Bangladesh Tax Handbook 2008-2009.pdf

Bangladesh Tax Handbook 2008-2009

Foreword

The National Budget of Bangladesh for the year 2008-2009 was presented by the Finance Advisor Dr. A. B. Mirza Md. Azizul Islam on 28th June 2008 in the form of a Finance Bill and the Bill was Þnally approved by the HonÕable President of the Government of Bangladesh to effect from 1st July 2008.

We have attempted to summarize the salient features of the new Finance Ordinance 2008 and basic taxation laws/rules for the beneÞt of our clients, business houses and potential investors. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice.

The information contained in this handbook is based on taxation laws/rules, but not intended to be a comprehensive guide. Every effort has been given to ensure correctness of the information. However, readers should always seek speciÞc advice before acting on the information provided in the tax handbook. For further information and assistance you may contact our ofÞce:

Editor:Humayan Kabir, ACAObaidul Islam Khan, ACA

Editorial Board:Baizid Md. Faiaz, MBA

Advisory Board:

Nurul Haque, FCABadrul Ahsan, FCAFazle R M Hasan, FCAFaruk U. Ahammed, FCA

All right reservedNo part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying recording, or otherwise without prior written permission of the Publisher.

Green Sayera B-1, House : 125, Road: 2, Block: A,Niketon Society, Gulshan-1, Dhaka, BangladeshPhone: 986 2802, Fax : + 880-2- 986 2819,

E-mail: [email protected], [email protected]

Index

Changes in Taxation Laws 2008-2009Income Tax 5-10Value Added Tax 11Summary in Taxation Laws 2008-2009Income TaxDefinitions 15Heads of Income 16Income Deemed to Accrue or Arise in Bangladesh 16Deemed Income 17Scope of Total Income 18Charge of Additional Tax 18Charge of Excess Profit Tax 18Income Exemption Limit 18Personal Tax Rate Structure 19Tax Rebate for assesses paying tax at the highest rate of 25% 19Minimum Tax (Individual) 19Incidence of Tax on Non-Resident 20Income fully Exempted from Tax subject to prescribed conditions and limitations 20Investment Allowance for Tax Rebate 21Income from Salary 22Income from House Property 23Income from Interest on Securities 24Income from Business or Profession 24Rates of Corporate Tax are as follows 25-27Allowable Deductions on income from Business or Profession 28-31Normal Depreciation Allowance 31Initial depreciation 32Accelerated Depreciation 33Deductions are NOT admissible in certain circumstances 33Capital Gains 34Exemption of Capital Gains from tax 35Capital Gain Tax 36Income from Other Sources 36Set-Off of Losses 36Carry forward of loss 37Carry forward of Depreciation Allowance 37Withholding Tax / Tax Deducted at Source (TDS) 37-41Tax Holiday for newly established industrial undertaking, Tourist Industry and Physical Infrastructure facility 41Tax Holiday for Hospitals 42New List of eligible sectors for Tax Holiday 43Advance Payment of Tax 44Payment on the Basis of Return 44Filing of Return of Income and Statement: 44Assessments 45-48Avoidance of Double Taxation 48Relief in respect of Foreign Income 48Value Added Tax Deduction of VAT at source 49-50Gift TaxGift Tax 51Exemption from Gift Tax 51Provisions of the Gift Act shall NOT apply to following gifts made by 52Return of Gift Tax 52Rates of Gift Tax 52

Particulars Page nos.

Major Changes in Bangladesh Taxation Laws

2008-2009

Income TaxValue Added Tax

Income Tax

Bangladesh Tax Handbook 2008-2009 5

1. Tax Exemption Limit:

The ceiling of Ôminimum tax exempted incomeÕ for the individual assessee has been enhanced from Taka 150,000 to Taka 165,000, while this limit for the individual female, persons aged 70 years & more and disabled assessee has been enhanced from Taka 150,000 to Taka 180,000 with effect from Financial Year 2007-2008 (Assessment Year 2008-2009). Accordingly, the level of income to charge highest tax @ 25% has been raised from Taka 1,125,000 to Taka 1,140,000.

2. Personal Tax Rate Structure:

The 5 tier Income slabs and Tax rates for individual assessee (Including Non-resident Bangladeshi) have been changed and that will be effective from Income Year 2007-2008 (Assessment Year 2008-2009) as per following table:

Income Year 2007-2008 Income Year 2006-2007 (Assessment Year 2008-2009) (Assessment Year 2007-2008)

Income Slabs Tax Rates Income Slabs Tax Rates

i. On the Þrst Taka 165,000 Nil i. On the Þrst Taka 150,000 Nil of total income for Male of total income

On the Þrst Taka 180,000 Nil

of total income for Female, Not Applicable Nil persons aged 70 & above and Disabled assessees

ii. On the next Taka 275,000 10% ii. On the next Taka 275,000 of 10% of total income total income

iii. On the next Taka 325,000 15% iii. On the next Taka 325,000 15% of total income of total income

iv. On the next Taka 375,000 20% iv. On the next Taka 375,000 20% of total income of total income

v. On the balance of total 25% v. On the balance of total income 25% income

Non-Resident (Foreign) assessee 25% Non-Resident (Foreign) assessee 25%

Minimum Tax: Individuals Tk. 2,000 Minimum Tax: Individuals Tk. 2,000

3. Minimum Tax (Individual):

Minimum tax for individual assessees has been remained same as Taka 2,000, whose income exceeding exemption limit of Taka 165,000 or Taka 180,000 or Taka 215,000 or Taka 230,000 (as the case may be). If minimum tax becomes less than Taka 2,000 or negative after adjusting Investment Tax Credit, individual assessees have to pay Taka 2,000 as minimum tax.

Minimum tax exempted income for female, persons aged 70 years & more and disabled assessees having only agricultural income has been enhanced from Taka 190,000 to Taka 230,000 while for other assesees this limit is Taka 215,000.

Changes in Taxation Laws 2008-2009

Income Tax


4. Conveyance Allowance: [Rule # 33C]

Exemption limit for conveyance allowance receivable by an employee in cash has been extended to Taka 24,000 per annum from Taka 18,000.

5. Investment Allowance for Tax Credit: [Section: 44]

Maximum ceiling for Investment Allowance has been enhanced from Taka 250,000 to Taka 500,000, subject to maximum of 25% (previously was 20%) of the total income, excluding employerÕs contribution to recognized PF & interest thereon, and actual investment made by assessee, whichever is lower.

Tax Rebate @ 10% (previously was 15%) on Investment, whichever is lower among the respective three above alternatives, shall be allowed.

6. Tax Holiday: [Section: 46B]

Exemption of Tax from the income and gains of newly established industrial undertakings, tourism industry or physical infrastructure facility set-up between 1st July 2008 and 30th June 2011 (both days inclusive), subject to certain cases, shall be exempted from tax at the rate speciÞed as:

If the said undertaking is set-up in Dhaka and Chittagong divisions, excluding the hill districts of Rangamati, Bandarban, and Khagrachari; Tax Holidays applicable for a period of 5 years beginning with the month of commencement of commercial production or operation;

Period of Exemption Rate of Exemption

For the Þrst two years (1st and 2nd year) 100% of Income

For the next two years (3rd and 4th year) 50% of Income

For the last one year (5th year ) 25% of Income

If the said undertaking is set-up in Rajshahi, Khulna and Barisal divisions, and hill districts of Rangamati, Bandarban, and Khagrachari; Tax Holidays applicable for a period of 7 years beginning with the month of commencement of commercial production or operation;


For the Þrst three years (1st, 2nd & 3rd year) 100% of Income

For the next three years (4th, 5th & 6th year) 50% of Income

For the last one year (7th year) 25% of Income

7. Changes in ceiling of House Rent Income for TDS (Section 53A & Rule 17B)

Monthly ceiling of House Rent income for TDS has been enhanced to Tk. 20,000 from Tk. 15,000


a.

b.

Income Tax


Enhancement of Computer Depreciation Rate and time for Accelerated Depreciation (Third Schedule)

Computer and computer equipments Depreciation Rate has been enhanced to 30% from 20%

Time limit for Accelerated Depreciation (Plant & Machinery) has been extended upto 30th June 2010.

9. Exemption of Tax from Total Income: [Sixth Schedule, Part A]

Certain exemptions have been granted through Sixth Schedule of ITO 1984:

3� Income from dividend of a Mutual Fund or a Unit Fund upto Taka 25,000 fully exempted. Such Income in excess of Tk. 25,000 is only taxable [Para # 22A]

Agricultural Income upto Tk. 50,000 (previously it was Tk. 40,000) [Para 29]

Income from the business of Software Development and Information Technology Enabled Services (ITES), including IT support & Software maintenance support services, data entry, data processing, call centre, BPO services, etc from 1st July 2008 to 30th June 2011 [Para # 33]

Income from fisheries, poultry, production & marketing of seeds, farming (cattle, dairy, frog & mushroom), horticulture, floriculture and sericulture from 1st July 2008 to 30th June 2011, if such income exceeds Taka 150,000 at least 10% of the income shall be invested in Bond or Government Securities [Para # 34]

3� Income from the export of handicrafts from 1st July 2008 to 30th June 2011 [Para # 35]

Any amount paid by the Government as Tax on behalf of Petroleum Exploration Company under Production Sharing Contract (PSC) in the hands of oil and gas companies [Para # 36]

3� Income from educational activities of private Agricultural College and University [Para # 37]

Income from any building not less than five storied having at least ten flats and constructed between 1st July 2008 to 30th June 2013 in the speciÞed areas [Para # 38]

Income from any Small and Medium Enterprise (SME) having annual turnover not more than Taka 2,400,000 [Para # 39]

3� Income from Zero Coupon Bond received by a person [Para # 40]

10. Income Tax Return for Govt. Employees living abroad [Section 75]:

An individual being Govt. official engaged in higher education on deputation or employed

under lien outside Bangladesh shall file Return or Returns for the period of such deputation or

lien, at a time, within 3 (three) months from the date of his return to Bangladesh. Provided

that DCT shall not extend the date of submission of return in respect of Universal Self

Assessment under Section 82BB.

3�

3�

3�

3�

3�

3�

8.

-

-


8

Taka 500 for each trade

license renewed by City Corpn.

Rent upto Tk. 15,000 = Nil

Rent from Tk. 15,001 to Tk. 35,000 = 3%

Rent exceeds Tk. 35,000 = 5%

Interest on deposit of Post Office Savings Bank Account

10%(deductible only when total interest exceeds Tk. 150,000 and TDS applicable on the excess of interest Tk. 150,000 only.)

11. Changes in Withholding Tax/ TDS rates: [Section 52 and 53]

Sl # Head of Deduction/ Section New TDS Rates Earlier TDS Rates collection of Tax at Source FY 2008-2009 FY 2007-2008

1 Trade License 52K

2 Rental Power Company 52N 4% Nil

3 Monthly House Rent to Landlord: 53A & Rule 17B

Rent upto Tk. 20,000 Nil

Rent from Tk. 20,001 to Tk. 40,000 3%

Rent exceeds Tk. 40,000 5%

4 Insurance Commission 53G 3% 7.5%

5 53I Nil

53J & Rule 17BB

3� Rent upto Tk. 15,000 Nil Nil

3� Rent Tk. 15,001 to Tk. 30,000 3% Nil

3� Rent exceeds Tk. 30,000 5% Nil

7 Advertising bill of newspaper or 53K 3% Nil magazine or private television channel;

8 TDS from Importers Sec. 53 & Rule 17A

Monthly Rental value of vacant land or plant or machinery : (not applicable for lease rentals payable to leasing companies)

6

Changes in Taxation Laws 2008-2009Income Tax


Taka 1,000 for each trade license

issued/renewed by City Corpn.

9

TDS @ 0.25% from export of any goods, except knit wear land woven garments, under section 53BBBB will no more be considered as Final Settlement of Tax (Section 82C) effective from 1st July 2008. This will now be considered as Advance Tax.

TDS from Interest of Scheduled Bank & Govt. approved DPS under section 53F is withdrawn, effective from 1st July 2008.

TDS on income of NRBs (Non-Resident Bangladeshi), other than Dividend income, shall be applied at same rate like resident assessees. TDS on Dividend Income of NRBs will be @ 10% only (Section 54).

➢

➢

➢

12. Introduction of new Annual Income Tax Return Form: [Rule 24, 25 & 25A]

As per SRO # 88-Ain/Income Tax/2008, dated 7th April, 2008, new Income Tax Return Forms IT-11 GA (for Individual) and IT-11 GHA (for Company) have been introduced to amend earlier forms with Wealth Statement (IT 10B) and Life Style Statement (IT 10BB) and subject to unavailability of new forms assessee may use earlier Income Tax Return Forms.

13. Penalty for Concealment of Income: [Section 128]

Penalty for concealment of income has been re-Þxed @ 10% of tax X number of years tax avoided, which would have been avoided with effect from 1st July 2008.

14. Withdrawal of Exemption of Tax from Income of CA Firms:

As per SRO # 205-Ain/Income Tax/2008 dated 30th June 2008, the Income of CA Firms will taxable in the hands of the Firms effective from the Income Year 2008-2009 by omitting SRO # 150-Ain/1995 dated 28th August 1995 (Amended SRO # 183-Ain/1998 dated 19th August 1998 and SRO # 181-Ain/1999 dated 1st July 1999).

15. Presumptive Tax on AC Bus:

As per SRO # 204-Ain/Income Tax/2008 dated 30th June 2008, Presumptive Tax on AC Bus has been re-Þxed at Tk. 5,000 effective from 1st July 2008, payable at the time of registration and renewal

Sl # Head of Deduction/ Section New TDS Rates Earlier TDS Rates collection of Tax at Source FY 2008-2009 FY 2007-2008

Electronic Cash Register (H.S. Code 8470.50.00)

Silver Bullion (H.S. Code 7106.91.00, 7106.92.00)

Gold Bullion (H.S. Code 7108.12.00, 7108.13.00)

Ferrous waste and scrap of stainless steel (H.S. Code 7204.21.10)

Nil

Nil

Nil

3%

3%

3%

3%

Changes in Taxation Laws 2008-2009Income Tax


10

Extension of Time to charge Tax at Reduced Rate Tax on Income of Jute Industry and Textile Industry:

As per SRO # 206-Ain/Income Tax/2008 dated 30th June 2008 the Jute Industry and SRO # 207-Ain/Income Tax/2008 dated 30th June 2008 Jute and Textile Industries will continue pay tax at reduced rate of @ 15% on their income until 30th June, 2011.

17. Whitening Black Money:

As per SRO # 208-Ain/Income Tax/2008 dated 30th June 2008, any individual, company or other assessee has failed to show his/her/its legal income and investment in Land, Building, Car, Bank balance, Stock etc. in income Tax Return, they may get redemption by paying tax liability & penalty @ 7% on tax of Income Year 2008-2009 and get advantage to show that income as investment in prescribed form between 1st July 2008 and 31st October 2008.

18. Withdrawal of provision on Foreign Technicians Tax-Free Income (6th Schedule):

Provision for exemption of tax on income of foreign Technician for 3 years has been withdrawn effective from 1st July 2008. However, persons already enjoying such beneÞt will continue to get the same until end of 3 years.

19. Withdrawal of Minimum Tax for Companies [Section 16CC]:

Provision for charging minimum tax for companies u/s 16CC has been withdrawn.

20. Cancellation of Provision for submission of Return u/s 82B, 83A and 83AA and Rule 38:

Provision for Þling Return under Self Assessment Scheme u/s 83A & Rule 38, Assessment on the basis of Return u/s 82B and Self Assessment Scheme for Private Limited Companies u/s 83AA have been withdrawn effective from 1st July 2008.


16.

Income Tax


11

Value Added Tax

1. Expansion of VAT net:

Income from the following businesses will be included in the scope of VAT:

a. Repairing & Servicing of taxable goods;

b. Engineering Firms;

c. Jarda, Scented Tobacco and Burnt Tobacco

2. Relieve from the Scope of VAT:

Income of the following sectors will not be included in the scope of VAT:

Services rendered by Academic & Training Institute except English Medium School, private Medical & Engineering college;

b. Indenting Commission;

c. Silver Bullion;

d. Rods & Iron;

e. Fabrics;

f. Poultry;

g. Dairy; and

h. Fishing;

3. Enhancement of Area Regarding Turnover Tax & Cottage Industry:

Turnover Tax @ 4% if annual turnover of taxable goods or services is less than Taka 2,400,000 (Previous Taka 2,000,000);

Investment of Cottage Industry does not exceed Taka 1,500,000 and corresponding annual turnover does not exceed Taka 2,400,000;

4. Offences & Penalties [Section 37]:

Penalties will be imposed for not maintaining any documents, Electronic Cash Register (ECR) or Computer.

5. Others:

a. VAT Return Form ÔMushok 19Õ format has been revised;

b. Examination of Return by Inspector or Superintendent or concerned authority within not more than 30 days (previous 60 days) has been re-Þxed;

Registration for Taxable goods or Services must have at least annual turnover Taka 2,400,000;

Exemption of VAT on supply of sample for export does not exceed Taka 20,000 (Previous 10,000);

e. VAT authority shall return the sample to its owner within 30 days;

a.

a.

b.

c.

d.

Changes in Taxation Laws 2008-2009Value Added Tax


Software Modules for Human Resource Management

Green Sayera B-1, House: 125, Road: 2, Block: A, Niketon Society, Gulshan-1, Dhaka, BangladeshPhone: 986 2802, Fax: + 880-2- 986 2819, E-mail: [email protected]

For your queries and software presentation you may contact:

Holidays

Training

performanceEmployeesdata

Employees data &

benefit package

Employees data &

benefit package

Payments

Payments &

deductions

OT & LW

P

Employees data &

benefit packageTax

challan

Emplo

yees

dat

a

Employee

s data

Employees data

Leav

e en

cash

men

t

Employees database (default sub-module)☛ Keeping all the employee records and the organogram in a central

database☛Facility of keeping employees� photograph, nominees photograph and

signature in the system☛Auto-generation of appointment letters☛Employee grade matrix can be conÞgured with grade category, grade

and step with payment amounts☛Transfer and promotion history of employees☛Manpower statement ☛CertiÞcate of service☛CompanyÕs organogram and job description of employees☛Multi-company operations and dataset keeping☛ Online operations between branches and HQs having LAN/WAN

connectivity☛ Ofßine operations among companies, and between HQs and branch

ofÞces in a company through a data synchronization utility support☛Company wise and branch wise backup/restore support☛UsersÕ activity audit trail☛ The central place of all HR Management Pack modules (PayPack and

TaxTool) for data sharing. This is the base module for all these packages.

Attendance Register (optional sub-module)☛Provision for keeping attendance records ☛Online veriÞcation☛Auto-posting of leave without pay into PayPack as a deduction in the

salary or into Leave Register as a deduction in the leave available☛Holiday calendars☛Printing attendance statements with various parameters☛Annual statements on hartal days☛Employee-wise monthly statements on total number of days attended,

late, absent and on leave☛Integration with electronic attendance card systems☛ Automatic overtime (OT) calculation based on the company policy

conÞgurable by the user☛ OT calculation methods and parameters and attendance options are

user- conÞgurable

Leave Register (optional sub-module)☛ConÞguration on leave types and total days in the year☛Storing leave application form☛Online veriÞcation of leave application forms☛Direct leave record entry form where online veriÞcation process will not

be used☛Affecting the attendance register automatically by leave records☛Adjusting the leave at the year end (earn or lapse)☛Auto-posting of leave encashment into PayPack as an income item☛Leave management options are user-conÞgurable

Training & Development (optional sub-module)☛ Creating annual training plan☛ Creating training courses and keeping training program records - local

& overseas training☛ Maintaining participantsÕ list in each training programs & keeping

records of performance☛Evaluate staff performance and recommend for training☛Training cost budget and actual expense comparison☛ Auto-posting of staff performance achieved from training into

Performance Appraisal process

Performance Appraisal (optional sub-module)☛Mechanisms for evaluating the performance of employees☛Mechanisms for appraising the performance of employees☛Exit interview with the staff

Summary in Taxation Laws2008-2009

Income TaxValue Added Tax

Gift Tax

15

Summary in Taxation Laws 2008-2009

a.

b.

c.

d.

e.

f.

g.

i.

ii.

iii.

1. Definitions:

Assessee [Section: 2(7)]: Assessee means a person by whom any tax or other sum of money is payable under Income Tax Ordinance 1984.

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.

Income [Section: 2(34)]: Income means any sum of income or gain from whatsoever source derived, or accruing or arising or received or deemed to be accrue or arise or to be received under any provision of IT Ordinance 1984

Tax [Section: 2(62)]: Tax means the income tax payable under the Income Tax Ordinance 1984 and include any additional tax, excess profit tax, penalty, interest, fee or other charge leviable or payable under the IT Ordinance 1984.

Income Year [Section: 2(35)]: Income Year means the financial year immediately preceding the assessment year or when accounts are closed on a date within the financial year, the twelve months ending on the date on which accounts are closed

Assessment Year [Section: 2(9)]: Assessment Year means the period of twelve months beginning from first day of July of every year. This is the immediate following financial year of Income Year. Examples of Accounting Year, Income Year and Assessment year:

Accounting Period / Year Income YearAssessment Year

1 Accounting Year: July 2007 to June 2008 2007-08 2008-09

2 Accounting Year: January 2007 to December 2007 2007-08 2008-09

3 Accounting Year: April 2006 to March 2007 2006-07 2007-08

4 Accounting Year: October 2006 to September 2007 2007-08 2008-09

5 Accounting Year: August 2006 to July 2007 2007-08 2008-09

Basis of Residence [Section: 2(55)]:

Individual: An individual will be Resident:

if he stays in Bangladesh for a period of or for the periods all together at least 182 days or more in the income year or

if he stays in Bangladesh for a period of or for the periods all together at least 90 days or more in the income year and 365 days or more during the immediate four preceding years of income year.

Company: The company will be resident if the management of its affairs is situated wholly in Bangladesh in the income year.

Hindu Undivided Family, Firm, Other Association of Persons: They will be resident if its control and management of affairs is situated wholly or partly in Bangladesh in the income year.


Income Tax

Non-resident [Section: 2(42)]: Non-resident means a person who is not a resident.

Perquisites [Section 2(45), 30(e)]: Perquisite limit Taka 200,000. Anything paid in excess of allowable perquisite limit is taxed in the hands of employer.

Perquisite means any payment made to an employee in the form cash or in any other form excluding: • basic salary • festival bonus • arrear salary • advance salary • overtime • leave encashment • leave fare assistance • incentive bonus maximum upto 10% of disclosed profit of relevant income year • contribution to a recognized Provident Fund, Pension Fund and Superannuation Fund.

Salaries [Section 2(58) and 18]: Salary includes:i. any wages;

ii. any annuity, pension or gratuity;

iii. any fee, commission, allowance, perquisites or profit in lieu of, or in addition to,

salary or wages;

iv. any advance of salary;

v. any leave encashment;

2. Heads of Income [Section 20]:

a. Salaries [Section 21];

b. Interest on Securities [Section 22 & 23];

c. Income from House Property [Section 24 & 25];

d. Agricultural Income [Section 26 & 27];

e. Income from Business or Profession [Section 28, 29 & 30];

f. Capital Gains [Section 31 & 32];

g. Income from Other Sources [Section 33 & 34];

3 Income Deemed to Accrue or Arise in Bangladesh: [Section 18]

The following income shall be deemed to accrue or arise in Bangladesh, namely:

a. Any income which falls under the head Salaries, wherever paid, if [Section 18(1)]:

• it is earned in Bangladesh; or

it is paid by Bangladesh Government or local authority in the service of such government or authority;

b. Any income accruing or arising, whether directly or indirectly, through or from [Section 18(2)]:

• any business connection in Bangladesh;

• any property, asset, right, other source of income in Bangladesh;

• transfer of capital assets in Bangladesh;

c. Any dividend paid outside Bangladesh by a Bangladeshi company [Section 18(3)]

d. Any income by way of interest payable [Section 18(4)]:

h.

i.

j.

16


•�


Income Tax

•� by the government; or

•� by a person who is resident / non-resident in Bangladesh;

e. Any income by way of fees for technical services payable [Section 18(5)]:

• by the government; or

• by a person who is resident / non-resident in Bangladesh;

f. Any income by way of royalty payable [Section 18(6)]:

• by the government; or

• by a person who is resident / non-resident in Bangladesh;

4. Deemed Income: [Section 19]

Unexplained cash credits, investments, possession of bullion, unpaid trading liabilities/ loan etc. will be treated as deemed income, which are mentioned below in brief with relevant heads of income and respective sub-section:

i Unexplained Cash credit - Income from Other Source [Section 19(1)]

Unrecorded investment or possession of bullion, jewellery etc. - Income from Other Source [Section 19(2)]

iii Unexplained expenditure - Income from Other Source [Section 19(3)]

iv Unrecorded investment - Income from Other Source [Section 19(4)]

v Ownership of any money, bullion etc. - Income from Other Source [Section 19(5)]

Income received from discontinued business - Income from Business or Profession [Section 19(6)]

vii Receipt of Dividend - Income from Other Source [Section 19(7)]

Difference between the purchase price and fair market value - Income from Other Source [Section 19(8)]

ix Salami or Premium - Income from Other Source [Section 19(9)]

x Goodwill, compensation or damages, etc. - Income from Other Source [Section 19(10)]

xi Cancellation of indebtedness - Income from Other Source [Section 19(11)]

xii Managing Agency Commission - Income from Other Source [Section 19(12)]

xiii Lotteries, crossword puzzles etc. - Income from Other Source [Section 19(13)]

xiv Income from Insurance Business - Income from Business or Profession [Section 19(14)]

Receipt back of loss, bad debt or expenditure and unpaid trading liability etc. - Income from Business or Profession [Section 19(15)]

Income from sale of depreciated assets having been used for the purpose of any business or profession - Income from Business or Profession [Section 19(16)]

Income from sale of depreciated assets having been used for agricultural purpose - Income from Agriculture [Section 19(17)]

17

xv

xvi

vi

ii

viii



Income Tax

xvii

Income from receipt of insurance, salvage or compensation moneys in respect of assets having been used for the purpose of any business or profession - Income from Business or Profession [Section 19(18)]

Income from receipt of insurance, salvage or compensation moneys in respect of assets having been used in agriculture - Income from Agriculture [Section 19(19)]

Income from sale of assets of capital nature - Income from Business or Profession [Section 19(20)]

xxiUnpaid Loan - Income from Other Source [Section 19(21)]

Un-adjustable security money taken from tenant - Income from House Property [Section 19(22)]

Income from transfer of export quota by Garments Industry - Income from Business or Profession [Section 19(23)]

Investment by a private limited company or a public limited company in its equity received from share holder or director not being received by cross cheque - Income from Other Source [Section 19(24)]

5.Scope of Total Income [Section 17]

The total income of any income year of any person includes:

6.Char ge of Additional Tax [Section 16B]:

If a publicly traded company (other than banking or insurance company) does not issue, declare or distribute dividend or bonus share equivalent to at least 15% of its paid up capital within 6 months following its income year, it will be charged 5% additional tax on undistributed profit in addition to tax payable under IT Ordinance 1984. Here undistributed profit means accumulated profit including free reserve.

7.Char ge of Excess Profit Tax [Section 16C]:

If a banking company operating under Banking Companies Act 1991 shows a profit exceeding 50% of the aggregate sum of capital and reserve, the bank shall pay @ 15% tax of such excess amount. Such tax is payable in addition to tax payable under IT Ordinance 1984.

8.Income Exemption Limit:

Tax exemption income limit of individual assesses enhanced from Taka 150,000 to Taka 165,000 for male individual assesses, while this limit for female, persons aged 70 & above and disabled assesses has been Þxed at Taka 180,000 with effect from Income Year 2007-2008 (Assessment year 2008-2009).

18

xviii

xix

xx

xxii

xxiii

xxiv

Resident

All income from whatever sources including received or deemed to be received in Bangladesh; accrue or arises or deemed to accrue or arises in Bangladesh; or accrue or arises outside Bangladesh

Non-Resident

All income from whatever sources including received or deemed to be received in Bangladesh; accrue or arises or deemed to accrue or arises in Bangladesh



Income Tax

9. Personal Tax Rate Structure: Taxable income slab and tax rates have been changed for personal income tax. The Five-tier taxable income slabs and tax rates for individual assessees (Including Non-resident Bangladeshi) applicable for the assessment year 2007-2008 and 2008-2009 are as follows:

Income Year 2007-2008 Income Year 2006-2007 (Assessment Year 2008-2009) (Assessment Year 2007-2008)

Income Slabs Tax Rates Income Slabs Tax Rates

i. On the first Taka 165,000 of total Nil i. On the first Taka 150,000 of Nil income for Male total income

On the first Taka 180,000 of total Nil Not Applicable Nil income for Female

On the first Taka 180,000 of total Nil Not Applicable Nil income for person aged 70 & above

On the first Taka 180,000 of total Nil Not Applicable Nil income for Disabled person

ii. On the next Taka 275,000 of total 10% ii. On the next Taka 275,000 of total 10% income income

iii. On the next Taka 325,000 of total 15% iii. On the next Taka 325,000 of total 15% income income

iv. On the next Taka 375,000 of total 20% iv. On the next Taka 375,000 of total 20% income income

v. On the balance of total income 25% v. On the balance of total income 25%

Non-Resident (Foreign) assessee 25% Non-Resident (Foreign) assessee 25%

Minimum Tax: Individuals Tk. 2,000 Minimum Tax: Individuals Tk. 2,000

10. Tax Rebate for assesses paying tax at the highest rate of 25%Individual assesses paid tax @ 25% during the assessment year 2007-2008 with declaration of more than 10% higher income in 2008-2009 will get 10% tax rebate on tax attributable to that additional higher income declared in 2008-2009 assessment year.

11. Minimum Tax (Individual):

Minimum tax for individual assessees has been remained same as Taka 2,000, whose income exceeding exemption limit of Taka 165,000 or Taka 180,000 or Taka 215,000 or Taka 230,000 (as the case may be). If minimum tax becomes less than Taka 2,000 or negative after adjusting Investment Tax Credit, individual assessees have to pay Taka 2,000 as minimum tax.

Minimum tax exempted income for female, persons aged 70 years & more and disabled assessees having only agricultural income has been enhanced from Taka 190,000 to Taka 230,000 while for other assesees this limit is Taka 215,000.

19



Income Tax

i.

vi.

ii.

viii.

xi.

xv.

12. Incidence of Tax on Non-Resident:

A person who is a non-resident is liable to tax on the incomes, profits and gains which are received or deemed to have been received or are deemed to accrue or arise to him in Bangladesh.

A non-resident assessee is not entitled to any sort of allowance and relief as are admissible to a resident assessee for the purpose of tax rebate;

A non-resident assessee (other than Bangladeshi non-resident) is liable to tax on his total income @ 25%.

A Bangladeshi non-resident is subject to tax at normal rate, as applicable for a resident assessee.

Income fully Exempted from Tax subject to prescribed conditions and limitations [Section 44(1) and Part A of Sixth Schedule]:

Certain incomes are totally exempted from tax and they are not includable with other income even for rate purpose. Income speciÞed in Part-A of the Sixth Schedule (Exclusions from Total Income) of the Income Tax Ordinance 1984 are exempt and excluded from the computation of total income subject to limits, conditions and qualiÞcations laid down therein:

Income from property held under Trust but shall not apply to NGOs registered with NGO Affairs Bureau [Para # 1]

Any income derived from micro credit operations by NGOs registered with NGOAB [Para # 1A]

iii. Income of a religious or charitable institution derived from voluntary contributions. [Para # 2]

iv. Income of Local Government [Para # 3]

v. Income of Provident Fund and other Funds [Para # 4]

Traveling Allowances, etc. (to meet expenses wholly and necessarily incurred in performance of the duties of an ofÞce or employment of proÞt) incurred [Para # 5]

vii. Income of Trustees on behalf of any recognized fund [Para # 6]

Income of the personnel of the foreign missions, not being a citizen of Bangladesh [Para # 7]

ix. Pension [Para # 8]

x. Interest on government securities maximum upto Taka 5,000 [Para # 12]

Interest on Debentures approved by SEC upto Taka 20,000 including exemption of interest on Govt. Securities of Taka 5000 [Para # 13]

xii. Share of Capital Gains of a Partner of a Firm [Para # 18]

xiii. Income of a member of Hindu Undivided Family [Para # 19]

xiv. Gratuity [Para # 20]

Any payment received from Provident Fund and other Funds (PF, WPPF and approved superannuation fund) [Para # 21]

20

13.


b.

a.

c.

d.


Income Tax

21

a.


xxvi.

xxvii.

xxix.

xxxii.

xxx

xxxiii.

xvi. Income from dividend of a mutual fund or a unit fund upto taka 25,000 [Para # 22A]

xvii. Interest on tax-free Government Securities [Para # 24]

xviii. Interest on the balance in a Recognized Provident Fund [Para # 25]

xix. Payment received on voluntary retirement [Para # 26]

xx. Income of indigenous Hillman [Para # 27]

xxi. Income from export business [Para # 28]

xxii. Income from agriculture upto Taka 50,000 [Para # 29]

xxiii. Income of Mutual Fund [Para # 30]

xxiv. Capital Gains from Machinery or Plant used in business or profession [Para # 31A]

xxv. Income from Savings Instruments upto Taka 150,000 [Para # 31B]

Income from the business of Software Development and Information Technology Enabled Services (ITES) [Para # 33]

Income from Þsheries, poultry, production & marketing of seeds, farming (cattle, dairy, frog & mushroom), horticulture, ßoriculture and sericulture; if such income exceeds taka 150,000 and at least 10% of income invested in bond & govt. securities [Para # 34]

xxviii. Income from the export of handicrafts [Para # 35]

Any amount paid by govt. as tax on behalf of Petroleum Exploration Company under Production Sharing Contract (PSC) [Para # 36]

Income from educational activities of private Agricultural College and University [Para # 37]

xxxi. Income from any building not less than Þve storied having at least ten ßats [Para # 38]

Income from any Small and Medium Enterprise (SME) having annual turnover not more than Taka 2,400,000 [Para # 39]

Income from Zero Coupon Bond [Para # 40]

14 Investment Allowance for Tax Rebate [Section 44 (2) & (3) and Part B of Sixth Schedule]:

Maximum ceiling of Investment Allowance: Maximum ceiling for Investment Allowance is Taka 500,000, subject to maximum of 25% of the total income excluding employerÕs contribution to recognized PF & Interest thereon.

b. Tax Rebate: Tax Rebate @ 10% of the eligible investment shall be allowed as Rebate.

c. Investments eligible for Tax Rebate:

i) Life insurance premium paid by an individual [Para # 1]

ii) Life insurance premium paid by Hindu Undivided Family [Para # 2]

iii) Contribution to Provident Fund and Other Funds [Para # 3, 4, 5 & 6]


Income Tax

iv) Investment in Stocks and Shares [Para # 8]

v) Investment in Debentures or Debenture-Stocks [Para # 9]

vi) Investment in Unit CertiÞcate etc [Para # 10]

vii) Contribution in any Deposit Pension Scheme (DPS) [Para # 11]

viii) Donation to a charitable Hospital [Para # 11A]

ix) Donation to organization for the welfare of the retarded people [Para # 11B]

x) Donation to Zakat Fund [Para # 13]

xi) Contribution to Benevolent Fund and Group Insurance Scheme [Para # 17]

xii) Donation of Aga Khan Development Network [Para # 21]

xiii) Donation to philanthropic or educational institution [Para # 22]

15. Income from Salary [Section 21]:

Any income classiÞable as salaries irrespective of its place of payment shall be deemed to be income accruing or arising income in Bangladesh if it is earned in Bangladesh or it is paid by the government or local authority in Bangladesh to a citizen in Bangladesh.

Salary once included in any year on due basis or advance payment basis is not includible in the income of any other year.

i. Income classiÞed under the head Salaries: Salaries include the following-

any salary due from an employer to the assessee in the income year whether paid or not;

any salary paid or allowed to him in the income year by or on behalf of an employer, though not due or before it became due to him;

any arrears of salary paid or allowed to him in the income year by or on behalf of an employer, if not charged to income tax for any earlier income year;

ii. Perquisites, allowances and benefits includible as income of Salaried Persons:

Extent of perquisites, etc. includible as income under the head salary has been prescribed in rule 33A to 33J. Basic salary for the purpose of determination of value of perquisites, allowances and benefits, means the pay and allowances payable monthly or otherwise but does not include:

dearness allowance or dearness pay unless it includes in the computation of superannuation or retirement benefits;

employerÕs contribution to a recognized provident fund or a fund to which Provident Fund Act 1925 applies and the interest thereon;

allowances which are exempt from the payment of tax;

allowances, perquisites, annuities and benefits as referred to sub rule 1 of rule-33;

A share-holder being director of more than one company shall be entitled to the benefit under rule-33 for one company only.

House rent allowance receivable in cash [Rule # 33A]: House rent allowance in excess of Taka 15,000 per month or 50% of basic salary or, whichever is less, shall be included in income.

22


iii.


Income Tax

23

Rent free accommodation [Rule # 33B]: The rental value of the accommodation or 25% of basic salary, whichever is less, shall be included in income.

Conveyance allowance receivable in cash with no conveyance facility [Rule # 33C]: Allowable amount Taka 24,000 per annum the allowance so receivable in excess of Taka 24,000 per annum shall be included in income.

Conveyance provided exclusively for personal or private use [Rule # 33D]: An amount equal to 7.5% of basic salary shall be included in income.

Additional conveyance allowance [Rule # 33E]: The whole amount shall be included in income.

viii.Free or concessional passage for travel abroad or within Bangladesh [Rule # 33G]:

Where free or concessional passage for travel abroad or within Bangladesh is provided by the employer to an employee (including the members of his household and dependents) shall be included in the income of the employee:

Where the passage is provided in accordance with the terms of employment: An amount equal to the sum by which the cash payments, if any, made by employer exceeds the actual expenditure incurred by the employee;

Where the passage is not in accordance with the terms of employment: The whole of the amount paid in cash and if not paid in cash, the amount which would have been expended by the employee if not provided by the employer;

Where free concessional passage for travel abroad is availed more than once in two years: The whole of the amount paid in cash, if any, for such additional passage. If no cash payment is made, the amount which would have been expended for this passage if not provided by the employer;

Where the transport is provided free of cost or at a confessional rate: By an undertaking engaged in the transport of passengers or the carriage of goods of an employee of the undertaking in any conveyance owned or charted by the undertaking for the purpose of the transport of passengers, nothing shall be added in his income;

Entertainment allowance [Rule # 33H]: The whole amount shall be included in income except for free tea, coffee, beverages or the like thereof provided at the office premises during the course of work.

Medical expenses [Rule # 33I]: Receipts / receivable from employer in excess of actual expenditure shall be included in the income of the assessee.

xi.Other benefits [Rule # 33J]: Equivalent amount shall be included in income.

Allowable exemptions on the income of Sponsor / Shareholder Directors [Rule # 33(2) (b)]: As per SRO 207-Ain/2005 dated 06.07.2005, a shareholder, being director of more than one company, shall be entitled to the benefits under rule # 33 for one company only.

16.Income from House Property [Section 24 & 25]:

Income from house property whether used for commercial or residential purposes is taxable on the basis of its annual value. The value determined by the tax authority will be treated as annual value.

Deductions allowable in the determination of income from house property: The following deductions are allowable in determining the net income:


iv.

v.

vi.

vii.

ix.

x.

xii.

a.

b.


Income Tax

Maintenance allowances: (25% of annual value in case it is used for residential purposes, and 30% of annual value in case it is used for commercial purpose)

ii) Insurance premium

iii) Interest on mortgage or other capital charges

iv) Any tax not being a charge leviable on annual basis

v) Ground rent

vi) Land development tax

Interest payable on capital borrowed for the purpose of acquisition, construction, reconstruction, repair or renovation of the house property; subject to ownerÕs self occupied portion for which interest on borrowed capital not exceeding Taka 2,000,000.

viii) Proportionate vacancy allowances

Interest payable during construction period to be allowed in 3 subsequent equal installments.

Interest or annual charge payable outside Bangladesh shall not be allowed as deduction on which tax has not been paid or deducted at source.

17. Income from Interest on Securities [Section 22 & 23]:Incomes classifiable under the head Interest on Securities are:

Interest receivable by the assessee on any security of the government or any security approved by the government;

Interest receivable by him on debenture or other securities of money issued by or on behalf of a local authority or company;

Deductions permissible in the determination of income from interest on securities are:

Commission or charges deducted from interest by a bank realizing the interest on behalf of the assessee;

Interest payable on money borrowed for the purpose of investment in the securities;

Interest on Debentures approved by SEC upto Taka 20,000 including exemption of interest on Govt. Securities of Taka 5,000; [Sixth Schedule, Para # 13]

Provided that allowance or deduction on account of interest or commission in respect of or allocable to the tax-free government securities shall not be allowed. Deduction will also not be allowed in respect of interest payable outside Bangladesh on which tax has not been paid or deducted.

18. Income from Business or Profession [Section 28]:

Income from business or profession includes the following:

i. profits and gains of any business or profession;

income of trade or professional association derived on account of specific services performed for its members;


i)

vii)

ix)

A.

B.

C.

i.

ii.

iii.

ii.

Summary in Taxation Laws 2008-2009Income Tax


iii. value of any benefit or perquisite arising from business or exercise of profession;

receipt back of loss, bad debt or expenditure and unpaid trading liability as referred to section 19 (15);

v. income from sale of asset of depreciated asset as referred to section 19 (16);

income from receipt of insurance, salvage or compensation money as referred to section 19 (18);

vii. income from sale of asset of capital nature as referred to section 19 (20);viii. income from transfer of export quota as referred to section 19 (23).

19. Rates of Corporate Tax are as follows:

iv.

vi.

Assessees

Publicly traded Companies (other than Banks, Insurance & Financial Institutions):

Normal Tax Rate (paying Dividend 10% or more)

Rebate @ 10% on applicable tax in case where declared dividend is more than 20%

Additional Tax, if declared dividend or bonus share rate is less than 15% [section: 16B]

Companies declaring dividend less then 10% or dividend not paid within the time Þxed by SEC

Banks, Insurance and Financial Institutions:

Corporate Tax

Excess Profit Tax (banks only): Profit in excess 50% of Capital+ Reserve [section: 16C]

Companies not publicly traded

Mobile Operator Company:If the company is converted into publicly traded company through at least 10% share for Initial Public Offering (IPO);

If not converted into a publicly traded company with 10% share for IPO;

Private University: Income accrued from private universities approved by University Grant Commission and other universities which are not public universities shall pay tax (other than Medical, Dental, Engineering and Agricultural University).

Previous RateAY 2007-08

30%

10%

5% on undistributed

profit

40%

45%

15% (on excess profit)

40%

35%

45%

15%

New RateAY 2008-09

27.5%

10%

5% on undistributed

profit

37.5%

45%

15% (on excess profit)

37.5%

35%

45%

15%

SL.NO.

i.

ii.

iii.

iv.

v.

Summary in Taxation Laws 2008-2009Income Tax

26

SL.NO.

vi.

vii.

viii.

ix.

x.

xi.

xii.

xiii.



Income Tax

Assessees

Company engaged in Diamond cutting and Polishing industry

Readymade Export oriented Garments Industries

Companies which manufacture of yarn related production of fabrics, dying, finishing and covering of yarn

Textile Industries

Jute Industries

Industries set up between July 2002 and June 2005 and also not applying for tax holiday (This rate will continue for five years)

Tax on Income Accrued from Research Institute under Trust Act.

Payment of Dividend: Payment of Dividend by companies formed under Company Act. 1994 or by foreign companies (FED/702/2006/5743 and Finance Ordinance 2008) to:

Non Resident Assessee: Other than non-resident Bangladeshi:

Company shareholders of tax treaty country with more than 10% total shareholdings;

Company shareholders of tax treaty countriy holding less than 10% of total shares of the company;

Company shareholders of non tax treaty countries;

Remittance of ProÞt to/by a Foreign Company

Person or Individual;

Resident Assessee: Including non-resident Bangladeshi:

Company Shareholders;

Individual;

New RateAY 2008-09

15%

10%

15%

15%

15%

20%

15%

10 %

20%

20%

20%

25%

20%

10%


15%

10%

15%

15%

15%

20%

15%

10 %

15%

15%

15%

25%

15%

10%

27

Assessees

Tax in respect of Capital Gain:

In Case of Company: [Second Schedule, Para # 2(a)]

Capital gain will be taxed as a block of income separate from other income of the assessee company at flat rate;

In Case of a person other than Company: [Second Schedule, Para # 2(b)]

Where the capital gain arises as result of a disposal after not more than 5 years from the date of acquisition;

Where the capital gain arises as result of a disposal after 5 years from the date of acquisition;

Income accrued outside Bangladesh to any of her citizen, if such income is brought into Bangladesh.

Income from business of software and IT Enabled Services (ITES) including IT Support & Software maintenance services, data entry, data processing, call centre, BPO Services, etc.

Capital gain arising out of transfer of govt. securities and stock & shares of public companies listed with Stock Exchanges [Section 32(7)]


15%(Concessional rate 10% has

been withdrawn)

At applicable rate on total

income including capital gain

At the rate applicable on total income

including said income

OR @ 15% on the

capital gain whichever is

lower

Nil

(SRO-Ain/IT/2004,

dated 13.09.04

Nil

(6th Schedule- Part A, Para 33)�

Nil

New RateAY 2008-09

15%

At applicable rate on total

income including capital gain

At the rate applicable on total income

including said income

OR @ 15% on the

capital gain whichever is

lower

Nil

(SRO-Ain/IT/2004,

dated 13.09.04

Nil

(6th Schedule- Part A, Para 33)�

Nil

SL.NO.

xiv.

xv.

xvi.

xvii.



Income Tax

20 . Allowable Deductions on income from Business or Profession [Section 29(1)]:

The allowable deductions which have been specifically mentioned are the following:

i. Rent for the business premises [Para # 1(i)]

ii. Repairs to hired business premises [Para # 1(ii)]

Bank interest paid or any profit shared with a bank run on Islamic principles in respect of capital borrowed for the purpose of business or profession [Para # 1(iii)]

iv. Share of profit paid by a bank run on Islamic principles [Para # 1(iv)]

An amount not exceeding 5% of the profit transferred to Special Reserve by financial institutions approved by the Government [Para # 1(v)]

vi. Repairs to own buildings, plants, machinery, furniture etc. [Para # 1(vi)

Insurance premium for insurance against risk of damage etc. of buildings plant etc. used in business or profession [Para # 1(vii)]

Depreciation of building, machinery, plant or furniture being owned by the assessee and used for business or profession; the allowances are admissible under Third Schedule [Para # 1(viii)]

Investment allowance for a passenger vessel or a fishing trawler, which is entitled to special depreciation is allowable at 20% of the original cost subject to stipulated conditions (Third Schedule, Para # 8) [Para # 1(ix)]

Obsolescence allowance for building, machinery or plant, which has been discarded, demolished or destroyed, under the stated circumstances and to the prescribed extent (Third Schedule, Para # 10) [Para # 1(xi)]

Obsolescence allowance and allowance on account of death or useless animals; [Para # 1(xii)]

xii. Land development tax or rent, local rate, etc. [Para # 1(xiii)]

xiii. Bonus paid to employees including festival bonus [Para # 1(xiv)]

The amount of bad debt, which is established to have become irrecoverable, under the stated circumstances [Para # 1(xv)]

The amount of bad debt written off as irrecoverable but deduction not allowed on the ground that it was not then irrecoverable, the amount which was established to be irrecoverable [Para # 1(xvi)]

The amount for bad debt having been irrecoverable in an earlier year, is allowable for the earlier year under the stated circumstances and with the consent of the assessee [Para # 1(xvii)]

Provision for bad and doubtful debt and interest thereon made by a commercial bank including the Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank and Karmosangsthan Bank for a sum equal to 1% of the outstanding loan including interest thereon or the amount of actual provision, whichever is less, subject to the specified conditions, allowable during the assessment years 2001-2002,2002-2003,2003-2004 and 2004-2005, 2005-06 and 2006-07;

iii.

v.

vii.

viii.

ix.

x.

xi.

xiv.

xv.

xvi.

xvii.

Income Tax



Handholding of Accounting functions

Handholding of Payroll functions

Transaction / Payment Processing

Employees and Corporate taxation matters

Design and Implementation of Software like TaxTool, HR/Administration , Paypack, Asset, and Benipack

Employees Provident Fund & Gratuity Fund Accounting functions

Due Diligence Review, Financial Modeling, Management & Financial Reviews

Business Advisory Services on corporate, tax, accounting and related matters

Implementation of Fixed Asset Management Systems

Design and development of Financial systems and Manuals

Salary Surveys / Pay restructuring

Headhunting / Executive Search / Recruitment and Work Permit for Expatriates

Imparting Training on basic Accounting and Computer systems

IT Audit / Compliance Audit

Handholding of Company Secretarial functions and Formation of company branch and liaison office

Our Value Added Services

Our Value Added Services

30

If any amount out of the provision for bad and doubtful debt and interest thereon, which has been allowed, is ultimately recovered, the amount so recovered shall be deemed to be profit of the year in which it is recovered [Para # 1(xviiiaa)]

Any expenditure, not being capital expenditure, laid out or expected on scientific research related to the business [Para # 1(xix)]

Any expenditure of a capital nature laid out or expended on scientific research related to the business subject to the stipulated conditions [Para # 1(xx)]

Any sum paid to scientific research institute etc. subject to the stipulated conditions [Para # 1(xxi)]

Any sum, not being of capital nature laid out or expended on any educational institute or hospital established for the benefit of employees subject to the stipulated condition [Para # 1(xxii)]

Expenditure (including capital expenditure) incurred on any educational institution or hospital established for benefit of employees and their dependents is deductible provided no charge is made for the services rendered by such hospital or institution. Expenditure incurred on the construction, maintenance or running of any institute for the training of industrial workers will be similarly deductible [Para # 1(xxiii)]

Any expenditure laid out or expended on the training of citizens of Bangladesh in connection with a scheme approved by the National Board of Revenue [Para # 1(xxiv)]

Expenses incurred in connection with visits abroad in a Trade Delegation sponsored by Government [Para # 1(xxv)]

Subscription paid to a registered trade organization or to a recognized professional institution is allowable expenditure for the purpose of computation of income from business [Para # 1(xxvi)]

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 [Para # 1(xxvii)]

Allowance in respect of expenditure on publicity and advertisement [Section 30, Para # f(iii)]

Any allowance in respect of expenditure on entertainment not in excess of the amount prescribed in this behalf, Ceiling of admissible expenditure has been prescribed in Rule 65 of Income Tax Rules, 1984 [Section 30, Para # f(i)]

On the first Taka 1,000,000 of income from business or profession: 4%

On the balance income : 2%

Foreign travel expenses for holidaying and recreation incurred by business houses on account of their employees and their dependants not exceeding the amount prescribed in this behalf under Rules 65A of the Income Tax Rules, 1984 [Section 30, Para # f(ii)]

The amount has been restricted upto 3 months� basic salary or three-fourth of the actual expenditure whichever is less, not oftener than once in every 2 years; subject to sum exceeding taka 10,000 shall not be allowed as deduction unless such payment is made through bank.

xxii.

xxiii.

xxiv.

xxv.

xxvi.

xxvii.

xxviii.

xxix.

xviii.

xix.

xx.

xxi.



Income Tax

31



Income Tax

SL.NO.

Class of Assets

Ships-

1) Ocean-going ships (new)

2) Ocean-going ships (Second hand) age at the time of purchase

• Less than 10 years• 10 years or more

Inland ships including steamers, motor vessels, iron or steel flats for cargo, wooden cargo boats, motor launches and speed boats.

Remarks

The allowance is to be calculated on the original cost

Rate/percentage of the written down value except as

otherwise indicated

21. Normal Depreciation Allowance (Third Schedule, Para # 3): [section: 29(1) (viii) & (ix)]

i. a) Building (general) 10%

b) Factory building 20%

ii. Furniture and fittings 10%

iii. Machinery and plant:

a) General rate 20%

b) Special rates-

3)

12%

12%24%

24%

Allowable expenditure on distribution of Free-Sample {(Rule: 65C), (Section 30, Para # f(iv)}In respect of industry other than pharmaceutical industry:

Turnover upto Taka 5 crore : 1.50%

Turnover exceeding Taka 5 crore but not exceeding Taka 10 crore : 0.75%

Turnover exceeding Taka 10 crore : 0.375%

In respect of pharmaceutical industry:

Turnover upto Taka 5 crore : 2.0%

Turnover exceeding Taka 5 crore but not exceeding Taka 10 crore : 1.0%

Turnover exceeding Taka 10 crore : 0.50%

Head OfÞce Expenses for a Company not incorporated in Bangladesh, allowable upto 10% the ProÞt (Section 30g)

Technical Assistance Fee / Royalty allowable upto 5% of the proÞt (Section 30h)

Incentive Bonus allowable upto 10% of the disclosed net proÞt (Section 30j)

xxx

xxx

32


In case of motor vehicles, being passenger vehicles or sedan cars, not plying for hire cost for the purpose of depreciation is restricted to Taka 1,000,000.

22. Initial depreciation: [Third Schedule, Para # 5A]

Where any building has been newly constructed or any machinery or plant has been in Bangladesh after 30th June 2002, an amount by way of initial depreciation allowance in respect of the year of construction or installation or the year in which such building, machinery or plant is used by the assessee for the first time for the purpose of his business or profession or the year in which commercial production is commenced, whichever is later, shall be allowed at the following rates:

In the case of building - 10% of the cost;

In the case of machinery or plant other than ships or motor vehicles not plying for hire - 25% of the cost;

SL.NO.

Class of Assets

Batteries, X-Ray and electric-therapeutic apparatus and accessories thereto.

Machinery used in the production and exhibition of cinematographic films

3) Motor vehicles, not plying for hire

4) Motor vehicles plying for hire

1) Professional and reference books

Aircraft, aero-engines and aerial photographic apparatus

Moulds used in the manufacture of glass or plastic goods or concrete pipe.

Mineral oil concerns

1) Below ground installations

Above ground installations, that is to say, portable boilers, drilling tools, well-head tanks and rigs.

Computer & Computer Equipments

RemarksRate/percentage of the written down value except as

otherwise indicated

1)

2)

3)

2)

20%

20%

20%

24%

30%

30%

30%

30%

30%

30%iv.

2)


Income Tax

33



Income Tax

For the first year in which the undertaking starts commercial production

For the next following second year

For the next following third year

i.

ii.

iii.

23. Accelerated Depreciation: [Third Schedule, Para # 7 & 7A]

In the case of any machinery or plant (other than office appliance and road transport vehicles) which not having been previously used in Bangladesh, has been or is used in an industrial undertaking set up in Bangladesh between the first day of July, 1977 and the thirtieth day of June 2010 (both days inclusive) accelerated depreciation allowance shall be allowed and computed as follows:

The assets enjoying accelerated depreciation will not be eligible for any other depreciation under the Income Tax Ordinance.

The undertaking must fulfill all the prescribed conditions and apply to Board in the prescribed manner for approval for the purpose of deprecation of this category within six months from the end of the month of commencement of commercial production. Board is to give decision on the application within 45 days [Section 46A (3) or 46B (6)].

Accelerated depreciation is also allowable on machinery and plant other than office appliances and road transport vehicles which having not being previously used in Bangladesh, has been or is used in the expansion unit of any existing undertaking or in the treatment and disposal of toxic and environmentally hazardous wastes or in the collection or processing of biodegradable waste or in the research and development in any industrial undertaking owned by a company. In this case accelerated depreciation is allowed at 80% for 1st year (starts commercial production or operation) and 20% for the next following year [Para # 7A (1)].

24. Deductions are NOT admissible in certain circumstances: [Section 30]

The following expenditures are not admissible deductions in the determination on income from business or profession:

Payment of salaries if tax is not deducted at the time of payment and paid thereon in accordance with section 50 [Para # 30(a)]

Any payment made by an assessee to any person if tax thereon has not been deducted and credited in accordance with Chapter VII and VAT thereon has not been collected or deducted and credited in accordance with VAT Act. 1991 [Para # 30(aa)]

Payment of interest, salary, commission or remuneration 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 [Para # 30(b)]

50% of the actual cost of plant and machinery to the assessee



34

Brokerage or commission paid to a non-resident if tax has not been deducted there from under section 56 [Para # 30(c)]

Payment to a provident or other fund unless effective arrangement has been made for deduction of tax at source while making the payments from the fund which are taxable under the head Salaries [Para # 30(d)]

Amount of perquisites or other benefits paid, as defined under Section 2(45), to any employee in excess of Taka 200,000 [Para # 30(e)]

Provided that this ceiling shall not be applicable to an employer where perquisites were paid to an employee in pursuance of any government decision to implement the recommendation of a Wage Board constituted by the government;

The amount of expenditure in excess of the prescribed rates and as is not, in the case of sales and services liable to excise duty, supported by excise stamp or seal in respect of the following items [Para # 30(f)]

Entertainment (Rule # 65)

Foreign travels of employees and their dependants for holidaying and recreation (Rule # 65A)

Distribution of free samples (Rule # 65C)

Any expenditure exceeding 10% of the profit under the head office expenses by a company not incorporated in Bangladesh under Companies Act 1994 [Para # 30(g)]

Any payment by way of royalty, technical services fee, technical know how fee or technical assistance fee exceeding 5% of the profit [Para # 30(h)]

Any payment by way of salary or remuneration made otherwise than by crossed cheque or bank transfer by a person to any employee having gross monthly salary of Taka 15,000 or more [Para # 30(i)]

Any expenditure by way of incentive bonus exceeding 10% of the disclosed net profit [Para # 30(j)]

Any expenditure by way of overseas traveling exceeding 1% of the disclosed turnover [Para # 30(k)]

25. Capital Gains: [Section 31]

Any gains arising from transfer of a capital asset (both movable and immovable) as defined in Section 2(15) of the Income Tax Ordinance is chargeable to income tax in accordance with the Second Schedule, Para # 2 of the Income Tax Ordinance, 1984 which prescribes rates of income tax in certain special cases;

In determination of the gain on transfer of any expenditure incurred solely in connection with transfer of the capital asset and the cost of acquisition including expenditure, if any, incurred for the improvement of asset are deductible from the sale value. In case of acquisition of asset:

viii.

ix.

x.

xi.

xii.

iv.

v.

vi.

vii.



Income Tax

35



Income Tax

26. Exemption of Capital Gains from tax: [Section 32]

Capital gains or portion thereof arising out of transfer of certain capital assets are exempted from the income tax under certain circumstances and upon fulfillment of certain conditions. Following are the cases of full or partial exemptions:

Transfer of capital asset used in the business with following rules: [Section 32(5)]

A declaration shall have to be made before the assessment is made;

A new capital asset for the purpose of business or profession has to be purchased within 1 year before or after the date of transfer;

When capital gain is greater than the cost of new asset, capital gain upto the extent of cost of acquisition of new asset shall be exempted and balance shall be charged to tax;

When capital gain is equal or less than the cost of new asset, no tax shall be charged on the capital gain;

Capital gain arising out of transfer of Government Securities and Stocks & Shares of public companies listed with a stock exchange in Bangladesh is exempted from tax [Section 32(7)]

Transfer of Buildings and Lands to a new company for setting up an industry and the whole amount of capital gain arising out of such transfer is invested in the equity of the said company, the capital gain shall not be charged to tax as income of the year of transfer [Section 32(10)]

Transfer of Capital Asset of a firm to a new company: Capital gain arising from transfer of capital asset of a firm to a new company registered under companies Act 1994 and the whole amount of capital gain is invested in the equity of the said company by the partners of the firm, then the capital gain shall not be charged to tax as income of the year of transfer [Section 32(11)]

Transfer of Stocks and Shares of a public company by a non-resident: Capital gain arising in the hand of a non-resident from transfer of stocks or shares of a listed company is exempted from tax provided such assessee is entitled to similar exemption in the country in which he is a resident [Section 31]

i.

ii.

i.

ii.

iii.

iv.

v.

Value of cost capital assets

Actual cost of the previous owner as reduced by depreciation allowance;

Where actual cost of the previous owner as reduced by depreciation allowance. Where actual cost to the previous owner can not be ascertained, fair market value of assets on the date on which it became the property of previous owner, shall be taken to be the cost of acquisition in the hand of present owner;

Events

By purchase the actual cost of the asset;

Property acquired by gift, bequest or will or under a transfer on a trust or distribution of capital asset on liquidation of company or dissolution of a Þrm or association of persons;

36

28. Income from Other Sources: [Section 33]

Following income of an assessee is assessable under the Income from Other Sources:

a. Dividend;

b. Interest;

c. Royalties and Technical Services;

d. Income from letting of machinery, plant, furniture, building etc;

e. Deemed Income [Section 19 (1, 2, 3, 4, 5, 7, 8, 9, 10, 11, 12, 13, 21 & 24)]

f. Income of any kind which is not classifiable under any other heads specified in Section 20

29. Set-Off of Losses: [Section 37]

Whenever an assessee sustains a loss in any year under any of the following heads of

income, such as, property, interest on securities, business or profession, agricultural income

and other sources, he is entitled to set-off the loss so sustained against his income, profits or

gains under any other head in that year. Any speculative transactions undertaken by an

assessee should be treated as a distinct and separate business and any loss incurred in

those transactions should be set-off only against the income, profits or gains of that business.

Loss on Capital Gains can not be set-off against income from any other head. Such loss can

be set-off only against the Capital Gains. Any loss from Business or Profession shall not be

set off against income from House Property in the year such loss crop up.

27. Capital Gain Tax: [Second Schedule]

Assessee

Tax in respect of Capital Gain:

In Case of Company: [Second Schedule, Para # 2(a)]

Capital gain will be taxed as a block of income separate from other income of the assessee company at flat rate

In Case of a person other than Company: [Second Schedule, Para # 2(b)]

Where the capital gain arises as result of a disposal after not more than 5 years from the date of acquisition

Where the capital gain arises as result of a disposal after 5 years from the date of acquisition;

New RateAY 2008-09

15%

Applicable rate on total income including

capital gain

Tax payable at the rate applicable on

total income including said income OR

@ 15% on the capital gain whichever is lower


15%

Applicable rate on total income including

capital gain

Tax payable at the rate applicable on

total income including said income OR

@ 15% on the capital gain whichever is lower



Income Tax

37



Income Tax

SL.No.

Section / Rule #

Particulars Rate of deduction (%)

1 50 Salaries and benefits:

➢ On first Taka 165,000 (Male Assessee); Nil

➢ On first Taka 180,000 (Female Assessee); Nil

➢ On first Taka 180,000 (Assessee aged 70 & more); Nil

➢ On first Taka 180,000 (Disabled Assessee); Nil

➢ On next Taka 275,000; 10

➢ On next Taka 325,000; 15

➢ On next Taka 375,000; 20

➢ On the rest of the balance; 25

2 50A Discount of the real value of Bangladesh Bank bills; ✓ Individual; ✓ Company;

3 51

4 52 & Rule16

Interest on securities excluding treasury bond or treasury bill issued by the government;

In case of Supply of goods or execution of contracts / subcontracts:

Where the cumulative payment does not exceed Taka 100,000;

30. Carry forward of loss: [Section 38]Whenever an assessee sustains any loss under the head ÔBusiness or ProfessionÕ not being loss from speculation business and the loss cannot wholly be set-off against income under any other head i.e. salary, property, agricultural income, interest on securities and income from other sources, 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. The only exception in this regard is that the loss sustained in speculative business shall be carried forward to be set-off only against speculative profits, if any, of the following year. Loss cannot be carried forward for more than six successive assessment years.

31. 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 or so on for succeeding 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 (Section 38) including loss from speculation business (Section 39).

32. Withholding Tax / Tax Deducted at Source (TDS): [Section 50, 51, 52, 53, 54, 55 & 56]

Nil

10

27.5 or 37.5 or 45 whichever is

applicable

38

SL.No.

Section / Rule #


5 52(1) & Indenting Commission; 3.5 Rule 17 Shipping Agency Commission; 5

6 52A(1)

7 52A(2) Royalty or Technical Know How Fee; 10

8 52A(3) Professional or Technical Services; 10

9 52AA

10 52AAA

11 52B Collection of tax from Cigarette Manufacturers; 6

12 52C Compensation against Acquisition of Property; 6

13 52D Interest on savings instruments;

Fees for services rendered by Doctors, Accountants, Engineers & Consultants;

Payments on certain services like stevedoring agency, private security service agency; Subject to Private Security Service TDS @ 1.125% (tax @ 7.5% of 15% profit) on bill amount;

Commissioner shall collect for commission receivable by clearing and forwarding agents;

10

7.5

7.5

Where the cumulative payment exceeds Taka 100,000 but does not exceed Taka 500,000;

Where the cumulative payment exceeds Taka 500,000 but does not exceed Taka 1,500,000;

Where the cumulative payment exceeds Taka 1,500,000 but does not exceed Taka 2,500,000;

Where the cumulative payment exceeds Taka 2,500,000;

In the case of supplied by oil marketing company:

Where the payment does not exceed Taka 200,000;

Where the payment exceeds Taka 200,000;

Nil

1

2.5

3.5

4

0.75

(Rate shall be applicable for savings certificate purchased on 1st January, 2004 or thereafter whose interest/profit accrued on 1st January, 2007 or thereafter);

10



Income Tax

39



Income Tax

SL.No.

Section / Rule #


✓ � Monthly rent upto Taka 20,000; Nil

✓ � Monthly rent from Taka 20,001 to Taka 40,000; 3

✓ � Monthly rent exceeds Taka 40,000; 5

Collection of tax from export of any goods except knitwear and woven garments;

Collection of tax on sale price of goods or property sold by public auction;

Deduction or collection of tax at source from courier business of a non resident;

Payment to actors and actress; Subject to such payment exceeds taka 36,000 in the aggregate in any income year;

Commission, discount or fees on account of marketing or distribution of goods;

22 53AA Collection of tax from shipping business of a resident; 5

23 53B & Export of Manpower (Service charges); 10 Rule 17C

24 53BB Collection of tax from export of knitwear and woven garments; 0.25

25 53BBB Collection of tax from Member of stock exchanges; 0.015

26 53BBBB

27 53C & Rule 17D

28 53CC

29 53D & Rule 17E

30 53DD Deduction from export cash subsidy; 5

31 53E

0.25

5

7.5

5

7.5

14 52F

15 52 I Commission of Letters of Credit; 5

16 52K

17 52L Collection of tax on account of Trustee Fee; 10

18 52M Collection of from freight forward agency commission; 7.5

19. 52N Rental Power Company 4%

20 53 & Rule 17A

21 53A & Rule Payment of rent to Landlord: 17B

Collection of the from brick manufacturers (at the time of permission for manufacture of bricks):✓ �for one section brick field;✓ for one and half section brick field;✓ �for two section brick field;

Collection of tax by City Corporation at the time of Renewal of Trade License;

Collection of tax from Importers and Exporters. The Board shall specify from whom collection to be made;

Tk. 10,000Tk. 12,000Tk. 18,000

Tk. 500 per trade license

3

40

SL.No.

Section / Rule #


35 53GG

36 53H Collection of tax on transfer, etc. of property; 5

37 53 I

38 53J & Rule 17BB

39 53K

40 54 Deduction from Dividends:

Payment of fees / remuneration to surveyor of General Insurance Company;

Interest on deposit of Post Office Savings Bank Account, deductible only when total interest exceeds Tk. 150,000 and TDS applicable only on the interest in excess of Tk. 150,000

Payment of rental value of vacant land or plant or machinery:

✓ Monthly rent upto Taka 15,000;

✓ � Monthly rent from Taka 15,001 to Taka 30,000;

✓ � Monthly rent exceeds Taka 30,000;

Advertising bill of newspaper or magazine or private television channel;

Company beneficiary for non-tax treaty countries;

Company beneficiary for tax treaty countries;

Company beneficiary for tax treaty countries having less than 10% shareholding

7.5

10

3

Nil

3

5

20

10

20

Commission or remuneration paid to agent or representative of a foreign buyer as per terms of L/C or under any other instructions;

Interest on Savings and Fixed Deposits or any term deposit maintained with schedule bank including a corporation, bank or by way of profit on term deposits, financial institutions, leasing company or housing company;

Collection of tax from persons engaged in real estate or land development business:

✓ �in case of building or apartment;

✓ �in case of land;

31 53EE

32 53F

33 53FF

34 53G Payment of insurance commission; 3

4

10

Tk 250 per sq. meter

5% of deed value

✓

✓

✓



Income Tax

41



Income Tax

Tax Holiday for newly established industrial undertaking, Tourist Industry and Physical Infrastructure facility set-up between the period of July, 2008 to June, 2011 etc. in certain cases: [Section 46B]

A. Condition for Tax Holiday:

Period of tax holiday has been further extended for 3 years beyond 30th June, 2008 in respect of industrial undertaking, tourist industry and physical infrastructure facility subject to following conditions:

i. The undertaking is set up in Bangladesh between 1st July, 2008 and 30th June 2011;

The undertaking is managed either by (i) a body corporate established by or under an act of Parliament having head office in Bangladesh or (ii) a company defined under companies Act 1913 or 1994 having subscribed & paid up capital of not less than Taka 1,000,000 on the date of commencement of commercial production;

iii. The undertaking is engaged in: [Section 46(B), Para # 2]

The Industrial Undertaking in the production of textile, jute, high value garments (overcoats, jackets & suits), pharmaceuticals, melamine, plastic, ceramics, sanitary, steel, fertilizer, computer and agriculture machinery etc;

✓ Providing on commercial basis, physical infrastructure facilities;

✓ Tourist industry as defined in the explanation to Section 46;

30% of the tax exempted income to be invested in the same undertaking or for a new industry during the period of exemption or within one year of expiring tax holiday period. An additional 10% profit has to be invested each year within 3 months of closing the income year by purchasing shares of listed companies in Bangladesh;

33.

SL.No.

Section / Rule #


41 55 & Income from lottery, etc. Rule 17I

42 56 Deduction from Income of non-residents:

Resident Company with more than 10% shareholding;

Individual: Resident

25

✓ �

✓ �

20

10

Applicable rate or 20% whichever is lower

Rate applicable to company i.e. 37.5%

At applicable Rate for resident

individual

✓ �Company;

✓ �Person other company & non resident Bangladeshi;

✓ �Non resident Bangladeshi;

ii.

iv.

✓

42

a.

b.

d.



Income Tax

v.

vi.

The undertaking is not formed by splitting up or by reconstruction or reconstitution of an existing business or by transfer to a new business of any machinery or plant used in Bangladesh at any time before commencement of the new business;

An application shall be filed with the Board for approval of the undertaking within 6 months from the end of the month of commencement of commercial production or operation, and the undertaking must be approved by the Board;

B. Period of Exemption: [Section 46(B), Para # 1]

If the said undertaking is set-up in Dhaka and Chittagong divisions, excluding the hill districts of Rangamati, Bandarban, and Khagrachari; for a period of 5 years beginning with the month of commencement of commercial production or operation;


For the first two years (1st and 2nd year); 100% of Income

For the next two years (3rd and 4th year); 50% of Income

For the last one years (5th year); 25% of Income

If the said undertaking is set-up in Rajshahi, Khulna and Barisal divisions, and hill districts of Rangamati, Bandarban, and Khagrachari; for a period of 7 years beginning with the month of commencement of commercial production or operation;


For the first three years (1st, 2nd & 3rd year); 100% of Income

For the next three years (4th, 5th & 6th year); 50% of Income

For the last one year (7thyear); 25% of Income

C. Computation of Tax Holiday Income

The profit and gain shall be computed under the head income from business or profession (section 28)

Loss sustained in a tax holiday undertaking shall not be set off against profits of taxable units. Loss shall be carried forward to be set off against income from same undertaking in the following years, but not beyond tax holiday period;

c. Only normal depreciation allowance, if any, shall be allowed;

Any dividend distributed by a tax-holiday company to its shareholders out of its exempted profit shall not be exempt from tax;

e. Capital gains earned by tax holiday undertaking shall not be exempt from tax;

Income of the said undertaking resulting from disallowance made under section 30 shall not be exempted from tax;

34. Tax Holiday for Hospitals: [SRO 204-Ain/IT/2005 dated 6th July 2005]

A newly established private hospital will be eligible for exemption of income for another 5

years subject to the following conditions:

b. The hospital is owned by a company registered under the Companies Act 1913 or 1994;

a.

43



Income Tax

The hospital is established between the period 1st July 1999 to 1st July 2008 in the private sector;

d. The hospital is housed in a building constructed on the companyÕs own land;

The hospital has number of beds (i) 200 beds in case of general hospital (ii) 50 beds in case of specialized hospital for heart, kidney and cancer patients;

f. 10% of the beds must be kept reserved for treatment of poor free of charge;

35. New List of eligible sectors for Tax Holiday: [Section 46B]

i. Industrial Undrtaking

a.Textile;

b Jute goods;

c. High Value Readymade Garments (overcoat, jackets, suits);

d.Pharmaceuticals;

e.Melamine;

f. Plastic products;

g.Ceramics & sanitary ware;

h.Steel from iron ore;

i. Sanitary ware;

j. MS Rod & CI Sheet;

k. Fertilizer;

l. Insecticide & pesticide;

m. Computer hardware;

n.Residential hotel having facility of three star or more;

o.Petro chemicals;

p.Basic raw materials of drugs, chemicals & Pharmaceuticals;

q.Agricultural machine;

r. Boilers & compressors;

s. Textile machinery;

ii. Physical Infrastructure Facility:

a. Sea or river port;

b. Container terminals, internal container depot (ICD) & container freight station (CFS);

c. LNG terminal and transmission line;

d. CNG terminal and transmission line;

e. Gas pipe line;

f. Flyover;

g. Mono-rail & underground rail;

h Telecommunication other than mobile phone

i. Large water treatment plant & supply through pipe line;

j. Waste treatment plant;

k. Solar energy plant;

l. Export processing zone;

c.

e.

44

And any other category of industrial including as the government may be notification in to official Gazette specify.

iii. Tourism Industry:

Residential hotel having facility of three star or more and any other category of tourist industry facility as the Government may by notification in the official Gazette specify.

36. Advance Payment of Tax: [Section 64]

➢ The ceiling of the amount of income for payment advance tax is taka 300,000; [Section 64]

The new assesses have been exempted from the payment of advance tax unless their income exceeds taka 300,000; [Section 68]

Advance tax is payable by an assessee during each financial year if the latest assessed income (assessment completed either on regular or provisional basis before the fifteenth May of the year) exceeds Taka 300,000. Advance tax is payable in four equal installments on 15th September, 15th December, 15th March and 15th June. If one estimates that oneÕs income during any financial year will be less than the last assessed income, one may submit an estimate of income of oneÕs own and that the tax paid on the basis of the estimate does not fall short of 75% of the tax payable on regular assessment. Because, if the tax paid falls short he is liable for interest. [Section 73]

37. Payment on the Basis of Return: [Section 74(1)]

Every person who is required to file a return under Section 75 shall, on or before the date on which he files the return, pay the amount of tax payable by him on the basis of such return as reduced by the amount of any tax deducted from this income or paid by him.

38. Filing of Return of Income and Statement: [Section 75, 76, 77 & 78]

Every person whose total income during an income year exceeds the exemption limit i.e. the maximum amount which is not chargeable to tax and every person whatever his income in the income year who was assessed to tax for any year within three years preceding that year, shall furnish a return setting forth therein (along with such other particulars as may be prescribed) his total income and total income during the income year.

Every company shall file a return of its income or the income of any other person for whom the company is assessable, on or before the date specified.

Where a person is not required to file a return under sub-section 1 of section 75, he is to file a return if he:

resides in a city corporation or pourashava, or divisional head quarters or district head quarters and fulfils any of the following conditions:

i. owns a more than one story building with an area of more than 1,600 sft;

ii. owns a motor car;

iii. subscribes a telephone;

iv. is a member of club registered under VAT Act 1991;

runs a business or profession with trade license from a city corporation or pourashava, union parishad and operates a bank account;

➢



Income Tax

a.

b.

45



Income Tax

is registered with a recognized professional body as a doctor, dentist, ITP, CA, CMA, engineer, architect, surveyor or any similar profession.

d. member of a club or a trade association;

is a candidate for an office of pourashava or a city corporation or a member of a parliament;

participant in a tender floated by government, semi-government, autonomous body or local authority;

g. has a tax payers identification number in accordance with the provision of section 184A;

Every individual shall furnish, along with the return or the certificate, as the case may be, a statement in the prescribed form and verified in the prescribed manner giving particulars of the total assets and liabilities of himself, his spouse and his minor children and dependants. He shall also furnish particulars of his personal and family expenditure as per proforma determined by the board to be called life-style as per rule 25A. In the case of a company the return will be accompanied by a statement of accounts audited by a chartered accountancy firm.

39. Assessments:

i. Assessment on Correct Return: [Section 82]

Where a return or a revised return has been filed under Chapter VIII and the Deputy Commissioner of Taxes is satisfied, without requiring the presence of the assessee or the production of any evidence, that the return is correct and complete, he shall assess the total income and determine the tax payable by him on the basis of such return and communicate the assessment order to the assessee within thirty days next following: Provided that-

Such return shall be filed on or before the date as specified in clause (c) of sub section (2) of section 75;

The amount of tax payable shall be paid on or before the date on which the return is filed; and

Such return does not show any loss or lesser income than the last assessed income, or assessment on the basis of such return does not result in refund;

ii. Universal Self Assessment [Section 82 BB]

Where an assessee furnish a correct and complete return of income, the DCT shall receive such return himself or cause to be received by any other official and issue a receipt of such return and, the receipt shall be deemed to be an order of assessment for the assessment year for which the return is filed.

A return shall be taken to be complete, if it is filed in accordance with the provisions of sub-section (2) of section 75

The amount of tax payable shall be paid on or before the date on which the return is filed in accordance with section 74.

The Board or any authority authorized by the Board may select a number of such returns filed may refer to the DCT for the purpose of audit to make the assessment under section 83 or 84.

c.

e.

f.

➢

➢

➢

➢

➢

➢

➢

46

iii. Final Settlement of Tax Liability: [Section 82C]

The settled liability scheme under section 82C was introduced in 1998. Certain incomes/receipts are treated as ÒincomeÓ under the scheme and taxes are collected or deducted at source from such incomes/receipts. Taxes deducted or collected at source are treated as final settlement of tax liability on the deemed income under the scheme. Following classes of incomes/receipts are referred to under the settled liability scheme in respect of which tax has been deducted or collected at source:

➢� Supply of goods or execution of contract on which tax is deductible u/s. 52;

➢� Manufacture of cigarettes u/s. 52B;

Shipping business of a resident on which tax is collectible under section 53AA;

➢� Real estate or land development business u/s 53FF;

Transaction by a member of a stock exchange for which tax is collectible under section 53BBB;

➢� Income from courier business of a non resident under section 53CC;

Export cash subsidy paid by the government for promotion of export under section 53DD;

Import of Goods u/s.53 not being goods imported by any industrial undertaking as raw materials for its own consumption;

➢� Value of the property from which tax is collectible u/s. 53H;

➢� Interest on savings instruments on which tax is deductible u/s. 52D;

Amount on account of winnings referred to in section 19(13) on which tax is deductible under section 55;

Export of manpower on which tax is deductible under section 53B;

Remuneration or reward, whether by way of commission or payable to an insurance agent, on which tax is deductible under section 53G;

➢� Auction purchase on which-tax is collectible under section 53C;

Payment on account of survey by surveyor of a general insurance company under section 53GG;

Payment of royalty, technical know-how fee, for which tax is deductible under section 52A(2);

➢� Commission from clearing & forwarding under section 52AAA;

The above rules shall NOT apply to:

The provisions of sub-section (1) of section 82C shall not apply in the case of supply of goods or execution of contract as mentioned in clause (a), with respect to a contractor of an oil company or a sub-contractor to the contractor of an oil & gas company as referred to in Rule-39 of the I.T. Rules;

The provision of sub-section (1) shall not apply in the case of deduction of tax from sale proceeds of building or lands as mentioned in clause (d) with respect to any investment made under sub-section (10) of section 32;



Income Tax

➢

➢

➢

➢

➢

➢

➢

➢

➢

47



Income Tax

An assessee shall not be allowed to take into account the full amount of income or receipts from which tax has been deducted or collected and considered as settled liability in explaining the nature and source- of any sum, investment, money, valuable articles, excess amount or expenditure referred to in section 19. The income on payments or receipts represented by the tax deducted at source can only be allowed as a source of fund for explaining any investment, etc;

Assessment on the basis of Report of a Chartered Accountant: [Section 83AAA]Where a return or a revised return filed by a company is reasonable believed to be incorrect or incomplete, the Board may appoint a registered Chartered Accountant to examine the accounts of that assessee.

The Chartered Accountant shall exercise the powers and functions of the DCT and after examining the accounts shall submit a report to the Board in writing. The Board shall forthwith forward the report to the Deputy Commissioner of Taxes and the Deputy Commissioner of Taxes after giving an opportunity to the assessee shall make the assessment on the basis of the report of the chartered Accountant and on the basis of the other evidences within thirty days after completion of hearing or consideration as the case may be and communicate the order within thirty days from the date of such order.

Assessment and computation of Income of Contractor of an Oil company (Rule 39)

Any person/company who resides out of Bangladesh and carries on business in Bangladesh under an agreement as a contractor to an oil company or as a subcontractor to the contractor to an oil company engaged in Petroleum Operations in Bangladesh for exploration and development of oil & gas may exercise an option for ascertainment of income, proÞts and gains from the operation of drilling of oil, geophysical survey, marine seismic survey, shallow water seismic survey and other activities relating to petroleum operations, under Rule 39.

In such case his income, proÞts and gains derived from such operations shall, subject to the provision of this rule, be deemed to be an amount equivalent to 10% of the gross earrings from such operations provided that:

such option shall be exercised before the 30th day of September of the year of assessment in which such person is assessable for the Þrst time in Bangladesh.

the option once exercised shall be treated as Þnal and shall be applicable to all assessments thereafter.

2. For the purposes of the Rule 39:

The expression Òincome, proÞts and gainsÓ shall mean the net income, proÞts and gains determined after considering all expenses, allowances and depreciation as allowed for the purposes of sections 28, 29 and 30 of the Ordinance;

the expression Ògross earningsÓ shall include the total value of all fees, moneys, income, compensations or reimbursable costs as stipulated in the

iv.

v.

1.

_

_

a.

b.

48

agreement with the oil company, or in the agreement with the contractor to the oil company (whether in cash or in kind and whether received or not) derived from the operations referred to in sub-rule by the person but excluding the amount of tax, if any, paid or payable on behalf of the said persons, as reduced by the following amounts-

amount constituting compensations or reimbursements exclusively for expenditures effected by the said person for the purchase of equipmentÕs for the oil company, which are, in fact, not his responsibility; and

amount constituting compensations or reimbursements exclusively for expenditures effected by the said person for the purpose of transporting or moving, drilling and other equipmentÕs into and out of Bangladesh

vi. Spot Assessment u/s 82D and Rule 38B;

vii.Provisional Assessment u/s 81;

viii. Best Judgement Assessment u/s 84;

ix. Assessment in the case of discontinued business u/s 89;

x. Assessment in the case of Deceased Persons u/s 92;

xi. Assessment in the case of departure from Bangladesh u/s 91;

xii. Assessment in the case of Minors, Lunatics, Idiots, Beneficiaries of any Trust, etc. u/s 95;

xiii. Assessment of Co-operative Societies u/s 47;

40. Avoidance of Double Taxation: [Section 144]

The Government of Bangladesh may enter into an agreement with the Government of other countries for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income leviable under the Ordinance and also under corresponding law of the other country. Under the agreement, each dominion determines the total income of an assessee in the ordinary way under its own laws but in respect of the source of income or categories of transactions, as specified in the agreement, it is entitled to retain tax on such portion of the income there from as is calculated according to the percentage as embodied in the agreement.

At present, Government of Bangladesh has entered into agreement for the avoidance of double taxation with the following 24 countries: U.K, Singapore, Sweden, South Korea, Canada, Romania, Pakistan, Sri Lanka, France, Malaysia, Japan, India, Netherlands, Germany, Italy, Denmark, China, Belgium, Poland, Thailand, Philippines, Vietnam, Norway and Turkey.

41. Relief in respect of Foreign Income: [Section 145]

Where there is no reciprocal arrangement for avoidance of double taxation, relief is available in respect of doubly taxed income. If any person who is resident in Bangladesh during any year can prove to the satisfaction of the Deputy Commissioner of Taxes that he paid income tax in respect of any income arising outside Bangladesh, he shall be entitled to deduction from Bangladesh income tax payable by him of a sum equal to the tax calculated on the double taxed income at the Bangladesh rate of tax or at the rate of tax of the foreign country , whichever is the lower.



Income Tax

(i)

(ii)

49



Value Added Tax

Value Added Tax (VAT)

42. Deduction of VAT at source:

The authority for deducting VAT at source has been given to the Government, Semi-Government, Autonomous Organizations, Non-Government Organizations (NGOs), Bank, Insurance or Limited Company. The services on which deduction at source applicable are listed below:

Head # Service Service Provider Rate of Code # Deduction ( %)

S 003 S 003.10 Motor Garage & Workshop; 4.5

S 003.20 Dockyard; 4.5

S 004 S 004.00 Construction Works/Firms ( Builders); 4.5

S 007 S 007.00 Advertisement Organisation:

15

9

15

S 008 S 008.10 Printing Press if value of material included; 4.5

Printing Press if value of material not included; 15

S 009 S 009.00 Auction; 15

S 010 S 010.10 Land Development Organization; 1.5

S 010 S 010.20 Building Construction Organization; 1.5

S 015 S 015.00 Freight Forwards; 15

S 018 S 018.00 Film Studio; 15

S 019 S 019.00 Photo Grapher; 4.5

S 020 S 020.00 Survey Sangstha; 15

S 023 S 023.20 Film Distributor; 15

S 024 S 024.00 Sales Centre of Furniture:

✓ At the time of production; 4.5

✓ At the time of marketing; 1.5

S 026 S 026.00 Goldsmith, Silversmith and Gold & Silver trader; 15

S 028 S 028.00 Courier & EMS Service; 4.5

S 029 S 029.10 Medical Centre; 2.25

Govt., Semi-Govt., Autonomous Body, Nationalised Bank and Insurance Sector;

Private Organisation, Non-Govt. Sangstha (NGO), Private Bank & Insurance, Limited Company, Any Sangstha and Person;

Others

50



Value Added Tax

Head # Service Service Provider Rate of Code # Deduction

( %)

S 029 S 029.20 Dental Clinic; 2.25

S 029 S 029.30 Pathological Laboratory; 2.25

S 031 S 031.00 Repairing or Servicing of Taxable goods; 15

S 032 S 032.00 Consultancy Þrm and Supervisory Þrm; 4.5

S 034 S 034.00 Audit and Accounting Firm; 4.5

S 036 S 036.10 Air-Conditioned Bus Service; 5.0025

S 036 S 036.20 Air-Conditioned Launce Service; 4.5

S 037 S 037.00 Procurement Provider; 2.25

S 040 S 040.00 Security Service Provider; 4.5

S 044 S 044.00 Specialized Doctors; 4.5

S 045 S 045.00 Legal Advisors; 4.5

S 048 S 048.00 Transport Contractor: ✓ For carrying petrol and related goods; 2.25 ✓ Others; 4.5

S 049 S 049.00 Transport Fare or Rent-a-car; 4.5

S 050 S 050.00 Architect, Interior Designer or decorator; 4.5

S 051 S 051.00 Engineering Firms; 15

S 053 S 053.00 Participant of Board Meeting; 15

S 056 S 056.00 Banking and non-banking service provider; 15

S 057 S 057.00 Electricity Supplier; 5.0025

S 059 S 059.00 Glass Sheet Manufacturer; 15

S 060 S 060.00 Buyer of Auction Goods; 1.5

S 061 S 061.00 Credit Card Supplying organization; 15

S 062 S 062.00 Money Changer; 15

S 063 S 063.00 Air Conditioned Tailoring Shop; 4.5

S 064 S 064.10 Amusement and Theme Park; 4.5

S 064 S 064.20 Picnic Spot and Shooting spot; 4.5

S 065 S 065.00 House clearing and Maintenance organization; 2.25

S 066 S 066.00 Lottery ticket seller; 15

S 067 S 067.00 Immigration Advisor; 4.5

S 068 S 068.00 Coaching Centre; 4.5

S 069 S 069.00 English Medium School; 4.5

S 070 S 070.00 Private Medical and Engineering College; 4.5

51



Gift Tax

43 Gift Tax:

The gift tax is leviable on gift made in any financial year on and from the 1st day of July 1990 at the prescribed in the schedule. Gift means the transfer by one person to another of any immovable or moveable property voluntarily and without consideration of any money's worth. The Gift Tax Act 1990;

The value of property under gift other than cash shall be the value which, in the opinion of the Deputy Commissioner of Taxes, it would fetch if sold in the open market on the date of gift. When a property is not saleable in the open market and its value cannot be determined according to the rules prescribed for the purpose. Methods of valuation of gift have been provided in the section 5 of the Gift Tax Act 1990.

44. Exemption from Gift Tax: [Section 4]

Gift tax shall not be charged under the Act in respect of the following gifts made by any person:

1) of property situated outside Bangladesh;

2) to the Government or any local authority;

3) to the following funds or institutions, for charitable purpose:

any University established under the law in force in Bangladesh or any educational institution including polytechnic institute, recognized by the Education Board or recognized or run by the Government;

any hospital recognized or run by the Government or any local authority or any hospital aided by the Government or any Local Authority;

(iii) any flood or disaster management fund established or approved by the Government;

such institutions or funds for religious or charitable purposes, not being a private religious institution or fund which does not ensure for the benefit of the public, as are established in Bangladesh and approved by the Government for such purposes or to any institution established for religious or charitable purposes and registered under any law for the time being in force, upto 20% of the total income determined for the concerned year or Tk. 100,000 whichever is less;

4) to dependent relative upto Tk. 20,000 on the occasion of his/her marriage;

by way of payment of policy of insurance or annuity for any person (other than wife/spouse) dependent upon him for support and maintenance upto Tk.20,000;

6) under a will;

7) under contemplation of death;

8) to sons, daughters, father, mother, his or her spouse, own brothers and sisters;

In addition to the above exemptions, gifts made in any financial year up to value of Tk. 20,000 are exempt from gift tax. The Government may by notification exempt any class of gift or any class of person from gift tax.

(i)

(ii)

(iv)

5)

52



Gift Tax

45. Provisions of the Gift Act shall NOT apply to following gifts made by: [Section 20]

1) a body corporate established or constituted by or under any law

any institution or fund, income whereof is exempt from income tax under paragraph 1 and 2 of Part A of the Sixth Schedule of the Income Tax Ordinance 1984;

46. Return of Gift Tax: [Section 3 & 7]

Every person who had made taxable gift during any financial year of an amount as to render him liable to gift tax under the gift tax act shall before the fifteenth day of September of the corresponding assessment year furnish to the Deputy Commissioner of Taxes a return in the prescribed form and in the prescribed manner. Tax on the basis of the return is payable on or before the date on which such return is furnished.

47. Rates of Gift Tax:

Particulars (Slab Amount of Taxable Gifts) Percentage Rate (%)

On the first Tk. 500,000 of the value of all taxable gifts; 5

On the next Tk. 1,000,000 of the value of all taxable gifts; 10

On the next Tk. 2,000,000 of the value of all taxable gifts; 15

On the balance of the value of all taxable gifts; 20

2)

Documents

Bangladesh Tax Handbook 2008-2009.pdf