Section 89 : Tax withholding in making payment of contraction or contract

1) In making payment of a sum exceeding fifty thousand rupees for payment of deed or contract, a resident person shall withhold tax at the rate of one and half percent of the total amount of payment.

2) The amount referred to in sub-section (1) shall also be fixed by adding any other payments, if any, made by such person or his/her associated person under the same contract to the person or his/her associated person entitled to payment under that contract in the past Ten days.

3) Notwithstanding anything contained in sub-section (1), tax shall be withheld as follows from payment made by any resident person to any non-resident person under any contract:-

a) For deed or contract, five percent,

b) For a commission in payment of a premium to a non-resident insurance company or a premium amount received for reinsurance from a non-resident insurance company, one and half percent,

c) Where the Department has given that resident person a notice in writing except as referred to in clause (a) or (b), at the rate specified in the notice.

Provided that this sub- section shall not be applicable in the payment for purchase of arms, ammunition, explosives and communication equipment purchased by Nepal Army, Nepal Police and Armed Police for their purpose.

¹3A) Tax shall be withheld at the rate of one and a half percent from payment of an amount exceeding fifty lakh rupees for a work to be performed by the consumer’s committee.

4) Notwithstanding anything contained in sub-section (1), this Section shall not apply to the following payments:-

a) Any other payment except rent paid for a land or house having source in Nepal or goods and equipment installed in the house to a natural person other than that of operating business,

b) Payments enjoying tax exemption or payments liable to tax withholding pursuant to Section 87, 88 or 88A.

Explanation: For the purpose of this Section, “deed or contract” means a contract or agreement concluded for the supply of any goods or labours or construction, installation, or establishment of tangible property or structure and such act as specified to be a deed or contract by the Department, and such contract or agreement also includes payment for the service related to construction, installation or establishment, if such service is also covered by it.

^{1 Inserted by the Financial Act, 2075.}