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Brief Answer Questions:
[10 × 2 = 20]Define direct tax with example.
Differentiate between income year and assessment year.
What do you understand by 'Canon of Certainty'?
Define Permanent Account Number (PAN).
Mention any two objectives of an auditing.
Mr. Clinton is an American citizen arrived in Nepal on 1st Chaitra and previous income year and stayed in Nepal at the end of Ashad of previous income year. He earned in Nepal Rs 1,000,000.
Required: Residential status and tax liability of Mr. Clinton.
Ms. Dahal has been operating a proprietorship business located at Birgunj Metropolitan City, her sales and taxable income was Rs 3,000,000 and Rs 300,000 respectively. She had adopted to be presumptive tax payer.
Required: Determine the tax liability with explanation as she is a presumptive taxpayer.
Mr. Sujal is working in a government organization at a regular salary of Rs 50,000 per month. The government has provided him apartment facility for his residence.
Required: Total amount to be included in employment income of Mr. Sujal.
Trading organization Supplied the following information:
➤ Opening stock Rs 150,000
➤ Purchase of raw material Rs 850,000 includes cost of fixed assets 100,000
➤ Carriage inward Rs 50,000
➤ Closing stock costing Rs 80,000 but the value of market price Rs 50,000
Required: Cost of Trading Goods.
The following are the details of incoming and outgoing about of various non-chargeable assets of Mr. Puskar for the previous income year.
Gain on sales of shares Rs 1,200,000
Loss from non-chargeable business assets last year Rs 200,000
Purchase of share Rs 1000,000 sold for Rs 1,300,000 (Non-listed – 2 years ago)
Required: Capital gain or loss from non-chargeable business assets and tax liability.
Short Answer Questions:(Attempt any SIX Questions)
[6 × 5 = 30]"Vouching is essence of auditing". Explain.
What do you understand by self-tax assessment? Explain with benefits.
Define tax deduction at sources with example.
A Trading organization provided the following information:
| Year | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 |
| Profit (loss) (Rs) | (260,000) | (230,000) | (75,000) | (50000) | 100,000 | (50,000) | 300,000 | 90000 | 700,000 |
On scrutiny, it was found that profit of 6th year was derived after deducting donations Rs 50,000 paid to tax exempt entity. Similarly, the profit of 9th year was calculated before deducting pollution control cost Rs 200,000.
Required: Taxable income with giving explanation wherever is necessary [4+1]
Following is the summarized statement of cash concerning class 'B' registered auditor for the previous year.
Receipts and payments Account
| Receipts | Rs. | Payments | Rs. |
| To Balance b/d | 40,000 | By Office expenses | 100,000 |
| 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 water and electricity expenses | 50,000 |
| 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 year.
➤ Water and electricity expenses is equally used for office and personal purpose.
➤ Allowable depreciation of fixed assets Rs 10,000.
Required:
(a) Net assessable income profession
(b) Statement of taxable income
An importer imported an air conditioner from India paying total amount Rs 100,000. No VAT was paid while import. Importer sold to retailer before reaching to final consumer. Both Importer and retailer incurred Rs 5000 for administrative and packaging cost. Profit charged by importer 20% on their cost price but retailer charged 20% on sales price.
Required:
(a) Cost price for the final consumer.
(b) Amount of VAT collected by the government at each level of sales. [2+3]
A trading firm provided the following information with respect to assets of Group 'D'.
➤ The opening WDV of assets Rs 1,000,000.
➤ During the previous year the company purchased assets as:
On Marg Rs 100,000
On Chaitra Rs 300,000
On Baisakh Rs 900,000
➤ Company disposed off the part of asset during the previous year at Rs 100,000 (book value Rs 80,000).
➤ Repair expenses was incurred during the previous year Rs 130,000
Required:
(a) Allowable depreciation for the year.
(b) Opening WDV for the next year. [2+3]
Long Answer Questions:(Attempt any THREE Questions)
[3 × 10 = 30]Describe the provision regarding business loss as laid down under the Income Tax Act, 2058.
What are the difference sources of income that fall under Income Tax Act, 2058?
Mr. Basnet furnished the following particulars of his incomes and expenditures for the previous year.
➤ Royalty from the books Rs 68,000 (net).
➤ Dividend from the resident company Rs 95,000 (net).
➤ Compensation received Rs 60,000.
➤ Bad debts recovered (20% not allowed previously) Rs 20,000.
➤ Interest received from unrecognized sector Rs 300,000.
➤ Gain from the investing insurance Rs 190,000 (net).
➤ Amount received for accepting of restriction – investment Rs 50,000.
➤ Rent received for letting out machinery Rs 360,000 (net).
➤ Joint investment income total Rs 200,000. Mr. Thapa is the investment partner with 40% share.
➤ Gain from the government securities Rs 20,000 (net)
➤ Gift from the client with market value Rs 10,000.
➤ Wind fall gain Rs 15,000 (net).
➤ Interest received from bank Rs 95,000 (net).
➤ Payment received from the natural resources after TDS Rs 255,000.
Following expenses are claimed for deduction:
➤ Cost of lottery ticket Rs 1,500
➤ Natural resources collection charge Rs 5,000
➤ Royalty collection charge Rs 8,000
➤ Allowable depreciation and repair of machinery Rs 50,000 and 10,000 respectively
➤ Remote area facilities as per rules, his location lies in remote area 'C'
➤ Life insurance premium of his own Rs 45,000
➤ Rent paid of office Rs 40,000
➤ Donation paid to public school of Rs 25,000
➤ House insurance premium paid Rs 12,000
➤ Medical expenses incurred of his own Rs 10,000. He claimed medical tax credit.
➤ Previous year investment loss Rs 50,000
Required: (a) Net assessable income from investment
(b) Statement of total taxable income
(c) Tax liabilities [5+3+2]
Dr. Shrestha retired as a medical officer from nursing home on 1st Chaitra of previous income year. The nursing home is located at remote area 'B'. He has submitted the following details of his income for the previous year.
➤ Monthly salary Rs 60,000.
➤ Pension income Rs 40,000 per month.
➤ Remote area allowance Rs 3,000 p.m.
➤ Dashain and tihar allowance equal to one and half month salary.
➤ Dearness allowance Rs 5,000 p.m.
➤ Transportation allowance Rs 2,000 p.m.
➤ Overtime pay Rs 50,000.
➤ Salary in lieu of leave Rs 80,000.
➤ Car and housing facilities is provided by nursing home.
➤ His life insurance premium paid by the employer Rs 50,000 for the insured sum of Rs 300,000.
➤ His contribution to recognized provident fund 10% of salary and employer also contributed equal amount.
➤ Tiffin and meal facility provided by employer at office Rs 5,000 p.m. in equal term to all staffs.
➤ School fees of his daughter paid by employer Rs 2,000 p.m.
➤ During the previous year the employer had sent him to Kathmandu to attend a short-term seminar. For this purpose, he was provided with travelling and daily allowance Rs 35,000 (net)
➤ Royalty income from natural resources Rs 85,000 (net)
➤ Emergency medical treatment expenses paid by employer Rs 480.
➤ Salary from part time lecture Rs 170,000 (net)
➤ Meeting allowance Rs 8,500 (net).
He has claimed the following expenses for deduction:
➤ Donation given to political party Rs 30,000
➤ Transportation expenses Rs 3,500.
➤ Household expenses Rs 8,000.
➤ Health insurance premium Rs 30,000.
➤ Medical expenses incurred Rs 5,000 of his own.
➤ Advance payment of tax Rs 10,000
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]Mr. Bharat, runs trading organization registered in Value Added Department and furnished following trading and profit and loss account for previous year:
| Particulars | Rs. | Particulars | Rs. |
| To Opening stock | 95,000 | By Sales (including VAT Rs 50,000) | 1,950,000 |
| To Purchases | 500,000 | By Closing stock | 55,000 |
| To VAT on Purchase | 25,000 | ||
| To Carriage | 150,000 | ||
| To Custom duty | 25,000 | ||
| To Wages | 200,000 | ||
| To Gross profit c/d | 1,010,000 | ||
| 2,005,000 | 2,005,000 | ||
| To Salaries | 180,000 | By Gross profit b/d | 1,010,000 |
| To Legal expenses | 19,000 | By Commission | 130,000 |
| To Bad debts expenses | 20,000 | By Interest on investment | 50,000 |
| To General reserve | 50,000 | By Refund of income tax | 20,000 |
| To Pollution control cost | 50,000 | By Sundry income | 25,000 |
| To Depreciation | 150,000 | By Dividend (Net) | 7,500 |
| To Repairs of fixed assets | 100,000 | By Bad debts recovered | 15,000 |
| To Donation paid to public school | 50,000 | By Amount received for accepting restriction regarding business | 40,000 |
| To Life insurance premium (Self) | 30,000 | ||
| To Office expenses | 165,000 | By Income from natural resources (net) | 85,000 |
| To Audit fees | 15,000 | ||
| To Hospitality expenses | 20,000 | ||
| To Advance income tax paid | 7,500 | ||
| To Fine and penalty | 25,000 | By Income from agriculture | 30,000 |
| To Bonus to staffs | 35,000 | ||
| To Interest on loan | 50,000 | ||
| To Advertising | 9,000 | ||
| To Net profit | 437,000 | ||
| 1,412,500 | 1,412,500 |
Additional information:
➤ Opening stock undervalued by 5% and closing stock overvalued by 10%
➤ Refund of income tax includes Rs 15,000 as refund of custom duty.
➤ Salary includes Rs 30,000 paid to a newly appointed staff without PAN.
➤ 25% of bank loan was used for personal purpose.
➤ Legal expenses included Rs 5,000 for income tax appeal against income tax officer.
➤ Depreciation on car has not been charged in the above statement. The depreciation base of the car was Rs 500,000.
➤ Office expenses include Rs 55,000 costs of patent right with life period of 5 years 8 months. Charge depreciation as per rule.
➤ Sundry income included Rs 5,000 income from interest from bank deposit.
➤ 40% of bad debts recovered was not allowed as deduction in previous year due to the lack of proof.
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]