Advance Tax to be collected through Agents (Section 95 ka)
In addition to provisions related to withholding tax by withholding
agents, there are additional provisions to collect/deduct advance tax
through agents.
These are not withholding agents because they are not making
payment that will be income of the receiving person. There are legal
agents registering transfer of assets of one person to another.
Followings are the types of gain/value on which agents are liable to
deduct advance tax when a person disposes his/her/its assets or imports
goods.
1. Gain on transaction in commodity future market – 10% on gain
2. Gain on disposal of listed securities in Security Board of Nepal
3. Gain on disposal of unlisted securities
4. Gain on disposal of Land & Building of a natural person qualifying
as NBCA
5. Gain on disposal of Land & Building of other persons other than
mentioned in point no. 4
6. Import Value for import of certain goods for trading purpose.
7. Language Test Fee and standardized test fees paid by students
pursuing foreign studies. 15% by BFIs
Gain on transaction in commodity future market
Parties involved in commodity future market
1. Market Operator (like NEPSE for securities)
2. Broker House (like Stock Broker)
3. Clearing Agent/Clearing Member Agency
4. Clients (who actually deals in commodity futures)
In case any person (client) derives gain from commodity future market,
the person operating that market needs to collect/deduct advance tax
on such gain @ 10%
Amount of advance tax = 10% on gain
Gain = Total amount derived on disposal of contract less expenses
- Cost of investment including charges
Example
Ram entered into future contract of gold for 3 months. He purchased 60
units of gold @Rs. 5,000 each. After 10 days, price per unit climbed at Rs.
6000. Ram sold such contract. Broker charged 1% at both transaction.
What will be the amount of advance tax to be collected on such
transaction.
Solution
Advance tax will be collected by the person operating such market @10%
on gain.
Gain = (6000x60)x99% - (5000x60)*101%
= 53,400
Therefore advance tax = Rs. 5,340 (10% on 53,400)
Gain on disposal of listed securities
Person operating securities market, i.e., NEPSE is responsible to
collect/deduct advance tax on gain on disposal of listed securities at the
following rate
In case of resident natural person other than SPB 5% on gain
In case of other resident person 10% on gain
In case of non-resident person (NP/Entity) 25% on gain
In case of Mutual Fund 0%
In case of resident entity dealing in securities duly registered
under prevailing laws on securities 0%
Note : Weighted average rate is applied to derive cost of disposal.
Mr. Ram purchased 2000 shares of NIC Asia Bank Ltd through broker no.
46 @ Rs. 400 on 1st Baishakh 2076. On 7th Baisakh, 2076, he additionally
purchased 3000 shares of same bank @ Rs. 380. On 15th Baisakha, 2076,
he sold 300 shares of NIC Asia @Rs. 399. Is there gain on sale of such
shares? If yes, find out the amount of advance tax to be deducted.
Assume broker charged 1% as commission on purchase and sale both.
Find out weighted average cost
Cost per share = ((2000x400x101%) + (3000x380x101%))/5000
= Rs. 391.88
When 300 shares are sold @ Rs. 399, there is obviously gain
Gain = 300x399x99% - 391.88x300
= 939
Therefore, advance tax = 5% on 939 = Rs. 46.95
Net payment to Mr. Ram = 300x399x99% - 46.95 =
Gain on disposal of unlisted securities
The concerned entity whose securities are disposed is responsible to
collect/deduct advance tax on gain on disposal of securities (other than
listed) at the following rate
In case of resident natural person other than SPB 10% on gain
In case of other resident person 15% on gain
In case of non-resident person(NP or Entity) 25% on gain
In case of Mutual Fund 0%
In case of resident entity dealing in securities duly registered
under prevailing laws on securities 0%
Note : Office of Company Registrar shall record such change in
shares only after receiving the proof of deposit of such deducted
advance tax.
Furthermore, in case of change in ownership as per section 57, the day
of deemed disposal of the entity will be on the day when Office of
Company Registrar has recorded such change.
Mr. Ram purchased 60% shares AB Pvt. Ltd. from Mr. Shyam, who was
owner (80%) of AB Pvt. Ltd. on 5th Baishakh 2076. AB Pvt. Ltd. deducted
10% advance tax on gain on disposal of securities owned by Mr. Shyam
and duly deposited. However, AB Pvt. Ltd. obtained letter of change in
share ownership from Office of Company Registrar only on 20th Jestha,
2076.
When is section 57 applicable?
Applicable on 20th jeshta
For this year, there will be 2 income years
From 1st Shrawan 2075 to 20th Jestha 2076 (section 57 applicable)
deemed disposal of entity.
All assets and liabilities of the entity are deemed to be disposed at market
value on that date.
Gain or loss on disposal of assets & liabilities are also included while
deriving income from business for such period.
From 21st Jestha 2076 to Ashadh end 2076 (just like new business)
Carried forward will be stopped
Normal business losses,
Foreign tax credit
interest expenses u/s 14(2),
Loss on disposal of business Assets & Business Liabilities
Gain on Disposal of Land & Building if it is NBCA
If land & building is disposed which is Non-business Chargeable Assets
of a natural person, Land Revenue Office shall deduct/collect advance
tax on gain on such disposal at the following rate
If ownership is of less than 5 years 5% on gain
If ownership is of more than 5 years 2.5% on gain
Note : if such land & building does not meet the definition of NBCA,
advance tax will not be deducted.
Example
Mr. Ram sold his land at Rs. 12 lakh to his son Mr. Shyam. Mr. Ram had
purchased such land 3 years ago at Rs. 9 lakh.
Is this land NBCA of Mr. Ram? If yes, what is the amount of advance tax
to be deducted on such disposal of land?
Answer:
The transfer within 3 generation except purchase & sale is not NBCA. But
in the given case, transfer has been made through sale and amount of
disposal is more than Rs. 10 lakhs. So this land is regarded as NBCA of
Mr. Ram.
Gain on disposal of NBCA will be taxable and Land revenue Office will
collect advance tax on such gain.
Gain = 12 lakhs – 9 lakhs = 3 lakhs
Rate of advance tax = 5% (since owned by Mr. Ram for less than 5 years)
Therefore, amount of advance Tax = 5% of 3 lakh = Rs. 15,000
Addition to the above example
If such transfer was not made through purchase & sale, will your answer
differ?
Yes, in such as case, the assets will not be NBCA of Mr. Ram. And disposal
of such land is not taxable. So, Land Revenue Office shall not deduct
advance tax on such transfer/disposal.
Gain on disposal of land & building in case of others
Advance tax to be collected by Land Revenue Office
= 1.5% on disposal value of such land/building
AB Pvt. Ltd. sold its land to Mr. Shyam at Rs. 9 lakhs which was purchased
by the company at Rs. 6 lakhs 4 years ago, what would be the amount of
advance tax to be deducted by Land Revenue office??
In this case, advance tax = 1.5% on disposal value, i.e, Rs. 9 lakh = Rs.
13,500
Question
Mr. Komal purchased a piece of land at Rs. 30 lakhs. He sold the land at
Rs. 45 lakhs. He paid registration expenses Rs. 2 lakhs for this land. In this
case, what would be the tax implications on the following situations?
a. The land was purchased on Chitra 20X-64 and sold it on Magh 20X-70.
b. The land was purchased on Magh 20X-67 and sold it on Magh 20X-70
c. The land was purchased on Chitra 20X-59 and sold it on Baishak 20X-71.
d. If selling and buying of the land were completed through a sole
shareholder of a Pvt. Ltd. The shareholder is Mr. Komal.
e. If the land was registered in the name of “Komal Enterprises” a SPB of Mr.
Komal.
Answer :
This is disposal of NBCA of Mr. Komal and gain on such disposal is
= 4500000 – (3000000+200000)
= 1300,000
Custom Point to collect advance tax
If following items are imported into Nepal for Trading Purpose, custom
office shall collect/deduct advance tax on Import Value.
5% as advance tax on imported value
Buffalo, He buffalo, he-goat, sheep, Chyangra under Part 1 of
HS Code
alive, fresh or frozen fish under Part 3 of HS Code
Fresh Flowers under Part 6 of HS Code
Fresh Vegetable, dry vegetables, baby corn and garlic, potato,
onion under Part 7 of HS Code
Fresh Fruits under Part 8 of HS Code
2.5% as advance tax on imported value
Meat under Part 1 of HS Code
Dairy Product, egg, honey under Part 4 of HS Code
Kodo, Fapar, Junelo, Chamal, Kanika under Part 10 of HS Code
Maida, Aanta, Flour under Part 11 of HS Code
Herbs and sugarcane under Part 12 of HS Code
Forest based Products under Part 14 of HS Code
Points to remember
All the above mentions persons who are liable to deduct advance
tax shall deposit such tax within 25th days of following Nepalese
calendar month
If not deducted and deposited, the responsibility shifts to the
person whose advance tax has not been deducted. The person gets
25 additional days to deposit such tax as advance tax as if it were
duly deducted by such agents.
All such advance tax can be claimed as deduction while computing
taxable income of the person.
If a natural person having only income from gain of NBCA opts not
to file income tax return, then such advance tax will be considered
as final and cannot be claimed by him/her again.
If such natural person has other incomes also, he has to file income
tax return and while calculating taxable income, gain on disposal of
NBCA will be included in assessable income from investment.
However, tax calculation on slab basis will be different than usual.
If gain from NBCA is also received by a resident natural person in addition
to his employment/business/other investment income.
Effect on tax rate;
Include gain from disposal of NBCA in assessable income from
investment.
Calculate assessable income (Total of AIFE, AIFB, AIFI, AIFWG)
Derive balance taxable income
Deduct gain from disposal NBCA from balance taxable income
If resultant figure is equal to or more than basic exemption limit,
calculate tax liability
Gain on NBCA will be taxed in the following ways
If gain on disposal of listed securities 5% (As deducted by NEPSE)
If gain on disposal of land & Builiding 2.5%, 5% (as deducted by Land
Revenue Office.)
If other case of NBCA, 10%
Mr. Ram had employment income of Rs. 5 lakh during the income year.
He additionally sold his land at Rs. 40 lakhs which was purchased 7 years
ago at Rs. 17 lakhs. He received natural resource payment of Rs. 1 lakh
for his unutilized land. Calculate his tax liability for the income year.
Assessable Income from Employment 5,00,000
Assessable Income From Investment
Gain on Disposal of NBCA 23,00,000
Natural Resource Payment 1,00,000 24,00,000
Assessable Income 29,00,000
Since no reductions available, his
balance taxable income is Rs. 29,00,000
Less : Gain on disposal of NBCA Rs. 23,00,000
Remaining amount 6,00,000
Since remaining amount is greater than basic exemption limit, i.e., Rs. 4
lakhs (assuming single), the computation will be as follows
1st Slab 4 lakh @ 1% 4,000
Next Rs. 1 lakh @10% 10,000
Next Rs. 1 lakh @20% 20,000
Tax on gain on disposal of NBCA
2.5% on Rs. 23,00,000 57,500
(same as deducted by LRO)
Gross Tax Liability 91,500
Less : Tax Credits Nil
Net Tax Liability 91,500
Less : advance tax (u/s 93, 95ka) 57,500
Tax payable to Govt. 34,000
Mr. ram has assessable income from business Rs. 2.5 lakhs and gain from
disposal of land A at Rs. 40 lakhs which was purchased 7 years ago at Rs.
17 lakhs and from disposal of land B at Rs. 12 lakhs which was purchased
at Rs. 9 lakh 2 years ago. Additionally, he has gain form disposal of listed
securities and unlisted securities amounting to Rs. 3 lakhs & 4 lakhs
respectively. Interest received during the year from AB Pvt. Ltd. Rs. 2
lakhs (net after TDS). Interest income was not related to his business.
Royalty received by him during the year was Rs. 42,500 (net after TDS)
Calculate his assessable income from investment and tax payable
during the year.
Computation of Assessable Income From Investment
Gain on disposal of Land A(NBCA) 23,00,000 (LRO deducts 2.5% AT
Gain on disposal of Land B(NBCA) 3,00,000 (LRO deducts 5% AT
Gain on disposal of listed securities 3,00,000 (NEPSE deducts 5% AT)
Gain on disposal of unlisted securities 4,00,000 (Entity deducts 10% AT)
Interest Income 2 lakh/.85 235,294 ( this is not FWP)
Royalty 42,500/.85 50,000
Assessable Income from Investment 35,85,294
Assessable Income from Business 2,50,000
Assessable Income 38,35,294
Balance taxable income 38,35,294
Less : Gain on disposal of NBCA
(33 lakhs) 33,00,000
Remaining balance taxable income 535294
Since it is greater than basic exemption limit
1St slab 0
Next Rs. 1 lakh @10% 10,000
Next Rs. 35294 7,058.8
Tax on Gain on Disposal of NBCA
Gain on disposal of L/B having owned for 5 or yrs
(23,00,000 x 2.5%) 57,500
Gain on disposal of L/B having owned less than 5 yrs
(3,00,000 x 5%) 15,000
Gain on disposal of listed securities
(3,00,000 x 5%) 15,000
Gain on disposal of unlisted securities
(4,00,000 x 10%) 40,000
Gross tax liability/Net tax liability 144,558.8
Less (Advance tax u/s 93 & 95ka) 170,294
u/s 93 (35294+7,500) 42,794
u/s 95ka ( 127,500
Tax payable/(receivable) to govt (25,735.20)
Mr. Ram, having assessable income from business amounting to Rs. 2
lakh, has gain from disposal of land having owned for more than 8 years
amounting to Rs. 10 lakhs. Calculate his gross tax liability.
AIFB 2,00,000
AIFI 10,00,000
Gain on disposal of land (NBCA)
AI/BTI 12 lakh
Less gain from disposal of NBCA 10 lakh
Balance 2 lakh
0/1
10
20
30
In this case, opting single,
1st slab (2 lakh AIFB) 0
1 slab (remaining 2 lakhs from NBCA gain) 0
Next Rs. …
Tax on gain from disposal of NBCA
Gain on disposal of land owned for more than 7 years
(10 lakhs – utilized for basic exemption limit, 2 lakh)
8 lakh @ 2.5% 20,000
Gross Tax liability 20,000
Less : Advance Tax u/s 93 Nil
Advance Tax u/s 95ka
(10 lakh x 2.5%) 25,000
Receivable from govt. (5,000)
Don’t forget the heads of income on which TDS has been deducted
1. If the withholding tax is final, no need to take it into tax calculation
again. So, no need to classify as which head of income it belongs to.
2. But, if such TDS is not final, will be regarded as advance tax.
In this case amount of income (withholding amount grossed up)
will be included while calculating assessable income of the payee.
Deducted TDS on such payment will be claimed as advance tax by
payee u/s 93.
