Provident Fund (PF)कर्मचारी सञ्चय कोष
The Provident Fund is a retirement savings deposit held at the Employees Provident Fund (Karmachari Sanchaya Kosh). The employee contributes 10% of basic salary, the employer matches it with another 10%, and the combined 20% is deposited monthly against the employee's PF number.
Also called: PF, EPF, EPF Nepal, Sanchaya Kosh, employees provident fund
Key facts
- Employee contribution
- 10%Of basic salary.
- Employer contribution
- 10%Matched, of the same basic.
- Total deposited
- 20%Against the employee's PF account number.
- Administered by
- Employees Provident FundKarmachari Sanchaya Kosh.
- Tax treatment
- DeductibleWithin the NPR 500,000 retirement ceiling.
How PF is calculated
Like every statutory contribution in Nepal, PF is assessed on basic salary rather than gross. The employee's 10% is deducted from pay and shows on the payslip. The employer's 10% is a company cost that never reduces the employee's net, but it is credited to the same account, so the employee's balance grows by 20% of basic every month.
Each employee has a PF account number issued by the fund. Payroll deposits against that number, which is why a joiner without one cannot be processed correctly and usually ends up in a suspense entry somebody has to unwind later.
PF, SSF and CIT are three different things
- PF is the mandatory retirement deposit at the Employees Provident Fund: 10% plus 10%, fixed.
- SSF is the contributory social security scheme: 31% of basic, and it replaces PF and gratuity for enrolled employees rather than sitting alongside them.
- CIT is voluntary. The employee elects an extra retirement contribution of up to 33% of basic to the Citizen Investment Trust, usually to reduce taxable income.
The tax effect
Retirement contributions reduce taxable income, but not without limit. The deduction is the lowest of the actual contribution, NPR 500,000, or one third of assessable income. Contributing more than the ceiling still builds the balance; it just stops reducing tax at that point.
This ceiling is shared, not per fund. PF and CIT are counted together against the same limit, which is what makes the arithmetic behind a CIT election worth doing properly rather than by rule of thumb.
Monthly PF on a NPR 40,000 basic salary
- Basic salary
- NPR 40,000
- Employee contribution (10%)
- NPR 4,000
- Employer contribution (10%)
- NPR 4,000
- Deposited to the fund (20%)
- NPR 8,000
NPR 4,000 appears as a deduction on the payslip. The other NPR 4,000 is a company cost the employee never sees in net pay.
Provident Fund (PF), answered
From basic salary. Both the 10% employee share and the 10% employer share are calculated on basic only, so allowances and overtime do not increase the contribution.
PF is a retirement deposit at the Employees Provident Fund, 10% plus 10% of basic. SSF is the wider contributory social security scheme at 31% of basic, covering medical, accident, dependent-family and old-age protection. An employee enrolled in the SSF does not run a separate PF deduction.
Yes, within limits. Retirement contributions are deductible up to the lowest of the actual amount, NPR 500,000, or one third of assessable income. PF and CIT share that one ceiling.
- Employees Provident Fund Act 2019 and the fund's published contribution rules (epfnepal.com.np).
- Deduction ceiling per the Income Tax Act 2058 retirement contribution limit, mirrored in lib/nepal-payroll.ts.
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.
Related terms
- Social Security Fund (SSF)सामाजिक सुरक्षा कोषThe Social Security Fund is Nepal's contributory social security scheme. Employer and employee together deposit 31% of the employee's basic salary every month (11% from the employee, 20% from the employer), and that pool pays out medical, accident, dependent-family and old-age benefits.
- Citizen Investment Trust (CIT)नागरिक लगानी कोषThe Citizen Investment Trust is a voluntary retirement savings scheme employees can join on top of PF or SSF. An employee elects to contribute up to 33% of basic salary, and the contribution reduces taxable income within the shared retirement ceiling.
- 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.
- GratuityउपदानGratuity is a retirement benefit an employer funds throughout an employee's service rather than paying as a lump sum at exit. Under the Labour Act 2074 the employer deposits 8.33% of basic salary every month into the Social Security Fund or an approved retirement fund.
- TDS (Tax Deducted at Source)स्रोतमा कर कट्टीTDS is income tax withheld by the employer from an employee's salary each month and deposited with the Inland Revenue Department on the employee's behalf. It is calculated on annual projected income and spread across the year, not charged month by month in isolation.
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