ranjan sir lecture details (updated in light of fa 2016) rrh update

Updated (Finance Act 2016)

Md. Ibne Nayeem Hasan, [email protected]

Mohammad Ahsanullah, [email protected]

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Study Material

Taxation

(Income Tax)

(With Finance Act 2016)

Initiated by:

Asif Ahmed, ACA

Manager

Finance & Accounts

Impress-Newtex Composite Textiles Ltd

Updated by:

Md. Mahee Al Islam

Md. Fazlul Ullah Arif

Afroza Akhtar

Audit and Advisory Services

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 2016’. Note that, we tried our best to incorporate the

recent changes of the FA 2016, but some mistakes may be there and we are cordially sorry for

that. Mr. Ranjan Kumer Bhowmik, 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 has been advised.

.




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Contents Part One: Income tax authority, types of taxes, some important definitions, tax rate, reduced tax rate: ............ 4

Some Important Definitions: ...................................................................................................................................... 5

Resident vs. Non-Resident: ........................................................................................................................................ 8

Tax Rate: .................................................................................................................................................................. 12

Part Two: Income from Salary .................................................................................................................................. 16

Definition of Salary: ................................................................................................................................................. 16

Pay and Allowances totally exempt from Tax: (Sixth Schedule, Part-A)................................................................. 18

Information regarding payment of salary (Section 108 read with rule 21, 22 and 23) ............................................. 19

Investment Tax Rebate: ............................................................................................................................................ 20

GPF vs. RPF vs. UPF: .............................................................................................................................................. 21

Part Three: Income from Interest on Securities ...................................................................................................... 24

Important sections: ................................................................................................................................................... 24

Part Four: Income from House Property ................................................................................................................. 27

Part Five: Agricultural Income: ................................................................................................................................ 30

Important sections of Agricultural Income: .............................................................................................................. 30

Section 35 - Method of accounting: .......................................................................................................................... 32

Sixth Schedule (Part A): ........................................................................................................................................... 33

Third Schedule: Computation of Depreciation Allowance: ...................................................................................... 33

Part Six: Capital Gain ................................................................................................................................................ 34

Important sections of Capital Gain: .......................................................................................................................... 34

Second Schedule: Para 2 (Tax payable on capital gain) ........................................................................................... 36

Sixth Schedule (Part A): (Exclusion from income): ................................................................................................. 36

Special tax rates on Capital Gain from sale of share ................................................................................................ 37

Part Seven: Income from Business and Profession .................................................................................................. 38

Definitions: ............................................................................................................................................................... 38

Rules: ........................................................................................................................................................................ 39

Section – 35; Method of accounting: ........................................................................................................................ 43

Third schedule: Tax Depreciation ............................................................................................................................ 48

Tax Holiday .............................................................................................................................................................. 50

Company Tax Assessment........................................................................................................................................ 55

Corporate Tax Rate ................................................................................................................................................... 58

Corporate Social Responsibility ............................................................................................................................... 61

Part Eight: Income from other sources ..................................................................................................................... 64

Important sections of income from other sources: .................................................................................................... 64

6th

Schedule: Part-A (Exclusion from total income) ................................................................................................. 65

Section – 36: Allocation of income from royalties, literary works, etc. ................................................................... 65

Part Nine: Set off and Carry Forward Losses .......................................................................................................... 69

Important sections related to set off and carry forward losses .................................................................................. 69

Carry forward of loss from business: Section 38 ...................................................................................................... 69

Advance Payment of Tax ......................................................................................................................................... 72

Advance tax at a glance: ............................................................................................................................................. 74

Part Ten: Income Tax Return .................................................................................................................................... 75




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Part Eleven: Table of Withholding Tax .................................................................................................................... 79

Part Thirteen: Assessment ......................................................................................................................................... 94

Assessment: .............................................................................................................................................................. 94

FINAL SETTLEMENT OF TAX LIABILITY (SEC-82C): .................................................................................... 96

Penalty and Prosecution: ........................................................................................................................................ 100

Prosecution (Imprisonment for punishable offence)............................................................................................... 103

Penalty for not maintaining accounts in the prescribed manner (section 123): ...................................................... 105

Penalty for failure to file Income Tax Return (Section- 124) ................................................................................. 105

Penalty for concealment of income (section-128) .................................................................................................. 105

Penalty for default in payment of tax (section-137) ............................................................................................... 105

Part Fourteen: Appeal .............................................................................................................................................. 106

Appeal: ................................................................................................................................................................... 106

Panel of Facilitators: ............................................................................................................................................... 114

Part Fifteen: Double Taxation Avoidance Agreement ........................................................................................... 116

Double Taxation Avoidance Agreement (Sec. 144 read with 7th Schedule): ........................................................ 116

Part Sixteen: Transfer Pricing ................................................................................................................................. 119

Important Definitions: ............................................................................................................................................ 119

Important sections related to transfer pricing: ........................................................................................................ 120

Penalty: ................................................................................................................................................................... 122

Income Tax Rules 1984 .......................................................................................................................................... 124

Part Seventeen: Statutory regulatory orders (SROs) ............................................................................................ 130

Part Eighteen: Illustrations ...................................................................................................................................... 139

Individual assessment ............................................................................................................................................. 139

Partnership firm assessment ................................................................................................................................... 163

Company assessment .............................................................................................................................................. 165




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

reduced tax rate:

Coverage:

1. Income Tax Ordinance 1984

2. Income Tax Rules 1984

3. SRO (Statutory Regulatory Order)

4. Circular of NBR

5. Case References

a. ITR (Indian Tax Report)

b. BTD (Bangladesh Tax Decisions)

Direct Tax Vs Indirect Tax:

Impact and incidence of the direct tax are on the same person; but impact and incidence of indirect taxes are 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, Supplementary Duty (SD).

Income Tax Laws:

Section (sub section)

Section Clause (sub clause)

Rule (sub rule)

Income Tax Ordinance Vs IT Rules:

Tax Ordinance – made or changed by the parliament

Tax Rules – made by NBR

Government can reduce tax burden through SRO‘s but cannot impose tax. 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




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Income tax authority is as follows –

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

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

3. Commissioner of Taxes (CT);

a. DG (Central Intelligence Cell, CIC);

b. DG (Inspection);

c. CT (Appeal);

d. DG (Training);

e. CT (Large Taxpayer Unit);

4. Additional Commissioner of Taxes (ACT);

a. Appellate Additional Commissioner of Taxes (AACT);

b. Inspecting Additional Commissioner of Taxes (IACT);

5. Joint Commissioner of Taxes (JCT);

a. Appellate Joint Commissioner of Taxes (AJCT);

b. Inspecting Joint Commissioner of Taxes (IJCT)

6. Deputy Commissioner of Taxes (DCT)

a. TRO – Tax Recovery Officer;

b. TPO - Transfer Pricing Officer

7. Assistant Commissioner of Taxes;

8. Extra Assistant Commissioner of Taxes; and

9. Inspector of Taxes

Types of Taxes:

Some Important Definitions:

NBR

Customs & VAT Income Tax

Income

Tax

Foreign

Travel Tax

Gift

Tax

Value

Added Tax

Turnover

Tax

Supplementary

Duty

Income [section-2(34)]:

Income" includes--

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

this Ordinance; [Added F. A. 2016]

(b) any amount which is subject to collection or deduction of tax at source under any provision of this ordinance; [Added F. A. 2016]

(c) any loss of such income, profits or gains

(d) 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;

(e) 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;

(f) any amount on which a tax is imposed; [Added F. A. 2016]

(g) any amount which is treated as income under any provision of this ordinance; [Added F. A. 2016]

Why tax?

Because they (officers) deal with

three taxes: income tax, gift tax

and travel tax.




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6th

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

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 -

(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;

(aa) every person by whom a minimum tax is payable under this ordinance. [Added F. A. 2016]

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

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

(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) and 2(46A)]:

2(46) - ―person" includes an individual, a firm, an association of persons, a Hindu undivided family, a trust, a

fund, a local authority, a company, an entity and every other artificial juridical person;

2(46A) - ―person with disability‖ means an individual registered as প্রতিবন্ধী বযতি (person with disability) under

section 31 of প্রতিবন্ধী বযতির অতিকার ও সুরক্ষা আইন ২০১৩ (২০১৩ সননর ৩৯ নাম্বার আইন)

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, financial institution [or any subsidiary thereof]Added F.A. 2016

, 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)

:

Provided that, the deputy commissioner of Taxes may allow a different financial year for a company

which is a subsidiary or holding company of a parent company incorporated outside Bangladesh if such

company requires to follow a different financial year for the purpose of consolidation of its accounts

with the parent company.[Added FA 2016]

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

declared, issued or paid by any company registered in Bangladesh under ককাম্পানী আইন, 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;




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Income Year Assessment Year

1 July 2013 – 30 June 2014 2014 – 2015

1 January 2013 – 31 December 2013 2014 – 2015

1 August 2012 – 31 July 2013 2014 – 2015

Tax Day [section 2(62A)]:

―Tax Day‖ means –

(i) in the case of an assessee other than a company, the thirtieth day of November following the end of the

income year.

(ii) in the case of a company, the fifteenth day of the seventh month following the end of the income year.

(iii) next working day following the Tax Day if the day mentioned in sub-clause (i) and (ii) is a public

holiday.

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;




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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 Non-Resident:

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. Therefore, 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 two 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 a non-resident in that

year.

If the first criterion of 182 days has been

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 person may

be resident in two different countries in the same

year, although he can have only one residency.

Particulars Firm Company

Partial Control and Management Resident Non-Resident

Full Control and Management Resident Resident

Particulars Resident Non-Resident

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 –

(a) an individual who has been in Bangladesh –

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

year; or

(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;

(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

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

wholly in Bangladesh in that year;




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SL. Category Condition Analysis

2. (i) Hindu

Undivided Family

(HUF)

(ii) Partnership

firm

(iii) Association of

Persons (AOP)

The control and management

of its affairs 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 two places of

residence; the residence of partners or an

individual member of HUF is immaterial for

determining the residence of a firm or family.

The place of control may be different from the

place where the actual trading occurs. Control of

a business does not necessarily mean the carrying

on of the business and therefore the place where

trading activities or physical operations occur 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 do

not by itself lead to the conclusion that the family

is non-resident in that year, since someone else,

though it is normally controlled by the karta, may

at a particular point of time control the business

of the family. The same principle applies equally

to cases of firms and other association of persons.

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.

Therefore, for the purpose of income tax a

company resides where it really houses 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 carried

outside Bangladesh. 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.




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Incidence of taxation based on 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. Means for Resident taxable income is Global Income but for Non-Resident taxable income means only income

from Bangladesh. Section 43 also deals with the computation of total income by inclusion, in some cases, of other

person's income. Assessees can be divided into 2 categories:-

(i) Resident; and

(ii) Non-Resident

The basic differences between resident and non-resident are tabulated below-

SL

No

Point of

view Resident Non-resident Analysis

1. Income (a) The entire income

accruing or arising

in any part of the

world, irrespective

of whether it is

received, in

Bangladesh or not

is taxable.

(a) 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 cannot

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 tax payment

if it comes through official channel.

2. Tax (a) General tax rate

is applicable.

(a) 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, lower one.

3 Investment

Tax Credit

(a) Investment tax

credit facility is

applicable

(a) Investment tax credit

facility is not applicable

a. The only exception is non-resident

Bangladeshi where investment tax

credit facility is applicable like

resident.




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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 case, the resident may be charged in respect of the profits which he has not in fact made but

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

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

the resident may be charged under section 104.




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Tax Rate:

Other than Company:

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

On the 1stTk. 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

Father or mother of a handicapped person or his/her legal guardian will be entitled to a tax-free slab of Tk. 25,000

higher than their original slab (first slab). This means the first slab for such person would be BDT 275,000. If both

father and mother is taxpayer, only one can avail this facility. Added FA 2016

Provided further that, any assessee is the owner of any small or cottage industry in less developed area or least

developed area and engaged in manufacturing of the product of small and cottage industry thereof will get rebate of

payment of income tax from income derived from such sources at the following rate:

Description Rate

a) In case where production of the concerned year

exceeds 15% but not more than 25% of the

previous year

- 5% of tax payable on such income

b) In case where, production exceeds 25% of the

immediately preceding year - 10% of tax payable of such income

Explanation:

(1) Person with disability means listed disable person as per Section 31 of law of protection and rights of

disabled person, 2013 (No 39 of law 2013)

(2) The meaning of least developed area or less developed areas as per Section 45of Sub-section (2B), clause (b)

and (c) of the ITO 1984 (Order No. XXXVI of 1984)

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

Till Tk. 2.25 Crore Nil

Over Tk. 2.25 to Tk. 5Crore 10%

Over Tk. 5 to Tk. 10 Crore 15%

Over Tk.10 to Tk. 15 Crore 20%

Over Tk.15 to Tk. 20 Crore 25%

Over Tk. 20 Crore 30%

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 (North and South) and 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 City Corporation; BDT 3,000

Minimum surcharge fixed at Tk. 3,000 for the

Assessment year 2016-2017.




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Surcharge calculation explanation:

Situation 1: Particulars Amount in BDT

Tax payers net worth 2,20,00,000

Total Income 5,00,000

Tax payable of income 25,000

Surcharge payable Nil





Surcharge payable (10% of Tax payable) 2,500


















Total Income 500,000






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Company:

Special Tax Rate:

SL No. Type Rate Last Amended

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 40% (Amended FA 2015)

If not listed 42.5% (Amended FA 2015)

But for bank, insurance and financial institution approved by the

Government in 201340%

4 Mobile Phone Operator 45%

5

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%

6 Cigarette Manufacturers 45% (Amended FA 2015)

7 Merchant Bank 37.5%

8Dividend received by a company or dividend paid to abroad will be

treated as dividend income and will be taxed at20%

9 Cooperative society (registered under cooperative society act 2001) 15% (Amended FA 2015)

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

11If the company fails to declare or pay dividend at less than 10% of

share capital within the specified time (60 days)35%

12

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)

13Tax has to be paid at the rate of 25% even if dividend is paid more than

30% of the paid up capital of the company.

14

In case of an assessee, not being a company, engaged in manufacturing

cigarette, bidi, gul and other goods which are related to tobacco rate of

tax on such income

45%

SL. Description Income Slab Rate

On 1st 10 Lac 3%

On next 20 Lac 10%

On remaining balance 15%

On 1st 10 Lac 3%

On next 20 Lac 10%


On 1st 10 Lac 3%

On next 20 Lac 10%


a. In case of Company 10%

b. In cose of an assessee not being a company maximum 10%

a. knitwear and oven garments 20%

b. In cose of an assessee not being a company maximum 20%

1

2

3

4

5

Assessee company engaged in Jute production and earning from exporting of Jute product

In case of Company engaged in production and exporting

Income from poultry

Poultry feed, dairy mulberry, apiculture, horticulture,

pisciculture etc.

Shrimp, poulty, fisheries, fish hatchery




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Section – 16:

Section 16C and 16CCC have been omitted by Finance Act 2016.

Capital Gain (Second Schedule):

In case of gain of winning any lottery tax at source is deducted at 20% 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. at 30% currently.

Rate Tax Amount

On 1st BDT 250,000 0% -

On next BDT 400,000 10% 40,000

On next BDT 500,000 15% 75,000

Remaining BDT 370,000 20% 74,000

Total Tax Liability BDT 189,000

Or

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

Whichever is lower

and in this case the lower amount is BDT 177,000

Applicable slab

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;

Other than Company:

Company at the rate of

15%

Capital Gain

Sold Within 5 yrs of

purchase tax at normal

slab rate

Sold after 5 yrs of purchase:

1. Slab rate on total income; or

2. Tax on capital Gain at 15%

and on other income, normal

slab rate

-Whichever is lower

Charge of additional tax [Section - 16B]:

Notwithstanding anything contained in any other provision of the Ordinance, where 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. [Amended FA 2016]




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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) Any pay or wages

b) Annuity

c) Pension –Totally exempted (due to or received by an assessed) as per 6th Schedule (Part-A) Para-8

d) Gratuity – Exempted up to Tk. two crore fifty lakh received by an assessee 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 or dearness pay (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 referred in sub rule (1)

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 made to an employee by an employer in the form of cash or any other form but

excluding the following:

a) Basic Salary

b) Festival bonus

c) Incentive bonus

d) Arrear Salary

Study Reference:

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

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

108 read with rule 23

124(2), 165 and 172

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

Provident Fund:

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

6th

Schedule (Part A) Para – 4,6, 21, 25

6th

Schedule (Part B) Investment allowance

SRO 454 (Serial 19) date – 31/12/1980

SRO 310, dated: 27 June 1984




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e) Advance Salary

f) Leave encashment

g) Leave Fare Assistance (LFA)

h) Overtime

i) Any benefit, whether convertible into money or not, made to an employee by an employer, other than-

j) 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, due to or received, in connection with the termination / modification of

any terms and conditions relating to employment.

b) Any payment, due to or received, 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;

(d) His 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 DCT may, on the basis of application made to him by the assessee, determine the tax payable as if the salary,

payment or interest had been received by the assesse 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 maid. 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




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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) Any income accruing to or derived by a provident fund to which Provident Fund Act, 1925(XIX of 1925)

applies.

(b) Any income accruing to or derived by Workers Profit Participation Fund established under Bangladesh Labour

Act, 2006, subject to any such conditions and limits as may be prescribed.

(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 not exceeding fifty thousand taka (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) (Para 24 A)

(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: -

(a) 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]

(b) 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)

(c) 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.)

(d) 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]

(e) All allowances and benefits (except basic salary and festival bonus) of Govt. employees are exempted from

payment of tax [SRO No: 198 dated 30/06/2015]




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

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

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

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

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

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

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

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

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

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

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

Tax on Tax

If salary tax is borne by the employer, then 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


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


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

assessee.




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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.

Provided that-

(1) Medical expenses or medical allowance not exceeding taka ten lakh received or receivable by an

employee being a person with disability shall not be included in his total income;

(2) Medical expenses reimbursed by an employer to an employee, other than an employee who is a

shareholder director, for a surgery relating to heart, kidney, eye, liver and cancer of the employee,

shall not be included in the total income of such employee.

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-4)

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)

Particulars 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





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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)

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

j) Any sum invested in the purchase of one computer or one laptop by an individual assessee (Para-23).

[B] Donations to:

1. Rural charitable hospital approved by the Government (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)

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

Whichever is lower is

exempted




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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.

Allowable Investment Allowance:

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

25% 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 eligible

amount

Tax rebate

@ 15% on 1st eligible

amount Tk. 2,50,000

@12% on next eligible

amount Tk. 5,00,000

@10% on the remaining

eligible amount

Income tax rate for the assessment year 2015-2016

Income Slab Rate Minimum Tax

On the First Tk. 2,50,000/- of total income Nil After rebate, minimum tax for individual tax payer is:

1. Tk. 5,000 in case of Dhaka and Chittagong city

corporation area,

2. Tk. 4,000 for each city corporation area

3. Tk. 3,000 for other areas if total income exceeds

the minimum taxable income

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




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)

Threshold limit in case of parents or legal guardian of any person with disability will be 25,000 taka more. If both

father and mother are assesses then one will avail this benefit.

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.




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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. as follows: (as per S.R.O no 259 dated 10 Sep

2016.

Time of deduction or collection Date of payment to the credit of Govt.

a) In case of any deduction or collection made in any

month from July to May of a year

Within two weeks from the end of the month in which

the deduction or collection was made

b) In case of any deduction or collection made in any

day from the first to the twentieth day of the June of

a year

Within days from the end of the month in which the

deduction or collection was made

c) In case of any deduction or collection made in any

other dates of the month of June of a year

The next following day in which the deduction or

collection was made




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Part Three: Income from Interest on Securities

Income from Interest on Securities:

Types of Securities:

1. Government Securities

2. Government Approved Securities

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

Sixth Schedule (part A):

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

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

Important sections:

Section-22:

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

Dolpat Bhai vs. CIT Bombay, 1952)

Section 23:

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




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Section 51:

Section – 51: Deduction at source from interest on securities

1. Any person responsible for issuing a security of the government or a security approved by the Government,

income of which is classifiable under the head "Interest on securities", shall collect, unless the Government

otherwise directs, income tax at the rate of five percent (5%) upfront on interest or discount receivable on

maturity on such security.

2. If the security mentioned in sub-section (1) is a security based on Islamic principles, income tax shall be

deducted or collected at the rate of five percent (5%) on profit or discount at the time of payment or credit;

whichever is earlier.

3. Income tax shall not be collected or deducted at source if the security mentioned in sub-section (1) is a Treasury

bond or Treasury bill issued by the Government.

Example (Upfront Systems);

A person purchase securities of Tk. 10,000,000 at 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 at 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 any income arising from, or loss sustained, in the business.

(4) The Deputy Commissioner of Taxes may, by notice in writing, require any person 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 of which such person was the owner, or in which he had beneficial interest at any time during the period

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.




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specified in the notice, as the Deputy Commissioner of Taxes may consider necessary for the purpose of ascertaining

whether tax has been borne in respect of the interest on all those securities 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.




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Part Four: Income from House Property

Introduction:

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

land appurtenant thereto owned by the assesses 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

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




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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.

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 5% at source by the following tenants from any amount of payment of house rent:

Govt. organization

NGO

Company

Bank (including co-operative bank)

University

Medical/Dental/Engineering College,

Any school and college

Hospital/clinic/diagnostic center.

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

at 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.




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

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

1. Repairs and maintenance:

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

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

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

(a) Repairs;

(b) Expenditure relating to collection of rent;

(c) Water and sewerage;

(d) Common electricity;

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

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

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

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

2. Land development tax*;

3. Municipal tax*;

4. Ground rent*;

5. Insurance Premium*,

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

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

payable for the year on such loan*;

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

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

equal installments from first 3 years of letting out*;

9. Irrecoverable rent:

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

following conditions are fulfilled:

a. The tenancy is bona-fide;

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

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

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

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

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

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

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

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

subsequent year.

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

proportionately.

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.




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Part Five: Agricultural Income:

Important sections of Agricultural Income:

Section 27: Deductions from Agricultural Income:

(1) In computing the income under the head "Agricultural income", the following allowances and deductions

shall be made, namely:

(a) any land development tax or rent paid in respect of the land used for agricultural purposes;

(b) any tax, local rate or cess paid in respect of the land used for agricultural purposes, if such tax, rate or

cess is not levied on the income arising or accruing, or deemed to accrue or arise, from agricultural

operations, or is not assessed, at a proportion or on the basis of such income;

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 any process

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 assesse shall be computed in

the prescribed manner.

3. Where the Board, by notification in the official Gazette, so directs, agricultural income from the sale of

rubber, tobacco, sugar or any other produce grown and manufactured by the assessee may be computed in the

manner prescribed for the purpose.




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(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;

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;

(1) 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

(2) 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.




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(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 at 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 assesse 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

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 "Agricultural income".




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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 to

exceed twenty five (25) lakh taka for the calculation of written down value for depreciation.

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".

Para - 27:

Notwithstanding anything contained in any order or regulation for the time being in force, any income of an

individual, being an indigenous Hillman of any of the hill districts of Rangamati, Bandarban and Khagrachari,

which has been derived solely from economic activities undertaken within the said hill districts.

Para - 29:

Any income, not exceeding two-lakh taka, chargeable under the head "Agricultural income" of an assessee, being

an individual, whose only source of income is agriculture.

Para - 46:

An amount equal to fifty (50) percent of the income of an assessee derived from the production of corn/maize, and

sugar beet.




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Part Six: Capital Gain

Capital Gain:

Important sections of Capital Gain:

Section 2(15) and 31:

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) any stock-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 Rajdhani

Unnayan Kartripakya (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




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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 connectionwith 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.:

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

2. 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 TK. 1,600

Capital Gain Tk. 600




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Purchase another building within one year (before or after) by this capital gain than this tk. 600 is tax-free. But,

Serial 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)

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 Tk. 2,00,000 of an individual assessee, whose only source of income 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 Tk. 36,00,000.

9. Para–40: income from zero coupon bond issued by bank, insurance or any financial institution upon

approval of BB.

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 applicable to his

total income including the said capital gains, or tax at the rate of fifteen per cent on the amount of the

capital gains whichever is the lower.

Simply we can conclude tax on capital gain if the capital asset disposed within five years period of its acquisition

at normal slab rate but if the capital asset disposed beyond five years period then tax payable on capital gain at

normal slab rate applicable or tax payable at 15% whichever is lower.




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10. 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 Tk. 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 Govt. within six month from the end of the income

year.

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

approve by the ministry of education of the government.

16. Para-50: donation to any technical and vocational training institute approved by ministry of education of

Govt. through crossed cheque or bank transfer.

17. Para-51: Donation to any national level institution engaged in the research & Development (R&D) of

agriculture, science, technology and industrial development.

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 at Tk. 1 crore to ABC Co. which has a cost price of Tk. 60 lac. However, 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. Share of listed companies: 10% for companies & firms, 0% for others (SRO no 196 dated 30/6/2015.

2. Share of private limited companies:

(i) Sale within 5 years of acquisition : at normal slab rate

(ii) Sale after 5 years of acquisition: at normal slab rate applicable on total income(including capital gain or @

15%, whichever is lower

(iii) Capital gain received by a non-resident on sale of shares on Bangladeshi listed companies is also tax free if

the assessee is entitled to similar exemption in his own country where he is a resident. (6th schedule, Part A,

Para 43)




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Part Seven: Income from Business and Profession

Income from Business and Profession:

Definitions:

Study References:

Section; 2(34), Income

2(14), Business

2(49), Profession Definitions

2(61), Speculative Business

Section; 19(15)-a, aa, b, c

19(16) with 3rd

schedule Para 10

19(18) with section 29(1)(xii) Deemed Income

19(20)

19(23) read with rule-30A

Section; 28 read with rule-19(6)

29

30-read with rule-65 Main Section

35

46B + 46C

Sixth Schedule (Part A), Para 1A, Para 33, Para 35, Para 37, Para 39, Para42, Para 44, Para 45.

Third Schedule; tax depreciation

SRO; CSR; 229 of 2011 and 223 of 2012

SRO – CSR: No. 223 dated 27 June 2012 and No. 186 dated 01 July 2014

Rule 30, 31, 32

Section 2(14): Business

Business includes any trade, commerce or manufacture or any adventure or concern in the nature of trade,

commerce or manufacture.

Section 2(34): Income

Income includes-

(a) any income,receipts,profits or gains, from whatever source derived, chargeable to tax under any

provision of this Ordinance.

(b) any amount which is subject to collection or deduction of tax at source under any provision of this

Ordinance.

(c) any loss of such income, profits or gains;

(d) 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;

(e) 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:

(f) any amount on which tax is imposed

(g) any amount which is treated as income 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 ককাম্পানীআইন, 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;




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Rules:

Section 2(49): Profession

Profession includes a vocation.

Section 2(61): Speculative Business

Speculation-business means business in which a contract for the purchase or sale of any commodity, including

stocks and shares, is periodically or ultimately settled otherwise than by the actual delivery or transfer of the

commodity or scripts, but does not include business in which -

(a) a contract in respect of raw materials or merchandise is entered into by a person in the course of his

manufacturing or mercantile business to guard against loss through future price fluctuations for the purpose

of fulfilling his other contracts for the actual delivery of the goods to be manufactured or the merchandise

to be sold by him;

(b) a contract in respect of stocks and shares is entered into by a dealer or investor therein to guard against loss

in his holdings of stocks and share through price fluctuations; and

(c) a contract is entered into by a member of a forward market or a stock exchange in the course of any

transaction in the nature of jobbing or arbitrage to guard against loss which may arise in the ordinary course

of his business as such member;

Rule-30: Determination of income from business when such income is also partially agricultural

In the case of income which is partially "agricultural income" and partially income from "business", in

determining that part of income which is from "business", the market value of any agricultural produce which

has been raised by the assessee or received by him in kind and which has been utilised as raw material in such

business or the sale proceeds of which are included in the accounts of the business shall be deducted, and no

further deduction shall be made in respect of any expenditure incurred by the assessee as a cultivator or receiver

of the produce in kind.

Rule-31: Computation of income derived from the sale of tea

1. Income derived from the sale of tea grown and manufactured by the seller in Bangladesh shall be computed

as if 40% of such income was derived from business and 60% of such income was derived from

agriculture:

Provided that in computing, such income from business, an allowance shall be made in respect of the cost

of planting bushes in replacement of bushes that have died or become permanently useless in an area

already planted, unless such area has previously been abandoned:

Provided further that in computing such income an allowance shall be made in respect of the expenditure

incurred in the income year by the assessee in connection with the development of the new areas for

bringing them under tea cultivation.

Rule-32: Computation of income derived from the sale of rubber

1. Income derived from the sale of rubber grown and manufactured by the seller in Bangladesh shall be

computed as if 40% of such income was derived from business and 60% of such income was derived from

agriculture.

Provided that in computing such income an allowance shall be made in respect of the expenditure incurred

in the income year by the assessee in connection with the development of the new areas for bringing them

under rubber cultivation.




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Deemed Income:

Example-1: Bad debt expense charged in the Income Statement and allowed by the tax authority in AY 2011-12but

subsequently the debtor paid debt. Then this expenditure will be treated as income in AY 2012-13.

Example-2: Interest on loan was incurred (but not paid) in IY 2011. But if it is not paid in the subsequent 3 years then

it will be treated as income in the following year (IY 2015). But if the interest paid subsequently in 2016 it will

deducted from the income of 2016.

Section 19(15)(c) is like Section 19(15)(aa) but for trading liability for example purchase of raw materials on

credit was allowed as cost of goods sold in IY 2011-12 but not paid until 2014-15 then it will be treated as

income in the IY 2015-16.

Section 19(15); Deemed Income:

Where, for the purpose of computation of income of an assessee under section 28, any deduction has been made

for any year in respect of any loss, bad debt, expenditure or trading liability incurred by the assessee, and-

(a) subsequently, during any income year, the assessee has received, except as provided in clause (aa) whether in

cash or in any other manner whatsoever, any amount in respect of such loss, bad debt, or expenditure, the

amount so received shall be deemed to be his income from business or profession during that income year

(example -1);

(aa) such amount on account of any interest which was to have been paid to any commercial bank or the

Bangladesh Development Bank ltd or on account of any share of profit which was to have been paid to any

bank run on Islamic principles and which was allowed as a deduction in respect of such expenditure though

such interest or share of profit was not paid by reason of the assessee having maintained his accounts on

mercantile basis, within three years after expiry of the income year in which it was allowed, shall, to such

extent as it remains unpaid, be deemed to be income of the assessee from business or profession during the

income year immediately following the expiry of the said three years (example -2);

(b) the assessee has derived, during any income year, some benefit in respect of such trading liability (discount),

the value of such benefit, if it has not already been treated as income under clause (c), shall be deemed to be

his income from business or profession during that income year;

(c) such trading liability or portion thereof as has not been paid within three years of the expiration of the

income year in which deduction was made in respect of the liability, such liability or portion, as the case may

be, shall be deemed to be the income of the assessee from business or profession during the income year

immediately following the expiry of the said three years;

and the business or profession in respect of which such allowance or deduction was made shall, for the purposes

of section 28, be deemed to be carried on by the assessee in that year:

[Provided that where any interest or share of profit referred to in clause (aa) or a trading liability referred to in

clause (c) is paid in a subsequent year, the amount so paid shall be deducted in computing the income in respect

of that year.]

Section-19(16):

Where any building, machinery or plant having been used by an assessee for purpose of any business or

profession carried on by him is disposed of during any income year and the sale proceeds thereof exceeds the

written down value, so much of the excess as does not exceed the difference between the original cost and the

written down value shall be deemed to be the income of the assessee for that income year classifiable under the

head "Income from business or profession (see below example).




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For example, a machinery

Cost price Tk. 100


WDV Tk. 70

Now, if machine is sold at 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".




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Sixth Schedule (Part A): Exclusion from income

Income from the following business is totally tax free –

1) Para-11A: Income from dividend received from a company listed in any stock exchange in Bangladesh up to

BDT 25,000 will be tax exempted. Exceeding this amount will be taxable. Amended F.A. 2015

2) Para-20: Income from gratuity amounting to BDT 2.50 core will be tax exempted. Excess of 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 36 lakh[Amended F.A. 2016]

:

7) 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 for the period and rate specified below;

a. Dhaka and Chittagong areas – for five years

b. Other than Dhaka and Chittagong areas – ten years[Amended F.A. 2014]

8) 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[Amended F.A. 2014]

100% tax-free

50% tax-free

25% tax-free

100% tax-free

50% tax-free

25% tax-free

Exemption

For 5 Years

For 10 Years

For first 2 Years

For next 2 Years

For next 1 Year

For first 3 Years

For next 3 Years

For next 4 Years

100% tax-free

50% tax-free

25% tax-free

100% tax-free

50% tax-free

25% tax-free

Exemption

For 5 Years

For 10 Years

For first 2 Years

For next 2 Years

For next 1 Year

For first 3 Years

For next 3 Years

For next 4 Years




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9) 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)

10) 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)

11) 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.(Amended FA 2015)

12) Para – 52: Any income, not being interest or dividend classifiable under the head ―Income from other sources‖,

received by any educational institution, if it -

(a) is enlisted for Monthly Pay Order (MPO) of the Government;

(b) follows the curriculum approved by the Government;

(c) is governed by a body formed as per Government rules or regulations.(Added FA 2015)

13) 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 sections deals with exemption from tax of newly established industrial undertakings set up between the period of

July 2011 and June 2019 (both days inclusive). 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 under section 28: income from business

and profession.

Location Total period of

exemption Rate and period of exemption

(a) Dhaka and Chittagong division (excluding

Dhaka, Narayanganj, Gazipur, Chittagong districts

, also the hill districts Rangamati, Bandarban and

Khagrachari)

5 Years

1st &2nd year--100% of Income

for 3rd year--60% of Income

for 4th year--40% of Income

for 5th year--20% of Income

(b) Rajshahi, Khulna, Barisal, Sylhet and Rangpur

divisions (excluding city corporation area)

andRangamati, Bandarban and Khagrachari

districts

10 Years

1st & 2nd year--100% of Income

3rd year--70% of Income

4th year--55% of Income



7th

to 10th

year--.20% of Income

Section – 35: Method of accounting

An assessee shall maintain separate accounts for his income from the following sources –

a. Income from business and profession

b. Income from agriculture

c. Income from other sources




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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. However, 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 is 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 that previously was 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; Explanation is given below;

d. Excess amount referred to in section 19(18);

Insurance, salvage or compensation received for building, plant being discarded, demolished or

destroyed.

(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);

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;

Original Cost = BDT 10

Sales Proceed = BDT 5

WDV = BDT 4

Gain= (5-4) = BDT 1

Business Gain= BDT 1

Original Cost = BDT 10

Sales Proceed = BDT 12

WDV = BDT 4

Gain= (12-4) = BDT 8

Business gain = (10-4) = BDT 6

Capital gain =(12-10)= BDT 2




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Section – 29: Deductions from income from business or profession

―Any expenditure, not being in the nature of capital expenditure or personal expenses of the assessee, laid out or

expended wholly and exclusively for the purpose of the business or profession of the assessee‖ (Omnibus clause:

section 29(1)(xxvii)). Some examples are as below:

Rent

Interest payable on borrowed capital

Tax depreciation and amortization of certain assets

Any expenditure incurred wholly and 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(aaa): Any payment by way of salary to an employee if the employee is required to obtain a 12 digit TIN but fails

to obtain the TIN at the time of making such payment(Added FA 2016)

30(b): Any payment made by a firm (partnership)or an association of persons to any partner of the firm or any

member of the association in the form of;

1. Salary

2. Remuneration

3. Commission

4. Interest

30(c): Payment of brokerage fee or commission to a non-resident without deducting TDS as per section 56

30(d): Any payment to a provident fund or other funds, which are taxable as income from ―Salary‖ shall not be

allowed as deduction unless effective arrangements has been made by the employer regarding collection of TDS

30(e): Excess perquisite (over BDT4, 70,000 per employee per year) and excess perquisite for employee with

disability (over BDT 25, 00,000 per employee per year) (Amended FA 2016)

30(f): (Read with rule 65); Entertainment expense, expense of distribution of free samples, foreign travels for

holidaying and recreation etc. are not allowed in excess of amount or rate prescribed in Rule 65 of this ordinance

Rule 65; Amount or rate for allowance if entertainment expense-

Entertainment expense is only allowable if the company makes profit. No, profit no entertainment! And

expense is allowable at the following rate;

On first Tk. 10 lac of income, profit or gains from business or profession – at the rate of 4%

On the remaining balance of income, profit or gains from business or profession – at the rate of 2%

Or,

The actual entertainment expense charged in the profit and loss account, whichever is lower.

“Profit should be calculated after disallowing charged entertainment expenses in profit and loss a/c”.

Rule 65A: Allowance in respect of foreign travel for holidaying and recreation

Equivalent to three fourth (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 a holiday opportunity of

Tk.100,000, which was also his actual expenditures. His basic salary is Tk. 20,000 per month. So allowable




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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 is to be paid 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 conditions, expense will disallowed.

Rule 65C; Rate of allowance in respect of expenditure on distribution of free Samples:

Slab of Disclosed Turnover Pharmaceuticals

Industry

Food, cosmetics and

toiletries industry (Added FA 2016)

Other industries (Amended FA 2016)

On a turnover up to Tk. 5 Crore at

the rate of-

2% 1.0% 0.50%

On a turnover in excess of Tk. 5

Crore but up to Tk. 10 Crore at the

rate of-

1% 0.50% 0.25%

On a turnover in excess of Tk. 10

Crore at the rate of-

0.50% 0.25% 0.10%

Or, the actual free sample given whichever is lower.

30(g): Headquarter expenditures of foreign companies (not incorporated in Bangladesh under the Companies Act

1994) are allowable up to 10% of net profit disclosed in the statement of accounts (or actual expenditure, whichever

is lower)

30(h): Royalty, technical service fee, technical knowhow fee and technical assistance fee is allowable up to 8% of net

profit disclosed in the statement of accounts (or actual, lower one)

30(i): Monthly gross salary or remuneration over Tk. 15,000 shall be given in check or bank transfer

30(j): Incentive bonus is allowable up to 10% of net profit disclosed in the statement of accounts

30(k): Overseas travelling allowable up to 1.25% of the disclosed turnover [Amended FA 2016]

30(l): Any commission paid or discount made to its shareholder directors by a company

30(m): Any payment over Tk. 50,000 should be in check or bank transfer, but not applicable in case of– salary

payment (each employee having gross salary less than Tk. 15,000), raw material purchase and payment for

government obligation

30(n): Any house or office rent whether for commercial purpose or not,paid without crossed check or bank transfer

Section 30A: Restriction on Disallowance by the DCT

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 and loss account without specifying reason for such disallowance or deduction.

Other Issues

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.




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Section 37 to Section 42: Set-off and Carry-forward of losses

Where loss is assesseed in any head of income, the assessee is entitled to set-off the loss against his income assesseed

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 under the head ―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 Tk. 5,000/-.

Unabsorbed depreciation loss can be carried forward for unlimited period.

Loss so carried forward is to be set off against income of the respective head.

If there is any loss at any exempted income, it cannot be set-off against any other income.




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Third schedule: Tax Depreciation

There are five (5) types of depreciation mentioned in the Income Tax 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 –

** 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, it was sold at Tk. 2,400,000.

Notional cost price Tk. 2,500,000

Less: Depreciation (Year-1) Tk. (500,000)

WDV after (Year-1) Tk. 2,000,000

Less: Depreciation (Year-2) Tk. (400,000)

WDV after (Year-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-July-2014 and 30-June-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

Unabsorbed depreciation (due to loss) can be

carry forwarded for unlimited time.

Business loss can be carry forwarded for 6 years.

Class of Assets 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%




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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 stating that no other tax exemption benefit is being enjoyed by the assessee

o Any other depreciation allowance will not be allowable

3. Initial Depreciation:

Only applicable for building and plant & machinery. In addition, the property has to be new and the

depreciation allowance is allowed only in the first year when the asset is first being used along with normal

depreciation allowance.

4. Extra depreciation

5. Other Tax Exemption

Industries set up in EPZ will enjoy tax exemption from the moth of commercial production.

Income from software development or Nationwide Telecommunication Transmission Network (NTTN)

or Information Technology Enabled Services (ITES) run by Bangladeshi resident is tax exempted up to

from 1 July 2008 to 30-June-2024. [para-33, 6th

Schedule, Part A]

Provided that, the person shall file income tax return in accordance with the provisions of section

75(2)(c) of the Ordinance

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, 2019 [para-35, 6th

Schedule, Part A]

6. Special depreciation

7. General Export Incentives:

50% of income of an assessee derived from the export business 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.

Class of asset Rate

Building 10%

Plant and machinery 25%

For example, a machine costs Tk. 100,00,000. In first year depreciation allowance is-

Initial depreciation allowance (at the rate of 25%) Tk. 25 lac

Normal depreciation allowance (at the rate of 20%) Tk. 20 lac

Total Depreciation allowance (for year 1) Tk. 45 lac

WDV after 1st year Tk. 55 lac.




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Tax Holiday

Introduction:

Tax holiday has been started to allow as a tax incentive for industrialization in this region since 1959 by introducing

new section 15BB in the then Income Tax 1922. In 1972, the tax holiday system was withdrawn by repealing section

15BB. However, 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 program was

first extended for the industries up to 30 June 1990 by Finance Act 1985 and up to 30 June 2000 by the FA 1989.

However, 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 2019 through the

FA 2014.

(1) Type of Industries eligible for tax holiday

Two types of industries are eligible to apply for tax holiday —

1. Industrial undertaking

2. Physical infrastructure facility

The following categories of industries are eligible for the definition of Industrial Undertakings:

01. Active ingredient industry and radio pharmaceuticals industry

02. Automobile manufacturing industry [FA-2015]

03. Barrier contraceptive and rubber latex

04. Basic chemicals or dyes and chemicals

05. Basic ingredients of electronic industries (e.g. resistance, capacitor, transistor, integrator, circuit)

06. Bi-cycle manufacturing industry [FA-2015]

07. Bio-fertilizer

08. Biotechnology

09. Boilers

10. Brick made of Automatic Hybrid Hoffmann Kiln [or Tunnel Kiln] Technology [FA-2015]

11. Compressors

12. Computer hardware

13. Energy efficient appliances

14. Insecticide or pesticide

15. Petro-chemicals

16. Pharmaceuticals

17. Processing of locally produced fruits and vegetables




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18. Radio-active (diffusion) application industry (e.g. developing quality or decaying polymer or preservation of

food or disinfecting medicinal equipment)

19. Textile machinery

20. Tissue grafting

21. Tyre manufacturing industry or [FA-2015]

22. Any other category of industry of industrial undertaking 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 (LNG) 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 physical infrastructure 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 1994 with its registered office in Bangladesh having subscribed and paid-up

capital of not less than Tk. 20,00,000 (Tk. Twenty Lakh) on the date of commencement of commercial

production or operation (Section 46C (3)(a)).

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 (Section 46A(2)(d)).

c) The undertaking must be approved by NBR for the purpose of tax holiday (Section 46C (3)(c)).

d) The undertaking shall have to obtain clearance certificate from the Directorate of Environment for the relevant

income year (Section 46B (4) (f)).

(3) Application procedure and its disposal by the NBR:

a) Tax holiday application is to be submitted to 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.




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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.

Provided that NBR shall not reject any application unless the applicant has been given a reasonable opportunity

of being heard.

c) 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 is considered 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: (Section 46A (2A))

i. The said undertaking enjoying tax holiday is engaged in any commercial transaction with another

undertaking or company having one or more common sponsor shareholders.

ii. If the DCT finds that, the undertaking 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 years

from the

day of

commercial

production

1st 2 years……...100% 1

st 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 years

from the

day of

commercial

production

1st 3 years……. 100% 1

st 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.

****Where any exemption 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 component authority of the Government. [Added FA-2015]




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The exemption allowed shall be withdrawn for the relevant assessment year and the DCT shall determine the tax

payable for such year.

(6) Period of tax holiday for physical infrastructure facility irrespective of the location:

Rate of exemption

Established within 30 June 2013

(10 Years)

Established from 01 July 2013 to 30 June 2019

(10 Years)

1st 5 years……………….100% 1

st 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 by another party, an attested copy of the agreement between the applicant company and the seller

company for the acquisition of the industrial undertaking/physical infrastructure with list and value of the

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.




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(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 as like ―Tax

Holiday‖ but without any tax holiday application to NBR if it starts its 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)

5year from the month of

commencement of

commercial operation

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)

10year from the month of

commencement of


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 year from the month of

commencement of


1st 2 years……………. 100%

2nd

2 years……………. 50%


(b) Rajshahi, Khulna, Sylhet, Rangpur and Barisal

division (including the hill district of Rangamati,

Bandarban and Khagrachari)

7 year from the month of

commencement of


1st 3 years……………. 100%

2nd

3 years……………. 50%





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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 Income Tax 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 listed 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 are 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;




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(1) As an assessee (Taxpayer):

Collection of TIN (Taxpayer Identification Number) certificate u/s 184A, 184B

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 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 filing 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 Account Number (TCAN) 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)

Submit withholding tax return at every 6 months interval as per section 75A

Submit monthly statements of withholding tax from salary as per Rule 21

Submit monthly statements of withholding tax other than salary as per Rule 18(7)

(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 of directors of a private limited company in case of winding up [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 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) Registration for purchase of a land, building or an apartment situated within any city corporation or any

paurashava of a district headquarter, deed value of which exceeds one lakh taka [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




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U/s 184C, a company shall display 12-digit TIN Certificate 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, with in the tax day; unless the date is extended by the DCT u/s 75(6).

Here tax day means last date of submission of return, which is 15th

of the 7th

month from the end of the income year.

That means every company will get 6.5 months time to submit the return. However, u/s 75(6) on application from the

company, the assessing officer (DCT) may extend the return submission date up to 2 month at his own capacity and

further 2 months after taking prior permission from the IJCT

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, before the assessment revised return can be filed if any omission or incorrect statement in the previously

filed return is 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 and statements are prepared and reported

in accordance with the BAS and BFRS and audited in accordance with BSA [sec 35(3)]

Where no method of accounting has been regularly employed, or if the method employed is such that, in the

opinion of the DCT the income of the assessee cannot be properly ascertained, the income of the company

shall be computed on such basis and in such manner as the Deputy Commissioner of Taxes may think fit

[sec 35(4)]




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Corporate Tax Rate

The income tax rates for companies are as follows:

Types of

Company

Head /sources of Income Tax Rate for Assessment Year

2016-2017 2015-2016

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

Listed Non-

listed

40% 42.50% 40% 42.50%

Merchant Bank 37.50% 37.50%


schedule) 15% 15%


companies

10% 10%


Other Company (4) Other income For publicly Traded Company 25% 25%

(a) Dividend declared by less

than 10% or failure to pay

declared dividend within 6

months

Withdrawn 35%

(c) Newly listed companies in

case of declaring more than 20%

shares through IPO

10 % tax rebate on

relevant tax rate

{25%-

(25%*10%0}

=22.5%

10 % tax rebate on

relevant tax rate

{25%-

(25%*10%0}

=22.5%

For non-publicly Traded

Company (including non-

resident company)

35% 35%

Mobile Phone

Company


schedule) 15% 15%


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% 45%

Other than publicly

Traded Company

45% 45%

Cooperative

Society

15% 15%

Excess profit

tax (u/s 16C)

(Withdrawn): 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.

Minimum

tax(u/s 16CCC)

1% (Tobaco) 0.3% (But for

manufacturing

companies 0.10%

for first 3 years

0.75% (Mobile

Phoen Operator)

0.60% (Other)




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10. Special Reduced Corporate Tax Rates

a) Garments: 20% [SRO no 208 dated 29 June 2016]

b) Private University: 15%

c) Textile: 15% (SRO no 193 dated 30/06/2015)

d) Poultry (Up to Tk. 20 lakh= nil; next Tk 10 lakh @ 5%; and on rest @ 10%) [SRO No 254 dated 16/08/2015]

e) Jute Industries: 10% (SRO no 205 dated 29/06/2016)

f) Selected autonomous bodies:25% (SRO no 158 dated 26/06/2014)

g) National level Research institute:15% (SRO no 163 dated 26/06/2014)

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 weeks

from the end of the month of such deduction or collection. The only exception is TDS or TCS during the

month of June, which must be deposited within June so that deductions are deposited within the same fiscal

year.

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 assesseed income if exceeds Tk. 4,00,000/-

Advance tax is to be paid in four (4) equal installments: 15 September, 15 December, 15 March and 15 June.

However, advance tax is to be paid by Tobacco Manufacturing Company every month.

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

30/06/2024 [para-33]

Income from private power generation company up to 15 years from its commercial production [SRO

no. 211-Ain/2013 dated 01/07/2013]

Any income from the export of handicrafts for the period from 1st day of July, 2008 to the 30

th day of

June, 2019 [para-35]




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(c) Accelerated Depreciation

In case of machinery or plants set up in Bangladesh between 01/07/2014 and 30/06/2019 and not having been

previously used in Bangladesh, accelerated depreciation subject to some conditions will be allowed as follows:-

[paragraph 7B of 3rd

Schedule]

First Year: 50% of actual cost

Second Year: 30%of actual cost

Third Year: 20%of actual cost

**Conditions:-

Applicants must be a Bangladeshi company

Applicant is an industrial undertaking

Application is made to NBR within 6 months from the end of the month of commercial production

Declaration not to enjoy any other tax exemption benefit

Any other depreciation allowance will not be allowable

(d) Initial Depreciation

In case of machinery or plants set up in Bangladesh after 30/06/2002 and not having been previously used in

Bangladesh, initial depreciation subject to some conditions will be allowed as follows:-[paragraph 5A of 3rd

Schedule]

In the case of building………………10% of actual cost

In the case of plant, machinery………25% of actual cost

(e) General Export Incentives:

50% of income of an assessee derived from the business of export is exempted from tax. This is not applicable for a

company registered outside Bangladesh, enjoying exemption of tax or reduction in rate by any notification made

under the ordinance.




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Corporate Social Responsibility

SRO No. 223 dated 27 June 2012

SRO No. 186 dated 01 July 2014

Corporate Social Responsibility (CSR) is defined as the integration of business operations and values, whereby the

interests of all stakeholders including investors, customers, employees, the community and the environment are

reflected in the company‘s policies and actions. CSR is about how businesses align their values and behavior with the

expectation of stakeholders – not just customers and investors, but also employees, suppliers, communities,

regulators, special interest groups, and society as a whole. It is the company‘s commitment to be accountable to its

stakeholders. CSR demands that businesses manage the economic, social, and environmental impacts of their

operations.

The Government sees CSR as the business contribution to its sustainable development goals. Essentially, it is about

how business takes account of its economic, social and environmental impacts in the way it operates – maximizing

the benefits and minimizing the downsides. However, CSR is still considered as the voluntary action that business can

take, over and above the compliance with minimum legal requirements, to address both its own competitive interests

and the interests of wider society. Key CSR issues include good governance, labor standards, responsible sourcing,

eco-efficiency, environmental management, stakeholder engagement, employee and community relations, social

equity and human rights. It is not only about fulfilling a duty to the society, it can bring competitive advantage.

The corporate sectors in Bangladesh spend a big amount outside their business for the betterment of the society and

the people. However, any expenditure for this purpose does not qualify for allowable deduction as this is not business

related expenditure. To encourage the companies to contribute towards the society, CSR provision has been

introduced in 2009 through an SRO and thereafter the area has been expanded in 2010 and further modified in 2011.

In the year 2012 two new areas have been included and one area shifted to 6th

Schedule (Part - A), Para – 47. One

new area of CSR has been added in the year 2014.

Conditions to qualify for CSR

1. Regularity in payment of salary to staff

2. Having waste treatment plant in industry

3. Regularity in payment of Income tax, VAT, duty and loan

4. CSR only through govt. approved institutions

5. Compliance with Labor Law

6. Amount spent for CSR will not be considered as business expenditures

7. Documents in support of actual CSR expenditure to be submitted to the concerned DCT

8. Submit CSR plan to NBR and obtain exemptions certificate

The companies will get 10% tax rebate on the lower amount of the following three:

Allowable Investment Allowance: The companies will get 10% tax rebate on the lower amount of the following

three:

20% of total income

OR

TK. 12,00,00,000/=

OR

Actual money spent for CSR

Whichever is lower is to

be treated as allowable

CSR

Tax rebate @ 10% is

applicable on such

allowable CSR.




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Areas of CSR:

The tax provision clearly specified 22 areas where the companies can perform their corporate social responsibility for

availing the benefit of tax rebate:

1. Natural calamities

2. Old home

3. Welfare of retarded persons

4. Education of poor children

5. Accommodation of slum dwellers

6. Awareness program of anti-dowry and women rights

7. Rehabilitation of poor and orphan children

8. Research on liberation war related subject

9. Sanitation in Chittagong hill tracts

10. Treatment of cataract, cancer, leprosy

11. Treatment of acid victims

12. Free medical treatment to the poor by specialized hospital

13. Public university

14. Technical and vocation education

15. Computer and information technology

16. Vocation training to unskilled workers for man power export

17. Infrastructure of national level sports

18. Donation to national level institution set up in memory of the liberation war

19. Donation to national level institution set up in memory of Father of the Nation

20. Donations made to non-profit voluntary social welfare organizations engaged for running rehabilitation

center, creation of awareness and treatment of HIV, AIDS and Drug addicted

21. Donations made to non-profit voluntary social welfare organizations engaged for running rehabilitation

center for recovered children/women of cross boarder trafficking

22. Donation to Govt. approved fund for helping victims of natural disaster or for any tournament or for any

national level program.

Inadmissible expenses in case of computing income from business and profession u/s 30:

a) Payment of salary, if the tax thereon has not been deducted at source u/s 50 [section 30(a)]

b) Payment of salary, remuneration, interest or commission to any partner of the firm [section 30(b)]

c) Any payment wherefrom tax is deductible but not deducted/collected [section 30(aa)]

d) Payment of salary to an employee if the employee is required to obtain e-TIN but fails to obtain the same at

the time of salary payment [section 30(aaa)]

e) Payment of brokerage/commission to a non-resident without TDS violating section 56 [section 30(c)]

f) Payment of PF or other funds unless effective arrangement has been made for TDS while making payments

from the fund which are taxable under the head ―Salaries‖

g) Payment of perquisites/other benefits to an employee in excess of Tk. 4,75,000 [section 30(e)]

h) Expenditure on foreign travels of employees and their dependents, spouse and minor children (including step

and adopted children) for holidaying and recreation exceeding 3 months basic salary or ¾ of actual

expenditure, whichever is less and such foreign travel shall not be oftener than once in every 2 years [section

30(f) read with rule 65A]

i) Distribution of free samples exceeding the following limits [section 30(f)(iv) read with Rule 65C]

Turnover Percentage of turnover

Pharmaceutical

Industry

Food, cosmetics and

toiletries industry

Other

industry

Up to Tk 5 Crore 2% 1% 0.50%

Exceeding Tk. 5 Crore up to Tk. 10 Crore 1% 0.50% 0.25%

Exceeding Tk. 10 Crore 0.50% 0.25% 0.10%




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j) Entertainment expenditure exceeding the following limits [section 30(f)(i) read with Rule 65]

Income Percentage of Income before allowing Entertainment

expenditure

On 1st Tk. 10 Lack 4%

On the reamining balance 2%

Example:

Suppose,

Net profit before entertainment allowance Tk. 5,151,600

Actual Entertainment Expenditure Tk. 54,000

Net profit before entertainment allowance

Tk. 5,151,600

Less: Entertainment Expense (as per rule 65)

On first 1,000,000 @ 4% Tk. 40,000

On next 41,51,600 @ 2% Tk. 83,032

Tk. 123,032

Or, the actual expenditure Tk. 54,000

Lower one shall be allowed

Tk. (54,000)

Taxable income after allowing Entertainment expense Tk. 5,097,600

k) Head office expenditure exceeding 10% of the disclosed net profit applicable for foreign company [section

30(g)]

l) Royalty and Technical Know-how fee exceeding 8% of the disclosed net profit [section 30(h)]

m) Salary or Remuneration paid by the employer otherwise than by crossed cheque or bank transfer having

gross monthly salary of Tk. 15,000/- or more

n) Incentive bonus exceeding 10% of disclosed net profit [section 30(j)]

o) Overseas travelling exceeding 1.25% of disclosed turnover [section 30(k)]

p) Any commission of discount paid by any company to its shareholder director [section 30(m)]

q) Any cash payment above Tk. 50,000 other than cheque or bank transfer except the following [section 30(m)]

Payment of purchase of Raw Material

Salary of employees where monthly salary payment was otherwise restricted

Any payment for Government obligation

r) Any house/office rent paid without crossed cheque or bank transfer [section 30(n)]




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Part Eight: Income from other sources

Income from other sources:

Important sections of income from other sources:

Section – 33: Income from other sources; [relevant with section 2(26)]

Income classified and computed under the head "Income from other sources", of an assessee is follows:-

(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), (21A), (21B),

(24), (26), (27) (28), (29), or (31) 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;

a. The amount of interest paid in respect of money borrowed for the purpose of acquisition of shares of a

company.

b. 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.

c. 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.

d. Notwithstanding anything contained in this section, no allowance shall be made on account of-

a) any interest chargeable under this Ordinance which is payable outside Bangladesh on which tax

has not been paid and from which tax has not been deducted at source under section 56; or

b) any payment which is chargeable under the head "Salaries" if tax has not been paid thereon or

deducted there from under section 50.

Study References:

Section; 2(26) Dividend; read with rule 19(7)

2(56) Royalty; 2(34)

2(31) Fees for technical services

Section; 33, 34, 35, 36

Section; 19(1) – 19(5)

19(8) – 19(13)

19(21), 19(21A), 19(21B) read with section 82BB(5)

19(24), 19(26), 19(27), 19(28), 19(29), 19(31)

6th

schedule (Part A); Para 11A, 22A




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Section – 35: Method of accounting

All income classifiable under the head ―Agricultural income‖, ―Income from business or profession‖ or ―Income from

other sources‖ shall be computed in accordance with the method of accounting regularly employed by the company

[section 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 and the statements are prepared and reported in accordance with the Bangladesh

Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS) and are audited in accordance

with the Bangladesh Standard on Auditing (BSA) [section 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 [section 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: Part-A (Exclusion from total income)

11A: For individual (or person) income from dividend received from a company listed in any stock exchange in

Bangladesh up to Tk. 25,000 will be exempted. [Amended FA 2015]

22A: Income from mutual fund or unit fund up to 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) Section 19(1):Where any sum is found credited in the books of an assessee maintained for any income

year and the assessees 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) Section 19(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




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be deemed to be the income of the assessee for such income year classifiable under the head "Income from

other sources".

(3) Section 19(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) Section 19(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 the 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) Section 19(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".

(6) Section 19(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".

(7) Section 19(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.

(8) Section 19(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 licenses 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".

(9) Section 19(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, Rajshahi Krishi Unnyan

Bank, Bangladesh Development Bank Ltd. or a leasing company or a financial institution registered under

আতথিকপ্রতিষ্ঠানআইন, 1993 (1993 সননর 27 নংআইন)

http://taxmatebd.com/index.php?pid=5#19-11




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Provided further that the provision of this sus-section shall not apply in case of a benefit or advantage, of

an assessee being an individual, not exceeding taka ten lakh (Tk.10 lakh) resulting from the waiver of

margin loan or interest thereof by a holder of Trading Right Enlistment Certificate (TREC) as defined

under Exchange Demutualisation Act 2013 (Act no 15 of 2013) in respect of the assessee’s investment in

shares, debentures, mutual funds or securities transacted in the stock exchange.

(10) Section 19(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".

(11) Section 19(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".

(12) Section 19(21): Where any sum, or aggregate of sums exceeding taka five lakh (Tk. 5 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 cheque drawn on a bank

or bank transfer, and has not been paid back in full within three (3) 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]

(13) Section 19(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‖. Added F.A. 2002

(14) Section 19(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

(15) Section 19(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. 2012

(16) Section 19(26): Where an assessee, being a company, receives any amount as loan 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




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(17) Section 19(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

(18) Section 19(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, the sum or any part

thereof, [which has not been paid within two (2) years from the end of the income year in which the

purchase was made, shall be deemed to be the income of the assessee for the income year immediately

following the expiry of the said two years and be classified under the hear "Income from other

sources".][Amended F.A. 2016]

(19) Section 19(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

(20) Section 19(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

shown 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




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Part Nine: Set off and Carry Forward Losses

Set Off and Carry Forward Losses:

Important sections related to set off and carry forward losses

Set off Losses: Section 37

Wherever an assessee sustains a loss in any year under any head of income, he is entitled to set off the loss so

sustained against his income, profits or gains under any other head in that year.

Provided that any loss in respect of any “speculation business” or any loss under “capital gains” or any loss from

any other source, income of which is exempted from tax shall not be so set off.

Provided further that any loss in respect of any income from any head; shall not be so set off against any income from

manufacturing of cigarette. [Amended FA 2016]

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) 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-

(i) Dhaka and Chittagong divisions, excluding Dhaka, Narayanganj, Gazipur, Chittagong, Rangamati,

Bandarban and Khagrachari districts, for a period of five (5) 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




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(ii) Rajshahi, Khulna, Sylhet, Barisal and Rangpur divisions (excluding City Corporation area) and

Rangamati, Bandarban and Khagrachari districts, for a period of ten (10) 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]

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.




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

In case of succession in business otherwise than by inheritance, the person succeeding in the business shall not be

entitled to set-off the loss of the person succeeded. In the case of change in constitution of firm, the firm shall not be

entitled to set-off the proportionate share of loss of the retired or deceased partner. A partner of the firm shall also not

be entitled to the benefit of such loss.

For example,

Partner Loss (Year 1)

Partner Profit (Year 2) Profit 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) (Retired) 20,000 0

Total loss 75,000

D (6 months) (New) 20,000 20,000

Loss to be carry forwarded = 0 (zero)

If C come back within 6 years and make profit, than remaining Tk. 5,000 can be set off.

If D is the successor of C, rest of Tk. 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 or 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 on set off losses:

Heads of income generating loss Set off against

Salary [Though loss is not possible] Any head [other than income from ―cigarette manufacturing‖]

Interest on securities Any head[other than income from ―cigarette manufacturing‖]

Income from house property Any head[other than income from ―cigarette manufacturing‖]

Agricultural income Any head [except "capital gains" and income from cigarette manufacturing]

Income from business or profession Any head [except income from ―house property‖, income from ―cigarette

manufacturing‖ and ―capital gain‖]

Capital gain Income from "capital gains" only

Income from other sources Any head [other than income from ―cigarette manufacturing‖]

Speculation business Income from any other “speculation business”

Income exempted from tax Set off not allowed

Following table gives a bird's eye view on 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




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Advance Payment of Tax

Advance income tax is the tax which is to be paid by the assessee 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)

In case of cigarette manufacturer:

A cigarette manufacturer shall pay advance tax at the rate of 3% on net sales in every month. This monthly

advance tax will be adjusted against quarterly installments.

The formula for net sales is= (A-B)

Where, A= Gross sales

B= VAT and SD (if any)

(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:

Installment Date of payment

1st

installment 15 September

2nd

installment 15 December

3rd

installment 15 March

4th

installment 15 June

Provided that if the assessment of an 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?




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If the advance tax paid by the assessee exceeds the tax payable by him on regular assessment, Government will pay

simple interest on excess payment @ 10% per annum to be calculated from 1st July of the respective assessmentyear

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 (please read section 73 for more understanding).

(7) What are the consequences in case of failure to pay advance tax?

The consequences are as follows:

(i) Assessee will be an assessee in default (section-69).

(ii) Simple interest at the rate of 10% per annum will be chargeable on the amount that falls short from 75% of

the assesseed tax to be calculated from 1st July of the assessment year but not more than 2 years (section 73).

However, the rate of simple interest will be 50% higher if the return is not filed on or before the “tax day”. [Amended FA 2016]

(iii) DCT may also impose penalty up to 100% of the shortfall (Sec-125).




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Advance tax at a glance:




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Part Ten: Income Tax Return

Every person who is required to file return of income shall have to fill-up the return form prescribed at Rule-24,

which shall also be verified in the manner indicated in that form.

For individual assessee the return together with the statement of assets, liabilities and expenditure as prescribed in

Rule-25 and the life style statement as prescribed in Rule-25A shall collectively constitute a valid and complete

return.

Return Form:

Now four (4) types of return forms are available. These are

1. For individual assessee [IT-11GA-2016]

2. For company assessee [IT-11GHA-2016]

3. For assessee other than individual and company [IT-11CHA-2016]

4. For spot assessment [IT-11GAGA]

Persons required filing return of income:

Every person (here person means Individual, Firm, Association of Persons (AOP), Hindu Undivided Family (HUF),

Non-Government Organizations (NGO), Trust, Fund, Local Authority, Company, Entity and every other 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 non- taxable ceiling of income (now it is Tk. 2,50,000/- for the assessment year 2016-2017)

(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, paurashava, divisional headquarters or district headquarters and

who at any time during the relevant income year fulfills any of the following conditions: -

a. Owns a motorcar

b. Owns a membership of a VAT registered club

c. Runs any business or profession having trade license from city corporation, paurashava or union

parishad

d. Has membership of any trade association or body

e. Runs for an office of any paurashava, city corporation or a member of parliament

f. Participates in a tender floated by the government autonomous body or local authority

g. Serves in the board of directors of a company or a group of companies

(4) The person has registered with a recognized professional body as

a. Doctor

b. Engineer

c. Architect

d. Dentist

e. Lawyer

f. Income tax practitioner (ITP)

g. Chartered accountant

h. Cost and management accountant

i. Surveyor

j. Insurance actuaries

k. Any other similar professional

(5) If the person is-

a. Company

b. NGO

c. Co-operative society




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d. Firm

e. AOP

f. Shareholder director/ shareholder employee of a company

g. Partner of a firm

h. An employee of the government or an authority or corporation, body or unit draws a monthly salary of

Tk. 16,000 or more

i. If any person has any exempted income or income where reduced tax rate is applicable

Person not required filing return of income:

The persons who are not required to file return of income are:

a. Public university

b. Educational institution receiving government benefits under MPO

c. Fund

d. Any person which the NBR exempt from filing return of income

Place for submission of return:

(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.

(ii) The only exception is in case of non-resident Bangladeshi who may file their return at the nearest Bangladesh

mission. The missions then send the return to NBR and NBR again send the return to concerned circle office.

(iii) Return can also be submitted at Tax Fair organized by the NBR every year.

Signing and verifying the return:

Sl. No. Type of assessee Signatory

1 Individual Individual himself

2 Hindu Undivided Family (HUF) Karta

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:

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.

Individual 1. An individual assessee shall furnish statement of assets, liabilities and

expenses if he-

(a) Has gross wealth exceeding TK 20,00,000, or

(b) Owns a motor car, or

(c) Has made investment in a house property or an apartment in the city

corporation area

2. An individual assessee shall also furnish lifestyle statement along with the

return.

3. Provided that and individual, not being a shareholder director of a company,

having income from salary or from business/profession may nor submit

lifestyle statement if his total income does not exceeds Tk. 3,00,000.




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Time limit for submission of return:

There are mainly four (4) types of time limit for submission of tax return and they are stated below;

Serial

No.

Type of assessee "Tax day"

within which

return must be

submitted

Remarks

1 Bank, insurance and other non-banking

institution

15 July Delay interest will be imposed at the

rate of 2% per month on the

difference between the tax assessed

on the total income for the income

year and tax paid in advance along

with tax deducted or collected at

source.

Period of delay interest: the period

will start from the first day

immediately following the tax day to:

(1) The date of filing return,

where return is filled

(2) The date of regular

assessment where return is

not filled

However the period shall not exceed

one year

2 A company which is a subsidiary or a

holding company of a parent company

incorporated outside Bangladesh if such

company requires to follow a different

financial year for the purpose of

consolidation of its accounts with the

parent company

Within 15th

day of

the 7th

month

from the end of

the income year

3 All other company 15 January

4 Other than company 30 November

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.

Section 124: DCT may impose a penalty amounting to

10% of last assessed tax (minimum Tk. 1,000) and in case

of continuing default Tk. 50 per day for everyday the

default continues.

Provided that, the penalty shall not exceed-

(a) In case of an assessee whose income was not

assessed previously, Tk. 5,000

(b) In case of an assessee whose income was assessed

previously, 50% of the last assessed tax or

Tk.1,000 whichever is higher

2 Revised return (1) If there is any omission

or incorrect statement in the

original return, the assessee

(1) After assessment, no revised return is acceptable.

(2) In any event, the offence of filing a false return




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can file revised return at

any time but before

assessment.

(2) In the same way, a

revised return can be re-

revised.

deliberately is punishable u/s 165, which cannot be

condoned by filing of a revised return.

(3) An assesse, who has submitted a false return, knowing

it to be false, cannot avail the benefits of this provision. 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)

Penalty for non-submission of return

Amount of penalty Reference Pre-condition

10% of last assessed

tax or Tk.1,000

Whichever is higher

124(1)

(1) In case of a new individual

assessee, whose income was not

previously assessed, the penalty

amount shall not exceed Tk. 5,000

(2) In case of existing individual

assessee penalty amount shall not

exceed 50% of the last assessed tax or

Tk. 1,000; whichever is higher.

+

Tk. 50 per day

during which the

default continues

Imprisonment for non-submission of return

Reason Reference Imprisonment Pre-condition

Failure to file return

u/s 75 or in

compliance with

notice u/s 77 and 93

164(C)

Maximum 1 year,

with or without fine

(1) No prosecution can be instituted

without prior sanction of the NBR.

(2) NBR has the power to

compound offences.

Whether the income of wife or minor child is to be included with the income of husband or father at the time

of filing return:

In computing the total income of any individual for the purpose of assessment, the following income shall be included

as per provision of section 43:

The income of the spouse or minor child of such individual as arises, directly or indirectly,

From the membership of the spouse in a firm of which such individual is a partner

From the admission of the minor child to the benefit of partnership in a firm of which such individual is a

partner

From assets transferred directly or indirectly to the spouse otherwise than by way of gift or for adequate

consideration or in connection with an agreement to live apart; or

From assets transferred directly or indirectly to the minor child, not being a married daughter, by such

individual otherwise than by way of gift or for adequate consideration.




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Part Eleven: Table of Withholding Tax

Sl.

No.

Item Section/

Rule

Rate of deduction/

collection

Deducting Authority Remarks

1 Salary (Including

Government

Salary)

50 Average rate;

[However, the

commissioner has the

power to permit

employer to deduct lump

sum every month instead

of actual average (Rule-

22)]

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.]

TDS required to be

deposited to

respective zone. In

case of Govt.

employee, it will be

deducted from his

own pay bill.

Government salary

(including

remuneration of

M.P)

50(1A)

50(1B)

50(B)

Average rate Govt. Accounts Office or

Government official

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

Respective

government accounts

officer shall issue a

tax deduction

certificate in

prescribed form

within 30 day of July

following the

financial year

2 Discount on

Bangladesh Bank

Bill

50A Maximum rate

Any person responsible

for making such payment

3 Interest on

securities

(including

debenture)

51 5% (at upfront system)

on interest receivable at

maturity.

In case of securities

based on Islamic

principal, 5% on profit at

the time of payment or

credit, whichever is

earlier


for issuing such security

TDS will not be

applicable for on

treasury bill/bond

4(a) Contract (82C) Section:5

2/

Rule16

If base amount ≤

Tk. 2,00,000

Nil Govt. organization

Project having govt.

involvement

Joint venture or

consortium

Company

A co-operative bank

A co-operative

society

A financial institution

NGO

School, College,

Applicable on base

amount- base amount

means

1. contract value, or

2. bill/invoice value,

or

3. Payment

Whichever is higher

The rate of deduction

is 50% higher if the

payee does not have

If base amount >

Tk. 2,00,000 but ≤

Tk. 5,00,000

1%

If base amount >

Tk. 5,00,000 but ≤

Tk. 10,00,000

2%

If base amount >

Tk. 10,00,000 but

≤ Tk. 25,00,000

3%




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If base amount >

Tk. 25,00,000 but

≤ Tk. 1,00,00,000

4% Institute or University

Hospital, clinic or

diagnostic center

Trust or Fund

Firm

Public-private

partnership

Foreign contractor

Any artificial

judiciary person not

mentioned above

12-digit e-TIN.

If base amount >

Tk. 1,00,00,000

but ≤ Tk.

5,00,00,000

5%

If base amount >

Tk. 5,00,00,000

but ≤ Tk.

10,00,00,000

6%

If base amount >

Tk. 10,00,00,000

7%

4(b) In case of payment

for (82C)-

- Supply of goods

- Manufacturer,

process or

conversion

- Printing,

packaging or

binding

Section:5

2/Rule

16

If base amount is

less than Tk.

20,00,000

3% ―Do‖ ―Do‖

If base amount >

Tk. 20,00,000 but

≤ Tk. 1,00,00,000

4%

If base amount >

Tk. 1,00,00,000

5%

4(c) a. Oil supplied by

oil marketing

company

Section

52 read

with

Rule 16

0.60% if payment

exceeds Tk. 2,00,000

―Do‖

―Do‖

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%

5 Royalty

Franchise fee

License

Brand name

Patent

Invention

Formula

Process

Method

Design

Pattern

Know-how

50A Rate of deduction is 10%

if the base amount does

not exceed Tk. 25 Lakh

―Do‖ ―Do‖

Rate of deduction is 12%

if the base amount

exceed Tk. 25 Lakh




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Copy right

Trade mark

Trade name

Literary, musical

or artistic

composition

Survey

Study

Forecast

Estimate

Customer list

Any other

intangibles

6 Indenting

commission

52AA Up to Tk. 25 lakh-6%

Above Tk. 25 lakh-8%

―Do‖ Applicable on base

amount- base amount

means

4. contract value, or

5. bill/invoice value,

or

6. Payment

Whichever is higher

The rate of deduction

is 50% higher if the

payee does not have

12-digit e-TIN.

Deducting authority

will not deduct tax at

source or will deduct

tax at a lower rate/

amount in case party

produces a certificate

issued by the DCT to

do so.

7

Private container

port or dockyard

service



8 Motor garage or

workshop



9 Shipping agency

commission



10 Private security

service provider

Cleaning service

Collection and

recovery agency

Event

management

Supply of

manpower

Catering service

52AA

-On commission

Up to Tk. 25 lakh-10%

Above Tk. 25 lakh-1.2%

-On gross receipts

Up to Tk. 25 lakh-1.5%


11 Advisory or

consultancy

services

Professional or

technical

services

Credit rating

agency

Meeting fees,

training fees or

honorarium

Mobile network

operator,

technical

support service

provider or

service delivery

52AA Base amount-



―Do‖ ―Do‖




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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

12 Transport Provider 52AA Base amount-



―Do‖ ―Do‖

13 C&F Agency

commission (82C)

52AAA At the rate of 10% Commissioner of customs

14 Hand-made

Cigarette

52B 10% on banderole Post office

15 Compensation paid

against land

acquisition (82C)

52C 2% of the deed value at

city corporation,

paurashava and

cantonment board area

Government or Local

Authority

1% of the deed value in

other area

16 Interest on savings

certificate (82C)

52D 5%

4. Not applicable on

wage earners‘

development bond,

US dollar investment

bond, Euro premium

bond, Euro

investment bond,

Pound sterling

premium bond and

Pound sterling

investment bond

5. Not applicable on

pensioners‘ savings

certificate if

cumulative

Bank

Post office

National Savings

Bureau




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investment during the

year does not exceed

Tk. 5,00,000

6. TDS at the rate of

5% will also be

applicable on interest

on savings instrument

purchased by any

fund

17 Workers‘

participation fund

52DD At the rate of 5% Person responsible for

making such payment

Newly inserted

through FA 2016

18 Brick field (at the

time of issuing

permission or

renewal of

permission)

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

19 L/C commission 52I At the rate of 5% on the

amount of such

commission


for opening letter of credit

(LC)

20 Travel Agency

Commission (82C)

52JJ 0.30% on the total value

of the tickets or any

charge for carrying cargo

(excluding embarkation

fees, travel tax, flight

safety insurance, security

tax and airport tax)

+

TDS on incentive bonus,

performance bonus or

any other benefit called

by whatever name, paid

in relation to sale of such

tickets or bill for

carrying cargo by air,

will have to be

calculated applying a

formula

(A/B)*C

Where,

A=Incentive bonus

B=Commission/discount

C=0.30%

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.

21 Any payment to

life insurance

policy holder in

excess of total

premium

52T At the rate of 5%

Life insurance company However, TDS will

not be applicable in

case of death of such

policyholder.

22 Local L/C 52U At the rate of 3%

On total proceeds

Bank or financial

institution

Not applicable on

rice, wheat, potato,




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exceeding Tk. 5,00,000 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.

23 Revenue sharing or

any license fee or

any other fees or

charges paid by

mobile phone

company to

regulatory any

authority

52V At the rate of 10% Mobile phone company

24 Trade license

renewal

52K Tk. 500 for Dhaka and

Chittagong City

Corporation

City Corporation and

paurashava

Tk. 300 for other city

corporations and

paurashava at district

headquarters

Tk. 100 for other

paurashava

25 Freight forward

agency commission

52M At the rate of 15% Person responsible for

making such payment

26 Import (82C)

(But AIT on raw

material import is

not 82C)

Section:

53 &

Rule-

17A

- At the rate of 5%

- But at the rate of 2%

on petroleum oil, raw

skin, M.S. rod and

mobile phone set

- Also for water vessels

and other floating

structures for breaking

up the rate is Tk. 800

per Ton

The Commissioner of

Customs

27 Service charge on

services provided

by a resident to any

foreign person

52Q At the rate of 10% Bank

28 International

Gateway Service

on International

phone call (82C)

52R At the rate of 1.5% Tax to deducted from

IGW by Bank

At the rate of 7.5% Tax to be deducted from

ICX by IGW

29 House rent Section:

53A &

At the rate of 5% Govt. organization

Corporation

However, the DCT

has power to issue




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Rule-

17B

NGO

Company

Bank (including co-

operative bank)

University

Medical/ Dental/

Engineering college

Any school and

college

Any hospital, clinic

or diagnostic center

TDS-certificate to the

owner of the house

property against

application based on

genuine grounds.

[Section 53(3)]

30 Shipping business

of a resident (82C)

53AA 5% of total freight

received/receivable

inside or outside

Bangladesh

The Commissioner of

Customs

Prescribed form in

rule 62(A)

(However, if service

rendered between 2

or more foreign

countries then the

rate is 3%)

31 Man power export

(82C)

53B/ 17C 10% on per head service

charge

Bureau of Manpower

32 Rent of conference

hall and convention

center

52P 5% NGO

Company

University

Medical/ Dental/

Engineering colleges

33 Export (82C) 53BB &

53BBBB

Jute export at the rate of

0.60% (as per SRO no

207 date 29 June 2016)

The bank through which

export proceed of an

exporter is received

Other than Jute export at

the rate of 0.70% (as per

SRO no 258 date 10

August 2016)

34 Share trading

house (82C)

53BBB 0.10% on the value of

shares, debentures,

mutual funds (except

bonds) or securities

transacted by a member

of a stock exchange at

the time of payment for

such transaction

CEO of a stock exchange

35 On sale of price of

goods or property

sold by public

auction (82C)

53C &

17D

5% of the sales price Govt. organization

Corporation

Company (including

private limited

company)

Insurance

However, in case of

auction tea the rate is

1%

36

Courier business of

a non-resident

53CCC 15% on the amount of

service charge accrued

Any company registered

under the Company‘s Act,

working as a local agent

of a non-resident courier

company shall deduct or




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collect tax in advance.

37 Performing in a

film, drama,

advertisement or

any TV or radio

program or

purchasing a film,

drama or TV or

radio program

53D 10% of the amount paid

or payable


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

38 Signing money,

subsistence money

or house rent paid

by real estate

developer company

to land owner

53P At the rate of 15% on the

sum so paid at the time

of payment

Real estate developer

company

39 Rental power

(82C)

52N At the rate of 6% on the

amount paid to rental

power company

Bangladesh Power

Development Board at the

time of making payment

to any rental power

company on account of

purchase of rental power

40 Salary of foreign

technician serving

in any diamond

cutting industry

(82C)

52(O) 5% of such salary at the

time of making payment

or giving credit

whichever is earlier

Diamond cutting industry This is not applicable

if the foreign

technician is

appointed after 30

June 2010

41 Export cash

subsidy (82C)

53DDD At the rate of 3% on the

amount so payable

Any person (Bank)

responsible for paying

any amount on account

export cash subsidy to an

exporter

42 Distributorship

Commission,

discount or fees

53E (1) At the rate of 10% on

discount, commission,

fees, dealer‘s

promotional charges or

any other payment called

by whatever name

Any person being a

corporation, body or

authority

Any corporation,

body or authority

makes any payment

by way of

commission, or fees

or allows any

discount or dealer‘s

promotional charges

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

53E (2) If any company (except

oil marketing company)

sells its products to its

distributor at a price

lower than the retail

price fixed by the

company, then at the rate

of 5% on (dealers‘

price*6%)

43 Foreign buyer‘s

agent (Final

53EE At the rate of 10% on

commission, charges or

Bank If bank pays any

commission out of




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settlement 82(C)

effective from 1

July 2015-2016)

remuneration so paid the proceeds of

export to any person

who is an agent or

representative of the

foreign buyer of

exported goods.

44 Bank interest 53F &

17H

At the rate of 10% on the

amount so received as

interest

The rate will be 15% if

the deposit holder holds

deposit more than Tk. 1

lakh but does not possess

a 12-digit TIN.

The rate will be 10% on

bank interest received by

public University, MPO

enlisted educational

institution, ICAB,

ICMAB and ICSB

though they have no TIN

and will be considered as

final settlement under

82(C)

At the rate of 5% on

interest of any fund

Bank & Financial

Institution

45 Real Estate

Business (82C)

53FF Tk. 1,600 or Tk. 1,500 or

Tk. 1,000 or Tk. 700 or

Tk. 300 per square meter

for residential building

or apartment depending

on the area

Registration Authority

Tk. 6,500 or Tk. 5,000 or

Tk. 3,500 or Tk. 2,500 or

Tk. 1,200 per square

meter for commercial

space depending on the

area

Land developer

(82C)

53FF At the rate of 5% of the

deed value of land at any

area of Dhaka, Gazipur,

Narayanganj,

Munshiganj, Narsingdi,

Manikganj and

Chittagong District.

At the rate of 2% of the

deed value in other

district

46 Insurance

commission paid to

53G At the rate of 5%

[At the time of payment

Insurance Company




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agent of insurance

company (82C)

or at the time of credit -

whichever is earlier]

47 Surveyor of

General Insurance

(82C)

53GG At the rate of 15%

[At the time of payment]

General Insurance

Company

SL.

No.

Item Section/

Rule

Rate of deduction/ collection Deducting

Authority

48 (i) Sale of land

or land and

building

(commercial

area)

53H/

17(II)

Schedule-A (for land or land and building in commercial

area or areas)

Sub-Registrar

Gulshan, Banani, Motijheel, Dilkhusha, North South Road,

Motijheel Expansion areas and Mohakhali of Dhaka

At the rate of 4% of the deed value or Tk. 10,80,000

per katha (1.65 decimal)-higher one

Kawran Bazar of Dhaka and Uttara, Sonargaon Janapath,

Shahbag, Panthapath, Banglamotor, Kakrail of Dhaka



- Narayanganj, Banga Bondhu Avenue, Badda, Sayedabad,

Postogola and Gandaria of Dhaka.

- Agrabad and CDA Avenue of Chittagong.



Nababpur and Fulbaria of Dhaka



For building/apartment/flat/structure/floor space situated on

the land:

In addition to tax applicable for land mentioned

above, an additional tax at Tk. 600 per square meter or

4% of the deed value of such building, apartment, flat,

structure, and floor space-higher one.

48 (ii) Sale of land

or land and

building

(other than

mentioned at

Schedule A)

53H/

17(II)

Schedule-B (for land or land and building in other area or

areas)

- 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.

At the rate of 4% of the deed value or Tk. 90,000 per

katha (1.65 decimal)-higher one

Sub-Registrar

Gulshan, Banani, Baridhara, Nababpur and Fulbaria of

Dhaka.



Dhanmondi, Green Road (from road 3 to 8 of Dhanmondi

residential area) of Dhaka.




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- 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

- Khulshi of Chittagong.



Kakrial, Sagunbagicha, Bijoynagar, Green road, Eskaton,

Elephant road area (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 area, 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 at Tk. 600 per square meter

or 4% of the deed value of such building/apartment/

flat/structure/floor space-higher one.

48 (iii) Sale of land

or land and

building

(other than

mentioned at

Schedule A

and B)

53H/

17(II)

Schedule-C

Within the jurisdiction of RAJUK and Chittagong

Development Authority (CDA) except areas in schedule A

and B;

A the rate of 4% of the deed value

Sub-Registrar

Within the jurisdiction of Gazipur, Narayanganj, Munshiganj,

Manikganj and Narsingdi, Dhaka and Chittagong districts

(excluding RAJUK and CDA), and within any City

Corporation (excluding Dhaka South City Corporation and

Dhaka North City Corporation);

A the rate of 3% of the deed value

Areas within the jurisdiction of a Pauroshava of any district




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headquarter;

At the rate of 3% of the deed value

Areas of any other Pauroshava;


Any other areas not specified in schedule A, B and C;


49 Registration

of leasehold

property

53HH At the rate of 4% of the lease amount of such property

(Applicable for lease that has a tenure of more than 10 years)

Sub-Registrar

50 Transfer of

share of

shareholder

of stock

exchange

(82C)

53N At the rate of 15% on any profits or gains arising from the

transfer of share of a shareholder of stock exchange

Principal officer

of DSE or CSE

51 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)

52 Interest on

Post Office

Savings Bank

Account

53I At the rate of 10% on the amount of such interest and at the

time of credit to the account of the payee or at the time of

actual payment, whichever is earlier

Any person

responsible for

paying the

interest to the

payee

53 Rental value

of vacant land

or plant and

machinery

53J At the rate of 5% on the rental value so paid or credited to the

account of the payee

Government

organization

Corporation

NGO

Company

Bank (including

co-operative

bank)

Insurance

University

Medical/

Dental/

Engineering

colleges

54 Direct

advertisement

to newspaper,

magazine or

private TV

channel or

53K Shall deduct tax in advance at the rate of 4% on such amount

at time of making payment

Government

organization

Corporation

NGO

Company

Bank (including




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private radio

station or any

web site

(including

airtime

purchase of

private

television

channel,

private radio

station or

such web

site)

co-operative

bank)

Insurance

University

Medical/

Dental/

Engineering

colleges

55 Soft drinks

(including

mineral or

bottled water)

52S At the rate of 4% on the value of such soft drinks and mineral

water determined by the VAT Authority

The Security

Printing

Corporation

56 Capital gain

from transfer

of shares by

sponsor

shareholders

and directors

of listed

companies

(82C)

53M At the rate of 5% on the amount of gain arising from such

transfer

DSE and CSE

57 Dividend 54 For Individual with 12 digit TIN at the rate of 10% on the

amount of such divided

If there is no 12-digit TIN, then at the rate of 15% on the

amount of such dividend

(For both resident and non-resident Bangladeshi)

Principal office of

a company

Company at the rate of 20% on the amount of such

divided

58 Lottery (82C) 55 At the time of making such payment at the rate of 20% on

such amount

Person

responsible for

such payment

Ordinance No. XXXVI of 1984 in section 56:

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:

Serial

No.

Description of Payment Rate of

deduction

1 Advisory or consultancy service 20%

2 Pre-shipment inspection service 20%

3 Professional service, technical services fee, technical know-how fee or technical

assistance fee

20%

4 Architecture, interior design or landscape design, fashion design or process design 20%




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5 Certification, rating etc. 20%

6 Charge or rent for satellite, airtime or frequency, rent for channel broadcast 20%

7 Legal service 20%

8 Management service including event management 20%

9 Commission 20%

10 Royalty, license fee or payment related to intangibles 20%

11 Interest 20%

12 Advertisement broadcasting 20%

13 Advertisement making 15%

14 Air transport or water transport 7.5%

15 Contractor or sub-contractor of manufacturing, process or conversion, civil work,

construction, engineering or works of similar nature

7.5%

16 Supplier 7.5%

17 Capital gain 15%

18 Insurance premium 10%

19 Rental of machinery, equipment etc. 15%

20 Dividend-

(a) company 20%

(b) any other person, not being a company- 30%

21 Artist, singer or player 30%

22 Salary or remuneration 30%

23 Exploration or drilling in petroleum operations 5.25%

24 Survey for oil or gas exploration 5.25%

25 Any service for making connectivity between oil or gas field and its export point 5.25%

26 Any payment against any services not mentioned above 20%

27 Any other payments 30%

[Amended by FA 2016]

However, 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 2016]

Time limit for payment:

All sums deducted or collected during the month of July to May, shall be deposited to the credit of the

government within 2 weeks from the end of the month of deduction or collection.

In case of deduction or collection made in any day from the 1st to the 20

th day of June of a year; within 7 days

from the date in which the deduction or collection was made.

In case of deduction or collection made in any other dates of the month of June of a year, the next following day

in which the deduction or collection was made.

Where the deduction or collection was made in the last two working days of the month of June of a year, the

payment shall be made to the credit of the Government on the same day on which the deduction or collection was

made. (Rule 13)

Deduction from salary may be deposited quarterly with prior permission (section 59 and Rule d13)

Deducting authority will have to issue certificate of TDS within 2 weeks of the months following the month of

deduction or within such time as it is convenient in the form prescribed by the NBR at Rule 18.

Consequence of non-compliance:




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The deducting authority will be deemed to be an assesse in default and shall be personally liable to pay the taxes

[section 57(1)].

Additional 2% per month is also to be paid [section 57(2)].

It may be treated as an offence which is punishable with imprisonment for a term up to 1 year with or without

fine if deduction authority fails to deduct/collect tax without reasonable cause [section 164(a)].

Expenditure will be treated as income for non deduction/collection of tax at source [section30].

When a person issues a TDS certificate without actual TDS, he shall be personally liable to pay the amount

[section 57A].

Withholding tax return:

Every company or co-operative society or NGO shall have to file withholding tax return to the concerned DCT

at every 6 months interval in the form prescribed at Rule 24A accompanied by copy of treasury challan as a

proof of TDS.

The 1st return by 31 January and the 2

nd return by 31 July. DCT may extend maximum of 15-day time to submit

such withholding tax return.

DCT can conduct audit after taking approval from the board but no such return shall be selected for audit after

expiry of 4 years from the end of the year in which the return was filed [section 75AA]

Withholding tax return form: return form at a glance

1. Name of the person 2. Type of the person 3. TIN 4. TCAN 5. Circle and tax zone 6. Deduction/collection period 7. Address, phone number and fax number, email, web address 8. Main business 9. Particulars of tax deducted/collected 10. Verification (Rule 24A)




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Part Thirteen: Assessment

Assessment:

1. PROVISIONAL ASSESSMENT (SEC-81):

The D.C.T. is empowered under section 81 of I. T. Ordinance, 1984 to make provisional assessment in a

summery manner–

i. On the basis of return and accounts and documents, 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 based on 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.

(vi) Such return shall mention 12 digit TIN no.

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. However, it should be kept in mind

that return must be correct and complete.

Procedure to submit return under universal self-assessment system: The procedure is very simple.

Assessee has to prepare his return either by himself or with the help of other and then it is to be signed and

verified. Assessee has to tick the box universal self-assessment at the top of the return form and after paying

tax (if applicable) submit the return within the last date of submission of return or within the extended time

allowed by the DCT. However, the assessee should keep in mind the following:

a. Such return must be submitted within the last date of submission of return or within the extended

time allowed by the DCT.

b. Tax as per return (if any) is to be paid before submission of return.

c. No question is to be raised by the DCT as to the source of initial capital investment in case of new

assessee showing new business if at least 25% of initial capital is shown as income. Initial capital

formed in such way is not transferable within 5 years from the end of the assessment year in any

manner.




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Scrutiny assessment:

After submission of return under universal self-assessment system, DCT shall scrutiny/process such return

and make adjustment

1. if there is any arithmetical error in the return and

2. if there is any incorrect claim

After necessary adjustment, DCT will send demand notice along with income computation sheet to the

assessee. The time limit is 12 months from the end of the assessment year within which such intimation is to

be sent to the assessee.

If as a result of scrutiny assessment more tax to be paid by the assessee then DCT shall have to give the

assessee a reasonable opportunity of being heard.

Tax audit:

The return submitted in 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. However, 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.




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FINAL SETTLEMENT OF TAX LIABILITY (SEC-82C):

Any tax deducted /collected at source from the following 27 heads shall be deemed to be the final discharge of

tax liability:

1. Contract, supply, manufacture, process, conversion, printing, packaging and binding. (Section 52+Rule 16)

2. Royalties (Section 52A)

3. C&F Agency commission (Section 52AAA)

4. Band role in case of handmade cigarette (Section 52B)

5. Compensation against property acquisition (Section 52C)

6. Interest on all type of saving instruments(Section 52D)

7. Travel Agent(Section 53JJ)

8. Rental power (Section 52N)

9. Salary of foreign technician serving in a diamond cutting industry(Section 52O)

10. International Gateway Service (IGS) on international phone call (Section 52R)

11. Import [other than raw-material import] (Section 53+Rule 17A)

12. Shipping Agency Commission(Section 53AA)

13. Manpower export(Section 53B+Rule 17C)

14. Export of (Section 53BB+Section 53BBBB)

(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

15. Shareholder of Stock Exchange (Section-53BBB)

16. Public Auction (Section 53C+Rule 17D)

17. Non-resident Courier (Section 53CCC)

18. Export cash subsidy (Section 53DDD)

19. The amount received on account of commission, charges by foreign buyer‘s agent. (Section 53EE) [Added FA

2015]

20. The amount received by public university, MPO enlisted educational institutions, ICAB, ICMAB and ICSB

on account of interest or share of profit (section 53F)Added FA 2015

21. Real Estate and Land Development Business (Section-53FF)

22. Insurance Commission (Section 53G)

23. Surveyor of General Insurance (Section-53GG)

24. Sale of property (Section-53H)

25. Capital Gain from transfer of shares by sponsor shareholders (Section 53M)

26. Income from Lottery (Section 55)

27. Transfer of shares of shareholders in stock exchange (Section 53N)

Section 82C has been completely re-drafted through Finance Act, 2016. Any tax deducted or collected at

source from above 27 heads shall be the minimum tax. Books of accounts shall be maintained in the regular

manner in accordance with the provision of section 35. Income shall be determined in regular manner and tax

shall be calculated by using regular rate. If tax so calculated is higher than the minimum tax rate the higher

amount shall be payable on such income. However, income and tax shall be computed in the following manner

from the five (5) sources out of the above 27 sources:

(Section-53BB)




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SL.

No

Source of Income Section Amount that will be

taken as income

Tax rate to be

applied

1 Compensation against land

acquisition

52 C Total amount of

compensation from land

acquisition

2% or 1% depending

on the location

2 Interest on saving instrument 52D Gross interest 5%

3 Export cash subsidy 53DDD Actual gross cash

subsidy

3%

4 Bank interest of certain

organization and fund

53(1)

(C)+53F(2)

Gross bank interest 10% and 5%

5 Transfer of property 53H Deed value Applicable rate of

source tax and as per

rule made there.

Where the assessee has income from regular sources in addition to income from sources for which minimum

tax is applicable then regular tax shall be calculated on the income from regular source and the total tax

liability shall be the aggregate of the minimum tax and regular tax.

Minimum tax shall not be refunded, nor shall be adjusted against refund due from earlier year or years or

refund due for the assessment due for the assessment year from any source. Where any surcharge, additional

interest, additional amount etc. is payable, it shall be payable in additional to minimum tax. Where the regular

tax is higher than the minimum tax, regular tax is payable.

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

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.




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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.




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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).




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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 finalised but the assessment is completed there is nothing to bar the DCT

to impose penalty.

There is another restriction that assessee has been heard or has been given a reasonable opportunity of being

heard before imposing penalty.

Equally no prosecution can be instituted without prior sanction of the Board and Board has power to

compound such offences.

Penal Provisions:

The penal provisions are tabulated below:

Sl. Grounds of Penalty Section Amount of Penalty Pre-conditions/

Comments

1 Penalty for not

maintaining accounts in

the prescribed manner

123

(Read with

section 35 and

Rule-8 and

Rule-8A)

(a) 1.5 times of the amount

of tax payable

(Maximum)

(b) Tk.100 where the total

income does not exceed

the threshold limit

(Maximum)

(c) 50% of tax on house

property or Tk. 5,000

whichever is higher in

case the owner of the

house receiving more

than Tk. 25,000 but

violates rules and order

of NBR relating to

maintenance of register

and depositing rent to

bank account.

1) Penalty cannot be

imposed unless the

assessee has been heard or

has been given a

reasonable opportunity of

being heard.

2) DCT shall not impose the

penalty without the

previous approval of the

IJCT.




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2 a) Penalty for failure to

file return including

withholding tax return

124(1) 10% of the tax imposed on

last assessed income subject

to a minimum of Tk. 1,000

Plus

Tk. 50 per day of default in

case of continuing default

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


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

TIN or TIN of another

person

124A Tk.20,000/(maximum) 1) Penalty cannot be

imposed unless the

assessee has been heard or

has been given a


being heard.

2) DCT shall not impose the

penalty without the

previous approval of the

IJCT




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e) Penalty for failure to

verify Taxpayer‘s

Identification Number

124AA Maximum Tk. 50,000

(NBR has given 25

authorities to verify TIN)

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.




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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.

12 Failure t0 submit

statement of international

transaction as per section

107EE

107HH

Maximum 2% of the value

of such international

transaction.

The above-mentioned sections prescribe the maximum penalty (except section 124,128 & 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 every

case. 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-




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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-




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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.

4. 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 arrears. The penalty so imposed under this ordinance shall be in addition to

any other liability of the assessee, which he has incurred in any other provisions under this ordinance or under any

other law of the country.




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Part Fourteen: Appeal

Appeal:

An appeal lies to the Appellate Joint Commissioner of Taxes (AJCT) or to the Commissioner (Appeals), as the case

may be, against the order of the Deputy Commissioner of Taxes (DCT). Section 153 gives the right of appeal only to

the taxpayer and not to the department. Therefore, income tax department cannot appeal against any order of the

DCT. However, the Inspecting Joint/Additional Commissioner of Taxes (IJCT/IACT) has the power U/S 120 to

revise any order passed by the DCT if it is erroneous and prejudicial to the interest of the revenue. Commissioner of

Taxes working in the territorial zone can also exercise his revisional power U/S 121A and pass such order not being

an order prejudicial to the interest of the assessee. Therefore, no appeal would lie if a right of appeal is not given at

our tax law because appeal is not an inherent right. The sequence of appeal is given below through a flow chart:

2nd appeal to the Taxes

Appellate Tribunal (both

assessee and income tax

department can go)

Choose an Appeal

Option

Order of

the DCT

1st Appeal to the

AJCT (other than

company cases and

its directors)

Review

application to

the CT of

Territorial

Zone

Reference application to High

Court Division of the Supreme

Court (Only at question of law

point)

Appeal to the Appellate Division of the

Supreme Court against the judgment of

the H/C division (if the H/C division

certifies to be fit case for appeal to the

Appellate Division)

1st Appeal to the

AACT

(For company cases

and its directors)

1st Appeal to the

Commissioner

(Appeals)

(For company and

its directors)

END

END

1

2

3

4 5 6

7

8

9




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1. First appeal to the AJCT/AACT/Commissioner (Appeals):

Only assessee can file 1st appeal to the Appellate Joint Commissioner of Taxes (AJCT) or Appellate Additional

Commissioner of Taxes (AACT) or Commissioner (Appeals) as per jurisdiction. The jurisdiction is usually

mentioned at the bottom of the demand notice issued by the DCT. Normally, AACT and Commissioner (Appeals)

deal with company cases along with the directors of the company and the AJCT deals with other individual cases.

Appeal to the Commissioner (Appeals) also lies against the order made by the IJCT U/S 10 or U/S 120.It is to be

noted here that the right of appeal is given to the assessee. Where an assessment is made on the representative or on

the agent of a non-resident, the person beneficially entitled to the income is nevertheless an assessee within the

meaning of section 153 and has therefore a right to appeal.

(a) When 1st appeal can be filed:

Appeal can be filed by the assessee against the following order of the DCT:

(i) Assessment Order (except assessment U/S 81, 82 and 82BB)

(ii) Determination of tax liability to pay.

(iii) Tax Computation (including an order imposing simple interest U/S 73)

(iv) Set-off of losses U/S 37 (If the assessee has any objection as to the computation of loss or set-off of

loss).

(v) Penalty U/S 124, 125, 126,127, 128 and 137.( There is no provision to file appeal against the order

of charging penalty @2% per month for non deduction/ collection of tax at source).

(vi) Refusal to allow a claim of refund.

(vii) Determination to the actual amount of refund.

(viii) Disallowing the claim of foreign tax credit (7th

Schedule(para-7)

Appeal can also be filed to the Commissioner (Appeals) against the following order of the IJCT/IACT:

(i) Assessment Order U/S 10.

(ii) Order to revise the order of the DCT U/S 120.

(b) Procedure to file 1st Appeal:

The following procedure should be followed to file 1st appeal:

(i) Appeal shall be filed at the form prescribed at Rule -27 and Rule-27A with duly signed and verified.

(ii) Appeal fee of TK. 200/- is to be paid before submission of appeal.

(iii) Tax as per return is to be paid if it is not paid at the time of filing return or afterwards.

(iv) Appeal shall have to be filed within 45 days from the date of service of demand notice except in case

of appeal against the disallowances of the foreign tax credit as per 7th

schedule Para-7.

However, appeal authorities can entertain an appeal after condoning the delay if he is convinced that

assessee has sufficient reason for failure of file appeal in time. Demand notice should be served properly

otherwise assessee will get unlimited time. The power to condone such delay is discretionary. Provision

for time limitation of 45 days will not attract if demand notice was not served with assessment order (I.T.

88) and Tax computation form (I.T. 30), in which case assessee will get unlimited time for filing appeal.

So without I.T.88 and I.T.30 the service of demand notice is not complete. In computing the 45 days, the

time required for obtaining a certified copy of such order should be excluded.

Where the 45 days expires on day which is a holiday, the appeal may be made on the day next following

such holiday.




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(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)




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(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) The appeal authority with 150 days shall dispose of appeal 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.




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(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 paid flowingly.

SL. No. Particulars Rate Rate to be applied

i. If tax demand is below Tk. 1,000,000 15% On the difference between the taxes 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:




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(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.

Assessment

order Appeal Tribunal

Law

Prosecution Special court

Assessment procedure and source of dispute

Source of

dispute

Honorable

High court




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(iv) Application shall have to be submitted within 60 days from 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. However, 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 (from both assessee and department) shall remain stayed during

the ADR negotiation process. The whole process is summarised in following figure:




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Procedure to file application to ADR

a. Four (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 businessperson 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) Either dispute may be resolved by an agreement, 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.




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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 assessee and the Commissioner‘s Representative and the Facilitator shall sign the agreement.

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 permission to apply for ADR.

2) In computing the period of limitations for filing appeal the time elapsed between the filing of the application and

the decision or order of the ADR shall be excluded.

Fees to be paid to Facilitator:

The Facilitator is entitled to receive fees from both the assessee and the Govt. The quantum of fees is to be computed

in the following way –

20% of disputed tax

Or,

Tk. 50,000

Whichever is lower, but not

less than Tk. 5,000.

50% of fees is to be paid by the

assesse and 50% by the Govt. or

Govt. approved agency within 30

days from resolving the dispute




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Part Fifteen: Double Taxation Avoidance Agreement

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

Double taxation avoidance agreement is usually an agreement between two (2) countries seeking to avoid double

taxation by defining the taxing rights of each country with regard to cross, border flows of income and providing tax

credits or exemptions to eliminate double taxation. The Govt. of Bangladesh also may enter into an agreement with

the Govt. of other countries for the avoidance of double taxation and the prevention of fiscal evasion. Income tax

policy wing of the National Board of Revenue (NBR) is entrusted to negotiate the double taxation treaty with foreign

countries to promote foreign direct investment in Bangladesh. Such agreement will come into force through

notification in the official Gazette. It will be treated as an international law and accordingly its legislative position

would be over and above our Bangladesh tax law. The objectives of such agreement are:

1. To provide relief from Bangladesh tax.

2. To determine income accruing or arising to non-residents from sources within Bangladesh.

3. To determine income of a non-resident carrying on business from within and outside Bangladesh.

4. To determine the income of a resident person having special relation with non-resident.

5. To recover tax.

6. To exchange the information for avoidance of double taxation and the prevention of fiscal evasion.

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

follows:

Article 1 : Persons Covered

Article 2 : Taxes Covered

Article 3 : General Definitions

Article 4 : Resident

Article 5 : Permanent Establishment

Article 6 : Income from Immovable Property

Article 7 : Business Profits

Article 8 : Shipping and Air Transport

Article 9 : Associated Enterprises

Article 10 : Dividends

Article 11 : Interest

Article 12 : Royalties

Article 13 : Fees for Technical Services

Article 14 : Independent Personal Services

Article 15 : Dependent Personal Services

Article 16 : Director's Fees

Article 17 : Artists and Sportsmen

Article 18 : Pensions

Article 19 : Government Service

Article 20 : Students and Trainees

Article 21 : Lecturers and Researchers

Article 22 : Other Income

Article 23 : Elimination of Double Taxation

Article 24 : Non-Discrimination

Article 25 : Mutual Agreement Procedure

Article 26 : Exchange of Information

Article 27 : Diplomatic Agents and Consular Officers

Article 28 : Entry into Force

Article 29 : Termination




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Like many others developed as well as developing countries of the world, Bangladesh too cannot absolve herself

from the need to facilitate her trade and investments with the outside world through international tax treaty network

with other countries. The increased pace of industrialization coupled with increased foreign direct investment in the

country necessitated tax treaty arrangements with other countries to provide investors with certainty and guarantees in

the area of taxation. As on March, 2011, the status of Bangladesh on Avoidance of Double Taxation Agreements is as

follows:

Name of the countries with which Agreement on Avoidance of

Double Taxation is in force

Sl. No Name of the Country SRO Date of effect in Bangladesh

(assessment year

commencing on or after)

No. Date

1. U.K 227-L/80 08/07/1980 01/07/1978

2. Singapore 124-L/82 21/04/1982 01/01/1980

3. Sweden 382-L/83 19/10/1983 01/07/1984

4. Korea 433-L/84 02/10/1984 01/07/1984

5. Canada 247-L/85 06/06/1985 01/07/1982

6. Pakistan 221-L/88 11/07/1988 01/01/1980

7. Romania 348-L/88 23/11/1988 01/07/1989

8. Sri Lanka 365-L/88 10/12/1988 01/07/1989

9. France 2-L/89 04/01/1989 01/07/1989

10. Malaysia 67-L/90 15/02/1990 01/01/1982

11. Japan 235-L/91 06/08/1991 01/07/1992

12. India 45-L/93 27/02/1993 01/07/1993

13. Germany 1-L/94 01/01/1994 01/01/1990

14. Netherlands 267-L/94 14/09/1994 01/07/1995

15. Italy 63-L/97 12/03/1997 01/07/1980

16. Denmark 72-L/97 17/03/1997 01/07/1997

17. China 114-L/97 13/05/1997 01/07/1998

18. Belgium 11-L/98 14/01/1998 01/07/1998

19. Thailand 222-L/98 07/09/1998 01/07/1999

20. Poland 39/L/99 03/03/1999 01/07/2000

21. Philippines 56/L/2004 04/03/2004 01/07/2004

22. Vietnam 301-L/2004 18/10/2004 01/07/2005

23. Turkey 308/L/2004 31/10/2005 01/07/2004

24. Norway 20-L/2006 12/02/2006 01/07/2006

25. Indonesia 60-L/2007 20/04/2007 01/07/2007

26. USA 71-L/2007 10/05/2007 01/07/2007

27. Switzerland 52-L/2010 23/02/2010 13/12/2009

28. Oman (only on airlines business) 16-L/2009 02/02/2009 01/07/2009

29. Myanmar 313-L/2012 18/10/2012 01/07/2012

30. Mauritius 122-L/2012 09/05/2012 01/07/2012

31. Saudi Arabia 103-L/2012 15/04/2012 01/10/2011

32. UAE 313-L/2012 05/09/2012 01/07/2012

33. Belarus 189-L/2014 08/07/2014 01/07/2014

34. Kuwait Not yet 19/02/2014(date

of signing)

Not yet




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Comparative Rates in Double Taxation

Avoidance Agreement

Sl. No. Name of the Country Permanent

Establishment

Maximum tax rate

for dividend

Maximum tax

rate for Interest

Maximum tax rate

for Royalties

1. U.K 183 days 10%/15% 7.5%/10% 10%

2. Singapore 183 days 15% 10% 10%

3. Sweden 183 days 10%/15% 10%/15% 10%

4. Korea 183 days 10%/15% 10% 10%

5. Canada 183 days 15% 15% 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%

27. Saudi Arabia 6 months 10% 7.5% 10%




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Part Sixteen: Transfer Pricing

Important Definitions:

107A. Definitions: In this Chapter, unless there is anything repugnant in the subject or context

(1) "Arm's length price" means a price in a transaction, the conditions (e.g. price, margin or profit split) of which do

not differ from the conditions that would have prevailed in a comparable uncontrolled transactions between

independent entities carried out under comparable circumstances;

(2) "Associated enterprise", in relation to another enterprise, means an enterprise which, at any time during the

income year, has the following relationship with the other enterprise-

a) one enterprise participates, directly or indirectly, or through one or more intermediaries, in the

management or control or capital of the other enterprise; or

b) the same person or persons participate, directly or indirectly, or through one or more intermediaries, in

the management or control or capital, of both enterprises; or

c) one enterprise holds, directly or indirectly, shares carrying more than 25% 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;




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(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 ITO 1984, 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;




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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.




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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 Commissioner 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 3

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 1% 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 1% 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 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]Deleted F.A. 2016

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

3,00,000 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.

Section 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] [Subs. F.A. 2009]

shall be made-




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(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, whichever 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 assesseed, 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.




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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




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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:

1. 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;

2. 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;

3. 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;

4. 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:

1) the case of tangible property: physical features, quality and reliability, availability, volume and

timing of property transferred;

2) in the case of services provided: the nature and extent of the services;

3) 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:

a) 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

b) reasonably accurate adjustments can be made to eliminate any material differences in the transactions.




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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;




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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 list of database utilised; [Subs. F.A. 2015]

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.] Omitted by SRO-192/Law/IT/2015




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75. Form of report to be furnished under section 107F: Every report under section 107F of the Ordinance shall be

made in the following form:

Report under section 107F

In respect of:

1. Name of the Assessee: ...................

2. TIN:

3. (a) Circle: ................ (b) Taxes Zone....................

1. All the information, documents and records required under section 107F of the Income Tax Ordinanc, 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. .....................................

Illustration-1:

ABC Bangladesh Ltd., a company incorporated in Bangladesh, manufactures high class motor vehicle engines for

sale both in Bangladesh and abroad. Foreign sales are made through ABC Hong Kong Pte Ltd., a company

incorporated in Hong Kong and wholly owned by ABC Bangladesh Ltd. In 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 in their local market.

During the income year ended 31 March 2015 ABC Bangladesh Ltd. sold 10 such engines at the above FOB price

and 5 such 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 in equivalent Taka. The overhead expenses (related to the above units imported and sold) including

the freight for the above FOB imports of ABC Hong Kong Pte Ltd. were USD 10,000 per unit. Neither of the above

two companies had any other income and expense during the income year.

Requirements:

(i) Will any report from accountant be required to be furnished to the income tax authority? If so, who can issue the

report? Draft a report to be issued in this regard.

(ii) On the basis of the information given above, determine income from the above international transactions having

regard to arm‘s length price.

(iii) Which method have you followed in computing the arm‘s length price as in (ii) above?

(iv) How much additional income tax will the government earn by following the above method?




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You may use exchange rate of USD 1= Tk.78.

Solution:

(i) Yes, a report from a qualified accountant is required to be furnished to the income tax authority as per section

107F of Income Tax Ordinance, 1984 as ABC Bangladesh Limited has entered into international transactions

amounting to [(30,000×10)+(31,000×5) =(4,55,000×78) =Tk. 3,54,90,000] which is more than Tk. 3 crore. Only a

qualified accountant, either a Chartered Accountant or a Cost and Management Accountant can issue such report. A

report is drafted as per Rule 75 as under:

(ii) Taking into consideration the fact that the same engine is sold in Bangladesh at fair market price (here arm‘s

length price) USD 40,000 per unit, income comes at Tk. 40,000 - 20,000 =20,000×15 =3,00,000×78 =Tk.

2,34,00,000.

(iii) Comparable uncontrolled 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.

(iv) Additional income tax to be paid 10,000×15 =1,50,000×78 =Tk. 1,17,00,000 @35% =Tk. 40,95,000.

Illustration-2:

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 which ABC Hong Kong 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 sell its engine products to M&S.

Requirement:

Will any transaction between ABC Bangladesh Ltd. and M&S fall under transfer pricing? Discuss.

Solution:

Yes, the transaction between ABC Bangladesh Limited and M&S LLC of USA will fall under transfer pricing

because M&S LLC of USA is also to be treated as deemed associated enterprise as per section 107A(2)(L).




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Part Seventeen: Statutory regulatory orders (SROs)




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Part Eighteen: Illustrations

Individual assessment

Practical problem 1

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

Practical problem 2

Salary Income Computation: (Rule 33)

Tk. Tk.

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


984,000



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

Actual Total Income 684,000

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

Salary Income Computation: (Section 33)

Tk. Tk. Tk.

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




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


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

Practical problem 3

Tk.

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

Free accommodation

(25% of Basic Salary) 156,000


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 the capital gain arises from disposal of asset after five years;

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

If rental value is not given 25% of the Basic Salary shall be used for computation of Total income of an assessee.




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Practical problem 4

Tk. Tk.

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

House Rent (25% of Basic Salary) 156,000

Less: House rent given (2,000*12) (24,000) 132,000


Practical problem 5

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

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 606,000 (190,000) 416,000

Note 1: House Rent (20,000*8)=160,000 or 50% of Basic Salary=216,000; whichever is lower

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

Where the accommodation is provided at a concessionary rate, the rent actually paid by

Practical Problem 6:

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

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/-).

(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 2016-2017.

9

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 2016.

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

the same.




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Solution:

Computation of total taxable income Reference BDT BDT

a. Income from Salary (Section-21)

1 Basic Salary (25000 X12) R-33 (2)a 300,000

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

3 Entertainment Allowance (1000 X12) R-33H 12,000

4 Employer‘s Contribution to R.P.F (2500 X12) Sch. 6-B-5 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 Rule-33D

(5% of Basic Salary or Tk. 60,0000; whichever is higher )

5% of Basic Salary 15,000

Tk. 60,000; 60,000 60,000

9 Fee for Golf Club 5,000

10 Medical Allowance (3000 X 12) 36,000

Less:Exempted- lower of Tk. 120,000 and 10%

of Basic Salary

Rule-33I


Tk. 120,000 120,000 30,000 6,000

11 Festival Bonus (25000 X 2) 50,000

12 Full Free Accommodation: Rule-33B

Rental value of accommodation (35000 X 12) 420,000

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

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

Total Salary Income 720,400

b. Income from Other Sources [Section-33]

Bank Interest (1,80,000 x ) Section-33a 200,000


c. Computation of Investment Allowance

1. Actual investment [as per 6th Schedule, Part-B]

1. Savings Certificate Para 10(1)(a) 100,000

2. LIP (Maximum limit 10% of sum assured) Para 1 40,000

3. Contribution to R.P.F. (Self + Employer) Para 5 60,000

4., Investment in shares SRO-196/L/ IT/2015 75,000

Total Actual Investment 275,000

Computation of Total Income of Mr. X

Mr. X

Calculation of total income for the year ended June 2016

Income year- 2015-16

Assessment Year-2016-17

10100

100




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Or,

3. Maximum allowance Sec. 44 15,000,000

Elegible amount for tax rebate [minimum of the (1), (2) and (3)] 267,120

Tax rebate @ 15% of the elligible amount 32,054

d. Income Tax Calculation:

Rate Tax amount

On 1st up to 250,000 0% -

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

Remaining 270,400 15% 40,560

Tax on Total Income of Tk. 920,400 80,560

Less: Tax Rebate on Investment Allowance (2,67,120 X 15%) (32,054)

Total Tax after deduction of Investment Tax Rebate 48,506

Less: Tax deducted at source from bank interest (See Income from Other sources) (20,000)

Net Tax Liability 28,506

Answer: (1) Total Income: - Tk. 9,20,400

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

Applicable slab

Practical Problem 7:

(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 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 147,000

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

ending 30 June 2015.

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.




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(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.

Solution:

Description Reference BDT BDT BDT

a) Salary Income:

Basic Salary (BS) (20,000*12) R-33 (2)a 240,000

Dearness allowance (20% of Basic Salary) Rule-33J 48,000

Bonus (1 months Basic Salary) Rule-33J 20,000

House rent allowance (55% of BS) 132,000

Less: 50% of BS or 25,000 p.m. lower one Rule-33A


Tk. 25,000 p.m 300,000 (120,000) 12,000

Medical Allowance (500 X 12) 6,000

Less: lower of Tk. 120,000 and 10% of Basic Salary Rule-33I


Tk. 120,000 120,000 (6,000) -

Conveyance Allowance 14,400

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

Posting Allowance Sch 6(A) Para 5 60,000

Employers' contribution to PF (10% of Basic Salary) 24,000

Accrued Interest 96,000

Less: Allowable @ 14.5% or 1/3 of BS (BS+DA), lower one Sch 6(A) Para 25

Interest at 14.5% [(96,000*100/16)*14.5%] 87,000

1/3 of Basic Salary (Basic+Dearness Allowance) 96,000 (87,000) 9,000

Total Salary Income 413,000

b) Interest on Securities: Reference BDT BDT BDT

Interest on SEC approved debenture Sec 22b 35,000

Interest on Government bond Sec 22a 70,000

Total income from interest on securities 105,000

c) Income from House Property: Reference BDT BDT BDT

Annual value 120,000

Less: Repair and maintenance (25% of Annual Value) 25(1)(h) (30,000)

Municipal tax (20,000/2) 25(1)(e) (10,000)

Insurance premium (12,000/2) 25(1)(d) (6,000)

Interest on HP loan (1,47,000/2) 25(1)(g) (73,500) (119,500)

Total income from house property 500

Mr. X

Calculation of Total Income for the year ended June 2015

Income Year: 2014-2015

Assessment Year: 2015-2016




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d) Income from business: Reference BDT BDT BDT

Partnership income (1/3 of Tk. 2,25,000) 75,000

Total income from business 75,000

e) Capital gain: Reference BDT BDT BDT

Sale of share of listed company 10,000,000

Less; Exempted (SRO no. 196,

30.6.2015)(10,000,000) -

Total capital gain -

f) Income from other sources: Reference BDT BDT BDT

Cash dividend (45,000/.90) 50,000

Less: Exempted up to 25,000 Sch. 6(A) Para 11A (25,000) 25,000

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

Total income from other sources 31,000

624,500

BDT BDT BDT

Employees contribution to RPF 24,000

Employers' contribution to RPF 24,000

Investment in share 100,000

Pension scheme (5000*12) 60,000 208,000

Or,

177,450 177,450

Or, 15,000,000 15,000,000

Tk. 1,50,00,000; whichever is lower

Lower one 177,450

So, investment allowance will be on tk. 1,78,950 @ 15% 26,618

Rate Tax amount

On 1st up to 250,000 - -

Remaining 374,500 10% 37,450

Tax on Total Income of Tk. 624,500 37,450

Less: Tax Rebate on Investment Allowance (1,77,450 X 15%) (26,618)

Total Tax after deduction of Investment Tax Rebate 10,833

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

Less: Tax deducted at source from Cash divided & Interest on Saving A/C (5000+600) (5,600)

Net Tax Liability 3,932

* (As per sixth schedule (Part B) Para - 16)

(10,833/6,24,500)*75,000=1,301

* Assuming Mr. X is below 65 years old.

Answer: (1) Total Income: -Tk. 624,500

(2) Net tax liability: - Tk. 3,932

30% of total income excluding Employer‘s contribution to RPF and taxable portion of

interest on RPF [(6,24500-24000-9000)*30%]

Applicable slab

Total income for Mr. X

Investment Allowance Calculation:

Practical problem 8:

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) = Tk. 0

P Bank let a house at Tk. 50,000 per month with advance of Tk. 500,000 which is adjustable with rent at

Tk. 10,000 per month, so –




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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 2016-2017.

Solution:

Reference BDT BDT

Sec.2(3)(a) 720,000

Sec25(1)(h) (180,000)

Sec25(1)(b) (2,500)

Sec25(1)(e) (10,000)

Sec25(1)(g) (25,000)

Sec25(1)(j) &

Sec25(1)(k)(180,000)

Sec25(1)(gg) (53,500) (451,000)

Sec 19(30) 150,000

Total House Property Income 419,000

*As no reasonable rent is given, total rent is assumed as annual value.

** Assumed that house was rented for residential purpose.

Add: Deemed income

Unspent portion of allowable deduction (180000-(60000/2))

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 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 2015-2016 Financial Year are –

Vacancy allowances (equal to 3 months rental value)



Description

Annual Value (AV*) (60,000*12)

Less: Repair and Maintenance (25% of Annual Value)

Interest at construction stage [1/2*(1/3*3,21,00)]

Mr. Alam

Calculation of House Property Income

Municipal Tax (1/2 of 20,000)

Insurance (1/2 of 5,000)

Bank interest (1/2 of 50,000)


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

Compute the house property income for Mr. Azim for the assessment year 2016-17.

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 Financial Year 2015-

16;

He has a residential house situated at Uttara, Dhaka. The city corporation for tax purpose valued its‘ annual value at tk. 200,000. He

spent tk. 6,000 for its‘ repair and paid city corporation tax at tk. 5,000. 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.




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Solution:

Reference BDT BDT

Sec.2(3)(a)

Actual Value (25,000*12) 300,000

Municipal Value; Whichever is higher 220,000 300,000

Sec25(1)(h) (75,000)

Sec25(1)(b) (2,000)

Sec25(1)(e) (2,500)

Sec25(1)(e) (1,000)

Sec25(1)(g) (2,000) (82,500)

Sec 19(30) 65,500

Total House Property Income 283,000

* Assumed that house was rented for residential purpose.

* Cost of alteration is capital expenditure which is not cover u/s 25. so it is not considered in computing HP income.

Interest on Mortage (1/2 of 4,000)

* white wash and repair, water and sewerage and service charges are within 1/4 statutory deduction of repair and maintenance.

* As the full house was not let out and annual value is determined on 50% of the property, so all related expenditure allowed

proportionately.

Description

Annual Value; Higher of Actual value or Municipal Value

Less: Repair and Maintenance (25% of Annual Value)

Insurance (1/2 of 4,000)

Municipal Tax (1/2 of 5,000)

Land Revenue Tax (1/2 of 2,000)

Add: Deemed income

Unspent portion of allowable deduction (75000-(19000/2))


Mr. Azim

Calculation of House Property Income


Worked example 6:

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 (annual value) 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


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, 2016. Compute his total

income and tax liability:




of 178

Worked example 6:

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 (annual value) 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


e. Income from land sale (capital gain) 160,000


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, 2016. Compute his total

income and tax liability:

Solution:

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 upto 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


Less: Allowable expenses:

Repair and maintenance

(25% of annual value, for residential use) Sec 25(1)(h) 74,400

City corporation tax Sec 25(1)(e) 9,000 (83,400) 214,200

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

Deductible expenses 74,400

Less: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: Exemted SRO-196/L/

IT/2015

(8,974,071) -

I Income from fisheries business SRO-199/L/

IT/2015

403,000

(Reduced Tax Rate @3%)

J Income from poultry firm 205,000

Less: Exempted (investment in govt. bond) Sch 6-A-42 (205,000) -

Total Income from Business and Profession 1,378,375

E Capital Gain

Income from land sale Sec-82© 160,000

(assuming that sales occurred within 5 years)

Mr. Azad



Computation of total taxable income




of 178

Solution:

Reference BDT BDT BDT


1. Basic salary R-33 (2)a 420,864

2. Festival bonus 70,144


Less: Lower of


Or, Tk. 25,000 p.m. 300,000 (210,432) 165,303




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



Repair and maintenance

(25% of annual value, for residential use) Sec 25(1)(h) 74,400

City corporation tax Sec 25(1)(e) 9,000 (83,400) 214,200

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

Deductible expenses 74,400

Less:Expenses claimed 60,000 14,400


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: Exemted SRO-196/L/

IT/2015

(8,974,071) -

I Income from fisheries business SRO-199/L/

IT/2015

403,000

(Reduced Tax Rate @3%)

J Income from poultry firm 205,000

Less: Exempted (investment in govt. bond) Sch 6-A-42 (205,000) -

Total Income from Business and Profession 1,378,375

E Capital Gain

Income from land sale Sec-82© 160,000

(assuming that sales occurred within 5 years)

Mr. Azad



Computation of total taxable income

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




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3. Maximum allowance u/s 44 15,000,000


Tax rebate-

on first 2,50,000 @ 15% 37,500

on balance tk 114,672 @ 12% 17,201

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 upto 250,000 0% -

On next upto 400,000 10% 40,000

On next upto 500,000 15% 75,000

On next upto 600,000 20% 120,000

Remaining 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 @20% on Tk. 571,944 (D) 114,388.70

Net tax liability (E=A-B-C+D) 394,427




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a.

b.

c.

d. Entertainment allowance @ 5% of basic salary was paid to Mr. A.

e.

f. Employer spent Tk. 500 p.m. for free tea, coffee and beverage for the office of Mr. A during working hours.

g. Company spent Tk. 200,000 for Mr. A during the year against reimbursement of utility bills of his residence.

h. Received share of net profit of Tk. 200,000 from partnership. He is entitled to tax rebate as per tax law.

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.

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 2016 and received interest of Tk. 50,000 in the following year on

the said investment of Tk. 500,000.

You are required to calculate the total income and tax liability of Mr. A for the assessment year 2016-2017. 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.

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.

Mr. A is 60 years old and employed by a private limited company. He has joined the company on 01 July 2015. He

has received the following income and benefits during the year ended 30 June 2016:

Basic salary Tk. 100,000 per month sent to his bank directly. He had outstanding salary for the month of June

2016 which was paid on 02 July 2016. 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 2015-16.

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.




of 178

Solution:

Mr. A





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)


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)

-




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G. Income from Other Sources

1. Dividend income (gross) 200,000

200,000


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.

698,355



Tax rebate-

on first 2,50,000 @ 15% 37,500

on balance tk 114,672 @ 12% 37,200

74,700



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


Tax Liability 334,763

Less: Average rate on income from partnership

[325,463 ÷ 2,447,850 × 200,000] (27,352)

Less: TDS on wage earners' bond [sec 52(d)]* -

Net tax liability 307,411

30% of Total taxable income excluding Employer's contribution to

PF and Capital gain [30% of (24,47,850-1,20,000-0)]

*No TDS has been deducted as per laws applicable for the income year 2016-17




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(a) From XYZ Ltd.

Basic Salary Tk.30,000/= p.m. * Medical Allowance 5,000/= p.m

House Rent Tk. 20,000/= p.m. * Conveyance Allowance 5,000/= p.m.

(b) From ABC Ltd.

Basic Salary Tk.25,000/= p.m. * Entertainment Allowance 5,000/= p.m

House Rent 15,000/= p.m. * Conveyance Allowance 5,000/= p.m.

* Bonus Tk.40,000/= p.a.

No car was provided by the company.

(e) Dividends of Tk.50,000/= received from investment in shares of a number of listed companies.

(f) She made a capital gain of Tk.2,00,000 by buying and selling listed company shares during the year.

(g) She earned an interest income of Tk.15,000/= from post office savings bank account.

Taka

Lecture Fees 200,000

Payments for articles published 50,000

Questions setting and scripts examination fees 40,000

She paid Tk.10,000 to a part-time typist for typing manuscripts of her articles.

(k) She received Tk.250,000 from agricultural land by selling crops.

(l) She received honorarium of Tk.150,000 during the year as a Board Director of Rupali Bank Ltd.

Other information are as follows:

• She spent Tk.20,000 on professional and technical books and publications during the year.

• She paid an annual subscription of Tk.5,000/= to ICAB on 1/7/14.

• She owns and maintains a motor car.

• She sold the shares of a listed company for Tk.2,00,000, which she bought for Tk.1,50,000 in the income

year 2013-2014, and for which she claimed and received the allowable tax rebate for the investment. She

has again bought shares of 3 other listed companies during the year for Tk.6,00,000/=.

Required:

Mrs. Rahim FCA is a retired Government Officer. She is 71 years of age. Currently she works as Advisors of XYZ

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:

(c) Consultancy fees of Tk.4,00,000 in total from UNDP for her work in Bangladesh and Tk.3,00,000 (in equivalent

US dollar) from World Bank for her work in Bhutan and Nepal.

(h) She entered into a contract with a developer on 1/11/14 for erecting a six storied building with 10 flats out of

which she will get 5 flats free of cost. In addition, she will be given Tk.60,00,000 in cash, to be paid in 3 equal

installments of Tk.20,00,000 each in November 2014, 2015 and 2016. She received Tk.20,00,000 in November 2014.

• Mrs. Rahim‘s declared income in the assessment year 2016-2017 is at least 20% more than that of the assessment

year 2015-2017.

Compute the total income of Mrs. Rahim and tax liability for the assessment year 2016-2017, advising whether she

should submit the return under Section 82BB ―Universal Self Assessment‖ or under normal procedure.

(d) Rental income @Tk.35,000 p.m. from an apartment owned by her. It is used by a foreigner as his residence. She

paid municipal tax of Tk.40,000/=, land revenue of Tk.12,000/= and a fire insurance premium of Tk.15,000/= during

the year. She also spent Tk. 60,000 for maintenance during the year. The apartment remained vacant for 2 months

during the year.

(i) She had an apartment which was sold for Tk.1 crore (which was same as the Mouza value) on 1 August 2014.

The buyer paid all the costs (including tax, stamp duty, registration costs etc.) at the time of registration in August

2014. The apartment was bought by her on 1 August 2000 at a cost of Tk.40 lac.

(j) Mrs. Rahim is a lecturer at the ICAB evening coaching classes and is also involved in the ICAB examination

process. She is also a regular contributor of articles to the ICAB Journal and newspapers. From these sources she

received the following additional income during the year:

• Mrs. Rahim has taken a life insurance policy in favour of her son and has paid quarterly premiums of Tk.15,000/=

each throughout the year and another for herself paid premium of Tk. 10,000 per month policy value of which is Tk.

10 Lac.




of 178

Solution:


A. Income from Salary Sec-21

From XYZ limited

1. Basic salary R-33 (2)a 360,000




Or, Tk. 25,000 p.m. 300,000 (180,000) 60,000

3. Medical allowance R-33I 60,000

Less: Lower of 10% basic salary or Tk. 120,000


Or, Tk. 120,000 (36,000) 24,000

4. Conveyance allowance R-33C 60,000


From ABC limited Note 1

1. Basic salary 300,000

2. House rent allowance 180,000

3. Entertainment allowance 60,000


5. 40,000

Total Income from Salary 1,114,000

B. Income from House Property

Sec-24 420,000


Repair and maintenance (25% of annual value) Sec 25(1)(h) 105,000

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 (242,000)

Add: Deemed income Sec 19(30)

Deductible expense 105,000

Expense claimed (60,000) 45,000


C. Income from Agriculture

Sales proceeds from crops Sec 26 250,000

Less: allowable expenses Sec 27(1)(C)ii

Cost of production (150,000)

Total Income from Agriculture 100,000

Mrs. Rahim FCA



Annual value (Since reasonable rent is not given, I assume rent

received is reasonable)

Bonus (Assuming festival bonus and paid once per annum)




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D. Income from Business or Profession

1. Consultancy fees Sec-28

Earned in Bangladesh 400,000

Earned in abroad 300,000

(300,000) -

Less: Depreciation on professional books (30% of 20,000) 3rd Schedule 6,000 (6,000)

Total Income from Business or Profession 394,000

D. Capital Gain

1 Gain from sale of shares Sec 31 200,000

Less: exempted (200,000) -

2 Gain from sale of apartment (416,667/.15) Note 2 2,777,780

Total Capital Gain 2,777,780

E. Income from Other Sources

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

Less: Exempted Sch. 6-A-11A (25,000) 30,556

2. Interest income from Post Office A/C (assuming net) 16,667

3. Honorarium from Rupali Bank (assuming net) 166,667

4. Income from ICAB net of direct expenses 280,000

5. Money received from developer 2,000,000

Total income from other sources 2,493,889


Calculation of Investment Allowance [as per 6th Schedule, Part-B]

1. Actual investment

[Para-1]

Premium paid 120,000

10% of Policy Value 100,000

Whichever is lower 100,000

b. Investment in shares of listed companies [Para-27] 600,000 700,000

2. 30% of Total taxable income excluding income U/S 82(C) [30% of (5,102,669-2,777,780)] 1,297,467



Tax rebate -

on first 2,50,000 @ 15% 37,500

on balance tk 4,50,000 @ 12% 54,000

91,500

a. Insurance premium of herself assuming her son is not minor

SRO-196/L/

IT/2015

Less: Exempted (assuming brought through proper channel)




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Total incom excluding capital gain is Tk.(7,102,669-2,777,780) 4,324,889


On 1st 300,000 0% -

Next 400,000 10% 40,000

Next 500,000 15% 75,000

Next 600,000 20% 120,000

Remaining 2,524,889 25% 631,222

On Capital Gain 2,777,780 15% 416,667

7,102,669 1,282,889


Gross Tax Liability 1,191,389

Less: TDS (5,556+1500+15000+416,667) (438,723)


Advice:

Note 1:

Note 2:

Applicable slab Rate Tax amount Maximum Amount

On 1st upto 300,000 0% 0 -

On next upto 400,000 10% 40,000 40,000

On next upto 500,000 15% 75,000 75,000

On next upto 600,000 20% 120,000 120,000

Remaining 2,524,889 25% 631,222 750,000

Note 3:

It is assumed that the subscription fees paid to ICAB is not soley for the profession.

Note 4:

Note 5:

She should submit return under universal self assessment as her income is 20% higher than the income of the

previous year. Therefore, it would not fall under the scope of audit but her return is to be furnished in compliance

with provisions of ITO 1984.

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 TDS

416,667 {(10,000,000/0.96)*4%} will be used to back calculate capital gain.

Since sufficient information about purchase price or fair market value is not given, I assume no capital gain arises

from the contract with developer rather Tk. 2,000,000 received from developer would be considered as income

from other sources.

UNDP & WB are the organisation of UN. Only the salary categorized person employee at UN is tax free. As

Mrs Rahim is not salaried person of UNDP & WB, so her income from there is not tax free. However

consultancy income could be shown as income from other sources.

As per rule 33 (2) (b) there is restriction of allowing benefits under rule 33 to a shareholder director from one

company only. Considering this sprit of law, exemtion benefits from salary income allowed only for one company

and all income from other company have been added with her total income.




of 178


Mr. Zaman Hoque was the HR Manager ofAnxiata Bangladesh Ltd. In July 2014, his basic

salary was Tk. 52,000 in the scale of 40,000-4,000*8-72,000. His date of yearly increment is

on 26th March. He was terminated from Anxiata Bangladesh Ltd. On 30th April 2015 and joined

Grameenphone Ltd. On 1st June of the same year. During the income year his income from

Anxiata Bangladesh Ltd. And Grameenphone Ltd. Are as follows:

From Anxiata Bangladesh Ltd.:

He received dearness allowance @10% of basic salary and medical allowance of 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 rent-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.200,000 and

gratuity of Tk. 100,000. Moreover, his accumulated balance from the RPF was Tk. 180,000

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. 213,119 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 with

current year's tax liability. His investments during the year were as follows:

a) Purchase one laptop Tk. 110,000

b) Payment of his life insurance premium Tk. 20,000 (policy value Tk. 500,000)

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

Complete the income and tax liability of Mr. Zaman Hoque for the assessment year 2015-16




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Solution:

Heads of Income Tk. Tk.

Income from salaries (section - 21):

1 Basic salary (Note 1) 584,774

2 Dearness allowance (Axiata) (524,774*10%) 52,477

(assuming it was not taxed earlier)

3 Medical Allowance (Total)[(2,000*10)+5,000] 25,000

Less: Exempted fully as it is within the

exemption limit 25,000

4 Bonus (52,000+56,000) 108,000

5 Employer's contribution to RPF (Total)

(584,774*10%) 58,477

6 Rent free accomodation (Axiata):

25% of B.S. (524,774*25%) 131,194

7 Car facility (Axiata) (524,774*5% ot Tk.60,000) 60,000

8 Entertainment allowance (Axiata) (1,000*10) 10,000

9 Compensation (Axiata) 200,000

10 Gratuity (Axiata) 100,000

Less: Exemption up to Tk.2.5 crore 100,000

11 Accumulated balance of RPF (Axiata) 180,000

Less: Exemption fee 180,000

12 House rent allowance (Grameenphone)

(60,000*40%) 24,000

Less: Exempted Tk. 25,000 per month or 50%

of Basic salary whichever is lower 24,000

13 Conveyance allowance

Less: Exempted - Up to Tk. 30,000 30,000

1,204,922

Income from other sources 213,119


Particulars Amount

1 Purchase one laptop (allowable up to Tk. 100,000 100,000

2 Payment of life insurance premium 20,000; maximum 10% of the policy value

i.e. 10% of 500,000=50,000) 20,000

3 Contribution to DPS (3,000*12) 36,000

4 Employee's and employer's contribution to RPF (58,477*2) 116,954

Total 272,954

Assessee: Mr. Zaman Hoque


Accounting year ended 30 June 2015

Computation of total income and tax liability

Computation of Investment Allowance




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Maximum limit of the investment allowance: 30% of Total income excluding employer's

contribution to RPF [(1,418,041-58,477)*30%] = 407,869 ot Tk. 1,500,000 or Tk. 272,954

whichever is less. So, the required amount of investment allowance on which 15% tax

rebate will be applicable is Tk. 272,954.

Rate Amount

(Tk.)

On the first 250,000 0% -

On the next 400,000 10% 40,000

On the next 500,000 15% 75,000

On the next 268,041 20% 53,608

Total 1,418,041 168,608

Less: Investment tax rebate (272,954*15%) (40,943)

TDS (20,000)

Refund Adjustment (10,000)


Tk.

1 Total basic salary

From Axiata:

B.S. from July 14 to February 15 = (Tk. 52,000*8) 416,000

B.S. from the month March 15= [(52,000*25/31)+(56,000*6/31)] 52,774

B.S. for the month April 15 56,000

524,774

From Grameenphone:

B.S. for the month June 15 60,000

Total basic salary for the income year 2014-2015 584,774

2 Since conveyance is received from a separate company, the exemption limit

has been considered.

3 In the month of May he was not employed. So, basic salary for the month of May

is not taken into consideration.

Tax Liability

Note:




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a) Salary Tk. 12,000/- per month (basic)

b) Dearness Allowance -40% of basic pay but maximum of Tk. 4,000 per month

c) Entertainment Allowance Tk. 400 per month

d) Bonus-equivalent to basic salary of two months

e) Income from Commercial Securities Tk. 6098/-

f) Honorarium as part time advisor Tk. 20,000/-

g) Income from Partnership Business Tk. 50,000/- (taxed)

h) Income from Agricultural Land (sale of product) Tk. 10,000/-

i) Royalty from books Tk. 7,000/-

j) Received birthday presentation of Tk. 5,000/-

k) Interest on pensioner saving certificate Tk 10,000/-

1

2

3 Purchased Prartirakhya Sanchay Patra for Tk. 20,000

4 He spent Tk. 8,000 on education for two college going children

Required to calculate:

a) The total taxable income

b) Investment tax credit for the year ended 30th June 2014

c) Tax to be paid

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

Mr. Fazal was provided with a free-furnished quarter. He also owns a house which is let out at Tk.

10,000 per month. The Municipal Value of the house is Tk. 100,000. He spent Tk. 7,500 for repair

and Tk. 30,000 for alteration. He also paid TK. 4,000 for Municipal Tax, Tk. 2,000 for fire insurance

premium, Tk. 3,000 for collection charges. Other Particulars of Mr. Fazal are as follows:

He insured his own life for Tk. 75,000 and for the life of his wife Tk. 50,000. He paid insurance

premiums on the above policies Tk. 6,000 and Tk. 4,000 respectively

He contributed 10% of his basic salary to a recognized provident fund to which his employer

contributed equal sums




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Solution:

Tk. Tk. Tk. Tk.

1. Income form Salary: Sec.21

a) 12,000*12 144,000

i) 57,600

48,000 48,000

ii) 4,800

iii) 12,000*2 24,000

iv) 36,000

v) 14,00 127,200 271,200

a) 6,098

120,000

Or, Municipal Value (Higher one is Annual Value) 100,000 120,000

ii) 4,000

iii) 2,000 36,000 84,000

30,000

10,500

19,500 103,500

10,000

6,000 4,000

50,000

a) 20,000

b) 7,000 27,000

c) 5,000

461,798

Computation of Total Income of Mr. Fazal

(Considering it for current year, otherwise students will not be benefited)

Income Year: 2014-2015, Assessment Year: 2015-16

Particulars

Dearness allowance: 40% of Basic pay

Maximum: 4,000*12

Basic salary

2. Interest on Securities: Sec.22

Income from Commercial Securities:

3. Income from House Property

Entertainment Allowance: 400*12

Bonus (2 month's Basic Salary)

Free Furnished Quarter: 25% of Basic pay

Employer's contribution to RPF: 10% of B.S.

Wholly let out house:

Less admissible deductions u/s 25:

i) Repair 1/4th of AV (including collection charge) 30,000

Deemed income from house property u/s 19(30)

Repairs allowed as per section 25

Annual Rental Value: 10,000*12

Municipal tax

Insurance Premium

4. Income from Agriculture: Sec.26

Sale of produce

Less: Repairs claimed (Tk. 7,500+Tk.3,000)=

Unspent amount will be treated as HP income u/s 19(30)

Less Cost of production @ 60%

5. Income from Business: Sec.28

Income from partnership Business (taxed income)

6. Income from Other Source: Sec.33

Honorarium as advisor

Royalty from books

Birthday gift (non-taxable as gift is not income)

Total Income




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Total

Investment Tk.

Admissible

Investment

Tk.

Tax Rebate

Tk.

28,800

20,000

Self: 6,000

or, 10% of policy amount 7,500

(i.e. 10% of Tk. 50,000) (Lower) 6000

Wife: 4,000

or, 10% of policy amount 5,000

(i.e. 10% of Tk. 50,000) (Lower) 4000

58800

b) Max Limit of Investment: 30% of T.I excluding

employer's contribution to RPF=461,798-14,000)

*30% = 447,398*30% = 134,219 or Tk. 15,000,000

or Actual Investment Tk. 58,800 (Whichover is

lower) 58800

Tax Credit: 15% on admissible investment of

Tk. 58,800

8820

Tax Calculation Tk.


Tax on 1st Tk. 250,000 0

Tax on remaining Tk. 211,798 @10@ 21,180

21180

Less: Investment tax rebate 8,820

12,360

Less: Rebate on income from partnership firm at average

rate as per 6th schedule (part-b) para 16

(50,000*12,360/461,798) 1,338

Net Tax Payable 11,022

1 Income from Commercial Securities needs not to be grossed up as TDS was at upfront system.

2 Rebate would be calculated at the average rate of tax out of the "Income from Partnership

Business" (taxed) to arrive at the Net tax calculation as per 6th schedule (part-b) para-16

3 Royalty income from books is taxable under Sec.36 Income Tax Ordinance 1984

4 Education expense for Children is not an item of investment allowance. So it is not considered for that

5 Interest on penssioner savings certificate is tax free up to investment of Tk. Lakh. As the interest

income figure is only Tk. 10,000, so I assume that investment was within that limit

Note:

i) Contribution to RPF: 14,400*2 (Employer and

Employee both)

ii) Savings certificate

iii) Life Insurance Premium

Particulars

a) Actual Investment

Investment Tax Rebate: Sec. 44(2) (b); 44(3)




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Partnership firm assessment

ABC Partnership Firm

Profit and loss account

For the year ended 30 June 2014

Assessment year: 2014-2015

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:

Particulars Amount Amount

Net profit 1,200,000

Add: Inadmissible expenses

Salary to A 200,000

Commission to A & C 900,000

Interest on capital of B & C 350,000

Provision for bad debt 250,000 1,700,000

Less: Income under other head:

Capital gain on machinery (500,000)

Income from business 2,400,000

Capital gain 500,000

Total income 2,900,000

ABC Partnership Firm


Assessment year:2016-17




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2. Tax liability of the firm

Range of income Rate Tax

Up to 250,000 0% -

Next 400,000 10% 40,000

Next 500,000 15% 75,000

Next 600,000 20% 120,000

Remaining 1,150,000 25% 287,500

2,900,000 522,500

Note: It is assumed that the machine was sold within 5 years of acquisition

3. Allocation of firm's profit among the partners

Allocation A B C Total

Remaining

Profit

Profit during the year 2,400,000

Salary 200,000 - - 200,000 2,200,000

Commission 400,000 - 500,000 900,000 1,300,000

Interest on capital 100,000 250,000 350,000 950,000

Allocation of remaining profit equally among the partners316,667 316,667 316,666 950,000 -

600,000 416,667 750,000 1,450,000

4. Total income of B

Income from house property Amount Amount

Annual Rent 300,000

Municipal Value (not given) -

Annual value (higher of the above) 300,000

Less: Allowable deductions

Repair & maintenance (30%) 90,000

Income from house property 210,000

Income from business & profession

Share of income from partnership firm (taxed) 416,667

Deemed income u/s 19(30) 90,000

Total income of B 716,667

5. Tax liability of B

Range of income Rate Tax

Up to 250,000 0% -

Next 400,000 10% 40,000

Remaining 66,667 15% 10,000

50,000

Less: Tax rebate on share of income from firm

[416,667*(50,000/716,667)] (29,070)


Note: If any amount remained after deduction of allocated salary, commission & interest on capital, that would be allocated to the

partner equally in the absence of agreed ratio.




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Company assessment

Company assessment 1:




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Solution:

Particulars Workings Amount

Net Profit 573,000

Less: Non Business Incomes

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)

(105,400)

Add: Inadmissible Expenses

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

4,515,000

Add: Expenditures to be treated afterward as per ITO

Entertainement 54,000

Depreciation 180,000

234,000

Less: Allowable Depreciation (115,000)

Add: Revenue gain on sale of Machine (62,000-12,000) 50,000

Net profit before entertainement 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

ABC Company

Income Year : 2015-2016





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Income from Other Sources:

Dividend Income (16,000÷0.80) 20,000

Exempted: Upto 25,000 (20,000)

-

Sundry Income 5,000

Interest On bank deposit(14,400÷0.90) 16,000

Loan from Sister Conscern not received through bank transfer 350,000

371,000


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


Calaculation of Minimum Tax:

Sales 8,980,000

Dividend 16,000

Interest 14,400

Sale of Machine 72,000


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 earlier than 3 years)

Calculation of Net Tax Liability:


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




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Company Assessment – 2:

The following adjusted accounts appeared in the records of ABC Ltd. For the year ended December 31,

2015. 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 2015 and purchased by ABC Ltd. In

2015.

(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 2013 Tk. 12,00,000

Sold in 2015 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

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

Comment:

There are no item under section 82 (C) , so there are no application of changes in calculation of tax

liabilities as per the changes of FY 2016-2017.




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(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 2015 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 2015.

(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 2013-2014.

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:


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

ABC Company






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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




Less:

1.Capital Gain (1,505,000)



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




Comment:

There are no item under section 82 (C) , so there are no application of changes in calculation of tax

liabilities as per the changes of FY 2016-2017.




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The profit and loss account of Star Ltd. is given below for the income year 2014-15:

Particulars Tk. Particulars Tk.

Cost of Goods Sold 1,500,000 Sales 3,500,000

Salaries 700,000 Dividend 120,000

Rent 150,000 Interest 30,000

Advertisement 200,000 Gain on sale of asset 40,000

Interest on Loan 80,000 Interest on Tax-Free securities 15,000

Utility Expenses 60,000 Interest on Foreign Investment 20,000

Donation 150,000

Transportation 110,000

Audit fee 200,000

Bad Debt 90,000

Contribution to RPF 70,000

Income tax paid in advance 30,000

Fines Paid to Customs 20,000

Annual Membership 15,000

Legal Expenses 25,000

Insurance premium 35,000

Sundry Expenses 12,000

Depreciation 65,000

Net Profit 213,000

Total 3,725,000 Total 3,725,000

Determine the taxable income of the company and net tax liability thereof. Consider the given

data below to assume that:

Star Ltd. Is a public Limited Company. Salaries are paid in cash without any cheque or bank

transfer. Tk.450,000 of salaries from Tk.700,000 falls under the category of gross salary more than

Tk.15,000, tax depreciation amounts to Tk.50,000; legal expenses are paid due to the infringeme-

nt of trademarks and the company has sold an asset for Th.100,000 that the company purchased 4

years back at a cost of Tk.80,000 with a written down value of Tk.60,000 to date.

Star Ltd.

Profit and Loss Account

For the year ended on June 30, 2015




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Solution:

(Considering it for current year, otherwise students will not be benefited)

Taka Taka

Income from Buiness or profession:

Net profit as per Profit and Loss Account 213,000

Less: Non Business Income for consideration at respective head

Dividend 120,000

Interest 30,000

Interest on tax-free securities 15,000

Interest on foreign investment 20,000

Gain on sale of asset (as Tk.20,000 is capital gain (100,000-80,000) 20,000

205,000

8,000


Salaries (for violation of section 30(i) being salary above Tk. 15,000

per month paid in cash) 450,000

Donation (assuming donation to unapproved institution and

condition to get CSR also not fulfilled) 150,000

Income tax (as income tax is not an exxpense as per section 29,

rather it is an apportion of profit. Income tax is always

chargeable on net profit before tax) 30,000

Fine paid to customs (as no such fine is admissible expense due to

violation of law) 20,000

Legal expense (disallowed being it was paid due to Infringement

of other's trademark) 25,000

Accounting Depreciation 65,000

740,000

748,000

Less: Tax Depreciation as per 3rd schedule (50,000)

Income from business 698,000

Capital Gain 20,000

Income from other sources:

Dividend (Tk. 120,000-less tax free Tk. 25,000) 95,000

Interest 30,000

Interest on Foreign Investment 20,000

145,000


Income Year: 2014-2015, Assessment Year: 2015-16

Star Ltd. (Status: Resident Company)




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Tax Calculation Tk.

Tax on total income excluding dividend and capital gain 187,000

(25% of Tk.748,000)

Tax on dividend (20% of Tk. 95,000) 19,000

Tax on capital gain (15% of Tk.20,000) 3,000

Gross Tax Liability 209,000

Less: Advance tax paid (30,000)

179,000

Less: B.S. on dividend (120,000*20%) (24,000)

Bank Interest (30,000*10%) (3,000)

Net tax Liability 152,000

OR

Minimum tax on gross receipt @30%

On sales Tk.3,500,000 @30% 10,500

On capital gain Tk.20,000@30% 60

On income from other sources Tk.145,000 @30%) 435

Total 10,995

Whichever is higher. So tax to be paid is 152,000

Note: Due to lack of information, foreign tax credit is not possible to give

on interest on foreign investment.




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Problem:

TK. In '000

Net sales (1) 90,000

Dividends (2) 6,000

Interest (3) 800

Gain on sale of shares (4) 1,000

Equity in earnings of Tech Partnership (5) 6,000

Keyman life insurance proceeds (6) 25,000

Insurance proceeds from fire loss claim (7) 1,500

Tax refund (8) 500

Total 130,800

TK. In '000

Cost of goods sold (9) 52,500

Salaries and wages (10) 26,000

Doubtful accounts (11) 2,000

Taxes (12) 9,000

Security services (13) 300

Audit, accountancy and taxation services (14) 500

Office Rent (15) 600

Car Rental (16) 100

Interest (17) 2,500

Donations (18) 1,800

Board meeting attendance fee (19) 300

Depreciation (20) 8,000

Other expenses (21) 3,000

Corporate Income Tax (22) 4,500

111,100

Net Income 19,700

Dividends Paid (23) 9,000

Additional information:

(1) Trade accounts receivable at December 31, 2015, and at December 31, 2014, amounted to

Tk.3,30,00,000 and Tk.2,00,00,000 respectively.

(2) Dividends include:

i) Tk.20,00,000 declared and paid in 2015 by an unrelated taxable local company whose

shares are traded on DSE and CSE;

ii) Tk.20,00,000 received in 2015 from a Singapore based company which remitted the

dividend amount net of an withholding tax of Tk.2,00,000 in equivalent Singapore dollar;

iii) Tk.20,00,000 received in 2015 from a Russian company, which remitted the dividend

amount net of an withholding tax of Tk.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 2012 Cost Tk.12,00,000

Sold in 2015 Proceeds of sale Tk.22,00,000

Revenues and Gains

Costs and Expenses

The following adjusted accounts appeared in the records of Oak Ltd., an accrual basis company, for the year

ended December 31, 2015. Numbers in brackets refer to the items in Additional Information.




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(5) Oak owns 50% of Tech Partnership. The other 50% is owned by an unrelated individual.

Tech reported the following tax information to Oak:

Oak‘s share of:

Partnership ordinary income Tk.79,00,000

Net long-term capital loss (19,00,000)

The firm paid a tax of Tk.13,66,250 on the Oak‘s share of net earnings.

(6) Oak owned the Keyman life insurance policy, paid the premiums, and was the direct

beneficiary. The proceeds were collected on the death of Oak‘s Controller.

(7) Insurance proceeds were received in 2015 against claim for damage of stock of goods by

fire in 2014. The cost of goods damaged was Tk.10,00,000, and the market value on the

date of fire was Tk.18,00,000. The damaged goods did not have any salvage value.

(8) The tax refund arose from Oak‘s overpayment of corporate Income tax on the 2015-2016 return.

(9) Cost of goods sold relates to Oak‘s net sales.

(10) Salaries and wages include inter alia:-

(a) Salary of Finance Manager Tk.6,00,000 (consolidated) paid in cash, not by cheque or

bank transfer;

(b) Officers‘ compensation of Tk.15,00,000 under Voluntary Retirement Scheme;

(c) Gratuity (unrecognized) provision of Tk.15,00,000 and gratuity payment of Tk.10,00,000;

(d) Incentive bonus of Tk.20,00,000 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.1,42,00,000 at

December 31, 2014. Actual bad debts written off in 2014 amounted to Tk.11,00,000.

(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 Tk.2,00,000

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 of Tk.5,00,000.

(15) No income tax was deducted at source from office rent

(16) No VAT was deducted at source from car rental.

(17) Interest expense resulted 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

10(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 Tk.15,00,000 on the Keyman life insurance policy covering the controller;

(b) Entertainment expenses of Tk.5,00,000 spent on the CEO‘s birth day party; and

(c) Four foreign travels of CEO, each costing Tk.2,00,000. All foreign trips were for

business purposes.

(22) Corporate income tax is the amount estimated before preparation of the return. 60% of the

estimated amount of tax has been paid as advance tax during the year 2015.




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(23) 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) of Tk.10,00,000 carried forward from the assessment year

2010-2011.

Required:

Currently Oak Ltd. is a publicly traded company with a paid up capital of Tk.3.5 crore. It was an unlisted public

company on 1/1/15. It raised an additional amount of Tk.20,00,000 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 1/7/15.

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-compliances 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 noncompliances,. If considered necessary, you may make assumptions in the light of the

relevant tax provisions.

Solution:


Net Income as per Accounts 19,700,000

01 Dividends (6,000,000)

02 Interest (800,000)

03 Gain on sale of shares (1,000,000)

04 Share income of Tech Partnership (6,000,000)

05 Keyman life insurance proceeds (25,000,000)

06 Tax refund (Not income in nature) (500,000) (39,300,000)

(19,600,000)


01 Salary and wages -U/S 30 (a) 600,000

02 Gratuity provision (No provision is allowed) 1,500,000

03 Gratuity payment ( for being unrecognized) 1,000,000

04 Incentive bonus - U/S 30(aa) 2,000,000

05 Provision for doubtful accounts 900,000

06 Payroll taxes considered as salary and wages expenses -

07 Security services -U/S 30(aa) 300,000

08 Audit, accountancy and taxation services - U/S 30(aa) 500,000

09 Office rent - U/S 30(aa) 600,000

10 Car Rental 100,000

11 Donation (Not allowed as expense but may considered as CSR) 1,800,000

12 Board meeting attendance fee -U/S 30(aa) 300,000

13

14 500,000

Oak Limited



Less: Non Business Incomes for consideration at appropriate heads

Keyman life insurance premium - (not allowed U/S 29(1) (vii) but

would be considered for computation of insurance proceeds)1,500,000

Entertainment expense of CEO's Birthday party assuming personal

expense and not related to business expenses




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15 Overseas travelling not exceeds the allowable limit of 1% of turnover -

16 Corporate income tax (not expenses rather allocation of profits) 4,500,000

16 Dividends paid without deduction of TDS 9,000,000 25,100,000

Income From Business 5,500,000

Less : Set off of carry forwarded Business Loss (1,000,000)

Taxable Income From Business 4,500,000

Income From Partnership 7,900,000

Income From Business or Profession 12,400,000



Capital Gain:

Capital gain from sale of shares (22,00,000-12,00,000) 1,000,000

Income from other sources

Dividend from local listed company (gross) 2,000,000

Less: Exempted as per (Sixth Schedule, Part A, Para 11A) (25,000) 1,975,000

Dividend from abroad (grossed up) 4,600,000

Keyman life insurance proceeds (25,000,000-1,500,000) 23,500,000

Deemed income under section 19(24) 1,000,000

31,075,000




Less:

1.Capital Gain (1,000,000)

2. Dividend (6,575,000)



Tax on Capital Gain on Sale of Share @ 10% 100,000

Tax on Dividend @ 20% 1,315,000

10,840,000

(180,000)


Add: simple interest u/s 73

75% of gross tax liability 8,130,000

Less: advance tax (60% of BDT 45,00,000) (5,400,000)

2,730,000

Penalty @ 10% for 2 years assumed for maximum period 546,000

Less: Foreign tax credit

Tax payable on Dividend income from Singapore at average rate 517,990

{(10,660,000/45,275,000)*2,200,000}

Tax paid in Singapore 200,000

Tax credit allowable (200,000)

(As capital loss or gain of partnership is taxable only at firm level so

total income before tax would be the income of the assessee)

Less: Rebate @10% on CSR activities assuming donation was related to the business

interest and it is within the maximum limit of 20% of total income or 120,000,000




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Tax payable on Dividend income from Russia at average rate 565,080

{(10,660,000/45,275,000)*2,400,000}

Tax paid in Russia 400,000

Tax credit allowable (400,000)

Less: Advance Tax Paid/TDS

Advance tax (5,400,000)

TDS on Local Dividend (2,000,000*20%) (400,000)

TDS on Gain on Sale of Share (1,000,000*10%) (100,000)

Tax paid by Tech Partnership on behalf of assessee (1,366,250) (7,266,250)

Net Tax liability 3,339,750

Calculation of Minimum Tax:

Sales 90,000,000

Dividend 6,000,000

Interest 800,000

Keyman life insurance proceeds 25,000,000

Insurance proceeds from fire loss claim 1,500,000

Sale of shares 2,200,000




Note

1 It is assumed that the company did not issued at least 20% of its paid up share capital through IPO.

2

3

4 As Sec 53O omitted by Finance Act 2015 which is applicable from 1 July 2015 So TDS has been deducted

accroding to previous provision but from the next AY there will be no TDS on Gain of Sale of Share of

Listed Company.

Tax rebate on Share of Partnership income at average rate is applicable for Resident or Non Resident

Bangladeshi. 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.

It is assumed that the company started its commercial operation earlier than three years period so 0.30 %

rate has been considered for minimum tax calculation.