Nepal Personal Tax Guide (IIT)
Nepal's Individual Income Tax (IIT) is a progressive system with five brackets ranging from 1% to 36%, administered by the Inland Revenue Department (IRD). Every resident individual receives a personal relief of NPR 500,000 per year on which no tax is payable. An additional 1% educational service fee is levied on the applicable tax amount. The tax year runs from mid-July to mid-July (Shrawan 1 to Ashad 31). All amounts in NPR.
Nepal's personal income tax system, administered by the Inland Revenue Department (IRD), applies a progressive rate structure to the taxable income of resident individuals. The tax year follows the Nepali calendar — Shrawan 1 to Ashad 31 (approximately mid-July to mid-July). A personal relief of NPR 500,000 is available to all resident individuals, meaning the first NPR 500,000 of income is tax-free. For related guidance, see our Corporate Tax Guide →, Tax Residency Guide →, and Tax Filing Guide →.
IIT Rates and Brackets (2026)
Taxable income is calculated after deducting the NPR 500,000 personal relief. The remaining income is taxed at progressive rates across five brackets:
- Up to NPR 500,000: 1% — initial bracket on the first NPR 500,000 of taxable income (after personal relief).
- NPR 500,001 – 700,000: 10% — on income between NPR 500,001 and NPR 700,000.
- NPR 700,001 – 1,000,000: 20% — on income between NPR 700,001 and NPR 1,000,000.
- NPR 1,000,001 – 2,000,000: 30% — on income between NPR 1,000,001 and NPR 2,000,000.
- Above NPR 2,000,000: 36% — top rate on all income exceeding NPR 2,000,000.
For example, an individual earning NPR 1,200,000 of taxable income (after personal relief) would pay: (500,000 × 1%) = NPR 5,000 + (200,000 × 10%) = NPR 20,000 + (300,000 × 20%) = NPR 60,000 + (200,000 × 30%) = NPR 60,000 = approximately NPR 145,000 in IIT before the education fee.
Education Service Fee
- Additional 1%: An educational service fee of 1% is levied on the total applicable tax amount (IIT calculated). This fee funds education initiatives and is collected alongside income tax.
- Calculation: If your IIT liability is NPR 145,000, the education fee adds an additional NPR 1,450, bringing the total tax payable to NPR 146,450.
- Treatment: The education fee is treated as a surcharge — it does not affect the progressive bracket calculation but simply increases the final tax bill proportionally.
Personal Relief and Deductions
- Personal relief (NPR 500,000): Every resident individual is entitled to a basic exemption of NPR 500,000 per tax year. This is applied automatically — no separate claim is needed. Married couples each receive their own NPR 500,000 relief on their respective incomes.
- Additional relief for spouses: If one spouse has no income, the unused personal relief may be transferred to the working spouse under certain conditions, subject to IRD guidelines.
- Other deductions: Contributions to approved retirement funds (up to NPR 300,000), life insurance premiums (up to NPR 40,000), health insurance premiums (up to NPR 40,000), and donations to approved charitable institutions (50% of donation, up to 5% of total income) are deductible from taxable income.
- Citizen pension contributions: Contributions to the Citizen Pension Scheme are deductible up to prescribed limits.
Married and Joint Filing
- Individual filing: Each individual files their own tax return. Nepal does not have joint filing for married couples — spouses are assessed separately on their own income.
- Spousal transfers: The personal relief of a non-working spouse can be claimed by the working spouse, subject to IRD approval. This effectively increases the tax-free threshold for a single-income household.
- Dependants: Additional relief may be available for dependent children and parents, though the rules differ from standard personal relief.
For corporate tax rates and business taxation, see our Corporate Tax Guide →. For SSF contributions deducted from salary, see our Social Contributions Guide →.