Brief Answer Questions:
[10 × 2 = 20]Define direct tax with example.
Define Income year and Assessment year with example.
Explain the term input VAT.
What do you understand by "Canon of Equity"?
Mention any two advantages of auditing.
Ronaldo who is a citizen of Portugal, came to Nepal on 1st Jestha, 2080 and stayed at the end of previous income year. He earned $15,000 as consultancy fees from ANFA.
Required: Taxable income, tax liability and residential status of Ronaldo. [Dollar exchange rate $ 1 = Rs 135].
Sita is operating a cosmetic business located at Dhulikhel Municipality City, her sales and taxable income were Rs. 2,500,000 and Rs 250,000 respectively. She had adopted to be a presumptive tax payer.
Required: Determine the tax liability with explanation as she is a presumptive taxpayer.
Mr. Sharma is working in a private company at a regular salary of Rs 40,000 per month. The company has provided him a quarter facility for his residence and a car facility for official as well as private purpose.
Required: Amount of vehicle and accommodation facility to be included in employment income of Mr. Sharma
Mrs. Ranju joined a job in Teaching Hospital Kathmandu on 1st Shrawan 2073 B.S. at a pay scale of Rs 30,000-1,000-35,000-1,500-42,500.
Required: Monthly salary of Mrs. Ranju.
Following are the details of Non-Chargeable Business Assets of Mr. Rahul for the previous income year.
| Particulars | Total Incomings (Rs) | Total Outgoing (Rs) |
| Land and Building | 15,500,000 | 13,000,000 |
| Share Details: Listed Company | 600,000 | 450,000 |
| Unlisted Company | 300,000 | 450,000 |
Unabsorbed loss of Non-chargeable Business Assets Rs 100,000 from preceding year.
Required: Capital gain or loss from Non-Chargeable Business Assets.
Short Answer Questions (Attempt any SIX Questions)
[6 × 5 = 30]"Tax is the compulsory contribution from a person to government". Explain.
Describe the provision of withholding method of tax collection as per the Income Tax Act, 2058 with example.
What do you mean by Administrative Review and its benefits to taxpayer?
A trading organization provided the following information:
| Years | 1 | 2 | 3 | 4 | 5 | 6 | 7 |
| Profit (loss) (Rs.) | (50,000) | (40,000) | 1,00,000 | 50,000 | (30,000) | 80,000 | 150,000 |
On scrutiny it is observed that a donation of Rs. 20,000 was given to an organization (approved by IRD) and charged in year one. The profit of the year 3 was derived after deducting PCC of Rs. 30,000. Similarly, the profit of year 6 was derived before deducting interest on bank loan of Rs. 10,000.
Required: Taxable income and giving explanation wherever necessary. [4+1]
Following is the summarized statement of cash concerning class 'B' registered auditor for the previous year.
Receipts and Payment Account
| Dr. | Cr. | ||
| Receipts | Amount Rs | Payments | Amount Rs |
| To Balance b/d | 40,000 | By Office expenses | 150,000 |
| To Consultation fees | 280,000 | By Office rent | 72,000 |
| To Audit fees | 350,000 | By Salary to assistant | 84,000 |
| To Interest from bank deposit (net) | 28,500 | By Life insurance premium (self) | 16,000 |
| To Income from writing article | 27,000 | By Household expenses | 42,000 |
| To Interest on investment | 40,000 | By Balance c/d | 421,000 |
| To Sale of old newspaper | 2,000 | ||
| To Dividend from resident Co. | 17,500 | ||
| 785,000 | 785,000 | ||
Additional information:
Consultation fees include Rs. 25,000 relating to next year.
Audit fees include Rs. 40,000 related to previous years.
Donation to exempt organization Rs. 15,000 not included in above statement.
Allowable depreciation Rs 10,000.
Required:
a. Net assessable income profession
b. Statement of taxable income [3+2]
An importer purchased a Television of Rs 113,000. VAT paid was included on its purchase. The item passes through two middlemen wholesaler and retailer before reaching to final customer. Additional cost incurred by each businessman Rs. 5,000. Profit charged on each stage of distribution @ 15% on their costs.
Required:
a. Cost price to consumer
b. Total VAT payable to government. [2+3]
ABC Co. Ltd. provided the following details of its assets under furniture group for the previous year.
Opening written Down value Rs 400,000
Additional of new assets:
1st Magh Rs 45,000
15th Jestha Rs 90,000
Disposal of one furniture having book value Rs 150,000 at a profit of Rs 50,000.
Actual repair made by the company on this block is Rs 80,000
Required:
a. Allowable depreciation and repairs and maintenance
b. Opening depreciation base of asset for the next year. [2+3]
Long Answer Questions (Attempt any THREE Questions)
[3 × 10 = 30]Describe the expenses which are not allowed for deduction while computing assessable income from business.
What do you understand by self-tax assessment? Explain with benefits.
Mr. Bikram furnished the following particulars of his incomes and expenditures for the previous year.
Royalty from natural resources Rs 850,000 (net)
Interest from private money lending activities Rs 200,000.
Rent from Machinery (net) 180,000
Dividend from a resident company Rs 28,500 (net).
Interest from bank deposit Rs 80,000.
Rent from house let out Rs 135,000 (net).
Bad debts recovered Rs 30,000 relating to investment (60% not allowed as deduction in last year.)
Agriculture income Rs 50,000.
Gift received relating to investment Rs 25,000.
Interest received from mutual fund Rs 38,000 (net)
He claimed for following expenses for deduction:
Interest collection charge of private money lending activities Rs 1,000.
Royalty collection charge Rs 2,000.
Dividend collection charge Rs 1,500.
Collection charge of house let out given to a broker Rs 3,000.
Life insurance premium of Rs 30,000 paid for a policy amount of Rs 300,000.
Donation to an approved local club Rs 5,000.
Required:
a. Net assessable income from investment
b. Statement of total taxable income
c. Tax liabilities [5+3+2]
Mrs. Sita joined a job at Reputed Private Bank Limited as a financial assistant on 1st Magh 2073 B.S. at a pay scale of Rs 25,000-1,000-30,000-1,500-40,000 and other details of income are as follows.
Dearness allowance Rs 2,000 p.m.
She received next year's salary as advance Rs 50,000
Accommodation facility provided by the office.
She received Rs 2,500 per month as education facility to her children from employer.
Water and electricity bill of Rs 1,000 and Rs 600 respectively paid per month by employer for which office deducts Rs 800 per month from her salary.
Life insurance premium Rs 25,000 paid by the employer.
Meeting Allowance Rs 17,000 (net)
Bank provides provident fund and Dashain allowance as per Government rules.
She received Meal and Tiffin facility equal to Rs 2,500 p.m. in the office premises as provided to all the employees.
She received travelling and daily allowance Rs 55,000.
Home leave encashment Rs 36,000.
Vehicle facility has been provided to her by the employer.
She was also provided a housing loan of Rs 2,000,000 at a concession rate of 5% p.a. by the bank but prevailing market interest rate is 10%.
She received Rs. 51,000 (net) as part time lecturer.
She has claimed the following expenses for deduction:
Donation given to tax exempt entity Rs 20,000
Domestic expenses Rs 45,000.
Health insurance premium Rs 23,000 (self)
Medical expenses incurred Rs 15,000 of her own.
She is working at remote area 'C'.
Advance payment of tax Rs 4,000
Required:
a. Assessable income from employment
b. Statement of taxable income
c. Tax liability. [5+3+2]
Comprehensive Answer / Case / Situation Analysis Questions:
[4 × 5 = 20]The following Trading and Profit and Loss Account of a trader for the previous year is given below:
Trading and Profit and Loss Account
| Particulars | Rs. | Particulars | Rs. |
| To Opening stock | 180,000 | By Sales | 3,000,000 |
| To Purchases | 1,200,000 | By closing stock | 200,000 |
| To Carriage on purchase | 20,000 | ||
| To Custom duty | 5,000 | ||
| To Gross profit c/d | 1,795,000 | ||
| 3,200,000 | 3,200,000 | ||
| To Salaries | 200,000 | By Gross profit b/d | 1,795,000 |
| To Office expenses | 30,000 | By Gain on sale of business assets | 20,000 |
| To Telephone and electricity | 18,000 | By Gift received | 16,000 |
| To Legal charges | 5,000 | By Compensation received | 51,000 |
| To Bad debts written off | 6,000 | By Dividend from Domestic company | 14,250 |
| To Repairs and maintenance | 5,000 | By Bad debts recovered (20% not allowed previously) | 10,000 |
| To Interest on bank loan | 10,000 | By Miscellaneous income | 25,000 |
| To Business promotion expenses | 18,000 | By Natural resources received (net) | 127,500 |
| To House rent | 12,000 | By Gain on sale of non chargeable Business assets | 20,000 |
| To Income tax paid | 13,000 | By Discount received | 1,1500 |
| To Donation | 5,000 | ||
| To Reserve fund | 15,000 | ||
| To Depreciation on machinery | 25,000 | ||
| To Research and Development cost | 50,000 | ||
| To Commission on sale | 3,000 | ||
| To Provision for bad debts | 8,000 | ||
| To Bonus to staffs | 10,000 | ||
| To Net profit c/d | 1,657,250 | ||
| 2,090,250 | 2,090,250 |
Additional Information:
Opening stock was overvalued by Rs 30,000
Closing stock was undervalued by Rs 20,000
Purchase included Rs 200,000 for the purchase of machinery on Ashwin of previous year.
25% of office expenses include expenses of his personal purpose.
40% of bank loan was used for personal purpose.
Miscellaneous income included Rs 10,000 income of elder citizen allowances.
Income tax paid included Rs 5,000 paid for current year as advance tax.
Previous year cumulative business loss stood Rs 75,000.
Legal charge includes:
i. Defending business assets 3,000.
ii. Income Tax appeal Rs 1,000.
iii. Income Tax penalty Rs 1,000.
Required:
a. Net assessable income from Business.
b. Net assessable income from investment.
c. Statement of total taxable income.
d. Tax liability.
e. Giving explanation wherever necessary. [10+2+3+2+3]