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):
  Salary components considered for TDS.

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

• Non-Taxable Addition (कर अयोग्य कमाइ):
  Salary components not included in TDS.

  • Example: Certain government-approved allowances/benefits.

2.B. Deductions

• Taxable Deduction (करयोग्य कटौती):
  Reduces taxable salary. Government-approved 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):
  Items not recognized for TDS.

  • Example: Loan repayments not under govt. 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 (for the year):

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

📌 Note:
If SSF deposit is used, 1% slab is not applicable. Other slabs (10%, 20%…) still apply.

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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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Practical Example – Salary TDS Calculation

Employee Data:

Monthly Salary Components:

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Step 1: Annual Taxable Salary

• Taxable Additions : (50,000+5,000+12,000)×12=8,04,000
• Taxable Deductions : (15,500+3,333.33)×12=2,25,999.96
• $$\text{Taxable Salary :}8,04,000–2,25,999.96=5,78,000$$

Note: For mid-year salary posting, multiply monthly taxable values by remaining months, then add special additions (e.g., bonuses, OT).

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Step 2: Apply Remote Area Discount

Remote Area C → Rs. 30,000, (discount for the year)

• 5,78,000–30,000 = 5,48,000
• No differently abled discount for John.

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Step 3: Apply Tax Slabs

• Annual Taxable Salary: 5,48,000

• SSF deposited → 1% slab ignored

• Remaining slabs:

Second slab (10%):

Taxable = 5,48,000

• Ignore 1% slab (SSF deposited)

• Second slab (10%): 5,48,000 – 5,00,000 = 48,000 → 48,000 × 10% = 4,800

✅ Annual TDS = Rs. 4,800

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Other Cases – Salary touches multiple slabs (Full-year example)

Case 1: Salary touches multiple slabs (full slab)

• Annual taxable salary = 10,00,000

• SSF applicable → ignore 1% slab

• Second slab: 2,00,000 × 10% = 20,000

• Third slab: 3,00,000 × 20% = 60,000

Total TDS for the year = 80,000

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Case 2: Salary mid-slab (partial slab)

• Annual taxable salary = 7,50,000

• SSF applicable → ignore 1% slab

• Second slab: 2,00,000 × 10% = 20,000

• Third slab: 7,50,000 – 5,00,000 (first slab) – 2,00,000 (second slab) = 50,000

• Third slab TDS: 50,000 × 20% = 10,000

Total TDS for the year = 20,000 + 10,000 = 30,000

✅ Always apply slabs sequentially, ignoring first slab only if SSF deposit exists.

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Step 4: Apply Rebates

After slabs are applied, two types of rebates may be considered:

1. Single Employee Rebate → 10% on TDS (if applicable)

2. Medical Expense Rebate → Maximum Rs. 750

Example:

• John wants to claim medical expenses = Rs. 1,000

• Maximum allowed = Rs. 750

• Medical rebate applied = 750

John not eligible for medical → Final TDS : 4,800 - 750 = 4,050 (Annual)
Monthly : 4050/12 = 337.5

✅ Final Annual TDS: Rs. 4,050
✅ Monthly TDS: Rs. 337.50

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Step 5: Net Payable Salary

Calculations:

• Total Monthly Additions = 50,000 + 5,000 + 12,000 = 67,000

• Total Monthly Deductions = 15,500 + 3,333.33 + 30,000 = 48,833.33

• Net Payable Salary = 67,000 – 48,833.33 – 337.50 = 17,829.17

✅ Net Salary (Monthly): Rs. 17,829.17
✅ Monthly TDS Deducted: Rs. 337.50

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This framework can be applied to all employees, with their specific additions, deductions, and applicable rebates.