In Nepal, income from employment, business, investment, and incidental profits is taxed.
The Income Tax Act, 2058 and the relevant Financial Act of the year have different limits for the amount of tax exemption. However, since there is no limit for tax exemption in the case of employment income of a natural person, social security tax is levied on the income from the beginning to the exemption limit. For the financial year 2080/81, income tax is not levied on the initial limit of a sole proprietorship firm owned by a natural person (Rs. 5 lakh for a single person and Rs. 6 lakh for a couple), but 1% social security tax is levied on the initial slab of employment income of a natural person, i.e. up to Rs. 5 lakh for a single person and Rs. 6 lakh for a couple. However, 1% tax is not levied on income from pension, pension fund and contribution-based social security fund for natural persons or couples.
The agricultural income of individuals other than firms, companies, partnerships and corporate bodies engaged in commercial agricultural business is not subject to tax at the federal government level. However, there will be a fifty percent tax exemption on the income earned by doing agricultural business by any firm, company, partnership or corporate body registered as such.
Employment income includes any other payments made in connection with employment, such as wages, salaries, vacation pay, overtime pay, fees, commissions, awards, and gifts.
Wage income tax must be paid through advance tax deductions along with the payment of each month’s wage or in lump sum payments.
Since the employer does not pay taxes on employment income, but rather deducts taxes, the employer must deposit the tax amount with the Taxpayer Services Office or the Internal Revenue Office or the Medium-Level Taxpayer Office or the Large Taxpayer Office where he is registered.
But the 1 percent tax on social security is not levied.
Anticipated tax is the tax payable annually, which is calculated as a lump sum payment in accordance with Schedule 1 (Tax Rate) of the Income Tax Act, 2058 BS.
A human being, whether male, female, or of another gender, and a sole proprietorship owned by a natural person are also called a natural person.