Understanding the taxes for salaried individuals in Nepal (with tax brackets)

Taxes can feel complex, but understanding them is crucial for responsible citizenship. This blog aims to simplify the process for salaried individuals in Nepal. We'll break down the key tax details you need to know, ensuring you're informed and compliant.

Who is Considered a Salaried Individual?

If you receive a regular salary or wages from an employer, you fall under the category of a salaried taxpayer in Nepal. This includes government employees, private company staff, and those working for NGOs.

What Taxes Do Salaried Individuals Pay?

The primary tax for salaried individuals in Nepal is Income Tax. This tax is levied on your annual income, with progressive tax slabs determining the rate you pay. Here's a breakdown:

• Income Tax Slabs (FY 2080/81 - 2023/24):
  • Up to NPR 400,000 - 1% Social Security Tax (Note: This doesn't apply to some professions)
  • NPR 400,001 to NPR 700,000 - Exempt
  • NPR 700,001 to NPR 1,000,000 (Couples: NPR 800,001 to NPR 1,100,000) - 10%
  • NPR 1,000,001 to NPR 2,000,000 (Couples: NPR 1,100,001 to NPR 2,000,000) - 20%
  • NPR 2,000,001 to NPR 5,000,000 - 30%
  • Above NPR 5,000,000 - 36%

Additional Deductions and Benefits:

There are various deductions and benefits available to salaried individuals that can lower your taxable income. These include:

• Medical Insurance Premium: Up to NPR 20,000 can be deducted for health insurance premiums paid to a resident insurer.
• Pension Income: A deduction is available for pension income or contributions to pension funds.
• Female Taxpayer Rebate: A rebate applies to resident females with only employment income.

How are Taxes Deducted from Salaries?

Your employer acts as a tax withholding agent. They deduct income tax and social security tax (if applicable) from your salary at source and deposit it with the government. You'll receive a payslip reflecting your pre-tax and post-tax salary.

Filing Income Tax Returns:

While your employer deducts tax at source, it's your responsibility to file an income tax return annually. This ensures proper tax assessment and allows you to claim any additional deductions or benefits you may be entitled to.

Remember:

• Keep all your salary slips and tax-related documents for record-keeping purposes.
• Consult a tax professional if you have any complexities regarding your tax situation.

Stay Informed, Stay Compliant

By understanding these basics, you can navigate the world of taxes in Nepal with greater confidence. Remember, the government website of the Inland Revenue Department (IRD) offers further resources and updates on tax regulations ird.gov.np.