Chapter 3 · Week 3 — Filing a D-01, End to End
Filing a D-01, End to End
A salaried natural person from payslips to submission number, including why slabs are marginal and how to sanity-check the result.
3 of 8 · 8 min
A natural person with employment income. The simplest return in the system, and the one most people file. This week you take one from payslips to submission number.
3.1 The order of operations
Tax is not computed on what you earned. It is computed on what is left after a specific sequence of subtractions, and the sequence matters because each step changes the base for the next.
┌─────────────────────────────────────────────────────────────┐ │ │ │ GROSS INCOME │ │ salary, allowances, bonus, benefits in kind │ │ │ │ │ ▼ − contributions to approved funds [R] │ │ (provident fund, SSF, approved retirement fund, │ │ within the ceilings the Act sets) │ │ │ │ │ ▼ − insurance premium relief [R] │ │ ▼ − other allowable deductions [R] │ │ │ │ │ ═══════════▼═══════════ │ │ TAXABLE INCOME │ │ │ │ │ ▼ apply the SLAB schedule │ │ │ │ │ ═══════════▼═══════════ │ │ TAX BEFORE CREDITS │ │ │ │ │ ▼ − tax credits / rebates [R] │ │ │ │ │ ═══════════▼═══════════ │ │ TAX LIABILITY │ │ │ │ │ ▼ − TDS already withheld │ │ ▼ − advance tax paid │ │ │ │ │ ═══════════▼═══════════ │ │ BALANCE PAYABLE (or refundable) │ │ │ └─────────────────────────────────────────────────────────────┘
Two errors account for most wrong D-01s, and both are ordering errors:
Applying a deduction after the slabs instead of before. A deduction reduces taxable income; a credit reduces tax. Confusing them changes the answer by the marginal rate.
Forgetting that slabs are marginal. Crossing into a higher band does not re-tax everything below it.
3.2 How a slab schedule actually works
This is the most misunderstood mechanic in Nepali personal tax.
MARGINAL, NOT AVERAGE
Taxable income Rs 1,500,000, against an illustrative schedule
(FY 2083/84 shape: 1% / 10% / 20% / 27% / 29%) [R]
┌─────────────────────────────────────────────────────────┐
│ band slice rate tax │
├─────────────────────────────────────────────────────────┤
│ first 1,000,000 1,000,000 1% 10,000 │
│ next 500,000 500,000 10% 50,000 │
│ ────────── ───────── │
│ total 1,500,000 60,000 │
└─────────────────────────────────────────────────────────┘
THE WRONG ANSWER people give:
1,500,000 × 10% = 150,000 ← 2.5x too much
Only the slice ABOVE 1,000,000 is taxed at 10%.
Everything below it stays at 1%.
Effective rate = 60,000 / 1,500,000 = 4.0%
Marginal rate = 10%
┌────────────────────────────────────────────────────────┐
│ Effective rate answers "what did I pay?" │
│ Marginal rate answers "what will one more rupee │
│ cost me?" │
│ │
│ Only the second one matters for any decision. │
└────────────────────────────────────────────────────────┘Drawn, the confusion disappears:
tax
│ ╱
│ ╱ ← 20% band
│ ╱
│ ______╱
│ ____╱ ← 10% band
│ ________╱
│ _______╱ ← 1% band
│_╱
└──────────┬──────────┬──────────┬────── taxable income
1,000,000 1,500,000 2,000,000
The line BENDS at each threshold. It does not JUMP.
There is no income at which earning one more rupee
leaves you worse off.3.3 The worked D-01
Illustrative throughout. Substitute the current year's figures.
TAXPAYER: a salaried natural person, FY 2083/84
STEP 1 — assemble gross income
Basic salary Rs 1,320,000
Allowances Rs 180,000
Festival bonus Rs 110,000
─────────────
Gross income Rs 1,610,000
STEP 2 — deductions, before the slabs [R]
Employee contribution to approved
retirement fund Rs 132,000
Insurance premium relief (within
the ceiling in the Act) Rs 25,000
─────────────
Total deductions Rs 157,000
STEP 3 — taxable income
1,610,000 − 157,000 = Rs 1,453,000
STEP 4 — apply the slabs (marginal)
first 1,000,000 @ 1% = Rs 10,000
next 453,000 @ 10% = Rs 45,300
─────────────
Tax before credits = Rs 55,300
STEP 5 — tax already paid
TDS deducted by employer Rs 52,000
Advance tax paid Rs 0
─────────────
Total paid Rs 52,000
STEP 6 — the balance
55,300 − 52,000 = Rs 3,300 PAYABLE
CHECKS BEFORE SUBMITTING
Effective rate = 55,300 / 1,453,000 = 3.81 %
Sanity: an effective rate BELOW the lowest slab rate
would be impossible; above the marginal rate would be
impossible. 3.81% sits between 1% and 10%. OK3.4 Where the numbers come from
EVERY FIGURE ON A D-01 MUST TRACE TO A DOCUMENT ┌────────────────────┬────────────────────────────────────┐ │ Gross income │ Salary certificate from employer │ │ │ — the annual statement, not the │ │ │ sum of twelve payslips you │ │ │ added up yourself │ ├────────────────────┼────────────────────────────────────┤ │ Fund contributions│ Fund statement for the year │ ├────────────────────┼────────────────────────────────────┤ │ Insurance premium │ Policy receipt │ ├────────────────────┼────────────────────────────────────┤ │ TDS │ TDS certificate AND the amount │ │ │ visible against your PAN in the │ │ │ system — check BOTH │ ├────────────────────┼────────────────────────────────────┤ │ Advance tax │ Payment voucher, confirmed in │ │ │ Payment Voucher Search │ └────────────────────┴────────────────────────────────────┘
The TDS row is where D-01s fail. Your certificate says one thing; the system knows what your employer actually deposited and reported. If the employer withheld but did not deposit, your certificate is worthless as a credit until that is resolved.
THE TDS RECONCILIATION, DRAWN
what your certificate says Rs 52,000 ████████████
what the system shows Rs 52,000 ████████████
── match ──> file
what your certificate says Rs 52,000 ████████████
what the system shows Rs 38,000 █████████
── GAP Rs 14,000
Filing on the certificate produces a return IRD's records
disagree with. Resolve the gap with the employer FIRST.3.5 The submission sequence
ON THE PORTAL
1 Income Tax → D-01 Return Entry ← the ENTRY door
2 Select PAN and the fiscal year
└── the year is in BS. Check it twice.
3 Enter income, deductions, TDS, advance tax
4 Review the computed tax
└── does it match the number you computed by hand?
If not, STOP. One of you is wrong and it
matters which.
5 SUBMIT
6 The system returns a SUBMISSION NUMBER
└── record it, with the password you set
7 Print / save the return
8 If a balance is payable: generate the voucher, pay,
then confirm in Payment Voucher Search
9 Reopen through Tax Return Login to verify the payment
has attached3.6 Three failure modes
┌──────────────────────────────────────────────────────────┐ │ 1. FILED FOR THE WRONG YEAR │ │ The BS year dropdown defaults, and a default is not │ │ a decision. A return filed against the wrong year │ │ leaves the right year unfiled. │ ├──────────────────────────────────────────────────────────┤ │ 2. CLAIMED A DEDUCTION ABOVE ITS CEILING [R] │ │ Several reliefs are "the lower of X% or Rs Y". │ │ Claiming the percentage without checking the cap │ │ is the most common over-claim on a D-01. │ ├──────────────────────────────────────────────────────────┤ │ 3. SUBMITTED, NEVER PAID │ │ Submitting the return and paying the balance are │ │ two separate acts. A submitted return with an │ │ unpaid balance accrues interest as if nothing had │ │ been filed at all. [R] │ └──────────────────────────────────────────────────────────┘
3.7 The "lower of" pattern
Because failure mode 2 is so common, it deserves its own formula.
┌────────────────────────────────────────────────────────┐
│ │
│ Many Nepali reliefs take the form: │
│ │
│ allowed = MIN( percentage × base , cash cap ) │
│ [R] │
└────────────────────────────────────────────────────────┘
WORKED — illustrative, with a "25% of fees or Rs 25,000"
shaped relief:
Fees actually paid Rs 140,000
25% of fees Rs 35,000
Cash cap Rs 25,000
────────────
Allowed = MIN(35,000, 25,000) = Rs 25,000
Claiming 35,000 over-claims by 10,000, which at a 10%
marginal rate understates tax by 1,000 — small, but it
is an error on the face of the return.Formulas from this week
Taxable income = gross income − allowable deductions [R]
Tax (marginal slabs)
= Σ over bands of (slice in band × band rate)
Effective rate = total tax ÷ taxable income
Marginal rate = the rate of the band the last rupee fell in
Balance = tax liability − (TDS + advance tax + prior payments)
"Lower of" reliefs
allowed = MIN(percentage × base, cash cap) [R]
Sanity check
lowest band rate < effective rate < marginal rateWhat you should be able to do now
- Lay out the order of operations from gross income to balance payable, and say why the order changes the answer.
- Explain marginal slabs and compute tax across bands without over-taxing the lower slices.
- Compute effective and marginal rates and use the effective rate as a sanity check.
- File a complete D-01 computation from source documents.
- Reconcile TDS to the system rather than to your own certificate, and say what to do when they disagree.
- Apply a "lower of percentage or cap" relief correctly.
- Name the three failure modes and how each is avoided.
Next week: the D-03 — business income, and the bridge from a set of accounts to a tax return.
Saved in this browser only — there is no account to create. Clearing your browser data clears your progress.