Income Tax at a Glance 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 Next Next Next Rest Amount 1,65,000/2,75,000/3,25,000/3,75,000/Nil 10% 15% 20% 25%

For female taxpayers, senior taxpayers of age 70 years and above and retarded taxpayers, tax payable for the First Next Next Next Rest Amount 1,80,000/2,75,000/3,25,000/3,75,000/Nil 10% 15% 20% 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 Non-publicly Traded Company Bank, Insurance & Financial Company Mobile Phone Operator Company 27.5% 37.5% 45% 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 Respective Zone LTU

1 Salaries

Section 50

deduction at average rate

2 Discount on the real deduction at normal rate value of Bangladesh Section 50A or maximum rate Bank Bills whichever is greater. 3 Interest on securities Section 51 10%on interest or discount

LTU Zone-2 (Partly) & LTU Zone-2

4 Supply of goods and nil up to 1 lac, 1-5 lacs execution of Section (1%), 5-15 lacs (2.5%), contracts and sub52(Rule 16) 15-25 lacs 3.5% and 25 contracts lacs and above (4%) 5 Indenting commission / Section 52 (Rule 17) 3.5% of the total receipt of indenting commission

Shipping agency commission 6 Royalty, Fees for professional or technical services

& 5% of total Shipping agency commission receipt Zone-8 Section 52 A10% of the fees Ctg. Zone2 Zone-2 Respective Zone Zone-2

7 Stevedoring agency Section 52 7.5% of the fees & Security service AA 8 C & F agency commission Section 52 7.5% of the fees AAA

9 Sale of bandrolls ( for 6% of the value of Section 52B biri) bandrolls. 10 Compensation for acquisition of property 11 Interest on saving instruments 12 Collection of tax from brick manufacturers 6% of the compensation Section 52C money Section 52D 10% of the amount of interest (Current rate)

Zone-2

1 Sec. = Tk.10,000/ for Respective each brick field. Zone 1.5 Sec. = Tk.12,000/ for Section 52F each brick field. 2 Sec. = Tk.18,000/ for each brick field. Section 52I 5% of the amount of commission. LTU Zone-3

13 Commission on Letter of Credits

14 Issuing & Renewal of Tk 500/- For renewal of Section 52K trade licence each Lincence 15 Trustee fees Section 52L 10%

16 Frieght Forward agency Com. 17 Rental power 18 Import of goods 19 Income from house property (house rent)

Section 52M 7.5% Section 52N 4% Section 53 (Rule17A) 3% of the value of imports. Zone-2 Zone-2 Dha & Other outside Zone Zone-2,ctg Zone-2, dhk & ctg Zone-5 Zone-7 Zone-5 0.25% Zone-2 Zone-6 Zone-2

No deduction if monthly rent is below 20,000/Section 53A 3% (if monthly rent is (Rule17B) 20,000-40,000 Tk.) and 5% (if monthly rent is above 40,000 Tk.) 5% of freight

20 Shipping business of Section resident 53AA

21 Export of manpower Section 53B 10% of the service (Rule 17C) charges. 22 Export of Knitwear 23 Member of Stock Exchange Section 53BB Section 53BBB 0.25% 0.015%

24 Export of goods Section except Knitweare & 53BBBB Woven garments 25 Sale of goods by public auction 26 Courier Service (Non-resident) 27 Payment to film

Section 53C 5% of the sale price (Rule 17D) Section 53CC 7.5%

Section 53D 5% of the amount paid

actors and actresses 28 Cash subsidy

(Rule 17E) Section 53DD

exceeding Tk. 36000/5% Zone-5 Zone-2 & LTU

29 Commission Fees or Section 53E 7.5% of the amount of discount paid to (Rule 17G) commission. distributors 30 Commission or charges paid to the agents of foreign buyers

Dhk.Zone6, Ctg.Zone4 % on the amount of Section 53EE 3 and Zone commission or charges. of Respective Division Section 53F 10% of the amount of (Rule 17H) interest. In case of Bldg. 250 per sq. meter Section 53FF In case of land 5% of deed value Section 53G 3% on the amount of commission Zone-1 Zone-5

Interest on bank 31 deposits 32 Real Estate & Developers

33 Insurance commission 34 Commission paid to the Surveyors of General Insurances

LTU Dhk.Zone2, Ctg.Zone3 and Zone of Respective Division Survey

Section 53GG

7.5% on the amount of commission.

35 Transfer of property Section 53H 5% of the value of the

(Rule 17I) Interest on Post Office Savings Bank Account

property.

Zone Zone-2

No deduction if the amount of interest does not exceeds Tk.1,50,000 Section 53I and if exceeds then 10% on the amount of interest . No deduction if monthly rent is below 15,000/Section 53J 3% (if monthly rent is (Rule 17BB) 15,000 -30,000 Tk.) and 5% (if monthly rent is above 30,000 Tk.) 3% of the value of the property.

36 Rent of vacant land, plant and machinery

Zone-2

37 Advertising bill of news paper, magazine, private television channel 38 Dividend

Zone-5 Section 53K

Section 54

(1) Resident individual 10%, non-resident individual 25% (2) Company 15% 20% of the amount won. Compny - rate applicable to the com. Other than company - maximum rate.

LTU (only LTUs files) all others Zone-2 Zone-2 Zone-6

39 Income from lottery Section 55 40 Income of nonresident Other than Section 56 non-resident Bangladeshi}

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