Date: Jun 01, 2026
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The Government of Nepal has introduced significant changes to the individual / personal income tax
structure for Fiscal Year 2083/84. Whether you are a salaried employee, individual either single or
couple, or pension recipient, or individual with business income, these revised tax slabs could have a
noticeable impact on your annual tax liability and take-home income.
The new tax policy provides substantial relief to low and middle-income earners by expanding the
lower tax brackets and reducing the highest tax rate from 39% to 29%.
In this guide, we break down the new income tax slabs, compare them with the previous fiscal year,
and explain what the changes mean for taxpayers across Nepal.
1. Larger Tax-Free and Low-Tax Income Threshold
The biggest change is the expansion of the lowest tax bracket.
For many taxpayers, this means significantly lower tax payments compared to FY 2082/83.
2. Maximum Tax Rate Reduced
The highest personal income tax rate has been reduced from 39% to 29%.
This makes Nepal's tax structure more competitive and lowers the tax burden on high-income
professionals, entrepreneurs, and business owners.
3. Simpler Tax Structure
The previous six-tier system has been streamlined into five tax brackets, making tax calculations
easier and more transparent.
Many taxpayers may not need to pay the 1% tax on the first Rs. 10,00,000 of income.
The 1% Social Security Tax is generally waived for:
For eligible taxpayers, the effective tax rate on the first Rs. 10,00,000 becomes 0%.
Salaried Employees
Employees earning up to Rs. 10 lakhs annually will see the biggest benefit, especially if they are
enrolled in the Social Security Fund (SSF). Many will pay little or no tax on their first Rs. 10 lakhs
of income.
Middle-Income Professionals
The wider 10% and 20% tax brackets reduce the amount of income exposed to higher tax rates,
resulting in meaningful annual savings.
High-Income Earners
Professionals, consultants, entrepreneurs, and executives earning above Rs. 40 lakhs annually will
benefit from the reduction of the maximum tax rate from 39% to 29%.
Business Owners
Registered sole proprietors may also qualify for exemption from the 1% Social Security Tax, further
reducing their overall tax burden.
Under the previous tax system, an individual earning Rs. 10 lakhs annually would pass through
multiple tax brackets of 1%, 10%, and 20%.Under the new FY 2083/84 structure:
Has the highest income tax rate changed?
- Yes. The maximum personal income tax rate has been reduced from 39% to 29%.
Is the first Rs. 10 lakhs completely tax-free?
- Not for everyone. The standard rate is 1%, but eligible SSF contributors, pension fund contributors,
pension earners, and certain sole proprietors may qualify for exemption.
Who benefits the most from the new tax slabs?
- Low and middle-income earners receive the greatest relief due to the expanded lower tax brackets.
High-income earners also benefit from the reduced top tax rate.
When do the new tax rates apply?
- The revised tax slabs apply for Fiscal Year 2083/84 as announced in Nepal's national budget.
The FY 2083/84 income tax reform represents one of Nepal's most significant personal tax revisions
in recent years. By expanding the lower tax brackets, simplifying the tax structure, and reducing the
maximum tax rate, the government has provided meaningful relief to a wide range of taxpayers.
Whether you are a salaried employee, business owner, pension recipient, or independent
professional, understanding these new tax slabs can help you better plan your finances and maximize
your after-tax income.
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