Nepal Pension Guide

Social Security Fund (SSF) Pension

• SSF pension scheme: The SSF operates a defined-contribution pension scheme for formal-sector employees. Both employee (9%) and employer (15%) contribute towards the pension component of the SSF (total 24% of basic pay). These contributions are invested by the SSF, and the accumulated corpus is used to provide a monthly pension upon retirement.
• Eligibility: An employee is eligible for an old-age pension upon reaching age 60 and having contributed to the SSF for at least 15 years. If the contribution period is less than 15 years, the employee receives a lump sum refund of contributions plus investment returns.
• Pension amount: The monthly pension depends on the total accumulated contributions, investment returns earned by the SSF, and the chosen annuity option. The SSF publishes annual statements showing the accumulated balance.
• Survivor benefits: Upon the death of a pensioner, the spouse (or dependent children) may receive a survivor pension at a reduced rate (typically 50% of the original pension).

Provident Funds

• Private provident funds: Many employers (especially banks, corporations, and government entities) operate provident fund (PF) schemes alongside or in transition to the SSF. In a PF, both employer and employee contribute a percentage of basic salary (typically 10% each).
• Tax treatment of PF: Employee contributions to approved PF are deductible from taxable income (up to NPR 300,000 per year). Employer contributions are not taxed as perquisite in the employee's hands (up to reasonable limits). The interest earned on the PF is tax-free. Withdrawals upon retirement are tax-free as well.
• SSF transition: The government is progressively moving all formal-sector employees to the SSF. During the transition, some employers maintain both PF and SSF contributions, while others have fully migrated to SSF.

Citizen Pension Scheme

• For informal workers: The Citizen Pension Scheme (Nagarik Pension Yojana) is a government-sponsored voluntary pension scheme for informal-sector workers, self-employed individuals, farmers, and those without formal employer pension coverage.
• Contributions: Participants contribute a monthly or annual amount to the scheme, with the government providing a matching contribution. Contribution tiers range from NPR 1,000 to NPR 5,000 per month, with corresponding government matching.
• Benefits: Upon reaching age 60 (or after a minimum contribution period), the participant receives a monthly pension based on accumulated contributions. The scheme is administered by the Citizen Pension Fund under the Ministry of Labour and Social Security.
• Tax deduction: Contributions to the Citizen Pension Scheme are deductible from taxable income up to prescribed limits.

Taxation of Pension Income

• Pension taxed as income: Pension income received after retirement is treated as employment income and taxed at normal IIT rates (1-36%) with the NPR 500,000 personal relief.
• Lump sum vs. monthly: Lump sum withdrawals from provident funds on retirement are generally tax-free (up to limits). Monthly pension payments from SSF or Citizen Pension are taxable in the year of receipt.
• Deduction for contributions: Contributions to SSF, provident funds, and the Citizen Pension Scheme are deductible from taxable income, reducing the current-year tax liability. The combined deduction for all retirement contributions is capped at approximately NPR 300,000 per year.

For SSF contribution rates and rules for employees, see our Social Contributions Guide →. For IIT rates applicable to pension income, see our Personal Tax Guide →.