KATHMANDU UNIVERSITY SCHOOL OF MANAGEMENT

Bachelor of Business Administration (Emphasis/Honours)

End Semester Examinations
Spring Semester (February – June 2020)

SUBJECT: MACC 441– Business Tax Planning in Nepal TIME: 2 hours 15 minutes
YEAR: III, SEMESTER: II FULLMARK: 50

Answer in your own words as far as possible, and try to be direct and specific with your
answers. Manage your time thoughtfully so that you are able to complete the paper within the
set timeframe. The figures in parenthesis indicate the full marks for the respective questions.
Attempt ALL questions

1. Calculate the taxable income on the income of Mrs. Rita Sharma for FY 20X1.X2. (10 Marks)
Basic Salary of Rs. 305,000 per month
As per requirement of Contributed Social Salary Act, 20% of basic salary contributed by the
employer and 11% deducted from her salary and total of 31% deposited to Social Security Fund.
One-month basic salary as festival allowance, 5% salary as performance-based allowance per
month, further employer has provided her one IPAD worth Rs. 125,000 for her outstanding
performance. Residential Allowance of Rs. 24,500 per month.
Medical allowance 2% of her salary per month. Residence has one employee arranged by the
employer for her domestic help with cost of 8,000 pm.
Being in core management team, she has attended 21 meetings during the year and received Rs.
4,000 per meeting.
The cost of education for her son and daughter costing Rs. 24,000 per month paid by employer.
The cost of whole life policy per year is 110,000, 50% is reimbursed by employer.
The cost of Toyota car for her official use is 85 lacs. She has donated Rs. 105,000 to Sahara
Nepal, which is tax exempted entity.
Explain your answer.

2. The income detail of Mr. Ram Acharya is given below:

Consultancy service fee to Hotel Star Rs. 950,000, the hotel has deducted 15% tax on the same
and deposited with Inland Revenue Office
Management consultancy fee of Rs. 45,000 per month to Nepal Water Purification Company for
financial consultancy, 15% tax deducted by the company.
He is working as lead consultant with Nepal Consultancy Pvt. Ltd., with following benefits
 Salary per month 220,000
One-month festival allowance.
He has received Rs. Rs. 55,000 per month from tenant of his house located at Anamnagar. The
per month tax of 10% is deducted by tenant and paid to ward office
Further he received dividend of Rs. 500,000 from different listed companies during the year in
his bank account. The amount is net of tax.
Suggest whether Mr. Hari need to file income tax return and calculate the taxable income
applicable for FY with latest provisions of Income Tax Act 2058. (10 Marks)

3. Discuss the tax implication on following: (3*5=15)

a. Mr. Sharma owns house in Thamel, Kathmandu which he purchased house in 2052 for Rs. One
crore. After purchasing the house, he let the house for rent for ABC Recreation Pvt. Ltd and sold
the same house to ABC Recreation Pvt. Ltd in 2077 for Rs. 9 cores.

b. Prasad & Sharma has been a self-employed VAT registered trader since 2075, and is in the
process of completing the VAT return for the month ended on 31 st Baisakh 2077. The following
is relevant information in relation to the completion of VAT return:
 Sales invoice totaling of Rs. 4,400,000 (ex. VAT) were issued to VAT registered
customer in respect of taxable sales. The firm offers 5% discounts in prompt payment.
 Sales invoice totaling Rs. 1,692,000 (ex. VAT) were issued to unregistered customer, of
which Rs. 51,700 was in respect of Zero-rated sales.
 During the month of Baisakh, goods amounting Rs. 1,120,000 were purchased. Of this,
goods worth Rs. 80,000 were used for Mr. Sharma’s private purpose.
 On 15th Baisakh, a Toyota Hilux Vehicle was purchased for Rs. 7,800,000 inclusive of
VAT.
 A total of Rs. 40,000 was incurred as telephone expense of which 30% relates to private
call during month.
 On 17th Baisakh, Office equipment was purchased for Rs. 600,000. The purchase was
partly financed by bank loan of Rs. 500,000.
 On 25th Baisakh, petrol of Rs. 10,000 incurred.
Unless stated otherwise, all of the figures as above are exclusive of VAT.
Calculate the amount of VAT payable by the firm for the month of Baisakh.
c. Mr. B has retired from XYZ Pvt. Ltd on Falgun 2076 under golden handshake retirement
scheme. He has served the XYZ Pvt. Ltd for 20 years. His basic salary including grade was NPR.
40,000 per month at the time of his retirement. As per the scheme, he is entitled for 7 years
salary as a golden hand shake. He is also entitled for the gratuity equivalent to 1.5 month’s salary
for every year of completed service. As per the official record, the amount of gratuity accrued on
2058/12/18 amounts to NPR. 300,000. Determine taxable amount and the amount of TDS at the
time of payment to Mr. A, as per the provisions of Income Tax Act, 2058.
4. Following are the details of financial of ABC Pvt. Ltd for the year ended 31 Ashad 20X2.

Particulars Rs
Opening stock 50,00,000
Purchase 1,65,00,000
Transportation 300,000
Salary and allowances 12,00,000
Depreciation 25,20,000
Repair and maintenance 500,000
Other Expenses 600,000
Sales 2,50,00,000
Profit from sale of motorcycle 45,000

Additional information:
a. Company has charged depreciation and repair on books as follows:
Assets Opening Additions Depreciation Repairs
Category WDV
Building 21,00,000 220,000 14,50,000 300,000
Vehicle 1930,000 550,000 620,000 100,000
Office 2170,000 300,000 450,000 100,000
equipment

b. Motorcycle sold during the year had NIL in the financial book.
c. All addition of the fixed assets is before poush.
d. Donation paid was Rs. 500,000 out of which Rs. 125,000 paid to tax exempt
organization.
e. Company has previous year carried forward loss of Rs. 1700,000.
f. Last year closing balance is Rs. 40,00,000 for tax purpose.
g. Other expenses include compensation of Rs. 500,000 which was committed last year
paid this year.
h. Company had closing stock of inventory costing Rs.45,00,000 while the market value
of the same was Rs. 35,00,000.

Required:
Taxable income and its explanation. (15 Marks)

All the best!!!