How to Comply with Bhutan’s Personal Income Tax (PIT) Brackets and Slabs

Bhutan’s Personal Income Tax (PIT) system applies tax progressively to an individual’s taxable income. From 1 January 2026, the Income Tax Act of Bhutan 2025 replaced the earlier income-tax framework. Individuals should therefore calculate and report PIT using the rules applicable to the 2026 income year and later periods.

Understanding the applicable PIT brackets, calculating taxable income correctly, maintaining supporting records, and filing the required return on time are important parts of tax compliance.

Bhutan PIT Slabs

Under Schedule 1 of the Income Tax Act of Bhutan 2025, individual taxable income is taxed using the following progressive rates:

Taxable Income	PIT Rate / Calculation
Up to Nu. 300,000	Nil
Above Nu. 300,000 to Nu. 500,000	5% of amount above Nu. 300,000
Above Nu. 500,000 to Nu. 750,000	Nu. 10,000 + 10% of amount above Nu. 500,000
Above Nu. 750,000 to Nu. 1,200,000	Nu. 35,000 + 15% of amount above Nu. 750,000
Above Nu. 1,200,000 to Nu. 2,000,000	Nu. 102,500 + 20% of amount above Nu. 1,200,000
Above Nu. 2,000,000 to Nu. 3,500,000	Nu. 262,500 + 25% of amount above Nu. 2,000,000
Above Nu. 3,500,000	Nu. 637,500 + 30% of amount above Nu. 3,500,000

These are progressive slabs, meaning the applicable percentage is applied according to the relevant portion of taxable income rather than applying the highest rate to the entire income.

1. Determine Your Taxable Income

The first step in PIT compliance is determining the amount that is actually taxable. Do not simply use total salary or total receipts as the taxable amount without considering the applicable provisions of the Income Tax Act.

Individuals may have income from employment as well as other sources. The 2025 Act contains provisions covering employment, business, investment and other sources of income, together with deductions and exempt amounts.

Keep records of:

• Employment income
• Other taxable income
• Eligible deductions
• Exempt income, where applicable
• Tax already deducted or paid
• Supporting documents for deductions and exemptions

This documentation helps ensure that the final taxable-income calculation can be supported if required.

2. Apply the Correct PIT Slab

Once taxable income has been calculated, apply the relevant progressive PIT formula.

For example, if an individual's taxable income is Nu. 600,000, the tax is calculated as:

Nu. 10,000 + 10% × (Nu. 600,000 − Nu. 500,000) = Nu. 20,000

The example demonstrates that the 10% rate applies only to the portion above Nu. 500,000 within that bracket. The entire Nu. 600,000 is not taxed at 10%.

For higher-income individuals, the same progressive approach continues through the subsequent brackets.

3. Keep Accurate Income Records

Maintaining complete records is an important part of PIT compliance. Employees and individuals with multiple income sources should retain salary statements, payment records, investment records, rental records and other relevant documentation.

Businesses and employers should also maintain accurate payroll records where employee income is involved. Proper records make it easier to reconcile income, deductions and tax payments when preparing the annual tax return.

4. Reconcile Tax Already Paid or Withheld

Where tax has already been deducted or paid during the year, the amount should be properly accounted for when determining the final tax position.

Individuals should therefore compare:

Calculated PIT liability − eligible tax already paid or withheld = remaining tax payable/refundable

The reconciliation should be supported by relevant payment or withholding records.

5. File the Income Tax Return on Time

The rules issued under the Income Tax Act 2025 provide that income tax returns are filed for each income year during the period beginning 1 February and ending on the last day of April of the immediately following calendar year. The rules provide for electronic filing through the platform specified by the Department, with hard-copy filing subject to the stated conditions.

For example, for an income year ending 31 December 2026, taxpayers should follow the applicable filing requirements for the filing period beginning in February 2027 and ending on the last day of April 2027.

6. Avoid Using Outdated PIT Slabs

One important compliance consideration for 2026 is distinguishing the new PIT structure from the previous rules.

The earlier Bhutan income-tax framework used different thresholds and rates. The 2025 Act introduced a new individual rate schedule, including a Nu. 300,000 nil-tax threshold and progressive rates extending to 30% for taxable income above Nu. 3.5 million.

Therefore, payroll teams, accountants and individuals should update tax calculations and payroll systems rather than continuing to use older PIT tables.

7. Maintain Supporting Documents

A practical PIT compliance checklist should include:

• Income records
• Salary and employment records
• Deduction documents
• Exemption-related documents
• Tax deduction or payment records
• Annual tax calculations
• Filed tax returns
• Relevant receipts and supporting evidence

Keeping these documents organized can make tax reconciliation and future verification more efficient.

8. Review Changes from the 2025 Income Tax Act

The Income Tax Act of Bhutan 2025 came into force on 1 January 2026 and includes provisions covering taxable income, deductions, exemptions, tax rates and filing obligations.

Because tax rules can be amended or supplemented by regulations and notifications, individuals and employers should check the latest information issued by Bhutan's Ministry of Finance and Department of Revenue and Customs before finalizing a tax calculation or return. The Ministry's official Acts and Policy page lists the Income Tax Act 2025 and related tax legislation.

Conclusion

Complying with Bhutan's PIT requirements involves more than selecting a tax rate. Individuals should first determine their taxable income, apply the correct progressive slab, account for eligible deductions and exemptions, reconcile taxes already paid or withheld, maintain supporting records and file the income tax return within the prescribed period.

For the 2026 income year, using the PIT rates under the Income Tax Act of Bhutan 2025 is particularly important because the new Act took effect on 1 January 2026.

Note: Tax rules can change through subsequent legislation, regulations and official notifications. The latest Ministry of Finance guidance should be checked before making a final PIT calculation.