You put in a lot of effort to earn certain money, yet you must provide a part of that amount to the government. Isn’t that heartbreaking? Every person who makes income is required to pay income tax, which differs depending on how much they earn.
Governments collect taxes as mandatory contributions to the country and the development of the nation. The governments collect an income tax of up to 30% of your income. And, as we all know, no one wants to pay income tax. So, here are 9 ways to reduce taxation legally in Nepal:
1. Enroll in Government Schemes
You can legally deduct high-income taxes if you contribute to the Employees Provident Fund and Citizen Investment Trust. So, if you deposit a total of Rs 300,000 into these two programs, you will be eligible for a deduction process. If you are not a part of it, you must join this; it can make you stop paying your hard-earned money.
2. Save Tax through salary expenses
Paying employees’ salaries through an office account helps the company save money on taxes. We may demonstrate the salary expenditures and legally save the amount of taxation.
3. Reduction through diplomatic missions
If you are a Nepali officer working on a diplomatic mission outside the country or abroad, you are eligible for a 75 percent reduction on the financial tax you are being paid on current days.
4. Buy insurance packages
If you want to avoid paying a high tax rate, buy an insurance package. You can avoid having to legally pay tax to the government by purchasing the insurance packages. If you purchase life insurance up to Rs 40,000 annually, you are eligible for a deduction.
This will reduce the taxable income and tax liabilities, but it will also result in savings over time. For a deduction of up to Rs 20,000, purchase health insurance. Rs 5,000 is free if you get house insurance.
5. By making charitable donations
There is good news for you if you like conducting charitable work. By presenting your bill of done charity as proof you can save yourself from paying taxes to the government. This is one of the best legal ways to avoid paying taxes.
6. Request exemptions for medical costs
You are eligible for income tax deductions for medical costs. You must present your medical bill for this at their location of business. According to the government, a person may claim 15% of their medical expenses, or up to Rs 750. This is therefore one of the legal ways to avoid paying taxes.
7. Work in remote areas
The government has separated Nepal’s districts into rural and urban areas, and these areas have various tax rates as well. A remote area payment up to Rs 50,000 that is tax-free is available to those who work in rural areas.
8. Show the annual losses
Show your company’s annual loss to be legally free from tax. To avoid paying taxes, you can demonstrate your company’s losses to the relevant authorities.
9. Make a plan for the loan
Loans made in the name of an organization, such as a home loan or a vehicle loan can help you in a reduction in taxes. This is also a good way to avoid paying huge taxes. The amount of tax that you must pay will be decreased. Some of your income will be deducted from a loan, allowing you to lawfully save money on taxes.