Income Tax in Bangladesh

1. Structure:

Among direct taxes, income tax is the main source of revenue. It is a progressive tax system. Income tax is imposed on the basis of ability to pay. "The more a taxpayer earns the more he should pay''- is the basic principle of charging income tax. It aims at ensuring equity and social justice. In Bangladesh income tax is being administered under the tax legislations named as “THE INCOME TAX ORDINANCE, 1984 (XXXVI OF 1984) and INCOME TAX RULES, 1984.”

2. Income Tax Authorities:

•           The National Board of Revenue;

•           Chief Commissioner of Taxes;

•           Directors-General of Inspection (Taxes);

•           Commissioner of Taxes (Appeals);

•           Commissioner of Taxes (Large Taxpayer Unit);

•           Director General (Training);

•           Director General, Central Intelligence Cell;

•           Commissioners of Taxes;

•           Additional Commissioners of Taxes (Appeal/Inspecting);

•           Joint Commissioners of Taxes (Appeal/Inspecting );

•           Deputy Commissioners of Taxes;

•           Tax recovery officers;

•           Assistant Commissioners of Taxes;

•           Extra Assistant Commissioners of Taxes; and

•           Inspectors of Taxes.

3. Heads 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.

•           Agricultural Income

•           Income from business or profession.

•           Capital gains.

•           Income from other sources.

4. Tax Rate (Assessment Year 2015-16) :

(a) Other than Company:

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

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

On next upto Tk. 4,00,000/- 10%

On next upto Tk. 5,00,000/- 15%

On next upto Tk. 6,00,000/- 20%

On next upto Tk. 30,00,000/- 25%

On balance amount              -30%

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

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

On next upto Tk. 4,00,000/- 10%

On next upto Tk. 5,00,000/- 15%

On next upto Tk. 6,00,000/- 20%

On next upto Tk. 30,00,000/- 25%

On balance amount              -30%

• For retarded taxpayers, tax free income threshold limit is TK.3,75,000/-.

• For gazetted war-wounded freedom fighters, tax free income threshold limit is Tk. 4,25,000/- .

• Minimum tax for any individual assessee living in Dhaka and Chittagong City Corporation area is Tk.5,000/-.

• Minimum tax for any individual assessee living in other City Corporations area is Tk. 4,000/-.

• Minimum tax for any individual assessee living in any other areas is Tk. 3,000/-.

• Non-resident Individual 30% (other than non-resident Bangladeshi)

(b) For Companies

(i) Publicly Traded Company 25%

(ii) Non-publicly Traded Company 35%

(iii) Bank, Insurance & Financial institutions (ExceptMerchant bank):

  • Publicly listed and 4th generation Banks & FI 40%

  • Other Banks & FI 42.5%

(iv) Merchant bank 37.5%

(v) Cigarette manufacturing company/Others 45%

(vi) Mobile Phone Operator Company 45%

(vii) Publicly traded mobile company 40%

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

5. Tax Rebate for investment :[Section 44(2)only allowable for Resident/NonResident Bangladeshi]

(a)Rate of Rebate:

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

(b)Types of investment qualified for the tax rebate are:-

• Life insurance premium up to 10% of the face value.

• Contribution to Provident Fund to which Provident Fund Act, 1925 applies.

• Self contribution and employer's contribution to Recognized Provident Fund.

• Contribution to Superannuation Fund.

• Contribution up to TK 60,000 to deposit pension scheme sponsored by any scheduled bank or a financial institution.

• Investment in approved debenture or debenture stock, Stocks or Shares.

• Contribution to Benevolent Fund and Group Insurance premium.

• Contribution to Zakat Fund.

• Donation to charitable hospital approved by National Board of Revenue.

• Donation to philanthropic or educational institution approved by the Government.

• Donation to socio-economic or cultural development institution established in Bangladesh by Aga Khan Development Network.

• Donation to ICDDRB.

• Donation to philanthropic institution-CRP, Savar, Dhaka.

• Donation up to tk. 5 lac to (1) Shishu Swasthya Foundation Hospital, Mirpur, Shishu Hospital, Jessore and Hospital for Sick Children, Sathkhira run by Shishu Swasthya Foundation, Dhaka. (2)Diganta Memorial Cancer Hospital, Dhaka. (3) The ENT and Head-Neck Cancer Foundation of Bangladesh, Dhaka and (4) Jatiya Protibandhi Unnayan Foundation, Mirpur, Dhaka.

• Donation to Dhaka Ahsania Mission Cancer Hospital.

• Donation to Sylhet Diabetic Samity, Islamia Eye Hospital and MA Ispahani Institute of Opthalmology, Kidney Foundation and National Heart Foundation of Bangladesh.

• Donation to Asiatic Society of Bangladesh.

• Donation to Muktijodha Jadughar.

• Donation to National level institution set up in memory of liberation war.

• Donation to National level institution set up in memory of Father of the Nation.

• Any investment by an individual in savings certificate and Bangladesh Government Treasury Bond.

• Investment in purchase of one computer or one laptop by an individual assessee.

6. Who should submit Income Tax Return?

• If total income of any individual other than female taxpayers, senior male taxpayers of 65 years and above, retarded taxpayers and war wounded gazetted freedom fighter during the income year exceeds Tk 2,50,000/-.

• If total income of any female taxpayer, senior male taxpayer of 65 years and above during the income year exceeds Tk 3,00,000/-.

• If total income of any retarded taxpayer during the income year exceeds TK. 3,75,000.

• If total income of any gazetted war-wounded freedom fighter taxpayer during the income year exceeds Tk. 4,25.000/-.

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

• A person who lives in any city corporation/paurashava/divisional HQ/district HQ and owns motor car/owns membership of a club registered under VAT Law.

• If any person runs a business or profession having trade license and operates a bank account.

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

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

• Any person who participates in a tender.

• Candidate for Paurashava, City Corporation, Upazilla or Parliament elections.

• Any company registered under the Company Act, 1913 or 1994.

• Any Non-government organization (NGO) registered with NGO Affairs Bureau.

7. Time to submit Income Tax Return:

(a)For Company Taxpayers:

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

(b)For Other Taxpayers:

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

8. Submission of withholding tax return and time to submit:

Person who makes any TDS (Tax deduction at source) on payment, must file a separate return of withholding tax under section 75A of the Ordinance.

• 15th day of October, January, April and July.

• Or extended date up to 15 days by DCT.

• Statement of TDS, Copy of Treasury challan /pay-orders should be submitted with the return.

9. Consequences of Non-Submission of Return and Return of withholding tax.

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

• in case of an individual assessee whose income was not assessed previously Tk. 5,000/-.

• in case of an individual assessee whose income was assessed previously, fifty per cent (50%) of the tax payable on the last assessed income or Tk. 1,000/-, whichever is higher.

• in case of a continuing default by any type of assessee, a further penalty of Tk. 50/- for every day of delay.

10. Consequences of using fake TIN:

• DCT can impose a penalty not exceeding TK.20,000/-

• For continuous use of fake TIN deliberately- 3 years imprisonment, up to TK. 50,000/- fine or both.

11. Assessment Procedures:

• For a return submitted under normal scheme, assessment is made after giving an opportunity of hearing.

• For returns submitted under Universal Self Assessment Scheme, the acknowledgement slip is considered to be an assessment order of the Deputy Commissioner of Taxes. Universal Self Assessment may be subject to “process and audit”.

Provided that a return of income filed under universal self assessment scheme, shall not be selected for audit where such return shows at least twenty per cent higher income than the income assessed or shown in the return of the immediately preceding assessment year and such return-

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

(b) does not show receipt of gift during the year;

(c) does not show any income chargeable to tax at a rate reduced under section 44; or

(d) does not show or result any refund.

12. 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.

13. Tax withholding functions:

In Bangladesh withholding taxes are usually termed as Tax deduction and collection at source. Under this system both private and public limited companies or any other organization specified by law are legally authorized and bound to withhold taxes at some point 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. 

14. 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 four lakh. Penalty is imposable for default in payment of any installment of advance tax.

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Note: Information placed here in above is only for general perception. This may not reflect the latest status on law and may have changed in recent time. Please seek our professional opinion before applying the provision. Thanks.