Ch 2, Bangladesh Income Tax

Chapter Highlights
• Income tax
• Characteristics & Objectives of Income tax
• Roles and Importance of Income tax
• Scope of Bangladesh Income tax law
• Important Concepts
 Income tax
Income tax is a tax that governments impose on financial income
generated by all entities within their jurisdiction. By law, businesses
and individuals must file an income tax return every year to
determine whether they owe any taxes or are eligible for a tax
refund. Income tax is a key source of funds that the government
uses to fund its activities and serve the public. Income tax is a tax on
income just, it is not a number of taxes.
Characteristics of Income tax:
• It is a direct tax charged on income
• Charged on total income of an income year of an assessee on an
assessement year.
• Rules and regulations are set by government(NBR).
• Tax imposed on items other than income is not income tax
 Objectives & Importance of Income tax
• Revenues collection
• Redistribution of income
• Increase in savings and capital investment
• Economic development

Roles of Income tax in economic development:

• Tax holiday facilities: Industries enjoy various facilities. Some industries
shall be exempted from tax established in certain area within a specific
time period. By providing this facilities government intends to ensure
economic development
• Accelerated Depreciation Allowance: Accelerated depreciation rate is
allowed for some machineries of some industries in some specific
areas.
• Investment allowance: It attracts new investors. It is given on new
machineries according to NBR rules.
• Tax incentives for small & Cottage industries: These types of industries
are given tax facilities to make a good position and for contributing in
the economy.
• Tax exemptions for some expenditures: Cancer Hospital, Govt Zakat
fund, President Relief fund, scientific research etc.
• Tax incentives for foreign investors and remittance to BD: Remittance
is exempted and foreign investor are offered various facilities.
 Scope of Bangladesh Income tax
• Income tax ordinance 1984
• Income tax rules 1984
• Finance Act
• SROs
• Judicial decisions
 Important concepts
• Agricultural Income: Income from any land situated in Bangladesh
by means of agriculture or process necessary to make the agri-crops
marketable.
• Assessment & Income Year:
• Perquisites: Any payment made to an employee in cash or in kind
excluding basic salary, festival bonus, incentive bonus(not more
than 10% of disclosed income of the year), arrear salary, advanced
salary, leave encashment and over-time.
• Resident:

You also should know: Fair market value, capital assets, Annual value.