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BBS Taxation in Nepal

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BBS Taxation in Nepal Chapter Wise Questions

Past TU exam questions for Taxation in Nepal, organised chapter by chapter with solutions.

Asked on 2081 Exam
1.

What is tax?

[2]
Asked on 2081 Exam
2.

Differentiate between income year and assessment year.

[2]
Asked on 2081 Exam
3.

State the meaning of "Canon of Economy".

[2]
Asked on 2079 Exam
4.

Define indirect tax with example.

[2]
Asked on 2079 Exam
5.

Explain the meaning of "Canon of Certainty".

[2]

Asked on 2081 Exam
1.

What is Permanent Account Number?

[2]

Asked on 2079 Exam
1.

Thomas is foreign citizenship holder arrived in Nepal on 1st Poush 2078 and stayed in Nepal at the end of Ashad 2079.

Required : His residential status for the income year 2078/79.

[2]

Asked on 2081 Exam
1.

Susan runs small business in Kathmandu Metropolitan city annual turnover Rs. 3 Million and taxable income amount Rs. 3 LacksRequired : Tax liability he selected presumptive taxation.

[2]
Asked on 2079 Exam
2.

Smrity is presumptive taxpayer located in Walling Municipality and her total turnover Rs. 2 million and total operating

expenses Rs. 1.8 million during the previous income year.

Required: Smrity opted presumptive taxpayer status and compute tax liability with explanation.

[2]

Asked on 2081 Exam
1.

Mr. Rai has received the salary from a company as an employee Rs. 6,00,000. The vehicle and accommodation facility is provided by office to him.Required: The amount of vehicle and accommodation facility to be included in his income

[2]
Asked on 2081 Exam
2.

Mrs. Muna an employee of government office was appointed on 1st Magh 2076 with a pay scale of Rs. 30,000 -

1000 - 42,000. The other particulars of her for previous year are given below.

Entertainment allowance Rs. 3,000 p.m.

Dearness allowance Rs. 3,000 p.m.

Meeting allowance Rs. 12,000

Accommodation and vehicle facility was provided by the office.

House keeper's salary provided by office Rs. 5,000 p.m. and Mrs Muna's contribution to housekeeper was Rs.

3000 p.m.

Her electricity bill of Rs. 1,000 p.m. was paid by the office.

Office provided soft loan Rs. 5,00,000 at interest rate of 5%. Market interest rate was 12%.

Her office is located at Zone B

She claimed following expenses for deduction:

Approved medical expenses spent by her of Rs. 3,000.

Life insurance premium (self) of Rs. 50,000 (on a policy of Rs. 10,00,000).

Health insurance premium of Rs. 23,000 on her own policy

She had donated Rs. 50,000 to a religious heritage of Nepal (an exempt organization approved by IRD).

Required:

a. Net (assessable) income from employment

b. Statement of total taxable income

c. Tax liability

[10]
Asked on 2079 Exam
3.

Briefly describe the provision related to quantification of vehicle facility provided to an employee.

[2]
Asked on 2079 Exam
4.

Basnet is an officer of government office. He was promoted to this post on 1st Shrawan 2073, 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 previous years as 

follows:

❖ Family allowance Rs. 10,000 p.m.

❖ Dearness allowance 20% of basic salary.

❖ City compensatory allowance 10% of current salary and one month equal Dashain allowance.

❖ Travelling and Daily allowance (TADA) Rs. 20,000.

❖ Interest from fixed deposit amount Rs. 30,000.

❖ Office provided him car facility along with driver. Fuel expenses Rs. 25,000. Driver salary Rs. 20,000 p.m. and

repairs & maintenance cost Rs. 30,000 paid by office.

❖ Office has also provided a free quarter for his accommodation.

❖ A domestic assistant provide by the office, his monthly salary Rs. 6,000 paid by office. Basnet contribution

 towards this facility was Rs. 2,000 pm.He claimed the following expenses for deduction:

❖ He is a member of Recognized Provident Fund contributing 10% of his salary towards this fund.

❖ He contributed amount Rs. 30,000 in the citizen investment trust.❖ He paid life insurance premium Rs. 35,000.

❖ Donation paid to social welfare organization Rs. 30,000.

❖ Basnet claimed medical expenses Rs. 20,000 and 50% paid by office.

Required : a. Net (assessable) income from Employment.

 b. Statement of Total Taxable Incomec. Tax liabilities

[10]
Asked on 2079 Exam
5.

What are the income that should be excluded while calculating employment income as per the section 10 of the Income Tax Act. 2058?

[10]

Asked on 2081 Exam
1.

What do you mean by "Non Changeable Business Assets"?

[2]

Asked on 2081 Exam
1.

Sole Trader Organization provided the following information:The opening written down value (Block D) is Rs. 5,00,000.Addition is made in 2nd Chaitra of Rs. 3,00,000.Actual repair and improvement cost is Rs. 50,000.Required: Allowable amount of repair and improvement cost of the year.

[2]
Asked on 2079 Exam
2.

ABC manufacturing Company supplied the following information.

• Opening stock of raw material and closing stock of finished goods Rs. 10,000 and Rs. 20,000 respectively.

• Import during the year Rs. 500,000, Custom duty to Rs. 40,000 and administrative expenses Rs. 25,000.

Required : Cost of trading goods.

[2]

Asked on 2081 Exam
1.

(a) SS Trades provided the following details of its fixed assets under block B and C.

Particulars Block 'B' (Rs.) Block 'C' (Rs.)
Opening WDV 400,000 900,000
New addition of assets during the year
on $1^{\text{st}}$ Ashwin 150,000 0
on $1^{\text{st}}$ Falgun 300,000 300,000
on $21^{\text{st}}$ Baishakh 0 600,000
Assets disposed off during the year 50,000 100,000
Repair and improvement cost during the year 40,000 90,000

Required:

(i) Allowable depreciation

(ii) Closing value of fixed asset of the year

(b) The operating results of a company are provided:

Year  6 7 8 9 10 
Profit/loss (Rs)  30,000 100,000 150,000 200,000 120,000

The company has incurred loss in its 2nd year of operations. The unrecovered loss of 2ndyear, 3rd year,  \( 4^{th} \) year and 5th year is Rs. 30,000, Rs. 40,000, Rs. 50,000 and Rs. 60,000 respectively. The profit of the 6th year is derived without deducting interest on bank loan Rs. 20,000 and profit of the 7th year is derived without adding commission income Rs. 10,000. In year 9, profit was calculated after deducting donation to PADT Rs. 100,000 and the profit of 7th year was ascertained deducting pollution control cost of Rs. 300,000. Required: Taxable income and explanation wherever necessary.

[15]
Asked on 2081 Exam
2.

Given below is the trading, profit and loss account of a proprietorship firm:

Particulars Amount Particulars Rs
To Opening stock 210,000 By Sales 4,900,000
To Purchase 2,020,000 By Closing stock 450,000
To Carriage 260,000
To Wages 340,000
To Customs duty 110,000
To Gross profit c/d 2,410,000
Total 5,350,000 Total 5,350,000
To Salary 650,000 By Gross profit b/d 2,410,000
To Office rent 240,000 By Rent from staff quarter 45,000
To General expenses 70,000 By Interest from investment 70,000
To Water and electricity 80,000 By Commission received 10,000
To Legal expenses 15,000 By Sundry receipts 40,000
To Audit expenses 30,000 By Bad debt recovered 60,000
To Promotion expenses 25,000 By Divided received 40,000
To Interest on loan 40,000 By Gain on sale of non business assets 130,000
To Bad debts 30,000 By Gift received relating to business 50,000
To Fine and penalties 10,000
To Provision for tax 30,000
To Life insurance premium (own) 35,000
To Fire insurance premium 20,000
To Donation 80,000
To Pollution control cost 110,000
To Depreciation (Block D) 50,000
To Repair (Block D) 30,000
To Sundry expenses 50,000
To Net profit c/d 1,260,000
Total  2,855,000 2,855,000

Further information:

  • i. Opening and closing stock were over valued by Rs. 10,000 and Rs. 50,000 respectively.

  • ii. Purchase include purchase of plant costing Rs. 120,000 which was purchased on 15th Chaitra of previous year and the opening WDV of the plant was Rs. 400,000. A part of plant costing Rs. 80,000 was disposed during the previous year.

  • iii. Business loss of last year is Rs. 50,000.

  • iv. Donation was given to private nursing home and public hospital equally.

  • v. Legal expenses include Rs. 5,000 incurred for domestic purpose.

  • vi. 30% of bad debt recovered was not allowed previously by Inland Revenue Office.

Required: * i) Net (assessable) income from business

  • ii) Statement of total taxable income

  • iii) Tax liability

[15]

Asked on 2081 Exam
1.

The following receipts and payments accounts of an auditor are given below:

Receipts Rs Payments Rs
To Balance b/d 160,000 By Office salaries 360,000
To Audit fees 890,000 By Office expenses 90,000
To Consultancy fees (net) 510,000 By Office rent 120,000
To Commission relating to audit work 50,000 By Purchase of office equipment (Bhadra) 240,000
To Interest on fixed deposit from NBL (net) 10,000 By Life insurance premium (self) 35,000
To Sale of old newspaper and journals 4,000 By Purchase of newspaper & journals 8,000
To Gift and presents from clients 30,000 By Income tax paid in advance 10,000
To Interest on govt. securities (net) 15,000 By Donation to tax exempt organization 140,000
To Dividend received (net) 19,000 By Purchase of stationery 25,000
To Lottery income 20,000 By Travelling expenses 30,000
By Miscellaneous expenses 20,000
By Domestic expenses 80,000
By Car expenses 24,000
By Balance c/d 526,000
Total 1,708,000 Total 1,708,000

Additional information:

  • 20 percent of car expenses were paid for personal purpose.

  • Office salaries include Rs. 10,000 paid to domestic servant.

  • 40 percent of donation was given to an organization which was not approved by IRD.

  • Half of domestic expenses were spent for general expenses of the office.

  • Allowable depreciation for the year was not shown in account.

Required:

  • a. Assessable (Net) income from profession

  • b. Statement of taxable income

  • c. Tax liabilit

[10]
Asked on 2079 Exam
2.

What do you mean by capital and revenue expenditure?

[2]

Asked on 2081 Exam
1.

Mention the exemption of individual working in a remote area.

[2]
Asked on 2081 Exam
2.

What are the allowable reductions in calculation of taxable income of a national person?

[10]
Asked on 2079 Exam
3.

Differentiate assessable income and taxable income.

[2]
Asked on 2079 Exam
4.

Mr. Nepal is retired government employee and received pension income Rs. 6,50,000 including one month equal Dashain allowance.

Required : Tax liability of Mr. Nepal he selected family status.

[2]
Asked on 2079 Exam
5.

(a) Shisir furnished you following particulars of income and expenses for the previous income year.

i. Income from profession Rs. 200,000

ii. Mining rent (natural resources after TDS) Rs. 510,000

iii. Lottery income received after TDS Rs. 25,000

iv. Gifts & present received in respect of investment Rs. 100,000

v. Birthday gifts received Rs. 5,000

vi. Dividend received foreign and domestic country Rs. 50,000each

vii. Rent from building Rs. 100,000

viii. Rent received from property after TDS Rs. 180,000

ix. Gain on sales of vacant agriculture land Rs. 120,000

x. Interest received from saving deposit Rs. 42,500

xi. Interest received from local money transaction Rs. 60,000

He claimed the following expenses to deduct.

i. Collection charge related with natural resources Rs. 10,000

ii. One and half month equal commission paid to agent for natural resources.

iii. Other allowable investment related expenses Rs. 45,000

iv. Insurance premium of building Rs. 6.000

v. Donation paid to red cross society amount Rs. 20,000

Required: a. Net assessable income from investment

b. Statement of total taxable income

(b) State the business on which additional depreciation (1/3 of the depreciation base) is allowed as per Income Tax Act. 2058

[10]

Asked on 2081 Exam
1.

Miss. Hira, a government employee, earned taxable income from employment Rs. 11,20,000.Required: Tax liability of Miss Hira.

[2]
Asked on 2081 Exam
2.

(a) Mr. Hari disclosed the following incomes and expenditures for the previous year.

Dividend from resident company Rs. 25,000

Income from natural resources Rs. 340,000 (net)

Royalty income Rs. 170,000 (net)

Interest from private money lending transactions Rs. 210,000

Interest from fixed deposit Rs. 9,500

Rent from house let out Rs. 180,000

Rent received by letting an asset Rs. 90,000 (after TDS)

Compensation received relating to investment Rs. 50,000

Dividend from foreign company Rs. 85,000

He claimed the following expenses for deduction:Donation to Pasupati Area Development Trust Rs. 50,000

Collection cost of natural resources income Rs. 1,000

Interest collection charge relating to money lending transactions Rs. 2,000

House rent collection charges Rs. 500

Collection cost of fixed deposit Rs. 400

Tax paid to foreign government Rs. 15,000

a. Assessable (Net) income from profession

b. Statement of taxable income

c. Tax liability

(b) Mention the conditions for an assesses to be resident person in case of natural person, partnership firm, trust and company.

[10]
Asked on 2079 Exam
3.

Given is the summarized statement of cash pertaining to a lawyer for the previous income year.

Receipts Amount Payments Amount
To Balance b/d- Cash in hand 50,000 By Office expenses 80,000
Cash at bank 250,000 By Computer Purchased (Ashwin) 150,000
To Legal fees 695,000 By Telephone & Communication expenses 30,000
To Gifts and present from clients 350,000 By Salary to office assistants 180,000
To consultation fees after TDS 85,000 By Life insurance premium of lawyer 35,000
To Agriculture income 40,000 By Pollution control cost 40,000
To interest or local money transaction 120,000 By Office rent 150,000
To Causal income received 30,000 By Water Electricity expenses 30,000
To Other professional incomes 75,000 By Hospitality and entertainment expenses 20,000
To sales of old paper and journal 5,000 By Heal insurance premium (own) 15,000
By Donation to remote area school 50,000
By printing & stationary expenses 30,000
By Balance C/d 890,000
Total 1,700,000 Total 1,700,000

  Further information : 

a. Water / electricity expenses are used equality for professional and personal purpose . 

b. Office expenses include Rs 10,000 paid to domestic helper . 

[10]
Asked on 2079 Exam
4.

(a) Following are the details of the fixed assets of XYZ Company.

Beginning written down value block - C Rs. 500,000

Beginning written down value block - D Rs. 500,000

The company has purchased a new plant & machinery as on 10th Jestha Rs. 600,000

The company has also purchased two second hand Maruti cars on 1st Ashwin, worth Rs. 300,000 each.

Repair and maintenance cost incurred during the year under block D Rs. 100,000 and Block C for Rs. 60,000.

During the year company has sold a small part of plant and machinery having book value. Rs. 90,000 sold for Rs. 100,000.

Required : a Allowable depreciation

b. Value of fixed asset at the end of the fiscal year.

(b) Following are the profit and loss position of a firm for the previous income year :

Years  5 6 7 8 9
Profit  20,000 80,000 155,000 170,000 600,000

Additional information:

  • a. On scrutiny, it revealed that profit of the 9th year was derived before deducting research and development and donation Rs. 132,500 and Rs. 50,000 respectively.

  • b. The company had unabsorbed loss of 1st year, 2nd year, 3rd year, and 4th year Rs. 600,000, Rs. 75,000, Rs. 50,000 and Rs. 25,000 respectively.

Required: Taxable income and explanation wherever necessary.

[15]
Asked on 2079 Exam
5.

Given below is the trading, profit and loss account of a sole trade organization for the previous income year.

Particulars Amount Particulars Amount
To Opening stock 50,000 By Sales 5,200,000
To Purchase 3,050,000 By Closing stock 300,000
To Carriage on purchase 30,000
To Wages 170,000
To Gross profit c/d 2,200,000
Total 5,500,000 Total 5,500,000
To Office rent paid 50,000 By Gross profit b/d 2,200,000
To salary 250,000 By Other receipts 40,000
To General expenses 80,000 By Dividend received 10,000
To Legal expenses 20,000 By Refund of custom duty 30,000
To Staff welfare expenses 120,000 By Bad debt recovered 40,000
To interest on bank loan 130,000 By Sales of scraps 10,000
To Fine and penalties 10,000 By Rent from staff quarter 20,000
To Life insurance premium (own) 30,000 By Gain on non - chargeable business assets 30,000
To insurance premium of fixed assets 20,000 By Gain on sales of business assets 20,000
To pollution control cost 50,000
To depreciation of fixed assets 50,000
To Membership renewal charges 10,000
To provision for dividend 10,000
To Donation to tax exempt entity 20,000
To Advance income tax paid 20,000
To Drawing by proprietor 30,000
To Net profit 1,500,000
Total 2,400,000 Total 2,400,000

Further information:

  • a. Closing stock was undervalued by Rs. 10,000.

  • b. Purchase include purchase of sofa set of Rs. 50,000.

  • c. Legal expense include Rs.10,000 penalty paid to Nepal Tele-communication.

  • d. 40% of donation was given to a private school and rest was given to public school.

  • e. Seventy percent of bad debts recovered were allowed previously.

  • f. Allowable depreciation of all fixed assets Rs. 40,000.

  • g. Unabsorbed business loss of last year stood Rs. 50,000.

Required:

  • a. Net (assessable) income from business.

  • b. Statement of total taxable income.

  • c. Tax liabilities (Assume-Individual).

[15]

Asked on 2081 Exam
1.

(a) An importer imported goods paying VAT amounted Rs. 5,200. He (importer) incurred carriage expenses of

Rs. 3,000 and sold them to a retailer charging 10% margin on cost. The retailer sold the goods to customer

charging 20% margin on outlay with Rs. 1,000 as selling expenses there on.

Required:

(i) Cost price of customer (ii) Total VAT payable to government at each stage(b) "Value Added Tax is levied on added value of goods and services."Explain in brief.

[10]
Asked on 2079 Exam
2.

(a) Sharma purchased goods from retailer at Rs. 7,910 including VAT. The retailer purchased goods from importer at Rs. 5,000 excluding VAT.

The importer imported the goods for Rs. 4,000 excluding value added tax.

Required: i. Value added by importer and retailer.

ii. Total VAT to government.

(b) Enumerate any five goods/services exempt from value added tax.

[10]

Asked on 2081 Exam
1.

(a) Explain the historical development of income taxation in Nepal.

(b) What are the duties of taxpayer (accesse) as per Income Tax Act 2058?

[15]

Asked on 2079 Exam
1.

(a) What are the circumstances under which the Inland Revenue Department can make jeopardy Assessment of tax?

(b) What is tax clearance certificate? What documents must be submitted to Inland Revenue Office for issue of such certificate?

[15]

Asked on 2081 Exam
1.

What do you mean by tax auditing? Explain the major features of tax auditing.

[10]
Asked on 2079 Exam
2.

Define cash basis of accounting.

[2]
Asked on 2079 Exam
3.

What do you mean by internal check? How does it differ from internal control?

[10]