TDS in Nepal: the rate chart, deadlines and penalties (2083/84)
Tax deducted at source (स्रोतमा कर कट्टी, TDS) is income tax a payer withholds from a payment and deposits with the Inland Revenue Department for the payee. In Nepal the general rate is 15% of the gross payment, with lower rates for named payments: 1.5% on service fees to a VAT-registered payee, 10% on rent, 1.5% on contract payments above Rs 50,000, 5% on dividends. The payer deposits the tax and files the monthly statement within 25 days of the end of the Nepali month and gives each payee a certificate. The rates below are the Income Tax Act 2058 as amended to the Finance Act 2082, with the Finance Act 2083's changes.
The short version
- Deduct when paying; deposit the tax and file the monthly statement (e-TDS) within 25 days of the end of the Bikram Sambat month; give every payee a certificate by the same day (s90, s91).
- Service fees: 15%, or 1.5% to a VAT-registered payee or a VAT-exempt resident entity. Rent: 10%. Contracts: 1.5% above Rs 50,000 a payment. Dividends: 5%. Deposit interest to individuals: 6%.
- Insurance agents' commission: 20% final (Finance Act 2083). Ride-sharing payouts: 1%. Windfall gains: 25%.
- TDS on a salary is the year's tax at the slab rates, withheld in equal monthly parts.
- Late statement: 2.5% a year of the TDS. Late deposit: 15% a year. Each is charged per month or part month and is the payer's own cost.
- TDS not deducted is still owed by the payer, jointly with the payee (s90(3)).
TDS rate chart 2083/84
| Payment | Rate | Final? | Section |
|---|---|---|---|
| Service fee to a payee not registered for VAT | 15% | No | s88(1) |
| Service fee to a VAT-registered resident, or a resident entity whose transactions are VAT exempt | 1.5% | No | s88(1) proviso (4) |
| Rent (land, buildings, equipment) | 10% | Final for a non-business individual's land or house rent | s88(1) proviso (5), s92(1)(b) |
| House rent received by a natural person | No TDS: the local level collects rent tax | - | s88(1) proviso (5)(b) |
| Vehicle hire paid to a VAT-registered vehicle-rental business | 1.5% | No | s88(1) proviso (5)(a) |
| Transport service or transport-vehicle hire | 2.5% (1.5% to a VAT-registered transport business) | Final for individuals taxed under Sch-1 s1(13) | s88(1) proviso (8) |
| Contract or agreement (goods, labour, construction, installation) | 1.5% of each payment above Rs 50,000 (payments under the same contract in the previous 10 days count together) | No | s89(1)-(2) |
| Contract payment to a non-resident | 5% | Yes | s89(3), s92 |
| Interest paid by a resident (other than to a resident bank) | 15% | No | s88(1) |
| Deposit, debenture and bond interest to a natural person, paid by a bank, financial institution, cooperative, debenture issuer or listed company | 6% | Yes | s88(3) |
| Dividend from a resident company or firm | 5% | Yes | s88(2)(a), s54 |
| Gain on investment insurance; gain from an unapproved retirement fund | 5% | Yes | s88(2)(b)-(c) |
| Royalty | 15% | No | s88(1) |
| Royalty for literary articles or works | 1.5% | No | s88(1) proviso (13) |
| Commission and sales bonus | 15% | No | s88(1) |
| Service fee or commission to a resident individual insurance agent | 20% | Yes | s88(1) proviso (14), s92(1)(ja2) (Finance Act 2083) |
| Meeting allowance (up to Rs 20,000 a meeting), occasional teaching, question papers, answer-sheet checking | 15% | Yes | s88(1), s92(1)(h) |
| Windfall gains: prizes, lotteries, gifts | 25% (listed national awards exempt up to Rs 5 lakh) | Yes | s88A |
| Satellite, bandwidth, optical fibre, telecom equipment or transmission line use | 10% | No | s88(1) proviso (7) |
| Aircraft lease | 10% | No | s88(1) proviso (3) |
| Mutual fund returns to a natural person | 5% | Yes | s88(1) proviso (6) |
| Registration, tuition and exam fees to a foreign school or university | 5% | No | s88(1) proviso (11) |
| Ride-sharing operator's payments to the natural persons on its platform | 1% | No | s95A(6च) (Finance Act 2083) |
| E-commerce operator's payouts to its sellers | 1% | No | s95A (Finance Act 2080) |
Withholding is on the gross payment, without the VAT: the VAT is the payee's tax to account for, not its income. A payer charges the VAT-registered rate only when the payee is in fact registered for VAT; a bill showing VAT is the simplest proof.
Advance tax collected by others
| Collected on | Rate (2083/84) | By | Section |
|---|---|---|---|
| Gain on listed shares held more than 365 days (individual) | 7.5% | Collected at settlement | s95A(2) (Finance Act 2083) |
| Gain on listed shares held 365 days or less (individual) | 10% | Collected at settlement | s95A(2) (Finance Act 2083) |
| Gain on listed shares, resident entity / others | 10% / 25% | Collected at settlement | s95A(2) |
| Gain on an individual's land or building owned 5 years or more | 7.5% | The registering body at registration | s95A(5) (Finance Act 2083) |
| Gain on an individual's land or building owned under 5 years | 10% | The registering body | s95A(5) (Finance Act 2083) |
| Land compulsorily acquired by the Government | 2.5% | The registering body | s95A(5)(क1) (Finance Act 2083) |
| Land or a building given free to the Government | Nil | - | s95A(5क) (Finance Act 2083) |
| Land or building disposed of by a non-individual | 1.5% of the disposal value | The registering body | s95A(6) |
| Foreign currency a non-business individual earns for software, IT, consultancy or social-media content | 5% | The bank or money-transfer firm | s95A (Finance Act 2080) |
| Foreign exchange sold for language and standardised test fees | 15% | The bank | s95A(6A) |
| Profits from commodity futures trading | 10% | The commodity exchange | s95A(1) |
Collectors deposit the advance tax and file a monthly statement within 25 days of the month's end; a late statement costs 1.5% a year of the tax to be collected, per month or part (s95A(8), s117(1)(b)).
When TDS does not apply
- Payments by a natural person that are not connected with his or her business (s88(4)(a)).
- Interest paid to resident banks and financial institutions, and interest between cooperative banks (s88(4)).
- Payments that are exempt from tax, and payments already taxed under another withholding section: there is no double TDS (s88(4), s89(4)).
- House rent received by a natural person, which the local level taxes instead (s88(1) proviso (5)(b)).
- Contract payments of Rs 50,000 or less, unless payments under the same contract in the previous 10 days take them above it (s89(1)).
Final withholding
A payment subject to final withholding is not added to the payee's income: the TDS is the whole tax (s92). Final withholding covers dividends from resident companies and firms; rent paid to a non-business individual for land or a house; gains on investment insurance and unapproved retirement funds; deposit and bond interest to individuals; payments to non-residents under s87-s89; lump-sum retirement payments; meeting allowances up to Rs 20,000 a meeting, occasional teaching, question setting and answer-sheet checking; windfall gains; mutual fund returns to individuals; vehicle and transport payments to individuals taxed under the vehicle schedule; and, from the Finance Act 2083, commission to resident individual insurance agents. Other TDS is a credit against the payee's tax for the year the payment was made (s93).
Depositing TDS and filing the statement
- Monthly statement and deposit
- Within 25 days of the end of each Bikram Sambat month, in IRD's format (e-TDS on the Taxpayer Portal), listing each payment, the payee's name, address and PAN, and the taxs90(1)-(2), s77
- Certificate to each payee
- Within 25 days of the month's end, showing the payment and the tax withhelds91(1)
- Salary certificates
- Within 30 days of the end of the year, or of the employee leavings91(3)
- Turnover-tax payers
- Deposit the TDS they deducted with their instalmentss90(4A)
- TDS is held in trust
- Withheld tax belongs to the Government, ranks before other debts and cannot settle the payer's own debtss103
- Deposits above Rs 10 lakh
- By cheque, draft or electronic transfer, not cashIncome Tax Rules r29
For 2083/84, Kartik's TDS is due by 25 Mangsir 2083 (11 December 2026); every month is in the Nepal tax calendar.
Late, missing or short TDS
| What went wrong | What it costs | Section |
|---|---|---|
| Statement filed late | 2.5% a year of the TDS, for each month or part month | s117(3) |
| TDS deposited late | 15% a year (the general interest rate), for each month or part month, not recoverable from the payee | s119, s2(bg), s119(3) |
| TDS not deducted | Treated as deducted: the payer owes it, jointly with the payee; the payer may recover it from the payee | s90(3), s90(5), s90(7) |
| Default order | The unpaid TDS with interest and the s120 fee, after a 15-day show-cause notice | s90(8) |
Example: Rs 12,000 of TDS due on 25 Mangsir, deposited a day late and with its statement 40 days late, costs Rs 150 of interest (one month) and Rs 50 of statement fee (two months).
TDS on salary
An employer works out the employee's tax for the year at the slab rates and withholds it in equal monthly parts (s87; Income Tax Rules r31). If the salary is the employee's only income, from one employer at a time, that TDS is the employee's whole tax (s4(3)).
| Taxable income | Rate | Tax at the top of the band |
|---|---|---|
| Up to Rs 10,00,000 | 1% (Social Security Tax) | Rs 10,000 |
| Rs 10,00,001 to 15,00,000 | 10% | Rs 60,000 |
| Rs 15,00,001 to 25,00,000 | 20% | Rs 2,60,000 |
| Rs 25,00,001 to 40,00,000 | 27% | Rs 6,65,000 |
| Above Rs 40,00,000 | 29% (27% plus 2 points) | - |
- Deductions before the slabs: retirement contributions (EPF, CIT, SSF, pension fund) up to the lower of Rs 5 lakh or a third of assessable income (Rules r21); life insurance up to Rs 40,000; health insurance up to Rs 20,000; private building insurance up to Rs 10,000; children's tuition fees, the lower of 25% or Rs 25,000 (Finance Act 2083).
- Remote-area allowance off taxable income: category A Rs 50,000, B Rs 40,000, C Rs 30,000, D Rs 20,000, E Rs 10,000 (Rules r38).
- A person with a disability deducts a further Rs 5 lakh; pension income has a Rs 2.5 lakh deduction (Finance Act 2083).
- A woman whose only income is her salary gets 10% off the tax.
- Perquisites: a vehicle for private use counts as 0.5% of salary, housing as 2% (Rules r13).
Example: a salary of Rs 1,00,000 a month (Rs 12 lakh a year) with no deductions is taxed Rs 10,000 + 10% of Rs 2,00,000 = Rs 30,000 a year, so Rs 2,500 is withheld each month. More in the income tax guide.
PAN and TDS
The monthly statement needs each payee's PAN. A purchase bill above Rs 2,000 without the supplier's PAN is not deductible, nor are wages to staff without a PAN beyond a one-off Rs 3,000 (s21(1)). A PAN is taken before earning income or withholding tax, and changes in its details are reported within 15 days (Rules r23, r24).
How BRAccount handles TDS
Every rate in the chart above is a withholding category in BRAccount, withheld on the net of VAT, with the contract threshold built in. The IRD TDS Register gives the monthly statement with each payee's PAN, the due date and the late charges. A purchase bill gets a warning when the TDS rate does not fit the supplier's VAT registration.
Questions
What is the TDS rate on service fees in Nepal?
15% of the payment, or 1.5% when the payee is registered for VAT or is a resident entity with VAT-exempt transactions (Income Tax Act s88(1)).
What is the TDS rate on rent in Nepal?
10% (s88(1) proviso (5)). No TDS is withheld on house rent received by a natural person, which the local level taxes; vehicle hire paid to a VAT-registered rental business is 1.5%.
What is the TDS on contract payments in Nepal?
1.5% of each payment above Rs 50,000 under a contract for goods, labour, construction or installation; payments under the same contract in the previous 10 days count together (s89). Contracts with non-residents are 5%.
When must TDS be deposited in Nepal?
Within 25 days of the end of the Nepali month in which it was withheld, with the monthly statement (s90). Kartik 2083's TDS is due by 25 Mangsir 2083.
What is the penalty for late TDS in Nepal?
A late statement costs 2.5% a year of the TDS and a late deposit 15% a year, each for every month or part month (s117(3), s119). The payer bears it.
What is the TDS on dividends in Nepal?
5%, and it is final: the shareholder adds nothing to income (s88(2), s54).
What is the TDS on bank interest for individuals?
6% on deposit, debenture and bond interest paid to a natural person by banks, financial institutions, cooperatives and listed companies, and it is final (s88(3)).
What TDS applies to insurance agents in 2083/84?
20% of the commission or service fee paid to a resident individual agent, as a final withholding (Finance Act 2083).
Is TDS deducted on VAT?
No. TDS is on the payment without the VAT, which is the payee's tax and not its income.
What happens if TDS is not deducted?
The payer still owes it, jointly with the payee, with interest from the due date, and may recover it from the payee (s90(3)-(7)).
How is TDS on salary calculated in Nepal?
The year's tax is computed at the 2083/84 slabs after allowed deductions and withheld in twelve equal parts. Rs 12 lakh a year gives Rs 30,000 of tax, Rs 2,500 a month.
Sources
- आयकर ऐन, २०५८ (Income Tax Act 2058), as amended to the Finance Act 2082
- आयकर नियमावली, २०५९ (Income Tax Rules 2059), 16th amendment
- आर्थिक ऐन, २०८३ (Finance Act 2083), Nepal Gazette 2083/03/30
- IRD: Finance Act 2083 handbook on exemptions, concessions and other provisions (revised edition)
- BRAccount's page-by-page reading of the Income Tax Act (247 pages), the Income Tax Rules (21 pages) and the Finance Act 2083 (415 pages)Each rate is cited to its section; the reading notes are kept with the software.