Under the Income Tax Act 2058, every salaried employee in Nepal has the legal right to reduce their assessable income using approved deductions — SSF contributions, CIT deposits, insurance premiums, and from FY 2083/84, qualifying education expenses.
TDS is calculated on the income that remains after these deductions. Applying them correctly requires two things from HR: the supporting document for each deduction, and for CIT, a confirmed deposit amount agreed with the employee before any funds are moved. When both are in place, employees are taxed on what the law intends. When they are not, employees are overtaxed — quietly, every month, until HR makes it right.
FY 2083/84 raises the stakes. The income tax structure has changed significantly this year. Employees who combine the new slabs with their entitled deductions will see a real difference in take-home pay.
The FY 2083/84 budget, announced by Finance Minister Dr. Swarnim Wagle on Jestha 15, 2083, introduced the most significant personal income tax reform Nepal has seen in recent years. Three changes are directly relevant to payroll and deduction management.
Income up to NPR 10,00,000 is now taxed at 1%, expanded from the previous NPR 5,00,000. Employees enrolled in SSF continue to have this entire band waived to 0%.
The couple versus single distinction has been removed. All resident employees now use the same slab structure. HR no longer needs to track or configure marital status for TDS calculation purposes.
A deduction of up to NPR 25,000 for qualifying education expenses is introduced for FY 2083/84. The full conditions — which institutions qualify, whether it covers the employee or dependents, and what documentation is required — depend on the Finance Act 2083 gazette notification.
House insurance premiums are deductible up to NPR 10,000 in FY 2083/84, increased from NPR 5,000 in the previous fiscal year.
| Taxable Income | Tax Rate |
|---|---|
| Up to NPR 10,00,000 | 1% (0% for SSF contributors) |
| NPR 10,00,001 – NPR 15,00,000 | 10% |
| NPR 15,00,001 – NPR 25,00,000 | 20% |
| NPR 25,00,001 – NPR 40,00,000 | 27% |
| Above NPR 40,00,000 | 29% (27% + 2% surcharge) |
| Non-resident employees | 25% flat (no slab benefits) |
⚠ Note:
Rates based on the Jestha 15, 2083 budget announcement, pending Finance Act gazette notification.
Verify at ird.gov.np before configuring payroll.
Contributions to SSF, PF, and CIT are deductible from assessable income. The deductible amount is the lowest of:
SSF and/ PF flow through payroll automatically. CIT is voluntary — employees who choose to contribute inform HR or the payroll team, who processes the deposit on their behalf. Because CIT is discretionary, employees can decide how much to contribute each year as a deliberate tax-saving strategy.
Employees can deduct premiums on qualifying individual policies. Employer-provided group policies do not qualify.
Life insurance premiums are paid annually but not necessarily at the start of the fiscal year. The employee submits the receipt whenever the annual payment is made — that is the point at which HR enters it and the deduction takes effect.
The Document Expiry feature in RealHRsoft tracks when each premium receipt is due for renewal. HR is notified before an existing receipt lapses so the deduction is not interrupted mid-year.
A deduction of up to NPR 25,000 for qualifying education expenses applies from this fiscal year, subject to Finance Act gazette notification.
Donations to IRD-approved tax-exempt organisations are deductible at the lowest of:
The Rebate section of the Employee Self-Service (ESS) Portal gives employees a structured interface to submit CIT plans, insurance receipts, and education expense documents. For life insurance, the employee uploads the premium receipt whenever the annual payment is made — not only in Shrawan. The Document Expiry feature records the validity period of each receipt and notifies HR before it lapses, so no month passes with an expired document on file.
When an employee decides to contribute to CIT, they submit their intended monthly deposit amount through the ESS Portal. The request is immediately visible to the payroll team — no emails, no paper, no follow-up needed. Once the payroll team reviews and approves the amount, Rebate Planning within Payroll Management applies the deduction automatically. The annual tax projection is recalculated and the adjusted TDS is distributed evenly across all remaining months of the fiscal year.
At year-end, the Tax Clearance Certificate feature generates TDS reports in Nepal Government-approved format for IRD submission — no manual rebuild required.
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Under the Income Tax Act 2058, salaried employees can deduct SSF, PF, and CIT contributions (up to NPR 5,00,000 or one-third of assessable income, whichever is lower), life insurance premiums (up to NPR 40,000), health insurance premiums (up to NPR 20,000), house insurance premiums (up to NPR 10,000 from FY 2083/84), and qualifying education expenses (up to NPR 25,000, subject to Finance Act gazette). Remote area allowances, disability deductions, and approved donations also qualify.
Verify current rates at ird.gov.np.
CIT is voluntary. Employees who choose to use it inform HR or the payroll team, who processes the deposit on their behalf. Because the contribution amount is at the employee’s discretion, CIT is a tax planning tool — employees can decide each year how much to deposit in order to reduce their assessable income, up to the ARF limit under the Income Tax Act 2058.
The Document Expiry feature in RealHRsoft records the validity period of each premium receipt uploaded against an employee’s rebate record. When a receipt is due for renewal — which for life insurance can fall at any point during the fiscal year — HR is notified automatically so the updated document is collected and the deduction continues without a gap.
