TDS (Tax Deducted at Source)

TDS (Tax Deducted at Source) is a withholding tax mechanism under Nepal’s Income Tax Act, 2058. When your business makes certain payments — for services, rent, contracts, or goods — you are required to deduct tax at source and remit it to the Inland Revenue Department (IRD) on the payee’s behalf. Udyot ERP automates this: it calculates the deduction, tracks the TDS Payable liability, generates the TDS return, and produces per-party TDS certificates — keeping you compliant without manual spreadsheets.

TDS sections and rates under Income Tax Act 2058

Different types of payments attract different TDS rates. The table below covers the most common sections. Whether the payee has a PAN determines the rate — parties without PAN are taxed at double the standard rate by IRD rules.

Cumulative threshold: TDS applies once cumulative payments to the same party within a fiscal year cross the threshold set by IRD (currently NPR 3,000 for most sections). Udyot tracks the running total per party per fiscal year and flags when a payment crosses the threshold.

Nepal note: The fiscal year runs Shrawan 1 to Ashadh 31 (mid-July to mid-July) in Bikram Sambat. Udyot resets the cumulative threshold counter automatically at the start of each new BS fiscal year.

Setting up a vendor for TDS in Udyot ERP

Before TDS can be auto-calculated on a payment, you need to tag your vendor with the correct TDS section.

1. Go to Accounting → Parties and open the vendor you want to configure.
2. Click Edit.
3. In the TDS Section field, select the applicable section (for example, Section 88(2) — Service 15%).
4. Tick Has PAN if the vendor has a PAN number. Leave it unticked only if they genuinely do not have a PAN — the rate will double automatically.
5. Save. The vendor card now shows a green TDS pill confirming the section and rate.

You only need to do this once per vendor — every payment voucher raised against them will apply TDS automatically from that point on.

Recording a payment with TDS deduction

When you pay a TDS-tagged vendor, Udyot splits the payment into the net bank outflow and the TDS liability — you do not need to do any manual calculation.

1. Go to Accounting → Vouchers → Payment → New.
2. Select the vendor in the party field. Because the vendor is TDS-tagged, a Deduct TDS toggle appears in their row.
3. Enter the gross invoice amount (the full amount before deduction).
4. Make sure Deduct TDS is ticked. Udyot fills in:
   • The TDS amount (gross × rate).
   • The net amount to pay from your bank (gross minus TDS).
   • The TDS Payable ledger (your IRD liability).
5. Select the bank or cash account you are paying from.
6. Add a bill reference if you want to track this against a specific purchase invoice.
7. Save the voucher.

The system posts three legs automatically:

• Dr Vendor Ledger — full gross amount (clears the payable)
• Cr Bank / Cash — net payment (actual outflow from your account)
• Cr TDS Payable — the deducted tax (your liability to IRD)

If you pay a TDS-tagged vendor without ticking Deduct TDS, Udyot warns you before saving.

TDS Payable vs TDS Receivable

There are two sides to TDS in Udyot — it helps to keep them distinct:

• TDS Payable (we deduct) — when you pay a vendor and deduct TDS, the amount sits in a TDS Payable ledger under Current Liabilities. You owe this to IRD and must deposit it by the 25th of the following month.
• TDS Receivable / Advance Tax (Section 90) — when your customers deduct TDS on payments they make to you, that deducted tax is an advance tax credit in your favour. It is recorded under TDS Receivable in Current Assets and can be set off against your final income tax liability at year-end.

Udyot maintains separate ledgers for both sides, so your balance sheet always shows a clear picture of what you owe IRD and what IRD owes you.

Remitting TDS to IRD

Once you have deducted TDS across a month, you need to deposit the total with IRD by the 25th of the following month.

1. Go to Tax → TDS Return to see the total TDS collected for the period, broken down by section.
2. Make the payment to IRD via your bank.
3. Record it as a Payment voucher: Dr TDS Payable, Cr Bank — for the amount remitted. This clears the TDS Payable liability from your books.

Generating the TDS return

Udyot produces a period-wise TDS return that you can submit to IRD.

1. Go to Tax → TDS Return.
2. Select the month (in BS format, for example Baisakh 2082).
3. Review the per-section summary — section code, number of deductions, total base amount, and total TDS.
4. Click Generate to create the TDS return record.
5. Download or print from the return’s detail page.

If you need to correct a return after filing, you can revise it — Udyot will warn you if you try to regenerate a period that has already been filed.

Issuing TDS certificates to vendors

Every vendor from whom you deducted TDS is entitled to a TDS certificate for their own tax filing. Udyot generates one per party per period.

1. Go to Reports → TDS Certificate.
2. Select the vendor and the BS fiscal year.
3. Udyot generates a printable certificate showing: vendor PAN, your company PAN, section, gross payment, TDS amount deducted, and the period.
4. Print or download it as a PDF and hand it to the vendor.

You can also reach a vendor’s certificate directly from their party page.

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