Among direct taxes, income tax is one of the main sources of revenue. It is a progressive tax system. Income tax is imposed on the basis of ability to pay. The more he earns the more he pays as income tax. It ensures the equity and social judgment.
Income Tax Authorities:
The person who is responsible for collecting income tax are called income authorities, they are as follows :
Definition of Income:
There is no Conclusive definition of income. However, under Bangladesh Income Tax Law the following is considerers as income for the purpose of assessing income tax.
Sources of Income:
For the purpose charging tax and computation of total income, sources of income can be classified in 8 categories, they are:
Current Tax Rate :
For Individuals and Other than Company
First 1,20,000 Nil
Next 2,50,000 10%
Next 3,00,000 15%
Next 3,50,000 20%
Rest Amount 25%
Publicly traded company 30%
Non- Publicly traded & private company 40%
Bank, Insurance & Financial Company 45%
(other than Bangladeshi)
• If any publicly traded company declares more than 20% dividend
10% rebate on total tax is allowed.
• Rebate also is allowed for the small and cottage industry in least
• Rebate up to 50% allowed on income from exports
• Minimum Tax Tk 1,800.
Who is to submit Income Tax Return:
Time to Submit Income Tax Return:
By fifteenth of July or thirty first December but not later than said months after the annul closing of accounts of the company.
By the Thirtieth day of September next following the income year.
Consequences of Non-Submission of Return
Assessment Procedures :
Appeal against the order of DCT :
Being aggrieved at the total income assessed or on any law point, the assessee may file an appeal against the assessment order of the tax officer.
a) to the Commissioner (Appeals),
b) revision petition to the Commissioner of Tax
c) to the Taxes Appellate Tribunal
Major areas for final settlement of tax liability :
Tax deduction at source for the following cases is treated as final discharge of tax liabilities and no additional tax or refund is charged or allowed.
Tax Recovery System:
For non-payment of income tax demand the following measure can be taken against the assessee for realization of tax.
Tax withholding functions :
In Bangladesh withholding taxes are usually termed as Tax deduction and collection at source. This system is considered as an important mechanism of tax collection. Under this system both private and public limited companies are legally authorized and bound to withhold taxes at some point of making payment and deposit the same to the Government Exchequer. The taxpayer receives a certificate from the withholding agent and gets credits of tax against assessed tax demand on production of the certificate.
Income Subject to deduction at source :
Advance Payment of Tax :
Every assessee is required to pay advance tax in four equal installments falling on 15th of September; December; March and June of each year if the latest assessed income exceeds Taka two lakh. For failure to pay any advance installment, penalty may be imposed for such default.
Fiscal incentives :
Following fiscal incentives are available for the assessee
a) Tax holiday till 30th June 2008 in fulfillment of certain conditions for newly established industrial undertaking, tourist industry, and physical infrastructure facility such as-
Industrial Undertaking :
production of textile, textile machinery, high value garments, pharmaceuticals, melamine, plastic products, ceramics, sanitary ware, steel from iron ore, fertilizer, insecticide & pesticide, computer hardware, petro-chemicals, basic raw materials of drugs, chemicals, pharmaceuticals, agricultural machine, ship building, boilers, compressors;
sea or river port, container terminals, internal container depot, container freight station, LNG terminal and transmission line, CNG terminal and transmission line, gas pipe line, flyover, large water treatment plant & supply through pipe line, waste treatment plant, export processing zone.
Tourist Industries :
residential hotel having facility of three star or more.
b) 100% Accelerated depreciation on cost of machinery is admissible for new industrial undertaking in the first year of commercial production.
c) Initial depreciation allowance for first year on machinery @25% of cost and in respect of factory building @ 10% of cost if the said factory or machinery is constructed or installed in Bangladesh after 30th June, 2002.
d) Industry set up in EPZ is exempt from tax for a period of 10 years from the date of commencement of commercial production.
Income from fishery, poultry, cattle breeding, dairy farming, horticulture, floriculture, mushroom cultivation and sericulture are exempt from tax up to 30th June, 2008, subject to investing at least 10% of the exempt income that exceed one lakh Taka.
e) Income derived from export of handicrafts.
f) An amount equal to 50% of the income derived from export business is exempt from tax.
g) Listed companies are entitled to 10% tax rebate if they declare dividend of 20% or more.
h) Income from computer software business up to 30th June, 2008 .