(a) Importer and retailer (VAT 13%)

Assume the importer's cost price is Rs 100. Profit is 10% of cost, and each trader's cost for profit is the price excluding VAT, because VAT is recovered through input credit.

a. Cost price to the final consumer = 121 + 15.73 = Rs 136.73 (per Rs 100 of importer's cost).

b. Total VAT to government: the importer pays Rs 14.30 and the retailer pays 15.73 - 14.30 = Rs 1.43 after input credit.

$14.30 + 1.43 = \textbf{Rs } 15.73 \;(= 13\% \text{ of } 121)$

(b) Mr. Nepal

a. Residential status: Mr. Nepal is a Nepali citizen deputed abroad by the Government of Nepal as its representative to the United Nations. Under the Income Tax Act, 2058, such a person is treated as a resident of Nepal, so his income is taxable in Nepal.

b. Taxable income

(a) Taxable income and tax liability of Bishal (family status, FY 2076/77)

Tax liability (couple slabs)

(b) Taxpayer and taxpayer rights

A taxpayer is any person (individual, firm, company or other entity) who is liable to pay tax, or to withhold tax, under the tax laws of Nepal, and who is registered or required to be registered with the Inland Revenue Department.

Five rights of a taxpayer:

1. Right to information - to be told clearly about tax laws, procedures, rates and deadlines.
2. Right to fair and respectful treatment - to be treated courteously and without discrimination by tax officials.
3. Right to privacy and confidentiality - the information given by a taxpayer cannot be disclosed except as the law permits.
4. Right to professional assistance - to be represented by a tax consultant, accountant or lawyer.
5. Right to appeal and review - to challenge an assessment before the Revenue Tribunal or the court, and to claim a refund of any excess tax paid.

Income Tax Computation of Shivam

Assessment Year: 2074/75 (Income Year: 2073/74)

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a. Net (Assessable) Income from Employment

1. Salary Income

2. Valuation of Facilities (Perquisites)

(i) Free quarter facility

Since the office has provided its own quarter (not rented), the taxable value is Nil.

(ii) Gardener facility

(iii) Car facility with fuel and driver

3. Other Employment Income

4. Retirement Contribution

Net Assessable Income from Employment

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b. Statement of Total Taxable Income

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c. Tax Liabilities

1. Deductions

2. Tax Calculation

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Working Notes

1. Salary scale: Rs. 60,000-1000-63,000-EB-1500-72,000. Since promotion was on 1st Shrawan 2073 (start of income year), annual salary = Rs. 60,000 × 12 = Rs. 720,000.

2. Remote area allowance: 20% of basic salary = 20% × 720,000 = Rs. 144,000 (fully taxable).

3. Free quarter: Since office provided its own quarter (no rent paid), taxable value = Nil.

4. Gardener facility: Taxable value = Employer's cost − Employee's contribution = 60,000 − 24,000 = Rs. 36,000.

5. Car facility: Fuel + driver's salary = 20,000 + 240,000 = Rs. 260,000 (fully taxable).

6. Meeting allowance: Net Rs. 8,500 × 20 = Rs. 170,000. Gross-up at 15% TDS: 170,000 × 100/85 = Rs. 200,000.

7. Interest on saving deposit: Net Rs. 47,000. Gross-up at 15% TDS: 47,000 × 100/85 = Rs. 55,294.

8. Guard's salary: Rs. 1,500 × 12 = Rs. 18,000. This is a personal expense, not deductible from salary income.

9. Donation limit: 5% of adjusted taxable income = 5% × 1,773,294 = Rs. 88,665. Actual donation Rs. 60,000 is within limit, so fully deductible.

10. Life insurance premium: Rs. 4,000 × 12 = Rs. 48,000; limited to Rs. 25,000 as per Income Tax Act.

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Final Answers

Computation of Total Taxable Income of John

1. Grossing Up of TDS Income

Working Notes:

• a. $\dfrac{180{,}000}{1-0.10} = 200{,}000$
• b. $\dfrac{450{,}000}{0.90} = 500{,}000$
• d. $\dfrac{340{,}000}{0.85} = 400{,}000$
• e. $\dfrac{150{,}000}{0.95} = 157{,}895$
• f. $\dfrac{200{,}000}{0.85} = 235{,}294$
• g. $\dfrac{510{,}000}{0.85} = 600{,}000$
• h. $\dfrac{90{,}000}{0.90} = 100{,}000$

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2. Classification of Income Under Heads (Section 7, Income Tax Act 2058)

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3. Deductions and Exemptions

(A) Income from House & Land (Section 14)

30% standard deduction is allowed on gross rent.

(B) Income from Business (Section 15)

Note on bad debt recovered: it is business income, but 30% (Rs. 30,000) was not allowed as a deduction earlier, so only 70% (Rs. 70,000) is taxable.

(C) Income from Investment (Section 16)

(D) Income from Other Sources (Section 17)

Note on Laptop Gift: As per Section 17(1)(b), any gift received in kind is taxable under Income from Other Sources at the prevailing market value. Hence, Rs. 100,000 is taxable.

(E) Capital Gain (Section 18)

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4. Computation of Total Taxable Income

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5. Tax Liability (For Individual, FY 2080/81)