TDS Calculator Nepal: Complete Withholding Tax Guide in 2083

A TDS calculator Nepal tool helps businesses, employers and freelancers calculate how much tax must be deducted from a payment before the recipient is paid. TDS applies to payments such as consultancy fees, rent, interest, dividends, commissions and contract amounts.

The payer deducts the applicable tax, pays the remaining amount to the recipient and deposits the deducted amount with Nepal’s Inland Revenue Department.

TDS rates are not the same for every payment. The rate can change based on the payment type, the recipient’s residency status, VAT registration and whether the deduction is treated as advance or final tax.

This guide explains the current rates, calculation formula and difference between TDS and income tax in practical terms.

Last rate review: August 2026
Applicable rate reference: Fiscal year 2083/84

What Is the Full Form of TDS in Tax?

The full form of TDS in tax is Tax Deducted at Source.

It means tax is deducted at the point where income is paid instead of waiting for the recipient to calculate and pay the entire tax at the end of the fiscal year.

In Nepal, TDS is generally called advance tax deduction or withholding tax. The Income Tax Act, 2058 uses the concept of tax withholding on specified payments.

The main withholding provisions appear in Sections 87, 88, 88A and 89 of the Income Tax Act, 2058.

Withholding Tax Meaning in Simple Language

The simplest withholding tax meaning is:

The person making a taxable payment keeps back a specified portion and deposits it with the government under the recipient’s PAN.

Consider a consultant who issues a bill for Rs.100,000.

If the applicable TDS rate is 15%:

• Gross consultancy fee: Rs.100,000
• TDS at 15%: Rs.15,000
• Net amount paid to consultant: Rs.85,000
• Amount deposited with IRD: Rs.15,000

The consultant has earned Rs.100,000, not Rs.85,000. The Rs.15,000 is tax deducted from the consultant’s income and deposited on the consultant’s behalf.

Who Is the Withholder?

The person or organization making the payment is called the withholder.

Common withholders include:

• Employers
• Companies
• Partnership firms
• Government offices
• Banks and financial institutions
• Cooperatives
• Non-governmental organizations
• Registered businesses
• Organizations paying rent, commissions or service fees

The withholder is responsible for:

1. Identifying whether TDS applies.
2. Applying the correct rate.
3. Deducting the tax.
4. Depositing the amount under the correct revenue heading.
5. Submitting and verifying the e-TDS statement.
6. Providing tax-deduction evidence to the recipient.

Who Is the Withholdee?

The person receiving the payment is called the withholdee.

This can be:

• Employee
• Consultant
• Freelancer
• Landlord
• Contractor
• Shareholder
• Depositor
• Commission agent
• Service provider
• Non-resident person

The recipient should provide a correct PAN so that the deducted amount appears in the appropriate taxpayer account.

Is TDS Always an Advance Tax?

TDS is often an advance payment of income tax, but not every withholding is treated in the same way.

Some deductions can be claimed as tax credits when the recipient files an annual income tax return. If the final annual tax is higher than the available TDS credit, the taxpayer pays the balance.

Other payments are subject to final withholding. In those cases, the deduction normally completes the tax liability on that particular payment.

Examples commonly treated as final withholding include:

• Dividends paid by resident companies or partnerships
• Non-business bank interest paid to a resident natural person
• Certain retirement payments
• Some non-resident payments
• Certain mutual-fund distributions
• Specified casual gains

Therefore, a TDS calculator should identify whether the result is an advance tax credit or a final withholding.

Common TDS Rates in Nepal

The following rates are based on the IRD withholding schedule for fiscal year 2083/84.

Rates can change through a new Finance Act. Always select the correct fiscal year in the calculator.

Consultancy and Service Fees

• General Nepal-source service fee or consultancy payment: 15%
• Service fee paid to a VAT-registered resident service provider: 1.5%
• Service fee paid to a resident VAT-exempt entity: 1.5%, where the statutory condition applies
• Personal foreign consultancy income received in foreign currency by a resident natural person not operating a business: 5% advance collection by the bank or payment institution

The 15% rate should not automatically be applied to every consultant invoice.

If the consultant is a VAT-registered resident service provider, the applicable withholding rate is generally 1.5% rather than 15%.

Rent Payments

• Rent paid to a resident person: generally 10%
• Vehicle rent paid to a VAT-registered person operating a vehicle-rental business: 1.5%
• House rent paid to a natural-person landlord: no federal income-tax TDS under the current schedule

The house-rent exception is important. Local house-rent tax may still apply under the relevant municipality’s rules.

Do not assume that “rent TDS is always 10%” without checking who owns the property and what type of rent is being paid.

Dividend Income

• Dividend paid by a resident company or partnership: 5%

Dividend TDS is generally treated as final withholding for the recipient.

If a shareholder receives a declared dividend of Rs.100,000:

• Dividend: Rs.100,000
• TDS at 5%: Rs.5,000
• Net dividend paid: Rs.95,000

Bank Interest

• Non-business deposit, debenture, government bond or similar interest paid to a resident natural person: 6%
• General Nepal-source interest payment covered by Section 88(1): 15%
• Interest paid by a resident bank or financial institution to a life insurance company on deposits: 5%

The 6% rate applies to common personal deposit interest that is not connected with the individual’s business.

A bank normally deducts this tax automatically when interest is credited. The deduction appears in the account statement or tax certificate.

Salary TDS

Salary TDS does not use one flat rate.

The employer estimates the employee’s annual taxable salary, applies the progressive income tax slabs and subtracts allowable deductions and rebates. It then deducts the estimated annual tax through monthly payroll.

Use the salary tax calculator on taxcalculatornp.com for employment income. A flat-rate TDS calculator should not be used for salary.

Other Common Withholding Rates

This is a practical summary. Residency, VAT status, payment threshold, tax treaty and final-withholding rules can change the treatment.

Consultancy TDS: Why the Rate May Be 15% or 1.5%

Consultancy TDS is one of the most common areas of confusion.

The correct rate depends on the consultant’s registration and the nature of the payment.

Example 1: Consultant Not Registered for VAT

Assume a resident consultant charges Rs.100,000 and the general 15% service-fee rate applies.$$\text{TDS} = 100,000 \times 15\% = 15,000$$

The payer gives Rs.85,000 to the consultant and deposits Rs.15,000 with the IRD.

Example 2: VAT-Registered Resident Consultant

Assume the consultant issues the following invoice:

• Service fee: Rs.100,000
• VAT at 13%: Rs.13,000
• Total invoice: Rs.113,000

The income-tax TDS is generally calculated on the service-fee base, excluding VAT.$$\text{Income-tax TDS} = 100,000 \times 1.5\% = 1,500$$

Income-tax TDS and VAT withholding are separate calculations. If the payer is legally required to withhold part of the VAT, that additional withholding must be calculated separately.

Rent TDS Calculation

Suppose a business pays Rs.50,000 monthly rent to a resident company and the 10% rate applies.$$\text{TDS} = 50,000 \times 10\% = 5,000$$

The payer deposits Rs.5,000 under the landlord’s PAN.

This example should not be applied automatically when house rent is paid to a natural-person landlord. Under the current federal schedule, that payment is not subject to income-tax TDS, although local rent tax may remain payable.

Bank Interest TDS Calculation

Assume a resident individual earns Rs.20,000 interest from a personal fixed deposit.

The deposit is not connected with the person’s business.$$\text{TDS} = 20,000 \times 6\% = 1,200$$

The bank deducts and reports the Rs.1,200. The customer should check the interest certificate or account statement before using the figure in any tax or income document.

TDS on Freelancer Income in Nepal

Freelancer taxation depends on whether the person operates a registered business and where the client is located.

Freelancer Providing Services in Nepal

A Nepali business paying a freelancer may deduct:

• 15% for a general service payment, or
• 1.5% where the freelancer is a qualifying VAT-registered resident service provider.

The freelancer may claim eligible advance TDS as a tax credit when filing the annual return.

Foreign Freelance Payment Received in Nepal

Under the current schedule, a bank, financial institution or money-transfer company generally collects 5% when a resident natural person who is not operating a business receives foreign-currency payment for:

• Software or similar digital services
• Personal consultancy provided outside Nepal
• Audio-visual content uploaded to social-media platforms

The registered-business treatment can differ. A freelancer should not assume that the bank’s 5% deduction completes every business tax obligation.

The Difference Between TDS and Income Tax

The main difference between TDS and income tax is that TDS is a collection method, while income tax is the actual tax liability on taxable income.

TDS Is Not an Additional Tax

Suppose a consultant has Rs.100,000 TDS deducted during the year.

After calculating annual taxable income, the consultant’s total income tax liability is Rs.140,000.

The result is:

• Annual income tax: Rs.140,000
• TDS credit: Rs.100,000
• Remaining tax payable: Rs.40,000

The consultant does not pay Rs.140,000 plus Rs.100,000. The TDS is adjusted against the annual liability.

What If TDS Is Higher Than the Final Tax?

Assume the final income tax liability is Rs.70,000 but verified TDS credit is Rs.100,000.

The taxpayer may have an excess credit of Rs.30,000. Depending on the tax treatment and return status, the amount may be carried forward, adjusted or claimed through the applicable refund process.

This does not apply in the same way to a payment subject to final withholding.

Advance TDS and Final TDS

Knowing whether the deduction is advance or final affects the annual return.

Advance TDS

Advance TDS is credited against the taxpayer’s final income tax.

Examples can include:

• Consultancy fees
• Service fees
• Contract payments
• Business-related rent
• Salary withholding
• Other payments not classified as final withholding

The taxpayer should include the gross income and claim the verified TDS credit.

Final TDS

Under Section 92 of the Income Tax Act 2058, final withholding normally completes the tax treatment of the specific payment. A final deduction does not necessarily mean the taxpayer has no other tax obligation; it only finalizes the tax on that particular payment.

Examples include:

Examples include:

• Dividend
• Non-business bank interest paid to a resident natural person
• Certain retirement payments
• Specified payments to non-residents
• Certain mutual-fund distributions
• Casual gains

A final deduction does not necessarily mean the taxpayer has no other tax obligation. It only finalizes the tax on that particular payment.

How to Use a TDS Calculator Nepal Tool

The TDS calculator Nepal tool should be used for fixed-rate payments such as consultancy fees, rent, interest, dividends, commissions and contract payments.

For salary, use a salary tax calculator because employment tax requires progressive slabs and annual deductions.

Step 1: Select the Fiscal Year

Choose the correct fiscal year.

TDS rates can change. Using an old bank-interest or capital-gain rate may produce the wrong result.

Step 2: Choose the Payment Type

Select the category that best describes the payment:

• Consultancy or service fee
• Rent
• Dividend
• Bank interest
• Commission
• Contract payment
• Transport service
• Foreign freelance income
• Other supported payment

Do not select the category based only on the invoice title. Review the actual service or payment.

Step 3: Select Resident or Non-Resident

Residency can change the applicable rate.

A payment to a non-resident may also be affected by a tax treaty. A basic calculator cannot determine treaty eligibility without additional information.

Step 4: Confirm VAT Registration

For service payments, confirm whether the recipient is:

• VAT-registered resident person
• VAT-exempt resident entity
• Not registered for VAT
• Non-resident

This is often the deciding factor between 1.5% and 15% consultancy TDS.

Step 5: Enter the Payment Amount

Enter the amount on which income-tax TDS applies.

For a VAT invoice, enter the service value before VAT in the taxable-payment field. Enter VAT separately if the calculator provides that option.

Step 6: Calculate TDS

The basic formula is:$$\text{TDS amount}=\text{Taxable payment}\times\text{TDS rate}$$

For a non-VAT payment:$$\text{Net payable}=\text{Gross payment}-\text{TDS}$$

For a VAT invoice:$$\text{Net payable}=\text{Service fee}+\text{VAT}-\text{Income-tax TDS}$$

Any separate VAT withholding must then be deducted where applicable.

Step 7: Review the Result

Check that the calculator shows:

• Payment category
• Gross taxable amount
• Applied TDS rate
• TDS amount
• VAT amount, if entered
• Net amount payable to the recipient
• Amount to deposit with the IRD
• Advance or final withholding status

A result is only useful when the selected category and taxpayer status are correct.

How Businesses Deposit and Report TDS

Calculating TDS is only the first step. The payer must also deposit and report it correctly.

Step 1: Collect the Recipient’s PAN

Ask the payee for the PAN certificate or verified PAN details before making the payment.

Check that the invoice name and PAN name match.

Step 2: Deduct the Correct Amount

Calculate TDS using the payment type, residency and registration status.

Record:

• Gross payment
• TDS rate
• TDS amount
• Net payment
• Payment date
• PAN
• Invoice or contract reference

Step 3: Deposit the TDS

Deposit the amount using an approved revenue-payment method.

Make sure the voucher contains the correct:

• Withholder PAN
• Revenue heading
• Tax period
• Amount
• Payment date

Step 4: Submit e-TDS

The withholder must submit an e-TDS statement through the IRD Taxpayer Portal.

The IRD guidance generally requires the monthly e-TDS statement and payment within 25 days after the end of the relevant Nepali month.

Step 5: Verify the Submission

A saved or submitted e-TDS statement may still require verification.

Check that the status is verified. Otherwise, the amount may not appear as a usable credit in the recipient’s tax record.

Step 6: Provide TDS Evidence

Give the recipient a tax-deduction certificate or other accepted evidence showing:

• Gross payment
• TDS amount
• Recipient PAN
• Tax period
• e-TDS transaction details
• Payer information

The recipient should not wait until the annual return deadline to check whether the credit appears.

Common TDS Calculation Mistakes

Using 15% for Every Consultant

A VAT-registered resident service provider may be subject to 1.5%, not 15%.

Check VAT status before deducting.

Using an Old Bank-Interest Rate

The current 2083/84 rate for non-business bank interest paid to a resident natural person is 6%.

A calculator using 5% would understate the deduction.

Deducting 10% From Every House-Rent Payment

The current federal schedule provides that house rent paid to a natural person does not require federal income-tax TDS.

Local house-rent tax may still apply.

Applying TDS to the VAT Amount

Income-tax TDS on a service invoice is generally calculated from the service-fee base, not the VAT added to that fee.

VAT withholding is a separate issue.

Entering the Wrong PAN

A correct payment under the wrong PAN does not provide the intended recipient with usable credit.

Compare the PAN certificate with the invoice before submitting e-TDS.

Deducting TDS but Not Depositing It

Keeping the deducted amount instead of depositing it creates tax, interest and penalty exposure for the payer.

It also prevents the recipient from claiming the credit.

Failing to Verify e-TDS

The recipient may see no credit even though the payer created a submission.

Confirm the final verification status.

Penalties for TDS Non-Compliance

The Inland Revenue Department strictly enforces the 25-day deadline. Failing to deposit the deducted tax on time attracts an annual interest rate of 15% on the outstanding amount. Furthermore, late filing of the e-TDS return carries a penalty of Rs. 100 per day (up to a maximum of Rs. 5,000). Filing an incorrect return can result in a fine of 50% to 100% of the short-deducted amount.

Frequently Asked Questions

Final TDS Checklist

Before making or accepting a payment, confirm:

• Correct fiscal year
• Payment category
• Recipient’s residency
• Recipient’s PAN
• VAT registration
• Correct TDS rate
• Taxable amount before VAT
• Net payable amount
• Advance or final withholding status
• Correct revenue heading
• e-TDS submission
• e-TDS verification
• TDS certificate provided to the recipient

A TDS calculator Nepal tool gives a reliable estimate only when the correct payment category and taxpayer status are selected. When the transaction involves a non-resident, tax treaty, mixed contract or unusual payment, confirm the treatment with the IRD or a qualified tax professional.

Official References

• IRD Withholding Rates for Fiscal Year 2083/84
• Income Tax Act, 2058
• IRD Taxpayer Portal
• IRD Tax FAQs

Disclaimer: This guide provides general tax information. TDS rates and conditions can change through the annual Finance Act. Confirm the applicable rate before filing or making a material payment.