TDS Rates in Nepal — the Complete Directory
Need it handled, not explained? Our accounting retainer includes monthly TDS computation, deposit, and e-TDS filing — see our tax services
What is TDS and who must deduct it?
Tax Deducted at Source (TDS) is Nepal's withholding tax system under the Income Tax Act 2058: when a business makes certain payments — salaries, service fees, rent, contracts, dividends — it must deduct tax at the prescribed rate, deposit it with the Inland Revenue Department, and file an e-TDS return.
The obligation sits on the payer. If you fail to deduct, you remain liable for the tax anyway — plus interest and fines — and the expense can be disallowed in your tax assessment. Withholding correctly is therefore not the payee's problem; it's yours.
TDS rates on common payments (Sections 87, 88 & 89)
| Payment type | Rate | Notes |
|---|---|---|
| Salaries & employment income (Sec 87) | Per salary slabs | Progressive slab rates; withheld monthly by the employer |
| Service fees — VAT-registered provider (VAT invoice) | 1.5% | On the invoice amount excluding VAT |
| Service fees — non-VAT provider (PAN invoice) | 15% | Consulting, professional, and technical services |
| Rent — house, building, land (to entities) | 10% | Natural persons' residential rent is taxed via local rent tax rules |
| Vehicle or equipment lease/rental | 10% | Plant, machinery & equipment lease payments |
| Contract payments above NPR 50,000 (Sec 89) | 1.5% | Threshold assessed over a rolling 10-day window per supplier |
| Interest paid by banks to individuals | 6% | Final withholding on deposit interest |
| Dividends | 5% | Final withholding |
| Royalties & sales commissions | 15% | |
| Payments to non-residents | 5%–15% | Varies by nature of payment and applicable DTAA |
| Foreign currency income from exported services (individuals) | 5% | Final withholding for qualifying IT/service exporters |
| Windfall gains (lottery, prizes) | 25% | Final withholding |
Deposit deadlines and e-TDS filing
Tax withheld in a Nepali month must be deposited — and the e-TDS return filed — within 25 days of the end of that month. The return is filed on the IRD's Taxpayer Portal:
- 01Log in to the IRD Taxpayer Portal with your PAN credentials and open the e-TDS section.
- 02Enter each payee's PAN, payment type, amount, and tax withheld, and generate the submission number.
- 03Deposit the withheld tax at an IRD-linked bank (or online) under the correct revenue account, referencing the submission number.
- 04Verify the return at your Inland Revenue Office so payees receive credit for the withheld tax.
- 05Issue withholding certificates to payees — they need them to claim the credit in their own returns.
The mistakes we see most often
- Applying 1.5% to a non-VAT service provider (the correct rate is 15% on PAN invoices)
- Missing the NPR 50,000 rolling threshold on repeated small contract payments to the same supplier
- Depositing on time but never verifying the e-TDS return — the payee gets no credit and disputes follow
- Not withholding on rent because "the landlord refused" — the liability stays with the payer regardless
- Treating final withholding (dividends, bank interest) as advance tax and double-counting the credit
Frequently asked questions
What is the TDS rate on consulting services in Nepal?
15% if the service provider bills on a PAN (non-VAT) invoice; 1.5% if the provider is VAT-registered and issues a VAT invoice. The distinction is checked in tax audits, so verify the supplier's VAT status before paying.
When must TDS be deposited with the IRD?
Within 25 days of the end of the Nepali month in which the tax was withheld, together with the e-TDS return filed on the IRD Taxpayer Portal.
What happens if I forget to deduct TDS?
The payer remains liable for the undeducted tax, plus interest and fees, and the related expense may be disallowed when your income tax is assessed. Back-depositing quickly limits the interest — talk to us before the assessment does it for you.
Is TDS a final tax or an advance?
Both exist. Dividends, bank deposit interest to individuals, and certain foreign-currency service income are final withholding — no further tax on that income. Most other TDS (services, rent, contracts) is an advance the payee credits against their annual tax liability.
Can Rolacon handle our monthly TDS filings?
Yes — TDS computation, deposit, e-TDS filing, verification, and withholding certificates are part of our standard accounting retainer. One fixed fee, no missed months.
Tired of tracking withholding rates? We file TDS for you.