What Changed and Why It Matters
Budget day in Nepal carries a particular weight for working professionals. Before Finance Minister Dr. Swarnim Wagle had finished reading the FY 2083/84 budget speech on Jestha 15, 2083 (May 29, 2026), one announcement had already caught the attention of salaried employees, freelancers, and business owners across the country: a sweeping overhaul of personal income tax.
Two changes define this revision. The income band taxed at just 1% has been expanded from Rs 5 lakh to Rs 10 lakh per year, effectively doubling the low-tax threshold in a single budget. Alongside that, the government has slashed the peak personal income tax rate by 10 full percentage points, bringing it down from 39% to 29%. For a tax system that had not seen reforms of this scale in years, FY 2083/84 marks a meaningful turning point.
This piece covers the complete revised slab structure, a direct comparison with the old system, and a plain-language breakdown of what the numbers mean for your actual take-home pay.
The Revised Income Tax Slabs for FY 2083/84 (2026/27)
Nepal uses a progressive tax system, which means each rate applies only to the slice of income that falls within that particular band. Crossing into a higher slab does not increase the tax on income you have already earned in a lower band. The full revised structure for FY 2083/84 is as follows:
| Annual Taxable Income (Rs.) | Tax Rate | Maximum Tax in This Band |
|---|---|---|
| Up to 10,00,000 | 1% | Rs 10,000 |
| 10,00,001 to 15,00,000 | 10% | Rs 50,000 |
| 15,00,001 to 25,00,000 | 20% | Rs 2,00,000 |
| 25,00,001 to 40,00,000 | 27% | Rs 4,05,000 |
| Above 40,00,000 | 29% | No upper limit |
One point worth clarifying: income up to Rs 10 lakh is not fully tax-free. A 1% rate applies to that entire band, meaning someone earning exactly Rs 10 lakh annually pays Rs 10,000 in income tax for the year. That works out to roughly Rs 833 per month, which for most earners in that bracket represents a negligible obligation.
Old System vs. New System: A Direct Comparison
Understanding the scale of this revision requires a quick look at what the previous structure looked like.
FY 2082/83 (old slabs):
- Minimal-tax threshold: Rs 5,00,000
- Top marginal rate: 39%
- Number of slabs: 6
FY 2083/84 (new slabs):
- Minimal-tax (1%) threshold: Rs 10,00,000
- Top marginal rate: 29%
- Number of slabs: 5
The threshold has doubled. The top rate has dropped by 10 percentage points. And the number of slabs has been reduced from 6 to 5, simplifying the calculation for most taxpayers. For anyone earning between Rs 5 lakh and Rs 10 lakh annually, this is the most impactful revision in recent memory. That entire income range, which previously fell into progressively higher bands, now sits entirely within the 1% bracket.
What the Revision Signals
A tax structure that keeps 1% rates active up to Rs 10 lakh sends a clear signal: the government is prioritising disposable income for middle-income earners. Pairing that with a top rate cut to 29% brings Nepal’s personal income tax ceiling closer to regional norms and reduces the friction that higher marginal rates create for compliance among top earners.
The revised system also removes the separate slab structure for individuals and married couples that existed in previous years, applying uniform slabs to all resident individuals. This simplification reduces confusion and makes year-end tax planning considerably more straightforward.
For salaried employees, the practical implication is a lower TDS deduction from your monthly payslip starting Shrawan 1, 2083 (mid-July 2026). Confirm with your HR or payroll team that the updated slabs have been applied, and check your payslip in the first month of the new fiscal year to verify the change has been reflected.
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