Nepal is one of the poorest countries in the world. According to the UN’s latest report Nepal’s GDP per capita is just 725 USD. Many claim it is because the country does not have proper tax system like in Western world. However the truth is entirely opposite, Nepal has one of the highest income tax systems in the world. If you earn Rs 55,000 (USD 500) or more per month you end up paying 30% tax. Here we explain how is Nepal’s income tax works. Ministry of Finance, Inland Revenue Department Nepal has new income tax rules from year 2018. The income tax in Nepal is divided in two categories, individual and couple which are explained below.

Income Tax In Nepal is one of the highest

Individual Income Tax Regulations 2018

Annual income Rs 1 to Rs 350,000 Tax percentage 1%

Anything you earn from Rs 1 up to Rs 350,000 will be taxed 1% of total income.

Annual income from Rs  350,001 to Rs 450,000 Tax percentage 10%

Your first 350,000 will be taxed 1% while more than 350,000 up to 450,000 will be taxed 10%.

Similarly annual  income from Rs 450,001 to Rs 650,000 Tax percentage  20%

Likewise annual income from 650,001 to Rs 2,000,000 Tax percentage  30%

From 2,000,001 and more, tax percentage 36%

(First calculate tax up to Rs 2,000,000 then remaining amount taxed on 30%+ 20% liability tax on income tax) See example no 4 for details

Example 1

What will be income tax if you earn Rs 15,000 per month?

If your monthly income is Rs 15,000. Your annual income will be 180,000 and tax percentage will be 1%

Income tax to pay Rs 1,800 (1% of Rs 180,000)

Example 2

How much tax you pay if your annual income is Rs 400,000?

First 350,000 will be taxed 1% = Rs 3,500

Remaining 50,000 (400,000-350,000) will be taxed 10% = Rs, 5,000

So total income tax you pay will be Rs 3,500+Rs 5,000 = Rs 8,500

Example 3

Now how much tax you will pay if your annual income is Rs 1,200,000?

First 350,000 is taxed 1% = 3,500

From 350,001 to 450,000 taxed 10% = 10,000 (10% of 100,000)

From 450,001 to 650,000 taxed 20% = 40,000 (20% of 200,000)

From 650,001 to 1,200,000 taxed 30% = 165,000 (30% of 550,000)

Total tax payable 218,500 (3,500+10,000+40,000+165,000)

Example 4

How much income tax you pay if you earn Rs 200,000 per month?

If your monthly income is 200,000 your annual income will be Rs 2,400,000

First 350,000  = 3500 (1% of total income)

From 350,000 to 450,000 = 10,000 (10% of 100,000)

From 450,000 to 650,000 = 40,000 (20% of 200,000)

From 650,000 to 2,000,000 = 405,000 (30% of 1,350,000)

From 2,000, 0001 to more = 134,000 (120,000+ 24,000 = 30% income tax + 20% Liability tax on income tax)

————-

Total Income Tax Payable 592,500 of annual income Rs 2,400,000

Liability Tax Explained  (Income above Rs 2,000,000)

From example no 4

Now calculating tax of 400,000 (which was above 2,400,000- 2,000,000)

120,000 (30% of 400,000) 

Add liability tax 20% on 30% income tax. That is 24,000 (20% of 120,000)

Similarly Income Tax on couple is explained below

Couple Income Tax Regulations 2018

Rs 1 to Rs 400,000 1%

Rs 400,001 to Rs 500,000 10%

Rs 500,001 to Rs 700,000 20%

Rs 700,001 to 20,000 30%

2000,001 >  30%+ 20% of tax

We hope things are clear, please do drop your comment below on comment box. And yes, let’s not forget to pay tax but also don’t forget to watch how our hard earned money is being used by politicians.