Brief Discussion About Salary Tax In Nepal

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Hello Guys,

With due respect to Mr. Degendra Sivakoti’s request, I would like to give a brief description about Salary Tax in Nepal and some ways of saving your Tax Liability.

I had briefly explained about it earlier in one of the sessions as well. Thus, this blog is just a revision for those who had attended the briefing session and a short introduction to salary tax for those who were not present during the session.

First of all, let me give you some general knowledge about tax.

Tax is a financial charge levied by the state or local government on people or institutions.

“ In this world, nothing can be said to be certain, except death and taxes” (Benjamin Franklin 1706–1790).

So, no matter where you live or where you go in this social environment, you will have to pay tax. The only difference is timing, rate, and the amount.

There are various types of tax and the tax charges are different from one jurisdiction to another. However, in this blog, we are specifically talking about “Salary Tax” and our jurisdiction is within the Territory of Nepal.

Income Tax in Nepal is governed by “Income Tax Act 2058” and “Salary Tax” is one of its components.

According to the recent Finance bill of Nepal, Salary Tax is levied at a rate of 1%, 15%, 25% and 35% (i.e Extra 40% of Tax amount) on yearly accessible salary upto 350,000, 350,001–450,000, 450,001–2,500,000 and 25,000,001 and above respectively.

There are two ways of saving tax either by not paying your tax liability at all (i.e tax evasion) or by reducing your tax liability (i.e tax reduction). The former is illegal and I do not recommend it at all, but the latter is a simple and legal way by remaining withing the given jurisdiction. I know most of us feel bored learning the tax rules but what we need is an easy way to save our income tax liability. So, understanding your in-depth feeling and without giving any vast description, I will directly provide some useful ways to save your income tax liability (i.e not through tax evasion).

1. If you are a married person and provided with valid marriage certificate, your tax band will increase by additional Rs 50,000 (Fifty thousand rupees).
2. If you make a contribution to registered retirement fund then the amount is deductible from accessible salary. For this purpose, the amount is equal to Rs 300,000 or 1/3 of taxable income, whichever is lower.
3. If you have life insurance or medical insurance, then the premium paid for such insurance is also deductible for the purpose of calculating tax. The amount for this purpose is limited to a maximum of Rs 20,000.
4. If you are a resident individual woman having remuneration income only, then you can opt for getting an additional rebate of 10% on tax liability.

There are other conditions like a rebate for the handicapped or incapacitated person, a person having pension income only, rural allowance, an employee employed in the foreign diplomatic mission, retirement payment resulting from the merger and so on, but such issues are not applicable to us (as the employees of Bajra Technologies Pvt Ltd). :)

Hope you guys like this brief description about the ways to decrease our tax liability.

Disclaimer:

The data provided in this blog is just for an informative purpose. Neither Bajra Technologies nor any of its affiliates or employees take guarantee of its accuracy and completeness of the data. It is not intended as legal advice for the purpose of managing tax liability. Those communications reflect the assumptions and views of the persons that prepared them.