June 9, 2026
THIMPHU – Civil servants across all grade levels have seen a significant increase in take-home pay following recent tax reforms, according to the Ministry of Finance’s latest Quarterly Macroeconomic Situation and Outlook.
The reforms, which include revisions to the Personal Income Tax structure and changes to Tax Deducted at Source (TDS) effective January 2026, have reduced monthly tax deductions, thereby increasing disposable income for government employees.
At the highest level, the Cabinet Secretary now sees monthly tax deductions reduced from Nu 26,478 to Nu 15,002, resulting in an increase in take-home pay of Nu 11,476 per month, or Nu 137,712 annually.
Similarly, government Secretaries benefit from a reduction in TDS from Nu 21,138 to Nu 11,782, translating to an additional Nu 9,356 per month, or Nu 112,272 annually.
Among executive positions, those in EX1/ES1 see deductions fall from Nu 15,958 to Nu 8,257, increasing monthly income by Nu 7,701. EX2/ES2 officials gain Nu 5,731 monthly as deductions drop from Nu 11,633 to Nu 5,902, while EX3/ES3 receive an additional Nu 4,458, with deductions falling from Nu 8,485 to Nu 4,027.
At the professional level, P1 officials experience a reduction in tax from Nu 6,105 to Nu 2,567, increasing take-home pay by Nu 3,538 per month. P2/SS1 earn an additional Nu 2,748, with deductions dropping from Nu 4,645 to Nu 1,897, while P3/SS2 see an increase of Nu 2,161 as deductions fall from Nu 3,438 to Nu 1,277.
For mid-level positions, P4/SS3 benefit from a reduction in deductions from Nu 2,643 to Nu 815, resulting in an additional Nu 1,828 monthly. P5/SS4 gain Nu 1,053 as deductions fall from Nu 1,533 to Nu 480.
Support staff have also seen noticeable gains.
S1 employees receive an additional Nu 943 per month as TDS declines from Nu 1,368 to Nu 425. S2 staff gain Nu 608, with deductions dropping from Nu 888 to Nu 280, while S3 see an increase of Nu 440 as deductions fall from Nu 600 to Nu 160.
For support staff at the base level, S4 deductions drop from Nu 280 to just Nu 10, increasing take-home pay by Nu 270 monthly. S5 employees gain Nu 130 as deductions are effectively removed, while O1 staff also benefit from a full removal of TDS, increasing their monthly income by Nu 90.
The tax adjustments were introduced alongside the implementation of the Goods and Services Tax and revisions to excise tax.
While these indirect taxes are expected to increase prices, the income tax revisions are designed to offset the burden on households.
According to the report, the reforms aim to ensure that individuals within the tax bracket do not experience a decline in real income. The increase in take-home pay is intended to help cushion the impact of rising consumption taxes.