How Income Tax Works in Nepal (2026)
Nepal reformed salary tax in 2026 (Finance Act 2083, FY 2083/84): one unified schedule of 1%/10%/20%/27%/29%. The 1% first band is the Social Security Tax — waived for SSF contributors. Note the tax year runs mid-July to mid-July.
The FY 2083/84 slabs (annual)
| Annual taxable income (NPR) | Rate |
|---|---|
| Up to 1,000,000 | 1% (waived for SSF contributors) |
| 1,000,001 – 1,500,000 | 10% |
| 1,500,001 – 2,500,000 | 20% |
| 2,500,001 – 4,000,000 | 27% |
| Above 4,000,000 | 29% |
SSF — on basic salary only
Employees contribute 11% of basic salary (10% pension + 1% SST); the employer adds 20%. The most common payroll error is computing it on gross — it's basic only. Deductible up to NPR 500,000/year. Women with only employment income get a 10% rebate on computed tax.
Worked example
Annual salary NPR 1,800,000 (basic 1,200,000, SSF contributor): SSF = 132,000. Taxable = 1,668,000. Tax = 50,000 + 20% × 168,000 = NPR 83,600/year. Monthly take-home ≈ NPR 132,033.
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Another worked example
Annual salary of NPR 2,000,000 (basic NPR 1,200,000, SSF contributor): SSF = 11% × 1,200,000 = NPR 132,000. Taxable = 1,868,000. Tax = 10% × 500,000 + 20% × 868,000 = NPR 223,600. Monthly take-home = (2,000,000 − 132,000 − 223,600) ÷ 12 ≈ NPR 137,033.
Reading your Nepali payslip
Check three things: SSF 11% — it should be on your basic salary, not gross (the most common Nepali payroll error); the slab calculation — SSF contributors skip the 1% SST band entirely, so your first taxable rupee is taxed at 10%; and the women's rebate — if you're a woman with only employment income, 10% should come off the computed tax. Nepal's tax year runs mid-July to mid-July (FY 2083/84), so "2026" figures cover that fiscal year.
Common mistakes
1. SSF on gross salary. 11% applies to basic salary only.
2. The old dual slab system. Finance Act 2083 unified the slabs — old married/single tables are obsolete.
3. Missing the reliefs. SSF contributors skip the 1% band; women get a 10% rebate.
What counts as taxable income in Nepal
Nepal taxes salary, allowances (dearness, housing, transport), bonuses, overtime, and retirement contributions made by the employer on your behalf. The one-third/SSF mechanics apply to this total. Exempt: genuine reimbursements and the SSF amounts within the NPR 500,000 deduction limit. Dashain bonus (the customary festival bonus, typically one month's salary) is fully taxable — a surprise for first-time filers every year.
Sources & verification
Figures compiled from: Inland Revenue Department Nepal.
Last verified: 23 October 2026. This guide is an estimate, not tax advice.