Kathmandu: The government has introduced significant changes to income tax rates through the newly announced budget for the fiscal year 2026/27.
Finance Minister Dr Swarnim Wagle is set to unveil a restructured tax slab system during today’s parliamentary session, aimed at providing relief to both individual and institutional taxpayers.
While the Income Tax Act of 2002 remains the foundational law, the government frequently utilizes the annual Finance Act to adjust these brackets to reflect the current economic climate.
According to sources at the Ministry of Finance, the new budget significantly lowers the tax burden on both ends of the spectrum. The maximum individual tax rate is being reduced from 39 percent to 33 percent.
Furthermore, the threshold for the minimum tax bracket, which currently levies a 1 percent social security tax, is being raised from an annual income of Rs 600,000 to Rs 800,000.
This dual approach is designed to lighten the load for high-salaried professionals while offering vital breathing room for the lower-middle class and low-income earners.
Beyond these primary adjustments, the government has also moved to decrease tax rates for intermediate income brackets, specifically for those earning between Rs 600,000 and Rs 2 million. Corporate taxpayers are also expected to benefit, as the government plans to selectively reduce institutional tax rates that currently range from 25 to 30 percent.
These changes come as a response to long-standing complaints from stakeholders who argued that high tax rates, coupled with administrative red tape, were discouraging both domestic and foreign investment in Nepal.
The strategic shift in tax policy reflects Finance Minister Wagle’s economic philosophy that a more moderate and simplified tax structure encourages better compliance. By easing the financial burden and making the tax system more taxpayer-friendly, the ministry believes it can actually increase total revenue collection in the long run.
The government hopes that these reforms will ultimately create a more attractive environment for investors and stimulate broader economic growth across the country.
#Nepal #Budget #Economy
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