Nepal Budget 2083/84: Personal Income Tax Exemption Raised to NPR 1 Million

While presenting the budget in parliament, Finance Minister Swarnim Wagle announced doubling the income tax exemption limit for individuals to NPR 1 million.

Minister Wagle expressed his expectation of constructive support from all state institutions including parliament, expressing confidence that this year’s budget will serve as an effective policy instrument for Nepalis at home and abroad.

He highlighted that the cycle of political instability has ended by leveraging the capital of the young demographic as an opportunity.

At the outset of the budget presentation, major policy reforms in taxation were also announced.

The Finance Minister stated, “I have reviewed tax rates significantly to ease entrepreneurship and business, expand the middle class, and stimulate the overall economy. To reduce the tax burden, I have doubled the income tax exemption limit for individuals to NPR 1 million. I have also reduced the maximum personal income tax rate by 10 percentage points.”

Currently, personal annual income up to NPR 500,000 for individuals and up to NPR 600,000 for couples is taxed at only 1 percent, with tax rates increasing in various brackets beyond that.

For couples, income between NPR 600,000 and NPR 800,000 is taxed at 10 percent; NPR 800,000 to NPR 1.1 million at 20 percent; and NPR 1.1 million to NPR 2 million at 30 percent.

Additionally, for taxable income between NPR 2 million and NPR 5 million, there is an additional 20 percent tax applied on the rate charged on NPR 2 million, and for taxable income exceeding NPR 4 million, an extra 30 percent tax applies on the rate charged on NPR 2 million, as stated in the Income Tax Act.

Tax administration experts note that because of this, the top tax rate can reach up to 39 percent, which is among the highest in South Asia.

There is significant public interest in the first budget of the stable government, which achieved a comfortable majority in the general elections following the displacement of the previous government led by the Janajati State Movement.

Finance Minister Wagle announced that the government will encourage capable citizens to voluntarily relinquish their social security allowances.

A program titled “Let those who can let go, and let those who cannot be supported” has been introduced in the budget for this purpose.

Wagle also shared plans to establish legal and technical provisions to grant voting rights in the annual budget to Nepalis residing abroad.

He additionally suggested holding extensive discussions regarding government grants to nationally recognized political parties.

The budget declaration stated that the government has placed agriculture as a top priority.

The Finance Minister announced a pilot program to provide loans covering up to 40 percent to farmers investing up to NPR 20 million.

Wagle also disclosed plans to have Nepal removed from the European Union’s aviation blacklist.

Additional concessions will be provided for loans disbursed to women entrepreneurs.

Swarnim Wagle, known as an expert in economics, described his first budget as ambitious in scale.

Last year’s budget was NPR 1.95 trillion, which was later reduced by NPR 300 billion.

Experts have noted that inflation, supply chain issues, and the ongoing conflict in the Middle East pose challenges to the government’s objectives.

Ruling party leaders expect this budget to provide relief to the middle class and promote industrial production.

The economic survey presented by Finance Minister Wagle in the house on Wednesday revealed that Nepal’s economic growth rate has been limited to 3.85 percent in the current fiscal year.

Due to rising inflation, including factors such as the Iran war, there is considerable attention on salary and income tax limit policies to be outlined in the budget next week in parliament.