Withholding Tax and Advance Tax

┌──────────────────────────────────────────────────────────────────────┐
│  ADVANCE TAX / CREDITABLE TDS                                        │
│                                                                      │
│  Withheld now, CREDITED against your final liability.                │
│  If too much was withheld → refund.                                  │
│  If too little → pay the balance.                                    │
│  You must file to settle it.                                         │
├──────────────────────────────────────────────────────────────────────┤
│  FINAL WITHHOLDING TAX                                               │
│                                                                      │
│  Withheld now, and that is the END of it.                            │
│  No credit, no refund, no assessment on that income.                 │
│  The income does not enter your ordinary computation.                │
└──────────────────────────────────────────────────────────────────────┘

⇒ Getting this wrong in either direction is expensive:
  • Treating a FINAL tax as creditable → you claim a credit you
    are not entitled to
  • Treating a CREDITABLE tax as final → you leave a refund unclaimed

┌────────────────────────────────────────┬─────────────┬─────────────┐
│  DISPOSAL                              │  FY 2083/84 │  FY 2082/83 │
├────────────────────────────────────────┼─────────────┼─────────────┤
│  Listed shares held ≤ 365 days         │    10%      │    7.5%     │
│  Listed shares held > 365 days         │     7.5%    │    5%       │
│  Land and building, natural person,                                │
│     held ≥ 5 years                     │     7.5%    │    5%       │
│     held < 5 years                     │    10%      │    7.5%     │
│  Involuntary disposal (compulsory                                  │
│     acquisition by GoN decision)       │     2.5%    │  5% / 7.5%  │
└────────────────────────────────────────┴─────────────┴─────────────┘

┌──────────────────────────────────────────────────────────────────────┐
│  BUT a resident natural person can no longer skip filing SOLELY      │
│  because their only income falls under Section 95Ka(6kha), (6ga)     │
│  and (6gha).                                                         │
│                                                                      │
│  ⇒ These two provisions must be read together. [R] Whether you must   │
│    file, and whether filing helps you, are separate questions.       │
└──────────────────────────────────────────────────────────────────────┘

╔═══════════════════════════════════════════════════════════════════╗
║   Resident RIDE-SHARING OPERATORS must withhold 1% ADVANCE TAX    ║
║   from payments to NATURAL PERSONS on their platforms.            ║
╚═══════════════════════════════════════════════════════════════════╝

Passenger pays platform
          │
          ▼
Platform → driver
          ├── withholds 1% ADVANCE tax  ──► IRD
          └── (and separately assesses and collects 5% VAT
               on the ride under the reverse-charge rule
               in Section 8(2b) — see Part 8)
          ▼
Driver receives net amount

! The 1% is ADVANCE tax — creditable, not final. The driver
  may claim it against their liability.

Payments to RESIDENT INDIVIDUAL INSURANCE AGENTS
   → FINAL withholding tax at 20%  (Section 88)

⇒ FINAL. The agent's commission does not enter their ordinary
  computation, and no credit arises.

Section 88Ka — NO TDS on agricultural contribution awards
up to Rs 500,000.

Higher amounts MAY be exempted by Gazette notice. [R]

The 1.5% TDS on payments EXCEEDING Rs 5,000,000 for work
carried out through CONSUMER COMMITTEES has been ABOLISHED.

⇒ Consumer committees are the local user groups that execute
  small public works in Nepal. Removing the withholding
  reduces friction on community-executed projects.

INCOME AND WITHHOLDING DURING THE YEAR

Source                          Gross      Withheld    Type
─────────────────────────────────────────────────────────────────
Employment (salary)          2,000,000      160,000    Creditable
Listed share sale, 200 days
   gain Rs 300,000             300,000       30,000    Final if no
                                 (gain)       (10%)     return filed
Ride-sharing income            180,000        1,800    Creditable
                                               (1%)
MFI deposit interest            40,000        —        Taxable above
                                                        Rs 25,000 [R]
─────────────────────────────────────────────────────────────────

IF THE TAXPAYER DOES NOT FILE
   The Rs 30,000 on the share gain is FINAL. Nothing more due
   on that gain, nothing recoverable.

IF THE TAXPAYER FILES
   The share gain enters the assessment; the Rs 30,000 becomes
   a credit; other reliefs and any allowable losses come into
   account; a refund or further liability is computed. [R]

! Which is better depends on the taxpayer's full position —
  particularly whether they have allowable losses or unused
  reliefs. This is precisely the point at which to take advice.

╔═══════════════════════════════════════════════════════════════════╗
║   Taxpayers now get FIVE YEARS, not two, to claim a refund.       ║
║                                                                   ║
║   Measured from the LATEST of:                                    ║
║       • the payment date                                          ║
║       • the year end                                              ║
║       • the case settlement date                                  ║
╚═══════════════════════════════════════════════════════════════════╝

┌──────────────────────────────────────────────────────────────────────┐
│  THE PAYER MUST                                                      │
│    1. Determine whether the payment is subject to withholding        │
│    2. Apply the correct rate                                         │
│    3. Deduct at the time prescribed                                  │
│    4. Deposit with the IRD by the due date [R]                        │
│    5. File the withholding return [R]                                 │
│    6. Issue the recipient evidence of deduction                      │
├──────────────────────────────────────────────────────────────────────┤
│  IF THE PAYER FAILS                                                  │
│    The payer generally becomes liable for the tax not withheld,      │
│    plus interest and penalties. [R] The recipient's own position      │
│    does not automatically discharge the payer.                       │
└──────────────────────────────────────────────────────────────────────┘

MYTH  "All TDS is creditable."
FACT  Some is FINAL — insurance agent commission at 20%, and 95Ka
      gains where no return is filed.

MYTH  "The ride-sharing 1% is a final tax."
FACT  It is ADVANCE tax. Creditable.

MYTH  "The platform's VAT and the platform's TDS are the same thing."
FACT  Different taxes, different bases, different mechanisms.

MYTH  "I have two years to claim a refund."
FACT  Now FIVE, from the latest of payment date, year end or case
      settlement date.

MYTH  "If I do not withhold, that is the recipient's problem."
FACT  The PAYER is generally liable for tax not withheld. [R]

MYTH  "MFI deposit interest is tax-free."
FACT  Taxable ABOVE Rs 25,000 (Section 10(2)).