Dashain and Tihar Bonus Rules in Nepal Explained

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Meta Description: Learn the Dashain and Tihar bonus rules in Nepal, including festival
allowance law, eligibility, deadlines, and how the profit bonus differs.
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Secondary Keywords: festival allowance Nepal, Bonus Act 2030 Nepal, Labour Act 2074
bonus, Dashain bonus eligibility, profit bonus Nepal
Dashain and Tihar Bonus Rules in Nepal: What
Employers Must Pay
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.
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
miss.
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 the basic 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 to digital 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
Is the Dashain bonus the same as the profit bonus in Nepal?
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.
How much is the Dashain festival allowance?
It equals one month of the employee's basic salary, prorated if the person worked less than a
full year.
Do all companies have to pay a Tihar bonus?
Tihar payments are usually a matter of company policy rather than a separate statutory
requirement, unlike the more clearly mandated Dashain allowance.
What happens if a company makes a loss?
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.
Can an employee who resigned still claim the festival bonus?
Generally yes, if they completed the required service period before leaving, since the
entitlement is based on service already rendered.
Is the bonus amount taxable?
Yes, both the festival allowance and the profit bonus are treated as taxable income in the
year they are received.