Auditing and
Taxation
Chapter 2: Basics of Income Tax
Course Code: FIN-3103
Assistant Professor Kazi Asequl Arefin
Department of Business Administration in Finance and Banking
Outline
▪ Income Tax Payment Cycle
▪ Income Year and Assessment Year
▪ Assessee and Person
▪ Determining Residential Status
▪ Computation of Total Income
▪ Charge of Surcharge
▪ Income Tax Rates
▪ Charge of Minimum Tax
▪ Problem Solving
Income Tax Payment Cycle in Bangladesh
1. Determination of
Income Year and
Assessment Year
2. Determination of
Residential Status
3. Classification of
Income under
Different Heads
• Resident
• Ten Heads of Income:
• Non Resident
• Salary, House Property,
Business-Profession,
Interest, Agricultural,
Capital Gain, etc.
Income Tax Payment Cycle in Bangladesh
4. Exclusion of
Income not
Chargeable to Tax
5. Computation of
Income under Each
Head
• Pension, Gratuity, House
• Admissible Expenses can
Rent Allowance,
Conveyance Allowance
be deducted
6. Clubbing of
Income of Spouse,
Minor, Child etc.
• Tax System is Progressive
• Some Income of Spouse,
Minor Child have to be
included in the income of
the person
Income Tax Payment Cycle in Bangladesh
7. Set-off or Carry
Forward of Losses
8. Computation of
Gross Total Income
9. Deductions from
Gross Total Income
• Adjustment of Different
• If Agriculture Income is
Sources
only source, Tk. 2 Lac is
deducted
• Interhead Adjustment
• Adjusting Loss in
Subsequent Years
Income Tax Payment Cycle in Bangladesh
10. Deriving at Total
Income
11. Application of
Rates of Income Tax
12. Deduction of Tax
Credit or Rebate
• Also known as taxable
• Slab Rate and basic
• Tax rebate is allowed on
income
exemption limit
investment allowance
and tax free incomes
Income Tax Payment Cycle in Bangladesh
13. Surcharge
14. Computation of
Net Tax Liability and
Surcharge
15. Adjustment of
Advance Tax
• Additional charge
• Net Income Tax
• Advance tax in
payable over the income
tax
Liability + Surcharge
installment
• Tax Deducted at source
Income Tax Payment Cycle in Bangladesh
16. Obtaining the TIN
17. Submission of
Income Tax Return
and Payment of Tax
• 12 digit E-TIN if income
• If any amount is due
exceeds non assessable
limit
• Due Date: Tax Day (Nov
30 each year)
Income Year and Assessment Year
• Tax is imposed on the financial year (Starting from July 1)
called assessment year
• Tax is levied in respect of the income earned in the Income
Year
• Basically, Income tax is paid in the next fiscal year of the
income year called assessment year
Income earned on
the Income Year
Tax Imposed on
the Assessment
Year
Income Year and Assessment Year
• Generally,
Income Year is the financial year immediately
preceding assessment year and Assessment Year is the
subsequent year of the income year with some exception
• For
Bank, Insurance Companies, and Financial Institutions
income year is 1 January to 31 December
• For other assessee, income year is the period from July to June
Determination of Income Year
• Usually July 1 of one year to June 30 of next year
• Jan 1 to Dec 30 for Bank, Insurance, or Financial Institutions
• Few Special Cases:
●Start of business to June 30
●Start of Job to June 30
●July 1 to liquidation
●July 1 to retirement or death
Determination of Assessment Year
• Usually the fiscal year after the income year
• Few Special Cases: (Assessed in Income Year)
●Income of discontinued business
●Persons leaving Bangladesh
●Income of non-resident shipping companies
Income and Assessment Year: Illustrative Examples
a. A Ltd started their business on August 01, 2022
b. ABC firm joined as a consultant of a government project on
January 01, 2023, for a five year contract.
c. B Ltd closed all their business operations permanently on
March 31, 2023
d. ABC Traders is a partnership firm and has been continuing its
operation since 2017. One of the partners, A died on April 30,
2023.
Assessee
Period covered in the
income year
Income Year
Assessment Year
A Ltd.
Start August 01, 2022
End June 30, 2023
2022-2023
2023-2024
ABC
(Firm)
Start January 01, 2023
End June 30, 2023
2022-2023
2023-2024
B Ltd.
Start July 01, 2022
End March 31, 2023
2022-2023
2022-2023*
ABC
Traders
(Firm)
Start July 01, 2022
End April 30, 2023
2022-2023
2023-2024
Income and Assessment Year: Illustrative Examples
e. XYZ Traders is a partnership firm and has been continuing its
operation since 2017. One of the partners, Z, retired on
August 31, 2022, and XY decided to continue the operation in
the name of XY traders from September 01, 2022. But
unfortunately, one partner died on May 15, 2023.
f. Prime Bank Ltd. Prepared its annual report covering the
period 1.1.2022 to 31.12.2022.
g. Mr. Jalil, a regular taxpayer, submitted his income tax return
in the “Income Tax Fair, 2023”.
Assessee
Period covered in the
income year
Income Year
Assessment Year
XYZ
Traders
(Firm)
Start July 01, 2022
End April 30, 2023
2022-23
2023-24
XY
Traders
(Firm)
Start September 01, 2022
End May 15, 2023
2022-23
2023-24
Prime
Bank Ltd.
Start January 01, 2022
End December 31, 2022
2022-23
2023-24
Mr. Jalil
Start July 01, 2022
End April 30, 2023
2022-23
2023-24
Income and Assessment Year: Illustrative Examples
h. Mr. Rabbi, a regular taxpayer, is going to leave Bangladesh
permanently on April 30, 2023.
i. M. V. Atlantis, a ship of Panama based company (i.e. non-resident
shipping company), carried imported goods to Bangladesh and
received BDT 20,00,000 against this service on April 30, 2023,
before leaving Chattogram port.
Assessee
Period covered in the
income year
Income Year
Assessment Year
Mr. Rabbi
Start July 01, 2022
End April 30, 2023
2022-23
2022-23*
M. V.
Atlantis
Start July 01, 2022
End April 30, 2023
2022-23
2022-23*
Assessee and Person
• Assessee is a person who is liable to pay any sum
• The term 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
judicial person [Section 2(46)]
Classification of Assessee
(On the basis of person)
• Individual
• Firm
• Association of Person (AOP)
• Hindu Undivided Family (HUF)
• Trust
• Fund
• Company
Classification of Assessee
• Company includes-
●Branch office of foreign organization
●Permanent organization of foreign entity or personnel
●Any association or incorporated body
●Any banking, insurance, financial institution
●Any industry or commerce association
●Organization registered with NGO affairs bureau or
Microcredit regulatory authority
Classification of Assessee
• Company includes-
●Gazetted Government Authority, Local authority,
Autonomous body
●Legally standing unit formed as separate entity
●Any entity except an individual, a firm, an association
of persons, HUF, a trust, and a fund.
●Any foreign association or organization, not registered
under any law specified as company under any general
or special order by the Board.
Self-Test
• Identify the status of the following entities as assessee:
Assessee
Dhaka University
Shohag Paribahan Pvt. Ltd.
Prime Bank Limited
X and Y, who are legal heirs of Z (Z
died in 2019 and X and Y carry on his
business without entering into
partnership)
Unique Enterprises, a firm consisting
of A, B, and C
Classification of Assess
Self-Test
• Identify the status of the following entities as assessee:
Assessee
Classification of Assess
Dhaka University
Company
Shohag Paribahan Pvt. Ltd.
Company
Prime Bank Limited
Company
X and Y, who are legal heirs of Z (Z
Association of Persons
died in 2019 and X and Y carry on his
business without entering into
partnership)
Unique Enterprises, a firm consisting
of A, B, and C
Firm
Self-Test
• Identify the status of the following entities as assessee:
Assessee
A Hindu joint family consisting of P,
Mrs. P, and their son S
Dhaka North City Corporation
Comilla Cantonment Board
ICB Mutual Fund
Anjuman Mufidul Islam
Mr. Faisal Imtiaz
Classification of Assess
Self-Test
• Identify the status of the following entities as assessee:
Assessee
A Hindu joint family consisting of P,
Classification of Assess
Hindu Undivided Family
Mrs. P, and their son S
Dhaka North City Corporation
Comilla Cantonment Board
ICB Mutual Fund
Anjuman Mufidul Islam
Mr. Faisal Imtiaz
Company
Company
Fund
Trust
Individual
Determining Residential Status
• Residential status refers to either:
●Period of stay of an Assessee in Bangladesh
●Degree of control or management of the affairs of an assessee
• Non resident is not taxed on income earned outside Bangladesh
while a resident is taxed on global income
Points Regarding Residential Status
• Separate set of rules for individual and firm
• Determined separately for each income year
• Always determined for the income year
• Person may be a resident of more than one country
• Residential Status does not depend on citizenship
• Burden of proof lies with the assessee
Rules for determining Residential Status
• For Individual: If he stays in Bangladesh for a period amounting
in all to 183 days or more in that year.
• Or, for periods amounting in all to 90 days or more, having
previously been in Bangladesh for periods amounting to 365
days or more during four year preceding that year
• For HUF, Firm, AOP, Company, Trust, Fund: If control and
management is situated wholly in Bangladesh
To be taxed or not
Resident
Non-Resident
Bangladeshi Income
(Received)
Bangladeshi Income
(Arise/Accrued)
Taxable
Taxable
Taxable
Taxable
Foreign Income
Taxable
Non-Taxable
Effect of Residential Status
• Resident
considers global income as his total income,
non-resident does not
• For non-resident foreigner minimum non-assessable limit is not
applicable
• Non-resident foreigner has to pay the maximum rate (30%)
• No tax rebate is applicable for non-resident foreigner
Minicase: Residential Status
• Selina
Akter, a Bangladeshi citizen, for the first time left
Bangladesh for higher studies on October 01, 2016.
• For celebrating Eid, she came to Bangladesh on October 12,
2017, and stayed for 90 days; again, she came to Bangladesh in
her brothers’ marriage ceremony on August 14, 2018 and stayed
for 68 days.
• She also stayed in Bangladesh for 115 days from September 17,
2019, in Bangladesh for research purpose.
• Finally, after completing her studies she came to Dhaka on April
01, 2021. Determine her residential status for the income year
2020-21.
Computation of (Gross) Total Income
• Any exemption or allowance is still included in gross total
income as well as any income deemed to be the income of the
assessee
• Income of spouse or minor child is included (benefit from firm
membership, assets transferred otherwise than by way of gift)
• Income arising from any settlement-disposition and revocable
transfer of asset
Tax Rebates
• As per ITO, tax rebate is allowed on investment allowance, tax
free incomes (e.g. share of profit in a firm) etc. as per the
following rates
• @Average rate on tax free income (e.g. share of profit in a firm)
• @15% on eligible amounts of investment allowance.
• Maximum amount eligible for tax rebate would be restricted to
lower of 3% of total income or Tk. Ten lac
Tax Rebates
Charge of Surcharge
• Govt may charge surcharge on income in addition to income tax
Net Wealth Amount
Rate
Up to Tk. 4 crore
Nil
More than 4 crore to Tk. 10 crore or,
Having multiple motor cars under one name or,
Having more than 8000 sq. ft house in city corporation area
10%
More than Tk. 10 crore to Tk. 20 crore
20%
More than Tk. 20 crore to Tk. 50 crore
30%
More than Tk. 50 crore
35%
• Additional 2.5% surcharge is applicable on income from tobacco made
products manufacturing business
Income Tax Rates
Income Tax Rates
• Minimum non-assessable income limit is 400,000 for women,
elder citizens being more than 65 years of age.
• For
disabled person and transgender, it is 475,000 and for
gazetted wounded freedom fighters it is 500,000
• Minimum
non-assessable income limit for parents or legal
guardian of disabled child/dependent will be Tk. 50,000 more
for each child/dependent
Income Tax Rates
Tax Rates of Capital Gain
(In case of person other than a company)
• On
disposal of capital assets within 5 years of
acquisition:
●Capital Gain included in total income and taxed at regular rate
• On disposal of capital assets after 5 years of acquisition:
●Taxed at flat 15% rate
Charge of Minimum Tax
• If the Assessee is:
●An individual having gross receipts of taka three crore or more;
●A firm having gross receipts of more than taka fifty lac, or
●A company,
• Irrespective of profit or loss be liable to pay minimum tax
Charge of Minimum Tax
• Minimum tax is Tk. 5,000 for Dhaka North, Dhaka South and
Chattogram.
• Minimum Tax is Tk. 4,000 for other city corporation area and
Tk. 3000 for other than city corporation area.
• Surcharge or any additional amount is payable in addition to
minimum tax
Charge of Minimum Tax
• Minimum tax for an individual having gross receipts of taka 3
crore or more will be 0.25% of gross receipts
Type of Assessee
Manufacturer of Cigarette, Bidi, Chewing Tobacco,
Smokeless Tobacco, or any other tobacco products
Minimum Tax (% of
Gross Receipts)
3.00%
Carbonated Beverage
Mobile Phone Operator
Individual other than individual engaged in the
manufacturing of tobacco products, having gross
receipts of taka 3 crore or more
3.00%
2.00%
0.25%
Any other cases
0.60%
Problem 2.1
Mr. Ramit, a 50-year-old Bangladeshi citizen, lives in Dhaka. Calculate
his income tax liability for the current assessment year based on the
following information:
• Stayed in Bangladesh during the income year: 300 days
• Total Global Income Tk. 12,50,000 [Domestic income Tk. 850,000;
foreign income Tk. 400,000]
• Net wealth amount at the end of the income year: Tk. 2 crore
• He has made actual allowable investment of Tk. 250,000.
• TDS Tk. 20,000 & Tax refund claim Tk. 5,000
Problem 2.2
Mrs. Selina, a 50-year-old Bangladeshi citizen, lives in Dhaka.
Calculate her income tax liability for the current assessment year
based on the following information:
• Stayed in Bangladesh during the income year: 200 days
• Total
Global Income Tk. 1,600,000 [Domestic income Tk.
1,300,000; foreign income Tk. 300,000]
• Net wealth amount at the end of the income year: Tk. 5 crore
• She has made actual allowable investment of Tk. 400,000
• TDS Tk. 20,000 & Tax refund claim Tk. 5,000
Problem 2.3
Mr. Bashir, a 70-year-old Bangladeshi citizen, lives in America. He is a
registered taxpayer of DNCC. Calculate his income tax liability for the
current assessment year based on the following information:
• Stayed in Bangladesh during the income year: 50 days
• Total Global Income Tk. 16,50,000 [Domestic income Tk. 5,50,000;
Foreign income Tk. 11,00,000]
• Net wealth amount at the end of the income year: Tk. 11 crore
• He has made actual allowable investment of Tk. 120,000 in Bangladesh
• TDS Tk. 1,000 & Tax refund claim Tk. 1,000.
Problem 2.4
Mr. Bashir, a 50-year-old disabled Bangladeshi citizen, lives in Rajshahi.
Calculate his income tax liability for the current assessment year based on
given information:
▪ Stayed in Bangladesh during the given income year: 360 days
▪ Total global income Tk. 1,575,000 [Domestic income 1,300,000 (house
property income Tk. 700,000; income from catering business Tk.
300,000; capital gain from selling a capital asset within 5 years of
acquisition Tk. 100,000; share of profit in a partnership firm Tk.
200,000); foreign income Tk. 275,000]
▪ Net wealth amount at the end of the income year: Tk. 22 crore
▪ He has made actual allowable investment of Tk. 400,000
▪ Advance tax Tk. 25,000, TDS Tk. 10,000 & Tax refund claim Tk. 5,000.
Problem 2.6
Mr. Tarif, a 75-year-old Bangladeshi citizen, lives in Rajshahi. Calculate
his income tax liability for the current assessment year based on the
following information:
▪ Stayed in Bangladesh during the income year: 360 days
▪ Total Global Income Tk. 1,600,000 [domestic income Tk. 1,300,000
(house property income Tk. 700,000; income from tobacco manufacturing
business Tk. 300,000; share of firm profit Tk. 300,000); foreign income
Tk. 300,000]
▪ Net wealth at the end of the income year: Tk. 30 crore
▪ He has made actual allowable investment of Tk. 400,000.
▪ Advance tax Tk. 25,000, TDS Tk. 10,000 & Tax refund claim Tk. 5,000.
▪ He is a gazetted wounded freedom fighter.
Problem 2.7
Mx. Doel, a 40 year old Bangladeshi transgender citizen, lives in Dhaka.
Calculate his tax liability for the current assessment year based on the
following information:
• Stayed in Bangladesh during the income year: 365 days
• Total
Global Income Tk. 875,000 [Domestic income Tk. 875,000,
foreign income- nil]
• Net wealth at the end of the income year: Tk. 50 lac
• Actual
allowable investment made during the income year of Tk.
200,000.
• TDS Tk. 10,000
Problem 2.8
Chris Gayle, a 42-year-old cricketer from West Indies, came to
Bangladesh for playing in BPL. He stayed in Bangladesh for two months
(March & April) of the income year. Calculate his income tax liability
for the current assessment year based on the following information:
• Stayed in Bangladesh during the income year: 61 days
• Total Global Income Tk. 120,000,000
• Income earned in Bangladesh Tk. 20,000,000
• Income earned outside Bangladesh Tk. 100,000,000
• Net wealth at the end of the income year Tk. 160 crore
• He has made investment of Tk. 10,00,000 in Bangladesh stock market
Assessee:
Chris Gayle
Assessment Year:
2023-2024
Income Year:
2022-2023
Since none of the conditions are fulfilled, Chris Gayle is a non-resident
foreigner assessee. So, he will pay tax only for the income earned inside
Bangladesh @ 30%. Moreover, he is also not eligible for any kind of tax
rebates.
So, the tax liability of Chris Gayle= 30% of Tk. 20,000,000
= Tk. 6,000,000