Professional Documents
Culture Documents
Defination of Terms
Defination of Terms
Defination of Terms
Direct Tax
Direct tax is that types of tax which is to be paid the government directly by the person that earns income
or profit. According to Dr. Huge Dalton 'a direct tax is really paid by the person on whom it is legally
imposed.' Tax liability of direct tax cannot be transferred to others and must be paid by the taxpayer to
whom it is legally levied. Such tax is imposed on the income and property of a person. The impact of
direct tax is limited within the taxpayer who is liable to pay such tax. In other words, a person paying and
bearing the tax is the same tax payer. Income tax, gift tax, interest tax, property (wealth) tax, house and
land tax, vehicle tax, inheritance tax, death tax, contract tax, etc. are the typical examples of direct tax. The
government collects or realizes such taxes directly from the taxpayers.
Indirect Tax
Indirect tax is such tax that is imposed on the consumption of goods or use of services. It is realized from
the businessperson who collects the tax from customers. In the words of Dr. Huge Dalton, 'An indirect tax
is imposed on one person but paid partly or wholly by another." It is levied on one person who does not
bear it. Tax is transferred to customers by adding it to the price of goods or services. The person paying
the tax and the person bearing the tax are different person. Thus, the government indirectly collects such
taxes from the general public. Sales tax (turnover tax), entertainment tax, excise duty, customs duty, value
added tax, hotel tax, passenger tax etc. are the typical examples of indirect tax.
Assessable Income
According to the section 6, the assessable income includes income from employment, business or
investment sourced in any country of the world in case of resident person and income from the
employment, business or investment sourced in Nepal in case of non-resident person. However, it is noted
that the assessable income does not include the exempted income as per the provision of business
exemptions and concessions under section 11 or as per the provision of taxation of retirement fund under
section 64.
Assessable income refers to the excess of chargeable incomes (amounts to be included in calculating
income) over deductible expenses and losses. The following equation can be presented to understand the
assessable income:
Assessable income = Chargeable incomes – Deductible expenses – Loss recovery (Applicable to
business)