## Commission Taxation and Bonus

Subject: Compulsory Maths

#### Overview

The amount paid by a company or manufacturer at the certain rate for the service or the sale of the certain type of item in certain quantity is called commission. Commission, in general, is expressed in percentage(%). A person, organization, industry or company the amount at a fixed rate or certain criteria to the government or the government institution for the earning of capital that amount paid is called a tax.

#### Commission

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 %

#### 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.

#### 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

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
##### Things to remember
• 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
• It includes every relationship which established among the people.
• There can be more than one community in a society. Community smaller than society.
• It is a network of social relationships which cannot see or touched.
• common interests and common objectives are not necessary for society.
##### Tax, Tip, Discount & Commission

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.

Annual income = Rs. 55000
Tax free income = Rs, 47 , 000
TAxable income = Rs . 55000 - Rs . 47 , 000 = Rs. 8000
From table table 2.5% tax is paid up to 1 - 10000
Hence , income tax of Rs. 8000 = Rs . 8000 $\times$ $\frac{2.5}{100}$ = Rs. 200

(ii). Annual income = Rs. 1 ,75 ,000
Taxfree income = Rs. 65 , 000
Taxable income = Rs. (1 , 75 000 - 65 , 000) = Rs . 1 , 10 , 000
Now , total income tax
= Rs. 10000 $\times$ $\frac{2.5}{100}$ + Rs. $\times$ Rs. 20 , 000 $\times$ $\frac{4}{100}$ + Rs. 70 , 000 $\times$ $\frac{5.25}{100}\ + Rs. 10000 \(\frac{12.75}{100}$
= Rs. 250 + Rs. 800 + 3 , 675 + Rs. 1 , 275 = Rs . 6000

(iii) Total income = Rs. 9 ,40 , 800
Tax free income = Rs. 5 , 50 ,000
Taxable income = Rs. 9 , 40 , 800 - Rs. 5, 50 , 000 = Rs. 3 , 90 , 8000

As in the above (ii) 2.5% is levied on Rs. 10 , 000 , 4% tax is levied on next Rs.20 , 000 and 5.25% is levied on the next Rs. 70 , 000

Now , remaining amount on taxable income of Rs. 3, 90 , 800 - (Rs. 10 , 000 + Rs. 20 , 000 + Rs. 70 , 000) = Rs. 2 , 90 , 800 , 12.75% tax is levied.

Now ,total income tax
= 250 + 800 + 3 , 675 + 37 , 077 = Rs. 41 , 802 Ans.

Selling price of land = Rs. 2 ,70 , 000
Comission received on the sale of Rs. 10 ,00 ,000 at the rate of $\frac{1}{2}$%
= Rs. 10 , 00 , 000 $\\times$ $\frac{1}{2 \times 100}$ = Rs. 5000.

Again , rest amount = (27 , 00 , 000) - 10 , 00 , 000) = Rs. 17 , 00 , 000

Now , comission received on the sale of Rs. 17 , 00 , 000 at the rate of $\frac{1}{4}$%
= Rs. 17 , 00 , 000 $\times$ $\frac{1}{4 \times 100}$ = Rs. 4250.

Here , total comission recived by the agent = Rs. 5 , 000 + Rs. 4250
= Rs. 9250

Total amount received by landowner = Rs. 27 , 00 , 000 - RS. 9250
= Rs. 26 , 90 , 750 Ans.

Distributed profit as bonus for 60 workers = 60 $\times$ Rs. 8000 = Rs. 480000
Let te profit of the company = x
By question ,
x $\times$ $\frac{25}{100}$ = Rs. 480000

$\therefore$ x = $\frac{Rs.480000 \times100}{25}$ = Rs. 1,92,000 Ans.

ljTotal profit of hotel = Rs. 2500000
Total amount which is distributed for 75 workers = 75 $\times$ Rs. 15000
= Rs. 11 , 25 , 000

$\therefore$ Distributed bonus (%) = $\frac{11,25,000}{25,00,000}$ $\times$ 100% = 45%. Ans.

Total profit of bank = Rs. x (suppose)
Total amount which is distributed for 140 employees = 140 $\times$ Rs. 12000
= Rs. 1 , 68 , 0000

By question ,
$\frac{1}{3}$ $\times$ x = Rs. 1 , 68 , 000
or , x= Rs. 168000 $\times$ 3 = Rs. 5 , 04 , 0000 Ans.

Cost of ticket with entertainment tax = Rs.98
Let actual cost of Ticket= Rs. x
Now , Entertainment tax = 22.5% of x = x $\times) \(\frac{22.5}{100}$ = 0.225

Here, x + 0.225x = Rs.98
or , x (1+0.225) = Rs.98
or. x(1.225) = Rs.98

$\therefore$ x = Rs. $\frac{98}{122.5}$ = Rs. 80

Hence , actual cost of ticket = Rs.80 Ans.

Service charge = 10% of rS.230 = 230 $\times$ $\frac{10}{100}$ = Rs. 23 Ans.

(ii) . Total bill with service charge = 230 + 23 = Rs. 253.
$\therefore$ Government tax = 4% of 253 $\times$ $\frac{4}{100}$ = Rs. 10.12 Ans.

(iii). Total oayable amount = Rs. 230 + Rs. 10.12 + Rs. 23
= Rs. 263.12 Ans.

(iv) . Bill with the service charge on which government tax should be levied = Rs. 253.
Total payable bill with 10% service charge and including government tax = Rs. 260.25

$\therefore$ Amount of goverrnment TAx = Rs. 260.25 - Rs. 253 = Rs.7.25

Here , government tax (%) = $\frac{Amount. of gov. tax}{govt. taxable bill}$ $\times$ 100
= $\frac{7.25}{253}$ $\times$ 100
= 2.865%
= 2.87% (approx) Ans.