Nepal’s Budget Shake-Up: Income Tax Exemption Doubles to Rs 1 Million as 360 Goods Lose Excise Duty

Finance Minister Dr. Swarnim Wagle has unveiled one of the most consequential tax overhauls in recent budget history, doubling the personal income tax exemption threshold to Rs 1 million per year and cutting the tax burden on a wide range of consumer and business goods.

Under the new budget for fiscal year 2026/27, income up to Rs 1 million will now face only a one percent tax, marking a major shift in how the government is trying to ease financial pressure on households while still keeping the revenue system intact.

A bigger tax-free cushion for individuals

The headline move is the sharp increase in the personal income tax exemption threshold. By raising the limit to Rs 1 million annually, the government is effectively allowing more of a worker's income to remain protected from heavier taxation.

This is a meaningful relief measure for salaried employees, small business owners, and self-employed earners who have been dealing with rising living costs and tighter household budgets.

Excise duty removed on 360 goods

In another major change, the government has removed excise duties on 360 different goods. The move is designed to simplify the domestic tax structure and reduce the cost burden across multiple parts of the economy.

For consumers, that could mean lower prices on select products. For businesses, it may reduce compliance friction and make the tax system easier to navigate.

Why this budget matters

The changes signal a clear policy direction: lighter direct tax pressure on individuals and a cleaner, less complicated indirect tax system. That combination could improve sentiment among taxpayers and businesses alike, especially if the reforms are implemented efficiently.

Finance Minister Wagle has also been building support for the budget through consultations with former finance ministers, a sign that the government wants the fiscal plan to be seen as both bold and grounded in broader policy advice.

What to watch next

The big questions now are how these tax changes will affect government revenue, consumer prices, and overall economic activity. If the relief measures boost spending and business confidence, the budget could deliver a stronger-than-expected political and economic payoff.

For now, the announcement stands out as a major attempt to reset Nepal's tax landscape in favor of simplicity, relief, and broader economic ease.