If you own a rented house, flat, or commercial space in Nepal, rental income is taxable — full stop. But many landlords get confused between the tax their tenant withholds and what they still owe when filing their own return. Miss the reconciliation step, and you risk double-counting your tax or underreporting income that the IRD can already see from your tenant's records. Here's exactly how rental income tax works in Nepal, step by step.
TDS on Rent (Tenant's Withholding Obligation, 10%)
When a tenant is a registered business, company, or institution — rather than an ordinary individual renting a home for personal use — Nepali tax law requires that tenant to withhold Tax Deducted at Source (TDS) on the rent paid, generally at 10% of the rent amount. This amount is deducted before payment and deposited by the tenant directly with the Inland Revenue Department under the landlord's PAN.
Key points for landlords to understand:
• If your tenant is an individual renting purely for residential use (not a business), TDS withholding may not apply the same way — but the rental income is still fully taxable in your hands.
• The withheld amount is not the final tax — it is an advance credit against your total annual tax liability.
• You must ensure your tenant deposits TDS under your correct, active PAN number, or the credit won't reflect correctly in your account.
Landlord's Annual Filing Requirement
Having TDS withheld does not remove your obligation to file an annual tax return. As a landlord, you must declare your total rental income for the year — not just the portion that was withheld — in your individual income tax return. The TDS already deposited by your tenant(s) is then claimed as a credit against your final computed tax liability.
If you have multiple tenants, or rent out more than one property, all of the rental income should be aggregated and reported together, along with the corresponding TDS certificates from each source.
Deadline Alignment with Individual Return (Poush End)
Rental income for individual landlords is reported as part of the standard individual income tax return, which follows Nepal's fiscal year (Shrawan to Ashad). The filing deadline for this return is Poush end (mid-January) of the following year — the same deadline that applies to salaried individuals and other personal taxpayers.
If a landlord operates rental activity through a registered business structure instead of as a private individual, the applicable deadline may shift to align with business filing timelines (typically Ashwin end) — so it's worth confirming which category your rental activity falls under.
Penalties for Underreporting Rental Income
Because tenants who are businesses report TDS deductions under the landlord's PAN, the IRD often already has a record of rental payments made to you. Underreporting rental income — or leaving it out of your return entirely — creates a visible mismatch that can trigger a notice, reassessment, interest on the underpaid tax, and additional penalty fees under the Income Tax Act.
Common triggers for scrutiny include:
• Rental income reported by a tenant's TDS filing that doesn't appear anywhere in the landlord's own return.
• A visible rented property (commercial space, shop, or known rental listing) with no matching declared income.
• Bank deposits that consistently match a rental pattern but are not reflected as taxable income.
Documentation (Rental Agreement, TDS Certificate)
Good documentation makes filing simple and protects you if your return is ever reviewed. As a landlord, keep the following on hand every year:
Keeping these organised — ideally in a dedicated folder per fiscal year — makes it far easier to reconcile your rental income with TDS credits at filing time, and gives you ready proof if the IRD ever raises a query.
Frequently Asked Questions
Do I need to register for PAN just to rent out one room?
If you earn taxable rental income, you are generally expected to hold a PAN so that TDS credited by tenants and your own filings can be matched correctly.
What if my tenant refuses to give a TDS certificate?
You are still required to report the income; without the certificate, you may need to follow up directly with the tenant or the IRD to confirm the deposited amount before it can be credited.
Can I deduct expenses like repairs from rental income?
Certain directly related expenses may be deductible depending on how the income is classified; maintain receipts and confirm the applicable rules with a tax professional.
Is rental income from a single family home taxed the same as commercial rent?
The underlying tax principle is similar, but the withholding obligation can differ depending on whether the tenant is a business or a private individual — always check your specific tenancy category.
This article is for general informational purposes only and does not constitute tax or legal advice. Always verify current TDS rates and filing rules with the Inland Revenue Department or a licensed tax professional.
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