If you are working in Nepal and getting paid, you need to be aware of different income tax rates nepal. Don’t worry this guide will explain everything in simple terms, even if you have never dealt with taxes before.
Think of income tax as a small percentage of your salary that goes to the government. Everyone who earns money has to pay it.
What is Income Tax?
Income tax is money you pay to the government based on how much you earn in a year. The more you earn, the more tax you pay.
Why do we pay it? This money helps the government build roads, schools, hospitals, and provide other services we all use.
How Much Tax should You Pay? (For Regular Employees)
Nepal uses a “slab system.” This means different portions of your income are taxed at different rates.
If You’re Single (Unmarried)
| Your Annual Income | Income Range | How Much Tax |
| First Rs 5 lakh | Rs 0 – Rs 5,00,000 | Only 1% |
| Next Rs 2 lakh | Rs 5,00,001 – Rs 7,00,000 | 10% |
| Next Rs 3 lakh | Rs 7,00,001 – Rs 10,00,000 | 20% |
| Next Rs 10 lakh | Rs 10,00,001 – Rs 20,00,000 | 30% |
| Next Rs 30 lakh | Rs 20,00,001 – Rs 50,00,000 | 36% |
| Above Rs 50 lakh | Rs 50,00,001 and above | 39% |
Simple breakdown:
- If you earn up to Rs 5,00,000 yearly → Pay 1%
- If you earn Rs 5,00,001 to Rs 7,00,000 yearly → First Rs 5 lakh at 1%, remaining at 10%
- If you earn Rs 7,00,001 to Rs 10,00,000 yearly → First Rs 5 lakh at 1%, next Rs 2 lakh at 10%, remaining at 20%
If You’re Married
Good news! Married people get a small benefit.
| Your Annual Income | Income Range | How Much Tax |
| First Rs 6 lakh | Rs 0 – Rs 6,00,000 | Only 1% |
| Next Rs 2 lakh | Rs 6,00,001 – Rs 8,00,000 | 10% |
| Next Rs 3 lakh | Rs 8,00,001 – Rs 11,00,000 | 20% |
| Next Rs 9 lakh | Rs 11,00,001 – Rs 20,00,000 | 30% |
| Next Rs 30 lakh | Rs 20,00,001 – Rs 50,00,000 | 36% |
| Above Rs 50 lakh | Rs 50,00,001 and above | 39% |
Simple breakdown:
- If you earn up to Rs 6,00,000 yearly → Pay 1%
- If you earn Rs 6,00,001 to Rs 8,00,000 yearly → First Rs 6 lakh at 1%, remaining at 10%
- If you earn Rs 8,00,001 to Rs 11,00,000 yearly → First Rs 6 lakh at 1%, next Rs 2 lakh at 10%, remaining at 20%
Real Example: How Much Tax Will You Actually Pay?
Let’s say you’re single and earn Rs 30,000 per month (Rs 3,60,000 per year).
Your tax calculation:
- First Rs 3,60,000 is taxed at 1% = Rs 3,600 per year
- That’s only Rs 300 per month!
Another Example: You earn Rs 60,000 per month (Rs 7,20,000 per year)
- First Rs 5,00,000 at 1% = Rs 5,000
- Next Rs 2,00,000 at 10% = Rs 20,000
- Remaining Rs 20,000 at 20% = Rs 4,000
Total tax per year = Rs 29,000 (about Rs 2,417 per month)
Important: That 1% is Special
The 1% tax you see in the first slab is called “Social Security Tax” (SST).
You DON’T pay this 1% if:
- You contribute to the Social Security Fund (SSF)
- You are getting pension income
- You are self-employed (own business)
What is TDS? (Tax Deducted at Source)
TDS means your company takes out tax from your salary before paying you.
Think of it like this:
- Your actual salary is Rs 30,000
- The company deducts Rs 300 as tax
- You receive Rs 29,700 in your hand
Your company sends that Rs 300 directly to the government as your tax.
Why is this good? You don’t have to worry about paying tax yourself. Your company handles it.
Special Benefits for Women
If you are a woman working a regular job, you get 10% discount on your total tax!
Example:
- Your tax came to Rs 10,000
- As a woman, you only pay Rs 9,000
- You save Rs 1,000!
When Do You Need to File a Tax Return?
“Filing a tax return” means submitting your income and tax details to the government.
You MUST file if:
- You earn more than Rs 40 lakh per year
- You run your own business
You DON’T need to file if:
- Your company already deducts tax (TDS) and your income is below Rs 40 lakh
- You’re a vehicle owner renting it out (and that’s your only income)
Understanding Your Salary Slip
Your salary slip shows different amounts. Here’s what they mean:
- Gross Salary: Total salary before any deductions
- EPF: Employee Provident Fund (your retirement savings)
- TDS: Tax deducted from your salary
- Net Salary: What you actually receive in your account
Example Salary Slip:
- Gross Salary: Rs 40,000
- EPF (10%): Rs 4,000
- TDS: Rs 400
- Net Salary: Rs 35,600
Common Terms You’ll Hear
- Assessable Income: Your total income that can be taxed
- Taxable Income: Income after all deductions (insurance, EPF, etc.)
- Tax Liability: Total tax you need to pay
- Tax Credit: Amount reduced from your tax
- PAN (Permanent Account Number): Your tax identification number like a tax ID card
What If You Work Two Jobs?
You need to combine the income from both jobs and calculate tax on the total.
Example:
- Job 1: Rs 3,00,000 per year
- Job 2: Rs 2,00,000 per year
- Total income: Rs 5,00,000
You pay tax based on Rs 5,00,000 total income.
Penalties: What Happens If You Don’t Pay Tax?
The government charges extra money if you:
Don’t file tax return on time:
- Rs 1,200 fine plus Rs 100 for each month of delay
Don’t pay tax on time:
- 15% extra charge per year on the amount you owe
Fake information:
- 50% to 100% penalty on the tax you tried to avoid
Important: Always pay your tax on time to avoid these penalties!
For Business Owners and Freelancers
If you run a small business or work freelance, tax rules are slightly different.
Very Small Businesses (Annual income below Rs 3 lakh)
You don’t calculate tax normally. Instead, you pay a fixed amount:
- In Kathmandu or big cities: Rs 7,500 per year
- In municipalities: Rs 4,000 per year
- In villages: Rs 2,500 per year
This is called “Presumptive Tax” very simple!
Medium Small Businesses (Annual income Rs 3-10 lakh)
You pay tax based on your total business turnover:
- General business: 0.8% to 1% of turnover
- Service business: 2% of turnover
- Gas/cigarette business: 0.25% to 0.30%
Vehicle Tax (If You Own a Car/Bike)
If you own a vehicle, you pay a small yearly vehicle tax:
Cars:
- Small cars (up to 1300cc): Rs 5,500
- Medium cars: Rs 6,000 to Rs 8,000
- Big cars: Rs 9,000
Bikes and Others:
- Two-wheeler: Different rates
- Bus/Truck: Rs 10,500
- Tractor: Rs 2,500
Electric Vehicles (Great news!):
- Much lower tax: Rs 3,000 to Rs 7,500, depending on power
Quick Checklist for Employees
- Check if your company deducts TDS from salary
- Get a PAN number if you don’t have one
- Save receipts for insurance premiums
- Keep track of EPF contributions
- Get your annual salary statement from company
- If you’re a woman, make sure you get the 10% tax credit
- File tax return if your income is above Rs 40 lakh
Simple Tax Planning Tips
- Start a life insurance policy: Saves up to Rs 40,000 from tax
- Get health insurance: Saves up to Rs 20,000 from tax
- Always ask for salary breakdown: Know where your money is going
- Keep salary slips safe: You’ll need them for loans, visa, or tax filing
- Use EPF wisely: It reduces tax AND saves for your future
- Open a tax-friendly investment: Some investments reduce your tax
Final Words
Understanding income tax rates nepal might seem difficult at first, but it’s actually straightforward once you learn the basics.
The key is to:
- Know how much you earn
- Understand which tax bracket you’re in
- Use available deductions
- Pay on time
Start small. Calculate your current tax situation using the slabs mentioned above. You’ll quickly realize it’s not as complicated as it sounds.
Most importantly: Don’t stress! Millions of people in Nepal pay taxes regularly. If you’re employed, your company handles most of it for you. Just stay informed and keep your documents safe.
Note: Tax rules can change. This guide is based on FY 2082-83 (2025-26) rules. For the most current information, always check www.ird.gov.np or consult a tax professional.
