Nepal's Finance Minister Swarnim Wagle on Friday, 29 May unveiled a NPR 2.124 trillion budget for fiscal year 2026-27 at a joint session of Parliament in Kathmandu, announcing sweeping income tax relief, a sovereign AI computing centre, and a liberalised foreign investment regime. The measures draw notable parallels with tax reforms introduced by the Indian government in February 2025.

Major Tax Relief for Individuals and Businesses

The most significant personal finance change is the doubling of the income tax exemption threshold — from NPR 500,000 to NPR 1 million annually. At the same time, the maximum personal income tax rate has been slashed by 10 percentage points, dropping from 39 per cent to 29 per cent, directly easing the burden on salaried professionals and the middle class.

On the corporate side, customs duties on 273 types of industrial raw materials have been reduced, with the government ensuring that tariffs on raw materials remain at least one tier below those on finished goods. The existing 11-tier customs structure has been streamlined into seven tiers. 'To support domestic industries, customs duties on 273 types of industrial raw materials have been reduced, ensuring that tariffs on raw materials remain at least one level lower than those on finished goods,' Minister Wagle said. 'The existing 11-tier customs structure has also been streamlined into seven tiers.'

Nepal's AI and Digital Economy Ambitions

In a headline-grabbing move, the budget outlines an ambitious plan to position Nepal as a regional technology hub. The government will establish the country's first Sovereign AI Compute Centre in Kathmandu, backed by increased investment in AI infrastructure and digital innovation. Wagle argued that Nepal's substantial clean hydropower resources could serve as the energy foundation for high-value AI computing services — a framing that connects the country's traditional energy strength to its emerging tech aspirations.

Plans also include establishing IT parks in major cities, expanding high-speed internet infrastructure, and offering tax incentives for digital service exports. Notably, the government will introduce clear legal provisions enabling individuals to work remotely from Nepal for foreign employers, a move aimed at attracting global remote-work opportunities and retaining talent within the country.

Foreign Investment Reforms and Fintech Push

To improve the investment climate, the government plans to amend the Foreign Investment and Technology Transfer Act to remove the minimum investment threshold for foreign investors — a barrier that critics had long flagged as a deterrent to smaller but high-potential ventures. 'Foreign investment procedures will be fully digitised, and the One Stop Service Centre will be strengthened to improve the investment climate,' Wagle said.

A fintech marketplace will also be established under the supervision of the Nepal Rastra Bank, the country's central bank, signalling intent to formalise and scale the digital financial services sector.

Startup Ecosystem and the India Parallel

The budget introduces the Nepal Enterprise Facility, a platform designed to integrate startups, small enterprises, and medium-sized enterprises into the national ecosystem. 'The platform will advance, in an integrated manner, policy arrangements related to entrepreneurship, identification of and access to innovative financial instruments, support networks including incubation services, and campaigns promoting domestic enterprises,' Wagle said.

The overall thrust of the budget — income tax threshold hikes, rate reductions, and a push for digital infrastructure — mirrors the direction taken by India's Union Budget presented in February 2025, where the Centre similarly raised the personal income tax exemption limit and prioritised technology investment. Nepal's new fiscal year begins in mid-July.

With the budget now tabled, implementation details and sectoral guidelines are expected to be fleshed out in the weeks ahead, as Nepal looks to translate its ambitious fiscal roadmap into measurable economic outcomes.