What TDS is
Tax Deducted at Source is tax withheld by the payer on behalf of the recipient and deposited with the IRD. For the recipient it is a prepayment credited against their annual tax; for the payer it is a compliance duty with penalties for failure.
Common rates
| Payment | Rate |
|---|---|
| Salary | Per the individual's slab, annualised |
| Rent (to individuals or entities) | 10% |
| Service fees to individuals / consultants | 15% |
| Service fees to VAT-registered entities | 1.5% |
| Contract or supply payments (over threshold) | 1.5% |
| Dividends | 5% (final) |
| Interest to individuals from banks | 6% (final) |
| Payments to non-residents for services | 15% (unless treaty) |
| Meeting fees, teaching, casual payments | 15% |
Some withholdings are final, meaning the recipient does not include the income again, while others are advance credits. Rates change with each Finance Act, so check before relying on this table.
Salary TDS
Employers must compute each employee's annual tax under the slabs (after SSF and insurance deductions), divide by twelve, and withhold monthly. Year-end adjustments are made in Ashadh.
e-TDS filing
- Log in to the IRD Taxpayer Portal and open e-TDS.
- Enter or upload the withholding details (payee PAN, amount, rate) for the month.
- Submit the return and pay through a connected bank by the 25th of the following month.
- Generate withholding certificates for payees from the verified return.
Certificates and reconciliation
Payees need certificates to claim credit on their own return. As a payer, reconcile your e-TDS totals to your ledger each month; mismatches are a frequent audit trigger.
Penalties
Failure to withhold makes the payer liable for the tax itself, plus interest at 15% per annum and fines. Late e-TDS returns attract additional fees.
This guide is general information for Nepal taxpayers, not advice for your specific situation. Rates and thresholds change with each Finance Act; confirm current figures with the IRD or with us before acting.
Want this handled for you?
Book a consultation and we'll apply it to your numbers.