Nepal’s New Tax Regime Takes Effect

A new tax regime has come into effect in Nepal, with the government increasing the minimum tax threshold and reducing the maximum tax rate.

As of Shrawan 1, 2083, the government has raised the minimum tax threshold to 1 million rupees (approximately $8,300 USD) for individuals, with a tax rate of 1% applicable on this amount.

The government has also reduced the maximum tax rate by 1 percentage point to 10%.

According to the Ministry of Finance, the tax burden has been reduced by increasing the minimum tax threshold.

Under the new tax regime, individuals with an annual income of up to 1 million rupees will pay only 1% tax.

However, this provision does not apply to single proprietorship firms and individuals who contribute to the retirement fund and social security fund.

Individuals with an annual income between 1 million and 1.5 million rupees will pay 10,000 rupees plus 10% tax on the amount exceeding 1 million rupees.

Those with an annual income between 1.5 million and 2.5 million rupees will pay 60,000 rupees plus 20% tax on the amount exceeding 1.5 million rupees.

Individuals with an annual income exceeding 2.5 million rupees will pay 260,000 rupees plus 27% tax on the amount exceeding 2.5 million rupees.

An additional 2% tax will be levied on individuals with an annual income exceeding 4 million rupees.

Currently, under the Income Tax Act 2058, individuals with an annual income of up to 500,000 rupees and couples with an annual income of up to 600,000 rupees pay only 1% social security tax.

A tax rate of 10% is applicable on the next 200,000 rupees, 20% on the next 300,000 rupees, 30% on the next 1 million rupees, and 36% on the next 3 million rupees.

A tax rate of 39% is applicable on annual incomes exceeding 5 million rupees.