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Income from employment

Concept of Employment or Remuneration
Employment is an agreement between an employee and an employer that the employee provides certain
services on the job and the employer provides remuneration. According to section 8, an individual's
remuneration for and income year should be taken as the individual remuneration from employment.
Section 2(aj) of the Act has given a definition that employment includes a past, present or prospective
employment. It can be said that remuneration means the income received by any natural person in respect
of any employment or service rendered by the person from the employer in any income year.
In the global perspective, remuneration from employment is also known as salary. Black's Law Dictionary
defines salary as a reward or recompense for service performed. In a more limited sense, salary is a fixed
periodical compensation paid for service performed. In a more limited sense, salary is a fixed periodical
compensation paid for services rendered. Accordingly to Butterworth's Business and Law Dictionary,
"Salary is a fixed amount paid regularly to an employee as remuneration for work done."

Essential Features of Remuneration

The essential features of remuneration from employment may make clear idea in order to understand the
meaning of remuneration. These features are as follows:
1. Relationship as employer and employee
2. Mode of payment
3. Remuneration income and professional income
4. Income received from the employer
5. Income received from an associate of the employer
6. Income received from third party
7. The amount paid should be of regular nature

Some Basic Points for Consideration

There are some basic considerations while computing assessable income from employment. These
considerations may be as follows:
 Remuneration, Salary & wages are not conceptually different. But the remuneration income and
professional income are conceptually different.
 Salary may be received from more than one employer.
 Salary from a former employer, present employer & prospective employer is included in the income
from employment.
 Salary income must be real but not fictitious.
 Remuneration income is taxed on the receipt basis: Tax accounting of remuneration is cash basis.
Hence, it is obvious that advance salary and arrears of salary may be taxed in the year of receipt apart
from the current year's salary.
Chargeable Income from Employment (Chargeable Remuneration)
The chargeable incomes under income from employment are specified in section 8 of income tax Act. As
per the Act, the following payments made to a natural person from the employer are included while
calculating the person's remuneration from an employment:
1. Payments of wages, salary, leave pay (including salary in lieu of leave and encashment of
accumulated home, sick etc. leave), overtime pay, fees, commissions, prizes, gifts (as per market
value in case of prize and gift is not in cash), bonuses, and other facilities i.e. Dashain expenses, Tihar
expenses, telephone facility, transportation facility etc.
2. Payments of any personal allowances including any cost of living, subsistence allowance, rent
allowance, entertainment allowance and transportation allowance.
3. Payments providing any discharge or reimbursement of costs by employer, incurred by the
individual or an associate of the individual. For example, reimbursement of medical expenses,
payment of life insurance premium and private trip expenses etc.
4. Payments for the restriction accept related to employment or agreement to any conditions of the
employment. For example: in case an employee receives Rs.5000 per month for not working in other
organization as per the agreement made on the request of the employer.
5. Payments for termination or loss of service or compulsory retirement. For example, amount derived
as golden hands shake scheme.
6. Contribution to retirement fund by employer.
7. Amounts required to be included in employment due to change in tax accounting.
In addition to above stated items of remuneration, the following types of perquisites are also
included in remuneration from employment of a person:
8. Transfer of the asset [27(a)]: In case of the transfer of the asset from employer to employee, the
market value of such asset is included in the employee's income. For example; if an employer
provides 100 liters of petrol as a fuel facility to an employee and market value of petrol per liter is
Rs.110, its total market value of Rs.11,000 should be included in the employee's income from
employment.
9. Vehicle for personal and official purpose and Rent-free accommodation for personal purpose
[27(b)]: Payments consisting of the following facilities determined in accordance with the rules are
included in the income of the employee:
a. Vehicle facility: Availability of vehicle wholly or partly for private purpose. However, such
amount will be limited only to 0.5 percent of annual salary. In case the facility is not provided as
fringe benefit but is paid as transportation allowance or paid certain amount as transportation
facility, such allowance or amount should be included in the employee's income. It is noted that
partly personal purpose also refers to the facility of vehicle provided to go to office and to return
to home from office. It is a common phenomenon that any vehicle will not run without driver and
fuel. Therefore, if once the above perquisite is charged in the income of the employee, the
payment or facility of driver and fuel should not be included in the employee's income.
If vehicle facility is provided to other individuals other than employer, 1% of market value of
vehicle should be included in the income.
If the driver, fuel facility and maintenance are provided for employee's own vehicle used for his
personal purpose, the amount of driver's salary and amount of fuel are included in the
employee's income. In case of motor vehicle facility is provided for joint use by employees, such
facility should be included in each's employment income
b. House facility (including rent-free accommodation) for personal purpose: This amount is
limited to only 2 percent of the annual salary. But in case the facility is not provided as fringe
benefit but is paid as house rent allowance or paid certain amount as residence facility, such
allowance or amount is included in the employee's income. If accommodation facility to other
individual other than employer, 25% of actual rent or 25% of prevailing rent should be included
in the income.
In case of the maintenance expenses is provided to employee's own house, the amount of such
payment is included in income of the employee.
10. Expenses incurred by employer for the provision of domestic assistants, food, household utilities
of the employee [27(c)]: The amount of expenses incurred by the employer for provision of following
facilities for the employee (but any contribution of the employee for provision of such facilities is not
included in income):
Service of housekeeper, cook, chauffeur (driver), gardener or other domestic assistants;
Any meal, refreshment or entertainment;
Drinking water, electricity, telephone and like utilities in respect of employee's place of resident.
11. Difference of actual interest and interest as pre market rate in case of a soft loan [27(d)]: In case,
the amount of interest on loan paid by the employee to the employer with a concession rate, the
difference amount of interest that is lower than the interest to be paid as per the standard higher rate
is included in the employee's income. for example, if a manager of a bank has received a housing
loan of Rs.10,00,000 to construct a house with a concession interest rate of 6% instead of the standard
 interest rate of 15% for housing loan in the same bank and he pays interest of Rs.60,000, the
difference amount of Rs.90,000 with compared to the interest of Rs.1,50,000 as per standard rate is
added to income from employment.
12. Compensation received [31(a), 62 & 92]: In case, a person or an associate of a person derives a
compensation amount including a payment under insurance that compensates for income from
employment, it is included in the income from employment at the time the compensation amount is
derived. The compensation for an income that the person derived or expected to derive from
employment is included in such category. For example, compensation to an employee from
insurance company that was insured by employer on termination from the job is included in the
employee's income from employment. It is noted that compensation or gain from the investment
insurance from resident person is subject to final withholding payments and is not included in the
individual's income but the compensation or gain form investment insurance from the non-resident
person is included in the individual's income.
 13. Personal expenses of employee directly paid by the employer [27(e)]: For the payment other than
stated above, the value of benefit of the payment made by the employer to a third person instead of
employee is included in the income of the employee. For example: School fee of the children of the
employee is directly paid by the employer to the school, life insurance premium paid by the
employer, etc.

Non-chargeable Incomes
Some incomes are not included in calculating a person's remuneration from employment even if they are
derived from the employment. These incomes are treated as tax-free income. The following amounts are
excluded in calculating an individual's remuneration form an employment: The following incomes are
exempted from income tax net:
1. Exempt amount [10]: The following payments are not included while calculating the income from
employment as per section 10 of the Act:
a. Amounts received by a person entitled to privileges under a bilateral or multilateral treaty
concluded by Nepal Government with any foreign country or international agency.
b. Amounts derived by a natural person from employment in the public service of the government
of a foreign country.
For application of this provision:
The person must be a resident or non-resident solely by reason of employment.
The amounts are to be payable from the public funds of the country.
c. Amounts derived from public fund of foreign country by a natural person who is not citizen of
Nepal as referred to in paragraph (b) or a member of the immediate family of the person.
d. Amounts derived by an individual, who is not a citizen of Nepal citizen, from employment at the
Government of Nepal's service on term of a tax exemption.
e. Allowances paid by Nepal Government to elder citizens, widows or disabled individuals.
f. Amounts derived by way of gift, bequest, inheritance or scholarship except as required to be
included in calculating income from business, employment or investment.
g. Amounts received by an exempt organization by way of the following:
Donation, gifts:
Other contributions that directly relate to the exempt organization's function, whether or not the
contribution is made in return for consideration.
Amount earned by Nepal Rastra Bank as per its objectives.
Amount earned by Securities Board of Nepal as per its objectives.
h. Pension received by a Nepali citizen retired from the army or police service of a foreign country.
These amounts must be paid from the public fund of that country.
i. Income earned by Nepal Government and Provincial Government.
2. Final withholding payments [92]: Final withholding is also known as final tax. If a person receives
the final withholding payments after tax deduction at source, they are not included in the person's
income. The following incomes received after deducting tax at source as final withholding payments
are not included while calculating income:
Dividends paid by a resident company and partnership firm.
Rent of land or a building and associated fitting and fixtures having a source in Nepal, and that is
received by an individual other than in conducting a business.
Payment made by a resident person for gains from investment insurance. (Life insurance)
Payment made by a resident unrecognized retirement fund to the beneficiary for gains from
unrecognized retirement fund.
Payment of interest by a resident bank, financial institution, other entity-issuing debenture,
cooperative and company listed under prevailing Act that is sourced in Nepal and not related to
a person's business, paid to the natural person.
Payment made to non-resident persons that are subject to tax withholding by employers,
withholding from investment returns and service fees, withholding from contract payment under
87, 88 and 89 respectively.
Retirement payment made by Nepal Government or recognized retirement fund or unrecognized
fund including all kind of retirement payment (excluding regular payment of pension) .
 Meeting allowance, payment for part-time teaching.
Payment of casual gain.
Payment of returns by a Mutual Fund to a natural person.
3. Meals and refreshments on similar terms: Meals or refreshments provided in premises operated by
or on behalf of an employer to the employees that are available to all the employees on similar terms
[8.3 (b)].
4. Discharge or reimbursement of expenses used for employer's business purpose or employer's
admissible deductions from business or investment [8.3(c.1 & c.2)]: Any discharge or
reimbursement of costs incurred by the employee that serve the proper business purposes of the
employer or that are or would otherwise be deductible in calculating the employer's income from
any business or investment. For the detailed analysis of chargeable and non-changeable income
received as reimbursement of expenses incurred by an employee, it should be identified whether or
not the expense is deductible expense from business or investment of the employer or is used for
proper business of the employer. To make clear idea about it, expenses of domestic or personal
nature that are expressly disallowed for deduction are clearly identified as mentioned in the
clarification of section 21 of the Act.
5. Payments of small amounts [8.3(d)] {6}: Payments of the prescribed small amounts which (after
taking into account the frequency with which the employer makes similar payments) are so small as
to make accounting for them unreasonable or administratively impracticable. [8.3(d)] As per the rule
6, an employer may make a payment of an amount not exceeding Rs.500 at a time as the payment of
small amount in this respect for a provision of tea, stationery, gifts, reward, awards, emergency
medical treatment or other similar expenses approved by the Department. {6}
6. Special provision of exemption for retirement payment and leave pay {20.6 (a) & (b)}: The
following amounts, which are previously exempted from tax, are also exempted:
The amounts accrued prior to the commencement of 'Income Tax Act 2058' (till 2058/12/18) to any
natural person as principal, interest and bonus in consideration of employee's and employer's
contribution in Employees Provident Fund and Citizen Investment Trust (Recognized Retirement
Funds) are exempted. However, the interest accrued on the same amount is taxed after that date
as final withholding payment. Similarly, the amount accrued till that date to an employee as
gratuity and amount of accumulated home and sick leave are also exempted. {20.6(a)}
Medical expenses up to Rs.1,80,000 payable at the time of discharge or retirement to that employee
who was working on job at the commencement of the Act. {20.6(b)}

Allowable Reduction or Common Expenses

The amounts that are deductible while computing taxable income are as follows:
1. Retirement contribution to recognized retirement fund [63] {21}: A natural person may claim to
have the person's taxable income for an income year reduced by retirement contributions made by
the individual during the year to an approved (recognized) retirement fund. In this respect,
Employee Provident Fund and Citizen Investment Trust are approved as recognized retirement
funds (RRF). To deduct contribution to the fund, the person must be a beneficiary of the fund.
However, there is a limitation for the deduction of contribution to RRF. The limitation is set as the
Actual contribution, Rs.3,00,000 or 1/3rd of assessable income of the person whichever is less.
Limitation of contribution to approved retirement fund
1/3 of total assessable income = ×××××
or, Actual contribution to ARF = ×××××
or, Maximum limit = 3,00,000
(Whichever is lower is allowable)
2. Donation to exempt organization [Sec. 12]: Donation given to an exempt organization, approved by
Inland Revenue Department (IRD), is allowed for reduction from taxable income. Reductions
allowed to an individual or an entity will not exceed Rs.1,00,000 or 5% of adjusted taxable income.
However, the Government of Nepal may prescribe, by publishing a notice in the Nepal Gazette, as to
allow full or partial deduction of the expense incurred for special purpose at the time of assessing
income. (Sec. 12)
Limitation of donation
 5% of adjusted taxable income = ×××××
or, Maximum limit = 1,00,000
or, Actual donation = ×××××
(Whichever is less is allowable)
Note: In this case, adjusted taxable income = assessable income – allowable ARF
Donation paid by a company for the protection and promotion of ancient, religious and cultural
heritage located in Nepal and for building public physical infrastructure for sports are allowed for
reduction with a pre-approval of Inland Revenue Department up to Rs.10 lakhs or 10% of assessable
income or Actual, whichever is lowest. (Sec. 12 Ka)
Limitation of donation
10% of assessable income =×××××
or, Maximum limit = 10,00,000
or, Actual donation = ×××××
(Whichever is less is allowable)
Note: This provision applicable only for company not for natural person.
Donation given to Prime Minister Disaster Relief Fund or Reconstruction Fund is fully allowed for
reduction.
Limitation of donation
Fully allowable .

Exemptions (Less from taxable income)

1. Statutory exemption limit: Statutory exemption limit of Rs.4,00,000 for individual (single) and
Rs.4,50,000 for couple is allowed to deduct while computing taxable income for the income year
2076/077.
2. Remote area allowance as an additional exemption limit: Remote area allowance is applicable to all
natural persons as an exemption in addition to the statutory exemption limit for income from
employment, business or investment (i.e. Rs.50,000, 40,000, 30,000, 20,000 and 10,000 for A, B, C, D
and E class respectively)].
3. Additional exemption for pension income: In case of pension income, an additional amount of 25%
of statutory exemption limit is allowed to deduct while computing taxable income of an individual
or a couple. It means that the extra exemption limit would be Rs.87,500 for an individual (single) and
Rs. 1,00,000 for a couple for the income year or Actual pension whichever is less.
4. Life insurance premium: Income Tax Act, 2058 has provided the facility of exemption for the life
insurance premium Rs. 25, 000 per year or Actual amount, whichever is lower from the taxable
income to the natural person.
5. Additional Exemption for person with physical disability: 50% of statutory exemption limit is
deducted from taxable income for disable person.
6. Foreign allowance: 75% of foreign allowance is to be deducted from taxable income for Nepalese
diplomats.
7. Health insurance premium: Income Tax Act, 2058 has provided the facility of exemption for the
health insurance premium paid to resident insurance company. Allowable limit is Rs. 20,000 per year
or actual health insurance paid, whichever is lower.

Tax Credit (Less from tax liability)

Tax credit is reduction of tax liability of a person after deriving all tax liability. In such case, tax is
computed forgetting credit but on paying credits is shrunken. Following tax credit items are provided by
Income Tax Act, 2058.
1. Medical tax credit : If a resident natural person became ill, the treatment cost is qualify for medical
tax credit under Sec. 51. A resident natural person may claim a medical tax credit for an income year
for any approved medical costs paid by the person or through others during the year in respect of
the person. For this purpose, approved medical costs mean medical costs approved as prescribed in
Income Tax Rules, 2059 rule 17. Eligible Medical Cost (EMC) is cost of treatments including fee paid
to doctor, lab cost, dispensary cost and other associate cost. In EMC, three costs are exception: one is
cosmetic surgery cost is not includable, next is, accidental injury cost if compensated else one and
 health insurance premium.
The medical tax credit of a natural person for an income year is to be calculated by applying the rate
of 15% to the amount of approved medical costs for the year and adding it to the any amount of
medical tax credit carried forward from previous income year. The medical tax credit claimed by the
person for any income year shall not exceed the limit prescribed. Income Tax Rules, 2059 has
prescribed the limit in rule 17.3. According to this rule, the limit for claim of medical tax credit is
Rs.750.
In case the amount of calculated medical tax credit is greater than Rs.750 and in case the natural
person cannot use the medical tax credit by reason of lack of tax payable for the year, the sum of any
excess amount and unused amount due to lack of tax payable may be carried forward and added to
the medical tax credit amount for the next income year.
Allowable medical tax credit
15% of eligible/approved medical cost = ××××
or, Maximum limit = Rs. 750
(Whichever is lower)

Carry forward of medical tax credit: In case a resident person has Nepal tax obligation and
medical tax credit in the same year, latter s/he became non-resident and further became
resident. In such case, earlier unrelieved medical tax credit cannot enjoy for tax. In the other
hand, if resident natural person has medical tax credit but no taxable income, it can be carry
forward to next (or further next) income years through income tax return.
2. Foreign tax credit : Amount of income tax paid in a foreign country is deductible as tax credit from
the tax liability of foreign source income. However, such amount does not exceed the average rate
income tax of Nepal. For this purpose, the average tax rate is calculated as follow:
Tax liability before deduciting foreign income tax
Average tax rate = Taxable income of the person × 100
3. Female employment tax credit: If resident individual is a woman having remuneration income only,
she is entitled to a rebate of 10% on total tax liability.
4. Tax deduct at source: Withholding tax is a tax automatically taken from income received during the
year. Other word withholding payment means the payments which are subject to tax deduction at
source. Withholding tax may be provisional or final. If provisional, the amount withheld is credited
against the taxpayer's final tax liability and adjusted accordingly. The provisional withholding is also
called tax credit, so it is deducted from tax liability.
5. Advance tax paid: All advance tax paid by taxpayer is allowed to deduct from tax liability.
6. Excess tax paid in last year: Every taxpayer allowed deducting excess tax paid in last year from
current year tax liability.
Tax Rate
1. A resident individual or a resident couple having taxable income from employment is taxed as
under:

* 1% social security tax is not imposed on the pension.

employment income.
3. Tax rate of capital gain: The profit from the disposal of non-business chargeable asset (capital gain)
is taxed at the rate of 2.5% to 10 % percent. In case of a resident person, capital gain is taxed as
follow.
Gain on sale of land and building with an ownership five year or more than five year and less than
ten year is taxed @ 2.5%
Gain on sale of land and building with an ownership less than five year is taxed @ 5%.
Gain on sale of share from listed company is taxed @ 5%.
Gain on sale of share from non-listed company is taxed @ 10%
4. A non-resident individual is taxed at 25% on taxable income with source in Nepal. Any withholding
payment made to a non-resident is treated as final.
 Specimen for Computation of Income from Employment, Taxable Income, Tax Liability
and Tax Payable
A. Computation of Assessable Income from Employment of Mr/Mrs. …….
For the Current Assessment year
Particulars Amount Total Amount
(Chargeable Income):
Salary (including grades) and wages [8.2(a)]..................................................................................... xxx
Leave pay (salary in lieu of leave) [8.2(a)] ......................................................................................... xxx
Pay for overtime [8.2 (a)] .................................................................................................................... xxx
Fees [8.2(a)] ....................................................................................................................................... xxx
Prizes and gifts related to employment (in case in kind as per market value) [8.2(a)] ...................... xxx
Bonus [8.2 (a)] .................................................................................................................................... xxx
Other facilities (Dashain bonus or Tihar bonus [8.2(a)]) .................................................................... xxx
Commission [8.2(b)] ........................................................................................................................... xxx
Dearness allowance [8.2(b)]............................................................................................................... xxx
Subsistence (Living allowance) [8.2(b)] ............................................................................................. xxx
House Rent allowance [8.2(b)] ........................................................................................................... xxx
Entertainment and transportation allowances [8.2(b)] ....................................................................... xxx
Other personal allowances (children education allowance) [8.2(b)] .................................................. xxx
Reimbursement for personal expenses [8.2(c)] ................................................................................. xxx
Payment for accepting any condition regarding employment [8.2(d)]................................................ xxx
Payment for discharge, loss or termination of the employment [8.2(e)] ............................................ xxx
Other payments made in respect of employment [8.2(f)] ................................................................... xxx
Retirement payment and retirement contribution by employer [8.2(g)].............................................. xxx
Amount related to vehicle facility (0.5% of salary) [27.1(b.1)] ............................................................ xxx
Amount related to provision of house or residence facility (2% of salary)[27.1(b.2)]......................... xxx
Amount related to housekeeper, driver, gardener or domestic assistants [27.1 (c.1 ........................ xxx
Any meal refreshment or entertainment provided by employer [27.1(c.2)] ........................................ xxx
Amount related to services related to drinking water, electricity, telephones and other utilities in xxx
respect of the employee [27.1 (c.3)]...................................................................................................
Under payment of interest (Loan provided by employer) .................................................................. xxx
Amount to be included due to change in the accounting system ...................................................... xxx
Assessable income from employment xxx
Income from investment ..................................................................................................................... xxx
Less: Expenses .................................................................................................................................. ( xxx)
Assessable income from investment.................................................................................................. xxx
Income from business/profession ...................................................................................................... xxx
Less: Expenses .................................................................................................................................. (xxx)
Assessable income from business/profession xxx
 B. Statement of Taxable Income
Particulars Amount Total Amount
Assessable Income from Employment ........................................................................................................... xxx
Assessable Income from Business/profession ............................................................................................... xxx
Assessable income from Investment .............................................................................................................. xxx
Total assessable income xxx
Less: Contributions to recognized retirement funds (Employee Provident Fund and Citizen Investment
Trust) @ 1/3 of assessable income or Rs.3,00,000 or Actual whichever is less) .......................................... xxx xxx
Adjusted taxable income xxx
Less: Donation (5% of adjusted taxable income before donation or Actual or 1,00,000 whichever is
lower or as prescribed by Government).......................................................................................................... xxx xxx
Taxable Income xxx
Less: Remote area allowance from 10,000 to 50,000 .................................................................................... xxx
25% of exemption limit for pension income ......................................................................................... xx
75% of foreign allowance ..................................................................................................................... xxx
50% of exemption limit for disable person ........................................................................................... xxx
Life insurance premium (upto 20,000) ................................................................................................. xxx
Health insurance premium (upto 20,000) ............................................................................................ xxx (xxx)
Taxable Income after exemption xxx
C. Computation of Income Tax Liability
First Rs.3,50,000 for individual or Rs.4,00,000 for couple ....................................................................... 1%
Next Rs.1,00,000 ..................................................................................................................................... 15%
Next Rs. 20,500,000 for individual and Rs. 20,00,000 for couple............................................................ 25%
Remaining amount .................................................................................................................................. 35%
Total tax liability xxx
Less: Medical Tax Credit .......................................................................................................................... xxx
Foreign Tax Credit................................................................................................................................... xxx
TDS Paid ................................................................................................................................................. xxx
Advance Tax Paid ................................................................................................................................... xxx
Excess Tax Paid in previous year ........................................................................................................... xxx
Rebate for woman tax payer (10% of total tax liability) ........................................................................... xxx xxx
Tax Payable to Government xxx

Problems
1. Mr. Pradhan is the branch manager of a bank. He has provided the following incomes & expenditures for the
previous year:
Salary Rs.16, 000 p.m.
Salary in lieu of leave ........................................................................................................................... One and half month salary
Prizes to his daughter on the occasion of her marriage ceremony by employer ................................. Rs.1000
He has been provided the following amenities (facilities or services):
i. Reimbursement of medical bill by employer Rs.10,000.
ii. Motor car with driver for commuting between residence and office.
iii. Rent-free accommodation.
iv. House keeper, cook, gardener for which the bank paid Rs.1, 000 p.m., Rs.2,000 p.m. and Rs.500 p.m.
respectively.
v. Free telephone at residence for which the bank paid Rs.8,000 during previous year.
vi. In order to meet the expenses of his daughter's marriage, he received advance of six month's salary and
also took a loan of Rs.2,00,000 from the bank with an interest rate of 6% where as the interest rate of
household loan is 12%. After six months, he repaid loan with interest in the same fiscal year.
vii. He is a member of ARF to which he contributes 15% of his salary and the bank however contributes 10% of
the salary. He also contributes 5% of his salary to Citizen Investment Trust.
viii. His wife was operating a business and generated an assessable income of Rs.5,00,000. She did not incur
any pollution control and research & development expenses in the course of her business.
ix. He has two houses in Kathmandu and one is used for their residence and another is rented out to a family
for their residential purpose. The annual rent from the house is Rs.72,000 received as without TDS.
x. The bank has withheld tax of Rs.2,080 p.m. at the time of payment of his salary.
 Required:
a. Assessable income from employment
b. Taxable income
c. Income tax payable by him assuming that they selected to be a single unit as a couple for the purpose of tax
assessment.
2. Mr. Som Adhikari joined as a manager in private company after voluntary retirement from previous job. He
appointed on 1st Poush 2065 at a pay scale of Rs. 30,000-1,000-35,000-2000-50,000. He contributed 10% salary
toward recognized provident fund and equal amount also contributed by the employer. Other income and
expenses are as follows:
i. Dearness allowance Rs. 3,000 P.M.
ii. Travelling and daily allowance (TADA) Rs. 10,000 (saving from TADA Rs. 4,000).
iii. House facility provided by office and office paid Rs. 10,000 rent to the house owner.
iv. He was provided a car along with driver Rs. 15,000 P.M and fuel 10 litters @ 99 per litter.
v. The company awarded him for his better performance with a LED T.V which has a market price of Rs.55,
000.
vi. Telephone bill paid by office Rs. 30,000, 40% of which is related to official use.
vii. Medical expenses reimbursement by office Rs. 6000 out of which Rs.2000 was related to cosmetic surgery
and Rs.4,000 was eye surgery.
viii. He is resident disabled individual. He received disabled allowance Rs.1000 p.m. from government.
ix. He donated a political party registered with election commission Rs. 1,50,000 and Prime Minister Disaster
Relief Fund Rs. 50,000.
x. Health insurance and life insurance premium paid by office Rs. 25,000 and 35,000 respectively.
xi. Business promotion expenses provided by company Rs.40,000 out of which 60% could not be certified.
xii. He has lead a delegation to an international conference he received leader allowance Rs. 15,000 and foreign
allowance Rs. 1,00,000.
xiii. He also received return on investment from Siddhartha Mutual Fund Rs. 95,000 (net).
xiv. He invested Rs. 1,50,000 in taxable government bound, interest @ 9% for 8 month received in net.
xv. He received interest from relative Rs. 85,000 (net)
xvi. Gain on sale of share (listed company) Rs. 47,500 (net)
xvii. His office located in remote area group B
Required: a. Assessable income from employment
b. Taxable income
c. Tax liability
 [Link]. Keshab Maharjan was appointed at a government officer on a pay scale of 38,000-1,000-43,000 EB 2,000-56,000 on
1st Poush 2068. He furnished information about his income of previous year.
i. Project allowances Rs.1,000 p.m.
ii. Best employee award Rs.15,000.
iii. Children allowances Rs.600 p.m.
iv. Meeting allowances Rs.7,000.
v. House rent allowances Rs.4,000 p.m.
vi. Dearness allowances Rs.400 p.m.
vii. He received Rs.10,000 as examiner ship remuneration from office.
viii. He received Rs.7,000 from Nepal Samachar Patra by writing articles.
ix. He received Rs.5,000 as interest and Rs.2,000 as bonus from provident fund.
x. Income tax paid by the office on behalf of employee is Rs.1,000 p.m.
xi. Leave encashment (accumulated) Rs.80,000 (19 Chaitra, 2058 onwards)
xii. He contributed Rs.50,000 to Citizen Investment Trust.
xiii. Medical expenses incurred during the year was Rs.50,000. Only 70% was reimbursed by the employer.
xiv. He got scholarship from a reputed University for ph. D. The amount of scholarship was Rs.5,000 per month.
xv. Mr. Maharjan had opted for joint assessment for the year.
Required: a. Taxable income b. Tax liability
Hints:
(i) The amount derived by way of scholarship is not included in the income as per section 10.f.
(ii) Dashain kharcha equal to one month salary and Provident fund contribution 10% by office are to be included in
income even though question is silent for government office.
4 . Mr. A joined a private firm as an Assistant financial director on
[Link] 2061 at a pay scale of Rs. 12,000- 1200 -24000-2000-40,000..He submits
Following details for the previous income year:
a) Bonus equal to two months basic salary.
b) Medical allowance 5% of salary.
c) Dasain bonus equal to one month salary.
d) A domestic servant @ Rs.1, 000 P.m. is provided for his domestic
service.
e) He is also provided with a rent free accommodation for which the firm
pays Rs. 3,000 [Link] rent to the owner.
f) He has contributed 10% of salary towards an unrecognized provident
fund and the firm has also contributed an equal amount.
g) His other income for the same period are:
i) Income from writing articles RS.18,000(net).
ii) Royalty from writing books RS.60,000.
h) He has claimed donation to Nepal sports council Rs.15, 000 and
transportation expenses Rs.7,000 for deduction.
i) Dearness allowance Rs. 2,500 p.m.
j) Income tax paid by employer Rs. 6,000.
K) Life insurance premium paid by employer Rs. 12,000.
l) Entertainment allowance Rs. 500 p.m.
m) Best employee award from employer Rs. 15,000.
n) Family allowance Rs. 20,000..
o) Car facility provided by employer.
Required: 1) Net (Assessable) Income from employment.
2) Statement of total taxable income.
3) Tax liability [5+3+2)
5. Mr. Adhikari, (disable person) a senior finance officer of an organization, submitted the following particulars his
incomes and during the previous year.
• Net salary including Dashain Kharcha after deducting provident fund and income tax deducted at source
Rs. 323,000
• Contribution to recognized provident fund Rs. 36,000
• Income tax deducted at sources Rs. 31000
• Dearness allowance Rs. 2,000 p.m.
• Saving from traveling and daily allowance Rs. 10,000
• Amount received after expiry of life insurance policy Rs 1,80,000 (net)
• Education expenses paid by the employer Rs.15000
• Accommodation facility provided by the employer
• Driver allowance provided by the employer Rs. 3,500 p.m. Actual amount paid to driver was Rs. 3,000 p.m.
• Telephone expenses paid by him Rs. 1,000 p.m. However telephone allowance provided by the employer
was Rs. 1,500 p.m.
• Donation to renovate an old temple Rs.30000.
• Pension from previous employer Rs.12 000 p.m.
• Life insurance premium paid to LIC RS.50,000(60% reimbursed by office).
• He also contribute Rs.30,000 to CIT. and paid Rs. 10,000 for household expenses.
• Amount received from interest on investment and gain on sale of share (listed) Rs.200,000 and 190,000 after
TDS respectively. TDS on gain on sale of share Rs.10,000.
Required: (a) . Assessable (net) income from employment (b) Taxable income (c) Tax Payable.