Apr 20, 2024

As per Income Tax Act of Nepal, Income from Employment for an Income Year of an individual‘s forms the remuneration paid to that Individual in that Income year.

As per Income Tax Act of Nepal, following payments made to the Individual by the employer during the year are included in the Taxable Income from Employment:

  1. payments of wages, salary, leave pay, overtime pay, fees, commissions, prizes, gifts, bonuses, and other facilities;
  2. payments of any personal allowance, including any cost of living, subsistence, rent, entertainment, and transportation allowance;
  3. payments providing any discharge or reimbursement of costs incurred by the individual or an associate of the individual;
  4. payments for the individual's agreement to any conditions of the employment;
  5. payments for redundancy or loss or termination of the employment;
  6. retirement contributions, including those paid by the employer to a retirement fund in respect of the employee, and retirement payments;
  7. other payments made in respect of the employment.

However, the following are excluded in calculating an individual's remuneration from an employment:

  1. amounts exempt under Section 10  of Income Tax Act, and final withholding payments;
  2. meals or refreshments provided in premises operated by or on behalf of an employer to the employer's employees that are available to all the employees on similar terms;
  3. any discharge or reimbursement of costs incurred by the individual
    1. that serve the proper business purposes of the employer; or
    2. that are or would otherwise be deductible in calculating the individual's income from any business or investment;
  4. payments of the prescribed small amounts which are so small and thus unreasonable or administratively impracticable to make accounting for them.

The employee is not required to file Income Tax return when he has only one Employer at a time and Employer is Resident and has claimed only such retirement benefit being paid by the employer and has claimed the payment for medical treatment made by Employer but has not claimed donation expenses.

In all other cases, return should be filed. 

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