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The Institute of Chartered Accountants of

Bangladesh
TAXATION 2
STUDY MANUAL
CO!"#IN$ %INANC" ACT 2&''(
CA )rofessional Stage A**lication Le+el
www.icab.org.bd )A#TN"#
IN L"A#NIN$

Ta,ation II
The Institute of Chartered Accountants of Bangladesh Professional Stage
The learning materials have been prepared by the Institute of Chartered Accountants
of Bangladesh
First edition arch !"##
All rights reserved. $o part of this publication may be reproduced in any form or by
any means or stored in any retrieval system% or transmitted in% any form or by any
means% electronic% mechanical% photocopying% recording or otherwise without prior
permission of the publisher.
Contents
)age
Introduction
Speci&cation grid for Ta'ation !
The learning materials
Study guide
(etting help
Syllabus and learning outcomes
# Introduction to Bangladesh Income Ta'
! Administration and Tribunal
) Charge of income ta'
* Income from salaries
+ Income from Interest on Securities
, Income from house property
- Agriculture income
. Income from business or profession
/ Capital gains
#" Income from other sources
## 0epreciation allowances
#! Set o1 and carry forward of losses
#) 2'emption and allowances 3ta' holiday 4 e'emption5
#* Payment of ta' before assessment
#+ Advance payment of ta'
#, 6eturn of income and statements
#- Assessment
#. Assessment of individuals
#/ Assessment of partnership &rms
!" Assessment of companies
!# 7iability in special cases and assessment of non8residents
!! Special provisions relating to avoidance of ta'
!) Powers of Income Ta' Authorities Including Search and Sei9ure
!* Imposition of Penalty
!+ 6ecovery of Ta'
!, 0ouble ta'ation relief
!- 6efunds
!. Appeal and reference
!/ iscellaneous
)" :alue Added Ta'
)# 2thics
Sample Paper
Sample Paper Answers

' Introduction
'-' .hat is Ta,ation and ho/ does it 0t /ithin the )rofessional Stage1
Structure
The syllabus has been designed to develop core technical% commercial% and
ethical s;ills and ;nowledge in a structured and rigorous manner.
The diagram below shows the twelve modules at the Professional Stage% where
the focus is on the ac<uisition and application of technical s;ills and ;nowledge%
and the Advanced Stage which comprises of two technical integration modules
and the Case Study.



The 2no/ledge 3ase
The aim of the Ta'ation module is to enable students to understand the general
ob=ectives of ta' and to calculate income ta'% capital gains ta'% corporation ta'
and :AT in straightforward scenarios.
)rogression to a**lication le+el
The ;nowledge base that is put into place here will be ta;en further in the
application level Ta'ation module% where the aim will be to enable students to
prepare ta' computations and provide ta' advice to individuals and companies%
again in straightforward scenarios. The above ta'es introduced at ;nowledge
level are ta;en to a higher level.
)rogression to ad+anced stage
2thics
Case Study
2thics
Advance Audit
and Assurance
Ad+anced
stage
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Busines
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Financial
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2thics
Financia
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2thics
Audit
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2thics
Taxation
Financial
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2thics
Business
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Manageme
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2thics
Law
2thics
Assuran
ce
2thics
Principle
s
of
Taxation
Accounting
)rofessional
stage
2thics
Business
Analysis
2thics
Financial and
Corporate
Reporting
The Case Study of advanced level then ta;es things further again. The aim is to
ensure that students can provide technical advice in respect of issues arising in
business transformations.
The above illustrates how the ;nowledge of ta'ation principles gives a platform
from which a progression of s;ills and ta'ation e'pertise is developed.
'-2 Ser+ices *ro+ided 36 *rofessional accountants
Professional accountants should be able to?
@ 2'plain the general ob=ectives of ta'% the inAuences upon Bangladesh
system of ta' and the di1erent types of ta' in Bangladesh
@ 6ecogni9e the ethical issues arising in the course of performing ta' wor; and
identify the obligations Bangladesh system of ta' imposes on ta'payers and
the implications for noncompliance of ta'payers
@ Calculate the amounts of income and their ta'es owed by or owed to
individuals
@ Calculate the capital gains ta' payable by individuals and the chargeable
gains sub=ect to corporation ta'
@ Calculate the corporation ta' liabilities of companies
@ Calculate the amount of :AT owed by or owed to businesses
2 S*eci0cation grid for Ta,ation !
2-' Module ai4
To de+elo* students7 2no/ledge of ta,ation in Bangladesh gained at
the )rofessional ",a4ination 5no/ledge( le+el and to ena3le the4 to
underta2e straightfor/ard ta, co4*utations for indi+iduals and
3usiness entities- To gi+e students a /or2ing 2no/ledge of the
*rocesses of ta, in+estigations and dis*utes and to ena3le the4 to
e,*lain the reasons for *rofessional ethical re8uire4ents in the area
of ta, /or2-
Bn completion of this module% students will be able to?
e'plain the relevance of ethical and professional issues for a professional
accountant underta;ing ta' wor;
provide information to business entities and to individuals on the amount
of ta'ation that they may owe to or be owed by the ta'ation authorities
advise and assist business entities and individuals in the adherence to
regulations surrounding ta'ation
provide information to business entities and to individuals on the e1ects
of national ta'es% including circumstances where foreign ta'es a1ect
national ta'es
describe the processes of ta' investigations and ta'ation disputes
2-2 S*eci0cation grid
This grid shows the relative weightings of sub=ects within this module and
should guide the relative study time spent on each. Bver time the mar;s
available in the assessment will e<uate to the weightings below% while slight
variations may occur in individual assessments to enable suitably rigorous
<uestions to be set.
eig!ting "#$
2thical considerations #"
The ta'ation of business entities )"
The ta'ation of individuals )"
Investigations and disputes #"
:alue Added Ta' !"
#""
9 The learning 4aterials
Cou will &nd the learning materials are structured as follows?
Title page
Contents page
The speci&cation grid for the Ta'ation !
A brief note about the learning materials
Study (uide. This includes
8 hints and tips on how to approach studying for your CA e'ams
8 guidance on how to approach studying with this study manual
Information on how to obtain help with your studies
The detailed syllabus and learning outcomes
2ach chapter has the following components where relevant?
Introduction
8 7earning ob=ectives
8 Practical signi&cance
8 Stop and thin;
8 >or;ing conte't
8 Syllabus lin;s
2'amination conte't
8 2'am re<uirements
8 2'aminerDs comments on how students tac;le <uestions
Chapter topics
8 0etails about topics
8 Problems
8 Answers
8 Some past years <uestions
8 Solution to those past years <uestions
The technical reference section is designed to assist you when you are wor;ing
in the oEce. It should help you to ;now where to loo; for further information on
the topics covered. Cou will not be e'amined on the contents of this section in
your e'amination.
: Stud6 guide
:-' ;el* 6ourself stud6 for 6our ACA e,a4s
2'ams for professional bodies such as the ICA2> are very di1erent from those
you have ta;en at college or university. Cou will be under greater ti4e
*ressure 3efore the e'am F as you may be combining your study with wor;.
Gere are some hints and tips.
The right a**roach
' De+elo* the right attitude
Belie+e in 6ourself Ces% there is a lot to learn. But
thousands have succeeded before and
you can too.
#e4e43er /h6 6ou7re
doing it
Cou are studying for a good reason? to
advance your career.

2 %ocus on the e,a4
#ead through the S6lla3us
and Stud6 $uide
These tell you what you are e'pected to
;now and are supplemented by
",a4ination conte,t sections in the
study manual.
#e4e43er /h6 6ou7re
doing it
Cou are studying for a good reason? to
advance your career.
9 The right 4ethod
See the /hole *icture Heeping in mind how all the detail you
need to ;now &ts into the whole
picture will help you understand it
better.
The Introduction of each chapter
puts the material in conte't.
The Learning o3<ecti+es% Section
o+er+ie/s and ",a4ination
conte,t sections show you what
you need to gras*.
Use 6our o/n /ords To absorb the information% you need to
*ut it into 6our o/n /ords.
Ta2e notes.
Answer the 8uestions in each
chapter.
Dra/ 4ind4a*s.
Try 7teaching7 a su3<ect to a
colleague or friend.
$i+e 6ourself cues to <og
6our Me4or6
Try ;ey points with a highlighter pen.
>rite 2e6 *oints on cards.
: The right reca*
#e+ie/= re+ie/= re+ie/ 6egularly reviewing a topic in summary
form can 0, it in 6our 4e4or6. The
Study anual helps you review in many
ways.
Cha*ter su44ar6 will help you to
recall each study session.
The Self>test actively tests your
grasp of the essentials.
(o through the ",a4*les in each
chapter a second or third time.
:-2 Stud6 c6cle
The best way to approach this Study anual is to tac;le the chapters in order.
>e will loo; in detail at how to approach each chapter below but as a general
guide% ta;ing into account your individual learning style% you could follow this
se<uence for each chapter.
5e6 stud6 ste*s Acti+it6
Step #
To*ic list
This topic list is shown in the contents for each chapter
and helps you navigate each part of the boo;I each
numbered topic is a numbered section in the chapter.
Step !
Introduction
This sets your ob=ectives for study by giving you the big
picture in terms of the conte't of the chapter. The content
is referenced to the Study guide% and 2'amination conte't
guidance shows what the e'aminers are loo;ing for. The
Introduction tells you why the topics covered in the
chapter need to be studied.
Step )
Section
o+er+ie/s
Section overviews give you a <uic; summary of the
content of each of the main chapter sections. They can
also be used at the end of each chapter to help you
review each chapter <uic;ly.
Step *
",*lanations
Proceed methodically through each chapter% particularly
focussing on areas highlighted as signi&cant in the
chapter introduction or study guide.
Step +
Note ta2ing
Ta;e brief notes% if you wish. 0onDt copy out too much.
6emember that being able to record something yourself is
a sign of being able to understand it. Cour notes can be in
whatever format you &nd most helpfulI lists% diagrams%
mindmaps.
Step ,
",a4*les
>or; through the e'amples very carefully as they
illustrate ;ey ;nowledge and techni<ues.
Step -
Ans/ers
Chec; yours against the suggested solutions% and ma;e
sure you understand any discrepancies.
Step .
Self>test
Jse the self8assessment <uestion to chec; how much you
have remembered of the topics covered.
Step /
?uestion
*ractice
Attempt the <uestion3s5 relating to this chapter in the
revision of suggested answers.
Mo+ing on---
>hen you are ready to start revising% you should still refer bac; to this Study
anual.
@ As a source of reference 3you should &nd the inde' particularly helpful for
this5.
@ As a way to re+ie/ 3the Section overviews% 2'amination conte't% Chapter
summaries and Self test <uestions help you here5.
6emember to ;eep careful hold of this Study anual F you will &nd it invaluable
in your wor;. The technical reference section has been designed to help you in
the wor;place by directing you to where you can &nd further information on the
topics studied.
@ $etting hel*
Firstly% if you are receiving structured tuition% ma;e sure you ;now how and
when you can contact your tutors for e'tra help.
Identify a wor; colleague who is <uali&ed% or has at least passed the paper you
are studying for% who is willing to help if you have <uestions.
Form a group with a small number of other students% you can help each other
and study together% providing informal support.
S6lla3us and learning outco4es
The following is the learning outcomes of ta'ation ! with reference to the
chapters covered the learning outcomes in this study manual?
'- "thical considerations
Candidates should 3e a3le to e,*lain the rele+ance of ethical and
*rofessional issues for a *rofessional accountant underta2ing ta,
/or2-
In the e'amination% candidates may be re<uired to
a. e'plain the relevance and importance of ;ey ethical and professional
issues for a professional accountant underta;ing ta' wor;
b. =udge when to refer ta'ation matters for senior help.
2- The ta,ation of 3usiness entities
Candidates should 3e a3le to *ro+ide infor4ation to 3usiness
entities on the a4ount of ta,ation that the6 4a6 o/e to or 3e
o/ed 36 the ta,ation authorities= ad+ise and assist 3usiness
entities in the adherence to regulations surrounding ta,ation= and
*ro+ide infor4ation on the eAects of national ta,es= including
circu4stances /here foreign ta,es aAect national ta,es-
In the e'amination% candidates may be re<uired to
a. identify investments and e'penditure which legally reduce ta' liability
and =udge when they might be appropriate
b. identify for actual or proposed transactions those treatments that are
illegal for ta' purposes and e'plain the reasons for the illegality
c. e'plain how ta' considerations can a1ect any investment decisions of a
business entity
d. e'plain how ta' considerations can a1ect &nancial reporting by an
entity
e. calculate the amounts sub=ect to national% regional and local ta'ation%
the resulting amount of ta' payable or recoverable by an entity and the
e1ects of any foreign ta'es on those amounts 3the calculation of foreign
ta' liabilities is not re<uired5
f. identify how ta' losses can be used by a business entity
g. describe the e1ect of a change in the ownership of a business entity on
its ta' losses
h. e'plain how alternative methods of achieving business ob=ectives can
lead to di1erent ta' outcomes
i. calculate the ta' implications for a business entity of di1erent courses
of action% ta;ing into account the relevant ta'es and other relevant
implications
=. identify the ta' holiday issues
9- The ta,ation of indi+iduals
Candidates should 3e a3le to *ro+ide infor4ation to indi+iduals on
the a4ount of ta,ation that the6 4a6 o/e to or 3e o/ed 36 the
ta,ation authorities= ad+ise and assist indi+iduals in the
adherence to regulations surrounding ta,ation= and *ro+ide
infor4ation on the eAects of national ta,es= including
circu4stances /here foreign ta,es aAect national ta,es-
In the e'amination% candidates may be re<uired to
a. identify for actual or proposed transactions those treatments that are
illegal for ta' purposes and e'plain the reasons for the illegality
b. calculate the amounts sub=ect to national ta'ation% the resulting
amount of ta' payable or recoverable by an individual or entity and the
e1ects of any foreign ta'es on those amounts 3the calculation of foreign
ta' liabilities is not re<uired5
c. identify how ta' losses can be used by an individual
d. e'plain how alternative methods of achieving personal ob=ectives can
lead to di1erent ta' outcomes
e. calculate the ta' implications for an individual of di1erent courses of
action 3borrowing% investment% e'penditure etc.5% ta;ing into account
the relevant ta'es and other implications
:- In+estigations and dis*utes
Candidates should 3e a3le to descri3e the *rocesses of ta,
in+estigations and ta,ation dis*utes-
In the e'amination% candidates may be re<uired to
a. identify the periods within which the relevant authorities can en<uire
into a ta'payerKs returns or other information and ta' liabilities and
describe the ta'payerKs right of appeal
b. 0escribe the process for dealing with ta'ation disputes.
@- !alue Added Ta, !AT(
Candidates should 3e a3le to e,*lain the *rocess of co4*utation
of !AT *a6a3le= ad4inistration= diAerent schedules= turno+er ta,=
su**le4entar6 dut6= other rele+ant rules and *rocedures and
ad+ise and assist indi+idual and 3usiness entities in the adherence
to regulations surrounding !AT= turno+er ta, and su**le4entar6
dut6
In the e'amination% candidates may be re<uired to
a. demonstrate the concept and de&nition
b. e'plain the imposition of :AT% supplementary duty and identify the
application of ta' rate
c. e'plain the registration procedures% method of computation of :AT
payable% time of payment of :AT and turnover ta' and
d. ention the documents re<uired for :AT administration
e. identify the di1erent schedule for :AT and supplementary duty
f. identify the :AT authorities and its power and functions
g. e'plain the conse<uences for non8compliance of :AT rules and
regulation

Chapter #
Introduction to Bangladesh inco4e
ta,
Contents
Introduction
2'amination conte't
To*ic List
#.# Introduction
#.! Bangladesh Ta' Structure
#.) Sources of ta' law and practice
#.* Scope of Bangladesh Income Ta'
#.+ Structure of IT Brdinance% #/.*
#., Bb=ectives and Importance of Income Ta'
#.- 6ole of Income Ta' in 2conomic 0evelopment of Bangladesh
#.. Some 0e&nitions L Important Concepts 6elating to Ta'
#./ The Concept of Income
#.#" Capital or 6evenue
#.## Ta' and Income Ta'
#.#! 0i1erent 6ates of Ta'
#.#) 7iability to ta'
#.#* Ta' 7iability on Income
#.#+ Some signi&cant issues of income ta'
Introduction
Learning o3<ecti+es
Identify the ob=ectives of ta' in terms of economic% social =ustice and
environmental issues
6ecognise which ta'es apply to di1erent ta'payers e.g. individual% partners
and companies
Identify the sources of ta' law
(et the idea about the income% ta' and income ta'
Hnow the history of income ta'
6ecognise di1erent rates of income ta' applicable to individual% corporate
and others
Jnderstand the concept of capital and revenue e'penditure
Identify the residential status of an assessee
)ractical signi0cance
2very person in Bangladesh is a1ected by our ta' system in some ways% often
on a daily basis and without even realising it. >e pay ta' on the money we
earn and on the things we buy and this ta' is of course used by the
government to pay for our development purpose such as schools% hospitals%
roads and so on.
As government and business practices change% the ta' system changes. In
Bangladesh we have an annual budget cycle which begins with the Pre Budget
6eport in late ay4early Mune and ends with the enactment of a Finance Act in
Mune. This is supplemented by a huge body of case law and practical
interpretation. Jnfortunately% the new law is usually =ust added to the e'isting
law and so the overall legislative burden increases over time. There are
regular calls for a programme of ta' simpli&cation% but although there has
been much discussion% we have seen little real change.
The Income Ta' Brdinance #/.*% The :alue Added Act #//# are the main
sources of ta' law. The $ational Board of 6evenue 3$B65% a statutory body is
the highest authority for the purpose of these Brdinance and Acts.
Income of di1erent types is ta'ed at di1erent rates. Before calculating income
ta' liability one should have the concept of income% ta'% income ta' and
income ta' rate and other relevant issues. 6esidential status has signi&cance
for determining ta' liability.
Bne way of helping people to deal with comple'ity in the ta' system is to use
technology. Presently people can use computeri9ed system to calculate ta' on
his4her ta'able income. 2ven $B6 website gives the opportunity to compute
ta' by using income ta' calculator.
Sto* and thin2
It is li;ely that you have personally been paying ta' on your various sources of
income4gains for some time. Gave you stopped to thin; about how this a1ects the
actions that you ta;eN
.or2ing conte,t
The impact of ta'ation on the overall economy and the society is increasing
day by day. Ta' is charged on di1erent types of assesses li;e individual and
companies. The volume and comple'ity of ta' law is now such that many
businesses have to spend considerable amounts of time =ust on ta'
administration. any business decisions will have ta' conse<uences. ost
large corporate operate on a global basis and will choose which country they
want their business to be based in.
>ithout advice from an accountant% a business can easily &nd itself paying too
much ta' and missing deadlines. It is important to have a good overall feel for
the ta' system early in your studies so that you ;now where to loo; for the
detailed rules when you need them later on.
S6lla3us lin2s
The topics covered in this chapter are essential bac;ground ;nowledge which
will underpin the whole of your Ta'ation studies.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Identify the social =ustice principles being applied for ta'ation purposes
Jnderstand which ta'es apply to di1erent ta'payers
Identify the sources of ta' law in Bangladesh.
0e&ne some terminologies relating to income ta'
0etermine the residential status of an assessee based on given
information
Identify the &ve tier ta' rate for individual and other ta' rates for other
assessees
?uestion *ractice
For <uestion practice on these topics go to the suggested <uestions and
answers covering the basic idea about ta'ation.
'-& O3<ecti+es
Section o+er+ie/
Ta'ation system of Bangladesh has developed gradually and has been
changed by successive governments in accordance with their political
philosophy.
(overnments use ta'ation to encourage or discourage certain types of
economic activity.
Ta'ation may be used to promote social =ustice but there is no political
consensus on what is meant by this term.
2nvironmental concerns have led to changes in ta'ation policy.
There is no e'haustive de&nition of income in Income Ta' Brdinance #/.*
3Brdinance5
Income ta' is ta' on income.
The Brdinance got its root in the then British India in #.,".
0i1erent ta' rates are applicable for di1erent types of assessee and
classes of income.
Income ta' is levied on income and not on capital receipts.
The distinction between capital and revenue receipts is much more diEcult
than between capital and revenue e'penditure.
6esidential status is very vital for determining ta' liability.
'-' Introduction
Among direct ta'es% income ta' is one of the main sources of revenue of
Bangladesh (overnment to generate funds for running its administration and
also funding development e'penditure. It is a digressive ta'ation system
where ta' rate increases up to a certain level and become &'ed for all income
e'ceeding that limit. Income ta' is imposed on the basis of ability to pay. OThe
more a ta'payer earns the more he should payDD8 is the basic principle of
charging income ta'. It aims at ensuring e<uity and social =ustice.
Bangladesh ta'ation system has developed over centuries from the then
British India in #.," to the present condition on a piecemeal basis. The
system% however% developed on the basis of generally accepted canons and
there had been e1orts towards rationali9ing the ta' administration for
optimi9ing revenue collection% reducing ta' evasion and preventing revenue
lea;age through system loss.
In the &scal scheme of our country% at present% income ta' is levied along with
other direct and indirect ta'es li;e :AT% 2'cise duty% (ift ta' etc.
'-2 Bangladesh Ta, Structure
The ta' structure of Bangladesh consists of both direct 3income ta'% gift ta'%
land development ta'% non8=udicial stamp% registration% immovable property
ta'% etc5 and indirect 3customs duty% e'cise duty% motor vehicle ta'% narcotics
and li<uor duty% :AT% S0% foreign travel ta'% IT% electricity duty% advertisement
ta'% etc5 ta'es. Analysis of revenue collection activities in Bangladesh reveals
that ta' revenue accounts for ." percent of government revenue and direct
ta'es represent only about #/P of total ta'es.
As per the $ational Budget !"##8#!% the ta' revenue target for the &scal year
!"##8#! has been set by the government to T;. /+-..+ billion which was T;.
-,".*! billion in the &scal year !"#"8##. From the analysis of the $ational
Budget !"##8#!% it can be seen that in the &scal year !"##8#! revenue
collections from value added ta' 3:AT5 have been estimated at around T;.
)*)."* billion 3)+..#P of total ta'5% from import duty at T;. #!,.)* billion
3#).#/P5% income ta' at T;. !-+.,# billion 3!..-- P5% supplementary duty at
T;. #,!.!" billion 3#,./)P5 and others ".-"P of this aggregate target.
The signi&cant features of Bangladesh ta' system are as follows?
A5 ultiple ta' system? The ta' system of Bangladesh consists of various
types of ta'es which are as follows?
I. Ta'es on Income and Pro&t
#. Income ta' 8 Company
!. Income ta' F Persons other than Company
II. Ta'es on Property L Capital Transfer
#. 2state 0uty
!. (ift Ta'
). $arcotics 0uty
*. 7and 6evenue
+. Stamp 0uty 8 non =udicial
,. 6egistration
III. Ta'es on (oods and Services
#. Customs 0uties
!. 2'cise 0uties
). :alue Added Ta' 3:AT5
*. Supplementary 0uty 3on lu'ury items and in addition to :AT5
+. Ta'es on :ehicles
,. 2lectricity 0uty
-. Bther Ta'es and 0uties 3travel ta'% turn over ta'% etc.5
B5 Inade<uate and stagnant revenue yield relative to (0P?
The ratio of ta' revenue to (0P is very low comparing to other developing
countries. >e can see the status of the ratio of ta' revenue to (0P of
Bangladesh in the following table for the last si' years?
Revenue as #
of %&P
'(()*
(+
'((+*
(,
'((,*
(-
'((-*
(.
'((.*
/(
'(/(*
//
Total revenue #".. #".+ ##.# ##.! ##.+ #!."/
Ta' 6evenue ..- ..) ... /." /.) #"."*
$on8ta'
6evenue
!.# !.! !.) !.! !.! !."+
C5 Gigh8ratio of indirect to direct ta' revenue?
An analysis of the revenue from the e'isting ta'es shows that the indirect
ta'es pre8dominate the revenue yield of the country. ore than -"P of the
ta' revenue are from indirect ta'es which is clear from the following table?
Revenue " in
Crore$
'(()*
(+
'((+*
(,
'((,*
(-
'((-*
(.
'((.*
/(
'(/(*
//
Total revenue **%.,. */%*-! ,"%+)/ ,/%#." -/%*.* /+.#..
Ta' 6evenue ),%#-+ )/%!*- *.%"#! ++%+!, ,)%/+, -/."+!
$on8ta' 6evenue .%,/) #"%!!+ #!%+!- #)%,+* #+%+!. #,.#)+
P of Ta' to
6evenue
.".,)P -/.))P -/.)#P .".!,P .".*,P
.).""P
0irect Ta' 30T5 .%)") #"%!-+ #!%+"! #+%*,! #/%+#, !+./-*
P of 0T to Total
Ta'
!!./+P !,.#.P !,."*P !-..+P )".+#P )!./"P
Indirect Ta' 3IT5 !-%.-! !.%/-! )+%+#" *"%",* **%**" +)."-.
P of IT to total
ta'
--."+P -)..!P -,./,P -!.#+P ,/.*/P
,-.#"P
05 0ominance of :AT and Import duty?
It has been seen that the dominance of :AT and import duty in ta'
revenue sector is increasing day by day. oreover% in order to increase
revenue collection from domestic sources% : AT networ; has been widened
in recent years. From the following table we can see their dominance?
# Collection
from
'(()*
(+
'((+*
(,
'((,*
(-
'((-*
(.
'((.*
/(
'(/(*
//
:AT )*.)P )*./P )+.*P ),.!P )+.,P )+.--P
Import duty !!..P !#.#P #/.)P #-.!P #,.)P #).--P
Income ta' #/.!P !!.-P !!./P !*.*P !+./P !-./,P
Supplementary
duty
#-.-P #+.+P #,.,P #,.*P #,.*P #-.#+P
Bther ta'es and
duties
"..P "..P #."P "..P ".-P ".,"P
2'cise duty ".+P ".+P ".*P ".*P ".*P ".)+P

25 Ta' administration in Bangladesh?
$ational Board of 6evenue 3$B65 is the central authority for ta'
administration in Bangladesh and collects almost ." percent of total
revenue for the country. :arious reform measures have been ta;en and
still in consideration to ma;e the ta' system of the country more e1ective
and eEcient.
F5 Ta' avoidance behavior of the Ta'payers?
The heavy reliance on indirect ta'ation has been treated as one of the
main obstacles in attaining economic progress in Bangladesh since only a
few ta' payers share the burden of ta'es. 0espite $B6Ds untiring e1ort%
the progress is not still satisfactory. People and corporate &rms use various
measures to evade ta' using loopholes of the current ta' system.
(5 $arrow Ta' base?
Bur ta' base is too narrow and the ta' law is full of e'emptions and
allowances. Agricultural sector provides employment for around ,"
percent of the population contributes only !+ percent of (0P and virtually
pays little in the form of income ta'.
From the above discussion% it is clear that attaining an optimal ta' structure
is one of the most important issues for the government of Bangladesh to
increase the revenue generation from ta'es for accelerating growth and to
improve the <uality of life of the citi9ens. A long8term sustainable solution to
enhance transparency% promote growth% improve ta' compliance and thus to
increase ta' to (0P ratio is a much desirable issue in the conte't of
Bangladesh.
'-9 Sources of ta, la/ and *racticeB
A- Legislation
The basic rules of Bangladesh ta'ation system are based on the Income Ta'
Brdinance #/.* and the Income Ta' 6ules #/.*. The :alue Added Ta' Act
#//# is the main source of :AT laws. The ta' legislation is amended each year
by the %inance Act. This is based on proposals in the Budget each year. The
Finance Act generally relates to the income year and assessment year starting
on Muly of that year. Therefore% the Finance Act !"## relates mainly to the
assessment year !"##8!"#!.
B- Case la/
Bver the years% many hundreds of ta' cases have been brought before the
courts where the interpretation of statute law is unclear.
0ecisions made by =udges to resolve these cases form case law. any
=udgments are precedent for future cases which means that they must be
followed unless superseded by legislation or the decision of a higher court.
C- NB# )u3lication
The $ational Board of 6evenue 3$B65 is a statutory body having the highest
e'ecutive authority and empowered to ma;e necessary rules concerning
income ta' matters and is authori9ed to give any interpretation of any
provision in any section of the Brdinance. $B6 ma;es available some forms%
noti&cations% brochures% and guidelines of income ta'% :AT and customs
through its websites and other forms of communication for public at large.
There are many S6Bs and circulars on income ta' and :AT published by $B6
providing guideline for ta' purpose.
'-: Sco*e of Bangladesh Inco4e Ta,
Some provisions% rules and regulations have to be ;ept in mind in order to
determine income ta' on the income of an assessee in Bangladesh. They are
as follows?
I. T!e 0ncome Tax 1rdinance2 /.-34 The Income Ta' Brdinance% #/.* came
into force on #st Muly% #/.* as Income Ta' anual I. It has !) Chapters%
#.- sections% numerous subsections and seven schedules containing
provisions regarding assessment% penalty% appeal etc.
II. 0ncome Tax Rules2 /.-34 Income Ta' 6ules% #/.* has framed various rules
for the administration of the Income Ta' Brdinance% #/.* as provided
therein.

III. Finance Act4 To give e1ect to the various proposals in the annual budget
covering the areas of direct and indirect ta'es% Finance Act is issued. It
contains various applicable ta' rates and other amendments of the Income
Ta' Brdinance and 6ules% #/.*.
I:. 5R1 "5tatutory Regulatory 1rders$4 According to the Section #.+ of the
Income Ta' Brdinance% #/.*% $B6 can issue certain circulars as and when
necessary. The provisions of these S6Bs are also to be considered at the
time of computing income ta' li;e the provisions of Income Ta' Brdinance
and 6ules.
:. 0ncome Tax Case Law4 In the course of assessment proceedings% there may
sometimes arise a dispute between the $B6 and the assessee over the
interpretation of some of the provisions of the act and rules. The assessee
can go the court ob=ecting the $B6Ds interpretation% and the =udgments
given by the courts act as guidance to the assessing oEcers and the
assessee in similar circumstances in the future.
'-@ Structure of Inco4e Ta, Ordinance= 'CD:B
The Income Ta' Brdinance% #/.* came into force on #
st
Muly% #/.* as
Income Ta' anual #. It has !) Chapters% #.- sections% numerous sub8
sections and seven schedules containing provisions regarding assessment%
penalty% appeal etc. A brief description regarding these enumerated below?
I- The Inco4e Ta, Ordinance= 'CD: > Cha*ters and Sections
II- The Inco4e Ta, Ordinance= 'CD:>Schedules
SL
#
Schedule Title
' First
Schedule:
Part-A Approved Superannuation Fund or Pension Fund
Part B
Part - C
6ecogni9ed Provident Fund
Approved (ratuity Fund
2 Second
Schedule:
6ates of income ta' in certain special cases
9 Third
Schedule:
Computation of 0epreciation Allowance
: Fourth
Schedule:
Computation of the Pro&ts and (ains of
Insurance Business
Chapte
r
Title Sections
' Preliminary 1-2
2 Administration 3-1
9 Ta'es Appellate Tribunal 11-1!
: Charge of Income Ta' 1"-1#
@ Computation of Income 2-$3
E 2'emption and Allowances $$-$%
F Payment of Ta' before Assessment $&-%$
D 6eturn and Statement %!-&
C Assessment &1-#$
'& 7iability in Special Cases #!-13
'' Special Provisions relating to avoidance of ta' 1$-1%
'2 6e<uirement of furnishing certain information 1&-11
'9 6egistration of &rms 111 'o(itted)
': Powers of Income Ta' Authorities 112-122
'@ Imposition of Penalty 123-133
'E 6ecovery of Ta' 13$-1$3
'F 0ouble Ta'ation 6elief 1$$-1$!
'D 6efunds 1$"-1!2
'DA Settlement of Cases
1!2A-1!2*
'o(itted)
'DB Alternate 0ispute 6esolution 1!2F-1!2S
'C Appeal and 6eference 1!3-1"2
2& Protection and Information 1"3
2' B1ences and Prosecution 1"$-1%1
22 iscellaneous 1%2-1&$
29 6ules and 6epeal 1&!-1&%
@ Fi+th
Schedule:
Part-A Computation of Pro&ts and (ains from 2'ploration
and production of petroleum and the determination
of ta' thereon.
Part- B Computation of Pro&ts and (ains from 2'ploration
and 2'traction of ineral deposits in Bangladesh
3e'cept oil and gas5.
E Si,th
Schedule:
Part-A 2'clusions from total Income
Part - B 2'emptions and allowances for assessees being
resident and nonresident Bangladeshi
F Se-enth
Schedule
Computation of relief from income ta' by way of
credit in respect of foreign ta'
III- The Inco4e Ta, #ules= 'CD:
The IT 6ules% #/.*% comprises si'ty nine rules to supplement various sections
and provisions of the IT Brdinance% #/.*. $ational Board of 6evenue 3$B65
en=oys Ae'ibility to amend or change any rules through the noti&cation in the
oEcial ga9ette.
'-E O3<ecti+es and I4*ortance of Inco4e Ta,B
Ta'ation is one of the ma=or sources of revenue to (overnment to meet a
countryDs revenue and development e'penditures with a view to
accomplishing some economic and social ob=ectives% such as redistribution of
income% price stabili9ation and discouraging consumption of harmful and
socially undesirable goods. Some ma=or ob=ectives and importance of income
ta' are as follows?
a(#e+enue collectionB Income ta' is a ma=or source of revenue for the
government. In Bangladesh% income ta' revenue accounts for nearly #.
percent of total government revenue. Therefore% the &rst and foremost aim
of income ta' is to raise public revenue to meet the ever increasing public
e'penditure.
3(#e>distri3ution of inco4eB An e1ective% eEcient and fair ta'ation
system can reduce ine<ualities in income and wealth. This is possible by
ta'ing rich people heavily and to confer bene&t to the poorer section
through progressive income ta'.
c( Increase in sa+ingsB An e1ective and eEcient ta' system encourages
people to save through providing ta' credit facilities on investment
allowance.
d(Increase in ca*ital in+est4entB An e1ective and eEcient ta' system
encourages local and foreign investors to invest in the country through
providing various facilities li;e ta' credit facilities on investment
allowance% ta' holiday scheme% depreciation allowance% ta' incentives etc.
e("cono4ic de+elo*4entB The income ta' revenue can be used by the
government to ensure the economic development of the country. It can be
used to build the infrastructure% to invest in social security programs% in
various poverty elevation programs.
So% from the above discussion it is clear that income ta' plays a signi&cant
role in the economic development of a country. For this reason various reform
strategies have been ta;en to moderni9e $B6.
'-F #ole of Inco4e Ta, in "cono4ic De+elo*4ent of BangladeshB
As it has been discussed before% ta'ation is one of the ma=or sources of public
revenue to meet a countryDs revenue and development e'penditures with a
view to accomplishing some fundamental economic and social ob=ectives%
such as redistribution of income% price stabili9ation and discouraging harmful
consumption. The contribution of income ta' is playing a pivotal role in the
economic development of Bangladesh. The government of Bangladesh has
ta;en various measures to moderni9e the ta' system and imposed various
provisions in the Income Ta' Brdinance% #/.*. Some of the provisions are as
following?
a(Ta, ;olida6 Sche4eB According to Section *+% *, and *- of the ITB%
#/.*% an industrial enterprise established within prescribed time limit in
the prescribed area shall be e'empted from ta' for period% i.e. * to #!
years. This is ;nown as Ta' Goliday Scheme. The main ob=ective of this
scheme is to ensure economic development through industriali9ation
attracting investment in some speci&c sectors e.g. tourism industries.
3(In+est4ent allo/anceB Investment allowance is given on the investment
in new machineries 3li;e machineries of new Fishing Boats L passenger
boats5 Q !"P% if they are established in $B6 speci&ed areas it is !+P. This
provision is also attracting investors.
c( Accelerated De*reciation Allo/anceB 0epreciation allowance is
allowed on the new machineries used in various industries at a speci&ed
rate 3#""P in &rst year for speci&ed areas% and ."P in &rst and !"P in the
second year for industries established in other areas.5
d(Ta, incenti+es for S4all G Cottage IndustriesB According to Section
*-3b53ii5 ta' incentives are allowed on the income and pro&t of cottage
industries to encourage investment in cottage industries which can
contribute to the economy signi&cantly.
e(Ta, incenti+es for encouraging sa+ingsB The government also
encourages savings providing ta' credit facilities on certain types of
investment and e'penditures. Such as% purchase of shares and
debentures% savings certi&cate% 0PS% insurance premium% provident fund
etc.
f( Ta, e,e4*tions in certain e,*endituresB Certain e'penditures to
enhance social welfare li;e contribution to presidentDs4prime ministerDs
relief fundI (overnment Ra;at fund% Ahsania ission Cancer Gospital etc.
are e'empted from ta' payment. These provisions also encourage people
to spend in certain social development program.
g(Ta, incenti+es for foreign in+estorsB ForS attracting foreign investors
various concessions li;e ta' holiday% ta' e'emptions for interest% royalty%
technical assistance and fees% remittance to own country have been
allowed as per the ITB% #/.*.
h(Allo/ance for scienti0c researchB For developing new products%
technologies in the industrial sectors certain allowance is allowed. Ta'
rebate is given on the cost of relevant scienti&c research.
i( Ta, incenti+es for re4ittance to BangladeshB A signi&cant number of
Bangladeshi people wor; abroad and to encourage them remittances
through ban;ing channel has been dec#ared ta' e'empted.
So% it can be said that to ensure the economic development of the country
certain provisions have been introduced in the ITB% #/.*. These provisions
encourage not only foreign investors but also the local entrepreneurs.
'-D So4e De0nitions G I4*ortant Conce*ts #elating to Ta,B
/6 Agricultural income 7895 '"/$:? Tagricultural incomeT means8
3a5 Any income derived from any land in Bangladesh and used for
agricultural purposes
3i5 By means of agricultureI or
3ii5 By the performance of any process ordinarily employed by a cultivator to
render mar;etable the produce of such landI or
3iii5 by the sale of the produce of the land raised by the cultivator in
respect of which no process% other than that to render the produce
mar;etable% has been performedI or
3iv5 by granting a right to any person to use the land for any periodI or
3b5 Any income derived from any building which8
3i5 is occupied by the cultivator of any such land as is referred to in sub8
clause 3a5 in which any process is carried on to render mar;etable any
such produce as aforesaidI
3ii5 is on% or in the immediate vicinity of such landI and
3iii5 is re<uired by the cultivator as the dwelling house or store8house or
other outhouse by reason of his connection with such land.
'6 Annual ;alue 7895 '"<$:? Tannual valueT shall be deemed to be
3a5 in relation to any property let out8
3i5 the sum for which property might reasonably be e'pected to let from
year to year and any amount received by letting out furniture% &'ture%
&ttings etc.I or
3ii5 where the annual rent in respect thereof is in e'cess of the sum referred
to in paragraph 3i5% the amount of the annual rent.
<6 Appellate =oint Commissioner 7895 '"3$:? TAppellate Moint CommissionerT
means a person appointed to be an Appellate Moint Commissioner of Ta'es J4S
) Uand includes an Appellate Additional Commissioner of Ta'esV Uand also a
person appointed to hold current charge of an Appellate Moint Commissioner of
Ta'esV.
36 Assessee 7895 '",$:? TAssesseeT% means a person by whom any ta' or other
sum of money is payable under this Brdinance% and includes8
3a5 every person in respect of whom any proceeding under this
Brdinance has been ta;en for the assessment of his income or the income of
any other person in respect of which he is assessable% or of the amount of
refund due to him or to such other personI
3b5 every person who is re<uired to &le a return J4S -+% J4S ./ or J4S /#I
3c5 every person who desires to be assessed and submits his return of
income under this BrdinanceI and
3d5 every person who is deemed to be an assessee% or an assessee in
default% under any provision of this BrdinanceI
)6 Assessment 7895 '"-$:? TassessmentT% with its grammatical variations and
cognate e'pressions% includes re8assessment and additional or further
assessmentI
+6 Assessment >ear 7895 '".$:? Tassessment yearT means the period of twelve
months commencing on the &rst day of Muly every yearI and includes any such
period which is deemed% under the provisions of this Brdinance% to be
assessment year in respect of any income for any periodI
,6 Business 7895 '"/3$:? TbusinessT includes any trade% commerce or
manufacture or any adventure or concern in the nature of trade% commerce or
manufactureI
-6 Capital asset 7895 '"/)$:? Tcapital assetT means property of any ;ind held by
an assessee% whether or not connected with his business or profession% but
does not include8
3a5 any stoc;8in8trade 3not being stoc;s and shares5% consumable stores
or raw materials held for the purposes of his business or professionI
3b5 personal e1ects% that is to say% movable property 3including wearing
apparel% =ewellery% furniture% &'ture% e<uipment and vehicles5% which are
held e'clusively for personal use by% and are not used for purposes of the
business or profession of the assessee or any member of his family
dependent on himI and
3c5 agricultural land in Bangladesh% not being land situate8
3i5 in any area which is comprised within the =urisdiction of municipality
3whether ;nown as a municipality% municipal corporation% town% or by any
other name5 or a cantonment Board and which has a population of not less
than ten thousand according to the last preceding census of which the
relevant &gures have been published before the &rst day of the income
yearI or
3ii5 in any area within such distance not being more than &ve miles from
the local limits of any municipality or cantonment board referred to in
paragraph 3i5% as the (overnment may having regard to the e'tent of% and
scope for% urbanisation of that area and other relevant considerations%
specify in this behalf by noti&cation in the oEcial (a9ette.
.6 C!arita?le Purpose 7895 '"/+$:? Tcharitable purposeT includes relief of the
poor% education% medical relief and the advancement of any ob=ect of general
public utilityI
/(6 C!ild 7895 '"/-$:? TchildT% in relation to any individual% includes a step8child
and an adopted child of that individualI
//6 Company 7895 '"'($:? TCompanyT means a company as de&ned in Uthe
Companies Act% #/#) 3:II of #/#)5 or the Companies Act% #//* 3:III of #//*5V
and includes8
3a5 a body corporate established or constituted by or under any law for the
time being in forceI
3b5 any nationali9ed ban;ing or other &nancial institution% insurance body
and industrial or business enterpriseI
3bb5 an association or combination of persons% called by whatever name% if
any of such persons is a company as de&ned in Uthe Companies Act%
#/#) 3:II of #/#)5 or the Companies Act% #//* 3:llI of #//*5I
3bbb5 any association or body incorporated by or under the laws of a
country outside BangladeshI andIV
3c5 any foreign association or body% Unot incorporated by or under any lawV%
which the Board may% by general or special order% declare to be a
company for the purposes of this BrdinanceI
/'6 &eputy Commissioner of Taxes 7895 '"'<$:? T0eputy Commissioner of Ta'esT
means a person appointed to be a 0eputy Commissioner of Ta'es J4S )% and
includes a person appointed to be an Assistant Commissioner of Ta'es% an
2'tra Assistant Commissioner of Ta'es and a Ta' 6ecovery BEcerI
/<6 &ividend 7895 '"'+$:? T0ividendT includes88
3a5 any distribution by a company of accumulated pro&ts% whether
capitali9ed or not% if such distribution entails the release by the company
to its shareholders of all or any part of its assets or reservesI
3b5 any distribution by a company% to the e'tent to which the company
possesses accumulated pro&ts% whether capitali9ed or not% to its
shareholders of debentures% debenture8stoc; or deposit certi&cates in
any form% whether with or without interestI
3c5 any distribution made to the shareholders of a company on its
li<uidation to the e'tent to which the distribution is attributable to the
accumulated pro&ts of the company immediately before its li<uidation%
whether capitali9ed or notI
3d5 any distribution by a company to its shareholders on the
reduction of its capital% to the e'tent to which the company possesses
accumulated pro&ts% whether such accumulated8 pro&ts have been
capitali9ed or notI
3dd5 any pro&t remitted outside Bangladesh by a company not
incorporated in Bangladesh under the Companies Act% #//* 3:III of
#//*5I
3e5 any payment by a private company of any sum 3whether as
representing a part of the assets of the company or otherwise5 by way of
advance or loan to a shareholder or any payment by any such company
on behalf% or for the individual bene&t% of any such shareholder% to the
e'tent to which the company% in either case% possesses accumulated
pro&tI but does not include88
3i5 a distribution made in accordance with sub8clause 3c5 or sub8
clause 3d5 in respect of any share including preference share for full cash
consideration% or redemption of debentures or debenture8stoc;% where
the holder of the share or debenture is not entitled in the event of
li<uidation to participate in the surplus assetsI
3ii5 any advance or loan made to a shareholder in the ordinary course
of its business% where the lending of money is a substantial part of the
business of the companyI 3iiia5 any bonus share issued by a company.
/36 @mployer 7895 '"',$:? TemployerT includes a former employerI
/)6 @mployee 7895 '"'-$:? TemployeeT% in relation to a company% includes the
managing director% or any other director or other person% who irrespective of his
designation% performs% any duties or functions in connection with the
management of the a1airs of the companyI
/+6 Fair MarAet ;alue 7895 '"<($:? Tfair mar;et valueT means% in relation to capital
asset8
3a5 the price which such asset would ordinarily fetch on sale in the
open mar;et on the relevant day% and% where such price is not
ascertainable% the price which the 0eputy Commissioner of Ta'es may%
with the approval in writing of the Inspecting Moint Commissioner%
determineI
3b5 the residual value received from the lessee in case of an asset
leased by a &nancial institution having license from the Bangladesh Ban;
on termination of lease agreement on maturity or otherwise sub=ect to
the condition that such residual value plus amount realised during the
currency of the lease agreement towards the cost of the asset is not less
than the cost of ac<uisition to the lessor &nancial institution.
/,6 Fees for Tec!nical 5ervices 7895 '"</$:? Tfees for technical servicesT means any
consideration 3including any lump sum consideration5 for the rendering of any
managerial% technical or consultancy services 3including the provision of services
of technical or other personnel5 but does not include consideration for any
construction% assembly% mining or li;e pro=ect underta;en by the recipient% or
consideration which would be income of the recipient classi&able under the head
TSalariesTI
/-6 0ncome 7895 '"<3$:? TincomeT includes88
3a5 any income% pro&ts or gains% from whatever source derived%
chargeable to ta' under any provision of this Brdinance under any head
speci&ed in J4S !"I
3b5 any loss of such income% pro&ts or gainsI
3c5 the pro&ts and gains of any business of insurance carried on by a
mutual insurance association computed in accordance with paragraph .
of the Fourth ScheduleI
3d5 any sum deemed to be income% or any income accruing or
arising or received% or deemed to accrue or arise or be received in
Bangladesh under any provision of this Brdinance.
/.6 0ncome >ear 7895 '"<)$:? Tincome yearT% in respect of any separate source of
income% means?
3a5 the &nancial year immediately preceding the assessment yearI
or
3b5 where the accounts of the assesses have been made up to a
date within the said . &nancial year and the assesses so opts% the twelve
months ending on such dateI or
3c5 in the case of a business or profession newly set up in the said
&nancial year% the period beginning with the date of the setting up of the
business or profession and 8
3i5 ending with the said &nancial yearI or
3ii5 where the accounts of the assesses have been made up to a date
within the said &nancial year and the assesses so opts% ending on
that dateI or
3d5 in the case of a business or profession newly set up in the
twelve months immediately preceding the said &nancial year 8
3i5 if the accounts of the assessee have been made up to a date
within the said &nancial year and the period from the date of the
setting up of the business or profession to the &rst8mentioned
date does not e'ceed twelve months% then% at the option of the
assesses% such period% or
3ii5 if any period has been determined under sub8clause 3e5% then the
period beginning with the date of the setting up of the business or
profession and ending with the last day of that period% as the case
may beI or
3e5 in the case of any person or class of persons or any business
or profession or class of business or profession such period as may be
determIDled by the Board or by such authority as the Board may
authori9e in this behalfI
3f5 in respect of the assesseeDs share in the income of a &rm of which
the assessee is a partner and the &rm has been assessed as such% the
period determined as the income year for the assessment of income of
the &rmI
3g5 where in respect of a particular source of income an assessee
has once been assessed or where in respect of a business or profession
newly set up% an assessee has once e'ercised the option under sub8
clause 3b5 or sub8clause 3c5 3ii5 or sub clause 3d5 3i5 then% he shall not% in
respect of that source% or% as the case may be% business or profession% be
entitled to vary the meaning of the e'pression Tincome yearT as then
applicable to him% e'cept with the consent of the 0eputy Commissioner
of Ta'es upon such conditions as the 0eputy Commissioner of Ta'es may
thin; &t to impose.
'(6 0nterest 7895 '"<-$:? TInterestT means interest?payable ill any manner in respect
of any money borrowed or debt incurred 3including a deposit% claim or other
similar right or obligation5 and includes any service fee or other charge in respect
of the money borrowed or debt incurred or in respect of any credit facility which
has not been utili9edI
'/6 MarAet ;alue 7895 '"3($:? Tmar;et valueT% in respect of agricultural produce%
means?
3a5 where such produce is ordinarily sold in the mar;et in its raw
state or after application to it of any process employed by a cultivator to
render it &t to be ta;en to the mar;et% the value calculated according to
the average price at which it has been sold during the year previous to
that in which the income derived from such produce &rst becomes
assessableI and
3b5 where such produce is not ordinarily sold in the mar;et in its
raw state% the aggregate of
3i5 the e'penses of cultivationI
3ii5 the land development ta' or rent paid for the lands in which it was
grownI and
3iii5 such amount as the 0eputy Commissioner of Ta'es &nds%
having regard to the circumstances of each case% to represent a
reasonable rate of pro&t on the sale of the produce in <uestion as
agricultural produceI
''6 Bon*resident 7895 '"3'$:? Tnon8residentT means a person who is not a residentI
'<6 PerCuisite 7895 '"3)$:? Tper<uisiteT means 8
3i5 any payment made to an employee by an employer in the form of
cash or in any other form e'cluding basic salary% festival bonus% incentive
bonus not e'ceeding ten percent of disclosed pro&t of relevant income
year% arrear salary% advance salary% leave encashment or leave fare
assistance and overtime% and
3ii5 any bene&t whether convertible into money or not% provided to an
employee by an employer% called by whatever name% other than
contribution to a recogni9ed provident fund% approved pension fund%
approved gratuity fund and approved superannuation fundI
'36 Person 7895 '"3+$:? TpersonT includes an individual% a &rm% an association of
persons% a Gindu undivided family% a local authority% a company and every other
arti&cial =uridical personI
')6 Pro&ts in lieu of salary UJ4S !3+"5V? Tpro&ts in lieu of salaryT includes88
3a5 the amount of compensation due to% or received by% an
assessee from his employer at% or in connection with% the termination of%
or the modi&cation of any terms and conditions relating to% his
employmentI and
3b5 any payment due to% or received by% an assesses from a
provident or other fund to the e'tent to which it does not consist of
contributions by the assesses and the interest on such contributionsI
'+6 RecogniDed Provident Fund 7895 '")'$:? Trecogni9led provident fundT means a
provident fund which has been% and continues to be% recogni9ed by the
Commissioner in accordance with the provisions <f Part B of the First ScheduleI
',6 6esident UJ4S !3++5V? TresidentT% in respect of any income year% means
3a5 an individual who has been in Bangladesh8
3i5 for a period of% or for periods amounting in all to% one hundred and
eighty two days or more in that yearI or
3ii5 for a period of% or periods amounting in all to% ninety days or more
in that year having previously been in Bangladesh for a period of%
or periods amounting in all to% three hundred and si'ty8&ve days
or more during four years preceding that yearI
3b5 a Gindu undivided family% &rmS or other association of persons%
the control and management of whose a1airs is situated wholly or partly
in Bangladesh in that yearI and
3c5 a Bangladeshi company or any other company the control and
management of whose a1airs is situated wholly in Bangladesh in that
yearI
'-6 Royalty 7895 '")+$:? TroyaltyT means consideration 3including any lump sum
consideration but e'cluding any consideration which is classi&able as income of
the recipient under the head TCapital gainsT5 for 88
3a5 transfer of all or any rights% including the granting of a license
in respect of a patent% invention% model% design% secret process or
formula% or trade mar; or similar propertyI
3b5 the imparting of any information concerning the wor;ing of% or
the use of% a patent% invention% model% design% secret process or formula%
or trade mar; or similar propertyI
3c5 the use of any patent% invention% model% design% secret process or
formula% or trade mar; or similar propertyI
3d5 the imparting of any information concerning technical%
industrial% commercial% or scienti&c ;nowledge% e'perience or s;illI
3e5 the transfer of all or any rights% including granting of a license%
in respect of any copyright% literary. artistic or scienti&c wor;% including
&lms or video tapes for use in connection with television or tapes for use
in connection with radio broadcasting% but not including consideration for
sale% distribution or e'hibition of cinematograph &lmsI or
3f5 the rendering of any services in connection with any of the
aforesaid activitiesI
'.6 Tax 7895 '"+'$:? Tta'T means the income ta' payable under this Brdinance and
includes any additional ta'% e'cess pro&t ta'% penalty% interest% fee or other
charges leviable or payable under this BrdinanceI
<(6 Total income 7895 '"+)$:? Ttotal incomeT means the total amount of income
referred to in section #- computed in the manner laid down in this Brdinance%
and includes any income which% under any provision of this Brdinance% is to be
included in the total income of an assesseeI
</6 Transfer 7895 '"++$:? TtransferT% in relation to a capital asset% includes the sale%
e'change or relin<uishment of the asset% or the e'tinguishment of any right
therein% but does not include8
3a5 any transfer of the capital asset under a gift% be<uest% will or
an irrevocable trustI
3b5 any distribution of the assets of a company to its shareholders
on its li<uidationI and 3c5 any distribution of capital assets on the
dissolution of a &rm or other association of persons or on the partition of
a Gindu undivided familyI
<'6 >ear 7895 '"+.$:? TyearT means a &nancial year.
'-C The Conce*t of Inco4e
There is no e'haustive de&nition of OincomeW in the Income Ta' Brdinance #/.*
3Brdinance5. The term income is easy to understand but diEcult to de&ne. >hat
is ta'ed% as so often has been pointed out under the Income Ta' 7aw% is nothing
that is realI it is the statutory income measured in a particular way.
The ob=ect of the Brdinance is to ta' OIncomeW. The term is e'panded in sec. !.
and )# into income% pro&ts and gainsI but the e'pansion is more a matter of
words than of substance. The word OincomeW is an e'pression of elastic ambit and
the courts when describing income have almost always <uali&ed their description
by saying that it is not e'haustive.
From various =udicial decisions% the following are held to be characteristics of
income?
3a5 Income should be received in the form of money or moneyKs worth.
3b5 Income should be in the form of revenue nature.
3c5 It should arise from some de&nite source or a source with some sort
of regularity.
3d5 It should be derived from a person other than the recipient.
3e5 Income tainted with illegality is also classi&ed as ta'able income
under ta' law.
Income is a more general term than pro&ts or gains. The words Oincome% pro&ts
and gainsW are used in a distinctive sense% and the word OincomeW is not limited
by the words Opro&tsW and OgainsW. A receipt may be ta'able as income% although
it may contain no element of pro&ts or gain. Pro&ts or gains mean something
which is in the nature of interest or fruit% as opposed to principal or tree. O(ainsW
is really e<uivalent to Opro&tsW. The pro&t of a trade or business is the surplus by
which the receipts from the trade or business e'ceed the e'penditure necessary
for the purpose of earning these receipts.
Section !3)*5 of the Income Ta' Brdinance #/.* gives a de&nition of Income as
under?
XIncomeK Includes8
a5 Any income% pro&ts and gains% from whatever source derived% chargeable
to ta' under any provision of the ordinance under any head speci&ed in
section !"I
3b5 Any loss of such income% pro&ts or gainsI
3c5 The pro&ts and gains of any business of insurance carried on by a mutual
insurance association computed in accordance with paragraph . of the
Fourth ScheduleI
3d5 Any sum deemed to be income% or any sum accruing or arising or
received% in Bangladesh under any provision of the BrdinanceI
But the amount of any bonus share or the amount of bonus declared to rise paid
up share capital shall not be included as income of that shareholder.
To understand the true nature of income% the following two case decisions can be
referred to?8
a( Sha/ .allace G Co CaseB
OIncome in the Brdinance connotes a periodical monetary return coming
in with some sort of regularity or e'pected regularity from a de&nite
source. The source need not be continuously productive% but it must be
one where ob=ect is the production of a de&nite return% e'cluding
anything in the nature of a mere windfall. Income is essentially the
product of something which is often loosely spo;en as XcapitalK. It is not
correct to say that every receipt which is not a capital is assessable. Bn
the other hand% it is only receipts that are of the nature of income
receipts that are assessableYY.W
3( #ani A4rit 5un/ar CaseB
OIncome% in order to be ta'able% need not arise from any business
activity% investment of enforceable obligation to pay% but may arise from
voluntary or customary payments. $or is it necessary that it should be
the result of some outlay on the part of the assesseeYYW
Therefore% for the purposes of the Income Ta' Brdinance #/.*% income is a
periodical monetary return coming in with some sort of regularity or e'pected
regularity from a de&nite source% not e'cluded by the Brdinance.
Total Inco4eB Sec 2E@(
Section !3,+5 de&nes the term Ototal IncomeW as follows? Ototal incomeW means
the total amount of income referred to in section #- computed in the manner laid
down in the Brdinance% and includes any income which% under any provision of
the Brdinance is to be included in the total income of an assessee.
'-'& Ca*ital or #e+enue
0i1erence between capital and revenue is of vital importance. Inco4e ta, is
le+ied on inco4e and not on ca*ital recei*ts- >hile ascertaining the
pro&ts of a business or profession% the revenue e'penditure and not the
capital e'penditure is deductible from the trading receipts. Courts have often
observed that it may conclusively be =udged that a particular receipt is a
capital or a revenue receipt. 0ecided cases merely illustrate and not all are
perfect guides.
The distinction between capital and revenue receipts is much more diEcult
than between capital and revenue e'penditure. There are no hard and fast
rules which may help in determining whether a particular receipt is a capital
or a revenue receipt.
>hether a particular e'penditure is incurred solely to earn pro&t or whether it
is a capital e'penditure depends in each case on the nature of business%
commercial practice% the nature of the e'penditure and other relative
circumstances. $o rigid rules can be laid down in this connection.
'-'' Ta, and Inco4e Ta, B
Income ta' is a ta' on income. Section !3,!5 of the Income Ta' Brdinance
#/.* de&nes ta' as follows? Tta'T means the income ta' payable under the
Brdinance and includes any additional ta'% e'cess pro&t ta'% penalty% interest%
fee or other charges leviable or payable under the Brdinance.T Therefore%
income ta' is any ta'% additional ta'% e'cess pro&t ta'% penalty% interest% fee
or other charges leviable or payable on any income or deemed income under
the Brdinance.
'-'2 DiAerent #ates of Ta,B
The di1erent rates of ta' for di1erent types of assessee for the assessment
year !"##8!"#! are as follows?
Ta, #ates for Indi+idual= %ir4s= Association of )ersons AO)(= ;indu
Undi+ided %a4il6 ;U%( and Arti0cial Huridical )ersonB
a(The limit of Total Income $BT liable to Income Ta' for the Assessment year
!"##8#! stands at T;. #."%""".
Ta' e'empted ceiling of income for Female assessee% senior citi9ens at age
,+ or above will be TH. !""%""" and that for handicapped4disabled persons
will be T;. !+"%""" for the assessment year !"##8!"#!.
The comparative FI:2 Tier ta' rates for two assessment years are given
below?
Tier
Assessment Cear? !"#" 8## Assessment Cear? !"##8#!
7evel of
Income
Slap Ta'
6ate
7evel of
Income
Slap Ta'
6ate
# Jp to
TH.#,+%"""
First
T;.#,+%"
"P Jp to T;.
#."%"""
First
T;.#."%"
"P
"" ""
! T;.#,+%"""8
T;.**"%"""
$e't
T;.!-+%"
""
#"P T;. #."%""#8
T;.*."%"""
$e't
T;.)""%"
""
#"P
) T;.**"%"""8
T;.-,+%"""
$e't
T;.)!+%"
""
#+P T;.*."%""#8
T;..."%"""
$e't
T;.*""%"
""
#+P
* T;.-,+%"""8
T;.#%#*"%"""
$e't
T;.)-+%"
""
!"P T;..."%""#8
#%#."%"""
$e't T;.
)""%"""
!"P
+ Above
T;.#%#*"%"""
Bn above !+P Above
T;.#%#."%"""
Bn
above
!+P
The minimum amount of income ta' is T;. !%"""I
3(S4all and cottage industriesB If the assessee is an owner of any small
and cottage industry or engaged in such ;ind of activities in a $B6
speci&ed less developed 4 least developed area% he4she will be eligible to
have a ta' rebate on such income at following rates?
ii5 If production 4 turnover increases by more than #+P but less than !+P
comparing to previous year% +P rebate on ta' applicable on such
income will be allowedI
iii5 If production 4 turnover increases by more than !+P comparing to
previous year% such rate of rebate will be #"P.
In order to avail the above opportunities% the industries be located in the
O7ess 0eveloped AreasW and O7east 0eveloped AreasW as speci&ed by $B6
in accordance of I.T.B. #/.*.
Ta, #ates for Co4*anies
Applicable ta' rates for companies for the Assessment year !"#"8!"## are as
follows?

a( )u3licl6 Traded Co4*an6B
3i5 Q !-.+PI however% such company is eligible to claim #"P
rebate on such payable ta' if it declares dividends at a rate
higher than !"P. if at least #"P dividend is declared and paid
within ," days of such declaration with a further rebate of #"P
of Ta' Payable in case of dividend of more than !"P is declared
and paid within ," days of such declaration.
3ii5 Q )-.+P if declared dividend is less than #"P or the declared
dividend is not paid within S2C stipulated time 3," days of such
declaration5.
3( Non>)u3licl6 Traded Co4*anies > I 9F-@J-
c( Ban2= Insurance and %inancial Institutions > I :2-@J-
d(Cigarette 4anufacturing co4*anies > I :2-@J-
Gowever% the rate will be reduced to )+P if such company is publicly traded.
d( Mo3ile )hone O*erator Co4*an6 > I :@J-
Provided t!at if t!e mo?ile p!one operator company turned into a
pu?licly traded company ?y oEering at least /(# "it must not include
Pre 0nitial Pu?lic 1Eering Placement at a rate !ig!er t!an )#$ of its paid
up capital t!roug! stocA exc!anges2 t!en t!e tax rate will come down to
<)#6
Inter>Cor*orate Ta, #ate Ta, #ate on Di+idend( for 2&''>'2
assess4ent 6ears
3a5 Company
3i5 If dividend declared by a company registered under Company Act
#//* or any pro&t remitted outside Bangladesh by a company not
incorporated in Bangladesh under Company Act #//*% the rate on
such dividend or pro&t is !"P.
3ii5 #"P to #+P in relation to a non8resident company resident of a
country with whom there is 0ouble Ta'ation Agreement with
Bangladesh.
3b5 Individual
3i5 6esident F at a rate applicable to his total income
3ii5 $on8resident 8 Q !+P
3iii5 #+P if the non8resident is resident of a country with whom there is
0ouble Ta'ation Agreement with Bangladesh.
Ta, #ate for Non>#esident
Ta' rate for non8resident 3Bther than $on 6esident Companies and $on8
6esident Bangladeshi5 is ma'imum that is Q !+P.
Ca*ital $ain Ta, #ate )aragra*h 2 of the Second Schedule(
a( Ca*ital gain on Ca*ital assets other than Shares referred to in
clause 3( 3elo/B
3#5 Companies? Q #+P.
3!5 Bther assessees?
3i5 0isposal within + years? at regular rates applicable to assesseeKs
total income including capital gains.
3ii5 0isposal after + years? at regular rates applicable to total
income 3including capital gains5 or at #+P% whichever is lower.
3( Ca*ital gain on Sale of SharesB
3i5 Shares of Public 7isted Companies? $o capital gain ta' 36ef. section
)!3-55
3ii5 Shares of Private 7imited Companies? Q #"P.
3iii5 (ain received by $on8resident on Sale of Shares of Public
Companies if the assessee is entitled to similar e'emption in the
country in which he is a resident.
Ta, #ate on .inning referred to in Section 'C'9(
As per Paragraph ) of the Second Schedule the ta' rate on winnings is the
rate applicable to total assesseeKs income 3including O>inningsW5 or !"P%
whichever is lower.
'-'9 Lia3ilit6 to ta,
A- Indi+iduals
An individual may be liable to the following ta'es?
Income ta' 3IT5% for e'ample
8 income from salary
8 income from interest on securities
8 income from house property
8 agricultural income
8 income from business or profession which he operates as a sole trader or
as a member of a partnership &rm
8 capital gains and
8 income from other sources
:alue added ta' 3:AT5 as the supplier of goods and services 3if a sole
trader5 or as the &nal consumer of goods or services
An individual is ta'ed annually on his income at the rate determined with
reference to the Finance Act enacted in every &nancial year.
B- )artnershi*s
A partnership is a group of persons carrying on a business together with a
view to ma;ing a pro&t.
2ach partner is liable to ta' on his share of income of the partnership in an
income year% but not for ta' on the shares of income of the other partners.
The partners are also liable to the following ta'es?
Income ta' of employees deducted at source
:alue added ta' 3:AT5 as the supplier of goods and services or as the &nal
consumer of goods or services
C- Co4*anies
A company is a legal person which is legally separate from its owners
3shareholders5 and its managers 3directors5. For the purpose of income ta' the
meaning of company is de&ned under section !3!"5 of Income Ta' Brdinance
#/.* 3hereinafter referred to as the Brdinance5.
A company is liable to the following ta'es?
Corporation ta' 3CT5 on its income
Income ta' of employees deducted at the time of payment of salaries and
remuneration
:alue added ta' 3:AT5 as the supplier of goods and services or as the &nal
consumer of goods or services
A company is liable to corporation ta'% the rate being determined with
reference to the Finance Act enacted in every &nancial year.
'-': Ta, Lia3ilit6 on Inco4e
The ta' is payable on income earned during an income year in the following
year i.e. assessment year. Gowever% there are provisions for payment of ta'es
in advance during the income year% such as deduction of ta'es at source 3Sec
*.5% advance payment of ta' u4s ,* etc.
Jnder Sec !3)+5% Inco4e 6ear means8
a5 the &nancial year 3Muly to Mune5 immediately preceding the assessment year.
b5 If the accounts of an assessee 3generally engaged in business or profession5
have been made up to a date within the said &nancial year% the period ending
on that date.
c5 If% a business or profession is newly set up in the said &nancial year% the
period from the starting up of business or profession to the end of the
&nancial year or where the accounts have been made up to a date within the
said &nancial year% the period ending on that date.
d5 The Board may determine such period as income year in the case of any
person or class of persons or any business or profession or class of business
or professions 3such as industrial units under various Sector Corporations5.
e5 If the assessee is a partner of a &rm and the &rm has been assessed as such%
the period determined as the income year for the assessment of income of
the &rm.
f5 An assessee engaged in business or profession% once adopted a period as
income year cannot change the income year without the consent of the
0eputy Commissioner of Ta'es upon such conditions as the 0eputy
Commissioner of Ta'es thin;s &t to impose.
$ormally% income year of an individual% e'cept engaging in business or
profession ends on )"
th
Mune of a year. An income year cannot e'ceed a period
of twelve calendar months.
'-'@ So4e signi0cant issues of inco4e ta,
Assess4ent 6earB
Assessment year means the year following the &nancial year% i.e. income year.
Thus% the assessment year always begins on #
st
Muly and ends on )"
th
Mune every
year. This period is also ;nown as the &nancial year. Accordingly% it is the current
&nancial year in which income of the immediately preceding &nancial year
3;nown as income year5 is assessed.
As per section !3/5 of the ITB% #/.*I the term TAssessment yearT means the
period of twelve months commencing on the &rst day of Muly every year.
From the following e'ample% we can see how to &nd out the assessment year?
2'ample #
2'ample !
Inco4e 6ear Assess4ent 6ear
"#."#.". to )#.#!.". !""/ 8 !"#"
"#.").". to )#.#!.". !""/ 8!"#"
"#."..". to )#."-."/ !"#" 8 !"##
",ce*tions to the rule of Assess4ent YearB
(enerally% income is ta'ed in the subse<uent year to the income year. But% in
certain cases% to protect the interests of revenue% the income is ta'ed in the
year of earning itself. Thus% in those cases the assessment year and the
income year are the same. The e'ceptions to the normal rule of assessment
year are discussed as under?
a(Inco4e of discontinued 3usiness KSection DC2(LB >here any
business or profession is discontinued in any assessment year% the income
of the period from the e'piry of the last income year upto the date of such
discontinuance may be charged to ta' in that assessment year.
3()ersons lea+ing Bangladesh KSection C;2(3(LB >hen it appears to
the Assessing BEcer that an individual may leave Bangladesh and has no
intention to return% the total income of such individual for the period from
the e'piry of the income year in relation to the current assessment year
upto the probable date of his departure from Bangladesh is chargeable to
ta' in current assessment year itself.
c( Inco4e of non>resident shi**ing co4*anies KSection '&22(LB
Section #"!3!5 of the ITB% #/.*% provides for the ta'ation of income of
non8resident shipping companies in the year in which they earn their
income in Bangladesh% provided that such companies do not have any
representative here.
.or2ed ",a4*le >'-'
An assessee closes its annual accounts consistently on )"
th
Mune. Gis
assessment for the accounting year ended )"
th
Mune !"#" was completed. The
assessee has decided to change its account closing date on )#
st
0ecember
Accounting 6ear
ends on
Inco4e
6ear
Assess4ent
6ear
)".",.!""- !"",8 "- !""-8 ".
)"."/.!""- !""-8 ". !"".8 "/
)#.#!.!""- !""-8 ". !"".8 "/
)#.").!"". !""-8 ". !"".8 "/
)#."-.!"". !"".8 "/ !""/8 #"
from the ne't year. 0etermine the date when should the assessee close its
ne't year end accounts.
Solution
Jpon ta;ing approval from the 0eputy Commissioner of Ta'es% the assessee
can close its ne't annual accounts for si' months period on )#
st
0ecember
!"#" and the income arising therefrom would be assessed in the assessment
year !"##8#!.
.or2ed ",a4*le >'-2
An assessee regularly closes its annual accounts on )#
st
0ecember and his
last assessment for the assessment year !"##8#!% corresponding to the
accounting year ended )#
st
0ecember% !"#" was completed. The assessee
has decided to change its ne't annual accounts on )"
th
Mune. 0etermine the
date when should this assessee close its ne't annual accounts.
Solution
Gere the assessee would not be allowed to close its ne't annual accounts on
)"
th
Mune !"##. Because assessment of income arising therefrom becomes
assessable in the assessment year !"##8#! when assessment for this
assessment year had already been completed based on the accounts ended
)#
st
0ecember !"#". As such he would be re<uired to close ne't annual
accounts on )"
th
Mune !"##% which would comprise a period of eighteen
months.
.or2ed ",a4*le M '-9
Can an assessee change its annual accounts closing dateN If so% under what
conditionsN
Solution
An assessee is allowed
to change its annual
accounts closing date
upon ta;ing approval
from the 0eputy
Commissioner of Ta'es
and on such conditions
as the 0eputy
Commissioner of Ta'es
thin;s &t to impose. As
for e'ample% if due to
change of accounting
year% the assesseeKs
ta' burden is reduced
the 0eputy
Commissioner of Ta'es
is entitled to charge
ta' at a higher rate
applicable for the
assessment year had
no change in closing
date of accounts
occurred.
DiAerent classes of
assesseeB
As per ITB% #/.*%
assessee is a person
who is liable to pay
any sum under the
Income Ta'
Brdinance% #/.* or in
respect of whom the
proceedings have
been under this
Brdinance. The below
diagram depicts the
di1erent classes of
assessee?
#esidential status
of an assesseeB
Section !3++5 de&nes
the term XresidentKW as
follows?8 X6esidentK% in respect of any income year% means8
3a5 an individual who has been in Bangladesh8
3i5 for a period of% or for periods amounting in all to% one hundred and
eighty8two days or more in that yearI or
3ii5 for a period of% or for periods amounting in all to ninety days or
more in that year having previously been in Bangladesh for a period
Individual
Company
Firm
7ocal Authority
Arti&cial Mudicial Person
Association of Person
Gindu Jndivided Family
$on8resident
Bangladeshi
$on8resident
Foreigner
6esident
$on8
resident
O
n

t
h
e

b
a
s
i
s

o
f

P
e
r
s
o
n
O
n

t
h
e

b
a
s
i
s

o
f

R
e
s
i
d
e
n
t
i
a
l

S
t
a
t
u
s
A
s
s
e
s
s
e
e
of% or for periods amounting in all to three hundred and si'ty8&ve
days or more during four years preceding that yearI
3b5 a Findu un*dividend family% &rm or other association of persons% the
control and management of whose a1airs is situated wholly or partly in
Bangladesh in that yearI and
3c5 a Banglades!i company or any ot!er company the control and
management of whose a1airs is situated wholly in Bangladesh in that
yearI
and% under section !3*!5% Xnon8residentK means a person who is not a
resident.
It is important to note here that the concept of resident as de&ned in the
Income Ta' Brdinance has nothing to do with the nationality of a particular
individual. A foreign national may be treated as X6esidentK for a particular year
if he or she ful&ls the legal re<uirements as above% where as a Bangladeshi
national may be treated as a X$on8residentK if he% or she does not ful&ll the
said re<uirements. To test residential status of an individual% the following Aow
chart will be helpful?

Ta,ation i4*lication of resident or non>resident
0etermination of residential status of an assessee has a signi&cance bearing
on the ta' liability as incidence of income ta' varies according to the
residential status of an assessee. In this regard we can consider the following
issues?
I. To determine t!e amount of total income? 0etermination of total income is
di1erent for residents and non8residents. A resident considers global
income as his total income but a non8resident does not consider income
from other countries in his total income.
An individual
stays in
Bangladesh for -
182 days or more
of an income
year?
Resident
Yes
90 days or more
of an income
year?
No
Yes
3! days or more
during " immediate
#receding years?
Yes
No
No
Non-resident
$s the assessee is Bangladeshi citi%en?
Non resident
Bangladeshi &N'B(
Non resident
)oreigner &N')(
Yes No
II. To determine minimum limit of taxa?le income? A resident and non8resident
Bangladeshi has to pay ta' if his total ta'able income is more than T;.
#%,+%""" as per the Brdinance 3in case of women% elderly citi9ens being
more than ,+ years old% the limit is T;. #%."%""" and disable persons the
limit is T;. !%""%""""5. But for a non8resident foreigner such minimum limit
is not applicable.
III. Tax rate4 For a resident an non8resident Bangladeshi ta' is calculated using
the rates applicable for various levels of income. Such as% for &rst T;.
#%,+%""" Q "P % for ne't T;. !%-+%""" Q #"P. But a non8resident foreigner
has to pay ta' at ma'imum rate i.e. Q !+P.
I:. 0ncome tax re?ate? A resident and non8resident Bangladeshi assessee gets
income ta' rebate on investment allowance and on ta' e'empted income
from gross ta' liability. But% for a non8resident foreigner no ta' rebate is
applicable.
:. Tax lia?ility? The average ta' rate applicable for a resident and non8resident
Bangladeshi is less than that of a non8resident foreigner since ta' is
calculated using di1erent lower ta' rates 3such as #"P% #+P% !"P L !+P5.
But a non8resident foreigner has to pay ta' at ma'imum rate i.e. Q !+P.
Thus% determination of residential status of an assessee has a signi&cant
bearing on the ta' liability as total income% ta'able income and ta' rate are
found to vary according to the residential status of an assessee.
.(pacts o+ re s idential status in assessin/ inco(e :
0etermination of residential status of an assessee has a signi&cant bearing on
the ta' liability as incidence of income ta' varies according to the residential
status of an assessee as per Section #- of the ITB% #/.*. Therefore% the scope
of total income varies according to the residential status of an assessee.
These provisions may be summari9ed as under?
Particulars o+ inco(e
To 0e ta,ed or not
1esident 2on-resident
Income received or deemed to be received in
Bangladesh
Ta'able Ta'able
Income accrued or arose or deemed to accrue or
arise in Bangladesh
Ta'able Ta'able
Income accrued or arose outside Bangladesh Ta'able $on8ta'able
.or2ed ",a4*le M '-:
r. J99al% an Indian citi9en% stayed in Bangladesh from #st August% !""/ to )#st
0ecember% !""/ and left for 7ondon. >hat will be his residential status in the income
year !""/8#"N
Solution
r. J99al is a non8resident since his stay in Bangladesh during income year !""/8#"
is U)# Z)"Z)# Z)"Z)#V [ #+) days which is less than re<uired #.! days.
.or2ed ",a4*le M '-@
r. Arif% a Bangladeshi citi9en% stayed in Bangladesh from #T Muly% !""/ to )#st
0ecember% !""/ and left for Mapan. >hat will be his residential status in the income
year !""/8#"N
Solution
r. Arif is a resident since his stay in Bangladesh during !""/8#" is
U)#Z)#Z)"Z)#Z)"Z)#V [
#.* days which is more than re<uired #.! days. .
.or2ed ",a4*le M '-E
r. A;ash stayed in Bangladesh from #T September% !""/ to )#st Manuary% !"#" and
left for Trinidad. Ge came bac; on #T ay !"#" and still staying in Bangladesh. >hat
will be his residential status in the income year !""/8#"N
Solution
r. A;ash is a resident since his stay in Bangladesh during !""/
U)"Z)#Z)"Z)#Z)#V [ #+) days and in !"#" from #st ay to )"th Mune U)#Z)"V [
,# days. In total he stayed for U#+)Z,#V [!#* days in the income year !""/8#"
which is more than re<uired #.! days.
.or2ed ",a4*le M '-F
r. 6a;esh Mason% a citi9en of JSA% has been staying in Bangladesh since #st Manuary%
!"",. Ge leaves Bangladesh on #, Muly% !""/ on a visit to JSA and returns on #st
arch% !"#". >hat will be his residential status in the income year !""/8#"N
Solution
Gis stay in Bangladesh during the income year !""/8#" is?
Muly% !""/ #.
arch% !"#" )#
April% !"#" )"
ay% !"#" )#
Mune% !"#" )"
Total staying ':& da6s
Gis stay in proceeding * income years?
!"".8"/ ),+
!""-8". ),,
!"",8"- ),+
!""+8", #.# UFrom #
st
Manuary% !"", to )"
th
Mune% !"",V
'=2FF da6s
As his stay was more than /" days in the income year !""/8#" and more than ),+
days in the preceding * years% he is a resident.
.or2ed ",a4*le M '-D
r. Muris 6einhards% a British citi9en has been coming to Bangladesh for #"" days
every year since !""+8",?
3a5 0etermine his residential status for the income year !"#"8##.
3b5 >ill your answer be di1erent if he has been coming to Bangladesh for
/" days instead of #"" days every yearN
Solution
3a5 Ge is a resident as he stayed in Bangladesh for #"" days 3more than
re<uired /" days5 in the income year !"#"8## and *"" days 3#"" ' *5
3more than re<uired ),+ days5 in the preceding * income years i.e. !"",8
"-% !""-8".% !"".8"/% !""/8#".
3b5 Ces. Ge will% in this case% be a non8resident as he stayed in
Bangladesh for /" days 3e<ual to re<uired /" days5 in the income year
!"#"8## but )," days 3/" ' *5 3less than re<uired ),+ days5 in the
preceding * income years i.e. !"",8"-% !""-8".% !"".8"/% !""/8#". Ge
doesnDt ful&ll any of the re<uired conditions.
.or2ed ",a4*le M '-C
r. Mashim Jddin was outside Bangladesh from !"
th
August% !"". for an employment
contract valid for two years% i.e. from #
st
August% !"". to )#
st
Muly% !"#". r. Jddin
did not come to Bangladesh at any time during the year !"". and !""/. Ge &nally
came to Bangladesh on #"
th
Manuary% !"#" and did not go bac;. 0etermine his
residential status for the income year !""/8#".
Solution
Total number of days r. Jddin stayed in Bangladesh during respective years?
!""/8#" 3From #"
th
Manuary% !"#" to )"
th
Mune% !"#"5? U!!Z!.Z)#Z)"Z)#Z)"5 [
#-! days.
!"".8"/ 3From #
st
Muly% !"". to !"
th
August% !"".5? U)# Z!"5 [ +# days.
!""-8". 3From #
st
Muly% !""- to )"
th
Mune% !"".5 [ ),+ days
!"",8"- 3From #
st
Muly% !"", to )"
th
M line% !""-5 [ ),+ days
!""+8", 3From #
st
Muly% !""+ to )"
th
Mune% !"",5 [ ),+ days
r. Jddin is a resident since he ful&lls the second condition. Gis stay in Bangladesh
during the income year !""/8#" is #-! days which is more than re<uired /" days in
that year% and U+# Z),+Z),+Z),+5I #%#*, days during previous four years which is
more than re<uired ),+ days.
.or2ed ",a4*le M '-'&
r. Mayed provides the following particulars of his stay in Bangladesh over a period of
last &ve years?
Year Da6s
!""+8", *"
!"",8"- ++
!""-8". #.!
!"".8"/ !""
!""/8#" /*
!"#"8## ##"
a5 0etermine his residential status for the income year !"#"8##.
b5 >hat will happen if he stays for .+ days in the year !"#"8##N
c5 >hat will happen if he stays for ." days in the year !"".8"/N
d5 >hat will happen if he stays for #.+ days in the year !"#"8## and total ),"
days during last four yearsN
Solution
a5 r. Mayed is a resident since he ful&lls the second condition. Gis stay in
Bangladesh during income year !"#"8## is ##" days which is more than
re<uired /" days in that year% and U++Z#.!Z!""Z/*V [ +)# days during
previous four years which is more than re<uired ),+ days.
b5 r. Mayed would be a non8resident since he doesnDt ful&ll the second condition.
Gis stay in Bangladesh during income year !"#"8## is .+ days which is less
than re<uired /" days in that year% although he stayed U++Z#.!Z!""Z/*V [
+)# days during previous four years which is more than re<uired ),+ days.
c5 r. Mayed is a resident since he ful&lls the second condition. Gis stay in
Bangladesh during income year !"#"8## is ##" days which is more than
re<uired /" days in that year% but his total stay during previous four years is
*## days U++Z#.!Z."Z/*V which is more than the re<uired ),+ days.
d5 r. Mayed would be a resident since he ful&lls the &rst condition. Gis stay in
Bangladesh during income year !"#"8## is #.+ days which is more than
re<uired #.! days of the &rst condition. In such a case% it is not important to
;now regarding his stay during four preceding years.
.or2ed ",a4*le M '-''
0r. Gannan Sar;er wor;s as a professor in a university in Australia. Ge left Bangladesh in
#//,. After - years of that% he &rst visited Bangladesh in the year !""). After wards he
visited Bangladesh every year to see his parents. The following table is providing the
information about the time period he stayed in Bangladesh in di1erent years from !"") to
!"#". 0etermine his residential status during these income years?
Year
2&&9>
&:
2&&:>
&@
2&&@>
&E
2&&E>
&F
2&&F>
&D
2&&D>
&C
2&&C>
'&
0ate of
entrance
#,."/."
)
#!.#"."
*
##."!."
,
"/.#!."
,
"#."-."
-
!..#!."
.
#+."-.
"/
0ate of e'it !..")."
*
#/.")."
+
#*.")."
,
"#.")."
-
!.."/."
-
!..",."
/
#!.").
#"
Solution
Year 2&&9>
&:
2&&:>
&@
2&&@>
&E
2&&E>
&F
2&&F>
&D
2&&D>
&C
2&&C>
'&
&ate of
entrance
#,."/."
)
#!.#"."
*
##."!."
,
"/.#!."
,
"#."-."
-
!..#!."
.
#+."-."
/
&ate of exit !..")."
*
#/.")."
+
#*.")."
,
"#.")."
-
!.."/."
-
!..",."
/
#!.").#
"
&ays of
staying in
current >ear
#+Z)#Z
)"Z)#Z
)#Z!/Z
!.[#/+
!"Z)"Z
)#Z)#Z
!.Z#/[
#+/
#.Z#*[
)!
!)Z)#Z
!.Z#[.
)
)#Z)#Z
!.[/"
*Z)#Z!
.Z)#Z)
"Z)#Z!
.[#.)
#-Z)#Z
)"Z)#Z
)"Z)#Z
)#Z!.Z
#![!*#
&ays of
staying in
previous 3
years
" #/+ #/+Z#+
/[)+*
#/+Z#+
/Z)![)
.,
#/+Z#+
/Z)!Z.
)[*,/
#+/Z)!
Z.)Z/"
[),*
)!Z.)Z
/"Z#.)
[)..
Residential
5tatus
6esident $on8
resident
$on8
resident
$on8
resident
6esident 6esident 6esident
.or2ed ",a4*le M '-'2
Ale' 0eliveries is a Partnership Firm whose
a5 control and management of a1airs is situated wholly in Bangladesh.
b5 control and management of a1airs is situated partly in Bangladesh.
c5 control and management of a1airs is situated wholly in outside Bangladesh.
0etermine the residential status of the &rm.
Solution
a5 6esidentI since control and management of a1airs is situated wholly in
Bangladesh.
b5 6esidentI since control and management of a1airs is situated partly in
Bangladesh.
c5 $on8residentI since control and management of a1airs is situated wholly in
outside Bangladesh.
.or2ed ",a4*le M '-'9
0BG is non8ban;ing &nancial institution in Bangladesh whose
a5 control and management of a1airs is situated wholly in Bangladesh.
b5 control and management of a1airs is situated partly in Bangladesh.
c5 control and management of a1airs is situated wholly in outside Bangladesh.
Solution
a5 6esidentI since control and management of a1airs is situated wholly in
Bangladesh.
b5 $on8residentI since control and management of a1airs is situated partly in
outside Bangladesh.
c5 $on8residentI since control and management of a1airs is situated wholly in
outside Bangladesh.
.or2ed ",a4*le M '-':
r. Abdul has earned income from various sources in the income year !"#" 8 ##
which are as following?
#. Salary income earned and payable in Bangladesh T;. #""%""".
!. Pro&t of T;. *"%""" from a business in 7ondon has been brought in Bangladesh.
The business has been managed and controlled from Bangladesh.
). Pro&t of T;. ,"%""" from a business in Singapore has not yet been brought in
Bangladesh.
The Business has been managed and controlled wholly from Singapore.
*. Pro&t of T;. -"%""" from a business in 0ubai has not yet been brought in
Bangladesh. The
Business has been managed and controlled wholly from Bangladesh.
Compute the amount of total income of r. Abdul% assuming that he is a
a5 6esidentI
b5 $on8resident
Solution
r. Abdul
Income year? !"#"8##I
Assessment year? !"## 8 #!
Computation of Total Income
)articulars
#esident
T2-
Non>resident
T2-
#. Income earned in Bangladesh? Salary Income #""%""" #""%"""
!. Foreign income?
Pro&t for business in 7ondon which has been
brought in Bangladesh
*"%""" 8
Pro&t for business in Singapore which has not yet
been brought in Bangladesh
,"%""" 8
Pro&t for business in 0ubai which has been
brought in Bangladesh
-"%""" .
Total inco4e 2F&=&&& '&&=&&&
.or2ed ",a4*le M '-'@
The following are the particulars of income of r. Raman for the income year !"#"8
##?
#. 6ent from a property in 0ha;a received in India T;. *"%"""
!. Income from a business in JSA controlled from Bangladesh T;. #+"%"""
). Income from a business in 0ha;a controlled from Pa;istan T;. #."%"""
*. 6ent from a property in Canada received there but subse<uently remitted
to Bangladesh T;. ,"%"""
+. Interest from deposits with a Bangladeshi ban; received in Canada T;.
!"%"""
,. (ifts received from his parents T;. *+%"""
Compute the amount of total income of r. Raman% assuming that he is a
a5 6esidentI
b5 $on8resident
Solution
r. Raman
Income year? !"#"8##
Assessment year? !"##8#!
Computation of Total Income
)articulars
#esident
T2-
Non>resident
T2-
#.
Income earned 4deemed to accrue4arise in
Bangladesh?
6ent from property in Bangladesh *"%""" *"%"""
Income from business in JSA controlled from
Bangladesh
#+"%""" #+"%"""
Income from business in 0ha;a controlled from
Pa;istan
#."%""" #."%"""
Interest form deposits !"%""" !"%"""
!. Foreign income?
6ent from property in Canada ,"%""" 8
Total inco4e :@&=&&& 9C&=&&&
$ote? (ifts received from parents is not regarded as income.
.or2ed ",a4*le M '-'E
The following are the particulars of income of r. 6ahman for the income year !"#"8
##?
#. Salary income received in Bangladesh for services rendered in Afganistan T;.
*"%"""
!. Income from profession in Bangladesh% but received in $epal T;. #+"%"""
). Property income in South Africa 3out of which T;. /"%""" was remitted to
Bangladesh5 T;. #."%"""
*. Pro&ts earned from business in Chittagong T;. ,"%"""
+. Agricultural income in Bhutan T;. !"%"""
Solution
r. 6ahman
Income year? !"#"8##
Assessment year? !"##8#!
Computation of Total Income
)articulars
#esident
T2-
Non>resident
T2-
#.
Income earned 4deemed to accrue4arise in
Bangladesh?

Salary income received in Bangladesh for services
rendered in Afganistan
*"%""" *"%"""
Income from profession in Bangladesh% but
received in $epal
#+"%""" #+"%"""
Pro&ts earned from business in Chittagong
Interest
,"%""" ,"%"""
Foreign income?
Property income in South Africa #."%""" #."%"""
Agricultural income in Bhutan !"%""" !"%"""
Total inco4e :@&=&&& 2@&=&&&
Chapter !
Ad4inistration and Tri3unal

Contents
Introduction
2'amination conte't
To*ic List
!.# :arious Income Ta' Authorities
!.!
Appointment of income Ta' Authorities
!.)
$B6 and Its Functions
!.* Subordination and Control of Income Ta' authorities
!.+
Power and Functions of Income Ta' Authorities
!.,
Ta'es Appellate Tribunal
!.-
Alternate 0ispute 6esolution
Self8Assessment \uestions
Introduction
Learning o3<ecti+es
Identify the di1erent income ta' authorities
6ecognise the power and functions of $B6 and other income ta'
authorities
Hnowing the functions and formulations of the Ta' Appellate Tribunal.
)ractical signi0cance
There are presently #+ classes of income ta' authorities. 2ach class of
authorities has de&ned functions and responsibilities.
To e'ercise the functions of Appellate Tribunal (overnment there e'ists a
Ta'es Appellate Tribunal. The power and functions of that Tribunal are
normally e'ercised by its Benches constituted by the president of the Tribunal.
Jnderstanding of the structure of income ta' authorities and the TribunalKs
procedures are essential for both ta' advisers and the assessees for dealing
the ta' matters when re<uired.
Sto* and thin2
0o you have the clear idea of the income ta' authoritiesN 0id you ;now that
in case of practical cases relating to income ta' in life% the ;nowledge on the
ta' authorities is very importantN
.or2ing conte,t
The ;nowledge on the administrative structure of income ta' authorities and
the TribunalKs procedures covered by this chapter are important for both the
ta' payers and ta' advisers in many times in case of necessity.
Bn behalf of assessee the accountants sometime re<uired to support the
submission of ta' return% hearing to the court etc% so they should have a clear
picture of income ta' authorities and its power and functions and the
TribunalKs procedures in their mind to assist their clients in resolving relevant
ta' issues.
S6lla3us lin2s
The topics covered in this chapter are important to your understanding of
income ta' authorities and Ta'es Appellate Tribunal.
Cou will be using this ;nowledge again when you tac;le the Ta'ation paper
later on in the Professional Stage and it will also underpin the technical
aspects at case study level.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Show the structure of various income ta' authorities
0iscuss the appointment procedures of income ta' authorities
ention the power and functions of di1erent income ta' authorities
Identify the Appellate Tribunal.
?uestion *ractice
For <uestion practice on this topic go to the suggested answers covering this
chapter.
2-& ADMINIST#ATION AND T#IBUNAL
Section O+er+ie/
There shall be #+ classes of income ta' authorities for the purposes of the
Brdinance.
$B6 may appoint di1erent ta' authorities% e'ecutive ministerial oEcers
and sta1 as it thin;s &t.
2ach class of authorities has de&ned power and functions.
(overnment shall establish a Ta'es Appellate Tribunal consisting of a
President and other members.
The procedures followed by the Ta'es Appellate Tribunal in disposing of the
appeals have been speci&ed in the Ta'es Appellate Tribunal 3Procedure5
6ules% #/.+.
The procedure followed by the Alternate 0ispute 6esolution to resolve
disputes.
2-' !arious Inco4e Ta, AuthoritiesB
0epending on the functions% income ta' authorities may be classi&ed into
two ma=or groups% namely%
I. Administrative? 2'ecutive loo;ing after the overall ta' administration
II. Mudicial? Mudicial e'ercising =udicial function in appeal cases
Inco4e Ta, Authorit6
Ad4inistrati+e
$ational Board of 6evenue
Hudicial
Appellate Tribunal
Chief Commissioner of Ta'es
0irectors8(eneral of Inspection 3Ta'es5
Commissioner of Ta'es 37arge Ta'payer
Jnit5
0irector (eneral 3Training5
0irector (eneral 3Central Intelligence
Cell5
Commissioner of Ta'es
T
o
p

i
d
d
l
e
B
o
t
t
o
m
0eputy Commissioners of Ta'es
Ta' 6ecovery BEcer
Assistant Commissioners of Ta'es
2'tra Assistant Commissioners of Ta'es
Inspectors of Ta'es
Commissioner of Ta'es 3appeal5
Appellate Additional
Commissioners of Ta'es
Appellate Moint Commissioner of
Ta'es
The Commissioner of Ta'es and sometimes% the 0eputy Commissioner of
Ta'es en=oy and e'ercise <uasi8=udicial powers.
2-2 A**oint4ent of Inco4e Ta, AuthoritiesB Sec :
3#5 Sub=ect to the rules and orders of the (overnment regulating the terms
and conditions of service of persons in public services and posts%
appointment of income ta' authorities shall be made in accordance with
the provisions of the Brdinance USection *3#5V.
3!5 The Board may appoint Chief Commissioner of Ta'es% 0irector (eneral%
Central Intelligence Cell as many 0irector8(eneral of Inspection%
Commissioners 3Appeals5% Commissioners% Moint Commissioners of Ta'es%
0eputy Commissioners of Ta'es% Ta' 6ecovery BEcers and Assistant
Commissioners of Ta'es such other e'ecutive or ministerial oEcers and
sta1 as it many thin; &t USection *3!5V.
3)5 $otwithstanding anything contained in the Brdinance% the Board may% with
the approval of the government% appoint one or more persons having
appropriate professional s;ill and e'perience to perform such functions as
may be speci&ed by an order issued in this behalf% and the person or
persons so appointed shall be deemed to be an income ta' authority for
the purposes of the Brdinance USection *3!A5V.
3*5 Sub=ect to such orders or instructions as the Board may from time to time%
issue in this behalf% any other income ta' authority may appoint any
income ta' authority subordinate thereto and such other e'ecutive or
ministerial oEcers and sta1 as may be necessary for assistance in the
e'ecution or its functions USection *3)5V.
2-9 NB# and Its %unctions
$ational Board of 6evenue 3$B65 is the highest e'ecutive authority. It is a
statutory body and its members are appointed by the (overnment to manage%
control and supervise the whole income ta' 0epartment. The $B6 is
empowered to ma;e necessary rules concerning income ta' matters and is
authori9ed to give any interpretation to any provision in any section of the
Brdinance. It cannot act by issuing any instructions to be construed as
interference to the authority of =udicial personnel li;e the Commissioner of
Ta'es 3Appeals5% Appellate Additional Commissioner of Ta'es% Appellate Moint
Commissioner of Ta'es and the Commissioner of Ta'es when they e'ercise
their =udicial powers.
Main functions of the NB#
#. To declare any foreign unincorporated association as a company for the
purposes of the Brdinance. USec% !3!"53c5V
!. To determine a period to be an income year of any person. USec. !3)+53e5.
). To delegate powers to the Inspecting Additional Commissioner of Ta'es to
e'ercise the powers of a Commissioner and to the Appellate Additional
Commissioner of Ta'es to e'ercise the powers of a Commissioner
3Appeals5 USec *AV
*. To determine the functions of the 0irector (eneral of Inspection% the
Commissioner 3Appeals5% the Appellate Moint Commissioner% the
Commissioner 37TJ5% the Inspecting Moint Commissioner and to determine
the =urisdiction of Income Ta' authorities. USec ,V
+. To issue orders% directions or instructions to all oEcers and other persons
engaged in the performance of any functions under the Brdinance. USec .V
,. To determine place of assessment when =urisdiction of an assesee falls
more than in one 9one. USec #-)AV
-. To direct to ma;e payment of ta' deducted at source within the speci&ed
time. USec +/V
.. To recogni9e and authori9e Chartered Accountant% cost and management
accountant% income ta' practitioner and members of other accounting
bodies for appearance in income ta' matters as authori9ed representative
of the assessee. USec #-* 3!5V
/. To ta;e disciplinary action against any authori9ed representative in case of
professional misconduct. USec #-* 3)5V
#". To allow ta' holiday or ta' e'emption to approved underta;ings. USec
**L*+V
11* To accord and withdraw recognition to Super Annuation Fund% Pension Fund
and (ratuity Fund. U#
st
Schedule part A% B L CV
#!. To reward employees of the ta' department or any other person for
furnishing information leading to ta' evasion. USec #.*V
2-: Su3ordination and Control of Inco4e Ta, AuthoritiesB Sec @
3#5 The Chief Commissioner of Ta'es% 0irector8(eneral of Inspection%
Commissioners 3Appeals5 and Commissioner shall be subordinate to the
Board.
3!5 The Additional Commissioner of Ta'es% Moint Commissioner of Ta'es and
Inspectors shall be subordinate to the Commissioners%

or the
Commissioners 3Appeals5% as the case may be% within whose =urisdiction
they are appointed to perform their function. Gowever% no order% direction
or instruction shall be given so as to interfere with the discretion of the
Appellate Moint Commissioners or the Commissioners 3Appeals5% in the
e'ercise of their appellate functions.
3)5 The 0eputy Commissioners of Ta'es and Inspectors shall be subordinate to
the Inspecting Moint Commissioner within whose =urisdiction they perform
their functions.
3*5 The Inspectors shall be subordinate to the 0eputy Commissioners of Ta'es
within whose =urisdiction they perform their functions.
2-@ )o/er and %unctions of Inco4e Ta, Authorities
Hurisdiction of Inco4e Ta, AuthoritiesB Sec E
As per section ,3#5% sub=ect to the provision of the Brdinance8
3aa5 the 3irector-4eneral o+ .nspection shall perform the following
functions% namely?
3i5 carry out inspection of income ta' casesI
3ii5 investigate or cause investigation to the carried out in respect of
cases involving lea;age of revenue or evasion of ta'esI
3iii5 carry out audit of cases of oEces involving income ta' cases onlyI
3iv5 furnish annual report about the wor;ing of income ta' oEcers dealing
with revenue matters to the Board by the thirty day of 0ecember
following the end of the &nancial year to which it relatesI and
3v5 such other functions as may be assigned to them by the Board
3aaa5 the 3irector 4eneral o+ Central .ntelli/ence Cell shall perform the
following functions% namely?8
3i5 carry out intelligence wor;s to gather information about ta'payersI
3ii5 analyse information gathered through intelligence wor; vis8a8vis
concerned income ta' recordsI
3iii5 detect ta' evasions% concealments of income and o1ences as
described in chapter ]]I of Income Ta' Brdinance #/.*I
3iv5 carry out investigations to prove ta' evasion or concealment or any
other irregularities relating to ta'es and to collect evidences in
support of ta' o1ences or ta' frauds for recovery of ta' with penalty
and to suggest prosecutions in &t casesI
3v5 to carry out functions as authorised by any other law.
3b5 the Commissioners or the Commissioner 3Appeals5 and the Appellate Moint
Commissioners shall perform their functions in respect of such areas% or
such incomes or classes of incomes% as the Board may assign to
themUSection ,3#53b5VI
3c5 the Commissioner 37arge Ta'payer Jnit5 shall perform his functions in
respect of such areas% or such persons% or such cases or classes of cases
or such incomes or classes of incomes% as the Board may assign to
himUSection ,3#53bb5VI
3d5 the Inspecting Moint Commissioners and the 0eputy Commissioners of
Ta'es shall perform their functions in respect of such areas% or such
persons for classes of persons% or such cases or classes of cases% or such
incomes or classes of incomes as the Commissioners to whom they are
subordinate may assign to themUSection ,3#53c5VI and
3e5 other incomes ta' authorities shall perform such functions as may be
assigned to them by the income ta' authority to whom they are
subordinate USection ,3#53d5V.
3!5 3a5 Any area or other =urisdiction or functions assigned to an income ta'
authority under section ,3#5 may be modi&ed or varied% or may be
transferred to any other income ta' authority with respect to areas%
persons or classes of persons or cases or classes of case% or
proceeding or classes of proceedingsI
3b5 any such transfers as is referred to in section ,3!53a5 may be made at
any stage of the proceedings and further proceedings may be
commenced from the stage at which such transfer ta;es place.
3)5 >here more income ta' authorities than one have been assigned the
same functions in respect of any area% or persons or classes of persons%
or cases or classes of cases% or incomes or classes of incomes% they shall
perform those functions in accordance with such allocation or distribution
of wor; as the authority assigning the functions may ma;e.
3*5 The powers of the Board% Commissioners and 0eputy Commissioner of
Ta'es% to assign any case to any authority% or to transfer any case from
one authority to another or to perform any function or functions under
this section% shall include the power in respect of all or any proceedings
relating to such caseI and e'cept as provided in section ,3+5% no such
assignment% transfer or performance of functions shall be called in
<uestion by or before any court or other authority.
3+5 Any person aggrieved by any order passed under section , may% within
thirty days of such order% ma;e a representation8
3a5 to the Inspecting Moint Commissioner if the order was passed by a
0eputy Commissioner of Ta'esI
3b5 to the Commissioner% the Commissioner 3Appeals5% if the order was
passed by an Inspecting Moint CommissionerI and
3c5 to the Board if the order was passed by a Commissioner I and any
order passed on such representation shall be &nal.
",ercise of Hurisdiction 36 SuccessorB Sec F
>here% in respect of any proceeding under the Brdinance% an income ta'
authority is succeeded by another% the income ta' authority so succeeding
may continue the proceeding from the stage at which it was left by his
predecessor.
ONcers etc= to follo/ Instructions of the BoardB Sec D
All oEcers and other persons engaged in the performance of any functions
under the Brdinance shall% in the matter of discharging those functions%
observe and follow such orders% directions or instructions as the Board may
issue from time to time. Gowever% no order% directions or instructions shall be
given so as to interfere with the discretion of the Appellate Moint Commissioner
or the Commissioner 3Appellate5 in the e'ercise of their appellate functions.
$uidance to the De*ut6 Co44issioner of Ta,esB Sec C
In the course of any proceedings under the Brdinance% the 0eputy
Commissioner of Ta'es may be assisted% guided or instructed by any income
ta' authority to whom he is subordinate or any other person authorised in this
behalf by the Board.
",ercise of Assess4ent %unctions 36 the Ins*ecting Hoint
Co44issioners and the Ins*ecting Additional Co44issionerB Sec
'&
The Commissioner may% with prior approval of the Board% by general or a
special order in writing% direct that in respect of all or any proceedings relating
to speci&ed persons of classes or persons within his =urisdiction% the powers
and function of the 0eputy Commissioner of Ta'es% the Inspecting Moint
Commissioner % the Inspecting Additional Commissioner and the
Commissioner under the Brdinance shall be e'ercised by the Inspecting Moint
Commissioner% the Inspecting Additional Commissioner% the Commissioner
and the Board% respectively and for the purpose of any proceedings in respect
of such cases or persons referred in the Brdinance or the rules made
thereunder to the 0eputy Commissioner of Ta'es% the Inspecting Moint
Commissioner% the Inspecting Additional Commissioner or the Commissioner
shall be deemed to be references to the Inspecting Moint Commissioner% the
Inspecting Additional Commissioner% the Commissioner and the Board%
respectively.
2-E Ta,es A**ellate Tri3unal
"sta3lish4ent of A**ellate Tri3unalB Sec ''
3#5 For the purpose e'ercising the functions of the Appellate Tribunal under
the Brdinance% the (overnment shall establish a Ta'es Appellate Tribunal
consisting of a President and such other members as the (overnment
may% from time to time% appoint USection ##3#5V.
3!5 A person shall not be appointed as a member of the Ta'es Appellate
Tribunal unless8
3i5 he was or is a member of the BoardI or
3ii5 he was Commissioner of Ta'esI or
3iii5 he is a chartered accountant and practiced professionally for a
period not less than . yearsI or
3iv5 he is a cost and management accountant and practiced
professionally for a period not less than . yearsI or
3v5 he is an income ta' practitioner within the meaning of section
#-*3!53f5 and practiced professionally for a period not less than !"
yearsI or
3vi5 he is a professional legislative e'pert having e'perience for a
period not less than . years in the process of drafting and ma;ing
&nancial and ta' lawsI or
3vii5 he is an advocate and practiced professionally for not less than #"
years in any income ta' oEce. USection ##3)5V
3i'5 he is% was or has been a 0istrict Mudge.
3)5 The (overnment shall appoint a member of the Appellate Tribunal to be
the President thereof USection ##3*5V.
",ercise of )o/er of the Tri3unal 36 BenchesB Sec '2
3#5 Jnless the president in any particular case or class of cases otherwise
directs% the powers and functions of the Appellate Tribunal shall be
e'ercised by Benches of the Appellate Tribunal% hereinafter referred to
as Bench% to be constituted by the President.
3!5 A Bench shall be so constituted that it has not less than two members.
Decision of BenchB Sec '9
3#5 Sub=ect to the provisions of sections #)3!5 and 3)5% the decision of bench in
any case or on any point shall be given in accordance with the opinion of
the ma=ority of its members.
3!5 Any point on which the members of a Bench are e<ually divided shall be
stated in writing and shall be referred by the president to one or more
other members of the Appellate Tribunal for hearing and the point shall be
decided according to the ma=ority of the members of the Appellate Tribunal
who have heard it including those who &rst heard it.
3)5 >here there are only two members of the Appellate Tribunal and they
di1er in any case% the (overnment may appoint an additional member of
the Appellate Tribunal for the purpose of hearing of the case and the
decision of the case shall be given in accordance with the opinion of the
ma=ority of the members of the Appellate Tribunal as constituted with such
additional member.
",ercise of )o/er 36 one Me43erB Sec ':
$otwithstanding anything contained in section #!% the (overnment may direct
that the powers and functions of the Appellate Tribunal shall be e'ercised by
any one of its member% or members or by two or more members =ointly or
severally.
#egulation of )rocedure of the A**ellate Tri3unalB Sec '@
3#5 Sub=ect to the provisions of the Brdinance% the Appellate Tribunal shall
regulate its own procedure and the procedure of its Benches in matters
arising out of the discharge of its function including the places at which a
Bench shall hold its sittings. USection #+V
3!5 A Bench shall hold its sittings at its head<uarters or such other place as
the President may consider convenient UTATP 6ule )V.
3)5 A Bench shall hear and determine such appeals and applications made
under the Brdinance as the President may% by general or special order%
direct UTATP 6ule *V.
3*5 The oEce of the Tribunal shall% sub=ect to any special order of the
President% observe the same oEcers hours and holidays as the oEce of
the Supreme Court 3Gigh 0ivision5 at 0ha;a UTATP 6ule +V.
3+5 The 7anguage of the Tribunal shall be 2nglish UTATP 6ule ,V.
Ta,es A**ellate Tri3unalOs )rocedures
The procedures followed by the Ta'es Appellate Tribunal in disposing of the
appeals have been speci&ed in the Ta'es Appellate Tribunal 3Procedure5 6ules%
#/.+ 3TATP 6ule5.
9-F Alternate Dis*ute #esolutions
Finance Act !"## introduces new chapter titled Alternate 0ispute 6esolution in
IT Brdinance #/.* to resolve any dispute of an assessee lying with any
income ta' authority% Ta'es Appellate Tribunal% or Court. This is done to
simplify and speed up dispute resolution process. The whole process is
summari9ed in following &gure?
National Board of Revenue
(NBR)
Facilitator
Concern -
Income Tax Authority
Tribunal
Court
Where the order has been
passed or dispute is
pending
Aggrieved by an
order of any Income
Tax Authority
With pending
dispute before any
Income tax
authority, tribunal or
court
Assessee
Assessee
Apply for
permission to start
ADR process
Received the
permission to start
ADR process
Apply for
ADR process
Select/appoint
the facilitator
and determine
his
responsibility
Respective
DCT
Forward copy
of application
Yes No Arrange meeting for
settlement
Assessee himself or
along with authorized
representative
Respective DCT or
Representative
Agreement is
reached wholly
or partly
No
Facilitator should
communicate the
result within 15
days from the date
of disagreement to
all related parties
Yes
Facilitator should
record details of
the result and
communicate to
the assessee and
the respective DCT
Result is fnal and
cannot be challenged
Assessee may appeal
to the proper authority
Proper
reply
ADR shall not
continue
An assessee may apply for resolution of the dispute through the A06 process
if aggrieved by an order of an income ta' authority or if a dispute is pending
before any income8ta' authority% tribunal or court. In case of any pending
dispute% the assessee is re<uired to get permission from the authority where it
is pending in writing before applying for A06 and if approval is received and
assessee applies for A06% the matter shall remain stayed during A06
negotiation process.
To resolve dispute in an alternative way% the Board may select or appoint
Facilitator and determine his duties and responsibilities. The assessee shall be
allowed to negotiate himself personally or along with an authori9ed
representative% with the CommissionerDs 6epresentative for the concerned
dispute under the facilitation and supervision of such Facilitator. Jpon
receiving the application of A06% the Facilitator shall forward a copy of the
application to the respective 0eputy Commissioner of Ta'es and also call for
his opinion on the grounds of the application. If the 0eputy Commissioner of
Ta'es fails to give his opinion regarding ful&llment of the conditions% the
Facilitator may notify in writing the applicant and the Commissioner of Ta'es
or the CommissionerDs 6epresentative to attend the meetings for settlement
of disputes on a date mentioned in the notice. >here an agreement is
reached% either wholly or in part% between the assessee and the
CommissionerDs 6epresentative% the Facilitator shall record% in writing% the
details of the agreement% sign and shall communicate the same to the
assessee and the concerned 0eputy Commissioner of Ta'es.
Gowever% where no agreement is reached or the dispute resolution is ended in
disagreement between the assessee and the concerned CommissionerDs
6epresentative for noncooperation of either of the parties% the Facilitator shall
communicate it within &fteen days from the date of disagreement% to the
applicant and the Board% the concerned court% Tribunal% appellate authority
and income ta' authority% as the case may be% about such unsuccessful
dispute resolution.
>here an agreement is reached% it shall be binding on both the parties and it
cannot be challenged in any authority% Tribunal or court either by the assessee
or any other income ta' authority. >here an agreement is not reached% the
assessee may prefer an appeal in following manner?
0ispute Arises out of an order of Appeal to
0eputy Commissioner of Ta'es Appellate Moint Commissioner of Ta'es
B6
Appellate Additional Commissioner of
Ta'es
B6
Commissioner of Ta'es 3Appeals5
Appellate Moint Commissioner of
Ta'es
Ta'es Appellate Tribunal
B6
Appellate Additional
Commissioner of Ta'es
B6
Commissioner of Ta'es 3Appeals5
The assessee8applicant may also appeal to the respective appellate authority
or court from where he has got permission to apply for A06.
Self>Assess4ent ?uestions
#. >hat are the various Income Ta' AuthoritiesN
!. 0iscuss the powers and functions of the Commissioner of Ta'es.
). 0iscuss brieAy the powers and functions of the 0eputy Commissioner of
Ta'es.
*. Gow is the Income Ta' Appellate Tribunal constitutedN
+. >hat are the <uali&cations re<uired for appointment as a ember of the
Appellate TribunalN
,. Gow A06 can be used to resolve the disputesN

Chapter )
Charge of Ta,
Contents
Introduction
2'amination conte't
To*ic List
).# Charge of Income Ta'
).! Charge of Surcharge
).) Charge of Additional Ta'
).* Charge of 2'cess Pro&t ta'
).+ Scope of the total Income
)., Income deemed to Accrue or Arise in Bangladesh
).- Jn8e'plained investments etc% 0eemed Income
).. Special Ta' Treatment in respect of Some Investments
Introduction
Learning o3<ecti+es
Identify the ways of charging income ta'
Illustrate the charge of surcharge% additional ta' and e'cess pro&t ta'
6ecognise the scope of total income
6ecognise the di1erent types of deemed income
)ractical signi0cance
Income ta' shall be charged levied% paid and collected at di1erent rates in
respect of the total income in accordance with provisions of the Brdinance. It
may be deducted at source% or paid or collected in advance. The rates of ta'
can vary on the basis of income and types of assessee. The assessee may be
re<uired to pay surcharge% additional ta' or e'cess pro&t ta' depending on
the situation.
Finance Act !"## repealed some opportunities given by the Finance Act !"#"
to the investors in certain cases of investment in the form of special ta'
treatment.
The scope of total income of a resident and non8resident includes the sources
and forms of income of these persons of any income year.
Sto* and thin2
Thin; about di1erent ways of charging income ta' and identify the similarity
and di1erentiation of the scope of income of a resident and a non resident. 0o
you reali9e that the di1erent types of une'plained investment will be deemed
as income under di1erent headsN Are you ac;nowledged about the special ta'
treatment in respect of some investmentN
.or2ing conte,t
Before determining individual and corporate ta'% the rate of ta' and the scope
of total income need to be identi&ed. Based on residential status the scope of
total income varies. Jne'plained investments are also ta'able under
respective heads. The opportunities given by the Finance Act !"#" to the
investors in certain cases of investment in the form of special ta' treatment
were withdrawn by Finance Act !"##.
An accountant will be e'pected to understand the scope of total income%
deemed income% applicable ta' rate% special ta' treatment and to give advice
on how the total income of individual and corporate can be determined. This
can also suggest their clients to ta;e the facility of special ta' treatment by
investing in those mentioned areas.
S6lla3us lin2s
Cou will be familiar with the charge of income ta' and to prepare for the
application level and also for the case study.
0etailed ;nowledge on this issue helps you to understand the progression
level and stage of your study.
Cou will be using this ;nowledge again when you tac;le the Ta'ation paper
later on in the Professional Stage and it will also underpin the technical
aspects at the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Clarify how income ta' shall be charged
0e&ne the surcharge% additional ta' and e'cess pro&t ta'
a;e clear the scope of total income of any income year of any person
Identify the income deemed to accrue or arise in Bangladesh
6ecognise di1erent une'plained investment etc% deemed to be ta'able
income
0emonstrate the di1erent category of investment for which special ta'
treatment are allowed
?uestion *ractice
For <uestion practice on these topics go to the suggested <uestions and
answers covering this chapter at the end.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates need to ta;e care of the sources of total income including di1erent
classes of une'plained investment as these are re<uired for calculation of
ta'able income of an assessee.
9-& C;A#$" O% TAX
Section O+er+ie/
Ta' shall be charged at any rate or rates according to the Brdinance.
The rates of ta' can be varied on the basis of income and types of
assessee.
The assessee may be re<uired to pay surcharge% additional ta' or e'cess
pro&t ta'.
Ta' may be deducted at source% or paid or collected in advance.
Jne'plained investments can be considered under the scope of ta'able
income.
The scope of total income of a resident and non8resident are di1erent.
9-' Introduction
Any income has to be brought under respective heads of income under S. !"
and can be charged to ta' only if it is so chargeable under the computing
section corresponding to that head of income. The liability to ta' arises by
virtue of this charging section which does not depend on assessmentI
assessment order only <uanti&es the liability which is &nally created by the
charging section. Following basic principles can be deduced from the analysis
of the charging section?
3i5 Income ta' is to be charged at the rate or rates &'ed for the year by the
Finance Act. The liability to ta' does not arise until the annual Finance Act
is passed UGamaA!ya Barayan 5ing! ; C0T "/.3+$ 0TR +-<:6 Section #.)
provides that if on the &rst day of Muly in any year provision has not been
made by any Act for the charging of income ta' for that year% the provision
in force in the immediate preceding year or the provision proposed in the
Finance Bill then before Parliament% whichever is more favorable to the
assessee% shall apply until the new Finance Act is passed.
3ii5 Income should be calculated with reference to the income year but ta'
rate4rates should be the rate4rates applicable to respective assessment
year. The use of the e'pression charged both in the Finance Act and
Income Ta' Brdinance does not mean that the income is charged to
income ta' under both the Act and Brdinance. They are used in di1erent
senses. The ta' will be charged in accordance with and sub=ect to the
provisions of the Income ta' Brdinance and the said charge shall be in
accordance with the rates prescribed in the Finance Act UGesoram
0ndustries and Cotton Mills LT& ; C6 6 T Calcutta 3#*,,5 IT6% -,-V.
3iii5The income ta'ed is that of the income year and not of the assessment
year. Since ta' is levied on the actual income of the income year% the
sources must be ta;en as they e'isted during the income year it is
immaterial whether the source of income actually e'ists in the assessment
year UMut!appa C!ettian ; C0T "/.3)$ 0TR2 <//V6 Gowever% there are
e'ceptions for a discontinued business% for persons leaving Bangladesh
when income year is the assessment year and for certain income under S.
.!3C5.
3iv5The charge is on every person as stated in S. ! 3*,5 i. e. an individual% a
&rm% an association of persons% a Gindu undivided family% a local authority%
a company and any other arti&cial =uridical person. 2stoppel is a rule of
evidence% not a cause of action and it cannot be the basis of liability under
the Income Ta' Brdinance. So% an assessment cannot be made on a
stranger to the income% merely he agrees or desires to be assessed on it
UAsit Gumer %!ose ; C0T2 0TR2 ),+V.
3v5 The ta' is levied on the total income of the assessee computed in the
manner laid down in speci&ed sections and sub=ect to the provisions of this
Brdinance. It will be for the assessee to produce materials to hold that a
receipt is of a casual or capital nature not chargeable to ta' and for the
6evenue to consider the materials and arrive at a reasonable conclusion.
3vi5Ta' is imposed in three stages. There is the declaration of a liability that is
the part of the statute which determines who is liable in respect of what.
$e't% there is the assessment liability that does not depend on the
assessment. That e'8hypothesis has already been &'ed. But assessment
particulari9es the e'act sum which a person is liable to pay. 7astly% the
recovery comes if the person ta'ed does not pay voluntarily.
9-2 Charge of Inco4e Ta,B Sec 'E
3#5 >here an Act of Parliament provides that income ta' shall be charged for
any assessment year at any rate or rates% income ta' at that rate or those
rates shall% sub=ect to the provisions of that Act% be charged levied% paid
and collected in accordance with the provisions of the Brdinance in respect
of the total income of the income year or income years% as the case may
be% of every person. Gowever% where under the provision of the Brdinance
income ta' is to be charged in respect of the income of a period other than
the income year% income ta' shall be charged% levied% paid and collected
accordingly.
3!5 >here under the provisions of the Brdinance income ta' to be deducted at
source% or paid or collected in advance% it shall be deducted% paid and
collected accordingly.
3)5 $otwithstanding anything contained in section #,3#5% income ta' shall be
charged at the rates speci&ed in the Second Schedule in respect of8
3i5 a non8resident person% not being a companyI
3ii5 any income classi&able under be headK Capital gainsKI and
3iii5 any income by way of XwinningsK referred to in section #/3#)5.
9-9 Charge of SurchargeB Sec 'EA
3#5 >here any Act of Parliament enacts that a surcharge on income shall be
charged for any assessment year at any rate or rates% surcharge at that rate
or those rates% sub=ect to the provisions of that Act% shall be charged for that
year in respect of the total income of the income year or the income years% as
the case may be% of every person.
3!5 All the provisions of the Brdinance relative to charge% assessment%
deduction at source% payment in advance% collection% recovery and refund of
income ta' shall% so far as may be% apply to the charge% assessment%
deduction at source% payment in advance% collection% recovery and refund of
the surcharge.
Surcharge on Indi+iduals re*orting net /ealth of 4ore than T2- 2
crores
Finance Act !"## introduces surcharge at the rate of #"P on ta'es payable
before charging such surcharge for individual assessees who reports net
wealth valuing more than T;. ! crore in Form #"B 3Statement of Assets and
7iabilities5 at the time of submitting ta' return.
Illustration #
$et ta' liability T;. *+%"""
$et wealth as per last assessment
year
T;. !"%-.%"""
Accretion in net wealth during
current year
T;. .%!)%"""
Total net wealth up to this
assessment year
T;. !/%"#%"""
Surcharge
$il 3net wealth is less than T;. !
crore5
Total ta' liability T;. *+%"""
Illustration !
$et ta' liability T;. #,"%"""
$et wealth as per last assessment
year
T;. #%.#%!)%"""
Accretion in net wealth during
current year
T;. !*%".%"""
Total net wealth up to this
assessment year
T;. !%"+%)#%"""
Surcharge T;. #,%""" 3#"P of T;. #,"%"""5
Total ta' liability
T;. #-,%""" 3T;. #,"%""" Z T;.
#,%"""5
9-: Charge of Additional Ta,B Sec 'EB
$otwithstanding anything contained in section *,A% where a public limited
company% not being a ban;ing or insurance company% listed with any stoc;
e'change in Bangladesh% has not issued% declared or distributed dividend or
bonus share e<uivalent to at least #+P of its paid8up capital to its
shareholders within a period of , months immediately following any income
year% the company shall be charged Q +P on the undistributed pro&ts in
addition to ta' payable under the Brdinance.
For the purpose of section #,B% undistributed pro&t means accumulated pro&t
including free reserve.
Illustration
Company A is listed with 0ha;a Stoc; 2'change 30S25 and declares cash
dividend of #"P for the year ending on Mune )"% !"##. An e'tract of balance
sheet is provided below to compute additional ta'?
6eserves?
(eneral 6eserve !*%""%""%"""
Stoc;holdersK 2<uity?
Paid up capital #""%""%""%
"""
Additional paid up
capital
#%""%""%""
"
6etained earnings !+%""%""%"
""
#!,%""%""%""
"
Total 6eserve and Stoc;holdersK
2<uity
#+"%""%""%""
"

The company is liable to pay additional ta' as it fails to declare dividend of at
least #+P of paid up capital. The amount of additional ta' will be at the rate
of +P on following?
6etained 2arnings !+%""%""%""
"
7ess? 0ividend declared
#"P of T;.
#""%""%""%"""
#"%""%""%""
"
Jndistributed pro&t #+%""%""%"
""
Free 6eserve !*%""%""%"
""
Total Jndistributed Pro&t )/%""%""%"
""
Additional ta' Q +P #/%+"%"""

9-@ Charge of ",cess )ro0t Ta,B Sec 'EC
>here a ban;ing company operating under the Ban;ing Company Act% #//#
shows pro&t in its return of income for an income year at an amount
e'ceeding +"P of its paid8up capital as de&ned in the said Act together with
reserve% the company% in addition to ta' payable under the Brdinance% shall
pay an e'cess pro&t ta' for that year Q #+P on so much of the pro&t as it
e'ceeds +"P of the aggregate of the capital and reserve as aforesaid.
Illustration
]CR Ban; 7td.% a scheduled ban;% operates in Bangladesh under the Ban;ing
Company Act% #//#. For the year ended Mune )"% !"##% the ban; reports T;.
)+)%""%""%""" pro&t in its return of income with the following information in
its Balance Sheet?
Stoc2holdersO "8uit6B
Paid up Capital *+"%""%""%
"""
Statutory 6eserve !"%""%""%"
""
Bther 6eserve #+%""%""%"
""
Surplus in Pro&t L 7oss
Account
+""%""%""%
"""
Total Stoc2holdersO "8uit6 CD@=&&=&&=&
&&

]CR Ban; is liable for e'cess pro&t ta' for the year due to reporting e'cess
pro&t i.e.% in e'cess of +"P of paid up capital and reserve. The amount of ta'
will be computed as under?
Paid up Capital *+"%""%""%""
"
Statutory 6eserve !"%""%""%"""
Bther 6eserve #+%""%""%"""
Total paid up capital and reserve *.+%""%""%"
""
+"P of total paid up capital and
reserve
!*!%+"%""%"
""
Pro&t as per return )+)%""%""%"
""
2'cess pro&t shown ##"%+"%""%"
""
2'cess pro&t ta' Q #+P #,%+-%+"%""
"
9-E Charge of Mini4u4 Ta,B Sec 'ECCC
$otwithstanding anything contained in any other provisions of this Brdinance%
every company shall% irrespective of its pro&ts or loss in an assessment year
for any reason whatsoever% including the sustaining of a loss% the setting o1 of
a loss of earlier year or years or the claiming of allowances or deductions
3including depreciation5 allowed under this Brdinance% be liable to pay
minimum ta' at the rate of 9ero point &ve 9ero 3".+"P5 per cent of the
amount representing such companyDs gross receipts from all sources for that
year.
For the purposes of this section% Dgross receiptsD means8
3a5 all receipts derived from the sale of goodsI
3b5 all fees or charges for rendering services or giving bene&ts including
commissions or discountsI
3c5 all receipts derived from any heads of income.
Illustration #
In the assessment year !"##8#!% Company ] reports loss of T;. #"%""%"""
with annual turnover of T;. #%""%""%""". The company is re<uired to pay T;.
+"%""" 3".+"P of T;. #%""%""%"""5 as minimum ta'. 6emember% the company
has made a loss% still it re<uires to pay ta'.
Illustration !
In the assessment year !"##8#!% Company ] reports ta'able pro&t of T;.
#%""%""" with annual turnover of T;. #%""%""%""". The company is re<uired to
pay T;. +"%""" 3".+"P of T;. #%""%""%"""5 as minimum ta'. Because ta' on
regular income at regular rate amounts to T;. !-%+"" that is lower than T;.
+"%""". Ta' in no case can be lower than the minimum ta'.
Illustration )
In the assessment year !"##8#!% Company ] reports ta'able pro&t of T;.
#"%""%""" with annual turnover of T;. #%""%""%""". Ta' liability of the
company will be T;. !%-+%""" 3!-.+P of T;. #"%""%"""5 applying regular rate
which is higher than minimum ta' of T;. +"%""" 3".+"P of T;. #%""%""%"""5.
Illustration *
In the assessment year !"##8#!% Company A reports total income of T;.
)%""%""" from business% house property and other sources. Annual assessed
business turnover is T;. #"%""%"""% property income T;. !%""%""" and receipt
from other sources i.e. interest on ban; deposit T;. #%!""%"".
Gere% the gross receipt of the company would be?
;eads of #ecei*ts
A4ount
T5(
3a
5
6eceipts derived from the sale of goods
3Turnover5
#"%""%"""
3b
5
Income from house property !%""%"""
3c
5
Income from other sources 3interest on ban;
deposit5
#%!"%"""
Total
#)%!"%"
""
Ta' liability on regular income at regular rate is T;. .!%+"" 3!-.+P of T;.
)%""%"""5. Gowever% minimum ta' is T;. ,%,"" 3".+"P of T;. #)%!"%"""5. As
regular ta' is higher than minimum ta'% ta' liability of the company will be T;.
.!%+"".
9-F Charge of ta, on sale of share at a *re4iu4 o+er face +alueB Sec 'E"
$otwithstanding anything contained in any other provisions of the ITB#/.* or
any other law% where a company raises its share capital through boo; building
or public o1ering or rights o1ering or placement or preference or in any other
way at a value in e'cess of face value% the company shall be charged% in
addition to ta' payable under the ITB#/.*% ta' at the rate of three percent
3)P5 on the di1erence between the value at which the share is sold and its
face value.
Illustration?
Company ] got permission to issue #"%""%""" of its common shares of TH #"
par value at TH. #+ through private placement. Gere% total premium per share
in T;. + 3T;. #+ F T;. #"5 and total amount of premium on sale will be T;.
+"%""%""" 3#"%""%""" shares Q T;. +5. The company is re<uired to pay ta'es
on premium Q )P and thus the amount of ta' will be T;. #+"%""" 3)P of T;.
+"%""%"""5.
9-D Sco*e of the Total Inco4eB Sec 'FB
3#5 The total income of any income year of any person includes8
3a5 in relation to a person who is a resident% all income% from whatever
source derived% which8
3i5 is received or deemed to be received in Bangladesh by or on
behalf of such person in such yearI or
3ii5 accrues or arises% or is deemed to accrue or arise to him in
Bangladesh during that yearI or
3iii5 accrues or arises to him outside Bangladesh during that year%
and
3b5 in relation to a person who is a non8 resident% all income % from
whatever source derived% which8
3i5 is received or deemed to be received in Bangladesh by or on
behalf of such person in such yearI or
3ii5 accrues or arises% or is deemed to accrue or arise to him in
Bangladesh during that year.
3!5 $otwithstanding anything contained in section #-3#5% where any amount
consisting of either the whole or a part of any income of a person has
been included in his total income or the basis that it has accrued or
arisen% to him any year% it shall not be included again in his total income
on the ground that it is received or deemed to be received by him in
Bangladesh in another year.
9-C Inco4e Dee4ed to Accrue or Arise in BangladeshB Sec 'D
The following income shall be deemed to accrue or arise in Bangladesh%
namely?
3#5 any income which falls under the head XsalariesK% wherever paid if8
3a5 it is earned in BangladeshI or
3b5 it is paid by the (overnment or a local authority in Bangladesh to a
citi9en of Bangladesh in the service of such (overnment or
authorityI
3!5 any income accruing or arising% whether directly or indirectly% through or
from8
3a5 any business connection in BangladeshI
3b5 any property% asset% right or other source of income in BangladeshI
or
3c5 transfer of capital assets in Bangladesh?
3)5 any divided paid outside Bangladesh by a Bangladeshi companyI
3*5 any income by way of interest payable8
3a5 by the (overnment? or
3b5 by a person who is a resident% e'cept where the interest payable in
respect of any debt incurred% or moneys borrowed and used% for the
purposes of a business or profession carried on by such person
outside Bangladesh or for the purpose of ma;ing or earning any
income from any source outside BangladeshI or
3c5 by a person who is a non8resident where the interest is in respect of
any debt incurred or moneys borrowed and used% for the purposes
of a business or profession carried on by such person in Bangladesh
or for the purpose of ma;ing or earning any income from any
source in Bangladesh.
3+5 any income by way of fees for technical services payable8
3a5 by the (overnment? or
3b5 by a person who is a resident% e'cept where such fees are payable
in respect of services utilised in a business or profession carried on
by any such person outside Bangladesh or for the purpose of
ma;ing or earning any income from any source outside BangladeshI
or
3c5 by a person who is non8 resident% where such fees are payable in
respect of services utilised in a business or profession carried on by
such person in Bangladesh or for the purpose of ma;ing or earning
any income from any source outside Bangladesh.
3,5 any income by way of royalty payable8
3a5 by the (overnment? or
3b5 by a person who is a resident% e'cept where royalty is payable in
respect of any right% property or information used or services
utilised for the purpose of a business or profession carried on by
any such person outside Bangladesh or for the purpose of ma;ing
or earning any income from any source outside BangladeshI or
3c5 by a person who is a non8resident% where royalty is payable in
respect of any right% property or information used or services
utilised for the purpose of a business or profession carried on by
any such person in Bangladesh or for the purpose of ma;ing or
earning any income from any source in Bangladesh
>hen the person entitled to such income is not resident in Bangladesh% he
may be charged to ta' in his own name or in the name of his agent. The
0eputy Commissioner of Ta'es must give hearing to a person whom he wants
to treat as agent of the non8resident person.
A person treated as an agent of a non8resident is empowered under the law to
deduct and retain any amount% which may be due as ta' from the non8
resident person.
Gowever% in the case of a business all the operations of which are not carried
out in Bangladesh% only such part of the income as is reasonably attributable
to the operation carried out in Bangladesh shall be deemed to accrue or arise
in Bangladesh.
9-'& Un>",*lained In+est4ents= inco4e or e,*enditure
There are some une'plained cash credits% investments% e'penditure
including possession of money% bullion% =ewellery% etc with an assessee
shall be deemed to be his income under the Income Ta' Brdinance #/.*.
The deemed incomes have been speci&ed in section #/ of the Brdinance.
' Une,*lained Cash Credit KSection 'C'(LB >here any sum is found
credited in the boo;s of an assessee% maintained for any income year and
the assessee o1ers no e'planation about the nature and source thereof% or
the e'planation o1ered is not in the opinion of the 0eputy Commissioner
of Ta'es% satisfactory% the sum so credited shall be deemed to be his
income for that income year classi&able under the head XIncome from
other sources.
2 DiAerence 3et/een actual and recorded +alues of in+est4ents=
4one6= 3ullion= <e/eller6 or other +alua3le article KSection 'C2(LB
>here% in any income year% the assessee has% made investments or is
found to be the owner of any bullion% =ewellery or other valuable article
and the 0eputy Commissioner of Ta'es &nds that the amount e'pended on
ma;ing such investments or in ac<uiring such bullion% =ewellery or other
valuable article e'ceeds the amount recorded in this behalf in the boo;s of
account maintained by the assessee for any source of income and the
assessee o1ers no e'planation about the e'cess amount or the
e'planation o1ered is not% in the opinion of the 0eputy Commissioner
Ta'es% satisfactory% the e'cess amount shall be deemed to be the income
of the assessee for such income year classi&able under the head XIncome
from other sourcesX.
9 Une,*lained e,*enditure KSection 'C9(LB >here% in any income year%
the assessee has incurred any e'penditure and he o1ers no e'planation
about the nature and source of the money for such e'penditure% or the
e'planation o1ered is not in the opinion of the 0eputy Commissioner of
Ta'es% satisfactory% the amount of the e'penditure shall be deemed to be
the income of the assessee for such income year classi&able under the
head XIncome from other sourcesK.
: Unrecorded in+est4ents KSection 'C:(LB >here% in the &nancial year
immediately preceding the assessment year% the assessee has made
investments which are not recorded in the boo;s of accounts% if any%
maintained by him for any source of income% and the assessee o1ers no
e'planation about the nature and source of fund for the investmentsI or
the e'planation o1ered is notI in the opinion of the 0eputy Commissioner
of Ta'es% satisfactory% the value of the investments shall be deemed to be
the income of the assessee for such &nancial year classi&able under the
head KIncome from other sourcesK.
@ Unrecorded 4one6= 3ullion= <e/eller6 or other +alua3le article
KSection 'C@(LB >here% in the &nancial year immediately preceding the
assessment year% the assessee is found to be the owner of any money%
bullion% =ewellery or other valuable article which is not recorded in the
boo;s of account% if any% maintained by him for any source of income% and
the assessee o1ers no e'planation about the nature and source of fund for
the ac<uisition of the money% bullion =ewellery or other valuable article% or
the e'planation o1ered is not in the opinion of the 0eputy Commissioner
of Ta'es satisfactory% =ewellery or other valuable article% shall be deemed
to be the income of the assessee for such &nancial year classi&able under
the head XIncome from other sourcesK.
E Inco4e recei+ed fro4 discontinued 3usiness B KSection M 'CE(L
Income received during any income year from discontinued business is
income of the said income year as income from business or profession.
F Declaration of di+idend B KSection M 'CF(L Any dividend declared or
distributed by a company shall be deemed to be the income of the income
year in which it is received and shall be included in the total income of the
assessee of that year.
D DiAerence 3et/een fair +alue and *a64ent against assets
KSection 'CD(LB >here any assets% not being stoc;8in8trade or stoc;s%
and shares% purchased by an assessee from any company and the 0eputy
Commissioner of Ta'es has reason to believe that the price paid by the
assessee is less then the fair mar;et value thereof% the di1erence between
the price so paid and the fair mar;et value thereof% shall be deemed to be
income of the assessee classi&able under the head XIncome from other
sourcesK.
C Sala4i or *re4ia recei*ts KSection 'CC(LB >here any lump sum
amount is received or receivable by an assessee during any income year
on account of salami or premia receipts by virtue of any lease% such
amount shall be deemed to be income of the assessee of the income year
in which it is received and classi&able under the head XIncome from other
sourcesK. Gowever% at the option of the assessee such amount may be
allocated for the purpose of assessment proportionately to the years
covered by the entire lease period% but such allocation shall in no case
e'ceed &ve years.
'& $ood/ill 4one6= co4*ensation or da4ages for cancellation or
ter4ination of contracts and licenses KSection 'C'&(LB >here any
amount is received by an assessee during any income year by way of
goodwill money or receipt in the nature of compensation or damages for
cancellation or termination of contracts and licenses by the (overnment of
any person% such amount shall be deemed to be the income of such
assessee for that income year classi&able under the head XIncome from
other sourcesK.
'' Bene0t or ad+antage fro4 cancellation of inde3tedness KSection
'C''(LB >here any bene&t or advantage% whether convertible into money
or not% is derived by an assessee during any income year on account of
cancellation of indebtedness% the money value of such advantage or
bene&t shall be deemed to be the income of such assessee for that income
year classi&able under the head XIncome from other sourcesK.
'2 Co44ission and co4*ensation fro4 4anaging agenc6 KSection
'C'2(LB Any managing agency commission including compensation
received during any income year by an assessee for termination of
agencies or any modi&cation of the terms and conditions relating thereto
shall be deemed to be his income for that income year classi&able under
the head XIncome from other sourcesK.
'9 .innings fro4 /agering contracts KSection 'C'9(LB Any amount is
received by an assessee during any income year by way of winnings from
lotteries% crossword pu99les% card games and other games of any sort or
from gambling or betting in any form or of any nature whatsoever shall be
deemed to be his income for that income year classi&able under the head
XIncome from other sourcesK.
': Dee4ed *ro0t and gains of 4utual insurance association KSection
'C':(LB Any pro&ts and gains derived in any income year from any
business of insurance carried on by a mutual insurance association
computed in accordance with the provisions of paragraph . of the Fourth
Schedule shall be deemed to be the income of such association for that
income year.
'@ #eco+er6 fro4 loss= 3ad de3t= e,*enditure or trading lia3ilit6
KSection 'C'@(LB >here% for the purpose of computation of income of an
assessee under section !.% any deduction has been made for any year in
respect of any loss% bad debt% e'penditure or trading liability incurred by
the assessee% and8
3a5 subse<uently% during any income year% the assessee has received%
e'cept as provided in Section #/3#+53aa5% whether in cash or in any
other manner whatsoever% any amount in respect of such loss% bad
debt or e'penditure% the amount so received shall be deemed to be his
income from business or profession during that income yearI
3aa5 Such amount on account of any interest which was to have been
paid to any commercial ban; or the Bangladesh Shilpa Ban; or the
Bangladesh Shilpa 6in Sangstha or on account of any share of pro&t
which was to have been paid to any ban; run on Islamic principles and
which was allowed as a deduction in respect of such e'penditure
though such interest or share of pro&t was not paid by reason of the
assessee having maintained his accounts on mercantile basis% with
three years after e'piry of the income year in which it was allowed%
shall% to such e'tent as it remains unpaid% be deemed to be income of
the assessee from business or profession during the income year
immediately following the e'piry of the said

three years. Gowever%
where any interest or share of pro&t is paid in a subse<uent year% the
amount so paid shall be deducted in computing the income in respect
of that year
3b5 the assessee has derived% during any income year% some bene&t in
respect such trading liability% the value of such bene&t% if it has not
already been treated as income under Section #/3#+53c5% shall be
deemed to be his income from business or profession during that
income year.
3c5 such trading liability or portion thereof has not been paid within three
years after e'piration of the income year in which deduction was made
in respect of the liability% such liability or portion% as the case may be%
shall be deemed to be the income of the assessee from business or
profession during the income year immediately following the e'piry of
the said three years. Gowever% where the trading liability is paid in a
subse<uent year% the amount so paid shall be deducted in computing
the income in respect of that year.
Illustration
Suppose an assessee has debited the Pro&t and 7oss Account by
Crediting trading liability for goods and services received during the
assessment year !""#8"! and such e'penses claimed was allowed in
assessment for that year% if such trading liability was not paid during
the ne't ) years 3Assessment years !""!8") to !""*8"+5% that trading
liability will be added bac; as income in assessment for the assessment
year !""+8", only and not in any other year.
'E )ro0t fro4 sale of 0,ed assets of 3usiness or *rofession KSection
'C'E(LB >here any building% machinery or plant having been used by an
assessee for purpose of any business or profession carried on by him is
disposed of during any income year and the sale proceeds thereof e'ceeds
the written down value% so much of the e'cess as does not e'ceed the
di1erence between the original cost and the written down value shall be
deemed to be the income of the assessee for that income year classi&able
under the head XIncome from business or professionK.
Illustrations
3a5 Cost of an asset FT;. #""%"". >ritten down value on the year of sale8
T;. ,"%""". Sale of the asset F T;. #""%""". Pro&t on sale of &'ed asset
will amount to T;. *"%""" 3#""%""" 8,"%"""5.
3b5 Cost of an asset FT;. #""%""". >ritten down value on the year of sale
T;. ,"%""". Sale of the asset FT;. #!"%""". In this case% pro&t on sale of
&'ed asset will amount to T;. *"%""" and capital gain u4s )! will
amount to T;. !"%""".
It is apparent that pro&t on sale of &'ed asset 3balancing charge5 under
no circumstances shall e'ceed the di1erence between cost of the asset
and written down value of the asset. In other words% ta' department
ta;es by way of revenue what it has allowed as depreciation allowance
in the past. In may be noted that no depreciation allowance is
allowable in the year when the asset is sold as per income ta'
provision.
?uestion
ABC 7td% purchased a machine in the year !""! at T;. +%"""%""" and sold
the same in $ovember !"", at T;. )%+""%""". The written down value is
T;. )%"""%""". The year end of the company is 0ecember.
Calculate the business pro&t or losses and also the capital pro&t or losses%
if any% for the relevant assessment year. 3P2 FI Session ay FMune% !""+5
Solution Assess4ent 6ear
2&&F>&D(
Sale of the machine [T;. )%+""%"""
7ess? >ritten down value )%"""%"""
Pro&t on Sale 3Balancing charge5 +""%"""
It is assumed that written down value of T;. )%"""%""" was wor;ed out as
per &scal rate. Pro&t on sale is within the di1erence between the original
cost and written down value of the asset sold.
Note
This section mentions pro&t from sale of building% machinery or plant.
Gence any pro&t on sale of furniture will remain outside the ambit of
ta'ation under Income Ta' Brdinance #/.*. Bn the same to;en% any loss
on sale of furniture is not an allowable e'pense.
'F )ro0t fro4 sale of agricultural assets KSection 'C'F(LB >here any
machinery or plant e'clusively used by an assessee for agricultural
purposes has been disposed of in any income year and the sale proceeds
thereof e'ceeds the written down value% so much of the e'cess as does
not e'ceed the di1erence between the original cost and the written down
value shall be deemed to be the income of the assessee for that income
year classi&able under the head XAgricultural incomeK
'D )ro0t out of insurance= sal+age or co4*ensation 4one6 fro4 0,ed
assets of 3usiness or *rofession KSection 'C'D(LB >here any
insurance% salvage or compensation moneys are received in any income
year in respect of any building% machinery or plant having been used by an
assessee for purpose of any business or profession is discarded
demolished or destroyed and the amount of such moneys e'ceeds the
written down value of such building% machinery or plant so much of the
e'cess as does not e'ceed the di1erence between the original cost and
the written down value less the scrap value shall be deemed to be the
income of the assessee for that income year classi&able under the head X
Income from business or professionK.
",a4*le T2-
>0: of machine discarded !"%"""
Briginal cost of the machine ."%"""
Insurance money received )"%"""
Gere the di1erence between insurance money and the >0: is T;. #"%"""
which would be treated as business income. If salvage or insurance money
received were T;. #""%"""% entire depreciation allowed earlier i.e. 3."%"""8
!"%"""5 [ T;. ,"%""" would be treated as business income and the
di1erence between insurance or salvage value and original cost% would be
capital gain i.e. 3#""%"""8."%"""5 [ T;. !"%""".
'C )ro0t out of insurance= sal+age or co4*ensation 4one6 fro4
agricultural assets KSection 'C'C(LB >here any insurance% salvage or
compensation moneys are received in any income year in respect of any
building% machinery or plant which having been used by the assessee
e'clusively for agriculture purpose is discarded% demolished or destroyed
and the amount of such moneys e'ceeds the written down value of such
machinery or plant so much of the e'cess as does not e'ceed the
di1erence between the original cost and the written down value less the
scrap value shall be deemed to be the income of the assessee for that
income year classi&able under the head XAgricultural incomeK
2& )ro0t on sale of ca*ital ite4s of scienti0c research KSection
'C2&(L? >here an asset representing e'penditure of a capital nature of
scienti&c research within the meaning of section !/3#53''5 is disposed of
during any income year% so much of the sale proceeds as does not e'ceed
the amount of the e'penditure allowed under the said clause shall be
deemed to be the income of the assessee for that income year classi&able
under the head XIncome from business or professionK.
2' Loan #ecei*t other/ise than 36 cross che8ue KSection 'C2'(LB
>here any sum% or aggregate of sums e'ceeding ta;a &fty thousand is
claimed or shown to have been received as loan by an assessee during
any income year from any person% not being a ban;ing company or a
&nancial institution% otherwise than by crossed che<ue drawn on a ban;%
has not been paid bac; in full within three years from the end of the
income year in which it is claimed or shown to have been received% the
said sum or part thereof which has not been paid bac;% shall be deemed to
be the income year of the assessee for the income year immediately
following the e'piry of the said three years and be classi&able under the
head XIncome from other sourcesK. Gowever% where the loan referred to in
section #/3!#5 is paid bac; in a subse<uent income year% the amount so
paid shall be deducted in computing the income in respect of that
subse<uent year.
22 Loan or $ift #ecei*t KSection 'C2'A(LB >here any sum is claimed to
have been received by an assessee as loan or gift during any income year
from a person who has transferred the sum from the initial capital of his
business or profession shown in his return &led under section .)A% the
amount of such loan or gift so was received by the assessee shall be
deemed to be his income of the year in which such loan or gift was
received and shall be classi&able under the head OIncome from other
sources.W
29 Transfer of Initial Ca*ital KSection 'C2'B(LB >here any sum% shown
as initial capital of business or profession in return of income &led under
section .!BB% is transferred by a person partly or fully within the period of
limitation stipulated in the said section% the sum so transferred shall be
deemed to be his income of the year in which such sum was transferred
and shall be classi&able under the head TIncome from other sourcesT.
2: ;ouse #ent Securit6 De*osit KSection 'C22(LB >here an assessee%
being the owner of a house property% receives from any person to whom
such house property or any part thereof is let out any amount which is not
ad=ustable against the rent payable% the amount so received shall be
deemed to be income of the assessee for the income year in which it is
received and be classi&able under the head XIncome from house propertyK.
Gowever% where such or part thereof is refunded by the assessee in a
subse<uent income year the amount so refunded shall be deducted in
computing the income of the assessee in respect of that income year.
2@ ",*ort ?uota KSection 'C29(LB >here during any income year an
assessee% being an e'porter of garments% transfers to any person% the
e'port <uota or any part thereof allowed to him by the (overnment% such
portion of the e'port value of the garments e'portable against the <uota
so transferred as may be prescribed for this purpose shall be deemed to
be income of the assessee for that income year% classi&able under the
head XIncome from business or professionK. For the purposes of section
#/3!)5 of the Brdinance% an amount e<ual to )P of the e'port value of the
garments e'portable against the e'port <uota transferred by an assessee
shall be deemed to be his income for the income year during which the
transfer too; placeU6ule )"AV.
",a4*le
A;lima (arments 7T0. transferred its e'port <uota of certain items to
Taslima (arments 7T0. in the year !"")8!""*. The e'port value of the
<uota transferred has been T;. #" million and for the transfer A;lima
charged T;. * million to Taslima.
As per 6ule )"A the value of the transfer is )P ^ #" million [ .) million.
Therefore% T;. )%""%""" would be A;limaKs income for income year !"")8
!""*. But it has reali9ed T;. *""%""". T;. )""%""" is income from business.
The balance T;. #""%""" may not be ta'ed. Gowever% it is certain that the
company will be ta'ed on full deemed value even when money received on
the transfer falls short of it.
There is a ta' rebate of +"P on the e'port of garments by companies
registered in Bangladesh but A;lima cannot claim the rebate for the value
received on the transfer of <uota since it has not e'ported therefore% the
amount will be ta'ed at full rate.
2E "8uit6 recei+ed fro4 shareholders in cash KSection 'C2:(LB >here
an assessee% being a private limited company or a public limited company
not listed with a stoc; e'change% increases its paid up capital by issuing
shares in an income year% the amount so received as increased paid up
capital% not being received by crossed che<ue or ban; transfer% shall be
deemed to be the income of such assessee for that income year
classi&able under the head TIncome from other sourcesW.
2F Loan recei+ed /ithout crossed chec2 or 3an2 transfer KSection 'C
2E(LB >here an assessee% being a company% receives any amount as loan
from any other company otherwise than by a crossed chec; or by ban;
transfer% the amount so received shall be deemed to be the income of
such assessee for that income year in which such loan was ta;en and shall
be classi&able under the head TIncome from other sourcesT.
2D Bu6ingP;iring 4otor carP<ee* 36 a co4*an6 KSection 'C2F(LB
>here an assessee% being a company% purchases directly or on hire one or
more motor car or =eep and value of any motor car or =eep e'ceeds ten
percent of its paid up capital% then &fty percent of the amount that
e'ceeds such ten percent of the paid up capital shall be deemed to be the
income of such assessee for that income year classi&able under the head
TIncome from other sourcesT.
9-'' S*ecial Ta, Treat4ent in res*ect of So4e In+est4ents
i( In res*ect of in+est4ent in the *urchase of 3ond under
Bangladesh Infrastructure %inance %und > Sec 'CC
$otwithstanding anything contained in any other provision of the ITB
#/.*% no <uestion as to the source of any sum invested by any person in
the purchase of bond issued or caused to be issued under Bangladesh
Infrastructure Finance Fund during the period between the &rst day of Muly%
!"#" and thirtieth day of Mune% !"#! 3both days inclusive5% shall be raised if
the assessee pays% before the &ling of return of income for the relevant
income year% ta' at the rate of ten per cent on such sum invested.
ii(In res*ect of in+est4ent in the *urchase of Bangladesh
$o+ern4ent Treasur6 Bond > Sec 'CD
$o <uestion as to the source of any sum invested by any person% being an
individual% in the purchase of Bangladesh (overnment Treasury Bond shall
be raised if such person pays% before the &ling of return of income for that
income year as per provisions laid down in sub8section 3!5 of section -+%
ta' at the rate of ten per cent on such sum invested.
Chapter *
Inco4e fro4 salaries
Contents
Introduction
2'amination conte't
To*ic List
>or;ed 2'amples and Solutions
*.# Geads of Income
*.! Income from Salaries
*.) Provident Fund
*.* $on8assessable Incomes under the Gead OSalaryW
*.+ Items Included in Investment Allowance 6elated to Salary Income
*., Salient Points in Assessment of Salaries
Introduction
Learning o3<ecti+es
Identify the di1erent heads of income.
Compute the total ta'able income under the head XIncome from SalaryK.
0e&ne the per<uisites% allowances and bene&ts under salary income.
Identify the allowable deduction under di1erent components of salary
income.
Identify the non8assessable income under XsalaryK
0e&ne the concept of provident fund and other funds related to salary.
Jnderstanding investment allowance and computing ta' rebate on that.
Computing ta' liability of an individual who en=oys income from salary.
)ractical signi0cance
Income from salary is very important for a lot of reasons. This is a common
head of income for most of the individual ta' payers. It can even be said that
individual ta'ation depends on this head of income. (overnment collects a
signi&cant portion of ta' under this head. Thus% ta'ation laws covering income
from salary is very rich and scope of learning is also enlarged. This chapter
carries signi&cance for corporate practitioners also in a sense that this
e'pense in certain conditions cannot be shown as e'pense. The application of
per<uisites and its impact on computing ta'es is very important.
Income from salary is the &rst head of income. To compute ta'able income of
an individual% it pays a signi&cant role. But if the seven heads% this is a very
common head of income. Again% this head encompasses di1erent technical
and conceptual issues li;e per<uisites% provident funds and other funds and
li;e where clear understanding is very important as a ta' practitioner and
professional.
Computing ta'able income under the head income from salary% computing
investment allowance and testing the amount for ma'imum limit% computing
ta' rebate on investment allowance% understanding the ad=ustment of ta'
deducted at sources and &nally computing net ta' liability of an individuals
are some mentionable points that is covered in this chapter and thus the
chapter become very signi&cant for the students. This chapter lays the
foundation of coming chapters also.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the computation of ta'able income under the head
Xincome from salaryK is one of the basic re<uirements for determining ta'
liabilityN Can you determine the ta'able income from salaryN 0o you
understand the application of investment allowance in computing &nal ta'
liabilityN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the total ta'able income for any income year. Before advising the clients%
accountants should have the clear concept relating to the admissible and
inadmissible e'penses so that they can deduct or add the e'penses in
determining the ta'able income.
As individual assessees are abundant and most of the individual assessees
have income under the head% understanding this chapter becomes a must for
wor;ing in practical life.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Identify the di1erent heads of income.
0e&ne the concepts of salaries.
6ecognise the per<uisites% allowances and bene&ts under salary income.
6ecognise the income assessable under the head.
Illustrate the e'emptions allowed in determining ta'able income under the
head.
Jnderstanding investment allowances and ta' rebate on that.
Computation of ta' liability.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
core concept on computation of income which is vital for calculating ta'
liability. Clear concept and understanding of each contents of this chapter will
help candidates to resolve any problems relating to computation of income.
:-& INCOM" %#OM SALA#I"S
Section O+er+ie/
There are seven heads of income.
Total income may not be ta'able income.
There are some allowable% inadmissible and not permissible deductions
under the head.
Computation of ta'able income from salary.
The per<uisites and allowances need to be considered before determining
salary income.
Jnderstanding provident fund and other funds.
Scope of investment allowance% ta' rebate on that.
Computing net ta' liability.
:-' ;eads of Inco4eB Sec 2&
Save as otherwise provided in the Brdinance% all incomes shall% for the
purpose of charge of income ta' and computation of total income% be
classi&ed and computed under the following heads of income% namely?
3a5 Salaries.
3b5 Interest on securities.
3c5 Income from house property.
3d5 Agricultural income.
3e5 Income from business or profession.
3f5 Capital gains.
3g5 Income from other sources.
:-2 Inco4e fro4 Salaries
i( Conce*t of SalariesB Sec 2@D(
There is no e'haustive de&nition of OsalaryW in the Brdinance. An inclusive
de&nition has% however% been given in Section !3+.5 of the Income Ta'
Brdinance #/.* as follows? 8 XsalaryK includes8
3a5 any wagesI
3b5 any annuity% pension or gratuityI
3c5 any fees% commissions% allowances% per<uisites or pro&ts in lieu of% or in
addition to% salary or wagesI
3d5 any advance of salaryI
3e5 any leave encashmentI
The following income of an assessee is classi&ed and computed under the
head OSalariesW% and thereby chargeable to ta'% namely8
3a5 any salary due from an employer to the assessee in the income year%
whether paid or notI
3b5 any salary paid or allowed to him in the income year by or on behalf of
an employer% . though not due or before it became due to himI and
3c5 any arrears of salary paid or allowed to him in the income year by or on
behalf of an employer% if not charged to income ta' for any earlier
income yearUSection !#V.
Salary once included in any year on due basis or advance payment basis is
not includible in the income of any other year. It is not logical to pay ta'es on
same income in multiple years.
ii( )er8uisites
Per<uisite has been de&ned in the B'ford dictionary as any casual
emolument% fee or pro&t attached to an oEce or position% any addition to
salary and wages. Gowever% as per Section !3*+5 of IT Brdinance #/.*%
OPer<uisiteW means 8
Any payment made to an employee by an employer in the form of cash or
in any other form e'cluding basis salary% festival bonus% incentive bonus
not e'ceeding ten percent of disclosed pro&t of relevant income year%
arrear salary% advance salary% leave encashment or leave fare assistance
and overtime% and
Any bene&t% whether convertible into money or not% provided to an
employee by an employer% called by whatever name% other than
contribution to a recogni9ed provident fund% approved pension fund%
approved gratuity fund and approved superannuation fund.
From the above de&nitions% it can be deduced that per<uisite includes F
a. The value of rent free accommodationI
b. The value of any concession in the matter of rent respecting any
accommodationI
c. Any sum payable by the employer% whether directly or indirectly% as
insurance premium for the assessee or his spouse or any of his
dependent child.
d. The value of any bene&t provided free of cost or at a concessionary rate%
and
e. The sum paid by an employer in respect of any obligation of an
employee.
Thus the phrase Xper<uisiteK signi&es some additional bene&t in addition to
the amount that may be legally due by way of contract for service rendered.
iii( !aluation of )er8uisites= Allo/ances and Bene0ts Includi3le
as Inco4e in the Cases of Salaried )ersonsB #ule 99
3#5 2'tent of per<uisites% allowances and bene&ts includible as income under
the head OsalaryK has been prescribed in rules ))A to ))M of the Income
Ta' 6ules% #/.*.
3!5 For the purpose of determination of value of per<uisites% allowances and
bene&ts%8
3a5 OBasic salaryW means the pay and allowances payable monthly
or otherwise but does not include?
3i5 dearness allowance or dearness pay unless it enters into the
computation of superannuation or retirement bene&ts of the
employee concerned.
3ii5 employerKs contribution to a recogni9ed provident fund or
fund to which the Provident Fund Act% #/!+ applies and the
interest of an employee in such fund.
3iii5 allowances which are e'empt from the payment of ta'I and
3iv5 allowances% per<uisites% annuities and bene&ts as referred
to in rule8))3#5.
3b5 TemployeeT% in relation to a company% includes the managing director%
or any other director or other person% who irrespective of his
designation% performs% any duties or functions in connection with the
management of the a1airs of the company
;ouse #ent Allo/ance #ecei+a3le in cashB #ule 99A
>here the house rent allowance is receivable by the employee in cash% the
amount% if any% by which the house rent allowance so receivable e'ceeds
+"P of the basic salary or T;.#+%""" per month% whichever is less% shall be
included in his income.

Illustration
r. ] is paid a monthly basic salary of T;. +"%""" and house rent
allowance of T;. !"%""". Gis ta'able income from house rent allowance
will be computed as?
;ouse #ent Allo/ance
Actual 3T;. !"%""" _#! months5
!*"%""
"
2'emption?
+"P of Basic 3T;. +"%""" _#! months _
+"P5
)%""%""
"
Br% T;. #+%""" _#! months
#%."%""
"
>hichever is lower
#%."%""
"
Amount added with ta'able income ,"%"""
#ent %ree Acco44odationB #ule 99B
3#5 >here the employee is provided with rent free accommodation% the
rental value of the accommodation or !+P of the basic salary of the
employee% whichever is less% shall be included in his income.
3!5 >here the accommodation is provided to the employee at a
concessional rate% the di1erence between the rent actually paid by him
and the amount determined to be includible in an employeeKs salary under
rule ))B3#5 shall be added to his income.

Illustration #
r. ] is paid a monthly basic salary of T;. *"%""" and a dearness
allowance of T;. )""" per month. Ge has also been provided with a rent
free accommodation which his employer rented for a monthly rent of T;.
!"%""". Gow much of the house rent will be added with ta'able incomeN
Includi3le a4ount of ;ouse #ent /ith Ta,a3le Inco4e
!+P of Basic 3T;. *"%""" _#! months _
!+P5
#%!"%""
"
Br% 6ental value 3T;. !"%""" _#!
months5
!%*"%""
"
>hichever is lower
#%!"%""
"

3$ote? dearness allowance by de&nition is not a part of basic salary5
>hen the accommodation is given by the employer at a concessional rate
the di1erence between the rent actually paid by him and lower of !+P of
basic salary and rental value shall be added with salary.
Illustration !
To &t the situation% let us change the earlier problem slightly. r. ] has
been paid a monthly basic salary of T;. *"%""". Besides he has been
provided with accommodation at a concessional monthly rate of T;.
#"%""". Actual monthly rent of the accommodation is T;. !"%""". Gow
much will be added with ta'able income due to availing this opportunity
from the employerN
Includi3le a4ount of ;ouse #ent /ith Ta,a3le Inco4e
!+P of Basic 3T;. *"%""" _#! months _
!+P5
#%!"%""
"
Br% 6ental value 3T;. !"%""" _#!
months5
!%*"%""
"
>hichever is lower
#%!"%""
"
Concessional rent paid 3T;. #"%""" _#!
months5
#%!"%""
"
Amount to be added with ta'able income "
Con+e6ance Allo/ance recei+a3le in cash /ith no Con+e6ance
%acilit6B #ule 99C
>here no conveyance is provided by the employer and the conveyance
allowance is receivable by the employee in cash% the allowance so
receivable in e'cess of T;. !*%""" annually shall be included in his income.

Illustration

r. ] is an oEcer in a private ban; in 0ha;a. Ge has his own car and is
paid T;. *"%""" annually in cash as conveyance allowance. Gow much of
this allowance will be added with ta'able salary incomeN
Includi3le a4ount of Con+e6ance Allo/ance /ith
Ta,a3le Inco4e
Actual allowance *"%"""
2'emption? up to !*%"""
Ta'able income #,%"""
$othing would be added if he received less than T;. !*%""" annually.
3$ote? The car is his own and not provided by his ban;.5
Con+e6ance %acilit6 )ro+ided ",clusi+el6 for )ersonal or )ri+ate
UseB K#ule 99DL
>here the conveyance is provided by the employer for the use of the
employee partly or e'clusively for personal or private purpose% there shall
be included in the employeeKs income% an amount e<ual to -.+"P of the
employeeKs basic salary.
Illustration
r. ] is paid a basic salary of T;. +"%""" per month. Ge has also been
provided with a car by his employer the cash price of which was T;. .
la;hs two years ago. Ge uses the car appro'imately ."P for personal uses
and !"P for oEce uses. -.+P of basic salary i.e. T;. )%-+" per month
would be added with salary as ta'able income and will be ta'ed at regular
rate.
Additional Con+e6ance Allo/anceB #ule 99"
>here a cash allowance is receivable by an employee in addition to the
per<uisite mentioned in rule ))0% the whole amount of such allowance
plus the amount determined under rule ))0 shall be included in his
income.
Illustration
r. ] receives T;. )%""" monthly as conveyance allowance. Ge also en=oys
a full time oEcial car for both his personal and oEce purpose. Gis basic
salary is T;. *.%""" per month. >hat will be the impact for these bene&ts
in cash and ;ind on computing ta'able income of r. ]N
Includi3le a4ount of Con+e6ance Allo/ance and %acilit6 /ith
Ta,a3le Inco4e
Actual allowance 3T;. )%""" _#!
months5
),%"""
-.+P of Basic 3T;. *.%""" _#! months
_ -.+P5
*)%!""
Ta'able income -/%!""
%ree or Concessional *assage for tra+el a3road or /ithin
Bangladesh B #ule 99$
3#5 >here free or concessional passage for travel abroad or within
Bangladesh is provided by the employer to an employee 3including the
members of his house8hold and dependents5% there shall be included in
his income of the employee8
3i5 >here the passage is provided in accordance with the terms of
employment% an amount e<ual to the sum by which the cash
payments% if any made by the employer e'ceeds the actual
e'penditure incurred by the employeeI and
3ii5 >here the passage is not in accordance with the terms of
employment% the whole of the amount paid in cash% if any% or if no
cash payment is made% the amount which would have been e'pended
by the employee had the free or concessional passage% as the case
may be% not been provided by the employerI
>here free concessional passage for travel abroad is availed by the
employee more than once in two years% the whole of amount paid to him in
cash% if any% for such additional passage or if no cash payment is made% the
amount which would have been e'pended by him had the additional
passage not been provided by the employer% shall be included in his
income.
3!5 >here the transport is provided free of cost or at a concessional rate
by an underta;ing engaged in the transport of passengers or the
carriage of goods to any employee of the underta;ing 3including the
members of his household and dependents5 in any conveyance owned or
chartered by the underta;ing for the purpose of the transport of the
passengers or carriage of goods% nothing shall be added in his income.
Illustration #
r. ] is an employee of (( Airlines traveled to Bang;o; recently along
with his wife% children and mother in law who is dependent on him. As a
term of the service contract all return tic;ets were provided by the
employer. Besides he was also given T;. !%""%""" to meet the
e'penditure abroad which also is a part of the service contract. The value
of the return tic;ets were T;. /"%""". Ge has spent T;. #%+"%""" on the
trip. Gere% himself% his spouse% children and mother in law are all <uali&ed
to get the privilege under the service contract. Ge has been given the
return tic;ets free so nothing is to be added with salary but cash amount
of T;. !%""%""" would be fully included with the salary income since the
above rule provides for passage or passage money and not for other
travel e'penditure.
Illustration !
r. ]% an employee of a multinational in 0ha;a% has been given T;.
#%""%""" as a travel passage to J.H. with his spouse as per terms of
employment. Bn the return tic;ets he saved T;. !+%""" by Aying the
cheapest airlines available in the sector.
2'cess of cash over the actual passage i.e. T;. !+%""" would be added
with his salary income.
Illustration )
r. ] has been given +"P passage assistance to JSA amounting to T;.
*"%""" which however% was paid by his employer not as a lien of his
contract but out of satisfaction on his performance.
Since the concessional passage has not been a part of service contract
the full amount would be added with salary.
"ntertain4ent Allo/anceB #ule 99;
>here any amount is payable to the employee by way of entertainment
allowance% the whole of the amount so payable shall be included in his
income. $o addition on this account shall% however% be made if free tea%
co1ee% beverages or the li;e thereof are provided at the oEce premises
during the course of wor;.
Medical ",*ensesB #ule 99I
>here any amount is payable to the employee by way of hospitali9ation
or medical e'penses% the amount% if any% by which the sum receivable by
him e'ceeds the actual e'penditure incurred by him shall be included in
his income. Any reimbursement of medical e'penditure will not be
included in total income.
Illustration #
r. ] receives T;. +%""" per month as medical allowance. 0uring a year%
r. ] produces documents showing that his actual medical e'penditure
was T;. !+%""". Thus% the e'cess amount of T;. )+%""" 3T;. ,"%""" F T;.
!+%"""5 will be included in ta'able income.
Illustration !
r. ]% was seriously ill and hospitali9ed. Gis medical bill was T;. .+%"""
which was reimbursed by his employer upon submission. In this situation%
r. ] will add nothing with his ta'able income.
Other Bene0tsB #ule 99H
>here any bene&t or annuity not covered by the provisions of rule ))A to
rule ))I is provided to the employee% the members of his household or his
dependents% there shall be included in his income an amount e<ual to the
amount which would have been e'pended by the employee in obtaining
such bene&t or annuity from an independent source in the same or near
locality% had it not been so provided% as reduced by the amount% if any%
e'pended wholly% necessarily and e'clusively in the performance of the
duties of the oEce held by him or actually paid by him in cash.
Jnder clause 3b5 of rule ))3!5 a shareholder director of company is to be
treated as an employee and hence to be entitled to the above allowances.
But these bene&ts can be claimed from salary income of one company
only.
Illustration #
r. ]% a director of a multinational in 0ha;a% had to attend a regional
management conference arranged by the group in Singapore and has
been paid T;. !%""%""" by the company to meet his wee;long e'penses in
Singapore. Ge actually spent T;. #%-"%""".
Gere% the bene&t of T;. !%""%""" has been given to r. ] wholly%
necessarily and e'clusively in the performance of his duty as a company
director% out of which he spent T;. #%-"%""". Therefore% under this sub8
rule% balance T;. )"%""" unspent would be added with salary.
Illustration !
r. ]% a manager% has been given an annuity by his employer to pay him
and his wife an annuity of T;. #%""%""" for ten years after his retirement
in two years time. The whole cost was borne by the company which has
been T;. +%""%""". Jnder this 6ule the whole amount would be added
with the salary. If for instance% +"P of the annuity cost is borne by him
then balance +"P i.e. T;. !%+"%""" would be added with his salary.
Test of Deter4ent )er8uisites
)articulars Sala
r6
)er8uisit
es
Non
e
Basic Salary
0earness allowance
Festival bonus
Performance bonus
7eave encashment
2mployerKs contribution to PF
Interest on PF
(ratuity credited
Special allowance in the performance of duties
Commission
Insurance premium borne by the employer
Incentive bonus by the employer
Gouse rent cash
Gouse free or at concession
2ntertainment
Conveyance Fcash
Car for personal use
Free ride from oEce
7eave passage
2ntertainment for the purpose of employer
edical8cash allowance
edical reimbursement
Travel reimbursement
Gouse rent paid in cash
Any other obligation of the employee 3Gouse
servant% mali etc.5

Basic )rinci*les
Anything paid in cash as &'ed sum forms part of the salary and any obligation
of the employee borne by the employer is per<uisite.
Illustration
From the following particulars of + employees of a company calculate the
per<uisites not admissible 3e'cess per<uisites5 as business e'penditure J4S )"
3e5.
"4*lo6ee A D C D "
# Basic Salary ),"%"""
)!"%""
"
)#"%""
"
!."%""
"
!-"%""
"
! Festival Bonus #."%"""
#,"%""
"
#+"%""
"
#*"%""
"
#)"%""
"
) Gouse 6ent Allowance 8
!""%""
"
!""%""
"
#."%""
" 8
* Conveyance Allowance #!"%"""
#""%""
"
#""%""
"
#""%""
"
#""%""
"
+ Contribution to 6PF ),%""" )!%""" )#%""" !.%""" !-%"""
, 2ntertainment Allowance *.%""" ),%""" ),%""" ),%""" )"%"""
- Free Accommodation !*"%""" 8 8 8
!""%""
"
. Telephone Bill #!%,+" /%."" #"%."" 8 8
/ Jtilities ,,%""" ,"%""" ,"%""" ,+%""" ,/%"""
#"
Total Income 3Total of # to
/5
#%",!%,+
"
/#-%."
"
./-%."
"
.!/%""
"
.!,%""
"
A Salary 3#Z!Z)Z+5 +-,%"""
-#!%""
"
,/#%""
"
,!.%""
"
*!-%""
"
B Per<uisites 3*Z,Z-Z.Z/5 *.,%,+"
!"+%."
"
!",%."
"
!"#%""
"
)//%""
"
C Per<uisites Allowed !+"%"""
!+"%""
"
!+"%""
"
!+"%""
"
!+"%""
"
0 2'cess Per<uisites 3B8C5 !),%,+" 8 8 8
#*/%""
"
$otes?
3i5 In the computation of total income of the company e'cess per<uisites
would be added J4S !/3e5.
3ii5 The basic principle is whatever paid in cash and in the form of a bene&t
monthly is a salary and should not constitute per<uisites.
3iii5 J4S !/3e5 per<uisites are allowable up to T;. !%+"%""" per employee.
:-9 )ro+ident %undB
Provident fund is the fund where funds are accumulated during the active
period of employees for his &nancial protection at the end of his service life%
amount contributed by the employee or the employer or both employee and
employer. The amount lying in the fund is invested in trust securities that
yield fair but secured returns. >hen an employee leaves his service either on
retirement or for any other reason% he gets bac; the money standing to the
credit of his provident fund account. In case of death of the employee% the
amount is refunded to his nominee. Provident fund is a social security
measure provided to employees for his rainy days of post8employment period.
There are three types of provident fund?
Statutor6 or $o+ern4ent *ro+ident fundB Statutory or (overnment
provident fund is controlled and maintained by the government for the
government employees. Such fund is constituted and run by the government
under Provident Fund Act #/!+% (eneral Provident Fund 6ules #/-/ and
Contributory Provident Fund 6ules #/-/. (overnment employees who are
permanently transferred to the pensionable =obs% they contribute to general
provident fund where government as an employer contributes nothing. Bn the
other hand% government employees who have no bene&ts from pension% they
contribute to contributory provident fund where both government and the
employee contribute. (enerally most of the government employees of our
country are pensionable.
Points to remem?er at t!e time of tax computation4
a. Since employer does not contribute to general provident fund there is no
<uestion of its inclusion with salary. But since government contributes to
contributory provident fund% governmentKs contribution will be included
with salary.
b. 2mployeeKs contribution to statutory 4 government provident fund will be
included in investment allowance.
c. Accumulated balance of (PF at the credit of employees when received% is
neither included in his total income nor ta'ed. It is e'cluded from total
income under Para !#3a5% Part A of Si'th Schedule of the ITB% #/.*.

#ecogniQed )ro+ident fundB 6ecogni9ed Provident fund is constituted under
the conditions mentioned in Part B% First schedule in the Income Ta'
Brdinance% #/.* and approved by the commissioner of ta'es. These funds are
available in non8government organi9ations where both employees and
employer contribute the same amount. In order that a provident fund may
receive and retain recognition% it shall satisfy the conditions set out below and
any other conditions which the $B6 may prescribe?
a5 All the employees shall be employed in Bangladesh or shall be
employed by an employer whose principal place of business or head
oEce is in Bangladesh. In case of e'ceptional situation the recognition
criterias will depend on the CommissionerKs =udgment.
Provident
Fund
Statutory Provident
Fund
6ecogni9ed Provident
Fund
Jnrecogni9ed Provident
Fund
(eneral Provident Fund
Contributory Provident
Fund
b5 2mployer must deduct a certain percentage from the salary of
employee and deposit the same to the fund.
c5 2mployer will also contribute the same amount as deducted from the
employee.
d5 The fund will constitute ta;ing the contribution of both the employer
and employee.
e5 The fund will be managed by trustee of two or more persons.
f5 2mployer will not be able to ta;e any amount from the fund.
g5 2mployee will receive the amount deposited to his account including
principal and interest at the time of leaving the =ob.
Points to remem?er at t!e time of tax computation4
a. Bnly% employerKs contribution to 6PF and interest thereon are included in
the total salary income of the employee as per the rules.
b. Both employerKs and employeeKs contribution to 6PF are considered to be
a part of investment allowance.
c. Accumulated balance at the credit of employee in the 6PF% when received
shall be e'cluded from total salary income under Para !#3b5% Part A of Si'th
Schedule of the ITB% #/.*.
UnrecogniQed )ro+ident %undB Jnrecogni9ed provident fund is not the
recogni9ed or statutory fund. This fund is not constituted under Part B% First
schedule in the Income Ta' Brdinance% #/.* or under any other applicable
acts or laws and is not approved by the commissioner of ta'es. In this fund%
both the employees and employer contributes and generally it is found in non8
government organi9ation. In this case% the employersK contribution and
interest thereon is not included in the total income of the employee. At the
time of the employeeKs retirement% the accumulated balance of the JPF
e'cept employeesK contribution and interest thereon is included in the total
income.
Points to remem?er at t!e time of tax computation4
a. 2mployer may contribute as well as employee to this provident fund% but
nothing will be added in the salary income.
b. At the time of employeeKs retirement% the accumulated balance of this fund
minus the employeeKs contribution plus interest thereon is ta'able and will
be added with salary.
A**ro+ed Su*erannuation %und AS%(B
This type of fund is created for granting pension and other bene&t to the
employees on their retirement% or after a speci&ed age or his death. This fund
is run by the individual name of the employees. This fund is approved and run
under the provisions of Part A% First Schedule of the ITB% #/.*. Both employee
and employer contribute to the fund. The contribution of the employer is
added to the income of the employee. But interest on this fund and any
amount received from it is not added to income.
A**ro+ed $ratuit6 %und A$%(B
If the employer agrees to constitute a gratuity fund for the employees on the
contract of =ob% then the employer contributes to the gratuity fund for the
bene&t of the employees in the event of retirement. The approved gratuity
fund is approved by $B6 and run under the conditions mentioned in in First
Schedule% Part C. 2mployee contributes nothing in this fund. The contribution
of the employer is considered as income of employee. But interest on this
fund and any amount received from it is not added to income.
.or2erOs )artici*ation %und .)%(B
It is established under the Companies Pro&t 3wor;ers participation5 Act% #/,.
3Act. ]II of #/,.5. Any payment received by an employee from this fund%
sub=ect to prescribed limits and conditions% shall be e'cluded from the total
income as provided under Para !#3d5% Part A of Si'th Schedule to the Income
Ta' Brdinance% #/.*.
:-: Non>assessa3le Inco4es under the head RSalar6SB
In Part A of Si'th Schedule of the ITB% #/.*% some incomes relating to salary
have been mentioned as non8assessable?
a( All e4*lo6ees= 4ainl6 for all Bangladeshi residentsB
i5 Any income from a provident fund established under the Provident
Fund Act% #/!+ or wor;ers participation fund. 3Para *5
ii5 Any special allowance% bene&ts or per<uisite speci&cally granted to
meet some oEcial e'penses. 3Para +5
iii5 Pension 3Para .5
iv5 (ratuity 3Para !"5
v5 Any receipt from government and recogni9ed provident fund% approved
superannuation fund and a wor;erKs participation fund. 3Para !#5
vi5 Interest on recogni9ed provident fund if it does not e'ceed #4)
rd
of basic
salary or interest amount computed Q #*.+P per annum. 3Para !+5
vii5 Any amount received by an employee of a government organi9ation% a
local authority% or an autonomous or semi8autonomous body at the
time of his retirement. 3Para !,5
3( %or foreign e4*lo6eesB
i5 Any income received by any ambassador% high commissioner% envoy%
minister% charge daEer% commissioner% counselor% secretary% advisor of
an embassy or high commission. 3Para -5
ii5 Salary of foreign technician employed by a Bangladeshi &rms.3Para #+5
iii5 Ta' liability of an employer computed on the salary of a foreign
technician as per Para #+. 3Para #,5
iv5 Salary of a foreign technician and ta' paid by the employer on his
salary who wor;s in a $B6 approved Consultancy or 2ngineering &rm.
:-@ Ite4s included in In+est4ent Allo/ance related to Salar6 Inco4eB
From basic salary% the employer can deducts a certain amount of money
under various heads according to the contract between employer and
employee. Bf those some of the deductions are included under the head
Investment Allowance? As per the rules e'plained in the Part B of Si'th
Schedule of the ITB% #/.*% the following items are considered as a part of the
Investment Allowance?
i5 Any income deducted to a deferred annuity or for ma;ing provisions for his
wife or children% provided that the sum so deducted shall not e'ceed one8
&fth of the salary. 3Para )5
ii5 2mployeeKs contribution to a (overnment4Statutory Provident Fund. 3Para
*5
iii5 2mployeeKs and 2mployerKs contribution to a 6PF. 3Para +5
iv5 Brdinary annual contribution to approved superannuation fund. 3Para ,5
v5 2mployeeKs contribution to a benevolent fund or group insurance scheme.
3Para #-5
Co4*utation of Ta,a3le Inco4e fro4 Salar6 at a glanceB
Descri*tion
A4ountP)ercentage that /ill 3e added
to salar6
#. Basic Salary Full
!. 0earness Allowance Full
). Bonus Full
*. Commission and fees Full
+. Advance salary Full
,. Accrued Salary Full% provided that it was not ta'ed in earlier
period
-. 7eave encashment Full
.. Pension $othing% since fully e'empted
/. (ratuity $othing% since fully e'empted
#". Annuity Full
##. Pro&t in lieu of Salary Full
#!. Pro&t in addition to Salary Full
#). 2ducation Allowance for
children
Full
#*. 2mployerKs contribution to 6PF Full
#+. 2mployerKs contribution to
Approved Superannuation
Fund
Full
#,. 2mployerKs contribution to
Approved (ratuity Fund
Full
#-. 2mployerKs contribution to life
insurance policy
Full
#.. 2ntertainment Allowance Full
#/. edical Allowance 2'cess over actual. If no actual% nothing.
!". Traveling Allowance 2'cess over actual.
!#. Special Allowance $othing% if given for oEcial purpose.
!!. Gouse 6ent Allowance Actual allowance less e'emptions of T;.
#+""" p. m. 3annually T;. #%."%"""5 or +"P
of basic salary whichever is less.
!). 6ent Free Accommodation 6ental value or !+P of basic whichever is
less
!*. Accommodation at
concessional rate
6ental value or !+P of basic whichever is
less% minus deducted rent
!+. Conveyance Allowance Actual amount less e'emption of T;. !*%"""
on an annual basis.
!,. Transport 4 conveyance facility -.+P of basic salary if conveyance facility is
given for personal% both personal and oEcial
purpose. $othing will be added if it is given
only for oEcial purpose.
!-. Interest on 6PF Actual Interest less e'empted to the e'tent of
the interest Q #*.+P rate or #4)
rd
of basic
salary% whichever is less.
!.. Free tea% co1ee or lunch in
oEce premises
$othing
!/. Free dress% telephone% power%
gas% water in oEce etc.
$othing
)". Free careta;er% sweeper etc. $othing
)#. Servant allowance Full
)!. Compensation Full
)). Allowance received as Gead of
the department 4 Charge
allowance.
Full
)*. Bvertime Full
)+. 6esidence telephone bills 4
utility bills 4 club bills
reimbursed
Full
:-E Salient )oints in Assess4ent of Salaries
3a5 Ta' is payable by an assessee under the head OSalariesW in respect of any
salary or wages% any annuity% pension or gratuity and any fees%
commission% per<uisites or pro&ts in lieu of% or in addition to% any salary or
wages% and any advance of salary.
3b5 Ta' is levied on salaries which are due% whether paid or not% as well as on
salaries which are paid% whether due or not.
3c5 6elationship of employer and employee must e'ist between the payer and
the recipient of salaries. The employer may be (overnment% a local
authority% a company or any other public body or association or any
private employer.
3d5 0eath8cum8retirement bene&ts or gratuities and certain payments from
funds are completely e'empt from ta'.
3e5 Income chargeable under the head OSalariesW is to be computed after
ma;ing certain deductions.
3f5 Salaried persons can have their assessments completed under self
assessment scheme of the return showing higher income than the last
assessment income.
3g5 The provisions regarding di1erent types of provident funds and payment of
life insurance premium are very important and are to be carefully studied
to &nd out the correct income ta' on income chargeable under the head
OSalariesW.
3h5 Salaries are sub=ect to deduction of ta' at source. Gence% income ta' is to
be paid on Salaries for a particular assessment year at the rates applicable
thereto.
:-F .or2ed ",a4*les and Solutions
.or2ed ",a4*le '
From the following data co4*ute the total inco4e and ta, *a6a3le by r. Amit
for the year ended )" Mune !"##?8
"le4ents of Salar6 #ule T2-
Basic salary Q T; #"%""" p.m. #%!"%"""
Bonus ! monthsK Basic Pay
Free furnished
accommodation
2mployeeKs contribution
to 6PF
Q #"P of basic salary
Car partly used for business and partly for
personal purpose
7ife insurance premium
,%"""
Solution 'B
r. Amit
Income Ta' Assessment Cear !"##8#!
Income for year ended on )" Mune !"##
Co4*utation of Total Inco4e and Ta, Lia3ilit6
Inco4e fro4 RsalariesS uPs 2'B T;.
Basic salary Q T;. #"%""" p.m. for #! months #%!"%""
"
Free Furnished Accommodation F !+P of basic )"%"""
Car Q -.+P of basic salary 3note F #5 /%"""
2mployerKs Contribution to 6PF F #"P of Basic #!%"""
Bonus F ! months basic !"%"""
Total ta'able income #%/#%""
"
Inco4e ta, Lia3ilit6B
Bn &rst T;. #%."%""" Q "P "
Bn ne't T;. ##%""" Q #+P #%,+"
Total on T;. #%/#%""" #%,+"
7ess? Ta' Credit Q #"P of T;. )"%""" 3note !5 )%"""
$et ta' payable 3note )5 !%"""
$ote F #? Conveyance used partly for personal and partly for business is not
e'empted rather added with salary to an amount that is e<ual to -.+P
of basic and thus ta'able.
$ote F !? Actual Investments made?
Contribution to 6PF by both employee and employer T;.
!*%"""
7ife insurance premium paid
,%"""
Total investment T;.
)"%"""
a'imum 7imit?
!"P of T;. #-/%""" 3total ta'able income e'cluding employerKs
contribution to 6PF5 T;. )+%."" or T;. #%""%""%"""% whichever is less
T;. )+%.""
Thus% allowable investment allowance will be T;. )"%""" on which #"P
ta' rebate is calculated.
$ote F )? inimum ta' liability is T;. !%""" for individual. Thus ta' liability% in no
case can be lower than T;. !%""".
.or2ed ",a4*le 2
r. il;y% C2B of a ultinational company in Bangladesh% has got the following
income for the income year ended )" Mune !"##. Cou are re<uired to calculate the
total income and ta' payable of r. il;y
3a5 Basic pay of T;.#+"%""" P.. sent to his ban; account.
3b5 6ent free accommodation fully furnished by the company.
3c5 Full time company car for !* hrs for his own use and for his family.
3d5 Company pays T;. #""%""" p4m. for his three school going children which is
paid to the school authority directly.
3e5 Ge received two festival bonuses e<uivalent to basic pay during the festival
time which he spent partly for his family and partly for the poor people in his
village.
3f5 0riverDs salary was T;. #"%""" p4m paid to his driverDs ban; account.
3g5 Company paid T;. )""%""" to him during the year being the reimbursement of
various utility bills of his houseI
3h5 7and and mobile bill paid T;. +""" p4m
3i5 Ge was paid T;. #%"""%""" for his overseas travels for the oEcial trip out of
which he saved !+P during that income yearI
3=5 Bill paid for international club T;. !+"%"""
3;5 Ge received interest on securities T;. #+"%""" on his investmentsI
3l5 Ge has got one house of his own at Baridhara and he received total T;.
#!""%""" as rent
3m5 Ge paid T;. #+"%""" as 7IP by himself
3n5 Ge invested T;. #+""%""" on (ovt. bonds and primary shares of various
companiesI
3o5 6eceived dividend T;. #+"%""" during the year.
3ICAB adapted5
Solution 2B
Mr- Mil26
Inco4e ta, assess4ent 6ear 2&''>2&'2
Accounting 6ear ended 9& Hune 2&''
Co4*utation of total inco4e and ta, lia3ilit6
Inco4e fro4 RsalariesS uPs 2'B T;.
Basic salary Q T;. #+"%""" p.m. for #!
months
T;. #+"%""" _ #! #.%""%"
""
Free Furnished Accommodation F !+P
of basic
T;. #.%""%"""
_!+P
*%+"%""
"
Car Q -.+P of basic salary 3note F #5 T;. #.%""%"""
_-.+P
#%)+%""
"
Fee to school going children T;. #%""%""" _
#!
#!%""%"
""
Festival Bonus T;. #+"%""" _ ! )%""%""
"
6eimbursement of Jtility Bills )%""%""
"
Savings from BEcial Bversees Travel T;. #"%""%""" _
!+P
!%+"%""
"
Bills paid for International Club !%+"%""
"
Total income from salaries *,%.+%"
""
Inco4e fro4 RInterest on SecuritiesS uPs 22>29
Interest on Securities T;. #+"%"""
_#""4/"
#%,,%,,
-
Inco4e fro4 R;ouse )ro*ertiesS
uPs 2:>2@
Annual value #!%""%"
""
7ess? Allowable e'penses 8
6epair and maintenance Q !+P )%""%""
"
/%""%""
"
Inco4e fro4 Other Source uPs
99>9:(
0ividend Income T;. #%+"%"""
_#""4/"
#%,,%,,
-
Total Ta,a3le Inco4e @C='D=9
9:
Inco4e ta, Lia3ilit6B
Bn &rst T;. #%."%""" Q "P "
Bn ne't T;. )%""%""" Q #"P )"%"""
Bn ne't T;. *%""%""" Q #+P ,"%"""
Bn ne't T;. )%""%""" Q !"P ,"%"""
Bn balance T;. *-%).%))* Q !+P ##%.*%+
.*
Total on T;. +/%#.%))* #)%)*%+
.*
7ess? Ta' Credit Q #"P of T;.
##%.)%,,- 3note !5
#%#.%),
-
Total ta' liability #!%#,%!
#-
7ess? Ta' 0educted at Sources
Bn interest on securities #,%,,-
Bn dividend income #,%,,- ))%))*
$et Ta' Payable ##%.!%.
.)
$ote F #? Conveyance used partly for personal and partly for business is not
e'empted rather added with salary to an amount that is e<ual to -.+P
of basic and thus ta'able.
$ote F !? Actual Investments made?
Investment in (overnment Bonds and Primary Shares T;.
#+%""%"""
7ife insurance premium paid
#%+"%"""
Total investment T;.
#,%+"%"""
a'imum 7imit?
!"P of T;. +/%#.%))* 3total ta'able income e'cluding employerKs
contribution to 6PF5 T;. ##%.)%,,- or T;. #%""%""%"""% whichever is less
T;. ##%.)%,,-
Thus% allowable investment allowance will be T;. ##%.)%,,- on which
#"P ta' rebate is calculated.

.or2ed ",a4*le 9
r. alli; is a service holder. Following are the particulars of his income from
salary for the year ended on )"
th
Mune !"##?
a. Basic salary T;. !+%""" per month.
b. 0earness allowance 8 #"P of Basic salary
c. Two festival bonuses 8 each e<ual to one monthDs basic salary
d. Ge has been provided with a rent8free <uarter% the annual rectal
value of which is T;. +"%""".
e. Ge has been provided with a car for both oEce and private use.
f. edical allowance 8 T;. !+" per month.
g. 0uring the year he received T;. ,%""" as traveling allowance.
h. Gis contribution to a statutory provident fund Q #"P of basic salary.
i. Interest on provident fund Q #)P on accumulated balance
e<uivalent to T;. !%+"".
=. Ge is given a servant allowance of T;. !"" per month.
;. Ge contributes #P of his basic salary to the (roup Insurance
Scheme.
l. Ge has paid T;. +"" per month on a 0eposit Pension Scheme.
Compute ta'able income from salary and investment allowance.
Solution 9B
AssesseeB Mr- Malli2
Inco4e ta, assess4ent 6ear 2&''>2&'2
Accounting 6ear ended 9& Hune 2&''
Co4*utation of total inco4e and ta, lia3ilit6
;eads of Inco4e= T T2- T2- T2-
Inco4e fro4 Salaries See > 2'(B
i5 Basic salary 3!+%"""'#!5
)%""%"
""
ii5 0earness allowance 3)%""%"""'#"P5 )"%"""
iii5 Festival bonus 3!+%"""'!5 +"%"""
iv5 6ent free accommodation?
6ental value i.e. +"%""" or !+P of Basic salary
i.e. -+%""" whichever is lower +"%"""
v5 Conveyance facility
3-.+P of Basic
Salary5
!!%+""
vi5 edical allowance 3!+"'#!5 )%"""
7ess? e'empted 3actual
e'pense5
) %"""
vii5 Traveling allowance ,%"""
7ess? e'empted 3actual
e'pense5
, %"""
viii5 Servant allowance 3!""'#!5 !%*""
Total :=@:=C&&
In+est4ent Allo/anceB Actual(
7- )articulars
A4ount
T2-(
2mployeeDs contribution to Statutory Provident Fund% #"P of B.S.
3)%""%"""'#"P5 )"%"""
2mployeeDs contribution to (roup Insurance Scheme #P of B.S.
3)%""%"""'# P5
)%"""
Contribution to 0PS 3+""'#!5 ,%"""
Total 9C=&&&
NoteB
#. If actual e'pense regarding medical and travel is not given% then the
full amount of such allowances can be considered as e'pensed and
be deducted as e'emption.
!. 2mployer i.e. the government does not contribute to the statutory
provident fund.
.or2ed ",a4*le :
Bn Mune !"##% r. Anil AmbaniDs basic salary falls on T;. #"%!"" in the scale of
/%,""8!""'#!#!%""". Gis date of yearly increment is on #
st
April. Ge received
dearness allowance Q #"P of basic salary and medical allowance T;. )"" per
month. 0uring the year his actual amount of medical e'pense was T;. )%""". Ge
received two bonuses e<uivalent to one monthDs basic salary8one received
before the date of increment and another after increment. Ge contributes #"P of
his basic salary to a recogni9ed provident fund from which he has also received
an interest of T;. #%+"" Q #+P interest. Gis employer also contributes the same
amount to the 6PF. Ge has been provided with a rent8free <uarter and a car for
both oEcial and personal purpose. 0uring the year he has also received an
entertainment allowance of T;. +%""" of which T;. *%+"" has actually been spent.
Gis investments during the year were as follows?
a. Purchase of shares of a listed company T;. !%""".
b. Purchase of gold T;. #"%""".
c. Payment of his life insurance premium T;. *%""" 3Policy value T;.
)+%"""5
d. Purchase of boo;s and maga9ine T;. )%""".
e. Contribution to a 0eposit Pension Scheme T;. +"" on a monthly
basis.
Compute ta'able income and ta' liability of r. Anil Ambani for the assessment
year !"##8#!.
Solution :B
AssesseeB Mr- S6ful ;o8ue
Inco4e ta, assess4ent 6ear 2&''>2&'2
Accounting 6ear ended 9& Hune 2&''
Co4*utation of total inco4e and ta, lia3ilit6
= >;eads>of Inco4e T2- T2- T2-
Inco4e fro4 Salaries See > 2'(B
i5 Basic salary U3#"%"""'/5 Z 3l"%!""')55 #%!"%,""
ii5 0earness allowance 3#%!"%,""'l"P5 #!%","
iii5 edical Allowance 3)""'I!5 )%,""
7ess? e'empted 3actual e'pense5 ) %""" ,""
iv5 Bonus U#"%"""Z #"%!""5 !"%!""
v5 2mployerDs contribution to 6PF
U#%!"%,""'lBPV
#!%","
vi5 Interest on
6PFQ#+P
#%+""
7ess? 2'empted ma'imum Q #*.+P i.e.
U3#%+""4#+^#*.+5 [ #%*+"V or one8third of
B.S. i.e.
*"%!"" whichever is lower # %*+ " +"
vii56ent free accommodation 3#%!"%,""'!+P5 )"%#+"
viii5 Conveyance facility 3#%!"%,""'-.+P5 /%"*+
i'5 2ntertainment
allowance
+%" ""
Total 2= &C=FE @
Computation of Investment Allowance?
)articulars A4ount T2-(
#. Purchase of shares of listed company !%"""
!. 2mployeeDs and 2mployerDs contribution to 6ecogni9ed
Provident
Fund 3#!%","'!5
!*%#!"
).
Payment of life Insurance Premium *%"""I ma'imum 3#"P
of the
policy value i.e. #"P of )+%""" [ )%+""5 )%+""
*. Contribution to 0eposit Pension Scheme 3+""'#!5 ,%"""
Total
9@=E2&
a'imum limit of the investment allowance? !"P of Total income e'cluding
employerDs contribution to 6PF and interest on the accumulated balance of 6PF
i.e. U3!%"/%-,+ 8 #!%"," +"5 ' !"PV [ *#%/+) or T;. #"%""%""%""" whichever is
less. So% the re<uired amount of investment allowance on which #"P ta' rebate
will be applicable is T;. )+%,!".
Ta, lia3ilit6
6ate Amount 3T;.5
Bn the &rst T;. #%."%""" "P $il
Bn the ne't !/%-,+ #"P !%/--
Total 2 =&C =FE@ !%/--
7ess? investment ta' credit 3)+%,!" '#"P5 )%+,!
Net ta, lia3ilit6 @D@(
Since the computed ta' liability is less than the minimum amount of ta' i.e. T;.
!%"""% the net ta' liability of r. Syful Go<ue for the assessment year !"##8#!
will be T;. !%""".
.or2ed ",a4*le @
r. Raman Go<ue was the G6 anager of A'iata Bangladesh 7td. Bn Muly !"#"%
his basic salary was T;. +!%""" in the scale of *"%"""8*%"""'.8-!%""". Gis date
of yearly increment is on !,
th
arch. Ge was terminated from A'iata Bangladesh
ltd on )"
th
April% !"## and Moined (rameenphone 7td on #
st
Mune of the same
year. 0uring the income year his income from salary from A'iata Bangladesh 7td
and (rameenphone 7td. >ere as follows?
%ro4 A,iataB
Ge received dearness allowance Q #"P of basic salary and medical allowance
T;. !""" per month. Ge received two festival bonuses each e<uivalent to one
monthDs basic salary in the month of September and April respectively. Ge
contributes #"P of his basic salary to a recogni9ed provident fund. Ge has been
provided with a rent8free <uarter and a full time car by the employer. 0uring the
year he has also received an entertainment allowance of T;. #%""" per month.
Ge has received compensation for the termination of T;. !%""%""" and gratuity of
T;. #%""%""". oreover% his accumulated balance from the 6PF was T;. #%."%""".
%ro4 $ra4een*honeB
Gis basic is T;. ,"%""" per month with *"P house rent allowance and T;. +%"""
medical allowance per month. Ge is also entitled to receive T;. *%"""
conveyance allowance per month. Ge contributes #"P of his basic salary to a
recogni9ed provident fund% his employer also contributes the same.
Gis ta'able income from other sources were T;. !%""%""" during the year. 0uring
the year the total I0S from various sources of his income was T;. !"%""".
oreover% his refund claims of T;. #"%""" for additional payment of ta' in the
last assessment year was to be ad=usted with current years ta' liability. Gis
investments during the year were as follows?
a. Purchase of a laptop T;. #%#"%""".
b. Payment of his life insurance premium T;. !"%""" 3Policy value T;.
+%""%"""5
c. Contribution to 0PS T;. )%""" per month.
Compute ta'able income and ta' liability of r. Ahmed for the assessment year
!"##8#!.
Solution @B
AssesseeB Mr- Ua4an ;o8ue
Inco4e ta, assess4ent 6ear 2&''>2&'2
Accounting 6ear ended 9& Hune 2&''
Co4*utation of total inco4e and ta, lia3ilit6
;eads of Inco4e T2- T2-
Income from Salaries 3Sec 8 !#5?
i5 Basic salary 3$ote #5 +%.*%--*
ii5 0earness allowance 3A'iata5
3S%!*%--*'l"P5
+!%*--
iii5 edical Allowance 3Total5U3!%"""'l"5 Z
+%"""V
!+%"""
7ess? 2'emption? Actual e'pense !+ %""" 8
iv5 Bonus U+!%"""Z+,%"""V #%".%"""
v5 2mployerDs contribution to 6PF 3Total5
U+% .*%--*' #"PV +.%*--
vi5 6ent free accommodation 3A'iata5?
!+P of B.S. 3+%!*%--*'!+P5 #%)#%#/*
vii5 Conveyance facility 3A'iata5
3+%!*%--*'-.+P5
)/%)+.
viii5 2ntertainment allowance 3A'iata5
3l%"""'l"5
#"%"""
i'5 Compensation 3A'iata5 !%""%"""
'5 (ratuity 3A'iata5 #%""%"""
7ess? 2'emption? Full # %""%""" .
'i5 Accumulated balance of 6PF 3A'iata5 #%."%"""
7ess? 2'emption? Full # %."%""" 8
'ii5 Gouse 6ent Allowance 3(rameenphone5
3,"%"""'*"P5 !*%"""
7ess? 2'empted T;. #+%""" per month or
+"P
of Basic salary i.e. )"%""" whichever is
lower
#+%"""
'iii5Conveyance allowance *%""" /%"""
7ess? 2'empted 8 Jpto T;% !*%"""
!*%"""
.
>>>>>>>>>
Inco4e fro4 Other
Sources
##%/)%!."
Total Inco4e !%""%""" %
#)%/)%!."
Co4*utation of In+est4ent Allo/ance
)articulars A4ount T2=(
#. Purchase of laptop 3allowable up to T;. #""%"""5 #%""%"""
!.
Payment of life Insurance Premium !"%"""I ma'imum
3#"P of the
policy value i.e. #"P of +%""%""" [ +"%"""5 !"%"""
). Contribution to 0PS 3)%""" '#! ),%"""
*. 2mployeeDs and 2mployerDs contribution to 6PF #%#,%/+*
3+.%*--'!5
Total 2=F2=C@:
a'imum limit of the investment allowance? !"P of Total income e'cludingK
employerKs contribution to 6PF and interest on the accumulated balance of 6PF
i.e. 33#)%/)%!."8+.%*--5 ' !"P5 [ !%,,%,/#or T;. #"%""%""%""" whichever is less%
So% the re<uired amount of investment allowance on which #"P ta' rebate will
be applicable is T;. !%,,%,/#.
Ta, lia3ilit6B
#ate
A4ount
T2-(
Bn the &rst T;. #%."%""" "P $il
Bn the ne't )%""%""" #"P )"%"""
Bn the ne't *%""%""" #+P ,"%"""
Bn the ne't )%""%""" !"P ,"%"""
Bn the ne't !%#)%!." !+P +)%)!"
Total #)%/)%!." !%")%)!"
7ess? Investment ta' credit 3!%,,%,/# '#"P5 3!,%,,/5
T0S 3!"%"""5
6efund ad=ustment 3#"%"""5
Net ta, lia3ilit6 '=:E=E@'
NoteB
#. Total Basic Salary?
From A'iata?
B. S. from Muly #" to February ## [ UT;. +!%""" ' .V [
T;. *%#,%"""
B. S. for the month arch ## [ U3+!%"""T!+4)#5 Z 3+,%"""T,4)#5V [ T;.
+!%--*
B. S. for the month April ## [
T;. +,%"""
[ T;. +%!*%--*
From (rameenphone?
B. S. for the month Mune ##
[ T;. ,"%"""
Total Basic salary for the income year !"#"8## [
T;. +%.*%--*
!. Since conveyance allowance is received from a separate company% the
e'emption limit has considered.
). In the month of ay he was not employed. So% Basic salary for the month
of ay is not available.
Self Assess4ent ?uestion
#. 3a5 2'plain what is meant by Oper<uisiteW under the Income Ta' Brdinance #/.*N
3b5 0oes it include employerKs contribution to a recogni9ed provident fundN
3c5 0iscuss the allowable per<uisites under the Brdinance.
!. A <uestion may arise why employerKs contribution to 6PF is once added to income
and again ran; for investment allowance of an assessee. This device is meant to
raise total income so that the assessee is put into higher slab of income ta' rate.
Chapter +
Inco4e fro4 interest on
securities
Contents
Introduction
2'amination conte't

To*ic List
>or;ed 2'amples and Solutions
+.# Introduction
+.! $ature of Securities
+.) Cum8Interest vs. 2'8Interest
+.* Bond >ashing Transactions
+.+ Types of Securities
+., Interest (rossing Jp
+.- 2'penses Admissible
+.. 2'emption
Introduction
Learning o3<ecti+es
Jnderstanding the head XInterest on SecuritiesK.
Compute the ta'able income under the head XInterest on SecuritiesK.
Hnowing di1ering types of securities traded in Bangladesh.
Identify the allowable deductions under the head XInterest on SecuritiesK.
Illustrate the allowable% inadmissible and not permissible deductions in
determining the income from XInterest on SecuritiesK.
0e&ne cum8interest% e'8interest and bond washing transactions.
)ractical signi0cance
Income from interest on securities is the second head of income. It is very
important to ;now interest bearing securities traded in mar;et and how this
income is brought under the purview of ta'ation. Though the revenue from
this source is not so signi&cant to the (overnment% still this chapter comprises
some technicalities over which professional accountants should have the
e'pertise.
Application of cum and e' interest and bond washing transaction in computing
ta'able interest income is very important and necessitates professional
=udgment and competence. These topics are e'plained in this chapter.

This chapter has practical signi&cance in a sense that the students will
interact with the capital mar;et directly. Approved commercial securities are
traded in the mar;et and thus the professional accountants can play a
signi&cant role in computing ta' liability of individuals and corporate as well.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the computation of ta'able income under the head
Xinterest on securitiesK is one of the seven heads of total income and includes
some comple'ityN 0o you feel that you are in a position to compute ta'
liability under this head independentlyN Can you visuali9e the scope of ta'
avoidance and remedies in this regardN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the ta'able income from di1erent heads for the income year. Before advising
the clients% accountants should have the clear concept relating to the
admissible and inadmissible e'penses and e'emptions so that they can
deduct or add the e'penses in determining the ta'able income.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
Cou will be also using this ;nowledge when you tac;le the ta'ation paper later
on in the Professional Stage and it will also underpin the technical aspects at
the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Identify income under the head Xinterest on securitiesK.
0e&ne the concepts of interest bearing securities.
6ecogni9e the allowable e'penses and inadmissible e'penses under the
head.
0e&ne di1erent types of securities.
Calculate ta'able income under the head Xinterest on securitiesK.
Jnderstand the application of e' and cum interest.
Gandle situations li;e bond washing transactions.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
one concept on computation of total ta'able income which is vital for
calculating ta' liability. Clear concept and understanding of each contents of
this chapter will help candidates to resolve any problems relating to
computation of income.
@-& INT"#"ST ON S"CU#ITI"S
Section O+er+ie/
There are seven heads of income.
The total income may not be ta'able income.
There are some allowable% inadmissible and not permissible deductions
under di1erent heads of income.
Computation of salary and business income has the most signi&cance.
The per<uisites and allowances need to be considered before determining
salary income
0epreciation allowances is very important for determining some business
pro&t
Ta' shall be payable on capital gains in respect of any pro&ts arising from
the transfer of a capital assets e'cept some cases.
The two main methods of accounting are cash system and mercantile
system.
An assessee may be allowed to set o1 and carry forwarded of losses.
@-' Introduction
Sco*e
As per section !! of ITB #/.*% Income classi&able under the head OInterest on
SecuritiesW includes?
3i5 Interest receivable by the assessee on any security of the (overnment
or approved by the (overnmentI
3ii5 Interest receivable by him on debentures or other securities of money
issued by or on behalf of a local authority or a company.
Section F !! deals with interest on securities issued by 3i5 the (overnment% 3ii5
a local authority% or 3iii5 a company. 0ebentures or other securities issued by a
company also fall within the scope of this section.
",clusion
All other securities% e. g. securities issued by a foreign (overnment% etc. are
outside the ambit of this section% and interest thereon would be charged u4s
!. or )). The shares of a company cannot be called securities for money.
0ividends on shares would be ta'able u4s !. if they are received in the course
of carrying on a business in shares% and in other cases% under the residuary
head of sec. )).
.hen )a6a3le
Jnder Section !!% ta' is payable in respect of interest XreceivableK by the
assessee on securities. But interest on securities becomes income only when
it is actually received and not when it is due or capable of being received by
the assessee. The word XreceivableK in this section has reference to the
<uantum of interest ta'able and not to the date of ta'ability. If interest is
actually received some times after it become due and receivable% the date of
ta'ability is the date when it is received and not the date when it becomes
due.
Allo/a3le Deductions
0eductions permissible in the determination of income from interest on
securities as per section !) are?
3i5 Commission or charges deducted from interest by a ban; realising the
interest on behalf on the assesseeI
3ii5 Interest payable on money borrowed for the purpose of investment in the
securities. To claim relief for interest on borrowed fund% such fund must be
borrowed solely for investment in securities and should be so used
throughout% even if the moneys borrowed for business purpose are
invested in securities for a period under some legal compulsion% no
deduction for interest under this section is allowed U0ndian 5teams!ip Co6
;6 C0T "/.)<$ 06 T6R6 33-:6
Gowever% deduction on account of interest or commission in respect of the
ta'8free (overnment securities shall not be allowed. 7i;ewise% deduction will
not be allowed in respect of interest payable outside Bangladesh on which ta'
has not been paid or deducted.
@-2 Nature of Securities
0ealings of securities may have varied purpose from the part of the investors.
For e'ample% it may ta;e any of the following three natures?
Trading securities are those types of securities where the main purpose is to
earn pro&t through trading 3buying and selling5 of securities. Gowever% held to
maturity securities are those types of securities where investment is made for
a long time period. Gowever% available for sale securities fall in between which
is not an investment for long time or where the dealing is not so fre<uent. The
investors wait for a while to see how to ma'imi9e pro&t on the deal. As
interest on securities is a separate head of income% even if the securities are
held as trading assets with in the course of business underta;en by a ban; or
an insurance company or a stoc; bro;er% the interest must be charged under
this head and not under S. !. as income from business or profession or under
Securitie
s
Trading Securities
Available for Sale
Securities
Geld to aturity Securities
S. )) as income from other sources UCentral @xc!ange BanA LT&6 ;6 C606T6
"/.))$ 06T6R6 /+,:.
@-9 Cu4>Interest +s- ",>Interest
Securities purchased with cum8interest means buying the securities with the
option of interest% i.e.% buying it before the date when interest on the securities
falls due. And when it is purchased after the due date of interest on such
securities% it is securities purchased with e'8interest. Interest on securities is
deemed to accrue on a certain date and not on a day to day basis. >hen
securities are bought cum interest% ta' is assessable on the whole amount of
interest when received subse<uently and no deduction is allowed in respect of
interest paid by the assessee with the purchase price. Similarly% the seller of
securities cum interest is not assessable on the amount of interest included in
the sale price of securities. There is wide scope to avoid ta' through
systematically buying and selling securities =ust on the eve of the payment of
interest and S.#", has given suEcient authority to the 0CT to handle those
cases of ta' avoidance. The basic principle to note however is that to be
assessed on the interest on securities the assessee does not have to be owner
of the securities throughout the period for which such interest arises and paid
of. 2ven one day of ownership is enough to attract the provisions of the section.
To understand the application of cum and e' interest% letKs assume that it
ta;es #" days to close boo;s prior to coupon payment date. Therefore if the
coupon date is the )#st 0ecember each year% the boo;s closed date would be
listed as the !#st 0ecember 3there are e'ceptions5. The day prior to the Boo;s
Closed date is ;nown as the last date to register 37065 8 this is the date on
which the holders of the bond are designated to receive the coupon.
2ssentially% the issuer or central depositary 3or settlement agent5 will establish
who owns the bond on the 706 date and the coupon will be paid to this
person on the coupon date irrespective of whether they actually own the bond
on Coupon payment date.
>here?
706 [ 7ast date to register 7C0 [ 7ast coupon date
$C0 [ $e't coupon date BC0 [ Boo;s closed date
This boo;s closed period is referred to as the e'8interest period 3or =ust e'
period5 i.e. the date when the purchaser of the bond is not entitled to the ne't
coupon. A bond which is trading cum interest simply means that the
purchaser will receive the ne't coupon% the whole amount.
",a4*leB
r. ] holds #+P debenture of B0T +""%""" on which coupon becomes due on
)#
st
0ecember each year. Bn $ovember )"% !"#"% r. ] sold the debenture to
r. C cum interest. r. ] charges the B0T as computed below.
BDT
Face :alue +""%"""
Interest 0ue at the date of
transaction
U+""%"""_#+P_/4#!V +,%!+"
7C0 706 BC0 $C0
Cum Interest 2' Interest
Selling Price ++,%!+"
r. ] will collect the interest due for the holding period 3from Manuary to
$ovember5 from r. C. r. C will receive the full amount of interest on
0ecember )#
st
and include the same with ta'able income on which ta' will be
payable by him at regular rate. Gowever% r. ] will pay no ta'es on interest as
this is capital gain to him and this is not ta'able.
@-: Bond .ashing Transactions
>hen some transactions happened between two parties to wash out the
impact of interest on ta'able income and thus avoiding the ta'es on that
mutually by both of the parties% such type of transaction is referred to as bond
washing transaction. It is a smart way of ta' avoidance. In this case% securities
are sold cum interest with an agreement to re8sell or re8transfer the securities.
Securities are sold to a person whose income is less than the minimum
ta'able limit and then he doesnKt need to pay any ta' on interest on securities
since his income is less than the ta'able limit. Bn the other hand since
securities are capital asset% no ta' will be given on the disposal value of the
securities by the seller. In this way both the seller and buyer avoid ta'es.
To prevent the avoidance of ta' in this manner% Section #",3#5 of the ITB%
#/.* provides that where a security owner transfers the securities on the eve
of due date of interest and reac<uires them eventually% the interest received
by the transferee4purchaser will be deemed as income of the transferor4seller
and% accordingly% it will be included in the total income of the transferor4seller
and not the transferee4purchaser. There is wide scope to avoid ta' in this way
and Section #", has given suEcient authority to the 0CT to handle those
cases of ta' avoidance.
@-@ T6*es of Securities
In terms of ta'ability% securities may be classi&ed as either (overnment
securities 3securities issued or approved by the (overnment5 or Commercial
securities 3securities issue by others5.
$o+ern4ent SecuritiesB Securities issued or approved by (overnment fall
under this category. It may be ta' free if ta' is not imposed on interest or may
be less ta' on the reasoning that the assessee will en=oy some e'emption on
interest income.
Ta, Free: These are the securities issued by the government for which no ta'
is paid hence it is declared ta'8free. USi'th Schedule% Part A% Para !*V. Income
from interest on ta'8free government securities is not included in computation
of ta'able income. 2'amples of these securities are >age8earners
Securities
(overnmen
t
Commercial
Ta' Free
7ess Ta'
0ebenture
Rero Coupon
Bond
Approved
Jnapprove
d
0evelopment Bond% $ational Bond% Treasury Bill% J.S. 0ollar Premium Bond
etc.
Less Ta,: These are the government securities on which ta' is deducted at
source at speci&ed rate Ucurrent T0S rate is '&JV. So the assessee receives
the net amount of interest and it is grossed up before including in the total
income.
Co44ercial SecuritiesB Securities issued by or on behalf of a local authority
or a company and approved by the S2C will be considered as commercial
securities. These types of securities may be either debenture or 9ero coupon
bonds.
3e0enture: These are the securities issued by or on behalf of a local
authority or a company and approved by the S2C. Thus% these de are
approved securities. Gowever% for any reason% if any securities issued are not
approved by the S2C% these will be unapproved debenture. These types of
debentures are not common in Bangladesh.
5ero-Coupon Bond: A Rero8coupon bond is such type of bond where coupon
3interest5 is 9ero. This type of securities is initially sold at a price lower than its
face value and the owner receives the face value at maturity. Thus% the gap
between the purchase price and face value is the bene&t of buying such
security to the owner. Any income derived from Rero8coupon bond received by
a person other than Ban;% Insurance or any Financial Institution is fully
e'empted from ta' USi'th Schedule% Part A% Para *"V. The price of a 9ero8
coupon bond can be calculated by using the following formula?
P [ 4 3#Zr5
n
Gere P represents price% represents maturity valueI r represents investorDs
re<uired annual yield 4 ! and n is the number of years until maturity ' !.
",a4*leB
If you want to purchase a Company ]CR 9ero8coupon bond that has a B0T
#%""" face value and matures in three years% and you would li;e to earn #"P
per year on the investment% using the formula above you might be willing to
pay?

B0T #%""" 4 3#Z."+5
,
[ B0T -*,.!!
Thus the income from investment in 9ero8coupon bond here will be B0T
!+).-. 3B0T #%""" F B0T -*,.!!5.
5.6 Interest $rossing U*
>hen interest is received after deducting ta' at source% it is re<uired to gross
up. The amount of interest received is not the total interest income and thus
the amount of ta' already paid should be added bac; to compute actual
interest income. The process is named as interest grossing up. Gowever%
grossing up is not re<uired if ta' is not deducted at source. The following
formulae may be used to compute gross interest?
Rate TDS of Fraction
Interest Net
Interest Gross

=
1
2'ample?
Say% net interest received is B0T /%""" after deducting ta'es Q #"P. (ross
interest is B0T #"%""" 3B0T /%""" 4 # 8 ".#5. Gere%
$et Interest
6eceived
Ta' deducted at source (ross Interest Income
B0T /%""" B0T #%""" U3B0T /%"""4#8".#5
_".#V
B0T #"%"""
@-F ",*enses Ad4issi3le
As per section !) of ITB #/.*% the following e'penses are admissible for
deduction to compute income ta'able under the head?
#. Ban2 co44issionPcharges for collection of interestB If such interest
is collected through ban; and eventually ban; charges the client for
collecting interest% such amount can be deducted for computing ta'able
income with the following two e'ceptions?
a- This deduction is not permissible if such charge is made for collecting
interest of such securities on which ta' cannot be imposed. 2'? ta' free
government securities% 9ero coupon bond.
3- If ban; commission is charged for purchasing securities% it will not be
considered as an allowable e'pense.
!. Interest on 3orro/ed ca*ital for in+est4ent in securitiesB Any
interest on money borrowed for the purpose of investment in the securities
by the assessee will be an allowable e'pense. But interest on borrowed
capital for investment in ta'8free government securities and 9ero8coupon
bond is not allowable e'pense as interest on these securities is not
ta'able.
@-D ",e4*tion
Interest income is e'empted from ta'es in following occasions as per ITB%
#/.*?
Securities ",e4*tion
Li4it
#eference
Ta'8free government
securities
Fully e'empted Si'th Schedule% Part A%
Para !*
Rero8coupon bond Fully e'empted Si'th Schedule% Part A% Para
*"
.or2ed ",a4*le and Solution
.or2ed ",a4*le 'B
s. AnanyaKs investments during the year ended )" Mune !"## were?
#. T;. .%""%""" ,P (overnment Securities.
!. T;. ,%""%""" .P 0ha;a City Corporation 0ebentures.
). T; #!%""%""" /P Gousing Bonds.
*. T;.#*%""%""" ,P (overnment Treasury Bills.
Gis ban; charged T;. #"%""" as commission for collecting interest. Ge paid T;.
-+%""" as interest on a loan which he too; for the purpose of purchasing Gousing
Bonds.
Calculate his income under Section !! and !).
Solution 'B
Ms- Anan6aOs
Inco4e Ta, Assess4ent Year 2&''>'2
Inco4e for 6ear ended on 9& Hune 2&''
Co4*utation of Interest Inco4e under Section 22 and 29

'-,P (overnment Securities U.""%""" _ ,4#""V *.%"""
2-.P 0CC 0ebenture U,""%""" _ .4#""V *.%"""
9-/P Gousing Bonds U#%!""%""" _ /4#""V #".%"""
:-,P (ovt. Treasury Bills U#%*""%""" _ ,4#""V .*%"""
Total Income !..%"""
7ess? Admissible 2'penses
Ban; Commission #"%"""
Interest on 7oan -+%""" .+%"""
Total Ta'able Income !")%"""
.or2ed ",a4*le 2B
Investment of r. Adil 6ahman in di1erent securities for the year ended Mune )"%
!"## is given below?
a5 Income from interest on ta'8free government securities T;. !"%"""
b5 Investment in #)P ta'8free government securities% T;. +""%"""
c5 Income from interest on less8ta' government securities T;. !-%"""
d5 Investment in #"P less8ta' government securities% T;. *""%"""
e5 Income from interest on approved commercial securities T;. )"%"""
f5 Investment in #"P approved commercial securities% T;. !""%"""
g5 Income from interest on unapproved commercial securities T;. /%"""
h5 Investment in ,P unapproved commercial securities% T;. )""%"""
i5 Investment of T;. *-.%""" is made in 9ero coupon bond with the face value of T;.
+""%""".
Solution 2B
Mr- Adil #ah4an
Assess4ent 6earB 2&''>2&'2
Inco4e 6earB 2&'&>2&''
Co4*utation of Total Inco4e

T;. T;.
Income from Interest on securities 3Sec 8 !! L !)5
3i5 Interest on ta' free government securities !"%"""
Interest on #)P ta' free government securities
3+""%""" ' #)P5
,+%"""
.+%"""
7ess? e'empted 8 full .+%""" nil
3ii5 Interest on less ta' government securities 3!-%""" '
#""4#"" 8 #"5
)"%"""
Interest on #"P less ta' government securities
3*""%"""'#"P5
*"%"""
-"%"""
3iii5 Interest on approved commercial securities )"%"""
Interest on #"P approved commercial securities 3!""%"""
' #"P5
!"%"""
+"%"""
3iv5 Interest on unapproved commercial securities /%"""
Interest on ,P unapproved commercial securities 3)""%"""
' ,P5
#.%"""
!-%"""
3v5 Income from 9ero8coupon bond UT;. +""%""" F T;. *-.%"""V !!%"""
7ess? e'emption 8 full !!%""" nil
Total ':F=&&&
.or2ed ",a4*le 9B
Information regarding investment made in di1erent securities by r. ] during the
income year ended on Mune )"% !"## is given below?
Securities 0ate of
Investment
Investment Interest
Ta'8free (overnment Securities arch !.% !""/ #!"%""" #*%*""
7ess8ta' (overnment Securities February #+%
!"#"
#+"%""" #,%!""
^
#*P Approved Commercial
Securities
$ovember !#%
!"#"
*."%"""
#!P Approved Commercial
Securities
Muly "#% !"#" ,""%""" -!%"""
Rero Coupon Bond Muly "#% !""/ *."%"""
]CR Company Stoc; Manuary #+% !"## !,"%"""
^
This amount is received after deducting ta'es Q #"P at source.
Other Infor4ationB
#. #*P approved commercial securities were purchased e'8interest from the
secondary mar;et. Interest on this security falls due on Bctober )# each year.
!. #!P approved commercial securities were purchased from primary mar;et on
which interest falls due on Mune )" each year.
). Face value of 9ero coupon bond is was T;. +""%""" and T;. !"%""" was
already reported as interest in the year of purchase.
*. ]CR Company Stoc; is purchased through IPB.
+. All interest is collected through ban; account and the ban; charges T;. /%"""
for the service.
,. r. ] has made following borrowings for investment in di1erent securities?
Securities 0ate of
Borrowing
Amount of
borrowing
6ate
Ta'8free (overnment
Securities
arch !.% !""/ #""%""" .P
7ess8ta' (overnment
Securities
February #+%
!"#"
#+"%""" /P
#*P Approved Commercial
Securities
$ovember !#%
!"#"
*""%""" #"P
#!P Approved Commercial
Securities
Muly "#% !"#" +""%""" #"P
Rero Coupon Bond Muly "#% !""/ *""%""" #!P
]CR Company Stoc; Manuary #+%
!"##
!""%""" #+P
6e<uirements?
Compute the amount of ta'able income under the head Xinterest on securitiesK and
also mention any item of investment allowance.
Solution 9B
Mr- X
Assess4ent 6earB 2&''>2&'2
Inco4e 6earB 2&'&>2&''
Co4*utation of Total Inco4e
T;. T;.
Inco4e fro4 Interest on Securities Sec > 22 G 29(
Interest on ta' free govt. securities #*%*""
7ess? e'empted F full Unote #V #*%*"" nil
Interest on less ta' govt. securities as grossed up 3note !5 #.%""" 8
LessB allowable e'penses
Ban; charges 3note )5 3#%**"5
Interest on borrowing 3/P of T;. #+"%"""5
3#)%+"
"5
)%","
Interest on #!P approved commercial securities -!%"""
LessB allowable e'penses
Ban; charges 3note )5 3,%)""5
Interest on borrowing 3#"P of T;. +""%"""5
3+"%""
"5
#+%-""
Total ta'able income #.%-,"
Ite4s of In+est4ent Allo/ance
#. #!P Approved Commercial Securities T;. ,""%"""
!. ]CR Company Stoc; T;. !,"%"""
Provided that the total amount doesnKt e'ceed the ma'imum limit
NotesB
#. $o deduction is allowed in ta' free government securities as no ta' is
imposed on such income and thus F no deduction.
!. Interest on less ta' government securities is grossed up as the amount of
interest received is the net interest after charging #"P ta'es. Thus the gross
interest income will be T;. #.%""" 3T;. #,%!"" 4 # F "./5.
). Total ban; charges of T;. /%""" is allocated among di1erent securities
proportionately as computed below?
Securities Interest )ro*ortion Ban2
Charges
Ta'8free (overnment Securities #*%*"" #*P #%!,"
7ess8ta' (overnment Securities #,%!"" #,P #%**"
#!P Approved Commercial
Securities
-!%""" -"P ,%)""
Total '&2=E&& '&&J C=&&&
*. There will be no interest income from #*P approved commercial securities as
it has been purchased e'8interest.
+. There will be no income from 9ero coupon bond during this income year.
,. Investment in stoc; is not within the scope of this chapter.
.or2ed ",a4*le :B
r. Mamal Haiser% a non8resident Bangladeshi% is a Permanent 6esident of Canada.
Gowever% he has investments in Bangladesh managed by his relatives. The
information regarding his investments in securities during the income year !"#"8##
are given below?
#. T;. #""%""" in #"P Bangladesh >age 2arnerDs 0evelopment Bond 3Purchased on
#T September% !""/5.
!. T;. !""%""" in .P Canadian T Bill in Canada 3Purchased on #st Muly% !"#"5.
). Interest on #"P less la' government securities T;. !%-"". The Ban; has
deducted T;. #"" as collection fee.
*. #*P Be'imco 0ebentures were purchased from 0S2 at a cost of T;. !)"%""" on
#
st
Manuary% !"## 3Face value is T;. !""%"""5. In this regard% he has sold #)P ACI
0ebenture at T;. #+"%""" on the same day 3The ac<uisition price was T;.
#)"%"""% Face value T;. #!+%"""5. Interest is paid on )"
th
Mune each year by the
companies on an annual basis. The ban; has charged him T;. +"" as transaction
fee.
+. #!P debentures of ABC 7td. of the face value of T;. +""%""" 3interest is payable
on )#
st
0ecember on an annual basis5 were sold e'8interest on 0ecember "#%
!"#" and T;. -""%""" #+P debenture of ]CR ltd was purchased e'8interest%
borrowing the additional sum from $CC Ban; Q #"P interest. The Ban; has
charged him T;. #%""" as commission for the settlement of the purchase and
sales and T;. #%+"" for collecting interests. The due dates of payment of interest
on #+P ]CR 0ebenture are September )" and arch )#.
,. The 0CT identi&ed that he has transferred #"P unapproved debenture of T;.
#""%""" to his friend on #+th Mune% !"## 3interest is paid on )"th Mune on an
annual basis5 and bought it bac; on )
rd
Muly% !"## at T;. #"+%""". The 0CT has
identi&ed the matter as Bond >ashing.
-. Bn )#T arch% !"## ) years Rero Coupon Bond of T;. +"%""" was matured and
he has received the amount as maturity value% whether the ac<uisition price of
the same was T;. )+%""". The collection fee of T;. +"" was charged in this
regard by his ban;.
0etermine ta' payable income for r. Mamal Haiser from interest on securities for the
income year !"#" 8 !"##.
Solution :B
Mr- Ha4al 5aiser
Assess4ent 6earB 2&''>2&'2
Inco4e 6earB 2&'&>2&''
Co4*utation of Total Inco4e
T;. T;.
Inco4e fro4 Securities SecB 22 G 29(B
Interest form ta' free government securities #"%"""
7ess? e'emption 3full5 #"%"""
8
Interest from less ta' government securities 3!%-"" '
#""4/"5
)%"""
7ess? Admissible e'penses 3collection fee5 #""
!%/""
8
Interest from approved commercial securities ."%+""
7ess? Admissible e'penses #"%/-/
,/%+!#
Interest from un8approved commercial securities #"%"""
Interest on 9ero coupon bond #+%"""
7ess? 2'emption 8 full #+%"""
8
Total D2=:2'
.or2ings and NoteB
#. #"P Bangladesh >age 2arnerDs 0evelopment Bond is a ta'8free government
security. Interest is considered for the whole year as it was on hand from the &rst
day of the I4C !"#"8##.
!. As he is a non8resident% interest on Canadian T Bill will not come under the scope
of his total income% as it is income earned outside Bangladesh. In Case of
resident% the interest would have to be considered under the head TForeign
incomeT instead of TIncome from Interest on SecuritiesT% as it is a security issued
by foreign authority.
). Income from approved debentures is calculated as follows?
3a5 Interest on securities is paid always on face value. So% Interest on #+P
Be'imco 0ebenture is 3!""%""" ' #*P5 [ T;. !.%""". As the &nal holder% he well
get the whole interest. Similarly% as he has sold the #)P ACI debenture in the
secondary mar;et% he is no more eligible to receive any interest on it as he is not
the &nal holder. This is an e'ample of cum8interest. Transaction fee for purchase
and sell of securities is not an admissible e'pense.
3b5 #!P debentures of ABC 7td. bearing the face value of T;. +""%""" were sold
before the due date of interest. So% the &nal holder is entitled to get the interest
on such debentures. In this regard% no income by way of interest arises in the
hand of r. Mamal Haiser. Gowever% the sale being e'8interest% the total sale price
is T;. +""%""" plus interest accrued for ## months 3#
st
Manuary% #" to )"
th
$ovember% #"5 i.e. T;. ++%""" 3+""%""" ' #!P ' ##4#!5 [ T;. +++%""". The
surplus received T;. ++%""" 3+++%""" 8 +""%"""5 would be deemed to be income
chargeable under the head TCapital gainsT.
3c5 The amount of additional sum borrowed to purchase #+P ]CR 0ebentures at
face value e'8interest is calculated as follows?
Particulars T;.
F: of #+P ]CR 0ebentures -""%"""
Add? Payment for accrued interest for the period Bctober "#% #" to
$ovember )"% #" UT;. -""%""" ' #+P ' !4#!V
#-%+""
Total cost -#-%+""
7ess? Amount received from sale of ABC 0ebenture +++%"""
Borrowings from Ban; 3Bn 0ecember "#% !"#"5 #,!.+""
3d5 After the ac<uisition% interest on #+P ]CR debentures received in the I4C
!"#"8## is only on )#
st
arch% !"## for si' months% as he receives the interest on
a semi8annual basis. So% the interest amount received on #+P debentures is
3-""%""" ' #+P ' #4!5 8 T;. +!%+"". The ne't interest will be received on
September )"% !"## which doesnDt fall in I4C !"#"8##.
3e5 So% the Total interest received from approved debentures in the #4C !"#"8##
will be?
Interest on #*P Be'imco 0ebenture [ T;. !.%"""
Interest on #+P ]CR 0ebenture [ T;. +!%+""
T;. ."%+""
Admissible e'penses?
Ban; collection fee for interests [ T;. #%+""
Interest on loan 3#,!%+"" ' #"P ' -4#!5
3From 0ecember "#% "/ to Mune )"% #"5 [ T;. /%*-/
T;. #"%/-/
"* As the sale of unapproved debentures is considered as bond washing transaction
by the 0CT% the interest amount will be considered as the income of r. Mamal
Haiser.
Self>Assess4ent ?uestion
#. 3a5 >hat incomes are included in OInterest on SecuritiesW under the Income Ta'
Brdinance #/.*. Is interest on private loan is an interest on securitiesN
3b5 >hat deductions are allowable from such income under the BrdinanceN
Chapter ,
Inco4e fro4 house *ro*ert6
Contents
Introduction
2'amination conte't
To*ic List
>or;ed 2'amples and Solutions
,.# Introduction
,.! Annual :alue
,.) Self Bccupancy
,.* Allowable 0eductions
,.+ $on Assessable Income
,., Ta' 0eduction at Source from Gouse Property
Introduction
Learning o3<ecti+es
Identify the income under the head XIncome from Gouse PropertyK.
Compute the total ta'able income under the head.
Hnowing annual value and its computation.
Identify the allowable deduction under the head.
Identify non8assessable income under the head.
2'plain ta' deducted at sources under the head in di1erent situations.
Compute net ta' liability.
)ractical signi0cance
Income from house property is the third head of income and very signi&cant
for income ta' professionals. It includes some conceptual issues and
technicalities that re<uire clear understanding about the topic.
Annual value is the value representing the income from house property. It is
the higher value of actual rent and municipal value. Actual rent is again
ad=usted for di1erent e'penses and T0S. These computations re<uire some
rationality on part of the tenants and landlords.
Scope of allowable deductions is another diEculty. Capitali9ed e'penses
cannot be deducted and in case of partly let out properties% e'penses are
deducted proportionately. 6epairs and maintenance is considered separately
depending on the status of the property as either commercial or residential
due to its signi&cance. Advance receipts from the tenants are considered as
income and at the time of refund% it has got separate treatment. All of these
ad=ustments are very technical and sometimes re<uire professional =udgment
and this is the reason why the chapter is practically signi&cant.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the computation of ta'able income under the head
XIncome from Gouse PropertyK is one of the basic re<uirements for determining
ta' liabilityN Can you determine the ta'able income under the headN 0o you
understand application of ta' deducted at sources by the tenantsN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the ta'able income for any income year under di1erent heads. Before
advising the clients% accountants should have the clear concept relating to the
admissible and inadmissible e'penses in di1erent heads of income so that
they can deduct or add the e'penses in determining the ta'able income.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
Cou will be also using this ;nowledge when you tac;le the ta'ation paper later
on in the Professional Stage and it will also underpin the technical aspects at
the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne the concepts of house properties
Identify the income under the head XIncome from Gouse PropertyK.
0e&ne the concepts of Annual :alues.
6ecognise the allowable deductions and allowances.
Hnowing self occupancy and its impact in computing ta'able income under
the head.
Identify tenantKs e'penses born by landlord and landlordKs e'penses born
by tenants.
Hnowing T0S rates and its application in computing net ta' liability.
0etermine interest on borrowed capital and installments for loan ta;en
during construction period.
Ad=ustments of advances received from tenants.
Impact of capitali9ed e'penses.
Hnowing the application of vacancy allowance and allowances for un8
collectible rents.
Computing repair and maintenance e'penses in di1erent cases.
Hnowing the residential and commercial use of house property and its
impact on computing ta'able income.
Jnderstanding di1erent status of a house propertyI fully let out% partly let
out and self occupied.
Compute net ta' liability.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
core concept on computation of income under the head Xincome from house
propertyK which is vital for calculating total ta' liability. Clear concept and
understanding of the contents presented in this chapter will help candidates
to resolve any problems relating to computation of income from the head.
E-& INCOM" %#OM ;OUS" )#O)"#TY
Section O+er+ie/
Income from house property is the third head of income.
Gouse property may be fully let out% partly let out or self occupied.
There are some allowable and some inadmissible deductions under the
head.
Computation of income under the head.
Gouse property may be let out for residential purpose or commercial
purpose.
Annual value is the higher one between actual rent and municipal value.
Actual rent will be ad=usted for e'penses and T0S.
Tenants are sometimes allowed to deduct ta'es before giving rent to the
landlords.
7andlords can claim allowances for vacancy and uncollected rents.
Advances received from tenants that is not ad=ustable with rents and
considered as income.
E-' Introduction
Sco*e
Gouse
Property
7et But Self
Bccupied
Fully Partly
Ta'able $ot Ta'able
6esidenti
al
Commerci
al
Ta,a3le Inco4e
Annual :alue 3A:5
Less
Ad4issi3le ",*ensesB
6epair L aintenance
For 6esidential F !+P of A:
For Commercial F )"P of A:
Bther 2'penses
Less
Allo/ancesB
:acancy Allowance
Allowance for Jncollectible 6ent
*6uals
Ta,a3le Inco4e
Section F !* is con&ned to Xbuildings and lands appurtenant thereto which
may be conveniently called Xhouse properlyK. Ta' under this section is levied
upon owner% legal or bene&cial% and not upon the occupant. It is levied not
upon the actual income from the property but upon statutory or arti&cial
income represented by bona&ed annual value of the property.
Income from house property is ta'able on the basis of its annual value of any
property% whether used for commercial or residential purposes consisting of any
building% furniture% &'ture% &ttings etc.
E-2 Annual +alue
Annual value has been de&ned in Section !3)5 of the Brdinance. Jnder Section
!3)5 3a5 Kannual valueK shall be deemed to be 8 3a5 in relation to any property let
out83i5 the sum for which property might reasonably be e'pected to let from
year to year and includes any amount received by letting out furniture% &'ture%
&ttings etcI or 3ii5 where the annual rent in respect thereof is e'cess of the sum
referred to in section !3)53a53i5% the amount of the annual rent.
Thus% annual value is not necessarily be the annual rental income disclosed by
an assessee but the value determined as such by the ta' authorities. If the
annual rent is higher than the value as determined by the ta' authorities on
the basis of the e'pected rent% annual rent is considered as the annual value.
>here the property is owned by two or more persons and their respective
shares are de&nite and ascertainable% the owners are assessable on their
respective share of income from the property and not as an association of
persons.
Thus the annual value will be the higher one between actual rent and
municipal value. Actual rent is the amount of rent received or deemed to be
received by the owner. It may re<uire some ad=ustments as shown below?
?uic2 $uide
Tenants 2'penses 32'penses for temporary
occupancy5
>ASA bill% (as bill% 2lectricity
bill
7andlords 2'penses 32'penses for
ownership5
Property Ta'es% Insurance
Premium
Annual
:alue
Actual 6ent unicipal
:alue
Gigher one
Ad=usted for
#. TenantsK e'pense born by the
landlord
!. 7andlordsK e'pense born by the
7ess
Add
Add
Illustration '
r. Brahman owns a + storied residential house with ) Aats in each story. This
is a fully let out house property and monthly rent of each Aat is T;. .%""".
unicipal value of the house is T;. #%,""%""". Compute annual value.
Annual !alueB
Actual 6ent UT;. .%""" _) _+ _#!V T;. #%**"%"""
unicipal :alue T;. #%,""%"""
Annual :alue% whichever is higher T;. #%,""%"""
Illustration 2
r. Brahman owns a + storied residential house with ) Aats in each story. Ge
occupied all the Aats in second Aoor for residence purpose. Bther Aats are let
out for residential purpose and monthly rent of each Aat is T;. .%""".
unicipal value of the house is T;. #%,""%""". Compute annual value.
Annual !alueB
Actual 6ent UT;. .%""" _) _* _#!V T;. #%#+!%"""
unicipal :alue U3T;. #%,""%""" _ #+54#!V T;. #%!."%"""
Annual :alue% whichever is higher T;. #%!."%"""
Illustration 9
r. Brahman owns a + storied residential house with ) Aats in each story. Ge
occupied all the Aats in second Aoor for residence purpose. Bther Aats are let
out for residential purpose and monthly rent of each Aat is T;. .%""" including
T;. #%""" for water% gas and electricity bill. unicipal value of the house is T;.
#%,""%""". Compute annual value.
Annual !alueB
Actual 6ent UT;. .%""" _) _* _#!V T;.
#%#+!%"""
7ess? TenantsK e'pense born by landlord UT;. #%"""
_) _* _#!V
T;.
#**%"""
Actual 6ent after Ad=ustment T;.
#%"".%"""
unicipal :alue U3T;. #%,""%""" _ #+54#!V T;.
#%!."%"""
Annual :alue% whichever is higher T;.
#%!."%"""
Illustration :
r. Brahman owns a + storied residential house with ) Aats in each story. Ge
occupied all the Aats in second Aoor for residence purpose. Bther Aats are let
out for residential purpose and monthly rent of each Aat is T;. .%""". In
addition to monthly rent% tenants also bear property ta'es and other ta'es at
the rate of T;. #"%""" per tenant annually. unicipal value of the house is T;.
#%,""%""". Compute annual value.
Annual !alueB
Actual 6ent UT;. .%""" _) _* _#!V T;.
#%#+!%"""
Add? 7andlordsK e'pense born by tenant UT;.
#"%""" _) _*V
T;.
#!"%"""
Actual 6ent after Ad=ustment T;.
#%!-!%"""
unicipal :alue U3T;. #%,""%""" _ #+54#!V T;.
#%!."%"""
Annual :alue% whichever is higher T;.
#%!."%"""
Illustration @
r. Brahman owns a + storied building which is let out to a business house.
After deducting ta'es% r. Brahman receives T;. #%/""%""" annually. r.
Brahman is responsible to pay for all gas% electricity and water bills which
amount to T;. ."%""" annually. Gowever% as per the agreement% the business
house is re<uired to pay all ta'es and insurance premium for the building
which amounts to another T;. #."%""". unicipal value of the house is T;.
!%"""%""". Compute annual value. U$ote? Applicable T0S rate is +PV
Annual !alueB
Actual 6ent T;.
#%/""%"""
Add? 7andlordsK e'pense born by tenant T;.
#."%"""
Add? Ta' deducted at sources U3T;. #%/""%"""4#8
"."+5 _ "."+V
T;.
#""%"""
7ess? TenantsK e'pense born by landlord 3T;.
."%"""5
Actual 6ent after Ad=ustment T;.
!%#""%"""
unicipal :alue T;.
!%"""%"""
Annual :alue% whichever is higher T;.
!%#""%"""
E-9 Self Occu*anc6
The house property may be occupied by the owner either for residential or
business purpose. In such cases% the following points are important to note
down?
a5 If self occupied for residential purpose? Annual value is not re<uired to be
determined since there is no income from house property and no ta' as
well.
b5 If self occupied for business purpose? It is assessed under the head
Xincome from business and professionK as per section !.. Ge is not entitled
to claim deductions under this section% however% can claim depreciation on
such property.
E-: Allo/a3le Deductions
As per section !+% while determining the net income under Income from house
property% the following deductions are allowable?
3i5 Any sum payable to (overnment as land development Ta' or rent on
account of the land comprised in the property.
3ii5 Any premium paid to insure the property against ris; of damage or
destruction
3iii5Interest on mortgage or other capital charge for the purpose of
reconstruction% e'tension or improvement of the house property.
3iv5Annual charge not being a capital charge
3v5 (round rent.
3vi5Interest payable on capital borrowed for the purpose of ac<uisition%
construction% reconstruction% repair or renovation of the house property.
Provided t!at w!ere t!e property or a portion t!ereof is self occupied and
acCuired2 constructed2 renewed or reconstructed wit! ?orrowed capital2
t!e amount of any interest2 paya?le on suc! ?orrowed capital not
exceeding taAa twenty laA!2 s!all ?e deducted from total incomeH
3vii5 >here the property has been constructed with borrowed capital and no
income was earned during the period of construction% interest payable
during that period on such capital% in three e<ual proportionate
installments for subse<uent ) years for which income is assessable from
that property.
3viii5 In respect of e'penditure for repairs% collection of rent% water and
sewerage% electricity and salary of darwan% security guard% pump8man% lift8
man and careta;er and all other e'penditure related to maintenance and
provision of basic services?
3a5 an amount e<ual to !+P of the annual value of the property in
respect of all e'penses mentioned in 3i5 above where the property is
used for residential purposeI
3b5 an amount e<ual to )"P of the annual value of the property in
respect of all e'penses mentioned in 3i5 above where the property is
used for commercial purpose.
3vi5 Proportionate vacancy allowance of the period for which the property
remains wholly unoccupied and in case of partly let out property such
portion of annual value appropriate to the vacant part as is proportionate
to the period of the vacancy of such part.
Interest or annual charge payable outside Bangladesh shall not be
allowed as deduction on which ta' has not been paid or deducted at
source.
E-@Non Assessa3le Inco4e
The following incomes from house property are non8assessable?
'- Annual value of the house used by the owner for his personal purpose i.e.
for his own residence or for the purpose of his business or profession
USection !*3#5V.
2- >here% the whole or part of the property is let out% a sum e<ual to such
portion of the annual value appropriate to the vacant part as is
proportionate to the period of the vacancy of such part USection !+3#53= L
;5V
9- Any income derived from house property held under trust or other legal
obligation wholly used for religious or charitable purposes USi'th Schedule%
Part A% Para #3#5V
:- Any income derived from any building% not less than &ve storied% having at
least ten Aats% constructed at any time between Muly "#% !""/ to Mune )"%
!"#* 3both days inclusive5% for ten years from the date of completion of
construction of the building% if it is situated in any area of Bangladesh
other than the areas of City Corporation% Cantonment Board% Tongi Jpa9ila%
$arayangan= Paurashaba% (a9ipur Pourashava and any Pourashaba under
0ha;a district USi'th Schedule% Part A% Para ).V
@- Any income derived from any building which is situated in a land occupied
and used for agricultural purpose% e.g. used by the cultivator4farmer as the
dwelling house or store house or other8out house by reason of his
connection with such land USection !3#53b5V
E-E Ta, Deduction at Source fro4 ;ouse )ro*ert6
>here the tenant in respect of a house property is the government or any
authority having the power to deduct ta'es% shall deduct ta' as advance ta'
from the rental amount following the rate as prescribed in 6ule #-B of the
Income Ta' 6ules% #/.*. But such amount of ta' is sub=ect to refund if income
of the owner is not ta' payable or if amount of advance ta' is more than the
ownerKs total ta' liability. $o such deduction is re<uired when the owner holds
certi&cate stating that there is no assessable income against this assessee.
According to Section +)A of the ITB% #/.* F
'- >here% the (overnment or any authority% corporation or body% including its
units% the activities or the principal activities of which are authori9ed by
any Act% Brdinance% order or instrument having the force of law in
Bangladesh or any company as de&ned in clause 3!"5 of Section !% or any
ban;ing company or any co8operative ban; established by or under any
law for the time being in force or any non8governmental organi9ation run
or supported by any foreign donation or assistance or any university or
medical college or dental college or engineering college% is a tenant in
respect of a house property% the tenant shall deduct ta' from the house
rent paid or payable as advance ta' such amount as may be prescribed.
2- >here% after the assessment made for the relevant year% it is found that no
ta' was payable by the owner of the house property or the amount of ta'
deducted is in e'cess of the amount payable% the amount deducted shall
be refunded%
3a5 if no ta' was payable% in full% or
3b5 if the amount deducted is in e'cess of the amount payable% to the
e'tent of the e'cess deduction to the owner of the house property.
9- >here the 0eputy Commissioner of Ta'es% on an application made in this
behalf% gives a certi&cate in the prescribed form to an owner of house
property that% to the best of his belief% the owner is not li;ely to have any
assessable income during the year or the income is otherwise e'empted
from payment of income ta' under any provisions of this Brdinance%
payment referred to in sub8section 3#5 shall be made without any
deduction until the certi&cate is cancelled.
1ate o+ T3S +ro( house propert7 F
According to 6ule #-B of the Income Ta' 6ules% #/.*% for the purposes of
ma;ing a deduction of ta' under Section +)A of the ITB% #/.*% every person
mentioned in that section who is responsible for ma;ing any payment to the
owner of a house property on account of house rent shall deduct an amount
calculated on such payment at the rates laid down in the schedule below?
Serial
no-
A4ount of *a64ents
#ate of
TDS
#. >here the monthly payment is less than T;. !"%""" $il
!. >here the monthly payment e'ceeds T;. !"%""" but
does not e'ceed T;. *"%"""
)P
). >here the monthly payment e'ceeds T;. *"%""" +P
.or2ed ",a4*les and Solutions
.or2ed ",a4*le 'B
r. ushta<ue AhmedKs house is let out at T;. #"%""" a month. Accounting year
ended on )" Mune !"##. Tenant <uitted on )# arch !"## and owed T;. !"%""" for
rent being unpaid. Gouse remained vacant for ) months during the alterations. The
owner wishes to claim the following deductions?
Ta2a
Cost of repairs #+%"""
Alterations e'penses )"%"""
Interest on mortgage #!%"""
Fire insurance premium +%"""
unicipal ta'es #"%"""
7egal action to recover unpaid rent which was later reali9ed F T;. ,%""".
#e8uiredB Calculate his income under Section !* of the Brdinance

Solution 'B
Mr- Mushta8ue Ah4ed
Income Ta' Assessment Cear !"##8#!
Income for year ended on )" Mune !"##
Co4*utation of Total Inco4e under Section 2:
Annual +alueB
Actual 6ent 3T;. #"%""" _ #! months5 #!"%"""
unicipal value nil
!ic!ever is !ig!er #!"%"""
LessB Allowable 0eductions
6epair and aintenance F !+P of T;.
#!"%"""
)"%"""
Interest on ortgage #!%"""
Fire Insurance Premium +%"""
unicipal Ta'es #"%"""
:acancy Allowance 3T;. #"%""" _ )5 )"%"""
Total &eductions .-%"""
Ta,a3le inco4e under the head ))%"""
.or2ed ",a4*le 2B
r. Faru< owns a residential house at Santinagar% 0ha;a% which was constructed #"
years bac; with a #+P loan of T;. !"%""%""" from Gouse Building Finance
Corporation. The house has been let out for commercial purpose at T;. #+"%""" per
month. The municipal value of the house is T;. #+%""%""".
The following e'penses were incurred in the income year !"#" 8 !"## for that house?
#. 6epair e'pense T;. **%"""I
!. City Corporation ta' T;. )+%"""I
). 6ent collection e'penses T;. #!%"""I
*. Fire insurance premium T;. .""" per <uarterI
Compute income from house property for the assessment year !"##8#!.
Solution 2B
Mr- %aru8
Inco4e 6earB 2&'& > 2&''
Assess4ent 6earB 2&''>2&'2
Calculation of Total Inco4e
Co4*utation of Total Inco4e under Section 2:
Annual +alueB
Actual 6ent 3T;. #+"%""" _ #! months5 #.%""%""
"
unicipal value #+%""%""
"
!ic!ever is !ig!er #.%""%"
""
LessB Allowable 0eductions
6epair and aintenance F )"P of T;.
#.%""%"""
*+"%"""
City Corporate Ta' )+%"""
Fire Insurance Premium 3T;. .%""" _ * 5 )!%"""
Interest on borrowed fund 3#+P of T;.
!"%""%"""5
)""%"""
Total &eductions .#-%"""
Ta,a3le inco4e under the head /.)%"""
NotesB
#. Since the house is let out for commercial purpose% repair and maintenance
e'pense is considered as )"P of the annual value. Gere actual spending for
repair e'penses and collection e'penses is not relevant.
!. Annual e'penses should be deducted from the annual value of the house. So &re
insurance premium is converted to annual &gure by multiplying * with <uarterly
premium.
.or2ed ",a4*le 9B
r. arwari has a house at oha;hali C4A with an area of *%."" s<uare feet. Ge let
out this house to a computer &rm at an annual rent of T;. ,""%""". The municipal
value per s<uare feet at oha;hali C4A is T;. #!". The following e'penses were
incurred in the income year !"#" 8 !"## for that house?
#. 6epair e'pense T;. /"%"""I
!. City Corporation ta' T;. #+%"""I
). Fire insurance premium T;. /%"""I
*. $ight guardDs salary T;. -%"""I
+. Installation of electricity line T;. !+%"""I
0uring the year r. arwari paid installment of loan to GBFC T;. ,-%+"" 3principal
amount is T;. ,*%"""5. According to the agreement the owner bears the water and
gas bill of the tenant which amounted to T;. !"%""" for the year. Compute income
from house property for the income year ended )"
th
Mune !"##.
Solution 9B
Mr- Mar/ari
Inco4e 6earB 2&'&>2&''
Assess4ent 6earB 2&''>2&'2
Calculation of Total Inco4e
Co4*utation of Total Inco4e under Section 2:
Annual +alueB
Actual 6ent ,%""%""
"
7ess? TenantsK e'pense born by the landlord !"%"""
6evised Actual 6ent +%."%""
"
unicipal value 3*%."" _ T;. #!"5 +%-,%""
"
!ic!ever is !ig!er +%."%""
"
LessB Allowable 0eductions
6epair and aintenance F )"P of T;.
+%."%"""
#-*%"""
City Corporate Ta' #+%"""
Fire Insurance Premium /%"""
Interest on borrowed fund 3T;. ,-%+"" F T;.
,*%"""5
)%+""
Total &eductions !%"#%+"
"
Ta,a3le inco4e under the head )%-.%+"
"
NotesB
#. Since the house is let out for commercial purpose% repair and maintenance
e'pense is considered as )"P of the annual value. Gere actual spending for such
a purpose is not considerable.
!. Installation of electricity line is a capital e'penditure% so this is not admissible.
.or2ed ",a4*le :B
r. Pa;rasi is the owner of three houses at (ulshan% 0ha;aI Hhulsi% ChittagongI and
ia Ba9ar% Comilla. 0etails of these houses are given below?
0etails
Gouse at
(ulshan
Gouse at
Hhulsi
Gouse at
ia Ba9ar
$umber of stories ) # !
$umber of Aats in each story ! # *
6ental status Fully let out
Self
Bccupied
Partly let out
T;. T;. T;.
unicipal value 3annual5 /%""%""" #%!"%""" -%""%"""
6ental value 3each Aat per month5 #!%""" 8 -%"""
2'penses incurred?
6epair and maintenance ."%""" !+%""" ,+%"""
Insurance premium 3<uarterly5 !%""" 8 #%+""
Salary of guard #+%""" +%""" -%"""
(round rent !%""" )%""" 8
7ocal government ta' 3per
month5
#%!"" ,"" +""
Interest on borrowed fund +%""" *%"""
In (ulshan% 0ha;a one Aat remain vacant for two months period and in ia
Ba9ar% Comilla two Aats are occupied by his sons who are fully dependent on
him. Gouse at (ulshan has been let out for residential purpose while house at
ia Ba9ar has been let out to a commercial &rm. Compute income from house
property for the income year ended )"
th
Mune !"##.
Solution :B
Mr- )a2rasi
Inco4e 6earB 2&'& > 2&''
Assess4ent 6earB 2&''>2&'2
Calculation of Total Inco4e
Co4*utation of Total Inco4e under Section 2:
;ouse at $ulshanB
Annual +alueB
Actual 6ent 3#!%""" ' #! ' ) ' !5 .%,*%""
"
unicipal value 3*%."" _ T;. #!"5 /%""%""
"
!ic!ever is !ig!er /%""%""
"
LessB Allowable 0eductions
6epair and aintenance F !+P of T;.
/%""%"""
!!+%"""
(round 6ent !%"""
Insurance Premium 3!%""" ' *5 .%"""
7ocal (overnment Ta' 3#%!"" ' #!5 #*%*""
Interest on borrowed fund +%"""
:acancy Allowance U3/%""%""" ' #4,5 '
!4#!V
!+%"""
Total &eductions !%-/%*"
"
,!"%,""
;ouse at Mia BaQarB
Annual +alueB
Actual 6ent 3,%""" ' #! ' ) ' !5 +%"*%""
"
unicipal value 3T;. -%""%""" _ ,4.5 +%!+%""
"
!ic!ever is !ig!er +%!+%""
"
LessB Allowable 0eductions
6epair and aintenance F )"P of T;.
+%!+%"""
#+-%+""
Insurance Premium U3#%+"" ' *5 ' ,4.5 *%+""
7ocal (overnment Ta' U3+"" ' #!5 ' ,4.5 *%+""
Interest on borrowed fund U*""" ' ,4.V )%"""
Total &eductions #%,/%+"
"
)++%+""
Total Ta,a3le inco4e under the head /-,%#""
NotesB
#. Gouse at Hhulsi is occupied by the owner% so it is fully e'empted.
!. The Aats occupied by the son are e'empted as they are fully dependent on
the owner.
.or2ed ",a4*le @B
r. Mamilur 6ahman is the owner of a &ve8storied building at 7almatia. Ge resides
with his family in the !
nd
Aoor and all other Aoors 3in each Aoor there are two units5
are let out for residential purpose at a monthly rent of T;. #"%""" per Aat including
T;. #%""" as >ASA and 02SA bill. The municipal value of the house is T;. #%"""%""".
r. Mamilur 6ahman also receives T;. *+"%""" as advance from the tenant of the
units during the income year ended on Mune )"% !"##.
r. 6ahman presents the following information for deduction?
#. 6epair e'penses T;. #)"%"""I
!. 7and development ta' T;. !!%"""I
). Insurance premium T;. #,%"""I
*. Careta;er and $ight guard salary T;. !*%"""I
+. (round rent T;. !%"""I
,. Alteration cost for ground Aoor T;. )"%""".
r. 6ahman has ta;en a B62 3Balancing% oderni9ation% 6evamping and 2'pansion5
loan of T;. #%+""%""" at a Aat interest rate of #.P from 0elta B6AC Gousing 30BG5
limited on 0ecember #+% !""/. 0uring the year one of the tenants in the ground Aoor
leave the house without paying rent for one month. r. 6ahman even after ta;ing
necessary legal action fails to collect this rent. Besides% the same Aat remained
vacant for another two months during the year. Compute income from house
property for the income year ended )"
th
Mune !"##.
Solution @B
Mr- Ha4ilur #ah4an
Inco4e 6earB 2&'&>2&''
Assess4ent 6earB 2&''>2&'2
Calculation of Total Inco4e
Co4*utation of Total Inco4e under Section 2:
Annual +alueB
Actual 6ent 3T;. #"%""" _ * _ ! _ #!5 /%,"%""
"
7ess? TenantsK e'pense born by the landlord 3T;.
#%""" _ * _ ! _ #!5
/,%"""
6evised Actual 6ent .%,*%""
"
unicipal value 3#"%""%""" _ *4+5 .%""%""
"
!ic!ever is !ig!er .%,*%""
"
AddB Advance 6eceived 3note #5 *%+"%""
"
Total Inco4e #)%#*%"
""
LessB Allowable 0eductions
6epair and aintenance F !+P of T;. .%,*%""" !#,%"""
7and 0evelopment Ta' !!%"""
Insurance Premium #,%"""
(round 6ent !%"""
:acancy Allowance 3T;. .%,*%""" _ #4._ !4#!5 #.%"""
Allowance for Jncollectible 6ent 3T;. .%,*%""" _
#4._ #4#!5
/%"""
Interest on borrowed fund 3#.P of T;. #%+""%"""5 !-"%"""
Total &eductions +%+)%""
"
Ta,a3le inco4e under the head -%,#%""
"
Note 'B The amount received in advance is deemed to be the income of the
assessee for the income year in which it is received and be classi&ed under the head
OIncome from Gouse PropertyW.
.or2ed ",a4*le EB
r. 6ana a9umder is the owner of a two8storied building at 0hanmondi where he
stays with his family in ground Aoor and another Aoor has been let out to a
government authority at a gross monthly rent of T;. )"%""". Gowever% he has ta;en
a #)P loan of T;. +""%""" on $ovember "#% !"#" from GBFC for moderni9ation of
the building and the Aoor remained vacant for two months during the moderni9ation
period. It is again let out to the same authority from Manuary #% !"## at a gross
monthly rent of T;. +"%""". The government authority deducts ta' at source at
prescribed rates before paying the rent to him. The municipal value of the house is
T;. /""%""".
The following e'penses were incurred in the income year !"#" 8 !"## for that house?
#. 6epair e'penses T;. +"%"""I
!. City Corporation ta' T;. !!%"""I
). Insurance premium T;. #,%"""I
*. Careta;er and $ight guard salary T;. !*%"""I
+. 7and revenue paid T;. !%""".
Compute income from house property for the income year ended )"
th
Mune !"##.
Solution EB
Mr- #ana MaQu4der
Inco4e 6earB 2&'& > 2&''
Assess4ent 6earB 2&'' > 2&'2
Calculation of Total Inco4e
Co4*utation of Total Inco4e under Section 2:
Annual +alueB
Actual 6ent 3T;. !#%/"" _ ,5 Z 3T;. *-%+"" _ ,5 *%#,%*"
"
unicipal value 3/%""%""" _ #4!5 *%+"%""
"
!ic!ever is !ig!er *%+"%""
"
LessB Allowable 0eductions
6epair and aintenance F )"P of T;. *%+"%""" #)+%"""
City Corporation Ta' !!%"""
Insurance Premium #,%"""
7and 6evenue !%"""
:acancy Allowance 3T;. *%+"%""" _ !4#!5 -+%"""
Interest on borrowed fund 3note #5 ),%###
Total &eductions !%.,%##
#
Ta,a3le inco4e under the head #%,)%..
/
Note 'B Interest for the vacant period will be charged in three e<ual installments in
three consecutive years. Gowever% interest for the other months 3from Manuary ##5
will be charged in this income year.
Interest on loan for the vacant period F ! months U3T;. +""%""" _ #)P
_ !4#!5 _#4)V
)%,##
Interest for occupancy period U3T;. +""%""" _ #)P _ ,4#!5 )!%+""
Total interest charged for the year ),%###
Gowever% T;. )%,## of interest will again be accounted for in ne't two years.
.or2ed ",a4*le FB
s. 6osnee 6oy owns two housesI one at Sutrapur and another at 7albagh. From the
following particulars compute her income form house property for the income year
!"#"8!"## and also ta' liability for the assessment year !"## 8 !"#!.
;ouse at Sutra*urB This is a three storied building 3in each Aoor there are two
Aats5. Bne of the Aats in &rst Aoor is used as residence by s. 6oy and the other Aat
in the same Aoor is used by her daughter8in8law who pays nothing for it. All other
Aats were let out at a monthly rent of T;. .%""" each. The municipal value of the
house is T;. *%."%""". She has also received T;. #%""%""" as advance from the
tenants which is not ad=ustable to rents. 2'penses of the house for the year were as
follows?
>hite wash e'pense
T;. !"%"""
6ent collection e'pense )%"""
City corporation ta'% <uarterly
!%*""
7and revenue paid #!%"""
Salary of guard% monthly
+""
7oan repayment to GBFC 3including interest T;. *%!""5 *!%+""
Installation of generator
#+%"""
The owner bears the water and gas bill of the tenants which amounted to T;. )"%"""
for the year. Bne Aat remains vacant for two months during the year and she li;es to
claim vacancy allowance.
;ouse at Lal3aghB
The house is let out to a private ban; branch and received monthly rent of T;.
*-%+"" net of T0S Q +P. DThe municipal value of the house is T;. ,%!+%""".
2'penses of the house for the year were as follows?
Fire insurance premium
T;. !+%"""
unicipal ta'es
#!%"""
Cost of alteration
++%"""
(round rent #"%"""
7egal e'penses
#!%"""
According to the terms of the agreement the tenants are to bear the cost of repair
which amounted to T;. #+%""" for the year. 0uring the year% s. 6oy incurred the
following investments and e'penses?
Family e'penses
T;. )%+"%"""
Insurance premium?
Bwn 3policy value T;. +%""%"""5
*"%"""
Spouse 3policy value T;. +%""%"""5
,"%"""
Investment in shares in secondary mar;et !+%"""
0onation to the PresidentDs relief fund !"%"""
0onation to a local club
,%"""
0onation to (overnment Ra;at fund
)"%"""
0onation to a os<ue
#"%"""
Solution FB
Ms- #osnee #o6
Inco4e 6earB 2&'& > 2&''
Assess4ent 6earB 2&''>2&'2
Calculation of inco4e fro4 house *ro*ert6
Co4*utation of Total Inco4e under Section 2:
;ouse at Sutra*urB
Annual +alueB
Actual rent 3.""" ' + ' #!5
*%."%""
"
7ess? Tenants e'penses paid by
landlord
)"%"""
6evised actual rent
*%+"%""
"
unicipal :alue 3*%."%""" ' +4,5
*%""%""
"
!ic!ever is !ig!er
*%+"%""
"
AddB Advance 6eceived
#%""%""
"
+%+"%""
"
LessB Allowable 0eductions
6epair L maintenance 3*%+"%""" ] !+P5
#%#!%+"
"
City Corporation Ta' 3!*"" ' * ' +4,5 .%"""
7and revenue paid 3#!""" ' +4,5 #"%"""
Interest paid to GBFC 3*%!"" ' +4,5 )%+""
:acancy allowance `3*%+"%"""4+5 ' !4#!5a #+%"""
!+%"""
Total &eductions
#%-*%""
"
)%-,%"""
;ouse at Lal3aghB
Annual +alueB
Actual 6ent UT;. *-%+"" ' #!V
+%-"%""
"
Add? T0S U+%-"%""" ' +4#""8+V )"%"""
7andlordKs e'pense paid by
tenant
#+%"""
Actual 6ental :alue
,%#+%""
"
unicipal value
,%!+%""
"
!ic!ever is !ig!er
,%!+%""
"
LessB Allowable 0eductions
#5 6epair L aintenance 3,!+""" ' )"P5
#%.-%+"
"
!5 Fire Insurance Premium !+%"""
)5 unicipal Ta' #!%"""
*5 (round rent #"%"""
!%)*%+"
"
)%/"%+""
Total inco4e
F=EE=@&&
Calculation of in+est4ent allo/ance for ta, creditB
Actual In+est4entB
Insurance premium
Bwn *"%"""
a'imum limit 3+%""%""" ' #"P5 +"%""" *"%"""
Spouse ,"%"""
a'imum limit 3+%""%""" ' #"P5 +"%""" +"%"""
0onation to presidentDs relief fund !"%"""
0onation to (overnment Ra;at fund )"%"""
Total In+est4ent '=:&=&&&
Ma,i4u4 li4it of in+est4ent allo/anceB
!"P of T;. -%,,%+"" 3Total income 8 employerDs
contribution to 6PF 8 interest from 6PF5
#%+)%)""
Br% 7ump sum #""%""%"""
!ic!ever is lower '@9=9&&
Thus% allowable amount of investment allowance is 8 #*"%"""
Investment ta' credit 3#%*"%""" ' #"P5 ':=&&&
Calculation of Ta, lia3ilit6B
6ate
Amount
3T;.5
Bn the &rst T;. !%""%""" "P $il
Bn the ne't )%""%""" #"P )"%"""
Bn the balance !%,,%+"" #+P )/%/-+
Total F=EE=@&& EC=CF@
7ess? investment ta' credit #*%"""
++%/-+
7ess? T0S )"%"""
Net ta, lia3ilit6 2@=CF@
Self>Assess4ent ?uestions
3a5 0e&ne OAnnual :alueW of a property under the Income Ta' Brdinance #/.*.
3b5 Is the XAnnual valueK of a property determined when it is occupied by its
owner for residential purposesN
3c5 >hat are the allowable deductions from annual value in determining the
XIncome from house propertyK under the BrdinanceN
Chapter -
Agriculture inco4e
Contents
Introduction
2'amination conte't
To*ic List
>or;ed 2'amples and Solutions
-.# Basics of Agricultural Income
-.! Characteristics of Agricultural Income
-.) Categories of Agricultural Income
-.* $on8agricultural Income
-.+ Income from Agricultural Gouse Property
-., Allowable 0eductions
-.- $on8assessable Agricultural Income
-.. Special Ta' 6ates
Introduction
Learning o3<ecti+es
Identify agricultural income.
Compute the ta'able income under the head XIncome from AgricultureK.
Identify di1erent types of agricultural income.
Identify the allowable deductions under the head.
Illustrate the non8assessable income under the head.
Hnow the application of reduced ta' rate.
Identify partly agricultural and partly business income.
Compute net ta' liability in di1erent situations.
)ractical signi0cance
The head XIncome from AgricultureK has huge potential for ma'imi9ing the
revenue to the (overnment in Bangladesh due to its signi&cance. Bangladesh
is an agricultural country and its agriculture sector has signi&cant contribution
to (0P every year. But collection of ta' from this head is insigni&cant. Gere%
professional accountants can play an important role by devising the way of
collecting ta' under the head through simpli&cation and moderni9ation of ta'
laws and process.
This chapter presents di1erent form of agricultural income% allowable
deductions% non8assessable income under the head% non8agricultural income%
and other related topics. A clear understanding on each topics presented in
the chapter will ma;e the students e'pert to give opinions to their cliens[ts in
ta' related issues.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the computation of ta'able income under the head
Xincome from agricultureK is one of the basic re<uirements for determining ta'
liabilityN Can you determine the ta'able income under the headN Can you
compute net ta' liability of an assessee having income under the headN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the total ta'able income for any income year. Before advising the clients%
accountants should have the clear concept relating to the admissible and
inadmissible e'penses so that they can deduct or add the e'penses in
determining the ta'able income.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
Cou will be also using this ;nowledge when you tac;le the ta'ation paper later
on in the Professional Stage and it will also underpin the technical aspects at
the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne agricultural income.
Identify di1erent types of agricultural income.
Compute the ta'able income under the head XIncome from AgricultureK.
0i1erentiate fully% partly and other agricultural income.
Identify the allowable deductions under the head.
Illustrate the non8assessable income under the head.
Hnow the application of reduced ta' rate and areas where this ta' rate is
applicable.
0e&ne non8agricultural income and its impact on computing total table
income and ta' liability.
Compute net ta' liability in di1erent situations.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
core concept on computation of income which is vital for calculating ta'
liability. Clear concept and understanding of each contents of this chapter will
help candidates to resolve any problems relating to computation of
agricultural income.
F-& INCOM" %#OM A$#ICULTU#"
Section O+er+ie/
Income from agriculture is one of the important heads of income for the
government.
The total income may not be ta'able income.
There are some allowable% inadmissible and not permissible deductions
under the head.
Some income under the head is not assessable.
Bn some speci&c classes of income under the head is ta'ed at a reduced
rate.
0epreciation allowance on agricultural property is di1erent.
A part of the gain on sale of agricultural asset will be reported as income
from agriculture.
It is very important to ;now non8agricultural income and partly agricultural
income.
An assessee will en=oy T;. +"%""" as non8assessable income in addition to
"P ta'ed income if he has income from agriculture only.
$o advance ta'es are payable under the head.

F-' Basics of Agricultural Inco4e
OAgricultural incomeW is de&ned in Section !3#5 of IT Brdinance #/.*. Jnder
the section% Xagricultural incomeK means8
3a5 any income derived from any land in Bangladesh and used for agricultural
purposes8
3i5 by means of agricultureI or
&ii( by performance of any process ordinarily employed by a cultivator to
render the produce mar;etableI or
3iii5by the sale of the produce of the land raised by the cultivator in respect
of which no process% other than that to render the produce mar;etable%
has been performedI or
3iv5 by granting a right to any person to use the land for any periodI or
3b5 any income derived from any building which8
3i5 is occupied by the cultivator of any such land as is referred to in
section !3#53a5 in which any process is carried on to render mar;etable
any such produce as aforesaidI
3ii5 is on% or in the immediate vicinity of such landI and
3iii5is re<uired by the cultivator as the dwelling house or store house or
other out8house by reason of his connection with such land.
Sco*e
The following income of an assessee shall be classi&ed and computed under
the head Xagricultural incomeK under section !,3#5% namely?8
3a5 any income derived by the assessee which comes within the meaning
of Xagricultural incomeK as de&ned in section !3#5I
3b5 the e'cess amount 3sale proceeds of any plant or machinery used
e'clusively for agricultural purpose in e'cess of the written down value5
referred to in section #/3#-5I
3c5 the e'cess amount 3insurance% salvage or compensation moneys
received in respect of plant or machinery used e'clusively for
agricultural purpose which has been discarded% demolished or
destroyed% in e'cess of the written down value5 referred to in section
#/3#/5I
F-2 Characteristics of Agricultural Inco4e
a5 Income should be derived from land. A person may transfer his agricultural
land to another in consideration of a life annuity as was in the case of
%opal 5aran Barain 5ing! ; C0T /.<)2 0TR '<, "P6C $ or of other thing which
is charged upon the land. The annual receipt would not be agricultural
income.
b5 The land on which agricultural income is assessed must be situated in
Bangladesh.
c5 The land must be used for agricultural purpose. Jnless there is some
measure of cultivation of the land% some e'penditure of s;ill and labor
upon it% it cannot be said to be used for agricultural purposes. Income from
the sale of forest trees% bushes% bamboos% fruits and Aowers growing on
Agricultural
Income
Agricultural
7and
Buildin
g
>ith
Agricultur
al Process
>ithout
Agricultur
al Process
Fully
Agricultural
Income
Partly
Agricultural
Income
Bther
Agricultural
Income
Incom
e
$on8agricultural
Income
7easing
6ent
Adhi
Borga
Bhag
T
h
r
o
u
g
h
Paddy%
Potato% Mute%
Cereals%
:egetables
etc
Tea% 6ubber%
and Bther
Semi
agricultural
produce
Pro&t from
sale of
assets%
cattle
rearing%
poultry%
&sheries% etc
(oods produced
without agricultural
process% forest trees
and timbers% honey
from honey comb
land naturally without any human s;ill and labour is not agricultural
income. Income derived from the sale of wild grass or trees of
spontaneous growth is not agricultural income. But land leased for gra9ing
or pasturing animals re<uired for agricultural purpose is used for
agricultural purposes and income from lease is agricultural income
irrespective of whether the grass on the land is cultivated or grown
naturally.
d5 $o advance ta' is payable on agricultural income.
F-9 Categories of Agricultural Inco4e
Such income may come from agricultural land or any building ad=acent to
agricultural land that is used for agricultural purposes. Income from
agriculture may be generated from agricultural land due to running
agricultural process or giving the right to do so to others through contract.
.ith Agricultural )rocess
If a person owns agricultural land and actively involves with the agricultural
process to produce agricultural goods commercially% it results income from
agriculture. It may fall in either of the three categories?
a5 Fully agricultural income
b5 Partly agricultural income
c5 Bther agricultural income
%ull6 Agricultural Inco4eB >here the owner of the land follows the
conventional process of cultivation through ploughing land and ali;e% the
goods are produced commercially and sold in the mar;etI it becomes fully
agricultural income. For e'ample? production of paddy% potato% =ute etc.
)artl6 Agricultural Inco4eB If it re<uires industrial process before selling
agricultural produce in the mar;et% it will be considered as partly agricultural
income. As per section !,3!5% !,3)5% 6ules )# and )!% income derived from the
sale of tea and rubber falls in this category. The following table gives the full
reference of partly agricultural income?
Inco4e generates
fro4
Agricultural
Inco4e
Inco4e fro4
Business or
)rofession
#eferen
ce
Tea ,"P *"P
Sec
!,3!5
6ule )#
6ubber 4Tobacco 4
Sugar 4 Bther similar
products
Sec
!,3)5
6ule )!
3a5 If only agricultural
process is involved
#""P $othing
3b5 If both agricultural
and industrial
process is involved
,"P *"P
In the case of income which is partially agricultural income and partially
income from business% in determining that part of income which is from
business% the mar;et value of any agricultural produce which has been raised
by the assessee or received by him in ;ind and which has been utili9ed as raw
material in such business or the sale proceeds of which are included in the
accounts of the business shall be deducted and no further deduction shall be
made in respect of any e'penditure incurred by the assessee as a cultivator
or receiver of the produce in ;ind.
For the purpose% Xmar;et valueK in respect of agricultural produce% means8
3a5 where such produce is ordinarily sold in the mar;et in its raw state or
after application of any process employed by a cultivator to render it &t to
be ta;en to the mar;et% the value calculated according to the average
price at which it has been sold during the year previous to that in which
the income derived from such produce &rst becomes assessableI and
3b5 where such produce is not ordinarily sold in the mar;et in its raw state%
the aggregate of8
3i5 the e'penses of cultivationI
3ii5 the land development ta' or rent paid for the lands in which it was
grownI and
3iii5 such amount as the 0eputy Commissioner of Ta'es &nds% having
regard to the circumstances of each case% to represent a reasonable
rate of pro&t on the sale of the produce in <uestion as agricultural
produce
In computing such income from business% an allowance shall be made in
respect of8
3a5 the cost of planting bushes in replacement of bushes that have died or
become permanently useless in an already planted area% unless such area
has previously been abandoned?
3b5 the e'penditure incurred in the income year by the assessee in
connection with the development of the new areas for bringing them
under tea cultivation.
Other Agricultural Inco4eB Bther than the agricultural income speci&ed
above% some other income may be generated from typical agricultural process
due to the e'panded de&nition of agriculture in agricultural economics. This
type of income will fall under this classi&cation. Some of such agricultural
income is e'empli&ed below?
3i5 Income from cattle rearing
3ii5 Income from sale of palm =uice and date =uice
3iii5 Income from sale of seeds and grass% if grown by human e1ort
3iv5 Income from agricultural cooperative society which was organi9ed for
farming and cattle rearing
3v5 Income from land or assets used for processing the agricultural
commodities to ma;e them mar;etable
3vi5 Income from sale of herbal or medicinal plants
3vii5 Income from cultivation of Aower and fruits
3viii5 Income from sale of honey if produced in agricultural land using special
technologies li;e special bo' for Goney8comb.
3i'5 Income from dairy farm% provided F
a5 assessee is the owner of the cattle
b5 cattle are reared in cattle rearing &eld
c5 il; is processed by the assessee
3'5 Income from poultry farm if they are reared in agricultural land
3'i5 Income from &sheries
.ithout Agricultural )rocess
Sometimes the assessee may have income from agricultural land even
without agricultural process. Some of the e'amples may be li;eI
3i5 Income form land leased for agricultural purposes
3ii5 Income from any system of sharing of crop generally ;nown as adhi%
barga or bhag.
F-: Non Agricultural Inco4e
Sometimes% we may be confused with some income not generated from
agriculture but may be closely related to that. A possible list is given below
and any income from these sources should be considered as income from
other sources.
3i5 Income from ferry ghat and mooring terminal
3ii5 Income from sale of produce that grow up in the agricultural land without
agricultural wor;s e.g. forest trees% wild grass% fruit and Aowers grown
spontaneously and without human e1ort
3iii5Income from salt production by Aooding the land with sea water and then
e'tracting salt therefrom
3iv5Income from cutting and selling of timber on contract
3v5 Interest on arrear of rent for agricultural land
3vi5Income from letting out vacant land not used for agricultural purpose
3vii5 6oyalty 4 ground rent against lease of land for mining% potteries% <uarries
etc.
3viii5 Sale of soil used for bric; &eld
3i'5Income from sale of water used for irrigation
3'5 Income from sale of forest trees% Aowers% bamboo% wild grass% reeds or
fruits produced naturally without any agricultural wor;
3'i5Sale of stones from <uarries
3'ii5 Income from salary for wor;ing as an agricultural supervisor 4 manager
3'iii5 Income from sale of crops which has been purchased from others for
resale
3'iv5 Income from dairy &rm established for business purpose
3'v5 Income from poultry &rm established separately for business purpose
3'vi5 Income from &sheries established for business purpose
3'vii5Fish hunting% ship anchor etc.
3'viii5 Income derived from butter and cheese ma;ing
3'i'5 Income received as commission for wor;ing as middleman in agro
products
3''5 6emuneration received by managing agent at a &'ed percentage of net
pro&t from a company having agricultural income.
3''i5 Interest received by an assessee against loan in the form of agricultural
produce
3''ii50ividend paid by a company out of its agricultural income
F-@ Inco4e fro4 agricultural house *ro*ert6
>hen the property is occupied by the cultivator or the recipient where any
process as may be described agricultural% is carried therein by the recipient of
agricultural income% or in the immediate vicinity of agricultural land% and is
used as a dwelling house by the cultivator or the recipient of agricultural
income% in connection with the land% any income from such house property is
regarded as agricultural income. But non agricultural income does not
becomes agricultural by reason of only in direct connection with agricultural
land UPremier Construction Co6 ;6C6LT6 /.3- 06T6R6 <-(2 <-3:6
F-E Allo/a3le Deductions
As per section !- of IT Brdinance #/.*% the following e'penditures are
admissible deductions at the time of determining income from agriculture?
3i5 any land development ta' or rent paid in respect of the land used for
agricultural purposes.
3ii5 any ta'% local rate or cess paid in respect of such land.
3iii5 where the land is sub=ect to a mortgage or other capital charge for the
purposes of reclamation or improvement% the amount of any interest
paid in respect of such mortgage or charge.
3iv5 any sum paid in respect of the maintenance of any irrigation or
protective wor; or other capital assets. Such rate is given below?
Assets #ate
#. Pucca building #"P
!. Hutcha and Pucca Building #+P
). Hucha building !"P
*. Temporary structure $4A^
+. Pucca walls +P
,. Fencing of substantial material #"P
-. Tube8well #+P
.. Tan;s #"P
/. Pucca irrigation channel #+P
#
".
Hucha irrigation channel !"P
#
#.
Hucha irrigation wells )).))
P
#
!.
Pucca irrigation wells +P
#
).
Bulloc; drawn iron implements #+P
#
*.
Bulloc; drawn wooden or leather implements and small
other hand4implements
!+P
#
+.
>eighing machine #"P
#
,.
Tractors and oil engines and thin implements #+P
#
-.
Power pumping machinery !"P
#
..
Factor made cart of iron material with rubber tyre #+P
#
/.
Country cart !"P
!
".
Steam engine #"P
!
#.
>or;shop tools #+P
!
!.
(eneral 3machinery% implements% plants and other
assets5 not provided above #"P

3vi5 any sum paid as premium in order to e1ect any insurance against loss
of% or damage to% such land or any crops to be raised or cattle to be
reared thereon.
3vii5 any e'penditure incurred in cultivating such land or raising livestoc;
thereon.
3viii5 any e'penditure incurred in performing any process for rendering the
produce of such land &t to be ta;en to mar;et .
3i'5 any e'penditure incurred in transporting such produce or livestoc; to
mar;et .
3'5 any e'penditure incurred in maintaining agricultural implements and
machinery in good form and in providing for the up;eep of cattle for
the purpose of such cultivation% process% or transport.
3'i5 any interest paid in respect of capital borrowed for the purpose of
ac<uisition% reclamation and improvement of such land.
3'ii5 where no boo;s of account have been maintained in respect of
agricultural income derived from land% deduction for cost of production
shall be an amount e<ual to ,"P of the mar;et value of the produce of
the land% instead of allowance as admissible under the aforesaid items
3vii5% 3viii5% 3i'5 and 3'5.
3'iii5 where the agricultural income is derived according to the local XbargaK
or XbhagK or XadhiK system% no deduction on account of cost of
production shall be admissible under this clause.
3'iv5 in respect of any machinery or plant used e'clusively for agricultural
purpose which has been sold% transferred by way of e'change%
ac<uired% discarded% demolished or destroyed in the previous year% the
loss on sale of such plant and machinery will also be allowed sub=ect to
certain conditions as provided for in the Brdinance.
3'v5 any other e'penditure not being in the nature of capital or personal
e'penditure% laid out wholly and e'clusively for the purpose of deriving
such income from such land.
0eduction in respect of interest will not be allowed unless ta' has been paid
or deducted in accordance with the provisions of Chapter :II of the Brdinance.
F-F Non>assessa3le Agricultural Inco4e
Some mentioned income under the head is non8assessable as per di1erent
provisions of IT Brdinance and 6ules. These are mentioned below?
#. Agricultural income is non8assessable up to T;. +"%""" for an individual
assessee if his only source of income is agriculture USi'th Schedule% Part A%
Para !/V. This T;. +"%""" is in addition to regular non8assessable limit of
T;. #."%""" 3in case of woman% elderly citi9ens of more than ,+ years of
old T;. !""%""" and for disable persons T;. !+"%"""5.
Illustration '
r. 6a=ib reports T;. !+"%""" as income from agriculture during the income
year ended on Mune )"% !"##. Ge has no income from other sources. In this
case% r. 6a=ib will pay ta'es on T;. !"%""" only. Gis non8assessable
income is T;. !)"%""" 3T;. #."%""" Z T;. +"%"""5. It is assumed that r.
6a=ib doesnKt fall in elderly citi9en or disable category.
!. Any income including agricultural income of an indigenous Gillman of any
of the hill districts of 6angamati% Bandarban and Hhagrachari% which has
been derived solely from economic activities underta;en within the said
hill districts USi'th Schedule% Part A% Para !-V.
). Sub=ect to the conditions made hereunder any income from poultry for the
period from the 0rst da6 of Hul6= 2&'' to the thirtieth da6 of Hune=
2&'9 USi'th Schedule% Part A% Para *!V8
3a5 if such income e'ceeds T;. #%+"%"""48 an amount not less than #"P
of the said income shall be invested in the purchase of (overnment
bond or securities within si' month from the end of the income
yearI
3b5 the person shall &le return in accordance with the provisions of
Section -+3!53c5 of the ITB% #/.*I and
3c5 no such income shall be transferred by way of gift or loan within
&ve years from the end of the income year.
*. Agricultural produce used for self consumption.
F-D S*ecial Ta, #ate
Any income from &sheries% pelleted poultry feed% production of seeds%
mar;eting of locally produced seeds% cattle farming% dairy farming%
horticulture% frog farming% mushroom farming% Aoriculture% bee ;eeping%
sericulture for the period from the &rst day of Muly% !"## to the thirtieth day of
Mune% !"#) will be ta'ed at a reduced rate of +P US6B !).87aw8IT4!"## dated
Muly ",% !"##V.
Note
Some basic operations li;e application of human s;ill and labor on the land
are re<uired to constitute agriculture. Thus spontaneous growth of forest trees
without the aid of any human agency is not regarded as agriculture.
.or2ed ",a4*les and Solutions
.or2ed ",a4*le '
6elevant information regarding the agricultural income of Mamal Ahmed for the year
ended on Mune )"% !"## is given below?
Sale of Paddy #+" maunds Q T;. ,"" per maund
Sale of Mute #"" maunds Q T;. ."" per maund
Sale of 6abi crops T;. ,+%"""
Sale of Tea T;. -"%"""
Income from Barga T;. !"%"""
7ease rental of Agricultural land T;. )"%"""
2'penses relating to these income are as follows?
Cost of seeds and fertili9er T;. *"%"""
Cultivation costs ,+%"""
Transportation costs #+%"""
Brdinary processing costs !+%"""
7and revenue paid -%"""
Crop insurance premium +%,""
Allowable depreciation )%"""
Interest on borrowed fund !%.""
Compute ta'able income for Mamal Ahmed assuming that
3a5 he did not ;eep proper boo;s of accounts
3b5 he ;ept necessary boo;s of accounts
Solution 'B
3a5 >hen proper boo;s of accounts were not maintained?
Ha4al Ah4ed
Inco4e 6earB 2&'& > 2&''
Assess4ent 6earB 2&'' > 2&'2
Calculation of Total Inco4e
Inco4e fro4 Agriculture Section > 2E G 2F(B
Income from sale of paddy 3#+" ' T;. ,""5 /"%"""
Income from sale of =ute 3#"" ' T;. .""5 ."%"""
Income from sale of rabi crops ,+%"""
Sale of Tea 3T;. -"%""" ' ,"P5 *!%"""
Income from Barga !"%"""
7ease 6ental of Agricultural land )"%"""
)%!-%""
"
LessB Ad4issi3le e,*ensesB
#. Production costs 3!)+%""" ' ,"P5
#%*#%""
"
). Jnion parisad ta' *%*""
*. Crop insurance premium +%,""
+. Allowable depreciation )%"""
,. Interest on borrowed fund !%.""
#%+,%."
"
#%-"%!""
Inco4e fro4 Business and )rofessionB
Sale of Tea 3-"%""" ' *"P5 !.%"""
Total Ta'able Income #%/.%!""
3b5 >hen proper boo;s of accounts were maintained?
Ha4al Ah4ed
Inco4e 6earB 2&'& > 2&''
Assess4ent 6earB 2&'' > 2&'2
Calculation of Total Inco4e
Inco4e fro4 Agriculture Section > 2E G 2F(B
Income from sale of paddy 3#+" ' ,""5 /"%"""
Income from sale of =ute 3#"" ' .""5 ."%"""
Income from sale of rabi crops ,+%"""
Sale of Tea 3-"%""" ' ,"P5 *!%"""
Income from Borga !"%"""
7ease of Agricultural land )"%"""
)%!-%""
"
LessB Ad4issi3le e,*ensesB
#. Production costs8
Cost of seeds and fertili9er *"%"""
Cultivation costs ,+%"""
Transportation costs #+%"""
Brdinary processing costs !+%"""
#%*+%"
""
!. 7and revenue paid -%"""
*. Crop insurance premium +%,""
+. Allowable depreciation )%"""
,. Interest on borrowed fund !%.""
#%,)%*"
"
#%,)%,""
Inco4e fro4 Business and )rofessionB
Sale of Tea 3-"%""" ' *"P5 !.%"""
Total Ta'able Income #%/#%,""
.or2ed ",a4*le 2
r. 6upom o=umder is a farmer who own agricultural land which is used three times
a year to produce agricultural goods. Such cultivation is mainly done for commercial
purposeI however% a very insigni&cant part is consumed by him. Ge is an elderly
citi9en 3age more than ,+ years5 and has reported income from no other sources.
0uring the income year ended on Mune )"% !"##% he has reported following
information relating to income from agriculture?
Agricultural
)roduce
!olu4e of
)roduction
Self
Consu4*tion
Mar2et *rice
Paddy !#+ maunds #+ maunds T;. -"" per
maund
Potato ##! maunds #! maunds T;. #." per
maund
Cereals .)+ ;gs )+ ;gs T;. ##+ per ;g
In addition to above income% he also produced seasonal vegetables 3beans5 during
winter on the surroundings of his agricultural land. Total production was !+, ;gs and
sold at the rate of T;. #,. But of the total production% #, ;gs are used for self
consumption and reported T;. #%!"" as cost of bean production.
Ge also has reported T;. /+%""" income from poultry &rm and ful&lls all conditions to
be non8assessable.
Ge has also reported T;. #."%""" income from &sheries.
2'penses relating to these incomes are as follows?
Cost of seeds and fertili9er T;.
),%+""
7abor charge *"%"""
aintenance costs of agricultural e<uipments *%"""
Jnion parisad ta' +%.""
Crop insurance premium .%!""
0epreciation on tractor Q !"P #*%"""
r. o=umder has borrowed T;. +"%""" from 6a=shahi Hrisi Jnnayon Ban; at an
interest rate of #!P per annum on #+
th
Bctober !"#". Allowable depreciation for
tractor as per the Third Schedule of the ITB% #/.* is at the rate of #+P. Cost of seeds
and fertili9er includes T;. #%+"" spent against Borga. Ge maintains boo;s of accounts
properly.
Solution 2B
Mr- #u*o4 Mo<u4der
Inco4e 6earB 2&'&>2&''
Assess4ent 6earB 2&''>2&'2
Calculation of Total Inco4e
Inco4e fro4 Agriculture Section > 2E G 2F(B
Income from sale of paddy 3!"" ' -""5
#%*"%""
"
Income from sale of potato 3#"" ' #."5 #.%"""
Income from seasonal vegetables 3!*" '#,5 )%.*"
Income from poultry farm /+%"""
7ess? e'emption 3full5 /+%""" 8
Income from &sheries 3considered separately at the
time of computing ta' liability at a reduced rate of
+P5
#."%"""
)%*#%.*
"
7ess? Admissible e'penses?
#. Production costs8
Cost of seeds and fertili9er ),%+""
7abor charge *"%"""
aintenance of agricultural e<uipment *%"""
."%+""
!. Jnion parisad ta' +%.""
). Crop insurance premium .%!""
*. Allowable depreciation 3note #5 #"%+""
+. Interest on borrowed fund 3note8!5
,. Cost of bean production
*%!+"
#%!""
#%#"%*+
"
Total
!)#%)/
"
7ess? e'emption 3up to +"%"""5 +"%"""
Total inco4e
'D'=9
C&
NotesB
#. Allowable depreciation [ 3#*%"""4.!"5 ' .#+ [#"%+""
!. Interest on borrowed fund [ 3+"%""" ' #!P5 ' ..+4#! [ *%!+"
). As agriculture is the only source of income for r. 6upom o=umder% he is allowed
to get ma'imum T;. +"%""" e'emption in assessing his ta'able income.
*. As total income of r. 6upom o=umder doesnKt e'ceed the non8assessable limit
of T;. !""%"""I he will have no ta' liability. Thus% imposing ta' at a lower rate for
income from &sheries will have no implication here for computing ta' liability.
.or2ed ",a4*le 9
From the following particulars of income% compute the ta'able income r. Mibon Harma;er
for the income year !"#" 8!"##.
#. Sale of Paddy? !+" maunds Q T;. +"" per maund T;.
#!+%"""
!. Sale of Mute? #"" maunds Q T;. *"" per maund *"%"""
). Sale of 6abi Crops?
+"%"""
*. Annual lease rental from leasing agricultural land !"%"""
+. Sale of forest timber and bamboo
,%"""
,. Income from Tea garden
)"%"""
-. Income from 6ubber garden
*"%"""
.. Income from Tobacco industry
)"%"""
/. Income from Sugar industry
+"%"""
#". Income from Poultry farm
)+%"""
##. Income from cattle rearing
)%"""
#!. Income from sale of Palm and 0ate Muice
,%"""
#). Income from sale of Goney
+%"""
2'penses for cultivation are as follows?
#ice and #a3i cro*s Hute
Cost of seeds and fertili9er T;. !+%"""
T;.
-%"""
7abor charge +%""" !%"""
Cost of hiring pump machine )%""" #%"""
6epair e'pense of e<uipments +"" 8
Transportation cost !%""" +""
r. Harma;er maintains proper boo; for 6ice and 6abi crops% however% he maintains no
boo; for =ute.
Bther e'penses as incurred were as follows?
Jnion parisad ta' T;. !%"""
7and revenue #%"""
Crop insurance premium !%+""
Allowable depreciation /%"""
aintenance cost of irrigation plant
Insurance Premium 8 Tractor
*%"""
-%"""
Ge had a pump machine which was purchased at T;. !+%""". It has become obsolete
and has been discarded at T;.#!%""". As on the date of discard% the written down
value after charging depreciation on the basis of prescribed rate at the ITB% #/.*
amounted to T;. #"%""".
Ge has ta;en agricultural loan of T;. +"%"""Q .P interest per annum from
Bangladesh Hrishi Ban;.
r. Harma;er has a tractor purchased for T;. !+"%""" on which he has an active
insurance policy. 0uring the income year% the tractor becomes out of order and he &led a
claim with insurance company. After proper scrutiny% he receives T;. .!%""" from
insurance company as coverage. Gowever% depreciation charged so far on the tractor as
per IT Brdinance is T;. #+"%""".
Solution 9B
Mr- Hi3on 5ar4a2er
Inco4e 6earB 2&'&>2&''
Assess4ent 6earB 2&''>2&'2
Calculation of Total Inco4e
Inco4e fro4 Agriculture Section > 2E G 2F(B
Sale of rice 3!+" ' ,""5
#%!+%""
"
Sale of Mute 3#"" ' *""5 *"%"""
Sale of rabi crops +"%"""
Annual lease rental !"%"""
Income from tea garden 3)"%""" ' ,"P5 #.%"""
Income from rubber garden 3*"%""" ' ,"P5 !*%"""
Income from Tobacco industry 3)"%""" ' ,"P5 #.%"""
Income from Sugar industry 3+"%""" ' ,"P5 )"%"""
Income from poultry Farm )+%"""
385 e'emption 3full5 )+%""" 8
Income from cattle rearing )%"""
Income from sale of Palm and 0ate =uice ,%"""
Income from sale of honey +%"""
(ain from sale of obsolete e<uipment
3sales 8 >0: [ #!%""" 8 #"%"""5 !%"""
)%*#%"""
7ess? admissible e'penses
#. Production e'penses?
Cost of seeds L Fertili9er !+%"""
7abor charge +%"""
Cost of pump machine hire )%"""
6epair e'panses of agricultural e<uip. +""
Transportation cost !%"""
Production costs for rice L 6abi Crops )+%+""
Costs for =ute 3*"%""" ' ,"P5 !*%"""
+/%+""
!. Jnion parisad Ta' !%"""
). 7and 6evenue #%"""
*. Crop insurance premium !%+""
+. Allowable 0epreciation /%"""
,. aintenance cost of irrigating plant *%"""
-. Insurance Premium F Tractor -%"""
.. 7oss from tractor 3T;. #""%""" F T;. .!%"""5 #.%"""
.. Interest from borrowed fund 3+"%""" ' .P5 *%""" *-%+""
#"-%"""
!%)*%"""
Inco4e fro4 Business or *rofessionB
Income from tea garden 3)"%""" ' *"P5 #!%"""
Income from rubber garden 3*"%""" ' *"P5 #,%"""
Income from Tobacco industry 3)"%""" ' *"P5 #!%"""
Income from Sugar industry 3+"%""" ' *"P5 !"%"""
,"%"""
Inco4e fro4 Other Sources
Sale of forest timber and bamboo ,%"""
Total Inco4e
9=&&=&&
&
.or2ed ",a4*le :
Compute ta'able income and ta' liability of r. 2;hlash ia from the following
particulars related to the income year ended on )"
th
Mune% !"##?
)articulars BDT
Sale of Paddy U!"" maunds Q T;. *"" per maundV ."%"""
Sale of Mute U#+" maunds Q T;. ,"" per maundV /"%"""
Sale of 6abi Crops ,"%"""
Income from agricultural cooperative society which was organi9ed
for farming
!+%"""
Income from lease of agricultural land #""%"""
Income from Barga #!+%"""
Income from sale of herbal or medicinal plants )"%"""
Income from lease of storehouse used for storing crops !"%"""
Income from sale of tobacco to BATC !"%"""
Income from sale of sugarcane to (overnment Sugar mill )+%"""
Income from &sheries #+"%"""
r. 2;hlash ia had a drum seeder which was purchased for T;. *"%""". Gowever% he
has sold the seeder for T;. )"%""" when the accumulated depreciation of the
machine was T;. !"%""" in his boo;. oreover% he also had a weighing machine
whichD was purchased at T;. #.%""". It has become obsolete and has been discarded
at T;. /%+"". At the time of sale the written down value of the machine was T;.
#)%""".
Ge didnDt maintain the boo;s of accounts properly. 2'penses claimed by him are as
follows?
Production costs !""%"""
7and revenue paid .%"""
Interest on loan !%+""
Jnion parisad ta' *%"""
Purchase of tractor -"%"""
aintenance of the irrigation plant #!%"""
In addition to it% during the year r. 2;hlash ia also incurred the following
investments and e'penses?
Family e'penses +"%"""
7ife Insurance premium 3policy value T;. !""%"""5 !+%"""
Purchase of unlisted companyDs share !+%"""
0onation to presidentDs relief fund !"%"""
0onation to a local club ,%"""
0onation to (overnment Ra;at fund )"%"""
Purchase of (old !-%"""
Solution :B
Mr- "2hlash Mia
Income year? !"#" 8 !"##
Assessment year? !"## 8 !"#!
Calculation of Total Income
Inco4e fro4 Agriculture Section > 2:(B
Income from sale of Paddy 3!"" ' *""5 ."%"""
Income from sale of Mute 3#+" ' ,""5 /"%"""
Sale of 6abi Crops ,"%"""
Income from Agricultural Co8operative Society !+%"""
Income from lease of agricultural land #""%"""
Income from Barga #!+%"""
Income from sale of herbal or medicinal plants )"%"""
Income from lease of storehouse used for storing crops !"%"""
Income from sale of tobacco to BA TC !"%"""
Income from sale of sugarcane to (overnment Sugar mill )+%"""
(ain on sale of drum seeder UT;. )"%""" F 3T;. *"%"""8
T;.!"%"""5V
#"%"""
Income from &sheries 3considered separately at the time of
computing ta' liability at a reduced rate of +P5
#+"%"""
-%*+%"""
LessB Admissible e'penses?
#. Production costs 3$ote 8 #5 #./%"""
!. 7and revenue paid .%"""
). Interest on loan !%+""
*. Jnion parisad ta' *%"""
+. aintenance of irrigation plant #!%"""
,. 7oss from sale of weighing machine 3$ote 8 !5 )%+""
!%#/%"""
Total inco4e @2E=&&&
Calculation of In+est4ent allo/anceB
Actual In+est4ent Made
Insurance premium
Bwn T;. !+%"""
a'imum limit? !%""%""" ] #"P !"%"""
T;. !"%"""
0onation to presidentDs relief fund !"%"""
0onation to (overnment Ra;at fund )"%"""
Actual In+est4ent F&=&&&
a'imum limit of investment?
7ump sum of
T;.
#%""%""%"""
Br% !+P of Total ta'able income 3!+P of T;.
+%!,%"""5
#%)#%+""
!ic!ever is lower #)#%+"""
Thus% allowance amount for investment allowance is T;. -"%"""
Ta' rebate Q #"P on allowable investment is 3-"%"""
' #"P5 T2- F=&&&
Calculation of Ta, lia3ilit6B
a5 Income on which regular rate is
applicable
Income Slab
6ate Amount 3T;.5
Bn the &rst T;. #%."%""" "P $il
Bn the balance #%/,%""" #"P #/%,""
b5 Income on which reduced ta' rate is
applicable
Income from &sheries #%+"%""" +P -%+""
Total +%!,%""" !-%#""
7ess? investment ta' credit -%"""
$e't ta' liability !"%#""
NotesB
#. Allowable production cost?
Total sale proceeds from produced goods?
a5 Sale of paddy ."%"""
b5 Sale of =ute /"%"""
c5 Sale of rabi crops ,"%"""
d5 Sale of herbal or medicinal plants )"%"""
e5 Sale of tobacco !"%"""
f5 Sale of sugarcane )+%"""
)#+%"""
Production cost [ 3)#+%""" ' ,"P5 [ #./%"""
!. 7osses due to discard of weighing machinery?
>0: of the machine T;. #)I"""
0isposable price /%+""
7oss from sale of weighing machine )%+""
). Since further processing8 was absent in case of tobacco and sugarcane% the
entire amounts have been considered as agricultural income.
Self>Assess4ent ?uestions
#. 0e&ne XAgricultural incomeK under the Income Ta' Brdinance #/.*.

!. 0iscuss the allowable deductions as per section !- of the Brdinance in
computing the ta'able income under the head XAgricultural incomeK.
). Gow will you compute the income in respect of Tea and 6ubber industriesN
*. >hat are the di1erent types of agricultural incomeN
+. Bn what categories of agricultural income% ta'es are imposed at a reduced
rateN
)ro3le4B
Compute ta'able income and ta' liability of r. Mulhash Hhan% a ,- years old farmer%
from the following particulars related to the income year ended on )"
th
Mune% !"##?
Sale of Paddy !"" maunds Q T;. *"" per maund
Sale of Mute #+" maunds Q T;. ,"" per maund
Sale of 6abi Crops T;. ,"%"""
Income from agricultural co8operative society
which was organi9ed for farming T;. !+%"""
Income from lease of agricultural land T;. #""%"""
Income from Barga T;. #!+%"""
Income from sale of herbal or medicinal plants T;. )"%"""
Income from lease of storehouse used for storing
crops
T;. !"%"""
Income from tobacco industry T;. !"%"""
Income from sale of sugar T;. )+%"""
Income from sale of tea T;. !"%"""
r. Athar Ali had a pump machine which was purchased for T;. *"%""". To ac<uire an
advance technology in the irrigation plant he has sold the pump machine for T;.
*!%""". At the time of sale the amount of accumulated depreciation of the pump
machine was T;. #.%""". oreover% he also had a weighing machine which was
purchased at T;. #.%""". It has become obsolete and has been discarded at T;.
/%+"". At the time of sale the written down value of the machine was T;. #)%""".
Ge didnKt maintain the boo;s of accounts properly. 2'penses claimed by him are as
follows?
Production costs !""%"""
7and revenue paid .%"""
Interest on loan !%+""
Jnion parisad ta' *%"""
Installation of irrigation plant -"%"""
aintenance of the irrigation plant #!%"""
In addition to it% during the year r. Athar Ali also incurred the following investments
and e'penses?
Family e'penses T;. +"%"""
7ife Insurance premium 3policy value
T;. )%""%"""5
!+%"""
Purchase of debenture from primary
mar;et
!+%"""
0onation to Aga Hhan 0evelopment
$etwor;
!"%"""
0onation to a local mos<ue ,%"""
0onation to (overnment Ra;at fund )"%"""
Purchase of Furniture !-%"""
Chapter .
Inco4e fro4 3usiness or *rofession
Contents
Introduction
2'amination conte't
To*ic List
>or;ed 2'amples and Solutions
..# eaning of Business and Profession
..! Scope of Income under the head XIncome from Business and
ProfessionK
..) Some Speci&c (uidelines
..* Allowable 0eductions
..+ 0eduction not Admissible
.., Capital and 6evenue 2'penditure
..- Illustrations of Some Important Concepts
Introduction
Learning o3<ecti+es
Identify income from business and profession.
Compute the ta'able income under the head XIncome from Business and
ProfessionK.
Identify the allowable deductions under the head.
Identify the e'penses that are inadmissible.
Introduce the comple'ity of computing income from business and
profession.
Identify the e'penses admissible up to a certain limit.
Compute net ta' liability in di1erent situations.
)ractical signi0cance
The head XIncome from Business and ProfessionK is very important to ta'ing
authority. A signi&cant part of ta' revenue government collects from this
head. This head also includes lot of comple' issues on which clear
understanding is re<uired to practice ta'. This chapter lays the basic
foundation of corporate assessment and ta'ation.
This chapter presents an idea of how conventional pro&t and loss account can
be ad=usted with applicable ta' laws. It presents the scope of income under
the head% admissible e'penses% inadmissible e'penses and other related
issues.
Some e'penses are admissible up to a certain limit. These are e'plained with
some e'amples. Bther comple' issues li;e per<uisites% balancing charge etc.
are simpli&ed with e'amples.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the computation of ta'able income under the head
Xincome from business and professionK is one of the basic re<uirements for
determining ta' liabilityN Can you determine the ta'able income under the
headN Can you compute net ta' liability of an assessee having income under
the headN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the total ta'able income for any income year. Before advising the clients%
accountants should have the clear concept relating to the admissible and
inadmissible e'penses so that they can deduct or add the e'penses in
determining the ta'able income.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
Cou will be also using this ;nowledge when you tac;le the ta'ation paper later
on in the Professional Stage and it will also underpin the technical aspects at
the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne income from business and profession.
Identify di1erent scope of income under the head.
Compute the ta'able income under the head XIncome from Business and
Profession.
Illustrate the income cannot be reported under the head.
Identify the allowable deductions under the head.
Illustrate the e'penses admissible up to a certain limit.
Compute net ta' liability under the head.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
core concept on computation of income which is vital for calculating ta'
liability. Clear concept and understanding of each contents of this chapter will
help candidates to resolve any problems relating to computation of income
from business and profession.
D-& INCOM" %#OM BUSIN"SS AND )#O%"SSION
Section O+er+ie/
Scope of income from business and profession is very big.
The total income may not be ta'able income.
There are some allowable% inadmissible and not permissible deductions
under the head.
Computation of income under the head is very signi&cance.
Any amount of per<uisites% entertainment allowance% and free sample are
not admissible.
0epreciation allowances is very important for determining pro&t
6evenue e'penditure and capital e'penditure is considered di1erently.
D-' Meaning of Business and )rofession
RBusinessS de&ned in Section F !3#*5 as including any trade% commerce or
manufacture% or any adventure or concern in the nature of trade% commerce
or manufacture.
According to B'ford Advanced learnerKs 0ictionary% business means the
activity of ma;ing% buying% selling or supplying goods or services for money.
Section !3*/5 de&nes a profession as 8 Dprofession includes a vocationD.
Profession involves the idea of an occupation using intellectual s;ill% or any
manual s;ill as distinguished from an operation which is substantially the
production or sale arrangements for the production or sale of commodities.
Following are the characteristics of a profession?
a. mastering of particular intellectual s;ill ac<uired through rigorous
education and trainingI
b. adherence to common code of conduct or professional ethicsI
c. acceptance of a social duty of due care and service.
Profession is therefore% a broader term di1erent from a vocation% trade or
commerce. The characteristics mentioned above are absolutely essential to
call any activity as professional which may not be so rigorously re<uired in a
vocation% occupation or trade. Further in a profession mental and intellectual
contents are much higher than mechanical s;ill re<uired in a vocation or
occupation.
D-2 Sco*e of Inco4e under the head VInco4e fro4 Business and
)rofessionO
Scope of income under the head XIncome from Business and ProfessionK
encompasses the following areas as per di1erent sections of IT Brdinance%
#/.*?
a(%ull6 Inco4e fro4 Business or )rofession
Section !.3#5
3a5
pro&ts and gains of any business or profession carried on by
the assessee
Section !.3#5
3b5
income derived from any trade or professional association or
other association of li;e nature
Section !.3#5
3c5
value of any bene&t or per<uisite arising from business or the
e'ercise of a profession
Section !.3#5
3d5
L Section
#/3#+5
receipt of any loss% bad debt or e'penditure already chargedI
unpaid amount of interest or share of pro&t to certain ban;s
after three years of chargeI bene&t derived in respect of
trading liability that remains unpaid for three years
Section !.3#5
3e5 L Section
#/3#,5
income from the disposal of any building% machinery or plant
used for purpose of any business or profession carried on by
him
Section !.3#5
3f5 L Section
#/3#.5
income from any insurance% salvage or compensation
moneys received in respect of any building% machinery or
plant used for the purpose of business or profession
Section !.3#5
3g5 L Section
#/3!"5
Income from the disposal of an asset representing
e'penditure of a capital nature on scienti&c research
Section !.3#5
3h5 L Section
#/3!)5
Income from the transfer of e'port <uota by an assessee
being an e'porter of garments
3()artl6 Inco4e fro4 Business or )rofession
Section !,3!5
L 6ule )#
Income from the sale of Tea
Section !,3)5
L 6ule )!
Income from the sale of 6ubber 4Tobacco 4 Sugar 4 Bther
similar products
D-9 So4e S*eci0c $uidelines
In line with section !.3!5 some typical companies should compute ta'able
income as per the guidelines given in di1erent schedules as mentioned below?
Fourth Schedule The pro&ts and gains from insurance business and the
ta' payable thereon
Fifth Schedule F
Part A
The pro&ts and gains from the e'ploration and
production of petroleum 3including natural gas5 and the
ta' payable thereon
Fifth Schedule F
Part B
The pro&ts and gains of any business which consists of
or includes the e'ploration and e'traction of such
mineral deposits of wasting nature% not being petroleum
and natural gas% as may be speci&ed
The amount of interest which is not brought in the pro&t and loss account and
;ept in suspense account relating to classi&ed bad and doubtful debts of
Bangladesh Shilpa Ban;% Bangladesh Shilpa 6in Sangstha% Investment
Corporation of Bangladesh and any commercial ban; including the
Bangladesh Hrishi Ban; and the 6a=shahi Hrishi Jnnayan ban; shall be
chargeable to ta' in the income year in which it is credited to the pro&t and
loss account for that year or as the case may be% it is actually received%
whichever is earlier USection !.3)5V.
D-: Allo/a3le Deductions
The e'penditures which are deductible in determining income from business
or profession liable to ta' have not been enumerated e'haustively. A few
heads of allowable e'penditures have been speci&ed under Section !/3#5 but
many other e'penses can be claimed to be admissible under section !/3#5
3''vii5 which is generally ;nown as OomnibusW clause.
The allowable deductions which have been speci&cally mentioned in section
!/3#5 are mentioned below?
3i5 6ent for the premises used for the purpose of business or profession
USection !/3#5 3i5V.
Provided t!at if a su?stantial part of t!e premises is used ?y t!e
assessee as a dwelling !ouse2 t!e amount s!all ?e a proportionate part
of t!e rent !aving regard to t!e proportionate annual value of t!e part
so used6
3ii5 6epairs to hired business premises is the assessee bears the e'pense
USection !/3#5 3ii5V.
Provided t!at if a su?stantial part of t!e premises is used ?y t!e
assessee as a dwelling !ouse2 t!e amount s!all ?e a proportionate part
of t!e sum paid for suc! repair !aving regard to t!e proportionate
annual value of t!e part so used6
3iii5 Ban; interest paid or any pro&t shared with a ban; run on Islamic
principles in respect of capital borrowed of the purpose of business or
profession USection !/3#5 3iii5V.
Provided t!at if any part of suc! capital relates to replenis!ing t!e cas!
or to any ot!er asset transferred to any ot!er entity2 w!en lending of
money is not t!e ?usiness of transferor2 t!e amount s!all ?e
proportionate part of t!e interest so paid or t!e proft so s!ared !aving
regard to t!e proportion of suc! capital so used6
3iv5 Share of pro&t paid by a ban; run on Islamic principles USection !/3#5
3iv5V.
3v5 An amount not e'ceeding +P of the pro&t transferred to Special 6eserve
by ban;s and &nancial institutions approved by the (overnment USection
!/3#5 3v5V.
3vi5 6epairs to own buildings% plants% machinery% furniture or other &'ed
assets USection !/3#5 3vi5V.
3vii5 Insurance premium for insurance against ris; of damage etc. of
buildings% plant furniture or other &'ed assets used in business or
profession USection !/3#5 3vii5V.
3viii5 0epreciation of building% machinery% plant or furniture being owned by
the assessee and used for business or profession as per Third Schedule
USection !/3#5 3viii5V.
3i'5 Investment allowance for a passenger vessel or a &shing trawler which is
entitled to special depreciation is allowable at !"P of the original cost
sub=ect to stipulated conditions USection !/3#5 3i'5V.
3'5 >here 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 e'change or compulsorily ac<uired by a
legally competent authority or e'ported outside Bangladesh in any
income year% an obsolescence allowance to the e'tent and computed in
the manner speci&ed in paragraph #" of the Third Schedule USection
!/3#5 3'i5V.
3'i5 Bbsolescence allowance and allowance on account of death or useless
animals used for the purpose of business or profession otherwise than as
stoc; in trade USection !/3#5 3'ii5V.
3'ii5 7and development ta' or rent% local rate or municipal ta' USection !/3#5
3'iii5V.
3'iii5 Bonus paid to employees including festival bonus USection !/3#5 3'iv5V.
3'iv5 The amount of bad debt which is established to have become
irrecoverable% under the stated circumstances USection !/3#5 3'v5V.
3'v5 The amount of bad debt written o1 as irrecoverable but deduction not
allowed on the ground that it was not then irrecoverable% the amount
which was established to be irrecoverable USection !/3#5 3'vi5V.
3'vi5 The amount of bad debt having been irrecoverable in an earlier year is
allowable for the earlier year under certain circumstances and with the
consent of the assessee USection !/3#5 3'vii5V.
3'vii5In respect of provision for bad and doubtful debt made by Bangladesh
Shilpa Ban; or Bangladesh Shilpa 6in Songstha for overdue loan% a sum
e<ual to &ve percent of such overdue loan or the amount of actual
provision for such bad or doubtful debt in the boo;s of the assessee%
whichever is the less USection !/3#5 3'viiia5V.
Provided t!at t!e deduction s!all ?e allowed only in respect of t!e
assessment years /.-,*..2 /.--*-. and /..(*./6
Provided furt!er t!at if any amount out of t!e amount so allowed is
ultimately recovered2 t!e same s!all ?e deemed to ?e a proft of t!e
year in w!ic! it is recovered6
3'viii5 Provision for bad and doubtful debt and interest thereon made by a
commercial ban; including the Bangladesh Hrishi Ban; and the 6a=shahi
Hrishi Jnnayan Ban; of a sum e<ual to #P of the outstanding loan
including interest thereon or the amount of actual provision% whichever is
less% sub=ect to the speci&ed conditions USection !/3#53'viiiaa5V.
Provided t!at t!e deduction s!all ?e allowed only in respect of t!e
assessment years /..(*./2 /../*.'2 /..'*.<2 /..<*.32 /..3*.)2 /..)*
.+2 /..+*.,2 /..,*.-2 /..-*..2 /...*'(((2 '(((*'((/2 '((/*'(('2
'(('*'((<2 '((<*'((32 '((3*'(()2 '(()*'((+ and '((+*'((,6
Provided t!at t!e provision of t!is clause s!all apply only in respect of
loan w!ic! t!e Banglades! BanA !as classifed as ?ad and dou?tful
de?ts6
0f any amount out of t!e provision for ?ad and dou?tful de?t and interest
t!ereon w!ic! !as ?een allowed is ultimately recovered2 t!e amount so
recovered s!all ?e deemed to ?e proft of t!e year in w!ic! it is
recovered6
Provided t!at no deduction under t!is clause s!all ?e allowed in respect
of *
a5 Any amount representing grant allowed by the (overnment in the
form of #+8Cear Special Treasury Bonds.
b5 Any loan advanced to any (overnment Brgani9ation or Body
Corporate or any other loan guaranteed by the (overnment.
c5 Any debt representing loans advanced to any director of the ban;% his
nominees or dependents.
3'i'5 Any e'penditure% not being capital e'penditure% laid out or e'pended on
scienti&c research related to the business USection !/3#5 3'i'5V.
3''5 Any e'penditure of a capital nature laid out or e'pended on scienti&c
research related to the business sub=ect to the stipulated conditions
USection !/3#5 3''5V.
3''i5 Any sum paid to scienti&c research institute or other speci&ed bodies
carrying out scienti&c research approved by the Board sub=ect to the
stipulated conditions USection !/3#5 3''i5V.
3''ii5Any sum% not being of capital nature laid out or e'pended on any
educational institute or hospital established for the bene&t of employees
sub=ect to the stipulated condition USection !/3#5 3''ii5V.
3''iii5 2'penditure 3including capital e'penditure incurred on any educational
institution or hospital for the bene&t of employees and their dependents
is deductible provided no charge is made for the services rendered by
such hospital or institution. 2'penditure incurred on the construction%
maintenance or running of any institute for the training of industrial
wor;ers will be similarly deductible USection !/3#5 3''iii5V.
3''iv5 Any e'penditure laid out or e'pended on the training of citi9ens of
Bangladesh in connection with a scheme approved by the $ational Board
of 6evenue USection !/3#5 3''iv5V.
3''v52'penses incurred in connection with visits abroad in a Trade 0elegation
sponsored by (overnment USection !/3#5 3''v5V.
3''vi5 Subscriptions paid to registered trade organi9ations annual
membership subscription paid to registered trade organi9ation or to a
recogni9ed professional institution is allowable e'penditure for the
purpose of computation of income from business USection !/3#5 3''vi5V.
3''vii5 Any e'penditure% not being in the nature of capital e'penditure or
personal e'penses of the assessee laid out or e'pended wholly and
e'clusively for the purpose of the business or profession of the assessee
USection !/3#53''vii5V.
Allo/a3le Deductions )ro*ortionatel6
>here any premises% building% machinery% plant or furniture is not wholly used
for business or profession% any deduction allowable under section !/3!5 will be
allowed proportionately.
D-@ Deduction not Ad4issi3le
The following e'penditures are not admissible deductions in the determination
of income from business or profession under the circumstances as stated
against each item?
3a5 Payment of salaries if ta' is not deducted at the time of payment and
paid thereon in accordance with section +" of Chapter :II USection
)"3a5V.
3b5 Any payment made by an assessee to any person if ta' thereon has
not been deducted and credited in accordance with the Chapter8:II and
:at thereon has not been collected or deducted and credited in
accordance with the :AT Brdinance #//#USection )"3aa5V.
3b5 Payment of interest% salary% commission or remuneration by a &rm or
an association of persons to any partner of the &rm or any member of
the association% as the case may be USection )"3b5V.
3c5 Bro;erage or commission paid to a non8resident if ta' has not been
deducted there from under section +, USection )"3c5V.
3d5 Payment to a provident or other fund unless e1ective arrangement has
been made for deduction of ta' at source while ma;ing the payments
from the fund which are ta'able under the head OSalariesW USection
)"3d5V.
3e5 Amount of per<uisites or other bene&ts paid to any employee in e'cess
of T;. !+"%""" USection )"3e5V.
In this regard% Xper<uisiteK means 8
i. Any payment made to an employee by an employer in the form of
cash or in any other form e'cluding basic salary% festival bonus%
arrear salary% advance salary% leave encashment or leave fare
assistance and over time% and
ii. Any bene&t% called by whatever name% provided to an employee by
an employer% whether convertible into money or not but other than
contribution to8
3a5 recogni9ed provident fundI
3b5 approved pension fundI
3c5 approved gratuity fundI
3d5 approved superannuation fund.
3f5 Any e'penditure in respect of the following as is in e'cess of the
amount or rate prescribed in this behalf and as is not% in the cases of
sales and services liable to e'cise duty% supported by e'cise stamp or
seal% namely?
3a5 entertainmentI
3b5 foreign travels of employees and their dependents for holidaying
and recreationI
3c5 publicity and advertisementI and
3d5 distribution of free samples.
3g5 Any e'penditure e'ceeding ten percent of the pro&t under the head of
Gead BEce e'penses by a company not incorporated in Bangladesh
under Company Act% #//*I
3h5 Any payment by way of royalty% technical services fee% technical ;now8
how fee or technical assistance fee e'ceeding si' percent of the pro&tI
3i5 Any payment by way of salary or remuneration made otherwise than
by crossed chec; or ban; transfer by a person to any employee having
gross monthly salary of ta;a &fteen thousand or moreI
3=5 Any e'penditure by way of incentive bonus e'ceeding ten per cent of
the disclosed net pro&tI
3;5 Any e'penditure by way of overseas traveling e'ceeding one percent of
the disclosed turnover.
D-E Ca*ital and #e+enue ",*enditure
Ca*ital ",*enditure
All e'penditure incurred in ac<uisition of an asset of a permanent nature which
is held for the purpose of carrying on business% such as land% building% plant%
furniture etc. is called capital e'penditure. Such e'penditure retains a
permanent value of the business e'cept for the wear and tear which the assets
undergo on account of their use. If an amount is e'pended on an e'isting asset%
its value is increased. It will be regarded as capital e'penditure. 2'penditure
incurred in obtaining a license to secure an agency will be a capital one though
the agency might not have become secured. Any e'penditure incurred for the
following purposes will be capital e'penditure?
3#5 For ac<uiring &'ed assets% e.g. land% building% machinery% furniture etc.
held for use in the business. The cost of a &'ed assets will include all
e'penses incurred up to the time the assets become ready for use% e.g.
legal charges% bro;erKs charges% freight% import duty% clearing% carriage%
cartage and erection chargesI
3!5 For retaining capital assetsI
3)5 For improvement and e'tension of &'ed assets% cost of ma;ing additions to
building% machinery% plant and furniture etc. and other improvements of
assetsI
3*5 For increasing in any way the pro&t earning capacity of a business% e.g. the
cost of shifting the business to better and more suitable premisesI
3+5 For raising money for capital purposes% e.g. bro;erage and commission
paid for procuring loansI
3,5 Cost of constructing a factory or installing machineryI
3-5 Cost of e<uipment and apparatusI
3.5 Cost of machinery% plant and furnitureI
3/5 2'penses incurred in connection with the erection of buildings and plantsI
3#"5 Amount spent on the construction of reservoirI
3##5 2'penditure incurred on improvements to property% as distinguished
from mere repairsI
3#!5 2'penditure incurred in respect of reconstruction of business premises
or converting the same from one type to anotherI
3#)5 Price paid for the purchases of copyright or patent right.
#e+enue ",*enditure
All e'penditure incurred in buying goods for resale or converting raw materials
to manufactured articles or incidental to the conduct and &nancing of the
business% is treated as revenue e'penditure. Cost of goods purchased for the
business in which a person deals% sums paid as rent% salaries and wages%
repairs etc. are instances of revenue e'penditure. 2'penditure incurred for
any of the following purposes will be regarded as revenue e'penditure?
3#5 For purchasing assets with a view to re8selling them at pro&t or
manufacturing them in a saleable condition% e.g. goods% raw materials and
storesI
3!5 For maintaining capital assets in good wor;ing order% e.g. repairs and
renewals of buildingsI
3)5 For meeting day8to8day e'penses of carrying on a business% e.g. salaries%
wages% rents etc.
Tests for deter4ining an e,*enditure as either ca*ital or re+enue
nature
If the money comes from circulating capital% it will be revenue e'penditureI if
it emanates from &'ed capital% it will be capital e'penditure.
If the answer to any of the following <uestions is in the aErmative% it is a
capital e'penditure% otherwise it is revenue e'penditure?
3!5 0oes the e'penditure result in the ac<uisition or retention of a capital
assetN
3)5 Is there an addition or improvement to &'ed assetsN
3*5 Gas it in any way improved income8generating capacity of the businessN
3+5 Gas it been incurred to raise any capital sum for businessN
The following e'penses which% prima facie% are of a revenue nature% become
capital under certain circumstances as under?
3#5 6aw materials and stores when utili9ed in ma;ing a &'ed assetI
&2( >ages and salaries when paid in connection with the installation or
construction of a &'ed asset. Thus% when a company manufactures a
machine for its own use% the wages and salaries of persons employed on
the wor; will be capital e'penditureI
&3( Carriage and freight e'penses incurred in connection with the ac<uisition
of &'ed assetsI
3*5 Cost of repairs incurred in putting a second hand &'ed assets into a proper
operational stateI
3+5 7egal charges incurred in connection with the ac<uisition of &'ed assets%
e.g. building% machinery% plant etc. and e'penses incurred in clearing
encumbrances thereon.
A particular item of e'penditure may be of both capital and revenue nature%
e.g.% the combined cost of repairs% renewals etc. The amount should be
apportioned after deciding how much of the total e'penditure represents cost
of improvements or additions etc. and how much of it is in the nature of pure
repairs.
The following types of e'penditure have been held to be capital e'penditure?
3#5 Preliminary e'penses incurred for Aoating or ac<uiring a businessI
3!5 2'penses incurred for raising of capitalI
3)5 Cost of shifting of business from one place to another with a view to
increasing its revenue8earning capacityI
3*5 7ump sum payments made to retiring directors of a company in order to
restrain them from entering into competition with the business of the
company.
D-F Illustrations of So4e I4*ortant Conce*ts
Balancing Charge
Balancing charge is the revenue gain earned by a business at the time of
disposal of any building% machinery and plant used for the purpose of
business or profession. Total gain on disposal is the di1erence between sale
proceeds and written down value 3>0:5 of the asset. If the sale proceed is
higher than the original cost% it results capital gain. And balancing charge
results once capital gain is deducted from total gain. At di1erent amount of
sale proceeds applied on same asset% di1erent concept is e'empli&ed below?
]CR Company owns an asset originally purchased for T;. #""%""". The
company recently disposes the asset when written down value of the asset
amounts to T;. +,%""". Assuming di1erent sale proceeds% the concepts are
presented below?
Sale
Proceeds
Total (ain
3Sale
Proceeds 8
>0:5
Capital (ain
3Sale
Proceeds 8
cost5
6evenue (ain
3Total gain F
Capital gain5
7oss 3>0: F
Sale
proceeds5
3a5 #!"%""
"
,*%""" !"%""" **%""" nil
3b5 /"%""
"
)*%""" nil )*%""" nil
3c5 +"%""
"
nil nil nil ,%"""
Co4*ensation #ecei+ed fro4 Insurance Co4*an6
>hen any building% machineries or plant used for the purpose of business or
profession is demolished% destroyed or discarded and insurance compensation
is received% amount e<ual to balancing charges is reported as income from
business or profession. The application is similar to balancing charge% the only
di1erence is that the asset is not disposed rather destroyed and thus the
amount is received from insurance company as compensation money.
7etKs assume the same asset. The asset is now destroyed and there is an
active policy covering the ris; of the asset. And the company lodged claim
with di1erent amount of compensation money received as shown below?
Compensat
ion
6eceived
Total (ain
3Compensatio
n 6eceived 8
>0:5
Capital (ain
3Compensatio
n 6eceived 8
cost5
6evenue (ain
3Total gain F
Capital gain5
7oss 3>0: F
Compensation
6eceived5
3a5 #)"%""" -*%""" )"%""" **%""" nil
3b5 #""%""" **%""" nil **%""" nil
3c5 *"%""" nil nil nil #,%"""
%ractional inco4e in Certain Cases e,*ort +alue of gar4ents= tea=
ru33er= to3acco(
In certain cases% income from business or profession is assessed as a certain
percentage of total income. These are?
a5 Part of income from tobacco% sugar or other agricultural products that
needs industrial process to ma;e it mar;etable. Gere% income from
business will be? Final Sale Proceeds F Fair value of the raw materials
produced. 36ule )"5
b5 )P of the e'port value of the garments e'portable against the e'port
<uota as transferred to any assessee 36ule )"A5
c5 *"P of the income derived from the sale of tea grown and manufactured
by the seller in Bangladesh 36ule )#5
d5 *"P of the income derived from the sale of rubber grown and
manufactured by the seller in Bangladesh 36ule )#5
7etKs assume that ]CR Company has income from the following sources as
mentioned below?
a5 The company has a tobacco &eld where tobacco leaves are produced and
transferred to the manufacturing plant to produce cigarettes and other
tobacco goods. It is assumed that the fair value of tobacco leaves would
be T;. *+"%""" and the company sold the tobacco goods for T;. #%#+"%""".
b5 The company has transferred a part of its e'port <uota of garments to
another company that may generate a total of T;. #%+""%""" e'port value.
c5 Income derived from the sale of tea grown and manufactured by the
company% T;. +""%""".
d5 Income derived from the sale of rubber grown and manufactured by the
company% T;. )""%""".
Sources Co4*utation Inco4e fro4
Business
From sale of Tobacco T;. #%#+"%""" F T;.
*+"%"""
T;. -""%"""
From transfer of e'port
<uota
)P of T;. #%+""%""" *+%"""
From sale of Tea *"P of T;. +""%""" !""%"""
From sale of 6ubber *"P of T;. )""%""" #!"%"""
Total income from Business T;. #%",+%"""
"ntertain4ent ",*enses
Any amount representing entertainment e'pense is not allowed for
deductions. For allowable deductions under the head% the following bases and
percentages are prescribed in 6ule ,+.
.nco(e8 pro9ts and /ains o+ the 0usiness and
pro+ession '0e+ore char/in/ such allo:ance)
Allo:a0le
rate
Bn the &rst T;. #" la;h
Bn the balance 4 rest of the amount
*P
!P
For e'ample% ]CR Company reports T;. .%/""%""" as pro&t for the year ended
Mune )"% !"## after charging T;. #+"%""" as entertainment allowance.
Compute the amount of allowable entertainment e'pense.
Bn &rst pro&t of T;. #%"""%""" Q
*P
T;. *"%"""
Bn balance of T;. .%"+"%""" Q
!P
#,#%"""
Bn total pro&t T;. /%"+"%""" 3including entertainment
e'pense5
!"#%"""

Thus% allowable amount of entertainment e'pense is T;. !"#%""".
%oreign Tra+el Allo/ance of "4*lo6ees
Foreign travels for holidays and recreation of an employee and his dependants
for once in every two years to the e'tent of ) months basic or three8fourths of
the actual e'penditure% whichever is less% shall be admissible. But in this
regard% payment e'ceeding T;.#"%""" shall not be allowed as a deduction
unless such payment is made by a crossed chec; on a ban; or by a crossed
ban; draft 36ule ,+A5.
Consider the following information to compute the allowable amount of
foreign travel allowance for r. ] who has =oined the company during the year
and availing the bene&t for the &rst time.
Basic Salary of r. ] T;. ,"%"""
Actual 2'penditure !""%"""
Such payments are made through crossed chec;.
Allowable amount of foreign travel e'pense?
) months basic salary Q T;. ,"%""" T;. #."%"""
)4*
th
of actual e'penditure T;. #+"%"""
>hichever is less T;. #+"%"""
Thus% T;. !""%""" is not allowable rather T;. #+"%""" will be allowable
e'pense.
%ree Sa4*le Distri3ution
2'penditure on distribution of free sample is admissible up to the percentage
as given below 36ule ,+C5?
Ceiling of Turno+er In res*ect of In #es*ect
)har4aceuti
cal
Industries
of Other
Industries
a( For a turnover up to Ta;a + crore at the
rate of
3( For a turnover in e'cess of Ta;a + crore
but up to Ta;a #" crore at the rate of
c( For a turnover in e'cess of Ta;a #" crore
at the rate of
! P
# P
".+"P
#.+" P
".-+P
".)-+P
For e'ample% letKs assume that the turnover of ]CR Company is given in the
table below. Assuming the company as pharmaceutical and others% the
allowable deduction for free sample distribution would be?
Turno+er
Pharmaceutical Bthers
6ate Amount
3T;.5
6ate Amount 3T;.5
a5 If turnover is T;.
*%""%""%"""
!P .%""%""" #.+"P ,%""%"""
b5 If turnover is T;.
.%""%""%"""
#P .%""%""" ".-+P ,%""%"""
c5 If turnover is T;.
#!%""%""%"""
".+"P ,%""%""" ".)-+P *%+"%"""
)er8uisites
Per<uisite to any employee is allowed up to T;. !+"%""". If actual per<uisite
given to an employee e'ceeds T;. !+"%"""I such amount e'ceeding T;.
!+"%""" is not allowed U3Section )"3e5V.
For e'ample% letKs assume that r. ] en=oys the following bene&ts during the
income year ended )"
th
Mune% !"## from his employer?
#. Basic Salary T;.
+"*%"""
!. Gouse rent allowance )""%"""
). Festival bonus Fe<ual the two months basic salary .*%"""
*. 7eave encashment *!%"""
+. Conveyance allowance )"%"""
,. Contribution to 6ecogni9ed Provident Fund Q #"P +"%*""
-. Servants wages !"%"""
.. Children educational allowance +"%"""
/. 7eave fare assistance *"%"""
#". Bungalow utilities !+%"""
Compute the amount of per<uisite disallowed.
Actual )er8uisites #ecei+ed
#. Gouse rent allowance T;.
)""%"""
!. Conveyance allowance )"%"""
). Servants wages !"%"""
*. Children educational allowance +"%"""
+. Bungalow utilities !+%"""
:alue of Per<uisites 6eceived *%!+%"""
Allowable per<uisites !%+"%"""
2'cess per<uisites disallowed #%-+%"""
This clearly tantamount to double ta'ation% once in the hands of the employee
3e'cess allowances received over allowable limit5 and again by the employer.
",*enses Allo/ed u* to a Certain )ercentage
It is important to remember that some e'penses% where there is a scope of
reporting higher amount% are permitted but up to certain limit. Amount
e'ceeding that limit is not allowed and thus ta'able. These e'penses are
reported below?
#eference ",*enses Allo/a3le
li4it
Section
)"3g5
Gead BEce 2'penses by a company not
incorporated in Bangladesh
#"P of Pro&t
Section
)"3h5
6oyalty% technical services fee% technical
;nowhow fee or technical assistance fee
.P of Pro&t
Section
)"3=5
Incentive bonus #"P of pro&t
Section
)"3;5
Bverseas traveling e'pense #P of
turnover

Instances of so4e e,*enses /hich are ca*ital as *er $enerall6
Acce*ted Accounting )rinci*les 3ut allo/a3le as re+enue e,*enses
as *er Inco4e Ta, *ro+ision
)articulars Accounting
)rinci*le
Inco4e Ta,
)ro+ision
3a5 2'tension e'penditure for bringing new
areas under cultivation for tea and rubber
companies
Capital 6evenue
under 6ule )#
and )!
3b5 Building constructed for educational
Institution or hospital or Institute for the
bene&t of employees and their
dependents free of cost and giving
training to industrial wor;ers 3Sec !/3#5
3''iii5
Capital 6evenue u4s
!/3i5 3''ii5
3c5 2'penditure of capital nature e'pended
on scienti&c research in Bangladesh 3Sec
!/3#53''5
Capital 6evenue u4s
!/3i5 3''5
.or2ed ",a4*les and Solutions
.or2ed ",a4*le 'B
State with reasons whether the following e'penses are fully or partly admissible
as deduction while computing income from business or profession?
#. Stoc;8in8trade was lost in &re% amounting to T;. #!%""" and was debited to
Pro&t and 7oss Account.
!. Amount spent on a successful suit &led against a person for infringing trade
mar; of the assessee 8 T;. #"%"""I
). Interest paid to ban; T;. #+%""" in connection with overdraft obtained for
paying dividendI
*. Bverseas traveling e'pense T;. +"%"""I The amount of disclosed turnover
and disclosed net pro&t is T;. *"%""%""" and T;. !"%""%""" respectivelyI
+. Incentive bonus T;. )%""%"""I The amount of disclosed turnover and
disclosed net pro&t is T;. *"%""%""" and T;. !"%""%""" respectivelyI
,. Salary paid to two employees Q T;. !"%""" per monthI one is paid in cash
and another through ban; transfer.
-. 6oyalty paid T;. !%""%"""I The amount of disclosed turnover and disclosed
net pro&t is T;. *"%""%""" and T;. !"%""%""" respectivelyI
.. Salary e'pense of a &rm T;. #""%""" of which T;. *"%""" is paid to a partner
as salaryI
/. Installation cost of an IPS% T;. +"%"""I
#". Penalty paid for violating income ta' law T;. !+%""".
##. 6epair e'pense of the hired premises paid T;. +"%"""% The building is used
both for oEce and residence at an e<ual proportion.
#!. Insurance premium paid T;. !+%"""% of which T;. +%""" is the life insurance
premium of the owner.
Solution 'B
#. 7oss of stoc;8in8trade is an admissible e'pense and is allowed to the full
amount.
!. 7itigation 4 legal e'pense is an admissible e'pense and is allowed to the full
amount as it is spent for protecting business interest. Any legal e'pense for
illegal purpose is not allowable.
). Interest e'pense on overdraft ta;en to meet business e'penses is
admissible e'pense and allowed to the full amount.
*. Bverseas traveling e'pense is admissible up to #P of the disclosed
turnover% so here the e'pense is admissible T;. *"%""" 3#P of T;.
*"%""%"""5 and rest of T;. #"%""" will be inadmissible.
+. Incentive bonus is admissible up to #"P of the disclosed net pro&t% so here
the admissible amount is up to T;. !""%""" 3#"P of T;. !"%""%"""5 and rest
of T;. #""%""" is inadmissible.
,. Bf total salary e'pense T;. *."%"""% T;. !*"%""" is admissible as it has
been paid through ban; transfer and rest of T;. !*"%""" is inadmissible as it
has been paid in cash.
-. 6oyalty is admissible up to .P of disclosed net pro&t% so here of total T;.
!""%""" admissible amount is up to T;. #,"%""" 3.P of T;. !"%""%"""5 and
rest of T;. *"%""" is inadmissible.
.. Bf total salary e'pense T;.#""%"""% T; ,"%""" is admissible as it has been
paid to employees and rest of T;. *"%""" is inadmissible as it has been paid
to a partner of the &rm.
/. $ot admissible% as it is a capital e'penditure.
#". $ot admissible as the penalty is imposed for violating laws.
##. Bf total repair e'pense of T;. +"%"""% T;. !+%""" is admissible which is for
the proportion of oEce use and the rest T;. !+%""" is inadmissible as half
proportion of the house has been used for residence.
#!. Bf total insurance premium of T;. !+%"""% T;. !"%""" is admissible which is
for the protection of business interest and the rest of T;. +%""" is
inadmissible as it is given for personal interest of the owner.
.or2ed ",a4*le 2B
The Pro&t and 7oss Account of Manani Traders owned by r. 6a=on o=umder for the
year ended on Mune )"% !"## is given below?
Hanani Traders
Pro&t and 7oss Account
For the year ended on Mune )"% !"##
De3it Ta2a Credit Ta2a
Salary )."%""" (ross Pro&t
#%/+"%""
"
Commission -"%""" Interest on Securities #."%"""
6ent of Premises #)!%"""
Interest on ban;
0eposit )!%"""
Fund 2mbe99lement )"%""" 6ecovery of Bad 0ebt #.%"""
0onations #+"%"""
(ain on Sale of
Furniture !-%"""
Bad debt ."%"""
7ife Insurance Premium +"%"""
0epreciation 2'pense
Furniture *"%"""
Provision for income ta' ).%"""
6epair e'pense !,%"""
7icense renewal fee *%"""
Penalty and Fine )-%"""
Bonus ."%"""
6oyalty -"%"""
Interest on Ban; 7oan *+%"""
Gousehold e'penses !!%"""
$et Pro&t /+)%"""

2=2&F=&
&&
2=2&F=&
&&
Other Infor4ationB
#. Salary includes Ta;a .-%""" paid to the owner.
!. Fund embe99lement occurred after oEce hour.
). 0onations include Ta;a ."%""" paid to a charitable hospital that is approved
under Paragraph ##A of Part B of the Si'th Schedule of ITB% #/.*.
*. 7ife insurance premium is the payment against the insurance policy
purchased in the ownerDs name.
+. Ta' depreciation amounts to Ta;a )"%""".
,. Furniture sold for T;. -.%""" that was originally purchased for T;. -"%""".
>ritten down value of the furniture on the date of sale was T;. +#%""".
#e8uiredB Compute the income from business or profession of r. Shaiham for
the year ended on Mune )"% !"#".
Solution 2B
AssesseeB Hanani Traders
Inco4e YearB 2&'&>''
Assess4ent YearB 2&''>'2
)articulars Ta2a Ta2a
Income from Business and Profession?
Pro&t as per P47 Account /+)%"""
Add? Inadmissible 2'penses
#. Salary .-%"""
!. Fund 2mbe99lement )"%"""
). 0onations -"%"""
*. 7ife insurance premium +"%"""
+. 0epreciation 2'pense 3to be treated later on5 *"%"""
,. Provision for Income Ta' ).%"""
-. Penalty and &ne )-%"""
.. Gousehold e'pense !!%""" )-*%"""
#%)!-%""
"
7ess? 0epreciation 2'pense 3As per ITB5 )"%"""
7ess? $on8Business Income
#%!/-%""
"
#. Interest on Securities #."%"""
!. Interest on Ban; deposit )!%"""
). Capital (ain on Sale of Furniture .%""" !!"%"""
Ta,a3le Inco4e fro4 Business or
)rofession
'=&FF-&&
&
NotesB
#. Salary paid to the owner is not an admissible e'pense.
!. As fund embe99lement occurred after oEce hour% this is not allowed.
). 0onations of Ta;a -"%""" are not made to the approved organi9ation and so
these are not allowed.
*. 7ife insurance premium is inadmissible as this is a personal e'pense.
+. 6oyalty is admissible up to an amount e<ual to .P of the disclosed net pro&t
i.e. .P of T;. /+)%"""% i.e. T;. -,%!*". Thus actual payment is admissible.
,. Bonus is admissible up to an amount e<ual to #"P of the disclosed net pro&t
i.e. #"P of T;. /+)%"""% i.e. T;. /+%)"". Thus actual payment is admissible.
-. Capital gain on sale of furniture was T;. .%""" 3T;. -.%""" F T;. -"%"""5. This
amount should be considered as income under the head XCapital (ainK.
.or2ed ",a4*le 9B
The Trading and Pro&t L 7oss Account of ;ahur and Brothers for the year ended
on Mune )"% !"## is given below?
Hahur and Brothers
Trading L Pro&t and 7oss Account
For the year ended on Mune )"% !"##
De3it Ta2a Credit Ta2a
Bpening Stoc; ."%""" Sales
#%*+"%""
"
Purchases -""%""" Closing Stoc; #,"%"""
>ages ,"%"""
0epreciation on
achinery #+%"""
Power and Fuel #"%"""
(ross Pro&t -*+%"""

'=E'&=&&
&
'=E'&=&
&&
Salaries #!"%""" (ross Pro&t -*+%"""
6ent% 6ates and Ta'es #.%""" Compensation 6eceived ."%"""
Annual embership Fee *"%""" Bad 0ebt 6ecovered !-%"""
7egal 2'penses #+%""" Interest and 0iscount 6eceived !+%"""
Jnderwriting
Commission )"%"""
Interest on Ta'8Free Commercial
Securities ."%"""
Purchase of Trademar;s ."%""" 0ividend on ] 7tdDs Share ,"%"""
Bad 0ebts )"%""" Commission !.%"""
Accounting Fees *"%"""
0epreciation 8 oEce
building )+%"""
Fines and Penalties #.%"""
0onation to Flood 6elief
Fund +"%"""
(ratuity to 2mployees #),%"""
Advance Income Ta' )+%"""
7oss on sale of oEce
furniture #.%"""
0owry paid to the
0aughter -"%"""
iscellaneous 2'pense )"%"""
$et Pro&t !."%"""

'=&:@=&&
&
'=&:@=&
&&

Other infor4ationB
#. Salaries include Ta;a !"%""" as salaries paid to the owner.
!. 6ecovered amount of bad debt was previously allowed as bad debt e'pense.
). 7egal e'pense is incurred for &ling and continuing a case against competitor
for protecting the interest of the business.
*. Fines and penalties were due to avoidance of ta' payment at an earlier
period.
+. Annual membership fee is the fee paid to union for the interest of the
business.
,. Compensation money is received from insurance company against a claim
lodged due to destroy of machinery originally purchased for T;. -"%""" with a
written down value of T;. +"%""".
-. Ta' depreciation was calculated as follows?
a. 0epreciation on achinery
Ta;a !+%"""
b. 0epreciation on BEce Building Ta;a
+"%"""
#e8uiredB Compute the income from business or profession and total ta'able
income of Mahur and Brothers for the year ended on Mune )"% !"##.
Solution 9B
AssesseeB Hahur and Brothers
Inco4e YearB 2&'&>''
Assess4ent YearB 2&''>'2
)articulars Ta2a Ta2a
Income from Business and Profession?
$et Pro&t as per Pro&t and 7oss Account
!."%""
"
Add? Inadmissible 2'penses
3#5 Salaries !"%"""
3!5 Jnderwriting Commission )"%"""
3)5 Purchase of Trademar;s ."%"""
3*5 Fines and Penalties #.%"""
3+5 Advance income ta' )+%"""
3,5 0owry paid to the 0aughter -"%"""
3-5 0epredation 2'penses 3to be treated later on5
Bn achinery #+%"""
Bn BEce Building )+%"""
)")%""
"
+.)%""
"
7ess? 0epreciation 2'pense 3As per ITB5
Bn achinery !+%"""
Bn BEce Building +"%""" -+%"""
+".%""
"
7ess? $on8Business Income
3#5 Interest on Ta' Free Commercial Securities ."%"""
3!5 Capital gain from compensation 3T;. ."%""" F #"%"""
T;. -"%"""5
3)5 0ividend on ] 7tdKs Share ,"%"""
#+"%""
"
Ta'able Income from Business or Profession
)+.%""
"
Add? $on8business Income
Income From Interest on Securities
Interest on Ta' Free Commercial Securities ."%"""
7ess? 2'empted fully ."%""" nil
Capital (ain
Compensation received #"%"""
Income from Bther Sources
0ividend on ] 7tdKs Share ,"%"""
Total Ta,a3le Inco4e
:2D=&
&
.or2ed ",a4*le :B
For the income year ended on Mune )"% !"##% (aco Pharmaceutical Company reports
net pro&t of T;. #-%/.)%""". A close scrutiny of its boo;s of accounts reveals the
following items?
#. Salary and allowances includes per<uisites of &ve directors as mentioned
below?
0irector # 0irector ! 0irector ) 0irector * 0irector +
T;.
#."%
"""
T;.
!+"%
"""
T;.
!."%
"""
T;.
)!+%
"""
T;.
!)"%
"""
!. Amount paid to a contractor of T;. .+%""" without deducting :AT at
prescribed rate.
). Pro&t includes T;. .+%""" as gain on sale of asset. The original cost of the
asset was T;. -"%""" and on the date of sale% the written down value of the
asset was T;. T;. +"%""".
*. The company lodged a claim against the demolishing of an asset and
recovered T;. -"%""". The cost was T;. ."%"""% however% the written down
value of the asset was T;. +"%""".
+. The company has income of T;. *!"%""" from tea grown and manufactured
in Bangladesh which was not considered at the time of computing pro&t.
,. The company has transferred e'port <uota of garments to another company
whose e'port value is estimated as T;. .""%""". $o income is reported in
pro&t and loss account.
-. 2ntertainment e'pense charged was T;. *+"%""".
.. Finance director received foreign travel allowance of T;. +""%""" and
charged against the pro&t. Ge has also received an allowance in last year
and it was deducted for ta' purpose.
/. 2'pense for free sample distribution is shown as T;. )*"%""". 6eported
turnover for the year is T;. .-%/+)%""".
#". 6oyalty e'pense charged is T;. ##!%""".
##. 0epreciation charged is T;. !+)%""" whereas ta' depreciation is T;.
#."%""".
Compute ta'able income from business and profession% considering the information
above.
Solution :B
AssesseeB $aco )har4aceutical Co4*an6
Inco4e YearB 2&'&>''
Assess4ent YearB 2&''>'2
)articulars Ta2a Ta2a
Income from Business and Profession?
$et Pro&t as per Pro&t and 7oss Account
#-%/.)%""
"
Add? Inadmissible 2'penses
#. Salaries 3per<uisites e'ceeding T;. !+"%"""5 #"+%"""
!. Paid to contractor .+%"""
). (ain on sale of asset 3Capital gain? T;. .+%""" F
T;. -"%"""5
#+%"""
*. 2ntertainment e'pense -"%)*"
+. Foreign travel allowance +""%"""
,. 2'penses of free sample #"%#-,
-. 0epredation 2'penses 3to be treated later on5 !+)%"""
#%").%+#,
#/%"!#%+#
,
7ess? 0epreciation 2'pense 3As per ITB5 #."%"""
#.%.*#%+#
,
Add? Income from tea 3*"P of T;. *!"%"""5 #,.%"""
2'port value of garments 3)P of T;. .""%"""5 !*"%""" *".%"""
Ta'able Income from Business or Profession
#/%!*/%+#
,
NotesB
#. Allowable entertainment e'pense is F #%"""%""" Q *P Z #,%/.)%""" Q !P [
*"%""" Z ))/%,," [ T;. )-/%,,". Thus% entertainment e'penses disallowed is
T;. -"%)*".
!. Foreign travel allowance is allowed for once in every two years. As last year%
the director received the allowance and deducted% this year this e'pense is
not allowed.
). 2'pense for free sample distribution allowed is T;. )!/%.!* 3".)-+P of T;.
.-%/+)%"""5. Thus% disallowed e'pense is T;. #"%#-, 3T;. )*"%""" F T;.
)!/%.!*5.
*. 6oyalty e'pense allowed is T;. #%*).%,*" 3.P of T;. #-%/.)%"""5. Thus% the
whole amount is admissible.
Self>Assess4ent ?uestions
#. State the main provisions of Sections !. and !/ of the Income Ta' Brdinance
#/.* relating to computation of income under the head Xincome from business or
professionK.
!. State the provisions of the Income Ta' Brdinance #/.* relating to?
3i5 Bbsolescence allowanceI and
3ii5 Balancing charge.
). 3a5 It is said that the list of allowances under Section !/ of the Income Ta'
Brdinance for computation of income under the head Xincome from business
or professionK is not e'haustive. >rite your comments on the above
statement.
3b5 7ist the inadmissible e'penses under section )" of the Brdinance.
*. The Income Statement with selective notes thereon of Rian 7td for the year ended
on Mune )"% !"## is as under?
Uian Ltd
Inco4e State4ent
%or the 6ear ended on Hune 9&= 2&''
)articulars Ta2a
$et Sales
7ess? Cost of (oods Sold
(ross Pro&t
Add? (ain on Sale of Building 3$ote #5
7ess? Administrative and Selling L 0istribution 2'penses 3$ote !5
Net )ro0t
#+%"""%"
""
.%.""%""
"
,%!""%""
"
!%!""%""
"
*%"""%""
"
!%*""%""
"
'=E&&=&
&&
Other infor4ationB
#. The Cost of the Building was Ta;a .%"""%""" and the amount of accumulated
depreciation up to the date of sale was Ta;a !%-""%""" and sold for Ta;a
-%+""%""".
!. Administrative and Selling L 0istribution 2'penses?
Salaries and >ages Ta;a #%+,!%"""
Fines and Penalties #!+%"""
6ents% 6ates L Ta'es ."%"""
Provision for Bad and 0oubtful 0ebts ,"%"""
7egal Charges )-%"""
Jnderwriting Commission #!"%"""
Incentive Bonuses *"%"""
Cost of Issuing Shares #""%"""
Audit Fees ,"%"""
Bverseas Traveling 2'pense #""%"""
0epreciation 2'pense ##,%"""
Total 2=:&&=&&&
). Salary and wages includes Ta;a #."%""" as payment to the owners and Ta;a
+!"%""" as payment classi&ed as per<uisites.
*. The &nes and penalties are charged by a local court for involvement in illegal
business transactions.
+. 7egal charges have been incurred for defending a suit for alleged breach of a
trading contract.
,. Ta' depreciation amounts to be Ta;a ."%""".
#e8uiredB Compute the income from business or profession of Rian 7td for the year
ended on Mune )"% !"##.
Chapter /
Ca*ital gains
Contents
Introduction
2'amination conte't
To*ic List
>or;ed 2'amples and Solutions
/.# Basics of Capital gains
/.! Some statutory de&nitions
/.) Computation of capital gains
/.* Ta' e'empted capital gains
/.+ $o e'emption on certain assets if investment allowance is received
/., Ta' rates in respect of capital gains
/.- Special Ta' 6ates on income earned from selling shares and stoc;s
/.. Apportionment of sale proceeds between original cost and
subse<uent improvements
Introduction
Learning o3<ecti+es
Identify income from capital gain.
Compute the ta'able income under the head XCapital (ainK.
Identify the allowable deductions under the head.
Identify ta' e'empted capital gains.
Introduce the comple'ity of computing income from capital gain.
Introduce special ta' rate of capital gains earned by certain individuals on
certain gains.
Compute ta' liability on capital gain in di1erent situations.
)ractical signi0cance
The head Xcapital gainK is very signi&cant in terms of understanding and
applications. Transfer of capital assets is very common in business. Thus% in
what situations% transfer of capital assets will result capital gain% what may
happen if the gain is reinvested within a certain time limit% what are the
powers of 0CT regarding the value of declared sale proceeds are some
important points covered in the chapter.
Capital gain ta' rate is di1erent than the regular rates applicable to
individuals and other assesses. Thus% the assessment and computation of ta'
liability is to a greater e'tent di1erent in case of capital gain. These points are
also addressed with due importance.
The chapter% as usual% also presents the scope of income under the head%
admissible e'penses% inadmissible e'penses and other related issues.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the computation of ta'able income under the head Xcapital
gainK is one of the basic re<uirements for determining ta' liabilityN Can you
determine the ta'able income under the headN Can you compute net ta'
liability of an assessee having income under the headN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the total ta'able income for any income year. Before advising the clients%
accountants should have the clear concept relating to the admissible and
inadmissible e'penses so that they can deduct or add the e'penses in
determining the ta'able income.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
Cou will be also using this ;nowledge when you tac;le the ta'ation paper later
on in the Professional Stage and it will also underpin the technical aspects at
the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne income from capital gain.
Identify di1erent scope of income under the head.
Compute the ta'able income under the head capital gain.
Illustrate the income cannot be reported under the head.
Identify the allowable deductions under the head.
Illustrate the power of 0CT if he believes that the declared value at which
the capital asset is transferred is not right.
Compute net ta' liability under the head.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
core concept on computation of income which is vital for calculating ta'
liability. Clear concept and understanding of each contents of this chapter will
help candidates to resolve any problems relating to computation of income
from capital gain.
C-& CA)ITAL $AINS
Section O+er+ie/
There is no capital gain ta' on personal e1ects and agricultural land 3with
certain restrictions5% shares including bonus shares in listed companies.
There is no capital gain ta' on the transfer of land and buildings to a new
company formed to set up an industry.
In determining the transfer value% income ta' authorities may consider the
fair mar;et value if it considers appropriate.
Capital loss can only by set o1 against capital gain.
It is ta'ed at the rate of #+ P in the case of company.
$on8residents are e'empt in case of capital gains on stoc;s and shares
provided they en=oy the same in their own countries.
C-' Basics of Ca*ital $ains
Section F )# provides that ta' shall be payable by an assessment under the
head OCapital (ainsW in respect of any pro&ts arising from the transfer 3i.e.
sale% e'change or relin<uishment% etc.5 of a capital assets. Such pro&ts and
gains shall be deemed to be the income of the income year in which the sale%
e'change% relin<uishment% etc. too; place.

Any gains arising from transfer of a capital asset 3both movable and
immovable5 as de&ned in section !3#+5 of the Income Ta' Brdinance #/.* is
chargeable to income ta' in accordance with paragraph ! of the Second
Schedule of the Brdinance which prescribe rates of income ta' on capital
gains.
C-2 So4e Statutor6 De0nitions
Ca*ital Assets
Capital gain arises only due to the transfer of capital asset. Capital asset is
de&ned in section !3#+5 of ITB #/.*. Capital asset means property of any ;ind
held by an assessee% whether or not connected with his business of
profession% but does not include8
Ca*ital
Asset
UAs per
section
!3#+5V
Transfer
USale%
e'change%
relin<uishme
ntV
UAs per
section !3,,5V
Ca*ital
$ain
UAs per
sections
)#% )!V
Ca*ital
$ain Ta,
UAs per
Para ! of
Second
ScheduleV
3a5 Any stoc;8in8trade 3not being stoc;s and shares5% consumable stores or
raw materials held for the purposes of his business or professionI
3b5 Personal e1ects% that is to say% movable property 3including wearing
apparel% =ewellery% furniture% &'ture% e<uipment and vehicles5% which are
held e'clusively for personal use by% and are not used for purposes of the
business or profession of the assessee or any member of his family
dependent on himI and
&c( Agricultural land in Bangladesh% not being land situated8
3i5 in any area which is comprised within the =urisdiction of 0ha;a%
$arayangan= and (a9ipur districts% Chittagong 0evelopment Authority
3C0A5% Hhulna 0evelopment Authority 3H0A5% 6a=shahi 0evelopment
Authority 360A5% a City Corporation% unicipality% Paurashava%
Cantonment BoardI or
&ii( in any area within such distance not being more than &ve miles from
the local limits of 6a=dhani Jnnayan Hartripa;ya 36AMJH5% Chittagong
0evelopment Authority 3C0A5% Hhulna 0evelopment Authority 3H0A5%
6a=shahi 0evelopment Authority 360A5% a City Corporation%
unicipality% Paurashava% Cantonment Board referred to in paragraph
3i5% as the (overnment may having regard to the e'tent of% and scope
for% urbanisation of that area and other relevant considerations% specify
in this behalf by noti&cation in the oEcial (a9etteI USection !3#+5V.
%air Mar2et !alue
In relation to capital asset% fair mar;et value means F
3a5 the price which such asset would ordinarily fetch on sale in the open
mar;et on the relevant day% and% where such price is not ascertainable% the
price which the 0eputy Commissioner of Ta'es may% with the approval in
writing of the Inspecting Moint Commissioner% determineI
&+( the residual value received from the lessee in case of an asset leased by a
&nancial institution having license from the Bangladesh Ban; on
termination of lease agreement on maturity or otherwise sub=ect to the
condition that such residual value plus amount realised during the
currency of the lease agreement towards the cost of the asset is not less
than the cost of ac<uisition to the lessor &nancial institution USection
!3)"5V.
Transfer
Transfer% in relation to a capital asset% includes the sale% e'change or
relin<uishment of the asset% or the e'tinguishments of any right therein% but
does not include?
a5 Any transfer of the capital asset under a gift% be<uest% will or an
irrevocable trustI
b5 Any distribution of the assets of a company to its shareholders on its
li<uidationI and
c5 Any distribution of capital assets on the dissolution of a &rm or other
association of persons or on the partition of a Gindu undivided family
USection !3,,5V.
C-9 Co4*utation of Ca*ital $ains
Section )! of ITB #/.* e'plains the methodology of computing capital gains. In
line with the provisions of that section% computation of capital gains is
presented below?
3a5 The income under the head OCapital gainsW shall be computed after ma;ing
the following deduction from the full value of the consideration received or
accruing from the transfer of the capital asset or the fair mar;et value
thereof% whichever is higher% namely?
3a5 Any e'penditure incurred solely in connection with the transfer of the
capital assetI and
&+( The cost of ac<uisition of the capital asset and any capital e'penditure
incurred for any improvements thereto but e'cluding any e'penditure
in respect of which any allowance is admissible under any provisions of
sections !)3deductions from interest on securities5% !/ 3deductions
from income from business or profession5 and )* 3deductions from
income from other sources5.
3b5 For the purpose of section )!% Ocost of ac<uisition of the capital assetW
means8
3i5 >here it was ac<uired by the assessee by purchase% the actual cost of
ac<uisitionI and
3ii5 >here it becomes the property of the assessee8
3a5 Jnder a deed of gift% be<uest or willI or
3b5 Jnder a transfer on a revocable or irrevocable trustI or
3c5 Bn any distribution of capital assets on the li<uidation of a
companyI or
3d5 Bn any distribution of capital assets on the dissolution of a &rm or
other association of persons or the partition of a Gindu undivided
family.
The actual cost of ac<uisition to the previous owner of the capital asset as
reduced by the amount of depreciation% if any% allowed to the previous
ownerI and where the actual cost of ac<uisition to the previous owner
cannot be ascertained% the fair mar;et value at the date on which the
capital asset became the property of the previous owner.
Gowever% where the capital asset is an asset in respect of which the
assessee has obtained depreciation allowance in any year% the cost of
ac<uisition of the capital asset to the assessee shall be its written down
value increased or diminished% as the case may be% by any ad=ustment
made under section #/3#,5 or 3#-5 or section !-3#5 3i5 or section !/3#5 3'i5?
>here the capital asset became the property of the assessee by
succession% inheritance or devolution% the actual cost of ac<uisition of the
capital asset to the assessee shall be the fair mar;et value of the property
prevailing at the time the assessee became the owner of such property.
If 0CT opines
di1erent fair
value than the
value stated by
transferor
Fair value is higher
than the
consideration by
at least #+P
Fair value is higher
than the
consideration by
at least !+P
0CT will
determine the
value
(overnment
may o1er to
buy the
capital asset
Deter4ination of %air Mar2et !alue
>here in the opinion of the 0eputy Commissioner of Ta'es% the fair mar;et
value of a capital asset transferred by an assessee as on the date of the
transfer e'ceeds the full value of the consideration declared by the assessee in
respect of the transfer of such capital asset by an amount of not less than #+P
of the value so declared% the fair mar;et value of the capital asset shall% with
the previous approval of the Inspecting Moint Commissioner of Ta'es% be ta;en
to be determined USection )!3)5V.
OAer to Bu6 the Ca*ital Assets 36 the $o+ern4ent
>here in the opinion of the 0eputy Commissioner of Ta'es% the fair mar;et
value of a capital asset transferred by an assessee as on the date of the
transfer e'ceeds the declared value thereof by more than !+P of such
declared value% the (overnment may o1er to buy the said asset in such
manner as the $ational Board of 6evenue may prescribe USection )!3*5V.
Illustration
r. Mashim declared the price of a piece of land as T;. )%"""%""" on #+
th
Muly%
!"#"% however% the 0CT estimates the fair value of the land to be T;.
)%+""%""" i.e. more than #+P of the declared value. Ge can with the prior
approval of the IMCT% determine the fair value at T;. )%+""%""" and can
compute capital gain or loss accordingly re=ecting thereby MashimKs declared
value. Further the (overnment may o1er to buy the land when in the opinion
of the 0CTI the fair mar;et value of the said land is say% T;. *%"""%""" i.e. at
least !+P more than the declared value. It is not clear whether in this case%
(overnment would actually buy or uses the pre8emption right to deter under8
declaration.
Since the 0CT is not the proper valuers% applications of the provisions may
delay or complicate the process of property transfer.
The manner to be followed in connection with the purchase of a capital asset
by the (overnment under section )!3*5 of the Brdinance shall be as follows?
3#5 >here the 0eputy Commissioner of Ta'es has reason to believe that any
immovable property is being transferred by a person 3hereinafter referred
to as the transferor5 to another person 3person hereinafter referred to as
the transferee5 and the fair mar;et value of such property e'ceeds the
declared value by more than twenty8&ve per cent% and the consideration
for such transfer as agreed to between the parties has not been truly
stated in the instrument of transfer with the ob=ect of facilitating the
reduction or evasion of the liability of the transferor to pay the ta' under
the Brdinance in respect of any income arising from the transfer or any
other ta'es or duties% he may% sub=ect to the provisions of this rule% initiate
proceedings for the ac<uisition of such property by the (overnment.
3!5 The 0eputy Commissioner of Ta'es shall initiate proceedings for
ac<uisition of immovable property under rule *" by giving a notice to that
e1ect in the oEcial (a9ette and a copy of such notice shall also be
published in the two leading newspapers of wide circulation where such
property is locatedI a copy of such notice shall also be served on the
transferor% the transferee and the person in occupation of the property% if
the transferee is not in occupation thereof Gowever% no such proceedings
shall be initiated after the e'piry of a period of two years from the end of
the month in which the instrument of transfer in respect of such property
is registered under the 6egistration Act% #/"..
3)5 Bb=ection against the ac<uisition of the immovable property in respect of
which a notice has been published in the oEcial (a9ette and the
newspapers may be made in writing by the transferor or the transferee to
the 0eputy Commissioner of Ta'es within si'ty days of the publication of
the notice in the oEcial (a9ette or newspapers.
3*5 The 0eputy Commissioner of Ta'es shall &' a date and place for the
hearing of the ob=ections against the ac<uisition and shall give notice of
the same to every person who has made such ob=ection. Gowever% notice
shall also be given to the transferee of such property even if he has not
made any such ob=ection.
3+5 After hearing the ob=ections% if any% after ta;ing into account all the
relevant materials on record% if the 0eputy Commissioner of Ta'es is
satis&ed that8
3a5 The fair mar;et value of such property e'ceeds the consideration paid
therefore by more than twenty8&ve per cent of such consideration% and
3b5 The consideration for such transfer as agreed to between the parties
has not been truly stated in the instrument of transfer with such ob=ect
as is referred to in clause 3#5I he may ma;e an order for the ac<uisition
of the property under this rule.
3,5 Any person aggrieved by an order made under rule *"3+5 may prefer an
appeal under the Brdinance to the Appellate Moint Commissioner of Ta'es.
3-5 As soon as may be after the order of ac<uisition of any immovable
property has been made under rule *"3+5 and after the disposal of appeal%
if any% the 0eputy Commissioner of Ta'es may by notice in writing% order
any person who may be in possession of the immovable property to
surrender or deliver possession thereof to him or any other person duly
authori9ed by him in writing in these behalf within )" days of the service
of the notice.
3.5 If any person refuses or fails to comply with a notice under rule *"3-5% the
0eputy Commissioner of Ta'es or any other person duly authori9ed by him
under that clause may ta;e possession of the immovable property and
may% for that purpose% re<uisition the services of any police oEcer to
assist him and it shall be the duty of such oEcer to comply with such
re<uisition and may use such force as may be necessary.
3/5 >hen the possession of the immovable property is surrendered or
delivered under rule *"3-5% the 0eputy Commissioner of Ta'es or the
person duly authorised by him in that behalf or% as the case may be% when
the possession thereof is ta;en under rule *"3.5% the (overnment shall
tender as consideration a sum e<ual to the aggregate of the amount of the
declared value for its transfer plus #"P of the said amount to the
transferor and the property shall vest absolutely in the (overnment free
from all encumbrances. Gowever% nothing in rule *"3/5 shall operate to
discharge the transferor or the transferee or any other person 3not being
the (overnment5 from any liability in respect of such encumbrances% and
notwithstanding anything contained in any other law% such liability may be
enforced against the transferor or the transferee or such other person by a
suit for damages.
3#"5 $otwithstanding anything contained in rule *"3/5% if any dispute arises
as to the apportionment of the amount of consideration amongst persons
claiming to be entitled thereto% the (overnment shall deposit in the
principal civil court of original =urisdiction the amount re<uired to be
tendered under rule *"3/5 and refer such dispute for decision of the court
and the decision of the court thereon shall be &nal.
Transfer of ca*ital asset used in the 3usinessB Sec 92@(
A capital gain arising from transfer of a capital asset being buildings or lands
which immediately before the date on which transfer too; place was being
used by the assessee for the purposes of his business or profession shall be
e'empted from payment of the income ta' up to the e'tent and upon
ful&llment of the conditions as mentioned below?8
3a5 A new capital asset for the purposes of his business or profession has to be
purchased within a period of one year before or after the date of transfer.
3b5 The declaration shall have to be &led for e'emption before the assessment
is made.
3c5 >hen the capital gain is greater than the cost of the new asset% the capital
gain up to the e'tent of cost of ac<uisition of the new asset shall be
e'empted and the balance shall be charged to ta'. In determining the
depreciation on such asset% cost shall be ta;en to be nil.
3d5 >hen the capital gain is e<ual or less than the cost of the new asset% no
ta' shall be charged on the capital gain.
The time8limit for purchase of the new asset can be e'tended by the 0eputy
Commissioner of Ta'es with prior approval of the Inspecting Moint
Commissioner of Ta'es.
Illustration 'B
7et us assume that a gain of T;. #%"""%""" is reali9ed by Company ] on
transfer of a building which was used by the company for running its business.
Gowever% within one year% the company has ac<uired another building costing
T;. #%+""%""". Show the implication of capital gain ta'.
(ain on transfer of building #%"""%"""
Cost of the new building #%+""%"""
Capital gain chargeable to ta' nil
0epreciation allowance will be available on cost additional
investment
+""%"""
Gowever% if the new building was purchased for T;. #%"""%"""% then
(ain on transfer of building #%"""%"""
Cost of the new building #%"""%"""
Capital gain chargeable to ta' nil
0epreciation allowance will be available on cost additional
investment
nil
Again% if the new building was purchased for T;. .""%"""% then
(ain on transfer of building #%"""%"""
Cost of the new building .""%"""
Capital gain chargeable to ta' !""%"""
0epreciation allowance will be available on cost additional
investment
nil
Illustration 2B
]CR Company sold a piece of land on #+ Muly% !"#" for T;. !" million. It incurred
advertisement cost of T;. ."%""" and paid T;. )""%""" bro;erage commission.
It bought the land + years bac; at a cost of T;. ) million% stamp duty and legal
costs were T;. *""%""" and T;. /"%""" respectively. Bn )" $ovember% !"#" it
has bought another price of land in 0ha;a at a cost of T;. #" million inclusive of
legal costs. The Company has duly informed the 0CT about its intention to roll
over the capital gain to new land purchased.
XYU Co4*an6
Assess4ent 6ear 2&''>2&'&
Co4*utation of Ca*ital gainB
Sale price of land !"%"""%""
"
7ess? Commission on sale )""%"""
Advertisement ."%""" )."%""
$et sale proceeds #/%,!"%""
"
0educt Cost of ac<uisition?
Purchase price )%"""%"""
Stamp duty *""%"""
7egal costs /"%""" )%*/"%"""
Capital gain #,%#)"%""
"
Investment made under Sec. )!3+5 3#"%"""%"
""5
Capital gain assessed ,%#)"%"""
Ta' value of new assets 3>0:5 would be $il and capital gain ta' is T;. /#/%+""
i.e. #+P on T;. ,%#)"%""".
7et us further assume that the cost of new land is T;. !+ millions% all inclusive
and now the rollover would be?
Cost of new asset
T;. !+%"""%"""
Investment made under Sec. )!3+5 3#,%#)"%"""5
Ta' written down value carried forward .%.-"%"""
For second land% the ac<uisition cost would be T;. .%.-"%""" and on its
disposal% if any% in future capital gain would be calculated accordingly.
C-: Ta, ",e4*ted Ca*ital $ains
Some capital gains are non8assessable and thus e'empted from ta'. These
are 8
a( Transfer of ca*ital assets used for the *ur*ose of 3usinessB Sec
92@(
If the capital gains% arising out of transfer of capital assets used in the
business or profession% is used fully or in part to purchase a new capital
asset within a period of one year before or after the date of transfer and if
the assessee elects in writing before the assessment for rolling over the
gain on new asset.
3( Transfer of $o+ern4ent securities and shares of *u3lic>listed
co4*aniesB Sec 92F(
Capital gains which arise from transfer of (overnment securities and
stoc;s and shares of public companies listed with a Stoc; 2'change in
Bangladesh are e'empted from ta'.
&c( Transfer of ca*ital 3eing 3uildings and lands to a ne/ co4*an6B
Sec 92'&(
>hen buildings and lands are transferred to a new company for setting up
an industry and the whole amount of capital gain arising out of such
transfer is invested in the e<uity of the said company% then the capital
gain shall not be charged to ta' as income of the year of the transfer.
d( Transfer of ca*ital asset of a 0r4 to a ne/ co4*an6B Sec 92''(
>hen capital gain arises from the transfer of capital asset of a &rm to a
new company registered under the Companies Act% #/#)4#//* and the
whole amount of capital gain is invested in the e<uity of the said
company by the partners of the &rm% then the capital gain shall not be
charged to ta' as income of the year of the transfer.
C-@ No e,e4*tion on certain assets if in+est4ent allo/ance is
recei+edB Sec 92'2(
$o e'emption is allowable on Capital gains which arises from transfer of the
following capital assets as is attributable to the cost of ac<uisition of such
capital asset in respect of which any investment allowance referred to in
paragraphs #% !% )% *% +% ,% .% /% #" and ## of Part XBK of the Si'th Schedule
was at any time allowed% notwithstanding the e'emptions available under
sections )!3+5% 3-5% 3#"5 and 3##5?8
#. Insurance sum or deferred annuity 3Paragraphs 3#5% 3!5 and 3)5 of Part XBK
of the Si'th Schedule5
!. Provident fund under the Provident Fund Act #/!+ 3Paragraph 3*5 of Part
XBK of the Si'th Schedule5
). 6ecogni9ed Provident Fund 3Paragraph 3+5 of Part XBK of the Si'th Schedule
*. Approved Superannuation Fund 3Paragraph 3,5 of Part XBK of the Si'th
Schedule5.
+. Primary Stoc;s and Shares of a public company listed with a Stoc;
2'change in Bangladesh 3Paragraph 3.5 of Part XBK of the Si'th Schedule5.
,. Primary Shares or Stoc; 3Paragraph 3/5 of Part XBK of the Si'th Schedule5
-. Primary 0ebenture or 0ebenture Stoc; 3Paragraph 3/5 of Part XBK of the
Si'th Schedule5
.. Savings Certi&cate% Jnit Certi&cate% utual Fund Certi&cate% (overnment
securities and shares of investment companies 3Paragraph 3#"5 of Part XBK
of the Si'th Schedule5.
/. Balance in 0eposit Pension Scheme 3Paragraph 3##5 of Part XBK of the Si'th
Schedule5
C-E Ta, rates in res*ect of ca*ital gains
Capital gain ta' is di1erent than regular ta' and is prescribed in Para ! of
Second Schedule of Income Ta' Brdinance% #/.*.
Capital gains in the hands of a company other than the capital gains arising
out of disposal of share will be ta'ed as a bloc; of income separate from other
income of the assessee company at a Aat rate of #+P regardless of the period
of holding of the asset from the date of its ac<uisition.
If the assessee is other than a company and the asset is transferred before
the e'piry of &ve years from the date of its ac<uisition% the capital gains will
be ta'ed at the usual rate applicable to the assesseeKs total income including
the capital gains. If the asset is transferred at any time after the e'piry of &ve
years from the date of its ac<uisition% the capital gains will be ta'ed at the
usual rate applicable to the assesseeKs total income including the capital gains
or at the rate of &fteen percent whichever of the two is lower. Thus% in short
the rates can be speci&ed as below?
Ca*ital gain
arises to
Situations )ercentage
3a5 company Q #+P
3b5 person other
than company
i5 due to disposal within
+ years
At regular rate
ii5 due to disposal after +
years
At regular rate or Q #+P%
whichever is lower
C-F S*ecial Ta, #ates on inco4e earned fro4 selling shares and stoc2s
As per S6B !,/8AI$4IT4!"#" circulated on Muly "#% !"#"% special ta' rate is
proposed for income from sale of stoc;s and shares by speci&ed persons as
mentioned below?
The following reduced ta' rates will be applicable on the income earned from
transaction of securities 3e'cluding government securities5 listed in the Stoc;
2'changes?
Sl
-
Nature of Ta,*a6erOs inco4e
Ta,
rate
3a
5
Any income earned from trading of shares4securities by a
co4*an6 de&ned as per section !3!"5 and by a 0r4 de&ned
as per Section !3)!5
#"P
3b
5
Any income earned from trading of shares4securities by any
S*onsor Shareholder P Director of a Ban2= %inancial
Institution= Merchant Ban2= Insurance Co4*an6= Leasing
Co4*an6= )ortfolio Manage4ent Co4*an6= Stoc2 Dealer
or Stoc2 Bro2er Co4*an6
+P
3c
5
Any income earned from trading of shares4securities by any
Shareholder Ue'cluding the Sponsor Shareholders40irectors
mentioned in above Sl. 3b5V having #"P or more shares of the
total paid up capital of a company 4 companies listed at any
time during the income year
+P
#. If a shareholder mentioned in Sl. 3b5 is a Company or Firm% then ta' rate will
be #"P% same as mentioned in Sl. 3a5.
!. In case of transferring the shares by any Sponsor Shareholder 4 0irector
mentioned in Sl. 3b5% ta' will be deducted at the rate of @J on the di1erence
between transfer value and cost of ac<uisition of the securities as per
Section +) of the ITB% #/.*.
). The income from trading of shares of all other types of ta'payersK e'cluding
those mentioned in the above lists is e,e4*ted from ta'.
*. Gere% the term OSecuritiesW will include any stoc;s% shares% mutual fund
units% bonds% debentures or other securities of any listed company tradable
in the stoc; e'changes of the country 3e'cluding the securities issued by the
government5.
+. This S6B is e1ective from Muly "#% !"#".
C-D A**ortion4ent of sale *roceeds 3et/een original cost and su3se8uent
i4*ro+e4ents
Since capital gain ta' di1ers in rates in case of assessee other than a company
depending on the length of period the property is held by the assessee% it is
essential to assign capital gain on them separately.
Illustration
r. Marin bought a building within the =urisdiction of 0ha;a unicipality . years
bac; for T;. ,+ million on which he also incurred another T;. )+ million as
improvements * years ago. Ge has sold the property in mid Mune% !"## for T;.
#." million.
$ow% sale proceeds of T;. #." millions should be apportioned between original
cost and improvements due to di1erent capital gain ta' rate applicable for
transfer made within + years and after &ve years. Such apportionment is made
below proportionately?
Bn original cost? T;. #." millions _ ,+4#"" [ T;. ##- millions
Bn improvement? T;. #." millions _ )+4#"" [ T;. ,) millions
$ow capital gain and ta' on capital gain will be computed as below?
Original Cost I4*ro+e4en
ts
Cost ,+%"""%""" )+%"""%"""
Sale Proceeds ##-%"""%""" ,)%"""%"""
Capital gain assessed +!%"""%""" !.%"""%"""
Capital gain ta' rate 6egular rate or #+P% whichever is
lower
#+P
Improvement part has been disposed o1 within + years of ac<uisition and thus
T;. !. million would be included with the total income of the assessee. Briginal
cost part has been held for . years and the ta' on it% would be the lower of ta'
payable on the total income including capital gain and #+P.
.or2ed ",a4*les and Solutions
.or2ed ",a4*le 'B
r. 2rshad has recorded the following transactions for the year ended on Mune )"%
!"##. Cou are re<uired to comment on implication of capital gain and capital gain
ta'es on each of the following transactions independently.
3a5 Ge has sold a motorcar at T;. ,""%""" that he purchased in !""- at a cost of T;.
*""%""" and used solely for personal purposes.
3b5 Sale of a )8storied building for T;. )%"""%""" in 0ecember !"#"% which was
purchased on arch !""" for T;. #%.""%""". In Manuary !""*% the building was
e'tended at a total cost of T;. +""%""". The fair value of the building in
0ecember !"#" was T;. )%!""%""".
3c5 Sold an agricultural land situated outside the =urisdiction of Comilla Cantonment
Board at a total price of T;. !%"""%""" which was purchased + years bac; at a
total price of T;. #%"""%""".
3d5 Sold a machine% purchased at a price of T;. ."%""" for the purpose of his
business% at a price of T;. #+"%""" at fair mar;et value. Another T;. )"%""" was
spent to improve the machine. At the time of sale% the machine had accumulated
depreciation amounting to T;. ,"%""".
Solution 'B
3a5 The motorcar is a movable property and used e'clusively for personal purposes.
It does not fall under the de&nition of capital asset as per section !3#+5. Thus% he
is not re<uired to assess capital gain on this transfer and no ta'es as well.
3b5 Calculation of capital gain from the sale of building?
Sale proceeds or fair mar;et value whichever is higher T;. )%!""%"""
7ess?
Cost of ac<uisition T;. #%.""%"""
Cost of e'tension +""%"""
!%)""%"""
Capital (ain T;. /""%"""
Gere% capital gain will be ta'ed at regular rate or #+P% whichever is lower as
transfer is made after + years both original cost and e'tension wor;.
3c5 The land% being an agricultural land situated outside the =urisdiction of a
cantonment board% does not fall under the category of capital asset as per
section !3#+5. So% the capital gain arising from such transfer will not be ta'ed.
3d5 Calculation of capital gain from the sale of machine?
Sale proceeds or fair mar;et value whichever is higher T;. #+"%"""
7ess?
Cost of Ac<uisition T;. ."%"""
Cost of improvement )"."""
##"%"""
Ca*ital $ain T2-
:&=&&&
.or2ed ",a4*le 2B
r. Ashi<ur 6ahman purchased an apartment in $ovember !""- for T;. #%,""%""".
Ge has paid #P bro;erage fee and subse<uently spent another T;. +""%""" for the
renovation of the house. Bn #
st
Muly% !"#" he entered into an agreement to sell the
property to r. Anowar for a consideration of T;. +%"""%""" and received earnest
money 3advance money5 of T;. #""%""". As per the terms of the agreement% the
balance payment should be made within /" days of the agreement and if not the
earnest money will be forfeited. As r. Anowar could not ma;e the payment within
the stipulated time the amount of T;. #""%""" was forfeited by r. 6ahman.
Subse<uently on #"th Mune% !"##% r. 6ahman sold the apartment to r. Abdur
6ahman for T;. +%+""%""". Ge also paid !P bro;erage fee on sale of the apartment.
The fair mar;et value of the house on the date of sale was T;. +%!""%""". Calculate
ta'able capital gains for the assessment year !"##8#!.
Solution 2B
Calculation of Ta'able capital gains?
)articulars Ta2a Ta2a
Income under TCapital (ainsT 3Sec )#5?
Full value of consideration received against Capital Asset?
3including the forfeited amount of T;. #""%"""5 +%,""%"""
Fair ar;et :alue at the Time of Transfer% +%!""%"""
0isposal vale of the capital asset 3whichever is higher5
+%,""%""
"
7ess 8 Allowable 0eductions
Bro;erage fee for sale 3+%+""%""" ' !P5 ##"%"""
Cost of Ac<uisition U#%,""%""" Z 3#%,""%""" 'l P5V #%,#,%"""
Cost of improvements of the asset +""%"""
!%!!,.""
"
Capital (ain
)%)-*%""
"
.or2ed ",a4*le 9B
r. Mason runs a business of his own. Ge has purchased a piece of land at a cost of
T;. #"%"""%""" on #
st
Manuary !""* within the =urisdiction of Chittagong unicipality.
Ge has paid T;. +"%""" as &ndersD fee and another T;. #!"%""" as registration fee for
the land. Ge has sold the land on Muly #+% !"#" at price of T;. !!%"""%""". For the
sale% he has to pay bro;erage fee Q !P on the gross sales amount received. In 0CTKs
opinion% the fair mar;et value of the land at the time of sale is T;. !"%"""%""". Bn
Mune )"% !"## he has purchased another land at a cost of 3a5 T;. #"%"""%""" 3b5 T;.
#!%"""%""" and e'pressed his intention of getting roll over relief of capital gain on
new land in writing to 0CT. Ge also had T;. !""%""" as ta'able income from interest
on securities and T;. #""%""" from income from other sources.
Solution 9B
AssesseeB Mr- Hason
Assess4ent YearB 2&''>'2
Inco4e YearB 2&'&>''
)articulars Ta2a Ta2a a( Ta2a 3( Ta2a
Inco4e under TCa*ital $ainsT See
9'(B
Sale Proceeds of Capital Assets% or
!!%"""%"
""
Fair ar;et :alue at the Time of
Transfer% whichever is higher
!"%"""%"
""
!!%"""%""
"
Less > Allo/a3le Deductions
3a5 2'penditure incurred to transfer
the asset 3$ote !5 **"%"""
3b5 Cost of Ac<uisition 3$ote )5
#"%#-"%"
""
3c5 Capital e'penditure incurred for
improvement of the asset nil
#"%,#"
"""
Ca*ital $ain
##%)/"%""
"
##%)/"%"""
7ess? 6einvested (ain to claim rollover relief USec )!3+5V
#"%"""%""
"
##.)/"%"""
Ca*ital $ain Assessed Note :(
'=9C&=&&
&
nil
Ta' value of new asset nil ,#"%"""
Co4*utation of Ta,a3le Inco4eB
Income from Interest on Securities 3given5 !""%""" !""%"""
Capital (ains 3as calculated above5 #%)/"%""" nil
Income from Bther Sources 3given5 #""%""" #""%"""
Total Ta,a3le Inco4e #%,/"%""" )""%"""
Co4*utation of Ta, Lia3ilit6B
Ta,a3le Inco4e
#ate
A4ount of Ta,
Inco4e tier Case a( Case 3( Case a( Case 3(
Bn First Ta;a #%."%""" #%."%""" $il "" ""
Bn $e't Ta;a )%""%""" #%!"%""" #"P )"%""" #!%"""
Bn $e't Ta;a *%""%""" #+P ,"%"""
Bn $e't Ta;a )%""%""" !"P ,"%"""
Bn Balance Ta;a +%#"%""" !+P #!-%+""
Total
#,%/"%""
"
)%""%""" !%--%+"" #!%"""
Average Ta' 6ate U!%--%+""4#%,/"%"""V
U#!%"""4)""%"""5
#,.*!P *.""P
Flat 6ate #+.""P #+.""P
Ta' 6ate on Capital (ain 3note ,5 #+.""P nil
Ta' on Capital (ain 3#+P on #)%/"%"""5 !%".%+""
Ta' on remaining ta;a )""%""" will be at
regular rate 3)""%""8#."%"""5 ' #"P
#!%""" #!%"""
Net Ta, Lia3ilit6 22&=@&& '2=&&&
NotesB
#. The land <uali&ed as capital asset. Because% it is not an agricultural land and is
situated within the =urisdiction area as speci&ed.
!. 2'penditure incurred to transfer the capital asset% Ta;a **"%""" 3bro;erage fees
Q !P of T;. !!%"""%""".
). Cost of ac<uisition% T;. #"%#-"%""" 3cost #"%"""%""" Z &ndersD fees +"%""" Z
registration Fees #!"%"""5
*. In case of 3a5 as the investment was less than the capital gain% there will be
capital gains e<uivalent to di1erential amount and ta' have to pay on such
amount though the ta' value of the new asset will be nil. But in case of 3b5
investment is more than the capital gain and so there will be no capital gain left
to charge under the head and the ta' value of the new asset will be the
di1erence between the cost of new assets and capital gains rolled over 3ta;a
#!%"""%""" 8 ta;a ##%)/"%""5.
+. There is no revenue gain as the cost and written down value of the asset is same.
,. Gere% the assessee is a person other than a company and the asset is sold after +
years of purchase. So% as per rule% ta' rate will be the lower of average la' rate
computed on ta' on total income including capital gain and #+P Aat rate%
whichever is lower. So in case 3a5% applicable ta' rate on capital gain 3ta;a
#%)/"%"""5 will be #+P as this is the lower one and at regular rate on remaining
income. But in case of case 3b5% ta' will be applied at regular rate as there is no
income under the head Dcapital gainD.
Self>Assess4ent ?uestion
#. 2'plain the terms Ocapital assetW% Ocost of ac<uisitionW and Ofair mar;et valueW
under the Income Ta' Brdinance #/.*.
!. State the capital gains e'empted from payment of Income Ta' under the
Brdinance.
). r. Gasan has purchased a machine at a total cost of T;. +""%""" on !)DT April
!"", for the purpose of his profession. In addition% he has paid T;. #"%""" as legal
fees. Ge has spent an additional sum of T;. +"%""" for improvement of the
machine. Bn )"
th
0ecember !""/% he had sold the machine at a total price of T;.
,""%""" when the balance of allowable accumulated depreciation was T;. #!,%"""
in his boo;s of accounts. But the fair mar;et value on that date amounts to T;.
,+"%""" in the opinion of 0CT. Ge incurred advertisement cost of T;. !"%""" and
#.+P as bro;erage commission on the sale value. Ge has ta'able income of T;.
!)"%""" from other sources. Compute capital gain% total ta'able income% and
specify ta' rate thereon.
Chapter #"
Inco4e fro4 other sources
Contents
Introduction
2'amination conte't
To*ic List
>or;ed 2'amples and Solutions
#".# Introduction
#".! 0ividend
#".) Interest Income other than Interest on Securities
#".* 6oyalty
#".+ Fees for Technical Service
#"., Income from 7etting of Assets
#".- 0eemed Income under di1erent sub8sections of Section #/
#".. Allowable 0eductions
#"./ Inadmissible 0eductions
Introduction
Learning o3<ecti+es
Identify income from other sources.
Compute the ta'able income under the head XIncome from Bther SourcesK.
Identify the allowable deductions under the head.
Identify ta' e'empted income under the head.
Introduce the comple'ity of computing income from other sources.
2'plain the application of T0S and (rossing Jp of income in certain cases.
Compute ta' liability on income from other sources in di1erent situations.
)ractical signi0cance
The head Xincome from other sourcesK is very signi&cant due to its importance
as a residual head of income. Income that doesnKt fall under any other head
comes under the scope of this head. Thus% it is important to ;now di1erent
categories of income coming under the dead.
0ividend income% interest income 3in speci&c cases5% royalty income% fees for
technical services% income from letting machineries are some income coming
under the head. Some deemed income under section #/ will also be
considered as income from other sources.
Ta' is deducted at sources as per rules in some categories of income under
the head. These incomes are re<uired to be grossed up before reporting them
in return of income. Sometimes% these are considered as &nal settlement of
ta' liability under section .!C and it is important to ;now the impact on
computing ta'able income and ta' liability as well.
The chapter% as usual% also presents the scope of income under the head%
admissible e'penses% inadmissible e'penses and other related issues.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the computation of ta'able income under the head
Xincome from other sourcesK is one of the basic re<uirements for determining
ta' liabilityN Can you determine the ta'able income under the headN Can you
compute net ta' liability of an assessee having income under the headN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the total ta'able income for any income year. Before advising the clients%
accountants should have the clear concept relating to the admissible and
inadmissible e'penses so that they can deduct or add the e'penses in
determining the ta'able income.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
Cou will be also using this ;nowledge when you tac;le the ta'ation paper later
on in the Professional Stage and it will also underpin the technical aspects at
the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne income from other sources.
Identify di1erent scope of income under the head.
Compute the ta'able income under the head.
Identify T0S and &nal settlement of ta' liability under section .!C.
Identify the allowable deductions under the head.
Introduce grossing up of income in certain cases and illustrate its impact
on computing ta'able income.
Compute net ta' liability under the head.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
core concept on computation of income which is vital for calculating ta'
liability. Clear concept and understanding of each contents of this chapter will
help candidates to resolve any problems relating to computation of income
from other sources.
'&-& INCOM" %#OM OT;"# SOU#C"S
Section O+er+ie/
Income from other sources is the last and residual head of income.
The total income may not be ta'able income.
There are some allowable% inadmissible and not permissible deductions
under the head.
0ividend% interest% royalty and fees for technical services are signi&cant
sources of income under the head.
Bn some income under the head% ta' is deducted at sources at speci&ed
rates.
(rossing up of income is important to report ta'able income.
Sometimes ta' deducted at sources is considered as &nal payment of ta'
liability under section .!C.
There are some admissible and inadmissible deductions under the head.
'&-' Introduction
This is the residuary head of income as mentioned in Section !" of the Income
Ta' Brdinance #/.*.
The following income of an assessee is assessable under this head?
3#5 0ividend and interest.
3!5 6oyalties and fees for technical services.
3)5 Income from letting of machinery% plant or furniture and also of buildings
if letting of buildings is inseparable from the letting of the machinery%
plant or furniture.
3*5 0eemed income under section #/3#5% 3!5% 3)5% 3*5% 3+5% 3.5% 3/5% 3#"5% 3##5%
3#!5% 3#)5% 3!#5% 3!#A5 or 3!*5.
3+5 Income of any ;ind or from any source which is not classi&able under any
of the other heads speci&ed in Section !".
From the above points% income from other sources can broadly be categori9ed
as follows?
Categories Particulars 6eferences
Speci&ed
Income
0ividend% interest%
royalties% fees for
technical services% income
from letting of speci&ed
assets
Section )) 3a5% 3b5 and 3c5
0eemed
income
Income as speci&ed in
di1erent subsections of
section #/
Section ))3d5% Section #/3#5% 3!5%
3)5% 3*5% 3+5% 3.5% 3/5% 3#"5% 3##5%
3#!5% 3#)5% 3!#5% 3!#A5 and 3!*5.
6esidual
income
Any income that is not
classi&ed as income in
any other sections
Section )) 3e5
'&-2 Di+idend
Section !3!,5 de&nes dividend in this way F 0ividend includes 8
3a5 any distribution by a company out of accumulated pro&ts% whether
capitali9ed or not % if such distribution entails the release by the company
to its shareholders of all or any part of its assets or reserves USection !3!,5
3a5VI
3b5 any distribution by a company% to the e'tent to which the company
possesses accumulated pro&ts% whether capitali9ed or not% to its
shareholders of debentures% debenture8stoc; or deposit certi&cates in any
form% whether with or without interest USection !3!,53b5VI
3c5 any distribution made to the shareholders of a company on its li<uidation
to the e'tent to which the distribution is attributable to the accumulated
pro&ts of the company immediately before its li<uidation whether
capitali9ed or not USection !3!,53c5VI
3d5 any distribution by a company to its shareholders on the reduction of its
capital% to the e'tent to which the company possesses accumulated pro&ts
whether such pro&ts have been capitali9ed or not USection !3!,53d5VI
3e5 any pro&t remitted outside Bangladesh by a company not incorporated in
Bangladesh under the Companies Act% #//* USection !3!,53dd5VI
3f5 any payment by a private company of any sum 3whether as representing a
part of the assets of the company or otherwise5 by way of advance or loan
to a shareholder or any payment by any such company on behalf% or for
the individual bene&t% of any such shareholder% to the e'tent to which the
company% in either case% possesses accumulated pro&t% but does not
include 8
3i5 a distribution made in accordance with section !3!,53c5 or 3d5 in
respect of any share including preference share for full cash
consideration% or redemption of debentures or debenture8stoc;% where
the holder of the share or debenture is not entitled in the event of
li<uidation to participate in the surplus assetsI
3ii5 any advance or loan made to a shareholder in the ordinary course of its
business% where the lending of money is a substantial part of the
business of the companyI
3iii5any dividend paid by a company which is set o1 by the company
against the whole or any part of any sum previously paid by it an
treated as dividend within the meaning of section !3!,53e5 to the
e'tent to which it is so set o1.
3iv5any bonus share issued by a company USection !3!,53e5V.
",e4*tionB Any income from dividend of a mutual fund or a unit fund is
e'empted up to T;. !+%""" USi'th schedule% Part A% Para !!AV.
Ta, Deducted at SourcesB Ta' on dividend income will be deducted at
following rates?
T6*e of Assessee #esidential Status TDS
#ates
Company Both resident and non8resident !"P
Person other than
Company
6esident and non8resident
Bangladeshi
#"P
$on8resident foreigner !+P
$rossing u*B Ces. Gowever% it is important to ;now the rate of T0S before
grossing up.
IllustrationB
r. 6ole' is a non8resident foreigner and received T;. -%+"" as dividend from
a Public 7imited Company incorporated in Bangladesh. Gere% rate of T0S was
!+P and thus% after grossing up% the amount of gross dividend will be T;.
#"%""" 3-%+"" #""4-+5.
'&-9 Interest Inco4e other than Interest on Securities
All interest income other than those considered in XInterest on SecuritiesK are
considered under this category. All possible sources of income% e'emption
limit and T0S rates are given in the table below?
Sources of Interest inco4e TDS
rate
",e4*tion
#. Interest on Savings 4 Fi'ed
deposits from a Ban;% co8
operative ban;% non8ban;ing
&nancial institution% leasing
company% housing &nance
company
#"P
$o e'emption
2* Share of pro&t from any ban;
run on Islamic Principles.
#"P $o e'emption
). Interest on Savings
Certi&cates?
a. + years Bangladesh
Sanchayapatra
b. ) monthly pro&t based ) year
Bangladesh Sanchayapatra
c. Pensioner Sanchayapatra
d. Paribar Sanchayapatra
+P
$o e'emption
*. Interest on Post BEce Savings
Ban;
#"P $o e'emption
+. Interest on >age 2arnerKs
0evelopment Bond.
+P $o e'emption
,. Interest on $on86esident
Foreign
Currency 0eposit Account
$il Fully e'empted
,* Interest on 0PS 4 Contributory
Savings Scheme run by a
commercial Ban; and approved
by the government.
$il Fully e'empted
.. Interest on Bangladesh
Industrial
0evelopment Bond
#"P 2'empted up to T;.
!+%""". If the interest
amount e'ceeds T;.
!+%"""% #"P T0S is
allowed on the whole
interest amount and to be
considered as the &nal
payment of ta' as per
Section .!3c5.
/. JS 0ollar Premium Bond $il Fully e'empted
#". JS 0ollar Investment Bond $il Fully e'empted
$rossing u*B (rossing up is important for interest income across items #% !%
)% *% + and . where T0S is applicable. It is not re<uired for other * items 3,% -%
/ L #"5 which is fully e'empted from ta' and thus no ta' is deducted at
source.
Illustration
7etKs assume that r. Arshad has reported interest income
from the following sources for the ended Mune )"% !"##.
Compute grossed up income.
3i5 Interest on &'ed deposit T;. #.%""".
3ii5 Interest on savings account T;. /%"""
3iii5 Share of pro&t from Islami Ban; Bangladesh 7imited T;.
#)%+""
3iv5 Interest on Savings certi&cate T;. /%+""
3v5 Interest on Post BEce Savings Ban; T;. /%"""
3vi5 Interest on >age 2arnerKs 0evelopment Bond T;. *%-+"
3vii5 Interest on $on86esident Foreign Currency 0eposit
Account T;. #"%"""
3viii5 Interest on 0PS T;. +%"""
3i'5 Interest on Bangladesh Industrial 0evelopment Bond
a5 T;. !"%""" and
b5 T;. !-%"""
3'5 Interest on JS 0ollar Premium Bond T;. ,%"""
3'i5 Interest on JS 0ollar Investment Bond T;. .%"""
Co4*uting $rossed U* Inco4e
Sources of interest inco4e TDS #ate %or4ulae $rossed u*
inco4e
Interest on &'ed deposit #"P T;. #.%"""4#8
".#
T;. !"%"""
Interest on savings account #"P T;. /%"""4#8
".#
T;. #"%"""
Share of pro&t from IBB7 #"P T;. #)%+""4#8
".#
T;. #+%"""
Interest on Savings certi&cate +P T;. /%+""4#8
"."+
T;. #"%"""
Interest on Post BEce Savings
Ban;
#"P T;. /%"""4#8
".#
T;. #"%"""
Interest on >age 2arnerKs
0evelopment Bond
+P T;. *%-+"4#8
"."+
T;. +%"""
Interest on $on86esident Foreign
Currency 0eposit Account
Fully
2'empted
$4A $4A
Interest on 0PS Fully
2'empted
$4A $4A
Interest on Bangladesh Industrial
0evelopment Bond
T;. !"%""" Fully
2'empted
$4A $4A
T;. !-%""" #"P T;. !-%"""4#8
".#
T;. )"%"""
^
Interest on JS 0ollar Premium
Bond
Fully
2'empted
$4A $4A
Interest on JS 0ollar Investment
Bond
Fully
2'empted
$4A $4A
^
T;. )%""" of ta' paid is the &nal ta' liability on this income. $o further ta'es
is due on this income.
'&-: #o6alt6
As per section ! 3+,5 of ITB #/.*% royalty means consideration 3including any
lump sum consideration but e'cluding any consideration which is classi&able
as income of the recipient under the head TCapital gainsT5 for 8
3a5 transfer of all or any rights% including the granting of a licence in respect of
a patent% invention% model% design% secret process or formula% or trade
mar; or similar propertyI
3b5 the imparting of any information concerning the wor;ing of% or the use of%
a patent% invention% model% design% secret process or formula% or trade
mar; or similar propertyI
3c5 the use of any patent% invention% model% design% secret process or formula%
or trade mar; or similar propertyI
3d5 the imparting of any information concerning technical% industrial%
commercial% or scienti&c ;nowledge% e'perience or s;illI
3e5 the transfer of all or any rights% including granting of a licence% in respect
of any copyright% literary% artistic or scienti&c wor;% including &lms or video
tapes for use in connection with television or tapes for use in connection
with radio broadcasting% but not including consideration for sale%
distribution or e'hibition of cinematograph &lmsI or
3f5 the rendering of any services in connection with any of the aforesaid
activities
Gowever% section ),% gives the guideline of how income from royalties% literary
wor;s% etc. can be allocated among di1erent income years depending on the
time used for completing the wor;s. BrieAy% the guideline is as follows?
Time ta;en to complete the
wor;
Allocation on an e<ual basis among the income
years
7ess than #! months the income year in which it is received
ore than #! but less than
!* months
the income year in which it is received and the
immediately preceding income year
ore than !* months the income year in which it is received and the two
immediately preceding income years
Ta, Deducted at Sources on #o6alt6 Inco4e
If the royalty is paid by the government or any other authority% corporation or
body% company 3including ban;ing and insurance company5% or any co8
operative ban; or any registered $(B% #"P ta' will be deducted at source
under section +!A3!5 and such amount as deducted will be considered as &nal
payment of ta' liability as per section .!3c5.
Thus% grossing up is re<uired is royalty income is received after T0S.
Illustration
7etKs assume that r. Harma;er has received a lump sum amount of T;. /"%""" as
royalty income from the government during the income year !"#" 8 !"##. Ge has
ta;en a total of #. months to complete the wor;. Thus% the allocation of the royalty
income may be allocated between this year and the immediate preceding year after
grossing up as follows?
(rossed Jp Income? T;. /"%"""4#8".# [ T;. #""%"""
This income will be allocated as follows?
Income year !""/ F !"#"? T;. +"%"""
Income year !"#" F !"##? T;. +"%"""
Gowever% ta' on this income is already paid and no further ta' is payable
on this income.
'&-@ %ees for Technical Ser+ice
Fees for technical services means any consideration 3including any lump sum
consideration5 for the rendering of any managerial% technical or consultancy
services 3including the provision of services of technical or other personnel5
but does not include consideration for any construction% assembly% mining or
li;e pro=ect underta;en by the recipient% or consideration which would be
income of the recipient classi&able under the head Salaries Usection !3)#5V.
Ta, Deducted at Sources on %ees for Technical Ser+ice
If the fees for professional or technical services is paid by the government or
any other authority% corporation or body% company 3including ban;ing and
insurance company5% or any co8operative ban; or any registered $(B% #"P
ta' is deducted at source under section +!A3)5. (rossing up is re<uired to
report gross income.
IllustrationB
7etKs assume that Soft Tech Solutions received T;. /"%""" as technical fee
from B6TA during the current income year. As the income was generated from
a government authority% ta' has been deducted at source Q #"P and thus the
gross income to be reported by Soft Tech Solutions would be T;. #""%""" 3T;.
/"%"""4#8".#5.
'&-E Inco4e fro4 Letting of Assets
Income from letting of machinery% plant or furniture belonging to the assessee
and also building inseparable from the mentioned assets is ta'able as income
from other sources if the same is not chargeable to ta' under the head
OIncome from Business or Profession under section !.W or under the head
OIncome from Gouse Property under section !*W. In this case the letting does
not constitute a business activity.
'&-F Dee4ed Inco4e under diAerent su3>sections of Section 'C
Sectio Inco4e to 3e sho/n under the head VInco4e fro4 Other
n SourcesO
'C'( Une,*lained credits
Any sum credited in the boo;s of an assessee maintained for any
income year and the assesses o1ers no e'planation about the
nature and source thereof% or the e'planation o1ered is not
satisfactory
'C2( Une,*lained in+est4ents
>here the assessee has made investments or is found to be the
owner of any bullion% =ewellery or other valuable article and the 0CT
&nds that the amount e'pended on ma;ing such investments or in
ac<uiring such bullion% =ewellery or other valuable article e'ceeds
the amount recorded in this behalf in the boo;s of account
maintained by the assessee for any source of income and the
assessee o1ers no e'planation about the e'cess amount or the
e'planation o1ered is not satisfactory
'C9( Une,*lained e,*enditure
>here the assessee has incurred any e'penditure and he o1ers no
e'planation about the nature and source of the money for such
e'penditure% or the e'planation o1ered is not satisfactory
'C:( Unrecorded in+est4ents
>here% in the &nancial year immediately preceding the assessment
year% the assessee has made investments which are not recorded in
the boo;s of account% if any% maintained by him for any source of
income% and the assessee o1ers no e'planation about the nature
and source of fund for the investments% or the e'planation o1ered
is not satisfactory
'C@( Unrecorded 4one6= <e/eller6 etc-
>here% in the &nancial year immediately preceding the assessment
year% the assessee is found to be the owner of any money% bullion%
=ewellery or other valuable article which is not recorded in the
boo;s of account% if any% maintained by him for any source of
income% and the assessee o1ers no e'planation about the nature
and source of fund for the ac<uisition of the money% bullion%
=ewellery or other valuable article% or the e'planation o1ered is not%
in the opinion of the 0eputy Commissioner of Ta'es% satisfactory
'CD( )urchase of assets at a *rice lo/er than the fair 4ar2et
+alue
>here any assets% not being stoc;8in8trade or stoc;s% and shares%
are purchased by an assessee from any company and the 0eputy
Commissioner of Ta'es has reason to believe that the price paid by
the assessee is less than the fair mar;et value thereof% the
di1erence between the price so paid and the fair mar;et value
'CC( Sala4i or *re4iu4 for granting leases
>here any lump sum amount is received or receivable by an
assessee during any income year on account of salami or premium
receipts by virtue of any lease% such amount received
'C'&( $ood/ill 4one6 or co4*ensation
>here any amount is received by an assessee during any income
year by way of goodwill money or receipt in the nature of
compensation or damages for cancellation or termination of
contracts and licences by the (overnment or any person% such
amount received
'C''( Bene0t or ad+antage on account of cancellation of
inde3tedness
>here any bene&t or advantage% whether convertible into money or
not% is derived by an assessee during any income year on account
of cancellation of indebtedness the money value of such advantage
or bene&t
'C'2( Managing agenc6 co44ission
Any managing agency commission including compensation
received during any income year by an assessee for termination of
agencies or any modi&cation of the terms and conditions relating
thereto
'C'9( .inning fro4 lotteries= cross/ord *riQes etc-
Any amount received by an assessee during any income year by
way of winnings from lotteries% crossword pu99les% card games and
other games of any sort or from gambling or betting in any form or
of any nature whatsoever
I4*ortant
Ta' will be deducted at sources on such income Q !"P as per
section ++ and Second Schedule% Para ). Gowever% it will be
considered as &nal payment of ta' liability as per section .!C3!53t5.
'C2'( Un*aid loan
>here any sum% or aggregate of sums e'ceeding T;. #%""%""" is
claimed or shown to have been received as loan by an assessee
during any income year from any person% not being a ban;ing
company or a &nancial institution% otherwise than by a crossed
che<ue drawn on a ban;% and has not been paid bac; in full within
three years from the end of the income year in which it is claimed
or shown to have been received% the said sum or part thereof which
has not been paid bac;
'C2'
A(
Loan or gift recei+ed under so4e circu4stances
>here any sum is claimed to have been received by an assessee as
loan or gift during any income year from a person who has
transferred the sum within the period of limitation stipulated in the
rule made under this Brdinance% from the initial capital of his
business or profession shown in his return &led under section .)A%
the amount of such loan or gift so received by the assessee
'C2'
B(
Transfer of initial ca*ital
>here any sum% shown as initial capital of business or profession in
return of income &led under section .!BB% is transferred by a
person partly or fully within the period of limitation stipulated in the
said section% the sum so transferred
'C2:( Disclosing in+est4ent in e8uit6 of an unlisted co4*an6
>here an assessee% being a private limited company or a public
limited company not listed with a stoc; e'change% increases its paid
up capital by issuing shares in an income year% the amount so
received as increased paid up capital% not being received by
crossed chec; or ban; transfer
'C2E( Loan ta2en 36 a co4*an6 other/ise than 36 a crossed chec2
or 3an2 transfer
>here an assessee% being a company% receives any amount as loan
from any other company otherwise than by a crossed che<ue or by
ban; transfer% the amount so received
'C2F( )urchase or hire of car at a *rice e,ceeding '&J of *aid u*
ca*ital
>here an assessee% being a company% purchases directly or on hire
one or more motor car or =eep and value of any motor car or =eep
e'ceeds ten percent of its paid up capital% then &fty percent of the
amount that e'ceeds such ten percent of the paid up capital
'&-D Allo/a3le Deductions
As per section )*% followings are the allowable deductions from the income
classi&able as income from other sources as per section )).
3#5 Interest paid on money borrowed for the purpose of ac<uisition of shares
of a company. Interest payable outside Bangladesh on which ta' has not
been paid and from which ta' has not been deducted at source shall not
however be admissible deduction.
3!5 Any e'penditure% not being capital e'penditure or personal e'penses%
spent solely for the purpose of ma;ing or earning the relevant income.
3)5 >here income from other sources is derived from letting on hire any
machinery% plant or furniture is inseparable with buildings% allowance for
repairs% insurance premium% depreciation and obsolescence allowance are
admissible in the determination of income from business under section
!/3#5 3vi5% !/3#5 3vii5% and !/3#5 3'i5% respectively as if the income from
such letting on hire were income from business or profession.
Provided that the provisions of section #/ 3#,5 shall also be applicable for
the determination of any pro&ts where the sale proceeds of such
machinery% plants% furniture or building e'ceeds the written down value
thereof.
'&-C Inad4issi3le Deductions
As per section )*3*5% following two e'penses are not admissible?
3a5 Any interest chargeable under the Brdinance which is payable outside
Bangladesh on which ta' has not been paid and from which ta' has not
been deducted at source under section +,I or
&+( Any payment which is chargeable under the head OSalariesW if ta' has
not been paid thereon or deducted there from under section +".
.or2ed ",a4*les and Solutions
.or2ed ",a4*le '
r. Abdur 6ahman has reported the following incomes classi&able under the head
XIncome from Bther SourcesK for the income year ended on Mune )"% !"##. Compute
ta'able income of r. 6ahman.
0ividend from a Private 7imited Company
/%"""
Interest on Fi'ed 0eposits
+%*""
Interest on Savings Certi&cate
#/%"""
Interest on Post BEce Savings Ban;
#%.""
6emuneration for e'am script evaluation and invigilation #%"""
Pri9e of winning Pri9e bond lottery
!+%"""
Sale of Fish of Pond
#%"""
Sale of forest Tree and bamboo
#%+""
Income from copyright and royalty
*%"""
6emuneration as 0irector
#"%"""
Income from marriage anniversary
+%"""
Income from license
!%"""
0uring the year he has purchased =ewellery of T;. #!+%""" the source of which has
not been e'plained to the 0CT. 0uring the year he has paid T;. !"" as license
renewal fee and T;. ."" as interest on loan ta;en to purchase the shares of private
limited company.
Solution '
AssesseeB Mr- A3dur #ah4an
Assess4ent 6earB 2&''>2&'2
Inco4e 6earB 2&'&>2&''
Deter4ination of total inco4e
Inco4e fro4 Other Sources Sec > 99(B
#. 0ividend from Pvt. 7td. Co. 3/%"""4#8".#5 #"%"""
!. Interest on Fi'ed 0eposits 3+%*""4#8".#5 ,%"""
). Interest on Savings Certi&cate 3#/%"""4#8"."+5 !"%"""
*. Interest on Post BEce Savings Ban; 3#%.""4#8".#5 !%"""
+. 6emuneration for e'am script evaluation #%"""
,. Pri9e of Pri9e bond lottery !+%"""
-. 7ess? Final payment of ta' as per .!3c5 !+%""" 8
.. Sale of Fish of Pond #%"""
/. Sale of forest tree and bamboo #%+""
#". Income from copyright and royalty *%"""
##. 6emuneration as 0irector #"%"""
#!. Income from marriage anniversary +%"""
7ess? 2'empted 3full5 +%""" 8
#). Income from license !%"""
#*. Jne'plained investment to purchase =ewellery #!+%"""
#%.!%+""
7ess? Allowable deductions?
7icense renewal fee !""
Interest on loan ."" #%"""
Total '=D'=@&&
NotesB
#. Assuming copyright and royalty has been received from a person% hence no T0S
is allowed.
!. Income from marriage anniversary is a gift hence e'empted from income ta'.
.or2ed ",a4*le 2
r. Moarder Gossain has reported the following incomes for the income year !"#"8##
classi&able under the head XIncome from Bther SourcesK. Compute ta'able income of
r. Gossain.
0ividend from ICB utual Fund 3gross amount5 )"%"""
Pro&t on Islami Ban; udaraba Savings Scheme !%-""
Interest on Savings Certi&cate 3gross5
)"%"""
Income from royalty of a boo; 3time of completion F #" months5 !%"""
Income received from a part8time =ob
l"%"""
Pri9e of winning Crosswords
!%"""
Income from letting out household machineries #%"""
Sale of forest timber
#%+""
Income from rent of a shop owned by him
*%"""
(ain from loan amorti9ation
#"%"""
Income from a newspaper for column writing
+%"""
Income from unused leased land
!%"""
Gonorarium for attending a Symposium
)"%"""
Income from private tuition in a Coaching Center #"%"""
6oyalty income from a government authority
#%.""
0uring the year he spent T;. !""%""" on a party in Gotel 6adisson% the source of
e'penditure remained une'plained to the 0CT. Ge has also visited Singapore
incurring a total cost of T;. #""%""" and purchased a 0iamond set of T;. !""%""" for
his wife for which the source of the money was not satisfactory to the 0CT. 0uring
the year he has paid T;. !%""" as commission for collecting the dividend and T;.
.%""" as interest on loan ta;en to purchase the shares of public limited company.
Solution 2B
AssesseeB Mr- Hoarder ;ossain
Assess4ent 6earB 2&''>2&'2
Inco4e 6earB 2&'& > 2&''
Deter4ination of total inco4e
Inco4e fro4 Other Sources Sec > 99(B
#. 0ividend from ICB utual Fund )"%"""
7ess? 2'empted F Jp to T;. !+%""" !+%""" +%"""
!. Pro&t on Islami Ban; Scheme 3!%-""4#8".#5 )%"""
). Interest on Savings Certi&cate )"%"""
*. Income from royalty of a boo; !%"""
+. Income received from a part8time =ob #"%"""
,. Pri9e of winning crosswords !%"""
7ess? Final payment of ta' as per .!3c5 !%""" 8
-. Income from letting out household machineries #%"""
.. Sale of forest timber #%+""
/. Income from rent of a shop *%"""
#". (ain from loan amorti9ation #"%"""
##. Income from newspaper column writing +%"""
#!. Income from unused leased land !%"""
#). Gonorarium for attending a Symposium )"%"""
#*. Income from private tuition in a Coaching
Center
#"%"""
#+. 6oyalty income from government 3#%.""4#8".#5 !%"""
7ess? Final payment of ta' as per .!3c5 !%""" 8
#,. Jne'plained investments?
Party in hotel !""%"""
Travel to Singapore #""%"""
Purchase of 0iamond =ewellery !""%"""
+%""%""
"
,#)%+"
"
LessB Allowable deductions?
Commission for collecting dividend !%"""
Interest on loan .%""" #%"""
Total
,#!%+"
"
Self>Assess4ent ?uestion
#. >hat is meant by OdividendW under the Income Ta' Brdinance #/.*N
!. >hat are the incomes assessable as OIncome from Bther SourcesW under the
BrdinanceN
). r. Moynal A;and has earned the following incomes for the year !"#"8##.
0ividend from preference shares of a Public 7imited Company *+%"""
0ividend from ICB utual Fund
#.%"""
Income from underwriting shares of a Company
)"%"""
Income from mooring terminal
*"%"""
Interest on Savings Ban; 0eposit
!-%"""
Gonorarium received as a director to be a member of the Board #"%"""
Pri9e of winning 6ed Crescent 7ottery
),%"""
Income from betting4housie
*.%"""
Interest on loan given to a friend
#+%"""
Income from consultancy wor; not related to his profession *"%"""
Income from participating in a training program
!"%"""
Income from Birthday Party
+"%"""
Income from lump sum royalty of a boo; which too; him two years to write the
boo; /"%"""

0uring the year he spent T;. !""%""" to purchase a piece of land% T;. /"%""" to
purchase a motorcycle and the e'planation given regarding the source of
e'penditure was unsatisfactory to the 0CT. Through investigation% the 0CT has also
identi&ed an F06 of T;. +""%""" in a local ban; source of which has also remained
e'plained. Ge has also visited India incurring a total cost of T;. #""%""" and
purchased a 0iamond set for T;. #""%""" for his wife for which the source of the
money was also une'plained. 0uring the year he has paid T;. #%+"" as commission
for collecting the dividend. Gis other e'penditures during the year were as follows?
Purchase of Boo;s and aga9ine
#+%"""
0onation to PresidentDs 6elief Fund
)"%"""
Contribution to a deposit pension scheme
."%"""
Purchase of a cow for 2id ul A9ha
#+%"""
Purchase of a 7aptop
#)"%"""
Purchase of Shares from secondary mar;et
!""%"""
Compute ta'able income and ta' liability of r. Moynal A;and for the assessment
year !"##8#!.
Chapter ##
De*reciation allo/ances
Contents
Introduction
2'amination conte't
To*ic List
##.# Basics of 0epreciation Allowances
##.! 0epreciation Allowance for 0i1erent Geads of Income
##.) 0epreciation allowance on assets used for agricultural purpose
##.* 0epreciation allowance on assets used in business or profession
##.+ Types of 0epreciation Allowance
##., $ormal depreciation allowance
##.- Initial 0epreciation Allowance
##.. Bther depreciation allowance
##./ Investment allowance? Section !/3#5 3i'5 L 3'5
##.#" >ritten down value of assets for the purpose of depreciation
allowance? 3Para ##3+5 3a5 L 3b5 and ##3,5 3a5 of the third Schedule5
##.## 0isposal of assets and treatment of gains or losses thereof 3Para #"%
Third Schedule5
##.#! 7imitation in respect of 0epreciation Allowance 3Para /% Third
Schedule5
##.#) 0epreciation? >hether Compulsory or BptionalN
>or;ed 2'amples and Solutions
Introduction
Learning o3<ecti+es
2'plain depreciation allowance.
Compute depreciation allowance% investment allowance.
0e&ne balancing charge and capital gain.
Identify di1erent types of depreciation allowances.
0i1erentiate accounting depreciation and ta' depreciation.
0e&ne di1erent rates of accelerated depreciation for di1erent assets.
0e&ne written down value and its application at ac<uisition and disposal of
assets.
2'plain gain and losses of assets in disposal.
)ractical signi0cance
0epreciation allowance is very important in computing income from business
and profession. It is an allowable deduction in computing income from
agriculture and income from business and profession. Thus% computing
depreciation and understanding its implication is very signi&cant.
Accounting depreciation and ta' depreciation is not the same that generates
deferred ta'ation. And it is very important for professional accountants to
practice deferred ta'ation. This chapter presents di1erent types of
depreciation allowances% investment allowance and other related topics.
It also presents a de&nition of written down value with the application of gain
and loss on disposal of assets. It also presents di1erent e'ceptions to the
common rule.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the computation of depreciation allowance is one of the
important issues for determining ta' liabilityN Can you determine the ta'able
income under the heads Xincome from agricultureK and Xincome from business
and professionK after allowing depreciation allowanceN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the total ta'able income for any income year. Before advising the clients%
accountants should have the clear concept relating to the admissible and
inadmissible e'penses so that they can deduct or add the e'penses in
determining the ta'able income.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
Cou will be also using this ;nowledge when you tac;le the ta'ation paper later
on in the Professional Stage and it will also underpin the technical aspects at
the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne depreciation allowance.
Compare depreciation allowance and investment allowance.
0e&ne written down value% balancing charge% industrial underta;ing and
capital gain.
Presents di1erent rates of depreciation for di1erent types of assets.
2'plain rates of depreciation for plant% machinery% ships and other
e'ceptional assets.
Jnderstanding the di1erence between accounting depreciation and ta'
depreciation.
0e&ne written down value and its application at ac<uisition and disposal of
assets.
2'plain gain and losses of assets in disposal.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
core concept on computation of income which is vital for calculating ta'
liability. Clear concept and understanding of each contents of this chapter will
help candidates to resolve any problems relating to computation of income
under the heads Xincome from agricultureK and Xincome from business and
professionK.
''-& D")#"CIATION ALLO.ANC"
Section O+er+ie/
0epreciation is allowed on cost but investment allowance is over the
above cost and depreciation allowance.
Any (overnment subsidy or any grant from any authority received for the
purchase is to be deducted from cost.
Sale value of motor car costing more than T;. #" la;hs is to be scaled
down in proportion to T;. #" la;hs limit and the same with assets used
partly for business or profession and partly for private purpose of the
assessee.
Full depreciation is allowed in the year of purchase and none is allowed in
the year of disposal of asset.
Sale value e'ceeding original cost is capital gain and should be ta'ed
accordingly.
0epreciation is calculated on reducing balance method 3>0:5 on all assets
other than accelerated depreciation or on ships and vessel when cost is
used.
Balancing charge is the revenue gain and should be ta'ed separately.
Accounting depreciation and ta' depreciation are di1erent and it creates
deferred ta'es.
''-' Basics of De*reciation Allo/ances
Besides various e'penditure allowed under Sec. !/ in arriving at the pro&t or
loss on business or profession in an income year% allowances are also given for
depreciation of capital assets within prescribed rules and at prescribed rates.
$ormally accountants charge depreciation on &'ed assets other than lands in
calculating pro&t or loss of business or profession periodically. This is a normal
wear and tear of &'ed asset caused by use% deAu'ion of time or obsolescence%
the rates and method of depreciation depend on the particular accounting
policy followed by the assessee. In calculating accounting depreciation%
accountants should not consider what ta' authorities allow and ta' authorities
also do not consider accounting depreciation in computing depreciation
allowed under ta' laws. It may be that accountant has not charged any
depreciation on &'ed assets or charged whole of a particular &'ed asset in a
year% but to the ta' man% it is immaterial since he would add bac; accounting
depreciation and deduct ta' depreciation in his assessment process.
Some basic rules or concepts used in the calculation and granting of
depreciation allowances are stated below?
3i5 It is allowed on &'ed assets other than land i.e. buildings% plant and
machinery% furniture and &ttings% e<uipments etc.
3ii5 Assets must be used in the relevant income year in business or
profession. It may be used for the whole year or for =ust one day in the
year. The allowance is given for the whole year without time
apportionment. Gowever% it would be on proportionate basis when assets
or some of these are used for private purpose and business purpose.
3iii5 Bwnership of the assets must be with the concerned assessee in the
income year. This condition overrides prima facie that of use when in the
case of lease% &nance operative or any other arrangement of hire
purchase purpose% the lessor retains the ownership. Ge is thus allowed full
ta' depreciation though the assets have been used by the assesee.
3iv5 It is obligatory on the part of the asessee to furnish the prescribed
particulars in respect of depreciation claim 36ule *#5. If the prescribed
particulars are not furnished% the 0CT may even refuse to grant any
allowance for depreciation. Gowever% where the particulars furnished are
incomplete or inaccurate he cannot decline to grant allowance where he
should call for further information to complete his own depreciation
allowance.
3v5 Aggregate depreciation allowed shall not e'ceed cost and the law deals
with the sub=ect of cost elsewhere.
3vi5 $o depreciation is allowed in the year the asset is sold discarded or
demolished even when it was used for ma=or or most part of the year.
Gowever% balancing allowances is allowed in that year when >0: of the
asset is greater than the proceeds.
3vii5 Third Schedule prescribes di1erent rates of depreciation allowances for
di1erent classes of assets. Bn ocean going ships and vessels the rate of
depreciation is based on actual cost% in all other cases% it is bases on
written down value 3>0:5 of the asset.
3viii5 Cost of motor vehicle used in the business or profession is restricted to
T;. #" 7a;hs for the purpose of depreciation allowance calculation.
3i'5 $o depreciation is allowed on assets before the commencement of
business i.e. commercial production.
3'5 >hile ac<uiring the asset% the assessee receives any capital grant or
(overnment subsidy or any assistance from any other authority or person
such amount shall be e'cluded from the ac<uisition cost for the
calculation of depreciation allowance.
3'i5 Fluctuation in the foreign e'change rate is given e1ect to determine the
cost base of any asset ac<uired with money borrowed and payable in
foreign currency.
3'ii5 0epreciation is not treated as an e'pense unli;e the matching of cost with
revenue by the accountants. Gowever% it is given as a speci&c case for the
diminution in capital assets used in business or profession. Since% it is not
treated as a cost by the ta' people% ta' pro&t or loss is calculated &rst
without having regard to depreciation allowance. If there is any pro&t
depreciation is set o1 against that. If not or if insuEcient to absorb the
whole% the balance is and can be carried forward inde&nitely as
unabsorbed depreciation. But in case of loss% it can be carried forward
only for si' years and when cannot be set o1 within that% is regarded a
capital loss. This facility of carry forward of unabsorbed depreciation is
e'tended to all ta' holiday or e'empted enterprises when however% they
cannot carry forward their business losses beyond the holiday or e'empt
period.
''-2 De*reciation Allo/ance for DiAerent ;eads of Inco4e
Income ta' Brdinance #/.* prescribes depreciation allowances for &'ed
assets used in di1erent heads of income as follows?
a5 Agricultural Income
b5 Income from Business and Profession
''-9 De*reciation allo/ance on assets used for agricultural *ur*ose
0epreciation allowances on &'ed assets used for agricultural purposes are
allowed at prescribed rates as given in Third Schedule. The schedule is
produced below?
Third Schedule
K)ara 'L
Sl.
$o
.
Classi&cation of irrigation or
protective wor; or other
capital assets.
6ate4percentage of
the written down
value% e'cept as
otherwise indicated.
6emar;s
' 2 9 :
#5 Pucca buildings #"
!5 Hutcha and pucca buildings #+
)5 Hutcha buildings !"
*5 Temporary structure 8 $o rate is
speci&edI renewal
will be allowed as
revenue
e'penditure
+5 Pucca walls +
,5 Fencing of substantial
material
#"
-5 Tube8well #+
.5 Tan;s #"
/5 Pucca irrigation channel #+
#"5 Hutcha irrigation channel !"
##5 Hutcha irrigation wells )).))
#!5 Pucca irrigation wells +
#)5 Bulloc; drawn iron
implements
#+
#*5 Bulloc; drawn wooden or
leather implements and other
small hand4implements.
!+
#+5 >eighing machine #"
#,5 Tractors and oil engines and
thin implements.
#+
#-5 Power pumping machinery !"
#.5 Factory made cart of iron
material with rubber tyre
#+
#/5 Country cart !"
!"5 Steam engine #"
!#5 >or;shop tools #+
!!5 (eneral 3machinery%
implements% plants and other
assets5 not provided for
above speci&cally.
#"
''-: De*reciation allo/ance on assets used in 3usiness or *rofession
In computing the pro&ts and gains from business or profession% allowance is
admissible for depreciation on building% machinery% plant% furniture owned by
the assessee and used for the purpose of his business or profession. To claim
depreciation allowance% Para ! of Third Schedule speci&es the following
conditions?
3#5 In computing pro&ts and gains from business or profession% an allowance
for depreciation shall be made in the manner hereinafter provided in
respect of any building% machinery% plant or furniture owned by an
assessee or bridge or road or Ay over of a physical infrastructure
underta;ing and used for the purposes of business or profession carried on
by him.
3!5 >here any such building% machinery% plant or furniture or bridge or road or
Ay over of a physical infrastructure underta;ing is not wholly used for the
purposes of the business or profession% the allowance under sub8
paragraph 3#5 shall be restricted to the fair proportional part of the amount
which would be admissible if such building% machinery% plant or furniture
were wholly so used.
3)5 $o allowance under this paragraph shall be made unless8
3a5 at the time of &ling a return of total income such particulars as may be
prescribed and such further information or documents as the 0eputy
Commissioner of Ta'es may re<uire% are furnishedI and
(b) such building% machinery% plant or furniture or bridge or road or Ay over
of a physical infrastructure underta;ing has been so used during
income year.
''-@ T6*es of De*reciation Allo/anceB As per Third Schedule of IT Brdinance
#/.*% depreciation allowances may be classi&ed as under?
#eference T6*es of Allo/ances
Para )% Third
Schedule
$ormal depreciation allowance
Para +A% Third
Schedule
Initial depreciation allowance
Para -% Third
Schedule
Accelerated depreciation allowance on machinery
and plant
Para -A% Third
Schedule
Accelerated depreciation allowance on machinery
and plant
Para .% Third
Schedule
Special depreciation allowance on Ships
''-E Nor4al de*reciation allo/ance
$ormal depreciation allowance is allowed at the following rates that may be
amended by the Board from time to time by noti&cation in the oEcial (a9ette.
Gowever% no allowance under this paragraph shall be made for a leasing
company on such machinery% plant% vehicle or furniture given to any leasee on
&nancial lease.
SL-
No-
Classi0cation of Assets
#ateP*ercentage
of the .ritten
Do/n !alue=
e,ce*t as
other/ise
indicated
#e4ar2s
# ! ) *
#. 3a5 Buildings 3general5
3b5 Factory Buildings
#"
!"
!. Furniture and Fittings #"
). achinery and Plant?
#. (eneral 6ate !"
!. Special 6ate?
3a5 Ships
i5 Bcean going ships 3new5 #!
ii5 Bcean going ships
3second hand5% age at
the time of purchase 8
The
allowance is
to be
calculated on
the original
costs.
- less than #" years #!
- #" years or more !*
iii5 Inland ships including
steamers% motor vessels%
sails% tug boats% iron or
steel Aats for cargo
boats% wooden cargo
boats% motor launches
and speed boats
!*
3b5 3i5 Batteries% ]86ay and
electro8therapeutic apparatus
and accessories theretoI
3ii5 achinery used in the
production and e'hibition of
cinematographic &lmsI
3iii5 otor vehicles all sorts
not plying for hireI
!"
!"
!"
3iv5 otor vehicles all sorts
plying for hire.
!*
3v5 Computer and computer
e<uipment
)"
3vi5 Bangladeshi made
computer software
+"
3c5 3i5 Professional and
reference boo;sI
3ii5 Aircraft% aero8engines
and aerial photographic
apparatusI
3iii5 oulds used in the
manufacture of glass or
plastic goods or concrete
pipe.
)"
)"
)"
3d5 ineral oil concerns F
3i5 Below ground
installationsI
3ii5 Above ground
installations% that is to say%
portable boilers% drilling
tools% well head tan;s and
rigs.
#""
)"
3e5 physical infrastructure
underta;ing8
3i5 Bridge
3ii5 6oad
3iii5 Fly over
!
!
!
NoteB Any asset that fall under the description Xachinery and PlantK having
useful life not more than one year% allowance is not allowed though the cost of
renewal or replacement thereof shall be allowed as a revenue e'penditure.
3Para +% Third Schedule5
''-F Initial De*reciation Allo/ance
This depreciation allowance is applicable to any building newly constructed or
any machinery or plant installed in Bangladesh after the thirtieth day of Mune%
!""! at the rates mentioned below?
3a5 In the case of building #"P of the cost thereof to the
assessee
3b5 In the case of machinery or plant other
than ships or motor vehicles not plying
for hire
!+P of the cost thereof to the
assessee
NotesB
#5 Initial depreciation allowance will not be applicable in case of F
a5 any motor vehicle not plying for hire% and
b5 any machinery or plant which has previously been used in Bangladesh.
!5 $ormal depreciation allowance will also be applied for subse<uent years.
Thus% application of this depreciation allowance is only in addition to
normal depreciation allowance.
''-D Other de*reciation allo/ance
Para -% -A and . of the Third Schedule have also granted some depreciation
allowances which do not form part of the depreciation allowance in Sec !/
These areB
'(Accelerated de*reciation allo/ance on 4achiner6 and *lant )ara
F(
Jnder this accelerated depreciation is granted on plant and machinery used in
an industrial underta;ing at varying rates depending on the area as speci&ed
by $B6% in which such underta;ing is set up to the ful&llment of the of the
following?
3a5 The machinery or plant is not an oEce appliance or road transport
vehicle.
3b5 The asset is new which means not previously been used in Bangladesh
3second hand or reconditioned asset would not <ualify5.
3c5 The industrial underta;ing must be set up between # Muly% #/-- and
)" Mune% !"#! 3both days inclusive5
3d5 The industrial underta;ing is owned and managed by a Bangladeshi
company or a body corporate formed under any law and having its
registered oEces in Bangladesh.
3e5 The allowance is given to the class of industries as noti&ed by $B6.
3f5 The allowance shall be given to or from the year of commercial
production.
3g5 The particulars as re<uired for the purpose of claiming the accelerated
depreciation allowance have been furnished.
3h5 Application complete in all respects% is made to $B6 within , months
from the end of the month of commercial production together with a
declaration that the underta;ing is neither en=oying ta' holiday nor
has made any application thereof to $B6. 36ule *"5
$B6 is to give decision on the application within ) months of application.
achinery and plant granted accelerated depreciation allowance would not be
allowed any other depreciation allowance.
#ate of accelerated de*reciation allo/anceB
a. For the &rst year in which the underta;ings
starts commercial production?
+"P of the actual cost of
plant and machinery to the
assessee
b. For the ne't following second year )"P of the actual cost of
plant and machinery to the
assessee
c. For the ne't following second year !"P of the actual cost of
plant and machinery to the
assessee
For the purpose of this paraW industrial underta;ingW includes e'pansion of an
e'isting unit if such e'pansion constitutes?
Similar unit carrying on a identi&able industries but does not include an
underta;ing formed by splitting up or reconstruction of an e'isting
underta;ing or by the transfer of plant or machinery of an e'isting
underta;ing or by the transfer of plant or machinery of an e'isting business to
a new business in Bangladesh. achinery and plant includes physical
infrastructure which means? generation% transformation% conversion%
transmission and distribution or supply of electrical energy% or hydraulic
power or road% highway% bridge% airport or the system of railway or
telecommunication or such other public facility as may be speci&ed by the
Board by noti&cation in the oEcial ga9ette.
2(Accelerated de*reciation allo/ance for Re,*ansion unitS of and
underta2ing e,e4*ted under Section :EAB )ara FA(
Jnder Paragraph -A% accelerated depreciation is also allowable on machinery
and plant 3other than oEce appliances and road transport vehicles5 which
having not been previously used in Bangladesh% has been or is used.
3b5 in the e'pansion unit set8up between the &rst of Muly% #//+ and the
thirtieth day of Mune% !""+ 3both days inclusive5 in any e'isting
underta;ing en=oying e'emption from ta' under section ,*AI or
3c5 between the &rst day of Muly% #//+ and the thirtieth day of Mune% !""+ in
the treatment and disposal of to'ic and environmentally ha9ardous wastes
or in the collection or processing of biodegradable wastes or in the
research and development in any industrial underta;ing owned and
managed by a company as de&ned in clause 3!"5 of Section !.
3i5 for the &rst year in which the
e'pansion unit starts commercial
production or operation or % as
the case may be% the
underta;ing starts operation%
." percent of the actual cost of the
machinery or plant to the assesseeI
3ii5 for the ne't following year. !" percent of the actual cost of the
machinery or plant to the assesseee.
The meaning of Oe'pansion unitW for the purpose of this paragraph is the
same as has been given for the purpose of paragraph 3-5 of the Third
Schedule.
An application in the prescribed form furnishing therein the prescribed
particulars is re<uired to be submitted to the Board for the allowance under
this paragraph% within si' months from the end of the month of
commencement of commercial production or operation. 36ule *"A5
The Board shall decide on the application within three months from the date
of receipt of the application% failing which accelerated depreciation% shall be
deemed to have been allowed.
If any person is aggrieved by the BoardKs decision% he may &le application
within four months of the receipt of the decision for review of its earlier
decision by the Board.
9(S*ecial de*reciation allo/ance on shi*s )ara D(
The allowance is admissible on inland passenger vessel% &shing trawler and
ships ordinarily not paying in inland water% owned by the assessee and
brought into use for the &rst time in Bangladesh on any day between #
st
Muly%
#/.! and )"
th
Mune #//+ 3both days inclusive5 at the following rates?
3i5 for the &rst year *" percent of the original costI
3ii5 for the second year )" percent of the original costI
3iii5 for the third year )" percent of the original costI
The assets en=oying special depreciation will not be eligible for any other
depreciation under the Income Ta' Brdinance. Gowever% above provision has
become absolute since not e'tended after #//+.
''-C In+est4ent allo/anceB Section 2C'( i,( G ,(
The allowance is admissible to inland passenger vessel and &shing trawler%
which are entitled to special depreciation% at the rate of !" percent of the cost
for the year in which those are put to use for public utility.
The allowance is also admissible to plant and machinery 3other than oEce
appliances and road transport vehicles5 which are entitled to accelerated
depreciation for the year in which the underta;ing goes into commercial
production at !+ percent of the cost if the underta;ing is set up in speci&ed
areas and at !" percent of the cost if the underta;ing in set up in speci&ed
areas and at !" percent of the cost if the underta;ing is set up in other areas.
''-'& .ritten do/n +alue of assets for the *ur*ose of de*reciation
allo/anceB )ara ''@( a( G 3( and ''E( a( of the third Schedule(
Owritten down valueW means F
3a5 In the case of assets
ac<uired in the income
year%
Actual cost to the assessee.
3b5 In the case of assets
ac<uired before the
income year
Actual cost to the assessee less all
depreciation allowed under Income Ta'
Brdinance #/.* or the Income Ta' Act%
#/!!% in respect of the earlier year or
years.
NoteB In the case of motor vehicles% being passenger vehicles or sedan cars%
not plying for hire% the actual cost to the assessee shall be deemed not to
e'ceed ten la;hs Ta;a.
''-'' Dis*osal of assets and treat4ent of gains or losses thereof )ara '&=
Third Schedule(
>here in any income year% building% machinery or plant is disposed of by an
assessee8
3a5 $o depreciation allowance shall be allowed in respect of year of disposal.
3b5 >hen the sale proceeds e'ceed the written down value% the e'cess
amount limited up to the di1erence between the original cost and the
written down value% shall be income of the year from business or
profession.
The principle underlying the provision is that the depreciation allowed in
the past as e'penditure in determining income shall be treated as income
in the year of sale when the sale proceeds e'ceed the written down value.
3c5 when the sale proceeds are less than the written down value of the assets%
de&cit shall be e'penditure deductible from the pro&ts or gains of business
or profession of that year.
3d5 >hen sale proceeds e'ceed the original cost% di1erence between original
cost and >0: i.e. depreciation allowances previously granted would be
business pro&t and amount e'ceeding cost would be assessed under Sec.
)# as capital gain.
''-'2 Li4itation in res*ect of De*reciation Allo/ance )ara C= Third
Schedule(
3#5 The aggregate of the allowances for depreciation allowed in respect of any
asset% shall not e'ceed the original cost of the asset.
3!5 >here full e1ect cannot be given to depreciation allowances in the year in
which it is admissible there being no income chargeable for that year or
such income being less than the allowance admissible% then% sub=ect &rst
to carrying forward of the loss% if any% under section ).% the allowances or
the part thereof to which e1ect has not been given shall be added to the
amount of the allowance for the following year or% if no allowance is
admissible for such following year% shall be deemed to be allowance
admissible for such year and so on for succeeding years till such time as
the entire allowance on this account is ad=usted against the pro&ts.
''-'9 De*reciationB .hether Co4*ulsor6 or O*tional1
0epreciation is an allowance to the assessee% but not an obligation upon. It is
optional and cannot be thrust upon an assessee as assessee can choose not
to claim depreciation.
The implication of the above is important for ta' e'empted companies in 2PR
and those engaged in power generation privately. Since they are not re<uired
to submit IT returns annually they do not calculate &scal depreciation and
even if they were re<uired% have the choice to calculate or not to calculate.
Therefore% >0: of assets at the e'piry of e'emption period should logically be
ta;en as their original costs recorded during the e'emption period 3S6B $B.
#--8IT4!""!5.
AssesseeOs right
The assessee would not lose the right to carry forward and set o1 against
pro&ts of subse<uent years% unabsorbed depreciation if?
a5 he does not carry on the same business
b5 he does not carry on any business
c5 he uses the assets not for business but for earning income assessable
under other sources
d5 he does not use the asset at all and
e5 he ceases to be the owner of the asset.
)artnersO right
A partner of a &rm is entitled to set o1 his share of unabsorbed depreciation
from a defunct &rm against his other business income.
Assign4ent of una3sor3ed de*reciation
The unabsorbed depreciation allowance cannot be assigned to the transferee
of the business. If a business is ac<uired by another% the unabsorbed
depreciation allowance of the previous owner becomes a capital loss and
cannot be carried forward by the successor in business for set o1 against
pro&ts of subse<uent years.
A4alga4ation= 4ergers etc-
>hen a company mergers into another and has unabsorbed depreciation or
carried forward loss from earlier years% the right to carry them forward is lost
and the transferee company being a di1erent assessee% cannot claim to carry
forward either the unabsorbed depreciation or the losses of the merged
company.
Change of shareholding or the constitution of 0r4
0isentitlement of carry forward of loss upon a change in shareholding in a
company does not apply in case of unabsorbed depreciation. Similarly change
in the constitution of a &rm does not disentitle the &rm from unabsorbed
claim.
.or2ed ",a4*les and Solutions
.or2ed ",a4*le '
Company ]% whose accounting year is ended on arch )# each year% has
purchased a machine for Ta;a !" 7a;hs on )" arch% !"". and sold the same
on #
st
April !"## for T;. !+ la;hs. Compute balancing charge and Capital gain.
Solution '
Assessment
Cears
0epreciation 6ate 0epreciation >ritten 0own
:alue
!%"""%"""
!"".8"/ !"P *""%""" #%,""%"""
!""/8#" !"P )!"%""" #%!."%"""
!"#"8## !"P !+,%""" #%"!*%"""
Total $ainB Sale Proceeds F >ritten 0own :alue [ T;. !%+""%""" F T;.
#%"!*%""" [ T;. #%*-,%"""
Ca*ital $ain [ Sale Proceeds F Briginal Cost [ T;. !%+""%""" F T;. !%"""%"""
[ T;. +""%"""
Balancing Charge [ Total (ain F Capital (ain [ T;. #%*-,%""" 8 T;. +""%"""
[ T;. /-,%"""
$otes?
#. 0i1erence between sale price and original cost is capital gain to be
assessed in !"##8!"#! assessment year% corresponding income year
!"#"8!"##.
!. Balancing charge e<uals allowances so far en=oyed i.e. T;. /-,%"""
3*""%""" Z )!"%""" Z !+,%"""5.
). The company received the allowances in !"".8!""/ assessment year%
for =ust buying the machine one day before its year end. Gad it been #
st
April% !"".% the allowance would have started from the assessment year
!""/8!"#" i.e. corresponding income year !"".8!""/. Similarly% on
disposal giving rise to balancing charge and capital gain% it has delayed
the ta' impact by one year =ust by completing the sale on #
st
April% !"##
instead of )# arch% !"##.
*. It is assumed that the company is not entitled to initial% investment or
accelerated depreciation allowance.
.or2ed ",a4*le 2
Company ] bought a machine for T;. +" la;hs on #"
th
Muly% !"". to be used in
its e'pansion unit in Savar% 0ha;a. The investment is <uali&ed for both
accelerated depreciation under Third Schedule and Investment allowance
under Sec !/. It sold the machine on #+ Manuary% !"## for T;. !" la;hs% The
CompanyKs year ends on )" Mune. Calculate depreciation and other admissible
allowance for the relevant assessment years.
Solution 2
Assess4ent 6ear 2&&C>2&'&
Cost Allowanc
e
achine +%"""%"
""
Accelerated depreciation Allowance 3)
rd
Schedule5
3."P5
*%"""%"
""
*%"""%""
"
Investment allowance USec !/ 3!"P5V #%"""%""
"
+%"""%""
"
Assess4ent 6ear 2&'&>2&''
Accelerated depreciation Allowance 3!"P5 #%"""%""
"
>ritten down value $il
Assess4ent 6ear 2&''>2&'&
Sale proceeds !"%""%"""
Balancing charge 3!"%""%"""5 3!"%""%"
""5
NotesB
3#5 Balancing charge in the assessment year% corresponding to the year of
sale being income year !"#"8!"## would be treated as business pro&t or
income.
3!5 Investment allowance does not form part by de&nition% of the depreciation
and therefore% does not fall within ma'imum of cost for depreciation
allowance. In other words% it is allowed over and above #""P cost of
<ualifying assets.
3)5 Since investment allowance is not depreciation% on disposal it is not
recouped in the form of balancing charge. It is a net gain for the clever
assessee for ma;ing the =udicial investment. Gowever% it appears to be
defective provision in the ta' law.
3*5 In the year of purchase if the assets are sold% no depreciation is allowed
overriding the principle that depreciation is allowed even when the asset
has been used for a day during the income year.
0i1erence between accounting and ta' pro&ts arises mainly because of timing
what accountants charge in the accounts as depreciation and what ta' people
allow. Since% both the group calculates on the cost as the upper limit% there
would be no di1erence in the long run. Gowever% after ta' results of
companies di1er signi&cantly from year to year or across the industry because
of the ta'ation anomaly. To remove this problem and to show an even after
ta' results year after year companies can maintain deferred ta'ation account
in accordance with International Accounting Standard $o. #! 3Income Ta'es5.
Self>Assess4ent ?uestion
#5 >hat are the di1erent types of depreciation allowanceN
!5 >hat is the basic di1erence between depreciation allowance and
investment allowanceN
)5 An asset was bought some years bac; for T;. # million% the >0: of
which was T;. ,""%""". It was sold for T;. *""%""". >hat is the
implication of ta'N
Chapter #!
Set oA and carr6 for/ard of losses
Contents
Introduction
2'amination conte't
To*ic List
>or;ed 2'amples and Solutions
#!.# Introduction to Set o1 and Carry Forward of 7osses
#!.! Set o1 of 7osses? Sec )-
#!.) Procedures of Set B1
#!.* Carry Forward of Business 7osses? Sec ).
#!.+ Set o1 and Carry Forward of 7oss in Speculation Business? Sec )/
#!., Set o1 and Carry Forward of 7oss under the Gead XCapital (ainsK? Sec
*"
#!.- Carry Forward of 7oss under the Gead XAgricultural IncomeK? Sec *#
#!.. Carry Forward of 7oss of Firm and Partner
#!./ Carry Forward of 7oss of Succeeded Business or Profession
#!.#" Carry Forward of 7oss of Jnabsorbed 0epreciation
#!.## Carry Forward of 7oss of Ta' Goliday Jnits? Sec *,A3,5
#!.#! Procedures of Carry Forward
Introduction
Learning o3<ecti+es
0e&ne set o1 and carry forward of losses.
Identify areas where set o1 losses is possible.
Identify the heads of income permissible for carry forward against di1erent
heads.
Identify the situations when carry forward is not permissible.
2'plain ma'imum years when carry forward is possible.
0i1erentiate carry forward of losses by individuals% &rms and partners.
2'plain the carry forward by underta;ings en=oying ta' holiday facilities.
Illustrate the concept of set o1 and carry forward of losses in di1erent
situations.
)ractical signi0cance
Set o1 and carry forward of losses is very important and practically signi&cant
to compute ta'able income of any year. These are the bene&ts en=oyed by
assesses to cover up their losses before paying ta'es to the government.
Set o1 means the coverage of loss under one head against another heads in a
speci&c year. Carry forward is the transferring of loss of a year to the
succeeding years for coverage if set o1 was absent or insuEcient. Such set o1
and carry forward facility can be availed provided that certain conditions are
ful&lled. This chapter presents such guidelines.
7osses from any head cannot be set o1 against income from any other heads.
And losses cannot be carried forward for unlimited period. Thus% professional
accountants need clear understanding on each topic of this chapter.
Sub=ect to some conditions% an assessee is allowed to set o1 and carry
forwarded of losses. The carry forward of losses under di1erent heads of
income are varied.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the understanding of set o1 and carry forward of loses is
important for computation of total ta'able incomeN Can you determine the
ta'able income from di1erent heads of income after set o1 and carry forward
of lossesN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the total ta'able income for any income year. Before advising the clients%
accountants should have the clear concept relating to set o1 and carry
forward of losses in determining the ta'able income.
The right practice of the option of set o1 and carry forward of losses
sometime help the assesse to reduce the current and future the ta' liability.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
Cou will be also using this ;nowledge when you tac;le the ta'ation paper later
on in the Professional Stage and it will also underpin the technical aspects at
the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Jnderstanding provisions regarding set o1 and carry forward of losses.
Identify areas where set o1 losses is possible.
Identify carry forward of losses from income from house property.
Identify carry forward of losses from income from business and profession.
Identify carry forward of losses from income from speculation business.
Identify carry forward of losses from income from capital gain.
Identify carry forward of losses from income of a partnership &rm.
Identify the situations when carry forward is not permissible.
2'plain ma'imum years when carry forward is possible.
2'plain the application of unabsorbed depreciation and its impact on
income from business and profession.
0i1erentiate carry forward of losses by individuals% &rms and partners.
2'plain the carry forward by underta;ings en=oying ta' holiday facilities.
Illustrate the concept of set o1 and carry forward of losses in di1erent
situations.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
core concept on computation of income which is vital for calculating ta'
liability. Clear concept and understanding of each contents of this chapter will
help candidates to resolve any problems relating to set o1 and carry forward
of losses.
'2-& S"T O%% AND CA##Y %O#.A#D O% LOSS"S
Section O+er+ie/
7oss arising in one head of income in any year can be set o1 against pro&t
arising under any other head e'cept capital loss or loss on speculative
transaction or property income in the same year.
Balance of loss% if remains% can be carried forward to be set o1 against
pro&t under same head for si' years.
Capital loss of T;. +%""" in a year cannot be carried forward nor can it be
set o1 against pro&t under any other head.
Jnabsorbed depreciation brought forward together with current yearDs
depreciation allowance forms total depreciation charge for the year.
Jnabsorbed depreciation can be carried forward inde&nitely i.e. without
time limit of si' years.
For carry forward and set o1 right the assessee and the broad character of
business must remain same.
12.1 Introduction to Set oA and Carr6 %or/ard of Losses
Ta' is imposed on income and thus% if loss is generated from any headsI
government o1ers suEcient options to ma;e the assessee well o1 enough so
that ta' may be collected. Two such options are?
a5 Set o1
b5 Carry forward and set o1
7ogically% set o1 considers only one year whereas carry forward includes
subse<uent years. As assessee have multiple sources of income% it is very
common that loss will not generate from each heads. Thus losses from one
head may be ad=usted with income from other heads so that net &gure results
income and ta' can be imposed on that. Gowever% if the total income from all
heads results losses% set o1 cannot be done practically. In such a situation%
loss of one year can be carried forward to subse<uent years for set o1. This
chapter presents these two issues in detail.

'2-2 Set oA of LossesB Sec 9F
>here% in respect of any assessment year% the net result of computation of
income under any head is a loss% the assessee shall% sub=ect to the other
provisions of the Brdinance% be entitled to have the amount of such loss set
o1 against his income% if any% assessable for that assessment year under any
other head.
Provided that any loss in respect of any speculation business or any loss under
the head OCapital gainsW or any loss from any other source% income of which is
e'empted from ta' shall not be so set o1% but shall% e'cluding any loss from
any other source% income of which is e'empted from ta'% in accordance with
the provisions of the Brdinance% be set o1% or be carried forward to
succeeding assessment year or years for set o1% against any income in
respect of speculation business or any income under the head OCapital gainsW.
Similarly any loss in respect of any income from business or profession shall
not be so set o1 against any income from house property.
Further% for the purposes of this section% the 0eputy Commissioner of Ta'es
shall in computing any loss% deduct any amount received in cash as subsidy
from the (overnment.
Provided further that any loss in respect of any income from business or
profession shall not be so set o1% or be carried forward to succeeding
assessment year or years for set o1% against any income from house property.
'2-9 )rocedures of Set OA
7osses from one head can be set o1 against income from other head3s5
sub=ect to the conditions as mentioned below?
'- The loss generated from one source under a particular head can be set
o1 against the other sources of income% if any% under the same head.
For e'ample% 7oss of software business can be set o1 against the
income from hardware business% as both are the sources of income
under the head OIncome from Business and ProfessionW.
2- If the loss generated from a source cannot be fully set o1 against the
income of other sources under the same head% it can be set o1 against
the income of other heads sub=ect to the prescribed conditions.
9- 7oss generated from any speculation business can only be set o1
against income from some other speculation businesses% if any.
:- Similarly% loss generated under the head OCapital gainW can only be set
o1 against any other income under the same head OCapital gainW.
@- $o set o1 of losses is allowed for any loss generated from ta' e'empted
income.
E- For the purpose of set o1 of losses the 0CT shall% in computing any loss%
deduct any amount received in cash as subsidy from the government.
F- Any loss under the head OIncome from Business or ProfessionW cannot
be set o1 against any income from house property.
D- In case of loss sustained by a &rm under any head can be set o1 only
against the income of the &rm under any other head and not against the
income of any of the partners of the &rm USection *!3)53a5V
The table produced below may be used as a short8cut guideline for set8o1?
Inco4e heads generating
losses
Set oA against
#. Salaries any head U(enerally loss is uncommonV
!. Interest on securities any head
). Income from house property any head
*. Agricultural income any head e'cept OCapital (ainW
+. Income from business or
profession
any head e'cept income from house
property and capital gainI
,. Capital gain income from OCapital gainW only
-. Income from other sources any head U(enerally loss is uncommonV
.. Speculation business income from speculation business only
/. Income e'empted from ta' Set o1 is not allowed
'2-: Carr6 %or/ard of Business LossesB Sec 9D
>here% for any assessment year% the net result of the computation of income
under the head XIncome from business or professionK is a loss to the assessee%
not being a loss sustained in a speculation business% and such loss has not
been wholly set o1 under section )-% so much of the loss as has not been so
set o1% the whole of the loss% where the assessee has no income under any
other head or has income only under the head XCapital gainsK% shall be carried
forward to the ne't following assessment year% and8
3a5 it shall be set o1 against the income% if any% from the business or
profession for which the loss was originally computed if such business or
profession continued to be carried on by him in the income yearI and
3b5 if the loss cannot be wholly so o1% the amount of the loss not so set o1
shall be carried forward to the ne't assessment year and so on for not
more than si' successive assessment years.
'2-@ Set oA and Carr6 %or/ard of Loss in S*eculation BusinessB Sec 9C
>here% for any assessment year% the result of computation of income in
respect of any speculation business carried on by the assessee is a loss% it
shall be set o1 only against the income% if any% from any other speculation
business carried on by him and assessable for that assessment year.
>here% for any assessment year% any loss computed in respect of a
speculation business has not been wholly set o1 section )/3#5% so much of the
loss as has not been so set o1% or the whole loss where the assessee has no
income from any other speculation business% shall% sub=ect to the provisions of
the Brdinance% be carried forward to the ne't following assessment year% and
3a5 it shall be set o1 against the income% if any% from any speculation business
carried on by him and assessable for that assessment yearI and
3b5 if the loss cannot be wholly so set o1% the amount of loss not so set o1
shall be carried forward to the ne't assessment year and so on for not
more than si' successive assessment years.
'2-E Set oA and Carr6 %or/ard of Loss under the ;ead VCa*ital $ainsOB Sec
:&
>here% in respect of any assessment year% the net result of computation of
income from any source under the head XCapital gainsK is a loss% it shall be set
o1 only against income from any other source falling under that head and
assessable for that year.
>here% for any assessment year% any loss computed under the head XCapital
gainsK has not been wholly set o1 under section *"3#5% so much of the loss as
has not been so set o1% or the whole loss where the assessee has no income
from any other source falling under that head% shall% sub=ect to the provisions
of the Brdinance% be carried forward to the ne't following assessment year%
and8
3a5 it shall be set o1 against income% if any% of the assessee under that head
and assessable for that yearI and
3b5 if the loss cannot be wholly so set o1% the amount of loss not so set o1
shall be carried forward to the ne't assessment year and so on for not
more than si' successive assessment year.
>here% in respect of any assessment year% the loss computed under the head
XCapital gainsK does not e'ceed &ve thousand ta;a it shall not be carried
forward and where it e'ceeds &ve thousand ta;a only so much of such loss
shall be carried forward as e'ceeds &ve thousand ta;a under section *"3)5.
'2-F Carr6 %or/ard of Loss under the ;ead VAgricultural Inco4eOB Sec :'
>here% for any assessment year% the net result of the computation of income
under the head XAgricultural incomeK is a loss to the assessee% and such loss
has not been wholly set o1 under section )-% so much of the loss as has not
been so set o1% or the whole of the loss% where the assessee has no income
under any other head or has income only under the head XCapital gainsK shall
be carried forward to the ne't following assessment year% and8

3a5 it shall be set o1 against agricultural income% if any% of the assessee
assessable for that assessment yearI and
3b5 if the loss cannot be wholly so set o1 the amount not so set o1 shall be
carried forward to the ne't assessment year and so on for not more than
si' successive assessment years.
'2-D Carr6 %or/ard of Loss of %ir4 and )artner
In the case of a &rm?
3a5 where the assessee is the &rm% the loss sustained by it under any head of
income shall be set o1 under section )- only against the income of the
&rm under any other head and not against the income of any of the
partners of the &rmI and
3b5 where the assessee is a partner of the &rm% he shall not be entitled to have
any loss sustained by the &rm carried forward and set o1 against his own
income USection *!3)5V.
In the case of a &rm% in the constitution of which a change has occurred8
3a5 the &rm shall not be entitled to set o1 so much of the loss proportionate to
the share of a retired or deceased partner as e'ceeds his share of pro&ts% if
any% of the income year in the &rmI and
3b5 a partner of the &rm shall not be entitled to the bene&t of any portion of
the said loss as is not apportioned to him USection *!3+5V.
'2-C Carr6 %or/ard of Loss of Succeeded Business or )rofession
>here any person carrying on any business or profession has been succeeded
in such capacity by another person otherwise than by inheritance% no person%
other than the person incurring the loss% shall be entitled to have the loss in
such business or profession set o1 against his income under any other head
USection *!3*5V.
",a4*leB
A% B% and C were partners in a &rm sharing pro&ts in the ratio of )?!?#. 0uring
income year !"#"8!"##% B retired and A and C continued in the ratios of )?#.
Jp to that year brought forward loss of the &rms amounted to T;. )""%""".
$et pro&t for the year amounted to T;. +""%""".
Gere is a case of change in the constitution of the &rm. The &rm cannot set o1
retiring partnerDs share of loss against its pro&t for the assessment year !"##8
!"#!% which is 3!4, _ T;. )""%"""5 [ T;. #""%""" nor C can individually set o1
or carry forward his share of the loss.
Assess4ent 6ear 2&''>2&'2
T2-
$et pro&t +""%"""
Brought forward loss
!""%"""
Ad=usted pro&t )""%"""
7et us assume the same facts as have been earlier e'cepting that A% B and C
retired when 0% 2 and F too; over the &rm.
It is a case of succession since none of the old partners is in new &rm and it is
not allowed to set o1 loss. To maintain continuity at least one partner must
continue before and after the change in partnership.
'2-'& Carr6 %or/ard of Loss of Una3sor3ed De*reciation
>here% in ma;ing an assessment for any year% full e1ect cannot be given to
the depreciation allowances referred to in section !/3#5 3viii5 owing to there
being no pro&ts or gains chargeable for that year or such pro&ts or gains
being less than the allowance then% sub=ect to the provisions of sub8section
3-5% the allowance or part of the allowance to which e1ect has not been given%
as the case may be% shall be added to the amount of the allowance for
depreciation for the following year and be deemed to be part of that
allowance or if there is no such allowance for that year% be deemed to be the
allowance for that year and so on for succeeding years USection *!3,5V .
>here% under section *!3,5% depreciation allowance is also to be carried
forward% e1ect shall &rst be given to the provisions of sections ). and )/3!5
USection *!3-5V.
'2-'' Carr6 %or/ard of Loss of Ta, ;olida6 UnitsB Sec :EAE(
>here the assessee sustains a loss from a ta' holiday underta;ing% it shall be
carried forward and set o1 against the pro&ts and gains of the said
underta;ing for the following year and where it cannot be wholly set o1% the
amount of the loss not so set o1% shall be carried forward for the ne't year
and so on% but no loss shall be carried forward beyond the ta' holiday period
speci&ed by the Board in the order issued under section *,A 3)5 or 3*5.
'2-'2 )rocedures of Carr6 %or/ard
7osses from particular heads can be carried forward to particular number of
years sub=ect to the provisions of IT Brdinance #/.*. Following points are
important to remember?
'- 7osses generated under the heads OIncome from Business and
ProfessionW% OSpeculation BusinessW% Capital (ainW and OAgricultural
IncomeW can be carry forwarded up to a period of si, successive years.
2- In any assessment year% if the business losses 3e'cluding losses of
speculation businesses5 have not been wholly set o1% it can be carried
forwarded to set o1 from the income of the same sources in subse<uent
si' years.
9- The loss from any business or profession can be carried forwarded only
if such business or profession is continued to be carried on by the
assessee in the subse<uent income years.
:- 7osses from speculation business can only be carried forwarded to set it
o1 only against income from speculation businesses in subse<uent si'
years.
@- Capital losses can be carried forwarded to set it o1 against the incomes
under the head OCapital gainW in subse<uent si' years. But the carried
forwarded amount will only be the e'cess of T;. +%""".
E- 7osses under the head OAgricultural incomeW can be carried forwarded
for a period of si' years and set o1 against agricultural income in
subse<uent si' years.
F- A successor8in8Business otherwise than by inheritance cannot claim to
carry forward the loss incurred by his predecessor8in8Business.
Following table gives a birdKs eye view of carry forward of losses?
Losses originated
fro4
Carried for/ard and set oA
against
)eriod of
3ene0ts
Business and
profession
Income from business and
profession
Si' succeeding
years
Speculation business Speculation business Si' succeeding
years
Capital gain Capital gain Si' succeeding
years
Agricultural income Agricultural income Si' succeeding
years
Ta' holiday units Pro&ts and gains of the said
underta;ing
>ithin holiday
period
Jnabsorbed
depreciation
Income from business and
profession
Jnlimited period

.or2ed ",a4*les and Solutions
.or2ed ",a4*le '
r. Amir Gossain has the following income in di1erent income years. Calculate his
ta'able income after considering provisions relating to set o1 and carry forward of
losses.
2&&D>2&&C 2&&C> 2&'& 2&'&>2&''
Income from Securities !"%""" )"%""" !"%"""
Income from Gouse
Property
#%)"%""" #%!"%""" #%)"%"""
Income from Agriculture 3#%-"%"""5 3)"%"""5 *"%"""
Income from Speculation 8 3*"%"""5 +"%"""
Income from Capital (ain !+%""" 8 8
Solution 'B
Mr- A4ir ;ossain
Inco4e 6earB 2&&D>2&&C
Assess4ent 6ear 2&&C>2&'&
Sources of inco4e
Ta,a3le
Inco4e
Set OA Carr6
%or/ard
Income from Securities !"%"""
Income from Gouse Property #%)"%"""
Income available to set o1 losses from
agriculture
#%+"%"""
#%+"%"""
Income from Agriculture 3#%-"%"""5
3#%-"%""
"5
Income available after set o1 3!"%"""5
Carry forward 3losses from agriculture5 !"%"""
Income after set o1 L carry forward of losses 8
Income from Capital gain !+%"""
Total inco4e 2@=&&&
Mr- A4ir ;ossain
Inco4e 6earB 2&&C>2&'&
Assess4ent 6earB 2&'&M2&''
Sources of inco4e
Ta,a3le
Inco4e
Set OA Carr6
%or/ard
Income from Securities )"%"""
Income from Gouse Property #%!"%"""
Income available to set o1 losses from
agriculture
#%+"%""" #%+"%"""
Income from Agriculture 3)"%"""5
Set o1? Current year losses 3)"%"""5
Income after set o1 #%!"%""" #%!"%"""
Carry forward? 7ast year losses from
agriculture
!"%"""
Carry forward? Income from Speculation *"%"""
Income after set o1 L carry forward of losses '=2&=&&&
Mr- A4ir ;ossain
Inco4e 6earB 2&'&>2&''
Assess4ent 6earB 2&''M2&'2
Sources of inco4e
Ta,a3le
Inco4e
Set OA Carr6
%or/ard
Income from Securities !"%"""
Income from Gouse Property #%)"%"""
Income available to set o1 losses from
agriculture
#%+"%"""
Income from Agriculture *"%"""
Set o1? 7osses carried forward from earlier
year
3!"%"""5
6emaining income from agriculture after set
o1
!"%""" !"%"""
Income from speculation +"%"""
Set o1? 7osses carried forward from last year 3*"%"""5
6emaining income from speculation after set
o1
'&=&&& '&=&&&
Income after set o1 L carry forward of losses '=D&=&&&
.or2ed ",a4*le 2
r. Mamshed Sowdagor reports the following income for the income year ended
on Mune )"% !"##.
Income from Business and Profession T;.
+""%"""
Income from Gouse Property #""%"""
Income from Capital (ain +"%"""
Income from Speculation Business ."%"""
Gowever% he has some losses carried forward from earlier years 3income years5
with the following details?
Geads Amount of
7osses
Cear of
Brigination
Income from Business and Profession T;. ."%""" !""-8".
Income from Capital (ain +"%""" !""!8")
Income from Speculation Business *"%""" !"")8"*
Jnabsorbed depreciation +"%""" !""#8"!
Solution 2B
Mr- Ha4shed So/dagor
Inco4e 6earB 2&'&>2&''
Assess4ent 6earB 2&''>2&'2
Sources of inco4e T2- T2- T2-
Income from Business and Profession +""%"""
Set o1? 7osses carried forward from
!""-8".
."%"""
Jnabsorbed depreciation +"%""" #)"%"""
Ta'able Income from business and
profession
)-"%"""
Income from house property #""%"""
Income from capital gain +"%"""
Set o1? not allowed as it e'ceed ,
years
8 +"%"""
Income from Speculation Business ."%"""
Set o1? 7osses carried forward from
!"")8"*
*"%""" *"%"""
Total ta'able income +,"%"""
Chapter #)
",e4*tion and allo/ances
Ta, holida6 P e,e4*tion(
Contents
Introduction
2'amination conte't
To*ic List
#).# 2'emption F Section ** and Si'th Schedule? Part A L Part B
#).! Ta' holiday scheme for newly established industrial underta;ings%
tourist industry and infrastructure facility
#).) 2'emption from Ta' of $ewly 2stablished Industrial Jnderta;ings Set8
up Between the Period of Muly% !"## to Mune% !"#)% etc. In Certain
Cases. Sec *,B
#).* 2'emption from ta' of newly established physical infrastructure facility
set up between the period of Muly% !"## and Mune% !"#)% etc. in certain
cases. Sec *,C
#).+ 2'emption of income of co8operative society
#)., Ta' holiday for hospital
#).- Concession to industries set up in any 2'port Process Rone
#).. Special ta' e'emptions 4 concessions in respect of certain business
Introduction
Learning o3<ecti+es
Identify the area of investment for ta' holiday scheme.
6ecognise the conditions for en=oying ta' holiday.
0etermine the ta' holiday income
)ractical signi0cance
Income from some newly established industrial underta;ings are e'empted
from ta' liability on the basis of ful&lling some conditions. To get the facility of
ta' holiday the underta;ings need to comply with some conditions and if any
conditions are not ful&lled in the course of ma;ing assessment of an
e'empted assesse% the e'emption will be withdrawn and the 0CT shall
determine the ta' payable for such year.
The ta' holiday and special ta' e'emptions or ta' concessions are provided to
di1erent types of business and industrial underta;ing to encourage those
businesses and industries for overall development of the country. Signi&cant
e'emption on income from e'port sales also a good initiative of government
to promote the e'port oriented companies.
Sto* and thin2
>hen you want to start a new business you can consider the opportunity of
ta' holiday or special ta' e'emption given by the (overnment. Cou can be the
part of the development of the country and at the same time you can get the
ta' holiday facility to enrich your business.
.or2ing conte,t
Accountants are sometime re<uired by the entrepreneur for giving advice on
how the business can be newly started or e'panded along with the ta' holiday
or special ta' e'emption facility. Being the mentorsK accountants can help
their clients regarding new business or e'pansion of their business in such
way that the clients can en=oy the ta' holiday opportunity to be bene&ted
economically.
Accountants should have the detailed ;nowledge on the area of ta' e'empted
business and the updates of the rules and regulation for getting ta' holiday
and other special ta' e'emptions facility so that they can rightly advise their
clients en=oying that facility in case of re<uirement.
S6lla3us lin2s
The topics covered in this chapter imply the area of industry and investments
from where you can get ta' holiday bene&t with the conditions for that
bene&t.
Cou will learn more about this area at application level and in case study of
advanced stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
6ecognise the di1erent industrial underta;ings for ta;ing ta' holiday
facility.
Illustrate the various conditions for getting ta' holiday.
State the computation of ta' holiday income.
ention the reasons for withdrawal and cancellation of ta' holiday.
0e&ne the e'emption of ta' liability for e'porting industries.
ention the di1erent types of business considered for special ta'
e'emptions.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.
'9-& TAX ;OLIDAY
Section O+er+ie/
Assessee en=oys some non8assessable income.
Assessee en=oys ta' rebate on investment allowances.
Some newly established industrial underta;ings are en=oying ta' holiday.
There are some conditions to get the ta' holiday facility.
The purpose of ta' holiday is to encourage industrial and other
development of the country in many sectors li;e tourism% infrastructural%
te'tile% hospital% e'porting industries etc.
Ta' holiday Income shall be computed li;e the computation of income from
business or profession.
Ta' holiday may be cancelled or withdrawn if one or more conditions not
ful&lled.

'9-' ",e4*tion M Section :: and Si,th ScheduleB )art A G )art B
Any income or class of income or the income of any person or class of persons
speci&ed in Part A of the Si'th Schedule shall be e'empt from the ta' as per
section **3#5. Following items as speci&ed in Part A of the Si'th Schedule of
the ITB% #/.*% are e'empted from ta'?
#. Income from property held under trust UPara F #V? Any income derived
from house property held under trust or other legal obligation wholly for
religious or charitable purpose and if part of the house is so held% the
income as set apart for application. Gowever% above provisions are not
applicable to an $(B registered with $(B A1airs Bureau. Gowever% where
any such income is not applied for charitable or religious purposes during
the income year% following conditions should be complied with to get the
ta' e'emptions?
3a5 There should be given a notice in writing to the 0CT specifying
purposes for which the income is being accumulated or set apart. But
the period of such accumulation should not be more than #" years.
3b5 The money so accumulated or set apart is either invested in any
(overnment Security or deposited in any post oEce Ban; Savings
Account or deposited in any account with scheduled ban; of which
&fty one percent or more shares are held by the government.
!. Income from micro credit operation of $(Bs UPara F #AV? Any income
derived from operation of micro credit by an $(B registered with $(B
A1airs Bureau.
). :oluntary contributions received by the 6eligious or Charitable Institutions
UPara F !V? Any income of a religious or charitable institution derived from
voluntary contributions and applicable solely to religious and charitable
purposes. It would however% not be applicable to a private religious trust
which does not ensure public welfare.
*. The income of a 7ocal government UPara F )V
+. Income of provident and other funds UPara F *V? Any income accruing to%
or derived by F
a5 a provident fund established under the Provident Fund Act% #/!+.
b5 A wor;ers participation fund established under the Companies Pro&ts
3>or;ers Participation5 Act% #/,.% sub=ect to any such conditions and
limits as may be prescribed.
,. Special allowances UPara F +V? Any special allowance% bene&t or per<uisite
speci&cally granted to meet e'penses wholly and necessarily incurred in
the performance of the duties of an oEce or employment of pro&t.
-. Income received by the trustees on behalf of speci&ed funds UPara F ,V?
Any income received by the trustees on behalf of a recogni9ed provident
fund% an approved superannuation fund and an approved gratuity fund.
.. Income of employees of Foreign issions UPara F -V? Any income received
by the following persons?
a5 Ambassadors% Gigh commissioners% envoys% ministers% charge de
a1airs% commissioners% counselors% consul de carriere% secretaries%
advisors or attachb of an embassy% high commission% legation or
commission of a foreign State.
b5 Trade commissioners or other oEcial representatives of foreign states%
if the oEcial salary of the corresponding oEcials of Bangladesh
(overnment en=oys a similar e'emption in that foreign country.
c5 Sta1 members or other oEcials employed in the oEces aforesaid
provided they are not engaged in any business or profession or other
employment.
/. Pension UPara F .V? Any pension due to% or received by% an assessee.
#". Income from newly Constructed Gouse UPara F #*V? Income from a newly
constructed residential house sub=ect to stipulated conditions and limits
as prescribed in paragraph #* of Part A of the Si'th Schedule of the ITB%
#/.*.
##. Share of Capital gains of a partner of a &rm UPara F #.V? Any income
received by a partner out of capital gains on which ta' has been paid by
the &rm.
#!. Income of a member of a Gindu Jndivided Family 3GJF5 UPara F #/V? Any
income received by a member of GJF out of income of the said family.
#). (ratuity UPara F !"V? Any income of an assessee representing payment
received as gratuity.
#*. Any payment received from Provident and other funds UPara F !#V? Any
payment from?
a5 A provident fund to which the Provident Funds Act% #/!+ applies.
b5 A recogni9ed provident fund% sub=ect to any such conditions and limits
as may be prescribed.
c5 An approved superannuation fund% sub=ect to any such conditions and
limits as may be prescribed.
d5 A wor;ers participation fund established under the Companies Pro&ts
3>or;ers Participation5 Act% #/,.% sub=ect to any such conditions and
limits as may be prescribed.
#+. 0ividend income from utual or Jnit fund UPara F !!AV? Income from
dividend of a mutual fund or a Jnit fund up to T;. !+%""".
#,. Interest on Ta' free government securities UPara F !*V? Any interest
classi&able under the head OInterest on securitiesW receivable by an
assessee on any security of the (overnment% which is issued with the
condition that interest thereon shall not be liable to ta'.
#-. Interest on the balance in a 6ecogni9ed Provident Fund UPara F !+V?
Interest credited on the accumulated balance of an employee in a
recogni9ed provident fund not e'ceeding one8third of the salary of the
employee for the concerned year and it is allowed at #*.+"P rate.
#.. Payment received on :oluntary retirement UPara F !,V? Amount received
by an employee of a (overnment organi9ation% a local authority% an
autonomous or semi8autonomous body including the units or enterprises
controlled by it% on a voluntary retirement scheme approved by the
government.
#/. Income of indigenous hillman UPara F !-V? Income received from economic
activities underta;en by indigenous Gillman in the hill districts of
6angamati% Bandarban and Hhagrachari.
!". Income from e'port business UPara F !.V? An amount e<ual to +"P of the
income of an assessee other than a company registered outside
Bangladesh derived from e'port business e'cepting the assessees who
are en=oying ta' e'emption or reduction thereon by any noti&cation.
!#. Agricultural income UPara F !/V? Agricultural income upto T;. +"%""" of an
individual assessee whose only source of income is agriculture.
!!. Income from IT business UPara F ))V? Income derived from the business of
software development and Information Technology 2nabled Services
3IT2S5 for the period from Muly "#% !"". to Mune )"% !"#). Provided that
the person shall &le income ta' return in accordance with the provisions
of Section -+3!53c5.
!). Income from &sheries% poultry etc. UPara F )*V? Sub=ect to the following
conditions% any income from &sheries% poultry% production of seeds%
mar;eting of locally produced seeds% cattle farming% dairy farming%
horticulture% frog farming% mushroom farming% Aoriculture% sericulture for
the period from Muly "#% !"". to Mune )"% !"##8
3a5 If such income e'ceeds T;. #%+"%"""48 an amount not less than #"P
of the said income shall be invested in government bonds or
securities within si' month from the end of the income yearI
3b5 The person shall &le income ta' return in accordance with the
provisions of Section -+3!53c5 of the ITB% #/.*I and
3c5 $o such income shall be transferred within &ve years from the end of
the income year? provided that income from &sheries as mentioned in
this paragraph shall not apply to a company.
!*. Income from e'port of handicrafts UPara F )+V? Any income derived from
the e'port of handicrafts for the period from Muly "#% !"". to Mune )"%
!"#).
!+. Ta' paid by the government on behalf of a petroleum company UPara F
),V? Any amount paid by the government as ta' on behalf of a petroleum
e'ploration company engaged in e'ploration of petroleum products in
Bangladesh under Production Sharing Contract 3PSC5 with the
(overnment of Bangladesh.
!,. Income of agricultural educational activities UPara F )-V? Income of any
private Agricultural College or private Agricultural Jniversity derived from
agricultural educational activities.
!-. Income of Building with speci&c characteristics UPara F ).V? Any income
derived from any building% not less than &ve storied% having at least ten
Aats% constructed at any time between Muly "#% !""/ to Mune )"% !"#*
3both days inclusive5% for ten years from the date of completion of
construction of the building% if it is situated in any area of Bangladesh
other than the areas of City Corporation% Cantonment Board% Tongi
Jpa9ila% $arayangan= Paurashaba% (a9ipur Pourashava and any
Pourashaba under 0ha;a district.
!.. Income of S2 UPara F )/V? Income derived from any Small and edium
2nterprise 3S25 engaged in production of any goods and having an
annual turnover of not more than ta;a twenty four la;h. Provided that the
person shall &le income ta' return in accordance with the provisions of
Section -+3!53c5.
!/. Income from Rero Coupon Bond UPara F *"V? Any income derived from
Rero Coupon Bond received by a person other than Ban;% Insurance or
any Financial Institution% sub=ect to the following conditions?
3a5 that the Rero Coupon Bond is issued by Ban;% Insurance or any
Financial Institution with prior approval of Bangladesh Ban; and
Securities and 2'change Commission.
3b5 that the Rero Coupon Bond is issued by any institution other than
Ban;% Insurance or any Financial Institution with prior approval of
Securities and 2'change Commission.
)". Income from poultry farming UPara F *!V? Sub=ect to the following
conditions% any income from poultry farming for the period from Muly "#%
!"## to Mune )"% !"#)8
3a5 If such income e'ceeds T;. #%+"%"""48 an amount not less than #"P
of the said income shall be invested in government bonds or
securities within si' month from the end of the income yearI
3b5 The person shall &le income ta' return in accordance with the
provisions of Section -+3!53c5 of the ITB% #/.*I and
3c5 $o such income shall be transferred by way of gift or loan within &ve
years from the end of the income year.
Ta, Credit Inco4e
An assessee shall be entitled to a credit from the amount of ta' payable on
his total income of an amount e<ual to ten percent of the sums speci&ed in
paragraphs in all paragraphs e'cluding paragraphs #+ and #, of Part B% Si'th
Schedule USection **3!53b5V. The following items should be considered as
investment allowance to en=oy ta' credit facility as per Part B% Si'th Schedule?
#. 7ife Insurance Premium Paid UPara F #V? Any sum paid in Bangladesh by an
assessee to e1ect an insurance or a contract for deferred annuity on the
life of himself% spouse or minor child% provided that such payment% in the
case of insurance% shall not e'ceed #"P of the sum assessed e'cluding
bonus or other bene&ts.
!. 7ife Insurance Premium Paid by a Gindu Jndivided Family UPara F !V? Any
sum paid in Bangladesh by a GJF to e1ect an insurance on the life of any
male member of the family or the wife of any such member.
). 0eduction from the salary of (overnment employee for deferred annuity
UPara F )V? Any sum not e'ceeding one8&fth of the salary deducted from
the salary payable by the (overnment or on its behalf to any individual in
accordance with the service conditions to secure a deferred annuity for
him or for his wife or children.
*. Contribution to Provident Funds UPara F *V? Any contribution by an
assessee to any provident fund to which the Provident Fund Act% #/!+
applies.
+. 2mployerKs and 2mployeeKs contribution to a 6ecogni9ed Provident Fund
UPara F +V? Any sum paid to a recogni9ed provident fund by the assessee
and the employer% where the assessee is a participant sub=ect to the
limits laid down in Part B of the Si'th Schedule.
,. Contribution to Superannuation Fund UPara F ,V? Any sum paid by the
assessee as ordinary annual contribution to approved superannuation
fund as a participant to the fund.
-. Investment in Savings Certi&cate UPara F #"V? Any sum invested by a non8
company assessee in the following if the investment are held for + years
from the date of purchase 4 up to its maturity?
a5 Savings Certi&cates or instruments speci&ed by the $B6I
b5 Jnit certi&cates and mutual fund certi&cates issued by ICB and its
subsidiariesI
c5 (ovt. securities including development loans4Bonds as speci&ed by the
$B6I
d5 Shares of Investment Companies as speci&ed by the $B6.
If the securities are disposed of by sale% transfer or in any other manner
within + years from the date of purchase or before the maturity thereof%
the ta' credit amount availed for such investment will be cancelled. This
amount has to be added to the ta' payable amount of the income year on
which such certi&cate was disposed i.e. the assessee has to pay bac; the
money.
.. Contribution to 0eposit Pension Scheme 30PS5 UPara F ##V? Any amount
not e'ceeding TA6+(2((( by an individual in any 0eposit Pension Scheme
sponsored by a Scheduled Ban;.
/. 0onation to a Charitable Gospital UPara F ##AV? Any sum paid as donation
to a charitable hospital established outside the city corporation% provided
the donation is made after one year of establishment of the hospital.
#". 0onation to Brgani9ations set up for the welfare of retarded people UPara
F ##BV? Any sum paid as donation to an organi9ation set up for the welfare
of retarded people% provided the donation is made after one year of
establishment of the organi9ation and is approved by the Social >elfare
0epartment and the $B6.
##. 0onation to Ra;at Fund UPara F #)V? Any sum paid by an assessee as
Ra;at to the Ra;at Fund or charitable fund established by or under the
Ra;at Fund Brdinance% #/.!.
#!. Contribution to Benevolent Fund and (roup Insurance Scheme UPara F
#-V? Any sum paid by an assessee to ma;e provision for his spouse%
children or other dependent person to a benevolent fund or any premium
paid under a group insurance scheme approved by the $B6.
#). Contribution to Aga Hhan 0evelopment $etwor; UPara F !#V? Any sum paid
by an assessee as donation to any socio8economic or cultural
development institution established by the Aga Hhan 0evelopment
$etwor; in Bangladesh.
#*. Contribution to Philanthropic or 2ducational Institution UPara F !!V? Any
sum paid by an assessee as donation to Philanthropic or 2ducational
Institution approved by the government for this purpose.
#+. Investment in Computer 4 7aptop UPara F !)V? Any sum invested in the
purchase of one computer 3Jpto T;. +"%"""5 or one laptop 3Jpto T;.
#%""%"""5 by an individual assessee.
#,. 0onation to national level institution set up in memory of the liberation
war UPara8!*V? Any sum paid by an assessee as donation to a national
level institution set up in memory of liberation war.
#-. 0onation to national level institution set up in memory of Father of the
$ation UPara8!+V? Any sum paid by an assessee as donation to a national
level institution set up in memory of Father of the nation.
#.. 0onation to Prime inisterKs Gigher 2ducation Fund UPara F !,V
#/. Investment in shares through IPB by an individual i.e. Primary share UPara
F !-V ? Any sum invested by an assessee% being an individual% in the
ac<uisition% through Initial Public B1ering 3IPB5% of any stoc;s of shares of
a company% mutual fund or debenture listed with any stoc; e'change.
!". Investment in (overnment Treasury Bond UPara F !.V? Any sum invested
by an assessee% being an individual% in the purchase of Bangladesh
(overnment Treasury Bond.
!#. Contribution to PresidentKs 6elief Fund US6B !+*47.+V
!!. Contribution to Prime inisterKs 6elief Fund US6B #!+47/# dated
"#."-.#//#V
!). Contribution to Ahsania ission Cancer Gospital US6B !"!4IT4!""+ dated
",."-.!""+V
!*. Contribution to Sylhet 0iabetic Society% Islamia 2ye Gospital and . A.
Ispahani Institute of Bphthalmology% Hidney FoundationI and $ational
Geart Foundation of Bangladesh US6B #"/4IT4!"", dated "-."+.!"",V
!+. Contribution to Child Gealth Foundation GospitalI Child Gospital% MessoreI
Gospital for Sic; Children% Sath;hira 36un by Child Gealth Foundation%
Bangladesh5I 0igonto emorial Cancer Gospital% 0ha;aI The 2$T L Gead8
$ec; Cancer Foundation of Bangladesh% 0ha;aI and $ational
0evelopment Foundation for 0isablesK% 0ha;a US6B )#,8AI$4!"".V
!,. Contribution to Matir Mano; Bangabondhu Shei;h u=ibur 6ahman emorial
Trust% 0ha;aI 6afatullah Community Gospital 36CG5% Thengamara% BograI
and Salvation for the 0eserving 3SF05% ani;gon= US6B ))8AI$4!""/ dated
"/.").!""/V
!-. Contribution to Asiatic Society of Bangladesh% 6amna% 0ha;a US6B )!8
AI$4!""/ dated "/.").!""/V
Gowever% Para #+ and #, is e'cluded from the above list as ta' shall not be
payable by an assessee in respect of any income or any sum speci&ed in
those paragraphs as per section **3!53a5. For 6eference% these two
paragraphs are presented below?
#. Income from Association of Persons? Any sum received by the assessee
out of the income of an association of persons other than a Gindu
Jndivided Family% company or &rm on which ta' has already been paid.
UPara F #+% Part B. Si'th ScheduleV
!. Income from a Firm? Any share of pro&t of a partnership &rm if ta' on such
pro&t or income has already been paid by the &rm. UPara F #,% Part B.
Si'th ScheduleV

As per section **3!53b5 of the ITB% #/.*% a resident and non8resident
Bangladeshi assessee will get ta' rebate of an amount e<ual to '&J of the
sums speci&ed in Part B of the Si'th Schedule. Gowever% as per Section **3)5%
ma'imum amount eligible for such rebate would be restricted to the lower of
the following?
2&J of the total income e'cluding employerKs contribution to 6PF and
interest on the accumulated balance of 6PF and any income u4s .!C% or
T2- '=&&=&&=&&&.

Illustration
An assesseeDs total ta'able income during income year !"#"8!"## amounted
to T;. #%"""%""" 3without deduction of investment allowance5. Ge has made
investments in allowable areas as per Part B% Si'th Schedule amounted T;.
*""%""". 2mployerKs contribution to recogni9ed provident fund was T;. ."%"""
and he has no income on which ta' is deducted at sources under section .!C.
Compute ta' rebate on investment allowance.
Actual investment made
? T;. *""%"""
a'imum limit?
!"P of ta'able income e'cluding employerKs contribution to 6PF and interest
on the accumulated balance of 6PF and any income u4s .!C? !"P of T;.
/!"%""" ? T;. #.*%"""
Br% ? T;.
#%""%""%"""
7ower one ? T;. #.*%"""
Thus% allowable amount for investment allowance is T;. #.*%""" and ta'
rebate will be #"P of T;. #.*%"""% i.e.% T;. #.%*"".
'9-2 Ta, ;olida6 Sche4e for ne/l6 esta3lished industrial underta2ings=
tourist industr6 and infrastructure facilit6B Sec :EA
Pro&ts and gains of an industrial underta;ing% tourist industry or physical
infrastructure facility 3hereinafter referred to as the said underta;ing5 set8up
in Bangladesh between # Muly #//+ and )" Mune !"". 3both days inclusive5
shall be e'empt from the ta' payable under section *,A3#5 of the Brdinance
for the period speci&ed below8
3a5 if the said underta;ing is set8up in% 0ha;a and Chittagong divisions
e'cluding the hill districts of 6angamati% Bandarban and Hhagrachari%
for a period of * years beginning with the month of commencement of
commercial production or operation of the said underta;ingI
3b5 if the said underta;ing is set8up in 6a=shahi% Hhulna% Sylhet and Barisal
divisions and the hill districts of 6angamati% Bandarban and
Hhagrachari% for a period of , years beginning with the month of
commencement of commercial production or operation of the said
underta;ing.
Industrial underta;ing% tourist industry% or physical infrastructure facility does
not include e'pansion of an e'isting underta;ing for the purpose of this
section 8
3i5 Tindustrial underta;ingT means an industry engaged in the production
of te'tile% te'tile machinery% high value garments% pharmaceuticals%
melamine% plastic products% ceramics% sanitary ware% steel from iron
ore% fertili9er% insecticide L pesticide% computer hardware% petro8
chemicals% basic raw materials of drugs% chemicals% pharmaceuticals%
agricultural machine% ship building% boilers% compressors and any other
category of industrial underta;ing as the (overnment may by
noti&cation in the oEcial (a9ette specify.
2'planation? Dhigh value garmentsD mean overcoats% =ac;ets and suits.
3ii5 Tphysical infrastructure facilityT means sea or river port% container
terminals% internal container depot% container freight station% 7$(
terminal and transmission line% C$( terminal and transmission line% gas
pipe line% Ayover% large water treatment plant L supply through pipe
line% waste treatment plant% solar energy plant% e'port processing 9one
and any other category of physical infrastructure facility as the
(overnment may by noti&cation in the oEcial (a9ette specifyI
3iii5 Ttourist industryT means residential hotel having facility of three star or
more and any other category of tourist industry facility as the
(overnment may by noti&cation in the oEcial (a9ette specify.
Conditions for Ta, ;olida6
The e'emption under section *,A3#5 shall apply to the said underta;ing if it
ful&lls the following conditions under section *,A3!5% namely?8
3a5 That the said underta;ing is owned and managed by88
3i5 a body corporate established by or under an Act of Parliament with
its head oEce in BangladeshI or
3ii5 a company as de&ned in the Companies Act% #/#)4#//* with its
registered oEce in Bangladesh and having a subscribed and paid
up capital of not less than T; #%""%""" on the date of
commencement of commercial production or operation?
3c5 That thirty per cent of the income e'empted under sub8section 3#5 is
invested in the said underta;ing or in any new industrial underta;ings
during the period of e'emption or within one year from the end of the
period to which the e'emption under that sub8section relates and in
addition to that another ten percent of the income e'empted under sub8
section 3#5 is invested in each year before the e'piry of three months from
the end of the income year in the purchase of shares of a company listed
with any stoc; e'change% failing which the income so e'empted shall%
notwithstanding the provisions of the Brdinance% be sub=ect to ta' in the
assessment year for which the e'emption was allowed.
Provided that the <uantum of investment referred to in this clause shall be
reduced by the amount of dividend% if any% declared by the company
en=oying ta' e'emption under this sectionI
Provided further that% the provision for purchase of shares of a company
listed with any stoc; e'change referred to in this clause shall not be
applicable in case of readymade garments industry% if it invests forty per
cent of the income e'empted under sub8section 3#5 in the said underta;ing
or in any new industrial underta;ing during the period of e'emption or
within one year from the end of the period to which the e'emption under
that sub8section relates.
It is to be noted that income to be invested mentioned as above means
total income for ta' purpose and not net pro&t as per pro&t and loss
account.
Illustration
Total income as per Computation of Income for ta' purpose T;. #%"""%"""
LessB dividend declared #""%"""
Balance /""%"""
3i5 to be invested in the said underta;ing or in any new industrial
underta;ing Q )"P% i.e.% T;. !-"%"""
3ii5 to be invested in the purchase of stoc; listed shares Q #"P% i.e.% T;.
/"%"""
3d5 that the said underta;ing is not formed by splitting up or by reconstruction
or reconstitution of business already in e'istence or by transfer to a new
business of any machinery or plant used in business which was being
carried on in Bangladesh at any time before the commencement of the
new businessI
3e5 that the said underta;ing is approved% and during the relevant income
year% stands approved by the Board for the purposes of section *,AI and
3f5 that the application in the prescribed form for approval for the purposes of
section *,A% as veri&ed in the prescribed manner% is made to the Board
within , months from the end of the month of commencement or
commercial production or operation.
Co4*utation of Ta, ;olida6 Inco4e
3#5 The pro&ts and gains of the underta;ing to which section *,A applies shall
be computed in the same manner as is applicable to income chargeable
under the head XIncome from business or profession USection *,A3+5V.
Gowever% in respect of depreciation% only the allowances for normal
depreciation speci&ed in paragraph ) of the Third Schedule shall be
allowed.
3!5 The pro&ts and gains of the said underta;ing shall be computed separately
from other income% pro&ts and gains of the assessee% if any% and where the
assessee sustains a loss from such underta;ing% it shall be carried forward
and set o1 against the pro&ts and gains of the said underta;ing for the
following year and where it cannot be wholly set o1% the amount of the
loss not so set o1% shall be carried forward for the ne't year and so on% but
no loss shall be carried forward beyond the period speci&ed by the Board
in the order issued under section *,A3)5 or 3*5 USection *,A3,5V.
3)5 Jnless otherwise speci&ed by the (overnment% nothing contained in
section *,A shall be so construed as to e'empt the following from ta'
chargeable under section *,AF
3a5 any dividend paid% credited or distributed or deemed to have been
paid% credited or distributed by a company to its share8holders out of
the pro&ts gainsI and
3b5 any income of the said underta;ing classi&able as XCapital gainsK
chargeable under the provisions of section )#I
3c5 any income of the said underta;ing resulting from disallowance made
under section )".
Note
A ta' holiday company is liable to pay ta' resulting from disallowance made
u4s )" in respect of the following.
3a5 Any payment of salaries chargeable to income ta'% if ta' at source has not
been deducted and paid to the (overnment Treasury.
3b5 Any payment paid by an assessee to any person if deductible ta' at source
has not been made and paid to the (overnment Treasury under Chapter
:II 3Section */5.
3c5 Any e'cess per<uisites u4s )"3e5 has been paid to the employees.
.or2ed ",a4*le
A ta' holiday companyKs Income was determined at T;. #%"""%""" without
considering disallowances u4s )" Uunder 3a5% 3b5 L 3c5 aboveV of T;. *""%""".
Solution
The ta' holiday company is liable to pay ta' on T;. *""%""".
.ithdra/al and Cancellation of Ta, ;olida6
3#5 >here any e'emption is allowed under section *,A and in the course of
ma;ing assessment% the 0eputy Commissioner of Ta'es is satis&ed that
any one or more of the conditions speci&ed in section *,A are not ful&lled%
the e'emption will stand withdrawn for the relevant assessment year and
the 0eputy Commissioner of Ta'es shall determine the ta' payable for
such year. USection *,A3.5V.
3!5 $otwithstanding anything contained in this section8
3a5 where the said underta;ing en=oying e'emption of ta' under section
*,A is engaged in any commercial transaction with another
underta;ing or company having one or more common sponsor
directors% and
3b5 during the course of ma;ing an assessment of the said underta;ing if
the 0eputy Commissioner of Ta'es is satis&ed that the said underta;ing
has purchased or sold goods at higher or lower price in comparison to
the mar;et price with intent to reduce the income of another
underta;ing or company.
The e'emption of ta' of that said underta;ing shall be deemed to have
been withdrawn for that assessment year in which such transaction is
made. USection *,A3!A5V.
3)5 Any such underta;ing approved under section *,A may% not later than one
year from the date of approval% apply in writing to the Board for the
cancellation of such approval% and the Board may pass such orders
thereon as it may deem &t.USection *,A3/5V.
3*5 $otwithstanding anything contained in section *,A% the Board may% in the
public interest% cancel or suspend fully or partially any e'emption allowed
under section *,A.USection *,A3#"5V.
Ta, ;olida6 not eligi3le in Certain Cases
A new industry% wherein investment of any sum by any person during the
period between the &rst day of Manuary% #//- and the thirty &rst day of
0ecember% #/// is e'empt from ta' without any <uestion as to the source of
the invested sum under section #/A shall not be eligible for ta' 8 holiday.
Such industry may however be considered for ta' holiday if the assessee pays
ta' at the rate of seven and a half per cent on the invested amount before the
&ling of return for the relevant income year 3Sec #/A5.
)rocedures of Ta, ;olida6
An application under section *,A3!53f5 of the Brdinance for approval for the
purposes of that section in respect of an industrial underta;ing% tourist
industry or physical infrastructure facility shall be made in the prescribed form
36ule +/A 3I5% in duplicate% duly signed and veri&ed by the anaging 0irector
or 0irector of the company.
'9-9 ",e4*tion fro4 Ta, of Ne/l6 "sta3lished Industrial Underta2ings
Set>u* Bet/een the )eriod of Hul6= 2&'' to Hune= 2&'9= etc- In Certain
Cases- Sec :EB
3#5 Sub=ect to the provisions of the IT Brdinance #/.*% income% pro&ts and
gains under section !. from an industrial underta;ing% tourism industry or
physical infrastructure facility 3hereinafter referred to as the said
underta;ing5 set8up in Bangladesh between the &rst day of Muly% !"## and
the thirtieth day of Mune% !"#) 3both days inclusive5 shall be e'empted
from the ta' payable under the Brdinance for the period% and at the rate%
speci&ed below?
if the said underta;ing is set8up in8
i) 0ha;a and Chittagong divisions% e'cluding 0ha;a% $arayangan=%
(a9ipur% Chittagong% 6angamati% Bandarban and Hhagrachari districts%
for a period of &ve years beginning with the month of commencement
of commercial production of the said underta;ing?
)eriod of ",e4*tion #ate of ",e4*tion
For the &rst two years 3&rst and second year5 #""P of income
For the ne't two years 3third and fourth year5 +"P of income
For the last one year 3&fth year5 !+P of income
3ii5 6a=shahi% Hhulna% Sylhet and Barisal divisions and 6angamati%
Bandarban and Hhagrachari districts% for a period of seven years
beginning with the month of commencement of commercial production
of the said underta;ing?
)eriod of ",e4*tion #ate of ",e4*tion
For the &rst three years 3&rst% second and
third year5
#""P of income
For the ne't three years 3fourth% &fth and si'th
year5
+"P of income
For the last one year 3seventh year5 !+P of income
3!5 For the purpose of this section%8
Industrial underta;ing means an industry engaged in the production of
active pharmaceuticals ingredient industry and radio pharmaceuticals
industry% barrier contraceptive and rubber late'% basic chemicals or dyes
and chemicals% basic ingredients of electronic industry 3e.g. resistance%
capacitor% transistor% integrator circuit5% bio8fertili9er% biotechnology%
boilers% compressors% computer hardware% energy eEcient appliances%
insecticide or pesticide% petro8chemicals% pharmaceuticals% processing of
locally produced fruits and vegetables% radio8active 3di1usion5 application
industry 3e.g. developing <uality or decaying polymer or preservation of
food or disinfecting medicinal e<uipment5% te'tile machinery% tissue
grafting% or any other category of industrial underta;ing as the
(overnment may% by noti&cation in the oEcial (a9ette% specify.
3)5 $otwithstanding anything contained in sub8section 3!5% for the
purpose of this section industrial underta;ing shall not include e'pansion
of an e'isting underta;ing.
3*5 The e'emption under sub8section 3#5 shall apply to the said
underta;ing if it ful&lls the following conditions% namely?8
3a5 that the said underta;ing is owned and managed by8
3i5 a body corporate established by or under any law for the time being
in force with its head oEce in BangladeshI or
3ii5 a company as de&ned in the Companies Act% #/#) 3:II of #/#)5 or
Companies Act% #//* 3Act $o. #. of #//*5 with its registered oEce
in Bangladesh and having a subscribed and paid up capital of not
less than two million ta;a on the date of commencement of
commercial production or operationI
3b5 that thirty percent of the e'empted income under subsection 3#5
is invested in the said underta;ing or in any new industrial
underta;ings during the period of e'emption or within one year from
the end of the period to which the e'emption under that sub8section
relates and in addition to that another ten percent of the e'empted
income under sub8section 3#5 is invested in each year before the e'piry
of three months from the end of the income year in the purchase of
shares of a company listed with any stoc; e'change% failing which the
income so e'empted shall% notwithstanding the provisions of the
Brdinance% be sub=ect to ta' in the assessment year for which the
e'emption was allowed?
Provided that the <uantum of investment referred to in this clause shall
be reduced by the amount of dividend% if any% declared by the company
en=oying ta' e'emption under this section.
Provided further that% the provision for purchase of shares of a
company listed with any stoc; e'change referred to in this clause shall
not be applicable in case of readymade garments industry% if it invests
forty per cent of the income e'empted under sub8section 3#5 in the said
underta;ing or in any new industrial underta;ing during the period of
e'emption or within one year from the end of the period to which the
e'emption under that subsection relates.
3c5 that the said underta;ing is not formed by splitting up or by
reconstruction or reconstitution of business already in e'istence or by
transfer to a new business of any machinery or plant used in business
which was being carried on in Bangladesh at any time before the
commencement of the new businessI
3d5 that the said underta;ing is approved% and during the relevant
income year% stands approved by the Board for the purposes of this
sectionI
3e5 that the application in the prescribed form for approval for the
purposes of this section% as veri&ed in the prescribed manner% is made
to the Board within si' months from the end of the month of
commencement of commercial production or operationI
3f5 that the said underta;ing obtained a clearance certi&cate for the
relevant income year from the 0irectorate of 2nvironmentI
3g5 that the said underta;ing maintains boo;s of accounts on a
regular basis and submits return of its income as per provisions laid
down in section -+ of this Brdinance.
3+5 $otwithstanding anything contained in this section% where a underta;ing
en=oying e'emption of ta' under this section is engaged in any
commercial transaction with another underta;ing or company having one
or more common sponsor directors% and during the course of ma;ing an
assessment of the said underta;ing if the 0eputy Commissioner of Ta'es
is satis&ed that the said underta;ing has purchased or sold goods at
higher or lower price in comparison to the mar;et price with intent to
reduce the income of another underta;ing or company% the e'emption of
ta' of that underta;ing shall be deemed to have been withdrawn for that
assessment year in which such transaction is made.
3,5 The Board shall give its decision on an application made under clause 3e5
of sub8section 3*5 within forty &ve days from the date of receipt of the
application by the Board% failing which the underta;ing shall be deemed
to have been approved by the Board for the purposes of this section?
Provided that the Board shall not re=ect any application made under this
section unless the applicant is given a reasonable opportunity of being
heard.
3-5 The Board may% on an application of any person aggrieved by any
decision or order passed under sub8section 3,5% if the application is made
within four months of the receipt of such decision or order% review the
previous decision or order and pass such order in relation thereto as it
thin;s &t.

3.5 The income% pro&ts and gains of the underta;ing to which this section
applies shall be computed in the same manner as is applicable to income
chargeable under the head DDIncome from business or professionDD?
Provided that in respect of depreciation% only the allowances for normal
depreciation speci&ed in paragraph ) of the Third Schedule shall be
allowed.
3/5 The income% pro&ts and gains of the underta;ing to which this section
applies shall be computed separately from other income% pro&ts and gains
of the assessee% if any% and where the assessee sustains a loss from such
underta;ing it shall be carried forward and set o1 against the pro&ts and
gains of the said underta;ing for the following year and where it cannot
be wholly set o1% the amount of the loss not so set o1% shall be carried
forward for the ne't year and so on% but no loss shall be carried forward
beyond the period speci&ed by the Board in the order issued under
subsection 3,5 or 3-5.
3#"5 Jnless otherwise speci&ed by the (overnment% nothing contained in
this section shall be so construed as to e'empt the following from ta'
chargeable under this section?8
3a5 any dividend paid% credited or distributed or deemed to have been
paid% credited or distributed by a company to its share8holders out of
the pro&ts and gainsI
3b5 any income of the said underta;ing classi&able as DDCapital gainsDD
chargeable under the provisions of section )#I
3c5 any income of the said underta;ing resulting from disallowance
made under section )".
3##5 >here any e'emption is allowed under this section and in the course of
ma;ing assessment% the 0eputy Commissioner of Ta'es is satis&ed that
any one or more of the conditions speci&ed in this section are not ful&lled%
the e'emption shall stand withdrawn for the relevant assessment year
and the 0eputy Commissioner of Ta'es shall determine the ta' payable
for such year.
3#!5 Any such underta;ing approved under this section may% not later
than one year from the date of approval% apply in writing to the Board for
the cancellation of such approval% and the Board may pass such order or
orders thereon as it may deem &t.
3#)5 $otwithstanding anything contained in this section% the Board may% in
the public interest% cancel or suspend fully or partially any e'emption
allowed under this section.
3#*5 The Board may ma;e rules regulating the procedure for the grant of
approval under sub8section 3,5% review under sub8section 3-5% furnish
information regarding payment of other ta'es by the said underta;ing%
and ta;e such other measure connected therewith or incidental to the
operation of this section as it as it may deem &t.
'9-: ",e4*tion fro4 ta, of ne/l6 esta3lished *h6sical infrastructure
facilit6 set u* 3et/een the *eriod of Hul6= 2&'' and Hune= 2&'9= etc- in
certain cases- Sec :EC
3#5 Sub=ect to the provisions of this Brdinance% income% pro&ts and gains
under section !. from physical infrastructure facility 3hereinafter referred
to as the said facility5 set up in Bangladesh between the &rst day of Muly%
!"## and the thirtieth day of Mune% !"#) 3both days inclusive5 shall be
e'empted from the ta' payable under this Brdinance for ten years
beginning with the month of commencement of commercial operation% and
at the rate% speci&ed below?
)eriod of ",e4*tion #ate of
",e4*tion
For the &rst &ve years 3&rst% second% third% fourth and
&fth year5
#""P of income
For the ne't three years 3si'th% seventh and eighth year5 +"P of income
For the last two years 3ninth and tenth year5 !+P of income
3!5 For the purpose of this section% Tphysical infrastructure facilityT means
deep sea port% elevated e'pressway% e'port processing 9one% Ayover% gas
pipe line% Gi8tech par;% Information and Communication Technology 3ICT5
village or software technology 9one% Information Technology 3IT5 par;%
large water treatment plant and supply through pipe line% 7i<ue&ed $atural
(as 37$(5 terminal and transmission line% mono8rail% rapid transit%
renewable energy 3e.g. energy saving bulb% solar energy plant% windmill5%
sea or river port% toll road% underground rail% waste treatment plant% or any
other category of physical infrastructure facility as the (overnment may%
by noti&cation in the oEcial (a9ette% specify.
3)5 The e'emption under sub8section 3#5 shall apply to the said facility if it
ful&lls the following conditions% namely?8
3a5 that the said underta;ing is owned and
managed by8
ii. a body corporate established by or under any law for the time being
in force with its head oEce in BangladeshI or
iii*a company as de&ned in Company Act% #//* with its registered
oEce in Bangladesh and having a subscribed and paid up capital of
not less than two million ta;a on the date of commencement of
commercial productionI
3b5 that thirty percent of the e'empted income under sub8section 3#5 is
invested in the said facility or in any new physical infrastructure facility
during the period of e'emption or within one year from the end of the
period to which the e'emption under that sub8section relates and in
addition to that% another ten percent of the e'empted income under
sub8section 3#5 is invested in each year before the e'piry of three
months from the end of the income year in the purchase of shares of a
company listed with any stoc; e'change% failing which the income so
e'empted shall% notwithstanding the provisions of this Brdinance% be
sub=ect to ta' in the assessment year for which the e'emption was
allowed?
)ro+ided that the 8uantu4 of in+est4ent referred to in this
clause shall 3e reduced 36 the a4ount of di+idend= if an6=
declared 36 the co4*an6 en<o6ing ta, e,e4*tion under this
sectionB
3c5 that the said facility is approved% and during the relevant income year%
stands approved by the Board for the purposes of this sectionI
3d5 that application in the prescribed form for approval for the purposes of
this section% as veri&ed in the prescribed manner% is made to the Board
within si' months from the end of the month of commencement of
commercial operationI
3e5 that the said facility maintains boo;s of accounts on a regular basis and
submits return of its income as per provisions of section -+ of this
Brdinance.
3*5 The Board shall give its decision on an application made under clause 3d5
of sub8section 3)5 within forty &ve days from the date of receipt of the
application by the Board% failing which the facility shall be deemed to have
been approved by the Board for the purposes of this section?
)ro+ided that the Board shall not re<ect an6 a**lication 4ade
under this section unless the a**licant is gi+en a reasona3le
o**ortunit6 of 3eing heard-
3+5 The Board may% on an application of any person aggrieved by any decision
or order passed under sub8section 3*5% if the application is made within
four months of the receipt of such decision or order% review the previous
decision% order or orders and pass such order in relation thereto as it
thin;s &t.
3,5 The income% pro&ts and gains of the facility to which this section applies
shall be computed in the same manner as is applicable to income
chargeable under the head TIncome from business or professionT?
)ro+ided that in res*ect of de*reciation= onl6 the allo/ances for
nor4al de*reciation s*eci0ed in *aragra*h 9 of the Third
Schedule shall 3e allo/ed-
3-5 The income% pro&ts and gains of the facility to which this section applies
shall be computed separately from other income% pro&ts and gains of the
assessee% if any% and where the assessee sustains a loss from such facility
it shall be carried forward and set o1 against the pro&ts and gains of the
said facility for the ne't year and where it cannot be wholly set o1% the
amount of the loss not so set o1% shall be carried forward for the following
year and so on% but no loss shall be carried forward beyond the period
speci&ed by the Board in the order issued under sub8section 3*5 or 3+5.
3.5 Jnless otherwise speci&ed by the (overnment% nothing contained in this
section shall be so construed as to e'empt the following from ta'
chargeable under this section ?8
3a5 any dividend paid% credited or distributed or deemed to have been
paid% credited or distributed by a company to its share8holders out of
the pro&ts and gainsI
3b5 any income of the said facility classi&able as TCapital gainsT chargeable
under the provisions of section )#I
3c5 any income of the said facility resulting from disallowance made under
section )".
3/5 >here any e'emption is allowed under this section and in the course of
ma;ing assessment% the 0eputy Commissioner of Ta'es is satis&ed that
any one or more of the conditions speci&ed in this section are not ful&lled%
the e'emption shall stand withdrawn for the relevant assessment year and
the 0eputy Commissioner of Ta'es shall determine the ta' payable for
such year.
3#"5 Any such facility approved under this section may% not later than one
year from the date of approval% apply in writing to the Board for the
cancellation of such approval% and the Board may pass such order or
orders thereon as it may deem &t.
3##5 $otwithstanding anything contained in this section% the Board may% in
the public interest% cancel or suspend fully or partially any e'emption
allowed under this section.
3#!5 The Board may ma;e rules regulating the procedure for the grant of
approval under sub8section 3*5% review under sub8section 3+5% furnish
information regarding payment of other ta'es by the said facility% and ta;e
such other measures connected therewith or incidental to the operation of
this section as it may deem &t.
'9-@ ",e4*tion of Inco4e of Co>O*erati+e Societ6B Sec :F
#5 Ta' shall not be payable by a co8operative society including a co8operative
society carrying on the business of ban;ing in respect of88
3a5 so much of its income as is derived by it as a result of such of its
dealings with its members as involve sale of goods% the lending of
money or the lease of buildings and land which is for the personal use
of such members% or where such member is a &rm or an association of
persons% for the personal use of the partners or members thereofI
3b5 the entire income from business carried on by it% if it is engaged in the
following88
3i5 agricultural or rural creditI
3ii5 cottage industryI
3iii5mar;eting of agricultural produce of its membersI
3vi5purchase of agricultural implements% seeds% livestoc; or other
articles intended for agriculture for the purpose of supplying them
to its membersI or
3v5 such processing% not being the performance of any manufacturing
operation with the aid of power% of the agricultural produce of its
members as is ordinarily employed by a cultivator to render
mar;etable the agricultural produce raised by himI
3c5 any income from interest and dividends derived from its investments
with any other co8operative societyI and
3d5 any income derived from the letting of godowns or warehouses for
the purpose of storage% processing or facilitating the mar;eting of
commodities belonging or meant for sale to its members.
For the purpose of section *-c
3a5 Xcottage industryK means an enterprise% not being owned by a =oint
stoc; company which ful&ls the following conditions% namelyc
3i5 it is basically an enterprise in which the owner is the investor% a
fulltime wor;er and the actual entrepreneurI
3ii5 the capital invested in plant% machinery and e<uipment does not
e'ceed T; )%""%""" at any time during the income yearI
3iii5the number of wor;ers% including the owner and the members of
his family% shall not on any one twenty8four hour day during the
income year% e'ceed &fteenI and
3iv5the owner of the enterprise or any member of his family does not
own any other industrial or commercial enterprise either in his
own name or in the name of any other personI and
3b5 Xmember of his familyK% in relation to the owner of an enterprise%
means the parents% spouse and children dependent on the owner and
employed in the enterprise% whether wor;ing full8time% or whether for
or without any wages% remuneration or compensation in any form.
!5 $othing contained in section *-3#5 shall apply to a co8operative society
carrying on such business of insurance as is carried on by a mutual
insurance association in respect of its pro&ts and gains to which paragraph
. of the Fourth Schedule applies.
'9-E Ta, ;olida6 for ;os*italB S-#-O- No- 2&:>AinPIt >2&&@ Dated E Hul6
2&&@
A newly established private hospital will be eligible for e'emption from income
ta' for &ve years sub=ect to the following conditions?
3#5 The hospital is owned by a company registered under the Companies Act%
#/#)4#//*.
3!5 The hospital is established between the period from #

Muly !""+ to )" Mune
!""..
3)5 The hospital is housed in a building constructed on the companyKs own
land.
3*5 The hospital has number of beds as mentioned below?
3a5 !"" beds in the case of general hospital.
3b5 +" beds in the case of speciali9ed hospital for heart% ;idney and cancer
patients.
3+5 #"P of the beds must be ;ept reserved for treatment of poor patients free
of charge.
The owner of the hospital en=oying e'emption from ta' shall &le return of
income to the concerned 0eputy Commissioner of Ta'es along with statement
of accounts and relevant documents L evidences in respect of the concerned
year of e'emption and the 0eputy Commissioner of Ta'es will determine the
income under sections !. and !/ along with the ownerKs income from other
sources% if any% and ma;e the income ta' assessment accordingly.
'9-F Concession to Industries set u* in an6 ",*ort )rocessing Uone
Based on compliance of some conditions% the concessions have been granted
to the industries set up in any 2'port Processing Rone% as follows?8
3#5 2'emption of pioneering industries? S.6.B. $o.!,,874., dated # Muly
#/.,?
3!5 2'emption of +"P of ta' on e'port sales of industries? S.6.B. $o. !,-8
74., dated # Muly #/.,
3)5 0ividend income of non8resident shareholders of companies having
industries set up in any 2'port Processing Rone? S.6.B. $o. !,.874.,
dated #

Muly #/.,?
3*5 Accelerated depreciation up to #""P for plant or machinery used in
speci&ed hitch electronic industry? S.6.B. $o. !,/874., dated # Muly #/.,?
3+5 2'emption of income of any industry set up in any 2'port Processing
Rone US6B $o !./47aw4./ dated #- August #/./V?.
'9-D S*ecial Ta, ",e4*tions P Concessions in #es*ect of Certain Business
3a5 As per S6B $o. ), 4 7aw4/- dated )
rd
February #//- provides for #+
years ta' e'emption from commencement of commercial production in
case of income of a Private Power (eneration Company.
3b5 As per S6B $o. !#*4I.T4!"") dated #/
th
Muly% !"") provisions have been
made for e'emption of any personKs income from agro8processing industry
from #
st
Muly% !""! to )"
th
Mune% !"",.
c5 As per S6B no. !#,4AI$4IT4!""+ dated #,
th
Muly% !""+% provision has been
made for e'emption of Bangladeshi residentKs income attributable to
software business up to )"
th
Mune% !"".. The person en=oying the
e'emption will have to furnish income ta' return for every year of the
e'emption period.
3d5 As per S6B $o. #--4I.T4!""! dated )
rd
Muly% !""! provision has been made
for ta'ing the income of new industrial underta;ing established during the
period from #
st
Muly% !""! to )"
th
Mune% !""+ at the rate !"P on ful&llment
of some conditions.
3e5 S6B no. !#,8AI$4IT4!""* dated #)
th
Muly% !""*? By this noti&cation the
(overnment has e'empted from income ta' any income accrued outside
Bangladesh to any person irrespective of his status as resident or non8
resident if such income is brought into Bangladesh under e'isting laws.
3f5 S6B no. !#-8AI$4IT4!""* dated #)
th
Muly% !""*? By this noti&cation the
(overnment has e'empted from income ta' any income accrued outside
Bangladesh to any person who is resident in Bangladesh% but not a
Bangladeshi citi9en if such income is brought into Bangladesh under
e'isting laws.
3g5 S6B no. !""48AI$4IT4!""+ dated ",."-.!""+ F Any person having not
previously declared any income can declare the same undisclosed income
from other sources during the period from "#."-.!""+ to )".",.!"", on
payment of -.+P ta' thereon and no <uestion as to the source of money
shall be raised. The declared income shall not be added with any income
from other sources previously shown in the return and ta' thereon have
been paid at normal rates in determination of total income declaring under
the Brdinance and the opportunity under this noti&cation shall not
constitute immunity from action if any ta;en previously under section /)
of the I.T. Brdinance. The declaration has to be made in prescribed form.
h5 2'emption on Income from Fish Farming% Poultry Farming% 0uc;ery% Cattle
Farming% 0airy Farming% Frog Farming% Gorticulture% Cultivation of ulberry%
Cocoon% ushroom and from Floriculture? S.6.B. )"/84/# 0ated / Bctober
#//#I S.6.B. $o. !"-8l4/) 0ated #. Bctober #//)I S.6.B. #!-8l4!""" 0ated
## ay !"""I and S.6.B. !#+4IT4!"") 0ated !" Muly !"")% S6B !",4Ain4It
0ated ,th Muly !""+
Chapter #*
)a64ent of ta, 3efore assess4ent
Contents
Introduction
2'amination conte't
To*ic List
#*.# 0eduction at Source and Advance Payment of Ta'
#*.! Income Sub=ect to 0eduction at Source
#*.) Person 6esponsible for Ta' 0eduction at Source? Sec */3)5
#*.* Time 7imit for Payment of Ta' 0educted at Source
#*.+ anner of Payment of Ta' 0educted at Source
#*., Issuance of Certi&cate for Ta' at Source
#*.- 6ates of T0S at a glance
#*.. Ta' on income of certain persons 3Final Settlement of ta'
liability5
#*./ Bther Issues relating to T0S
Introduction
Learning o3<ecti+es
6ecognise di1erent classes of income from where ta' are deducted or
collected at source.
ention the time limit and manner of payment of ta' deducted at source.
2'plain the result of deduction or not deduction of ta' at source where
deduction is re<uired by law.
0e&ne the computation% estimation and payment procedures of T0S.
ention the income heads that come under &nal settlement of ta' as per
section .!C.

)ractical signi0cance
There are two methods of collecting ta'es% one is direct method and another
is ta' deducted at source. The ordinary method of collection is direct
collection of ta' from the assessee. 0eduction of ta' at source is provided for
in certain speci&ed cases. The deducted ta' shall be credited accordingly with
the &nal payment of ta'. If default is made in the deduction of ta'es at
source% the ta' may be collected from the assessee directly% and further the
person who is liable to deduct but has not deducted the ta' under this
section% may be held personally liable and treated as an assessee in default in
respect of the ta'.
This chapter presents areas of ta'es deducted at source and related
provisions as per income ta' ordinance. Section .!C and its application are
detailed here. For computing ta'able income% ta' liability the importance of
this chapter is very signi&cant.

Sto* and thin2
There are so many sources where ta' is re<uired to be deducted or collected
at the time of payment. 0o you thin; how both ta' deducted at source and
advance payment of ta' are madeN
.or2ing conte,t
In corporate sectors% normally there are many payments made every day
where deductions of ta' at source are re<uired by ta' law. In some cases the
accountants are as;ing for advice on how and when the deductions need to
be done. Accountants can provide the service to their clients on ta' deduction
at source so that the clients can avoid any penalty for non8compliance of ta'
law in this regard.
0etailed ;nowledge about the payment of ta' before assessment in
compliance with ta' law can help accountants to support their clients
signi&cantly.
S6lla3us lin2s
Cou will also meet this area of ta'ation at application level and at case study
in advanced stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Identify the classes of income from where ta' are deducted or collected at
source.
6ecognise the di1erent amounts and rates of ta' deducted at source.
Identify the responsibility for deduction of ta' at source.
0e&ne the time limit for payment of ta' at source.
ention the manner of payment of ta' deducted at source.
2'plain the result of deduction or not deduction of ta' at source where
deduction is re<uired by law.
Identify the areas where ta' deducted at source is considered as &nal
payment of ta' liability under section .!C.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates need to remember the di1erent amount and rates of ta' deducted
at source while preparing for e'am. In practical problem at case study level
both ta' deduction at source and calculation of advance ta' may be as;ed.

':-& )AYM"NT O% TAX B"%O#" ASS"SSM"NT
Section O+er+ie/
There are two methods of collecting ta'es% direct ta' and ta' deducted at
source 3T0S5.
There are many classes of income from where ta' are deducted or
collected at source.
T0S shall be paid to the credit of the (overnment within three wee;s from
the date of such deduction or collection e'cept in case of salary.
6ate of T0S are varied.
The deducted ta' shall be credited accordingly with the &nal payment of
ta'.
Ta' deducting authority will be held liable for failing to deduct ta'es and
failing to deposit the same with government.
The assessee shall get the credit for T0S.
':-' Deduction at Source and Ad+ance )a64ent of Ta,B Sec :D
3#5 $otwithstanding that regular assessment in respect of any income is to be
made later in any assessment year% and without pre=udice to the charge
and recovery of ta' under the Brdinance after such assessment% the ta' on
income shall be payable by deduction or collection at source% or by way of
advance payment% in accordance with the provisions of this Chapter.
3!5 Any sum deducted or collected or paid by way of advance payment% in
accordance with the provisions of this chapter% shall for the purpose of
computing the income of an assessee% be deemed to be the income
received and be treated as payment of ta' in due time by the assessee.
':-2 Inco4e Su3<ect to Deduction at SourceB Sec :C
Ta' payable under the Brdinance shall be deducted or collected at source in
respect of the following income% namely8
3#5 income% classi&able under the head XSalariesKUSec */3#53a5VI
3!5 income from discount on the real value of Bangladesh Ban; bills USec
*/3#53aa5VI
3)5 income% classi&able under the head XInterest on securitiesKUSec */3#53b5VI
3*5 income derived on account of supply of goods% e'ecution of contracts or
services rendered USec */3#53c5VI
3+5 income derived by the importers and e'porters on account of import and
e'port of goods USec */3#53d5VI
3,5 income derived on account of indenting commission USec */3#53e5VI
3-5 income derived on account of winnings from lottery or crossword
pu99les% as referred to in section #/ 3#)5 USec */3#53f5VI
3.5 any income chargeable under the Brdinance which is paid or payable to
a non8resident USec */3#53g5VI
3/5 income% classi&able under the head XIncome from house propertyKUSec
*/3#53h5VI
3#"5 income derived on account of e'port of manpower USec */3#53i5VI
3##5 income derived on account of purchase by public auction USec */3#53=5VI
3#!5 income derived on account of acting in &lms USec */3#53;5VI
3#)5 income derived on account of shipping agency commission USec */3#5
3m5VI
3#*5 income derived from commission% discount or fees payable to
distributors for distribution or mar;eting or manufactured goods USec
*/3#53n5VI
3#+5 income derived on account of interest on saving deposits% &'ed deposits
and share of pro&ts on term deposits USec */3#53o5VI
3#,5 income derived on account of insurance commission USec */3#53p5VI
3#-5 income% classi&able under the head XCapital gainsKUSec */3#53<5VI
3#.5 income derived on account of fees for professional or technical
servicesUSec */3#53r5VI
3#/5 income derived on account of manufacture of cigarettes manually
without any mechanical aid whatsoever USec */3#53s5VI
3!"5 income derived from compensation against ac<uisition of property USec
*/3#53t5VI
3!#5 income derived on account of interest on saving instruments USec */3#5
3u5VI
3!!5 income derived on account of running of bric; &eld USec */3#53w5VI
3!)5 income derived on account of services rendered by the doctors USec
*/3#53'5VI
3!*5 income derived on account of commission of letter of credit USec */3#5
395VI
3!+5 income derived on account of survey by a surveyor of general insurance
company USec */3#539a5VI
3!,5 income derived on account of commission% remuneration or charges as a
foreign buyerKs agent USec */3#539c5VI
3!-5 income from dividendsUSec */3#539d5VI
3!.5 income derived on account of rendering certain services USec 3*/53#5
39e5VI
3!/5 income derived on account of shipping business of a resident USec 3*/5
3#539f5VI
3)"5 income derived on account of business of real estate and land developer
USec 3*/53#539g5VI
3)#5 income derived by an e'porter on account of e'port of any commodity
USec 3*/53#539h5VI
3)!5 income derived by a member of a stoc; e'change on account of
transaction of shares% debentures% mutual funds% bonds or securities USec
3*/53#539i5VI
3))5 income derived on account of courier business of a non8resident USec
3*/53#539=5VI
3)*5 on account of issuance or renewal of trade licence USec 3*/53#539m5VI
3)+5 income derived on account of trustee fees USec 3*/53#539n5VI
3),5 income derived on account of freight forward agency commission USec
3*/53#539o5VI
3)-5 income derived on account of rental power USec 3*/53#539p5VI
3).5 income derived on account of interest of Post BEce Savings Ban;
Account USec 3*/53#539<5VI
3)/5 income derived on account of rental value of vacant land or plant or
machinery USec 3*/53#539r5VI
3*"5 income derived on account of advertisement USec 3*/53#539s5VI
3*#5 income derived by foreign technician serving in a diamond cutting
industry USec 3*/53#539t5VI
3*!5 on account of issue of share at a premium USec 3*/53#539u5VI
3*)5 income derived from transfer of securities or mutual fund units by
sponsor shareholders of a company etc. USec 3*/53#539v5VI
3**5 deduction of ta' for services from convention hall% conference centre%
room or% as the case may be% hall etc. USec 3*/53#539w5VI and
3*+5 deduction of ta' from residents for any income in connection with any
service provided to any foreign person USec 3*/53#539'5V.
':-9 )erson #es*onsi3le for Ta, Deduction at SourceB Sec :C9(
Ta' to be deducted at source under section */3#5 in respect of any income
shall be deducted in accordance with the provisions of this chapter by the
person responsible for ma;ing payment which constitutes the income of the
payee. In terms of section */3)5% for the purpose of Chapter :II% Xperson
responsible for ma;ing paymentK% with its grammatical variations and cognate
e'pressions% means8
3a5 in the case of payments constituting income classi&able under head the
XSalariesK not being payment made by the (overnment% the employer
himself or% if the employer is a local authority% company or institution% such
authority% company or institution% including the principal oEcer thereofI
3b5 in the case of payment constituting income classi&able under head
XInterest on securitiesK not being payment made by or on behalf of the
(overnment% the authority% company or other institution issuing the
securityI and
3c5 in the case of payment of any other sum which constitutes an income of
the payee chargeable to ta' under the Brdinance% the payer himself% or if
the payer is a company or other institution% such company or institution
including the principal oEcer thereof.
':-: Ti4e Li4it for )a64ent of Ta, Deducted at SourceB #ule '9
All sums deducted or collected in accordance with the provisions of Chapter
:II of the Brdinance shall be paid to the credit of the (overnment within three
wee;s from the date of such deduction or collection by the person ma;ing the
deduction or collection% as the case may be. Gowever% the 0eputy
Commissioner of Ta'es may% in a special case and with the approval of the
Inspecting Additional Commissioner of Ta'es or the Inspecting Moint
Commissioner of ta'es% permit an employer to pay the ta' deducted from any
income chargeable under the head OSalariesW <uarterly on September #+%
0ecember #+% arch #+ and Mune #+.
':-@ Manner of )a64ent of Ta, Deducted at SourceB #ule ':
&a( )a64ents to su**liers and contractors? #ule ':2(
$otwithstanding anything contained in rule #*3#5 or rule #)% the person
responsible for ma;ing deduction% with respect to supply of goods or e'ecution
of contract under section +!% fees for professional or technical services under
section +!A% fees for services rendered by doctors under section +!(% house
property under +)A or commission or fees under section +)2 of the Brdinance%
shall issue a Che<ue e<uivalent to the amount of ta' deducted at source in
favour of the concerned 0eputy Commissioner of Ta'es and hand over the
same to the person from whom such ta' has been deducted and such person
shall deposit the Che<ue through income ta' challan form to Bangladesh Ban;
or the Sonali Ban;% as the case may be% and on production of the counter foil of
the challan% he shall be entitled to get his remaining dues on the concerned
accountI
&a( )a64ents to non>resident? #ule ':9(
>here ta' is deducted from payment made to a person who is not a resident
in Bangladesh% the person ma;ing such deduction shall deposit the deducted
amount through challan to the Bangladesh Ban; or the Sonali Ban;% as the
case may be.
c(Interest on sa+ing de*osits= 0,ed de*osits and ter4 de*ositsB #ule
'F;
3#5 For the purposes of ma;ing deduction of ta' under section +)F of the
Brdinance% each branch of a scheduled ban; including a co8operative
ban; shall deduct income ta' on interest or share of pro&t on saving
deposits or &'ed deposits or term deposits at the time of credit or
payment of the interest or the share of pro&t% whichever is earlier%
and report the total amount of ta' deducted to its head oEce.
3!5 The head oEce of each such ban; shall deposit the total amount of
ta' deducted by all its branches in the Bangladesh Ban;% in lump sum
under the head of account #4##*#4""""4"##8 Income Ta' F other than
companies% giving particulars as O0eduction of income ta' under
section +)F of the Income Ta' Brdinance #/.*W.
d( Transfer of *ro*ert6B #ule 'FI 2( to @(
3a5 The collection of ta' mentioned in sub8rule 3#5 shall be made through
0emand 0raft% Pay Brder or Challan mentioning one of the following
heads of account% namely?8
3#5 In the case of the district of 0ha;a% the Companies%
U#4##*#4""""4"#"#8Income Ta'8CompaniesVI and
3!5 In other cases% U#4##*#4""""4"###8 Income Ta' Bther than
Companies.V
3b5 The person responsible for registration of the document shall record on
the transfer document the amount of the ta' and the number and date
of the Challan% 0emand 0raft or Pay Brder% as the case may be.
3c5 The Challan% 0emand 0raft or Pay Brder shall be made in favour of or
credited to?8
a. in the case of the district of 0ha;a% the Commissioner of Ta'es%
Central Survey Rone% 0ha;aI
b. in the case of the district of Chittagong% the Commissioner of Ta'es%
Ta'es Rone8)% ChittagongI
c. in the case of the district of 6a=shahi% the Commissioner of Ta'es%
Ta'es Rone% 6a=shahiI
d. in the case of the district of Hhulna% Bagerhat and Sat;hira% the
Commissioner of Ta'es% Ta'es Rone% HhulnaI
e. in case of other districts?
a. if there e'ists no ta'es oEce% the 0eputy commissioner of
Ta'es under whose =urisdiction such district fallsI
b. if there e'ists only one ta'es oEce% the 0eputy
commissioner of ta'es of that districtI
c. if there e'ists more than one ta'es oEce% the 0eputy
Commissioner of Ta'es of Circle8# of that district.
3d5 The Commissioner of Ta'es and the 0eputy Commissioner of Ta'es
concerned shall verify the amounts of ta' so collected with challans
received by them from the Treasury BEces concerned.
e( Others? #ule ':'(
The person responsible for ma;ing deduction or collection under Chapter :II
of the Brdinance shall pay the amount of ta' so deducted or collected to the
credit of the (overnment by remitting it within the time speci&ed in rule #)
into the Bangladesh Ban; or the Sonali Ban;% as the case may be%
accompanied by an income ta' challan% blan; copies of which can be had
from the oEce of the 0eputy Commissioner of Ta'es for the purpose.
':-E Issuance of Certi0cate for Ta, at SourceB #ule 'D
a(Su**l6 of goods or e,ecution of contracts or 3( rent of house
*ro*ert6 or c( fees for *rofessional or technical ser+ices K#ule
'D'(LB
All paying authorities shall issue a certi&cate as re<uired under section +.
of the Brdinance to the person from whom ta' has been deducted under
*/3#53c5 3h5 or 3r5 of the ordinance within &fteen days of deduction.
3(OthersB #ule 'D2(
All paying and collecting authorities responsible for ma;ing deduction or
collection of ta' under chapter :II of the Brdinance% e'cept ta' in respect
of 3a5 supply of goods or e'ecution of contract or 3b5 rent of house property
or 3c5 fees for professional or technical services% shall furnish to the person
from whom such deduction or collection has been made a certi&cate in the
prescribed form.
c( Su**l6 of $oods and ",ecution of ContractsB Second )ro+iso to
#ule 'E
>here the Board gives a certi&cate in writing in the application of any
assessee or class of assesses that total income of such assessee or class
of assesses who is a recipient of any payment will be less than the
minimum liable to ta' or will be liable to a rate of ta' less than the rate
speci&ed in the rule% the person responsible for paying any amount on
account of the supply of goods or e'ecution of contract shall% unless such
certi&cate is cancelled by the Board pay the amount without deduction or
deduct the ta' at a rate less than the rate speci&ed in this rule. Gowever%
where the Board gives a permission in writing on the application of any
person responsible for paying any amount on account of the supply of
goods or e'ecution of contract under any foreign aided pro=ect in
Bangladesh% full payment of the bill may be made on production of the
copy of challan as proof of payment of ta' deductible from such bill% under
the Third Proviso of 6ule #,.
d(I4*orterB )ro+iso to #ule 'Fa
>here the Board is satis&ed that an importer is not li;ely to have any
ta'able income during any period or the income is otherwise e'empted
from payment of income ta' under any provision of the Brdinance% it may%
on application by such importer e'empt such person from payment of ta'
for the period during which income of such importer is not li;ely to be
assessable or is e'empted from payment of ta'.
e(Inco4e fro4 ;ouse )ro*ert6 K#ule ''aLB
The certi&cate under section +)A 3)5 of the Brdinance shall be issued by
the 0eputy Commissioner of Ta'es in the prescribed form.
':-F #ates of TDS at a glance

Sl-
;ead of TDS #ef- TDS #ate P A4ountP #e4ar2
#. Salaries
embers of Parliament
J4S +"
J4S +"B
Average of the rates applicable
to the estimated total income of
the payee under this head
!. 0iscount on the 6eal
:alue of Bangladesh
Ban; Bills
J4S +"A a'imum rate
). Interest on Securities J4S +# #"P
*. Payments for Supply of
(oods% 2'ecution of
Contracts
J4S +!
6ule #,
Jp to T;. !""%"""[ $il
From T;. !""%""# to +""%"""[
#P
From T; +""%""# to #%+""%"""[
!.+P
From T; #%+""%""# to
)"%"""%"""[*P
Above T;. )"%"""%"""[ +P
In case of oil supplied by oil
mar;eting companies? up to T;.
!""%"""[ $il% >here the
payments e'ceeds T;. !""%"""[
" .-+P
+. Indenting Commission J4S
+!3#5
6ule
#-3#5
-.+P
,. Shipping Agency J4S +P

Sl-
;ead of TDS #ef- TDS #ate P A4ountP #e4ar2
Commission +!3I5%
6ule
#-3!5
-. Fees for Services
6endered by 0octors
J4S
+!A3#5
#"P
.. 6oyalty and Technical
Hnow8Gow Fee
J4S
+!A3!5
#"P
/. Fees for Professional or
Technical Services
J4S
+!A3)5
#"P
#". Stevedoring agency L
Private Security service
or any services other
than services speci&ed
in this chapter
J4S
+!AA
#"P
##. Clearing and Forwarding
Agents
J4S
+!AAA
#"P
#!. Cigarette anufacturers J4S +!B ,P of the value of the banderols
#). Compensation Against
Ac<uisition of Property
J4S +!C !P of the amount of such
compensation% if property
situated within City Corporation%
Paurashava or Cantonment
Board% otherwise #P
#*. Interest on Saving
Instruments
J4S +!0 +P
#+. Bric; anufacturers J4S +!F T;. )"%"""48 for one section bric;
&eld. T;. *+%"""48 for two section
bric; &eld T;. ,"%"""48 for three
section bric; &eld.
#,. Commission on 7etter of
Credit
J4S +!I +P
#-. Collection of Ta' by City
Corporation or
Pourashava at the Time
of Issuing and 6enewal
of Trade 7icense
J4S +!H T;. +""48 for each trade license
#.. Collection of Ta' from
Freight Forward Agency
Commission
J4S +! #+P
#/. Collection of Ta' on
Account of 6ental Power
J4S +!$ *P
!". Collection of Ta' from a
Foreign Technician
Serving in a 0iamond
Cutting Industry
J4S +!B +P
!#. For services from
convention hall%
conference centre etc.
J4S +!P +P
!!. 0eduction of ta' from
resident for any income
in connection with any
J4S +!\ #"P

Sl-
;ead of TDS #ef- TDS #ate P A4ountP #e4ar2
service provided to any
foreigner
!). Collection of Ta' from
Importers and 2'porters
J4S +) +P
!*. 0eduction at Source
from Gouse Property
J4S +)A
6ule #-B
Jp to T;. !"%""" per month
Up.mV F$il From T;. !"%"""48 to
T;. *"%"""48 p.m. F )P ore than
T;. *"%"""48 p.m. 8+P
!+. Collection of Ta' from
Shipping Business of a
6esident
J4S
+)AA
+P of total freight received or
receivable in or out of
Bangladesh.
)P of total freight received or
receivable from services
rendered between two or more
foreign countries.
!,. 0eduction of Ta' from
Income 0erived on
Account of 2'port of
anpower
J4S +)B
6ule #-C
#"P
!-. Collection of Ta' from
2'port of Certain Items
J4S
+)BB
".,P of total e'port proceeds
!.. Collection of Ta' from
ember of Stoc;
2'changes
J4S
+)BBB
".#"P
!/. Collection of Ta' from
2'port of any (oods
e'cept Certain Items
J4S
+)BBBB
".-P of total e'port proceeds
)". Collection of Ta' on Sale
Price of (oods or
Property Sold by Public
Auction
J4S +)C
6ule
#-0
+P of the total sale proceeds.
)#. 0eduction or Collection
of Ta' at Source from
Courier Business of a
$on86esident
J4S
+)CC
#+P on the amount of service
charge accrued
)!. 0eduction From
Payment to Actors and
Actresses
J4S +)0 #"P
)). Commission% 0iscount or
Fees
J4S +)2 #"P
)*. Commission or
6emuneration Paid to
Agent of Foreign Buyer
J4S
+)22
-.+P
)+. Interest and Share of
Pro&t on Saving% Fi'ed
and Term 0eposits
J4S +)F%
6ule 8#-
#"P
),. Collection of Ta' from
Persons 2ngaged in 6eal
J4S +)FF 3i5 T;. !%""" per s<uare meter for
building or apartment for

Sl-
;ead of TDS #ef- TDS #ate P A4ountP #e4ar2
2state or 7and
0evelopment Business
residential purpose situated at
(ulshan odel Town% Banani%
Baridhara% oti=eel commercial
area and dil;usa commercial area
of 0ha;a and TH .%""" per s<
meter building for commercial
purpose. TH. #."" per S\ meter
for residential building situated at
0efense BEcers Gousing Society
30BGS5% 0hanmondi 6esidential
Area% 7almatia Gousing Society%
Jttara odel Town% Bashundhara
6esidential Area% 0ha;a
Cantonment Area% Harwan Ba9ar
Commercial Area of 0ha;a and
Hhulshi 6esindential Area%
Panchlaish 6esidential Area and
Agrabad of ChittagongI and TH
,%""" per S\ meter building used
for commercial purpose.
3ii5 T;. ."" per s<uare meter for
residential building or apartment
is situated in areas other than
areas mentioned in sub8clause 3i5
and TH. !%""" per S\ meter for
commercial building
!P of deed value from
September #% !""/ in case of
property situated in any city
corporation% paurashava or
cantonment board.

#P of deed value from
September #% !""/ in case of
property situated in places other
than any city corporation%
paurashava or cantonment
board.
)-. Insurance Commission J4S +)( +P
).. 6emuneration or Fees of
Surveyors of (eneral
Insurance Company
J4S
+)((
#+P
)/. Collection of Ta' on
Transfer% etc. of Property
J4S +)G 3a5>ithin =urisdiction of 0ha;a%
(a9ipur and $arayangan=
districts% C0A% H0A% 60A% other
city corporations% Paurashava%
Cantonment Board irrespective
of agricultural L nonagricultural
land 8 !P
3b5In any area other than the
areas mentioned in clause 3a5 for
other than agricultural land 8 #P.

Sl-
;ead of TDS #ef- TDS #ate P A4ountP #e4ar2
*". 0eduction at Source
from Interest on 0eposit
of Post BEce Savings
Ban; Account
J4S +) I #"P
*#. 0eduction at Source
from 6ental :alue of
:acant 7and or Plant or
achinery
J4S +) M
6ule
#-BB
Jp to T;. #+%""" per month% $ilI
From T;. #+%""# to )"%""" per
month% )PI ore than T;.
)"%""" per month% +P.
*!. 0eduction of Ta' from
Advertising Bill of
$ewspaper or aga9ine
or Private Television
Channel
J4S +) H )P
*). Collection of ta' from
sale of share at a
premium
J4S +) 7 )P
**. Collection of ta' from
transfer of shares by the
sponsor shareholders of
a company listed on
stoc; e'change
J4S +) +P
*+. Income from 0ividend J4S +* 6esident4non8resident
Bangladeshi Company Q!"P
6esident4non8resident
Bangladeshi Person other than
company Q#"P
$on8resident 3Bther than
Bangladeshi non8resident5
person other than a company
Q!+P
*,. Income from >innings J4S ++ !"P
*-. Income of $on86esidents J4S +, $on8resident Company Q
applicable to a company
$on8resident $on8Bangladeshi
Person other than a company Q
!+P
$on8resident Bangladeshi person
Q applicable to a resident
':-D Ta, on inco4e of certain *ersons %inal Settle4ent of ta, lia3ilit6(
UPs M D2C(
Ta' deducted on certain income is considered as &nal settlement of ta'es as
per section .!C of IT Brdinance #/.*. The provisions in this regard are as
follows?
'(Sub=ect to sub8sections 3)5% 3*5% 3+5% 3,5% 3-5% 3.5 and 3/5% notwithstanding
anything contained in any other provisions of this Brdinance% ta' deducted
or collected at source in accordance with the provisions mentioned in sub8
section 3!5 shall be deemed to be the &nal discharge of ta' liability from
that source.
2(The provisions referred to in sub8section 3#5 shall be the following% namely8
a( the amount representing the payments on account of supply of goods
or e'ecution of contract to which ta' is deductible under section +!I
3( the amount representing the payment on account of royalty% fees for
technical services for which ta' is deductible under section +!A3!5I
c( commission from clearing and forwarding agency business for which
ta' is deductible under section +!AAAI
d( the amount of the value of the banderols computed for the purpose
of collection of ta' on account of the manufacture of cigarettes under
section +!BI
e( the amount of compensation against ac<uisition of property under
section +!CI
f( the amount of salaries of a foreign technician serving in a diamond
cutting industry% for which ta' is deductible under section +!BI
g( the amount as computed for the purpose of collection of ta' under
section +) in respect of goods imported% not being goods imported by
an industrial underta;ing as raw materials for its own consumptionI
h( the amount received or receivable from shipping business of a
resident on which ta' is collectible under section +)AAI
i( the amount received on account of e'port of manpower on which ta'
is deductible under section +)BI
<( the amount received on account of e'port of certain items on which
ta' is deductible under section +)BBI
2( the amount received on account of transaction by a member of a
stoc; e'change for which ta' is collectible under section +)BBB I
l( the amount of auction purchase on which ta' is collectible under
section +)CI
4( the amount received on account of courier business of a non8resident
u4s +)CCI
n( the amount received from persons engaged in real estate or land
development business on which ta' is collectible under section +)FFI
o( the amount of remuneration or reward% whether by way of
commission or otherwise payable to an insurance agent on which ta'
is deductible under section +)(I
*( the amount representing the payment on account of survey by
surveyor of a general insurance company on which ta' is deductible
under section +)((I
8( the amount of the value of the property as mentioned in section +)G
for the purpose of collection of ta' under that sectionI
r( the premium received from raising of share at a premium over face
value under section +)7I
s( income derived from transfer of securities or mutual fund units by
sponsor shareholders of a company etc. under section +)I
t( the amount on account of winnings referred to in section #/3#)5 on
which ta' is deductible under section ++?
Provided that provisions of sub8section 3#5 shall not be applicable in the case
of clause 3a5 of this sub8section with respect to a contractor of an oil company
or a sub8contractor to the contractor of an oil company as referred to in rule
)/ of the Income8ta' 6ules% #/.*.
9(Ta' deducted or collected at source from the sources mentioned in sub8
section 3!5 shall not be ad=usted against refund due for earlier year or
years or refund due for the assessment year from any source other than
those mentioned in sub8section 3!5.
:(Income from the sources mentioned in sub8section 3!5 shall be determined
on the basis of the ta' deducted or collected at source and the rate or
rates of ta' applicable for the assessment year.
@(Income computed in accordance with sub8section 3*5 shall not be set o1
with loss computed under any other source for the assessment year or
with loss of earlier year or years.
E(Any income shown or assessed in e'cess of the amount determined in sub8
section 3*5 shall be liable to ta' at the rate or rates applicable for the
assessment year.
F(Any amount not admissible as allowances under section )" shall be added
to the income as referred to in sub8section 3*5.
D(Income referred to in sub8sections 3,5 and 3-5 shall be ta'able at the rate
or rates applicable for the year after determining income under sub8
section 3*5.
C(In addition to the ta' mentioned in this section% in accordance with the
provisions of the Finance Act% if any% the assessee shall pay surcharge.
Illustration
r. B% owner of a Bro;erage Gouse% has presented the following information in
the assessment year !"##8#!?
Income from Gouse Property T;.
!+"%"""
Income from other businesses T;.
!"+%"""
Ta' deducted at sources against bro;erage commission T;.
+"%"""
Income shown as bro;erage commission T;.
#"%""%"""
0etermine the total income of r. ] considering the provisions of the Section
.!3C5.
Solution
As T0S against bro;erage commission is a &nally settled ta' liability% so the
&rst step is to calculate total income e'cluding any item where ta' has been
settled &nally. So% total income e'cluding &nally ta' settled item?
Income from Gouse Property T;. !+"%"""
Income from other businesses T;. !"+%"""
T;. *++%"""
So% Ta' on such income will be?
Bn #
st
T;. #."%""" "P $il
Bn ne't T;. !-+%""" #"P T;. !-%+""
Total T;. !-%+""
$ow% income against &nally settled ta' liability of T;. +"%""" will be calculated
as follows on the basis of regular rate?
Bn the rest of !
nd
slab 3T;. )""%""" F T;. !-+%"""5 [ T;. !+%""" Q #"P [
T;. !%+""
So% T;. *-%+"" ta' will be for the )
rd
slab where ta' rate is #+P.
So% against this T0S of T;. *-%+"" the applicable income will be
3*-%+""4#+^#""5 [ T;. )#,%,,-
So% income against which T;. +"%""" &nally settled T0S will be 3T;. !+%""" Z
T;. )#,%,,- [ T;. )*#%,,-.
But As bro;erage commission T;. #"% ""%""" income has been shown i.e.
e'cess income has been shown by 3T;. #"%""%""" 8 T;. )*#%,,-5 [ T;.
,+.%))). So for this additional income of T;. ,+.%))) ta' will be charged on
regular rate.
':-C Other Issues relating to TDS
Conse8uences of %ailure to Deduct= etcB Sec @F
>here a person re<uired by or under the provisions of this Chapter to deduct%
collect or pay to the credit of the (overnment ta'% and in the cases mentioned
in section +*% the principal oEcer and the company of which he is the
principal oEcer% fails to pay the ta' in accordance with the provisions of this
Chapter% he or it shall 8
3a5 without pre=udice to any other conse<uences to which he or it may be
liable% be deemed to be an assessee in default in respect of the ta'I and
3b5 in addition to such ta'% pay an amount at the rate of two percent per
month of such ta' for the period commencing on the date following the
e'piry of the time within which it is to be paid under section +/ and
ending on the date of the actual payment of the ta'.
>here the 0eputy Commissioner of Ta'es in the course of any proceedings
under the Brdinance &nds any person% re<uired by or under the provisions of
this chapter to deduct% collect or pay to the credit of the (overnment ta'% who
has failed to deduct% collect or pay the ta' in accordance with the provisions
of this chapter% shall% notwithstanding the provisions of section #)-% ta;e
necessary action for realisation of such ta' alongwith the additional amount
payable under clause 3b5 of sub8section 3#5 from the person deemed to be an
assesssee in default under clause 3a5 of that sub8section.
Certi0cate of Deduction etc-= of Ta,B Sec @D
2very person who deducts or collects ta' as re<uired by the provisions of this
Chapter shall% at the time of ma;ing any payment in relation to which ta' has
been deducted or collected% furnish to the person to or from whom such
payment or collection has been made% a certi&cate to the e1ect that the ta'
has been deducted or collected specifying therein8
a5 the amount deducted or collectedI
b5 the rate at which deduction or collection has been madeI and
c5 such other particulars as may be prescribed.
)a64ent to $o+ern4ent of Ta, DeductedB Sec @C
All sums deducted or collected as ta' under the provisions of this Chapter
shall be paid within the prescribed time by the person ma;ing the deduction
or collection to the credit of the (overnment or as the Board may direct.
UnauthoriQed Deduction )rohi3itedB Sec E&
Save as provided in the Brdinance% no person shall charge% withhold% deduct
or collect any sum% directly or indirectly as ta' and where any sum is so
charged withhold% deducted or collected% it shall be paid in the manner
provided in section F +/.
)o/er to Le+6 Ta, /ithout )re<udice to other Mode of #eco+er6B
Sec E'
The power to levy ta' by deduction or collection under this Chapter shall be
without pre=udice to any other mode of recovery.
Credit of Ta, Deducted or Collected at SourceB Sec E2
Any deduction or collection of ta' made and paid to the account of the
(overnment in accordance with the provisions of this Chapter shall be treated
as a payment of ta' on behalf of the person from whose income the deduction
or collection was made% or of the owner of the security or of the shareholder%
as the case may be% and credit shall be given to him therefor on the
production of the certi&cate furnished under section F +. in the assessment% if
any made for the following year under the Brdinance ?
Provided that% if such person or such owner obtains% in accordance with the
provisions of the Brdinance% a refund of any portion of the ta' so deducted% no
credit shall be given for the amount of such refund ?
Provided further that where such person or owner is a person whose income is
included under the provisions of section *) 3*5 or 3+5 or section #"* or #"+ or
#", in the total income of another person% such other person shall be deemed
to be the person or owner on whose behalf payment has been made and to
whom credit shall be given in the assessment for the following year.
)a64ent of Ta, /here no Deduction is 4adeB Sec E9
The ta' under the Brdinance shall be payable by the assessee direct8
3a5 in any case where ta' has not been deducted or collected as re<uired by%
and in accordance with% the provisions of this Chapter I
3b5 in any case where the amount deducted or collected is found% after
regular assessment% to be less than the ta' due from the assessee% to the
e'tent of de&ciency I and
3c5 in the case of income in respect to which no provision has been made for
deduction or collection of ta' under the provisions of this Chapter.
Self>Assess4ent ?uestionsB
3a5 0iscuss the various types of income from which ta' is re<uired to be deducted or
collected at source under the provisions of the Income Ta' Brdinance #/.*.
3b5 State the provisions regarding information to be furnished to the Ta' Authorities
in connection with payment of salary% interest% dividend% collection of ta' from
property% payment to non8resident% and other sources under the provisions of the
Income Ta' Brdinance #/.*.
3c5 ention the application for &nal payment of ta' liability under section .!C.
3d5 >hat are the conse<uences of failure of deducting ta'es in time at prescribed
rates or failure of depositing deducted ta'es within timeN
Chapter #+
Ad+ance *a64ent of ta,
Contents
Introduction
2'amination conte't
To*ic List
>or;ed 2'amples and Solutions
#+.# 6e<uirement to pay advance payment of ta'
#+.! Computation of advance ta'
#+.) Installments of advance ta'
#+.* 2stimate of advance ta'
#+.+ Advance payment of ta' by new assesses
#+., Failure to pay installments
#+.- 7evy of interest for failure to pay advance ta'
#+.. Credit of advance ta'
#+./ Interest payable by (overnment on e'cess payment of
advance ta'
#+.#" Interest payable by the assessee on de&ciency in payment of
advance ta'
#+.## Payment of ta' on the basis of return
Introduction
Learning o3<ecti+es
6ecognise di1erent classes of assesses re<uired to pay advance ta'.
ention the time limit and manner of payment of advance ta'.
2'plain the bases and methods of computing advance ta'.
0e&ne the conse<uences of non8payment or insuEcient payment of
advance ta'.
ention the situation and when government will pay simple interest Q
#"P to assessee.

)ractical signi0cance
0epending on assessed or provisionally assessed income% an assessee may
re<uire to pay advance ta'. In some cases the new assessee also re<uires to
pay advance ta'. The calculation of amount% rate% estimation and installment
of advance ta' are guided by the Brdinance. The assessee shall get the credit
of advance ta'. In case of e'cess or de&cit payment of advance ta' an
assessee may receive or pay the interest from or to the (overnment. Ta' paid
in advance shall be ad=usted at the time of ta' payment on the basis of the
return.
Payment of advance ta' is important as failure of doing so will ma;e the
assessee being Xassessee in defaultK. Advance ta' is a re<uirement and it
reduces ta' burden at the end of the year. Thus% it is helpful to the assessee
as a method of ta' planning. Professional accountants are re<uired to help
their clients in that regard. So the practical signi&cance of this chapter
re<uires no e'tra mentioning.

Sto* and thin2
Advance ta' is re<uired to pay on total income e'cluding income from
agriculture and capital gains. Both old and new ta'payers are re<uired to pay
advance ta' if they ful&ll the threshold set by ta' laws. 0o you thin; how
advance payment of ta' is madeN
.or2ing conte,t
In corporate sectors% advance payment of ta'es is a must as it should e'ceed
the threshold of T;. *""%""". In some cases the accountants are as;ing for
advice on how and when the advance ta'es should be paid. The service for
estimation and calculation of advance ta' is re<uired by some assessee.
Accountants can provide the service to their clients on due payment of
advance ta' so that the clients can avoid any penalty for non8compliance of
ta' law in this regard.
0etailed ;nowledge about the payment of advance ta' in compliance with ta'
law can help accountants to support their clients signi&cantly.
S6lla3us lin2s
Cou will also meet this area of ta'ation at application level and at case study
in advanced stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne the re<uirement of advance payment of ta'.
0emonstrate how the computation% estimation and payment procedures of
advance ta' are made.
0escribe the conse<uences of payment or not payment of advance ta'.
Identify di1erent classes of assesses re<uired to pay advance ta'.
ention the time and installments of payment of advance ta'.
Illustrate the application of -+P test to compute simple interest in case of
de&cit.
?uestion *ractice
For <uestion practice on these topics% go to the suggested answers covering
this chapter.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates need to remember the methods of computing advance ta'% bases
of advance ta'% -+P test% computation of simple interest Q #"P on de&cit
amount of ta' and other comple'ities. In practical problem at case study level
calculation of advance ta' may be as;ed for with di1erent dates when
installment falls due.

'@-& AD!ANC" )AYM"NT O% TAX
Section O+er+ie/
An assessee% both old and new% may re<uire paying advance ta'.
Advance ta'es are paid on income e'cluding income from agriculture and
capital gain.
The assessee shall get the credit for advance ta'.
If the amount of advance ta' paid along with T0S is less than -+P of due
ta'% assessee is re<uired to pay simple interest Q#"P on such de&cit.
(overnment will also pay simple interest Q#"P if advance ta' for any
reason e'ceeds due ta'.
If the assessee fails to pay advance ta'% he will be the assessee in default.
'@-' #e8uire4ent to )a6 Ad+ance )a64ent of Ta,B Sec E:
3*,52'cept as provided in section ,*3!5% ta' shall be payable by an assessee
during each &nancial year by way of advance payment of ta'% hereinafter
referred to as Xadvance ta'K% in accordance with the provisions hereafter
made in this Chapter% if the total income of the assessee for the latest
income year in respect of which he has been assessed by way of regular
assessment% or has been provisionally assessed under the Brdinance% or
the Income8 ta' Act #/!! e'ceeds T; *%""%""".
3*-5$othing in section ,*3#5 shall apply to any income classi&able under the
heads XAgricultural incomeK and XCapital gainsK.
'@-2 Co4*utation of Ad+ance Ta,B Sec E@
3*.5The amount of advance ta' payable by an assessee in a &nancial year
shall be the amount e<ual to the ta' payable on his total income of the
latest income year as assessed on regular basis or provisionally% as the
case may be% as reduced by the amount of ta' re<uired to be deducted or
collected at source in accordance with the preceding provisions of this
Chapter.
3*/5The ta' payable under section ,+3#5 shall be calculated at the rates in
force in respect of the &nancial year referred therein.
'@-9 Install4ents of Ad+ance Ta,B Sec EE
Advance ta' shall be payable in four e<ual installments on the &fteenth day of
September% 0ecember% arch and Mune of the &nancial year for which the ta'
is payable. Gowever% if before the &fteenth day of ay of the year% an
assessment of the assessee is completed in respect of an income year% later
than that on the basis of which the ta' was computed under section ,+% the
assessee shall pay in one installment on the speci&ed date or in e<ual
installments on the speci&ed dates% if more than one falling after the date of
the said assessment% the ta' computed on the revised basis as reduced by the
amount% if any% paid in accordance with the original computation.
'@-: "sti4ate of Ad+ance Ta,B Sec EF
3+"5>here% an assessee who is re<uired to pay advance ta' under section ,*
estimates% at any time before the last installment is due% that the ta'
payable by him for the relevant assessment year is li;ely to be less than
the amount of ta' as computed under section ,+% he may% after giving to
the 0eputy Commissioner of Ta'es an estimate of the ta' payable by him%
pay such estimated amount of advance ta'% as reduced by the amount% if
any% already paid% in e<ual installments on the due dates of payment
under section ,,.
3+#5The assessee may furnish a revised estimate of such amount at any time
before any time before any of such installments become payable and may
thereby ad=ust any e'cess or de&ciency% by reference to the amount
already paid by him under this section% in any subse<uent installment or
installments payable in such &nancial year.
'@-@ Ad+ance )a64ent of Ta, 36 ne/ AssesseesB Sec ED
Any person who has not previously been assessed by way of regular
assessment under the Brdinance or the Income Ta' Act% #/!!% shall before the
&fteenth day of Mune in each &nancial year% if his total income% sub=ect to
section ,* 3!5% of the period which would be the income year for the
immediately following assessment year is li;ely to e'ceed T;. *%""%"""% send
to the 0eputy Commissioner of Ta'es an estimate of his total income and
advance ta' payable by him calculated in the manner laid down in section ,+
and shall pay such amount on such dates speci&ed in section ,, as have not
e'pired by installments which may be revised according to section ,-3!5.
'@-E %ailure to )a6 Install4ents of Ad+ance Ta,B Sec EC
>here% an assessee who is re<uired to pay advance ta' fails to pay any
installment of such ta'% as originally computed or% as the case may be%
estimated% on the due date% he shall be deemed to be an assessee in default
in respect of such installment.
'@-F Le+6 of Interest for %ailure to *a6 Ad+ance Ta,B Sec F&
>here% in respect of an assessee who is re<uired to pay advance ta'% it is
found in the course of regular assessment that advance ta' has not been paid
in accordance with the provisions of this Chapter% there shall be added%
without pre=udice to the conse<uences of the assessee being in default under
section ,/% to the ta' as determined on the basis of such assessment% simple
interest thereon calculated at the rate and for the period speci&ed in section
-).
'@-D Credit of Ad+ance Ta,B Sec F'
Any sum% other than a penalty or interest% paid by or recovered from an
assessee as advance ta'% shall be treated as a payment of ta' in respect of
the income of the period which would be the income year for an assessment
for the year ne't following the year in which it was payable and shall be given
credit for in the assessment of ta' payable by the assessee.
'@-C Interest )a6a3le 36 $o+ern4ent on ",cess )a64ent of Ad+ance
Ta,B Sec F2
3+!5 The (overnment shall pay simple interest at #"P per annum on the
amount by which the aggregate sum of advance ta' paid during a &nancial
year e'ceeds the amount of ta' payable by him as determined on regular
assessment.
3+)5 The period for which interest under section -!3#5 shall be &rst day of
Muly of the year of assessment to the date of regular assessment in respect
of the income of that year or a period of two years from the said &rst day
of Muly% whichever is shorter.
IllustrationB
r. 6obi calculated advance ta' for the income year !"#"8## as per the
latest assessed income of ta;a #%"""%""". 6egular assessment for the
assessment year !"##8#! was completed on Mune )"% !"#! and pro&t
assessed amounts to ta;a .""%""". Applicable ta' rate is *"P. Calculate
interest payable by the government on e'cess amount.
Calculation of e,cess ad+ance ta, *aidB
Amount of advance ta' paid on the basis of latest assessed income
3*"P of ta;a #%"""%"""5 T;. *""%"""
Advance ta' as per regular assessment 3*"P of ta;a .""%"""5 T;.
)!"%"""
2'cess of advance ta' paid T;. ."%"""
Interest payable by the government? 3#"P on ta;a ."%"""5 T;. .%"""
Note? Interest will be paid for a period from #
st
Muly !"## 3&rst day of
assessment year5 to Mune )" !"#! 3day of regular assessment5 or for a
ma'imum of ! years% whichever is shorter.
1!*10 Interest )a6a3le 36 the Assessee on De0cienc6 in )a64ent of
Ad+ance Ta,B Sec F9
3+*5 >here% in any &nancial year% an assessee has paid advance ta' on the
basic of his own estimate and the advance ta' so paid together with the
ta' deducted at source% if any % under this Chapter is less than seventy8&ve
per cent% of the amount of ta' payable by him as determined on regular
assessment% the assessee shall pay% in addition to the balance of ta'
payable by him% simple interest at #"P per amount on the amount by
which the ta' so paid and deduction falls short of -+P of the assessed ta'.
3++5 The period for which interest under section -)3#5 shall be payable shall
be the period from the &rst day of Muly of the year in which the advance
ta' was paid to the date of regular assessment in respect of the income of
that year or a period of two years from the said &rst day of Muly whichever
is shorter.
3+,5 $otwithstanding anything contained in sections -)3#5 and 3!5 8
i. where ta' is paid under section -*% or
ii. provisional assessment has been made under section .# but regular
assessment has not been made% the simple interest shall be calculated
in accordance with the following provisions8
#. up to the date on which ta' under8section -* or provisionally
assessed% was paidI
!. thereafter% such simple interest shall be calculated on the amount by
which the ta' so paid falls short of the said assessed ta'.
3+-5 >here% as a result of appeal% revision or reference% the amount on
which interest was payable under section -)3#5 has been reduced% the
amount of interest payable shall be reduced accordingly and the e'cess
interest paid% if any% shall be refunded together with the amount of ta'
that is refundable.
Illustration
For the assessment year !"##8#!% a certain assessee has latest assessed
income of ta;a #%"""%""". But% he wants to pay advance ta' for the year on
the basis of his own estimates that amounts to ta;a .""%""". 6egular ta'
rate is *"P. 0uring the year% ta' deducted at source was ta;a +"%""".
6egular assessment for the assessment year !"##8#! was completed on
February !.% !"#! resulting ta;a #%!""%""" pro&t including pro&t of ta;a
."%""" from capital gain and ta;a !!"%""" from agricultural income.
Calculate the amount of e'cess or shortfall and e'plain the conse<uences for
the same.
Income eligible to apply advance ta' as per regular assessment is
ta;a /""%""" 3ta;a #%!""%""" F ta;a ."%""" F ta;a !!"%"""5%
e'cluding capital gain and agricultural income.
Ta' liability as per regular assessment 3*"P of ta;a /""%"""5 T;.
),"%"""
Ta' paid in the form of Ta' deducted at sources T;. +"%"""
Advance ta' 3*"P of ta;a .""%""" F ta;a +"%"""5 T;. !-"%""" T;.
)!"%"""
ShortfallPDe0cit T2- :&=&&&
,)# test4 The de&cit or shortfall is re<uired to be tested for charging
interest.
-+P of ta' liability as per regular assessment 3-+P of ta;a ),"%"""5
T;. !-"%"""
Ta' paid actually T;. )!"%"""
ShortfallPDe0cit nil
Conse8uenceB In this case% the assessee is re<uired to pay the shortfall
of ta;a *"%""". There is no <uestion of interest resulting from -+P test.
'@-'')a64ent of Ta, on the Basis of #eturn KSee F:L
2very person who is re<uired to &le a return u4s -+% --% -.% ./3!5% /#3)5% or
/)3#5 shall pay the amount of ta' payable on the basis of such return as
reduced by the amount of any ta' deducted from his income u4s *. and ,* on
or before the return &led.
A person who without reasonable cause fails to pay ta' as re<uired under this
section% shall be deemed to be an assessee in default.
Advance Ta'
Payable
By
$ew ta'
payer
Bld ta'
payer
0oes latest
assessed
income
e'ceed T;.
*""%"""N
Ces $o
Advance
Ta'
Payable
$o
Advance
Ta'
Payable
Advance Ta' [ Ta' paid on the basis
of last assessed income F T0S% if any
0oes
advance ta'
paid plus
T0S -+P
of ta'
determinedN
Ces $o
$o penalty% simply the
balance of ta' will be paid
Assessee will pay the unpaid
amount of ta' plus simple
interest Q #"P as penalty on
such amount falls short than
-+P of assessed ta'
Is the
assessed
income
li;ely to
e'ceed T;.
*""%"""N
Ces
$o
Advance
Ta'
Payable
$o
Advance
Ta'
Payable
0oes
advance
ta' paid
plus T0S
-+P of ta'
determined
N
Ces $o
$o penalty% simply the
unpaid amount of ta' will
be paid
Assessee will pay the unpaid
amount of ta' plus simple
interest Q #"P as penalty on
such amount falls short than
-+P of assessed ta'
.or2ed ",a4*les and Solutions
.or2ed ",a4*le '
r. Alim Sei;h has the following records of assessment for various years?
Inco4e 6ears
Date of
assess4ent
Total assessed
inco4e
!"",8"-
!""-8".
!"".8"/
!""/8#"
!"#"8##
!#
st
of February%
!"".
#"
th
of arch% !"##
)"
th
of ay% !"#"
#+
th
of February !"##
$ot yet assessed
Ta;a ,""%"""
Ta;a #%+""%"""
Ta;a #%!""%"""
Ta;a #%!+"%"""
$4A
r. Sei;h% due to the changes of nature of income% wants to pay advance ta' on the
basis of his own estimate in lieu of latest assessed income. According to his own
estimate% total ta'able income amounts to ta;a #%!""%""" including ta;a #""%"""
from capital gain and ta;a !""%""" from agricultural income. Assessment for the
income year !"#"8## has been completed on !.
th
February !"#! and his actual
income amounts to ta;a #%.""%""" e'cluding capital gain and agricultural income.
For the income year !"#"8##% his ta' deducted at source was ta;a #""%""" and he
has paid further ta' of ta;a #+"%""" on )#
st
0ecember !"## J4s F -*. Applicable ta'
rate for r. Sei;h is *"P. 2'plain ta' implications.
Solution 'B
7atest assessed income in this case would be ta;a #%+""%""" 3IC !""-8".5 if advance
ta' was based on that. But% r. Sei;h paid advance ta' on the basis of his own
estimate. So% let us &rst compute the amount of advance ta' paid.
2stimated income of r. Sei;h e'cluding capital gain and agricultural income
T;. /""%"""
Amount of advance ta' payable 3*"P of ta;a /""%"""5 T;.
),"%"""
Advance Income Ta' to be paid per installment 3ta;a ),"%"""4*5 T;.
/"%"""
Advance ta' paid by r. Sei;h on the date of assessment T;.
#."%"""
3Because only two installments are made on #+
th
September and #+
th
0ecember
respectively5
7et us calculate the amount of shortfall4de&cit?
Ta' liability as per regular assessment 3*"P of ta;a #%.""%"""5 T;.
-!"%"""
Ta' paid in the form of
Ta' deducted at sources T;. #""%"""
Advance ta' paid 3as calculated above5 T;. #."%""" T;.
!."%"""
ShortfallPDe0cit T2-
::&=&&&
7ess? ta' paid J4s F -* T;. #+"%"""
6emaining 7iability T;.
!/"%"""
So% r. Sei;h would be re<uired to pay ta;a !/"%""" as additional ta'. $ow let us use
-+P test to decide whether he would be charged interest on the shortfall or not.
-+P of ta' liability as per regular assessment 3-+P of ta;a -!"%"""5 T;.
+*"%"""
Ta' paid actually T;. !."%"""
#e+ised ShortfallPDe0cit T2-
2E&=&&&
7ess? ta' paid J4s F -* T;. #+"%"""
#e4aining lia3ilit6 T2- ''&=&&&
So% r. Sei;h would be charged interest as per the -+P test for the following time
period?
Bn ta;a ##"%"""I interest will be charged Q #"P for a period from #
st
Manuary !"#!
to !.
th
February !"#! whereas on ta;a #+"%"""I interest will be charged at the same
rate but for a period from #
st
April !"## to )#
st
0ecember !"##. So% total interest
payable by r. Sei;h would be ta;a #)%".).)) U3##""""_#"P_!4#!5 Z
3#+""""_#"P_/4#!5V. Thus% total amount due by r. Sei;h to the government
amounts to ta;a )%")%".).)) 3!/"%""" Z#)%".).))5.
Self>Assess4ent ?uestion
#. 0iscuss brieAy the provisions of the Income Ta' Brdinance #/.* with regard to
the following?
3a5 The assessees who are re<uired to ma;e advance payments of ta' and the
nature of incomes which are to be left out of consideration for this purposeI
3b5 The basis on which advance payments of ta' should be calculated for old
assessees and new assessees% and the due dates of payment thereofI
3c5 The interest payable by (overnment on e'cess payment and interest
chargeable to assessee on shortfall% in respect of advance payment of ta'.
!. In what situation% government will pay interest to assesseeN
). r. Idris ia calculated advance ta' for the income year !""/8#" as per the latest
assessed income of ta;a #%"""%""". 6egular assessment for the assessment year
!"#"8## was completed on Mune )"% !"#! and pro&t assessed amounts to ta;a
-""%""". Applicable ta' rate is *"P. Calculate interest payable by the
government on e'cess amount.
Chapter #,
#eturn of inco4e and state4ents
Contents
Introduction
2'amination conte't
To*ic List
#,.# 6e<uirement to &le return of income
#,.! Form of submission of return of income
#,.) Signature and veri&cation of return
#,.* 0ue date of submission of return of income ta'
#,.+ 0ocument to be submitted along with the return if income
#,., 6eturn of withholding ta'
#,.- Bbligation to furnish Annual Information 6eturn
#,.. Concurrent =urisdiction
#,./ Certi&cate in place of return
#,.#" $otice for &ling return
#,.## Filing of revised return
#,.#! Production of accounts and documents
#,.#) Statement of assets and liabilities
#,.#* Production of other information as per di1erent Sections and 6ules at
the time of Submission of 6eturn or in other circumstances
Introduction
Learning o3<ecti+es
2'plain the re<uirement to &le return of income
State the procedures of &lling the return.
Identify the forms and documents to be submitted with the return of
income.
ention the information need to be provided with return.
Prescribe di1erent forms of return.
)ractical signi0cance
2very person shall &le or caused to be &led a return of his income or the
income of any other person in respect of which he is assessable to ta'. There
are some rules and guideline for submission of return. The total procedures
covering the time limitation for submitting the return% &lled forms% documents
and information to be provided with the return of income. 0uly &led return
need to have the declaration and authentication.
Production of accounts and documents% statements of assets and liabilities%
income statement% statement of individual regarding particulars of life style
are the essential elements in case of submission of return.
7earning of income ta' is &nally reAected in submitting the form of return
where income from di1erent heads is reported and net ta' liability is
computed. This is the reporting of assesses to the government authority
disclosing relevant information.
Sto* and thin2
0o you reali9e that submission of return is an obligatory responsibility for
every assessee by any meansN 0o you ;now that the production of supporting
accounts% forms and documents and timely submission of return with
authenticated declaration about the true information are very signi&cantN
.or2ing conte,t
In case of submission of return% the accountants can guide their clients how to
prepare their return with all supporting documents. Accountants should have
the clear understanding about the legal procedures for submission of return.
0etailed understanding about the rules and procedures for &ling return give
the opportunity to the accountants in practice to help their as ta' advisers.
S6lla3us lin2s
The topics covered in this chapter are very important for students%
accountants% ta' advisers and even for the assessee at large for compliance
with the ta' rules and procedures regarding submission of return.
>hen you tac;le the <uestions at application level and case study you will be
e'pected to be very familiar with the total procedures for submitting return.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne the re<uirement to &le return of income.
ention the due date of submission of return of income.
Identify the forms% documents and information to be submitted with return.
0e&ne the term of IT #"B and IT #"BB in case of &lling return.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have historically prepared well for this area of the syllabus.
'E-& #"TU#N AND STAT"M"NT
Section O+er+ie/
An assesse shall &le or cause to be &led a return of income in the
prescribed form.
The return of income shall be signed and veri&ed
6eturn shall be submitted within due date.
The 0CT can serve notice for &ling return after the due date for submission
of return.
The return shall be accompanied by certain documents including IT8#"B
and IT8#"BB
Form of return for individual assessee and company is di1erent.
0ue dates of submitting return is di1erent for di1erent classes of assesses.
'E-' #e8uire4ent to 0le #eturn of Inco4eB Sec F@'(= 'A( and 'B(
3#5 Save as provided in section -,% every person shall &le or cause to be &led%
with the 0eputy Commissioner of Ta'es% a return of his income or the
income of any other person in respect of which he is assessable to ta'
under the Brdinance8
3a5 if his total income during the income year e'ceeded the ma'imum
amount which is not chargeable to ta' under the Brdinance% or
3b5 if he was assessed to ta' for any one of the three years
immediately preceding that income year USection -+3#5V.
Gowever% any non8resident Bangladeshi may &le his return of income along
with ban; draft e<uivalent to the ta' liability% if any% on the basis of such
return% to his nearest Bangladesh ission and the ission will issue a
receipt of such return with oEcial seal and send the return to the Board
UProviso to Section -+3#5V.
3!5 A person who is not re<uired to furnish return under section -+3#5% shall &le
a return of his income during the income year on or before the speci&ed
date if he?
3a5 resides within the limits of a city corporation or of a municipality of
a divisional head<uarters or district head<uarters and who at any
time during the relevant income year ful&ls any of the following
conditions% namely8
3i5 owns a building which consists of more than one storey and the
plinth area of which e'ceeds one thousand si' hundred s<uare
feetI
3ii5 owns a motor carI
3iii5subscribes a telephoneI
3iv5owns a membership of a club registered under the :alue added
Ta' Act% #//#I
3b5 runs any business or profession having trade license from a city
corporation% a paurashava or a union parishad% and operates a ban;
accountI
3c5 has registered with a recognised professional body as a doctor%
dentist% lawyer% income ta' practitioner% chartered accountant% cost
and management accountant% engineer% architect or surveyor or
any other similar professionI
3d5 member of a chamber of commerce and industries or a trade
associationI
3e5 is a candidate for an oEce of any union parishad% paurashava% city
corporation% or a ember of ParliamentI
3f5 participates in a tender Aoated by the government% semi8
government% autonomous body or a local authorityI
3g5 has a ta'payerKs identi&cation number3TI$5 in accordance with the
provisions of section #.*AI and
3h5 any non8government organisation registered with $(B A1airs
Bureau.
2]P7A$ATIB$? In this sub8section% the term Xmotor carK means a motor car
as de&ned in section !3!+5 of the otor :ehicles Brdinance #/.) and
includes a =eep and a micro8bus U2'planation to Section -+3#A5V.
3)5 $otwithstanding anything contained in sections -+3#5 and 3#A5% every
company shall &le a return of its income or the income of any other person
for whom the company is assessable% on or before the date speci&ed in
section -+3!53c5USection -+3#B5V.
'E-2 %or4 of Su34ission of #eturn of Inco4e KSection F@2(A(L
The return under section -+3#5% 3#A5 and 3#B5 shall be furnished in the
prescribed form setting forth therein such particulars and information as may
be re<uired thereby including the total income of the assessee.
'E-9 Signature and !eri0cation of #eturn KSection F@2(3(L
The return of income shall be signed and veri&ed8
3i5 in the case of an individual% by the individual himselfI where the individual
is absent from Bangladesh% by the individual concerned or by some
person duly authorised by him in this behalfI and when the individual is
mentally incapacitated from attending to his a1airs% by his guardian or by
any other person competent to act on his behalfI
3ii5 in the case of Gindu undivided family% by the Harta% and% where the Harta
is absent from Bangladesh or is mentally incapacitated from attending to
his a1airs by any other adult member of such familyI
3iii5 in the case of a company or local authority% by the principal oEcer
thereofI
3iv5 in the case of a &rm% by any partner thereof% not being a minorI
3v5 in the case of any other association% by any member of the association or
the principal oEcer thereofI and
3vi5 in the case of any other person% by that person or by some person
competent to act on his behalfI
'E-: Due date of Su34ission of #eturn of Inco4eB Sec F@2(C(
3#5 The return of income shall be &led% unless the date is e'tended under
section -+3)58
3i5 in the case of a company% by the &fteenth day of Muly ne't following
the income year or% where the &fteenth day of Muly falls before the
e'piry of si' months from the end of the income year% before the
e'piry of such si' monthsI and
3ii5 in all other cases% by the thirtieth day of September ne't following
the income year.
&2( The last date for the submission of return as speci&ed in section -+3!5 may
be e'tended by the 0eputy Commissioner of Ta'es up to ) months from
the date so speci&ed and further e'tend the date up to three months with
the approval of the Inspecting Moint commissioner of Ta'es USection -+3)5V.
Illustration
%or Assessee 3eing a co4*an6
Accounting 6ear ended on Due date of %iling the
#eturn
)#.#!.!"#" By #+
th
Muly !"##
)#.").!"## By )"
th
September !"##
)".",.!"## By )#
st
0ec !"##
)#."-.!"## By #+
th
Muly !"#!
)"."/.!"## By #+
th
Muly !"#!
%or Assessee 3eing a *erson other than co4*an6
Income Cear Due date of %iling the
#eturn
!"#"8## By )"
th
September !"##
!"##8#! By )"
th
September !"#!
)#8#!8!"#" 3&rm5 By )"
th
September !"##
'E-@ Docu4ents to 3e Su34itted Along /ith the #eturn of Inco4e
KSection F@2(D(L
The return of income shall be accompanied by8
3i5 in the case of an individual% a statement in the prescribed form and
veri&ed in the prescribed manner giving particulars of his personal and
family e'penditure to be called life styleI and a statement in the
prescribed form and veri&ed in the prescribed manner giving particulars
speci&ed in section ." in respect of himself% his spouse% his minor children
and dependantsI and
3ii5 in the case of a company% a statement of accounts audited by a chartered
accountant.

'E-E #eturn of /ithholding ta, KSection F@AL
3#5 2very person% being a company% shall &le or cause to be &led% with the
0eputy Commissioner of Ta'es where he is being assessed% a return of
withholding ta' collected or deducted as per provisions of Chapter :II of
this Brdinance.
3!5 The return under sub8section 3#5 shall be8
3a5 furnished in the prescribed form setting forth therein such
particulars and information as may be re<uired therebyI
3b5 signed and veri&ed by the principal oEcer thereofI
3c5 &led <uarterly% unless the date is e'tended under sub8section
3)5% by the &fteenth day of Bctober% Manuary% April and Muly of the
&nancial year for which the ta' is deducted or collectedI
3d5 accompanied by a statement of deduction or collection of ta'
along with copy of treasury challans or payment orders.
3)5 The last date for the submission of return as speci&ed in sub8section 3!5
may be e'tended by the 0eputy Commissioner of Ta'es up to &fteen days
from the date so speci&ed.
'E-F O3ligation to furnish Annual Infor4ation #eturn KSection F@BL
3#5 (overnment may% by noti&cation in the oEcial ga9ette% re<uire any person
or group of persons responsible for registering or maintaining boo;s of
account or other documents containing a record of any speci&ed &nancial
transaction% under any law for the time being in force% to furnish an Annual
Information 6eturn% in respect of such speci&ed &nancial transaction.
3!5 The Annual Information 6eturn referred to in sub8section 3#5 shall be
furnished to the Board or any other income ta' authority or agency% in
such form% manner and within such time as may be prescribed.
'E-D Concurrent <urisdiction KSection F@CL
Board may% by general or a special order in writing% direct that in respect of all
or any proceedings relating to receiving of return of income and issuance of
ac;nowledgement thereof in accordance with the provisions of section -+% --%
-.% ./3!5% /#3)5 or /)3#5% the powers and functions of the 0eputy
Commissioner of Ta'es shall be concurrently e'ercised by such other authority
as may be speci&ed by the Board.
'E-C Certi0cate in *lace of return KSection FEL
>here the entire total income of an assessee during the income year
consisted of income classi&able under the head TSalariesT or any other
income from which the full amount of ta' payable by him has been deducted%
such assessee may% instead of &ling a return under section -+% &le a
certi&cate in such form as may be prescribed accompanied% where applicable%
by a statement referred to in section -+ 3!5 3d5 I and the certi&cate and
statement so &led shall be deemed for all purposes of this Brdinance to be a
return and statement &led under that section.
'E-'& Notice for %iling #eturnB Sec FF
3#5 The 0eputy Commissioner of Ta'es may% at any time after e'piry of the
date speci&ed in section -+% by a notice in writing% re<uirec
a. any person% other than a company% to &le a return of his total income
as provided in that section if% in the opinion of the 0eputy
Commissioner of Ta'es the total income of such person was% during the
income year% of such amount as to render liable to ta'I
b. any company to &le a return of its total income% if it is not &led.
3!5 The return under section --3#5 shall be &led within such period% not being
less than twenty8one days% as may be speci&ed in the notice or within such
e'tended period as the 0eputy Commissioner of Ta'es may allow.
'E-'' %iling of #e+ised #eturnB Sec FD
Any person who has not &led a return as re<uired by section -+ or -- or who
having &led return% discovers any omission or incorrect statement therein%
may% without pre=udice to any liability which he may have incurred on this
account% &le a return or a revised return% as the case may be% at any time
before the assessment is made.
'E-'2 )roduction of Accounts and Docu4entsB Sec FC
The 0eputy Commissioner of Ta'es may% by notice in writing% re<uire an
assessee who has &led a return under section -+% or to whom a notice has
been issued under section --% to produce or cause to be produced such
accounts% statements and documents on such date as may be speci&ed in the
notice% such accounts% statements and documents including those relating to
any period% not being earlier than three years prior to the income year% as he
may consider necessary for the purpose of ma;ing an assessment under the
Brdinance.
'E-'9 State4ent of Assets and Lia3ilities and life st6leB Sec D&
&1( The 0eputy Commissioner of Ta'es may% by notice in writing% re<uire an
assessee to &le by the date speci&ed in the notice statements giving
particulars in respect of the following unless they have already been
given in or with return &led under section -+% -- or -.% or with a
certi&cate &led under section -, namely?
3a5 the total assets% liabilities and e'penses of the assessee as on the
date or dates speci&ed in the noticeI
3b5 the total assets% liabilities and e'penses of the spouse% minor children
and dependents of the assessee as on the date or dates so speci&edI
and
3c5 any assets transferred by the assessee to any person during the
period or periods so speci&ed% and the consideration thereforeI
3d5 particulars of life style of the assessee.
3!5 The statements to be &led under sub8section 3#5 shall be prepared in such
form and veri&ed in such manner as may be prescribed.
'E-': )roduction of other infor4ation as *er diAerent Sections and #ules
at the ti4e of Su34ission of #eturn or in other circu4stances
J4s F #". L 6ule 8 !) Information regarding payment of salary
J4s F #"/ L 6ule 8 !" Information regarding payment of interest
J4s F ##" L 6ule 8 #/ Information regarding payment of dividend
6ule 8 #" Particulars to be furnished on interest on securities by
a person other than the (overnment
6ule 8 #! Particulars to be furnished by persons ma;ing
deductions at source
6ule 8 !# Statement of deduction of ta' under the head
OSalariesW where such deduction is not made by or on
behalf of the (overnment
6ule F !* % 6ule !+ L Form of 6eturn
!+A
6ule 8 *# Particulars for depreciation allowance
6ule 8 *- Furnishing of an abstract of the provident fund
account of an employee
6ule F +.B 6eturn% statements% etc.% that may be re<uired to be
furnished
%or4 of #eturn
%or Indi+iduals
IT ##(A Form of return of income under the income ta' ordinance #/.* for
individual and other ta'payers 3Bther than company5
IT #"B Statement of Assets and 7iabilities
IT #"BB Statement under section -+3!53d53i5 and section ." of the Income
Ta' Brdinance% #/.* regarding particulars of life style
%or Co4*an6
IT
##(GA
Form of return of income under the income ta' ordinance #/.* for
Company ta'payers only
Chapter #-
Assess4ent
Contents
Introduction
2'amination conte't
To*ic List
#-.# Introduction to Assessment
#-.! Provisional assessment
#-.) Assessment on correct return
#-.* Assessment under simpli&ed procedure
#-.+ Jniversal self assessment
#-., Ta' on income of certain persons
#-.- Spot assessment
#-.. Assessment after hearing
#-./ Assessment on the basis of report of a Chartered Accountant
#-.#" Best =udgment assessment
#-.## Presumptive ta' assessment on owners of road transport
#-.#! :arious specialised assessments
Introduction
Learning o3<ecti+es
Illustrate the various types of assessment.
Identify the conditions% rules and procedure for di1erent classes of
assessment.
0e&ne the limitation for assessment.

)ractical signi0cance
Assessments of income and ta' liability are very signi&cant for every
assessee. There are di1erent classes of assessment such as provisional
assessment% assessment on correct return% assessment under simpli&ed
procedures% assessment on the basis of return% universal self assessment%
deemed assessment for certain income of certain persons% spot assessment%
assessment after hearing% assessment on the basis of report of a chartered
accountant% best =udgement assessment etc. 2ven there are various
speciali9ed assessments such as assessment in case of discontinued business%
persons leaving Bangladesh% deceased person% income escaping assessment
etc. So there is no way to avoid the assessment for any assessee.
For every classes of assessment there are either some conditions% rules and
procedures speci&ed for assessee and4or for ta' authorities. Some limitation
for assessment also has signi&cance.
Sto* and thin2
0id you realise how important is the assessment for any assessee either
individual or companyN 0o you thin; nobody can avoid assessment in any way
if he is re<uired to be assessed under ta' lawN
.or2ing conte,t
Assessment of ta' is very important for every assessee. An assessee must
re<uire to be assessed in any way. Accountants have a great role to provide the
technical assistance to their client in case of assessment. As there are many
conditions% rules and procedures for di1erent types of assessments%
accountantsK support sometime very signi&cant to complete the assessment of
their clients.
any clients are re<uiring the support for correct assessment from
accountants in every year. 0etailed ;nowledge of accountants on conditions%
rules and procedures for di1erent assessments has the importance in case of
re<uired support for clientsK ta' assessment in many ways.
S6lla3us lin2s
The topics covered in this chapter have the signi&cance for professional study
as you can utili9e the ;nowledge throughout the application level and case
study and also in your practical life.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Identify the di1erent classes of assessment.
0e&ne the provisional assessment.
Characterise the assessment on correct return and assessment on the
basis of return.
0e&ne the assessment under which ta' liability shall be deemed as &nally
discharged.
0e&ne the specialty of universal self assessment.
6ecognise the rules and procedures for spot assessment.
Illustrate the assessment after hearing and best =udgement assessment.
0e&ne the assessment on the basis of report of a chartered accountant.
6ecognise the presumptive ta' assessment on owners of road transport
with the rate of ta'.
0e&ne the assessment of &rms.
Typify the assessment in case of change in constitution of a &rm and
constitution of new successor &rm.
Typify the assessment in case of succession to business otherwise than on
death and discontinued business.
0e&ne the assessment in case of partition of Gindu undivided family.
Characterise the assessment in case of partition of persons leaving
Bangladesh% deceased person and income escaping assessment.
Identify the limitation for assessment.

?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.
'F-& ASS"SSM"NT
Section O+er+ie/
There are di1erent classes of assessment of total income and ta' payable.
The conditions% rules and methods of various assessments are di1erent.
It is not easy for any person to escape assessment who is re<uired to be
assessed.
There are certain limitations of assessment.
'F-' Introduction to Assess4ent
Assessment to ta' is an important stage in the whole cycle for ta' collection.
It is used to mean% sometimes% the computation of income% sometimes the
determination of the amount of ta' payable and sometimes the whole
procedure laid down in the Act for imposing liability upon the ta' payer
UC606T6; G!emc!and Ra!das6 /.<- 06T6R 33/2 3/+"PC$:6 The meaning to be
assigned to the word OassessmentW has to be understood in each section with
reference to the conte't in which it has been used 7A6B6 LaAs!man 5!enoy
;606T616 .)- 06T6R ',)2 .3/"5C$:6
'F-2 )ro+isional Assess4entB Sec D'
3#5 The 0eputy Commissioner of Ta'es may% at any time after # Muly of the
year for which the assessment is to be made% proceed to ma;e% in a
summary manner% a provisional assessment of the ta' payable by the
assessee on the basis of the return and the accounts and documents% if
any% accompanying it and where no return has been &led% on the basis of
the last assessment including an assessment under this section.
3!5 In ma;ing a provisional assessment under this section% the 0eputy
Commissioner of Ta'es shall8
a5 rectify any arithmetical errors in the return% accounts and documentsI
b5 allow% on the basis of the information available from the return%
accounts and documents% such allowances as are admissible under the
Third Schedule and any loss brought forward under section ). or )/ or
*#.
3)5 For the purposes of payment and recovery% the ta' as determined to be
payable upon provisional assessment shall have e1ect as if it were
determined upon regular assessment.
3*5 The ta' paid or deemed to have been paid under Chapter :II% in respect of
any income provisionally assessed under sub8section 3#5% shall be deemed
to have been paid towards the provisional assessment.
3+5 Any amount paid or deemed to have been paid towards provisional
assessment under this section shall be deemed to have been paid towards
regular assessmentI and the amount paid or deemed to have been paid
towards provisional assessment in e'cess of the amount found payable
after regular assessment shall be refunded to the assessee.
3,5 $othing done or su1ered by reason or in conse<uence of any provisional
assessment made under this section shall pre=udice the determination on
merit of any issue which may arise in the course of regular assessment.
3-5 There shall be no right of appeal against a provisional assessment under
this section.
'F-9 Assess4ent on Correct #eturnB Sec D2
>here a return or a revised return has been &led under Chapter :III of ITB
#/.* and the 0CT is satis&ed% without re<uiring the presence of the assessee
or the production of any evidence% that the return is correct and complete% he
shall assess the total income of the assessee and determine the ta' payable
by him on the basis of such return and communicate the assessment order to
the assessee within thirty days ne't following?
Provided that8
a5 such return shall be &led on or before the date speci&ed in clause 3c5 of
sub8section 3!5 of section -+I
b5 the amount of ta' payable shall be paid on or before the date on which the
return is &ledI and
c5 such return does not show any loss or lesser income than the last assessed
income% or assessment on the basis of such return does not result in
refund.
'F-: Assess4ent Under Si4*li0ed )rocedureB Sec D2A
>here% an assessee% other than a public company as de&ned in the
Companies Act% #/#)4#//* who has previously been assessed for any
assessment year ended on or before the thirtieth day of Mune% #//+% &les a
return showing income for the income year relevant to the assessment year
commencing on or after the &rst day of Muly% #//+ and ending on or before the
thirtieth day of Mune% #//- and the income shown in such return is higher by
not less than #"P over the last assessed income and has also increased by at
least a further sum of #"P for each preceding assessment year in respect of
which the assessment is pending% the return &led by the assessee shall be
deemed to be correct and complete% and the 0eputy Commissioner of Ta'es
shall assess the total income of the assessee on the basis of such return and
determine the ta' payable by him on the basis of such assessment and
communicate the assessment order to the assessee within thirty days ne't
following% provided8
3a5 he has% at the time of &ling such return% made payment of the ta' on the
basis of the return% or ta;a twelve hundred% whichever is higher% and the
assessment on the basis of such return shall not result in any refundI and
3b5 the net accretion of his wealth% if he is not re<uired to submit statement of
assets and liabilities under section -+3!53b5% along with his disclosed family
e'penses and ta'es paid during the year% shall not e'ceed the income
disclosed for the year and the income or receipt% if any% e'empted from
ta'.
NoteB The assessment under this Section has e'pired on the assessment year
#//-8/..
'F-@ Uni+ersal Self Assess4entB Sec D2BB
>here an assessee furnishes a correct and complete return of income either
manually or electronically% Sub=ect to sub8section 3)5% the 0eputy
Commissioner of Ta'es shall received such return himself or cause to be
received by any other oEcial authori9ed by him and issue a receipt of such
return manually or electronically and the said receipt shall be deemed to be
an order of assessment for the assessment year for which the return is &led.
A return shall be ta;en to be complete% if it is &led in accordance with the
provisions of section -+3!5 or -+3)5 and ta' has been paid as per section -*.
$otwithstanding anything contained in sub8section 3#5 and section /)% the
Board or any authority subordinate to the Board% if so authorised by the Board
in this behalf% may select% in the manner to be determined by the Board% a
number of these returns &led under sub8section 3#5 and refer the returns so
selected to the 0eputy Commissioner of Ta'es for the purpose of audit and
the 0eputy Commissioner of Ta'es shall thereupon proceed% if so re<uired% to
ma;e the assessment under section .) or section .*% as the case may be
Pro-ided that a return o+ inco(e 9led under this section shall not 0e
selected +or audit :here such return sho:s at least t:ent7 per cent
hi/her inco(e than the inco(e assessed or sho:n in the return o+
the i((ediate precedin/ assess(ent 7ear and-
"a$ does not ha-e an7 inco(e :hich is e,e(pted +ro( ta,< or
"?$ does not ha-e receipt o+ 4i+t< or
"c$ does not ha-e loan other than +ro( a 0an= or 9nancial institution<
or
"d$ su( o+ accretion o+ net :ealth and sho:n e,penditure is co-ered
07 the inco(e>
$o <uestion as to the source of investment made by a new assessee deriving
income from business or profession shall be raised% if he shows income at
least not less than twenty &ve percent of the capital invested in business or
profession and pays ta' on such income before &ling return.
The initial capital investment or any fraction thereof shall not be transferred in
any manner or lent out within &ve years from the end of the assessment year
in respect of which assesseDs return of income has been &led under this
section.
'F-E Ta, on inco4e of certain *ersonsB Sec D2C
3#5 Sub=ect to sub8sections 3)5% 3*5% 3+5% 3,5% 3-5% 3.5 and 3/5% notwithstanding
anything contained in any other provisions of this Brdinance% ta' deducted
or collected at source in accordance with the provisions mentioned in sub8
section 3!5 shall be deemed to be the &nal discharge of ta' liability from
that source.
3!5 The provisions referred to in sub8section 3#5 shall be the following% namely8
a5 the amount representing the payments on account of supply of goods
or e'ecution of contract to which ta' is deductible under section +!I
b5 the amount representing the payment on account of royalty% technical
;now8how fee for which ta' is deductible under section +!A3!5I
c5 commission from clearing and forwarding agency business for which
ta' is deductible under section +!AAAI
d5 the amount of the value of the banderols computed for the purpose of
collection of ta' on account of the manufacture of cigarettes under
section +!BI
e5 the amount of compensation against ac<uisition of property under
section +!CI
f5 the amount of salaries of a foreign technician serving in a diamond
cutting industry% for which ta' is deductible under section +!BI
g5 the amount as computed for the purpose of collection of ta' under
section +) in respect of goods imported% not being goods imported by
an industrial underta;ing as raw materials for its own consumptionI
h5 the amount received or receivable from shipping business of a resident
on which ta' is collectible under section +)AAI
i5 the amount received on account of e'port of manpower on which ta' is
deductible under section +)BI
=5 the amount received on account of e'port of certain items on which ta'
is deductible under section +)BBI
;5 the amount received on account of transaction by a member of a stoc;
e'change for which ta' is collectible under section +)BBB I
l5 the amount of auction purchase on which ta' is collectible under
section +)CI
m5 the amount received on account of courier business of a non8resident
under section +)CCI
n5 the amount received from persons engaged in real estate or land
development business on which ta' is collectible under section +)FFI
o5 the amount of remuneration or reward% whether by way of commission
or otherwise payable to an insurance agent on which ta' is deductible
under section +)(I
p5 the amount representing the payment on account of survey by
surveyor of a general insurance company on which ta' is deductible
under section +)((I
<5 the amount of the value of the property as mentioned in section +)G
for the purpose of collection of ta' under that sectionI
r5 the premium received from raising of share at a premium over face
value under section +)7I
s5 income derived from transfer of securities or mutual fund units by
sponsor shareholders of a company etc. under section +)I
t5 the amount on account of winnings referred to in section #/3#)5 on
which ta' is deductible under section ++?
)ro+ided that *ro+isions of su3>section '( shall not 3e a**lica3le
in the case of clause a( of this su3>section /ith res*ect to a
contractor of an oil co4*an6 or a su3>contractor to the contractor
of an oil co4*an6 as referred to in rule 9C of the Inco4e>ta,
#ules= 'CD:-
3)5 Ta' deducted or collected at source from the sources mentioned in sub8
section 3!5 shall not be ad=usted against refund due for earlier year or
years or refund due for the assessment year from any source other than
those mentioned in sub8section 3!5.
3*5 Income from the sources mentioned in sub8section 3!5 shall be determined
on the basis of the ta' deducted or collected at source and the rate or
rates of ta' applicable for the assessment year.
3+5 Income computed in accordance with sub8section 3*5 shall not be set o1
with loss computed under any other source for the assessment year or
with loss of earlier year or years.
3,5 Any income shown or assessed in e'cess of the amount determined in sub8
section 3*5 shall be liable to ta' at the rate or rates applicable for the
assessment year.
3-5 Any amount not admissible as allowances under section )" shall be added
to the income as referred to in sub8section 3*5.
3.5 Income referred to in sub8sections 3,5 and 3-5 shall be ta'able at the rate
or rates applicable for the year after determining income under sub8
section 3*5.
3/5 In addition to the ta' mentioned in this section% in accordance with the
provisions of the Finance Act% if any% the assessee shall pay surcharge.
Ta3le sho/ing the TDS dee4ed to 3e the 0nal discharge of ta,
lia3ilit6
Sl-
W
;ead of TDS
#ef- of
SecP#ul
e
TDS #ate P A4ount
#. Payments for Supply
of (oods% 2'ecution
of Contracts
J4S +! Jp to T;. !""%"""[ $il
From T;. !""%""# to +""%"""[ #P
From T; +""%""# to #%+""%"""[
!.+P
From T; #%+""%""# to
)"%"""%"""[*P
Above T;. )"%"""%"""[ +P
In case of oil supplied by oil
mar;eting companies? up to T;.
!""%"""[ $il% >here the
payments e'ceeds T;. !""%"""[
" .-+P
!. 6oyalty and
Technical Hnow8Gow
Fee
J4S
+!A3!5
#"P
). Clearing and
Forwarding Agents
J4S
+!AAA
#"P
*. Cigarette
anufacturers
J4S +!B ,P of the value of the banderols
+. Compensation
Against Ac<uisition
of Property
J4S +!C !P of the amount of such
compensation% if property situated
within City Corporation%
Paurashava or Cantonment Board%
otherwise #P
,. Collection of Ta'
from a Foreign
Technician Serving
in a 0iamond
Cutting Industry
J4S +!B +P
-. Collection of Ta' J4S +) +P
Sl-
W
;ead of TDS
#ef- of
SecP#ul
e
TDS #ate P A4ount
from Importers and
2'porters
.. Collection of Ta'
from Shipping
Business of a
6esident
J4S
+)AA
+P of total freight received or
receivable in or out of
Bangladesh.
)P of total freight received or
receivable from services rendered
between two or more foreign
countries.
/. 0eduction of Ta'
from Income
0erived on Account
of 2'port of
anpower
J4S +)B #"P
#". Collection of Ta'
from 2'port of
Certain Items
J4S
+)BB
".,P of total e'port proceeds
##. Collection of Ta'
from ember of
Stoc; 2'changes
J4S
+)BBB
".#"P
#!. Collection of Ta' on
Sale Price of (oods
or Property Sold by
Public Auction
J4S +)C +P of the total sale proceeds
#). 0eduction or
Collection of Ta' at
Source from Courier
Business of a $on8
6esident
J4S
+)CC
#+P on the amount of service
charge accrued
#*. Collection of Ta'
from Persons
2ngaged in 6eal
2state or 7and
0evelopment
Business
J4S +)FF 3i5 T;. !%""" per s<uare meter for
building or apartment for
residential purpose situated at
(ulshan odel Town% Banani%
Baridhara% oti=eel commercial
area and dil;usa commercial area
of 0ha;a and TH .%""" per s<
meter building for commercial
purpose. TH. #."" per S\ meter
for residential building situated at
0efense BEcers Gousing Society
30BGS5% 0hanmondi 6esidential
Area% 7almatia Gousing Society%
Jttara odel Town% Bashundhara
6esidential Area% 0ha;a
Cantonment Area% Harwan Ba9ar
Commercial Area of 0ha;a and
Hhulshi 6esindential Area%
Panchlaish 6esidential Area and
Agrabad of ChittagongI and TH
Sl-
W
;ead of TDS
#ef- of
SecP#ul
e
TDS #ate P A4ount
,%""" per S\ meter building used
for commercial purpose.
3ii5 T;. ."" per s<uare meter for
residential building or apartment
is situated in areas other than
areas mentioned in sub8clause 3i5
and TH. !%""" per S\ meter for
commercial building
!P of deed value from September
#% !""/ in case of property
situated in any city corporation%
paurashava or cantonment board.

#P of deed value from September
#% !""/ in case of property
situated in places other than any
city corporation% paurashava or
cantonment board.
#+. Insurance
Commission
J4S +)( +P
#,. 6emuneration or
Fees of Surveyors of
(eneral Insurance
Company
J4S
+)((
#+P
#-. Collection of Ta' on
Transfer% etc. of
Property
J4S +)G 3a5>ithin =urisdiction of 0ha;a%
(a9ipur and $arayangan= districts%
C0A% H0A% 60A% other city
corporations% Paurashava%
Cantonment Board irrespective of
agricultural L nonagricultural land
8 !P
3b5In any area other than the
areas mentioned in clause 3a5 for
other than agricultural land 8 #P.
#.. Collection of ta'
from sale of share at
a premium
J4S +)7 )P
#/. Collection of ta'
from transfer of
shares by the
sponsor
shareholders of a
company listed on
stoc; e'change
J4S +) +P
!". Income from
>innings
J4S ++ !"P
'F-F S*ot Assess4entB Sec D2D and #ule M 9DBB
$otwithstanding anything contained in the Brdinance% where an assessee% not
being a company% who has not previously been assessed under the Brdinance%
carrying on any business or profession in any shopping centre or commercial
mar;et or having a small establishment% the 0eputy Commissioner of Ta'es
may &' the ta' payable by him in such manner and at such rate as may be
prescribed and the receipt obtained for payment of such ta' shall be deemed
to be an order of assessment under section .! USection .!0V.
#ule 9DBB
3a5 An assessee carrying on business within the limits of any City Corporation
shall pay ta' at the following rates8

6ate of ta' per annum
3i5 >here the initial capital does not
e'ceed T;.+%""%"""48 T;.#%!""48
3ii5 If the initial capital e'ceeds T;.+%""%"""48
but does not e'ceed T;.#"%""%"""48
T;.)%+""48
3b5 An assessee carrying on business within the limits of a unicipality of any
0ivisional Gead<uarter or 0istrict Gead<uarter shall pay ta' at the
following rates?8

6ate of ta' per annum
3i5 If the initial capital investment does not
e'ceed T;.+%""%"""48 T;. #%!""48
3ii5 If the initial capital e'ceeds T;.+%""%"""48
but does not e'ceed T;.#"%""%"""48
T;. !%+""48
3c5 An assessee carrying on profession as a lawyer or a doctor for a period
e'ceeding &ve years but not e'ceeding #" years shall pay ta' at the
following rates?8
6ate of ta' per
annum
3i5 >here profession is carried on within the
limits of any City Corporation
T;. !%"""48
3ii5 >here profession is carried on in any other area
T;.#%!""48
The assessee shall% with the help of the 0eputy Commissioner of Ta'es% &ll up
a return of income in form B as prescribed in rule !*3#5% which can be had
from the 0eputy Commissioner of Ta'es% and submit the same to the 0eputy
Commissioner of Ta'es on the spot.
The ta' &'ed under rule ).B shall remain in force for two subse<uent
assessment years% and the receipt of the payment of such ta' shall be
deemed to be an order of assessment under section .! of the Brdinance.
'F-D Assess4ent After ;earingB Sec D9
3#5 >here a return or revised return has been &led under Chapter :III and the
0eputy Commissioner of Ta'es is not satis&ed without re<uiring the
presence of the person who &led the return or the production of evidence
that the return is correct and complete% he shall serve on such person a
notice re<uiring him% on a date to be therein speci&ed% to appear before
the 0eputy Commissioner of Ta'es% or to produce or cause to be produced
before him or at his oEce% any evidence in support of the return.
3!5 The 0eputy Commissioner of Ta'es shall% after hearing the person
appearing% or considering the evidence produced in pursuance of the
notice under section .)3#5 and also considering such other evidence% if
any% as he may re<uire on speci&ed points% by an order in writing assess%
within thirty days after the completion of the hearing or consideration% as
the case may be% the total income of the assessee and determine the sum
payable by him on the basis of such assessment% and communicate the
order to the assessee within thirty days ne't following.
Students should carefully note that for completion of assessment u4s .)3!5%
the 0eputy Commissioner should issue the following notices.
3a5 $otice u4s .)3I5 8 6e<uiring further information about the return
&led
3b5 $otice u4s -/8 Production of boo;s of accounts and various
statements
In case of failure to serve any of the above notices% the assessment made
under this section is rendered defective and unenforceable. If the assessee
&les a revised return before the assessment is completed% the 0CT should
issue fresh notices u4s .)3#5 and -/.
'F-C Assess4ent on the Basis of #e*ort of a Chartered AccountantB Sec
D9AAA
3#5 >here a return or revised return is &led under Chapter :II by an assessee
being a company and the Board has reasonable cause to believe that the
return or revised return is incorrect or incomplete% the Board may appoint
a registered chartered accountant to e'amine the accounts of that
assessee.
3!5 The chartered accountant appointed under sub8section .)AAA3#5 shall
e'ercise the powers and functions of the 0eputy Commissioner of Ta'es as
referred to in section -/ and sections ##)3a5% 3b5% 3c5% 3d5 and 3e5.
3)5 The chartered accountant% after e'amination of the accounts of that
assessee% shall submit a report in writing to the Board alongwith &ndings
within a time as may be speci&ed by the Board.
3*5 Bn receipt of the report referred to in subsection .)AAA3)5% the Board shall
forthwith forward the report to the concerned 0eputy Commissioner of
Ta'es for consideration.
3+5 Bn receipt of the report under sub8section .)AAA3*5% the 0eputy
Commissioner of Ta'es shall serve a notice upon the assessee under
section .)3#5.
3,5 The 0eputy Commissioner of Ta'es shall% after hearing the person
appearing and considering the evidences produced including the &ndings
stated in the report received under section .)AAA3+5 and also considering
the other evidences% by an order in writing% assess within thirty days after
the completion of hearing or consideration% as the case may be% the total
income of an assessee and shall determine the sum payable by the
assessee on the basis of such assessment% and communicate the said
order to the assessee within thirty days from the date of such order.
'F-'& Best Hudg4ent Assess4entB Sec D:
3#5 >here any person fails8
3a5 to &le the return re<uired by a notice under section -- and has
not &led a return or revised return under section -.I or
3b5 to comply with the re<uirements of a notice under section -/ or
."I or
3c5 to comply with the re<uirements of a notice under section .)3#5I
the 0eputy Commissioner of Ta'es shall% by an order in writing% assess the
total income of the assessee to the best of his =udgment and determine the
sum payable by the assessee on the basis of such assessmentI and in the
case of a &rm% may refuse to register it or may cancel its registration if is
already registered% and communicate such order to the assessee within )"
days ne't following USection .*3!5V.
3!5 >here% in the opinion of the Board% a best =udgment assessment made by a
0eputy Commissioner of Ta'es under section .*3#5 shows lac; of proper
evaluation of legal and factual aspects of the case which has resulted in an
arbitrary and in=udicious assessment% the action leading to such assessment
made by the said 0eputy Commissioner of Ta'es shall be construed as
misconduct USection .*3!5V.
'F-'' )resu4*ti+e Ta, Assess4ent on O/ners of #oad Trans*ort
The (overnment has e'empted income from bus% mini8bus% coaster% prime
mover% truc;% tan; lorries% pic;8up van% human hauler% ma'i auto8ric;shaw used
for transportation of goods plying for hire provided the owner of the
vehicle4vehicles pays ta' on presumptive basis at the following rates%
mentioned in S.6.B. $o. !!#874// dated !-8"-8// and S6B $o. !"!874!"""
dated ")."-.!"""?8
A.6ate of presumptive ta' in the case of owners of bus% mini8bus% coaster% prime
mover% truc;% tan; lorry% pic;8up van% ma'i or auto8ric;shaw used for
transportation of goods?8
Categor6 #ate of
Ta,
For each bus having capacity of e'ceeding +! seats T;.
+%"""
For each bus having capacity up to +! seats *%"""
For each air8conditioned bus *%+""
For each mini8bus or coaster whether air8conditioned or not !%-""
Ta'i Cab FAC )%+""
Ta'i Cab F$on AC !%+""
For each prime8mover used as carrier of container +%"""
For each truc; or tan; lorry having capacity of e'ceeding +
tons
*%"""
For each truc; or tan; lorry having capacity of one and half ton
but not e'ceeding + tons
!%+""
For each truc; having capacity up to # and half ton or each
pic;8up van and all ;inds of human hauler% ma'i or auto8
ric;shaw for transportation of goods
-+"
B.6ate of presumptive ta' in the case of owners of bus% mini8bus% coaster% prime
mover% truc;% tan; lorry% pic;8up van% ma'i or auto8ric;shaw used for
transportation of goods after the e'piry of ten years from the date of
registration?8
Categor6 #ate of
Ta,
For each bus having capacity of e'ceeding +! seats T;.
!%"""
For each bus having capacity up to +! seats #%+""
For each air8conditioned bus #%.""
For each mini8bus or coaster whether air8conditioned or not #%"""
For each prime8mover used as carrier of container !%+""
For each truc; or tan; lorry having capacity of e'ceeding +
tons
!%"""
For each truc; or tan; lorry having capacity of one and half ton
but not e'ceeding + tons
#%"""
For each truc; having capacity up to # and half ton or each
pic;8up van and all ;inds of human hauler% ma'i or auto8
ric;shaw for transportation of goods
)""
C.$o <uestion will be raised by the 0eputy Commissioner of Ta'es as to the
source of investment in bus% mini8bus% coaster% prime mover% truc;% tan;
lorry% pic;8up van% ma'i or auto8ric;shaw used for transportation of goods if
additional ta' at !""P of the ta' mentioned in items A and B above is paid
as ta' on the investment at the time of the &rst registration of such
transport.
'F-'2 !arious S*ecialised Assess4ents
Assess4ent of %ir4sB Sec D@
3#5 $otwithstanding anything contained in the Brdinance% where the assessee
is a &rm and the total income of the &rm has been assessed under section
.!% .)% or .*% as the case may be% the ta' payable by the &rm shall be
determined on the basis of the total income of the &rm.
3!5 >henever any determination is made in accordance with the provisions of
section .+3#5% the 0eputy Commissioner of Ta'es shall% by an order in
writing% notify to the &rm8
a5 the amount of ta' payable by it% if anyI
b5 the amount of the total income on which the determination has been
basedI and
c5 the apportionment of the amount of income between the several
partners.
Assess4ent in Case of Change in Constitution of a %ir4B Sec DE
3#5 >here% at the time of assessment of a &rm% it is found that a change has
occurred in the constitution of the &rm% the assessment shall be made on
the &rm as constituted at the time of ma;ing the assessment?
Provided that
3a5 the income of the year shall% for the purpose of inclusion in the total
income of the partners% be apportioned between the partners who% in
such income year% were entitled to receive the sameI and
3b5 when the ta' assessed upon a partner cannot be recovered from him% it
shall be recovered from the &rm as constituted at the time of ma;ing
the assessment.
3!5 For the purposes of this section% there is a change in the constitution of a
&rm8
3a5 where all the partners continue with a change in their respective shares
or in the shares of some of them% or
3b5 where one or more persons who were partners continue to be so with a
change by cessation of one or more partners or addition of one or more
new partners.
Assess4ent in Case of Constitution of Ne/ Successor %ir4B Sec DF
>here% at the time of assessment on a &rm% it is found that a new &rm has been
constituted to succeed the &rm to which the assessment relates and it cannot
be covered by section .,% separate assessments shall be made on the
predecessor &rm and the successor &rm in accordance with the provisions of
section .. relating to assessment in case of succession to business.
Assess4ent in Case of Succession to Business Other/ise than on
DeathB Sec DD
3#5 >here% a person% carrying on any business or profession% has been
succeeded therein otherwise than on death by another person in any
income year% and the successor continues to carry on that business or
profession8
3a5 the predecessor shall be assessed% in respect of the income of the
income year in which the succession too; place% for the period up to the
date of succession% and
3b5 the successor shall be assessed% in respect of the income of the income
year% for the period after the date of succession.
3!5 $otwithstanding anything contained in section ..3#5% where the predecessor
cannot be found% the assessment of the income year in which the succession
too; place up to the date of succession and of the income year or years
preceding that year shall be made on the successor in the li;e manner and
to the same e'tent as it would have been made on the predecessorI and the
provisions of the Brdinance shall% so far as may be% apply accordingly.
3)5 >here any sum payable under this section in respect of the income of a
business or profession cannot be recovered from the predecessor% the
0eputy Commissioner of Ta'es shall record a &nding to that e1ect% and
thereafter the sum payable by the predecessor shall be payable by and
recoverable from the successor who shall be entitled to recover it from the
predecessor.
Assess4ent in Case of Discontinued BusinessB Sec DC
3#5 >ithout pre=udice to the provision of section .-% where any business or
profession is discontinued in any &nancial year% and assessment may be
made in that year% notwithstanding anything contained in section #,% on the
basis of the total income of the period between the end of the income year
and the date of such discontinuance in addition to the assessment% if any%
made on the basis of the income year.
3!5 Any person discontinuing any business or profession in any &nancial year
shall give to the 0eputy Commissioner of Ta'es a notice of such
discontinuance within &fteen days thereofI and such notice shall be
accompanied by a return of total income in respect of the period between
the end of the income year and the date of such discontinuance and that
&nancial year shall be deemed to be the assessment year in respect of the
income of the said period.
3)5 >here% a person fails to give the notice re<uired by sub8section ./3!5% the
0eputy Commissioner of Ta'es may direct that a sum shall be recovered
from him by way of penalty not e'ceeding the amount of ta' subse<uently
assessed on him in respect of any income from the business or profession
up to the date of its discontinuance.
3*5 >here% an assessment is to be made under section ./3#5% the 0eputy
Commissioner of Ta'es may serve8
3a5 on the person whose income is to be assessedI
3b5 in the case of a &rm% on the person who was a partner of the &rm at the
time of discontinuance of the business or professionI and
3c5 in the case of a company% on the principal oEcer of the companyI a
notice to furnish within such time% not being less than seven days% a
return of his total income giving such particulars and information as are
re<uired to be furnished with a return to be &led under section -+ along
with such other particulars% records and documents as may be speci&ed
in the notice.
3+5 The provisions of the Brdinance shall% so far as may be% apply to a notice
under section ./3*5 for the purpose of assessment of ta' as if it were a
notice under section --.
Assess4ent in Case of )artition of a ;indu Undi+ided %a4il6 ;U%(B
Sec C&
3#5 A Gindu family hitherto assessed as a Gindu undivided family shall be
deemed% for the purposes of the Brdinance% to continue to be a Gindu
undivided family e'cept where% and in so far as% a &nding of partition has
been given under this section in respect of that family.
3!5 >here% at the time of an assessment of a Gindu undivided family% it is
claimed by any member thereof that a partition has ta;en place amongst
the members of the family% the 0eputy Commissioner of Ta'es shall ma;e an
en<uiry thereinto after giving notice to all the members of the family.
3)5 Bn the completion of the en<uiry% the 0eputy Commissioner of Ta'es shall
record a &nding as to whether there has been a partition of the =oint family
property% and% if there has been such a partition% the date on which it has
ta;en place.
3*5 In the case of a &nding under section /"3)5 that the partition of the
undivided family too; place after the e'piry of the income year% the total
income of the income year of the undivided family shall be assessed as if no
partition has ta;en placeI and each member or group of members of the
family shall% in addition to any ta' for which he or it may be separately
liable% be =ointly and severally liable for the ta' on the income of the family
so assessed.
3+5 In the case of &nding under section /"3)5 that the partition of the undivided
family too; place during the income year% the total income of the undivided
family in respect of the period up to the date of partition shall be assessed
as if no partition had ta;en placeI and each member or group of members of
the family shall% in addition to any ta' for which he or it may be separately
liable% be =ointly and severally liable for the ta' on the income of that period
as so assessed.
3,5 $otwithstanding anything contained in this section% if the 0eputy
Commissioner of Ta'es &nds after completion of the assessment of Gindu
undivided family that the family has already e1ected a partition% the ta'
shall be recoverable from every person who was a member of the family
before the partitionI and every such person shall be =ointly and severally
liable for ta' on the income of the family so assessed.
3-5 For the purposes of this section% the several liability of any member or group
of members of a Gindu undivided family shall be computed according to the
partition of the property of the undivided family allotted to him or it at the
partition.
3.5 The provisions of this section shall% so far as may be% apply in relation to the
levy and collection of any penalty% interest% &ne or other sum in respect of
any period up to the date of the partition of a Gindu undivided family as
they apply in relation to levy and collection of ta' in respect of any such
period.
Assess4ent in Case of )ersons Lea+ing BangladeshB Sec C'
3#5 >here it appears to the 0eputy Commissioner of Ta' that any person may
leave Bangladesh during the current &nancial year or shortly after its e'piry
and that he has no intention of returning% an assessment may be made in
that year% notwithstanding anything contained in section #,% on the basis of
the total income of such person if8
3a5 he has been previously assessed% for the period from the e'piry of the
last income year of which income has been assessed to the probable
date of his departure from BangladeshI and
3b5 he has not been previously assessed% of the entire period of his stay in
Bangladesh up to the probable date of his departure there from.
3!5 Assessment under section /#3#5 shall be made8
3a5 in respect of each completed income year included in the period referred
to in section /#3#5% at the rate at which ta' would have been charged
had it been fully assessedI and
3b5 in respect of the period from the e'piry of the last of the completed
income years to the probable date of departure% at the rate in force for
the &nancial year in which such assessment is made and that &nancial
year shall be deemed to be the assessment year in respect of the income
of the said period.
3)5 For the purpose of ma;ing an assessment under this section% the 0eputy
Commissioner of Ta'es may serve a notice upon the person concerned
re<uiring him to &le% within such time% not being less than seven days% as
may be speci&ed in the notice8
3a5 a return in the same form and veri&ed in the same manner as a return
under section -+ setting forth% along with such other particulars as may
be re<uired by the notice% his total income for each of the completed
income years comprised in the relevant period referred to in section
/#3#5I and
3b5 an estimate of his total income for the period from the e'piry of the last
of such completed income year to the probable date of his departure
from Bangladesh.
3*5 All the provisions of the Brdinance shall% so far as may% apply to the notice
under section /#3)5 for purpose of assessment of ta' as if it were a notice
under section --.
3+5 $othing in this section shall be deemed to authorise a 0eputy Commissioner
of Ta'es to assess any income which has escaped assessment or has been
under assessed or has been assessed at too low a rate or has been the
sub=ect of e'cessive relief under the Brdinance but in respect of which he is
debarred from issuing a notice under section /).
Assess4ent in Case of Inco4e of a Deceased )ersonB Sec C2
3#5 >here a person dies% his legal representative shall be liable to pay any ta'
or other sum payable under the Brdinance which the deceased would have
been liable to pay if he had not died% in the li;e manner and to the same
e'tent as the deceasedI and the legal representative of the deceased shall%
for the purposes of the Brdinance% be deemed to an assessee. Gowever%
before deeming the legal representative of the deceased to be an assessee%
a notice to that e1ect shall be issued to him by the 0eputy Commissioner of
Ta'es.
3!5 For the purposes of ma;ing an assessment of the income of the deceased
and recovery of ta'8
3a5 any proceeding ta;en against the deceased before his death shall be
deemed to have been ta;en against the legal representative and may be
continued from the stage at which it stood on the date of the death of
the deceasedI and
3b5 any proceeding which could have been ta;en against the deceased% if he
had not died% may be ta;en against the legal representativeI and all the
provisions of the Brdinance shall% so far as may be% apply accordingly.
3)5 The liability of legal representative under the Brdinance shall be limited to
the e'tent to which the estate of the deceased is capable of meeting the
liability.
3*5 For the purposes of section /! and other provisions of the Brdinance in
which the rights% interest and liabilities of the deceased are involved% Xlegal
representativeK includes an e'ecutor% an administrator and any person
administering the estate of the deceased.
Assess4ent in Case of Inco4e "sca*ing Assess4entB Sec C9
3#5 If% for any reason% any income chargeable to ta' for any assessment year
has escaped assessment or has been under assessed or has been assessed
at too low a rate or has been the sub=ect e'cessive relief or refund under the
Brdinance% the 0eputy Commissioner of Ta'es may issue a notice to the
assessee containing all or any of the re<uirements which may be included in
a notice under section -- and may proceed to assess or determine% by an
order in writing% the total income of the assessee or the ta' payable by him%
as the case may be% and all the provision of this Brdnance shall% so far as
may be% apply accordingly. Gowever% the ta' shall be charged at the rate or
rates applicable to the assessment year for which the assessment is made.
3!5 $o proceeding under section /)3#5 shall be initiated unless de&nite
information has come into the possession of the 0eputy Commissioner of
Ta'es and he has obtained the previous approval of the Inspecting Moint
Commissioner in writing to do so% e'cept in a case where a return has not
been &led under section -+ or --.
3)5 A notice under section /)3#5 may be issued by the 0eputy Commissioner of
Ta'es8
3a5 in any case in which he has reason to believe that the assessee or any
other person on his behalf has not &led a return under section -+ or --%
at any timeI
3b5 in any case in which he has reason to believe that the assessee has for
any assessment year concealed the particulars of his income or
furnished inaccurate particulars thereof or omitted or failed to disclose
all material facts necessary for the assessment for such year% within &ve
years from the end of the assessment year for which the assessment is
to be made.
Gowever% in a case where a fresh assessment is made for any
assessment year in pursuance of an order under sections #!"% #!#A% #+,
or #+/% the period of &ve years referred to in this clause shall commence
from the end of the year in which the fresh assessment is madeI
3c5 in any other case% within two years from the end of the assessment year
for which the assessment is to be made.
3*5 In computing the period of limitation for the purpose of ma;ing an
assessment or ta;ing any other proceedings under the Brdinance% the
period% if any% for which such assessment or other proceedings has been
stayed by any Court% Tribunal or any other authority% shall be e'cluded.
3+5 $otwithstanding anything contained in section /)3)5% where an assessment
or any order has been annulled% set aside% cancelled or modi&ed% the
concerned income ta' authority may start the proceedings from the stage
ne't preceding the stage at which such annulment% setting aside%
cancellation or modi&cation too; place% and nothing contained in the
Brdinance shall render necessary the re8issue of any notice which has
already been issued or the re8furnishing or re&ling of any return% statement
or other particulars which has already been furnished or &led% as the case
may be.
Li4itation for Assess4entB Sec C:
3#5 Sub=ect to the provisions of sections /*3!5 and 3)5% no order of assessment
under the provisions of this Chapter in respect of any income shall be made
after the e'piry of si' months from the end of the assessment year in which
the income was &rst assessable.
3#A5 $otwithstanding anything contained in section /*3#5% no order of
assessment under sections .!BB shall be made8
3a5 after the e'piry of two years from the end of the assessment year in
which the income was &rst assessableI and
3b5 after the e'piry of the period of &fteen months from the end of the
month in which the return is submitted% whichever is earlier.
3!5 $otwithstanding anything contained in section /*3#5% assessment under
section /) may be made8
3a5 in the cases falling under section /)3)53a5 and 3b5% within two years from
the end of the year in which notice under the said section was issuedI
and
3b5 in the cases falling under section /)3)53c5% within one year from the end
of the year in which notice under the said section was issued.
&3( $otwithstanding anything contained in section /*% limiting the time within
which any action may be ta;en% or any order or assessment may be made%
order or assessment% as the case may be% to be made on the assessee or
any other person in conse<uence of% or to give e1ect to% any &nding or
direction contained in an order under section #!"% #!#A%#+,% #+/% #,# or
#,! or% in the case of a &rm% an assessment to be made on a partner of a
&rm in conse<uence of an assessment made on the &rm% may be made
within )" days from the date on which the order was communicated and
such revised order shall be communicated to the assessee within thirty days
ne't following.
Gowever% where an order of assessment has been set aside by any authority
in that case the assessment shall be made within forty &ve days from the
date on which the order was communicated to him.
2]P7A$ATIB$A I? >here% by an order under sections #!"% #!#A% #+,% #+/%
#,# or #,!% any income is e'cluded from the total income of the assessee
for an assessment year% and another assessment of such income for another
assessment year shall% for the purposes of this section% be deemed to be
one made in conse<uence of% or to give e1ect to% any &nding or direction
contained in the said order.
2]P7A$ATIB$ II? >here% by an order under sections #!"% #!#A% #+,% #+/%
#,# or #,!% any income is e'cluded from the total income of one person and
held to be the income of another person% an assessment of such income of
such other person% shall% for the purposes of this section% be deemed to be
one made in conse<uence of or to give e1ect to% any &nding or direction
contained in the said order.
3*5 >here the 0eputy Commissioner of Ta'es fails to give e1ect to any &nding
or direction contained in an order referred to in section /*3)5 within the
period stipulated therein% such failure of the 0eputy Commissioner of Ta'es
shall be construed as misconduct.

Chapter #.
Assess4ent of indi+iduals
Contents
Introduction
2'amination conte't
To*ic List
#..#
0e&nition of Individuals
#..! Scope of Income of Individual Assessee
#..)
$on8assessable and Ta' Credit Income
#..*
(rossing Jp of Income
#..+
Ta' 6ate of Individuals
#..,
Procedure of Assessment
#..-
Specimen Form of computation of total Income and Total Ta'
7iability
>or;ed 2'ample and Solutions
Introduction
Learning o3<ecti+es
Illustrate the assessment of individuals.
Identify di1erent heads of income.
0i1erentiate non8assessable and ta' credit income.
0e&ne grossing up of income.
State the procedure of assessment
Prescribe a specimen format of computing total ta'able income and net
ta' liability.
0e&ne the limitation for assessment.

)ractical signi0cance
Assessment of income and ta' liability is very signi&cant for every assessee.
Assessing the income of individual assessee and ta' liability thereof is
important for individual assesses. The chapter recapitulates the ta'able
income% non8assessable income% ta' credit income% grossing up of income%
applicable ta' rates and related issues re<uired for completing the
assessment of individuals. Application of double ta'ation relief% set8o1 and
carry forward of losses% T0S as per .!C% rebate for income from a partnership
&rm are e'empli&ed. Professional accountants are re<uired to have suEcient
e'pertise on all of these issues.
Sto* and thin2
0id you realise how important is the assessment for individualN Can you do the
assessment of individual assessees independentlyN
.or2ing conte,t
Assessment of ta' is very important for every assessee. An assessee must
re<uire to be assessed in any way. Accountants have a great role to provide the
technical assistance to their client in case of assessment. As there are many
conditions% rules and procedures for di1erent types of assessments%
accountantsK support sometime very signi&cant to complete the assessment of
their clients.
any clients are re<uiring the support for correct assessment from
accountants in every year. 0etailed ;nowledge of accountants on the
technicalities of computation of ta'able income and ta' liability thereof for
individual assessee is very in case of re<uired support for clientsK ta'
assessment.
S6lla3us lin2s
The topics covered in this chapter have the signi&cance for professional study
as you can utili9e the ;nowledge throughout the application level and case
study and also in your practical life.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0o the assessment of individuals.
Identify ta'able income across di1erent heads.
Computing investment allowance% ma'imum limit and ta' credit.
Identify non8assessable income and its application in computing ta'able
income.
Apply T0S under section .!C showing its impact on total ta'able income.
Identify the procedure of assessment
Compute net ta' liability after due credit due to T0S% investment
allowance and others.

?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.
'D-& ASS"SSM"NT O% INDI!IDUALS
Section O+er+ie/
Scope of income for individuals is di1erent than &rm or company.
Applicable ta' rates for individuals are di1erent than &rm or company.
Some income of individual assessee is non8assessable.
Bn some income% the assessee en=oys investment ta' credit.
For T0S% assessee will get full credit at the time of computing net ta'
liability.
>ith certain terms and conditions% loss under one head can be set o1
against income under another heads
If loss under one head cannot be set o1 completely% it can be carried
forward to succeeding years to set o1 against the income under the
same head.
'D-' De0nition of Indi+iduals
The word XindividualK has special meaning in income ta' law. To loo; at the its
reference in ta' law% we should loo; at two de&nitions% i.e. assessee and
person.
TAssesseeT% means a person by whom any ta' or other sum of money is
payable under this Brdinance% and includes 8
3a5 every person in respect of whom any proceeding under this Brdinance
has been ta;en for the assessment of his income or the income of any
other person in respect of which he is assessable% or of the amount of
refund due to him or to such other personI
3b5 every person who is re<uired to &le a return under section -+% section ./
or section /#I
3c5 every person who desires to be assessed and submits his return of
income under this BrdinanceI and
3d5 every person who is deemed to be an assessee% or an assessee in default%
under any provision of this Brdinance USection !3-5V.
TPersonT includes an individual% a &rm% an association of persons% a Gindu
undivided family% a local authority% a company and every other arti&cial
=uridical person USection !3*,5V.
Thus% the word XassesseeK means a person that includes an individual who is
liable to pay ta' as per Income Ta' Brdinance% #/.*. This chapter presents
the assessment of income of individuals and computation of ta' liability of an
individual assessee.
'D-2 Sco*e of Inco4e of Indi+idual Assessee
As per section !" of IT Brdinance #/.*% for the purpose of charge of income
ta' and computation of total income% all incomes shall be classi&ed and
computed under the following heads of income% namely
3a5 Salaries.
3b5 Interest on securities.
Net incomeX
100 Rate of tax deducted at source
100
Gross income =
3c5 Income from house property.
3d5 Agricultural income.
3e5 Income from business or profession.
3f5 Capital gains.
3g5 Income from other sources.

'D-9 Non>assessa3le and Ta, Credit Inco4e
Across the seven heads as mentioned in section !"% some categories of
income are declared as non assessable. Thus% at the time of assessment% it is
important to ;now the items of non8assessable income so that it can be
e'cluded at the time of computing ta'able income. Again% ta' credit income is
such categories of income that can be used to claim ta' rebate for using such
income in allowable investment categories. The list of non8assessable and ta'
credit income is given in following schedules that is sub=ect to change from
time to time by the Board?
$on8assessable Income ? Si'th Schedule% Part A
Ta' Credit Income ? Si'th Schedule% Part B
The economic rationality of these provisions is embedded in the e<uation of
income in economics?
C [ CZI
>here% C represents Income% C represents Consumption and I represents
Investment.
Inco4e X Consu4*tion
Y
In+est4ent
Ta'able Allowable investment
$on8assessable 0isallowed investment
To reduce the ta' burden% some speci&c income from speci&c sources is
declared non8assessable on which no ta' is imposed. Again% to discourage
consumption and motive investment% some investments are allowed for
claiming investment ta' credit at the rate of #"P.
'D-: $rossing U* of Inco4e
Another important issue is the grossing up of income which is received by the
assessee after deducting ta'es at speci&ed rate at sources. The e<uation used
to gross up income is given below?
Thus% for grossing up income% it is important to ;now the rate of T0S. Bnly
income received after ta' is re<uired to gross up. (rossed up income should
be included in calculating ta'able income% however% ta' already paid will be
claimed as credit at the time of computing net ta' liability.
'D-@ Ta, #ate of Indi+iduals
Individuals are ta'ed as per the &ve tier ta'ation system as applicable to
Bangladesh. Gowever% these rates are same for every individual including
Bangladeshi $on8residents% GJF% Firm% ABP and every other arti&cial =udicial
person. Current rates applicable to individuals on ta'able income are?
Inco4e tier #ates
Bn the &rst T;. #%."%"""
a
$il
Bn the ne't T;. )%""%""" #"P
Bn the ne't T;. *%""%""" #+P
Bn the ne't T;. )%""%""" !"P
Bn the
balance
^^^^
b
!+P
NoteB
a5 The non8assessable income limit will be as follows?
For women and elderly citi9ens being more than E@
years of age
T;. !""%"""
For disable persons T;. !+"%"""
For others T;. #."%"""
b5 If the aggregate income of an individual e'ceeds T;. #%#."%""" 3T;.
#."%""" Z T;. )""%""" Z T;. *""%""" Z T;. )""%"""5% he will be charged
at ma'imum !+P on such income as it e'ceeds T;. #%#."%""".
c5 Gowever% the minimum ta' would be T;. !%""".
d5 If the assessee is an owner of any small and cottage industry or engaged
in such ;ind of activities in a $B6 speci&ed less developed 4 least
developed area% he4she will be eligible to have a ta' rebate on such
income?
If production 4 turnover increases
by more than #+P but less than
!+P comparing to previous year
+P rebate on ta' applicable on such
income will be allowed
If production 4 turnover increases
by more than !+P comparing to
previous year
#"P rebate on ta' applicable on
such income will be allowed
e5 Bnly indi+idual assessee having net wealth e'ceeding T;. 2 t/o( crore
as per wealth statement is liable to pay surcharge I'&J on income ta'
payable e1ective from the assessment year !"##8#!.
f5 Gowever% the rate of ta' would be !+P 3at ma'imum rate5 if the individual
assess is classi&ed as non8resident foreigner 3$6F5.
'D-E )rocedure of Assess4ent
Step #? Compute ta'able income under di1erent heads.
U0onKt forget to e'clude non8assessable income and grossing up of income at
the time of computing ta'able income is speci&ed areasV
Step !? Compute allowable investments made
U0onKt forget to test actual investment so that it must not e'ceed the
ma'imum limit. If it e'ceed ma'imum limit% allowable investment would be
the lower oneV
Step )? Compute net ta' liability
U0onKt forget to consider ta' credit due to T0S% refund ad=ustment% rebate%
double ta'ation relief% rebate on additional income and rebate on income from
partnership &rmV
'D-F S*eci4en %or4 of co4*utation of total Inco4e and Total Ta, Lia3ilit6
Sources of Inco4e and )articulars
A4ou
nt
A4oun
t
A4oun
t
'- Inco4e fro4 Salar6 section M 2'(B
Basic salary
0earness allowance
Annuity
Festival bonus 4 performance bonus
7eave encashment 4 Compensation
2mployerKs contribution to recogni9ed provident
fund
Interest on recogni9ed provident fund
7ess? e'empted F interest Q #*.+P or #4)
rd
of
basic salary whichever is lower
Advance salary 4 outstanding salary
6etirement allowance 4 gratuity 4 pension
7ess? e'empted 8 full
2ntertainment allowance
edical allowance
less? e'empted F actual e'pense
Gouse8rent allowance
7ess? T;. #%."%""" 3monthly Q #+%"""5 or +"P
of basic salary whichever is lower
6ent free accommodation 3furnished or no
furnished5 ? the rental value or !+P of basic
salary whichever is lower
Accommodation at a concessional rate? the
rental value or !+P of basic salary whichever is
lower
^^^
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^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
7ess? rent paid by the employee
Conveyance allowance
7ess? e'empted F 3ma'imum T;. !*%"""5
Conveyance facility? -.+P of basic salary
Conveyance facility L allowance? both above will
be added% no deduction.
ServantKs allowance
Bthers bene&t
^^^
^^^
^^^
^^^ ^^^
2- Inco4e fro4 Securit6 section M 22(B
a5 Interest from ta' free government securities ^^^
7ess? e'emption 3full5 ^^^
^^^
b5 Interest from less ta' government securities
3Interest received ] #""4/"5 ^^^
7ess? Admissible e'penses 8
Ban; charge and commission
^^
Interest on borrowed fund
^^
^^^
^^^
c5 Interest from approved commercial securities ^^^
7ess? Admissible e'penses 8
Ban; charge and commission
^^
Interest on borrowed fund
^^
^^^
^^^
d5 Interest from unapproved commercial
securities
^^^
7ess? Admissible e'penses 8
Ban; charge and commission
^^
Interest on borrowed fund
^^
^^^
^^^
e5 Income from 9ero8coupon bond ^^^
7ess? e'empted F full ^^^
^^^
^^^
9- Inco4e fro4 ;ouse )ro*ert6 Section 2:
>2@(B
Annual :alue?
6ental value ^^^
Add? T0S 3If any5 ^^^
Add? BwnerKs e'penses paid by the tenant ^^^
7ess? TenantKs e'penses paid by the owner 3^^^5
Actual 6ental :alue ^^^
unicipal :alue ^^^
Gigher of Actual 6ental value and unicipal
:alue
^^^
7ess? admissible e'penses?
#. 7and development ta' ^^^
!. Insurance Premium
). Interest on ortgage 7oan
*. Annual ta' Uunicipal or local
authority ta'V
+. Interest on Borrowed Capital
,. (round 6ent
-. 6epair L aintenance 2'penses
UCollection charge% sewerage bill% salary of
guard% liftmen% careta;erV
UAdmissi?le limit? 6esident house? !+P L
Commercial house? )"PV
.. :acancy Allowance
/. Jncollectible 6ent
^^^
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^^^
^^^
^^^
^^^
^^^
^^^
:- Inco4e fro4 Agriculture Section 2E >2F(B
Sale of crops ^^^
Income from any land or building used for
agricultural purposes ^^^
Income from granting a right UIBorgaJV ^^^
Income from tea garden or rubber garden
U,"PV
^^^
6evenue pro&t by sale of discarded or demolished
agricultural machineries ^^^
Bther income relating to agriculture ^^^
^^^
7ess? Admissible e'penses F
#. 7and development ta'
!. Any ta'es Ulocal ta'es% etcV
). production costs
Cost for cultivating the land or raising live8
stoc;
Brdinary processing costs to ma;e crop
mar;etable
Transportation cost of crops or livestoc; to
mar;et
aintenance cost of agricultural e<uipments
L up ;eeping of cattle for cultivation
.+ proper 0oo=s o+ accounts does not
(aintained an e,penditure e6ui-alent to
"? o+ sales proceeds is allo:ed as
ad(issi0le e,pense
*. Insurance Premium
+. 6epair and aintenance of irrigation plant
,. 0epreciation
-. Interest on ortgage 7oan
.. Interest on Borrowed Capital
/. 7osses due to sale of cultivable land
#". losses due to discard or demolish of agricultural
machineries
##. Bther revenue e'penses
^^^
^^^
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^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
@- Inco4e fro4 Business or )rofessionB
$et Income as per Pro&t and 7oss Account
Add? 2'penses that are not allowed 3made debited
^^^
^^^
in P47 acc.5
Add? Income under the head of Business and
Profession that are not included earlier
7ess? 2'penses that are allowed 3not debited in P47
acc5
Total Income
7ess? Income that are not from business or
profession 3already credited in P47 acc.5
KKK
3^^^5
^^^
^^^
^^^
E- Share of )ro0t in a )artnershi* %ir4 ^^^
F- Inco4e fro4 S*ouse or Minor Child ^^^
D- Ca*ital $ainB
Sale Proceeds of Capital Assets% or
Fair ar;et :alue at the Time of Transfer% w!ic!ever
is !ig!er
Less M Allo/a3le Deductions
3a5 2'penditure incurred to transfer the capital
asset3s5
3b5 Cost of Ac<uisition
3c5 Capital e'penditure incurred for
improvements of the asset3s5
Capital (ain
Less? Ta'82'empted capital gain
^^^
^^^
^^^
^^^
^^^
^^^^
^^^^
^^^^^
^^^^^
ZZZ
C- Inco4e fro4 other sourcesB
#. 0ividend from utual 4 unit fund U0ividend
received #""4/"V
7ess? 2'empted F upto T;. !+%"""
!. 0ividend from public or private ltd. Co.
U0ividend received #""4/"V
). Interest from Ban; deposit 4 pro&t from Islami
Ban; UInterest received #""4/"V
*. Interest on Savings Certi&cate
Bn + year 4 ) year Bangladesh Savings
Certi&cate UInterest received #""4/+V
Bn Pensioner 4 Paribar Sanchayapatra
UInterest received #""4/+V
+. Interest on Post BEce Savings Ban; L Postal
Savings Certi&cate UInterest received #""4/"V
,. Any commission4fee received from parties other
than employer
-. 6oyalty income from boo;s 4 mine4 Ferighat4 UIf
ta' is deducted at source it will be assumed as
&nal ta' settlement as per section .!3c5 and full
amount will be deductedI otherwise% full amount
will be addedV
.. Income from pri9e bond 4 lottery 4 <ui9
competition 4 crossword UAmount received
#""4/"V
7ess? Final ta' settlement as per section .!3c5 F
3full5
/. Income 4 commission 4 fee as remuneration of
0irector
#". $on8agricultural income li;e sale of forest trees%
sale of fruits% sale of honey% sale of &sh of pond
^^^
3^^^5
3^^^5
3^^^5
^^^
3^^^5
^^^
^^^
^^^
^^^
^^^
^^^
^^^
8
^^^
^^^
^^^
^^^
^^^
3other than &rm5 etc
##. Income from invigilation L e'am script
evaluation
#!. Income from writing articles 4 columns in
newspapers
#). Income from participating in radio 4 T:4
cultural 4training programs
#*. Income from lease of non8agricultural land
#+. Income from Tuition
#,. Income from underwriting commission for sale
of shares and securities.
#-. Income from non8resident husband 4 wife 3If not
brought through ban;ing channel5
#.. Income from patent 4 license
#/. Income from rent of boat 4 mooring terminal
!". Income from letting out household appliances
li;e furniture% machineries etc
!#. Jne'plained Investments deemed to be Income
as per Section #/
!!. Any other income not classi&ed under any head
7ess8 Allowable deductions?
Interest on loan ta;en to purchase share
and
securities
Any revenue e'penditure incurred for
ma;ing
earnings
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^
^^^ ^^^
'&- %oreign Inco4e ZZZ
Total Inco4e Ta,a3le( ZZZ
Calculation of Ta, lia3ilit6B
T2- #ates
A4ount
T2-(
Bn &rst #%."%"
""
"P 8
Bn ne't )%""%"
""
#"P ^^^^^
Bn ne't *%""%"
""
#+P ^^^^^
Bn ne't )%""%"
""
!"P ^^^^^
Bn remaining balance ^^^^^^ !+P ^^^^^
Total ^^^^^^ ^^^^^
7ess? Ta' rebate on income from partnership &rm ^^^^^
7ess? 0ouble ta'ation relief ^^^^^
7ess? Special 6ebate on additional income ^^^^^
7ess? Investment ta' credit Q #"P ^^^^^
^^^^^
7ess? Ta' deducted at source4Advance ta'es ^^^^^
7ess? Ta' 6efund ad=ustment ^^^^^
Net Ta, lia3ilit6 ZZZZZ
.or2ed ",a4*le and Solutions
.or2ed ",a4*le '
r. Mamshed Gasan is an e'ecutive of a private &rm. Ge furnished the following
information for the income year ended !"#" F !"##. Compute his ta'able income
and ta' liability for the assessment year !"## F !"#!.
Inco4e fro4 Salar6B
i. Basic salary T;. ))%""" per monthI
ii. Festival bonus e<uivalent to two months basic salaryI
iii. Gouse rent allowance T;. #+%""" per monthI
iv. 2ntertainment allowance Q +P of basic salaryI
v. edical allowance T;. !%""" per month 3actual annual e'pense T;. #.%"""5I
vi. Conveyance allowance T;. #%+"" per monthI
vii. Contribution to recogni9ed provident fund both by employee and employer Q
#"P of basic salary
Inco4e fro4 AgricultureB
i. Sale of crops T;. #%+"%"""I
ii. Income from sale of sugar T;. ."%"""I
iii. Income from sale of &sh of pond T;. *+%"""
Inco4e fro4 other sourcesB
i. Interest from &'ed deposit T;. !-%"""I
ii. Interest from + year Bangladesh savings certi&cate T;. #/%"""I
iii. 0ividend received T;. /%"""
iv. Income from lease of non agricultural land T;. )+%"""
Actual investment made by r. Mamshed Gasan during the year is given below.
i. 7ife Insurance Premium paid T;. !"%"""I Policy value T;. !%""%"""
ii. 0onated to local club T;. !%"""I
iii. (ift to wife T;. !"%"""I
iv. 0onation to a local mos<ue T;. +%"""I
v. Investment in primary shares of listed companies T;. ,"%"""I
vi. Investment in Savings Certi&cate T;. )"%"""I
vii. 0onation to a Charitable Gospital T;. #"%"""I
viii. Purchase of furniture T;. #+%"""I
i'. 0onation to Apollo Gospital T;. )"%"""I
'. 0onation to (ovt. Ra;at Fund T;. +%""".
r. Mamshed Gasan has T;. .%+"" refund ad=ustment from last year and a carry
forward of loss from agriculture of T;. ,"%""" for last three years.
Solution 'B
Mr- Ha4shed ;asan
Inco4e YearB 2&'& M 2&''
Assess4ent YearB 2&'' M 2&'2
Calculation of ta,a3le inco4e
Sources of inco4e
A4oun
t
A4oun
t
A4oun
t
'- Inco4e fro4 Salar6 sectionB 2'(B
Basic salary 3))%""" ] #!5 )%/,%"
""
Festival bonus 3))%""" ] !5 ,,%"""
Gouse rent allowance 3#+%""" ] #!5 #%."%"
""
7ess? e'empted 8
+"P of basic salary #%/.%"""
Br% T;. #+%""" per month #%."%"""
>hichever is
lower
#%."%"
""
8
2ntertainment allowance Q +P #/%.""
edical allowance 3!%""" ] #!5 !*%"""
7ess? e'empted 3actual spending5 #.%"""
,%"""
Conveyance allowance 3#%+"" ] #!5 #.%"""
7ess? e'empted 3ma'imum T;. !*%"""5 #.%""" 8
2mployerKs contribution to 6PF )/%,""
+%!-%*"
"
2- Inco4e fro4 Agriculture sectionB 2E G 2F(B
Sale of crops #%+"%"
""
Income from sale of sugar 3,"P5 *.%"""
#%/.%"
""
7ess? Admissible e'penses F
Production cost 3#%+"%""" ] ,"P5 /"%"""
#%".%"
""
7ess? carry forward of losses from last year ,"%"""
*.%"""
9- Inco4e fro4 Business or )rofession
sectionB2DM9&(
Income from sale of sugar 3*"P5 )!%"""
:- Inco4e fro4 other sources sectionB 99 G
9:(B
Income from sale of &sh of pond *+%"""
Interest from &'ed deposit 3!-%""" ] #""4/"5 )"%"""
Interest from savings certi&cate 3#/%""" ]
#""4/+5
!"%"""
0ividend income 3/%""" ] #""4/"5 #"%"""
7ease of non agricultural land )+%"""
#%*"%""
"
Total inco4e F=:F=:
&&
Calculation of Allo/a3le in+est4ent
A4ount
7ife insurance premium 3ma'imum up to #"P of policy
value5
T;.
!"%"""
Investment in primary share ,"%"""
Contribution to 6PF 3T;. )/%,"" _ !5 -/%!""
Investment in savings certi&cate )"%"""
0onation to?
Charitable hospital #"%"""
Ra;at fund +%"""
Actual investment !%"*%!""
Ma,i4u4 li4itB
!"P of ta'able income e'cluding contribution to 6PF
3-%*-%*"" F )/%,""5
#*#%+,"
Br% #%""%""%"
""
>hichever is lower #*#%+,"
Thus= the a4ount of allo/a3le in+est4ent is #*#%+,"
Calculation of Ta, lia3ilit6B
#ates A4ount
Bn &rst T;. #%."%""" "P 8
Bn ne't T;. )%""%""" #"P T;.
)"%"""
Bn ne't T;. !%,-%*"" #+P *"%##"
Total -%*-%*"" -"%##"
7ess? Investment ta' credit 3#%*#%+,"] #"P5 #*%#+,
++%/+*
7ess? Ta' deducted at source +%"""
+"%/+*
7ess? Ad=ustment of refund .%+""
Ta, lia3ilit6 *!%*+*
NotesB
'- Actual allowable investment by r. Mamshed Gasan for the year is T;. !%"*%!""
which e'ceeds the ma'imum limit of allowable investment. a'imum limit here is
!"P of 3-%*-%*"" F )/%,""5 i.e.% T;. #%*#%+," or T;. #%""%""%""" whichever is
lower% i.e.% T;. #%*#%+," and rebate is computed on the basis of this &gure.
2- Ta' deducted at source includes T;. )%""" on interest from ban; deposit% T;.
#%""" on savings certi&cate and T;. #%""" on divided income.
.or2ed ",a4*le 2
rs. Marin Gu< is the general manager of a private company. Ger sources of income
for the year ended )"
th
Mune% !"## were as follows?
Inco4e fro4 Salar6B
Basic salary per month T;. *+%"""
edical allowance per month !%"""
Gouse rent allowance per month !+%"""
Conveyance allowance per month !%+""
2mployerKs Contribution to 6PF #"P of Basic
edical allowance 3actual e'penditure T;.
#+%"""5
T;. !"%"""
Inco4e fro4 SecuritiesB
Interest received from ta' free government
securities
T;. !+%"""
Interest received from less ta' government
securities
),%"""
Inco4e fro4 house *ro*ert6B
Annual rent received T;. !%."%"""
unicipal value )%""%"""
2'penses related to the house for the year?
6epair and aintenance T;. #%""%"""
unicipal ta' .%"""
Inco4e fro4 AgricultureB
Sale of crops T;. )%""%"""
0uring the year% rs. Gu< incurred the following investment and e'penses?
7ife insurance premium T;. *.%"""
0onation to local mos<ue *"%"""
Purchase share from primary mar;et **%"""
As per the list of asset and liability for the assessment year !"##8#!% rs. Gu<Ks net
asset value e'ceeds T;. ! crores. From the above particulars of rs. Gu< calculate
total ta'able income and ta' liability for the assessment year !"##8#!.
Solution 2B
Mrs- Harin ;u8
Inco4e YearB 2&'& M 2&''
Assess4ent YearB 2&'' M 2&'2
Calculation of ta,a3le inco4e
Sources of inco4e
A4oun
t
A4oun
t
A4ount
'- Inco4e fro4 Salar6 sectionB 2'(B
Basic salary 3*+%""" ] #!5 +%*"%""
"
edical allowance 3!%""" ] #!5 !*%"""
7ess? e'empted 3actual spending5 #/%"""
+%"""
Gouse rent allowance?
!+%""" ] #! )%""%""
"
7ess? e'empted 8
+"P of basic salary !%-"%"""
Br% T;. #+%""" per month #%."%"""
>hichever is
lower
#%."%""
"
#%!"%""
"
Conveyance allowance 3!%+"" ] #!5 )"%"""
7ess? e'empted 3ma'imum T;. !*%"""5 !*%"""
,%"""
2mployerKs contribution to 6PF +*%"""
-%!+%"""
2- Inco4e fro4 Securities sectionB 22 G 29(B
Interest from ta' free government securities !+%"""
7ess? e'empted 3full5 !+%"""
8
Interest from less ta' government securities
3),%""" ] #""4/"5 *"%"""
*"%"""
9- Inco4e fro4 ;ouse )ro*ert6 sectionB 2: G
2@(B
Actual rental value !%."%""
"
unicipal value )%""%""
"
Annual value 3whichever is higher5 )%""%""
"
7ess? Admissible e'penses F
6epair and maintenance 3)%""%""" _ !+P5 -+%"""
unicipal ta' .%"""
.)%"""
!%#-%"""
:- Inco4e fro4 Agriculture sectionB 2E G 2F(B
Sale of crops )%""%""
"
7ess? Admissible e'penses F
Production cost 3)%""%""" _ ,"P5 #%."%""
"
#%!"%"""
Total ta, *a6a3le inco4e ''=&2=&
&&
NotesB
'- edical allowance is e'empted upto actual spending so the amount saved from it
is ta'able.
2- It is assumed that the house property has been let out for residential purpose and
so the repair and maintenance e'pense is considered as !+P of annual value.
9- Production cost is considered as ,"P of the selling price of the crops.
:- Though ta' has already been deducted at source from the less ta' government
securities% at the time of calculating net ta' liability T0S of T;. *%""" 3*"%""" F
),%"""5 has been ad=usted.
@- As actual investment does not e'ceed ma'imum limit of investment% here
allowable investment for ta' credit is the amount of actual investment.
.or2ed ",a4*le 9
r. Anu Ahmed has the following income for the income year ended on )"
th
Mune%
!"##?
Inco4e fro4 Salar6
r. Anu Ahmed received basic salary of T;. #.%+"" in the month of Mune% !"##
following the scale of his salary #-%""" F #%+"" F !"%""". The date of annual
increment of his salary is #
st
April. Besides basic salary he received dearness
allowance Q #+P of basic salaryI 2ntertainment allowance and edical allowance Q
!"P and Q#"P of basic salary respectivelyI Annual bonus and fees T;. ),%"""I
house rent allowance T;. ##%""" per monthI conveyance allowance T;. #%!+" per
month. Ge contributes #"P of basic salary to a recogni9ed provident fund 36PF5 and
Calculation of Allo/a3le in+est4ent
A4ount
7ife insurance premium T;. *.%"""
Contribution to 6PF #%".%"""
Share purchase from primary mar;et **%"""
Actual investment !%""%"""
Ma,i4u4 li4itB
!"P of ta'able income e'cluding contribution to 6PF
3##%"!%""" F +*%"""5
!%"/%,""
Br% #%""%""%"""
whichever is lower !%"/%,""
Thus% the allowable investment allowance is the actual
one
2=&&=&&&
Calculation of Ta, lia3ilit6B
#ates A4ount
Bn &rst T;. !%""%""" "P 8
Bn ne't T;. )%""%""" #"P T;. )"%"""
Bn ne't T;. *%""%""" #+P ,"%"""
Bn ne't T;. !%"!%""" !"P *"%*""
Total ##%"!%""" #%)"%*""
7ess? Investment ta' credit 3!""%""" ] #"P5 !"%"""
#%#"%*""
AddB Surcharge ''&=:&& ] !P( 2=2&D
#%#!%,".
7ess? Ta' deducted at source *%"""
Ta, lia3ilit6 '=&D=E&D
his employer also contributes the same in the fund. 0uring the year he received T;.
#+%""" as interest on provident fund and the rate of interest was #+P. Ge
contributes to old age fund Q +P of basic salary.
Inco4e fro4 Interest on Securities
r. Ahmed invested T;. *"%""" in #!P ta' free government securities% T;. +"%""" in
#"P less ta' government securities% T;. *%""%""" in #+P approved commercial
securities 3purchased on #
st
Manuary !"##5 and T;. ,"%""" in #+P unapproved
commercial securities. Ge &nanced T;. #%""%""" by ta;ing a .P loan to purchase
approved commercial securities. Ban; charge T;. !%*#+ as collection fee of these
interests.
Income from Business and Profession
0ue to the economic problem and huge competition% his business results a loss of T;.
."%""" this year which he li;e to set o1 against income from the sources mentioned
above.
Income from Capital (ain
Ge has sold a machine before the e'piry of + years which was purchased at a price of
ta;a ."%""" for the purpose of his business% at a price of ta;a #+"%""" at fair mar;et
value. Another ta;a )"%""" was spent to improve the machine. At the time of sale%
the machine had accumulated depreciation amounting to ta;a ,"%""".

r. Ahmed made and incurred the following investment and e'penses during the
said year?
#. 7ife insurance premium T;. ,%"""I value of the policy worth T;. -"%""".
!. Purchase of Boo;s T;. ,%""" and purchase of scienti&c instruments T;. #"%""".
). Purchase of Primary Shares of Public 7imited Company T;. !"%""".
*. 0onation to religious institutions T;. .%"""I donation to (ovt. Ra;at Fund T;.
-%+""I donation to president relief fund T;. !.%"""I donation to a local club T;.
/%"""I donation to a blind school T;. #+%"""I
+. Purchase of a piece of land worth T;. -"%""" in the name of his wife and a sum of
T;. +%""" was spent for its registration.
,. Spent a sum of T;. #+%""" as educational e'penses of his children.
-. Purchase of ICB certi&cate T;. !"%""".
.. Purchase of (old T;. !"%""".
/. Contribution to group insurance T;. !%""".
Ascertain his total income and ta' to be paid in the assessment year of !"## F !"#!.
Solution 9B
Mr- Anu Ah4ed
Inco4e YearB 2&'& M 2&''
Assess4ent YearB 2&'' M 2&'2
Calculation of ta,a3le inco4e
Sources of inco4e
A4oun
t
A4oun
t
A4oun
t
'- Inco4e fro4 Salar6 sectionB 2'(B
Basic salary 3$ote F #5 !%".%+
""
0earness allowance Q #+P )#%!-+
2ntertainment allowance Q !"P *#%-""
edical allowance Q #"P !"%.+"
7ess? e'empted 3actual spending5 !"%.+" 8
Annual bonus and fees ),%"""
Gouse rent allowance? 3##%""" ] #!5 #%)!%"
""
7ess? e'empted 8 lower of?
+"P of basic salary #%"*%!+"
Br% T;. #+%""" per month #%."%""" #%"*%!
+"
!-%-+"
Conveyance allowance 3#%!+" ] #!5 #+%"""
7ess? e'empted 3ma'imum T;. !*%"""5 #+%""" 8
2mployerKs contribution to 6PF !"%.+"
Interest from 6PF #+%"""
7ess? e'empted F lower of?
Interest Q #*.+"P U3#+%"""4.#+5^.#*+V [ #*%+""
Br% #4) of basic salary U!%".%+""4)V [ ,/%+"" #*%+""
+""
)%,,%+-
+
2- Inco4e fro4 Securities sectionB 22 G 29(B
Interest from ta' free government securities
3*"%""" ] #!P5 *%.""
7ess? e'empted 3full5 *%."" 8
Interest from less ta' government securities
3+"%""" ] #"P5 +%"""
7ess? Admissible e'pense 8
Ban; charge 3!%*#+4*.%)"" ] *%+""5 !!+
*%--+
Interest from approved commercial securities
3*%""%""" ] #+P ] ,4#!5 )"%"""
7ess? Admissible e'pense 8
Ban; charge 3!%*#+4*.%)"" ] )"%"""5 3#%+""5
Interest on borrowed fund
3#%""%""" ] .P ] ,4#!5 3*%"""5
!*%+""
Interest from unapproved commercial securities
3,"%""" ] #+P5 /%"""
7ess? Admissible e'pense 8
Ban; charge 3!%*#+4*.%)"" ] /%"""5 *+"
.%++"
)-%.!+
9- Inco4e fro4 Business or )rofession
sectionB2DM9&(
7osses from business 3."%""
"5
6evenue gain from the sale of machine ,"%"""
3!"%"""
5
:- Ca*ital $ain sectionB 9'(
Sale proceeds or fair mar;et value whichever is
higher
#+"%""
"
7ess?
Cost of Ac<uisition ."%"""
Cost of improvement )"%""" ##"%""
"
Capital gain *"%"""
Total inco4e :=2:=:
&&
Calculation of allo/a3le in+est4entB
A4ount A4ount
#. Insurance premium T;. ,%"""
a'imum? #"P of T;. -"%""" -%"""
T;. ,%"""
!. Purchase of primary shares of public ltd. company !"%"""
). 0onation to Ra;at fund -%+""
*. 0onation to president relief fund !.%"""
+. 0onation to a blind school #+%"""
,. Purchase of ICB certi&cate !"%"""
-. Contribution to group insurance !%"""
.. Contribution to 6PF 3!"%.+" ] !5 *#%-""
/. Contribution to old age fund #"%*!+
Total allowable investment #%+"%,!+
a'imum limit of allowable investment?
!"P 3total ta'able income F employerKs
contribution to 6PF F interest received from 6PF5
[ 3*%!*%*"" F !"%.+" F +""5 ] !"P ."%,#"
Br% #%""%""%"
""
>hichever is lower ."%,#"
Thus allo/a3le in+est4ent for ta, credit D&=E'&
Calculation of Ta, lia3ilit6B
#ates A4ount
Bn &rst T;. #%."%""" "P 8
Bn ne't T;. !%**%*"" #"P T;. !*%**"
Total *%!*%*"" !*%**"
7ess? Investment ta' credit 3."%,#" ] #"P5 .%",#
#,%)-/
7ess? Ta' deducted at source +""
Ta, lia3ilit6 #+%.-/
NotesB
'- After increment on April #% !"#" r. Ahmed receives basic salary of T;. #.%+""
whereas before increment he received basic salary of T;. #-%""". So his basic
Salary for the income year is 3#-%""" ] / Z #.%+"" ] )5 [ T;. !%".%+"".
2- As nothing mentioned% full medical allowance has considered as actual spending
for such purpose.
9- Ban; charge collection fees for the amount of interest collected by the ban;.
Gere% in less ta' government securities total interest income is T;. +%""" but ban;
collected interest of T;. *%+"" as such interest is sub=ect to T0S Q #"P.
:- Total ban; charge of T;. !%*#+ was charged for collection of total interest of T;.
*.%)"" 3*%."" Z *%+"" Z )"%""" Z /%"""5. So a proportionate ban; charge is
deducted from each source of interest as an admissible e'pense e'cept in case of
ta' free government securities.
@- Though ta' has already been deducted at source from the less ta' government
securities% at the time of calculating net ta' liability T0S of T;. +"" 3+%""" ] #"P5
have been ad=usted.
E- As the capital asset is sold within + years of ac<uisition% it is included with other
ta'able income and charged at regular rates.
F- It is assumed that the revenue gain on sale of machinery is not included in
income from business and profession. Thus the business loss of T;. ."%""" is set
o1 against other income under the same head. And the balance is set o1 against
income from either salary or interest on securities.
.or2ed ",a4*le :
r. Moynal Abedin wor;s as an oEcer in a ultinational Corporation% head<uartered in
JSA. Gis sources of income for the year ended on )"
th
Mune% !"## were as follows?
a. Inco4e fro4 Salar6B
#. Basic Salary T;. #+%""" per month.
!. 0earness allowance #"P of the basic salary
). Two bonuses e<uivalent to two months basic salary.
*. edical allowance T;. #%""" per month 3actual e'pense T;.
#"%"""5
+. 2ntertainment allowance T;. !"" per month
,. Ge has been provided with a free car both for oEcial and personal use.
-. Ge has also been provided with a rent free unfurnished <uarter municipal
value of which is T;. ."%""".
.. Travel allowance as a part of his contract T;. #%""%"""I from where he saved
T;. #"%""".
/. Ge contributes #"P of his basic salary to a 6ecogni9ed Provident Fund.
#". 0uring the year% he received interest of T;. #%."" Q #.P on 6PF.
##. Ge has ta;en one monthKs basic salary as advance in the month of Mune to
meet up some of his &nancial diEculties.
b. Interest on SecuritiesB
#. Interest on ta'8free government securities T;. )%""".
!. Interest on less8ta' government securities T;. !%-"".
). Interest on approved debentures T;. !-%)"". Ge has borrowed T;. !"%""" Q
#"P interest to purchase it. Ban; also charged T;. *"" to collect the interest.
c. Inco4e fro4 ;ouse )ro*ertiesB
Ge owns a two8storied house in 0hanmondi. Ge stays in one Aoor with his family
and another Aoor is let out for residential purpose at a rate of T;. /%""" per
month. The municipal value of the house is T;. !%""%""" per annum. 0uring the
year he spent the following e'penses?
6epair e'pense T;. !%"""
Insurance e'pense T;.
*%"""
7and development ta' T;. #%+""
Sewerage and utilities e'pense T;. #%"""
Payment of 0BG 7oan installment 3including interest of T;. +""5 T;. +%"""
0uring the year% the house has remained vacant for two months.
d. Agricultural inco4eB
Sale of crops T;. +%"""
Income from borga T;. !%"""
e. Share of *ro0t in a *artnershi* 0r4 T;. #"%"""
f. Inco4e of s*ouse and 4inor child T;. *"%"""
g. Ge has won a lottery income of T;. )%""%""" 3ta' deducted Q !"P 8 T;. ,"%"""5
h. 0uring the year r. Abedin visited South Horea as a consultant and generated
T;. +%""%""" and he paid income ta' Q !+P in South Horea as per 0TA. From
another visit to 6ussia he generated T;. )%""%""" and paid income ta' Q !"P.
i. Inco4e fro4 3usiness and *rofession
Pro&t from sole8proprietorship business T;. *%"""I last yearKs loss carried
forwarded T;. #%""".
=. Inco4e fro4 other sourcesB
#. Interest income from &'ed deposit account T;. *%+""
!. Pro&t from Islami ban; T;. /""
). 0ividend from ICB utual Fund T;. )#%+""
*. 0ividend from a public limited company T;. #%.""
*. Sale of forest timber T;. !%"""
In+est4ent clai4ed 36 Mr- A3edinB
#. Payment of life insurance premium T;. .%""" 3Policy value T;. #""%"""5
!. Purchase of a listed companyKs primary share T;. +%"""
). Purchase of boo;s and maga9ines T;. #%"""
*. Purchase of a share of co8operative society T;. !%"""
+. Contribution to PresidentKs 6elief Fund T;. )%"""
,. Contribution to (ovt. Ra;at Fund T;. !%+""
-. Purchase of Furniture T;. #+%"""
Based on the above information% calculate r. AbedinKs ta'able income and ta'
liability for the assessment year !"## 8 !"#!.
Solution :B
Mr- Ho6nal A3edin
Inco4e YearB 2&'& M 2&''
Assess4ent YearB 2&'' M 2&'2
Calculation of ta,a3le inco4e
Sources of inco4e A4ount
A4oun
t
A4ount
'- Inco4e fro4 Salar6 SectionB 2'(B
Basic salary 3#+%""" ] #!5 #%."%"
""
0earness allowance 3#%."%""" _ #"P5 #.%"""
Bonus 3#+%""" _ !5 )"%"""
edical allowance 3#%""" _ #!5 #!%"""
7ess? 2'empted F actual e'pense #"%""" !%"""
2ntertainment allowance 3!"" ] #!5 !%*""
Conveyance facility 3#%."%""" _ -.+P5 #)%+""
6ent Free Accommodation? lower of?
!+P of basic salary *+%"""
Br% 6ental value ."%""" *+%"""
Travel allowance #%""%""
"
7ess? 2'empted F actual e'pense /"%"""
#"%"""
Advance salary #+%"""
2mployerKs contribution to 6PF 3#"P of T;.
#."%"""5
#.%"""
Interest from 6PF #%.""
7ess? e'empted F lower of?
Interest Q #*.+"P U3#%.""4.#.5^.#*+V [ #%*+"
Br% #4) of basic salary U#%."%"""4)V [
,"%"""
#%*+"
)+"
)%)*%!+"
2- Inco4e fro4 Securities Section M 22(B
Interest on ta' free government securities )%"""
7ess? 2'empted 8 Full )%""" 8
Interest on less8ta' government securities
3!%-"" _ #""4/"5 )%"""
Interest on approved debentures !-%)""
7ess? Allowable e'penses?
Ban; Charge 3*""5
Interest on loan 3!%"""5
!*%/""
!-%/""
9- Inco4e fro4 ;ouse )ro*ert6 SectionB 2:
G 2@(B
Actual rental value 3/%""" _ #!5 #%".%""
"
unicipal value 3!%""%""" 4 !5 #%""%""
"
Annual value 3whichever is higher5 #%".%""
"
7ess? Admissible e'penses F
6epair and maintenance 3!+P _ #%".%"""5 !-%"""
Insurance 3*%""" 4 !5 !%"""
7and development ta' 3#%+"" 4 !5 -+"
Interest on loan 3+"" 4 !5 !+"
:acancy allowance 3#%".%""" _ !4#!5 #.%"""
*.%"""
,"%"""
:- Agricultural Inco4e SectionB 2E G 2F(B
Sale of crops +%"""
Income from borga !%"""
-%"""
7ess? Allow e'penses? Production cost 3+%""" _
,"P5
)%"""
*%"""
@- Inco4e fro4 Business and )rofession
SectionB 2D (B
Pro&t from sole8proprietorship business *%"""
7ess? Set o1 of losses #%"""
)%"""
E- Share of *ro0t in a *artnershi* 0r4 #"%"""
F- Inco4e of s*ouse or 4inor child *"%"""
D- Inco4e fro4 other sources SectionB 99 G
9:(B
Interest from &'ed deposit 3*%+"" _ #""4/"5 +%"""
Pro&t from Islami Ban; 3/"" _ #""4/"5 #%"""
0ividend from ICB utual Fund 3)#%+"" _
#""4/"5
)+%"""
7ess? 2'empted F up to T;. !+%""" !+%"""
#"%"""
0ividend of Public 7td. Co. 3#%."" _ #""4/"5 !%"""
Sale of forest timber !%"""
!"%"""
:- %oreign Inco4eB
Income from South Horea ?
brought through ban;ing channel !%+"%""
"
7ess? e'emption !%+"%""
"
8
Income didnKt brought through ban;ing channel !%+"%""
"
Income from 6ussia? )%""%""
"
+%+"%"""
Total income e'cluding income on which &nal
payment of ta' is applicable u4s .!3C5
#"%*/%#+
"
Pri9e money of a lottery u4s .!C )%"*%*-"
Total Ta'able Income #)%+)%,!
"
Calculation of Allo/a3le in+est4ent
A4ount
7ife insurance premium T;. .%"""
Share purchase +%"""
Contribution to 6elief fund )%"""
Contribution to 9a;at fund !%+""
Contribution to 6PF 3#.%""" _!5 ),%"""
Actual investment +*%+""
a'imum limit of allowable investment?
!"P 3total ta'able income F employerKs contribution to 6PF F interest
received from 6PF F income under .!C5 [ 3#)%+)%,!" F #.%""" F )+" F
)%"*%*-"5 ] !"P
!%",%#,"
Br% #%""%""%
"""
>hichever is lower !%,-%"+*
Thus allo/a3le in+est4ent for ta, credit /ould 3e @:=@&&
Calculation of Ta, lia3ilit6B
#ates A4ount
Bn &rst T;. #%."%""" "P 8
Bn ne't T;. )%""%""" #"P T;.
)"%"""
Bn ne't T;. *%""%""" #+P ,"%"""
Bn ne't T;. )%""%""" !"P ,"%"""
Bn balance T;. #%-)%,!" !+P *)%*"+
Total #)%+)%,!" #/)%*"+
7ess? Investment ta' credit 3+*%+"" _ #"P5 3+%*+"5
#.-%/++
Ta' credit for pro&t on partnership &rm 3#"%""" _ #*.!/P5 3#%*!/5
#.,%+!,
7ess? Ta' deducted at source ,*%,""
#!"%/!,
LessB Dou3le ta,ation relief ##*%)!"
Net ta, lia3ilit6 E=E&E
NotesB
#. T0S includes T;. )"" on interest on less8ta' government securities% T;. +"" on
interest on &'ed deposit% T;. #"" on pro&t from Islami Ban;% T;. )%+"" on dividend
from ICB mutual fund% T;. !"" on dividend of public limited company and T;.
,"%""" on winning of lottery.
!. 2mployeeKs contribution to statutory provident fund is an investment allowance.
). Purchase of boo;s% shares of co8operative society and furniture is not considered
as investment allowance.
*. Average rate of ta' [ 3#/)%*"+ 4 #)%+)%,!"5 _ #"" [ #*.!/P
+. 0ouble ta'ation relief?
Average ta' rate in Bangladesh is 3#%/)%*"+4#)%+)%,!"5 i.e. #*.!/P
Ta' relief F
Bn income from South Horea 3as per 0TA5 !+P of +%""%"""
[ T;. #!+%"""
a'imum relief for 0TA country is at an average rate of the country F
3+%""%""" ] #*.!/P5 [
-#%*+"
Bn income from 6ussia 3no 0TA e'ists5?
!"P or average whichever is lower i.e. #*.!/P of )%""%"""
[ *!%.-"
Total double ta'ation relief [ 3-#%*+" Z *!%.-"5 [ T;. ##*%)!"
,. As T0S against lottery is a &nally settled ta' liability% so the &rst step is to
calculate total income e'cluding lottery income where ta' has been settled
&nally. So% total income e'cluding lottery income is T;. #"%*/%#+".
So% Ta' on such income will be?
Bn #
st
T;. #."%""" "P $il
Bn ne't T;. )""%""" #"P T;. )"%"""
Bn ne't T;. *""%""" #+P T;. ,"%"""
Bn ne't T;. #,/%#+" !"P T;. ))%.)"
Total T;. #!)%.)"
$ow% T0S on lottery is T;. ,"%""" and income against this ta' will be calculated
as follows on the basis of regular rate using the bac; calculation approach?
Ta' on the rest of *
th
slab 3T;. )""%""" F T;. #,/%#+"5 [ T;. #)"%.+" Q !"P[ T;.
!,%#-"
So% for the rest of the amount of ta' 3T;. ,"%""" F T;. !,%#-"5 [ T;. ))%.)"% ta'
slab will be the +
th
slab where ta' rate is !+P.
So% against this T0S of T;. ))%.)" the applicable income will be 3))%.)"4!+^#""5
[ T;. #)+%)!"
So% lottery income against which T;. ,"%""" &nally settled T0S will be shown as
3T;. #,/%#+"Z T;. #)+%)!"5 [ T;. )"*%*-".
Chapter #/
Assess4ent of *artnershi* 0r4s
Contents
Introduction
2'amination conte't
To*ic List
#/.#
Assessment of Firms
#/.!
Special Provisions regarding assessment of Firms
#/.)
Procedure of Assessment of Firms
#/.*
6ate of Ta' applicable to Firm
#/.+
Set o1 and carry forward of FirmKs losses
#/., Computation of PartnersK Share in the FirmKs Pro&t or 7oss
#/.- 7iability of a Firm for Jnrecoverable Ta' due from Partners
>or;ed 2'amples and Solutions
Introduction
Illustrate the assessment of partnership.
Identify the scope of income of a &rm.
Specify ma=or provisions regarding the assessment of &rm.
Identify rates for ta'ing income of a &rm.
State the procedure of assessment of income of &rm and its partner

)ractical signi0cance
Assessment of &rm and ta' liability is very signi&cant for every assessee.
Assessing the income of &rm and ta' liability thereof is important for persons
owning partnership &rm and managing it. The chapter recapitulates the scope
of ta'able income% non8assessable income% ta' credit income% grossing up of
income% applicable ta' rates and related issues re<uired for completing the
assessment of &rms. Application of ta' rebate by partners on income from
partnership &rm is e'empli&ed. Professional accountants are re<uired to have
suEcient e'pertise on all of these issues.
Sto* and thin2
0id you realise how important is the assessment for &rmsN Can you do the
assessment of &rms independentlyN
.or2ing conte,t
Assessment of ta' is very important for every assessee. An assessee must
re<uire to be assessed in any way. Accountants have a great role to provide the
technical assistance to their client in case of assessment. As there are many
conditions% rules and procedures for di1erent types of assessments%
accountantsK support sometime very signi&cant to complete the assessment of
their clients.
any clients are re<uiring the support for correct assessment from
accountants in every year. 0etailed ;nowledge of accountants on the
technicalities of computation of ta'able income and ta' liability thereof for
individual assessee is very in case of re<uired support for clientsK ta'
assessment.
S6lla3us lin2s
The topics covered in this chapter have the signi&cance for professional study
as you can utili9e the ;nowledge throughout the application level and case
study and also in your practical life.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0o the assessment of &rms and partners as well.
Identify ta'able income of a &rm after ad=usting e'penses.
Computing investment allowance% ma'imum limit and ta' credit.
Identify non8assessable income and its application in computing ta'able
income.
Identify the procedure of assessment
Compute net ta' liability after due credit due to investment allowance% ta'
rebate at average rate on income from &rm and others.

?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.
'C-& ASS"SSM"NT O% )A#TN"#S;I) %I#MS
Section O+er+ie/
Scope of income for &rm is di1erent than other assessee.
Applicable ta' rates for &rm are di1erent than other assessee.
Bn some income% the &rm en=oys investment ta' credit.
For T0S% the &rm will get full credit at the time of computing net ta'
liability.
>ith certain terms and conditions% loss under one head can be set o1
against income under another heads
If loss under one head cannot be set o1 completely% it can be carried
forward to succeeding years to set o1 against the income under the
same head.
'C-' Assess4ent of %ir4s
The word &rm includes a partnership &rm. 7i;e individuals% a &rmKs income
is also assessed to compute ta' payable by the &rm. Bne point is very
important to remember is that assessment of partnership &rm and
partners are done separately. In ta'ation laws% partnership and partners
are totally di1erent% have di1erent income though the ta' rates are same
with some e'ceptions.
'C-2 S*ecial )ro+isions regarding assess4ent of %ir4s
A &rm can be assessed F
Jnder section .!? assessment on correct return
Jnder section .)? assessment after hearing
Jnder section .*? best =udgment assessment
A &rm can also be assessed in special cases F
Jnder section .,? Assessment in case of change in the constitution of a &rm
Jnder section .-? Assessment in case of constitution of new successor &rm
Jnder section ..? Assessment in case of succession to business otherwise
than on death
Jnder section ./? Assessment in case of discontinued business
'C-9 )rocedure of Assess4ent of %ir4s
As the assessment of &rm and its partners are sometimes non8detachable% it
is important to remember to assess their income separately. Btherwise% there
is a strong possibility of integrating partnersK income with that of the
partnership &rm to whom they are the partners. It is advised to follow the
procedures as mentioned below to avoid possible mista;es.
For the Firm
3#5 Start with the accounting pro&t as computed in partnership Pro&t and 7oss
Account.
3!5 Ad=ust the pro&t in line with F
Section !.? Income from business or profession
Section !/? 0eductions from income from business or profession
Section )"? 0eduction not admissible in certain circumstances
3)5 The pro&t so computed will be ta'able pro&t of the &rm and ta'able in the
hand of the &rm. Gowever% such pro&t will be distributed among the
partners as per their respective pro&t and loss sharing ratio.
3*5 The pro&t as calculated above is ta'able provided that the total income
e'ceeds the e'emption limit% i.e.% Ta;a #%."%""".
3+5 The &rm may also claim ta' rebate Q #"P on allowable investments as
individuals.
%or )artners
3,5 PartnersK ta'able income will be a total of salary% interest% commission etc.
earned from the &rm and share of pro&t or loss as computed in step ). The
total income will be ta'ed as per the individual ta' rates. Income from &rm is
to be considered as ta' free income because ta' on this part is already paid by
the &rm% and partners will get rebate at average rate on their partnership
income from ta' so computed. They may also claim rebate for <ualifying
amount of investment allowance% if any% in normal way.
Note? Firms may not be re<uired to pay ta' due to income less than Ta;a
#%."%""" or carry forward and set o1 of previous years losses. In such a
situation% partners will pay ta' in a normal way but cannot claim any rebate
on pro&t received from &rm% as &rm has not paid ta'es on such pro&t.
'C-: #ate of Ta, a**lica3le to %ir4
Income of a &rm is ta'able at the same rates applicable to individuals which
are as follows?
Total Inco4e Sla3s A**lica3le
#ates
Bn &rst T;.
#%."%"""
$il
Bn ne't T;.
)%""%"""
#"P
Bn ne't T;.
*%""%"""
#+P
Bn ne't T;.
)%""%"""
!"P
Bn balance Balance !+P
It is to be mentioned here that the minimum amount of ta' should not be less
than Ta;a !%""" and non8assessable income for a &rm is T;. #."%""".
'C-@ Set oA and carr6 for/ard of %ir4Os losses
3#5 In case of losses sustained by a &rm under any head of income shall be set
o1 only against the income of the &rm under any other head and not
against the income of any of the partners of the &rm UJ4s *!3)53a5V.
3!5 Any loss from business can be carried forward for setting of against such
income% if any% for , consecutive years 3J4s 8 ).5.
3)5 If there is any loss from any speculation business% it should be set o1 in
the same year against income from other speculative businesses and if
there is no other such business% it can be carried forward for si'
consecutive years to set o1 only against the income from such speculative
business 3J4s 8 )/5.
3*5 If there is any loss under the head Xcapital gainK can be carried forward for
si' consecutive years if the loss e'ceeds Ta;a +""" for setting o1 against
income from capital gains only so much of such loss as e'ceeds Ta;a +%"""
3J4s 8 *"5.
3+5 If there is any loss under the head Xagricultural incomeK can also be carried
forward for setting o1 against income from this head for si' consecutive
years 3J4s 8 *#5.
3,5 In case of changes in constitution of a &rm% the proportionate loss of a
retired or deceased partner cannot be carried forward by the &rm UJ4s F
*!3+53a5V.
'C-E Co4*utation of )artnersO Share in the %ir4Os )ro0t or Loss KUPs M
:99(L
To compute partnersK share in the &rmKs pro&t or loss% we need to ad=ust any
interest% salary% commission or any other payment made to partners in any
other mode. Then the balance will be distributed among the partners as per
the respective pro&t and loss sharing ratio. So the share of a partner in a &rm
will be ta;en to be any salary% interest% commission or other remuneration
payable to him by the &rm in the income year increased or decreased
respectively by his share in the balance of the pro&t or loss of the &rm. If the
partners have their individual income with the shared income from the &rm%
such shared income should be added with other individual income to compute
the partnersK total ta'able income. If the &rm has already been ta'ed%
partners will not pay ta' on such shared income 3Paragraph #, of Part B of
Si'th Schedule5. But% this addition of shared income to the partnersK other
income may enhance the rate of ta' for such other income or may bring the
partners within the ambit of ta'ation where such partnersK individual income
was below the ta'able limit.
'C-F Lia3ilit6 of a %ir4 for Unreco+era3le Ta, due fro4 )artners UPs >
CD(B
>here any ta' payable by partner of a &rm in respect of his share of the
income from the &rm cannot be recovered from him% the 0eputy
Commissioner of Ta'es shall notify such amount of the ta' to the &rm.
Jpon noti&cation% the &rm so noti&ed shall be liable to pay the said ta'
and% for the purposes of recovery thereof% shall be deemed to be an
assessee in respect of such ta'.
.or2ed ",a4*les and Solutions
.or2ed ",a4*le 'B
6onob% Sanob and anob are the three e<ual partners of 6onob L Brothers. The
pro&t and loss account for the year ended on Mune )"% !"## was given below?
6onob L Brothers
Pro&t and 7oss Account
For the year ended on Mune )"% !"##
)articulars
A4ount
T2-(
)articulars
A4ount
T2-(
6ent
Jtilities
Commissions
Advertisements
Income ta'
Interest on Capital?
6onob F )"%"""
Sanob F !"%"""
anob F )"%"""
Salaries?
6onob F !,%"""
anob F !*%"""
$et Pro&t
-!%"""
*.%"""
..%"""
!!%"""
!"%"""
."%"""
+"%"""
*%!"%"""
(ross Pro&t .%""%"""
.%""%""" .%""%"""
Other Infor4ationB
'- 6ent includes T;. !,%""" paid to r. 6anob who partially owns the business
premises.
2- T;. !+%""" of commission is given to r. anob for his special assignment.
9- Partners have income from di1erent sources as follows?
Sources Mr- #ano3
Mr-
Sano3
Mr-
Mano3
Income from Gouse Property
Income from Interest on Securities
Agricultural Income
Income from other sources 30ividend5
,"%"""
+"%"""
8
!+%"""
8
."%"""
8
!+%"""
*"%"""
8
+"%"""
!+%"""
#e8uiredB
#. Compute the ta'able income of the &rm
!. Compute the amount of ta' liability of the &rm.
). Show the amount of distribution to the partners.
*. Compute the amount of ta'able income of the partners.
+. Compute the amount of net ta' liability of the partners.
Solution 'B
#e8uire4ent 'B Ta,a3le inco4e of the 0r4
)articulars
A4ount
T2-(
A4ount
T2-(
$et Pro&t as per Pro&t and 7oss A4C
A00? 0istribution to the Bwners?
Interest on Capital?
6onob F )"%"""
Sanob F !"%"""
anob F )"%"""

Salaries?
6onob F !,%"""
anob F !*%"""
Commission?
anob F !+%"""
Total Ta,a3le Inco4e of the %ir4
."%"""
+"%"""
!+%"""
*%!"%"""
#%++%"""
2=E@=&&&
#e8uire4ent 2B Ta, lia3ilit6 of the 0r4
Inco4e Sla3s Ta, #ate
A4ount
T2--(
Bn First T;. #%."%"""
Bn $e't T;. .+%"""
"P
#"P
$il
.%+""
Bn Total T;. !%,+%""" D=@&&
#e8uire4ent 9B Distri3ution to the )artners
)articulars
)artners
Total
A4ount left
to 3e
Distri3uted
#ono3 Sano3 Mano
3
Amounts to be distributed
Interest on Capital
Salaries
)"%"""
!,%"""
!"%"""
!*%"""
)"%"""
8
."%"""
+"%"""
!%,+%"""
#%.+%"""
#%)+%"""
Commission
Pro&t 3allocated on #?#?#
ratio5
Total a4ount allocated
8
),%,,,
8
),%,,-
!+%"""
),%,,-
!+%"""
#%#"%"""
#%#"%"""
C2=EE
E
D&=EE
F
C'=EE
F
2=E@=&&
&
#e8uire4ent :B Ta,a3le inco4e of the )artners
;eads of Inco4e
#ono3 Sano3 Mano3
#. Income from Interest on Securities
!. Income from Gouse Property 3less cost of
repairs and maintenance Q !+P5
). Agricultural Income 3less cost of cultivation Q
,"P5
*. Income from Firm
+. Income from Bther Sources 8 0ividends
+"%"""
*+%"""
/!%,,,
!+%"""
."%"""
."%,,-
!+%"""
8
)"%"""
!"%"""
/#%,,-
!+%"""
Total Ta,a3le Inco4e 2='2=EE
E
'=D@=E
EF
'=EE=E
EF
#e8uire4ent @B Net ta, lia3ilit6 of the *artners
Inco4e Sla3s
#ate
s
A4ount of Ta,
#ono3 Sano
3
Mano
3
Bn First T;. #%."%"""
Bn $e't T;. )!%,,,
T;. +%,,-

7ess? 6ebate on &rms income
on average rate
#ono3 3)%!,-4!%#!%,,, ^
/!%,,,5
Sano3 3+,-4#%.+%,,- ^
."%,,-5
Net Ta, Lia3ilit6
"P
#"P
$il
)%!,-
$il
+,-
$il
)%!,-
#%*!*
+,-
!*,
$il
'=D:9 92' Nil
Both 6onob and Sanob will have to pay minimum ta' of T;. !%""". Gowever% anob
will pay nothing as his income is less than non8assessable limit.
.or2ed ",a4*le 2
Asha% Pasha% and 6asha are three e<ual partners of a &rm% Asha= )asha G #asha
Associates. For the income year ended Mune )"% !"##% the &rm produces the
following information for the purpose of computing ta'able income and ta' liability of
the &rm as well as its partners.

3a5 The &rm owns a commercial building partly 3one half5 occupied by the &rm to
operate its own business and partly 3another half5 let out at a monthly rent of
TH )+%""". Corporate ta'es are paid Q #"P on the municipal value of TH
.""%""". 0uring the year% the &rm has also earned TH *"%""" as advance and
TH #"%""" as &rst yearKs rent from a =oint stoc; company by letting its top Aoor
to hoard a commercial advertisement.
3b5 The &rm is engaged with trading of garments supplies which resulted following
gross margin amount for the year?
)articulars A4ount
T5(
A4ount
T5(
Sales +%"""%"""
7ess? Cost of (oods Sold
Beginning Inventory .""%"""
Y Purchase *%!""%"""
Cost of (oods Available for Sale +%"""%"""
- 2nding Inventory #%"""%"""
Cost of (oods Sold *%"""%"""
(ross argin #%"""%"""
3c5 Bther relevant information is given below?
Stoc;s are always valued at !P above cost. Analysis also reveals that purchase
amount is overstated by TH !""%""" for the year. Total operating e'penses
charged during the period amounted to TH *+"%""" which included following
items among other things?
&i( -aintenance to Building.
A4ount
T5(
A4ount T5(
7et Fout portion )"%"""
Portion used for business !"%"""
+"%"""
3ii5 unicipal Ta'es? Total amount of municipal ta'es paid for the year was TH
*"%""" out of which the tenant bears TH #"%""".
3iii5 Annual contribution to Cotton 0ealers Association% a trade association is
TH #"%""".
3iv5 Contribution to Aga Hhan 0evelopment $etwor; was TH +"%""".
3v5 All of the partners were active and too; part in running business. Salaries
paid to the partners were TH *"%""" to Asha% TH +"%""" to Pasha and TH
)"%""" to 6asha.
3vi5 7egal charges amounts to a total of TH +"%""" including a &ne of TH
#"%""" charged due to its attachment with illegal form of business.
3vii5 The &rm charged TH #+%""" against pro&t to write o1 uncollectible amount
of receivable which is not allowed.
3viii5 The &rm incurred a loss of TH +"%""" from speculative business.
3i'5 Accounting depreciation charged was TH ).%""" which was TH )%"""
higher than ta' depreciation.
&d( Asha had no other income during the yearI however% Pasha and 6asha were
also partners of another &rm. The respective income of Pasha and 6asha from
the &rm for the year ended )"
th
Mune !"## were as under?
)artner
s
Salar6 Interest )ro0tP Loss(
Pasha
6asha
TH *"%"""
TH ,"%"""
TH #"%"""
TH !"%"""
TH 3+"%"""5
TH !"%"""
3e5 Asha had income from a house property at 7ondon amounting to TH +""%"""
3after deduction of #+P ta' at source5.
3f5 6asha had income from interest on approved commercial securities of TH
)"%""". Ban; charged TH )"" as collection fee and TH )%""" as interest on
borrowing% money borrowed from the ban; for investment in approved
commercial securities.
Compute ta' liability of XAsha% Pasha L 6asha AssociatesK for the year as per Finance
Act !"## and total ta'able income in the hands of partners from all sources.
Solution 2
3a5 Computation of total ta'able income of the &rm?
Co4*utation of In+est4ent Allo/anceB
Actual?
Contribution to Aga Hhan 0evelopment $etwor; T;.
+"%"""
a'imum 7imit?
!"P of total ta'able income% i.e.% !"P of #!%/)%"-. [ T;. !%+.%,#,
Br T;. #%"""%""" whichever is less T;.
!%+.%,#,
Particulars Ta;a Ta;a Ta;a
3#5 Income from house property 3J4s 8 !*5
Annual @alue
Actual rent 3#! months Q TH )+%"""5
A00? municipal ta' paid by the tenants
B6
unicipal :alue 3.""%"""4!5

!ic!ever is !ig!er
7ess?
repairs and maintenance 3)"P of annual
value5
municipal ta' for let8out portion 3#4! of TH
*"%"""5
Ta'able income from Gouse Property
*!"%"""
#"%"""
*)"%"""
#*/%"""
!.#%"""
*)"%"""
*""%"""
#!/%"""
!"%"""
3*5 Income from Business 3J4s 8 !.5
(ross Pro&t as per Trading Account
A00? Bverstatement of Bpening Stoc;
3TH .""%"""4#."!^"."!5
Bverstatement of purchase
7ess? Bverstatement of Closing Stoc;
3TH #%"""%"""4#."!^"."!5
7ess? Bperating e'penses
Add? 2'penses inadmissible
aintenance F let out portion
unicipal ta'es 3)"%""" F #4! of
*"%"""5
Salaries to partners
7egal charges
>rite o1
7oss on speculative transactions
Accounting 0epreciation
7ess? Admissible 2'penses
Ta' 0epreciation
Ta'able income from Business
#+%,.,
!""%"""
!#+%,.,
#/%,".
.%"""
#"%"""
#%!"%"""
#"%"""
#+%"""
+"%"""
).%"""
#%"""%""
"
#/,%"-.
#%#/,%"-
.
*+"%"""
-*,%"-.
!+#%"""
//-%"-.
)+%"""
/,!%"-.
3+5 Income from other sources 3J4s 8 ))5
From display of advertisement
Total Ta'able income of the Firm
+"%"""
#%!/)%"-
.
\ualifying amount for investment allowance T;.
+"%"""
Co4*utation of Ta, Lia3ilit6 of the %ir4B
Inco4e Sla3s
Ta,
#ate
A4ount
T2--(
Bn First T;. #."%"""
Bn $e't T;. )""%"""
Bn $e't T;. *""%"""
Bn $e't T;. )""%"""
Bn ne't T;. ##)%"-.
"P
#"P
#+P
!"P
!+P
$il
)"%"""
,"%"""
,"%"""
!.%!-"
Bn Total T;.#!%/)%"-.
7ess? 6ebate on investment allowance 3#"P of T;..
+"%"""5
Net ta, lia3ilit6
#-.%!-"
+%"""
'=F9=2F&
Allocation of )ro0t to )artners A= B G C(
)articulars
)artners
Total
A4ount left
to 3e
Distri3uted
Asha )asha #asha
Amounts to be distributed
Salaries
Pro&t 3allocated on #?#?#
ratio5
Total a4ount allocated
*"%"""
)%/#%"!
,
+"%"""
)%/#%"!
,
)"%"""
)%/#%"!
,
#%!"%""
"
##%-)%"
-.
#!%/)%"-.
##%-)%"-.
:=9'=&
2E
:=:'=&
2E
:=2'=&
2E
'2=C9=&
FD
Total Ta,a3le Inco4e in the hands of the )artnersB
;eads of Inco4e Asha )asha #asha
#. Income from Firm
!. Income from Firm
). Income from Interest on Securities
*%)#%"!, *%*#%"!, *%!#%"!,
#%""%"""
!,%-""
Total Ta,a3le Inco4e :=9'=&2
E
:=:'=&2
E
@=:F=F2
E
Chapter !"
Assess4ent of co4*anies
Contents
Introduction
2'amination conte't
To*ic List
!".# Companies
!".! 6esidential Status of Companies
!".) Submission of 6eturn
!".* Set o1 and Carry Forward of 7osses
!".+ >ithholding of Ta'
!"., Advance Payment of Ta'
!".- Applicable Ta' 6ates for Companies
!".. Ta' 6ebate
!"./ Corporate Social 6esponsibility
!".#" Scope of Income
>or;ed 2'amples and Solutions
Introduction
0e&ne di1erent type of companies.
Illustrate the assessment of companies.
Identify the scope of income of companies.
Specify ma=or provisions regarding the assessment of companies.
Identify rates for ta'ing income of a company.
State the procedure of assessment of income companies.
Specify the special provisions of assessing income of ban;ing% insurance
and leasing companies.

)ractical signi0cance
Corporate assessment is full of comple'ities that re<uire special s;ill to
handle. Jnderstanding corporate accounting and converting it in line with the
re<uirements of ta'ing authorities is the &rst hurdle. Assessable income% non8
assessable income% rebate% application of CS6% applying di1erent rates for
capital gain% dividend income and other income are some of the comple'ities.
As professional accountants mostly serve corporate houses% this chapter
becomes mostly signi&cant for them. Again% corporate ta' planning% now8a8
days% becomes a norm which necessitates e'tra s;ill on part of the <uali&ed
accountants. (overnment also re<uires this type of services from professional
accountants due to the reasoning of ma'imi9ing its income.
Bther common re<uirements li;e T0S% set o1 and carry forward of losses% 0TA%
grossing up of income are also applied in this chapter.
Sto* and thin2
0id you realise that the assessment of companies is very important from every
perspectiveN Are you con&dent enough to have the assessment of companies
independentlyN
.or2ing conte,t
Assessment of ta' is very important for every classes of assessee. An assessee
must re<uire to be assessed in any way. Accountants have a great role to
provide the technical assistance to their client in case of assessment. As there
are many conditions% rules and procedures for di1erent types of assessments%
accountantsK support sometime very signi&cant to complete the assessment of
their clients. >hen the client is a corporate% this chapter becomes very
signi&cant.
any clients are re<uiring the support for correct assessment from
accountants in every year. 0etailed ;nowledge of accountants on the
technicalities of computation of ta'able income and ta' liability thereof for
corporate assessee is important in case of re<uired support for clientsK ta'
assessment.
S6lla3us lin2s
The topics covered in this chapter have the signi&cance for professional study
as you can utili9e the ;nowledge throughout the application level and case
study and also in your practical life.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0o the assessment of corporate.
Identify ta'able income of a company after ad=usting for e'penses.
Computing ta' rebate in di1erent scenario.
Identify non8assessable income and its application in computing ta'able
income.
Identify the procedure of assessment.
Compute net ta' liability.
0o the assessment of speciali9ed form of companies li;e ban;% insurance
and leasing companies.

?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.
2&-& ASS"SSM"NT O% COM)ANI"S
Section O+er+ie/
Scope of income for company is di1erent than other assessee.
Applicable ta' rates for company are di1erent than other assessee.
Capital gain% dividend income and other income of companies are ta'ed at
di1erent rates.
Assessment of ban;s% insurance companies% leasing companies and other
companies are to some e'tent di1erent.
For CS6 activities in de&ned areas% companies will en=oy ta' rebate.
Company assessee will en=oy some common bene&ts li;e set o1 and
carry forward of tosses% ta' rebate% T0S ad=ustments% ad=ustment for
advance ta' etc.
2&-' Co4*anies
Assessment of companies means applying the assessment procedures on the
income of companies. Company has a de&nite meaning in income ta'
ordinance and other acts. For the purpose of assessment% some of such
de&nitions are produced below?
TCompanyT means a company as de&ned in the Companies Act% #/#) 3:II of
#/#)5 or Companies Act% #//* and includes 8
3a5 A body corporate established or constituted by or under any law for the
time being in forceI
3b5 Any nationali9ed ban;ing or other &nancial institution% insurance body and
industrial or business enterpriseI
3c5 An association or combination of persons% called by whatever name% if any
of such persons is a company as de&ned in the Companies Act% #/#) 3:II
of #/#)5 or Companies Act% #//*I
3d5 Any association or body incorporated by or under the laws of a country
outside BangladeshI and
3e5 any foreign association or body% not incorporated by or under any law%
which the Board may% by general or special order% declare to be a company
for the purposes of this Brdinance UJ4s F !3!"5V.
Companies Act #//* de&nes XCompanyK to mean a company formed and
registered under the act or an e'isting company UJ4s F !3c5 of Companies Act%
#//*V. Again% Xe'isting companyK means a company formed and registered
under any law relating to companies in force at any time before the
commencement of the act% and is in operation after commencement of the act
UJ4s F !3h5 of Companies Act% #//*V.
Gowever% at the time of prescribing the rates of ta'es% companies are
classi&ed as F
1)Ban;% Insurance% Financial
Institutions
2)obile Phone Bperator
Company
a)Private 7imited Company
b)Public limited company
3)Cigarette anufacturing
Company
a)Private 7imited Company
b)public limited company
4)Bther Company a)Publicly traded company
b)$on8publicly traded company% local
authority and private limited
company and other companies
As per the prescription of Income Ta' Brdinance of computing pro&t and loss
through schedules% companies are classi&ed as F
Fourth Schedule Computation of the Pro&ts and (ains of Insurance
Business
Fifth Schedule F
Part A
Computation of Pro&ts and (ains from the e'ploration
and production of Petroleum and the determination of
the ta' thereon
Fifth Schedule F
Part B
Computation of Pro&ts and (ains from the e'ploration
and e'traction of ineral 0eposits 3Bther than Bil and
Bil (as5 in Bangladesh
0ue to the typical nature of business% IT Brdinance prescribes di1erent
methods of computation of pro&t and loss from these businesses.
>hatever may be de&nitions or classi&cations made% pro&ts or gains from any
type of companies are ta'able at speci&ed rates.
2&-2 #esidential Status of Co4*anies
6esidential status of companies is di1erent than individuals and IT Brdinance
prescribes di1erent rules for that. Bn the basis of residential status applicable
for companies% there may be Bangladeshi or foreign companies. The
prescriptions for deciding the residential status of companies are given below?
T6esidentT% in respect of any income year% means a Bangladeshi company or
any other company the control and management of whose a1airs is situated
wholly in Bangladesh in that year UJ4s F !3++53c5V. And% Tnon8residentT means
a person who is not a resident UJ4s F !3*!5V. Thus% to be residentI
#. The company should be a Bangladeshi company% i.e.% formed and
registered under the Companies Act% #/#) 3:II of #/#)5 or Companies Act%
#//* and includes a body corporate established or constituted by or under
any law for the time being in force in Bangladesh having in either case its
registered oEce in BangladeshI or
!. Any other company the control and management of whose a1airs is
situated wholly in Bangladesh in that year.
If any of the two conditions have not been ful&lled% the status of such a company will
be non8resident.
2&-9 Su34ission of #eturn
A company assessee shall have to furnish a return setting forth therein its
total income by the #+
th
day of Muly each year or within , months from the end
of the income year whichever is later. Gowever% on application from the
company% the 0CT may e'tend the return &ling period up to three months
from the date so speci&ed and he may further e'tend the date up to three
months with the approval of Inspecting Moint Commissioner. The return should
be signed by the principal oEcer as de&ned in section !3*.5 of IT Brdinance
UJ4s F -+3!53b53iii5V. And the return of income for companies should be
submitted in prescribed form 3Form? IT ##8(GA5.
2&-: Set oA and Carr6 %or/ard of Losses
>here loss is assessed in any head of income% the company is entitled to set
o1 the loss against its income assessed in other heads of that year. Gowever%
loss on speculation business and loss on capital gain cannot be set o1 against
income from any other head. If there is no income from other speculative
business or capital gain from sale of other assets in the same yearI such loss
can be set o1 only against the income of respective speculative business or
capital gains in the coming years% if any. >hen loss cannot be wholly set o1%
then the unabsorbed loss shall be carried forward but for not more than si'
successive assessment years. Jnabsorbed depreciation loss can be carried
forward for unlimited period. 7oss so carried forward is to be set o1 against
income of the respective head only. It is to be noted that loss from the source of
e'empted income cannot be set o1 against any source of ta'able income.
2&-@ .ithholding of Ta,
Finance Act !"## introduces the submission of withholding ta' return by
inserting a new section 3-+A? 6eturn of withholding ta'5. 2very person% being
a company% shall &le a return of withholding ta' collected or deducted with
the 0eputy Commissioner of Ta'es where he is being assessed. The return
shall be prepared in prescribed form and signed and veri&ed by the principal
oEcer. Such return shall be &led <uarterly% by the &fteenth day of Bctober%
Manuary% April and Muly of the &nancial year for which the ta' is deducted or
collectedI and it must accompany a statement of deduction or collection of
ta' along with copy of treasury challans or payment orders. Gowever% the last
date for the submission of return may be e'tended by the 0eputy
Commissioner of Ta'es up to &fteen days from the date so speci&ed.
2&-E Ad+ance )a64ent of Ta,
2very company assessee shall pay advance ta' in four e<ual installments
falling on #+
th
Sept.I #+
th
0ec.I #+
th
arch and #+
th
Mune of each &nancial year
if the latest assessed income e'ceeds T;. four la;hs. Bn failure of payment of
any installment% the company will be deemed to be an assessee in default.
Penalty may be imposed for such default. If a company estimates that its
income during any &nancial year will be less than the last assessed income% it
may submit an estimate of income and pay the advance ta' accordingly. If the
amount of advance ta' together with the ta' deducted at source% if any% is less
than -+P of the ta' payable on the basis of regular assessment% interest Q#"P
is leviable on the amount by which the ta' so paid and deducted falls short of
-+P of the assessed ta'. Bn the other hand% the company is entitled to receive
interest Q#"P on the amount by which the aggregate sum of advance ta' paid
during a &nancial year e'ceeds the amount of the ta' payable on the basis of
regular assessment.
2&-F A**lica3le Ta, #ates for Co4*anies
Charge of additional ta, UPs M 'EB(
If a public limited company% not being a ban;ing or insurance company% listed
with any stoc; e'change in Bangladesh does not issue% declare or distribute
dividend or bonus share e<uivalent to at least &fteen percent of its paid up
capital to its share holders within a period of si' months immediately following
any income year% the company shall be charged additional ta' at the rate of &ve
per cent on the undistributed pro&t in addition to ta' payable under this
Brdinance. Gere% Tundistributed pro&tT means total income with accumulated
pro&t including free reserve.
Charge of e,cess *ro0t ta, UPs M 'EC(
If a ban;ing company shows pro&t in its return of income for an income year at an
amount e'ceeding &fty per cent of the aggregate sum of capital as de&ned under
the said ban; company act together with reserve% the company% in addition to ta'
payable under the Brdinance% shall pay an e'cess pro&t ta' for that year at the rate
of &fteen per cent on so much of pro&t as it e'ceeds &fty per cent of the aggregate
sum of the capital and reserve as aforesaid.
Charge of 4ini4u4 ta, for co4*anies UPs M 'ECCC(
$otwithstanding anything contained in any other provisions of this Brdinance%
every company shall% irrespective of its pro&ts or loss in an assessment year
for any reason whatsoever% including the sustaining of a loss% the setting o1 of
a loss of earlier year or years or the claiming of allowances or deductions
3including depreciation5 allowed under this Brdinance% be liable to pay
minimum ta' at the rate of Qero *oint 0+e Qero &-@&J( *er cent of the
amount representing such companyDs gross receipts from all sources for that
year. For the purposes of this section% Dgross receiptsD means8
a)all receipts derived from the sale of goodsI
b)all fees or charges for rendering services or giving bene&ts including
commissions or discountsI
c)all receipts derived from any heads of income.
Illustration
Uero, Machine is a Private 7imited Co. registered in Bangladesh. Following
information is related to the income year !"#"8##?
$et operating income T;. #!%+"%"""
Interest income T;. !%+"%"""
Total assessed income T;. #+%""%"""
Sales revenue 4 turnover for the year is reported as T;. !%""%""%""".
Applicable income ta' rate is )-.+P. Calculate income ta' liability of ] 7td. for
the year.
Income ta' Q regular rate i.e. )-.+P is T;. +,!%+"" 3#+%""%""" ] )-.+P5.
(ross receipts of the company? 3T;. !%""%""%""" Z T;. !+"%"""5 [ T;.
!%"!%+"%"""
inimum ta' amount [ 3T;. !%"!%+"%""" ] ".+"P5 [ T;. #"#%!+".
Since% the regular ta' is greater than the minimum ta' amountI the ta'
liability of ] 7td. will be T;. +,!%+"".
Cor*orate Ta, #ate at a $lance
T6*es of
Co4*an6
T6*es of Inco4e
Ta, rates for AY
2&'&>
''
2&''>
'2
Ban;%
Insurance%
Financial
Institutions
3#5 Capital
gain arising
out of
Transfer of stoc;s and shares
of any company registered
under Companies Act% #//*.
US6B $o. F !,/87aw4Income
Ta'4!"#"V
#"P #"P
Transfer of other capital
assets
#+P #+P
3!5 0ividend
income
0ividend declared by any
company registered under
companies act #/#) or #//*
or any foreign company
!"P !"P
3)5 Bther
income
Both for publicly and not
publicly traded company
*!.+P *!.+P
obile Phone
Bperator
Company
3#5 Ta'able
Income
Private 7imited Company *+P *+P
3!5 Ta'able
Income
If converted into public
limited company by issuing
minimum #"P of shares
through IPB
)+P )+P
Cigarette
anufacturin
g Company
3#5 Ta'able
Income
Private 7imited Company n4a *!.+P
3#5 Ta'able
Income
Publicly Traded Company n4a )+P
Bther
Company
3#5 Capital
gain arising
out of
Transfer of stoc;s and shares
of any company registered
under Companies Act% #//*.
US6B $o. F !,/87aw4Income
Ta'4!"#"V
#"P #"P
Transfer of other capital
assets
#+P #+P
3!5 0ividend
income
0ividend declared by any
company registered under
companies act #/#) or #//*
or any foreign company
!"P !"P
3)5 Bther
income
8For publicly traded
company?
dividend declared less than
#"P or no dividend within
the S2C stipulated time
)-.+P )-.+P
dividend declared Q !"P
and more
n4a !*.-+P
8Bther situation !-.+P !-.+P
$on8publicly traded
company% local authority and
private limited company and
other companies as per sec
!3!"5.
)-.+P )-.+P
But minimum ta' for companies will be Qero *oint 0+e Qero &-@&J( *er
cent of the amount representing such companyDs gross receipts from all
sources for that year.
2&-D Ta, #e3ate
If any publicly traded company other than ban;% insurance% &nancial
institutions declare dividends at the rate of more than !"P% it will en=oy #"P
of ta' rebate on applicable ta'.
If any company engaged in the production of goods and registered under the
companies act #//*% it will en=oy ta' rebate at a rate as mentioned below?
)articulars
#ate of
#e3ate
If production in volume e'ceeds #+P but does not e'ceed
!+P as compared with preceding year.
!.+P of ta' on
such income
If production in volume e'ceeds !+P as compared with
preceding year.
+P of ta' on
such income
If total income includes income received from life
assurance business.
#!.+P on such
income
Bn the amount of dividend received from a company
registered in Bangladesh under the companies act in force
of a body corporate formed in pursuance of an act of
parliament.
#+P on such
dividend
income
Bn the amount spent to perform speci&ed CS6 activities
U6ef? S6B !-"8AI$4IT4!"#" dated "#."-.!"#" e'plained in
#"P of such
e'penditure
Ch8+V
2&-C Cor*orate Social #es*onsi3ilit6 KS#O 22C>AINPITP2&'' dated &:>&F>
2&''L
Allo/a3le li4itB a'imum limit of allowable e'penditure under the head
Corporate Social 6esponsibility 3CS65 is !"P of total income or T;.
.%""%""%"""I whichever is lower. If actual e'penditure e'ceeds this limit% such
amount e'ceeding the limit cannot be used to compute ta' rebate.
Ta, #e3ateB Ta' rebate will be computed Q #"P on such e'penditure for CS6
within the ma'imum limit.
ConditionsB To claim ta' rebate against CS6% the corporate must ful&ll the
following conditions?
#. ust pay salaries and allowances to its wor;er regularly and must have
waste treatment plant if it involves with the production of industrial goodsI
!. ust pay income ta'% :AT and duty timely and must repay institutional
loansI
). Can only donate money to the institutions recogni9ed by the government
for the purpose of CS6I
*. ust ful&ll all rules as per Bangladesh 7abor Act% !"",.
Gowever% no company can charge such e'penditure e'pensed as a result of
CS6 in manufacturing or pro&t and loss account. Such company shall also
submit suEcient documents with 0CT to prove whether the e'penditure
claimed as CS6 is really spent.
Areas of CS#B Finance Act !"## withdraws + areas and inserts ) new areas
of CS6 giving it a total of !" areas e'penditure in which the companies can
claim #"P rebate due to its CS6 activities provided that it does not e'ceed
the ma'imum limit. These areas are?
'- 0onation through any government bodies to reduce the misery of people
of areas a1ected by natural calamities li;e Cyclone% 2arth<ua;e%
Gurricane% Flood etc.I
2- 0onation to the institutions engaged in the establishment of old home and
its managementI
9- 0onation to any social organi9ation engaged in the >elfare of mentally or
physically disable peopleI
:- 0onation to the educational institutions engaged in educating street 4
homeless childrenI
@- 0onation to such institutions engaged in housing pro=ects for people living
in slumsI
E- 0onation to social organi9ations involved in building public awareness on
women8right and against dowry systemI
F- 0onation to organi9ations involved in feeding and rehabilitating orphan 4
homeless childrenI
D- 0onation to organi9ations involved in research on liberation war% campaign
to uphold the spirit of liberation war and welfare of freedom &ghtersI
C- 0onation to organi9ations engaged in maintaining healthy sewerage
systems in Chittagong hill tract% alluvial land% river brea;age areasI
'&- 0onation to organi9ations engaged in the
treatment of hare8lipped% cataractI cancer% leprosyI
''- 0onation to individuals and organi9ations engaged
in providing edicare services to the Acid :ictims
'2- 0onation to speciali9ed hospital providing free
medical services to poor patients and wor; for improving the <uality of
treatment e. g.% hospitals for Cancer% 7ever% Hidney% Thalasemia% 2ye and
Cardio.
'9- 0onation to public universitiesI
':- 0onation to any government recogni9ed
educational institution established for providing educational scholarship
and &nancial assistance to poor freedom &ghtersK children along with
promoting technical and vocational education to the poor meritorious
studentsI
'@- 0onation to government or PB included private
educational institution engaged in establishing lab for training computer or
IT or implementing 2nglish education programsI
'E- 0onation to organi9ations engaged in providing
technical and vocational training to uns;illed or semi8s;illed wor;ers for
e'porting manpowerI
'F- 0onation to organi9ations engaged in the
development of infrastructure and training for sports at national levelI
'D- 0onation to national level museum established or
to be established for preserving the memory of education warI
'C- 0onation to national level institutions engaged in
protecting the memory of the father of the nationI and
2&- 0onation to the Prime inisterKs Gigher 2ducation
Fund.
2&-'& Sco*e of Inco4e
Corporate income should be computed with reference to the following
sections?
Section !.? Income from business or profession
Section !/? 0eductions from income from business or profession
Section )"? 0eduction not admissible in certain circumstances
Gowever% in terms of ta' rate% income is classi&ed as F
a5 Capital gain
b5 0ividend income
c5 Bther income
.or2ed ",a4*les and Solutions
.or2ed ",a4*le '
4s. Mohn orris Inc. is a multinational company doing business in Bangladesh. The
company &led return of income for the assessment year !"##8!"#! showing net
income of T;. )"%""%""". 2'amination of the audited statement of accounts &led with
the return of income revealed the following?
3a5 Salary includes T;. )%)"%""" paid to a 0irector wor;ing at the head oEce at
California. Ge has never visited Bangladesh and no ta'es% as such% has been
deducted at the time of ma;ing the payment.
3b5 Gead oEce e'penses charged T;. ##%""%""". $o evidence could be produced for
this other than GB auditorsK certi&cates.
3c5 Fine of T;.##%""" paid for violation of customs law charged to P L 7 Account.
3d5 Two $issan Petrol Meeps purchased for T;. *+%""%""" during the year.
0epreciation Q !"P charged on the full cost of the vehicles.
3e5 To procure business T;.#"%""%""" has been paid as commission to a local agent.
In ma;ing the payment% the provision of section +)2 of IT Brdinance% #/.* has
not been complied with.
3f5 The company sold a motor vehicle for T;. *%,+%""". Briginal cost of the vehicle
was T;. +%!+%""" and the written down value was T;. )%!+%""". This has not
been reAected in the accounts.
3g5 T;.#+%""" donated to a non8recognised school.
3h5 iscellaneous e'penses include T;. -!%""" paid as salaries to three servants
who are wor;ing at the residence of the anaging 0irector.
3i5 Conveyance e'penses include T;. !%!"%""" paid for the plane fare of the wife
and son of the anaging 0irector for the visit of the neighboring countries.
3=5 Interest e'pense claimed at T;. ))%+"%""". The company has outstanding ban;
loan of T;. !.#" crores. The company advanced T;. -+%""%""" interest8free loan
to a sister8concern in Bangladesh.
From the above information compute the total income of the company for ta'
purpose.
Solution '
MPs Hohn Morris Inc-
Assessment year !"##8!"#!
Particular Amount
3T;.5
Amount
3T;.5
Net inco4e 9=&&&=&&&
Add? Inadmissible 2'penses
0irectors Salary ))"%"""
2'cess 0epreciation Charged +""%"""
0onation not approved #+%"""
2'cess Per<uisites *!%"""
Pro&t on sale of otor Car #*"%"""
Fine ##%"""
Interest on Ban; 7oan #%#/,%*!/
Gead BEce 2'pense #%#""%""" )%))*%*!/
Ad=usted Pro&t ,%))*%*!/
0educt? Gead oEce e'pense F #"P of pro&t ,))%**)
Ta,a3le Inco4e @=F&&=CDE
NotesB
3#5 Salary paid to a non8resident director without deduction of ta' at source is
inadmissible. Ta' at the ma'imum rate of !+P should have been deducted at
source.
3!5 Fine or penalty for breach of law is not allowed.
3)5 Interest on borrowed capital Dis generally allowed when ta;en for business
purposes. But borrowed fund given to the sister concern is not for the business
and therefore% proportionate interest has been disallowed. Ref C0T v 8nited
Breweries.
3*5 Section +)2 of IT% #/.* re<uires deduction at source on the payment of
commission for distribution of assesseeDs products% not for procurement of
business for the company.
3+5 0i1erence between sale proceeds of the motor vehicle and its written down value
of T;. #%*"%""" is a business pro&t.
3,5 Jnder the Third Schedule for depreciation purpose cost of motor vehicle is
restricted to T;. l"%""%""" and !"P depreciation on two cars therefore should be
T;. *%""%""" whereas on T;. *+%""%""" the company claimed T;. /%""%"""%
2'cess of T;. +%""%""" has been added bac;.
3-5 ServantDs salary and travel plane fare are per<uisites to the managing director of
a total sum of T;. !%/!%""" under section )"3e5 per<uisites are allowable up to
T;.!+"%""". Therefore% the e'cess has been added bac;.
3.5 Gead oEce e'penses is allowed up to #"P of the ad=usted pro&t u4s )"3g5.
.or2ed ",a4*le 2
The pro&t and loss account of Care Pharmaceuticals for the year ended on Mune )"
!"## reports net income of ta;a !"%""%""". A careful scrutiny of accounts and
supporting documents revealed the following facts?
3a5 0uring the year the company sold some of its pharmaceutical supplies that
remained unused for a long time in the storeroom. The company sold the supplies
for a loss of ta;a #+"%""" as the e'piry period is very close and charged such loss
against current years pro&t.
3b5 The company recovered ta;a !"%""" from bad debt that was written o1 earlier
and was allowed. The amount so recovered was credited to sundry debtors
account.
3c5 The company had ta;a ."%""" interests due to Bangladesh Shilpa 6in Sangstha in
the year !""* and such interest was shown as allowable deduction in that year.
Still% such interest remains unpaid.
3d5 The company has a trading liability with one overseas company to the tune of
ta;a #%+"%""" which has been totally waived by the overseas company under
special agreement during this year.
3e5 0uring the year% the company sold one e<uipment for ta;a #%."%""" which was
purchased at a total cost of ta;a #%)"%""" and had a written down value of ta;a
/"%""" on the date of sale. The company reports ta;a /"%""" as gain on sale of
e<uipment in the credit side of pro&t and loss account.
3f5 0ue to a sudden &re on the factory building% the e'tended portion of the building
is totally destroyed and compensation received from the insurance company
totaled ta;a !%+"%""". In addition% the company reali9ed an additional sum of
ta;a )"%""" by selling the scrap. The e'tension was constructed at a total cost of
ta;a *%""%""" and depreciation charged to date amounts to ta;a +"%""".
3g5 The company sold a scienti&c apparatus used for scienti&c research for ta;a ."%"""
which was originally purchased at ta;a #%+"%""" and fully depreciated. The sale proceed
is not recorded at all.
3h5 The company have had e'port <uota for e'porting garments to 2J countries. As
the company has recently changed the line of operation 3switched from garments
manufacturing to pharmaceuticals5% it transferred the e'port <uota to another
garments manufacturer for an annual sum of ta;a -"%""". Such income is not
reported at all.
3i5 The company claimed investment allowance for new machinery installed during
the year costing ta;a #"%""%""" which is entitled to accelerated depreciation.
3=5 Bonus and commission to the &eld representatives at the rate of * months pay
ta;a )%""%""" including # monthKs pay as festival bonus. But the general practice
of bonus and commission for the similar business is two months pay.
3;5 Sum of ta;a #%!"%""" paid to an institution for scienti&c research which is not approved
by $B6.
3l5 Sum of ta;a +%""%""" e'pended for establishing a hospital for the bene&t of
employees without any charge. The company has not claimed any other
deduction or allowance.
3m5 Salary of ta;a +%""%""" and rent of ta;a ."%""" were paid without deducting
ta' at source.
3n5 Payment of bro;erage and commission of ta;a ,"%""" made to a non8resident
without deducting ta' at source.
3o5 Annual per<uisites en=oyed by 0% Chairman and + members of BB0 amounts to ta;a
!!%""%""".
3p5 Accounting depreciation charged to the account is ta;a !%+"%""" but ta'
depreciation amounts to ta;a )%""%""" e'cluding the amount of accelerated
depreciation on machinery.
3<5 :alue of the free sample distributed was ta;a !%""%""". Annual turnover during
the year was ta;a ."%""%""".
3r5 2'penditure on foreign travels for holidaying and recreation of the employees and their
dependants to the e'tent of the amount e<uivalent to three months basic salary of ta;a
)%,"%"""I actual e'penditure being ta;a *%""%""" and that the travel was not oftener
than once in two years.
3s5 Sum of ta;a +"%""" e'pended to train employees 3Bangladeshi citi9en5 in
connection with a scheme approved by the Board.
3t5 The company e'pensed a sum of ta;a !%""%""" for visits abroad as a member of
trade delegation sponsored by the government.
3u5 Annual membership fee of ta;a #%+"%""" is paid to Bangladesh Pharmaceutical
Society which is a professional institution recogni9ed by the Board.
3v5 2'penditure on publicity and advertisement% ta;a )%""%""".
3w52ntertainment e'penditure% ta;a #%+"%""".
#e8uiredB Compute the ta'able income of the company.
Solution 2B
Care )har4aceuticals
Status? 6esident Company
Income Cear? !"#"8##
Assessment Cear? !"##8#!
)articulars Ta2a Ta2a
Inco4e fro4 Business or )rofessionB
$et Pro&t as per Pro&t and 7oss Account !"%""%""
"

Add?
Inadmissible 2'penses
2'cess Bonus paid to Field 6epresentatives #%!"%"""
Amount paid for conducting scienti&c research #%!"%"""
Salary and 6ent paid without T0S +%."%"""
Payment to $on8resident without T0S ,"%"""
2'cess amount of Per<uisites .%""%"""
0epreciation !%+"%"""
2'cess cost of Free Sample *"%"""
2'cess amount in Golidaying and 6ecreation ,"%""" !"%)"%""
"
*"%)"%""
"
7ess? 2'penses Admissible but not Shown
Accelerated 0epreciation on achinery .%""%"""
0epreciation )%""%""" ##%""%""
"
!/%)"%""
"

Add?
Income not Credited to P47 Account
Bad 0ebt 6ecovered !"%"""
Interest due to BS6S ."%"""
>aiver of a Trading 7iability #%+"%"""
Sale proceed of Scienti&c Apparatus ."%"""
6eceipt from transferring 2'port \uota -"%""" *%""%"""
))%)"%""
"
Add
?
6evenue Pro&t on Sale of 2<uipment *"%""" *"%"""
))%-"%""
"

7ess?
Income received from $on8Business Geads
(ain on Sale of 2<uipment /"%""" /"%"""
Ad=usted net pro&t before allowance for 2ntertainment
2'penditure
)!%."%""
"
Add? 2ntertainment allowance to be considered
separately
#%+"%"""
)*%)"%""
"
7ess? Admissible 2ntertainment Allowance ..%,""
Ta'able income under the head business ))%*#%*"
"
Non>Business Inco4eB
Capital (ain +"%"""
Total ta'able Income ))%/#%*"
"
NotesB
'- 7oss on sale of supplies is an allowable deduction as such supplies does not fall
under capital asset as per the de&nition given in sec !3#+5.
2- Amount of bad debt recovered will be the current yearKs pro&t and should be
credited to the pro&t and loss account as such bad debt was allowed earlier.
9- As the interest due to Bangladesh Shilpa 6in Sangstha is not paid within three
years% such interest will be deemed to be current yearKs income UJ4s F #/3#+5
3aa5V.
:- As the company received waiver of a trading liability during this year% it should be
shown as deemed income of the year UJ4s F #/3#+5 3b5V.
@- Computation of (ain% Capital (ain and 6evenue (ain from the sale of e<uipment?
)articulars Ta2a Ta2a
#. Sale Proceeds
!. Initial Costs
). Capital (ain 3#8!5
*. >ritten 0own :alue 3!8*5
+. 6evenue (ain
,. (ain on Sale of 2<uipment as shown in P47 Account 3#8
*5
#%."%""
"
#%)"%""
"
/"%"""
+"%""
"
*"%""
"
/"%""
"
E- As the insurance compensation received 3ta;a !%+"%"""5 is less than the amount
of written down value of the building 3ta;a )%+"%"""5% it is not ta'able UJ4s F
#/3#+5V.
F- Sale proceed of the asset used for scienti&c research shall be the deemed income
in the year of sale under section #/3!"5.
D- The rate of accelerated depreciation on machinery for the &rst year is ."P.
C- Calculation of amount of e'cess bonus paid to &eld representatives? Payment for
# months% ta;a ,"%"""3ta;a )%""%"""4+5. So% allowable bonus will be ta;a
#%."%""" 3! months bonus and # months festival bonus5. 2'cess amount paid is
ta;a #%!"%""" 3ta;a )%""%""" F ta;a #%."%"""5.
'&- The amount e'pensed for hospital is allowable deduction as it charges nothing
against services from the employees and the company claims no deduction or
allowance in this regard.
''- Allowable amount of per<uisites to 0% Chairman and + 0irectors will be ta;a
#*%""%""" 3ta;a !%""%""" _ -5. Thus% e'cess amount of per<uisite is ta;a
.%""%""" 3ta;a !!%""%""" F ta;a #*%""%"""5 that is not allowed.
'2- The allowable rate of free sample for a pharmaceutical industry is !P for
annual turnover upto ta;a + crore. The turnover of the company were ta;a
."%""%""" and free sample allowed is ta;a #%,"%""" 3!P of ta;a ."%""%"""5.
Thus% e'cess amount was ta;a *"%""" 3ta;a !%""%""" F ta;a #%,"%"""5 that is not
allowed.
'9-
Three 3)5 moths basic salary ta;a )%,"%"""
)4*
th
of actual e'penditure 3)4*
th
of *%""%"""5 )%""%"""
2'cess amount paid that is not allowed ,"%"""
$ote #*? Amount of admissible entertainment allowance?
Bn the &rst ta;a #"%""%""" Q *P ta;a *"%"""
Bn the balance ta;a !*%)"%""" Q !P *.%,""
Bn total income of ta;a )*%)"%""" ta;a ..%,""
Assess4ent of Ban2s
According to Income Ta' Brdinance% #/.*% ban;s may have earnings from two
di1erent sources?
a5 Income from business or professionI and
b5 Interest on securities.
To assess the income of a ban;% some special points are re<uired to be considered
carefully.
'- )ro+ision for 3ad and dou3tful de3t and interest thereon made by
a commercial ban; including the Bangladesh Hrishi Ban; and the
6a=shahi Hrishi Jnnayan ban;% is allowed as deductions to the e'tent
of #P of the total outstanding loan including interest thereon or the
amount of actual provision for such bad and doubtful debt and interest
thereon in the boo;s of the assessee% whichever is less. If any amount
out of the amount so deducted is ultimately recovered the same shall
be deemed to be a pro&t of the year in which it is recovered.
USec!/3'viiiaa5V
2- >hen a ban;ing company operating under Ban; Company Act% #//#
shows pro&t in its return of income at an amount e'ceeding +"P of its
capital and reserve% the ban; shall pay an e,cess *ro0t ta, for that
year at the rate of #+P on such e'cess pro&t 3Sec #,C5. For the
purpose of capital and reserve computation% Bangladesh Ban; B6P0
circular is relevant.
9- In the case of Bangladesh Shilpa Ban;% Bangladesh Shilpa 6in
Sangstha% Investment Corporation of Bangladesh and any commercial
ban; including Bangladesh Hrishi Ban; and 6a=shahi Hrishi Jnnayan
Ban;% the income by way of interest in relation to such categories of
bad and doubtful debt as the Bangladesh Ban; may classify% shall be
ta'ed in the income year in which it is credited to the pro&t and loss
account or in the income year in which it is actually received%
whichever is earlier. USec !.3)5V
.or2ed ",a4*le 9
ABC Ban; 7td.% a ban; incorporated in Bangladesh% has submitted the following
audited income statement showing pro&t before ta' of TH !+.%""" for the income
year !"#"8##. Cou have been provided with the notes supporting the &gures to
compute the ta' liability of the ban; for the respective assessment year?
)articulars
A4ount
T2-(
A4ount
T2-(
Interest Income
Interest Paid on 0eposits L Borrowings
etc.
$et Interest Income
Income from investments
Commission% 2'change and Bro;erage
Bther Bperating Income 3!"Z,#5
Total O*erating Inco4e A(
Less4 1perating @xpenses
Payment to 2mployees
Postage and Telegrams
6ent% 6ates L Insurance% etc.
7egal Charges
0irectorsK Fees
AuditorsK Fees
6epairs to Premises
Stationery% Printing and Advertisements
Stamps
Charges on 7oan 7osses
Bther 2'penses of Business
Total O*erating ",*enses B(
Pro&t 4 37oss5 before Provision 3C[A8B5
Provisions4
Speci&c Provision
(eneral Provision
Total Provision 305
Total )ro0t P Loss( 3efore Ta,es C>
D(
!#+%"""
+%"""
##%"""
!%"""
!%"""
#%"""
,"%"""
-!%"""
)%"""
+%"""
#+%"""
#!%"""
)"%"""
,+"%"""
!""%"""
:@&=&&&
#""%"""
,"%"""
.#%"""
EC'=&&&
9C'=&&&
)""%"""
*!%"""
2@D=&&&
Su**orting Infor4ationB
#. Accounting depreciation charged was T;. +"%""" whereas ta' depreciation is T;.
."%""".
!. Inadmissible e'penses have been found as follows?
Per<uisites T;. +"%"""
Printing and Advertisement 3capital nature5 *"%"""
Bther e'penses 3ta' is not deducted at sources5 #"%"""
). Balance Sheet 3e'tract5?
Paid up Capital T;. !%"""%"""
Statutory 6eserve -+"%"""
6etained 2arnings !+"%"""
0ividend 2<uali9ation Fund !""%"""
*. Classi&cation of 7oans and Advances?
Jnclassi&ed T;. !%#""%"""
Sub8standard .+"%"""
0oubtful #%#*+%"""
Bad47oss #"%!+"%"""
+. 2ntertainment 2'penses amounts to TH ,+%""" for the period.
Solution 9B
ABC Ban2 Li4ited
Assess4ent YearB 2&''>'2
Co4*utation of Ta,a3le Inco4e and Ta, Lia3ilit6
)articulars Ta2a Ta2a
$et Pro&t as per audited accounts
7ess? Income to be considered separately
Income from Investment
Add? 2'penses to be considered separately
Accounting 0epreciation
Provision for Bad and 0oubtful 0ebt
2ntertainment 2'penses
Add? Inadmissible 2'penses
Per<uisites
Printing and Advertisement
Bther 2'penses
7ess? 2'penses admissible but under separate rates
Ta' 0epreciation
Provision for Bad and 0oubtful 0ebt 3$ote #5
Add? Income from Investments
7ess? 2ntertainment 2'penses 3$ote !5
Total Ta,a3le Inco4e
+"%"""
*!%"""
,+%"""
!+.%"""
#""%"""
#+.%"""
#+-%"""
+"%"""
*"%"""
#"%"""
)#+%"""
#""%"""
."%"""
*!%"""
*#+%"""
#!!%"""
!/)%"""
#""%"""
)/)%"""
#+%-!"
9FF=2D&
Calculation of Ta, Lia3ilit6B
Ta'able Income? T;. )--%!." Q *+P T;. #,/%--,
Ta' on 2'cess Pro&t Q #+P 3$ote )5 nil
$et Ta' 7iability T;. #,/%--,
NotesB
'- Total loans outstanding irrespective of classi&cations amounted to T;. #*)%*+%""".
Thus% #P of the loan amounts to #*)%*+". But% actual provision made amounts to
T;. *!%""" which is less and therefore allowed.
2- The rate for allowable entertainment e'penses is *P on income of &rst T;.
#"%""%""" and !P on rest% if any. Thus% in this case entertainment e'pense will be
T;. #+%-!" 3*P of T;. )/)%"""5.
9- Calculation of 2'cess Pro&t under section #,C of the IT Brdinance #/.*?
Tier #? Core Capital
Paid up capital T;. !"%""%"""
Statutory 6eserve -%+"%"""
6etained 2arnings !%+"%""" T;.
)"%""%"""
Tier !? Supplementary Capital
(eneral Provision on Jnclassi&ed 7oan 3#P5 T;. !#%"""
0ividend 2<uali9ation Fund !""%"""
!%!#%"""
Total Capital T;. )!%!#%"""
Pro&t? +"P thereof T;. #,%#"%+""
Actual Pro&t T;. )%--%!."
2'cess Pro&t nil
Assess4ent of Leasing Co4*anies
A lease is an arrangement whereby the lessor confers the right to use an asset in
return for a payment or series of payments. In a lease transaction legal ownership of
the leased assets rests with the lessor through in substance the leasee is the owner
for the purposes.
Basically there are two types of lease 3i5 &nance lease 3ii5 operating lease.
A lease is classi&ed as a &nance lease if it transfers substantially all the ris;s and
rewards incidental to ownership. All other leases are classi&ed as operating leases.
7essee under a &nance lease is the owner of the asset for all practical purposes
e'cepting that in legal form he is not the owner until the asset is &nally transferred
to him at the end of the lease period. Bperating leases are =ust li;e hire purchase
transactions and the lessee is the owner in no sense of the term% legal or economic.
So4e S*eci0c )ro+isions usa3le for Leasing Co4*aniesB
3i5 Since ownership of the asset remains with the lessor in both types of lease%
under our ta' law he would be entitled to claim depreciation allowances on the
<uali&ed assets leased out.
3ii5 >hole of rental received is credited as lessorDs income without di1erentiating
capital receipts thereon. For the lessee all the rents payable are also treated as
allowable e'penditure. If rents received and rents paid neutrali9e each other for
ta' purpose% it is only the ta' depreciation that is allowed to the lessor. Any way
there is no revenue loss.
3iii5 Section !3)"5 3b5 de&nes Xfair value of assetsK leased by leasing companies or
&nancial institution. The residual value of leased asset on termination or
maturity of lease agreement% plus the rental realised during the lease period
shall not be less than the cost of ac<uisition. In other words% no capital loss or
balancing allowance in the case of leased assets is allowed.
3iv5 Jnder section !/3v5% transfer to a special reserve not e'ceeding +P of the total
income until the reserve fund e<uals the paid up capital of the &nancial
institution is an admissible deduction.
3v5 The third schedule% Para ) Sub8para *? $o allowance on depreciation shall be
made for leasing company on such machine% plant% vehicle or furniture given to
any lessee on &nancial lease.
.or2ed ",a4*le :B
Prime 7easing is a public limited company listed with 0ha;a Stoc; 2'change. It has
recently submitted its income ta' return for the accounting year ending on )#
0ecember% !"#" showing a net pro&t before ta' of T;. ##%)-%!+%""".
%urther e,a4ination of the 0le= records and docu4ents re+ealed the
follo/ingB
3a5 0epreciation on leased assets charged in the accounts of T;. )%."%+"%""" and
loss on disposal of leased assets was T;. !/%..%""" this arose out of the shortage
of residual value of returned or repossessed assets plus rentals received on the
lease of these assets over the original cost of the assets.
3b5 Provision for used assets and term &nance has been made in the accounts at T;.
+#%)+%+"" and T;.#/%#)%/"" respectively. This has been provided in accordance
with FI0 Circular $o. . issued by the Bangladesh Ban;.
3c5 Ta' depreciation for the relevant year is +%.+%""%""".
3d5 Balances of statutory reserve and paid up share capital on #.#.!"#" were T;.
#%.,%""%""" and T;.#!%""%""%""" respectively.
3e5 2'cess per<uisites amounted to T;. ,%/+%""" and legal e'penses included T;.
."%""" for professional fees for the ac<uisition of companyDs new oEce at
0hanmondi.
3f5 $et pro&t included dividend received on investments of T;. #/%/.%""".
Cou are re<uired to compute the 3a5 total income and 3b5 ta' liability of the company
for the relevant assessment year.
Solution :
Prime 7easing
Assessment Cear? !"##8!"#!
Co4*utation of Total Inco4e and Ta, lia3ilit6
Particulars Amount
3T;.5
Amount
3T;.5
$et income ##%)-%!+%"
""
7ess? 0ividend Income 3to be considered separately5 #/%/.%"""
##%#-%!-%"
""
Add? Inadmissible 2'penses
Accounting 0epreciation on leased assets )%."%+"%""
"
0isallowed loss on disposal of leased assets !/%..%"""
Provision for used assets +#%)+%+""
Provision for term &nance #/%#)%/""
2'cess per<uisites ,%/+%"""
7egal fee for capital asset ."%"""
*%..%,!%*"
"
,%!.%,*%,"
"
7ess? Ta' depreciation +%.+%""%""
"
Business Income *)%,*%,""
Income from dividend #/%/.%"""
Total income ,)%,!%,""
7ess? #"P transfer to statutory reserve ,%),%!,"
+-%!,%)*"
Ta, Lia3ilit6 Co4*utation
Ta' on dividend income #/%/.%""" Q !".""P )%//%,""
Ta' on Balance income *)%,*%,"" Q *!.+"P #.%+*%/+
+
,)%,!%,"" !!%+*%++
+
NotesB
3#5 7oss on disposal of leased assets is not allowed.
3!5 $o provision for bad or doubtful lease or &nance is allowed.
3)5 Ta' on dividend income is Q#+P for the company assesee.
Assess4ent of Insurance Co4*anies
It is a common ;nowledge that the true pro&t of life insurance business cannot
correctly be determined under the ordinary method of accounting. Gence the
Brdinance has provided for a special method of computing the pro&ts of a company
doing insurance business. By virtue of section !.3!53a5 the assessment of insurance
company is completely governed by the rules contained in the Fourth Schedule of
the Brdinance. Therefore% the following provisions are implicitly e'cluded while
computing the pro&ts of an insurance company?
a. Sections !! and !) relating to the computing of income chargeable under the
head TInterest on SecuritiesT.
b. Sections !* and !+ relating to the computation of income chargeable under the
head TIncome from Gouse PropertyT.
c. Sections !.% !/ and )" relating to the computation of pro&ts and gains from
business or profession.
d. Sections )# and )! relating to the computation of income chargeable under the
head Ocapital gainsT.
e. Section )) and )* relating to the computation of income under the head TIncome
from Bther SourcesT.
f. Section ,! relating to the giving of credit of ta' deducted at source.
Thus the pro&ts and gains of insurance business from all sources are to be computed
arti&cially as one income in accordance with the provisions in the Fourth Schedule
and not under di1erent heads of income.
In the Schedule assessment of insurance business has been discussed under three
di1erent heads?
Para ! ?Computation of pro&ts and gains of life insurance business
Para , ?Computation of pro&ts and gains of other insurance business
Para - ?Pro&ts and gains of non8resident person
Assess4ent of Life Insurance BusinessB
The pro&t and gains of life insurance business are to be ta;en as the greater of the
following?
3a5 $et e'ternal incomings i.e. gross e'ternal incomings of the income year from
that business less the management e'penses of that yearI
3b5 Annual average surplus% i.e. the annual average of the surplus arrived at by
ad=usting the surplus or de&cit disclosed by the actuarial valuation in respect
of the last inter valuation period ending before the commencement of the
assessment year sub=ect to the following e'clusions.
3i5 any surplus or de&cit included therein which was made in any earlier
inter valuation period and
3ii5 any e'penditure or allowance which is not deductible under the provisions
of sections !/ and )" in computing income chargeable under the head
DIncome from business or professionD.
Thus the assessable pro&ts under the &rst method would vary from year to year. The
annual average actuarial surplus under the second method would be constant during
the particular inter valuation period.
$ross e,ternal inco4ingsB
The e'pression Dgross e'ternal incomingsD is de&ned in Para / of the Schedule as
meaning the full amount of incomings from interest% dividends% &nes and fees and all
other incomings from whatever source derived including pro&ts from revisions and
on the sale or granting of annuities but e'cluding the following?
3a5 premium received on policyI
3b5 interest and dividends in any annuity funds and
3c5 pro&ts on the realisation of investments
Manage4ent ",*ensesB
The e'pression Tmanagement e'pensesT has been de&ned in Para / of the Schedule
as meaning the full amount of the e'penses including commissions% incurred
e'clusively for the purpose of life insurance business plus a fair proportion of the
e'penses incurred in the general management of the whole business. The following
e'penses are e'cluded from the above de&nition?
3a5 bonuses or other sums paid to or reserved on behalf of policyholders
3b5 depreciation of and losses on the realisation of investments and
3c5 any other e'penditure or allowance other than those allowed J4S !/.
Gowever% the ma'imum limit of such management e'pense is prescribed in Para !?
3a5 -.+ percent of the premium on single premium life insurance policies% Plus
3b5 -.+ percent of the &rst yearDs premiums on policies under which less Plus
than #! annual premiums are payable%
3c5 /" percent of the &rst yearDs premium in respect of all other life
insurance policies%
Plus
3d5 #! percent of all renewal premiums received during the income year.
Annual a+erage sur*lusB
The other alternative method of computing pro&ts of a life insurance business is
based on annual average surplus determined by the actuarial valuation. Sub=ect to
certain ad=ustments the actuarial valuation forms the basis of computation of pro&ts
or gains.
a( A4ount *aid to or reser+ed for or e,*ended on 3ehalf of the
*olic6holdersB
The &rst ad=ustment to be made to the surplus is to allow -+P of the amounts paid
to or reserved for or e'pended on behalf of policyholders as a deduction there from.
If the amount so ;ept for policyholders which was allowed as a deduction in the past
is not actually so paid% the amount so allowed in the past will be added bac; to the
pro&ts for the period in which the amount ceases to be so reserved.
3( A**reciation or de*reciation of in+est4entsB
Any amount either written o1 or reserved by the insurance company in the accounts
or through the actuarial valuation balance to meet depreciation or loss on the
realisation of investments should be allowed if the same is wiped out by a rise in a
subse<uent year either within or after the same intervaluation period.
c( Interest on ta, free $o+ern4ent Securities
Interest received in respect of any securities of the (overnment which have been
issued with the condition that interest thereon shall not be liable to ta'.
Credit for ta, deducted at sourceB
>here for any year an assessment of the pro&ts and gains of life insurance business
is made in accordance with the annual average of a surplus disclosed by a valuation
for an inter8valuation period e'ceeding #! months% then in computing the ta'
payable for that year% credit for ta' deducted at source shall not be given u4s ,! for
the ta' paid in the income year% but credit shall be given for the annual average of
the ta' paid from interest on securities or otherwise during such period.
.or2ed ",a4*le @
According to the last actuarial valuation at )# 0ecember !"#"% the Pioneer 7ife
Insurance Co. 7td. had a surplus of T;. #"%""%""". There was a de&cit of T;. )%""%"""
in the preceding actuarial valuation. ,"P of the surplus was reserved for bonus to
the policyholders. The company had the following income in the income year !"#"8
!"##?
#. Premium T;. !"%""%"""
!. Interest on ta' free government securities T;. #%""%"""
). 0ividends T;. #%+"%"""
*. Fines and fees T;. ."%"""
+. Pro&ts on sale of shares T;. /"%"""
,. Pro&ts on granting annuities and reversion T;. #%+"%"""
anagement e'penses claimed and admitted by the 0CT are T;. !%+"%""". 0uring
the undervaluation period the company paid income ta' at source of T;. )%""%""".
Some of the share investments have depreciated in value during the year by T;.
,"%""". 0etermine the income of life insurance business of the company for the
income year !"#"8!"##.
Solution @
)ioneer Life Insurance Co- Ltd.
Assessment Cear? !"##8#!
Actuarial sur*lusB Amount
3T;.5
Surplus as per !"#" valuation #"%""%"""
Add? 0e&cit on earlier valuation )%""%"""
#)%""%"""
Add? Income ta' deducted at source )%""%"""
#,%""%"""
7ess? 6eserve for bonus 3-+P ' #"%""%""" ' ,"P5 *%+"%"""
Ad=usted surplus ##%+"%"""
Annual average surplus !%)"%"""
Add? Pro&t on sale of shares /"%"""
)%!"%"""
7ess? 0epreciation of share investment ,"%"""
Ad=usted annual average !%,"%"""
$ross e,ternal earnings
Interest on securities #%""%"""
0ividends #%+"%"""
Fines and Fees ."%"""
Pro&t on annuities and reversions #%+"%"""
*%."%"""
7ess? anagement e'penses !%+"%"""
$et e'ternal earnings !%)"%"""
For income ta' purpose for the assessment year !"##8!"#!% ad=usted annual
average of T;. !%,"%""" being higher of the two would be the assessed amount.
Assess4ent of $eneral Insurance Co4*an6
3#5 Forth Schedule governs the computation of increase of insurance business both life
and general.
3!5 Admissibility of business e'penditure section !/ and inadmissibility under
section )" apply in general insurance business too.
3)5 Para ,3!5 of Forth Schedule permits a general insurance company to transfer
#"P of the net premium income of that year to a fund created to meet
e'ceptional losses and such transfer is an admissible deduction.
3*5 Para ,3)5 of Forth Schedule sets the mechanism for the upper limit of the fund
which is% the amount of the fund should be e<ual to the premium income of the
year or average premium of the immediate ) years preceding whichever is
higher.
.or2ed ",a4*le E
Following is the pro&t and loss account of Sonar Bangla Insurance Co. 7td. for the
year )# 0ecember !"#"?
A4ount A4ount
0irectorsD fee *.%""" Interest% dividend% rent #%/-%!,%"
!/
Audit fees #%)+%""" Pro&t transferred from
other
#%-!%-)%/
+!
6egistration% renewal etc. !%"+%))# revenue accounts
Advertisement )!%*"%!+
#
Bther Income /%.)!
0epreciation -%/!%#!-
Interest on overdraft #%.#%#/.
Balance transferred to
Appropriation Account )%!)%+-%/
",
)%-"%"/%.
#)
)%-"%"/%.
#)
Further scrutiny of the relevant papers% &les and documents revealed the following?
3#5 (ross premium received during the year was T;.#!+,"-*!, and in three years
immediately preceding were T;. #)#!#!)".% T;. #),..-".+ and T;.
#)++."#"/ respectively.
3!5 $et premium income of the year was T;. ,***#!/, and the balance brought
forward on reserve for e'ceptional loss was T;.#"#/*+-!".
3)5 Accounting depreciation has been T;. -/!#!- whereas as per ta' law this has
been computed as T;. /#/"!/.
3*5 (ratuity provided in the accounts was for T;. --/.*+ and paid actually T;.
,%!+%.,".
3+5 Analysis of the dividend% rent etc. revealed that an amount of T;. ,*..!.*
being interests on various ban; deposits has been included therein.
Calculate the ta'able pro&t and ta' liability of the company for the relevant
assessment year?
Sonar Bangla Insurance Co- Ltd-
Assessment Cear? !"##8!"#!
Particulars A4ount T2-( A4ount T2-(
$et pro&t per accounts )%!)%+-%/",
7ess? Income for separate treatment
0ividends #%)!%)-%-*+
Interest ,*%..%!.* #%/-%!,%"!/
#%!,%)#%.--
Add? Inadmissible deductions
Accounting depreciation -%/!%#!-
(ratuity provision -%-/%.*+ #+%-!%"!!
#%*!%")%.//
7ess? Ta' depreciation /%#/%"!/
(ratuity actually paid ,%!+%.,"
6eserve for e'ception losses ,*%**%#)"
-/%./%"#/
Business Income ,!%#*%.."
0ividend Income #%)!%)-%-*+
Income from other source8interest etc. ,*%..%!.*
Total Income !%+/%*"%/"/
Co4*utation of Ta, Lia3ilit6
Ta' on dividend income #%)!%)-%-*
+
Q !".""P !,%*-%+*
/
Ta' on Balance income ,!%#*%.." Q *!.+"P !,%*#%)!
*
Ta' on other income ,*%..%!.* Q *!.+"P !-%+-%+!
#
Total Ta' 7iability ."%*,%)/
*
NotesB
3#5 0ividends received by a company assessee is ta'able Q!"P
3!5 (ratuity actually paid is allowed.
3)5 6eserve for e'ceptional losses.
Current Cear Preceding Three Cears
!""/ !"". !""-
(ross premium
income
#!%+,%"-%*!, #)%++%."%#"/ #)%,.%.-%".
+
#)%#!%#!%)
".
Average of ) years T;.#)%*+%+/%.)*
Since average of three years premium income is higher than the premium of
T;.#!+,,"-*!, 3current yearDs gross premium5% the reserve for e'ceptional losses
can be built up to that amount.
Bpening balance in e'ceptional loss reserve TH.
#"%#/%*+%-!"
Transfer admissible 8 l "P of net premium income of T;. ,***l!/, ,*%**%#)"
Balance carried forward #"%.)%./%.+"
Non>resident carr6ing insurance 3usiness in Bangladesh B 3Para -5 the pro&ts
and gains of the branches in Bangladesh of a nonresident insurance company may
be deemed to be the proportion of the total world income of the company
corresponding to the proportion which its premium income derived from Bangladesh
bears to its total premium income. The total world income of nonresident life
insurance companies whose pro&ts are periodically ascertained by actuarial
valuation shall be computed in the manner laid down in these paragraphs for the
computation of pro&ts and gains of the life insurance business carried on in
Bangladesh.
For e'ample% A7ICB Bangladesh 7td. is incorporated in JSA and it carries on
insurance business in Bangladesh for several years through branches. For the year
ended )# arch !"## its audited world income has been ta;a /+" million against a
total premium income for the same year of ta;a )!+" million. In Bangladesh it
earned premium income of ta;a ," million. Therefore% pro&ts earned in Bangladesh is
computed as ta;a #-.+* million 3/+"4)!+"_,"5.
Chapter !#
Lia3ilit6 in S*ecial cases and
Assess4ent of Non>residents
Contents
Introduction
2'amination conte't
To*ic List
!#.# 7iability of representative in certain cases
!#.! Persons to be treated as agent
!#.) 6ight of representative to recover ta' paid
!#.* 7iability of &rm or association for unrecoverable ta' due from partners
or members
!#.+ 7iability of partners% etc.% for discontinued business of a &rm% etc.%
!#., 7iability of 0irectors for unrecoverable ta' of private companies
!#.- 7iability of li<uidator for ta' of private companies under li<uidation
!#.. Lia3ilit6 to ta, in case of shi**ing 3usiness of non>residents
!#./ 7iability to ta' in case of air transport business of non8residents
Introduction
Learning o3<ecti+es
0e&ne the liability of a representative in certain cases in respect of
income.
6ecognise the persons to be treated as agent.
Identify the right of representative to recover ta' paid.
6ecogni9e the ta' liabilities of di1erent persons such as &rms or
association% partners% directors% li<uidator in certain cases
0e&ne the liability to ta' in case of shipping and air transport business of
non8residents.
)ractical signi0cance
There is no option to avoid the liability for payment of ta'. In certain cases the
representative of any person in respect of income is liable to ta;e some
de&ned responsibilities especially for assessment. There is a list of persons
who shall be treated as agent in relation to a non8resident. 6epresentative
who paid ta' on account of his liability has some right to recover the sum so
paid from the person on whose behalf it is paid.
There are di1erent types of de&ned liabilities stated in this chapter. Firm or
association has liability for unrecoverable ta' due from partners or members.
Partners% etc.% have liability for discontinued business of a &rm% etc. 0irectors
have liability for unrecoverable ta' of private companies. 7i<uidator has
liability for ta' of private companies under li<uidation. The principal or the
agent has liability to ta' in case of air transport business of non8residents.
Sto* and thin2
It is obvious that liability of ta' cannot be ignored under ta' law. The agents
or representative or other persons in certain cases are liable to pay ta' on
behalf of other persons.
.or2ing conte,t
The agents or representative or other person as de&ned in this chapter in
relation to liabilities are sometime see;ing ta' e'pert support as clients to
resolve this issue. Accountants can give support to these clients. As ta'
e'perts accountants can also help in recovering ta' liability from the
representative or agents by providing his e'pertise in this regard.
S6lla3us lin2s
The topics covered in this chapter are fundamental to your understanding of
income ta'.
Cou will be using this ;nowledge again when you tac;le the Ta'ation paper
later on in the Professional Stage and it will also underpin the technical
aspects at the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Identify the liability of a representative in certain cases in respect of
income.
Identify the persons to be treated as agent.
Illustrate the right of representative to recover ta' paid.
7iability of &rm or association for unrecoverable ta' due from partners or
members.
ention the liability of partners% etc.% for discontinued business of a &rm%
etc.
0e&ne the liability of directors for unrecoverable ta' of private companies.
Identify the liability of li<uidator for ta' of private companies under
li<uidation.
0e&ne the liability to ta' in case of shipping business of non8residents.
0e&ne the liability to ta' in case of air transport business of non8residents.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to remember to recogni9e the di1erent types of liabilities of
representative% agents and persons in di1erent cases.
2'-& LIABILITY IN S)"CIAL CAS"S AND ASS"SSM"NT O% NON>#"SID"NTS
Section O+er+ie/
There is no option to avoid the liability for payment of ta' under ta' law.
7iability shall be ta;en by the representative or agent in certain cases.
There is a list of persons who shall be treated as agent of a non8resident.
6epresentative may have the right to recover the ta' he paid.
There are some procedures to recover ta' liabilities of di1erent assessee.
$on8residents doing shipping business in Bangladesh will pay ta'es Q .P
that is considered as the &nal discharge of ta' liability.
$on8residents doing air transport business in Bangladesh will pay ta'es Q
)P that is considered as the &nal discharge of ta' liability.

2'-' Lia3ilit6 of #e*resentati+e in Certain Cases
3#5 2very person who is a representative of another person in respect of any
income for the purpose of this section shall% in respect of such income%
3a5 be sub=ect to the same duties% responsibilities and liabilities as if
such income were received by% or accruing to% or in favour of% him
bene&ciallyI
3b5 be liable to assessment in his own nameI and
3c5 be deemed% sub=ect to other provisions of this Chapter% to be the
assessee for all purposes of this Brdinance.
3!5 A person% who is assessed in pursuance of this section as a representative
in respect of any income% shall not% in respect of the same income% be
assessed under any other provision of this Brdinance.
3)5 $othing in this section shall prevent either the direct assessment of the
person for whom% or on whose behalf or for whose bene&t% the
representative is entitled to receive any income or recovery from such
person of the ta' payable in respect of such income.
As per section /+% the following categories of persons may act as the
representative of persons as speci&ed?
6epresented by 8 6epresentative of 8
the guardian or manager or trustee minor% lunatic or idiot
the Administrator8(eneral% the
BEcial Trustee% or any receiver%
manager or other person appointed
by or under any order of a Court%
Any person who actually earns
the trustee or trustees appointed
under a trust
Any person who actually earns or
recipient of bene&ts
Agent $on8resident
2'-2 )ersons to 3e Treated as Agent B Section M CE
#5 For the purposes of this Brdinance% the following persons shall% sub=ect to
the provisions of sub8section 3!5 and 3)5 be treated as agent in relation to
a non8resident% namely 8
3a5 any person in Bangladesh 8
i. who is employed by or on behalf of% the non8residentI
ii. who has any business connection with the non8residentI
iii. who holds% or controls the receipts or disposal of any money
belonging to the non8residentI
iv. who is a trustee of the non8residentI or
v. from or through whom the non8resident is in receipt of any income%
whether directly or indirectly I
3b5 any person whether a resident or non8resident% who has ac<uired% by
means of transfer% a capital asset in Bangladesh from a person residing
outside BangladeshI and
3c5 any person who% for any other reasonable cause% is declared or treated
as an agent of the non8resident.
!5 An independent bro;er in Bangladesh% who in respect of any transaction%
does not deal directly with% or on behalf of% a non8resident principal but
deals with% or through% a non8resident bro;er% shall not be treated as an
agent in relation to a non8resident in respect of such transaction if 8
3a5 the transaction is carried on in the ordinary course of business through
the non8resident bro;erI and
3b5 the non8resident bro;er is carrying on such transaction in the ordinary
course of business.
)5 $o person shall be treated under this Brdinance as an agent in relation to
a non8resident unless he has been given by the 0eputy Commissioner of
Ta'es an opportunity of being heard.
2'-9 #ight of #e*resentati+e to #eco+er Ta, )aid B Section M CF
3#5 A representative who% on account of his liability under section F /+% pays
any sum% shall be entitled to recover the sum so paid from the person on
whose behalf it is paid% or to retain out of any moneys that may be in his
possession or may come to him in his possession or may come to him in
his capacity as a representative% an amount e<uivalent to the sum so paid.
3!5 A representative% or any person who apprehends that he may be assessed
as a representative% may retain% out of any money payable to the person
3hereinafter referred to as the bene&ciary5 on whose behalf he is liable to
ta' under section /+% a sum not e'ceeding his estimated liability.
3)5 In the event of any disagreement between the bene&ciary and the
representative or% as the case may be% the person apprehensive of being
assessed as representative% as to the amount to be retained under sub8
section 3!5% such representative or person may secure from the 0eputy
Commissioner of ta'es a certi&cate stating the amount to be so retained
pending the settlement of the liability and the certi&cate so obtained shall
be the warrant for retaining that amount.
2'-: Lia3ilit6 of %ir4 or Association for Unreco+era3le Ta, Due fro4
)artners or Me43ersB Sec CD
3#5 >here any ta' payable by partner of a &rm or a member of an association
of persons in respect of his share of the income from the &rm or
association% as the case may be% cannot be recovered from him% the
0eputy Commissioner of Ta'es shall notify the amount of the ta' to the
&rm or association.
3!5 Jpon noti&cation of the amount of ta' under sub8section 3#5% the &rm or
association so noti&ed shall% notwithstanding anything contained in any
other law for the time being in force% be liable to pay the said ta' and
shall% for the purposes of recovery thereof% be deemed to be an assessee
in respect of such ta'I and the provisions of this Brdinance shall apply
accordingly.
2'-@ Lia3ilit6 of )artners= etc-= for Discontinued Business of a %ir4= etc- B
Sec CC
3#5 >here any business or profession carried on by a &rm or an association of
persons has been discontinued% or where a &rm or an association of
persons is dissolved% assessment of the total income of the &rm or
association may be made as if no such discontinuance or dissolution had
ta;en placeI and all the provisions of this Brdinance shall% so far as may
be% apply accordingly.
3!5 >here an assessment is made under sub8section 3#5 in respect of a &rm or
an association of persons% every person who was a partner of the &rm or
member of the association at the time of discontinuance of business% or as
the case may be% dissolution of the &rm or association% and the legal
representative of any such person who is deceased% shall be =ointly and
severally liable for the amount of ta' found payable by the &rm or
association upon such assessment and shall% for the purpose of recovery of
such ta'% including penalty and other sum payable% be deemed to be an
assesseeI and the provisions of this Brdinance shall apply accordingly.
2'-E Lia3ilit6 of Directors for Unreco+era3le Ta, of )ri+ate Co4*aniesB Sec
'&&
3#5 >here any private company is wound up and any ta' assessed on the
company% whether before% or in the course of% or after its li<uidation% in
respect of any income of any income year cannot be recovered% every
person who was% at any time during the relevant income year% a director of
that company% shall% notwithstanding anything contained in the Companies
Act #/#) 3:II of #/#)5 or Companies Act #//* 37aw $o. #.% #//*5% be
=ointly and severally liable to pay the said ta' and shall% for the purposes of
recovery thereof% be deemed to be an assessee in respect of such ta'I and
the provisions of this Brdinance shall apply accordingly.
3!5 $otwithstanding the provisions of sub8section 3#5% the liability of any
person thereunder in respect of the income of a private company shall
cease if he proves to the 0eputy Commissioner of Ta'es that non8recovery
of ta' from the company cannot be attributed to any gross neglect%
misfeasance or breach of any duty on his part in relation to a1airs of the
company.
2'-F Lia3ilit6 of Li8uidator for Ta, of )ri+ate Co4*anies Under
Li8uidationB Sec '&'
3#5 A li<uidator of a private company which is wound up% whether under the
orders of a court or otherwise% shall% within thirty days after he has
become such li<uidator% give notice of his appointment as such to the
0eputy Commissioner of Ta'es having =urisdiction to assess the company.
3!5 The 0eputy Commissioner of Ta'es shall% after ma;ing such en<uiries or%
calling for such information as he may consider necessary% notify to the
li<uidator% within three months of the date of receipt of the notice under
sub8section 3#5% the amount which% in his opinion% would be suEcient to
provide for any ta' which is then% or is li;ely thereafter to become% payable
by the company.
3)5 Bn being noti&ed under sub8section 3!5% the li<uidator shall set aside an
amount e<ual to the amount so noti&ed and shall not% before he sets aside
such amount% part with any of the assets of the company e'cept for the
purpose of payment of ta' payable by the company or for ma;ing
payment to secure such creditors as are entitled under the law to priority
of payment over debts due to the (overnment on the date of li<uidation.
3*5 The li<uidator shall be personally liable for payment of the ta' on behalf of
the company to the e'tent of the amount noti&ed% if any% under sub8
section 3!5% if he 8
a5 fails to give notice as re<uired by sub8section 3#5? or
b5 contravenes the provisions of sub8section 3)5
3+5 >here there are more li<uidators than one% the obligations and liabilities of
a li<uidator under this section shall attach to all the li<uidators =ointly and
severally.
3,5 This section shall have e1ect notwithstanding anything to the contrary
contained in any other law for the time being in force.
",*lanationM In this section% Oli<uidatorW includes any person who has been
appointed to be the receiver of the assets of the company under li<uidation.
2'-D Lia3ilit6 to ta, in case of shi**ing 3usiness of non>residentB Sec '&2
3#5 $otwithstanding anything contained in this Brdinance% where a non
resident carries on the business of operation of ships as the owner or
charterer thereof 3hereinafter in this section referred to as the principal5
ta' shall be levied and collected in respect of such business in accordance
with the provisions of this section.
3!5 Before the departure from any port in Bangladesh of any ship% the master
of the ship shall prepare and furnish to the 0eputy Commissioner of Ta'es
a return showing8
3a5 the amount paid or payable whether in or out of Bangladesh to the
principal% or to any person on his behalf% on account of the carriage of
passengers% livestoc;% mail or goods shipped at the port since the last
arrival of the shipI and
3b5 the amount received% or deemed to be received in Bangladesh by% or
on behalf of% the principal on account of the carriage of passengers%
livestoc;% mail or goods at any port outside Bangladesh.
3)5 Bn receipt of the return% the 0eputy Commissioner of Ta'es shall
determine the aggregate of the amounts referred to in sub8section 3!5 and%
for this purpose% may call for such particulars% accounts or documents% as
he may re<uire and the aggregate of the said amounts so determined%
shall be deemed to be income received in Bangladesh by the principal
from the said business chargeable to ta' under this Brdinance under the
head TIncome from business or professionT% and ta' thereon shall be
charged at the rate of eight percent of such income.
3*5 >here the 0eputy Commissioner of Ta'es is satis&ed that it is not possible
for the master of the ship or the principal to furnish the return re<uired
under subsection 3!5 before the departure of the ship from the port and
the principal has made satisfactory arrangements for the &ling of the
return and payment of the ta' by any other person on his behalf% the
0eputy Commissioner of Ta'es may% if the return is &led within thirty days
of the departure of the ship% deem the &ling of the return by the person so
authorised by the principal as suEcient compliance with sub8section 3!5.
3+5 $o port clearance shall be granted to the ship until the Commissioner of
Customs or any other oEcer duly authorised to grant the same% is satis&ed
that the ta' payable under sub8section 3)5 has been duly paid or that
satisfactory arrangements have been made for the payment thereof.
3,5 $othing contained in this Brdinance shall be so construed as to allow any
e'pense against the aggregate amount of receipts as determined under
subsection 3)5.
3-5 The ta' paid under this section shall be deemed to be the &nal discharge
of the ta' liability of the assessee under this Brdinance% and the assessee
shall not be re<uired to &le the return of total income under section -+ nor
shall he be entitled to claim any refund or ad=ustment on the basis of such
return.
2'-C Lia3ilit6 to Ta, in Case of Air Trans*ort Business of Non>#esidentsB
Sec '&9A
3#5 $otwithstanding anything contained in this Brdinance% where a non8
resident person carries on the business of operation of aircraft% as the
owner or charterer thereof 3hereinafter in this section referred to as Othe
principalW5% and any aircraft owned or chartered by him calls on any airport
in Bangladesh% the aggregate of the receipts arising from the carriage or
passengers% livestoc;% mail or goods loaded at the said airport into that
aircraft shall be deemed to be income received in Bangladesh by the
principal from the said business chargeable to ta' under the head OIncome
from business or professionW% and ta' thereon shall be charged at the rate
of three percent of such income.
3!5 The principal or an agent authori9ed by him in this behalf shall prepare
and furnish to the 0eputy Commissioner of Ta'es% within forty8&ve days
from the last day of each <uarter of every &nancial year% that is to say% the
thirtieth day of September% the thirty8&rst day 0ecember% the thirty8&rst
day of arch and the thirtieth day of Mune% respectively% return in respect
of each <uarter as aforesaid showing 8
3a5 the amount paid or payable whether in or out of Bangladesh to the
principal% or to any person on his behalf% on account of the carriage of
passengers% livestoc;% mail or goods loaded at the said airportI and
3c5 the amount received% or deemed to be received% in Bangladesh by% or
on behalf of% the principal on account of the carriage of passengers%
livestoc;% mail or goods at any airport outside Bangladesh.
3)5 Bn receipt of the return% the 0eputy Commissioner of Ta'es may% after
calling for such particulars% accounts or documents% as he may re<uire%
determine the aggregate of the amounts referred to in sub8section 3!5% and
charge ta' as laid down in sub8section 3#5.
3*5 >here% the principal fails to pay the ta' payable under sub8section 3#5 for
more than three months% the Commissioner of Ta'es may issue to the
authority by whom clearance may be granted to that aircraft% a certi&cate
containing the name of the principal and the amount of ta' payable by
himI and on receipt of such certi&cate% the said authority shall refuse
clearance from any airport in Bangladesh to any aircraft owned or
chartered by such person until the ta' payable has been paid.
3+5 $othing contained in this Brdinance shall be so construed as to allow any
e'pense against the aggregate amount of receipts as determined under
sub8section 3)5.
3,5 The ta' paid under this section shall be deemed to be the &nal discharge
of the ta' liability of the assessee under this Brdinance% and the assessee
shall not be re<uired to &le the return of total income under section -+ nor
shall he be entitled to claim any refund or ad=ustment on the basis of such
return.
Thus% sections #"! and #")A of IT Brdiance #/.*% prescrives the ta' rates on
income of non8residents involved with shipping and air transport business
which may be pointed out below?
Business Inco4e Ta,
#ate
#eturn
su34itted 36
Status
Shipping .P aster of ship Final discharge of ta'
liability
Air
Transport
)P Principal or agent Final discharge of ta'
liability

Chapter !!
S*ecial )ro+isions relating to
a+oidance of ta,
Contents
Introduction
2'amination conte't
To*ic List
!!.# Avoidance of ta' through transactions with non8residents
!!.! Avoidance of ta' through transfer of assets
!!.) Avoidance of ta' by transactions in securities
!!.* Ta' clearance certi&cate re<uired for persons leaving Bangladesh
!!.+ Form of ta' clearance and e'emption certi&cates
Introduction
Learning o3<ecti+es
Identify the measure in case of avoidance of ta' through transactions with
non8residents
0e&ne the avoidance of ta' through transfer of assets and transaction in
securities
6ecognise the conditions and rules for ta' clearance certi&cate re<uired
for persons leaving Bangladesh.
0emonstrate the di1erent forms for ta' clearance and e'emption
certi&cate.
ention the conditions for e'emption from production of ta' clearance
certi&cate.

)ractical signi0cance
The ta' authorities have some measures in case of avoidance of ta' through
transactions with non8residents% transfer of assets and transaction in
securities. The ta' authorities can determine the reasonable amount of
income in certain cases of such avoidance.
Sub=ect to some e'ceptions and conditions% a person who is not domiciled in
Bangladesh% or a person who being domiciled in Bangladesh at the time of his
departure is re<uired to obtain a ta' clearance certi&cate or an e'emption
certi&cate.
Sto* and thin2
There are some measures with ta' authorities in case of avoidance of ta' in
certain cases. 0o you thin; that any person can still avoid ta' by any meansN
.or2ing conte,t
In case of avoidance of ta' through transaction with non8resident or
otherwise% either intentional or unintentional% the ta' clients are facing many
problems from ta' authorities. Sometime they thin; that the measures ta;en
by ta' authorities are not in line with =ustice. In such a case accountants can
help them by providing the e'pert service in this regard.
The accountants also can support by giving advice to his client in case of ta'
clearance4e'emption certi&cate re<uired for him while leaving Bangladesh.
S6lla3us lin2s
The topics covered in this chapter are fundamental to your understanding of
income ta'.
Cou will be using this ;nowledge again when you tac;le the Ta'ation paper
later on in the Professional Stage and it will also underpin the technical
aspects at the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Identify the measure in case of avoidance of ta' through transactions with
non8residents
0e&ne the avoidance of ta' through transfer of assets.
0e&ne the avoidance of ta' through transaction in securities.
ention the conditions and rules for ta' clearance certi&cate re<uired for
persons leaving Bangladesh.
2'hibit the di1erent forms of ta' clearance and e'emption certi&cates
6ecognise the conditions for e'emption from production of ta' clearance
certi&cate.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.
22-& S)"CIAL )#O!ISIONS #"LATIN$ TO A!OIDANC" O% TAX
Section O+er+ie/
The ta' authorities have some measures against avoidance of ta'.
Ta' authorities can determine the reasonable amount of income in certain
cases of ta' avoidance.
Ta' clearance or e'emption certi&cate is re<uired for some person leaving
Bangladesh at the time of his departure.
There are some conditions for e'emption from production of ta' clearance
certi&cate.
22-' A+oidance of Ta, Through Transactions /ith Non>#esidentsB Sec '&:
>here any business is carried on between a resident and a non8resident and it
appears to the 0eputy Commissioner of Ta'es that% owing to the close
connection between them% the a1airs of business is so arranged that the
business transacted between them produces to the resident either no pro&ts
or pro&ts less than the ordinary pro&ts which might be e'pected to yield in
that business% the 0eputy Commissioner of Ta'es shall determine the amount
of income which may reasonably be considered to have accrued to the
resident from such business and include such amount in the total income of
the resident.
22-2 A+oidance of Ta, through Transfer of AssetsB Sec '&@
&1( Any income which becomes payable to a non8resident by virtue% or in
conse<uence% of any transfer of assets% whether alone or in con=unction
with associated operation% shall be deemed to be the income of the person
who8
3a5 has ac<uired% by means of such transfer or associated operations% any
right by virtue% or in conse<uence% of which he has the power to en=oy%
whether forthwith or in future% the income which becomes so payable
to the non8resident% or
3b5 has received or is entitled to receive at any time% for reasons
attributable to such transactions or associated operations% any sum
paid or payable by way of loan or repayment of loan or any other sum%
not being a sum paid or payable as income or for full consideration of
money or moneyKs worth.
3!5 The income which becomes payable to a non8resident and is deemed
under section #"+3#5% to be the income of the person referred to therein
shall be so deemed for all purposes of this Brdinance% whether such
income would or would not have been chargeable to ta' apart from the
provisions of this section.
3)5 The provisions of this section shall not operate if it is shown to the
satisfaction of the 0eputy Commissioner of Ta'es8
3a5 that neither the transfer nor any associated operation had for its
purpose% or for one of its purposes% the avoidance of liability to
ta'ationI or
&+( that the transfer and all associated operations were bona &de
commercial transaction and were not designed for the purpose of
avoiding liability to ta'ation.
3*5 >here any person has been charged to ta' on any income which is
deemed under section #"+3#5 to be his income% that income shall not
again be deemed to form part of his income for the purpose of this
Brdinance if it is subse<uently received by him whether as income or in
any other form.
3+5 A person shall% for the purposes of this section% be deemed to have power
to en=oy the income payable to a non8resident if8
3a5 such income is in fact so dealt with as to be calculated to ensure at any
time for the bene&t of such person in any formI or
3b5 the receipt or accrual of such income operates to increase the value of
any assets held by such person or for his bene&tI or
3c5 such person receives or is entitled to receive at any time any bene&t
provided or to be provided8
3i5 out of such incomeI or
3ii5 out of money which is% or will be% available for the purpose by
reason of the e1ect or successive e1ects of associated operations
on such income and on any assets representing the incomeI or
3d5 such person has% by means of the e'ercise of any power of
appointment% revocation or otherwise% power to obtain for himself% with
or without the consent of any other person% the bene&cial en=oyment of
such incomeI or
3e5 such person is able to control% directly or indirectly% the application of
such income% in any manner whatsoever.
3,5 In determining whether a person has power to en=oy income% regard shall
be had to the substantial result and e1ect of the transfer and any
associated operation% and to all bene&ts which may at any time accrue to
such person as a result of the transfer and associated operations
irrespective of the nature or form of the bene&t.
",*lanationB For the purposes of this sectionc
3a5 XassetsK includes property or rights of any ;ind and XtransferK in relation to
assets being rights% includes creation of those rightsI
3b5 Xassociated operationK% in relation to any transfer% means an operation of
any ;ind e1ected by any person in relation to8
3i5 any of the assets transferredI or
3ii5 any income arising from such assetsI or
3iii5any assets representing% directly or indirectly% any of the assets
transferred% or the accumulation of the income arising from such
assetsI
3c5 Xbene&tK includes a payment of any ;indI
3d5 references to assets representing any assets transferred% or any income or
accumulation of income arising therefrom% includes references to shares in
or obligation of any company to which% or the obligation of any other
person to whom% any such assets or that income or accumulation of
income is or has been transferred% and
3e5 any body corporate incorporated outside Bangladesh shall be treated as if
it were a non8resident.
22.3 A+oidance of Ta, 36 Transactions in SecuritiesB Sec '&E
3#5 >here the owner of any securities sells or transfers those securities and
buys them bac; or reac<uires them% or buys or ac<uires similar securities%
and the result of the transaction is that any interest becoming payable in
respect of the original securities sold or transferred by the owner is not
receivable by the owner% the interest payable as aforesaid shall be
deemed% for all purposes of this Brdinance% to be the income of such
owner and not of any other person% whether the interest payable as
aforesaid would or would not have been chargeable to ta' apart from the
provisions of this sub8section.
3!5 >here any person has had for any period during an income year any
bene&cial interest in any securities and the result of any transactions
within that year relating to such securities or the income thereof is that no
income is received by him% or that the income received by him is less than
the sum which the income would have amounted to% had the income from
such securities accrued from day to day% and been apportioned to the said
period% then the income from such securities for the said period shall be
deemed to be the income of such person.
3)5 >here% any person carrying on a business which consists wholly or partly
in dealing in securities buys or ac<uires any securities from any other
person and either sells bac; or re8transfers those securities% or sells or
similar securities% to such other person% and the result of the transactions
is that the interest becoming payable in respect of the securities bought or
ac<uired by him is receivable by him but is not deemed to be his income
by reason of the provisions of section #",3#5% no account shall be ta;en of
the transactions in computing for any of the purposes of this Brdinance%
any income arising from% or loss sustained% in the business.
3*5 The 0eputy Commissioner of Ta'es may% by notice in writing% re<uire any
person to furnish him% within such time% not being less than twenty eight
days% as may be speci&ed in the notice% such particulars in respect of all
securities of which such person was the owner% or in which he had
bene&cial interest at any time during the period speci&ed in the notice% as
the 0eputy Commissioner of Ta'es may consider necessary for the
purpose of ascertaining whether ta' has been borne in respect of the
interest on all those securities and also for other purposes of this section.
",*lanationB For the purposes of this section8
3a5 XinterestK includes dividendI
3b5 XsecuritiesK includes stoc;s and sharesI and
3c5 securities shall be deemed to be similar if they entitle their holders to the
same right against the same persons as to capital and interest and the
same remedies for the enforcement of these rights% notwithstanding any
di1erence in the total nominal amounts of the respective securities or in
the form in which they are held or in the manner in which they can be
transferred.
22-: Ta, Clearance Certi0cate #e8uired for )ersons Lea+ing BangladeshB
Sec '&F
#e8uire4ent for Ta, ClearanceP",e4*tion Certi0cate
3#5 Sub=ect to such e'ceptions as the Board may ma;e in this behalf% a person
who is not domiciled in Bangladesh% or a person who being domiciled in
Bangladesh at the time of his departure is not% in the opinion of an income
ta' authority li;ely to return to Bangladesh% shall not leave Bangladesh
without obtaining from the 0eputy Commissioner of Ta'es authorised in
this behalf by the Board8
3a5 a ta' clearance certi&cate% or
3b5 if he has intention of returning to Bangladesh% an e'emption certi&cate
which shall be issued only if the 0eputy Commissioner of Ta'es is
satis&ed that such person has such intentionI and such e'emption
certi&cate may be either for a single =ourney or for all =ourneys within
the period speci&ed in the certi&cate USection #"-3#5V.
3!5 The owner or charterer of any ship or aircraft% who issues any authority to
any person referred to in section #"-3#5 for travel by such ship or aircraft
from any place in Bangladesh to any place outside Bangladesh unless such
person has a certi&cate re<uired by that section% shall8
3a5 be liable to pay the amount of ta'% if any% which has or may become
due and payable by such person and also to a penalty which may
e'tend to two thousand ta;aI and
&+( be deemed% for the purposes of recovery of such ta' and penalty% to be
an assessee in default% and all the provisions of this Brdinance shall
apply accordingly USection #"-3!5V.
",*lanationB For the purposes of section #"-8
3a5 Xe'emption certi&cateK% in relation to any person% means a certi&cate to
the e1ect that such person is e'empt from the re<uirement of having a ta'
clearance certi&cate for the purpose of the =ourney or =ourneys speci&ed
thereinI
3b5 XownerK or XchartererK includes any representative% agent or employee
who may be empowered by the owner or charterer of a ship or aircraft to
issue an authority to travel by the ship or aircraftI and
3c5 Xta' clearance certi&cateK% in relation to a person% means a certi&cate to
the e1ect that such person has no liability under the Brdinance% the
Income ta' Act% #/!!%

the (ift8ta' Act% #/,) or% or the >ealth8ta' Act%
#/,)% or that satisfactory arrangements have been made for the payment
of all or any of such ta'es which are or may become payable by which
person.
22-@ %or4 of ta, clearance and e,e4*tion certi0cates K#ule E'LB
3#5 2very application for a ta' clearance certi&cate or an e'emption certi&cate
shall be made% in terms of rule ,#% in the following form?
Application for a certi&cate under section #"- of the Income Ta'
Brdinance% #/.*?
To
The 0eputy Commissioner of Ta'es.
YYYYYYYYYYYYYY..
Sir%
I re<uest that a ta' clearance e'emption certi&cate be granted
to me. I give below the necessary particulars.
#. $ame of applicant YYYYYYYYYYYYYYYY
3in bloc; letters5.
!. 0omicileYYYYYYYYYYYYYYYYYYYY
). Present addressYYYYYYYYYYYYYYYYY..
*. Permanent addressYYYYYYYYYYYYYYYY.
+. $ature of Business or profession in Bangladesh YYYY...
3if the visit to Bangladesh was made only as a tourist and no
income was earned during the period of stay in Bangladesh% it
should be so stated5.
,. Place3s5 at which the business or profession is or was carried on
YYYYYYYYYYYYYYYYYYYYYYYYYY
-. $ame and address of employer3s5 of the applicantYYYYYYY
3in case the applicant is representing a &rm or a company% the
name and address of the &rm or company should be stated5
.. $ame of the 0eputy commissioner of Ta'es% if any where last
assessment of the applicant was madeYYYYYYYYY..
/. 0ate of arrival in BangladeshYYYYYYYYYYYYYY
#". Probable date of departureYYYYYYYYYYYYYYYY
##. 0estinationYYYYYYYYYYYYYYYYYYYYY
#!. ode of travel 3air4sea4land5YYYYYYYYYYYYYY.
Place? Cours faithfully%
0ate? 3Applicant5
$. B. Please see the certi&cate.
>hen the applicant is an e'isting assessee% the application should be
addressed to the 0eputy Commissioner of Ta'es who completed the last
assessment.
ZStri2e out /hiche+er is ina**lica3le-
Certi0cate to 3e furnished 36 "4*lo6ersPAssociatesPAgentsP;ead
ONce Branch ONce= etc-
#. Certi&ed thatYYYYYYYYYYYYYYYYYYYis our employee4
representative4
3$ame in bloc; letters5 associate.
!. 3i5 Certi&ed that YYYYYYYYYY3(ive name5 is leaving Bangladesh
temporarily on leave4duty and will return byYYYYYYY 3(ive
appro'imate date5.
^3ii5 Certi&ed that his4her income was less than the ta'able minimum
during the period3s5.
3iii5A che<ue for the amount of ta' due along with the computation of
income is enclosed.
3iv5>e underta;e to pay the liability% if any% when determined.
Signature YYYYYYY
0esignationYYYYYY.
$ame and address of the
2mployers4
Associates4Agents4Gead
BEce4Branch
BEce
ZStri2e out /hiche+er is ina**lica3le
(uarantee Certi&cate to be furnished by a ta' payer in Bangladesh in the case
of persons who are neither employees nor representatives of any &rm.
>e4I%YYYYYYYYYYYYYYYYYcertify 3name in bloc; letters5 that
YYYYYYYYYYYYYYY..is ;nown to us4me and that we4I underta;e to
pay his4her ta' liability% if any% when determined.
Signature of the
guarantorYY.YY..
$ame and addressYYY..
YYYY..
YYYYYYYYYY.......
YYYYY
TI$
YYYYYYYYYYYY........Y
Circle YYYYYYYYYY.......
YY.
Ta, clearance certi0cate issued 36 the De*ut6 Co44issioner of Ta,es
shall 3e in the follo/ing for4B>
Boo; $o. Serial $o. Boo; $o. Serial $o.
Counterfoil of certi&cate under section
#"- of the Income Ta' Brdinance% #/.*
3]]]:I of #/.*5
0ateddddddddddd
TA]2S 02PA6T2$T
Certi&cate under section #"- of The
Income Ta' Brdinace% #/.* 3]]:I of
#/.*5
BEce of the 0eputy Commissioner of
Ta'es
$amedddddddddddddddddddddddddddddddddddd
Present address ddddddddddddddddddddddddd ddddddd Circle ddddddddd
Permanent Addressddddddddddddddddddddddd
dddddddddddddddddddddddddddddddddddddd Place dddddddddddddddddddddddddddddddddddd
d
Business of profession ddddddddddddddddddd 0ateddddddddddddddddddddddddddddddddddddd
0ate of arrival in Bangladesh dddddddddddd
This is to certify that dddddddddddddddd
of dddddddddd 3whose signature
or thumb impression is aE'ed below5
has no liability made satisfactory
arrangements for his4her liabilities
under the Income Ta' Brdinance%#/.*
3]]]:I of #/.*5% the Income ta' Act%
#/!! 3]I of #/!!5% the (ift8ta' Act%
#/,) 3]I: of #/,)5 (ift Ta' Act% #//"
3]7I: of #//"5 or the wealthta' Act%
#/,) 3]: of #/,)5. This certi&cate is
valid up to
0ate of departuredddddddddddddddddddddddd
3as stated in the application5
0ate up to which the certi&cate is
:alidddddddddddddddddddddddddddddddddddddd
Challan $o. and date of payment of ta'ddd
Signature of left8hand thumb impression
of the Persion named in the
certi&catedddddddddddddddddddddddddddddddd
0eputy Commissioner of Ta'es
ddddddd 4 Circle.
dddddddddddddddddddddddddddddddddddddddd
Signaturedddddddddddddddddddddddddddddddd
Signature of the left8handdddddddddd 4
Circle.
0eputy Commissioner of Ta'es%
Signature of left8hand 4Circle.
Thumb impression of the Person
named In the Certi&cate
",e4*tion certi0cate issued 36 the De*ut6 Co44issioner of Ta,es
shall 3e in the follo/ing for4B
Boo; $o. Serial $o. Boo; $o. Serial $o.
Counterfoil of certi&cate under section
#"- Bf the Income Ta' Brdinance% #/.*
3]]]:I of #/.*5
0ate dddddddddd
TA]2S 02PA6T2$T
Certi&cate under section #"- of The
Income Ta' Brdinace% #/.* 3]]:I of
#/.*5
BEce of the 0eputy Commissioner of
Ta'es
$amedddddddddddddddddddddddddddddddddddd
Present address ddddddddddddddddddddddddd
Place dddddddddddddddddddddddddddddddddddd
d
Permanent Addressddddddddddddddddddddddd
dddddddddddddddddddddddddddddddddddddd
0ateddddddddddddddddddddddddddddddddddddd
0ate of arrival in Bangladesh dddddddddddd
This is to certify thatdddddddddddddddd
of dddddddddddddddd 3whose signature
or thumb impression is aE'ed below5
is e'empted from producing evidence
of payment of ta'es in connection
with his =ourney to all =ourney
performed before.
ddddddddddddddddddddddddddddddddddddddddd
0ate of applicationddddddddddddddddddddddd
0ate of departuredddddddddddddddddddddddd
3as stated in the application5
0eputy Commissioner of Ta'es
ddddddd 4 Circle.
ddddddddddddddddddddddddddddddddddddddddd
ddddddddddddddddddddddddddddddddddddddddd
Signaturedddddddddddddddddddddddddddddddd
Signature or left8hand thumb impression
of the
Person named in the certi&cate This
certi&cate is valid up to
0eputy Commissioner of
Ta'es% dddddddddddddddd 4Circle
Signature or left8hand Thumb
impression of the Person named in the
certi&cateddddddddddddddd
)roduction of certi0cate of ta, clearance or e,e4*tion certi0cate
3efore an6 oNcer of i44igration or custo4s K#ule E2LB
3#5 Sub=ect to the provisions of rule ,)% every person who is not domiciled in
Bangladesh shall be re<uired to produce a ta' clearance certi&cate or
e'emption certi&cate to an oEcer of immigration or customs for
e'amination before he leaves Bangladesh.
3!5 In the case of a person who claims to be domiciled in Bangladesh% the oEcer
of immigration or customs the oEcer of customs and the owner of charter of
a ship or aircraft may accept any of the following evidences of nationality%
namely?8
a5 a passport issued by the (overnmentI or
b5 a certi&cate of nationality or domicile issued by a 0istrict agistrate or
the (overnment.
",e4*tion fro4 *roduction of ta, clearance certi0cate K#ule E9LB The
following e'ceptions are made under section #"-3#5 of the Brdinance% namely?
3#5 all person below the age of eighteen years Urule ,)3a5VI
3!5 passengers who can show by the dates stamped on their passports or by
other reliable evidenceI that8
I. they have not spent more than ninety days at a time in BangladeshI
and
II. they have not spent more than ninety days in any &nancial year in
Bangladesh Urule ,)3b5VI
3)5 all members of diplomatic% trade or commercial missions appointed by
foreign (overnments% trade commissioners and consul democratic and all
full time employees of such diplomatic missions% trade commissioners and
consular oEcers Urule ,)3f5VI
3*5 all oEcers and employees of foreign (overnment visiting Bangladesh on
duty Urule ,)3g5VI
3+5 the wives and dependants of persons covered by rules ,)3f5 and 3h5 Urule
,)3h5VI
3,5 woman who gives a declaration to the e1ect that she is wholly dependent
upon her husband% parent or guardian and has no independent source of
income Urule ,)3i5V.
Chapter !)
)o/ers of inco4e ta, authorities
including search and seiQure
Contents
Introduction
2'amination conte't
To*ic List
!).# Introduction
!).! Power to Call for Information
!).) Power to Inspect registers of companies
!).* Power of survey
!).+ Additional powers of en<uiry and production of documents
!)., Power of search and sei9ure
!).- Power to verify deduction or collection of ta'
!).. 6etention of sei9ed assets
!)./ Application of retained assets
!).#" Power of Inspecting Moint Commissioner to revise orders of 0CT
!).## 6evisional power of Commissioner
!).#! Power to ta;e evidence on oath% etc.
Introduction
Learning o3<ecti+es
Identify the power of respective income ta' authorities to call for
information.
Identify the power to inspect the registers of company
6ecognise the power of survey.
0emonstrate the additional power of en<uiry and re<uiring the production
of documents.
Power of search and sei9ure.
Power to verify the deduction and collection of ta'es.
6ight to retain the sei9ed assets and application thereof.
Power of revision of orders.
Power to ta;e evidence on oath.

)ractical signi0cance
To carry out the responsibilities and ensure compliance in adopting di1erent
rules% respective income ta' authorities have been given suEcient powers.
This chapter presents such power of income ta' authorities in di1erent
situation. Such powers may be to call for information% inspect the registers%
conduct survey% re<uire for documents% search and sei9ure% verify deduction
and collection of ta'es% retaining sei9ed assets% revise orders and ta;e
evidence of oath.
For di1erent assesses% this chapter is very important as they re<uire to ;now
the power of authorities so that they can comply with the speci&c
re<uirements.
Sto* and thin2
6espective income ta' authorities en=oy re<uired powers to carry out their =ob
smoothly. 0o you thin; that you ;now all of such powers applicable to
di1erent income ta' authoritiesN
.or2ing conte,t
Powers of income ta' authorities are very important for both income ta'
authorities and assesses. Accountants can provide valuable advises to clients
in case of non8compliance and any type of failures if they ;now the power of
income ta' authorities properly. It will be helpful for the client to avoid
e'cessive penalty or other types of punishment. It is also an important part of
ta' planning.
The accountants can also support by giving advice to his client in case of
powers already e'ercised by income ta' authorities for non8compliance or
failures.
S6lla3us lin2s
The topics covered in this chapter are fundamental to your understanding of
income ta'.
Cou will be using this ;nowledge again when you tac;le the Ta'ation paper
later on in the Professional Stage and it will also underpin the technical
aspects at the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
ention the power of income ta' authorities to call for information
Identify the power to inspect the registers of company
0emonstrate the additional power of en<uiry and re<uiring the production
of documents
Power of search and sei9ure
Power to verify the deduction and collection of ta'es.
6ight to retain the sei9ed assets and application thereof.
Power of revision of orders.
Power to ta;e evidence on oath.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.
29-& )O."#S O% INCOM" TAX AUT;O#ITI"S INCLUDIN$ S"A#C; AND
S"IUU#"
Section O+er+ie/
The ta' authorities en=oy powers to e'ercise re<uired =obs and
responsibilities.
Ta' authorities have powers to search and sei9e assets and retain them.
Ta' authorities may verify the documents related to deduction or collection
of ta'es.
Ta' authorities may revise the orders already passed in respective cases.
29-' Introduction
Income ta' authorities en=oy the power of search and sei9ure of boo;s of
accounts% records% documents and moveable properties after searching
through the business premises% residential building% vessel% aircraft% or any
other places belonging to a person. This chapter covers re<uired provisions
under IT Brdinance regarding such power of income ta' authorities.
29-2 )o/er to Call for Infor4ation Section ''9(
The 0eputy Commissioner of Ta'es% the Inspecting Moint Commissioner% the
Commissioner% the 0irector (eneral% Central Intelligence Cell% or any other
oEcer authorised in this behalf by the Commissioner or the Board may% for
the purposes of this Brdinance% by notice in writing% re<uire8
S7 Assessee 6e<uirements
3a5 Firm a statement of the names and addresses of the
partners and their respective shares
3b5 Gindu undivided
family 3GJF5
a statement of the names and addresses of the
manager and the members of the family
3c5 Any person to be a
trustee% guardian or
agent
a statement of the names and addresses of the
persons for or of whom he is trustee% guardian or
agent
3d5 Any assessee a statement of the names and address of all
persons to whom he has paid in any income year
any rent% interest% commission% royalty or
bro;erage% or any annuity% not being an annuity
classi&able under the head TSalariesT% amounting
to more than three thousand ta;a% together with
particulars of all such payment
3e5 Any dealer% bro;er
or agent% or any
person concerned in
the management of
a Stoc; 2'change
a statement of the names and addresses of all
persons to whom he or the 2'change has paid
any sum in connection with the transfer of
capital assets% or on whose behalf or from whom
he or the 2'change has received any such sum%
together with the particulars of all such
payments and receipts
3f5 Any person%
including a ban;ing
company
information in relation to such points or matters%
or such statements or accounts giving such
particulars% as may be speci&ed in the notice
)ro+ided that no such notice on a 3an2ing
co4*an6 shall 3e issued 36 the De*ut6
Co44issioner of Ta,es or the Ins*ector=
/ithout the a**ro+al of the Co44issioner(
23*3 )o/er to Ins*ect registers of co4*anies Section '':(
The 0eputy Commissioner of Ta'es% the Moint Commissioner of Ta'es or any
person authorised in writing in this behalf by either of them% may inspect and%
if necessary% ta;e copies% or cause copies to be ta;en% of any register of the
members% debenture8holders or mortgagees of any company or any entry in
such register.
29-: )o/er of sur+e6 Section ''@(
3#5 For the purpose of survey of liability of any person to ta' under this
Brdinance% an income ta' authority may% notwithstanding anything
contained in other provisions of this Brdinance but sub=ect to such
directions or instructions as the Board may issue in this behalf% enter any
place of premises within the limits or its =urisdiction and8
!. inspect any accounts or documents and chec; or verify any article or
thingI
). ma;e an inventory of any cash% stoc; or other valuable articles or
things chec;ed or veri&ed by itI
*. place mar;s of identi&cation on or stamp the boo;s of accounts or
other documents inspected by it and ma;e or cause to be made
e'tracts or copies therefromI
+. record the statement of any person which may be useful for% or
relevant to% any proceeding under this BrdinanceI and
,. ma;e such en<uiries as may be necessary.
3!5 Sub=ect to the provisions of section ##-% any income8ta' authority
e'ercising powers under sub8section 3#5% shall not remove or cause to be
removed from any place or premises wherein he has entered% any boo;s of
accounts or other documents% or any cash% stoc; or other valuable article
or thing.
3)5 2very proprietor% employee or other person who may be attending in any
manner to% or helping in% the carrying on of any business or profession% or
every person who may be residing in the place or premises in respect of
which an income ta' authority may be e'ercising power under sub8section
3#5% shall in aid of the e'ercise of such power%
3a5 a1ord the authority necessary facilities for inspection of boo;s of
accounts or other documents% or for chec;ing or verifying the cash%
stoc; or other valuable article or thing found in such place or premisesI
and
3b5 furnish such information as the authority may re<uire in respect of any
matter which may be useful for% or relevant to% any proceeding under
this Brdinance.
29-@ Additional *o/ers of en8uir6 and *roduction of docu4ents Section
''E(
3#5 The 0irectors8(eneral of Inspection% the Commissioner% the director
(eneral% Central Intelligence Cell and the Inspecting Moint Commissioner
may% without pre=udice to other powers which they may have under other
provisions of this Brdinance% ma;e any en<uiry which they consider
necessary as respects any person liable% or believed by them to be liable%
to assessment under this Brdinance% or re<uire any such person to
produce% or cause to be produced% any accounts or documents which they
may consider necessary.
3!5 For the purposes of sub section 3#5% the 0irectors8(eneral of Inspection%
the Commissioner% the 0irector (eneral% Central Intelligence Cell% and the
Inspecting Moint Commissioner shall have the same powers as the 0eputy
Commissioner of Ta'es has under this Brdinance for the purposes of
ma;ing en<uiry or re<uiring the production of accounts or documents
including the powers under section ##-3!5.
3)5 the Commissioner% the director (eneral% Central Intelligence Cell the
Inspecting Moint Commissioner% the 0eputy Commissioner of Ta'es or an
Inspector% if he is so authorised in writing% may% for the purpose of ma;ing
any en<uiry which he considers necessary% enter the premises in which a
person liable or believed by him to be liable to assessment% carries on his
business or profession% and may call for and inspect any such personDs
accounts or any documents in his possession% and may stamp any
accounts or documents so inspected% and may retain such accounts or
documents for so long as may be necessary for e'amination thereof or for
the purposes of a prosecution?
)ro+ided that the De*ut6 Co44issioner of Ta,es or an Ins*ector
shall not 4a2e an6 en8uiries fro4 an6 scheduled 3an2 regarding
an6 client of such 3an2 e,ce*t /ith the *rior a**ro+al of the
Co44issioner= the Director $eneral= Central intelligence Cell-
29-E )o/er of search and seiQure Section ''F(
3#5 >here the 0irectors8(eneral of Inspection or the Commissioner% the
0irector (eneral% Central Intelligence Cell or such other oEcer empowered
in this behalf by the Board% has% on account of information in his
possession% reason to believe that8
-. any person% to whom a summons or notice under this Brdinance has
been or might be issued to produce% or cause to be produced% any
boo;s of accounts or other documents% or electronic records and
systems%

has failed to% or is not li;ely to% produce or cause to be
produced such boo;s of accounts or other documents% or
.. any person is in possession of any money% bullion% =ewellery or other
valuable article or thing which represents% wholly or partly% income or
property which is re<uired to be disclosed under this Brdinance but has
not been so disclosed% he may authorise any oEcer subordinate to him%
being not below the ran; of the 0eputy Commissioner of Ta'es% to
e'ercise the powers under sub8section 3!5.
3!5 An oEcer authorised under sub8section 3#5 3hereinafter referred to as the
authorised oEcer5 may% notwithstanding anything contained in any other
law for the time being in force%
a. enter and search any building% place% vessel% vehicle or aircraft where
he has reason to suspect that any boo;s of accounts% documents%
electronic records and systems% money% bullion% =ewellery or other
valuable article or thing referred to in sub8section 3#5 are or have been
;eptI
b. brea;8open the loc; of any door% bo'% loc;er% safe% almirah or other
receptacle for the purpose of the said entry% and search% if ;eys thereof
are not availableI
/. search any person who has got out of% or is about to get into% or is in%
the building% place% vessel% vehicle or aircraft% if he has reason to
suspect that such person has secreted about his person any such
boo;s of accounts% documents% electronic records and systems% money%
bullion% =ewellery or other valuable article or thingI
#". sei9e any such boo;s of accounts% documents% electronic records and
systems% money% bullion% =ewellery or other valuable article or thing
found as a result of such searchI
##. place mar;s of identi&cation on or stamp any boo;s of accounts or
other document or ma;e or cause to be made e'tracts or copies
therefromI and
#!. ma;e a note or an inventory of any such money% bullion% =ewellery or
other valuable article or thingI
#). e'tract the data% images or any inputs stored in the electronic records
and systems or enter the systems by brea;ing through password
protection or copy or analyse the data% boo;s of accounts% documents%
images or inputs.
3)5 The authorised oEcer may re<uisition the services of any police oEcer or
other oEcer of the (overnment or any professional e'pert from outside
the government to assist him for all or any of the purposes speci&ed in
sub8section 3!5I and it shall be the duty of every such oEcer or
professional e'pert to comply with such re<uisition.
3*5 The authorised oEcer may% where it is not practicable to sei9e any such
boo;s of accounts% documents% electronic records and systems%

money%
bullion% =ewellery or other valuable article or thing% by order in writing%
re<uire the owner or the person who is in immediate possession or control
thereof not to remove% part with or otherwise deal with it without obtaining
his previous permissionI and the authorised oEcer may ta;e such steps as
may be necessary for ensuring compliance with the order?
)ro+ided that if the o/ner or the *erson concerned= /ith out an6
reasona3le cause= fails to co4*l6 /ith the *ro+isions of this su3>
section= the De*ut6 Director $eneral= Central Intelligence Cell or
the De*ut6 Co44issioner of Ta,es 4a6 realiQe fro4 hi4 the
4one6 or the +alue of the 3ullion= <e/eller6= +alua3le article or
thing= if an6= re4o+ed= *arted /ith or other/ise dealt /ith[ and in
such a case the said *erson shall 3e dee4ed to 3e an assessee in
default under this Ordinance-
3+5 The authorised oEcer may% during the course of the search or sei9ure%
e'amine on oath any person who is found to be in possession or control of
any boo;s of accounts% documents% electronic records and systems%
money% bullion% =ewellery or other valuable article or thing and any
statement made by such person during the e'amination may thereafter be
used in evidence in any proceeding under this Brdinance% or the Income8
ta' Act% #/!! 3]I of #/!!5.
3,5 >here any boo;s of accounts% documents% electronic records and systems%
money% bullion% =ewellery or other valuable article or thing is found in the
possession or control of any person in the course of a search% it may be
presumed that8
3a5 the boo;s of accounts% documents% electronic records and systems%
money% bullion% =ewellery% article or thing belongs to such personI
3b5 the contents of the boo;s of accounts and documents% the boo;s of
accounts% documents% electronic records and systems% are trueI and
3c5 the signature on% or the handwriting in% any such boo;s or documents is
the signature or handwriting of the person whose signature or
handwriting it purports to be.
3-5 The person from whose custody any boo;s of accounts or other documents
or electronic records and systems% are sei9ed under sub8section 3!5 may
ma;e copies thereof% or ta;e e'tracts therefrom% in the presence of the
authorised oEcer or any other person designated by him% at such place
and time as the authorised oEcer may appoint in this behalf.
3.5 The boo;s of accounts or other documents or electronic records and
systems% sei9ed under sub8section 3!5 shall not be retained by the
authorised oEcer for a period e'ceeding one hundred and eighty days
from the date of the sei9ure unless for reasons recorded in writing%
approval of the Commissioner% the 0irector (eneral% Central intelligence
Cell has been obtained for such retention?
)ro+ided that the Co44issioner= the Director $eneral= Central
intelligence Cell shall not a**ro+e such retention for a *eriod
e,ceeding thirt6 da6s after all the *roceedings under this
Ordinance in res*ect of the 6ears for /hich the 3oo2s of accounts
or other docu4ents= Kelectronic records and s6ste4s=

as are
rele+ant= ha+e 3een co4*leted-
3/5 If any person% legally entitled to the boo;s of accounts or other documents
or electronic records and systems% sei9ed under sub8section 3!5 ob=ects to
the approval given by the Commissioner the 0irector (eneral% Central
Intelligence Cell under sub8section 3.5% he may ma;e an application%
stating therein the reasons for his ob=ection% to the Board for the return of
the boo;s of accounts or other documentsI or electronic records and
systems% and the Board may% after giving the applicant an opportunity of
being heard% pass such orders thereon as it may thin; &t.
3#"5 Sub=ect to the provisions of this Brdinance and the rules% if any% made
in this behalf by the Board% the provisions of the Code of Criminal
Procedure% #./. 3Act : of #./.5% relating to search and sei9ure shall apply%
so far as may be% to search and sei9ure under sub8section 3!5.
",*lanation> For the purposes of this section% the word TproceedingT means
any proceeding in respect of any year under this Brdinance which may be
pending on the date on which a search is authorised under this section or
which may have been completed on or before such date and also includes all
proceedings under this Brdinance which may be commenced after such date
in respect of any year.
29-F )o/er to +erif6 deduction or collection of ta, Section ''FA(
$otwithstanding anything contained in this Brdinance or any other law for the
time being in force% the Board or any other authority empowered by the Board
in this behalf may enter the premises of a deducting or collecting authority to
e'amine% monitor or verify boo;s of accounts and relevant records in relation
to 8
i. deduction or collection of ta' by the concerned authority in accordance
with the provisions of chapter :II of this BrdinanceI and
ii. deposit of the ta' so collected or deducted to the credit of the
government as per rules.
29-D #etention of seiQed assets Section ''D(
3#5 >here any money% bullion% =ewellery or other valuable article or thing
3hereinafter referred to as assets5 is sei9ed under section ##-% the
authorised oEcer shall% unless he himself is the 0eputy Commissioner of
Ta'es% forward a report thereof% together with all relevant papers% to the
0eputy Commissioner of Ta'es.
3!5 >here he has sei9ed any asset under section ##- or% as the case may be%
he has received a report under sub8section 3#5% the 0eputy Commissioner
of Ta'es shall% after giving the person concerned a reasonable opportunity
of being heard and ma;ing such en<uiry as the 0irectors8(eneral of
Inspection or the Commissioner may direct% within eninety days of the
sei9ure of the assets% and with the previous approval of the
Commissioner%8
iii. estimate the undisclosed income 3including income from the
undisclosed property5% in a summary manner to the best of his
=udgment on the basis of such materials as are available with himI
iv. calculate the amount of ta' payable under this Brdinance on the
income so estimatedI and
v. specify the amount that will be re<uired to satisfy any e'isting liability
under this Brdinance% the Income ta' Act% #/!! 3]I of #/!!5% the (ift
ta' Act% #/,) 3]I: of #/,)5% and the >ealth8ta' Act% #/,) 3]: of #/,)5%
in respect of which such person is in default or is deemed to be in
default?
Provided t!at if2 after taAing into account t!e materials availa?le wit!
!im2 t!e &eputy Commissioner of Taxes is of t!e view t!at it is not
possi?le to ascertain to w!ic! particular income year or years suc!
income or any part t!ereof relates2 !e may calculate t!e tax on suc!
income or part2 as t!e case may ?e2 as if suc! income or part were t!e
total income c!argea?le to tax at t!e rates in force in t!e fnancial year
in w!ic! t!e assets were seiDed6
@xplanation* In computing the period of ninety days for the purposes of
sub8section 3!5% any period during which any proceeding under this
section is stayed by an order or in=unction of any Court shall be
e'cluded.
3)5 After completing the proceedings under sub8section 3!5% the 0eputy
Commissioner of Ta'es shall% with the approval of the Commissioner% ma;e
an order re<uiring the person concerned to pay the aggregate of the
amounts referred to in sub8section 3!5 3b5 and 3c5 and shall% if such person
pays% or ma;es satisfactory arrangement for the payment of% such
amounts or any part thereof% release the assets sei9ed under section ##-
or such part thereof as he may deem &t in the circumstances of the case.
3*5 >here the person concerned fails to pay% or to ma;e satisfactory
arrangements for the payment of% any amount re<uired to be paid in
pursuance of the order under sub8section 3)5 or any part thereof% he shall
be deemed to be an assessee in default in respect of the amount or part%
and the 0eputy Commissioner of Ta'es may retain in his custody the
assets sei9ed under section ##- on any part thereof as are in his opinion
suEcient for the realisation of the said amount or% as the case may be% of
such part thereof as has not been paid.
3+5 If the 0eputy Commissioner of Ta'es is satis&ed that the assets sei9ed
under section ##- or any part thereof were held by a person for or on
behalf of any other person% he may proceed under this section against
such other person% and all the provisions of this section shall apply
accordingly.
3,5 If any person ob=ects% for any reason% to an order made under sub8section
3)5% he may% within thirty days of the date of such order% ma;e an
application% stating therein the reasons for his ob=ection% to the
Commissioner for appropriate relief in the matterI and the Commissioner
may% after giving the applicant an opportunity of being heard% pass such
orders thereon as he may thin; &t.
29-C A**lication of retained assets Section ''D(
3#5 >here the assets retained under sub8section 3*5 of section ##. consist
solely of money% or partly of money and partly of other assets%8
#*. the 0eputy Commissioner of Ta'es shall &rst apply such money towards
payment of the amount in respect of which the person concerned is
deemed to be an assessee in default under that sub8sectionI and
thereupon such person shall be discharged of his liability to the e'tent
of the money so appliedI and
#+. where% after application of the money under clause 3a5% any part of the
amount referred to therein remains unpaid% the 0eputy Commissioner
of Ta'es may recover the amount remaining unpaid% by sale of such of
the assets as do not consist of money in the manner movable property
may be sold by a Ta' 6ecovery BEcer for the recovery of ta'I and for
this purpose he shall have all the powers of a Ta' 6ecovery BEcer
under this Brdinance.

3!5 $othing contained in sub8section 3#5 shall preclude the recovery of the
amount referred to in section ##. 3*5 by any other mode provided in this
Brdinance for the recovery of any liability of an assessee in default.
3)5 Any assets or proceeds thereof which remain after the discharge of the
liability in respect of the amount referred to in section ##. 3*5 shall
forthwith be made over or paid to the persons from whose custody the
assets were sei9ed.
29-'& )o/er of Ins*ecting Hoint Co44issioner to re+ise orders of De*ut6
Co44issioner of Ta,es Section '2&(
3#5 The Inspecting Moint Commissioner may call for from the 0eputy
Commissioner of Ta'es and e'amine the record of any proceeding under
this Brdinance% and % if he considers that any order passed therein by the
0eputy Commissioner of Ta'es is erroneous in so far as it is pre=udicial to
the interests of the revenue% he may% after giving the assessee an
opportunity of being heard% and after ma;ing or causing to be made% such
in<uiry as he thin;s necessary% pass such order thereon as in his view the
circumstances of the case would =ustify% including an order enhancing or
modifying the assessment or canceling the assessment and directing a
fresh assessment to be made.
3!5 $o order shall be made under sub8section 3#5 after the e'piry of four years
from the date of the order sought to be revised.
29-'' #e+isional *o/er of Co44issioner Section '2'A(
3#5 The Commissioner may on an application made by the assessee% call for
the record of any proceeding under this Brdinance in which an order has
been passed by any authority subordinate to him and may ma;e such
en<uiry or cause such en<uiry to be made and% sub=ect to the provisions of
this Brdinance% may pass such order thereon% not being an order
pre=udicial to the assessee% as he thin;s &t.
3!5 The application for revision of an order under this Brdinance passed by
any authority subordinate to the Commissioner shall be made within si'ty
days of the date on which such order is communicated to the assessee or
within such further period as the Commissioner may consider &t to allow
on being satis&ed that the assessee was prevented by suEcient cause
from ma;ing the application within the said si'ty days.
3)5 The Commissioner shall not e'ercise his power under sub8section 3#5 in
respect of any order8
#,. where an appeal against the order lies to the Appellate Moint
Commissioner or to the Commissioner 3Appeals5 or to the Appellate
Tribunal and the time within which such appeal may be made has not
e'pired or the assessee has not waived his right of appealI or
#-. where the order is pending on an appeal before the Appellate Moint
Commissioner or it has been made the sub=ect of an appeal to the
Commissioner 3Appeals5 or to the Appellate Tribunal.
3*5 $o application under sub8section 3#5 shall be entertained unless8
i. it is accompanied by a fee of two hundred ta;aI and
ii. the undisputed portion of the ta' has been paid.
",*lanation> The Tundisputed portion of the ta'T means the ta' payable
under section -*.
3+5 For the purposes of this section% an order by the Commissioner declining to
interfere shall not be construed as an order pre=udicial to the assessee.
3,5 $otwithstanding anything contained in this Brdinance% an application for
revision made under sub8section 3#5 shall be deemed to have been allowed
if the Commissioner fails to ma;e an order thereon within a period of si'ty
days from the date of &ling the application.
",*lanation> For the purposes of this section% the Appellate Moint
Commissioner of Ta'es shall be deemed to be an authority subordinate to the
Commissioner to whom the 0eputy Commissioner of Ta'es% whose order was
the sub=ect8matter of the appeal order under revision% is subordinate.
29-'2 )o/er to ta2e e+idence on oath= etc- Section '22(
3#5 The 0eputy Commissioner of Ta'es% the Moint Commissioner of Ta'es% the
Commissioner% the 0irector (eneral% Central Intelligence Cell% the
Commissioner 3Appeals5 and the Appellate Tribunal shall% for the purposes
of this Brdinance% have the same powers as are vested in a Court under
the Code of Civil Procedure% #/". 3Act : of #/".5% when trying a suit in
respect of the following matters% namely?
iii. discovery and inspectionI
iv. enforcing the attendance of any person and e'amining him on oath or
aErmationI
v. compelling the production of accounts or documents 3including
accounts or documents relating to any period prior or subse<uent to
the income year5I and
vi. issuing commissions for the e'amination of witness.
3!5 The 0eputy Commissioner of Ta'es shall not e'ercise his powers under this
section for the purpose of enforcing the attendance of an employee of a
scheduled ban; as a witness or compelling the production of boo;s of
account of such a ban; e'cept with the prior approval of the
Commissioner.
3)5 Any authority mentioned in sub8section 3#5 may impound and retain in its
custody for such period as it considers &t% any boo;s of accounts or other
documents produced before it in any proceeding under this Brdinance.
3*5 Any proceeding under this Brdinance% before any authority mentioned in
sub8section 3#5% shall be deemed to be a =udicial proceeding within the
meaning of section #/) and !!.% and for the purposes of section #/,% of
the Penal Code 3Act ]7: of #.,"5.
Chapter !*
I4*osition of )enalt6
Contents
Introduction
2'amination conte't
To*ic List
!*.# Introduction
!*.! Penalty for not maintaining accounts in the prescribed manner
!*.) Penalty for failure to &le return% certi&cate% statement% accounts or
information
!*.* Penalty for using fa;e Ta'8payerDs Identi&cation $umber
!*.+ Failure to pay advance ta'
!*., Penalty for non8compliance with notice
!*.- Failure to pay ta' on the basis of return
!*.. Penalty for concealment of income
!*./ Penalty for default in payment of ta'
!*.#" Summary of Penalties
!*.## Bar to imposition of penalty without hearing
!*.#! Previous approval of inspecting Moint Commissioner for imposing
penalty
!*.#) Brders of Appellate Moint Commissioner% Commissioner or Appellate
Tribunal to be sent to 0eputy Commissioner of Ta'es
!*.#* Penalty to be with pre=udice to other liability
Introduction
Learning o3<ecti+es
ention the di1erent non8compliances of ta' law for which penalties are
imposed.
Identify the penalties due to non8compliance of ta' law in certain cases.
0e&ne the measures against any order of penalty.
)ractical signi0cance
If any person without any reasonable cause failed to comply ta' law in certain
cases the ta' authorities may impose penalty on that person. There are
re<uirements by ta' law such as maintaining of accounts in the prescribed
manner% &ling of return% certi&cate% statements% accounts or information%
payment of advance ta'% compliance with notice% payment of ta' on the basis
of return etc. $on8compliance of these re<uirements may cause to penalties
payable by the persons made such non8compliances. Concealment of income
and default in ma;ing payment of ta' are also caused to penalties.
$o penalties mentioned here shall be made on any person unless such person
has been heard or has been given a reasonable opportunity of being heard.
The imposition of any penalty on any person shall be without pre=udice to any
other liability.
Sto* and thin2
0id you reali9e how important it is to ensure the compliance of the
re<uirements of ta' law mentioned in this chapter for avoiding penaltiesN The
penalties can be <uite e'tensive in some cases.
.or2ing conte,t
Cou need to ;now the conse<uences for non8compliance of the re<uirements
of ta' law in this chapter. Cou must ;eep it in mind that the penalties may be
massive and imposition of penalties for such non8compliance can also harm
the reputation of the assessee and his &nancial sustainability.
The accountants can help the clients to comply with all the re<uirements of
ta' law in this regards so that the clients can avoid any such penalties and
retain the esteem from ta' authorities and sta;eholders.
S6lla3us lin2s
The topics covered in this chapter are very important as it is dealt with the
legal re<uirement of ta' law.
Cou will be using this ;nowledge again when you tac;le the Ta'ation paper
later on in the Professional Stage and it will also support the technical aspects
at the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Identify the penalty for not maintaining accounts in the prescribed manner.
Identify the penalty for failure to &le return% certi&cate% statement%
accounts or information.
6ecognise the penalty for failure to pay advance ta' and failure to pay ta'
on the basis of return.
Identify the penalty for non8compliance with notice% concealment of
income and default in payment of ta'.
ention the bar to imposition of penalty without hearing.
0emonstrate the authority and procedures for imposition of penalty.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to remember the re<uirements of ta' law in relation to
imposition of penalty in case of non8compliance with the amount or rate of
penalties.

!*." IM)OSITION O% )"NALTY
Section O+er+ie/
Penalties can be imposed on any person for non8compliance of certain
ta' law.
The amount and rate of penalties can be varied in case to case.
Jnless hearing or a reasonable opportunity of being heard% no penalties
shall be imposed.
!*.# Introduction
Penalty is the outcome of non8compliance of any provisions of IT Brdinance in
any manner. Such penalties are important to encourage compliance and
establish e<uity at the time of imposing penalty. As per chapter ]: of income
ta' ordinance% a penalty may be imposed on following grounds?
a5 for not maintaining accounts in the prescribed manner
b5 for failure to &le return% certi&cate% statement% accounts or information
c5 for using fa;e Ta'8payerDs Identi&cation $umber 3TI$5
d5 for failure to pay advance ta'
e5 for non8compliance with notice
f5 for failure to pay ta' on the basis of return
g5 for concealment of income
h5 for default in payment of ta'
2ach of the above mentioned failures or non8compliances is o1ence and
sub=ect to speci&c penalty as per the provisions laid down in chapter ]: of IT
Brdinance #/.* e'cept penalty for default in payment of ta' 3h5 above on
which penalty is imposed as per the provisions laid down in chapter ]:I
3section #)-5 of IT Brdinance #/.*.
!*.! )enalt6 for not Maintaining Accounts in the )rescri3ed Manner
Section '29(
>here any person has% without reasonable cause% failed to comply with the
provisions of any order or rule made in pursuance of% or for the purposes of
section )+3!5% the 0eputy Commissioner of Ta'es may impose on him a
penaltyc
3a5 of a sum not e'ceeding one and a half times the amount of ta' payable by
himI and
3b5 where the total income of such person does not e'ceed the ma'imum
amount on which ta' is not chargeable% of a sum not e'ceeding T;. #"".
!*.) )enalt6 for %ailure to 0le #eturn= Certi0cate= State4ent= Accounts or
Infor4ation Section '2:(
3#5 >here any person has% without reasonable cause% failed to &le a return of
income re<uired by or under sections -+% --% ./3!5% /#3)5% /)3#5 and or
withholding ta' re<uired under section -+A% the 0eputy Commissioner of
Ta'es may impose upon such person a penalty amounting to ten per cent
of ta' imposed on last assessed income sub=ect to a minimum of T;.
#%"""% and in the case of a continuing default a further penalty of T;. +"
for every day during which the default continues.
3!5 >here any person has% without reasonable cause% failed to &le or furnish
or% as the case may be% obtain and display within the time laid down
therefor%8
3a5 any certi&cate% statement% accounts or information re<uired by or
under sections +.% #".% #"/% or ##"I or
3b5 the ta'8payerDs identi&cation number 3TI$5 certi&cate under section
#.*C the 0eputy Commissioner of Ta'es shall impose upon such
person a penalty of T;. +"" and in the case of a continuing default a
further penalty of T;. !+" for every month or fraction thereof during
which the default continues.
Provided that where any person has% without any reasonable cause% failed to
furnish information as re<uired under section ##) % the 0eputy Commissioner
of Ta'es may impose a penalty of T;. !+%""" and in case of a continuing
default a further penalty of T;. +"" for each day.
!*.* )enalt6 for using fa2e Ta,>*a6er7s Identi0cation Nu43er Section
'2:A(
>here a person has% without reasonable cause% used Ta'8payerDs Identi&cation
$umber 3TI$5 of another person or used fa;e TI$ on a return of income or any
other documents where TI$ is re<uired under this Brdinance% the 0eputy
Commissioner of Ta'es may impose a penalty not e'ceeding T;. !"%""" on
that person.
!*.+ %ailure to )a6 Ad+ance Ta, Section '2@(
>here% in the course of any proceeding in connection with the assessment of
ta' under Chapter I]% the 0eputy Commissioner of Ta'es is satis&ed that any
person hasc
3a5 without reasonable cause% failed to pay advance ta' as re<uired by section
,*I or
3b5 furnished under section ,- any estimate of ta' payable by him which he
;new% or had reason to believe% to be untrue% he may impose upon such
person a penalty of a sum not e'ceeding the amount by which the ta'
actually paid by him falls short of the amount that should have been paid.
!*., )enalt6 for Non>Co4*liance /ith Notice Section '2E(
>here any person has% without reasonable cause% failed to comply with any
notice issued under section -/% ." or under section .)3#5 or 3!5% the 0eputy
Commissioner of Ta'es may impose on him a penalty not e'ceeding the
amount of ta' chargeable on the total income of such person.
!*.- %ailure to )a6 Ta, on the Basis of #eturn Section '2F(
>here% in the course of any proceeding under the Brdinance% the 0eputy
Commissioner of Ta'es is satis&ed that any person has not paid ta' as
re<uired by section -*% or the ta' paid by him under that section is less than
eighty percent of the amount payable thereunder% he may impose upon such
person a penalty of a sum not e'ceeding !+P of the whole of the ta' or as the
case may be% of such portion of the ta' as has not been paid.
!*.. )enalt6 for Conceal4ent of Inco4e Section '2D(
3#5 >here% in the course of any proceeding under the Brdinance% the 0eputy
Commissioner of Ta'es% the Appellate Moint Commissioner% the
Commissioner 3Appeals5 or the Appellate Tribunal is satis&ed that any
person has% either in the said proceeding or in any earlier proceeding
relating to an assessment in respect of the same income year8
3a5 concealed particulars of his income or furnished inaccurate particulars
of such incomeI or
3b5 understated the value of any immovable property in connection with its
sale or transfer with a view to evading ta'% he or it shall impose upon
such person a penalty of ten percent of ta' which would have been
avoided had the income as returned by such person or as the case may
be% the value of the immovable property as stated by him been
accepted as correct?
Provided that if the concealment referred to in clause 3a5 and 3b5 of this sub8
section or sub8section 3!5 is detected after a period of more than one year
from the year in which the concealment was &rst assessable to ta'% the
amount of penalty shall increase by an additional ten percent for each
preceding assessment year.
3!5 For the purpose of section #!.3#5% concealment of particulars of income or
furnishing of inaccurate particulars of income shall include 8
3a5 the suppression of any item of receipt liable to ta' in whole or in part%
or
3b5 showing any e'penditure not actually incurred or claiming any
deduction therefor.
!*./ )enalt6 for Default in )a64ent of Ta, Section '9F(
3#5 >here an assessee is in default or is deemed to be in default in ma;ing
payment of ta'% the 0eputy Commissioner of Ta'es may direct that% in
addition to the amount of ta' in arrears% a sum not e'ceeding that amount
shall be recovered from the assessee by way of penalty.
3!5 >here% as a result of any &nal order% the amount of ta'% with respect to the
default in the payment of which the penalty was levied% has been wholly
reduced% the penalty levied shall be cancelled and the amount of penalty
paid shall be refunded.
!*.#" Su44ar6 of )enalties
In line with the above provisions% a summary of penalties may be drawn as
below?
#ef
-
#easons of )enalt6 Authorit6 )enalt6
Sec
#!)
for not maintaining
accounts in the
prescribed manner
0CT with
approval
from IMCT
Sum not e'ceeding one and a half
times the amount of ta' payable by
him% however% such amount must not
e'ceed T;. #"" where the total
income does not e'ceed the non8
assessable limit% say% T;. #."%"""
Sec
#!*
for failure to &le return
of income
0CT Ten per cent of ta' imposed on last
assessed income sub=ect to a
minimum of T;. #%""" and in the
case of a continuing default a further
sum of T;. +" for every default days
for failure to &le
certi&cate% statement%
accounts% information
or TI$ certi&cate
0CT T;. +"" and in the case of a
continuing default a further sum of
T;. !+" for every default month or
fraction thereof
for failure to furnish
information as re<uired
under section ##)
0CT T;. !+%""" and in case of a
continuing default a further sum of
T;. +"" for each default day
Sec
#!*
A
for using fa;e Ta'8
payerDs Identi&cation
$umber
0CT with
approval
from IMCT
Sum not e'ceeding T;. !"%"""
Sec
#!+
for failure to pay
advance ta'
0CT with
approval
from IMCT
Sum not e'ceeding the amount by
which the ta' actually paid falls short
of the amount that should have been
paid
Sec
#!,
for non8compliance
with notice
0CT with
approval
from IMCT
Sum not e'ceeding the amount of ta'
chargeable on total income
Sec
#!-
for failure to pay ta' on
the basis of return
0CT with
approval
from IMCT
Sum not e'ceeding !+P of the whole
of the ta' or as the case may be% of
such portion of the ta' as has not
been paid
Sec
#!.
for concealment of
income
0CT% AMCT%
Commissio
ner
3Appeals5
or
Appellate
Tribunal
Sum of #"P of ta' which would have
been avoided had the income as
returned by such person or as the
case may be% the value of the
immovable property as stated by him
been accepted as correctI provided
that if such concealment is detected
after a period of more than one year
the amount of penalty shall increase
by an additional #"P for each
preceding assessment year
Sec
#)-
for default in payment
of ta'
0CT sum not e'ceeding the amount of ta'
in arrears

!*.## Bar to I4*osition of )enalt6 /ithout ;earing Section '9&(
$o order imposing a penalty under this Chapter shall be made on any person
unless such person has been heard or has been given a reasonable
opportunity of being heard. The assessee must be given a reasonable
opportunity of being heard without which penalty proceedings would be
invalid UBanaransi 0as :. CIT IT6% !#-:. Gowever% where a 0CT is succeeded by
another% the succeeding 0CT can pass a penalty order without providing such
opportunity to the assessee if the case was fully heard by his predecessor and if
not% the proceedings would be invalid UCalcutta Tanneries 7T0. :. CIT IT6% #-.:.
!*.#! )re+ious A**ro+al of Ins*ecting Hoint Co44issioner for I4*osing
)enalt6 Section '9'(
The 0eputy Commissioner of Ta'es shall not impose any penalty under this
Chapter without the previous approval of the Inspecting Moint Commissioner
e'cept in the cases referred to in section #!*.
!*.#) Orders of A**ellate Hoint Co44issioner= Co44issioner A**eal( or
A**ellate Tri3unal to 3e sent to De*ut6 Co44issioner of Ta,es
Section '92(
The Appellate Moint Commissioner or the Commissioners 3Appeals5 or the
Appellate Tribunal ma;ing an order imposing any penalty under this chapter
shall forthwith send a copy of the order to the 0eputy Commissioner of Ta'es%
and thereupon all the provisions of the Brdinance relating to the recovery of
penalty shall apply as if such order were made by the 0eputy Commissioner
of Ta'es.
!*.#* )enalt6 to 3e /ithout )re<udice to other Lia3ilit6 Section '99(
The imposition on any person of any penalty under Chapter ]: shall be
without pre=udice to any other liability which such person may incur% or may
have incurred% under the Brdinance or under any other law for the time being
in force.

Chapter !+
#eco+er6 of Ta,
Contents
Introduction
2'amination conte't
To*ic List
!+.# $otice of demand
!+.! Penalty for default in payment of ta'
!+.) Certi&cate for recovery of ta'
!+.* ethod of recovery by Ta' 6ecovery BEcer
!+.+ Power of withdrawal of certi&cate and stay of proceeding
!+., :alidity of Certi&cate for recovery not open to dispute
!+.- 6ecovery of Ta' through Collector of 0istrict
!+.. 6ecovery of ta' through special agistrates
!+./ Bther modes of recovery
!+.#" Self Assessment \uestions
Introduction
Learning o3<ecti+es
0e&ne the notice of demand.
Identify the penalty for default in payment of ta'.
0e&ne the certi&cate for recovery of ta'.
Identify the di1erent methods and modes of recovery of ta'.
)ractical signi0cance
A notice of demand in the prescribed form shall be served upon the assessee
specifying the sum payable and the time within which it is payable where any
ta' is payable in conse<uence of any assessment made or any order passed
under or in pursuance of the Brdinance.
An assessee in default or is deemed to be in default in ma;ing payment of ta'
may be directed to pay penalty in addition to ta' in arrears. For recovery of
ta' from an assessee in default% a certi&cate for recovery of ta' may be
issued. The Ta' 6ecovery BEcer upon receipt of that certi&cate can recover
the ta' in compliance with the method and mode of recovery as speci&ed. Ta'
can also be recovered by the Collector of 0istricts or through Special
agistrates. There are other modes of recovery mentioned in this chapter.
Sto* and thin2
0o you have the idea about the method and mode of recovery of ta' by ta'
authorityN 0o you ;now about notice of demand and penalty for default in
payment of ta'N
.or2ing conte,t
The ta' authority has some procedures to recovery of ta'es. They can serve
notice of demand% they can issue certi&cate for ta' recovery. They can recover
ta' even through Collector of 0istrict or Special agistrate. They have also
other modes of recovery. So it is not easy for any assessee to get rid of from
payment of ta'. Besides an assessee in default or is deemed to be in default
in ma;ing payment of ta' may be penali9ed.
Accountants can suggest their clients to pay the ta' on the basis of
assessment in due time. They can aware the clients that ma;ing default in
payment of ta' may cause to penalty in addition to ta' payable.
S6lla3us lin2s
The topics covered in this chapter are fundamental to your understanding of
income ta'.
Cou will be using this ;nowledge again when you tac;le the Ta'ation paper
later on in the Professional Stage and it will also underpin the technical
aspects at the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne the notice of demand.
Identify the penalty for default in ma;ing payment of ta'.
0e&ne the certi&cate for recovery of ta'.
Identify the method of recovery by Ta' 6ecovery BEcer.
0e&ne the power of withdrawal of certi&cate and stay of proceeding.
0e&ne the recovery of ta' through Collector of 0istrict.
0e&ne the recovery of ta' through special agistrates.
Identify other modes of recovery.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.

!+." #"CO!"#Y O% TAX
Section O+er+ie/
$otice of demand can be served upon the assessee for recovery of ta'
0efault assessee may be directed to pay penalty in addition to ta' in
arrears.
Certi&cate of recovery may be issued for ta' recovery from default
assessee.
Ta' can also be recovered by the Collector of 0istricts or through Special
agistrates.
There are di1erent methods and modes of recovery of ta'.

!+.# Notice of De4andB Sec '9@
3#5 >here any ta' is payable in conse<uence of any assessment made or any
order passed under or in pursuance of the Brdinance% the 0eputy
Commissioner of Ta'es shall serve upon the assessee 3which e'pression
includes any other person liable to pay such ta'5 a notice of demand in the
prescribed form specifying therein the sum payable and the time within
which% and the manner in which% it is payable% together with a copy of an
assessment order.
3!5 >here the assessee upon whom a notice of demand has been issued
under section #)+3#5 ma;es an application in this behalf before the e'piry
of the date of payment speci&ed in the notice% the 0eputy Commissioner
of Ta'es may e'tend the time for payment or allow payment by
installments sub=ect to such conditions% including payment of interest on
the amount payable% as he may thin; &t in the circumstances of the case.
3)5 If the sum payable is not paid within the time speci&ed in the notice of
demand issued under section #)+3#5 or% as the case may be% within the
time as e'tended under section #)+3!5% the assessee shall be deemed to
be in default.
Gowever% where the assessee has presented an appeal under this
Brdinance in respect of the assessment or imposition of the ta' or of the
amount thereof% the 0eputy Commissioner of Ta'es shall treat the
assessee as not being in default for so long as such appeal is not disposed
of.
3*5 If% in a case where payment by installment has been allowed under section
#)+3!5% the assessee commits default in paying any one of the
installments within the time &'ed therefor% the assessee shall be deemed
to be in default as to the whole of the amount then outstanding% and the
other installments shall be deemed to have been due on the same date as
the installment in respect of which default has actually been committed
was due for payment.
3+5 >here an assessee has been assessed in respect of income arising outside
Bangladesh in a country the laws of which prohibit or restrict the
remittance of money to Bangladesh% the 0eputy Commissioner of Ta'es
shall not treat the assessee as in default in respect of that part of the ta'
which is due in respect of such amount of income as cannot% by reason of
the prohibition or restriction% be brought into Bangladesh% and shall
continue to treat the assessee as not in default in respect of such part of
the ta' until the prohibition or restriction is removed.
2]P7A$ATIB$? For the purposes of this section% income shall be deemed to
have been brought into Bangladesh if it has been or could have been utili9ed
for the purposes of any e'penditure actually incurred by the assessee outside
Bangladesh or if the income% whether capitali9ed or not% has been brought
into Bangladesh in any form.
!+.! )enalt6 for Default in )a64ent of Ta,B Sec '9F
a. >here an assessee is in default or is deemed to be in default in ma;ing
payment of ta'% the 0eputy Commissioner of Ta'es may direct that% in
addition to the amount of ta' in arrears% a sum not e'ceeding that
amount shall be recovered from the assessee by way of penalty.
b. >here% as a result of any &nal order% the amount of ta'% with respect to
the default in the payment of which the penalty was levied% has been
wholly reduced% the penalty levied shall be cancelled and the amount
of penalty paid shall be refunded.
!+.) Certi0cate for #eco+er6 of Ta,B Sec '9D
a. >hen an assessee is in default or in deemed to be is default in ma;ing
payment of ta'% the 0eputy Commissioner of Ta'es may forward to the
Ta' 6ecovery BEcer a certi&cate for recovery of the ta'% under his
signature specifying the amount of arrears due from the assesseeI and
such certi&cate may be issued notwithstanding that proceedings for
recovery of the arrears by any other mode have been ta;en.
b. A certi&cate under section #).3#5 may be forwarded toc
3a5 the Ta' 6ecovery BEcer within whose =urisdiction the assessee carried
on his business or profession or the principal place of business or
profession of the assessee is situateI or
3b5 the Ta' 6ecovery BEcer within whose =urisdiction the assessee resides
or any movable or immovable property of the assessee is situateI or
3c5 the Ta' 6ecovery BEcer who has =urisdiction in relation to the assessee
whose income is assessable by the 0eputy Commissioner of Ta'es
forwarding the certi&cate.
!+.* Method of #eco+er6 36 Ta, #eco+er6 ONcerB Sec '9C
a. Jpon receipt of certi&cate forwarded to him under section #).% the Ta'
6ecovery BEcer shall% notwithstanding anything contained in any other
law for the time being in force% proceed% in accordance with the rules
made in this behalf by the Board% to recover from the assessee the
amount speci&ed in the certi&cate by one or more of the following
modes% namely8
3a5 attachment and sale% or sale without attachment% of any movable or
immovable property of the assesseeI
3b5 arrest of the assessee and his detention in prisonI
3c5 appointment of a receiver for the management of the movable and
immovable properties of the assessee.
b. >hile recovering under sub8section 3#5 the amount speci&ed in the
certi&cate forwarded to him% the Ta' 6ecovery BEcer may also recover
in the same manner from the assessee in default% in addition to such
amount% any cost and charges% including e'penses on the service of
any notice or warrant% incurred in the proceedings for the recovery of
the ta' in arrears.
c. If the Ta' 6ecovery BEcer to whom a certi&cate is forwarded under
section #). is not able to recover the entire amount by the sale of
movable and immovable properties of the assessee within his
=urisdiction% but has information that the assessee has property within
the =urisdiction of another Ta' 6ecovery BEcer% he may send the
certi&cate to such other Ta' 6ecovery oEcer or to the Ta' 6ecovery
BEcer within whose =urisdiction the assessee residesI and the Ta'
recovery BEcer to whom the certi&cate has been so sent shall proceed
to recover under Chapter ]:I the amount remaining un8recovered as if
the certi&cate was forwarded to him by the 0eputy Commissioner of
Ta'es.
!+.+ )o/er of .ithdra/al of Certi0cate and Sta6 of )roceedingB Sec ':&
a. $otwithstanding the issue of a certi&cate for recovery under section
#).% the 0eputy Commissioner of Ta'es shall have power to withdraw%
or correct any clerical or arithmetical error in the certi&cate by sending
an intimation to that e1ect to the Ta' 6ecovery BEcer.
b. >here the order giving rise to a demand of ta' for which a certi&cate
for recovery has been issued has been modi&ed in appeal or other
proceedings under this Brdinance and% as a conse<uence thereof% the
demand is reduced but the order is the sub=ect matter of further
proceedings under this ordinance% the 0eputy Commissioner of Ta'es
shall stay the recovery of such part of the amount of the certi&cate as
pertains to the said reduction for the period for which the appeal or
other proceedings remain pending.
c. >here a certi&cate for recovery has been issued and subse<uently the
amount of outstanding demand is reduced as a result of appeal or
other proceedings under this Brdinance% the 0eputy Commissioner of
Ta'es shall% when the order% which was the sub=ect matter of such
appeal or other proceeding% has become &nal and conclusive% amend
the certi&cate or withdraw it% as the case may be.
d. The 0eputy Commissioner of Ta'es shall communicate to the Ta'
6ecovery BEcer any orders of cancellation% correction% stay of
proceeding% withdrawal or amendment% as the case may be% of a
certi&cate for recovery.
!+., !alidit6 of Certi0cate for #eco+er6 not O*en to Dis*uteB Sec ':'
>hen the 0eputy Commissioner of Ta'es forwards a certi&cate for recovery
under section #). to a Ta' 6ecovery BEcer% it shall not be open to the
assessee to dispute before the Ta' 6ecovery BEcer the correctness of the
assessment% and the Ta' 6ecovery BEcer shall not entertain any ob=ection to
the certi&cate on any ground whatsoever.
!+.- #eco+er6 of Ta, Through Collector of DistrictB Sec ':2
a. The 0eputy Commissioner of Ta'es may forward to the Collector of
0istrict in which the oEce of the 0eputy Commissioner of Ta'es is
situate or the district in which the assessee resides or owns property or
carries on business or profession% a certi&cate under his signature
specifying the amount of arrears due from an assessee% and the
Collector% on receipts of such certi&cate% shall proceed to recover% from
such assessee the amount speci&ed therein as if it were an arrear of
land revenue.
b. >ithout pre=udice to any other powers which the Collector of 0istrict
may have in this behalf% he shall% for the purposes of recovery of the
amount speci&ed if the certi&cate for recovery forwarded to him under
section #*!3#5% have the powers which a Civil Court has under the Code
of Civil Procedure% #/".% for the purposes of recovery of an amount due
under a decree.
c. The 0eputy Commissioner of Ta'es may% at any time% recall from the
Collector of 0istrict a certi&cate forwarded to him under section #*!3#5
and upon such recall% all proceeding commenced in pursuance of the
certi&cate shall abate. Gowever% the recall of a certi&cate shall not
a1ect any recoveries made by the Collector before the recall as if the
certi&cate had not% to the e'tent of such recovery% been recalledI nor
shall the recall of a certi&cate issued at any time prevent the recovery%
by issue of a fresh certi&cate% of any amount which was recoverable at
the time the certi&cate so recalled was issued.
!+.. #eco+er6 of Ta, Through S*ecial MagistratesB Sec ':2A
a. >ithout pre=udice to the provisions of section #*!% the 0eputy
Commissioner of Ta'es may forward to a agistrate of the First Class%
specially empowered in this behalf by the (overnment% hereinafter
referred to as Othe Special agistrateW% a certi&cate under his signature
specifying the amount of arrears due from the assessee% and the
Special agistrate shall% on receipt of such certi&cate% proceed to
recover from the assessee the amount speci&ed therein as if it were an
arrear of land revenue and the Special agistrate were a Collector of
0istrict.
b. >ithout pre=udice to any other powers of a Collector of 0istrict which
the Special agistrate may have in this behalf% he shall% for the
purposes of recovery of the amount speci&ed in the certi&cate for
recovery forwarded to him under section #*!A3#5% have the powers
which a Civil Court has under the Code of Civil Procedure% #/".% for the
purposes of recovery of an amount due under a decree.
c. The 0eputy Commissioner of Ta'es may% at any time% recall from the
Special agistrate a certi&cate forwarded to him under section #*!A3#5
and upon such recall% all proceedings commenced in pursuance of the
certi&cate shall abate. Gowever% the recall of a certi&cate shall not
a1ect any recoveries made by the Special agistrate before the recall
as if the certi&cate had not% to the e'tent of such recovery% been
recalledI nor shall the recall of a certi&cate issued at any time prevent
the recovery% by issue of a fresh certi&cate of any amount which was
recoverable at the time the certi&cate so recalled was issued.
!+./ Other Modes of #eco+er6B Sec ':9
a. $otwithstanding the issue of a certi&cate for recovery of ta' under
section #). or section #*!% the 0eputy Commissioner of Ta'es may
also recover the ta' in the manner provided in section #*)3#A5 or 3!5.
3#A5For the purpose of recovery of ta' payable by an assessee which is not
disputed in appeal to any appellate forum% the 0eputy Commissioner of Ta'es
may% with the previous approval of the Commissioner% after giving the
assessee an opportunity of being heard% stop movement of any goods and
services from the business premises of such assessee and also shutdown such
business premises till the recovery of the ta' referred to above or any
satisfactory arrangement has been made for the recovery of such ta'.
b. For the purposes of recovery of any ta' payable by an assessee% the
0eputy Commissioner of Ta'es may% by notice in writing% re<uire any
personc
i. from whom any money or goods is due or may become due to the
assessee% or who holds% or controls the receipt or disposal of% or may
subse<uently hold% or control the receipt or disposal of% any money or
goods belonging to% or on account of% the assessee% to pay to the
0eputy Commissioner of Ta'es the sum speci&ed in the notice on or
before the date speci&ed therein for such paymentI or
ii. who is responsible for payment of any sum to the assessee classi&able
as income of the assessee under the head XSalariesK% to deduct from
any payment subse<uent to the date of the notice% any arrear of ta'
due from the assessee% and to pay the sum so deducted to the credit of
the (overnment.
c. A person who has paid any sum as re<uired by section #*)3!53a5 shall
be deemed to have paid such sum under the authority of the assessee
and the receipt by the 0eputy Commissioner of Ta'es shall constitute a
good and suEcient discharge of the liability of such person to the
assessee to the e'tent of the sum speci&ed in the receipt.
d. A person who has deducted any sum as re<uired by section #*)3!53b5
shall be deemed to have deducted the ta' under section +" and the
relevant provisions of Chapter :II shall apply accordingly.
e. If the person to whom a notice under section #*)3!5 is sent fails to
ma;e payment or to ma;e deductions in pursuance of the notice% he
shall be deemed to be an assessee in default in respect of the amount
speci&ed in the notice and proceedings may be ta;en against him for
reali9ation of the amount as if it were an arrear of ta' due from himI
and the provisions of this Chapter shall apply accordingly.
f. The 0eputy Commissioner of Ta'es may at any time amend or revo;e
any notice issued under section #*)3!5 or e'tend the time for ma;ing
any payment in pursuance of such notice.
g. In any area with respect to which the Commissioner has directed that
any arrears may be recovered by any process enforceable for the
recovery of an arrear of any municipal ta' or local rate imposed under
any enactment for the time being in force in any part of Bangladesh%
the 0eputy Commissioner of Ta'es may proceed to recover the amount
due by such process.
h. The Commissioner may direct by what authority any powers or duties
incident under any such enactment as aforesaid to the enforcement of
any process for the recovery of a municipal ta' or local rate shall be
e'ercised or performed when that process is employed under section
#*)3-5.
",*lanationB For the removal of doubts% it is hereby clari&ed that the several
modes of recovery speci&ed in Chapter ]:I are neither mutually e'clusive nor
a1ect in any way any other law for the time being in force relating to the
recovery of debts due to (overnment% and it shall be lawful for the 0eputy
Commissioner of Ta'es% if for any special reasons to be recorded by him% to
have recourse to any such mode of recovery notwithstanding that the ta' due
is being recovered from an assessee by any other mode.
!+.#" Self>Assess4ent ?uestions
0iscuss brieAy the salient features of the various provisions of the Income8ta'
Brdinance% #/.* relating to recovery of ta' by the Ta' Authorities.
Chapter !,
Dou3le Ta,ation #elief
Contents
Introduction
2'amination conte't
To*ic List
2E-' 0ouble Ta'ation F Some Basic Concepts
2E-2 Agreement to Avoid 0ouble Ta'ation
2E-9 6elief In 6espect of Income Arising Butside Bangladesh
2E-: ethods of avoiding double ta'ationN Gow the methods wor;
2E-@ Ta' Treaty
2E-E Some other concepts used in 0TAA
Introduction
Learning o3<ecti+es
0e&ne the agreement to avoid double ta'ation.
6ecognise the relief in respect of income arising outside Bangladesh.
)ractical signi0cance
The (overnment of Bangladesh may enter into an agreement with the
(overnment of any other country for the avoidance of double ta'ation and the
prevention of &scal evasion with respect to income ta'es. The agreement can
provide some provisions for implementation such as relief from the ta'
payable% recovery of ta' leviable under the Brdinance and under the
corresponding law in force in that country etc.
If any person who is resident in Bangladesh in any year proves that he has
paid ta' on any income for any income year outside Bangladesh in any
country with which there is no reciprocal agreement for relief or avoidance of
double ta'ation% ta' shall be deducted from the ta' payable by him under the
Brdinance% a sum e<ual to the ta' calculated on such doubly ta'ed income at
the average rate of ta' of Bangladesh or the average rate of ta' of the said
country% whichever is the lower.
Sto* and thin2
0o you reali9e the impact of agreement to avoid double ta'ationN 0o you
;now the list of countries with whom Bangladesh has agreement to avoid
double ta'ationN 0o you ;now about the relief in respect of income arising
outside BangladeshN
.or2ing conte,t
Accountant can help their clients by giving advice with procedures to avoid
double ta'ation. They should have the updated ;nowledge on various
agreements for avoidance of double ta'ation with di1erent countries. Based
on the provisions of these agreements they can support their clients in this
regard.
S6lla3us lin2s
Cou will be using this ;nowledge again when you tac;le the Ta'ation paper
later on in the Professional Stage and it will also underpin the technical
aspects at the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne the agreement to avoid double ta'ation.
6ecognise the provision mentioned in agreement to avoid double ta'ation.
Identify the relief in respect of income arising outside Bangladesh.
7ist the name of countries with whom Bangladesh has agreement for
avoidance of double ta'ation.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.

2E-& DOUBL" TAXATION #"LI"% INCLUDIN$ TAX T#"ATI"S
Section O+er+ie/
For the avoidance of double ta'ation Bangladesh enters into agreement
with many countries.
0ouble ta'ation agreement also prevents the &scal evasion with respect to
income ta'es.
Jnder double ta'ation relief system% the payable ta' will be the sum e<ual
to the ta' calculated on such doubly ta'ed income at the average rate of
ta' of Bangladesh or the average rate of ta' of the agreed country%
whichever is the lower.
26.1 Dou3le Ta,ation M So4e Basic Conce*ts
.hat is dou3le ta,ation1
0ouble ta'ation means ta'ing the same income twice% once in the home
country and again in the host country. For e'ample% a Bangladeshi citi9en may
have income arose in India which is once ta'ed in India and again in
Bangladesh.
;o/ does dou3le ta,ation arise1
0ouble ta'ation may arise in the following two ways?
3i5 The =urisdictional connections used by di1erent countries may overlap with
each other. For e'ample% r. 6ole'% a resident under the Bangladesh
Income Ta' Brdinance #/.* has to pay ta' on his total world income in
JSA also as citi9en of JSA 36esidential =urisdiction5.
3ii5 The ta'payer or his income may have connections with more than one
country. For e'ample% r. 6ahamat% a Bangladeshi citi9en% has income from
6omania on investments and dividend income from France in addition to
income from Bangladesh. Ge has to pay ta' on his total world income in
Bangladesh and also on income earned in 6omania and France 3Source
=urisdiction5.
.hat are the 3road o3<ecti+es of Bangladesh DTA1
The ma=or ob=ectives of Bangladesh 0TA are as follows?
3i5 To obtain a more e1ective relief from double ta'ation compared to relief
allowed under unilateral measures.
3ii5 To create a favorable climate for the inAow of F0I in Bangladesh.
3iii5To ma;e special ta' incentives provided by Bangladesh fully e1ective for
the ta'payers of the capital e'porting countries.
3iv5To prevent evasion and avoidance of ta'.
3v5 To foster long term% mutually bene&cial economic relationship with others
specially the developed countries.
.hich 4odel of a+oidance of dou3le ta,ation agree4ent is follo/ed
in Bangladesh1
There are two models of avoidance of double ta'ation agreement vi9.% J$
odel and B2C0 odel. Bangladesh generally follows J$ model of avoidance
of double ta'ation agreement which consists of the following !/ Articles?
Article ;eading Main Contents
#. Scope of the convention To whom applicable
!. Ta'es covered Speci&c ta'es covered
). (eneral de&nitions
Person% company% enterprise% international
traEc%
competent authority
*. 6esident
6esident of a contracting state who can
access the
treaty
+.
Permanent establishment
3P25
>hat constitutes 4does not constitute P2
,.
Income from immovable
property
Immovable property and income therefrom
-. Business pro&ts
0etermination and ta'ation of pro&ts
arising from business carried on through P2
..
Shipping% inland waterways%
transport and air transport
Place of deemed accrual of pro&ts and
mode of
ta'ation thereon
/. Associated enterprises
2nterprises under common management
and ta'ation of pro&ts arising therefrom
#". 0ividends 0e&nition and ta'ation of dividends
II. Interest 0e&nition and ta'ation of interest
#!. 6oyalties
0e&nition and ta'ation of royalties% Country
where ta'able
#). Capital gains
0e&nition and ta'ation of capital gains%
Country where ta'able
#*.
Independent personal
services
Types of services covered% Country where
ta'able
#+. 0ependent personal services 0e&nition% Country where ta'able
#,.
0irectorsD fees and
remuneration
for top level managerial
oEcials
0e&nition% Country where ta'able
#-.
Income earned by
entertainers and athletes
Types of activities covered% ode and
country where ta'able
#..
Pension and social security
payments
Country where ta'able
#/.
6emuneration and pensions
in
respect of (overnment
servants
Type of remuneration% Country where
ta'able
!".
Payment received by
students and apprentices
Ta'ation and related e'emptions
!#. Bther income
6esidual Article to cover incomes not
covered under Articles% ode of ta'ation
and country where ta'able
!!. Capital 3ta' on wealth5
0e&nition and mode of ta'ation% Country
where ta'able
Article ;eading Main Contents
!*. $on8discrimination
2<uitable basis of ta'ing $ationals and
Citi9ens of
foreign state
!+. utual Agreement Procedure
>here ta'ation is not as per provisions of
the convention% a person may present his
case to competent authority of respective
states
!,. 2'change of information
Competent authorities to e'change
information for carrying out the provisions
of the convention ethodology for the
same
!-.
0iplomatic agents and
consular oEcers
Privileges of this category to remain
una1ected
!.. 2ntry into force
21ective date from which the convention
comes
into force%
Assessment year from which it comes into
force
!/. Termination of treaty Time and $otice period ode
Besides the above clauses% 0TAAs normally contain a Protocol or
emorandum% which is li;e a supplement to the Treaty. This is attached
normally at the end of the Treaty% which clari&es borderline issues% and also
recti&es unintended omissions.
The other model% B2C0 model% is mostly followed amongst !/ B2C0
countries. The fundamental di1erence between these two is essentially oneI
J$ model is based on ta'ing the income on source principle where as B2C0
model is on resident principle. Since F0I Aows from developed to developing
countries% the latter tends to bene&t the developed countries.
.hat i4*act dou3le ta,ation in general= /ould ha+e on glo3al
econo4ic acti+ities1
a5 It hampers free Aow of capital and technology across borders and
b5 It becomes a prohibitive burden on concerned ta'payers leading to decline
in foreign investments.
.hat are the eAects of Dou3le Ta, A+oidance Agree4ents DTAA( in
Bangladesh1
The e1ects of an agreement entered into by virtue of section #** of Income
Ta' ordinance #/.* would be?
3i5 if no ta' liability is imposed under the Brdinance% the <uestion of resorting
to 0TAA would not arise. $o provision of 0TAA can possibly fasten a ta'
liability which is not imposed by the Brdinance. The treaties with all intent
and purpose% can lessen the vigor of double ta'ation cannot however%
enhance it.
3ii5 In case of a di1erence in the provisions of the Brdinance and those of the
0TAA% to the e'tent they are more bene&cial to the provisions of the
Brdinance% will override the ordinance which is the fundamental concept in
treaty override.
.hat are the diAerences 3et/een dou3le ta, relief and dou3le ta,
a+oidance1
0ouble ta' relief means granting of relief in respect of income on which
income ta' has been paid under the Bangladesh ta' laws and also in other
country.
0ouble ta'ation avoidance means avoidance of double ta'ation of income
under the ta' laws of the two countries. Bne important distinction between
the two is that in the case of avoidance of double ta'ation the assesee does
not have to pay the ta' &rst to claim refund later but he would be obliged to
do so in the case of relief against double ta'ation. The other distinction is that
no bene&t is given unless otherwise stipulated in the 0TAA but relief can be
awarded unilaterally against double ta' even when there e'ists no 0TAA.
Section #*+ of Bangladesh Income Ta' Brdinance #/.* empowers the 0CT to
grant such relief.
Firstly% as per section #** of Income Ta' Brdinance #/.*% where Bangladesh
(ovt. has entered into any 0TAA% the provisions of that agreement would
normally apply to the case of an assessee covered by such agreement.
Gowever if the relevant provisions in the Bangladesh Income Ta' Brdinance
are more favourable% then to that e'tent he can see; applications of the
provisions of the Brdinance as against those of the agreement.
2E-2 Agree4ent to A+oid Dou3le Ta,ationB Sec '::
This section confers the right to (BB to enter into an agreement with the
government of any other country for the avoidance of double ta'ation and the
prevention of &scal evasion with respect to income ta' and may% by (a9ette
$oti&cation% ma;e such provisions as may be necessary to implement the
agreement.
Income ta' policy section of $B6 is entrusted to negotiating the 0ouble
Ta'ation Agreement 30TA5 with foreign countries to promote foreign direct
investment in Bangladesh. 0TA is an agreement between two countries
see;ing to avoid double ta'ation by de&ning the ta'ing rights of each country
with regard to cross border Aows of income% providing for ta' credits or
e'emptions to eliminate double ta'ation.
At present% (overnment of Bangladesh has entered into 0ouble Ta'ation
Avoidance Agreement 30TAA5 with )! countries as stated below?
Sl-
Na4e of the
Countr6
S#O Date of eAect in
Bangladesh
Kassess4ent 6ear
co44encing on or
afterL
No- Date
#. Jnited Hingdom
of (reat Britain
and $orthern
Ireland
!!-874." ".4"-4#/." "#4"-4#/-.
!. Singapore #!*874.! !#4"*4#/.! "#4"#4#/."
). Sweden ).!874.) #/4#"4#/.) "#4"-4#/.*
*. 6epublic of
Horea
*))874.* "!4#"4#/.* "#4"-4#/.*
+. Canada !*-874.+ ",4",4#/.+ "#4"-4#/.!
,. Pa;istan !!#874.. ##4"-4#/.. "#4"#4#/."
-. 6omania )*.874.. !)4##4#/.. "#4"-4#/./
.. Sri 7an;a ),+874.. #"4#!4#/.. "#4"-4#/./
/. France !874./ "*4"#4#/./ "#4"-4#/./
#". alaysia ,-874/" #+4"!4#//" "#4"#4#/.!
##. Mapan !)+874/# ",4".4#//# "#4"-4#//!
#!. India *+874/) !-4"!4#//) "#4"-4#//)
#). (ermany #874/* "#4"#4#//* "#4"#4#//"
#*. The
$etherlands
!,-874/* #*4"/4#//* "#4"-4#//+
#+. Italy ,)874/- #!4")4#//- "#4"-4#/."
#,. 0enmar; -!874/- #-4")4#//- "#4"-4#//-
#-. China ##*874/- #)4"+4#//- "#4"-4#//.
#.. Belgium ##874/. #*4"#4#//. "#4"-4#//.
#/. Thailand !!!874/. "-4"/4#//. "#4"-4#///
!". Poland )/474// ")4")4#/// "#4"-4!"""
!#. Philippines +,874!""* "*8")8!""* "#8"-8!""*
!!. :ietnam )"#874!""* #.8#"8!""* "#8"-8!""+
!). Tur;ey )".874!""+ )#8#"8!""+ "#8"-8!""+
!*. $orway !"8 74!"", #!8"!8!"", "#8"-8!"",
!+. JSA -#874!""- #"8"+8!""- "#8"-8!""-
!,. Indonesia ,"874!""- !,8"*8!""- "#8"-8!""-
!-. Swit9erland 8 #"8#!8!""- "#8"-8!"#"
!.. Bman #,874!""/ "!8"!8!""/ "#8"-8!""/
!/. auritius 8 !#8#!8!""/ "#8"-8!"#"
)". yanmar 8 "-8#"8!"". "#8"-8!"##
)#. Saudy Arabia 8 "*8"#8!"## "#8"-8!"##
)!. JA2 8 #-8"#8!"## "#8"-8!"##
2E-9 #elief In #es*ect of Inco4e Arising Outside BangladeshB Sec ':@
This section empowers 0CT to allow relief to an assessee in respect of any
income accrued or arisen in any other country with which Bangladesh does
not have 0TA. The assessee must prove that he has su1ered ta' on that
income by way of deduction or otherwise% then the 0CT may deduct from the
ta' payable by the assessee a sum e<ual to ta' calculated on such doubly
ta'ed income at the average rate of ta' of Bangladesh or the average rate of
ta' at the said country% whichever is lower. Average rate of ta' means the rate
arrived at by dividing the amount of ta' calculated on the total income by
such income.
2E-: Co4*arati+e *icture of Dou3le Ta, A+oidance and Ta, #elief
0ouble ta' avoidance and ta' relief as presented in sections #** and #*+
respectively in IT Brdinance #/.* have conceptual di1erence which is
presented in the table below?
#eferenc
e
Inco4e Section Ta, ad+antages
Section
#**
and
Schedule
-
Arises from those
countries with
whom there is
0TAA
Avoidanc
e of
0ouble
Ta'ation
Ta' calculated as per the rate in
the agreement% but it will not be
more than the ta' amount
calculated on the basis of the
average ta' rate applicable in
Bangladesh 3considering foreign
income in total income5 on the
foreign income.
Section
#*+
Arises from those
countries with
whom there is no
0TAA
6elief Ta' calculated on such doubly
ta'ed income at the average
rate of ta' of Bangladesh or the
average rate of ta' of the said
country% whichever is lower.
Illustration 'B
r. $a9im% a Bangladeshi resident% received interest income of T;. *+"%"""
from Indonesia after deduction of #"P of ta' at source during the year ending
on )" Mune% !"##. Gis other income in Bangladesh amounts to T;. )""%""" for
the same year. Compute the net ta' liability of r. $a9im.
Mr- NaQi4
Assess4ent 6earB 2&''>2&'2
;eads of Inco4e A4ount T2-(
Income from Bangladesh sources )""%"""
Foreign income 3T;. *+"%"""4#8".#5 +""%"""
Total ta'able income .""%"""
Co4*utation of Ta, Lia3ilit6B
Tier of Inco4e #ate A4ount T2-(
Bn &rst T;. #."%""" $il $il
Bn ne't )""%""" #"P )"%"""
Bn balance )!"%""" #+P *.%"""
T;. .""%""" -.%"""
Thus% the average ta' rate in Bangladesh is /.-+P 3T;. -.%""" 4 T;. .""%""" _
#""5. So% the ma'imum limit of ta' credit will be T;. *.%-+" 3T;. +""%""" _
/.-+P5 though he already paid T;. +"%""" ta' in Indonesia. r. $a9im will
have to pay T;. !/%!+" 3T;. -.%""" F T;. *.%-+"5 as remaining ta' in
Bangladesh.
Illustration 2B
rs. Asma Mahan records the income for the income year !"#" 8 ## as income
from Bangladesh T;. !%"""%"""I income from Sweden T;. ,""%"""I income
from Singapore T;. *""%"""I and income from 6ussia T;. #%"""%""". The
income ta' rate for foreigners in Sweden is )"P% but he has paid ta' Q !+P
as per 0TA. !"P ta' has been paid in 6ussia for the income generated in
6ussia and !+P ta' has been paid in Singapore for the income generated in
Singapore. Show the application of double ta'ation relief due to these foreign
incomes for the assessment year !"## 8 #!.
Mrs- As4a Hahan
Co4*utation of total inco4e
)articulars T2- T2-
#. Income from Bangladesh
!. Income from Sweden
). Income from 6ussia
*. Income from Singapore
!%"""%""
"
,""%"""
#%"""%""
"
*""%"""
Total Income *%"""%""
"
Mrs- As4a Hahan
Co4*utation of Ta, *a6a3le in Bangladesh
)articulars #ate- T2-
Bn &rst !%""%"""
Bn ne't )%""%"""
Bn ne't *%""%"""
Bn ne't )%""%"""
Bn balance !%.""%"""
"P
#"P
#+P
!"P
!+P
8
)"%"""
,"%"""
,"%"""
-%""%""
"
Total Ta'
7ess? 0ouble ta'ation relief 3$ote5
.%+"%""
"
*%#!%+"
"
$et ta' payable *%)-%+"
"
NotesB
'- Average ta' rate in Bangladesh [ U3.%+"%"""4*%"""%"""5 _#""V [ !#.!+P
2- Ta' relief from income from 6ussia 3$o 0TA5 [ Q !"P or average ta' rate
i.e. !#.!+P whichever is lower [ 3#%"""%""" _!"P5 [ T;. !""%"""
9- Ta' relief from income from Sweden 30TA e'ists5 [ 3,""%""" _!+P5 [ T;.
#+"%""". Gowever% ma'imum limit is T;. #!-%+"" 3,""%""" _!#.!+P5.
:- Ta' relief from income from Singapore 3$o 0TA5 [ Q !+P or average ta'
rate i.e. !#.!+P whichever is lower [ 3*""%""" _!#.!+P5 [ T;. .+%"""
@- Total double ta'ation relief is [ T;. 3!""%""" Z #!-%+"" Z .+%"""5 [ T;.
*#!%+"".
2E-@ Methods of a+oiding dou3le ta,ation1
There are four methods of avoiding double ta'ation. They are 8
3i5 Jnilateral relief
3ii5 Bilateral relief
3iii5ultilateral relief
3iv5$on8ta' treaties
Unilateral relief
Jnder this system whether the income is sub=ect to ta' abroad or not is
immaterial% relief is given by way of ta' credit for the ta' paid abroad.
Jnder Section #*+ of the Income Ta' Brdinance #/.*% ta' credit method is
followed. A resident in Bangladesh who has paid income ta' in any country
with which Bangladesh does not have a treaty for the relief or avoidance of
double ta'ation is allowed credit against his Bangladesh income ta' for an
amount e<ual to Bangladesh coverage rate i.e. average rate or the foreign
rate whichever is lower% applied to the doubly ta'ed income. This is done as
follows?
a. >here the foreign ta' is e<ual to Bangladesh ta'% full amount of foreign
ta' will be given credit.
b. >here the foreign ta' e'ceeds the Bangladesh ta'% the liability to
Bangladesh ta' is nil. Gowever% no refund in respect of the e'cess amount
is allowed.
c. >here foreign ta' is less than Bangladesh ta'% the di1erence would be
payable by the ta'payer.
The basic principle to remember is that credit4relief will never e'ceed the
Bangladesh income ta' on the concerned income calculated at average rate.
Bilateral relief
It may ta;e one of the following two forms?
Firstly% the treaty may apply e'empting method% the country in <uestion
refraining from e'ercising =urisdiction to ta' a particular income.
For instance% the country of source where P2 is located is assigned an
e'clusive =urisdiction to ta' the pro&ts of the establishment. In turn it may
agree to refrain from e'ercising its =urisdiction to ta' the owner of these
pro&ts.
Alternatively% the treaty may provide relief from double ta'ation by redacting
the ta' ordinarily due in one or both of the contracting states on that income
which is sub=ect to double ta'ation.
For instance% the country% which is the source of a dividend% often agrees to
reduce the withholding rate normally applicable to dividends paid to non8
resident and the country of residence agrees to give ta' credit or similar relief
for the ta' paid in the source country. In such a case% both the countries
e'ercise the rights to =urisdiction% while mutually agreeing for ad=ustments%
many 0TAAs combine both the methods of relief.
Multilateral treaties
These are similar to bilateral treaties achieved through agreement between
many countries i.e. 22C.
Non>ta, treaties
These are not direct treaties of ta' but are of friendship% co8operation cultural
e'change% political and diplomatic relations% but which conse<uently may
reAect upon ta' matters.
2E-E Ta, Treat6
.hat is a ta, treat6 and ho/ does it /or21
XTreatyK as commonly understood is a formally concluded and rati&ed
agreement between independent nations. Ta' treaties are generally a matter
of bargain and prolonged negotiations centering on economic interests of the
countries involved.
.hat is the sco*e of ta, treaties in deter4ining <urisdiction1
$ormally ta' treaty between two countries covers8
3i5 Persons 3ii5 Ta'es 3iii5 Territory 3iv5 Time
The treaty% generally applies to residents of the contracting states. 2ach
country retains the power to ta' its citi9ens and residents on their total world
income 3Status =urisdiction5 and ta' others% non citi9ens% non8residents only on
their income in the country 3Source =urisdiction5. Gowever% the treaty
provisions protect the ta'payer from su1ering double ta'ation on the same
income.
;o/ does a treat6 3eco4e la/1
The agreement entered into becomes a part of domestic law only when it has
sanction of the constitutions of the nations which are parties to it. The power
to legislate is conferred on our Parliament and therefore% the (overnment has
authority to enter into 0TAA. Gowever% all treaties are also re<uired to be
formally approved by oEcial ga9ette noti&cation.
2E-F So4e other conce*ts used in DTAA
Treat6 O+erride
The e'ecutive of the state has been given rights under our Constitution to
enter into 0TAAs. This is an e'ecutive power e'ercisable by the (ovt. li;e
legislative and =udicial powers. As the power to enter into 0TAAs comes from
the Constitution% the relevant article thereof will have the e1ect of the 0TAA
overriding the Brdinance% as the e'ecutive also has to e'ercise =urisdiction
;eeping in mind 0TAA obligations and commitments made thereon. It is now
an undisputed proposition that 0TAA overrides the Brdinance.
Ta, ;a+ens
Ta' haven nations are those with nil or moderate level of ta'ation and4or
o1ering liberal ta' incentives for e'port activities% shipping business. These
ta' havens attract investments as the corporate ta' rate is low. They may also
e'empt dividends and capital gains on the transfer or e'change of movable
assets li;e shares and sometime immovable properties li;e land% building%
plants etc. Besides ta' haven countries may also pursue absolute secrecy and
easy e'change control policies to attract o1shore investors.
There are two types of ta' haven
#.$il ta' haven
!.$il ta' outside haven countries
Treat6 sho**ing
Must as the domestic law can% sometimes% be used more than fairly to the
advantage of a ta'payer% the 0TAA too can be e'ploited through popularly
;nown means of OTreaty ShoppingW. A non8resident see;ing shelter under a
0TAA is still open to domestic assessment when the ta' authorities feel that%
he is ta;ing an undue advantage of provisions of the 0TAA or has structured
the commercial arrangement in such a way so as to avail the 0TAA bene&t
otherwise not available to him. The authorities may then deny the bene&ts of
the 0TAA. The most common form of Treaty Shopping is setting up of a
dummy enterprise. This is set up by say% Company A% in one of the
Contracting States% to avail 0TAA bene&ts% which the company% not being a
resident of either Contracting States% would otherwise not be entitled to. In
such a case% the Court can lift the corporate veil.
Attri3ution #ule
The basic re<uirement to bring the business pro&ts to ta' they should be
capable of being attributable to the Permanent 2stablishment 3P25 or
residency. The <uestion to be as;ed is the enterprise trading with the country
on a regular basisN If yes% what is the nature of establishment in BangladeshN
If the income arises out of the business activity carried on in that state and if
it can be attributed to the P2% it can be ta'ed in that e'tent of attribution.
Certain established and accepted rules are to be followed in the determination
of such income. (enerally the e'penses that can or cannot be considered will
depend upon the ta'ation laws of each state.
%orce of attraction rule
It means all income arising from all source in a country where the foreign
enterprise maintains a P2 is sub=ect to ta' in that country irrespective of
whether the said income is attributable to the P2 or not. Therefore% pro&ts
arising from transactions outside P2 are also ta'able. As per this rule not only
the pro&ts attributable to the sale of same or similar ;ind of goods is brought
to ta' and any other income from sources within the country are also
regarded income attributable to the P2.
Students should carefull6 note the follo/ing 4ain o3<ecti+es of
Dou3le Ta,ation Agree4entB
a5 Any income earned by a resident of a contracting state in the other
contracting state cannot escape from ta' assessment in both the
contracting states.
b5 Any income earned by a resident of a contracting state in the other
contracting state cannot be ta'ed in the both the contracting states.
c5 Conditions of ta'ability and rates of ta' payable of a resident of a
contracting state in respect of incomes from various heads earned in the
other contracting state.
Chapter !-
#efunds
Contents
Introduction
2'amination conte't
To*ic List
2F-' 6e<uirement to issue refund :oucher
2F-2 2ntitlement to refund
2F-9 Claim of refund for deceased or disabled persons
2F-: Correctness of assess4ent= etc-= not to 3e 8uestioned
2F-@ 6efund on the basis of orders in appeal
2F-E %or4 of clai4 and li4itation
2F-F Interest on delayed refund
2F-D Ad=ustment of refund against ta'
Introduction
Learning o3<ecti+es
6ecognise the re<uirement to issue refund voucher
0e&ne the entitlement to refund.
6ecognise the claim of refund for deceased or disabled persons
0e&ne the refund on the basis of orders in appeal
Identify the interest on delayed refund
0e&ne the ad=ustment of refund against ta'
)ractical signi0cance
>hen any amount of ta' is refundable by ta' law the 0CT shall issue refund
voucher unless such return is set o1 against ta'. The refund shall be entitled
when the amount of ta' paid e'ceeds the properly chargeable ta' or when
income of one person included in income of another person.
>here through death% incapacity% insolvency% li<uidation or other cause% a
person% is unable to claim or receive any refund due to him% the legal
representative shall be entitled that refund. In case of refund on the basis of
orders in appeal% the amount is payable within )" days. Interest is also
payable if there is delay in payment of refund more than ! months from the
claim of refund. In certain cases the refundable amount can be ad=usted
against ta'.
Sto* and thin2
2'cess payment of ta' is refundable or ad=ustable against ta'. 0o you reali9e
that refundable ta' can be received or ad=usted even in some cases with
interestN
.or2ing conte,t
2'cess payment of ta' by a ta'payer may be incurred in many ways. 6efund
of such ta' is a legal right for that ta'payer. Accountants support to calculate
and claim the refundable ta' on behalf and in favour of the clients that is
sometime very essential.
0etailed ;nowledge on the refund procedures can help accountants to provide
this service to their clients.
S6lla3us lin2s
Cou will be using this ;nowledge again when you tac;le the Ta'ation paper
later on in the Professional Stage and it will also underpin the technical
aspects at the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Identify the re<uirement to issue refund voucher.
entioned who are entitled to refund.
6ecognise the claim of refund for deceased or disabled persons.
6ecognise the refund on the basis of orders in appeal.
Identify the interest on delayed refund.
ention how refund is ad=usted against ta'.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have historically prepared well for this area of the syllabus. Better
prepared candidates are able to perform well in the more diEcult areas.

2F-& #"%UNDS
Section O+er+ie/
0CT shall issue refund voucher when any amount of ta' is refundable
unless such return is set o1 against ta'.
7egal representative of an unable person shall be entitled for refund.
6efund on the basis of orders in appeal is payable within )" days of such
order.
Interest is also payable in case of delay in payment of refund for more
than ! months Q -.+P.
6efundable amount can be ad=usted against ta'.
2F-' #e8uire4ent to Issue #efund !oucherB Sec '9@'A= 'B and 'C(B
3#5 >here any amount of ta' is refundable in conse<uence of any order%
e'cept an order passed under section .)A and .)AA in pursuance of the
Brdinance% the 0eputy Commissioner of Ta'es shall specify in the notice
referred to in section #)+3#5 the sum refundable to the assessee together
with a copy of an assessment order and a refund voucher unless such
refund is set o1 against ta' as per provision of section #+! USection
#)+3#A5V.
3!5 The 0eputy Commissioner of Ta'es shall not set o1 without giving the
assessee an opportunity of being heard and in that case refund voucher
for the amount due for refund% if any% shall be issued within a period not
e'ceeding )" days from the date of assessment USection #)+3#B5V.
3)5 >here the 0eputy Commissioner of Ta'es fails to issue refund voucher for
any refund due to an assessee within the time speci&ed in section #)+%
such failure on the part of the 0eputy Commissioner of Ta'es shall be
construed as misconduct USection #)+3#C5V.
2F-2 "ntitle4ent to #efundB Sec ':E
3#5 A person% who satis&es the 0eputy Commissioner of Ta'es or other
authority appointed by the (overnment in this behalf that the amount of
ta' paid by him or on his behalf% or treated as paid by him or on his behalf%
for any year e'ceeds the amount with which he is properly chargeable
under the Brdinance for that year% shall be entitled to a refund of any such
e'cess.
3!5 >here the income of the person is included under any provision of the
Brdinance in the total income of any other person% such other person
alone shall be entitled to a refund under chapter ]:III in respect of such
income.
2F-9 Clai4 of #efund for Deceased or Disa3led )ersonsB Sec ':F
>here through death% incapacity% insolvency% li<uidation or other cause% a
person% is unable to claim or receive any refund due to him% his legal
representative% or the trustee% guardian or receiver% as the case may be% shall
entitled to claim or receive such refund for the bene&t of such person or
estate.
2F-: Correctness of assess4ent= etc-= not to 3e 8uestionedB Sec ':D
In any claim for refund under this chapter% it shall not be open to the claimant
to <uestion the correctness or validity of any assessment or other matter
which has become &nal and conclusive or to as; for a review of the same% and
the claimant shall not be entitled to any relief on any such issue raised e'cept
refund of the ta' paid in e'cess.
2F-@ #efund on the Basis of Orders in A**ealB Sec ':C
>here% as a result of any order passed in appeal or other proceeding under
this Brdinance% refund of any amount becomes due to an assessee% the
0eputy Commissioner of Ta'es shall%

refund the amount% unless set o1 against
ta' or treated as payment of ta' as per provisions of section #+! to the
assessee% within )" days from the date on which the refund has become due
without his having to ma;e any claim in that behalf.
2F-E %or4 of clai4 and li4itationB Sec '@&
2very claim for refund under sections #*, and #*- shall be made in
prescribed form under 6ule ), and veri&ed in such manner as may be
prescribed.
#ule 9EB Form of Application for 6efund of Income Ta'
I% 888888888888888888888888888888888888888 of 888888888888888888888888888 hereby declare that my
total income computed in accordance with the provisions of the Income Ta'
Brdinance% #/.*% during the income year ending on relating to the
assessment year 888888888888888888888888888888888888 amounted to ta;a%
88888888888888888888888f8888888888that the total income ta' chargeable in respect of
such total income is ta;a 888888888888888888888 and that the total amount of income
ta' paid or treated as paid under sections *.3!5 and ,! is ta;a
8888888888888888888888
I% therefore% re<uest that a refund of ta;a 8888888888888888888888888888may be allowed
to me.

3signature5
I hereby declare that I am resident 4 non8resident in Bangladesh and that what
is stated in this application is correct.
0ate8888888888888888888888888888
3signature5
NotesB
#. The application should be accompanied by return of income in the
speci&ed form unless it has already been &led.
!. >here the application is made in respect of interest on securities% the
application shall be accompanied by the certi&cates re<uired under section
+..
). The application for refund shall be made to the 0eputy Commissioner of
Ta'es of the Circle in which the applicant is chargeable directly to ta'%
otherwise to the 0eputy Commissioner of Ta'es under whose =urisdiction
the applicant resides% unless there is a special 6efund Circle% in which case
the application shall be made to the 0eputy Commissioner of Ta'es of that
Circle.
*. A non8resident person shall ma;e his application for refund to the 0eputy
Commissioner of Ta'es who has =urisdiction over him. If the non8 resident
ta'8payer is assessed through a statutory agent% the application for refund
shall be made to the 0eputy Commissioner of Ta'es who has =urisdiction
over that statutory agent.
+. The application may be presented by the applicant in person or through a
duly authorised agent or may be sent by registered post.
2F-F Interest on Dela6ed #efundB Sec '@'
>here a refund due to an assessee is not paid within two months of the date
of the claim for refund% or refund becoming due conse<uent upon any order
passed in appeal or other proceeding under this Brdinance interest at the rate
of -.+P per annum shall be payable to the assessee on the amount of refund
from the month following the said two months to the date of issue of the
refund.
Illustration
r. 6ahman made a claim of refund on #+
th
arch% !"#" for T;. #+"%""".
There would not be any interest payment if the refund is issued within #+
th
ay% !"#" i.e. within two months.
7et us assume that the refund was issued on #+
th
ay% !"##. $ow interest at
-.+P on T;. #+"%""" for a complete year 3from #+
th
ay of !"#" to #+
th
ay of
!"##5 i.e. T;. ##%!+" after disregarding two months% would be payable to the
assessee in addition to refund of T;. #+"%""".
7et us further assume that the original assessment in the above case was
made on )"
th
April% !%"". against which the assessee preferred appeal and
&nally won the case in Appellate Tribunal which passed the refund order on
#"
th
Muly% !"#". Payment was issued on /
th
April !"##.
Gere% the assessee does not have to claim the refund but 0CT is under an
obligation to issue refund within one month of the Appellate order. Since it has
not been done% interest is payable from #"
th
August% !"#" i.e. after the month
of becoming due% to the actual date of refund i.e. /
th
April% !"##.
Interest payable% eight months at the rate of -.+P per annum on T;. #+"%"""
[ T;. -%+"".
2F-D Ad<ust4ent of #efund Against Ta,B Sec '@2
>here% under the provisions of this Brdinance% the Income8ta' Act #/!!% the
(ift8ta' Act% #/,)% or the >ealth8ta' Act% #/,)% any refund or repayment is
found to be due to any person% the amount to be refunded or repaid or any
part thereof may be set o1 against the ta'% payable by that person under this
Brdinance or treated% at the option in writing of that person% as payment of
ta' payable under section ,* or section -* thereof.
?uestion
A refund of ta' becomes due to an assessee on reduction of total income in appeal
&led by him% but the 0eputy Commissioner of Ta'es does not ta;e any action to
ma;e the refund. >hat are the remedies open to the assesseeN 3P2 FI Session ay F
Mune !""#5
Ans/er
#. The aggrieved assessee can &le appeal to the Appellate Moint Commissioner
of Ta'es or the Commissioner 3Appeals5 against the refusal of the 0eputy
Commissioner of Ta'es to ma;e the refund.
!. The assessee can apply to the 0eputy Commissioner of Ta'es to ad=ust the
refundable amount against his arrear ta' demand% if any% u4s #+! of the
Income Ta' ordinance #/.*.
). The assessee can ta;e administrative action% such as% applying to the
Commissioner of Ta'es re<uesting him to direct the 0eputy Commissioner of
Ta'es to ma;e the refund.
*. The assessee can apply to the $ational Board of 6evenue% re<uesting to
direct the concerned Commissioner of Ta'es for ta;ing necessary measures
to ma;e available the refund.

Chapter !.
A**eal and #eference
Contents
Introduction
2'amination conte't
To*ic List
!..# First Appeal
!..! Appeal Against Brder of Ta' 6ecovery BEcer
!..) Second Appeal
!..* 6eference application to the Supreme Court
!..+ Summary of Appeal and 6eference
!.., 6evisional Power of the Commissioner of Ta'es
Self8Assessment \uestions
Introduction
Learning o3<ecti+es
Identify the conditions and procedures for di1erent appeal and references.
ention the di1erent orders of ta' authorities for which an assessee may
be aggrieved.
0e&ne various appeals to the di1erent ta' authorities in di1erent
situations.
Identify the decisions or results of appeal come from di1erent stages of ta'
authorities.

)ractical signi0cance
An assessee not being a company or an assessee being a company in respect
of certain cases aggrieved by any order of a 0CT or IMC can appeal to the AMC
or the Commissioner 3Appeal5 against such order. Appeal can also be made to
the AMC against the order of ta' recovery oEcer. An assessee may appeal to
the Appellate Tribunal if he is aggrieved by an order of an AMC or the
Commissioner 3Appeal5 in respect of concealment of income or decision in
appeal by them. The Appellate Tribunal may% after giving both the parties to
the appeal an opportunity of being heard% pass such orders on the appeal as it
thin;s &t. The Appellate Tribunal may dispose the appeal if the appellant does
not appear when the appeal is called for hearing. The assessee or the
Commissioner may refer any <uestion of law arising out of the order of the
Appellate Tribunal communicated to him to Gigh Court 0ivision. The Gigh
Court 0ivision shall pass such orders as are necessary to dispose of the case
in conformity with the =udgement delivered by it.
For the appeal and reference% the appellant need to comply some conditions
and maintain some procedures to ma;e his appeal valid.
Sto* and thin2
The aggrieved parties in certain cases can appeal to the di1erent ta'
authorities. 0o you thin; that the appeal and reference procedures are
enough to get the proper =udgment by the aggrieved parties under the
BrdinanceN
.or2ing conte,t
The appeal and reference procedure under ta' law is the most comple' and
ris;y area for the aggrieved parties. The assessee being a client is sometime
very much re<uired the service from an accountant. Accountants being ta'
e'pert can provide the practical and useful advice and service to their clients
in such cases.
0etailed and reasonable ;nowledge on appeal and reference can help
accountants to provide practical service to their clients in this regard.
S6lla3us lin2s
Cou will be using this ;nowledge again when you tac;le the Ta'ation paper
later on in the Professional Stage and it will also underpin the technical
aspects at the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Identify the conditions for appeal made by assessee against order of 0CT.
6ecognise the procedures of appeal before AMC or the Commissioner.
0emonstrate the decision in appeal by the AMC on4or the Commissioner.
Identify the appeal against order of Ta' 6ecovery BEcer
0e&ne the appeal to the Appellate Tribunal.
Identify the disposal of appeal by the Appellate Tribunal.
0e&ne the reference to the Gigh Court 0ivision.
ention the decision of the Gigh Court 0ivision.
Identify the appeal to the appellate division
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have historically prepared well for this area of the syllabus. Better
prepared candidates are able to perform well in the more diEcult areas.
!.." A))"AL AND #"%"#"NC"
Section O+er+ie/
There are di1erent orders of ta' authorities by which an assessee may be
aggrieved.
The aggrieved assessee can appeal to appropriate ta' authorities
The aggrieved ta' authority can also appeal in certain cases.
Appeal can be made to di1erent ta' authorities including Appellate
Tribunal
Appeal can also be referred to Gigh Court.
There are some methods for ma;ing appeal including time limitation and
appeal fee.
0ecision can be made by the AMC or the Commissioner 3Appeal5 or
Appellate Tribunal.
Appellate Tribunal can also dispose the appeal if the appellant does not
appear when the appeal is called for hearing.
The Gigh Court 0ivision shall pass such orders as are necessary to dispose
of the case in conformity with the =udgement delivered by it.

!..# %irst A**ealB Sec- '@9= '@:= '@@ G '@E
Appeals by an assessee not being a company against the order of the 0eputy
Commissioner of Ta'es shall be made to the Appellate additional4Moint
Commissioner of Ta'es. An assessee being a company may &le appeal against
the order of the 0eputy Commissioner of Ta'es or of an Inspecting
Additional4Moint Commissioner to the Commissioner 3Appeals5. Such appeal
must be &led within forty8&ve days of the receipt of the concerned order in the
prescribed form accompanied with appeal fee of T;. !"". $o appeal shall lie
against order of assessment unless the ta' payable on the basis of return has
been paid before &ling the appeal. Time8limit for disposal of appeal has been
prescribed at one hundred and &fty days from the end of the month which the
appeal was &led. If no order is made within the prescribed time8limit% appeal
shall be deemed to have been allowed. Bn disposal of an appeal the order
shall be communicated within thirty days of passing such order.
T6*e of Orders that 4a6 4a2e an assessee= not 3eing a co4*an6=
aggrie+edB
3a5 the amount of loss computed under section )-I
3b5 assessment of income% determination of liability to pay% or computation of
ta' including advance ta'I
3c5 imposition of interest under section -)I
3d5 refusal to register a &rm or cancellation of registration under section .* or
###I
3e5 imposition of penalty under section #!*% #!+% #!,% #!-% 3#!.5 or #)-I and
3f5 refusal to allow a claim to a refund or the determination of the amount of
refund admissible under Chapter ]:III.
T6*e of Orders that 4a6 4a2e an assessee= 3eing a co4*an6=
aggrie+edB
&a( the amount of loss computed under section )-I
3b5 assessment of income% determination of liability to pay% or computation of
ta' including advance ta'I
3c5 imposition of interest under section -)I
3d5 refusal to allow a claim to a refund or the determination of the amount of
refund admissible under Chapter ]:IIII
3e5 imposition of penalty under Chapter ]: or section #)-I and
3f5 assessment under section #" or #!".
)ro3le4
Can the &rst appellate authority dismiss an appeal for non8appearance of the
appellant on the hearing date of appealN
Ans/er
The &rst appellate authority is not empowered to dismiss an appeal for having
the appellant absent on the appeal hearing date. The appellate authority
should pass an appellate order on merit after e'amination of the assessment
records made available by the concerned 0eputy Commissioner of Ta'es.
!..! A**eal Against Order of Ta, #eco+er6 ONcerB Sec '@F
Any person aggrieved by an order of the Ta' 6ecovery BEcer under section
#)/ may% within )" days from the date of service of the order% appeal to the
Inspecting Moint Commissioner to whom the Ta' 6ecovery BEcer is
subordinate% and decision of the Inspecting Moint Commissioner on such
appeal shall be &nal.
!..) Second A**ealB Sec- '@D and '@C
Appeals against the order of Appellate Additional4Moint Commissioner of ta'es
or the Commissioner 3Appeals5 as the case may be% lie with the Ta'es
Appellate Tribunal.
Such appeal by an assessee must be &led% within forty8&ve days of the
communication of the order% in the prescribed form accompanied by appeal
fee of T;. #""". In the case of appeal &led by an assessee the ta' payable
at#"P of the amount representing di1erence between the ta' determined on
the basis of the order of the AMCT or the CT appeal and ta' payable under
section -* must be paid.
The 0eputy Commissioner of Ta'es can &le an appeal to the Tribunal with the
prior approval of the Commissioner of Ta'es.
An appeal &led by an assessee to Appellate Tribunal shall be deemed to have
been allowed if the Appellate Tribunal fails to ma;e an order thereon within a
period of si' months from end of the month in which the appeal was &led. The
time8limit of si' months for disposal of appeal has been e'tended to one year
in respect of an appeal &led by an assessee before the #
st
Muly% !""!.
The Appellate Tribunal shall communicate its order on the appeal to the
assessee and to the Commissioner within thirty days from the date of such
order.
)ro3le4
Can the Appellate Tribunal pass an order e'8parte for non8appearance of the
appellant on the hearing date of appealN
Ans/er
If the appellant does not appear when the appeal is called for hearing% the
Tribunal may dismiss the appeal for default. If the appellant ma;es on
application within )" days of such order of dismissal% for restoration of the
appeal on the ground that notice of the appeal was not served on him or that
the service was not valid in law or that he was prevented by suEcient cause
from appearing on the appointed day and the Tribunal if satis&ed% the order of
dismissal shall be vacated and a fresh date of appeal hearing be &'ed and
disposed of on merit.
!..* #eference a**lication to the Su*re4e CourtB Sec- 'E&= 'E' and 'E2
The assessee or the Commissioner may within ninety days from the date of
receipt of the order of the appellate Tribunal refer to the Gigh Court 0ivision in
the prescribed form and manner% <uestion of law arising out of the order of
the tribunal. Provided that no reference by an assessee shall be entertained
unless the assessee has paid the following ta' at the rate of8
a. twenty &ve per cent of the di1erence between the ta' as determined on
the basis of the order of the Ta'es Appellate Tribunal and the ta' payable
under section -* where ta' demand does not e'ceed one million ta;aI
b. &fty per cent of the di1erence between the ta' as determined on the basis
of the order of the Ta'es Appellate Tribunal and the ta' payable under
section -* where ta' demand e'ceeds one million ta;a.
Provided that the Board may% on an application made in this behalf% modify or
waive% in any case% the re<uirement of such payment.
An appeal shall lie to the Appellate division from a =udgment of the Gigh Court
0ivision if the Gigh Court certi&es the order to be &t for appeal to the
Appellate 0ivision.
Provision of the Code of Civil Procedure% #/". relating to the appeals to the
Appellate 0ivision shall so far as may be% apply in regard to the appeals under
Section #,! in the li;e manner as they apply in the case of appeals from
decrees of the Gigh Court 0ivision.
!..+ Su44ar6 of A**eal and #eference
A close scrutiny of above discussions reveals the following situations for easy
understanding?
A**eal against the
order of >
A**eal 36 A**eal to Ti4e li4it
Ta' 6ecovery BEcer Any person aggrieved
by an order of the Ta'
6ecovery BEcer
Inspecting
Moint
Commissioner
>ithin )"
days
0eputy
Commissioner of
Ta'es
Any aggrieved
assessee% not being a
company%
Appellate Moint
Commissioner
>ithin *+
days
Any partner Appellate Moint
Commissioner
>ithin *+
days
Any aggrieved
assessee% being a
company
Commissioner
3Appeals5
>ithin *+
days
Inspecting Moint
Commissioner
any assessee
aggrieved
Commissioner
3Appeals5
>ithin *+
days
Appellate Moint
Commissioner or the
Commissioner
3Appeals5
Any assessee Appellate
Tribunal
>ithin ,"
days
the Appellate
Tribunal
The assessee or the
Commissioner
Gigh Court
0ivision 3for
reference
only5
>ithin /"
days
!.., #e+isional )o/er of the Co44issioner of Ta,esB Sec '2'A
An assessee may also &le revision petition before the Commissioner of Ta'es
within si'ty days of receipt of Brder of the 0eputy Commissioner of Ta'es on
payment of fees of ta;a !"" along with payment of admitted liability. 6evision
petition will be deemed to have been allowed the commissioner fails to ma;e
an order within si'ty days from the date of &ling the application for revision.
Self>Assess4ent ?uestions
3a5 >hat are the various Income Ta' Appellate Authorities under I. T. Brdinance
#/.*N
3b5 >hat are the time limits and rela'ation thereof% if any% in respect of the following
matters under the I. T. Brdinance #/.*?
i5 Filing of appeal to the Appellate Additional Moint Commissioner of Ta'es u4s.
#+)I
ii5 Filing of appeal to the Commissioner of Ta'es 3Appeals5 u4s.#+)I
iii5 Filing of appeal to the Ta'es Appellate Tribunal u4s. #+.I
iv5 Filing of reference application to the Gigh Court 0ivision4Appellate 0ivision of
the Supreme Court u4s. #,"% #,#% and #,!.
3c5 0iscuss the provisions relating to service of notice u4s. #-. of the I. T. Brdinance.
3d5 >hat do you understand by a point of fact and a point of lawN
3e5 OAppellate Tribunal is the highest Appellate Authority for <uestion of factW 8 0o
you agree with this statementN
Chapter !/
Miscellaneous
Contents
Introduction
2'amination conte't
To*ic List
#.#,
Protection of Information
#.#-
B1ences and Prosecution
#.#.
Fiscal and other Incentives to Foreign investors in Bangladesh
#.#/
Time 7imitations in the Income Ta' Brdinance #/.*
Introduction
Learning o3<ecti+es
Jnderstand protection of information and relevant provisions
Identify di1erent types of o1ences and prosecutions to that
Specify di1erent &scal and other incentives given to foreign investors
ention di1erent sections where time limitation is proposed
)ractical signi0cance
This is a chapter that includes some important issues of income ta' laws in
the country. As due to the assessment procedures% income ta' authorities at
di1erent levels possess valuable information of corporate houses and di1erent
individuals. In certain cases% the assessees e'pect that the information will be
protected and IT Brdinance prescribes di1erent provisions related to such
protection of information.
Bangladesh government o1ers di1erent &scal and other incentives to foreign
investors to attract foreign investment in the country. It is important for
economic development of the country and to establish congenial environment
for investment.
Another important coverage of the chapter is o1ences and prosecutions.
0i1erent types of o1ences are identi&ed with its ultimate prosecutions.
Professional accountants should be very e'pert in these areas to save their
client from prosecutions.
At the end% it includes a summary of di1erent sections of IT ordinance where
di1erent time limitations are speci&ed. These are very important in a sense
that failure to abide by the time frames in di1erent sections may lead to non8
compliance% even sometimes the assessee may be considered as assessee in
default.
Sto* and thin2
Protection of information is a right to assessee. Foreign investors in Bangladesh
en=oy &scal and other incentives. Punishable o1ences are sub=ect to de&ned
prosecutions. It is li;ely that you ;now all the sections where a time frame is
proposed. Gave you stopped to thin; about how this a1ects the actions that you
ta;eN
.or2ing conte,t
Professional accountants practice ta' on behalf of their clients where
protection of information is important. They should also ;now di1erent
incentives available to foreign investors to attract foreign investment in the
country. Professional accountants should ;now di1erent punishable o1ences
and limited time from to save their clients from possible trouble.
S6lla3us lin2s
The topics covered in this chapter are essential bac;ground ;nowledge which
will underpin the whole of your Ta'ation studies.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Identify the documents and information that need protection
ention di1erent types of o1ences and respective prosecutions
Specify di1erent &scal and other incentives given to foreign investors to
attract investment
Analy9e di1erent sections where time limitation is proposed
?uestion *ractice
For <uestion practice on these topics go to the suggested <uestions and
answers covering the basic idea about ta'ation.
2C-& MISC"LLAN"OUS
Section o+er+ie/
Speci&ed statements% return% documents% any evidence and record should
be protected.
Foreign investors en=oys &scal and other incentives li;e ta' holiday%
accelerated depreciation% double ta' avoidance etc. to encourage them to
invest in Bangladesh.
Some o1ences are punishable.
IT Brdinance prescribes time limit in di1erent sections where compliance is
important.
2C-' )rotection of Infor4ation
As per section #,) 3#5 of Income Ta' Brdinance% all particulars or information
contained in the following shall be con&dential and shall not be disclosed?
a5 any statement made% return furnished or accounts or documents produced
under the provisions of this BrdinanceI
b5 any evidence given% or aEdavit or deposition made% in the course of any
proceedings under this Brdinance other than proceedings under Chapter
]]I 3B1ences and Prosecution5I
c5 any record of any assessment proceedings or any proceeding relating to
the recovery of demand under this Brdinance.
Gowever% the disclosure of following information in de&ned cases and
purposes is not considered con&dential as per section #,)3)5?
a5 any particulars in% or in respect of any statement% return% accounts%
documents% evidence% aEdavit or deposition re<uired for the purposes of
prosecution of an o1ence under this Brdinance% the Penal Code 3]7: of
#.,"5% or the Foreign 2'change 6egulation Act% #/*- 3:II of #/*-5I
b5 any particulars or information which is necessary for the purposes of this
Brdinance to any person acting in the e'ecution of this Brdinance% or of
any particulars to any person being an e'pert whose services have been
placed at the disposal of the (overnment by any international organi9ation
of which Bangladesh is a memberI
c5 any particulars or information which is occasioned by the lawful
employment under this Brdinance of any process for the service of any
notice or the recovery of any demandI
d5 any particulars of the amount due from an assessee under this Brdinance
by the Board or any oEcer authorised by it% or by the Commissioner% to
any department of the (overnment% local authority% ban;% corporation or
other organisation for the purpose of the recovery of any demandI
e5 any particulars to a Civil Court in any suit which relates to any matter
arising out of any proceeding under this Brdinance and to which
(overnment is a partyI
f5 any particulars to the Controller and Auditor8(eneral of Bangladesh for the
purpose of enabling him to discharge his functions under the ConstitutionI
g5 any particulars to any oEcer appointed by the Controller and Auditor8
(eneral of Bangladesh or the Board for the purpose of auditing ta'
receipts or refundsI
h5 any particulars relevant to any in<uiry into the conduct of any oEcial of
the income ta' department to any person appointed to hold such in<uiry
or to a Public Service Commission established under the Constitution when
e'ercising its functions in relation to any matter arising out of any such
in<uiryI
i5 any particulars relevant to any in<uiry into a charge of misconduct in
connection with income ta' proceedings against a lawyer% a chartered
accountant or a cost and management accountant to any authority
empowered to ta;e disciplinary action against such lawyer% chartered
accountant or cost and management accountantI
=5 any particulars by a public servant where the disclosure is occasioned by
the lawful e'ercise by him of the powers under the Stamp Act% #.// 3II of
#.//5% to impound an insuEciently stamped documentI
;5 any facts to an authorised oEcer of the (overnment of any country
outside Bangladesh with which the (overnment of the PeopleDs 6epublic of
Bangladesh has entered into an agreement for the avoidance of double
ta'ation and the prevention of &scal evasion where such disclosure is
re<uired under the terms of the agreementI
l5 any such facts to any oEcer to the (overnment as may be necessary for
the purpose of enabling the (overnment to levy or realise any ta' imposed
by itI
m5 any such facts to any authority e'ercising power under the 2'cise and Salt
Act% #/** 3I of #/**5% the (ift8ta' Act% #/,) 3]I: of #/,)5% the >ealth8ta'
Act% #/,) 3]: of #/,)5% the Customs Act% #/,/ 3I: of #/,/5% the Sales Ta'
Brdinance% #/.!% 3]:ill of #/.!5 or as may be necessary for the purpose of
enabling it duly to e'ercise such powersI
n5 So much of any such particulars% to the appropriate authority as may be
necessary to establish whether a person has or has not been assessed to
income ta' in any particular year or years% where% under the provisions of
any law for the time being in force% such fact is re<uired to be establishedI
o5 Any such particulars to the Bangladesh Ban; as are re<uired by that Ban;
to enable it to discharge its functions under the foreign e'change control
laws or to compile &nancial statistics of international investments and
balance of paymentsI
p5 Any such information as may be re<uired by any oEcer or department of
the (overnment for the purpose of investigation into the conduct and
a1airs of a public servantI
<5 Any such particulars as may be re<uired by any order made under section
#/3!5 of the Foreign 2'change 6egulation Act% #/*- 3:II of #/*-5I or
r5 A list of higher ta'8payers in accordance with rules made in this behalf.
2C-2 OAences and )rosecution
IT Brdinance #/.* presents the rules for punishment through sections #,* to
#,. due to speci&ed types of o1ences committed by di1erent classes of
assessees. Such punishments in line with the o1ences are presented below?
Chapter ]]I of
$o prosecution for an o1ence punishable under any provisions shall be
instituted e'cept with the previous sanction of the Board. The Board may
compound such o1ence either before or after the institution of any
proceedings or prosecution for a punishable o1ence.
2C-9 %iscal and other Incenti+es to %oreign in+estors in Bangladesh
Bangladesh always encourages foreign investment in the country for the
economic development of the country. Thus% the government provides
incentives to encourage foreign investment in the country through di1erent
wings4departments of the government. A summary of such incentive is given
below?
Fiscal Incentives Bther Incentives
Jnrestricted 2'it Policy
$ational Board of
6evenue 3$B65
Concessionary income ta'
in lieu of Ta' holiday and
accelerated 0epreciation
allowance Concessionary
duty on imported machinery
Full 6epatriation facilities
of dividend and capital at
the event of e'it

2C-: Ti4e Li4itations in the Inco4e Ta, Ordinance 'CD:
There are several time limitations under the Income Ta' Brdinance #/.*% non8
compliance of which% in many cases% attracts penal actions apart from
disallowances of claims% imposition of additional ta'% departmental action
against oEcers and the li;e. It is therefore necessary to have a ready rec;oner
for all of these time limitations. >ith this ob=ective following table has been
compiled?
#ef )unish4ent for )unish4ent
Sec
#,*
non8compliance of
certain obligations
with imprisonment for a term which may e'tend
to one year% or with &ne% or with both
Sec
#,+
false statement in
veri&cation
with imprisonment for a term which may e'tend
to three years% but shall not be less than three
months% or with &ne% or with both
Sec
#,+
A
improper use of Ta'8
payerDs Identi&cation
$umber
with imprisonment for a term which may e'tend
to three years or with &ne up to ta;a &fty
thousand or both
Sec
#,+
B
obstructing an
income ta' authority
with imprisonment for a term not e'ceeding one
year% or with a &ne% or with both
Sec
#,,
concealment of
income
with imprisonment which may e'tend to &ve
years% but shall not be less than three months% or
with &ne% or with both
Sec
#,-
disposal of property
to prevent
attachment
with imprisonment for a term which may e'tend
to &ve years% or with &ne% or with both
Sec
#,.
disclosure of
protected
information
with imprisonment for a term which may e'tend
to si' months% or with &ne
Chapter )"
!alue Added Ta,
Contents
Introduction
2'amination conte't
To*ic List
)*.#
Introduction
)*.!
Statutory 0e&nitions as per :AT Act #//#
)*.)
2volution and 2conomic 6ationality of :AT
)*.*
:AT 6egistration
)*.+
Imposition of :AT
)*.,
Application of Ta' 6ate
)*.-
0etermination of Cost for Calculation of :AT
)*..
:AT Payable
)*./
ethod and Time of Payment
)*.#"
Boo;s and 0ocuments 6e<uired to be aintained for :AT Purposes
)*.##
Truncated :alue
)*.#!
:AT 0eduction 4 Collection at Source
)*.#)
:AT Authorities
)*.#*
Turnover ta'
)*.#+
Input Ta'
)*.#,
Supplementary 0uty
)*.#-
Conse<uences of $on8compliance
>or;ed 2'amples and Solutions
Self8Assessment \uestions

Introduction
Learning o3<ecti+es
Jnderstanding the concept of :AT% Turnover Ta' and Supplementary 0uty.
(etting familiar with the relevant rules and procedures of :AT% Turnover
Ta' and Supplementary 0uty.
Computation of cost for calculating :AT and computing :AT payable
Jnderstanding :AT 6ates and Truncated :alue
Hnowing the conse<uences of non8compliance of :AT rules and regulations
)ractical signi0cance
:alue Added Ta' 3:AT5 is an important source of &nancing to the (overnment
of Bangladesh. 2very year% it comprises more than )"P of government ta'
revenue and thus the (overnment heavily relies on :alue Added Ta' 3:AT5 for
raising fund for running a big administration. :alue Added Ta' 3:AT5 is the ta'
that is paid on the value added by the respective ta' payer. :AT is regulated
by the :alue Added Ta' Act% #//#. Jnless any e'emption% :AT is chargeable
and payable on all goods and services imported% produced or rendered in
Bangladesh at #+P e'cept on e'ports and Ore8importsW on which ta' is
imposed at 9ero percent. Some person in some cases re<uired to register for
the purposes of :AT by submitting application with some documents.
0etermination of cost on which :AT will be computed is very important to :AT
practitioners. ethod and time of payment of :AT need to be followed as per
the Act. :arious boo;s and documents are re<uired to be maintained for :AT
purposes. Bn certain services% estimated value addition 3truncated value5 is
instructed for determining :AT. In an economy li;e Bangladesh where a
signi&cant portion of (overnment revenue comes from :AT% ;nowing :AT with
all technicalities is very signi&cant. :AT Act also addresses re<uired rules and
provisions for Turnover Ta' and Supplementary 0uty.
There are some di1erences between :AT and Turnover Ta'. Turnover Ta' is a
ta' on the turnover of a manufacturer or producer of ta'able goods or a
provider of ta'able services% as the case may be% who is not re<uired to
register for the purposes of :AT. The rate of turnover ta' has now been re8
&'ed at )P on turnover. There are some guidelines% rules and procedures on
Turnover relating to registration% payment% boo;s and documents to be
maintained and penalties.
Input ta' is :AT paid by a ta' payer on his inputs. For claiming credit of input
ta' some conditions are to be met.
Supplementary duty is an output ta'% in addition to :AT% on lu'uries% not
essential and not socially desirable goods and services. The rate of
supplementary duty varies from #+P to )+"P.
Sto* and thin2
Thin; about other types of ta' and :AT. 0o you reali9e the signi&cance of :AT%
Turnover Ta'% Input Ta' and Supplementary 0utyN
.or2ing conte,t
The revenue collection through :AT is increasing sharply day by day. Turnover
ta'% input ta' and supplementary duty also have signi&cance as sources for
revenue to the (overnment. 0i1erent methods% rules% conditions and
procedures relating to :AT and other ta'es are very important to ;now.
Clients are sometime e'pecting the e'pert opinion in calculating and other
legal procedures relating to :AT and other ta'es from accountants.
Accountants should have clear concept with practical e'posure in this area so
that they can ta;e the opportunity to provide the service to their clients.
S6lla3us lin2s
Cou will be using this ;nowledge again to underpin the technical aspects at
the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
h. 0emonstrate the concept of :AT% supplementary duty and identify the
application of ta' rate
i. 2'plain the registration procedures% method of computation of :AT
payable% time of payment of :AT and turnover ta'
=. ention the documents re<uired for :AT administration
;. Identify the di1erent schedule for :AT and supplementary duty
l. Identify the :AT authorities and its power and functions
m. 2'plain the conse<uences for non8compliance of :AT rules and regulation
?uestion *ractice
For <uestion practice on these topics go to the suggested answers at the end
of the manual covering this chapter
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates need to be careful on di1erent :AT bases and rates for computing
:AT payable with the respective dates of payments and the ad=ustments of
:AT deducted4collected at sources with :AT payable to compute the net
amount.
9&-& !ALU" ADD"D TAX
Section O+er+ie/
:AT is the ta' on the value added by ta' payer
Jnless any e'emption% :AT rate is #+P.
Some persons are not re<uired to be registered for the purposes of :AT.
:AT will be paid by the importer% suppliers and provider of ta'able
services.
Bn certain services estimated value addition is instructed 3truncated5 for
determining :AT.
There are some speci&c method and time of payment of :AT.
Some boo;s and documents are re<uired to be maintained for :AT
purposes.
There are some di1erences between :AT% Turnover Ta' and Supplementary
0uty.
The rate of turnover ta' is )P.
Input ta' is the :AT paid by a ta' payer on his inputs.
Supplementary duty is an output ta'% in addition to :AT% on lu'urious
goods and services those are not essential and not socially desirable.
Supplementary duty may vary from #+P to +""P.
9&-' Introduction
:alue Added Ta' 3commonly ;nown as :AT5 is the ta' on the value added by a
ta' payer. In an economy where value addition is signi&cant and value is
added at di1erent levels% (overnment has suEcient rationality to impose such
ta'es. It is Ae'ible for the authority to ma'imi9e revenue. :AT is not a new
ta'I the e'cise duty on domestic production at the production stage and sales
ta' on imports at the import stage are replaced by uniform :AT intended to be
revenue neutral with some e'emptions of agricultural and service sectors and
9ero rating for e'ports while it was introduced for the &rst time in Bangladesh
with e1ect from # Muly #//#.
:AT is an important type of indirect ta' where impact and incidence of ta'es
fall on di1erent persons. Any ta' not borne by the person on whom it is
initially imposed is an indirect ta'. The ultimate burden of :AT falls on &nal
consumers as di1erent persons have the mechanism to shift the burden onto
the shoulders of others. For e'ample% the traders% on whom :AT is charged%
transfer the ta' burden to subse<uent traders until the goods reach the &nal
buyers or customers who cannot shift the incidence or burden to anyone else.
:AT is levied on e'penditure rather than on income as done under direct ta'
system.

In Bangladesh% :AT is still regulated by the :alue Added Ta' Act%
#//#3hereinafter referred to as the Act5I :alue Added Ta' 6ules%
#//#3hereinafter referred to as the 6ules5I Finance Acts and various rules%
regulations and noti&cations issued under the Act.
Jnless e'empted in terms of the First and Second Schedules under section
)3#5 of the :AT Act% #//#% :AT is chargeable and payable on all goods and
services imported% produced or rendered in Bangladesh at #+P e'cept on
e'ports and Ore8importsW on which ta' is imposed at 9ero 3"5 percent.
The 9ero rate is an actual ta' rate of the :AT% the same as #+ percent% #"
percent etc. Thus% the credit o1set on purchases can be claimed against the
liability i.e.% 9ero. Bn the other hand% a good which is e'empt cannot claim any
credit and has no ta' liability against which to o1set it and thereby pays ta'
on input which must be wholly passed on or absorbed. In this way% the 9ero
rate allows consumers complete e'emption because% for instance% the retailer
can claim full amount of ta' he has paid on his input and% therefore% pays no
ta'% while all the previous stages have passed their ta' liability fully forward.
Initially it will involve the re<uired cost of administration without yielding any
revenue. But this will bring all economic activities under the :AT system which
will help achieving the ultimate ob=ective of having an elastic ta' system for
the country.
>hen :AT 3output ta'5 is imposed on Ofull valueW% ta' payer pays :AT 3output
ta'5 at #+PI and when :AT 3output ta'5 is imposed on Oestimated added
valueW% the ta' payer pays :AT 3output ta'5 at #.+P% !.!+P% *.+P% +P or /P%
depending on the estimated value addition ranging from #"P% #+P% )"P%
)).)+P% or ,"P% as the case may be.
:AT is computed as a percentage of the value added on goods or services. It
is charged on the value of consumption% applied at each point of transactions
of goods or services from primary production to &nal consumption. At every
stage one has to pay as well as collect :AT before reaching the stage of the
&nal consumption. So% every one% e'cept the &nal consumer% does not have to
bear any :AT from his own account. Because whatever the person other than
the &nal consumer has paid as :AT at the time of purchase he shall collect
that amount of :AT from the persons who shall buy his goods or services and
also collect ta' on value which is added by him before selling. :alue addition
by the seller is the di1erence between the selling prices of the goods or
services 3Butput5 and the cost of raw materials 3Input5 purchased. The
amount of value addition may consist of processing cost such as wages%
overheads etc. and pro&t. Thus% :AT collection increases at every stage
because of the value addition that is ma'imi9ed at the &nal stage. This value
addition stops when any goods or a service is purchased for &nal consumption
and the consumer has to bear the full amount of :AT. At each point of
transaction the ta' is passed onto the shoulder of ne't person in the form of
higher price% which consists of selling price plus :AT. This process illustrates
that a business does not bear :AT. Being at the &nal point in the chain of total
transaction% the &nal consumer bears the whole amount of the ta'. This above
e'planation is the basic procedure of :AT system which is e'plained below
with an e'ample assuming &ve layers of transactions from importer through
&nal consumer.
:alue
Addition
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A B C 0
2 [
3BZCZ
05
F [
B_#+P
( [
2_#+P
G [
2Z(
I 3(8F5
Importer #"" #" !" #)" #+."" #/.+" #*/.+
"
#/.+
"
Producer #)" )+ #+ #." #/.+" !-."" !"-."
"
-.+"
>holesaler #." + !" !"+ !-."" )".-+ !),."
+
).-+
6etailer !"+ + #+ !!+ ).-+ )).-+ !+..-
+
).""
Final
Consumer
!!+ 8 8 8 8 8 8 8
Total 99-F@
The above table illustrates the collection% computation of :AT at di1erent
stages. 2'cept for importer% :AT payable in column 3I5 is computed by
deducting :AT paid on input 3F5 from :AT levied on output 3(5. In case of
importer% the process has started from him in this illustration and importer
himself is responsible to pay total :AT to the (overnment Treasury at this
stage. Gowever% the importer has collected the total :AT paid to (overnment
from his customer i.e. the producer. In other cases% such as producer who is
responsible for payment of :AT of T;. -.+"% this amount has been computed
by deducting the :AT paid by the producer at input stage 3T;. #/.+"5 from the
:AT levied on sale 3T;. !-5 which is to be collected from the wholesaler. In
other words% this is e'actly #+P of value addition 3CZ05 by the producer 3#+P
of T;. +"5 as in all other cases e'cept importer and &nal consumer.
Though the above illustration gives a view that :AT is a very simple system of
ta'ation for the ta'payer and government but practically this illustration
reAects the system partially. Because in Bangladesh% e'ceptions in :AT system
are observed due to the presence of XTruncated :ATK system% :AT e'emption%
Rero8rated :AT etc.
Jnder the XTruncated :ATK system reduced rates 3lower than the standard rate
of #+P5 are allowed to be collected from the consumers 3who may or may not
be &nal consumers5 and the seller cannot set o1 her4his input ta' against
her4his output ta'. >hile you go through this boo; you shall &nd these types
of e'ceptions in details.
In case of :AT e'emption% :AT is e'empted at output stage and :AT paid at
input stage cannot be set o1 and should be treated as cost. But in case of
Rero rated :AT the amount paid as :AT at input stage can be recovered by
getting refund of amount given at input stage.
9&-2 Statutor6 De0nitions as *er !AT Act 'CC'
Some important terms relating to :AT are de&ned in section !% :AT Act #//#.
Some of the de&nitions are presented below with speci&c references?
",e4*ted means goods and services e'empted from paying :AT under this
Act F sec !3a5.
Out*ut Ta, means :alue Added Ta' imposed under this Act F sec !3b5.
In*ut means
all ;inds of raw materials 3any gasI and any material or pac;ages used as
fuels5% pac;aging materials% services% machinery and parts of machinery
e'cluding labour% land% building% oEce e<uipments and transportI
in case of trading% goods imported% purchased% ac<uired or otherwise
obtained in any way for sale% e'change or transfer in any manner F sec
!3c5.
In*ut Ta, means :alue Added Ta' paid on inputs imported by registered
person or purchased from any other registered person F sec !3d5.
Ta, *eriod means a term of one month or such term which may be &'ed by
the (overnment for this purpose by (a9ette noti&cation F sec !3e5.
Ta,a3le goods mean the goods which are not included in the &rst schedule F
sec !3f5.
Ta,a3le ser+ice means a service which not is included in the second
schedule F sec !3g5.
Current Account means an account maintained with the Commissioner by
the registered person in speci&ed form in which details of purchases% sales%
treasury deposits% payable and deductible :AT% and where applicable%
statement of other ta'es will be entered F sec !3i5.
Turno+er means all money received or receivable by any person for the
supply of ta'able goods produced or manufactured by him or for rendering of
ta'able services for a particular period F sec !3;5.
#eturn means the return re<uired to &le under Section )+ of this Act F sec
!3n5.
%i,ed date means 8
Speci&ed date to pay :AT or% where applicable% :AT and supplementary
duty as per section , of this Act
Speci&ed date to &le return as per :AT 6ules F sec !3o5.
$oods mean all ;inds of movable property% e'cluding shares% stoc;s% coins%
securities and recoverable claims F sec !3p5.

Co44ercial docu4ents means boo; of accounts% &les% documents or
papers maintained by a person to record his commercial transaction showing
&nancial condition of his business% namely ?8 debit voucher% credit voucher%
cash memo% daily accounts of purchase and sales cash boo;% primary or
=ournal boo;% ban; account and accounts or documents related thereto% trial
balance% ledger% &nancial statement and analyses% pro&t and loss account%
pro&t and loss appropriation account% ban; account reconciliation and balance
sheet and all related documents including audit report 8 sec !3<<<5.
)erson includes any business organi9ation% group of persons and association
8 sec !3t5.
Uero rated ta,a3le goods or ser+ices means goods or services which are
e'ported or deemed to have been e'ported or any food or any material as
described in sub section 3!5 of section ) on which value added ta' or% where
applicable% supplementary duty will not be imposed and all other ta'es and
duties paid on materials used for manufacturing such e'portable goods
3e'cluding advance income ta' and any supplementary duty paid on such
inputs used for manufacturing e'portable goods as noti&ed by the
(overnment for the purpose through (a9ette noti&cation5 shall be refunded 8
sec !3v5.
Total recei*ts mean the total amount of money received or receivable%
including commission or charge% by a provider of ta'able services in e'change
of such services rendered e'cluding :AT F sec !3'5.
9&-9 "+olution and "cono4ic #ationalit6 of !AT
:AT is the youngest member of the sales ta' family. This ta' was proposed for
the &rst time by 0r. >ilhelm :on Siemens for (ermany in #/#/ as an
improved turnover ta'. The improvement consisted in the subtraction of
previous outlays from ta'able sales with the results that the ta' base of each
&rm would be reduced to the value which it added to the product. In #/!#%
:AT was suggested by Professor Thomas S. Adams for the Jnited States of
America who observed sales ta' with a credit or refund for ta'es paid by the
producer or dealer 3as purchaser5 on goods bought for resale or for necessary
use in the production of goods for sales. :AT was also recommended by the
Shoup ission for reconstruction of the Mapanese 2conomy in #/*/. Gowever%
the ta' was not introduced by any country till #/+). France led the way in
#/+* by adopting a :AT that covered the industrial sector alone and the ta'
was limited up to the wholesale level. The ta' was limited to the boundaries of
France until the &fties.
:AT has% however% been spreading rapidly since the si'ties. The Ivory Coast
followed France by adopting :AT in #/,". The ta' was introduced by Senegal
in #/,# and by Bra9il and 0enmar; in #/,-. The ta' has gathered further
momentum as it was made a standard form of sales ta' re<uired for the
countries of the 2uropean Jnion 3then 2uropean 2conomic Community5. In
#/,.% France e'tended :AT to the retail level while the Federal 6epublic of
(ermany introduced it in its ta' system. The $etherlands and Sweden
imposed this ta' in #/,/ while 7u'embourg adopted it in #/-"% Belgium in
#/-#% Ireland in #/-!% and Italy% the Jnited Hingdom% and Austria in #/-). Bf
the other members of the 2uropean Jnion% Portugal and Spain introduced :AT
in #/.,% (reece in #/.-% while this ta' was adopted by Finland in #//*. any
other 2uropean countries have adopted :AT. Similarly% many countries in
$orth and South America% Africa and Bceania have introduced :AT.
:AT has been spreading in the Asian region as well. The 6epublic of :ietnam
adopted :AT brieAy in #/-). South Horea introduced :AT in #/--% China in
#/.*% Indonesia in #/.+% Taiwan in #/.,% Philippines in #/..% Mapan in #/./%
Thailand in #//!% and Singapore in #//* while ongolia has been
implementing this ta' since #//..
In the South Asian Association for 6egional Cooperation 3S6C5 region% :AT
has been considered in great depth in India. This country introduced :AT in a
di1erent way under the name of modi&ed value added ta' 3B0:AT5 in #/.,.
Jnli;e the :AT system of other countries% the8Indian B0:AT system is
designed to correct the e'cise duty. This ta' is adopted mainly to avoid the
disadvantages of input ta'ation% such as ta' cascading. The scope of B0:AT
has been e'tended over the years. Further% various attempts have been made
to introduce a broad8based :AT in place of several domestic trade ta'es.
There seems to be a broad agreement among the Indian States to convert the
State sales ta' into a :AT. Among the other members of the SAA6C countries%
Pa;istan adopted :AT in #//"% Bangladesh in #//#% and $epal in #//- while
Sri 7an;a introduced :AT in #//..
As :AT is less distortive and more revenue8productive% it has been spreading
all over the world. This ta' had been adopted by eight countries by the end of
the #/,"s. Since then the ta' has been introduced by at least one country
each year e'cept #/-*% #/-. and #/-/. By !"""% about #!" countries have
adopted :AT and it is under consideration in many other countries. In fact% :AT
has become a popular topic for ta' reform in recent years. >riting in Finance
and &evelopment2 7iam 2brill claimed that Tthe rapid rise of the value8added
ta' was the most dramatic8and probably most important8development in
ta'ation in the latter part of the twentieth century% and it still continues.T From
having been largely the preserve of more developed countries in 2urope and
7atin America% it has become a pivotal component of the ta' systems of both
developing and transition economies.
In April #/-/% the Ta'ation 2n<uiry Commission 3T2C5 oEcially too; up the
issue of introducing :AT in Bangladesh as an alternate to sales ta'. Jntil #/.!%
sales ta' was being collected under the Sales Ta' Act #/+#% which was
replaced by the Sales Ta' Brdinance #/.! with e1ect from # Muly #/.!. The
>orld Ban; played the pioneering role in introduction of :AT in Bangladesh. A
>orld Ban; ission visited Bangladesh for preparing an agenda for ta' reform
in Bangladesh in 0ecember #/.,. The mission submitted its &nal report on #+
Bctober #/./. The report recommended the introduction of a manufacturing8
cum8import stage :AT at a single standard rate within three years. Thereafter%
a Bangladesh Ta' ission visited India% Indonesia% the Philippines and Thailand
during #) $ovember 8 "* 0ecember #/./. The ission submitted its report in
Manuary #//". The government discussed the issues relating to introduction of
:AT with all related private and public agencies including the various leading
Chambers of Commerce and Industry from time to time. The government
prepared the :alue Added Ta' Act #//" 30raft5 in Mune #//".
Final version of the :alue Added Ta' Act was promulgated on )# ay #//# as
a Presidential Brdinance with eight sections 3relating to registration under :AT
system and the appointment and powers of :AT authorities5. It was made
e1ective from ! Mune #//#. The :alue Added Ta' Bill #//# was introduced in
the Parliament on # Muly #//# and the Parliament passed it on / Muly #//#.
>ith the Presidential assent to the bill on the ne't day it came into e1ect as
The :alue Added Ta' Act #//#. The :AT Act #//# replaced the Business
Turnover Ta' Brdinance #/.! and the Sales Ta' Brdinance #/.! with e1ect
from # Muly #//#. $ot :AT is a very important source of revenue for the
(overnment of Bangladesh which is reAected in the table below.
2
&
&
2

>
&
9
2
&
&
9

>
&
:
2
&
&
:

>
&
@
2
&
&
@

>
&
E
2
&
&
E

>
&
F
2
&
&
F

>
&
D
2
&
&
D
>
&
C
2
&
&
C
>
'
&
2
&
'
&
>
'
'
Ta'8(0P ratio ..) ..+ .., ..- ..) ... /." /.! #"."
Total 6evenue
)##
!"
)+*
""
)/!
""
**.
,.
*/*-
!
,"%+
)/
,/%#
."
-/%*.
*
/+%#
..
Total Ta' 6evenue
!*/
+"
!.)
""
)#/
+"
),#
-+
)/%!
*-
*.%"
#!
++%+
!,
,)%/+
,
-/%"
+!
:alue Added Ta'
."-
#
.+-
+
#",
"+
#!)
/.
#),.
)
#-%"
#)
!"%#
#,
!!%-/
+
!.%!
-*
P of :AT to Ta'
6evenue
)!.)
+
)".)
"
)).#
/
)*.!
-
)*..
,
)+.*
)
),.!
)
)+.,* )+.-
-
Customs 0uty 3C05
+.-
+
-)"
"
.""
"
.!)
+
.!-/
/%)"
"
/%+-
"
#"%*)
"
#"%/
#+
P of C0 to Ta'
revenue
!).+
+
!+..
"
!+."
*
!!.-
,
!#."
/
#/.)
-
#-.!
*
#,.)# #)..
#
Income Ta' 3IT5
*-.
.
+!-
"
+.+
"
,/,
"
./!*
##%"
"+
#)%+
).
#,%+,
"
!!%#
"+
P of IT to Ta'
reveneu
#/.#
/
#..,
!
#..)
#
#/.!
*
!!.-
*
!!./
!
!*.)
.
!+../ !-./
,
[Source: Bangladesh Economic Review, 2010]
9&-: !AT #egistration
.hen #egistration are #e8uired for the )ur*oses of !AT
A person needs to register for the purposes of :AT before the commencement
of?
3a5 production or manufacture of ta'able goodsI
3b5 trading of ta'able goodsI
3c5 rendering of ta'able servicesI
3d5 import of ta'able goodsI
3e5 e'port of ta'able goods.
Bnce registered% no renewal of registration is re<uired.
)ersons #e8uired to #egister for the )ur*oses of !AT
The following persons are re<uired to register for the purposes of :AT?
3a5 ImporterI
3b5 2'porterI
3c5 ProducerI
3d5 TraderI and
3e5 Service provider.
The persons who are falling under the category of Oturnover ta'W and Ocottage
industryW are not re<uired to register for the purposes of :AT. Gowever%
producer or service provider having turnover below T; ," lac% thereby falling
under the category of Oturnover ta'W% and Ocottage industryW may voluntarily
register for the purposes of :AT.
If any person who ought to register for the purposes of :AT fails to do so% the
:AT 0ivisional BEcer registers the person under section #+3*5 of the Act
e1ective from the date the person ought to have registeredI and informs the
person accordingly.
Docu4ents to 3e Su34itted for !AT #egistration
Application for :AT 6egistration shall be made to the :AT 0ivisional BEcer in
Form :AT8,. The following documents shall be submitted along with the
application form?8
3a5 Trade 7icenseI
3b5 TI$ Certi&cate 3if any5I
3c5 I6C426C Certi&cate3if any5I
3d5 7ist of all related Selling Centers in the case of Ocentral registrationWI
3e5 0eclaration in Form :AT8- of the production or business premises% plant%
machinery% &ttings% &nished or tradable goods% stoc;s% and inputs.
If the application is complete% the :AT 0ivisional BEcer shall issue the
Certi&cate of 6egistration in Form :AT8. within - days of the application.
$o fee is payable for registration for the purposes of :AT.
If a person carries out business from various premises% he may obtain Ocentral
registrationW so as to pay :ATI and complies with the re<uirements of the :AT
laws OcentrallyW. Gowever% no OgroupW 3that is% various companies4entities
under common management or ownership5 registration is permissible under
the :AT Act% #//#.
If Ocentral registrationW is not obtained% then separate registration for separate
premises shall be re<uired for the purposes of :AT. Gowever% if a registered
person changes his premises or businesses% he will &le declaration with the
:AT Circle BEce in Form :AT8/ at least #* days prior to such changes in his
premises or businesses.
.hen registration 4a6 3e cancelled for the *ur*oses of !AT
The registration may be cancelled for the purposes of :AT if?8
3a5 the registered person discontinues businessesI
3b5 the registered personKs businesses are e'empted for the purposes of :ATI
3c5 the turnover of the registered person is below T;. *" lacI
3d5 the registered person fails to commence business after obtaining
certi&cate of registrationI
3e5 the turnover of the self8registered person is below T;. *" lac.
The registered person shall apply to the :AT Circle BEce in :AT Form8#" for
cancellation of the registration.
9&-@ I4*osition of !AT
0i1erent re<uirements for imposition of :AT are presented below as per
section ) of :AT Act.
3#5 :alue added Ta' will be &'ed and payable at #+P on all goods imported
into Bangladesh e'cept the goods listed in the &rst schedule of this Act
and on the supply of all goods not listed in above schedule and on all
services rendered in Bangladesh e'cept those listed in the second
schedule of this Act. The rate 3#+P5 will be applied on the value computed
as per section +.
3!5 >ithout pre=udice to the above sub8section 3#5% ta' will be imposed at Rero
rate on the following goods or servicesI
a* Any goods or services e'ported or considered to be e'ported from
BangladeshI
+* Food and other things supplied in transport leaving Bangladesh for
consumption outside Bangladesh in accordance with section !* of the
Customs Act.#/,/ 3I: of #/,/5.
Provided that this sub8section will not be applicable to the following
goods?
a. Any goods re8imported or treated as being re8imported into
BangladeshI
b. Such goods which have been presented for e'port in accordance with
section #)# of the customs Act #/,/ but not e'ported within thirty
days from the submission of the bill of e'port or such e'tended time as
allowed by the Commissioner for this purpose.
3)5 :alue Added Ta' will be paid by?
a. The I4*orter in case of imported goods.
b. The su**lier in case of goods manufactured or produced in
Bangladesh.
c. The *ro+ider of ser+ices in case of rendering of servicesI and
d. In other cases% the su**lier.
3*5 For &'ing and computing :AT payable on any imported or supplied goods
under this section% same classi&cation as made in Customs Act will apply.
9&-E A**lication of Ta, #ate
Application of ta' rates as per section * of :AT Act is presented below?
3#5 The rate of :alue Added Ta' in case of supply of ta'able goods or
services will be that rate of :alue Added Ta' imposed upon those goods
&'ed for the time being in accordance with Section ,3!5 or where
applicable% Section ,3)5.
3!5 The rate of :alue Added Ta' in case of import of ta'able goods will be
that rate of :alue Added Ta' imposed on such ta'able goods on the date
as mentioned in section )" of Customs Act #/,/ 3I: of #/,/5.
The ta' will come in force on that date on which the bill of entry is
presented under the Customs Act for clearance of the said goods for
consumption within the country.
Gowever% where the bill of entry is submitted before the conveyance in
which the goods are being imported has reached the country the relative
date will be the date of submitting the manifest after the said
conveyance has arrived% and
Imposing of the ta' will come in force at the date of release of goods
from the godown under Section #"* of Custom Act.
9&-F Deter4ination of Cost for Calculation of !AT
The following discussion is based on section + of :AT Act #//#.
3#5 In case of importation of goods the amount on which the :alue Added Ta'
will be payable% will be determined by adding the amount of import duty%
and supplementary duty along with any other duty and ta' 3if any5 e'cept
advance income ta' and import duty under section !+ or !+3A5 of the
Customs Act.
:alue on which Import 0uty will be charged ^^^
Add? Import 0uty ^^
Add? Supplementary 0uty ^^
Add? Bther 0uties% if any ^^
Add? Bther Ta'es% if any ^^
:alue on which :alue Added Ta' will be charged ^^^
3!5 In case of supply of goods% sub=ect to the provision mentioned in sub8
section )% the :alue Added Ta' which will be payable on the price
receivable by the manufacturer or producer or trader from the buyer. Such
price includes raw material costs and other costs incurred by the
manufacturer or producer or trader and in appropriate cases% it also
includes commission% charges% fees% supplementary duties% any other
duties and ta'es 3e'cluding value added ta'5% and pro&t.
Provided that% in cases where goods sub=ect to value added ta' are
manufactured with imported material% or in the case of sale% e'change or
transfer of imported goods in any other manner% input ta' credit is ta;en
under section / of this Act on the basis of +alue arrived at under sections
!+ or !+ 3A5 of the Customs Act then the :alue added ta' due on the
goods so supplied shall be calculated on the basis of such value.
Gowever% the Board may set the rules of computing value for :AT when
one registered manufacturer wants to manufacture branded product of
another manufacturer.
3)5 >here :alue Added Ta' is to be imposed on the basis of the retail price of
goods% the (overnment by (a9ette noti&cation will be able to &' the retail
price of those goods on which value added ta' will be imposed and such
retail price will be calculated by the producer or manufacturer after
approval of the proper oEcer which will include all ;inds of e'penditure%
commission% charges% duties and ta'es and that commodity after being
specially branded or described will be sold at in that price to the consumer
3the price must be printed clearly% visibly% legibly and unreasonably on the
surface of the goods or on their pac;et% bag etc.5
3*5 In the case of services% :alue Added Ta' will be imposed on the total
receipts.
Provided that in the case of providing any speci&c service the Board% by an
order% will be able to determine the amount of :alue Added Ta' on the
basis of a rate &'ed for addition of cost or actual addition of cost.
3+5 (oods on which trade discount is allowedI value added ta' on such goods
are based on the value at which it is supplied after deducting such
discount. Provided that in case where goods are supplied at a discount% the
value at which the goods are supplied and the amount of the discount will
be shown on the invoice and the amount of trade discount must be
consistent with the normal business policy.
3,5 >ithout pre=udice to the remainder of this section% if the Board% on
consideration of national interest and after any necessary in<uiry becomes
satis&ed that the &'ation of a tari1 value is necessary in order to
determine :alue Added Ta'% or where applicable :alue Added Ta' and
supplementary duty in case of ta'able goods or services then the Board
will be able to &' a tari1 value for the ta'able goods or services by an
order issued in a (a9ette noti&cation.
9&-D Method and Ti4e of )a64ent
Section , of :AT Act #//# provides relevant rules and provisions regarding the
method and time of payment of :AT.
3+5 :alue Added Ta' on imported goods will be paid at the same time and in
the same manner as import duty in accordance with rules made under and
according to the Customs Act% as if the same was an import duty under
that Act and in order to control any matter related to the said :alue Added
Ta' or% where applicable% supplementary duty% the rules% orders and
instruction under this Act remain applicable regards% in provision to that
Act and under this Act% orders and instruction% as far as possible% will apply
to :alue Added Ta' or% where applicable% supplementary duty in such way
as it applies to import duty.
3,5 :alue Added Ta' will be payable on goods% which are produced%
manufactured or imported% purchased or otherwise ac<uired in any other
manner by any registered person in the course of supply by that registered
person carrying on or e'panding their business% at the time of one of the
following activities whichever occurs &rst ?8
a. >hen the goods are delivered or suppliedI
b. >hen an invoice relating to the goods is givenI
c. >hen any goods are used personally or given for use to another
personI
d. >hen part or full payment is received.
3-5 :alue Added Ta'% on services rendered by any registered person during
running business or e'tension thereon% will be at the time of one of the
following activities that occurs &rst.
a. >hen the service is givenI
b. >hen an invoice relating to the service is given.
c. >hen part or full payment is received.
3.5 >ithout pre=udice to the remainder of this section the Board% under
procedures speci&ed by rule will be able to &' the time and procedure to
pay :alue Added Ta' along with advance payment% or where applicable%
supplementary duty% on any goods% classes of goods or services.
3/5 $otwithstanding anything contained in sub8section 3*5% the Board may
direct through oEcial ga9ette to use secured stamp or banderole or special
sign or mar; of speci&ed value on the body of the pac;age or container or
pot of the goods or classes of goods for the purpose of reali9ing value
added ta' or% where applicable% supplementary duty from the date of such
noti&cation USection ,3*A5V.
3#"5 >ithout pre=udice to any rules of this section% the Board may direct the
service receivers or% in appropriate cases% the person responsible for the
payment of value of services or commission% to collect or deduct :AT at
source of any :AT registered person at the time of ma;ing such payment
and deposit the same to the treasury through de&ned procedure of
directives set by the Board USection ,3*AA5V.
3##5 A person who reali9es or deducts :alue Added Ta' at the source must
give a certi&cate in respect of such reali9ation or deduction to the person
who renders the service according to a &'ed procedure which will include
the following information ?
a. The 6egistration number of the :alue Added Ta' payerI
b. The total value of services or commission paid for the service
receivedI
c. :alue Added Ta' imposable value of services or commissionI
d. Amount of :alue Added Ta' reali9ed or deductedI and
e. Any other necessary information USection ,3B5V.
3#!5 If the person responsible for the payment of value of services or
commission as per sub8section *AA% failed to collect or deduct such value
added ta'es at source and also failed to deposit the same% then 8
3i5 Such value added ta' will be collected with !P interest per month
from the person paying the value of services or commission as if he
was such a person of providing services under subsection 3*AA5I
3ii5 Such value added ta' collected% deducted and deposited under sub8
section 3*AA5 shall be treated as paid under the provisions of this Act
on behalf of the concerned service provider and may% sub=ect to
validity of the certi&cate issued under subsection 3*B5% be shown in
the return referred to in section )+ as paid by the concerned service
providerI
3iii5 without any pre=udice to the provisions of clause 3i5% in case of failure
to deposit the deducted or collected value added ta' in the
(overnment treasury within two months from the date of such
deduction or collection of value added ta' at source% concerned
Commissioner may impose a personal penalty% not e'ceeding T;.
!+%"""% on the person responsible for collection or deduction% the
person responsible for deposit and the chief e'ecutive oEcer of the
concerned organi9ation.
3#)5 :alue Added Ta' payable on goods supplied or services rendered%
e'cept at the time of importation% will be paid through the current account
and the value added ta' return in accordance with the methods prescribed
in the 6ules.
9&-C Boo2s and Docu4ents #e8uired to 3e Maintained for +at )ur*osesB
The following boo;s and documents shall be maintained by a :AT payer?8
3a5 Purchases 6egister in Form :AT8#,I
3b5 Sales 6egister in Form :AT8#-I
3c5 Current Account in Form :AT8#.I
3d5 Invoices in Form :AT8## or ##AI
3e5 Paid Treasury ChallansI
3f5 :AT 6eturn in Form :AT8#/I and

These boo;s and documents shall be maintained for at least * years.
9&-'& Truncated !alue
Truncated or short value system is one where :AT at standard rate 3#+P5 is
charged on the deemed or estimated value addition. Since this is based on a
fraction of the value% input ta' rebate cannot be obtained e'cepting on
e'ports or deemed e'ports.
Sometimes% it becomes very diEcult to avail :AT credit4ad=ustment facilities
due to non availability of invoices supporting the purchase of input. In order
to remove this operational diEculty &'ed bases such as #"P% !+P% )"P% and
,"P value addition is ta;en into account for calculation of :AT for a number of
goods and services. Thus% truncated value is the percentage of value addition
on which :AT is applicable. At di1erent level of value addition% :AT is payable
at a rate as shown below?
!alue Addition \ %lat #ate X !AT )a6a3le #ate
#"P #+P #.+P
!"P #+P )."P
)"P #+P *.+P
,"P #+P /."P
!AT on certain ser+ices on esti4ated +alue addition
a Trade Ser+ices
:AT is payable by a distributor% agent% wholesaler and retailers on non8
e'empted goods Q #.+P of sales 3that is% #+P on #"P value addition5 on a
monthly basis within #" days of the ne't month through treasury challans. $o
input ta' credit is allowed against such payment of :AT. Gowever% :AT is not
applicable on raw agricultural products and products to which e'cise duty
applies.
3 #etail trade ser+ices
:AT is payable by a retailer in 0ha;a and Chittagong City Corporations at T;
*%!""I in 6a=shahi% Hhulna% Sylhet and Barisal City Corporations at T; )%"""I in
municipalities located at district level at T; !%*""I and in other areas at T;
#%!"". Gowever% :AT is not applicable to raw agricultural products and
products to which e'cise duty applies.
c Other Ser+ices
Some of other services% the value addition and the rates of :AT are as follows?
Ta,a3le Ser+ices !alue Addition !AT
otor vehicle garage and wor;shop )"P of total receipts *.+"P
Construction contractors )"P of total receipts *.+"P
Building developers #"P of total receipts #.+"P
Consultancy and supervisory &rm )"P of total receipts *.+"P
Audit and accountancy &rm )"P of total receipts *.+"P
Securities Service )"P of total receipts *.+"P
7egal Adviser )"P of total receipts *.+"P
Ban;ing and non8ban;ing services
#""P of total
receipts #+.""P
Credit cards
#""P of service
charges #+.""P
Coaching center )"P of total receipt
*.+"P
2nglish edium School )"P of total tuition
fee
*.+"P
Speciali9ed 0octor )"P of total fee
*.+"P
$o input ta' credit is allowed against such payment of :AT
9&-'' !AT deduction P collection at source
:AT is deductible at source from certain services at di1erent rates such as
Construction contractors Q *.+P of total bills
Indenting commission. Q !.!+P
7essors Q#+P of service charges
Printer Q *.+P of service charges
Procurement providers Q !.!+P of service charges
Consultancy &rm and supervisory &rms Q *.+P of service charges
Board meeting participants Q #+P of meeting fees
Ban;ing services Q #+.""P of service charges
Sale of goods on auction Q #.+P of service charges
Audit and accounting &rm Q *.+P of service charges
Advertisement &rm Q /P and #+P of service charges by ban;s%
insurances companies% $(Bs% Firms% individuals and other cases
respectively.
$o turnover ta' is deductible at source from the aforesaid services.
The following persons shall be responsible for deduction of :AT at source?8

3a5 (overnmentI
3b5 Semi8(overnmentI
3c5 Autonomous BodiesI
3d5 $(BsI
3e5 Ban;sI
3f5 Insurance CompaniesI and
3g5 7imited Companies.
Any person responsible for deducting :AT shall be liable to pay deductible :AT
along with interest at !P per month from the due date of deduction to the
date of payment if the person failed to collect% deduct and deposit the same.
9&-'2 !AT Authorities
The following are the :AT Authorities under section !" of the :AT Act% #//#?8
# Chief Commissioner% :ATI
! Commissioner% :ATI
) Commissioner 3Appeal5% :ATI
* Commissioner% 7arge Ta' payersK Jnit% :ATI
+ 0irector (eneral% Central Intelligence Cell
, 0irector (eneral% Audit% Investigation and Inspection 0irectorate% :ATI
- 0irector (eneral% 0uty 2'emption L 0rawbac; BEce% :ATI
. Additional Commissioners or Additional 0irector (eneral% :ATI
/ Moint Commissioner or 0irector% :ATI
#" 0eputy Commissioner or 0eputy 0irector% :ATI
## Assistant Commissioner or Assistant 0irector% :ATI
#! Superintendent% :ATI
#) Inspector% :ATI
#* Any :AT BEcer of another designation.
9&-'9 Turno+er ta,
Conce*t of Turno+er ta,
Turnover Ta' is a ta'% as an alternative to :AT% on the turnover of a
manufacturer or producer of ta'able goods or a provider of ta'able services%
as the case may be% who is not re<uired to register for the purposes of :AT
under section #+ of the :AT Act% #//#.
The turnover ta' was payable at !P of the turnover at the time of its
introduction. Gowever% the rate of turnover ta' has now been re8&'ed at )P.
.hen and ho/ #egistration for Turno+er Ta, is Done
If turnover of any trader of goods or provider of services is below T; ," lac% he
may apply to the Superintendent of the :AT Circle BEce in Form :AT8, for
registration for the purposes of turnover ta'. If the Superintendent is satis&ed
as to the turnover% he will issue the Certi&cate of 6egistration in Form :AT8.
within - days of the application.
Bnce registered% no renewal of registration is re<uired. $o fee is payable for
registration for the purposes of turnover ta'.
If% after registration% the turnover of a registered person e'ceeds T; ," lac
during a continuous period of #! months% he will apply within the ne't )" days
after the end of #! months for registration for the purposes of :AT to the :AT
0ivisional BEcer in Form :AT8,.
Gowever% constructors% clearing and forwarding agencies% lessors% suppliers%
rent8a8car service providers% board meeting participants% land sellers and
letter of credit service providers shall not be allowed registration for turnover
ta' even if their turnover falls below T; ," lac.
.hen and ;o/ Turno+er Ta, is )aid
The turnover ta' shall be payable% monthly% <uarterly or yearly% as speci&ed
by the registered person in his application Q )P of the turnover during the
month% <uarter or year% as the case may be.
The turnover ta' is payable in advance in the case of yearly payment% within
)" days of the date of declarationI and in other cases% in the case of &rst
payment% within )" days of the date of declaration based on declared
turnoverI and in the case of subse<uent payments% within #+ days of each
month or <uarter% as the case may be. In the case of subse<uent payments of
turnover ta'% the Paid Treasury Challan along with Turnover Ta' 6eturn Form
:AT8* shall be submitted to the Superintendent of the :AT Circle BEce within
#+ days of the end of each month or <uarter% as the case may be.
Turnover ta' will be paid to the treasury% Bangladesh Ban; or Sonali Ban;% as
the case may be% through Challan Form T. 6. 8,% using #) digit codeI for
e'ample% #4##))4""#+4")!# for 0ha;a 3$orth5 CommissionarateI and
#4##))4""#"4")!# for 0ha;a 3South5 Commissionarate.
If any ta' payer of turnover ta' fails to pay ta' on due date% the
Superintendent of the :AT Circle BEce may impose on that ta' payer &ne up
to T; +%"""I and additional ta' Q !P per month for the delayed or non8
payment period.
$o input ta' is allowed as credit to the ta' payer of turnover ta'. $o person
can also claim credit for payment of turnover ta' through invoices against his
turnover ta' or :AT.
Boo2s and Docu4ents #e8uired to 3e Maintained for Turno+er Ta,
)ur*oses
# 0aily Purchases and Sales 6egister in Form :AT8#-AI
! Cash emos in serial order in self8designedI
) Paid Treasury ChallanI
* Turnover Ta' 6eturn in Form :AT8*I and
+ 0eclaration of Turnover in Form :AT8!.B.
These boo;s and documents shall be maintained for at least * years.
)enalt6 for %alse Declaration for Turno+er Ta,
If a ta' payer ma;es false declaration for turnover ta' by understating his
turnover% he may be penali9ed under section )- of the :AT Act% #//# to the
e'tent of at least the ta' evaded and at best !.+ times of the ta' evadedI and
also re<uired to pay unpaid ta'.
DiAerences Bet/een !AT and Turno+er Ta,
)articulars
!AT Turno+er Ta,
#. Application for
6egistration
Application is to be
made to the 0ivisional
BEce.
Application is to be made
to the Circle BEce.
!. Ta' 6ate Ta' payer pays :AT at
#+P of the value
added% which may be
TfullT invoice value or a
part thereof% as the
case may be.
Ta' payer pays turnover
ta' at )P of the TfullT
invoice value.
). Credit of Input
Ta'
Ta' payer can ta;e
credit of input ta' paid
by him.
Ta' payer cannot ta;e
credit of input ta' paid by
him.
*. Credit of :AT
paid by purchaser
The purchaser can ta;e
credit of the :AT paid
by him.
The purchaser cannot
ta;e credit of the :AT
paid by him.
+. Ta' Payment The ta' payer pays :AT
before each delivery of
goods or rendering of
service.
The ta' payer pays
monthly% <uarterly or
annually% as the case
may be.
,. Boo;s and
documents
The ta' payer maintains
Purchases 6egister%
Sales
The ta' payer maintains
0aily Purchases and Sales
6egister.
6egister% Current
Account and Invoices.
-. 6eturn The ta' payer submits
6eturn in Form :AT8#/
monthly within #" days
of the end of the month.
The ta' payer submits
6eturn in Form :AT8*
monthly or <uarterly
within #+ days of the end
of the month or <uarter%
as the case may be
9&-': In*ut Ta,
Input ta' is :AT paid by a ta' payer on his inputs% that is% all raw materials%
pac;ing materials% services% fuel% machinery% spare parts% and all purchased
goods for sales. Gowever% inputs do not include labor% land% buildings% oEce
e<uipment% vehicles and their construction or maintenance materials and
insurance relating thereto.
Conditions to 3e 4et for clai4ing In*ut Ta,
The following conditions are to be met for claiming credit of input ta'?8
a5 The Ta' payer must have been registered for the purposes of OfullW :AT%
not turnover ta' or not :AT based on estimated value addition.
b5 The Ta' payer must have Bills of 2ntry for imports and :AT Invoices 3:AT8
##5 for local purchases of goods and services% maintained for * years.
c5 The Ta' payer must declare the inputs in Price 0eclaration including
output4input ratio.
d5 The Ta' payer must claim the input ta' within the related year. Gowever%
claim for input ta' may be allowed after the related year for bona&de
reason.
e5 The Ta' payer must possess the inputs for which input ta' has been
claimed.
f5 The Ta' payer can claim credit against :AT only% not import duty%
supplementary duty and4or income ta' at source. Gowever% an e'porter
can claim credit against import duty and4or supplementary duty under
Oduty e'emption and drawbac;W 3generally ;nown as 020B5 arrangement
under rule #/3*5.
S*ecial Treat4ent of S*eci0ed RIn*ut Ta,S
The Ta' payer can claim ,"P of the :AT paid as claim against input ta' in
respect of charges for telephone% teleprinter% fa'% internet% freight forwarders%
clearing L forwarding agents% >ASA% insurance% audit and accounting &rms%
suppliers% security services% carrying agents% letter of credit services%
electricity% and other related ta'able services.
)enalt6 for %alse Declaration for In*ut Ta,
If a ta' payer ma;es false declaration relating to credit of input ta'% he may
be penali9ed under section )- of the :AT Act% #//# to the e'tent of at least
the ta' evaded and at best !.+ times of the ta' evadedI and also the credit of
the input ta' shall be cancelled.
9&-'@ Su**le4entar6 Dut6
Supplementary duty is an output ta'% in addition to :AT% levied on lu'uries%
not essential and not socially desirable goods and services. The rate of
supplementary duty varies from #+ to +""P.
Third Schedule of :AT Act% #//# as amended by the Finance Act% !"##% there
are some goods or services or classes of goods or services sub=ect to
supplementary duty at the rate mentioned there against% such as dairy
products Q!"P% chocolates% sweet biscuits% wages and wafers Q,"P% bear
from malt Q!+"P% cigarettes Q!+"P% alcoholic beverages and wines Q
)+"P% motor car and double cabin pic;8up with minimum four doors with
cylinder capacity e'ceeding *""" cc Q +""P% satellite channel distributor Q
!+P% &lm e'hibitors Q)+P etc.
Deter4ining the +alue of the goods or ser+ices for i4*osition of SD
For the purpose of imposition of supplementary duty% the value of the goods
or services shall be F
:alue for imposition of Import 0uty Z Import 0uty
In case of (oods
Produced or
anufactured in
Bangladesh
Amount received from buyer e'cluding :AT and S0
3Such amount will be received by either producer or
manufacturer for goods produced or manufacturedI or
trader for other ta'able goods5
In case of service
rendered in
Bangladesh
Total amount received for such services rendered
e'cluding :AT and S0
In case of (oods on
which :AT is
imposed on retail
price
Bn retail price as per Section +3)5
9&-'E Conse8uences of Non>co4*liance
$on8compliance covers a wider range of situations starting from registration
to the collection and payment of :AT as per the provisions mentioned in :AT
Act% #//#. According to Section 37 of the VAT Act, 1991, and Rule 4 & 35 of the VAT
Rules, 1991, an assessee may be penalized for the following ofences:
Sl- OAences )enalties
# As per Section )-3#5% if any person?
3a5 fails to apply for registration under this
ACT even when it is necessary for him to
apply.
3b5 fails to submit a return within the
speci&ed dateI
3c5 fails to inform the :AT oEcer about any
change of information related to
registrationI
3d5 fails to comply with the direction of any
summons under section !+I
3e5 fails to maintain information in 2C6 and
computerI
3f5 violates any other provision of this Act%
Fine of not less than T;.
+%""" and not more than T;.
!+%""".
! As per Section )-3!5% if any person?
3a5 fails to submit return or submits false
returnI
3b5 does not pay ta' even and fails to submit
return within the speci&ed time though
notice has been served twice on himI
3c5 submits return incorrect on substantive
groundsI
3d5 evade or attempts to evade :AT through
e'clusion of purchase information in
purchase accounts boo; 3JSH8#,5
3e5 evade or attempts to evade :AT through
submission of forged or false documents
to :AT oEcerI
3f5 fails to submit documents speci&ed by
:AT oEcer against two orders.
3g5 does not ;eep proper records in
accordance with this law or destroy or
i5 a &ne of an amount not
less than e<uivalent
amount and not more
than #.+ times of the
amount of ta' 3:AT L S05
payable upon the goods
or serviceI
ii5 a &ne of at least T;.
#"%""" and not more than
T;. # lac in the case of
other irregularities other
than ta' evasion.
alter or mutilate the records or ma;e it
falseI
3h5 ma;es consciously a false statement or
declaration
3i5 obstructs or prevents the access of ta'
oEcer to inspect or sei9e the records%
boo;s or other documents in relation to
:ATI
3=5 involves in transaction of or ac<uires
goods even though it is ;nown to him ta'
has been evaded thereonI
3;5 ta;es a credit of input8ta' through forged
or fa;e invoiceI
3l5 evades or attempts to evade value
added ta' or supplementary duty by any
other meansI
3m5 issues challans stating therein the
amount of :AT even without being a
registered personI
3n5 does not perform anything as re<uired or
perform something as not re<uired under
Section ,3*a5.
3o5 releases goods without maintaining the
balance in the current account for paying
output ta' or ad=usting against the
deposit of money and input ta' rebate%
re<uired under this Act or the 6ules.
3p5 does or abates in doing anything
speci&ed in the abovementioned clauses.
) As per Section )-3)5% if any registered service
provider or :AT deducting authority fails to
deposit ta' or &ne or other dues to the
government treasury within prescribed time
Shall have to pay the unpaid
ta' liability together with !P
per month as additional
interest. 7T!is provision s!all
not preLudice t!e function of
any penal provisions
regarding oEence under t!e
;AT Act and Rules6:
* If amount of :AT deducted at source is not
deposited to government treasury in due time
by the deducting party
a. Amount including
interest will be
collected from the
party as if he was the
supplierI
b. a'imum &ne T;.
!+%"""
c.
+ As per Section )-3*5% notwithstanding anything
contained in any other provision of this Act% if a
registered person fails to pay :AT 3including
S05 within ) months after notice has been
served twice or does any o1ense twice within
#! months under Section ).3!5 or fails to
register himself within # month from the date
of the receipt of the notice under Section
#+3*5% then
a5 if he is a registered
person% his business
premises may be loc;ed
up and his registration
may also be cancelledI
and
b5 if he is a registrable
person% his business
premises may be loc;ed
up.
, As per 6ule *3#)a5% if a registered person fails
to pay the turnover ta' determined by the
Superintendent as per the rules
Ge may be &ned in ma'imum
rate of T;. +%""" including
e'cess !P ta' per month on
unpaid amount.
- As per 6ule )+% if a registered person fails to
comply with any provisions of the :AT 6ules%
#//# shall be liable to
a penalty of an amount%
being not less than !"P% and
not more than -+P.of the
amount of value added ta'
3including S05 and the goods
or service 3where applicable5
related to such contravention
shall be forfeited to the
(overnment
2'cept in the case of punishment order given by a Special Mudge Court% no
penalty can be imposed of or business premises can be loc;ed up under this
section without giving the person concerned a reasonable opportunity of
being heard% either in person or by his legal representative. A guilty person
may be penali9ed by ) months to ! years =ail or &ned by the amount e<ual to
:AT amount including supplementary duty or ma'imum #.+ times &ne or both
USection )-3,5V.
.or2ed ",a4*les and Solutions
.or2ed ",a4*le '
Parte' produces 0uple' Board% declaring its price at T;. *"%""" per metric ton. It
received an order on !+ Mune !"#" from British American Tobacco 3Bangladesh5 7td
to deliver +"" metric tons of duple' board on !- Mune !"#". It intended to deliver the
goods on !- Mune if :AT could be paid by then. The company had a :AT deposit
balance on the morning of !- Mune !"#" amounting to T;. #"%""%""".
Calculate the amount to be deposited by the company on !- Mune !"#" to enable it
to despatch the goods on that date.
Solution '

A4ount T2-( A4ount
T2-(
:AT chargeable and payable on +"" Ts *"%""" ' +""
'#+P
)"%""%"""
7ess? :AT deposit balance on the morning of !-
Mune !"#"
#"%""%"""
Further :AT deposit to made through Treasury
Challan
!"%""%"""

.or2ed ",a4*le 2
Asset 0evelopment L Goldings 7td sold an apartment% 08*% of !""" sft to r. 6ashed
in Asset Pla9a in (ulshan% 0ha;a at a cost of T;. *"%""%""". The company wants to
deliver the apartment to r. 6ashed on )" August !"##. The 0eed of Agreement
speci&es that :AT is payable by r. 6ashed.
Calculate the :AT payable by r. 6ashed.
Solution 2
A4ount
T2-(
A4ount
T2-(
:AT chargeable and payable *"%""%"""'#.
+P
,"%"""
.or2ed ",a4*le 9
odhumati Sweets deals in sweets and mil; products at -* irpur 6oad% 0hanmondi%
0ha;a. It obtained registration for the purpose of turnover ta'. It has declared that
its yearly sales during the income year ending )# 0ecember !"#" would amount to
T;. #"%""%"""I and it wants to pay turnover ta' on a monthly basis.
Calculate monthly turnover ta' of odhumati Sweets.
Solution 9B
A4ount
T2-(
A4ount
T2-(
Turnover ta' for the income year ending )#
0ecember !"#"
#"%""%"""'*
P
*"%"""
onthly turnover ta' *"%"""4#! )%)))
Self>Assess4ent ?uestionsB
'- >hat do you mean by Ovalue added ta'WN
2- >hat is the rate of :ATN >hen di1erent rates are appliedN
9- $ame the laws that regulate :AT.
:- $ame three goods that are e'empted from payment of :AT.
@- $ame three services that are e'empted from payment of :AT.
E- >ho are re<uired to register for the purposes of :ATN
F- >hen such registration is re<uiredN
D- >hat documents are re<uired to be submitted for such registrationN
C- Is any fee payable for such registrationN
'&- Is renewal of such registration re<uiredN
''- >hat boo;s and documents are to be maintained by a registered ta' payer for
the purposes of :ATN
'2- For how many years such boo;s and documents are to be maintained by such a
ta' payerN
'9- $ame &ve services on which :AT is deductible at source.
':- At what rates :AT is deductible at sourceN
'@- >ho are responsible for deduction of :AT at sourceN
'E- >hat may be the conse<uences for not deducting :AT at sourceN
'F- $ame the :AT Authorities under the :AT Act% #//#.
'D- >hat do you mean by Oturnover ta'WN
'C- >hat is the rate of turnover ta'N
2&- >hen and how turnover ta' is paidN
2'- >ho are re<uired to register for the purposes of turnoverN
22- >ho cannot register for the purposes of turnoverN
29- >hat documents are re<uired to be submitted for such registrationN
2:- Is any fee payable for such registrationN
2@- Is renewal of such registration re<uiredN
2E- >hat boo;s and documents are to be maintained by a registered ta' payer for
the purposes of turnover ta'N
2F- For how many years such boo;s and documents are to be maintained by such a
ta' payerN
2D- 0i1erentiate between value added ta' and turnover ta'.
2C- >hat do you mean by Oinput ta'WN
9&- >hat conditions are to be met for claiming credit of input ta'N
9'- >hat do you mean by Osupplementary dutyWN
92- >hat are various rates of supplementary dutyN
99- $ame three goods on which supplementary duty is chargeable.
9:- $ame three services on which supplementary duty is chargeable with rates.
Chapter )#
"thics
Contents
Introduction
2'amination conte't
Topic ist
31*1
Fundamental principles
)#.! Threat and safeguards framewor;
)#.) 2thical conAict resolution
)#.* 0isclosure of information
)#.+ ConAict of interest
)#., Basic principles of ta'ation wor;
)#.- Ta' Authorities errors
)#.. Anti8money laundering
)#./ Ta' evasion : Ta' avoidance

Introduction
Learning o3<ecti+es
Identify the guidance given in the IFAC Code of 2thics for Professional
Accountants in relation to a ta' practice with regard to?
Tic;
B1
Identify ethical issues arising from ta' wor; underta;en%
e'plain the relevance and importance of these issues and
provides guidance in given scenarios
0iscriminate between ta' avoidance and ta' evasion
Mudge when to refer matters for specialist help
)ractical signi0cance
Belonging to a professional body re<uires adherence to a code of ethics and
have had claims for breaches of con&dentiality. This is part of what
di1erentiates a Chartered Accountant from un<uali&ed accountants. Clients%
members of the public% and the government recognise that we are re<uired to
adhere to e'acting standards and so e'pect a certain standard of behaviour
from us.
oney laundering has been a ma=or problem in the past and as part of new
laws designed to combat this% professionals are re<uired to participate in its
prevention by reporting certain suspicions relating to the proceeds of crime.
Sto* and thin2
Accountants have been &ned for non8compliance with the Code of 2thics.
2ven in the short time that the anti8money laundering regulations have
e'isted accountants have been prosecuted. It is essential that professional
accountants should act ethically in all of their wor;.
>hat sort of <uestions should you as; a potential client apart from the
obvious onesN Should
you always do what the client wants whether you agree or notN
.or2ing conte,t
2thical considerations underpin all of your studies as well as your wor;
e'perience. Cou will often ma;e ethical decisions without even realising it% but
sometimes you may &nd yourself in a <uandary and be unsure how to act.
This is when the Code of 2thics will be of assistance. Cou need to ;now what
to loo; out for and how to act. Cou should always ta;e particular care in
relation to client con&dentialityI not always an easy tas;.
S6lla3us lin2s
The topics covered in this chapter are essential ;nowledge for the whole of
your Ta'ation studies. They will ensure that advice and communication is
appropriate and in ;eeping with the re<uirements of the ICAB.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Apply the &ve fundamental principles to given scenarios
0etermine safeguards to be put in place when threats are made to the
fundamental principles
Advise on the ethical resolution of conAicts
(ive appropriate guidance relating to conAicts of interest and money
laundering
?uestion *ractice
For <uestion practice on these topics go to the end of this manual covering
this chapter
9'-& %unda4ental )rinci*les
Section O+er+ie/
The International Federation of Accountants 3IFAC5 has produced a Code of
2thics for professional accountants 3IFAC Code5.
ICAB has adopted and published IFAC Code of 2thics for ICAB embers.
The IFAC Code aims to ensure high <uality ethical standards for use by
professional accountants around the world.
Part A of the IFAC Codes 3the Codes5 establishes the fundamental
principles of professional ethics for accountants.
De0nition
)rofessional accountant? A member of the ICAB.
The Codes re<uire a professional accountant to comply with the following &ve
fundamental principles?
Integrity
Bb=ectivity
Professional competence and due care
Con&dentiality
Professional behaviour
The purpose of this chapter is to provide bac;ground information which will
assist your understanding of the framewor; of the Bangladesh ta'ation
system% why governments impose ta' and the principles of ta'ation.
The Bangladesh ta'ation system has developed over centuries from the then
British India in #.," to the present condition on a piecemeal basis. Successive
ruler and governments have changed the ta'ation system in accordance with
their political ob=ectives. There has never been an all8party political consensus
about how the Bangladesh ta'ation system should be changed and there
probably never will be.
Integrit6
De0nition
Integrity? 6e<uires all professional accountants to be straightforward and
honest in professional and business relationships.
A professional accountant should not be associated with any information
where he believes that the information?
Contains a materially false or misleading statement
Contains statements or information furnished rec;lessly
Bmits or obscures information re<uired to be included where such
omission or obscurity would be misleading
O3<ecti+it6
De0nition
Bb=ectivity? Imposes an obligation on professional accountants not to
compromise their professional or business =udgement because of bias% conAict
of interest or the undue inAuence of others.
6elationships that bias or unduly inAuence the professional =udgement of the
professional accountant should be avoided.
)rofessional co4*etence and due care
De0nition
Professional competence and due care? 6e<uires professional accountants to?
aintain professional ;nowledge and s;ill at the level re<uired to ensure
that clients or employers receive competent professional service based on
current developments in practice% legislation and techni<uesI and
Act diligently in accordance with applicable technical and professional
standards when providing professional services.
Competent professional service re<uires competence to be achieved in two
phases?
Attainment of professional competenceI and
aintenance of professional competence% re<uiring a continuing
awareness and understanding of relevant issues.
Steps should be ta;en to ensure that those wor;ing for the professional
accountant have appropriate training and supervision.
Any limitations relating to the service being provided must be made clear to
clients and other users to ensure that misinterpretation of facts or opinions
does not ta;e place.
Con0dentialit6
De0nition
Con&dentiality? Imposes an obligation on professional accountants to refrain
from?
0isclosing outside the &rm con&dential information ac<uired as a result of
professional and business relationships without proper and speci&c
authority or unless there is a legal or professional right or duty to discloseI
and
Jsing con&dential information ac<uired as a result of professional and
business relationships to their personal advantage or the advantage of
third parties.
A professional accountant should maintain con&dentiality even in a social
environment. The professional accountant should be alert to the possibility of
inadvertent disclosure% particularly in circumstances involving long association
with a business associate or a close or immediate family member.
A professional accountant should also consider the need to maintain
con&dentiality of information within the &rm. All reasonable steps should be
ta;en to ensure that sta1 under the professional accountantDs control and
persons from whom advice and assistance is obtained respect the professional
accountantDs duty of con&dentiality.
A professional accountant should also maintain con&dentiality of information
disclosed by a prospective client or employer.
The need to comply with the principle of con&dentiality continues even after
the end of relationships between a professional accountant and a client or
employer. >hen a professional accountant changes employment or ac<uires a
new client% the professional accountant is entitled to use prior e'perience. The
professional accountant should not% however% use or disclose any con&dential
information either ac<uired or received as a result of a professional or
business relationship.
)rofessional 3eha+iour
De0nition
Professional behaviour? Imposes an obligation on a professional accountant to
comply with relevant laws and regulations and avoid any action that may
bring discredit to the profession.
This includes actions which a reasonable and informed third party% having
;nowledge of all relevant information% would conclude negatively a1ects the
good reputation of the profession.
Professional accountants should be honest and truthful and should not?
a;e e'aggerated claims for the services they are able to o1er% the
<uali&cations they possess% or e'perience they have gained
a;e disparaging references or unsubstantiated comparisons to the wor;
of others
9'-' Threats and safeguards fra4e/or2
Section O+er+ie/
The circumstances in which professional accountants operate may give
rise to speci&c threats to compliance with the &ve fundamental principles.
The Codes provide a framewor; to help identify% evaluate and respond to
these threats.
The professional accountant is then able to apply safeguards to eliminate
the threats or reduce them to an acceptable level.
As a result% compliance with the &ve fundamental principles is not
compromised.

Threats
The professional accountant is obliged to evaluate any threat as soon as he
;nows% or should be e'pected to ;now% of its e'istence.
Both <ualitative and <uantitative factors should be ta;en into account in
considering the signi&cance of the threat.
ost threats to compliance with the fundamental principles fall into the
following categories?
Self>interest threats% which may occur as a result of the &nancial or
other interests of a professional accountant or of an immediate or close
family member
Self>re+ie/ threats= which may occur when a previous =udgment needs
to be re8evaluated by the professional accountant responsible for that
=udgment
Ad+ocac6 threats% which may occur when a professional accountant
promotes a position or opinion to the point that subse<uent ob=ectivity
may be compromised
%a4iliarit6 threats% which may occur when% because of a close
relationship% a professional
accountant becomes too sympathetic to the interests of others
Inti4idation threats% which may occur when a professional accountant
may be deterred from acting ob=ectively by threats% actual or perceived
Safeguards
If a professional accountant cannot implement appropriate safeguards% he
should decline or discontinue the speci&c professional service involved% or
where necessary resign from the client.
Safeguards that may eliminate or reduce such threats to an acceptable level
fall into two broad categories?
Safeguards created by the profession% legislation or regulation.
Safeguards in the wor; environment.
Safeguards created by the profession% legislation or regulation include% but are
not restricted to?
2ducational% training and e'perience re<uirements for entry into the
profession
Continuing professional development re<uirements
Corporate governance regulations
Professional standards
Professional or regulatory monitoring and disciplinary procedures
2'ternal review by a legally empowered third party of the reports% returns%
communications or information produced by a professional accountant
Certain safeguards may increase the li;elihood of identifying or deterring
unethical behaviour. Such safeguards% which may be created by the
accounting profession% legislation% regulation or an employing organisation%
include% but are not restricted to?
21ective% well publicised complaints systems operated by the employing
organisation% the profession or a regulator% which enable colleagues%
employers and members of the public to draw attention to unprofessional
or unethical behavior
An e'plicitly stated duty to report breaches of ethical re<uirements
The nature of the safeguards to be applied will vary depending on the
circumstances. In e'ercising professional =udgment% a professional accountant
should consider what a reasonable and informed third party% having
;nowledge of all relevant information% including the signi&cance of the threat
and the safeguards applied% would conclude to be unacceptable.
9'-2 "thical con]ict resolution
Section O+er+ie/
To ensure compliance with the fundamental principles a professional
accountant may need to resolve a conAict in applying the principles.
The conAict resolution process may be formal or informal.
In both cases the same steps are to be followed.
Con]ict resolution *rocess
>hen initiating either a formal or informal conAict resolution process% a
professional accountant should consider the following &ve factors?
6elevant facts
6elevant parties
2thical issues involved
Fundamental principles related to the matter in <uestion
2stablished internal procedures
Alternative courses of action
Gaving considered these issues% the appropriate course of action can be
determined which resolves the conAict with all or some of the &ve
fundamental principles. If the matter remains unresolved% the professional
accountant should consult with other appropriate persons within the &rm for
help in obtaining resolution.
>here a matter involves a conAict with% or within% an organisation% a
professional accountant should also consider consulting with those charged
with governance of the organisation.
It is advisable for the professional accountant to document the issue and
details of any discussions held or decisions ta;en% concerning that issue.
If a signi&cant conAict cannot be resolved% a professional accountant may
wish to obtain professional advice from the relevant professional body or legal
advisors% and thereby obtain guidance on ethical and legal issues without
breaching con&dentiality.
If% after e'hausting all relevant possibilities% the ethical conAict remains
unresolved% a professional accountant should% where possible% refuse to
remain associated with the matter creating the conAict.
The professional accountant may determine that% in the circumstances% it is
appropriate to withdraw from the engagement team or speci&c assignment% or
to resign altogether from the engagement or the &rm.
Interacti+e 8uestion 'B "thical con]ict resolution KDiNcult6 le+elB
",a4 standardL
r. M% a member of the ICAB% is the reporting accountant of a pension
company. Bver the years he has developed a close wor;ing relationship with
the &nance director r. (.
6ecently he has become concerned about the &nancial controls within the
company being overridden by r. (% with the possibility of substantial funds
being withdrawn from the company ban; account. r. M discussed this at a
formal end of audit meeting with r. (% who assured him that the issue would
be recti&ed immediately but that she felt there was no real issue and the
controls were overridden for good reasons.
r. M is not satis&ed with the e'planations given and wishes to ta;e further
steps to resolve the
ethical conAict.
#e8uire4ent
Butline the options open to r. M.
Ans/er
r. M may &rst wish to approach the other directors of the company in order to
resolve the ethical conAict with r. (. If this course of action does not give r.
M suEcient comfort that the conAict is resolved he will have to consider going
outside the company.
r. M may wish to obtain professional advice from the ICAB or the legal
advisors% and thereby obtain guidance on ethical issues without breaching
con&dentiality. r. M should consider obtaining legal advice to determine
whether there is a re<uirement to report.
If the ethical conAict remains unresolved% r. M should refuse to remain
associated with the matter creating the conAict. Ge may determine that% in
the circumstances% it is appropriate to resign altogether from the
engagement.
9'-9 Disclosure of infor4ation
Section O+er+ie/
Part A of the Codes contains a section relating to con&dentiality.
The con&dentiality section e'plains when a professional accountant may
disclose information to third parties without threatening the fundamental
principle of con&dentiality.
.hen to disclose
A professional accountant may disclose con&dential information if?
0isclosure is permitted by law and is authorised by the client or the
employer
0isclosure is re<uired by law% for e'ample?
8 Production of documents or other provision of evidence in the course of
legal proceedings% or
8 0isclosure to the appropriate public authorities of infringements of the
law% e.g. under antimony laundering legislation
There is a professional duty or right to disclose% when not prohibited by
law?
8 To comply with the <uality review of a member body or professional
body
8 To respond to an in<uiry or investigation by a member body or
regulatory body
8 To protect the professional interests of a professional accountant in
legal proceedings
8 To comply with technical standards and ethics re<uirements
%actors to consider regarding disclosure
In deciding whether to disclose con&dential information% professional
accountants should consider the following?
>hether the interests of all parties% including third parties whose interests
may be a1ected% could be harmed if the client or employer consents to the
disclosure of information by the professional accountant
>hether all the relevant information is ;nown and substantiated% to the
e'tent it is practicable to do so. >hen the situation involves
unsubstantiated facts% incomplete information or unsubstantiated
conclusions% professional =udgment should be used in determining the type
of disclosure to be made% if any
The type of communication that is e'pected and to whom it is addressedI
in particular% professional accountants should be satis&ed that the parties
to whom the communication is addressed are appropriate recipients
.or2ed ",a4*leB Disclosure of infor4ationB
Cou have =ust obtained r. Mamal as a client. Ge has a source of income which
may or may not be ta'able depending on his personal circumstances which
are uncertain.
#e8uire4ent
0iscuss the ethical considerations you must bear in mind when deciding
whether to disclose the income on his ta' returns.
Solution
There is a possible legal obligation to disclose the source to Ta' Authorities%
but the situation is unclear.
Cou must use your professional =udgment% based on all facts. If disclosure is
not to be made the e'act reasons for non disclosure should be recorded and
r. Mamal advised of the reason for non disclosure.
If you decide that disclosure is re<uired% the client should be noti&ed. If he
does not accept the advice% you should decide whether you can continue to
act for r. Mamal

9'-: Con]icts of interest
Section O+er+ie/
Part B of both the IFAC Code and the ICA2> Code illustrate how the
fundamental principles are applied in certain situations for professional
accountants in public practice.
Bne of the illustrations given in part B contains details relating to conAicts
of interest.
The threat of a con]ict of interest
A professional accountant should ta;e reasonable steps to identify
circumstances that could pose a conAict of interest. These may give rise to
threats to compliance with the fundamental principles.
A conAict may arise between the &rm and the client or between two
conAicting clients being managed by the same &rm. For e'ample where a &rm
acts for?
A Client which has speci&c interests which conAict with those of the &rmI
Financial involvements between the client and the &rm eg where a loan is
made by or to a clientI
Both a husband and wife in a divorce settlement I
A company and for its directors in their personal capacityI or
Two competing business
2valuation of threats includes consideration as to whether the professional
accountant has any
business interests or relationships with the client or a third party that could
give rise to threats. If
there are other than clearly insigni&cant% safeguards should be considered and
applied as necessary.
Safeguards
0epending upon the circumstances giving rise to the conAict% safeguards
should ordinarily include the professional accountant in public practice?
$otifying the client of the &rmDs business interest or activities that may
represent a conAict of interest
$otifying all ;nown relevant parties that the professional accountant is
acting for two or more parties in respect of a matter where their respective
interests are in conAict
$otifying the client that the professional accountant does not act
e'clusively for any one client in the provision of proposed services 3for
e'ample% in a particular mar;et sector or with respect to a speci&c service5
In each case the professional accountant should obtain the consent of the
relevant parties to act.
>here a professional accountant has re<uested consent from a client to act
for another party 3which may or may not be an e'isting client5 and that
consent has been refused% then he must not continue to act for one of the
parties in the matter giving rise to the conAict of interest.
The following additional safeguards should also be considered?
The use of separate engagement teams
Procedures to prevent access to information 3eg strict physical separation
of such teams% con&dential and secure data &ling5
Clear guidelines for members of the engagement team on issues of
security and con&dentiality
The use of con&dentiality agreements signed by employees and partners
of the &rm
6egular review of the application of safeguards by a senior individual not
involved with relevant client engagements
>here a conAict of interest poses a threat to one or more of the fundamental
principles that cannot be eliminated or reduced to an acceptable level through
the application of safeguards% the professional accountant should conclude
that it is not appropriate to accept a speci&c engagement or that resignation
from one or more conAicting engagements is re<uired.
Interacti+e 8uestion 2B Con]ict of interest DiNcult6 le+elB
",a4 standard(
A professional Accountant in Public Practice has had two partners% r. S and
r. 6 as clients for many years. r. S is intending to sell his share of the
partnership to r. 6 so that can continue as a sole trader. Both have as;ed if
you will be their advisor.
#e8uire4ents
Butline the accountantsK position with regard to the potential conAict of
interest.
Ans/er
The &rm should not usually act for both parties in a transaction. Gowever this
can cause particular problems where both have previously been clients.
There are available options%
The &rm has three options%
To act for both
To act for one
To act for neither

In this situation where there is an element of doubt% the latter is probably
the preferred
course of action.
9'-@ Basic *rinci*les of ta,ation /or2
Section O+er+ie/
Bne of the topics included in the statement is an e'planation as to the
accountantDs relationship with the client.
Agent or *rinci*al
It is very important that it is understood when an accountant is acting as an
agent on behalf of a client and when he is acting as the principal. The two
di1erent capacities carry di1erent degrees of ris; and potential liability.
An e'planation as to when an accountant is acting in each capacity should be
given in a client engagement letter. The letter should also e'plain the scope of
the clientDs and the accountantDs responsibilities in each case.
Agent
An accountant acts as agent when he merely prepares documents on behalf
of a client. The client retains responsibility for the accuracy of the document
itself. The accountant is thus an agent when performing ta' compliance wor;
such as preparing and submitting a ta' return on behalf of a client. The client
would be re<uired to sign the return prior to its submission.
The accountant ta;es no responsibility for any information which he passes on
to the ta' authorities when acting as an agent. The accountant is not normally
liable if any of the information proves to be incorrect.
Acting as an agent is therefore considered to be a low ris; activity.
)rinci*al
An accountant acts as principal when he provides advice to the client as to
the ta'ation conse<uences of di1erent courses of action. The accountant
ta;es full responsibility for the advice given and may be liable to the ta'payer
in the event the advice turns out to be incorrect or inappropriate.
>here an accountant does not have the professional s;ill re<uired to act as a
principal in a particular case he may still accept the engagement. Gowever%
he must ensure that the opinion of a suitably <uali&ed accountant is sought.
Acting as a principal is therefore considered to be a high ris; activity.
9'-E Ta, Authorities errors
Section O+er+ie/
Bne of the topics included in the statement is Ta' Authorities errors.
Ta, Authorities errors
It may be apparent to the professional accountant that a mista;e has been
made by Ta' Authorities% such as?
The raising of an inade<uate assessment
An under collection of ta' or interest
An over repayment of ta' or interest
The mista;e may be
Bne of law
A calculation or clerical error
A misunderstanding on the part of Ta' Authorities of the facts as presented
Professional accountants are advised to include in their letters of engagement
authority to advise Ta' Authorities of errors% so that consent from the client is
not needed. >here no such authority has been obtained% the procedure set
out below must be followed.
>here the accountant becomes aware that Ta' Authorities% in full possession
of the facts% has made a material error in dealing with the a1airs of a client%
the professional accountant should see; the clientDs authority to advise Ta'
Authorities of the error.
In cases of a Ta' Authorities error% unless the ta' at sta;e is de minimis% the
professional accountant should refer the matter to the client. The client should
be?
As;ed to authorise the professional accountant to advise Ta' Authorities of
the errorI and
>arned of the possible legal conse<uences if he is reluctant to give the
authority sought% including interest and penalties and possible criminal
prosecutionI and
Advised that if consent is not given% the accountant will consider ta;ing
independent legal advice with a view to?
$otifying Ta' Authorities in any event% and notifying the client of his actionI
and
Ceasing to act for the client.
The professional accountant should ensure that a written record is ;ept of all
advice given to clients in connection with Ta' Authorities errors.
If a professional accountant is speci&cally as;ed by Ta' Authorities to agree a
&gure% he must agree what he believes to be the correct &gureI this may be a
&gure negotiated in the course of discussions following full disclosure of the
facts and circumstances. Ge may not accept a &gure he ;nows to be incorrect%
and he does not need to see; his clientDs authority to disclose to Ta'
Authorities its errors in this case.
9'-F Anti>4one6 laundering
Section O+er+ie/
oney 7aundering Prevention Act% !""! has been Published with the
purpose of combating money laundering
Accountants should comply the re<uirement relating to money8laundering
Mone6 laundering
De0nition
oney laundering is the process of changing large amounts of money
obtained from crimes% such as drug traEc;ing% into origination from a
legitimate source.
oney 7aundering is the process by which criminals attempt to conceal the
true origin and ownership of the proceeds of criminal activities. If successful%
the money can lose its criminal identity and appear legitimate.
In terms of section ! 3tha5 of oney 7aundering Prevention Act% !""!% Toney
7aundering means 3a5 Properties ac<uired or earned directly or indirectly
through illegal meansI 3b5 Illegal transfer% conversion% concealment of location
or assistance in the above act of the properties ac<uired or earned directly or
indirectly through legal or illegal means.T In this Act% OProperties means
movable or immovable properties of any nature and descriptionW.
The term oney 7aundering is used for a number of o1ences involving the
proceeds of crime or terrorist funds. It now includes possessing% or in any way
dealing with% or concealing% the proceeds of any crime.
Someone is engaged in money laundering under where they?
Ac<uire or earn properties directly or indirectly through illegal means
Transfer% convert% conceal location or assist in the above act of the
properties ac<uired or earned directly or indirectly through legal or illegal
means
>here a professional accountant suspects that a client is involved in money
laundering he should report this to the authorities.
Ta, related oAences
Ta' related o1ences are not in a special category. The proceeds or monetary
advantage arising from ta' o1ences are treated no di1erently from the
proceeds of theft% drug traEc;ing or other criminal conduct.
3Ta' avoidance and evasion is considered further in this chapter5
Anti>4one6 laundering *rocedures
Businesses need to maintain the some procedures% in respect of all relevant
business such as?
Appoint a oney 7aundering 6eporting BEcer 376B5 and implement
internal reporting procedures
Train sta1 to ensure that they are aware of the relevant legislation% ;now
how to recognise and deal with potential money laundering% how to report
suspicions to the 76B% and how to identify clients
2stablish internal procedures appropriate to deter and prevent money
laundering% and ma;e relevant individuals aware of the procedures
:erify the identity of new clients and maintain evidence of identi&cation
aintain records of client identi&cation% and any transactions underta;en
for or with the client
6eport suspicions of money laundering
6ecords of client identi&cation and transactions also need to be maintained
for few years.
Client con0dentialit6 in relation to 4one6 laundering
An accountant should disclose con&dential information without client consent
in certain circumstances. In order to disclose con&dential information% the
accountant must have ;nowledge or suspicion% or reasonable grounds for
;nowledge or suspicion% that a person has committed a money laundering
o1ence.
0isclosure without reasonable grounds for ;nowledge or suspicion will
increase the ris; of a business or an individual being open to an action for
breach of con&dentiality.
)unish4ent for Mone6 Laundering
If any person is engaged in oney 7aundering in any way he will be regarded
as a person who has committed a crime and the concerned accused for that
crime will be sentenced to imprisonment for at least a period of si' months
and a ma'imum of seven years and will be &ned for an amount not e'ceeding
double the amount involved in the crime.
9'-D Ta, e+asion + Ta, a+oidance
Section o+er+ie/

Ta' evasion is illegal and Ta' avoidance is legal.
Ta' evasion could lead to prosecution for both the client and his
accountant
Ta' avoidance
Ta, e+asion
Ta' evasion consists of see;ing to mislead Ta' Authorities by either?
Suppressing information to which Ta' Authorities is entitled% for e'ample
by?
8 Failing to notify Ta' Authorities of a liability to ta'
8 Jnderstating income or gains
8 Bmitting to disclose a relevant fact
or
Providing Ta' Authorities with deliberately false information% for e'ample
by?
8 0educting e'penses that have not been incurred
8 Claiming capital allowances on plant that has not been purchased
inor cases of ta' evasion are generally settled out of court via the payment
of penalties. Gowever% there is a statutory o1ence of evading income ta' that
can be dealt with in a magistrates court.
Serious cases of ta' evasion% particularly those involving fraud% continue to be
the sub=ect of criminal prosecutions which may lead to &nes and4or
imprisonment on conviction.
Furthermore% ta' evasion o1ences will fall within the de&nition of money
laundering and in certain cases individuals may be prosecuted under one of
the money laundering o1ences. This includes both the under declaring of
income and the over claiming of e'penses.
If the assets of any clients were derived from illegal activities or if the client
has committed ta' evasion that considered under money laundering% a threat
to compliance with the fundamental principles would be created. In such
situations% the professional accountant may consider see;ing legal advice and
he should report this to the authorities.
Ta, a+oidance

Ta' avoidance is not de&ned% but is broadly any legal method of reducing the
ta' burden.

In recent years there has been a re<uirement for promoters of certain ta'
avoidance schemes to
disclose their schemes to Ta' Authorities% and for ta'payers to disclose details
of which schemes
they have used. This may enable Ta' Authorities to ta;e action more rapidly
to close the
ambiguity.
Ta, e+asion + ta, a+oidance
The distinction between Ta' evasion v ta' avoidance is usually obvious as
avoidance has
no intention of misleading Ta' Authorities.
The Accountant should ta;e care in situations% for e'ample where a client
believes that
his ta' avoidance has been successful and so does not submit a ta' return.
T!e @nd

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