Nepal Raises Personal Income Tax Threshold to Rs 1 Million as Top Rate Drops to 29%

Nepal’s new budget brings one of the most notable personal tax shakeups in recent years. Finance Minister Dr. Swarnim Wagle announced that the minimum threshold for the 1 percent income tax bracket has been doubled from Rs 500,000 to Rs 1,000,000, while the maximum income tax rate has been cut from 39 percent to 29 percent.

The change signals a clear effort by the government to reduce pressure on salaried workers, entrepreneurs, and middle-income earners as it presents the fiscal year 2083/84 budget in the Federal Parliament.

A bigger tax-free cushion for individuals

Under the revised structure, individuals will now pay just 1 percent income tax on income up to Rs 1 million, a major jump from the previous Rs 500,000 limit. That means a much larger share of personal income will remain in the lowest tax band before higher rates begin to apply.

This revision is expected to bring immediate relief for many taxpayers, especially in a climate where household budgets have been stretched by inflation and rising living costs.

Top tax rate cut to 29 percent

Alongside the higher entry threshold, the government has also lowered the highest income tax rate from 39 percent to 29 percent. That reduction is designed to soften the tax load on higher earners and improve overall sentiment in the private sector.

Earlier budget documents for FY 2082/83 showed a top personal tax rate of 39 percent on income above Rs 5 million, making this one of the sharpest downward revisions in Nepal’s personal tax system in recent years.

Why this matters for the economy

The move comes as the government attempts to balance revenue needs with calls for a more taxpayer-friendly system. A lower tax burden can boost disposable income, support consumption, and improve confidence among professionals and business owners.

It may also reflect pressure from the private sector, which had been advocating for a personal income tax threshold of Rs 1 million and for lower rates across the board.

Part of a wider budget reset

The income tax revision is not happening in isolation. Budget coverage from local outlets also points to broader fiscal adjustments, including cuts in customs duty rates on raw materials used in manufacturing. Together, these changes suggest the government is trying to support both consumers and producers while encouraging economic activity.

For taxpayers, though, the headline is simple: Nepal has moved to make income tax lighter at both ends, with a higher starting threshold and a lower ceiling at the top.