Firm Regd. No. 1432 | COP No. 1612 | ICAN Registered Chartered Accountants

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ICAN Regd. 1432 • COP No. 1612 • Pokhara-10, Nepal

Tax CircularVerified Technical Guidance

Nepal Withholding Tax (TDS) Handbook: Practical Guide under Income Tax Act 2058

नेपालको स्रोतमा कर कट्टी (TDS) मार्गदर्शन: आयकर ऐन २०५८ अनुसार

Sima & Associates Technical Cell

•

Published: 8/15/2026

•Firm Regd. No. 1432 | COP No. 1612

2 min read

•

Official Technical Guidance

Document Outline

Executive Brief & Purpose

A comprehensive practitioner's guide to deducting, depositing, and reconciling withholding taxes under Sections 87, 88, 88Ka, and 89 of Nepal Income Tax Act 2058.

1. Statutory Framework of Withholding Tax#

Under Chapter 17 of the Income Tax Act, 2058, the person making specified payments has a mandatory statutory obligation to withhold tax at source at the time of payment or credit, whichever occurs earlier.

Failure to deduct or deposit TDS attracts statutory interest under Section 117 and statutory penalty under Section 119.

2. Distinction: Final vs. Non-Final Withholding#

Classification	Meaning & Legal Effect	Primary Examples
Final Withholding Tax	The tax deducted at source is treated as the final settlement of tax liability on that income. The recipient is not required to include this income in their annual income tax return.	- Bank interest paid to natural persons (5%)

Dividends distributed to resident shareholders (5%)
House rent paid to natural persons (10%) | | Non-Final (Adjustable) | The tax deducted is treated as an advance tax credit. The recipient must declare the gross income and claim the TDS amount as a tax credit. | - Consultancy and technical fees (15%)
Service supply contracts under Section 89 (1.5%)
Commission payments (15%) |

3. Monthly Deposit & ETDS Reconciliation Protocol#

Deadline: All tax deducted during a Nepali month must be deposited at designated commercial banks by the 25th day of the following Nepali month.
PAN Attribution: Ensure the exact Permanent Account Number (PAN) of the payee is recorded on the deposit voucher.
ETDS Verification: Upload withholding schedules through the IRD Taxpayer Portal to ensure the withholding certificate reflects in the payee's tax ledger.

Applicable Standards & Topics:

#TDS Rates#Section 88#Section 89#Withholding Tax#ETDS

Statutory Informational Disclaimer (ICAN Code of Ethics)

This publication is prepared by the Technical Cell of Sima & Associates, Chartered Accountants (Firm Regd. No. 1432, COP No. 1612) solely for general educational and informational guidance. Under the Nepal Chartered Accountants Regulations and the ICAN Handbook of the Code of Ethics, this material does not constitute formal statutory audit opinion, tax advice, nor does it establish a client-auditor relationship. Commercial enterprises should consult a qualified Chartered Accountant before executing financial or commercial transactions based on these interpretations.

Verify authentic CA audit certificates at official ICAN UDIN Portal

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Tax CircularVerified Technical Guidance

Nepal Withholding Tax (TDS) Handbook: Practical Guide under Income Tax Act 2058

नेपालको स्रोतमा कर कट्टी (TDS) मार्गदर्शन: आयकर ऐन २०५८ अनुसार

Sima & Associates Technical Cell

•

Published: 8/15/2026

•Firm Regd. No. 1432 | COP No. 1612

2 min read

•

Official Technical Guidance

Document Outline

Executive Brief & Purpose

A comprehensive practitioner's guide to deducting, depositing, and reconciling withholding taxes under Sections 87, 88, 88Ka, and 89 of Nepal Income Tax Act 2058.

1. Statutory Framework of Withholding Tax#

Failure to deduct or deposit TDS attracts statutory interest under Section 117 and statutory penalty under Section 119.

2. Distinction: Final vs. Non-Final Withholding#

Classification	Meaning & Legal Effect	Primary Examples
Final Withholding Tax	The tax deducted at source is treated as the final settlement of tax liability on that income. The recipient is not required to include this income in their annual income tax return.	- Bank interest paid to natural persons (5%)

Dividends distributed to resident shareholders (5%)
House rent paid to natural persons (10%) | | Non-Final (Adjustable) | The tax deducted is treated as an advance tax credit. The recipient must declare the gross income and claim the TDS amount as a tax credit. | - Consultancy and technical fees (15%)
Service supply contracts under Section 89 (1.5%)
Commission payments (15%) |

3. Monthly Deposit & ETDS Reconciliation Protocol#

Deadline: All tax deducted during a Nepali month must be deposited at designated commercial banks by the 25th day of the following Nepali month.
PAN Attribution: Ensure the exact Permanent Account Number (PAN) of the payee is recorded on the deposit voucher.
ETDS Verification: Upload withholding schedules through the IRD Taxpayer Portal to ensure the withholding certificate reflects in the payee's tax ledger.

Applicable Standards & Topics:

#TDS Rates#Section 88#Section 89#Withholding Tax#ETDS

Statutory Informational Disclaimer (ICAN Code of Ethics)

Verify authentic CA audit certificates at official ICAN UDIN Portal

Further Technical Reading

Related Directives & Circulars

View All Knowledge Hub

NFRS Guideline

1 min

NFRS Conversion Roadmap: Bridging Local GAAP to International Reporting Standards

A strategic roadmap for Nepalese corporations transitioning from NAS to NFRS, covering opening balance sheet adjustments, lease capitalization (NFRS 16), and fair valuation.

9/28/2026Read

ICAN Directive

2 min

Understanding ICAN UDIN: Verification Guide for Bankers and Corporate Stakeholders

Detailed analysis of the 18-digit Unique Document Identification Number mandatory for all audit reports, review engagements, and tax certificates signed by ICAN practicing members.

9/5/2026Read

Budget Brief

2 min

National Budget & Finance Act 2081: Key Directives for Corporate & Individual Taxpayers

A technical brief analyzing the major income tax rate revisions, VAT schedule modifications, Social Security exemptions, and advance tax mandates introduced by the Finance Act 2081.

7/20/2026Read