Tax Deducted at Source (TDS) rates in Nepal for 2077/2078 (UPDATED)

TDS stands for tax deducted at source. Any company or person doing a financial transaction that is subject to TDS payment is required to deduct tax at source i.e while making the transaction.  . 

The company or person that makes the payment after deducting TDS is called a deductor and the company or person receiving the payment is called the deductee. It is the deductor’s responsibility to deduct TDS before making the payment and deposit the same with the government. TDS is deducted irrespective of the mode of payment–cash, cheque or credit–and is linked to the PAN of the deductor and deducted.

Generally, TDS is deducted on the following types of payments:

  • Salaries
  • Interest payments by banks
  • Commission payments
  • Rent payments
  • Consultation fees
  • Professional fees
  • Dividends
  • Windfall gains

Here we will be discussing the rates and rules of TDS in Nepal for the FY 2077/2078 (2020/2021). 

 

A. Tax withholding Rates (TDS)

 

S.N

# Nature of Transaction FY 2020-21 FY 2019-20

FY 2077/78

FY 2076/77

i

Interest income from the deposit under ‘Micro Finance Program’, ‘Rural Development Bank’, ‘Postal Saving Bank & Cooperative (u/s-11(2)) in rural areas is exempted from tax

No change 

Up to Rs 25,000

ii

Windfall gains 

No change 

25%*

iii

Payment of rent except for house rent to a natural person and except provided in the serial number (iv) & (v) below, made by resident person** 

No change 

10%

iv

Payment for vehicle hire to VAT-registered person 

No change 

1.5%

v

Payment for freight or rental payment against the lease of carriage vehicle relating carriage of goods 

i. Against non VAT invoice 

ii. Against VAT Invoice 

No change 

 

1.5% 

2.5% 

 

2.5%

vi

Profit and gain from the transaction of commodity future market 

No change 

10%

vii

On returns to be distributed by Mutual Fund: – 

Natural person: 

Other than Natural Person :

 

No change 

 

5% 

 

15%

viii

On Dividend paid by the resident company and partnership firm – To Resident person – To Non-resident Person 

 

No change 

 

5% for both

ix

On payment of gain from investment insurance

No change 

5%

x

On payment of gain from unapproved retirement fund

No change 

5%

xi

On payment of interest or similar type having source in Nepal by Resident Bank, Cooperatives, financial institutions or debenture issuing entity, or listed company – 

– In case of payment made to natural person [not involved in any business activity] 

 

– In case of payment made to entities 

No change 

5% 

15% 

xii

On payment of premium to non- resident insurance company – On payment of commission relating to reinsurance premium to nonresident insurance company 

No change 

1.5%

xiii

Payment against contract or agreement to Non-Resident person.

(Word “repair of aircraft & other contract” removed to include all type of

contract or agreement.)

No change.

 

5%

xiv

On payment exceeding Rs 5 million made towards the works done through the consumer committee 

No change 

1.5%

xv

Contract payments exceeding Rs 50,000 

No change 

1.5%

xvi

Payment of consultancy fee/ for procurement of services: – 

– by resident person against VAT invoice 

– by resident person against Non-VAT invoice 

 

No change 

 

1.5% 

15%

xvii

Payment against contract or agreement to Non-Resident person for “repair of aircraft & other contract” removed to include all type of contract or agreement 

No change in rates. 

5%

xviii

On payment for use of Satellite, Bandwidth, Optical fiber, telecommunication equipment or electricity transmission by resident person irrespective of its location 

No change 

10%

xix

On payment of interest on loan taken from foreign banks in foreign currency for the investment as specified by Nepal Rastra Bank by resident banks and financial institutions. On payment of interest on loan taken from foreign banks for the investment as specified by Nepal Rastra Bank by banks and financial institutions. 

10%

– 

*Windfall gain tax of 25% will be exempted for the reward up to Rs 500,000 received on behalf of contribution in the field of literature, art, culture, sports, journalism, science and technology and general administration.

B. Rates of Advance Taxes

** In case of house rent other than payment to natural person, additional municipality tax to be included and deposited with the local ward/municipal office (2% in case of Kathmandu and Lalitpur Municipal Authorities)

C. Applicability of TDS

C. Final Withholding Payments

Only left for reference. The following table contains TDS rates and rules of FY 2076/77. You can simply ignore this.

Tax Deducted at Source (TDS) rates, rules and updates of Nepal for 2073/2074

TDS WITHHOLDING IN OTHER PAYMENTS

S.N

Nature of Transaction

2072/2073

2073/2074

A Interest income from deposit up to Rs 10000 under ‘Micro Finance Program’, ‘Rural Development Bank’, ‘Postal Saving Finance Program’, ‘Rural Development Bank’, ‘Postal SavingBank’ & Co-Operative (u/s-11(2) in rural areas) Exempt from tax Exempt from tax
B Wind fall gains 25% 25%
  Wind fall gains from Literature, Arts, Culture, Sports, Journalism,Science & Technology and Public Administration amountreceived up to 5 lacs Nil Nil
C Payment of rent by resident person having source in Nepal  10% 10%
D Payment of Rent by Resident person having source in Nepal if the Bill raised is VAT bill 1.50% 1.50%
E Profit and Gain from Transaction of commodity future market 10% 10%
F Profit and Gain from Disposal of Shares:    
In case of Individual    
Listed Shares 5% 5%
Non Listed Shares 10% 10%
Others    
Listed Shares 10% 10%
Non Listed Shares 15% 15%
G On dividend paid by the resident entity. 5% for both 5% for both
  To Resident Person    
  To Non Resident Person    
H On payment of gain in investment insurance 5% 5%
I On payment of gain from unapproved retirement fund 5% 5%
J On payment of interest or similar type having source in Nepal to natural person [ not involved in any business activity ] by Resident Bank, financial institutions or debenture issuing entity,
or listed company
5% 5%
K Payment made by natural person relating to business or other payments relating to house rental except house rent No TDS No TDS
L Payment for articles published in newspaper, question setting,answer evaluation No TDS No TDS
M Interest payment to Resident bank, other financial institutions No TDS No TDS
N Interregional interchange fee paid to credit card issuing bank No TDS No TDS
O Interest or fees paid by Government of Nepal under bilateral No TDS No TDS
P On payment of general insurance premium to resident insurance company No TDS No TDS
Q On payment of premium to non-resident insurance company    
R Contract payment exceeding Rs 50000 for a single contract wtith in 10 days. 1.50% 1.50%
S Interest & Dividend paid to Mutual Fund No TDS No TDS
T Payment of consultancy fee    
  to resident person against VAT invoice 1.50% 1.50%
  to resident person against non VAT invoice 15% 15%
U Payment on contract to Non Resident Person    
  On service contract 15% 15%
  On repair of aircraft & other contract 5% 5%
  In cases other than above as directed by IRD.    
V Gain on disposal of Interest in any resident entity (both listed or unlisted) exchange (Taxable amount is calculated under section 37)    
To resident natural person 10% 10%
To others including non resident 15% 15%
W TDS deducted on payment of dividend made by Mutual fund to natural Person is final withholding Tax. 5% 5%
X TDS on Payment by Resident Person for utilizing services related with Satellite, Bandwidth, Optical Fiber, equipment relating to telecommunications or electric transmission 15% 10%
Y Dividend Paid by Partnership Firm to its Partners 5% 5%
It is now Final Withholding
       
  INCOME FROM INVESTMENT    
S.N Particulars 72/73 73/74
1 INDIVIDUAL    
Tax withholding on capital gain for natural person on transaction exceeding Rs 3 million (to be made by land revenue office at the time of registration)    
disposal of land or land & building owned for more than 5 years up to 10 years    
disposal of land or land & building owned for less than 5 years    
2 Corporate    
Income from disposal of non business chargeable assets (Capital Gain) Normal Rate Normal Rate
(However 10% TDS is deducted by Land Revenue Office)

OTHER IMPORTANT POINTS FOR TDS IN NEPAL THAT ARE WORTH REMEMBERING

– In case of Disposal of Interest on entity as per section 37 (2Kha), company registrar shall update the register only after receiving the evidence for payment of TDS applicable on capital gain from such disposals. (New)
– Infrastructure tax at the rate of Rs.5/ltr is levied in addition to all applicable taxes on import of petrol, diesel, and aviation fuel. (New)


– Any person and entity licensed to operate casino during the F.Y. 2073/74 shall be liable to pay 30 million rupees as royalty, furthermore, person operating the same business only using modern machines and equipment shall be liable to pay 7.5 million rupees as royalty. (New)


– In case of disposal of land and building by person other than mentioned in section 95(ka), Malpot office during the registration shall collect advance tax equal to 10% of gain on such disposal. (New)


– Presumptive Tax Rates has been changed as follows: (New)
a. Person dealing with Cigarette, Gas etc. and having profit margin up to 3 percent is liable to pay tax at 0.25% of Turnover instead of 0.5% of Turnover.
b. Similarly in case of businesses other than Cigarette, Gas etc. 0.75 percent instead of 1.5 percent of Turnover.
c. In case of Service Industry 2 percent (no Change).


– Natural Person whether Resident or not having Taxable Income exceeding Rs. 40 Lakhs is compulsorily required to submit Income Tax Return within the time limit prescribed by Income Tax Act.


– Person contributing any amount to Prime Minister Relief Fund or National Reconstruction
Fund established by Government of Nepal during any Income Year, are entitled to deduct such amount while calculating taxable income for such Income Year.

  • I need to know about the rate of TDS on govt. office rent.While asking to others, they are also confusion on either 10% or 15% of monthly rent amount.

  • Dear Sir,

    Please confirm the meaning of “other contract” in clause “U” mentioned above is inclusive of the international EPC contract loaned by World Bank under NEA or exclusive ?

    I thought that EPC contract should be exlusive, am i right?

    Thanking for your kindly reply!

    Best regards,

  • could you please let me know what will be the taxes to be made from a company. In other words id ABC company ‘s profit is Rs,1000000.00 ( ten lakhs) and if the company’s share holder want s this profit tb divided between themselves as per their shares in the company, whjat percentage of taxes have to bepaid or deucted.

  • Dear Sir,
    I am trying to do a international consultancy as a lead consultant and Have a partner from France whom I awe some percentage of the cost.
    I would be grateful to understand if you could help me understand the taxation rules for this. say total project fund is $50000 and I owe the consultant $30000 and I need to send the amount from Nepal.

    Thank you

    • Basudev ji;
      The consultancy fee is subject to 15% TDS and 13% reverse VAT. Reverse VAT is which you can adjust with your other business invoice of VAT transaction. You will have to present all your contract with the company along with TDS and reverse VAT submission evidence and present it for NRB approval thru the bank you intend to transact.

    • Do we need to deduct tax for the labor who carry furniture of the office during the relocation of office if yes what rate?

    • 13% reverse charge to pe paid and filed during VAT return in addition to the billed amount.

      15% TDS to be deducted on the billed amount. Pls note that bank will not make payment unless you provide them the TDS payment challan.

  • Point (R) says Contract payment exceeding Rs 50000 for a single contract within 10 days 1.5% TDS. Is it applicable if the contract payment is related to service registered in PAN only??

  • if an electrician is called to repair telephone line and plumber is called to repair water pipe line, electrician submits pan bill and plumber does not. In such case, how much tax to be levied on such service. Till now, I have treated this kind of service as repair and maintenance wages and has been deducting 1 percent tax. Please, advise.

  • I would like to know is it to deduct 20000 rural tax exemption for less than 1yr or have to deduct the per month rural tax exemption i.e. 1666.66.or how will we adjust the rural tax exemption for less than 1 yr like 6 month, 2 month.

  • If I am purchasing a software (apparently it will be sent against a pro forma invoice) from outside nepal, what would be the applicable taxes?
    Is 15% TDS and 13% reverse vat applicable for this as well, appreciate your comment

    • hi Ashish ji, so what you did, paid 15%+13%! Some says for software, which is a product, one need to pay only 1.5% TDS and 13% reverse VAT.

    • For Payment Purpose 15% TDS is to be deducted. However Pro Forma Invoice in itself is not the final Invoice. Only after receiving the Final Invoice can we Book the Expense and Apply 13% Reverse VAT & TDS of 15% can be claimed.

  • I would like to know that how to make payment of VAT bills by Company after deducting TDS on it.

    Example:
    VAT applicable amount – 10,000/-
    VAT – 13% of 10,000/- = 1,300/-
    Total amount – 11,300/-

    Option:1
    TDS =1.5% of 11,300/- =170/-
    Payment =11300-1.5% of 11300 = 11,130/-
    or
    Option:2
    TDS =1.5% of 10000 = 150/-
    Payment =11300-150 = 11,150/-

    Which one is correct one. Please suggest me

  • We are receiving some courier services from india and they have given us invoice as per the law of india
    than what would be happen if we are doing payment in Indian currency. what should we have to deduct TDS as per Nepal???

    Please answer

  • Is it compulsory to raise PR, PO for every purchase we made for the project to any amount or is there any minimum value to which PR, PO is no required

    • If salary of a person is more than 350000 year wise, than it is treated as social security tax moreover the person having salary more than 350000 is tretaed as remuneration incom.
      For eg:
      salary of Mr Ram: rs 30000 Per Month
      year wise salary: 30000*12=360000
      First slab – 350000 @ 1% = 3500 ( social security tax)
      Next _ 10000 @ 15% = 1500 ( remuneration income Tax )

  • Dear sir

    Please help on a matter. Our company is a resident company in Nepal and we had received transportation and CHA services from a Indian resident comapany and our work contract is more than Rs. 50000/-.
    And we want to paid the money to Indian company against his service bill. You are requested please confirm about the TDS applicability??

  • I only know following…

    1. Deduct 1.5% on Vat
    2. Deduct 15% on Pan

    Please clarify me following:
    1. Is there any difference on deducting tax for service and goods bill?
    2. Is there any limit (in bill or Accounting Period) for making applicable TDS rule?

  • Please clarify me following:
    1. Is there any difference on deducting tax for service and goods bill?
    2. Is there any limit (in bill or Accounting Period) for making applicable TDS rule?

  • I would like to get a help regarding TDS on Goods Transport Service:
    My company purchases big quantity of coals from the VAT registered vendors for which those vendors issue TAX invoice. However, the coal is transported from vendors’ location to our location by a Third Company which basically deals in transporting such materials and the Third company issues a normal PAN invoice (the amount of invoice ranges from 55K-95K).
    Similarly, after the coal reaches our location, we have to pay extra amount for unloading the coal from Trucks.

    So, what shall be the TDS implication on these 2 cases?
    a) Transportation of Coal from Vendor to our locaiton,
    b) Unloading wages paid.

  • I am doing a construction contra t in Nepal and Come from India they r deducting 15% TDS how to get refund for the same

    • Request for the TDS deduction Receipt and verification of TDS deduction at Nepal. You can claim that Tax has already been deducted in Nepal by showing the document when paying you annual tax in India. The amount of tax deduction in Nepal can be deducted from your annual tax payment requirement in India.

    • The usual practice is that, for service nature we have to deduct TDS. But, for goods bill TDS is not Deducted.

  • Freight paid to transport of goods by indian to nepal :- mode of transport indian railway or truck by transporter companies is indian company or individual.
    question is what about TDS provision……
    2nd. in nepal hording bored is revenue expenses or capital expense..

    • If the freight service is from any foreign nation to custom office of Nepal only then we should not deduct TDS of such nature as the facility received was beyond the boundary of Nepal. If the transportation service is for within Nepal then 2.5% TDS should be deducted irrespective of whether they are registered in VAT or not.

  • If we purchase goods for the organization and if we have done certain program and we made it from hotel. In that case the amount is nominal we get VAT BILL. So in this case we have to raised tds 1.5% or not.

  • Do we deduct TDS 1.5% or 15% or no TDS on Tea, coffee, food that provided (on request only) by small Khaja Ghar at Government Office.

  • Dear Sir,

    We are EPC contractor from China of NEA, project is loaned by EIB, NEA open LC directly to China for goods which are imported from out of Nepal, so how much TDS will be deducted?

  • I found this : (h)Personal services are also tax-exempt. These are services provided, for example, by actors and other entertainers, sportsmen, writers, translators and manpower supplies agents. As it says tax-exempt, then is this means they are also NO TDS services? (It is also written in VAT Act)

  • Hello sir please help me .
    If I am engaged in in a work having the salary of Rs:11,000/- per month what oercent/ amount of TDS shall be paid

  • How to pay low tax for the fixed deposit in the bank ?How much tax does need to pay for FD in the bank?

  • What is the TDS Rate for The Cargo Companies (International)? Do we have to deduct the TDS on their Service or not?

  • I am a company if I issue VAT bill to a client for Digital Marketing, what’s the TDS percentage the client should deduct before making the payment??Its 1.5% or 15%?

  • I am a distributer of abc company FY 2077-78 fy incentives gives to retailers but company dedication 15 % tds to distributer for
    Retailers claim amounts but distributer also deposit individual partywise tds 15% amounts to tax office how I claim my company deposit 15 % tds amount

  • We had a contract for overwheling of Hydroower Electromechanical machine between our company and indian Company and established LC accordingly. But after claim them for payment .
    It is applicale VAT and TDS and pls mention the % and payment method.

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