Income Tax

An income tax is a tax imposed on individuals or entities (taxpayers) that varies with respective
income or profits (taxable income). Income tax generally is computed as the product of a tax
rate times taxable income. Taxation rates may vary by type or characteristics of the taxpayer.
The tax rate may increase as taxable income increases (referred to as graduated or progressive
rates). The tax imposed on companies is usually known as corporate tax and is levied at a flat rate.
However, individuals are taxed at various rates according to the slab in which they fall. Further, the
partnership firms are also taxed at flat rate. Most jurisdictions exempt locally organized charitable
organizations from tax. Capital gains may be taxed at different rates than other income. Credits of
various sorts may be allowed that reduce tax. Some jurisdictions impose the higher of an income
tax or a tax on an alternative base or measure of income.
An income tax is a tax that governments impose on income generated by businesses and individuals
within their jurisdiction. By law, taxpayers must file an income tax return annually to determine
their tax obligations. Income taxes are a source of revenue for governments. They are used to fund
public services, pay government obligations, and provide goods for citizens.

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 legislations named as “THE
INCOME TAX ORDINANCE, 1984 (XXXVI OF 1984) and INCOME TAX RULES, 1984.”

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 :
1. Salaries.
2. Interest on securities.
3. Income from house property.
4. Agricultural Income.
5. Income from business or profession.
6. Capital gains.
7. Income from other sources

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 Tax Rate Rule(Assessment Year 2017-18) (As per Finance Act,
2015):

(a) Other than Company:

For individuals other than female taxpayers, senior taxpayers of 65 years and above, retarded
taxpayers and gazetted war-wounded freedom fighter, income tax is payable for the;

On first upto Tk. 2,50,000/- Nil

On next upto Tk. 4,00,000/- 10%
On next upto Tk. 5,00,000/- 15%
On next upto Tk. 6,00,000/- 20%
On next upto Tk. 30,00,000/- 25%
On balance 30%
amount

For female taxpayers, senior taxpayers of age 65 years and above, income tax is payable for the

On first upto Tk. 3,00,000/- Nil

On next upto Tk. 4,00,000/- 10%
On next upto Tk. 5,00,000/- 15%
On next upto Tk. 6,00,000/- 20%
On next upto Tk. 30,00,000/- 25%
On balance 30%
amount

1. Minimum tax for any individual assesses living in Dhaka and Chittagong City Corporation
area is Tk. 5,000/-.
2. Minimum tax for any individual assesses living in other City Corporations area is Tk. 4,000/-.
3. Minimum tax for any individual assesses living in any other areas is Tk. 3,000/-.
4. Non-resident Individual 30% (other than non-resident Bangladeshi)

(b)For Companies:

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 Publicly Traded Company 25%

Non-publicly Traded Company 35%

Bank, Insurance & Financial institutions (Except Merchant
bank):
40%
 Publicly listed and 4th generation Banks & FI
42.5%
 Other Banks & FI
Merchant bank 37.5%

Cigarette manufacturing company/Others 45%

Mobile Phone Operator Company 45%

Publicly traded mobile company 40%

Income of Co-operative Society 15%

If any non-publicly traded company transfers minimum of 20% shares of its paid-up capital
through IPO (Initial Public Offering) it would get 10% rebate on total tax in the year of transfer.

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Tax exemption threshold for individual taxpayers

Status Amount (BDT)

General Taxpayers 250,000

Women and senior citizen aged 65 years and above 300,000

retarded taxpayers 375,000

Person with disability 400,000

Gazette war-wounded freedom fighters 425,000

Surcharge based on disclosed net wealth of individual taxpayer

Amount of net wealth Rate on income tax

Upto BDT 22,500,000 0%

From BDT 22,500,001 to BDT 50,000,000 10%

From BDT 50,000,001 to BDT 100,000,000 15%

From BDT 100,000,001 to BDT 150,000,000 20%

From BDT 150,000,001 to BDT 200,000,000 25%

Where net wealth exceeds BDT 200,000,000 30%

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Tax Rebate for investment :[Section 44(2)/only allowable for
Resident/Non-Resident Bangladeshi]

Rate of Rebate:
Amount of allowable investment is - actual investment or 30% of total (taxable) income or
Tk.1,50,00,000/- whichever is less. Tax rebate amounts to 15% of allowable investment.

Types of investment qualified for the tax rebate are:-

 Life insurance premium 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 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 approved debenture or debenture stock, Stocks or Shares.
 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 socio-economic or cultural development institution established in
Bangladesh by Aga Khan Development Network.
 Donation to ICDDRB.
 Donation to philanthropic institution-CRP, Savar, Dhaka.
 Donation up to tk. 5 lac to (1) Shishu Swasthya Foundation Hospital, Mirpur, Shishu
Hospital, Jessore and Hospital for Sick Children, Sathkhira run by Shishu Swasthya
Foundation, Dhaka. (2) Diganta Memorial Cancer Hospital, Dhaka. (3) The ENT and
Head-Neck Cancer Foundation of Bangladesh, Dhaka and (4) 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 Opthalmology, Kidney Foundation and National Heart
Foundation of Bangladesh.
 Donation to Asiatic Society of Bangladesh.
 Donation to Muktijodha Jadughar.
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  Donation to National level institution set up in memory of liberation war.
 Donation to National level institution set up in memory of Father of the Nation.
 Any investment by an individual in savings certificate and Bangladesh Government
Treasury Bond.
 Investment in purchase of one computer or one laptop by an individual assessee.

Who should submit Income Tax Return?

 If total income of any individual other than female taxpayers, senior male taxpayers of 65
years and above, retarded taxpayers and war wounded gazetted freedom fighter during the
income year exceeds Tk 2,50,000/-.
 If total income of any female taxpayer, 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 total income of any gazetted 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
motor car/owns membership of a club registered under VAT Law.
 If any person runs a business or profession having 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.

Time to submit Income Tax Return: [Section 75(2) of the

Ordinance]
(a) For Company Taxpayers:

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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.

(b)For Other Taxpayers:

Unless the date is extended, by the Thirtieth day of September next following the income year.

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.

Consequences of Non-Submission of Return and Return of

withholding tax. (Section 124 of the Ordinance):

 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 assessee whose income was not assessed previously Tk.
5,000/-.
 in case of an individual assessee whose income was assessed previously, fifty per
cent (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.

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.

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 Assessment Procedures:

 For a return submitted under normal scheme, assessment is made after giving an
opportunity of hearing.
 For returns submitted under Universal Self Assessment Scheme, the
acknowledgement 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 per cent higher income than the
income assessed or shown in the return of the immediately preceding assessment year and
such return-

(a) is accompanied by corroborative evidence in support of income exempted

from tax;
(b) does not show receipt of gift during the year;
(c) does not show any income chargeable to tax at a rate reduced under section
44; or
(d) does not show or result any refund.

Conclusion
Taxable income of taxpayers resident in the jurisdiction is generally total income less income
producing expenses and other deductions. Generally, only net gain from sale of property,
including goods held for sale, is included in income. Income of a corporation's shareholders
usually includes distributions of profits from the corporation. Deductions typically include all
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income producing or business expenses including an allowance for recovery of costs of business
assets. Many jurisdictions allow notional deductions for individuals, and may allow deduction of
some personal expenses. Most jurisdictions either do not tax income earned outside the
jurisdiction or allow a credit for taxes paid to other jurisdictions on such income. Nonresidents
are taxed only on certain types of income from sources within the jurisdictions, with few
exceptions.
Most jurisdictions require self-assessment of the tax and require payers of some types of income
to withhold tax from those payments. Advance payments of tax by taxpayers may be required.
Taxpayers not timely paying tax owed are generally subject to significant penalties, which may
include jail for individuals or revocation of an entity's legal existence.

References
Webs:

https://en.wikipedia.org/wiki/Income_tax

https://nbr.gov.bd/uploads/paripatra/PARIPATRA_2017-18.pdf

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https://nbr.gov.bd/uploads/publications/NIRDESHIKA_2017-18.pdf

https://nbr.gov.bd/uploads/publications/107.pdf

https://nbr.gov.bd/uploads/rules/15.pdf

https://www.investopedia.com/terms/i/incometax.asp

Book:

"Bangladesh Income Tax" by Nikhil Chandra Shil.

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