Fiscal Year 2083/84 began on 1 Shrawan 2083 (mid-July 2026), and it brought one of the biggest personal income tax overhauls Nepal has seen in over a decade. Finance Minister Dr. Swarnim Wagle's budget speech, delivered to Parliament on 15 Jestha 2083 (29 May 2026), doubled the tax-free income threshold and cut the top marginal rate significantly. If you're an employer, freelancer, or salaried employee, there are a handful of concrete things you need to check right now to make sure you're compliant, and not overpaying or underpaying, under the new structure.
Updating Payroll Systems for the New Slabs
The headline change is a restructured income tax slab table for individuals. The tax-free threshold has doubled from NPR 500,000 to NPR 1,000,000, and the top marginal rate has dropped from 39% to 29%. The new slab structure for FY 2083/84 is broadly: 1% up to NPR 10 lakh, 10% on the next 5 lakh, 20% on the next 10 lakh, 27% on the next 15 lakh, and 29% on income above NPR 40 lakh.
For payroll teams, this means:
- Reconfigure payroll software with the new slab table before processing the first Shrawan salary run, since applying old rates even for a single cycle creates an over-withholding problem that has to be corrected later.
- Recalculate each employee's projected annual tax liability under the new structure, since monthly TDS is based on an annualized income projection, not just the current month's salary.
- Communicate the change to employees so they understand why their net take-home pay has increased, and can verify the new deduction on their first payslip of the new fiscal year.
PAN and VAT Renewal Reminders
The start of a new fiscal year is also a natural checkpoint to confirm your registration status is current:
- PAN status: Confirm your Permanent Account Number registration details, including business address and contact information, are up to date with IRD, especially if anything changed during the previous fiscal year.
- VAT registration: If your turnover has crossed the mandatory VAT registration threshold during FY 2082/83, you may now be required to register for VAT for FY 2083/84 onward; check your prior year's turnover against the current threshold.
- Renewal of business registration: Some local-level business registration renewals also fall due around the fiscal year transition; confirm your municipal or ward-level renewal obligations alongside your tax registration.
Advance Tax Installment Schedule Reset
For businesses and self-employed professionals who pay advance tax in installments, the start of FY 2083/84 resets your installment calculation. Since the underlying tax rates and slabs have changed, your advance tax installments for the new fiscal year should be recalculated based on your projected FY 2083/84 income and the new rate structure, not simply carried forward from last year's installment amounts. Using last year's installment figures without adjustment risks either significant underpayment (triggering interest) or unnecessary overpayment of cash you didn't need to part with early.
Common Transition Mistakes
- Mixing old and new rates in the same payroll run: Applying the new slabs to income earned during FY 2082/83 (before Shrawan 1) is incorrect; that income remains governed by the old rate table.
- Forgetting IT sector exemption changes: Businesses that relied on prior-year export incentive exemption percentages should confirm whether those percentages have been revised for the new fiscal year, since sector-specific incentives are frequently adjusted in each budget.
- Not updating advance tax installments: As noted above, carrying forward the previous year's installment amount without recalculation is a frequent and costly oversight.
- Delaying software updates: Waiting until mid-year to update payroll or accounting software compounds the correction work needed later; the safest approach is to update systems before the first pay cycle of the new fiscal year.
Frequently Asked Question
Does the new rate apply to income earned before Shrawan 1?
No. Income earned during FY 2082/83, the fiscal year that ended in mid-July 2026, continues to be assessed under the old slab structure that was in effect at the time that income was earned. The new FY 2083/84 slabs, including the doubled exemption threshold and the reduced top rate, apply only to income earned from 1 Shrawan 2083 onward, once the Finance Act 2083 provisions take effect.
Disclaimer: This article is for general informational purposes only and does not constitute legal or tax advice. Figures are based on the FY 2083/84 budget speech and Finance Bill as announced; final rates depend on the enacted Finance Act and IRD circulars. Please consult an ICAN-registered Chartered Accountant or the Inland Revenue Department directly for advice specific to your situation.
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