Non Corporate Tax Structure

Introduction: One of the major sources of public revenue to meet a country’s revenue and development expenditures with a view to accomplish some economic and social objectives, such as redistribution of income, price stabilization and discouraging harmful consumption. It supplements other sources of public finance such as issuance of currency notes and coins, charging for public goods and services and borrowings. The term ‘Tax’ has been derived from the French word taxe and etymologically, the Latin word taxare is related to the term ‘Tax’, which means ‘to charge’.

Tax is a contribution exacted by the state. It is a non penal but compulsory and unrequited transfer of resources from the private to the public sector, levied on the basis of predetermined criteria. According to Article 152(1) of the Constitution of Bangladesh, taxation includes the imposition of any tax, rate, duty or impost, whether general, local or special, and tax shall be construed accordingly. Rate is a local tax imposed by local government on its residents or the property owners of the locality, a duty is a tax levied on a commodity, and an impost is a tax imposed for an entry into a country.

Under the provision of article 83 of the Constitution, “no tax shall be levied or collected except by or under the authority of an Act of Parliament”. The imposition, regulation, alteration, remission or repeal of any tax is dealt with by the ‘Money Bill’, but except in case of reduction or abolition of any tax, the ‘Money Bill’ cannot be introduce in the Parliament without the President’s recommendation. Taxation:

Taxation means an imposition of a non penal, yet compulsory levy for transfer of resources from the private to the public sector, imposed by the public representative on the basis of predetermined criteria and without reference to any specific commitment, in order to accomplish some nation’s economic and social objectives. There are the dues that we pay for the privileges of membership in an organized civil society like Bangladesh. Importance: Internal resources mobilization gets the top most priority to any good governance which aims at ensuring a balanced economic growth.

Income tax plays a very significant role in such a resource mobilization. Good tax laws protect the rights of the citizens, ensure due contribution to the treasury and take care of the national economy too. The more the people will be enlightened about their tax obligations, the les will be the complications for an ongoing economic boost. Income tax is a very political and socially important subject which otherwise tend to reduce the social inequalities through taxing the richer and distributing the same to others through various economic measures. Classification of Taxpayers:

For the purpose of socio-economic stabilization, taxpayers have been classified either as corporate or non-corporate. Companies, banks, corporations and other statutory bodies have been taken as corporate and the rest e. g. Individuals, firms, H. U. F, A. O. P are designated as non-corporate. Tax rates, residential status, tax exemptions, rebates etc. and in many other areas, the two groups of taxpayers also differ. Components of Income: a) Any income, profits or gains, from whatever source derived, chargeable to tax under IT Ordinance; 84; b) Any loss of such income, profits or gains; ) The profits and gains of any business of insurance carried on by a mutual insurance association computed in accordance with the IT Ordinance; 84; d)

Any sum deemed to be income, or any income arising or received or deemed to accrue or arise or be received in Bangladesh. New provision; 2002: Provided however, that Bonus or Bonus Shares issued declared by a company shall not be included as income of the recipient shareholder. Income may be “assessable” or “non- assessable”. Non-assessable are totally ignored by tax laws Viz. pension income, receipts of accumulated balance from recognized provident fund etc. s have been declared as non-assessable income by the Govt. from time to time. Assessable income is again divided into taxable and non-taxable income. Non-taxable income is taken into total income for taxation rate purpose but no tax is to be paid on this part of income, rather, a proportionate rebate is allowed on this income as is included in the total income.

Non-taxable income like share income of partnership firm, share income from Hindu Undivided Family etc. (Salary income of Govt. servant was deemed to have been tax paid till 30. 06. 2010 but it has been made taxable by Finance Act. 011) are included in the total income of the tax payers only to raise the income ceiling and the tax rates as and when applicable. Total Income and its Sources (Sec. 43) Any income subjected to tax must fall within a definite source as defined U/S 20 of IT Ordinance, 84. These are income from salaries, profession or vocation, interest on securities, house property income, agriculture, capital gains and income from other sources. Except the last two heads, all others are more or less self-explanatory. An income from other sources is one, which cannot be attributed to any of the defined sources as above.

For example, income from gambling, lotteries, dividends, royalties or any income deemed to be as such for reasons of investments and expenses not being adequately explained. Trading liabilities and personal loans not being paid off within three years are also be deemed to be income on the 4th year. Interest received from Fixed Deposits in Postal Savings Banks or any other scheduled Banks, Dividend income are also specified as income from other sources u/s 33. Sec. 43(2): All non-taxable income shall be included in total income but not the non-assessable income. Nonassessable income is totally ignored for tax purposes. Sec. 3(4): Income of wife or minor children shall have to be included in total income of the husband or father unless it can be reasonably explained.

The only exception is in the case of wife or minor child when such income arises from assets transferred by way of gift by the husband or father. Capital Gains (Sec. 31): Capital gains arise as a result of disposal of capital assets except personal effects like wearing apparel, jewellery, furniture, equipments and vehicles. It also does not include gains from agricultural lands beyond five miles of the radius of an urban area, call it municipality, city corporation or otherwise.

The law provides that if the sale value shown falls short of the fair market value by more than 15%, the DCT may, with prior approval of his joint commissioner, estimate the fair market value. If this difference goes further to more than 25%, the Govt. may opt to buy it as per the provisions of Income Tax Ordinance 1984. All these are there just to check the gross under valuation of properties so sold off. The rates of capital gains tax have also been simplified. Capital gains arising out of disposal of assets within five years of acquisition shall fetch tax at normal rate along with other income.

If the gains as such, accrue after five years the tax payable by an individual shall be the normal tax along with other income or the normal tax on other income if there be any, plus 15% on the portion of capital gains, whichever is beneficial for the tax payer. It has been also provided that tax deducted at source @ 2% on the “Deed Value” at the time of registration of the sale deed shall be deemed to be a final discharge of tax liability u/s 82C under this head except where the same capital gains have been reinvested under sub section 10 of section 32 in the equity of a new industry. a.

If the sale proceeds of the scrapped assets fall below the written down value, the deficiency shall be deemed to be obsolescence allowance u/s 19(16). b. The excess of sale proceeds over the written down value, subject to deduction of a maximum depreciation amount allowed so far, shall be taken to be the capital gain u/s 31 and the deducted amount of depreciation shall be deemed to be a business income u/s 28. c. Capital gains arising to an individual from the transfer of Govt. securities and stock and shares of public limited companies listed with the stock exchanges of Bangladesh are exempted from tax.

This exemption shall also be available to a “Non-resident” if similar benefit is available for him in his home country. Sec. 32(7): Capital gains arising from transfer of shares and stocks to a company shall be however, taxed at a concessional rate of 10% from assessment year 2010-2011. Rates of Taxes as per Finance Act, 2012 Individual / Firm / Hindu Undivided Family / Association of Person (AOP) First Tk. 200,000 ———————————–Nil Next Tk. 300,000 ———————————@ 10% Next Tk. 400,000———————————–@ 15% Next Tk. 00,000———————————–@ 20% On the balance ———————————-@ 25% Provided however, that a lady tax payer or a Senior person over 65 shall enjoy the initial exemption of Tk. 225,000/-.

A retarded person shall get an exemption of Tk. 275,000/-. Provided further that an assessee who paid taxes in the maximum rate in the last year shall get a rebate @ 10% on the additional tax attributable to any excess income shown at more than 10% this year over last year. The NRB shall be taxed at normal rates as applicable to a resident of Bangladesh. But in no case, tax shall be lesser than Tk. ,000/- for any particular assessment year (as per Finance Act 2012). An investment tax rebate @10% on 20% of the total income excluding the employers contribution to Provident Fund (Part B of First Schedule) or Tk. 100,00,000/- whichever is less, shall be enjoyed by an individual taxpayer. But a corporate Tax Payer is not eligible for any such benefit of investment tax rebate.

Wealth Tax had been abolished (Finance, Act, 1999) and instead, a surcharge had been introduced @10% of the income tax payable for the year if the total wealth, subject to exclusion of a residential house, exceeded Tk. 0 Lac and @15% if the same exceeded Tk. 30,00,000/-. This surcharge had again been abolished by Finance, Act, 2002. But the same surcharge has again been introduced through Finance Act. 2011 whereby a surcharge @ 10% shall be imposed on a person whose total wealth as per wealth statement exceeds taka 02 crore. The income earned abroad by a Bangladeshi citizen and the same being remitted through proper banking channel is totally tax exempted vide SRO. 216-Laws/Income tax/2004 dated 13. 7. 2004. Taxability of interests on saving Certificates

Interests credited/paid to the holders of Saving Certificates of any category other than Wage Earners Development Bond, USD premium bond etc. were subjected to 05% deduction of tax at source till 31. 12. 2003 and the taxes so deducted were considered to be the final discharge of tax liability u/s 82c(4). But Certificates purchased after 31. 12. 2003 were immuned from such deductions of taxes at source till 30. 06. 2007. The interests earned therefrom were as usual added to total income and taxed accordingly. Finance Act. 2011 had brought another amendment to sec. 2D whereby intersts on any saving instruments including Wage Earners Development Bond, USD premium bond shall be subjected to a 5% deduction of tax at source and the provision for final discharge of tax liability u/s 82C was also withdrawn. Even the interest from pensioners’ savings certificate shall be taxed as usual with 5% tax deduction as aforesaid. But no tax is deductable u/s 52D if the savings instruments are purchased by an approved superannuation fund or pension fund or gratuity fund or a recognized provident fund or a workers profit participation fund.

Henceforth, all such interests shall face tax deductions@5% for onward credit from the tax payable. Who is to pay tax? Sec. 2(55) Taxability of a person is determined on the basis of his residential status. Anyone stays in the taxable territory for 182 days or more in the income year or 365 days at a time or consecutively within 04 years immediately before the income year just preceding the assessment year plus a minimum of 90 days in the income year, shall be deemed to be resident. Otherwise, a non-resident. Non-resident except a Bangladeshi non-resident has to pay tax at the maximum rate of 25% irrespective of total income.

Moreover, a Non-Resident shall not be entitled to any sort of tax rebate like investment tax rebates etc. HUF, firms or other Association of Persons shall be resident in Bangladesh if its control and management is situated wholly or partly in Bangladesh in that year. Who and when to submit return & where? Any assessee being taxed at any time within the last 03 years and assesses having got taxable income for the current year shall have to submit I. T. return. Admitted tax has to be deposited along with return (Sec. 74). A person owing a building of more than one story and with a plinth area of more than 1600 sft.

Or a motor car or having an ISD telephone connections, contesting the elections of local bodies or of the Parliament or being a member of a club registered under VAT ACT, 1991, has also to submit IT return (Sec. 75 (1)/(75)(1A). In the case of an individual, such returns including the returns under Universal Self Assessment, shall be accompanied by particulars of his personal and family expenditures as per the prescribed form –IT-10BB. Penalty for non-submission of return (Sec. 124): Any person failing to file the return within time may have to pay a penalty f 10% of the last assessed tax but in no case it shall be lesser than Tk. 1000/- plus in cases of continuous defaults, a further sum of Tk. 50/- per day till the default continues. For assesses other than companies and statutory bodies, the last date fixed by law for submission of return is 30th September each year. The companies, banks and other statutory bodies like TCB, BCIC, Grameen Bank etc. have to submit their returns within 06 months from the end of its income year or within the next 15th July, whichever is later. Non submission of returns within due date unless extended by the NBR or by the Dy.

Commissioner of Taxes in individual cases for a maximum periods of six months, shall entail a mandatory penalty as stated before and in addition, a summary assessment by the Deputy Commissioner of Taxes (DCT) may be made u/s 84 ex-parte to the best of his judgment. However, the DCT shall not extend any time in case of a return under Universal Self Assessment u/s 82BB. The return has to be submitted to the income tax circle concerned. The whole of the taxable territories have been divided into Zones, Ranges and Circles. For example, Dhaka Zones 1 to 8, Chittagong Zones 1 to 3, Rajshahi & Khulna Zones etc.

Zones and Ranges are headed by Commissioners and Addl. /Joint commissioners and the Circles by Deputy/ Asst. Commissioners on the basis of its revenue importance. An assessee has to file the return to the concerned income tax circle under whose jurisdiction the assessee falls as per order of the Tax Authorities. Appeals by aggrieved tax payers: An aggrieved assessee, other than a company, may prefer an appeal to the appellate Joint/Addl. Commissioner of Taxes within 45 days from the date of receipt of the impugned assessment order. (An appeal fee of Tk. 200/- Finance Ordinance, 2007 to be deposited to govt. /c under code no. 1-1143-0010-1876 and the admitted liability U/S 74 shall have to be paid before filing the appeal. A company will file the appeal direct to the Commissioner of Appeals with similar conditions. Sec. 153(1A) The aforesaid appeals shall be deemed to have been accepted unless an order is passed by the appellate authorities within 150 days from the end of the month in which the appeal was filed [sec. 156(6)] Sec. 121A: Revisional powers of the Commissioner This section was deleted by Finance Ordinance, 2007, but again reintroduced by Finance Act. 2009.

The Commissioner may call for any case record wherein the order has been passed by any officer subordinate to him and may pass an order as he deems fit. On the other hand, the tax payer may also file a revision petition to the Commissioner of Taxes within 60 days from the date of receipt of the impugned order along with a fee of Tk. 200/-. The undisputed tax under sec. 74 has also to be paid before filing the petition. The aforesaid review petition shall be deemed to have been accepted unless an order is passed by the Commissioner within 60 days from the date of filing the review petition.

This revision petition is subject to the condition that the applicant has to forgo the right to further appeals to Appellate Joint/Addl. Commissioner of taxes or the Commissioner of taxes (Appeals) or to the Taxes Appellate Tribunal as stated earlier. Taxes Appellate Tribunal: (Sec. 158) Taxes Appellate Tribunal shall be constituted by members being recruited from amongst retired members, NBR, retired Commissioners of Taxes, existing Commissioners of Taxes, Chartered Accountants & ICMA’s with at least 08 years practice, retired District and session Judge and practicing Tax Lawyers of enormous experience.

Subject to norms, procedures and limitations, an assessee can appeal to Tribunal within 60 days and on payment of an appeal fee of Tk. 1000/- to be deposited to govt. a/c against the orders of the Appellate Commissioners/Additional commissioners/Joint commissioners of taxes. The appeal shall be deemed to have been accepted unless any order is passed on such appeal by the Tribunal within 06 months from the end of the month in which the appeal was filed. Provided however, that no appeal shall lie to the Tribunal unless 10% of the mount representing the difference between the tax as determined on the basis of the order in the 1st appeal (revised assessment u/s156) and the tax payable u/s74 as per return is paid. It is further provided that the Commissioner of Taxes may, however, waive such payment of taxes u/s 158(2) in a manner as he deems fit on cogent grounds (F. Act. 2011). Reference to the Hon’ble Supreme Court. (Sec. 160, 162) Such references only on questions of law may be made within 90 days and on payment of a fee Tk. 2,000/-.

Provided however that no reference under sub sec. 01 shall lie against the order of the Taxes Appellate Tribunal unless the following taxes have been paid. a. 25% of the difference between taxes payable under sec. 74 and the taxes due after the disposal of the case by the Tribunal (taxes u/s. 159) when such taxes does not exceed Tk. 10,00,000/- b. 50% of the difference between taxes payable under sec. 74 and the taxes due after the disposal of the case by the Tribunal when such taxes exceeds Tk. 10,00,000/-