1.How shall the person with income earned from employment only pay tax?
In making payment of monthly remuneration, the employer shall deduct or withhold the tax on the basis of the annual taxable income of the employee at the rate referred to in schedule 1 of the Income tax Act, 2058. Such withheld amount shall be paid to the Department of Inland Revenue within 15 days of expiration of each month by the employer along with necessary statements.
2. Is there any exemption of tax on income from employment?
No, there is no any exemption of tax on income from employment. In case of income from employment of natural person, tax is levied as following:
For an invividual
|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. What is the time of payment of tax of the income from employment?
The employer withholds the tax every month at the time of making paying of the remuneration to the employee.
4. Who assesses the tax?
The tax to be paid is assessed by the employer and the employee shall scrutinize as to such withheld tax is correct or not.
5. How the tax is calculated?
The tax is calculated at the rate as given in the schedule 1 on the amount after making every deduction and adjustment as provided by law.
6. 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.
7. Is there any special facility for people having income from remuneration?
There are following facilities:
a. Remote allowance
The natural person who is employed in the remote location as specified by Government of Nepal and get remote allowance can deduct such allowance from taxable income. Such remote allowance to be deducted shall not be more than Rs. 50,000 and tax shall be calculated in the remaining amount only.
b. Foreign allowance
For the employee working in the abroad based diplomatic missions of the State of Nepal, seventy five percent amount of their abroad allowance shall be deducted from the taxable income, and the tax shall then be calculated on the remaining amount only.
c. Pension income
The resident person if has any pension income, tax shall be computed only on the amount remaining balance after subtracting an additional twenty-five percent of the taxable income for the natural person and for the spouse from their taxable income and the tax shall then be calculated on the remaining amount only.
d. Disabled Allowance:
In case of a disabled resident individual, additional fifty percent of the taxable income for the natural person and for the spouse from their taxable income and the tax shall then be calculated on the remaining amount only.
e. Investment Insurance Premium
The person who has investment insurance can deduct annual investment insurance premium or Rs. 20,000 whichever is less from the taxable income.
f. Medical Insurance Premium
The person who has medical insurance can deduct annual medical insurance premium or Rs. 20,000 whichever is less from the taxable income.
g. Adjustment of medical treatment
Any resident natural person may make a claim for adjustment of tax for medical treatment in any income year for the approved medical expenditure incurred by him/herself or through any other person for him/herself.
h. Donation, gifts given to organizations entitled to tax exemption, the retirement contribution made to the retirement fund can also be claimed for deductions.
Further, in case of women with income source from employment only, she can have 10% tax exemption in her tax liability.
8. Who provides you with tax clearance certificate in case of income form remuneration?
The offices under the Inland Revenue Department provides you will provide you with tax clearance certificate.
9. Who shall certify annual income of remuneration?
The annual income of remuneration shall be certified by the employer.
10. What will happen if the employer does not withhold the tax?
If the employer does not withhold the tax, such tax along with the interest at the normal rate as per section 119 will be recovered.
If the employer does not file tax returns within the given time that is twenty-five days after expiration of every month, the Inland Revenue Department can order to pay such tax and also the interest at normal rate.
11. Whether the employer shall withhold tax at the same rate or at different rate while making payment of the resident and non-resident employee?
While making payment to the resident employee, the employer shall withhold the tax at the tax rate as provided on the basis of their annual income.
On the other hand, while making payment to the non-resident employees, the employer shall withhold the tax at 25% of the amount of payment.
12. If the tax on income from remuneration is paid in excess, can it be adjusted next year?
If the tax on income from remuneration is paid in excess than the payable tax, it can be adjusted next year.
13. If I have employment in two places. Do I have to file my income returns?
14. How do I claim for the adjustment of my medical treatment expenditure?
Approved medical treatment expenditure can be claimed for adjustment by presenting the proof of approved medical treatment.
15. Can a person claim the amount gift, donations to be deducted from taxable income?
Yes, the person can claim to deduct the amount of gift, donation if given to the organization entitled to tax exemption. Such deductible amount in any income year shall be either one lakh Rupees or 5% of the taxable income assessed without making such deduction whichever is less.