Nepal’s one of the best Online learning Platform

@Sushil Sir Jii Academy

1
BBS Third Year

Model Set-2080
Solution

100%Complete
Model Question-2080
Model Question-2080
Model Question-2080
Q.No.1 Write down different types of Taxes.
Answer Types of Tax:

1) Direct tax: 2) Indirect tax:

a) Income tax a) Value Added Tax
b) Property tax b) Excise duty
c) Vehicle tax c) Custom Duty
d) Casual gain tax d) Service Tax

Sushil Sir Jii Academy

Q.No.2 What do you mean by “Tax Deduction at Source”.
Answer Tax Deduction at source (TDS) is a procedure to collection tax at the source of income. A certain percentage tax is
deducted by payer at the time of making payment to receiver, and this amount is remitted to Government and rest
amount is paid to receiver.

Sushil Sir Jii Academy

Q.No.3 Differentiate between Income Year and Assessment Yer.
Answer

Income Year Assessment Year

1.This is the year in which income was earned. 1.This is the year in which tax calculate.

2. It is also known as Previous year. 2. It is also known as Current Year.

Sushil Sir Jii Academy

Q.No.4 . Explain the meaning of “Canon of Eqality”.
Answer
Canon of equity state that , a good taxis that which is based on the principle of equality. In this principle, it is
maintained that tax must be levied according to tax paying capacity of the individuals.

Sushil Sir Jii Academy

Q.No.5 What do you men by Permanent Account Number [PAN].
Answer Permanent Account Number CPAN) is a unique Code provided to the tax payer that provides an
identity to the tax payer. This is fixed and Unchangeable even with the change in place, name, and
nature of transaction of the business.

10

Sushil Sir Jii Academy

Q.No.6 Briefly describe the provision related to quantification of vehicle and accommodation facilities provided to an employee.
Answer
Provision of quantification to employee:
i) For vehicle facility➔ 0.5% of his/ her Salary.
ii) For accommodation facility➔ 2% of his her salary.
This should be included in income from employment.

11

Sushil Sir Jii Academy

Q.No.7 Mr. Messi is Argentina Citizen arrived in Nepal on 1st Shrawon of Previous year and stayed here till to 30th Marg of the
previous income year. During this period, he provided consultation service to Nepal Football Association and earned amount
Rs.400000 herein Nepal.
Required: His residential status and Tax Liability.
Solution
Length of Stay = 1st Shrawon to 30th Marg
= 5 months
= 5 x 30 days
= 150 days

Therefore, Mr. Messi stayed in Nepal less than 183 days (i.e 150 days). So, his residential status is non-resident.

Calculation of Tax Liability.

25% of Rs.400000
= Rs.100000

12

Sushil Sir Jii Academy

Q.No.8 Proprietorship firm invested Rs.500000 on XYZ Company Ltd. In return of such investment, XYZ Company provided
interest amount to Rs.50000. What will be the Tax implication of such interest income received by proprietorship firm?
Solution Interest received from XYZ Co. Rs.50000 is final TDS. So, we should not record it on as income for tax purpose.

13

Sushil Sir Jii Academy

Q.No.9 A Trading Company supplied the following information.
➔Beginning Inventory of Merchandise of Rs.175000
➔Import of Merchandised during the year Rs.500000.
➔Customs duty paid Rs.50000 for merchandised products.
➔Freight charge Rs.25000 for merchandised products.
➔Ending inventory value costing Rs.50000 but market value Rs.70000.
Required: Cost of Trading Stock
Solution Calculation of Cost of Trading Stock.
We know,
Cost of Trading Stock = Beginning Inventory + Purchase + Custom duty + Freight charge – Ending Inventory
= Rs.175000 + 500000 + 50000 + 25000 – 50000
= Rs.700000

14

Sushil Sir Jii Academy

Q.No.10 Susan is presumptive taxpayer has total turnover and income amount Rs.3 million and Rs.3 lacs respectively. Firm is
situated in Kathmandu Metropolitan City; he claims the medical expenses and life insurance premium Rs.10000 and Rs.30000
respectively. What will be the tax implication of such presumptive taxpayer?
Solution Annual Tax amount of Susan for Kathmandu Metropolitan is Rs.7500

15

Sushil Sir Jii Academy

Q.No.11 Suman is an Executive Director in an office. He was promoted to this post on 1st Shrawan 2078, at salary scale of
Rs.40000-1000-43000-EB-1500-58000. The other details provided by him for the previous year as follows:
• Director allowance: Rs.10000 p.m.
• Remote area allowance: 20% of basic salary
• City compensatory allowance: 10% of salary and one-month equal Dashain allowance.
• Meeting allowance Rs.850(Net) per meeting for 24 meetings.
• Interest on fixed deposit (Net) Rs.18800.
• Car facility with fuel but without driver. However, the employer has paid driver’s allowance Rs.6000 p.m. Where his own
contribution was Rs.2000 p.m. as agreed.
• Employer has also provided a free quarter for his accommodation.
• A gardener and cook were also provided by the employer. Their salaries were Rs.5000 p.m. and Rs.4000 p.m. respectively. His
contribution towards these facilities was Rs.4000 p.m. and Rs.2000 p.m. respectively.
He claimed the following expenses for deduction:
• He is a member of Recognized Provident Fund contributing 10% of his salary towards this fund.
• Salary of guard Rs 1,500 p.m. who was appointed by himself.
• Donation to Tax exempt organization Rs.50000.
• Life Insurance premium Rs.30000 pm policy of Rs.800000.
• Unabsorbed medical tax credit amount Rs.2250.
Required:
a) Net(assessable) income from Employment.
b) Statement of Taxable Income.
c) Tax Liability.

16

Sushil Sir Jii Academy

Solution Calculation of income from employment of Mr. Suman for the previous year.

Particulars Amounts Rs.

Salary (40000x12) 480000
Remote area allowance (20% of 480000) 96000
Director allowance (100000 x 12) 120000
Car Facility (0.5% of Rs.480000) 2400
Driver’s allowance (4000x12) 48000
Accommodation Facility(2% of Rs.480000) 9600
Gardener & Cook Facility (3000x12) 36000
Dashain Allowance (400000 x1) 40000
Provident Fund (10% of Rs.480000) 48000

Assessable Income from Employment 880000

17

Sushil Sir Jii Academy

Solution Statement of Taxable income of Mr. Suman for the previous year.

Particulars Amounts Rs.

Assessable income from employment 880000
Assessable income from Business/Investment Nil
Total Assessable income 880000
Less: Allowable reduction:
Contribution to Retirement fund
1/3 of Rs.880000 = Rs.293333.33
Or, 20% of Rs.480000 = Rs.96000 (96000)
Or, Maximum Limit=Rs.300000
[Whichever is less]
Donation to Organization
5% of (Rs.880000-96000) = Rs.39200 (39200)
Or, Actual Donation = Rs.50000
Or, maximum Limit = Rs.100000
[Whichever is less]
(25000)
Life Insurance Premium
Actual amount = Rs.36000
Or, maximum limit= Rs.25000
[Whichever is less]
Total Taxable Income 719800
18

Sushil Sir Jii Academy

Solution Calculation of Tax Liability.

Particulars Amounts Rs.

Up to Rs.450000 @1% (assume couple) 4500
Next Rs.100000@10% 10000
Balance Rs.169800@20% 33960
Total Tax Liability 48460
Less: Medical Tax Credit
Unabsorbed amount = Rs.2250
(750)
Or, Maximum limit = Rs.750
[Whichever is less]

Tax Payable 47710

19

Sushil Sir Jii Academy

Q.No.12 Given is the summarized statement of cash pertaining to an artist for the previous income year.
Receipt Amounts Payments Amount

To Balance b/d 450000 By Computer purchased (Falgun) 180000

To Receipt from script playing 500000 By Telephone expenses 30000

To Receipt from dance training program 200000 By Salary to assistant 170000

To Advisory fee 100000 By Life Insurance Premium(own) 30000

To Dividend Received 50000 By Research and Development 20000

To Interest on Investment 100000 By Office rent 120000

To lottery Income 50000 By Water/Electricity expenses 50000

To Gift from clients 50000 By Balance c/d 900000

Total 1500000 Total 1500000

20

Sushil Sir Jii Academy

Q.No.12 Given is the summarized statement of cash pertaining to an artist for the previous income year.
Receipt Amounts Payments Amount
To Balance b/d 450000 By Computer purchased (Falgun) 180000

To Receipt from script playing 500000 By Telephone expenses 30000

To Receipt from dance training 200000 By Salary to assistant 170000

program
To Advisory fee 100000 By Life Insurance Premium(own) 30000

To Dividend Received 50000 By Research and Development 20000

To Interest on Investment 100000 By Office rent 120000

To lottery Income 50000 By Water/Electricity expenses 50000

To Gift from clients 50000 By Balance c/d 900000

Total 1500000 Total 1500000
Further information:
• Telephone and water/electricity expenses are used equally for professional and personal purpose.
• Compensation of Rs 200,000 for the breach of contract from a producer has not been received yet.
• Gift from clients includes Rs 2000 bad debts recovered which is not allowed for deduction previously.
• Outstanding salaries Rs 10,000 are yet to be paid.
• Advisory fees include Rs 5,000 relating to three years ago and advance consultation fees Rs 10,000 is not included in above receipts account
Required:
a. Assessable (Net) income from profession
b. Statement of taxable income
c. Tax liability [6+2+2]
21

Sushil Sir Jii Academy

Solution Calculation of assessable income from Profession of an artist for the previous year.

Particulars Amounts Rs.

Receipt from script playing 500000
Receipt from dance training programe 200000
Advisory fee 100000
Consultation fee 10000
Gift from Clients [50000-2000] 48000
Gross Income from Profession 858000
Less: Allowable Deduction
Telephone expenses [30000/2] (15000)
Salary to assistant (170000)
Office rent (120000)
Water/Electricity [50000/2] (25000)
Depreciation on Computer [25% of (2/3 x 180000)] (30000)
Total assessable income before PCC and R&D 498000
Less: Research & Development cost
[50% of 498000 or, actual 20000 (whichever is less)] (20000)

Assessable income from Profession 4780000

22

Sushil Sir Jii Academy

Solution Calculation of assessable income from Investment of an artist for the previous year.

Particulars Amounts Rs.

Interest on Investment 100000

Assessable income from Investment 100000

23

Sushil Sir Jii Academy

Solution Statement of Taxable income of an artist for the previous year.

Particulars Amounts Rs.

Assessable income from profession 478000
Assessable income from Investment 100000
Total assessable income 578000
Less: Allowable reduction:
Life Insurance Premium
Actual amount = Rs.30000
Or, Maximum limit = Rs.25000 (25000)
[Whichever is less]

Total Taxable income 553000

24

Sushil Sir Jii Academy

Solution Calculation of Tax Liability.

Particulars Amounts Rs.

Up to Rs.400000 (assume single) Nil
Next Rs.100000 @10% 10000
Balance Rs.53000@20% 10600

Total Tax Payable 20600

25

Sushil Sir Jii Academy

Q.No.13 a) Retailer paid to importer Rs 13,673 selling price including value added tax. The goods were imported by Mr. Bikash.
Both the middlemen importer as well as retailer incurred
packaging and administration cost Rs 1,000 and 900 respectively. Profit charged by the
importer 10 percent on cost plus profit but retailer charged 15 percent on their transfer
price. Annual Tax amount of Susan for Kathmandu Metropolitan is Rs.7500
Required:
a. Import price of the importer
b. Total VAT to government [4+1]

Solution Channels CP Without Value Added SP Without VAT@13% SP With VAT VAT Payable
VAT VAT to
Government
Importer(Mr. 10000 1300 11300 1300
Bikash)
Importer to 10000 1000+1100=21 12100 1573 13673 273
Retailer 00
Retailer to 12100 900+2294=319 15294 1988 17282 415
Customer 4

a) Import price of the importer = Rs.11300 (With VAT)

b) Total VAT to Government = 1300 + 273 + 415 = Rs.1988
26

Sushil Sir Jii Academy

Q.No.13 b) “Value added tax is effective only in developed countries”, comment. [3+2]
Solution Value added tax (VAT) is a consumption tax that is imposed on the value added to a product or Service at each stage of its production or
distribution. While VAT is commonly associated with developed countries, it is not necessarily ineffective in developing countries. However,
there are several reasons why VAT is often considered more effective in developed countries:

a) Infrastructure and Administration:

Developed countries generally have a well- established infrastructure and administrative systems in place to implement and enforce VAT
effectively.

b) Formal Economy:
Developed countries tend to have a larger formal economy, with a higher proportion of economic activities conducted by registered business.

c) Compliance Culture:
Developed countries often have a higher level of tax compliance and a culture of tax payment: This can be attributed to factors such as better
public awareness about the importance of taxation, trust in government institutions, and the presence of strong legal frameworks.

d) Administrative capacity:
Developed countries generally have stronger administrative capacity to implement and monitor VAT systems. This includes the ability to
implement anti - evasion measures, conduct audits, and deal with complex business transactions.

e) Informal Sector:
Developing countries often have a large informal Sector, which consists of unregistered and cash- based businesses. VAT implementation
becomes more challenging in such economies, as it is difficult to track transactions and enforce tax compliance in the informal sector.

f) Socioeconomic factors:
Developing countries often face unique socio- economic challenges, such as high levels of Poverty, income inequality, and significant portion
of the population engaged in subsistence agriculture.

27

Sushil Sir Jii Academy

Q.No.14 . a) Susan furnished you following particulars of income and expenses for the previous income year.

1. Mining rent from natural resources (TDS Rs. 90,000): Rs 510,000

2. Royalty received (net): Rs 85,000
3. Dividend received from foreign country: Rs 50,000
4. Interest received from financial institution after TDS: Rs 85.000
5. Having equal investment in shares, Mr. Susan and his brother they received all together Rs 100,000 as interest on investment.
6. Gain on sales of non-chargeable business assets Rs 1,00,000.
7. Interest received from saving deposit Rs 47,500
8. Interest received from local money transaction Rs 50.000
9. Dividend from domestic country Rs 30.000
10. House rent received Rs 90.000
He claimed the following expenses to deduct.
1. Collection charge of royalty related with natural resources Rs 3,000
2. One-month equal commission paid to agent for mining rent of natural resources
3. Health insurance premium Rs 30,000 includes Rs 5,000 as cosmetic surgery.
Required: Net assessable income from investment [5]

28

Sushil Sir Jii Academy

Solution
Calculation of net assessable income from Investment of Mr. Susan for the previous year.
Particulars Amount Rs.
Mining rent from natural resources 600000
Royalty received [85000/0.85] 100000
Dividend received from foreign company 50000
Interest on Investment [100000/2] 50000
Gain on sales of non business assets 100000
Interest received from local transaction 50000
Gross income from investment 950000
Less: Allowable Deduction:
Collection charge of Royalty income (3000)
Commission paid [600000/12] (50000)

Net Assessable income from Investment 897000

29

Sushil Sir Jii Academy

Q.No.14 . b) What are the incomes that should be excluded while calculating employment income as per the section 10 of the
Income Tax Act, 2058. [5]
Solution Income that should be excluded while calculating employment income as per section 10 of income tax act 2058 are as
follows:
a) Amount received by a person entitled to tax exemption privilege under a bilateral or multilateral treaty or agreement
between government of Nepal and foreign country.
b) Amount received by an individual from employment in the public service of the government of a foreign country.
c) Amount received by an individual, who is not a citizen of Nepal from employment at the government of Nepal's
service on term of tax exemption.
d) Any kind of income of government of Nepal, state government & local government.
e) Pension received by Nepali Citizen from the army or police service of foreign government.
f) Amount received from the public fond of a Country by an individual who is not a citizen of Nepal or by a member
of the immediate family of the individual etc.

30

Sushil Sir Jii Academy

Q.No.16 “Auditing begins where accounting ends” explain. [10]
Solution While accountancy and auditing are closely related fields, they have distinct roles and functions within the
realm of financial management and reporting. Accountancy primarily focuses on recording, classifying
Summarizing, and interpreting. Financial transactions and information. It involves task such as bookkeeping,
preparing financial statements, and providing
Financial analysis and advice.

On the other hand, auditing begins where accountancy ends. Auditing is the independent examination and
evaluation of financial statements, records; and other relevant information of an organization to ensure their
accuracy, reliability, and compliance with applicable laws and regulations.

The purpose of auditing is to provide an objective and unbiased assessment of the financial information
presented by an entity. In summary, while accountancy involves the preparation and interpretation of financial
information, auditing builds upon that Foundation by providing an independent evaluation and assurance on
the accuracy, reliability, and compliance of the financial statements. Auditing adds an additional layer of
credibility and confidence to the financial information presented to stakeholders.
In summary, auditing goes beyond the boundaries of accountancy by providing independent assurance on the accuracy,
completeness, and compliance of financial information. It involves a risk-based approach, specific professional
standards, sampling techniques, and the issuance of an audit report, all aimed at enhancing the credibility of financial
reporting and providing stakeholders with confidence in the reported information.

31

Sushil Sir Jii Academy

Q.No.17 a) Following are the details of the fixed assets of sujal organization.
Solution Particulars Block C Rs. Block D Rs.
Beginning WDV 500000 500000
New Additions during the year

25th Marg 180000 90000

10th Magh 180000 90000
10th Jestha 180000 90000
Disposal of the parts of assets 160000 180000
during the year

Repair and maintenance during 50000 50000

the year

Required: a) Allowable Depreciation

b) Value of Fixed Assets at the end of the fiscal year [3+5]

32

Sushil Sir Jii Academy

Solution Calculation of allowable depreciation.
Particulars Block C Rs. Block D Rs.
Opening WDV 500000 500000
Add: Additions during the year
On 25th Marg [3/3] 180000 90000
On 10th Magh[2/3] 120000 60000
On 10th Jestha[1/3] 60000 30000

Less: Disposal During the year (160000) (180000)

Depreciation Basis 700000 500000

X Rate of Depreciation 20% 15%

Allowable Depreciation 140000 75000

33

Sushil Sir Jii Academy

Solution Calculation of value of fixed assets at the end of fiscal year.
Particulars Block C Rs. Block D Rs.
Depreciation Basis after allowable Depreciation 560000 425000
[Depreciation Basis – Allowable Depreciation]
Add: Unabsorbed additions
On 10th Magh [ 1/3] 60000 30000
On 10th Jestha [2/3] 120000 60000

Add: Capitalized Repair Cost 1000 15000

Value of Fixed assets at the end of fiscal year 741000 530000

Working Note:
Block C Block D
Allowable Repair Cost:
7% of Depreciation Basis : 49000 35000
Or, Actual Repair Cost :
[Whichever is less] 50000 50000
Therefore, Allowable repair cost of Block C is Rs.49000 and Repair cost of Block D is Rs.35000.

So, Capitalized Repair Cost = Actual repair cost – Allowable Repair Cost
34

Sushil Sir Jii Academy

Q.No.17 b) Following are the profit and loss position of a firm for the previous income year.
Solution Year 6 7 8 9 10
Profit or (Loss) 100000 125000 (50000) 200000 800000

Additional Information:
a. On scrutiny, it revealed that donation 75,000 charged in the profit and loss account in the 8th year.
b. In the 7th year profit was derived before deducting allowable depreciation expenses Rs 25,000.
c. Profit of 9th year was derived before adjusting business income Rs 50,000.
d. Profit of the 10th year was derived after deducting research and development cost Rs 200.000 and before deducting
donation Rs 50.000.
e. The firm had unabsorbed loss at the closing of 5th year was Rs 725,000, out of which Rs 300,000 was related to 1st &
year, 2nd year Rs 275,000 and 3rd year Rs.100,000 and fourth and fifth year Rs 25,000 each.
Required: Taxable income, tax liability giving explanation wherever is necessary. [7]

35

Sushil Sir Jii Academy

Solution Calculation of Taxable income and tax Liabilities from the given data.
Years 6 7 8 9 10
Particulars
Profit or loss 100000 125000 (50000) 200000 800000
Add Back: Donation - - 75000 - -
Less: Depreciation (25000)
Add: Business Income 50000
Add: R&D Cost 200000
Adjusted income before carry forward 100000 100000 25000 250000 1000000
Less: Carry forward of losses
Year 1 Rs.300000 (100000) (100000) (25000)
Year 2 Rs.275000 (25000)
Year 3 Rs.100000 (100000)
Year 4 Rs.25000 (25000)
Year 5 Rs.25000 (25000)
Adjusted Taxable income - - - - 850000
Less: Allowable repairs (200000)
Total taxable income 650000
36

Sushil Sir Jii Academy

Solution Calculation of Tax Liabilities.
Up to Rs.400000 = -
Next Rs.400000 @10% = Rs.10000
Balance Rs.150000 @20% = Rs.30000
Total Tax Liabilities = Rs.40000

Explanation:
a) Normal losses can be carried forward upto next seven income years.
b) Business income is taxable income.

Working Notes:
Calculation of allowable repair expenses:

50% of Rs.850000 = Rs.425000

Or, Actual amount = Rs.200000
[Whichever is less]

Allowable repair expenses is Rs.200000

37

Sushil Sir Jii Academy

Q.No.17 Given below is the trading, Profit and loss account of a proprietorship organization. [15]
Particulars Amount Rs. Particulars Amount Rs.

To Opening Stock 500000 By Sales excluding VAT 8550000

To Purchase 5050000 By VAT collected from clients 300000 Further information:
• Opening and closing stock were undervalued by Rs.30000
To Carriage on Purchase 50000 By Closing Stock 300000 and Rs.20000 respectively.
To Wages 550000
To Gross profit c/d 3000000 • Legal expenses include Rs.5000 for income tax appeal.
9050000 9050000 • Loss from business last year stood Rs.100000.
To Office rent paid 150000 By Gross profit b/d 3000000 • Purchase includes Rs 250,000, the value plant purchased
To Salary 350000 By House rent received 100000
To General Expenses 65000 By Dividend Received 50000 on Kartik of previous year beginning depreciation base
To Legal Expenses 20000 By Refund of custom duty 50000 amount of plant was Rs 50,000. No part of plant was sold
To VAT Paid to supplier 250000 By Bad debt recovered 40000 during the previous year.
To Interest on Bank 30000 By Agriculture income (own 10000
(overdraft) hard work) • 60% of donation was paid to non-approved institution by
To Fine and penalties 5000 By Rent from staff quarter 25000 Inland Revenue Department and balance paid to TE
To Life insurance 30000 By Speculation income 25000 organization.
premium(own)
To Pollution control Cost 225000 By Gain on non-Chargeable 100000 • Seventy percent of bad debts recovered was allowed
business assets previously.
To Depreciation [Block-D] 50000 • General expenses include Rs 60,000 printing expenses
To Membership renewal 5000
charges
paid at a time by cash, while banking facility is available
To Provision for tax 10000 within 10 KM and Rs 5,000 fine paid to the Nepal
To Donation 110000 Electricity Corporation.
To Advance tax Paid 20000 Required:
To Drawing 30000 a) Net (assessable) Income from business
To Insurance premium of 15000
fixed assets
b) Statement of total taxable Income
To Net Profit 2035000 C) Tax liabilities
3400000 3400000 38

Sushil Sir Jii Academy

Q.No.19 a) Self-assessment tax could be an effective system of tax assessment. Justify [8]
Self-assessment tax can indeed be an effective System of tax assessment under certain circumstances. Self- assessment tax is a system where
taxpayers are responsible for calculating and reporting their own taxable income, deductions, and tax liabilities to the tax authorities.
Self-assessment tax can indeed be an effective System of tax assessment for several reasons:

a) Accuracy:
Self-assessment tax requires tax payers to report their income, deductions, and tax liabilities accurately. This system places the responsibility
on the taxpayer to ensure the information provided is correct. As a result, tax payers are motivated to take the necessary steps to accurately
calculate their tax liabilities, leading to more precise reporting..

b) b)Efficiency:-
Self-assessment tax eliminates the need For the tax authorities to perform individual assessments for every taxpayer. Instead, taxpayers
complete and submit their own tax returns, which reduce the administrative burden on the tax authority.
c) Timelines
Self-assessment tax enables taxpayers to File their returns and pay their taxes within specific deadlines. This promotes timely compliance and
ensures that tax revenues are collected promptly, Which is crucial for government's cash flow.

d) Transparency
By requiring taxpayers to disclose their income Sources and deductions, self: assessment tax promotes transparency in the tax system. Taxpayers
Tax payers are accountable for the accuracy of their tax returns, and this transparency helps to minimize tax evasion and increase public trust in the
fairness of the tax systems.

e) Compliance and Voluntary Disclosure:

Self-assessment tax systems encourage taxpayers to be complaint by making it their responsibility to report their income accurately. By providing a
clear framework for taxpayers to disclose their financial Information, the System encourages voluntary compliance and discourages tax evasion.

However, it's important to note that Self-assessment tax systems also rely on the integrity and honest of taxpayers. The effectiveness of such a
system depends on robust enforcement mechanisms, regular audits," and penalties for non-compliance. Additionally, Support and guidance should
be provided to taxpayers to ensure they understand their fulfill them accurately.
39

Sushil Sir Jii Academy

Q.No.19 b) Describe the installment method of tax collection as per the Income Tax Act, 2058 with example
The installment method of tax collection is a System where taxpayers are required to pay their liability in installment
rather than in their lump sump at the end of tax year. This system is used in many countries, including Nepal, where it
is provide for under income tax act 2058.

Under this method, taxpayers are required. to make advance tax payment based on estimated tax liability for the year.
A person who deserve or expect to derive any assessable income during an income year from business or investment
it is required to pay tax for the year by three installment.
1st installment: 40% of estimated tax is to be Paid by the end of Poush.
2nd installment :- 70% of estimated tax is to be paid by the end of chaitra.
3rd installment:- 100% of estimated tax is to be paid by the end of Ashadh.

For example, Let’s a taxpayer's has an estimated tax liability of Rs. 100,000 for the tax year. Under installment
method, the taxpayers may be required to make three installment for the payment of
Rs. 40000, Rs. 30000 and Rs. 30000 each, due on end of poush, Chaitra and Ashadh respectively.

Good Luck
@sushilsirjii

[सानो अनरु ोध: हामीले यो तयार पार्ाा वा टाइप गर्ाा केहह गल्तत भएको भए सोको बारे SMS गरे र जानकारी हर्नह
ु ोला, हामम जततसक्यो तिटो सच्याउने िौ ]
40

Sushil Sir Jii Academy