Taxation In NepalTU Board 2082
(a) Regmi furnished you following particulars of income and expenses for the previous income year. a. Rent from building let out after TDS Rs. 180,000 b. Rent from subletting of building let out…
5(a) Regmi furnished you following particulars of income and expenses for the previous income year. a. Rent from building let out after TDS Rs. 180,000 b. Rent from subletting of building let out after TDS Rs. 450,000 c. Interest received from financial institution Rs. 100,000 d. Interest received from unrecognized sector after TDS Rs. 340,000 e. Dividend received from resident company after TDS Rs. 150,000 f. Dividend received from foreign country after TDS Rs. 200,000 g. Mining rent from natural resources after [TDS Rs. 90,000] Rs. 510,000 h. Rent from plant and machinery let out after TDS Rs. 90,000 i. He received gain on sales of non-listed share in NEPSE Rs. 200,000. Regmi claimed the following expenses to deduct. a. Collection charge of building let out Rs. 10,000 b. Rent paid to subletting of building Rs. 120,000 c. Allowable depreciation of plant and machinery Rs. 10,000. d. Life insurance premium Rs. 50,000 e. Previous year cumulative investment loss Rs. 50,000 Required: a. Net assessable income from investment. b. Statement of total taxable income (4+1) (b) Described the provision of withholding method of tax collection as per the Income Tax Act, 2058 with example. [5]
Answer
(a) Net Assessable Income from Investment & Statement of Total Taxable Income
1. Net Assessable Income from Investment
The net assessable income from investment is calculated by deducting allowable expenses from gross income (after TDS where applicable). The relevant incomes and expenses are:
| Income/Expense | Amount (Rs.) |
|---|---|
| Rent from building let out (after TDS) | 180,000 |
| Collection charge (deductible) | (10,000) |
| Net rent from building | 170,000 |
| Interest from financial institution | 100,000 |
| Interest from unrecognized sector (after TDS) | 340,000 |
| Dividend from resident company (after TDS) | 150,000 |
| Dividend from foreign country (after TDS) | 200,000 |
| Mining rent (after TDS) | 510,000 |
| Rent from plant & machinery (after TDS) | 90,000 |
| Gain on sale of non-listed shares (NEPSE) | 200,000 |
Total Net Assessable Income from Investment = 1,840,000
2. Statement of Total Taxable Income
| Particulars | Amount (Rs.) |
|---|---|
| Net Assessable Income from Investment | 1,840,000 |
| Less: Allowable Depreciation (Plant & Machinery) | (10,000) |
| Less: Rent Paid for Subletting | (120,000) |
| Less: Life Insurance Premium (Not Deductible) | - |
| Less: Previous Year’s Cumulative Investment Loss | (50,000) |
| Total Taxable Income | 1,660,000 |
(b) Withholding Method of Tax Collection (Income Tax Act, 2058)
The withholding tax (TDS) system is a method of tax collection at the source of income. Under Section 80(1) of the Income Tax Act, 2058, certain payments must be deducted at source before payment to the recipient. The deductor (payer) is responsible for depositing the tax to the government.
Key Provisions:
- Applicability: Applies to payments such as rent, interest, dividends, professional fees, and commissions.
- Rate: Typically 10% (varies based on income type and payer).
- Deductor’s Responsibility:
- Deduct tax at the time of payment.
- Issue a TDS certificate to the payee.
- Deposit the tax to the government within the due date.
- Exemptions: Some payments (e.g., salary, business income) are not subject to TDS.
Example:
Suppose Company X pays Rs. 50,000 as interest to Mr. Y (an individual). Under the withholding tax rule:
- Tax Deducted (10%) = Rs. 5,000
- Net Payment to Mr. Y = Rs. 45,000
- Company X must deposit Rs. 5,000 to the government and issue a TDS certificate to Mr. Y.
This method ensures timely tax collection and reduces tax evasion by making taxpayers accountable from the source of income.
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