FY 2083/84 status: This guide explains proposed rules from the Economic Bill 2083 together with existing Inland Revenue Department guidance. Review and update this article after the authenticated Economic Act 2083 and updated IRD guidance are published.
Nepal salary tax is calculated annually, even when an employer deducts tax every month. The correct calculation starts with annual taxable employment income, applies eligible deductions and then uses progressive tax slabs.
The Economic Bill 2083 proposes a common primary schedule for a resident natural person or couple. This article explains how that proposed schedule works in practice.
Proposed Salary-Tax Slabs for FY 2083/84
| Annual Taxable Income After Eligible Deductions | Proposed Rate | Calculation |
|---|---|---|
| Up to Rs. 10,00,000 | 1% | 1% of taxable employment income |
| Rs. 10,00,001 to Rs. 15,00,000 | 10% | Rs. 10,000 plus 10% of the amount above Rs. 10,00,000 |
| Rs. 15,00,001 to Rs. 25,00,000 | 20% | Rs. 60,000 plus 20% of the amount above Rs. 15,00,000 |
| Rs. 25,00,001 to Rs. 40,00,000 | 27% | Rs. 2,60,000 plus 27% of the amount above Rs. 25,00,000 |
| Above Rs. 40,00,000 | 29% | Rs. 6,65,000 plus 29% of the amount above Rs. 40,00,000 |
How Progressive Salary Tax Works
Your entire salary is not taxed at the highest rate shown in the table. Each portion of taxable income is charged according to the slab in which it falls.
For example, a person with annual taxable employment income of Rs. 18,00,000 does not pay 20% on the entire Rs. 18,00,000. The calculation is:
- First Rs. 10,00,000 at 1%: Rs. 10,000
- Next Rs. 5,00,000 at 10%: Rs. 50,000
- Remaining Rs. 3,00,000 at 20%: Rs. 60,000
- Total estimated tax before rebates or credits: Rs. 1,20,000
Is the First Rs. 10 Lakh Tax-Free?
No. For ordinary employment income, the proposed first band generally applies a 1% charge. However, the Economic Bill 2083 lists specified exceptions. The 1% first-band charge does not apply in certain cases, including qualifying natural persons contributing to the contribution-based Social Security Fund.
The bill also identifies special treatment for pension income, pension-fund income and registered sole-proprietorship taxpayers. A salary calculator should ask the user about SSF participation and income type before applying the first-band charge.
Step-by-Step Salary-Tax Calculation
- Add annual basic salary.
- Add festival allowance, bonus, overtime, commission and taxable benefits.
- Add income from another employer when applicable.
- Subtract eligible deductions such as approved retirement-fund contributions and qualifying insurance premiums.
- Calculate taxable income.
- Apply the proposed progressive slab rates.
- Apply eligible rebates and tax credits.
- Subtract tax already withheld by the employer.
- Divide the remaining amount by the remaining payroll months when estimating monthly withholding.
Salary-Tax Examples
Example 1: Taxable Salary of Rs. 9,00,000
- Taxable employment income: Rs. 9,00,000
- Ordinary first-band rate: 1%
- Estimated tax: Rs. 9,000
Example 2: Taxable Salary of Rs. 12,00,000
- Tax on first Rs. 10,00,000: Rs. 10,000
- Tax on remaining Rs. 2,00,000 at 10%: Rs. 20,000
- Estimated tax: Rs. 30,000
Example 3: Taxable Salary of Rs. 30,00,000
- Tax up to Rs. 25,00,000: Rs. 2,60,000
- Tax on remaining Rs. 5,00,000 at 27%: Rs. 1,35,000
- Estimated tax: Rs. 3,95,000
Example 4: Taxable Salary of Rs. 45,00,000
- Tax up to Rs. 40,00,000: Rs. 6,65,000
- Tax on remaining Rs. 5,00,000 at 29%: Rs. 1,45,000
- Estimated tax: Rs. 8,10,000
Monthly Payroll Withholding
An employer normally estimates annual salary-tax liability and deducts tax across salary-payment months. Payroll should be recalculated when salary, bonus, deductions, SSF status or employment circumstances change.
Frequently Asked Questions
Are the FY 2083/84 salary-tax slabs final?
This article uses the Economic Bill 2083. Verify the authenticated Economic Act 2083 and updated IRD guidance before relying on a final calculation.
Does the proposed first band apply to married and unmarried taxpayers?
The Economic Bill 2083 proposes a common primary schedule for a resident natural person or couple.
Should I calculate tax using gross salary?
Start with assessable employment income and apply eligible deductions before calculating taxable income. Gross salary and taxable income are not always the same.
Official Sources
Disclaimer: This article provides general educational information and does not constitute legal, accounting or tax advice. FY 2083/84 figures described as proposed are based on the Economic Bill 2083. Verify the authenticated Economic Act 2083 and updated Inland Revenue Department guidance before filing a return, completing a final payroll adjustment or relying on a calculation.
