Nepal Income Tax Calculator

How Nepal income tax works in plain language

If you earn a salary in Nepal, the Inland Revenue Department wants a piece of it. But the system is not the simple percentage many people imagine. Nepal uses a progressive slab system, where different parts of your income are taxed at different rates. This means a Rs 1 million annual income does not face a single rate from rupee one to rupee one million. The first portion is taxed at 1 percent, the next at 10 percent, the next at 20 percent, and so on, with each slice paying its own rate.

The Income Tax Act 2058 BS is the governing law, and it has been amended every year through the annual Finance Act presented in Jestha alongside the national budget. For Fiscal Year 2082/83, which corresponds to roughly mid-July 2025 to mid-July 2026 in the Gregorian calendar, the slabs were carried forward from the previous year unchanged. The Inland Revenue Department, commonly called IRD, operates under the Ministry of Finance and runs the entire collection and compliance machinery from its head office in Lazimpat and through regional Inland Revenue Offices and Taxpayer Service Offices spread across all seven provinces.

Three things are worth understanding before you compute anything. First, residency matters. A resident individual is taxed on worldwide income, while a non-resident pays tax only on Nepal-source income at a flat 25 percent. Most Nepalis working in Nepal are residents and use the slab structure. Second, your tax year is the Bikram Sambat fiscal year, not the Gregorian calendar year. Income earned between Shrawan 1, 2082 and Ashad 31, 2083 falls under FY 2082/83. Third, the slabs apply to taxable income, which is your gross income minus all eligible deductions. The slabs do not apply to your gross salary directly. This last point is where most people miscalculate.

The federal nature of Nepal's tax system also means the income tax is collected at the federal level, not by provinces. Vehicle tax goes to provinces, but income tax goes to the central treasury and is administered through IRD. This makes tax filing the same regardless of which province you live in, which simplifies compliance for people who work in one province and live in another.

For most salaried employees, the practical experience is that the employer deducts tax at source every month based on an estimate of the annual income, deposits it to IRD, and provides a Form 25-Ka summary at year end. Employees with a single employer and total income up to Rs 4 million do not need to file an annual return at all, provided the employer has handled TDS correctly. That single rule covers the majority of working Nepalis. The complications arise only when you have multiple income sources, are self-employed, run a business, or earn from abroad in foreign currency.

FY 2082/83 slabs explained slab by slab

Nepal uses six progressive bands. Each band has its own rate, and only the income within that band gets taxed at that rate. Here are the bands for both single and married filers under FY 2082/83 rules.

Read the table carefully. The slabs differ between single and married filers only for the first three bands. Once you pass Rs 11 lakh of income for married couples and Rs 10 lakh for singles, the upper slabs are identical. The married couple advantage is concentrated at the lower and middle income levels, which is where most working Nepalis sit.

To compute tax for a single filer earning Rs 12 lakh per year, you would walk through the slabs like this. The first Rs 5 lakh is taxed at 1 percent, giving Rs 5,000. The next Rs 2 lakh, taking you from Rs 5 lakh to Rs 7 lakh, is taxed at 10 percent, giving Rs 20,000. The next Rs 3 lakh, from Rs 7 lakh to Rs 10 lakh, is taxed at 20 percent, giving Rs 60,000. The remaining Rs 2 lakh, from Rs 10 lakh to Rs 12 lakh, is taxed at 30 percent, giving Rs 60,000. Total tax is Rs 5,000 plus Rs 20,000 plus Rs 60,000 plus Rs 60,000, which is Rs 145,000 per year.

This is the same number our calculator produces when you enter monthly basic salary of Rs 100,000, twelve months worked, no festival bonus, no other income, no deductions, and single filing status. Confirm it yourself in the tool above.

The 36 percent and 39 percent bands at the top deserve a note. The 36 percent rate is computed under Section 1 of Schedule 1 of the Income Tax Act as 30 percent plus a 20 percent surcharge on income between Rs 20 lakh and Rs 50 lakh. Most tax tables show this as a flat 36 percent, which is the simpler way to think about it. The 39 percent band kicks in only above Rs 50 lakh and applies to a small fraction of taxpayers, mostly senior corporate executives, established professionals, and high-earning business owners.

The 1 percent Social Security Tax and how to legally avoid it

The 1 percent on the first slab is technically not income tax. It is the Social Security Tax, abbreviated SST, deposited into a separate revenue account from regular income tax. The distinction matters because three categories of taxpayers are exempt from this 1 percent and pay zero on the first slab.

The first exempt category is contributors to the Social Security Fund, the SSF run by the Government of Nepal under the Contribution-based Social Security Act 2074. If your employer has registered with the SSF and is depositing your contributions there, you are an SSF contributor. The 1 percent SST is automatically waived for you because the SSF contribution itself fulfils the social security purpose that SST was designed to fund.

The second exempt category is sole proprietors and registered private firms. The Income Tax Act treats business income earned by a sole proprietor differently from employment income. The first slab still has tax applied, but the 1 percent slot reverts to zero or moves into the regular tax structure of the business income chapter.

The third exempt category is recipients of pension income from a recognised pension fund. Pension income is treated as effectively post-tax retirement support, so the 1 percent SST is not charged a second time on it.

For everyone else, the 1 percent SST applies. On a Rs 5 lakh first slab for singles, that is Rs 5,000 per year. On a Rs 6 lakh first slab for married filers, it is Rs 6,000. These are not large amounts in absolute terms, but they do add up across millions of taxpayers and they fund a small piece of Nepal's social security budget.

The practical advice for younger employees who are not yet enrolled in SSF is to ask their employer about SSF registration. Employers in many sectors are now required to enrol employees, and the SSF gives access to medical, accident, maternity, and old-age benefits in addition to waiving the SST. The combination is usually better than the SST alone.

Single vs married, in actual rupees

The Income Tax Act treats a married couple electing joint assessment as one taxable entity, with thresholds extended in the first three slabs. A married filer enjoys an additional Rs 1,00,000 of room in the first slab, an additional Rs 1,00,000 in the second slab, and an additional Rs 1,00,000 in the third slab, before the upper slabs converge with the single structure.

What does this mean in actual savings? Let us compute a few cases.

The pattern is clear. The married couple advantage maxes out at Rs 29,000 per year once income passes Rs 11 lakh. For most middle-income working couples in Nepal, that Rs 29,000 represents about a month's worth of groceries or one return air ticket between Kathmandu and Pokhara. Worth claiming, but not a fortune.

The bigger question is whether to file jointly or separately. Joint filing typically wins because of the threshold expansion. Separate filing can win in narrow cases where one spouse has significant deductible expenses or a specific legal structure makes individual treatment cleaner. The decision is once-per-year, made when filing the return, and can be changed in subsequent years.

One important rule: a couple must elect joint assessment to use the married threshold. The IRD does not automatically apply it just because two people are legally married. The election is made in the annual return through a specific declaration. If you are recently married and used to file as single, switch to joint election in the year of marriage to start capturing the Rs 29,000 annual benefit.

Every deduction you are allowed to claim

Deductions reduce your taxable income before the slabs apply. Every rupee of legitimate deduction can save you up to 39 paisa of tax at the top slab and 1 paisa at the bottom slab. The most common deductions Nepali employees miss are insurance premiums and retirement fund contributions, particularly when the employer does not include them in the TDS calculation.

SSF, EPF, and CIT contributions

Contributions to the Social Security Fund, Employees Provident Fund, and Citizen Investment Trust are deductible up to the lesser of one-third of your assessable income or Rs 5,00,000. For most employees this works out to roughly Rs 1.5 to 2 lakh per year of deduction, which translates into Rs 15,000 to Rs 60,000 of tax savings depending on which slabs are affected. Note that the Finance Act 2082 narrowed approved retirement funds to specifically EPF, CIT, SSF, and the Pension Fund under the Pension Fund Act. Other company-managed funds no longer qualify for this deduction.

Life insurance premium

Life insurance premium paid in the year is deductible up to a maximum of Rs 40,000. The premium can be on policies covering the taxpayer or close family members. For someone in the 30 percent slab, this Rs 40,000 deduction translates to Rs 12,000 of tax savings. Bring your premium receipts to your tax officer or to your filing session every year. This is the single most missed deduction by salaried employees because employers typically handle TDS based on salary information alone.

Health insurance premium

Health insurance premium paid in the year is deductible up to a maximum of Rs 20,000. This was introduced as a deduction relatively recently and many older articles do not mention it. The deduction applies to comprehensive health policies, not pure indemnity policies. Like the life insurance deduction, you need to claim it manually because employers do not usually have visibility into your personal health policy.

Donations to approved bodies

Donations made to bodies approved by the Inland Revenue Department are deductible up to the lesser of 5 percent of your taxable income or Rs 1,00,000. The list of approved bodies is published by IRD and includes registered charities, educational institutions, religious bodies, and government-approved disaster relief funds. Casual private donations or contributions to unapproved bodies do not qualify.

Remote area allowance

Employees posted to remote areas receive an additional deduction calibrated by area category. Areas are classified A, B, C, D, and E based on remoteness, with maximum allowance of Rs 50,000 per year for the most remote category A. This applies to government employees, NGO workers, and private sector staff posted in qualifying districts.

The women's 10 percent rebate and who qualifies

Section 11 of the Income Tax Act provides a 10 percent rebate on computed income tax for women taxpayers. The rebate is one of the more meaningful tax benefits available, but it comes with three eligibility conditions that owners of the benefit often miss.

First, the rebate is available only on employment income. If the woman has business income, investment income, or a mixed income profile, only the tax computed on the employment portion is rebated. This is a precise rule and the IRD applies it strictly.

Second, the rebate is available only when filing as single. A woman who elects joint assessment with her husband under the married couple threshold cannot also claim the women's rebate on the same return. The two benefits are mutually exclusive. For most middle-income working women, the 10 percent rebate exceeds the married couple advantage, so single filing tends to come out ahead.

Third, the rebate applies to the computed tax, not to the taxable income. So if your tax before rebate is Rs 100,000, the rebate is Rs 10,000 and your final tax is Rs 90,000. The rebate stacks on top of all deductions and is the last step before final tax.

To put this in context, a woman earning Rs 100,000 per month with the standard one-month festival bonus, no other income, and SSF contributor status, would face a tax of about Rs 145,000 before the rebate. The 10 percent rebate brings this down to Rs 130,500, an annual saving of Rs 14,500. Across a forty-year career, that is roughly Rs 5.8 lakh of cumulative tax saving from this rebate alone.

The rebate is one reason Nepal's tax code is genuinely female-friendly relative to peer South Asian economies. It also explains why some married couples deliberately structure income so that the wife's salary maximises the rebate while the husband's salary uses the regular slab structure. This is fully legal and is a routine tax planning step done by accountants for dual-income couples.

Worked examples at common Nepali salary points

Tax tables make sense in the abstract, but it helps to see real cases. Here are six worked examples at salary points common to Nepali middle-class earners. All cases assume single filer with no SSF, no special status, twelve months worked, and a one-month festival bonus.

Notice the pattern. At Rs 40,000 monthly, total tax is roughly 1.3 percent of annual income. At Rs 80,000 monthly, the effective tax rate climbs to about 7.4 percent. At Rs 200,000 monthly, the effective rate reaches 15 percent. At Rs 350,000 monthly, the effective rate is around 21 percent. The progressive structure is doing exactly what it was designed to do, taxing higher earners at higher effective rates without dropping a sudden cliff.

Add the standard deductions and the picture improves further. A software developer at Rs 80,000 monthly who contributes Rs 10,000 per month to EPF (Rs 1,20,000 annually) and pays Rs 30,000 in life insurance and Rs 15,000 in health insurance can claim Rs 1,65,000 in deductions. This drops taxable income from Rs 10,40,000 to Rs 8,75,000, which moves them into the 20 percent slab range and reduces tax from Rs 77,000 to about Rs 50,000. That is Rs 27,000 of annual saving from properly claimed deductions, which is roughly two and a half weeks of net salary recovered.

For the senior banker at Rs 1,50,000 monthly, full deductions push savings even higher. Maxing all four primary deductions (SSF/EPF/CIT cap, life insurance Rs 40,000, health insurance Rs 20,000, donations Rs 1,00,000) reduces taxable income by about Rs 4,60,000, dropping tax from Rs 250,000 to about Rs 113,000. That is Rs 137,000 of annual saving, or roughly one month of net pay. The lesson generalises: the higher your income, the more valuable each rupee of deduction becomes, because the marginal rate it offsets is higher.

Sole proprietors and turnover-based tax

Sole proprietors and registered private firms have a few special rules that differ from employment-income taxpayers. The headline difference is that the 1 percent SST does not apply to business income earned by a sole proprietor, regardless of whether they are SSF contributors.

For very small businesses, the Income Tax Act provides a presumptive tax option. Resident natural persons with business turnover not exceeding Rs 30,00,000 and taxable income below Rs 3,00,000 can pay a fixed annual tax based on business location, ranging roughly from Rs 7,500 to Rs 25,000 depending on whether the business is in a metropolitan, sub-metropolitan, or rural setting. This avoids the slab calculation entirely and provides a simple flat amount.

For mid-sized businesses with turnover between Rs 30 lakh and Rs 1 crore and taxable income up to Rs 10 lakh, a turnover-based tax option is available at 0.25 percent for general goods, 0.30 percent for trading, and 2 percent for services. This is a compromise between the small-business flat tax and the full slab calculation, and it requires fewer accounting records than the full method.

The Finance Act 2082 added a meaningful provision: if a registered business has zero transactions during the year, no presumptive tax is payable. This protects entrepreneurs whose business idea did not get off the ground in a given year from facing a tax bill purely on the basis of registration.

One important exclusion: doctors, engineers, auditors, lawyers, consultants, players, and actors cannot use the presumptive or turnover-based options. These professional categories must always file under the regular slab structure with proper income, expense, and deduction documentation. The reasoning is that these professionals typically have higher incomes and the tax authority wants the more detailed reporting.

For sole proprietors at higher income levels, the standard slab structure applies the same as for employees, except the 1 percent SST is waived. A sole proprietor earning Rs 12,00,000 in business profit faces tax of about Rs 140,000 instead of Rs 145,000 that an equivalent salaried single would pay. The Rs 5,000 difference is exactly the missing 1 percent SST on the first slab.

Freelancers earning in foreign currency

The Finance Act 2079 introduced a simplified flat tax regime for Nepali freelancers earning income in foreign currency from clients outside Nepal. This category includes software developers working for overseas firms, content creators earning from YouTube AdSense and similar platforms, designers on Upwork, virtual assistants, and other knowledge workers paid in dollars or other foreign currencies.

The flat rate is 5 percent of the foreign currency income, applied as final withholding tax. This means once the 5 percent is deducted at the bank during inward remittance, no further income tax is owed on that income, and the income does not need to be included in the annual return. The flat rate is significantly lower than the slab structure that would otherwise apply, making this a generous incentive for export-oriented service workers.

To qualify, three conditions must be met. First, the income must be received in foreign currency through a formal banking channel, not in cash or via informal channels. Second, the freelancer must have a registered PAN linked to the relevant bank account. Third, the work must be for a client outside Nepal. Domestic freelance income for Nepali clients does not qualify and falls under the regular slab structure.

The 5 percent rate is final, meaning the freelancer cannot claim deductions against this income, and IRD does not refund the 5 percent if the freelancer's overall income would have placed them in a lower effective rate. For most foreign-currency freelancers earning above the basic threshold, the 5 percent rate is much better than the slab alternative anyway.

For freelancers with mixed income, where part comes from abroad in foreign currency and part comes from domestic Nepali clients, the foreign currency portion is taxed at the 5 percent flat rate as final, and the domestic portion is taxed under the regular slab structure as a separate computation. The two streams do not get combined for slab calculation purposes.

Senior citizens and disabled taxpayers

The Income Tax Act provides specific reliefs for two categories of vulnerable taxpayers: senior citizens aged 60 and above, and persons with disabilities.

Senior citizens receive an additional Rs 50,000 of basic exemption added to their first slab threshold. For a senior single filer, this means the first Rs 5,50,000 falls into the 1 percent SST band instead of Rs 5,00,000. For a senior married filer, the first Rs 6,50,000 is at 1 percent SST instead of Rs 6,00,000. The relief is small in absolute terms but it recognises that retired Nepalis on fixed pension or savings income should face slightly less tax pressure.

Persons with disabilities receive a more generous benefit. The basic exemption is increased by 50 percent. For a disabled single filer, the first slab extends to Rs 7,50,000 (Rs 5,00,000 plus Rs 2,50,000) at the 1 percent SST rate. For a disabled married filer, the first slab extends to Rs 9,00,000 (Rs 6,00,000 plus Rs 3,00,000). This effectively shields a meaningful chunk of income from the 10 percent and higher slabs, providing real financial relief for taxpayers whose disability often involves additional living costs.

Both reliefs are claimed in the annual return by checking the relevant declaration field. The disabled taxpayer relief requires a disability certificate issued by an authorised medical authority, typically a government hospital or a registered medical board. Senior citizen status is verified through citizenship certificate or any official ID showing date of birth.

One nuance: if a taxpayer qualifies for both reliefs, for example a senior citizen who is also disabled, the reliefs combine. The disabled threshold expansion of 50 percent and the senior Rs 50,000 stack, giving a single filer a first-slab threshold of Rs 8,00,000 (Rs 5 lakh plus Rs 2.5 lakh disabled plus Rs 50,000 senior). This combined relief is rare in practice but it is the rule.

When you must file and when you do not

Not every Nepali earner needs to file an annual income tax return. The Income Tax Act has a specific filing exemption for the most common case, salaried employees with a single employer.

If your only source of income is salary from a single employer, your annual remuneration does not exceed Rs 4 million, and your employer has correctly withheld TDS on the slab structure, you are not required to file an annual return. This rule covers the vast majority of working Nepalis. Your employer's Form 25-Ka summary at year end is your tax record, and you do not need to do anything further.

You must file an annual return if any of the following apply. You have multiple employers or worked for more than one employer in the year. Your total income exceeds Rs 4 million regardless of source. You have business income, including freelance work that is not foreign-currency based. You have rental income, capital gains, dividend income, or other investment income that is not subject to final TDS. You want to claim deductions that your employer did not include in TDS calculation. You want to claim a refund of excess TDS deducted. You are a non-resident with Nepal-source income.

The annual filing deadline is three months after the end of the fiscal year, which works out to roughly Ashwin end (mid-October) for FY 2082/83, the deadline being approximately October 16, 2026. The IRD allows extensions of up to three additional months upon written application explaining the reason for delay. Extensions are routinely granted but are not automatic.

Filing is now done online through the IRD taxpayer portal, accessible at ird.gov.np. The portal supports income statement, deduction claim, tax computation, payment integration with eSewa and Khalti, and digital receipt issuance. The shift from paper to digital filing has been one of the more meaningful improvements in Nepal's tax administration over the past five years, and it has reduced the typical filing time from a half-day exercise involving a physical visit to a regional IRD office to roughly thirty minutes online.

Penalties and how the IRD calculates them

The Income Tax Act provides for several penalties that compound quickly. Understanding them helps explain why timely compliance is much cheaper than catching up later.

Late filing of an annual return attracts a fee of Rs 100 per day or 0.1 percent of the assessable income, whichever is higher, capped at the higher of Rs 5,000 or whatever the calculation produces. For most middle-income earners, this works out to a few thousand rupees if you are a few months late, but it can rise quickly for higher earners.

Late payment of tax that is owed attracts interest at 15 percent per annum, calculated daily from the due date until actual payment. Across a year, the interest can substantially exceed the original tax amount for taxpayers who delay significantly. A Rs 100,000 tax bill paid one year late carries Rs 15,000 of interest plus the late filing fee, easily turning into Rs 18,000 to Rs 20,000 of total surcharge.

Non-compliance with TDS obligations carries some of the harshest penalties. An employer or payer who fails to deduct TDS becomes personally liable for the full tax that should have been deducted, plus 15 percent annual interest from the date the deduction should have happened. Section 90 of the Income Tax Act treats this as a serious compliance violation, and the IRD has been increasingly aggressive in enforcement particularly against employers and contracting parties.

Tax evasion, defined as wilful misrepresentation of income or claim of false deductions, can attract penalties of 50 percent to 100 percent of the underpaid tax, plus criminal prosecution under specific provisions of the Act. Conviction can include imprisonment, though in practice the IRD pursues civil penalties more often than criminal cases.

For honest mistakes the picture is gentler. Voluntary disclosure of underreported income through a revised return, before the IRD issues an assessment, typically attracts only the basic interest and a smaller administrative fee. The IRD has historically rewarded voluntary compliance and reserved the harsh penalties for deliberate evasion or repeated non-compliance.

TDS, advance tax, and reconciliation

Tax Deducted at Source, abbreviated TDS, is the mechanism through which most income tax in Nepal actually reaches the government. Rather than waiting for an annual return, certain payers are required to deduct tax at the time of payment and deposit it directly with IRD on behalf of the recipient.

For salaried employees, the employer estimates total annual income at the start of the year, computes the slab tax, divides by twelve months, and deducts the monthly portion from the salary before paying the employee. Each month, the employer deposits the deducted amount with IRD by the 25th of the following month and provides the employee with a year-end Form 25-Ka summary.

For other income types, different TDS rates apply at the point of payment. Service or consultancy fees attract 15 percent TDS if the recipient is PAN-only, or 1.5 percent if the recipient is VAT-registered. Rent payments attract 10 percent TDS, treated as final tax for the recipient. Bank interest on individual deposits attracts 5 percent TDS, also treated as final. Dividends attract 5 percent TDS, also final.

The distinction between adjustable and final TDS matters for filing. Adjustable TDS, like salary TDS or service TDS, is a prepayment that gets credited against the annual tax liability when the recipient files the return. If the TDS exceeds actual liability after deductions, the recipient claims a refund. Final TDS, like rent or interest TDS, is the end of the tax obligation on that income, and the income does not need to appear on the annual return at all.

For people with significant non-salary income, advance tax is required. The Income Tax Act expects taxpayers to pay tax in three quarterly instalments during the year, with reconciliation at the annual return. Advance tax is not required if the total tax payable is less than Rs 7,500, which exempts most lower-income earners from this requirement. For higher earners with mixed income, advance tax is calculated at 40 percent of estimated annual tax due by Poush end, 70 percent by Chaitra end, and 100 percent by Ashad end. Failure to pay advance tax on schedule attracts the standard 15 percent annual interest on the shortfall.

Common mistakes that cost real money

After a few years of seeing the same patterns, certain errors stand out as the ones that consistently cost Nepali taxpayers money. Avoid these and your effective tax rate drops noticeably.

Forgetting to claim insurance deductions

Life insurance up to Rs 40,000 and health insurance up to Rs 20,000 are deductible, but employer TDS calculations rarely include them. If you have personal life or health policies, you must file a return to claim these deductions or they are simply lost. For someone in the 30 percent slab, the combined Rs 60,000 deduction is Rs 18,000 of recovered tax per year.

Filing single when SSF would help

If you are an SSF contributor, the 1 percent SST is waived. Some employees do not realise their employer has registered them with SSF and they pay an unnecessary Rs 5,000 to Rs 6,000 per year. Check with your HR or your salary slip to confirm whether SSF deduction is being made.

Married couples filing as single

The married couple threshold is not automatic. You must elect joint assessment in the annual return. Couples who simply file as singles each year miss out on Rs 29,000 of annual saving. The election is a one-line declaration in the return form.

Ignoring the women's rebate

Women with employment income are entitled to a 10 percent rebate on tax computed on that income, when filing as single. This stacks with all other deductions and can save Rs 10,000 to Rs 50,000 per year depending on income level. Many women filers, particularly those in their first few years of employment, simply do not know about this rebate.

Mixing foreign currency and domestic freelance income

Foreign currency freelance income through a formal banking channel is taxed at 5 percent flat as final TDS. Domestic freelance income is taxed at slab rates. Mixing them in your accounting and treating them all under one regime leads to either overpayment of tax or compliance problems. Keep separate records and let the bank handle the foreign currency 5 percent automatically through inward remittance documentation.

Late filing because of the December assumption

Nepal's filing deadline is mid-October, three months after the mid-July fiscal year end. Many people assume December or even March because of habits from other countries or the Indian system. Late filing penalties stack up at Rs 100 per day plus 15 percent annual interest on any unpaid tax, easily exceeding the cost of just filing on time.

Not keeping receipts

The IRD can request supporting documentation for any deduction up to seven years after the return was filed. Insurance premium receipts, donation acknowledgements, SSF contribution statements, all of these need to be retained. Many taxpayers throw away receipts after filing, only to face a problem if the IRD later requests verification.

Frequently asked questions