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Chapter 13- Income from Investment

Answer to Question No. 1- Page 133


Particulars:
Amount to be included in Income (Sec. 9)
House rent income net of TDS
Bank interest income net of TDS- Nepal
Bank Ltd.
Natural resources payments net of TDS

Interest income net of TDS from ABC Ltd.

Inclusion
200,000

2,500,000

Compensation received from loss of last


year investment
Income from investment insurance net of
TDS- Rastriya Beema Sanstha
Gift related to investment income

25,000

Dividend income net of TDS from Sanima


Bank Ltd.
A. Total Amount to be included in
Income
Deductions to arrive at Assessable Income
Expenses related to collection of house rent

50,000

8,500
5,500

B. Total deductible Expenses


Assessable Income from Investment (AB)
Less: Allowable Deductions
a. Contribution to ARF
b. Donation paid to tax exempt
organization

14,000
2,761,000

Taxable Income

2,721,000

40,000

617,350
15,000
525,000
77,500

It is final withholding assuming that Mr. Narayan does


not conduct business of leasing or subleasing of house
This is final withholding- bank interest received by
natural person and not related to operation of business
Included as per Sec. 9 (2) and as its not final
withholding. Grossed up as it is net of TDS. This
payment attracts 15% WHT, means 170000 is 85% of
actual payment, Gross payment is Rs. 200,000
This interest is not final withholding as it is not a
resident bank or FI, and the interest is assumed not for
debenture or bonds. If we assume the interest is
against debenture and bonds, and ABC Ltd. is
authorized to issue such securities, it becomes final
withholding. WHT on such interest is 15% and thus
2125000 is grossed up to 100%
Included as per Sec. 9 & sec. 31 as the amount is
included when the compensation is actually received
Final withholding as Rastriya Beema Sansthan is
resident insurance company
Included as per Sec. 9 (2)- gift received in connection
to investment
Final withholding. Dividend received from resident
company is final withholding

2,775,000

Expenses related to natural resources


Allowable depreciation allowance as per the
Act
Life insurance premium paid to Rastriya
Beema Sanstha

Tax Liability
1st Rs. 300,000 Nil
Next Rs. 100,000@ 15%
Next Rs. 2,100,000 @ 25%
Balance Rs. 221,000 @35%

Reason to include or not include

Not allowed as per Sec. 21, expense related to


collection of Final withholding payments
Sec. 13- general expenses
Sec. 19- as it is said its allowable
As related to Final withholding and is considered by
Beema Sansthan while computing gain on Investment
Insurance

As per Sec. 12, lower of:


a. Actual
b. 5% of ATI- 5% of 2,761,000
c. Rs. 100,000
As the question says there is no any assessable
income from business or employment
Married, and the maximum tax rate for investment is
10%.
There is no additional surcharge of 40% on tax above
taxable income of Rs. 25 Lakhs as the maximum tax
rate for investment is 10% as explained by Sec. 1 (4)

Chapter 13- Income from Investment

Advance tax paid (WHT considered as


advance tax)
Natural Resource payment
Interest from ABC Co.

(Kha) of Schedule 1 which comes after Sec. 1 (1) and


Sec. 1 (2) of Schedule 1.
There is no net tax liability payable, the amount is
refundable
30,000
375,000