9 Clever Ways to Legally Reduce Income Tax in Nepal

3 min

reduce income tax

You put in a lot of effort to earn certain money, yet you must provide a part of that amount to the government. Isn’t that heartbreaking? Every person who makes income is required to pay income tax, which differs depending on how much they earn.

Governments collect taxes as mandatory contributions to the country and the development of the nation. The governments collect an income tax of up to 30% of your income. And, as we all know, no one wants to pay income tax. So, here are 9 ways to reduce taxation legally in Nepal:

1. Enroll in Government Schemes

You can legally deduct high-income taxes if you contribute to the Employees Provident Fund and Citizen Investment Trust. So, if you deposit a total of Rs 300,000 into these two programs, you will be eligible for a deduction process. If you are not a part of it, you must join this; it can make you stop paying your hard-earned money.

nepali money

2. Save Tax through salary expenses

Paying employees’ salaries through an office account helps the company save money on taxes. We may demonstrate the salary expenditures and legally save the amount of taxation.


3. Reduction through diplomatic missions

If you are a Nepali officer working on a diplomatic mission outside the country or abroad, you are eligible for a 75 percent reduction on the financial tax you are being paid on current days.

Pararastra Mantralaya nagarik

4. Buy insurance packages

If you want to avoid paying a high tax rate, buy an insurance package. You can avoid having to legally pay tax to the government by purchasing the insurance packages. If you purchase life insurance up to Rs 40,000 annually, you are eligible for a deduction.

This will reduce the taxable income and tax liabilities, but it will also result in savings over time. For a deduction of up to Rs 20,000, purchase health insurance. Rs 5,000 is free if you get house insurance.

Jivan sahara

5. By making charitable donations

There is good news for you if you like conducting charitable work. By presenting your bill of done charity as proof you can save yourself from paying taxes to the government. This is one of the best legal ways to avoid paying taxes.

charity donations

6. Request exemptions for medical costs

You are eligible for income tax deductions for medical costs. You must present your medical bill for this at their location of business. According to the government, a person may claim 15% of their medical expenses, or up to Rs 750. This is therefore one of the legal ways to avoid paying taxes.

medical cost

7. Work in remote areas

The government has separated Nepal’s districts into rural and urban areas, and these areas have various tax rates as well. A remote area payment up to Rs 50,000 that is tax-free is available to those who work in rural areas.

remote school

8. Show the annual losses

Show your company’s annual loss to be legally free from tax.  To avoid paying taxes, you can demonstrate your company’s losses to the relevant authorities.

illustration of loss

9. Make a plan for the loan

Loans made in the name of an organization, such as a home loan or a vehicle loan can help you in a reduction in taxes. This is also a good way to avoid paying huge taxes. The amount of tax that you must pay will be decreased. Some of your income will be deducted from a loan, allowing you to lawfully save money on taxes.

Personal Loan in Nepal

Also Read: Broke in Your 20s? Try These 7 Ways to Make Money in Nepal

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