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Tribhuvan University

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Elective Taxation In Nepal

Taxation In NepalTU Board 2080

What do you mean by "Tax Deduction at Source"?

2

Answer

· Based on the official syllabus and past papers
Updated

Tax Deduction at Source (TDS) refers to the system where the person making a payment (deductor) deducts a specified percentage of tax from the payment before handing over the amount to the recipient (deductee). This mechanism ensures timely tax collection and reduces tax evasion by directly transferring the deducted amount to the government.

In Nepal, TDS is applicable under the Income Tax Act, 2058 for payments such as salaries, interest, dividends, commissions, and professional fees. The deductor (e.g., employer, bank, or business) is responsible for deducting tax at the prescribed rate, depositing it with the Inland Revenue Department (IRD), and issuing a TDS certificate to the deductee. This system simplifies tax compliance and ensures a steady revenue flow for the government.

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