Handbook of Income Tax

HANDBOOK OF INCOME TAX
Handbook of Income Tax

Based on the Income Tax Ordinance 1984
Prepared by
Farid Mohammad Nasir
CA student
Application Level
S. F. Ahmed & Co.
Chartered Accountants
Updated in light of Finance Act 2016

Edition 2.0.2
(Eid Edition)
Let’s sacrifice all the evils, misdeeds & machinations.
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Table of Contents
0. Prelude ................................................................................................................................................ 01
1. Basics of Bangladesh Income Tax ......................................................................................................... 02
2. Income from Salaries ........................................................................................................................... 08
3. Income from Interest on Securities ...................................................................................................... 14
4. Income from House Property ............................................................................................................... 19
5. Income from Agriculture ...................................................................................................................... 22
6. Income from Business or Profession ..................................................................................................... 27
7. Capital Gains ........................................................................................................................................ 38
8. Income from Other Sources ................................................................................................................. 44
9. Sixth Schedule Part-A (Exclusions from Total Income) .......................................................................... 48
10. Sixth Schedule Part-B (Allowances for Investment Credit) .................................................................... 52
11. Set Off and Carry Forward of Loss ........................................................................................................ 54
12. Double Taxation Avoidance Agreement (DTAA) ................................................................................... 55
13. Transfer Pricing .................................................................................................................................... 61
14. Minimum Tax: Application of 82C ........................................................................................................ 81
15. Annexures............................................................................................................................................ 88
16. Deferred Tax .. ..................................................................................................................................... 93
17. Bibliography......................................................................................................................................... 96
18. Changes/Addition in the “Second Edition - Revised (Eid Edition)”.. ...................................................... 97
Prelude
The sole objective of this Handbook is to help determine the assessable income (taxable income) of the seven heads
for both the class of individual assessee and company assessee which will help us in our professional examination
as well as in our professional life. This Handbook is mainly prepared to determine Total Income (i.e. Total Taxable
Income).
This Handbook is a secondary level guideline regarding taxation. Before studying this Handbook, you should have
a minimum level of knowledge of taxation laws i.e. Income Tax Ordinance 1984, Income Tax Rules 1984, Finance
Act of the respective year, income tax related SROs & Circulars issued by the Government time to time.
In this Handbook, it’s been tried hard at the maximum effort to discuss all the issues in respect of the seven heads to
determine the assessable income (taxable income) of the respective income head but this Handbook is not an
inclusive one. If anything in the Handbook is contradictory with ITO 1984 & ITR 1984, the provisions in ITO
1984 & ITR 1984 must prevail over this Handbook. Some issues can be missed. If anyone finds anything missing
or contradictory while and after reading this Handbook that an issue or some issues are left not included in this
Handbook, please be it known to me so that I can include those issues in further editions. I seek your kind and sincere
cooperation in this regard.
First Edition (Independence Edition) : March 2015

First Edition-Revised (Boishakhi Edition) : April 2015
Second Edition (Budget Edition) : August 2016
Second Edition-Revised (Eid Edition) : September 2016
The areas, which have been discussed in this Handbook, have been tried to present very sincerely and carefully. The
author of the Handbook was very sincere and careful when preparing this Handbook. Despite that If any errors,
mistakes or any mispresentations are found in this Handbook, it is totally unintentional and due to mistake. So I urge
all the readers to let me know such facts so that I can amend those errors or mistakes in future editions.
Best regards

Date: 13 September 2016
Farid Mohammad Nasir Updated in light of Finance Act 2016 Page 1

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1. Basics of Bangladesh Income Tax
Section 2(34) “Income” includes -
(i) any income, receipts, profits or gains, from whatever source derived, chargeable to tax
under any provision of this the ITO 1984;
(ii) any amount which is subject to collection or deduction of tax at source under any provision
of this the ITO 1984;
(iii) any loss of such income, profits or gains;
(iv) the profits and gains of any business of insurance carried on by a mutual insurance
association computed in accordance with paragraph 8 of the Fourth Schedule;
(v) 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 the ITO 1984;
(vi) any amount on which a tax is imposed;
(vii) any amount which is treated as income under any provision of the Ordinance.
Section 2(62) “Tax” means the income tax payable under the ITO 1984 and includes any additional tax, excess
profit tax, penalty, interest, fee or other charges leviable or payable under the ITO 1984.
Section 2(65) "Total income" means the total amount of income referred to in section 17 computed in the
manner laid down in the Ordinance, and includes any income which, under any provision of the
Ordinance, is to be included in the total income of an Assessee;
Section 2(42) "Non-resident", means a person who is not a resident.
Section 2(55) "Resident" in respect of any income year, means –
(a) an individual who has been in Bangladesh –
(i) for a period of, or for periods amounting in all to, one hundred and eighty-two days or
more in that year; or
(ii) 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 sixty-five days or more during four years preceding that year;
(b) a Hindu undivided family, firm or other association of persons, the control and management
of whose affairs is situated wholly or partly in Bangladesh in that year; and
(c) a Bangladeshi company or any other company the control and management of whose affairs
is situated wholly in Bangladesh in that year;
Section 2(55) "Assessee", means a person by whom any tax or other sum of money is payable under the
Ordinance, and includes –
(a) every person in respect of whom any proceeding under the Ordinance has been taken 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 person;
(aa) every person by whom a minimum tax is payable under the Ordinance;
(b) every person who is required to file a return under section 75, section 89 or section 91;
(c) every person who desires to be assessed and submits his return of income under the
Ordinance; and
(d) every person who is deemed to be an Assessee, or an Assessee in default, under any provision
of the Ordinance;
Section 2(46) “Person” includes an individual, a firm, an association of persons, a Hindu undivided family, a
trust, a fund, a local authority, a company, an entity and every other artificial juridical person;
Section 2(46A) “Person with disability” means an individual registered as ‘person with disability’ under section
31 of cÖwZeÜx e¨w³i AwaKvi I myi¶v AvBb, 2013 (2013 m‡bi 39 bs AvBb).

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Basics of Bangladesh Income Tax
Section 2(9) "Assessment year (AY)" means the period of twelve months commencing on the first day of July
every year; and includes any such period which is deemed, under the provisions of the Ordinance,
to be assessment year in respect of any income for any period;
Section 2(62A) “Tax Day” means -
(i) in the case of an assessee other than a company, the thirtieth day of November following the
end of the income year;
(ii) in the case of a company, the fifteenth day of the seventh month following the end of the
income year;
(iii) the next working day following the Tax Day if the day mentioned in sub-clauses (i) and (ii) is
a public holiday.
Section 2(35) "Income year” means –
(i) the period beginning with the date of setting up of a business and ending with the thirtieth
day of June following the date of setting up of such business;
(ii) the period beginning with the date on which a source of income newly comes into existence
and ending with the thirtieth day of June following the date on which such new source comes
into existence;
(iii) the period beginning with the first day of July and ending with the date of discontinuance of
the business or dissolution of the unincorporated body or liquidation of the company, as the
case may be;
(iv) the period beginning with the first day of July and ending with the date of retirement or death
of a participant of the unincorporated body;
(v) the period immediately following the date of retirement, or death, of a participant of the
unincorporated body and ending with the date of retirement, or death, of another participant
or the thirtieth day of June following the date of the retirement, or death, as the case may be;
(vi) in the case of bank, insurance or financial institution and subsidiary thereof the period of
twelve months commencing from the first day of January of the relevant year;
(vii) in any other case the period of twelve months commencing from the first day of July of
the relevant year:
Provided that the Deputy Commissioner of Taxes may allow a different financial year for a
company which is a subsidiary or holding company of a parent company incorporated outside
Bangladesh if such company requires to follow a different financial year for the purpose of
consolidation of its accounts with the parent company.
Section 2(69) "Year" means a financial year.
Section 2(8) "Assessment", with its grammatical variations and cognate expressions, includes re-assessment
and additional or further assessment;
Section 2(20) "Company" means a company as defined in the Companies Act, 1913 (VII of 1913) or †Kv¤úvbx
AvBb, 1994 (1994 m‡bi 18 bs AvBb), and includes-
(a) a body corporate established or constituted by or under any law for the time being in
force;
(b) any nationalized banking or other financial institution, insurance body and industrial
or business enterprise;
(bb) an association or combination of persons, called by whatever name, if any of such
persons is a company as defined in 4[the Companies Act, 1913 (VII of 1913) or
‡Kv¤úvbx AvBb, 1994 (1994 m‡bi 18 bs AvBb);
(bbb) any association or body incorporated by or under the laws of a country outside
Bangladesh; and;
(c) 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 the
Ordinance;
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Section 2(11) "Bangladeshi company" means a company formed and registered under the Companies Act, 1913
(VII of 1913) or †Kv¤úvbx AvBb, 1994 (1994 m‡bi 18 bs AvBb) 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 office in Bangladesh;
Section 2(33) "Foreign company" means a company which is not a Bangladeshi company;
Section 2(32) "Firm" has the same meaning as assigned to it in the Partnership Act, 1932 (IX of 1932);
Section 2(47) "Prescribed" means prescribed by ‘Rules’ made under the Ordinance;
Ordinance The Income Tax Ordinance 1984 (ITO 1984)

Rules The Income Tax Rules 1984 (ITR 1984)
SRO Statutory Regulatory Order
Total income i.e. "total taxable income"

Section 2(65) says: "Total income" means the total amount of income referred to in section 17 computed in the
manner laid down in the Ordinance, and includes any income which, under any provision of the Ordinance, is to be
included in the total income of an Assessee;
Scope of the total income (Section 17)

(1) Subject to the provisions of the Ordinance, the total income of any income year of any person includes-
(a) in relation to a person who is a resident, all income, from whatever source derived, which-
(i) is received or deemed to be received in Bangladesh by or on behalf of such person in such year; or
(ii) accrues or arises, or is deemed to accrue or arise to him in Bangladesh during that year; or
(iii) accrues or arises to him outside Bangladesh during that year; and
(b) in relation to a person who is a non-resident, all income from whatever source derived, which-
(i) is received or deemed to be received in Bangladesh by or on behalf of such person in such year; or
(ii) accrues or arises, or is deemed to accrue or arise, to him in Bangladesh during that year.
(2) Notwithstanding anything contained in sub-section (1), where any amount consisting of either the whole or a
part of any income of a person has been included in his total income on the basis that it has accrued or arisen,
or is deemed to have accrued or arisen, to him in 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.
Computation of total income (Section 43)

(1) For the purpose of charge of tax, the total income of an assessee shall be computed in the manner provided in
the Ordinance.
(2) In computing the total income of an assessee, there shall be included any exemption or allowance specified in
part B of the Sixth Schedule and any income deemed to be the income of the assessee under section 19, subject
to the limits, conditions and qualifications laid down therein.
(3) Where the assessee is a partner of a firm, then, whether the firm has made a profit or a loss, his share (whether
a net profit or a net loss) shall be taken to be any salary, interest, commission or other remuneration payable
to him by the firm in respect of the income year increased or decreased respectively by his share in the balance
of the profit or loss of the firm after the deduction of any interest, salary, commission or other remuneration
payable to any partner in respect of the income year and such share shall be included in his total income:
Provided that if his share so computed is a loss, such loss may be set off or carried forward and set off in
accordance with the provisions of section 42.
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(4) In computing the total income of any individual for the purpose of assessment, there shall be included –
(a) so much of the income of the spouse or minor child of such individual as arises, directly or indirectly -
(i) from the membership of the spouse in a firm of which such individual is a partner;
(ii) from the admission of the minor child to the benefits of partnership in a firm of which such individual
is a partner;
(iii) from assets transferred directly or indirectly to the spouse otherwise than by way of gift or for
adequate consideration or in connection with an agreement to live apart; or
(iv) from assets transferred directly or indirectly to the minor child, not being a married daughter, by
such individual otherwise than by way of gift or for adequate consideration; and
(b) so much of the income of any person or association of persons as arises from assets transferred, otherwise
than by way of gift or for adequate consideration, to such person or association of persons by such
individual for the benefit of the spouse or minor child or both.
(5) All income arising to any person by virtue of a settlement or disposition whether revocable or not from assets
remaining the property of the settlor or disponer, shall be deemed to be income of the 2[settlor] or disponer,
and all income arising to any person by virtue of a revocable transfer of assets shall be deemed to be income
of the transferor and shall be included in the total income of such person.
(6) For the purpose of sub-section (5) -
(a) a settlement, disposition or transfer shall be deemed to be revocable if it contains any provision for the
retransfer directly or indirectly of the income or assets to the settlor, disponer or transferor, of in any way
gives the settlor, disponer or transferor a right to resume power directly over the income or assets;
(b) the expression - “settlement or disposition” shall include any disposition, trust, covenant, agreement or
arrangement, and the expression settlor or disponer, in relation to a settlement or disposition, shall include
any person by whom the settlement or disposition was made.
Income deemed to accrue or arise in Bangladesh (Section 18)

The following income shall be deemed to accrue or arise in Bangladesh, namely -
(1) any income which falls under the head "Salaries", wherever paid if -
(a) it is earned in Bangladesh; or
(b) it is paid by the Government or a local authority in Bangladesh to a citizen of Bangladesh in the service
of such Government or authority;
(2) any income accruing or arising, whether directly or indirectly, through or from-
(a) any business connection in Bangladesh;
(b) any property, asset, right or other source of income in Bangladesh; or
(c) transfer of capital assets in Bangladesh:
Provided that 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;
(3) any dividend paid outside Bangladesh by a Bangladeshi company;
(4) any income by way of interest payable -

(a) by the Government; or
(b) by a person who is a resident, except where the interest is 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 making or earning any income from any source outside
Bangladesh; or
(c) by a person who is a non-resident 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 purposes of making or earning any income from any source in Bangladesh;

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(5) any income by way of fees for technical services payable –

(b) by a person who is a resident, except 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 purposes of making
or earning any income from any source outside Bangladesh; or
(c) by a person who is non-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 purposes of making or earning any
income from any source in Bangladesh.
(6) any income by way of royalty payable -

(b) by a person who is a resident, except where the royalty is payable in respect of any right, property or
information used or services utilized for the purposes of a business or profession carried on by such
person outside Bangladesh or for the purposes of making or earning any income from any source
outside Bangladesh; or
(c) by a person who is a non-resident where the royalty is payable in respect of any right, property or
information used or services utilized for the purposes of a business or profession carried on by such
person in Bangladesh or for the purposes of making or earning any income from any source in
Bangladesh.
Heads of income (Section 20) [Classification of income as per ITO 1984]

Income from all types of sources is classified into seven (7) heads as per ITO 1984. Section 20 describes as follows:
Section 20 says: Save as otherwise provided in the Ordinance, all incomes shall, for the purpose of charge of income
tax and computation of total income, be classified and computed under the following heads of income, namely: -
(a) Salaries. (See Section 21)
(b) Interest on securities. (See Section 22 & 23)
(c) Income from house property. (See Section 24 & 25)
(d) Agricultural income. (See Section 26 & 27)
(e) Income from business or profession. (See Section 28, 29, 30 & 30A)
(f) Capital gains. (See Section 31 & 32)
(g) Income from other sources. (See Section 33 & 34)
The seven (7) heads of income have been discussed in the next seven chapters of this Handbook one by one.
Charge of income tax (Section 16)

(1) Where an Act of Parliament (i.e. Finance Act) provides that income tax shall be charged for any assessment year
at any rate or rates, income tax at that rate or those rates shall, subject to the provisions of that Act, be charged,
levied, paid and collected in accordance with the provisions of the Ordinance in respect of the total income of
the income year or income years, as the case may be, of every person:
Provided that where under the provisions of the Ordinance income tax is to be charged in respect of the
income of a period other than the income year, income tax shall be charged, levied, paid and collected
accordingly.
(2) Where under the provisions of the Ordinance income-tax is to be deducted at source, or paid or collected in
advance, it shall be deducted, paid and collected accordingly.
(3) Notwithstanding anything contained in sub-section (1), income-tax shall be charged at the rates specified in the
Second Schedule in respect of -
(i) a non-resident person, not being a company;
(ii) any income classifiable under the head "Capital gains"; and
(iii) any income by way of "winnings" referred to in section 19 (13).
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Charge of surcharge (Section 16A)

(1) Where any Act of Parliament (i.e. Finance Act) enacts that a surcharge on income shall be charged for any
assessment year at any rate or rates, such surcharge at that rate or those rates 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.
(2) All the provisions of the Ordinance relating to charge, assessment, deduction at source, payment in advance,
collection, recovery and refund of income tax shall, so far as may be, apply to the charge, assessment, deduction
at source, payment in advance, collection, recovery and refund of the surcharge.
Charge of additional tax (Section 16B)

Notwithstanding anything contained in any other provision of the Ordinance, where any person employs or allows,
without prior approval of the Board of Investment or any competent authority of the Government, as the case may
be, any individual not being a Bangladeshi citizen to work at his business or profession at any time during the income
year, such person shall be charged additional tax at the rate of fifty percent (50%) of the tax payable on his income
or taka five lakh, whichever is higher in addition to tax payable under the Ordinance.
Charge of additional amount, etc. (Section 16BB)

Where under the provisions of the Ordinance any interest, amount or any other sum, by whatever name called, is to
be charged in addition to tax, it shall be charged, levied, paid and collected accordingly.
Charge of Minimum tax (Section 16BBB) [Go to Section 82C(4)]

Where under the provisions of the Ordinance any minimum tax is to be charged, it shall be charged, levied, paid and
collected accordingly.
Sources of tax laws in Bangladesh

1. Income Tax Ordinance 1984;
2. Income Tax Rules 1984;
3. Finance Act of the respective year;
4. Paripatra of the respective year;
5. Statutory Regulatory Order (SRO);
6. NBR Circular, Order.
Classification of taxes based on impact and incident of tax

(i) Direct tax:
Direct taxes are those which are paid on the income of the taxpayers. The burden of such tax cannot be
shifted by the taxpayers to other persons. Examples include income tax, land revenue tax etc.
(ii) Indirect tax:
Indirect taxes are those which are imposed on the purchase of any goods or services. Here tax burden is
ultimately shifted to the final consumers. Examples include value added tax, turnover tax, customs duty,
supplementary duty, excise duty etc.
(In simple thought – direct tax is imposed on income and indirect tax is imposed on expenditure.)

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2. Income from Salaries
SECTION OVERVIEW
 Definition  Scope of Income under Salaries
 Valuation of Perquisites  Exempted Income under Salaries
Related References:
Sections - 21 & 172
2(58), 2(50), 2(27), 2(28) & 2(24)
Schedule 6th Part A - Para 4, 5, 8 20, 21, 25, 26 (for Bangladeshi) & 7, 15, 16 (for foreigners)
Rule - 33, 33(a, b, c, d, e, f, g, h, i, j)
SROs - 226-Law/IT/2011 dated 4th July 2011 – Tax on ministers
227-Law/IT/2011 dated 4th July 2011 – Tax on SC judges
198-Law/IT/2015 dated 30th June 2015 – Tax on Gov’t. employees
182-Law/1999 dated 1st July 1999 – Tax on tax
Definition:
Section 2(58) “Salaries” include -
(a) Any pay or wages;
(b) Any annuity, pension or gratuity;
(c) Any fees, commission, allowances, perquisites or profits in lieu of (See Section2(50)), or in
addition to, salary or wages;
(d) Any advance of salary;
(e) Any leave encashment.
Section 2(50) “Profits in lieu of salary” includes -

(a) the amount of compensation due to, or received by, an Assessee from his employer at, or in
connection with, the termination of, or the modification of any terms and conditions relating
to, his employment; and
(b) any payment due to, or received by, an Assessee from a provident or other fund to the extent
to which it does not consist of contributions by the Assessee and the interest on such
contributions;
Section 2(28) “Employee” 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 affairs of the company;
Section 2(27) "Employer" includes a former employer;
Section 2(24) "Director" and " manager" in relation to a company have the meanings assigned to them in the
Companies Act, 1913 (VII of 1913) or †Kv¤úvbx AvBb, 1994 (1994 m‡bi 18 bs AvBb)];
Section 21
Section 21(1) provides that the following income of an assessee shall be classified and computed under
the head "Salaries", namely: -
(a) any salary due from an employer to the assessee in the income year, whether paid or not;
(b) 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 him; and
(c) 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-tax for any earlier income year.

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Income from Salaries
When we deal with the head – “Income from Business or Profession”, we should be familiar with the concept of
“Perquisite”. Valuation of perquisites (or implication of perquisites) does not have any effect while determining the income
from “Salaries”. Elements of perquisites are related with the head – Salaries. That’s why it has been discussed here.
As per Section 2(45) “Perquisite” means –
(i) any payment made to an employee by an employer in the form of cash or in any other
form excluding
1. basic salary,
2. festival bonus,
3. incentive bonus not exceeding ten percent of disclosed profit
4. arrear salary,
5. advance salary,
6. leave encashment or
7. leave fare assistance and
8. overtime.
(ii) any benefit, whether convertible into money or not, provided to an employee by an
employer, called by whatever name, other than contribution (by employer) to a
1. recognized provident fund (RPF)
2. approved pension fund (APF)
3. approved gratuity fund (AGF)
4. approved superannuation fund (ASF)
Valuation of perquisites, allowances & benefits (Rule 33)

Rule 33(1) For the purpose of computing the income chargeable under the head “Salary”, the value of
perquisites, allowances and benefits includable in the said income shall be determined in
accordance with the provision of the rule 33A to rule 33J, whichever is applicable.
Rule 33(2) For the purpose of determining the value of perquisites, allowances and benefits under sub-
rule(1)--
(a) “basic salary” means the pay and allowances payable monthly or otherwise, but does
not include-
(i) dearness allowance or dearness pay unless it enters into the computation of
superannuation or retirement benefits of the employee concerned;
(ii) employer‘s contribution to a recognised provident fund or a fund to which the
Provident Fund Act, 1925(XIX of 1925), applies and the interest credited on the
accumulated balance of an employee in such fund;
(iii) allowances which are exempt from the payment of tax; and
(iv) allowances, perquisites, annuities and benefits referred to in Sub-Rule (1);
(b) a shareholder, being director of more than one company, shall be entitled to the benefits
under Rule 33 for one company only.
Examples of perquisites include:

 House rent allowance
 Dearness allowance
 Conveyance allowance (Cash/Car)
 Medical allowance
 Mobile/Telephone Bill
 Servant allowance (Allowance for support staff)
 Honorarium/ Reward/Fee
 Other allowances
Perquisite limit for each employee (as per Section 30(e)):
To any employee – Tk. 475,000
To any employee who is a person with disability – Tk. 2,500,000
N.B: when you read the section 2(45), always read the Section 30(e) along with.
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The following table shows the items whether the income (relating to Salaries) or part of salary income to be
included in the total income under the head “Income from Salaries” or not:
# Description Ref To be included in Total Exempted from
Income Total Income
01 Basic Salary Sec. 2(58) Full ×
02 Dearness Allowance Sec. 2(58) Full ×
03 Bonus / Ex-gratia Sec. 2(58) Full ×
04 Festival bonus/performance bonus Sec. 2(58) Full ×
05 Overtime Sec. 2(58) Full ×
06 Commission and fees Sec. 2(58) Full ×
07 Advance salary Sec. 172(a) Full ×
08 Accrued / outstanding salary Sec. 172(a) Full ×
09 Profit in lieu of salary Sec. 172(c) Full ×
10 Leave encashment /Compensation Sec. 2(58) Full ×
11 Honorarium/ Reward/Fee from employer Sec. 2(58) Full ×
12 Annuity Sec. 2(58) Full ×
13 Education allowance for children Sec. 2(58) Full ×
14 Servant allowance (Allowance for support staff) Sec. 2(58) Full ×
15 Allowance received as Head of a department Sec. 2(58) Full ×
16 Residence telephone bills / utility bills / club bills Sec. 2(58) Full ×
reimbursed
17 House rent allowance in Cash Rule 33a 50% of Basic Salary or
Tk. 25,000 per month;
whichever is less.
18 Rent free accommodation Rule 33b(1) The rental value or
25% of Basic Salary;
whichever is less.
19 Accommodation at a concessional rate Rule 33b(2) The difference between
Rule-33b(1) and actually
cash paid by the assessee
20 Conveyance allowance received in Cash Rule 33c Excess over Tk. 30,000 Up to Tk. 30,000
21 Conveyance provided for the use of the employee Rule 33d 5% of Basic Salary or,
partly or exclusively for personal or private 60000; whichever is higher
purposes
22 Additional conveyance allowance along with Any allowance mentioned
Rule 33e
conveyance facility in 33d plus the amount of
the conveyance allowance
paid in cash
23 Free or concessional passage for travel abroad or Rule 33g (1.i) If, as per the terms of If no cash is paid
within Bangladesh employment, the sum by during travel, then
which cash payments made nothing will be added
by the employer exceeds to the total income.
the actual expenditure (see the rule*)
24 Free or concessional passage for travel abroad or Rule 33g (1.ii) If not as per the terms of
within Bangladesh employment - the whole
amount paid in cash, if no ×
cash is paid then the amount
would have been expended
25 Free or concessional passage for travel abroad or Rule 33g (2) Fully exempted -
within Bangladesh If any benefit as per
Rule 33g (1) provided
by the undertakings
×
engaged in the
transport of passengers
or the carriage of
goods.
26 Entertainment allowance Full ×
27 Free Tea, coffee, beverage or the like thereof Rule 33h × Fully exempted
provided at the office premises (i.e. launch or tiffin)

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28 Medical allowance 10% of Basic Salary

Rule 33i or Maximum Tk.
√
120,000 whichever is
less.
 Medical allowance not exceeding Tk. 1,000,000
received by a person with disability is exempted.
 Medical allowance reimbursed by an employer to an
employee other than shareholder director for
surgery a surgery relating to heart, kidney, eye, liver
and cancer of the employee is exempted.
29 Any other benefit or annuity Rule 33j if not exempted; (see the (see the rule)
rule)
30 The value of any benefit provided free of cost or at Rule 33j
Full ×
a concessional rate
31 Any sum paid by an employer in respect of Rule 33j
Full ×
obligation on employee
32 Employer’s contribution to Recognized
Full ×
Provident Fund (RPF)
33 Interest on RPF Para 25, 6th Actual interest less
RPF
Sch-Part A
(minus) exempted to
&
the extent of the
SRO_No._310/
Law/IT/1984
interest @ 14.50% or,
(for the Rate 1/3rd of basic salary;
14.5%) whichever is lower.
34 Both employee’s and employer’s contribution
to Unrecognized Provident Fund (UPF) plus its × Fully exempted
UPF
interest(if any)
35 Any payment received by an assessee from
Full ×
UPF at retirement
36 Employer’s contribution to an Approved
Full ×
Superannuation Fund (ASF)
ASF
37 Interest on accumulated balance of ASF Para5(1), Part-

A, 1st Schedule × Fully exempted
× Fully exempted
ASF at retirement
39 Employer’s contribution to an Approved
Full ×
Gratuity Fund (AGF)
AGF
40 Interest on accumulated balance of AGF Para 5, Part-C,

1st Schedule × Fully exempted
× Fully exempted
AGF at retirement
42 Any payment (Accumulated balance while leaving Para 21, 6th
Sch-Part A
job*) received from -
(a) a government provident fund* × Fully exempted
(b) a recognized provident fund (RPF)*
(c) an approved superannuation fund (ASF)*
(d) a workers’ participation fund Excess over Tk. 50,000 Up to Tk. 50,000
43 Any Pension received by an assesse Para 8, 6th Sch-
Part A × Fully exempted
44 Gratuity Para 20, 6th Excess over Tk. 2.5 Crore Up to Tk. 2.5 Crore
Sch-Part A
45 Any amount received by an employee of a Govt. Para 21, 6th
Sch-Part A
organization at the time of voluntary retirement in × Fully exempted
accordance with any scheme approved by the Govt.
46 *Employer’s contribution to Life Insurance Policy 33j Full ×

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47 (1) Any income accruing to, or derived by, a Para 4, 6th Sch-
Part A
provident fund established under the Provident
Fund Act 1925 (for govt. employees)
Fully exempted
(2) Any income accruing to, or derived by, ×
workers’ participation fund established under the
Bangladesh Labor Act, 2006
48 Any Special allowance, benefits or perquisite Para 5, 6th Sch-
Part A × Fully exempted
specially granted to meet some official expenses
49 Remuneration of Ambassador/high Commissioner/ Para 7, 6th Sch-
Part A
Charge d’affairs/ commissioner/ counselor/
counsel de carrier/ secretary/ advisor of any × Fully exempted
Embassies of foreign states and the their non-
Bangladeshi employees
Salaries are exempted from payment of tax (as per SRO & Notification):
01. As per Private Sector Power Generation Policy of Bangladesh, income of any foreigner employed in a
private power generation company of Bangladesh is tax free for 3 years from the date of his/her arrival
in Bangladesh. (SRO-114-Law/IT/1999)
02. Any salary drawn by any foreigner from through contracting state or agency as per bilateral agreement
between the Govt. of Bangladesh and Govt. of the contracting state or agency from any foreign aided
development project is fully exempted from tax. (SRO-207-Law/It/1997)
03. Salaries of categorized personnel of United States and its agencies are tax free as per provision of
schedule-1 (Article-V) Section-17 and schedule-2 (Article-VI) Section-18 of United States and
Specialized Agencies (Privileges and Immunities) Act, 1975. (NBR Circular No: NBR/Tax/Tax-7/Tax
Policy/02/2006, dated 29/04/2007)
04. When in any year an assessee has ceased to be an employee participating in a recognized Provident Fund
and has been declared by the employer maintaining the Fund not to be eligible to receive the whole for
the accumulated balance due to him, so much of his income as is assessable for that year shall be
exempted from income tax and shall be excluded from the computation of total income and if such
amount exceeds the amount of his income in that year, so much of his income in the following year as
is equal to the amount of such excess shall be so exempted and excluded is such year or years. (SRO-
454-Law/IT/1980 dated 31.12.1980 (Serial No 19))
05. Chargeability of tax on only Basic Salary of certain persons e.g. ministers, MPs, Judges, Govt.
employees etc.:
Name of person Chargeability of tax on
Prime Minister, Speaker, Ministers, and Only Basic salary is taxable; other allowances/elements of salary
Advisors with minister rank, Deputy are fully exempted from tax (SRO-226-Law/IT/2011 dated
Speaker 04/07/2011
Honorable Judges of High Court and Only Basic salary is taxable; other allowances/elements of salary
Appellate Division of the Supreme Court are fully exempted from tax (SRO-227-Law/IT/2011 dated
04/07/2011
Government employees Only Basic salary, Festival allowance and Bonus are taxable; other
allowances/elements of salary are fully exempted from tax (SRO-
198-Law/IT/2015 dated 30/06/2015
Illustrative Example
See page at 101 – 106 of pdf softcopy (98 – 103 of Handbook page)

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Tax on tax paid by employer on behalf of employee

If any employee’s tax on salary income is borne by any employer, ‘tax amount’ paid by employer on employee’s
salary will be tax exempted to the hands of employee as per SRO No. 182-Law/1999 dt. 01 July 1999.
Example:
Mr. X has been appointed to the post of tax consultant at a consolidated salary of Tk. 150,000 per month on
condition that all the regulatory deductions will have to be borne by the employer. As per calculation [Section
50(1)] it is seen that tax of Tk. 11,250 monthly on such payment will be borne by the employer.
Mr. X has on other income for the year ended 30 June 2016.
Though his total income is Tk.1,800,000, his taxable income has amounted to Tk. 1,250,000. What is tax liability?
Solution:
Slab Tax rate Amount of tax
On first 250,000 0% -
On next 400,000 10% 40,000
On next 500,000 15% 75,000
On next 100,000 20% 20,000
Total tax liability 135,000
Tax paid by employer (11,250 x 12) 135,000
Other than of Tk. 1,800,000 paid to Mr. X, his employer also paid tax of Tk. 135,000 on his behalf. Tk. 135,000 is tax
exempted to Mr. X even though Tk. 135,000 is also his income. He does not need to pay any more tax for this year.
Here is the SRO on tax on tax:
The items to be considered under the head “Salaries” and ‘regarding Salaries’ for investment credit purpose
have been discussed in the section of Investment Credit / Allowance at the end part of this handbook.

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3. Income from Interest on Securities
SECTION OVERVIEW
 Definition  Allowable expenditure
 Scope  Implication of Section 106
 Classification of Securities  Illustrative Example
 TDS on Interest on Securities
Related References:
Sections - 22 & 23
51, 106 & 172(d)
Schedule 6th Part A - Para 24, 24A & 40
Rule - there is no relevant rule to this head
SROs - no SRO is issued in relation to this head
As per Section 22, the following conditions should be met in order to be termed as an income under the head “Income
from Interest on Securities”
(a) Income must be received as interest.
(b) The income must be from securities issued by the government and/or debentures or securities
issued by local authorities and/or companies.
As interest on securities is a separate head of income, therefore, even if the securities are held as trading assets within
the course of any business undertaken by a bank, an insurance company, a leasing company or a stock broker; the
interest must be charged under the head “Income from Interest on Securities” not under the head “Income from
Business or Profession” as per section 28. When these securities are sold, any gain or losses from such disposal will
be considered as capital gain or losses; hence will not be recorded under the head “Income from Interest on
Securities”. Rather any gain from such event will be recorded under the head “Capital Gain”
Classification of Securities
Type of Securities Nature TDS as per Sec. 51 Taxable Status
 Treasury Bond
No TDS Fully taxable
Government Securities  Treasury Bill
[Sec. 22(a)]  Bangladesh Bank Bills
5% upfront Fully taxable
 Other Gov’t securities
Debentures/Other securities issued by:
Commercial Securities  Local authority or 5% upfront Fully taxable
[Sec. 22(b)]  Company
Zero Coupon Bond No TDS Tax free
The following interests from different sources will not be considered under the head “Income from Interest
on Securities” but under the head “Income from Other Sources”
i) Income or profit received from all kinds of bank deposits like Savings Deposits or Fixed Deposits
ii) Income from investments other than securities in any government or commercial projects
iii) Interest on capital and loan from a person or partnership firm
iv) Interest on securities issued by any individuals, partnership firm, association of persons (AOP), club etc.
v) Interest on Savings Certificates
vi) Interest on Post Office Savings Bank and Postal Savings Certificate
vii) Interest on securities issued by any foreign government
viii) Interest received from a company on Book-Debt / Accounts Receivable balance

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Income from Interest on Securities
# Description Ref To be included in Total To be exempted from

Income Total Income
01 Tax free govt. securities Para 24, 6th Sch- × Fully exempted
Part A
02 Gov’t securities Sec. 22 (a) Full ×
03 Commercial securities Sec. 22 (b) Full ×
04 Zero Coupon Bond (ZCB) Para 40, 6th Sch- × Fully exempted
Part A
Admissible Expenses
# Payment/Account head /At the account head Reference Purposes of expenses / Limit for Admissible Expenses
01 Bank commission/charges for collecting Sec. 23 (1) (a) Any sum for this purpose
interest
02 Interest on borrowed capital for Sec. 23 (1) (b) Any interest payable for this purpose
investment in securities
03 No allowance or deduction will be allowed for tax-free Gov’t. securities [Ref: Proviso of
Section 23]
04 No deduction will be allowed in respect of any interest payable outside Bangladesh on which tax has not been paid
or deducted as per Chapter VII [Ref: Section
23(2)]
Grossing up of interest while calculating the taxable income:

In case of Treasury Bonds and Treasury Bills:
As TDS is not deducted from Treasury Bonds and Treasury Bills, there arises no question to gross
up the interest received from Treasury Bonds and Treasury Bills.
In case of Commercial Securities:

As TDS on securities is collected on upfront basis, there is NO need to gross up the interest received
from securities because tax at source (TDS) is collected by the authority while issuing securities.
Implication of Section 106: Avoidance of tax by transactions in securities

 Cum-interest – A security status that means the buyer of the security has the right to receive the current
interest payment on the security. Cum-interest security requires the buyer to pay the seller the accrued
interest on the security, and the buyer is then entitled to the next interest payments from the security.
 Ex-interest – Securities that do not include the interest payment when purchased or sold. A security that is
ex-interest is sold or bought with the knowledge that the buyer of the security will not receive the immediate
next interest payment from the security. But the buyer of the ex-interest security is entitled to receive interest
payments after the immediate next interest payment.
 Interest on securities is accrued on a certain date, not on a day-to-day basis. When securities are bought
cum interest, tax is assessable on the whole amount of interest when received subsequently. As a result, there
is a wide scope to avoid tax through buying and selling securities just on the eve of the payment of interest.
To prevent tax evasion through such transactions, Section 106 has given sufficient authority to the DCT to
handle those cases of evasion.
 Beneficial interest – A beneficial interest is the right to receive benefits on assets held/owned by another
party. More generally, a beneficial interest is any “interest of value, worth, use in property one does not
own”.

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Here is Section 106: Avoidance of tax by transactions in securities.

Section Section Details
106(1) Where the owner of any securities sells or transfers those securities and buys them back or reacquires them,
or buys or acquires similar securities, and the result of the transactions 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 the Ordinance, to be the income of such owner and
not of any other person, whether the interest payable as foresaid would or would not have been chargeable to
tax apart from the provisions of this sub-section.
Example-1:
Mr. X purchased 12% Partex Debenture for Tk. 500,000 on 01 June 2014. Interest is payable on each 30 June.
He sold 12% debenture on 30 June 2016 and bought 15% ACI Debenture on the same day interest on which is
payable on each 30 September.
In this example Mr. X sold 12% Partex Debenture and bought 15% ACI Debenture. As per Secon 106 he has
acquired similar securities. Therefore, as per Section 106(1) Interest on 12% Partex Debenture Tk. 60,000
(12% of 500,000) will be included in the head “Income from Interest on Securities” in the hands of Mr. X.
Example-2:
Mr. Y purchased 12% Pran Debenture for Tk. 600,000 on 01 June 2012. Interest is payable on each 30 June.
He sold 12% debenture on 01 June 2016 and bought 15% RFL Debenture on the same day interest on which is
payable on each 30 September.
In this example Mr. X sold 12% Pran Debenture and bought 15% RFL Debenture. As per Section 106 he has
acquired similar securities. Therefore, as per Section 106(1) Interest on 12% Partex Debenture Tk. 72,000
(12% of 600,000) will be included in the head “Income from Interest on Securities” in the hands of Mr. Y.
106(2) Where any person has had for any period during an income year any beneficial 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 if the income from such securities had accrued from day to day, and such income had 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.
Example:
106(3) Where, any person carrying on a business which consists wholly or partly in dealing in securities buys or
acquires any securities from any other person and either sells back or re-transfers those securities, or sells or
transfers 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 acquired by him is receivable by him but is not deemed to be his
income by reason of the provisions of sub-section (1), no account shall be taken of the transactions in computing
for any of the purposes of the Ordinance any income arising from, or loss sustained in, the business.
106(4) The Deputy Commissioner of Taxes may, by notice in writing, require any person to furnish him, within such
time, not being less than twenty-eight days, as may be specified in the notice, such particulars in respect of all
securities of which such person was the owner, or in which he had beneficial interest at any time during the
period specified in the notice, as the Deputy Commissioner of Taxes may consider necessary for the purpose of
ascertaining whether tax has been borne in respect of the interest on all those securities and also for other
purposes of this section.
Explanation: - For the purposes of this section: -
(a) "interest" includes dividend;
(b) "securities" includes stocks and shares; and
(c) 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
difference 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.

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The following example will you a glimpse about how to treat the Income on Interest on Securities.
Mr. Adeel entered into the following transactions on various dates. Calculate the Income from Interest on Securities
for the income year ended 30 June 2016.
1. Mr. Adeel purchased five 182-day Treasury Bill on 01 January 2016 for Tk. 95,000 each with the face value
of Tk. 100,000 each. Bank charged Tk. 500 for collecting interest.
2. He purchased 15% 15-years Treasury Bond for Tk. 1,000,000 from DSE on 01 July 2015. Interest is payable
on each 30 June & 31 December. Bank charged Tk. 1,000 for collecting interest.
3. He purchased 12% DCC Debenture for Tk. 500,000 on from DSE on 01 January 2015. Interest is payable
on each 30 June. Bank charged Tk. 1,300 for collecting interest.
4. 15% ACI Bond was purchased for Tk. 800,0000 on 01 June 2016. In this regard he has sold 15% RFL Bond
for Tk. 600,000 on the same day. In both cases interest is payable on each 30 June. Bank charged Tk. 700
for collecting interest.
5. He purchased a Zero Coupon Bond for Tk. 934,000 with the face value of Tk. 1,000,000. The redemption
date of this ZCB is on 30 June 2016.
Solution:
# Details Notes Tk. Total Total
Income on Interest on Securities
1 Interest from Treasury Bills (i) 25,000 25,000
2 Interest from Treasury Bond (ii) 150,000 150,000
3 Interest from DCC Debenture (iii) 60,000 60,000
4 Interest from ACI Debenture (Implication of Sec. 106) (iv) 120,000

Interest from RFL Debenture (Implication of Sec. 106) 90,000 210,000
5 Interest from Zero Coupon Bond (v) 66,000

Less: Full exemption (As per Para 40 of 6th Schedule Part A) (66,000) -
Total Income from Interest on Securities 445,000

Less: Bank charges (vi) (3,500)
Total Taxable Income from Interest on Securities 441,500
Notes:
(i) Purchaser may purchase a minimum face value of T-Bills of Tk.1 lakh or in multiples of Tk.1 lakh without
maximum limit. There are three type of T-Bills of 91-day, 182-day and 364-day maturity being issued through
regular auction at Bangladesh Bank held on each Sunday. T-bills are issued on discount price. Face value of
T-Bills is payable at maturity. So, Mr. Adeel received Tk. 100,000 at maturity for each T-Bill by which he
earned an interest of Tk. 5,000 (100,000 – 95,000) in each T-Bill whereas cost price of each T-Bill was Tk.
95,000. Therefore, total interest is Tk. 25,000 (5,000 x 5 T-Bills).
(ii) Bangladesh Bank issues Treasury Bonds of 2-year, 5-year, 10-year, 15-year and 20-year maturity through
action held on each Tuesday with the Face Value of Tk. 1 lakh or in multiples of Tk. 1 lakh without maximum
limit. T-Bonds are issued at par through yield based multiple price basis. Profit of T-Bonds is payable after
each six months’ interval from the date of issue and principal will be paid at maturity. It is worth mentioning
that there are 221 T-Bonds listed with DSE as of 30 June 2016. In this case, Mr. Adeel received interest on 31
December 2015 of Tk. 75,000 (15% x 1,000,000 x 6/12) and 30 June 2016 of Tk. 75,000 (15% x 1,000,000 x
6/12). So, total interest is Tk. 150,000 (75,000 + 75,000).
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(iii) Interest received from DCC Debenture of Tk. 60,0000 (12% of 500,000)
(iv) It’s an implication of Section 106. Mr. Adeel sold his ACI Debenture and bought a similar kind of RFL
Debenture to avoid tax. Interest of Tk. 120,000 (15% of 800,000) as normal course of transactions shall be
deemed to be his income. On the other hand, interest of Tk. 90,000 (15% of 600,000) is also be his income as
per Section 106(1).
(v) Interest from Zero Coupon Bond is Tk. 66,000 (1,000,000 – 934,000). Interest from Zero Coupon Bond is fully
exempted from tax as per Para 40 of 6th Schedule Part A.
(vi) Bank charge of Tk. 3,500 (500 + 1,000 + 1,300 + 700).
The items to be considered under the head “Interest on Securities” and ‘regarding Securities’ for investment
credit purpose have been discussed in the section of Investment Credit / Allowance at the end part of this
handbook.

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4. Income from House Property
SECTION OVERVIEW
 Definition  Allowable expenditure
 Non-assessable House Property Income  Deemed House property Income
Related References:
Sections - 24 & 25
2(3)-Annual Value; 19(22), 19(30), 33(c), 53(a) & 123(2)
Schedule - 6th Schedule Part A - Para 1, 14 & 38
Rule – 8A
SROs - 454(Serial No. 18)-Law/80 dt.21.12.1980; 210-L/IT/13 dt. 01.07.2013
Annual Value under Section 2(3) shall be deemed to be in relation to any property let out-
(i) the sum for which property might reasonably be expected to let from year to year and any
amount received by letting out furniture, fixture, fittings etc; or
(ii) where the annual rent in respect thereof is in excess of the sum referred to in paragraph (i), the
amount of the annual rent.
Income from house property under Section 24:

(1) Tax shall be payable by an Assessee under the head "Income from house property" in respect of the annual
value of any property, whether used for commercial or residential purposes, consisting of any building,
furniture, fixture, fittings etc. and lands appurtenant thereto of which he is the owner, other than such portions
of the property as he may occupy for the purposes of any business or profession carried on by him, the
income from which is assessable to tax under the Ordinance.
(2) Where any such property as is referred to in sub-section (1) is owned by two or more persons and their
respective shares are definite and ascertainable, such persons shall not constitute and shall not be deemed to
be, an association of persons; and for the purpose of computation of the income of an Assessee in respect of
that property, only such part of such income as is proportionate to the share of the Assessee shall be reckoned
as his income from that property.
Conditions of income to be charged under this head:

1. Assessee must be the legal owner or deemed to be the owner
2. House property must be rented for commercial or residential purposes
3. Property must consist of any buildings or land / lands appurtenant thereto
RENTAL STATUS OF THE HOUSE PROPERTY:

1. Fully let out house property:
 All reasonable income (municipal value) or actual annual rental income (whichever is
higher) is chargeable to tax and all admissible expenses are fully considered in this regard
2. Partly let out house property:

 All reasonable income (municipal value) or actual annual rental income generated from the
let out part of the property (whichever is higher) is chargeable to tax and all admissible
expenses are proportionately considered for the let out part in this regard
3. Fully occupied house property by the owner:

 Annual value in such a case is not needed and considered as non-assessable income as per
the ITO 1984

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Income from House Property
Non-assessable Income
# Reasons / areas Reference Limit for Admissible Expenses
01 Annual value of the house used by the Sec. 24 (1) (a) Any sum for this purpose
owner for his own residence purpose and
for the purpose of business or profession
02 Vacancy allowance (also discussed below) Sec. 25 (1) The amount equal to such portion of the annual value
(j&k)
03 Any income derived from the house Para 1(1), 6th Any amount
Sch-Part A
property held by the trust or other legal
obligation wholly used for religious or
charitable purpose
04 Any income derived from any building Para 38, 6th (see the reference for details)
Sch-Part A
for ten years from the date of completion
of construction
05 House property income of any chamber of SRO-210 Any amount of rent income
Dated: 01/07/13
commerce and industry
Admissible Expenses
# Payment/Account head /At the account head Reference Purposes of expenses / Limit for Admissible Expenses
01 Land development tax or rent Sec. 25 (1) (a) Any sum payable for this purpose
02 Insurance premium Sec. 25 (1) (b) The amount of any premium for this purpose
03 Interest on mortgage loan Sec. 25 (1) (d) The amount of interest payable on such mortgage or charge
04 Annual tax/charge Sec. 25 (1) (e) Any tax leviable, in respect of property or income from
property, by local authority or Govt but does not include any
tax leviable under the ITO 1984
05 Ground rent Sec. 25 (1) (f) The amount of such rent
06 Interest on borrowed capital Sec. 25 (1) (g) The amount of any interest payable on such capital borrowed
from bank or financial institution
07 Interest on borrowing during construction Sec. 25 (1) Where no income is earned during the period of construction,
(gg)
the interest payable during such period will proportionately
be distributed in subsequent first three years for which income
is assessable (see the section if not clear)
08 Repair and maintenance includes: Sec. 25 (1) (h) Admissible limit for Repair and maintenance is as follows:
 Expenditure for repairs (i) An amount equal to one-fourth (25%) of the annual
 Collection of rent value where the property is used for residential purpose;
 Water and sewerage
(ii) An amount equal to thirty percent (30%) of the annual
 Electricity value where the property is used for commercial
 Salary of darwan, security guard, purpose.
pump-man, lift-man & caretaker
 All other expenditure related to
maintenance
09 Vacancy allowance Sec. 25 (1) (j) Where the whole property was let out and vacant during a part
of the year, a sum equal to such portion of the annual value is
admissible.
10 Vacancy allowance Sec. 25 (1) (k) Where the property was let out in parts and vacant during a
part of the year, a sum equal to such portion of the annual
value is admissible.
11 Uncollectible/irrecoverable rent SRO-454-L/80 Part of rent which can’t be recovered anymore and which has
Dated:
31/12/1980
been assessed in the preceding year will be deducted from
total income in the subsequent year
# Provision for Inadmissible Expenses:
No deduction shall be allowed in respect of any interest or annual charge payable outside Bangladesh on which tax has not been
paid or deducted as per the provisions of Chapter VII [Ref: section 25(2)]

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Income from House Property
Treatment of unspent repair and maintenance: Section 19(30)

Where an assessee is found to have any sum or part thereof allowed or deducted but not spent in accordance
with the provision of clause (h) of sub-section (1) of section 25 of the Ordinance, such unspent sum or part thereof
shall be deemed to be the income of such assessee for that income year classifiable under the head “Income from
house property
Example:
Annual Value of an assessee stands Tk. 1,000,000. He has rented his house for residential purposes. His allowable
limit for repair and maintenance is Tk. 250,000 (25% of 1,000,000). But he spent only Tk. 170,000 for repair and
maintenance purposes. As per Section 19(30), the unspent amount of Tk. 80,000 (250,000 – 170,000) will be deemed
his income under the head “Income from House Property”.
Treatment of advance rent when it is not adjustable against house rent: Section 19(22)
Where the advance received by the owner is not adjustable against house rent, then such advance will be
treated as house property income as per Section 19(22). However, such advance will be allocated into 5 years
including 1st year in equal proportion if the assessee opts so. Where such advance or part thereof is refunded by the
owner, then the amount so refunded shall be deducted from income in which year it is refunded.
Grossing-up ‘Rental Value’ when the tenant bears any owner’s expenses:
If the tenant bears any expenses like repair and maintenance which is supposed to be borne by the owner,
actual rent will be increased by the same amount.
Deducting from ‘Rental Value’ when the owner bears any tenant’s expenses:
If the owner bears any expenses like water bill, gas bill, electricity bill which is supposed to be borne by the
tenant, actual rent will be decreased by the same amount.
Income from letting out SUBLET by a tenant is considered as ‘Income from Other Sources’ not as ‘Income from
House Property’
No items under the head “Income from House Property” and ‘regarding House Property’ are considered for
investment credit purpose.

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5. Income from Agriculture
SECTION OVERVIEW
 Definition  Admissible expenses
 Scope  Non-Agriculture income
 Agriculture income  Special tax rate through SROs
Related References:
Sections - 26 & 27
2(1), 2(40) 19(17), 19(19) & 35(1)
Schedule 6th, Part A - Para 27, 29 & 46
Rule - 30, 31, 32
SROs - 199-Law-IT/2015 dt. 30 June 2015
SROs - 254-Law-IT/2015 dt. 16 August 2015
SROs - 255-Law-IT/2015 dt. 16 August 2015
Definition/Scope of Agricultural Income: Section 2(1):

"Agricultural income" means -
(a) Any income derived from any land in Bangladesh and used for agricultural purposes –
(i) by means of agriculture; or
(ii) by the performance of any process ordinarily employed by a cultivator to render marketable the
produce of such land; or
(iii) 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 marketable, has been performed; or
(iv) by granting a right to any person to use the land for any period; or
(b) any income derived from any building which –

(i) is occupied by the cultivator of any such land as is referred to in sub-clause (a) in which any process
is carried on to render marketable any such produce as aforesaid;
(ii) is on, or in the immediate vicinity of such land; and
(iii) is required by the cultivator as the dwelling house or store-house or other out-house by reason of his
connection with such land;
Market value in respect of agricultural produce: Section 2(40):

"Market value", in respect of agricultural produce, means -
(a) where such produce is ordinarily sold in the market in its raw state or after application to it of any process
employed by a cultivator to render it fit to be taken to the market, 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 first becomes assessable; and
(b) where such produce is not ordinarily sold in the market in its raw state, the aggregate of –
(iv) the expenses of cultivation;
(v) the land development tax or rent paid for the lands in which it was grown; and
(vi) such amount as the Deputy Commissioner of Taxes finds, having regard to the circumstances of each
case, to represent a reasonable rate of profit on the sale of the produce in question as agricultural
produce;

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Income from Agriculture
Characteristics of Agricultural Income:

(i) It must derive from any agricultural land situated in Bangladesh. The land may be situated in an
urban area or in a rural area.
(ii) It must come from fundamental agricultural work like field cultivation or cultivation of ground, in
the sense of tilling of land, sowing of seeds, planting and similar basic and subsequent operations
on the land
Basic Operations: Agriculture in its primary sense denotes the cultivation of the field and is
restricted to cultivation of the land in the strict sense of the term, meaning tilling of the land, sowing
of the seeds, planting and similar operation on the land.
Subsequent Operations: Such operations are absolutely necessary for the purpose of effectively
raising the agricultural produce and are to be performed after the produce spouts from the land e.g.
weeding, digging the soil around the growth, removal of undesirable undergrowth, and all operations
which foster the growth and preservation of the produce not only from insects and pets but also from
the depredation from outside, tending, pruning, cutting, harvesting and rendering the produce fit for
the market, would all be agricultural operations when taken in conjunction with the basic operations
(iii) Income from any other assets solely used for agricultural purposes is considered as Agricultural
Income
(iv) It may become necessary to perform a process to make the agricultural products marketable or
saleable, then the gain in the value of the produce by such process is classified as Agricultural
Income
(v) Income (rent) may come from any building situated in the agricultural land or adjacent vacant
agricultural land (Remember: this rent is not regarded as ‘Income from House Property’)
(vi) Income may come from gain on sale or discarded value of machineries or plant used for agricultural
purpose
(vii) Some income may partially be considered as agricultural income e.g. Sale of tea, Sale of rubber,
Sale of tobacco and Sale of Sugar
From the above discussion, it is clear that agriculture would include horticulture, floriculture, arboriculture,
sericulture etc. It would include the raising of grooves, plantations, raising of grass or pastures. It would extend to
cultivation of all commodities of food value like sugarcane, coffee, mangoes and other fruits etc.; artistic and
decorative value like flowers and creepers; housing value like bamboo, timber; fuel value; medicinal value and health
value. It would also include growing of animals, poultry when it is not done for business purpose. Agriculture income,
however, cover only those incomes which are derived from human effort not naturally.
i.e. Crops or trees of spontaneous growth in forests or in any other areas where there is no human effort is not
considered as agricultural income (This income is regarded as ‘Income from Other Sources”
SUMMERY OF PARTLY AGRICULTURAL INCOME

Particulars AI BoP Reference
Income from tea garden 60% 40% Sec 26(2), Rule 31
Income from rubber garden 60% 40% Sec 26(3), Rule 32
OTHER FORMS OF AGRICULTURAL INCOME:

1. Income from cattle rearing
2. Income from sale of palm juice and date juice
3. Income from sale of seeds and grass, if grown by human effort
4. Income from agricultural cooperative society which was organized for farming and cattle rearing
5. Income from land or assets used for processing the agricultural commodities to make them marketable
6. Income from sale of herbal or medical plants
7. Income from cultivation of flower and fruits
8. Income from sale of honey if produced in agriculture land using special technologies like special box for
honey-comb
9. Income from dairy farm provided that
a) Assessee is the owner of the cattle
b) Cattle are reared in cattle rearing field
c) Milk is processed by the assessee
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10. Income from poultry farm if they are reared in agricultural land
11. Income from land leased for agricultural purposes
12. Income from any system of sharing of crop generally known as adhi, barga or bhag
Agricultural Income under Section 19(17) & 19(19):

Under section 19(17):
Where any machinery or plant exclusively used by an assessee for agricultural purpose has been
disposed and the sale proceeds thereof exceed the WDV, so much of the excess as does not exceed
the difference between the Original Cost and the WDV shall be deemed to be the income classifiable
under the head “Agricultural Income”
Under section 19(19):

Where any insurance, salvage or compensation moneys are received in any income year in respect
of any machinery or plant which has been used by the assessee exclusively for agricultural purpose
is discarded, demolished or destroyed and the amount of such moneys exceed the WDV of such
machinery or plant, so much of the excess as does not exceed the difference between the Original
Cost and the WDV less the Scrap Value shall be deemed to be the income classifiable under the
head “Agricultural Income”
DON’T GET CONFUSED WITH SOME TYPICAL NON-AGRICULTURAL INCOME:

1. Income from ferry ghat, mooring terminal
2. Income from sale of products that grow up in the agricultural land without agricultural works e.g. forest
trees, wild grass, fruit and flowers grown spontaneously and without human effort
3. Income from sale of forest trees, flowers, bamboo, wild grass, reeds of fruits produced naturally without any
agricultural work
4. Income from salt production by flooding the land with sea water and then extracting salt therefrom
5. Income from cutting and selling of timber on contract
6. Income from interest on arrear of rent for agricultural land
7. Income from letting out vacant land not used for agricultural purpose
8. Income from royalty/ground rent against lease of land for mining, potteries, quarries etc
9. Income from sale of stones from quarries
10. Income from sale of sail for brick field
11. Income from sale of water for irrigation
12. Income from salary for working as an agricultural supervisor/manager
13. Income from sale of crops which have been purchased from other for resale
14. Income from dairy farm solely established for business purpose (Don’t mix up with the Serial No. 11 above)
15. Income from poultry farm established separately for business purpose (Don’t mix up with the Serial No. 12 above)
16. Income from fisheries/fishing established for business purpose
17. Income from fish hunting, ship anchoring etc.
18. Income derived from butter and cheese making
19. Income received as commission foe working as middleman in agro products
20. Remuneration received by managing agent at a fixed percentage of net profit from a company having
agricultural income
21. Interest received by an assessee against loan in the form of agricultural produce
22. Income from dividend paid by a company out of its agricultural income.

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Admissible Expenses
# Payment/Account head /At the account Reference Purposes of expenses / Limit for Admissible Expenses
head
01 Land development tax Sec. 27 (1) (a) Any sum payable for the land used for agricultural purposes
02 Local tax Sec. 27 (1) (b) Any tax, local tax or cess (see the Section for details)
03 Production costs: Sec. 27 (1) (c) (i) Conditions to be met to be admissible:
a) For cultivating the land or raising livestock thereon;
Components of production cost: b) For performing any process ordinarily employed by a
cultivator to render marketable the produce of the land;
 Cultivation cost
c) For transporting the produce of the land or the livestock
 Process cost raised to the market; and
 Transportation cost d) For maintaining the agricultural implements and machinery
 Maintenance cost of implements & in good repair and for proving upkeep of cattle for the
machinery purpose of cultivation, process or transportation as
aforesaid.
04 Production costs Sec. 27 (1) (c) (ii) 60% of market value of the produce of the land where no books
of accounts in respects of agricultural income are maintained
(NOTE: where books of accounts are maintained, 100% of
actual production costs are admissible expenses)
05 Production costs in respect of adhi, Sec. 27 (1) (c) No deduction is allowed if agricultural income is derived by
(iii)
barga or bhag (Inadmissible expenses) the owner of the land from share of the produce raised through
any system of sharing of crop generally known as adhi, barga
or bhag
06 Insurance premium Sec. 27 (1) (d) Any sum paid as premium relating to any agricultural activities
07 Maintenance cost of Irrigation, Sec. 27 (1) (e) Any sum paid in respect of the maintenance of any irrigation
Protective work & Other capital assets or protective work or other capital assets
08 Depreciation Sec. 27 (1) (f) A sum calculated at the rate as provided in the Third Schedule-
Para 1
09 Interest on mortgage Sec. 27 (1) (g) The amount of interest paid in respect of mortgage or charge
where land is subject to a mortgage or other capital charge
10 Interest on borrowed capital Sec. 27 (1) (h) Where the land has been acquired or improved by the use of
borrowed capital, the amount of any interest is paid in respect
of such capital
11 Loss incurred from sale of demolished Sec. 27 (1) (i) The amount actually written-off / the amount of losses from
machineries (see this Section if not clear) any demolishment is allowable expense but maximum
allowable limit:
i) where no insurance or compensation money is received -
Maximum limit = (written down value – scrap
value[SV])
ii) where no insurance or compensation money is received -
Maximum limit = (WDV – SV) – the amount of
insurance or compensation money received
12 Loss incurred from sale or exchange of Sec. 27 (1) (j) The amount actually written-off by way of sale or exchange of
machineries (see this Section if not clear) machinery or plant which has been used exclusively for
agricultural purpose but the maximum of the amount by which
the WDV of the machinery or plant exceeds the amount for
which the asset has been actually sold or transferred
Maximum limit = (WDV – the amount of actual
sale/transfer)
13 Other expenses Sec. 27 (1) (k) Not being capital or personal nature, any other expenditure
laid out wholly and exclusively for the purpose of deriving
agricultural income from the land
# Provision for Inadmissible Expenses:
No deduction shall be allowed in respect of any interest on which tax has not been paid or deducted as per the provisions of
Chapter-VII [Ref: Section 27(2)]

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SPECIAL TAX RATE THROUGH SROs

SRO No. 199-Law/Income Tax/2015 dated 30 June 2015
Any income from Production of Pelleted Poultry Feed, Production of pelleted feed for fish, shrimp and cattle,
Production of Seeds, Marketing of locally produced seeds, Cattle Farming, Dairy Farming, Frog Farming &
Horticulture, Silk tree plantation, Apiculture, Sericulture, Mushroom Farming, Floriculture will be taxed at the
following rate:
Amount of income Rate of Tax

On first 10 lakh 3%
On next 20 lakh 10%
On the rest amount 15%
SRO No. 254-Law/Income Tax/2015 dated 16 August 2015

Any income from poultry farming will be taxed at the following rate:

On first 20 lakh 0%
On next 10 lakh 5%
SRO No. 255-Law/Income Tax/2015 dated 16 August 2015

Any income from hatcheries poultry, shrimp and fish & fisheries (fish cultivation) will be taxed at the following rate:

On first 10 lakh 0%
On next 10 lakh 5%
See the Annexure V to know the history of these SROs
Non-assessable Agriculture Income

01 Any income including agricultural income of an indigenous Hillman of any of the hill districts of Rangamati, Bandarban &
Khagrachhari, which has been solely derived from economic activities undertaken within the said the said hill districts.
[Ref: Para 27, Part-A,6th
Schedule]
02 Any income, not exceeding Tk. 200,000 chargeable under the head “Agricultural Income” of as assessee being an individual,
whose only source of income is agriculture. [Ref: Para 29, Part-A,6th
Schedule]
03 An amount equal to fifty percent (50%) of the income derived from corm, maize or sugar beet [Ref: Para 45, Part-A,6th
Schedule]
No items under the head “Income from Agriculture” and ‘regarding Agriculture’ are considered for
investment credit purpose.

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6. Income from Business or Profession
SECTION OVERVIEW
 Definition  Deemed income from business
 Scope  Corporate tax rates
 Admissible expenses  Illustrative example
 Inadmissible expenses
Related References:
Main Section: 28, 29 & 30
Definition: 2(14) - Business
2(34) - Income
2(45) - Perquisites
2(49) - Profession
2(61) - Speculative Business
Deemed Income: 19(15) - a, aa, b, c
19(16) with 3rd Schedule Para 10
19(18) with section 29(1) (xii)
19(20) & 19(23) with Rule-30A
Rule: 30, 30A, 31, 32, 65, 65A, 65C
Schedule: 6 Part A - Para 1A, 33, 35, 37, 39, 42, 44, 45 & 3rd Schedule-all Para except Para-1
th,
SROs:
# Brief description of the SROs SRO Period Date
01 0.60% TDS on export proceeds from jute goods SRO No. 207-Law/IT/2016 30 June 2019 June 29, 2016
02 10% Tax on income from export of jute products SRO No. 205-Law/IT/2016 AY 2016-27 June 29, 2016
to
AY 2019-20
03 10% Tax on income for the industries engaged in SRO No. 258-Law/IT/2016 AY 2016-27 August 10, 2016
production of jute products to
AY 2019-20
04 0.70% TDS on export proceeds from goods, other than SRO No. 257-Law/IT/2016 30 June 2017 August 10, 2016
jute goods, mentioned is Section 53BB & 53BBB
05 20% Tax on income from export of knitwear and oven SRO No. 208-Law/IT/2016 Only for AY June 29, 2016
garments 2016-17
06 15% Tax on textile industries SRO No. 193-Law/IT/2015 01 July 2015 June 30, 2015
to
30 June 2019
07 Tax exemption for 5 years & 7 years at different rates SRO No. 219-Law/IT/2012 (no time limit) June 27, 2012
on income of industries set up at EPZ at different rates.
08 Tax exemption on companies set up in Bangladesh SRO No. 226-Law/IT/2015 (no time limit) July 08, 2015
Economic Zones (BEZ) for 10 years at different rates.
09 Tax exemption on developers of Bangladesh SRO No. 227-Law/IT/2015 (no time limit) July 08, 2015
Economic Zones (BEZ) for 10 years at different rates.
10 Tax exemption on companies set up in Bangladesh Hi- SRO No. 228-Law/IT/2015 (no time limit) July 08, 2015
tech Park (BHP) for 10 years
11 Tax exemption on developers of Bangladesh Hi-tech SRO No. 229-Law/IT/2015 (no time limit) July 08, 2015
Park (BHP) for 10 years for 10 years at different rates.
12 25% Tax on local authority / Autonomous Institutions SRO No. 158-Law/IT/2014 (no time limit) June 26, 2014
13 Reduced tax on various sources of income like SRO No. 199-Law/IT/2015 (no time limit) June 30, 2015
fisheries, poultry feed, cattle farming, dairy farming, SRO No. 254-Law/IT/2015 (no time limit) August 16, 2015
hatcheries etc. (See the SROs) SRO No. 255-Law/IT/2015 (no time limit) August 16, 2015
14 Exemption on income of private power generation SRO No. 211-Law/IT/2013 For 15 years July 01, 2013
company SRO No. 213-Law/IT/2013
(See all the three SROs to be clear about these) SRO No. 212-Law/IT/2013 For 10years
15 15% Tax on National level research institute SRO No. 157-Law/IT/2007 June 28, 2007
16 15% Tax on private university SRO No. 268-Law/IT/2010 July 01, 2010

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Income from Business or Profession
17 Tax exemption of new private hospitals established SRO No. 204-Law/IT/2005 July 06, 2005
between 1st July 2005 to 30th June 2008 for 5 years
18 SRO on CSR i. SRO No. 229-Law/IT/2011 July 04, 2011
ii. SRO No. 223-Law/IT/2012 June 27, 2012
iii. SRO No. 186-Law/IT/2014 July 01, 2014
19 Travel Tax on different rates SRO No. 159-Law/IT/2014 June 26, 2014
20 Tax on passenger vehicles SRO No. 171-Law/2009 June 30, 2009
SRO No. 160-Law/IT/2014 June 26, 2014
21 Tax on Water-way transport SRO No. 224-Law/IT/2012 27 June, 2012
SRO No. 162-Law/IT/2014 26 June, 2014
22 Exemption on Income of DSE & CSE for 5 years on SRO No. 157-Law/IT/2014 26 June, 2014
various rates in each of 5 years
23 Tax exemption on BSEC income at different rates for SRO No. 195-Law/IT/2015 For 5 years June 30, 2015
5 years
24 Tax rebate for 10 years or up to 2019 for Production- SRO No. 185-Law/IT/2014 July 01, 2014
oriented industries which are not situated in the city
corporation area and subject to other conditions
The list of SROs is not an inclusive one. There are a number of SROs regarding income tax to be paid on the income
head “Income from Business or Profession” but some important SROs are mentioned here.
Definition/Scope of Income from Business or Profession:

See the Section 2(14), 2(34), 2(45), 2(49) 2(61) & 28 of the ITO 1984 for details to have a clear idea
Section 2(14) “Business” includes trade, commerce, manufacture and adventure or concern in the nature of
trade, commerce and/or manufacture.
Section 2(34) “Income” (See page at 2 – Handbook page) (PDF page at 5)
Section 2(45) “Perquisites” [See page at 9 (PDF page 12). A discussion about perquisites have been made there]
Section 2(49) “Profession” includes vacation.
(Profession involves the idea of an occupation requiring purely intellectual skill or manual skill on
the basis of some special learning.)
Section 2(61) "Speculation-business" means business in which a contract for the purchase or sale of any
commodity, including stocks and shares, is periodically or ultimately settled otherwise than by the
actual delivery or transfer of the commodity or scripts, but does not include business in which –
(a) a contract in respect of raw materials or merchandise is entered into by a person in the course
of his manufacturing or mercantile business to guard against loss through future price
fluctuations for the purpose of fulfilling his other contracts for the actual delivery of the goods
to be manufactured or the merchandise to be sold by him;
(b) a contract in respect of stocks and shares is entered into by a dealer or investor therein to
guard against loss in his holdings of stocks and share through price fluctuations; and
(c) a contract is entered into by a member of a forward market or a stock exchange in the course
of any transaction in the nature of jobbing or arbitrage to guard against loss which may arise
in the ordinary course of his business as such member;
Section 28 "Income from business or profession" - (1) The following income of an Assessee shall be
classified and computed under the head "Income from business or profession", namely: -
(i) profits and gains of any business or profession carried on, or deemed to be carried on, by
the Assessee at any time during the income year;
(ii) income derived from any trade or professional association or other association of like
nature on account of specific services performed for its members;
(iii) value of any benefit or perquisite, whether convertible into money or not, arising from
business or the exercise of a profession;
(iv) the amount, the value of the benefit and the trading liability referred to in section 19(15);
(v) the excess amount referred to in section 19(16);
(vi) the excess amount referred to in section 19(18);
(vii) the sale proceeds referred to in section 19(20);
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(viii) the amount of income under section 19(23).

Explanation - Where speculative transactions carried on by an Assessee are of such a nature as
to constitute a business, the business (hereinafter referred to as "speculation business") shall be
deemed to be distinct and separate from any other business.
(See also the Sub-Section 2 & 3 of Section 28)
Allowable deductions/Admissible Expenses

head
01 Rent of premises Sec. 29(1)(i) The amount of rent paid for the premises
Provided that:
*Proportional rent is allowed for deduction if the premises are
partially used for dwelling
*No deduction is allowed if the premise is owned by the
assessee.
02 Repair of the hired premises Sec. 29(1)(ii) The amount paid for the repair of hired premises
Provided that:
Proportional amount of sum paid for such repair is allowed for
deduction if the premises are partially used for dwelling.
03 Interest on borrowed capital Sec. 29(1)(iii) The amount of any interest paid or any profit shared with a bank
run on Islamic principles. (see the proviso of this section)
04 Distribution of profits Sec. 29(1)(iv) Any sum paid by way of profit a bank run on Islamic principles
on deposits
05 Transfer to Special Reserve Sec. 29(1)(v) An amount not exceeding 5% of total income transferred to any
Account special reserve by financial institutions as approved by the Govt.
provided that such reserve doesn’t exceed the paid up capital
06 Current repair & maintenance Sec. 29(1)(vi) The amount paid on account of current repairs to buildings,
machinery, plant or furniture used by the business or profession
07 Insurance premium Sec. 29(1)(vii) The whole or proportionate part of the amount on account of any
premium paid against risk of…. (see the rest of the section)
08 Depreciation Sec. 29(1)(viii) Depreciation allowances of the business assets, or bridge or road
(Fiscal depreciation, not accounting
or flyover owned by a physical infrastructure undertaking, as
depreciation) admissible under the Third Schedule.
09 Amortization of license fee Sec. 29(1)(viiia) Amortization of license fee as admissible under the 3rd
Schedule.
10 Investment allowance for Ship Sec. 29(1)(ix) An amount of 20% of the original cost of a ship, being a
passenger vessel plying ordinarily on inland waters or a fishing
trawler for the year in which the ship or the trawler is first put to
use for public utility.
11 Obsolescence allowance Sec. 29(1)(xi) An obsolescence allowance of building, machinery, plant or
any other fixed assets but not being imported software to the
extent and computed in paragraph 10 of the Third Schedule
12 Allowance for disabled or dead Sec. 29(1)(xii) An amount equivalent to the difference of the original cost of
animals the animal and the, if any, realized by sale or other disposition
of the carcass of the animal (see the section for details).
13 Land development tax or Local Sec. 29(1)(xiii) Any sum paid on account of land development tax or rent, local
Taxes rates or municipal taxes in respect of premises or part thereof as
is used for the purpose of the business or profession.
14 Bonus or Commission (paid to Sec. 29(1)(xiv) Any sum paid to the employees as bonus or commission for
employees) services rendered (not payable as profits or dividends) with
reference to:
o the general practice in similar business or profession,
o the profits of the business or profession, and
o the pay and other conditions of service of the employees.
15 Bad debt Sec. 29(1)(xv) The amount of any debt or part thereof which is established to
have become irrecoverable and has actually written off from the
books of accounts (see the section for details).

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16 Previous year’s bad debt Sec. 29(1)(xvi) Any debt actually written off as irrecoverable but has not been
allowed earlier as irrecoverable; so much of such debt or part
thereof as has been established to have become irrecoverable in
(IY-income year) any subsequent year shall be allowed as a deduction in that IY.
17 Additional bad debt Sec. 29(1)(xvii) Any debt actually written as irrecoverable for an income year
and the DCT is satisfied that the debt or part thereof became
irrecoverable in an earlier income year not falling beyond fours
immediately preceding the income year when it was written off.
18 Provision for bad and doubtful debt Sec. 29(1)(xviiia) Provision for bad and doubtful debts made by banks is applicable for
& some assessment years (see the two sections for details)
Sec. 29(1)(xviiiaa)
19 Payment for scientific research Sec. 29(1)(xx) Any capital expenditure laid out or expended on scientific
research in BD related to the business carried on by the assessee:
Provided that where a deduction allowed for any income year
under this clause, no depreciation/obsolescence allowance shall
be allowed under clause (viii) or (xi) for the same income year.
20 Donation to research institute/body Sec. 29(1)(xxi) Any sum paid (i) to a scientific institute, association or other
body engaged in such scientific research or, (ii) to a university,
college, technical school or other institution [subject to the
approval of the Board] for the purpose of scientific research or
training related to the class of business carried on by the assesse.
21 Payment to educational institution Sec. 29(1)(xxii) Any revenue expenditure laid out or expended on any
or hospital educational institutional or hospital for the benefit of the
employees, their families and dependents or on the training of
industrial workers, if
o no charge is made for services rendered by such institution or
hospital or for the training of the workers; and
o no deduction or allowance is claimed for such expenditure
under any other clause of the section.
22 Donation to educational institution Sec. 29(1)(xxiii) Any capital expenditure laid out or expended on the construction
or hospital (for construction & & maintenance of educational institutional or hospital
maintenance purpose) established for the benefit of the employees, their families and
dependents or on the training of industrial workers, if
o no charge is made for services rendered by such institution or
hospital or for the training of the workers; and
o no deduction or allowance is claimed under any other clause
of the section for the same income year in respect of
expenditure represented either wholly or partly by any asset.
23 Expenditure on training Sec. 29(1)(xxiv) Any expenditure laid out or expended on the training of citizens
of BD in connection with a scheme approved by the Board.
24 Expenditure on traveling abroad as a Sec. 29(1)(xxv) Any revenue expenditure or personal expenses incurred by an
member of Trade Delegation assessee in connection with visits abroad as a member of a trade
delegation sponsored by the Govt.
25 Subscription to a registered Trade Sec. 29(1)(xxvi) Any sum paid on account of annual membership subscription to
Organization a registered trade organization within the meaning of the Trade
Ordinance, 1961 or to a professional institution recognized by
the Board in this behalf.
26 Other revenue expenditure Sec. 29(1)(xxvii) Any revenue, not personal, expenditure laid out or expended
(for the sole purpose of the business wholly or exclusively for the purpose of the business or
/profession) profession of the assessee.
[This clause is very important to
claim any expenses as admissible]
27 Fair proportional allowance or Sec. 29(2) Where any premises, building, machinery, plant or furniture are
deduction not wholly used for the purposes of the business or profession,
any allowance or deduction under section 29(1) shall be
restricted to the fair proportional part of the amount.

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Non-allowable deductions/Inadmissible Expenses

# Payment/Account head /At the account Reference Reasons to be Inadmissible / Limit for Admissible Expenses
head
01 At the head of Salaries Sec. 30(a) If salaries are paid to the employees without deducting taxes at
sources (TDS) as per Section 50
02 Any head of expenses Sec. 30(aa) If any payment is made to any person without deducting tax
(Any expenses can be inadmissible expenses if (TDS) as per Chapter VII of ITO, 1984.
TDS is not deducted)
03 Any payment by way of salary to an Sec. 30(aaa) Any payment by way of salary to an employee if the employee is
employee without TIN required to obtain a twelve-digit Taxpayer’s Identification Number
under the provisions of the Ordinance but fails to obtain the same at
the time of making such payment;
04 Any payment to a Partner or member Sec. 30(b) Any payment by way of interest, salary, commission or
of any AOP (Association of Persons) remuneration made by a firm or an AOP to any partner or any
member of the AOP, as the case may be
05 Brokerage or commission paid to a Sec. 30(c) Any payment by way of brokerage or commission made to person
Non-resident who is not a resident in BD is inadmissible unless tax (TDS) has
been deducted therefrom under section 56
06 Any payment to provident fund or Sec. 30(d) Any payment to a provident fund or other fund established for the
other fund benefit of the employees unless the employer has made effective
arrangements to secure that tax shall be deducted at source from any
payments, made from the fund, which are taxable being income
falling under the head “Salaries”
07 Perquisites Sec. 30(e) So much of the expenditure as per the provisions (see Section 2(45)
for the definition and scope of Perquisites) of perquisites to any
[See page at 9 (PDF page 12). A discussion employee (per employee) exceeds Tk. 475,000 and to any employee
about perquisites have been made there] who is a person with disability, as exceeds Tk. 2,500,000.
08 Expenses incurred for Entertainment, Sec. 30(f) Any expenditure in respect of the following as in excess of the
Foreign travels of employees for amount or rate specified in this behalf and as in not, in the cases of
holidaying and recreation and sales and services liable to excise duty, supported by excise stamp
Distribution of free samples or seal, namely:- (as follows)
Entertainment Rule 65 The amounts or rates in excess of which no deduction shall be
admissible for the expenditure in respect of entertainment are
specified below:
(a) On the first 10 lakh of *income, profits and gains of the
(*income, profits and gains mean the business or profession (computed before making any allowance in
income, profits and gains after deducting respect of expenditure on Entertainment) ……………………...4%
all admissible expenses, other than only (b) On the balance of income, profits and gains of the business or
Entertainment, as per the ITO 1984) profession (computed in the manner as aforesaid)……….…….2%
Foreign travels Rule 65A (1) The allowance in respect of expenditure on foreign travels for
holidaying and recreation of the employee and his dependents in
excess of the amount equivalent to three-month basic salary of the
employee or three-fourths of the actual expenditure, which is less
(not oftener than once in every two years) shall be admissible
(2) Provided that any payment of sum exceeding Tk. 10,000 shall
(given to employee and his dependent for not be allowed as a deduction unless such payment is made by a
holidaying & recreation purpose) crossed cheque drawn on a bank or by a crossed bank draft
Distribution of free samples Rule 65C The rates in excess of which no deduction shall be admissible for
expenditure in respect of distribution of free samples are as follows:
(a) in case of a pharmaceutical industry-
(i) for a turnover upto taka 5 crore….......................................@ 2%
(ii) for a turnover in excess of Tk. 5 crore but upto10 crore....@ 1%
(iii) for a turnover in excess of Tk. 10 crore…….………....@0.50%
(b) in case of a food, cosmetics and toiletries industry-
( % on Turnover) (i) for a turnover upto Tk. 5 crore…………………………….@ 1%
(ii) for a turnover in excess of Tk. 5 crore but upto10 crore..@ 0.5%
(iii) for a turnover in excess of Tk. 10 crore.........................@ 0.25%
(c) in case of any other industries-
(i) for a turnover upto Tk. 5 crore.........................................@ 0.5%
(ii) for a turnover in excess of Tk. 5 crore but upto10 crore@ 0.25%
(iii) for a turnover in excess of Tk. 10 crore..........................@ 0.1%
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09 Head Office expenses Sec. 30(g) Any expenditure exceeding 10% of the Net Profit disclosed in the
statements of accounts under the Head Office expenses by a
company not incorporated in Bangladesh
10 Royalty, technical service fee, Sec. 30(h) Any payment by way of royalty, technical service fee, technical
technical know-how fee or technical know-how fee or technical assistance fee exceeding 8% of the Net
assistance fee Profit disclosed in the statements of accounts
11 Any cash payment by way of Salary Sec. 30(i) Any payment by way of salary or remuneration made other than by
to an employee having gross monthly a crossed cheque or bank transfer to an employee having gross
salary of Tk. 15,000 or more monthly salary of Tk. 15,000 or more
12 Incentive bonus Sec. 30(j) Any expenditure by way of incentive bonus exceeding 10% of the
Net Profit disclosed in the statements of accounts
13 Overseas traveling Sec. 30(k) Any expenditure by way of overseas traveling exceeding 1.25% of
the disclosed turnover
14 Any commission paid or discount Sec. 30(l) Any payment by way of commission paid or discount made to its
made to a shareholder director shareholder by a company
15 Cash payment over Tk. 50,000 Sec. 30(m) Any payment exceeding Tk 50,000 or more, other than by a crossed
cheque or bank transfer excluding –
(i) payment for the purchase of raw materials;
(ii) salary or remuneration made to any employee, without
prejudice to an obligation referred to in Section 30 (i);
(iii) any payment for government obligation
16 Office rent paid without a crossed Sec. 30(n) Any payment by way of any rent of any property whether used for
cheque or bank transfer commercial or residential purposes, other than a crossed cheque or
bank transfer
# Provision for Disallowance:
Notwithstanding anything contained in sections 28, 29 & 30, the DCT shall not make any disallowance or deduction for any
year from any claim made by the assessee in the trading account or, profit or loss account without specifying reason for such
allowance or deduction [Ref: Sec. 30A]
SUMMERY OF PARTLY ‘INCOME FROM BUSINESS’

Particulars AI BoP Reference
Income from tea garden 60% 40% Sec 26(2), Rule 31
Income from rubber garden 60% 40% Sec 26(3), Rule 32

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DEEMED INCOME CONSIDERED AS “INCOME FROM BUSINESS OR PROFESSION”
Ref Particulars
Sec. 19(15) Where, for the purpose of computation of income of an Assessee under section 28, any deduction has been made for
any year in respect of any loss, bad debt, expenditure or trading liability incurred by the Assessee, and--
(a) subsequently, during any income year, the Assessee has received, except as provided in clause (aa) whether in cash
or in any other manner whatsoever, any amount in respect of such loss, bad debt, or expenditure, the amount so received
shall be deemed to be his income from business or profession during that income year;
(aa) such amount on account of any interest which was to have been paid to any commercial bank or the Bangladesh
Development Bank Ltd. or on account of any share of profit which was to have been paid to any bank run on Islamic
principles and which was allowed as a deduction in respect of such expenditure though such interest or share of profit
was not paid by reason of the Assessee having maintained his accounts on mercantile basis, within three years after
expiry of the income year in which it was allowed, shall, to such extent as it remains unpaid, be deemed to be income
of the Assessee from business or profession during the income year immediately following the expiry of the said three
years;
(b) the Assessee has derived, during any income year, some benefit in respect of such trading liability, the value of such
benefit, if it has not already been treated as income under clause (c), shall be deemed to be his income from business or
profession during that income year;
(c) such trading liability or portion thereof as has not been paid within three years of the expiration 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 expiry of
the said three years; and the business or profession in respect of which such allowance or deduction was made shall, for
the purposes of section 28, be deemed to be carried on by the Assessee in that year:
Provided that where any interest or share of profit referred to in clause (aa) or a trading liability referred to
in clause (c) is paid in a subsequent year, the amount so paid shall be deducted in computing the income in respect of
that year.
Example -
19(16) Where any building, machinery or plant having been used by an Assessee for purpose of any business or profession
&
along with
carried on by him is disposed of during any income year and the sale proceeds thereof exceeds the written down value,
3rd Schedule so much of the excess as does not exceed the difference between the original cost and the written down value shall be
Para 10 deemed to be the income of the Assessee for that income year classifiable under the head "Income from Business or
Profession”
Example -
Sec. 19(18) Where any insurance, salvage or compensation moneys are received in any income year in respect of any building,
&
along with
machinery or plant which having been used by the Assessee for the purpose of business or profession is discarded,
Sec. 29 (xi) demolished or destroyed and the amount of such moneys exceed the written down value of such building, machinery
or plant, so much of the excess as does not exceed the difference 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 classifiable under the head
"Income from Business or Profession".
Example -
Sec. 19(20) Where an asset representing expenditure of a capital nature on scientific research within the meaning of section 29 (1)
(xx) is disposed of during any income year, so much of the sale proceeds as does not exceed the amount of the
expenditure allowed under the said clause shall be deemed to be the income of the Assessee for that income year
classifiable under the head "Income from Business or Profession". (See the two explanations attached to the Section
19(20) in ITO, 1984)
Example -
Sec. 19(23) Where during any income year an Assessee, being an exporter of garments, transfers to any person, the export quota or
any art thereof allotted to him by the Government, such portion of the export value of the garments exportable against
the quota o transferred as may be prescribed (Rule 30A) for this purpose shall be deemed to be the income of the
Assessee for that income year, classifiable under the head "Income from Business or Profession"
Example -

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CORPORATE TAX RATE
Assessment Year Assessment Year

Sl. Type of companies 2016-2017 2015-2016
Rate of tax Rate of tax
01 Publicly traded company 25% 25%
Newly listed companies in case of transferring 20% of paid-up capital to 24.75% 24.75%
share market through IPO
02 Non-publicly traded company* 35% 35%
*(including non-resident company)
03 Bank, Insurance, Financial institutions:
(a) Publicly traded 40% 40%
(b) Non-publicly traded 42.5% 42.5%
04 Merchant Bank 37.5% 37.5%
05 Cigarette manufacturing company 45% 45%
06 Mobile phone operator company 45% 45%
If Mobile phone operator company converts into publicly traded company 40% 40%
issuing minimum 10% shares of its paid up capital through IPO, of which
maximum 5% being issued through Pre-IPO placement
If such company transfers at least 20% share through IPO, it will enjoy
10% rebate on tax in the respective year
07 Income from dividend 20% 20%
08 Cigarette manufacturing assessee other than company 45% 45%
09 Co-operative society registered under the Co-operative 15% 15%
Society Act, 2001
10 Capital Gain 15% 15%
Capital Gain from sale of shares of listed companies 10% 10%
(SRO No-196-Law/IT/2015)
11 Charge of additional tax (Section 16B): 5% 5%
A public limited company, not being a banking or insurance company,
listed with any stock exchange in Bangladesh, has not issued, declared or
distributed dividend or bonus share equivalent to at least fifteen per cent
(15%) of its paid up capital to its shareholders within a period of six
months immediately following any income year, the company shall be
charged additional tax at the rate of five per cent (5%) on the undistributed
profit in addition to tax payable under the Ordinance;
"Undistributed profit" means accumulated profit including free reserve.
12 Excess profit tax (Section 16C) 15% 15%
If any bank show profit exceeding 50% of the aggregate sum of capital
and reserve, the company (the banking company), in addition to tax payable
under the ITO, 1984, shall have to pay an excess profit tax for that year @
15% on such excess profit
13 Minimum tax (u/s 82C(4))
 Manufacturer of cigarette, bidi, chewing tobacco, smokeless 1% 0.30%
tobacco or any other tobacco products
 Mobile phone operator 0.75% 0.30%
 Any other cases 0.65% 0.30%

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The following is the audited statement of profit or loss and other comprehensive income of XYZ Ltd. for the year
ended 30 June 2016.
XYZ Ltd
Statement of profit or loss and other comprehensive income
for the year ended 30 June 2016
Amount in BDT
Notes July 2015 to
June 2016
Revenue 97,000,000
Cost of goods sold (65,000,000)
Gross profit 32,000,000
General and administrative expenses:
Salaries and allowances 1 8,452,300
Depreciation 1,250,000
Entertainment expenses 500,000
Bad debts provision 225,000
Legal expenses 2 157,500
(10,584,800)
Selling and distribution costs (2,457,200)
Operating profit 18,958,000
Other income:
Profit from sale of investment 100,000
Interest on govt. securities 150,000
Bank interest 112,000
Dividend 180,000
Capital gain 500,000
1,042,000
Net profit/(loss) for before tax 20,000,000
Income tax expense (7,000,000)
Net profit/(loss) after tax 13,000,000
Other comprehensive income -
Total comprehensive income 13,000,000
Other information:
1. Salaries and allowances include Tk. 130,000 on which no TDS was deducted.
2. Legal expenses include Tk. 57,500 which was spent for against lawsuit of infringement of copyright law.
3. Some income which was not credited in profit or loss account:
(i) Waiver of trading liability Tk. 400,000
(ii) Bad debt recovered Tk. 15,000
(iii) Interest due but not paid within 3 years Tk. 121,000
(iv) Income from transferring quota Tk. 42,500
(v) Sale proceeds of scientific apparatus Tk. 130,000
rd
4. Fiscal depreciation as per 3 Schedule is Tk. 1,567,500. Tax deducted by the dividend paying company: Tk. 36,000
5. Advance income tax paid u/s 64 is Tk. 4,200,000 & TDS deducted by the customers and bank is Tk. 1,164,000
Requirement:
Calculate the total taxable income and determine the tax liability of XYZ Ltd. for the Assessment Year 2016-17 as
per the present provision of the income tax law.

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Solution:
Assessee: XYZ Ltd.
TIN: 479439796082
Computation of Total Income/(Loss)
Assessment Year: 2016 - 2017
Income Year Ended: 30 June 2016
Taka Taka
A. Income from Business or Profession
Net Profit (before tax) for the year ended 30 June 2016 as per Audited Accounts: 20,000,000
Less: Non-business income for separate consideration:

Dividend 180,000
(1,042,000)
Add: Expenses for separate consideration:
Accounting Depreciation 1,250,000
Entertainment Expenses 500,000
1,750,000
Add: Inadmissible expenses:

Bad debt provision 225,000
Legal expense 57,500
Salary (if TDS not deducted) 130,000
412,500
Less: Admissible expenses:
Other admissible expenses -
Any admissible expenses not shown in PL account -
Fiscal depreciation as per 3rd schedule 1,567,500
(1,567,500)
Add: Income not credited in P/L account
Waiver of trading liability 400,000
Bad debt recovered 15,000
Interest due but not paid within 3 years 121,000
Income from transferring quota 42,500
Sale proceeds of scientific apparatus 130,000
708,500
Total income from business before entertainment allowance 20,261,500
Actual entertainment expenses 500,000
Entertainment expenses allowable (whichever is lower) (See Note No. 1) 425,230 (425,230)
Total Income from Business or profession 19,836,270
B. Interest on securities
Total interest on securities 150,000
C. Capital Gain
Total capital gain 600,000

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D. Income from Other Sources

Dividend 180,000
Total income from other sources 680,000
E. Total taxable income (A+B+C+D) 21,266,270
Computation of tax liability

Tax payable other than capital gain & dividend @ 35% 20,486,270 7,170,195
Tax payable on capital gain @15% 600,000 90,000
Tax payable on dividend @20% 180,000 36,000
Total tax liability 21,266,270 7,296,195
Less: Advance tax paid:
Advance Tax Paid u/s 64 of the ITO, 1984 4,200,000
Tax Deducted at Source (TDS) 1,200,000 5,400,000
Net tax payable for the assessment year 2016 - 2017 1,896,195
Notes
01 Rule 65 of ITO: (Entertainment Allowance)
4% on first Tk.1,000,000 1,000,000 40,000
2% on remaining total income 9,261,500 385,230
Total income from business before entertainment allowance 20,261,500
Allowable entertainment allowance as per Rule 65 425,230
.
02 It is assumed that dividend is received from a non-listed company.

03 Amount of total advance tax and TDS:
Advance income tax:
Tax paid u/s 64 Tk. 4,200,000 Tk. 4,200,000
Tax deducted at sources:

Tax deducted by the dividend paying company Tk. 36,000
Tax deducted by the customers and bank Tk. 1,164,000 Tk. 1,200,000
Grand total Tk. 5,400,000

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7. Capital Gains
SECTION OVERVIEW
 Definition  Cost of acquisition
 Scope  Tax free capital gains
 Computation of capital gains  Rate of tax on capital gains
Related References:
Sections - 31 & 32
2(15) - Capital Asset
2(30) - Fair Market Value
2(66) – Transfer
2(68) – Written down value
16(3)ii - Charge of tax on Capital Gains
53M & 53N (settled under Section 82C)
Schedule: 2nd Schedule - Para 2
6th Schedule-Para 18 & 43
Rule - 42
SROs - SRO No-196-Law/IT/2015
Capital Gains arise from the transfer of capital assets

Definitions:
Section 2(15) "Capital asset" means property of any kind held by an Assessee, whether or not connected with his
business or profession, but does not include-
(a) any stock-in-trade (not being stocks and shares), consumable stores or raw materials held for the
purposes of his business or profession; and
(b) personal effects, that is to say, movable property (including wearing apparel, jewelry, furniture,
fixture, equipment and vehicles), which are held exclusively 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 him;
Section 2(30) "Fair market value" means, in relation to capital asset-

(a) the price which such asset would ordinarily fetch on sale in the open market on the relevant day, and,
where such price is not ascertainable, the price which the Deputy Commissioner of Taxes may, with
the approval in writing of the Inspecting Joint Commissioner, determine;
(b) the residual value received from the lessee in case of an asset leased by a financial institution having
license from the Bangladesh Bank on termination of lease agreement on maturity or otherwise subject
to the condition that such residual value plus amount realized during the currency of the lease
agreement towards the cost of the asset is not less than the cost of acquisition to the lessor financial
institution.
Section 2(66) "Transfer" in relation to a capital asset, includes the sale, exchange or relinquishment of the asset,
or the extinguishment of any right therein, but does not include -
(a) any transfer of the capital asset under a gift, bequest, will or an irrevocable trust;
(b) any distribution of the assets of a company to its shareholders on its liquidation; and
(c) any distribution of capital assets on the dissolution of a firm or other association of persons or on
the partition of a Hindu undivided family;
Section 2(68) "Written down value" means the written down value as defined in the Third Schedule;
"Written down value" means -
(a) where the assets were acquired in the income year, the actual cost thereof to the assessee;
(b) where the assets were acquired before the income year, the actual cost thereof to the assessee as reduced by
the aggregate of the allowances for depreciation allowed under the Ordinance, or the Income-tax Act, 1922
(XI of 1922), in respect of the assessments for earlier year or years; (As per 3rd Schedule)

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Capital Gains
Characteristics of Capital Gains:

(i) The Capital Asset has to be transferred.
(ii) Income under this head has to be recognized in the income year in which the transfer takes place.
SECTION-31 says:
Tax shall be payable by an assessee under the head "Capital Gains" in respect of any profits and gains
arising from the transfer of a capital asset and such profits and gains shall be deemed to be the income of
the income year in which the transfer took place
Computation of capital gains as per Section-32(1):

Capital gain = Higher of (i) or, (ii) or, (iii) less (i) or, (ii)
(i) Consideration received from the transfer (i) Any expenditure incurred solely in
of the capital asset; or connection with the transfer of the
(ii) Consideration accruing from the transfer capital asset; or
of the capital asset; or (ii) The cost of acquisition of the capital
(iii) Fair market value. asset and any capital expenditure
incurred for any improvements.
Cost of acquisition as per Section-32(2):

Ref. Situations Cost of acquisition
Section-32(2) (i) Where the capital asset was acquired by the the actual cost of acquisition
assessee by purchase -
Section-32(2) (ii) Where the capital asset became the property of (i) the actual cost of acquisition to the
the assesse: - previous owner of the capital asset as
(i) under a deed of gift, bequest or will; or reduced by the amount of depreciation, if
(ii) under a transfer on a revocable or any, allowed to the previous owner; or,
irrevocable trust; or
(iii) on any distribution of capital assets on the (ii) and where the actual cost of acquisition to
liquidation of a company; or the previous owner cannot be ascertained,
(iv) on any distribution of capital assets on the the fair market value at the date on which
dissolution of a firm or other association of the capital asset became the property of the
persons or the partition of a Hindu previous owner:
undivided family.
Provided that where the capital asset is an asset in respect of which the assessee has
obtained depreciation allowance in any year, the cost of acquisition of the capital asset to
the assessee shall be its written down value increased or diminished, as the case may be, by
any adjustment made under section 19(16) or (17) or section 27 (1) (j) or section 29(1) (xi).
Section-32(2) (ii) where the capital asset became the property the actual cost of acquisition of the capital
2nd proviso of the assessee by succession, inheritance asset to the assessee shall be the fair market
or devolution - value of the property prevailing at the time the
assessee became the owner of such property.

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Capital Gains
Roll-over tax relief on capital gains as per Section-32(5):

Where a capital gain arises from the transfer of a capital asset which immediately before the date on which the
transfer took place was being used by the assessee for the purposes of his business or profession and the assessee
has, within a period of one year before or after that date, purchased a new capital asset for the purposes of his business
or profession, then, instead of the capital gain being charged to tax as income of the income year in which the transfer
took place, it shall, if the assessee so elects in writing before the assessment is made, be dealt with in accordance
with the following provisions of this sub-section, that is to say-
i.e. for getting roll-over tax relief on capital gains, the following conditions must be fulfilled:
1. The capital asset must be used by the assessee before the transfer takes place;
2. The capital asset must be used for the purposes of his business or profession;
3. The assessee has to purchase a new capital asset for the purposes of his business or profession within
a period of one year before or after that date;
i.e. if you purchase a new capital asset one year before transfer of the existing capital asset, you will
be able to get tax relief on capital gain arising from transfer of capital asset
and if you purchase a new capital asset one year after transfer of the existing capital asset, you will
also be able to get tax relief on capital gain arising from transfer of capital asset;
4. And the assessee so elects in writing to get roll-over tax relief before the assessment is made.
(a) if the amount of the capital gains is greater than the cost of acquisition of the new asset - (CG>New asset)
i. the difference between the amount of the capital gain and the cost of acquisition of the new asset
shall be charged under section 31 as income of the income year, and
i.e. the capital gain arising from transfer of an old capital asset is Tk. 1,000,000 and the
cost of acquisition of new capital asset is Tk. 850,000. So, the capital gain to be charged to
tax is Tk. 150,000 (1,000,000 – 850,000)
ii. for the purposes of computing in respect of the new asset any allowance under the Third Schedule
or the amount of any capital gain arising from its transfer, the cost of acquisition or the written
down value, as the case may be, shall be nil, or
i.e. for depreciation purpose the cost of acquisition or the written down value shall be nil.
That means no tax depreciation as per 3rd Schedule is allowed on the assets which have
been purchased by the capital gain which was not taxed due to ‘roll-over tax relief’.
(b) if the amount of the capital gain is equal to or less than the cost of acquisition of the new asset - (CG<=New
asset)
i. the capital gain shall not be charged under section 31, and
i.e. the capital gain arising from transfer of an old capital asset is Tk. 900,000 and the cost of
acquisition of new capital asset is Tk. 1,100,000. So, no capital gain to be charged to tax.
ii. for the purposes of computing in respect of the new asset (i) any allowance under the 3rd Schedule or ((ii)
any income under section 19(16) or (iii) the amount of any capital gain arising from its transfer, the cost of
acquisition or the written down value shall be reduced by the amount of the capital gain:
i.e. in above case the cost of accusation of new asset is Tk. 200,000 (1,100,000 – 900,000).
(i) for tax depreciation purpose, depreciation will be calculated on the amount Tk. 200,000;
(ii) for any income u/s 19(16), the WDV will be based on the cost of Tk. 200,000;
(iii) for calculation any capital gain arising from the transfer of the asset cost Tk. 1,100,000, the
cost or WDV will be based on the amount Tk. 200,000 for tax purpose, not Tk. 1,100,000.

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Capital Gains
Tax exemption on capital gains arising from Gov’t securities as per Section-32(7):
Notwithstanding anything contained in Section 32 or Section 31, where a capital gain arises from the transfer of a
capital asset being Government securities and then no tax shall be charged under this Sec. 31
1. The following example gives a purview in case of Treasury Bill (T.Bill)

Mr. A purchases a 01-year Treasury Bill from an AD branch on 15.06.2015 with yield to maturity (YTM) 8.4834%.
The following are the details:
Face Value = Tk. 1,000,000
Cost price = Tk. 921,800
Date of issue = 15.06.2015
Date of maturity = 14.06.2016
Yield to maturity = 8.4834%
He has sold his T.Bills for Tk. 1,001,580 on 13 December 2016. Transaction cost was Tk. 1,000.
Calculate the capital gain arising from the transaction.
Solution:
Selling price Tk. 991,580
Cost price Tk. 921,800
Transaction cost Tk. 1,000
So, the capital gain = Tk. 68,780 (991,580 – 921,800 – 1,000)

Therefore, the capital gain of Tk. 68,780 will be tax free as per Section 32(7) of the ITO 1984.
2. The following example gives a purview in case of Treasury Bond (T.Bond)

Mr. B purchases a 05-year Treasury Bond from an DSE on 25.05.2015 with remaining maturity of 4 years 7 months
and 5 days. Total amount paid by him was Tk. 1,046,02 including Tk. 42,110 as holding period interest and Tk. 1000
as commission. Applicable yield to maturity (YTM) is 10.5122% and coupon is Tk. 10.6%. Coupon payment is
semiannual. The following are the details:
Face Value Tk. 1,000,000
Date of issue 01.01.2015
Date of maturity 31.12.2019
Accrued coupon interest up to 25.05.2015 Tk. 42,110
Commission Tk. 1,000
Total amount paid by Mr. B Tk. 1,046,026
Actual cost price of T.Bond Tk. 1,002,916 (1,046,026 – 42,110 – 1,000)
Yield to maturity 10.5122%
Coupon rate (semiannual) 10.6%
He has sold his T.Bond for Tk. 1,030,970 on 13 March 2016.
Calculate the capital gain arising from the transaction.

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Capital Gains
Solution:
Can you say what happened to Mr. B in between the time 25.06.2016 and 13.03.2016?
Ans: He has received interest of Tk. 106,000 [53,000 as on 30.06.2015 (1,000,000 x 10.6% x 6/12)
+ 53,000 as on 31.12.2015 (1,000,000 x 10.6% x 6/12)]
Tk. 106,000 will be shown as “Interest on securities”
Selling price Tk. 1,030,970

Cost price Tk. 1,002,916
Commission Tk. 1,000
Though as on 13 March 2016 holding period interest was Tk. 20,910 (1,000,000 x 10.6% x 72/365), Mr. B was able
to sell his T.Bond for Tk. 1,070,970. So, the capital gain from the transaction = Tk. 24,944 (1,070,970 – 1,002,916
– 42,110 – 1,000)
Therefore, the capital gain of Tk. 24,944 will be tax free as per Section 32(7) of the ITO 1984.
Other non-assessable Capital Gain as per ITO 1984 and as per SROs
# Source of Capital Gain Reference Particulars
01 Capital gain arising from the transfer Sec. 32(10) Notwithstanding anything contained in this section or section 31,
of Buildings and Land to a new where a capital gain arises from the transfer of capital asset
company being buildings or lands to a new company registered under
7[the Companies Act, 1913 (VII of 1913) or ‡Kv¤úvbx AvBb, 1994
(1994 m‡bi 18 bs AvBb)], for setting up of an industry, and if the

whole amount of capital gain is invested in the equity of the said
company, then the capital gain shall not be charged to tax as
income of the year in which the transfer took place.
02 Capital gain of a firm arising from the Sec. 32(11) Notwithstanding anything contained in this section or section 31,
transfer of its capital asset to a new where a capital gain arises from the transfer of capital asset of a
company firm to a new company registered under the Companies Act,
1913 (VII of 1913) or ‡Kv¤úvbx AvBb, 1994 (1994 m‡bi 18 bs AvBb),
and if the whole amount of the capital gain is invested in the
equity of the said company by the partners of the said firm, then
the capital gain shall not be charged to tax as income of the year
in which the transfer took place.
03 Capital gain arising from the trading SRO No. 196- The income earned from trading of securities, listed with any
Law/IT/2015 dt.
of securities list with any stock 30 June 2015
stock exchanges and approved by the BSEC, by all individual
exchanges by general shareholders (general) shareholder-assessees is exempted from tax.
04 Capital gain arising from the transfer SRO No. 188- Capital gain arising from the transfer of a Power Generation
Law/IT/2009 dt.
of a Power Generation Company 01 July 2009
Company provided that the company began its commercial
& production within 30 June 2013
SRO No. 235-
Law/IT/2011 dt.
06 July 2011

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Capital Gains
Rate of Tax on Capital Gains

Capital Gain to different Particulars Tax Rate
assessees
Tax on capital gain (Para-2, 2nd Schedule)

In case of a company Capital Gain disposed in any year (Irrespective of 5 years provision) 15%
In case of a person other (i) Capital Asset disposed before 5 years:
than a company The amount of capital gain will be included in total income and taxed
accordingly at regular rate. If average tax exceeds 15%, then Capital
Gain separately will be taxed @ 15%
If average doesn’t exceed 15%, then Capital Gain will be taxed @ Average
Rate
(ii) Capital Asset disposed after 5 years 15%
Special Tax Rates on income earned from selling of Stocks & Shares: (SRO No. 196-Law/IT/2015 dt. 30 June 2015)
(a.1) Companies defined Any gain earned by the Companies and Firms from the transaction of 10%
u/s Section 2(20) and Firms Securities will be taxed @
defined u/s Section 2(32)
(a.2) Sponsor Shareholders Any gain earned by Sponsor Shareholders or Shareholder Directors 5%
or Shareholder Directors from the transaction of Securities of Bank, Financial Institution, Merchant
(Individual Assessee) Bank, Insurance, Leasing Company, Portfolio Management Company, Stock
Dealer Company or Stock Broker Company
(a.3) Any shareholder who Any gain earned from trading of shares/securities by any Shareholder 5%
holds more than 10% shares [excluding the Sponsor Shareholders / Director Shareholders mentioned in
of paid-up capital of a listed Serial No. a.2 ] having 10% or more shares of the total paid-up capital of a
company (Individual Assessee) company listed with any exchange at any time during the income year
(b) Other Shareholders The gain earned by other shareholders other than those mentioned in (a.1), Tax
(Individual Assessee) (a.2) & ( a.3) and by the sponsor shareholders mentioned in Section 53M exempted
from trading of Securities is exempted from tax
Explanation: here the term “Securities” includes Stocks, Shares, Mutual Fund Unit, Bond, Debenture or other securities of
all companies or institutions, excluding government securities, being approved by the BSEC which are transactable and listed
with any stock exchanges.
Tax on income earned from Transfer of securities or mutual fund units by Sponsor Shareholders:
(as per ITO provisions)
Sponsor Shareholder of On the difference between Transfer Value and Cost of Acquisition of the 5%
Securities or Mutual Fund Securities or Mutual Fund Units at the time of transfer or declaration of
Units of a company transfer or according consent to transfer of Securities or Mutual Fund Units
of a Sponsor-Shareholder or Director or Placement-holder of a company or
Sponsor or Placement-holder of a Mutual Fund Units listed with a stock
. (53M &
82C)
exchange.
Tax on income earned from Transfer of share of Shareholder of Stock Exchanges:
. (as per ITO
provisions)
Shareholder of Stock Any profits or gain arising from the transfer of share of a shareholder of 15%
Exchanges stock exchange at the time of transfer or declaration of transfer or according
. (53N & 82C) consent to transfer of share of Stock Exchange, whichever is earlier.
The items to be considered under the head “Capital Gain” for investment credit purpose have been discussed
in the section of Investment Credit / Allowance at the end part of this handbook.

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8. Income from Other Sources
SECTION OVERVIEW
 Scope  Interest income
 Admissible Expenses  Income under Section 19
Related References:
Sections - 33 & 34, 36
2(26)-Dividend; read with Rule-19(7); 2(38)-Interest;
2(31)-Fees for technical services; 2(56)-Royalty;
Section: 19(1)-19(5); 19(8)-19(13);
19(21), 19(21A), 19(21B*), 19(24) [*read with Section 82BB (5)]; 19(26)-19(29)
& 19 (31);
Schedule: 6th Schedule Part-A Para 11A & 22A
Rule - 19(7)
Scope of ‘Income from Other Sources’ (Section 33):

The following income of an assessee shall be classified and computed under the head "Income from other sources",
namely: -
(a) dividend and interest;
(b) royalties and fees for technical services;
(c) income from letting of machinery, plants or furniture belonging to the assessee, and also of buildings
belonging to him if the letting of buildings is inseparable from the letting of the machinery, plant or
furniture;
(d) any income to which section 19 (1), (2), (3), (4), (5), (8), (9), (10), (11), (12), (13), (21), (21A), (21B),
(24), (26), (27), (28), (29) or (31) applies;
(e) any other income of any kind or from any source which is not classifiable under any of the other heads
specified in section 20.
As per Section 34
Allowable deductions/Admissible Expenses

head
01 Interest expense Sec. 34(1) The amount of interest paid in respect of money borrowed for
the purpose of acquisition of shares of a company (against this
interest expense, the assessee wants to get dividend income from those
shares)
02 Any revenue expenditure Sec. 34(2) Any revenue expenditure, but not personal expenditure of the
assessee, incurred solely for the purpose of making or earning
the relevant income.
03 Obsolescence allowance Sec. 34(3) Where the income is derived from letting on hire of machinery,
Repair & maintenance plant or furniture belonging to the assessee and also of building
Insurance premium belonging to him if the letting of the building is inseparable from
the letting of such machinery, plant or furniture, the same
allowances as are admissible under section 29(1) (vi), (vii) and
(xi) to an assessee in respect of income under the head "Income
from business or profession" subject to the same conditions and
limitations as if the income from such letting on hire were
income from business or profession:
Provided that the provisions of section 19(16) shall also be
applicable for the determination of any profits where the sale proceeds
of such machinery, plant, furniture or building exceeds the written
down value thereof.

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Income from Other Sources
Non-allowable deductions/Inadmissible Expenses

# No allowance shall be made on account Reference Reasons to be inadmissible / Limit for Admissible Expenses
of
01 Interest payable outside Bangladesh on Sec. 34(4) a Any interest chargeable under the Ordinance which is payable
which tax has not been deducted outside Bangladesh on which tax has not been paid and from
which tax has not been deducted at source under section 56
02 “Salaries” if tax is not deducted Sec. 34(4) b Any payment which is chargeable under the head "Salaries" if
tax has not been paid thereon or deducted there from under
section 50
Deduction of tax from dividends:

Particulars TDS Ref
Rate
Dividend income from public and private company’s ordinary / preference shares is subject to the following
deductions in different categories
Resident and non-resident Bangladeshi (Both RB & NRB):
01 If shareholder is a company 20% Sec. 56(a)
02 If shareholder is a person other than a company; If TIN 10% Sec. 56(b)
If shareholder is a person other than a company; If no TIN 15%

Non-resident foreigner (NRF):
03 20% Sec. 56(1) Serial 13
If shareholder is a company
04 If shareholder is a person other than a company 30%
If dividend is received from a listed company, then up to Tk. 25,000 will be exempted from tax 6th Sch. Part-A, Para-11A
Dividend from Mutual Fund/Unit Fund:

01 Dividend income from mutual fund/unit fund is also subject to deductions in the same manner as above but
exemption limit for ‘Dividend income from mutual fund/unit fund’ is Tk. 25,0000 [Ref:6th Sch. Part-A, Para-22A]
Deduction of tax from other interests (which are not included in the head of “Income from Interest on
Securities”):
National Saving Instruments (Sanchaypatra), Development Bonds and (Post Office) Saving Bank A/c are
administered by Directorate of National Savings (DNS) under Internal Resources Division (IRD), Ministry of
Finance, Bangladesh. Such Saving Products, Development Bonds and Saving Bank A/c are as follows:
Particulars TDS Rate Ref
No. of
Products
Sanchaypatra (Maintained by Bank, Bureau & Post Office)
01 1. 5 Years Sanchaypatra 5% 52D
02 2. 3 Monthly Sanchaypatra 5% 52D
03 3. Pensioner Sanchaypatra 5% 52D (If Cumulative investment doesn’t
exceed five lakh taka, NO TDS) / 82C
04 4. Paribar Sanchaypatra 5% 52D
Development Bond(Maintained by Bank):
05 1. Wage Earners Development Bond 5% 52D (If Cumulative investment doesn’t
exceed five lakh taka, NO TDS) / 82C
06 2. Bangladesh Prize Bond (Maintained also by Bureau & Post Office) 20% 55 / 82C
07 3. US Dollar Premium Bond Tax Free (I didn’t still find the reference)
08 4. US Dollar Investment Bond Tax Free (I didn’t still find the reference)
Saving Bank (Maintained by Post Office):

1. Post Office Saving Bank:
09 I. Post Office Savings Bank A/c - Ordinary A/c 10% 53I
10 II. Post Office Savings Bank A/c - Fixed Deposit 10% 53I
11 2. Postal Life Insurance Tax Free (I didn’t still find the reference)
[See Annexure I to have a clear idea about the effective Saving Instruments prevailing in BD] Ref: Directorate of National Savings (DNS)

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Tax Free Securities (Bond) (Para 24A of 6th Sch.)

Particulars TDS Tax exemption
 Wage Earners Development Bond
 US Dollar Premium Bond
No TDS Tax free
 US Dollar Investment Bond
 Euro Premium Bond
As per 2nd proviso 6th Sch. Para
 Euro Investment Bond of Section 52D 24A, Part A
 Pound Sterling Investment Bond
 Pound Sterling Premium Bond
Other Interest income generated from….:

Sources of Interest Income TDS Rate Ref
01 Interest income (or Profit from any bank run on Islamic 10% if TIN, 53F
principles) on Savings Deposits / FDR from any scheduled but in case Provided that no tax shall be deducted on
of no TIN the interest or share of profit arising out of
bank, co-operative bank, or bank run on Islamic principles, any deposit pension scheme (DPS)
or NBFI or any leasing company, or housing finance 15%
sponsored by the Govt. or by a Scheduled
company Bank with prior approval of the Govt.
(53F2)
02 Interest on Non-Resident Foreign Currency Deposit A/c Tax Free SRO No. 415-Law/82 dt. 13 Dec 1982
03 Interest on DPS / Contributory Savings scheme run by a Tax Free SRO No. 89-Law/IT/2003 dt. 02 April
scheduled bank and approved by the government 2003
04 Interest on Bangladesh Industrial 10% Development Bond 10% SRO No. 154-Law/99 dt 10 June 1999
& 82C (with reference to Section 53F):
Interest upto Tk. 25,000 exempted.
If the interest amount exceeds Tk.
25,000, 10% TDS is allowed on the
whole interest amount and to be
considered as the final payment of tax
as per Section 82C
TDS rate for other incomes under the head ‘Income from Other Sources’
Sources of Income TDS Rate Ref
01 Royalty [See Section 12(4)(2), 18(6) & 36)] 10% 52A(2) & 82C
02 Fees for professional or technical services 10% 52A(2) & 82C
03 Income from lottery etc. 20% 19(13), 55 & 82C
Income under Section 19:

# Ref Short description of the Section-19
01 Sec. 19(1) Unexplained credits:
Example-
02 Sec. 19(2) Unexplained investments:
Example-
03 Sec. 19(3) Unexplained expenditure:
Example-
04 Sec. 19(4) Unrecorded investments:
Example-
05 Sec. 19(5) Unrecorded money, jewellary etc:
Example-
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06 Sec. 19(8) Purchase of assets at a lower price than the fair value:
Example-
07 Sec. 19(9) Salami or premium for granting leases:
Example-
08 Sec. Goodwill money or compensation:
19(10)
Example-
09 Sec. Benefit or advantage on account of cancellation of indebtedness:
19(11)
Example-
10 Sec. Managing agency commission:
19(12)
Example-
11 Sec. Winning from lotteries, crossword prizes etc:
19(13)
Example-
12 Sec. Unpaid loan:
19(21)
Example-
13 Sec. Loan or gift received under some circumstances:
19(21A)
Example-
14 Sec. Transfer of initial share capital:
19(21B)
Example-
15 Sec. Received cash against issuing share capital by an unlisted company other than crossed cheque or
19(24)
bank transfer:
Example-
16 Sec. Loan taken by a company other than by a crossed cheque or by bank transfer:
19(26)
Example-
17 Sec. Purchase or hire of car at a price exceeding 10% of paid up capital:
19(27)
Example-
18 Sec. Loan or gift taken by an assessee other than by a crossed cheque or by bank transfer:
19(28)
Example-
19 Sec. Liability in respect of purchase of material for construction of building or house property not
19(29)
being
paid within two years from the end of the income year:
Example-
20 Sec. Difference between original return and revised return:
19(31)
Example-
Note: Examples will be added in the next Edition

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9. Exclusions from Total Income: (Sixth Schedule-Part A)
[Non-assessable/Tax Exempted Income]
Following are the tax-exempted income as per Part-A of the Sixth Schedule under Section 44(1):
# Ref Short Description Particulars
01 Para- Income from property held (1) Any income derived from house property held under trust or other legal
1(1)
under Trust obligation wholly for religious or charitable purposes, and in the case of house
property so held in part only for such purposes, the income applied, or finally set
apart for application, thereto.
Explanation- The provisions of this paragraph shall not apply in the
(See the Sub-Para 2 & 3 to be
case of a non-government organization registered with NGO Affairs Bureau
more clear about this)
02 Para-1A Any service charge derived Any service charge derived from operation of micro credit by a nongovernment
from Micro Credit organization registered with NGO Affairs Bureau
operation of NGOs Explanation- For the purpose of this paragraph, "service charge" means any
financial charge or interest or share of profit, called by whatever name, paid or payable by
the loan recipient for the amount borrowed under micro credit programme from the non-
government organization
Clarification- That means any other income other than ‘service charge’ is subject to tax.
03 Para-2 Contributions received by Any voluntary contributions received by a religious or charitable institution and
the Religious or Charitable applicable solely to religious or charitable purposes
Institutions Provided that nothing contained in paragraph 1 or 2 shall operate to exempt from
the provisions of the Ordinance that part of the total income of a private religious trust
which does not ensure for the benefit of the public.
04 Para-3 Income of Local Govt. The income of a Local Government [i.e. Union/Upazilla/Zilla Parishad, City
Corporation etc.]
05 Para-4 Income of Provident Fund (1) Any income accruing to, or derived by, a Provident Fund to which the
and Workers Participation Provident Fund Act, 1925 (XIX of 1925), applies. [PF for only govt.
Fund employees]
(2) Any income accruing to, or derived by, Workers Participation Fund
established under the Bangladesh Labour Act, 2006 (XLII of 2006), subject to
any such conditions and limits as may be prescribed.
06 Para-5 Special Allowances Any special allowance, benefits or perquisite specifically granted to meet
expenses wholly and necessarily incurred in the performance of the duties of an
office or employment of profit [i.e.- Any special allowances received by any employees]
07 Para-6 Income received by the Any income received by the trustees on behalf of a recognized Provident Fund,
Trustees on behalf of an Approved Superannuation Fund or Pension Fund and an Approved Gratuity
specified funds Fund.
08 Para-7 Income of employees of Any income received by the following persons:
Foreign Missions (a) any ambassador, high commissioner, envoy, minister, charge d'affairs,
commissioner, counsellor, consul de carriere, secretary, adviser or attache of an
embassy, high commission, legation or commission of a foreign State, as
remuneration from such State for service in such capacity
(b) a trade commissioner or other official representative in Bangladesh of a foreign
State as his official salary, if the official salary of the corresponding officials, if
any, of the Government, resident for similar purposes in the country concerned,
enjoy a similar exemption in that country;
(c) a member of the staff of any of the officials referred to in clauses (a) and (b),
provided that he is not engaged in any business or profession or employment in
BD
09 Para-8 Pension Any pension due to, or received by, an assesse
10 Para-11a Dividend Income from dividend received from a company listed in any stock exchange in
Bangladesh up to Tk. 20,000
11 Para-14 Income of newly Income from newly constructed residential house subject to stipulated conditions
constructed house and limits as prescribed in this paragraph [See this Para at ITO to know the details]
12 Para-18 Any share (part) of Capital Any income received by an assessee in respect of any share of income out of the
Gains of a partner of a firm capital gains on which tax has been paid by the firm of which the assessee is a
partner

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6th Schedule Part A
13 Para-19 Income of a member of a Any sum received by an assessee as a member of a Hindu Undivided Family
HUF where such sum has been paid out of the income of the family [Bcoz a HUF is
separately assessed]
14 Para-20 Gratuity Any income up to Tk. 25,000,000 received as an assessee gratuity [at retirement]
15 Para-21 Any payment received from: Any payment from:
-Provident Fund
(a) a provident fund to which the provident Funds Act, 1925 (XIX of 1925), applies;
-Recognized Provident Fund or
-Approved Superannuation Fund
(b) a recognized provident fund, subject to any such conditions and limits as may be
-Workers Participation Fund prescribed; or
(c) an approved superannuation fund, subject to any such conditions and limits as
may be prescribed; or
(at the time of retirement)
(d) a workers participation fund established under evsjv‡`k kÖg AvBb, 2006 (2006 m‡bi 42
bs AvBb) to any person not exceeding Tk. 50,000, notwithstanding anything
contained in any other law for the time being in force regarding tax exemption of
such payment
16 Para-22a Dividend from Mutual Income from dividend of a mutual fund or a unit fund up to Tk. 25,000
Fund or Unit Fund
17 Para-24 Interest on tax free Any interest classifiable under the head "Interest on securities" receivable by an
government securities assessee on any security of the Government, which is issued with the condition
that interest thereon shall not be liable to tax.
18 Para- Interest received from Any income received by an assessee from Wage earners development bond, US
24A
specified bonds dollar premium bond, US dollar investment bond, Euro premium bond, Euro
investment bond, Pound sterling investment bond or Pound sterling premium
bond.
19 Para-25 Interest on the balance in a Any sum representing interest credited on the accumulated balance of an
RPF employee in a recognized provident fund (RPF), as it does not exceed one-third of
[*SRO No. 384-Law/1982] the salary of the employee for the year concerned or, an interest at a 14.50%*t
(whichever is less).
20 Para-26 Any amount received on Any amount received by an employee of a Govt. organization, a local authority,
voluntary retirement or an autonomous or semi-autonomous body including the units or enterprises
controlled by it, at the time of his voluntary retirement in accordance with any scheme
approved by the Gov’t.
21 Para-27 Income of indigenous Notwithstanding anything contained in any order or regulation for the time being
Hillman in force, any income of an individual, being an indigenous Hillman of any of
the hill districts of Rangamati, Bandarban and Khagrachari, which has been
derived solely from economic activities undertaken within the said hill districts.
22 Para-28 Income from export An amount equal to 50% of the income of an assessee, other than a company not
business registered in Bangladesh, derived from the business of export but it shall not apply in
(See the Para’s Explanation) case of an assessee, who is enjoying exemption of tax or reduction in rate of tax by
any notification.
23 Para-29 Agricultural income Any income not exceeding Tk. 200,000 chargeable under the head ‘Agricultural
Income’ of an assessee, being an individual, whose only source of income is
agriculture.
24 Para-32a Interest from Pensioners’ Any sum or aggregate of sums received as interest from pensioners' savings
Savings Certificate and certificate where the total accumulated investment at the end of the relevant
Wage Earners Bond income year in such certificate does not exceed taka five lakh.
25 Para-33 Income from IT business Any income derived from the business of software development or Nationwide
Telecommunication Transmission Network (NTTN) or Information Technology
Enabled Services (ITES) for the period from 01 July 2008 to 30 June 2024:
Provided that the person shall file income tax return in accordance with
the provisions of section 75 of the Ordinance.
Explanation: Information Technology Enabled Services (ITES) means- Digital Content
Development and Management, Animation (both 2D and 3D), Geographic Information
Services (GIS), IT Support and Software Maintenance Services, Web Site Services,
Business Process Outsourcing, Data entry, Data Processing, Call Centre, Graphics Design
(digital service), Search Engine Optimization, Web Listing, document conversion, imaging
and archiving including digital archiving of physical records.
26 Para-34 Income from fisheries, (This para is dead!!! Please see Annexure-V. The provision of this Para has been
poultry etc. transferred to SROs.)

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6th Schedule Part A
27 Para-35 Income from export of Any income derived from the export of handicrafts for the period from 01July
handicrafts 2008 to 30 June 2019
28 Para-36 Tax paid by the Govt. on Any amount paid by the Government as tax on behalf of a petroleum exploration
behalf of the petroleum company engaged in exploration of petroleum products in Bangladesh under
company Production Sharing Contract (PSC) with the Government of Bangladesh
29 Para-37 Income of any private Income of any private Agricultural College or private Agricultural University
agricultural College/University derived from agricultural educational activities
30 Para-38 Income of new building Any income derived from any building situated in any area of Bangladesh, not
with specific characteristics less than five storied having at least ten flats, constructed at any time between 01
July 2009 and 30 June 2014 (both days inclusive), for 10 years from the date of
completion of construction of the building, except the building situated in any
areas of City Corporation Cantonment Board, Tongi Upazila, Narayanganj
Paurashava, Gazipur Paurashava and any Paurashava under Dhaka district
31 Para-39 Income of SMEs Income derived from any Small and Medium Enterprise (SME) engaged in
production of any goods and having an annual turnover of not more than Tk.
36,00,000
Provided that person shall file income tax return in accordance with the
provisions of section 75(2)(c) of the Ordinance
32 Para-40 Income from Zero Coupon Any income derived from Zero Coupon Bond received by a person other than
Bond (ZCB) Bank, Insurance or any Financial Institution, subject to the following conditions:
(a) that the Zero Coupon Bond is issued by Bank, Insurance or any Financial
Institution with prior approval of Bangladesh Bank and Securities Exchange
Commission.
(b) that the Zero Coupon Bond is issued by institution other than Bank, Insurance
or any Financial Institution with prior approval of Securities Exchange
Commission.
33 Para-42 Income from poultry (This para is dead!!! Please see Annexure-V. The provision has been transferred
farming to SROs.)
34 Para-43 Income from Capital gains Any profits and gains under the head "Capital Gains" arising from the transfer of
of a Non-resident assessee stocks or Shares of a public company as defined in (‡Kv¤úvbx AvBb, 1994 (1994 m‡bi
18 bs AvBb) listed in any stock exchange in Bangladesh of an assessee being a non-
resident subject to the condition that such assessee is entitled to similar exemption in
the country in which he is a resident (This provision is basically for Non-resident
assessee)
35 Para-44 Income from Cinema Hall An amount of income derived from cinema hall or Cineplex which starts
or Cineplex commercial exhibition between 01 July 2012 and 30 June 2019 for the period and
at the rate specified below: if it is set-up in-
(i) Dhaka or Chittagong divisions (excluding Rangamati, Bandarban and
Khagrachari districts) for a period of five years beginning with the month
of commencement of commercial exhibition: -
(ii) Rajshahi, Khulna, Sylhet Rangpur and Barisal divisions and Rangamati,
(See this Para for the Rate of Bandarban and Khagrachari districts for a period of ten years beginning
Exemption in different years) with the month of commencement of commercial exhibition:--
36 Para-45 Income of industrial An amount of income derived by an industrial undertaking engaged in the
undertaking engaged in the production of rice bran oil and commencing commercial production by 30 June
production of rice brain oil 2019 and at the rate specified below if the said undertaking is set-up in-
(i) Dhaka or Chittagong divisions (excluding city corporation area and
Rangamati, Bandarban and Khagrachari districts) for a period of five years
beginning with the month of commencement of commercial production: -
(ii) Rajshahi, Khulna, Sylhet Rangpur and Barisal divisions (excluding city
corporation area) and Rangamati, Bandarban and Khagrachari districts for a
(See this Para for the Rate of period of ten years beginning with the month of commencement of
Exemption in different years) commercial exhibition:--
37 Para-46 Income from production of An amount equal to fifty percent of the income of an assessee derived from the
corn/maize or sugar cane production of corn/maize or sugar beet.

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6th Schedule Part A
38 Para-47 Income of an assessee Income of an assessee donated in an income year to any fund established by or
donated to any fund under the provisions of the ‘Trust of Prime Minister's Education Assistance Act,
established by or under 2012 (Act No. 15 of 2012) subject to a maximum of-
Prime Minister’s Education (a) twenty percent (20%) of income of a company or taka eight crore, whichever
Assistance Fund is less;
(b) twenty percent (20%) of income of an assessee other than a company or one
crore taka, whichever is less.
39 Para-48 Income earned abroad is Any income earned in abroad by an individual assessee being a Bangladeshi
brought to BD through citizen and brought any such income into Bangladesh as per existing laws
proper channel applicable in respect of foreign remittance.
40 Para-49 Income donated to any Income of an assessee donated in an income year by a crossed cheque or bank
Girls’ school or college transfer to any girls' school or girls' college approved by the Ministry of Education
of the government.
Technical and Vocational transfer to any Technical and Vocational Training Institute approved by the
Training Institute Ministry of Education of the government.
National Level research transfer to any national level institution engaged in the Research & Development
Institute (R&D) of agriculture, science, technology and industrial development.
43 Para-52 Income of educational Any income, not being interest or dividend classifiable under the head “Income
institution from other sources”, received by any educational institution, if it –
(i) is enlisted for Monthly Pay Order (MPO) of the Government;
(ii) follows the curriculum approved by the Government;
(iii) is governed by a body formed as per Government rules or regulations.
44 Para-53 Income of professional Any income, not being interest or dividend classifiable under the head “Income
institute. from other sources”, received by any public university or any professional institute
established under any law and run by professional body of Chartered Accountants
or Cost and Management Accountants or Chartered Secretaries
Exempted Income by SRO:

# Particulars SRO Date
01 Contribution to President’s Fund SRO No. 254-Law/1985 June 10, 1985
02 Contribution to Prime Minister’s Fund SRO No. 125-Law/1991 May 05, 1991

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10. Exemptions and Allowances for Assessees Being Resident and
Non-resident Bangladeshi: (Sixth Schedule-Part B)
[Allowance/Rebate for Investment Credit]
Following are the items to be considered for Investment Credit purpose @ 15%/12%/10% under Section 44(2)(b)
# Ref Short Description Particulars
01 Para-1 Life Insurance Premium paid Any sum paid by an assessee, being an individual, to effect an insurance, or a
contract for deferred annuity, on the life of the assessee or on the life of a wife
or husband or a minor child of the assessee, subject to the limit of such
payment, in the case of insurance, to 10% of the actual sum assured (excluding
bonus or other benefits.)
02 Para-2 Life Insurance Premium paid a Any sum paid by an assessee, being a Hindu Undivided Family (HUF), to
HUF effect an insurance on the life of any male member of the family or the wife of
any such member:
Provided that no exemption under this paragraph or paragraph (1)
shall be allowed unless the premium and the proceeds of the life insurance
policy or the contract for deferred annuity, as the case may be, are both
payable in Bangladesh.
03 Para-3 Deduction from salary of Govt. Any sum deducted from salary payable by or on behalf of the Govt. to any
employee for deferred annuity individual, being a sum deducted in accordance with the conditions of his
service for the purpose of securing to him a deferred annuity or of making
provisions for his wife or children, provided that the sum so deducted shall not
exceed one-fifth of the salary.
04 Para-4 Contribution to Provident Fund Any sum paid by the assessee as a contribution to any provident fund to which
Provident Fund Act, 1925 (XIX of 1925), applies.
Clarification- This Para is for the Govt. employees and contributions
of both employee’s & employer’s will be considered for investment credit
purpose.
05 Para-5 Employer’s and Employee’s Any sum representing the assessee's and the employer's contribution to a
contributions to a RPF Recognised Provident Fund (RPF) in which the assessee is a participant subject
to the limits laid down in Part B of the First Schedule.
Clarification- This Para is for the Non-Govt. employees i.e.
Company, NGO, Association etc.
06 Para-6 Contribution to Approved Any sum paid by the assessee as ordinary annual contribution to Approved
Superannuation Fund Superannuation Fund (ASF) in which the assessee is a participant
Clarification- Only the employee’s contribution
07 Para-10 Investment in Savings (1) Subject to the maximum laid down in sub-paragraph (2), any sum invested
Certificates, Unit Fund/Mutual by an assessee, not being a company (only individual assessees will get this
Fund, any Govt. Securities benefit), in the purchase of the following, namely:
and/or Shares of Investment (a) such savings certificates or instruments as the Board may specify in this
Companies Behalf [See the SRO No. 170-Law/IT/2006; & also see the
Annexure I to check what types of Sanchaypatra are considered for
investment credit purpose]
(b) unit certificates and mutual fund certificates issued by any financial
institution or the Investment Corporation of Bangladesh and its
subsidiaries
(c) such Government securities (including Development loans or Bonds) as
the Board may specify in this behalf; and
(d) shares of such investment companies as the Board may specify in this
behalf.
Explanation-For the purpose of clause (d) "investment companies"
means companies engaged principally or wholly in buying and selling
securities of other companies and includes a company eighty per cent of whose
paid up capital is employed at any one time as investment in other companies,
but does not include a bank or an insurance company or a corporation which is
a member of stock exchange.

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6th Schedule Part B
(3) Where any certificate, security or share in respect of which any credit in
tax has been allowed to the assessee earlier, is disposed of by sale, transfer
or in any other manner within five years from the date of its purchase or
before the maturity, then the amount of tax payable by the assessee under
the other provisions of the Ordinance in respect of the income year in
which such certificate was so disposed of, shall be increased by an amount
equal to the credit in tax allowed to the assessee in respect of such
certificate (hereinafter referred to as the "said amount") and the sum so
arrived at or where no tax is payable by the assessee under the other
provisions of the Ordinance in respect of that income year, the said amount
shall be deemed to be the tax payable in respect of that income year and
other provisions of the Ordinance shall, so far as may be, apply
accordingly. (See the Sub-para (2) of Para 10)
08 Para-11 Contribution to Deposit Pension An amount not exceeding Tk. 60,000 by an individual in any deposit pension
Scheme (DPS) scheme sponsored by a scheduled bank or a financial institution
09 Para-11a Donation to a Charitable Any sum paid as donation by an assessee to a charitable hospital which is
Hospital established outside the city corporation area and one year before such payment
and is approved by the Board for this purpose
10 Para-11b Donation to an Organization set Any sum paid as donation by an assessee to an organization set up for the
up for the welfare of retarded welfare of retarded people, established at least one year before such payment
people and is approved by the Social Welfare Department and by the Board for this
purpose
11 Para-13 Donation to Zakat Fund Any sum paid by an assessee as Zakat to the Zakat Fund or as donation or
contribution to a charitable fund established by or under the Zakat Fund
Ordinance, 1982 (Act No. XI of 1982)
12 Para-17 Contribution to a Benevolent Any sum paid by an assessee, in order to make provision for his wife, children
Fund and a Group Insurance or other persons dependent on him, to a benevolent fund or any premium paid
Fund under a group insurance scheme if such fund or the scheme is approved by the
Board for this purpose.
13 Para-21 Contribution to Aga Khan Any sum paid by an assessee as donation to any socio-economic or cultural
Development Fund development institution established in Bangladesh by the Aga Khan
Development Network
14 Para-22 Contribution to Philanthropic Any sum paid by an assessee as donation to a philanthropic or educational
or Educational Institution institution which is approved by the Government for this purpose
[See the Annexure II to check what types of donations (donations in
different areas) are allowable for investment credit purpose]
N.B. Donations to any Mosque, Madrasa or any School, College or

University will not randomly be allowable if donations to specific areas are
not approved by the Govt./NBR.
15 Para-23 Investment in Computer / Any sum invested in the purchase of one computer or one laptop by an
Laptop individual assessee (For Desktop Tk. 50,000 & for Laptop Tk. 100,000).
16 Para-24 Donation to a National Level Any sum paid by an assessee as donation to a national level institution set up
Institution set up in the memory in memory of the liberation war.
of Liberation War
17 Para-25 Donation to a National Level Any sum paid by an assessee as donation to a national level institution set up
Institution set up in the memory in memory of Father of the Nation.
of Father of the Nation
18 Para-27 Invested in secondary shares of Any sum invested by an assessee, being an individual, in the acquisition, of
listed companies any stocks or shares of a company, mutual fund or debenture listed with any
stock exchange.
19 Para-28 Investment in Govt. Treasury Any sum invested by an assessee, being an individual, in the purchase of
Bond Bangladesh Government Treasury Bond.
Income from Association of Persons (AOP) as per Para-15, Part B of Sixth Schedule & Income from a Firm as per
Para-16, Part B of Sixth Schedule are tax-exempted income but included in Total Income for rate purpose. The
assessee will get a rebate of on tax at the average rate for such income.
For More Tax exempted incomes see Annexure-III

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11. Set Off and Carry Forward of Loss
Set off Carry forward & set off
Sl. Name of head (loss)
(in the current assessment year) (in the next 5 assessment years)
1. Salaries (Is any loss derived in this head?)
2. Interest on securities against any other head
3. Income from house property against any other head
against any other head except against only agricultural

4. Agricultural income
‘Capital gains’ income
5. against any other head except
Income from Business or against only income from
‘Capital gains’ and ‘Income from
Profession business or profession
house property’
can’t be set off against any other against only other speculation
Speculation business
head business income
against only capital gains
can’t be set off against any other
6. Capital gains (only loss exceeding Tk. 5,000 can
head
be carried forward and set off)
against any other head
7. Income from other sources
(generally loss is not derived)
Loss from any other source, income of

can’t be set off ever can’t be carried forward & set off
which is exempted from tax
Provided that any loss in respect of any income from any head shall not so be set off against any income from
manufacturing of cigarette, bidi, zarda, chewing tobacco, gul or any other smokeless tobacco or tobacco products.

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12. Double Taxation Avoidance Agreement (DTAA)
SECTION OVERVIEW
 Definition  DTAA
 Scope  Illustrative example
Related References:
Sections – 144 & 145
Para 48 of 6th Schedule Part A
What is double taxation?

Double taxation means paying taxes on the same income twice, once in the home country and once again in the
host country. For example, a Bangladeshi citizen may have income arisen in Singapore which is once taxed in
Singapore and again in Bangladesh
How does double taxation arise?

Double taxation may arise in the following two ways:
(i) The jurisdictional connections used by different countries may overlap with each other. For example, Mr.
Donald, a resident under the Income Tax Ordinance of Bangladesh, has to pay tax to the Bangladesh
Government on his total income that also arises in USA. Mr. Donald also has to pay tax on his USA income
in USA under USA tax law. (Residential jurisdiction)
(ii) The taxpayer or his income may have connections with more than one country. For example, Mr. Rahman a
Bangladeshi citizen, has income from France on investments and dividend income from England in addition
to income from Bangladesh. He has to pay taxes on his total income arising in France, England & Bangladesh
to the Bangladesh Government. (Source jurisdiction)
For avoidance double taxation, Bangladesh Government may enter into agreement with other countries which is
called Double Tax Avoidance Agreement (DTAA). Double taxation agreement prevents the fiscal evasion with
respect to income taxes. Under double taxation relief system, the amount of tax payable will be the sum equal to the
tax calculated on such doubly taxed income at the average rate of tax to be paid in Bangladesh or the average rate
of tax of the foreign income, whichever is lower.
Agreement to Avoid Double Taxation: Section 144

This section confers the right to GOB to enter into an agreement with the government of any other country for the
avoidance of double taxation and the prevention of fiscal evasion with respect to income tax and may, by Gazette
Notification, make such provisions as may be necessary to implement the agreement.
The objectives of a Bangladesh DTAA are as follows:

 to obtain a more effective relief from double taxation compared to relief gained under unilateral measures;
 to create a favorable climate for the inflow of foreign investment into the country;
 to make special tax incentives provided by Bangladesh fully effective for taxpayers of capital
exporting countries;
 to prevent evasion and avoidance of tax; and
 to foster long term, mutually beneficial economic relationship with others specially the developed countries.

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Double Taxation Avoidance Agreement (DTAA)

Income Tax policy section of National Board of Revenue is entrusted to negotiating the Double Taxation Agreements
with foreign countries to promote foreign direct investment in Bangladesh. DTA is an agreement between two
countries seeking to avoid double taxation by defining the taxing rights of each country with regard to cross-border
flows of income and providing for tax credits or exemptions to eliminate double taxation. It also provides exchange
of information between treaty partners regarding evasion of tax.
The Bangladesh model of Avoidance of Double Taxation Agreement consists of 29 Articles that are as follows:
Article Heading Main contents

Article 1 Persons Covered To whom applicable
Article 2 Taxes Covered Specific taxes covered
Article 3 General Definitions Person, company, enterprise, international traffic, competent
authority
Article 4 Resident Resident of a contracting state who can access the treaty
Article 5 Permanent Establishment What constitutes /does not constitute PE
Article 6 Income from Immovable Immovable property and income therefrom
Property
Article 7 Business Profits Determination and taxation of profits arising from business
carried on through PE
Article 8 Shipping and Air Transport Place of deemed accrual of profits and mode of
taxation thereon
Article 9 Associated Enterprises Enterprises under common management and taxation of profits
arising therefrom
Article 10 Dividends Definition and taxation of dividends
Article 11 Interest Definition and taxation of interest
Article 12 Royalties Definition and taxation of royalties, Country where taxable
Article 13 Capital gains Definition and taxation of capital gains, Country where taxable
Article 14 Independent Personal Services Types of services covered, Country where taxable
Article 15 Dependent Personal Services Definition, Country where taxable
Article 16 Director's Fees Definition, Country where taxable
Article 17 Artists and Sportsmen Types of activities covered, Mode and country where taxable
Article 18 Pensions Country where taxable
Article 19 Government Service Type of remuneration, Country where taxable
Article 20 Students and Trainees Taxation and related exemptions
Article 21 Lecturers and Researchers Taxation and related exemptions
Article 22 Other Income Residual Article to cover incomes not covered under Articles,
Mode of taxation and country where taxable
Article 23 Elimination of Double Taxation Definition and mode of taxation, Country where taxable
Article 24 Non – Discrimination Equitable basis of taxing Nationals and Citizens of foreign state
Article 25 Mutual Agreement Procedure Where taxation is not as per provisions of the convention, a
person may present his case to competent authority of
respective states
Article 26 Exchange of Information Competent authorities to exchange information for carrying out
the provisions of the convention Methodology for the same
Article 27 Diplomatic Agents and
Privileges of this category to remain unaffected
Consular Officers
Article 28 Entry into Force Effective date from which the convention comes
into force,
Assessment year from which it comes into force
Article 29 Termination Time and Notice period Mode

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Like many other countries in the developed as well as the developing world, Bangladesh too cannot absolve herself
from the need to facilitate her trade and investments with the outside world through international tax treaty network
with other countries. The increased pace of industrialization coupled with increased foreign direct investment in the
country necessitated tax treaty arrangements with other countries to provide investors with certainty and guarantees
in the area of taxation. As at 6th August, 2000, the status of Bangladesh DTA's are as follows:
Name of the countries with which Agreement on Avoidance of

Double Taxation is in force.
Sl. Name of the SRO Date of effect
No. in Bangladesh
Country No. Date
[assessment year
commencing on or after]
1. United Kingdom of Great Britain and 227-L/80 08/07/1980 01/07/1978
Northern Ireland
2. Singapore 124-L/82 21/04/1982 01/01/1980
3. Sweden 382-L/83 19/10/1983 01/07/1984
4. Republic of Korea 433-L/84 02/10/1984 01/07/1984
5. Canada 247-L/85 06/06/1985 01/07/1982
6. Pakistan 221-L/88 11/07/1988 01/01/1980
7. Romania 348-L/88 23/11/1988 01/07/1989
8. Sri Lanka 365-L/88 10/12/1988 01/07/1989
9. France 2-L/89 04/01/1989 01/07/1989
10. Malaysia 67-L/90 15/02/1990 01/01/1982
11. Japan 235-L/91 06/08/1991 01/07/1992
12. India 45-L/93 27/02/1993 01/07/1993
13. Germany 1-L/94 01/01/1994 01/01/1990
14. The Netherlands 267-L/94 14/09/1994 01/07/1995
15. Italy 63-L/97 12/03/1997 01/07/1980
16. Denmark 72-L/97 17/03/1997 01/07/1997
17. China 114-L/97 13/05/1997 01/07/1998
18. Belgium 11-L/98 14/01/1998 01/07/1998
19. Thailand 222-L/98 07/09/1998 01/07/1999
20. Poland 39/L/99 03/03/1999 01/07/2000
21. Philippines 56/L/2004 04/03/2004 01/07/2004
22. Vietnam 301-L/2004 18/10/2004 01/07/2005
23. Turkey 308/L/2004 31/10/2005 01/07/2004
24. Norway 20-L/2006 12/2/2006 01/07/2006
25. Indonesia 60-L/2007 20/04/2007 01/07/2007
26. USA 71-L/2007 10/5/2007 01/07/2007
27. Switzerland 52-L/2010 23/02/2010 13/12/2009
28. Oman (only on airlines business) 16-L/2009 02/02/2009 01/07/2009
29. Myanmar 313-L/2012 18/10/2012 01/07/2012
30. Mauritius 122-L/2012 09/05/2012 01/07/2012
31. Saudi Arabia 103-L/2012 15/04/2012 01/10/2011
32. UAE 313-L/2012 05/09/2012 01/07/2012
33. Belarus 189-L/2014 08/07/2014 01/07/2014
34. Kuwait Not yet 19/02/2104 (date Not yet
of signing)

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Relief in respect of income arising outside Bangladesh: Section 145

This section empowers DCT to allow relief to an assessee in respect of any income accrued or arisen in any other
country with which Bangladesh does not have DTA. The assessee must prove that he has suffered tax on that income
by way of deduction or otherwise, then the DCT may deduct from the tax payable by the assessee a sum equal to tax
calculated on such doubly taxed income at the average rate of tax of Bangladesh or the average rate of tax at the said
country, whichever is lower. Average rate of tax means the rate arrived at by dividing the amount of tax calculated
on the total income by such income.
Comparative picture of Double Tax Avoidance and Tax Relief

Double tax avoidance and tax relief as presented in sections 144 and 145 respectively in IT Ordinance 1984 have
conceptual difference which is presented in the table below:
Reference Income Section Tax advantages

Section 144 Arises from those Avoidance Tax calculated as per the rate in the agreement, but it will
and countries with whom of Double not be more than the tax amount calculated on the basis of
Schedule 7 there is DTAA Taxation the average tax rate applicable in Bangladesh (considering
foreign income in total income) on the foreign income.
Section 145 Arises from those Relief Tax calculated on such doubly taxed income at the average
countries with whom rate of tax of Bangladesh or the average rate of tax of the
there is no DTAA said country, whichever is lower.
Section 144 & 7th Schedule (Where DTAA exists)

7th Schedule
Para 2 Credit is to be allowed against Bangladesh tax chargeable in respect of any income, the amount
of the Bangladesh taxes so chargeable shall be reduced by the amount of the credit;
Para 3 Credit shall not be allowed to any persons who are non-residents;
Para 4 The amount of the credit to be allowed for foreign tax against Bangladesh tax in respect of any
income shall not exceed the amount which would be arrived at by applying the average rate of
such tax to the doubly taxed income.
i.e. LOWER OF amount of tax calculated at the average rate including the doubly taxed
income and the amount of tax paid in such country
Example-1:
Mr. M has the following income for the Assessment Year 2016-17
Income from France 1,200,000
Income in Bangladesh 1,000,000
2,200,000
And he has paid tax of Tk. 300,000 in France (1,200,000 x 25% = 300,000)

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Solution:
Calculation of tax payable by Mr. M
On first 250,000 0% -
On next 400,000 10% 40,000
On next 500,000 15% 75,000
On next 600,000 20% 120,000
On next 450,000 25% 112,500
2,200,000 347,500
Tax Credit allowed to the assessee on the doubly taxed income (189,545)
Total tax payable by the assesse 157,955
Workings:
Average rate including doubly taxed income 15.795% =(347,500/2,200,000)*100
Tax Credit allowed to the assessee on the double taxed income:

Tax using the average rate 1,200,000 15.795% 189,545
The amount of tax paid in France 1,200,000 25.00% 300,000
Tax credit allowed to the assessee, whichever is lower 189,545
Exemple-2:
Mr. N has the following income for the Assessment Year 2016-17
Income from USA 500,000
1,500,000
Mr. N paid tax of Tk. 50,000 in USA (500,000 x 10% = 50,000)
Solution:
Calculation of tax payable by Mr. N
On first 250,000 0% -
On next 400,000 10% 40,000
On next 500,000 15% 75,000
On next 350,000 20% 70,000
1,500,000 185,000
Tax Credit allowed to the assessee on the doubly taxed income (50,000)
Workings:

Tax using the average rate 500,000 12.333% 61,667
he amount of tax paid in USA 500,000 10.00% 50,000
Tax credit allowed to the assessee, whichever is lower 50,000

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Section 145 (Where no reciprocal DTAA exists)
* Income accrued/arisen to the assessee outside Bangladesh

* Assessee has paid tax therein
* DCT will deduct from tax payable by the assessee a sum equal to the tax calculated on such doubly tax income at
the average rate of tax of Bangladesh or the average rate of the said country, whichever is lower.
Exemple-3:
Calculation of tax payable by Mr. P
Income from Russia 500,000
1,500,000
Mr. P has paid tax of Tk. 187,500 in Russia (750,000 x 25% = 187,500)
On first 250,000 0% -
On next 400,000 10% 40,000
On next 500,000 15% 75,000
On next 600,000 20% 120,000
1,750,000 235,000
Tax Credit allowed to the assessee on the double taxed income (100,714)
Workings:

Tax using the average rate 750,000 13.43% 100,714
The amount of tax paid in Russia 750,000 25.00% 187,500
Tax credit allowed to the assessee, whichever is lower lower 100,714
You can also see two examples given in Taxation-II manual of ICAB in Chapter 26

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13. Transfer pricing
SECTION OVERVIEW
 Basic concept of transfer pricing (TP)  TP methods as per ITO with example
 TP regulations as per ITO  Illustrative example
Related References:
Section: 107A – 107J
Rule: 70 - 75A
Basic Concept of Transfer Pricing

Transfer pricing = Transfer + Pricing
Transfer = Selling goods, rendering services, granting right to use intangibles (i.e. software, brand) etc.
Pricing = Determination of price (margin, profit); in other words, assigning a value to the transaction (profit splitting,
cost allocation, management expense).
To put simply: transfer pricing = transaction pricing
Not all transactions fall under transfer pricing regulation as per ITO. Only the transactions between related
parties/associated enterprises, either or both of the related parties/associated enterprises must have to be non-resident,
are transfer pricing transactions which is called ‘international transactions’ as per ITO
So, what is transfer pricing?

Transfer pricing is the determination of prices at which goods, services and intangible properties
are transacted between related parties/associated enterprises.
When the pricing of transaction within related parties/associated enterprises is fair and rational (at Arm’s Length),
there is no problem. But transactions which are underpriced/overpriced (i.e. lower or higher than fair market price)
cause a serious concern for tax authorities.
Transfer Pricing Mechanism

Example:
MNC: P&G Global
France Bangladesh
P&G (France) Ltd. + P&G (Bangladesh) Ltd.
(Tax Rate: 15%) (Tax Rate: 35%)
Information about companies, countries and tax rate.

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Transfer Pricing
Illustrative explanation:
In normal business transaction both the group P&G pays taxes of Tk. 85 (Tk. 15 in Sweden and Tk. 70 in Bangladesh)
Sweden Bangladesh
P&G (Sweden) Ltd. Tk. P&G (Bangladesh) Ltd. Tk.
Sales 300 Sales 600
Cost & Expenses 200 Purchase 300
Expenses 100
Profit 100 Profit 00
Tax @ 15% 15 Tax @ 35% 70
But what does the group do using transfer pricing mechanism?
Case-1:
Sweden Bangladesh
Sales 400 Sales 600
Cost & Expenses 200 Purchase 400
Expenses 100
Tax @ 15% 30 Tax @ 35% 35
Using this mechanism, the group P&G pays taxes of Tk. 65 (Tk. 30 in Sweden and Tk. 35 in Bangladesh). As a
result of it, Bangladesh Government loses Tk. 35 (70 – 35) as tax revenue.
Tax effect
Transfer
In respect of Case-1 Regular
pricing
Combined Tax Liability of P&G 85 65
Tax Revenue for Bangladesh 70 35
Tax Revenue for Sweden 10 30
Case-2:
Sweden Bangladesh
Sales 400 Sales 600
Cost & Expenses 200-50 Purchase 400
=150 Expenses 100
Management expenses 50
Tax @ 15% 37.5 Tax @ 35% 17.5
Using this mechanism, the group P&G pays taxes of Tk. 55 (Tk. 37.5 in Sweden and Tk. 17.5 in Bangladesh). As a
result of it, Bangladesh Government loses Tk. 52.5 (70 – 17.5) as tax revenue.
Tax effect
Transfer
In respect of Case-2 Regular
pricing
Combined Tax Liability of P&G 85 55
Tax Revenue for Bangladesh 70 17.5
Tax Revenue for Sweden 10 37.5
Transfer Pricing Business Procedure
Up to submission of Return: Taxpayer’s end

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Transfer Pricing
After the submission of Return: Tax department’s end

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Transfer Pricing
After the submission of Return: Tax department’s end
Popular means of transfer pricing

 Pricing Arrangement
 Management expense (HQ and intra-company)
 Charge for Intellectual Property or Intangibles (royalty, fees, copyright, trademark, patent, brand name,
franchise, software etc.)
 Sharing or allocation of common cost
 Interest expense
Transfer Pricing Methods as per OCED

Transfer pricing methods are applied to determine the arm’s length price of a transaction.
OECD (Organisation for Economic Co-Operation and Development) recommends for five methods:
A. Traditional transaction methods:

1. Comparable Uncontrolled Price method (CUP method)
2. Resale Price method (RPM)
3. Cost Plus method (CPM)
B. Transactional profit methods:
1. Transactional Net Margin method (TNMM)
2. Transactional Profit Split method (PSM).
Bangladesh lax authority (NBR) has adopted the OCED model methods to deal with the transfer pricing transactions.

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Transfer Pricing
Transfer Pricing Regulations as per ITO 1984

Definition of transfer pricing related terms
Section 107A(1) "Arm's length price (ALP)" means a price in a transaction, the conditions (e.g. price, margin or
profit split) which do not differ from the conditions that would have prevailed in a comparable
uncontrolled transaction between independent entities carried out under comparable circumstances;
Section 107A(2)
Definition of associated enterprise (AE)
107A (2) (a) One enterprise > participates > in management / control/ capital of other enterprise (OE);
107A (2) (b) The same person > participates > in management / control/ capital of other enterprise;
107A (2) (c) One enterprise > holds shares (voting power)> 50%+ > of other enterprise:
107A (2) (d) The same person > holds shares (voting power) > 25%+ of other enterprise;
107A (2) (e) One enterprise > borrows (from OE) > 50%+ > of book value of total assets of other enterprise;
107A (2) (f) One enterprise > guarantees (OE) > 10%+ > of book value of total borrowings of other enterprise;
107A (2) (g) One enterprise’s > 50%+ BoD/Members of the governing board > appointed by other enterprise;
107A (2) (h) One enterprise’s > any Executive Director/Executive Member of the governing board appointed by
other enterprise or, in common with the other enterprise;
107A (2) (i) The same person/persons> appoint > 50%+ of the BoD members in both enterprise;
107A (2) (j) The same person/persons> appoint>any Executive Director/Executive Member in both enterprise
107A (2) (k) One enterprise > has practical ability to control of the decision of other enterprise;
107A (2) (l) Both enterprises > are bounded by such relationship of mutual interest as may be prescribed.
Section 107A(3) "Enterprise" means a person or a venture of any nature (including a permanent establishment of
such person or venture);
Section 107A(4) "Independent enterprise" means an enterprise that is not an associated enterprise;
Section 107A(5) "International transaction" means a transaction between associated enterprises, either or both of
whom are non-residents, in the nature of purchase, sale or lease of tangible or intangible property,
or provision of services, or lending or borrowing money, or any other transaction having a bearing
on the profits, income, losses, assets, financial position or economic value of such enterprises, and
includes-
(a) a mutual agreement or arrangement between two or more associated enterprises for the
allocation or apportionment of, or any contribution to, any cost or expense incurred or to
be incurred in connection with a benefit, service or facility provided or to be provided to any
one or more of such enterprises;
(b) a transaction entered into by an enterprise with a person other than an associated enterprise,
if there exists a prior agreement in relation to the relevant transaction between such other
person and the associated enterprise, or the terms of the relevant transaction are determined
in substance between such other person and the associated enterprise;
Section 107A(6) "Permanent establishment" includes a place of management, a branch, an agency, an office, a
warehouse, a factory, a workshop, a mine, an oil or gas well, a quarry or any other place of
extraction of natural resources, a firm or plantation, or any other fixed place through which the
business of the enterprise is wholly or partly carried on
Section 107A(7) "Property" includes goods, articles, things or items, patent, invention, formula, process, design,
pattern, know-how, copyright, trademark, trade name, brand name, literary, musical, or artistic
composition, franchise, license or contract, method, program, software, database, system,
procedure, campaign, survey, study, forecast, estimate, customer list, technical data, any aspects of
advertising and marketing, any item which has substantial value, or any other intangible property;
Section 107A(8) "Record" includes electronically held information, documents and records;

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Transfer Pricing
Section 107A(10) "Transaction" includes an arrangement, understanding or action between two or more parties,
whether or not such arrangement, understanding or action is formal or in writing; or whether or not
it is intended to be enforceable by legal proceeding;
Section 107A(11) "Uncontrolled transaction" means a transaction undertaken between enterprises not being the
associated enterprises.
Determination of income from international transaction having regard

to arm’s length price: Section 107B
The amount of any income, or expenditure, arising from an international transaction shall be determined
having regard to the arm's length price.
Question: What is international transaction?

Answer: International transaction means a transaction between associated enterprises, either or both of
associated enterprises are non-residents.
Question: What, if both of the associated enterprises are residents, are the effects of the transitions even if
the transactions take place between associated enterprises?
Answer: If transactions take place between two resident associated enterprises, the transactions will not fall
into international transaction. To be international transaction, one associated enterprise must have to be
a non-resident.
Question: What is associated enterprise?

Answer: See the Section 107A (2). If one enterprise fulfills any conditions prescribed therein.
Question: What is arm’s length price (ALP)?

Answer: Arm’s length price (ALP) means a price in a transaction, the conditions (e.g. price, margin or profit
split) which do not differ from the conditions that would have prevailed in a comparable uncontrolled transaction
between independent entities carried out under comparable circumstances; [Ref-Section 107A (1)]
Question: What is controlled transaction?

Answer: Controlled transaction means transaction between associated enterprises.
Question: What is uncontrolled transaction?

Answer: Uncontrolled transaction means transaction between independent entities.
Question: How is arm’s length price determined?

Answer: As per the Section 107C, there are six (6) methods being used to determine the arm’s length
price.

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Transfer Pricing Transfer Pricing
Computation of arm’s length price (ALP): Section 107C

1. The arm's length price in relation to an international transaction shall be determined by applying the most
appropriate method or methods selected from the following methods based on the nature of transaction, the
availability of reliable information, functions performed, assets employed, risks assumed or such other
factors as may be prescribed, namely: -
(a) comparable uncontrolled price method (CUP);
(b) resale price method (RPM);
(c) cost plus method (CPM);
(d) profit split method (PSM);
(e) transactional net margin method (TNM);
(f) any other method (other method) where it can be demonstrated that-
(i) none of the methods mentioned in clause (a) to (e) can be reasonably applied to determine
the arm's length price for the international transaction; and
(ii) such other method yields a result consistent with the arm's length price.
2. The most appropriate method referred to in sub-section (1) shall be applied for determination of arm's
length price in the manner as may be prescribed:
Provided that the arm's length price determined under this section shall not result in total income lower
than the total income that would have been resulted if the price at which international transaction has actually
been undertaken were taken as the price charged or paid in the said international transaction.
i.e. ALP >= total income at actual price charged in the international transaction.
The six methods as per Rule 70 are discussed below:

The most appropriate method for determining arm's length price in relation to an international transaction shall be
applied in the following manner:
Comparable uncontrolled price method (CUP)

Rule 70 (1) (a)
(a) Comparable uncontrolled price method is applied in the following manner: -
(i) the price charged or paid for property transferred or services provided in an uncontrolled transaction or a
number of transactions of comparable circumstances is identified;
(ii) if the price so identified differs from the price of the international transaction, the differential amount is
calculated;
(iii) the price of international transaction is then adjusted by the said differential amount;
(iv) the adjusted price under sub-clause (iii) is taken to be the arm's length price of the property transferred or
services rendered in the international transaction.
Characteristics of CUP method:

 The Comparable Uncontrolled Price (CUP) method compares (i) the price charged in a controlled transaction
to (ii) the price in a comparable uncontrolled transaction; If there is any difference between the two prices
[(i) and (ii)], this may indicate that the conditions of the commercial and financial relations of the associated
enterprises are not arm's length.
 CUP is the most direct and reliable measure;
 Internal CUP offers greatest comparability;
 Differences that have effect on price need to be adjusted.
Availability of information/documents:
This method is applicable when products, economic conditions, contractual terms are same or similar. That
means you will be able to justify/use this method to be applied when you will have invoices/bill/sales
contract of the products/services with similar economic conditions, contractual terms etc. of other entities.
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Transfer Pricing
Example-1:
 BDCo has purchased 2000 units of raw materials from its related party, MyCo (Malaysia) for $20 per unit.
 Fortune Corporation of Bangladesh has purchased 1000 units of similar items from MyCo for $19
per unit. to sell the items through dealers.
 Dollar rate at that time was 1 US dollar = Tk. 80 and Corporate tax rate for BDCo is 35%.
Solution:
Assessee: BDCo
Arm’s Length Price per unit for purchase from MYCo is 19
Transfer Pricing Adjustment per unit = $1 ($20 – $19)
Transfer Pricing Adjustment for 2000 units = $2000 (2000 x $1)
Transfer Pricing Adjustment in Taka = Tk. 160,000 ($2000 x 80)
Tax to be paid is Tk. 56,000 (160,000 x 35%)
Example-2:
TaiCo of Taiwan sold 500 units DVD player to its related party wholesaler BDCo, of Bangladesh at $20 each on
c.i.f. basis. DVD players are sold with remote control, and connection cable. BDCo sells DVD player at its own
brand name - Best Video; brand name is labeled locally for $1 for 4 players (BDCo bears the cost of labeling). BDCo
sold each DVD player for $25.
TaiCo also sold 600 units of the same DVD player to Dhaka Electronics, an independent importer, at 10 each on
f.o.b. basis. A brand name - DE was labeled by TaiCo. The price of DVD player does not include remote control and
connection cable. Remote controls are procured locally for $1 each, and connection cable costs $2 for each dozen.
Transportation cost from Taiwan to Chittagong port is $1 for each DVD player.
BDCo is a taxpayer in Bangladesh. Corporate tax rate for BDCo. is 35%.
Dollar rate at that time was 1 US dollar = Tk. 80
 What is the arm’s length price?
 What will be transfer pricing adjustment?
Solution:
Before going to solution the following terms need to be discussed.
F.O.B (Free on board): Sales contract based on F.O.B means that the costs i.e. insurance cost, freight cost & other
cost relating to export/import will be borne by BUYER
C.I.F (Cost, Insurance & Freight): Sales contract based on C.I.F means that the costs i.e. insurance cost, freight
cost & other cost relating to export/import will be borne by SELLER
C&F (Cost & Freight): Sales contract based on C&F means that the costs i.e. freight cost & other cost relating to
export/import will be borne by SELLER but insurance cost will be borne by buyer after goods loaded into ship.

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Transfer Pricing
Let’s go to solution: –
Calculation of total cost per DVD player to BDCo.
Purchase cost per DVD player $20.00
Labeling cost per DVD player ($1 ÷ 4) $0.25
Total cost per DVD player $20.25
Calculation of total cost per DVD player to Dhaka Electronics

Purchase cost per DVD player $10.00
Cost of per remote control $1.00
Cost of per connection cable ($2 ÷ 12) $0.17
Transportation cost per DVD player $1.00
Total cost per DVD player $12.17
Assessee: BDCo
Arm’s Length Price per DVD player (i.e. fair value of cost of per DVD player) for purchase from MYCo. is $12.17
Transfer Pricing Adjustment per DVD player: $8.08 ($20.25 – $12.17).
Transfer Pricing Adjustment for 500 units = $8.08 x 500
= $4,041.67
Transfer Pricing Adjustment in Taka = Tk. 323,333.33 ($4,041.67 x 80)
Tax to be paid is Tk. 113,166.67 (323,333.33 x 35%)
Resale price method (RPM)

Rule 70 (1) (b)
(b) resale price method is applied in the following manner: -
(i) the price at which the said property or service is resold to an independent enterprise is identified;
(ii) the price, as identified in sub-clause (i), is reduced by a comparable normal gross margin;
(iii) the price so arrived at is then adjusted for other unique costs (such as customs duty) associated with the
purchase of the property or services;
(iv) the price so arrived at is then adjusted to take into account the material differences (differences that could
materially affect the gross margin in open market condition) such as functions performed, risks involved,
assets employed, time gap between the original purchase and the resale and accounting practices between
the international transactions and the comparable uncontrolled transactions, or between the enterprises
undertaking such transactions;
For example: Assume that there are two distributors selling the same product in the same market
under the same brand name. Distributor A offers a warranty; Distributor B offers none. Distributor
A is not including the warranty as part of a pricing strategy and so sells its product at a higher price
resulting in a higher gross profit margin (if the costs of servicing the warranty are not taken into
account) than that of Distributor B, which sells at a lower price. The two margins are not comparable
until a reasonably accurate adjustment is made to account for that difference.
(v) the adjusted price under sub-clause (iv) shall be taken to be the arm's length price of the property purchased
or the service obtained in the international transaction.

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Transfer Pricing
Characteristics of RPM method:

 The Resale Price Method (RPM) begins with the price at which a product that has been purchased from an
associated enterprise is resold to an independent enterprise
 The resale price method analyzes the comparable normal gross margin (which can be compared to gross
profit margin earned by independent enterprises) and determines the arm’s length price (of COGS) by
subtracting the appropriate gross profit from the applicable resale price;
 The resale price margin of the reseller in the controlled transaction may be determined by reference to the
resale price margin that the same reseller earns on items purchased and sold in comparable uncontrolled
transactions (“internal comparable”). Also, the resale price margin earned by an independent enterprise in
comparable uncontrolled transactions may serve as a guide (“external comparable”)
 This method is probably most useful where it is applied to marketing operations.
You will need the information of ‘comparable normal gross margin’ earned by the same reseller comparable
in uncontrolled transactions (“internal comparable”) and ‘comparable normal gross margin’ earned by an
independent enterprise in comparable uncontrolled transactions (“external comparable”) to apply the RPM.
Example-1:
Singapore Bangladesh
Manufacturer Distributor
SgCo. (Tk.) DhCo. (Tk.)
Sales 1,850 2,000
Cost of Goods Sold (from AE) 1,200 1,850
Gross Profit 650 150
Other expenses 400 140
Net Profit 250 10
The appropriate gross profit margin for similar products is 10%. What is the arm’s length transfer price?
Solution:
Arm’s Length Price (COGS) = RSP x (1‐GPM),
where:
RSP = the resale price to independent parties; and
GPM = the appropriate Gross Profit Margin
Calculation of arm’s length price(COGS):

Sales (resale price) 2,000
(-) Gross Profit Margin @ 10% of resale price 200
Arm’s Length Cost of Goods Sold 1,800
Transfer pricing adjustment: 1850 -1800 = 50
The adjustment figure:

TP
DhCo. (Bangladeshi Distributor) Original
Adjustment
Sales 2,000 2,000

Cost of Goods Sold (from AE) 1,850 1,800
Net Profit 10 60

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Transfer Pricing
Example-2:
MirpurCo., a distributor, is a Bangladesh subsidiary of HKCo (Hong Kong). MirpurCo. distributed 500 units of
Mobile Handsets manufactured by HKCo. The purchase price of MirpurCo. is $19 per unit. MirpurCo. resells
Mobile Handsets to independent parties for $20. City Electronics of Bangladesh purchased 600 units of similar
products from HKCo. The gross margin ratio of City Electronics is 10%.
MirpurCo. gives 1-year warranty for the products. Warranty risk is borne by MirpurCo. City Electronics does
not bear any warranty risk. Warranty cost is estimated at $1 for 4 units.
HKCo provides packing materials to City Electronics, while MirpurCo. procures packing materials locally for
$1 per unit.
The dollar rate on that date was $1 = Tk. 80.
1. What is the arm’s length price of the transaction?

2. What will be the transfer pricing adjustment?
3. Suppose 35% tax rate is applicable for MirpurCo. What is the amount of tax to be paid due to TP
adjustment?
Solution:
In this problem, the Rule 70(1)(b)(iii) & (iv) will be applied because the sales conditions of MirpurCo. And City
Electronics are not same in respect of warranty and packing process. MirpurCo. gives 1-year warranty. Other the
hand City Electronics does not give any warranty. That’s the warranty costs and packing costs being incurred by
MirpurCo. will be adjusted with the arm’s length price determined under RPM.
 Arm’s Length Price (COGS) = RSP x (1‐GPM)

where:
RSP = the resale price to independent parties; and
GPM = the appropriate Gross Profit Margin
 Given that the comparable gross profit margin of City Electronics is 10%.
 Warranty cost per unit = Tk. $0.25 ($1 ÷ 4)
 Packing cost per unit = Tk. $1.00
Calculation of arm’s length price (COGS):

Sales (resale price per unit) $20
(-) Gross Profit Margin @ 10% of resale price $2
Arm’s Length Cost of Goods Sold per unit $18

TP
MirpurCo. Original
Adjustment
Sales ($20 x 500 units) $10,000 $10,000

Cost of Goods Sold ($19x500) : ($18x500) $9,500 $9,000
Gross Profit $500 $1,000
Other expenses ($0.25 + $1.00) x 500 $625 $625
Net Profit / (loss) ($125) $375

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Answer-1: The arm’s length price is $9000 ($18 x 500).

Answer-2: The transfer pricing adjustment is $ 500 {$375-($125)}
Or, Tk. 40,000 ($500 x 80).
Answer-3: The amount of tax to be paid due to TP adjustment is Tk. 40,000 x 35%
Or, Tk. 14,000.
[At arm’s length, an independent party looks for a price which earns a gross margin sufficient to cover the operating
costs and leaving a profit that compensates for functions performed, assets used and risks assumed.]
Cost plus method (CPM)

Rule 70 (1) (c)
(c) cost plus method is applied in the following manner: -
(i) the direct and indirect costs incurred in the supply of property or the provision of services, hereinafter
referred to as cost base, are determined;
(ii) a comparable profit mark-up (based on comparable accounting policies) is identified;
(iii) appropriate adjustment is then made to the comparable profit mark-up adjusted to take into account the
material differences (differences that could materially affect the mark-up in open market condition) such as
functions performed, risks involved, assets employed, contractual terms and market conditions between the
international transactions and the comparable uncontrolled transactions, or between the enterprises
undertaking such transactions;
(iv) the adjusted profit mark-up under sub-clause (iii) is then added to the cost base;
(v) the sum so arrived at is taken to be the arm’s length price of the property transferred or services provided in
the international transaction.
Characteristics of CPM method:

 The Cost Plus Method (CPM) begins with the costs incurred by the supplier of property (or services) in a
controlled transaction for property transferred or services provided to an associated purchaser.
 In the Cost Plus Method, the arm’s length supply price is determined by adding an appropriate cost plus
mark-up to the cost base (COGS).
 An appropriate cost plus mark-up is then added to this cost, to make an appropriate profit in light of the
functions performed and the market conditions.
 What is arrived at after adding the cost plus mark up to the above costs may be regarded as an arm's length
price of the original controlled transaction.
 This method probably is most useful where semi-finished goods are sold between associated parties, where
associated parties have concluded joint facility agreements or long-term buy-and-supply arrangements, or
where the controlled transaction is the provision of services.
 The cost plus mark-up of the supplier in the controlled transaction should ideally be established by reference
to the cost plus mark-up that the same supplier earns in comparable uncontrolled transactions (“internal
comparable”). In addition, the cost plus mark-up that would have been earned in comparable transactions by
an independent enterprise may serve as a guide (“external comparable”).
 RPM vs. CPM: profit over sale vs. profit over costs
You will need the information of ‘comparable profit mark-up’ earned by the same reseller comparable in
uncontrolled transactions (“internal comparable”) and ‘comparable profit mark-up’ earned by an
independent enterprise in comparable uncontrolled transactions (“external comparable”) to apply the CPM.

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Transfer Pricing
Example-1:
Bangladesh Japan
Manufacturer Distributor
BDCo. (Tk.) JPCo. (Tk.)
Sales (to AE) 2,000 2,500
Cost of Goods Sold 1,800 2,000
Net Profit 10 300
The appropriate cost plus mark-up in similar situation is 30%.
Solution:
Arm’s Length Price = COGS + (COGS x profit mark-up)
Here, Profit mark-up = Gross Profit/COGS
Calculation of arm’s length price (Selling price):

COGS 1800
(-) Gross Profit Margin @ 30% of resale price 540
Arm’s Length Supply Price 2340
Transfer pricing adjustment: 2,340- 2,000 = 340

TP
BDCo. (Bangladeshi Manufacturer) Original
Adjustment
Sales (to AE) 2,000 2,340

Cost of Goods Sold 1,800 1,800
Net Profit 10 350
Example-2:
DhPower manufactures UPS for its related party in Taiwan, TaiPower. using designs supplied by TaiPower. Under
the contract, DhPower earned a cost plus mark up of 12%. The Costs are defined as direct cost (direct materials and
labour) plus actual indirect cost. Actual indirect cost is found to be 20% of direct cost. DhPower has manufactured
100 units of UPS under the contract. Direct cost for each unit was Tk. 800.
DhPower has also manufactured 100 units of UPS for an independent party in Taiwan using designs supplied by that
party (materials used were slightly different, but production process was the same). Under the contract, DhPower
also earned a cost plus mark up of 20%. The Costs are defined as direct cost (direct materials and labour) plus
estimated indirect cost (indirect costs are estimated at 30% of the direct cost). Direct cost per for each unit was Tk.
1000.
1. What is the volume of related party transaction?

2. What is the arm’s length price? What will be the transfer pricing adjustment?

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Solution:
1. The volume of related party transaction is 100 units (sold to TaiPower)
2. Determination of arm’s length price and transfer pricing adjustment:
 Arm’s Length Price = COGS + (COGS x profit mark-up)
Here, Profit mark-up = Gross Profit/COGS
 Comparable profit mark-up = 20%
Calculation of arm’s length price (Selling price):

DhPower Tk.
Direct cost per unit 800.00
Indirect cost (20% of direct costs) per unit 160.00
COGS per unit 960.00
Mark-up per unit (20% of COGS) 152.00
Selling price 1,052.00

TP
DhPower (Bangladeshi Manufacturer) Original
Adjustment
Direct cost per unit 800.00 800.00

Indirect cost (20% of direct costs) per unit 160.00 160.00
COGS per unit 960.00 960.00
Mark-up per unit (12% : 20% of COGS) 115.20 192.00
Selling price 1,075.20 1,152.00
Transfer pricing adjustment per unit: 1152.00 – 1075.20 = Tk. 76.80
Transfer pricing adjustment for 100 units: 100 x 76.80 = Tk. 7,680
[At arm’s length, an independent party looks for a transfer price which ensures a mark-up sufficient to compensate
for the functions performed, assets used, and risks assumed.]
Profit split method (PSM)

Rule 70 (1) (d)
(d) profit split method is applied in the following manner: -
(i) the combined profit, arising from international transaction or transactions and divisible among the associated
enterprises, is identified;
(ii) the combined profit is then divided among the associated enterprises by using the following approaches:
a. each of the associated enterprises is allocated a basic return based on the basic functions
(manufacturing, distribution, service provision etc.) each enterprise performed and determined by
reference to market returns earned by independent enterprise in similar transaction. This basic return
does not usually account for the return that would be generated by any unique and valuable assets
possessed by the associated enterprises. The residual profit (which may be attributable to such unique
assets), calculated by deducting the sum of basic returns allocated to associated enterprises from the
combined profit, is then apportioned to the associated enterprise based on their relative contribution
and taking into consideration how independent enterprises in similar circumstances would have divided
such residual profit; or

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Transfer
TransferPricing
Pricing
b. basic return is not allocated to the associated enterprises; the combined profit is divided among the
associated enterprises based on the relative contribution of each the associated enterprises to that profit;
(iii) the profit thus allocated to the assessee under sub-clause (ii) is taken to be the arm’s length price.
Characteristics of PSM method:

 The Profit Split Method (PSM) is applied when both parties of the controlled transaction contribute to
produce a common product/service.
 The combined profits to be split in a transactional profit split method are the profits of the associated
enterprises from the controlled transactions in which the associated enterprises are engaged.
 The combined profits to be split should only be those arising from the controlled transaction(s) under review.
In determining those profits, it is essential to first identify the relevant transactions to be covered by the
transactional profit split.
 Where a taxpayer has controlled transactions with more than one associated enterprise, it is also necessary
to identify the parties in relation to those transactions and the profits to be split among them.
 In order to determine the combined profits to be split, the accounts of the parties to the transaction to which
a transactional profit split is applied need to be put on a common basis as to accounting practice and currency,
and then combined. Because accounting standards can have significant effects on the determination of the
profits to be split, accounting standards should be selected in advance of applying the method and applied
consistently over the lifetime of the arrangement.
You will need the information of ‘combined profit’ earned by the associated enterprises arising from
international transactions to apply the CPM.
To determine arm’s length profit two approaches are followed:

a) contribution analysis approach
b) residual profit-split approach.
a) Contribution analysis approach:

 The combined profits from the controlled transactions are allocated between or among the parties
based on their relative contributions to the whole.
 Functions are examined and value (value added) of relative contribution is determined. Some factors:
expenses incurred, labor, PPE.
 A profit split percentage is then assigned.
b) Residual profit-split approach:

Two -step process:
Step 1:
Assign an arm’s length return to parties in the controlled transaction for the routine functions
performed on the respective sides, i.e., manufacturing, distributing, marketing, services, etc.
Step 2:
The balance (Residual) is then spilt between/among parties according to the respective
intangibles.
The division of the combined profits:

the division of the combined profits under a transactional profit split method is generally achieved using one or more
allocation keys. Depending on the facts and circumstances of the case, the allocation key can be a figure (e.g. a 30%-
70% split based on evidence of a similar split achieved between independent parties in comparable transactions), or
a variable (e.g. relative value of participant’s marketing expenditure or other possible keys as discussed below).
 Asset-based allocation keys

 Cost-based allocation keys etc.

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Transfer Pricing
Example:
Uttara Motors (UM) and its foreign parent earns a profit of Tk. $50,000 by producing 100 units of motor bikes.
Uttara Motors (UM) applied 45% assembling costs. But Financial Statements shows a profit of Tk. 10,000.
What is the arm’s length price?
Solution:
As Uttara Motors incurred 45% of the costs incurred by it and its parent, UM’s arm’s length price will be 45% of
the combined profit earned by UM and its parent i.e. $22,500 ($50,000 x 45%).
Transactional net margin method (TNM)

Rule 70 (1) (e)
(e) transactional net margin method is applied in the following manner: -
(i) the net profit margin earned by the associated enterprise from the international transaction with the
associated enterprise is computed having regard to an appropriate base such as costs, sales or assets;
(ii) the net profit margin earned by an independent enterprise or enterprises from comparable uncontrolled
transaction or a number of such transactions is computed having regard to the same base;
(iii) appropriate adjustment is then made to the net profit margin referred to in sub-clause (ii) to take into account
the differences, that can materially affect the net profit margin, between the international transactions and
the comparable uncontrolled transactions, or between the enterprises undertaking such transactions;
(iv) the adjusted net profit margin under sub-clause (iii) is then applied to the base as referred to in sub-clause
(i) to arrive at the arm’s length price in relation to the international transaction.
Characteristics of TNMM method:

 The transactional net margin method examines the net profit relative to an appropriate base (e.g. costs, sales,
assets) that a taxpayer realises from a controlled transaction or transactions.
 A transactional net margin method operates in a manner similar to the cost plus and resale price methods.
This similarity means that in order to be applied reliably, the transactional net margin method must be applied
in a manner consistent with the manner in which the resale price or cost plus method is applied.
 This means in particular that the net profit indicator of the taxpayer from the controlled transaction should
ideally be established by reference to the net profit indicator that the same taxpayer earns in comparable
uncontrolled transactions, i.e. by reference to “internal comparables”. Where this is not possible, the net
margin that would have been earned in comparable transactions by an independent enterprise (“external
comparables”).
 A functional analysis of the controlled and uncontrolled transactions is required to determine whether the
transactions are comparable and what adjustments may be necessary to obtain reliable results.
 Measures of profitability are calculated as net profit on appropriate base such as sales, costs or assets.
You will need the information of ‘combined profit’ earned by the associated enterprises arising from
international transactions to apply the CPM.

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Transfer Pricing
Example:
Information about GulshanCo. and an independent company
Independent
Details GulshanCo.
entity
Sales 2,000 2,500
Cost of Goods Sold (AE) 1,600 2,000
Net Profit 80 180
Net profit margin on sales 4.0% 7.2%
Comparable Net Profit: 7.2%
What will be the arm’s length profit?
Sales 2,000
Cost of Goods Sold (AE) ?
Gross Profit ?
Other expenses 320
Net Profit ?
Calculation of arm’s length price (net profit)

Details GulshanCo.
Sales 2,000
Cost of Goods Sold (AE) 1,536
Gross Profit 464
Other expenses 320
Net Profit 144
The transfer pricing adjustment

Transfer pricing adjustment is Tk. 64 (144 – 80)
Other method (OM)

Section 107C (1) (f)
(f) any other method where it can be demonstrated that-

(i) none of the methods mentioned in clause (a) to (e) can be reasonably applied to determine the arm's
length price for the international transaction; and
(ii) such other method yields a result consistent with the arm's length price.
When to apply Other Method?

You will apply other method when any of the methods from (a) to (d) cannot be applied due to company’s
circumstances and nature of business transaction. Such circumstances may arise when a company operates its
business under an agreement prescribed by any regulatory body in Bangladesh or under any globally accepted price
agreement.
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Transfer Pricing
Maintenance and keeping of information, documents and records: Section 107E

& Rule 73
Every person who has entered into an international transaction shall keep and maintain such information, documents
and records as per Rule 73.
Maintenance and keeping of information, documents and records is compulsory
for every person who has entered into an international transaction in which the
aggregate value exceeds Tk. 3 crore. [Rule 73 (2)]
And the information, documents and records shall be kept and maintained for a period of eight (8) years from the
end of the relevant assessment year.
Statement of international transaction: Section 107EE & Rule 75A

Every person who has entered into an international transaction shall furnish, along with the return of income (Annual
Tax Return being submitted under section 75), a statement of international transaction in the form and manner as per
Rule 75A.
Submission of statement of international transaction is compulsory for every
person who has entered into an international transaction.
Report from an accountant: Section 107F & Rule 75

The Deputy Commissioner of Taxes may, by notice in writing, require that a person who has entered into
international transaction or transactions the aggregate value of which, as recorded in the books of accounts, exceeds
three crore taka during an income year shall furnish within the period as may be specified in the notice and in the
form and manner as per Rule 75, a report from a Chartered Accountant or a Cost and Management Accountant
regarding all or of a part of the information, documents and records furnished under section 107E.
Key points:
Question: Is submission of a report from an accountant compulsory?
Answer: No, it’s not compulsory to submit a report. If DCT requires the report, then the report has to be submitted.
Question: When may DCT require a report from an accountant?

Answer: DCT may require a report from an accountant when the aggregate value of international transaction/s, as
recorded in the books of accounts, exceeds three crore (Tk. 30,000,000) taka during an income year.
Question: Accountant means?

Answer: Accountant referred in this section means either a Chartered Accountant or a Cost and Management
Accountant.

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Transfer Pricing
Illustrative example
Example-1:
ABC Bangladesh Ltd., a company incorporated in Bangladesh, manufactures high class motor vehicle engines for
sale both m Bangladesh and abroad Foreign sales are made through ABC Hong Kong Pvt. Ltd, a company
iuCOlpOt'8ted in Hong Kong and wholly owned by ABC Bangladesh Ltd 10 Hong Kong, corporate tax rate is 25%
and in Bangladesh, it is 35%. ABC Bangladesh Ltd sells engines to ABC Hong Kong Pte. Ltd. at USD 30,000 (FOB)
per unit. In Bangladesh, the same engine is sold at USD 40,000 per unit. ABC Hong Kong Pte. Ltd sells these units
at USD 60,000 per unit in their local market. During the income year ended 31 March 2015 ABC Bangladesh Ltd.
sold 10 such engines at the above FOB price and 5 such engines at USD 31,000 C&F price per unit. The freight was
USD 1,000 per unit. 14 of the above 15 export sales took place during the last 9 months of the year. The cost of sales
and total overhead expenses (related to the above units sold) of ABC Bangladesh Ltd were USD 20,000 per unit in
equivalent Taka. The overhead expenses (related to the above units imported and sold) including the freight for the
above FOB imports of ABC Hong Kong Pte. Ltd. were USD 10,000 per unit. Neither of the above two companies
had any other income and expense during the income year.
Requirements:
(i) Will any report from accountant be required to be furnished to the income tax authority? If so, who can issue
the report? Draft a report to be issued in this regard.
(ii) On the basis of the information given above, determine income from the above international transactions
having regard to arm's length price.
(iii) Which method have you followed in computing the arm's length price as in (ii) above?
(iv) How much additional income tax will the government earn by following the above method?
You may use exchange rate of USD 1= Tk. 78.
Solution:
(i) Yes, a report from a qualified accountant is required to be furnished to the income tax authority as per section
107F of The Income Tax Ordinance, 1984 as ABC Bangladesh Ltd has entered into international transactions
amounting to Tk. 35,490,00 (30,000 x 10 + 31,000 x 5 = 4,55,000 x 78) which is more than Tk.3 crore. Only
a qualified accountant, either a Chartered Accountant or a Cost and Management Accountant can issue such
report. A report is drafted as per Rule-75 as under:
Report under section 107F
In respect of:
(1) Name of the Assessee: ...................
(2) TIN:
(3) (a) Circle: ................ (b) Taxes Zone....................
1. All the information, documents and records required under section 107F of the Income Tax
Ordinance, 1984 are furnished and annexed to this Report;
2. The List of Annexure is prepared and signed by me/us;
3. It appears from my/our examination that the information, documents and records furnished
undersection 107F are authentic.
Signature
Name:
Address:
Identification Details (Membership Number, etc.)
Contact Details:
Place:
Date:
List of Annexure (to be signed in each page):
1. ....................................
2. ....................................

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Transfer Pricing
(ii) Taking into consideration the fact that the same engine is sold in Bangladesh at fair market price (here arm's
length price) USD 40,000 per unit, income comes at Tk.40,000 - 20,000=20,000 x 15 = 300,000 x 78 = Tk.
23,400,000
(iii) Comparable uncontrolled price method is followed here to determine arm's length price as arranged sales price
with associated enterprise can easily be compared with the information of local sales price.
(iv) Additional income tax to be paid 10,000 x 15= 150,000 x 78 = Tk. 11,7 00,000 @ 35%= Tk. 4,095,000
Example-2:
ABC Hong Kong Pte. Ltd. has a global agreement with M&S LLC of USA which incorporates a clause stating that
in the case of any purchase by M&S from any company within the group to which ABC Hong Kong Pte. Ltd. belongs,
M&S will get a rebate of 5% on the purchase price from that company. Now ABC Bangladesh Ltd. intends to enter
into an agreement with M&S to sell its engine products to M&S.
Requirement:
Will any transaction between ABC Bangladesh Ltd. and M&S tilU under lrausfer pricing? Discuss.
Solution:
Yes, the transaction between ABC Bangladesh Ltd. and M&S LLC of USA will fall under transfer pricing because
M&S LLC or USA is also to be treated as deemed associated enterprise as per section 107A(2)(L).
The Italic text in black font is the identical Section/Rule of TP

regulations and the plain text in normal font is the explanation

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14. Minimum Tax: Application of 82C
SECTION OVERVIEW
 Definition  Explanation
 Sources subject to 82C  Illustrative example
Related Reference:
Section: 82C
Definition
(i) Regular source means any source for which minimum tax is not applicable under sub-section (2) of Section
82C;
(ii) Regular tax means the tax calculated on regular income using the regular manner;
(iii) Regular rate means the rate of tax, that would be applicable if the tax exemption or the reduced rate were
not granted.
The Italic text in black font is the identical section of 82C

and the plain text in black font is the explanation of 82C
82C. Minimum Tax
(1) Notwithstanding anything contained in any other provisions of the Ordinance, minimum tax shall be payable by
an assessee in accordance with the provisions of this section.
(2) Minimum tax on income on sources from which tax has been deducted or collected under certain sections shall
be the following –
(a) any tax deducted or collected at source under the provisions of sections mentioned in clause (b) shall be
the minimum tax on income from the source or sources for which tax has been deducted or collected;
(b) the tax referred to in clause (a) shall be the tax deducted or collected under sections 52, 52A, 52AAA, 52B,
52C, 52D, 52JJ, 52N, 52O, 52R, 53, 53AA, 53B, 53BB, 53BBB, 53BBBB, 53C, 53CCC, 53DDD, 53EE,
53F, 53FF, 53G, 53GG, 53H, 53M, 53N and 55:
The above mentioned sections are as follows in brief:
Rate of TDS
Sl. Section Tax deducted or collected at source
or TCS
1. 52 Tax deducted from payment to contractors, etc. [Rule 16]
• against the execution of a contract 1% – 7%
• against supply of goods; or • manufacture, process or 3% – 5%
conversion; or • printing, packaging or binding
2. 52A Tax deducted from payment of royalties etc. 10% / 12%
3. 52AAA Tax collected from clearing and forwarding (C&F) agents 1/0%
4. 52B Tax collected from cigarette manufacturers 10%
5. 52C1 Tax deducted from compensation against acquisition of property 2% / 1%
6. 52D1 Tax deducted from interest on saving instruments 5%
7. 52JJ Tax collected from travel agent 0.30%
8. 52N Tax collected on account of rental power 6%
9. 52O Tax collected from a foreign technician serving in a diamond 6%
cutting industry
10. 52R Tax deducted from receipts in respect of international phone call 1.5% / 7.5%
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Minimum Tax: Application of 82C
Rate of TDS
Sl. Section Tax deducted or collected at source
or TCS
11. 53 Tax collected from importers [Rule 17A] 5% / 2% /
Tk. 800 PMT
12. 53AA Tax collected from shipping business of a resident 5%
13. 53B Tax collected from income derived on account of export of 10%
manpower [Rule 17C]
14. 53BB Tax collected from export of certain items2/3 0.70%/0.60%
15. 53BBB Tax collected from member of stock exchanges 0.05%
16. 53BBBB Tax collected from export of any goods except certain items2 0.70%
17. 53C Collection of tax on sale price of goods or property sold by 5% / 1%
public auction [Rule 17D]
18. 53CCC Tax deducted or collected from courier business of a non-resident 15%
19. 53DDD3 Tax deducted from export cash subsidy 3%
20. 53EE Tax deducted from commission or remuneration paid to agent of 10%
foreign buyer
21. 53F1 Tax deducted from interest on saving deposits and fixed deposits, 10% / 15% /
etc. 5%
22. 53FF Tax collected from persons engaged in real estate or land
development business
23. 53G Tax deducted from insurance commission 5%
24. 53GG Tax deducted from fees, etc. of surveyors of general insurance 15%
company
25. 53H1 Tax collected on transfer, etc. of property [Rule 17II]
26. 53M Tax collected from transfer of securities or mutual fund units by 5%
sponsor shareholders of a company etc.
27. 53N Tax collected from transfer of share of shareholder of stock 15%
exchanges
28. 55 Tax deducted from income from lottery, etc. 20%
1
See Proviso of Sub-Clause (d) of Sub-Section 2 of the Section 82C.
2
TDS @ 0.70% on export proceeds from goods, other than jute goods, mentioned in Section 53BB & 53BBBB
has been set by SRO No. 257-Law/IT/2016 dated on 10 August 2016 although FA 2016 had set TDS @ 1%
on export proceeds from goods mentioned in Section 53BB & 53BBBB.
3
TDS @ 0.60% on export proceeds from only jute goods mentioned in Section 53BB has been set by SRO
No. 207-Law/IT/2016 dated on 29 June 2016.
Provided that the tax deducted or collected from the following sources shall not be the minimum tax for
the purpose of this sub-section
(i) tax collected under section 52 from the following persons
a. a contractor of an oil company or a subcontractor to the contractor of an oil company as
may be prescribed;
b. an oil marketing company and its dealer or agent excluding petrol pump station;
c. any company engaged in oil refinery;
d. any company engaged in gas transmission or gas distribution;
(ii) tax deducted under section 53 from import of goods by an industrial undertaking as raw materials
for its own consumption;
(iii) tax deducted under section 53F from a source other than the sources mentioned in clause (c) of
sub-section (1) and sub-section (2) of that section;
i.e. interest received by a public university, or an MPO enlisted educational institution, or
ICAB, ICMAB, or ICSB.
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Minimum Tax: Application of 82C Minimum Tax: Application of 82C
(c) for the sources of income for which minimum tax is applicable, books of accounts shall be maintained in
the regular manner in accordance with the provisions of section 35;
(d) income from any source, for which minimum tax is applicable under this sub-section, shall be determined
in regular manner and tax shall be calculated by using regular rate on such income. If the tax so calculated
is higher than the minimum tax under clause (a), the higher amount shall be payable on such income:
Example-1.1 (Company):
XYZ Co. Ltd., a commercial importer, has the following income for the year ended 30 June 2016.
Tax has been collected by Customs Authority u/s 53 @ 5% on Assessable Value as determined under
Section 25 of the Customs Act 1969 for the year amounting Tk. 100,000.
Details Source u/s 82C
Revenue 10,000,000
TDS @5% u/s 53 100,000
Statement of profit or loss
Revenue 10,000,000
COGS (6,500,000)
GP 3,500,000
Admin, selling & other expenses (2,000,000)
Profit before tax 1,500,000
Income tax @35% (525,000)
Profit after tax 975,000
What is the implication of minimum tax as per Section 82C(2)?
Solution-1.1:
Minimum tax 100,000
Regular tax 525,000
Tax to be paid for the source subject to u/s 82C, whichever is higher of minimum tax and
regular tax: Tk. 525,000
Example-1.2 (Individual):
Mr. X has a net income of Tk. 650,0000 arising from the import business for the year ended 30 June
2016. He has paid tax at source of Tk. 50,000 under section 53 @5%.

Net income 650,000
TDS @5% u/s 53 50,000
Calculation of tax liability of Mr. X

Tax rate Amount of tax
On first 250,000 0% -
On next 400,000 10% 40,0000
Total tax payable 40,0000
Minimum tax 50,000

Regular tax 40,000
Tax to be paid for the source subject to u/s 82C, whichever is higher of minimum tax and
regular tax: Tk. 50,000
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Provided that income shall be determined and tax shall be calculated for certain sources in the
manner as specified in the following –
Sources of
Serial
income as Amount that will be taken as income Rate or amount of tax
No.
mentioned in
(1) (2) (3) (4)
1 Section 52C Amount of compensation as mentioned in As mentioned in section 52C
section 52C 1 i.e. 2% / 1%
2 Section 52D Amount of interest as mentioned in section As mentioned in section 52D
52D 2 i.e. 5%
3 Section 53DDD Amount of export cash subsidy as As mentioned in section
mentioned in Section 53DDD 3 53DDD i.e. 3%
4 Section 53F(1)(c) Amount of interest as mentioned in section As mentioned in section 53F
and (2) 53F 4 i.e. 10% / 5%
5
5 Section 53H Deed value as mentioned in section 53H As mentioned in section 53H
and the rule made thereunder
(see the Section and Rule 17II)
1
TDS on compensation made by the Gov’t against acquisition of property (Section 52C);
2
TDS on interest on saving instruments (Section 52D);
3
TDS from export cash subsidy (Section 53DDD)
4
TDS on interest on saving deposits & fixed deposits (Section 53F(1)(c) & (2)); and
5
TCS on income from sale of land or land & building (Section 53H & Rule 17II) will be the final discharge of tax
liability from the above 5 source of income.
No extra tax has to be paid as per Section 82C(2)(b) i.e. TDS/TCS from the above five sources is
the final settlement/discharge of tax liability.
Example-2.1:
Mr. Z has sold a piece of land of his for Tk. 2,000,000 (deed value). Land Registration Authority
has collected tax at source of Tk. 20,000 (1% of the deed value). What is Mr. X’s tax liability for
this source?
Solution-2.1:
As per Section 82C(2)(d)(proviso) the amount which will be treated as income is the deed value
of the transaction i.e. Tk. 2,000,000 and tax will be calculated as 2,000,000 x 1% = Tk. 20,000
(as mentioned in Section 53H and accordingly Rule 17II).
So, tax liability for Mr. Z for this source is Tk. 20,000 which is equal to the tax collected at source.
Self-test:
Ms. Mimmi has earned interest on saving instruments (Sanchaypatra) of Tk. 500,000 on which
tax has been deducted at source of Tk. 25,000. What is her tax liability for this source of income?
(e) income or loss computed in accordance with clause (d) or the proviso of clause (d) shall not be set off with
loss or income, respectively, computed for any regular source.
(3) Where the assessee has income from regular source in addition to the income from source or sources for which
minimum tax is applicable under sub-section (2) -
(a) regular tax shall be calculated on the income from regular source;
(b) the tax liability of the assessee shall be the aggregate of the tax as determined under sub-section (2) and
the regular tax under clause (a).
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Example-3.1 (Company):
From Example-1.1 above XYZ Co. Ltd. has, say, also income from other regular sources. The
following are the details in this regard.
Regular Source u/s
Details
sources 82C(2)
Revenue 3,000,000 10,000,000
TDS @5% u/s 53 - 100,000
Statement of profit or loss
Revenue 3,000,000 10,000,000
COGS (2,000,000) (6,500,000)
GP 1,000,000 3,500,000
Admin, selling & other expenses (800,000) (2,000,000)
Profit before tax 200,000 1,500,000
Income tax @35% (70,000) (525,000)
Profit after tax 130,000 975,000
Minimum tax for source u/s 82C 100,000

Regular tax for source u/s 82C 525,000
Tax to be paid for the source subject to u/s 82C = Tk. 525,000
Regular tax for regular source = Tk. 70,000
Total tax to be paid by XYZ Co. Ltd. = Tk. 595,000 (525,000 + 70,000)
Example-3.2 (Individual):
From Example-1.2 above Mr. X has, say, also income of Tk. 500,000 from other regular sources.
The following are the details in this regard.

Income from source subject to u/s 82C 650,000
Income from regular sources 500,000
Total income 1,150,000
TDS @5% u/s 53 50,000
Calculation of tax liability of Mr. X

Tax rate Amount of tax
On first 250,000 0% -
On next 400,000 (150,000) 10% 40,000 (15,000)
On next 500,000 (500,000) 15% 75,000 (75,000)
Total tax 115,000 (90,000)
Minimum tax for source u/s 82C 50,000

Regular tax for source u/s 82C 90,000 (15,000 + 75,000) Or, (115,000 – 25,000)
i.e Total tax – regular tax for
regular source
Tax to be paid for the source subject to u/s 82C = Tk. 90,000
Regular tax for regular source = Tk. 25,000 (40,000 – 15,000)
Total tax to be paid by XYZ Co. Ltd = Tk. 115, 000 (90,000 + 25,000)
N.B: Amounts in the “first bracket” are subject to minimum tax.

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Minimum Tax: Application of 82C Minimum Tax: Application of 82C
(4) Subject to the provisions of sub-section (5), minimum tax for a firm or a company shall be the following –
(a) every firm having gross receipts of more than taka fifty lakh or every company shall, irrespective of its
profits or loss in an assessment year, for any reason whatsoever, including the sustaining of a loss, the
setting off of a loss of earlier year or years or the claiming of allowances or deductions (including
depreciation) allowed under the Ordinance, be liable to pay minimum tax in respect of an assessment year
at the following rate –
Serial No. Classes of assessee Rate of minimum tax
1 Manufacturer of cigarette, bidi, chewing tobacco, 1% of the gross receipts
smokeless tobacco or any other tobacco products
2 Mobile phone operator 0.75% of the gross receipts
3 Any other cases 0.60% of the gross receipts:
Provided that such rate of tax shall be zero point one zero percent (0.10%) of such receipts for an
industrial undertaking engaged in manufacturing of goods for the first three income years since
commencement of its commercial production.
(b) where the assessee has an income from any source that is exempted from tax or is subject to a reduced tax
rate, the gross receipts from such source or sources shall be shown separately, and the minimum tax under
this sub-section shall be calculated in the following manner –
(i) minimum tax for receipts from sources that are subject to regular tax rate shall be calculated by
applying the rate mentioned in clause (a);
(ii) minimum tax for receipts from sources that enjoys tax exemption or reduced tax rate shall be
calculated by applying the rate mentioned in clause (a) as reduced in proportion to the exemption
of tax or the reduction of rate of tax;
(iii) minimum tax under this sub-section shall be the aggregate of the amounts calculated under sub-
clauses (i) and (ii).
Example-4.1:
ABC Co. Ltd. (a non-listed company), a jute goods exporter, incurs a loss for the year ended 30 June
2017 of Tk. 500,000. Bank has deducted tax at source of Tk. 60,000 @ 0.60% for the period ended 30
June 2017. It is in tax bracket of 10% as per SRO No. 205-Law/IT/2016 dated 29 June 2016. Its revenue
is Tk. 10,000,000 and it also receives bank interest of Tk. 225,000 (after deducting TDS @ 10% by bank).
What is the tax implication for ABC Co. Ltd.?
Solution-4.1:
As ABC Co. Ltd. incurs a loss for the year ended 30 June 2017, it is subject to pay minimum tax @ 0.60%
under Section 82C(4).
Its gross receipts are as follows:
Revenue 10,000,000
Bank interest (225,000 ÷ 90%) 250,000
Total gross receipts 10,250,000
Calculation of minimum tax as per Section 82C(4)

Minimum tax mentioned in Section
As per Section As per Section

82C(4) is basically 'Revenue Tax'
Details
82C(4)(b)(i) 82C(b)(4)(ii)
Source of income Bank interest Revenue
Gross receipts 250,000 10,000,000
Minimum tax rate 0.60% 0.60%
Minimum tax as per Sec. 82C(4)(b)(i) : 82C(4)(a) 1,500 60,000
Proportionate amount as per Sec. 82C(4)(b)(ii)
(60,000 x 10% ÷ 35%)* - 17,143
Minimum tax to be paid 1,500 17,143
Minimum tax as per 82C(4)(b)(iii) (1,500 + 17,143) 18,643
* If ABC Co. Ltd. didn’t fall into a tax rate of 10%, then it had to pay a tax @ 35%. So, its proportion of minimum tax is (10% ÷ 35%.)

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Explanation - For the purposes of this sub-section, 'gross receipts' means -

(i) all receipts derived from the sale of goods;
(ii) all fees or charges for rendering services or giving benefits including commissions or discounts;
(iii) all receipts derived from any heads of income.
(5) Where the provisions of both sub-section (2) and sub-section (4) apply to an assessee, minimum tax payable by
the assessee shall be the higher of
(a) the minimum tax under sub-section (2); or

(b) the minimum tax under sub-section (4).
Example-5.1:
Let’s take the Example-4.1 of ABC Co. Ltd. above. Can you say what the minimum tax is as per
Section 82C(2) and what amount of tax has to be paid by ABC Co. Ltd.?
Solution-5.1:
As per Section 82C(2) minimum tax is as follows:
Minimum tax for source u/s 82C for revenue 60,000
Minimum tax for source u/s 82C for bank interest 25,000
Total minimum tax 85,000
(a) As per Section 82C(2) minimum tax is Tk. 85,000 and

(b) As per Section 82C(4) minimum tax is Tk. 18,643 (from above).
As per Section 82C(5) minimum tax payable by ABC Co. Ltd. is Tk. 61,500 which is higher of (a) & (b).
(6) Minimum tax under this section shall not be refunded, nor shall be adjusted against refund due for earlier year
or years or refund due for the assessment year from any source.
(7) Where any surcharge, additional interest, additional amount etc. is payable under provisions of the Ordinance,
it shall be payable in addition to the minimum tax.
(8) Where the regular tax calculated for any assessment year is higher than the minimum tax under this section,
regular tax shall be payable.
(9) In this section -

(i) “regular source” means any source for which minimum tax is not applicable under sub-section (2);
(ii) “regular tax” means the tax calculated on regular income using the regular manner;
(iii) “regular rate” means the rate of tax, that would be applicable if the tax exemption or the reduced rate
were not granted.

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15. Annexures
Annexure I
Interest income from the above mentioned Sanchaypatra, Bonds or Saving A/c will be included in the head “Income
from Other Sources” not in the head “Income from Interest on Securities”
Ref: See the SRO No. 170-Law/IT/2006
Ten types of Sanchaypatra (Saving Instruments) have been introduced in Bangladesh till date. Those are:
01. Bangladesh Saving Certificate (10 Years)
02. Defense Saving Certificate
03. 5-Years Bangladesh Saving Certificate
04. Bonus Saving Certificate
05. 3-Years Saving Certificate
06. 6-Monthly Profit Basis Saving Certificate
07. Family Saving Certificate (Paribar Sanchaypatra)
09. Deposits Saving Certificate
10. Pensioner Saving Certificate
Among those only four types of Sanchaypatra are in effect now. Those are:
01. 5-Years Bangladesh Saving Certificate
02. Family Saving Certificate (Paribar Sanchaypatra)
04. Pensioner Saving Certificate
Note: The red marked Saving Instruments (Sanchaypatra) are not presently effective in Bangladesh.

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Annexure II
Annexure II
List of areas of donations which are allowable for investment credit purpose is as follows. If any assessee donates
any sum, then the assessee will get a rebate of 15% on the donated amount (Para-22 of 6th Schedule Part B)
# Area of donations SRO Date
01 Contribution to: SRO No. 92-Law/2008 April 10, 20008
Dhaka Community Hospital
02 Contribution to: SRO No. 202-Law/Income Tax/2005 July 06, 2005
Ahsania Mission Hospital
03 Contribution to: SRO No. 109-Law/2006 June 07, 2006
i. Sylhet Diabetic Society
ii. Islamia Eye Hospital & M. A. Ispahani
Institute of Ophthalmology
iii. Kidney Foundation
iv. National Heart Foundation of BD
04 Contribution to: SRO No. 232-Law/2006 Sep 24, 2006
International Centre for Diarrhoea Disease Research,
Bangladesh (ICDDR,B)
05 Contribution to: SRO No. 42-Law/Income Tax/2008 Feb 24, 2008
Centre for the Rehabilitation of the Paralyzed (CRP)
06 Contribution to maximum upto 5 lac: SRO No. 316-Law/2008 Nov 18, 2008
1. Institutions administered by Child Health
Foundation, Bangladesh
i. Child Health Foundation Hospital, Mirpur, Dhk
ii. Child Hospital, Jessore
iii. Hospital for Sick Children, Satkhira
2. Diganta Memorial Cancer Hospital, Dhaka
3. The ENT and Head-Neck Cancer Foundation of BD
4. National Disabled Development Foundation, Mirpur
07 Contribution to: SRO No. 32-Law/2009 March 09, 2009
Asiatic Society of Bangladesh, Ramna, Dhaka
1. Jatir Janak Bangobondhu Sheikh Mujibur Rahman
Memorial Trust, Dhaka
2. Rafatullah Community Hospital (RCH),
Thengamara, Bogra
3. Salvation For the Deserving (SFD), Manikgang
Liberation War Museum, Segunbagicha
10 Contribution to: SRO No. 11-Law/2011 Jan 10, 2011
Society for Assistance to Hearing Impaired Children
(SAHIC)

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Annexure III
Annexure III
Tax exempted income as per SROs (Date-wise)
# SRO Date
Brief description of the SROs
01 Scholarships granted to meet the cost of educations (Para-4) SRO No. 454-Law/1980 31 Dec 1980
Rations received by Armed Forces or territorial force (Para-13) SRO No. 178-Law/Income Tax/2002 03 March 2002
(SRO 178 & 156 is the amendment of SRO 454) SRO No. 156-Law/Income Tax/2007 28 July 2007
02 Monetary award granted by the Cultural Heritage Fund SRO No. 39-Law/1982 19 Jan 1982
for outstanding contribution in the field of Art and
Culture
03 Interest accrued on a non-resident currency account SRO No. 415-Law/1982 13 Dec 1982
04 Income of Welfare Fund established for the welfare of SRO No. 239-Law/1987 29 Sep 1987
the Tea Garden Workers
05 Income of Stock Exchanges SRO No. 102-Law/1996 18 June 1996
06 Tax on tax amount paid by the paid by the employer to SRO No. 192-Law/1999 01 July 1999
employee
07 Income of the District Sports Association, Divisional SRO No. 298-Law/Income Tax/2000 28 Sep 2000
Sports Association, National Sports Association and
National Sports Council (NSC)
08 Monetary award granted to Govt. employees by the SRO No. 245-Law/2001 29 August 2001
Govt. for outstanding contribution in the of official
duties
09 Interest on DPS of bank approved by the Govt. SRO No. 89-Law/IT/2003 02 Feb 2003
10 Income of a new hospital for 5 years SRO No. 204-Law/Income Tax/2005 06 July 2005
11 Income of Army Welfare Trust established for the welfare of SRO No. 23-Law/2007 22 Feb 2007
the ex-army personnel, their children and dependents
12 Income of private power generation company for 15 SRO No. 188-Law/Income Tax/2009 01 July 2009
years SRO No. 235-Law/Income Tax/2011 06 July 2011
SRO No. 211-Law/Income Tax/2013 01 July 2013
SRO No. 213-Law/Income Tax/2013 01 July 2013
13 Income of a public university SRO No. 268-Law/Income Tax/2010 01 July 2010
14 Income of Mutual Fund (itself) SRO No. 333-Law/Income Tax/2011 10 Nov 2011
15 Income of industries set up in EPZ SRO No. 219-Law/Income Tax/2012 27 June 2012
16 Income (other than Income from Interest & Income from SRO No. 210-Law/Income Tax/2013 01 July 2013
Business) of Chamber of Industry & Commerce,
Commerce Organization, Federation of Industry or
Commerce approved
The list is not an inclusive one. There are many tax-exempted incomes but the important ones are enumerated here.

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Annexure IV
Annexure IV
Non-assessable incomes some of which are enumerated below:
1. Gift received on Birthday or Marriage Anniversary
2. Gift against affection or love
3. Receipt of money taken from the streets with no claim
4. Any income including agricultural income of an indigenous Hillman of any of the hill districts
of Rangamati, Bandarban & Khagrachhari, which has been solely derived from economic
activities undertaken within the said the said hill districts. [Ref: Para 27, Part-A,6th Schedule]
5. Honorarium of Jury
6. Reward of prize Bond or Gift Cheque
Example of some assessable casual and non-recurring income:

1. Income from lottery, cross-word or horse-race completion
2. Honorarium received as a middleman to settle a dispute
3. Reward from the employer for extra-ordinary effort
4. Profit of sale of goods through auction
5. Remuneration of professional actors/actresses, players, dancers, musicians, singers etc.
6. Reward received by a lawyer from the client for winning a case

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Annexure V
Annexure V
History of Para 34 & 42 of 6th Schedule Part A
Year S.N. Period Tax Rate
1989 1st SRO SRO No. 235-Law/1989 dated 01 July 1989 Up to 30 June 2000 Fully exempted
(Fisheries, Poultry, Cattle Farming, Dairy Farming,

Frog Farming & Horticulture)
SRO No. 236-Law/1989 dated 01 July 1989 Up to 30 June 2000 Fully exempted
(Silk tree plantation, Sericulture, Mushroom

Farming, Floriculture)
1991 2nd SRO SRO No. 309-Law/1991 dated 09 October 1991 Up to 30 June 2000 Fully exempted
(Subject to some
(Fisheries, Poultry, Cattle Farming, Dairy Farming, conditions)
Frog Farming & Horticulture, Silk tree plantation,
Sericulture, Mushroom Farming, Floriculture)
(and cancelled the SRO No. 236 of 1989)

rd
2000 3 SRO SRO No. 127-Law/2000 dated 11 May 2000 Up to 30 June 2005 Fully exempted
(Subject to some
conditions)
(Fisheries, Poultry, Cattle Farming, Dairy Farming,

2001 4th SRO SRO No. 168-Law/2001 dated 28 June 2001 Up to 30 June 2005 Fully exempted
(Subject to some
(Fisheries, Poultry, Production of Pelleted Poultry conditions)
Feed, Production of Seeds, Marketing of locally
produced seeds, Cattle Farming, Dairy Farming,

th
2003 5 SRO SRO No. 215-Law/IT/2003 dated 19 July 2003 Up to 30 June 2005 Fully exempted
(Subject to some

2005 6th SRO SRO No. 206-Law/IT/2005 dated 06 July 2005 Up to 30 June 2008 Fully exempted
(Subject to some
(Extended the time up to 30 June 2008)

2008 Inserted Inserted Para 34 and allowed exemption from 01 Up to 30 June 2011 Fully exempted
Para 34 July 2008 to 30 June 2011 (Subject to some
conditions)

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Annexure V
(Fisheries, Poultry, Production of Pelleted Poultry

2011 Inserted Inserted Para 42 and allowed exemption from 01 From 01 July 2011 Fully exempted
Para 42 July 2011 to 30 June 2013 to 30 June 2013 (Subject to some
conditions)
(Poultry farming)
Issued SRO No. 238-Law/IT/2011 dated 06 July 2011 From 01 July 2011 Reduced tax
SRO No. to 30 June 2013 rate @ 5%
238
(Fisheries, Production of Pelleted Poultry Feed,
Production of Seeds, Marketing of locally produced
seeds, Cattle Farming, Dairy Farming, Frog
Farming & Horticulture, Silk tree plantation,
Apiculture, Sericulture, Mushroom Farming,
Floriculture)
2013 Para 42 Amended Para 42 and extended the exemption the Fully exempted
time to 30 June 2015. (Subject to some
conditions)
(Poultry farming)
Issued SRO No. 208-Law/IT/2013 dated 01July 2013 Reduced tax
SRO No. rate @ 3%
208
(Fisheries, Production of Pelleted Poultry Feed,
Production of pelleted feed for fish, shrimp and
cattle, Production of Seeds, Marketing of locally
Apiculture Sericulture, Mushroom Farming,
Floriculture)
2015 Issued SRO No. 208-Law/IT/2015 dated 30 June 2015 (no time limit) Reduced tax
SRO No. rate @ 3%,
199 (Production of Pelleted Poultry Feed, Production of 10% & 15% on
pelleted feed for fish, shrimp and cattle, Production different
of Seeds, Marketing of locally produced seeds, income slabs.
Cattle Farming, Dairy Farming, Frog Farming &
Horticulture, Silk tree plantation, Apiculture
Sericulture, Mushroom Farming, Floriculture
Issued SRO No. 254-Law/IT/2015 dated 16 August 2015 (no time limit) Reduced tax
SRO No. rate @ 0%, 5%
254 (Poultry farming) & 10% on
different
income slabs.
Issued SRO No. 255-Law/IT/2015 dated 16 August 2015 (no time limit) Reduced tax
SRO No. rate @ 0%, 5%
255 & 10% on
(Hatcheries poultry, shrimp and fish & fisheries different
(fish cultivation)) income slabs.

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16. Deferred Tax
In the next Edition of this handbook, deferred tax will be introduced although deferred tax is a requirement /
application of Financial Accounting. Stay connected.
Just Definitions/Meanings stated in this Edition

Accounting profit Accounting profit is profit or loss for a period before deducting tax expense.
Taxable profit Taxable profit (tax loss) is the profit (loss) for a period, determined in accordance with the rules
(tax loss) established by the taxation authorities, upon which income taxes are payable (recoverable).
Tax expense (tax Tax expense (tax income) is the aggregate amount included in the determination of profit or loss
income) for the period in respect of current tax and deferred tax.
Income tax Income tax expense (tax income) comprises current tax expense (current tax income) and
expense deferred tax expense (deferred tax income). Income tax expense is recognised in profit or loss.
Current tax Current tax is the amount of income taxes payable (recoverable) in respect of the taxable profit
(tax loss) for a period.
Current tax comprises the expected tax payable (or recoverable) on the taxable income (or tax
loss) for the year and any adjustment to the tax payable or receivable in respect of previous years'
using tax rates enacted or substantively enacted at the reporting date.
Deferred tax Deferred tax is recognised in compliance with Bangladesh Accounting Standard (BAS) 12:
Income Taxes, providing for temporary (taxable/deductible) differences between the carrying
amounts of assets and liabilities for financial reporting purposes and amounts used for taxation
purposes.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary
(taxable/deductible) differences when they reverse, based on the laws that have been enacted or
substantively enacted by the date of statement of financial position. Deferred tax assets and
liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets,
and they relate to income taxes levied by the same tax authority on the same taxable entity.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will
be available against which the deductible temporary difference can be utilised. Deferred tax assets
are reviewed at each date of statement of financial position and are reduced to the extent that it is
no longer probable that the related tax benefit will be realised.
A deferred tax liability is recognised for all taxable temporary differences. Deferred tax liabilities
are reviewed at each date of statement of financial position and are reduced to the extent that it is
no longer probable that the related tax obligation will be settled.
An entity shall offset deferred tax assets and deferred tax liabilities if, and only if:
(a) the entity has a legally enforceable right to set off current tax assets against current tax
liabilities; and
(b) the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the
same taxation authority on either:
(i) the same taxable entity; or
(ii) different taxable entities which intend either to settle current tax liabilities and assets on
a net basis, or to realise the assets and settle the liabilities simultaneously, in each future
period in which significant amounts of deferred tax liabilities or assets are expected to be
settled or recovered.
Deferred tax Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of
liabilities taxable temporary differences.
Deferred tax Deferred tax assets are the amounts of income taxes recoverable in future periods in respect of:
assets (a) deductible temporary differences;
(b) the carryforward of unused tax losses; and
(c) the carryforward of unused tax credits.

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Deferred Tax
Temporary Temporary differences are differences between the carrying amount of an asset or liability in the
differences statement of financial position and its tax base. Temporary differences may be either:
(a) taxable temporary differences, which are temporary differences that will result in taxable
amounts in determining taxable profit (tax loss) of future periods when the carrying amount
of the asset or liability is recovered or settled; or
(b) deductible temporary differences, which are temporary differences that will result in amounts
that are deductible in determining taxable profit (tax loss) of future periods when the carrying
amount of the asset or liability is recovered or settled.
The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes
Carrying amount Carrying amount is accounting book value of assets (liabilities) (i.e. cost less accumulated
depreciation, in respect of PPE)
Tax base The tax base of an asset is the amount that will be deductible for tax purposes against any taxable
economic benefits that will flow to an entity when it recovers the carrying amount of the asset. If
those economic benefits will not be taxable, the tax base of the asset is equal to its carrying
amount.
The tax base of a liability is its carrying amount, less any amount that will be deductible for tax
purposes in respect of that liability in future periods. In the case of revenue which is received in
advance, the tax base of the resulting liability is its carrying amount, less any amount of the
revenue that will not be taxable in future periods.
Current tax Current tax for current and prior periods shall, to the extent unpaid, be recognised as a liability.
liabilities and If the amount already paid in respect of current and prior periods exceeds the amount due for those
current tax assets periods, the excess shall be recognised as an asset.
An entity shall offset current tax assets and current tax liabilities if, and only if, the entity:
(a) has a legally enforceable right to set off the recognised amounts; and
(b) intends either to settle on a net basis, or to realise the asset and settle the liability
simultaneously.
Components of Components of tax expense (income) may include:
tax expense (i) current tax expense (income);
(income) (ii) any adjustments recognised in the period for current tax of prior periods;
(iii) the amount of deferred tax expense (income) relating to the origination and reversal of
temporary differences;
(iv) the amount of deferred tax expense (income) relating to changes in tax rates or the
imposition of new taxes;
(v) the amount of the benefit arising from a previously unrecognised tax loss, tax credit or
temporary difference of a prior period that is used to reduce current tax expense;
(vi) the amount of the benefit from a previously unrecognised tax loss, tax credit or temporary
difference of a prior period that is used to reduce deferred tax expense;
(vii) deferred tax expense arising from the write-down, or reversal of a previous write-down, of
a deferred tax asset in accordance with paragraph 56 (BAS 12); and
(viii) the amount of tax expense (income) relating to those changes in accounting policies and
errors that are included in profit or loss in accordance with BAS 8, because they cannot be
accounted for retrospectively.
Measurement of Current tax liabilities (assets) for the current and prior periods shall be measured at the amount
tax expected to be paid to (recovered from) the taxation authorities, using the tax rates (and tax laws)
that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to
the period when the asset is realised or the liability is settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted by the end of the reporting period.
Manner of Deferred tax is recovered/settled with the expectation to retain the asset and recover its carrying
recovery/settlement amount through use or with the sale of the asset without further use.
of deferred tax

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Bibliography
1. Income Tax Ordinance 1984 as amended upto July 2016

2. Income Tax Rues 1984 as amended upto July 2014
3. Finance Acts of current and previous years enacted by the Parliament
4. SROs relating to Income Tax, issued time to time
5. Paripatra of current and previous years
6. Taxation I Manual of ICAB
7. Taxation II Manual of ICAB
8. Bangladesh Accounting Standard (BAS) 12: Income Taxes
Last but not the least

It is my great pleasure to have been at the end of second edition of the Handbook of Income Tax (HIT) after a
rigorous effort and a long time. Once again is replied that this handbook (Eid Edition) is second edition – revised in
the form as HIT. So some errors can be found in this handbook and some spellings can also be wrong as it is a paper
of near about forty thousand words which have been typed solely by me. In this handbook I have tried to support all
the issues (items) with reference to substantiate the Handbook. In the next edition of the HIT, I will try to substantiate
all the missing issues/items to support with reference. In this regard I seek your kind and sincere
response/suggestion/reference to make this Handbook more valuable, more readable and most usable for the readers
and users of the Handbook.
Stay connected for the future Edition of this Handbook which will include a chapter of Tax Planning and Deferred Tax.
And in the next July 2017 a Handbook of Value Added Tax based on the new VAT act “Value Added Tax and
Supplementary Duty Act 2012” will be published by me if the “VAT & SD Act 2012” becomes enforceable.
Wish you all the very best.
Thanking you

Date: 13 September 2016
Happy Taxing…

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18. Changes in the “Second Edition - Revised (Eid Edition)”
Changes in the “Second Edition - Revised (Eid Edition)” are marked with the BLUE color in the pages mentioned
below.
The changes are as follows:

Page No.
Sl. PDF page Handbook page Old New (change)
No. (Softcopy) (Hardcopy, if you’ve (Budget Edition) (Eid Edition)
already printed)
1. 11 8 Under “Definition”
Section 2(62) Section 2(58)
2. 11 8 Under “Definition”
Section 2(28) - “Employer” Section 2(27) - “Employer”
3. 12 9 When we deal with the head - When we deal with the head –
Salaries, we should be familiar “Income from Business or
with the concept of “Perquisite” Profession”, we should be familiar
with the concept of “Perquisite”.
Valuation of perquisites (or
implication of perquisites) does
not have any effect while
determining the income from
“Salaries”. Elements of
perquisites are related with the
head – Salaries. That’s why it has
been discussed here.
4. 13 10 Rule 33d:
5% Basic Salary will be added Any allowance mentioned in 33d
5. 19 16 Tk. 66,000 (12% of Tk. 72,000 (12% of 600,000)
600,000*11/12)
6. 20 17
The BLUE marked writings have been changed.
7. 21 18
8. 86 83 XYZ Co. Ltd., a manufacturer of XYZ Co. Ltd., a commercial
ready-made garments, has the importer, has the following
following income for the year income for the year ended 30 June
ended 30 June 2016. Tax has been 2016. Tax has been collected by
deducted by its correspondence Customs Authority u/s 53@ 5%
bank u/s 53BB for the year on Asspessable Value as
amounting Tk. 100,000. determined under Section 25 of
the Customs Act 1969 for the year
amounting Tk. 100,000.
& &
In 2nd row of the table: In 2nd row of the table:
“TDS @1% u/s 53BB” “TDS @5% u/s 53”
9. 88 85 Example-1: Example-3.1:
In 2nd row of the table: “TDS @5% u/s 53”
“TDS @1% u/s 53BB”
Example-2: Example-3.2:
Tk. 25,000 (40,000 – 25,000) Tk. 25,000 (40,000 – 15,000)
10. 89 86 In the table headline: In the table headline:
In Column-2: In Column-2:
As per Section 82C(b)(i) As per Section 82C(4)(b)(i)
In Column-3: In Column-3:
As per Section 82C(b)(ii) As per Section 82C(4)(b)(ii)
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Changes in the Second Edition – Revised (Eid Edition) & Illustrative Example for calculation of individuals’ tax
11. 90 97 Solution-5.1 Solution-5.1

In the 2nd row, 2nd column: 1,500 In the 2nd row, 2nd column: 25,000
And, in total column: 61,500 And, in total column: 85,000
Illustrative Example (N.B: Page 12)
Mr. Abdul Kader khan is a doctor of a private hospital situated in the area of Dhaka North City Corporation. Salaries
and professional income earned by him for the income year ended 30 June 2016 are as follows:
Income from salaries:

Details Amount
Basic salary (50,000 x 12) 600,000
House rent allowance 300,000
Medical allowance (2,000 x 12) 24,000
Festival bonus (equivalent to two-basic salary) 100,000
Total 1,024,000
He has contributed Tk. 5,000 to recognised provident fund over the year. His employer also contributed the same
amount of taka.
Income from profession:

Mr. Kader practices privately. On ab average he sees ten new patients and 30 old patients daily. Fee for new patients
is Tk. 500 and for old patients Tk. 300. He practices privately 300 days a year. Relevant expenses incurred by him
for the year Tk. 1,400,000.
Investment:
Mr. Kader deposited per month Tk. 6,000 in a Deposit Pension Scheme (DPS) with a scheduled bank. He has invested
Tk. 1,000,000 in purchase of shares of a listed company. Besides, he has also purchased a Savings Certificate
(Sanchaypatra) of Tk. 500,000.
Requirement:
Calculate total income and tax liability of Mr. Abdul Kader for the Assessment Year 2016-2017.

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Solution
Name of Assessee : Mr. Abdul Kader
Area of Residence : Dhaka North City Corporation
Income year : 2015-2016
Assessment year : 2016-2017
Computation of total income Schedule 24A
1. Income from Salary:

Gross Exempted Taxable
Particulars Income Income Income
(Taka) (Taka) (Taka)
Basic Salary 600,000 - 600,000
(50,000 x 12)
House rent allowance 300,000 300,000 -
(50% of basic salary or Tk. 25,000 month, whichever is lower)
Medical allowance 24,000 24,000 -
(10% of basic salary or maximum Tk. 120,000, whichever is lower)
Festival Allowance 100,000 - 100,000
Employer’s contribution to a recognized provident fund 60,000 - 60,000
Total income from salary 1,084,000 324,000 760,000
2. Income from Business of Profession:

Gross Admissible Taxable
Particulars Income Expense Income
(Taka) (Taka) (Taka)
New patients 1,500,000 - 1,500,000
(10 patients x 300 days x Tk. 500)
Old patients 2,700,000 - 2,700,000
(30 patients x 300 days x Tk. 300)
Total receipts: 4,200,000 - 4,200,000
Less: Allowable expenditure - (1,400,000) (1,400,000)
Net income from profession 4,200,000 (1,400,000) 2,800,000
Total income (total taxable income) (1+2) 3,560,000
Calculation of gross tax liability

Slab Tax rate Tax payable
On First Tk. 250,000 0% -
On Next Tk. 400,000 10% 40,000
On Next Tk. 500,000 15% 75,000
On Next Tk. 600,000 20% 120,000
On Next Tk. 1,810,000 25% 452,500
Gross Tax liability 687,500

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Calculation of eligible amount for investment rebate Schedule 24D
01 Contribution to DPS (6,000 x 12 = Tk. 72,000 but not exceeding Tk. 60,000) 60,000
02 Investment in approved savings certificate 500,000
03 Investment in approved debenture or debenture stock, Stock or shares 1,000,000
Self-contribution and employer’s contribution to Recognized Provident Fund
04 120,000
(5,000 x 12 x 2)
05 Total allowable investment, contribution etc. 1,680,000
06 Eligible amount for rebate (the lesser of 06A, 06B or 06C) 890,000
06A Total allowable investment, contribution, etc. (as in 13) 1,680,000
06B 25% of the total income (excluding any income for which a tax
exemption or a reduced rate is applicable under subsection (4) of section
890,000
44 or any income from any source or sources mentioned in clause (a) of
sub-section (2) of section 82C.) i.e. 3,560,000 x 25%
06C 1.5 crore 15,000,000
N.B: Employer’s contribution shall not be deducted for determining 25% of the total income i.e. Tk. 3,560,000.
As per Section 44(2)(c)(ii) only the following will have to be deducted for determining 25% of the total income:
i) any income for which a tax exemption is applicable under Section 44(4)
ii) any income for which a reduced tax is applicable under Section 44(4)
iii) any income from any source or sources mentioned in clause (a) of sub-section (2) of section 82C.
Calculation of tax rebate

As the total income exceeds Tk. 3,000,000, the amount of tax rebate will be calculated as follows:
Particulars Slab Tax rate Tax payable
On the First Tk. 250,000 of eligible amount 250,000 15% 37,500
On the Next Tk. 500,000 of eligible amount 500,000 12% 60,000
On the rest of eligible amount (890,000 – 750,000) 140,000 10% 14,000
Amount of tax rebate 111,500
Calculation of tax liability

Particulars Tax payable
Gross tax liability 687,500
Less: tax rebate 111,500
Tax payable 576,000
Minimum tax for Mr. Kader is Tk. 5,000 as he lives in in the area of Dhaka City North Corporation.
So, tax liability of Mr. Abdul Kader for the Assessment Year 2016-2017 is Tk. 576,000. That is higher of tax payable
and minimum tax.
Nota Bene:
Schedule 24A - The format for calculating income from Salary has been extracted from the “Schedule 24A” in Rule 24 in which
new RETURN OF INCOME has been introduced by the SRO No. 259-Law/Income Tax/2016 dated on 10 August 2016.
Schedule 24D - The format for calculating rebatable investment has been extracted from the “Schedule 24D” in Rule 24 in
which new RETURN OF INCOME has been introduced by the SRO No. 259-Law/Income Tax/2016 dated on 10 August 2016.
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Supplemental discussion regarding “rate of tax rebate”

Finance Act 2016 has brought changes in Section 44(2)(b) & (c). As a result, huge impact on tax liability and
complexity in calculation has increased.
The replaced Section 44(2)(b) & (c) is as follows:

“(b) an assessee, being a resident or a non-resident Bangladeshi, shall be entitled to a credit from the amount of tax
payable on his total income of the following amount:
Total income Amount of credit

(i) if the total income does not exceed 15% of the eligible amount;
taka ten lakh
(ii) if the total income exceeds taka (i) 15% of the first two lakh fifty thousand of
ten lakh but does not exceed taka the eligible amount; and
thirty lakh (ii) 12% on the rest of the eligible amount;
(iii) if the total income exceeds taka (i) 15% of the first two lakh fifty thousand of
thirty lakh the eligible amount; and
(ii) 12% of the next five lakh of the eligible
amount; and
(iii) 10% on the rest of the eligible amount;
(c) the “eligible amount” mentioned in clause (b) shall be the lesser of -
(i) the sums specified in all paragraphs excluding paragraphs 15 and 16 of Part B of the Sixth Schedule; or
(ii) 25% of the total income excluding any income for which a tax exemption or a reduced rate is applicable
under sub-section (4) of section 44 or any income from any source or sources mentioned in clause (a) of
sub-section (2) of section 82C; or
(iii) one crore and fifty lakh taka.”
Application of the replaced Section 44(2)(b) with Illustrative Example

The rate for tax rebate has now been variable on the total income (i.e. total taxable income). Total income will set
the rate/rates for tax rate. Earlier before 30 June 2016 rate for tax rebate was 15% as flat rate. Now we have to find
a RATE or RATES for tax rebate first which will be applied for calculating the amount tax rebate. The rate/rates
will depend on the total income.
In this connection three situations have been prescribed in the Section 44(2)(b) as follows:
Situation Total income Rate/rates
1. Total income < Tk. 1,000,000 15% on the whole eligible amount
2. Tk. 1,000,000 > Total income < Tk. 3,000,000 15% on the first 2.5 lakh of eligible amount
12% on the rest of the eligible amount
3. Total income > Tk. 3,000,000 15% on the first 2.5 lakh of eligible amount
12% on the next 5 lakh of eligible amount
10% on the rest of the eligible amount
From 01 July 2016 amount of tax rebate has to be calculated using SLAB SYSTEM as like we use slab system for
calculating individuals’ tax liability.
We have already seen an instance in the Illustrative Example of Mr. Abdul Kader when total income exceeds Tk.
3,000,000 and its impact on calculation of tax rebate. That is an example of the Situation-3.
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Let’s go to exemplify the Situation-1:

Suppose Mr. Kader’s total income (i.e. total taxable income) for the Assessment Year 2016-2017 is Tk. 950,000
and the investments made by his are the same with the Situation-1.
Calculation of gross tax liability

On First Tk. 250,000 0% -
On Next Tk. 400,000 10% 40,000
On Next Tk. 300,000 15% 45,000
Calculation of eligible amount for investment rebate

04 120,000
(5,000 x 12 x 2)
237,500
sub-section (2) of section 82C.) i.e. 950,000 x 25%
06C 1.5 crore 15,000,000

As the total income does not exceed Tk. 1,000,000, the amount of tax rebate will be calculated as follows:
On the First Tk. 237,500 of eligible amount 237,500 15% 35,625

Tax payable 49,375
and minimum tax.
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Let’s go to exemplify the Situation-2:

Suppose Mr. Kader’s total income (i.e. total taxable income) for the Assessment Year 2016-2017 is Tk. 2,500,000
and the investments made by his are the same with the Situation-2.

On First Tk. 250,000 0% -
On Next Tk. 400,000 10% 40,000
On Next Tk. 500,000 15% 75,000
On Next Tk. 600,000 20% 120,000
On Next Tk. 750,000 25% 187,500
Calculation of eligible amount for investment rebate

04 120,000
(5,000 x 12 x 2)
625,000
sub-section (2) of section 82C.) i.e. 2,500,000 x 25%
06C 1.5 crore 15,000,000

As the total income exceeds Tk. 1,000,000 but does not exceed Tk. 3,000,000 the amount of tax rebate will be
calculated as follows:
On the First Tk. 250,000 of the eligible amount 250,000 15% 37,500
On the rest of the eligible amount (625,000 – 250,000) 375,000 12% 45,000

Tax payable 340,000
and minimum tax.
farid.pq@gmail.com
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Handbook of Income Tax - Revised Second Edition (Updated in Light of Finance PDF

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Handbook of Income Tax - Revised Second Edition (Updated in Light of Finance PDF

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Handbook of Income Tax

Updated in light of Finance Act 2016

First Edition (Independence Edition) : March 2015

Farid Mohammad Nasir

Farid Mohammad Nasir Updated in light of Finance Act 2016 Page 1

Farid Mohammad Nasir Updated in light of Finance Act 2016 Page 2

Ordinance The Income Tax Ordinance 1984 (ITO 1984)

Total income i.e. "total taxable income"

Scope of the total income (Section 17)

Computation of total income (Section 43)

Income deemed to accrue or arise in Bangladesh (Section 18)

(3) any dividend paid outside Bangladesh by a Bangladeshi company;

(4) any income by way of interest payable -

Farid Mohammad Nasir Updated in light of Finance Act 2016 Page 5

(5) any income by way of fees for technical services payable –

(6) any income by way of royalty payable -

Heads of income (Section 20) [Classification of income as per ITO 1984]

Charge of income tax (Section 16)

Charge of surcharge (Section 16A)

Charge of additional tax (Section 16B)

Charge of additional amount, etc. (Section 16BB)

Charge of Minimum tax (Section 16BBB) [Go to Section 82C(4)]

Sources of tax laws in Bangladesh

Classification of taxes based on impact and incident of tax

Farid Mohammad Nasir Updated in light of Finance Act 2016 Page 7

Section 2(50) “Profits in lieu of salary” includes -

Section 2(27) "Employer" includes a former employer;

Farid Mohammad Nasir Updated in light of Finance Act 2016 Page 8

Valuation of perquisites, allowances & benefits (Rule 33)

Examples of perquisites include:

Farid Mohammad Nasir Updated in light of Finance Act 2016 Page 10

28 Medical allowance 10% of Basic Salary

37 Interest on accumulated balance of ASF Para5(1), Part-

40 Interest on accumulated balance of AGF Para 5, Part-C,

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Farid Mohammad Nasir Updated in light of Finance Act 2016 Page 12

Tax on tax paid by employer on behalf of employee

Here is the SRO on tax on tax:

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Farid Mohammad Nasir Updated in light of Finance Act 2016 Page 14

# Description Ref To be included in Total To be exempted from

Grossing up of interest while calculating the taxable income:

In case of Commercial Securities:

Implication of Section 106: Avoidance of tax by transactions in securities

Farid Mohammad Nasir Updated in light of Finance Act 2016 Page 15

Here is Section 106: Avoidance of tax by transactions in securities.

Farid Mohammad Nasir Updated in light of Finance Act 2016 Page 16

1 Interest from Treasury Bills (i) 25,000 25,000

2 Interest from Treasury Bond (ii) 150,000 150,000

3 Interest from DCC Debenture (iii) 60,000 60,000

4 Interest from ACI Debenture (Implication of Sec. 106) (iv) 120,000

5 Interest from Zero Coupon Bond (v) 66,000

Total Income from Interest on Securities 445,000

Farid Mohammad Nasir Updated in light of Finance Act 2016 Page 18

Income from house property under Section 24:

Conditions of income to be charged under this head:

RENTAL STATUS OF THE HOUSE PROPERTY:

2. Partly let out house property:

3. Fully occupied house property by the owner:

Farid Mohammad Nasir Updated in light of Finance Act 2016 Page 19

Farid Mohammad Nasir Updated in light of Finance Act 2016 Page 20

Treatment of unspent repair and maintenance: Section 19(30)