Fiscal Nepal
First Business News Portal in English from Nepal
KATHMANDU: Nepal’s revised personal income tax regime officially came into effect on Friday, with the government implementing higher income thresholds and lower tax rates under the Economic Act 2083 for the new fiscal year 2083/84.
The new tax structure increases the minimum income threshold eligible for the lowest tax rate to Rs 1 million (10 lakh), offering relief to salaried individuals and reducing their overall tax burden.
According to the Ministry of Finance, individuals with annual taxable employment income of up to Rs 1 million will now pay only 1 percent income tax.
The revised tax slabs are as follows:
The government has also reduced the highest personal income tax rate by 10 percentage points, a move aimed at making Nepal’s tax system more competitive while encouraging compliance.
The Finance Ministry said the revised tax policy is intended to ease the tax burden on individuals by increasing the minimum taxable income threshold.
However, the revised provisions will not apply to certain categories of income. According to the Economic Act, income related to approved retirement funds, pension funds, and the Contribution-based Social Security Fund, as well as specified income of sole proprietorship taxpayers, will continue to be governed by separate tax provisions.
Before the new rules came into force, Nepal’s Income Tax Act imposed a 1 percent social security tax only on annual income of up to Rs 500,000 for individuals and Rs 600,000 for married couples. Income above those thresholds was taxed progressively at 10 percent, 20 percent, 30 percent, 36 percent, and 39 percent, with the highest rate applying to annual income exceeding Rs 5 million.
The revised income tax structure is one of several fiscal measures that came into effect on Friday with the beginning of the new fiscal year, as the government seeks to boost disposable income, stimulate economic activity, and reform Nepal’s tax system.
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