Exact income tax slabs, deductions, and TDS rates for salaried individuals in Nepal for FY 2081/82 - with real worked calculation examples.
Income tax in Nepal is levied on personal annual earnings under the Income Tax Act 2058. It uses a progressive slab system - as income rises, different portions are taxed at different rates. Critically, you do not pay the higher rate on your entire income - only on the portion within each slab. Salaried employees pay through TDS: your employer deducts monthly estimated tax and deposits it to IRD under your PAN.
Understanding your tax slab has two practical benefits. First: you know exactly how much of your gross salary you legally take home. Second: you discover legal deduction opportunities - SSF, life insurance, health insurance, CIT contributions reduce your taxable income. Someone earning NPR 60,000/month who claims all deductions saves NPR 10,000-20,000 annually.
Add all taxable income: base salary, allowances, bonuses. Exclude: expense reimbursements, employer SSF contributions (13.33% of basic).
Employee SSF (11% of basic), life insurance up to NPR 40,000/year, health insurance up to NPR 40,000/year, CIT retirement contributions up to NPR 3,00,000/year.
Apply each slab rate only to income within that range. Your effective average rate is always lower than the highest slab you reach.
Divide annual tax liability by 12. This is the monthly TDS your employer deducts.
| Annual Income Slab | Tax Rate | Maximum Tax in This Slab |
|---|---|---|
| Up to NPR 5,00,000 | 1% | NPR 5,000 |
| NPR 5,00,001 - NPR 7,00,000 | 10% | NPR 20,000 |
| NPR 7,00,001 - NPR 10,00,000 | 20% | NPR 60,000 |
| NPR 10,00,001 - NPR 20,00,000 | 30% | NPR 3,00,000 |
| Above NPR 20,00,000 | 36% | On amount above 20L |
| Married Couple - each slab threshold +NPR 1,00,000 | - | - |
Nepal's income tax is administered by IRD (ird.gov.np) under the Finance Ministry. Every salaried person must have a PAN - 9-digit tax ID. Employers file monthly TDS returns. Fiscal year: Shrawan 1 to Ashad 31. File returns by Magh 31 of the following year. Employees can verify TDS, download e-TDS certificates, and check tax records on the IRD Taxpayer Portal.
Aashish believed he was in the 20% bracket and his entire salary was taxed at 20%. He had never claimed his life insurance deduction or confirmed SSF deductions.
Actual calculation: Annual NPR 9,60,000 − SSF 11% (basic NPR 50,000 = NPR 66,000) − Life insurance NPR 25,000 = taxable NPR 8,69,000. Tax: 1% × 5L = NPR 5,000; 10% × 2L = NPR 20,000; 20% × 1.69L = NPR 33,800. Total: NPR 58,800/year = NPR 4,900/month. Effective rate: 6.77%, not 20%.
Goal & Dilemma: Optimizing tax on an annual gross salary of NPR 12,00,000 (Married status).
1%, 10%, 20%, 30%, or 36%.
NPR 5L, 2L, 3L, 10L, then unlimited above 20L.
Gross salary minus all legal deductions.
Net taxable NPR 8,69,000: 1%×5L = NPR 5,000; 10%×2L = NPR 20,000; 20%×1.69L = NPR 33,800. Total: NPR 58,800/year = NPR 4,900/month TDS.
Thinking entire salary is taxed at the highest slab rate.
Only the income within each slab is taxed at that rate.
Not claiming life and health insurance deductions.
Give HR your insurance premium receipts - up to NPR 40,000 each deductible per year.
Not verifying TDS deposits on the IRD portal.
Log in to ird.gov.np quarterly to confirm employer TDS deposits.
Only-salary earners with correct TDS are generally exempt. If you have rent, freelance, or interest income above NPR 10,000, filing is mandatory.
NPR 40,000 per year total across all life policies. Health insurance has a separate NPR 40,000/year limit. Combined max: NPR 80,000/year in insurance deductions.
Each slab threshold increases by NPR 1,00,000 - so the first slab goes to NPR 6,00,000 (vs NPR 5,00,000 for singles).
ird.gov.np → Taxpayer Portal → Login with PAN + password → TDS Verification.
Under the Income Tax Act, the basic 1% tax exemption slab is NPR 5,00,000 for unmarried individuals and NPR 6,00,000 for married couples.
Yes. Employees enrolled in the formal contribution-based Social Security Fund (SSF) are legally exempt from the 1% Social Security Tax on their first tax slab.