TDS on salary and supplier payments in Nepal
TDS in Nepal is withheld when you pay, not when the bill arrives, and deposited within 25 days after the end of that month (Income Tax Act 2058, section 90). On salary it follows the annual tax slabs. On a service payment it is 15%, or 1.5% when the payee is VAT-registered (section 88). On a contract payment it is 1.5% when a single payment exceeds NPR 50,000 (section 89).
Last reviewed: 2026-10-10. This is general information, not tax advice.
TDS on salary.
Salary TDS is the year's tax spread over the months. Take annual gross salary, subtract PF, SSF and CIT deposits (up to one third of gross or NPR 5,00,000, whichever is lower), and tax the rest slab by slab. For FY 2083/84 the first NPR 10,00,000 is taxed at 1%, the social security tax, which Social Security Fund contributors do not pay. Monthly TDS is the annual tax divided by 12.
TDS on supplier payments.
Two sections of the Income Tax Act 2058 cover most supplier payments:
- Section 88, services: 15% of the payment, or 1.5% when paid to a VAT-registered person.
- Section 89, contracts: 1.5% when a single payment exceeds NPR 50,000. Payments under one contract made within 10 days are added together for that test. It is a per-payment test, not a total for the fiscal year.
- Section 90, deposit: TDS withheld in a month is deposited within 25 days after that month ends.
How EK ERP handles it.
- Each payroll run works out salary TDS with the slabs of its own fiscal year, after SSF and CIT deductions.
- Export the e-TDS salary sheet for each BS month for IRD upload.
- Record TDS on a supplier payment by entering the rate or amount when you pay the bill; payment TDS is kept separate from salary TDS.
- See the next TDS filing deadline on the dashboard.
Read more: payroll software, salary tax calculator, accounting, EK ERP pricing.
TDS, answered.
Other Nepal guides: VAT and IRD registers, SSF, Bikram Sambat, Best ERP software, Best HR and payroll software.
What is the TDS rate on service payments in Nepal?
15% under section 88 of the Income Tax Act 2058, or 1.5% when the payment goes to a VAT-registered person.
When does 1.5% contract TDS apply?
Under section 89, when a single contract payment exceeds NPR 50,000. Payments under the same contract within 10 days are aggregated. It is not based on the fiscal-year total.
When is TDS deposited?
TDS is withheld at the time of payment and, under section 90, deposited within 25 days after the end of the month in which it was withheld.
How is salary TDS worked out?
On the year's taxable income after PF, SSF and CIT deductions, using the slabs for the fiscal year, then divided by 12. For FY 2083/84 the first NPR 10,00,000 is taxed at 1%, which SSF contributors do not pay.
Is this tax advice?
No. This is general information, not tax advice. It was last reviewed on 2026-10-10. Check the current Act or ask your auditor before you file.
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