Taxation In NepalTU Board 2080
(a) Susan furnished you following particulars of income and expenses for the previous income year: i. Rent from natural resources after TDS Rs. 510,000 ii. Consultation fees received after TDS Rs.…
5(a) Susan furnished you following particulars of income and expenses for the previous income year: i. Rent from natural resources after TDS Rs. 510,000 ii. Consultation fees received after TDS Rs. 170,000 iii. Casual income received after TDS Rs. 75,000 iv. Gifts received in respect of investment Rs. 100,000 v. Birthday gifts received Rs. 10,000 vi. Dividend received foreign and domestic country Rs. 50,000 and Rs. 20,000 respectively vii. House rent received Rs. 85,000 viii. Rent received from plant and machinery after TDS Rs. 90,000 ix. Gain on sales of vacant agriculture land Rs. 100,000 x. Interest received from bank deposit Rs. 19,000 xi. Interest received from indigenous bankers Rs. 50,000 He claimed the following expenses to deduct: i. Collection charge related with natural resources Rs. 3,000. ii. One month equal commission paid to agent for natural resources. iii. Other allowable investment related expenses Rs. 45,000. iv. Life insurance premium Rs 3,000 per month policy of Rs. 500,000. Required: a. Net assessable income from investment b. Statement of total taxable income [4+1] (b) What are the incomes that should be excluded while calculating employment income as per the section 10 of the Income Tax act, 2058. [5]
Answer
(a)
a. Net assessable income from investment
Income from investment is taxable under Section 10(1)(a) of the Income Tax Act, 2058. The following incomes qualify as investment income:
| Income Type | Amount (Rs.) | Deductions (Rs.) | Net Income (Rs.) |
|---|---|---|---|
| Rent from natural resources | 510,000 | 3,000 (collection charge) + 4,250 (1 month commission) = 7,250 | 510,000 – 7,250 = 502,750 |
| Consultation fees | 170,000 | – | 170,000 |
| Dividend (domestic) | 20,000 | – | 20,000 |
| Interest from bank deposit | 19,000 | – | 19,000 |
| Interest from indigenous bankers | 50,000 | – | 50,000 |
| Total net investment income | 761,750 |
Net assessable income from investment = Rs. 761,750
b. Statement of total taxable income
| Income Type | Amount (Rs.) | Exclusions/Deductions (Rs.) | Taxable Amount (Rs.) |
|---|---|---|---|
| Investment Income | 761,750 | – | 761,750 |
| Casual Income | 75,000 | – | 75,000 |
| House Rent Received | 85,000 | – | 85,000 |
| Rent from Plant & Machinery | 90,000 | – | 90,000 |
| Gain on Sale of Agricultural Land | 100,000 | – | 100,000 |
| Gifts (Investment-related) | 100,000 | Excluded (Section 10(1)(c)) | 0 |
| Birthday Gifts | 10,000 | Excluded (Section 10(1)(c)) | 0 |
| Dividend (Foreign) | 50,000 | Excluded (Section 10(1)(d)) | 0 |
| Life Insurance Premium | 3,000 × 12 = 36,000 | Deductible (Section 10(1)(g)) | –36,000 |
| Total Taxable Income | 1,181,750 |
Total taxable income = Rs. 1,181,750
(b)
Incomes excluded while calculating employment income under Section 10 of the Income Tax Act, 2058 are as follows:
| Excluded Income | Section Reference | Reason |
|---|---|---|
| House Rent Allowance (HRA) | 10(1)(a) | Exempt up to Rs. 45,000 (or actual HRA received, whichever is lower). |
| Conveyance Allowance | 10(1)(b) | Exempt up to Rs. 20,000 per annum. |
| Medical Allowance | 10(1)(c) | Exempt up to Rs. 50,000 (or actual medical expenses, whichever is lower). |
| Children’s Education Allowance | 10(1)(d) | Exempt up to Rs. 50,000 per child (max 2 children). |
| Pension & Gratuity | 10(1)(e) | Fully exempt if received as retirement benefit. |
| Leave Encashment | 10(1)(f) | Exempt up to Rs. 100,000 (or actual encashment, whichever is lower). |
| Gifts (up to Rs. 50,000) | 10(1)(g) | Exempt if received in cash or kind (excluding birthday gifts). |
| Reimbursement of Expenses | 10(1)(h) | Exempt if actual expenses are reimbursed (e.g., travel, training). |
| Foreign Earnings (if taxed abroad) | 10(1)(i) | Exempt if taxed in the country of origin. |
| Compensation for Injury/Disability | 10(1)(j) | Fully exempt if received due to workplace injury. |
| Allowances for Blind/Deaf Employees | 10(1)(k) | Exempt up to Rs. 75,000 per annum. |
| Transport Allowance (for disabled) | 10(1)(l) | Exempt up to Rs. 30,000 per annum. |
| Children’s Hostel Allowance | 10(1)(m) | Exempt up to Rs. 30,000 per child (max 2 children). |
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