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TAX Deducted at Source (TDS)

TAX Deducted at Source (TDS). Presentation on. TDS Concept. By Resident only. Rate of TDS on Payment to resident and to non resident may differ. Rate and method may differ based on structure of recipient & payee. TDS Concept Cont…. PAYE Concept Exempted entity need also make TDS.

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TAX Deducted at Source (TDS)

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  1. TAX Deducted at Source (TDS) Presentation on

  2. TDS Concept • By Resident only. • Rate of TDS on Payment to resident and to non resident may differ. • Rate and method may differ based on structure of recipient & payee.

  3. TDS Concept Cont…. • PAYE Concept • Exempted entity need also make TDS. • Person require to make TDS should registered in PAN. • TDS are Final withholding and Creditable both. Credit of TDS to be claimed within same year of income.

  4. What is TDS TDS = Tax deducted at Source Amount which is deducted at source in prescribed set of payment according to of Income Tax ACT 2058.

  5. Obligation to Deduct TDS Primary obligation = Withholding agent (Payer) In case of non deduction obligation will transfer to withholdee (Payee).

  6. Time of Deduction TDS should be deducted earlier of following Time of payment or booking of expenditure

  7. Final withholding Amount • Dividend paid by resident companies. • Amount paid to natural person in consideration of land & building. • Payment made by resident person for gain from investment insurance including compensation for personal accident. • Gain from retirement fund paid by resident person.

  8. Final withholding Amount • Interest paid by bank, financial institution or any other institute issuing debenture or company listed under prevailing laws to natural person for other than conducting business. • Retirement payment made by government of Nepal or approved/unapproved retirement fund. • Windfall gains. • Meeting allowance and payment made for occasional teaching. • Any consideration payment made by Mutual fund to Natural person.

  9. TDS on Income from Employment Scope Person having taxable income from Past, present and future employer How to calculate Tax • In case of regular employee calculation shall be made by employer at the beginning of the income year for entire year. • In case of new employee joining middle of the year, calculation shall be made from date of joining for remaining period of income year.

  10. TDS on Income from Employment Applicable Rate • Up to 400,000 for couple and 350,000 for single person taxed at the rate of 1% • Next 100,000 taxed at the rate of 15%  • Upto NRs. 25 Lac amount at the rate of 25% • If taxable income of person is more than NRs. 25 lac – taxable income above NRs. 25 lac at the rate of 35%

  11. TDS on Rent & Others Scope of this Provision Rent Payment for getting a right to use some tangible assets   Applicable rate  Rent paid to resident person having source in Nepal 10%

  12. Case Study - 1 ABC Co. has taken 2 flats on rent from Mr. A for NRs. 100,000. ABC Co. not requires all the rooms for its office therefore it provides one flat on rent to XYZ Co for NRs. 50,000. What amount shall each party to deduct while paying rent?

  13. Case Study - 2 ABC Project paid NRs. 10,000 to Municipality of NepalgunJ for 10 days hall rent taken to conduct workshop. Applicability of TDS ? Related circular Rent paid to local government agencies i.e. VDC, DDC, Municipality shall be paid only after deducting TDS even though income of local government agencies are exempted from income tax.

  14. Interest Interest is a consideration received for investment in bank deposit, government saving bond, Nepal Rastra Bank saving bond and loan to other person. Applicable rate of TDS: • In case of natural person 5% • Other than natural person (Entity) 15% • No TDS for interest paid to BFI • No TDS on interest to ARF- 2065.1.4 • TDS is to be made in case of Exempted Entity

  15. Case Study - 3 ABC Bank paid interest amounting NRs. 40,000 to Citizen Investment Fund (CIT) on 31.03.2066. Applicability of TDS ? Related circular Deduction of TDS does not applicable on the interest payment made to approved retirement fund. (Circular date : 2065.01.10)

  16. Case Study - 4 ABC Bank paid interest of NRs. 10,000 to XYZ INGO is registered as tax exempted entity in Inland Revenue Department). Applicability of TDS ? Related circular TDS shall deduct on the payment made to tax exempt entity, indeed it could claim for refund in such case. (Circular date : 2065/04/24)

  17. Service Charge General form of Service charge • All professional and technical fee • Language translation fee • Payment made by cable operator etc Applicable TDS Rate • 15% in ordinary case • 1.5% if service provider registered in Value Added Tax (VAT).

  18. Other • Payment from government, approved retirement fund and unapproved retirement fund 5% • Commission paid by resident company to nonresident person 5% • Payment made for plane lease 10% • Dividend paid by resident company 5% • Payment for natural resource and royalty 15%

  19. Others • Windfall gain 25% • Rent payment 10% • Vehicle rent paid to VAT registered vehicle Co. 1.5% • Payment of return to natural person by Mutual Fund 5% • Gain on investment (life) insurance 5% • Gain on transaction in commodity future market 10% • Meeting allowance, periodic/part time teaching 15%

  20. Payment on which provision of TDS is not applicable • Interest paid to residential banks and financial institution. • Payment of interest and dividend to mutual funds. • Payment made to natural person for other than conducting business and for house rent. • Inter regional exchange charge paid to banks which issue credit cards. • Interest or fee paid by Nepal government to foreign organization under international treaty.

  21. Cont… • Amount already taxed under section 87 of the Act. • In case the payment is made for setting questions papers, for making of answer copies, for providing articles for news paper and magazines. • Interest amount up to 25,000 annually paid by micro credit bank, Hulak Bachat Bank, Cooperative based on rural area.

  22. TDS on Contract Payment What is Contract ?

  23. TDS on Contract Payment If payment made for single contract or agreement exceeds NRs. 50,000 or payment made within 10 day in a single contract exceeds NRs. 50,000. • Applicable rate1.5%

  24. TDS on Contract Payment Contractual payment to Nonresident person • For service contract 10%

  25. TDS on Profit on Share Disposal In case of Listed Companies • Natural person 5% Others 10% In case of non listed Companies: • Natural person 10% Others 15% • In case of mutual fund Nil

  26. TDS on Capital Gain • On disposal 5% on non business chargeable assets owned for period less than 5 year. • On disposal 2.5% on non business chargeable assets owned for period more than 5 year.

  27. TDS return and deposit Time of deposit • Return and TDS amount shall deposited by withholding agent within 25 days of following month. In case of non deduction • It deems that TDS has been deducted at the time of deduction and it shall require depositing TDS return and amount accordingly.

  28. Any Questions ???Thank You

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