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/Medical Insurance Deduction:

If you've enrolled in medical insurance from a resident general insurance company, you're eligible for a deduction of Rs. 20,000 or the actual annual premium amount (whichever is lower) from your taxable income. This provision is outlined in Clause 16 of Annex-1.

3) Property Insurance Deduction:

For residents who have insured their residential property, a deduction of Rs. 5,000 or the actual premium amount (whichever is lower) is available from their taxable income. This provision is stated in Clause 16Ka of Annex-1.

Tabulated View for easy reference

Understanding these provisions allows you to optimize your tax benefits while securing essential coverage for life, health, and property. Explore how these deductions can work for you and maximize your savings this tax season!

Comments

Process for Electronic Billing Software Registration with Inland Revenue Department Nepal

Process is straight forward, one is required to submit the online form along with the following documents: 1) Copy of the Tax Clearance Certificate 2) Copy of the Permanent Account Number (PAN) 3) Copy of Company Registration Certificate 4) User Manual for the software signed by company representative and stamped on each page 5) Guarantee letter that Data Amendment or Edit (Manipulation) is not possible on the software 6) Data Backup and Recovery System is available on the software 7) System Architecture Detail 8) Software Set Up file and Invoice Sample in Excel – 20 copies each in 20 pen drive 9) Connection with Central Billing Management Software (CBMS) – API can be collected Service Branch of Inland Revenue Department After all the above documents are ready, One can submit the online form following procedures below: 1) Log on to www.ird.gov.np 2) Go to Taxpayer Portal 3) Go to Ele

Nepal Accounting Standard (NAS) for Not for Profit Organizations (NGOs and INGOs) 2018 - Basics

Effective Date: Nepal Accounting Standard Board has published an Accounting Standard for Not for Profit Organizations in November 2019 effective Fiscal Year 2077/78 (July 16 2020, and onwards). Any organization adopting it to prior to the date above shall disclose the fact. Applicable Organization: NAS is applicable to all not for profit organization registered with the Social Welfare Council or working in Nepal under a general agreement, or project offices working under the bilateral agreement with Nepal Government and Foreign Government Purpose: Guide Not for Profit Organizations to prepare the general purpose financial statement to the entire non-profit organization as a single reporting entity . Improve the quality of the data to provide adequate information to the users of the financial statements Reduce the diversity that exists among NPOs in accounting practice and presentation We should note that NAS is based on the Going Concern assumption and the concep

Process of Obtaining Tax Clearance Certificate in Nepal?

A tax clearance certificate confirms that an individual or entity: is in compliance with the Nepalese Income Tax Act, 2058 and its regulations, has submitted the tax return, audit report and necessary schedules, and all the taxes have been duly paid to the Government of Nepal Who issues Tax Clearance Certificate? The Inland Revenue Department (IRD) is authorized to obtain tax clearance certificate on behalf of the Ministry of Finance, Government of Nepal. How do I apply? An application must be filed at the concerned Tax Payer's office with NRs 10 stamp with the following documents enclosed: 1) Entity: Copy of the payment of taxes per Self Assessment submitted to IRD. Copy of the Audit Report duly audited by the member of the Institute of Chartered Accountants of Nepal (ICAN). Copy of the Previous Year Income Tax Return and Copy of Tax Clearance Certificate Obtained if any. Copy of the Permanent Account Number (PAN) Certificate. 2) Individual: In the c

Learn with NirmalAryal/Arthabichar Nepal - Guide to Entrepreneurs, Startups, and Business Enthusiast

Search This Blog