Do you need a PAN if you only earn a salary in Nepal?

A friend started her first formal job last Shrawan, and on day two HR asked for her PAN. She was baffled. She had no business, no side income, just a salary that the company would tax at source before it ever reached her. Why did a salaried employee need a tax number at all?

It is a fair question, and the honest answer is not the one most people assume. You do effectively need a PAN. But the reason has almost nothing to do with you owing extra tax, and almost everything to do with your employer's accounts.

The short answer: yes, but not for the reason you'd guess

There is no law that fines an ordinary individual for simply not holding a PAN. The pressure comes from a different direction.

Since FY 2076/77 (mid-July 2019), Section 21(1) of the Income Tax Act 2058, as amended by the Finance Act 2076, treats salary and wages paid to a worker without a PAN as an inadmissible expense for the employer. In plain terms: if your company pays you and cannot record your PAN against that payment, it loses the right to deduct your salary when calculating its own taxable profit. That makes your salary more expensive to the company than it should be. So every compliant employer in the country now collects PANs from staff before running payroll. The government put it bluntly at the time: it does not validate a company's salary payments to employees who lack a PAN.

The one carve-out: daily-wage workers earning up to Rs 2,000 a day were exempted from the requirement. That threshold dates from 2019, so treat it as indicative and check whether it has since moved.

This is why mass PAN registration in Nepal tracks the salary rule, not personal tax bills. Before the 2019 mandate only a couple of hundred thousand individuals held a personal PAN; the requirement pulled millions of salaried workers into the system within a few years.

Personal PAN vs business PAN

A quick distinction that confuses new registrants. The IRD issues two kinds.

A personal PAN (PPAN) belongs to an individual and handles personal income tax. This is what a salaried employee needs. A business PAN belongs to a legal entity, a company, firm, or proprietorship, and handles business income tax, VAT, and excise. You do not need a business PAN to hold a job. If you later register a side business or company, that entity gets its own business PAN separate from your personal one. The same split matters the moment you start earning freelance or side income, where the payer needs your PAN to withhold TDS.

How to get one: free, and roughly a day

The process is genuinely light, which surprises people braced for a queue at the tax office.

1. Go to the IRD taxpayer portal (taxpayerportal.ird.gov.np) and choose New Taxpayer Registration, then PAN Registration.
2. Select the taxpayer type (personal) and fill the form.
3. Upload a copy of your citizenship (both sides) and a passport-size photo, and give an active mobile number.
4. Submit. Processing is fast, often within a day at a tax service office, and typically one to three working days online.

There is no fee. A personal PAN is free whether you apply online, through the Nagarik App, or in person at a revenue office. Many employers will walk a new hire through this on the first day, since they need it for payroll anyway.

Where else a PAN turns up

Your job is the main trigger, but a PAN (and increasingly the National ID) follows money around.

• Getting paid as a contractor or freelancer. A company paying you for work needs your PAN to withhold TDS and book the expense, the same logic as salary.
• Property and vehicle registration, larger contracts. A PAN is commonly required at the Land Revenue Office and Transport Management Office, and for sizeable contracts, to create an audit trail.
• Bank accounts. Here the headline requirement is now the National ID, mandatory for account opening since mid-January 2025 (Magh 2081), with PAN tied into the KYC framework rather than being the sole gatekeeper. The blanket claim that you need a PAN to open any account is overstated; the National ID is what banks ask for first.

The broader trend, set out in the FY 2082/83 policy, is consolidation: the National ID is becoming the unifying identifier across banking KYC, SIM registration, social security, land and company registration, and PAN. Linkage, not replacement, for now.

Do you still have to file a return?

This is the part that relieves most salaried readers. Often, no.

Under Section 4(3) of the Income Tax Act, if salary from a single resident employer is your only income and the employer has deducted TDS correctly, that TDS is treated as your final tax. No separate return is required. The override sits in Section 97(2): anyone whose income exceeds Rs 4 million (Rs 40 lakh) in a fiscal year must file regardless. The full who-must-file map, including the D-01/D-03 forms, is in how to file income tax online.

Two things can still pull you into filing even under Rs 40 lakh: a second income source (rent, freelance, a second employer), or wanting to claim deductions and credits your employer did not apply. If you intend to claim the insurance, CIT, and donation deductions that lower your bill, you file to claim them. The mechanics of what your employer already withholds are in TDS on salary explained, and reading the slip itself is covered in how to read your Nepali salary slip.

A related point on the 1% social security tax that sits on the first slab of salary income: it is waived for those contributing to the Social Security Fund, since the SSF contribution serves the same purpose. Your PAN is how all of this reconciles to you.

What's changing in FY 2082/83

Two shifts worth flagging, both pointing the same way: tighter enforcement.

The Finance Bill 2082 removed the tax-amnesty scheme that had let people who transacted without a PAN waive accrued interest and penalties if they registered and filed for the relevant years. With the amnesty gone, getting compliant late is more expensive. At the same time, the National ID linkage above is being extended across services, so the days of operating financially without a registered identity are closing. For a salaried earner the takeaway is simple: get the PAN early, because the cost of not having one only rises from here.

What you actually need to know

Three takeaways:

1. Yes, you effectively need a PAN, but for your employer's sake. Since 2019, a company cannot deduct salary paid to a worker without a PAN, so payroll requires it. It is not a personal penalty, and it is free to get.
2. Most salaried people do not file a return. Single employer, correct TDS, income under Rs 40 lakh: the TDS is your final tax under Section 4(3). You file only for a second income, or to claim deductions your employer skipped.
3. The identity net is tightening. The PAN amnesty is gone and the National ID now anchors banking and more. Register early; the cost of staying outside the system keeps climbing.

Not sure whether your salary situation requires a return, or whether claiming a deduction is worth filing for? Email parjanya57@gmail.com with the rough numbers and I'll point you to the right form.

This post is part of the Nepal Money Basics guide — the earn-and-reconcile-tax section.