Logo

Taxation in Nepal

bbsthird year
Chapter Wise NotesQuestion BanksSyllabusChapter Wise Questions
tu-logo

Faculty of Management

2081

Bachelor of Business Studies

Taxation in Nepal

MGT 224

Full Marks: 100

Pass Marks: 35

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 ]

1.

What is tax?

[2]
2.

What is Permanent Account Number?

[2]
3.

Differentiate between income year and assessment year.

[2]
4.

State the meaning of "Canon of Economy".

[2]
5.

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

[2]
6.

Mention the exemption of individual working in a remote area.

[2]
7.

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]
8.

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

[2]
9.

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]
10.

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]

"Section B"

Attempt Any FIVE questions .

[5*10=50 ]

1.

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]
2.

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]
3.

(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]
4.

(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]
5.

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

[10]
6.

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

[10]

"Section C"

Attempt any Two questions .

[2*15=30 ]

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]
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]
3.

(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]