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KATHMANDU, July 12 (Reuters) Nepal's interim government cut off all state allowances to unpopular King Gyanendra and his family in the annual budget unveiled today.

The 2.6 billion dollars budget presented to parliament by Finance Minister Ram Sharan Mahat for the financial year beginning on July 17 makes no provision for the king.

In 2006/07 the royal palace received $3.1 million in allowances.

''The status the king had last year does not remain the same under the constitution,'' Mahat told reporters. ''I have presented the budget according to the spirit of the constitution.'' Gyanendra was forced to renounce absolute rule last year as a decade-long armed revolt by anti-monarchy Maoists reached a climax amid huge popular protests in the capital.

The Maoists are now part of the interim government. An interim constitution written in January gives no role to the king.

Mahat said the 774 palace employees would have their salaries paid out of the government's miscellaneous account.

The move comes months before elections for a constituent assembly demanded by the Maoists in return for their 2006 truce. The assembly will write a new constitution and decide the fate of the monarchy. The Maoists are calling for its abolition.

Mahat has set aside 54 million dollars for the November election.

The former guerrillas and some other political parties had insisted the government give no money to the king.

Many Nepalis considered their king an incarnation of Lord Vishnu, the Hindu god of protection, but the new government has stripped the current monarch of nearly all of his powers, including control of the army.

More than 13,000 people were killed in the Maoist revolt which also hit the aid- and tourism-dependent economy.

REUTERS AM RK2050