Conceptual Foundation

Meaning and Concept of Tax

Tax is a compulsory payment to government by taxpayer without any expectation of some specified
return and it is computed and paid as prescribed in the law. Every government needs sufficient revenues
to handle daily administration, to maintain peace and security, to carry out development plans and to
launch other public welfare programmes. The government (public) revenues are collected through
various internal sources. These sources can be (a) taxes (b) revenues from government corporations, and
public enterprises (c) fees (d) special assessment and (e) fines and penalties. Among them, tax is the main
source of collecting public revenues because it occupies the most important part of the government
treasury. In Nepal, more than 80% of total revenue comes from tax revenues and the rest from non-tax
revenues in the government budget.
The Government of Nepal also receives grants, gifts and donations from foreign governments and
multinational organizations to finance the deficit budget in every fiscal year. Tax is a compulsory
payment by a person to the government as per prevailing law. A person pays tax to the government
without expectation of any quid pro quo (direct benefit). The government mobilizes the tax for public
benefit and interest.
According to Prof. Seligman "A tax is a compulsory contribution from a person to the government to defray the
expenses incurred in the common interest of all persons without reference to special benefit."
In the words of Taylor "A tax is a compulsory payment to the government without expectation of direct benefit
in return to the taxpayer." Similarly, Bastable has opined that "A tax is a compulsory contribution of wealth of a
person or body of persons for the service of public powers."
The above-mentioned definition conveys those taxes are not voluntary contribution but are compulsory
charge by government on income expenditure and property of an individual, corporation or trust as well
as the gifts and casual gain. The government does not provide direct return in benefit of taxpayer but it is
incurred for the common interest of people and non-payment of tax is subject to punishment by law.

Sources of Financing in Nepal

The government of Nepal collects the required capital mainly from following sources.
Debts Revenue Grants
Objectives of Tax (Functions of Tax)
Tax is one of the major sources of public revenue so the primary objective of taxation is to generate
sufficient fund to pay all kind of expenditure of government. The government mobilizes its revenues
through budget in daily administration, maintaining peace and security, lunch development programmes
and fulfills public interests. Thus, tax policies are considered as tools of social and economic activities of
government. Thus, collection of tax is made to achieve the following objectives.
1. To raise government revenues: The main objective of tax is to provide required fund to meet public
expenditure include day to day administration, building of public physical infrastructure,
maintaining security and other public welfare expenses etc. for that the government formulate and
implements various tax policies.
2. To reduce economic inequalities: The government levies more tax upon high-income group and
mobilizes it to improve the economic conditions of low-income group. As a result, the economic
inequalities will be reduced.
3. To maintain welfare state: The government must conduct different welfare programmes, such as,
education, health, communication, transportation, sanitation, electricity etc. Likewise, it should
maintain economic stability in the country. Thus, the government collects various taxes in order to
perform such welfare programmes.
4. To encourage production of essential goods: The tax policy attempts to provide tax exemptions or to
levy the tax at a low rate to the industries which produce essential goods. On the other hand, the tax
policy attempts to impose the tax at higher rate to the industries that produce luxurious and harmful
goods. As a result, the production of essential goods is encouraged and production of luxurious and
hazardous goods is discouraged.
5. To remove regional economic disparity: The government provides tax exemption, rebates and
concessions to those industries which are operated in the backward and remote regions. As a result,
 the economic activities will be increased in those regions which are economically backward. Thus it
helps to maintain economic parity among the regions.
6. To reduce unemployment: The government can reduce the unemployment in the country by
promoting various employment generation activities. Industries, providing more employment are
given more facilities. As a result, unemployment problem can be reduced to a great extent through
liberal tax policy.

Classification or Types of Tax

Different economists have classified taxes into several categories such as best on form, structure, nature,
tax base and volume. On the basis of shifting of burden tax can be classified in to two broad categories (i.e
direct tax and indirect tax). This is the most common and popular classification of tax.
TAX

Direct Tax Indirect Tax

• Income tax • Customs duty
• Gift tax (Export/Import duty)
• Interest tax • Excise duty
• Property (wealth) tax • Value added tax
• House & Land tax • Entertainment tax
• Capital gain tax • Hotel tax
• Casual gain tax • Passenger tax
• Rent tax
• Vehicle tax
• Contract tax
Direct Tax
Direct tax is that types of tax which is to be paid the government directly by the person that earns income
or profit. According to Dr. Huge Dalton 'a direct tax is really paid by the person on whom it is legally
imposed.' Tax liability of direct tax cannot be transferred to others and must be paid by the taxpayer to
whom it is legally levied. Such tax is imposed on the income and property of a person. The impact of
direct tax is limited within the taxpayer who is liable to pay such tax. In other words, a person paying and
bearing the tax is the same tax payer. Income tax, gift tax, interest tax, property (wealth) tax, house and
land tax, vehicle tax, inheritance tax, death tax, contract tax, etc. are the typical examples of direct tax. The
government collects or realizes such taxes directly from the taxpayers.

Merits of direct tax

1. Equitable: The equity is bared on ability to pay where the burden of tax is distributed among
different citizen proportionately. Direct tax is levied on income and property of a taxpayer. So the
amount of tax is increased or decreased according to proportional increase or decrease in the income
or property. More tax is imposed on more income and property while less tax is levied on less income
or property. Thus, direct tax is based on the principle of ability to pay in an equitable manner.
2. Certainty: The taxpayers are informed about the amount, time and procedure of payment of direct
taxes. Tax payer knows in advance that the amount of tax to be paid. So, direct tax has a quality of
certainty.
3. Progressive: The huge amount of direct tax is collected from opulent (extremely rich) people and less
tax from poor people and the government utilizes it for the development programmes and public
benefits. The poor people are indirectly benefited from direct tax. Thus, direct tax is progressive in
nature and is a means of redistribution of income.
4. Elasticity: The amount of direct tax is increased or decreased according to proportional increase or
decrease in income and properties. Furthermore, the government can easily increase or decrease the rate of
direct tax in a considering to the economic situation of the country.
5. Economy: Direct tax has a quality of economy because low cost is incurred in levying and collecting
tax.
6. Public awareness: Taxpayers are conscious about the development programmes of the country
because they feel that there is also their contribution in the national budget through direct tax.
Demerits of Direct Tax
1. Economic burden: Direct tax is imposed on taxpayers' own income or property but the government
does not provide them any direct benefits. So, they may feel the tax as an economic burden.
Furthermore, the taxpayers always feel high tax rate as an unnecessary financial burden.
2. Possibility of tax evasion: If taxpayers feel direct tax as an unnecessary burden, they attempt to pay
the tax as much less as possible the person that earns income or profit. As a result, there will be a
chance of tax evasion by hiding income or properties.
3. Lack of mass participation: Direct tax is levied only on those taxpayers who have taxable income or
properties. Therefore, there is limited participation of tax payers in public revenue through direct tax.
4. Discourages saving and investment: A certain portion of earned income is to be paid as direct tax. So
saving of each taxpayer will decrease which will result in reduction of investment.
5. Inconvenience: A taxpayer has to maintain the books of accounts appropriately and submit them to
the tax office for checking whether they are appropriate or not. Furthermore, the tax officer assesses
the tax liability on judgmental basis and sometimes on estimation basis. In such cases, the taxpayers
feel inconvenient.

Indirect Tax
Indirect tax is such tax that is imposed on the consumption of goods or use of services. It is realized from
the businessperson who collects the tax from customers. In the words of Dr. Huge Dalton, 'An indirect tax
is imposed on one person but paid partly or wholly by another." It is levied on one person who does not
bear it. Tax is transferred to customers by adding it to the price of goods or services. The person paying
the tax and the person bearing the tax are different person. Thus, the government indirectly collects such
taxes from the general public. Sales tax (turnover tax), entertainment tax, excise duty, customs duty, value
added tax, hotel tax, passenger tax etc. are the typical examples of indirect tax.

Merits of Indirect Tax

1. Convenient to taxpayer: Indirect tax is paid in small installment instead of lump-sum by the user of
service or goods. Indirect tax is added to the price of goods sold or services provided to the
customers. The customers who are the real taxpayers do not feel any burden of tax because they do
not pay the bulk amount in tax. Thus, it is convenient for the real taxpayers.
2. Mass participation: All the customers become taxpayers because indirect tax is added to the price of
goods or services and collected along with the sales. Hence, there is the mass participation in national
revenue through indirect tax.
3. Elasticity: The government can easily change the rate of indirect tax as per need. So, indirect tax has a
quality of elasticity and flexibility.
4. Less chance of tax evasion: Indirect tax is imposed on one person but the person collects it from the
customers. So, the businessperson does not feel it as economic burden and there will be less chance of
tax evasion.
5. Control in consumption: The government can control or discouraged consumption of luxurious and
harmful goods by charging higher tax rates on these goods. On the other hand, the government can
encourage the consumption of necessary goods by charging lower tax rate. Likewise, the government
encourages domestic products and discourages foreign goods through higher rates of indirect tax.

Demerits of Indirect Tax

1. Uncertainty: If the demand for goods or services increases, the amount of indirect tax will be
increased and vice versa. Since the demand of goods or services is not constant, the government
cannot collect revenues through indirect tax on estimation basis.
2. Inequitable: Both high-income group and low-income group need daily consumption goods in
similar quantities. As they consume similar goods in similar quantities, these groups equally
contribute the national revenue through indirect tax. Since both high-income and low-income groups
pay indirect tax in similar amount, it is quite inequitable.
3. Bad effect: If indirect tax rate is high, the price of goods or services will be increased. Accordingly, the
consumption of these expensive goods or services may be reduced. As a result, the high tax rate may
cause bad effect on consumption, production and employment.
 4. Lack of awareness: The consumers may be unknown about the indirect tax which they pay along
with the purchase of goods or services. Hence, they will be ignorant of the utilization of revenues
collected through indirect tax.
5. Consumer exploitation: Normally indirect taxes are added to the cost of each taxable product and
collected through the agent such as producer, distributor and retailer. The agent may not pay all
collected taxes to the government. Thus, there may be the chance of consumer exploitation.
Furthermore, indirect taxes inflate the cost of the product so as to reduce the purchasing capacity of
the people.

Canons or Principles of Taxation

Canon of taxation refers to the administrative aspects of a tax. They related to the rate, amount, and
method of levy and collection of a tax. In other words, the characteristic or qualities, which a good tax
should possess, are described as canon of taxation. The influence of tax on industry and trade and ability
of a person to pay tax should be considered while formulating tax policies. There are some principles that
help to formulate appropriate tax policies. These principles or canons are explained below.
Adam Smith, the father of Economics, had mentioned the following four criteria, maxims or canons of
taxation in his famous book 'The Wealth of Nations':
1. Canon of equality or equity: Equity means that people should pay taxes according to their capacity.
Equity does not mean that all people should pay equal tax. It, in fact means that everyone should
make equal sacrifice. It means equality of sacrifice, so that rich people should pay more amount of tax
than poor people. The tax policy should be formulated considering the ability of public to pay taxes.
For this, higher tax is imposing on the higher income or properties while lower tax is levied on the
lower income or properties. This policy establishes the equitable tax liability to the same income
group.
2. Canon of certainty: According to this principle, there should be a certainty regarding taxes. A
taxpayer should be informed about the rate, time, method and procedures of tax payment.
Furthermore, the government, through budget, fixes its target of revenues that comes from taxes.
3. Canon of convenience: According to this canon, the convenience of the taxpayer also be kept in mind
while imposing tax. Taxpayers are ordinary people who neither have sufficient knowledge about the
taxation nor the capacity to hire tax experts. So, good tax system should have the quality of simplicity
that can be easily understood and followed by the ordinary people in the society. In this respect, the
time, procedure and place of tax payment should be convenient to the taxpayers. If a taxpayer feels
inconvenience to pay tax he/she will tend to evade tax. For this, the government should levy the tax
at the time of income or at the different installments through nearest tax office or bank to the taxpayer
and provide self-tax assessment.
4. Canon of economy: According to this canon, the cost of tax collection should be the lowest. If the
expenditure for collecting tax is more than or equal to the amount of tax, such tax policy will not result
in surplus to the public revenues and will not be beneficial to the country. Thus, good tax policy should
follow the principle of economy. The cost for collecting tax should be minimize to the possible extent so
as to minimize the difference between the amount paid by people and the amount that actually goes to
the government treasury.
In addition to these canons, Bastable, in his book 'Public Finance', had mentioned two other principles
which are describes below:
5. Canon of productivity: The tax system of a country should be productive. It means that the
government should utilize the collected tax in the productive work that would cause to raise
additional tax. Government tax policy should encourage to the production and distribution of goods
and service by minimizing tax rate.
6. Canon of elasticity or flexibility: The tax system should be flexible so as to increase or decrease the
revenues through tax as required by the state. Furthermore, the tax liabilities of persons in each fiscal
year should be increased or decreased according to increase or decrease in their income, properties
and transactions.
Other modern Economists have added some other canons of taxation. They are
7. Canon of simplicity: This canon implies that every tax should be simple so that the taxpayer can
understand its implications without inviting the costly help of tax experts. If the tax is complex and
 complicated, the taxpayer will have to seek the assistance of tax experts in order to understand its
implications. Beside a complicated tax also increase the chances of corruption in the country.
8. Canon of Neutrality: A good tax system should not affect negatively to the production and
distribution system of the country. It should be facilitates to the production and distribution system.
It should not only consider how to increase tax revenue but also considered how to grow economy of
the country.
9. Canon of co-ordination: In democratic country, there may be existence of central and federal state
government. State government has autonomy in day-to-day administration and policy making. In
formulating tax policy there should be co-ordination between central and state government.
Similarly, there should be co-ordination among other laws and acts prevailing in the country. It
should not affect the spirit of other acts in the country.
10. Canon of diversity: According to this canon, the tax system should not be totally depending on one
source of revenue. It is risky for the government to depend on a single source. The diversification of taxes
should be practiced in such a way as every section and every individual must pay something to the national
exchequer.

Features of Income Tax Act 2058

Income tax play a vital role in national economy and income tax is major revenue of the Nepal
government. Income Tax Act 2058 introduced many new concept in this Act were not prevailed in
previous tax law. This Act has 143 sections. Income Tax Regulation 2059 was promulgated for the
effective implementation of this Act after one year. The main features of Income Tax Act 2058 are as
follows:
1. Compilation of all provisions related to income tax/All tax related matters within one Act:
2. Clear definition:
3. Wide coverage:
4. Provision for income returns and self-tax assessment:
5. Set off and carry forward loss:
6. Provision of tax accounting:
7. Provision for quantification, allocation and characterization:
8. Provision for international taxation:
9. Provision for calculation of income:
10. Provision for deductible expense:
11. Simplification in depreciation related provisions:
12. Aggregated provisions for facilities like exemptions:
13. Provisions for tax rats and collection, remission and refund of tax
14. Stringent fine and penalty provision for defaulters:
15. Provision of appeal:

Definition of Basic Terms

1. Withholding agent [2a]: Withholding agent means a person who is required to withhold tax at source
at the time of payment for employment, investment return, service fee or contract.
2. Final withholding payment [2c] Final withholding payment means a payment of Dividend, Rent,
Gains, Interest and payment made to a non-resident person on which tax deduction has to be made as
per section 92. Such payment will not be included in the income of the recipient while calculating
taxable income.
3. Retirement fund [2d]: Section 2 (d) has defined the term 'retirement fund' as any entity established
and maintained solely for the purposes of accepting and investing retirement fund contributions in
order to provide retirement fund payments to individuals who are beneficiaries of the entity or a
dependent of such an individual.
4. Retirement payment [2e] The term 'retirement payment' is defined in section 2(e). It means a
payment made either to an individual in the event of the individual's retirement or to a dependent of
an individual in the event of individual's death. In addition, this Act has also defined the 'approved
retirement fund' that includes retirement fund approved (recognized) by the Inland Revenue
Department as complying with the requirement prescribed by the rules [2bh].
5. Retirement contribution [2f] According to section 2(f), retirement contribution means a payment
made to a retirement fund for the provision or future provision of retirement payments.
6. Income [2h]: Income means a person's income from employment, business, investment or casual gain
and the total of that income as calculated in accordance with the Act. There are different types of
income that may be assessable income, total assessable income, taxable income, cash income, accrual
income, income in kind, recurring receipts and nonrecurring receipts. Assessable income refers to the
excess of all chargeable incomes over all deductible expenses for each income head. Total assessable
income may comprise total of assessable income from all four heads. Taxable income means the
balance amount derived by subtracting common deductions (contribution to recognized retirement
funds and donation/gift to exempt organization) from total assessable income.
Income received as payment is known as cash income. Income may be earned by a person without its
actual receipt and such income is called accrual income. Income received in terms of physical good is
known as income in kind. Recurring receipt is any planned, ordinary or regular income.
Nonrecurring receipt is the casual receipt by a result of chance, fortune, or without specific motive
and interest or without foresight plan (i.e. lottery prize, money found in street.)
7. Casual gain [2i] casual gain refers to lottery, gift, prize, winnings (Baksis, Jitauri) and other gains
received casually.
8. Income year and assessment year [2j]: Income year means the period from the start of Shrawan of a
year to the end of Ashadh of the following year this is also a fiscal year or financial year of the
government. It is also called previous year, preceding year or accounting year. But the Act has not
defined 'assessment year'. In general, assessment year means the following year of income year in
which the taxpayer is required to submit the income return and pay income tax within a particular
date. It is a subsequent year. The income return so filed is processed for the tax assessment process
must be finished by the end of the assessment year. In conclusion, the income of previous year is
assessable in the assessment year.
9. Company [2n]: For the purpose of income tax, a company means a company established under
'Company Act 2063' or any corporate body or any unincorporated association, committee, institution,
society, or group of persons other than a partnership or a proprietorship firm (whether or not
registered) or a trust. The word company also includes a partnership firm (registered or unregistered)
having 20 or more partners, a retirement fund, a co-operative, a unit trust, a joint venture, foreign
company and foreign institution prescribed by the Director General.
10. Tax [2o]: Tax means income tax imposed under the Act. It also includes the following payments-
expenses incurred by the Department in the process of creating charge and performing auction of the
property of tax debtor, amount payable by a withholding agent or withholdee, amount payable by
installment payer, amount payable on regular self-assessment, jeopardy assessment and amended
assessment, amount payable to the Department in respect of a tax liability of a third party, amount
payable by way of interest and penalties and amount payable by way of fine by the order of the
Department.
11. Witholdee [2p]: Withholdee means a person receiving or entitled to receive a payment for
employment, investment return, service fees and contract from which tax is required to be
withheld under Chapter 17 of ITA 2058. In this regard final withholding payment, according to
section 2(c), means a payment of dividend, rent, gains, interest and payment made to non -
resident person to be made after withholding final tax as mentioned in section 92.
12. Assessment [2q]: In general, the word "assessment" refers to the procedure of ascertaining and
imposing tax liability of a person. According to the provision made in the Act, it includes compulsory
assessment under section 99, jeopardy assessment under Section 100, amended assessment under
section 101 and assessment of interest and penalties under Section 122. Assessment is defined to
include reassessment (amended assessment) under Section 101. It is obvious that if an amended
assessment has replaced the former assessment, it does not include that replaced assessment.
13. Non-business chargeable assets [2t] Non-business chargeable assets include land, buildings, and an
interest in an entity or securities. However, it excludes the following assets.
▪ Business asset, depreciable asset or trading stock
▪ A private building of an individual that has been owned continuously for a least ten years and
resided for a total period of at least ten years either continuously or intermittently.
 ▪ Interest in a retirement fund of a beneficiary
▪ Land, house and land or private building of an individual that is disposed in less than three
million (thirty lakh) rupees. Private building refers to "building and the land occupied" or 'one
ropani land' whichever is lower. or
▪ Asset of an individual that is disposed off by way of any type of transfer other than sales and
purchase made within three generations.
14. Exempt organization [2u]: An exempt organization means any entity that is not required to pay the
income tax legally. Normally, non-profit organizations are provided such facilities. But any benefit
acquired by any person out of the assets of the exempt entity or amount derived by the entity, except
in relation to the entity's function or payment for assets or services rendered to the entity by the
person, is not exempt from tax. The Act has included following entities within tax-exempt
organizations:
▪ A social, religious, educational, or charitable organization of a public character registered
without having a profit motive.
▪ An amateur (non-professional) sporting association formed for the purpose of promoting social
or sporting amenities not involving in the acquisition of gain by the association or by its
individual members.
▪ A political party registered with the Elections Commissions.
▪ A village development committee, metropolitan city, sub-metropolitan city, municipality or
district development committee.
15. Trust [2v] and trustee [2w]: A trust is an arrangement for the holding of the assets by a trustee. The
Act has clarified that the trust does not include a partnership, a corporate body, a retirement fund,
cooperative, a unit trust, or a joint venture. According to section 2(u), trustee denotes an individual or
Goothi or corporate body holing assets in a fiduciary capacity whether held alone or jointly with
other individuals or corporate bodies. The trustee includes the following persons:
▪ Any executor or administrator of a deceased individual's estate,
▪ Any liquidator, receiver, or trustee in bankruptcy,
▪ Any person having, either in a private or official capacity, the possession, direction, control or
management of the assets of an incapacitated person,
▪ Any person who manages assets under a private foundation or other similar arrangement, and
▪ Any person in a similar position to person mentioned in i, ii, iii and iv.
16. Long term contract [2x] Long term contract means such contract, the term of which exceeds 12
months.
17. Entity [2y] Entity means the following institutions or organizations.
▪ A partnership, trust, or company
▪ A village Development Committee, Municipality or District Development Committee
▪ Nepal government
▪ A foreign government or a political sub-division of the foreign government, or a public
international organization established under treaty
▪ A permanent establishment of an individual or an entity that is not situated in that country in
which the individual or entity is resident.
18. Lease [2ac] Lease means a temporary right of one person in respect of an asset of another person,
other than money. It includes a license, option, rental agreement or tenancy.
19. Employment [2ak]: Employment includes past, present or prospective employment.
20. Investment (2am): Investment means an Act of holding or investing one or more assets of similar nature
that are used in an integrated fashion. But it excludes an act of holding of assets (other than non-
business chargeable assets) primarily for personal use by the person owing the assets or investing
amount on such assets. It also excludes employment or business.
21. Resident and Non-resident person [2ap and 2s]: On the basis of residential status, a person may be
resident and non-resident. Section 2(ap) of the Act has given clear definition of different resident
persons. In case of an individual, resident person means an individual whose normal place of abode
is in Nepal; who is present in Nepal for more than 182 days in any period of 365 consecutive days of
 any income year, or who is an employee or an official of GON posted abroad at any time during the
income year.
In the case of a trust, a trust that is established in Nepal; that has a trustee that is a resident person for
the income year; or that is controlled directly or through one or more interposed entities by a person or
persons one of whom is a resident person for the income year. In the case of a company or a foreign
government or a political subdivision of the foreign government, resident person includes a company or
such an entity that is established (formed or incorporated) under the laws of Nepal; or that has its
effective management in Nepal during the income year. According to the Act, a resident person
includes any partnership, any institution or entity established under treaty and a foreign permanent
establishment of a non-resident person situated in Nepal. According to section 2(s), non-resident person
means a person who is not a resident person or does not fulfill the quality of resident person.
22. Business [2as]: It refers to an industry, a trade, a profession or like isolated transaction with a
business charter and includes a past, present, or prospective business. The term does not refer to
employment.
23. Interest [2at] Interest refers to the following payments or gains.
▪ Payment made or incurred under a debt obligation that is not a repayment of capital.
▪ Any gain realized by way of a discount, premium, swap payment, or similar payment, and
The portion which is treated as interest in the payments made to a person under an annuity or by
a person acquiring an asset under an installment sale or the use of an asset under a finance
lease.
24. Asset [2be, 2bk, 2r, 2at]: According to section 2(be), an asset means a tangible or an intangible asset
that includes currency, goodwill, know-how, property, an owner's interest in a foreign branch, a right to
income or future income, and part of an asset.
25. Associated Persons [2bf]According to section 2(bf) associated persons means two or more persons or
group of such persons where one may reasonably be expected to act in accordance with the intentions
of the other and includes-
▪ an individual and a relative of the individual or an individual and a partner of the individual;
▪ a foreign permanent establishment and its owner; and
▪ an entity and a person who, either alone or together with an associate or associates controls or
may benefit from 50 percent or more of the rights to income, capital, or voting power of the
entity, as the case requires, either directly or through one or more interposed entities; or a person
who is an associate of such person. provided that, the term does not include the following
persons - (1) employee and (2) persons prescribed by the department as not being associate
persons.
26. Adjusted taxable income [2bg] Adjusted taxable income means taxable income before deducting
PCC, RD, interest paid to controlling entity and donation.
27. Partnership [2 bh] Partnership means a firm (whether or not registered) that has less than 20
partners. But the term does not include a proprietorship firm or joint venture.
28. Normal interest rate [2bi] Normal interest rate means 15 % annual interest rate.
29. As per section [2bk] a depreciable asset means an asset used in business or investment for earning
income and that is likely to lose value because of wear, tear, obsolescence or the passing of time. A
depreciable asset does not include trading stock.
30. Business assets [2aw] According to section 2 (aw), business asset means those assets used in business
other than trading stock or depreciable asset.
31. Gift: Gift means a payment that is without consideration or a payment with consideration to the extent
the market value of the payment exceeds the market value of the consideration.