How to Read Your Salary Slip and Understand Tax Deductions in Nepal

Most salaried employees in Nepal glance at one number on their payslip — the amount that lands in their bank account — and ignore everything else. That is a mistake. Your salary slip is a legal record of how much you earned, how much tax and social security was withheld in your name, and whether your employer is depositing those amounts correctly with the government. Once you know how to read it, a payslip stops being a confusing grid of numbers and becomes a useful compliance check you can run every month in under two minutes.

This guide walks through a typical Nepali payslip line by line: what each entry means, how Gross, Taxable, and Net salary differ, what SST, TDS, and SSF actually stand for, and how you can independently verify that your employer withheld the right amount.

What Exactly Is a Salary Slip?

A salary slip (payslip) is a formal statement your employer issues each pay period, showing your earnings, the statutory and voluntary deductions withheld, and the resulting net amount paid to you. Under Nepali labour and tax law, employers are expected to maintain and, on request, provide these records — they are what you would present if a bank asks for income proof, if you apply for a visa, or if you need to reconcile your own annual tax return with what your employer reported to the Inland Revenue Department (IRD).

Breakdown of a Typical Nepali Payslip

While formats vary by employer, almost every Nepali payslip is built around the same four blocks shown in the diagram above: Gross Salary at the top, a Deductions section in the middle, and Net Pay at the bottom. Within Gross Salary, employers typically split the amount into a few components:

Gross vs Taxable vs Net Salary

These three figures are the most commonly confused terms on a Nepali payslip, so it is worth separating them clearly:

Gross Salary is your full earnings for the month before anything is withheld — the number your offer letter usually quotes on an annual basis. Taxable Salary is narrower: it is what remains after certain exemptions and allowable deductions (for example, your own SSF contribution, up to the permitted limit) are subtracted from Gross Salary, and it is the figure the income tax slab rates are actually applied to. Net Salary is what is left after every deduction — tax, SSF, any loan recovery, or other withholding — has been taken out of Gross Salary. Net Salary is always the smallest of the three, and it is the only one of the three that should match your bank statement.

SST, TDS, and SSF/PF Line Items Explained

Social Security Tax (SST)

Nepal's lowest income tax slab is charged at 1% and is labelled the Social Security Tax on many payslips. It applies to the first slab of taxable income — up to NPR 500,000 a year for an unmarried individual and NPR 600,000 for a couple filing jointly — and is deposited to a separate government revenue account rather than the general income tax account. Employees who are already contributing to the Social Security Fund (SSF), sole proprietors, and pensioners are generally exempt from this 1% SST, since their retirement contribution already serves a similar purpose.

TDS (Tax Deducted at Source)

TDS is the mechanism by which your employer withholds your income tax every month instead of waiting for you to pay it in a lump sum at year-end. There is no single flat TDS rate on salary — instead, your employer estimates your total annual taxable income, applies Nepal's progressive slab rates, and deducts a proportionate share each month. For the fiscal year 2082/83 (2025/26), the resident individual slabs are broadly as follows:

These slabs are set by the annual Finance Act, so it is worth re-checking them each Nepali fiscal year rather than assuming they stay the same. Your employer's payroll system should be applying whichever version is currently in force.

SSF / PF Line Item

Employees registered under the Social Security Fund (SSF) contribute 11% of their basic salary every month, while the employer separately adds a further 20% of basic salary on top — a combined 31% that funds four protection schemes: medical and health, accident and disability, dependent family protection, and old-age pension. Only your 11% employee share appears as a deduction reducing your net pay; the employer's 20% share is a cost to the company and does not reduce what you take home, though it should still be visible on a detailed payslip or your SSF portal statement. Employers who have not yet migrated to SSF may still run the older Provident Fund (PF) structure of 10% employee plus 10% employer, alongside a separate gratuity provision.

How to Verify Your Employer Deducted Correctly

You do not need an accounting background to spot-check your own payslip. Run through these steps once a quarter:

1. Confirm your basic salary is being used correctly for SSF. Multiply your basic salary by 11% and compare it to the SSF deduction line. If the deduction is calculated on your gross salary instead of basic salary, flag it — it is a common payroll error.

2. Annualise your taxable income and re-run the slabs yourself. Multiply your monthly taxable salary by 12, apply the slab table above, and divide by 12. Your figure should be close to the TDS shown — small differences are normal because employers true up bonuses or increments partway through the year.

3. Log in to the SSF portal. Every registered employee can check their SSF contribution history online. If your payslip shows a deduction but the SSF portal shows nothing credited for that month, your employer has withheld the money from you without depositing it — a serious compliance failure that should be raised immediately, in writing.

4. Reconcile against your annual tax withholding statement. At year-end, your employer should issue a statement summarising your total taxable income and TDS withheld for the year. Add up your twelve payslips and compare the total to this statement before you rely on it for your own tax filing.

FAQ

What if your payslip doesn't match your bank credit?

First, check for timing differences — some employers process bank transfers a day or two after issuing the payslip, or split a payment across two dates. If amounts genuinely differ, request an itemised explanation from HR or payroll in writing. Common causes include an unrecorded loan recovery, a mid-month attendance adjustment, or a bank transfer fee. If the shortfall relates to tax or SSF deductions that do not appear to have been deposited, you can independently verify your SSF contributions on the SSF portal and your TDS credit on the IRD's taxpayer portal using your PAN.

Can my employer deduct more TDS than the slab requires?

Employers sometimes over-withhold slightly during the year as a buffer against bonuses or salary revisions, and true this up in later months or at year-end. Excess TDS withheld beyond your actual annual liability is adjustable against your final tax return, or refundable, once you file.

Is SSF contribution compulsory for every employee?

Yes, for employees of formal-sector employers, and employees cannot opt out once their employer is registered. The law applies regardless of company size, so even a business with a single employee is expected to enrol that person.