Police official Gyan Bikram Shah said the bus was so packed that some people were riding on the roof.
The driver lost control on the rain-slicked road, and the bus plunged into a flooded irrigation canal, Shah said. Rescuers recovered 39 bodies.
Most of those on board were believed to be Indian nationals from the neighboring Indian state of Uttar Pradesh state who were visiting Nepal on an annual pilgrimage to Hindu temples. However, the victims' nationalities and identities were not yet clear because Indian citizens do not need to register when they cross into Nepal, Shah said.
The driver is believed to have survived the crash but may have fled, he said.