Nepal Increases Tax Exemption Limit for Pension Fund Contributions


The government of Nepal has increased the exemption limit for taxable income contributed to pension funds through an amendment to the income tax regulations, unveiled on Wednesday. The ceiling for income tax exemption on annual contributions to pension funds has been raised from Rs. 300,000 to Rs. 500,000. Pension funds include schemes managed by the Employee Provident Fund, Citizen Investment Trust, and the Social Security Fund.

Under the new provision, individuals can deduct up to Rs. 500,000 from their annual taxable income if this amount is deposited in pension funds. Previously, the maximum deductible amount was Rs. 300,000 per annum. The amended income tax regulation states, “Individual income taxpayers can deduct up to Rs. 500,000 or one-third of their taxable income, whichever is less when contributing to pension funds.”

This change means that income earners can receive a tax exemption for Rs. 41,666 per month if deposited into pension funds, an increase from the previous threshold of Rs. 25,000 per month. For instance, an individual earning Rs. 1.5 million annually can deposit Rs. 500,000 in pension funds and will only be taxed on the remaining Rs. 1 million.

According to the current income tax law, the tax rates are as follows: one percent for annual income up to Rs. 500,000; 10 percent for income between Rs. 500,000 and Rs. 700,000; 20 percent for income between Rs. 700,000 and Rs. 1 million; 30 percent for income between Rs. 1 million and Rs. 2 million; 36 percent for income between Rs. 2 million and Rs. 5 million; and 39 percent for income above Rs. 5 million.

Additionally, the government has doubled the annual tax exemption amount for medical treatment to Rs. 1,500. The new rule also requires traders to submit details of their corporate bank accounts to the Inland Revenue Department (IRD) in a specified format.

These provisions will take effect at the beginning of the new fiscal year 2024/25, according to the IRD, aiming to encourage retirement savings and streamline tax compliance in Nepal.

Leave a Reply

Your email address will not be published. Required fields are marked *

More Interesting Read

Liberty Micro Life Insurance to Launch Public Share Offering
Latest Articles

Liberty Micro Life Insurance to Launch Public Share Offering

Liberty Micro Life Insurance Limited is preparing to offer 2,250,000 ordinary shares to the public at Rs. 100 per share, aiming to collect a total of Rs. 225,000,000. The public share issue is being organized in collaboration with Nepal SBI Merchant Banking Ltd and RBB Mutual Fund 1, creating a major opportunity for investors looking […]

Read More
Global IME Bank Proposes 5.5% Dividend for FY 2080/81
Latest Articles

Global IME Bank Proposes 5.5% Dividend for FY 2080/81

Global IME Bank Limited (GBIME) has proposed a 5.5% dividend for its shareholders for the fiscal year 2080/81. This decision was made during the 446th board meeting held on Ashwin 21. The proposed dividend includes 5.5% bonus shares, which will be distributed based on the bank’s paid-up capital of Rs. 36.12 Arba. The distribution of […]

Read More
Global IME Bank Launches Festival Cashback Offer with NEPALPAY QR
Latest Articles

Global IME Bank Launches Festival Cashback Offer with NEPALPAY QR

Global IME Bank, in collaboration with Nepal Clearing House Limited (NCHL) and KK Mart, has launched an exciting limited-time cashback offer for the upcoming festival season. From October 4 to October 16, 2024 (18th to 30th Ashoj), users of GlobalSmart+ and connectIPS can enjoy a 10% cashback, up to Rs. 100, when they make payments […]

Read More