Parties promise measures for lower and middle-income earners

Political parties have unveiled tax reform agendas in their manifestos for the upcoming House of Representatives election, with varying levels of clarity on income tax relief for lower and middle-income groups.

The Nepali Congress has proposed exempting annual personal income up to NRs one million from income tax, raising the current threshold of NRs 500,000 for individuals and NRs 600,000 for couples. It has also pledged to cap the maximum personal income tax rate at 25%, down from the existing 39% applied to income above NRs five million, and to levy additional tax only on annual income exceeding NRs 10 million.

Additionally, the Congress promises free treatment for children under three years old and senior citizens over 73. They also pledge to expand health insurance to cover the underprivileged, ensure free and compulsory education up to the secondary level (Grade 12) reducing the financial burden on parents, and improve hospital infrastructure for better access to care. The other party to have committed to such free and compulsory education in the way Congress has is CPN (UML), while the Rastriya Swatantra Party (RSP) has made no such commitments except for reformed public education. A 2024 government estimate indicated that implementing the provision of free and compulsory education, which is also constitutionally mandated, would require an additional NRs 223 billion in the education budget.

The RSP has pledged to review income tax thresholds based on family burden but has not specified revised rates. It has promised to introduce deductions for education, health, and child-rearing expenses. For eligible families, it would reduce taxable income, but the impact would depend on how generous the deductions are, who qualifies, and whether there are caps or income limits.

The party's social protection policies include 100% insured health services, integrated social security from birth to death, and reformed public education, with 1.2 million formal, inclusive, and secure jobs created over five years in IT, construction, tourism, agriculture, minerals, industry, and services.

CPN (UML) has committed to a progressive tax system aimed at reducing inequality but has not detailed specific income tax measures. However, it has unveiled immediate action plans along with 25 long-term “pillars of prosperity,” focusing on women, youth, workers and low-income families, measures it says will also strengthen middle-income households.

The UML has pledged to raise the minimum monthly wage to NRs 25,000, promised NRs 20,000 per child as a nutrition allowance for new mothers, free life insurance coverage of up to NRs 500,000 for pregnant women, and doubled health check-up and transport subsidies.

Students pursuing technical higher education would receive interest-free loans of the same amount along with internship opportunities, UML has promised. The party has further committed to provide free sanitary pads to every schoolgirl and extend mid-day meal benefits to students through Grade 10.

The UML also pledged to waive cooperative and financial institution loans of up to NRs 25,000 for low-income families and bring them under contributory social security schemes.

Meanwhile, NC has proposed reducing corporate income tax to 20%, setting a 10% rate for exports of goods and services, 5% for IT export businesses, and 15% for production-oriented industries. It says the measures would promote entrepreneurship and gradually increase state revenue. Neither the Rastriya Swatantra Party (RSP) or CPN (UML)’s manifestoes have outlined such specific tax rates for businesses.