Payroll Software in Nepal with Full Salary & Tax Compliance

1. It starts with the salary structure, not the gross

A Nepali salary is split into a basic component and allowances, and that split decides almost everything downstream. PF, SSF, CIT and gratuity are all assessed on basic. The overtime rate is derived from basic. Allowances are taxable but carry no contribution.

So two employees on the same NPR 40,000 gross can cost the company different amounts and take home different net pay, purely because their basic percentage differs. Set the split once per grade and let every run inherit it, rather than deciding it per employee per month.

There is a floor under all of it: the minimum remuneration fixed under the Labour Act 2074 is NPR 19,550 a month, published as NPR 12,170 basic plus NPR 7,380 dearness allowance, effective Shrawan 1, 2082.

2. One retirement scheme, never both

A company runs either the Social Security Fund or the older Provident Fund arrangement. Under SSF the employee contributes 11% of basic and the employer adds 20%, so 31% of basic reaches the fund each month. Under PF it is 10% from each side, usually with a voluntary CIT election of up to 33% of basic on top.

Either way the contribution reduces taxable income, but only up to the statutory retirement ceiling: the lowest of the actual contribution, NPR 500,000 a year, or one third of assessable income. Contributing beyond that ceiling still builds the employee's balance; it just stops reducing the tax.

• SSF contributors are exempt from the 1% social security tax charged on the first income band.
• The employer share is a cost of employment, not a payslip deduction, so it never reduces take-home pay.
• Switching scheme mid-year means two contribution histories in one fiscal year, which is why most companies switch at Shrawan.

3. Tax is annual, withheld monthly

TDS is not charged month by month in isolation. The employer projects the employee's annual income, deducts the allowable retirement contribution, applies the FY 2083/84 slabs to what remains, and withholds one twelfth of the result each month. A salary revision in Poush therefore changes every remaining month of the year, not just that one.

The 2083/84 budget merged the separate single and couple schedules into one table for every resident natural person: 1% up to NPR 1,000,000, 10% NPR 1,000,001 to NPR 1,500,000, 20% NPR 1,500,001 to NPR 2,500,000, 27% NPR 2,500,001 to NPR 4,000,000, 29% above NPR 4,000,000.

4. The month is a Bikram Sambat month

Nepal's statutory deadlines are counted from the end of the BS month, and the fiscal year runs Shrawan to Ashad. Payroll defined on Gregorian months adds a reconciliation step to every single period, and the mismatch shows up first at the year boundary when the slabs change.

• SSF or PF contributions: deposited within 15 days of the month ending.
• Withheld tax and the corresponding return: within 25 days of the month ending.
• Slab changes arrive with the budget, before Shrawan, so the first run of the year is the one most likely to be wrong.

5. What payroll accounting needs out of the run

Payroll is where a large share of a Nepali company's accounting entries originate, so the run has to end in documents finance can post and an auditor can follow, not in a spreadsheet somebody edited afterwards.

• A salary register: every employee's basic, allowances, gross, each deduction and net pay, for the period.
• A bank transfer file in the format the company's bank accepts, built from approved net pay.
• Contribution totals for the SSF or PF deposit, and the eTDS file in IRD format for the withholding return.
• Salary cost split by department or branch, and by project where donor funding has to be reported separately.
• A locked period and an export log, so a closed month cannot quietly change after the accounts are drawn.