About Income Tax in Nepal
In Nepal, income tax is regulated by the Inland Revenue Department (IRD) and governed by the Income Tax Act, 2058. The system operates on a progressive tax slab structure under self-assessment principles. This means individual taxpayers are responsible for declaring their income sources, claiming applicable deductions, and resolving their tax liabilities annually.
Using our tax calculator, you can plan your finances by estimating how much income tax will be withheld from your salary. Knowing your progressive brackets also helps you identify ways to legally lower your taxable base, such as by maximizing contributions to citizen investment trusts (CIT) or social security funds (SSF).
Allowed Deductions under Nepal Tax Laws
Taxpayers can claim deductions to decrease their net assessable income, effectively lowering their overall tax burden:
- Provident Funds (EPF) & Social Security (SSF): Up to 1/3rd of assessable income or Rs. 300,000 (whichever is lower) can be claimed for combined retirement contributions.
- Citizen Investment Trust (CIT): Annual contributions up to Rs. 300,000 can be deducted from taxable income.
- Life Insurance: Lifelong insurance premiums up to Rs. 40,000 (increased from Rs. 25,000 in recent fiscal revisions) are tax-exempt.
- Health Insurance: Exemption on health premiums up to Rs. 20,000 annually.
Personal Income Tax (PIT) Brackets (FY 2080-81)
For Unmarried Individuals
| Taxable Income (Rs.) | Tax Rate (%) |
|---|---|
| Up to 500,000 | 1% |
| 500,001 - 700,000 | 10% |
| 700,001 - 1,000,000 | 20% |
| 1,000,001 - 2,000,000 | 30% |
| 2,000,001 - 5,000,000 | 36% |
| Over 5,000,000 | 39% |
For Married Couples
| Taxable Income (Rs.) | Tax Rate (%) |
|---|---|
| Up to 600,000 | 1% |
| 600,001 - 800,000 | 10% |
| 800,001 - 1,100,000 | 20% |
| 1,100,001 - 2,000,000 | 30% |
| 2,000,001 - 5,000,000 | 36% |
| Over 5,000,000 | 39% |