Income Tax at a Glance Among direct taxes, income tax is the main source 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. In Bangladesh, income tax is being administered under the tax legislation named “THE INCOME TAX ORDINANCE, 1984 (XXXVI OF 1984) an INCOME TAX RULES, 1984.”
Income Tax Authorities: (Section 3 of the Ordinance)
- The National Board of Revenue;
- Chief Commissioner of Income Tax;
- Directors-General of Inspection (Taxes);
- Commissioner of Income Tax(Appeals);
- Commissioner of Taxes (Large Taxpayer Unit);
- Director General (Training);
- Director-General, Central Intelligence Cell;
- Commissioners of Income Tax;
- Additional Commissioners of Income Tax(Appeal/Inspecting);
- Joint Commissioners of Income Tax(Appeal/Inspecting);
- Deputy Commissioners of Income Tax;
- Tax recovery officers;
- Assistant Commissioners of Income Tax;
- Extra Assistant Commissioners of Taxes; and
- Inspectors of Taxes.
(3) Heads of Income: (Section 20 of the Ordinance)
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 :
- Interest on securities.
- Income from house property.
- Agricultural Income.
- Income from business or profession.
- Capital gains.
- Income from other sources.
(4) Tax Rate:
Other than Company: For individuals other than female taxpayers, senior taxpayers of 65 years and above, retarded taxpayers and gazette war-wounded freedom fighter, income tax is payable for the
|On first upto||Tk.3,00,000-||Nil|
|On next upto||Tk. 1,00,000/-||5%|
|On next upto||Tk. 3,00,000/-||10%|
|On next upto||Tk. 4,00,000/-||15%|
|On next upto||Tk. 5,00,000/-||20%|
|On balance amount||25%|
|On first upto||Tk.3,50,000/-||Nil|
|On next upto||Tk.1,00,000/-||5%|
|On next upto||Tk.3,00,000/-||10%|
|On next upto||Tk.4,00,000/-||15%|
|On next upto||Tk.500,000/-||20%|
|On balance amount||25%|
- For retarded taxpayers, the tax-free income threshold limit is TK.4,50,000/-.
- For gazette war-wounded freedom fighters, the tax-free income threshold limit is Tk. 4, 75, 000/-.
- The minimum tax for any individual assesses living in Dhaka and Chittagong City Corporation area is Tk. 5,000/-.
- The minimum tax for any individual assesses living in other City Corporations area is Tk. 4,000/-.
- The minimum tax for any individual assessee living in any other area is Tk. 3,000/-.
- Non-resident Individual 30% (other than non-resident Bangladeshi)
|(i)||Publicly Traded Company||25%|
|(ii)||Non-publicly Traded Company||32.5%|
|(iii) Bank, Insurance & Financial institutions (Except Merchant bank):|
|1. Publicly listed and 4th generation Banks & FI||40%|
|2. Other Banks & FI||42.5%|
|(v)||Cigarette manufacturing company/Others||45%|
|(vi)||Mobile Phone Operator Company||45%|
|(vii)||Publicly traded mobile company||40%|
(5) Tax Rebate for investment: [Section 44(2)/only allowable for Resident/Non-Resident Bangladeshi]
(a) Rate of Rebate:
The amount of allowable investment is – actual investment or 25% of the total (taxable) income or Tk. 1,50,00,000/- whichever is less. The tax rebate amounts to 15% of the allowable investment.
Types of investment qualified for the tax rebate are:-
- Life insurance premiums up to 10% of the face value.
- Contribution to Provident Fund to which Provident Fund Act, 1925 applies.
- Self contribution and employer’s contribution to the Recognized Provident Fund.
- Contribution to Superannuation Fund.
- Contribution up to TK 60,000 to deposit pension scheme sponsored by any scheduled bank or a financial institution.
- Investment in an approved debenture or debenture stock, Stocks, or Shares.
- Contribution to Benevolent Fund and Group Insurance premium.
- Contribution to Zakat Fund.
- Donation to a charitable hospital approved by the National Board of Revenue.
- Donation to philanthropic or educational institution approved by the Government.
- Donation to socio-economic or cultural development institution established in Bangladesh by Aga Khan Development Network.
- Donation to ICDDRB.
- Donation to philanthropic institution-CRP, Savar, Dhaka.
- A donation up to tk. 5 lac to
- Shishu Swasthya Foundation Hospital, Mirpur, Shishu Hospital, Jessore and Hospital for Sick Children, Sathkhira run by Shishu Swasthya Foundation, Dhaka.
- Diganta Memorial Cancer Hospital, Dhaka.
- The ENT and Head-Neck Cancer Foundation of Bangladesh, Dhaka and
- Jatiya Protibandhi Unnayan Foundation, Mirpur, Dhaka.
- Donation to Dhaka Ahsania Mission Cancer Hospital.
- Donation to Sylhet Diabetic Samity, Islamia Eye Hospital and MA Ispahani Institute of Ophthalmology, Kidney Foundation, and National Heart Foundation of Bangladesh.
- Donation to Asiatic Society of Bangladesh.
- Donation to Muktijodha Jaguar.
(6) Who should submit Income Tax Return?
If the total income of any individual other than female taxpayers, senior male taxpayers of 65 years and above, retarded taxpayers and war-wounded gazette freedom fighter during the income year exceeds Tk 2,50,000/-. If the total income of any female taxpayer, the senior male taxpayer of 65 years and above during the income year exceeds Tk 3,00,000/-.
- If total income of any retarded taxpayer during the income year exceeds TK. 3,75,000.
- If the total income of any gazette war-wounded freedom fighter taxpayer during the income year exceeds Tk. 4,25.000/-.
- 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 motor car/owns membership of a club registered under VAT Law.
- If any person runs a business or profession having a trade license and operates a bank account.
- any professional registered as a 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.
- Candidate for Paurashava, City Corporation, Upazilla, or Parliament elections.
- Any company registered under the Company Act, 1913 or 1994.
- Any Non-government organization (NGO) registered with NGO Affairs Bureau.
(7) Time to submit Income Tax Return: [Section 75(2) of the Ordinance]
(a) For Company Taxpayers:
By the 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.
(b) For Other Taxpayers:
Unless the date is extended, by the Thirtieth day of September next following the income year.
(8) Submission of withholding tax return and time to submit:
Person who makes any TDS (Tax deduction at source) on payment, must file a separate return of withholding tax under section 75A of the Ordinance.
15th day of October, January, April, and July. Or extended date up to 15 days by DCT. Statement of TDS, Copy of Treasury challan /pay-orders should be submitted with the return.
(9) Consequences of Non-Submission of Return and Return of withholding tax. (Section 124 of the Ordinance):
The imposition of penalty amounting to 10% of tax on last assessed income subject to a minimum of Tk. 1,000/-
- In case of an individual assesses whose income was not assessed previously Tk. 5,000/-.
- In case of an individual assesses whose income was assessed previously, fifty percent (50%) of the tax payable on the last assessed income or Tk. 1,000/-, whichever is higher.
In case of a continuing default by any type of assessee, a further penalty of Tk. 50/- for every day of delay.
(10) Consequences of using fake TIN:
DCT can impose a penalty not exceeding TK.20,000/-
For continuous use of fake TIN deliberately- 3 years imprisonment, up to TK. 50,000/- fine or both.
(11) Assessment Procedures:
For a return submitted under the normal scheme, assessment is made after giving an opportunity of hearing.
For returns submitted under Universal Self-Assessment Scheme, the acknowledgment slip is considered to be an assessment order of the Deputy Commissioner of Taxes. Universal Self-Assessment may be subject to “process and audit”.
Provided that a return of income filed under universal self-assessment scheme, shall not be selected for audit where such return shows at least twenty percent higher income than the income assessed or shown in the return of the immediately preceding assessment year and such return-
- Is accompanied by corroborative evidence in support of income exempted from tax;
- Does not show receipt of gift during the year;
- Does not show any income chargeable to tax at a rate reduced under section 44, or
- Does not show or result in any refund.
(12) An appeal against the order of DCT: (Under section 153 & 158 of the Ordinance)
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.
(13) Tax withholding functions:
In Bangladesh withholding taxes are usually termed as a Tax deduction and collection 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 in 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 a certificate.