Employers in Nepal withhold income tax from salaries every month and deposit it with the Inland Revenue Department. This is called TDS (tax deducted at source).
How the monthly amount is worked out
The usual method is to estimate the employee's taxable income for the whole year, apply the year's tax slabs, and withhold one twelfth each month. Taxable income is salary and taxable allowances, minus allowed deductions such as retirement contributions (SSF, CIT) up to the yearly limit.
Bonuses and festival allowance
One-off pay such as a bonus or the Dashain festival allowance is taxed in the month it is paid, at the rate it adds on top of the year's regular income. That month's TDS is higher than usual, which surprises staff if nobody explains it.
When to deposit
TDS withheld in a month is deposited within 25 days after the end of that Nepali month, together with the TDS return.
Women employees
Women with only salary income get a rebate on the computed tax, at the rate set in the Finance Act.
How WorkforceOS helps
WorkforceOS has this year's slabs built in, taxes one-off pay in its month, shows on each payslip how the tax was worked out, and reminds you before the deposit date. See payroll.
This is general information to help you plan, not legal or tax advice. Rules change with each budget; check the current rules with the SSF office, the Inland Revenue Department or your accountant.