Supriya Khanal is a section officer working in a semi-government organization. Her monthly salary is Rs. 48,000. Her annual income is equivalent to her 14 monthly salaries. The tax rates for 2080/2081 for individuals are as follows:
| Income (Rs.) | Rate of tax |
| ----------------- | ----------- |
| Upto 5,00,000 | 1% |
| 5,00,000 - 7,00,000 | 10% |
| 7,00,000 - 10,00,000| 20% |
| 10,00,000 - 20,00,000| 30% |
| Above 20,00,000 | 36% |
a) Which government office is responsible for the administration of income tax?
b) How much social security tax should she pay?
c) Determine the amount of income tax that should be paid in a year.
Answer (2)
The Inland Revenue Department is responsible for administering income tax. Supriya does not need to pay any social security tax, and her income tax liability for the year is Rs. 22,200 based on her annual income of Rs. 672,000.
;
The Inland Revenue Department administers income tax.
Supriya pays no social security tax (based on given information).
Calculate annual income: 14 × 48 , 000 = 672 , 000 .
Calculate income tax: ( 0.01 × 500 , 000 ) + ( 0.10 × 172 , 000 ) = 22 , 200 . The income tax is 22 , 200 .
Explanation
Understanding the Problem Let's break down this income tax problem step by step. First, we need to understand Supriya's annual income and the applicable tax rates. Then, we'll calculate her income tax liability.
Identifying the Responsible Office a) The government office responsible for the administration of income tax is the Inland Revenue Department.
Determining Social Security Tax b) The problem does not provide any information or percentage for social security tax. Therefore, we assume that Supriya does not need to pay any social security tax.
Calculating Annual Income c) To calculate the income tax, we first need to find Supriya's annual income. Her monthly salary is Rs. 48,000, and her annual income is 14 times her monthly salary. So, her annual income is: 14 × 48 , 000 = 672 , 000 Therefore, Supriya's annual income is Rs. 672,000.
Calculating Income Tax Now, we need to calculate the income tax based on the given tax slabs. Here's how we'll do it:
Slab 1: Income up to Rs. 5,00,000, the tax rate is 1%.
Slab 2: Income between Rs. 5,00,000 and Rs. 7,00,000, the tax rate is 10%.
Since Supriya's income is Rs. 672,000, it falls into both Slab 1 and Slab 2. Let's calculate the tax for each slab:
Slab 1 Tax: 1% of Rs. 5,00,000 0.01 × 500 , 000 = 5 , 000
Slab 2 Tax: 10% of the income exceeding Rs. 5,00,000 (i.e., Rs. 672,000 - Rs. 5,00,000 = Rs. 172,000) 0.10 × 172 , 000 = 17 , 200
Now, we add the tax from both slabs to find the total income tax: 5 , 000 + 17 , 200 = 22 , 200 Therefore, Supriya should pay Rs. 22,200 in income tax for the year.
Final Answer In conclusion, the Inland Revenue Department is responsible for income tax administration. Supriya does not need to pay social security tax (based on the information provided). The amount of income tax Supriya should pay in a year is Rs. 22,200.
Examples
Understanding income tax calculations is crucial for personal finance. For instance, if you're planning your annual budget, knowing how much tax you'll owe helps you manage your expenses effectively. Similarly, businesses use these calculations for financial planning and compliance. Moreover, governments rely on accurate tax collection to fund public services like education, healthcare, and infrastructure. Therefore, mastering these concepts is essential for both individuals and organizations to make informed financial decisions and contribute to the economy.
