The Supreme Court has decided that only five percent tax will be levied on the retirement benefits of government employees. The issue was mentioned in the verdict of joint session of Justices Ishwor Khatiwada and Nahakul Subedi made public on November 7.
Earlier, the government had decided to deduct 15 percent tax from retired employees under the Income Tax Act 2001. Rastriya Banijya Bank employees had filed a writ petition in the court against the decision. In the same case, the court has ruled that only five percent tax will be levied.
There is a provision of deducting tax at the rate of 5 percent only on the profit calculated as per clause B of sub-section 1 of section 65 of the said act in case of payment on leave to the employee.
Previous decision has been revoked and only 5 percent tax has been deducted as per the restrictive phrase of section 88 of the same Act. With this decision of the Supreme Court, only five percent tax will be levied on the amount including benefits received by government employees when they retire.
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