May 30, 2022 | Investopaper
The government has increased the limit of income tax exemption. Through the budget statement of the Fiscal Year 2079/80, the government has increased the limit of direct income tax .
Now, the income tax of up to Rs 500,000 per annum for a person (unmarried) and up to Rs 600,000 per annum for married couples has been waived. Previously, such ceiling was fixed at Rs. 4 lakhs per annum for an unmarried person and Rs. 4.50 lakhs per annum for married couples.
However, one will have to pay one percent social security contribution even if they do not have to pay income tax. The government has clarified that the income tax limit has been increased keeping in view the basic living expenses of an individual or a family.
Similarly, the limit for deducting insurance premiums for income tax purposes has been increased to Rs 40,000. Earlier, the limit was Rs 25,000 per annum.
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The budget has also provided a 40 percent income tax exemption for five years from the date of commencement of business if a new industry is established to manufacture or assemble four-wheeled electric vehicles.
In the Fiscal Year 2079/80, 75 percent income tax exemption will be provided to small business taxpayers with an annual turnover of up to Rs. 30 lakhs. Likewise, 50 percent income tax exemption will be provided to medium business taxpayers with an annual turnover between Rs. 30 lakhs to Rs. 1 crore.
In order to provide relief to the COVID affected businesses, the government has made a provision of 50 percent tax exemption on commercial taxable income of the tourism sector industries such as hotels, travel, trekking, movie business and others which are most affected by the epidemic of Covid-19.
Similarly, the government has announced to give full income tax exemption for 15 years from the date of commencement of business if special industries are set up in hilly districts of Karnali and Sudurpaschim Province to provide direct employment to more than 100 people.
Also, a person earning foreign currency by providing services based on software, electronic services, business process outsourcing or information technology outside Nepal will be taxed at only 1 percent on the income.
The government has reduced the telecommunication service fee tax to 10 percent. Earlier, it was 13 percent.