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Assessable Income From Employment. March 2017. Definition of Employment Income. Employment that includes a past, present or prospective employment – Income Tax Act 2058 Definition.
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Assessable Income From Employment March 2017
Definition of Employment Income • Employment that includes a past, present or prospective employment – Income Tax Act 2058 Definition. • The act of performing a certain job for the person, who appoints one for the job, in consideration of a regular payment is called an employment. The income from an employment can be generated only when a relation of employer and employee or master and servant has been established between a payer and a payee. • Whatever the employees derives from the employment in the shape of a regular salary, allowance, overtime payment, bonus etc. is include in the income from employment.
Cont. • An employment is known as a long term employment but, in legal terms, an employment last for a short period and may also be part time one. A natural person may have more than one employment on a day. • The employer may be any person like a natural person (a proprietorship firm), an entity, GON, a local body of the GON, an institution, an organization, a foreigner, etc, but the employee is an always an individual.
Difference between Employment and Consultancy • An employee-employer contract is a contract for employment • A contractor-client contract is a contract for services
Amounts to be included in Income, Income Tax Act 2058. • Salary and Wages • Payment against leave • Fees, Commission • Overtime Payments • Prize, gifts, awards, etc. • Bonus, incentives
Amounts to be included in Income, Income Tax Act 2058. • Payment for personal allowances including Dearness allowances, subsistence allowances, rent, entertainment allowances or transportation allowances • Discharge or reimbursement of cost incurred by individual or an associate of the individual. • Payment against the acceptance of any condition in connection to employment. • Payment for redundancy or loss or termination from employment. • Retirement Payments and Employer’s contribution to retirement fund.
Retirement Payment • Accrued Gratuity, leave, medical is not taxed till 2058.12.18 (See Public Circular dated 2059.3.20 and 2059.4.28). Beyond this tax attractive. • Paid by ARF - 5% TDS on Pay less Rs. 5 lakh or 50% whichever is higher. • Retirement Payment from Unapproved retirement fund-5% TDS. • Retirement Payment from other fund/sources-15% TDS.
Characterization and Quantification of Perquisites Perquisites Accommodation facility Others Vehicle facility Loan at Concessional rate
Vehicle Facility • In case an employer provides vehicle facility to an employee for the personal use of the employee or both for personal and official use, an amount equal to 0.5% of salary shall be included. • Salary means basic salary plus grade. • Vehicle is provided along with driver cost, repair and maintenance and fuel, o.5% of salary will include all. • Only driver cost, repair and maintenance or fuel is provided without vehicle than actual cost that is borne by employer is included.
Accommodation Facility • The employer may provide the accommodation facility in this way • Furnished • Unfurnished • Employer’s own building or apartment • Building occupied by employer’s through rent • In above all case, the amount to be included is 2% of salary (basic salary plus grade)
Loan Facility and Others • In case an employer provides loan at concessional interest rate, charging of interest below prevailing market rate of interest, an amount equivalent to interest saving shall be included in income of the employee. • In case of other facility like service of house keeper, chauffer, gardener or other domestic assistant, utilities in respect of employee’s residence including water supplies, telephone, electricity • The amount of the cost incurred by the employer in providing such facility shall be included in income.
Payments not to be Included in the Income • Any amount given by an employee for which exemption is given under Section 10 of Income Tax Act, • TADA for outstations, Uniform (if common for all), Training cost, • Any amount received which is subject to final withholding tax , • An reimbursement of exp. Incurred by the employee that serves the purpose of the business of the employer, • Daytime meals and refreshments reimbursement of expenses incurred for purpose of official work. • Reimbursement of expenses of small nature up to NRs 500 at a time.
Practical Exercise • Miss. Bijaya Laxmi Shakya is working in FEDO as a Technician in Kathmandu district and she earned the following remuneration for the fiscal year 2073/74. • Salary 50,000 P.M • Dashain Bonus One Month • Dearness Allowance 20,000 PM • Field Allowance 25,000 PM • Employer contribution to PF 10% of basic salary and the same amount contributed by Shakya and deposited in Approved Retirement Fund
Cont… • Miss. Shakya insured her life. Actual premium paid Rs 15,000 in the year 2073/74 ( insured Value Rs 300,000). • Car facility has been provided to her by the Organization. • She has contributed donations of Rs 50,000 to tax exempt organization approved by IRD. • Miss. Shakya has incurred NRs 15,000 medical expenses for medical treatment from the approved medical institution during the year. • Compute tax liability of Miss. Shakya for the fiscal year 2073/74.
