New Fiscal Year Begins Friday: Tax Cuts, New Levies, Monetary Policy Take Effect

Nepal will officially begin the new fiscal year 2083/84 (2026/27) on Friday, with the government's budget, policy and programme, and the Nepal Rastra Bank's new monetary policy set to take effect. The new fiscal framework introduces sweeping changes to taxation, customs duties, excise policies, green taxes, banking regulations, and capital market reforms aimed at stimulating private investment, reducing business costs, and strengthening economic activity. Among the most significant changes is the revision of the personal income tax structure, with the threshold for the 1 percent tax rate doubled from Rs 500,000 to Rs 1 million and the maximum tax rate reduced from 39 percent to 29 percent. The government has also implemented a 21 percent salary increase for civil servants effective from Shrawan 1. Customs duties have been streamlined from 11 slabs to seven, while import duties on 273 industrial raw materials have been reduced to lower production costs. Excise duty has been removed from 360 products, although taxes on alcohol, tobacco, junk food, juices, and selected luxury goods have increased. A unified Green Tax replacing several existing infrastructure-related charges will also come into effect, alongside a subsidy programme providing up to 40 percent support for farmers investing up to Rs 20 million in agriculture. Capital market reforms, including the phased introduction of intraday trading, short selling, and derivatives trading, as well as the treatment of capital gains tax as a final tax on listed shares, will also begin under the new fiscal regime. At the same time, several new levies are expected to directly affect consumers, including a 3 percent Education Equity Fee on private educational institutions, a 3 percent Health Equity Fee on private healthcare services, a 5 percent VAT on household electricity consumption above 50 units, a 2 percent luxury tax on five-star hotels, luxury resorts, and imported liquor, a 0.5 percent Skill Promotion Fee on gold and silver jewellery purchases, and additional charges on ride-sharing services. Meanwhile, the Nepal Rastra Bank's monetary policy, also taking effect Friday, aims to keep inflation below 5.5 percent, expand private sector lending by 11 percent, and increase broad money supply by 14 percent. It also introduces measures to support credit expansion, ease blacklisting provisions for bounced cheques, and allow commercial banks to invest in foreign government securities. While the government expects the combined fiscal and monetary reforms to improve the investment climate, modernize the capital market, strengthen the banking system, and support economic growth, consumers are likely to face higher costs in sectors such as education, healthcare, electricity, ride-sharing, and luxury services.