A business firm in Babarmahal encountered difficulties in obtaining a tax clearance certificate for the last fiscal year because its client failed to submit the tax deducted at source (TDS) to the tax office on time. The firm had received payment for services rendered in mid-December to mid-January last year, but the client did not deposit the deducted TDS, causing complications for the service provider.
A representative of the auditing firm, a chartered accountancy company, told New Business Age on condition of anonymity that this issue is becoming increasingly common. Businesses receiving payments are facing challenges when clients delay TDS payments, disrupting their ability to comply with tax regulations.
Stakeholders have highlighted that the state’s focus on tax collection has led to a rise in situations where payees are unfairly burdened due to payers' negligence in settling TDS liabilities. Chartered Accountant (CA) Shailendra Upreti explained that TDS applies to various transactions, including salaries, rent, gifts, interest, and service charges, with rates varying based on the nature of the transaction.
Upreti elaborated that TDS involves deducting the applicable tax from payments made to a recipient and depositing it in the government's account. Problems arise when payers fail to submit the deducted tax to the tax office. “Those responsible for mistakes should face consequences, but those without fault are also being penalized,” Upreti remarked, criticizing the government’s inadequate measures to address such issues.
Tax specialist advocate Tulsi Kafle emphasized that the onus lies on the payer to settle TDS liabilities as per the law. He called for increased accountability and monitoring by tax authorities to ensure compliance, noting that the current laws create ambiguity by holding both parties accountable.
Former President of the Nepal Chamber of Commerce, Rajendra Malla, echoed similar concerns. He urged the government to revise impractical tax laws and ensure accountability lies solely with the liable party. “The state must monitor and regulate to determine the responsible party for TDS payments,” Malla stated.
Laxmi Kumar Rimal, Chief Tax Officer at the Medium Taxpayer Office in Babarmahal, noted that taxpayers often attempt to obtain certificates without fulfilling TDS obligations. He confirmed that under current regulations, both parties are held accountable, and neither can receive a tax payment certificate until TDS is settled.
Rimal added that payers are legally required to submit TDS and may face penalties for non-compliance. However, the law also places some responsibility on the payee. Advocate and corporate affairs expert Naveen Bhandari suggested that the issue could be resolved by requiring TDS payment before the recipient receives their due amount.
