Nepal's new tax slabs for FY 2083/84 — what changed for payroll
Finance Act 2083 merged the single and married schedules, widened the 1% band to NPR 10 lakh and cut the top rate to 29%. What it means for TDS.
From Shrawan 1, 2083, salaried income in Nepal is taxed under a materially different table. If your payroll ran on last year's slabs in Shrawan or Bhadra, you have been over-withholding.
Here is what changed, and what payroll has to do about it.
Figures reflect the Finance Act 2083 as at Bhadra 2083. Confirm against the Inland Revenue Department before applying them. This is an explanation, not tax advice.
The new table
| Annual taxable income (NPR) | Rate |
|---|---|
| Up to 1,000,000 | 1% |
| 1,000,001 – 1,500,000 | 10% |
| 1,500,001 – 2,500,000 | 20% |
| 2,500,001 – 4,000,000 | 27% |
| Above 4,000,000 | 29% |
Three changes matter.
One table for everyone. The separate schedules for single and married taxpayers are gone. Previously the married schedule sat NPR 100,000 higher at the lower bands, which meant payroll had to know each employee's filing status to withhold correctly. Now it does not.
The 1% band more than doubled. It ran to NPR 500,000; it now runs to NPR 1,000,000. Anyone earning under about NPR 83,000 a month is now entirely inside the first band.
The top rate fell from 39% to 29%. Last year's structure ran to 36% between NPR 2,000,000 and 5,000,000 and 39% above that. Both are gone, replaced by 27% and 29%.
The exemption that catches payroll systems out
The 1% on the first band is Social Security Tax, and it is not levied on people contributing to the Social Security Fund. The same exemption applies to contributors to an approved pension fund, to pension recipients, and to sole proprietorships.
For an SSF-registered employer this is not a rounding difference. The entire first NPR 1,000,000 of an employee's annual income is exempt rather than taxed at 1%. On a salary of NPR 90,000 a month, that alone is the difference between a meaningful monthly deduction and almost none.
A payroll engine that applies the slab table without checking SSF status over-withholds from every employee, every month, by a small enough amount that nobody queries it. That is the worst kind of error: too small to notice, large enough to matter across a year and a workforce.
What it means for a monthly payslip
Nepali payroll withholds monthly against the projected annual position, so a mid-year change is not simply "apply the new rate from now on."
For the majority of employees, whose annual income sits under NPR 1,000,000, the practical outcome is straightforward: if the employer is SSF-registered, income tax withholding on salary drops to nil, and the deductions on the payslip are the 11% SSF contribution and anything else the organization deducts.
For employees above that threshold, the calculation is genuinely different from last year at every level, and any system carrying forward last year's bands is wrong in a way that compounds.
What to do about it
Check which table your payroll ran in Shrawan. If the slabs were not updated before the first run of the fiscal year, you have over-withheld for at least one month and probably two. That is correctable — but you have to know.
Check whether your system knows about the SSF exemption. This is the single most common gap. Test it: run a payslip for an SSF-contributing employee earning under NPR 1,000,000 a year and see whether any income tax comes out. If it does, the exemption is not implemented.
Our Nepal salary calculator applies these slabs and the exemption, so you can check a payslip against it in a minute.
Check whether the slabs are configuration or code. Nepali tax bands change most years, and this year they changed a lot. If updating them means waiting for a vendor release, you will be waiting again next Jestha. If they are settings in an admin screen, updating them takes an afternoon.
Check the retirement contribution deduction. It is the lowest of the actual contribution, NPR 500,000, or one third of assessable income — not a flat cap, and not the actual contribution unconditionally.
The wider point
This is the second year running that Nepali payroll rules have shifted enough to require a code or configuration change, and there is no reason to expect the pattern to stop.
International HR platforms handle this slowly, because Nepal is a small market and their engineering priorities sit elsewhere. Some never implement it at all, which is why so many Nepali organizations run an international HRIS for records and a spreadsheet for the actual payroll calculation.
The alternative is software where the tax table is a setting you control, on infrastructure you control. Then a Finance Act published in Jestha is something you handle before Shrawan, rather than something you wait on.
Ace HR keeps salary components and tax brackets as configuration at the organization level, so slab changes are an admin task rather than a release. Try the salary calculator · See the payroll module · What a licence includes