Tax in Nepal: F/Y 2025/26 (2083/84)

Meta Description: Let’s be honest: reading official tax notices in Nepal often feels like decoding a legal textbook. But with the major structural tax reforms introduced for Fiscal Year 2083/84, understanding how your salary is taxed is now much simpler and significantly lighter on your wallet.

Whether you earn a monthly salary, work as a freelancer, or run a small business, here is the complete, practical guide to how income tax works in Nepal this year.

What Major Changes Happened in FY 2083/84?

If you were used to the old tax rules, three massive updates have taken effect:

1. The 1% Base Slab Doubled: You now pay just 1% Social Security Tax on income up to NPR 10 Lakhs (up from the previous NPR 5 Lakh limit).
2. One Unified Schedule: The old distinction between single and married individuals has been merged into a single, straightforward tax table for everyone.
3. Top Rate Slashed to 29%: The previous high surcharge rates (36% and 39%) have been replaced by a capped top rate of 29%.

Income Tax Slabs for FY 2083/84 (Unified Rates)

Nepal follows a progressive tax ladder. Each percentage rate applies only to the specific slice of income falling inside that band:

Annual Taxable Income (NPR)	Applicable Tax Rate	Maximum Tax for This Slice
First NPR 10,00,000 (Up to 10 Lakhs)	1% (Social Security Tax)*	NPR 10,000
Next NPR 5,00,000 (10L to 15 Lakhs)	10%	NPR 50,000
Next NPR 10,00,000 (15L to 25 Lakhs)	20%	NPR 2,00,000
Next NPR 15,00,000 (25L to 40 Lakhs)	27%	NPR 4,05,000
Above NPR 40,00,000 (Above 40 Lakhs)	29%	29% on remaining balance

Pro Tip on the 1% SST: If you are enrolled in and actively contributing to the Social Security Fund (SSF) or an approved pension scheme, the 1% Social Security Tax on the first NPR 10 Lakhs is 0% (completely waived).

Legal Ways to Lower Your Taxable Income

You do not have to pay tax on every single rupee you make. You can deduct several approved savings and expenses from your gross income before applying the tax slabs:

• Retirement Contributions (SSF / EPF / CIT): Deduct up to one-third (1/3) of your annual assessable income or up to a maximum limit of NPR 5,00,000 per year (whichever is lower).
• Life Insurance Premium: Claim a deduction of up to NPR 40,000 per fiscal year against paid premiums.
• Health / Medical Insurance: Deduct up to NPR 20,000 per fiscal year.
• Residential House Insurance: Deduct up to NPR 10,000 per year for insuring your private home.
• Female Employee Tax Rebate: Resident female employees whose only source of earnings is employment income get a direct 10% rebate on their total calculated tax liability.

Real-Life Example: Step-by-Step Calculation

Let’s see how this works in practice. Suppose you earn a gross salary of NPR 18,00,000 (18 Lakhs) a year, contribute to a retirement fund, and pay life insurance.

Step 1: Calculate Allowable Deductions

• Retirement Contribution (EPF/CIT): NPR 2,60,000
• Life Insurance Premium: NPR 40,000
• Total Deductions: NPR 3,00,000
• Net Taxable Income: NPR 18,00,000 – NPR 3,00,000 = NPR 15,00,000

Step 2: Apply the FY 2083/84 Tax Slabs

• First NPR 10,00,000 @ 1%: NPR 10,000 (or NPR 0 if under SSF)
• Next NPR 5,00,000 @ 10%: NPR 50,000
• Total Annual Tax: NPR 60,000 (or NPR 50,000 with SSF)

(Under the old tax slabs, this same salary would have cost you over NPR 1,20,000 in annual tax!)

What About Remote Workers and Freelancers?

If you provide digital services (software development, writing, graphic design, or online consulting) to overseas clients and receive foreign currency through a commercial bank in Nepal, you do not use the progressive slab table above.

Your earnings are subject to a flat 5% final withholding tax (TDS) deducted automatically by the receiving bank, making compliance straightforward and hassle-free.

Frequently Asked Questions (FAQ)

1. Is there still a separate slab for married couples? No. The FY 2083/84 tax reform merged single and married filers into one unified schedule with an identical NPR 10 Lakh base threshold.

2. When did these new slabs become effective? These new rates apply to all income earned from 1 Shrawan 2083 (mid-July 2026) onwards.

3. Do I need to file an individual tax return if my office deducts TDS? If your entire income comes from a single employer and TDS is deducted accurately, separate individual tax filing is generally not mandatory unless your income crosses statutory audit thresholds or you earn additional income from other sources.

Summary Checklist

• Check your monthly payslip to ensure your HR/payroll has updated to the FY 2083/84 unified table.
• Maximize your EPF, CIT, or SSF contributions to reduce your taxable income.
• Submit proof of your life and health insurance premiums to your employer before the tax year closes to claim your deductions.