Income Tax Bangladesh for Assessment Year-2008-09

Among direct taxes, income tax is one of the main sources of revenue. It is a progressive tax system. Income tax is imposed on the basis of ability to pay. The more a taxpayer earns the more he should pay''- is the basic principle of charging income tax. It aims at ensuring equity and social justice.

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

Sources of Income:
For the purpose of computation of total income and charging tax thereon, sources of income can be classified into 7 categories, which are as follows :
Salaries
Interest on securities
Income from house property
Income from agriculture
Income from business or profession
Capital gains
Income from other sources.

Tax Rate (Assessment Year- 2008-09) :

Other than Company :
For individuals other than female taxpayers, senior taxpayers of 70 years and above and retarded taxpayers, tax payable for the
First 1,65,000/- Nil

Next 2,75,000/- 10%

Next 3,25,000/- 15%

Next 3,75,000/- 20%

Rest Amount 25%

For female taxpayers, senior taxpayers of age 70 years and above and retarded taxpayers, tax payable for the
First 1,80,000/- Nil

Next 2,75,000/- 10%

Next 3,25,000/- 15%

Next 3,75,000/- 20%

Rest Amount 25%

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

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

For Companies
Publicly Traded Company 27.5%
Non-publicly Traded Company 37.5%
Bank, Insurance & Financial Company 45%
Mobile Phone Operator Company 45%

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

Tax Rebate for investment :

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

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

Who should submit Income Tax Return ?

If total income of any individual other than female taxpayers, senior taxpayers of 70 years and above and retarded taxpayers during the income year exceeds Tk 1,65,000/-.

If total income of any female taxpayer, senior taxpayer of 70 years and above and retarded taxpayer during the income year exceeds Tk 1,80,000/-.

If any person was assessed for tax during any of the 3 years immediately preceding the income year.

A person who lives in any city corporation/paurashava/divisional HQ/district HQ and owns a building of more than one storey and having plinth area exceeding 1,600 sq. feet/owns motor car/owns membership of a club registered under VAT Law.

If any person subscribes a telephone.

If any person runs a business or profession having trade license.

Any professional registered as doctor, lawyer, income tax practitioner, Chartered Accountant, Cost & Management Accountant, Engineer, Architect and Surveyor etc.

Member of a Chamber of Commerce and Industries or a trade Association.

Any person who participates in a tender.

A person who has a Taxpayer's Identification Number (TIN).

Candidate for Union Parishad, Paurashava, City Corporation or Parliament.

Time to Submit Income Tax Return:
For Company By fifteenth day of July next following the income year or, where the fifteenth day of July falls before the expiry of six months from the end of the income year, before the expiry of such six months.

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

imposition of penalty amounting to 10% of tax on last assessed income subject to a minimum of Tk. 1,000/-

In case of a continuing default a further penalty of Tk. 50/- for every day of delay.

Assessment Procedures :
For a return submitted under normal scheme, assessment is made after hearing.

For returns submitted under Universal Self Assessment Scheme, the acknowledgement slip is determined to be an assessment order. Universal Self Assessment is of course subject to audit.

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

Tax withholding functions : In Bangladesh withholding taxes are usually termed as Tax deduction and collected at source. Under this system both private and public limited companies or any other organization specified by law are legally authorized and bound to withhold taxes at some point of making payment and deposit the same to the Government Exchequer. The taxpayer receives a certificate from the withholding authority and gets credits of tax against assessed tax on the basis of such certificate.

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

No. Heads Section/Rule Rate Chalan in the name of
1
Salaries
Section 50
deduction at average rate
Respective Zone
2
Discount on the real value of Bangladesh Bank Bills
Section 50A
deduction at normal rate or maximum rate whichever is greater.
LTU
3
Interest on securities
Section 51
10%on interest or discount
LTU
4
Supply of goods and execution of contracts and sub-contracts
Section 52(Rule 16)
nil up to 1 lac, 1-5 lacs (1%), 5-15 lacs (2.5%), 15-25 lacs 3.5% and 25 lacs and above (4%)
Zone-2 (Partly) & LTU
5
Indenting commission /Shipping agency commission
Section 52 (Rule 17)
3.5% of the total receipt of indenting commission & 5% of total Shipping agency commission receipt
Zone-2
6
Royalty, Fees for professional or technical services
Section 52 A
10% of the fees
Zone-8
7
Stevedoring agency & Security service
Section 52 AA
7.5% of the fees
Ctg. Zone-2
8
C & F agency commission
Section 52 AAA
7.5% of the fees
Zone-2
9
Sale of bandrolls ( for biri)
Section 52B
6% of the value of bandrolls.
Respective Zone
10
Compensation for acquisition of property
Section 52C
6% of the compensation money
Zone-2
11
Interest on saving instruments
Section 52D
10% of the amount of interest (Current rate)
Zone-2
12
Collection of tax from brick manufacturers
Section 52F
1 Sec. = Tk.10,000/ for each brick field.1.5 Sec. = Tk.12,000/ for each brick field.2 Sec. = Tk.18,000/ for each brick field.
Respective Zone
13
Commission on Letter of Credits
Section 52I
5% of the amount of commission.
LTU
14
Issuing & Renewal of trade licence
Section 52K
Tk 500/- For renewal of each Lincence
Zone-3
15
Trustee fees
Section 52L
10%

16
Frieght Forward agency Com.
Section 52M
7.5%

17
Rental power
Section 52N
4%

18
Import of goods
Section 53 (Rule17A)
3% of the value of imports.
Zone-2
19
Income from house property (house rent)
Section 53A (Rule17B)
No deduction if monthly rent is below 20,000/-3% (if monthly rent is 20,000-40,000 Tk.) and 5% (if monthly rent is above 40,000 Tk.)
Zone-2 Dha & Other outside Zone
20
Shipping business of resident
Section 53AA
5% of freight
Zone-2,ctg
21
Export of manpower
Section 53B (Rule 17C)
10% of the service charges.
Zone-2, dhk & ctg
22
Export of Knitwear
Section 53BB
0.25%
Zone-5
23
Member of Stock Exchange
Section 53BBB
0.015%
Zone-7
24
Export of goods except Knitweare & Woven garments
Section 53BBBB
0.25%
Zone-5
25
Sale of goods by public auction
Section 53C (Rule 17D)
5% of the sale price
Zone-2
26
Courier Service (Non-resident)
Section 53CC
7.5%
Zone-6
27
Payment to film actors and actresses
Section 53D (Rule 17E)
5% of the amount paid exceeding Tk. 36000/-
Zone-2
28
Cash subsidy
Section 53DD
5%
Zone-5
29
Commission Fees or discount paid to distributors
Section 53E (Rule 17G)
7.5% of the amount of commission.
Zone-2 & LTU
30
Commission or charges paid to the agents of foreign buyers
Section 53EE
4 % on the amount of commission or charges.
Dhk.Zone-6, Ctg.Zone-3 and Zone of Respective Division
31
Interest on bank deposits
Section 53F (Rule 17H)
10% of the amount of interest.
Zone-1
32
Real Estate & Developers
Section 53FF
In case of Bldg. 250 per sq. meterIn case of land 5% of deed value
Zone-5
33
Insurance commission
Section 53G
3% on the amount of commission
LTU
34
Commission paid to the Surveyors of General Insurances
Section 53GG
7.5% on the amount of commission.
Dhk.Zone-2, Ctg.Zone-3 and Zone of Respective Division
35
Transfer of property
Section 53H (Rule 17I)
5% of the value of the property.
Survey Zone

Interest on Post Office Savings Bank Account
Section 53I
No deduction if the amount of interest does not exceeds Tk.1,50,000 and if exceeds then 10% on the amount of interest .
Zone-2
36
Rent of vacant land, plant and machinery
Section 53J (Rule 17BB)
No deduction if monthly rent is below 15,000/-3% (if monthly rent is 15,000 -30,000 Tk.) and 5% (if monthly rent is above 30,000 Tk.)
Zone-2

37
Advertising bill of news paper, magazine, private television channel
Section 53K
3% of the value of the property.
Zone-5
38
Dividend
Section 54
(1) Resident individual 10%, non-resident individual 25% (2) Company 15%
LTU (only LTU’s files) all others Zone-2
39
Income from lottery
Section 55
20% of the amount won.
Zone-2
40
Income of non-resident Other than non-resident Bangladeshi}
Section 56
Compny - rate applicable to the com. Other than company - maximum rate.
Zone-6

Major areas for final settlement of tax liability : Tax deducted at source for the following cases is treated as final discharge of tax liabilities. No additional tax is charged or refund is allowed in the following cases:-
Supply or contract work
Band rolls of hand made cigarettes
Import of goods
Transfer of properties
Export of manpower
Real Estate Business
Export value of garments
Local shipping business
Royalty, technical know-how fee
Insurance agent commission.
Auction purchase
Payment on account of survey by surveyor of a general insurance company
Clearing & forwarding agency commission.
Transaction by a member of a Stock Exchange.
Courier business
Export cash subsidy

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

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

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

Fiscal incentives :Following are fiscal incentives available to a taxpayer:-

a) Tax holiday : Tax holiday is allowed for industrial undertaking, tourist industry and physical infrastructure facility established between 1st July 2008 to 30th June 2011 in fulfillment of certain conditions.

Industrial Undertaking Eligible for Tax holiday : (i) An industry engaged in production of textile, textile machinery, jute goods, high value garments, pharmaceuticals, melamine, plastic products, ceramics, sanitary ware, steel from iron ore, MS Rod, CI Sheet, fertilizer, insecticide & pesticide, computer hardware, petro-chemicals, agriculture machinery, boilers, compressors, basic raw materials of drugs, chemicals and pharmaceuticals. (ii) An industry engaged in agro-processing, ship building, diamond cutting. Physical Infrastructure Eligible for Tax holiday: Sea or river port, container terminals, internal container depot, container freight station, LNG terminal and transmission line, CNG terminal and transmission line, gas pipe line, flyover, mono rail, underground rail, telecommunication other than mobile phone, large water treatment plant & supply through pipe line, waste treatment plant, solar energy plant, export processing zone. Tourism Industry Eligible for Tax holiday : Residential hotel having facility of three star or more.

b) Accelerated depreciation: Accelerated depreciation on cost of machinery is admissible for new industrial undertaking in the first year of commercial production 50%, in the second year 30% and in the third year 20%.c) Income derived from any Small and Medium Enterprise (SME) engaged in production of any goods and having an annual turnover of not more than taka twenty four lakh is exempt from tax.d) Industry set up in EPZ is exempt from tax for a period of 10 years from the date of commencement of commercial production.e) Income from fishery, poultry, cattle breeding, dairy farming, horticulture, floriculture, mushroom cultivation and sericulture are exempt from tax up to 30th June, 2011, subject to investing at least 10% of the exempted income that exceeds one lakh Taka, in government bonds.f) Income derived from export of handicrafts is exempted from tax up to 30th June, 2011.g) An amount equal to 50% of the income derived from export business is exempted from tax.h) Listed companies are entitled to 10% tax rebate if they declare dividend of 20% or more.i) Income from Information Technology Enabled Services (ITES) business is exempted up to 30th June, 2011.

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