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Salary Income Tax Calculator
Salary Income tax is imposed on individuals and businesses based on their income over a month or year. Government-established tax brackets determine the amount of tax owed. Taxpayers are required to file an Income Tax Return annually. Failure to file an income tax return can result in significant penalties.
Taxes are levied under the Income Tax Act 2002 provisions, which mandate the imposition and collection of taxes on company income. Resident companies are taxed on their worldwide income, while non-residents must pay tax on their net income earned or sourced in Nepal. The tax is applied to net income after deductions for specific expenses and allowances as specified in the ITA.
1.For Single Individuals (FY 2025-26 / FY 2082-83)
| Tax Banding | Taxable Income | Tax Rate |
| Band 1 | First Rs 500,000 | 1%* |
| Band 2 | Next Rs 200,000 (up to 700,000) | 10% |
| Band 3 | Next Rs 300,000 (up to 1,000,000) | 20% |
| Band 4 | Next Rs 1,000,000 (up to 2,000,000) | 30% |
| Band 5 | Next Rs 3,000,000 (up to 5,000,000) | 36% |
| Additional Tax | Remaining above Rs 5,000,000 | 39% |
- For Married Couples (FY 2025-26 / FY 2082-83)
Married couples benefit from a higher initial tax-free threshold.
| Tax Banding | Taxable Income | Tax Rate |
| Band 1 | First Rs 600,000 | 1%* |
| Band 2 | Next Rs 200,000 (up to 800,000) | 10% |
| Band 3 | Next Rs 300,000 (up to 1,100,000) | 20% |
| Band 4 | Next Rs 900,000 (up to 2,000,000) | 30% |
| Band 5 | Next Rs 3,000,000 (up to 5,000,000) | 36% |
| Additional Tax | Remaining above Rs 5,000,000 | 39% |
Important Notes on the Tax Rates
- Social Security Tax (1%): The 1% rate on the first band is the Social Security Tax, which must be deposited in a separate revenue account (11211). This tax is not applicable if the taxpayer is depositing the amount into the Social Security Fund (SSF). It is also waived for taxpayers registered as sole proprietors or those with income solely from pension or a contribution-based pension fund.
- 36% Rate Calculation: The 36% rate is computed as 30% plus an additional 20% on the tax rate applicable to taxable income above Rs 2,000,000 and up to Rs 5,000,000.
- 39% Rate Calculation: The 39% rate is computed as 30% plus an additional 30% on the tax rate applicable to taxable income above Rs 5,000,000.
Deductions from Salary Income Tax in Nepal
| A. Deductions on Income | Remarks |
| Natural persons working in remote areas are entitled to Remote Area Allowance | Additional deduction from taxable amount up to Rs 50,000. (A-50,000, B-40,000, C- 30,000, D-20,000, E-10,000). |
| A natural person with pension income included in the taxable income | An additional deduction equal to 25% of the amount prescribed under the first tax band or actual pension receipts, whichever is lower shall be allowed from taxable income. |
| Incapacitated natural person | Additional deduction from the taxable amount equal to 50% of the amount prescribed under the first tax band or actual income whichever is lower. |
| B. Reduction in Income | |
| Life insurance premium | A natural person who has procured life insurance and paid the premium amount thereon shall be entitled to a deduction from the taxable income the lower of the actual annual insurance premium or Rs 40,000. |
| Medical insurance | A natural person who has been insured with a resident insurer/insurance company for health insurance shall be entitled to a deduction from the taxable income the lower of the actual premium paid or Rs 20,000. |
| Insurance of private building | A resident natural person who has insured a private building in his/her ownership with a resident insurer/insurance company shall be entitled to a deduction of the actual annual premium paid for such insurance or Rs 5,000 whichever is lower. |
Tax Credits (Reduction in Tax Liability)
These credits are applied directly to the calculated tax liability:
- Female Tax Credit: A natural person who is female and has only remuneration income is entitled to a tax credit of 10% on the tax liability.
- Medical Tax Credit: A resident natural person is entitled to a credit which is the least of: (i) Rs 1,500, or (ii) 15% of Medical Expenses (plus any carried forward amount), or (iii) Actual tax liability.Taxation for Freelancers and Small TaxpayersThe tax rules differ significantly for self-employed individuals and small businesses:
- Freelancers & Self-Employed: Freelancers and self-employed persons generally pay a flat rate of 5% on their income. Unlike full-time employees whose tax is deducted automatically, freelancers must compute, report, and pay their tax themselves. They must maintain proper records of expenses and revenue. If a freelancer’s total annual income exceeds Rs 5 million, they are required to register for VAT.
- Presumptive Taxpayer Scheme: Small taxpayers (resident natural persons) with business taxable income not exceeding Rs 300,000 and business turnover not exceeding Rs 3 million may opt for presumptive taxation. For example, the presumptive tax rates for FY 2025-26 are Rs 7,500 for Metropolitan/Sub-Metropolitan areas, Rs 4,000 for Urban Municipality, and Rs 2,500 for Rural Municipality.
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