Tax Saving Policy

A simple playbook for reducing taxable income and maximizing allowed deductions in Nepal.

1. Maximize Your CIT (Citizen Investment Trust)

Fill the gap between mandatory SSF/PF contributions and the maximum allowed deduction.

Your office SSF/PF rarely hits the maximum Section 63 cap. You can voluntarily contribute to CIT to reach the highest deductible amount.

Limitations

Deduction is limited to the lower of 1/3 of yearly income or the cap.
Cap: Rs 5,00,000 for SSF or Rs 3,00,000 for PF.

Monthly CIT Formula

(min(Yearly Income / 3, Cap) - Mandatory Yearly SSF/PF) / 12

2. Opt for SSF (Social Security Fund)

SSF offers a higher deduction cap and a 1% tax waiver on the first slab.

Limitations

SSF: Deduction cap up to Rs 5,00,000.
PF: Deduction cap up to Rs 3,00,000.

Direct Savings

If you are on SSF, the government waives the 1% base tax on the first slab (Rs 5,00,000 for Single, Rs 6,00,000 for Couple). That saves about Rs 5,000 to Rs 6,000 per year.

3. Claim All Allowed Insurance Premiums

Declare yearly insurance premiums to reduce taxable income directly.

Life Insurance

Deduct actual premium up to Rs 40,000 per year.

Health Insurance

Deduct actual premium up to Rs 20,000 per year.

House Insurance

Deduct actual premium up to Rs 5,000 per year.

4. Choose the Right Marital Status

Filing as a couple can expand the lower tax slabs when your spouse has no income.

Single Status

1% slab applies on the first Rs 5,00,000.

Couple Status

1% slab applies on the first Rs 6,00,000.

Strategy

If your spouse does not earn (or earns below the taxable threshold), filing as a couple pushes more income into lower slabs, saving up to Rs 10,000 per year as income moves through the 10%, 20%, and 30% brackets.