One day I was alone happily thinking about how I don’t need to pay income tax to the government. The happiness lasted until I realized I am jobless with no income.
You have a wonderful well-paying job, Income Tax is your biggest headache. You have no job, being jobless is your headache.
A place where you need to pay a tax for happiness either. Imagine it? I wonder, how much tax will I pay. THANK GOD!!!! we don’t have to pay tax for being happy. But again we have to pay taxes for everything that brings happiness to our life. I R O N I C, isn’t it?
Tax is imposed on everything. From everything you eat to everything you wear, your undergarments are no exception either. Biology has exceptions, Chemistry has exceptions, Physics has exceptions but there is no exception in the Tax system. You have to pay tax on everything. Literally on everything.
But worst of all, income tax is a nightmare. You work your ass off for earning some amount but you have to give the government some money from your income. Heart-wrecking isn’t it?
Although I am jobless and I have never contributed a penny to the government on income tax but I can empathize with you all guys. You must be here because you want to save yourself from paying income tax to the government legally. And Yes!!! You have come to the right place.
Today, in this article we are going to give an idea about 10 Smart Ways to Save Income Tax Legally in Nepal in 2022
What is Tax?
Tax is a compulsory contribution to state revenue, levied by the government on workers’ income and business profits, or added to the cost of some goods, services, and transactions.
Income Tax is an amount of money every individual who earns requires to pay to the government according to their income. Taxes are mandatory contributions collected by governments.
Why do Government Requires Tax?
The government requires tax because:
- Taxes are the primary source of revenue for the government.
- Tax hells to build the nation
- A tax collected is used to improve and maintain public infrastructures like transportation, health services, emergency services, and welfare programs.
10 Smart Ways to Save Income Tax Legally in Nepal
The government charges up to 30 percent income tax based on how much you earn. And we all know that nobody wants to pay income tax. Do tell me if anyone wants to pay it in the comment section down below. So, people look for ways to save themselves from paying income tax to the government. We are going to discuss 10 ways on how to save yourself from paying income tax legally.
So, Let’s go, my friend!!
1. Join Government Schemes
Did you know, that the first one percent of the income you make is levied if you are part of the pension fund or the social security fund?
If you contribute to the Employees Provident Fund and Citizen Investment Trust, you can get rid of heavy income taxes legally. So, deposit a total of Rs 300,000 combined into these two schemes, and you are liable for an exemption. If you are not part of it, make sure you are because you can save yourself from paying your hard-earned money.
2. Buy Insurance Packages
Buy an insurance package, if you wish to get rid of heavy tax duty. Buying the insurance packages ensures you don’t have to pay tax to the government legally. You are liable for an exemption if you buy life insurance up to Rs 40,000 a year.
Doing so will decrease the taxable amount and tax liability and on the other hand, it becomes savings in the long run. Buy health insurance for an exemption of up to Rs 20,000. Buy house insurance exempts Rs 5,000 from the taxable income. Both are allowed by the government. So for sure, it is legal to do so which saves you from paying tax.
3. By Making Charitable Donations
If you are someone who loves doing Charity, then Good news for you. You can save yourself from paying tax to the government by showing your bill of done charity for the proof and BOOM!! your tax will be exempt. Do some charity and save yourself from paying tax. This is one of the good means to save yourself from tax legally.
4. Claim Exemptions for Medicinal Expenses
You can also claim income tax exemptions for medicinal expenses. For this, you have to submit your medical bill at their workplace. The government says a person can claim 15 percent or up to Rs 750 of the amount spent on medical expenses. So, this is one of the legal ways to save yourself from paying taxes. Useful, right?
5. Make a Plan for the Loan
Make a plan for the loan. Loans such as a home loan or automobile loan in the name of an organization. This is also an effective way to escape tax. The amount of the tax you are obliged to pay will be reduced. Some of your income will be deducted in a loan which helps to save the tax legally.
6. Work in Remote Areas
Nepal’s districts are divided into rural and urban areas. The tax brackets for these areas are different. If a person is working in rural areas, they are eligible for a remote area allowance of up to Rs 50,000 which is untaxable. So, how about considering working in remote areas?
7. Rebate for Diplomatic Missions
If you are a Nepali official working in a foreign country for diplomatic missions, you can save a 75 percent rebate on the extra allowance you receive while working there.
8. If You Are a Single Woman
For single women (Ekal Mahela in Nepali) having only one source of income, the government has made a provision to waive 10 percent of the tax they have to pay.
For example, if you are a single woman who has to pay Rs 10,000 in tax per year, the government will waive Rs 1,000.
9. Save Tax Through Salary Expenses
If you are a company owner, pay a salary to all your employee from your office account. Show these expenses to the concerned authorities. Evidence of salary expenses will save you from paying tax.
10. Show the Annual Losses
Show the annual loss of your company, to be exempt from the tax legally. You can show your’s company losses to the concerned authorities and save yourself from paying tax.
Following all these ways, you can save yourself from paying taxes to the government. And you will not be in trouble for not paying tax either because they are all legal methods.
So, which one among all of them did you find most effective? Comment down in the comment section down below.
Thank You!! for reading our article till the end. Have a good day.