1. What incomes are included in Income from Remuneration?
The income from employment includes following:
- Amount for wages, salary, leave, amount for overtime work, fee, commission, prize, gift, bonus, and payment for other facilities,
- Payment for any personal allowance including amount for dear allowance, subsistence allowance, entertainment and transport allowance,
- Payment received for settlement of or reimbursement of expenses incurred by him/her or his/her associated person for personal purpose,
- Payment made for having given consent to any terms of employment,
- Payment made for termination, loss of employment, or for compulsory retirement,
- Retirement payment and retirement contribution including the amount deposited by the employer for that employee in the retirement fund,
- Other payments made in respect of employment.
2. What amount of income from employment is taxable?
The Finance Act, 2076 has made provision of tax on income from employment as following:
For an individual
|Income in Rs.||Tax rate|
|Up to 4,00,000/-||1%|
|Rs. 4,00,000/- to Rs. 5,00,000/-||Rs. 4000/- for up to Rs. 4,00,000/- and 10% on remaining|
|Rs. 5,00,000/- to Rs. 7,00,000/-||Rs. 14000/- for up to Rs. 5,00,000/- and 20% on remaining|
|Rs. 7,00,000/- to Rs. 20,00,000/-||Rs 54,000/- for up to Rs. 7,00,000/- and 30% on remaining|
|More than Rs. 20,00,000/-||30% plus 20% of 30%|
For the couple
|Up to Rs. 4,50,000/-||1%|
|Rs.450000/- to Rs. 5,50,000/-||Rs 4,500/- for up to Rs. 4,50000/- and 10% on the remaining|
|Rs. 5,50,000/- to Rs. 750000/-||Rs. 14,500/- up to for Rs. 5,50,000/- and 20% on remaining|
|Rs. 7,50,000/- to Rs. 20,00,000/-||Rs. 54,500/- up to for Rs. 7,50,000/- and 30% on remaining|
|More than Rs. 20,00,000/-||30% plus 20% of 30%|
3. When shall the tax on income from employment paid?
The employer withholds the tax every month at the time of making paying of the remuneration to the employee. And such employer shall pay to the concerned Inland Revenue office along with the statement mentioning payment subject to tax withholding, name address of the person subject to tax withholding and the permanent account number, amount of tax withheld within 15 days of expiration of each month.
4. Where shall payment of tax made?
Such employer who has withheld the tax while making payment of remuneration to the employee shall pay to the concerned Inland Revenue office (which is near the organization of the employer or related to the organization making payment). Such withheld tax can also be paid through bank by the medium of e- TDS by paying revenue along with the statement mentioning payment subject to tax withholding, name address of the person subject to tax withholding and the permanent account number, amount of tax withheld.
In cases, where the employer has not withheld the tax the person (employee) should him/herself assess his/her tax and make payment.
The person who is employed at more than place at the same time or the person who runs business along with employment should present the income returns. However, if the tax is withheld by the employer such income return should not be presented by the employee.
The employer withholding the tax shall make payment of the tax withhold within 25 day of expiration of each month.
5. The taxpayer should be registered or not?
The taxpayers should obtain Permanent Account Number (PAN). The person who withholds tax should also obtain PAN. Those who are required to obtain PAN if does not obtain it, fine will be imposed.
6. Who does the computation of the tax?
The computation of the tax of the employee is done by the employer. However, the employee shall submit his/ her details like selection of individual person or as couple, and also make claim of deductions of following amounts while computing the taxable income.
- Donation, gifts given to organizations entitled to tax exemption
- the retirement contribution made to the retirement fund
- investment insurance premium. It shall not exceed Rs. 20000/-
- medical insurance premium. It shall not exceed Rs. 20000/-
- remote allowance
the employee can also make claim for adjustment of tax for medical treatment for the approved medical expenditure.
7. What will be the proof of the tax payment?
The employee shall get the proof of the tax withholding while receiving the remuneration. The employees whose tax has been withhold can get the information about the payment of such withhold tax by entering his/her PAN username and password.
The person can obtain Tax Clearance Certificate from Inland Revenue Office or Large taxpayers Office or Taxpayers Service Office from which one has obtained PAN.
8. What can be done if the computation of tax is mistaken?
If there is any mistake in the computation of the tax, it should be adjusted with the tax to be paid in the next month. If the person came to know about mistake in computation of tax at the end of the year only and more tax has been paid, he/she can demand it to the Inland Revenue Office or Large taxpayers Office or Taxpayers Service Office. However, if less tax has been paid, the remaining amount shall be paid immediately along with the fine and the details of income and the mistake.
9. Shall the person with income from employment only file income returns.?
In case of the person who earns more than forty lakhs annually, he/she shall file income returns as provided in section 96 of the Income Tax Act.
In case of the person earning less than forty lakhs annually and has only one employer and does not claim any donation claims he/she does not need to file income return. However, the person who is employed at more than place at the same time or the person who runs business along with employment should present the income returns.
10. What if the person receives other income besides income from employment?
The person need not file income returns if the income received by the person is the income from which tax is withheld finally like:
- Rent paid for the land or building and fixtures and equipment appurtenant thereto having source in Nepal to other natural person except one who is carrying on business,
- Profit paid by a resident person for investment insurance,
- Profit paid by a resident person for the interest of an unapproved retirement fund,
- Interest paid by a bank or financial institution.
However, if the income received are from business, transaction, investment besides income from employment, he/she needs to file the income returns.
11. Is tax imposed on the house and vehicle provided by the company?
The house and transport vehicle provided by the company shall be added in the income by converting. The method of such conversion is as such:
- In case the person has received transport vehicle, the amount of 0.5% of his/ her salary is included with his/her taxable income.
- In case the person has receive house to live, the amount of 0.2% of his/her salary is included with his/her taxable income
12. Is pension taxable?
Yes. However, 1% Social Security tax is not levied.
13. Are the amount received from social security fund and amount received for medical treatment taxable?
14. Are fringe benefits taxable or not?
Any type of facilities and fringe benefits should be included in the income from remuneration and included in taxable income. Since, every payment related to employment are taxable, tax planning would not work. Even if any goods in kind or service is received or received facility in more convenient rate than the market value (loan in low interest rate)or any indirect facility is received, such kinds or services and facilities have to be quantified and evaluate as per the market value and such amount shall be included in the taxable income.
15. If the person who has income from employment received any amount in place of facility of transport vehicle. How tax computation is done in respect of such amount?
If the person with income from employment receives any amount in place of transport vehicle facility, such entire amount shall be included in the income from employment.