A Project Proposal on

A Study of Income Tax System in Nepal

Submitted By:

SANJU YONJAN

Roll No.:

T.U. Regd. No.:

ARUNIMA COLLEGE

Submitted To:

The Faculty of Management

Tribhuvan University

Kathmandu

In Partial Fulfillment of the Requirements for the Degree of

BACHELOR OF BUSINESS STUDIES (BBS)

Kathmandu, Nepal

Mangsir, 2076
 TABLE OF CONTENT

Particulars Page no.

Background of the Study 1

Statement of the Problem 2

Objectives of the Study 2

Scope of the Study 3

Limitation of the Study 3

Research Design 4

Organization to the Study 4

References 5

Background of the Study

The word ‘tax’ is derived from the Latin word ‘taxare’ meaning to estimate. It is a type of
levy of financial charge or fee imposed by a government on legal entities or individuals
in order to fund various public expenditures. A failure to pay, or evasion or resistance to
taxation is punishable by law.

Great Britain is the first country in the world to introduce the modern income tax. It
introduced Income tax in 1799 A.D. to finance the war fought with France. The idea of
introducing Income tax in Nepal originated in the early 1950s when a multi-party
democratic system was introduced. Income Tax Act, 2058 effective from 19 chaitra 2058
is the prevailing act that charges income tax to different persons. Income Tax Act is the
main source of the income tax law is calculated, paid or collected within the ambit of the
act. The act is amended by Finance Act of every year. The government submits finance
bill to the parliament along with the budget which is implemented once within the state of
Nepal. Income tax regulation is also a major source of Income Tax law in Nepal. The
Council of Ministers frames Income Tax Regulation. With the amendments at different
times, currently Income Tax directive in 2066 that has been updated in 2068 B.S.
pursuant to power conferred in sec.139 of Income Tax Act, 2058 that clarifies the various
provisions of the Act and is also the source of Income Tax Law in Nepal.

The practical concept of taxation law is to realize the maximum revenue, of course, with
in the frame work of law. On the other hand payment of taxes reduces the disposal
income of the tax payers and imposes a burden on them. Since tax by definition is a
payment without direct quid pro quo, every tax payer wants to pay the minimum in the
form of taxes. The exemptions, deductions, rebates and relief have been provided by the
legislature to achieve certain social and economic goals and to encourage savings and
investments for the economic development of the country. If a person takes the advantage
of the deductions and rebates, s/he not only reduces his/her tax liability, but also helps in
achieving the objectives of the legislature, which is lawful, social and ethical.

Statement of the Problem

In the context of Nepalese economic environment, how is INCOME TAX progressing is
the main concern here. There are several research questions which are mentioned below:

 How much awareness is there among persons about INCOME TAX?

 How INCOME TAX can be made backbone of the economy?
 How can INCOME TAX help in economic development and prosperity?
 What are the key problems of INCOME TAX implementation in Nepal and
possible correction measures?
 Is there any significance change in the revenue collection after implementation of
INCOME TAX?

Objectives of the Study

The main objective of the study is to evaluate the present situation of Income Tax in
Nepal, its collection and assistance in revenue collection. The study was conducted with
the following objectives:

 To assess the efficiency to the administrative machinery for collection of income

tax and management of taxation matters as per the Income Tax Act.
 To compare the revenue structure before and after the implementation of Income
Tax.
 To know whether the persons are satisfied with the provisions of Income Tax Act
and Rules or not.
 To identify the problems for effective implementation Income tax.

Scope of the Study

Income Tax is an important part of economy of the country. The scope of the study is to
explore the practical scenario of INCOME TAX in Nepal. In addition, it also finds out
the contribution of Income tax to Gross Domestic Product (GDP). This study helps to
show the comparative position of revenue yield before and after the Income tax was
implemented in Nepal. This will evaluate the effectiveness and shortcomings of Income
Tax in Nepal. As another objective of this research is to find out the problem of effective
Income tax implementation and its possible corrective measures, the scope of the study
helps others to get their interest in the subject of Income tax, its contribution for
economic development and prosperity of Nepal. It may be helpful for persons to know
about Income tax implications in Nepal. It will also be helpful for other researchers who
are interested in doing research in Income Tax System in Nepal.

Limitation of the Study

 Simple techniques have been used in analysis.
 Major information about the Income tax system was collected from the websites.
 Mostly the secondary data have been analyzed.
 Lack of experts.
 This study has been concentrated only about the study of Income Tax in Nepal,
hence it’s not a complete study of the whole tax system in Nepal.

In spite of the above limitations, all efforts were made to ensure the correctness in the
data collection.

Research Design
For that research we have basically focused on secondary data obtained from websites
and published material. Various sequential steps have been adopted in studying the
problem with certain objectives in view. The research method is designed to achieve the
objectives of this research report and contains research design, population and sample,
data collection procedure, tools for analysis and methods of analysis and presentations.

Organization to the Study

This study can be organized into five different chapters. They are as follows:

CHAPTER 1: INTRODUCTION

Background of the study, brief description about Income Tax, statement of the problem,
objectives of the study, needs and significance of the study, review of literature and
limitations of the study.

CHAPTER 2: LITERATURE REVIEW

Concept of Income Tax, Historical Background of Income Tax in Nepal, Legal Provision
for Income Tax and review of related previous studies.

CHAPTER 3: RESEARCH METHODOLOGY

Research method of population and sample , variable, research design, data collection
procedure and presentation and analysis tools and techniques.

CHAPTER 4: RESULTS AND FINDINGS

Data presentation and analysis of data, the primary and secondary data collected from
various sources have been presented in a systematic format: such as tables, charts, and
figures. These collected data have been analyzed by using different mathematical,
statistical and analytical tools. In addition to that, the major findings of the study have
been presented.

CHAPTER 5: DISCUSSION AND CONCLUSIONS

It is the output of the study in the form of summary, conclusion and recommendation. It
consist of summary of the major findings of the study, concluding it with major
recommendations and suggestions for future improvement and betterment of Income Tax
in Nepal from both administrative and revenue perspective which maybe a good
reference to the Income tax administrators, consumers, students, researchers and other
professionals in the field of taxation in general and Income Tax in particular. At the end
of this research report, bibliography and appendices have also been incorporated.

References
1) Text Books:
 Kamal Deep Dhakal, Ishwari P Bhattarai, Girija P Koirala, Bikram Pandey
and Romakant Bhattarai, Fundamentals of Taxation & Auditing (2018
Edition)
 Umesh Raj Pandeya, Professional Accountant, Income Tax and Vat,
Professional Resources Developers Group (2015 Edition)
2) Websites:
 Finance Ministry: www.mof.gov.np/en/archive-documents/budget-speech-
17.html?lang=
 Inland Revenue Department: www.ird.gov.np
 Nepal Rastra Bank: https://nrb.org.np/red/publications/annual_reports/
 Wikipedia: https://en.wikipedia.org/wiki/Income_tax
 https://ird.gov.np/Content/Tax,LawsRules/Acts/IncomeTax