BBA Taxation and Auditing

Define direct tax with example.

What do you understand by 'Canon of Certainty'?

Define direct tax with example.

What are the difference sources of income as per the Income Tax Act, 2058?

Ramesh a citizen of Pakistan came to Nepal on 1st Magh 2080 and stayed here till Baisakh last 2081. He earned Rs 200,000 as consultancy fees.

Required: Taxable income, tax liability and residential status of Mr. Ramesh.

What are the tax exempt incomes under the Income Tax Act, 2058 under section 10.

Mr. Sujal is working in a government organization at a regular salary of Rs 50,000 per month. The government has provided him apartment facility for his residence.

Required: Total amount to be included in employment income of Mr. Sujal.

Dr. Shrestha retired as a medical officer from nursing home on 1st Chaitra of previous income year. The nursing home is located at remote area 'B'. He has submitted the following details of his income for the previous year.
➤ Monthly salary Rs 60,000.
➤ Pension income Rs 40,000 per month.
➤ Remote area allowance Rs 3,000 p.m.
➤ Dashain and tihar allowance equal to one and half month salary.
➤ Dearness allowance Rs 5,000 p.m.
➤ Transportation allowance Rs 2,000 p.m.
➤ Overtime pay Rs 50,000.
➤ Salary in lieu of leave Rs 80,000.
➤ Car and housing facilities is provided by nursing home.
➤ His life insurance premium paid by the employer Rs 50,000 for the insured sum of Rs 300,000.
➤ His contribution to recognized provident fund 10% of salary and employer also contributed equal amount.
➤ Tiffin and meal facility provided by employer at office Rs 5,000 p.m. in equal term to all staffs.
➤ School fees of his daughter paid by employer Rs 2,000 p.m.
➤ During the previous year the employer had sent him to Kathmandu to attend a short-term seminar. For this purpose, he was provided with travelling and daily allowance Rs 35,000 (net)
➤ Royalty income from natural resources Rs 85,000 (net)
➤ Emergency medical treatment expenses paid by employer Rs 480.
➤ Salary from part time lecture Rs 170,000 (net)
➤ Meeting allowance Rs 8,500 (net).

He has claimed the following expenses for deduction:
➤ Donation given to political party Rs 30,000
➤ Transportation expenses Rs 3,500.
➤ Household expenses Rs 8,000.
➤ Health insurance premium Rs 30,000.
➤ Medical expenses incurred Rs 5,000 of his own.
➤ Advance payment of tax Rs 10,000

Required: (a) Assessable income from employment
(b) Statement of taxable income
(c) Tax liability. 

Mr. Dahal is working in a reputed bank as a senior officer. The bank provided him car loan facility amount to Rs 3,000,000 on 1st Marga of previous year at interest rate of 8% p.a. The prevailing rate of interest was 10% p.a.

Required: Quantified amount of interest subsidy to be included in employment income of Mr. Dahal.

Ms. Thapa is a government officer and received net salary after deducting approved retirement fund Rs 60,000 and tax deduction at sources Rs 20,000, including one-month equal Dashain allowance Rs 570,000 in the previous income year.

Required: Monthly salary, taxable income and tax liability of Ms. Thapa, she elected family status.

Mr. Rohit is an employee of Nepal Government. He was appointed 1st Baishakh 2075 at the pay scale Rs 54,000 – 2000 – 60,000 EB – 3,000- 75,000. He has submitted the following particulars of his incomes and expenses of previous year.
- Saving from TADA Rs 50,000
- Dearness allowance Rs 2,000 p.m.
- Local allowance Rs 2,500 p.m.
- Medical allowance Rs 60,000.
- He received salary in lieu of leave Rs 18,000.
- Meeting allowances Rs 20,000 (net).
- Life insurance premium paid by employer on behalf of Mr. Rohit was Rs 50,000 on the insured sum of Rs 300,000.
- Office has provided him accommodation and vehicle facility.
- Office has provided him a household servant whose salary was Rs 5,000 p.m. but office has deducted Rs 3,000 p.m. from his salary income.
- He received dividend Rs 19,000 (net) from a bank.
- Salary from part time teaching Rs 170,000 (Net).

He claimed the following expenses as deduction:
- Donation to social welfare organization Rs 20,000.
- Health Insurance premium paid Rs 31,000.
- Personal and household expenses Rs 25,000.
- Approve medical expenses Rs 30,000 paid by office.
- Tuition fees of his son paid Rs 50,000.
- He is working at remote area 'B' zone.
- House insurance premium Rs 15,000.

Required:
(a) Assessable income from employment
(b) Statement of taxable income
(c) Tax liability.

Differentiate between income year and assessment year.

Define Permanent Account Number (PAN).

Mr. Clinton is an American citizen arrived in Nepal on 1st Chaitra and previous income year and stayed in Nepal at the end of Ashad of previous income year. He earned in Nepal Rs 1,000,000.

Required: Residential status and tax liability of Mr. Clinton.

Ms. Dahal has been operating a proprietorship business located at Birgunj Metropolitan City, her sales and taxable income was Rs 3,000,000 and Rs 300,000 respectively. She had adopted to be presumptive tax payer.

Required: Determine the tax liability with explanation as she is a presumptive taxpayer.

What are the difference sources of income that fall under Income Tax Act, 2058?

What do you understand by Permanent Account Number (PAN)?

Mr. Anish has been operating a proprietorship business located at Lalitpur Metropolitan City, his sales and taxable income was Rs 2,600,000 and Rs 300,000 respectively. He had adopted to be presumptive tax payer.

Required: Determine the tax liability with explanation as he is a presumptive taxpayer.

Trading organization Supplied the following information:
➤ Opening stock Rs 150,000
➤ Purchase of raw material Rs 850,000 includes cost of fixed assets 100,000
➤ Carriage inward Rs 50,000
➤ Closing stock costing Rs 80,000 but the value of market price Rs 50,000

Required: Cost of Trading Goods.

Following are the details of the fixed assets of ABC Trading Organization.

Required:
a. Allowable depreciation and repairs and maintenance
b. Value of fixed assets at the end of the fiscal year.

Describe the provision regarding depreciation as laid down under the Income Tax Act, 2058 under Sec-19.

A Trading organization provided the following information:

On scrutiny, it was found that profit of 6th year was derived after deducting donations Rs 50,000 paid to tax exempt entity. Similarly, the profit of 9th year was calculated before deducting pollution control cost Rs 200,000.

Required: Taxable income with giving explanation wherever is necessary 

Following is the summarized statement of cash concerning class 'B' registered auditor for the previous year.

Receipts and payments Account

Additional information:
➤ Consultation fees include Rs 25,000 relating to next year.
➤ Audit fees include Rs 40,000 related to previous year.
➤ Water and electricity expenses is equally used for office and personal purpose.
➤ Allowable depreciation of fixed assets Rs 10,000.

Required:
(a) Net assessable income profession
(b) Statement of taxable income

A trading firm provided the following information with respect to assets of Group 'D'.
➤ The opening WDV of assets Rs 1,000,000.
➤ During the previous year the company purchased assets as:
On Marg Rs 100,000
On Chaitra Rs 300,000
On Baisakh Rs 900,000
➤ Company disposed off the part of asset during the previous year at Rs 100,000 (book value Rs 80,000).
➤ Repair expenses was incurred during the previous year Rs 130,000

Required:
(a) Allowable depreciation for the year.
(b) Opening WDV for the next year. 

Describe the provision regarding business loss as laid down under the Income Tax Act, 2058.

Mr. Bharat, runs trading organization registered in Value Added Department and furnished following trading and profit and loss account for previous year:

Additional information:
➤ Opening stock undervalued by 5% and closing stock overvalued by 10%
➤ Refund of income tax includes Rs 15,000 as refund of custom duty.
➤ Salary includes Rs 30,000 paid to a newly appointed staff without PAN.
➤ 25% of bank loan was used for personal purpose.
➤ Legal expenses included Rs 5,000 for income tax appeal against income tax officer.
➤ Depreciation on car has not been charged in the above statement. The depreciation base of the car was Rs 500,000.
➤ Office expenses include Rs 55,000 costs of patent right with life period of 5 years 8 months. Charge depreciation as per rule.
➤ Sundry income included Rs 5,000 income from interest from bank deposit.
➤ 40% of bad debts recovered was not allowed as deduction in previous year due to the lack of proof.

Required:
a. Net assessable income from Business.
b. Net assessable income from investment.
c. Statement of total taxable income.
d. Tax liability.
e. Giving explanation wherever necessary. 

Following are the financial results of a company of last 6 years:

On scrutiny, it was found that a donation of Rs 300,000 was given to Public Hospital charged in year 1. Similarly, the profit of 4th year was calculated after deducting pollution control cost Rs 400,000 and before deducting interest on bank loan Rs 50,000 at 5th year.

Required: Taxable income with giving explanation wherever necessary.

Mrs. Barsha is an advocate, maintains her account on a cash basis furnished the following statement for the year end 31st Ashadh.

Additional information:

1 ) Legal fees include Rs 56,000 relating to two years ago.
2) Allowable depreciation Rs 30,000.
3) Office expenses included Rs. 10,000 paid for household servant.
4) Outstanding salary Rs 20,000 is yet to be paid.
5) Electricity and telephone expenses is used equally for profession and domestic purpose.

Required:

a. Net assessable income profession

b. Statement of taxable income

Mrs. Barsha is an advocate, maintains her account on a cash basis furnished the following statement for the year end 31st Ashadh.

Additional information:
- Legal fees include Rs 56,000 relating to two years ago.
- Allowable depreciation Rs 30,000.
- Office expenses included Rs. 10,000 paid for household servant.
- Outstanding salary Rs 20,000 is yet to be paid.
- Electricity and telephone expenses is used equally for profession and domestic purpose.

Required:
a. Net assessable income profession
b. Statement of taxable income

The following are the details of incoming and outgoing about of various non-chargeable assets of Mr. Puskar for the previous income year.

Gain on sales of shares Rs 1,200,000
Loss from non-chargeable business assets last year Rs 200,000
Purchase of share Rs 1000,000 sold for Rs 1,300,000 (Non-listed – 2 years ago)

Required: Capital gain or loss from non-chargeable business assets and tax liability.

Mr. Basnet furnished the following particulars of his incomes and expenditures for the previous year.
➤ Royalty from the books Rs 68,000 (net).
➤ Dividend from the resident company Rs 95,000 (net).
➤ Compensation received Rs 60,000.
➤ Bad debts recovered (20% not allowed previously) Rs 20,000.
➤ Interest received from unrecognized sector Rs 300,000.
➤ Gain from the investing insurance Rs 190,000 (net).
➤ Amount received for accepting of restriction – investment Rs 50,000.
➤ Rent received for letting out machinery Rs 360,000 (net).
➤ Joint investment income total Rs 200,000. Mr. Thapa is the investment partner with 40% share.
➤ Gain from the government securities Rs 20,000 (net)
➤ Gift from the client with market value Rs 10,000.
➤ Wind fall gain Rs 15,000 (net).
➤ Interest received from bank Rs 95,000 (net).
➤ Payment received from the natural resources after TDS Rs 255,000.

Following expenses are claimed for deduction:
➤ Cost of lottery ticket Rs 1,500
➤ Natural resources collection charge Rs 5,000
➤ Royalty collection charge Rs 8,000
➤ Allowable depreciation and repair of machinery Rs 50,000 and 10,000 respectively
➤ Remote area facilities as per rules, his location lies in remote area 'C'
➤ Life insurance premium of his own Rs 45,000
➤ Rent paid of office Rs 40,000
➤ Donation paid to public school of Rs 25,000
➤ House insurance premium paid Rs 12,000
➤ Medical expenses incurred of his own Rs 10,000. He claimed medical tax credit.
➤ Previous year investment loss Rs 50,000

Required: (a) Net assessable income from investment
(b) Statement of total taxable income
(c) Tax liabilities 

Mr. Pandey, purchased shares two years ago at cost Rs 500,000 and entire shares sold at Rs 1,200,000.

Required: Capital gain and tax liability.

Mr. Kamal furnish the following income details of previous income year.
- Rent from natural resources of Rs 425,000 (Net).
- Royalty income Rs 85,000 (Net).
- Dividend from the foreign country Rs 100,000.
- Compensation received Rs 63,000.
- Bad debts recovered (20% not allowed previously) Rs 10,000.
- Interest received from private money lending transaction Rs 170,000 (Net).
- Gain from the investing insurance Rs 190,000 (Net).
- Rent received for letting machinery Rs 360,000 after TDS Rs 40,000.
- Income from joint investment Rs 100,000. Mr. Jhalak is the investment partner with 20% share.
- Interest from the fixed deposit Rs 20,000 (Net).
- Gift from the client with market value Rs 9,000.
- Wind fall gain Rs 15,000 (Net).
- Payment received from the natural resources after TDS Rs 8,500.

Following expenses are claimed for deduction:
- Cost of lottery ticket Rs 500.
- Joint investment expenses Rs 10,000.
- Royalty collection charge Rs 4,000.
- Allowable depreciation of machinery Rs 20,000.
- Rent paid for office Rs 42,000.
- Personal expenses Rs 20,000.

Required:
(a) Net assessable income from investment
(b) Statement of total taxable income
(c) Tax liabilities

Mr. Bhandari, a trader furnished the following trading and profit and loss account for previous year:

Additional information:

• Opening stock undervalued by 10% and closing stock overvalued by 20%

• Refund of income tax includes Rs 15,000 as refund of custom duty.

• Legal expenses included Rs 5,000 for fine and penalty paid to local government.

• Depreciation on car has not been charged in the above statement. The depreciation base of the car was Rs 500,000.

• Office expenses include Rs 55,000 as a printing expenses paid at a time by cash while banking facilities available within 10 kilometers.

• Previous year business loss stood Rs 50,000.

Required:

 a. Net assessable income from Business.

 b. Net assessable income from investment.

c. Statement of total taxable income.

d. Tax liability.

 e. Giving explanation wherever necessary.

What do you understand by self-tax assessment? Explain with benefits.

Define tax deduction at sources with example.

Define tax audit with suitable example.

Describe the provision of installment method of tax collection as per the Income Tax Act, 2015 with example.

What do you mean by final withholding payments? List out any five final withholding incomes.

"Self-assessment of tax system is effective in developed country". Explain.

An importer imported an air conditioner from India paying total amount Rs 100,000. No VAT was paid while import. Importer sold to retailer before reaching to final consumer. Both Importer and retailer incurred Rs 5000 for administrative and packaging cost. Profit charged by importer 20% on their cost price but retailer charged 20% on sales price.

Required:
(a) Cost price for the final consumer.
(b) Amount of VAT collected by the government at each level of sales. 

Define output VAT with suitable example.

A customer bought a television from a retail store paying Rs 339,000. The TV was imported by Mr. Sundar and it was sold to the retailer. The importer and retailer both incurred Rs 1,000 each as an additional cost and profit margin of 10% on selling price as included in all cases.

Required:
(a) Import price of TV
(b) Amount of VAT payable to the government at each stage

Mention any two objectives of an auditing.

"Vouching is essence of auditing". Explain.