Suman is an Executive Director in an office. He was promoted to this post on 1st Shrawan 2080, at a salary scale of Rs. 50,000 1,500 53,000 EB 2,000 63,000. The other details provided by him for the…

Here is the model answer for the TU Board 2080 examination question on Taxation in Nepal for Bachelor of Business Studies (BBS) Year 3:

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Step 1: Calculate Basic Salary

Suman’s salary scale is Rs. 50,000 – Rs. 1,500 – Rs. 53,000 – EB – Rs. 2,000 – Rs. 63,000. Since he was promoted on 1st Shrawan 2080, he is eligible for the full scale of Rs. 63,000 (after the last increment).

Basic Salary = Rs. 63,000

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Step 2: Calculate Other Allowances

1. Director Allowance: Rs. 10,000 per month

2. Dearness Allowance (DA): 20% of basic salary $$DA=20\%\times 63,000=0.20\times 63,000=\text{Rs. 12,600}$$

3. City Compensatory Allowance (CCA): 10% of salary + one month’s Dashain allowance

   • Salary (Basic + DA + Director Allowance) = 63,000 + 12,600 + 10,000 = Rs. 85,600
   • CCA (10%) = 10% × 85,600 = Rs. 8,560
   • Dashain Allowance = 1 month’s salary = Rs. 85,600
   • Total CCA = 8,560 + 85,600 = Rs. 94,160 (paid once in Dashain)

4. Meeting Allowance: Rs. 1,700 (net) per meeting for 10 meetings $$\text{Total Meeting Allowance}=1,700\times 10=\text{Rs. 17,000}$$

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Step 3: Calculate Total Income from Salary

• Monthly Salary Components:
  • Basic: Rs. 63,000
  • DA: Rs. 12,600
  • Director Allowance: Rs. 10,000
  • Total Monthly Salary = 63,000 + 12,600 + 10,000 = Rs. 85,600
• Annual Salary = 85,600 × 12 = Rs. 1,027,200
• Dashain Allowance (one-time) = Rs. 85,600
• Total Annual Salary Income = 1,027,200 + 85,600 = Rs. 1,112,800

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Step 4: Calculate Income from Other Sources

1. Interest from Mega Bank Savings Account (Net): Rs. 28,500 (annual)
2. Car Facility (Imputed Income):
   • Fuel Expenses: Rs. 25,000 (paid by office)
   • Driver Salary: Rs. 20,000 × 12 = Rs. 240,000
   • Repairs & Maintenance: Rs. 30,000
   • Total Imputed Income = 25,000 + 240,000 + 30,000 = Rs. 295,000 (Note: Since the car is provided by the office, the full cost is considered as income.)
3. Free Quarter (Accommodation Benefit):
   • Rent Value: Typically, 10% of salary is considered as rent value.
   • Annual Rent Value = 10% × 1,112,800 = Rs. 111,280
4. Domestic Assistant Facility:
   • Office Pays: Rs. 6,000 × 12 = Rs. 72,000
   • Suman’s Contribution: Rs. 2,000 × 12 = Rs. 24,000
   • Imputed Income = 72,000 - 24,000 = Rs. 48,000

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Step 5: Calculate Total Income

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Step 6: Calculate Deductions

1. Provident Fund (PF) Contribution: 10% of salary $$PF=10\%\times 1,027,200=\text{Rs. 102,720}$$
2. Donations:
   • Rural Municipality: Rs. 75,000
   • Private School: Rs. 20,000
   • Total Donations = 75,000 + 20,000 = Rs. 95,000
3. Health Insurance Premium: Rs. 2,000 × 12 = Rs. 24,000

Total Deductions = 102,720 + 95,000 + 24,000 = Rs. 221,720

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Step 7: Calculate Taxable Income

$$\text{Taxable Income}=\text{Total Income}-\text{Deductions}=1,595,580-221,720=\text{Rs. 1,373,860}$$

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Step 8: Calculate Income Tax

Nepal’s Income Tax Slab Rates (2080/81):

• Up to Rs. 500,000: 10%
• Rs. 500,001 – 1,000,000: 20%
• Above Rs. 1,000,000: 30%

Tax Calculation:

1. First Rs. 500,000: 10% × 500,000 = Rs. 50,000
2. Next Rs. 500,000 (500,001 – 1,000,000): 20% × 500,000 = Rs. 100,000
3. Remaining Rs. 373,860 (1,000,001 – 1,373,860): 30% × 373,860 = Rs. 112,158
4. Total Income Tax = 50,000 + 100,000 + 112,158 = Rs. 262,158

(Note: If Suman is eligible for any tax exemptions or rebates, they should be subtracted here.)

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Final Answer

Suman’s total taxable income is Rs. 1,373,860, and his total income tax liability is Rs. 262,158. After deductions, his net taxable income is Rs. 1,111,702 (1,373,860 – 262,158). However, since the question only asks for taxable income and tax calculation, the key figures are:

• Total Income: Rs. 1,595,580
• Total Deductions: Rs. 221,720
• Taxable Income: Rs. 1,373,860
• Income Tax Due: Rs. 262,158