IRD has recently issued a circular on March 11, 2016 on employee bonus. According to new circular, business enterprises will be allowed to deduct bonus to the extent of 10% of net profit before tax but after bonus during the Income Year when the bonus is apportioned.
But the employers should make sure that the bonus shall be distributed within next Income Year. In case of the employers requiring prior approval from Government of Nepal for distribution, the distribution shall be completed within the year when the approval is obtained.
The surplus amount left after distributing it to employees as per Bonus Act & Regulation shall be included in the income of the employers as per Sec. 25 (1) (ga) in the immediately succeeding Income Year. But to the extent of amount deposited in the National Level Welfare Fund (30% of Surplus) as per Bonus Law is exempted from the inclusion as per Sec. 25 (1) (ga).