Nepal Income Tax for FY 2082/83: A Complete, Worked Guide
Every salaried person in Nepal pays income tax through TDS (tax deducted at source), yet very few can explain how their own tax is actually computed. Employers deduct a monthly amount, the number changes when you get a raise, and the logic stays hidden. This guide opens the box: it walks through the FY 2082/83 tax structure step by step, with a real worked example, so you can check your own payslip.
How Nepal taxes personal income
Nepal uses a slab (progressive) system administered by the Inland Revenue Department (IRD) under the Income Tax Act 2058. "Progressive" means the rate rises as income rises, but only the portion of income inside each band is taxed at that band's rate — a common point of confusion. Earning one rupee more never reduces your take-home pay.
Your taxable income is your assessable income minus allowable deductions (SSF, CIT, approved insurance, and the relevant exemption threshold). The remainder is then sliced across the slabs.
FY 2082/83 slabs (individual)
| Income band (NPR) | Rate |
|---|---|
| First 5,00,000 | 1%* |
| Next 2,00,000 (5–7 lakh) | 10% |
| Next 3,00,000 (7–10 lakh) | 20% |
| Next 10,00,000 (10–20 lakh) | 30% |
| Above 20,00,000 | 36%** |
*The 1% on the first band is effectively a social security tax, not income tax, and it is waived for those contributing to the SSF. **The top effective rate reaches 36% because of a 10% surcharge on tax at the highest band.
For a married couple choosing joint assessment, the first band is 6,00,000 instead of 5,00,000 — a higher tax-free-ish threshold.
The deductions that actually reduce your tax
- Social Security Fund (SSF): employees contribute 11% of basic salary; this is deductible from taxable income (and it removes the 1% social security tax).
- Citizen Investment Trust (CIT) / approved retirement funds: contributions up to one-third of assessable income or NPR 5,00,000 (whichever is lower) are deductible.
- Life insurance premium: deductible up to NPR 40,000.
- Health insurance premium: deductible up to NPR 20,000.
- Donations to approved organisations, within limits.
These are not loopholes — they are the government deliberately encouraging saving and insurance. Using them is the single biggest lever an ordinary salaried person has.
A worked example
Take Sita, unmarried, with a basic salary of NPR 60,000/month (NPR 7,20,000/year) plus allowances of NPR 20,000/month (NPR 2,40,000/year). Gross annual income: NPR 9,60,000.
- SSF deduction: 11% of basic = 11% × 7,20,000 = 79,200.
- Taxable income: 9,60,000 − 79,200 = 8,80,800.
- Apply the slabs (as an SSF contributor, the first band is 1% → 0):
- First 5,00,000 → 0 (SSF contributor)
- Next 2,00,000 at 10% → 20,000
- Remaining 1,80,800 (of the 7–10 lakh band) at 20% → 36,160
- Annual tax ≈ NPR 56,160, or about NPR 4,680/month deducted as TDS.
If Sita also puts NPR 5,000/month into CIT (60,000/year), her taxable income drops to 8,20,800 and her tax falls by roughly 12,000 — a real, legal saving.
You can run your own numbers instantly with the Nepal Income Tax Calculator and see the CTC-to-in-hand breakdown with the Salary Calculator.
Common mistakes
- Confusing gross with taxable income. Tax is on income after SSF/CIT and exemptions, not on gross.
- Assuming a raise into a higher slab cuts your pay. Only the portion above the threshold is taxed higher.
- Forgetting the fiscal year. Nepal's tax year runs Shrawan 1 to Ashadh end (mid-July to mid-July), not January–December. Convert dates with the AD↔BS converter.
The bottom line
Nepali income tax is very learnable once you separate the three ideas: assessable income, deductions, and progressive slabs. Check your payslip against the worked example above — if your employer's TDS looks off, it usually traces back to how they treated SSF or allowances. Tax slabs change most fiscal years, so always confirm the current year's figures before filing.