Budget 2026/27: Govt sets Rs 1 million income tax exemption

KATHMANDU: The government has set an income tax exemption limit of Rs 1 million for individual taxpayers in its budget estimates for the fiscal year 2026/27, Finance Minister Dr Swarnim Wagle said as he read the budget at a joint sitting of the federal parliament.

Dr Wagle said the budget includes an overhaul of the tax system aimed at expanding the middle class and making the overall economy more dynamic. “A comprehensive review has been made in the tax system to make the overall economy dynamic through the expansion of the middle class,” he said.

To encourage industrial production, the minister said customs duty on industrial raw materials will be reduced by at least one level compared with ready-made goods. Customs duty has been cut on 273 types of raw materials, and the existing 11-level customs structure has been restructured and limited to seven levels, he added.

The excise duty currently levied on 360 items has been abolished, Dr Wagle said. Scattered levies, including infrastructure development tax and road maintenance and improvement fees collected at customs points, have been integrated under a single green tax.

The budget also provides for the value-added tax (VAT) refund system to be fully automated, the minister said.