Bangladesh Income Tax hand note_Ranjan sir lecture details (updated in light of Finance Act 2015), Bangladesh Tax hand note for ICAB & ICMAB

Updated (Finance Act 2015)

Md. Ibne Nayeem Hasan, [email protected]

Khaled Mahamud Sujon, [email protected] Page 1 of 171

Study Material

Taxation

(Without VAT)

(With Finance Act 2015)

Initiated by:

Asif Ahmed

Deputy Manager

Finance & Accounts

Impress-Newtex Composite Textiles Ltd

Updated by:

Md. Ibne Nayeem Hasan

Khaled Mahamud Sujon

Sami Mymoon Akash

Mahee Al Islam Niloy

Assistant, Audit and Advisory

KPMG in Bangladesh

Rahman Rahman Huq

Chartered Accountants

This study material is mainly an accumulation of the lectures of Mr. Ranjan Kumer Bhowmik,

FCMA with the update of ‘Finance Act 2015’. Note that, we tried our best to incorporate the

recent changes of the FA 2015, but some mistakes may be there and we are cordially sorry for

that. Mr. RanjanKumerBhowmik, FCMA is not concern about this study material; hence do

not responsible for any mistakes or misrepresentation of laws (if any) mentioned here. So

reader awareness is being advised.

.




Contents Part One: Income tax authority, types of taxes, some important definitions, tax rate, reduced tax rate .............. 5

Some Important Definitions: ...................................................................................................................................... 6

Resident vs. Non-Resident: ...................................................................................................................................... 10

Tax Rate: .................................................................................................................................................................. 13

Part Two: Income from Salary .................................................................................................................................. 17

Definition of Salary: ................................................................................................................................................. 17

Pay and Allowances totally exempt from Tax: (Sixth Schedule, Part-A) ................................................................. 19

Salaries exempt from payment of tax (as per S.R.O.): ............................................................................................. 19

Information regarding payment of salary (Section 108 read with rule 21, 22 and 23) ............................................. 20

Investment Tax Rebate: ............................................................................................................................................ 21

GPF Vs RPF Vs UPF: .............................................................................................................................................. 22

Practical Problems .................................................................................................................................................... 24

Part Three: Income from Interest on Securities ...................................................................................................... 40

Important sections: ................................................................................................................................................... 40

Part Four: Income from House Property: ................................................................................................................ 42

Part Five: Agricultural Income: ................................................................................................................................ 47

Important sections of Agricultural Income: .............................................................................................................. 47

Section 35 - Method of accounting: .......................................................................................................................... 49

Sixth Schedule (Part A): ........................................................................................................................................... 50

Third Schedule: Computation of Depreciation Allowance: ...................................................................................... 50

Part Six: Capital Gain ................................................................................................................................................ 51

Important sections of Capital Gain: .......................................................................................................................... 51

Second Schedule: Para 2 (Tax payable on capital gain): .......................................................................................... 52

Sixth Schedule (Part A): (Exclusion from income): ................................................................................................. 53

Special tax rates on Capital Gain from sale of share ................................................................................................ 53

Part Seven: Income from Business and Profession .................................................................................................. 54

Definitions: ............................................................................................................................................................... 54

Rules: ........................................................................................................................................................................ 55

Deemed Income: ....................................................................................................................................................... 56

Sixth Schedule (Part A); Exclusion from income; .................................................................................................... 58

Section – 35; Method of accounting: ........................................................................................................................ 60

Third schedule; Tax Depreciation: ........................................................................................................................... 63

Tax Holiday .............................................................................................................................................................. 65

Company Tax Assessment ........................................................................................................................................ 69

Corporate Tax Rate ................................................................................................................................................... 72

Corporate Social Responsibility ............................................................................................................................... 75


Part Eight: Income from other sources ..................................................................................................................... 94

Important sections of income from other sources: .................................................................................................... 94

6th Schedule (Exemption); ........................................................................................................................................ 95

Section – 36: Allocation of income from royalties, literary works, etc: ................................................................... 95

Section – 19; Un-explained investments, etc., deemed to be income; ...................................................................... 95





Part Nine: Set off and Carry Forward Losses ........................................................................................................ 105

Important sections related to set off and carry forward losses ................................................................................ 105

Carry forward of loss from business: Section 38 .................................................................................................... 105

Carry forward of loss in speculation business: Section 39 ..................................................................................... 106

Carry forward of loss under the head ―Capital Gains‖: Section 40 ........................................................................ 106

Loss of Agricultural Income: Section 41 ................................................................................................................ 106

Set-off of loss in the case of succession in business: Section: 42 ........................................................................... 107

Carry forward of depreciation allowance: Section 42(6) ........................................................................................ 107

Advance Payment of Tax ....................................................................................................................................... 108

Part Ten: Income Tax Return.................................................................................................................................. 109

Part Eleven: Table of Withholding Tax .................................................................................................................. 114

Part Twelve: Assessment of Partnership Firm ....................................................................................................... 127

Sixth Schedule (Part A) Para – 18 .......................................................................................................................... 127

Section – 30(b); Deduction Inadmissible: .............................................................................................................. 127

Section – 43(3); Computation of total income: ...................................................................................................... 127

Section – 85; Special provisions regarding assessment of firms: ........................................................................... 127

Practical Problems: ................................................................................................................................................. 128

Part Thirteen: Assessment ....................................................................................................................................... 130

Assessment: ............................................................................................................................................................ 130

FINAL SETTLEMENT OF TAX LIABILITY (SEC. 82C): ................................................................................. 131

Penalty and Prosecution: ........................................................................................................................................ 135

Prosecution (Imprisonment for punishable offence) ............................................................................................... 138

Penalty for not maintaining accounts in the prescribed manner (section 123). ...................................................... 139

Penalty for failure to file Income Tax Return (Section- 124) ................................................................................. 140

Penalty for concealment of income (section 128) ................................................................................................... 140

Penalty for default in payment of tax (section-137) ............................................................................................... 140

Part Fourteen: Appeal .............................................................................................................................................. 141

Appeal: ................................................................................................................................................................... 141

Panel of Facilitators ................................................................................................................................................ 148

Part Fifteen: Double Taxation Avoidance Agreement ........................................................................................... 150

Double Taxation Avoidance Agreement (Sec. 144 read with 7th Schedule): ........................................................ 150

The Bangladesh model of Agreement on Avoidance of Double Taxation consists of 29 Articles that are as follows:

................................................................................................................................................................................ 150

Part Sixteen: Transfer Pricing ................................................................................................................................. 153

Important Definitions: ............................................................................................................................................ 153

Important sections related to transfer pricing: ........................................................................................................ 154

Penalty: ................................................................................................................................................................... 156

Income Tax Rules 1984 .......................................................................................................................................... 157

Part Seventeen: Statutory regulatory orders (SROs) ............................................................................................ 164




Acknowledgement

Without help of the below mate this sheet might not be prepared. gratitude goes to:

Sami Mymoon Akash(RRH)

Mahee Al Islam Niloy(RRH)

Khaled Mahamud Sujon(RRH)

Mohammd Ahsanullah(RRH)

Md.Riad Hossain (RRH)

Mariam Rabeya(Acnabin)




Part One: Income tax authority, types of taxes, some important definitions, tax rate,

reduced tax rate

Coverage:

1. Income Tax Ordinance 1984

2. Income Tax Rules 1984

3. SRO (Statutory Regulatory Order)

4. Circular of NBR

5. Case References

a. ITR (Indian Tax Report)

b. BTD (Bangladesh Tax Decisions)

Direct Tax Vs Indirect Tax:

Impact and incidence of the direct tax are on the same person, but in case of indirect tax impact and incidence can be

shifted to others, which are ultimately borne by the final consumer.

Direct tax – Income tax, travel tax, gift tax etc.

Indirect Tax – VAT, turnover tax, SD.

Income Tax Laws:

Section (sub section)

Section Clause (sub clause)

Rule (sub rule)

IT Ordinance Vs IT Rules:

Tax Ordinance – made or changed by the parliament

Tax Rules – made by NBR

Govt. can reduce tax burden through SRO but cannot imposetax. Power to impose new tax rested on the parliament.

Income Tax Authority (Section –3):

Section – 3:

There shall be the following classes of income tax authorities for the purposes of this Ordinance, namely:-

1. (1) The National Board of Revenue,

2. [(1A)]Deleted. F.A. 1995

3. [(1B) Chief Commissioner of Taxes;]Added F. A. 2011

4. (2) Directors-General of Inspection (Taxes),

5. (2A) Commissioner of Taxes (Appeals),

6. (2B) Commissioner of Taxes (Large Taxpayer Unit),

7. (2C) Director General (Training);

8. (2D) Director General, Central Intelligence Cell ;

9. (3) Commissioners of Taxes,

10. (3A) Additional Commissioners of Taxes who may be either Appellate Additional Commissioner of

Taxes or Inspecting Additional Commissioner of Taxes,

11. (4) Joint Commissioner of Taxes who may be either Appellate Joint Commissioners of taxes or

Inspecting Joint Commissioner of Taxes,

12. (5) Deputy Commissioners of Taxes,

13. [(6) Tax Recovery Officers nominated by the Commissioner of Taxes among the Deputy

Commissioner of Taxes within his jurisdiction;]Subs F. A. 2011

14. (7) Assistant Commissioners of Taxes,

15. (8) Extra Assistant Commissioners of Taxes; and

16. (9) Inspectors of Taxes

http://taxmatebd.com/index.php?pid=3#3-1A




Income tax authority is as follows –

1. NBR – Supreme authority headed by ‗the Chairman‘.

2. Chief Commissioner of Taxes (not yet appointed anyone)

3. Commissioner of Taxes (CT);

a. DG (Central Intelligence Cell, CIC);

b. DG (Inspection);

c. CT (Appeal);

d. DG (Training);

e. CT (Large Taxpayer Unit);

4. Additional Commissioner of Taxes (ACT);

a. Appellate Additional Commissioner of Taxes (AACT);

b. Inspecting Additional Commissioner of Taxes (IACT);

5. Joint Commissioner of Taxes (JCT);

a. Appellate Joint Commissioner of Taxes (AJCT);

b. Inspecting Joint Commissioner of Taxes (IJCT)

6. Deputy Commissioner of Taxes (DCT)

a. TRO – Tax Recovery Officer;

b. TPO - Transfer Pricing Officer

7. Assistant Commissioner of Taxes;

8. Extra Assistant Commissioner of Taxes; and

9. Inspector of Taxes

Types of Taxes:

Some Important Definitions:

NBR

Customs & VAT Income Tax

Income

Tax

Foreign

Travel Tax

Gift

Tax

Value

Added Tax

Turnover

Tax

Supplementary

Duty

Income; (section 2(34)):

Income" includes--

1. (a) any income, profits or gains, from whatever source derived, chargeable to tax under any provision of

this Ordinance under any head specified in section 20;

2. (b) any loss of such income, profits or gains;

3. (c) the profits and gains of any business of insurance carried on by a mutual insurance association

computed in accordance with paragraph 8 of the Fourth Schedule;

4. (d) any sum deemed to be income, or any income accruing or arising or received, or deemed to accrue or

arise or be received in Bangladesh under any provision of this Ordinance:

Provided that the amount representing the face value of any bonus share or the amount of any bonus

declared, issued or paid by any company registered in Bangladesh under ক োম্পোনীআইন, 1994 (1994

সননর 18 নংআইন) to its shareholders with a view to increase its paid-up share capital shall not be

included as income of that shareholder;

Why taxes???

Because they (officers) deal with

three taxes: income tax, gift tax

and travel tax.




6th schedule, Part A, Local government are not taxable entity.

Income Year and Assessment Year:

TAX; (section 2(62)):

"Tax" means the income-tax payable under this Ordinance and includes any additional tax, excess profit tax,

penalty, interest, fee or other charges leviable or payable under this Ordinance;"

Assessee; (section 2(7)):

"Assessee", means a person by whom any tax or other sum of money is payable under this Ordinance, and

includes -

1. (a) every person in respect of whom any proceeding under this Ordinance has been taken for the

assessment of his income or the income of any other person in respect of which he is assessable, or of

the amount of refund due to him or to such other person;

2. (b) every person who is required to file a return under section 75, section 89 or section 91;

3. (c) every person who desires to be assessed and submits his return of income under this Ordinance; and

4. (d) every person who is deemed to be an assessee, or an assessee in default, under any provision of this

Ordinance;"

Person; (section 2(46)):

"Person" includes an individual, a firm, an association of persons, a Hindu undivided family, a local authority, a

company and every other artificial juridical person;

Assessment Year; (section 2(9)):

"Assessment year" means the period of twelve months commencing on the first day of July every year; and

includes any such period which is deemed, under the provisions of this Ordinance, to be assessment year in

respect of any income for any period;

Income Year; (section 2(35)):

"Income year", in respect of any separate source of income, means--

(a) the period beginning with the date of setting up of a business and ending with the thirtieth day of June

following the date of setting up of such business;

(b) the period beginning with the date on which a source of income newly comes into existence and ending with

the thirtieth day of June following the date on which such new source comes into existence;

(c) the period beginning with the first day of July and ending with the date of discontinuance of the business or

dissolution of the unincorporated body or liquidation of the company, as the case may be;

(d) the period beginning with the first day of July and ending with the date of retirement or death of a participant

of the unincorporated body;

(e) the period immediately following the date of retirement, or death, of a participant of the unincorporated body

and ending with the date of retirement, or death, of another participant or the thirtieth day of June following the

date of the retirement, or death, as the case may be;

(f) in the case of bank, insurance or financial institution the period of twelve months commencing from the first

day of January of the relevant year; or

(g) in any other case the period of twelve months commencing from the first day of July of the relevant year;"; (Amended FA 2015)

Income Year Assessment Year

July 1, 2013 – June 30, 2014 2014 – 2015

January 1, 2013 – December 31, 2013 2014 – 2015

August 1, 2012 – July 31, 2013 2014 – 2015




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Resident and Non-Resident:

For Individual–182 days; or 90 days + 365 days in previous 4 years

For Company and Firm –

Difference between resident and nonresident:

Firm Company

Partial Control & Management Resident Non-Resident

Full Control & Management Resident Resident

Resident Nonresident

Taxed on Global income Local income

Investment allowance Allowable Not allowable

Tax rate Normal rate Direct tax rate

Resident; (section 2(55)):

"Resident", in respect of any income year, means -

1. (a) an individual who has been in Bangladesh -

1. (i) for a period of, or for periods amounting in all to, one hundred and eighty two days or more in that

year; or

2. (ii) for a period of, or periods amounting in all to, ninety days or more in that year having previously been

in Bangladesh for a period of, or periods amounting in all to, three hundred and sixty-five days or more

during four years preceding that year;

2. (b) a Hindu undivided family, firm or other association of persons, the control and management of whose

affairs is situated wholly or partly in Bangladesh in that year; and

3. (c) a Bangladeshi company or any other company the control and management of whose affairs is situated

wholly in Bangladesh in that year;




Resident vs. Non-Resident:

Not only the rate of tax depends upon the residential status of the assessee but also the category of income to be

included in computing total income depends upon the residential status of the assessee. So, in income tax viewpoint

firstly the residential status of the assessee is to be determined. As per section 2(55) a person will be resident if he

fulfills the following conditions:-

Sl.

No

Category of person Condition for being

resident

Analysis

1. Individual

(Bangladeshi or

foreigner)

Stay in Bangladesh for at

least 182 days in aggregate

during the income year.

OR

Stay in Bangladesh for at

least 90 days in aggregate

during the income year

+

An aggregate stay of at least

365 days in Bangladesh in

the course of 4 years

preceding the income year.

The test of residence here are alternative not

cumulative. Each of the 2 tests requires the personal

presence of the assessee in Bangladesh during the

income year. If the assessee is continuously out of

Bangladesh during the whole year, he must be

treated as non-resident in that year.

If the 1st criteria of 182 days has fulfilled he is

to be regarded as resident irrespective of any other

consideration. If anybody resides here for less than

90 days then obviously he is non-resident. Thus a

man may be resident in 2 different countries in the

same year, although he can have onlyone domicile.

2. (i) Hindu Undivided

Family (HUF)

(ii) Partnership firm

(iii) Association of

Persons (AOP)

The control and management

of its affairs is situated

wholly or partly in

Bangladesh during the

income year.

If the control and management is situated

wholly outside Bangladesh only then an HUF, firm

or other AOP can be treated as non-resident. Since

partial control is sufficient for the purpose of

residence, a firm may have 2 places of residence;

The residence of partners or an individual member

of HUF is immaterial for the purpose of determining

the residence of a firm or family.

The place of control may be different from the

place where the actual trading is carried on. Control

of a business does not necessarily mean the carrying

on of the business and therefore the place where

trading activities or physical operations are carried

on is not necessarily the place of control and

management. Control and management signifies the

controlling and directive power and situated implies

the functioning of such power at a particular place

with some degree of performance.

Control and management means de facto

control and management and not merely the right or

power to control and manage. The absence of the

karta from Bangladesh throughout the year does not

by itself lead to the conclusion that the family is

non-resident in that year, since the business of the

family, though it is normally controlled by the karta,

may at a particular point of time be controlled by

some one else. The same principle applies equally to

cases of firms and other association of persons.




Sl.

No

Category of person Condition for being resident Analysis

3. Company The control and management

of its affairs is situated

wholly in Bangladesh during

the income year.

A company whether a Bangladeshi company or

a foreign company whether it is registered at

Registrar of Joint Stock Companies of Bangladesh

or not is resident here in Bangladesh if the control

and management of its affairs is situated fully in

Bangladesh during the income year.

In the classical word, a company cannot eat or sleep

but it can keep house and do business and for the

purpose of income tax a company resides where it

really keeps house and does business, i.e. where the

central management and control actually abides.

While the location of control and management is the

sole test of residence for HUF, Firm and AOP, it is

also a test for companies.

Here controls mean de facto control not merely

de jure control. The control and management, the

head and brain, does not reside where there is some

ultimate power of control such as the power to alter

the articles of associations by a special resolution or

the power to interfere with fundamental finance.

A company may be resident in Bangladesh

even though its entire trading operations are carried

onabroad. If the management and control is situated

here, the company is resident here and it does not in

the least matter where the actual selling and buying

of the goods takes place.

Incidence of taxation on the basis of residential status:

Section 16 is the charging section where it is clearly mentioned that income tax is to be charged on the total income

of the assessee. The liability to tax arises by virtue of the charging section. The assessment order only quantifies the

liability, which is created by the charging section.

Here total income as per section 2(65) means total amount of income as referred to in section 17 and includes any

other income which is to be included in the total income of the assessee as per provision of The Income Tax

Ordinance, 1984. The principle underlying section 17 is to make the chargeability of income depending upon the

locality of receipt or accrual. Section 43 also deals with the computation of total income by inclusion, in some cases,

of other person's income. Assesses can be divided into 2 categories:-

(i) Resident; and

(ii) Non-resident.




The basic difference between resident and non-resident is tabulated below:-

Sl.

No

Area Resident Non-resident Analysis

1. Income

point of

view

The entire income

accruing or arising in

any part of the world,

irrespective of whether it

is received in

Bangladesh or not is

taxable.

The income accruing or

arising in Bangladesh

only is taxable.

(a) A non-resident, unlike a resident, is

not chargeable in respect of income

accruing or arising outside Bangladesh

and not received in Bangladesh.

(b) If an income is taxed on the ground

of accrual or deemed accrual, it can not

be taxed again on the ground of receipt

either in the same year or in a different

year.

(c) As per S.R.O. No. 216-Law/ Income

tax/2004 dated 13/07/2004 foreign

income of a Bangladeshi national,

irrespective of resident or non-resident,

is exempt from payment of tax if it

comes through official channel.

2. Tax point

of view

General tax rate is

applicable.

Maximum tax rate is

applicable.

(a) The only exception is non-resident

Bangladeshi where general tax rate is

applicable.

(b) If any resident assessee proves to the

satisfaction of the DCT that, he has paid

tax at foreign country by deduction or

otherwise on any income which has

accrued or arisen to him outside

Bangladesh with which there is no

reciprocal tax treaty, the DCT may

deduct from the tax payable by the

assessee a sum equal to the tax

calculation on such doubly taxed income

at the average rate of tax of Bangladesh

or the average rate of tax of the foreign

country whichever is less.

3 Investment

Tax Credit

Point of

view

Investment tax credit

facility is applicable

Investment tax credit

facility is not applicable

The only exception is non-resident

Bangladeshi where investment tax credit

facilityis applicable like resident.

Thus, the incidence of tax depends upon and is determined by the question whether the assessee is resident in

Bangladesh. A non-resident entitles partial exemption from chargeability of tax to which resident is not entitled. The

incidence of Tax is higher in the case of persons who are resident and lower in the case of persons who are non-

resident.

Avoidance of tax through transactions with non-residents (Sec.104 read with rule-34 and 35)

Business may be carried on between a resident and a non-resident and owing to the close connection between them,

the course of business may be so arranged that the resident makes either no profit or less than the ordinary profit in

that business. Such an arrangement might deprive Bangladesh Govt. from tax which would otherwise be payable by

the resident. In such cases the resident may be charged in respect of the profits which he has not in fact made but

which he might reasonably be expected to have made had he done the business on ordinary commercial terms.

Rule-35 read with rule-34 prescribes the method of determining the amount of notional income in respect of which

the resident may be charged under section 104.




Tax Rate:

Other than Company:

Entity other than the company (individual, HUF, firms etc) are taxed at progressive rate as below –

On the 1st tk. 250,000 Nil

On next tk. 400,000 10%

On next tk. 500,000 15%

On next tk. 600,000 20%

On next tk. 3,000,000 25%

Balance amount 30%

For women and senior citizen (65+) first slab will be of tk. 300,000; for handicapped, it is of tk. 375,000 and for

gazetted war-wounded freedom fighters, it is of tk. 425,000.(Amended FA 2015)

As per second schedule, in case of non-resident non-Bangladeshi tax rate is 30% direct.

Surcharge is payable by an individual assessee on total tax payable if the total net worth exceeds tk. 2.25crore as

stated below: Surcharge will be calculated based on tax liability after considering investment tax rebate.

Total net worth Rate

Over Tk 2.25to 10 crore 10%

Over Tk 10 to 20 crore 15%

Over Tk 20 to 30 crore 20%

Over Tk 30 crore 25%

Minimum surcharge has been fixed at Tk. 3,000 for the Assessment year 2015-2016. (Added FA 2015)

(Amended FA 2015)

Study References:

1. Finance Act

2. Section 16 (16B, 16C, 16CCC) of ITO

3. Second Schedule of ITO

4. SRO (Reduced tax rate)

Minimum tax;

Resident in Dhaka or Chittagong City Corporation; BDT 5,000

Resident in other City Corporation; BDT 4,000

Resident in Paurashabhas at District towns; BDT 3,000

Resident in areas other than those mentioned above; BDT 3,000




Company:

Company tax rate is direct on its assessment income at following rate –

1. Listed company 25%(Amended FA 2015)

2. Non listed or non-resident company 35%(Amended FA 2015)

3. Bank, insurance & NBFI (except merchant banks)

If listed or government approved Bank, insurance and financial isntitution in 2013

40%(Amended FA 2015)

If not listed 42.5%(Amended FA 2015)

4. Mobile Phone Operator 45%

But if any such mobile phone operator converts it as a publicly traded company by transferring minimum

10% share of its paid up capital, provided Pre Initial Public Offering Placement will not be more than 5% of

that, in that case tax rate 40%




5. Cigarette Manufacturers 45%(Amended FA 2015)

6. Merchant Bank 37.5%

7. Cooperative society (registered under cooperative society act 2001) 15% (Added FA 2015)

dividend received by a company or dividend paid to abroad will be treated as dividend income and tax rate

will be 20%.

Tax on capital gain of the company will be 15%.

Unlike in the previous year, no rebate is allowed even if dividend is paid more than 30% of the share capital.

The rate of income tax would be 35% if the company fails to declare or pay dividend at less than 10% of

share capital within the specified time (60 days).

Non-listed companies including mobile phone operator companies other than banks, insurance and other

financial institutions, merchant banks and cigarette manufacturing companies will receive rebate of 10% in

the year of listing if they list at least 20% of their paid up capital.(Amended FA 2015)

Section – 16:

Section - 16B; Charge of additional tax:

Notwithstanding anything contained in any other provision of the Ordinance, where---

(a) a public limited company, not being a banking or insurance company, listed with any stock exchange in

Bangladesh, has not issued, declared or distributed dividend or bonus share equivalent to at least fifteen percent

(15%) of its paid up capital to its shareholders within a period of six months immediately following any income

year, the company shall be charged additional tax at the rate of five per cent (5%) on the undistributed profit in

addition to tax payable under this Ordinance: or

(b) any person employs or allows, without prior approval of the Board of Investment or any competent authority

of the Government, as the case may be, any individual not being a Bangladeshi citizen to work at his business or

profession at any time during the income year, such person shall be charged additional tax at the rate of fifty

per cent (50%) of the tax payable on his income or taka five lakh, whichever is higher in addition to tax

payable under this Ordinance. (Added FA 2015)

Explanation.-For the purpose of this section, "undistributed profit" means total income with accumulated profit

including free reserve.

Section - 16C; Charge of excess profit tax:

1. Where a banking company operating under ব্োং ন োম্পোনীআইন, 1991 (1991 সননর 14 নংআইন) shows

profit in its return of income for an income year at an amount exceeding fifty per cent of its capital as

defined under the said Act together with reserve, the company, in addition to tax payable under the

Ordinance, shall pay an excess profit tax for that year at the rate of fifteen per cent on so much of

profit as it exceeds fifty per cent of the aggregate sum of the capital and reserve as aforesaid.

Section - 16CCC; Charge of minimum tax: 1. Notwithstanding anything contained in any other provisions of this Ordinance, every company shall,

irrespective of its profits or loss in an assessment year for any reason whatsoever, including the

sustaining of a loss, the setting off of a loss of earlier year or years or the claiming of allowances or

deductions (including depreciation) allowed under this Ordinance, be liable to pay minimum tax at the

rate of zero point three zero (0.30%) per cent of the amount representing such company's gross receipts

from all sources for that year:

Provided that such rate of tax shall be zero point one zero per cent (0.10%) of such receipts for an

industrial undertaking engaged in manufacturing of goods for the first three income years since

commencement of its commercial production.(Amended FA 2015)

Explanation: For the purposes of this section, 'gross receipts' means-

(a) All receipts derived from the sale of goods;

(b) All fees or charges for rendering services or giving benefits including commissions or

discounts;

(c) All receipts derived from any heads of income.]Added F.A. 2011




Capital Gain (Second Schedule):

Example: Salary income Tk. 520,000 and capital gain Tk. 1,000,000, Therefore total income is Tk.

1,520,000, on which tax shall be, assuming the capital gain arises from disposal of asset after five years;

Applicable slab Rate Tax Amount

On 1st up to 250,000 0% -

On next up to 400,000 10% 40,000

On next up to 500,000 15% 75,000

Remaining 370,000 20% 74,000

Total Tk. 1,520,000 189,000

Or

{(520,000-250,000)*10%}+(1,000,000*15%) = Tk. 177,000

Whichever is lower

and in this case the lower amount is Tk. 177,000

In case of gain of winning any lottery tax are deducted @ 20% at source though it can be computed with total

income, but no further tax rebate can be claimed.

Tax on the capital gain of the non-resident non-Bangladeshi shall be at the maximum rate i.e. @ 30% currently.

Reduced Tax Rate (SRO):

1. Jute, Textile 15%

2. Private University, Private College 15%

3. Local authority (RAJUK, BRTA, CDA, KDA etc) 25%

Section - 16E; Charge of tax on sale of share at a premium over face value:

Notwithstanding anything contained in any other provisions of this Ordinance or any other law, where a company

raises its share capital through book building or public offering or rights offering or placement or preference

share or in any other way at a value in excess of face value, the company shall be charged, in addition to tax

payable under this Ordinance, tax at the rate of three (3) percent on the difference between the value at which the

share is sold and its face value. Added F.A. 2010 and omitted F.A. 2013

Other than Company:

Company:

15%

Within 5 yrs of purchase:

normal rate

Capital Gain

After 5 yrs of purchase:

1. Slab rate on total

income; or

2. Tax on cap. Gain 15%

and on other income,

normal slab rate

Whichever is lower




4. Cattle feed, fish feed, shrimp feed (from AY 2014-15) 3%

Part Two: Income from Salary

Income from Salary:

Definition of Salary:

There is no exhaustive definition of salary at Income Tax Ordinance, 1984. Only an inclusive definition is given at

section 2(58) where ―salary‖ includes the following:-

a) Wages (or pay)

b) Annuity

c) Pension –Totally exempted as per 6th Schedule (Part-A) Para-8

d) Gratuity – Exempted as per 6th Schedule (Part-A) Para-20

e) Fees

f) Commission

g) Allowances

h) Perquisites (Indirect benefits)

i) Profits in lieu of salary or wages

j) Profits in addition to salary or wages

k) Advance Salary

l) Leave encashment

However, the term “Basic Salary” has been defined at Rule 33(2) as well as at Rule 65A (1) where basic salary

means the pay and allowances payable monthly or otherwise but does not include the following:

a) Dearness allowance (unless it enters into the computation of Superannuation or retirement benefits of the

employee)

b) Employer‘s contribution to Recognised Provident Fund and interest credited on the accumulated balance

c) Allowances which are tax exempted

d) Allowances, perquisites, annuities and other benefits

Section 2(58) contains definitions within the definition. Salary includes perquisites and profits in lieu of salary, which

again defined at section 2(45) and 2(50) respectively.

Perquisite is defined in the Oxford English Dictionary as "any casual emolument, fee or profit attached to an

office or position in addition to salary or wages.” There is an exclusive definition of perquisite at section 2(45)

where perquisite means any payment or benefit made to an employee in the form of cash or any other form but

excluding the following:

a) Basic Salary

Study Reference:

Definition: Section – 2(58), 2(45), 2(50), 2(27), 2(28) read with rule 33(2)(b)

Section – 21, 50, 50B read with rule 21 and 22

108 read with rule 23

124(2), 165 and 172

Exemption: Rule – 33 read with Sixth Schedule (Part A) para 5

Provident Fund:

1st schedule (Part B) read with Rule – 43, 44

6th Schedule (Part A) Para – 4,6, 21, 25

6th Schedule (Part B) Investment allowance

SRO 454 (Serial 19) date – 31/12/1980

SRO 310, dated: 27 June 1984




b) Festival bonus

c) Incentive bonus

d) Arrear Salary

e) Advance Salary

f) Leave encashment

g) Leave Fare Assistance (LFA)

h) Overtime

i) Contribution by the employer to-

1) Recognized provident fund.

2) Approved Pension Fund.

3) Approved Gratuity Fund and

4) Approved Superannuation Fund.

There is an inclusive definition of "Profits in lieu of salary" at section 2(50) where profits in lieu of salary include: -

a) The amount of compensation in connection with the termination / modification of any terms and

conditions relating to employment.

b) Any payment from a provident or other fund to the extent to which it does not consist of contributions

by the employee and the interest on such contributions.

Classification of Salary (Section: 21)

The following 3 (three) categories of income of an assessee is classified and computed under the head ―salaries‖,

namely;-

a) Salary due from an employer to an employee in the income year, whether paid or not ;

b) Salary paid or allowed to an employee in the income year though not due before it become due to him; and

c) Arrears of salary paid or allowed to him in the income year, if not charged to income tax for any earlier

income year.

Salary once included in any year on due basis or advance payment basis is not includible again in salary income of an

employee of any other year. No payment can fall and to be taxed under the head salary unless the relationship of

employer and employee exists between the payer and the payee. Salary can be taxed not only on payments made

by an employer during employment, but also on payments by a former employer after the employment has come to an

end. The definition of ―employee‖ is given at section 2(28) where employee includes a director also. It has been

provided that an employee, in relation to a company, includes the managing director or any other director or other

person, who irrespective of his designation performs any duties or functions in connection with the management of

the affairs of the company. So a director who is not connected with the management of affairs of the company may

not be called employee. For the purpose of determining the value of perquisites of an employee under rule-33,

employee includes a shareholder director. If the shareholder director is director of more than one company then he

shall be entitled to the benefits under rule - 33 for one company only.

―In order to be classified under salary, there must be an employment contract.‖ Such as – consultancy fee will be

income from business and profession unless and until there is an employment contract.

Apportionment of salary over the years due to arrear or advance salary (sec.172)

Where the salary is assessable at a rate higher than that at which it would otherwise have been assessed by reason of-

(a) Any portion of salary being received in arrear or in advance;

(b) Salary received in the year for more than 12 months;

(c) Received a payment, which is a profit in lieu of salary;

The DCT may, on the basis of application to him by the assessee, allocate salary over the year or years to which it

relates and may refund the amount of tax, if any, paid in excess. According to section 21, salary is taxable in the year

in which it is due or is paid. Where salary is paid in arrear or in advance, or where a retirement benefit or salary for

more than 12 months is received in any one year, the income for that year may be liable to assessment at a rate higher




than that at which it would otherwise have been assessed. Section 172 authorises the DCT to grant appropriate relief

for income tax in the above situation.

Pay and Allowances totally exempt from Tax: (Sixth Schedule, Part-A)

The following pay and allowances shall be exempted from payment of tax and shall not be included in the

computation of salary income:-

(a) Interest accrued on PF on which Provident Fund Act, 1925 applies (Para 4(1)).

(b) All sum accrued on Workers Profit Participation Fund established under the Companies Profit (workers

participation) Act, 1968 (Para 4(2)) by a worker as defined in section 2(65) of the said Act (Para 4(2)). (Amended FA

2015)

(c) Any special allowances, benefits, or perquisites granted to meet expenses incurred for official duties (Para-5)

(d) Remuneration of Ambassadors/High Commissioner/Charge d‘affairs etc. of Embassies of foreign states and

their non-Bangladeshi employees (Para-7).

(e) Pension (Para-8).

(f) Gratuity up to taka two crore fifty lakh (Para-20).(Amended FA 2015)

(g) Any payment from provident fund to which PF Act. 1925 applies or from a recognized provided fund, an

approved superannuation fund or workers‘ profit participation fund established under Labour Law 2006 to any

worker (Para-21).

(h) Interest credited on accumulated balance of a recognized provident fund. The exemption limit is 1/3rd of salary

[here salary means basic salary and dearness allowance (if any)] or interest credited @ 14.5% whichever is

lower (Para-25, definition of salary as per 1st Schedule (Part -B) and S.R.O.no 310 dated 27/06/1984).

(i) Any amount received at the time of voluntary retirement in accordance with any scheme approved by the Govt.

(Para-26).

(j) Income from dividend received from a company listed in any stock exchange in Bangladesh up to twenty five

thousand taka. (Para- 11A). (Amended FA 2015)

(k) Any income received by an assessee from Wage earners development bond, US dollar premium bond, US dollar

investment bond, Euro premium bond, Euro investment bond, Pound sterling investment bond or Pound sterling

premium bond. (Added FA 2015)

(l) Income from of a mutual fund or a unit fund up to taka twenty five thousand. (Amended FA 2015)

Salaries exempt from payment of tax (as per S.R.O.):

Salaries of the following categories are exempted as per Govt. S.R.O. and notification: -

(m) As per Private Sector Power Generation Policy of Bangladesh, income of any foreigner employed in a private

power generation company of Bangladesh is tax-free for 3 years from the date of his arrival in Bangladesh.

(S.R.O. no 114/1999); [not applicable for quick rental power generation company]

(n) Any salary drawn by any foreigner from the contracting state or agency as per bilateral agreement between the

Govt. of Bangladesh and Govt. of the contracting state or agency from any foreign aided development project is

fully exempt from payment of tax. (S.R.O. NO 207/1997)

(o) Salaries of categorized personnel of United Nations and its agencies are tax free as per provision of schedule-1

(Article-V) Section-17 and schedule-2 (Article-VI) section-18 of United Nations and Specialized Agencies

(Privileges and Immunities) Act, 1975. (NBR Circular No: NBR/Tax-7/Tax Policy/02/2006, dated. 29/4/2007.)

(p) When in any year an assessee has ceased to be an employee participating in a recognised Provided Fund and

has been declared by the employer maintaining the Fund not to be eligible to receive the whole for the

accumulated balance due to him, so much of his income as is assessable for that year shall be exempted from

income tax and shall be excluded from the computation of his total income and if such amount exceeds the

amount of his income in that year, so much of his income in the following year or years as is equal to the

amount of such excess shall be so exempted and excluded is such year or years. [S.R.O.no 454(serial no19)

dated:31/12/1980]

(q) All allowances and benefits (except basic salary and festival bonus) of Govt. employees, Ministers, MP and

Judges of Supreme Court are exempted from payment of tax [SRO No:226,227 and 228 dated 04/7/2011]




Information regarding payment of salary (Section 108 read with rule 21, 22 and 23)

Every employer shall furnish salary statement of employees in the form prescribed at rule-23 to the DCT before 1st

September each year. The DCT may however extend this date. This section requires information to be given

regarding accrual and actual payment of salary in order to help detection of any avoidance of tax. In case of non-govt.

employees every person responsible for making deduction before payment of salaries to them shall send forthwith a

statement prepared in the form prescribed in rule-21 to the concerned DCT.

The Commissioner of Taxes may under rule-22 permit an employer to pay tax on the income of his employees in a

lump sum every month based on the average amount of tax deductible from such income from salaries and submit at

the end of the year the statement in the form prescribed in rule-23(3) Such statement must show not only the salary

which is paid but also the salary due. Because salary due is chargeable under section 21, whether paid or not.

Failure to furnish statement is punishable under section 124(b) and for making a false statement under section 165.

Tax on Tax

If salary tax is borne by the employer, than tax will not be treated as perquisite in the hand of the employee and

therefore there is no tax on tax issue in this case. (S.R.O. no 182/1999 dated 01-07-1999)

Salary Income Computation (rule 33)

As per income tax law the following pay and allowances will be included in computing salary income:-

a) Full basic salary;

b) Full festival bonus;

c) Full incentive bonus;

d) Full dearness allowance.

e) Full entertainment allowance;

f) Any allowance where there is no exemption limit

g) Employer‘s contribution to Recognised provident fund;

h) Cash house rent allowance if it exceeds 50% of basic salary or Tk. 25,000/- per month whichever is lower;

(If job is for 9 months, exemption will also be for 9 months)

Example: Tk. Tk. Tk.

Basic salary (52,000*12) 624,000

House rent allowance (30,000*12) 360,000

Less: Lower of 50% basic salary or Tk.

25,000 p.m. whichever is lower

50% of basic salary 312,000

Or, Tk. 25,000 p.m. 300,000 (300,000) 60,000

Total Income 684,000

Note: If actual house rent is less than Tk 3,00,000 then that amount shall be allowable.

i) Rental values of the rent-free accommodation or 25% of basic salary of the employee whichever is less.

Particulars Tk Tk. Tk

Basic salary (52,000*12) 6,24,000

Rental Value 1,60,000

House Rent (25% of Basic Salary) 1,56,000

(the lower one) 1,56,000

Less: House rent paid (2,000*12) 24,000 1,32,000

Total Income 7,56,000




If rental value is not given, 25% of the Basic Salary shall be used for computation of total income

of an assessee.

Where the accommodation is provided at a concessionary rate, the rent actually paid by him shall be deducted.

j) Cash conveyance allowance if it exceeds Tk. 30,000/ per year.

Example: Received Exempted Net Income

Tk. Tk. Tk.

Basic salary (52,000*8) 416,000 - 416,000

House Rent (20,000*8) 160,000 (160,000) -

Conveyance Allowance 30,000 (30,000) -

Total Income 606,000 (190,000) 416,000

Note 1: House rent (25,000*8) or 50% of Basic salary, whichever is lower.

Note 2: Conveyance Allowance is allowable up to TK 30,000 irrespective of months.

k) Where conveyance facilities are provided partly or exclusively to an employee for personal or private

purposes, an amount equivalent to Tk. 60,000 per annum or 5% of basic salary whichever is higher shall

be added to his/her income. If any additional allowance is given along with the car facility, both will be added

to the salary income. nothing will be added if is given for official purpose.

l) Medical allowance if it exceeds 10% of basic salary or Tk. 120,000/- per year, whichever is lower.

m) The value of any benefit provided free of cost or at a concessionary rate;

n) Any sum paid by an employer in respect of any obligation of an employee.

o) In case of leave fares assistance; if it is mentioned in the job contract then it is exempted up to actual

expenditure. If it is not mentioned in the job contract then fully taxable. But if the travel is outside the country

the exemption is only applicable for every alternative year. If within the country, then exemption is for every

time of travel. (Amended FA 2015)

Voluntary disclosure of income [Section: 19E(3)(e)]

Voluntary disclosure of income as per section 19E will not be applicable to any income which is exempted from tax

in the concerned income year or is chargeable to tax at a reduced rate in accordance with section 44 of the Income

Tax ordinance, 1984. (Amended FA 2015)

Investment Tax Rebate:

According to section 44(2) and Part-B of the 6th schedule, the following investments and donations are eligible for

tax rebate:-

[A] Investments:

a) Life insurance premium (Para-1); (up to 10% of the policy value)

b) Employee‘s contribution to provident fund to which P.F.Act, 1925 applies (Para-3)

c) Both employee‘s and employer‘s contribution to Recognized Provident Fund (Para-5)

d) Employee‘s contribution to approved superannuation fund in which the employee is a participant (Para-6)

e) Contribution to benevolent fund and group insurance scheme (Para 17)

f) Contribution to any DPS up to Tk.60,000 per year at any scheduled bank. (Para-11)

g) Investment in the following instruments-

1. Savings Certificates;

2. Unit Certificates and Mutual Fund Certificates issued by ICB or any other financial institution; or

3. Government Bonds and Securities. (Para-10)

h) Investment at shares, debentures or mutual fund (both IPO and secondary market). (Para-27)

Particulars Tk. Tk

Basic salary (52,000*12) 6,24,000

House Rent (25% of Basic Salary) 1,56,000

Less: House rent paid (2,000*12) 24,000 1,32,000





i) Investment at Govt. Treasury bond (Para-28)

j) Purchase of 1computer (desktop) within Tk. 50,000/ or1 laptop within Tk.1,00,000/(Para-23).

[B] Donations to:

1. Rural charitable hospital approved by the Govt (Para- 11A)

2. Organisation for the welfare of the retarded people approved by the Social Welfare Department and NBR

(Para 11B)

3. Donation to Jakat Fund (Para 13)

4. Donation to an institution of Aga Khan Development Network (Para 21)

5. National level institution set up in memory of the liberation war (Para-24)

6. National level institution set up in memory of Father of the Nation. (Para-25)

7. Donation to Govt. approved philanthropic and educational institutions (Para-22)

GPF Vs RPF Vs UPF:

SL Subject GPF RPF UPF

1 Employees‘ contribution Automatic taxable* Automatic taxable* Automatic taxable*

2 Employers‘ contribution N/A Taxable Taxable but at the

end of the service

3 Investment allowance Yes Yes (both) No

4 Interest on PF Tax free **Tax free up to a

certain limit

Fully taxable

5 Treatment on the hand of

employer

N/A Allowable

expenditure on

Profit and loss

account

Not allowable

6 Pre-mature termination / leave

the job

*** ***Employee can

adjust in subsequent

years.

***

7 Payment at retirement No treatment No treatment Taxable (employer

portion and interest)

*Automatic Taxable = deduction of contribution to PF cannot be considered. Total basic salary are added to the total

income

**

One third (1/3) of the basic salary (Basic + Dearness allowance) (Para 25)

Or

Interest @ 14.5%

(SRO 310)

Whichever is lower is exempted

For example, a person received interest on his PF @ 16% which is tk. 230,000 and his basic salary is tk. 600,000.

Then exemption will be –

1. 1/3 of his BS, which is tk. 200,000 or

2. Interest @ 14.5% = ((230,000/.16)*.145) = 208,438

Lower one is exempted, that is tk. 200,000 is exempted.

So his total income = (600,000+(230,000 -200,000)) = 630,000

But this interest should be excluding from the total income in time of calculating investment allowance.

*** (SRO 454)

In case of pre-mature job leave and where employees received nothing from the PF, on which the employee has

already pay tax should be deducted from his total income in the subsequent years.




1. Allowable Investment Allowance:

The allowable investment allowance is the lower amount of the following three:

30% of total income excluding

(1)employer‘s contributions to

recognized provident fund (RPF)

(2) taxable portion of interest on RPF

(3) any income u/s 82C

(4) any income on which reduced tax

rate is applicable

OR

TK. 15,000,000/=

OR

Actual Investments as per 6th Schedule

Part B

Whichever is lower is to

be treated as investment

allowance

Tax rebate @ 15% is

applicable on such

allowable investment.

2. Income tax rate for the assessment year 2015-2016

Rates

i. On the First Tk. 2,50,000/- of total income = nil

ii. On the next Tk. 4,00,000/- of total income = 10%

iii. On the next Tk. 5,00,000/- of total income = 15%

iii. On the next Tk. 6,00,000/- of total income = 20%

v. On the next Tk. 30,00,000/- of total income = 25%

vi. On the balance of total income = 30%

However, the threshold limit for woman and senior citizen ageing 65 years or more is Tk. 300,000/ and for

physically handicapped persons Tk. 375,000/- and for gazetted war-wounded freedom fighter is Tk.

4,25,000/-.(Amended FA 2015)

After rebate, minimum tax for individual taxpayer is Tk. 5,000 (for Dhaka and Chittagong city corporation

area), Tk. 4,000 (for other City Corporation) and Tk. 3,000 (for other areas) if total income exceeds the

minimum taxable limit.(Amended FA 2015)

Deduction of tax at source from salaries (Section 50+Rule-13)

The employer including Govt. (govt. Employees are taxed on their basic salary, festival allowance and bonus) shall

deduct tax at source at the time of paying salaries at an average rate applicable to the estimated total income of the

employee. At the time of making such deductions, the amount to be deducted may be increased or decreased for the

purpose of adjusting any excess or deficiency arising out of any previous deductions or failure to make deductions.

The employer‘s liability to deduct tax is absolute and is not affected by any private arrangement whereby the

employee has undertaken to discharge his own tax liability.

However employer will not deduct tax at source or will deduct tax at a lower rate or amount in case an employee can

produce a certificate issued by the DCT to do so.




The amount deducted shall be deposited to the credit of the Govt. within 2 weeks from the end of the month of

deduction. However DCT can, with the prior approval of the IJCT, permit an employer to pay the tax deducted at

source under the head salaries quarterly on: -

a) 15th September

b) 15th Decembe

c) 15th March; and

d) 15th June

Practical Problems

Practical Problem -1:

Mr. X (50 years old) is the Managing Director of ABC Co. Ltd. He has been given the following monthly salary and

allowances for the year ending on 30 June 2015.

1 Basic Salary Tk 25,000 per month

2 Dearness Allowance Tk. 5,000 per month

3 Entertainment Allowance Tk 1,000 per month

4 Employer‘s Contribution to P.F. (Recognized) Tk.2,500 per month

5 Lunch Allowance Tk. 1,000 per month

6 School fee for the Children of Mr. X Tk. 5,000 per month

7 Utility Allowances Tk. 3,000 per month

8 Fee for Golf Club (yearly) Tk. 5,000 per year

9

Medical Allowance Tk. 3,000 per year

(Actual expenditure during the year was Tk. 30,000/-)

10 Festival Bonus Equal to basic pay (got two bonus during the year)

11 Other Particulars:-

(1) He has purchased 5 years savings certificates amounting to Tk. 1,00,000/-.

(2) Employer provided him a free accommodation. (Rent of the house is roughly Tk. 35,000p.m.)

(3) Employer also provided him a full time car.

(4) He has been given a servant from his office whose monthly salary is Tk. 1,200/-.

(5) He paid L.I.P. Tk. 50,000/-. (Policy value is Tk. 4,00,000/-).

(6) He contributed Tk. 2,500/- per month to the recognized provident fund (RPF). Employer also contributed the

same.

(7) During the year he received bank interest amounting to Tk. 1,80,000/-( net of tax)

(8) He purchased secondary shares of Tk.75,000/- of a public ltd. company which is listed in DSE.

Compute the total income and determine the tax liability of Mr. X for the assessment year 2015-2016.




Computation of Total Income of Mr. X

Mr. X

Calculation of total income for the year ended June 2015

Income year- 2014-15

Assessment Year-2015-16

1. Income from Salary (Section-21) Tk. Tk.

(1) Basic Salary (25000 X12) 3,00,000

(2) D.A. (5000X12) 60,000

(3) Entertainment Allowance (1000 X12) 12,000

(4) Employer‘s Contribution to R.P.F (2500 X12) 30,000

(5) Lunch Allowance (1000 X12) 12,000

(6) School Fee (5000 X12) 60,000

(7) Utility Allowance (3000 X12) 36,000

(8) Notional income for full time car for private use(5% of

Basic Salary or Tk.60,0000;whichever is higher)

60,000

(9) Fee for Golf Club 5,000

(10) Medical Allowance (3000 X 12) 36,000

Less: lower of 120,000 and 10% of Basic Salary 30,000 6,000

(11) Festival Bonus (25000 X 2) 50,000

(12) Full Free Accommodation:

Rental value of accommodation (35000 X 12) 4,20,000

25% of basic Salary (whichever is less) 75,000 75,000

(13) Servant‘s Salary (1200 X 12) 14,400

Salary Income 720,400

2. Income from Other Sources [Section-33]

Bank Interest (1,80,000 x 10100

100

)

2,00,000


Computation of Investment Allowance

Actual Investment:

1. Savings Certificate 1,00,000

2. LIP (10% of sum assured) 40,000

3. Contribution to R.P.F. (Self + Employer) 60,000

4., Investment in shares 75,000

Total investment allowances claimed 275,000

As per Section 44(3) of the I.T. Ordinance, allowable investment allowance comes to 30% of total income

[excluding employer‘s contribution to R.P.F.] = (920,400 - 30,000) x 30% = 267,120 or TK 15,000,000 or Actual

Investment whichever is less.




Tax Calculation

On 1st Tk. 250,000/- of Total Income Tax Nil

On Next Tk. 400,000/- of Total Income Tax @ 10% Tk. 40,000

On Next Tk. 270,400/- of Total Income Tax @ 15% Tk. 40,560

Tax on Total Income of Tk. 920,400

Tk.80,560

Less: Tax Rebate on Investment Allowance (267,120

X 15%)

40,068

Total Tax: 40,492

Less:- Tax deducted at source from bank interest 20,000

Net tax liability 20,492

Answer: (1) Total Income: - Tk. 920,400

(2) Net tax liability: - Tk. 20,492




Practical Problem -2:

From the following particulars compute the total income and tax liability of Mr. X for the income

year ending 30 June 2015.

(a) Salary Income:

Basic salary Tk. 20,000 p.m.

Dearness allowance – 20% of basic salary

Bonus – 1 month‘s basic salary

House rent allowance – 55% of basic salary

Medical allowance – Tk. 500 p.m.

Conveyance allowance – Tk. 1,200 p.m.

Posting allowance – Tk. 5,000 p.m. to meet extra cost of living for posting at Hill District

Subscription to RPF – 10% (Employer‘s contribution also same)

Interest accrued Tk. 96,000 on P.F. balance calculated @ 16% p.a.

(b) Interest on Securities:

Interest on SEC approved debenture Tk. 35,000/-

Interest on Govt. Bond Tk. 70,000/- (TDS @ 10%, Tk. 7,000/- at upfront system 3 years before)

(c) Income from House Property:

Mr. X has one residential house one-half of which is let out at a monthly rent of Tk. 10,000/- and the other half is

self-occupied.

Mr. X incurred following actual expenditures for the full house:

Taka

Municipal tax 20,000

Repairs and maintenance 60,000

Insurance premium 12,000

Salary of caretaker 30,000

Interest on house building loan 1,47,000

(d) Income from Business:

⅓rd share income form a partnership business firm Tk. 73,000 (after tax).

Firm‘s income Tk. 2,25,000/-

(e) Capital Gain:

Gain from sale of listed companies share Tk. 10,00,000/-

(f) Income from other sources:

Cash dividend (net) from a listed company Tk. 45,000/-

Stock dividend of 100 shares (face value Tk. 10 but market price on that day Tk. 1,500 per share)

Interest (net) on savings bank account Tk. 5,400/-

During the year Mr. X made the following investments:

1. Life insurance premium at the name of his father Tk. 60,000 (Policy value Tk. 5,00,000/-)

2. Investment in shares of a listed company Tk. 1,00,000/-

3. Contribution to monthly pension scheme of Islami Bank Tk. 5,000/- p.m.




Solutions:

Mr. X

Calculation of Total Income for the year ended June 2015

IY: 2014-15

AY: 2015-16

Description Workings Amount (BDT)

a) Salary Income:

Basic Salary (BS) 20,000*12 2,40,000

Dearness allowance 20% of BS 48,000

Bonus 1 months BS 20,000

House rent allowance (55% of BS) 1,32,000

Less: 50% of BS or 25,000 p.m. lower one (1,20,000) 12,000

Medical Allowance 6,000

Less: Exempted-up to lower of 120,000 or 10% of BS (Rule 33I) 6,000 -

Conveyance Allowance 14,400

Less: Allowable up to 30,000 (Rule 33D) (14,400) -

Posting Allowance (it can also be allowable fully under sixth

schedule (part A) Para 5)

60,000

Employers' contribution to PF 24,000

Interest accrued 96,000

Less: Allowable @ 14.5% or 1/3 of BS (BS+DA), lower one (87,000)

9,000

Total Salary Income 4,13,000

b) Interest on Securities:

Interest on SEC approved debenture 35,000

Interest on Govt. bond 70,000

Total income from interest on securities 1,05,000

c) Income from House Property:

Annual value 1,20,000

Less: Repair and maintenance 25% of AV (30,000)

Municipal tax (10,000)

Insurance premium (6,000)

Interest on HP loan (73,500)

Total income from house property 500

d) Income from business:

Partnership income 225,000*1/3 75,000

Total income from business 75,000

e) Capital gain:

Sale of share of listed company 10,00,000

Less; Exempted (SRO no. 217, 18.08.2014) (10,00,000) -

Total capital gain -

f) Income from other sources:

Cash dividend (45,000/.90)

Less: Exempted up to 25,000 ( 6th schedule, Part A, Para 11A)

50,000

(25,000)

25,000

Interest on savings bank account 5,400/.90 6,000

Total income from other sources 36,000

Total income for Mr. X 6,24,500




Investment Allowance:

Employees contribution to RPF 24,000

Employers' contribution to RPF 24,000

Investment in share 1,00,000

Pension scheme (5000*12) 60,000

2,08,000

or, 30% of total income excluding Employer‘s contribution to RPF

and taxable portion of interest on RPF [(6,24,500-24000-

9000)*30%] 1,77,450

or, 1,50,00,000

Lower one (177,450).

So, investment allowance will be on tk. 177,450 @ 15% =Tk.26,618

Calculation Tax Liability:

On the first 2,50,000 0% 0

Remaining 3,74,500 10% 37,450

6,29,500 37,450

Less: Investment allowance (26,618)

10,832

Less: Tax rebate on partnership income* (1,301)

Less: TDS (5,000+600) (5,600)

Net Tax Liability 3,931

* (as per sixth schedule (part b) Para - 16)

= (10833/624,500)*75,000

=1,301

Note: Assuming Mr. X is below 65 years old.

Answer:

Total income Taka 6,24,500

Net Tax Liability Taka 3,931




Question No.8:

The fo llowing are the particulars of income of Mr.Fazal for the year ended 30th June, 2014. IS

a) Salary Tk. I 2,0001- per month (basic) b) Dearness Allowance -4()t/o of basic pay but maximum ofTk.4,OOO per month c) Entertainment Allowance Tk.400 per month. d) Bonus--equivalent to basic sal3l)' of two months. e) Income rrom Commercial Securities Tk.6,09&1·. f) Honorarium as part lime advisor Tk.20,0001· g) Income from Partnersh ip Business Tk.SO,OOOI-(taxed). h) Income from Agricultural Land (sa le of product) n .1 0,000'-i) Royalty rrom books Tk.7,OOO. j) Received bin.h day presentation Tk.S,OOO. k) Interest on pensioner saving certificate n .lo.ooo.

Mr. Fazal was provided with a free-furnished quarter. He also owns a house whidl is let out al n . I 0,000 per month . The Municipal V.lue of the house is n .I,oo,ooo. He spent 1\.7,5001- for repair and llWO,OOO for altemation . He also paid TkA,OOO for Municipal Tax, Tk.2,OOO for fire insurance. premium, Tk.J,OOO for col lection charges. Other Part.:Culars of Mr. Faza l are as follows:

i. He contributed 10% of his basic salary to • recognized provident fund 10 which his employer conlribuled equal sums..-

ii . He insured his own life for Tk.75.000 and for the life of his wife for Tk .50,OOO. He paid insurance premiums on Ihe above policies Tk.6,OOO and Tk.4.000 respeclive l), .

iii . Purchased Pratirakh)'a Saneha), Patta for Tk.20,OOO. iv. He spent Tk.8,OOO on education for two college going children. Required to alculale:

I) The total taKable income .. ii) Investment lax credit for the year ended 3O~ June 2014. iii) Tax to be paid.

Page 1 0f t;




,

Answer to q UeJ tion no.8: Computation'or TOlal income of Mr. Fazal

[Considering it for current assessment year otherwise students will not be benefited] Income Year. 2014- 15 I Year. 2015·

Tk. Tk. 11<. TIt. lacome from Salar" Sec 21

, Basic SaIIllY: TIt. ~n'hIY 12,OOOX12 1.44.000 i ;'I~an~: 4~~ofi~--~~57,6oor-~==--1

48,000 48,000 I ii, 1 AI : 4ooXI2 4,800 I ii Bonus (2 month ', . 12,1 (2 24,000

Ii, '~e 1~~~%0~~'~~Y.-__ ~ ____ ~3~6i •• ~1000+-~~t-~~ I v: _, 110 RPF~B. S. 14,400 1,27,200 2,71,200

el ...... • on , Sec.22 rMi" Income from ' ~

Income from Hou .. 1 : Sec.2. Whollv leI oul house: ~nnual Rent.1 Value: 12 ~

Dc IV'lu~H~~ro~ne,~C;A~"n~nu'I~V'lu~e)~I~~ 1,2~~----+---~ I :;es;e~ir v~ of A'. v , • ~s 25: , ch..-ge) 30000

~ .I tax @~ 84,000

~i""'me from : uJ, 19(30) Repairs aUowed as per seclion 2S - '" -~ ,. 30,000 L,e,s: Repairs claimed (Tk. 7,500+ Tk.l,OOO)- 10,500 Unspent amount will be treated as HP income uls I9(JO)

4. lacome fro .. ~~Pr<>duce !-ess eoSl of I j 6~

Inrome [rom : Sec.2S ncome from I income) . In,ome from Other Source: Sec. JJ

10,000 6,000

.) i 20.000

TOllllncome

19,100 1,03,100

4,000

4,61,798

page z of 5

, ,




Investment Tn Reba te: Sec. 44(1) (b); 44(3)

Particulars Tolal Admissible Tax Investment Tk. Investment rebate Tk.

a) Actuallnvcstment:

;. Contribution to RPF: 14,400 X 2 21,100 (Employer and Employee both)

ii. Savings eertificatc 20,000 iii. Li fe Insurance Premium

Self: 6,000 or, 10% of Policy amount 7,100

(Le. IIW. ofTk. 10,000) (Lower) 6,000 Wife: 4,000 Or, 10% of Policy amount 1,000 (;.e. 10% of n. 10,000) (Lower)

4,000 11,800

b) Max Limit of Investment 30% of T.I. excluding employer's contribution to RPF=4,61,798-14,400) X 30% "" 4,47,398 X 30% ,. 1,34,219 or Tk. 1,50,00,000 or Actual investment Tld 8JOO (Whictlever is lo~r) ~ Tax Credit: 15% on admissible investment ofTk. 58,800

Tn calcul atio n: TOli ncome Taxon IIITk.2.50,OOO'" Tax on remaining Tk. 2, 11,798@ 10%

Less: Investment tax rebate

Less: Rebate on income from partnersl!ip finn al average rate as per 6" schedule (pan.b)pa~.16 (10,000)( 12,360/4,61,798)

Net tax payable

NOle:

Tk.

11,800

Tkc~ Nil lW2 21 ,180 Llli 12,360

l.ill Tk. J.J...lli

8,820

I) Income from Commercia l Securities needs not to be grossed-up as TOS was at upfront system. 2) Rebate would be calculated It the avetage rate of lax out of the .-.ncome from Parti~hip

Business" (taxed) to arrive at the Net lax calcuiliton as per 6· schedule (part-b) para-I 6. J) Royalty income from books is ttloxable under Scc.36 of Income Tax Ordinance 1984. 4) Education expense for Children is not an item of investment allowance. So it is nOI considered

for that 5) Interest on pensioner savings certi ficate is tax free up 10 investment of TIe_ 5 lakh. As the inlerest

income figure is only Tk. IO,OOO, so I assume thott investment was within that limit.




Worked example 5

Mr. Zaman Hoque was the HR Manager ofAxiala Bangladesh Ltd. On July 2014, his basic salary was Tk.52,OOO in the scale of 40 000-4 000x8-72 000. His date of yearly Increme~t '~ on 26"' MarCh. He was terminated from Axiata 'Banglade~h ltd. on 30th April, 2015 and JOflne

h·' me rom Grameenphone Ltd. on 1" June of the same year. During the income year IS Inco Axiata Bangladesh Ltd and Grameenphone Ltd. are as follows:

From Axlata Bangladesh Ltd.:

He received deamess allowance @ 10% of basic salary and medical allowance Tk. 2000 per month. He received two festival bonus each equivalent to one month's basIc salary In the month of September and April respectively. He contributes 10% of hIS basIc salary to a recognized provident fund. He has been provided with a renl-free quarter and a full tIme car by the employer. During the year he has also received an entertainment allowance of Tk. 1,000 per month. He has received compensation for the termination of Tk. 2,00,000 and gratuity of Tk. 1,00,000. Moreover, his accumulated balance from the RPF was Tk. 1,80,000.

From Grameenphone:

His basic salary is Tk. 60,000 per month with 40% house rent allowance and Tk. 5,000 medical allowance per month. He is also entitled to receive Tk. 4,000 conveyance allowance per month. He contributes 10% of his basic salary to a recognized provident fund. His employer also contributed the same. His taxable Income from other sources were Tk. 2,13,119 during the year. During the year total TDS from various sources of his Income was Tk. 20,000. Moreover, his refund claims of Tk. 10,000 for excess payment of tax in the last assessment year was to be adjusted witlh current year's tax liability. His investments during the year were as fOllows:

a. Purchase one laptop Tk. 1,10,000.

b. Payment of his life insurance premium Tk. 20,000 (Policy value Tk. 5,00,000)

c. Contribution to DPS Tk. 3,000 per month.

Compute total Income and tax liability of Mr. Zaman Hoque fortlhe assessment year 2015-16.

SoIytIon5j

AueuH: Mr, Zaman Hoque Aueament year 2015-2016

Accounting year ended 30 June 2015 Computlltlon of total Income and tax liability

BasIc salary (Note 1) 5.84.774 52.477 ~ allowance (AxIaIa) (5,24.774xlO%)

Uedlcal allowance (TotaI)(2.000XI0) + 5.000] Examptad fUlly _It II within Iha .xalnpth~

Scanned by CamScanner




60,000 . 24 774xSO/C or Tk.60,OOO) 10,000 vii) Car facility (Axlats) (S" 0 10

viii) Entertainment allowance (Axiata) (I,OOOX ) 2,00,000 ix) Compensation (Axiata) 1,O~:: x) Gratuity (Axiata) 100 0 .

Less: Exemption: up to Tk.2.S crore 1,80,O~ xi) Accumulated balance of RPF (Axiata) 18000 -

Less: Exemption: Full xii) House rent allowance (Grameenphone) 24,OO( (60,OOOx40%) 0

Less: Exempted Tk. 2S,OOO per month or 50 Yo 24.0lK of Basic salary whichever is lower

xiii)Conveyance allowance Less: Exempted - Up to Tk. 30,000 30.000 . --

Income from other source. irotallncome

Computation of Inveetment allowance

PU~ch81se one laptop up 2. Payment of life insurance premium 20,000; maximum (10% of the

policy value i.e. 10% of 5,00,000 = 50,000) 3. Contribution to DPS (3,000 x12) 4. Employee's and employer's contribution to RPF (58,477x2)

12,04,922 ') 13119.

1& lIt041

20,000 36,000

Maximum limit of the Invastmant allowance: 30% of Total income excluding' employer's contribution to RPF ((14,18,041-58,477) x 30%) = 4,07,869 or Tk. 1,50,00,000 or Tk.2,72,954whlc:hever Is less, So, the required amount of Investment allowance on which 15% tax rabate will be app/k:abIe Is Tk • . 2,72,954.

Tax liability:

/;fk. 2,50,000





From Axiata: B. S. from July 14 to February 15=(Tk. 52,000 x 8) =Tk. 4,16,OOO B. S. for the month March 15 = [(52,000"25131) + (56,000"6131)) = Tk. 52,774 B. S. for the month April 15 = Tk· 56.000

From Grameenphone: B. S. for the month June 15

Total basic salary for the income year 2014-15

=Tk.5,24,774

= Tk.60,OOO = Tk.5,84.n4

2. Since conveyance allowance is received from a separate company, the exemption limit has considered.

3. In the month of May he was not employed. So, Basic salary for the month of May Is not taken into consideration.





Problem: Mrs_ Rahim FCA is a retired Government Officer_ She is 71 years of age_ Currently she wo.-ks as Adviso.-s ofXYZ Ltd and ABC Ltd, private companies in Bangladesh_ She also works as a part time consultant for UNDP and World Bank During the twelve months ended 30 June 2015 she received the following income: (a) From XYZ Ltd

(h) From ABC Ltd

Basic Salary Tk30,000/~ p_m_ House Rent Tk_ 20,000/~ p_m_

Basic Salary Tk25,000/~ p_m_ House Rent 15,000/~ p_m_

• •

• • •

Medical Allowance 5,000/~ p_m Conveyance Allowance 5,000/= p_m_

Entertaimnent Allowance 5,000/~ p_m Conveyance Allowance 5,000/~ p_m_ Bonus Tk_40,000/~ p_lL

No car was provided by the company_ (c) Consultancy fees of Tk_4,00,000 in total from UNDP for her work in Bangladesh and Tk3,00,000 (in equivalent US dollar) from Wo.-ld Bank for her work in Bhntan and NepaL

(d) Rental income @Tk35,000p_m_ from an apar1ment owned by her_ It is used by a foreigner as his residence_ She paid

municipal las of Tk_ 40,000/~, land revenue of Tk_12,000/~ and a fire insurance premimn of Tk_15,000/~ during the year_

She also spent Tk_ 60,000 for maintenance during the year_ The apar1ment remained vacant for 2 months during the year_ (e) Dividends of Tk_50,OOO/= received from investment in shares of a mnnber of listed companies_

(t) She made a capital gain of Tk2,00,000 by buying and selling lisred company shares during the year_ (g) She earned an interest income ofTk_15,000/~ from post office savings bank acconnL (h) She entered inlo a contract with a developer on 1111114 for erecting a sis sloried building with 10 flats out of which she will get 5 flats free of cosL In addition, she will he given Tk_60,00,000 in cash, to he paid in 3 equal installments of Tk20,00,000 each in Novemher 2014, 2015 and 2016_ She received Tk20,00,000 in Novemher 2014_ (i) She had an apar1mentwhich was sold for Tk_l crore (which was same as the Mouza value) on 1 Angust 2014_ The buyer paid all the costs (including las, stamp doty, registration costs etc_) at the time of registration in Angust 2014_ The apar1ment was bonght by her on 1 Angust 2000 at a cost of Tk_40 lac_

G) Mrs_ Rahim is a lecturer at the ICAB evening coaching classes and is also involved in the ICAB examination proce88_ She is also a regular contributor of articles to the ICAB Journal and newspaper8_ From these sources she received the following

additional income during the year Taka

Lec10re Fees 2,00,000 Payments fo.- articles published 50,000 Questions setting and scripts examination fees 40,000 She paid Tk_IO,OOO 10 a part-time typist for typing manuscripts of her articles_

(k) She received Tk250,000 from agricnl10ralland by selling cTOpS_ (1) She received hono.-arium of Tk_150,000 during the year as a Board Director of Rupali Bank Ltd

Other infonnation are as follows:

• MTS_ Rahim has taken a life insurance policy in favour of her son and has paid quarterly premiums ofTk_15,000/~ each throughout the year and another fo.- herself paid premium of Tk_ 10,000 per month policy value of which is Tk_ 10 Lac_

• She spent Tk20,000 on professional and techuical books and publications during the year_ • She paid an annual subscription ofTk_5,000/~ 10 ICAB on 117/14_ • She owns and maintains a motor C3r_

• She sold the shares of a lisred company for Tk2,00,000, which she bonght for Tk_l,50,000 in the income year 2013-2014, and for which she claimed and received the allowable las rehaw fo.- the investmenL She has again bonght shares of 3 other lisred companies during the year for TIL6,00,000/~_

• Mrs_ Rahim's declared income in the assessment year 2015-2016 is at least 20% more than that of the assessment year 2014-2015_

Required: Compute the total income of Mrs_ Rahim and las liability fo.- the assessment year 2015-2016, advising whether she should submit the return under Section 82BB <1Jniversal Self Assessment" ()[' under nonnal procedure_




Solution: Mrs_ Rahim FCA

Income Year: 2014-15

Assessment Year: 2015-16

Computation oftotal taxable income I Reference BDT BDT

A. Income from Salary , Sec-21

From XYZ limited ~---------L Basic salary I R-33 (2)a 3,60,000

r----------2_ House rent allowance R-33A 2,40,000

---------Less: Lower of 50% basic salary or Tk_ 25,000 p_m_

50% of basic salary 1,80,000 Or, Tk_ 25,000 p_m_ 3,00,000 (1,80,000) 60,000

---------3_ Medical allowance I R-33I 60,000

---------Less: Lower of 10% basic salary or Tk_ 120,000


Or, Tk_ 1,20,000 (36,000) 24,000

---------4_ Convey ance allowance R-33C 60,000 [_._._._.

Less: Exempted upto Tk 30,000 (30,000) 30,000

----------From ABC limited , Note I _ .. _ .. _ .. _. L Basic salary 3,00,000 2_ House rent allowance 1,80,000 3_ Entertainment allowance 60,000

4_ Convey ance allowance 60,000 5_ Bonus (Assuming festival bonus and paid once per annum) 40,000

Total Income from Salary 11,14,000 B. Income from House Property

Annual value (Since reasonable rent is not given, I assume rent Sec-24 4,20,000 -----------

received is reasonable)

Less: Allowable expenses: _ .. _ .. _ .. _. Repair and maintenance (25% of annual value) Sec 25(1)(h) 1,05,000

-----------Municipal tax Sec 25(1)(e) 40,000

-----------Land revenue Sec 25(1)(h) 12,000 _ .. _ .. _ .. _. Insurance premium Sec 25(1)(b) 15,000 _ .. _ .. _ .. _. Vacancy allowance Sec 25(1)(j) 70,000 (2,42,000) _ .. _ .. _ .. _.

Add: Deemed income Sec 19(30) -----------

Deductible expense 1,05,000

Expense claimed (60,000) 45,000

Total Income from House Property 2,23,000

C. Income from Agriculture

Slaes proceeds from crops I Sec 26 I 2,50,000 '-----------, Less allowable expenses ~ ~~~!~1)(9ii .j Cost of production (1,50,000)

Total Income from Agriculture 1,00,000




D. Income from Business or Profession L Consultancy fees Sec-28

Earned in Bangladesh 4,00,000 Earned in abroad 3,00,000 Less: Exempted (assuming brought through proper channel) (3,00,000) -

Less: Depreciation on professional hooks (30% of20,000) 3rd Schedule 6,000 (6,000) Total Income from Business or Profession 3,94,000 D. Capital Gain ----------

I Gain :from sale of shares ,

Sec 31 ,

2,00,000 1-----------1 Less exempted , SRO-I961Lf , (2,00,000) -,

F~ -IT~~OI~ - -:1 2 Gain from sale of ~ent (416,6671.15) Note 2 27,77,780 ----------Total Capital Gain 2777780 E. Income from Other Sources

---------L Dividend income (Assuming net and she has TIN) Sec-33A 55,556 ---------

Less: Exempted Sch.6-A-llA (25,000) 30,556 ---------2. Interest income fiom Post Office Ale (assuming net) 16,667 -----------3. Honorarimn fiom Rupali Bank (assnming net) 1,66,667 -----------4. Income fiom ICAB net of direct expenses 2,80,000 5. Money received fiom developer 20,00,000 Total income from other sources 24,93,889 Total Taxable Income 71,02,669

Calculation of Invest:ment AUowance [as per 6th Schedule., Part-B]

1. Actual investment -----------a. Insurance premium of herself assuming her son is not ___ [P~-IL __ nnnor

Premimn paid

I 1,20,000 I

10% of Policy Valne 1,00,000 , Whichever is lower 1,00,000 -----------

b. Investment in shares of listed companies [para-27] 6,00,000 7,00,000 2. 30% of Total taxable income exclnding income VIS 82(C) [30% of(5,102,669-2,777,780)] 12,97,467

3. Maximum allowance u/s 44 1,50,00,000

Tax rebate@ 15% of the lowest of (1), (2) and (3) 1,05,000




Tax Liability Calculation Total incom excluding capital gain is Tk.(7,102,669-2, 777,780) 43,24,889

Al!l!licable slab Rate Tax amount On 1st 3,00,000 0% -

Next 4,00,000 10% 40,000 Next 5,00,000 15% 75,000 Next 6,00,000 20% 1,20,000

Remaining 25,24,889 25% 6,31,222 On Capital Gain 27,77,780 15% 4,16,667

71,02,669 12,82,889

Less: Investment tax rebate (1,05,000)

Gross Tax Liability 1l,77,889 Less: IDS (5,556+1500+15000+416,667) (4,38,723) Net tax liability 7,39,166

Advice: She should submit return under universal self assessment as her income is 20% higher than the income of the previous yeaL Therefore, it would not full under the scope of audit but her return is tu be furnished in compliance with provisions of ITO 1984_

Note 1: As per rule 33 (2) (b) there is restriction of allowing benefits under rule 33 tu a shareholder directur from one company ouly _ Considering this sprit of law, exemtion benefits from salary income allowed ouly for one company and all income from other company have been added with her tutal income_

Note 2:

Since the sale of capital assets occurred after 5 years of acquisition and the total income excluding income under sale of apartment is TK 2,324,889 so the applicable tax rate for back calculation of income under 82(C) would be 15% as it is lower than the applicable tax rate which is 25% (marginal tax rate)_ Therefore amount of IDS 416,667 {(I 0,000,000/0_96)*4%} will be used tu hack calculate capital gaia

Applicable slab Rate Tax amount Maximum Amount On Istuptu 3,00,000 0% 0 -

On next upto 4,00,000 10% 40,000 40,000 On next upto 5,00,000 15% 75,000 75,000 On next upto 6,00,000 20% 1,20,000 1,20,000 Remaining 25,24,889 25% 6,31,222 7,50,000

Note 3: It is assumed that the subscription fees paid tu ICAB is not soley for the profession_

Note 4: UNDP & WB are the organisation of UN_ Ouly the salary categorized person employee at UN is tax free_ As Mrs Rahim is not salaried person ofUNDP & WB, so her income from there is not tax free_ However consul_cy income could be shown as income from other sources_

NoteS: Since sufficient information about purchase price or :fa.ir market value is not given, I assume no capital gain arises from the contract with developer rather 'I'lL 2,000,000 received from developer would be considered as income from other sources_




Part Three: Income from Interest on Securities

Income from Interest on Securities:

Types of Securities:

1. Government Securities

2. Government Approved Securities

3. Securities/Debentures issued by company or local authority.

Sixth Schedule (part A):

Para 24: Interest on tax-free government securities are totally tax-free.

Para 40: Interest on Zero Coupon Bond (ZCB) is tax-free

Important sections:

Section – 22:

However, Supreme Court says tax should be deducted when it is received or withdrawn (case ref: Lal Bhai Dolpat

Bhai Vs CIT Bombay, 1952)

Section 23:

Section 51:

Section – 51; Deduction at source from interest on securities:

Study Reference:

Section; 22, 23, 51, 172(d), 106

Sixth Schedule (part A); Para 24 and Para 40

Section – 22; Interest on securities:

The following incomes of an assessee shall be classified and computed under the head "Interest on Securities",

namely:-

(a) Interest receivable by the assessee on any security of the Government or any security approved by

Government; and

(b) interest receivable by him on debentures or other securities of money issued by or on behalf of a

local authority or a company.

Section – 23; Deductions from interest on securities:

(1) In computing the income under the head "Interest on securities", the following allowances and deduction

shall be made, namely:-

(a) any sum deducted from interest by way of commission or charges by a bank realising the interest

on behalf of the assessee;

(b) any interest payable on money borrowed for the purpose of investment in the securities by the

assessee:

Provided that no allowance or deduction on account of any interest or commission paid under

clause (a) or (b), as the case may be, in respect of, or allocable to the securities of

Government which have been issued with the condition that interest thereon shall not be

liable to tax, shall be made in computing the income under section 22;

[(c)]Deleted F.A. 1995

(2) Notwithstanding anything contained in sub-section (1), no deduction shall be allowed under this section in

respect of any interest payable outside Bangladesh on which tax has not been paid or deducted in accordance

with the provisions of Chapter VII.

Income from savings certificate will be

treated as income from other sources.

http://taxmatebd.com/index.php?pid=6#23-1c




1. In the case of the security of the Government, or security approved by the Government, unless the

Government otherwise directs, the person responsible for issuing any security, income of which is

classifiable under the head "Interest on securities", shall collect income tax at the rate of five percent

(5%)Subs by F.A. 2014upfront on interest or discount, receivable on maturity, from the purchaser of the securities:

Provided that this provision shall not apply to the Treasury Bond or Treasury Bill issued by the Government.

Example (Upfront Systems);

A person purchase securities of tk. 10,000,000 @ 6% simple interest matured after 3 years.

So, interest income after 3 years = tk. (10,000,000*6%*3) = tk. 1,800,000.

So, TDS @ 5% on tk. 1,800,000 (which is tk. 90,000) would be deducted today.

Section 172(d):

Section 106; Avoidance of tax by transactions in securities:

(1) Where the owner of any securities sells or transfers those securities and buys them back or reacquires them, or

buys or acquires similar securities, and the result of the transactions is that any interest becoming payable in respect

of the original securities sold or transferred by the owner is not receivable by the owner, the interest payable as

aforesaid shall be deemed, for all purposes of this Ordinance, to be the income of such owner and not of any other

person, whether the interest payable as aforesaid would or would not have been chargeable to tax apart from the

provisions of this sub-section.

2)Where any person has had for any period during an income year any beneficial interest in any securities and the

result of any transactions within that year relating to such securities or the income thereof is that no income is

received by him, or that the income received by him is less than the sum which the income would have amounted to

had the income from such securities accrued from day to day, and been apportioned to the said period, then the

income from such securities for the said period shall be deemed to be the income of such person.

(3) Where, any person carrying on a business which consists wholly or partly in dealing in securities buys or acquires

any securities from any other person and either sells back or re-transfers those securities, or sells or transfers similar

securities, to such other person, and the result of the transactions is that the interest becoming payable in respect of

the securities bought or acquired by him is receivable by him but is not deemed to be his income by reason of the

provisions of sub-section (1), no account shall be taken of the transactions in computing for any of the purposes of

this Ordinance anyincome arising from, or loss sustained, in the business.

(4) The Deputy Commissioner of Taxes may, by notice in writing, require anyperson to furnish him, within such

time, not being less than twenty-eight days, as may be specified in the notice, such particulars in respect of all

securities ofwhich such person was the owner, or in which he had beneficial interest atany time during the period

specified in the notice, as the DeputyCommissioner of Taxes may consider necessary for the purpose ofascertaining

whether tax has been borne in respect of the interest on all thosesecurities and also for other purposes of this section.

Explanation.- For the purposes of this section,-

(a) "Interest" includes dividend;

(b) "Securities" includes stocks and shares; and

(c) Securities shall be deemed to be similar if they entitle their holders to the same right against the same

persons as to capital and interest and the same remedies for the enforcement of these rights, notwithstanding any

difference in the total nominal amounts of the respective securities or in the form in which they are held or in the

manner in which they can be transferred.

Section – 172(d); Relief:

His (assessee) having received in arrears in one income year any portion of his income from interest on securities

relatable to more income years than one; the Deputy Commissioner of Taxes may, on an application made to him

in this behalf, determine the tax payable as if the interest had been received by the assessee during the income

year or years to which it relates and may refund the amount of tax, if any, paid in excess of the tax so determined.




Part Four: Income from House Property:

Introduction:-

As per Income Tax Ordinance, 1984 house property means any building (including furniture, fixture, fittings etc.) and

land appurtenant thereto owned by the assessee and rented for commercial or residential purposes. Property

situated outside Bangladesh should also be assessed according to the same provision of section 24 of the Income Tax

Ordinance, 1984. Rental income derived from vacant plots of land will not be treated as house property income

rather it will be treated as income from other sources u/s 33.If an assessee lets out his machinery, plant, or

furniture along with building and the letting out building is inseparable from the letting of machinery, plant or

furniture, the income must necessarily be assessed as income from other sources and in such a case there is no

room for disintegrating the rent or assessing a part of the rent as income from house property.

Section 24:Income from House Property:

Ownership of the property:-

The tax on house property income is upon the owner (either legal or beneficial) and not upon the occupant. The mere

existence of a dispute regarding the title to ownership of a certain property cannot of itself hold up an assessment

even if a suit has been filed, otherwise it would be open to an assessee to delay assessment indefinitely. The DCT has

prima facie the power to decide whether the person sought to be taxed is the owner of the property.

For example, if a person (a government employee) gives rent to the government for the quarter and received

rent @ tk. 10,000 per month for letting it out. This house property income shall not be added to his HP income, as he

does not possess the ownership of the house. Rather it would be added to his ‗income from other sources‘.

Assessment of Co-owner:-

As per section 24(2), where property is owned by two or more persons and their respective shares are definite and

ascertainable, the co-owners should not be assessed in respect of their income from such property as an association of

persons (AOP), but each co-owner must be assessed individually in respect of his share of house property income.

Though co-heirs may possess the property jointly under the Muslim law, the shares of co-heirs under that law are

definite and ascertainable, and therefore each of the heirs must be separately assessed u/s 24 in respect of his share

of house property income.

For example, Mr. A having a building at Motijhel C/A received rent @ tk. 1,000,000 per month but after his

death the property is divided among his 4 sons (B, C, D and E) and they received tk. 250,000 each from this building.

So according to income tax law they cannot be assessed for tk. 1,000,000 aggregately as an AOP, rather portion of

their receipt will be added up with their individual income and they will assessed individually.

Self-occupied property:-

In respect of house property, no tax is payable if the owner occupies the property for his own residence or for the

purpose of his business or profession the profits of which are assessable to tax u/s 28.

Section 2(3); Annual Value:

Income tax is levied not upon the actual income from the property but upon the notional income based an annual

value. Annual value is defined in section 2(3)as ―The sum for which the property might reasonably be expected to let

from year to year and any amount received by letting out furniture, fixture, fittings etc‘‘. That is, the sum for which

the owner could let the premises having regard to all the prevailing circumstances such as local conditions and the

demand for house in that particular locality. Where the property is let out and the owner receives the rent, the annual

value may be more or less, than the actual rent received, as the annual value is only a hypothetical sum. In case where

the actual consideration received by the owner from his tenant does not represent the annual value, evidence of such

annual value may be afforded by the rents paid for similar and similarly situated properties in the locality.

Study References:

Section; 2(3), 24, 25, 19(22),19(30), 53A

Sixth Schedule (Part A); Para 1, Para 38

SRO 454 (Serial No. 18) Date – 31/12/1980




Grossing-up when the owner’s burden borne by the tenant:

It is necessary to take into account the whole of the consideration exacted by the owner for the right to use and

occupy the property. For example, where the tenant agrees to pay the service charge which is actually payable by the

owner, the total consideration paid by the tenant is the house rent plus the service charge and that is the figure which

may be taken as evidence of the annual value by grossing-up.

Treatment of advance when it is not adjustable against house rent:

In case the advance received by the owner is not adjustable against house rent then such advance will be treated as

house property income as per section 19(22) of the Income Tax Ordinance, 1984. However, such advance may be

allocated into 5 years including 1st year in equal proportion if the assessee opts so. Where such advance or part

thereof is refunded by the owner then the amount so refunded shall be deducted if it is taken as income as per section

19(22).

Maintenance of separate bank account by the owner of the house property (Rule – 8A)

Where any person having ownership or possession of any house property, whether used for residential or commercial

purpose, receives any rent exceeding Tk. 25,000/- per month shall have to maintain a separate bank account for the

purpose of depositing rent and advance (if any) received from such house property. He shall also maintain a separate

register for recording particulars of tenants and amount received or receivable from the tenants.

DCT can impose penalty for any violation of this rule as per section 123(2). The maximum penalty is 50% of tax

payable on house property income or Tk. 5,000/-, whichever is higher.

Deduction of tax at source from house rent (Section 53A):

Tax is to be deducted at source by the following tenants from the payment of house rent at @ 5% by any Govt.

organization, NGO, Company, Bank (including co-operative bank), University, Medical/Dental/Engineering College,

Any school and college, and Hospital/clinic/diagnostic center.

For Example, P Bank let a house @ tk. 50,000 per month with advance of tk. 500,000 which is adjustable with rent @

tk. 10,000 per month, so –

TDS on rent = tk. (50,000*5%) = tk. 2,500

Payment in each month = tk. (50,000 – 10,000, - 2,500) = tk. 37,500

Annual Value = tk. (50,000*12) = tk. 600,000

TDS on tk. 500,000 (at the time of payment) = 0

Exemption from payment of tax:

(1) Income from house property held under trust or other legal obligation wholly for religious or charitable purpose is

exempt from payment of tax as per 6th schedule (part-A) paragraph-1(1). However, this provision will not be

applicable for NGO.

(2) House property income of any chamber of commerce and industry ( i.e. FBCCI or MCCI etc.) is completely tax

free as per SRO no 210, dated 01/07/2013.

Sixth Schedule (Part A), Para – 38:

Any income derived from any building situated in any area of Bangladesh, not less than five storied having at

least ten flats, constructed at any time between the first day of July, 2009 and the thirtieth day of June, 2014

(both days inclusive), for ten years from the date of completion of construction of the building, except the

buildings situated in any areas of City Corporation, Cantonment Board, Tongi Upazilla, Narayanganj

Paurashava, Gazipur Paurashava and any Paurashava under Dhaka District are excluded from the total income.




Allowable deductions from annual value to derive income from house property (Section – 25):-

In computing house property income, the following allowances are deductible from the annual value:-

(1) Repairs and maintenance:-

The following expenditures relating to repairs, maintenance and provision of basic services are granted as a

deduction. Where the property is let out for residential purposes, the allowable deduction is 1/4th of the annual value

and where it is let out for commercial purpose the allowable deduction is 30% of the annual value:

(a) Repairs;

(b) Expenditure relating to collection of rent;

(c) Water and sewerage;

(d) Common electricity;

(e) Salary of darwan, security guard, pump-man, lift-man, caretaker

(f) All other expenditure related to maintenance and provision of basic services.

However, if it is not really spent or partly spent then the remaining unspent amount shall be deemed to be the

income from house property as per section 19(30).

(2) Land development tax*;

(3) Municipal tax*;

(4) Ground rent*;

(5) Insurance Premium*,

(6) Vacancy allowance (if the property remain vacant during a part of the year);

(7) Where the let out property is acquired, constructed, repaired, renewed or reconstructed with loan then the

interest payable for the year on such loan*;

(8) Where the let out property has been constructed with borrowed capital and there was no house property income

during the period of construction, the interest payable during the period of construction will be allowable in 3

equal installments from first 3 years of letting out*;

(9) Irrecoverable rent:-

Relief in respect of irrecoverable rent has been granted through S.R.O. No:-454-L/80 dated 31-12-1980 if the

following conditions are fulfilled:

(a) The tenancy is bona-fide;

(b) The defaulting tenant has vacated, or steps have been taken to compel him to vacate the property;

(c) The defaulting tenet is not in occupation of any other property of the assessee;

(d) The assessee has taken all reasonable steps to institute legal proceedings for the recovery of the unpaid

rent or satisfies the Deputy Commissioner of Taxes that legal proceedings would be useless and;

(e) The annual Value of the property to which the unpaid rent relates has been included in the assessed

income of the year during which that rent was due and income tax has been duly paid on such assessed

income;

The concession given here appears to be an exemption but it is actually a deduction as that part of rent which

will be irrecoverable and which has already been charged in the preceding year will be deducted from the

total income in the subsequent year.

*If the full house is not rented(partly used by owner or his dependent) then all of these deductions shall be made

proportionately.




Problem – 1:

Mr. Alam a retired govt. officer owns a two-storied house in Dhanmondi, Dhaka. He along with his family occupies

the ground floor while the first floor has been let out from October 1, 2014 for a monthly rental of Tk. 60,000 and

before then it was vacant for about 3 months. He has constructed the house with a loan of Tk. 25 lac from National

Bank Limited and paid interest of Tk. 321,000 during the construction period from January 2013 to June 2013.

During the Financial Year 2012-2013, he has paid Tk. 5 lac to the bank. His other expenses in relation to the property

for 2014-2015 Financial Year are: –

Repair and maintenance tk. 50,000

Insurance premium tk. 5,000

Municipal tax tk. 20,000

Bank interest tk. 50,000

Salary of security guard tk. 10,000

Municipal value of the property tk. 300,000

Compute the house property income for Mr. Alam for the assessment year 2015-16.

Solution:

Mr. Alam

Calculation of House Property Income



Description Reference BDT BDT

Annual Value (AV*) (60,000*12) Sec.2(3)(a) 720,000

Less: Repair and Maintenance (25% of Annual Value) Sec25(1)(h) (180,000)

Insurance (1/2 of 5,000) Sec25(1)(b) (2,500)

Municipal Tax (1/2 of 20,000) Sec25(1)(e) (10,000)

Bank interest (1/2 of 50,000) Sec25(1)(g) (25,000)

Vacancy allowances (equal to 3 months rental value) Sec25(1)(k) (180,000)

Interest at construction stage [1/2*(1/3*3,21,00)] Sec25(1)(gg) (53,500) (451,000)

Add: Unspent portion of allowable deduction Sec 19(30)

Allowable deduction

180,000

Expense claimed

(30,000) 150,000

Total House Property Income 419,000




Problem – 2:

Mr. Azim owns a house the municipal value of which is tk. 220,000. Half of the house has been let out at tk. 25,000

per month. The rest of the house is used by his son in law who pays nothing for the use. Following were the expenses

for the house in FY 2014-15;

White wash and repair tk. 6,000

Insurance premium tk. 4,000

Municipal tax tk. 5,000

Water and sewerage charges tk. 7,000

Interest on mortgage tk. 4,000

Service charges tk. 6,000

Land revenue tax tk. 2,000

Cost of alteration tk. 15,000

He has a residential house situated at Uttara, Dhaka. The city corporation for tax purpose valued its‘ annual value at

tk. 200,000. He also paid interest on a loan taken from Agrani bank for alteration and expansion of the house for

which interest payable was tk. 20,000 per year.

Compute the house property income for Mr. Azim for the assessment year 2015-16.

Solution:

Mr. Azim

Calculation of House Property Income



Description Reference BDT BDT

Annual Value; Higher of Actual value or Municipal Value Sec.2(3)(a)

Actual Value (25,000*12)

300,000

Municipal Value; Whichever is higher

220,000 300,000

Less: Repair and Maintenance (25% of Annual Value) Sec25(1)(h) (75,000)

Insurance (1/2 of 4,000) Sec25(1)(b) (2,000)

Municipal Tax (1/2 of 5,000) Sec25(1)(e) (2,500)

Land Revenue Tax (1/2 of 2,000) Sec25(1)(e) (1,000)

Interest on Mortgage (1/2 of 4,000) Sec25(1)(g) (2,000) (82,500)


Allowable deduction

75,000

Expense claimed

(9,500) 65,500

Total House Property Income 283,000

* Assumed that house was rented for residential purpose.

* white wash and repair, water and sewerage and service charges are within 1/4 statutory deduction of repair and

maintenance.

* Cost of alteration is capital expenditure which is not cover u/s 25. So it is not considered in computing HP

income.

* As the full house was not let out and annual value is determined on 50% of the property, so all related

expenditure allowed proportionately.( 6,000+7,000+6,000)/2=9,500




Part Five: Agricultural Income:

Important sections of Agricultural Income:

Section 27: Deductions from Agricultural Income:

(1) In computing the income under the head "Agricultural income", the following allowances and deductions shall be

made, namely:-

(a) any land development tax or rent paid in respect of the land used for agricultural purposes;

(b) any tax, local rate or cess paid in respect of the land used for agricultural purposes, if such tax, rate or

cess is not levied on the income arising or accruing, or deemed to accrue or arise, from agricultural

operations, or is not assessed, at a proportion or on the basis of such income;

(c) (i) subject to sub-clauses (ii) and (iii), the cost of production, that is to say, the expenditure incurred for

the following purposes, namely:-

(a) for

cultivating the land or raising livestock thereon;

Study References:

Section; 2(1), 26, 27, 35, 19(17), 19(19)

Rule: 31 and 32

Third Schedule

Sixth Schedule (Part A); Para 27, Para 29 and Para 45

Section 2(1):

Agricultural income means -

(a) any income derived from any land in Bangladesh and used for agricultural purposes -

(i) by means of agriculture; or

(ii) by the performance of any process ordinarily employed by a cultivator to render marketable the

produce of such land; or

(iii) by the sale of the produce of the land raised by the cultivator in respect of which no process, other

than that to render the produce marketable, has been performed; or

(iv) by granting a right to any person to use the land for any period; or

(b) any income derived from any building which -

(i) is occupied by the cultivator of any such land as is referred to in sub-clause (a) in which anyprocess

is carried on to render marketable any such produce as aforesaid;

(ii) is on, or in the immediate vicinity of such land; and

(iii) is required by the cultivator as the dwelling house or store-house or other out-house by reason of

his connection with such land;

Section 26; Agricultural income:

(1) The following income of an assessee shall be classified and computed under the head "Agricultural income",

namely:-

(a) any income derived by the assessee which comes within the meaning of "agricultural income" as

defined in secion 2(1);

(b) the excess amount referred to in section 19(17);

(c) the excess amount referred to in section 19(19).

(2) Agricultural income derived from the sale of tea grown and manufactured by the assessee shall be computed in

the prescribed manner.

(3) Where the Board, by notification in the official Gazette, so directs, agricultural income from the sale of rubber,

tobacco, sugar or any other produce grown and manufactured by the assessee may be computed in the manner

prescribed for the purpose.




(b) for performing any process ordinarily employed by a cultivator to render marketable the

produce of the land;

(c) for transporting the produce of the land or the livestock raised thereon to the market; and

(d) for maintaining agricultural implements and machinery in good repair and for providing upkeep

of cattle for the purpose of cultivation, processing or transportation as aforesaid;

(ii) where books of accounts in respect of agricultural income derived from the land are not

maintained, the cost of production to be deducted shall, instead of the expenditure mentioned in sub-

clause (i). be sixty per cent of the market value of the produce of the land;

(iii) no deduction on account of cost of production shall be admissible under this clause if the

agricultural income is derived by the owner of the land from the share of the produce raised through

any system of sharing of crop generally known as adhi, barga or bhag;

(d) any sum paid as premium in order to effect any insurance against loss of, or damage to, the land or any

crop to be raised from, or cattle to be reared on, the land;

(e) any sum paid in respect of the maintenance of any irrigation or protective work or other capital assets ;

and such maintenance includes current repairs and, in the case of protective dykes and embankments, all

such work as may be necessary from year to year for repairing any damage or destruction caused by flood or

other natural causes;

(f) a sum calculated at the rate as provided in the Third Schedule on account of depreciation in respect of

irrigation or protective work or other capital assets constructed or acquired for the benefit of the land from

which agricultural income is derived or for the purpose of deriving agricultural income from the land, if the

required particulars are furnished by the assessee;

(g) where the land is subject to a mortgage or other capital charge for purposes of reclamation or

improvement, the amount of any interest paid in respect of such mortgage or charge;

(h) where the land has been acquired, reclaimed or improved by the use of borrowed capital, the amount of

any interest paid in respect of such capital;

(i) where any machinery or plant which has been used by the assessee exclusively for agricultural purposes

has been discarded, demolished or destroyed in the income year, the amount actually written off on that

account in the books of accounts of the assessee,-

(i) subject to the maximum of the amount by which the written down value of the machinery or plant

exceeds the scrap value thereof if no insurance, salvage or compensation money has been received in

respect of such machinery or plant; and

(ii) subject to the maximum of the amount by which the difference between the written down value and

the scrap value exceeds the amount of insurance, salvage or compensation money received in respect

of such machinery or plant;

(j) where any machinery or plant which has been used by the assessee exclusively for agricultural purposes

has been sold or transferred by way of exchange in the income year, the amount actually written off on that

account in the books of accounts of the assessee, subject to the maximum of the amount by which the written

down value of the machinery or plant exceeds the amount for which it has been actually sold or transferred;

and

(k) any other expenditure, not being in the nature of capital expenditure or personal expenditure, laid out

wholly and exclusively for the purpose of deriving agricultural income from the land.

(2) Notwithstanding anything contained in sub-section (1), no deduction shall be allowed under this section in respect

of any interest on which tax has not been paid or deducted in accordance with the provisions of Chapter VII.




Section 35 - Method of accounting:

Books of accounts shall be maintain in –

1. Income from Business and Profession

2. Agricultural Income

3. Income from Other Sources

Rule – 31 and 32: Sale of Tea and Rubber

Section 19 (17) and 19(19):

For example, an agricultural machinery

Cost price Tk. 100

Less: Depreciation (30)

WDV Tk. 70

Now, if machine is sold @ tk. 78 or tk. 68 or tk. 114 treatment of gain will be as follows;

Case – 1: Tk. 8 is agricultural income

Case – 2: Tk. 2 is agricultural loss

Case – 3: Tk. 30 is agricultural income and tk. 14 is capital gain

Rule – 31; Computation of income derived from the sale of tea:

1. Income derived from the sale of tea grown and manufactured by the seller in Bangladesh shall be computed as if

40% of such income was derived from business and 60% of such income was derived from agriculture:

Provided that in computing, such income from business, an allowance shall be made in respect of the cost of

planting bushes in replacement of bushes that have died or become permanently useless in an area already

planted, unless such area has previously been abandoned:

Provided further that in computing such income an allowance shall be made in respect of the expenditure incurred

in the income year by the assessee in connection with the development of the new areas for bringing them under

tea cultivation.

Rule – 32; Computation of income derived from the sale of rubber:

1. Income derived from the sale of rubber grown and manufactured by the seller in Bangladesh shall be computed

as if 40% of such income was derived from business and 60% of such income was derived from agriculture.

Provided that in computing such income an allowance shall be made in respect of the expenditure incurred in the

income year by the assessee in connection with the development of the new areas for bringing them under rubber

cultivation.

Section – 19(17):

Where any machinery or plant exclusively used by an assessee for agricultural purposes has been disposed of in ny

income year and the sale proceeds thereof exceeds the written down value, so much of the excess as does not

exceed the difference between the original cost and the written down value shall be deemed to be the income of

the assessee for that income year classifiable under the head "Agricultural income".

Section – 19(19):

Where any insurance, salvage or compensation moneys are received in any income year in respect of any

machinery or plant which having been used by the assessee exclusively for agricultural purpose is discarded,

demolished or destroyed and the amount of such moneys exceed the written down value of such machinery or

plant, so much of the excess as does not exceed the difference between the original cost and the written down

value less the scrap value shall be deemed to be the income of the assessee for that income year classifiable under

the head "Agricultural income".




For example, an agricultural machinery

Cost price Tk. 100


WDV Tk. 70

Now, if machine is destroyed and insurance claim and sale of scrap generate tk. 78 or tk. 68 or tk. 114 treatment of

such gain will be as follows;

Case – 1: Tk. 8 is agricultural income

Case – 2: Tk. 2 is agricultural loss

Case – 3: Tk. 30 is agricultural income and tk. 14 is capital gain.

Sixth Schedule (Part A):

Third Schedule: Computation of Depreciation Allowance:

Para–1; Depreciation allowance on assets used for agricultural purposes

Para – 2; Allowance for depreciation

See the details from the Income Tax Ordinance 1984.

[Change in F. A. 2015]

1. Depreciation rate for imported computer software is allowed at the rate of 10% (Serial No. 3(b) (vii) of

Depreciation Rate Table in Paragraph 3).

2. Cost of motor vehicles, being passenger vehicles or sedan cars, not plying for hire, shall be deemed not exceed

twenty five (25) lakh taka for the calculation of written down value for depreciation.

Para - 27:

Notwithstanding anything contained in any order or regulation for the time being in force, any income of an

individual, being an indigenous Hillman of any of the hill districts of Rangamati, Bandarban and Khagrachari,

which has been derived solely from economic activities undertaken within the said hill districts.

Para - 29:

Any income, not exceeding two-lakh taka, chargeable under the head "Agricultural income" of an assessee, being

an individual, whose only source of income is agriculture.

Para - 46:

An amount equal to fifty (50) percent of the income of an assessee derived from the production of corn/maize, and

sugar beet.




Part Six: Capital Gain

Capital Gain:

Important sections of Capital Gain:

Section 2 (15) & 31:

Section 32; Computation of capital gains:

Capital gain is computed as higher of the full value of the consideration received or accruing from the transfer of the

capital asset or fair market value thereof less (i) any expenditure incurred solely in connection with the transfer of the

capital asset, or (ii) the cost of acquisition of the capital asset and any capital expenditure incurred for any

improvements thereto but excluding any expenditure in respect of which any allowance is admissible under any

provision of section 23, 29 and 34.

Capital gain is from purchased property:

Capital gain = Sales price – Acquisition price

Where;

Sales price = Higher of full consideration or fair market value

Acquisition price = actual cost + other expenses to make it useable

1. Capital gain from property gifted, transferred on trust or distributed on liquidation of company or firm etc:

Study References:

Section; 2(15), Capital Asset

31, Capital Gain

32, Manner of computing capital gain; read with rule - 42

Second Schedule; Tax rate on capital gain

Sixth Schedule (Part A), Para 18, Para 43

Share Market: SRO No. – 269; date – 01/07/2010.

Section – 2(15); Capital Assets:

"Capital asset" means property of any kind held by an assessee, whether or not connected with his business or

profession, but does not include--

(a) anystock-in-trade (not being stocks and shares), consumable stores or raw materials held for the purposes of

his business or profession; and

(b) personal effects, that is to say, movable property (including wearing apparel, jewellery, furniture, fixture,

equipment and vehicles), which are held exclusively for personal use by, and are not used for purposes of the

business or profession of the assessee or any member of his family dependent on him;

[(c) agricultural land in Bangladesh, not being land situated

(i) in any area which is comprised within the jurisdiction of Dhaka, Narayanganj and Gazipur districts,

Chittagong Development Authority (CDA), Khulna Development Authority (KDA), Rajshahi

Development Authority (RDA), a City Corporation, Municipality, Paurashava, Cantonment Board; or

(ii) in any area within such distance not being more than five miles from the local limits of

RajdhaniUnnayanKartripakya (RAJUK), Chittagong Development Authority (CDA), Khulna Development

Authority (KDA), Rajshahi Development Authority (RDA), a City Corporation, Municipality, Paurashava,

Cantonment Board referred to in paragraph (i), as the Government may having regard to the extent of, and scope

for, urbanisation of that area and other relevant considerations, specify in this behalf by notification in the official

Gazette;]F.A. 2011.[ Sub-clause (c) inserted by F.A. 2011 and subsequently omitted by F.A. 2014]

Section – 31; Capital gains:

1. Tax shall be payable by an assessee under the head "Capital gains" in respect of any profits and gains

arising from the transfer of a capital asset and such profits and gains shall be deemed to be the income of

the income year in which the transfer took place[.]Subs F. A. 2011

[Proviso]Deleted F.A. 2011

http://taxmatebd.com/index.php?pid=6#31




Capital gain (where actual cost of acquisition ascertainable) = Sales price – (Acquisition price of the

previous owner less depreciation allowed).

For example, Mr. A is gifted a land by Mr. X, cost of that to Mr. X was Tk. 10 lac and and accumulated

depreciation is Tk. 5 lac. Few years later Mr. A gifted it to Mr. B. B sales the land for tk. 15 lac. Then capital

gain for B is;Capital gain = Tk. (25-10-5) = Tk. 10 lac.

Capital gain (where actual cost of acquisition cannot be ascertained) = Sales price – (Fair market value at the

date on which the capital asset became the property of the previous owner).

For example, Mr. A is gifted a land by Mr. X, which have a fair market value to Tk. 10 lac. Few years later

Mr. A gifted it to Mr. B. B sales the land for tk. 25 lac. Than capital gain for B is,

Capital gain = Tk. 25 lac – Tk. 10 lac = tk. 15 lac.

3. Capital gain from property by succession, inheritance or devolution:

Capital gain = Sales price – Fair market value prevailing at the time of the property became the asset of the

assessee

For example, Mr. A has some land. Few years later Mr. A became dead and all of his land goes to his son

Mr. B, which has a fair market value of tk. 20 lac at that moment. B sells the land for Tk. 25 lac in two years

later. Than capital gain for B is:

Capital gain = Tk. 25 lac – Tk. 20 lac = Tk. 5 lac.

Capital gain on sale of property of business and profession is tax free if another property purchased within one

(1) year (before or after). For example,

Capital machinery with cost of Tk 1,000

Sales price 1,600

Capital Gain Tk. 600

Purchase another building within one year (before or after) by this capital gain than this tk. 600 is tax-free.

But,

Sl Situation Consequences

1 If purchase price is tk. 600 No gain tax and tax depreciation is not allowable for that property.

2 If purchase price is tk. 500 Gain tax on tk. 100 and tax depreciation is not allowable for that property.

3 If purchase price is tk. 900 No gain tax, but tax depreciation is allowable for tk. 300.

Gain on sale of govt. securities is tax-free (Section 32(7)).

Second Schedule: Para 2 (Tax payable on capital gain):

Where the total income of an assessee includes any income chargeable under the head "Capital gains" (hereinafter

referred to as the "said income"), the tax payable by him on his total income shall be-

(a) in the case of a company-

(i) tax payable on the total income as reduced by the said income had such reduced income been the total

income; plus

(ii) tax at the rate of fifteen per cent on the whole amount of the said income;

Simply tax payable on capital gain will be @ 15% in the case of a company.

(b) in the case of a person other than a company-

(i) where the said income arises as a result of disposal by the assessee of his capital assets after not more

than five years from the date of their acquisition by him, tax payable on the total income including the

said income (means capital gain will be taxed at normal slab rate); and

(ii) where the said income arises as a result of disposal by the assessee of his capital assets after five

years from the date of their acquisition by him, tax payable on the capital gains at the rate applicableto

his total income including the said capital gains, or tax at the rate of fifteen per cent on the amount of the

capital gains whichever is the lower.

Simply we can conclude tax on capital gain if the capital asset disposed within five years period of its acquisition

at normal slab rate but if the capital asset disposed beyond five years period then tax payable on capital gain at

normal slab rate applicable or tax payable at 15% whichever is lower.




Sixth Schedule (Part A): (Exclusion from income):

1. Para 11- A : Income from dividend received from a company listed in any stock exchange in Bangladesh up

to twenty five thousand taka. (Amended FA 2015)

2. Para–18: share of capital gain from partnership business

3. Para-20: any income up to TK. 2.5 crore received by an assessee as gratuity. (Amended FA 2015)

4. Para-22A: income from mutual or unit fund up to Tk 25,000.

5. Para-28: 50% income from export business.

6. Para-29: agricultural income up to 2,00,000 of an individual assessee, whose only source of incoem is

agriculture

7. Para–33: income from software and IT business up to 30 June 2024.

8. Para–39: income from SME business , turnover not more than 30,00,000.

9. Para–40: income from zero coupon bond issued by bank,insurance or any Financial institution upon approval

of BB.

10. Para–42:income from poulty farming ; rate (first 20 lac-0%, next 10 lac-5%, remaining-10%)_SRO:254

11. Para-43: capital gain from sale of share of non-resident non-Bangladeshi shareholders , Subject to the

condition, that such non-resident Non-Bangladeshi is entitled to similar exemption in the country in which

he is a resident.

12. Para-46: 50% of income from production of corn/maize or sugar beet.

13. Para-48: any income earned in abroad by BD citizen and brought into BD as per law of foreign remittance.

14. Para-49: donation to any girls' school or girls' college through crossed cheque or bank transfer that school

need to approved by the ministry of education of the government.

15. Para-50: donation to vocational training institute through crossed cheque or bank transfer that school need to

approved by the ministry of education of the government.

16. Para-50: donation to national level institute engaged in R & D of agriculture,science, technology and

industrial development through crossed cheque or bank transfer.

If capital gain arises from transfer of capital asset being buildings or lands to new company to set up an

industry and if the whole amount of capital gain is invested in equity of that company, then this gain shall

not be charged to tax as income of the year in which the transfer took place. For example, Mr. X sold his

land @ tk. 1 crore to ABC Co. which has a cost price of tk. 60 lac. But he receives share of tk. 1 crore from

the company instead of cash. Than his capital gain of tk. 40 lac is tax-free.

If capital gain arises from transfer of capital asset of a firm to new company, and if the whole amount of

capital gain is invested in equity of that company by the partners of the firm, then this gain shall not be

charged to tax as income of the year in which the transfer took place.

Special tax rates on Capital Gain from sale of share

1. In case of company or firm @ 10%

2. In case of placement shareholder or sponsor shareholders @ 5%

3. If any person holds more than 10% of share of a company than gain on sale of such share is taxable @ 5%

4. In case of individual tax-free




Part Seven: Income from Business and Profession

Income from Business and Profession:

Definitions:

Study References:

Section; 2(34), Income

2(14), Business

2(49), Profession Definitions

2(61), Speculative Business

Section; 19(15) – a, aa, b, c

19(16) with 3rd schedule Para 10

19(18) with section 29(1)(xii) Deemed Income

19(20)

19(23) read with rule – 30A

Section; 28 read with rule - 19(6)

29

30 read with rule – 65 Main Section

35

46B + 46C

Sixth Schedule (Part A), Para 1A, Para 33, Para 35, Para 37, Para 39, Para42, Para 44, Para 45.

Third Schedule; tax depreciation

SRO; CSR; 229 of 2011 and 223 of 2012

SRO – CSR: No. 223 dated 27 June 2012 and No. 186 dated 01 July 2014

Rule 30, 31, 32

Section 2(14); Business:

Business includes any trade, commerce or manufacture or any adventure or concern in the nature of trade,

commerce or manufacture.

Section 2(34); Income:

Income includes-

(a) any income, profits or gains, from whatever source derived, chargeable to tax under any provision of this

Ordinance under any head specified in section 20;

(b) any loss of such income, profits or gains;

(c) the profits and gains of any business of insurance carried on by a mutual insurance association computed in

accordance with paragraph 8 of the Fourth Schedule;

(d) any sum deemed to be income, or any income accruing or arising or received, or deemed to accrue or arise

or be received in Bangladesh under any provision of this Ordinance:

[]Deleted F.A. 1993

Provided that the amount representing the face value of any bonus share or the amount of any bonus declared,

issued or paid by any company registered in Bangladesh under ক োম্পোনীআইন, 1994 (1994 সননর 18 নংআইন) to

its shareholders with a view to increase its paid-up share capital shall not be included as income of that

shareholder;

Section 2(49); Profession:

Profession includes a vocation.

http://taxmatebd.com/index.php?pid=2#2-34




Rules:

Section 2(61); Speculative Business:

Speculation-business means business in which a contract for the purchase or sale of any commodity, including

stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the

commodity or scripts, but does not include business in which -

(a) a contract in respect of raw materials or merchandise is entered into by a person in the course of his

manufacturing or mercantile business to guard against loss through future price fluctuations for the purpose of

fulfilling his other contracts for the actual delivery of the goods to be manufactured or the merchandise to be

sold by him;

(b) a contract in respect of stocks and shares is entered into by a dealer or investor therein to guard against loss

in his holdings of stocks and share through price fluctuations; and

(c) a contract is entered into by a member of a forward market or a stock exchange in the course of any

transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course of

his business as such member;

Rule – 30; Determination of income from business when such income is also partially agricultural:

In the case of income which is partially "agricultural income" and partially income from "business", in

determining that part of income which is from "business", the market value of any agricultural produce which

has been raised by the assessee or received by him in kind and which has been utilised as raw material in such

business or the sale proceeds of which are included in the accounts of the business shall be deducted, and no

further deduction shall be made in respect of any expenditure incurred by the assessee as a cultivator or receiver

of the produce in kind.

Rule – 31; Computation of income derived from the sale of tea:

1. Income derived from the sale of tea grown and manufactured by the seller in Bangladesh shall be

computed as if 40% of such income was derived from business and 60% of such income was derived

from agriculture:

Provided that in computing, such income from business, an allowance shall be made in respect of the

cost of planting bushes in replacement of bushes that have died or become permanently useless in an

area already planted, unless such area has previously been abandoned:

Provided further that in computing such income an allowance shall be made in respect of the

expenditure incurred in the income year by the assessee in connection with the development of the new

areas for bringing them under tea cultivation.

Rule – 32; Computation of income derived from the sale of rubber:

1. Income derived from the sale of rubber grown and manufactured by the seller in Bangladesh shall be

computed as if 40% of such income was derived from business and 60% of such income was derived

from agriculture.

Provided that in computing such income an allowance shall be made in respect of the expenditure

incurred in the income year by the assessee in connection with the development of the new areas for

bringing them under rubber cultivation.




Deemed Income:

Example – 1: Bad debt expense charged in the Income Statement and allowed by the tax authority in AY 2011-12 but

subsequently the debtor paid debt. Then this expenditure will be treated as income in AY 2012-13.

Example – 2: Interest on loan was incurred (but not paid) in IY 2011. But if it is not paid in the subsequent 3 years

then it will be treated as income in the following year (IY 2015). But if the interest paid subsequently in 2016 it will

deducted from the income of 2016.

Section 19(15)(c) is like Section 19(15)(aa) but for trading liability for example purchase of raw materials on

credit was allowed as cost of goods sold in IY 2011-12 but not paid until 2014-15 then it will be treated as

income in the IY 2015-16.

Section 19(15); Deemed Income:

Where, for the purpose of computation of income of an assessee under section 28, any deduction has been made

for any year in respect of any loss, bad debt, expenditure or trading liability incurred by the assessee, and--

(a) subsequently, during any income year, the assessee has received, except as provided in clause (aa) whether in

cash or in any other manner whatsoever, any amount in respect of such loss, bad debt, or expenditure, the

amount so received shall be deemed to be his income from business or profession during that income year

(example -1);

(aa) such amount on account of any interest which was to have been paid to any commercial bank or the

Bangladesh Development Bank ltd or on account of any share of profit which was to have been paid to any

bank run on Islamic principles and which was allowed as a deduction in respect of such expenditure though such

interest or share of profit was not paid by reason of the assessee having maintained his accounts on mercantile

basis, within three years after expiry of the income year in which it was allowed, shall, to such extent as it

remains unpaid, be deemed to be income of the assessee from business or profession during the income year

immediately following the expiry of the said three years (example -2);

(b) the assessee has derived, during any income year, some benefit in respect of such trading liability (discount),

the value of such benefit, if it has not already been treated as income under clause (c), shall be deemed to be his

income from business or profession during that income year;

(c) such trading liability or portion thereof as has not been paid within three years of the expiration of the income

year in which deduction was made in respect of the liability, such liability or portion, as the case may be, shall

be deemed to be the income of the assessee from business or profession during the income year immediately

following the expiry of the said three years;

and the business or profession in respect of which such allowance or deduction was made shall, for the purposes

of section 28, be deemed to be carried on by the assessee in that year:

[Provided that where any interest or share of profit referred to in clause (aa) or a trading liability referred to in

clause (c) is paid in a subsequent year, the amount so paid shall be deducted in computing the income in respect

of that year.]

Section – 19(16):

Where any building, machinery or plant having been used by an assessee for purpose of any business or profession

carried on by him is disposed of during any income year and the sale proceeds thereof exceeds the written down

value, so much of the excess as does not exceed the difference between the original cost and the written down

value shall be deemed to be the income of the assessee for that income year classifiable under the head "Income

from business or profession (see below example).




For example, a machinery

Cost price Tk. 100


WDV Tk. 70

Now, if machine is sold @ tk. 78 or tk. 68 or tk. 114 treatment of gain will be as follows;

Case – 1: Tk. 8 is Business income

Case – 2: Tk. 2 is Business loss

Case – 3: Tk. 30 is Business income and tk. 14 is capital gain

For example, a machinery

Cost price Tk. 100


WDV Tk. 70

Now, if machine is destroyed and insurance claim and sale of scrap generate tk. 78 or tk. 68 or tk. 114 treatment of

such gain will be as follows;

Case – 1: Tk. 8 is business income

Case – 2: Tk. 2 is business loss

Case – 3: Tk. 30 is business income and tk. 14 is capital gain

Section – 19(18):

Where any insurance, salvage or compensation moneys are received in any income year in respect of any building,

machinery or plant which having been used by the assessee for the purpose of business or profession is discarded,

demolished or destroyed and the amount of such moneys exceed the written down value of such building,

machinery or plant, so much of the excess as does not exceed the difference between the original cost and the

written down value less the scrap value shall be deemed to be the income of the assessee for that income year

classifiable under the head "Income from business or profession (see below example).

Section – 19(20):

Where an asset representing expenditure of a capital nature on scientific research within the meaning of section 29

(1) (xx) is disposed of during any income year, so much of the sale proceeds as does not exceed the amount of the

expenditure allowed under the said clause shall be deemed to be the income of the assessee for that income year

classifiable under the head "Income from business or profession.

Section – 19(23):

Where during any income year an assessee, being an exporter of garments, transfers to any person, the export

quota or any part thereof allotted to him by the Government, such portion of the export value of the garments

exportable against the quota so transferred as may be prescribed for this purpose shall be deemed to be the income

of the assessee for that income year, classifiable under the head "Income from business or profession".




Sixth Schedule (Part A); Exclusion from income;

Income from the following business is totally tax free –

1. Para-11A: dividend from listed company in BD amount BDT 25,000 will be tax exempted. exceeding this

amount will be taxable. Amended F.A. 2015

2. Para-20: income from gratuity amount 2.50 core will be tax free. excess this amount will be taxable. Amended

F.A. 2015

3. Para–33; Any income derived from the business of software development or Nationwide

Telecommunication Transmission Network (NTTN) or Information Technology Enabled Services (ITES)

for the period from the first day of July, 2008 to the thirtieth day of June, [2024]Amended F.A. 2015

4. Para – 35:any income derived from the export of handicrafts for the period from the first day of July, 2008 to

the thirtieth day of June, 2019. Amended F.A. 2015

5. Para – 37; Income of any private Agricultural College or private Agricultural University derived from

agricultural educational activities.

6. Para – 39; Income derived from any Small and Medium Enterprise (SME) engaged in production of any

goods and having an annual turnover of not more than taka 30 lakh:

7. Para – 42; Any income from poultry farming for the period from the first day of July , 2011 to the thirtieth

day of June, 2015 subject to the following conditions :

a. If such income exceeds taka 1,50,000/- an amount not less than 10% of the said income shall be

invested in the purchase of bond or securities issued by the Government within six months from the

end of the income year;

b. The person shall file return of his income in accordance with the provisions of clause (c) of sub-

section (2) of section 75 of this Ordinance; and

c. No such income shall be transferred by way of gift or loan within five years from the end of the

income year.

8. Para – 44; Cinema Hall or Cineplex has been given exemption facility which starts exhibition between the

first day of July, 2012 and thirtieth day of June, 2019

a. Dhaka and Chittagong areas – for five years

Other than Dhaka and Chittagong areas – ten years [Change in F.A. 2014]

9. Para – 45; Exemption facility for Production of rice bran oil has been given up to 2019

a. Dhaka and Chittagong areas – for five years

b. Other than Dhaka and Chittagong areas – for ten years [Change in F.A. 2014]

Exemption

For 5 Years

For 10

Years

For 2 Years

For 2 Years

For 1 Year

For 3 Years

For 3 Years

For 4 Years

100% tax-free

50% tax-free

25% tax free

100% tax-free

50% tax-free

25% tax free




Para --- 49. Income of an assessee donated in an income year by a crossed cheque or bank transfer to any girls' school

or girls' college approved by the Ministry of Education of the government.(Amended FA 2015)

Para --- 50. Income of an assessee donated in an income year by a crossed cheque or bank transfer to any Technical

and Vocational Training Institute approved by the Ministry of Education of the government. (Amended FA 2015)

Para --- 51. Income of an assessee donated in an income year by a crossed cheque or bank transfer to any national

level institution engaged in the Research & Development (R&D) of agriculture, science, technology and industrial

development.] [Para 48-51 (Amended FA 2015)

Para --- 52. Any income, not being interest or dividend classifiable under the head ―Income from other sources‖,

received by any educational institution, if it -

(i) is enlisted for Monthly Pay Order (MPO) of the Government;

(ii) follows the curriculum approved by the Government;

(iii) is governed by a body formed as per Government rules or regulations.(Added FA 2015)

Para --- 53. Any income, not being interest or dividend classifiable under the head ―Income from other sources‖,

received by any public university or any professional institute established under any law and run by professional body

of Chartered Accountants or Cost and Management Accountants or Chartered Secretaries. (Added FA 2015)

Section 46B: Tax Holiday

This is a period (5 years or 10 years depending on location of the industry) for which the company is allowed

exemption of tax on its ―income from business and profession‖

(a) Dhaka and Chittagong division (excluding Dhaka,

Narayanganj, Gazipur, Chittagong districts , also the

hill districts Rangamati, Bandarban and Khagrachari)

5 Years

1st & 2nd years……………100%

for 3rd year……………........60%

for 4th year............................40 %

for 5th year………….......…20%

(b) Rajshahi, Khulna, Barisal, Sylhet and Rangpur

divisions (excluding city corporation area) and

Rangamati, Bandarban and Khagrachari districts

10 Years

1st 2 years…………… 100%

3rd year………………..70%

4th year………………..55%

5th year………………..40%

6th year………………...25%

Exemption

For 5 Years

For 10

Years

For 2 Years

For 2 Years

For 1 Year

For 3 Years

For 3 Years

For 4 Years

100% tax-free

50% tax-free

25% tax free

100% tax-free

50% tax-free

25% tax free




7th - 10th year..................20%

Section – 35; Method of accounting:

Accounts shall be maintained for –

1. Income from business and profession.

2. Income from agriculture

3. Income from other sources.

Section – 28; Income from business or profession:

Example, X corporation have made a bridge in Bangladesh (in 2008) and kept its instruments here in hope of getting

another project but did not operate any liaison office. But in the last four (4) years they did not get any project and

sold their machine this year, which become scrap, more than WDV. However, their office is not active in Bangladesh

at this time, their business deemed to be carried on and tax is imposed as the business is in operation.

In a summary, the following incomes are treated as “Income from Business and Profession”:

(a) Profits and gains of any business or profession

(b Value of the benefit and the unpaid trading liability referred to in section 19(15)

Recovery of any loss, bad debt or expenditure which was previously allowed as deduction

Any amount of interest on loan to any commercial bank, BSB,BSRS, or any bank run on Islamic

principles allowed as deduction but remains unpaid for three years

Trading liability if remains unpaid for three years

(c) Excess amount referred to in section 19(16);

Gains on disposal of building, plants used for business

(d)Excess amount referred to in section 19(18);

Insurance, salvage or compensation received for building, plant being discarded, demolished.

(e) Sale proceeds referred to in section 19(20)

Gains on disposal of capital asset on scientific research

(f) The amount of income under section 19 (23)]

(g) Sale of export quota by garments exporter

The following income of an assessee shall be classified and computed under the head "Income from business or

profession", namely:-

(a) profits and gains of any business or profession carried on, or deemed to be carried on (see below

example), by the assessee at any time during the income year;

(b) income derived from any trade or professional association or other association of like nature on account

of specific services performed for its members;

(c) value of any benefit or perquisite, whether convertible into money or not, arising from business or the

exercise of a profession;




Section – 29; Deductions from income from business or profession;

―Any expenditure, not being in the nature of capital expenditure or personal expenses of the assessee, laid out or

expended wholly and exclusively for the purpose of the business or profession of the assessee‖ (Omnibus clause at

the end of the section 29) .

Rent

Interest payable on borrowed capital

Tax depreciation and amortization of certain assets.

Any expenditure incurred wholly & exclusively for the purpose of business or profession

Section – 30; Deduction not admissible in certain circumstances;

30 (a): if salary paid without TDS

30 (aa): any other payment without TDS and VDS

30(b): any payment by firm‘s (partnership) to partners as

1. Salary

2. Remuneration

3. Commission

4. Interest

30 (c): payment of brokerage fee or commission to non-resident deducting TDS u/s 56.

30(d): if payment to a provident fund or other fund, from which are taxable as income from salary, unless effective

arrangement of collection of TDS is made.

30(e): excess perquisite (over tk. 4, 50,000 per employee per year) (Amended FA 2015)

30(f) (with rule 65); entertainment, free sample, publicity & advertisement, holidaying & recreation. These

expenditures are allowable under rule 65 excess of that is not deductible.

1. Entertainment:

Entertainment expense is only allowable if the company is make profit. No profit no entertainment! And

expense is allowable at –

On the 1st tk. 10 lac of assessed profit – 4%

And on the balance profit over tk. 10 lac – 2%

Or

The actual entertainment expense charged in the profit and loss account, whichever is lower.

―Profit should be assessed after disallowing charged entertainment expenses in profit and loss a/c‖.

2. Free Sample (Rule 65 c):

Pharmaceuticals Others

On the first 5 crore of disclosed turnover 2% 1.5%

On the next 5 crore of disclosed turnover 1% 0.75%

On the balance 0.50% 0.375%

Or, the actual free sample given whichever is lower.

3. Holidaying & Recreation:

¾ of the actual expenditure or 3 months basic salary of the employee (who enjoyed the opportunities)

whichever is lower is allowable and such foreign travels shall not be oftener than once in every 2 years.

For example, Mr. X is an employee of ABC ltd. the company has given him an holiday opportunity of tk.

100,000 which was also his actual expenditures. His basic salary is tk. 20,000 per month. So allowable

expenditure will be ¾ of actual expenditure (tk. 75,000) or basic salary of 3 months (tk. 60,000) lower one,

which is tk. 60,000 other tk. 40,000 will add back with the company‘s profit.




However, the company has to fulfill the following conditions –

a. If payment is more than tk. 10,000 it should be given in crossed cheque or by a crossed bank draft.

b. Same employee cannot be provided with foreign holidaying opportunity for subsequent year.

If the company did not fulfill the above condition full expense will disallowed.

30(g): Headquarter expenditures of foreign companies are allowable up to 10% of net profit disclosed in the

statement of accounts (or actual, lower one).

30(h): Royalty and technical knowhow fee is allowable up to 8% of net profit disclosed in the statement of accounts

(or actual, lower one).

30(i): monthly gross salary over tk. 15,000 shall be given in check or bank transfer.

30(j): incentive bonus allowable up to 10% of net profit disclosed in the statement of accounts before tax.

30(k); overseas travelling allowable up to 1% of disclosed turnover.

30(l); Any commission, discount paid by any company to its shareholder director.

30(m): any payment over tk. 50,000 should be in check or bank transfer, but not applicable in – salary, raw material

purchase and payment to government.

30(n): any house/office rent paid without crossed check or bank transfer.

(c). Restriction on Disallowance by the DCT [Section 30 A]

The DCT shall not make any disallowance or deduction for any year from any claim made by an assessee in the

trading account or profit or loss account without specifying reason for such disallowance or deduction.

(d). Other Issue

i. Allowance of depreciation as per Third Schedule of I.T Ordinance, 1984. if charged beyond the allowable

limit, the excess is to be disallowed

ii. Applicability of provision of section 19 of the I.T Ordinance, 1984 regarding deemed income.

(e). Set-off and Carry-forward of losses [Section 37-42]

Where loss is assessed in any head of income, the assesse is entitled to set off the loss against his income assessed in

other heads of that year. However, loss on speculation business and loss on capital gain cannot be set off against

income from any other head. Such loss can be set off only against the income of respective speculative business or

capital gains. When loss cannot be wholly set off, then the unabsorbed loss under the following four heads shall be

carried forward but for not more than six (6) successive assessment years.

Speculation business loss

Business loss

Capital loss and

Loss at agricultural income

Important notes-

Loss from business or profession shall not be set off against house property income.

In case of capital loss, it cannot be carried forward if the loss does not exceed Taka 5,000/-.

Unabsorbed depreciation loss can be carried forward for unlimited period.

Loss so carried forward is to be set off against income of the respective head.

If there is any loss at any exempted income, it cannot be set off against any other income.




Third schedule; Tax Depreciation:

There are five types of depreciation mentioned in the IT Ordinance –

1. Normal depreciation:

According to the chart in third schedule of ITO, tax depreciation is allowable on written down value (cost in

the first year) at the following rate –

Building (factory) 20%

Building (office) 10%

Office equipment 10 %

Plant and machinery 20%

Furniture 10%

Computer 30%

Imported computer software 10%

Road/bridge/flyover 2%

Car* 20%

* in case of car depreciation is allowable up to tk. 25 lac. If the car‘s price is over tk. 25 lac, depreciation

should be calculated as if the price is tk. 25 lac. (Not applicable for rent-a-car or similar company)Amended FA

2015

In case of financial lease, assessee will get the depreciation not the leasing company.

In the year of acquisition, full depreciation is allowable but in the year of disposal, no depreciation is

allowable.

For example, Car price tk. 3,000,000. After 2 years sold at tk. 2,400,000. Compute gain.

Notional cost price tk. 2,500,000

Less: Depreciation (Y 1) (500,000)

WDV after Y 1 tk. 2,000,000

Less: Depreciation (Y 2) (400,000)

WDV after Y 2 tk. 1,600,000

Proportionate sales price = (Notional cost price / actual price) * actual sales price

= (2,500,000 / 3,000,000) * 2,400,000

= tk. 2,000,000

Gain (business income) = (tk. 2,000,000 – tk. 1,600,000) = tk. 400,000

2. Accelerated Depreciation:

In case of machinery or plants set up in Bangladesh between 01/07/2014 and 30/06/2019 and not having

been previously used in Bangladesh, accelerated depreciation subject to some conditions will be allowed as

follows:-[paragraph 7B of 3rd Schedule]

First Year:……………….50% of actual cost

Second Year:……………30%of actual cost

Third Year:……………….20%of actual cost

Conditions:-

o Applicants must be a Bangladeshi company

o Applicant is an industrial undertaking as per 46B(2)

o Application is made to NBR within 6 months from the end of the month of commercial production

o Declaration not to enjoy any other tax exemption benefit

o Any other depreciation allowance will not be allowable

3. Initial Depreciation:

Only applicable for Building and Plant & machinery. But the property should be new and given only in the

first year of addition along with normal depreciation.

Rate of depreciation:

Unabsorbed depreciation (due to loss) can be carry

forwarded for unlimited time.

Business loss can be carry forwarded for 6 years.




Building 10%

Plant and machinery 25%

For example, a machinery coats tk. 100 lac. In first year depreciation allowance is –

Initial depreciation (25%) tk. 25 lac

Normal depreciation (20%) tk. 20 lac

Depreciation allowance (year 1) tk. 45 lac

WDV after 1st year tk. 55 lac.

4. Extra depreciation

5. Other Tax Exemption

•Industries set up in EPZ will enjoy tax exemption from the moth of commercial production.

•Income from computer software business run by Bangladeshi resident is tax exempted up to 30/06/2024

[para-33, 6th Schedule, Part A]

•Income from private power generation company up to 15 years from its commercial production [SRO no.

36-ain/97 dated 03/02/1997]

•Any income from the export of handicrafts for the period from 1st day of July, 2008 to the 30th day of June,

2024 [para-35, 6th Schedule, Part A]

6. Special depreciation

7. General Export Incentives:

50% 0f income of an assessee derived from the business of export is exempted from tax. This is not

applicable for a company registered outside Bangladesh, enjoying exemption of tax or reduction in rate by

any notification made under the ordinance.




Tax Holiday

Introduction:

Tax holiday has been started to allow as a tax incentive for industrialization in this region since 1959 by introducing

new section 15BB in the then Income Tax 1922. In 1972, the tax holiday system was withdrawn by repealing section

15BB. But the incentive was re-introduced by incorporating section 14A in the Income Tax 1922 by the Finance Act

1974 with effect from the assessment year 1974-75 for industrial undertakings (established on or after 1st July 1973

having subscribed and paid up capital not less than Tk. 1,00,000 and not more than Tk. 35,00,000) and also for tourist

industries (established on or after 1st January 1976 having subscribed and paid up capital not less than Tk. 1,00,000

and not more than Tk. 10,00,00,000) with the tax holiday period of 9 years for the prescribed areas and of 5 years for

other areas.

With the introduction of the Income Tax Ordinance 1984, the provision of the tax holiday has been maintained under

section 45 and 46 primarily. The provision was applicable for industrial undertakings (established between 01 July

1974 and 30 June 1985) and tourist industries (established between 01 July 1976 and 30 June 1985) having

subscribed and paid up capital not less than Tk. 1,00,000 for any industries. The tax holiday incentive was first

extended for the industries up to 30 June 1990 by Finance Act 1985, then up to 30 June 2000 by the FA 1989. But

subsequently through FA 1991 the incentive was restricted for the industries established within 30 June 1995 with an

apparent intention of withdrawing the tax holiday incentive since 1995-96.

New section 46A has been introduced through FA 1995 allowing the tax holiday incentive for industrial undertakings,

tourist industries and physical infrastructure facilities established between 01 July 1995 and 30 June 2008 with having

subscribed and paid up capital not less than Tk. 1,00,000. It is extended for another 3 years through inserting section

46B with some minor changes and again for 2 years through inserting section 46C with having subscribed and paid

up capital not less than Tk. 20,00,000. Tax holiday facility has further been extended up to 30 June 2024 through the

FA 2015.

(1) Type of Industries eligible for tax holiday

Two types of industries are eligible to apply for tax holiday —

1. Industrial undertaking

2. Physical infrastructure facility

The following categories of industries are eligible for the definition of Industrial Undertakings:

01. Active ingredient industry and radio pharmaceuticals industry

02. Automobile manufacturing industry[FA-2015]

03. Barrier contraceptive and rubber latex

04. Basic chemicals or dyes and chemicals

05. Basic ingredients of electronic industries (e.g. resistance, capacitor, transistor, integrator, circuit)

06. Bi-cycle manufacturing industry[FA-2015]

07. Bio-fertilizer

08. Biotechnology

09. Boilers

10. Brick made of Automatic Hybrid Hoffmann Kiln [ or Tunnel Kiln] Technology[FA-2015]

11. Compressors

12. Computer hardware

13. Energy efficient appliances

14. Insecticide or pesticide

15. Petro-chemicals

16. Pharmaceuticals

17. Processing of locally produced fruits and vegetables




18. Radio-active (diffusion) application industry (e.g. developing quality or decaying polymer or preservation of

food or disinfecting medicinal equipment)

19. Textile machinery

20. Tissue grafting

21. Tyre manufacturing industry or[FA-2015]

22. Any other category of industries as the Govt. may notify in the official Gazette.

The following categories of industries are within the meaning of Physical Infrastructure Facility:

01. Deep sea port

02. Elevated expressway

03. Export processing zone

04. Flyover

05. Gas pipe line

06. Hi-tech park

07. ICT village or software technology zone

08. IT park

09. Large water treatment plant and supply through pipe line

10. Liquefied Natural Gas terminal and transmission line

11. Mono-rail

12. Rapid transit

13. Renewable energy (e.g. energy saving bulb, solar energy plant, windmill)

14. Sea or river port

15. Toll road or bridge

16. Underground rail

17. Waste treatment plant

18. Any other category of industries as the Govt. may notify in the official Gazette.

(2) Conditions for Eligibility:

Some conditions are required to be fulfilled for tax holiday under section 46B and 46C of the Income Tax Ordinance,

1984. These are as follows:

a) The undertaking must be owned and managed by either a body corporate established by or under an act of

parliament with its head office in Bangladesh;

or

a company as per Companies Act 1913/1994 with its registered office in Bangladesh having subscribed and paid-

up capital of not less than Tk. 20,00,000 on the date of commencement of commercial production or operation.

b) The undertaking is not formed by splitting up or by reconstruction or reconstitution of business already in

existence or by transfer to a new business of any plant and machinery used in business, which was being carried

on in Bangladesh at any time before the commencement of the new business.

c) The undertaking must be approved by the NBR for the purpose of tax holiday.

d) The undertaking shall have to obtain clearance certificate from the Directorate of Environment for the relevant

income year.

(3) Application procedure and its disposal by the NBR:

a) Tax holiday application is to be submitted to the NBR within 6 months from the end of the month of commercial

production or operations in the form prescribed in Rule 59A, in duplicate, duly signed and verified by the MD or

Director of the company.

b) NBR shall give its decision within 45 days from the date of receipt of the application by the Board. Otherwise,

the undertaking shall be deemed to have been approved.

c) NBR shall not reject any application unless the applicant is given a reasonable opportunity of being heard.

d) If NBR rejects any tax holiday application, the undertaking can submit a review application to the Chairman of

the Board within 4 months from the date of the receipt of the rejection letter. The Chairman then will either

review himself or will constitute a committee consisting of 3 members of the NBR who will review its previous

decision and pass such order as it thinks fit. There is no time limit for disposal of the review application. The




decision of the review committee of the NBR as final and conclusive and there is no scope to submit further

review application.

(4) Withdrawal and Cancellation of tax holiday:

a) Any undertaking after getting tax holiday from the NBR can write to the NBR for cancellation of tax holiday

within 1 year from the date of granting such tax holiday.

b) NBR may also cancel/suspend fully/partly any tax holiday in the public interest.

c) The DCT in the course of assessment may also withdraw the tax holiday from the relevant assessment year if he

is satisfied that one or more of the required conditions are not fulfilled.

d) Tax holiday shall be deemed to have been withdrawn for the assessment year in which the following transaction

are made:

i. If the company is engaged in any commercial transaction with another company having one or more sponsor

shareholders.

ii. If the DCT finds that the company has purchased or sold goods at higher/lower price than the normal market

price with the intention to reduce the income of another undertaking/company.

(5) Period of tax holiday for industrial undertaking:

Years Rate of exemption

If it is established

within 30 June 2013

Established from 01 July

2013 to 30 June 2019

(a) Dhaka and Chittagong division

(excluding Dhaka, Narayanganj,

Gazipur, Chittagong, Rangamati,

Bandarban and Khagrachari districts)

5 1st 2 years…….100% 1st 2 years…….….. 100%

2nd 2 years…….50% 3rd year ………….... 60%

Last year…..……25% 4th year…………… 40%

5th year…………… 20%

(b) Rajshahi, Khulna, Sylhet, Rangpur

and Barisal division (excluding City

Corporation area) and the hill districts

of Rangamati, Bandarban and

Khagrachari

10 1st 3 years……. 100% 1st 2 years……….. 100%

2nd 3 years……. 50% 3rd year …………....70%

Last year……… 25% 4th year…………... 55%

5th year…………… 40%

6th year……… ……25%

7th to 10th year……. 20%

Provided that bio-fertilizer industry and petro-chemical industry will get tax holiday for 5 years even if it is set up in

the district of Dhaka, Narayanganj, Gazipur and Chittagong.

**** if any employer employs an foreigner without the approval of " Board of Investment" then tax holiday for

industrial undertaking and physical infrastructure facility will be withdrawn and if continues in later year then

tax holiday facility will be will be withdrawn means need to pay tax on profit for the company for this illegal

employment of the foreigner.[FA-2015]

(6) Period of tax holiday for physical infrastructure facility irrespective of the location:

Rate of exemption

Established within 30 June 2013 Established from 01 July 2013 to 30 June 2019

1st 5 years……………. 100% 1st 2 years……………. 100%

2nd 3 years……………. 50% 3rd year …………….…. 80%

Last 2 years……..…… 25% 4th year……………..… 70%

5th year………………… 60%

6th………………………. 50%

7th year ………….……. 40%

8th year………………… 30%

9th year………………… 20%

10th year………….…… 10%

(7) Conditions to be fulfilled after getting tax holiday:




a. The profits and gains of the tax holiday company shall be computed separately.

b. Any loss during the tax holiday period cannot be carried forward beyond the tax holiday period.

c. Only normal depreciation is applicable for tax holiday enjoying companies.

d. 30% + 10% = 40% year wise tax holiday income is to be reinvested. 30% is to be reinvested in the same

company or in a new industry within the tax holiday period or maximum within 1 year from the end of the tax

holiday period. Another 10% is to be reinvested in the shares of listed company in each year within 3 months

from the end of the income year.

Otherwise income of the year or years will subject of tax. However, the quantum of reinvestment will be reduced

by the amount of dividend if declared by the company.

e. The income of the tax holiday company under the following heads are taxable:

(i) Capital gain

(ii) Any income arising from the disallowance u/s 30

(iii) Dividend is taxable at the hand of shareholders.

(8) Documents to be submitted with tax holiday application:

The following documents are to be submitted along with tax holiday application:

a. An attested copy of certificate of incorporation;

b. An attested copy of the Memorandum of Association and Articles of Association of the company;

c. A certificate of commencement of business;

d. In case the company has already commenced business, certified copy of the audited balance sheet and profit

and loss accounts for the period for which accounts have been prepared;

e. In case of industrial undertaking/physical infrastructure facility for which approval is sought has been

acquired for another party, an attested copy of the agreement between the applicant company and the seller

enter into for the acquisition of the industrial undertaking/physical infrastructure with list and value of assets

acquired;

f. A certificate to the effect that the industrial undertaking/physical infrastructure facility has not applied or

shall not apply for accelerated depreciation allowance under paragraph 7 or 7A of the Third Schedule to the

Ordinance.

(9) Tax exemption on income of cinema hall/Cineplex and industry producing rice bran oil [6th

Schedule (Part-

A) Para 44 and 45]:

Income of cinema hall/Cineplex and income from industry producing rice bran oil will also be tax free like tax

holiday but without any tax holiday application to NBR if it starts commercial exhibition/production within 01 July

2012 to 30 June 2019. Time and condition of tax exemption is tabulated below:

Area Years Rate of exemption

(a) Dhaka and Chittagong division (excluding the hill

district of Rangamati, Bandarban and Khagrachari)

5 1st 2 years……………. 100%

2nd 2 years……………. 50%

Last year……………… 25%

(b) Rajshahi, Khulna, Sylhet, Rangpur and Barisal

division (including the hill district of Rangamati,

Bandarban and Khagrachari)

10 1st 3 years……………. 100%

2nd 3 years……………. 50%

Last 4 years..………… 25%

(10) Tax exemption on income of industry set up at EPZ:

Industries set up at EPZ (including private EPZ) from 01 January 2012 onward will automatically get tax exemption

as per SRO – 219 dated 04 July 2011. The area and period of tax exemption is tabulated below:

Area Years Rate of exemption

(a) Dhaka and Chittagong division (excluding the hill

district of Rangamati, Bandarban and Khagrachari)

5 1st 2 years……………. 100%

2nd 2 years……………. 50%


(b) Rajshahi, Khulna, Sylhet, Rangpur and Barisal 7 1st 3 years……………. 100%




division (including the hill district of Rangamati,

Bandarban and Khagrachari)

2nd 3 years……………. 50%


Company Tax Assessment

01. Introduction:

In the income tax ordinance, 1984, there is no separate status for taxation of a corporate body, But in the context of

Bangladesh, Corporate Taxation means charging of tax on income or profit of companies. Therefore, Corporate Tax

can be termed as company tax, which differs from the tax levied on individuals. Both companies and individuals are

assessed and taxed under the same I.T. Ordinance 1984.

02. Definition of Company:

Under Section 2 (20) of the income Tax Ordinance 1984, ―Company" means a company as defined in the Company

Act, 1913 (VII of 1913) or Company Act, 1994 (Act No. 18 Of 1994) and includes-

(a) A body corporate established or constituted by or under any law for the time being in force;

(b) Any nationalized banking or other financial institution, insurance body and industrial or business enterprise;

(bb) Any association or combination of persons, called by whatever name, if any of such persons is a company as

defined in the Companies Act, 1913 (VII of 1913) or Company Act, 1994 (Act No. 18 Of 1994);

(bbb) any association or body incorporated by or under the laws of a country outside Bangladesh"

(c) Any foreign association or body, not incorporated by or under any law], which the Board may, by general or

special order, declare to be a company for the purposes of this Ordinance;

03. Classification of Company:

For preferential tax purpose, Companies are classified into following groups:

1) Bank, insurance and Financial institutions;

2) Merchant Bank;

3) a) Publicly traded company

b) Non- Publicly traded company

4) Mobile Phone Operator company

5) Cigarette manufacturing company

6) Non Resident Company

04. Publicly traded Company:

―Publicly traded company‖ means a company which fulfills the following conditions:

a) The company is registered in Bangladesh under the Companies Act 1913 or 1994;

b) The company is enlisted with the Stock Exchange before the end of the concerned income year in which

income tax assessment will be made.

05. Obligations of a Corporate Taxpayer under Income Tax laws:

Following the corporate tax compliance obligations as per various sections the Income Tax Ordinance 1984:

1) Obligations of a corporate entity as an assessee (taxpayer);

2) Obligations of a corporate entity as a Tax collector on behalf of tax authority;

3) Obligations of related persons of a corporate entity.

(1) As an assessee (taxpayer):




Collection of TIN (Taxpayer Identification Number) certificate u/s 184B, 184A

Displaying of TIN certificate u/s 184C

Advance income tax payment u/s 64

Preparation of tax return u/s 75

Payment of tax as per tax as per tax return u/s 74

Filling of tax return and statement in prescribed forms u/s 75

Filing of revised return if any omission or incorrect statement in previously filed return discovered before

the assessment is made u/s 78

Maintenance of accounts and documents u/s 35

Production of accounts and documents on receipts of a notice from the DCT u/s 79

Compliance with various notice

Notice of demand u/s 135

Notice of file return u/s 77

Notice to produce accounts, statements and documents u/s 79

Notice to attend hearing u/s 83(1) in case of assessment after hearing

Notice to file return for re- assessment u/s 93(1)

Notice to attend hearing u/s 130 in case of imposing penalty u/s 123-128

Notice calling for information u/s 113

(2) As a tax collector on behalf of tax authority:

Collection of Tax Collection A/C Number u/s 184BB

Tax deduction /collection at source if applicable and deposit to the treasury u/s 48-63

Giving documents of TDS with necessary information u/s 58 and

Furnishing annual returns in case of payment of salary before 1st September (u/s 108 and rule 23), interest

(u/s 109 and rule 20) and dividend (u/s 110 and rule 19)

(3) Obligations of related persons of corporate entity:

Filling a return of any other person for whom the company is assessable [u/s 75 (1B)]

Joint liability in case of director of a private limited company (u/s 100)

Joint liability in case of Liquidator of a private limited company (u/s 101)

06. TIN (Tax payer’s Identification Number) Certificate for a Company:

Every company requires 12 digit Tax payer‘s Identification Number (TIN) to mention it in the income tax return. As

per Section 184B, TIN Certificate is mandatory at the time of registration of a company under the Companies Act,

1994 and also in respect of sponsor shareholder directors [Section 184A (1)]. Besides these, in the following cases, a

company requires mandatory submission of 12 digit TIN Certificate under various clauses of section 184A:

1) Opening a letter of credit for the purpose of import; [Clause(a)];

2) Submitting an application for the purpose of obtaining an import registration certificate (IRC) [Clause(aa)];

3) Renewal of trade license in the area of a city corporation or of a paurashava [Clause(b)];

4) Submitting tender documents for the purpose of supply of goods, execution of a contract or for rendering

services [Clause(c)];

5) Purchase of a land, building or an apartment situated within any city corporation area [Clause(f)];

6) Registration, change of ownership or renewal of fitness of a car, jeep or microbus [Clause(g)];

7) Registration of company under Companies Act , 1994

Under section 184C, a company shall display 12 digit TIN Certificate Number at a conspicuous place of the

company‘s business premises.




07. Submission of Income Tax Return:

As per section 75 (2) (c), the return must be filed , unless the date is extended, by the fifteenth day of July next

following the income year or where the fifteen day of July falls before the expiry of six months from the end of the

income year, before the expiry of such six months. However, u/s 75(3), on application from the company, the

assessing officer [DCT] may extend the return submission date up to 2 months at his own capacity and further 2

months after taking prior permission from the IJCT.(Amended FA 2015)

In case of company though 15th July is the last date of submission of return but every company will get at

least 6 months‘ time from the end of the accounting year to submit tax return . Some examples are tabulated below:

SL. No. Income Year Ending Last date of submission of

Return

Assessment Year

1 31.12.2013 15.07.2014 2014-15

2 30.06.2014 31.12.2014 2014-15

3 31.03.2014 30.09.2014 2014-15

4 30.09.2013 15.07.2014 2014-15

5 30.07.2013 15.07.2014 2014-15

6 15.07.2013 15.07.2014 2014-15

The return should be signed by the principal officer of the company [75(2)(b)(iii)]. As per section 2(48), ‗Principal

Officer‘, means-

a) Managing director, manager, secretary, treasurer, agent or accountant (by whatever designation known), or

any officer responsible for management of the affairs, or of the accounts, of the authority, company, body or

association; and

b) Any person connected with the management or the administration of the company upon whom the Deputy

Commissioner of Taxes has served a notice of his intention to treat him as principal officer.

However, revised return can be filed before the assessment is made if any omission or incorrect statement in the

previously filed return discovered [u/s78].

09. Methods of Accounting and maintenance of Accounts [Sec 35]

All income classifiable under the head ―Agricultural income‖, ―Income from business or profession‖ or

―Income from other sources‖ shall be computed in accordance with the method of accounting regularly

employed by the company [sec 35(1)]

Every public or private company as defined in the Companies Act, 1913 (VII of 1913) or 1994 shall, with

the return of income required to be filed under this Ordinance for any income year, furnish a copy of the

trading account, profit and loss account and the balance sheet in respect of that income year certified by a

chartered accountant to the effect that the accounts are maintained according to the BAS and reported in

accordance with BFRS [sec 35(3)]

Where no method of accounting has been regularly employed, or if the method employed is such that, in the

opinion of the DCT the income of the assessee cannot be properly ascertained, the income of the company

shall be computed on such basis and in such manner as the Deputy Commissioner of Taxes may think fit

[sec 35(4)]




Corporate Tax Rate

The income tax rates for companies are as follows:

Types of Company Head /sources of Income Tax Rate for Assessment Year

2015-2016 2014-2015

Bank, Insurance,

Financial Institutions

(1) Capital Gain (2nd schedule) 15% 15%

(2) Capital Gain from sale of shares of listed

companies 10% 10%

(3) Dividend Income 20% 20%

(4) other income Listed

Non-

listed

42.5% 40% 42.5%

Merchant Bank 37.5% 37.5%

Other Company



companies 10% 10%


(4) other income

For publicly Traded

Company

25% 27.5%

(a) Dividend declared by less

than 10% or failure to pay

declared dividend within 6

months

35% 35%

(b) Dividend declared more

than 30% will get

10 % tax rebate

No rebate

24.75% (if

dividend

declared more

than 30%

(c) Newly listed companies

in case of declaring more

than 20% shares through IPO

10 % tax rebate

on relevant tax

rate

24.75%

For non-publicly Traded

Company (including non-

resident company)

35%

37.5%

Mobile Phone

Company



companies 10% 10%


(4) other income

For publicly Traded

Company 40% 40%

Other than publicly Traded

Company 45% 45%

Cigarette

Manufacturing

Company

Income from

Cigarette

Manufacturing

business

For publicly Traded

Company 45% 40%

Other than publicly Traded

Company 45% 45%

Cooperative Society 15% 0%

Excess profit tax (u/s

16C)

If any bank shows profit exceeding 50% of the aggregate sum of capital and reserve, shall

have to pay excess profit tax @ 15% on such excess profit.

Additional tax (u/s

16B)

If listed company other than a bank and insurance has not issued, declared or distributed

dividend of bonus share equivalent to at least 15% of paid up capital within six months

immediately following any income year, shall have to pay additional tax @ 5% of

―undistributed profit‖ (accumulated profit + free reserve)

Minimum tax(u/s

16CCC)

Minimum tax @ .30% on gross receipt is to be paid irrespective of profit or loss. In case

of manufacturing company for the first three years, the minimum tax rate will be .10%.




10. Special Reduced Corporate Tax Rates

a) Textile Industries: 15%

b) Private University: 15%

c) Fish farming: 3%

d) Jute Industries: 15%

e) Selected autonomous bodies:25%

f) National level Research institute:15%

11. Tax Withholding Function: u/s 48-63

According to the provision of Chapter VII (section 48-63), tax is to be deducted or collected at source at the

prescribed rate/ rates.

(a) Deposit of Deducted /Collected tax: [Rule-13]

All sums deducted or collected at sources shall be deposited to the credit of the Government within 2 (Two)

weeks from the end of the month of such deduction or collection

The Deputy Commissioner of Taxes may, in a special case and with the approval of the Inspecting

Additional Commissioner of Taxes or Joint Commissioner of taxes, permit an employer to pay the tax

deducted from ―Salaries‖ quarterly on September 15, December 15, March 15 and June 15.

(b) Procedure of Deposit of Deducted /Collected tax: [Rule-14]

The amount of tax deducted or collected shall be deposited to the credit of the Government by remitting it into the

Bangladesh Bank or the Sonali Bank, as the case may be, accompanied by an income tax challan. [Rule 14(1)]

12. Payment of Advance Tax: u/s 64-73

In case of first year, if income is likely to exceed Tk. 4,00,000/- or

In case of old assessee, last assessed income if exceeds Tk. 4,00,000/-

Advance tax is to be paid in four (4) equal installments 15thSeptember, 15thDecember, 15th March and 15th

June.

13. Fiscal Incentives:

Following Fiscal incentives are available for a company:

(1) Tax Holiday: u/s 46B and 46C

This is a period (5 years or 10 years depending on location of the industry) for which the company is allowed

exemption of tax on its ―income from business and profession‖

(2) Other Tax Exemption

Industries set up in EPZ will enjoy tax exemption from the moth of commercial production.

Income from computer software business run by Bangladeshi resident is tax exempted up to 30/06/2019

[para-33]

Income from private power generation company up to 15 years from its commercial production [SRO no.

36-ain/97 dated 03/02/1997]

Any income from the export of handicrafts for the period from 1st day of July, 2008 to the 30th day of June,

2015 (para-35)




(C) Accelerated Depreciation

In case of machinery or plants set up in Bangladesh between 01/07/2014 and 30/06/2019 and not having been

previously used in Bangladesh, accelerated depreciation subject to some conditions will be allowed as follows:-

[paragraph 7B of 3rd Schedule]

First Year:……………….50% of actual cost

Second Year:……………30%of actual cost

Third Year:……………….20%of actual cost

Conditions:-

Applicants must be a Bangladeshi company

Applicant is an industrial undertaking

Application is made to NBR within 6 months from the end of the month of commercial production

Declaration not to enjoy any other tax exemption benefit

Any other depreciation allowance will not be allowable

(d) Initial Depreciation

In case of machinery or plants set up in Bangladesh after 30/06/2002 and not having been previously used in

Bangladesh, initial depreciation subject to some conditions will be allowed as follows:-[paragraph 5A of 3rd

Schedule]

In the case of building………………10% of actual cost

In the case of plant, machinery………25% of actual cost

(e) General Export Incentives:

50% 0f income of an assessee derived from the business of export is exempted from tax. This is not applicable for a

company registered outside Bangladesh, enjoying exemption of tax or reduction in rate by any notification made

under the ordinance.




Corporate Social Responsibility

SRO No. 223 dated 27 June 2012

SRO No. 186 dated 01 July 2014

Corporate Social Responsibility (CSR) is defined as the integration of business operations and values, whereby the

interests of all stakeholders including investors, customers, employees, the community and the environment are

reflected in the company‘s policies and actions. CSR is about how businesses align their values and behavior with the

expectation of stakeholders – not just customers and investors, but also employees, suppliers, communities,

regulators, special interest groups, and society as a whole. It is the company‘s commitment to be accountable to its

stakeholders. CSR demands that businesses manage the economic, social, and environmental impacts of their

operations.

The Government sees CSR as the business contribution to its sustainable development goals. Essentially, it is about

how business takes account of its economic, social and environmental impacts in the way it operates – maximizing

the benefits and minimizing the downsides. However, CSR is still considered as the voluntary action that business can

take, over and above the compliance with minimum legal requirements, to address both its own competitive interests

and the interests of wider society. Key CSR issues include good governance, labor standards, responsible sourcing,

eco-efficiency, environmental management, stakeholder engagement, employee and community relations, social

equity and human rights. It is not only about fulfilling a duty to society, it can bring competitive advantage.

The corporate sector in Bangladesh spend a big amount outside their business for the betterment of the society and the

people. But any expenditure for this purpose does not qualify for allowable deductions as this is not business related

expenditure. To encourage the companies to contribute towards the society, CSR provision has been introduced in

2009 through an SRO and thereafter the area has been expanded in 2010 and further modified in 2011. In the year

2012 two new areas have been included and one area shifted to 6th Schedule (Part - A), Para – 47. One new area of

CSR has been added in the year 2014.

Conditions to qualify for CSR

1. Regularity in payment of salary to staff

2. Having waste treatment plant in industry

3. Regularity in payment of Income tax, VAT, duty and loan

4. CSR only through govt. approved institutions

5. Compliance with Labor Law

6. Amount spent for CSR will not be considered as business expenditures

7. Documents in support of actual CSR expenditure to be submitted to the concerned DCT

8. Submit CSR plan to NBR and obtain exemptions certificate

The companies will get 10% tax rebate on the lower amount of the following three:

Allowable Investment Allowance:

The companies will get 10% tax rebate on the lower amount of the following three:

20% of total income

OR

TK. 12,00,00,000/=

OR

Actual money spent for CSR

Whichever is lower is to

be treated as allowable

CSR

Tax rebate @ 10% is

applicable on such

allowable CSR.




Areas of CSR:

The tax provision clearly specified 22 areas where the companies can perform their corporate social responsibility for

availing the benefit of tax rebate:

1. Natural calamities

2. Old home

3. Welfare of retarded persons

4. Education of poor children

5. Accommodation of slum dwellers

6. Awareness program of anti-dowry and women rights

7. Rehabilitation of poor and orphan children

8. Research on liberation war related subject

9. Sanitation in Chittagong hill tracts

10. Treatment of cataract, cancer, leprosy

11. Treatment of acid victims

12. Free medical treatment to the poor by specialized hospital

13. Public university

14. Technical and vocation education

15. Computer and information technology

16. Vocation training to unskilled workers for man power export

17. Infrastructure of national level sports

18. Donation to national level institution set up in memory of the liberation war

19. Donation to national level institution set up in memory of Father of the Nation

20. Donations made to non-profit voluntary social welfare organizations engaged for running rehabilitation

center, creation of awareness and treatment of HIV, AIDS and Drug addicted

21. Donations made to non-profit voluntary social welfare organizations engaged for running rehabilitation

center for recovered children/women of cross boarder trafficking

22. Donation to Govt. approved fund for helping victims of natural disaster or for any tournament or for any

national level program.




~~~. Inadmissible Expenses in use of tomDutinr: income from business or profession WI 30

Rnl .. K.I • .,. ........ fCMA OIuc_Gnu"

1CS(f .. )A~"OU'"

i) Payment of salary. 'ftax tbereoo has no! been deducted at source uls SOfscc. 30(a») ii) Payment ofsalary,remunctllion,inlcrest or commission to any partner OrlM firm(scc. 3c.:b)] iii) AIty plymenl wherefrom tax and VA i is deductible but not deducted (sec. 3O(u»). iv) Paymtnt of brokerage Of commissioo to • non-resident without deduction of tax at source:

violating SCdion S6 (scc.10(c») v) Payment to employees' provident fuRd or olher funds unless effective arrangement has been

made for deduction of tax al source wh ik: making the payments from the fund which are ..... b~ undeo' the head 'Salories ( .... 30(d»

vi) Payment ofperqu isitesl other benefits to an employee in CIlCes5 to TK. ".SO.OOO[scc. JO(c)J vii) Expenditure on foreign Irlivels of employees and their dependents, spouse and minor

children (including step and adopted children) for Iwllidaying and recreation exccedill8 3 months basic salary or 3/4- of acrual expenditure whichever is less and such fon:ign travels shall not be oftener than once in every 2 yean.(sec. JO(f) (ii) read with Rule65A)

viii) Distribution offrcesample exceeding the following linit[sec. JO(fXiv) read with Rule 6.5C): Tu rnover- % oftar-n ove r-

Phannaceuticallndustry Other Industry

Up to Tk.. S crore - 2"- 1.5% Exceeding n. 5 crorc. but up to n. 10 CtOrC W. 0.75% Excccdint n . 10 CtOrC 0.5% 0.375%

Ix) Entertainment expenditure exceeding the following limits (sec. JO(l)(i) read with Rule 65):

Jacome On lsi Tk. 10 be On the balance

Limit 4% 2%

x) Head Office Expendilu~ exceeding 10% of the disclosed net profit appl icable for foreign -pany ( .... 30(g») •

xi) Royalty and technical know-how fee exceeding 8% of the disclosed net profit (soc:. J~») xii) Salary Of remuneration paid by the employer otherwise Lhan by crossed cheque or bank

transfer having gross month ly salary of Taka 15,0001· or more [~. 30(i)J xiii) Incentive bonus exceeding 10% of disclosed nd profillsec. JO(j») xiv) Overseas traveling exceeding 1% ordjsc~ IUmQver [sec:. 30(k») xv) Any commission or discount paid by any company to its sharehokterdireclor(sec. 30(1)J xvi) Any cash payment above n..50,OOO other than cheque or bank lransfer except[scc. JO(m»)

1. Payment for purchase of raw materials

2. Salary of employees where monthly salary payment was otherwise re.strictcd

J. Any payment for government obligation.

xvii) Any house/office rent paid without crossed cheque or bank tnlnSrcr (§eG. JO(m»)

===---~=

IftPI'H ~ 1t. l.1hawnwI: 'CWo 1--*i1lP1O )IJ(7/101S)

-..1> -




Practical Problems

Company Assessment - 1:




Solutions of Problem:

ABC Company

Income Year : 2014-2015


Particulars Workings Amount

Net Profit

573,000

Less: Non Business Incomes

(105,400)

Dividend Income (16,000)

Interest on Bank Deposit (14,400)

Interest on Govt. Securities (10,000)

Profit on sale of Machine based on accounting concept (30,000)

Sundry Income (5,000)

Refund of Income Tax (Neither an income nor an expenditure) (30,000)

Add: Inadmissible Expenses 4,515,000

Salary and Allowance (Note-1) 4,250,000

Interest on Loan from Sister concern 35,000

Charity 10,000

Income tax paid in advance 200,000

Fines 20,000

Add: Expenditures to be treated afterward as per ITO 234,000

Entertainment 54,000

Depreciation 180,000

Less: Allowable Depreciation (115,000)

Add: Revenue gain on sale of Machine (62,000-12,000) 50,000

Net profit before entertainment allowance 5,151,600

Less Entertainment Expense (as per rule 65) On first 1,000,000 @ 4% 40,000

On next 41,51,600 @ 2% 83,032

123,032

or the actual expenditure 54,000

Lower one (54,000)

Income From Business & Profession

5,097,600

Interest on Securities:

Interest on Govt Securities 10,000

Capital Gain:

Capital gain from sale of Machine (72,000-62,000) 10,000

Income from Other Sources:

Dividend Income (16,000÷0.80) 20,000

Exempted: Up to 25,000 (20,000)

-

Sundry Income 5,000

Interest On bank deposit(14,400÷0.90) 16,000

Loan from Sister Concern not received through bank transfer 350,000

371,000




Total Income

5,488,600

Calculation of Gross Tax Liability


Less:

1.Capital Gain (10,000)

Total Income for 25% 5,478,600

Tax Liability at 25% 1,369,650

Tax on Capital Gain @ 15% 1,500

Gross Tax Liability 1,371,150

Calculation of Minimum Tax:

Sales 8,980,000

Dividend 16,000

Interest 14,400

Sale of Machine 72,000

Interest on Govt Securities 10,000

Sundry Income 5,000

Bad debt recovered 71,600

Total Gross Receipt 9,169,000

Minimum Tax @ 0.30% on Gross Receipts 27,507

(Assuming the company started its commercial production in 3 years before)

Calculation of Net Tax Liability:

Gross Tax Liability

1,371,150

Less:

1. TDS on Dividend (4,000)

2. TDS on Bank Deposit (1,600) 3. Advance Income Tax (200,000) (205,600)

Net Tax Liability

1,165,550

Notes:

1. Calculation of inadmissible Salaries & Allowances

Salary without TDS 1,050,000

Excess Perquisites 370,000

Excess Incentive Bonus (600,000-573,000*10%) 542,700

Salary paid in cash (4250,000-1050000-370000-542700) 2,287,300

4,250,000




Company Assessment – 2:

The following adjusted accounts appeared in the records of ABC Ltd. For the year ended December 31, 2014.

Numbers in brackets refer to the items in additional information.

Revenues and gains

Tk.000

Net Sales 126,500

Interest 1,000 (1)

Gains on sale of shares 2,500 (2)

Total 1, 30,000 Costs and expenses

Cost of goods sold 65,300

Salaries and wages 26000 (3)

Security services 300 (4)

Audit and taxation services 500

Office rent 600

Donations 1,800 (5)

Board meetings attendance fee 300 (6)

Other expenses 3,000 (7)

Depreciation 8,000 (8)

Corporate income tax 4,500 (9)

Total 110,300 Net profit 19,700

Dividends Paid 9,000

Additional Information:

(1) Interest revenue comprises interest on government bonds issued in 2014 and purchased by ABC Ltd. in 2014.

(2) Gain on sale of shares arose from the following purchase and sale of shares of a company listed with DSE and

CSE:

Bought in 2010 Tk. 12,00,000

Sold in 2014 proceeds of sale Tk. 37,00,000

(3) Salaries and wages include inter alia salary of Finance Manager tk.6,00,000 (consolidated) paid in cash (not by

cheque or bank transfer ), Gratuity (unapproved) provision of tk.15,00,000 and gratuity payment of tk.10,00,000

(4) Security services include payments to a private security company. No VAT was deducted at source from such

payments.

(5) Donations were all paid in 2014 to ICAB, Specially designed for the purchase of library books, computers and

training materials.

(6) No income tax and VAT was deducted at source from board meeting attendance fee paid to 10 (ten) directors.

(7) Others expenses include inter alia:

(a) Entertainment expenses of Tk.5,00,000 spent on MD‘s birthday party ; and

(b) Four foreign travels of MD, each costing Tk.2,00,000. All foreign trips were for business purposes.

(8) ABC Ltd. Has always used written down value depreciation and same depreciation rates for both accounts and tax

purposes.

(9) Corporate income tax is the amount estimated before preparation of the tax return 60% of the estimated amount of

tax has been paid as advance tax during the year 2014.

(10) Dividend has been paid at the rate 35%.

The company has a capital loss of Tk.10, 00,000 carried forward from the assessment year 2011-1012.

ABC limited is a public limited company.

Required:

Compute the total income and the total income tax liability of ABC Ltd. while making the above computations, any

non-compliance of the relevant provisions of the tax laws (income tax as well as VAT) by the company are to be

considered strictly in accordance with the legal provisions for such non-compliances. If considered necessary, you

may make assumptions in the light of the relevant tax provisions.




Solution:

ABC Company

Income Year : 2014-2015


Particulars Workings Amount

Net Income

19,700,000

Less: Non Business Incomes

(3,500,000)

Interest (1,000,000)

Gain on sale of shares (2,500,000)

Add: Inadmissible Expenses

10,000,000

Salary and wages 600,000

Gratuity provision 1,500,000

Gratuity payment 1,000,000

Security services 300,000

Donation 1,800,000

Board meeting attendance fee 300,000

Corporate income tax 4,500,000

Add: Expenditures to be treated afterward as per ITO

500,000

Entertainement 500,000

Net profit before entertainement allowance

26,700,000

Less Entertainment Expense (as per rule 65)

On first 1,000,000 @ 4% 40,000

On next 2,57,00,000 @ 2% 514,000

554,000

or the actual expenditure 500,000

Lower one

(500,000)

Income From Business & Profession

26,200,000

Interest on Securities:

Interest on Govt Securities

1,000,000

Capital Gain:

Capital gain from sale of shares (37,00,000-12,00,000) 2,500,000

Less: Previous loss carry forwarded and set off (10,00,000 - 5,000) (995,000) 1,505,000


Calculation of Gross Tax Liability

Total Income

28,705,000

Less:

1.Capital Gain

(1,505,000)

Total Income for 25%

27,200,000

Tax Liability at 25% 6,800,000

Tax on Capital Gain @ 15%

225,750

7,025,750

Add: simple interest u/s 73

75% of gross tax liability 5,269,313

Less: advance tax (60% of BDT 45,00,000) (2,700,000)

2,569,313

Penalty @ 10% for 2 years assumed for maximum period

513,863

Less: Advance tax paid

(2,700,000)

Net Tax liability

4,839,613




Calaculation of Minimum Tax:

Sales 126,500,000

Interesst 1,000,000

Sale of shares 3,700,000

Total Gross Receipt 131,200,000

Minimum Tax @ 0.3% on Gross Receipts 393,600

Net Tax Liability

4,839,613




QUr5lion No.9:

The profit.and loss account of Star ltd . is eiven below for the income year 2013·2014. 20

SnrUd. Profit and loss Account

For the year ended on June 10, Z014

Particulan Tk. Pa rticulan Tk. Ccst o f goods sold 1,500,000 Sales J,500.000 Salaries 100 000 Dividend 120000 Rent 150.000 [nterest JO,OOO Advertisement 200 000 aain on sale of Asset 40000 Interest on Loan 80000 lnterest on Tax-Free Securities 15000 Utility Expenses 60000 interest on Foreign Investment 20,000 Donalton 150000 TransPOrtation 110.000 Audit Fee 200 000 Bad Debt 90,000 Contribut ion 10 RPF 10000 Incame Tax oaid in Advance JOOOO Fines pajd 10 Customs 20000 Annual MembershiD 15000 Le •• 1 Expenses 25000 Insul'1lnce Premium J5000 Sundry Expenses 12000 Depreciation 65000 Net Profit 2 IJ 000 Tolal 37,25 000 T otal 31-25000

Determine the taxable income of the company and net tax liability thereof. Consider the given data below and assume that:

Star ltd . is a Public limited Company. Salaries Ire paid In cash without any r.heque or bank transfer. Tk.4,SO,OOO of salaries from Tk.1,DO,OOO falls under the category of gross salary morc than Tk.1S,1Xn; tax depreciation amounts toTk.50,OOO; ~gal ex~nses are paid due to the infringement of trademilrts and the company has sold an asset for TIc.l ,DO,COO that the company has purchased 4 years back at a cost of Tk.80.000 with a written down value of Tk.60,OOO to date.

PolgC 4 of,




Answer to the gUC5tion no 9: Star Ltd . ISlatus: Resident Company]

(Considering it for current assessment year Olherwise students will nOC be benefited] Year. 2014-15 ' ASsessment year; 2015-16

Income from Business or profession: Net Profit as per PrQfit and Loss Ac<:ounl Lt..u: Non-business income forconsiderntion at respective head: Dividend Interest Interest 00 tax-free securities Interest 00 foreign investment

Taka

Gain on sale of asset [as Tk.20,OOO is capital gain(I,OO,()()()'80,OOO)]

1,20,000 10,000 15,000 20,000 20,000

Add: Inadmissible Expenses Salaries ( for vrolation of section 30(i) being salary

above Tic I 5,000 per month paid in cash) Donation (assuming donation to unapproved institution

and condition to get CSR also not (umfleet) Income Tax (as income tax is not an expense

as per section 29,rathcr it is an appropriation of profit Income tax is always chargeable 00 nel profit before laX)

Fine paid to customs (as no such fine is admissible expense due 10 violation of law)

Legal expense (disallowed being it was paid due to I nfringement of olher's trademark)

Accounting Depreciation

Less: Tax Depreciat ion as per lid schedule

Income from business

Capita l Gain

4,50,000

1,50,000

10,000

20,000

25,000 65,000

Income from other sourc~: q~ooo Dividend\f..l.olO.OOO -,("" t.2Io h.. "Z4'~ ~OO Interest 0'- 30.000 Interest on foreign investment 20,000

Total 'ncome Tax (.Iicul.lioD:

Tax on lota l income excluding dividend &. capital gain (25% of TIe. 7,48,909) 1,R:3 ,~o 1' . Tax on dividend (20'10 of Taka I;3;OOO)tg·ooo Tax on capital gain (J 5% ofTk.20,OOO) Gross Tax Liability

Tau

2,11,000

2 OS 000 8,000

1,40,000 1,48,000 lli!Ql!

6,98,000

20,000

I As',MO ~ 8;88,888 8,GS~

Tk. ~'V ~ "l,.,O ),000

Less: Advance tax paid Net Tax Liability

~~~" . . )0000 <9. I;IM,IIM '·11, 0 ~, . 'Th~ on .Ji.;a", . OR

Minimum laX on gross receipt@OJO% 1 . .21:1 .000)0 :!if. ... .006

OnsalesTk.3S,OO,ooo@O.)O'Io-, 10,500 ®0"""9~f-366"~"i,_a ... On capita l gain Tk.20,[email protected]%" \.I.4!,e

O 60 &f.oo.

On income from other sources Tk. I.,)tY,[email protected]%=;.r( LI~ ~ Tota l Tk.l t.e1'o 0 f'I'l~ 'l~' -C'

~\v~h~;~eh~e~V7e~'7i'~h~;~,e~'~So~wx~~IO~be~~~~Tk~.~I~~~'~,ood'~~.~'~---~---~~-o~~~~=c~~ Note: Due to lack of information, rort.ign lax credit is nOI possible 10 give on interest on foreign

inveslment _ _ i 5c... - b Page s or,f




l2!!£,tion No. 3(a):

ABC Ltd .• a publicly traded company incorporated and ' . . owned and IS a manufacturer of refrigerators, freezers op~ating ~ Bangladesh, IS 70010 Bangladesbi which is registered as a trade mark in Bangladesh. Th~ alr-COn~lboners under the brand name ABC and loss account for the year ended 31 December 2014' ompany IS the owner of the brand The profit

Turnover Add: Interest income

Less : Cost of sales

Less: Salaries, wages, and bonuses Employees Provident fund Donation Advertising Rental of premises Travelling Foreign excbange loss Maintenance of plant and machinery Bad and doubtful debts Freight and insurance Depreciation Motor vehicles expenses Net profit before tax

Notes:

IS as follows:

Notes

(I)

(2)

(3) (4) (5) (6) (7) (8) (9) (10) (11)

Tk. 000 Tk. 000 161,596

7,040 1,536

20 7,398 1,858 1,500 280 232

2,038 3,044 1,880

~ 161,904 115.416 46,488

582 27.408 J.2J!Wl

(I) Interest income is from a fixed cIIpoeit placed _ • but m Bangladesh. The interest wu received during the year and has been aroeaed-up m. the _lots InteRSt income includes Tk.28,OOO (gross) earned but received by ABC Ltd. .31 Deeember,2014.

(2) Cost of sales is arrived at after mditjog Tk.so,~ of the cost of goods manufactured by the company, which were withdrawn1i'om Siock fat- _ of fixed assets by the company. The

normal selling price wu

(3) Salaries, wages, and bonuses of January 2014,pcusion

(4) The Employees ~ F,\JrJ':~ staff and 12% far Gec:UCi~iII:~

(S) 1\.._ .• , • ---on II in'\WPjll.!ll l!lW

!be ABC bnoIlotaAO (6)~.

~lIa • webaite

~~~~~to CFO in cash for the month ~ Fun(unapproved).




(7) Rental of premises:

Included in the rental is a sum Tk.50,Ooo paid in respect of the early termination of the lease of a building which the company vacated in September 2014. The lease was to have run for another 5 Yean The building was no longer suitable as a showroom for the company's goods due to the construction ofa toll plaza.

(8) Travelling Includes:

(i) Vacation airfare and hotel accommodation costing Tk.36,OOO for important overseas customers (ii) Reimbursement to the directors of the company of salaries of Tk.200,ooo and EmplO)'e/l&

Provident Fund contributions ofTk.25,ooo in respect of drivers employed by the directors. (9) The foreign exchange loss is in respect of the purchase of component parts for manufacture. The

realized loss amounts to Tk.14,Ooo only. (10) Maintenance of plant and machinery includes the installation cost of a machine amountinl to

Tk.34,ooo. (II) Bad and doubtful debts comprise: Tk.

Bad debts recovered (238,000) Specific provision brought forward (1,902,000) General p~il' brought forward (2,410,000) Bad debts written ofT 240,000 Specific provision carried forward 2,7SO~ General provision carried forward 3,598,000 2,038,000 The specific provision carried forward inc~a sum ofTk.26,ooo, being the balance of a personal loan granted to a director who has now resigned ftiID the Board

(12) Depreciation aUowances have been computed at Tk.1 ,644,000 for the assessment year 201~1~ but without taking into account the following acquisitions:

M.~bIne:

On 14 August 2014 the company purchased a machine at a cost of Tk366,000. Tho Tk34,000 mentioned in Dote (10) was incurred on preparing the site for installation ;,s .,,,,,", ..

machine. The machine commenced to be used for the business two weeks after acquisition.

Motor "r: A new car costing Tk.4,400,000 was purchased OD 9 July 2014 for the generallllllllltlgrp;~~

13) Dividend has been paid at the rate of30% (20% cash, 10% bonus) for the year ended 31 2013.

1~ JJ:,~ has a capital loss Tk I ,000,000 carried forward from the lISIIe&SIneoit.,.

2007-OS Tk 200,000 2OOS-09 Tk 300,000 2009-10 Tk. 400 000 Tk. I ,000,000 The loss carried forward from the assessment yeara includes: i) 2007-OS: TkIOO,ooo depreciation aUowanee.

ii) 2010-11: Tk.50,OOO loss under the head "Capital gain". All otha- louea carried forward relate to business income.

Requlre...u:

a) Compute toI8l income for the Income year ended 31 Decemba: 2014 year 2015-2016.

b)





Accountin~ Year ended on 31 December 2014 Computation of total income and tax thereon

Particulars T.'_. Note ....

~~~~~~~~~--t=~~.-Il~" before tax as per statement 19,080

In~ome to be considered separately under appropriate head: h n" ...... ' lDCome

Profit from business as per audited statement of accounts

Items of expenditure for separate consideration:

[Depreciation as per audited financial statements 1F0rieim exchange loss

[Inadmilulille expenses: lIlal,allY paid in cash iO<maltioll to unapproved sector rAdverti.i"o expense paid without deduction of income tax and VAT [:o,ntributiOlIS to unrecognized provident fund !Reiml,UTi,enlenl of director's driver salary and provident fund

t:::;~~~~~~cost of plant and machinery (being capital nature) li'ro'visic)n for bad and doubtful debts

debts recovered [Adlnissible incomel(expenses): IWritt..., off provision for doubtful debts l,Re!ilizc:d foreign exchange loss

lIncclme from business or profession before considering depreciation, ~ll>sorbed business loss and unabsorbed tax depreciation loss

depreciation for the Assessment Year 2015-16 after depreciation

off unabsorbed tax depreciation loss off unabsorbed business loss

[Inclt. from balDeu or pro_toa

4

5

6

7 8

1,880.00 280.00

64 20 54

1,536

225

34 2,276

(14)

25,379

25,125




Notes:

Taxable income and income tax payable thereon has been computed considering the prclVillici!tJ"~,it.. Finance Act 2014;

2 It is assumed that no revenue is recognized for cost of goods transferred as fIXed assets no gross innow of economic benefit.

3 Pension is exempt from income tax in the hand of Ihe recipient by paragraph 8 of the Part A of the ITO, 1984 and hence the provision of Section 30 (d) IS not apphcab~e here Fund is un-approved, contribution to such fund will be inadmissible. Howev~, Slltee not mention about amount of contribution to such Fund. no amount has been dIsallowed _,., .• ""=

4 Provident Fund It is assumed that Ihe provident fund is not recognized by the Commissioner of Taxes

5 Provision for bad and doubtful debts;

Total provision brought forward (Tk. 1,902+ Tk. 2,410) Provision wnllen ofT during the year Provision made during the year (balancing figure) Total provision earned forward (Tk. 2,750+ Tk. 3,598)

6 Tax depreciation

Depreciation allowance computed Normal depreciation on machinery (Tk. 366 + Tk. 34)x20% Initial depreciation on machinery (Tk. 366 + Tk.34)x25% ·Normal depreciation on new car (Tk. 2,000)x20%

• As per Para II (6) (a) of the Third schedule of the ITO 1984, the actual cost plying for hire, shall not exceed Tk.20,00,000/. As the purchase price of the said limit, depreciation has been calculated on deemed purchase price (i.e. tw1l11lJffItIJ

7 As per Section 42 (6) of the ITO, 1984 unabsorbed depreciation loss can be bffwith busmess income for unlimited period of time;

8 Uuabsorbed business loss:

9

10

.l'otal Loss

. .})pciation aIJowaoce c:anied forward AY 2007-08 ~;c:uned forward UDder the head "Capital Gain"

eJisjblefor set offunder Secti0\l38 (b) of the ITO •





Problem: The following adjusted accounts appeared in the records of Oak Ltd_, an accrual basis company, for the year ended December 31, 2014_ Numbers in brackets refer to the items in Additional Information..

Net sales (I) Dividends (2) Interest (3) Gain on sale of shares (4)

Revenues and Gains

Equity in earnings of Tech Partnership (5) Keyman life insurance proceeds (6) Insurance proceeds from fire loss claim (7) Tax refund (8)

Total

Cost of goods sold (9) Salaries and wages (10) Doubtful accounts (11) Taxes (12) Security services (13)

Costs and Expenses

Audit, accountaney and taxation services (14) Office Rent (15) Car Rental (16) Interest (17) Donations (18) Board meeting attendance fee (19) Depreciation (20) Other expenses (21) Corporate Income Tax (22)

Net Income

Dividends Paid (23)

Additional inforIDation:

TK.. In '000 90,000

6,000 800

1,000 6,000

25,000 1,500

500 1,30,800

TK.. In '000

52,500 26,000

2,000 9,000

300 500 600 100

2,500 1,800

300 8,000 3,000 4,500

1,11,100 19,700

9,000

(I) Trade accounts receivable at Deceruber 31,2014, and at December 31, 2013, amounted to 'Ik3,30,00,000 and '11<-2,00,00,000 respectively_

(2) Dividends include: i) 'Ik20,00,000 declared and paid in 2014 by an unrelated taxable local company whose shares are traded on DSE and CSE; ii) 'Ik20,00,000 received in 2014 from a Singapore based company which remitted the dividend amount net of an withholding tax of'Ik2,00,000 in equivalent Singapore dollar; iii) 'Ik20,00,000 received in 2014 from a Russian company, which remitted the dividend amount net of an withholding tax of'11<-4,00,000 in equivalent RubeL

(3) Interest revenue comprises interest on government bonds issued in 2004 and purchased by Oak in 2004_

(4) Gain on sale of shares arose from the following purchase and sale of shares in an unrelated company listed on DSE and CSE: Bought in 20 II Cost 'Ik 12,00,000 Sold in 2014 Proceeds of sale '11<-22,00,000

(5) Oak owns 50% of Tech Partnership_ The other 50% is owned by an unrelated individual_

Tech reported the followiug tax information to Oak: Oak's share of: Partnership ordinary income '11<-79,00,000 Net loug-term capital loss (19,00,000) The firm paid a tax of'Ik13,66,250 on the Oak's share of net earnings_

(6) Oak owned the Keyman life insurance policy, paid the preruiums, and was the direct beneficiary_The proceeds were collected on the death of Oak's Controller_




(7) Insurance proceeds were received in 2014 against claim for damage of stock of goods by fire in 2013_ The cost of goods damaged was '11LiO,OO,OOO, and the market value on the date of fire was 'Ik 18,00,000_ The damaged goods did not have any salvage value_

(8) The tax refund arose from Oak's oVeq>ayment of corporate Income tax on the 2014-2015 retut-a (9) Cost of goods sold relates to Oak's net sales_

(10) Salaries and wages include inter alia:-(a) Salary of Finance Manager 'Ik6,00,000 (consolidated) paid in cash, not by cheque or bank transfer; (b) Officers' compensation of 'Ik 15 ,00,000 under Voluntary Retirement Scheme; (c) Gratoity (unrecognized) provision of'Ik15,00,000 and gratoity payment of '11<-10,00,000; (d) Incentive bonus ofTk..20,OO,OOO to officers and non-officers_

(11) Doubtful accounts expense represents an addition to Oak> s allowance for doubtful accounts

based on an aging schedule whereby Oak "reserves" all accounts receivable over 120 days for book purposes_ The balance in Oak's allowance for doubtful accounts was Tk..l ,42,00,000 at December 31, 2014_ Actual bad debts written off in 2014 amounted to '11LiI,OO,OOR

(12) Taxes comprise payroll taxes, but do not relate to officers' compensation, gratuity and incentive bonus as in (10) above, for which neither any income tax has been deducted nor it has been paid by the company_

(13) Security services include payments a to private security company _ No income tax or VAT was deducted at source from such payments_

(14) Audit, accountancy and taxation services include: i) Audit fee Tk2,00,000 ii) Accountancy services 2,00,000 iii) Taxation services 1,00,000 Accountancy services were provided by a :firm of chartered accountants who were not the auditors of Oak.. No income tax or VAT was deducted from the above payments ofTk_5,OO,00R

(15) No income tax was deducted at source from office rent (16) No VAT was deducted at source from car rental_

(17) Interest expense resolted from borrowing for working capital purposes_ (18) Donations were all paid in 2014 to Dhaka University, specifically designated for the

purchase of lab equipment-(19) No income tax or VAT was deducted at source from Board meeting attendance fee paid to

lO(ten) directors_

(20) Oak has always used written down value depreciation for both book and tax purposes_ (21) Other expenses include inter alia:-

(a) Premiums of'Ik_15,OO,OOO on the Keyman life insurance policy covering the controller; (b) Entertaimnent expenses of'Ik5,00,000 spent on the CEO's birth day party; and (c) Four foreign travels of CEO, each costing Tk2,00,000_ All foreign trips were for business purposes_

(22) COlporate income tax is the amount estimated before preparation of the return_ 60% of the estimated amount of tax has been paid as advance tax doring the year 2014_

(22) No dividend tax was deducted at the time of dividend payments to its shareholders, all of whom are local_ There are 10 institutional shareholders (five banks and five insurance companies) holdings in total 10% of share capital, and all others are individuals_

The company has a tax loss (business loss) ofTk..IO,OO,OOO carried forward from the assessment year 2009-20IR

Currently Oak Ltd is a publicly traded company with a paid up capital ofTk35 crore_ It was an unlisted public company on 111114_ It raised an additional amount of Tk20,00,000 paid up capital from the then shareholders in January 2014_ 50% of such capital money was received by cheque and 50% in cash_ The company became a listed company on 117114_

Required:

Compute the total income and the total income tax liability of Oak Ltd_ for the relevant assessment year, based on the above information.. While making the above computations, any non-compIiances of the relevant provisions of the tax laws (income tax as well as VAn by the company are to be considered strictly in accordance with the legal provisions for such noncompliances,_ If considered necessary, you may make assumptions in the light of the relevant tax provisions_




COlDPany AssessIDent OakLimi_



Particulars Workin~ AlIIOunt

Net IncoIDe as per Accounts 1,97,00.,000

Less: Non Business Ineo:mes for consideration at appropriate heads

o I Dividends (60,00,000)

02 Interest (8,00,000)

03 Gain on sale of shares (10,00,000)

04 Share income of Tech Partnership (60,00,000)

05 Keyman life insorance proceeds (2,50,00,000)

06 Tax refund (Not income in nature) (5,00,000) (3,93,00.,000'

(1,96,00.,000) Add: Inadmissible Expenses

01 Salary and wages -VIS 30 (a) 6,00,000

02 Gratuity provision (No provision is allowed) 15,00,000

03 Gratuity payment ( for being unrecognized) 10,00,000 04 Incentive bonus - VIS 30(aa) 20,00,000

05 Provision for doubtful accounts 9,00,000

06 Payroll taxes considered as sa1a.ty and wages expenses -

07 Security services -VIS 30(aa) 3,00,000 08 Audit, accountancy and taxation services - VIS 30(aa) 5,00,000 09 Office rent - VIS 30(aa) 6,00,000

10 Car Rental 1,00,000

II Donation (Not allowed as expense but may considered as CSR) 18,00,000

12 Board meeting attendance fee -VIS 30(aa) 3,00,000 13 Keyman life insorance premium - (not allowed VIS 29(1) (vii) but would

15,00,000 be considered for computation of insurance proceeds)

14 Entertainment expense of CEO's Birthday party assuming personal 5,00,000 expense and not related to business expenses

15 Overseas travelling not exceeds the allowable limit of 1% of turnover -

16 Cotporate income tax (not expenses rather allocation of profits) 45,00,000

16 Dividends paid without deduction of 'IDS 90,00,000 2,51,00.,000

Ineo:me From Business 55,00.,000 Less: Set off of carry forwarded Business Loss (10,00.,000)

Taxable IncoIDe From Business 45,00.,000

Ineo:me From Partnership 79,00.,000 (As capital loss or gain of partnership is taxable ouiy at firm level so total income before tax would be the income of the assessee)

Ineo:me From Business or Profession 1.24.00.000

Interest on Securities: Interest on Govt Securities 8.00.000

Capital Gain:

Capital gain from sale of shares (22,00,000-12,00,000) 10,00.,000

Ineo:me from other sources Dividend from local listed company (gross) 20,00,000

Less: Exempted as per (Sixth Schedule, Part A, Para IIA) (25,000) 19,75,000 Dividend from abroad (grossed up) 46,00.,000 Keyman life insorance proceeds (25,000,000-1,500,000) 2,35,00.,000 Deemed income under section 19(24) 10,00.,000

31075,000

Total Ineo:me 4,52,75,000




Calculation of Gross Tax Liability Total Income Less: LCapital Gain 2_ Dividend

Total Income for 25%

Tax Liability at 25%

Tax on Capital Gain on Sale of Share @ 10% Tax on Dividend @ 20%

Less: Rebate @10% on CSR activities assuming donation was related to the business interest and it is within the maximum limit of20% of total income or 120,()()(),OOO

Gross Tax Liability

Add: simple interest U/S 73 75% of gross tax liability Less: advance tax (60% ofBDT 45,OO,()()()

Penalty @ 10% for 2 years assumed for maximum period

Less: Foreign tax credit Tax payable on Dividend income from Singapore at average rate {(I 0, 660, ()()()/4 5,275,(00)*2,200,000 }

Tax paid in Singapore Tax credit allowable

Tax payable on Dividend income from Russia at average rate { ( 10,660, ()()()/4 5,275,(00)*2,400,000 }

Tax paid in Russia Tax credit allowable

Less: Advance Tax PaidffDS Advance tax TDS on Local Dividend (2,()()(),()()()*20%) TDS on Gain on Sale of Share (1,()()(),OOO*IO%)

Tax paid by Tech Partnership on behalf of assessee Net Tax liability

Calculation of Minimum Tax: Sales Dividend Interest Keyman life insurance proceeds Insurance proceeds from fire loss claim Sale of shares

Total Gross Receipt

Minimum Tax @ 0.3% on Gross Reeeipts

Net Tax Liability

Note

81,30,()()() (54,00, ()()()

27,30,()()()

I

5,17,990 I 2,00, ()()()

5,65,080

4,00, ()()()

(54,00, ()()() (4,00, ()()() (1,00, ()()()

(13,66,250)

9,00,00, ()()() 60,00, ()()()

8,00, ()()() 2,50,OO,()()()

15,00, ()()() 22,OO,()()()

12,s5,OO,()()()

1 It is assumed that the company did not issued at least 20% of its paid up share capital through IPO_

4,52,75,()()()

(10,00, ()()() (65,75,()()()

3,77,00,000 94,25,()()()

1,00, ()()() 13,15,()()()

1,08,40,()()()

(1,80,()()()

1,06,60,000

5,46, ()()()

(2,00, ()()()

(4,00, ()()()

(72,66,250)

33,39,750

3,76,500

33,39,750

2 Tax rebate on Share of Partnership income at average rate is applicable for Resident or Non Resident BangladeshL So in the case of company it is not applicable as per 6th Schedule Part B Para 16_ Therefor the total income before tax is added with toatal income and tax paid by partnership is treated as the Tax Credit.

3 It is assumed that the company started its commercial operation earlier than three years period so 030 % rate has been considered for minimum tax calculation_

4 As Sec 530 omitted by Finance Act 2015 which is applicable from I Jnly 2015 So TDS has been dedocted accroding to previous provision but from the next A Y there will be no TDS on Gain of Sale of Share of Listed Company_




Part Eight: Income from other sources

Income from other sources:

Important sections of income from other sources:

Section – 33; Income from other sources; [relevant with section 2(26)] The following income of an assessee shall be classified and computed under the head "Income from other sources",

namely:-

(a) dividend and interest;

(b) royalties and fees for technical services;

(c) income from letting of machinery, plants or furniture belonging to the assessee, and also of buildings

belonging to him if the letting of buildings is inseparable from the letting of the machinery, plant or furniture;

(d) any income to which section 19 (1), (2), (3), (4), (5), (8), (9), (10), (11), (12), (13), (21), ), (21B), (24), (26),

(27 (21A) or (24) applies;

(e) any other income of any kind or from any source which is not classifiable under any of the other heads

specified in section 20.

Section – 34; Deductions from income from other sources;

(1) The amount of interest paid in respect of money borrowed for the purpose of acquisition of shares of a

company.

(2) Any expenditure, not being in the nature of capital expenditure or personal expenses of the assessee, incurred

solely for the purpose of making or earning the relevant income.

(3) Where the income is derived from letting on hire of machinery, plant or furniture belonging to the assessee and

also of building belonging to him if the letting of the building is inseparable from the letting of such machinery,

plant or furniture, the same allowances as are admissible under section 29(1) (vi), (vii) and (xi) to an assessee in

respect of income under the head "Income from business or profession" subject to the same conditions and

limitations as if the income from such letting on hire were income from business or profession:

Provided that the provisions of section 19(16) shall also be applicable for the determination of any profits where

the sale proceeds of such machinery, plant, furniture or building exceeds the written down value thereof.

(4) Notwithstanding anything contained in this section, no allowance shall be made on account of-

(a) any interest chargeable under this Ordinance which is payable outside Bangladesh on which tax has

not been paid and from which tax has not been deducted at source under section 56; or

(b) any payment which is chargeable under the head "Salaries" if tax has not been paid thereon or

deducted there from under section 50.

Study References:

Section; 2(26) Dividend; read with rule 19(7)

2(56) Royalty; 2(34)

2(31) Fees for technical services

Section; 33, 34, 35, 36

Section; 19(1) – 19(5)

19(8) – 19(13)

19(21), 19(21A), 19(21B) read with section 82BB(5)

19(24), 19(26), 19(27), 19(28), 19(29), 19(31)

6th schedule (Part A); Para 11A, 22A




Section – 35; Method of accounting:

All income classifiable under the head ―Agricultural income‖, ―Income from business or profession‖ or ―Income from

other sources‖ shall be computed in accordance with the method of accounting regularly employed by the company

[sec 35(1)]

Every public or private company as defined in the Companies Act, 1913 (VII of 1913) or 1994 shall, with the return

of income required to be filed under this Ordinance for any income year, furnish a copy of the trading account, profit

and loss account and the balance sheet in respect of that income year certified by a chartered accountant to the effect

that the accounts are maintained according to the BAS and reported in accordance with BFRS [sec 35(3)]

Where no method of accounting has been regularly employed, or if the method employed is such that, in the opinion

of the DCT the income of the assessee cannot be properly ascertained, the income of the company shall be computed

on such basis and in such manner as the Deputy Commissioner of Taxes may think fit [sec 35(4)]

Section – 2(26); Dividend:

1. Any distribution of assets, whether capitalized or not, will be treated as dividend.

2. Subsidiary of a foreign company want to remit money to its parent company will be treated as dividend.

3. If director of a private company take loans from the company, such loan will be treated as dividend.

Stock dividend is not a dividend at all.

6th

Schedule (Exemption);

11A; For individual (or person) Tk. 25,000 will be exempted from dividend income from a listed company. Amended FA

2015

22A: For mutual fund or unit fund Tk. 25,000 will be exempted from income. Amended FA 2015

Section – 36: Allocation of income from royalties, literary works, etc:

Where the time taken by the author of a literary or artistic work in the making thereof exceeds twelve months, the

amount received or receivable by him during any income year in lump sum on account of royalties or copyright fees

in respect of that work shall, if he so claims, be deemed to be the income of-

(a) the income year in which it is received and the immediately preceding income year if the time taken in

making such work exceeds twelve months but does not exceed twenty-four months ; and

(b) the income year in which it is received and the two immediately preceding income years if the time taken

in making such work exceeds twenty-four months, and shall be allocated in equal proportions to each such

income year and the income of the assessee in respect of an income year shall be computed accordingly.

Explanation.- For the purposes of this section, the expression "author" includes a joint author and the expression

"lump sum" in regard to royalties or copyright fees includes an advance payment on account of such royalties or

copyright fees which is not returnable.

Section – 19; Un-explained investments, etc., deemed to be income;

(1) Where any sum is found credited in the books of an assessee maintained for any income year and the assesses

offers no explanation about the nature and source thereof, or the explanation offered is not, in the opinion of the

Deputy Commissioner of Taxes, satisfactory, the sum so credited shall be deemed to be his income for that income

year classifiable under the head "Income from other sources".

(2) Where, in any income year, the assessee has made investments or is found to be the owner of any bullion,

jewellery or other valuable article and the Deputy Commissioner of Taxes finds that the amount expended on making

such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this

behalf in the books of account maintained by the assessee for any source of income and the assessee offers no

explanation about the excess amount or the explanation offered is not, in the opinion of the Deputy Commissioner of

Taxes, satisfactory, the excess amount shall be deemed to be the income of the assessee for such income year

classifiable under the head "Income from other sources".




(3) Where, in any income year, the assessee has incurred any expenditure and he offers no explanation about the

nature and source of the money for such expenditure, or the explanation offered is not in the opinion of the Deputy

Commissioner of Taxes, satisfactory, the amount of the expenditure shall be deemed to be the income of the assessee

for such income year classifiable under the head "Income from other sources".

(4) Where, in the financial year immediately preceding the assessment year, the assessee has made investments which

are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers

no explanation about the nature and source of fund for the investments, or the explanation offered is not, in the

opinion of the Deputy Commissioner of Taxes, satisfactory, the value of the investments shall be deemed to be the

income of the assessee for such financial year classifiable under the head "Income from other sources".

(5) Where, in the financial year immediately preceding the assessment year, the assessee is found to be the owner of

any money, bullion, jewellery or other valuable article which is not recorded in the books of account, if any,

maintained by him for any source of income, and the assessee offers no explanation about the nature and source of

fund for the acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered is not, in

the opinion of the Deputy Commissioner of Taxes, satisfactory, the money or the value of the bullion, jewellery or

other valuable article, shall be deemed to be the income of the assessee for such financial year classifiable under the

head "Income from other sources".

(8) Where any assets, not being stock-in-trade or stocks, and shares, are purchased by an assessee from any company

and the Deputy Commissioner of Taxes has reason to believe that the price paid by the assessee is less than the fair

market value thereof, the difference between the price so paid and the fair market value shall be deemed to be income

of the assessee classifiable under the head "Income from other sources".

(9) Where any lump sum amount is received or receivable by an assessee during any income year on account of

salami or premia receipts by virtue of any lease, such amount shall be deemed to be income of the assessee of the

income year in which it is received and classifiable under the head "Income from other sources":

Provided that at the option of the assessee such amount may be allocated for the purpose of assessment

proportionately to the years covered by the entire lease period, but such allocation shall in no case exceed five years.

(10) Where any amount is received by an assessee during any income year by way of goodwill money or receipt in

the nature of compensation or damages for cancellation or termination of contracts and licences by the Government or

any person, such amount shall be deemed to be the income of such assessee for that income year classifiable under

the head "Income from other sources".

(11) Where any benefit or advantage, whether convertible into money or not, is derived by an assessee during any

income year on account of cancellation of indebtedness []Deleted F.A. 1999, the money value of such advantage or benefit

shall be deemed to be his income for that income year classifiable under the head "Income from other sources":

Provided that the provisions of this sub-section shall not apply in case of a loan or interest waived in respect of an

assessee by a commercial bank including Bangladesh Krishi Bank, RajshahiKrishiUnnyan Bank, Bangladesh

Development Bank Ltd. or a leasing company or a financial institution registered under আর্থি প্রর্িষ্ঠোনআইন, 1993

(1993 সননর 27 নংআইন)

(12) Any managing agency commission including compensation received during any income year by an assessee for

termination of agencies or any modification of the terms and conditions relating thereto shall be deemed to be his

income for that income year classifiable under the head "Income from other sources".

(13) Any amount received by an assessee during any income year by way of winnings from lotteries, crossword

puzzles, card games and other games of any sort or from gambling or betting in any form or of any nature whatsoever

shall be deemed to be his income for that income year classifiable under the head "Income from other sources".

(21) Where any sum, or aggregate of sums exceeding taka five lakh is claimed or shown to have been received as

loan by an assessee during any income year from any person, not being a banking company or a financial institution,

otherwise than by a crossed chequedrawn on a bank or bank transfer, and has not been paid back in full within three

years from the end of the income year in which it is claimed or shown to have been received, the said sum or part

thereof which has not been paid back, shall be deemed to be the income of the assessee for the income year





immediately following the expiry of the said three years and be classifiable under the head "Income from other

sources":

Provided that where the loan referred to in this sub-section is paid back in a subsequent income year, the amount so

paid shall be deducted in computing the income in respect of that subsequent year .Amended FA 2015

[(21A) Where any sum is claimed to have been received by an assessee as loan or gift during any income year from a

person who has transferred the sum within the period of limitation stipulated in the rule made under this Ordinance,

from the initial capital of his business/profession shown in his return filed under section 83A, the amount of such

loan/gift so received by the assessee shall be classifiable for that income year under the head "Income from other

sources"]

[(21B) Where any sum, shown as initial capital of business or profession in return of income filed under section

82BB, is transferred by a person partly or fully within the period of limitation stipulated in the said section, the sum

so transferred shall be deemed to be his income of the year in which such sum was transferred and shall be

classifiable under the head "Income from other sources".] Added F.A. 2011

[(24) Where an assessee, being a private limited company or a public limited company not listed with a stock

exchange, increases its paid up capital by issuing shares in an income year, the amount so received as increased paid

up capital, not being received by crossed cheque or bank transfer, shall be deemed to be the income of such assessee

for that income year classifiable under the head "Income from other sources.]Subs. F.A. 2010

[(25)]Deleted F.A. 2007

[(26)Where an assessee, being a company, receives any amount as lan from any other company otherwise than by a

crossed cheque or by bank transfer, the amount so received shall be deemed to be the income of such assessee for that

income year in which such loan was taken and shall be classifiable under the head "Income from other sources".]Added

F.A. 2011

Provided that where the loan or part thereof referred to in this sub-section is repaid in a subsequent income

year, the amount so repaid shall be deducted in computing the income for that subsequent year.Added F.A. 2014

[(27)Where an assessee, being a company, purchases directly or on hire one or more motor car or jeep and value of

any motor car or jeep exceeds ten percent of its paid up capital together with reserve and accumulated profit, then

fifty percent of the amount that exceeds such ten percent of the paid up capital together with reserve and accumulated

profit shall be deemed to be the income of such assessee for that income year classifiable under the head "Income

from other sources".]Amended F.A. 2015

(29) Where an assessee other than real estate company, during any income year, purchases on credit any material for

the purpose of construction of building or house property or its unit and fails to pay the sum or any part thereof

representing the liability in respect of such purchase, die sum or any part thereof, which has not been paid in the

following year in which such purchase was made, shall be deemed to be the income of the assessee for that income

year classifiable under the head "Income from other sources". Added FA 2015

(30) Where an assessee, in the course of any proceedings under this Ordinance, is found to have any sum or part

thereof allowed or deducted but not spent in accordance with the provision of clause (h) of sub-section (1) of section

25 of this Ordinance, such unspent sum or part thereof shall be deemed to be the income of such assessee for that

income year classifiable under the head ―Income from house property. Added FA 2015

(31): Where an assessee files a revised return under sections 78 or 93 and shows tax exempted income or income that

is subject to reduced tax rate, so much of the excess as it exceeds the amount shows in the original return shall be

deemed to be income for that income year classifiable under the head "Income from other sources". Added FA 2015





Practical Problems

Problem - 1 – Individual Assessment:

BDT

a. Salary Income

Basic salary 420,864

Festival bonus 70,144

House rent allowance 375,735

Entertainment allowance 4,173

Conveyance allowance 35,072

Other allowance 16,262

Employer's contribution to Provident fund 42,086

Tax deducted from salary 12,000

b. House Property Income

House rent 297,600

City Corporation tax 9,000

Salary of security guard 48,000

Salary of sweeper 12,000

c. Income from business 378,975

d. Income from partnership (A real estate business) 596,400

[Tax deducted at source Tk. 65,280]

e. Income from land sale (capital gain) 160,000

[Tax deducted at source Tk. 40,000]

f. Income from share business u/s 32(7) 8,974,071

g. Dividend income (Gross) 1,204,374

h. Interest from SB A/C (Gross) 965

i. Income from fisheries business 403,000

j. Income from poultry firm 205,000

[Investment in govt. bond]

Notes:

1. Purchase of 5-years Bangladesh Sanchaya Patra 200,000

2. Investment in DPS 120,000

3. Advance tax for car registration 15,000

4. Assessee's total wealth 125,090,210

5. The assessee has a flat in Bashundhara R/A but was vacant due to non-connection of

electricity and gas.

The following are the income of Mr. Azad for the year ended June 30, 2015. Compute his total income and tax liability:




Solution:

Mr. Azad



Computation of total taxable income Reference BDT BDT BDT

A. Income from Salary

1. Basic salary R-33 (2)a

420,864

2. Festival bonus

70,144

3. House rent allowance R-33A 375,735

Less: Lower of


Or, Tk. 25,000 p.m. 300,000 (210,432) 165,303

5. Entertainment allowance R-33H

4,173

6. Conveyance allowance 35,072

Less: Exempted up to Tk. 30,000 (30,000) 5,072

7. Other allowance R-33J

16,262

8. Employer's contribution to PF Sch. 6-B-5

42,086

Total Income from Salary

723,904

B Income from House Property

Annual value

297,600

Less: Allowable expenses:

Repair and maintenance

(25% of annual value, for residential use) Sec 25(1)(h) 74,400

City corporation tax Sec 25(1)(e) 9,000 (83,400) 214,200


Deductible expenses

74,400

Expenses claimed

(60,000) 14,400

Total Income from House Property

228,600

Income from Business and Profession

C Income from Business Sec 28

378,975

D Income from partnership Sec 43(3)

596,400

F Income from Share Business 8,974,071

Less: Exempted SRO-196/L/

IT/2015 (8,974,071) -

I Income from fisheries business (Reduced

Tax Rate @3%)

SRO-199/L/

IT/2015 403,000

J Income from poultry firm 205,000

Less: Exempted Sch 6-A-42 (205,000) -

Total Income from Business and Profession

1,378,375

E Capital Gain

Income from land sale (Note 1) Sec-82©

160,000

(assuming that sales occurred within 5 years)

F. Income from Other Sources

1. Dividend income (gross) Sec-33A 1,204,374

Less: Exempted Sch. 6-A-11A (25,000) 1,179,374




2. Interest from SB A/c Sec-33

965

Total income from other sources

1,180,339

Total Taxable Income

3,671,218

Calculation of Investment Allowance

1. Actual investment [as per 6th Schedule, Part-B]

a. Purchase of 5-years Bangladesh Sanchaya Patra 200,000

b. Investment in DPS [up to BDT 60,000] [Para-11] 60,000

c. Investment in govt. bond [10% of BDT 205,000] [Para-10] 20,500

d. Employee and Employer's contribution to PF [Para-5] 84,172 364,672

2. 30% of Total taxable income excluding Employer's

contribution to PF, Income from fisheries business

and Capital gain [30% of (3,671,218-42,086-403,000-160,000)] 919,840

3. Maximum allowance u/s 44 15,000,000

Tax rebate @ 15% of the lowest of (1), (2) and (3) 54,701

Tax Liability Calculation

Total income excluding income from fisheries business

[3,671,218 - 403,000] 3,268,218

Applicable slab Rate Tax

amount

On 1st up to 250,000 0% -

On next up to 400,000 10% 40,000

On next up to 500,000 15% 75,000

On next up to 600,000 20% 120,000

Remaining (excluding fisheries income) 1,518,218 25% 379,555

Fisheries income 403,000 3% 12,090

626,645

Less: Investment tax rebate (54,701)

Tax Liability (A) 571,944

Less: Average rate on income from partnership (B) (104,371)

[571,944 ÷ 3,671,218 × 596,400]

Less: Advance payment of tax (C)

From salary 12,000

On land sale 40,000

Advance tax for car registration 15,000

On interest 97

On dividend income 120,437 (187,534)

Add: Surcharge @15% on Tk. 571,944 (D) 85,792

Net tax liability (E=A-B-C+D) 365,830




(Note 1):

It is assumed that sales of land occurred within 5 years. It is obvious that as the total income excluding

income under reduced tax and sale of land is TK 3,108,218 (3,671,218-403,000-160,000) so the applicable

tax rate for back calculation of income under 82(C) would be 25%.

Applicable slab Rate Tax amount Maximum Amount

On 1st upto

250,000 0% - -

On next upto 400,000

10%

40,000 40,000


15%

75,000 75,000


20%

120,000 120,000

Remaining 1,358,218

25%

379,555 750,000

3,108,218

Here remaining amount of tax that may come under 25% tax rate is Tk. 410,445 (750,000-379,555)

Therefore, the amount of Income for the TDS 40,000 would be TK. 160,000 (40,000/25%)




Problem - 2 – Individual Assessment:

a.

b.

c.

d. Entertainment allowance @ 5% of basic salary was paid to Mr. A.

e.

f.

g.

h.

i. Derived net income from production of corn, maize and sugar beet for Tk. 5,000.

j.

k.

l.

m.

n.

During the year Mr. A has claimed the following expenditures as his investments:

1. Purchased Sanchay Patra for Tk. 50,000.

2. Contributed 10% of his basic salary towards Super Annuation Fund.

3. Deposited Tk. 75,000 under Deposit Pension Scheme with a Financial Institution.

4. Deposited Tk. 20,000 to Benevolent Fund.

5.

6. Paid insurance premium of Tk. 20,000 for his spouse and minor child. The policy value is Tk. 100,000.

7. Purchased a computer for Tk. 50,000 and a laptop for Tk. 60,000.

Mr. A is 60 years old and employed by a private limited company. He has joined the company on 01 July 2014. He

has received the following income and benefits during the year ended 30 June 2015:

Basic salary Tk. 100,000 per month sent to his bank directly. He had outstanding salary for the month of

June 2015 which was paid on 02 July 2015. He had also received arrear salary of Tk. 50,000 during the year

from previous employment..

The present employer allowed house accommodation at a concessional rate. Mr. A paid Tk. 60,000 only as

rent during the income year 2014-15.

You are required to calculate the total income and tax liability of Mr. A for the assessment year 2015-2016. Make

necessary assumptions, if required.

Contributed 10% of basic salary to a recognised provident fund. A similar contribution was made by the

employer wherefrom he receive interest of Tk. 1,800 from the said fund @ 18%.

Rental income of Tk. 600,000 received from a five-storied building consists of 10 flats constructed during

the period from 01 July 2012 to 30 June 2013 in an area of Muladi, Barisal.

Mr. A incurred a capital loss of Tk. 500,000 on account of sale of shares in the earlier year, but this year he

made a capital gain of Tk. 600,000 from the sale of shares.

Received share of net profit of Tk. 200,000 from partnership. He is entitled to tax rebate as per tax law.

Mr. A is also a manufacturer and exporter of garments products. He sold export quota at Tk. 25,000 against

export value of Tk. 500,000.

Taken advance of Tk. 200,000 from a company against accumulated profit where he was an alternate

director and a shareholder.

Purchased wage earners' bonds on 30 June 2014 and received interest of Tk. 50,000 in the following year on

the said investment of Tk. 500,000.

Company spent Tk. 200,000 for Mr. A during the year against reimbursement of utility bills of his residence.

Additional conveyance allowance of Tk. 50,000 was paid to Mr. A in addition to the conveyance allowed

under Rule 33D.

Free and consessional passage of Tk. 200,000 for travel in Bangladesh by Mr. A was allowed by the

employer against actual claim of expenditure of Tk. 300,000.

Employer spent Tk. 500 p.m. for free tea, coffee and beverage for the office of Mr. A durig working hours.




Solution:

Mr. A



Computation of total taxable income Reference BDT BDT

A. Income from Salary

1. Basic salary R-33 (2)a

1,200,000

2. Arrear salary from previous employment Sec 21(1)c

50,000

(assuming it was not taxed earlier)

3. House rent allowance [25% of basic salary] R-33B 300,000

Less: Rent paid (60,000) 240,000

4. Conveyance allowance R-33E 50,000

Add: Car facility (Conveyance facility) R-33D 60,000 110,000

(Higher of Tk 60,000 or 5% of Basic Salary)

5. Entertainment allowance R-33H

60,000

6. Free and concessional passage in Bangladesh R-33G 200,000

Less: Exempted (actual expenditure) (200,000) -

7. Reimbursement of Utility

200,000

8. Employer's contribution to RPF Sch-1(B)-3

120,000

9. Interest on RPF 1,800

Less: Lower of interest @ 14.5% or 1/3 of BS Sch-6(A)-25

Interest @ 14.5% 1,450

1/3 of Basic Salary 400,000 (1,450) 350

Total Income from Salary

1,980,350

B. Income from Interest on Securities

Interest on securities (gross) Sec 22

50,000

Total Income from Interest on Securities

50,000

C. Income from House Property

Rental income Sec 24

600,000

Less: Exempted 6th-A-38

(600,000)

-

D. Agricultural Income

Income from production of corn, maize and sugar beet

5,000

Less: Exempted 50% 6th-A-46

(2,500)

2,500

E. Income from Business and Profession

1. Income from partnership business

200,000

2. Export quota [3% of BDT 500,000] Sec 19(23) &

R-30A

15,000

215,000

F. Capital Gain

Income from share sale

(assuming that sales occurred within 5 years)

600,000

Less: Exempted 100% SRO-269

(2010)

(600,000)

-




G. Income from Other Sources

1. Dividend income (gross)

200,000

200,000

Total Taxable Income

2,447,850

Calculation of Investment Allowance [as per 6th Schedule, Part-B]

1. Actual investment

a. Sanchay Patra 50,000

b. Contribution to Super Annuation Fund [Para-6] 120,000

c. Investment in DPS [up to BDT 60,000] [Para-11] 60,000

d. Contribution to RPF [Para-5] 240,000

e. Insurance premium [Para-1] 10,000

f. Laptop purchase [Para-23] 60,000

g. Contribution to Benevolent Fund [Para-17] 20,000 560,000

2. 30% of Total taxable income excluding Employer's contribution to PF and

Capital gain [30% of (24,47,850-1,20,000-0)]

698.355

3. Maximum allowance u/s 44 15,000,000

Tax rebate @ 15% of the lowest of (1), (2) and (3) 84,000

Tax Liability Calculation

Applicable slab Rate Tax

amount

On 1st 250,000 0% -

Next 400,000 10% 40,000

Next 500,000 15% 75,000

Next 600,000 20% 120,000

Remaining 697,850 25% 174,463

2,447,850 409,463

Less: Investment tax rebate (84,000)

Tax Liability

325,463

Less: Average rate on income from partnership

[325,463 ÷ 2,447,850 × 200,000] (26,592)

Less: TDS on wage earners' bond [sec 51(1)]* -

Net tax liability 298,871

*No TDS has been deducted as the total investment does not exceed tk. 500,000 as per laws

applicable for the income year 2014-15




Part Nine: Set off and Carry Forward Losses

Set Off and Carry Forward Losses:

Important sections related to set off and carry forward losses

Set off Losses: Section 37

Wherever an assessee sustains a loss in any year under any head of income, he is entitled to set off the loss so

sustained against his income, profits or gains under any other head in that year. Provided that any loss in respect of

any speculation business or any loss under capital gains or any loss from any other source, income of which is

exempted from tax shall not be so set off. Provided further that any loss in respect of any income from any head

shall not be so set off against any income from manufacturing of cigarette. Amended FA 2015

Carry forward of loss from business: Section 38

Whenever an assessee sustains any loss under the head “Business or Profession” and the loss cannot wholly be set-

off against under any other head, such unadjusted loss shall be carried forward to the following year to be set-off

against the profits and gains of the same business or profession. Loss cannot be carried forward for more than 6

successive assessment years. Provided business loss cannot be set off against capital gain.

Section - 46B: Exemption from tax of newly established industrial undertakings set up between the period of

July 2011 and June 2019, etc. in certain cases.-

1. (1) Subject to the provisions of this Ordinance, income, profits and gains under section 28 from an industrial

undertaking (hereinafter referred to as the said undertaking) set-up in Bangladesh between the first day of

July, 2011 and the thirtieth day of June, 2019(both days inclusive) shall be exempted from the tax payable

under this Ordinance for the period, and at the rate, specified below:

2. if the said undertaking is set-up in-

1. (i) Dhaka and Chittagong divisions, excluding Dhaka, Narayanganj, Gazipur, Chittagong,

Rangamati, Bandarban and Khagrachari districts, for a period of five years beginning with the

month of commencement of commercial production of the said undertaking:

Period of Exemption Rate of Exemption

For the first two years (first and second year) 100% of income

For the third year 60% of income

For the fourth year 40% of income

For the last year (fifth year) 20% of income

Study References:

Section; 37: carry forward losses.

Section: 38 read with section 46B, 46C and 3rd schedule

39,40,41,42




2. (ii) Rajshahi, Khulna, Sylhet, Barisal and Rangpurdivisions(excluding City Corporation area) and

Rangamati, Bandarban and Khagrachari districts, for a period of ten years beginning with the month

of commencement of commercial production of the said undertaking:

Period of Exemption Rate of Exemption

For the first two years (first and second year) 100% of income

For the third year 70% of income

For the fourth year 55% of income

For the fifth year 40% of income

For the sixth year 25% of income

For the last four years (seventh to tenth year) 20% of income

For the purpose of this section "industrial undertaking" means an industry engaged in the production of active

pharmaceuticals ingredient industry and radio pharmaceuticals industry; automobile manufacturing industry; barrier

contraceptive and rubber latex; basic chemicals or dyes and chemicals; basic ingredients of electronic industry (e.g.

resistance, capacitor, transistor, integrator circuit); bi-cycle manufacturing industry; bio-fertilizer; biotechnology;

boilers; brick made of automatic Hybrid Hoffmann Kiln technology or Tunnel Kiln; compressors; computer

hardware; energy efficient appliances; insecticide or pesticide; petro-chemicals; pharmaceuticals; processing of

locally produced fruits and vegetables; radio-active (diffusion) application industry (e.g. developing quality or

decaying polymer or preservation of food or disinfecting medicinal equipment); textile machinery; tissue grafting;

tyre manufacturing industry; any other category of industrial undertaking as the Government may, by notification in

the official Gazette, specify. Amended FA 2015

(11) Where any exemption is allowed under this section and in the course of making assessment, the Deputy

Commissioner of Taxes is satisfied that any one or more of the conditions specified in this section are not fulfilled or

any individual not being a Bangladeshi citizen is employed or allowed to work without prior approval of the Board of

Investment or any competent authority of the Government, as the case may be, for this purpose the exemption shall

stand withdrawn for the relevant assessment year and the Deputy Commissioner of Taxes shall determine the tax

payable for such year. Amended FA 2015

Carry forward of loss in speculation business: Section 39

Loss from speculation business, which cannot be set-off during the year against income from any other speculation

business, can be carried forward to the next following year and set-off against income from any speculation business

in the said following year. If the loss cannot be wholly set-off, it can be carried forward to the next year and so on,

restricted up to 6 successive years.

Carry forward of loss under the head “Capital Gains”: Section 40

Loss under the head ―Capital Gains‖ can be set-off against income from the same head during the income year. If the

loss cannot be set-off in the above manner, the loss or portion thereof can be carried forward to the next assessment

year and set-off against income under the same head in that year restricted up to 6 successive assessment years.

Loss up to Taka 5,000 cannot be carried forward. Amount in excess of Taka 5,000 can only be carried forward and

set-off in the aforesaid manner.

Loss of Agricultural Income: Section 41

Where any assessee sustains a loss of profit or gains in any year under the head ―Agricultural Income‖ and the loss

cannot be wholly set-off under Section 37, so much of the loss as has not been wholly set off , or the whole loss

where the assessee has no income under any other head or has income only under the head ―Capital Gains‖, shall be

carried forward to the following year and set-off against the profits and gains, if any, of such agricultural income and

if the loss in either case cannot be wholly set-off, the amount of loss not so set-off, shall be carried forward to the next

year and so on but not more than 6 years.




Set-off of loss in the case of succession in business: Section: 42

In case of succession in business otherwise than by inheritance, the person succeeding in the business shall not be

entitled to set – off the loss of the person succeeded. In the case of change in constitution of firm, the firm shall not be

entitled to set-off the proportionate share of loss of the retired or deceased partner. A partner of the firm shall also not

be entitled to the benefit of such loss.

For example,

Partner Loss (Year 1) Partner Proft (Year 2) Proft after set off

A 25,000 A 40,000 15,000

B 25,000 B 40,000 15,000

C 25,000 C (6 months) 20,000 0

Total loss 75,000 D (6 months) 20,000 20,000

Loss to be carry forwarded = 0 (zero)

If C come back within 6 years and make profit, than remaining 5,000 can be set off.

If D is the successor of C, rest of 5,000 loss can be set-off against D‘s income.

Carry forward of depreciation allowance: Section 42(6)

Depreciation allowance which cannot be given full effect of, in any year, because of there being no profits or of

inadequate profits, unadjusted allowances or portion thereof as the case may be, shall be carried forward to the next

year yor years and be part of allowance for that year.

While setting-off loss on account of depreciation allowance, effect shall first be given to business loss including loss

from speculation business.

Following table gives a bird's eye view of set off of losses:

Heads of income generating

loss

Set off against

1. Salary [Though loss is not

possible]

any head [other than income from cigarette manufacturing]

2. Interest on securities any head[other than income from cigarette manufacturing]

3. Income from house property any head[other than income from cigarette manufacturing]

4. Agricultural income any head except "capital gains" and income from cigarette manufacturing

5.Income from business/

profession

any head except income from house property, Income from cigarette

manufacturing and capital gains;

6. Capital gain income from "capital gains" only

7. Income from other sources any head [other than income from cigarette manufacturing]

8. Speculation business income from any other speculation business

9. Income exempted from tax Set off not allowed

Following table gives a bird's eye view of carry forward of losses:

Loss originated from Carry forward and set off against Period of carry forward

Business or profession Income from same business or profession 6 succeeding years

Speculation business Any speculation business 6 succeeding years

Capital gains after deducting Tk. 5,000. Capital gains 6 succeeding years

Agricultural income Agricultural income 6 succeeding years

Profits and gains of Tax holiday

undertaking

Profits and gains of the said undertaking Within tax holiday period

Unabsorbed depreciation Income from business and profession Unlimited period




Advance Payment of Tax

Advance income tax is the tax which is to be paid by the assesse in advance either by deduction or collection of tax at

source or by payment of quarterly instalments.

(1) Who is liable to pay advance tax?

Both existing and new assessees are liable to pay advance income tax if following situations arise —

In case of existing assessee, if his last assessed total income exceeds Tk. 400,000 [excluding agricultural income

and capital gain (other than capital gain from sale of share)], and

In case of new assessee, if his current year‘s income is likely to exceed Tk. 400,000 [excluding agricultural

income and capital gain (other than capital gain from sale of share)].

(2) What is the basis on which advance tax payments should be calculated?

In case of existing assessee:

In case of existing assessee, advance tax is to be calculated based on his last assessed income applying current

tax rate. If his last assessed income exceeds Tk. 400,000 [excluding agricultural income and capital gain (other

than capital gain from sale of share)], he is required to pay advance tax. (Sec-64)

In case of new assessee:

A new assessee who has not previously been assessed shall also be required to pay advance tax if his current

year‘s income [excluding agricultural income and capital gain (other than capital gain from sale of share)] is

likely to exceed Tk. 400,000. (Sec-68)

(3) When and how is advance tax to be paid?

Advance tax is to be paid in the following four equal installments based on financial year for which the tax is payable:

1st installment : 15th September

2nd installment : 15thDecember

3rd installment : 15thMarch

4th installment : 15thJune

Provided that if an assessment of the assessee is completed before 15th May, then on that basis the payable amount of

the rest installment/installments is/are to be determined. (Sec-66)

(4) Whether deduction/collection of tax at source will be treated as advance tax?

Yes, withholding tax is also to be treated as advance payment of tax.

(5) What will happen in case of excess payment of advance tax?

If the advance tax paid by the assessee exceeds the tax payable by him on regular assessment, Govt. will pay simple

interest on excess payment @ 10% per annum to be calculated from 1st July of the respective assessment year to the

date of regular assessment but not more than 2 years.

(6) Is there any scope to pay estimated amount of advance tax?

Yes, if any assessee feels, at any time during the year, that his tax is likely to be less that the tax payable as per law,

then he may submit an estimate to the DCT and pay estimated amount of advance tax accordingly (Sec-67). However,

at the time of assessment if the DCT finds that his estimate is wrong and tax actually comes higher, then assessee will

have to pay simple interest as per section 73.

(7) What are the consequences in case of failure to pay advance tax?

The consequences are as follows:

I. Assessee will be treated as an assessee in default (Sec-69).

II. Simple interest @ 10% per annum will be chargeable on the amount falls short from 75% of the assessed tax to

be calculated from 1st April of the year in which the advance tax was paid to the date of assessment but not more

than 2 years (Sec-73).

III. DCT may also impose penalty up to 100% of the shortfall (Sec-125).




Part Ten: Income Tax Return

Every person who is required to file return of income shall have to fill-up the return form prescribed at Rule-24,

which shall also be verified in the manner indicated in that form.

For individual assessee the return together with the statement of assets, liabilities and expenditure as prescribed at

Rule-25 and the life style statement as prescribed at Rule-25A shall collectively constitute a valid and complete

return.

Return Form

Now 5 types of return forms are available. These are

(1) For individual and other taxpayers (other than company) [IT-11GA]

(2) For company taxpayers only [IT-11GHAl]

(3) For spot assessment [IT-11GAGA]

(4) For salaried individual only [IT-11UMA]

(5) Only for the income from business or profession up to Tk.3,00,000/ [IT-11CHA]

Persons required to file return of income

Every person (here person means Individual, Firm, Association of Persons (AOP),Hindu Undivided Family

(HUF),Local Authority, Company and Artificial Juridical Person) is required to file return of income if

(1) His total income (here total income means income on which tax is changeable during the income year

exceeded the non- taxable ceiling of income (now it is Tk. 2,50,000/- for the assessment year 2015-2016)

(2) He was assessed to tax for any one of the 3 years immediately preceding the year under consideration.

(3) He resides in the area of city corporation, pourashava, divisional headquarters or district headquarters and who at

any time during the relevant income year fulfils any of the following conditions: -

(a) Owns a motorcar.

(b) Owns a membership of a VAT registered club.

(4) He has any business or profession having any trade license and also operates bank account (whatever profit he has

earned or loss he has incurred).

5) He has registered with a recognized professional body as

A. Doctor

B. Engineer

C. Architect

D. Dentist

E. Lawyer

F. Income tax practitioner (11711

G. Chartered accountant

H. Cost and management accountant

I. Surveyor

J. Actuary or

K. Any other similar professional man

(6) He is a member of any trade association or body

(7) He is a candidate of pourashava, City Corporation or parliament

(8) He participates in a tender floated by the Govt. semi-govt. autonomous body or local authority.

In addition to above, every company and NGO are required to file return of income (irrespective of profit or

loss or doing any business or not) every year compulsorily




Place where return is to be submitted:

(i) Tax Return is to be submitted at concerned income tax circle office as per jurisdiction. Deputy

Commissioner of Taxes (DCT) usually heads the circle office.

(2) The only exception is in case of non-resident Bangladeshi who may file their return at nearest

Bangladesh mission. The missions then send the return to NBR and NBR again send the return to

concerned circle office.

(3) Return can also be submitted at Tax Fair organized by the NBR every year.

Return by whom to be signed and verified

SI. Type of assessee Signatory

i. Individual Individual himself

2. Hindu Undivided Family (HUF) Karla

3. Company Principal Officer

4. Local Authority Principal Officer

5. Partnership Firm Any adult partner

6. Association of Persons (AOP) Any member of the association or

the principal officer thereof

7. Artificial Juridical person By the person concerned or by

any other person competent to act in

this behalf.

Documents to be accompanied with return:

in case of company it is mandatory to submit audited statement of accounts at the time of filing return and

a separate calculation sheet is to ' be submitted if income shown at return differs from audited statement of

accounts.

In case of individual it is mandatory to submit statement of assets, liabilities & expenditure and also life

style statement at the time of filing return.

Submission of life style statement is optional in case of salaried person who will use simple 2 pages

prescribed return form and also for those businessman who will use simple 2 pages another prescribed return

form if their business income does not exceed Tk. 3,00,000/ .

Time limit for submission of return

There are mainly 2 types of time limit for submission of tax return. One is for companies and other is for

all other types of assesses. The time limits are tabulated below:

Sl

No.

Type of

assesses

Last date of

submission

of return

Remarks

1. Company 15th July Provided that when the 15th July falls before the expiry of 6 months

from the end of the income year, then return is not required to submit

within 15th July. It is to be submitted within 6 months from the end of

the income year

2. Other than

Company

3oth

September

Govt may extend the date through gazette

notification. If so then within the extended date.




However the Last date of submission of return may be extended by the concerned DCT if the assessee duly applied

for time. He may extend the time up to 2 months al his own capacity and may extend further 2 months with the prior

approval of his IJCT. In this way total 4 months time may he extended for submission of tax returns.

Can a return be revised or a revised return be re-revised:

As per section 78 the provision for submission of new return or revised return is enumerated below

SL Type of Return Provision

of law

Remarks

1 New return Any person who has not

filed a return as required

by section 75/77, he can

submit return of current

year or earlier year or

years at any time.

Penalty u/s 124 may be imposed by the DCT for non-

submission of return timely

2 Revised return (1) If there is any

omission or incorrect

statement at the

original return, the

assessee can file revised

return at any time but

before assessment.

(2) In the same way a

revised return can be re-

revised

(1) after assessment no revised return is acceptable.

(2)In any event the offence of filing a false return

deliberately is purnishable u/s 165 which cannot be

condoned by filing of a revised return.

(3) The benefit of this provision cannot be claimed by an

assessee who has made a false return knowing it to be

false. A Penalty may be imposed u/s 128 in respect of

previous fake return notwithstanding the filing of the

revised.

(4) if any assessee files revised return u/s 78 or 93

showing tax free income or income where reduced tax

rate is applicable, so much of the excess as exceeds the

amount in original return shall be deemed to be the

income from other sources as per section 19(31)




--1 Penalty fo r non-SUbmjS~iOn ofre~ Amount of penalty Refuma: section P~-conditions

lo" o((h~ 114 (1) (I) In ~ oh ne .. , .. indiridwol_ aOUMd Whlehew:r .. hOM lno;o .......... '""

I .. " or iJ hi", ... p.-io\ldyUlHied Tlc • • .-I· thu pe .... lt, .. rnount

+ styli not UCHiI Tk.

'T1t.SO per .-(I) Incase ofWRIOJ day durin, Indi"ldu,"I ... ~ .. hlch th" peruolly,mwntdWl

dl'uuit nOt I'JICH'd ~ of 1_ C'Ontl nu". ,"~I,".~Tk.. I ,_

.. hleh",,, iJ hi""'r .

.... -~~ ,-__ I01110 ___ "",""J

•

---" ~mprisonment for non-submission of return I

Particulars RcfCftllCf! Imprisonment Pre-conditions Flill.,., 10 Ii" 164(C) '- (,) No pro5«Ution retunI vis 1j (Maximwn) =bo ~. with or Institu.ted -- without fioc . .. ithoul prior

.nth lIOIicc s.mctionorlM ""non

"B~ (l) NBRh.uthe

,.,..,~

compou.nd orr~

t.o_........,~

___ I0III0 .. ____

• ~T{

B







Part Eleven: Table of Withholding Tax

Sl.

No.

Item Section/

Rule

Rate of deduction/

collection

Deducting Authority Remarks

1 Salary 50 Average rate Every employer Employer will not

deduct tax at source

or will deduct tax at a

lower rate/ amount in

case an employee can

produce a certificate

issued by the DCT to

do so.

Govt. salary

(including

remuneration of

M.P.)

50(1)

(A)(B)

Average rate Govt. Accounts Office Government official

is acting as Drawing

and Disbursing

Officer (DDO) or

making or signing a

bill for himself or for

any other official

subordinate to him to

draw salary from the

Government or any

authority

2 Discount on

Bangladesh Bank

Bill

50A *maximum rate

1. Individual - 30%

2. Company - applicable

rate (whichever is higher)

Any person

responsible for

making such payment

3 Interest on securities

(including

debenture)

51 5% (at upfront system) Any person

responsible for issuing

such security

TDS will not be

applicable for on

treasury bill/bond

4 Contractor and

supplier (82C)

Section:

52/

Rule16

If payment ≤ Tk.

2,00,000

Nil Govt.

organization

Corporation

NGO

Company

Bank (including

co-operative

bank)

Insurance

company

University

Medical/ Dental/

Engineering

colleges

Applicable on

cumulative payment

made to same

contractor/ supplier

during the year.

If payment > Tk.

2,00,000 but ≤

Tk. 5,00,000

1%

If payment > Tk.

5,00,000 but ≤

Tk. 15,00,000

2.50%

If payment > Tk.

15,00,000 but ≤

Tk. 25,00,000

3.50%

If payment > Tk.

25,00,000 but ≤

Tk. 3,00,00,000

4%

If payment > Tk.

3,00,00,000

5%

5 a. Oil supplied by

oil marketing

Section

52 read

0.60% if payment exceeds

Tk. 2,00,000.

Same




company with

Rule 16

- Govt. organization

- Corporation

- NGO

- Company

- Bank (including co-

operative bank)

- Insurance company

- NBFI

- School, college and

university

- Hospital, clinic and

diagnostic center

b. Oil supplied by

dealer or agent

of oil marketing

company

(excluding

petrol pump

station)

1%

c. Oil supplied by

oil refinery

3%

d. Gas supplied by

Gas

transmission

company or gas

supplied by gas

distribution

company Not

(82 C)

3% Gas distribution

company

Indenting

commission

52AA 7.50%

Private container

port or dockyard

service

52AA 5%

Motor garage or

workshop

52AA 5%

Shipping agency

commission

52AA 5%

6 Service rendered by

doctor at hospital or

diagnostic center

52A(1) 10% NGO

Company

Trust (who are

running any

general/

specialized

hospital or any

diagnostic center)

Provided that where

the Board, on an

application made in

this behalf, gives a

Certificate in writing

that the income is

exempted from tax of

those professional or

technical service

provider, payment

shall be made without

any deduction of tax.

Royalty/ Technical

know-how fee (82C)

52A(2) 10% Govt.

organization

Corporation

NGO

Company

Bank (including

co-operative

bank)

Insurance

company

Fees for

professional/

technical services

(including any

services applying

professional

knowledge)

52A(3) 10% (if the payee does not

have any 12-digit TIN then

the rate will be 15%)

7 Private security

service provider

Cleaning service

Collection and

recovery agency

52AA

(a) commission 10%

(b) gross receipts 1.5%

Truncated Rate for special

Govt.

organization

Corporation

NGO

Company

Deducting authority

will not deduct tax at

source or will deduct

tax at a lower rate/

amount in case party




Event

management

Supply of

manpower

case as per NBR circular:

1.50% (10% of 15%) of

gross bill

[if commission is not

identifiable from the

bill commission is

deemed to be 15% of

the bill and 10% tax

deduction will be

applicable on that

truncated base of 15%]

Bank (including

co-operative

bank)

Insurance

company

produces a certificate

issued by the DCT to

do so.

8

Catering service

Contract or toll

manufacturing

Credit rating

agency

Meeting fees,

training fees or

honorarium

Mobile network

operator,

technical

support service

provider or

service delivery

agents engaged

in mobile

banking

operations

Product

processing

charge

Stevedoring/

berth operation

commission

Any other

service which is

not mentioned

in Chapter VII

of this

Ordinance and

is not a service

provided by any

bank, insurance

or financial

institutions

52AA 10% Govt.

organization

Corporation

NGO

Company

Bank (including

co-operative

bank)

Insurance

company

9.

Transport Provider 52AA 3% Govt.

organization

Corporation

NGO




Printing service Company

Bank (including

co-operative

bank)

Insurance company

10. C&F Agency

commission (82C)

52AAA 10% Commissioner of

customs

11.

Hand-made

Cigarette

52B(1) 10% on banderole Any person

responsible for selling

banderols to any

manufacturer of

cigarette.

Any person

responsible for

collecting Value

Added Tax (VAT) in

accordance with

Value Added Tax.

199, section 21

from cigarette

manufacturers shall

collect tax at the rate

of three per cent

(3%) of Maximum

Retail Price (MRP) of

such cigarette at the

time of collection of

such VAT.

Cigarette

manufacturer

52B(2) 3% of Maximum Retail

Price (MRP) of such

cigarette at the time of

collection of such VAT.

12. Land acquisition

(82C)

52C 2% at city corporation,

paurashava and cantonment

board area

Persons responsible

for making such

payment.

1% in other area

13. Interest on savings

certificate (partly

82C)

52D 5%

But no tax shall be deducted

on interest where the

cumulative investment at the

end of the income year in

the pensioners' saving

certificate is up to 5 lakh.

Provided further that no tax

shall be deducted from

interest or profit arising

from Wage earners

development bond, US

dollar premium bond, US

dollar investment bond,

Euro premium bond, Euro

investment bond, Pound

sterling investment bond or

Pound sterling premium

bond.‖[FA 2015]

Bank

Post office

National Savings

Bureau

14. Brick field 52F Tk. 45,000 for one section D.C. Office

Tk. 75,000 for one and half

section

Tk. 90,000 for two section

Tk. 1,50,000 for automatic

brickfield




14a L/C commission 52I 5% on such commission

15. Travel Agency

Commission (82 (C)

effective from 2015-

2015 income year)

52JJ .30%

On commission or discount

or incentive bonus or any

other benefit paid by the

airlines to General sales

agent (GSA) for selling air

ticket/ air cargo

Airlines For the purpose of

computation of value

of tickets or charge,

any payment made in

respect of any

embarkation fees,

travel tax, flight

safety insurance,

security tax and

airport tax shall be

deducted from such

value or charge.

16. Any payment to life

insurance policy

holder in excess of

total premium

52T 5%

However, TDS will not be

applicable in case of death

of such policy holder.

Life insurance

company

17.

Local L/C 52U 3%

On total proceeds exceeding

Tk. 5,00,000

Bank or financial

institution

Not applicable on

rice, wheat, potato,

onion, garlic, peas,

chick peas, lentils,

ginger, turmeric,

dried chilies, pulses,

maize, coarse flour,

flour, salt, edible oil,

sugar, black pepper,

cinnamon,

cardamom, clove,

date, cassia leaf,

computer or

computer accessories,

jute, cotton, yarn and

all kinds of fruits.

18.

Revenue sharing or

any license fee or

any other fees or

charges paid to

regulatory authority

52V 10% Mobile phone

company

19. Trade license

renewal

52K Tk. 500 for Dhaka and

Chittagong City Corporation

City Corporation and

pourashava

Tk. 300 for other city

corporations and paurashava

at district headquarters

Tk. 100 for other

pourashava

20. Freight forward

agency commission

52M 15% Person responsible for

making such payment

21. L/C commission 52(I) 5% Bank

22.

Import (82C)

(But AIT on raw

material import is

not 82C)

53/ 17A 5%

(But in case of iron, steel,

water vessels and other

floating structures for

breaking up, the rate is Tk.

The Commissioner of

Customs




800 per ton)

23.

Service charge on

services provided by

a resident to any

foreign person

52Q 10% Bank

24. International

Gateway Service on

International phone

call (82C)

52R 1% on IGW Bank (through which

the receipt on account

of international

gateway service in

respect of

international phone

call is received)

5% on ICX and ANS

company.

International Gateway

Service Provider

(through which the

revenue related to

international phone

call is shared under an

agreement with

BTRC)

25.

House rent 53A/

17B

5% Govt.

organization

Corporation

NGO

Company

Bank (including

co-operative

bank)

University

Medical/ Dental/

Engineering

colleges

Any hospital,

clinic or

diagnostic center

26.

Shipping business of

a resident (82C)

53AA 5%

(However, if service

rendered between 2 or more

foreign countries then the

rate is 3%)

The Commissioner of

Customs

New prescribed form

introduced in rule

62(A)

27. Man power export

(82C)

53B/

17C

10% on per head service

charge

Bureau of Manpower

28.

Rent of conference

hall and convention

center

52P 5% NGO

Company

University

Medical/ Dental/

Engineering

colleges

29.

Export of knit-wear,

Woven garments,

terry towel, carton,

garments

53BB 0.60%

(In case of garments, the

rate is 0.30%)

Bank




accessories, jute

goods, frozen food,

vegetables, leather

goods, and packed

foods (82C)

Any other type of

export

53BBBB

30. Security house (82C) 53BBB 0.05% on transaction value

(other than bond)

DSE and CSE

31.

Public auction (82C) 53C/

17D

5% (In case of tea auction,

the rate is 1% only)

Govt.

organization

Corporation

Company

(including private

limited company)

Insurance

32.

Performing in a film,

drama,

advertisement or any

TV or radio program

or purchasing a film,

drama or TV or radio

program

53D 10%

Any person

responsible for

making part or full

payment for

purchasing/

performing in a film,

drama, advertisement

or any television or

radio program

Not applicable if total

payment does not

exceed Tk. 10,000

33. Rental power (82C) 52N 6% PDB

34. Salary of foreign

technician serving in

any diamond cutting

industry (82C)

52(O) 5% Diamond cutting

industry

35. Export cash subsidy

(82C)

53DDD 3% Bank

36. Distributorship

Commission

53E 10%

If any company sells its

products to its distributors at

a price lower than MRP,

then 3% tax on difference

between DP and MRP is to

be collected.

Company By way of

commission, or fees

or allows any

discount or dealer‘s

promotional charges

or fees or

commission or any

other payment called

by whatever name for

distribution or

marketing of goods,

shall deduct or collect

at the time of

credit of such

commission, or fees

or at the time of

payment thereof,

whichever is earlier.

37. Foreign buyer‘s

agent(Final

settlement 82(c)

53EE 10% Bank




effective from 1 July

2015-2016)

38. Bank interest 53F/

17H

10%

The rate will be 15% if the

deposit holder holds deposit

more than Tk. 1,00,000 but

does not possess 12-digit

TIN.

Bank Ten per cent (10%)

where the person

receiving such

interest or share of

profit is a public

university, or an

educational

institution whose

teachers are enlisted

for Monthly Pay

Order (MPO),

following the

curriculum approved

by the Government

and whose governing

body is also formed

as per Government

rules or regulations,

or any professional

institute established

under any law and

run by professional

body of Chartered

Accountants, Cost

and Management

Accountants or

Chartered

Secretaries.

Irrespective of TIN

number and will be

considered as final

settlement under

82(c).

39.

Real Estate Business

(82C)

53FF Tk. 1,600 or Tk. 1,500 or

Tk. 600 per square meter for

residential building or

apartment depending on the

area

Registration Authority

Tk. 6,000 or Tk. 5,000 or

Tk. 1,600 per square meter

for commercial space

depending on the area

Land developer

(82C)

53FF 5% of the deed value of land

at any area of Dhaka,

Gazipur, Narayanganj,

Munshiganj, Narsingdi,

Manikganj& Chittagong

District.

2% in other district

40. Insurance

commission paid to

53G 5%

[At the time of payment or

Insurance Company




agent of insurance

company (82C)

at the time of credit -

whichever is earlier]

41. Surveyor of General

Insurance (82C)

53GG 15%

[At the time of payment]

General Insurance

Company

Sl.

No.

Item Section/

Rule

Rate of deduction/ collection Deducting Authority

42

(i)

Sale of land or land

and building

(commercial area)

53H/

17(II)

Schedule – A (For Land)

Gulshan, Banani, Motijheel, Dilkhusha, North

South Road, Motijheel Expansion areas and

Mohakhali of Dhaka

4% of the deed value or Tk. 10,80,000 per

katha (1.65 decimal) — Higher one

Sub-Registrar

Kawran Bazar, Uttara, SonargaonJanapath,

Shahbag, Panthapath, Banglamotor, Kakrail of

Dhaka



BangaBondhu Avenue, Badda, Sayedabad,

Postogola and Gandaria of Dhaka.

Agrabad and CDA Avenue of Chittagong and

Narayanganj.



For building/apartment/flat/structure/floor

space:

In addition to tax applicable for land

mentioned above, an additional tax @ Tk.

600 per square meter or 4% of the deed

value of such

building/apartment/flat/structure/floor space

— Higher one.

42

(ii)


and building (other

than mentioned at

Schedule A)

53H/

17(II)

Schedule – B (For Land)

Uttara (Sector 1–9), Khilgaon rehabilitation area

(beside 100 feet road), Azimpur, Rajarbagh

rehabilitation area (beside biswa road),

Baridhara DOHS, Bashundhara (block A-G),

Niketon of Dhaka.

Agrabad, Halishohor, Panchlaish, Nasirabad,

Mehedibag of Chittagong.

4% of the deed value or Tk. 90,000 per


Sub-Registrar

Gulshan, Banani, Baridhara, Nababpur and

Fulbaria of Dhaka.



Dhanmondi, Green Road (from road 3 to 8 of

Dhanmondi Residential area) of Dhaka.



Kakrial, Sagunbagicha, Bijoynagar, Green road,

Eskaton, Elephant Road, Fakirapool, Arambagh,




Mogbazar, (within 100 feet of main road),

Tejgaon industrial area, Sher-e-banglanagar

administrative area, Agargaon administrative

area, Lalmatia, Mohakhali DOHS, Cantonment

of Dhaka and Khulshi of Chittagong.



Kakrial, Sagunbagicha, Bijoynagar, Green road,

Eskaton, Elephant Road (outside 100 feet of

main road) of Dhaka.



Uttara (Sector 10 to 14), Nikunj (north and

south), Badda rehabilitation area, Gandaria

rehabilitation area, Shympur rehabilitation area,

IG bagan rehabilitation are, Tongi industrial

area of Dhaka.



Shympur industrial area, Postogola industrial

area and Jurain industrial area of Dhaka.



Khilgaon rehabilitation area (beside less than

100 feet road), Rajarbagh rehabilitation area

(beside 40 feet and internal road) of Dhaka.



Goran (beside 40 feet road) and

HazaribaghTanary Area of Dhaka.

For building/apartment/flat/structure/floor

space:

In addition to tax applicable for land

mentioned above, an additional tax @ Tk.

600 per square meter or 4% of the deed

value of such building/apartment/

flat/structure/floor space — Higher one.

42

(v)


and building (other

than mentioned at

Schedule A and B)

53H/

17(II)

Schedule – C

Within the jurisdiction of RAJUK and CDA

except areas in schedule A and B:

4% of the deed value

Sub-Registrar

Within the jurisdiction of Gazipur, Narayanganj,

Munshiganj, Manikganj and Narsingdi, Dhaka

and Chittagong districts (excluding RAJUK,

CDA and Dhaka both City Corporation area)


Areas within the jurisdiction of Pauroshava of

any district headquarter


Areas of any other Pauroshava:





Other areas not specified in schedule A, B and C


43 Registration of

leasehold property

53HH 4%

Applicable for more than 10 years‘ lease.

Sub-Registrar

44

Transfer of share of

shareholder of stock

exchange (82C)

53N 15% on gain DSE and CSE

45 Gain on sale of

shares or securities

traded in Stock

Exchange (82C)

SRO

No.196

Company or firm – 10% Company holding Trading

Right Entitlement (TREC)

of any stock exchange on

proportionate average cost

of share including fees,

commission, interest on

loan (before closing of a

financial year)

46

Deduction of tax

from any sum paid

by real estate

developer to land

owner.

53P 15% on account of signing money, subsistence

money, house rent or in any other form called

by whatever name for the purpose of

development of the land of such owner.

Person engaged in real

estate or land development

business.

47 Interest on post

office savings bank

53I 10% Post office

48

Rental value of

vacant land or plant

and machinery

53J 5% Govt. organization

Corporation

NGO

Company

Bank (including co-

operative bank)

Insurance

University

Medical/ Dental/

Engineering colleges

49

Direct advertisement

to newspaper,

magazine or private

TV channel or

private radio station

or any web site

(including airtime

purchase of private

television channel,

private radio station

or such web site)

53K 4% Govt. organization

Corporation

NGO

Company

Bank (including co-

operative bank)

Insurance

University

Medical/ Dental/

Engineering colleges

50

Soft drinks

(including mineral or

bottled water)

52S 4%

(on the value of such soft drinks and mineral

water determined by the VAT Authority)

The Security Printing

Corporation




51

Capital gain from

transfer of shares by

sponsor shareholders

and directors of

listed companies

(82C)

53M 5% DSE and CSE

52 Dividend 54 Individual @ 10%.

If there is no 12-digit TIN, then @ 15%.

[For Resident & Non-resident Bangladeshi]

Company

Company @ 20%

53 Lottery (82C) 55 20% Person responsible for

such payment

54

Any payment to non-

resident which is not

covered by any other

section

56 Foreign individual @ 30%

Person responsible for

such payment

Provided that where the Board, on an application made in this behalf, gives a certificate in writing that the person

rendering such services is otherwise exempted from tax under any provision of this Ordinance, the payment referred

to in this section shall be made without any deduction or with deduction at a lesser rate for that income year.Amended FA

2015

Ordinance No. XXXVI of 1984 in section 56:

(1) Subject to the provisions of sub-section (2), Government or any person responsible for making payment to a non-

resident of any amount which constitutes income of such non-resident chargeable to tax under this Ordinance shall,

unless such person is himself liable to pay tax thereon as agent, at the time of making such payment, deduct tax on the

amount so payable at the rate, specified below:

Description of Payment Rate of deduction

1 Accounting or tax consultancy 20%

2 Advertisement making 15%

3 Advertisement broadcasting 20%

4 Advisory or consultancy service 30%

5 Air transport or water transport 7.5%

6 Architecture, interior design or landscape design 20%

7 Artist, singer or player 30%

8 Capital gain received-

(a) from capital assets (not being securities listed with stock

exchange)— 15%

(b) by a company or firm if such gain is arisen from

securities listed with any stock exchange in Bangladesh

which is not exempted from tax in the country of such non-resident 10%

9 Certification 30%

10 Charge or rent for satellite, airtime or frequency 20%

11 Contractor, sub-contractor or supplier 5%

12 Courier service 15%

13 Dividend-

(a) company 20%

(b) any other person, not being a company- 30%




14 Insurance premium 10%

15 Interest, royalty or commission 20%

16 Legal service 20%

17 Machinery rent 15%

18 Management or event management 20%

19 Pre-shipment inspection service 30%

20 Professional service, technical services fee, technical know how fee or

technical assisstance fee

20%

21 Salary or remuneration 30%

22 Exploration or drilling in petroleum operations 5.25%

23 Survey for oil or gas exploration 5.25%

24 Any service for making connectivity between oil or gas field and its

export point

5.25%

25 Any other payments 30%.

Added FA 2015

Time limit for payment:

Normally within 2 weeks from the end of the month of deduction [Rule 13]

Deduction from salary may be deposited quarterly with prior permission

Double Cheque Method:

1. Deduction from contractors or suppliers (Sec-52);

2. Fees for professional or technical services (Sec-52A);

3. House property (Sec-53A);

4. Commission or fees (Sec-53E);

5. Unauthorized deduction prohibited (Sec-60);

6. Payment where no deduction is made (Sec-63).

Consequence of non-compliance:

The deducting authority will be treated as an assessee in default [Sec-57(1)(a)].

2% additional amount per month is collectible [Sec-57(1)(b)].

Expenditure will be treated as income for non-deduction/ collection of tax at source [Sec-30].




Part Twelve: Assessment of Partnership Firm

Assessment of Partnership Firm:

Sixth Schedule (Part A) Para – 18

Any income received by an assessee in respect of any share of income out of the capital gains on which tax has been

paid by the firm of which the assessee is a partner.

Sixth Schedule (Part B) Para – 16

Any sum being the share or portion of the share of the assessee in the income of 1[a firm] if tax of such income has

already been paid by the firm:

Provided that where there is included in the total income of an assessee any income exempted under this paragraph,

the tax payable by the assessee shall be an amount bearing to the total amount of the tax which would have been

payable on the total income had no part of it been exempted, at the same proportion as the unexempted portion of the

total income bears to the total income.

Study References:

Section – 30(b);

43(3)

85

Sixth Schedule (Part A) Para – 18

Sixth Schedule (Part B) Para – 16

Section – 30(b); Deduction Inadmissible:

Any payment by way of interest, salary, commission or remuneration made by a firm or an association of

persons to any partner of the firm or any member of the association, as the case may be.

Section – 43(3); Computation of total income:

Where the assessee is a partner of a firm, then, whether the firm has made a profit or a loss, his share (whether a

net profit or a net loss) shall be taken to be any salary, interest, commission or other remuneration payable to him

by the firm in respect of the income year increased or decreased respectively by his share in the balance of the

profit or loss of the firm after the deduction of any interest, salary, commission or other remuneration payable to

any partner in respect of the income year []Deleted F.A. 1995 and such share shall be included in his total income.

Provided that if his share so computed is a loss, such loss may be set off or carried forward and set off in

accordance with the provisions of section 42.

Section – 85; Special provisions regarding assessment of firms:

(1) Notwithstanding anything contained in this Ordinance, where the assessee is a firm and the total income of the

firm has been assessed under sections 82, 83, or 84, as the case may be,-

[(a)] Deleted F.A. 1995

(b) in the case of a firm, the tax payable by the firm shall be determined on the basis of the total income

of the firm.

(2) Whenever any determination is made in accordance with the provisions of sub-section (1), the Deputy

Commissioner of Taxes shall, by an order in writing, notify to the firm-

(a) the amount of tax payable by it, if any ;

(b) the amount of the total income on which the determination has been based; and

(c) the apportionment of the amount of income between the several partners.


http://taxmatebd.com/index.php?pid=10#85-1a




Practical Problems:

Problem - 1

ABC Partnership Firm

Profit and loss account

For the year ended 30 June 2015

Assessment year: 2015-2016

Debit

Credit

Description BDT Description BDT

Salary to A 200,000 Gross profit 3,000,000

Office rent to B

300,000

Capital gain on machinery

500,000

Interest paid to B

100,000

― ― ― C

250,000

Office Maintenance

300,000

Provision for bad debt

250,000

Commission paid to A

400,000

― ― C

500,000

Net profit

1,200,000

3,500,000

3,500,000

Compute:

1. Total taxable income of the firm;

2. Allocation of firm's profit among the partners;

3. Tax liability of the firm;

4. Total taxable income of B;

5. Net tax payable by B.

Solution:

(1) Total Income

BDT

Net profit as per profit and loss account 1,200,000

Less: Capital gain for separate consideration (500,000)

700,000

Add: Inadmissible expenses:

Salary to partner A [Sec - 30(6)] 200,000

Interest to partner (B+C) 350,000

Commission (A+C) 900,000

Provision for bad debt 250,000

Business Income 2,400,000

Income from capital gain 500,000


Particulars




(2) Allocation of Income

Total taxable income of the firm 2900,000

Less: Capital gain (As it is not distributable as per 6th Schedule, Part-A, Para-18) (500,000)

2,400,000

Value of benefits provided to partners (1,450,000)

Distributable Income 950,000

Distribution:

A = (950,000/3 + 600,000) = (316,667+600,000) = 916,667

B = (316,667+100,000) = 416,667

C = (316,667+ 750,000) = 1,066,667

Minimum tax: As gross receipts information is not given in the question, it is assumed minimum tax is lower than the

computed amount.

4. Income of B

Income from house property

Amount Amount

Annual value

300,000

Less: Repair & maintenance (30%)

(90,000)

Income from house property

210,000

Income from business & profession

Share of income from partnership firm (taxed)

416,667

Total income of B

626,667

Assumed expense claimed for repairs is equal to deductible allowance

Range of income

Rate Tax

Up to 250,000 0% -

Remaining 376,667 10% 37,667

37,667

Less: Tax rebate on share of income from firm

[37,667*(416,667/626,667)]

(25,044)

Net tax liability

12,622

A B C Total

Salary 200,000 - - 200,000

Commission 400,000 - 500,000 900,000

Interest - 100,000 250,000 350,000

600,000 100,000 750,000 1,450,000

3. Tax Liability:

Tax (BDT)

On First 250,000 @ 0% -

Next 400,000 @ 10% 40,000

Next 500,000 @ 15% 75,000

Next 600,000 @ 20% 120,000

Balance 1,150,000 @ 25% 287,500

Total 2,900,000 5, 22,500

Assume that the capital gain is within the 5 years of purchase.




Part Thirteen: Assessment

Assessment:

1. PROVISIONAL ASSESSMENT (SEC.81):

The D.C.T. is empowered under section 81 of I. T. Ordinance, 1984 to make provisional assessment in a

summery manner–

i. On the basis of return and statements, where return has been filed (after allowing

depreciation as per 3rd Schedule and also after setting off any loss carried forward if any); or

ii. On the basis of last assessed income, where no return has been filed.

As the name indicates that it is not final, just an assessment done provisionally to collect tax before regular

assessment. There shall be no right of appeal against provisional assessment. Rather all penal measures can

be enforced to recover tax as per provisional assessment.

2. ASSESSMENT ON THE BASIS OF CURRECT RETURN (SEC.82):

Where in the opinion of the D.C.T. normal return or revised return submitted by the assessee is correct and

complete in all respect he shall assess total income on the basis of that return and communicate the

assessment order within 30 days from the date of such assessment. The following are the restrictions to do

assessment under this section:

i. Return must be filed within the prescribed time;

ii. Tax as per return shall be paid before submission of return;

iii. Such return does not show any loss.

iv Such return does not show lesser income than the last assessed income.

v. Assessment on the basis of such return does not result in refund.

3. UNIVERSAL SELF- ASSESSMENT (SEC. 82BB):

Introduction:

Universal self assessment system has been introduced in our country from the assessment year

2007-2008. Every assessee (including company) is eligible to submit return under this system. In this system

assessee has to tick the box [universal self assessment] at the top of the return form. DCT will issue a receipt

of such return and that receipt will mean that assessment is complete. It is hassle free in the sense that

assessment has been done on the basis of return and without any physical presence. Meanwhile, due to this

simplicity, it becomes very popular method of submitting return. But it should be kept in mind that return

must be correct and complete.

Procedure to submit return under universal self assessment system:

The procedure is very simple. Assessee has to prepare his return either by himself or with the help

of other and then it is to be signed and verified. Assessee has to tick the box universal self assessment at the

top of the return form and after paying tax (if applicable) submit the return within the last date of submission

of return or within the extended time allowed by the DCT. However, the assessee should keep in mind the

following:

(a) Such return must be submitted within the last date of submission of return

or within the extended time allowed by the DCT.

(b) Tax as per return (if any) is to be paid before submission of return.

(c) No question is to be raised by the DCT as to the source of initial capital

investment in case of new assessee showing new business if at least 25% of initial capital is shown

as income. Initial capital formed in such way is not transferable within 5 years from the end of the

assessment year in any manner.




Scrutiny assessment:

After submission of return under universal self assessment system, DCT shall scrutiny/process such

return and make adjustment

(1) if there is any arithmetical error in the return and

(2) if there is any incorrect claim

After necessary adjustment DCT will send demand notice along with income computation

sheet to the assessee. The time limit is 12 months from the end of the assessment year within which such

intimation is to be sent to the assessee.

If as a result of scrutiny assessment more tax to be paid by the assessee then DCT shall have to give

the assessee a reasonable opportunity of being heard.

Tax audit:

The return submitted at this system may, afterwards, be selected by the NBR or its subordinate

authority (if so authorized by the Board) for audit. The Board will determine the manner of such selection.

If return filed under universal self-assessment scheme showing at least 20% higher income than the

income assessed or shown in the immediate preceding assessment year, then it shall not be selected for tax

audit by the NBR. But the conditions are:

1.Return is to be accompanied by corroborative evidences in support of tax exempted income (if

any).

2. Return is to be accompanied by bank statement in support of taking loan(if any) exceeding taka 5

lac.

3. Return does not show any receipt of gift

4. Return does not show any income on which reduced tax rate is applicable.

5. Return does not show any refund

If the return is selected for audit, then DCT will proceed to make fresh assessment by issuing

notice under section 83(1) for hearing and he will make assessment within 2 years from the end of the

assessment year. Otherwise it will be barred by time limitation. Assessment can be done under section 83(2)

or under section 84 as the situation permits.

Re-open the assessment under section 93:

If any concealment has been detected in the return submitted by the assessee under universal self

assessment scheme within 6 years from the end of the assessment year then the DCT may re-open the case

and proceed to assess further

Documents to be attached with the return:

Audited statements of accounts

Income computation sheet if shown income differ from income shown at audited statement of accounts

[section -75]

Separate statement for:

Any income from other sources e.g. interest, dividend, etc.

Tax exempted income [Rule 24]

Information regarding name, address and TIN of the directors of the company [Rule 24]

Evidence of tax payment on the basis of income disclosed in the return.

FINAL SETTLEMENT OF TAX LIABILITY (SEC. 82C):

Any tax deducted /collected at source from the following heads shall be deemed to be the final discharge of

tax liability:

1. Contractors and suppliers (Section 52+Rule 16)

2. Royalty and Technical know-how fee (Section 52A(2)




3. C&F Agency commission (Section 52AAA)

4. Handmade cigarette (Section 52B(1)) Amended FA 2015

5. Compensation against property acquisition (Section 52C)

6. Rental power (Section 52N)

7. International Gateway Service (IGS) on international phone call (Section 52R)

8. Import [other than raw-material import] (Section 53+Rule 17A)

9. Shipping Agency Commission(Section 53AA)

10. Manpower export(Section 53B+Rule 17C)

11. Export of -

(a) knit-wear

(b) Woven garments

(c) Terry towel

(d) Carton

(e) Garments accessories

(f) Jute goods

(g) Frozen foods

(h) Vegetables

(i) Leather goods and

(j) Packed foods

12. Member of Stock Exchange (Section-53BBB)

13. The amount received on account of export of any goods except certain items on which tax is deductible

under section 53BBBBAdded FA 2015

14. Public Auction (Section 53C+Rule 17D)

15. Non-resident Courier (Section 53CC)

16. Salary of foreign technicians serving in a diamond cutting industry (Section-52 O)

17. Export cash subsidy (Section 53DDD)

18. The amount received on account of commission, charges by foreign buyer‘s agent. (Section 53EE)Added

FA 2015

19. The amount received by public university, MPO enlisted educational institutions, ICAB, ICMAB and

ICSB on account of interest or share of profit {section 53F(1)(c)}Added FA 2015

20. Real Estate and Land Development Business (Section-53FF)

21. Insurance Commission (Section 53G)

22. Surveyor of General Insurance (Section-53GG)

23. Sale of property (Section-53H)

24. Capital Gain from transfer of shares by sponsor shareholders (Section 53M)

25. Income from Lottery (Section 55)

26. Savings instrument (Section 52D)Amended FA 2015

27. Transfer of shares of shareholders in stock exchange (Section 53N) (82C(6) not applicable)

28. Tax collected from travel agent under (Section 52JJ)Added FA 2015

Section 82C has been re-drafted through Finance Act, 2011 changing the way of calculating income which

will suffer more taxes. Some new conditions are as follows:

(1) Income to be determined through back calculation

(2) Such income will not set off with loss under any other head or loss of earlier year or years.

(3) Though it is final settlement of tax liability but tax is to be paid again in the following situations:

If shown income is in excess of the amount determined under back calculation, then tax is to be

paid again at the applicable rate on excess income shown.

Tax at applicable rate will also be payable on disallowances under sec. 30.

Individual taxpayer shall have to pay surcharge if net wealth exceeds Tk.2 crore.

4. SPOT ASSESSMENT (SEC.82D):

Where an assessee, not being a company, who has not previously been assessed but carrying on business or

profession in any shopping center or commercial market or having a small establishment, the D.C.T may fix

(Section-53BB)




tax payable by him at the rate prescribed at Rule-38B and the receipt obtained for payment of such tax shall

be deemed to be an assessment order.

5. ASSESSMENT AFTER HEARING (SEC.83):

When the D.C.T. is not satisfied without requiring the physical presence of the assessee who filed the return

or the production of evidences then he will issue notice u/s 83(1) fixing a date and time for hearing.

After hearing and considering the evidences produced and if necessary considering such other evidences by

issuing another notice u/s 83(2) the D.C.T. will make assessment u/s 83(2) within 30 days from the last

hearing and communicate the assessment order within another 30 days from the date of assessment.

Thus, section 83(1) deals with notice of hearing and section 83(2) deals with both requisition notice and

assessment.

6. ASSESSMENT ON THE BASIS OF REPORT OF NBR APPOINTED CHARTERED

ACCOUNTANT (SEC.83AAA):

When NBR has reasonable cause to believe that a return submitted by any company assessee is incorrect or

incomplete, then the Board may appoint a chartered accountant to examine the books of accounts of that

company. He will then exercise the powers and functions of a DCT only relating to section 79 and other than

clause (f) of section 113. After examination of the books of accounts, he will submit report to the Board and

the Board will then forward the report to the DCT for consideration. After receiving the report, DCT will

proceed to assess the income of the company by issuing notice u/s 83(1)

7. BEST JUDGMENT ASSESSMENT (SEC. 84):

Where any assessee fails to file return required by a notice u/s 77/93 and has not filed a return or revised

return u/s 78 or to comply with the requirements of notices u/s 79, 80 or 83(I), the D.C.T. shall assess

income to the best of his judgment.

8. ASSESSMENT OF BUS, TRUCK, MINIBUS ETC.:

Deviating from the normal assessment procedure, owner of bus/mini bus, truck/truck Lorries, coaster, taxi

cab etc. will pay tax on at the fixed rate prescribed at SRO No 160-law/2014 dated 26/06/2014.

9. ASSESSMENT OF PARTNERSHIP FIRM (SEC.85):

Like other category of assessee, DCT will assess the income of the partnership firm and determine the tax

payable thereon by the firm. He will also apportion the total income of the firm (arrived before tax) between

the partners.

10. ASSESSMENT IN CASE OF CHANGE IN THE CONSTITUTION OF THE FIRM (SEC.86):

If DCT find at the time of assessment of a firm that a change has occurred in the constitution of the firm, the

assessment shall be made on the re-constituted firm but the conditions are:

(1) Income will be apportioned between those partners who were partners during the income year.

(2) When tax assessed on any partner is not recoverable from him it will be recovered from the re-

constituted firm.

11. ASSESSMENT IN CASE OF CONSTITUTION OF A NEW SUCCESSOR FIRM (SEC.87):

If it is found at the time of assessment of a firm that a new firm has been constituted to succeed the previous

firm DCT will make two assessments one for the predecessor firm and the other for the successor firm.

12. ASSESSMENT IN CASE OF SUCCESSION TO BUSINESS OTHERWISE THAN ON DEATH

(SEC.88):

Where any person carrying on business or profession has been succeeded otherwise than by death by another

person the predecessor shall be assessed for the period up to the date of succession and the successor shall be

assessed for the period after the date of succession. Provided that-

(1) Where the predecessor cannot be found the assessment shall be made on the successor




(2) Where tax is not recoverable from the predecessor, it is to be recovered from the successor

who shall be entitled to recover it from the predecessor.

13. ASSESSMENT IN CASE OF DISCONTINUED BUSINESS (SEC.89):

When any business or profession is discontinued, a notice of such discontinuance must be given to the

D.C.T. within 15 days of such discontinuance of the business or profession accompanied by a return of total

income for the broken period. If the person discontinuing such business or profession fails to give such

notice, the D.C.T. may impose penalty a sum not exceeding the amount of tax subsequently assessed on him.

14. ASSESSMENT IN CASE OF PERSONS LEAVING BANGLADESH (SEC. 91):

Whenever any person is leaving Bangladesh and has no intention to come back, the D.C.T. may proceed to

assess him for all the completed income years for which his assessments remain pending as well as for the

broken period up to the probable date of his departure from Bangladesh.

Here is deviation from the usual practice as the assessment of the broken period may be completed before

the commencement of the relevant assessment year. One important thing to note here is that, the assessee is

entitled under the law to get at least seven days‘ time to file his return and statements of income.

15. ASSESSMENT IN CASE OF INCOME OF A DECEASED PERSON (SEC. 92):

Whenever any person dies, his executor, administrator or other legal representative is liable under the law to

pay out of the estate of the deceased any tax which was payable by him and any other tax liability which

might be payable in consequence of any assessment made after his death. Liability of the legal representative

is limited to the extent to which decreased estate is capable of meeting the liability.

Legal representative shall be deemed to be an assessee for this purpose, provided a notice is given to him as

per section 92(2).

16. ASSESSMENT IN CASE OF INCOME ESCAPING ASSESSMENT (SEC. 93):

A fresh assessment can be made by the D.C.T. in case of –

i) Escaped assessment;

ii) Under assessment;

iii) Assessment at too low a rate;

iv) Assessment results excessive relief or refund.

Preconditions:

i) Action under section 93 cannot be initiated unless definite information has come into the possession

of the D.C.T.

ii) Before initiating the proceeding under section 93 previous approval in writing from the DCT is to

be taken, except in a case where a return has not been filed u/s 75/77

iii) Notice under section 93 can be issued within 5 years from the end of the assessment year in case it

is escaped assessment or under assessment and within 2 years from the end of the assessment year

in case it is assessed at too low a rate or has been subject to excessive relief or refund.

17. ASSESSMENT IN THE CASE OF MINORS, LUNATICS, IDIOTS, BENEFICIARIES OF ANY

TRUST. (SEC. 95):

Minors, lunatics and idiots are assessable to tax as beneficiaries through their guardians and trustees in the

same way and to the same extent as it would have been livable and recoverable from such beneficiaries of

full age or sound mind in direct receipt of any income profits and gains. In the like manner, the beneficiaries

of any property managed by a Trust, Court of Words, receiver or manager will be brought to tax through the

Trustees, Court of Words, receivers or manager.

18. ASSESSMENT OF NON-RESIDENT SHIPPING BUSINESS (SEC. 102):




If any Ship calls on any port in Bangladesh, the aggregate of the receipt arising from the carriage of

passenger, livestock, mail or goods shipped at the port since the last arrival of the ship or at any port outside

Bangladesh for which amount is received or deemed to be received in Bangladesh shall be treated as income

received in Bangladesh and in this case tax rate will be 8% (usually tax rate is 4% in case where there is a

double taxation avoidance agreement with the country the ship is originated).

19. ASSESSMENT OF NON-RESIDENT AIRLINES (SEC. 103A):

If any foreign aircraft calls on any airport in Bangladesh, the aggregate of the receipts arising from the

carriage of passengers, livestock, mail or goods loaded at the said airport into that aircraft shall be deemed to

be income received in Bangladesh and in this case tax rate will be 3% (usually no tax in case where there is a

double taxation avoidance agreement with the country the aircraft is originated).

Penalty and Prosecution:

Introduction

There are provisions for imposition of penalties on fraudulent assessee at chapter XV (section 123-133), offences and

prosecution at chapter XXI (section 164-171) of the Income Tax Ordinance, 1984.

The penalty is the additional amount of income tax though as per definition of tax at section 2 (62), tax includes

penalty. The power to impose penalty is given mainly to the Deputy Commissioner of taxes (DCT) and in case of

concealment of income the power to impose penalty is also given to the Commissioner of Taxes (Appeal), Appellate

Joint Commissioner of Taxes and Taxes Appellate Tribunal. The power to impose penalty is subject to the prior

approval of the Inspecting Joint Commissioner of taxes (IJCT) except in the case of imposing penalty for failure to

file return u/s 124. Penal proceedings can be initiated by the DCT only in the course of any proceedings in connection

with the regular assessment and no such proceedings can be started after completion of the assessment order. If the

penalty proceedings are not finalized but the assessment is completed there is nothing to bar the DCT to impose

penalty. There is another restriction that assessee has been heard or has been given a reasonable opportunity of being

heard before imposing penalty.

Equally no prosecution can be instituted without prior sanction of the Board and Board has power to compound such

offences.

Penal Provisions

The penal provisions are tabulated below:

Sl. Grounds of Penalty Section Amount of Penalty Pre-conditions/

Comments

1. Penalty for not

maintaining accounts in

the prescribed manner

123

(Read with

section 35 and

Rule-8 and

Rule-8A)

(a) 1.5 times of the amount

of tax payable (Maximum)

(b) Tk.100 where the total

income does not exceed the

threshold limit (Maximum)

(c) 50% of tax on house

property or Tk. 5,000

whichever is higher in case

the owner of the house

receiving more than Tk.

25,000 but violates rules

and order of NBR relating

to maintenance of register

and depositing rent to bank

account.

1) Penalty cannot be

imposed unless the assessee

has been heard or has been

given a reasonable

opportunity of being heard.

2) DCT shall not impose the

penalty without the previous

approval of the IJCT.




2. a) Penalty for failure to

file return including

withholding tax return

124(1) Provided that such penalty

shall not exceed—

(a) in case of an assessee,

being an individual, whose

income was not assessed

previously five thousand

taka;

(b) in case of an assessee,

being an individual, whose

income was assessed

previously, fifty per cent

(50%) of the tax payable on

the last assessed income or

taka one thousand,

whichever is higher.Amended

FA 2015

Penalty cannot be imposed

unless the assessee has been

heard or has been given a

reasonable opportunity of

being heard.

b) Penalty for failure to

furnish certificate,

statement, accounts,

information etc. required

u/s 58, 108, 109, 110 and

184C

124(2) Tk 500/- plus 250 per month

during which the default

continues.

-Do-

c) Penalty for failure to

furnish information

required u/s 113

124(2) Tk.25,000/- plus 500/- per

day during which the default

continues.

-Do-

d) Penalty for using fake

T.I.N. or T.I.N. of

another person

124A Tk.20,000/( maximum) 1) Penalty cannot be

imposed unless the assessee

has been heard or has been

given a reasonable

opportunity of being heard.

2) DCT shall not impose the

penalty without the previous

approval of the IJCT

e)Penalty for failure to

verify Taxpayer‘s

Identification Number

124AA Penalty not exceeding taka

fifty thousand.

Where a person, responsible

for verification of the

authenticity of twelve-digit

Taxpayer‘s Identification

Number (TIN) in

accordance with the

provision of sub-section (2)

of section 184A of this

Ordinance, has, without

reasonable cause, failed to

comply with such

requirement under that

provision.Added FA 2015




3. Failure to pay advance

tax

125 The amount of short fall

(maximum)

-Do-

4. Penalty for non-

compliance with notice

u/s 79, 80, 83(1) and

83(2)

126 The amount of tax

subsequently assessed

(maximum)

-Do-

5. Failure to pay tax u/s 74

on the basis of return

127 If tax paid u/s 74 is less than

the payable amount then

25% of the short fall

(maximum). Amended FA 2015

-Do-

6. Penalty for concealment

of income

128 15% of the tax evasion. If

the tax evasion is detected

after one year or more, then

the amount of penalty will

increase by additional 15%

for each earlier assessment

year

-Do-

7. Penalty for false audit

report by Chartered

Accountant

129A Not less than Tk. 50,000

and not more than Tk.

2,00,000.

-Do-

8. Penalty for furnishing

fake audit report

129B Penalty of a sum of one lakh

taka for that income year.

Where beyond reasonable

doubt any audit report

furnished by an assessee

along with the return of

income or thereafter for any

income year is not signed by

a chartered accountant or is

believed to be false.Added FA

2015

9. Penalty for default in

payment of tax

137 The amount of arrear tax

(maximum)

If the amount of tax on

which penalty was imposed

has been fully reduced by

the order of any Appeal/

Tribunal/ Supreme court,

the penalty shall

automatically be cancelled

and if any penalty paid shall

be refunded.

10. Failure to deduct/collect

tax at source or having

deducted/collected fails

to deposit into national

exchequer.

57 2% per month of the amount

of tax to be deducted,

collected or deposited

(1) The deducting authority

will also be treated as an

assessee in default.

(2) Expenditure will be

disallowed as per section

30(a) and 30(aa)

11. Failure to give notice to

the DCT regarding the

discontinuance of

business

89(3) The amount of tax

subsequently assessed

(maximum)

No pre-condition.

The above-mentioned sections prescribe the maximum penalty (except section 124 & section 57 where penalty is

fixed). But the fact is that the ceiling of penalty does not mean that penalty must necessarily be imposed in everycase.

The discretion of the DCT to levy or not to levy a penalty is still preserved by the penalty sections mentioned above.




Prosecution (Imprisonment for punishable offence)

The prosecution provisions are tabulated below:

Sl. Nature of Offence Reference

Section

Imprisonment Comments

1. Failure to deduct/collect

tax at source or having

deducted/collected but

fails to deposits into

national exchequer.

164 (a) 1 year (maximum) with or

without fine

1) No prosecution can

be instituted without

prior sanction of the

NBR.

2) NBR has the power

to compound offences.

2. Non-compliance of

notices u/s 77, 79, 80 and

83

164 (b) 1 year (maximum) with or

without fine

-Do-

3. Failure to file return u/s

75 or in compliance with

notice u/s 77 and 93

164 (c) 1 year (maximum) with or

without fine.

-Do-

4. Refuses to furnish

information required u/s

113

164 (cc) 1 year (maximum) with or

without fine

-Do-

5. Refuses to permit

inspection or to allow

copies to be taken in

accordance with the

provisions of section 114

164 (d) 1 year (maximum) with or

without fine.

-Do-

6. Fails to furnish

information required u/s

115

164 (e) 1 year (maximum) with or

without fine

-Do-

7. Fails to comply with the

requirement u/s 116

164 (ee) 1 year (maximum) with or

without fine

-Do-

8. Fails to comply with the

requirement u/s 116A

164 (eee) 1 year (maximum) with or

without fine

-Do-

9. Refuses to permit or

obstructs the income tax

authority to exercise

power u/s 117

164 (f) 1 year (maximum) with or

without fine

-Do-

10. Makes false statement at

the verification of the

return or other

documents

165 (a) Minimum 3 months but

maximum up to 3 years with

or without fine

-Do-

11. Punishment for

furnishing fake audit

report

165(AA) Imprisonment for a term

which may extend to three

years, but shall not be less

than three months, or with

fine up to taka one lakh, or

both.

if he furnishes along

with the return of

income or thereafter any

audited statement of

accounts which is false

or does not conform

with signature of a

chartered accountant

purported to be

signatory to such

statement.Added FA 2015




12. Willfully aids, abets,

assists, incites or induces

other person to deliver a

false return, accounts,

statements, etc.

165 (b) Minimum 3 months but


or without fine

-Do-

13. Refuses to furnish

information as may be

necessary for the purpose

of survey u/s 115

165 (d) Minimum 3 months but


or without fine

-Do-

14. Deliberately using fake

TIN or TIN of another

person

165A 3 years (maximum) with or

without fine up to Tk. 50,000

-Do-

15. Obstructs income tax

authority to discharge

their function

165B 1 year (maximum) with or

without fine

-Do-

16. Punishment for

unauthorized

employment

165C Imprisonment for a term

which may extend to three

years, but shall not be less

than three months, or with

fine up to taka five lakh, or

both.

If he employs or allows

to work any individual

not being a Bangladeshi

citizen without prior

approval from Board of

Investment or any

competent authority of

the government as the

case may be. Added FA 2015

17. Conceals income or

deliberately furnishes

inaccurate particulars

166 Minimum 3 months but


or without fine

-Do-

18. Disposal the property

after the receipt of notice

from TRO to prevent

attachment

167 5 years (maximum) with or

without fine

-Do-

19. Disclosure of information

in contravention of the

provisions of section 163

168 6 months (maximum) with or

without fine

-Do-

Penalty for not maintaining accounts in the prescribed manner (section 123).

As per provision of section 35 income shall be computed in accordance with the method of accounting regularly

employed by the assessee in case of the following heads of income: -

1. Income from business or profession.

2. Agricultural Income

3. Income from other sources.

Medical practitioners known as doctors, surgeons, physicians, dentists, psychiatrists, homeopaths, veterinary surgeons

other than medical practitioners, who do not make any separate charge for consultation but make a charge for the

medicines supplied by them and legal practitioners (including income-tax practitioners) accountant and auditors,

architects and engineers, are to maintain accounts in the manner prescribed in Rule-8.

In case of house property income, the owner shall have to maintain register relating to details of rent received if

monthly rent received exceeds Tk. 25,000 and that rent must be deposited to his bank account. (Rule - 8A)




Penalty for failure to file Income Tax Return (Section- 124)

The Deputy Commissioner of Taxes has not the absolute power to impose penalty without giving due regard to see

the circumstances which causes default on the part of the assessee to file the return on time and if there is any

reasonable cause for which he failed to file the return on time penalty should not be imposed. Absence of reasonable

cause is necessary to justify a penalty-mere non-furnishing of, or delay in furnishing a return of income is not enough.

Imposition of penalty is not compensatory but punitive and the proceeding to impose penalty is quasi criminal. It is

well settled that the liability to pay penalty does not arise merely on proof of default in filing the return on time and

the discretionary power of the authority to impose penalty for failure to file return on time is to be exercised judicially

and on consideration of all the relevant circumstances. Penalty may be imposed for not furnishing a return within the

time allowed in the notice calling for a return, even if the assessee does furnish a return after the expiration of the

time allowed.

Penalty for concealment of income (section 128)

This section prescribes penalty for concealment of income. An assessee who had deliberately filed an incorrect return

shall submit a revised return. When the omission in the first return is on the point of being discovered, the DCT while

assessing on the basis of the revised return shall impose a penalty under section 128 of I.T. Ordinance, 1984 for

concealment of income in the first return.

Concealment of income in the original return would be attracting penalty even if the assessee submits a revised return

u/s-78 before the assessment is completed.

This section specifies the different nature of concealment and prescribes the maximum amount of penalty to be

imposed depending on the nature and circumstances of the case. For concealing particulars of income or for

furnishing inaccurate particulars of income which includes suppression of any item of receipt liable to tax or showing

such expenditure which has not been actually incurred or claiming any deduction which is not legally allowable. For

such type of concealment DCT shall impose @15% of the tax evasion. If the tax evasion is detected after one year or

more, then the amount of penalty will increase by additional 15% for each earlier assessment year.

Penalty for default in payment of tax (section-137)

This section gives discretion to the DCT to impose or not to impose a penalty when an assessee is in default in

payment of tax including advance tax. It is not obligatory on the DCT to impose a penalty in every case where there is

default in payment of tax and the amount of the penalty is also in his discretion, but the total amount of penalty

should not exceed the amount of tax in arrear.

The penalty so imposed under this ordinance shall be in addition to any other liability of the assessee, which he has

incurred in any other provisions under this ordinance or under any other law of the country.




Part Fourteen: Appeal

Appeal:

An appeal lies to the Appellate Joint Commissioner of Taxes (AJCT) or to the Commissioner (Appeals), as the case

may be, against the order of the Deputy Commissioner of Taxes (DCT). Section 153 gives the right of appeal only to

the tax payer and not to the department. Therefore, income tax department cannot appeal against any order of the

DCT. But the Inspecting Joint/Additional Commissioner of Taxes (IJCT/IACT) has the power U/S 120 to revise any

order passed by the DCT if it is erroneous and prejudicial to the interest of the revenue. Commissioner of Taxes

working in the territorial zone can also exercise his revisional power U/S 121A and pass such order not being an

order prejudicial to the interest of the assessee. Therefore, no appeal would lie if a right of appeal is not given at our

tax law because appeal is not an inherent right. The sequence of appeal is given below through a flow chart:

2nd appeal to the Taxes

Appellate Tribunal (both

assessee and income tax

department can go)

Choose an

Appeal Option

Order

of the

DCT

1st Appeal to the

AJCT (other

than company

cases and its

directors) Review

application

to the CT

of

Territorial

Zone

Reference application to

High Court Division of

the Supreme Court (Only

at question of law point)

Appeal to the Appellate

Division of the Supreme Court

against the judgment of the H/C

division (if the H/C division

certifies to be fit case for appeal

to the Appellate Division)

1st Appeal to the

AACT

(For company

cases and its

directors)

1st Appeal to the

Commissioner

(Appeals)

(For company

and its directors)

END

END

1

2

3

4 5 6

7

8

9




1. First appeal to the AJCT/AACT/Commissioner (Appeals)

Only assessee can file 1st appeal to the Appellate Joint Commissioner of Taxes (AJCT) or Appellate Additional

Commissioner of Taxes (AACT) or Commissioner (Appeals) as per jurisdiction. The jurisdiction is usually

mentioned at the bottom of the demand notice issued by the DCT. Normally, AACT and Commissioner (Appeals)

deal with company cases along with the directors of the company and the AJCT deals with other individual cases.

Appeal to the Commissioner (Appeals) also lies against the order made by the IJCT U/S 10 or U/S 120.It is to be

noted here that the right of appeal is given to the assessee. Where an assessment is made on the representative or on

the agent of a non-resident, the person beneficially entitled to the income is nevertheless an assessee within the

meaning of section 153 and has therefore a right to appeal.

(a) When 1st appeal can be filed

Appeal can be filed by the assessee against the following order of the DCT:

(i) Assessment Order (except assessment U/S 81, 82 and 82BB)

(ii) Determination of tax liability to pay.

(iii) Tax Computation (including an order imposing simple interest U/S 73)

(iv) Set-off of losses U/S 37 (If the assessee has any objection as to the computation of loss or set-off of

loss).

(v) Penalty U/S 124, 125, 126,127, 128 and 137.( There is no provision to file appeal against the order

of charging penalty @2% per month for non deduction/ collection of tax at source).

(vi) Refusal to allow a claim of refund.

(vii) Determination to the actual amount of refund.

(viii) Disallowing the claim of foreign tax credit (7th Schedule(para-7)

Appeal can also be filed to the Commissioner (Appeals) against the following order of the IJCT/IACT:

(i) Assessment Order U/S 10.

(ii) Order to revise the order of the DCT U/S 120.

(b) Procedure to file 1st Appeal

The following procedure should be followed to file 1st appeal:

(i) Appeal shall be filed at the form prescribed at Rule -27 and Rule-27A with duly signed and verified.

(ii) Appeal fee of TK. 200/- is to be paid before submission of appeal.

(iii) Tax as per return is to be paid if it is not paid at the time of filing return or afterwards.

(iv) Appeal shall have to be filed within 45 days from the date of service of demand notice except in case

of appeal against the disallowances of the foreign tax credit as per 7th schedule Para-7.

However appeal authorities can entertain an appeal after condoning the delay if he is convinced that

assessee has sufficient reason for failure of file appeal in time. Demand notice should be served properly

otherwise assessee will get unlimited time. The power to condone such delay is discretionary. Provision

for time limitation of 45 days will not attract if demand notice was not served with assessment order (I.T.

88) and Tax computation form (I.T. 30), in which case assessee will get unlimited time for filing appeal.

So without I.T.88 and I.T.30 the service of demand notice is not complete. In computing the 45 days, the

time required for obtaining a certified copy of such order should be excluded.

Where the 45 days expires on day which is a holiday, the appeal may be made on the day next following

such holiday.

(c) Disposal of appeal cases by the appeal authority




The following procedure should be followed by the appeal authority to dispose of an appeal:

(i) Notice of hearing is to be given to both appellant and the concerned DCT.

(ii) Appeal authority can make enquiry and call for such particulars as he may require before

disposing of an appeal. He can also give instruction to the DCT for further enquiry.

(iii) Appeal authority can allow new or additional ground of appeal if he is satisfied that the omission

of that ground was not willful or unreasonable.

(iv) Appeal authority will not admit any documentary evidence which was not produced before the

DCT unless he is satisfied that appellant was prevented by sufficient cause from producing such

evidence before DCT.

(v) Appeal authority in his judgment can give following decision when an appeal filed against

assessment order:

a. confirm

b. reduce

c. Enhance

d. Set aside with the direction to make fresh assessment. (only on the ground that notice was

not served properly)

e. Annul

Enhancement of assessment means increase in the amount of total income or tax. It can be

done only after giving the assessee a reasonable opportunity of being heard.

If the AJCT or Commissioner (Appeals) does not enhance the total income but by means of

reduction under one head and an increase under another head allows the assessment to remain

the same or reduces it, it can not be said to have enhanced merely because income under one

head has been increased Where the assessee‘s income has been assessed under more than one

head, even if the assessee‘s appeal is confined to the income assessed under only one of the

heads, the AJCT or Commissioner (Appeals) may enhance the assessment by increasing the

amount assessed under another head of income in respect of which the assessee has not

appealed. The reason is that income tax is only one tax and when the assessee goes in appeal

then exposes the assessment as a whole.

But appeal authority has no power to enhance the assessment by assessing entirely new sources

of income outside the subject matter of the assessment appealed against. He has no jurisdiction

to travel beyond the subject matter of the assessment and his power of enhancement relates only

to that income which has been subjected to the process of assessment.

On the other hand it is not open to the assessee who has preferred an appeal to withdraw it so as to prevent

the Appellate Joint Commissioner of Taxes (AJCT) or Commissioner (Appeals) from enhancing the

assessment.

(d) Appeal authority in his judgment can give the following decisions when an appeal filed against

penalty order:

(i) confirm

(ii) set-aside (only on the ground that notice was not served properly)

(iii) cancel

(iv) reduce

(v) enhance (only after giving reasonable opportunity of being heard)

(e) In any other case, appeal authority can pass such order as they think fit. But the AJCT or Commissioner

has no power to review his own order in any case but he is empowered U/S 173 to rectify any mistake

apparent from record.

(f) Appeal shall be disposed of by the appeal authority with 150 days from the end of the month of which the

appeal was filed and such order shall be communicated to the appellant, DCT and Commissioner of Taxes




within 30 days. If the appeal is not disposed of within the period of limitation the appeal so filed shall be

deemed to have been allowed.

2. Procedure to file 2nd appeal to the Taxes Appellate Tribunal

(a) Both assessee and DCT (with prior approval of his Commissioner) can prefer 2nd appeal against the

1st appeal order (Including an order imposing penalty u/s 128 by the AJCT or Commissioner

(Appeals). An order of the AJCT or Commissioner (Appeals) refusing to condone delay (if there is

any application for condo nation) and refusing to admit, or rejecting after hearing, an appeal as time

barred, will be treated as an order passed in the appeal and a 2nd appeal would lie to the tribunal.

(b) Appeal shall be filed at the form prescribed at Rule-28 with duly signed and verified by the

appellant.

(c) Tribunal fee of TK.1000/- is to be paid before submission of 2nd appeal (this fee is not applicable

when appeal is filed by the DCT).

(d) Assessee has to pay tax @ 10% of the difference between the tax as per appeal order and tax as per

section 74. However, authority to reduce such tax has been given to the Commissioner of Taxes if

assessee applies for this.

(e) Appeal shall be filed to the Taxes Appellate Tribunal within 60 days from the date of receiving 1st

appeal order.

3. Disposal of appeal by the Taxes Appellate Tribunal

The following procedure should be followed by the Taxes Appellate Tribunal to dispose of an appeal:

(a) Notice of hearing is to be given to both appellant and the department. Even if the appellant does not

appear on the day fixed for hearing, the Tribunal is bound to decide the appeal on merit and cannot

dismiss the appeal for default.

(b) Tribunal may call for such particulars as they may require or can give instruction to the DCT for

further inquiry.

(c) Tribunal will give judgment as they think fit. The power to pass such order as the Tribunal thinks fit

can be exercised only in relation to the matters that arise in the appeal. It is not open to the Tribunal

to adjudicate or give a finding on a question which is not in dispute and which does not form the

subject matter of the appeal.

The Tribunal would be entitled to enhance the assessment as it stands after the appeal order in case

of appeal by the department or in case of cross appeal. But when the appeal is filed by the assessee

and there is no cross appeal by the department, it is not open to the Tribunal to give a finding

adverse to the assessee.

(d) Since a reference application to the High Court division lies only on a question of law, the Tribunal

is the final fact finding authority.

(e) Appeal shall be disposed of by the Appellate Tribunal within 6 months from the end of the month of

filing appeal; otherwise appeal so filed shall be deemed to have been allowed. Such order should be

communicated within 30 days for the date of order.

(f) Tribunal has no power to review its own order but they are empowered by section 173 to rectify any

mistake apparent from record.

(g) Tribunal has power to permit an appeal to be withdrawn.

Decision shall be given in accordance with the opinion of the majority of its members. It is the duty of the

members of the Tribunal who heard the appeal in the first instance to formulate clearly the point on which they

differ and it is only thereafter that a reference can be made to a third member. After the decision of the third

member on the point referred to him the case should go back to the original Bench, since the third member has

not given the jurisdiction to decide and dispose of the appeal. In this way decision will be based on the opinion

of the majority of the members.

4. Procedure to file reference application to High Court Division of the Supreme Court




(a) Both assessee and the Commissioner of Taxes (with prior permission from NBR) can file reference

application to High Court Division of the Supreme Court only against any question of law arising

from the order( including an order under section 173) of the Taxes Appellate Tribunal. An order of

the Tribunal dismissing an appeal as time barred or refusing to condone delay is obviously an order

of the Tribunal and consequently a reference lies against it. Where assessee is the applicant the

Commissioner of Taxes will be the respondent and where the Commissioner of Taxes is the

applicant, the assessee will be the respondent.

(b) Application shall be filed within 90 days from the date of receipt of the Tribunal order at the form

prescribed at Rule-29 with duly signed and verified.

(c) Fee of Tk. 2,000 is to be paid before submission of application. However no fee is needed if

application is made by the Commissioner of Taxes.

(d) Where the assessee is the applicant then 15% or 25% of the difference between the tax as per return

and the tax as per tribunal order is to be paidfollowingly.

Particulars Rate Rate to be applied

i. If tax demand is below Tk. 1,000,000 15% On the difference between the

tax as per Tribunal order and

tax as per return.

ii. If tax demand is more than Tk. 1,000,000 25%

However NBR has the power to waive or modify the requirement of such payment.

(e) Application shall be in triplicate and accompanied by the following document:

(i) Certified copy of Tribunal Order

(ii) Certified copy of Appeal Order

(iii) Certified copy of Assessment Order

(iv) Any other document relevant to the question of law which was submitted to the DCT or to

the AJCT or to the Tribunal.

(f) After getting hearing notice from the High Court Division, the respondent shall have to submit the

reply in writing at least 7 days before the date of hearing.

(g) Tax as per Tribunal order shall be payable notwithstanding the pendency of a reference in the High

Court Division. The High Court Division may in a proper case stay of recovery proceedings till the

disposal of the reference.

5. Disposal of reference application by the High Court Division

(a) A division bench of not less than 2 Judges will hear the case as per section 98 of the Code of Civil

Procedure, 1908.If the judges are equally divided the question on which there is the difference of

judicial opinion may be referred to another judge or to a larger Bench and the decision of the

majority of the judges would prevail.

(b) The High Court Division will decide the question of law and deliver its judgment containing the

grounds on which the decision is founded. The judgment of the High Court Division as a whole is

binding between the parties in the particular case. If the judgment expounds a wrong construction of

the Ordinance, an appeal against it is open and there is no other procedure by which it can be

corrected.

(c) The cost of the reference shall be in the discretion of the Court.




6. Procedure to file appeal to the Appellate Division of the Supreme Court

An appeal shall lie to the Appellate Division against the judgment of the High Court Division provided the

High Court Division certifies the case to be a fit one for appeal to the Appellate Division of the Supreme

Court. The High Court Division would certify the case as a fit one for appeal and grant leave to appeal to the

Appellate Division if a substantial question of law is involved or if the question is otherwise of great public or

private importance.

If the High Court Division refuses to certify a case to be a fit one for appeal to the Appellate Division, an

application may be made to the Appellate Division for special leave to appeal against the decision of the High

Court Division in special circumstances.

7. Disposal of appeal by the Appellate Division of the Supreme Court

The appellate division will hear and dispose of the appeal as per provision of Code of Civil Procedure, 1908.

8. Revisional Power of Commissioner of Taxes under section 121A

While section 120 empowers the Inspecting Joint Commissioner of Taxes and Inspecting Additional

Commissioner of Taxes to exercise revisional power in favour of revenue, section 121A empowers the

Commissioner of Taxes of the territorial zone to exercise revisional power in favour of the assessee. The

following procedure should be followed to file a review application to the Commissioner of Taxes:

(i) Application shall be made in a plain paper as there is no prescribed form.

(ii) Review fee of TK. 200/- is to be paid before submission of application.

(iii) Tax as per return is to be paid if the application is filed against the order of the DCT and undisputed

portion of tax as per 1st appeal order is to be paid if the application is filed against the AJCT or AACT.

(iv) Application shall have to be submitted within 60 days from the date the date of receiving order.

However Commissioner of Taxes can entertain an application after condoning the delay if he is

convinced that assessee has sufficient reason for failure of submit application in time. However the

power to condone such delay is discretionary. If it is made against the order of the DCT, it is to be made

either after the time of appeal (45 days) is over or with an affidavit waiving the right of appeal and if it

is made against the order of the AJCT or AACT it is to be made either after the time of 2nd appeal (60

days) is over or with an affidavit waiving the right of filing Tribunal.

9. Disposal of revisional application by the Commissioner of Taxes

(1) Commissioner of Taxes will hear a case which is passed by any authority subordinate to him. DCT is

directly the subordinate to the Commissioner of Taxes. Though AJCT and AACT are not subordinate to

the Commissioner but for the purpose of section 121A, they will be deemed to be the subordinate to the

Commissioner so that their order can be revised by the Commissioner of Taxes.

(2) Commissioner of Taxes will pass order within 60 days from the date of receiving application failing

which application will be deemed to have been allowed fully.

(3) Commissioner of Taxes can make enquiry and can also give instruction to the DCT for further enquiry.

(4) Commissioner of Taxes shall not pass any order which is prejudicial to the assessee. A prejudicial order

is that order which places the assessee in a different and worse position than before. But an order

declining to interfere shall not be deemed to be an order prejudicial to the assessee. Commissioner‘s

revisional power is of an administrative nature and therefore he is not bound to hear the assessee before

passing his order.

(5) An order passed by the Commissioner of Taxes under section 121A is not appeal able to the Taxes

Appellate Tribunal and no reference will lie against such order.




10. Alternative Dispute Resolution (ADR)

Any dispute of an assessee lying with any income tax authority i.e. Taxes Appellate Tribunal or Supreme

Court may be resolved through ADR. Assessee can also go directly to the ADR against the assessment or re-

assessment done by the DCT. If the case is pending at Appellate Tribunal or Supreme Court, then an assessee

can also prefer ADR taking permission in writing from the concerned appeal forum. After obtaining such

permission from the appeal forum, the appeal (both from assessee and department) shall remain stayed during

the ADR negotiation process. The whole process is summarized in following figure:




Procedure to file application to ADR

a. 4 sets of application form at the prescribed form will be submitted to the respective appeal authority.

b. Fee Tk. 500 per year is to be paid and copy of which is to be attached with the application.

c. Application for ADR is to be filed within 30 days from the date of receiving demand notice of the date

of receiving permission from the appeal authority/court, as the case may be.

d. Where the case is under process appeal/tribunal/court then the copy of permission is to be attached with

the application of ADR.

e. Assessee shall not be eligible for the application of ADR if he does not file return of income for the

concerned year and does not pay tax as per return.

Procedure of disposal by the ADR

1. Board will nominate a facilitator from the panel of facilitators and convey it to the applicant, facilitator

and the concerned Commissioner of Taxes. Board may, however, change the facilitator if any objection is

raised by the applicant or by the tax department.

2. Upon receiving the application of ADR, the facilitator shall forward a copy of the application to the

respective Deputy Commissioner of Taxes (DCT) and call for his opinion on the grounds of the

application and also whether the conditions of return submission and tax payment as per return by the

assessee have been complied with.

3. If the DCT fails to give his opinion regarding fulfillment of the above mentioned conditions within 5

working days from receiving the copy, the Facilitator may deem that the conditions thereto have been

fulfilled.

Panel of Facilitators

NBR will form a panel of facilitators. The following persons shall be eligible for appointment as a facilitator by the

Board –

1) An expert retired income tax official not below the rank of Joint Commissioner of Taxes.

2) A retired official of judicial service not below the rank and status of District Judge.

3) A Chartered Accountant practiced income tax for a period not less than 8 years.

4) A Cost and Management Accountant practiced income tax for a period not less than 10 years.

5) An Income Tax Practitioner within the meaning of section 174(2)(f) and practiced income tax for a period not

less than 20 years.

6) A professional legislative expert not below the rank and a status of Deputy Secretary.

7) A business man expert at income tax law.

Methodology to be followed by the Facilitator to mitigate the dispute

(1) The facilitator will notify in writing both the applicant and the Commissioner of Taxes or the Commissioner‘s

representative to attend the meeting for settlement of disputes.

(2) He may adjourn the meeting from time to time.

(3) He may call for records or evidences from the DCT or from the applicant with a view to settle the dispute.

(4) Before disposing of the application, he can cause to make such enquiry by any income tax authority as he thinks

fit.

(5) The Facilitator will assist the applicant assessee and the Commissioner‘s representative to agree on resolving the

dispute or disputes through consultations and meetings.

(6) Dispute may be resolved by an agreement, either wholly or in part, where both the parties of the dispute accept the

points for determination of the facts or laws applicable in the dispute.




(7) Where an agreement is reached, either wholly or in part, between the assessee and the Commissioner‘s

Representative, the Facilitator shall record, in writing, the details of the agreement.

(8) The recording of every such agreement shall describe the terms of the agreement including any tax payable or

refundable and any other necessary and appropriate matter and the manner in which any sums due under the

agreement shall be paid and such other matters as the Facilitator may think fit to make the agreement effective.

(9) The agreement shall be void if it is subsequently found that it has been concluded by fraud or misrepresentation of

facts.

(10) The agreement shall be signed by the assessee and the Commissioner‘s Representative and the Facilitator.

(11) Where no agreement, whether wholly or in part, is reached or the dispute resolution is ended in disagreement

between the applicant assessee and the concerned Commissioner‘s Representative for non-cooperation of either of the

parties, the Facilitator shall communicate it in writing recording reasons thereof, within 15 days from the date of

disagreement to the applicant and the Board, the concerned court/ Tribunal/ appellate authority and income tax

authority, as the case may be, about such unsuccessful dispute resolution.

(12) Where the agreement is reached, recorded and signed accordingly containing time and mode of payment of

payable dues or refund, as the case may be, the Facilitator shall communicate the same to the assessee and the

concerned DCT for compliance with the agreement.

(13) No agreement shall be deemed to have been reached if the Facilitator fails to make an agreement within 2

months from the end of the month in which the application is filed.

(14) Where there is a successful agreement, the Facilitator shall communicate the copy of the agreement to all the

parties within 15 days from the date on which the Facilitator and the parties have signed the agreement.

Effect of agreement

1) Where an agreement is reached, it shall be binding on both the parties and it cannot be challenged in any

authority, Tribunal or Court either by the assessee or by the department.

2) Every agreement shall be conclusive as to the matters stated therein and no matter covered by such agreement

shall be reopened.

Limitation of appeal where agreement is not concluded

1) Where an agreement is not reached wholly or partly, the assessee may prefer an appeal –

a. To the Appellate Joint Commissioner of Taxes (Appeals), as the case may be, where the dispute arises

against the order of the DCT.

b. To the Taxes Appellate Tribunal, where the dispute arises against the order of the Appellate Joint

Commissioner of Taxes or Appellate Additional Commissioner of Taxes or Commissioner of Taxes

(Appeals), as the case may be, and

c. In the court from where the assessee applicant has got permission to apply for ADR.

2) In computing the period of limitations for filing appeal the time elapsed between the filing of the application and

the decision or order of the ADR shall be excluded.

Fees to be paid to Facilitator

The Facilitator is entitled to receive fees from both the assessee and the Govt. The quantum of fees is to be computed

in the following way –

20% of disputed tax

or

Tk. 50,000

Whichever is lower, but not

less than Tk. 5,000.

50% of fees is to be paid by the

assesse and 50% by the Govt. or

Govt. approved agency within 30

days from resolving the dispute




Part Fifteen: Double Taxation Avoidance Agreement

Double Taxation Avoidance Agreement (Sec. 144 read with 7th Schedule):

Double taxation avoidance agreement is usually an agreement between 2 countries seeking to avoid double taxation

by defining the taxing rights of each country with regard to cross, border flows of income and providing tax credits or

exemptions to eliminate double taxation. The Govt. of Bangladesh also may enter into an agreement with the Govt. of

other countries for the avoidance of double taxation and the prevention of fiscal evasion. Income tax policy wing of

the National Board of Revenue (NBR) is entrusted to negotiate the double taxation treaty with foreign countries to

promote foreign direct investment in Bangladesh. Such agreement will come into force through notification in the

official Gazette. It will be treated as an international law and accordingly its legislative position would be over and

above our Bangladesh tax law. The objectives of such agreement are:-

1. To provide relief from Bangladesh tax.

2. To determine income accruing or arising to non-residents from sources within Bangladesh.

3. To determine income of a non-resident carrying on business from within and outside Bangladesh.

4. To determine the income of a resident person having special relation with non-resident.

5. To recover tax.

6. To exchange the information for avoidance of double taxation and the prevention of fiscal evasion.

The Bangladesh model of Agreement on Avoidance of Double Taxation consists of 29

Articles that are as follows:

Article 1 : Persons Covered

Article 2 : Taxes Covered

Article 3 : General Definitions

Article 4 : Resident

Article 5 : Permanent Establishment

Article 6 : Income from Immovable Property

Article 7 : Business Profits

Article 8 : Shipping and Air Transport

Article 9 : Associated Enterprises

Article 10 : Dividends

Article 11 : Interest

Article 12 : Royalties

Article 13 : Fees for Technical Services

Article 14 : Independent Personal Services

Article 15 : Dependent Personal Services

Article 16 : Director's Fees

Article 17 : Artists and Sportsmen

Article 18 : Pensions

Article 19 : Government Service

Article 20 : Students and Trainees

Article 21 : Lecturers and Researchers

Article 22 : Other Income

Article 23 : Elimination of Double Taxation

Article 24 : Non-Discrimination

Article 25 : Mutual Agreement Procedure

Article 26 : Exchange of Information

Article 27 : Diplomatic Agents and Consular Officers

Article 28 : Entry into Force

Article 29 : Termination




Like many others developed as well as developing countries of the world, Bangladesh too cannot absolve herself

from the need to facilitate her trade and investments with the outside world through international tax treaty network

with other countries. The increased pace of industrialization coupled with increased foreign direct investment in the

country necessitated tax treaty arrangements with other countries to provide investors with certainty and guarantees in

the area of taxation. As on March, 2011, the status of Bangladesh on Avoidance of Double Taxation Agreements is as

follows:

Name of the countries with which Agreement on Avoidance of

Double Taxation is in force.

Sl. No Name of the Country SRO Date of effect in Bangladesh

(assessment year

commencing on or after)

No. Date

1. U.K 227-L/80 08/07/1980 01/07/1978

2. Singapore 124-L/82 21/04/1982 01/01/1980

3. Sweden 382-L/83 19/10/1983 01/07/1984

4. Korea 433-L/84 02/10/1984 01/07/1984

5. Canada 247-L/85 06/06/1985 01/07/1982

6. Pakistan 221-L/88 11/07/1988 01/01/1980

7. Romania 348-L/88 23/11/1988 01/07/1989

8. Sri Lanka 365-L/88 10/12/1988 01/07/1989

9. France 2-L/89 04/01/1989 01/07/1989

10. Malaysia 67-L/90 15/02/1990 01/01/1982

11. Japan 235-L/91 06/08/1991 01/07/1992

12. India 45-L/93 27/02/1993 01/07/1993

13. Germany 1-L/94 01/01/1994 01/01/1990

14. Netherlands 267-L/94 14/09/1994 01/07/1995

15. Italy 63-L/97 12/03/1997 01/07/1980

16. Denmark 72-L/97 17/03/1997 01/07/1997

17. China 114-L/97 13/05/1997 01/07/1998

18. Belgium 11-L/98 14/01/1998 01/07/1998

19. Thailand 222-L/98 07/09/1998 01/07/1999

20. Poland 39/L/99 03/03/1999 01/07/2000

21. Philippines 56/L/2004 04/03/2004 01/07/2004

22. Vietnam 301-L/2004 18/10/2004 01/07/2005

23. Turkey 308/L/2004 31/10/2005 01/07/2004

24. Norway 20-L/2006 12/02/2006 01/07/2006

25. Indonesia 60-L/2007 20/04/2007 01/07/2007

26. USA 71-L/2007 10/05/2007 01/07/2007

27. Switzerland 52-L/2010 23/02/2010 13/12/2009

28. Oman(only on airlines

business)

16-L/2009 02/02/2009 01/07/2009

29. Myanmar 313-L/2012 18/10/2012 01/07/2012

30. Mauritius 122-L/2012 09/05/2012 01/07/2012

31. Saudi Arabia 103-L/2012 15/04/2012 01/10/2011

32. UAE 313-L/2012 05/09/2012 01/07/2012

33. Belarus 189-L/2014 08/07/2014 01/07/2014

34. Kuwait Not yet 19/02/2014(date of

signing)

Not yet




Comparative Rates in Double Taxation

Avoidance Agreement

Sl. No. Name of the Country Permanent

Establishment

Maximum tax rate

for dividend

Maximum tax

rate for Interest

Maximum tax rate

for Royalties

1. U.K 183 days 10%/15% 7.5%/10% 10%

2. Singapore 183 days 15% 10% 10%

3. Sweden 183 days 10%/15% 10% 10%

4. Korea 183 days 10%/15% 10% 10%

5. Canada 183 days 15% 10% 10%

6. Pakistan 183 days 15% 15% 15%

7. Romania 183 days 10%/15% 10% 10%

8. Sri Lanka 183 days 15% 15% 15%

9. France 183 days 10%/15% 10% 10%

10. Malaysia 183 days 15% 15% 15%

11. Japan 6 months 10%/15% 10% 10%

12. India 183 days 10%/15% 10% 10%

13. Germany 183 days 15% 10% 10%

14. Netherlands 6 months 10%/15% 10% 10%

15. Italy 183 days 10%/15% 10%/15% 10%/15%

16. Denmark 183 days 10%/15% 10% 10%

17. China 6 months 10% 10% 10%

18. Belgium 183 days 15% 15% 10%

19. Thailand 183 days 10%/15% 10%/15% 15%

20. Poland 183 days 10%/15% 10% 10%

21. Philippines 6 months 10%/15% 15% 15%

22. Vietnam 6 months 15% 15% 15%

23. Turkey 12 months 10% 10% 10%

24. Norway 6 months 10%/15% 10% 10%

25. Indonesia 183 days 10%/15% 10% 10%

26. USA 183 days 10%/15% 10% 10%




Part Sixteen: Transfer Pricing

Important Definitions:

107A. Definitions.- In this Chapter, unless there is anything repugnant in the subject or context, -

(1) "arm's length price" means a price in a transaction, the conditions (e.g. price, margin or profit split) of which do

not differ from the conditions that would have prevailed in a comparable uncontrolled transactions between

independent entities carried out under comparable circumstances;

(2) "associated enterprise", in relation to another enterprise, means an enterprise which, at any time during the

income year, has the following relationship with the other enterprise-

(a) one enterprise participates, directly or indirectly, or through one or more intermediaries, in the

management or control or capital of the other enterprise; or

(b) the same person or persons participate, directly or indirectly, or through one or more

intermediaries, in the management or control or capital, of both enterprises; or

(c) one enterprise holds, directly or indirectly, shares carrying more than twenty five percent of the voting

power in the other enterprise; or

(d) the same person or persons controls shares carrying more than twenty five percent of the voting power in

both enterprises; or

(e) the cumulative amount of borrowings of one enterprise from the other enterprise constitutes more than

fifty percent of the book value of the total assets of that other enterprise; or

(f) the cumulative amount of guarantees provided by one enterprise in favour of the other enterprise

constitutes more than ten percent of the book value of the total borrowings of the other enterprise; or

(g) more than half of the board of directors or members of the governing board of one enterprise

are appointed by the other enterprise; or

(h) any executive director or executive member of the governing board of one enterprise is appointed by, or

is in common with the other enterprise; or

(i) the same person or persons appoint more than half of the board of directors or members in both

enterprises; or

(j) the same person or persons appoint any executive director or executive member in both

enterprises; or

(k) one enterprise has the practical ability to control the decision of the other enterprise; or

(l) the two enterprises are bonded by such relationship of mutual interest as may be prescribed;

(3) "enterprise" means a person or a venture of any nature (including a permanent establishment of such person or

venture);

(4) "independent enterprise" means an enterprise that is not an associated enterprise;

(5) "international transaction" means a transaction between associated enterprises, either or both of whom are non-

residents, in the nature of purchase, sale or lease of tangible or intangible property, or provision of services, or

lending or borrowing money, or any other transaction having a bearing on the profits, income, losses, assets, financial

position or economic value of such enterprises, and includes-

(a) a mutual agreement or arrangement between two or more associated enterprises for the

allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in

connection with a benefit, service or facility provided or to be provided to any one or more of such

enterprises;




(b) a transaction entered into by an enterprise with a person other than an associated enterprise, if there exists

a prior agreement in relation to the relevant transaction between such other person and the associated

enterprise, or the terms of the relevant transaction are determined in substance between such other person

and the associated enterprise;

(6) "permanent establishment" includes a place of management, a branch, an agency, an office, a

warehouse, a factory, a workshop, a mine, an oil or gas well, a quarry or any other place of extraction of natural

resources, a firm or plantation, or any other fixed place through which the business of the enterprise is wholly or

partly carried on;

(7) "property" includes goods, articles, things or items, patent, invention, formula, process, design, pattern, know-

how, copyright, trademark, trade name, brand name, literary, musical, or artistic composition, franchise, license or

contract, method, program, software, database, system, procedure, campaign, survey, study, forecast, estimate,

customer list, technical data, any aspects of advertising and marketing, any item which has substantial value, or any

other intangible property;

(8) "record" includes electronically held information, documents and records;

(9) "Transfer Pricing Officer" means any income tax authority authorised by the Board to perform the

function of a Transfer Pricing Officer;

(10) "transaction" includes an arrangement, understanding or action between two or more parties, whether or not

such arrangement, understanding or action is formal or in writing; or whether or not it is intended to be enforceable

by legal proceeding;

(11) "uncontrolled transaction" means a transaction undertaken between enterprises not being the

associated enterprises.

Important sections related to transfer pricing:

107B. Determination of income from international transaction having regard to arm's length price.-

Notwithstanding anything contained in Chapter XI of this Ordinance, the amount of any income, or

expenditure, arising from an international transaction shall be determined having regard to the arm's length price.

107C. Computation of arm's length price.-

(1) The arm's length price in relation to an international transaction shall be determined by applying the most

appropriate method or methods selected from the following methods based on the nature of transaction, the

availability of reliable information, functions performed, assets employed, risks assumed or such other factors as may

be prescribed, namely:—

(a) comparable uncontrolled price method;

(b) resale price method;

(c) cost plus method;

(d) profit split method;

(e) transactional net margin method;

(f) any other method where it can be demonstrated that-

(i) none of the methods mentioned in clause (a) to (e) can be reasonably applied to determine the

arm's length price for the international transaction; and

(ii) such other method yields a result consistent with the arm's length price.

(2) The most appropriate method referred to in sub-section (1) shall be applied for determination of arm's length price

in the manner as may be prescribed:

Provided that the arm's length price determined under this section shall not result in total income lower

than the total income that would have been resulted if the price at which international transaction has

actually been undertaken were taken as the price charged or paid in the said international transaction.




(3) Where in the course of any assessment under Chapter IX of this Ordinance, the Deputy Commissioner of Taxes is

of the opinion that—

(a) the price charged or paid in an international transaction has not been determined by the assessee in

accordance with sub-sections (1) and (2); or

(b) the assessee has failed to maintain the information, documents or records in accordance with the

provisions of section 107E; or

(c) the information or data based on which the arm's length price was computed by the assessee is not

reliable or correct;

The Deputy Commissioner of Taxes may determine the arm's length price in relation to the said international

transaction in accordance with provisions of sub-sections (1) and (2) on the basis of information or documents or

other evidence available to him.

(4) In determining the arm's length price under sub-section (3), the Deputy Commissioner of Taxes shall give an

opportunity to the assessee by serving a notice calling upon him to show cause, on a date and time to be specified in

the notice, why the arm's length price should not be so determined on the basis of information or documents or other

evidence available to the Deputy Commissioner of Taxes.

(5) Where an arm's length price is determined under sub-section (3) of this section or under sub-section (4) of section

107D, the Deputy Commissioner of Taxes shall, by an order in writing, proceed to compute the total income of the

assessee having regard to the arm's length price so determined.

107D. Reference to Transfer Pricing Officer.-

(1) Notwithstanding anything contained in section 107C of this Ordinance,-

(a) the Deputy Commissioner of Taxes, with prior approval of the Board, may refer the determination of the

arm's length price under section 107C to the Transfer Pricing Officer;

(b) the Transfer Pricing Officer, with prior approval of the Board, may proceed to determine the arm's length

price in relation to any international transaction.

(2) Where a reference is made or any proceedings have been initiated under sub-section (1), the Transfer

Pricing Officer shall serve a notice on the assessee requiring him to produce or cause to be produced on a date to be

specified therein, any evidence on which the assessee may rely in support of his computation of the arm's length price

in relation to the international transaction in question.

(3) The Transfer Pricing Officer shall, after considering the evidence produced before him or available to him

including the evidence as he may require on any specified points from the assessee or from any other person, and

after taking into account all relevant materials which he has gathered shall, by order in writing, determine the arm's

length price in relation to the international transaction in accordance with section 107C of this Ordinance and send a

copy of his order to the Deputy Commissioner of Taxes.

(4) The Deputy Commissioner of Taxes, upon receipt of the order under sub-section (3), shall proceed to compute the

total income of the assessee in conformity with the arm's length price so determined by the Transfer Pricing Officer.

(5) The Transfer Pricing Officer may rectify any order passed by him under sub-section (3) so as to correct any

mistake apparent from the record either of his own motion or on the mistake having been brought to his notice by the

assessee or any other income tax authority, and the provisions of section 173 of this Ordinance shall, so far as may be,

apply accordingly.

(6) Where any rectification is made under sub-section (5), the Transfer Pricing Officer shall send a copy of his order

to the Deputy Commissioner of Taxes who shall thereafter proceed to amend the order of

assessment in conformity with such order of the Transfer Pricing Officer.

107E. Maintenance and keeping of information, documents and records.-

(1) Every person who has entered into an international transaction shall keep and maintain such information,

documents and records as may be prescribed.




(2) Without prejudice to the provisions of sub-section (1), the Board may prescribe the period for which the

information, documents and records shall be kept and maintained.

(3) The Deputy Commissioner of Taxes may, by notice in writing, require any person to furnish any

information, documents and records as prescribed under sub-section (1) within the period as may be

specified in the notice.

107EE. Statement of international transactions to be submitted.-

Every person who has entered into an international transaction shall furnish, along with the return of income, a

statement of international transactions in the form and manner as may be prescribed.]

107F. Report from an accountant to be furnished.-

The Deputy Comissioner of Taxes may, by notice in writing, require that a person who has entered into international

transaction or transactions the aggregate value of which, as recorded in the books of accounts, exceeds three crore

taka during an income year shall furnish within the period as may be specified in the notice and in the form and

manner as may be prescribed, a report from a Chartered Accountant or a Cost and Management Accountant regarding

all or of a part of the information, documents and records furnished under section 107E.

Penalty:

107G. Penalty for failure to keep, maintain or furnish information, documents or records to the

Deputy Commissioner of Taxes.-

Where any person fails to keep, maintain or furnish any information or documents or records as required by section

107E of this Ordinance, without prejudice to the provisions of Chapter XV of this Ordinance, the Deputy

Commissioner of Taxes may impose upon such person a penalty not exceeding one percent of the value of each

international transaction entered into by such person.

107H. Penalty for failure to comply with the notice or requisition under section 107C.-

Where any person fails to comply with the notice or requisition under section 107C of this Ordinance, the Deputy

Commissioner of Taxes may impose upon such person a penalty not exceeding one per cent of the value of each

international transaction entered into by such person.

107HH. Penalty for failure to comply with the provision of section 107EE.-

Where any person fails to comply with the provision of section 107EE of this Ordinance, the Deputy Commissioner

of Taxes may impose upon such person a penalty not exceeding two per cent (2%) of the value of each international

transaction entered into by such person.

107I. Penalty for failure to furnish report under section 107F.-

Where any person fails to furnish a report from a Chartered Accountant as required by section 107F of this

Ordinance, the Deputy Commissioner of Taxes may impose upon such person a penalty of a sum not exceeding three

lakh taka.

107J. Applicability of this Chapter.-

The provisions of this Chapter shall come into force from the date specified by the Board through

notification in the official Gazette.

94. Limitation for assessment

(1) Subject to the provisions of sub-sections (2) and (3), no order of assessment under the provisions of this Chapter

in respect of any income shall be made after the expiry of six months from the end of the assessment year in which

the income was first assessable.

(1A) Notwithstanding anything contained in sub-section (1), no order of assessment under subsection (3) of section

82BB} shall be made-

(a) after the expiry of two years from the end of the assessment year in which the income was first assessable

[.]Subs. F.A. 2010 [or] Deleted F.A. 2010




[(b) after the expiry of the period of fifteen months from the end of the month in which the return is

submitted, which ever is earlier.]Deleted F.A. 2010

(1B) Notwithstanding anything contained in sub-section (1) or (1A), no order of assessment under section 107C of

this Ordinance shall be made after the expiry of three years from the end of the assessment year in which the income

was first assessable.] Added F. A. 2012

173. Correction of errors.‐

(1) Any income tax authority or the Appellate Tribunal may, by order in writing, amend any order passed by it so as

to new any error apparent from the record either of its own motion or on the error having been brought to its notice by

the assessee or any other income tax authority and all the provisions of this Ordinance as may be applicable shall

have effect accordingly.

(2) No amendment under sub‐section (1) which has the effect of enhancing an assessment or reducing a refund or

otherwise increasing the liability of the assessee shall be made unless the parties affected

thereby having been given a reasonable opportunity of being heard.

(3) Where any such error as is referred to in sub‐section (1) is brought to the notice of the authority

concerned by the assessee and no amendment is made by such authority within the financial year next

following the date in which the error is brought to its notice, the amendment under that sub‐section shall

be deemed to have been made so as to new the error and all the provisions of this Ordinance shall have

effect accordingly.

(4) No amendment under sub‐section (1) shall be made after the expiration of four years from the date of the order

sought to be amended.

(5) Where in respect of any completed assessment of a partner in a firm it is found on the assessment of the firm or on

any reduction or enhancement made in the income of the firm under sections 120,[121A]Subs F. A. 2014, 156, 159,

161 or 162 that the share of the partner in the profit or loss of the firm has not been included in the assessment of the

partner, or, if included, is not correct, the inclusion of the share in the assessment or the correction thereof, as the case

may be, shall be deemed to be correction of an error apparent from the record within the meaning of this section, and

the provisions of sub‐section (1) shall apply thereto accordingly, the period of four years referred to in sub‐section (4)

being computed from the date of the final order passed in the case of the firm.

(6) Where as a result of proceedings initiated under section 93, a firm or an association of persons is

assessed, and the Deputy Commissioner of Taxes concerned is of opinion that it is necessary to compute

the total income of a partner in the firm or a member of the association of persons, as the case may be,

the Deputy Commissioner of Taxes may proceed to compute the total income and determine the sum

payable on the basis of such computation as if the computation is a correction of an error apparent from the record

within the meaning of this section, and the provisions of sub‐section (1) shall apply accordingly, the period of four

years specified in sub‐section (4) being reckoned from the date of the final order passed in the case of the firm or

association of persons, as the case may be.

(7) Subject to the provisions of sub‐section (3) where an amendment is made under this section, an order shall be

passed in writing by the income tax authority concerned or the Appellate Tribunal, as the case may be.

Income Tax Rules 1984

70. Determination of arm’s length price under section 107C.

(1) The most appropriate method for determining arm's length price in relation to an international transaction shall be

applied in the following manner:

(a) comparable uncontrolled price method is applied in the following manner:

(i) the price charged or paid for property transferred or services provided in an uncontrolled transaction or a

number of transactions of comparable circumstances is identified;

(ii) if the price so identified differs from the price of the international transaction, the differential amount is

calculated;




(iii) the price of international transaction is then adjusted by the said differential amount;

(iv) the adjusted price under sub-clause (iii) is taken to be the arm's length price of the property transferred

or services rendered in the international transaction.

(b) resale price method is applied in the following manner:

(i) the price at which the said property or service is resold to an independent enterprise is identified;

(ii) the price, as identified in sub-clause (i), is reduced by a comparable normal gross margin;

(iii) the price so arrived at is then adjusted for other unique costs (such as customs duty) associated with the

purchase of the property or services;

(iv) the price so arrived at is then adjusted to take into account the material differences (differences that

could materially affect the gross margin in open market condition) such as functions performed, risks

involved, assets employed, time gap between the original purchase and the resale and accounting practices

between the international transactions and the comparable uncontrolled transactions, or between the

enterprises undertaking such transactions;

(v) the adjusted price under sub-clause (iv) shall be taken to be the arm's length price of the property

purchased or the service obtained in the international transaction.

(c) cost plus method is applied in the following manner:

(i) the direct and indirect costs incurred in the supply of property or the provision of services,

hereinafter referred to as cost base, are determined;

(ii) a comparable profit mark-up (based on comparable accounting policies) is identified;

(iii) appropriate adjustment is then made to the comparable profit mark-up adjusted to take into

account the material differences (differences that could materially affect the mark-up in open

market condition) such as functions performed, risks involved, assets employed, contractual terms and

market conditions between the international transactions and the comparable uncontrolled transactions, or

between the enterprises undertaking such transactions.

(iv) the adjusted profit mark-up under sub-clause (iii) is then added to the cost base;

(v) the sum so arrived at is taken to be the arm‘s length price of the property transferred or services provided

in the international transaction.

(d) profit split method is applied in the following manner:

(i) the combined profit, arising from international transaction or transactions and divisible among

the associated enterprises, is identified.

(ii) the combined profit is then divided among the associated enterprises by using the following

approaches:

a. each of the associated enterprises is allocated a basic return based on the basic functions

(manufacturing, distribution, service provision etc.) each enterprise performed and determined by reference

to market returns earned by independent enterprise in similar transaction. This basic return does not usually

account for the return that would be generated by any unique and valuable assets possessed by the associated

enterprises. The residual profit (which may be attributable to such unique assets), calculated by deducting

the sum of basic returns allocated to associated enterprises from the combined profit, is then apportioned to

the associated enterprise based on their relative contribution and taking into consideration how independent

enterprises in similar circumstances would have divided such residual profit; or

b. basic return is not allocated to the associated enterprises; the combined profit is divided among the

associated enterprises based on the relative contribution of each the associated enterprises to that profit;

(iii) the profit thus allocated to the assessee under sub-clause (ii) is taken to be the arm‘s length price.

(e) transactional net margin method is applied in the following manner:

(i) the net profit margin earned by the associated enterprise from the international transaction with the

associated enterprise is computed having regard to an appropriate base such as costs, sales or assets;




(ii) the net profit margin earned by an independent enterprise or enterprises from comparable uncontrolled

transaction or a number of such transactions is computed having regard to the same base;

(iii) appropriate adjustment is then made to the net profit margin referred to in sub-clause (ii) to take into

account the differences, that can materially affect the net profit margin, between the international

transactions and the comparable uncontrolled transactions, or between the enterprises undertaking such

transactions;

(iv) the adjusted net profit margin under sub-clause (iii) is then applied to the base as referred to in sub

clause (i) to arrive at the arm‘s length price in relation to the international transaction.

71. Factors to be considered in judging comparability.

(1) The following factors shall be considered in judging the comparability of an uncontrolled transaction with the

international transaction under the different methods as mentioned in rule 70:

(a) the characteristics of property, services or intangible properties involved in the transaction:

(i) the case of tangible property: physical features, quality and reliability, availability, volume and

timing of property transferred;

(ii) in the case of services provided: the nature and extent of the services;

(iii) in the case of intangible property: the type of intangible, the form of transaction, the expected

benefits, the duration of protection, the degree of protection, etc;

(b) the functions performed, the risks assumed and the assets employed, especially the functions, risks and

assets that are materially significant in determining the price or margin in relation to the international

transaction;

(c) the contractual terms (whether or not such terms are formal or written) dictating the allocation of

responsibilities, risks and benefits between enterprises involved in the international transaction;

(d) economic circumstances, that affect the international transaction and uncontrolled transactions, including

geographic location, the size and level of markets; the extent of competition in the market, the availability of

substitute goods and services, the purchasing powers of consumers, government orders and policies and the

timing of the transaction;

(e) Any other factors that have material effect on the international transaction and uncontrolled transaction.

(2) An uncontrolled transaction shall be deemed to comparable to an international transaction if:

(i) there are no material differences in respect of cost, price or margin between the

transactions being compared or between the enterprises undertaking such transactions; or

(ii) reasonably accurate adjustments can be made to eliminate any material differences in

the transactions.

(3) In analysing the comparability, data relating to the relevant financial year (in which the international

transaction has been entered into) shall be considered. \

Provided that data relating to a period prior to the financial year may also be considered if such data bears such facts

which could have an influence on the analysis of comparability.

72. Most appropriate method.

(1) For the purposes of sub-section (1) of section 107C, the most appropriate method for determining the arm‘s length

price of an international transaction shall be the method that, under the facts and circumstances, provides the most

reliable measure of an arm‘s length price in relation to the international transaction.

(2) In selecting the most appropriate method as specified in sub-rule (1), the following factors shall be

considered, namely:

(a) the nature and class of the international transaction, and of enterprises entering into the

international transaction;




(b) the comparability factors (industry, functions, risks, contractual terms, market level) that are materially

significant in determining the price or margin in relation to the international transaction;

(c) the quality (availability, coverage, validity and reliability) of relevant data;

(d) the reliability of assumptions in the method;

(e) the sensitivity of results in the deficiency in data and assumptions;

(f) the extent to which the reliable and accurate adjustments can be made to eliminate the differences, if any,

between the international transaction and the comparable uncontrolled transaction or between the enterprises

entering into such transactions.

73. Information and documents to be kept and maintained under section 107E.

(1) Every person who has entered into an international transaction shall keep and maintain the following

information and documents, namely:

(a) ownership profile of the multinational group in which the assessee enterprise is a member. Profile should

include information on groups global organisational structure, showing in details the name, location, legal

status and country of tax residence of the enterprises in the group with whom the assessee enterprise have

international transactions, and ownership linkages among them;

(b) business profile of the group including the line of business, industry dynamics, and market and economic

environment in which the group operates, and the business model and strategies of past, present and future;

(c) brief business profiles of each of the member of the group;

(d) information on the business relationship (purchase and sells of goods, provision of services, use of assets

and intangibles etc.) among the members of the groups;

(e) consolidated financial statement of the group;

(f) profile of the assessee enterprise and each of the associated enterprises operating in Bangladesh,

including tax and VAT registration number, IRC & ERC numbers, address, locations of activity centers etc;

(g) business profile of the assessee enterprise and each of the associated enterprises operating in Bangladesh

including the line of business, industry dynamics, and market and economic environment in which the

assessee enterprise operates, and the business model and strategies of past, present and future of the assessee

enterprise;

(h) brief description of the functions performed, risks assumed and assets employed or to be employed by

the assessee and by the associated enterprises involved in the international transaction;

(i) financial statements of the assessee enterprise and each of the associated enterprises operating in

Bangladesh;

(j) information on economic and market analyses, forecasts, budgets or any other financial estimates

prepared by the assessee enterprise and each of the associated enterprises operating in Bangladesh either for

whole business or for any segment or line of product;

(k) details of all transactions with the associated enterprises;

(l) contracts, terms and agreements of the transactions with associated enterprises;

(m) segment financial statements with respect to the transactions with associated enterprises;

(n) the manner of choosing tested party including the rationale for the choice;

(o) details of comparables including the manner in which the comparables have been screened and the

adjustment made to achieve comparability;

(p) details of comparability analysis;

(q) the manner of choosing tested party including the rationale for choice;




(r) information on transfer pricing method chosen considered for determining the arm‘s length price

including the justification stating why the method is considered most appropriate;

(s) records showing the calculations and workings regarding the determination of the arm‘s length

price/margin including the explanation of any assumption;

(t) any assumption, policy and price negotiations which may have an effect on the determination of the arm‘s

length price;

(u) information on any adjustment made to transfer prices to align them with arm‘s length prices determined

under these rules and consequent adjustment made to the total income for tax purposes;

(v) any other information, data or document, including information or data relating to the associated

enterprise, which may be relevant for determination of the arm‘s length price.

(2) Nothing contained in sub-rule (1) shall apply in a case where the aggregate value, as recorded in the

books of account, of international transactions entered into by the assessee in the income year does not

exceed three crore taka.

(3) The information specified in sub-rule (1) shall be supported by authentic documents, which may include the

following:

(a) official publications, reports, studies and data bases from the Government of the country of residence of

the associated enterprise, or of any other country;

(b) reports of market research studies carried out and technical publications brought out by institutions of

national or international repute;

(c) price publications including stock exchange and commodity market quotations;

(d) published accounts and financial statements relating to the business affairs of the associated enterprises;

(e) agreements and contracts entered into with associated enterprises or with unrelated enterprises in respect

of transactions similar to the international transactions;

(f) letters and other correspondence documenting any terms negotiated between the assessee and the

associated enterprise;

(g) documents normally issued in connection with various transactions under the accounting practices

followed.

(4) The information and documents specified in sub-rules (1) and (2) shall be kept and maintained for a period of

eight years from the end of the relevant assessment year.

74. Report from a certified accountant to be furnished under section 107F.

The report from a certified accountant (i.e. a chartered accountant or a cost and management accountant) required to

be furnished under section 107F by every person who has entered into an international transaction during an income

year shall be in prescribed Form and verified in the manner indicated therein.




― 75. Form of report to be furnished under section 107F.- Every report under section 107F of the

Ordinance shall be made in the following form:

Report under section 107F

In respect of:

1. Name of the Assessee:...................

2. TIN:

3. (a) Circle: ................ (b) Taxes Zone....................

1. All the information, documents and records required under section 107F of the Income Tax Ordinance,

1984 are furnished and annexed to this Report;

2. The List of Annexure is prepared and signed by me/us;

3. It appears from my/our examination that the information, documents and records furnished under

section 107F are authentic.

Signature

Name:

Address:

Identification Details (Membership Number, etc.)

Contact Details:

Place:

Date:

List of Annexure (to be signed in each page):

1. ....................................

2. .....................................




Question No. 4 (a):

AB~ Bangladesh Ltd:, a company incorporated in Bangladesh, manufactures high class motor vehicle engtnes for sale both m Bangladesh and abroad Foreign sales are made through ABC Hong Koog Pvt. Ltd, a company iuCOlpOt'8ted in Hong Koog and wholly owned by ABC Bangladesh Ltd 10 Hong Kong, corporate tax rate is 25% and in Bangladesh, it is 35%. ABC Bangladesh Ltd sells engines to ABC Hong Kong Pte Ltd. at USD 30,000 (FOB) per unit. In Bangladesh, the same engine is sold at USD 40,000 per unit. ABC Hong Kong Pte Ltd sells these units at USD 60,000 per unit io their local market. During the income year ended 31 Marcb 2015 ABC Bangladesh Ltd. sold 10 such engines at the above FOB price and 5 sucb engines at USD 31,000 C&F price per unit. The freight was USD 1,000 per unit. 14 of the above 15 export sales took place during the last 9 months of the year. The cost of sales and total overhead expenses (related to the above units sold) of ABC Bangladesh Ltd were USD 20,000 per unit io equivalent Taka. The overhead expenses (related to the above units imported and sold) iDcludiDg the freight for the above FOB imports of ABC Hong Koog Pte Ltd. were USD 10,000 per unit. Neither of the above two companies had any other iDcome and expense during the income year.

Requirements:

(i) Will aoy report from accountant be required to be furnished to the iocome tax authority? If so, who can issue the report? Draft a report to be issued in this regard. 6

(ii) On the basis of tbe informatioo given above, determine iDcome from the above internationaJ transactions having regard to arm's length price. 4

(iii) Which method have you followed in computing the arm's length price as in (ii) above? 2

(iv) How DOlCb additional income tax will the government earn by following the above method? 2

Y 011 may use exchange rate of USD 1= Tk. 78.

Allswer to question 4 (a):

(I) Yes, a report from a qualified BCCOUIItant is required to be furnisbed to the income tax authority as per section 107F of The Income Tax 0rdiDaDce, 1984 as ABC Bangladesb Ltd bas entered into internatioDal IIaD8aCtions amounting to [30,OOOxI0+3I,OOOxS=4,SS,000x78=Tk.3,S4,90,OOO) which is more than Tk.3 crore. Only a qualified accountant, eithee a Chartered Accountant or a Cost and Management AccOllWm can issue such report. A report is drafted as per Rule-75 as uudec:

(ii) Taking into considecation the fact that the same engine is sold in Bangladesh at fair market price (beee

ann's length price) USD 40,000 per unit, income comes at Tk.4O,OOO-20,000=20,OOOxlS=3,oo,000x78=Tk.2,34,OO,OOOI

(iii) Comparable IIIICODtrolled price method is followed here to determine arm's length price as arranged sales price with associated enterprise can easily be compared with the information of local sales price.

I (iv~onaI income tax to be paid 1O,000x 15= I, 50,ooox78=Tk.I , 17, 00,000 @35o/o=Tk.40, 95,000

l QiIIIIon No. 4(b):

ABC Hong Kong Pte Ltd. has a global agreement with M&S LLC of USA which incorporates a clause stating that in the case of any purchase by M&S from any company within the group to whicb ABC Hong Koog Pte Ltd. belongs, M&S will get a rebate of 5% on the purchase price from that company. Now ABC Bangladesh Ltd. intends to enter into an agreement with M&S to seU its engine products to M&S.

Requirement:

Will any transaction between ABC Bangladesh Ltd. and M&S tilU under lrausfer pricing? Discuss. 3

Answer to question 4 (b):

Y <s, tbe transactioo between ABC Bangladesb Ltd. and M & S LLC of USA will fall under traosfer pricing

because M & S LLC or USA is also to be treated as deemed associated enterprise as per section 107A(2)(L).




Part Seventeen: Statutory regulatory orders (SROs)




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<Me.: ('"1fi1"it-08) I




~,'III'R,. '"' ~~-~oM I- Income-tax Ordinance, 1984

(Ordinance. lOOCVI of 1984) <fl"ll section 185 .a .tI'«f "U'14C*1. -.nfB "!Il.-'t" ~.

Income Tax Rules, 1984 <IH ~ .. Iii.," '1W11~ 0+II ~ -.f.n1 <fl~ ~~

~-.fP!. '"1": -

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- 11. In case of company engaged in gas 3%. -, dist ri bution, any amount

(~)ruleI7~~. (0) rule 17A <fl"ll .,fi4!:'1~ rule 17A~""~, "l"'lT: -

" 11A. Cotl~ion of t ax. from impanel'S.- For the purpose of m ilking

collection of t ax under section 53 of the Ordinilnce , the Commissione r o f

Customs or il ny ilppropriilte officer shilll collect tax in m e eil'" o f a ny import

of goods at the following rate:

(iI) fIve per cent on the viii .... of t he imported goods in CiI'" of impon o f

goods excluding the goods mentioned in cliluse (b) ilnd dilu", (e);

(b) two per cent on the Viii"" of the Importe d goods in t he CiI'" of import

of goods specified below:-(I ) Petroleum oils il nd oils obtilir>ed from bituminous minerills,

crude (H.S Code: 2109.00.00);

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Economy & Finance

Bangladesh Income Tax hand note_Ranjan sir lecture details (updated in light of Finance Act 2015), Bangladesh Tax hand note for ICAB & ICMAB