Basics of Withholding Tax system (TDS) in Nepal

1. WITHHOLDING TAX IN NEPAL
AN INTRODUCTION
Nepal Accounting and Management Services Private Limited
Kathmandu, Nepal

2. TAX DEDUCTION AT SOURCE IN NEPAL
 TDS (Withholding Tax) is the tax deducted by the payer
while making payments for Contract, Rent, Interest,
Commission, Royalty, etc.
 TDS so deducted should be paid to the Government within
25 days of the closure of month of deduction.
 The person making such deduction should file monthly
Withholding Tax Return to the concerned tax office (or
Online).
 If Return is not filed on time, fine of 1.5% of the TDS
amount for the month shall be charged. Failure of payment
of TDS amount would result in interest of 15% p.a.

3. TDS ON RENT
 While making payments for rent, 10% TDS need
to be deducted. If it is advance payment of rent,
then also deduction of TDS is compulsory.
 Rent includes rent of House, Vehicles, Leases,
etc.
 TDS so deducted shall be final for the individuals
who are not running business.
 Other individuals and corporates can claim credit
for such TDS deducted.

4. TDS ON CONTRACTS
 While making payments for contracts amounting
more than NPR 50,000/-, 1.50% TDS need to be
deducted.
 If payment is made to Foreign Non-Resident
person, then 10% TDS should be deducted, if the
contract is for service else 5% TDS is deducted.
 If the person is registered on VAT, then 1.5%
TDS of the amount excluding VAT shall be
deducted.

5. OTHER HEADINGS FOR TDS
 Sale of Shares: If listed in NSE, 5% TDS for
individual and 10% TDS for other entities. If not
listed in NSE then, 10% TDS for individuals and
15% TDS for other entities.
 Payment of Dividends: 5% TDS is to be deducted
at the time of payment of dividend by any
company or a partnership firm.
 Payment of Meeting Allowances: 15% TDS shall
be deducted while making payments for meeting
allowances.