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Umesh Raj Pandeya, CA January 18, 2014

Your house owner comes to you to receive a payment of rent of Rs. 100,000. You withhold Rs. 10,000 and pay him in cash/cheque Rs. 90,000 You will deposit Rs. 10,000 in the respective IRO/TSO within 25th of next month along with the details of such payments

Rs. 10,000 is WHT that you are required to withhold while making payments.

In certain payments, the payer (withholder) is required to withhold some amount (Payment * Rate) and make the payment of balance to the recipient (withholdee). This requirement
People normally use the term TDS to represent the Withholding Taxes TDS means Tax Deducted at source.

is Withholding of Tax and the amount is WHT

Income Tax Act, 2058 has made mandatory requirement to withhold tax at the time of payment in the following Sections:
Sec 87- Withholding of Tax by Employer Sec 88- WHT at the time of payment of Service Fees & Investment Return Sec 88Ka- WHT while making payment of Windfall Gain Sec 89- WHT while making Contract Payments Sec 95 Ka- Advance Tax Withholding in specific requirement

Sec 88 covers the WHT Rate for following:


Service Fee Commission or Sales Bonus Interest Rent Payment Against Natural resources Royalty Retirement Payments Other returns Dividend Gain on Investment Insurance

Payment by Natural Person except that related to operation of Business & rent for Building and Land and apparatus along with such land and building Articles in Newspaper Setting up questions Checking Answer-sheets Interest paid to Resident B/FI Exempted Amounts (Specified in Sec 10)

Payments attracting Sec 87

Interregional Interchange Fee paid to Banks issuing Credit Cards Fees or Interest paid by GON to foreign Countries Interest up to Rs. 10,000 paid by Micro finance, rural development bank, Post Office Saving Banks and Cooperatives specified in Sec 11 (2) based on rural areas Payment of Dividend or Interest to Mutual Fund

You have hired a consultant for tax advisory service. The fee of each enquiry is Rs. 30,000. You have received one such invoice of Rs. 30,000. How much will you pay to your consultant in Cash?

It means the rate of TDS for Service Fee is 15% in all cases except in case of VAT Invoice when it is 1.5%.

Is it Rs. 25,500 or 29,550? First look at the invoice, you have received. If its a VAT Invoice, deduct TDS @ 1.5% and pay Rs. 29,550. If its not, withhold Rs. 4,500 (@15%) and make the payment of Rs. 25,500

Service Fee is:


You have received a memo from Company Secretary to make payment of Meeting Fee to your Directors. The allowance for a meeting is Rs. 2,000 for each presence of a director. What is the rate of WHT? Not Required- Articles in Newspaper, Setting Questions and Checking Answers and payment to Employee

Fee for any service received Commission Meeting Allowance Management Fee Technical Service Fee

The rate is 15% except for the commission paid by resident MANPOWER AGENCIES to non-resident when it is 5%. Not Required:
Payment to Employees

The staffs working at Marketing Division for your company are entitled to sales bonus w.r.t. the sales target met. Such sales bonus for Mr. Ravi is Rs. 200,000 for the year 2069/70. What is the amount of WHT?

The rate is 15% in all cases Not Required:


Payment to Employees Royalty defined by Clause Kaka of Sec 2 of Income

Tax Act, 2058 (5-subclauses) Payment for Natural Resources defined by Clause Sha of Sec 2 of Income Tax Act, 2058 (2subclauses)

The rent is 10% in all cases including that for Lease payment of Aircrafts.
Rent defined by Clause Sa of Sec 2 of Income Tax

Act, 2058 (5-subclauses)

The rate is 15% in all cases except when all the following cases are satisfied when tax is withheld @ 5%:

You are from GIZ. You have placed the amount in call account in a bank. What should be the rate of WHT so that you would not be required to complain? WHT not required while making payment to Resident B/FI, Mutual Fund, and in payment up to Rs. 10,000

Payment by resident B/FI, entity issuing debentures, or listed company to a natural person against deposit, bond, debenture- when the interest have source in Nepal and is not related to business

by Micro finance, rural development bank, Post Office Saving Banks and Cooperatives specified in Sec 11 (2) based on rural areas

You have had retirement saving in CIT. At the time of retirement, CIT told you that total amount accrued to you is Rs. 15,00,000 including your contribution and the interest on the contribution. What amount will you expect to receive? You have made saving for retirement in an Unapproved Retirement Fund. Your Contribution is Rs. 20,00,000. The Fund informed you that total amount before WHT to be paid to you is Rs. 22,00,000. What amount will you expect to receive?

The first case is of Payment from ARF. CIT, EPF and other retirement funds approved by IRD are approved retirement Funds. The WHT rate is 5% of Gain amount in case of payment from ARF. Gain is:
Actual Payment Less: 15,00,000
(750,000) Higher of Following

50% of Payment 750,000 Rs. 500,000 500,000 750,000 TDS= 5% of 750,000

The RF that have not obtained approval from IRD is URF. The WHT rate is 5% on Gain Gain = Total payment from URF- Your Contribution = 22,00,000- 20,00,000
= 200,000 WHT= 5% of 200,000

15% Mr. Hari Kumar is entitled to Gratuity at the time of retirement. The amount of such Gratuity is Rs. 15,00,000. What is the amount of WHT? Special case for any accrual of Retirement Benefit & Medical Facilities No such taxation for accrual of Retirement Benefit

till Chaitra 18, 2058 & Medical facilities up to Rs. 180,000

Benefit from Mutual Fund- 5% Dividend- 5%


Not required while making payment to Mutual Fund

Gain on Investment Insurance- 5% of Gain Gain is calculated as you have calculated in the case of Unapproved RF.

Windfall Gain defined- Lottery, gift, Baksis,

jitaury

WHT Rate- 25% Not Required for:

National and International Prizes up to Rs. 5 Lakhs

for contributions in literature, culture, journalism, sports, technology and public administration

Contract means:

Supply of Goods or Human Resources; Contract related to installation, construction or establishment of

WHT Rate- 1.5% for Payments above Rs. 50,000 You have to go back to last 10 days to ensure that you have not make cumulative payments in last 10 days and today of Rs. 50,000. If it exceed Rs. 50,000.. Deduct WHT @ 1.5% on all payments of last 10 days and the payment made today where WHT is not withheld

tangible asset or structure; or Arrangements prescribed by IRD as Contract; If the Contract related to installation, construction or establishment of tangible asset or structure includes service element as well. The service is also a part of contract payment

Repair of Aircraft- 5% Other Contracts/ Agreements- 5% Insurance Premium to Non Resident Insurance Company- 1.5% In other cases- at the rate specified by IRD

You are an employee of Mercantile Exchange Ltd. Ram Prasad is a person dealing in Commodity Future Market. He makes gain of Rs. 200,000 from Commodity Future Market. What is the amount of WHT?
It is 20,000 (@10% of Gain) to be deducted by person operating Commodity Future Market Service

You are finance manager of a share broker. Mr. Ayodhya Prasad had purchased 100,000 Kitta shares of Himalayan Bank Ltd at Rs. 1500 each on Ashad 25, 2065. He sold all the shares at Rs. 1800 each on Shrawan 25, 2070. What amount will you withhold as Tax?
5% of Gain in case of Resident Natural Person 10% of Gain in case of OTHERS Withholding by THE SHARE BROKER

No such taxation for Capital Gain of Mutual Fund

You are finance manager of a Agricultural Trading (P) Ltd. Mr. Ayodhya Prasad, a shareholder of the company, has sold 100,000 Kitta shares of the company on Shrawan 25, 2070 at Rs. 1500 each (Cost: Rs.100). What amount will you withhold as Tax & When?
10% of Gain in case of Resident Natural Person 15% in all OTHER CASES TAX to be withheld by the Company, the share of which has been disposed, when the shareholder asks for Da.Kha. Of shares under Companies Act

No such taxation for Capital Gain of Mutual Fund

No Tax Withholding for:


Sales of Land for less than Rs. 30 Lakhs Sales of Private Building for Less Than Rs. 30 Lakhs Private building: Building+ Area occupied by the building (Area shall not be more than 1 ropani) Sales of building owned continuously for 10 years or more and where you have resided for 10 years or more either continuously or intermittently Transfer within 3 generation Otherwise than

through sales

Ownership More than 5 years- 2.5% of Gain Ownership Less Than 5 Years- 5% of Gain
Tax to be withheld by Malpot Karyalaya, where you have to declare the gain in a form developed by IRD

You have withheld tax on the specified payments above.. What shall you do after withholding the amount?

Ensure the PAN Number of the Withholdee (Receiver) Log in to E-TDS Option Fill up the E-TDS form for all payments made during the months attracting WHT Submit the E-TDS Return for verification within 25th of Next Month (What if you follow English Pay the WHT deducted within 25th of Next Month

Calendar?)

You have made payment of Rs. 30,000 service fee without withholding tax (full invoice value). Will you require to submit TDS Return and make TDS Payment?
Yes.. Even if you have not withheld tax, It is deemed that you have withheld tax at the time while you made the payment of service fee.

You have not paid WHT within the date specified in Slide 25.. What is the implication?
There is a penal provision to make you comply the requirement of the Act Either you comply the provisions or pay fees & Interest

Fees for non-submission of Return: 1.5% p.a. of WHT amount under such return for WHT u/s 87, 88, 88Ka & 89

1.5% p.a. of Base amount to withhold tax under such return for WHT u/s 95Ka

Interest on delay in deposit of WHT:


deposit

15% p.a. of WHT amount for which there is delay in

You have to issue WHT Certificate within 25th of Next Month for withholding of Tax Made in any month The certificate shall clearly disclose WHT amount and payment amount Practical Issue:

The date of deposit of WHT along with the Deposit Voucher Number is also provided to the Withholdee so that it would be helpful to claim Advance Tax

Dividend- Paid by Resident Company Rent- Not related to Business and received by Natural Person Gain on Investment Insurance- Paid by Resident Company Gain on Payment from URF- Paid by Resident Company Interest- Received by Natural Person & Exempt Organization:

Paid by resident B/FI, entity issuing debentures, or listed company to a natural person against deposit, bond, debenturewhen the interest have source in Nepal
Payment after WHT to Non Resident persons All Retirement Payments Meeting Allowances Part Time Lecture Allowances Windfall Gain Benefit paid by Mutual Fund

Book Income Net of WHT Example?????

ANY QUESTIONS? THANK YOU!!!

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