Income Tax at a Glance
 
 

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 a taxpayer earns the more he should pay''- is the basic principle of charging income tax. It aims at ensuring equity and social justice.

Income Tax Authorities:

          Income Tax Authorities are :-

  • National Board of Revenue,
  • Director General of Inspection (Tax),
  • Commissioner of Taxes (Appeals),
  • Commissioner of Taxes (LTU)
  • Director General (Training),
  • Director General Central Intelligence Cell (CIC),
  • Commissioner of Taxes,
  • Additional Commissioner of Taxes (Appeal/Inspecting),
  • Joint Commissioner of Taxes(Appeal/Inspecting ),      
  • Deputy Commissioner of Taxes,
  • Assistant Commissioner of Taxes,
  • Extra Assistant Commissioner of Taxes,
  • Inspectors of Taxes.

Sources of Income:

For the purpose of computation of total income and charging tax thereon, sources of income can be classified into 7 categories, which are as follows :

  • Salaries
  • Interest on securities
  • Income from house property
  • Income from agriculture
  • Income from business or profession
  • Capital gains
  • Income from other sources.

Tax Rate (Assessment Year- 2008-09) :

Other than Company :

For individuals other than female taxpayers, senior taxpayers of 70 years and above and retarded taxpayers, tax payable for the

First                      1,65,000/-              Nil
Next                      2,75,000/-              10%
Next                      3,25,000/-              15%
Next                      3,75,000/-              20%
Rest Amount                                      25%

For female taxpayers, senior taxpayers of age 70 years and above and retarded taxpayers, tax payable for the

First                      1,80,000/-              Nil
Next                      2,75,000/-              10%
Next                      3,25,000/-              15%
Next                      3,75,000/-              20%
Rest Amount                                      25%

Minimum tax for any individual assessee is Tk. 2,000

Non-resident Individual                       25%
(other than non-resident Bangladeshi)
For Companies

Publicly Traded Company                                     27.5%

Non-publicly Traded Company                              37.5%

Bank, Insurance & Financial Company                   45%

Mobile Phone Operator Company                          45%

If any publicly traded company declares more than 20% dividend, 10% rebate on total tax is allowed.

 Tax Rebate for investment :

          Rate of Rebate:

          Amount of allowable investment is either up to 25% of total income or Tk. 5,00,000/- whichever is less. Tax rebate amounts to 10% of allowable investment.

          Types of investment qualified for the tax rebate are :-

  • Life insurance premium
  • Contribution to deferred annuity
  • Contribution to Provident Fund to which Provident Fund Act, 1925 applies
  • Self contribution and employer's contribution to Recognized Provident Fund
  • Contribution to Super Annuation Fund
  • Investment in approved debenture or debenture stock, Stocks or Shares
  • Contribution to deposit pension scheme
  • Contribution to Benevolent Fund and Group Insurance premium
  • Contribution to Zakat Fund
  • Donation to charitable hospital approved by National Board of Revenue
  • Donation to philanthropic or educational institution approved by the Government
  • Donation to socioeconomic or cultural development institution established in Bangladesh by Aga Khan Development Network

Who should submit Income Tax Return ?

  • If total income of any individual other than female taxpayers, senior taxpayers of 70 years and above and retarded taxpayers during the income year exceeds Tk 1,65,000/-.
  • If total income of any female taxpayer, senior taxpayer of 70 years and above and retarded taxpayer during the income year exceeds Tk 1,80,000/-.
  • If any person was assessed for tax during any of the 3 years immediately preceding the income year.
  • A person who lives in any city corporation/paurashava/divisional HQ/district HQ and owns a building of more than one storey and having plinth area exceeding 1,600 sq. feet/owns motor car/owns membership of a club registered under VAT Law.
  • If any person subscribes a telephone.
  • If any person runs a business or profession having trade license.
  • Any professional registered as doctor, lawyer, income tax practitioner, Chartered Accountant, Cost & Management Accountant, Engineer, Architect and Surveyor etc.
  • Member of a Chamber of Commerce and Industries or a trade Association.
  • Any person who participates in a tender.
  • A person who has a Taxpayer's Identification Number (TIN).
  • Candidate for Union Parishad, Paurashava, City Corporation or Parliament.

Time to Submit Income Tax Return:

For Company
By fifteenth day of July next following the income year or, where the fifteenth day of July falls before the expiry of six months from the end of the income year, before the expiry of such six months.

 For Other than Company
Unless the date is extended, by the Thirtieth day of September next following the income year.
Consequences of Non-Submission of Return

  • imposition of  penalty  amounting to  10% of tax on last assessed income subject to a minimum of  Tk. 1,000/-
  • In case of a continuing default a further penalty of Tk. 50/- for every day of delay.

 

Assessment Procedures  :

  • For a return submitted under normal scheme, assessment is made after hearing.
  • For returns submitted under Universal Self Assessment Scheme, the acknowledgement slip is determined to be an assessment order. Universal Self Assessment is of course subject to audit. 

Appeal against the order of DCT :
A taxpayer can file an appeal against DCT's order to the Commissioner (Appeals)/Additional or Joint Commissioner of Taxes (Appeals) and to the Taxes Appellate Tribunal against an Appeal order.

Tax withholding functions :

In Bangladesh withholding taxes are usually termed as Tax deduction and collected at source. Under this system both private and public limited companies or any other organization specified by law 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 authority and gets credits of tax against assessed tax on the basis of such certificate.

Heads of Income Subject to deduction or collection of income tax       
at source with specified rates of deduction.

 

No.

Heads

Section/Rule

Rate

Chalan in the name of

1

Salaries

Section 50

deduction at average rate

Respective Zone

2

Discount on the real value of Bangladesh Bank Bills

Section 50A

deduction at normal rate or maximum rate whichever is greater.

LTU

3

Interest on securities

Section 51

10%on interest or discount

LTU

 4

Supply of goods and execution of contracts and sub-contracts

Section 52(Rule 16)

nil up to 1 lac, 1-5 lacs (1%), 5-15 lacs (2.5%), 15-25 lacs 3.5% and 25 lacs and above (4%)

Zone-2 (Partly) & LTU

5

Indenting commission /
Shipping agency commission

Section 52 (Rule 17)

3.5% of the total receipt of indenting commission & 5% of total Shipping agency commission receipt

Zone-2

6

 Royalty, Fees for professional or technical services

Section  52 A

10% of the fees

Zone-8

7

Stevedoring agency & Security service

Section  52 AA

7.5% of the fees

Ctg. Zone-2

8

C & F agency commission

Section  52 AAA

7.5% of the fees

Zone-2

9

Sale of bandrolls ( for biri)

Section 52B

6% of the value of bandrolls.

Respective Zone

10

Compensation for acquisition of property

Section 52C

6% of the compensation money

Zone-2

11

Interest on saving instruments

Section 52D

10% of the amount of interest  (Current rate)

Zone-2

12

Collection of tax from brick manufacturers

Section 52F

1 Sec. = Tk.10,000/ for each brick field.
1.5 Sec. = Tk.12,000/ for each brick field.
2 Sec. = Tk.18,000/ for each brick field.

Respective Zone

13

Commission on Letter of Credits

Section 52I

5% of the amount of commission.

LTU

14

Issuing & Renewal of trade licence

Section 52K

Tk 500/- For renewal of each Lincence

Zone-3

15

Trustee fees

Section 52L

10%

 

16

Frieght Forward agency Com.

Section 52M

7.5%

 

17

Rental power

Section 52N

4%

 

18

Import of goods

Section 53 (Rule17A)

3% of the value of imports.

Zone-2

19

Income from house property (house rent)

Section 53A (Rule17B)

No deduction if monthly rent is below 20,000/-
3% (if monthly rent is 20,000-40,000 Tk.) and
5% (if monthly rent is above 40,000 Tk.)

Zone-2 Dha & Other outside Zone

20

Shipping business of resident

Section 53AA

5% of freight

Zone-2,ctg

21

Export of manpower

Section 53B (Rule 17C)

10% of the service charges.

Zone-2,   dhk & ctg

22

Export of Knitwear

Section 53BB

0.25%

Zone-5

23

Member of Stock Exchange

Section 53BBB

0.015%

Zone-7

24

Export of goods except Knitweare & Woven garments

Section 53BBBB

0.25%

Zone-5

25

Sale of goods by public auction

Section 53C (Rule 17D)

5% of the sale price

Zone-2

26

Courier Service (Non-resident)

Section 53CC

7.5%

Zone-6

27

Payment to film actors and actresses

Section 53D (Rule 17E)

5% of the amount paid  exceeding 
Tk. 36000/-

Zone-2

28

Cash subsidy

Section 53DD

5%

Zone-5

29

Commission Fees or discount paid to distributors

Section 53E (Rule 17G)

7.5% of the amount of commission.

Zone-2  & LTU

30

Commission or charges paid to the agents of foreign buyers

Section 53EE

4 % on the amount of commission or charges.

Dhk.Zone-6, Ctg.Zone-3 and Zone of Respective Division

31

Interest on bank deposits

Section 53F (Rule 17H)

10% of the amount of interest.

Zone-1

32

Real Estate & Developers

Section 53FF

In case of Bldg. 250 per sq. meter
In case of land  5% of deed value

Zone-5

33

Insurance commission

Section 53G

3% on the amount of commission

LTU

34

Commission paid to the Surveyors of General Insurances

Section 53GG

7.5% on the amount of commission.

Dhk.Zone-2, Ctg.Zone-3 and Zone of Respective Division

35

Transfer of property

Section 53H (Rule 17I)

5% of the value of the property.

Survey Zone

 

Interest on Post Office Savings Bank Account

Section 53I

No deduction if the amount of   interest  does not exceeds Tk.1,50,000  and if exceeds then 10% on the amount of   interest  .

Zone-2

36

Rent of vacant land, plant and machinery

Section 53J (Rule 17BB)

No deduction if monthly rent is below 15,000/-
3% (if monthly rent is 15,000 -30,000 Tk.) and
5% (if monthly rent is above 30,000 Tk.)

Zone-2

 

 37

Advertising  bill of news paper, magazine, private television channel

Section 53K

3% of the value of the property.

Zone-5

38

Dividend

Section 54

(1) Resident individual 10%, non-resident individual 25% (2) Company 15%

LTU (only LTU’s files) all others Zone-2

39

Income from lottery

Section 55

20% of the amount won.

Zone-2

40

Income of non-resident   Other than  non-resident Bangladeshi}

Section 56

Compny - rate applicable to the com. Other than company - maximum rate.

Zone-6

 

Major areas for final settlement of tax liability :
Tax deducted at source for the following cases is treated as final discharge of tax liabilities. No additional tax is charged or refund is allowed in the following cases:-

  • Supply or contract work
  • Band rolls of hand made cigarettes
  • Import of goods
  • Transfer of properties
  • Export of manpower
  • Real Estate Business
  • Export value of garments
  • Local shipping business
  • Royalty, technical know-how fee
  • Insurance agent commission.
  • Auction purchase
  • Payment on account of survey by surveyor of a general insurance company
  • Clearing & forwarding agency commission.
  • Transaction by a member of a Stock Exchange.
  • Courier business
  • Export cash subsidy

Tax Recovery System :
In case of non-payment of income tax demand the following measures can be taken against a taxpayer for realization of tax:-

  • Imposition of penalty
  • Attachment of bank accounts, salary or any other payment. 
  • Filing of Certificate case to the Special Magistrate.

Advance Payment of Tax :
Every taxpayer is required to pay advance tax in four equal installments falling on 15th September; 15th December; 15th March and 15th June of each year if the latest assessed income exceeds Taka three lakh. Penalty is imposed for default in payment of any installment of advance tax.

Fiscal incentives :

Following are fiscal incentives available to a taxpayer:-
a)       Tax holiday : Tax holiday is allowed for industrial undertaking, tourist industry and physical infrastructure facility established          between 1st July 2008 to 30th June 2011 in fulfillment of certain         conditions.
          Industrial Undertaking Eligible for Tax holiday :
          (i)      An industry engaged in production of textile, textile machinery, jute goods, high value garments, pharmaceuticals, melamine, plastic products, ceramics, sanitary ware, steel from iron ore, MS Rod, CI Sheet, fertilizer, insecticide & pesticide, computer hardware, petro-chemicals, agriculture machinery, boilers, compressors, basic raw materials of drugs, chemicals and pharmaceuticals.
          (ii)      An industry engaged in agro-processing, ship building, diamond cutting.
          Physical Infrastructure Eligible for Tax holiday:
          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, mono rail,    underground rail, telecommunication other than mobile phone, large     water treatment plant & supply through pipe line, waste treatment    plant, solar energy plant, export processing zone.
          Tourism Industry Eligible for Tax holiday :
          Residential hotel having facility of three star or more.
b)      Accelerated depreciation: Accelerated depreciation on cost of          machinery is admissible for new industrial undertaking in the first          year of commercial production 50%, in the second year 30% and in       the third year 20%.
c)       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 twenty four lakh is exempt from tax.
d)      Industry set up in EPZ is exempt from tax for a period of 10 years from the date of commencement of commercial production.
e)       Income from fishery, poultry, cattle breeding, dairy farming, horticulture, floriculture, mushroom cultivation and sericulture are exempt from tax up to 30th June, 2011, subject to investing at least 10% of the exempted income that exceeds one lakh Taka, in government bonds.
f)      Income derived from export of handicrafts is exempted from tax up to 30th June, 2011.
g)      An amount equal to 50% of the income derived from export business is exempted from tax.
h)      Listed companies are entitled to 10% tax rebate if they declare    dividend of 20% or more.
i)        Income from Information Technology Enabled Services (ITES) business is exempted up to 30th June, 2011.


Avoidance of Double Taxation Agreement :

There are agreements on avoidance of double taxation between Bangladesh and 28 countries which are:-

(1)  United Kingdom of Great Britain and Northern Ireland, (2) Singapore (3) Sweden  (4) Republic of Korea  5) Canada  (6) Pakistan  (7) Romania  (8) Sri Lanka (9) France (10) Malaysia (11) Japan (12) India (13) Germany (14)  The Netherlands  (15) Italy (16) Denmark (17) China (18) Belgium (19)  Thailand  (20) Poland  (21) Philippines  (22) Vietnam  (23) Turkey (24) Norway (25) USA (25) Indonesia (27) Switzerland (28) Oman

 
     

 

 

   
   
   
 
 

 

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