Note on Commission Taxation and Bonus

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Commission

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Commission is paid by the company at a certain rate for the agent at selling the service. Commission is expressed in terms of percentage(%). As the business increases the commission also increases.

A company related to selling and purchasing of land in Biratnagar receives 5% of the selling price from the land owner after arranging the selling of the land.

A foreign motor car company provides the following amount on sales to its company authorized agent or dealer for the purpose of the promotion of the sale at the following rate:

4% on the annual sale up to Rs. 4000000.

5% on the annual sale up to Rs. 5500000.

7% on the annual sale to Rs. 10000000.

But the same company provides 5.5% of the total sale to the sales person of a jeep. Therefore, the amount received by the sales person on the sale of the jeep for Rs. 5500000.

While solving the problems relating to commission, following formulae are used:

  1. Commission = fixed percentage of selling price
  2. Price after commission = selling price - commission amount
  3. Commission % = \(\frac {commission}{selling\;price}\)×100 %
figure

Taxation

A person, organization, industry or company pays the amount at a fixed rate or under certain criteria to the government or the government institutions (like VDC, municipality, metropolitan, tax office) for the earning of capital. The money so paid is called a tax. There are different kinds of taxes like income tax, transportation tax, entertainment tax, value added tax, etc.

Income Tax

Income tax is levied on the income. In our country, a person or the institution pays a certain rate to the government on the amount earned above the fixed amount. Persons, minimum expenditure depends on the personal status like married or unmarried, the number of dependent family members etc. Income tax is levied to the earning above the minimum expenditures (called the allowances). The limit of allowances is fixed by the government. The rate is subject to change by the time.

  1. Taxable income = Total income - Tax-free allowances
  2. Income Tax = Rate of tax % (in %) * Taxable income

Example:
A teacher's monthly salary is Rs. 13500, and the annual allowances are Rs. 140000. If the income above this is taxable at the rate of 15%, how much salary does he receives per month after the deduction of the income tax?

Monthly salary = Rs.13500
Annual salary = 12 \(\times\) Rs. 13500
= Rs. 162000
Allowances = Rs. 140000
Taxable income = Rs. 162000 - Rs. 140000
= Rs. 22000
Annual income tax = 15% of Rs. 22000
= \(\frac{15}{100}\) \(\times\) Rs. 22000
= Rs. 3300

Monthly Income tax = Rs. \(\frac{3300}{12}\) = Rs. 275.
\(\therefore\) Monthly Salary Received = Rs. 13500 - Rs. 275
= Rs. 13225.

Figure: Bonus
Figure: Bonus

Bonus

If a factory or a company or any other business organization makes a profit, they distribute a certain amount of profit to their staff to encourage at their work.This additional amount of profit is called the bonus.The bonus is expressed in percentage.The percentage is decided by the body o executive committee of an organization. Therefore, the bonus is provided by the annual general meeting (AGM) of an organization.

Discount

A shopkeeper marks price (MP) fixed before selling to earn more profit but he deducts a certain amount in mark price due to various reason. Discount is the deducted amount given to a customer by shopkeeper while purchasing goods.The price at which the good is sold after the deduction of a discount amount is called selling price (SP).

  1. Actual discount (D) = Marked price (MP) - Selling price (SP)
  2. Discount percentage = \(\frac{Actual\;discount}{Marked\;price}\)*100

Value Added Tax (VAT)

Vat is a tax levied on the supply of goods and services. Vat rely on a country which is determined annually by state govern. In a case of Nepal, currently, 13% VAT is charged. VAT is determined by adding taxes for different purposes. And it is charged on the actual selling price.

  1. VAT amount = Rate of VAT × Selling price
  2. SP with VAT = SP + VAt amount
  3. VAT% = \(\frac{VAT\;amount}{SP}\)×100

  • Tax is a financial charge or other levy imposed upon a taxpayer (an individual or legal entity) by a state or the functional equivalent of a state to fund various public expenditures.
  • Bonus means an extra payment (bonus payment) received for doing one's job well.
  • Commission = fixed percentage of selling price
  • Price after commission = selling price - commission amount
  • Commission % = \(\frac{commission}{selling \;price}\)×100
  • Taxable income = Total income - Tax-free allowances
  • Income Tax = Rate of tax % (in %) × Taxable income
  • VAT amount = Rate of VAT * Selling price
  • SP with VAT = Sp + VAt amount
  • VAT% = \(\frac{VAT\;amount}{SP}\)×100
.

Very Short Questions

Tax free income = Rs.120 , 500
Annual income = Rs.165 , 000
Taxable income = Rs . 165 , 000 - Rs. 120 , 500 = Rs. 44 , 500
Rate of income tax = 30%

Actual income

Annual income = Rs. 1 , 89 , 500
tax free amount = Rs. 34 , 500
Taxable amount = Rs. 1 ,89 500 - Rs. 34 , 500 = Rs. 1 , 55 , 000
Here , 30% income tax should be paid up to Rs. 1 , 46 , 000
Initial income tax = Rs . 1 , 46 , 000 \(\times\) \(\frac{30}{100}\) = Rs. 43 , 800
Taxable Income on which 40% tax is levied = Rs. 1 , 55 , 000 - Rs. 1, 46 , 000
= Rs . 9000

Again , income tax of Rs. 9000 = RS. 9000 \(\times\) \(\frac{40}{100}\) = Rs. 3 , 600

Total income tax = Rs. 43 , 800 + Rs. 3 , 600 = Rs. 47 , 400 Ans.

Annual income = Rs. 82 , 000
Tax free amount = Rs. 31 ,000
Taxable amount = Rs. 82 , 000 - Rs. 31 , 000 = Rs. 51 , 000
Total income tax paid = Rs. 14 , 820
Rate of income tax = \(\frac{rs.14 , 820}{rs.51 , 000}\) \(\times\) 100 = 28%. Ans.

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  • What will be total sales in order to receive Rs.1200 at the rate of 3(frac{1}{3})% as commission?

    Rs.50000


    Rs.21000


    Rs.36000


    Rs.2300


  • Mahesh receives a monthly salary of Rs.8750 plus a 2% commission on his total sales for the month. If his total sales of the month is Rs.87500, What will his gross amount?

    Rs.2222


    Rs.6500


    Rs.1234


    Rs.7480


  • A man gets commission of 12% on the sales which amounts to Rs.8500. How much will the businessman get from the sales?

    Rs.5600


    Rs.7480


    Rs.2000


    Rs.2100


  • An agent gets a commission of 15% on the sales which amounts to Rs.6750. How much will the businessman get from the sales?

    Rs.2100.0


    Rs.5737.50


    Rs.42000


    Rs.8900


  • Last year, the yearly income of serviceman was Rs.96000. Income tax was not levied upto yearly income Rs.75000 and 10% of his yearly income was invested in civil investing fund which was also tax free. If 15% tax was levied on the rest income, how much yearly tax should he pay?

    Rs.1710
    Rs.1234
    Rs.1445
    Rs.5876
  • A civil servant had a salary of Rs.9600. Tax upto Rs.85000 per year would be exempted . If he paid Rs.377.50 as a tax per month, how much percent of tax was imposed?

    15%


    25%


    22%


    20%


  • Rs.85000 was exempted in the yearly income of a government service holder. If he paid tax Rs.8850 in a year at the rate of 15%, what was his monthly income?

    Rs.20000


    Rs.12500


    Rs.12000


    Rs1000


  • Sweta's yearly income is Rs. 186000. If Rs.125000 in a year is tax  free, Find the income tax at 15% per year.

    Rs.9150


    Rs.1000


    Rs.1204


    Rs.1230


  • The tax  free amount of a man is Rs.100000. Find the income of a man in a year if he pays annual tax of Rs.15000 at the rate of 20%?

    Rs.175000


    Rs.162500


    Rs.124000


    Rs.126000


  • The monthly salary of a civil servant is Rs.7500. If 15% tax is allowed on the yearly income of more than Rs.60000, how much tax should he pay?

    Rs.1200


    Rs.3500


    Rs.4500


    Rs.6500


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DISCUSSIONS ABOUT THIS NOTE

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commission taxation

in 2071 the monthly salary of the chief justice of nepal was Rs.53580. if 1% tax was levied on first Rs.300000 and certain rate on remaining so that the chief justice paid Rs.4537 monthly tax.how much was the tax percentage on remaining?


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yuresh thapa

why is their no answer in question number 1


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A business firm Has monthly income has a monthly income rs 5600.the business firm is free of tax upto income upto the income of 200000 was taxed at th rate of 15 percent and rest at 25percent find the amount of tax payed by business firm

H


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pawan

the monthly salary of a married civil servant is rs 25700 and 10%of his salary is deducted as his provident fund. howb much income tax should he pay in a year?


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