The classification of societies around categories such as caste, ethnicity, race, social class and gender is a pervasive feature of sociality as well as governmentality.  Perhaps more starkly in Nepal, social classification by the state is critical to understanding of the past structuring of the inequality, as well as future initiatives for equity.  Nepal has traversed through infamous Muluki Ain of 1854 which classified all the people of the country in hierarchy of caste structure to present-day identity-based social categories of Indigenous Nationalities, Dalits, Madhesis, and others for the purpose of affirmative action and anti-discrimination policies.  This paper outlines the terrain of the social classification in Nepal along the complexities added by the reclaiming of identities by those who bear them in recent years and challenges for affirmative action policies. I discuss whether the categories we use are socially significant – for politics, culture, social life, personal identity, and for better picture of Nepali society, as well as for serving public policy to judge our progress towards fairness and equality.