Very Short Questions and Answers
1. What is set off a loss? Mention the methods of setting off losses?
An adjustment of losses subject to the certain rules against incomes is known as set off of losses. The three methods are:
- Carry forward
- Carry backward
- A combination of a method
2. Briefly state the provision related to an adjustment of loss on a long-term contract.
Loss arising from a long-term contract obtained under global competition can be carried backward to proceeding to income year or years as per written approval of the Inland Revenue Department.
NUMERICAL PROBLEMS
3. Mention the allowed tenure for the adjustment of the following losses.
a) Business loss
b) Investment loss
c) Loss of BOT/ BOOT
d) Loss on an entity conducting petroleum business
SOLUTION
a) Next 7 years
b) Next 7 years
c) Next 12 years
d) Next 12 years
4. From the information given below, make a proper adjustment of loss.
Loss from business in Nepal …… Rs 10,000
Income from a business in Pakistan. .Rs 5,000
Income from investment in Nepal Rs 2,000
Income from investment in Bhutan Rs 1,500
Here, a loss of Rs 10,000 from domestic business can be deducted from the global income. A loss of Rs 8,500 is fully set off and the unrelieved loss of Rs 1,500 can be carried forward to the next seven income years and offset against any source of income.
Short Questions and Answers
1. How is business loss carried forward? Describe in the light of the provision made in ITA, 2058.
While calculating the income of a person for an income year from a business or an investment, the following losses are allowed for deduction:
- any unrelieved loss of the year incurred by the person from any other business.
- any unrelieved loss of the previous seven income years incurred by the person from any business.
However, electricity projects involving building a power station, generating and transmitting electricity; the projects conducted by any entity so as to build public infrastructure own, operate & transfer (BOOT) to the Government of Nepal; and an entity conducting petroleum business under Nepal Petroleum Act, 2040 can deduct losses of the previous 12 income years. Loss from domestic business can be offset against all types of income (business or investment) from any source (domestic or foreign). Loss from foreign business can be offset against a foreign business or investment income of the same country only.
2. How is investment loss carried forward? Briefly describe the provision in the Act.
While calculating the income of a person for an income year from an investment, any unrelieved loss of the year incurred by the person from any other investment is allowed for deduction. In addition to this, losses from any investment of the past seven years can be deducted. Losses from a domestic investment can be deducted only against investment income whether domestic or foreign. Losses from foreign investment can be deducted from foreign investment income only.
3. The following are the operating results of a company for the last 6 years.
| Year Profit/(loss)
|
1 | 2 | 3 | 4 | 5 | 6 |
| (Rs. 100,000)
|
20,000
|
(70,000)
|
30,000
|
(30,000)
|
20,000
|
The company has donated Rs. 40,000 in year three and has deducted before determining the above profit/loss.
Required: Taxable income of business giving explanation wherever necessary.
