Example 1:
In the fiscal year 2021-22, Mr. Ruhin, who serves as the Managing Director of XYZ Pvt Limited, hired Mr.
Smith, an Australian citizen, without obtaining prior government approval. During this fiscal year, the
company incurred a tax liability of BDT 962,500.
Furthermore, in the fiscal year 2021-22, XYZ Pvt Limited reported an after-tax profit of BDT 3,500,000.
The company also declared a 10% cash dividend in that year. The total capital of the company was BDT
10,000,000.
What is the total tax liability of XYZ Pvt Limited for the fiscal year 2021-22?
Suggested answer:
According to Income Tax Act 2023, section 19, without prior government approval, a company has to
pay an additional tax of 50% of tax liability or BDT 500,000 whichever is higher if any foreign person
works for that company.
Particular
BDT
the tax liability, mentioned above
962,500
50% of tax liability
481,250
So, the company has to pay an additional income tax of BDT 500,000 because it is higher than 50% of tax
liability for violating rules.
According to the Income Tax Act 2023, section 22, if the Company fails to pay 30% of the dividend from
net income, then they have to pay 10% taxes on the amount transferred to the general reserve or
retained earnings.
Particular
dividend to be paid (10% of 10,000,000)
Net income
BDT
1,000,000
3,500,000
30% of net income
1,050,000
So, the company failed to comply with the rules and had to pay an additional income tax of 10% of funds
transferred on retained earnings.
Particular
After-Tax profit
Less: Dividend
The amount transferred to retained earning
Addition income tax (10%)
The total tax burden for the company is
Particular
Tax liability
Additional tax for violating Sec 19
Additional tax for violating Sec 22
Total tax burden
BDT
3,500,000
1,050,000
2,450,000
245,000
BDT
962,500
500,000
245,000
1,707,500
Question 2
Mr. Ruhin is an executive at a private software company who is a USA resident and worked as a
consultant for a Bangladeshi company. His income details for the year 2022-23 are as follows:
1.
2.
3.
4.
5.
6.
7.
Basic salary: Tk. 40,000 per month
House rent allowance: 40% of basic salary
Medical allowance: Tk. 4,000 per month
Conveyance allowance: Tk. 3,000 per month
Traveling allowance: Tk. 70,000
Performance bonus: Tk. 90,000
Overtime allowance: Tk. 30,000
He is provided with a company-owned car of 3500 CC for both office and personal use.
During the year, he received two festival bonuses, one in December and another in April, each equal to
one and a half months' basic salary.
Mr. Ruhin contributes 12% of his basic salary to the Recognized Provident Fund (RPF), and his employer
matches this contribution. The interest earned on the RPF balance is Tk. 75,600.
Additionally, he contributes 6% of his basic salary to a group insurance premium.
Throughout the year, he made the following expenses and investments:
- Life insurance premium paid (Policy value Tk. 350,000): Tk. 16,000
- Purchase of land: Tk. 280,000
- Purchase of shares from the primary market: Tk. 6,000
Calculate Mr. Ruhin's total income and tax liability for the year 2022-23.
Suggested answer:
Total income for Mr. Ruhin for the income year 2022-23:
Particular
Basic salary
House rent allowance
Medical allowance
Conveyance allowance
Traveling allowance
Performance bonus
Overtime allowance
3500 CC car facility
Festival allowance
Contribution to RPF by employer
Interest earned on RPF
Income from salary
BDT
480,000
192,000
48,000
36,000
70,000
90,000
30,000
25,000
120,000
57,600
75,600
1,224,400
Less: exemption of 1/3 of income from salary ( BDT 408,133) or
BDT 450,000 whichever is lower
Total income
The tax liability of Mr. Ruhin is calculated below
Total income
For the first 816,267
408,133
816,267
Tax rate
30%
Tax liability
244,880
Mr Ruhin is not a resident of Bangladesh and any non-resident doesn’t get any investment rebate.
Example 3
Sunflowers Private Limited company operates in Bangladesh and has the following financial data for the
fiscal year:









Net Business Profit: 50,00,000 taka
Net Trading Profit: 40,00,000 taka
Business Turnover: 2,00,00,000 taka
Perquisites paid to an employee: 12,00,000 taka
Expenses for royalties, license fees, and other intangible assets: 9,00,000 of taka
Head office or intra-group expenditure: 5,00,000 taka
Foreign travel expenses for business purposes: 1,50,000 taka
Promotional expenditure other than advertising: 1,20,000 of taka
Shareholder director receives a commission: 8,00,000 taka
Calculate the taxable income and tax liability for Company XYZ based on the provided law.
Suggested answer:
particular
Profit before tax
Add. deductions not allowable:
Excess prerequisite
Excess Expenses for royalties, license fees, and other intangible
assets
Excess Foreign travel expenses
Excess Promotional expenditure other than advertising
Shareholder director receives a commission
Total deduction not allowable
Total taxable income
Tax rate
Tax liability
Notes:
Determine the deductions not allowable:
a) Shareholder director's commission: 8,00,000 taka
BDT
BDT
50,00,000
2,00,000
4,00,000
50,000
20,000
8,00,000
16,06,000
66.06.000
27.5%
18,16,650
b) Perquisites in excess of 10 lakh: 2,00,000 taka
c) Additional expenses on intangible assets (10% of net business profit i.e. BDT 500,000): 4,00,000 taka
d) Additional foreign travel expenses (0.5% of business turnover i.e. BDT 100,000): 50,000 of taka
e) Excess promotional expenditure (0.5% of business turnover): 20,000 taka