Allowanceभत्ता
An allowance is a regular payment made on top of basic salary for a specific purpose, such as dearness, transport or communication. Allowances count as taxable earnings but are excluded from the base used for PF, SSF, gratuity and overtime.
Also called: dearness allowance, bhatta, salary allowance Nepal
Taxable, but not contributory
This is the single distinction that matters. An allowance is part of gross salary and therefore taxable, but it is not part of basic salary and therefore does not increase PF, SSF, gratuity or the overtime rate.
That asymmetry is why the basic-to-allowance split is a live decision in every Nepali salary structure rather than a formatting choice.
Common allowances
- Dearness allowance, which appears as a named component in the government's minimum wage notice.
- Transport allowance.
- Communication or mobile allowance.
- Fuel allowance, where paid as a fixed monthly amount rather than reimbursed against bills.
Allowance or reimbursement
A fixed monthly payment is an allowance and is taxable. A reimbursement against an actual expense, supported by a bill, is a different thing entirely and is not remuneration. Companies that pay a fixed sum but call it a reimbursement create a problem for themselves at assessment time, because the label does not decide the treatment.
Allowance, answered
Yes. Allowances form part of gross salary and are taxed with the rest of it. What they are excluded from is the contribution base for PF, SSF, gratuity and overtime.
No. PF, SSF and gratuity are all assessed on basic salary only.
A cost-of-living component paid alongside basic salary. It is named as a separate element in Nepal's minimum wage notice, which publishes the rate as a basic component plus a dearness allowance.
This page explains general practice in Nepal. It is not legal or tax advice, and statutory figures are revised from time to time. Check the current Act, rule or notice before acting on it.
Put it into practice
Related terms
- Basic Salaryआधारभूत तलबBasic salary is the fixed core of an employee's pay, before allowances, overtime and bonuses. In Nepal it is also the base every statutory contribution is assessed on, which makes it the most consequential number in a salary structure.
- Gross Salaryकुल तलबGross salary is an employee's total earnings for a period before any deduction: basic salary plus every allowance, overtime and taxable benefit. It is the figure most offer letters quote and the one employees compare against.
- Minimum Wageन्यूनतम पारिश्रमिकThe minimum wage is the lowest remuneration an employer in Nepal may lawfully pay, fixed by the Government of Nepal on the recommendation of the Minimum Remuneration Fixation Committee. It is published as a basic component plus a dearness allowance and is revised on a recurring cycle.
- Payslipतलब पर्चीA payslip is the statement an employer issues each pay period showing earnings, deductions and net pay. In Nepal it is the employee's proof of income and of the tax and contributions withheld on their behalf.
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