Executive Summary

There are some laws around our society to run the activities smoothly and our concern for the
project is about Direct Tax Structure in Bangladesh as per ITO. 1984
Taxation, one of the major sources of public revenue to meet a country's revenue and
development expenditures with a view to accomplishing some economic and social objectives,
such as redistribution of income, price stabilization and discouraging harmful consumption. It
supplements other sources of public finance such as issuance of currency notes and coins,
charging for public goods and services and borrowings. The term 'tax' has been derived from the
French word taxe and etymologically, the Latin word taxare is related to the term 'tax', which
means 'to charge'. Tax is 'a contribution exacted by the state'. It is a non-penal but compulsory
and unrequited transfer of resources from the private to the public sector, levied based on
predetermined criteria.
According to Article 152(1) of the Constitution of Bangladesh, taxation includes the imposition
of any tax, rate, duty or impost, whether general, local or special, and tax shall be construed
accordingly. Rate is a local tax imposed by local government on its residents or the property
owners of the locality, a duty is a tax levied on a commodity, and an impost is a tax imposed for
an entry into a country. Under the provision of article 83 of the Constitution, "no tax shall be
levied or collected except by or under the authority of an Act of Parliament".
Bangladesh inherited a system of taxation from its past British and Pakistani rulers. The system,
however, developed based on generally accepted canons and there had been efforts towards
rationalizing the tax administration for optimizing revenue collection, reducing tax evasion and
preventing revenue leakage through system loss.
Taxes include narcotics duty (collected by the Department of Narcotics Control, Ministry of
Home Affairs), land revenue (administered by the Ministry of Land and collected at local Tafsil
offices numbered on average, one in every two Union Parishads), non-judicial stamp (collected
under the Ministry of Finance), registration fee (collected by the Registration Directorate of the
Ministry of Law, Justice and Parliamentary Affairs) and motor vehicle tax (collected under the
Ministry of Communication).

Page 1 of 32

The tax structure in the country consists of both direct (income tax, gift tax, land development
tax, non-judicial stamp, registration, immovable property tax, etc) and indirect (customs duty,
excise duty, motor vehicle tax, narcotics and liquor duty, VAT, SD, foreign travel tax, TT,
electricity duty, advertisement tax, etc) taxes.
The present land revenue system of Bangladesh has its base in the East Bengal state acquisition
and tenancy act 1950 which established a direct contract between the taxpayer and the
government. In accordance with the provisions of this Act, every person shall be liable to pay
income-tax in respect of his total income of the tax year. Subject to the provisions of this Act,
income-tax, including additional income-tax as described in section 4 and surcharge under
section 5 shall be charged in respect of the total income of a tax year of every person. Where the
income tax referred to in sub-section (2) is to be charged in respect of the income of a period
other than the tax year, the income-tax for such period shall be charged accordingly. The incometax referred to in sub-section (2) shall be charged at the rate specified in the First Schedule in the
manner provided therein. In respect of the income chargeable under sub-section (2), income tax
shall be deducted or collected at source or paid in advance, in accordance with the provisions of
this Act. The chargeability of income-tax on the income of a tax year under the foregoing
provisions shall be determined in accordance with the provisions of this Act.
Income Tax Ordinance 1984 (ITO) promulgated on the basis of recommendations of the Final
Report of the Taxation Enquiry Commission submitted in April 1979. Income taxpayers
(assessees) are classified as individuals, partnership firms, Hindu undivided families (HUF),
associations of persons (AOP), companies (publicly traded and private), local authorities, and
other artificial juridical persons. Tax rates and scope of taxable income differ based on residential
status of an assessee (resident or non-resident).

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What is meant by Tax? A tax is a financial charge or other levy imposed on an individual or a
legal entity by a state or a functional equivalent of a state. Taxes consist of direct taxes and
indirect taxes. Pecuniary burden laid upon individuals or property to support the government a
payment exacted by legislative authority. Tax is not a voluntary payment or donation but an
enforced contribution, exacted pursuant to legislative authority and is any contribution imposed
by government whether under the name of VAT, Custom, Excise or other name.
Taxation: Taxation means imposition of a non-penal yet compulsory levy for transfer of
resources from private to public sector, imposed by the public representative based on predetermined criteria and without reference to any specific commitment, in order to accomplish
some nations economic and social objective. These are dues that we pay for the privileges of
membership in an organized civil society. Tax is imposed in the assessment year based on
income year.
Assessment year: The assessment is a period of 12 months just following the income year
means computation of total income and tax payable there on.
Income year: Income year is the year when the income is earned.
The income tax is administrated Income Tax Ordinance, 1984 and the Income tax Rules, 1984 as
well as notification made under the Ordinance. The charge of tax of a person depends on its
residential status. Total world Income of a resident is charged to tax in Bangladesh. Whereas, a
non-resident's Bangladesh income is only charged to tax in Bangladesh. There are seven heads of
income. They are salary, interest on security, house property, agriculture, business and
profession, capital gain and other sources.
Submission of income tax returns is generally due by 30th September in case of non-companies
and by 31st December in case of companies.
Assessment is made in several procedures. They are self-assessment, presumptive assessment,
spot assessment, pre-audit based assessment. Certain percent of self-assessment cases are
selected for audit.

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The assessee can prefer appeal if aggrieved by his assessment. There are three primary forums
for appeal. They are to the Appellate Commissioner/Additional Commissioner/Joint
Commissioner

or

to

the

Commission

for

reviews.

The

decisions

of

Appellate

Commissioner/Additional Commissioner/Joint Commissioner can be challenged to the next

Appellate Court named as Appellate Tribunal.
Withholding tax is levy able on a number of items including contractors, imports, transfer of
urban land/building, bank deposits etc.
Bangladesh has Agreement on Avoidance of Double Taxation with 20 countries. Negotiations
with some other countries are on way.
Taxation one of the major sources of public revenue to meet a country's revenue and
development expenditures with a view to accomplishing some economic and social objectives,
such as redistribution of income, price stabilization and discouraging harmful consumption. It
supplements other sources of public finance such as issuance of currency notes and coins,
charging for public goods and services and borrowings. The term 'tax' has been derived from the
French word taxe and etymologically, the Latin word taxare is related to the term 'tax', which
means 'to charge'. Tax is 'a contribution exacted by the state'. It is a non-penal but compulsory
and unrequited transfer of resources from the private to the public sector, levied based on
predetermined criteria.
According to Article 152(1) of the Constitution of Bangladesh, taxation includes the imposition
of any tax, rate, duty or impost, whether general, local or special, and tax shall be construed
accordingly. Rate is a local tax imposed by local government on its residents or the property
owners of the locality, a duty is a tax levied on a commodity, and an impost is a tax imposed for
an entry into a country. Under the provision of article 83 of the Constitution, "no tax shall be
levied or collected except by or under the authority of an Act of Parliament".
Bangladesh inherited a system of taxation from its past British and Pakistani rulers. The system,
however, developed based on generally accepted canons and there had been efforts towards
rationalizing the tax administration for optimizing revenue collection, reducing tax evasion and
preventing revenue leakage through system loss.
Taxes include narcotics duty (collected by the Department of Narcotics Control, Ministry of
Home Affairs), land revenue (administered by the Ministry of Land and collected at local Tafsil
Page 4 of 32

offices numbered on average, one in every two Union Parishads), non-judicial stamp (collected
under the Ministry of Finance), registration fee (collected by the Registration Directorate of the
Ministry of Law, Justice and Parliamentary Affairs) and motor vehicle tax (collected under the
Ministry of Communication).
The tax structure in the country consists of both direct (income tax, gift tax, land development
tax, non-judicial stamp, registration, immovable property tax, etc) and indirect (customs duty,
excise duty, motor vehicle tax, narcotics and liquor duty, VAT, SD, foreign travel tax, TT,
electricity duty, advertisement tax, etc) taxes.
The present land revenue system of Bangladesh has its base in the East Bengal state acquisition
and tenancy act 1950 which established a direct contract between the taxpayer and the
government.
The most important tax on the value of transferred property is the non-judicial stamp tax (levied
under the Stamp Act 1899), which has been in existence since January 1899. Current rates of
non-judicial stamp duty are provided in the First Schedule of the Finance Act 1998, ranging from
Tk 4 to Tk 10,000 in case of absolute rate, or from 0.07% to 1.5% of the value of consideration
in case of ad valorem rate. The judicial stamp tax is being levied under the Court Fees Act 1870,
although the levy of court fees originated in the introduction of the Bengal Regulation No. 38 of
1795.
The first sales tax was introduced in the former Central Provinces of India in 1938. In Bengal,
sales tax was adopted in 1941. In 1948, sales tax was transferred as a central tax under the
General Sales Tax Act of 1948. The Sales Tax Act 1951 came into force on 1 July 1951 by
repealing the Pakistan General Sales Tax Act of 1948. Until 1982, sales tax was being collected
under the 1951 Act, which was replaced by the Sales Tax Ordinance 1982. The VAT law was
promulgated by repealing the Business.
Income tax was first introduced in the subcontinent by the British in 1860 to make up the
revenue deficit caused by the sepoy revolt, 1857. After independence of Bangladesh, income tax
was made effective under the Income Tax Act 1922 passed on the basis of the recommendations
of the All-India Income Tax Committee appointed in 1921. Currently, income tax has been
imposed under the Income Tax Ordinance 1984 (ITO) promulgated on the basis of
recommendations of the Final Report of the Taxation Enquiry Commission submitted in April
1979. Income taxpayers (assessees) are classified as individuals, partnership firms, Hindu
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undivided families (HUF), associations of persons (AOP), companies (publicly traded and
private), local authorities, and other artificial juridical persons. Tax rates and scope of taxable
income differ based on residential status of an assessee (resident or non-resident).
From fiscal or assessment year, (AY) 2000-01, there is a filing threshold of annual total income
of Tk. 100,000 applicable for individuals (including non-resident Bangladeshis), partnership
firms, HUF, AOP and assessees other than companies and local authorities. In case an identity of
this group has a total annual income less than this level, he is not required to submit tax return
but if someone's income is higher, he is to pay a minimum tax of Tk.2, 000.
Bangladesh inherited a system of taxation from its past British and Pakistani rulers.
INCOME-TAX AUTHORITIES
In Bangladesh, under the Ministry of Finance, there are three separate divisions viz.
a) Finance Division (FD)
b) Internal Resource Division (IRD)
c) External Relations Division (ERD)
National Board of Revenue is working under Internal Resource Division and it is the apex body
of tax administration. Under National Board of Revenue, there are two wings viz.
i) Taxes Wing
ii) Customs & VAT Wing
The highest executive Authority is the National Board of Revenue. The Chairman, National
Board of Revenue is the highest administrative authority of the tax administration including
Customs & VAT. The Chairman is also the Secretary of the Internal Resource Division (IRD).
Under the chairman, there are some members in each wing. Under the National Board of
Revenue, a Commissioner of Taxes is the head of the department and he is in charge of the tax
zones.
Under the commissioner, there are Additional! Joint commissioners of taxes who are in charge of
ranges. Some ranges constitute a zone. Ranges are again divided into certain circles which are
headed by Deputy! Assistant! Extra Assistant Commissioners of Taxes.
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Postings, placements are generally made on the basis of revenue importance and the efficiency /
track record of the individual officer concerned. Inspectors of taxes are directly recruited by the
zonal commissioner and placed under different circles for enquiry purposes. There are also some
inspectors posted in the Commissioners office/Additional/Joint Commissioner office. Director
General of Inspection is in charge of inspections of the functions of commissioners all over the
country.
On the appellate side, there are Commissioners of Taxes (Appeals), Additional / Joint
Commissioner of Taxes (Appeals), who are assigned with the responsibilities of hearing appeals
from aggrieved assesses.

Bangladesh Taxes Appellate Tribunal is the highest forum of appeal on the question of facts.
But on question of law, either the aggrieved assesses or the concerned Commissioner of Taxes
may appeal to Honorable Supreme Court.

Newly inducted Director General of Taxes intelligence is to look after the concealments of
income, tax evasion and other irregularities in tax matters.

The National Board of Revenue (NBR) is a statutory body appointed by the Government under
the National Board of Revenue Order, 1972 (P. 0. No. 76 of 1972). Its powers of administration,
supervision and control extend over the whole Department. It is authorized to make rules but is
not empowered to give interpretation of any word used in a section it cannot impose on tax
payer a burden that is not in the statute (1985 BTD 131 (Trb.)); and to issue directions and
instructions to all officers of the Department for smooth running of administration, with one
exception it cannot interfere with the discretion of Commissioners of Taxes (Appeals),
Appellate Additional Commissioners of Taxes and Appellate Joint Commissioner of Taxes. The
judicial discretion vested in the Commissioner of Taxes in exercise of his revisional powers
under Sec. 121 cannot also be controlled by the Board. (C.I.T. v. Lala Rajshwar Parsad
[1956] 29 I. T.R. 792).

Page 7 of 32

[For a flow-chart view of the income-tax authorities P. T.O]

Page 8 of 32

Page 9 of 32

Income: Income means anything received in cash or in kind unless exempted by laws.
1) Assessable Income: Assessable Incomes are those incomes, which are included in the
determination of total income of a taxpayer.
a) Taxable Income: Taxable Incomes are those incomes that the tax is to be paid on
those incomes.
b) Non- Taxable Income: Non taxable income is taken into total income for taxation rate
purpose but no tax is to be paid on this part of income.
2) Non- Assessable Income: Non- assessable incomes are those incomes which are not
included in the determination of total income of a taxpayer.
1. Single Tax: Only one tax for everybody. Single tax is the poll tax or the head tax or adolescent
tax, which is imposed on a person simply because he is there in the society.
2. Multiple Taxes: A system under which different types of taxes shall be levied by the govt.
according to suitability. Ex. Income Tax, VAT.
a) Direct Tax: Direct tax is a sort of tax the impact of effect incidents and which fall back on the
person on whom it is imposed. EX: Income Tax, Marriage Tax etc.
b) Indirect Tax: Indirect taxes are those burden of which can be passed on others through price
vehicles.
c) Progressive Tax: The tax rate increases as the taxable income/amount increases.
d) Regressive tax: The opposite of a progressive tax is a regressive tax where the tax rate
decreases as the taxable income/amount increases.
e) Proportional Tax: In between is a proportional tax, where tax is fixed as the amount to which
the rate is applied increases.
A) Resident Taxpayer: Anyone who lives in the taxable territory for 182 days in the income year
or 365 days in the last four years preceding the income year and 90 days in the income year than
he is a resident.
B) Non- Resident: A nonresident is a person who is not a resident.
Note: Assesses and Tax payers are not apart from each other rather alike.
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Firm:
The head office of the firm should be registered in Bangladesh. Then it will be permitted as a
resident. Otherwise, the higher rate of taxes will be imposed on the firm as a non-resident.
Companies:
Given below are under companies of Non-Corporate Assesses.
Tax avoidance is the legal utilization of the tax regime to one's own advantage, in order to reduce
the amount of tax that is payable by means that are within the law. By contrast tax evasion is the
general term for efforts to not pay taxes by illegal means. The term tax mitigation is a synonym
for tax avoidance. Its original use was by tax advisors as an alternative to the pejorative term of
tax avoidance. Latterly the term has also been used in the tax regulations of some jurisdictions to
distinguish tax avoidance foreseen by the lawmakers from tax avoidance which exploits
loopholes in the law.
Based on these concepts arises the pillar of Tax Protesters as well as Tax Resistance:
Some of those attempting not to pay tax believe that they have uncovered interpretations of the
law that show that they are not subject to being taxed: these individuals and groups are
sometimes called tax protesters. An unsuccessful tax protestor has been attempting openly to
evade tax, while a successful one avoids tax. Tax resistance is the declared refusal to pay a tax
for conscientious reasons (because the resister does not want to support the government or some
of its activities). Tax resistors typically do not take the position that the tax laws are themselves
illegal or do not apply to them (as tax protesters do) and they are more concerned with not
paying for particular government policies that they oppose.
Avoidance also reduces government revenue and brings the tax system into disrepute, so
governments need to prevent tax avoidance or keep it within limits. The obvious way to do this is
to frame tax rules so that there is no scope for avoidance. In practice, this has not proved
achievable and has led to an ongoing battle between governments amending legislation and tax
advisors' finding new scope for tax avoidance in the amended rules.

Page 11 of 32

Tax Evasion:
By contrast, tax evasion is the general term for efforts by individuals, firms, trusts and other
entities to evade taxes by illegal means. Tax evasion usually entails taxpayers deliberately
misrepresenting or concealing the true state of their affairs to the tax authorities to reduce their
tax liability, and includes, in particular, dishonest tax reporting (such as declaring less income,
profits or gains than actually earned; or overstating deductions).
Illegal income and tax evasion:
Who earn income by illegal means (gambling, theft, drug trafficking etc.) is required to report
unlawful gains as income when filing annual tax returns. Suspected lawbreakers have therefore
been charged with tax evasion when there is insufficient evidence to try them for their non-tax
related crimes. Other times tax evasion can be used as a "one more nail in the coffin" by
prosecutors by stating that if a person earns illegal income, s/he may also be guilty of tax
evasion. Those who attempt to report illegal income as coming from a legitimate source could be
charged with money laundering.
Evasion of Value Added Tax (VAT):
During the latter half of the twentieth century, Value Added Tax (VAT) has emerged as a modern
form of consumption tax through the world. Producers who collect VAT from the consumers may
evade tax by under-reporting the amount of sales.
Control of Evasion:
Level of evasion depends on a number of factors one of them being fiscal equation. People's
tendency to evade income tax declines when the return for due payment of taxes is not obvious.
Evasion also depends on the efficiency of the tax administration. Corruptions by the tax officials
often render control of evasion difficult. Tax administrations resort to various means for plugging
in scope of evasion and increasing the level of enforcement.
Public opinion on tax avoidance:
Tax avoidance may be considered to be the dodging of one's duties to society, or alternatively the
right of every citizen to structure one's affairs in a manner allowed by law, to pay no more tax
Page 12 of 32

than what is required. Attitudes vary from approval through neutrality to outright hostility.
Attitudes may vary depending on the steps taken in the avoidance scheme, or the perceived
unfairness of the tax being avoided.
Corruption by tax officials:
Corrupt tax officials cooperate with the tax payers who intend to evade taxes. When they detect
an instance of evasion, they refrain from reporting in return for illegal gratification or bribe.
Corruption by tax officials is a serious problem for the tax administration in a huge number of
underdeveloped countries.
The distinction in various jurisdictions of Tax Evasion and Tax Avoidance:
The use of the terms tax avoidance and tax evasion can vary depending on the jurisdiction. In
general, the term "evasion" applies to illegal actions and "avoidance" to actions within the law.
The term "mitigation" is also used in some jurisdictions to further distinguish actions within the
original purpose of the relevant provision from those actions that are within the letter of the law,
but do not achieve its purpose.
Most countries impose taxes on income earned or gains realized within that country regardless of
the country of residence of the person or firm. Most countries have entered into bilateral double
taxation treaties with many other countries to avoid taxing nonresidents twice -- once where the
income is earned and again in the country of residence (and perhaps, for Bangladeshi citizens,
taxed yet again in the country of citizenship) -- however, there are relatively few double-taxation
treaties with countries regarded as tax havens. To avoid tax, it is usually not enough to simply
move one's assets to a tax haven. One must also personally move to a tax haven (and, for
Bangladesh nationals, renounce one's citizenship) to avoid tax.
Double taxation on the professional is accumulated to VAT and Income tax.
VAT+ Income Tax=double taxation on the professionals

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From the definition of direct tax we came to know that these taxes are borne by tax payers and
cannot be passing on to any other persons. In the case of direct taxes connection between the
taxpayer and the revenue authorities is direct and personal. Direct taxes consist of:
1. Income tax
2. Gift tax
3. Corporation tax
4. Capital gain tax
5. Foreign travel tax
6. Urban property tax etc.
Income tax: Income tax is paid on income. It is administered through the Income Tax Ordinance,
1984 and notifications made time to time under the Ordinance. As per section 2(62) as amended
through the Income Tax Ordinance, 1984 and includes any additional tax, excess profit tax,
penalty, interest, fee, or other charges leviable or payable under the Income Tax Ordinance, 1984.
Income tax is one of the major sources of revenue for government.
Gift tax: Gift taxes are charged on gifts. If any person transfers any movable or immovable
property voluntarily and without consideration or with an inadequate consideration, of any
money or moneys worth to another person then the transfer of the property will be treated as
gift. Gift tax is supervised by the Gift Act, 1990. The rates of the gift tax are prescribed in the
schedule to the Gift Tax Act 1990.
Corporation tax: According to the definition of corporation has a separate entity. Therefore tax is
also imposed on corporations. But tax rate varies among different corporations according to their
structure.
Capital Gain tax: Capital gain arises out of disposal of capital assets. We need to give capital
gain taxes if our income from capital gain meets the requirements of Income Tax Ordinance,
1984. It will be discussed more broadly under the head of income from capital gain in our
dissertation.

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Urban property tax: Property taxes are imposed on property. Like land development tax, land
revenue, city corporation tax etc. Tax is also imposed on property when we sell it but it comes
under income from capital gain.
It is said that the rate of income tax in Bangladeshis the lowest among all of the countries of the
world. For the betterment of the country as well as the taxpayers tax rates are keep on changing
from time to time. The rates of income tax vary from assessee to assessee. The tax rate of an
individual tax payer is not same as the tax rate applicable to a corporate assessee.
Tax rate for an individual: An individual tax payer below 65 years of age is taxed according to
the five stairs of taxation but if the assessee is over 65 or a lady then the 1 st tax ceiling would be
180,000 instead of 165,000 and other ceilings remain same. Tax rate of a non corporate tax payer
as per Finance Act, 2010 is:
1st

tk. 165,000

Nil

2nd

tk. 275,000

@10%

27,500

3rd

tk. 325,000

@ 15%

48,750

4th

tk. 375,000

@ 20%

75,000

On Balance

@ 25%

Note: (1) Minimum tax for an individual, however, cannot be less than tk. 2,000 and if the net
tax payable is more than tk. 10,000 then it has to be paid by a pay-order by a scheduled bank.
(2) If the assessee is a physically retarded person then up to tk. 200,000 is tax exempted.
An assessee does not have any income rather than from agriculture will get additional exemption
of tk. 50,000 irrespectively.

Page 15 of 32

Tax rate for corporate: as per Finance Act: 2009

Types of the corporation

Tax rate

Public limited company listed with the stock exchange

27.5%

Private limited company

37.5%

Bank, insurance companies and other financial institutions

42.5%

Garments industries (Finance Act: 2003)

Agro-processing industries

10%
Exempted

Mobile phone operators companies

45%

For textile industries (up to 30/06/06)

20%

Private Universities

15%

Co-operative Society

Exempted

Note: As per finance act 2009; every company irrespective of shown profit or loss shall pay a
min. tax of tk. 5000
Tax rate for a non resident: Tax rate for a non resident is 25% of his or her income. But a
Bangladeshi non resident will pay the normal rate of tax as per the five stairs of taxation. There
are seven heads of income. To compute one tax payers total income we have to consider income
of that individual from all these seven heads. These seven heads of income are Income from Salary (sec. 21)
Income from Interest on Securities (sec. 22)
Income from House Property (sec. 24)
Income from Agriculture (sec. 26)
Income from Business and Profession (sec. 28)
Income from Capital Gains (sec. 31)
Income from Other Sources (sec. 33)

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These heads of income are discussed below:

(1) Income from Salary: U/S 21
The basic salary one salaried person gets and the other benefits he or she receives from the
institute as a member of the institute are to be calculated while computing the total income.
Besides, there are some allowances which the tax payer gets; those are given below.

Whatever the amount the taxpayer gets as conveyance expense or allowance taka 24,000
shall be exempted from the conveyance allowance if the taxpayer is provided with a full time
transport service (as for example- governmental employees), then 7.5% of the basic salary
shall be added to the total income as a notional income; and if the taxpayer is
provided with part time transportation facility then only 5% of the basic salary shall
be added with the total income.

The salaried person can be provided with rent allowance or house facilities. If the taxpayer is
given the house rent allowance then 50% of the basic salary or taka 15,000 per month
whichever is less shall be exempted from the total salary. But if the employer provides the
house instead of house rent allowance then 25% of the basic salary shall be added to the total
income as notional income from the residential house.

If the salaried person is also provided with the medical allowance then the properly utilized
portion of the medical allowance is to be deducted from the medical allowance as expense
and the rest of the amount shall remain with the total income to be taxed. If the full medical
allowance is being utilized then that entire amount shall be treated as the medical expense.

Besides all these the dearness allowance, special allowance for overtime, bonuses,
entertainment allowance, and the employees contribution to recognized provident fund all
these shall be added with the total income.

Pension that one taxpayer gets shall not be taxed as it is entirely non-assessable.

Page 17 of 32

(2) Income from Interest on Securities: U/S 22

Securities: Security means acknowledgement of indebtedness by the Govt. towards

the members of the public who buy the security certificate issued by the Govt.

Debentures: Debentures means an acknowledgement of indebtedness by public Ltd.

Company towards the members of the public who buy the debenture certificate issued
by the public Ltd. Company.
Interest on securities up to Tk. 5,000 is exempt.
Interest on debentures alone is exempt up to Tk. 20,000 only.
But, the exemption from the both taken together shall not exceed Tk. 20,000.
If the investments are made out of loans from any financial institutions, the interest
payable there on shall be deducted from income on securities.
(3) Income from House property: U/S 24
Tax from the house property shall be ascertained on the basis of annual value of house property.

Annual value: Annual value is the reasonable rate which the house owner is expected to

get from time to time.

Or
Annual value is the reasonable rent at which house can be let out from time to time
Or
The actual rent, whichever is higher.
Only the house owner shall be assessed to pay tax.
When the share of house property each definite and as ascertainable income then tax shall be
calculated on the basis of specific share.
Deductions from income from house property:
Any sum payable to Government as land development tax or rent on

account of the land

comprised in the property.

The amount of any premium paid to insure the property against risk of damage or
destruction.
Where the property is subject to a ground rent, the amount of such rent.
Expenditures for repairs and others
Page 18 of 32

i. An amount equal to one fourth of the annual value of the property where the property is
used for residential purpose.
ii. An amount equal to thirty per cent of the annual value of the property where is used for
commercial purpose.
Where, the whole of the property is let out and it was vacant during a part of the year, a sum
equal to such portion of the annual value of the property as is proportionate to the vacancy of
such part.
(4) Income from Agriculture: U/S 26
Any receipts out of cultivation of land and the use of buildings, premises, and land appurtenant
thereto shall be considered as the income from agriculture after some considerations. The
allowable deductions under agriculture are given below.

Agricultural income shall be determined after allowing a deduction of 60% from receipts
from agriculture as agricultural expenses to avoid the no acceptable evidences of the
production cost of cultivation.

If the agriculturist does not have any other income source other than the agriculture then
he or she will get exemption of more taka 50,000 after the deduction of 60% of the
receipts as the agricultural expense.

There are some agricultural incomes which are also considered as the business income. As for
example- income from tea garden is bifurcated between agricultural income and business
income at the ratio of 60% and 40% consecutively. Income from rubber cultivation is also
bifurcated at the same ratio.
(5) Income from business and profession: U/S 28
Income from business and profession is the most important head of income because the largest
amount of tax is collected from this head. The term business includes any trade, commerce or
manufacture or any adventure or concern in the nature of trade, commerce or manufacture.

Page 19 of 32

Profession means some sorts of engagement by virtue of which a person can earn money through
his or her personal qualification.
Chargeability: The following income should be considered under income tax ordinance of 1984.
(A) Profits and gains of any business or profession carried on, or deemed to be carried on, by the
assessee at any time during the income year;
(B) Income derived from any trade or professional association or other association of like nature
on account of specific services performed for its members;
(C) Value of any benefit or perquisite, whether convertible into money or not, arising from
business or the exercise of a profession;
(D) The amount, the value of the benefit and the trading liability referred to in section 19(15);
(E) The excess amount referred to in section 19(16);
(F) The excess amount referred to in section 19(18);
(G) The sale proceeds referred to in section 19(20);
1 [(h) the amount of income under section 19(23).]
Explanation. -- Where speculative transactions carried on by an assessee are of such a nature as
to constitute a business, the business (hereinafter 1 Ins by F.A. 1994 referred to as "speculation
business") shall be deemed to be distinct and separate from any other business.
(2)

Notwithstanding anything contained in this Ordinance,-

(a) The profits and gains of any business of insurance and the tax payable thereon shall be
computed in accordance with the provisions of the Fourth Schedule;
(b) the profits and gains from the exploration and production of petroleum (including natural gas)
and the tax payable thereon shall be computed in accordance with the provisions of Part A of the
Fifth Schedule;
(c)

the profits and gains of any business which consists of, or includes, the exploration and

extraction of such mineral deposits of a wasting nature (not being petroleum and natural gas) as
may be specified in this behalf by the Government, carried on by an assessee in Bangladesh shall
be computed in accordance with the provisions of Part B of the Fifth Schedule.
1[(3) Notwithstanding anything to the contrary contained in any other provisions of this
Ordinance, in the case of Bangladesh Shilpa Bank, Bangladesh Shilpa Rin Sangstha
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2[ Investment Corporation of Bangladesh] and any commercial bank including the Bangladesh
Krishi Bank and Rajshahi Krishi Unnayan Bank, the income by way of interest in relation to
such categories of bad or doubtful debts as the Bangladesh Bank may classify in the income year
in which it is credited to its profit and loss account for that year or, as the case may be, in which
it is actually received, whichever is earlier.]
29. Deductions from income from business or profession.
(1) In computing the income under the head "Income from business or profession", the following
allowances and deductions shall be allowed, namely:(i) The amount of any rent paid for the premises in which the business or profession is carried on
Provided that if a substantial part of the premises is used by the assessee as a dwelling-house, the
amount shall be a proportionate part of the rent having regard to the proportionate annual value
of the part so used;
(ii) the amount paid for the repair of the hired premises in which the business or profession is
carried on if the assessee has undertaken to bear the cost of such repair; Provided that if a
substantial part of the premises is used by the assessee as a dwelling-house, the amount shall be a
proportionate part of the sum paid for such repair having regard to the proportionate annual value
of the part so used;
(iii) The amount of any interest paid or any profit shared with a bank run on Islamic principles in
respect of capital borrowed for the purposes of the business or profession;
Provided that if any part of such capital relates to replenishing the cash or to any other asset
transferred to 1[any other entity, when lending of money is not the business of transferor], the
amount shall be proportionate part of the interest so paid or the profit so shared having regard to
the proportion of such capital so used;
(iv) any sum paid or credited to any person maintaining a profit and loss sharing account or
deposit with a bank run on Islamic principles by way of distribution of profits by the said bank in
respect of the said account of deposit;
(v) an amount not exceeding 2 [five percent] of the total income carried to any special reserve
created by such financial institution and for such purposes as may be approved by the
Government in this behalf, if the aggregate amount standing in such reserve does not exceed the
paid up share capital of the institution;
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(vi) The amount paid on account of current repairs to buildings, machinery, plant or furniture
used for the purposes of the business or profession;
(vii) the whole or the proportionate part of the amount of any premium paid for insurance,
against risk of damage, destruction or loss of buildings, machinery, plant or furniture, stocks or
stores according as the whole or part thereof is used for the purposes of the business or
profession;
(viii) in respect of depreciation of building, machinery, plant or furniture, being the property of
the assessee and used for the purposes of business or profession, the allowances as admissible
under the Third Schedule;
(ix) in the case of a ship, being a passenger vessel plying ordinarily on inland waters, or a fishing
trawler, which is entitled to a special depreciation allowance under paragraph 8 of the Third
Schedule, an investment allowance of an amount equivalent to twenty percent of the original cost
to the assessee for the year in which the ship or the trawler is first put to use for public utility;
Text Box: P1P Subs. for a newly set up industrial undertaking or to an extension of an existing
industrial undertaking whose income is exempted from payment of tax by F. O. 2007
P2P Subs. for ten per cent by F. O. 2007
1[(x) in the case of any machinery or plant (other than office appliances and road transport
vehicles) which is entitled to accelerated depreciation under paragraph 7 of the Third Schedule,
an investment allowance, for the year in which the undertaking starts commercial production, at
the following rates, namely:(a) If the undertaking is set up in areas specified in this behalf by the Board, an amount
equivalent to 25 percent of the actual cost to the assessee;
(b) In other cases, an amount equivalent to 20 percent of the actual cost to the assessee;]
2 [(xa) where an assessee being a company registered under 3[the Companies Act, 1913 (VII of
1913) or Company ACT 1994, 1994 invests any amount in the purchase of any new plant or
machinery for installation in an industrial undertaking set up in Bangladesh and owned by it for
the purpose of balancing, modernization or replacement of the plant or machinery already
installed therein, an investment allowance at the rate of twenty-five percent of the amount so
invested;]

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(xi) where any building, machinery or plant which, after having been used by the assessee for the
purpose of his business, has been discarded, demolished or destroyed in any income year or any
such asset has been sold, transferred by way of exchange or compulsorily acquired by a legally
competent authority or exported outside Bangladesh in any income year, an obsolescence
allowance to the extent and computed in the manner specified in paragraph 10 of the Third
Schedule;
(xii) in the case of any animal which has been used by the assessee for the purpose of business or
profession otherwise than as stock-in-trade, has died or become permanently useless for such
purpose, an amount equivalent to the difference between the original cost of the animal to 1
Omitted by F.A. 2005 Ins. By F.A. 1989, deleted by F.A. 2004 23 Subs. For the companies Act.
anything contained in this Ordinance, allow such debt or part thereof as a deduction for such
earlier income year if the assessee accepts such finding of the Deputy Commissioner of Taxes
and re-compute the total income of the assessee for such earlier income year and make the
necessary amendment; and the provisions of section 173 shall, so far as may be, apply thereto the
period of four years referred to in sub- section (4) of that section being reckoned from the end of
the year in which the assessment relating to the income year in which the debt or part thereof is
written off was made;
1[(xviii) in respect of provision for bad and doubtful debt made by a bank for overdue
agricultural or rural loan, a sum equal to one and a half per cent of such overdue loan or the
amount of actual provision for such bad or doubtful debt in the books of the assessee, whichever
is the less; Provided that if any amount out of the amount so allowed is ultimately recovered, the
same shall be deemed to be a profit or the year in which it is recovered];
2[(xviiia)in respect of provision for bad and doubtful debt made by Bangladesh Shilpa Bank or
Bangladesh Shilpa Rin Sangstha for overdue loan, a sum equal to five per cent. of such overdue
loan or the amount of actual provision for such bad or doubtful debt in the books of the assessee,
whichever is the less; Provided that the deduction shall be allowed only in respect of the
assessment years 1987-88, 1988-89, 1989-90 and 1990-91; Provided further that if any amount
out of the amount so allowed is ultimately recovered, the same shall be deemed to be a profit of
the year in which it is recovered;]
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3(xviiiaa) in respect of provision for bad and doubtful debt and interest thereon made by a
commercial bank including the Bangladesh Krishi Bank, 4 [Karmo-Shangshtan Bank] and the
Rajshahi Krishi Unnayan Bank, a sum equal to 5[one per cent] of the total outstanding loan
including interest thereon or the amount of actual provision for such bad or doubtful debt and
interest thereon in the books of the assessee, whichever is less;
1 Deleted. By F.A. 1990
2 Ins by F.A. 1987
3 Ins by F.A. 1990
4 Ins by F.A. 2006
5 Subs. For five per cent by F.A 1997 again re-subs. For three per cent by F.A. 2003 re-subs
for two percent by F.A.2005 Provided that the provisions of this clause shall apply only in
respect of such loan as the Bangladesh Bank may, from time to time, classify as bad or doubtful
debt;
1[Provided further that the deduction shall be allowed only in respect of the assessment years
1990-91, 1991-92, 1992-93, 1993-94, 1994-95, 2[1995-96, 1996-97, 1997-98, 1998-99 3[, 19992000, 2000-2001 4[, 2001-2002, 2002-2003, 2003-2004 5[2004-2005, 2005-2006 and
2006-2007];]]
6[Provided further that if any amount out of the amount so allowed is ultimately
recovered, the same shall be deemed to be a profit of the year in which it is recovered:]
7[Provided further that no deduction under this clause shall be allowed in respect of
(a) Any amount representing grant allowed by the Government in the form of 15-years Special
Treasury Bonds;
(b) Any loan advanced to any government organization, body corporate, local authority,
autonomous body, or any other loan guaranteed by the Government; and
(c) Any debt representing loans advanced to any director of the bank, his nominees or
dependants;]

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8 [Provided further that no deduction under this clause shall be allowed to an assessee if he
avails himself of the computation of his income from interests on bad or doubtful debts under
sub section(3) of section 28;]
1 Subs. By F.A. 1993
2 Subs. By F.A. 1997 for and 1995-96 or till the assessment year the actual provision in respect
of which is equal to the bad and doubtful debts as per Bangladesh Banks guideline in this behalf
ins. By F.A. 1995
3 Subs. .for and 1999-2000 by F.A. 1999
Subs. .for and 2001-2002 by F.A. 2002 4
5 Subs. .for and 2004-2005 by F.A. 2005
6 Ins. By F.A. 1995
7 Ins. By F.A. 1993
8 Ins. By F.A. 1996 &deleted by F.A. 1997
(xix) Any expenditure, not being in the nature of capital expenditure, laid out or expended on
scientific research in Bangladesh related to the business carried on by the assessee;
(xx) any expenditure of a capital nature laid out or expended on scientific research in Bangladesh
related to the business carried on by the assessee: Provided that where a deduction is allowed for
any income year under this clause in respect of expenditure represented wholly or partly by any
asset, no deduction shall be allowed under clause (viii) or (ix) for the same income year in
respect of that asset;
(xxi) any sum paid to a scientific research institute, association or other body having as its object
the undertaking of scientific research, or to a University, College, Technical School or other
Institution for the purpose of scientific research or technical training related to the class of
business carried on by the assessee, if such Institute, association or body, or such University,
College, Technical School or Institution is, for the time being, approved by the Board for the
purpose of this clause.
Explanation.--In this clause and in clauses (xix) and (xx),-(a) "scientific research" means any activities in the field of natural or applied science for the
extension of knowledge;

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(b) references to expenditure incurred on scientific research do not include any expenditure
incurred in the acquisition of rights in, or arising out of, scientific research, but save as aforesaid,
include all expenditure incurred for the prosecution of, or the provision of facilities for the
prosecution of, scientific research;
(c) reference to scientific research related to a business or class of business includes-(i) Any scientific research which may lend to or facilitate an extension of that business or, as the
case may be, all businesses of that class;
(ii) Any scientific research of a medical nature which has a special relation to the welfare of
workers employed in that business or, as the case may be, business of that class;
(xxii) any expenditure, not being in the nature of capital expenditure, laid out or expended on any
educational institution or hospital established for the benefit of the employees of the assessee,
their families and dependents or on the training of industrial workers, if
(a) No charge is made for services rendered by such institution or hospital or for the training of
the workers; and (b) No deduction or allowance is claimed for such expenditure under any other
clause of this section;
(xxiii) Any expenditure in the nature of capital expenditure laid out or expended on the
construction and maintenance of any educational institution or hospital established by the
assessee for the benefit of his employees, their families and dependents, or on any institute for
the training of industrial workers, if-(a) No charge is made for the services rendered by such institution or hospital or for the training
of the workers; and
(b) No deduction or allowance is claimed under any other clause of this section for the same
income year in respect of expenditure represented either wholly or partly by any asset;
(xxiv) Any expenditure laid out or expended on the training of citizens of Bangladesh in
connection with a scheme approved by the Board for purposes of this clause;
(xxv) Any expenditure, not being in the nature of capital expenditure or personal expenses,
incurred by an assessee in connection with visits abroad as a member of a trade delegation
sponsored by the Government;
(xxvi) Any sum paid on account of annual membership subscription to a registered trade
organization within the meaning of the Trade Organizations Ordinance, 1961(XLV of 1961), or
to a professional institution recognized by the Board in this behalf;
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(xxvii) 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.
(2) Where any premises, building, machinery, plant or furniture is not wholly used for the
purposes of business or profession, any allowance or deduction admissible under this section
shall be restricted to the fair proportional part of the amount, which would be allowable if such
premises, building, machinery, plant or furniture was wholly so used.
Explanation.--For the purposes of this section, the expression plant includes ships, vehicles,
books, scientific apparatus and surgical and other instruments or equipment's used for the
purpose of business or profession.
30. Deduction not admissible in certain circumstances.
Notwithstanding anything contained in section 29, no deduction on account of allowance from
income from business or profession shall be admissible in respect of the following, namely:(a) Any payment which is an income of the payee classifiable under the head "Salaries" if tax
there on has not been paid in accordance with provisions of Chapter VII;
1 [(aa) any payment made by an assessee to any person if tax thereon has not been deducted and
credited in accordance with the provisions of Chapter VII and g~j value-added tax thereon has
not been collected or deducted and credited in accordance with the provisions of 1991
(b) Any payment by way of interest, salary, commission or remuneration made 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;
(c) Any payment by way of brokerage or commission made to a person who is not a resident in
Bangladesh unless tax has been deducted there from under section 56;
(d) any payment to a provident fund or other fund established for the benefit of the employees
unless the employer has made effective arrangements to secure that tax shall be deducted at
source from any payments made from the fund which are taxable being income falling under the
head "Salaries";

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2[(e) So much of the expenditure by an assessee on the provision of perquisites, as defined in

clause (45) of section 2, to any employee as exceeds taka 3[two lakh]: Provided that the
provision of this clause shall not be applicable to an employer where perquisites were paid to an
employee in pursuance of any Government decision published in the official Gazette to
implement the recommendation of a Wage Board constituted by the Government;]
(f) Any expenditure in respect of the following as is in excess of the amount or rate prescribed in
this behalf and as is not, in the cases of sales and services liable to excise duty, supported by
excise stamp or seal, namely:(i) entertainment;
(ii) foreign travels of employees and their dependents for holidaying and recreation;
(iii) publicity and advertisement; and
1 [(g) Any expenditure ten percent of the profit under the head of Head Office expenses by a
company not incorporated in Bangladesh under (Company Act, 1994 (h) any payment by way of
royalty , technical services fee, technical knowhow fee or technical assistance fee exceeding
2[five percent] of the profit;]
3[(i) 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 fifteen thousand
or more;
(j) Any expenditure by way of incentive bonus exceeding ten per cent of the disclose net profit;
(k) Any expenditure by way of overseas traveling exceeding one per cent of the disclosed
turnover.]
4[30A. Provision for disallowance- Notwithstanding anything contained in sections 28, 29 and
30, the Deputy Commissioner of Taxes shall not make any disallowance or deduction for any
year from any claim made by an assessee in the trading account or profit or loss account without
specifying reason for such disallowance or deduction.]

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(6) Income from Capital Gain: U/S 31

Tax shall be payable by an assessee under the head "Capital gains" in respect of any profits and
gains arising from the transfer of a capital asset and such profits and gains shall be deemed to be
the income of the income year in which the transfer took place.
Computation of capital gains:
(1) The income under the head "Capital gains" shall be computed after making the following
deduction from the full value of the consideration received or accruing from the transfer of the
capital asset or the fair market value thereof, whichever is higher, namely:(a) Any expenditure incurred solely in connection with the transfer of the capital asset; or
(b) the cost of acquisition of the capital asset and any capital expenditure incurred for any
improvements thereto but excluding any expenditure incurred for any improvements thereto but
excluding any expenditure in respect of which any allowance is admissible under any provisions
of sections 23,29 and 34;
(c) In respect of which any allowance is admissible under any provisions of sections 23, 29 and
34. (2) For the purpose of this section, "cost of acquisition of the capital asset" means(i) Where it was acquired by the assessee by purchase, the actual cost of acquisition; and (ii)
where it became the property of the assessee1 [(a) by succession, inheritance or devolution; or];
(b) Under a deed of gift, bequest or will; or];
2 [(c) by succession, inheritance or devolution; or];
3[(cc) under a deed of gift, bequest or will; or
(ccc) under a transfer on a revocable or irrevocable trust; or]
(d) On any distribution of capital assets on the liquidation of a company; or
(e) On any distribution of capital assets on the dissolution of a firm or other association of
persons or the partition of a Hindu undivided family;
Tax rate for capital gain:
Tax rate for capital gain varies from assessee to assessee. Followings are the tax rates for
individual and corporate.

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Individual: For an individual if capital gain arises within 5 years of purchase then normal rate of
tax shall be applicable on the capital gain. But if capital gain arises after 5 years of purchase then
either capital gain tax or normal rate whichever is beneficial for the tax payer.
Corporate: For a corporate tax payer tax rate on capital gain is 15% irrespective of the years
when it is sold.
(7) Income from Other sources: U/S 33
If any amount is found credited and no adequate explanation can be offered then it will be
added to income as income from other sources.
If any investment is found to have been made by an assessee and no adequate explanation is
offered then it is considered income from other sources.
Any loan exceeding tk. 25,000 unless paid by a crossed check, shall be deemed to be
income in the fourth year if it is not paid in the main time.
Trading liabilities has to be paid within 3 years if it is not paid within 03 years then it will be
deemed the income from other sources.
Any expenditure that is not explained adequately, then it will be considered as income
from other sources.
Unexplained expenses on foreign tour shall be added to total income from other sources.
Interest from bank received and also the dividend income.
Submission of income tax returns is generally due by 30th September in case of non-companies
and by 31st December in case of companies.
Assessment is made in several procedures. They are self assessment, presumptive assessment,
spot assessment, pre-audit based assessment. Certain percent of self assessment cases are
selected for audit.
The assessee can prefer appeal if aggrieved by his assessment. There are three primary forums
for appeal. They are to the Appellate Commissioner/Additional Commissioner/Joint
Commissioner

or

to

the

Commission

for

reviews.

The

decisions

of

Appellate

Commissioner/Additional Commissioner/Joint Commissioner can be challenged to the next

Appellate Court named as Appellate Tribunal.

Page 30 of 32

Withholding tax is levy able on a number of items including contractors, imports, transfer of
urban land/building, bank deposits etc.
The income tax wing of the National Board of Revenue (NBR) is now having, seemingly, its
busiest ever time.
The wing is trying, on one hand, to bring in a large number of potential taxpayers under its tax
net and asking the existing ones to comply with the tax rules properly, on the other. Lack of
awareness, coupled with other systemic problems including tax rates, has been responsible for
keeping the country's tax GDP ratio one of the lowest in the world.
According to the report, the number of taxpayers in the country, as the concerned authorities
expect, would be doubled-an increase of 2.0 million of new taxpayers-- at the end of the 200708. This expectation of appears too ambitious to many people who are someway or other familiar
with the state of affairs relating to revenue collection.
The survey that is being carried out in Dhaka metropolitan area by the NBR to bring in new
income taxpayers under its net is a step in the right direction. The NBR, reportedly, could
interview a little more than 6300 businesspeople over a period of one month and identify more
than 3600 potential taxpayers in Dhaka where the concentration of tax officials is the highest in
the country. [The Bangladesh Journal; The Voice of Bangladesh's New Generation; Sunday,
05.06.2007, 10:53am (GMT+6)]
The National Board of Revenue (NBR) has recorded a 193 percent rise in income tax collection
totaling Tk 739.11 crore in the tax year 2007-08 from Tk 252.11 a year ago.
It is mainly because of raising the ceiling of tax-free income. The introduction of Universal Self
Assessment has also augmented tax collection.
One of the objectives of the tax measures is to induce the tax payers to pay taxes voluntarily.
Some of the measures proposed:
1. Government can consider extending the financial benefits on the basis of Income taxes given
by the individuals-such as fixing the amount of loan by the banks and financial institutions on the
amount of taxes, etc.
2. Let the tax of the individuals be disclosed or publicly known. So that culture develop
to compare the taxes, not the income or the wealth,
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3. Clean the Income Tax office from corruption so that people of the department do
not consider it as a department to make illegal money; Few days back, one of our group members
met an Engineer who passed from BUET and now working as a Deputy Commissioner of
Taxes; but why on Earth a BUET Engineer would choose the Income Tax as his
career department!
4. Simplify the systems of payment of income tax so that a tax payer does not the need
the help of a middle man (income tax layer or office man) to prepare his return.
5. Gradually electronic payment system may be introduced where the tax payer will
pay his taxes through internet which is now followed in developed countries.
6. Slim down the Income Tax Department, make it more automated. The unnecessary staffs have
created a negative image of the department than doing any good.
7. In assessment of the professional income, the help of the professional bodies can be
taken. It will be more accurate and rational than the so called of the so called
Inspectors, who thrive on their twisted assessment; etc.

Bibliography
(1) www.taxadvisors-bd.com
(2) Understanding Income Tax Law by Barrister Abdul Halim
(3) www.nbr-bd.org
(4) www.wikipedia.com
(5) Basics of Taxation (ITO. 1984), Charge of Income Tax, Exclusion from Total Income
(sec. 44)

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