What Are the Types of Taxable Income in Nepal?

Understanding taxable income is important for every business and individual in Nepal. Whether you run a company or earn as a freelancer, knowing what income is taxable helps you stay compliant with the law and avoid penalties.

In this blog, we’ll explain the types of taxable income in Nepal in simple terms. Let’s get started.

What is Taxable Income?

Taxable income is the total income on which the government applies tax. In Nepal, every individual and business must pay tax based on their income as per the Income Tax Act, 2058.

Main Types of Taxable Income in Nepal

According to the law, there are three main types of taxable income:

1. Employment Income

This includes all earnings from a job or employment. Examples are:

• Salary
• Wages
• Bonuses
• Allowances
• Overtime payments
• Fringe benefits (such as housing or transport provided by the employer)

2. Business Income

This includes income earned through business or professional activities. Examples include:

• Profits from a registered company or firm
• Income from consultancy, freelancing, or personal business
• Service fees
• Commission income

Even if your business is small or home-based, you must declare your income and pay tax accordingly.

3. Investment Income

This refers to income earned through investments. Examples include:

• Interest from bank deposits
• Dividends from shares
• Capital gains (profit from selling land, property, or shares)
• Rental income from property

Each type of investment income may be taxed at different rates or have special rules, so it’s important to check or consult a tax professional.

Other Sources of Taxable Income

Sometimes, people may also have other taxable incomes such as:

• Income from foreign employment
• Windfall gains (like lottery or awards)
• Royalties and copyrights
• Retirement pensions (in some cases)

Why It’s Important to Know About Taxable Income

Knowing your taxable income helps you:

✅ Calculate and pay your tax correctly
✅ Avoid penalties and legal issues
✅ Plan your finances better
✅ Stay compliant with Nepal’s tax laws

For detailed information on the latest tax rates for individuals and businesses, visit our blog on Income Tax Rates in Nepal 2025: Corporate and Individual Taxation

Final Words

Whether you’re a company owner, freelancer, or employee, understanding the types of taxable income in Nepal is key to proper tax planning. If you need help with tax filing, company registration, or business compliance, our team at Company Sewa is here to help.