Kathmandu: The new fiscal year 2026/27 has officially commenced on Friday, July 17 (Shrawan 1). With the start of this fiscal cycle, the government’s latest policies, programs, and budget, alongside the central bank’s newly unveiled monetary policy, have all moved into the implementation phase.
This transition brings a significant shift in the nation’s financial landscape, as the government has scrapped several old taxes while introducing new levies and concessions aimed at simplifying the tax system, encouraging private sector investment, and boosting industrial growth.
One of the most notable changes this year is a sweeping reform of the personal income tax structure. The government has doubled the threshold for the minimum one percent tax bracket, moving it from the previous 500,000 rupees to one million rupees.
Furthermore, the maximum personal income tax rate has been slashed from 39 percent to 29 percent. Under the new five-tier system, income up to one million rupees is taxed at one percent, with rates scaling up to a maximum of 29 percent for earnings exceeding four million rupees. This move is expected to provide substantial financial relief to middle and high-income earners. Additionally, civil servants will see a boost in their take-home pay as a 21 percent overall salary hike, which includes a 10 percent increase in basic pay, comes into effect this month.
Environmental and sector-specific policies have also seen significant updates. An integrated “Green Tax” has been introduced, consolidating various previous charges like infrastructure development and road maintenance fees. To promote commercial farming, the government has implemented a provision to provide up to 40 percent incentive grants to farmers investing up to 20 million rupees.
Meanwhile, the capital market is set for modernization with the phased introduction of intraday trading, short selling, and derivative transactions. Crucially for investors, capital gains tax on the sale of listed shares will now be treated as a final tax, providing much-needed clarity and stability to the stock market.
However, the new fiscal measures also introduce several additional costs that will directly impact the general public. Private educational and healthcare institutions are now required to levy a three percent “Equity Fee” on their services. In a move that has sparked conversation regarding consumer impact, a five percent Value Added Tax (VAT) has been applied to domestic electricity consumption exceeding 50 units.
While the government has suggested that alternative arrangements will be made to prevent this burden from falling entirely on consumers, specific details remain unannounced. Commercial electricity users, on the other hand, will continue to pay the standard 13 percent VAT.
Luxury consumption and service sectors have also been targeted with new fees. A two percent luxury tax is now applicable to five-star hotels, high-end resorts, and imported liquor. Furthermore, the annual royalty for mini-casinos has been doubled from 15 million to 30 million rupees. Purchasers of gold and silver jewellery will now face an additional 0.5 percent “Skill Promotion Fee,” and the burgeoning ride-sharing industry is subject to a new five percent service charge. These targeted taxes reflect the government’s strategy to generate revenue from non-essential services and luxury goods.
On the monetary front, the Nepal Rastra Bank’s policy for the current fiscal year also goes into effect today, with a primary goal of stimulating the economy and increasing credit flow. The policy aims to maintain inflation within 5.5 percent while targeting an 11 percent expansion in private sector credit.
Key features include the stabilization of interest rates through a corridor system and the relaxation of blacklisting rules for check-bounce cases. While the combined efforts of the government and the central bank are expected to modernize the banking system and lower industrial costs, the immediate rise in the cost of education, healthcare, and digital services suggests a mixed economic outlook for the average consumer.
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