Chapter 5

Taxation in Nepal

TU BBS past exam questions

Past questions and answers

3 questions set from this chapter. Most repeated first.

2081 · MGT.224 Taxation in Nepal (New Course)

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

Answer

Given: turnover Rs 30,00,000; taxable income Rs 3,00,000; resident individual in Kathmandu Metropolitan City who has chosen presumptive taxation.

Step 1: Eligibility. A natural person running a small business with turnover not exceeding Rs 30,00,000 may opt for presumptive taxation. Suman's turnover is exactly Rs 30,00,000, so he is eligible.

Step 2: Presumptive income. For Kathmandu Metropolitan City it is taken as 1% of turnover:

$30{,}00{,}000 \times 1\% = \text{Rs } 30{,}000$

Step 3: Income to be taxed. The actual taxable income (Rs 3,00,000) is higher than the presumptive income (Rs 30,000), so tax is charged on Rs 3,00,000.

Step 4: Tax. The whole amount falls in the first slab (1%):

$3{,}00{,}000 \times 1\% = \text{Rs } 3{,}000$

Step 5: Rebate. The rebate is the lower of 1% of taxable income (Rs 3,000) and Rs 750, that is Rs 750.

$\text{Tax liability} = 3{,}000 - 750 = \textbf{Rs } 2{,}250$

Answer checked by Claude Sonnet · Oct 21, 2026

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2081 · MGT.224 Taxation in Nepal (New Course) · 10 marks

Mrs. Mana 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. Mana'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 lean 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 [5+3+2]

Answer

Assumptions: the previous year is FY 2076/77 (Shrawan 2076 to Ashad 2077), so Mrs. Mana worked 6 months (Magh to Ashad) at the starting salary; she is assessed as a single resident individual; the office is in remote-area Group B.

a. Net assessable income from employment

Particulars	Working	Amount (Rs)
Basic salary	30,000 x 6	1,80,000
Entertainment allowance	3,000 x 6	18,000
Dearness allowance	3,000 x 6	18,000
Meeting allowance		12,000
Housekeeper facility	(5,000 - 3,000) x 6	12,000
Electricity bill paid by office	1,000 x 6	6,000
Soft loan benefit	5,00,000 x (12% - 5%) x 6/12	17,500
Accommodation and vehicle facility (office provided, no value given)		Nil
Net assessable income from employment		2,63,500

b. Statement of total taxable income

Particulars	Amount (Rs)
Net assessable income from employment	2,63,500
Less: remote area allowance (Group B)	(40,000)
Less: life insurance premium (actual 50,000; limit 25,000)	(25,000)
Less: health insurance premium (actual 23,000; limit 20,000)	(20,000)
Adjusted taxable income	1,78,500
Less: donation to approved exempt organization (lower of 5% x 1,78,500 = 8,925 and Rs 1,00,000; actual 50,000)	(8,925)
Total taxable income	1,69,575

c. Tax liability

The whole income falls in the first slab (1%, up to Rs 4,00,000 for a single person):

$169{,}575 \times 1\% = \text{Rs } 1{,}696$

Medical tax credit = 15% of Rs 3,000 = Rs 450 (within the Rs 750 limit).

$\text{Net tax liability} = 1{,}696 - 450 = \textbf{Rs } 1{,}246$

Answer checked by Claude Sonnet · Oct 21, 2026

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2081 · MGT.224 Taxation in Nepal (New Course)

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 (Ithadra) 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
1,708,000 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:

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 (Ithadra)	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
	1,708,000		1,708,000

Answer

Income tax computation of the auditor (single resident individual, FY 2076/77)

1. Income from profession

Particulars	Amount (Rs)
Audit fees	8,90,000
Consultancy fees (net 5,10,000 grossed up: 5,10,000 / 85%)	6,00,000
Commission relating to audit work	50,000
Sale of old newspapers and journals	4,000
Gifts and presents from clients	30,000
Total business receipts	15,74,000

Interest on fixed deposit, interest on government securities, dividend and lottery income were received after final withholding tax, so they are not added again.

Allowable expenses

Particulars	Working	Amount (Rs)
Office salaries	3,60,000 - 10,000 (domestic servant)	3,50,000
Office expenses		90,000
Office rent		1,20,000
Purchase of newspapers and journals		8,000
Stationery		25,000
Travelling expenses		30,000
Miscellaneous expenses		20,000
Domestic expenses	50% for office use	40,000
Car expenses	80% of 24,000 (20% personal)	19,200
Depreciation on office equipment	25% of 2,40,000	60,000
Total allowable expenses		7,62,200

Not allowed: life insurance premium (dealt with as a deduction below), income tax paid in advance (a tax credit), the personal part of car and domestic expenses, and the servant's salary.

$\text{Business income} = 15{,}74{,}000 - 7{,}62{,}200 = \text{Rs } 8{,}11{,}800$

2. Taxable income

Particulars	Amount (Rs)
Assessable income	8,11,800
Less: life insurance premium (actual 35,000; limit 25,000)	(25,000)
Adjusted taxable income	7,86,800
Less: donation to approved organization (60% of 1,40,000 = 84,000; limit 5% x 7,86,800 = 39,340)	(39,340)
Taxable income	7,47,460

The 40% donation (Rs 56,000) to the unapproved organization is not deductible.

3. Tax liability

Slab	Amount (Rs)	Rate	Tax (Rs)
First	4,00,000	1%	4,000
Next	1,00,000	10%	10,000
Next	2,00,000	20%	40,000
Balance	47,460	30%	14,238
Total tax	7,47,460		68,238

Tax already paid: TDS on consultancy fees Rs 90,000 (6,00,000 - 5,10,000) and advance tax Rs 10,000, a total of Rs 1,00,000, which exceeds the tax liability, so Rs 31,762 is refundable.

Answer checked by Claude Sonnet · Oct 21, 2026

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Questions from TU 4 Yrs BBS 3rd Year Business Environment Question Paper (III Year · MGT. 217 (New Course) · 2082), TU 4 Yrs BBS 3rd Year Fundamentals of Management Question Paper (3rd Year · Fundamentals of Financial Management · 2082), TU 4 Yrs BBS 3rd Year Business Law (Old Course) Question Paper (III Year · MGT. 204 (Old Course) · 2082), TU 4 Yrs BBS 3rd Year Taxation in Nepal Question Paper (Third Year · MGT.224 Taxation in Nepal (New Course) · 2081), TU 4 Yrs BBS 3rd Year Fundamentals of Management Question Paper (3rd Year · MGT.218 Fundamental of Taxation & Auditing (Old Course/Chance) · 2081), TU 4 Yrs BBS 3rd Year Fundamentals of Management Question Paper (III Year · MGT 214 Fundamental of Marketing (New Course) · 2081), TU 4 Yrs BBS 3rd Year Business Law Question Paper (III Year · Business Law (MGT. 204 (Old Course)) · 2080), TU 4 Yrs BBS 3rd Year Business Environment Question Paper (III Year · MGT. 217, New Course · 2079) and TU 4 Yrs BBS 3rd Year Fundamentals of Management Question Paper (III Year · MKT 214 · 2079). Answers are written for this site; check them against your class notes.

Past questions and answers

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

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