Maximize up to NPR 3,00,000 in legal income tax deductions while earning 6.5%-7.5% guaranteed compounding interest.
Employees Provident Fund (EPF / KSK) and Citizen Investment Trust (CIT / NLK) are Nepal's premier government-backed statutory retirement saving institutions. They combine payroll-deductible retirement accumulation with substantial income tax exemptions under the Income Tax Act 2058.
Taxes are one of the single largest lifetime expenses for salaried professionals in Nepal. If your gross salary is NPR 12,00,000, you could pay substantial income tax. By channeling NPR 3,00,000 into CIT (Karmachari Bachat Briddhi Scheme or Gratuity Fund), your taxable income drops from NPR 12 Lakh to NPR 9 Lakh, instantly saving tens of thousands of rupees in hard tax cash while earning guaranteed compounding interest backed by the Government of Nepal.
The tax deduction allowed is the LOWEST of: (a) Actual contribution, (b) 1/3rd of Assessable Income, or (c) The statutory ceiling of NPR 3,00,000 (combined CIT + EPF + SSF).
Salaried workers typically enroll in CIT Karmachari Bachat Briddhi Yojana (कर्मचारी बचत वृद्धि स्वीकृत अवकाश कोष) or Gratuity Scheme.
Your employer deducts the amount before computing TDS, or you deposit directly using your CIT Identification Number via connectIPS.
Interest is credited quarterly/semi-annually, plus CIT and EPF declare annual profit dividends (मुनाफा बाँडफाँड) after audited financial statements.
| Feature / Parameter | Employees Provident Fund (EPF / KSK) | Citizen Investment Trust (CIT / NLK) | Strategic Takeaway |
|---|---|---|---|
| Establishment Act | Karmachari Sanchaya Kosh Act 2019 BS | Nagarik Lagani Kosh Act 2047 BS | Both 100% sovereign government-backed entities |
| Contribution Model | Mandatory 10% employee + 10% employer | Voluntary (any amount up to tax limits) or employer scheme | CIT offers unmatched voluntary flexibility for individuals |
| Tax Deduction Limit | Lower of 1/3rd income or NPR 300,000 | Lower of 1/3rd income or NPR 300,000 | Ceiling of NPR 3 Lakh is shared across all approved funds |
| Interest Rate Benchmark | 6.50%-7.50% per annum | 6.50%-7.50% per annum | Both yield higher than commercial bank savings accounts |
| Annual Dividend / Profit | 0.50%-1.25% additional bonus profit | 0.50%-1.50% additional bonus profit | Boosts total effective return to 8%+ long term |
| Loan Borrowing Facility | Up to 90% special loan against balance | Up to 80% loan against accumulated balance | Instant liquidity for emergency medical or education needs |
Under Section 63 and Schedule 1 of Nepal's Income Tax Act 2058 (amended by Finance Act 2081/82), retirement contributions are designated as "Approved Retirement Fund Deductions" (स्वीकृत अवकाश कोष). When retiring or withdrawing from EPF/CIT after completing tenure, taxation on retirement payments is governed by Section 65 and Section 88: 5% final withholding tax applies to the gain/interest component, keeping post-retirement taxes exceptionally low compared to normal income brackets.
Without any deductions, Sushila’s top income bracket falls into the 20% and 30% tax slabs, resulting in significant annual tax liability. She decides to maximize her CIT voluntary contribution.
Sushila contributes NPR 2,50,000 per year into CIT Karmachari Bachat Briddhi. Since 2.5 Lakh is less than 1/3rd of her income (NPR 3.66 Lakh) and below the NPR 3.0 Lakh ceiling, the entire NPR 2,50,000 is deducted from her taxable income! Her taxable income drops from NPR 11,00,000 to NPR 8,50,000. She directly saves NPR 50,000 in income tax in year 1! That is an immediate guaranteed 20% "return" via tax savings, plus CIT credits 7.0% interest + 1.0% profit share on her deposit!
Goal & Dilemma: Optimizing an annual taxable salary of NPR 18,00,000 under Nepal's progressive income tax brackets.
Total taxable compensation before Section 63 deductions
Total rupees deposited into approved funds in that fiscal year
Annual ceiling defined under Income Tax Act Schedule 1
Salary = NPR 12 Lakh. 1/3rd = NPR 4 Lakh. Actual CIT contribution = NPR 3 Lakh. Maximum cap = NPR 3 Lakh. Eligible Deduction = min(4,00,000, 3,00,000, 3,00,000) = NPR 3,00,000. Taxable income becomes NPR 9 Lakh!
Contributing more than NPR 3,00,000 expecting additional tax exemption.
Cap your tax-motivated contributions at NPR 3,00,000 per fiscal year.
Treating CIT or EPF like an ATM and taking maximum loans for vacations.
Reserve CIT/EPF loans strictly for genuine medical emergencies or home construction.
Forgetting to submit your CIT statement to your company HR/finance before Chaitra.
Provide your official CIT deposit receipts to HR by Falgun/Chaitra so TDS is adjusted on your payroll.
Yes. Individuals can open an account in the CIT Karmachari Bachat Briddhi Yojana either through their employer or independently by presenting their PAN card and citizenship.
Under the Income Tax Act, the maximum combined tax exemption ceiling for all approved retirement funds (SSF + CIT + EPF) is NPR 5,00,000 for SSF contributors, and NPR 3,00,000 for non-SSF contributors.
Interest is calculated on daily or monthly balances and credited to the account semi-annually or annually, compounding automatically.
Under Section 63 of the Income Tax Act 2058, the maximum deduction permitted from your gross taxable income for contributions made to an approved retirement fund (CIT, EPF, or SSF) is one-third (1/3) of your total assessable income or NPR 3,00,000, whichever is lower.
Yes. Self-employed individuals, doctors, lawyers, consultants, and business owners can open an individual voluntary account under CIT's 'Citizens Unit Scheme' or voluntary pension schemes by visiting any CIT branch or registering online with their PAN and citizenship certificate.