What is an income tax slab? आयकर दर
An income tax slab is a band of annual taxable income that is taxed at its own rate. Nepal's personal income tax is marginal: each rate applies only to the income inside its band, so moving into a higher slab never raises the tax on the income below it.
Also called: tax slab, tax bracket, aayakar dar
How a slab works
A slab is a band, not a rate on the whole income. Income up to the first threshold is taxed at the first rate, the slice between the first and second thresholds at the second rate, and so on up the table. Someone just over a threshold pays the higher rate only on the amount above it.
This is worth stating plainly because the opposite belief is common, and it leads employees to turn down raises they think will cost them money.
This entry is the definition. The current table, what changed this year, the SSF exemption on the first band and the worked examples are in our guide to Nepal's income tax slabs and rates.
Income Tax Slabs, answered
The slab is the band of income; the rate is the percentage charged on the income inside that band. Because the rates are marginal, the effective rate (total tax divided by taxable income) ends up lower than the rate of the highest slab a salary reaches, once that salary is past the first band.
- Income Tax Act 2058, Schedule 1, as amended by the Finance Act. The current rates and their gazette citation are in the guide linked above.
This page explains general practice in Nepal. It is not legal or tax advice, and statutory figures are revised from time to time. Check the current Act, rule or notice before acting on it.
Related terms
- TDS (Tax Deducted at Source)स्रोतमा कर कट्टीTDS is income tax withheld by the employer from an employee's salary each month and deposited with the Inland Revenue Department on the employee's behalf. It is calculated on annual projected income and spread across the year, not charged month by month in isolation.
- Social Security Tax (SST)सामाजिक सुरक्षा करThe social security tax is the 1% charged on the first NPR 1,000,000 of a resident individual's annual income. It is collected through payroll like ordinary income tax, and it is waived for employees who contribute to the Social Security Fund.
- Citizen Investment Trust (CIT)नागरिक लगानी कोषCitizen Investment Trust (CIT) लाई नेपालीमा नागरिक लगानी कोष (nagarik lagani kosh) भनिन्छ। यसमा कर्मचारीले आफ्नो इच्छाले आधारभूत तलबको 33%सम्म अवकाश बचतका लागि जम्मा गर्न सक्छन्, र सीमाभित्रको यो रकमले करयोग्य आय घटाउँछ। The Citizen Investment Trust is a voluntary retirement savings scheme employees can join on top of PF or SSF. An employee elects to contribute up to 33% of basic salary, and the contribution reduces taxable income within the shared retirement ceiling.
- Nepali Fiscal Yearआर्थिक वर्षNepal's fiscal year runs from the first of Shrawan to the last day of Ashad in the Bikram Sambat calendar, which is roughly mid-July to mid-July in the Gregorian calendar. Tax slabs, leave accrual, bonuses and annual returns all follow it.
- Net Payखुद तलबNet pay is the amount that actually reaches an employee's bank account: gross salary minus the retirement contribution, any voluntary CIT election, monthly TDS, and any other authorised deduction such as a salary advance.
- Inland Revenue Department (IRD)आन्तरिक राजस्व विभागIRD stands for Inland Revenue Department (आन्तरिक राजस्व विभाग), Nepal's tax administration, responsible for income tax, VAT and excise. For payroll it is the body that publishes the tax slabs, issues PANs, receives monthly withholding deposits and defines the eTDS format.
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