Nepal Income Tax 2058 has mentioned the payment() that needed to be deducted in the course of business or employment or investment transactions such prescribes tax referred as TDS. The payer as TDS withholding agent to receiver as withholdee. TDS deducted to the IRD either in cash, or by cheque or draft or through the bank. 

Many circumstances  it is deemed as  income tax paid by the payer on behalf of the TDS withholdee. Therefore, it can be treated as tax credit during the filing income tax and minus the income tax liability. 

The two types of  TDS a. final TDS and Non-final ( or adjustable) TDS.

A. Final TDS 

B. Adjustable TDS.


Final TDS that is deducted from the payment by the taxpayer agent which cannot be reduce from the income tax liability of the withholdee. This TDS is not considered income of the withholdee when calculating income tax. It is simply ignored when calculating the income tax liability of the withholdee. 

The TDS that is deducted form the payment by the TDS withholding agent and can be used to reduce the tax liability of the withholdee. The withholdee claims non -final TDS as tax credits in Annex 10 ( form Income tax Tax-c-01-02-0960). Non- final TDS reduces the income tax payable of the withholdee because it was paid by the TDS withholding agent on behalf of the withholdee. 

Payments are subject to final TDS:

1.Payments of dividends by a resident company to its beneficiaries

2. Except if in conjunction with business operations, payment of rent for the lease

3. Gain of payment made by a resident investment insurance company to an insured

4. Gain of pyments made resident persons from unapproved retirement funds

5. Payments made for interest on deposits to an individual by resident banks or financial institutions.

6. Any of the above listed payments made to non- resident persons.

7. Lump sum retirement payments made by HMG 

8. Payment made for meeting allowances, occasional teaching,