2013-2014

Bangladesh Tax Handbook 2013-2014 1

Bangladesh Tax Handbook 2013-20142 Bangladesh Tax Handbook 2013-2014 3

Page

Major Changes in Bangladesh Taxation Laws 2013-2014

1. Tax Exemption Limit 9

2. Personal Tax Rate Structure 9

3. Minimum Tax (Individual) 10

4. Changes regarding Surcharge on individual 10

5. Minimum tax for firm subject to gross receipts 10

6. Withdrawal of tax on share premium 10

7. Changes in Company Tax Rates 10

8. Special tax treatment in respect of investment in residential building and apartment

10

9. Amortization of license fees 11

10. House Rent allowance receivable in cash 12

11. Conveyance allowance receivable in cash with no conveyance facility 12

12. Changes regarding the extent of admissible allowance 12

13. Tax holiday of newly established industrial undertakings 12

14. Amendments in Tax Holiday Scheme 13

15. Extension of areas for TDS from certain services 13

16. Changes of rate of Withholding Tax at source 14

17. Return of income-in simplified return form 16

18. Power of giving order for not removing property 16

19. Reference to High Court Division 17

20. Amendment in Sixth Schedule, Part-A 17

21. Extension of time to avail reduced tax rate for certain industrial companies 17

22. Tax exempted income as per different SROs 18

23. Amendment of Alternative Dispute Resolution (ADR) 18

24. Procedure for spot assessment 18

25. Amendment of Tax-payers Identification Number 19

26. Summary of VAT Changes in FY: 2012-2013 20

Various Tax Incentives allowed as per Tax Laws

1. Tax incentives for Expatriate 23

2. Tax Incentives on Jute Industry, RMG & Textile Industry 23

IndexIndexPage


Page

24. Capital Gains 45

25. Exemption of Capital Gains from tax 46

26. Capital Gain Tax 47

27. Income from Other Sources 47

28. Set-Off of Losses 48

29. Carry forward of loss 48

30. Carry forward of Depreciation Allowance 48

31. Income fully exempted from Tax subject to fulfillment of prescribed conditions and limitations

48

32. Tax Holiday for newly established industrial undertaking, Tourist Industry and Physical Infrastructure facility set-up between the period of July 2011 to June 2015 etc. in certain cases

50

33. List of eligible sectors for Tax Holiday 53

34. Tax Holiday for Hospitals 54

35. Exemption from tax of newly established physical infrastructure facility set up between the period July 2011 and June 2015, etc. in certain cases

54

36. Exemption of income of cooperative societies 56

37. Investment Allowance for Tax Rebate 56

38. Rates of Corporate Tax 57

39. Normal Depreciation Allowance and Amortization 60

40. Amortization of License fees 62

41. Initial depreciation 62

42. Accelerated Depreciation 62

43. Withholding Tax / Tax Deducted at Source (TDS) 63

44. Rates of tax at source 64

45. Form of Return of Withholding Tax 70

46. Advance Payment of Tax 76

47. Payment on the Basis of Return 76

48. Mode of payment of Tax by assessee 76

49. Return of statement of lifestyle 76

50. Filing of Return of Income and Statement 77

51. Return of withholding tax 78

52. Obligation to furnish Annual Information Return 78

Page

3. Tax Incentives on Fisheries, Poultry, Dairy Farming etc. 23

4. Tax Incentives on Real Estate and Land development Industry 23

5. Tax Incentives on Information & Technological Industry 23

6. Tax Incentives on investment in Stock Exchange 24

7. Tax Incentive on money borrowed from abroad 26

8. Incentive for investment in residential building and apartment 26

Summary of Taxation Laws 2013-2014Income Tax

1. Definitions 29

2. Charge of Income Tax 30

3. Charge of Surcharge 31

4. Charge of Additional Tax 31

5. Charge of Excess Profit Tax 31

6. Charge of Minimum Tax 31

7. Income Exemption Limit 32

8. Personal Tax Rate Structure 32

9. Minimum Tax (Individual) 33

10 Incidence of Tax on Non-Resident 33

11. Scope of Total Income 33

12. Income Deemed to Accrue or Arise in Bangladesh 34

13. Deemed Income 34

14. Special tax treatment in respect of investment in residential building and apartment 36

15. Special tax treatment in respect of investment in the purchase of bond under Bangladesh Infrastructure Finance Fund (BIFF)

37

16. Special tax treatment in respect of investment in the purchase of Bangladesh Government Treasury Bond

37

17. Voluntary disclosure of income 37

18. Income from Salary 38

19. Income from Interest on Securities 40

20. Income from House Property 40

21. Income from Business or Profession 41

22. Allowable Deductions on income from Business or Profession 41

23. Deductions are not admissible in certain circumstances 44

Index Index


Page

53. Concurrent jurisdiction 78

54. Assessments 79

55. Some final settlement of tax liability 80

56. Assessment on the basis of Report of a Chartered Accountant 81

57. Assessment and computation of Income of Contractor of an Oil Company 81

58. Assessments under other sections 82

59. Transfer Pricing 82

60. Determination of income from international transaction having regard to arms length price

83

61. Transfer Pricing Officer 83

62. Maintenance and keeping of information, documents and records 83

63. Report from an accountant to be furnished 83

64. Provision of penalty on transfer pricing 84

65. Determination of arms length price under section 107C 84

66. Factors to be considered in judging comparability 84

67. Most appropriate method 85

68. Information and documents to be kept and maintained under section l07E 85

69. Additional powers of enquiry and production of documents 85

70. Power of giving order for not removing property 85

71. Avoidance of Double Taxation 86

72. Relief in respect of Foreign Income 86

Value Added Tax

73. Who will deduct VAT 89

74. Where to deposit the deducted VAT? 89

75. Scope of VAT and its specified rates 89

Gift Tax

76. Gift Tax 99

77. Exemption from Gift Tax 99

78. Provisions of the Gift Act shall NOT apply in certain cases 100

79. Return of Gift Tax 100

80. Rates of Gift Tax 100

Income TaxIndex


1. Tax Exemption Limit

The ceiling of tax exempted income for the individual assessee has been enhanced from Taka 200,000 to Taka 220,000, while this limit for the individual female, persons aged 65 years & more has been enhanced from Taka 225,000 to Taka 250,000 and limit for physically challenged assessee has also been enhanced from Taka 275,000 to 300,000 with effect from 01 July 2013.

2. Personal Tax Rate Structure

The person defined under section 2(46) of Income Tax Ordinance (ITO) 1984, every individual assessee (including Non-resident Bangladeshi), firm (partnership or single), association of persons (AOP), Hindu undivided family (HUF), artificial juridical persons and Non-Government Organization (NGO) shall have to pay income tax on their total income according to 5 tier income slabs and tax rates for the Financial Year 2012-2013 and Assessment Year 2013-2014.

The following table entails comparable scenario of 5 tier income slabs and tax rates for the two consecutive Financial Years 2012-2013 and 2011-2012:

Financial Year 2012-2013(Assessment Year 2013-2014)


Income SlabsTax

RatesIncome Slabs

Tax Rates

i. On the first Taka 220,000 of total income of assessee

Nil i. On the first Taka 200,000 of total income of assessee

Nil

On the first Taka 250,000 of total income for Female, persons aged 65 years & above assessee

Nil On the first Taka 225,000 of total income for Female, persons aged 65 years & above assessee

Nil

On the first Taka 300,000 of total income of physically challenged assessee

Nil On the first Taka 275,000 of total income of physically challenged assessee

Nil

ii. On the next Taka 300,000 of total income

10% ii. On the next Taka 300,000 of total income

10%

iii. On the next Taka 400,000 of total income

15% iii. On the next Taka 400,000 of total income

15%

iv. On the next Taka 300,000 of total income

20% iv. On the next Taka 300,000 of total income

20%

v. On the balance of total income

25% v. On the balance of total income

25%

Non-resident (Foreign) assessee

25% Non-resident (Foreign) assessee

25%

Income Tax Income Tax


building or apartment for residential purpose and pays tax on the basis of measurement before the assessment for the relevant assessment year in which the investment is completed, then tax authority will not raise question on the source of investment. Area, measurement and tax rates of such residential building or apartment are as follows:

SL.NO.

Areas of residential building or apartment

Plinth area up to 200 square meters,

Tax amount per square meter (Taka)

Plinth area more than 200 square meters,

Tax amount per square meter (Taka)

1 Gulshan Model Town, Banani, Baridhara, Motijheel Commercial Area and Dilkusha Commercial Area of Dhaka

5,000/- 7,000/-

2 Dhanmandi Residential Area, De-fence Officers Housing Society (DOHS), Mahakhali, Lalmatia Hous-ing Society, Uttara Model Town, Bashundhara Residential Area, Dhaka Cantonment, Kawran Bazar, Bijaynagar, Segunbagicha, Nikunja of Dhaka, and Panchlaish, Khulshi, Agrabad and Nasirabad Area of Chit-tagong

4,000/- 5,000/-

3 Other areas of City Corporations except serial nos. 1 & 2 above

2,000/- 3,000/-

4 Areas of Paurasabhas of any district headquarters

1,000/- 1,500/-

5 Upazilla and Others 700/- 1,000/-

6 If already owned a building or apartment in any City Corporation before such investment is completed or the assessee invests in two or more Buildings or Apartments

As per above tax Plus extra 20% of

above calculated tax

As per above tax Plus extra 20% of above

calculated tax

9. Amortization of license fees is allowable business expenditure [Section#29 (1) (viiia) & Third Schedule, Para 10A]

License fees shall be amortized proportionately for two or more years. License fees mean Spectrum Assignment Fee paid by a cellular mobile phone operator. It is applicable for the license fee paid on or after 01 July 2012.

3. Minimum Tax (Individual)

Minimum tax for individual assessee has been changed on the basis of location. If tax payable becomes less than Taka 3,000 or Taka 2,000 or Taka 1,000 or negative after adjusting Investment Tax Credit, individual assessee has to pay minimum tax as follows:

Minimum tax is Taka 3,000 for resident of City Corporations Minimum tax is Taka 2,000 for resident of District Head Quarters and Paurashavas Minimum tax is Taka 1,000 for resident of Upazillas and others

Minimum tax exempted income for female, persons aged 65 years & more and physically challenged assessee having only agricultural income are Taka 300,000 and 350,000 respectively while for other assessee, this limit is Taka 270,000.

4. Changes regarding Surcharge on individual [sec: 16A]

Surcharge @ 10% will be levied on income tax payable in case of having net assets of more than Tk. 2 crore to Tk. 10 crore in his statement of assets and liabilities, whereas the rate of surcharge is 15% for assets more than value of Tk. 10 crore. Surcharge is applicable only for individual assessee.

5. Minimum tax for firm subject to gross receipts more than Tk. 50 Lac [Sec: 16CCC]

Every firm is liable to pay minimum tax @ 0.50% on gross receipts if gross receipts exceed Tk. 50 Lac. This will be applicable for the Assessment Year 2013-2014.

6. Withdrawal of tax on share premium [Sec: 16E]

Tax @ 3% has been withdrawn on the sale of share premium over face value.

7. Changes in Company Tax Rates

Types of CompaniesTax Rates as per

AY 2013-2014Tax Rates as per

AY 2012-2013

Cigarettes Manufacturing Company (Publicly traded) 40% 35%

Cigarettes Manufacturing Company (Not-Publicly traded)

45% 42.5%

Mobile phone operator company (Publicly traded) 40% 35%

8. Special tax treatment in respect of investment in residential building and apartment [section # 19BBBBB]

Source of any sum invested by any person in the construction or purchase of any residential



Period of Exemption Rate of Exemption

For the first and second years 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 seventh year 10% of income

Provided that an industry engaged in the production of bio-fertilizer and petro-chemicals shall be entitled for exemption from tax under the provisions of this section even if it is set up in the districts of Dhaka, Gazipur, Narayanganj or Chittagong.

14. Amendments in Tax Holiday Scheme [Section#46C]

Subject to the provisions of this Ordinance, income, profits and gains under section 28 from physical infrastructure facility, set up in Bangladesh between the first day of July, 2011 and the thirtieth day of June, 2015 (both days inclusive) shall be exempted from the tax payable under this Ordinance for ten years beginning with the month of commencement of commercial operation at the rates, below:






For the sixth year 50% of income

For the seventh year 40% of income

For the eighth year 30% of income

For the ninth year 20% of income

For the tenth year 10% of income

15. Extension of areas for TDS from certain services:

15.1 Deduction of tax from fees for professional and technical services [section # 52A (3)] On account of fees for professional or technical services shall be deducted or collected

as per following way:

ten per cent (10%) of such fees where the person receiving such fees furnishes his taxpayers Identification Number (TIN) to the payer; or

fifteen per cent (15%) of such fees where the person receiving such fees fails to furnish his Taxpayers Identification Number (TIN) to the payer.

10. House Rent allowance receivable in cash [Rule-33A]

Tax exempted house rent allowance has been increased from Tk. 180,000 to Tk. 240,000.

11. Conveyance allowance receivable in cash with no conveyance facility [Rule-33C]

Tax exempted conveyance allowance has been increased from Tk. 24,000 to Tk. 30,000.

12. Changes regarding the extent of admissible allowance [Section#44, sixth schedule part-B]

Sl. ParticularsAssessment Year

2013-2014Assessment Year

2012-2013

1 Maximum Allowable investment 1.5 Crore Taka 1 Crore Taka

2 % of Investment for tax rebate on total income excluding employers PF contribution

30% 20%

3 Actual investment Tk. 1.50 Crore or 30% of total income or actual investment, whichever

is less

Tk. 1.00 Crore or 20% of total income or actual investment, whichever is less

34 % of allowable tax rebate 15% 10%

13. Tax holiday of newly established industrial undertakings [Section#46B]

Tax holiday of newly established industrial undertakings has been extended upto 30 June 2015 (previously it was 30 June 2013) with the following:-

Industry undertaking in Dhaka and Chittagong divisions, excluding Dhaka, Narayanganj, Gazipur, Chittagong, Rangamati, Bandarban and Khagrachari Districts will avail tax holiday benefit for a period of five years from the date of commercial production of the said undertaking:






Industry undertaking in Rajshahi, Khulna, Sylhet and Barisal divisions and Rangamati, Bandarban and Khagrachari districts will avail tax holiday benefit for a period of seven years from the date of commercial production of the said undertaking:



Sl. No

Sections & Rules

Heads of Withholding tax

Rates of withholding (AY: 2013-2014)


2 53FF Real estate or land development business at the time of registering any document for transfer of any land or building or apartment

(i) Tk. 1,600 per square meter for building or apartment for residential purpose situated at Model Town, Banani, Baridhara, Motijheel Commercial Area and Dilkusha Commercial Area of Dhaka

(ii) Tk. 6,500 per sq meter building for commercial purpose for the areas mentioned in (i).

(iii) Tk. 1,500 per square meter for building or apartment situated at Dhanmandi Residential Area, Defence Officers Housing Society (DOHS), Mahakhali, Lalmatia Housing Society, Uttara Model Town, Bashundhara Residential Area, Dhaka Cantonment, Kawran Bazar Commercial Area of Dhaka, and Panchlaish R/A, Khulshi R/A, Agrabad and Nasirabad Area of Chittagong;

(iv) Tk. 5,000 per sq meter building used for commercial purpose for the areas mentioned in (iii).

(i) Tk. 2,000 per square meter for building or apartment for residential purpose situated at Model Town, Banani, Baridhara, Motijheel Commercial Area and Dilkusha Commercial Area of Dhaka

(ii) Tk. 8,000 per sq meter building for commercial purpose for the areas mentioned in (i).

( iii) Tk. 1,800 per square meter for building or apartment situated at Dhanmandi Residential Area, Defence Officers Housing Society (DOHS), Mahakhali, Lalmatia Housing Society, Uttara Model Town, Bashundhara Residential Area, Dhaka Cantonment, Kawran Bazar, Commercial Area of Dhaka, and Panchlaish R/A, Khulshi R/A, Agrabad and Nasirabad Area of Chittagong;

(iv) Tk. 6,000 per sq meter building used for commercial purpose for the areas mentioned in (iii).

15.2 Deduction of tax from payment of stevedoring agency and private security service [section# 52AA]

If National Board of Revenue issues certificate in writing that the person rendering such services is not likely to have any assessable income during the year or the income is otherwise exempted from tax under any provision of the Ordinance, payment shall be made without any deduction or with deduction at a lesser rate for that income year as per Certificate.

15.3 Withdrawal from deduction of tax on Bond transactions by a member of Stock Exchange [Section # 53BBB]

Requirement of deduction of tax at source on Bond transactions made by a member of Stock Exchange has been withdrawn. Since deduction of tax at source has been withdrawn, income on Bond transactions will not be assessed u/s 82C.

15.4 Deduction of tax from Collection of tax from manufacturer of soft drinks [section # 52S]

Tax @ 3% of the value of soft drinks will be collected while banderols or stamps are delivered to any manufacturer of soft drinks. The value of such soft drinks will be the value as determined for the purpose of the Value Added Tax (VAT).

15.5 Collection of tax on sale prices of Tea sold by public auction [section # 53C, rule-17D]

The person responsible for auction of tea shall collect tax at the rate of 1% [Previously it was 0.50%].

15.6 Deduction or collection of tax from commission, discount or fees [section# 53E (2)]

Any company, as defined in clause (20) of section 2 of the Ordinance other than oil marketing company, which sells goods to any distributor or to any other persons under a written contract at a price lower than the retail price fixed by such company, shall collect at the time of sale of such goods to such distributor or other persons at the rate of five per cent (5%) of the difference between the sale price to the distributor or other persons and the retail price fixed by such company.

16. Changes of rate of Withholding Tax at source

Sl. No

Sections & Rules




1 52B Collection of tax from cigarette manufacturers at the time of selling banderols

10% of the value of the banderols.

6% of the value of the banderols.


Continued Continued


19. Reference to High Court Division [section # 160]

For consideration of High Court Division, tax rate has been decreased from 25% to 15% where tax demand does not exceed Tk. 1 million and the rate from 50% to 25% where tax demand exceeds Tk. 1 million on the difference between the tax determined by taxes appellate tribunal and tax payable under section 74.

20. Amendment in Sixth Schedule, Part-A

Amendments are as follows:

Paragraph 11 A: Income from dividend amounting to Tk. 10,000 previously it was Tk. 5,000.

Paragraph 35: Any income from the export of handicrafts for the period from 01 July 2011 to 30 June 2015, previously it was 2013.

Paragraph 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 Tk. 30 Lac, previously it was Tk. 24 Lac.

Paragraph 42: Any income from poultry farming for the period from 01 July 2011 to 30 June 2015, previously it was 2013.

21. Extension of time to avail reduced tax rate for certain industrial companies

Sl. Particulars AY: 2013-2014 AY: 2012-2013

1 Income from production of jute industries tax @ 15%. [As per SRO No.206 AIN/AIT/2013, dated 01 July 2013]

Till 30 June 2015 Till 30 June 2013

2 Income from production of Textile and Yarn manufacturing related companies regis-tered under the Company Act 1994 @ 15%. [As per SRO No. 207 AIN/AIT/2013, dated 01 July 2013]


3 Export oriented handicrafts an amount equal to 50% of the income is tax exempted.


4 Income derived from fisheries, production of seeds, marketing of locally produced seeds, cattle farming, dairy farming, horticulture, frog farming, mushroom farming, floricul-ture and sericulture. [As per SRO No.208 AIN/AIT/2013, dated 01 July 2013]

3% till 30 June 2015

5% till 30 June 2013

Sl. No

Sections & Rules




(V)Tk. 600 per square meter for residential building or apartment is situated in areas other than areas mentioned in (i) & (ii) above and Tk. 1,600 per sq meter for commercial building for the areas mentioned in (i) & (iii) above.

(V)Tk. 800 per square meter for residential building or apartment is situated in areas other than areas mentioned above and Tk. 2,000 per sq meter for commercial building for the areas mentioned in (i) & (iii) above.

3 Sec-52, rule-16

Supply of goods and execution of contracts, sub-contracts & local LC

In case of oil supplied by oil marketing companies: If payment exceeds 2 lac-0.60%.

In case of oil supplied by oil marketing companies: If payment exceeds 2 lac-0.75%.

17. Return of income-in simplified return form [Section# 75 (2) (di)]

An individual, not being a shareholder director of a company, having income from salary or income not exceeding Tk. 3 Lac from business or profession may opt not to submit particulars of life style statement or IT 10BB.

18. Power of giving order for not removing property [section # 116 A]

In the course of performing functions under the Ordinance, the Director General, Central Intelligence Cell or the Commissioner has definite information in his hands that any person has concealed the particulars of income or investment, he may, by order in writing- require any person who is in immediate possession or control of any money, bullion, jewellery, financial instrument, financial asset, valuable article or any other property not to remove, part with, or otherwise deal with it without obtaining previous permission of the concerned authority passing such order:

Every such order shall cease to have effect after the expiry of a period of one year from the date of the order made.

The income tax authority may extend such period or periods with the approval of the Board. Provided that the total period of extension shall in no case exceed one year.

In computing the period if any, for which the order has been stayed by any Court, shall be excluded.


Continued


Initial capital InvestmentRate of

tax (Taka)Applicability

If the initial capital investment up to Taka 8 lac

3,000/- For assessee of any area.





(b) Where an assessee carrying on profession as a Lawyer or Doctor-

Length of professionRate of

tax (Taka)Applicable area

Upto 3 Years 1,000/- For the assessee not located under any city corporation or any paurashava of district Head quarters.

Upto 4 Years 2,000/- For the assessee located at paurashava in district headquarters and other area excluding city corporation.

Upto 5 Years 3,000/- For assessee of any area.

Upto 10 Years 5,000/- For assessee of any area.

25. Amendment of Tax-payers Identification Number [Rule-64B]

Every person shall, for the purpose of obtaining Tax-payers Identification Number (TIN) referred to in section 184B of the Ordinance, submit an application-

Electronically through the website hosted by the Board for this purpose by following the procedure mentioned in the website. (web address: www.incometax.gov.bd)

Manually in the form prescribed below to the Deputy Commissioner of Taxes with whom his Jurisdiction lies to any other authority or agency as may be authorized by the Board in this respect.

All income taxpayers will have to get new TINs by December 31 next through e-TIN registration. The existing TIN will be invalid from 01 January 2014.

22. Tax exempted income as per different SROs

Any income of Federation of Chamber of Commerce and Industries approved by Ministry of Commerce (except income from Bank interest, profit of organization and income from Business) as per SRO No. 210 AIN/AIT/2013, dated 01 July, 2013. It will be effective from Assessment Year 2014-2015.

Private power generation companies (except coal based power generation companies) will get tax exemption for 15 years if its commercial production starts within 31 December 2014. [SRO No. 211/AIN/IT/2013, dated 01 July 2013].

Private power generation companies (except coal based power generation companies) which will start commercial production from 01 January 2015 will enjoy tax exemption facility if it starts commercial production on or after 01 January 2015 as per following Schedule: [SRO No. 212/AIN/IT/2013, dated 01 July 2013]:


For the first five years (1st, 2nd,3rd, 4th & 5th year) 100% of income

For the next three years (6th, 7th, & 8th year) 50% of income

For the last two years (9th and 10th year) 25% of income

23. Amendment of Alternative Dispute Resolution (ADR) [SRO NO. 68-AIN/IT/2011, dated 05 March 2012 & SRO No. 205-AIN/IT/2012, dated 01 July 2013]

In the case of a dispute pending before Appellate Tribunal, Assessee has to file application to the Register/Deputy Register/Assistant Register of the concerned Tribunal Bench.

After getting permission from High Court Division or Appeal Division of the Supreme Court ,the assessee has to file an application to the Second Secretary (Taxes Legal) of NBR.

24. Procedure for spot assessment [Rule-38B (2)]

(a) Where an assessee carrying on business-

Initial capital InvestmentRate of

tax (Taka)Applicability


1,000/- For the assessee not located under any city corporation or any paura-

shava of district Head quarters.


2,000/- For the assessee located at paurashava in district headquar-ters and other area excluding city

corporation.


Continued


26. Summary of VAT Changes in FY: 2012-2013

Enhancement of Annual Turnover amount for turnover tax: Turnover tax @ 3% if annual turnover of taxable goods or services is less than Taka 8,000,000 (Previous Taka 7,000,000)

Condition for tax rebate: 80% rebate will be allowed on Telephone, Tele printer, Fax, Internet, Freight Forwarders, C&F agent, WASA, Audit & Accounting Firm, Procurement Provider, Security Service, Legal Consultant, Transport Contractor, Banking Service. [earlier it was 60%]

Withholding VAT:

Areas of withholding VAT extended by the following:

IT enabled service 4.5% Other Miscellaneous Services 15% Sponsorship Services 7.5% Meditation Services 7.5%

Package Value Added Tax for small businessmen-[SRO No.173-AIN/2013/677-Mushak, dated 06 June, 2013]

Minimum value added tax shall be payable by small businessmen and shop owner who got registration voluntarily as per following table:

Sl No.

Applicable AreaAnnual Maximum

Value Addition (Taka)VAT Rate

Minimum pay-able VAT (Taka)

1 Dhaka & Chittagong City Corporations

80,000/- 15% 12,000/-

2 Other City Corporations

60,000/- 15% 9,000/-

3 Paurashava of District headquarters

40,000/- 15% 6,000/-

4 Other areas 20,000/- 15% 3,000/-

Declaration of Taxable Goods by NBR--[SRO No.176-AIN/2013/680-Mushak, dated 06 June, 2013]

Activity Code Activity Name

CO 17.28 Sweet & Sweet related goods

CO 38.30 Furniture

VAT Tax Incentives


1. Tax incentives for Expatriate

Salaries and allowances of expatriate personnel, employed in a foreign aided project established under an agreement between the Bangladesh Government and foreign Government, are tax exempted subject to respective agreement. SRO # 227-L/82 dated 20 June 1982.

2. Tax Incentives on Jute Industry, RMG & Textile Industry

Income tax rate for Jute Goods [SRO # 206-Ain/Income Tax/2013, dated 01 July 2013]: Any industry manufactures or produces jute goods shall have to pay tax @ 15% and this incentive will be applicable upto 30 June 2015.

Reduced rate of tax @ 10% of companies engaged in ready-made garments industries on export sale and this incentive will be applicable upto 30 June 2014. [SRO # 265-Ain/Income Tax/2010 later modified by SRO No. 217-AIN/IT/2012, dated 27 June 2012]

Reduced rate of tax @ 15% of companies engaged in textile industries from 01.07.2008 to 30.06.2015 [SRO # 207- Ain/Income Tax/2013, dated 01 July 2013]

3. Tax Incentives on Fisheries, Poultry, Dairy Farming etc.

Any income from fisheries, poultry, production of pelleted poultry feed, production seeds, marketing of locally produced seeds, cattle farming, dairy farming, horticulture, frog farming, mushroom farming, floriculture, sericulture etc. irrespective of individual or company assessee shall have to pay tax @ 3% (earlier which was tax exempted through para # 34 of sixth schedule). Ref. Income tax rate for fisheries, poultry, dairy farming etc. [SRO # 208-Ain/Income Tax/2013, dated 01 July 2013].

4. Tax Incentives on Real Estate and Land development Industry

According to Section 38, Sixth Schedule, Part A

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 Upazila, Narayanganj Paurashava, Gazipur Paurashava and any Paurashava under Dhaka district.

5. Tax Incentives on Information & Technological Industry

According to serial number 33, Sixth Schedule, Part A

Any income derived from the business of software development and Information Technology Enabled Services (ITES) for the period from the first day of July, 2008 to the thirtieth day of June, 2015:

Tax Incentives Tax Incentives


a. Company and Firm assessee: all companies [u/s-2(20)] and partnership firms [u/s-2(32)] shall pay tax @ 10% on income for transfer of stocks and shares public limited companies listed with stock exchange. This clause is only applicable for all listed companies and firms including banks and insurance entity. The tax shall be paid as advance & besides this all other income will be taxed as prescribed manner and it will be effective for any transfer of shares from 01 July 2010.

b. Sponsored shareholder assessee: any transfer of shares and stocks of bank, financial institution, merchant bank, insurance, leasing company, portfolio Management Company, stock dealer or stock broker company by individual sponsored shareholders or directors, the assessee has to pay tax @ 5%. On the other hand company assessee has to pay tax @ 10%. The payment of tax will be treated as advance tax and it will be effective for any transfer of shares from 01 July 2010.

c. More than 10% securities owned assessee: other than sponsored shareholders or directors, if any person owned more than 10% securities of listed companies i.e. bank, financial institution, merchant bank, insurance, leasing company, portfolio management company, stock dealer or stock broker company has to pay tax @ 5% on income from transfer of those securities. This will be applicable if any assessee holds more than 10% securities of listed companies any time within the income year. The tax shall be paid as advance and it will be effective for any transfer of shares from 01 July 2010.

Assessee has to pay Advance Income Tax as per prescribed manner, if any income and/or gain from transfer of stocks and shares of a company listed with stock exchange [section: 64(2)]

Here securities means all stocks, shares, mutual fund unit, bond, debenture & other of listed companies and transacted in stock exchange but not government securities. Capital gain on transfer of listed shares by all individual assessee will be tax exempted.

Collection of tax from transfer of securities or mutual fund unit by sponsored shareholders of a company etc.

The Securities and Exchange Commission (SEC) or Stock Exchange (SE), as the case may be, at the time of transfer or declaration of transfer or according consent to transfer of securities or mutual fund unit of a sponsored shareholder or director or placement holder of a company or sponsor or placement holder of a mutual fund listed with a stock exchange shall collect tax @ 5% on the difference between transfer value and cost of acquisition of securities or mutual fund units.

Here transfer includes transfer under a gift, bequest, will or an irrevocable trust and transfer value means closing price prevailing on the day of consent accorded by SEC or SE or when last traded as the case may be.

Provided that the person shall file income tax return in accordance with the provisions of section 75(2)(c) of the Ordinance.

Explanation: Information Technology Enabled Services (ITES) means- Digital Content Development and Management, Animation (both 2D and 3D), Geographic Information Services (GIS), IT Support and Software Maintenance Services, Web Site Services, Medical Transcription, Business Process Outsourcing, Data entry, Data Processing, Call Centre, Graphics Design, Search Engine Optimization, Web Listing, E-commerce and Online Shopping, Document conversion, imaging and archiving.

6. Tax Incentives on investment in Stock Exchange

Income tax will be imposed on capital gain arising from the transfer of capital assets being stocks and shares of public limited companies listed with stock exchange in Bangladesh and bonus shares of the company but income from transfer of government securities is exempted [section: 32(7)]

nvestment in shares in the Stock Exchanges [SRO # 237-Ain/Income Tax/2011, dated 06 July 2011]

No explanation regarding sources of income will be searched by the tax authority if investment of un-taxed income is made on primary or secondary shares of any company listed with stock exchanges in Bangladesh and paid income tax @ 10% on invested amount subject to fulfilling following conditions:

Person (individual, firm, private limited company etc.) other than public limited company can take this opportunities;

Investment must be made within 01 July 2011 to 30 June 2012 and declaration of such investment in prescribed form must be submitted to Deputy Commissioner of Taxes (DCT) within 15 July 2012 or any time when investment will be made;

Copy of pay order for tax @ 10% on invested amount, portfolio statement and Beneficiary Owners (BO) account ledger should be submitted along with declaration form;

Invested amount should not be withdrawn from capital market before 30 June 2013 and if the amount or any part of amount is withdrawn, the amount withdrawn shall be treated as income from other source. But whole invested amount may be mobilized with purchasing and selling of listed company shares and any gain from transactions is allowed for withdrawal;

Any tax concealment is noticed to tax authority within 30 June 2011 and then action taken as per section # 93, no such benefit will be availed by the assessee;

Investment shall be shown with assets and liabilities in income tax return and no investment allowance shall be exercised.

As per SRO # 269-Ain/Income Tax/2010, dated 01 July 2010, assessee has to pay tax on the income of transfer of stocks and shares as per following schemes:

Tax Incentives Tax Incentives


7. Tax Incentive on money borrowed from abroad

SRO # 417-L/76 dated 29 November 1976

Under certain conditions, tax is fully exempted on the Interest on money borrowed from abroad by:

Government

Statutory bodies

Industrial undertakings

8. Incentive for investment in residential building and apartment. [Sec: 19BBBBB]

No question as to the source of any sum invested by any person in the residential building or apartment, if such person pays tax @ 10% on sum invested before the relevant assessment year.

Tax Incentives Income Tax


Income TaxIncome Tax

1. Definitions

a. Assessee [Section: 2(7)]: Assessee means a person by whom any tax or other sum of money is payable under Income Tax Ordinance 1984.

b. Person [Section: 2(46)]: Person includes an individual, a firm, an association of persons, a Hindu undivided family, a local authority, a company and every other artificial juridical person.

c. Income [Section: 2(34)]: Income means any sum of income or gain from whatsoever source derived, or accruing or arising or received or deemed to be accrue or arise or to be received under any provision of IT Ordinance 1984.

d. Tax [Section: 2(62)]: Tax means the income tax payable under the Income Tax Ordinance 1984 and include any additional tax, excess profit tax, penalty, interest, fee or other charge leviable or payable under the IT Ordinance 1984.

e. Income Year [Section: 2(35)]: Income Year means the financial year immediately preceding the assessment year or when accounts are closed on a date within the financial year, the twelve months ending on the date on which accounts are closed.

f. Assessment Year [Section: 2(9)]: Assessment Year means the period of twelve months beginning from first day of July of every year. This is the immediate following financial year of Income Year. Examples of Accounting Year, Income Year and Assessment year:

Accounting Period/Year Income Year Assessment Year

1 Accounting Year: July 2012 to June 2013 2012-13 2013-14

2 Accounting Year: January 2012 to December 2012

2012-13 2013-14

3 Accounting Year: April 2011 to March 2012 2011-12 2012-13

4 Accounting Year: October 2011 to September 2012

2012-13 2013-14

5 Accounting Year: August 2011 to July 2012 2012-13 2013-14

g. Annual Value [Section: 2(3)]: Annual value means the sum arising from letting out any property and related furniture, fixture and fittings or any sum received as Annual Rent, whichever is higher.

h. Basis of Residence [Section: 2(55)]:

i. Individual: An individual will be Resident: - if he/she stays in Bangladesh for a period of or for the periods all together at least 182 days or more in the income year or - if he/she stays in Bangladesh for a period of or for the periods all together at least 90 days or more in the income year and 365 days or more during the immediate four preceding years of income year.


ii. Company: The company will be resident if the management of its affairs is situated wholly in Bangladesh in the income year.

iii. Hindu Undivided Family, Firm, Other Association of Persons: They will be resident if its control and management of affairs is situated wholly or partly in Bangladesh in the income year.

i. Non-resident [Section: 2(42)]: Non-resident means a person who is not a resident.

j. Salary [2(58) and 18] and Perquisites [2(45) and 30(e)]: Salary includes the following:

yy Basic Salary yy Contribution to PFyy Festival Bonus yy Pension Fundyy Incentive Bonus, allowable upto 10% of dis-

closed net profit [Section # 30(j)] yGratuity Fund

yy Arrear Salary yy Superannuation Fundyy Advance Salary yy Project payyy Leave Encashment yy Compensation payyy Leave Fare Assistance yy Wages or any other paymentyy Overtime

Perquisites include the following:

Any benefits other than the items included under salary shall be considered as perquisites - Examples of perquisites are:

Dearness Allowance House Rent allowed up to BDT 2,40,000 Conveyance allowed up to BDT 30,000 Medical allowed up to actual expenditure Maximum perquisites allowed BDT 250,000 Excess of perquisites (over Tk. 250,000) will be taxed as per Organizations

tax rate.

Any other allowance2. Charge of Income Tax [Section 16]

Income tax shall be charged for any assessment year at any rate or rates in accordance with the provisions of this Ordinance in respect of the total income of the income year or years.

Income Tax

Income tax shall be deducted and collected at source and paid accordingly. Non-resident not being a company, capital gain and winnings shall be taxed as per second Schedule of this Ordinance.

3. Charge of Surcharge [Section 16A]

Surcharge on income shall be charged for any assessment year at any rate or rates as the case may be. Again, if any individual assessee whose total net worth more than Tk. 2 crore to 10 crore as per statement of assets, liabilities and expenses, shall have to pay tax @ 10% on tax payable, whereas the rate of surcharge is 15% for assets more than value of Taka 10 crore.

4. Charge of Additional Tax [Section 16B]

If a publicly traded company (other than banking or insurance company) does not issue, declare or distribute dividend or bonus share equivalent to at least 15% of its paid up capital within 6 months immediately following its income year, it will be charged 5% additional tax on undistributed profit in addition to tax payable under IT Ordinance 1984. Here undistributed profit means accumulated profit including free reserve.

5. Charge of Excess Profit Tax [Section 16C]

If a banking company operating under Bank Company Act 1991 shows profit exceeding 50% of the aggregate sum of capital and reserve, the bank shall pay @ 15% tax of such excess amount. Such tax is payable in addition to tax payable under IT Ordinance 1984.

6. Charge of Minimum Tax [Section 16CCC]

Minimum tax for every firm shall, subject to having more than gross receipts of Taka 50 Lacs and every company irrespective of its profits or loss liable to pay minimum tax @ 0.50% on total receipt from business in the income year. Total receipt from business for minimum tax purpose will be calculated as follows:

Sum of received or receivable from sale of products;

Sum of received or receivable from rendering of services;

Interests, Commissions, Discounts, Fees or Charges; and

Income received or receivable from any other sources.

Minimum tax of the company assessee will be determined on total received or receivable from all sources of income. Minimum tax will not be applicable, if any company has no received or receivable from sales or any other sources and if companys income already taxed under section # 82C. But minimum tax will be applicable irrespective of net loss or adjustable accumulated loss from previous years. This minimum tax has to be paid by the company at the time of filling income tax return and in accordance with section # 74.

Income Tax


9. Minimum Tax (Individual)

Minimum tax for individual assessee has been changed on the basis of location. Whose taxable income exceeding exemption limit of Taka 220,000 or Taka 250,000 or Taka 300,000 (as the case may be) has to pay tax on the basis of following location:

Minimum tax is Taka 3,000 for resident of City Corporations. Minimum tax is Taka 2,000 for resident of District Head Quarters and Paurashavas Minimum tax is Taka 1,000 for resident of Upazillas and others

If minimum tax becomes less than Taka 3,000 or Taka 2,000 or Taka 1,000 (as the case may be) or negative after adjusting Investment Tax Credit, individual assessee has to pay Taka 3,000 or Taka 2,000 or Taka 1,000 respectively as minimum tax.

Minimum tax exempted income for female, persons aged 65 years & more and disabled assessee having only agricultural income is Taka 300,000 and 350,000 respectively while for other assessee, this limit is Taka 270,000.

10. Incidence of Tax on Non-Resident

A person who is a non-resident is liable to pay tax on the incomes, profits and gains which are received or deemed to have been received or are deemed to accrue or arise to him in Bangladesh.

A non-resident assessee is not entitled to any sort of allowance and relief as are admissible to a resident assessee for the purpose of tax rebate;

A non-resident assessee (other than Bangladeshi non-resident) is liable to pay tax on his total income @ 25% [Second Schedule]

A Non-resident Bangladeshi (NRB) is subject to pay tax at normal rate, as applicable for a resident assessee.

11. Scope of Total Income [Section 17]

The total income of any income year of any person includes:

Resident Non-Resident

All income from whatever sources including received or deemed to be received in Bangladesh; accrue or arises or deemed to accrue or arises in Bangladesh; or accrue or arises outside Bangladesh.

All income from whatever sources including received or deemed to be received in Bangladesh; accrue or arises or deemed to accrue or arises in Bangladesh.

7. Income Exemption Limit

Tax exempted minimum income limit of individual assessee has been enhanced from Taka 200,000 to Taka 220,000 for male, while this limit for female, persons aged 65 years & above has been enhanced from Taka 225,000 to Taka 250,000 and for disabled assessee this limit enhanced from Taka 275,000 to Taka 300,000 with effect from Income Year 2012-2013 (Assessment Year 2013-2014).

8. Personal Tax Rate Structure

The person defined under section 2(46) of Income Tax Ordinance (ITO) 1984, every individual assessee (including Non-resident Bangladeshi), firm (partnership or single), association of persons, Hindu undivided family, artificial juridical person and Non-Government Organization (NGO) shall have to pay income tax on their total income according to 5 tier income slabs and tax rates for the Financial Year 2012-2013 and Assessment Year 2013-2014.

The following table entails comparable scenario of 5 tier income slabs and tax rates for the two consecutive financial years:



Income Slabs Tax Rates

Income Slabs Tax Rates

i. On the first Taka 220,000 of total income of assesses

Nil i. On the first Taka 200,000 of total income of assessee

Nil

On the first Taka 250,000 of total income for Female, persons aged 65 years & above assessee

Nil On the first Taka 225,000 of total income for Female, persons aged 65 years & above assessee

Nil

On the first Taka 300,000 of total income of physically challanged assessee

Nil On the first Taka 275,000 of total income of physically challanged assessee

Nil

ii. On the next Taka 300,000 of total income

10% ii. On the next Taka 300,000 of total income

10%

iii. On the next Taka 400,000 of total income

15% iii. On the next Taka 400,000 of total income

15%

iv. On the next Taka 300,000 of total income

20% iv. On the next Taka 300,000 of total income

20%

v. On the balance of total income 25% v. On the balance of total income

25%

Non-resident (Foreign) assessee

25% Non-resident (Foreign) assessee

25%



VIII Difference between the purchase price and fair market value - Income from Other Sources [Section 19(8)]

IX Salami or Premium - Income from Other Sources [Section 19(9)]

X Goodwill, compensation or damages, etc. - Income from Other Sources [Section 19(10)]

XI Cancellation of indebtedness - Income from Other Sources [Section 19(11)]

XII Managing Agency Commission - Income from Other Sources [Section 19(12)]

XIII Lotteries, crossword puzzles etc. - Income from Other Sources [Section 19(13)]

XIV Income from Insurance Business - Income from Business or Profession [Section 19(14)]

XV Receipt back of loss, bad debt or expenditure and unpaid trading liability etc. -Income from Business or Profession [Section 19(15)]

XVI Income from sale of depreciated assets having been used for the purpose of any business or profession - Income from Business or Profession [Section 19(16)]

XVII Income from sale of depreciated assets having been used for agricultural purpose - Income from Agriculture [Section 19(17)]

XVIII Income from receipt of insurance, salvage or compensation moneys in respect of assets having been used for the purpose of any business or profession - Income from Business or Profession [Section 19(18)]

XIX Income from receipt of insurance, salvage or compensation moneys in respect of assets having been used in agriculture - Income from Agriculture [Section 19(19)]

XX Income from sale of assets of capital nature - Income from Business or Profession [Section 19(20)]

XXI Unpaid loan Taka 500,000 is to be recognized as income immediately after expiry of 3 years of loan taken. Income from Other Source [Section 19(21)]

XXII Loan or gift received by the assessee shall be deemed to be his income of the year in which the same is received- Income from Other Source [Section 19(21A)]

XXIII Initial Capital of Business or Profession is shown in return of income under section # 82BB transferred fully or partly shall be deemed income of the year in which transferred being made- Income from Other Source [Section 19(21B)]

XXIV Un-adjustable security money taken from tenant - Income from House Property [Section 19(22)]

XXV Income from transfer of export quota by Garments Industry - Income from Business or Profession [Section 19(23)]v

XXVI Investment by a company, not listed with any stock exchange, received paid up capital from any share holder not being received by cross cheque or bank transfer - Income from Other Source [Section 19(24)]

12. Income Deemed to Accrue or Arise in Bangladesh [Section 18]:

The following income shall be deemed to accrue or arise in Bangladesh, namely:

a. Any income which falls under the head Salaries, wherever paid, if [Section 18(1)]: it is earned in Bangladesh; or it is paid by Bangladesh Government or local authority in the service of such

government or authority;

b. Any income accruing or arising, whether directly or indirectly, through or from [Section 18(2)]: any business connection in Bangladesh; any property, asset, right, other source of income in Bangladesh; transfer of capital assets in Bangladesh;

c. Any dividend paid outside Bangladesh by a Bangladeshi company [Section 18(3)]

d. Any income by way of interest payable [Section 18(4)]: by the government; or by a person who is resident / non-resident in Bangladesh;

e. Any income by way of fees for technical services payable [Section 18(5)]: by the government; or by a person who is resident / non-resident in Bangladesh;

f. Any income by way of royalty payable [Section 18(6)]: by the government; or by a person who is resident / non-resident in Bangladesh;

13. Deemed Income [Section 19]

Unexplained cash credits, investments, possession of bullion, unpaid trading liabilities/ loan etc. will be treated as deemed income, which are mentioned below in brief with relevant heads of income and respective sub-section:

I Unexplained Cash credit - Income from Other Source [Section 19(1)]

II Unrecorded investment or possession of bullion, jewellery etc. - Income from Other Source [Section 19(2)]

III Unexplained expenditure - Income from Other Sources [Section 19(3)]

IV Unrecorded investment - Income from Other Sources [Section 19(4)]

V Ownership of any money, bullion etc. - Income from Other Sources [Section 19(5)]

VI Income received from discontinued business - Income from Business or Profession [Section 19(6)]

VII Receipt of Dividend - Income from Other Sources [Section 19(7)]



XXVII Company assessee receives loan from any other person other than crossed cheque or bank transfer shall be deemed income for that year of loan received- Income from Other Source [Section 19(26)]

XXVIII Company assessee purchases directly or on hire motor car or jeep and value of any motor car or jeep exceeds 10% of its paid up capital, then 50% of that exceeds amount shall be deemed to be income of the year- Income from Other Source [Section 19(27)]

XXIX Individual assessee receives any sum exceeding Taka 500,000 as loan or gift otherwise than by a crossed cheque or bank transfer-Income from Other source [Section 19(28)]

14. Special tax treatment in respect of investment in residential building and apartment [Section: 19BBBBB]

Source of any sum invested by any person in the construction or purchase of any residential building or apartment for residential purpose and pays tax on the basis of measurement before the assessment for the relevant assessment year in which the investment is completed, then tax authority will not raise question on the source of investment.

Area, measurement and tax rates of such residential building or apartment are as follows:

SL.#


Plinth area up to 200 square

meters, Tax amount per square

meter (Taka)

Plinth area more than 200 square

meters, Tax amount per square meter

(Taka)

1 Gulshan Model Town, Banani, Baridhara, Motijheel Commercial Area and Dilkusha Commercial Area of Dhaka

5,000/- 7,000/-

2 Dhanmandi Residential Area, Defence Officers Housing Society (DOHS), Mahakhali, Lalmatia Hous-ing Society, Uttara Model Town, Bashundhara Residential Area, Dhaka Cantonment, Kawran Bazar, Bijaynagar, Segunbagicha, Nikunja of Dhaka, and Panchlaish, Khulshi, Agrabad and Nasirabad Area of Chittagong

4,000/- 5,000/-

3 Other areas of City Corporations except serial nos. 1 & 2 above

2,000/- 3,000/-

Income TaxIncome Tax

SL.#


Plinth area up to 200 square

meters, Tax amount per square

meter (Taka)

Plinth area more than 200 square

meters, Tax amount per square meter

(Taka)

4 Areas of Paurasabhas of any district headquarters

1,000/- 1,500/-

5 Upazilla and Others 700/- 1,000/-

6 It already owned a building or apartment in any City Corporation before such investment is completed or the assessee invests in two or more Buildings or Apartments

As per above tax Plus extra 20% of above calculated

tax

As per above tax Plus extra 20% of

above calculated tax

15. Special tax treatment in respect of investment in the purchase of bond under Bangladesh Infrastructure Finance Fund (BIFF) [Section: 19C]

No question shall be raised as to the source of any investment by any person in the purchase of bond issued under Bangladesh Infrastructure Finance Fund (BIFF) during the period between 01 July 2010 and 30 June 2012 (both days inclusive), if assessee pays tax @ 10% on such investment before filling return of income for the relevant income year. Any person may invest under this scheme.

16. Special tax treatment in respect of investment in the purchase of Bangladesh Government Treasury Bond [section # 19D]

Notwithstanding anything contained in any other provision of the Ordinance, no question as to the source of any sum invested by any person, being an individual, in the purchase of Bangladesh Government Treasury Bond shall be raised if such person pays, before the filling of return of income for that income year as per provisions laid down in section # 75(2), tax @ 10% on sum invested.

17. Voluntary disclosure of income [section # 19E]

Any person, who has not been assessed tax for previous assessment year or years or who has been assessed for tax lower than actual tax those year or years may disclose such income in the respective heads of income in the return of income along with the income for the current assessment year.

Return of income under this provision shall be treated as valid, if:

The return of income is submitted within the time as specified u/s 75 (2) Tax payable at applicable rate on total income inculding such income and penalty

@310% proportionate to such income are paid before submission of Return

Continued


any salary paid or allowed to him in the income year by or on behalf of an employer, though not due or before it became due to him;

any arrears of salary paid or allowed to him in the income year by or on behalf of an employer, if not charged to income tax for any earlier income year;

ii. House rent allowance receivable in cash [Rule # 33A]: House rent allowance in Taka 20,000 per month or 50% of basic salary or, whichever is less, shall be included in income.

iii. Rent free accommodation [Rule # 33B]: The rental value of the accommodation or 25% of basic salary, whichever is less, shall be included in income.

iv. Conveyance allowance receivable in cash with no conveyance facility [Rule # 33C]: Allowable amount is Taka 30,000 per annum. The allowance so receivable in excess of Taka 30,000 per annum shall be included in income.

v. Conveyance provided partly or exclusively for personal or private use [Rule # 33D]: An amount equal to 7.5% of basic salary shall be included in income.

vi. Additional conveyance allowance [Rule # 33E]: The whole amount shall be included in income.

vii. Free or concessional passage for travel abroad or within Bangladesh [Rule # 33G]:

Where free or concessional passage for travel abroad or within Bangladesh is provided by the employer to an employee (including the members of his household and dependents) shall be included in the income of the employee:

Where the passage is provided in accordance with the terms of employment:

An amount equal to the sum by which the cash payments, if any, made by employer exceeds the actual expenditure incurred by the employee;

Where the passage is not in accordance with the terms of employment: The whole of the amount paid in cash and if not paid in cash, the amount which

would have been expended by the employee if not provided by the employer;

Where free concessional passage for travel abroad is availed more than once in two years:

The whole of the amount paid in cash, if any, for such additional passage or if no cash payment is made, the amount which would have been expended for this passage if not provided by the employer shall be included in his income.

Where the transport is provided free of cost or at a concessional rate: By an undertaking engaged in the transport of passengers or the carriage

A declaration is enclosed with the return of income including Name of the person declaring Head of the declared income and amount thereof; and Amount of tax and penalty paid thereof.

The provision of this section shall not apply, where -

A notice under clause (b) of sub-section (3) of section 93 has been issued before submission of such return of income

A notice on a banking company under clause (f) of section 113 has been issued before submission of such return of income;

Any proceeding under section 164,165,166 has been initiated before submission of such return of income ;or

Any income declared under this section is Not derived from any legitimate source of income or Derived from any criminal activities under any other law for the time being in force.

The income shown under this section may be invested in income generating activities or any section including the following:

Industrial undertaking including its expansion; Balancing ,moderating, renovation and extension of an existing industry; Building or apartment or land; Securities listed with a stock exchange in Bangladesh; or Any trade, commercial, or industrial venture engaged in production of goods or services.

18. Income from Salary [Section 21]

Any income classifiable as salaries irrespective of its place of payment shall be deemed to be income accruing or arising income in Bangladesh if it is earned in Bangladesh or it is paid by the government or local authority in Bangladesh to a citizen in Bangladesh.

Salary once included in any year on due basis or advance payment basis is not includible in the income of any other year.

i. Income classified under the head Salaries: Salaries include the following-

any salary due from an employer to the assessee in the income year whether paid or not;



i. Maintenance allowances: (25% of annual value in case it is used for residential purposes, and 30% of annual value in case it is used for commercial purpose)

ii. Insurance premium

iii. Interest on mortgage or other capital charges

iv. Any tax not being a charge leviable on annual basis

v. Ground rent

vi. Land development tax

vii. Interest payable on capital borrowed for the purpose of acquisition, construction, reconstruction, repair or renovation of the house property; subject to owners self occupied portion for which interest on borrowed capital not exceeding Taka 2,000,000.

viii Proportionate vacancy allowances

ix. Interest payable during construction period to be allowed in 3 subsequent equal installments.

Interest or annual charge payable outside Bangladesh shall not be allowed as deduction on which tax has not been paid or deducted at source.

21. Income from Business or Profession [Section 28]

Income from business or profession includes the following:

i. profits and gains of any business or profession;

ii. income of trade or professional association derived on account of specific services performed for its members;

iii. value of any benefit or perquisite arising from business or exercise of profession;

iv. receipt back of loss, bad debt or expenditure and unpaid trading liability as referred to section 19 (15);

v. income from sale of asset of depreciated asset as referred to section 19 (16);

vi. income from receipt of insurance, salvage or compensation money as referred to section 19 (18);

vii. income from sale of asset of capital nature as referred to section 19 (20);

viii income from transfer of export quota as referred to section 19 (23).

22. Allowable Deductions on income from Business or Profession [Section 29(1)]

The allowable deductions which have been specifically mentioned are the following:

i. Rent for the business premises [Para # 1(i)]

ii. Repairs to hired business premises [Para # 1(ii)]

of goods of an employee of the undertaking in any conveyance owned or charted by the undertaking for the purpose of the transport of passengers, nothing shall be added in his income;

viii. Entertainment allowance [Rule # 33H]: The whole amount shall be included in income except for free tea, coffee, beverages or the like thereof provided at the office premises during the course of work.

ix. Medical expenses [Rule # 33I]: Receipts / receivable from employer in excess of actual expenditure shall be included in the income of the assessee.

x. Other benefits [Rule # 33J]: Equivalent amount shall be included in income.

xi. Allowable exemptions on the income of Sponsor / Shareholder Directors [Rule # 33(2)(b)]: As per SRO 207-Ain/2005 dated 06.07.2005, a shareholder, being director of more than one company, shall be entitled to the benefits under rule # 33 from one company only.

19. Income from Interest on Securities [Section 22 & 23]

Incomes classifiable under the head Interest on Securities are:

a. Interest receivable by the assessee on any security of the government or any security approved by the government;

b. Interest receivable by him on debenture or other securities of money issued by or on behalf of a local authority or company;

c. Deductions permissible in the determination of income from interest on securities are:

i. Commission or charges deducted from interest by a bank realizing the interest on behalf of the assessee;

ii. Interest payable on money borrowed for the purpose of investment in the securities;

Provided that allowance or deduction on account of interest or commission in respect of or allocable to the tax-free government securities shall not be allowed. Deduction will also not be allowed in respect of interest payable outside Bangladesh on which tax has not been paid or deducted.

20. Income from House Property [Section 24 & 25]

a. Income from house property whether used for commercial or residential purposes is taxable on the basis of its annual value. The value determined by the tax authority u/s- 2(3) will be treated as annual value.

b. Deductions allowable in the determination of income from house property: The following deductions are allowable in determining the net income:



xvii Provision for bad and doubtful debt and interest thereon made by a commercial bank including the Bangladesh Krishi Bank, Rajshahi Krishi Unnayan Bank and Karmosangsthan Bank for a sum equal to 1% of the outstanding loan including interest thereon or the amount of actual provision, whichever is less, subject to the specified conditions, allowable during the assessment years 2001-2002,2002-2003,2003-2004 and 2004-2005, 2005-06 and 2006-07; If any amount out of the provision for bad and doubtful debt and interest thereon, which has been allowed, is ultimately recovered, the amount so recovered shall be deemed to be profit of the year in which it is recovered [Para # 1(xviiiaa)]

xviii Any expenditure, not being capital expenditure, laid out or expected on scientific research related to the business [Para # 1(xix)]

xix Any expenditure of a capital nature laid out or expended on scientific research related to the business subject to the stipulated conditions [Para # 1(xx)]

xx Any sum paid to scientific research institute etc. subject to the stipulated conditions [Para # 1(xxi)]

xxi Any sum, not being of capital nature laid out or expended on any educational institute or hospital established for the benefit of employees subject to the stipulated condition [Para # 1(xxii)]

xxii Expenditure (including capital expenditure) incurred on any educational institution or hospital established for benefit of employees and their dependents is deductible provided no charge is made for the services rendered by such hospital or institution. Expenditure incurred on the construction, maintenance or running of any institute for the training of industrial workers will be similarly deductible [Para # 1(xxiii)]

xxiii Any expenditure laid out or expended on the training of citizens of Bangladesh in connection with a scheme approved by the National Board of Revenue [Para # 1(xxiv)]

xxiv Expenses incurred in connection with visits abroad in a Trade Delegation sponsored by Government [Para # 1(xxv)]

xxv. Subscription paid to a registered trade organization or to a recognized professional institution is allowable expenditure for the purpose of computation of income from business [Para # 1(xxvi)]

xxvi. 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 [Para # 1(xxvii)]

xxvii. Allowance in respect of expenditure on publicity and advertisement [Section 30, Para # f(iii)]

iii. Bank interest paid or any profit shared with a bank run on Islamic principles in respect of capital borrowed for the purpose of business or profession [Para #1(iii)]

iv. Share of profit paid by a bank run on Islamic principles [Para # 1(iv)]

v. An amount not exceeding 5% of the profit transferred to Special Reserve by financial institutions approved by the Government [Para # 1(v)]

vi Repairs to own buildings, plants, machinery, furniture etc. [Para # 1(vi)

vii. Insurance premium for insurance against risk of damage etc. of buildings plant etc. used in business or profession [Para # 1(vii)]

viii Depreciation of building, machinery, plant or furniture being owned by the assessee or bridge or road or fly over owned by a physical infrastructure undertaking and used for business or profession; the allowances are admissible under Third Schedule [Para # 1(viii)]In respect of amortization of license fees as admissible under the third schedule [Para # 1(viiia)]

ix Investment allowance for a passenger vessel or a fishing trawler, which is entitled to special depreciation at 20% of the original cost subject to stipulated conditions (Third Schedule, Para # 8) [Para # 1(ix)]

x Obsolescence allowance for building, machinery or plant, which has been discarded, demolished or destroyed, under the stated circumstances and to the prescribed extent (Third Schedule, Para # 10) [Para # 1(xi)]

xi Obsolescence allowance and allowance on account of death or useless animals; [Para # 1(xii)]

xii Land development tax or rent, local rates, etc. [Para # 1(xiii)]

xiii Bonus paid to employees including festival bonus [Para # 1(xiv)]

xiv The amount of bad debt, which is established to have become irrecoverable, under the stated circumstances [Para # 1(xv)]

xv The amount of bad debt written off as irrecoverable but deduction not allowed on the ground that it was not then irrecoverable, the amount which was established to be irrecoverable [Para # 1(xvi)]

xvi The amount for bad debt having been irrecoverable in an earlier year, is allowable for the earlier year under the stated circumstances and with the consent of the assessee [Para # 1(xvii)]



iii. Payment of interest, salary, commission or remuneration by a firm or an association of persons to any partner of the firm or any member of the association as the case may be [Para # 30(b)]

iv. Brokerage or commission paid to a non-resident if tax has not been deducted there from under section 56 [Para # 30(c)]

v. Payment to a provident or other fund unless effective arrangement has been made for deduction of tax at source while making the payments from the fund which are taxable under the head Salaries [Para # 30(d)]

vi. Amount of perquisites or other benefits paid, as defined under Section 2(45), to any employee in excess of Taka 250,000 [Para # 30(e)] Provided that this ceiling shall not be applicable to an employer where perquisites were paid to an employee in pursuance of any government decision to implement the recommendation of a Wage Board constituted by the government;

vii. The amount of expenditure in excess of the prescribed rates and as is not, in the case of sales and services liable to excise duty, supported by excise stamp or seal in respect of the following items [Para # 30(f)]Entertainment (Rule # 65) Foreign travels of employees and their dependants for holidaying and recreation (Rule # 65A) Distribution of free samples (Rule # 65C)

viii. Any expenditure exceeding 10% of the profit under the head office expenses by a company not incorporated in Bangladesh under Companies Act 1994 [Para # 30(g)]

ix. Any payment by way of royalty, technical services fee, technical know how fee or technical assistance fee exceeding 8% of the profit [Para # 30(h)]

x. Any payment by way of salary or remuneration made otherwise than by crossed cheque or bank transfer by a person to any employee having gross monthly salary of Taka 15,000 or more [Para # 30(i)]

xi. Any expenditure by way of incentive bonus exceeding 10% of the disclosed net profit [Para # 30(j)]

xii. Any expenditure by way of overseas traveling exceeding 1% of the disclosedturnover [Para # 30(k)]

xiii. Any payment by way of commission paid or discount made to its shareholder director by a company [Para # 30(l)]

xiv. Any payment by a person exceeding Taka 50,000 or more, otherwise than by a crossed cheque or bank transfer excluding payment for the purchase of raw materials and payment for government obligation.

24. Capital Gains [Section 31]

Any gains arising from transfer of a capital asset (both movable and immovable) as defined in Section 2(15) of the Income Tax Ordinance is chargeable to income tax in accordance with the

xxviii. Any allowance in respect of expenditure on entertainment not in excess of the amount prescribed in this behalf, Ceiling of admissible expenditure has been prescribed in Rule 65 of Income Tax Rules, 1984 [Section 30, Para # f(i)]On the first Taka 1,000,000 of income from business or profession : 4%On the balance income : 2%

xxvix. Foreign travel expenses for holidaying and recreation incurred by business houses on account of their employees and their dependants not exceeding the amount prescribed in this behalf under Rules 65A of the Income Tax Rules, 1984 [Section 30, Para # f(ii)] The amount has been restricted upto 3 months basic salary or three-fourth of the actual expenditure whichever is less, not oftener than once in every 2 years; subject to sum exceeding Taka 10,000 shall not be allowed as deduction unless such payment is made through bank.

xxx. Allowable expenditure on distribution of Free-Sample {(Rule: 65C), (Section 30,Para # f(iv)} In respect of industry other than pharmaceutical industry:Turnover upto Taka 5 crore : 1.50%Turnover exceeding Taka 5 crore but not exceeding Taka 10 crore : 0.75%Turnover exceeding Taka 10 crore : 0.375%

In respect of pharmaceutical industry:Turnover upto Taka 5 crore : 2.0%Turnover exceeding Taka 5 crore but not exceeding Taka 10 crore : 1.0%Turnover exceeding Taka 10 crore : 0.50%

xxxi Head Office Expenses for a Company not incorporated in Bangladesh, allowable upto 10% of the net profitt (Section 30g)

xxxii Technical Assistance Fee / Royalty allowable upto 5% of the profit (Section 30h)

xxxiii Incentive Bonus allowable upto 10% of the disclosed net profit (Section 30j)

23. Deductions are not admissible in certain circumstances [Section 30]

The following expenditures are not admissible deductions in the determination on income from business or profession:

i. Payment of salaries if tax is not deducted at the time of payment and paid thereon in accordance with section 50 [Para # 30(a)]

ii. Any payment made by an assessee to any person if tax thereon has not been deducted and credited in accordance with Chapter VII and VAT thereon has not been collected or deducted and credited in accordance with VAT Act. 1991 [Para # 30(aa)]



iv. Transfer of Capital Asset of a firm to a new company: Capital gain arising from transfer of capital asset of a firm to a new company registered under companies Act 1994 and the whole amount of capital gain is invested in the equity of the said company by the partners of the firm, then the capital gain shall not be charged to tax as income of the year of transfer [Section 32(11)]

v. Transfer of Stocks and Shares of a public company by a non-resident: Capital gain arising in the hand of a non-resident from transfer of stocks or shares of a listed company is exempted from tax provided such assessee is entitled to similar exemption in the country in which he is a resident [Section 31]

26. Capital Gain Tax [Second Schedule]

Assessee New RateAY 2013-14

Previous RateAY 2012-13

Tax in respect of Capital Gain: In Case of Company: [Second Schedule,

Para # 2(a)] Capital gain will be taxed as a block of income separate from other income of the assessee company at flat rate

15% 15%

In Case of a person other than Company: [Second Schedule, Para # 2(b)]Where the capital gain arises as result of a

disposal after not more than 5 years from the date of acquisition

Where the capital gain arises as result of a disposal after 5 years from the date of acquisition;

Applicable rate on total income including capital

gainTax payable at the

rate applicable on total income including said

income @ 15% on the capital

Applicable rate on total income including

capital gainTax payable at the rate

applicable on total income including said income @ 15% on the

capital

27. Income from Other Sources: [Section 33]

Following income of an assessee is assessable under the Income from Other Sources:

a. Dividend;

b. Interest;

c. Royalties and Technical Services;

d. Income from letting of machinery, plant, furniture, building etc;

e. Deemed Income [Section 19 (1, 2, 3, 4, 5, 7, 8, 9, 10, 11, 12, 13, 21 & 24)]

f. Income of any kind which is not classifiable under any other heads specified in Section 20.

Second Schedule, Para # 2 of the Income Tax Ordinance, 1984 which prescribes rates of income tax in certain special cases;

In determination of the gain on transfer of any expenditure incurred solely in connection with transfer of the capital asset and the cost of acquisition including expenditure, if any, incurred for the provement of asset are deductible from the sale value. In case of acquisition of asset:

Events Value of cost capital assets

i. By purchase the actual cost of the asset;

Actual cost of the previous owner as reduced by depreciation allowance;

ii. Property acquired by gift, bequest or will or under a transfer on a trust or distribution of capital asset on liquidation of company or solution of a firm or association of persons;

Where actual cost of the previous owner as reduced by depreciation allowance. Where actual cost to the previous owner cannot be ascertained, fair market value of assets on the date on which it became the property of previous owner, shall be taken to be the cost of acquisition in the hand of present owner;

25. Exemption of Capital Gains from tax [Section 32]

Capital gains or portion thereof arising out of transfer of certain capital assets are exempted from the income tax under certain circumstances and upon fulfillment of certain conditions. Following are the cases of full or partial exemptions:

i. Transfer of capital asset used in the business with following rules: [Section 32(5)]

A declaration shall have to be made before the assessment is made;

y a new capital asset for the purpose of business or profession has to be purchased within 1 year before or after the date of transfer;

y when capital gain is greater than the cost of new asset, capital gain upto the extent of cost of acquisition of new asset shall be exempted and balance shall be charged to tax;

y when capital gain is equal or less than the cost of new asset, no tax shall be charged on the capital gain;

ii. Capital gain arising out of transfer of Government Securities is exempted from tax [Section 32(7)]

iii. Transfer of Buildings and Lands to a new company for setting up an industry and the whole amount of capital gain arising out of such transfer is invested in the equity of the said company, the capital gain shall not be charged to tax as income of the year of transfer [Section 32(10)]



iiiIncome of a religious or charitable institution derived from voluntary contributions. [Para # 2]

iv Income of Local Government. [Para # 3]

v Income of Provident Fund and other Funds. [Para # 4]

viTraveling Allowances, etc. (to meet expenses wholly and necessarily incurred in performance of the duties of an office or employment of profit) incurred. [Para # 5]

vii Income of Trustees on behalf of any recognized fund. [Para # 6]

viiiIncome of the personnel of the foreign missions, not being a citizen of Bangladesh. [Para # 7]

ix Pension. [Para # 8]

x Income from dividend amounting to Taka 10,000.

xi Share of Capital Gains of a Partner of a Firm. [Para # 18]

xii Income of a member of Hindu Undivided Family. [Para # 19]

xiii Gratuity. [Para # 20]

xivAny payment received from Provident Fund and other Funds (PF, WPPF and approved superannuation fund). [Para # 21]

xv Income from dividend of a mutual fund or a unit fund upto Taka 25,000. [Para # 22A]

xvi Interest on tax-free Government Securities. [Para # 24]

xvii Interest on the balance in a Recognized Provident Fund. [Para # 25]

xviii Payment received on voluntary retirement. [Para # 26]

xix Income of indigenous Hillman. [Para # 27]

xx Income from export business. [Para # 28]

xxi Income from agriculture upto Taka 50,000. [Para # 29]

xxii Capital Gains from Machinery or Plant used in business or profession. [Para # 31A]

xxiii Income from the business of Software Development and Information Technology Enabled Services (ITES) upto 30 June 2015. [Para # 33]

xxiv Income from fisheries (not applicable to a company), poultry, production & marketing of seeds, farming (cattle, dairy, frog & mushroom), horticulture, floriculture and sericulture; if such income exceeds Taka 150,000 and at least 10% of income invested in bond & govt. Securities. [Para # 34]

xxv Income from the export of handicrafts upto 30 June 2015. [Para # 35]

xxvi Any amount paid by govt. as tax on behalf of Petroleum Exploration Company under Production Sharing Contract (PSC). [Para # 36]

xxvii Income from educational activities of private Agricultural College and University. [Para # 37]

28. Set-Off of Losses [Section 37]

Whenever an assessee sustains a loss in any year under any of the following heads of income, such as, property, interest on securities, business or profession, agricultural income and other sources, he is entitled to set-off the loss so sustained against his income, profits or gains under any other head in that year. Any speculative transactions undertaken by an assessee should be treated as a distinct and separate business and any loss incurred in those transactions should be set-off only against the income, profits or gains of that business. Loss on Capital Gains cannot be set-off against income from any other head. Such loss can be set-off only against the Capital Gains. Any loss from Business or Profession shall not be set off against income from House Property in the year such loss crop up.

29. Carry forward of loss [Section 38]

Whenever an assessee sustains any loss under the head of Business or Profession not being loss from speculation business and the loss cannot wholly be set-off against income under any other head i.e. salary, property, agricultural income, interest on securities and income from other sources, 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. The only exception in this regard is that the loss sustained in speculative business shall be carried forward to be set-off only against speculative profits, if any, of the following year. Loss cannot be carried forward for more than six successive assessment years.

30. 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 so on for succeeding years an

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