Salary Slip in Nepal: PF, CIT, SSF and Tax Explained · Aafno Hisab
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Your Salary Slip Explained: PF, CIT, SSF and Tax
10 min read · Published on 7 September 2026
The offer letter says Rs. 60,000. The bank says Rs. 55,440. Somewhere in between is a piece of paper nobody explained, with eight lines on it and abbreviations that all look like they mean the same thing.
Here is the whole thing, line by line. The short version, before we start: most of what leaves your salary is still your money. It has just moved somewhere you cannot spend it this month. That is a different situation from tax, and worth being able to tell apart.
The figures here are the FY 2083/84 slabs, which changed substantially from the year before: one schedule for everyone, the 1% band widened to Rs. 10,00,000, and the top rate cut. Rates move with each year's budget, so confirm at ird.gov.np or with your accounts department before relying on a number.
First: basic pay is not the same as salary
This is the line that confuses everyone, and almost every calculation below depends on it.
Your salary is usually split into basic salary and allowances: dearness, transport, communication, and so on. So a Rs. 60,000 job might be Rs. 40,000 basic plus Rs. 20,000 allowance.
The split matters because provident fund, gratuity and SSF are all calculated on basic, not on the total. Two jobs paying the same Rs. 60,000 can put very different amounts into your retirement, depending only on how the split was written.
When you compare two offers, ask what the basic is. It is a more useful question than the headline number, and almost nobody asks it.
Provident fund, 10% from you, 10% from them
The Employees Provident Fund is the oldest of these. You contribute 10% of basic, your employer adds another 10%, and both go into an account in your name.
On a Rs. 40,000 basic that is Rs. 4,000 from you and Rs. 4,000 from the employer, Rs. 8,000 a month into your own retirement account.
Two things people get wrong:
The employer's half is not a gift. It is part of what it costs to employ you, and it is counted as your income for tax purposes before the deduction is applied. Which is fair, because it is your money.
Only your half reduces your take-home. The employer half never appears in your bank account either way, which is why the slip can be confusing.
The fund earns interest and pays out as a lump sum when you leave service. It is your money in the plainest sense, you just cannot reach it until then.
Gratuity, 8.33%, paid entirely by the employer
Under the Labour Act, your employer sets aside 8.33% of basic every month as gratuity. On Rs. 40,000 basic that is about Rs. 3,332 a month, or roughly Rs. 40,000 a year.
It costs you nothing from your take-home and it is genuinely yours. It is also the line most people forget when comparing an offer to a freelance rate, freelancers have no gratuity, no employer PF and no insurance, which is a real part of the difference in what a rate has to cover.
SSF, the newer system that replaces both
The Social Security Fund works differently. Employers enrolled in SSF do not run a separate provident fund and gratuity; SSF takes their place.
The contribution is 31% of basic: 11% from you, 20% from the employer.
On Rs. 40,000 basic that is Rs. 4,400 from you and Rs. 8,000 from the employer, Rs. 12,400 a month, against Rs. 8,000 under the PF route.
That 31% is not only a retirement pot. It is split across several schemes, so it buys things a provident fund does not:
Medical treatment and maternity cover
Accident and disability cover
Dependent family protection if you die
Old-age protection: the largest share, and the part that becomes your pension
The trade-off is real and worth understanding rather than having an opinion about:
PF + gratuity
SSF
Total going in
20% + 8.33% of basic
31% of basic
From your pocket
10%
11%
Insurance included
No
Yes, medical, accident, dependants
At the end
Lump sum you control
Pension, paid for life
Flexibility
Higher, it is a pot of money
Lower, the schemes are defined
Neither is simply better. A lump sum you invest well can beat a pension; a pension you cannot outlive is worth a great deal to someone with no other cushion. What is not in doubt is that more money goes in under SSF.
CIT, the voluntary one
The Citizen Investment Trust is a retirement scheme you can join yourself. Some employers run it alongside PF; individuals and the self-employed can contribute directly.
It matters for one specific reason: contributions to an approved retirement fund reduce your taxable income, and CIT is a way to use that allowance if your PF or SSF contribution has not already filled it. How much room you have depends on the year's limits, which is the next section.
Income tax, how it is actually calculated
Nepal taxes salary in slabs. Each band of income is taxed at its own rate; you never pay the top rate on your whole income, which is the most common misunderstanding about how this works.
Two things change the calculation:
One schedule for everyone. The separate slabs for individuals and married couples were merged from FY 2083/84, so the old exercise of choosing between individual and couple assessment no longer applies.
The first band carries a 1% social security tax for most salaried people. If you contribute to SSF or an approved retirement fund, that 1% does not apply, your contribution is already doing that job, which on ordinary salaries makes the whole first band tax-free.
Then come the deductions, which are the part worth actually acting on:
Retirement contributions: PF, SSF, CIT and gratuity together. The deduction is the lowest of your actual contribution, one third of your assessable income, or Rs. 5,00,000.
Life insurance premium, up to a limit
Health insurance premium, up to a smaller limit
Donations to approved organisations, within limits
A remote-area allowance if you work in one
Every one of these is money you would otherwise pay as tax. The insurance ones in particular go unclaimed constantly, because nobody tells the accounts department the policy exists.
A worked example: Rs. 60,000 a month
Basic Rs. 40,000, allowance Rs. 20,000, unmarried, on the PF and gratuity route.
Line
Per year
Gross salary
Rs. 7,20,000
Add: employer PF (10% of basic)
Rs. 48,000
Add: gratuity (8.33% of basic)
Rs. 39,984
Assessable income
Rs. 8,07,984
Less: retirement contribution deduction
Rs. 1,35,984
Taxable income
Rs. 6,72,000
Under the FY 2083/84 slabs the whole of that sits inside the first band, taxed at 1%. Total tax Rs. 6,720 a year, about Rs. 560 a month.
So the slip reads:
Per month
Gross
Rs. 60,000
Less: your PF (10% of basic)
Rs. 4,000
Less: income tax
Rs. 560
Take-home
Rs. 55,440
Of the Rs. 4,560 that left, only Rs. 560 is actually gone. The other Rs. 4,000 went into your own retirement account, and was joined there by Rs. 7,332 from your employer that never touched your salary at all.
Look at the year rather than the month and the picture changes shape: you were paid Rs. 7,20,000, you paid Rs. 6,720 in tax, and Rs. 1,35,984 went into retirement savings.
The same salary, under SSF
Now run the same job at an SSF-enrolled employer. You contribute 11% of basic, Rs. 4,400 a month instead of Rs. 4,000, and the employer contributes Rs. 8,000 instead of Rs. 7,332.
Here the 1% social security tax does not apply at all, because your SSF contribution already does that job. On this salary that means no income tax whatsoever: take-home of Rs. 55,600, slightly more than the PF route despite the larger contribution.
Same salary, more take-home, no tax. And Rs. 1,48,800 a year goes into your future instead of Rs. 1,35,984: nearly Rs. 13,000 more, with medical, accident and dependant cover the provident fund does not provide.
That is the honest case for SSF, and it is a stronger one than most people realise: it is not costing you take-home. It is converting an employer cost you never see into cover you would otherwise have to buy.
Why your take-home is lower than the offer letter
If your offer was quoted as CTC, cost to company, it included the employer's PF, gratuity or SSF contribution, and possibly insurance. Those are real money spent on you, and they are genuinely part of your compensation. They are simply not part of your bank balance.
A Rs. 60,000 CTC and a Rs. 60,000 gross salary are different jobs. When someone quotes a number, ask which one it is.
What to check on your slip every month
It takes two minutes and it catches real errors.
Is the basic what your contract says? A quietly reduced basic reduces your PF, your gratuity and your eventual pension all at once.
Is PF or SSF exactly 10% or 11% of basic? Round numbers that do not tie to the percentage are worth asking about.
Is the employer's share shown? You are entitled to know it. If the slip hides it, ask.
Is your tax roughly steady across months? A sudden jump usually means an allowance was reclassified, or a deduction you claimed was dropped.
Have you told accounts about your insurance policies? Nobody will ask you. The deduction is only applied if you claim it.
In the last quarter, check whether your deduction ceiling is unused. If it is, a CIT contribution before the year closes converts tax into savings.
The short version
Deductions are calculated on basic pay, not gross. Ask for the split before you accept an offer.
PF is 10% + 10%.Gratuity is 8.33%, all employer. SSF is 11% + 20% and replaces both.
On a Rs. 60,000 salary the tax is Rs. 560 a month on the PF route and nothing at all on SSF.
Retirement contributions and insurance premiums reduce your tax. Most unclaimed tax relief in Nepal is unclaimed insurance premiums.
The slab system means the top rate applies only to the top band, never to your whole salary.
Rates change every Jeth. Check ird.gov.np for the current year.
Take-home is the number worth tracking, not gross. Aafno Hisab records what actually reaches you and where it goes afterwards, in Nepali rupees and on the Bikram Sambat calendar. See what it does.
Common questions
What is the difference between basic salary and gross salary in Nepal?
Gross salary is the total; basic salary is the portion that provident fund, gratuity and SSF are all calculated on, with the rest paid as allowances. Two jobs paying the same gross can put very different amounts into your retirement depending only on the split, which is why the basic figure is worth asking about before accepting an offer.
How much PF is deducted from salary in Nepal?
Under the provident fund route you contribute 10% of basic pay and your employer adds another 10%, so 20% of basic goes into an account in your name. Your employer separately sets aside 8.33% of basic as gratuity. Only your own 10% reduces your take-home; the rest never passes through your bank account.
Is SSF better than PF for an employee?
The same 28.33% of basic funds retirement under either route. SSF adds medical, accident and dependant cover from its remaining contribution, and pays a pension for life rather than a lump sum. On an ordinary salary the take-home is roughly the same or slightly better under SSF, because SSF contributors are exempt from the 1% social security tax.
What deductions reduce income tax on a Nepali salary?
Retirement contributions, provident fund, SSF, gratuity and CIT combined, deductible at the lowest of your actual contribution, one third of assessable income, or Rs. 5,00,000. Life insurance premiums and health insurance premiums are deductible within their own limits, as are approved donations. Insurance relief is the most commonly missed, because the employer has to be told the policy exists.
Why is my take-home less than the salary in my offer letter?
If the offer was quoted as cost to company it included your employer's provident fund, gratuity or SSF contribution and possibly insurance, real money spent on you that never reaches your bank. Your own contribution and income tax then come out of the remainder. Ask whether a quoted figure is CTC or gross; they describe different jobs.
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