TDS and Audit Act Quiz

TDS provisions are in which chapter of the Income Tax Act 2058?

• A) Chapter 5
• B) Chapter 10
• C) Chapter 17 ✔
• D) Chapter 20

Why: Withholding tax (TDS) rules are in Chapter 17 of the Income Tax Act, 2058, which covers who must withhold, at what rate and when to deposit.

The Income Tax Act in force is from:

• A) 2052
• B) 2058 ✔
• C) 2063
• D) 2075

Why: Nepal's current income tax law is the Income Tax Act, 2058 (आयकर ऐन, २०५८), with the Income Tax Rules, 2059. Rates are updated each year by the Finance Act.

TDS means:

• A) Tax deducted by the payer at payment ✔
• B) Tax paid after 5 years
• C) Tax on land only
• D) Tax refund

Why: TDS (Tax Deducted at Source) means the payer cuts tax from a payment before paying, and deposits it with the government on the payee's behalf.

The person who deducts TDS is the:

• A) Withholding agent ✔
• B) Auditor
• C) Tax officer
• D) Receiver

Why: The withholding agent (रोक्का गर्ने व्यक्ति) is the payer, such as an employer or office, who deducts tax and deposits it.

Withheld tax must be deposited within:

• A) 7 days
• B) 15 days
• C) 25 days after month end ✔
• D) 1 year

Why: Tax withheld in a month must be deposited within 25 days after that month ends, along with the withholding details.

Withholding on salary is under section:

• A) 87 ✔
• B) 88
• C) 89
• D) 92

Why: Section 87 covers withholding on employment payments: the employer deducts tax from salary every month.

Withholding on contract payments is under section:

• A) 87
• B) 88
• C) 89 ✔
• D) 90

Why: Section 89 covers withholding on contract or agreement payments, for example to suppliers and contractors.

The usual TDS rate on house rent paid to individuals is:

• A) 1.5%
• B) 5%
• C) 10% ✔
• D) 15%

Why: Rent paid to an individual landlord usually has 10% TDS, deducted by the tenant office or business.

TDS on windfall gains such as lottery is:

• A) 5%
• B) 10%
• C) 15%
• D) 25% ✔

Why: Windfall gains such as lottery prizes, gifts and awards have 25% TDS, deducted before the prize is paid.

If an agent fails to deduct or deposit TDS:

• A) The agent becomes liable ✔
• B) Nobody is liable
• C) Only the payee pays
• D) Tax is cancelled

Why: An agent who fails to deduct or deposit TDS becomes personally liable for that tax, plus interest and fees.

Matters to be audited are listed in which section of the Audit Act 2075?

• A) Section 2
• B) Section 8 ✔
• C) Section 15
• D) Section 20

Why: Section 8 of the Audit Act, 2075 lists the matters the Auditor General checks, such as regularity, economy, efficiency and internal control.

Propriety (औचित्य) audit is in section:

• A) 8
• B) 9 ✔
• C) 10
• D) 3

Why: Section 9 of the Audit Act, 2075 covers propriety (औचित्य) audit: whether spending was reasonable and proper, not only legal.

Which is a matter audited under section 8?

• A) Effectiveness of internal control ✔
• B) Staff birthdays
• C) Political speeches
• D) Weather

Why: Under section 8, auditors check the effectiveness of internal control and internal audit, because weak controls lead to waste and beruju.

TDS on dividends is usually:

• A) 1.5%
• B) 5% ✔
• C) 15%
• D) 25%

Why: Dividends usually have 5% TDS, deducted by the company before paying shareholders.

A withholding certificate is given to the:

• A) Payee ✔
• B) Auditor General
• C) Court
• D) Bank

Why: The withholding agent gives a certificate to the payee, the person whose tax was deducted, so they can show the tax was paid.

Withholding on investment returns and service fees is under section:

• A) 88 ✔
• B) 87
• C) 89
• D) 17

Why: Section 88 covers withholding on investment returns (such as interest, dividends and rent) and service fees.

TDS on payments under a contract above Rs 50,000 is usually:

• A) 1.5% ✔
• B) 15%
• C) 25%
• D) 5%

Why: Section 89 sets 1.5% TDS on contract payments above Rs 50,000. Example: Rs 1,00,000 × 1.5% = Rs 1,500.

TDS on interest paid by a bank to an individual depositor is usually:

• A) 6% ✔
• B) 1.5%
• C) 25%
• D) 15%

Why: Banks withhold 6% on interest paid to individual depositors. This is final withholding, so the depositor need not show it in a return.

TDS on service fees paid to a VAT-registered resident is usually:

• A) 1.5% ✔
• B) 15%
• C) 10%
• D) 25%

Why: Service fees paid to a VAT-registered resident have 1.5% TDS, a lower rate than for non-registered payees, because VAT-registered businesses keep proper records.

TDS on meeting allowances and part-time teaching is usually:

• A) 15% ✔
• B) 1.5%
• C) 6%
• D) 25%

Why: Meeting allowances and part-time teaching fees usually have 15% TDS, deducted by the paying office.

The first income slab of salary for social security tax is taxed at:

• A) 1% ✔
• B) 10%
• C) 0%
• D) 15%

Why: The first salary slab carries 1% social security tax. Contributors to the Social Security Fund are exempt from this 1%.

In Nepal, the income year for tax purposes is the:

• A) Fiscal year (Shrawan to Ashadh) ✔
• B) Calendar year (January–December)
• C) Baisakh to Chaitra
• D) Any 12 months chosen by the taxpayer

Why: The income year is the fiscal year, from Shrawan 1 to the end of Ashadh, the same as the government budget year.

The annual income tax return is normally due within how many months after the end of the income year?

• A) 3 months ✔
• B) 1 month
• C) 6 months
• D) 12 months

Why: The return is due within 3 months after the income year ends, i.e. by the end of Ashwin. An extension can be requested.

The government department that administers income tax is the:

• A) Inland Revenue Department ✔
• B) Department of Customs
• C) Office of the Auditor General
• D) FCGO

Why: The Inland Revenue Department (आन्तरिक राजस्व विभाग) under the Ministry of Finance collects income tax and VAT.

Tax that is deducted at the time of payment is called:

• A) Withholding tax (TDS) ✔
• B) Advance tax by instalment
• C) Customs duty
• D) Excise duty

Why: Tax deducted at the time of payment is withholding tax (TDS). The payer deducts it and deposits it with IRD.

When TDS is "final withholding", the payee:

• A) Need not include that income in the return ✔
• B) Must pay tax again
• C) Gets double refund
• D) Must pay customs duty

Why: With final withholding, the deducted tax settles the tax on that income, so the payee need not include it in their return.

Income tax is a:

• A) Direct tax ✔
• B) Indirect tax
• C) Sales tax
• D) Customs tax

Why: Income tax is a direct tax: the person who earns the income pays it and cannot pass it on to someone else. VAT is an indirect tax.

The withholding agent must give the payee a:

• A) Certificate of tax deducted ✔
• B) Citizenship certificate
• C) Tender form
• D) Darta slip

Why: The agent must give the payee a certificate of tax deducted, which proves the tax was withheld and can be claimed in the return.

Tax paid in instalments during the year on expected income is:

• A) Advance tax (instalment) ✔
• B) Withholding tax
• C) VAT
• D) Excise

Why: Advance tax is paid in instalments during the year on expected income, mainly by businesses, so tax is not left until year end.

The Auditor General of Nepal is appointed by the:

• A) President on the recommendation of the Constitutional Council ✔
• B) Prime Minister alone
• C) Chief Justice
• D) Speaker

Why: Under Article 240, the President appoints the Auditor General on the recommendation of the Constitutional Council.

The term of office of the Auditor General is:

• A) 6 years ✔
• B) 5 years
• C) 4 years
• D) 10 years

Why: The Auditor General serves a six-year term from appointment, under Article 240.

The Auditor General submits the annual report to the:

• A) President ✔
• B) Prime Minister
• C) Chief Justice
• D) Finance Minister

Why: The Auditor General submits the annual report to the President, who sends it to the Federal Parliament through the Prime Minister.

The Audit Act now in force is the Audit Act of:

• A) 2075 BS ✔
• B) 2048 BS
• C) 2058 BS
• D) 2063 BS

Why: The Audit Act, 2075 (लेखापरीक्षण ऐन, २०७५) replaced the Audit Act, 2048 after federalism.

The Constitution provision on the Auditor General is in Part:

• A) 22 ✔
• B) 21
• C) 23
• D) 24

Why: Part 22 of the Constitution (Articles 240–241) covers the Auditor General: appointment, term and functions.

Audit that checks whether rules and laws were followed is:

• A) Compliance audit ✔
• B) Performance audit
• C) Propriety audit
• D) Internal audit only

Why: Compliance (regularity) audit checks whether money was spent according to laws, rules and approved budgets.

Audit that checks economy, efficiency and effectiveness is:

• A) Performance audit ✔
• B) Financial audit
• C) Compliance audit
• D) Store audit

Why: Performance audit checks the 3 Es: economy (low cost), efficiency (good output for input) and effectiveness (goals achieved).

Audit that checks whether spending was reasonable and proper is:

• A) Propriety audit ✔
• B) Financial audit
• C) IT audit
• D) Tax audit

Why: Propriety (औचित्य) audit checks whether spending was reasonable and in the public interest, even if it was technically legal.

Audit that checks financial statements and accounts is:

• A) Financial audit ✔
• B) Performance audit
• C) Social audit
• D) Environmental audit

Why: Financial audit checks that the accounts and financial statements are correct and give a true picture.

Audit carried out by an office's own system during the year is:

• A) Internal audit ✔
• B) Final audit
• C) External audit
• D) Special audit

Why: Internal audit is done during the year by the office's own system (in government, the Treasury and Accounts Controller Office) to correct errors early.

Audit carried out by the Office of the Auditor General is:

• A) Final (external) audit ✔
• B) Internal audit
• C) Self audit
• D) Tax audit

Why: The Office of the Auditor General carries out the final (external) audit after the year, independently of the office.

Government-owned companies where the government has more than 50% share are audited by:

• A) The Auditor General ✔
• B) Only private auditors without OAG
• C) The police
• D) The ward office

Why: Under Article 241, the Auditor General audits government offices and companies where the government owns more than 50%.

Amounts found irregular in audit are recorded as:

• A) Beruju ✔
• B) Peski
• C) Revenue
• D) Grant

Why: Irregular or unsettled amounts found in audit are recorded as beruju (बेरुजु), which the office must clear.

An office must respond to audit queries within the:

• A) Time given by the auditor ✔
• B) Next five years
• C) Any time it likes
• D) Never

Why: An office must answer audit queries within the time the auditor gives. Late or missing replies become beruju.

The person responsible for clearing beruju in an office is the:

• A) Account-responsible officer (head of office) ✔
• B) Office assistant
• C) Driver
• D) Store helper

Why: The account-responsible officer (लेखा उत्तरदायी अधिकृत), usually the head of office, must settle beruju.

Local levels (municipalities) are audited by the:

• A) Office of the Auditor General ✔
• B) Election Commission
• C) Provincial police
• D) Supreme Court

Why: The Office of the Auditor General also does the final audit of local levels such as municipalities and rural municipalities.

Withholding on salary is done by the:

• A) Employer ✔
• B) Employee's family
• C) Bank only
• D) Ward office

Why: The employer deducts tax from employees' salary every month and deposits it, under section 87.

A person who receives a payment from which tax is withheld is the:

• A) Payee (withholdee) ✔
• B) Withholding agent
• C) Auditor
• D) Assessing officer

Why: The payee (withholdee) receives the payment after tax is cut, and gets a certificate showing the tax deducted.

If TDS of Rs 1,500 is deducted at 1.5%, the payment amount was:

• A) Rs 1,00,000 ✔
• B) Rs 10,000
• C) Rs 1,500
• D) Rs 15,000

Why: Payment = TDS ÷ rate = 1,500 ÷ 0.015 = Rs 1,00,000. Check: 1,00,000 × 1.5% = 1,500.

Rent of Rs 30,000 is paid to an individual landlord. TDS at 10% is:

• A) Rs 3,000 ✔
• B) Rs 300
• C) Rs 1,500
• D) Rs 4,500

Why: TDS = 30,000 × 10% = Rs 3,000, so the landlord receives Rs 27,000.

A lottery prize of Rs 2,00,000 has TDS at 25% of:

• A) Rs 50,000 ✔
• B) Rs 25,000
• C) Rs 20,000
• D) Rs 75,000

Why: TDS = 2,00,000 × 25% = Rs 50,000, so the winner receives Rs 1,50,000.