Economy

Social Security Tax Law

Published by Octron on August 31, 2009

Jobholders with an annual income of up to Rs. 160,000 have to pay a 1 percent social security tax, whereas traders have been exempted from it. The government has stated in the budget announcement of the current fiscal year that it would impose a 1 percent tax for social security for both government and private sector employees. “Those with their own businesses, however, have to pay the 1 percent social security tax if their annual income is more than Rs. 160,000,” said Bishnu Nepal, deputy director general of the Inland Revenue Department (IRD).

A salaried married couple, however, can pay social security tax up to their income at Rs. 200,000. Couples who earn up to Rs. 200,000 through their firms, however, do not come under the social security tax net. “But all earners whether they are salary holders or self-employed have to pay social security tax if their income crosses the first slab (Rs. 160,000 for individual and Rs. 200,000 for a couple) where income tax is imposed,” said Nepal. When asked about different provisions for salary earners and persons earning through business, revenue secretary Krishna Hari Baskota said that providing exemption to certain segments of the population and bringing others under the tax net was a natural process in the government’s tax policy.

“A one day’s salary of government employees had been deducted for the youth self-employment programme last year too,” he said. The government has been providing allowances for elderly people, widows, the disabled and marginalized communities which it wants to expand in the future. Likewise, those making an income of up to Rs. 150,000 and those doing business transactions of up to Rs. 1.5 million have to pay an accumulated tax of Rs. 5,000 for this year in metropolitan and sub-metropolitan cities. The tax is Rs. 2,500 in the municipalities and Rs. 1,500 in the villages. They are usually small businessmen and they make up 65 percent of the total number of taxpayers in the country, said the IRD.

Although the first slab of income tax is imposed on those with incomes above Rs. 160,000, they have to pay tax on their income up to Rs. 150,000 or on their annual transactions of Rs. 1.5 million rupees. Officials said that imposition of taxes on a reduced amount of income was not aimed at compensating for the exemption in the social security tax but because small traders were allowed to run their businesses without keeping accounts.

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