Is Dashain Allowance Taxable in Nepal? How to Calculate It in 2083/84

Dashain allowance (festival allowance) is one month's basic salary and it is taxable in Nepal. See how much extra TDS it adds under the FY 2083/84 slabs, with examples.

This guide is for employers and employees in Nepal working out tax on the festival allowance (चाडपर्व खर्च) for FY 2083/84.

Short answer: yes. Dashain allowance is employment income and is taxed like salary. But under the FY 2083/84 slabs, the extra tax is much smaller than most people expect.

What the festival allowance is

Under the Labour Act 2074, every worker gets a festival allowance of one month's basic salary once a year, for the main festival of their religion or culture. For most companies that's Dashain. It's prorated for people with less than a year of service.

Why it's taxable

Salary tax in Nepal is on all employment income for the year: basic pay, allowances, overtime, bonuses and the festival allowance. The allowance simply adds to the year's total income.

How much tax it adds (FY 2083/84)

The extra tax depends on which band the allowance falls into.

Example 1: Rs 50,000 a month (basic Rs 40,000), not in SSF

• Yearly salary: Rs 6,00,000
• Plus Dashain allowance: Rs 40,000. Total Rs 6,40,000, still under Rs 10 lakh.
• Extra tax on the allowance: 1% = Rs 400

Example 2: the same employee, enrolled in SSF

• The 1% band is waived for SSF contributors.
• Extra tax on the allowance: Rs 0

Example 3: Rs 1,50,000 a month (basic Rs 1,00,000), not in SSF

• Yearly salary: Rs 18,00,000, already in the 20% band
• Plus Dashain allowance: Rs 1,00,000. Total Rs 19,00,000.
• Extra tax on the allowance: 20% = Rs 20,000

The payroll trap: the Asoj or Kartik spike

The common mistake is taxing the whole allowance as if it were a normal month's salary. That makes the month's taxable pay look twice as high, so the TDS for that month looks huge, and staff complain right before Dashain.

The correct way:

1. Add the allowance to the expected income for the year.
2. Recalculate the year's tax with the new total.
3. Deduct what's left for the year, less tax already deducted, spread over the remaining months, or deduct the extra in the allowance month.

Either way, the year's total is right. Explain the approach to staff in advance so the Dashain payslip doesn't surprise anyone.

Checklist for Dashain payroll

• Amount = one month's basic, not gross.
• Prorated for staff with less than a year of service.
• Added to the year's income before calculating TDS.
• SSF contributors don't pay the 1% band on it.
• Paid in time for the festival: a week or more before Ghatasthapana keeps everyone happy.
• Shown as a separate line on the payslip.

Let payroll do it

TeamKro's Nepal payroll rules include the festival allowance as one month of basic pay, prorated in the first year and taxed as salary. TDS is recalculated against the whole year, so there's no spike and no manual Excel work. Try the tax calculator or book a demo.

FAQ

Is the festival allowance one month's gross salary?
No, it's one month's basic salary under the Labour Act.

Do new employees get the full allowance?
Employees with less than a year of service get a proportionate amount.

Can we pay it at Tihar or another festival instead?
It's paid for the worker's main festival, based on their religion or culture. Most companies pay everyone at Dashain unless someone asks otherwise.

Last checked 31 October 2026 against the Labour Act 2074 and the FY 2083/84 slabs (Finance Act 2083). Confirm with IRD or your accountant. General information, not tax advice.

Sources: ShareSansar: Budget 2083/84 tax changes · Pradhan Law: Labour Act 2074 · Inland Revenue Department