KATHMANDU, May 30: The government has introduced changes to the income tax system through the Finance Bill 2026, allowing tax calculations to be based on the combined income of an individual or a married couple.
Under the new provision, taxable income of up to Rs 1 million per year for an individual or couple will be subject to a 1 percent tax rate. Previously, the 1 percent rate applied only to employment income of up to Rs 500,000 per year.
Govt raises income tax threshold to Rs 1 million
The new tax slabs will not apply to sole proprietorships, pension income, pension funds, or contributions made to social security funds.
For annual taxable income between Rs 1 million and Rs 1.5 million, taxpayers will pay Rs 10,000 on the first Rs 1 million and 10 percent tax on income above that amount. Previously, the 10 percent rate applied to income between Rs 500,000 and Rs 700,000.
Income between Rs 1.5 million and Rs 2.5 million will be taxed at Rs 60,000 on the first Rs 1.5 million, plus 20 percent on the amount exceeding Rs 1.5 million.
For income above Rs 2.5 million, taxpayers will pay Rs 260,000 on the first Rs 2.5 million and 27 percent on the remaining income.
Those earning more than Rs 4 million annually will also be required to pay an additional 2 percent surcharge on the excess income.
