eTDS is the electronic statement of tax deducted at source that every withholding agent in Nepal lodges with the Inland Revenue Department, and it is due within fifteen days of the end of each month. The same fifteen days is the deadline for depositing the tax itself. Both obligations sit in Section 90 of the Income Tax Act 2058.
For an employer, the amounts in that statement come out of the monthly payroll run, so the statement is only as good as the withholding behind it. Our guide to calculating employee salary in Nepal covers the run itself, and TDS on salary covers how the deduction is computed per employee.
Table of Contents
- What eTDS actually is
- The monthly cycle
- Filing eTDS, step by step
- What lateness costs
- Where employers get caught
- The annual return sits on top of this
- Frequently asked questions
- What is eTDS in Nepal?
- What is the eTDS deadline in Nepal?
- What is the penalty for a late TDS statement in Nepal?
- What happens if an employer does not deduct TDS at all?
- Can an employer recover TDS it failed to deduct from the employee?
- When must a TDS certificate be given to an employee?
- Is eTDS the same as the annual income return?
- Sources
What eTDS actually is
TDS is the tax an employer or other payer takes out of a payment before making it. eTDS is the electronic form of the statement that reports those deductions, lodged through the IRD's taxpayer portal against your PAN.
Section 90(1) sets out what the statement must contain, in the format the Department specifies:
- every payment subject to withholding made that month under Sections 87, 88 or 89,
- the name and address of each person the tax was withheld from, and their PAN where they have one,
- the amount of tax withheld on each payment, and
- anything else the Department specifies.
The withholding heads an employer touches most are Section 87 (employment) and Section 88 (investment return and service charge). Section 87 withholds employment income at the Schedule 1 slab rates. Section 88 withholds a flat 15% on interest, natural resource payments, rent, royalty and service charge, with a proviso taking provident fund and gratuity paid by an approved retirement fund down to 6%, and 10% on dividends under Section 88(2).
Mixing those heads up is the most common reason a statement gets rejected or amended later. A monthly consultant invoice and a monthly salary are both payments your company makes to a person, and they report under different sections at different rates.
The monthly cycle
Run payroll and compute the deduction. Employment tax is withheld at the Schedule 1 rate on the annualised position of each employee, not at a flat percentage. See TDS on salary for how the annualisation works.
Deposit the tax within fifteen days of month end. Section 90(2) requires the tax to be paid to the Department along with the statement, inside the Section 90(1) time limit. Shrawan's deduction is therefore due before the middle of Bhadra.
Lodge the statement in the same window. The statement is submitted electronically against your PAN through the IRD taxpayer portal at ird.gov.np, and the tax is deposited through a bank on a voucher generated for the period.
Keep the deposit reference. A statement lodged without the matching deposit is a half-finished obligation, and the two are reconciled against each other later. The voucher number is what proves the second half.
Issue certificates. Section 91 requires a withholding certificate showing the tax withheld and paid. For most heads it is due within fifteen days of the month ending. For employment under Section 87, Section 91(3) makes it annual instead: within thirty days of the year ending, or when the employee stops working for you during the year.
Filing eTDS, step by step
- Register the PAN for electronic services on the IRD taxpayer portal, if the company has not already. The submission is made under the company's own PAN, not the employee's.
- Assemble the schedule from the payroll register: one row per person paid, with PAN, gross payment, section, rate and tax withheld.
- Reconcile it to the payroll control account before uploading anything. The total tax in the statement and the total TDS line in the payroll journal have to be the same number. Our guide to payroll accounting in Nepal sets out the entries that make that check possible.
- Generate the voucher and deposit the tax at the bank, inside the fifteen days.
- Upload the statement for the period and record the submission reference.
- Match the deposit against the statement. Do not assume a bank transfer landed against the right period.
What lateness costs
The two failures are priced separately, which surprises people who assume that paying the tax late is the whole problem.
| What happened | Provision | Consequence |
|---|---|---|
| Statement lodged late | §117(3) | 1.5% a year of the tax that should have been withheld, for each month and part of a month, from the due date until it is lodged |
| Tax deposited late | §119(1) | Interest at the normal rate, for each month and part of a month, on the amount outstanding |
| Nothing withheld at all | §90(3) | Tax is deemed withheld anyway, at the time it should have been |
| Neither withheld nor paid | §90(5) | Payer and payee are jointly and severally liable to the Department |
| Interest charged on the payer | §119(3) | It cannot be recovered from the person the tax should have come from |
Section 90(7) is the balancing provision: where the withholding agent pays over tax it never actually deducted, it may recover that tax from the person concerned. Section 119(3) then removes the interest from that recovery. The principal is recoverable, the penalty for being late is not.
Where employers get caught
- Treating the fifteen days as fifteen working days. It is fifteen days from the end of the month.
- Filing the statement and forgetting the deposit, or the reverse. Section 90(1) and 90(2) are two obligations sharing one deadline.
- Missing a leaver. Someone paid a part month still belongs in that month's statement, and Section 91(3) says their certificate is due when they go, not at year end.
- Reporting a service-fee payment under the employment head. A contractor on a retainer is not an employee, and the rate is different.
- Issuing no annual certificate. Section 96(2)(c)(1) requires the withholding certificate to accompany an income return, so a missing certificate becomes the employee's problem in Ashoj.
- Reconciling once a year. Twelve statements that each disagree slightly with the payroll register take far longer to unpick in Ashad than they would have taken monthly.
The annual return sits on top of this
Monthly eTDS is not the year-end job. Under Section 96(1), a person files an income return within three months of the income year ending, which puts the ordinary deadline at the end of Ashoj. Section 98 lets the Department extend that by up to three months on a written application made inside the original window.
Section 97 excuses some people from filing at all, including a person with no tax to pay for the year. For a salaried employee whose only income is employment income already withheld in full under Section 87, that is often the case, which is precisely why the Section 91(3) certificate matters: it is the evidence that the tax was already taken.
Missing the annual return is priced under Section 117(1): 1.5% a year of assessable income, computed without deductions, for each month and part of a month, or NPR 1,000 per month, whichever is higher.
NepalHRM generates the IRD eTDS file from the closed payroll run, ready to upload. The deductions come from the same tax engine that produced the payslips, so the statement and the payroll register reconcile by construction. Your finance team does the uploading and the deposit. See how payroll works, or book a walkthrough.
Frequently asked questions
What is eTDS in Nepal?
It is the electronic statement of tax deducted at source that a withholding agent lodges with the Inland Revenue Department under Section 90(1) of the Income Tax Act 2058, listing every payment subject to withholding in the month, the recipient's PAN, and the tax withheld.
What is the eTDS deadline in Nepal?
Within fifteen days of the end of each month. Section 90(1) sets that limit for the statement and Section 90(2) applies the same limit to depositing the tax.
What is the penalty for a late TDS statement in Nepal?
Section 117(3) imposes a fee of 1.5% a year of the tax that should have been withheld, charged for each month and part of a month from the due date until the statement is lodged. Late payment of the tax itself attracts interest separately under Section 119.
What happens if an employer does not deduct TDS at all?
Section 90(3) deems the tax to have been withheld at the time it should have been, so the liability exists regardless. Section 90(5) then makes the payer and the recipient jointly and severally liable to the Department.
Can an employer recover TDS it failed to deduct from the employee?
The tax, yes: Section 90(7) allows recovery of an amount equal to the tax paid over. The interest, no: Section 119(3) specifically prevents the withholding agent from recovering interest caused by its own failure.
When must a TDS certificate be given to an employee?
For employment income withheld under Section 87, within thirty days of the income year ending, or when the employee leaves employment during the year. Other withholding heads follow the ordinary fifteen day rule in Section 91(2).
Is eTDS the same as the annual income return?
No. eTDS is a monthly statement of amounts withheld. The annual income return is filed under Section 96(1) within three months of the year ending, and the withholding certificate is one of the documents that accompanies it.
Sources
- Income Tax Act, 2058 (2002), Nepal Law Commission text as published by the Institute of Chartered Accountants of Nepal: en.ican.org.np. Sections 87, 88, 90, 91, 96, 97, 98, 117 and 119 read from that text, retrieved 2026-08-07.
- Inland Revenue Department taxpayer portal and PAN registration: ird.gov.np, checked 2026-08-07.
- Institute of Chartered Accountants of Nepal, Highlights of Federal Budget of Nepal for FY 2083/84: en.ican.org.np. Checked for amendments to Sections 90 and 117 for FY 2083/84; the section-by-section list records none, retrieved 2026-08-07.
Related reading: TDS on salary in Nepal · Payroll compliance calendar for FY 2083/84 · Salary tax calculator
