Filing taxes can feel overwhelming, but Nepal’s Electronic Tax Deduction at Source (ETDS) system makes it much easier for businesses and organizations to stay on top of their tax responsibilities.
Managed by the Inland Revenue Department (IRD), ETDS is all about simplifying how taxes are collected and reported. Whether you run a small shop or a big company, knowing how ETDS works is key to staying compliant and avoiding fines.
Let’s break it down step by step, with practical examples and tips to make the process clear.
What is ETDS?
ETDS is Nepal’s online system for handling Tax Deducted at Source (TDS).
Simply, TDS is the tax businesses must take out of certain payments–like salaries, rent and service fees–and send to the government.
The IRD requires all kinds of organizations, from companies to nonprofits, to use ETDS to report these taxes. By going digital, ETDS minimizes paperwork, reduces mistakes and helps everyone to keep things more accurate and transparent.
How to File ETDS: A Step-by-Step Guide
Filing ETDS is very simple if you follow these steps on the IRD’s Taxpayer Portal:
- Visit the IRD Website:
Visit the IRD website and click on the “Taxpayer Portal” link to get started. - Sign Up or Log In:
If you’re new, register with your business details and Permanent Account Number (PAN). If you already have an account, just log in. - Start Your ETDS Filing:
Look for the “E-TDS” option in the menu and click “Register” to get a submission number for your tax return. - Enter Payment Details:
Click “Enter Transactions” and fill in details like the recipient’s PAN, payment amount, TDS amount and date. You can also upload an Excel or XML file if you have lots of transactions. - Include Voucher Information:
Add details like the treasury account number, voucher number, payment method (cash or bank) and the bank name. Double-check everything to avoid errors. - Submit and Check:
Review your entries, hit submit and use the “Self Verify” option to finish. You’ll get a confirmation message on your registered KYT(Know Your Taxpayer) number if everything seems fine.
Examples of TDS Rates in Nepal
TDS rates depend on the type of payment and the recipient.
Here’s a quick look at some common rates for the 2080/81 fiscal year (2023/24), based on the Income Tax Act:
- Salaries: 1% to 36%, depending on income levels.
- Rent: 10% for individuals, 15% for companies.
- Contracts: 1.5% for locals, 5% for non-residents.
- Interest: 15% for everyone.
- Service Fees: 1.5% for locals, 5% for non-residents.
- Dividends: 5% for all.
For example, if you pay NPR 50,000 in rent to an individual, you’d deduct NPR 5,000 (10%) as TDS and send it to the IRD. Rates can change, so it is advised to check the IRD’s website or talk to a tax expert to stay updated.
Documents You’ll Need
- PAN Numbers: Yours and the recipient’s for identification.
- Payment Records: Invoices or receipts showing the payment and the TDS amount.
- Voucher(Challan): Proof that you’ve paid the TDS (with bank details and dates).
- Transaction List: A record of all payments where the TDS was deducted.
- TDS Certificate: A document you give the recipient showing the tax deducted.
Possessing a physical as well as a digital copy of these documents may come in handy.
When and How Often to File
How often you file ETDS depends on your business size:
- Monthly: Most businesses file within 25 days after the month ends.
- Quarterly: Smaller businesses can file every three months, due within 25 days.
- Annual Summary: Everyone submits a yearly TDS report.
- No TDS? File Anyway: If you didn’t deduct any TDS, submit a “nil(null) return.”
Missing deadlines can lead to fines or interests, so mark your calendar and check the IRD Website for the exact dates.
Why ETDS Matters (and What to Watch Out For)
ETDS saves time, cuts down on errors, and keeps your tax records clean. But it’s not without challenges. The IRD portal can glitch or you might even mess up the data entry if you’re not careful. If you’re new to digital filing, it can feel tricky at first.
Take it slow, double-check your entries and if possible, get a tax expert to help. Using accounting software can also make things comparatively smoother.