There are numerous reforms made by the Finance Ordinance 2078 in the Income Tax Act 2058. The biggest winner seems to be Small businesses having turnover up to NRs. 1 crore as they are now covered under the presumptive tax/turnover basis taxation. Unlike earlier, the condition of not having registered in VAT has also been removed. It has somewhat the lessened tax burden but doesn't mean one should refrain from keeping from books of accounts.
Earlier such presumptive tax was available only for a resident person having income from business up to NRs. 20 lakh and profit of NRs. 2 lakh. Now, it has been increased to NRs. 30 lakh and taxable income of NRs. 3 lakh.
Similarly, turnover tax has been increased from earlier NRs. 50 Lakh to NRs. 1 crore in case of a business. Now, the new slab applicable is as follows:
- Turnover above NRs. 30 lakh up to NRs. 50 Lakh
- conducting Gas & Cigratte business with 3% commission or value addition: 0.25% of turnover
- other business: 0.3% of turnover
- service industry: 2% of turnover
- Turnover above NRs. 50 lakh up to NRs. 1 crore
- conducting Gas & Cigratte business with 3% commission or value addition: 1% of turnover
- other business: 0.8% of turnover
- service industry: 2% of turnover
Second place goes to Start-Ups whereby it has been granted tax-exempt status up to 5 years from the date of commencement of operations provided the turnover is up to NRs. 1 crore. Further, startup seed investment has also been encouraged. Now, entities can claim expense deduction up to NRs. 1 lakh per startup (maximum 5 startups).
There are other changes as well which we will be covering over the next few weeks. Please stay tuned.
For reference, we have complied the Act with the recent changes. Click me to download
This is an unofficial version and not compiled by Inland Revenue Department. For any confusion or doubts, please go through Finance Ordinance 2078 published on the Ministry of Finance website.
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