Salary TDS Calculation (Nepal – FY 2082/83)

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The calculation of Tax Deducted at Source (TDS) on salary is different from TDS on purchases and sales.
This document explains how TDS is calculated on employee salaries in accordance with Nepal Government rules FY 2082/83.

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1. Payroll Head

Definition

A Payroll Head is a salary component that represents either an addition (income/allowance) or a deduction from an employee’s salary.

Examples

• Additions (Income):

  • Basic Salary (BS): Rs. 10,000

  • Dearness Allowance (DA): Rs. 5,000

• Deductions:

  • Social Security Fund (SSF): Rs. 3,100

✅ Payroll heads are the specific items used to calculate Gross Salary, and then arrive at Net Payable Salary after deductions.

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2. Types of Payroll Heads

Payroll heads are divided into two categories: Taxable and Non-Taxable.

2.A. Additions

• Taxable Addition (करयोग्य कमाइ):
  Income components included in taxable salary.

  • Example: Basic Salary, Allowances (except exempted by law).

• Non-Taxable Addition (कर अयोग्य कमाइ):
  Income components not considered for TDS.

  • Example: Certain government-approved allowances or benefits.

2.B. Deductions

• Taxable Deduction (करयोग्य कटौती):
  These reduce taxable salary. Allowed deductions include:

  • SSF (Social Security Fund)

  • CIT (Citizen Investment Trust)

  • Life Insurance

  • Medical Insurance

  • Approved Retirement Funds

  ✅ Maximum deductible limit = Rs. 500,000 per FY.

• Non-Taxable Deduction (कर अयोग्य कटौती):
  Deductions not considered in TDS calculation.

  • Example: Loan repayment not under govt. approved schemes.

📌 Formula:
Taxable Salary = (Taxable Additions – Taxable Deductions)

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3. Tax Slab & Tax Influencing Factors

3.A. Insurance Deduction

• Life Insurance → up to Rs. 40,000 per year

• Medical Insurance → up to Rs. 20,000 per year

📌 Formula after insurance:
Net Taxable = Taxable Salary – Life Insurance – Medical Insurance

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3.B. Remote Area Discount (कर छुट – दूरदराज क्षेत्र)

Employees working in government-defined remote areas get additional rebates from taxable income:

Example:

• Taxable Income = Rs. 50,000

• If Area A → Discount = 50,000 → Net Taxable = 0 → No TDS payable

• If Area B → Discount = 40,000 → Net Taxable = 10,000 → 1% slab applies

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3.C. Differently Abled Discount (अपाङ्गता कर छुट)

• 50% rebate on taxable income limit OR

• Rs. 250,000 (whichever is minimum)
  👉 Applied on taxable income limit (slab base), not directly on tax amount.

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3.D. Tax Slabs FY 2082/83

For Single Individuals

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For Married Individuals

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3.E. Medical Expense Rebate

• Differently abled employees can claim Rs. 750 max direct tax rebate.

Example:
Tax as per slab = Rs. 15,000
Medical rebate = Rs. 750
✅ Final Tax = Rs. 14,250

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3.F. Female Employee Rebate

• Unmarried female employees → 10% rebate on final tax amount.

Example:
Tax = Rs. 14,250
Female rebate = 10% (Rs. 1,425)
✅ Net Tax = Rs. 12,825

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4. Retirement Fund Threshold

Government allows tax deduction for contributions made to Retirement Funds, up to a maximum threshold 5 Lakh.

Eligible Components:

• Employees Provident Fund (EPF)

• Citizen Investment Trust (CIT)

• Approved Retirement Fund

• Social Security Fund (SSF)

✅ Total Retirement Fund deduction limit = Rs. 500,000 per FY8283 (combined).

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5. Step-by-Step TDS Process

1. Start with Taxable Additions

2. Subtract Taxable Deductions (max Rs. 500,000)

3. Subtract Insurance deductions (40,000 + 20,000)

4. Apply Remote Area Rebate (if applicable)

5. Apply Differently Abled Rebate (if applicable)

6. Compute Net Taxable Income

7. Apply Tax Slabs

8. Subtract Medical Rebate (Rs. 750, if eligible)

9. Subtract Female Employee Rebate (10% if eligible)

✅ Arrive at Final Payable TDS

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6. Net Payable Salary

📌 Formula:
Net Payable = Total Additions – Total Deductions – Net TDS

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7. Key Notes (Important Points)

• Taxable Salary = Taxable Additions – Taxable Deductions – Insurance – Remote Area Rebate

• Non-taxable components are excluded from TDS computation.

• Maximum deductible limit (Retirement Funds) = Rs. 500,000 per FY8283.

• Life Insurance limit = Rs. 40,000, Medical = Rs. 20,000

• Correct classification of payroll heads is essential for accurate tax deduction.

• Order of calculation matters → deductions → rebates → slab → tax

• Consider Special Rebates (Female, Differently Abled, Remote area) before finalizing tax

✅ This framework ensures correct and compliant salary TDS calculation under Nepal Income Tax Rules FY 2082/83.

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Documented By - Sundar Mishra.