BBS Taxation in Nepal

bbsthird year

This course covers tax concepts, tax accounting, types of taxpayers, taxation of different income sources, VAT, tax liability, tax collection, auditing, penalties, and appeal procedures.

Chapter Wise Notes Question Banks Syllabus Chapter Wise Questions

Faculty of Management

2080

Bachelor of Business Studies

Taxation in Nepal

MGT 224

Full Marks: 100

Candidates are required to give their answers in their own words as far as practicable. The figures in the margin indicate full marks.

"Section A"

Brief Answer Questions .

[10*2=20 ]

Define direct tax with an example.

[2]

What do you mean by "Tax Deduction at Source"?

[2]

Differentiate between income year and assessment year.

[2]

Explain the meaning of "Canon of Equity".

[2]

What do you mean by Permanent Account number (PAN)?

[2]

Briefly describe the provisions related to quantification of accommodation facilities provided to an employee.

[2]

Thomas is foreign citizenship holder arrived in Nepal on 1st Baishakh 2078 and stayed in Nepal till the end of Kartik, 2079.

Required: His residential status for the income year 2078/79 and explanation as per Income Tax Act.

[2]

Mr. Nepal is a retired government employee and received pension income Rs. 652,000 including one month equal Dashain allowance.

Required: Tax liability of Mr. Nepal.

[2]

A trading organization supplied the following information:

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

Import during the year Rs. 500,000, Custom duty Rs. 100,000 and administrative expenses Rs. 25,000.

Value of closing stock Rs. 20,000 but the market value Rs. 15,000.

Required: Cost of trading goods.

[2]

10.

Rajan is presumptive taxpayer located in Kathmandu Metropolitan City and his total turnover is Rs. 19 lacs and total operating expenses Rs. 17 lacs during the previous income year.

Required: Rajan elected presumptive taxpayer status and compute tax liability with explanation.

[2]

"Section B"

Attempt any FIVE Questions .

[5*10=50 ]

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 previous years as follows:

Director allowance: Rs. 10,000 p.m.

Dearness allowance : 20% of basic salary.

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

Meeting allowance : Rs. 1,700 (Net) per meeting for 10 meetings.

Interest from Mega Banks' saving deposit account (Net) Rs. 28,500

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. Suman contribution towards this facility was Rs. 2,000 p.m.

He claimed the following expenses for deduction:

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

Donation paid to rural municipality and private school Rs. 75,000 and Rs. 20,000 respectively.

Health insurance premium Rs. 2,000 per month.

Suman himself spends for his personal medical treatment Rs. 20,000 and unabsorbed medical tax credit amount carry forward from last year Rs. 1,000.

Required:

a. Net (assessable) income from Employment

b. Statement of Total Taxable Income

c. Tax liabilities and the selected family status.

[10]

Given is the summarized statement of cash pertaining to an artist for the previous income year.

Receipts	Amount	Payments	Amount
To Balance b/d- Cash in hand	20,000	By Administrative expenses	50,000
Cash at bank	230,000	By office equipment Purchased (Chaitra)	180,000
To Receipt from script playing	700,000	By Communication expenses	30,000
To Receipt from dance training program	300,000	By Salary to assistants	180,000
To consultation fees after TDS	85,000	By Life insurance premium (Own)	35,000
To Dividend received	40,000	By Research and development	50,000
To interest on investment	120,000	By Office rent	120,000
To Causal income received	30,000	By Water Electricity expenses	30,000
To Other professional incomes	75,000	By Refreshment expenses	20,000
		By Insurance premium of building	15,000
		By Donation to tax exempt entity	40,000
		By Balance C/d	850,000
Total	1,600,000	Total	1,600,000

Further information:

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

b. Compensation of Rs. 200,000 for the breach of contract from a producer has not has not been received yet.

c. Other professional incomes include Rs. 5,000 bad debts recovered which is not allowed for deduction previously.

d. Outstanding office rent Rs 20,000 is yet to be paid.

e. Receipt from script playing includes Rs. 2,000 relating to three years ago income and advance consultation fees Rs. 20,000 is not shown in above receipts account.

Required :

a. Assessable (Net) income from profession

b. Statement of taxable income

c. Tax liability

[10]

(a) A Final consumer Shital paid value added tax Rs. 39,000 while purchasing consumable goods. The goods was imported by ABC Ltd and sold to retailer. Make up 20 percent on cost price was included in all levels.

Required:

i. Import price of the importer

ii. Total VAT to government.

(b) Value added tax is based on added value of goods and service." Explain.

[10]

(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

(b) What are the incomes that should be excluded while calculating employment income as per the section 10 of the Income Tax act, 2058.

[10]

Define an assesses. Mention the provision for a natural tax payer to be a resident as per the Income Tax Act..

[10]

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

[10]

"Section C"

Attempt any TWO questions .

[2*15=30]

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

Beginning written down value block - C Rs. 400,000

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

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

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

Repair and maintenance cost incurred during the year under block D Rs. 80,000 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 businessman for the previous income year :

Years	Profit or (Loss)
1	(200,000)
2	(200,000)
3	(50,000)
4	(50,000)
5	100,000
6	(50,000)
7	20,000
8	70,000
9	400,000

Additional information

a. On scrutiny, it revealed that profit of 6th year was derived after deducting donation Rs. 20,000 to tax exempt entity

b. Profit of the 9th year was derived before deducting research and development cost Rs. 70,000.

Required: Taxable income giving explanation wherever is necessary.

[15]

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

Particulars	Amount	Particulars	Amount
To Opening stock	25,000	By Sales	5,000,000
To Purchase	2,000,000	By Closing stock	300,000
To Carriage on purchase	25,000
To Wages	175,000
To Gross profit c/d	2,225,000
	5,300,000		5,300,000
To Office rent paid	50,000	By Gross profit b/d	2,225,000
To Salary	250,000	By Sundry incomes	50,000
To General expenses	65,000	By Dividend received	5,000
To Legal expenses	20,000	By Refund of custom duty	45,000
To Staff welfare expenses	125,000	By Bad debt recovered	40,000
To Interest on bank loan	130,000	By Agriculture income	10,000
To Fine and penalties	5,000	By Rent from staff quarter	25,000
To Life insurance premium (own)	30,000	By Gain on non - chargeable business assets	50,000
To insurance premium of fixed assets	15,000	By Gain on foreign exchange	25,000
To Research and development cost	50,000
To Depreciation	50,000
To Membership renewal charges	5,000
To provision for tax	10,000
To Donation	20,000
To Advance tax paid	20,000


To Drawing	30,000
To Net profit	1,600,000
Total	2,475,000	Total	2,475,000

Further information:

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

b. Closing stock was valued Rs. 30,000 on last stock taking, however, it was not shown on the opening date.

c. Legal expenses include Rs. 5,000 for income tax penalty.

d. 60% of donation was given to a private hospital and rest was given to tax exempt organization.

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

f. Allowable repairs and depreciation were Rs. 30,000 and Rs. 40,000 respectively.

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

[15]

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

(b) Describe the instalment method of tax collection as per the Income Tax Act, 2058 with example.

[15]

BBS Taxation in Nepal

BBS Third Year Taxation in Nepal Question Paper 2080 (TU) – Solved

Faculty of Management