What deductions can a salaried person claim in Nepal?
A salaried person in Nepal can deduct an approved retirement contribution — Provident Fund, Social Security Fund or Citizen Investment Trust — up to a combined NPR 5,00,000 a year, a life insurance premium up to NPR 40,000, and a health insurance premium up to NPR 20,000. Those are the reliefs the Act gives against employment income.
That is the whole list for employment income. It is short by design: Nepal gives relief for money you lock away for later and for insurance you carry, and not for what you spend. Anyone offering you a longer list is either describing business income — where genuine costs of earning are deductible — or describing another country.
Are payslip deductions the same as tax deductions?
No. A payslip deduction is money leaving your pay — tax withheld, your fund contribution, a loan instalment. A tax deduction is an amount subtracted from your income before the bands are applied, so it lowers the tax rather than the pay. Your fund contribution happens to be both, which is exactly why the two get confused.
| What’s compared | Deducted from your pay | Deducted from your taxable income |
|---|---|---|
| Income tax withheld (TDS) | Yes | No — it is the tax itself |
| Your PF or SSF contribution | Yes | Yes, inside the combined ceiling |
| Your CIT contribution | Yes, if routed through payroll | Yes, inside the same ceiling |
| Employer PF or SSF contribution | No — it is paid on top | No — it is added to your income |
| Life or health insurance premium | Usually no — you pay it yourself | Yes, up to its own ceiling |
| A staff loan instalment | Yes | No |
The fourth row is the one that surprises people. The employer’s contribution never touches your payslip, and it still raises your tax, because the Act counts it as income in your hands the moment it is paid into your fund. Every figure on this site is computed that way; a good many calculators are not.
Every ceiling, in one table
Each relief has a ceiling of its own, and the three retirement routes also share one ceiling between them. Claiming above a ceiling is allowed — it simply buys no further relief.
| PF, SSF and CIT combinedOne ceiling shared by all three; the mandatory contribution is counted first | NPR 5,00,000 a year |
|---|---|
| Citizen Investment TrustWhichever is lower, and still inside the combined ceiling above | NPR 3,00,000 or 33.33% of assessable income |
| Life insurance premiumIts own ceiling, outside the retirement one | NPR 40,000 a year |
| Health insurance premiumIts own ceiling, outside the retirement one | NPR 20,000 a year |
| Resident woman rebateNot a deduction — a rebate on the computed tax, applied last | 10% |
How much tax does each deduction actually save?
A deduction saves tax at your marginal rate, not at the rate on your whole salary. On a salary of NPR 1,00,000 a month the top rupee is charged at 10%, so a NPR 40,000 life insurance premium claimed in full is worth NPR 4,000 a year — not the premium itself.
| Deduction | Rate or ceiling | Relief allowed | Tax saved for the year |
|---|---|---|---|
| Provident Fund | 10% + 10% of basic | NPR 1,44,000 | NPR 7,200 |
| Social Security Fund | 11% + 20% of basic | NPR 2,23,200 | NPR 17,920 |
| Citizen Investment Trust | NPR 3,00,000 or ⅓ of income | NPR 3,00,000 | NPR 21,000 |
| Life insurance premium | NPR 40,000 | NPR 40,000 | NPR 4,000 |
| Health insurance premium | NPR 20,000 | NPR 20,000 | NPR 2,000 |
Each row is that deduction on its own, against a salary with no other relief, basic at 60% of gross where a contribution is involved. Stacked together they interact — the retirement rows share a ceiling, and once enough relief has come off, the last slice of income drops into a lower band and the next deduction saves less. Put your own figures into the calculator to see the stack rather than the parts.
Why the fund rows save less than their relief suggests
A deduction is not a discount
Why does my CIT contribution save less than I expected?
Because Provident Fund, Social Security Fund and Citizen Investment Trust share one ceiling of NPR 5,00,000 a year between them, and the mandatory contribution is counted first. CIT relief is only the room left over — put in more than that room and the excess is money saved, not tax saved.
Worked through: on NPR 1,00,000 a month with a Provident Fund, the mandatory contribution already uses part of the NPR 5,00,000 ceiling. Adding NPR 3,00,000 of CIT on top produces NPR 4,44,000 of total relief, not the sum of the two — the ceiling bites, and the tax saved is NPR 21,720 for the year.
So the useful question before a CIT top-up is not “how much can I put in?” but “how much room is left?”. The calculator shows the allowed figure beside the claimed one and names the ceiling that cut it, which is the number to size the contribution against. The post on reducing salary tax legally works the same decision through end to end.
Can I claim my medical bills against salary tax in Nepal?
Not as a deduction, but section 51 of the Income Tax Act 2058 gives a medical tax credit: 15% of approved medical expenditure, taken off the tax itself rather than off your income. It is capped at a figure the Income Tax Rules prescribe, and anything the cap or a small tax bill leaves unused can be carried forward to a later year.
A credit and a deduction are not the same instrument, and the difference is the whole point of this section. A deduction removes an amount from the income the bands run on, so it saves you that amount times your marginal rate. A credit is subtracted from the computed tax itself, rupee for rupee — which makes it worth the same to every taxpayer regardless of band.
| What it isTaken off the tax due, not off assessable income | A credit, not a deduction |
|---|---|
| How muchThe rate is set by section 51 itself | 15% of approved expenditure |
| CeilingThe Act says only 'the prescribed limit' — confirm the current figure before relying on it | Set by the Income Tax Rules |
| Unused amountWhether the cap blocked it or your tax was too small to absorb it | Carried forward |
| Who can claimFor expenditure on themselves, whoever paid it | A resident natural person |
Why this page does not print a rupee figure
Two exclusions worth knowing before you keep a receipt: cosmetic procedures do not count, and neither does any part of a bill an insurer reimbursed — the credit is for what the treatment actually cost you. The claim also goes through a return rather than through payroll, so unlike the reliefs above, telling your employer achieves nothing.
The calculator does not compute this credit, and says so rather than guessing: approved expenditure is a defined term, the ceiling lives outside the Act, and a tool that assumed either would be confidently wrong. It is here because a page called “deductions” that never mentioned the one relief for medical treatment would be leaving money on the table for the reader who needed it.
Which expenses are not deductible from salary tax in Nepal?
Rent, school fees, a home loan instalment, transport costs and everyday living expenses are not deductible from employment income in Nepal. The Act allows relief for approved retirement contributions and for insurance premiums; it does not run a general schedule of personal expenses the way some other countries do.
- Rent you pay. Not deductible from employment income. Rent you receive is taxed under different rules altogether.
- School and tuition fees. Not deductible.
- Home loan interest or instalments. Not deductible from salary.
- Medical bills, as a deduction. The relief above is for a health insurance premium, not for treatment. Treatment has its own route — the medical tax credit, which comes off the tax rather than off the income.
- Transport, fuel and daily expenses. Not deductible — and a cash transport allowance is taxable income on the way in.
Charitable donations, remote-area postings, pension income and disability have their own treatment in the Act, and the rules turn on facts a calculator cannot see. They are outside what this site computes; take them to a registered accountant or to the Inland Revenue Department.
How do I claim a deduction on my salary tax?
Tell payroll, in writing, before the year ends. Fund contributions routed through payroll are already counted; an insurance premium or a CIT contribution you arranged yourself is invisible to them until you hand over the receipt. Once declared, the relief applies to the whole year and the excess withheld so far comes back through a smaller deduction in the months that remain.
- Work out what the relief is worth first — the table above, or the calculator with your own numbers.
- Check the room left under the combined ceiling before topping up CIT, so the contribution is sized to the relief and not to a round number.
- Give payroll the policy or the receipt in writing, well before the fiscal year closes at the end of Ashad.
- Check the next payslip. A declared relief should reduce the tax line for the rest of the year, not only the month you declared it.
- Keep the receipts. They are what your TDS certificate and any later return are checked against.
Related on this site: how the whole calculation fits together, the TDS the deduction changes, the bands the relief moves you between, and SSF against PF, which decides which mandatory contribution fills the shared ceiling in the first place.
Sources
- Income Tax Act 2058
Section 63 and Schedule 1: the reliefs and every ceiling quoted above.
- Citizen Investment Trust
The CIT scheme itself, and the contribution routes open to salaried members.
- Inland Revenue Department
Filing, and the income types with relief rules this page does not cover.