Commission Taxation and Bonus

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

Value Added Tax (VAT)

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