Dashain Bonus and Tihar Bonus rules in Nepal confuse many employees. Workers often assume they qualify for one bonus, but the law actually entitles them to another. Each fall, offices in Kathmandu, Pokhara, and elsewhere try to figure out how to pay festival bonuses correctly. Yet many employees can’t explain why their neighbor received six months’ pay while they received only one month’s pay. Two parallel laws from the Nepal government create this confusion.
Dashain and Tihar Bonus Rules in Nepal: What Employers Must Pay
Fast Onboarding
Secure Cloud-Based
Employee Self-Service
Both Taxable
Festival Allowance
Capped by Salary Bracket
Profit Bonus
Under one law, a company is guaranteed a fixed amount of money for the festival, regardless of its performance. Others tie money to annual profit and may fluctuate significantly across companies. Knowing which rule applies to you is a key part in considering how to budget your festival, how to talk to HR about your pay, and even whether to complain. This article explains both in plain English, covers some practical scenarios of eligibility requirements and resolves some of the numbers that most online explanations
Two Different Payments, Two Different Laws
In Nepali labour law, festival money is considered different from profit linked money, though most people use the word ‘bonus’ in a generic way.The Labour Act, 2074 (2017) covers the festival allowance also known as Dasain allowance.Section 37 of that Act requires every qualifying employer to pay each worker one month’s basic salary before the festival begins. The company’s profitability that year doesn’t affect this payment. The law treats it as a festival expense, not a performance reward, so even a loss-making firm must pay it.
The Bonus Act 2030 (1974) and its amendments govern the second payment, called the profit bonus. This law applies only when a company earns net profit for its fiscal year. A profitable company must set aside 10% of its net income as a bonus pool. It then allocates this pool among eligible staff using a formula based on salary bands. In a loss-making year, the company creates no pool, so no worker receives this second payment.
Guaranteed Payment: Festival Allowance
When people hear the term “Dashain bonus,” they think of the festival allowance. It is equivalent to one month’s basic pay as calculated on thebasic salary, not the gross pay, of an employee, and is not likely to include allowances such as transport or communication expenses.This applies to employers with ten or more employees. Smaller, registered employers may follow slightly different arrangements.
Timing matters here. The law requires employers to pay before the festival begins. Many companies pay about a week in advance. This gives workers cash for shopping, travel, and family time. Workers who joined partway through the year receive a prorated amount based on their length of service. If someone resigns before Dashain but has already completed the qualifying service period, they may claim the payment, since it’s based on service already rendered.
The actual practice around Tihar differs. Many employers offer a similar courtesy allowance around Tihar. However, this usually stems from company policy or a collective agreement clause, not statutory law like the Dashain payment. The Tihar amount varies considerably across industries and can differ significantly from the Dashain amount. Employees should check their appointment letter or staff handbook for exact figures.
Profit Bonus: Company Performance-based.
The Bonus Act 2030 comes into play when an enterprise makes a profit in its fiscal year. 10% of net income (pre bonus and tax deductions) is set aside for distribution. The general rule is that staff must have worked at least half the financial year to be eligible for the proportion of that year. This ensures that the staff who have just joined the school do not receive a full proportion.
It’s not a 50/50 split for distribution. The Act divides workers into wage brackets and sets different caps, so that a lower wage-worker could get as many as eight months of salary, versus six months for a higher wage-worker earning more than two times the minimum wage. This design intentionally reduces income disparities instead of simply reflecting the income gap already in place. The money that remains after paying every eligible worker is not lost, that is, 70 percent of the money goes to the enterprise’s own welfare fund, and 30 percent is deposited to a national welfare fund managed by the government.
This will require the payment to be completed within eight months of the end of the fiscal year, allowing the companies to undertake an audit before issuing their profits. The festival allowance and profit bonus is taxable income, as it is received, which means that there is a risk of tax being withheld from the amount received where this is included. Employees need to take account of any tax withheld from their stated allowance and profit bonus as it is received, and not assume that the full amount is paid into their account.
The places where employees are likely to be confused
One common misconception is that the amount of the festival allowance is tied to the company’s success. It doesn’t. If the firm makes a record profit or if it barely makes it through the year, the one month’s payment is always basic salary. A frequent error is the International Civil Service Regulations that apply to government employees, which usually differ significantly from the provisions in the Labour Act regarding work done during a festival, because they are applicable to different groups of employees.
Staff members often also believe that they will not receive any pending festival payment if they are leaving a job. Generally, where the service was already completed prior to departure, the right to that service will not be extinguished by the termination of the employment relationship.
What HR Teams Should Prepare Before Festival Season
When the festival season is near, payroll becomes essential as even a simple mistake in calculating basic salary components or failure to pay can lead to a labour dispute. Most of the medium-sized businesses in Nepal have now migrated todigital payroll software that automatically reminds them about the due dates of the various festival allowances, and also allows them to separate basic pay from allowances to accurately calculate the payments. It also creates audit trails that can be checked for compliance. One of the easier steps that any growing business can take to prevent payroll nightmares at the end of the year is to find the right payroll software to eliminate the need to track festival dates in a spreadsheet.
Frequently Asked Questions (FAQ)
No. The Dashain payment is a fixed festival allowance under the Labour Act, while the profit bonus under the Bonus Act depends entirely on whether the company made a profit that year.
It equals one month of the employee's basic salary, prorated if the person worked less than a full year.
Tihar payments are usually a matter of company policy rather than a separate statutory requirement, unlike the more clearly mandated Dashain allowance.
The profit bonus simply doesn't apply that year, but the festival allowance under the Labour Act still must be paid regardless of profit or loss.
Generally yes, if they completed the required service period before leaving, since the entitlement is based on service already rendered.
Yes, both the festival allowance and the profit bonus are treated as taxable income in the year they are received.
Trusted by 1600+ Organisations
Why to Choose Hajir?
Efficiently manage payroll, leave, and communication to streamline
HR processes and enhance employee satisfaction.
HR processes and enhance employee satisfaction.
Cost Effective Solution
Automates manual processes, saving businesses on administrative costs and resources.
Cloud-Based Accessibility
Access your data anytime, anywhere—perfect for remote and hybrid work environments.
Customizable Features
Adaptable to your business needs, with features like shift scheduling, WPS compliance, and custom reporting.
User-Friendly Interface
Designed for simplicity, ensuring a smooth experience for both HR teams and employees.
Data Security & Compliance
Robust security measures protect sensitive employee information, meeting regional compliance standards.
Quick Implementation
Hassle-free setup and onboarding process that gets your HR operations up and running in no time.
Scalability
Whether for small businesses or large enterprises, it can scale to meet the needs of any organization.
Boost Employee Productivity
With automated processes and real-time updates, Hajir helps you focus on what matters most—growing your business
12h/6d Customer Support
Dedicated support ensures that your HR operations run without a hitch.
Download the App and Get Started
Get the app from Play Store and App Store
