Topics 15 & 16 · Finance & Tax Compliance

Record Keeping & Electronic Billing

Nepal's IRD mandates electronic billing for VAT-registered businesses. Good record keeping protects you in audits and helps you access credit.

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E-Billing Mandate Accounting Software What to Keep E-TDS Audit Readiness

IRD Electronic Billing Mandate

All VAT-registered businesses must use IRD-approved billing software to issue bills. Handwritten receipts are no longer accepted for VAT-registered firms.

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Penalty for non-compliance: Failure to use IRD-approved billing software can result in fines of NPR 25,000–500,000 and suspension of VAT registration.

Who Must Comply

MandatoryAll VAT-registered businesses (turnover > NPR 50L for goods, NPR 20L for services)
RequiredBusinesses with electronic cash registers (ECR) — any retail format
RequiredHotels, restaurants, travel agencies, hospitals
RecommendedPAN-only businesses (not VAT) — good practice, not yet mandated

What the Electronic Bill Must Include

✅ Bill number (sequential, IRD-compliant format)
✅ Date and time of transaction
✅ Seller PAN / VAT number
✅ Buyer name (and PAN/VAT if B2B)
✅ Itemized products/services with quantity and rate
✅ Tax base amount, VAT (13%), and total
✅ QR code (IRD-mandated from FY 2080/81)
✅ Digital signature of billing system

Registration Steps

1
Register Billing Software with IRD
Log in to taxpayerportal.ird.gov.np → Billing Software Registration. Upload software details, company info, server address.
2
Get Approval & API Key
IRD issues a unique API key for your business. This key is embedded in each bill's QR code for real-time verification.
3
Start Issuing Bills
All bills issued through IRD-approved software are automatically reported to IRD. No separate VAT returns for billing — data flows automatically.
4
Monthly VAT Return
File monthly VAT return on IRD portal using bills data. System auto-populates from your billing software. Due by 25th of following month.

IRD-Approved Billing Software (sample list)

SoftwareTypeCostBest ForNepal Payments
Tally PrimeDesktopNPR 45,000 onceManufacturers, traders, large SMEs✓ IRD API
Busy AccountingDesktopNPR 15,000–30,000Small retailers, service firms✓ IRD API
Swastik AccountingDesktopNPR 8,000–20,000Small businesses, local support✓ IRD API
Focus ERP / POSDesktop/CloudSubscriptionRetail POS, hotels, restaurants✓ IRD API
IRD's Free Web PortalOnlineFreeVery small businesses, manual entry✓ Native

Accounting & Finance Tools

Choose the right accounting system based on your business size and needs. Good bookkeeping = easier loans, faster audits, and better business decisions.

🟢 Micro Business (< NPR 20L)
Option 1 — IRD Free Portal
taxpayerportal.ird.gov.np. Issue bills, file returns. No cost. Limited to billing only.
Option 2 — Google Sheets / Excel
Free. Track income, expenses, inventory manually. Download FNCCI template.
Option 3 — Swastik / Ashutosh Billing
Nepali software, NPR 5,000–10,000. Local support, Nepali interface, IRD-approved.
Best: IRD Portal + Excel
🔵 Small Business (NPR 20L–2Cr)
Busy Accounting
NPR 15,000–25,000. Handles inventory, billing, basic payroll. IRD-approved. Widely used.
Swastik ERP
NPR 20,000–40,000. Good for trading firms. Nepali-language support.
QuickBooks Online
USD ~25/month. Good if dealing with international clients / foreign invoicing.
Best: Busy Accounting
🟣 Medium Business (> NPR 2Cr)
Tally Prime
NPR 45,000 once + AMC. Industry standard. Multi-branch, multi-currency, audit trail.
SAP Business One
NPR 500,000+. Enterprise-grade ERP. Manufacturing, supply chain.
Microsoft Dynamics 365
Cloud ERP. Good for export-oriented businesses needing CRM + accounting.
Best: Tally Prime
💡 Key Nepal-specific accounting requirements:
All accounts must be maintained in Nepali Rupee (NPR). Fiscal year runs Shrawan to Ashad (mid-July to mid-July). Financial statements must follow Nepal Financial Reporting Standards (NFRS) for companies above NPR 2Cr turnover.

What Records to Keep & For How Long

Record TypeRetention PeriodWhy NeededFormat
All issued bills/invoices7 yearsVAT audit, ITR filingDigital (IRD billing system)
Purchase receipts / input VAT7 yearsInput VAT credit claimsPaper + digital scan
Bank statements7 yearsTax authority, loan applicationsOriginal (PDF from bank)
Payroll records7 yearsSocial security (SSF), E-TDSDigital (software export)
Employment contractsDuration + 3 yearsLabour disputesSigned original
Trade licence / CSIO certActive + 3 yearsBusiness continuity proofOriginal + digital scan
Import / Export documents7 yearsCustoms auditDigital + original
Annual financial statementsPermanentlyCompany history, investor due diligenceAudited originals
Fixed asset registerLifetime of asset + 7 yearsDepreciation, insuranceSpreadsheet / Tally
Board/minutes meetingsPermanentlyCompany governanceSigned minutes book
⚠️ IRD can audit up to 5 fiscal years back for standard matters and 7 years in case of suspected tax evasion. Keep all records accordingly. Digital records are accepted if they can be printed and verified.

E-TDS — Tax Deducted at Source

If you pay salaries, rent, professional fees, or dividends, you must deduct TDS and deposit it with IRD monthly.

TDS Rates by Payment Type

Payment TypeTDS Rate
Employment income (salary)As per slab (5%–36%)
Rent — building, land10%
Consulting / Professional fees15%
Dividends5%
Interest income5% (banks deduct automatically)
Contract payments > NPR 50,0001.5%
Royalties15%
Winnings / Prize25%

E-TDS Filing Process

1
Deduct TDS at time of payment
Subtract the TDS percentage from payment. Pay recipient the net amount. Record in your accounting system.
2
Deposit with IRD by 25th
Deposit all TDS collected during the month via IRD portal (taxpayerportal.ird.gov.np) or at any bank by the 25th of the following month.
3
File E-TDS Return
Submit monthly E-TDS return on IRD portal listing each payment, recipient PAN, and TDS amount. Keep TDS certificates issued to recipients.
4
Annual TDS Reconciliation
Reconcile total TDS deducted against all monthly returns. Cross-reference with employee ITR (if applicable).
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Late deposit penalty: 15% interest per annum + up to 50% penalty on unpaid TDS amount.

Audit Readiness

Be prepared before IRD calls. A well-organized file means faster audits and no surprise penalties.

Audit-Ready File Structure

📁 Folder 1: Registration Documents
PAN, VAT cert, CSIO/OCR cert, Trade licence
📁 Folder 2: Annual Financial Statements
P&L, Balance Sheet, Cash Flow — per fiscal year
📁 Folder 3: VAT Returns
All monthly VAT returns + payment receipts
📁 Folder 4: TDS Records
Monthly E-TDS returns + TDS certificates issued
📁 Folder 5: Purchase Records
All supplier invoices, import documents
📁 Folder 6: Payroll
Monthly salary slips, SSF contribution receipts
📁 Folder 7: Bank Statements
All business accounts — monthly statements
📁 Folder 8: ITR
Annual income tax return + tax clearance certificates

Common Audit Findings (Avoid These)

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Cash sales not billed
All sales must be billed regardless of payment method. Cash sales without bills = tax evasion.
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Personal expenses in business accounts
Never pay personal bills from the business account. Creates taxable income queries.
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Input VAT on non-business purchases
Only claim input VAT on goods/services used for taxable business activities.
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Mismatched purchase/sales amounts
IRD cross-matches your purchase invoices with supplier's sales invoices. Discrepancies trigger audits.
ℹ️
Tip: Hire a registered tax auditor (Chartered Accountant) for your annual tax audit. Required by law for companies above NPR 1Cr turnover.