On the first working day of Bhadra, someone in your office is asked when salaries are going in. The honest answer depends on whether Shrawan's attendance was closed, whether last month's raise reached the sheet, and whether anyone has checked the TDS. Payroll in Nepal is a sequence, and most of its mistakes come from one step running before the step it depends on.
**The short answer.** A monthly payroll run in Nepal has six steps:
1. Close attendance and leave for the Bikram Sambat month.
2. Work out each employee's gross pay.
3. Deduct SSF (11% of the employee's share) or PF and CIT deposits.
4. Withhold salary TDS: the year's tax from the fiscal year's slabs, spread over 12 months.
5. Pay net salaries by bank transfer.
6. Deposit the TDS within 25 days after the month ends and file the e-TDS salary sheet with IRD.
## Step 1: Close the month in Bikram Sambat
The fiscal year starts on 1 Shrawan and ends on the last day of Ashadh. Pay periods, TDS months and leave years all follow it. BS months also vary in length, so "October salary" is a meaningless period for a Nepali payroll. Shrawan salary is the real period.
Closing the month means three things are final before any money is calculated:
- attendance, including the missing punches someone promised to sort out
- approved leave, with unpaid days marked
- joiners, leavers and raises that take effect inside the month
If any of these arrive after the run, you are doing the run twice.
## Step 2: Gross pay
Gross is basic salary plus allowances, adjusted for unpaid leave, mid-month joining, advances being recovered and leave encashment. It is the step everyone thinks of as "payroll", and on a clean month it takes the least time.
## Step 3: SSF, PF and CIT
For staff enrolled in the [Social Security Fund](https://ssf.gov.np/):
- the employee contributes 11% of basic salary
- the employer contributes 20%, made up of provident fund 10%, gratuity 8.33% and insurance 1.67%
- in total that is 31%
Both shares are worked out on [basic salary](https://pioneerlaw.com/resource/social-security-system-in-nepal/), so allowances don't change the SSF figure. Only the 11% comes out of the employee's pay.
Staff on a provident fund or Citizen Investment Trust instead have those deposits deducted here. Whatever the route, the deposits matter twice: once in net pay, and again in the tax calculation. That's the next step.
## Step 4: Salary TDS, worked through
Salary TDS is the year's tax divided across the months. You never calculate it from the month's salary alone.
Take one employee on NPR 1,20,000 a month who deposits NPR 5,000 a month in CIT, and is not in SSF. For FY 2083/84 (slabs from the [2083/84 budget](https://www.sharesansar.com/newsdetail/nepal-budget-208384-personal-income-tax-threshold-raised-to-rs-10-lakh-maximum-rate-cut-to-29-2026-05-29)):
| | NPR |
|---|---|
| Annual gross (1,20,000 x 12) | 14,40,000 |
| Retirement deduction (CIT 5,000 x 12) | 60,000 |
| Taxable income | 13,80,000 |
| First 10,00,000 at 1% (social security tax) | 10,000 |
| Next 3,80,000 at 10% | 38,000 |
| Annual tax | 48,000 |
| **Monthly TDS (48,000 / 12)** | **4,000** |
The deduction for PF, SSF and CIT deposits is capped at one third of annual gross or NPR 5,00,000, whichever is lower. Here the 60,000 is well under both.
If this employee were enrolled in SSF, the first 1% slab would not apply at all, so their tax would start at the 10% slab.
Two things break this tidy table in real months:
- **A raise in Poush.** It changes the annual figure, so TDS for every remaining month has to be re-spread. Deducting the old 4,000 until Ashadh leaves a shortfall that lands in one painful month.
- **A new budget.** It can change the slabs, so a payroll run has to use the slabs of its own fiscal year, not whichever table was last pasted into the sheet.
Try your own figures in the [salary tax calculator](/tools/salary-tax-calculator). It runs the same engine as EK ERP's payroll.
## Step 5: Net pay and the bank transfer
For the employee above, net pay before any other deductions is:
1,20,000 minus 5,000 CIT minus 4,000 TDS = **NPR 1,11,000**
Multiply that by every employee, and the bank file is where a typo costs real money. A batch transfer built from the payroll run is safer than retyping account numbers into internet banking.
## Step 6: Deposit TDS and file the e-TDS sheet
TDS is withheld when salary is paid. Under section 90 of the [Income Tax Act 2058](https://ird.gov.np/content/13405/income-tax-act--2058--as-amended-by/), it is deposited within 25 days after the end of that month. The e-TDS salary sheet tells IRD whose tax it was.
This is the step that slips when the run itself ran late. A month that started with "when are salaries going in" can easily end with a missed deposit date.
## Where EK ERP fits
Everything above works in a spreadsheet up to a point. We wrote about [where that point tends to be](/blog/payroll-spreadsheet-breaks-30-employees).
EK ERP runs the same six steps by BS month:
- Each run uses the tax slabs of its own fiscal year.
- SSF and CIT are deducted inside the run.
- Each run produces payslips employees can download, a bank transfer batch, and the e-TDS salary sheet for the month to upload to IRD.
- The dashboard shows the next TDS filing deadline.
It does not file for you. The upload to IRD is still yours, and so is the decision about which allowances are taxable.
If you run payroll now, the most useful thing to do this week has nothing to do with software. Check one employee who got a raise this year, and confirm their monthly TDS changed when the salary did. Then see [how EK ERP runs payroll](/features/payroll).
## Frequently asked questions
### How is monthly TDS on salary calculated in Nepal?
Take annual gross salary, subtract PF, SSF and CIT deposits (capped at one third of gross or NPR 5,00,000, whichever is lower), tax the rest with the fiscal year's slabs, and divide by 12. For NPR 1,20,000 a month with NPR 5,000 CIT in FY 2083/84, that is NPR 4,000 a month.
### When must salary TDS be deposited in Nepal?
Within 25 days after the end of the month in which it was withheld, under section 90 of the Income Tax Act 2058.
### What are the SSF contribution rates in Nepal?
The employee contributes 11% and the employer 20% of basic salary, 31% in total. SSF contributors do not pay the 1% social security tax slab.
### Does EK ERP file TDS with IRD?
No. EK ERP produces the e-TDS salary sheet for each Bikram Sambat month. You upload it to IRD yourself.
*This is general information, not tax advice. Check the current Act or ask your auditor before you file.*
