Quick Answer (TL;DR)

The 10% you hear about is two separate taxes. Individual tenant → individual landlord: landlord pays 10% municipal ghar bahal kar at the ward (KMC =10%; other municipalities vary — confirm your ward's Economic Act). Company/business tenant → any landlord: tenant withholds 10% federal TDS to IRD. You generally pay only one on the same rent — per the 2025 Adhikari ruling — but a follow-on division-bench decision reopened aspects with cases pending, so keep all receipts and check current status before paying.

Two Different Taxes — Same 10% Name

Municipal ghar bahal karLocal Government Operation Act 2074 — landlord's rental income, collected at the ward. Rate set by each municipality in its Economic Act (10% KMC; elsewhere varies — confirm at ward). Self-declaration (swaghoshana).
Federal TDS on rentIncome Tax Act 2058 Sec 88 — payer withholds at source when a business/entity pays rent. Generally 10% to a natural-person landlord; rent to a company-entity also ~10% but mutually exclusive with municipal tax under the 2025 ruling logic (pending follow-on litigation — verify current status).

Who Pays Which Tax?

Individual tenant → individual landlord (family renting a flat)Municipal tax — landlord declares and pays 10% (KMC) at the ward. Federal TDS = 0 (Sec 88 proviso: individual house rent to a natural person not withheld).
Company / NGO / government tenant → individual landlordFederal 10% TDS — tenant withholds 10%, deposits to IRD, gives landlord an e-TDS certificate. No municipal tax on that rent.
Any tenant → company/firm landlordFederal 10% withholding (payer withholds to IRD). Municipal ghar bahal kar does not apply to company-to-company rent.
Liability defaultMunicipal tax: landlord liable unless lease assigns to tenant. Federal TDS: business tenant liable as withholding agent.

2025 Supreme Court Rule — No Double Tax

Overlapping claims (ward asking for 10% while IRD already withheld 10% on company-to-company rent) were addressed by the 2025 Supreme Court (Adhikari ruling): local house-rent tax applies only where the lessor is a natural person; rent to a company is federal withholding only. However, a follow-on division-bench decision reopened aspects of this split with cases pending — so treat the exclusivity as the current working rule, not a final settled guarantee. If a ward demands municipal tax on a company-to-company lease already under TDS, cite the ruling and the Income Tax Act exclusion of natural-person house rent from "rent" definition, keep the federal TDS proof, keep both receipts where both are demanded, and check current status on ird.gov.np / at your ward before paying.

How to Calculate (Both Paths)

Municipal tax = Annual Rent × Municipal Rate (e.g., 10% in KMC) Federal TDS = Rent Payment × 10% (withheld by business tenant at payment)

Example: Rs 30,000/month in Kathmandu

Annual gross rent30,000 ×12 = Rs 3,60,000
Path A — Individual tenant (municipal)Tax = 3,60,000 ×10% = Rs 36,000. Landlord pays at ward; net keeps Rs 3,60,000 gross but owes Rs 36,000 to ward. If lease says “tenant deducts”, tenant pays landlord Rs 3,24,000 + Rs 36,000 to ward.
Path B — Company tenant (federal)TDS = Rs 36,000 withheld by company, deposited to IRD. Landlord receives Rs 3,24,000 + e-TDS certificate for Rs 36,000; no municipal payment (per 2025 ruling logic — confirm current status as follow-on litigation is pending).
Other municipalityPath A uses your municipality's own Economic Act rate (varies — confirm at ward), e.g. 3,60,000 × local rate
Try it: Use SolutionsNepal’s House Rent Tax Calculator — pick landlord type (individual vs entity) and enter your municipality rate to see both paths side-by-side.

Where & How to Pay: Ward vs IRD

Municipal ghar bahal karAt the ward office of the property's municipality. Bring lease agreement + landlord ID. Payable monthly/quarterly/annually per ward notice; keep the ward receipt.
Federal TDSWithholding tenant deposits via <a href="https://taxpayerportal.ird.gov.np" target="_blank" rel="noopener noreferrer">taxpayerportal.ird.gov.np</a> (connectIPS/eSewa) within 25 days of the Nepali month-end, files e-TDS return, and issues e-TDS certificate to landlord within 15 days — per IRD notice, verify current deadlines on <a href="https://ird.gov.np" target="_blank" rel="noopener noreferrer">ird.gov.np</a>.

Final vs Adjustable

Final withholdingMunicipal tax (individual→individual) and 10% TDS withheld from a natural-person landlord under Sec 92 (final withholding on rent to non-business individuals, per IRD reading — verify current circular) — no further return addition; the 10% is the full tax on that rent.
AdjustableNot applicable to the two paths above as final; other rent-to-entity cases per IRD circular may be adjustable — confirm on <a href="https://ird.gov.np" target="_blank" rel="noopener noreferrer">ird.gov.np</a> for your specific counterparty.

Common Mistakes to Avoid

  • Paying both taxes on the same rent without checking — generally only one applies (2025 Adhikari ruling), but follow-on litigation is pending, so keep both receipts where both are demanded and check current status
  • Withholding TDS as an individual tenant to a natural-person landlord (Sec 88 proviso says no — per IRD reading, verify current notice)
  • Assuming 10% is universal — each municipality sets its own rate in its Economic Act; always check the local Economic Act at the ward
  • Treating a ward receipt and an IRD e-TDS certificate as interchangeable (different collectors, different ledgers)
  • Forgetting the landlord still declares municipal-taxed rent nowhere else vs TDS landlord who needs the e-TDS certificate for proof

Checklist

  • Identify landlord (individual vs company/firm) and tenant (individual vs business) — that picks the path
  • Confirm municipality rate (10% KMC; elsewhere your ward's Economic Act rate) vs federal 10%
  • Calculate annual rent × rate; decide net-to-landlord per lease wording
  • Municipal path: declare at ward with lease + ID; keep receipt
  • Federal path: tenant withholds at payment, deposits by 25th next Nepali month (per IRD notice — verify current deadline), issues e-TDS certificate within 15 days (per IRD notice — verify)
  • Keep both the lease and the tax receipt/certificate for the whole fiscal year; where both taxes are demanded, keep both receipts and check current ruling status

Official Sources & Final Note

Sources: Income Tax Act 2058 Sec 88 (and proviso on house rent to natural persons) + Sec 92 (final withholding) — full text via lawcommission.gov.np; Local Government Operation Act 2074; Kathmandu Metropolitan City Finance Act (10%); IRD notices (ird.gov.np) and Taxpayer Portal; and the 2025 Supreme Court Adhikari ruling on municipal vs federal rent tax (Pioneer Law summary) plus the follow-on division-bench decision (cases pending). Verify your municipality's current rate at the ward where the property sits.

Last updated: September 27, 2026. Rechecked as of October 2026. Municipal rates are set per local Economic Act each FY and can change; federal withholding follows the annual Finance Act. Verify at your ward / ird.gov.np before paying. SolutionsNepal is an educational guide, not a tax advisor.

Frequently asked questions

What is the house rent tax rate in Kathmandu?

10% of annual rent. Kathmandu Metropolitan City levies 10% municipal ghar bahal kar on individual-to-individual rent. Other municipalities set their own rate in each municipal Economic Act — varies by municipality, confirm at the ward where the property sits.

Who pays house rent tax — landlord or tenant?

Municipal tax: landlord is statutorily liable (tenant only if the lease assigns it). Federal TDS: the business/company tenant withholds 10% and deposits to IRD; the landlord receives net rent + TDS certificate.

Do I pay both municipal tax and federal TDS?

On the same rent, generally only one applies: individual tenant → municipal tax (landlord pays at ward); business/company tenant → federal 10% TDS (tenant withholds to IRD). Per the 2025 Adhikari ruling, federal tax covers legal persons and local tax covers natural persons — but a follow-on division-bench decision reopened aspects with cases pending, so keep both receipts where relevant and check current status on ird.gov.np / at your ward before paying.

Is individual-to-individual rent subject to TDS?

No. Under Income Tax Act 2058 Sec 88 proviso, an individual paying house rent to a natural person does not withhold TDS (per IRD reading — verify current notice). The landlord declares the rent in the annual return; for final-withholding cases the 10% at ward is the full tax.

Is rent to a company taxed differently?

Yes. Rent paid to a company/firm/entity is 10% federal withholding (withholder = payer). That municipality does not levy ghar bahal kar on the same company-to-company rent — federal TDS applies alone (per the 2025 ruling logic — confirm current status as follow-on litigation is pending).

How do I calculate it?

Individual→individual (KMC): Rs 30,000×12 = Rs 3,60,000 ×10% = Rs 36,000 municipal tax at ward. Company tenant: same gross, tenant withholds Rs 36,000 to IRD, pays landlord Rs 3,24,000.

Where do I pay?

Municipal tax: ward office of the property's municipality (self-declaration, monthly/quarterly/annual). Federal TDS: tenant deposits via IRD portal (connectIPS/eSewa) within 25 days of Nepali month-end and issues e-TDS certificate within 15 days — per IRD notice, verify current deadlines on ird.gov.np.

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Written by SolutionsNepal Team

Nepal tax and property researchers