TDS in Nepal 2082/83 (2026)

TDS on rent is broadly around 10%, with variations depending on whether the landlord is an individual or a company. Confirm the current rate for your situation.

Deposit the deduction and file the e-TDS return within 25 days of the end of the Nepali month in which the tax was deducted, through the IRD taxpayer portal.

TDS is governed by the withholding-tax provisions of the Income Tax Act 2058 (2002), administered by the Inland Revenue Department under the Ministry of Finance. The Act sets the categories of payment that attract withholding, the rates (which are revised through annual Finance Acts), the deposit and filing obligations, and the consequences of failing to deduct or deposit. Specific rates are usually confirmed against the current Finance Act and IRD circulars for the relevant fiscal year.

A withholding agent is anyone required to deduct tax at source on a payment — typically an employer (on salary) and any business making payments for rent, service or consultancy fees, interest, dividend, royalty or commission, plus certain other categories under the Act. Becoming a withholding agent is automatic on making such payments; there is no separate registration. The agent's duty is to deduct, deposit, file the e-TDS return, and issue the withholding certificate to the payee.

Broadly, a resident service or contract supplier issuing a VAT invoice has TDS deducted at 1.5%, while a supplier on a PAN bill (no VAT) has TDS at 15%; consultancy fees are commonly withheld at 15%. Payments to non-resident service providers are commonly withheld at 5%. These rates are indicative under the current framework; because Finance Acts can revise specific bands, confirm the exact rate that applies to your transaction with the current IRD circular.

Dividend distributed by a Nepali company is broadly subject to TDS at 5%, withheld by the company at the time of distribution, for both resident and non-resident recipients under the current framework. This is a final tax for many recipients, meaning the withholding completes their tax obligation on that dividend. As with other rates, dividend treatment can be adjusted by the Finance Act, so confirm the current rate and any treaty-based variations for non-resident shareholders.

Interest paid by a bank or financial institution to a resident individual on deposits is broadly subject to TDS at around 5%, while interest paid to a company or to a non-resident is commonly withheld at 15%. The exact rate has been revised in recent Finance Acts and sources differ on the current figure for individual deposits, so confirm with the IRD circular for the current fiscal year before applying a number to a specific situation, particularly for non-resident interest.

Royalty and commission payments are commonly withheld at 15% under the current TDS framework, both for resident and (broadly) non-resident payees, subject to any applicable tax-treaty relief for non-residents. Because royalty and commission can interact with intellectual-property arrangements and cross-border treaties, getting the right rate — including any reduced treaty rate — is important. Confirm the rate that applies to your payment, ideally with a tax adviser, before deducting and depositing.

The e-TDS return is filed through the Inland Revenue Department's taxpayer portal, using the entity's PAN login. The return covers the deductions made in the relevant Nepali month and is filed alongside payment of the deducted amount, within 25 days of the end of that month. Filing electronically is the standard, and a nil return is required where the entity is registered for TDS reporting but had no withholding to report in the period.

The withholding certificate is the document the withholding agent issues to the payee confirming the amount deducted and deposited with the IRD on the payee's behalf, typically within 15 days of the month-end. The payee uses it to claim a credit on their annual income-tax return. A clean record of certificates is what makes the annual reconciliation straightforward, both for the payee claiming credit and for the agent showing compliance in case of an IRD review.

If a withholding agent fails to deduct, or deducts but does not deposit, the Income Tax Act 2058 makes the payer personally liable for the undeducted tax with interest — commonly 15% per annum — plus late-filing fees on the e-TDS return. Penalties accumulate quietly over time and can become substantial if discovered in an audit covering multiple years. The remedy is procedural: month-end deduction, deposit and filing on the 25th, every month, without exception.

Yes. TDS turns on the nature of the payment, not whether it is made in cash, by cheque or by bank transfer, so paying rent or a consultancy fee in cash does not avoid the withholding obligation. Cash payments without TDS are a common cause of liability arising in IRD audits, alongside cash payments above the limit set by the Act for deductibility purposes. Treat the cash/bank distinction as irrelevant to whether TDS must be deducted.

Some categories of payment fall outside the TDS framework either by statutory exclusion or because the Income Tax Act 2058 treats them differently — for example, rent for a residential house paid by an individual to a natural person is widely understood to be outside the TDS regime, with the landlord paying tax through their annual return instead. Because exclusions are specific and limited, confirm any exemption for your payment with the Act and current IRD circulars.

Yes. Payments to non-residents — for services, royalty, interest, and similar — generally attract TDS, with the rate depending on the category and any applicable double-tax treaty between Nepal and the recipient's country. Non-resident payments are often withheld at 5% for service contracts and 15% for royalty and similar, but treaty relief can reduce the rate where conditions are met. Take advice on cross-border payments, because both Nepal tax and treaty rules can apply.

TDS is a withholding under the Income Tax Act 2058, while VAT is a separate indirect tax under the VAT Act 2052 — they coexist on the same invoice. A VAT-registered service supplier issuing a VAT invoice generally has TDS withheld at the lower 1.5% rate; a supplier on a PAN bill (no VAT) is withheld at 15%. So the payer reads the invoice — VAT or PAN — and applies the corresponding TDS rate.

TDS records — including the deduction calculation, the deposit voucher, the e-TDS return, and the withholding certificates issued — should be kept for the retention period required under the Income Tax Act 2058, commonly five years, so that the records can be produced in an IRD review or audit. Because tax-record-keeping rules can change and overlap with broader corporate-record requirements, treat the longest applicable period as the practical retention.

Yes. If the TDS withheld during the year exceeds the payee's final tax liability shown on the annual income-tax return, the excess can be claimed as a refund through the return, with the IRD processing the refund in accordance with its procedures. Where the withholding is a final tax for the payee (such as some dividend and interest categories), no further refund applies. The position depends on the type of income, so a tax adviser confirms it case by case.

No. There is no separate TDS registration in Nepal — withholding obligations attach automatically to a business or employer once it makes the relevant payments, on the basis of its PAN. The Inland Revenue Department records TDS under the entity's PAN, and the e-TDS return is filed through the taxpayer portal logged in with that PAN. So once you have a PAN, the TDS obligation arises if and when you make withholding-triggering payments.

When setting up the TDS routine on a new business, for a tax notice or audit covering past withholding, and where the correct rate is not obvious — for example payments to non-residents, mixed VAT-and-PAN suppliers, royalty arrangements, or treaty-relief claims. A lawyer or tax adviser confirms the right rate, the deduction base and the filing route, and represents the business in an IRD assessment when past TDS is in question. Early advice is far cheaper than fixing exposure after an audit.