The Government of Nepal has framed the Social Security Regulations, Social Security Schemes Operational Directives in the month of Mangshir, 2075 and made effective from the same month. But the implementation of Social Security Fund did not seem very well. Henceforth, it has been made mandatory for all the entities from the starting of Fiscal Year 2076-77.Again after having the scheme under subscribed and other implementation issues, the extension had been given till Ashwin 2076.
More about Social Security Fund.
The Social Security Fund is governed by the Social Security Act, 2075.The notice published on Gazette has not specified the sector /nature of industry, business or transactions that need to be enrolled with social security fund. Hence, all the employers and employees are required to be registered with SSF.
After getting registered under SSF, the employer and employees are required to contribute the following amount of the basic’s salary each month:
Social Security Fund is earmarked to four different schemes. Allocation to the different schemes would be in the following way:
|Social Security Schemes||
|Medical Treatment, Health and Maternity Protection Scheme||1%|
|Accident and Disability Protection Scheme||1.40%|
|Dependent Family Protection Scheme||0.27%|
|Old Age Protection Scheme||28.33% (*)|
(*) The 28.33% includes 20% for the provident fund and 8.33% for the gratuity.
Impact of Taxation on implementation of SSF
- Whether the social security tax (1%) is still to be deposited to the income tax office if a person has already been registered in SSF?
According to the amendment in the Income Tax Act done by the Finance Act, 2076, social security tax is not to be deposited to the tax office by the contributor of Social Security Fund and Pension Holder. It means it is deposited itself in the schemes of social security after getting registered in SSF according to social security act. But if the employees and employers are not registered in the Social Security Fund, they need to deposit the same amount to the income tax officer as done before.
- Whether income tax deductions is available if the contributions made to SSF?
Since the Income Tax Act has already recognized the SSF as an approved retirement fund, the amount contributed to SSF will also get deductions as Sec.63 of the Income Tax Act. It means minimum of the following amount is allowed for reduction to compute the taxable income for the income year of contribution:
- One third of assessable income.
- Actual Contribution i.e.31%.
- Whether amount contributed from the salary to SSF is taxed or not? If so, how much amount is taxed in the income?
Yes, it has to be taxed and included in the income of the employee. The amount of 20% of basic salary is to be included in the income of the employee and shall be taxed on it after getting certain deductions as per the act.
Fore more information, please refer http://www.ssf.gov.np