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Updated (Finance Act 2015)
Md. Ibne Nayeem Hasan, ibnenayeem@gmail.com
Khaled Mahamud Sujon, sujonais@gmail.com Page 1 of 171
Study Material
Taxation
(Without VAT)
(With Finance Act 2015)
Initiated by:
Asif Ahmed
Deputy Manager
Finance & Accounts
Impress-Newtex Composite Textiles Ltd
Updated by:
Md. Ibne Nayeem Hasan
Khaled Mahamud Sujon
Sami Mymoon Akash
Mahee Al Islam Niloy
Assistant, Audit and Advisory
KPMG in Bangladesh
Rahman Rahman Huq
Chartered Accountants
This study material is mainly an accumulation of the lectures of Mr. Ranjan Kumer Bhowmik,
FCMA with the update of ‘Finance Act 2015’. Note that, we tried our best to incorporate the
recent changes of the FA 2015, but some mistakes may be there and we are cordially sorry for
that. Mr. RanjanKumerBhowmik, FCMA is not concern about this study material; hence do
not responsible for any mistakes or misrepresentation of laws (if any) mentioned here. So
reader awareness is being advised.
.
Updated (Finance Act 2015)
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Khaled Mahamud Sujon, sujonais@gmail.com Page 2 of 171
Contents Part One: Income tax authority, types of taxes, some important definitions, tax rate, reduced tax rate .............. 5
Some Important Definitions: ...................................................................................................................................... 6
Resident vs. Non-Resident: ...................................................................................................................................... 10
Tax Rate: .................................................................................................................................................................. 13
Part Two: Income from Salary .................................................................................................................................. 17
Definition of Salary: ................................................................................................................................................. 17
Pay and Allowances totally exempt from Tax: (Sixth Schedule, Part-A) ................................................................. 19
Salaries exempt from payment of tax (as per S.R.O.): ............................................................................................. 19
Information regarding payment of salary (Section 108 read with rule 21, 22 and 23) ............................................. 20
Investment Tax Rebate: ............................................................................................................................................ 21
GPF Vs RPF Vs UPF: .............................................................................................................................................. 22
Practical Problems .................................................................................................................................................... 24
Part Three: Income from Interest on Securities ...................................................................................................... 40
Important sections: ................................................................................................................................................... 40
Part Four: Income from House Property: ................................................................................................................ 42
Part Five: Agricultural Income: ................................................................................................................................ 47
Important sections of Agricultural Income: .............................................................................................................. 47
Section 35 - Method of accounting: .......................................................................................................................... 49
Sixth Schedule (Part A): ........................................................................................................................................... 50
Third Schedule: Computation of Depreciation Allowance: ...................................................................................... 50
Part Six: Capital Gain ................................................................................................................................................ 51
Important sections of Capital Gain: .......................................................................................................................... 51
Second Schedule: Para 2 (Tax payable on capital gain): .......................................................................................... 52
Sixth Schedule (Part A): (Exclusion from income): ................................................................................................. 53
Special tax rates on Capital Gain from sale of share ................................................................................................ 53
Part Seven: Income from Business and Profession .................................................................................................. 54
Definitions: ............................................................................................................................................................... 54
Rules: ........................................................................................................................................................................ 55
Deemed Income: ....................................................................................................................................................... 56
Sixth Schedule (Part A); Exclusion from income; .................................................................................................... 58
Section – 35; Method of accounting: ........................................................................................................................ 60
Third schedule; Tax Depreciation: ........................................................................................................................... 63
Tax Holiday .............................................................................................................................................................. 65
Company Tax Assessment ........................................................................................................................................ 69
Corporate Tax Rate ................................................................................................................................................... 72
Corporate Social Responsibility ............................................................................................................................... 75
Practical Problems .................................................................................................................................................... 78
Part Eight: Income from other sources ..................................................................................................................... 94
Important sections of income from other sources: .................................................................................................... 94
6th Schedule (Exemption); ........................................................................................................................................ 95
Section – 36: Allocation of income from royalties, literary works, etc: ................................................................... 95
Section – 19; Un-explained investments, etc., deemed to be income; ...................................................................... 95
Updated (Finance Act 2015)
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Practical Problems .................................................................................................................................................... 98
Part Nine: Set off and Carry Forward Losses ........................................................................................................ 105
Important sections related to set off and carry forward losses ................................................................................ 105
Carry forward of loss from business: Section 38 .................................................................................................... 105
Carry forward of loss in speculation business: Section 39 ..................................................................................... 106
Carry forward of loss under the head ―Capital Gains‖: Section 40 ........................................................................ 106
Loss of Agricultural Income: Section 41 ................................................................................................................ 106
Set-off of loss in the case of succession in business: Section: 42 ........................................................................... 107
Carry forward of depreciation allowance: Section 42(6) ........................................................................................ 107
Advance Payment of Tax ....................................................................................................................................... 108
Part Ten: Income Tax Return.................................................................................................................................. 109
Part Eleven: Table of Withholding Tax .................................................................................................................. 114
Part Twelve: Assessment of Partnership Firm ....................................................................................................... 127
Sixth Schedule (Part A) Para – 18 .......................................................................................................................... 127
Section – 30(b); Deduction Inadmissible: .............................................................................................................. 127
Section – 43(3); Computation of total income: ...................................................................................................... 127
Section – 85; Special provisions regarding assessment of firms: ........................................................................... 127
Practical Problems: ................................................................................................................................................. 128
Part Thirteen: Assessment ....................................................................................................................................... 130
Assessment: ............................................................................................................................................................ 130
FINAL SETTLEMENT OF TAX LIABILITY (SEC. 82C): ................................................................................. 131
Penalty and Prosecution: ........................................................................................................................................ 135
Prosecution (Imprisonment for punishable offence) ............................................................................................... 138
Penalty for not maintaining accounts in the prescribed manner (section 123). ...................................................... 139
Penalty for failure to file Income Tax Return (Section- 124) ................................................................................. 140
Penalty for concealment of income (section 128) ................................................................................................... 140
Penalty for default in payment of tax (section-137) ............................................................................................... 140
Part Fourteen: Appeal .............................................................................................................................................. 141
Appeal: ................................................................................................................................................................... 141
Panel of Facilitators ................................................................................................................................................ 148
Part Fifteen: Double Taxation Avoidance Agreement ........................................................................................... 150
Double Taxation Avoidance Agreement (Sec. 144 read with 7th Schedule): ........................................................ 150
The Bangladesh model of Agreement on Avoidance of Double Taxation consists of 29 Articles that are as follows:
................................................................................................................................................................................ 150
Part Sixteen: Transfer Pricing ................................................................................................................................. 153
Important Definitions: ............................................................................................................................................ 153
Important sections related to transfer pricing: ........................................................................................................ 154
Penalty: ................................................................................................................................................................... 156
Income Tax Rules 1984 .......................................................................................................................................... 157
Part Seventeen: Statutory regulatory orders (SROs) ............................................................................................ 164
Updated (Finance Act 2015)
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Acknowledgement
Without help of the below mate this sheet might not be prepared. gratitude goes to:
Sami Mymoon Akash(RRH)
Mahee Al Islam Niloy(RRH)
Khaled Mahamud Sujon(RRH)
Mohammd Ahsanullah(RRH)
Md.Riad Hossain (RRH)
Mariam Rabeya(Acnabin)
Updated (Finance Act 2015)
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Part One: Income tax authority, types of taxes, some important definitions, tax rate,
reduced tax rate
Coverage:
1. Income Tax Ordinance 1984
2. Income Tax Rules 1984
3. SRO (Statutory Regulatory Order)
4. Circular of NBR
5. Case References
a. ITR (Indian Tax Report)
b. BTD (Bangladesh Tax Decisions)
Direct Tax Vs Indirect Tax:
Impact and incidence of the direct tax are on the same person, but in case of indirect tax impact and incidence can be
shifted to others, which are ultimately borne by the final consumer.
Direct tax – Income tax, travel tax, gift tax etc.
Indirect Tax – VAT, turnover tax, SD.
Income Tax Laws:
Section (sub section)
Section Clause (sub clause)
Rule (sub rule)
IT Ordinance Vs IT Rules:
Tax Ordinance – made or changed by the parliament
Tax Rules – made by NBR
Govt. can reduce tax burden through SRO but cannot imposetax. Power to impose new tax rested on the parliament.
Income Tax Authority (Section –3):
Section – 3:
There shall be the following classes of income tax authorities for the purposes of this Ordinance, namely:-
1. (1) The National Board of Revenue,
2. [(1A)]Deleted. F.A. 1995
3. [(1B) Chief Commissioner of Taxes;]Added F. A. 2011
4. (2) Directors-General of Inspection (Taxes),
5. (2A) Commissioner of Taxes (Appeals),
6. (2B) Commissioner of Taxes (Large Taxpayer Unit),
7. (2C) Director General (Training);
8. (2D) Director General, Central Intelligence Cell ;
9. (3) Commissioners of Taxes,
10. (3A) Additional Commissioners of Taxes who may be either Appellate Additional Commissioner of
Taxes or Inspecting Additional Commissioner of Taxes,
11. (4) Joint Commissioner of Taxes who may be either Appellate Joint Commissioners of taxes or
Inspecting Joint Commissioner of Taxes,
12. (5) Deputy Commissioners of Taxes,
13. [(6) Tax Recovery Officers nominated by the Commissioner of Taxes among the Deputy
Commissioner of Taxes within his jurisdiction;]Subs F. A. 2011
14. (7) Assistant Commissioners of Taxes,
15. (8) Extra Assistant Commissioners of Taxes; and
16. (9) Inspectors of Taxes
Updated (Finance Act 2015)
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Income tax authority is as follows –
1. NBR – Supreme authority headed by ‗the Chairman‘.
2. Chief Commissioner of Taxes (not yet appointed anyone)
3. Commissioner of Taxes (CT);
a. DG (Central Intelligence Cell, CIC);
b. DG (Inspection);
c. CT (Appeal);
d. DG (Training);
e. CT (Large Taxpayer Unit);
4. Additional Commissioner of Taxes (ACT);
a. Appellate Additional Commissioner of Taxes (AACT);
b. Inspecting Additional Commissioner of Taxes (IACT);
5. Joint Commissioner of Taxes (JCT);
a. Appellate Joint Commissioner of Taxes (AJCT);
b. Inspecting Joint Commissioner of Taxes (IJCT)
6. Deputy Commissioner of Taxes (DCT)
a. TRO – Tax Recovery Officer;
b. TPO - Transfer Pricing Officer
7. Assistant Commissioner of Taxes;
8. Extra Assistant Commissioner of Taxes; and
9. Inspector of Taxes
Types of Taxes:
Some Important Definitions:
NBR
Customs & VAT Income Tax
Income
Tax
Foreign
Travel Tax
Gift
Tax
Value
Added Tax
Turnover
Tax
Supplementary
Duty
Income; (section 2(34)):
Income" includes--
1. (a) any income, profits or gains, from whatever source derived, chargeable to tax under any provision of
this Ordinance under any head specified in section 20;
2. (b) any loss of such income, profits or gains;
3. (c) the profits and gains of any business of insurance carried on by a mutual insurance association
computed in accordance with paragraph 8 of the Fourth Schedule;
4. (d) any sum deemed to be income, or any income accruing or arising or received, or deemed to accrue or
arise or be received in Bangladesh under any provision of this Ordinance:
Provided that the amount representing the face value of any bonus share or the amount of any bonus
declared, issued or paid by any company registered in Bangladesh under ক োম্পোনীআইন, 1994 (1994
সননর 18 নংআইন) to its shareholders with a view to increase its paid-up share capital shall not be
included as income of that shareholder;
Why taxes???
Because they (officers) deal with
three taxes: income tax, gift tax
and travel tax.
Updated (Finance Act 2015)
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6th schedule, Part A, Local government are not taxable entity.
Income Year and Assessment Year:
TAX; (section 2(62)):
"Tax" means the income-tax payable under this Ordinance and includes any additional tax, excess profit tax,
penalty, interest, fee or other charges leviable or payable under this Ordinance;"
Assessee; (section 2(7)):
"Assessee", means a person by whom any tax or other sum of money is payable under this Ordinance, and
includes -
1. (a) every person in respect of whom any proceeding under this Ordinance has been taken for the
assessment of his income or the income of any other person in respect of which he is assessable, or of
the amount of refund due to him or to such other person;
2. (b) every person who is required to file a return under section 75, section 89 or section 91;
3. (c) every person who desires to be assessed and submits his return of income under this Ordinance; and
4. (d) every person who is deemed to be an assessee, or an assessee in default, under any provision of this
Ordinance;"
Person; (section 2(46)):
"Person" includes an individual, a firm, an association of persons, a Hindu undivided family, a local authority, a
company and every other artificial juridical person;
Assessment Year; (section 2(9)):
"Assessment year" means the period of twelve months commencing on the first day of July every year; and
includes any such period which is deemed, under the provisions of this Ordinance, to be assessment year in
respect of any income for any period;
Income Year; (section 2(35)):
"Income year", in respect of any separate source of income, means--
(a) the period beginning with the date of setting up of a business and ending with the thirtieth day of June
following the date of setting up of such business;
(b) the period beginning with the date on which a source of income newly comes into existence and ending with
the thirtieth day of June following the date on which such new source comes into existence;
(c) the period beginning with the first day of July and ending with the date of discontinuance of the business or
dissolution of the unincorporated body or liquidation of the company, as the case may be;
(d) the period beginning with the first day of July and ending with the date of retirement or death of a participant
of the unincorporated body;
(e) the period immediately following the date of retirement, or death, of a participant of the unincorporated body
and ending with the date of retirement, or death, of another participant or the thirtieth day of June following the
date of the retirement, or death, as the case may be;
(f) in the case of bank, insurance or financial institution the period of twelve months commencing from the first
day of January of the relevant year; or
(g) in any other case the period of twelve months commencing from the first day of July of the relevant year;"; (Amended FA 2015)
Income Year Assessment Year
July 1, 2013 – June 30, 2014 2014 – 2015
January 1, 2013 – December 31, 2013 2014 – 2015
August 1, 2012 – July 31, 2013 2014 – 2015
Updated (Finance Act 2015)
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~'f : ABC f'1f1l&;S '4 i "'1i~i?l (lIT <m~'fi. ~ <n ~ ~ om) f?<:m ~ ~\!I~ ~ I ~RI1R~ \!I ~ ~ ~o~~ ~"PI1<$ i'5fffi<flB'l
(income year) '1tJiift <Kf <rIBf (assessment year) ~o~I':l- :"o~ '1 I ~ ~11JTC>l4 r. ~",b- 8 l!l"i'f '1<1: ~ R~ ~ ~ ~ 41'1 I..,o; lil ~o ~~ - ~o ~ '1
<Kf ~ ~ fuiJr;f ~ r."flJ ~ ~<l: ~. ~o ~1':l1 ~'"Ri f.wR ~ \!IO ~ ';,'!iffi ~ ~ ~ ~ M'ffiI -.p;r fil~r ';,'!iffi ~
ll i'!li"l if!(4"o, iil ~C !li 6!" 1 ~ ~. ~o~'" !(c ...... \!Io "fT. ::;o~ '" '1'lfil ipBl41C"li1 ~
ABC ~ C:;:;I...,I!fIC::> GiIC1l"l'::; T'f"" ~ f.imJ.!ft 'EI ~ ~ ~
... ·IR-b ~ I <.!INnlC ABC ("I'l"".·"ifl ~ ~ ~" ~ <:<'II 'fG ~ ~o~~_ ~o~ "I , ~. <.!I";~ "'I'll' ~ ~o~~~o~ 'I. ~ ABC ,::<I..., I<'ii'll 'J1t: "'I'll' f:JoiRIcr ~~ q:!f; ~ ~~~ ~~~. fWmI ~ ~r.< ~ :), 01lVRf ;;JOU" ~ C".~ 0l<I ~ ~ 'OIii1t>'11C .... ~
~ C'"ft"'l" <?o 'ili"' m I ~ "'I'll' ~ :;;o!T 'Jft' fil>t l .. ""., "''J>t'llC''l'll ~ <.!I~ ' .... 1...,1·"1 ... 9'fI'OIC'f'il ~ '1.12 "I'l'1'lrn ~ ~ ~ >t4 !J-fl41 ~ f.;,"I) ( ~ ) ...,~ ~ >t"OIT1iI ~ ~ <"'VlI ~ ~ ~12~; <.!I'ft,
~. ,::<I...,I!ii ~ "5;'lJ1'iU C"~i4i<: _ 'lI"lI'O,,"I'iI ~ t!""t'lIT'Il!' ~ ~ 1ft f'<>tI<l"l'I(4I'lI 'IT-U ~ 'l':'II ~ ('Ir:t<l! ~ "' 'ffiiJf''1, ~ lt\r8 <.!I'iI ,\12 tmI1
~ ~ ~ C'f'!7j',;ffi ~ <:)O"C>tl:~ I
~ .,fil .. f,!,"$ <.!I ~ ~("I';!l' \'<Icu .. !!' <.!l f>$0:f1'I' ~ ~jt ':::?t ~
~ ~~ ~ ~ >t .. ! I:;:; ,., f<lC"G ~ I ~, ~ ~ ~ 'J'lt ~ >t "~I::;I CI1'd i'iRT ~~Ifr (i ~ ~~ ~ ~ -c:n- "'1G 1 ~'R ~ C'I't"I'
~ ~- "Fl >t ~ !'::<It>'1<l ~ ~ .!l; '4I>t' ~ lOiT!I ~ sr.u ft>t'r<I ~ (l~~~~ 1
~ ~ • .!l;o ~a <.!l'<l" tmI1 ~ .. !rlf t!.,.-omrr (...,) { .. I ~ IC""" lncomr Year <.!I'iI
-!If.:!i i IM>!> ~ ~ ~. ~o ~ .!;I -c:n-~ <.'lI0ffl1:;I'l"(" :;S ~ tlf>!> jlM'O '4Vf 0f9'T ~ '11 ~o~'~~o~ '\ ~ ~ ~ ~ ~ I
Updated (Finance Act 2015)
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Resident and Non-Resident:
For Individual–182 days; or 90 days + 365 days in previous 4 years
For Company and Firm –
Difference between resident and nonresident:
Firm Company
Partial Control & Management Resident Non-Resident
Full Control & Management Resident Resident
Resident Nonresident
Taxed on Global income Local income
Investment allowance Allowable Not allowable
Tax rate Normal rate Direct tax rate
Resident; (section 2(55)):
"Resident", in respect of any income year, means -
1. (a) an individual who has been in Bangladesh -
1. (i) for a period of, or for periods amounting in all to, one hundred and eighty two days or more in that
year; or
2. (ii) for a period of, or periods amounting in all to, ninety days or more in that year having previously been
in Bangladesh for a period of, or periods amounting in all to, three hundred and sixty-five days or more
during four years preceding that year;
2. (b) a Hindu undivided family, firm or other association of persons, the control and management of whose
affairs is situated wholly or partly in Bangladesh in that year; and
3. (c) a Bangladeshi company or any other company the control and management of whose affairs is situated
wholly in Bangladesh in that year;
Updated (Finance Act 2015)
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Resident vs. Non-Resident:
Not only the rate of tax depends upon the residential status of the assessee but also the category of income to be
included in computing total income depends upon the residential status of the assessee. So, in income tax viewpoint
firstly the residential status of the assessee is to be determined. As per section 2(55) a person will be resident if he
fulfills the following conditions:-
Sl.
No
Category of person Condition for being
resident
Analysis
1. Individual
(Bangladeshi or
foreigner)
Stay in Bangladesh for at
least 182 days in aggregate
during the income year.
OR
Stay in Bangladesh for at
least 90 days in aggregate
during the income year
+
An aggregate stay of at least
365 days in Bangladesh in
the course of 4 years
preceding the income year.
The test of residence here are alternative not
cumulative. Each of the 2 tests requires the personal
presence of the assessee in Bangladesh during the
income year. If the assessee is continuously out of
Bangladesh during the whole year, he must be
treated as non-resident in that year.
If the 1st criteria of 182 days has fulfilled he is
to be regarded as resident irrespective of any other
consideration. If anybody resides here for less than
90 days then obviously he is non-resident. Thus a
man may be resident in 2 different countries in the
same year, although he can have onlyone domicile.
2. (i) Hindu Undivided
Family (HUF)
(ii) Partnership firm
(iii) Association of
Persons (AOP)
The control and management
of its affairs is situated
wholly or partly in
Bangladesh during the
income year.
If the control and management is situated
wholly outside Bangladesh only then an HUF, firm
or other AOP can be treated as non-resident. Since
partial control is sufficient for the purpose of
residence, a firm may have 2 places of residence;
The residence of partners or an individual member
of HUF is immaterial for the purpose of determining
the residence of a firm or family.
The place of control may be different from the
place where the actual trading is carried on. Control
of a business does not necessarily mean the carrying
on of the business and therefore the place where
trading activities or physical operations are carried
on is not necessarily the place of control and
management. Control and management signifies the
controlling and directive power and situated implies
the functioning of such power at a particular place
with some degree of performance.
Control and management means de facto
control and management and not merely the right or
power to control and manage. The absence of the
karta from Bangladesh throughout the year does not
by itself lead to the conclusion that the family is
non-resident in that year, since the business of the
family, though it is normally controlled by the karta,
may at a particular point of time be controlled by
some one else. The same principle applies equally to
cases of firms and other association of persons.
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Sl.
No
Category of person Condition for being resident Analysis
3. Company The control and management
of its affairs is situated
wholly in Bangladesh during
the income year.
A company whether a Bangladeshi company or
a foreign company whether it is registered at
Registrar of Joint Stock Companies of Bangladesh
or not is resident here in Bangladesh if the control
and management of its affairs is situated fully in
Bangladesh during the income year.
In the classical word, a company cannot eat or sleep
but it can keep house and do business and for the
purpose of income tax a company resides where it
really keeps house and does business, i.e. where the
central management and control actually abides.
While the location of control and management is the
sole test of residence for HUF, Firm and AOP, it is
also a test for companies.
Here controls mean de facto control not merely
de jure control. The control and management, the
head and brain, does not reside where there is some
ultimate power of control such as the power to alter
the articles of associations by a special resolution or
the power to interfere with fundamental finance.
A company may be resident in Bangladesh
even though its entire trading operations are carried
onabroad. If the management and control is situated
here, the company is resident here and it does not in
the least matter where the actual selling and buying
of the goods takes place.
Incidence of taxation on the basis of residential status:
Section 16 is the charging section where it is clearly mentioned that income tax is to be charged on the total income
of the assessee. The liability to tax arises by virtue of the charging section. The assessment order only quantifies the
liability, which is created by the charging section.
Here total income as per section 2(65) means total amount of income as referred to in section 17 and includes any
other income which is to be included in the total income of the assessee as per provision of The Income Tax
Ordinance, 1984. The principle underlying section 17 is to make the chargeability of income depending upon the
locality of receipt or accrual. Section 43 also deals with the computation of total income by inclusion, in some cases,
of other person's income. Assesses can be divided into 2 categories:-
(i) Resident; and
(ii) Non-resident.
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The basic difference between resident and non-resident is tabulated below:-
Sl.
No
Area Resident Non-resident Analysis
1. Income
point of
view
The entire income
accruing or arising in
any part of the world,
irrespective of whether it
is received in
Bangladesh or not is
taxable.
The income accruing or
arising in Bangladesh
only is taxable.
(a) A non-resident, unlike a resident, is
not chargeable in respect of income
accruing or arising outside Bangladesh
and not received in Bangladesh.
(b) If an income is taxed on the ground
of accrual or deemed accrual, it can not
be taxed again on the ground of receipt
either in the same year or in a different
year.
(c) As per S.R.O. No. 216-Law/ Income
tax/2004 dated 13/07/2004 foreign
income of a Bangladeshi national,
irrespective of resident or non-resident,
is exempt from payment of tax if it
comes through official channel.
2. Tax point
of view
General tax rate is
applicable.
Maximum tax rate is
applicable.
(a) The only exception is non-resident
Bangladeshi where general tax rate is
applicable.
(b) If any resident assessee proves to the
satisfaction of the DCT that, he has paid
tax at foreign country by deduction or
otherwise on any income which has
accrued or arisen to him outside
Bangladesh with which there is no
reciprocal tax treaty, the DCT may
deduct from the tax payable by the
assessee a sum equal to the tax
calculation on such doubly taxed income
at the average rate of tax of Bangladesh
or the average rate of tax of the foreign
country whichever is less.
3 Investment
Tax Credit
Point of
view
Investment tax credit
facility is applicable
Investment tax credit
facility is not applicable
The only exception is non-resident
Bangladeshi where investment tax credit
facilityis applicable like resident.
Thus, the incidence of tax depends upon and is determined by the question whether the assessee is resident in
Bangladesh. A non-resident entitles partial exemption from chargeability of tax to which resident is not entitled. The
incidence of Tax is higher in the case of persons who are resident and lower in the case of persons who are non-
resident.
Avoidance of tax through transactions with non-residents (Sec.104 read with rule-34 and 35)
Business may be carried on between a resident and a non-resident and owing to the close connection between them,
the course of business may be so arranged that the resident makes either no profit or less than the ordinary profit in
that business. Such an arrangement might deprive Bangladesh Govt. from tax which would otherwise be payable by
the resident. In such cases the resident may be charged in respect of the profits which he has not in fact made but
which he might reasonably be expected to have made had he done the business on ordinary commercial terms.
Rule-35 read with rule-34 prescribes the method of determining the amount of notional income in respect of which
the resident may be charged under section 104.
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Tax Rate:
Other than Company:
Entity other than the company (individual, HUF, firms etc) are taxed at progressive rate as below –
On the 1st tk. 250,000 Nil
On next tk. 400,000 10%
On next tk. 500,000 15%
On next tk. 600,000 20%
On next tk. 3,000,000 25%
Balance amount 30%
For women and senior citizen (65+) first slab will be of tk. 300,000; for handicapped, it is of tk. 375,000 and for
gazetted war-wounded freedom fighters, it is of tk. 425,000.(Amended FA 2015)
As per second schedule, in case of non-resident non-Bangladeshi tax rate is 30% direct.
Surcharge is payable by an individual assessee on total tax payable if the total net worth exceeds tk. 2.25crore as
stated below: Surcharge will be calculated based on tax liability after considering investment tax rebate.
Total net worth Rate
Over Tk 2.25to 10 crore 10%
Over Tk 10 to 20 crore 15%
Over Tk 20 to 30 crore 20%
Over Tk 30 crore 25%
Minimum surcharge has been fixed at Tk. 3,000 for the Assessment year 2015-2016. (Added FA 2015)
(Amended FA 2015)
Study References:
1. Finance Act
2. Section 16 (16B, 16C, 16CCC) of ITO
3. Second Schedule of ITO
4. SRO (Reduced tax rate)
Minimum tax;
Resident in Dhaka or Chittagong City Corporation; BDT 5,000
Resident in other City Corporation; BDT 4,000
Resident in Paurashabhas at District towns; BDT 3,000
Resident in areas other than those mentioned above; BDT 3,000
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Company:
Company tax rate is direct on its assessment income at following rate –
1. Listed company 25%(Amended FA 2015)
2. Non listed or non-resident company 35%(Amended FA 2015)
3. Bank, insurance & NBFI (except merchant banks)
If listed or government approved Bank, insurance and financial isntitution in 2013
40%(Amended FA 2015)
If not listed 42.5%(Amended FA 2015)
4. Mobile Phone Operator 45%
But if any such mobile phone operator converts it as a publicly traded company by transferring minimum
10% share of its paid up capital, provided Pre Initial Public Offering Placement will not be more than 5% of
that, in that case tax rate 40%
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5. Cigarette Manufacturers 45%(Amended FA 2015)
6. Merchant Bank 37.5%
7. Cooperative society (registered under cooperative society act 2001) 15% (Added FA 2015)
dividend received by a company or dividend paid to abroad will be treated as dividend income and tax rate
will be 20%.
Tax on capital gain of the company will be 15%.
Unlike in the previous year, no rebate is allowed even if dividend is paid more than 30% of the share capital.
The rate of income tax would be 35% if the company fails to declare or pay dividend at less than 10% of
share capital within the specified time (60 days).
Non-listed companies including mobile phone operator companies other than banks, insurance and other
financial institutions, merchant banks and cigarette manufacturing companies will receive rebate of 10% in
the year of listing if they list at least 20% of their paid up capital.(Amended FA 2015)
Section – 16:
Section - 16B; Charge of additional tax:
Notwithstanding anything contained in any other provision of the Ordinance, where---
(a) a public limited company, not being a banking or insurance company, listed with any stock exchange in
Bangladesh, has not issued, declared or distributed dividend or bonus share equivalent to at least fifteen percent
(15%) of its paid up capital to its shareholders within a period of six months immediately following any income
year, the company shall be charged additional tax at the rate of five per cent (5%) on the undistributed profit in
addition to tax payable under this Ordinance: or
(b) any person employs or allows, without prior approval of the Board of Investment or any competent authority
of the Government, as the case may be, any individual not being a Bangladeshi citizen to work at his business or
profession at any time during the income year, such person shall be charged additional tax at the rate of fifty
per cent (50%) of the tax payable on his income or taka five lakh, whichever is higher in addition to tax
payable under this Ordinance. (Added FA 2015)
Explanation.-For the purpose of this section, "undistributed profit" means total income with accumulated profit
including free reserve.
Section - 16C; Charge of excess profit tax:
1. Where a banking company operating under ব্োং ন োম্পোনীআইন, 1991 (1991 সননর 14 নংআইন) shows
profit in its return of income for an income year at an amount exceeding fifty per cent of its capital as
defined under the said Act together with reserve, the company, in addition to tax payable under the
Ordinance, shall pay an excess profit tax for that year at the rate of fifteen per cent on so much of
profit as it exceeds fifty per cent of the aggregate sum of the capital and reserve as aforesaid.
Section - 16CCC; Charge of minimum tax: 1. Notwithstanding anything contained in any other provisions of this Ordinance, every company shall,
irrespective of its profits or loss in an assessment year for any reason whatsoever, including the
sustaining of a loss, the setting off of a loss of earlier year or years or the claiming of allowances or
deductions (including depreciation) allowed under this Ordinance, be liable to pay minimum tax at the
rate of zero point three zero (0.30%) per cent of the amount representing such company's gross receipts
from all sources for that year:
Provided that such rate of tax shall be zero point one zero per cent (0.10%) of such receipts for an
industrial undertaking engaged in manufacturing of goods for the first three income years since
commencement of its commercial production.(Amended FA 2015)
Explanation: For the purposes of this section, 'gross receipts' means-
(a) All receipts derived from the sale of goods;
(b) All fees or charges for rendering services or giving benefits including commissions or
discounts;
(c) All receipts derived from any heads of income.]Added F.A. 2011
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Capital Gain (Second Schedule):
Example: Salary income Tk. 520,000 and capital gain Tk. 1,000,000, Therefore total income is Tk.
1,520,000, on which tax shall be, assuming the capital gain arises from disposal of asset after five years;
Applicable slab Rate Tax Amount
On 1st up to 250,000 0% -
On next up to 400,000 10% 40,000
On next up to 500,000 15% 75,000
Remaining 370,000 20% 74,000
Total Tk. 1,520,000 189,000
Or
{(520,000-250,000)*10%}+(1,000,000*15%) = Tk. 177,000
Whichever is lower
and in this case the lower amount is Tk. 177,000
In case of gain of winning any lottery tax are deducted @ 20% at source though it can be computed with total
income, but no further tax rebate can be claimed.
Tax on the capital gain of the non-resident non-Bangladeshi shall be at the maximum rate i.e. @ 30% currently.
Reduced Tax Rate (SRO):
1. Jute, Textile 15%
2. Private University, Private College 15%
3. Local authority (RAJUK, BRTA, CDA, KDA etc) 25%
Section - 16E; Charge of tax on sale of share at a premium over face value:
Notwithstanding anything contained in any other provisions of this Ordinance or any other law, where a company
raises its share capital through book building or public offering or rights offering or placement or preference
share or in any other way at a value in excess of face value, the company shall be charged, in addition to tax
payable under this Ordinance, tax at the rate of three (3) percent on the difference between the value at which the
share is sold and its face value. Added F.A. 2010 and omitted F.A. 2013
Other than Company:
Company:
15%
Within 5 yrs of purchase:
normal rate
Capital Gain
After 5 yrs of purchase:
1. Slab rate on total
income; or
2. Tax on cap. Gain 15%
and on other income,
normal slab rate
Whichever is lower
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4. Cattle feed, fish feed, shrimp feed (from AY 2014-15) 3%
Part Two: Income from Salary
Income from Salary:
Definition of Salary:
There is no exhaustive definition of salary at Income Tax Ordinance, 1984. Only an inclusive definition is given at
section 2(58) where ―salary‖ includes the following:-
a) Wages (or pay)
b) Annuity
c) Pension –Totally exempted as per 6th Schedule (Part-A) Para-8
d) Gratuity – Exempted as per 6th Schedule (Part-A) Para-20
e) Fees
f) Commission
g) Allowances
h) Perquisites (Indirect benefits)
i) Profits in lieu of salary or wages
j) Profits in addition to salary or wages
k) Advance Salary
l) Leave encashment
However, the term “Basic Salary” has been defined at Rule 33(2) as well as at Rule 65A (1) where basic salary
means the pay and allowances payable monthly or otherwise but does not include the following:
a) Dearness allowance (unless it enters into the computation of Superannuation or retirement benefits of the
employee)
b) Employer‘s contribution to Recognised Provident Fund and interest credited on the accumulated balance
c) Allowances which are tax exempted
d) Allowances, perquisites, annuities and other benefits
Section 2(58) contains definitions within the definition. Salary includes perquisites and profits in lieu of salary, which
again defined at section 2(45) and 2(50) respectively.
Perquisite is defined in the Oxford English Dictionary as "any casual emolument, fee or profit attached to an
office or position in addition to salary or wages.” There is an exclusive definition of perquisite at section 2(45)
where perquisite means any payment or benefit made to an employee in the form of cash or any other form but
excluding the following:
a) Basic Salary
Study Reference:
Definition: Section – 2(58), 2(45), 2(50), 2(27), 2(28) read with rule 33(2)(b)
Section – 21, 50, 50B read with rule 21 and 22
108 read with rule 23
124(2), 165 and 172
Exemption: Rule – 33 read with Sixth Schedule (Part A) para 5
Provident Fund:
1st schedule (Part B) read with Rule – 43, 44
6th Schedule (Part A) Para – 4,6, 21, 25
6th Schedule (Part B) Investment allowance
SRO 454 (Serial 19) date – 31/12/1980
SRO 310, dated: 27 June 1984
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b) Festival bonus
c) Incentive bonus
d) Arrear Salary
e) Advance Salary
f) Leave encashment
g) Leave Fare Assistance (LFA)
h) Overtime
i) Contribution by the employer to-
1) Recognized provident fund.
2) Approved Pension Fund.
3) Approved Gratuity Fund and
4) Approved Superannuation Fund.
There is an inclusive definition of "Profits in lieu of salary" at section 2(50) where profits in lieu of salary include: -
a) The amount of compensation in connection with the termination / modification of any terms and
conditions relating to employment.
b) Any payment from a provident or other fund to the extent to which it does not consist of contributions
by the employee and the interest on such contributions.
Classification of Salary (Section: 21)
The following 3 (three) categories of income of an assessee is classified and computed under the head ―salaries‖,
namely;-
a) Salary due from an employer to an employee in the income year, whether paid or not ;
b) Salary paid or allowed to an employee in the income year though not due before it become due to him; and
c) Arrears of salary paid or allowed to him in the income year, if not charged to income tax for any earlier
income year.
Salary once included in any year on due basis or advance payment basis is not includible again in salary income of an
employee of any other year. No payment can fall and to be taxed under the head salary unless the relationship of
employer and employee exists between the payer and the payee. Salary can be taxed not only on payments made
by an employer during employment, but also on payments by a former employer after the employment has come to an
end. The definition of ―employee‖ is given at section 2(28) where employee includes a director also. It has been
provided that an employee, in relation to a company, includes the managing director or any other director or other
person, who irrespective of his designation performs any duties or functions in connection with the management of
the affairs of the company. So a director who is not connected with the management of affairs of the company may
not be called employee. For the purpose of determining the value of perquisites of an employee under rule-33,
employee includes a shareholder director. If the shareholder director is director of more than one company then he
shall be entitled to the benefits under rule - 33 for one company only.
―In order to be classified under salary, there must be an employment contract.‖ Such as – consultancy fee will be
income from business and profession unless and until there is an employment contract.
Apportionment of salary over the years due to arrear or advance salary (sec.172)
Where the salary is assessable at a rate higher than that at which it would otherwise have been assessed by reason of-
(a) Any portion of salary being received in arrear or in advance;
(b) Salary received in the year for more than 12 months;
(c) Received a payment, which is a profit in lieu of salary;
The DCT may, on the basis of application to him by the assessee, allocate salary over the year or years to which it
relates and may refund the amount of tax, if any, paid in excess. According to section 21, salary is taxable in the year
in which it is due or is paid. Where salary is paid in arrear or in advance, or where a retirement benefit or salary for
more than 12 months is received in any one year, the income for that year may be liable to assessment at a rate higher
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than that at which it would otherwise have been assessed. Section 172 authorises the DCT to grant appropriate relief
for income tax in the above situation.
Pay and Allowances totally exempt from Tax: (Sixth Schedule, Part-A)
The following pay and allowances shall be exempted from payment of tax and shall not be included in the
computation of salary income:-
(a) Interest accrued on PF on which Provident Fund Act, 1925 applies (Para 4(1)).
(b) All sum accrued on Workers Profit Participation Fund established under the Companies Profit (workers
participation) Act, 1968 (Para 4(2)) by a worker as defined in section 2(65) of the said Act (Para 4(2)). (Amended FA
2015)
(c) Any special allowances, benefits, or perquisites granted to meet expenses incurred for official duties (Para-5)
(d) Remuneration of Ambassadors/High Commissioner/Charge d‘affairs etc. of Embassies of foreign states and
their non-Bangladeshi employees (Para-7).
(e) Pension (Para-8).
(f) Gratuity up to taka two crore fifty lakh (Para-20).(Amended FA 2015)
(g) Any payment from provident fund to which PF Act. 1925 applies or from a recognized provided fund, an
approved superannuation fund or workers‘ profit participation fund established under Labour Law 2006 to any
worker (Para-21).
(h) Interest credited on accumulated balance of a recognized provident fund. The exemption limit is 1/3rd of salary
[here salary means basic salary and dearness allowance (if any)] or interest credited @ 14.5% whichever is
lower (Para-25, definition of salary as per 1st Schedule (Part -B) and S.R.O.no 310 dated 27/06/1984).
(i) Any amount received at the time of voluntary retirement in accordance with any scheme approved by the Govt.
(Para-26).
(j) Income from dividend received from a company listed in any stock exchange in Bangladesh up to twenty five
thousand taka. (Para- 11A). (Amended FA 2015)
(k) Any income received by an assessee from Wage earners development bond, US dollar premium bond, US dollar
investment bond, Euro premium bond, Euro investment bond, Pound sterling investment bond or Pound sterling
premium bond. (Added FA 2015)
(l) Income from of a mutual fund or a unit fund up to taka twenty five thousand. (Amended FA 2015)
Salaries exempt from payment of tax (as per S.R.O.):
Salaries of the following categories are exempted as per Govt. S.R.O. and notification: -
(m) As per Private Sector Power Generation Policy of Bangladesh, income of any foreigner employed in a private
power generation company of Bangladesh is tax-free for 3 years from the date of his arrival in Bangladesh.
(S.R.O. no 114/1999); [not applicable for quick rental power generation company]
(n) Any salary drawn by any foreigner from the contracting state or agency as per bilateral agreement between the
Govt. of Bangladesh and Govt. of the contracting state or agency from any foreign aided development project is
fully exempt from payment of tax. (S.R.O. NO 207/1997)
(o) Salaries of categorized personnel of United Nations and its agencies are tax free as per provision of schedule-1
(Article-V) Section-17 and schedule-2 (Article-VI) section-18 of United Nations and Specialized Agencies
(Privileges and Immunities) Act, 1975. (NBR Circular No: NBR/Tax-7/Tax Policy/02/2006, dated. 29/4/2007.)
(p) When in any year an assessee has ceased to be an employee participating in a recognised Provided Fund and
has been declared by the employer maintaining the Fund not to be eligible to receive the whole for the
accumulated balance due to him, so much of his income as is assessable for that year shall be exempted from
income tax and shall be excluded from the computation of his total income and if such amount exceeds the
amount of his income in that year, so much of his income in the following year or years as is equal to the
amount of such excess shall be so exempted and excluded is such year or years. [S.R.O.no 454(serial no19)
dated:31/12/1980]
(q) All allowances and benefits (except basic salary and festival bonus) of Govt. employees, Ministers, MP and
Judges of Supreme Court are exempted from payment of tax [SRO No:226,227 and 228 dated 04/7/2011]
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Information regarding payment of salary (Section 108 read with rule 21, 22 and 23)
Every employer shall furnish salary statement of employees in the form prescribed at rule-23 to the DCT before 1st
September each year. The DCT may however extend this date. This section requires information to be given
regarding accrual and actual payment of salary in order to help detection of any avoidance of tax. In case of non-govt.
employees every person responsible for making deduction before payment of salaries to them shall send forthwith a
statement prepared in the form prescribed in rule-21 to the concerned DCT.
The Commissioner of Taxes may under rule-22 permit an employer to pay tax on the income of his employees in a
lump sum every month based on the average amount of tax deductible from such income from salaries and submit at
the end of the year the statement in the form prescribed in rule-23(3) Such statement must show not only the salary
which is paid but also the salary due. Because salary due is chargeable under section 21, whether paid or not.
Failure to furnish statement is punishable under section 124(b) and for making a false statement under section 165.
Tax on Tax
If salary tax is borne by the employer, than tax will not be treated as perquisite in the hand of the employee and
therefore there is no tax on tax issue in this case. (S.R.O. no 182/1999 dated 01-07-1999)
Salary Income Computation (rule 33)
As per income tax law the following pay and allowances will be included in computing salary income:-
a) Full basic salary;
b) Full festival bonus;
c) Full incentive bonus;
d) Full dearness allowance.
e) Full entertainment allowance;
f) Any allowance where there is no exemption limit
g) Employer‘s contribution to Recognised provident fund;
h) Cash house rent allowance if it exceeds 50% of basic salary or Tk. 25,000/- per month whichever is lower;
(If job is for 9 months, exemption will also be for 9 months)
Example: Tk. Tk. Tk.
Basic salary (52,000*12) 624,000
House rent allowance (30,000*12) 360,000
Less: Lower of 50% basic salary or Tk.
25,000 p.m. whichever is lower
50% of basic salary 312,000
Or, Tk. 25,000 p.m. 300,000 (300,000) 60,000
Total Income 684,000
Note: If actual house rent is less than Tk 3,00,000 then that amount shall be allowable.
i) Rental values of the rent-free accommodation or 25% of basic salary of the employee whichever is less.
Particulars Tk Tk. Tk
Basic salary (52,000*12) 6,24,000
Rental Value 1,60,000
House Rent (25% of Basic Salary) 1,56,000
(the lower one) 1,56,000
Less: House rent paid (2,000*12) 24,000 1,32,000
Total Income 7,56,000
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If rental value is not given, 25% of the Basic Salary shall be used for computation of total income
of an assessee.
Where the accommodation is provided at a concessionary rate, the rent actually paid by him shall be deducted.
j) Cash conveyance allowance if it exceeds Tk. 30,000/ per year.
Example: Received Exempted Net Income
Tk. Tk. Tk.
Basic salary (52,000*8) 416,000 - 416,000
House Rent (20,000*8) 160,000 (160,000) -
Conveyance Allowance 30,000 (30,000) -
Total Income 606,000 (190,000) 416,000
Note 1: House rent (25,000*8) or 50% of Basic salary, whichever is lower.
Note 2: Conveyance Allowance is allowable up to TK 30,000 irrespective of months.
k) Where conveyance facilities are provided partly or exclusively to an employee for personal or private
purposes, an amount equivalent to Tk. 60,000 per annum or 5% of basic salary whichever is higher shall
be added to his/her income. If any additional allowance is given along with the car facility, both will be added
to the salary income. nothing will be added if is given for official purpose.
l) Medical allowance if it exceeds 10% of basic salary or Tk. 120,000/- per year, whichever is lower.
m) The value of any benefit provided free of cost or at a concessionary rate;
n) Any sum paid by an employer in respect of any obligation of an employee.
o) In case of leave fares assistance; if it is mentioned in the job contract then it is exempted up to actual
expenditure. If it is not mentioned in the job contract then fully taxable. But if the travel is outside the country
the exemption is only applicable for every alternative year. If within the country, then exemption is for every
time of travel. (Amended FA 2015)
Voluntary disclosure of income [Section: 19E(3)(e)]
Voluntary disclosure of income as per section 19E will not be applicable to any income which is exempted from tax
in the concerned income year or is chargeable to tax at a reduced rate in accordance with section 44 of the Income
Tax ordinance, 1984. (Amended FA 2015)
Investment Tax Rebate:
According to section 44(2) and Part-B of the 6th schedule, the following investments and donations are eligible for
tax rebate:-
[A] Investments:
a) Life insurance premium (Para-1); (up to 10% of the policy value)
b) Employee‘s contribution to provident fund to which P.F.Act, 1925 applies (Para-3)
c) Both employee‘s and employer‘s contribution to Recognized Provident Fund (Para-5)
d) Employee‘s contribution to approved superannuation fund in which the employee is a participant (Para-6)
e) Contribution to benevolent fund and group insurance scheme (Para 17)
f) Contribution to any DPS up to Tk.60,000 per year at any scheduled bank. (Para-11)
g) Investment in the following instruments-
1. Savings Certificates;
2. Unit Certificates and Mutual Fund Certificates issued by ICB or any other financial institution; or
3. Government Bonds and Securities. (Para-10)
h) Investment at shares, debentures or mutual fund (both IPO and secondary market). (Para-27)
Particulars Tk. Tk
Basic salary (52,000*12) 6,24,000
House Rent (25% of Basic Salary) 1,56,000
Less: House rent paid (2,000*12) 24,000 1,32,000
Total Income 7,56,000
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i) Investment at Govt. Treasury bond (Para-28)
j) Purchase of 1computer (desktop) within Tk. 50,000/ or1 laptop within Tk.1,00,000/(Para-23).
[B] Donations to:
1. Rural charitable hospital approved by the Govt (Para- 11A)
2. Organisation for the welfare of the retarded people approved by the Social Welfare Department and NBR
(Para 11B)
3. Donation to Jakat Fund (Para 13)
4. Donation to an institution of Aga Khan Development Network (Para 21)
5. National level institution set up in memory of the liberation war (Para-24)
6. National level institution set up in memory of Father of the Nation. (Para-25)
7. Donation to Govt. approved philanthropic and educational institutions (Para-22)
GPF Vs RPF Vs UPF:
SL Subject GPF RPF UPF
1 Employees‘ contribution Automatic taxable* Automatic taxable* Automatic taxable*
2 Employers‘ contribution N/A Taxable Taxable but at the
end of the service
3 Investment allowance Yes Yes (both) No
4 Interest on PF Tax free **Tax free up to a
certain limit
Fully taxable
5 Treatment on the hand of
employer
N/A Allowable
expenditure on
Profit and loss
account
Not allowable
6 Pre-mature termination / leave
the job
*** ***Employee can
adjust in subsequent
years.
***
7 Payment at retirement No treatment No treatment Taxable (employer
portion and interest)
*Automatic Taxable = deduction of contribution to PF cannot be considered. Total basic salary are added to the total
income
**
One third (1/3) of the basic salary (Basic + Dearness allowance) (Para 25)
Or
Interest @ 14.5%
(SRO 310)
Whichever is lower is exempted
For example, a person received interest on his PF @ 16% which is tk. 230,000 and his basic salary is tk. 600,000.
Then exemption will be –
1. 1/3 of his BS, which is tk. 200,000 or
2. Interest @ 14.5% = ((230,000/.16)*.145) = 208,438
Lower one is exempted, that is tk. 200,000 is exempted.
So his total income = (600,000+(230,000 -200,000)) = 630,000
But this interest should be excluding from the total income in time of calculating investment allowance.
*** (SRO 454)
In case of pre-mature job leave and where employees received nothing from the PF, on which the employee has
already pay tax should be deducted from his total income in the subsequent years.
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1. Allowable Investment Allowance:
The allowable investment allowance is the lower amount of the following three:
30% of total income excluding
(1)employer‘s contributions to
recognized provident fund (RPF)
(2) taxable portion of interest on RPF
(3) any income u/s 82C
(4) any income on which reduced tax
rate is applicable
OR
TK. 15,000,000/=
OR
Actual Investments as per 6th Schedule
Part B
Whichever is lower is to
be treated as investment
allowance
Tax rebate @ 15% is
applicable on such
allowable investment.
2. Income tax rate for the assessment year 2015-2016
Rates
i. On the First Tk. 2,50,000/- of total income = nil
ii. On the next Tk. 4,00,000/- of total income = 10%
iii. On the next Tk. 5,00,000/- of total income = 15%
iii. On the next Tk. 6,00,000/- of total income = 20%
v. On the next Tk. 30,00,000/- of total income = 25%
vi. On the balance of total income = 30%
However, the threshold limit for woman and senior citizen ageing 65 years or more is Tk. 300,000/ and for
physically handicapped persons Tk. 375,000/- and for gazetted war-wounded freedom fighter is Tk.
4,25,000/-.(Amended FA 2015)
After rebate, minimum tax for individual taxpayer is Tk. 5,000 (for Dhaka and Chittagong city corporation
area), Tk. 4,000 (for other City Corporation) and Tk. 3,000 (for other areas) if total income exceeds the
minimum taxable limit.(Amended FA 2015)
Deduction of tax at source from salaries (Section 50+Rule-13)
The employer including Govt. (govt. Employees are taxed on their basic salary, festival allowance and bonus) shall
deduct tax at source at the time of paying salaries at an average rate applicable to the estimated total income of the
employee. At the time of making such deductions, the amount to be deducted may be increased or decreased for the
purpose of adjusting any excess or deficiency arising out of any previous deductions or failure to make deductions.
The employer‘s liability to deduct tax is absolute and is not affected by any private arrangement whereby the
employee has undertaken to discharge his own tax liability.
However employer will not deduct tax at source or will deduct tax at a lower rate or amount in case an employee can
produce a certificate issued by the DCT to do so.
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The amount deducted shall be deposited to the credit of the Govt. within 2 weeks from the end of the month of
deduction. However DCT can, with the prior approval of the IJCT, permit an employer to pay the tax deducted at
source under the head salaries quarterly on: -
a) 15th September
b) 15th Decembe
c) 15th March; and
d) 15th June
Practical Problems
Practical Problem -1:
Mr. X (50 years old) is the Managing Director of ABC Co. Ltd. He has been given the following monthly salary and
allowances for the year ending on 30 June 2015.
1 Basic Salary Tk 25,000 per month
2 Dearness Allowance Tk. 5,000 per month
3 Entertainment Allowance Tk 1,000 per month
4 Employer‘s Contribution to P.F. (Recognized) Tk.2,500 per month
5 Lunch Allowance Tk. 1,000 per month
6 School fee for the Children of Mr. X Tk. 5,000 per month
7 Utility Allowances Tk. 3,000 per month
8 Fee for Golf Club (yearly) Tk. 5,000 per year
9
Medical Allowance Tk. 3,000 per year
(Actual expenditure during the year was Tk. 30,000/-)
10 Festival Bonus Equal to basic pay (got two bonus during the year)
11 Other Particulars:-
(1) He has purchased 5 years savings certificates amounting to Tk. 1,00,000/-.
(2) Employer provided him a free accommodation. (Rent of the house is roughly Tk. 35,000p.m.)
(3) Employer also provided him a full time car.
(4) He has been given a servant from his office whose monthly salary is Tk. 1,200/-.
(5) He paid L.I.P. Tk. 50,000/-. (Policy value is Tk. 4,00,000/-).
(6) He contributed Tk. 2,500/- per month to the recognized provident fund (RPF). Employer also contributed the
same.
(7) During the year he received bank interest amounting to Tk. 1,80,000/-( net of tax)
(8) He purchased secondary shares of Tk.75,000/- of a public ltd. company which is listed in DSE.
Compute the total income and determine the tax liability of Mr. X for the assessment year 2015-2016.
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Computation of Total Income of Mr. X
Mr. X
Calculation of total income for the year ended June 2015
Income year- 2014-15
Assessment Year-2015-16
1. Income from Salary (Section-21) Tk. Tk.
(1) Basic Salary (25000 X12) 3,00,000
(2) D.A. (5000X12) 60,000
(3) Entertainment Allowance (1000 X12) 12,000
(4) Employer‘s Contribution to R.P.F (2500 X12) 30,000
(5) Lunch Allowance (1000 X12) 12,000
(6) School Fee (5000 X12) 60,000
(7) Utility Allowance (3000 X12) 36,000
(8) Notional income for full time car for private use(5% of
Basic Salary or Tk.60,0000;whichever is higher)
60,000
(9) Fee for Golf Club 5,000
(10) Medical Allowance (3000 X 12) 36,000
Less: lower of 120,000 and 10% of Basic Salary 30,000 6,000
(11) Festival Bonus (25000 X 2) 50,000
(12) Full Free Accommodation:
Rental value of accommodation (35000 X 12) 4,20,000
25% of basic Salary (whichever is less) 75,000 75,000
(13) Servant‘s Salary (1200 X 12) 14,400
Salary Income 720,400
2. Income from Other Sources [Section-33]
Bank Interest (1,80,000 x 10100
100
)
2,00,000
Total Income 9,20,400
Computation of Investment Allowance
Actual Investment:
1. Savings Certificate 1,00,000
2. LIP (10% of sum assured) 40,000
3. Contribution to R.P.F. (Self + Employer) 60,000
4., Investment in shares 75,000
Total investment allowances claimed 275,000
As per Section 44(3) of the I.T. Ordinance, allowable investment allowance comes to 30% of total income
[excluding employer‘s contribution to R.P.F.] = (920,400 - 30,000) x 30% = 267,120 or TK 15,000,000 or Actual
Investment whichever is less.
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Tax Calculation
On 1st Tk. 250,000/- of Total Income Tax Nil
On Next Tk. 400,000/- of Total Income Tax @ 10% Tk. 40,000
On Next Tk. 270,400/- of Total Income Tax @ 15% Tk. 40,560
Tax on Total Income of Tk. 920,400
Tk.80,560
Less: Tax Rebate on Investment Allowance (267,120
X 15%)
40,068
Total Tax: 40,492
Less:- Tax deducted at source from bank interest 20,000
Net tax liability 20,492
Answer: (1) Total Income: - Tk. 920,400
(2) Net tax liability: - Tk. 20,492
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Practical Problem -2:
From the following particulars compute the total income and tax liability of Mr. X for the income
year ending 30 June 2015.
(a) Salary Income:
Basic salary Tk. 20,000 p.m.
Dearness allowance – 20% of basic salary
Bonus – 1 month‘s basic salary
House rent allowance – 55% of basic salary
Medical allowance – Tk. 500 p.m.
Conveyance allowance – Tk. 1,200 p.m.
Posting allowance – Tk. 5,000 p.m. to meet extra cost of living for posting at Hill District
Subscription to RPF – 10% (Employer‘s contribution also same)
Interest accrued Tk. 96,000 on P.F. balance calculated @ 16% p.a.
(b) Interest on Securities:
Interest on SEC approved debenture Tk. 35,000/-
Interest on Govt. Bond Tk. 70,000/- (TDS @ 10%, Tk. 7,000/- at upfront system 3 years before)
(c) Income from House Property:
Mr. X has one residential house one-half of which is let out at a monthly rent of Tk. 10,000/- and the other half is
self-occupied.
Mr. X incurred following actual expenditures for the full house:
Taka
Municipal tax 20,000
Repairs and maintenance 60,000
Insurance premium 12,000
Salary of caretaker 30,000
Interest on house building loan 1,47,000
(d) Income from Business:
⅓rd share income form a partnership business firm Tk. 73,000 (after tax).
Firm‘s income Tk. 2,25,000/-
(e) Capital Gain:
Gain from sale of listed companies share Tk. 10,00,000/-
(f) Income from other sources:
Cash dividend (net) from a listed company Tk. 45,000/-
Stock dividend of 100 shares (face value Tk. 10 but market price on that day Tk. 1,500 per share)
Interest (net) on savings bank account Tk. 5,400/-
During the year Mr. X made the following investments:
1. Life insurance premium at the name of his father Tk. 60,000 (Policy value Tk. 5,00,000/-)
2. Investment in shares of a listed company Tk. 1,00,000/-
3. Contribution to monthly pension scheme of Islami Bank Tk. 5,000/- p.m.
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Solutions:
Mr. X
Calculation of Total Income for the year ended June 2015
IY: 2014-15
AY: 2015-16
Description Workings Amount (BDT)
a) Salary Income:
Basic Salary (BS) 20,000*12 2,40,000
Dearness allowance 20% of BS 48,000
Bonus 1 months BS 20,000
House rent allowance (55% of BS) 1,32,000
Less: 50% of BS or 25,000 p.m. lower one (1,20,000) 12,000
Medical Allowance 6,000
Less: Exempted-up to lower of 120,000 or 10% of BS (Rule 33I) 6,000 -
Conveyance Allowance 14,400
Less: Allowable up to 30,000 (Rule 33D) (14,400) -
Posting Allowance (it can also be allowable fully under sixth
schedule (part A) Para 5)
60,000
Employers' contribution to PF 24,000
Interest accrued 96,000
Less: Allowable @ 14.5% or 1/3 of BS (BS+DA), lower one (87,000)
9,000
Total Salary Income 4,13,000
b) Interest on Securities:
Interest on SEC approved debenture 35,000
Interest on Govt. bond 70,000
Total income from interest on securities 1,05,000
c) Income from House Property:
Annual value 1,20,000
Less: Repair and maintenance 25% of AV (30,000)
Municipal tax (10,000)
Insurance premium (6,000)
Interest on HP loan (73,500)
Total income from house property 500
d) Income from business:
Partnership income 225,000*1/3 75,000
Total income from business 75,000
e) Capital gain:
Sale of share of listed company 10,00,000
Less; Exempted (SRO no. 217, 18.08.2014) (10,00,000) -
Total capital gain -
f) Income from other sources:
Cash dividend (45,000/.90)
Less: Exempted up to 25,000 ( 6th schedule, Part A, Para 11A)
50,000
(25,000)
25,000
Interest on savings bank account 5,400/.90 6,000
Total income from other sources 36,000
Total income for Mr. X 6,24,500
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Investment Allowance:
Employees contribution to RPF 24,000
Employers' contribution to RPF 24,000
Investment in share 1,00,000
Pension scheme (5000*12) 60,000
2,08,000
or, 30% of total income excluding Employer‘s contribution to RPF
and taxable portion of interest on RPF [(6,24,500-24000-
9000)*30%] 1,77,450
or, 1,50,00,000
Lower one (177,450).
So, investment allowance will be on tk. 177,450 @ 15% =Tk.26,618
Calculation Tax Liability:
On the first 2,50,000 0% 0
Remaining 3,74,500 10% 37,450
6,29,500 37,450
Less: Investment allowance (26,618)
10,832
Less: Tax rebate on partnership income* (1,301)
Less: TDS (5,000+600) (5,600)
Net Tax Liability 3,931
* (as per sixth schedule (part b) Para - 16)
= (10833/624,500)*75,000
=1,301
Note: Assuming Mr. X is below 65 years old.
Answer:
Total income Taka 6,24,500
Net Tax Liability Taka 3,931
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Question No.8:
The fo llowing are the particulars of income of Mr.Fazal for the year ended 30th June, 2014. IS
a) Salary Tk. I 2,0001- per month (basic) b) Dearness Allowance -4()t/o of basic pay but maximum ofTk.4,OOO per month c) Entertainment Allowance Tk.400 per month. d) Bonus--equivalent to basic sal3l)' of two months. e) Income rrom Commercial Securities Tk.6,09&1·. f) Honorarium as part lime advisor Tk.20,0001· g) Income from Partnersh ip Business Tk.SO,OOOI-(taxed). h) Income from Agricultural Land (sa le of product) n .1 0,000'-i) Royalty rrom books Tk.7,OOO. j) Received bin.h day presentation Tk.S,OOO. k) Interest on pensioner saving certificate n .lo.ooo.
Mr. Fazal was provided with a free-furnished quarter. He also owns a house whidl is let out al n . I 0,000 per month . The Municipal V.lue of the house is n .I,oo,ooo. He spent 1\.7,5001- for repair and llWO,OOO for altemation . He also paid TkA,OOO for Municipal Tax, Tk.2,OOO for fire insurance. premium, Tk.J,OOO for col lection charges. Other Part.:Culars of Mr. Faza l are as follows:
i. He contributed 10% of his basic salary to • recognized provident fund 10 which his employer conlribuled equal sums..-
ii . He insured his own life for Tk.75.000 and for the life of his wife for Tk .50,OOO. He paid insurance premiums on Ihe above policies Tk.6,OOO and Tk.4.000 respeclive l), .
iii . Purchased Pratirakh)'a Saneha), Patta for Tk.20,OOO. iv. He spent Tk.8,OOO on education for two college going children. Required to alculale:
I) The total taKable income .. ii) Investment lax credit for the year ended 3O~ June 2014. iii) Tax to be paid.
Page 1 0f t;
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,
Answer to q UeJ tion no.8: Computation'or TOlal income of Mr. Fazal
[Considering it for current assessment year otherwise students will not be benefited] Income Year. 2014- 15 I Year. 2015·
Tk. Tk. 11<. TIt. lacome from Salar" Sec 21
, Basic SaIIllY: TIt. ~n'hIY 12,OOOX12 1.44.000 i ;'I~an~: 4~~ofi~--~~57,6oor-~==--1
48,000 48,000 I ii, 1 AI : 4ooXI2 4,800 I ii Bonus (2 month ', . 12,1 (2 24,000
Ii, '~e 1~~~%0~~'~~Y.-__ ~ ____ ~3~6i •• ~1000+-~~t-~~ I v: _, 110 RPF~B. S. 14,400 1,27,200 2,71,200
el ...... • on , Sec.22 rMi" Income from ' ~
Income from Hou .. 1 : Sec.2. Whollv leI oul house: ~nnual Rent.1 Value: 12 ~
Dc IV'lu~H~~ro~ne,~C;A~"n~nu'I~V'lu~e)~I~~ 1,2~~----+---~ I :;es;e~ir v~ of A'. v , • ~s 25: , ch..-ge) 30000
~ .I tax @~ 84,000
~i""'me from : uJ, 19(30) Repairs aUowed as per seclion 2S - '" -~ ,. 30,000 L,e,s: Repairs claimed (Tk. 7,500+ Tk.l,OOO)- 10,500 Unspent amount will be treated as HP income uls I9(JO)
4. lacome fro .. ~~Pr<>duce !-ess eoSl of I j 6~
Inrome [rom : Sec.2S ncome from I income) . In,ome from Other Source: Sec. JJ
10,000 6,000
.) i 20.000
TOllllncome
19,100 1,03,100
4,000
4,61,798
page z of 5
, ,
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Investment Tn Reba te: Sec. 44(1) (b); 44(3)
Particulars Tolal Admissible Tax Investment Tk. Investment rebate Tk.
a) Actuallnvcstment:
;. Contribution to RPF: 14,400 X 2 21,100 (Employer and Employee both)
ii. Savings eertificatc 20,000 iii. Li fe Insurance Premium
Self: 6,000 or, 10% of Policy amount 7,100
(Le. IIW. ofTk. 10,000) (Lower) 6,000 Wife: 4,000 Or, 10% of Policy amount 1,000 (;.e. 10% of n. 10,000) (Lower)
4,000 11,800
b) Max Limit of Investment 30% of T.I. excluding employer's contribution to RPF=4,61,798-14,400) X 30% "" 4,47,398 X 30% ,. 1,34,219 or Tk. 1,50,00,000 or Actual investment Tld 8JOO (Whictlever is lo~r) ~ Tax Credit: 15% on admissible investment ofTk. 58,800
Tn calcul atio n: TOli ncome Taxon IIITk.2.50,OOO'" Tax on remaining Tk. 2, 11,798@ 10%
Less: Investment tax rebate
Less: Rebate on income from partnersl!ip finn al average rate as per 6" schedule (pan.b)pa~.16 (10,000)( 12,360/4,61,798)
Net tax payable
NOle:
Tk.
11,800
Tkc~ Nil lW2 21 ,180 Llli 12,360
l.ill Tk. J.J...lli
8,820
I) Income from Commercia l Securities needs not to be grossed-up as TOS was at upfront system. 2) Rebate would be calculated It the avetage rate of lax out of the .-.ncome from Parti~hip
Business" (taxed) to arrive at the Net lax calcuiliton as per 6· schedule (part-b) para-I 6. J) Royalty income from books is ttloxable under Scc.36 of Income Tax Ordinance 1984. 4) Education expense for Children is not an item of investment allowance. So it is nOI considered
for that 5) Interest on pensioner savings certi ficate is tax free up 10 investment of TIe_ 5 lakh. As the inlerest
income figure is only Tk. IO,OOO, so I assume thott investment was within that limit.
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Worked example 5
Mr. Zaman Hoque was the HR Manager ofAxiala Bangladesh Ltd. On July 2014, his basic salary was Tk.52,OOO in the scale of 40 000-4 000x8-72 000. His date of yearly Increme~t '~ on 26"' MarCh. He was terminated from Axiata 'Banglade~h ltd. on 30th April, 2015 and JOflne
h·' me rom Grameenphone Ltd. on 1" June of the same year. During the income year IS Inco Axiata Bangladesh Ltd and Grameenphone Ltd. are as follows:
From Axlata Bangladesh Ltd.:
He received deamess allowance @ 10% of basic salary and medical allowance Tk. 2000 per month. He received two festival bonus each equivalent to one month's basIc salary In the month of September and April respectively. He contributes 10% of hIS basIc salary to a recognized provident fund. He has been provided with a renl-free quarter and a full tIme car by the employer. During the year he has also received an entertainment allowance of Tk. 1,000 per month. He has received compensation for the termination of Tk. 2,00,000 and gratuity of Tk. 1,00,000. Moreover, his accumulated balance from the RPF was Tk. 1,80,000.
From Grameenphone:
His basic salary is Tk. 60,000 per month with 40% house rent allowance and Tk. 5,000 medical allowance per month. He is also entitled to receive Tk. 4,000 conveyance allowance per month. He contributes 10% of his basic salary to a recognized provident fund. His employer also contributed the same. His taxable Income from other sources were Tk. 2,13,119 during the year. During the year total TDS from various sources of his Income was Tk. 20,000. Moreover, his refund claims of Tk. 10,000 for excess payment of tax in the last assessment year was to be adjusted witlh current year's tax liability. His investments during the year were as fOllows:
a. Purchase one laptop Tk. 1,10,000.
b. Payment of his life insurance premium Tk. 20,000 (Policy value Tk. 5,00,000)
c. Contribution to DPS Tk. 3,000 per month.
Compute total Income and tax liability of Mr. Zaman Hoque fortlhe assessment year 2015-16.
SoIytIon5j
AueuH: Mr, Zaman Hoque Aueament year 2015-2016
Accounting year ended 30 June 2015 Computlltlon of total Income and tax liability
BasIc salary (Note 1) 5.84.774 52.477 ~ allowance (AxIaIa) (5,24.774xlO%)
Uedlcal allowance (TotaI)(2.000XI0) + 5.000] Examptad fUlly _It II within Iha .xalnpth~
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60,000 . 24 774xSO/C or Tk.60,OOO) 10,000 vii) Car facility (Axlats) (S" 0 10
viii) Entertainment allowance (Axiata) (I,OOOX ) 2,00,000 ix) Compensation (Axiata) 1,O~:: x) Gratuity (Axiata) 100 0 .
Less: Exemption: up to Tk.2.S crore 1,80,O~ xi) Accumulated balance of RPF (Axiata) 18000 -
Less: Exemption: Full xii) House rent allowance (Grameenphone) 24,OO( (60,OOOx40%) 0
Less: Exempted Tk. 2S,OOO per month or 50 Yo 24.0lK of Basic salary whichever is lower
xiii)Conveyance allowance Less: Exempted - Up to Tk. 30,000 30.000 . --
Income from other source. irotallncome
Computation of Inveetment allowance
PU~ch81se one laptop up 2. Payment of life insurance premium 20,000; maximum (10% of the
policy value i.e. 10% of 5,00,000 = 50,000) 3. Contribution to DPS (3,000 x12) 4. Employee's and employer's contribution to RPF (58,477x2)
12,04,922 ') 13119.
1& lIt041
20,000 36,000
Maximum limit of the Invastmant allowance: 30% of Total income excluding' employer's contribution to RPF ((14,18,041-58,477) x 30%) = 4,07,869 or Tk. 1,50,00,000 or Tk.2,72,954whlc:hever Is less, So, the required amount of Investment allowance on which 15% tax rabate will be app/k:abIe Is Tk • . 2,72,954.
Tax liability:
/;fk. 2,50,000
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From Axiata: B. S. from July 14 to February 15=(Tk. 52,000 x 8) =Tk. 4,16,OOO B. S. for the month March 15 = [(52,000"25131) + (56,000"6131)) = Tk. 52,774 B. S. for the month April 15 = Tk· 56.000
From Grameenphone: B. S. for the month June 15
Total basic salary for the income year 2014-15
=Tk.5,24,774
= Tk.60,OOO = Tk.5,84.n4
2. Since conveyance allowance is received from a separate company, the exemption limit has considered.
3. In the month of May he was not employed. So, Basic salary for the month of May Is not taken into consideration.
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Problem: Mrs_ Rahim FCA is a retired Government Officer_ She is 71 years of age_ Currently she wo.-ks as Adviso.-s ofXYZ Ltd and ABC Ltd, private companies in Bangladesh_ She also works as a part time consultant for UNDP and World Bank During the twelve months ended 30 June 2015 she received the following income: (a) From XYZ Ltd
(h) From ABC Ltd
Basic Salary Tk30,000/~ p_m_ House Rent Tk_ 20,000/~ p_m_
Basic Salary Tk25,000/~ p_m_ House Rent 15,000/~ p_m_
• •
• • •
Medical Allowance 5,000/~ p_m Conveyance Allowance 5,000/= p_m_
Entertaimnent Allowance 5,000/~ p_m Conveyance Allowance 5,000/~ p_m_ Bonus Tk_40,000/~ p_lL
No car was provided by the company_ (c) Consultancy fees of Tk_4,00,000 in total from UNDP for her work in Bangladesh and Tk3,00,000 (in equivalent US dollar) from Wo.-ld Bank for her work in Bhntan and NepaL
(d) Rental income @Tk35,000p_m_ from an apar1ment owned by her_ It is used by a foreigner as his residence_ She paid
municipal las of Tk_ 40,000/~, land revenue of Tk_12,000/~ and a fire insurance premimn of Tk_15,000/~ during the year_
She also spent Tk_ 60,000 for maintenance during the year_ The apar1ment remained vacant for 2 months during the year_ (e) Dividends of Tk_50,OOO/= received from investment in shares of a mnnber of listed companies_
(t) She made a capital gain of Tk2,00,000 by buying and selling lisred company shares during the year_ (g) She earned an interest income ofTk_15,000/~ from post office savings bank acconnL (h) She entered inlo a contract with a developer on 1111114 for erecting a sis sloried building with 10 flats out of which she will get 5 flats free of cosL In addition, she will he given Tk_60,00,000 in cash, to he paid in 3 equal installments of Tk20,00,000 each in Novemher 2014, 2015 and 2016_ She received Tk20,00,000 in Novemher 2014_ (i) She had an apar1mentwhich was sold for Tk_l crore (which was same as the Mouza value) on 1 Angust 2014_ The buyer paid all the costs (including las, stamp doty, registration costs etc_) at the time of registration in Angust 2014_ The apar1ment was bonght by her on 1 Angust 2000 at a cost of Tk_40 lac_
G) Mrs_ Rahim is a lecturer at the ICAB evening coaching classes and is also involved in the ICAB examination proce88_ She is also a regular contributor of articles to the ICAB Journal and newspaper8_ From these sources she received the following
additional income during the year Taka
Lec10re Fees 2,00,000 Payments fo.- articles published 50,000 Questions setting and scripts examination fees 40,000 She paid Tk_IO,OOO 10 a part-time typist for typing manuscripts of her articles_
(k) She received Tk250,000 from agricnl10ralland by selling cTOpS_ (1) She received hono.-arium of Tk_150,000 during the year as a Board Director of Rupali Bank Ltd
Other infonnation are as follows:
• MTS_ Rahim has taken a life insurance policy in favour of her son and has paid quarterly premiums ofTk_15,000/~ each throughout the year and another fo.- herself paid premium of Tk_ 10,000 per month policy value of which is Tk_ 10 Lac_
• She spent Tk20,000 on professional and techuical books and publications during the year_ • She paid an annual subscription ofTk_5,000/~ 10 ICAB on 117/14_ • She owns and maintains a motor C3r_
• She sold the shares of a lisred company for Tk2,00,000, which she bonght for Tk_l,50,000 in the income year 2013-2014, and for which she claimed and received the allowable las rehaw fo.- the investmenL She has again bonght shares of 3 other lisred companies during the year for TIL6,00,000/~_
• Mrs_ Rahim's declared income in the assessment year 2015-2016 is at least 20% more than that of the assessment year 2014-2015_
Required: Compute the total income of Mrs_ Rahim and las liability fo.- the assessment year 2015-2016, advising whether she should submit the return under Section 82BB <1Jniversal Self Assessment" ()[' under nonnal procedure_
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Solution: Mrs_ Rahim FCA
Income Year: 2014-15
Assessment Year: 2015-16
Computation oftotal taxable income I Reference BDT BDT
A. Income from Salary , Sec-21
From XYZ limited ~---------L Basic salary I R-33 (2)a 3,60,000
r----------2_ House rent allowance R-33A 2,40,000
---------Less: Lower of 50% basic salary or Tk_ 25,000 p_m_
50% of basic salary 1,80,000 Or, Tk_ 25,000 p_m_ 3,00,000 (1,80,000) 60,000
---------3_ Medical allowance I R-33I 60,000
---------Less: Lower of 10% basic salary or Tk_ 120,000
10% of basic salary 36,000
Or, Tk_ 1,20,000 (36,000) 24,000
---------4_ Convey ance allowance R-33C 60,000 [_._._._.
Less: Exempted upto Tk 30,000 (30,000) 30,000
----------From ABC limited , Note I _ .. _ .. _ .. _. L Basic salary 3,00,000 2_ House rent allowance 1,80,000 3_ Entertainment allowance 60,000
4_ Convey ance allowance 60,000 5_ Bonus (Assuming festival bonus and paid once per annum) 40,000
Total Income from Salary 11,14,000 B. Income from House Property
Annual value (Since reasonable rent is not given, I assume rent Sec-24 4,20,000 -----------
received is reasonable)
Less: Allowable expenses: _ .. _ .. _ .. _. Repair and maintenance (25% of annual value) Sec 25(1)(h) 1,05,000
-----------Municipal tax Sec 25(1)(e) 40,000
-----------Land revenue Sec 25(1)(h) 12,000 _ .. _ .. _ .. _. Insurance premium Sec 25(1)(b) 15,000 _ .. _ .. _ .. _. Vacancy allowance Sec 25(1)(j) 70,000 (2,42,000) _ .. _ .. _ .. _.
Add: Deemed income Sec 19(30) -----------
Deductible expense 1,05,000
Expense claimed (60,000) 45,000
Total Income from House Property 2,23,000
C. Income from Agriculture
Slaes proceeds from crops I Sec 26 I 2,50,000 '-----------, Less allowable expenses ~ ~~~!~1)(9ii .j Cost of production (1,50,000)
Total Income from Agriculture 1,00,000
Updated (Finance Act 2015)
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D. Income from Business or Profession L Consultancy fees Sec-28
Earned in Bangladesh 4,00,000 Earned in abroad 3,00,000 Less: Exempted (assuming brought through proper channel) (3,00,000) -
Less: Depreciation on professional hooks (30% of20,000) 3rd Schedule 6,000 (6,000) Total Income from Business or Profession 3,94,000 D. Capital Gain ----------
I Gain :from sale of shares ,
Sec 31 ,
2,00,000 1-----------1 Less exempted , SRO-I961Lf , (2,00,000) -,
F~ -IT~~OI~ - -:1 2 Gain from sale of ~ent (416,6671.15) Note 2 27,77,780 ----------Total Capital Gain 2777780 E. Income from Other Sources
---------L Dividend income (Assuming net and she has TIN) Sec-33A 55,556 ---------
Less: Exempted Sch.6-A-llA (25,000) 30,556 ---------2. Interest income fiom Post Office Ale (assuming net) 16,667 -----------3. Honorarimn fiom Rupali Bank (assnming net) 1,66,667 -----------4. Income fiom ICAB net of direct expenses 2,80,000 5. Money received fiom developer 20,00,000 Total income from other sources 24,93,889 Total Taxable Income 71,02,669
Calculation of Invest:ment AUowance [as per 6th Schedule., Part-B]
1. Actual investment -----------a. Insurance premium of herself assuming her son is not ___ [P~-IL __ nnnor
Premimn paid
I 1,20,000 I
10% of Policy Valne 1,00,000 , Whichever is lower 1,00,000 -----------
b. Investment in shares of listed companies [para-27] 6,00,000 7,00,000 2. 30% of Total taxable income exclnding income VIS 82(C) [30% of(5,102,669-2,777,780)] 12,97,467
3. Maximum allowance u/s 44 1,50,00,000
Tax rebate@ 15% of the lowest of (1), (2) and (3) 1,05,000
Updated (Finance Act 2015)
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Tax Liability Calculation Total incom excluding capital gain is Tk.(7,102,669-2, 777,780) 43,24,889
Al!l!licable slab Rate Tax amount On 1st 3,00,000 0% -
Next 4,00,000 10% 40,000 Next 5,00,000 15% 75,000 Next 6,00,000 20% 1,20,000
Remaining 25,24,889 25% 6,31,222 On Capital Gain 27,77,780 15% 4,16,667
71,02,669 12,82,889
Less: Investment tax rebate (1,05,000)
Gross Tax Liability 1l,77,889 Less: IDS (5,556+1500+15000+416,667) (4,38,723) Net tax liability 7,39,166
Advice: She should submit return under universal self assessment as her income is 20% higher than the income of the previous yeaL Therefore, it would not full under the scope of audit but her return is tu be furnished in compliance with provisions of ITO 1984_
Note 1: As per rule 33 (2) (b) there is restriction of allowing benefits under rule 33 tu a shareholder directur from one company ouly _ Considering this sprit of law, exemtion benefits from salary income allowed ouly for one company and all income from other company have been added with her tutal income_
Note 2:
Since the sale of capital assets occurred after 5 years of acquisition and the total income excluding income under sale of apartment is TK 2,324,889 so the applicable tax rate for back calculation of income under 82(C) would be 15% as it is lower than the applicable tax rate which is 25% (marginal tax rate)_ Therefore amount of IDS 416,667 {(I 0,000,000/0_96)*4%} will be used tu hack calculate capital gaia
Applicable slab Rate Tax amount Maximum Amount On Istuptu 3,00,000 0% 0 -
On next upto 4,00,000 10% 40,000 40,000 On next upto 5,00,000 15% 75,000 75,000 On next upto 6,00,000 20% 1,20,000 1,20,000 Remaining 25,24,889 25% 6,31,222 7,50,000
Note 3: It is assumed that the subscription fees paid tu ICAB is not soley for the profession_
Note 4: UNDP & WB are the organisation of UN_ Ouly the salary categorized person employee at UN is tax free_ As Mrs Rahim is not salaried person ofUNDP & WB, so her income from there is not tax free_ However consul_cy income could be shown as income from other sources_
NoteS: Since sufficient information about purchase price or :fa.ir market value is not given, I assume no capital gain arises from the contract with developer rather 'I'lL 2,000,000 received from developer would be considered as income from other sources_
Updated (Finance Act 2015)
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Part Three: Income from Interest on Securities
Income from Interest on Securities:
Types of Securities:
1. Government Securities
2. Government Approved Securities
3. Securities/Debentures issued by company or local authority.
Sixth Schedule (part A):
Para 24: Interest on tax-free government securities are totally tax-free.
Para 40: Interest on Zero Coupon Bond (ZCB) is tax-free
Important sections:
Section – 22:
However, Supreme Court says tax should be deducted when it is received or withdrawn (case ref: Lal Bhai Dolpat
Bhai Vs CIT Bombay, 1952)
Section 23:
Section 51:
Section – 51; Deduction at source from interest on securities:
Study Reference:
Section; 22, 23, 51, 172(d), 106
Sixth Schedule (part A); Para 24 and Para 40
Section – 22; Interest on securities:
The following incomes of an assessee shall be classified and computed under the head "Interest on Securities",
namely:-
(a) Interest receivable by the assessee on any security of the Government or any security approved by
Government; and
(b) interest receivable by him on debentures or other securities of money issued by or on behalf of a
local authority or a company.
Section – 23; Deductions from interest on securities:
(1) In computing the income under the head "Interest on securities", the following allowances and deduction
shall be made, namely:-
(a) any sum deducted from interest by way of commission or charges by a bank realising the interest
on behalf of the assessee;
(b) any interest payable on money borrowed for the purpose of investment in the securities by the
assessee:
Provided that no allowance or deduction on account of any interest or commission paid under
clause (a) or (b), as the case may be, in respect of, or allocable to the securities of
Government which have been issued with the condition that interest thereon shall not be
liable to tax, shall be made in computing the income under section 22;
[(c)]Deleted F.A. 1995
(2) Notwithstanding anything contained in sub-section (1), no deduction shall be allowed under this section in
respect of any interest payable outside Bangladesh on which tax has not been paid or deducted in accordance
with the provisions of Chapter VII.
Income from savings certificate will be
treated as income from other sources.
Updated (Finance Act 2015)
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1. In the case of the security of the Government, or security approved by the Government, unless the
Government otherwise directs, the person responsible for issuing any security, income of which is
classifiable under the head "Interest on securities", shall collect income tax at the rate of five percent
(5%)Subs by F.A. 2014upfront on interest or discount, receivable on maturity, from the purchaser of the securities:
Provided that this provision shall not apply to the Treasury Bond or Treasury Bill issued by the Government.
Example (Upfront Systems);
A person purchase securities of tk. 10,000,000 @ 6% simple interest matured after 3 years.
So, interest income after 3 years = tk. (10,000,000*6%*3) = tk. 1,800,000.
So, TDS @ 5% on tk. 1,800,000 (which is tk. 90,000) would be deducted today.
Section 172(d):
Section 106; Avoidance of tax by transactions in securities:
(1) Where the owner of any securities sells or transfers those securities and buys them back or reacquires them, or
buys or acquires similar securities, and the result of the transactions is that any interest becoming payable in respect
of the original securities sold or transferred by the owner is not receivable by the owner, the interest payable as
aforesaid shall be deemed, for all purposes of this Ordinance, to be the income of such owner and not of any other
person, whether the interest payable as aforesaid would or would not have been chargeable to tax apart from the
provisions of this sub-section.
2)Where any person has had for any period during an income year any beneficial interest in any securities and the
result of any transactions within that year relating to such securities or the income thereof is that no income is
received by him, or that the income received by him is less than the sum which the income would have amounted to
had the income from such securities accrued from day to day, and been apportioned to the said period, then the
income from such securities for the said period shall be deemed to be the income of such person.
(3) Where, any person carrying on a business which consists wholly or partly in dealing in securities buys or acquires
any securities from any other person and either sells back or re-transfers those securities, or sells or transfers similar
securities, to such other person, and the result of the transactions is that the interest becoming payable in respect of
the securities bought or acquired by him is receivable by him but is not deemed to be his income by reason of the
provisions of sub-section (1), no account shall be taken of the transactions in computing for any of the purposes of
this Ordinance anyincome arising from, or loss sustained, in the business.
(4) The Deputy Commissioner of Taxes may, by notice in writing, require anyperson to furnish him, within such
time, not being less than twenty-eight days, as may be specified in the notice, such particulars in respect of all
securities ofwhich such person was the owner, or in which he had beneficial interest atany time during the period
specified in the notice, as the DeputyCommissioner of Taxes may consider necessary for the purpose ofascertaining
whether tax has been borne in respect of the interest on all thosesecurities and also for other purposes of this section.
Explanation.- For the purposes of this section,-
(a) "Interest" includes dividend;
(b) "Securities" includes stocks and shares; and
(c) Securities shall be deemed to be similar if they entitle their holders to the same right against the same
persons as to capital and interest and the same remedies for the enforcement of these rights, notwithstanding any
difference in the total nominal amounts of the respective securities or in the form in which they are held or in the
manner in which they can be transferred.
Section – 172(d); Relief:
His (assessee) having received in arrears in one income year any portion of his income from interest on securities
relatable to more income years than one; the Deputy Commissioner of Taxes may, on an application made to him
in this behalf, determine the tax payable as if the interest had been received by the assessee during the income
year or years to which it relates and may refund the amount of tax, if any, paid in excess of the tax so determined.
Updated (Finance Act 2015)
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Part Four: Income from House Property:
Introduction:-
As per Income Tax Ordinance, 1984 house property means any building (including furniture, fixture, fittings etc.) and
land appurtenant thereto owned by the assessee and rented for commercial or residential purposes. Property
situated outside Bangladesh should also be assessed according to the same provision of section 24 of the Income Tax
Ordinance, 1984. Rental income derived from vacant plots of land will not be treated as house property income
rather it will be treated as income from other sources u/s 33.If an assessee lets out his machinery, plant, or
furniture along with building and the letting out building is inseparable from the letting of machinery, plant or
furniture, the income must necessarily be assessed as income from other sources and in such a case there is no
room for disintegrating the rent or assessing a part of the rent as income from house property.
Section 24:Income from House Property:
Ownership of the property:-
The tax on house property income is upon the owner (either legal or beneficial) and not upon the occupant. The mere
existence of a dispute regarding the title to ownership of a certain property cannot of itself hold up an assessment
even if a suit has been filed, otherwise it would be open to an assessee to delay assessment indefinitely. The DCT has
prima facie the power to decide whether the person sought to be taxed is the owner of the property.
For example, if a person (a government employee) gives rent to the government for the quarter and received
rent @ tk. 10,000 per month for letting it out. This house property income shall not be added to his HP income, as he
does not possess the ownership of the house. Rather it would be added to his ‗income from other sources‘.
Assessment of Co-owner:-
As per section 24(2), where property is owned by two or more persons and their respective shares are definite and
ascertainable, the co-owners should not be assessed in respect of their income from such property as an association of
persons (AOP), but each co-owner must be assessed individually in respect of his share of house property income.
Though co-heirs may possess the property jointly under the Muslim law, the shares of co-heirs under that law are
definite and ascertainable, and therefore each of the heirs must be separately assessed u/s 24 in respect of his share
of house property income.
For example, Mr. A having a building at Motijhel C/A received rent @ tk. 1,000,000 per month but after his
death the property is divided among his 4 sons (B, C, D and E) and they received tk. 250,000 each from this building.
So according to income tax law they cannot be assessed for tk. 1,000,000 aggregately as an AOP, rather portion of
their receipt will be added up with their individual income and they will assessed individually.
Self-occupied property:-
In respect of house property, no tax is payable if the owner occupies the property for his own residence or for the
purpose of his business or profession the profits of which are assessable to tax u/s 28.
Section 2(3); Annual Value:
Income tax is levied not upon the actual income from the property but upon the notional income based an annual
value. Annual value is defined in section 2(3)as ―The sum for which the property might reasonably be expected to let
from year to year and any amount received by letting out furniture, fixture, fittings etc‘‘. That is, the sum for which
the owner could let the premises having regard to all the prevailing circumstances such as local conditions and the
demand for house in that particular locality. Where the property is let out and the owner receives the rent, the annual
value may be more or less, than the actual rent received, as the annual value is only a hypothetical sum. In case where
the actual consideration received by the owner from his tenant does not represent the annual value, evidence of such
annual value may be afforded by the rents paid for similar and similarly situated properties in the locality.
Study References:
Section; 2(3), 24, 25, 19(22),19(30), 53A
Sixth Schedule (Part A); Para 1, Para 38
SRO 454 (Serial No. 18) Date – 31/12/1980
Updated (Finance Act 2015)
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Grossing-up when the owner’s burden borne by the tenant:
It is necessary to take into account the whole of the consideration exacted by the owner for the right to use and
occupy the property. For example, where the tenant agrees to pay the service charge which is actually payable by the
owner, the total consideration paid by the tenant is the house rent plus the service charge and that is the figure which
may be taken as evidence of the annual value by grossing-up.
Treatment of advance when it is not adjustable against house rent:
In case the advance received by the owner is not adjustable against house rent then such advance will be treated as
house property income as per section 19(22) of the Income Tax Ordinance, 1984. However, such advance may be
allocated into 5 years including 1st year in equal proportion if the assessee opts so. Where such advance or part
thereof is refunded by the owner then the amount so refunded shall be deducted if it is taken as income as per section
19(22).
Maintenance of separate bank account by the owner of the house property (Rule – 8A)
Where any person having ownership or possession of any house property, whether used for residential or commercial
purpose, receives any rent exceeding Tk. 25,000/- per month shall have to maintain a separate bank account for the
purpose of depositing rent and advance (if any) received from such house property. He shall also maintain a separate
register for recording particulars of tenants and amount received or receivable from the tenants.
DCT can impose penalty for any violation of this rule as per section 123(2). The maximum penalty is 50% of tax
payable on house property income or Tk. 5,000/-, whichever is higher.
Deduction of tax at source from house rent (Section 53A):
Tax is to be deducted at source by the following tenants from the payment of house rent at @ 5% by any Govt.
organization, NGO, Company, Bank (including co-operative bank), University, Medical/Dental/Engineering College,
Any school and college, and Hospital/clinic/diagnostic center.
For Example, P Bank let a house @ tk. 50,000 per month with advance of tk. 500,000 which is adjustable with rent @
tk. 10,000 per month, so –
TDS on rent = tk. (50,000*5%) = tk. 2,500
Payment in each month = tk. (50,000 – 10,000, - 2,500) = tk. 37,500
Annual Value = tk. (50,000*12) = tk. 600,000
TDS on tk. 500,000 (at the time of payment) = 0
Exemption from payment of tax:
(1) Income from house property held under trust or other legal obligation wholly for religious or charitable purpose is
exempt from payment of tax as per 6th schedule (part-A) paragraph-1(1). However, this provision will not be
applicable for NGO.
(2) House property income of any chamber of commerce and industry ( i.e. FBCCI or MCCI etc.) is completely tax
free as per SRO no 210, dated 01/07/2013.
Sixth Schedule (Part A), Para – 38:
Any income derived from any building situated in any area of Bangladesh, not less than five storied having at
least ten flats, constructed at any time between the first day of July, 2009 and the thirtieth day of June, 2014
(both days inclusive), for ten years from the date of completion of construction of the building, except the
buildings situated in any areas of City Corporation, Cantonment Board, Tongi Upazilla, Narayanganj
Paurashava, Gazipur Paurashava and any Paurashava under Dhaka District are excluded from the total income.
Updated (Finance Act 2015)
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Allowable deductions from annual value to derive income from house property (Section – 25):-
In computing house property income, the following allowances are deductible from the annual value:-
(1) Repairs and maintenance:-
The following expenditures relating to repairs, maintenance and provision of basic services are granted as a
deduction. Where the property is let out for residential purposes, the allowable deduction is 1/4th of the annual value
and where it is let out for commercial purpose the allowable deduction is 30% of the annual value:
(a) Repairs;
(b) Expenditure relating to collection of rent;
(c) Water and sewerage;
(d) Common electricity;
(e) Salary of darwan, security guard, pump-man, lift-man, caretaker
(f) All other expenditure related to maintenance and provision of basic services.
However, if it is not really spent or partly spent then the remaining unspent amount shall be deemed to be the
income from house property as per section 19(30).
(2) Land development tax*;
(3) Municipal tax*;
(4) Ground rent*;
(5) Insurance Premium*,
(6) Vacancy allowance (if the property remain vacant during a part of the year);
(7) Where the let out property is acquired, constructed, repaired, renewed or reconstructed with loan then the
interest payable for the year on such loan*;
(8) Where the let out property has been constructed with borrowed capital and there was no house property income
during the period of construction, the interest payable during the period of construction will be allowable in 3
equal installments from first 3 years of letting out*;
(9) Irrecoverable rent:-
Relief in respect of irrecoverable rent has been granted through S.R.O. No:-454-L/80 dated 31-12-1980 if the
following conditions are fulfilled:
(a) The tenancy is bona-fide;
(b) The defaulting tenant has vacated, or steps have been taken to compel him to vacate the property;
(c) The defaulting tenet is not in occupation of any other property of the assessee;
(d) The assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid
rent or satisfies the Deputy Commissioner of Taxes that legal proceedings would be useless and;
(e) The annual Value of the property to which the unpaid rent relates has been included in the assessed
income of the year during which that rent was due and income tax has been duly paid on such assessed
income;
The concession given here appears to be an exemption but it is actually a deduction as that part of rent which
will be irrecoverable and which has already been charged in the preceding year will be deducted from the
total income in the subsequent year.
*If the full house is not rented(partly used by owner or his dependent) then all of these deductions shall be made
proportionately.
Updated (Finance Act 2015)
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Problem – 1:
Mr. Alam a retired govt. officer owns a two-storied house in Dhanmondi, Dhaka. He along with his family occupies
the ground floor while the first floor has been let out from October 1, 2014 for a monthly rental of Tk. 60,000 and
before then it was vacant for about 3 months. He has constructed the house with a loan of Tk. 25 lac from National
Bank Limited and paid interest of Tk. 321,000 during the construction period from January 2013 to June 2013.
During the Financial Year 2012-2013, he has paid Tk. 5 lac to the bank. His other expenses in relation to the property
for 2014-2015 Financial Year are: –
Repair and maintenance tk. 50,000
Insurance premium tk. 5,000
Municipal tax tk. 20,000
Bank interest tk. 50,000
Salary of security guard tk. 10,000
Municipal value of the property tk. 300,000
Compute the house property income for Mr. Alam for the assessment year 2015-16.
Solution:
Mr. Alam
Calculation of House Property Income
Income Year: 2014-2015
Assessment Year: 2015-2016
Description Reference BDT BDT
Annual Value (AV*) (60,000*12) Sec.2(3)(a) 720,000
Less: Repair and Maintenance (25% of Annual Value) Sec25(1)(h) (180,000)
Insurance (1/2 of 5,000) Sec25(1)(b) (2,500)
Municipal Tax (1/2 of 20,000) Sec25(1)(e) (10,000)
Bank interest (1/2 of 50,000) Sec25(1)(g) (25,000)
Vacancy allowances (equal to 3 months rental value) Sec25(1)(k) (180,000)
Interest at construction stage [1/2*(1/3*3,21,00)] Sec25(1)(gg) (53,500) (451,000)
Add: Unspent portion of allowable deduction Sec 19(30)
Allowable deduction
180,000
Expense claimed
(30,000) 150,000
Total House Property Income 419,000
Updated (Finance Act 2015)
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Problem – 2:
Mr. Azim owns a house the municipal value of which is tk. 220,000. Half of the house has been let out at tk. 25,000
per month. The rest of the house is used by his son in law who pays nothing for the use. Following were the expenses
for the house in FY 2014-15;
White wash and repair tk. 6,000
Insurance premium tk. 4,000
Municipal tax tk. 5,000
Water and sewerage charges tk. 7,000
Interest on mortgage tk. 4,000
Service charges tk. 6,000
Land revenue tax tk. 2,000
Cost of alteration tk. 15,000
He has a residential house situated at Uttara, Dhaka. The city corporation for tax purpose valued its‘ annual value at
tk. 200,000. He also paid interest on a loan taken from Agrani bank for alteration and expansion of the house for
which interest payable was tk. 20,000 per year.
Compute the house property income for Mr. Azim for the assessment year 2015-16.
Solution:
Mr. Azim
Calculation of House Property Income
Income Year: 2014-2015
Assessment Year: 2015-2016
Description Reference BDT BDT
Annual Value; Higher of Actual value or Municipal Value Sec.2(3)(a)
Actual Value (25,000*12)
300,000
Municipal Value; Whichever is higher
220,000 300,000
Less: Repair and Maintenance (25% of Annual Value) Sec25(1)(h) (75,000)
Insurance (1/2 of 4,000) Sec25(1)(b) (2,000)
Municipal Tax (1/2 of 5,000) Sec25(1)(e) (2,500)
Land Revenue Tax (1/2 of 2,000) Sec25(1)(e) (1,000)
Interest on Mortgage (1/2 of 4,000) Sec25(1)(g) (2,000) (82,500)
Add: Unspent portion of allowable deduction Sec 19(30)
Allowable deduction
75,000
Expense claimed
(9,500) 65,500
Total House Property Income 283,000
* Assumed that house was rented for residential purpose.
* white wash and repair, water and sewerage and service charges are within 1/4 statutory deduction of repair and
maintenance.
* Cost of alteration is capital expenditure which is not cover u/s 25. So it is not considered in computing HP
income.
* As the full house was not let out and annual value is determined on 50% of the property, so all related
expenditure allowed proportionately.( 6,000+7,000+6,000)/2=9,500
Updated (Finance Act 2015)
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Part Five: Agricultural Income:
Important sections of Agricultural Income:
Section 27: Deductions from Agricultural Income:
(1) In computing the income under the head "Agricultural income", the following allowances and deductions shall be
made, namely:-
(a) any land development tax or rent paid in respect of the land used for agricultural purposes;
(b) any tax, local rate or cess paid in respect of the land used for agricultural purposes, if such tax, rate or
cess is not levied on the income arising or accruing, or deemed to accrue or arise, from agricultural
operations, or is not assessed, at a proportion or on the basis of such income;
(c) (i) subject to sub-clauses (ii) and (iii), the cost of production, that is to say, the expenditure incurred for
the following purposes, namely:-
(a) for
cultivating the land or raising livestock thereon;
Study References:
Section; 2(1), 26, 27, 35, 19(17), 19(19)
Rule: 31 and 32
Third Schedule
Sixth Schedule (Part A); Para 27, Para 29 and Para 45
Section 2(1):
Agricultural income means -
(a) any income derived from any land in Bangladesh and used for agricultural purposes -
(i) by means of agriculture; or
(ii) by the performance of any process ordinarily employed by a cultivator to render marketable the
produce of such land; or
(iii) by the sale of the produce of the land raised by the cultivator in respect of which no process, other
than that to render the produce marketable, has been performed; or
(iv) by granting a right to any person to use the land for any period; or
(b) any income derived from any building which -
(i) is occupied by the cultivator of any such land as is referred to in sub-clause (a) in which anyprocess
is carried on to render marketable any such produce as aforesaid;
(ii) is on, or in the immediate vicinity of such land; and
(iii) is required by the cultivator as the dwelling house or store-house or other out-house by reason of
his connection with such land;
Section 26; Agricultural income:
(1) The following income of an assessee shall be classified and computed under the head "Agricultural income",
namely:-
(a) any income derived by the assessee which comes within the meaning of "agricultural income" as
defined in secion 2(1);
(b) the excess amount referred to in section 19(17);
(c) the excess amount referred to in section 19(19).
(2) Agricultural income derived from the sale of tea grown and manufactured by the assessee shall be computed in
the prescribed manner.
(3) Where the Board, by notification in the official Gazette, so directs, agricultural income from the sale of rubber,
tobacco, sugar or any other produce grown and manufactured by the assessee may be computed in the manner
prescribed for the purpose.
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(b) for performing any process ordinarily employed by a cultivator to render marketable the
produce of the land;
(c) for transporting the produce of the land or the livestock raised thereon to the market; and
(d) for maintaining agricultural implements and machinery in good repair and for providing upkeep
of cattle for the purpose of cultivation, processing or transportation as aforesaid;
(ii) where books of accounts in respect of agricultural income derived from the land are not
maintained, the cost of production to be deducted shall, instead of the expenditure mentioned in sub-
clause (i). be sixty per cent of the market value of the produce of the land;
(iii) no deduction on account of cost of production shall be admissible under this clause if the
agricultural income is derived by the owner of the land from the share of the produce raised through
any system of sharing of crop generally known as adhi, barga or bhag;
(d) any sum paid as premium in order to effect any insurance against loss of, or damage to, the land or any
crop to be raised from, or cattle to be reared on, the land;
(e) any sum paid in respect of the maintenance of any irrigation or protective work or other capital assets ;
and such maintenance includes current repairs and, in the case of protective dykes and embankments, all
such work as may be necessary from year to year for repairing any damage or destruction caused by flood or
other natural causes;
(f) a sum calculated at the rate as provided in the Third Schedule on account of depreciation in respect of
irrigation or protective work or other capital assets constructed or acquired for the benefit of the land from
which agricultural income is derived or for the purpose of deriving agricultural income from the land, if the
required particulars are furnished by the assessee;
(g) where the land is subject to a mortgage or other capital charge for purposes of reclamation or
improvement, the amount of any interest paid in respect of such mortgage or charge;
(h) where the land has been acquired, reclaimed or improved by the use of borrowed capital, the amount of
any interest paid in respect of such capital;
(i) where any machinery or plant which has been used by the assessee exclusively for agricultural purposes
has been discarded, demolished or destroyed in the income year, the amount actually written off on that
account in the books of accounts of the assessee,-
(i) subject to the maximum of the amount by which the written down value of the machinery or plant
exceeds the scrap value thereof if no insurance, salvage or compensation money has been received in
respect of such machinery or plant; and
(ii) subject to the maximum of the amount by which the difference between the written down value and
the scrap value exceeds the amount of insurance, salvage or compensation money received in respect
of such machinery or plant;
(j) where any machinery or plant which has been used by the assessee exclusively for agricultural purposes
has been sold or transferred by way of exchange in the income year, the amount actually written off on that
account in the books of accounts of the assessee, subject to the maximum of the amount by which the written
down value of the machinery or plant exceeds the amount for which it has been actually sold or transferred;
and
(k) any other expenditure, not being in the nature of capital expenditure or personal expenditure, laid out
wholly and exclusively for the purpose of deriving agricultural income from the land.
(2) Notwithstanding anything contained in sub-section (1), no deduction shall be allowed under this section in respect
of any interest on which tax has not been paid or deducted in accordance with the provisions of Chapter VII.
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Section 35 - Method of accounting:
Books of accounts shall be maintain in –
1. Income from Business and Profession
2. Agricultural Income
3. Income from Other Sources
Rule – 31 and 32: Sale of Tea and Rubber
Section 19 (17) and 19(19):
For example, an agricultural machinery
Cost price Tk. 100
Less: Depreciation (30)
WDV Tk. 70
Now, if machine is sold @ tk. 78 or tk. 68 or tk. 114 treatment of gain will be as follows;
Case – 1: Tk. 8 is agricultural income
Case – 2: Tk. 2 is agricultural loss
Case – 3: Tk. 30 is agricultural income and tk. 14 is capital gain
Rule – 31; Computation of income derived from the sale of tea:
1. Income derived from the sale of tea grown and manufactured by the seller in Bangladesh shall be computed as if
40% of such income was derived from business and 60% of such income was derived from agriculture:
Provided that in computing, such income from business, an allowance shall be made in respect of the cost of
planting bushes in replacement of bushes that have died or become permanently useless in an area already
planted, unless such area has previously been abandoned:
Provided further that in computing such income an allowance shall be made in respect of the expenditure incurred
in the income year by the assessee in connection with the development of the new areas for bringing them under
tea cultivation.
Rule – 32; Computation of income derived from the sale of rubber:
1. Income derived from the sale of rubber grown and manufactured by the seller in Bangladesh shall be computed
as if 40% of such income was derived from business and 60% of such income was derived from agriculture.
Provided that in computing such income an allowance shall be made in respect of the expenditure incurred in the
income year by the assessee in connection with the development of the new areas for bringing them under rubber
cultivation.
Section – 19(17):
Where any machinery or plant exclusively used by an assessee for agricultural purposes has been disposed of in ny
income year and the sale proceeds thereof exceeds the written down value, so much of the excess as does not
exceed the difference between the original cost and the written down value shall be deemed to be the income of
the assessee for that income year classifiable under the head "Agricultural income".
Section – 19(19):
Where any insurance, salvage or compensation moneys are received in any income year in respect of any
machinery or plant which having been used by the assessee exclusively for agricultural purpose is discarded,
demolished or destroyed and the amount of such moneys exceed the written down value of such machinery or
plant, so much of the excess as does not exceed the difference between the original cost and the written down
value less the scrap value shall be deemed to be the income of the assessee for that income year classifiable under
the head "Agricultural income".
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For example, an agricultural machinery
Cost price Tk. 100
Less: Depreciation (30)
WDV Tk. 70
Now, if machine is destroyed and insurance claim and sale of scrap generate tk. 78 or tk. 68 or tk. 114 treatment of
such gain will be as follows;
Case – 1: Tk. 8 is agricultural income
Case – 2: Tk. 2 is agricultural loss
Case – 3: Tk. 30 is agricultural income and tk. 14 is capital gain.
Sixth Schedule (Part A):
Third Schedule: Computation of Depreciation Allowance:
Para–1; Depreciation allowance on assets used for agricultural purposes
Para – 2; Allowance for depreciation
See the details from the Income Tax Ordinance 1984.
[Change in F. A. 2015]
1. Depreciation rate for imported computer software is allowed at the rate of 10% (Serial No. 3(b) (vii) of
Depreciation Rate Table in Paragraph 3).
2. Cost of motor vehicles, being passenger vehicles or sedan cars, not plying for hire, shall be deemed not exceed
twenty five (25) lakh taka for the calculation of written down value for depreciation.
Para - 27:
Notwithstanding anything contained in any order or regulation for the time being in force, any income of an
individual, being an indigenous Hillman of any of the hill districts of Rangamati, Bandarban and Khagrachari,
which has been derived solely from economic activities undertaken within the said hill districts.
Para - 29:
Any income, not exceeding two-lakh taka, chargeable under the head "Agricultural income" of an assessee, being
an individual, whose only source of income is agriculture.
Para - 46:
An amount equal to fifty (50) percent of the income of an assessee derived from the production of corn/maize, and
sugar beet.
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Part Six: Capital Gain
Capital Gain:
Important sections of Capital Gain:
Section 2 (15) & 31:
Section 32; Computation of capital gains:
Capital gain is computed as higher of the full value of the consideration received or accruing from the transfer of the
capital asset or fair market value thereof less (i) any expenditure incurred solely in connection with the transfer of the
capital asset, or (ii) the cost of acquisition of the capital asset and any capital expenditure incurred for any
improvements thereto but excluding any expenditure in respect of which any allowance is admissible under any
provision of section 23, 29 and 34.
Capital gain is from purchased property:
Capital gain = Sales price – Acquisition price
Where;
Sales price = Higher of full consideration or fair market value
Acquisition price = actual cost + other expenses to make it useable
1. Capital gain from property gifted, transferred on trust or distributed on liquidation of company or firm etc:
Study References:
Section; 2(15), Capital Asset
31, Capital Gain
32, Manner of computing capital gain; read with rule - 42
Second Schedule; Tax rate on capital gain
Sixth Schedule (Part A), Para 18, Para 43
Share Market: SRO No. – 269; date – 01/07/2010.
Section – 2(15); Capital Assets:
"Capital asset" means property of any kind held by an assessee, whether or not connected with his business or
profession, but does not include--
(a) anystock-in-trade (not being stocks and shares), consumable stores or raw materials held for the purposes of
his business or profession; and
(b) personal effects, that is to say, movable property (including wearing apparel, jewellery, furniture, fixture,
equipment and vehicles), which are held exclusively for personal use by, and are not used for purposes of the
business or profession of the assessee or any member of his family dependent on him;
[(c) agricultural land in Bangladesh, not being land situated
(i) in any area which is comprised within the jurisdiction of Dhaka, Narayanganj and Gazipur districts,
Chittagong Development Authority (CDA), Khulna Development Authority (KDA), Rajshahi
Development Authority (RDA), a City Corporation, Municipality, Paurashava, Cantonment Board; or
(ii) in any area within such distance not being more than five miles from the local limits of
RajdhaniUnnayanKartripakya (RAJUK), Chittagong Development Authority (CDA), Khulna Development
Authority (KDA), Rajshahi Development Authority (RDA), a City Corporation, Municipality, Paurashava,
Cantonment Board referred to in paragraph (i), as the Government may having regard to the extent of, and scope
for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the official
Gazette;]F.A. 2011.[ Sub-clause (c) inserted by F.A. 2011 and subsequently omitted by F.A. 2014]
Section – 31; Capital gains:
1. Tax shall be payable by an assessee under the head "Capital gains" in respect of any profits and gains
arising from the transfer of a capital asset and such profits and gains shall be deemed to be the income of
the income year in which the transfer took place[.]Subs F. A. 2011
[Proviso]Deleted F.A. 2011
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Capital gain (where actual cost of acquisition ascertainable) = Sales price – (Acquisition price of the
previous owner less depreciation allowed).
For example, Mr. A is gifted a land by Mr. X, cost of that to Mr. X was Tk. 10 lac and and accumulated
depreciation is Tk. 5 lac. Few years later Mr. A gifted it to Mr. B. B sales the land for tk. 15 lac. Then capital
gain for B is;Capital gain = Tk. (25-10-5) = Tk. 10 lac.
Capital gain (where actual cost of acquisition cannot be ascertained) = Sales price – (Fair market value at the
date on which the capital asset became the property of the previous owner).
For example, Mr. A is gifted a land by Mr. X, which have a fair market value to Tk. 10 lac. Few years later
Mr. A gifted it to Mr. B. B sales the land for tk. 25 lac. Than capital gain for B is,
Capital gain = Tk. 25 lac – Tk. 10 lac = tk. 15 lac.
3. Capital gain from property by succession, inheritance or devolution:
Capital gain = Sales price – Fair market value prevailing at the time of the property became the asset of the
assessee
For example, Mr. A has some land. Few years later Mr. A became dead and all of his land goes to his son
Mr. B, which has a fair market value of tk. 20 lac at that moment. B sells the land for Tk. 25 lac in two years
later. Than capital gain for B is:
Capital gain = Tk. 25 lac – Tk. 20 lac = Tk. 5 lac.
Capital gain on sale of property of business and profession is tax free if another property purchased within one
(1) year (before or after). For example,
Capital machinery with cost of Tk 1,000
Sales price 1,600
Capital Gain Tk. 600
Purchase another building within one year (before or after) by this capital gain than this tk. 600 is tax-free.
But,
Sl Situation Consequences
1 If purchase price is tk. 600 No gain tax and tax depreciation is not allowable for that property.
2 If purchase price is tk. 500 Gain tax on tk. 100 and tax depreciation is not allowable for that property.
3 If purchase price is tk. 900 No gain tax, but tax depreciation is allowable for tk. 300.
Gain on sale of govt. securities is tax-free (Section 32(7)).
Second Schedule: Para 2 (Tax payable on capital gain):
Where the total income of an assessee includes any income chargeable under the head "Capital gains" (hereinafter
referred to as the "said income"), the tax payable by him on his total income shall be-
(a) in the case of a company-
(i) tax payable on the total income as reduced by the said income had such reduced income been the total
income; plus
(ii) tax at the rate of fifteen per cent on the whole amount of the said income;
Simply tax payable on capital gain will be @ 15% in the case of a company.
(b) in the case of a person other than a company-
(i) where the said income arises as a result of disposal by the assessee of his capital assets after not more
than five years from the date of their acquisition by him, tax payable on the total income including the
said income (means capital gain will be taxed at normal slab rate); and
(ii) where the said income arises as a result of disposal by the assessee of his capital assets after five
years from the date of their acquisition by him, tax payable on the capital gains at the rate applicableto
his total income including the said capital gains, or tax at the rate of fifteen per cent on the amount of the
capital gains whichever is the lower.
Simply we can conclude tax on capital gain if the capital asset disposed within five years period of its acquisition
at normal slab rate but if the capital asset disposed beyond five years period then tax payable on capital gain at
normal slab rate applicable or tax payable at 15% whichever is lower.
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Sixth Schedule (Part A): (Exclusion from income):
1. Para 11- A : Income from dividend received from a company listed in any stock exchange in Bangladesh up
to twenty five thousand taka. (Amended FA 2015)
2. Para–18: share of capital gain from partnership business
3. Para-20: any income up to TK. 2.5 crore received by an assessee as gratuity. (Amended FA 2015)
4. Para-22A: income from mutual or unit fund up to Tk 25,000.
5. Para-28: 50% income from export business.
6. Para-29: agricultural income up to 2,00,000 of an individual assessee, whose only source of incoem is
agriculture
7. Para–33: income from software and IT business up to 30 June 2024.
8. Para–39: income from SME business , turnover not more than 30,00,000.
9. Para–40: income from zero coupon bond issued by bank,insurance or any Financial institution upon approval
of BB.
10. Para–42:income from poulty farming ; rate (first 20 lac-0%, next 10 lac-5%, remaining-10%)_SRO:254
11. Para-43: capital gain from sale of share of non-resident non-Bangladeshi shareholders , Subject to the
condition, that such non-resident Non-Bangladeshi is entitled to similar exemption in the country in which
he is a resident.
12. Para-46: 50% of income from production of corn/maize or sugar beet.
13. Para-48: any income earned in abroad by BD citizen and brought into BD as per law of foreign remittance.
14. Para-49: donation to any girls' school or girls' college through crossed cheque or bank transfer that school
need to approved by the ministry of education of the government.
15. Para-50: donation to vocational training institute through crossed cheque or bank transfer that school need to
approved by the ministry of education of the government.
16. Para-50: donation to national level institute engaged in R & D of agriculture,science, technology and
industrial development through crossed cheque or bank transfer.
If capital gain arises from transfer of capital asset being buildings or lands to new company to set up an
industry and if the whole amount of capital gain is invested in equity of that company, then this gain shall
not be charged to tax as income of the year in which the transfer took place. For example, Mr. X sold his
land @ tk. 1 crore to ABC Co. which has a cost price of tk. 60 lac. But he receives share of tk. 1 crore from
the company instead of cash. Than his capital gain of tk. 40 lac is tax-free.
If capital gain arises from transfer of capital asset of a firm to new company, and if the whole amount of
capital gain is invested in equity of that company by the partners of the firm, then this gain shall not be
charged to tax as income of the year in which the transfer took place.
Special tax rates on Capital Gain from sale of share
1. In case of company or firm @ 10%
2. In case of placement shareholder or sponsor shareholders @ 5%
3. If any person holds more than 10% of share of a company than gain on sale of such share is taxable @ 5%
4. In case of individual tax-free
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Part Seven: Income from Business and Profession
Income from Business and Profession:
Definitions:
Study References:
Section; 2(34), Income
2(14), Business
2(49), Profession Definitions
2(61), Speculative Business
Section; 19(15) – a, aa, b, c
19(16) with 3rd schedule Para 10
19(18) with section 29(1)(xii) Deemed Income
19(20)
19(23) read with rule – 30A
Section; 28 read with rule - 19(6)
29
30 read with rule – 65 Main Section
35
46B + 46C
Sixth Schedule (Part A), Para 1A, Para 33, Para 35, Para 37, Para 39, Para42, Para 44, Para 45.
Third Schedule; tax depreciation
SRO; CSR; 229 of 2011 and 223 of 2012
SRO – CSR: No. 223 dated 27 June 2012 and No. 186 dated 01 July 2014
Rule 30, 31, 32
Section 2(14); Business:
Business includes any trade, commerce or manufacture or any adventure or concern in the nature of trade,
commerce or manufacture.
Section 2(34); Income:
Income includes-
(a) any income, profits or gains, from whatever source derived, chargeable to tax under any provision of this
Ordinance under any head specified in section 20;
(b) any loss of such income, profits or gains;
(c) the profits and gains of any business of insurance carried on by a mutual insurance association computed in
accordance with paragraph 8 of the Fourth Schedule;
(d) any sum deemed to be income, or any income accruing or arising or received, or deemed to accrue or arise
or be received in Bangladesh under any provision of this Ordinance:
[]Deleted F.A. 1993
Provided that the amount representing the face value of any bonus share or the amount of any bonus declared,
issued or paid by any company registered in Bangladesh under ক োম্পোনীআইন, 1994 (1994 সননর 18 নংআইন) to
its shareholders with a view to increase its paid-up share capital shall not be included as income of that
shareholder;
Section 2(49); Profession:
Profession includes a vocation.
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Rules:
Section 2(61); Speculative Business:
Speculation-business means business in which a contract for the purchase or sale of any commodity, including
stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the
commodity or scripts, but does not include business in which -
(a) a contract in respect of raw materials or merchandise is entered into by a person in the course of his
manufacturing or mercantile business to guard against loss through future price fluctuations for the purpose of
fulfilling his other contracts for the actual delivery of the goods to be manufactured or the merchandise to be
sold by him;
(b) a contract in respect of stocks and shares is entered into by a dealer or investor therein to guard against loss
in his holdings of stocks and share through price fluctuations; and
(c) a contract is entered into by a member of a forward market or a stock exchange in the course of any
transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of
his business as such member;
Rule – 30; Determination of income from business when such income is also partially agricultural:
In the case of income which is partially "agricultural income" and partially income from "business", in
determining that part of income which is from "business", the market value of any agricultural produce which
has been raised by the assessee or received by him in kind and which has been utilised as raw material in such
business or the sale proceeds of which are included in the accounts of the business shall be deducted, and no
further deduction shall be made in respect of any expenditure incurred by the assessee as a cultivator or receiver
of the produce in kind.
Rule – 31; Computation of income derived from the sale of tea:
1. Income derived from the sale of tea grown and manufactured by the seller in Bangladesh shall be
computed as if 40% of such income was derived from business and 60% of such income was derived
from agriculture:
Provided that in computing, such income from business, an allowance shall be made in respect of the
cost of planting bushes in replacement of bushes that have died or become permanently useless in an
area already planted, unless such area has previously been abandoned:
Provided further that in computing such income an allowance shall be made in respect of the
expenditure incurred in the income year by the assessee in connection with the development of the new
areas for bringing them under tea cultivation.
Rule – 32; Computation of income derived from the sale of rubber:
1. Income derived from the sale of rubber grown and manufactured by the seller in Bangladesh shall be
computed as if 40% of such income was derived from business and 60% of such income was derived
from agriculture.
Provided that in computing such income an allowance shall be made in respect of the expenditure
incurred in the income year by the assessee in connection with the development of the new areas for
bringing them under rubber cultivation.
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Deemed Income:
Example – 1: Bad debt expense charged in the Income Statement and allowed by the tax authority in AY 2011-12 but
subsequently the debtor paid debt. Then this expenditure will be treated as income in AY 2012-13.
Example – 2: Interest on loan was incurred (but not paid) in IY 2011. But if it is not paid in the subsequent 3 years
then it will be treated as income in the following year (IY 2015). But if the interest paid subsequently in 2016 it will
deducted from the income of 2016.
Section 19(15)(c) is like Section 19(15)(aa) but for trading liability for example purchase of raw materials on
credit was allowed as cost of goods sold in IY 2011-12 but not paid until 2014-15 then it will be treated as
income in the IY 2015-16.
Section 19(15); Deemed Income:
Where, for the purpose of computation of income of an assessee under section 28, any deduction has been made
for any year in respect of any loss, bad debt, expenditure or trading liability incurred by the assessee, and--
(a) subsequently, during any income year, the assessee has received, except as provided in clause (aa) whether in
cash or in any other manner whatsoever, any amount in respect of such loss, bad debt, or expenditure, the
amount so received shall be deemed to be his income from business or profession during that income year
(example -1);
(aa) such amount on account of any interest which was to have been paid to any commercial bank or the
Bangladesh Development Bank ltd or on account of any share of profit which was to have been paid to any
bank run on Islamic principles and which was allowed as a deduction in respect of such expenditure though such
interest or share of profit was not paid by reason of the assessee having maintained his accounts on mercantile
basis, within three years after expiry of the income year in which it was allowed, shall, to such extent as it
remains unpaid, be deemed to be income of the assessee from business or profession during the income year
immediately following the expiry of the said three years (example -2);
(b) the assessee has derived, during any income year, some benefit in respect of such trading liability (discount),
the value of such benefit, if it has not already been treated as income under clause (c), shall be deemed to be his
income from business or profession during that income year;
(c) such trading liability or portion thereof as has not been paid within three years of the expiration of the income
year in which deduction was made in respect of the liability, such liability or portion, as the case may be, shall
be deemed to be the income of the assessee from business or profession during the income year immediately
following the expiry of the said three years;
and the business or profession in respect of which such allowance or deduction was made shall, for the purposes
of section 28, be deemed to be carried on by the assessee in that year:
[Provided that where any interest or share of profit referred to in clause (aa) or a trading liability referred to in
clause (c) is paid in a subsequent year, the amount so paid shall be deducted in computing the income in respect
of that year.]
Section – 19(16):
Where any building, machinery or plant having been used by an assessee for purpose of any business or profession
carried on by him is disposed of during any income year and the sale proceeds thereof exceeds the written down
value, so much of the excess as does not exceed the difference between the original cost and the written down
value shall be deemed to be the income of the assessee for that income year classifiable under the head "Income
from business or profession (see below example).
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For example, a machinery
Cost price Tk. 100
Less: Depreciation (30)
WDV Tk. 70
Now, if machine is sold @ tk. 78 or tk. 68 or tk. 114 treatment of gain will be as follows;
Case – 1: Tk. 8 is Business income
Case – 2: Tk. 2 is Business loss
Case – 3: Tk. 30 is Business income and tk. 14 is capital gain
For example, a machinery
Cost price Tk. 100
Less: Depreciation (30)
WDV Tk. 70
Now, if machine is destroyed and insurance claim and sale of scrap generate tk. 78 or tk. 68 or tk. 114 treatment of
such gain will be as follows;
Case – 1: Tk. 8 is business income
Case – 2: Tk. 2 is business loss
Case – 3: Tk. 30 is business income and tk. 14 is capital gain
Section – 19(18):
Where any insurance, salvage or compensation moneys are received in any income year in respect of any building,
machinery or plant which having been used by the assessee for the purpose of business or profession is discarded,
demolished or destroyed and the amount of such moneys exceed the written down value of such building,
machinery or plant, so much of the excess as does not exceed the difference between the original cost and the
written down value less the scrap value shall be deemed to be the income of the assessee for that income year
classifiable under the head "Income from business or profession (see below example).
Section – 19(20):
Where an asset representing expenditure of a capital nature on scientific research within the meaning of section 29
(1) (xx) is disposed of during any income year, so much of the sale proceeds as does not exceed the amount of the
expenditure allowed under the said clause shall be deemed to be the income of the assessee for that income year
classifiable under the head "Income from business or profession.
Section – 19(23):
Where during any income year an assessee, being an exporter of garments, transfers to any person, the export
quota or any part thereof allotted to him by the Government, such portion of the export value of the garments
exportable against the quota so transferred as may be prescribed for this purpose shall be deemed to be the income
of the assessee for that income year, classifiable under the head "Income from business or profession".
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Sixth Schedule (Part A); Exclusion from income;
Income from the following business is totally tax free –
1. Para-11A: dividend from listed company in BD amount BDT 25,000 will be tax exempted. exceeding this
amount will be taxable. Amended F.A. 2015
2. Para-20: income from gratuity amount 2.50 core will be tax free. excess this amount will be taxable. Amended
F.A. 2015
3. Para–33; Any income derived from the business of software development or Nationwide
Telecommunication Transmission Network (NTTN) or Information Technology Enabled Services (ITES)
for the period from the first day of July, 2008 to the thirtieth day of June, [2024]Amended F.A. 2015
4. Para – 35:any income derived from the export of handicrafts for the period from the first day of July, 2008 to
the thirtieth day of June, 2019. Amended F.A. 2015
5. Para – 37; Income of any private Agricultural College or private Agricultural University derived from
agricultural educational activities.
6. Para – 39; Income derived from any Small and Medium Enterprise (SME) engaged in production of any
goods and having an annual turnover of not more than taka 30 lakh:
7. Para – 42; Any income from poultry farming for the period from the first day of July , 2011 to the thirtieth
day of June, 2015 subject to the following conditions :
a. If such income exceeds taka 1,50,000/- an amount not less than 10% of the said income shall be
invested in the purchase of bond or securities issued by the Government within six months from the
end of the income year;
b. The person shall file return of his income in accordance with the provisions of clause (c) of sub-
section (2) of section 75 of this Ordinance; and
c. No such income shall be transferred by way of gift or loan within five years from the end of the
income year.
8. Para – 44; Cinema Hall or Cineplex has been given exemption facility which starts exhibition between the
first day of July, 2012 and thirtieth day of June, 2019
a. Dhaka and Chittagong areas – for five years
Other than Dhaka and Chittagong areas – ten years [Change in F.A. 2014]
9. Para – 45; Exemption facility for Production of rice bran oil has been given up to 2019
a. Dhaka and Chittagong areas – for five years
b. Other than Dhaka and Chittagong areas – for ten years [Change in F.A. 2014]
Exemption
For 5 Years
For 10
Years
For 2 Years
For 2 Years
For 1 Year
For 3 Years
For 3 Years
For 4 Years
100% tax-free
50% tax-free
25% tax free
100% tax-free
50% tax-free
25% tax free
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Para --- 49. Income of an assessee donated in an income year by a crossed cheque or bank transfer to any girls' school
or girls' college approved by the Ministry of Education of the government.(Amended FA 2015)
Para --- 50. Income of an assessee donated in an income year by a crossed cheque or bank transfer to any Technical
and Vocational Training Institute approved by the Ministry of Education of the government. (Amended FA 2015)
Para --- 51. Income of an assessee donated in an income year by a crossed cheque or bank transfer to any national
level institution engaged in the Research & Development (R&D) of agriculture, science, technology and industrial
development.] [Para 48-51 (Amended FA 2015)
Para --- 52. Any income, not being interest or dividend classifiable under the head ―Income from other sources‖,
received by any educational institution, if it -
(i) is enlisted for Monthly Pay Order (MPO) of the Government;
(ii) follows the curriculum approved by the Government;
(iii) is governed by a body formed as per Government rules or regulations.(Added FA 2015)
Para --- 53. Any income, not being interest or dividend classifiable under the head ―Income from other sources‖,
received by any public university or any professional institute established under any law and run by professional body
of Chartered Accountants or Cost and Management Accountants or Chartered Secretaries. (Added FA 2015)
Section 46B: Tax Holiday
This is a period (5 years or 10 years depending on location of the industry) for which the company is allowed
exemption of tax on its ―income from business and profession‖
(a) Dhaka and Chittagong division (excluding Dhaka,
Narayanganj, Gazipur, Chittagong districts , also the
hill districts Rangamati, Bandarban and Khagrachari)
5 Years
1st & 2nd years……………100%
for 3rd year……………........60%
for 4th year............................40 %
for 5th year………….......…20%
(b) Rajshahi, Khulna, Barisal, Sylhet and Rangpur
divisions (excluding city corporation area) and
Rangamati, Bandarban and Khagrachari districts
10 Years
1st 2 years…………… 100%
3rd year………………..70%
4th year………………..55%
5th year………………..40%
6th year………………...25%
Exemption
For 5 Years
For 10
Years
For 2 Years
For 2 Years
For 1 Year
For 3 Years
For 3 Years
For 4 Years
100% tax-free
50% tax-free
25% tax free
100% tax-free
50% tax-free
25% tax free
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7th - 10th year..................20%
Section – 35; Method of accounting:
Accounts shall be maintained for –
1. Income from business and profession.
2. Income from agriculture
3. Income from other sources.
Section – 28; Income from business or profession:
Example, X corporation have made a bridge in Bangladesh (in 2008) and kept its instruments here in hope of getting
another project but did not operate any liaison office. But in the last four (4) years they did not get any project and
sold their machine this year, which become scrap, more than WDV. However, their office is not active in Bangladesh
at this time, their business deemed to be carried on and tax is imposed as the business is in operation.
In a summary, the following incomes are treated as “Income from Business and Profession”:
(a) Profits and gains of any business or profession
(b Value of the benefit and the unpaid trading liability referred to in section 19(15)
Recovery of any loss, bad debt or expenditure which was previously allowed as deduction
Any amount of interest on loan to any commercial bank, BSB,BSRS, or any bank run on Islamic
principles allowed as deduction but remains unpaid for three years
Trading liability if remains unpaid for three years
(c) Excess amount referred to in section 19(16);
Gains on disposal of building, plants used for business
(d)Excess amount referred to in section 19(18);
Insurance, salvage or compensation received for building, plant being discarded, demolished.
(e) Sale proceeds referred to in section 19(20)
Gains on disposal of capital asset on scientific research
(f) The amount of income under section 19 (23)]
(g) Sale of export quota by garments exporter
The following income of an assessee shall be classified and computed under the head "Income from business or
profession", namely:-
(a) profits and gains of any business or profession carried on, or deemed to be carried on (see below
example), by the assessee at any time during the income year;
(b) income derived from any trade or professional association or other association of like nature on account
of specific services performed for its members;
(c) value of any benefit or perquisite, whether convertible into money or not, arising from business or the
exercise of a profession;
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Section – 29; Deductions from income from business or profession;
―Any expenditure, not being in the nature of capital expenditure or personal expenses of the assessee, laid out or
expended wholly and exclusively for the purpose of the business or profession of the assessee‖ (Omnibus clause at
the end of the section 29) .
Rent
Interest payable on borrowed capital
Tax depreciation and amortization of certain assets.
Any expenditure incurred wholly & exclusively for the purpose of business or profession
Section – 30; Deduction not admissible in certain circumstances;
30 (a): if salary paid without TDS
30 (aa): any other payment without TDS and VDS
30(b): any payment by firm‘s (partnership) to partners as
1. Salary
2. Remuneration
3. Commission
4. Interest
30 (c): payment of brokerage fee or commission to non-resident deducting TDS u/s 56.
30(d): if payment to a provident fund or other fund, from which are taxable as income from salary, unless effective
arrangement of collection of TDS is made.
30(e): excess perquisite (over tk. 4, 50,000 per employee per year) (Amended FA 2015)
30(f) (with rule 65); entertainment, free sample, publicity & advertisement, holidaying & recreation. These
expenditures are allowable under rule 65 excess of that is not deductible.
1. Entertainment:
Entertainment expense is only allowable if the company is make profit. No profit no entertainment! And
expense is allowable at –
On the 1st tk. 10 lac of assessed profit – 4%
And on the balance profit over tk. 10 lac – 2%
Or
The actual entertainment expense charged in the profit and loss account, whichever is lower.
―Profit should be assessed after disallowing charged entertainment expenses in profit and loss a/c‖.
2. Free Sample (Rule 65 c):
Pharmaceuticals Others
On the first 5 crore of disclosed turnover 2% 1.5%
On the next 5 crore of disclosed turnover 1% 0.75%
On the balance 0.50% 0.375%
Or, the actual free sample given whichever is lower.
3. Holidaying & Recreation:
¾ of the actual expenditure or 3 months basic salary of the employee (who enjoyed the opportunities)
whichever is lower is allowable and such foreign travels shall not be oftener than once in every 2 years.
For example, Mr. X is an employee of ABC ltd. the company has given him an holiday opportunity of tk.
100,000 which was also his actual expenditures. His basic salary is tk. 20,000 per month. So allowable
expenditure will be ¾ of actual expenditure (tk. 75,000) or basic salary of 3 months (tk. 60,000) lower one,
which is tk. 60,000 other tk. 40,000 will add back with the company‘s profit.
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However, the company has to fulfill the following conditions –
a. If payment is more than tk. 10,000 it should be given in crossed cheque or by a crossed bank draft.
b. Same employee cannot be provided with foreign holidaying opportunity for subsequent year.
If the company did not fulfill the above condition full expense will disallowed.
30(g): Headquarter expenditures of foreign companies are allowable up to 10% of net profit disclosed in the
statement of accounts (or actual, lower one).
30(h): Royalty and technical knowhow fee is allowable up to 8% of net profit disclosed in the statement of accounts
(or actual, lower one).
30(i): monthly gross salary over tk. 15,000 shall be given in check or bank transfer.
30(j): incentive bonus allowable up to 10% of net profit disclosed in the statement of accounts before tax.
30(k); overseas travelling allowable up to 1% of disclosed turnover.
30(l); Any commission, discount paid by any company to its shareholder director.
30(m): any payment over tk. 50,000 should be in check or bank transfer, but not applicable in – salary, raw material
purchase and payment to government.
30(n): any house/office rent paid without crossed check or bank transfer.
(c). Restriction on Disallowance by the DCT [Section 30 A]
The DCT shall not make any disallowance or deduction for any year from any claim made by an assessee in the
trading account or profit or loss account without specifying reason for such disallowance or deduction.
(d). Other Issue
i. Allowance of depreciation as per Third Schedule of I.T Ordinance, 1984. if charged beyond the allowable
limit, the excess is to be disallowed
ii. Applicability of provision of section 19 of the I.T Ordinance, 1984 regarding deemed income.
(e). Set-off and Carry-forward of losses [Section 37-42]
Where loss is assessed in any head of income, the assesse is entitled to set off the loss against his income assessed in
other heads of that year. However, loss on speculation business and loss on capital gain cannot be set off against
income from any other head. Such loss can be set off only against the income of respective speculative business or
capital gains. When loss cannot be wholly set off, then the unabsorbed loss under the following four heads shall be
carried forward but for not more than six (6) successive assessment years.
Speculation business loss
Business loss
Capital loss and
Loss at agricultural income
Important notes-
Loss from business or profession shall not be set off against house property income.
In case of capital loss, it cannot be carried forward if the loss does not exceed Taka 5,000/-.
Unabsorbed depreciation loss can be carried forward for unlimited period.
Loss so carried forward is to be set off against income of the respective head.
If there is any loss at any exempted income, it cannot be set off against any other income.
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Third schedule; Tax Depreciation:
There are five types of depreciation mentioned in the IT Ordinance –
1. Normal depreciation:
According to the chart in third schedule of ITO, tax depreciation is allowable on written down value (cost in
the first year) at the following rate –
Building (factory) 20%
Building (office) 10%
Office equipment 10 %
Plant and machinery 20%
Furniture 10%
Computer 30%
Imported computer software 10%
Road/bridge/flyover 2%
Car* 20%
* in case of car depreciation is allowable up to tk. 25 lac. If the car‘s price is over tk. 25 lac, depreciation
should be calculated as if the price is tk. 25 lac. (Not applicable for rent-a-car or similar company)Amended FA
2015
In case of financial lease, assessee will get the depreciation not the leasing company.
In the year of acquisition, full depreciation is allowable but in the year of disposal, no depreciation is
allowable.
For example, Car price tk. 3,000,000. After 2 years sold at tk. 2,400,000. Compute gain.
Notional cost price tk. 2,500,000
Less: Depreciation (Y 1) (500,000)
WDV after Y 1 tk. 2,000,000
Less: Depreciation (Y 2) (400,000)
WDV after Y 2 tk. 1,600,000
Proportionate sales price = (Notional cost price / actual price) * actual sales price
= (2,500,000 / 3,000,000) * 2,400,000
= tk. 2,000,000
Gain (business income) = (tk. 2,000,000 – tk. 1,600,000) = tk. 400,000
2. Accelerated Depreciation:
In case of machinery or plants set up in Bangladesh between 01/07/2014 and 30/06/2019 and not having
been previously used in Bangladesh, accelerated depreciation subject to some conditions will be allowed as
follows:-[paragraph 7B of 3rd Schedule]
First Year:……………….50% of actual cost
Second Year:……………30%of actual cost
Third Year:……………….20%of actual cost
Conditions:-
o Applicants must be a Bangladeshi company
o Applicant is an industrial undertaking as per 46B(2)
o Application is made to NBR within 6 months from the end of the month of commercial production
o Declaration not to enjoy any other tax exemption benefit
o Any other depreciation allowance will not be allowable
3. Initial Depreciation:
Only applicable for Building and Plant & machinery. But the property should be new and given only in the
first year of addition along with normal depreciation.
Rate of depreciation:
Unabsorbed depreciation (due to loss) can be carry
forwarded for unlimited time.
Business loss can be carry forwarded for 6 years.
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Building 10%
Plant and machinery 25%
For example, a machinery coats tk. 100 lac. In first year depreciation allowance is –
Initial depreciation (25%) tk. 25 lac
Normal depreciation (20%) tk. 20 lac
Depreciation allowance (year 1) tk. 45 lac
WDV after 1st year tk. 55 lac.
4. Extra depreciation
5. Other Tax Exemption
•Industries set up in EPZ will enjoy tax exemption from the moth of commercial production.
•Income from computer software business run by Bangladeshi resident is tax exempted up to 30/06/2024
[para-33, 6th Schedule, Part A]
•Income from private power generation company up to 15 years from its commercial production [SRO no.
36-ain/97 dated 03/02/1997]
•Any income from the export of handicrafts for the period from 1st day of July, 2008 to the 30th day of June,
2024 [para-35, 6th Schedule, Part A]
6. Special depreciation
7. General Export Incentives:
50% 0f income of an assessee derived from the business of export is exempted from tax. This is not
applicable for a company registered outside Bangladesh, enjoying exemption of tax or reduction in rate by
any notification made under the ordinance.
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Tax Holiday
Introduction:
Tax holiday has been started to allow as a tax incentive for industrialization in this region since 1959 by introducing
new section 15BB in the then Income Tax 1922. In 1972, the tax holiday system was withdrawn by repealing section
15BB. But the incentive was re-introduced by incorporating section 14A in the Income Tax 1922 by the Finance Act
1974 with effect from the assessment year 1974-75 for industrial undertakings (established on or after 1st July 1973
having subscribed and paid up capital not less than Tk. 1,00,000 and not more than Tk. 35,00,000) and also for tourist
industries (established on or after 1st January 1976 having subscribed and paid up capital not less than Tk. 1,00,000
and not more than Tk. 10,00,00,000) with the tax holiday period of 9 years for the prescribed areas and of 5 years for
other areas.
With the introduction of the Income Tax Ordinance 1984, the provision of the tax holiday has been maintained under
section 45 and 46 primarily. The provision was applicable for industrial undertakings (established between 01 July
1974 and 30 June 1985) and tourist industries (established between 01 July 1976 and 30 June 1985) having
subscribed and paid up capital not less than Tk. 1,00,000 for any industries. The tax holiday incentive was first
extended for the industries up to 30 June 1990 by Finance Act 1985, then up to 30 June 2000 by the FA 1989. But
subsequently through FA 1991 the incentive was restricted for the industries established within 30 June 1995 with an
apparent intention of withdrawing the tax holiday incentive since 1995-96.
New section 46A has been introduced through FA 1995 allowing the tax holiday incentive for industrial undertakings,
tourist industries and physical infrastructure facilities established between 01 July 1995 and 30 June 2008 with having
subscribed and paid up capital not less than Tk. 1,00,000. It is extended for another 3 years through inserting section
46B with some minor changes and again for 2 years through inserting section 46C with having subscribed and paid
up capital not less than Tk. 20,00,000. Tax holiday facility has further been extended up to 30 June 2024 through the
FA 2015.
(1) Type of Industries eligible for tax holiday
Two types of industries are eligible to apply for tax holiday —
1. Industrial undertaking
2. Physical infrastructure facility
The following categories of industries are eligible for the definition of Industrial Undertakings:
01. Active ingredient industry and radio pharmaceuticals industry
02. Automobile manufacturing industry[FA-2015]
03. Barrier contraceptive and rubber latex
04. Basic chemicals or dyes and chemicals
05. Basic ingredients of electronic industries (e.g. resistance, capacitor, transistor, integrator, circuit)
06. Bi-cycle manufacturing industry[FA-2015]
07. Bio-fertilizer
08. Biotechnology
09. Boilers
10. Brick made of Automatic Hybrid Hoffmann Kiln [ or Tunnel Kiln] Technology[FA-2015]
11. Compressors
12. Computer hardware
13. Energy efficient appliances
14. Insecticide or pesticide
15. Petro-chemicals
16. Pharmaceuticals
17. Processing of locally produced fruits and vegetables
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18. Radio-active (diffusion) application industry (e.g. developing quality or decaying polymer or preservation of
food or disinfecting medicinal equipment)
19. Textile machinery
20. Tissue grafting
21. Tyre manufacturing industry or[FA-2015]
22. Any other category of industries as the Govt. may notify in the official Gazette.
The following categories of industries are within the meaning of Physical Infrastructure Facility:
01. Deep sea port
02. Elevated expressway
03. Export processing zone
04. Flyover
05. Gas pipe line
06. Hi-tech park
07. ICT village or software technology zone
08. IT park
09. Large water treatment plant and supply through pipe line
10. Liquefied Natural Gas terminal and transmission line
11. Mono-rail
12. Rapid transit
13. Renewable energy (e.g. energy saving bulb, solar energy plant, windmill)
14. Sea or river port
15. Toll road or bridge
16. Underground rail
17. Waste treatment plant
18. Any other category of industries as the Govt. may notify in the official Gazette.
(2) Conditions for Eligibility:
Some conditions are required to be fulfilled for tax holiday under section 46B and 46C of the Income Tax Ordinance,
1984. These are as follows:
a) The undertaking must be owned and managed by either a body corporate established by or under an act of
parliament with its head office in Bangladesh;
or
a company as per Companies Act 1913/1994 with its registered office in Bangladesh having subscribed and paid-
up capital of not less than Tk. 20,00,000 on the date of commencement of commercial production or operation.
b) The undertaking is not formed by splitting up or by reconstruction or reconstitution of business already in
existence or by transfer to a new business of any plant and machinery used in business, which was being carried
on in Bangladesh at any time before the commencement of the new business.
c) The undertaking must be approved by the NBR for the purpose of tax holiday.
d) The undertaking shall have to obtain clearance certificate from the Directorate of Environment for the relevant
income year.
(3) Application procedure and its disposal by the NBR:
a) Tax holiday application is to be submitted to the NBR within 6 months from the end of the month of commercial
production or operations in the form prescribed in Rule 59A, in duplicate, duly signed and verified by the MD or
Director of the company.
b) NBR shall give its decision within 45 days from the date of receipt of the application by the Board. Otherwise,
the undertaking shall be deemed to have been approved.
c) NBR shall not reject any application unless the applicant is given a reasonable opportunity of being heard.
d) If NBR rejects any tax holiday application, the undertaking can submit a review application to the Chairman of
the Board within 4 months from the date of the receipt of the rejection letter. The Chairman then will either
review himself or will constitute a committee consisting of 3 members of the NBR who will review its previous
decision and pass such order as it thinks fit. There is no time limit for disposal of the review application. The
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decision of the review committee of the NBR as final and conclusive and there is no scope to submit further
review application.
(4) Withdrawal and Cancellation of tax holiday:
a) Any undertaking after getting tax holiday from the NBR can write to the NBR for cancellation of tax holiday
within 1 year from the date of granting such tax holiday.
b) NBR may also cancel/suspend fully/partly any tax holiday in the public interest.
c) The DCT in the course of assessment may also withdraw the tax holiday from the relevant assessment year if he
is satisfied that one or more of the required conditions are not fulfilled.
d) Tax holiday shall be deemed to have been withdrawn for the assessment year in which the following transaction
are made:
i. If the company is engaged in any commercial transaction with another company having one or more sponsor
shareholders.
ii. If the DCT finds that the company has purchased or sold goods at higher/lower price than the normal market
price with the intention to reduce the income of another undertaking/company.
(5) Period of tax holiday for industrial undertaking:
Years Rate of exemption
If it is established
within 30 June 2013
Established from 01 July
2013 to 30 June 2019
(a) Dhaka and Chittagong division
(excluding Dhaka, Narayanganj,
Gazipur, Chittagong, Rangamati,
Bandarban and Khagrachari districts)
5 1st 2 years…….100% 1st 2 years…….….. 100%
2nd 2 years…….50% 3rd year ………….... 60%
Last year…..……25% 4th year…………… 40%
5th year…………… 20%
(b) Rajshahi, Khulna, Sylhet, Rangpur
and Barisal division (excluding City
Corporation area) and the hill districts
of Rangamati, Bandarban and
Khagrachari
10 1st 3 years……. 100% 1st 2 years……….. 100%
2nd 3 years……. 50% 3rd year …………....70%
Last year……… 25% 4th year…………... 55%
5th year…………… 40%
6th year……… ……25%
7th to 10th year……. 20%
Provided that bio-fertilizer industry and petro-chemical industry will get tax holiday for 5 years even if it is set up in
the district of Dhaka, Narayanganj, Gazipur and Chittagong.
**** if any employer employs an foreigner without the approval of " Board of Investment" then tax holiday for
industrial undertaking and physical infrastructure facility will be withdrawn and if continues in later year then
tax holiday facility will be will be withdrawn means need to pay tax on profit for the company for this illegal
employment of the foreigner.[FA-2015]
(6) Period of tax holiday for physical infrastructure facility irrespective of the location:
Rate of exemption
Established within 30 June 2013 Established from 01 July 2013 to 30 June 2019
1st 5 years……………. 100% 1st 2 years……………. 100%
2nd 3 years……………. 50% 3rd year …………….…. 80%
Last 2 years……..…… 25% 4th year……………..… 70%
5th year………………… 60%
6th………………………. 50%
7th year ………….……. 40%
8th year………………… 30%
9th year………………… 20%
10th year………….…… 10%
(7) Conditions to be fulfilled after getting tax holiday:
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a. The profits and gains of the tax holiday company shall be computed separately.
b. Any loss during the tax holiday period cannot be carried forward beyond the tax holiday period.
c. Only normal depreciation is applicable for tax holiday enjoying companies.
d. 30% + 10% = 40% year wise tax holiday income is to be reinvested. 30% is to be reinvested in the same
company or in a new industry within the tax holiday period or maximum within 1 year from the end of the tax
holiday period. Another 10% is to be reinvested in the shares of listed company in each year within 3 months
from the end of the income year.
Otherwise income of the year or years will subject of tax. However, the quantum of reinvestment will be reduced
by the amount of dividend if declared by the company.
e. The income of the tax holiday company under the following heads are taxable:
(i) Capital gain
(ii) Any income arising from the disallowance u/s 30
(iii) Dividend is taxable at the hand of shareholders.
(8) Documents to be submitted with tax holiday application:
The following documents are to be submitted along with tax holiday application:
a. An attested copy of certificate of incorporation;
b. An attested copy of the Memorandum of Association and Articles of Association of the company;
c. A certificate of commencement of business;
d. In case the company has already commenced business, certified copy of the audited balance sheet and profit
and loss accounts for the period for which accounts have been prepared;
e. In case of industrial undertaking/physical infrastructure facility for which approval is sought has been
acquired for another party, an attested copy of the agreement between the applicant company and the seller
enter into for the acquisition of the industrial undertaking/physical infrastructure with list and value of assets
acquired;
f. A certificate to the effect that the industrial undertaking/physical infrastructure facility has not applied or
shall not apply for accelerated depreciation allowance under paragraph 7 or 7A of the Third Schedule to the
Ordinance.
(9) Tax exemption on income of cinema hall/Cineplex and industry producing rice bran oil [6th
Schedule (Part-
A) Para 44 and 45]:
Income of cinema hall/Cineplex and income from industry producing rice bran oil will also be tax free like tax
holiday but without any tax holiday application to NBR if it starts commercial exhibition/production within 01 July
2012 to 30 June 2019. Time and condition of tax exemption is tabulated below:
Area Years Rate of exemption
(a) Dhaka and Chittagong division (excluding the hill
district of Rangamati, Bandarban and Khagrachari)
5 1st 2 years……………. 100%
2nd 2 years……………. 50%
Last year……………… 25%
(b) Rajshahi, Khulna, Sylhet, Rangpur and Barisal
division (including the hill district of Rangamati,
Bandarban and Khagrachari)
10 1st 3 years……………. 100%
2nd 3 years……………. 50%
Last 4 years..………… 25%
(10) Tax exemption on income of industry set up at EPZ:
Industries set up at EPZ (including private EPZ) from 01 January 2012 onward will automatically get tax exemption
as per SRO – 219 dated 04 July 2011. The area and period of tax exemption is tabulated below:
Area Years Rate of exemption
(a) Dhaka and Chittagong division (excluding the hill
district of Rangamati, Bandarban and Khagrachari)
5 1st 2 years……………. 100%
2nd 2 years……………. 50%
Last year……………… 25%
(b) Rajshahi, Khulna, Sylhet, Rangpur and Barisal 7 1st 3 years……………. 100%
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division (including the hill district of Rangamati,
Bandarban and Khagrachari)
2nd 3 years……………. 50%
Last year……………… 25%
Company Tax Assessment
01. Introduction:
In the income tax ordinance, 1984, there is no separate status for taxation of a corporate body, But in the context of
Bangladesh, Corporate Taxation means charging of tax on income or profit of companies. Therefore, Corporate Tax
can be termed as company tax, which differs from the tax levied on individuals. Both companies and individuals are
assessed and taxed under the same I.T. Ordinance 1984.
02. Definition of Company:
Under Section 2 (20) of the income Tax Ordinance 1984, ―Company" means a company as defined in the Company
Act, 1913 (VII of 1913) or Company Act, 1994 (Act No. 18 Of 1994) and includes-
(a) A body corporate established or constituted by or under any law for the time being in force;
(b) Any nationalized banking or other financial institution, insurance body and industrial or business enterprise;
(bb) Any association or combination of persons, called by whatever name, if any of such persons is a company as
defined in the Companies Act, 1913 (VII of 1913) or Company Act, 1994 (Act No. 18 Of 1994);
(bbb) any association or body incorporated by or under the laws of a country outside Bangladesh"
(c) Any foreign association or body, not incorporated by or under any law], which the Board may, by general or
special order, declare to be a company for the purposes of this Ordinance;
03. Classification of Company:
For preferential tax purpose, Companies are classified into following groups:
1) Bank, insurance and Financial institutions;
2) Merchant Bank;
3) a) Publicly traded company
b) Non- Publicly traded company
4) Mobile Phone Operator company
5) Cigarette manufacturing company
6) Non Resident Company
04. Publicly traded Company:
―Publicly traded company‖ means a company which fulfills the following conditions:
a) The company is registered in Bangladesh under the Companies Act 1913 or 1994;
b) The company is enlisted with the Stock Exchange before the end of the concerned income year in which
income tax assessment will be made.
05. Obligations of a Corporate Taxpayer under Income Tax laws:
Following the corporate tax compliance obligations as per various sections the Income Tax Ordinance 1984:
1) Obligations of a corporate entity as an assessee (taxpayer);
2) Obligations of a corporate entity as a Tax collector on behalf of tax authority;
3) Obligations of related persons of a corporate entity.
(1) As an assessee (taxpayer):
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Collection of TIN (Taxpayer Identification Number) certificate u/s 184B, 184A
Displaying of TIN certificate u/s 184C
Advance income tax payment u/s 64
Preparation of tax return u/s 75
Payment of tax as per tax as per tax return u/s 74
Filling of tax return and statement in prescribed forms u/s 75
Filing of revised return if any omission or incorrect statement in previously filed return discovered before
the assessment is made u/s 78
Maintenance of accounts and documents u/s 35
Production of accounts and documents on receipts of a notice from the DCT u/s 79
Compliance with various notice
Notice of demand u/s 135
Notice of file return u/s 77
Notice to produce accounts, statements and documents u/s 79
Notice to attend hearing u/s 83(1) in case of assessment after hearing
Notice to file return for re- assessment u/s 93(1)
Notice to attend hearing u/s 130 in case of imposing penalty u/s 123-128
Notice calling for information u/s 113
(2) As a tax collector on behalf of tax authority:
Collection of Tax Collection A/C Number u/s 184BB
Tax deduction /collection at source if applicable and deposit to the treasury u/s 48-63
Giving documents of TDS with necessary information u/s 58 and
Furnishing annual returns in case of payment of salary before 1st September (u/s 108 and rule 23), interest
(u/s 109 and rule 20) and dividend (u/s 110 and rule 19)
(3) Obligations of related persons of corporate entity:
Filling a return of any other person for whom the company is assessable [u/s 75 (1B)]
Joint liability in case of director of a private limited company (u/s 100)
Joint liability in case of Liquidator of a private limited company (u/s 101)
06. TIN (Tax payer’s Identification Number) Certificate for a Company:
Every company requires 12 digit Tax payer‘s Identification Number (TIN) to mention it in the income tax return. As
per Section 184B, TIN Certificate is mandatory at the time of registration of a company under the Companies Act,
1994 and also in respect of sponsor shareholder directors [Section 184A (1)]. Besides these, in the following cases, a
company requires mandatory submission of 12 digit TIN Certificate under various clauses of section 184A:
1) Opening a letter of credit for the purpose of import; [Clause(a)];
2) Submitting an application for the purpose of obtaining an import registration certificate (IRC) [Clause(aa)];
3) Renewal of trade license in the area of a city corporation or of a paurashava [Clause(b)];
4) Submitting tender documents for the purpose of supply of goods, execution of a contract or for rendering
services [Clause(c)];
5) Purchase of a land, building or an apartment situated within any city corporation area [Clause(f)];
6) Registration, change of ownership or renewal of fitness of a car, jeep or microbus [Clause(g)];
7) Registration of company under Companies Act , 1994
Under section 184C, a company shall display 12 digit TIN Certificate Number at a conspicuous place of the
company‘s business premises.
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07. Submission of Income Tax Return:
As per section 75 (2) (c), the return must be filed , unless the date is extended, by the fifteenth day of July next
following the income year or where the fifteen day of July falls before the expiry of six months from the end of the
income year, before the expiry of such six months. However, u/s 75(3), on application from the company, the
assessing officer [DCT] may extend the return submission date up to 2 months at his own capacity and further 2
months after taking prior permission from the IJCT.(Amended FA 2015)
In case of company though 15th July is the last date of submission of return but every company will get at
least 6 months‘ time from the end of the accounting year to submit tax return . Some examples are tabulated below:
SL. No. Income Year Ending Last date of submission of
Return
Assessment Year
1 31.12.2013 15.07.2014 2014-15
2 30.06.2014 31.12.2014 2014-15
3 31.03.2014 30.09.2014 2014-15
4 30.09.2013 15.07.2014 2014-15
5 30.07.2013 15.07.2014 2014-15
6 15.07.2013 15.07.2014 2014-15
The return should be signed by the principal officer of the company [75(2)(b)(iii)]. As per section 2(48), ‗Principal
Officer‘, means-
a) Managing director, manager, secretary, treasurer, agent or accountant (by whatever designation known), or
any officer responsible for management of the affairs, or of the accounts, of the authority, company, body or
association; and
b) Any person connected with the management or the administration of the company upon whom the Deputy
Commissioner of Taxes has served a notice of his intention to treat him as principal officer.
However, revised return can be filed before the assessment is made if any omission or incorrect statement in the
previously filed return discovered [u/s78].
09. Methods of Accounting and maintenance of Accounts [Sec 35]
All income classifiable under the head ―Agricultural income‖, ―Income from business or profession‖ or
―Income from other sources‖ shall be computed in accordance with the method of accounting regularly
employed by the company [sec 35(1)]
Every public or private company as defined in the Companies Act, 1913 (VII of 1913) or 1994 shall, with
the return of income required to be filed under this Ordinance for any income year, furnish a copy of the
trading account, profit and loss account and the balance sheet in respect of that income year certified by a
chartered accountant to the effect that the accounts are maintained according to the BAS and reported in
accordance with BFRS [sec 35(3)]
Where no method of accounting has been regularly employed, or if the method employed is such that, in the
opinion of the DCT the income of the assessee cannot be properly ascertained, the income of the company
shall be computed on such basis and in such manner as the Deputy Commissioner of Taxes may think fit
[sec 35(4)]
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Corporate Tax Rate
The income tax rates for companies are as follows:
Types of Company Head /sources of Income Tax Rate for Assessment Year
2015-2016 2014-2015
Bank, Insurance,
Financial Institutions
(1) Capital Gain (2nd schedule) 15% 15%
(2) Capital Gain from sale of shares of listed
companies 10% 10%
(3) Dividend Income 20% 20%
(4) other income Listed
Non-
listed
42.5% 40% 42.5%
Merchant Bank 37.5% 37.5%
Other Company
(1) Capital Gain (2nd schedule) 15% 15%
(2) Capital Gain from sale of shares of listed
companies 10% 10%
(3) Dividend Income 20% 20%
(4) other income
For publicly Traded
Company
25% 27.5%
(a) Dividend declared by less
than 10% or failure to pay
declared dividend within 6
months
35% 35%
(b) Dividend declared more
than 30% will get
10 % tax rebate
No rebate
24.75% (if
dividend
declared more
than 30%
(c) Newly listed companies
in case of declaring more
than 20% shares through IPO
10 % tax rebate
on relevant tax
rate
24.75%
For non-publicly Traded
Company (including non-
resident company)
35%
37.5%
Mobile Phone
Company
(1) Capital Gain (2nd schedule) 15% 15%
(2) Capital Gain from sale of shares of listed
companies 10% 10%
(3) Dividend Income 20% 20%
(4) other income
For publicly Traded
Company 40% 40%
Other than publicly Traded
Company 45% 45%
Cigarette
Manufacturing
Company
Income from
Cigarette
Manufacturing
business
For publicly Traded
Company 45% 40%
Other than publicly Traded
Company 45% 45%
Cooperative Society 15% 0%
Excess profit tax (u/s
16C)
If any bank shows profit exceeding 50% of the aggregate sum of capital and reserve, shall
have to pay excess profit tax @ 15% on such excess profit.
Additional tax (u/s
16B)
If listed company other than a bank and insurance has not issued, declared or distributed
dividend of bonus share equivalent to at least 15% of paid up capital within six months
immediately following any income year, shall have to pay additional tax @ 5% of
―undistributed profit‖ (accumulated profit + free reserve)
Minimum tax(u/s
16CCC)
Minimum tax @ .30% on gross receipt is to be paid irrespective of profit or loss. In case
of manufacturing company for the first three years, the minimum tax rate will be .10%.
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10. Special Reduced Corporate Tax Rates
a) Textile Industries: 15%
b) Private University: 15%
c) Fish farming: 3%
d) Jute Industries: 15%
e) Selected autonomous bodies:25%
f) National level Research institute:15%
11. Tax Withholding Function: u/s 48-63
According to the provision of Chapter VII (section 48-63), tax is to be deducted or collected at source at the
prescribed rate/ rates.
(a) Deposit of Deducted /Collected tax: [Rule-13]
All sums deducted or collected at sources shall be deposited to the credit of the Government within 2 (Two)
weeks from the end of the month of such deduction or collection
The Deputy Commissioner of Taxes may, in a special case and with the approval of the Inspecting
Additional Commissioner of Taxes or Joint Commissioner of taxes, permit an employer to pay the tax
deducted from ―Salaries‖ quarterly on September 15, December 15, March 15 and June 15.
(b) Procedure of Deposit of Deducted /Collected tax: [Rule-14]
The amount of tax deducted or collected shall be deposited to the credit of the Government by remitting it into the
Bangladesh Bank or the Sonali Bank, as the case may be, accompanied by an income tax challan. [Rule 14(1)]
12. Payment of Advance Tax: u/s 64-73
In case of first year, if income is likely to exceed Tk. 4,00,000/- or
In case of old assessee, last assessed income if exceeds Tk. 4,00,000/-
Advance tax is to be paid in four (4) equal installments 15thSeptember, 15thDecember, 15th March and 15th
June.
13. Fiscal Incentives:
Following Fiscal incentives are available for a company:
(1) Tax Holiday: u/s 46B and 46C
This is a period (5 years or 10 years depending on location of the industry) for which the company is allowed
exemption of tax on its ―income from business and profession‖
(2) Other Tax Exemption
Industries set up in EPZ will enjoy tax exemption from the moth of commercial production.
Income from computer software business run by Bangladeshi resident is tax exempted up to 30/06/2019
[para-33]
Income from private power generation company up to 15 years from its commercial production [SRO no.
36-ain/97 dated 03/02/1997]
Any income from the export of handicrafts for the period from 1st day of July, 2008 to the 30th day of June,
2015 (para-35)
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(C) Accelerated Depreciation
In case of machinery or plants set up in Bangladesh between 01/07/2014 and 30/06/2019 and not having been
previously used in Bangladesh, accelerated depreciation subject to some conditions will be allowed as follows:-
[paragraph 7B of 3rd Schedule]
First Year:……………….50% of actual cost
Second Year:……………30%of actual cost
Third Year:……………….20%of actual cost
Conditions:-
Applicants must be a Bangladeshi company
Applicant is an industrial undertaking
Application is made to NBR within 6 months from the end of the month of commercial production
Declaration not to enjoy any other tax exemption benefit
Any other depreciation allowance will not be allowable
(d) Initial Depreciation
In case of machinery or plants set up in Bangladesh after 30/06/2002 and not having been previously used in
Bangladesh, initial depreciation subject to some conditions will be allowed as follows:-[paragraph 5A of 3rd
Schedule]
In the case of building………………10% of actual cost
In the case of plant, machinery………25% of actual cost
(e) General Export Incentives:
50% 0f income of an assessee derived from the business of export is exempted from tax. This is not applicable for a
company registered outside Bangladesh, enjoying exemption of tax or reduction in rate by any notification made
under the ordinance.
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Corporate Social Responsibility
SRO No. 223 dated 27 June 2012
SRO No. 186 dated 01 July 2014
Corporate Social Responsibility (CSR) is defined as the integration of business operations and values, whereby the
interests of all stakeholders including investors, customers, employees, the community and the environment are
reflected in the company‘s policies and actions. CSR is about how businesses align their values and behavior with the
expectation of stakeholders – not just customers and investors, but also employees, suppliers, communities,
regulators, special interest groups, and society as a whole. It is the company‘s commitment to be accountable to its
stakeholders. CSR demands that businesses manage the economic, social, and environmental impacts of their
operations.
The Government sees CSR as the business contribution to its sustainable development goals. Essentially, it is about
how business takes account of its economic, social and environmental impacts in the way it operates – maximizing
the benefits and minimizing the downsides. However, CSR is still considered as the voluntary action that business can
take, over and above the compliance with minimum legal requirements, to address both its own competitive interests
and the interests of wider society. Key CSR issues include good governance, labor standards, responsible sourcing,
eco-efficiency, environmental management, stakeholder engagement, employee and community relations, social
equity and human rights. It is not only about fulfilling a duty to society, it can bring competitive advantage.
The corporate sector in Bangladesh spend a big amount outside their business for the betterment of the society and the
people. But any expenditure for this purpose does not qualify for allowable deductions as this is not business related
expenditure. To encourage the companies to contribute towards the society, CSR provision has been introduced in
2009 through an SRO and thereafter the area has been expanded in 2010 and further modified in 2011. In the year
2012 two new areas have been included and one area shifted to 6th Schedule (Part - A), Para – 47. One new area of
CSR has been added in the year 2014.
Conditions to qualify for CSR
1. Regularity in payment of salary to staff
2. Having waste treatment plant in industry
3. Regularity in payment of Income tax, VAT, duty and loan
4. CSR only through govt. approved institutions
5. Compliance with Labor Law
6. Amount spent for CSR will not be considered as business expenditures
7. Documents in support of actual CSR expenditure to be submitted to the concerned DCT
8. Submit CSR plan to NBR and obtain exemptions certificate
The companies will get 10% tax rebate on the lower amount of the following three:
Allowable Investment Allowance:
The companies will get 10% tax rebate on the lower amount of the following three:
20% of total income
OR
TK. 12,00,00,000/=
OR
Actual money spent for CSR
Whichever is lower is to
be treated as allowable
CSR
Tax rebate @ 10% is
applicable on such
allowable CSR.
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Areas of CSR:
The tax provision clearly specified 22 areas where the companies can perform their corporate social responsibility for
availing the benefit of tax rebate:
1. Natural calamities
2. Old home
3. Welfare of retarded persons
4. Education of poor children
5. Accommodation of slum dwellers
6. Awareness program of anti-dowry and women rights
7. Rehabilitation of poor and orphan children
8. Research on liberation war related subject
9. Sanitation in Chittagong hill tracts
10. Treatment of cataract, cancer, leprosy
11. Treatment of acid victims
12. Free medical treatment to the poor by specialized hospital
13. Public university
14. Technical and vocation education
15. Computer and information technology
16. Vocation training to unskilled workers for man power export
17. Infrastructure of national level sports
18. Donation to national level institution set up in memory of the liberation war
19. Donation to national level institution set up in memory of Father of the Nation
20. Donations made to non-profit voluntary social welfare organizations engaged for running rehabilitation
center, creation of awareness and treatment of HIV, AIDS and Drug addicted
21. Donations made to non-profit voluntary social welfare organizations engaged for running rehabilitation
center for recovered children/women of cross boarder trafficking
22. Donation to Govt. approved fund for helping victims of natural disaster or for any tournament or for any
national level program.
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~~~. Inadmissible Expenses in use of tomDutinr: income from business or profession WI 30
Rnl .. K.I • .,. ........ fCMA OIuc_Gnu"
1CS(f .. )A~"OU'"
i) Payment of salary. 'ftax tbereoo has no! been deducted at source uls SOfscc. 30(a») ii) Payment ofsalary,remunctllion,inlcrest or commission to any partner OrlM firm(scc. 3c.:b)] iii) AIty plymenl wherefrom tax and VA i is deductible but not deducted (sec. 3O(u»). iv) Paymtnt of brokerage Of commissioo to • non-resident without deduction of tax at source:
violating SCdion S6 (scc.10(c») v) Payment to employees' provident fuRd or olher funds unless effective arrangement has been
made for deduction of tax al source wh ik: making the payments from the fund which are ..... b~ undeo' the head 'Salories ( .... 30(d»
vi) Payment ofperqu isitesl other benefits to an employee in CIlCes5 to TK. ".SO.OOO[scc. JO(c)J vii) Expenditure on foreign Irlivels of employees and their dependents, spouse and minor
children (including step and adopted children) for Iwllidaying and recreation exccedill8 3 months basic salary or 3/4- of acrual expenditure whichever is less and such fon:ign travels shall not be oftener than once in every 2 yean.(sec. JO(f) (ii) read with Rule65A)
viii) Distribution offrcesample exceeding the following linit[sec. JO(fXiv) read with Rule 6.5C): Tu rnover- % oftar-n ove r-
Phannaceuticallndustry Other Industry
Up to Tk.. S crore - 2"- 1.5% Exceeding n. 5 crorc. but up to n. 10 CtOrC W. 0.75% Excccdint n . 10 CtOrC 0.5% 0.375%
Ix) Entertainment expenditure exceeding the following limits (sec. JO(l)(i) read with Rule 65):
Jacome On lsi Tk. 10 be On the balance
Limit 4% 2%
x) Head Office Expendilu~ exceeding 10% of the disclosed net profit appl icable for foreign -pany ( .... 30(g») •
xi) Royalty and technical know-how fee exceeding 8% of the disclosed net profit (soc:. J~») xii) Salary Of remuneration paid by the employer otherwise Lhan by crossed cheque or bank
transfer having gross month ly salary of Taka 15,0001· or more [~. 30(i)J xiii) Incentive bonus exceeding 10% of disclosed nd profillsec. JO(j») xiv) Overseas traveling exceeding 1% ordjsc~ IUmQver [sec:. 30(k») xv) Any commission or discount paid by any company to its sharehokterdireclor(sec. 30(1)J xvi) Any cash payment above n..50,OOO other than cheque or bank lransfer except[scc. JO(m»)
1. Payment for purchase of raw materials
2. Salary of employees where monthly salary payment was otherwise re.strictcd
J. Any payment for government obligation.
xvii) Any house/office rent paid without crossed cheque or bank tnlnSrcr (§eG. JO(m»)
===---~=
IftPI'H ~ 1t. l.1hawnwI: 'CWo 1--*i1lP1O )IJ(7/101S)
-..1> -
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Practical Problems
Company Assessment - 1:
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Solutions of Problem:
ABC Company
Income Year : 2014-2015
Assessment Year: 2015-2016
Particulars Workings Amount
Net Profit
573,000
Less: Non Business Incomes
(105,400)
Dividend Income (16,000)
Interest on Bank Deposit (14,400)
Interest on Govt. Securities (10,000)
Profit on sale of Machine based on accounting concept (30,000)
Sundry Income (5,000)
Refund of Income Tax (Neither an income nor an expenditure) (30,000)
Add: Inadmissible Expenses 4,515,000
Salary and Allowance (Note-1) 4,250,000
Interest on Loan from Sister concern 35,000
Charity 10,000
Income tax paid in advance 200,000
Fines 20,000
Add: Expenditures to be treated afterward as per ITO 234,000
Entertainment 54,000
Depreciation 180,000
Less: Allowable Depreciation (115,000)
Add: Revenue gain on sale of Machine (62,000-12,000) 50,000
Net profit before entertainment allowance 5,151,600
Less Entertainment Expense (as per rule 65) On first 1,000,000 @ 4% 40,000
On next 41,51,600 @ 2% 83,032
123,032
or the actual expenditure 54,000
Lower one (54,000)
Income From Business & Profession
5,097,600
Interest on Securities:
Interest on Govt Securities 10,000
Capital Gain:
Capital gain from sale of Machine (72,000-62,000) 10,000
Income from Other Sources:
Dividend Income (16,000÷0.80) 20,000
Exempted: Up to 25,000 (20,000)
-
Sundry Income 5,000
Interest On bank deposit(14,400÷0.90) 16,000
Loan from Sister Concern not received through bank transfer 350,000
371,000
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Total Income
5,488,600
Calculation of Gross Tax Liability
Total Income 5,488,600
Less:
1.Capital Gain (10,000)
Total Income for 25% 5,478,600
Tax Liability at 25% 1,369,650
Tax on Capital Gain @ 15% 1,500
Gross Tax Liability 1,371,150
Calculation of Minimum Tax:
Sales 8,980,000
Dividend 16,000
Interest 14,400
Sale of Machine 72,000
Interest on Govt Securities 10,000
Sundry Income 5,000
Bad debt recovered 71,600
Total Gross Receipt 9,169,000
Minimum Tax @ 0.30% on Gross Receipts 27,507
(Assuming the company started its commercial production in 3 years before)
Calculation of Net Tax Liability:
Gross Tax Liability
1,371,150
Less:
1. TDS on Dividend (4,000)
2. TDS on Bank Deposit (1,600) 3. Advance Income Tax (200,000) (205,600)
Net Tax Liability
1,165,550
Notes:
1. Calculation of inadmissible Salaries & Allowances
Salary without TDS 1,050,000
Excess Perquisites 370,000
Excess Incentive Bonus (600,000-573,000*10%) 542,700
Salary paid in cash (4250,000-1050000-370000-542700) 2,287,300
4,250,000
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Company Assessment – 2:
The following adjusted accounts appeared in the records of ABC Ltd. For the year ended December 31, 2014.
Numbers in brackets refer to the items in additional information.
Revenues and gains
Tk.000
Net Sales 126,500
Interest 1,000 (1)
Gains on sale of shares 2,500 (2)
Total 1, 30,000 Costs and expenses
Cost of goods sold 65,300
Salaries and wages 26000 (3)
Security services 300 (4)
Audit and taxation services 500
Office rent 600
Donations 1,800 (5)
Board meetings attendance fee 300 (6)
Other expenses 3,000 (7)
Depreciation 8,000 (8)
Corporate income tax 4,500 (9)
Total 110,300 Net profit 19,700
Dividends Paid 9,000
Additional Information:
(1) Interest revenue comprises interest on government bonds issued in 2014 and purchased by ABC Ltd. in 2014.
(2) Gain on sale of shares arose from the following purchase and sale of shares of a company listed with DSE and
CSE:
Bought in 2010 Tk. 12,00,000
Sold in 2014 proceeds of sale Tk. 37,00,000
(3) Salaries and wages include inter alia salary of Finance Manager tk.6,00,000 (consolidated) paid in cash (not by
cheque or bank transfer ), Gratuity (unapproved) provision of tk.15,00,000 and gratuity payment of tk.10,00,000
(4) Security services include payments to a private security company. No VAT was deducted at source from such
payments.
(5) Donations were all paid in 2014 to ICAB, Specially designed for the purchase of library books, computers and
training materials.
(6) No income tax and VAT was deducted at source from board meeting attendance fee paid to 10 (ten) directors.
(7) Others expenses include inter alia:
(a) Entertainment expenses of Tk.5,00,000 spent on MD‘s birthday party ; and
(b) Four foreign travels of MD, each costing Tk.2,00,000. All foreign trips were for business purposes.
(8) ABC Ltd. Has always used written down value depreciation and same depreciation rates for both accounts and tax
purposes.
(9) Corporate income tax is the amount estimated before preparation of the tax return 60% of the estimated amount of
tax has been paid as advance tax during the year 2014.
(10) Dividend has been paid at the rate 35%.
The company has a capital loss of Tk.10, 00,000 carried forward from the assessment year 2011-1012.
ABC limited is a public limited company.
Required:
Compute the total income and the total income tax liability of ABC Ltd. while making the above computations, any
non-compliance of the relevant provisions of the tax laws (income tax as well as VAT) by the company are to be
considered strictly in accordance with the legal provisions for such non-compliances. If considered necessary, you
may make assumptions in the light of the relevant tax provisions.
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Solution:
ABC Company
Income Year : 2014-2015
Assessment Year: 2015-2016
Particulars Workings Amount
Net Income
19,700,000
Less: Non Business Incomes
(3,500,000)
Interest (1,000,000)
Gain on sale of shares (2,500,000)
Add: Inadmissible Expenses
10,000,000
Salary and wages 600,000
Gratuity provision 1,500,000
Gratuity payment 1,000,000
Security services 300,000
Donation 1,800,000
Board meeting attendance fee 300,000
Corporate income tax 4,500,000
Add: Expenditures to be treated afterward as per ITO
500,000
Entertainement 500,000
Net profit before entertainement allowance
26,700,000
Less Entertainment Expense (as per rule 65)
On first 1,000,000 @ 4% 40,000
On next 2,57,00,000 @ 2% 514,000
554,000
or the actual expenditure 500,000
Lower one
(500,000)
Income From Business & Profession
26,200,000
Interest on Securities:
Interest on Govt Securities
1,000,000
Capital Gain:
Capital gain from sale of shares (37,00,000-12,00,000) 2,500,000
Less: Previous loss carry forwarded and set off (10,00,000 - 5,000) (995,000) 1,505,000
Total Income 28,705,000
Calculation of Gross Tax Liability
Total Income
28,705,000
Less:
1.Capital Gain
(1,505,000)
Total Income for 25%
27,200,000
Tax Liability at 25% 6,800,000
Tax on Capital Gain @ 15%
225,750
7,025,750
Add: simple interest u/s 73
75% of gross tax liability 5,269,313
Less: advance tax (60% of BDT 45,00,000) (2,700,000)
2,569,313
Penalty @ 10% for 2 years assumed for maximum period
513,863
Less: Advance tax paid
(2,700,000)
Net Tax liability
4,839,613
Updated (Finance Act 2015)
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Calaculation of Minimum Tax:
Sales 126,500,000
Interesst 1,000,000
Sale of shares 3,700,000
Total Gross Receipt 131,200,000
Minimum Tax @ 0.3% on Gross Receipts 393,600
Net Tax Liability
4,839,613
Updated (Finance Act 2015)
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QUr5lion No.9:
The profit.and loss account of Star ltd . is eiven below for the income year 2013·2014. 20
SnrUd. Profit and loss Account
For the year ended on June 10, Z014
Particulan Tk. Pa rticulan Tk. Ccst o f goods sold 1,500,000 Sales J,500.000 Salaries 100 000 Dividend 120000 Rent 150.000 [nterest JO,OOO Advertisement 200 000 aain on sale of Asset 40000 Interest on Loan 80000 lnterest on Tax-Free Securities 15000 Utility Expenses 60000 interest on Foreign Investment 20,000 Donalton 150000 TransPOrtation 110.000 Audit Fee 200 000 Bad Debt 90,000 Contribut ion 10 RPF 10000 Incame Tax oaid in Advance JOOOO Fines pajd 10 Customs 20000 Annual MembershiD 15000 Le •• 1 Expenses 25000 Insul'1lnce Premium J5000 Sundry Expenses 12000 Depreciation 65000 Net Profit 2 IJ 000 Tolal 37,25 000 T otal 31-25000
Determine the taxable income of the company and net tax liability thereof. Consider the given data below and assume that:
Star ltd . is a Public limited Company. Salaries Ire paid In cash without any r.heque or bank transfer. Tk.4,SO,OOO of salaries from Tk.1,DO,OOO falls under the category of gross salary morc than Tk.1S,1Xn; tax depreciation amounts toTk.50,OOO; ~gal ex~nses are paid due to the infringement of trademilrts and the company has sold an asset for TIc.l ,DO,COO that the company has purchased 4 years back at a cost of Tk.80.000 with a written down value of Tk.60,OOO to date.
PolgC 4 of,
Updated (Finance Act 2015)
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Answer to the gUC5tion no 9: Star Ltd . ISlatus: Resident Company]
(Considering it for current assessment year Olherwise students will nOC be benefited] Year. 2014-15 ' ASsessment year; 2015-16
Income from Business or profession: Net Profit as per PrQfit and Loss Ac<:ounl Lt..u: Non-business income forconsiderntion at respective head: Dividend Interest Interest 00 tax-free securities Interest 00 foreign investment
Taka
Gain on sale of asset [as Tk.20,OOO is capital gain(I,OO,()()()'80,OOO)]
1,20,000 10,000 15,000 20,000 20,000
Add: Inadmissible Expenses Salaries ( for vrolation of section 30(i) being salary
above Tic I 5,000 per month paid in cash) Donation (assuming donation to unapproved institution
and condition to get CSR also not (umfleet) Income Tax (as income tax is not an expense
as per section 29,rathcr it is an appropriation of profit Income tax is always chargeable 00 nel profit before laX)
Fine paid to customs (as no such fine is admissible expense due 10 violation of law)
Legal expense (disallowed being it was paid due to I nfringement of olher's trademark)
Accounting Depreciation
Less: Tax Depreciat ion as per lid schedule
Income from business
Capita l Gain
4,50,000
1,50,000
10,000
20,000
25,000 65,000
Income from other sourc~: q~ooo Dividend\f..l.olO.OOO -,("" t.2Io h.. "Z4'~ ~OO Interest 0'- 30.000 Interest on foreign investment 20,000
Total 'ncome Tax (.Iicul.lioD:
Tax on lota l income excluding dividend &. capital gain (25% of TIe. 7,48,909) 1,R:3 ,~o 1' . Tax on dividend (20'10 of Taka I;3;OOO)tg·ooo Tax on capital gain (J 5% ofTk.20,OOO) Gross Tax Liability
Tau
2,11,000
2 OS 000 8,000
1,40,000 1,48,000 lli!Ql!
6,98,000
20,000
I As',MO ~ 8;88,888 8,GS~
Tk. ~'V ~ "l,.,O ),000
Less: Advance tax paid Net Tax Liability
~~~" . . )0000 <9. I;IM,IIM '·11, 0 ~, . 'Th~ on .Ji.;a", . OR
Minimum laX on gross receipt@OJO% 1 . .21:1 .000)0 :!if. ... .006
OnsalesTk.3S,OO,ooo@O.)O'Io-, 10,500 ®0"""9~f-366"~"i,_a ... On capita l gain Tk.20,000@0.30%" \.I.4!,e
O 60 &f.oo.
On income from other sources Tk. I.,)tY,OOO@O.JO%=;.r( LI~ ~ Tota l Tk.l t.e1'o 0 f'I'l~ 'l~' -C'
~\v~h~;~eh~e~V7e~'7i'~h~;~,e~'~So~wx~~IO~be~~~~Tk~.~I~~~'~,ood'~~.~'~---~---~~-o~~~~=c~~ Note: Due to lack of information, rort.ign lax credit is nOI possible 10 give on interest on foreign
inveslment _ _ i 5c... - b Page s or,f
Updated (Finance Act 2015)
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l2!!£,tion No. 3(a):
ABC Ltd .• a publicly traded company incorporated and ' . . owned and IS a manufacturer of refrigerators, freezers op~ating ~ Bangladesh, IS 70010 Bangladesbi which is registered as a trade mark in Bangladesh. Th~ alr-COn~lboners under the brand name ABC and loss account for the year ended 31 December 2014' ompany IS the owner of the brand The profit
Turnover Add: Interest income
Less : Cost of sales
Less: Salaries, wages, and bonuses Employees Provident fund Donation Advertising Rental of premises Travelling Foreign excbange loss Maintenance of plant and machinery Bad and doubtful debts Freight and insurance Depreciation Motor vehicles expenses Net profit before tax
Notes:
IS as follows:
Notes
(I)
(2)
(3) (4) (5) (6) (7) (8) (9) (10) (11)
Tk. 000 Tk. 000 161,596
7,040 1,536
20 7,398 1,858 1,500 280 232
2,038 3,044 1,880
~ 161,904 115.416 46,488
582 27.408 J.2J!Wl
(I) Interest income is from a fixed cIIpoeit placed _ • but m Bangladesh. The interest wu received during the year and has been aroeaed-up m. the _lots InteRSt income includes Tk.28,OOO (gross) earned but received by ABC Ltd. .31 Deeember,2014.
(2) Cost of sales is arrived at after mditjog Tk.so,~ of the cost of goods manufactured by the company, which were withdrawn1i'om Siock fat- _ of fixed assets by the company. The
normal selling price wu
(3) Salaries, wages, and bonuses of January 2014,pcusion
(4) The Employees ~ F,\JrJ':~ staff and 12% far Gec:UCi~iII:~
(S) 1\.._ .• , • ---on II in'\WPjll.!ll l!lW
!be ABC bnoIlotaAO (6)~.
~lIa • webaite
~~~~~to CFO in cash for the month ~ Fun(unapproved).
Updated (Finance Act 2015)
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(7) Rental of premises:
Included in the rental is a sum Tk.50,Ooo paid in respect of the early termination of the lease of a building which the company vacated in September 2014. The lease was to have run for another 5 Yean The building was no longer suitable as a showroom for the company's goods due to the construction ofa toll plaza.
(8) Travelling Includes:
(i) Vacation airfare and hotel accommodation costing Tk.36,OOO for important overseas customers (ii) Reimbursement to the directors of the company of salaries of Tk.200,ooo and EmplO)'e/l&
Provident Fund contributions ofTk.25,ooo in respect of drivers employed by the directors. (9) The foreign exchange loss is in respect of the purchase of component parts for manufacture. The
realized loss amounts to Tk.14,Ooo only. (10) Maintenance of plant and machinery includes the installation cost of a machine amountinl to
Tk.34,ooo. (II) Bad and doubtful debts comprise: Tk.
Bad debts recovered (238,000) Specific provision brought forward (1,902,000) General p~il' brought forward (2,410,000) Bad debts written ofT 240,000 Specific provision carried forward 2,7SO~ General provision carried forward 3,598,000 2,038,000 The specific provision carried forward inc~a sum ofTk.26,ooo, being the balance of a personal loan granted to a director who has now resigned ftiID the Board
(12) Depreciation aUowances have been computed at Tk.1 ,644,000 for the assessment year 201~1~ but without taking into account the following acquisitions:
M.~bIne:
On 14 August 2014 the company purchased a machine at a cost of Tk366,000. Tho Tk34,000 mentioned in Dote (10) was incurred on preparing the site for installation ;,s .,,,,,", ..
machine. The machine commenced to be used for the business two weeks after acquisition.
Motor "r: A new car costing Tk.4,400,000 was purchased OD 9 July 2014 for the generallllllllltlgrp;~~
13) Dividend has been paid at the rate of30% (20% cash, 10% bonus) for the year ended 31 2013.
1~ JJ:,~ has a capital loss Tk I ,000,000 carried forward from the lISIIe&SIneoit.,.
2007-OS Tk 200,000 2OOS-09 Tk 300,000 2009-10 Tk. 400 000 Tk. I ,000,000 The loss carried forward from the assessment yeara includes: i) 2007-OS: TkIOO,ooo depreciation aUowanee.
ii) 2010-11: Tk.50,OOO loss under the head "Capital gain". All otha- louea carried forward relate to business income.
Requlre...u:
a) Compute toI8l income for the Income year ended 31 Decemba: 2014 year 2015-2016.
b)
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Accountin~ Year ended on 31 December 2014 Computation of total income and tax thereon
Particulars T.'_. Note ....
~~~~~~~~~--t=~~.-Il~" before tax as per statement 19,080
In~ome to be considered separately under appropriate head: h n" ...... ' lDCome
Profit from business as per audited statement of accounts
Items of expenditure for separate consideration:
[Depreciation as per audited financial statements 1F0rieim exchange loss
[Inadmilulille expenses: lIlal,allY paid in cash iO<maltioll to unapproved sector rAdverti.i"o expense paid without deduction of income tax and VAT [:o,ntributiOlIS to unrecognized provident fund !Reiml,UTi,enlenl of director's driver salary and provident fund
t:::;~~~~~~cost of plant and machinery (being capital nature) li'ro'visic)n for bad and doubtful debts
debts recovered [Adlnissible incomel(expenses): IWritt..., off provision for doubtful debts l,Re!ilizc:d foreign exchange loss
lIncclme from business or profession before considering depreciation, ~ll>sorbed business loss and unabsorbed tax depreciation loss
depreciation for the Assessment Year 2015-16 after depreciation
off unabsorbed tax depreciation loss off unabsorbed business loss
[Inclt. from balDeu or pro_toa
4
5
6
7 8
1,880.00 280.00
64 20 54
1,536
225
34 2,276
(14)
25,379
25,125
Updated (Finance Act 2015)
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Notes:
Taxable income and income tax payable thereon has been computed considering the prclVillici!tJ"~,it.. Finance Act 2014;
2 It is assumed that no revenue is recognized for cost of goods transferred as fIXed assets no gross innow of economic benefit.
3 Pension is exempt from income tax in the hand of Ihe recipient by paragraph 8 of the Part A of the ITO, 1984 and hence the provision of Section 30 (d) IS not apphcab~e here Fund is un-approved, contribution to such fund will be inadmissible. Howev~, Slltee not mention about amount of contribution to such Fund. no amount has been dIsallowed _,., .• ""=
4 Provident Fund It is assumed that Ihe provident fund is not recognized by the Commissioner of Taxes
5 Provision for bad and doubtful debts;
Total provision brought forward (Tk. 1,902+ Tk. 2,410) Provision wnllen ofT during the year Provision made during the year (balancing figure) Total provision earned forward (Tk. 2,750+ Tk. 3,598)
6 Tax depreciation
Depreciation allowance computed Normal depreciation on machinery (Tk. 366 + Tk. 34)x20% Initial depreciation on machinery (Tk. 366 + Tk.34)x25% ·Normal depreciation on new car (Tk. 2,000)x20%
• As per Para II (6) (a) of the Third schedule of the ITO 1984, the actual cost plying for hire, shall not exceed Tk.20,00,000/. As the purchase price of the said limit, depreciation has been calculated on deemed purchase price (i.e. tw1l11lJffItIJ
7 As per Section 42 (6) of the ITO, 1984 unabsorbed depreciation loss can be bffwith busmess income for unlimited period of time;
8 Uuabsorbed business loss:
9
10
.l'otal Loss
. .})pciation aIJowaoce c:anied forward AY 2007-08 ~;c:uned forward UDder the head "Capital Gain"
eJisjblefor set offunder Secti0\l38 (b) of the ITO •
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Problem: The following adjusted accounts appeared in the records of Oak Ltd_, an accrual basis company, for the year ended December 31, 2014_ Numbers in brackets refer to the items in Additional Information..
Net sales (I) Dividends (2) Interest (3) Gain on sale of shares (4)
Revenues and Gains
Equity in earnings of Tech Partnership (5) Keyman life insurance proceeds (6) Insurance proceeds from fire loss claim (7) Tax refund (8)
Total
Cost of goods sold (9) Salaries and wages (10) Doubtful accounts (11) Taxes (12) Security services (13)
Costs and Expenses
Audit, accountaney and taxation services (14) Office Rent (15) Car Rental (16) Interest (17) Donations (18) Board meeting attendance fee (19) Depreciation (20) Other expenses (21) Corporate Income Tax (22)
Net Income
Dividends Paid (23)
Additional inforIDation:
TK.. In '000 90,000
6,000 800
1,000 6,000
25,000 1,500
500 1,30,800
TK.. In '000
52,500 26,000
2,000 9,000
300 500 600 100
2,500 1,800
300 8,000 3,000 4,500
1,11,100 19,700
9,000
(I) Trade accounts receivable at Deceruber 31,2014, and at December 31, 2013, amounted to 'Ik3,30,00,000 and '11<-2,00,00,000 respectively_
(2) Dividends include: i) 'Ik20,00,000 declared and paid in 2014 by an unrelated taxable local company whose shares are traded on DSE and CSE; ii) 'Ik20,00,000 received in 2014 from a Singapore based company which remitted the dividend amount net of an withholding tax of'Ik2,00,000 in equivalent Singapore dollar; iii) 'Ik20,00,000 received in 2014 from a Russian company, which remitted the dividend amount net of an withholding tax of'11<-4,00,000 in equivalent RubeL
(3) Interest revenue comprises interest on government bonds issued in 2004 and purchased by Oak in 2004_
(4) Gain on sale of shares arose from the following purchase and sale of shares in an unrelated company listed on DSE and CSE: Bought in 20 II Cost 'Ik 12,00,000 Sold in 2014 Proceeds of sale '11<-22,00,000
(5) Oak owns 50% of Tech Partnership_ The other 50% is owned by an unrelated individual_
Tech reported the followiug tax information to Oak: Oak's share of: Partnership ordinary income '11<-79,00,000 Net loug-term capital loss (19,00,000) The firm paid a tax of'Ik13,66,250 on the Oak's share of net earnings_
(6) Oak owned the Keyman life insurance policy, paid the preruiums, and was the direct beneficiary_The proceeds were collected on the death of Oak's Controller_
Updated (Finance Act 2015)
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(7) Insurance proceeds were received in 2014 against claim for damage of stock of goods by fire in 2013_ The cost of goods damaged was '11LiO,OO,OOO, and the market value on the date of fire was 'Ik 18,00,000_ The damaged goods did not have any salvage value_
(8) The tax refund arose from Oak's oVeq>ayment of corporate Income tax on the 2014-2015 retut-a (9) Cost of goods sold relates to Oak's net sales_
(10) Salaries and wages include inter alia:-(a) Salary of Finance Manager 'Ik6,00,000 (consolidated) paid in cash, not by cheque or bank transfer; (b) Officers' compensation of 'Ik 15 ,00,000 under Voluntary Retirement Scheme; (c) Gratoity (unrecognized) provision of'Ik15,00,000 and gratoity payment of '11<-10,00,000; (d) Incentive bonus ofTk..20,OO,OOO to officers and non-officers_
(11) Doubtful accounts expense represents an addition to Oak> s allowance for doubtful accounts
based on an aging schedule whereby Oak "reserves" all accounts receivable over 120 days for book purposes_ The balance in Oak's allowance for doubtful accounts was Tk..l ,42,00,000 at December 31, 2014_ Actual bad debts written off in 2014 amounted to '11LiI,OO,OOR
(12) Taxes comprise payroll taxes, but do not relate to officers' compensation, gratuity and incentive bonus as in (10) above, for which neither any income tax has been deducted nor it has been paid by the company_
(13) Security services include payments a to private security company _ No income tax or VAT was deducted at source from such payments_
(14) Audit, accountancy and taxation services include: i) Audit fee Tk2,00,000 ii) Accountancy services 2,00,000 iii) Taxation services 1,00,000 Accountancy services were provided by a :firm of chartered accountants who were not the auditors of Oak.. No income tax or VAT was deducted from the above payments ofTk_5,OO,00R
(15) No income tax was deducted at source from office rent (16) No VAT was deducted at source from car rental_
(17) Interest expense resolted from borrowing for working capital purposes_ (18) Donations were all paid in 2014 to Dhaka University, specifically designated for the
purchase of lab equipment-(19) No income tax or VAT was deducted at source from Board meeting attendance fee paid to
lO(ten) directors_
(20) Oak has always used written down value depreciation for both book and tax purposes_ (21) Other expenses include inter alia:-
(a) Premiums of'Ik_15,OO,OOO on the Keyman life insurance policy covering the controller; (b) Entertaimnent expenses of'Ik5,00,000 spent on the CEO's birth day party; and (c) Four foreign travels of CEO, each costing Tk2,00,000_ All foreign trips were for business purposes_
(22) COlporate income tax is the amount estimated before preparation of the return_ 60% of the estimated amount of tax has been paid as advance tax doring the year 2014_
(22) No dividend tax was deducted at the time of dividend payments to its shareholders, all of whom are local_ There are 10 institutional shareholders (five banks and five insurance companies) holdings in total 10% of share capital, and all others are individuals_
The company has a tax loss (business loss) ofTk..IO,OO,OOO carried forward from the assessment year 2009-20IR
Currently Oak Ltd is a publicly traded company with a paid up capital ofTk35 crore_ It was an unlisted public company on 111114_ It raised an additional amount of Tk20,00,000 paid up capital from the then shareholders in January 2014_ 50% of such capital money was received by cheque and 50% in cash_ The company became a listed company on 117114_
Required:
Compute the total income and the total income tax liability of Oak Ltd_ for the relevant assessment year, based on the above information.. While making the above computations, any non-compIiances of the relevant provisions of the tax laws (income tax as well as VAn by the company are to be considered strictly in accordance with the legal provisions for such noncompliances,_ If considered necessary, you may make assumptions in the light of the relevant tax provisions_
Updated (Finance Act 2015)
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COlDPany AssessIDent OakLimi_
Income Year: 2014-2015
Assessment Year: 2015-2016
Particulars Workin~ AlIIOunt
Net IncoIDe as per Accounts 1,97,00.,000
Less: Non Business Ineo:mes for consideration at appropriate heads
o I Dividends (60,00,000)
02 Interest (8,00,000)
03 Gain on sale of shares (10,00,000)
04 Share income of Tech Partnership (60,00,000)
05 Keyman life insorance proceeds (2,50,00,000)
06 Tax refund (Not income in nature) (5,00,000) (3,93,00.,000'
(1,96,00.,000) Add: Inadmissible Expenses
01 Salary and wages -VIS 30 (a) 6,00,000
02 Gratuity provision (No provision is allowed) 15,00,000
03 Gratuity payment ( for being unrecognized) 10,00,000 04 Incentive bonus - VIS 30(aa) 20,00,000
05 Provision for doubtful accounts 9,00,000
06 Payroll taxes considered as sa1a.ty and wages expenses -
07 Security services -VIS 30(aa) 3,00,000 08 Audit, accountancy and taxation services - VIS 30(aa) 5,00,000 09 Office rent - VIS 30(aa) 6,00,000
10 Car Rental 1,00,000
II Donation (Not allowed as expense but may considered as CSR) 18,00,000
12 Board meeting attendance fee -VIS 30(aa) 3,00,000 13 Keyman life insorance premium - (not allowed VIS 29(1) (vii) but would
15,00,000 be considered for computation of insurance proceeds)
14 Entertainment expense of CEO's Birthday party assuming personal 5,00,000 expense and not related to business expenses
15 Overseas travelling not exceeds the allowable limit of 1% of turnover -
16 Cotporate income tax (not expenses rather allocation of profits) 45,00,000
16 Dividends paid without deduction of 'IDS 90,00,000 2,51,00.,000
Ineo:me From Business 55,00.,000 Less: Set off of carry forwarded Business Loss (10,00.,000)
Taxable IncoIDe From Business 45,00.,000
Ineo:me From Partnership 79,00.,000 (As capital loss or gain of partnership is taxable ouiy at firm level so total income before tax would be the income of the assessee)
Ineo:me From Business or Profession 1.24.00.000
Interest on Securities: Interest on Govt Securities 8.00.000
Capital Gain:
Capital gain from sale of shares (22,00,000-12,00,000) 10,00.,000
Ineo:me from other sources Dividend from local listed company (gross) 20,00,000
Less: Exempted as per (Sixth Schedule, Part A, Para IIA) (25,000) 19,75,000 Dividend from abroad (grossed up) 46,00.,000 Keyman life insorance proceeds (25,000,000-1,500,000) 2,35,00.,000 Deemed income under section 19(24) 10,00.,000
31075,000
Total Ineo:me 4,52,75,000
Updated (Finance Act 2015)
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Calculation of Gross Tax Liability Total Income Less: LCapital Gain 2_ Dividend
Total Income for 25%
Tax Liability at 25%
Tax on Capital Gain on Sale of Share @ 10% Tax on Dividend @ 20%
Less: Rebate @10% on CSR activities assuming donation was related to the business interest and it is within the maximum limit of20% of total income or 120,()()(),OOO
Gross Tax Liability
Add: simple interest U/S 73 75% of gross tax liability Less: advance tax (60% ofBDT 45,OO,()()()
Penalty @ 10% for 2 years assumed for maximum period
Less: Foreign tax credit Tax payable on Dividend income from Singapore at average rate {(I 0, 660, ()()()/4 5,275,(00)*2,200,000 }
Tax paid in Singapore Tax credit allowable
Tax payable on Dividend income from Russia at average rate { ( 10,660, ()()()/4 5,275,(00)*2,400,000 }
Tax paid in Russia Tax credit allowable
Less: Advance Tax PaidffDS Advance tax TDS on Local Dividend (2,()()(),()()()*20%) TDS on Gain on Sale of Share (1,()()(),OOO*IO%)
Tax paid by Tech Partnership on behalf of assessee Net Tax liability
Calculation of Minimum Tax: Sales Dividend Interest Keyman life insurance proceeds Insurance proceeds from fire loss claim Sale of shares
Total Gross Receipt
Minimum Tax @ 0.3% on Gross Reeeipts
Net Tax Liability
Note
81,30,()()() (54,00, ()()()
27,30,()()()
I
5,17,990 I 2,00, ()()()
5,65,080
4,00, ()()()
(54,00, ()()() (4,00, ()()() (1,00, ()()()
(13,66,250)
9,00,00, ()()() 60,00, ()()()
8,00, ()()() 2,50,OO,()()()
15,00, ()()() 22,OO,()()()
12,s5,OO,()()()
1 It is assumed that the company did not issued at least 20% of its paid up share capital through IPO_
4,52,75,()()()
(10,00, ()()() (65,75,()()()
3,77,00,000 94,25,()()()
1,00, ()()() 13,15,()()()
1,08,40,()()()
(1,80,()()()
1,06,60,000
5,46, ()()()
(2,00, ()()()
(4,00, ()()()
(72,66,250)
33,39,750
3,76,500
33,39,750
2 Tax rebate on Share of Partnership income at average rate is applicable for Resident or Non Resident BangladeshL So in the case of company it is not applicable as per 6th Schedule Part B Para 16_ Therefor the total income before tax is added with toatal income and tax paid by partnership is treated as the Tax Credit.
3 It is assumed that the company started its commercial operation earlier than three years period so 030 % rate has been considered for minimum tax calculation_
4 As Sec 530 omitted by Finance Act 2015 which is applicable from I Jnly 2015 So TDS has been dedocted accroding to previous provision but from the next A Y there will be no TDS on Gain of Sale of Share of Listed Company_
Updated (Finance Act 2015)
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Part Eight: Income from other sources
Income from other sources:
Important sections of income from other sources:
Section – 33; Income from other sources; [relevant with section 2(26)] The following income of an assessee shall be classified and computed under the head "Income from other sources",
namely:-
(a) dividend and interest;
(b) royalties and fees for technical services;
(c) income from letting of machinery, plants or furniture belonging to the assessee, and also of buildings
belonging to him if the letting of buildings is inseparable from the letting of the machinery, plant or furniture;
(d) any income to which section 19 (1), (2), (3), (4), (5), (8), (9), (10), (11), (12), (13), (21), ), (21B), (24), (26),
(27 (21A) or (24) applies;
(e) any other income of any kind or from any source which is not classifiable under any of the other heads
specified in section 20.
Section – 34; Deductions from income from other sources;
(1) The amount of interest paid in respect of money borrowed for the purpose of acquisition of shares of a
company.
(2) Any expenditure, not being in the nature of capital expenditure or personal expenses of the assessee, incurred
solely for the purpose of making or earning the relevant income.
(3) Where the income is derived from letting on hire of machinery, plant or furniture belonging to the assessee and
also of building belonging to him if the letting of the building is inseparable from the letting of such machinery,
plant or furniture, the same allowances as are admissible under section 29(1) (vi), (vii) and (xi) to an assessee in
respect of income under the head "Income from business or profession" subject to the same conditions and
limitations as if the income from such letting on hire were income from business or profession:
Provided that the provisions of section 19(16) shall also be applicable for the determination of any profits where
the sale proceeds of such machinery, plant, furniture or building exceeds the written down value thereof.
(4) Notwithstanding anything contained in this section, no allowance shall be made on account of-
(a) any interest chargeable under this Ordinance which is payable outside Bangladesh on which tax has
not been paid and from which tax has not been deducted at source under section 56; or
(b) any payment which is chargeable under the head "Salaries" if tax has not been paid thereon or
deducted there from under section 50.
Study References:
Section; 2(26) Dividend; read with rule 19(7)
2(56) Royalty; 2(34)
2(31) Fees for technical services
Section; 33, 34, 35, 36
Section; 19(1) – 19(5)
19(8) – 19(13)
19(21), 19(21A), 19(21B) read with section 82BB(5)
19(24), 19(26), 19(27), 19(28), 19(29), 19(31)
6th schedule (Part A); Para 11A, 22A
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Section – 35; Method of accounting:
All income classifiable under the head ―Agricultural income‖, ―Income from business or profession‖ or ―Income from
other sources‖ shall be computed in accordance with the method of accounting regularly employed by the company
[sec 35(1)]
Every public or private company as defined in the Companies Act, 1913 (VII of 1913) or 1994 shall, with the return
of income required to be filed under this Ordinance for any income year, furnish a copy of the trading account, profit
and loss account and the balance sheet in respect of that income year certified by a chartered accountant to the effect
that the accounts are maintained according to the BAS and reported in accordance with BFRS [sec 35(3)]
Where no method of accounting has been regularly employed, or if the method employed is such that, in the opinion
of the DCT the income of the assessee cannot be properly ascertained, the income of the company shall be computed
on such basis and in such manner as the Deputy Commissioner of Taxes may think fit [sec 35(4)]
Section – 2(26); Dividend:
1. Any distribution of assets, whether capitalized or not, will be treated as dividend.
2. Subsidiary of a foreign company want to remit money to its parent company will be treated as dividend.
3. If director of a private company take loans from the company, such loan will be treated as dividend.
Stock dividend is not a dividend at all.
6th
Schedule (Exemption);
11A; For individual (or person) Tk. 25,000 will be exempted from dividend income from a listed company. Amended FA
2015
22A: For mutual fund or unit fund Tk. 25,000 will be exempted from income. Amended FA 2015
Section – 36: Allocation of income from royalties, literary works, etc:
Where the time taken by the author of a literary or artistic work in the making thereof exceeds twelve months, the
amount received or receivable by him during any income year in lump sum on account of royalties or copyright fees
in respect of that work shall, if he so claims, be deemed to be the income of-
(a) the income year in which it is received and the immediately preceding income year if the time taken in
making such work exceeds twelve months but does not exceed twenty-four months ; and
(b) the income year in which it is received and the two immediately preceding income years if the time taken
in making such work exceeds twenty-four months, and shall be allocated in equal proportions to each such
income year and the income of the assessee in respect of an income year shall be computed accordingly.
Explanation.- For the purposes of this section, the expression "author" includes a joint author and the expression
"lump sum" in regard to royalties or copyright fees includes an advance payment on account of such royalties or
copyright fees which is not returnable.
Section – 19; Un-explained investments, etc., deemed to be income;
(1) Where any sum is found credited in the books of an assessee maintained for any income year and the assesses
offers no explanation about the nature and source thereof, or the explanation offered is not, in the opinion of the
Deputy Commissioner of Taxes, satisfactory, the sum so credited shall be deemed to be his income for that income
year classifiable under the head "Income from other sources".
(2) Where, in any income year, the assessee has made investments or is found to be the owner of any bullion,
jewellery or other valuable article and the Deputy Commissioner of Taxes finds that the amount expended on making
such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this
behalf in the books of account maintained by the assessee for any source of income and the assessee offers no
explanation about the excess amount or the explanation offered is not, in the opinion of the Deputy Commissioner of
Taxes, satisfactory, the excess amount shall be deemed to be the income of the assessee for such income year
classifiable under the head "Income from other sources".
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(3) Where, in any income year, the assessee has incurred any expenditure and he offers no explanation about the
nature and source of the money for such expenditure, or the explanation offered is not in the opinion of the Deputy
Commissioner of Taxes, satisfactory, the amount of the expenditure shall be deemed to be the income of the assessee
for such income year classifiable under the head "Income from other sources".
(4) Where, in the financial year immediately preceding the assessment year, the assessee has made investments which
are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers
no explanation about the nature and source of fund for the investments, or the explanation offered is not, in the
opinion of the Deputy Commissioner of Taxes, satisfactory, the value of the investments shall be deemed to be the
income of the assessee for such financial year classifiable under the head "Income from other sources".
(5) Where, in the financial year immediately preceding the assessment year, the assessee is found to be the owner of
any money, bullion, jewellery or other valuable article which is not recorded in the books of account, if any,
maintained by him for any source of income, and the assessee offers no explanation about the nature and source of
fund for the acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered is not, in
the opinion of the Deputy Commissioner of Taxes, satisfactory, the money or the value of the bullion, jewellery or
other valuable article, shall be deemed to be the income of the assessee for such financial year classifiable under the
head "Income from other sources".
(8) Where any assets, not being stock-in-trade or stocks, and shares, are purchased by an assessee from any company
and the Deputy Commissioner of Taxes has reason to believe that the price paid by the assessee is less than the fair
market value thereof, the difference between the price so paid and the fair market value shall be deemed to be income
of the assessee classifiable under the head "Income from other sources".
(9) Where any lump sum amount is received or receivable by an assessee during any income year on account of
salami or premia receipts by virtue of any lease, such amount shall be deemed to be income of the assessee of the
income year in which it is received and classifiable under the head "Income from other sources":
Provided that at the option of the assessee such amount may be allocated for the purpose of assessment
proportionately to the years covered by the entire lease period, but such allocation shall in no case exceed five years.
(10) Where any amount is received by an assessee during any income year by way of goodwill money or receipt in
the nature of compensation or damages for cancellation or termination of contracts and licences by the Government or
any person, such amount shall be deemed to be the income of such assessee for that income year classifiable under
the head "Income from other sources".
(11) Where any benefit or advantage, whether convertible into money or not, is derived by an assessee during any
income year on account of cancellation of indebtedness []Deleted F.A. 1999, the money value of such advantage or benefit
shall be deemed to be his income for that income year classifiable under the head "Income from other sources":
Provided that the provisions of this sub-section shall not apply in case of a loan or interest waived in respect of an
assessee by a commercial bank including Bangladesh Krishi Bank, RajshahiKrishiUnnyan Bank, Bangladesh
Development Bank Ltd. or a leasing company or a financial institution registered under আর্থি প্রর্িষ্ঠোনআইন, 1993
(1993 সননর 27 নংআইন)
(12) Any managing agency commission including compensation received during any income year by an assessee for
termination of agencies or any modification of the terms and conditions relating thereto shall be deemed to be his
income for that income year classifiable under the head "Income from other sources".
(13) Any amount received by an assessee during any income year by way of winnings from lotteries, crossword
puzzles, card games and other games of any sort or from gambling or betting in any form or of any nature whatsoever
shall be deemed to be his income for that income year classifiable under the head "Income from other sources".
(21) Where any sum, or aggregate of sums exceeding taka five lakh is claimed or shown to have been received as
loan by an assessee during any income year from any person, not being a banking company or a financial institution,
otherwise than by a crossed chequedrawn on a bank or bank transfer, and has not been paid back in full within three
years from the end of the income year in which it is claimed or shown to have been received, the said sum or part
thereof which has not been paid back, shall be deemed to be the income of the assessee for the income year
Updated (Finance Act 2015)
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immediately following the expiry of the said three years and be classifiable under the head "Income from other
sources":
Provided that where the loan referred to in this sub-section is paid back in a subsequent income year, the amount so
paid shall be deducted in computing the income in respect of that subsequent year .Amended FA 2015
[(21A) Where any sum is claimed to have been received by an assessee as loan or gift during any income year from a
person who has transferred the sum within the period of limitation stipulated in the rule made under this Ordinance,
from the initial capital of his business/profession shown in his return filed under section 83A, the amount of such
loan/gift so received by the assessee shall be classifiable for that income year under the head "Income from other
sources"]
[(21B) Where any sum, shown as initial capital of business or profession in return of income filed under section
82BB, is transferred by a person partly or fully within the period of limitation stipulated in the said section, the sum
so transferred shall be deemed to be his income of the year in which such sum was transferred and shall be
classifiable under the head "Income from other sources".] Added F.A. 2011
[(24) Where an assessee, being a private limited company or a public limited company not listed with a stock
exchange, increases its paid up capital by issuing shares in an income year, the amount so received as increased paid
up capital, not being received by crossed cheque or bank transfer, shall be deemed to be the income of such assessee
for that income year classifiable under the head "Income from other sources.]Subs. F.A. 2010
[(25)]Deleted F.A. 2007
[(26)Where an assessee, being a company, receives any amount as lan from any other company otherwise than by a
crossed cheque or by bank transfer, the amount so received shall be deemed to be the income of such assessee for that
income year in which such loan was taken and shall be classifiable under the head "Income from other sources".]Added
F.A. 2011
Provided that where the loan or part thereof referred to in this sub-section is repaid in a subsequent income
year, the amount so repaid shall be deducted in computing the income for that subsequent year.Added F.A. 2014
[(27)Where an assessee, being a company, purchases directly or on hire one or more motor car or jeep and value of
any motor car or jeep exceeds ten percent of its paid up capital together with reserve and accumulated profit, then
fifty percent of the amount that exceeds such ten percent of the paid up capital together with reserve and accumulated
profit shall be deemed to be the income of such assessee for that income year classifiable under the head "Income
from other sources".]Amended F.A. 2015
(29) Where an assessee other than real estate company, during any income year, purchases on credit any material for
the purpose of construction of building or house property or its unit and fails to pay the sum or any part thereof
representing the liability in respect of such purchase, die sum or any part thereof, which has not been paid in the
following year in which such purchase was made, shall be deemed to be the income of the assessee for that income
year classifiable under the head "Income from other sources". Added FA 2015
(30) Where an assessee, in the course of any proceedings under this Ordinance, is found to have any sum or part
thereof allowed or deducted but not spent in accordance with the provision of clause (h) of sub-section (1) of section
25 of this Ordinance, such unspent sum or part thereof shall be deemed to be the income of such assessee for that
income year classifiable under the head ―Income from house property. Added FA 2015
(31): Where an assessee files a revised return under sections 78 or 93 and shows tax exempted income or income that
is subject to reduced tax rate, so much of the excess as it exceeds the amount shows in the original return shall be
deemed to be income for that income year classifiable under the head "Income from other sources". Added FA 2015
Updated (Finance Act 2015)
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Practical Problems
Problem - 1 – Individual Assessment:
BDT
a. Salary Income
Basic salary 420,864
Festival bonus 70,144
House rent allowance 375,735
Entertainment allowance 4,173
Conveyance allowance 35,072
Other allowance 16,262
Employer's contribution to Provident fund 42,086
Tax deducted from salary 12,000
b. House Property Income
House rent 297,600
City Corporation tax 9,000
Salary of security guard 48,000
Salary of sweeper 12,000
c. Income from business 378,975
d. Income from partnership (A real estate business) 596,400
[Tax deducted at source Tk. 65,280]
e. Income from land sale (capital gain) 160,000
[Tax deducted at source Tk. 40,000]
f. Income from share business u/s 32(7) 8,974,071
g. Dividend income (Gross) 1,204,374
h. Interest from SB A/C (Gross) 965
i. Income from fisheries business 403,000
j. Income from poultry firm 205,000
[Investment in govt. bond]
Notes:
1. Purchase of 5-years Bangladesh Sanchaya Patra 200,000
2. Investment in DPS 120,000
3. Advance tax for car registration 15,000
4. Assessee's total wealth 125,090,210
5. The assessee has a flat in Bashundhara R/A but was vacant due to non-connection of
electricity and gas.
The following are the income of Mr. Azad for the year ended June 30, 2015. Compute his total income and tax liability:
Updated (Finance Act 2015)
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Solution:
Mr. Azad
Income Year: 2014-15
Assessment Year: 2015-16
Computation of total taxable income Reference BDT BDT BDT
A. Income from Salary
1. Basic salary R-33 (2)a
420,864
2. Festival bonus
70,144
3. House rent allowance R-33A 375,735
Less: Lower of
50% of basic salary 210,432
Or, Tk. 25,000 p.m. 300,000 (210,432) 165,303
5. Entertainment allowance R-33H
4,173
6. Conveyance allowance 35,072
Less: Exempted up to Tk. 30,000 (30,000) 5,072
7. Other allowance R-33J
16,262
8. Employer's contribution to PF Sch. 6-B-5
42,086
Total Income from Salary
723,904
B Income from House Property
Annual value
297,600
Less: Allowable expenses:
Repair and maintenance
(25% of annual value, for residential use) Sec 25(1)(h) 74,400
City corporation tax Sec 25(1)(e) 9,000 (83,400) 214,200
Add: Unspent portion of allowable deduction Sec 19(30)
Deductible expenses
74,400
Expenses claimed
(60,000) 14,400
Total Income from House Property
228,600
Income from Business and Profession
C Income from Business Sec 28
378,975
D Income from partnership Sec 43(3)
596,400
F Income from Share Business 8,974,071
Less: Exempted SRO-196/L/
IT/2015 (8,974,071) -
I Income from fisheries business (Reduced
Tax Rate @3%)
SRO-199/L/
IT/2015 403,000
J Income from poultry firm 205,000
Less: Exempted Sch 6-A-42 (205,000) -
Total Income from Business and Profession
1,378,375
E Capital Gain
Income from land sale (Note 1) Sec-82©
160,000
(assuming that sales occurred within 5 years)
F. Income from Other Sources
1. Dividend income (gross) Sec-33A 1,204,374
Less: Exempted Sch. 6-A-11A (25,000) 1,179,374
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2. Interest from SB A/c Sec-33
965
Total income from other sources
1,180,339
Total Taxable Income
3,671,218
Calculation of Investment Allowance
1. Actual investment [as per 6th Schedule, Part-B]
a. Purchase of 5-years Bangladesh Sanchaya Patra 200,000
b. Investment in DPS [up to BDT 60,000] [Para-11] 60,000
c. Investment in govt. bond [10% of BDT 205,000] [Para-10] 20,500
d. Employee and Employer's contribution to PF [Para-5] 84,172 364,672
2. 30% of Total taxable income excluding Employer's
contribution to PF, Income from fisheries business
and Capital gain [30% of (3,671,218-42,086-403,000-160,000)] 919,840
3. Maximum allowance u/s 44 15,000,000
Tax rebate @ 15% of the lowest of (1), (2) and (3) 54,701
Tax Liability Calculation
Total income excluding income from fisheries business
[3,671,218 - 403,000] 3,268,218
Applicable slab Rate Tax
amount
On 1st up to 250,000 0% -
On next up to 400,000 10% 40,000
On next up to 500,000 15% 75,000
On next up to 600,000 20% 120,000
Remaining (excluding fisheries income) 1,518,218 25% 379,555
Fisheries income 403,000 3% 12,090
626,645
Less: Investment tax rebate (54,701)
Tax Liability (A) 571,944
Less: Average rate on income from partnership (B) (104,371)
[571,944 ÷ 3,671,218 × 596,400]
Less: Advance payment of tax (C)
From salary 12,000
On land sale 40,000
Advance tax for car registration 15,000
On interest 97
On dividend income 120,437 (187,534)
Add: Surcharge @15% on Tk. 571,944 (D) 85,792
Net tax liability (E=A-B-C+D) 365,830
Updated (Finance Act 2015)
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(Note 1):
It is assumed that sales of land occurred within 5 years. It is obvious that as the total income excluding
income under reduced tax and sale of land is TK 3,108,218 (3,671,218-403,000-160,000) so the applicable
tax rate for back calculation of income under 82(C) would be 25%.
Applicable slab Rate Tax amount Maximum Amount
On 1st upto
250,000 0% - -
On next upto 400,000
10%
40,000 40,000
On next upto 500,000
15%
75,000 75,000
On next upto 600,000
20%
120,000 120,000
Remaining 1,358,218
25%
379,555 750,000
3,108,218
Here remaining amount of tax that may come under 25% tax rate is Tk. 410,445 (750,000-379,555)
Therefore, the amount of Income for the TDS 40,000 would be TK. 160,000 (40,000/25%)
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Problem - 2 – Individual Assessment:
a.
b.
c.
d. Entertainment allowance @ 5% of basic salary was paid to Mr. A.
e.
f.
g.
h.
i. Derived net income from production of corn, maize and sugar beet for Tk. 5,000.
j.
k.
l.
m.
n.
During the year Mr. A has claimed the following expenditures as his investments:
1. Purchased Sanchay Patra for Tk. 50,000.
2. Contributed 10% of his basic salary towards Super Annuation Fund.
3. Deposited Tk. 75,000 under Deposit Pension Scheme with a Financial Institution.
4. Deposited Tk. 20,000 to Benevolent Fund.
5.
6. Paid insurance premium of Tk. 20,000 for his spouse and minor child. The policy value is Tk. 100,000.
7. Purchased a computer for Tk. 50,000 and a laptop for Tk. 60,000.
Mr. A is 60 years old and employed by a private limited company. He has joined the company on 01 July 2014. He
has received the following income and benefits during the year ended 30 June 2015:
Basic salary Tk. 100,000 per month sent to his bank directly. He had outstanding salary for the month of
June 2015 which was paid on 02 July 2015. He had also received arrear salary of Tk. 50,000 during the year
from previous employment..
The present employer allowed house accommodation at a concessional rate. Mr. A paid Tk. 60,000 only as
rent during the income year 2014-15.
You are required to calculate the total income and tax liability of Mr. A for the assessment year 2015-2016. Make
necessary assumptions, if required.
Contributed 10% of basic salary to a recognised provident fund. A similar contribution was made by the
employer wherefrom he receive interest of Tk. 1,800 from the said fund @ 18%.
Rental income of Tk. 600,000 received from a five-storied building consists of 10 flats constructed during
the period from 01 July 2012 to 30 June 2013 in an area of Muladi, Barisal.
Mr. A incurred a capital loss of Tk. 500,000 on account of sale of shares in the earlier year, but this year he
made a capital gain of Tk. 600,000 from the sale of shares.
Received share of net profit of Tk. 200,000 from partnership. He is entitled to tax rebate as per tax law.
Mr. A is also a manufacturer and exporter of garments products. He sold export quota at Tk. 25,000 against
export value of Tk. 500,000.
Taken advance of Tk. 200,000 from a company against accumulated profit where he was an alternate
director and a shareholder.
Purchased wage earners' bonds on 30 June 2014 and received interest of Tk. 50,000 in the following year on
the said investment of Tk. 500,000.
Company spent Tk. 200,000 for Mr. A during the year against reimbursement of utility bills of his residence.
Additional conveyance allowance of Tk. 50,000 was paid to Mr. A in addition to the conveyance allowed
under Rule 33D.
Free and consessional passage of Tk. 200,000 for travel in Bangladesh by Mr. A was allowed by the
employer against actual claim of expenditure of Tk. 300,000.
Employer spent Tk. 500 p.m. for free tea, coffee and beverage for the office of Mr. A durig working hours.
Updated (Finance Act 2015)
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Solution:
Mr. A
Income Year: 2014-15
Assessment Year: 2015-16
Computation of total taxable income Reference BDT BDT
A. Income from Salary
1. Basic salary R-33 (2)a
1,200,000
2. Arrear salary from previous employment Sec 21(1)c
50,000
(assuming it was not taxed earlier)
3. House rent allowance [25% of basic salary] R-33B 300,000
Less: Rent paid (60,000) 240,000
4. Conveyance allowance R-33E 50,000
Add: Car facility (Conveyance facility) R-33D 60,000 110,000
(Higher of Tk 60,000 or 5% of Basic Salary)
5. Entertainment allowance R-33H
60,000
6. Free and concessional passage in Bangladesh R-33G 200,000
Less: Exempted (actual expenditure) (200,000) -
7. Reimbursement of Utility
200,000
8. Employer's contribution to RPF Sch-1(B)-3
120,000
9. Interest on RPF 1,800
Less: Lower of interest @ 14.5% or 1/3 of BS Sch-6(A)-25
Interest @ 14.5% 1,450
1/3 of Basic Salary 400,000 (1,450) 350
Total Income from Salary
1,980,350
B. Income from Interest on Securities
Interest on securities (gross) Sec 22
50,000
Total Income from Interest on Securities
50,000
C. Income from House Property
Rental income Sec 24
600,000
Less: Exempted 6th-A-38
(600,000)
-
D. Agricultural Income
Income from production of corn, maize and sugar beet
5,000
Less: Exempted 50% 6th-A-46
(2,500)
2,500
E. Income from Business and Profession
1. Income from partnership business
200,000
2. Export quota [3% of BDT 500,000] Sec 19(23) &
R-30A
15,000
215,000
F. Capital Gain
Income from share sale
(assuming that sales occurred within 5 years)
600,000
Less: Exempted 100% SRO-269
(2010)
(600,000)
-
Updated (Finance Act 2015)
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G. Income from Other Sources
1. Dividend income (gross)
200,000
200,000
Total Taxable Income
2,447,850
Calculation of Investment Allowance [as per 6th Schedule, Part-B]
1. Actual investment
a. Sanchay Patra 50,000
b. Contribution to Super Annuation Fund [Para-6] 120,000
c. Investment in DPS [up to BDT 60,000] [Para-11] 60,000
d. Contribution to RPF [Para-5] 240,000
e. Insurance premium [Para-1] 10,000
f. Laptop purchase [Para-23] 60,000
g. Contribution to Benevolent Fund [Para-17] 20,000 560,000
2. 30% of Total taxable income excluding Employer's contribution to PF and
Capital gain [30% of (24,47,850-1,20,000-0)]
698.355
3. Maximum allowance u/s 44 15,000,000
Tax rebate @ 15% of the lowest of (1), (2) and (3) 84,000
Tax Liability Calculation
Applicable slab Rate Tax
amount
On 1st 250,000 0% -
Next 400,000 10% 40,000
Next 500,000 15% 75,000
Next 600,000 20% 120,000
Remaining 697,850 25% 174,463
2,447,850 409,463
Less: Investment tax rebate (84,000)
Tax Liability
325,463
Less: Average rate on income from partnership
[325,463 ÷ 2,447,850 × 200,000] (26,592)
Less: TDS on wage earners' bond [sec 51(1)]* -
Net tax liability 298,871
*No TDS has been deducted as the total investment does not exceed tk. 500,000 as per laws
applicable for the income year 2014-15
Updated (Finance Act 2015)
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Part Nine: Set off and Carry Forward Losses
Set Off and Carry Forward Losses:
Important sections related to set off and carry forward losses
Set off Losses: Section 37
Wherever an assessee sustains a loss in any year under any head of income, he is entitled to set off the loss so
sustained against his income, profits or gains under any other head in that year. Provided that any loss in respect of
any speculation business or any loss under capital gains or any loss from any other source, income of which is
exempted from tax shall not be so set off. Provided further that any loss in respect of any income from any head
shall not be so set off against any income from manufacturing of cigarette. Amended FA 2015
Carry forward of loss from business: Section 38
Whenever an assessee sustains any loss under the head “Business or Profession” and the loss cannot wholly be set-
off against under any other head, such unadjusted loss shall be carried forward to the following year to be set-off
against the profits and gains of the same business or profession. Loss cannot be carried forward for more than 6
successive assessment years. Provided business loss cannot be set off against capital gain.
Section - 46B: Exemption from tax of newly established industrial undertakings set up between the period of
July 2011 and June 2019, etc. in certain cases.-
1. (1) Subject to the provisions of this Ordinance, income, profits and gains under section 28 from an industrial
undertaking (hereinafter referred to as the said undertaking) set-up in Bangladesh between the first day of
July, 2011 and the thirtieth day of June, 2019(both days inclusive) shall be exempted from the tax payable
under this Ordinance for the period, and at the rate, specified below:
2. if the said undertaking is set-up in-
1. (i) Dhaka and Chittagong divisions, excluding Dhaka, Narayanganj, Gazipur, Chittagong,
Rangamati, Bandarban and Khagrachari districts, for a period of five years beginning with the
month of commencement of commercial production of the said undertaking:
Period of Exemption Rate of Exemption
For the first two years (first and second year) 100% of income
For the third year 60% of income
For the fourth year 40% of income
For the last year (fifth year) 20% of income
Study References:
Section; 37: carry forward losses.
Section: 38 read with section 46B, 46C and 3rd schedule
39,40,41,42
Updated (Finance Act 2015)
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2. (ii) Rajshahi, Khulna, Sylhet, Barisal and Rangpurdivisions(excluding City Corporation area) and
Rangamati, Bandarban and Khagrachari districts, for a period of ten years beginning with the month
of commencement of commercial production of the said undertaking:
Period of Exemption Rate of Exemption
For the first two years (first and second year) 100% of income
For the third year 70% of income
For the fourth year 55% of income
For the fifth year 40% of income
For the sixth year 25% of income
For the last four years (seventh to tenth year) 20% of income
For the purpose of this section "industrial undertaking" means an industry engaged in the production of active
pharmaceuticals ingredient industry and radio pharmaceuticals industry; automobile manufacturing industry; barrier
contraceptive and rubber latex; basic chemicals or dyes and chemicals; basic ingredients of electronic industry (e.g.
resistance, capacitor, transistor, integrator circuit); bi-cycle manufacturing industry; bio-fertilizer; biotechnology;
boilers; brick made of automatic Hybrid Hoffmann Kiln technology or Tunnel Kiln; compressors; computer
hardware; energy efficient appliances; insecticide or pesticide; petro-chemicals; pharmaceuticals; processing of
locally produced fruits and vegetables; radio-active (diffusion) application industry (e.g. developing quality or
decaying polymer or preservation of food or disinfecting medicinal equipment); textile machinery; tissue grafting;
tyre manufacturing industry; any other category of industrial undertaking as the Government may, by notification in
the official Gazette, specify. Amended FA 2015
(11) Where any exemption is allowed under this section and in the course of making assessment, the Deputy
Commissioner of Taxes is satisfied that any one or more of the conditions specified in this section are not fulfilled or
any individual not being a Bangladeshi citizen is employed or allowed to work without prior approval of the Board of
Investment or any competent authority of the Government, as the case may be, for this purpose the exemption shall
stand withdrawn for the relevant assessment year and the Deputy Commissioner of Taxes shall determine the tax
payable for such year. Amended FA 2015
Carry forward of loss in speculation business: Section 39
Loss from speculation business, which cannot be set-off during the year against income from any other speculation
business, can be carried forward to the next following year and set-off against income from any speculation business
in the said following year. If the loss cannot be wholly set-off, it can be carried forward to the next year and so on,
restricted up to 6 successive years.
Carry forward of loss under the head “Capital Gains”: Section 40
Loss under the head ―Capital Gains‖ can be set-off against income from the same head during the income year. If the
loss cannot be set-off in the above manner, the loss or portion thereof can be carried forward to the next assessment
year and set-off against income under the same head in that year restricted up to 6 successive assessment years.
Loss up to Taka 5,000 cannot be carried forward. Amount in excess of Taka 5,000 can only be carried forward and
set-off in the aforesaid manner.
Loss of Agricultural Income: Section 41
Where any assessee sustains a loss of profit or gains in any year under the head ―Agricultural Income‖ and the loss
cannot be wholly set-off under Section 37, so much of the loss as has not been wholly set off , or the whole loss
where the assessee has no income under any other head or has income only under the head ―Capital Gains‖, shall be
carried forward to the following year and set-off against the profits and gains, if any, of such agricultural income and
if the loss in either case cannot be wholly set-off, the amount of loss not so set-off, shall be carried forward to the next
year and so on but not more than 6 years.
Updated (Finance Act 2015)
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Set-off of loss in the case of succession in business: Section: 42
In case of succession in business otherwise than by inheritance, the person succeeding in the business shall not be
entitled to set – off the loss of the person succeeded. In the case of change in constitution of firm, the firm shall not be
entitled to set-off the proportionate share of loss of the retired or deceased partner. A partner of the firm shall also not
be entitled to the benefit of such loss.
For example,
Partner Loss (Year 1) Partner Proft (Year 2) Proft after set off
A 25,000 A 40,000 15,000
B 25,000 B 40,000 15,000
C 25,000 C (6 months) 20,000 0
Total loss 75,000 D (6 months) 20,000 20,000
Loss to be carry forwarded = 0 (zero)
If C come back within 6 years and make profit, than remaining 5,000 can be set off.
If D is the successor of C, rest of 5,000 loss can be set-off against D‘s income.
Carry forward of depreciation allowance: Section 42(6)
Depreciation allowance which cannot be given full effect of, in any year, because of there being no profits or of
inadequate profits, unadjusted allowances or portion thereof as the case may be, shall be carried forward to the next
year yor years and be part of allowance for that year.
While setting-off loss on account of depreciation allowance, effect shall first be given to business loss including loss
from speculation business.
Following table gives a bird's eye view of set off of losses:
Heads of income generating
loss
Set off against
1. Salary [Though loss is not
possible]
any head [other than income from cigarette manufacturing]
2. Interest on securities any head[other than income from cigarette manufacturing]
3. Income from house property any head[other than income from cigarette manufacturing]
4. Agricultural income any head except "capital gains" and income from cigarette manufacturing
5.Income from business/
profession
any head except income from house property, Income from cigarette
manufacturing and capital gains;
6. Capital gain income from "capital gains" only
7. Income from other sources any head [other than income from cigarette manufacturing]
8. Speculation business income from any other speculation business
9. Income exempted from tax Set off not allowed
Following table gives a bird's eye view of carry forward of losses:
Loss originated from Carry forward and set off against Period of carry forward
Business or profession Income from same business or profession 6 succeeding years
Speculation business Any speculation business 6 succeeding years
Capital gains after deducting Tk. 5,000. Capital gains 6 succeeding years
Agricultural income Agricultural income 6 succeeding years
Profits and gains of Tax holiday
undertaking
Profits and gains of the said undertaking Within tax holiday period
Unabsorbed depreciation Income from business and profession Unlimited period
Updated (Finance Act 2015)
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Advance Payment of Tax
Advance income tax is the tax which is to be paid by the assesse in advance either by deduction or collection of tax at
source or by payment of quarterly instalments.
(1) Who is liable to pay advance tax?
Both existing and new assessees are liable to pay advance income tax if following situations arise —
In case of existing assessee, if his last assessed total income exceeds Tk. 400,000 [excluding agricultural income
and capital gain (other than capital gain from sale of share)], and
In case of new assessee, if his current year‘s income is likely to exceed Tk. 400,000 [excluding agricultural
income and capital gain (other than capital gain from sale of share)].
(2) What is the basis on which advance tax payments should be calculated?
In case of existing assessee:
In case of existing assessee, advance tax is to be calculated based on his last assessed income applying current
tax rate. If his last assessed income exceeds Tk. 400,000 [excluding agricultural income and capital gain (other
than capital gain from sale of share)], he is required to pay advance tax. (Sec-64)
In case of new assessee:
A new assessee who has not previously been assessed shall also be required to pay advance tax if his current
year‘s income [excluding agricultural income and capital gain (other than capital gain from sale of share)] is
likely to exceed Tk. 400,000. (Sec-68)
(3) When and how is advance tax to be paid?
Advance tax is to be paid in the following four equal installments based on financial year for which the tax is payable:
1st installment : 15th September
2nd installment : 15thDecember
3rd installment : 15thMarch
4th installment : 15thJune
Provided that if an assessment of the assessee is completed before 15th May, then on that basis the payable amount of
the rest installment/installments is/are to be determined. (Sec-66)
(4) Whether deduction/collection of tax at source will be treated as advance tax?
Yes, withholding tax is also to be treated as advance payment of tax.
(5) What will happen in case of excess payment of advance tax?
If the advance tax paid by the assessee exceeds the tax payable by him on regular assessment, Govt. will pay simple
interest on excess payment @ 10% per annum to be calculated from 1st July of the respective assessment year to the
date of regular assessment but not more than 2 years.
(6) Is there any scope to pay estimated amount of advance tax?
Yes, if any assessee feels, at any time during the year, that his tax is likely to be less that the tax payable as per law,
then he may submit an estimate to the DCT and pay estimated amount of advance tax accordingly (Sec-67). However,
at the time of assessment if the DCT finds that his estimate is wrong and tax actually comes higher, then assessee will
have to pay simple interest as per section 73.
(7) What are the consequences in case of failure to pay advance tax?
The consequences are as follows:
I. Assessee will be treated as an assessee in default (Sec-69).
II. Simple interest @ 10% per annum will be chargeable on the amount falls short from 75% of the assessed tax to
be calculated from 1st April of the year in which the advance tax was paid to the date of assessment but not more
than 2 years (Sec-73).
III. DCT may also impose penalty up to 100% of the shortfall (Sec-125).
Updated (Finance Act 2015)
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Part Ten: Income Tax Return
Every person who is required to file return of income shall have to fill-up the return form prescribed at Rule-24,
which shall also be verified in the manner indicated in that form.
For individual assessee the return together with the statement of assets, liabilities and expenditure as prescribed at
Rule-25 and the life style statement as prescribed at Rule-25A shall collectively constitute a valid and complete
return.
Return Form
Now 5 types of return forms are available. These are
(1) For individual and other taxpayers (other than company) [IT-11GA]
(2) For company taxpayers only [IT-11GHAl]
(3) For spot assessment [IT-11GAGA]
(4) For salaried individual only [IT-11UMA]
(5) Only for the income from business or profession up to Tk.3,00,000/ [IT-11CHA]
Persons required to file return of income
Every person (here person means Individual, Firm, Association of Persons (AOP),Hindu Undivided Family
(HUF),Local Authority, Company and Artificial Juridical Person) is required to file return of income if
(1) His total income (here total income means income on which tax is changeable during the income year
exceeded the non- taxable ceiling of income (now it is Tk. 2,50,000/- for the assessment year 2015-2016)
(2) He was assessed to tax for any one of the 3 years immediately preceding the year under consideration.
(3) He resides in the area of city corporation, pourashava, divisional headquarters or district headquarters and who at
any time during the relevant income year fulfils any of the following conditions: -
(a) Owns a motorcar.
(b) Owns a membership of a VAT registered club.
(4) He has any business or profession having any trade license and also operates bank account (whatever profit he has
earned or loss he has incurred).
5) He has registered with a recognized professional body as
A. Doctor
B. Engineer
C. Architect
D. Dentist
E. Lawyer
F. Income tax practitioner (11711
G. Chartered accountant
H. Cost and management accountant
I. Surveyor
J. Actuary or
K. Any other similar professional man
(6) He is a member of any trade association or body
(7) He is a candidate of pourashava, City Corporation or parliament
(8) He participates in a tender floated by the Govt. semi-govt. autonomous body or local authority.
In addition to above, every company and NGO are required to file return of income (irrespective of profit or
loss or doing any business or not) every year compulsorily
Updated (Finance Act 2015)
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Place where return is to be submitted:
(i) Tax Return is to be submitted at concerned income tax circle office as per jurisdiction. Deputy
Commissioner of Taxes (DCT) usually heads the circle office.
(2) The only exception is in case of non-resident Bangladeshi who may file their return at nearest
Bangladesh mission. The missions then send the return to NBR and NBR again send the return to
concerned circle office.
(3) Return can also be submitted at Tax Fair organized by the NBR every year.
Return by whom to be signed and verified
SI. Type of assessee Signatory
i. Individual Individual himself
2. Hindu Undivided Family (HUF) Karla
3. Company Principal Officer
4. Local Authority Principal Officer
5. Partnership Firm Any adult partner
6. Association of Persons (AOP) Any member of the association or
the principal officer thereof
7. Artificial Juridical person By the person concerned or by
any other person competent to act in
this behalf.
Documents to be accompanied with return:
in case of company it is mandatory to submit audited statement of accounts at the time of filing return and
a separate calculation sheet is to ' be submitted if income shown at return differs from audited statement of
accounts.
In case of individual it is mandatory to submit statement of assets, liabilities & expenditure and also life
style statement at the time of filing return.
Submission of life style statement is optional in case of salaried person who will use simple 2 pages
prescribed return form and also for those businessman who will use simple 2 pages another prescribed return
form if their business income does not exceed Tk. 3,00,000/ .
Time limit for submission of return
There are mainly 2 types of time limit for submission of tax return. One is for companies and other is for
all other types of assesses. The time limits are tabulated below:
Sl
No.
Type of
assesses
Last date of
submission
of return
Remarks
1. Company 15th July Provided that when the 15th July falls before the expiry of 6 months
from the end of the income year, then return is not required to submit
within 15th July. It is to be submitted within 6 months from the end of
the income year
2. Other than
Company
3oth
September
Govt may extend the date through gazette
notification. If so then within the extended date.
Updated (Finance Act 2015)
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However the Last date of submission of return may be extended by the concerned DCT if the assessee duly applied
for time. He may extend the time up to 2 months al his own capacity and may extend further 2 months with the prior
approval of his IJCT. In this way total 4 months time may he extended for submission of tax returns.
Can a return be revised or a revised return be re-revised:
As per section 78 the provision for submission of new return or revised return is enumerated below
SL Type of Return Provision
of law
Remarks
1 New return Any person who has not
filed a return as required
by section 75/77, he can
submit return of current
year or earlier year or
years at any time.
Penalty u/s 124 may be imposed by the DCT for non-
submission of return timely
2 Revised return (1) If there is any
omission or incorrect
statement at the
original return, the
assessee can file revised
return at any time but
before assessment.
(2) In the same way a
revised return can be re-
revised
(1) after assessment no revised return is acceptable.
(2)In any event the offence of filing a false return
deliberately is purnishable u/s 165 which cannot be
condoned by filing of a revised return.
(3) The benefit of this provision cannot be claimed by an
assessee who has made a false return knowing it to be
false. A Penalty may be imposed u/s 128 in respect of
previous fake return notwithstanding the filing of the
revised.
(4) if any assessee files revised return u/s 78 or 93
showing tax free income or income where reduced tax
rate is applicable, so much of the excess as exceeds the
amount in original return shall be deemed to be the
income from other sources as per section 19(31)
Updated (Finance Act 2015)
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--1 Penalty fo r non-SUbmjS~iOn ofre~ Amount of penalty Refuma: section P~-conditions
lo" o((h~ 114 (1) (I) In ~ oh ne .. , .. indiridwol_ aOUMd Whlehew:r .. hOM lno;o .......... '""
I .. " or iJ hi", ... p.-io\ldyUlHied Tlc • • .-I· thu pe .... lt, .. rnount
+ styli not UCHiI Tk.
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dl'uuit nOt I'JICH'd ~ of 1_ C'Ontl nu". ,"~I,".~Tk.. I ,_
.. hleh",,, iJ hi""'r .
.... -~~ ,-__ I01110 ___ "",""J
•
---" ~mprisonment for non-submission of return I
Particulars RcfCftllCf! Imprisonment Pre-conditions Flill.,., 10 Ii" 164(C) '- (,) No pro5«Ution retunI vis 1j (Maximwn) =bo ~. with or Institu.ted -- without fioc . .. ithoul prior
.nth lIOIicc s.mctionorlM ""non
"B~ (l) NBRh.uthe
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___ I0III0 .. ____
• ~T{
B
Updated (Finance Act 2015)
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Updated (Finance Act 2015)
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Part Eleven: Table of Withholding Tax
Sl.
No.
Item Section/
Rule
Rate of deduction/
collection
Deducting Authority Remarks
1 Salary 50 Average rate Every employer Employer will not
deduct tax at source
or will deduct tax at a
lower rate/ amount in
case an employee can
produce a certificate
issued by the DCT to
do so.
Govt. salary
(including
remuneration of
M.P.)
50(1)
(A)(B)
Average rate Govt. Accounts Office Government official
is acting as Drawing
and Disbursing
Officer (DDO) or
making or signing a
bill for himself or for
any other official
subordinate to him to
draw salary from the
Government or any
authority
2 Discount on
Bangladesh Bank
Bill
50A *maximum rate
1. Individual - 30%
2. Company - applicable
rate (whichever is higher)
Any person
responsible for
making such payment
3 Interest on securities
(including
debenture)
51 5% (at upfront system) Any person
responsible for issuing
such security
TDS will not be
applicable for on
treasury bill/bond
4 Contractor and
supplier (82C)
Section:
52/
Rule16
If payment ≤ Tk.
2,00,000
Nil Govt.
organization
Corporation
NGO
Company
Bank (including
co-operative
bank)
Insurance
company
University
Medical/ Dental/
Engineering
colleges
Applicable on
cumulative payment
made to same
contractor/ supplier
during the year.
If payment > Tk.
2,00,000 but ≤
Tk. 5,00,000
1%
If payment > Tk.
5,00,000 but ≤
Tk. 15,00,000
2.50%
If payment > Tk.
15,00,000 but ≤
Tk. 25,00,000
3.50%
If payment > Tk.
25,00,000 but ≤
Tk. 3,00,00,000
4%
If payment > Tk.
3,00,00,000
5%
5 a. Oil supplied by
oil marketing
Section
52 read
0.60% if payment exceeds
Tk. 2,00,000.
Same
Updated (Finance Act 2015)
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company with
Rule 16
- Govt. organization
- Corporation
- NGO
- Company
- Bank (including co-
operative bank)
- Insurance company
- NBFI
- School, college and
university
- Hospital, clinic and
diagnostic center
b. Oil supplied by
dealer or agent
of oil marketing
company
(excluding
petrol pump
station)
1%
c. Oil supplied by
oil refinery
3%
d. Gas supplied by
Gas
transmission
company or gas
supplied by gas
distribution
company Not
(82 C)
3% Gas distribution
company
Indenting
commission
52AA 7.50%
Private container
port or dockyard
service
52AA 5%
Motor garage or
workshop
52AA 5%
Shipping agency
commission
52AA 5%
6 Service rendered by
doctor at hospital or
diagnostic center
52A(1) 10% NGO
Company
Trust (who are
running any
general/
specialized
hospital or any
diagnostic center)
Provided that where
the Board, on an
application made in
this behalf, gives a
Certificate in writing
that the income is
exempted from tax of
those professional or
technical service
provider, payment
shall be made without
any deduction of tax.
Royalty/ Technical
know-how fee (82C)
52A(2) 10% Govt.
organization
Corporation
NGO
Company
Bank (including
co-operative
bank)
Insurance
company
Fees for
professional/
technical services
(including any
services applying
professional
knowledge)
52A(3) 10% (if the payee does not
have any 12-digit TIN then
the rate will be 15%)
7 Private security
service provider
Cleaning service
Collection and
recovery agency
52AA
(a) commission 10%
(b) gross receipts 1.5%
Truncated Rate for special
Govt.
organization
Corporation
NGO
Company
Deducting authority
will not deduct tax at
source or will deduct
tax at a lower rate/
amount in case party
Updated (Finance Act 2015)
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Event
management
Supply of
manpower
case as per NBR circular:
1.50% (10% of 15%) of
gross bill
[if commission is not
identifiable from the
bill commission is
deemed to be 15% of
the bill and 10% tax
deduction will be
applicable on that
truncated base of 15%]
Bank (including
co-operative
bank)
Insurance
company
produces a certificate
issued by the DCT to
do so.
8
Catering service
Contract or toll
manufacturing
Credit rating
agency
Meeting fees,
training fees or
honorarium
Mobile network
operator,
technical
support service
provider or
service delivery
agents engaged
in mobile
banking
operations
Product
processing
charge
Stevedoring/
berth operation
commission
Any other
service which is
not mentioned
in Chapter VII
of this
Ordinance and
is not a service
provided by any
bank, insurance
or financial
institutions
52AA 10% Govt.
organization
Corporation
NGO
Company
Bank (including
co-operative
bank)
Insurance
company
9.
Transport Provider 52AA 3% Govt.
organization
Corporation
NGO
Updated (Finance Act 2015)
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Printing service Company
Bank (including
co-operative
bank)
Insurance company
10. C&F Agency
commission (82C)
52AAA 10% Commissioner of
customs
11.
Hand-made
Cigarette
52B(1) 10% on banderole Any person
responsible for selling
banderols to any
manufacturer of
cigarette.
Any person
responsible for
collecting Value
Added Tax (VAT) in
accordance with
Value Added Tax.
199, section 21
from cigarette
manufacturers shall
collect tax at the rate
of three per cent
(3%) of Maximum
Retail Price (MRP) of
such cigarette at the
time of collection of
such VAT.
Cigarette
manufacturer
52B(2) 3% of Maximum Retail
Price (MRP) of such
cigarette at the time of
collection of such VAT.
12. Land acquisition
(82C)
52C 2% at city corporation,
paurashava and cantonment
board area
Persons responsible
for making such
payment.
1% in other area
13. Interest on savings
certificate (partly
82C)
52D 5%
But no tax shall be deducted
on interest where the
cumulative investment at the
end of the income year in
the pensioners' saving
certificate is up to 5 lakh.
Provided further that no tax
shall be deducted from
interest or profit arising
from Wage earners
development bond, US
dollar premium bond, US
dollar investment bond,
Euro premium bond, Euro
investment bond, Pound
sterling investment bond or
Pound sterling premium
bond.‖[FA 2015]
Bank
Post office
National Savings
Bureau
14. Brick field 52F Tk. 45,000 for one section D.C. Office
Tk. 75,000 for one and half
section
Tk. 90,000 for two section
Tk. 1,50,000 for automatic
brickfield
Updated (Finance Act 2015)
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14a L/C commission 52I 5% on such commission
15. Travel Agency
Commission (82 (C)
effective from 2015-
2015 income year)
52JJ .30%
On commission or discount
or incentive bonus or any
other benefit paid by the
airlines to General sales
agent (GSA) for selling air
ticket/ air cargo
Airlines For the purpose of
computation of value
of tickets or charge,
any payment made in
respect of any
embarkation fees,
travel tax, flight
safety insurance,
security tax and
airport tax shall be
deducted from such
value or charge.
16. Any payment to life
insurance policy
holder in excess of
total premium
52T 5%
However, TDS will not be
applicable in case of death
of such policy holder.
Life insurance
company
17.
Local L/C 52U 3%
On total proceeds exceeding
Tk. 5,00,000
Bank or financial
institution
Not applicable on
rice, wheat, potato,
onion, garlic, peas,
chick peas, lentils,
ginger, turmeric,
dried chilies, pulses,
maize, coarse flour,
flour, salt, edible oil,
sugar, black pepper,
cinnamon,
cardamom, clove,
date, cassia leaf,
computer or
computer accessories,
jute, cotton, yarn and
all kinds of fruits.
18.
Revenue sharing or
any license fee or
any other fees or
charges paid to
regulatory authority
52V 10% Mobile phone
company
19. Trade license
renewal
52K Tk. 500 for Dhaka and
Chittagong City Corporation
City Corporation and
pourashava
Tk. 300 for other city
corporations and paurashava
at district headquarters
Tk. 100 for other
pourashava
20. Freight forward
agency commission
52M 15% Person responsible for
making such payment
21. L/C commission 52(I) 5% Bank
22.
Import (82C)
(But AIT on raw
material import is
not 82C)
53/ 17A 5%
(But in case of iron, steel,
water vessels and other
floating structures for
breaking up, the rate is Tk.
The Commissioner of
Customs
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800 per ton)
23.
Service charge on
services provided by
a resident to any
foreign person
52Q 10% Bank
24. International
Gateway Service on
International phone
call (82C)
52R 1% on IGW Bank (through which
the receipt on account
of international
gateway service in
respect of
international phone
call is received)
5% on ICX and ANS
company.
International Gateway
Service Provider
(through which the
revenue related to
international phone
call is shared under an
agreement with
BTRC)
25.
House rent 53A/
17B
5% Govt.
organization
Corporation
NGO
Company
Bank (including
co-operative
bank)
University
Medical/ Dental/
Engineering
colleges
Any hospital,
clinic or
diagnostic center
26.
Shipping business of
a resident (82C)
53AA 5%
(However, if service
rendered between 2 or more
foreign countries then the
rate is 3%)
The Commissioner of
Customs
New prescribed form
introduced in rule
62(A)
27. Man power export
(82C)
53B/
17C
10% on per head service
charge
Bureau of Manpower
28.
Rent of conference
hall and convention
center
52P 5% NGO
Company
University
Medical/ Dental/
Engineering
colleges
29.
Export of knit-wear,
Woven garments,
terry towel, carton,
garments
53BB 0.60%
(In case of garments, the
rate is 0.30%)
Bank
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accessories, jute
goods, frozen food,
vegetables, leather
goods, and packed
foods (82C)
Any other type of
export
53BBBB
30. Security house (82C) 53BBB 0.05% on transaction value
(other than bond)
DSE and CSE
31.
Public auction (82C) 53C/
17D
5% (In case of tea auction,
the rate is 1% only)
Govt.
organization
Corporation
Company
(including private
limited company)
Insurance
32.
Performing in a film,
drama,
advertisement or any
TV or radio program
or purchasing a film,
drama or TV or radio
program
53D 10%
Any person
responsible for
making part or full
payment for
purchasing/
performing in a film,
drama, advertisement
or any television or
radio program
Not applicable if total
payment does not
exceed Tk. 10,000
33. Rental power (82C) 52N 6% PDB
34. Salary of foreign
technician serving in
any diamond cutting
industry (82C)
52(O) 5% Diamond cutting
industry
35. Export cash subsidy
(82C)
53DDD 3% Bank
36. Distributorship
Commission
53E 10%
If any company sells its
products to its distributors at
a price lower than MRP,
then 3% tax on difference
between DP and MRP is to
be collected.
Company By way of
commission, or fees
or allows any
discount or dealer‘s
promotional charges
or fees or
commission or any
other payment called
by whatever name for
distribution or
marketing of goods,
shall deduct or collect
at the time of
credit of such
commission, or fees
or at the time of
payment thereof,
whichever is earlier.
37. Foreign buyer‘s
agent(Final
settlement 82(c)
53EE 10% Bank
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effective from 1 July
2015-2016)
38. Bank interest 53F/
17H
10%
The rate will be 15% if the
deposit holder holds deposit
more than Tk. 1,00,000 but
does not possess 12-digit
TIN.
Bank Ten per cent (10%)
where the person
receiving such
interest or share of
profit is a public
university, or an
educational
institution whose
teachers are enlisted
for Monthly Pay
Order (MPO),
following the
curriculum approved
by the Government
and whose governing
body is also formed
as per Government
rules or regulations,
or any professional
institute established
under any law and
run by professional
body of Chartered
Accountants, Cost
and Management
Accountants or
Chartered
Secretaries.
Irrespective of TIN
number and will be
considered as final
settlement under
82(c).
39.
Real Estate Business
(82C)
53FF Tk. 1,600 or Tk. 1,500 or
Tk. 600 per square meter for
residential building or
apartment depending on the
area
Registration Authority
Tk. 6,000 or Tk. 5,000 or
Tk. 1,600 per square meter
for commercial space
depending on the area
Land developer
(82C)
53FF 5% of the deed value of land
at any area of Dhaka,
Gazipur, Narayanganj,
Munshiganj, Narsingdi,
Manikganj& Chittagong
District.
2% in other district
40. Insurance
commission paid to
53G 5%
[At the time of payment or
Insurance Company
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agent of insurance
company (82C)
at the time of credit -
whichever is earlier]
41. Surveyor of General
Insurance (82C)
53GG 15%
[At the time of payment]
General Insurance
Company
Sl.
No.
Item Section/
Rule
Rate of deduction/ collection Deducting Authority
42
(i)
Sale of land or land
and building
(commercial area)
53H/
17(II)
Schedule – A (For Land)
Gulshan, Banani, Motijheel, Dilkhusha, North
South Road, Motijheel Expansion areas and
Mohakhali of Dhaka
4% of the deed value or Tk. 10,80,000 per
katha (1.65 decimal) — Higher one
Sub-Registrar
Kawran Bazar, Uttara, SonargaonJanapath,
Shahbag, Panthapath, Banglamotor, Kakrail of
Dhaka
4% of the deed value or Tk. 6,00,000 per
katha (1.65 decimal) — Higher one
BangaBondhu Avenue, Badda, Sayedabad,
Postogola and Gandaria of Dhaka.
Agrabad and CDA Avenue of Chittagong and
Narayanganj.
4% of the deed value or Tk. 3,60,000 per
katha (1.65 decimal) — Higher one
For building/apartment/flat/structure/floor
space:
In addition to tax applicable for land
mentioned above, an additional tax @ Tk.
600 per square meter or 4% of the deed
value of such
building/apartment/flat/structure/floor space
— Higher one.
42
(ii)
Sale of land or land
and building (other
than mentioned at
Schedule A)
53H/
17(II)
Schedule – B (For Land)
Uttara (Sector 1–9), Khilgaon rehabilitation area
(beside 100 feet road), Azimpur, Rajarbagh
rehabilitation area (beside biswa road),
Baridhara DOHS, Bashundhara (block A-G),
Niketon of Dhaka.
Agrabad, Halishohor, Panchlaish, Nasirabad,
Mehedibag of Chittagong.
4% of the deed value or Tk. 90,000 per
katha (1.65 decimal) — Higher one
Sub-Registrar
Gulshan, Banani, Baridhara, Nababpur and
Fulbaria of Dhaka.
4% of the deed value or Tk. 3,00,000 per
katha (1.65 decimal) — Higher one
Dhanmondi, Green Road (from road 3 to 8 of
Dhanmondi Residential area) of Dhaka.
4% of the deed value or Tk. 2,40,000 per
katha (1.65 decimal) — Higher one
Kakrial, Sagunbagicha, Bijoynagar, Green road,
Eskaton, Elephant Road, Fakirapool, Arambagh,
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Mogbazar, (within 100 feet of main road),
Tejgaon industrial area, Sher-e-banglanagar
administrative area, Agargaon administrative
area, Lalmatia, Mohakhali DOHS, Cantonment
of Dhaka and Khulshi of Chittagong.
4% of the deed value or Tk. 1,80,000 per
katha (1.65 decimal) — Higher one
Kakrial, Sagunbagicha, Bijoynagar, Green road,
Eskaton, Elephant Road (outside 100 feet of
main road) of Dhaka.
4% of the deed value or Tk. 1,20,000 per
katha (1.65 decimal) — Higher one
Uttara (Sector 10 to 14), Nikunj (north and
south), Badda rehabilitation area, Gandaria
rehabilitation area, Shympur rehabilitation area,
IG bagan rehabilitation are, Tongi industrial
area of Dhaka.
4% of the deed value or Tk. 60,000 per
katha (1.65 decimal) — Higher one
Shympur industrial area, Postogola industrial
area and Jurain industrial area of Dhaka.
4% of the deed value or Tk. 48,000 per
katha (1.65 decimal) — Higher one
Khilgaon rehabilitation area (beside less than
100 feet road), Rajarbagh rehabilitation area
(beside 40 feet and internal road) of Dhaka.
4% of the deed value or Tk. 72,000 per
katha (1.65 decimal) — Higher one
Goran (beside 40 feet road) and
HazaribaghTanary Area of Dhaka.
For building/apartment/flat/structure/floor
space:
In addition to tax applicable for land
mentioned above, an additional tax @ Tk.
600 per square meter or 4% of the deed
value of such building/apartment/
flat/structure/floor space — Higher one.
42
(v)
Sale of land or land
and building (other
than mentioned at
Schedule A and B)
53H/
17(II)
Schedule – C
Within the jurisdiction of RAJUK and CDA
except areas in schedule A and B:
4% of the deed value
Sub-Registrar
Within the jurisdiction of Gazipur, Narayanganj,
Munshiganj, Manikganj and Narsingdi, Dhaka
and Chittagong districts (excluding RAJUK,
CDA and Dhaka both City Corporation area)
3% of the deed value
Areas within the jurisdiction of Pauroshava of
any district headquarter
3% of the deed value
Areas of any other Pauroshava:
2% of the deed value
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Other areas not specified in schedule A, B and C
1% of the deed value
43 Registration of
leasehold property
53HH 4%
Applicable for more than 10 years‘ lease.
Sub-Registrar
44
Transfer of share of
shareholder of stock
exchange (82C)
53N 15% on gain DSE and CSE
45 Gain on sale of
shares or securities
traded in Stock
Exchange (82C)
SRO
No.196
Company or firm – 10% Company holding Trading
Right Entitlement (TREC)
of any stock exchange on
proportionate average cost
of share including fees,
commission, interest on
loan (before closing of a
financial year)
46
Deduction of tax
from any sum paid
by real estate
developer to land
owner.
53P 15% on account of signing money, subsistence
money, house rent or in any other form called
by whatever name for the purpose of
development of the land of such owner.
Person engaged in real
estate or land development
business.
47 Interest on post
office savings bank
53I 10% Post office
48
Rental value of
vacant land or plant
and machinery
53J 5% Govt. organization
Corporation
NGO
Company
Bank (including co-
operative bank)
Insurance
University
Medical/ Dental/
Engineering colleges
49
Direct advertisement
to newspaper,
magazine or private
TV channel or
private radio station
or any web site
(including airtime
purchase of private
television channel,
private radio station
or such web site)
53K 4% Govt. organization
Corporation
NGO
Company
Bank (including co-
operative bank)
Insurance
University
Medical/ Dental/
Engineering colleges
50
Soft drinks
(including mineral or
bottled water)
52S 4%
(on the value of such soft drinks and mineral
water determined by the VAT Authority)
The Security Printing
Corporation
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51
Capital gain from
transfer of shares by
sponsor shareholders
and directors of
listed companies
(82C)
53M 5% DSE and CSE
52 Dividend 54 Individual @ 10%.
If there is no 12-digit TIN, then @ 15%.
[For Resident & Non-resident Bangladeshi]
Company
Company @ 20%
53 Lottery (82C) 55 20% Person responsible for
such payment
54
Any payment to non-
resident which is not
covered by any other
section
56 Foreign individual @ 30%
Person responsible for
such payment
Provided that where the Board, on an application made in this behalf, gives a certificate in writing that the person
rendering such services is otherwise exempted from tax under any provision of this Ordinance, the payment referred
to in this section shall be made without any deduction or with deduction at a lesser rate for that income year.Amended FA
2015
Ordinance No. XXXVI of 1984 in section 56:
(1) Subject to the provisions of sub-section (2), Government or any person responsible for making payment to a non-
resident of any amount which constitutes income of such non-resident chargeable to tax under this Ordinance shall,
unless such person is himself liable to pay tax thereon as agent, at the time of making such payment, deduct tax on the
amount so payable at the rate, specified below:
Description of Payment Rate of deduction
1 Accounting or tax consultancy 20%
2 Advertisement making 15%
3 Advertisement broadcasting 20%
4 Advisory or consultancy service 30%
5 Air transport or water transport 7.5%
6 Architecture, interior design or landscape design 20%
7 Artist, singer or player 30%
8 Capital gain received-
(a) from capital assets (not being securities listed with stock
exchange)— 15%
(b) by a company or firm if such gain is arisen from
securities listed with any stock exchange in Bangladesh
which is not exempted from tax in the country of such non-resident 10%
9 Certification 30%
10 Charge or rent for satellite, airtime or frequency 20%
11 Contractor, sub-contractor or supplier 5%
12 Courier service 15%
13 Dividend-
(a) company 20%
(b) any other person, not being a company- 30%
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14 Insurance premium 10%
15 Interest, royalty or commission 20%
16 Legal service 20%
17 Machinery rent 15%
18 Management or event management 20%
19 Pre-shipment inspection service 30%
20 Professional service, technical services fee, technical know how fee or
technical assisstance fee
20%
21 Salary or remuneration 30%
22 Exploration or drilling in petroleum operations 5.25%
23 Survey for oil or gas exploration 5.25%
24 Any service for making connectivity between oil or gas field and its
export point
5.25%
25 Any other payments 30%.
Added FA 2015
Time limit for payment:
Normally within 2 weeks from the end of the month of deduction [Rule 13]
Deduction from salary may be deposited quarterly with prior permission
Double Cheque Method:
1. Deduction from contractors or suppliers (Sec-52);
2. Fees for professional or technical services (Sec-52A);
3. House property (Sec-53A);
4. Commission or fees (Sec-53E);
5. Unauthorized deduction prohibited (Sec-60);
6. Payment where no deduction is made (Sec-63).
Consequence of non-compliance:
The deducting authority will be treated as an assessee in default [Sec-57(1)(a)].
2% additional amount per month is collectible [Sec-57(1)(b)].
Expenditure will be treated as income for non-deduction/ collection of tax at source [Sec-30].
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Part Twelve: Assessment of Partnership Firm
Assessment of Partnership Firm:
Sixth Schedule (Part A) Para – 18
Any income received by an assessee in respect of any share of income out of the capital gains on which tax has been
paid by the firm of which the assessee is a partner.
Sixth Schedule (Part B) Para – 16
Any sum being the share or portion of the share of the assessee in the income of 1[a firm] if tax of such income has
already been paid by the firm:
Provided that where there is included in the total income of an assessee any income exempted under this paragraph,
the tax payable by the assessee shall be an amount bearing to the total amount of the tax which would have been
payable on the total income had no part of it been exempted, at the same proportion as the unexempted portion of the
total income bears to the total income.
Study References:
Section – 30(b);
43(3)
85
Sixth Schedule (Part A) Para – 18
Sixth Schedule (Part B) Para – 16
Section – 30(b); Deduction Inadmissible:
Any payment by way of interest, salary, commission or remuneration made by a firm or an association of
persons to any partner of the firm or any member of the association, as the case may be.
Section – 43(3); Computation of total income:
Where the assessee is a partner of a firm, then, whether the firm has made a profit or a loss, his share (whether a
net profit or a net loss) shall be taken to be any salary, interest, commission or other remuneration payable to him
by the firm in respect of the income year increased or decreased respectively by his share in the balance of the
profit or loss of the firm after the deduction of any interest, salary, commission or other remuneration payable to
any partner in respect of the income year []Deleted F.A. 1995 and such share shall be included in his total income.
Provided that if his share so computed is a loss, such loss may be set off or carried forward and set off in
accordance with the provisions of section 42.
Section – 85; Special provisions regarding assessment of firms:
(1) Notwithstanding anything contained in this Ordinance, where the assessee is a firm and the total income of the
firm has been assessed under sections 82, 83, or 84, as the case may be,-
[(a)] Deleted F.A. 1995
(b) in the case of a firm, the tax payable by the firm shall be determined on the basis of the total income
of the firm.
(2) Whenever any determination is made in accordance with the provisions of sub-section (1), the Deputy
Commissioner of Taxes shall, by an order in writing, notify to the firm-
(a) the amount of tax payable by it, if any ;
(b) the amount of the total income on which the determination has been based; and
(c) the apportionment of the amount of income between the several partners.
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Practical Problems:
Problem - 1
ABC Partnership Firm
Profit and loss account
For the year ended 30 June 2015
Assessment year: 2015-2016
Debit
Credit
Description BDT Description BDT
Salary to A 200,000 Gross profit 3,000,000
Office rent to B
300,000
Capital gain on machinery
500,000
Interest paid to B
100,000
― ― ― C
250,000
Office Maintenance
300,000
Provision for bad debt
250,000
Commission paid to A
400,000
― ― C
500,000
Net profit
1,200,000
3,500,000
3,500,000
Compute:
1. Total taxable income of the firm;
2. Allocation of firm's profit among the partners;
3. Tax liability of the firm;
4. Total taxable income of B;
5. Net tax payable by B.
Solution:
(1) Total Income
BDT
Net profit as per profit and loss account 1,200,000
Less: Capital gain for separate consideration (500,000)
700,000
Add: Inadmissible expenses:
Salary to partner A [Sec - 30(6)] 200,000
Interest to partner (B+C) 350,000
Commission (A+C) 900,000
Provision for bad debt 250,000
Business Income 2,400,000
Income from capital gain 500,000
Total Income 2,900,000
Particulars
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(2) Allocation of Income
Total taxable income of the firm 2900,000
Less: Capital gain (As it is not distributable as per 6th Schedule, Part-A, Para-18) (500,000)
2,400,000
Value of benefits provided to partners (1,450,000)
Distributable Income 950,000
Distribution:
A = (950,000/3 + 600,000) = (316,667+600,000) = 916,667
B = (316,667+100,000) = 416,667
C = (316,667+ 750,000) = 1,066,667
Minimum tax: As gross receipts information is not given in the question, it is assumed minimum tax is lower than the
computed amount.
4. Income of B
Income from house property
Amount Amount
Annual value
300,000
Less: Repair & maintenance (30%)
(90,000)
Income from house property
210,000
Income from business & profession
Share of income from partnership firm (taxed)
416,667
Total income of B
626,667
Assumed expense claimed for repairs is equal to deductible allowance
Range of income
Rate Tax
Up to 250,000 0% -
Remaining 376,667 10% 37,667
37,667
Less: Tax rebate on share of income from firm
[37,667*(416,667/626,667)]
(25,044)
Net tax liability
12,622
A B C Total
Salary 200,000 - - 200,000
Commission 400,000 - 500,000 900,000
Interest - 100,000 250,000 350,000
600,000 100,000 750,000 1,450,000
3. Tax Liability:
Tax (BDT)
On First 250,000 @ 0% -
Next 400,000 @ 10% 40,000
Next 500,000 @ 15% 75,000
Next 600,000 @ 20% 120,000
Balance 1,150,000 @ 25% 287,500
Total 2,900,000 5, 22,500
Assume that the capital gain is within the 5 years of purchase.
Updated (Finance Act 2015)
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Part Thirteen: Assessment
Assessment:
1. PROVISIONAL ASSESSMENT (SEC.81):
The D.C.T. is empowered under section 81 of I. T. Ordinance, 1984 to make provisional assessment in a
summery manner–
i. On the basis of return and statements, where return has been filed (after allowing
depreciation as per 3rd Schedule and also after setting off any loss carried forward if any); or
ii. On the basis of last assessed income, where no return has been filed.
As the name indicates that it is not final, just an assessment done provisionally to collect tax before regular
assessment. There shall be no right of appeal against provisional assessment. Rather all penal measures can
be enforced to recover tax as per provisional assessment.
2. ASSESSMENT ON THE BASIS OF CURRECT RETURN (SEC.82):
Where in the opinion of the D.C.T. normal return or revised return submitted by the assessee is correct and
complete in all respect he shall assess total income on the basis of that return and communicate the
assessment order within 30 days from the date of such assessment. The following are the restrictions to do
assessment under this section:
i. Return must be filed within the prescribed time;
ii. Tax as per return shall be paid before submission of return;
iii. Such return does not show any loss.
iv Such return does not show lesser income than the last assessed income.
v. Assessment on the basis of such return does not result in refund.
3. UNIVERSAL SELF- ASSESSMENT (SEC. 82BB):
Introduction:
Universal self assessment system has been introduced in our country from the assessment year
2007-2008. Every assessee (including company) is eligible to submit return under this system. In this system
assessee has to tick the box [universal self assessment] at the top of the return form. DCT will issue a receipt
of such return and that receipt will mean that assessment is complete. It is hassle free in the sense that
assessment has been done on the basis of return and without any physical presence. Meanwhile, due to this
simplicity, it becomes very popular method of submitting return. But it should be kept in mind that return
must be correct and complete.
Procedure to submit return under universal self assessment system:
The procedure is very simple. Assessee has to prepare his return either by himself or with the help
of other and then it is to be signed and verified. Assessee has to tick the box universal self assessment at the
top of the return form and after paying tax (if applicable) submit the return within the last date of submission
of return or within the extended time allowed by the DCT. However, the assessee should keep in mind the
following:
(a) Such return must be submitted within the last date of submission of return
or within the extended time allowed by the DCT.
(b) Tax as per return (if any) is to be paid before submission of return.
(c) No question is to be raised by the DCT as to the source of initial capital
investment in case of new assessee showing new business if at least 25% of initial capital is shown
as income. Initial capital formed in such way is not transferable within 5 years from the end of the
assessment year in any manner.
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Scrutiny assessment:
After submission of return under universal self assessment system, DCT shall scrutiny/process such
return and make adjustment
(1) if there is any arithmetical error in the return and
(2) if there is any incorrect claim
After necessary adjustment DCT will send demand notice along with income computation
sheet to the assessee. The time limit is 12 months from the end of the assessment year within which such
intimation is to be sent to the assessee.
If as a result of scrutiny assessment more tax to be paid by the assessee then DCT shall have to give
the assessee a reasonable opportunity of being heard.
Tax audit:
The return submitted at this system may, afterwards, be selected by the NBR or its subordinate
authority (if so authorized by the Board) for audit. The Board will determine the manner of such selection.
If return filed under universal self-assessment scheme showing at least 20% higher income than the
income assessed or shown in the immediate preceding assessment year, then it shall not be selected for tax
audit by the NBR. But the conditions are:
1.Return is to be accompanied by corroborative evidences in support of tax exempted income (if
any).
2. Return is to be accompanied by bank statement in support of taking loan(if any) exceeding taka 5
lac.
3. Return does not show any receipt of gift
4. Return does not show any income on which reduced tax rate is applicable.
5. Return does not show any refund
If the return is selected for audit, then DCT will proceed to make fresh assessment by issuing
notice under section 83(1) for hearing and he will make assessment within 2 years from the end of the
assessment year. Otherwise it will be barred by time limitation. Assessment can be done under section 83(2)
or under section 84 as the situation permits.
Re-open the assessment under section 93:
If any concealment has been detected in the return submitted by the assessee under universal self
assessment scheme within 6 years from the end of the assessment year then the DCT may re-open the case
and proceed to assess further
Documents to be attached with the return:
Audited statements of accounts
Income computation sheet if shown income differ from income shown at audited statement of accounts
[section -75]
Separate statement for:
Any income from other sources e.g. interest, dividend, etc.
Tax exempted income [Rule 24]
Information regarding name, address and TIN of the directors of the company [Rule 24]
Evidence of tax payment on the basis of income disclosed in the return.
FINAL SETTLEMENT OF TAX LIABILITY (SEC. 82C):
Any tax deducted /collected at source from the following heads shall be deemed to be the final discharge of
tax liability:
1. Contractors and suppliers (Section 52+Rule 16)
2. Royalty and Technical know-how fee (Section 52A(2)
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3. C&F Agency commission (Section 52AAA)
4. Handmade cigarette (Section 52B(1)) Amended FA 2015
5. Compensation against property acquisition (Section 52C)
6. Rental power (Section 52N)
7. International Gateway Service (IGS) on international phone call (Section 52R)
8. Import [other than raw-material import] (Section 53+Rule 17A)
9. Shipping Agency Commission(Section 53AA)
10. Manpower export(Section 53B+Rule 17C)
11. Export of -
(a) knit-wear
(b) Woven garments
(c) Terry towel
(d) Carton
(e) Garments accessories
(f) Jute goods
(g) Frozen foods
(h) Vegetables
(i) Leather goods and
(j) Packed foods
12. Member of Stock Exchange (Section-53BBB)
13. The amount received on account of export of any goods except certain items on which tax is deductible
under section 53BBBBAdded FA 2015
14. Public Auction (Section 53C+Rule 17D)
15. Non-resident Courier (Section 53CC)
16. Salary of foreign technicians serving in a diamond cutting industry (Section-52 O)
17. Export cash subsidy (Section 53DDD)
18. The amount received on account of commission, charges by foreign buyer‘s agent. (Section 53EE)Added
FA 2015
19. The amount received by public university, MPO enlisted educational institutions, ICAB, ICMAB and
ICSB on account of interest or share of profit {section 53F(1)(c)}Added FA 2015
20. Real Estate and Land Development Business (Section-53FF)
21. Insurance Commission (Section 53G)
22. Surveyor of General Insurance (Section-53GG)
23. Sale of property (Section-53H)
24. Capital Gain from transfer of shares by sponsor shareholders (Section 53M)
25. Income from Lottery (Section 55)
26. Savings instrument (Section 52D)Amended FA 2015
27. Transfer of shares of shareholders in stock exchange (Section 53N) (82C(6) not applicable)
28. Tax collected from travel agent under (Section 52JJ)Added FA 2015
Section 82C has been re-drafted through Finance Act, 2011 changing the way of calculating income which
will suffer more taxes. Some new conditions are as follows:
(1) Income to be determined through back calculation
(2) Such income will not set off with loss under any other head or loss of earlier year or years.
(3) Though it is final settlement of tax liability but tax is to be paid again in the following situations:
If shown income is in excess of the amount determined under back calculation, then tax is to be
paid again at the applicable rate on excess income shown.
Tax at applicable rate will also be payable on disallowances under sec. 30.
Individual taxpayer shall have to pay surcharge if net wealth exceeds Tk.2 crore.
4. SPOT ASSESSMENT (SEC.82D):
Where an assessee, not being a company, who has not previously been assessed but carrying on business or
profession in any shopping center or commercial market or having a small establishment, the D.C.T may fix
(Section-53BB)
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tax payable by him at the rate prescribed at Rule-38B and the receipt obtained for payment of such tax shall
be deemed to be an assessment order.
5. ASSESSMENT AFTER HEARING (SEC.83):
When the D.C.T. is not satisfied without requiring the physical presence of the assessee who filed the return
or the production of evidences then he will issue notice u/s 83(1) fixing a date and time for hearing.
After hearing and considering the evidences produced and if necessary considering such other evidences by
issuing another notice u/s 83(2) the D.C.T. will make assessment u/s 83(2) within 30 days from the last
hearing and communicate the assessment order within another 30 days from the date of assessment.
Thus, section 83(1) deals with notice of hearing and section 83(2) deals with both requisition notice and
assessment.
6. ASSESSMENT ON THE BASIS OF REPORT OF NBR APPOINTED CHARTERED
ACCOUNTANT (SEC.83AAA):
When NBR has reasonable cause to believe that a return submitted by any company assessee is incorrect or
incomplete, then the Board may appoint a chartered accountant to examine the books of accounts of that
company. He will then exercise the powers and functions of a DCT only relating to section 79 and other than
clause (f) of section 113. After examination of the books of accounts, he will submit report to the Board and
the Board will then forward the report to the DCT for consideration. After receiving the report, DCT will
proceed to assess the income of the company by issuing notice u/s 83(1)
7. BEST JUDGMENT ASSESSMENT (SEC. 84):
Where any assessee fails to file return required by a notice u/s 77/93 and has not filed a return or revised
return u/s 78 or to comply with the requirements of notices u/s 79, 80 or 83(I), the D.C.T. shall assess
income to the best of his judgment.
8. ASSESSMENT OF BUS, TRUCK, MINIBUS ETC.:
Deviating from the normal assessment procedure, owner of bus/mini bus, truck/truck Lorries, coaster, taxi
cab etc. will pay tax on at the fixed rate prescribed at SRO No 160-law/2014 dated 26/06/2014.
9. ASSESSMENT OF PARTNERSHIP FIRM (SEC.85):
Like other category of assessee, DCT will assess the income of the partnership firm and determine the tax
payable thereon by the firm. He will also apportion the total income of the firm (arrived before tax) between
the partners.
10. ASSESSMENT IN CASE OF CHANGE IN THE CONSTITUTION OF THE FIRM (SEC.86):
If DCT find at the time of assessment of a firm that a change has occurred in the constitution of the firm, the
assessment shall be made on the re-constituted firm but the conditions are:
(1) Income will be apportioned between those partners who were partners during the income year.
(2) When tax assessed on any partner is not recoverable from him it will be recovered from the re-
constituted firm.
11. ASSESSMENT IN CASE OF CONSTITUTION OF A NEW SUCCESSOR FIRM (SEC.87):
If it is found at the time of assessment of a firm that a new firm has been constituted to succeed the previous
firm DCT will make two assessments one for the predecessor firm and the other for the successor firm.
12. ASSESSMENT IN CASE OF SUCCESSION TO BUSINESS OTHERWISE THAN ON DEATH
(SEC.88):
Where any person carrying on business or profession has been succeeded otherwise than by death by another
person the predecessor shall be assessed for the period up to the date of succession and the successor shall be
assessed for the period after the date of succession. Provided that-
(1) Where the predecessor cannot be found the assessment shall be made on the successor
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(2) Where tax is not recoverable from the predecessor, it is to be recovered from the successor
who shall be entitled to recover it from the predecessor.
13. ASSESSMENT IN CASE OF DISCONTINUED BUSINESS (SEC.89):
When any business or profession is discontinued, a notice of such discontinuance must be given to the
D.C.T. within 15 days of such discontinuance of the business or profession accompanied by a return of total
income for the broken period. If the person discontinuing such business or profession fails to give such
notice, the D.C.T. may impose penalty a sum not exceeding the amount of tax subsequently assessed on him.
14. ASSESSMENT IN CASE OF PERSONS LEAVING BANGLADESH (SEC. 91):
Whenever any person is leaving Bangladesh and has no intention to come back, the D.C.T. may proceed to
assess him for all the completed income years for which his assessments remain pending as well as for the
broken period up to the probable date of his departure from Bangladesh.
Here is deviation from the usual practice as the assessment of the broken period may be completed before
the commencement of the relevant assessment year. One important thing to note here is that, the assessee is
entitled under the law to get at least seven days‘ time to file his return and statements of income.
15. ASSESSMENT IN CASE OF INCOME OF A DECEASED PERSON (SEC. 92):
Whenever any person dies, his executor, administrator or other legal representative is liable under the law to
pay out of the estate of the deceased any tax which was payable by him and any other tax liability which
might be payable in consequence of any assessment made after his death. Liability of the legal representative
is limited to the extent to which decreased estate is capable of meeting the liability.
Legal representative shall be deemed to be an assessee for this purpose, provided a notice is given to him as
per section 92(2).
16. ASSESSMENT IN CASE OF INCOME ESCAPING ASSESSMENT (SEC. 93):
A fresh assessment can be made by the D.C.T. in case of –
i) Escaped assessment;
ii) Under assessment;
iii) Assessment at too low a rate;
iv) Assessment results excessive relief or refund.
Preconditions:
i) Action under section 93 cannot be initiated unless definite information has come into the possession
of the D.C.T.
ii) Before initiating the proceeding under section 93 previous approval in writing from the DCT is to
be taken, except in a case where a return has not been filed u/s 75/77
iii) Notice under section 93 can be issued within 5 years from the end of the assessment year in case it
is escaped assessment or under assessment and within 2 years from the end of the assessment year
in case it is assessed at too low a rate or has been subject to excessive relief or refund.
17. ASSESSMENT IN THE CASE OF MINORS, LUNATICS, IDIOTS, BENEFICIARIES OF ANY
TRUST. (SEC. 95):
Minors, lunatics and idiots are assessable to tax as beneficiaries through their guardians and trustees in the
same way and to the same extent as it would have been livable and recoverable from such beneficiaries of
full age or sound mind in direct receipt of any income profits and gains. In the like manner, the beneficiaries
of any property managed by a Trust, Court of Words, receiver or manager will be brought to tax through the
Trustees, Court of Words, receivers or manager.
18. ASSESSMENT OF NON-RESIDENT SHIPPING BUSINESS (SEC. 102):
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If any Ship calls on any port in Bangladesh, the aggregate of the receipt arising from the carriage of
passenger, livestock, mail or goods shipped at the port since the last arrival of the ship or at any port outside
Bangladesh for which amount is received or deemed to be received in Bangladesh shall be treated as income
received in Bangladesh and in this case tax rate will be 8% (usually tax rate is 4% in case where there is a
double taxation avoidance agreement with the country the ship is originated).
19. ASSESSMENT OF NON-RESIDENT AIRLINES (SEC. 103A):
If any foreign aircraft calls on any airport in Bangladesh, the aggregate of the receipts arising from the
carriage of passengers, livestock, mail or goods loaded at the said airport into that aircraft shall be deemed to
be income received in Bangladesh and in this case tax rate will be 3% (usually no tax in case where there is a
double taxation avoidance agreement with the country the aircraft is originated).
Penalty and Prosecution:
Introduction
There are provisions for imposition of penalties on fraudulent assessee at chapter XV (section 123-133), offences and
prosecution at chapter XXI (section 164-171) of the Income Tax Ordinance, 1984.
The penalty is the additional amount of income tax though as per definition of tax at section 2 (62), tax includes
penalty. The power to impose penalty is given mainly to the Deputy Commissioner of taxes (DCT) and in case of
concealment of income the power to impose penalty is also given to the Commissioner of Taxes (Appeal), Appellate
Joint Commissioner of Taxes and Taxes Appellate Tribunal. The power to impose penalty is subject to the prior
approval of the Inspecting Joint Commissioner of taxes (IJCT) except in the case of imposing penalty for failure to
file return u/s 124. Penal proceedings can be initiated by the DCT only in the course of any proceedings in connection
with the regular assessment and no such proceedings can be started after completion of the assessment order. If the
penalty proceedings are not finalized but the assessment is completed there is nothing to bar the DCT to impose
penalty. There is another restriction that assessee has been heard or has been given a reasonable opportunity of being
heard before imposing penalty.
Equally no prosecution can be instituted without prior sanction of the Board and Board has power to compound such
offences.
Penal Provisions
The penal provisions are tabulated below:
Sl. Grounds of Penalty Section Amount of Penalty Pre-conditions/
Comments
1. Penalty for not
maintaining accounts in
the prescribed manner
123
(Read with
section 35 and
Rule-8 and
Rule-8A)
(a) 1.5 times of the amount
of tax payable (Maximum)
(b) Tk.100 where the total
income does not exceed the
threshold limit (Maximum)
(c) 50% of tax on house
property or Tk. 5,000
whichever is higher in case
the owner of the house
receiving more than Tk.
25,000 but violates rules
and order of NBR relating
to maintenance of register
and depositing rent to bank
account.
1) Penalty cannot be
imposed unless the assessee
has been heard or has been
given a reasonable
opportunity of being heard.
2) DCT shall not impose the
penalty without the previous
approval of the IJCT.
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2. a) Penalty for failure to
file return including
withholding tax return
124(1) Provided that such penalty
shall not exceed—
(a) in case of an assessee,
being an individual, whose
income was not assessed
previously five thousand
taka;
(b) in case of an assessee,
being an individual, whose
income was assessed
previously, fifty per cent
(50%) of the tax payable on
the last assessed income or
taka one thousand,
whichever is higher.Amended
FA 2015
Penalty cannot be imposed
unless the assessee has been
heard or has been given a
reasonable opportunity of
being heard.
b) Penalty for failure to
furnish certificate,
statement, accounts,
information etc. required
u/s 58, 108, 109, 110 and
184C
124(2) Tk 500/- plus 250 per month
during which the default
continues.
-Do-
c) Penalty for failure to
furnish information
required u/s 113
124(2) Tk.25,000/- plus 500/- per
day during which the default
continues.
-Do-
d) Penalty for using fake
T.I.N. or T.I.N. of
another person
124A Tk.20,000/( maximum) 1) Penalty cannot be
imposed unless the assessee
has been heard or has been
given a reasonable
opportunity of being heard.
2) DCT shall not impose the
penalty without the previous
approval of the IJCT
e)Penalty for failure to
verify Taxpayer‘s
Identification Number
124AA Penalty not exceeding taka
fifty thousand.
Where a person, responsible
for verification of the
authenticity of twelve-digit
Taxpayer‘s Identification
Number (TIN) in
accordance with the
provision of sub-section (2)
of section 184A of this
Ordinance, has, without
reasonable cause, failed to
comply with such
requirement under that
provision.Added FA 2015
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3. Failure to pay advance
tax
125 The amount of short fall
(maximum)
-Do-
4. Penalty for non-
compliance with notice
u/s 79, 80, 83(1) and
83(2)
126 The amount of tax
subsequently assessed
(maximum)
-Do-
5. Failure to pay tax u/s 74
on the basis of return
127 If tax paid u/s 74 is less than
the payable amount then
25% of the short fall
(maximum). Amended FA 2015
-Do-
6. Penalty for concealment
of income
128 15% of the tax evasion. If
the tax evasion is detected
after one year or more, then
the amount of penalty will
increase by additional 15%
for each earlier assessment
year
-Do-
7. Penalty for false audit
report by Chartered
Accountant
129A Not less than Tk. 50,000
and not more than Tk.
2,00,000.
-Do-
8. Penalty for furnishing
fake audit report
129B Penalty of a sum of one lakh
taka for that income year.
Where beyond reasonable
doubt any audit report
furnished by an assessee
along with the return of
income or thereafter for any
income year is not signed by
a chartered accountant or is
believed to be false.Added FA
2015
9. Penalty for default in
payment of tax
137 The amount of arrear tax
(maximum)
If the amount of tax on
which penalty was imposed
has been fully reduced by
the order of any Appeal/
Tribunal/ Supreme court,
the penalty shall
automatically be cancelled
and if any penalty paid shall
be refunded.
10. Failure to deduct/collect
tax at source or having
deducted/collected fails
to deposit into national
exchequer.
57 2% per month of the amount
of tax to be deducted,
collected or deposited
(1) The deducting authority
will also be treated as an
assessee in default.
(2) Expenditure will be
disallowed as per section
30(a) and 30(aa)
11. Failure to give notice to
the DCT regarding the
discontinuance of
business
89(3) The amount of tax
subsequently assessed
(maximum)
No pre-condition.
The above-mentioned sections prescribe the maximum penalty (except section 124 & section 57 where penalty is
fixed). But the fact is that the ceiling of penalty does not mean that penalty must necessarily be imposed in everycase.
The discretion of the DCT to levy or not to levy a penalty is still preserved by the penalty sections mentioned above.
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Prosecution (Imprisonment for punishable offence)
The prosecution provisions are tabulated below:
Sl. Nature of Offence Reference
Section
Imprisonment Comments
1. Failure to deduct/collect
tax at source or having
deducted/collected but
fails to deposits into
national exchequer.
164 (a) 1 year (maximum) with or
without fine
1) No prosecution can
be instituted without
prior sanction of the
NBR.
2) NBR has the power
to compound offences.
2. Non-compliance of
notices u/s 77, 79, 80 and
83
164 (b) 1 year (maximum) with or
without fine
-Do-
3. Failure to file return u/s
75 or in compliance with
notice u/s 77 and 93
164 (c) 1 year (maximum) with or
without fine.
-Do-
4. Refuses to furnish
information required u/s
113
164 (cc) 1 year (maximum) with or
without fine
-Do-
5. Refuses to permit
inspection or to allow
copies to be taken in
accordance with the
provisions of section 114
164 (d) 1 year (maximum) with or
without fine.
-Do-
6. Fails to furnish
information required u/s
115
164 (e) 1 year (maximum) with or
without fine
-Do-
7. Fails to comply with the
requirement u/s 116
164 (ee) 1 year (maximum) with or
without fine
-Do-
8. Fails to comply with the
requirement u/s 116A
164 (eee) 1 year (maximum) with or
without fine
-Do-
9. Refuses to permit or
obstructs the income tax
authority to exercise
power u/s 117
164 (f) 1 year (maximum) with or
without fine
-Do-
10. Makes false statement at
the verification of the
return or other
documents
165 (a) Minimum 3 months but
maximum up to 3 years with
or without fine
-Do-
11. Punishment for
furnishing fake audit
report
165(AA) Imprisonment for a term
which may extend to three
years, but shall not be less
than three months, or with
fine up to taka one lakh, or
both.
if he furnishes along
with the return of
income or thereafter any
audited statement of
accounts which is false
or does not conform
with signature of a
chartered accountant
purported to be
signatory to such
statement.Added FA 2015
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12. Willfully aids, abets,
assists, incites or induces
other person to deliver a
false return, accounts,
statements, etc.
165 (b) Minimum 3 months but
maximum up to 3 years with
or without fine
-Do-
13. Refuses to furnish
information as may be
necessary for the purpose
of survey u/s 115
165 (d) Minimum 3 months but
maximum up to 3 years with
or without fine
-Do-
14. Deliberately using fake
TIN or TIN of another
person
165A 3 years (maximum) with or
without fine up to Tk. 50,000
-Do-
15. Obstructs income tax
authority to discharge
their function
165B 1 year (maximum) with or
without fine
-Do-
16. Punishment for
unauthorized
employment
165C Imprisonment for a term
which may extend to three
years, but shall not be less
than three months, or with
fine up to taka five lakh, or
both.
If he employs or allows
to work any individual
not being a Bangladeshi
citizen without prior
approval from Board of
Investment or any
competent authority of
the government as the
case may be. Added FA 2015
17. Conceals income or
deliberately furnishes
inaccurate particulars
166 Minimum 3 months but
maximum up to 5 years with
or without fine
-Do-
18. Disposal the property
after the receipt of notice
from TRO to prevent
attachment
167 5 years (maximum) with or
without fine
-Do-
19. Disclosure of information
in contravention of the
provisions of section 163
168 6 months (maximum) with or
without fine
-Do-
Penalty for not maintaining accounts in the prescribed manner (section 123).
As per provision of section 35 income shall be computed in accordance with the method of accounting regularly
employed by the assessee in case of the following heads of income: -
1. Income from business or profession.
2. Agricultural Income
3. Income from other sources.
Medical practitioners known as doctors, surgeons, physicians, dentists, psychiatrists, homeopaths, veterinary surgeons
other than medical practitioners, who do not make any separate charge for consultation but make a charge for the
medicines supplied by them and legal practitioners (including income-tax practitioners) accountant and auditors,
architects and engineers, are to maintain accounts in the manner prescribed in Rule-8.
In case of house property income, the owner shall have to maintain register relating to details of rent received if
monthly rent received exceeds Tk. 25,000 and that rent must be deposited to his bank account. (Rule - 8A)
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Penalty for failure to file Income Tax Return (Section- 124)
The Deputy Commissioner of Taxes has not the absolute power to impose penalty without giving due regard to see
the circumstances which causes default on the part of the assessee to file the return on time and if there is any
reasonable cause for which he failed to file the return on time penalty should not be imposed. Absence of reasonable
cause is necessary to justify a penalty-mere non-furnishing of, or delay in furnishing a return of income is not enough.
Imposition of penalty is not compensatory but punitive and the proceeding to impose penalty is quasi criminal. It is
well settled that the liability to pay penalty does not arise merely on proof of default in filing the return on time and
the discretionary power of the authority to impose penalty for failure to file return on time is to be exercised judicially
and on consideration of all the relevant circumstances. Penalty may be imposed for not furnishing a return within the
time allowed in the notice calling for a return, even if the assessee does furnish a return after the expiration of the
time allowed.
Penalty for concealment of income (section 128)
This section prescribes penalty for concealment of income. An assessee who had deliberately filed an incorrect return
shall submit a revised return. When the omission in the first return is on the point of being discovered, the DCT while
assessing on the basis of the revised return shall impose a penalty under section 128 of I.T. Ordinance, 1984 for
concealment of income in the first return.
Concealment of income in the original return would be attracting penalty even if the assessee submits a revised return
u/s-78 before the assessment is completed.
This section specifies the different nature of concealment and prescribes the maximum amount of penalty to be
imposed depending on the nature and circumstances of the case. For concealing particulars of income or for
furnishing inaccurate particulars of income which includes suppression of any item of receipt liable to tax or showing
such expenditure which has not been actually incurred or claiming any deduction which is not legally allowable. For
such type of concealment DCT shall impose @15% of the tax evasion. If the tax evasion is detected after one year or
more, then the amount of penalty will increase by additional 15% for each earlier assessment year.
Penalty for default in payment of tax (section-137)
This section gives discretion to the DCT to impose or not to impose a penalty when an assessee is in default in
payment of tax including advance tax. It is not obligatory on the DCT to impose a penalty in every case where there is
default in payment of tax and the amount of the penalty is also in his discretion, but the total amount of penalty
should not exceed the amount of tax in arrear.
The penalty so imposed under this ordinance shall be in addition to any other liability of the assessee, which he has
incurred in any other provisions under this ordinance or under any other law of the country.
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Part Fourteen: Appeal
Appeal:
An appeal lies to the Appellate Joint Commissioner of Taxes (AJCT) or to the Commissioner (Appeals), as the case
may be, against the order of the Deputy Commissioner of Taxes (DCT). Section 153 gives the right of appeal only to
the tax payer and not to the department. Therefore, income tax department cannot appeal against any order of the
DCT. But the Inspecting Joint/Additional Commissioner of Taxes (IJCT/IACT) has the power U/S 120 to revise any
order passed by the DCT if it is erroneous and prejudicial to the interest of the revenue. Commissioner of Taxes
working in the territorial zone can also exercise his revisional power U/S 121A and pass such order not being an
order prejudicial to the interest of the assessee. Therefore, no appeal would lie if a right of appeal is not given at our
tax law because appeal is not an inherent right. The sequence of appeal is given below through a flow chart:
2nd appeal to the Taxes
Appellate Tribunal (both
assessee and income tax
department can go)
Choose an
Appeal Option
Order
of the
DCT
1st Appeal to the
AJCT (other
than company
cases and its
directors) Review
application
to the CT
of
Territorial
Zone
Reference application to
High Court Division of
the Supreme Court (Only
at question of law point)
Appeal to the Appellate
Division of the Supreme Court
against the judgment of the H/C
division (if the H/C division
certifies to be fit case for appeal
to the Appellate Division)
1st Appeal to the
AACT
(For company
cases and its
directors)
1st Appeal to the
Commissioner
(Appeals)
(For company
and its directors)
END
END
1
2
3
4 5 6
7
8
9
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1. First appeal to the AJCT/AACT/Commissioner (Appeals)
Only assessee can file 1st appeal to the Appellate Joint Commissioner of Taxes (AJCT) or Appellate Additional
Commissioner of Taxes (AACT) or Commissioner (Appeals) as per jurisdiction. The jurisdiction is usually
mentioned at the bottom of the demand notice issued by the DCT. Normally, AACT and Commissioner (Appeals)
deal with company cases along with the directors of the company and the AJCT deals with other individual cases.
Appeal to the Commissioner (Appeals) also lies against the order made by the IJCT U/S 10 or U/S 120.It is to be
noted here that the right of appeal is given to the assessee. Where an assessment is made on the representative or on
the agent of a non-resident, the person beneficially entitled to the income is nevertheless an assessee within the
meaning of section 153 and has therefore a right to appeal.
(a) When 1st appeal can be filed
Appeal can be filed by the assessee against the following order of the DCT:
(i) Assessment Order (except assessment U/S 81, 82 and 82BB)
(ii) Determination of tax liability to pay.
(iii) Tax Computation (including an order imposing simple interest U/S 73)
(iv) Set-off of losses U/S 37 (If the assessee has any objection as to the computation of loss or set-off of
loss).
(v) Penalty U/S 124, 125, 126,127, 128 and 137.( There is no provision to file appeal against the order
of charging penalty @2% per month for non deduction/ collection of tax at source).
(vi) Refusal to allow a claim of refund.
(vii) Determination to the actual amount of refund.
(viii) Disallowing the claim of foreign tax credit (7th Schedule(para-7)
Appeal can also be filed to the Commissioner (Appeals) against the following order of the IJCT/IACT:
(i) Assessment Order U/S 10.
(ii) Order to revise the order of the DCT U/S 120.
(b) Procedure to file 1st Appeal
The following procedure should be followed to file 1st appeal:
(i) Appeal shall be filed at the form prescribed at Rule -27 and Rule-27A with duly signed and verified.
(ii) Appeal fee of TK. 200/- is to be paid before submission of appeal.
(iii) Tax as per return is to be paid if it is not paid at the time of filing return or afterwards.
(iv) Appeal shall have to be filed within 45 days from the date of service of demand notice except in case
of appeal against the disallowances of the foreign tax credit as per 7th schedule Para-7.
However appeal authorities can entertain an appeal after condoning the delay if he is convinced that
assessee has sufficient reason for failure of file appeal in time. Demand notice should be served properly
otherwise assessee will get unlimited time. The power to condone such delay is discretionary. Provision
for time limitation of 45 days will not attract if demand notice was not served with assessment order (I.T.
88) and Tax computation form (I.T. 30), in which case assessee will get unlimited time for filing appeal.
So without I.T.88 and I.T.30 the service of demand notice is not complete. In computing the 45 days, the
time required for obtaining a certified copy of such order should be excluded.
Where the 45 days expires on day which is a holiday, the appeal may be made on the day next following
such holiday.
(c) Disposal of appeal cases by the appeal authority
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The following procedure should be followed by the appeal authority to dispose of an appeal:
(i) Notice of hearing is to be given to both appellant and the concerned DCT.
(ii) Appeal authority can make enquiry and call for such particulars as he may require before
disposing of an appeal. He can also give instruction to the DCT for further enquiry.
(iii) Appeal authority can allow new or additional ground of appeal if he is satisfied that the omission
of that ground was not willful or unreasonable.
(iv) Appeal authority will not admit any documentary evidence which was not produced before the
DCT unless he is satisfied that appellant was prevented by sufficient cause from producing such
evidence before DCT.
(v) Appeal authority in his judgment can give following decision when an appeal filed against
assessment order:
a. confirm
b. reduce
c. Enhance
d. Set aside with the direction to make fresh assessment. (only on the ground that notice was
not served properly)
e. Annul
Enhancement of assessment means increase in the amount of total income or tax. It can be
done only after giving the assessee a reasonable opportunity of being heard.
If the AJCT or Commissioner (Appeals) does not enhance the total income but by means of
reduction under one head and an increase under another head allows the assessment to remain
the same or reduces it, it can not be said to have enhanced merely because income under one
head has been increased Where the assessee‘s income has been assessed under more than one
head, even if the assessee‘s appeal is confined to the income assessed under only one of the
heads, the AJCT or Commissioner (Appeals) may enhance the assessment by increasing the
amount assessed under another head of income in respect of which the assessee has not
appealed. The reason is that income tax is only one tax and when the assessee goes in appeal
then exposes the assessment as a whole.
But appeal authority has no power to enhance the assessment by assessing entirely new sources
of income outside the subject matter of the assessment appealed against. He has no jurisdiction
to travel beyond the subject matter of the assessment and his power of enhancement relates only
to that income which has been subjected to the process of assessment.
On the other hand it is not open to the assessee who has preferred an appeal to withdraw it so as to prevent
the Appellate Joint Commissioner of Taxes (AJCT) or Commissioner (Appeals) from enhancing the
assessment.
(d) Appeal authority in his judgment can give the following decisions when an appeal filed against
penalty order:
(i) confirm
(ii) set-aside (only on the ground that notice was not served properly)
(iii) cancel
(iv) reduce
(v) enhance (only after giving reasonable opportunity of being heard)
(e) In any other case, appeal authority can pass such order as they think fit. But the AJCT or Commissioner
has no power to review his own order in any case but he is empowered U/S 173 to rectify any mistake
apparent from record.
(f) Appeal shall be disposed of by the appeal authority with 150 days from the end of the month of which the
appeal was filed and such order shall be communicated to the appellant, DCT and Commissioner of Taxes
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within 30 days. If the appeal is not disposed of within the period of limitation the appeal so filed shall be
deemed to have been allowed.
2. Procedure to file 2nd appeal to the Taxes Appellate Tribunal
(a) Both assessee and DCT (with prior approval of his Commissioner) can prefer 2nd appeal against the
1st appeal order (Including an order imposing penalty u/s 128 by the AJCT or Commissioner
(Appeals). An order of the AJCT or Commissioner (Appeals) refusing to condone delay (if there is
any application for condo nation) and refusing to admit, or rejecting after hearing, an appeal as time
barred, will be treated as an order passed in the appeal and a 2nd appeal would lie to the tribunal.
(b) Appeal shall be filed at the form prescribed at Rule-28 with duly signed and verified by the
appellant.
(c) Tribunal fee of TK.1000/- is to be paid before submission of 2nd appeal (this fee is not applicable
when appeal is filed by the DCT).
(d) Assessee has to pay tax @ 10% of the difference between the tax as per appeal order and tax as per
section 74. However, authority to reduce such tax has been given to the Commissioner of Taxes if
assessee applies for this.
(e) Appeal shall be filed to the Taxes Appellate Tribunal within 60 days from the date of receiving 1st
appeal order.
3. Disposal of appeal by the Taxes Appellate Tribunal
The following procedure should be followed by the Taxes Appellate Tribunal to dispose of an appeal:
(a) Notice of hearing is to be given to both appellant and the department. Even if the appellant does not
appear on the day fixed for hearing, the Tribunal is bound to decide the appeal on merit and cannot
dismiss the appeal for default.
(b) Tribunal may call for such particulars as they may require or can give instruction to the DCT for
further inquiry.
(c) Tribunal will give judgment as they think fit. The power to pass such order as the Tribunal thinks fit
can be exercised only in relation to the matters that arise in the appeal. It is not open to the Tribunal
to adjudicate or give a finding on a question which is not in dispute and which does not form the
subject matter of the appeal.
The Tribunal would be entitled to enhance the assessment as it stands after the appeal order in case
of appeal by the department or in case of cross appeal. But when the appeal is filed by the assessee
and there is no cross appeal by the department, it is not open to the Tribunal to give a finding
adverse to the assessee.
(d) Since a reference application to the High Court division lies only on a question of law, the Tribunal
is the final fact finding authority.
(e) Appeal shall be disposed of by the Appellate Tribunal within 6 months from the end of the month of
filing appeal; otherwise appeal so filed shall be deemed to have been allowed. Such order should be
communicated within 30 days for the date of order.
(f) Tribunal has no power to review its own order but they are empowered by section 173 to rectify any
mistake apparent from record.
(g) Tribunal has power to permit an appeal to be withdrawn.
Decision shall be given in accordance with the opinion of the majority of its members. It is the duty of the
members of the Tribunal who heard the appeal in the first instance to formulate clearly the point on which they
differ and it is only thereafter that a reference can be made to a third member. After the decision of the third
member on the point referred to him the case should go back to the original Bench, since the third member has
not given the jurisdiction to decide and dispose of the appeal. In this way decision will be based on the opinion
of the majority of the members.
4. Procedure to file reference application to High Court Division of the Supreme Court
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(a) Both assessee and the Commissioner of Taxes (with prior permission from NBR) can file reference
application to High Court Division of the Supreme Court only against any question of law arising
from the order( including an order under section 173) of the Taxes Appellate Tribunal. An order of
the Tribunal dismissing an appeal as time barred or refusing to condone delay is obviously an order
of the Tribunal and consequently a reference lies against it. Where assessee is the applicant the
Commissioner of Taxes will be the respondent and where the Commissioner of Taxes is the
applicant, the assessee will be the respondent.
(b) Application shall be filed within 90 days from the date of receipt of the Tribunal order at the form
prescribed at Rule-29 with duly signed and verified.
(c) Fee of Tk. 2,000 is to be paid before submission of application. However no fee is needed if
application is made by the Commissioner of Taxes.
(d) Where the assessee is the applicant then 15% or 25% of the difference between the tax as per return
and the tax as per tribunal order is to be paidfollowingly.
Particulars Rate Rate to be applied
i. If tax demand is below Tk. 1,000,000 15% On the difference between the
tax as per Tribunal order and
tax as per return.
ii. If tax demand is more than Tk. 1,000,000 25%
However NBR has the power to waive or modify the requirement of such payment.
(e) Application shall be in triplicate and accompanied by the following document:
(i) Certified copy of Tribunal Order
(ii) Certified copy of Appeal Order
(iii) Certified copy of Assessment Order
(iv) Any other document relevant to the question of law which was submitted to the DCT or to
the AJCT or to the Tribunal.
(f) After getting hearing notice from the High Court Division, the respondent shall have to submit the
reply in writing at least 7 days before the date of hearing.
(g) Tax as per Tribunal order shall be payable notwithstanding the pendency of a reference in the High
Court Division. The High Court Division may in a proper case stay of recovery proceedings till the
disposal of the reference.
5. Disposal of reference application by the High Court Division
(a) A division bench of not less than 2 Judges will hear the case as per section 98 of the Code of Civil
Procedure, 1908.If the judges are equally divided the question on which there is the difference of
judicial opinion may be referred to another judge or to a larger Bench and the decision of the
majority of the judges would prevail.
(b) The High Court Division will decide the question of law and deliver its judgment containing the
grounds on which the decision is founded. The judgment of the High Court Division as a whole is
binding between the parties in the particular case. If the judgment expounds a wrong construction of
the Ordinance, an appeal against it is open and there is no other procedure by which it can be
corrected.
(c) The cost of the reference shall be in the discretion of the Court.
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6. Procedure to file appeal to the Appellate Division of the Supreme Court
An appeal shall lie to the Appellate Division against the judgment of the High Court Division provided the
High Court Division certifies the case to be a fit one for appeal to the Appellate Division of the Supreme
Court. The High Court Division would certify the case as a fit one for appeal and grant leave to appeal to the
Appellate Division if a substantial question of law is involved or if the question is otherwise of great public or
private importance.
If the High Court Division refuses to certify a case to be a fit one for appeal to the Appellate Division, an
application may be made to the Appellate Division for special leave to appeal against the decision of the High
Court Division in special circumstances.
7. Disposal of appeal by the Appellate Division of the Supreme Court
The appellate division will hear and dispose of the appeal as per provision of Code of Civil Procedure, 1908.
8. Revisional Power of Commissioner of Taxes under section 121A
While section 120 empowers the Inspecting Joint Commissioner of Taxes and Inspecting Additional
Commissioner of Taxes to exercise revisional power in favour of revenue, section 121A empowers the
Commissioner of Taxes of the territorial zone to exercise revisional power in favour of the assessee. The
following procedure should be followed to file a review application to the Commissioner of Taxes:
(i) Application shall be made in a plain paper as there is no prescribed form.
(ii) Review fee of TK. 200/- is to be paid before submission of application.
(iii) Tax as per return is to be paid if the application is filed against the order of the DCT and undisputed
portion of tax as per 1st appeal order is to be paid if the application is filed against the AJCT or AACT.
(iv) Application shall have to be submitted within 60 days from the date the date of receiving order.
However Commissioner of Taxes can entertain an application after condoning the delay if he is
convinced that assessee has sufficient reason for failure of submit application in time. However the
power to condone such delay is discretionary. If it is made against the order of the DCT, it is to be made
either after the time of appeal (45 days) is over or with an affidavit waiving the right of appeal and if it
is made against the order of the AJCT or AACT it is to be made either after the time of 2nd appeal (60
days) is over or with an affidavit waiving the right of filing Tribunal.
9. Disposal of revisional application by the Commissioner of Taxes
(1) Commissioner of Taxes will hear a case which is passed by any authority subordinate to him. DCT is
directly the subordinate to the Commissioner of Taxes. Though AJCT and AACT are not subordinate to
the Commissioner but for the purpose of section 121A, they will be deemed to be the subordinate to the
Commissioner so that their order can be revised by the Commissioner of Taxes.
(2) Commissioner of Taxes will pass order within 60 days from the date of receiving application failing
which application will be deemed to have been allowed fully.
(3) Commissioner of Taxes can make enquiry and can also give instruction to the DCT for further enquiry.
(4) Commissioner of Taxes shall not pass any order which is prejudicial to the assessee. A prejudicial order
is that order which places the assessee in a different and worse position than before. But an order
declining to interfere shall not be deemed to be an order prejudicial to the assessee. Commissioner‘s
revisional power is of an administrative nature and therefore he is not bound to hear the assessee before
passing his order.
(5) An order passed by the Commissioner of Taxes under section 121A is not appeal able to the Taxes
Appellate Tribunal and no reference will lie against such order.
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10. Alternative Dispute Resolution (ADR)
Any dispute of an assessee lying with any income tax authority i.e. Taxes Appellate Tribunal or Supreme
Court may be resolved through ADR. Assessee can also go directly to the ADR against the assessment or re-
assessment done by the DCT. If the case is pending at Appellate Tribunal or Supreme Court, then an assessee
can also prefer ADR taking permission in writing from the concerned appeal forum. After obtaining such
permission from the appeal forum, the appeal (both from assessee and department) shall remain stayed during
the ADR negotiation process. The whole process is summarized in following figure:
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Procedure to file application to ADR
a. 4 sets of application form at the prescribed form will be submitted to the respective appeal authority.
b. Fee Tk. 500 per year is to be paid and copy of which is to be attached with the application.
c. Application for ADR is to be filed within 30 days from the date of receiving demand notice of the date
of receiving permission from the appeal authority/court, as the case may be.
d. Where the case is under process appeal/tribunal/court then the copy of permission is to be attached with
the application of ADR.
e. Assessee shall not be eligible for the application of ADR if he does not file return of income for the
concerned year and does not pay tax as per return.
Procedure of disposal by the ADR
1. Board will nominate a facilitator from the panel of facilitators and convey it to the applicant, facilitator
and the concerned Commissioner of Taxes. Board may, however, change the facilitator if any objection is
raised by the applicant or by the tax department.
2. Upon receiving the application of ADR, the facilitator shall forward a copy of the application to the
respective Deputy Commissioner of Taxes (DCT) and call for his opinion on the grounds of the
application and also whether the conditions of return submission and tax payment as per return by the
assessee have been complied with.
3. If the DCT fails to give his opinion regarding fulfillment of the above mentioned conditions within 5
working days from receiving the copy, the Facilitator may deem that the conditions thereto have been
fulfilled.
Panel of Facilitators
NBR will form a panel of facilitators. The following persons shall be eligible for appointment as a facilitator by the
Board –
1) An expert retired income tax official not below the rank of Joint Commissioner of Taxes.
2) A retired official of judicial service not below the rank and status of District Judge.
3) A Chartered Accountant practiced income tax for a period not less than 8 years.
4) A Cost and Management Accountant practiced income tax for a period not less than 10 years.
5) An Income Tax Practitioner within the meaning of section 174(2)(f) and practiced income tax for a period not
less than 20 years.
6) A professional legislative expert not below the rank and a status of Deputy Secretary.
7) A business man expert at income tax law.
Methodology to be followed by the Facilitator to mitigate the dispute
(1) The facilitator will notify in writing both the applicant and the Commissioner of Taxes or the Commissioner‘s
representative to attend the meeting for settlement of disputes.
(2) He may adjourn the meeting from time to time.
(3) He may call for records or evidences from the DCT or from the applicant with a view to settle the dispute.
(4) Before disposing of the application, he can cause to make such enquiry by any income tax authority as he thinks
fit.
(5) The Facilitator will assist the applicant assessee and the Commissioner‘s representative to agree on resolving the
dispute or disputes through consultations and meetings.
(6) Dispute may be resolved by an agreement, either wholly or in part, where both the parties of the dispute accept the
points for determination of the facts or laws applicable in the dispute.
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(7) Where an agreement is reached, either wholly or in part, between the assessee and the Commissioner‘s
Representative, the Facilitator shall record, in writing, the details of the agreement.
(8) The recording of every such agreement shall describe the terms of the agreement including any tax payable or
refundable and any other necessary and appropriate matter and the manner in which any sums due under the
agreement shall be paid and such other matters as the Facilitator may think fit to make the agreement effective.
(9) The agreement shall be void if it is subsequently found that it has been concluded by fraud or misrepresentation of
facts.
(10) The agreement shall be signed by the assessee and the Commissioner‘s Representative and the Facilitator.
(11) Where no agreement, whether wholly or in part, is reached or the dispute resolution is ended in disagreement
between the applicant assessee and the concerned Commissioner‘s Representative for non-cooperation of either of the
parties, the Facilitator shall communicate it in writing recording reasons thereof, within 15 days from the date of
disagreement to the applicant and the Board, the concerned court/ Tribunal/ appellate authority and income tax
authority, as the case may be, about such unsuccessful dispute resolution.
(12) Where the agreement is reached, recorded and signed accordingly containing time and mode of payment of
payable dues or refund, as the case may be, the Facilitator shall communicate the same to the assessee and the
concerned DCT for compliance with the agreement.
(13) No agreement shall be deemed to have been reached if the Facilitator fails to make an agreement within 2
months from the end of the month in which the application is filed.
(14) Where there is a successful agreement, the Facilitator shall communicate the copy of the agreement to all the
parties within 15 days from the date on which the Facilitator and the parties have signed the agreement.
Effect of agreement
1) Where an agreement is reached, it shall be binding on both the parties and it cannot be challenged in any
authority, Tribunal or Court either by the assessee or by the department.
2) Every agreement shall be conclusive as to the matters stated therein and no matter covered by such agreement
shall be reopened.
Limitation of appeal where agreement is not concluded
1) Where an agreement is not reached wholly or partly, the assessee may prefer an appeal –
a. To the Appellate Joint Commissioner of Taxes (Appeals), as the case may be, where the dispute arises
against the order of the DCT.
b. To the Taxes Appellate Tribunal, where the dispute arises against the order of the Appellate Joint
Commissioner of Taxes or Appellate Additional Commissioner of Taxes or Commissioner of Taxes
(Appeals), as the case may be, and
c. In the court from where the assessee applicant has got permission to apply for ADR.
2) In computing the period of limitations for filing appeal the time elapsed between the filing of the application and
the decision or order of the ADR shall be excluded.
Fees to be paid to Facilitator
The Facilitator is entitled to receive fees from both the assessee and the Govt. The quantum of fees is to be computed
in the following way –
20% of disputed tax
or
Tk. 50,000
Whichever is lower, but not
less than Tk. 5,000.
50% of fees is to be paid by the
assesse and 50% by the Govt. or
Govt. approved agency within 30
days from resolving the dispute
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Part Fifteen: Double Taxation Avoidance Agreement
Double Taxation Avoidance Agreement (Sec. 144 read with 7th Schedule):
Double taxation avoidance agreement is usually an agreement between 2 countries seeking to avoid double taxation
by defining the taxing rights of each country with regard to cross, border flows of income and providing tax credits or
exemptions to eliminate double taxation. The Govt. of Bangladesh also may enter into an agreement with the Govt. of
other countries for the avoidance of double taxation and the prevention of fiscal evasion. Income tax policy wing of
the National Board of Revenue (NBR) is entrusted to negotiate the double taxation treaty with foreign countries to
promote foreign direct investment in Bangladesh. Such agreement will come into force through notification in the
official Gazette. It will be treated as an international law and accordingly its legislative position would be over and
above our Bangladesh tax law. The objectives of such agreement are:-
1. To provide relief from Bangladesh tax.
2. To determine income accruing or arising to non-residents from sources within Bangladesh.
3. To determine income of a non-resident carrying on business from within and outside Bangladesh.
4. To determine the income of a resident person having special relation with non-resident.
5. To recover tax.
6. To exchange the information for avoidance of double taxation and the prevention of fiscal evasion.
The Bangladesh model of Agreement on Avoidance of Double Taxation consists of 29
Articles that are as follows:
Article 1 : Persons Covered
Article 2 : Taxes Covered
Article 3 : General Definitions
Article 4 : Resident
Article 5 : Permanent Establishment
Article 6 : Income from Immovable Property
Article 7 : Business Profits
Article 8 : Shipping and Air Transport
Article 9 : Associated Enterprises
Article 10 : Dividends
Article 11 : Interest
Article 12 : Royalties
Article 13 : Fees for Technical Services
Article 14 : Independent Personal Services
Article 15 : Dependent Personal Services
Article 16 : Director's Fees
Article 17 : Artists and Sportsmen
Article 18 : Pensions
Article 19 : Government Service
Article 20 : Students and Trainees
Article 21 : Lecturers and Researchers
Article 22 : Other Income
Article 23 : Elimination of Double Taxation
Article 24 : Non-Discrimination
Article 25 : Mutual Agreement Procedure
Article 26 : Exchange of Information
Article 27 : Diplomatic Agents and Consular Officers
Article 28 : Entry into Force
Article 29 : Termination
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Like many others developed as well as developing countries of the world, Bangladesh too cannot absolve herself
from the need to facilitate her trade and investments with the outside world through international tax treaty network
with other countries. The increased pace of industrialization coupled with increased foreign direct investment in the
country necessitated tax treaty arrangements with other countries to provide investors with certainty and guarantees in
the area of taxation. As on March, 2011, the status of Bangladesh on Avoidance of Double Taxation Agreements is as
follows:
Name of the countries with which Agreement on Avoidance of
Double Taxation is in force.
Sl. No Name of the Country SRO Date of effect in Bangladesh
(assessment year
commencing on or after)
No. Date
1. U.K 227-L/80 08/07/1980 01/07/1978
2. Singapore 124-L/82 21/04/1982 01/01/1980
3. Sweden 382-L/83 19/10/1983 01/07/1984
4. Korea 433-L/84 02/10/1984 01/07/1984
5. Canada 247-L/85 06/06/1985 01/07/1982
6. Pakistan 221-L/88 11/07/1988 01/01/1980
7. Romania 348-L/88 23/11/1988 01/07/1989
8. Sri Lanka 365-L/88 10/12/1988 01/07/1989
9. France 2-L/89 04/01/1989 01/07/1989
10. Malaysia 67-L/90 15/02/1990 01/01/1982
11. Japan 235-L/91 06/08/1991 01/07/1992
12. India 45-L/93 27/02/1993 01/07/1993
13. Germany 1-L/94 01/01/1994 01/01/1990
14. Netherlands 267-L/94 14/09/1994 01/07/1995
15. Italy 63-L/97 12/03/1997 01/07/1980
16. Denmark 72-L/97 17/03/1997 01/07/1997
17. China 114-L/97 13/05/1997 01/07/1998
18. Belgium 11-L/98 14/01/1998 01/07/1998
19. Thailand 222-L/98 07/09/1998 01/07/1999
20. Poland 39/L/99 03/03/1999 01/07/2000
21. Philippines 56/L/2004 04/03/2004 01/07/2004
22. Vietnam 301-L/2004 18/10/2004 01/07/2005
23. Turkey 308/L/2004 31/10/2005 01/07/2004
24. Norway 20-L/2006 12/02/2006 01/07/2006
25. Indonesia 60-L/2007 20/04/2007 01/07/2007
26. USA 71-L/2007 10/05/2007 01/07/2007
27. Switzerland 52-L/2010 23/02/2010 13/12/2009
28. Oman(only on airlines
business)
16-L/2009 02/02/2009 01/07/2009
29. Myanmar 313-L/2012 18/10/2012 01/07/2012
30. Mauritius 122-L/2012 09/05/2012 01/07/2012
31. Saudi Arabia 103-L/2012 15/04/2012 01/10/2011
32. UAE 313-L/2012 05/09/2012 01/07/2012
33. Belarus 189-L/2014 08/07/2014 01/07/2014
34. Kuwait Not yet 19/02/2014(date of
signing)
Not yet
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Comparative Rates in Double Taxation
Avoidance Agreement
Sl. No. Name of the Country Permanent
Establishment
Maximum tax rate
for dividend
Maximum tax
rate for Interest
Maximum tax rate
for Royalties
1. U.K 183 days 10%/15% 7.5%/10% 10%
2. Singapore 183 days 15% 10% 10%
3. Sweden 183 days 10%/15% 10% 10%
4. Korea 183 days 10%/15% 10% 10%
5. Canada 183 days 15% 10% 10%
6. Pakistan 183 days 15% 15% 15%
7. Romania 183 days 10%/15% 10% 10%
8. Sri Lanka 183 days 15% 15% 15%
9. France 183 days 10%/15% 10% 10%
10. Malaysia 183 days 15% 15% 15%
11. Japan 6 months 10%/15% 10% 10%
12. India 183 days 10%/15% 10% 10%
13. Germany 183 days 15% 10% 10%
14. Netherlands 6 months 10%/15% 10% 10%
15. Italy 183 days 10%/15% 10%/15% 10%/15%
16. Denmark 183 days 10%/15% 10% 10%
17. China 6 months 10% 10% 10%
18. Belgium 183 days 15% 15% 10%
19. Thailand 183 days 10%/15% 10%/15% 15%
20. Poland 183 days 10%/15% 10% 10%
21. Philippines 6 months 10%/15% 15% 15%
22. Vietnam 6 months 15% 15% 15%
23. Turkey 12 months 10% 10% 10%
24. Norway 6 months 10%/15% 10% 10%
25. Indonesia 183 days 10%/15% 10% 10%
26. USA 183 days 10%/15% 10% 10%
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Part Sixteen: Transfer Pricing
Important Definitions:
107A. Definitions.- In this Chapter, unless there is anything repugnant in the subject or context, -
(1) "arm's length price" means a price in a transaction, the conditions (e.g. price, margin or profit split) of which do
not differ from the conditions that would have prevailed in a comparable uncontrolled transactions between
independent entities carried out under comparable circumstances;
(2) "associated enterprise", in relation to another enterprise, means an enterprise which, at any time during the
income year, has the following relationship with the other enterprise-
(a) one enterprise participates, directly or indirectly, or through one or more intermediaries, in the
management or control or capital of the other enterprise; or
(b) the same person or persons participate, directly or indirectly, or through one or more
intermediaries, in the management or control or capital, of both enterprises; or
(c) one enterprise holds, directly or indirectly, shares carrying more than twenty five percent of the voting
power in the other enterprise; or
(d) the same person or persons controls shares carrying more than twenty five percent of the voting power in
both enterprises; or
(e) the cumulative amount of borrowings of one enterprise from the other enterprise constitutes more than
fifty percent of the book value of the total assets of that other enterprise; or
(f) the cumulative amount of guarantees provided by one enterprise in favour of the other enterprise
constitutes more than ten percent of the book value of the total borrowings of the other enterprise; or
(g) more than half of the board of directors or members of the governing board of one enterprise
are appointed by the other enterprise; or
(h) any executive director or executive member of the governing board of one enterprise is appointed by, or
is in common with the other enterprise; or
(i) the same person or persons appoint more than half of the board of directors or members in both
enterprises; or
(j) the same person or persons appoint any executive director or executive member in both
enterprises; or
(k) one enterprise has the practical ability to control the decision of the other enterprise; or
(l) the two enterprises are bonded by such relationship of mutual interest as may be prescribed;
(3) "enterprise" means a person or a venture of any nature (including a permanent establishment of such person or
venture);
(4) "independent enterprise" means an enterprise that is not an associated enterprise;
(5) "international transaction" means a transaction between associated enterprises, either or both of whom are non-
residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or
lending or borrowing money, or any other transaction having a bearing on the profits, income, losses, assets, financial
position or economic value of such enterprises, and includes-
(a) a mutual agreement or arrangement between two or more associated enterprises for the
allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in
connection with a benefit, service or facility provided or to be provided to any one or more of such
enterprises;
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(b) a transaction entered into by an enterprise with a person other than an associated enterprise, if there exists
a prior agreement in relation to the relevant transaction between such other person and the associated
enterprise, or the terms of the relevant transaction are determined in substance between such other person
and the associated enterprise;
(6) "permanent establishment" includes a place of management, a branch, an agency, an office, a
warehouse, a factory, a workshop, a mine, an oil or gas well, a quarry or any other place of extraction of natural
resources, a firm or plantation, or any other fixed place through which the business of the enterprise is wholly or
partly carried on;
(7) "property" includes goods, articles, things or items, patent, invention, formula, process, design, pattern, know-
how, copyright, trademark, trade name, brand name, literary, musical, or artistic composition, franchise, license or
contract, method, program, software, database, system, procedure, campaign, survey, study, forecast, estimate,
customer list, technical data, any aspects of advertising and marketing, any item which has substantial value, or any
other intangible property;
(8) "record" includes electronically held information, documents and records;
(9) "Transfer Pricing Officer" means any income tax authority authorised by the Board to perform the
function of a Transfer Pricing Officer;
(10) "transaction" includes an arrangement, understanding or action between two or more parties, whether or not
such arrangement, understanding or action is formal or in writing; or whether or not it is intended to be enforceable
by legal proceeding;
(11) "uncontrolled transaction" means a transaction undertaken between enterprises not being the
associated enterprises.
Important sections related to transfer pricing:
107B. Determination of income from international transaction having regard to arm's length price.-
Notwithstanding anything contained in Chapter XI of this Ordinance, the amount of any income, or
expenditure, arising from an international transaction shall be determined having regard to the arm's length price.
107C. Computation of arm's length price.-
(1) The arm's length price in relation to an international transaction shall be determined by applying the most
appropriate method or methods selected from the following methods based on the nature of transaction, the
availability of reliable information, functions performed, assets employed, risks assumed or such other factors as may
be prescribed, namely:—
(a) comparable uncontrolled price method;
(b) resale price method;
(c) cost plus method;
(d) profit split method;
(e) transactional net margin method;
(f) any other method where it can be demonstrated that-
(i) none of the methods mentioned in clause (a) to (e) can be reasonably applied to determine the
arm's length price for the international transaction; and
(ii) such other method yields a result consistent with the arm's length price.
(2) The most appropriate method referred to in sub-section (1) shall be applied for determination of arm's length price
in the manner as may be prescribed:
Provided that the arm's length price determined under this section shall not result in total income lower
than the total income that would have been resulted if the price at which international transaction has
actually been undertaken were taken as the price charged or paid in the said international transaction.
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(3) Where in the course of any assessment under Chapter IX of this Ordinance, the Deputy Commissioner of Taxes is
of the opinion that—
(a) the price charged or paid in an international transaction has not been determined by the assessee in
accordance with sub-sections (1) and (2); or
(b) the assessee has failed to maintain the information, documents or records in accordance with the
provisions of section 107E; or
(c) the information or data based on which the arm's length price was computed by the assessee is not
reliable or correct;
The Deputy Commissioner of Taxes may determine the arm's length price in relation to the said international
transaction in accordance with provisions of sub-sections (1) and (2) on the basis of information or documents or
other evidence available to him.
(4) In determining the arm's length price under sub-section (3), the Deputy Commissioner of Taxes shall give an
opportunity to the assessee by serving a notice calling upon him to show cause, on a date and time to be specified in
the notice, why the arm's length price should not be so determined on the basis of information or documents or other
evidence available to the Deputy Commissioner of Taxes.
(5) Where an arm's length price is determined under sub-section (3) of this section or under sub-section (4) of section
107D, the Deputy Commissioner of Taxes shall, by an order in writing, proceed to compute the total income of the
assessee having regard to the arm's length price so determined.
107D. Reference to Transfer Pricing Officer.-
(1) Notwithstanding anything contained in section 107C of this Ordinance,-
(a) the Deputy Commissioner of Taxes, with prior approval of the Board, may refer the determination of the
arm's length price under section 107C to the Transfer Pricing Officer;
(b) the Transfer Pricing Officer, with prior approval of the Board, may proceed to determine the arm's length
price in relation to any international transaction.
(2) Where a reference is made or any proceedings have been initiated under sub-section (1), the Transfer
Pricing Officer shall serve a notice on the assessee requiring him to produce or cause to be produced on a date to be
specified therein, any evidence on which the assessee may rely in support of his computation of the arm's length price
in relation to the international transaction in question.
(3) The Transfer Pricing Officer shall, after considering the evidence produced before him or available to him
including the evidence as he may require on any specified points from the assessee or from any other person, and
after taking into account all relevant materials which he has gathered shall, by order in writing, determine the arm's
length price in relation to the international transaction in accordance with section 107C of this Ordinance and send a
copy of his order to the Deputy Commissioner of Taxes.
(4) The Deputy Commissioner of Taxes, upon receipt of the order under sub-section (3), shall proceed to compute the
total income of the assessee in conformity with the arm's length price so determined by the Transfer Pricing Officer.
(5) The Transfer Pricing Officer may rectify any order passed by him under sub-section (3) so as to correct any
mistake apparent from the record either of his own motion or on the mistake having been brought to his notice by the
assessee or any other income tax authority, and the provisions of section 173 of this Ordinance shall, so far as may be,
apply accordingly.
(6) Where any rectification is made under sub-section (5), the Transfer Pricing Officer shall send a copy of his order
to the Deputy Commissioner of Taxes who shall thereafter proceed to amend the order of
assessment in conformity with such order of the Transfer Pricing Officer.
107E. Maintenance and keeping of information, documents and records.-
(1) Every person who has entered into an international transaction shall keep and maintain such information,
documents and records as may be prescribed.
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(2) Without prejudice to the provisions of sub-section (1), the Board may prescribe the period for which the
information, documents and records shall be kept and maintained.
(3) The Deputy Commissioner of Taxes may, by notice in writing, require any person to furnish any
information, documents and records as prescribed under sub-section (1) within the period as may be
specified in the notice.
107EE. Statement of international transactions to be submitted.-
Every person who has entered into an international transaction shall furnish, along with the return of income, a
statement of international transactions in the form and manner as may be prescribed.]
107F. Report from an accountant to be furnished.-
The Deputy Comissioner of Taxes may, by notice in writing, require that a person who has entered into international
transaction or transactions the aggregate value of which, as recorded in the books of accounts, exceeds three crore
taka during an income year shall furnish within the period as may be specified in the notice and in the form and
manner as may be prescribed, a report from a Chartered Accountant or a Cost and Management Accountant regarding
all or of a part of the information, documents and records furnished under section 107E.
Penalty:
107G. Penalty for failure to keep, maintain or furnish information, documents or records to the
Deputy Commissioner of Taxes.-
Where any person fails to keep, maintain or furnish any information or documents or records as required by section
107E of this Ordinance, without prejudice to the provisions of Chapter XV of this Ordinance, the Deputy
Commissioner of Taxes may impose upon such person a penalty not exceeding one percent of the value of each
international transaction entered into by such person.
107H. Penalty for failure to comply with the notice or requisition under section 107C.-
Where any person fails to comply with the notice or requisition under section 107C of this Ordinance, the Deputy
Commissioner of Taxes may impose upon such person a penalty not exceeding one per cent of the value of each
international transaction entered into by such person.
107HH. Penalty for failure to comply with the provision of section 107EE.-
Where any person fails to comply with the provision of section 107EE of this Ordinance, the Deputy Commissioner
of Taxes may impose upon such person a penalty not exceeding two per cent (2%) of the value of each international
transaction entered into by such person.
107I. Penalty for failure to furnish report under section 107F.-
Where any person fails to furnish a report from a Chartered Accountant as required by section 107F of this
Ordinance, the Deputy Commissioner of Taxes may impose upon such person a penalty of a sum not exceeding three
lakh taka.
107J. Applicability of this Chapter.-
The provisions of this Chapter shall come into force from the date specified by the Board through
notification in the official Gazette.
94. Limitation for assessment
(1) Subject to the provisions of sub-sections (2) and (3), no order of assessment under the provisions of this Chapter
in respect of any income shall be made after the expiry of six months from the end of the assessment year in which
the income was first assessable.
(1A) Notwithstanding anything contained in sub-section (1), no order of assessment under subsection (3) of section
82BB} shall be made-
(a) after the expiry of two years from the end of the assessment year in which the income was first assessable
[.]Subs. F.A. 2010 [or] Deleted F.A. 2010
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[(b) after the expiry of the period of fifteen months from the end of the month in which the return is
submitted, which ever is earlier.]Deleted F.A. 2010
(1B) Notwithstanding anything contained in sub-section (1) or (1A), no order of assessment under section 107C of
this Ordinance shall be made after the expiry of three years from the end of the assessment year in which the income
was first assessable.] Added F. A. 2012
173. Correction of errors.‐
(1) Any income tax authority or the Appellate Tribunal may, by order in writing, amend any order passed by it so as
to new any error apparent from the record either of its own motion or on the error having been brought to its notice by
the assessee or any other income tax authority and all the provisions of this Ordinance as may be applicable shall
have effect accordingly.
(2) No amendment under sub‐section (1) which has the effect of enhancing an assessment or reducing a refund or
otherwise increasing the liability of the assessee shall be made unless the parties affected
thereby having been given a reasonable opportunity of being heard.
(3) Where any such error as is referred to in sub‐section (1) is brought to the notice of the authority
concerned by the assessee and no amendment is made by such authority within the financial year next
following the date in which the error is brought to its notice, the amendment under that sub‐section shall
be deemed to have been made so as to new the error and all the provisions of this Ordinance shall have
effect accordingly.
(4) No amendment under sub‐section (1) shall be made after the expiration of four years from the date of the order
sought to be amended.
(5) Where in respect of any completed assessment of a partner in a firm it is found on the assessment of the firm or on
any reduction or enhancement made in the income of the firm under sections 120,[121A]Subs F. A. 2014, 156, 159,
161 or 162 that the share of the partner in the profit or loss of the firm has not been included in the assessment of the
partner, or, if included, is not correct, the inclusion of the share in the assessment or the correction thereof, as the case
may be, shall be deemed to be correction of an error apparent from the record within the meaning of this section, and
the provisions of sub‐section (1) shall apply thereto accordingly, the period of four years referred to in sub‐section (4)
being computed from the date of the final order passed in the case of the firm.
(6) Where as a result of proceedings initiated under section 93, a firm or an association of persons is
assessed, and the Deputy Commissioner of Taxes concerned is of opinion that it is necessary to compute
the total income of a partner in the firm or a member of the association of persons, as the case may be,
the Deputy Commissioner of Taxes may proceed to compute the total income and determine the sum
payable on the basis of such computation as if the computation is a correction of an error apparent from the record
within the meaning of this section, and the provisions of sub‐section (1) shall apply accordingly, the period of four
years specified in sub‐section (4) being reckoned from the date of the final order passed in the case of the firm or
association of persons, as the case may be.
(7) Subject to the provisions of sub‐section (3) where an amendment is made under this section, an order shall be
passed in writing by the income tax authority concerned or the Appellate Tribunal, as the case may be.
Income Tax Rules 1984
70. Determination of arm’s length price under section 107C.
(1) The most appropriate method for determining arm's length price in relation to an international transaction shall be
applied in the following manner:
(a) comparable uncontrolled price method is applied in the following manner:
(i) the price charged or paid for property transferred or services provided in an uncontrolled transaction or a
number of transactions of comparable circumstances is identified;
(ii) if the price so identified differs from the price of the international transaction, the differential amount is
calculated;
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(iii) the price of international transaction is then adjusted by the said differential amount;
(iv) the adjusted price under sub-clause (iii) is taken to be the arm's length price of the property transferred
or services rendered in the international transaction.
(b) resale price method is applied in the following manner:
(i) the price at which the said property or service is resold to an independent enterprise is identified;
(ii) the price, as identified in sub-clause (i), is reduced by a comparable normal gross margin;
(iii) the price so arrived at is then adjusted for other unique costs (such as customs duty) associated with the
purchase of the property or services;
(iv) the price so arrived at is then adjusted to take into account the material differences (differences that
could materially affect the gross margin in open market condition) such as functions performed, risks
involved, assets employed, time gap between the original purchase and the resale and accounting practices
between the international transactions and the comparable uncontrolled transactions, or between the
enterprises undertaking such transactions;
(v) the adjusted price under sub-clause (iv) shall be taken to be the arm's length price of the property
purchased or the service obtained in the international transaction.
(c) cost plus method is applied in the following manner:
(i) the direct and indirect costs incurred in the supply of property or the provision of services,
hereinafter referred to as cost base, are determined;
(ii) a comparable profit mark-up (based on comparable accounting policies) is identified;
(iii) appropriate adjustment is then made to the comparable profit mark-up adjusted to take into
account the material differences (differences that could materially affect the mark-up in open
market condition) such as functions performed, risks involved, assets employed, contractual terms and
market conditions between the international transactions and the comparable uncontrolled transactions, or
between the enterprises undertaking such transactions.
(iv) the adjusted profit mark-up under sub-clause (iii) is then added to the cost base;
(v) the sum so arrived at is taken to be the arm‘s length price of the property transferred or services provided
in the international transaction.
(d) profit split method is applied in the following manner:
(i) the combined profit, arising from international transaction or transactions and divisible among
the associated enterprises, is identified.
(ii) the combined profit is then divided among the associated enterprises by using the following
approaches:
a. each of the associated enterprises is allocated a basic return based on the basic functions
(manufacturing, distribution, service provision etc.) each enterprise performed and determined by reference
to market returns earned by independent enterprise in similar transaction. This basic return does not usually
account for the return that would be generated by any unique and valuable assets possessed by the associated
enterprises. The residual profit (which may be attributable to such unique assets), calculated by deducting
the sum of basic returns allocated to associated enterprises from the combined profit, is then apportioned to
the associated enterprise based on their relative contribution and taking into consideration how independent
enterprises in similar circumstances would have divided such residual profit; or
b. basic return is not allocated to the associated enterprises; the combined profit is divided among the
associated enterprises based on the relative contribution of each the associated enterprises to that profit;
(iii) the profit thus allocated to the assessee under sub-clause (ii) is taken to be the arm‘s length price.
(e) transactional net margin method is applied in the following manner:
(i) the net profit margin earned by the associated enterprise from the international transaction with the
associated enterprise is computed having regard to an appropriate base such as costs, sales or assets;
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(ii) the net profit margin earned by an independent enterprise or enterprises from comparable uncontrolled
transaction or a number of such transactions is computed having regard to the same base;
(iii) appropriate adjustment is then made to the net profit margin referred to in sub-clause (ii) to take into
account the differences, that can materially affect the net profit margin, between the international
transactions and the comparable uncontrolled transactions, or between the enterprises undertaking such
transactions;
(iv) the adjusted net profit margin under sub-clause (iii) is then applied to the base as referred to in sub
clause (i) to arrive at the arm‘s length price in relation to the international transaction.
71. Factors to be considered in judging comparability.
(1) The following factors shall be considered in judging the comparability of an uncontrolled transaction with the
international transaction under the different methods as mentioned in rule 70:
(a) the characteristics of property, services or intangible properties involved in the transaction:
(i) the case of tangible property: physical features, quality and reliability, availability, volume and
timing of property transferred;
(ii) in the case of services provided: the nature and extent of the services;
(iii) in the case of intangible property: the type of intangible, the form of transaction, the expected
benefits, the duration of protection, the degree of protection, etc;
(b) the functions performed, the risks assumed and the assets employed, especially the functions, risks and
assets that are materially significant in determining the price or margin in relation to the international
transaction;
(c) the contractual terms (whether or not such terms are formal or written) dictating the allocation of
responsibilities, risks and benefits between enterprises involved in the international transaction;
(d) economic circumstances, that affect the international transaction and uncontrolled transactions, including
geographic location, the size and level of markets; the extent of competition in the market, the availability of
substitute goods and services, the purchasing powers of consumers, government orders and policies and the
timing of the transaction;
(e) Any other factors that have material effect on the international transaction and uncontrolled transaction.
(2) An uncontrolled transaction shall be deemed to comparable to an international transaction if:
(i) there are no material differences in respect of cost, price or margin between the
transactions being compared or between the enterprises undertaking such transactions; or
(ii) reasonably accurate adjustments can be made to eliminate any material differences in
the transactions.
(3) In analysing the comparability, data relating to the relevant financial year (in which the international
transaction has been entered into) shall be considered. \
Provided that data relating to a period prior to the financial year may also be considered if such data bears such facts
which could have an influence on the analysis of comparability.
72. Most appropriate method.
(1) For the purposes of sub-section (1) of section 107C, the most appropriate method for determining the arm‘s length
price of an international transaction shall be the method that, under the facts and circumstances, provides the most
reliable measure of an arm‘s length price in relation to the international transaction.
(2) In selecting the most appropriate method as specified in sub-rule (1), the following factors shall be
considered, namely:
(a) the nature and class of the international transaction, and of enterprises entering into the
international transaction;
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(b) the comparability factors (industry, functions, risks, contractual terms, market level) that are materially
significant in determining the price or margin in relation to the international transaction;
(c) the quality (availability, coverage, validity and reliability) of relevant data;
(d) the reliability of assumptions in the method;
(e) the sensitivity of results in the deficiency in data and assumptions;
(f) the extent to which the reliable and accurate adjustments can be made to eliminate the differences, if any,
between the international transaction and the comparable uncontrolled transaction or between the enterprises
entering into such transactions.
73. Information and documents to be kept and maintained under section 107E.
(1) Every person who has entered into an international transaction shall keep and maintain the following
information and documents, namely:
(a) ownership profile of the multinational group in which the assessee enterprise is a member. Profile should
include information on groups global organisational structure, showing in details the name, location, legal
status and country of tax residence of the enterprises in the group with whom the assessee enterprise have
international transactions, and ownership linkages among them;
(b) business profile of the group including the line of business, industry dynamics, and market and economic
environment in which the group operates, and the business model and strategies of past, present and future;
(c) brief business profiles of each of the member of the group;
(d) information on the business relationship (purchase and sells of goods, provision of services, use of assets
and intangibles etc.) among the members of the groups;
(e) consolidated financial statement of the group;
(f) profile of the assessee enterprise and each of the associated enterprises operating in Bangladesh,
including tax and VAT registration number, IRC & ERC numbers, address, locations of activity centers etc;
(g) business profile of the assessee enterprise and each of the associated enterprises operating in Bangladesh
including the line of business, industry dynamics, and market and economic environment in which the
assessee enterprise operates, and the business model and strategies of past, present and future of the assessee
enterprise;
(h) brief description of the functions performed, risks assumed and assets employed or to be employed by
the assessee and by the associated enterprises involved in the international transaction;
(i) financial statements of the assessee enterprise and each of the associated enterprises operating in
Bangladesh;
(j) information on economic and market analyses, forecasts, budgets or any other financial estimates
prepared by the assessee enterprise and each of the associated enterprises operating in Bangladesh either for
whole business or for any segment or line of product;
(k) details of all transactions with the associated enterprises;
(l) contracts, terms and agreements of the transactions with associated enterprises;
(m) segment financial statements with respect to the transactions with associated enterprises;
(n) the manner of choosing tested party including the rationale for the choice;
(o) details of comparables including the manner in which the comparables have been screened and the
adjustment made to achieve comparability;
(p) details of comparability analysis;
(q) the manner of choosing tested party including the rationale for choice;
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(r) information on transfer pricing method chosen considered for determining the arm‘s length price
including the justification stating why the method is considered most appropriate;
(s) records showing the calculations and workings regarding the determination of the arm‘s length
price/margin including the explanation of any assumption;
(t) any assumption, policy and price negotiations which may have an effect on the determination of the arm‘s
length price;
(u) information on any adjustment made to transfer prices to align them with arm‘s length prices determined
under these rules and consequent adjustment made to the total income for tax purposes;
(v) any other information, data or document, including information or data relating to the associated
enterprise, which may be relevant for determination of the arm‘s length price.
(2) Nothing contained in sub-rule (1) shall apply in a case where the aggregate value, as recorded in the
books of account, of international transactions entered into by the assessee in the income year does not
exceed three crore taka.
(3) The information specified in sub-rule (1) shall be supported by authentic documents, which may include the
following:
(a) official publications, reports, studies and data bases from the Government of the country of residence of
the associated enterprise, or of any other country;
(b) reports of market research studies carried out and technical publications brought out by institutions of
national or international repute;
(c) price publications including stock exchange and commodity market quotations;
(d) published accounts and financial statements relating to the business affairs of the associated enterprises;
(e) agreements and contracts entered into with associated enterprises or with unrelated enterprises in respect
of transactions similar to the international transactions;
(f) letters and other correspondence documenting any terms negotiated between the assessee and the
associated enterprise;
(g) documents normally issued in connection with various transactions under the accounting practices
followed.
(4) The information and documents specified in sub-rules (1) and (2) shall be kept and maintained for a period of
eight years from the end of the relevant assessment year.
74. Report from a certified accountant to be furnished under section 107F.
The report from a certified accountant (i.e. a chartered accountant or a cost and management accountant) required to
be furnished under section 107F by every person who has entered into an international transaction during an income
year shall be in prescribed Form and verified in the manner indicated therein.
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― 75. Form of report to be furnished under section 107F.- Every report under section 107F of the
Ordinance shall be made in the following form:
Report under section 107F
In respect of:
1. Name of the Assessee:...................
2. TIN:
3. (a) Circle: ................ (b) Taxes Zone....................
1. All the information, documents and records required under section 107F of the Income Tax Ordinance,
1984 are furnished and annexed to this Report;
2. The List of Annexure is prepared and signed by me/us;
3. It appears from my/our examination that the information, documents and records furnished under
section 107F are authentic.
Signature
Name:
Address:
Identification Details (Membership Number, etc.)
Contact Details:
Place:
Date:
List of Annexure (to be signed in each page):
1. ....................................
2. .....................................
Updated (Finance Act 2015)
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Question No. 4 (a):
AB~ Bangladesh Ltd:, a company incorporated in Bangladesh, manufactures high class motor vehicle engtnes for sale both m Bangladesh and abroad Foreign sales are made through ABC Hong Koog Pvt. Ltd, a company iuCOlpOt'8ted in Hong Koog and wholly owned by ABC Bangladesh Ltd 10 Hong Kong, corporate tax rate is 25% and in Bangladesh, it is 35%. ABC Bangladesh Ltd sells engines to ABC Hong Kong Pte Ltd. at USD 30,000 (FOB) per unit. In Bangladesh, the same engine is sold at USD 40,000 per unit. ABC Hong Kong Pte Ltd sells these units at USD 60,000 per unit io their local market. During the income year ended 31 Marcb 2015 ABC Bangladesh Ltd. sold 10 such engines at the above FOB price and 5 sucb engines at USD 31,000 C&F price per unit. The freight was USD 1,000 per unit. 14 of the above 15 export sales took place during the last 9 months of the year. The cost of sales and total overhead expenses (related to the above units sold) of ABC Bangladesh Ltd were USD 20,000 per unit io equivalent Taka. The overhead expenses (related to the above units imported and sold) iDcludiDg the freight for the above FOB imports of ABC Hong Koog Pte Ltd. were USD 10,000 per unit. Neither of the above two companies had any other iDcome and expense during the income year.
Requirements:
(i) Will aoy report from accountant be required to be furnished to the iocome tax authority? If so, who can issue the report? Draft a report to be issued in this regard. 6
(ii) On the basis of tbe informatioo given above, determine iDcome from the above internationaJ transactions having regard to arm's length price. 4
(iii) Which method have you followed in computing the arm's length price as in (ii) above? 2
(iv) How DOlCb additional income tax will the government earn by following the above method? 2
Y 011 may use exchange rate of USD 1= Tk. 78.
Allswer to question 4 (a):
(I) Yes, a report from a qualified BCCOUIItant is required to be furnisbed to the income tax authority as per section 107F of The Income Tax 0rdiDaDce, 1984 as ABC Bangladesb Ltd bas entered into internatioDal IIaD8aCtions amounting to [30,OOOxI0+3I,OOOxS=4,SS,000x78=Tk.3,S4,90,OOO) which is more than Tk.3 crore. Only a qualified accountant, eithee a Chartered Accountant or a Cost and Management AccOllWm can issue such report. A report is drafted as per Rule-75 as uudec:
(ii) Taking into considecation the fact that the same engine is sold in Bangladesh at fair market price (beee
ann's length price) USD 40,000 per unit, income comes at Tk.4O,OOO-20,000=20,OOOxlS=3,oo,000x78=Tk.2,34,OO,OOOI
(iii) Comparable IIIICODtrolled price method is followed here to determine arm's length price as arranged sales price with associated enterprise can easily be compared with the information of local sales price.
I (iv~onaI income tax to be paid 1O,000x 15= I, 50,ooox78=Tk.I , 17, 00,000 @35o/o=Tk.40, 95,000
l QiIIIIon No. 4(b):
ABC Hong Kong Pte Ltd. has a global agreement with M&S LLC of USA which incorporates a clause stating that in the case of any purchase by M&S from any company within the group to whicb ABC Hong Koog Pte Ltd. belongs, M&S will get a rebate of 5% on the purchase price from that company. Now ABC Bangladesh Ltd. intends to enter into an agreement with M&S to seU its engine products to M&S.
Requirement:
Will any transaction between ABC Bangladesh Ltd. and M&S tilU under lrausfer pricing? Discuss. 3
Answer to question 4 (b):
Y <s, tbe transactioo between ABC Bangladesb Ltd. and M & S LLC of USA will fall under traosfer pricing
because M & S LLC or USA is also to be treated as deemed associated enterprise as per section 107A(2)(L).
Updated (Finance Act 2015)
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Khaled Mahamud Sujon, sujonais@gmail.com Page 164 of 171
Part Seventeen: Statutory regulatory orders (SROs)
Updated (Finance Act 2015)
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Updated (Finance Act 2015)
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Khaled Mahamud Sujon, sujonais@gmail.com Page 166 of 171
~,'III'R,. '"' ~~-~oM I- Income-tax Ordinance, 1984
(Ordinance. lOOCVI of 1984) <fl"ll section 185 .a .tI'«f "U'14C*1. -.nfB "!Il.-'t" ~.
Income Tax Rules, 1984 <IH ~ .. Iii.," '1W11~ 0+II ~ -.f.n1 <fl~ ~~
~-.fP!. '"1": -
( ~ ) rule 16 <IH "The Schedule' <IH <flAj 10 ,n .tmJ:~ f"I>t., (.)~,. ~ <11,,",,-:"'fI" ~ -r- <IIfl 11 '1F.1t'i1~:e; ~. '"1":-
- 11. In case of company engaged in gas 3%. -, dist ri bution, any amount
(~)ruleI7~~. (0) rule 17A <fl"ll .,fi4!:'1~ rule 17A~""~, "l"'lT: -
" 11A. Cotl~ion of t ax. from impanel'S.- For the purpose of m ilking
collection of t ax under section 53 of the Ordinilnce , the Commissione r o f
Customs or il ny ilppropriilte officer shilll collect tax in m e eil'" o f a ny import
of goods at the following rate:
(iI) fIve per cent on the viii .... of t he imported goods in CiI'" of impon o f
goods excluding the goods mentioned in cliluse (b) ilnd dilu", (e);
(b) two per cent on the Viii"" of the Importe d goods in t he CiI'" of import
of goods specified below:-(I ) Petroleum oils il nd oils obtilir>ed from bituminous minerills,
crude (H.S Code: 2109.00.00);
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Updated (Finance Act 2015)
Md. Ibne Nayeem Hasan, ibnenayeem@gmail.com
Khaled Mahamud Sujon, sujonais@gmail.com Page 167 of 171
('5) cQ'f,~, '(9 Oft ~ lwl'-~/GlBI"'II/,o~1Z , ~: >00 !fI, ,o ~ 1Z J!'$rIi: cQ
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(O.dinance No. XXXVI 011984), ~,~U O.dinance 'I!i!tT~. <Ill" <ection 44 <Ill"
sub-section (4) <Ill" clau", (b) N :!I'l1I "UI4!'''1 1!H1l". ~ 00 ~. ~8~~ ~
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<Ill" ~ '''' ''''I~ ~~"j"I, .. ~ cla",e (32) <Ill"
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~."lim" '&~---- >0 '
Updated (Finance Act 2015)
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Khaled Mahamud Sujon, sujonais@gmail.com Page 168 of 171
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Updated (Finance Act 2015)
Md. Ibne Nayeem Hasan, ibnenayeem@gmail.com
Khaled Mahamud Sujon, sujonais@gmail.com Page 169 of 171
<") <.!I'f,~.'(9 '" ~lolo-~fOil~!N~a ~ lZ, ~' 'Oa !E, ~a~1Z ~I III ,:tjQI"ltf1'!1 ~ pelleted poultry reed ~'"IJIF. 'f1Wf ~. ~ '(9 ~
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Updated (Finance Act 2015)
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Khaled Mahamud Sujon, sujonais@gmail.com Page 170 of 171
Updated (Finance Act 2015)
Md. Ibne Nayeem Hasan, ibnenayeem@gmail.com
Khaled Mahamud Sujon, sujonais@gmail.com Page 171 of 171
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