Arthabichar Nepal - Guide to Entrepreneurs, Startups, and Business Enthusiast

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Filing Taxes in Nepal with Both Salary and Business Income: A Practical Guide

Many individuals in Nepal find themselves in a situation where they earn income from a salaried job while also running a small business. This can lead to confusion about how to file taxes correctly. One common question I recently received highlights this perfectly. The Question (प्रश्न) In Nepali (नेपालीमा): मेरो बाबाको व्यवसाय पान पसल हो। मेरो बाबाले अर्को कम्पनीमा काम पनि गर्नुभएको छ। त्यसैले उहाँको तलब आय र व्यवसाय आय दुवैको कर कसरी तिर्नुपर्ने हो? केही आइडिया भए सुझाव दिनुहोला है। In English: My father runs a betel nut (pan) shop as a business. He also works at another company. So, how should he pay tax on both his salary income and his business income? Please suggest if you have any idea. The Expert Opinion: How to Handle Dual Income and Which Form to File Thank you for this important question. Your father's situation is quite common, and the answer hinges on understanding which tax return form applies. Let me clarify the process step by step. 1. Calculating Total Taxable Inco...

Maximizing Tax Benefits: Understanding Insurance Premium Deductions in Nepalese Income Tax

Question: If an employee is not enrolled in any retirement fund but has paid 40,000 for life insurance or 10,000 for health insurance, should these insurance payments be subtracted from their taxable income or not? (this was posed in one of the facebook group) Answer: Regardless of whether an individual has contributed to a retirement fund, they remain eligible to reduce Rs. 40,000 for life insurance and Rs. 10,000 for health insurance from their taxable income. You might be wondering how? Let's delve into the deductions permitted by the Nepalese Income Tax Act, 2058, regarding life, health, and property insurance premiums. This blog should help you understand how insurance payments can impact your taxable income. 1) Life Insurance Deduction: For residents holding life insurance, you can claim a deduction of up to Rs. 40,000 or the actual annual premium amount (whichever is lower) from your taxable income. Refer to Annex-1, Clause 12 for this provision. 2) Health...

What is Financial Planning and Analysis? How does it help founders?

Hey fellow entrepreneurs! Ever heard of FP&A and wondered what it means for your business? FP&A stands for Financial Planning & Analysis. It's basically like having a financial GPS for your business. ️ It helps you: ** Plan your future:** Set realistic goals and budgets. Forecast revenue and expenses. Identify potential risks and opportunities. ** Analyze your performance:** Track your progress towards goals. Identify areas for improvement. Make data-driven decisions. ** Optimize your finances:** Allocate resources efficiently. Manage cash flow effectively. Maximize profitability. So, how does this benefit you as a founder? Peace of mind: You'll have a clear understanding of your financial health and future prospects. Better decision-making: You'll be able to make informed decisions based on data, not just gut feeling. Increased efficiency: You'll be able to allocate resources more effectively and avoid costly mistakes. Improved performa...

Can You Pay Vehicle Taxes in a Different Province's Transport Management Office in Nepal for a Vehicle Registered Elsewhere? Like Koshi to Gandaki?

Introduction Nepal's transformation into a federal state with seven provinces has brought about a distinct shift in governance. Each province now wields the power to establish its own laws, creating a unique administrative setup. Unique Tax Systems in Each Province Since the shift to federalism, an intriguing trend has emerged. Each province has independently set its own tax rates and devised specific procedures for blue book renewals in the transport sector. It's like having a mosaic of rules that don't always align seamlessly. While transport ministers from all provinces initially discussed the possibility of standardizing vehicle tax rates, progress has been slow. Despite an agreement allowing vehicle owners to pay taxes in a province of their choice, regardless of where their vehicle is registered, little has changed. This initiative was handed over to the Federal Ministry of Physical Infrastructure and Transport to oversee ( source ). The Need for Progress Unfortunatel...

How to avoid fine on Bluebook renewal, Vehicle Tax payment and Pollution Check in Nepal?

In my reflections as a blogger, I often wonder why, despite my best efforts, I consistently end up paying fines during vehicle tax payment and blue book renewal. My understanding was rooted in the belief that taxes should be settled within a specified period during the Fiscal Year. Perhaps, my immersion in Income Tax matters led me to assume that we had a generous 90-day window at the close of the Fiscal Year to fulfill our obligations. As many of you know, the Fiscal Year in Nepal commences on Shrawan 1 and concludes at the end of Ashad. Accordingly, the standard due date would be at the end of Ashoj. However, my recent visit to the Transport Management Office proved otherwise. I was confident that I wouldn't have to dig too deep into my pockets to cover fines. To my surprise, I was slapped with a hefty 20% fine for tax and a whopping 100% fine for Blue Book renewal. It felt exorbitant and left me with an additional Rs. 6,400 less in my hard-earned money, all due to my confusion a...

What is Permanent Account Number (PAN)? Do we need to renew it each fiscal year?

The Permanent Account Number (PAN) is a unique identification provided to every taxpayer in accordance with Section 78 of the Nepalese Income Tax Act 2058 and Rule 23 of the Nepalese Income Tax Rules 2059. This number is assigned to individuals and entities registered with the Inland Revenue Department, enabling them to file returns, submit statements, and process documents. As outlined in Rule 24 of the Nepalese Income Tax Act 2059, any alterations in the details associated with the Permanent Account, such as changes in address, must be reported within 15 days of the modification. Following the receipt of the application, a new PAN Certificate reflecting the updated information will be issued to the taxpayer. While individuals refer to it as Personal PAN, for entities, it is simply known as PAN, as per the categorization established by the Tax Act. In our upcoming articles, we'll discuss the process of acquiring a PAN for both individuals and entities, including foreign nationals ...

Nepalese VAT Act: Understanding VAT Claims for Food Expenses in Business

Introduction: Determining whether a business can claim VAT against food expenses depends on the nature and purpose of the expenditure. Let's walk through a checklist to find the answer: 1) Was it a Business Expense? If yes, proceed to question 2. Otherwise, VAT cannot be claimed. 2) Was it for Entertainment Purposes? If yes (e.g., staff retreat, gatherings, farewells), VAT cannot be claimed. Otherwise, it may be eligible. VAT Act and Regulations: Rule 41 of VAT Regulation specifies that certain services or goods are not eligible for input tax credit under Sec 17 of the Nepalese Income Tax Act. These include: 1) Beverages (excluding mineral water, as clarified in the directive) 2) Alcohol or alcohol-based beverages like whiskey and beer 3) Petrol for vehicles 4) Entertainment expenses In the case of food expenses, it's crucial to determine whether they fall under the category of entertainment expenses. This encompasses activities that provide perso...