E-TDS Filing in Nepal: Step-by-Step for Employers

Everything employers need to know to withhold, deposit, and file TDS correctly — and avoid IRD queries.

Any employer or business making payments subject to withholding tax — salaries, contractor payments, professional fees, rent, and more — has an ongoing responsibility to correctly deduct, deposit, and report that tax through Nepal's e-TDS system. Getting this wrong doesn't just create a compliance headache for the business; it can also create real problems for employees trying to reconcile their own personal tax filings. Here's how the process actually works.

Who Must File e-TDS

Any entity required to withhold tax at source on payments it makes — most commonly employers on employee salaries, but also businesses making payments for rent, professional/consultancy fees, contractor payments, and various other categories subject to withholding — is required to file e-TDS returns reporting these deductions. This obligation applies regardless of business size once an entity is making payments subject to withholding requirements; it is not limited only to large companies.

Monthly vs Annual TDS Returns

Employers and withholding agents generally need to manage two related but distinct reporting cycles:

• Monthly TDS deposits and returns: Tax withheld during each month must be deposited with the IRD and reported through the e-TDS system within the prescribed monthly deadline, reflecting the ongoing nature of payroll and vendor payments.
• Annual reconciliation: At year-end, the cumulative TDS withheld and deposited across the year needs to reconcile properly with each employee's or vendor's total annual figures, supporting their own individual annual tax filings.

Treating the monthly filings diligently throughout the year makes the annual reconciliation dramatically easier, since errors compound and become harder to trace the longer they go uncorrected.

Step-by-Step Portal Filing

1. Deduct the correct TDS amount from each applicable payment (salary, rent, professional fee, etc.) based on the correct rate for that payment category.
2. Deposit the withheld tax with the IRD within the monthly deadline, using the appropriate payment channel.
3. Log in to the e-TDS filing module on the IRD's online portal.
4. Enter payee-wise details — PAN, payment amount, and TDS withheld — for every payment made during the period.
5. Submit the monthly e-TDS return and retain the system-generated acknowledgment.
6. Issue TDS certificates to employees/payees showing the amounts withheld, which they need for their own annual filings.
7. Reconcile cumulative figures at year-end against total payments and total tax withheld across the full fiscal year.

Common Errors That Trigger IRD Queries

• Incorrect or mismatched PAN details entered for an employee or payee
• Applying the wrong TDS rate for a specific category of payment
• Discrepancies between the amount actually deposited and the amount reported in the e-TDS return
• Missing or late monthly filings that create gaps in the annual reconciliation
• Failing to issue proper TDS certificates that match the figures reported to the IRD

Most of these issues stem from data entry mistakes or timing gaps rather than deliberate misreporting, but they still attract the same scrutiny from the tax office, so careful review before each submission is well worth the extra few minutes it takes.

Reconciling TDS With Employee Tax Statements

At year-end, each employee or payee needs a clear TDS certificate showing exactly how much was withheld from their payments across the fiscal year, since this figure directly supports their own personal annual income tax filing. Employers should reconcile their total deposited TDS, their total reported e-TDS figures, and the sum of individual certificates issued to make sure all three align. Any mismatch between these three figures is a common source of confusion for employees when they file their own returns and can also flag the employer for closer review.

FAQ: What Happens If TDS Deposited Doesn't Match Filed Amount?

What happens if the TDS amount actually deposited doesn't match the amount reported in the e-TDS return?
This kind of mismatch is one of the most common triggers for an IRD query or clarification request, since the system cross-checks deposited amounts against filed figures. If a genuine discrepancy exists — due to a data entry error, a missed payment, or a timing difference — the employer should proactively identify and correct it, ideally before the IRD flags it independently, since voluntary correction is generally viewed more favorably than a discrepancy uncovered during a review. Persistent or unexplained mismatches can lead to closer scrutiny of the employer's broader payroll and vendor payment records.

Can an employer correct a mistake in a previously filed e-TDS return?
In many cases, a correction or revision mechanism is available for genuine errors, subject to the specific process and timeframe the IRD permits for such corrections. Employers who identify an error should address it as soon as possible rather than letting it carry forward into subsequent periods or the annual reconciliation.

Do very small businesses with only one or two employees still need to file e-TDS monthly?
Yes. The obligation to withhold and report TDS applies based on the nature of the payment (such as salary above the exemption threshold) rather than the overall size of the business. Even small employers with a handful of staff need to maintain the same monthly filing discipline as larger companies.