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The Institute of Chartered Accountants of

Bangladesh
TAXATION 2
STUDY MANUAL
CO!"#IN$ %INANC" ACT 2&''(
CA )rofessional Stage A**lication Le+el
www.icab.org.bd )A#TN"#
IN L"A#NIN$

Ta,ation II
The Institute of Chartered Accountants of Bangladesh Professional Stage
The learning materials have been prepared by the Institute of Chartered Accountants
of Bangladesh
First edition arch !"##
All rights reserved. $o part of this publication may be reproduced in any form or by
any means or stored in any retrieval system% or transmitted in% any form or by any
means% electronic% mechanical% photocopying% recording or otherwise without prior
permission of the publisher.
Contents
)age
Introduction
Speci&cation grid for Ta'ation !
The learning materials
Study guide
(etting help
Syllabus and learning outcomes
# Introduction to Bangladesh Income Ta'
! Administration and Tribunal
) Charge of income ta'
* Income from salaries
+ Income from Interest on Securities
, Income from house property
- Agriculture income
. Income from business or profession
/ Capital gains
#" Income from other sources
## 0epreciation allowances
#! Set o1 and carry forward of losses
#) 2'emption and allowances 3ta' holiday 4 e'emption5
#* Payment of ta' before assessment
#+ Advance payment of ta'
#, 6eturn of income and statements
#- Assessment
#. Assessment of individuals
#/ Assessment of partnership &rms
!" Assessment of companies
!# 7iability in special cases and assessment of non8residents
!! Special provisions relating to avoidance of ta'
!) Powers of Income Ta' Authorities Including Search and Sei9ure
!* Imposition of Penalty
!+ 6ecovery of Ta'
!, 0ouble ta'ation relief
!- 6efunds
!. Appeal and reference
!/ iscellaneous
)" :alue Added Ta'
)# 2thics
Sample Paper
Sample Paper Answers

' Introduction
'-' .hat is Ta,ation and ho/ does it 0t /ithin the )rofessional Stage1
Structure
The syllabus has been designed to develop core technical% commercial% and
ethical s;ills and ;nowledge in a structured and rigorous manner.
The diagram below shows the twelve modules at the Professional Stage% where
the focus is on the ac<uisition and application of technical s;ills and ;nowledge%
and the Advanced Stage which comprises of two technical integration modules
and the Case Study.



The 2no/ledge 3ase
The aim of the Ta'ation module is to enable students to understand the general
ob=ectives of ta' and to calculate income ta'% capital gains ta'% corporation ta'
and :AT in straightforward scenarios.
)rogression to a**lication le+el
The ;nowledge base that is put into place here will be ta;en further in the
application level Ta'ation module% where the aim will be to enable students to
prepare ta' computations and provide ta' advice to individuals and companies%
again in straightforward scenarios. The above ta'es introduced at ;nowledge
level are ta;en to a higher level.
)rogression to ad+anced stage
2thics
Case Study
2thics
Advance Audit
and Assurance
Ad+anced
stage
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Busines
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Financial
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Financia
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2thics
Audit
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2thics
Taxation
Financial
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2thics
Business
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Manageme
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2thics
Law
2thics
Assuran
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2thics
Principle
s
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Taxation
Accounting
)rofessional
stage
2thics
Business
Analysis
2thics
Financial and
Corporate
Reporting
The Case Study of advanced level then ta;es things further again. The aim is to
ensure that students can provide technical advice in respect of issues arising in
business transformations.
The above illustrates how the ;nowledge of ta'ation principles gives a platform
from which a progression of s;ills and ta'ation e'pertise is developed.
'-2 Ser+ices *ro+ided 36 *rofessional accountants
Professional accountants should be able to?
@ 2'plain the general ob=ectives of ta'% the inAuences upon Bangladesh
system of ta' and the di1erent types of ta' in Bangladesh
@ 6ecogni9e the ethical issues arising in the course of performing ta' wor; and
identify the obligations Bangladesh system of ta' imposes on ta'payers and
the implications for noncompliance of ta'payers
@ Calculate the amounts of income and their ta'es owed by or owed to
individuals
@ Calculate the capital gains ta' payable by individuals and the chargeable
gains sub=ect to corporation ta'
@ Calculate the corporation ta' liabilities of companies
@ Calculate the amount of :AT owed by or owed to businesses
2 S*eci0cation grid for Ta,ation !
2-' Module ai4
To de+elo* students7 2no/ledge of ta,ation in Bangladesh gained at
the )rofessional ",a4ination 5no/ledge( le+el and to ena3le the4 to
underta2e straightfor/ard ta, co4*utations for indi+iduals and
3usiness entities- To gi+e students a /or2ing 2no/ledge of the
*rocesses of ta, in+estigations and dis*utes and to ena3le the4 to
e,*lain the reasons for *rofessional ethical re8uire4ents in the area
of ta, /or2-
Bn completion of this module% students will be able to?
e'plain the relevance of ethical and professional issues for a professional
accountant underta;ing ta' wor;
provide information to business entities and to individuals on the amount
of ta'ation that they may owe to or be owed by the ta'ation authorities
advise and assist business entities and individuals in the adherence to
regulations surrounding ta'ation
provide information to business entities and to individuals on the e1ects
of national ta'es% including circumstances where foreign ta'es a1ect
national ta'es
describe the processes of ta' investigations and ta'ation disputes
2-2 S*eci0cation grid
This grid shows the relative weightings of sub=ects within this module and
should guide the relative study time spent on each. Bver time the mar;s
available in the assessment will e<uate to the weightings below% while slight
variations may occur in individual assessments to enable suitably rigorous
<uestions to be set.
eig!ting "#$
2thical considerations #"
The ta'ation of business entities )"
The ta'ation of individuals )"
Investigations and disputes #"
:alue Added Ta' !"
#""
9 The learning 4aterials
Cou will &nd the learning materials are structured as follows?
Title page
Contents page
The speci&cation grid for the Ta'ation !
A brief note about the learning materials
Study (uide. This includes
8 hints and tips on how to approach studying for your CA e'ams
8 guidance on how to approach studying with this study manual
Information on how to obtain help with your studies
The detailed syllabus and learning outcomes
2ach chapter has the following components where relevant?
Introduction
8 7earning ob=ectives
8 Practical signi&cance
8 Stop and thin;
8 >or;ing conte't
8 Syllabus lin;s
2'amination conte't
8 2'am re<uirements
8 2'aminerDs comments on how students tac;le <uestions
Chapter topics
8 0etails about topics
8 Problems
8 Answers
8 Some past years <uestions
8 Solution to those past years <uestions
The technical reference section is designed to assist you when you are wor;ing
in the oEce. It should help you to ;now where to loo; for further information on
the topics covered. Cou will not be e'amined on the contents of this section in
your e'amination.
: Stud6 guide
:-' ;el* 6ourself stud6 for 6our ACA e,a4s
2'ams for professional bodies such as the ICA2> are very di1erent from those
you have ta;en at college or university. Cou will be under greater ti4e
*ressure 3efore the e'am F as you may be combining your study with wor;.
Gere are some hints and tips.
The right a**roach
' De+elo* the right attitude
Belie+e in 6ourself Ces% there is a lot to learn. But
thousands have succeeded before and
you can too.
#e4e43er /h6 6ou7re
doing it
Cou are studying for a good reason? to
advance your career.

2 %ocus on the e,a4
#ead through the S6lla3us
and Stud6 $uide
These tell you what you are e'pected to
;now and are supplemented by
",a4ination conte,t sections in the
study manual.
#e4e43er /h6 6ou7re
doing it
Cou are studying for a good reason? to
advance your career.
9 The right 4ethod
See the /hole *icture Heeping in mind how all the detail you
need to ;now &ts into the whole
picture will help you understand it
better.
The Introduction of each chapter
puts the material in conte't.
The Learning o3<ecti+es% Section
o+er+ie/s and ",a4ination
conte,t sections show you what
you need to gras*.
Use 6our o/n /ords To absorb the information% you need to
*ut it into 6our o/n /ords.
Ta2e notes.
Answer the 8uestions in each
chapter.
Dra/ 4ind4a*s.
Try 7teaching7 a su3<ect to a
colleague or friend.
$i+e 6ourself cues to <og
6our Me4or6
Try ;ey points with a highlighter pen.
>rite 2e6 *oints on cards.
: The right reca*
#e+ie/= re+ie/= re+ie/ 6egularly reviewing a topic in summary
form can 0, it in 6our 4e4or6. The
Study anual helps you review in many
ways.
Cha*ter su44ar6 will help you to
recall each study session.
The Self>test actively tests your
grasp of the essentials.
(o through the ",a4*les in each
chapter a second or third time.
:-2 Stud6 c6cle
The best way to approach this Study anual is to tac;le the chapters in order.
>e will loo; in detail at how to approach each chapter below but as a general
guide% ta;ing into account your individual learning style% you could follow this
se<uence for each chapter.
5e6 stud6 ste*s Acti+it6
Step #
To*ic list
This topic list is shown in the contents for each chapter
and helps you navigate each part of the boo;I each
numbered topic is a numbered section in the chapter.
Step !
Introduction
This sets your ob=ectives for study by giving you the big
picture in terms of the conte't of the chapter. The content
is referenced to the Study guide% and 2'amination conte't
guidance shows what the e'aminers are loo;ing for. The
Introduction tells you why the topics covered in the
chapter need to be studied.
Step )
Section
o+er+ie/s
Section overviews give you a <uic; summary of the
content of each of the main chapter sections. They can
also be used at the end of each chapter to help you
review each chapter <uic;ly.
Step *
",*lanations
Proceed methodically through each chapter% particularly
focussing on areas highlighted as signi&cant in the
chapter introduction or study guide.
Step +
Note ta2ing
Ta;e brief notes% if you wish. 0onDt copy out too much.
6emember that being able to record something yourself is
a sign of being able to understand it. Cour notes can be in
whatever format you &nd most helpfulI lists% diagrams%
mindmaps.
Step ,
",a4*les
>or; through the e'amples very carefully as they
illustrate ;ey ;nowledge and techni<ues.
Step -
Ans/ers
Chec; yours against the suggested solutions% and ma;e
sure you understand any discrepancies.
Step .
Self>test
Jse the self8assessment <uestion to chec; how much you
have remembered of the topics covered.
Step /
?uestion
*ractice
Attempt the <uestion3s5 relating to this chapter in the
revision of suggested answers.
Mo+ing on---
>hen you are ready to start revising% you should still refer bac; to this Study
anual.
@ As a source of reference 3you should &nd the inde' particularly helpful for
this5.
@ As a way to re+ie/ 3the Section overviews% 2'amination conte't% Chapter
summaries and Self test <uestions help you here5.
6emember to ;eep careful hold of this Study anual F you will &nd it invaluable
in your wor;. The technical reference section has been designed to help you in
the wor;place by directing you to where you can &nd further information on the
topics studied.
@ $etting hel*
Firstly% if you are receiving structured tuition% ma;e sure you ;now how and
when you can contact your tutors for e'tra help.
Identify a wor; colleague who is <uali&ed% or has at least passed the paper you
are studying for% who is willing to help if you have <uestions.
Form a group with a small number of other students% you can help each other
and study together% providing informal support.
S6lla3us and learning outco4es
The following is the learning outcomes of ta'ation ! with reference to the
chapters covered the learning outcomes in this study manual?
'- "thical considerations
Candidates should 3e a3le to e,*lain the rele+ance of ethical and
*rofessional issues for a *rofessional accountant underta2ing ta,
/or2-
In the e'amination% candidates may be re<uired to
a. e'plain the relevance and importance of ;ey ethical and professional
issues for a professional accountant underta;ing ta' wor;
b. =udge when to refer ta'ation matters for senior help.
2- The ta,ation of 3usiness entities
Candidates should 3e a3le to *ro+ide infor4ation to 3usiness
entities on the a4ount of ta,ation that the6 4a6 o/e to or 3e
o/ed 36 the ta,ation authorities= ad+ise and assist 3usiness
entities in the adherence to regulations surrounding ta,ation= and
*ro+ide infor4ation on the eAects of national ta,es= including
circu4stances /here foreign ta,es aAect national ta,es-
In the e'amination% candidates may be re<uired to
a. identify investments and e'penditure which legally reduce ta' liability
and =udge when they might be appropriate
b. identify for actual or proposed transactions those treatments that are
illegal for ta' purposes and e'plain the reasons for the illegality
c. e'plain how ta' considerations can a1ect any investment decisions of a
business entity
d. e'plain how ta' considerations can a1ect &nancial reporting by an
entity
e. calculate the amounts sub=ect to national% regional and local ta'ation%
the resulting amount of ta' payable or recoverable by an entity and the
e1ects of any foreign ta'es on those amounts 3the calculation of foreign
ta' liabilities is not re<uired5
f. identify how ta' losses can be used by a business entity
g. describe the e1ect of a change in the ownership of a business entity on
its ta' losses
h. e'plain how alternative methods of achieving business ob=ectives can
lead to di1erent ta' outcomes
i. calculate the ta' implications for a business entity of di1erent courses
of action% ta;ing into account the relevant ta'es and other relevant
implications
=. identify the ta' holiday issues
9- The ta,ation of indi+iduals
Candidates should 3e a3le to *ro+ide infor4ation to indi+iduals on
the a4ount of ta,ation that the6 4a6 o/e to or 3e o/ed 36 the
ta,ation authorities= ad+ise and assist indi+iduals in the
adherence to regulations surrounding ta,ation= and *ro+ide
infor4ation on the eAects of national ta,es= including
circu4stances /here foreign ta,es aAect national ta,es-
In the e'amination% candidates may be re<uired to
a. identify for actual or proposed transactions those treatments that are
illegal for ta' purposes and e'plain the reasons for the illegality
b. calculate the amounts sub=ect to national ta'ation% the resulting
amount of ta' payable or recoverable by an individual or entity and the
e1ects of any foreign ta'es on those amounts 3the calculation of foreign
ta' liabilities is not re<uired5
c. identify how ta' losses can be used by an individual
d. e'plain how alternative methods of achieving personal ob=ectives can
lead to di1erent ta' outcomes
e. calculate the ta' implications for an individual of di1erent courses of
action 3borrowing% investment% e'penditure etc.5% ta;ing into account
the relevant ta'es and other implications
:- In+estigations and dis*utes
Candidates should 3e a3le to descri3e the *rocesses of ta,
in+estigations and ta,ation dis*utes-
In the e'amination% candidates may be re<uired to
a. identify the periods within which the relevant authorities can en<uire
into a ta'payerKs returns or other information and ta' liabilities and
describe the ta'payerKs right of appeal
b. 0escribe the process for dealing with ta'ation disputes.
@- !alue Added Ta, !AT(
Candidates should 3e a3le to e,*lain the *rocess of co4*utation
of !AT *a6a3le= ad4inistration= diAerent schedules= turno+er ta,=
su**le4entar6 dut6= other rele+ant rules and *rocedures and
ad+ise and assist indi+idual and 3usiness entities in the adherence
to regulations surrounding !AT= turno+er ta, and su**le4entar6
dut6
In the e'amination% candidates may be re<uired to
a. demonstrate the concept and de&nition
b. e'plain the imposition of :AT% supplementary duty and identify the
application of ta' rate
c. e'plain the registration procedures% method of computation of :AT
payable% time of payment of :AT and turnover ta' and
d. ention the documents re<uired for :AT administration
e. identify the di1erent schedule for :AT and supplementary duty
f. identify the :AT authorities and its power and functions
g. e'plain the conse<uences for non8compliance of :AT rules and
regulation

Chapter #
Introduction to Bangladesh inco4e
ta,
Contents
Introduction
2'amination conte't
To*ic List
#.# Introduction
#.! Bangladesh Ta' Structure
#.) Sources of ta' law and practice
#.* Scope of Bangladesh Income Ta'
#.+ Structure of IT Brdinance% #/.*
#., Bb=ectives and Importance of Income Ta'
#.- 6ole of Income Ta' in 2conomic 0evelopment of Bangladesh
#.. Some 0e&nitions L Important Concepts 6elating to Ta'
#./ The Concept of Income
#.#" Capital or 6evenue
#.## Ta' and Income Ta'
#.#! 0i1erent 6ates of Ta'
#.#) 7iability to ta'
#.#* Ta' 7iability on Income
#.#+ Some signi&cant issues of income ta'
Introduction
Learning o3<ecti+es
Identify the ob=ectives of ta' in terms of economic% social =ustice and
environmental issues
6ecognise which ta'es apply to di1erent ta'payers e.g. individual% partners
and companies
Identify the sources of ta' law
(et the idea about the income% ta' and income ta'
Hnow the history of income ta'
6ecognise di1erent rates of income ta' applicable to individual% corporate
and others
Jnderstand the concept of capital and revenue e'penditure
Identify the residential status of an assessee
)ractical signi0cance
2very person in Bangladesh is a1ected by our ta' system in some ways% often
on a daily basis and without even realising it. >e pay ta' on the money we
earn and on the things we buy and this ta' is of course used by the
government to pay for our development purpose such as schools% hospitals%
roads and so on.
As government and business practices change% the ta' system changes. In
Bangladesh we have an annual budget cycle which begins with the Pre Budget
6eport in late ay4early Mune and ends with the enactment of a Finance Act in
Mune. This is supplemented by a huge body of case law and practical
interpretation. Jnfortunately% the new law is usually =ust added to the e'isting
law and so the overall legislative burden increases over time. There are
regular calls for a programme of ta' simpli&cation% but although there has
been much discussion% we have seen little real change.
The Income Ta' Brdinance #/.*% The :alue Added Act #//# are the main
sources of ta' law. The $ational Board of 6evenue 3$B65% a statutory body is
the highest authority for the purpose of these Brdinance and Acts.
Income of di1erent types is ta'ed at di1erent rates. Before calculating income
ta' liability one should have the concept of income% ta'% income ta' and
income ta' rate and other relevant issues. 6esidential status has signi&cance
for determining ta' liability.
Bne way of helping people to deal with comple'ity in the ta' system is to use
technology. Presently people can use computeri9ed system to calculate ta' on
his4her ta'able income. 2ven $B6 website gives the opportunity to compute
ta' by using income ta' calculator.
Sto* and thin2
It is li;ely that you have personally been paying ta' on your various sources of
income4gains for some time. Gave you stopped to thin; about how this a1ects the
actions that you ta;eN
.or2ing conte,t
The impact of ta'ation on the overall economy and the society is increasing
day by day. Ta' is charged on di1erent types of assesses li;e individual and
companies. The volume and comple'ity of ta' law is now such that many
businesses have to spend considerable amounts of time =ust on ta'
administration. any business decisions will have ta' conse<uences. ost
large corporate operate on a global basis and will choose which country they
want their business to be based in.
>ithout advice from an accountant% a business can easily &nd itself paying too
much ta' and missing deadlines. It is important to have a good overall feel for
the ta' system early in your studies so that you ;now where to loo; for the
detailed rules when you need them later on.
S6lla3us lin2s
The topics covered in this chapter are essential bac;ground ;nowledge which
will underpin the whole of your Ta'ation studies.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Identify the social =ustice principles being applied for ta'ation purposes
Jnderstand which ta'es apply to di1erent ta'payers
Identify the sources of ta' law in Bangladesh.
0e&ne some terminologies relating to income ta'
0etermine the residential status of an assessee based on given
information
Identify the &ve tier ta' rate for individual and other ta' rates for other
assessees
?uestion *ractice
For <uestion practice on these topics go to the suggested <uestions and
answers covering the basic idea about ta'ation.
'-& O3<ecti+es
Section o+er+ie/
Ta'ation system of Bangladesh has developed gradually and has been
changed by successive governments in accordance with their political
philosophy.
(overnments use ta'ation to encourage or discourage certain types of
economic activity.
Ta'ation may be used to promote social =ustice but there is no political
consensus on what is meant by this term.
2nvironmental concerns have led to changes in ta'ation policy.
There is no e'haustive de&nition of income in Income Ta' Brdinance #/.*
3Brdinance5
Income ta' is ta' on income.
The Brdinance got its root in the then British India in #.,".
0i1erent ta' rates are applicable for di1erent types of assessee and
classes of income.
Income ta' is levied on income and not on capital receipts.
The distinction between capital and revenue receipts is much more diEcult
than between capital and revenue e'penditure.
6esidential status is very vital for determining ta' liability.
'-' Introduction
Among direct ta'es% income ta' is one of the main sources of revenue of
Bangladesh (overnment to generate funds for running its administration and
also funding development e'penditure. It is a digressive ta'ation system
where ta' rate increases up to a certain level and become &'ed for all income
e'ceeding that limit. Income ta' is imposed on the basis of ability to pay. OThe
more a ta'payer earns the more he should payDD8 is the basic principle of
charging income ta'. It aims at ensuring e<uity and social =ustice.
Bangladesh ta'ation system has developed over centuries from the then
British India in #.," to the present condition on a piecemeal basis. The
system% however% developed on the basis of generally accepted canons and
there had been e1orts towards rationali9ing the ta' administration for
optimi9ing revenue collection% reducing ta' evasion and preventing revenue
lea;age through system loss.
In the &scal scheme of our country% at present% income ta' is levied along with
other direct and indirect ta'es li;e :AT% 2'cise duty% (ift ta' etc.
'-2 Bangladesh Ta, Structure
The ta' structure of Bangladesh consists of both direct 3income ta'% gift ta'%
land development ta'% non8=udicial stamp% registration% immovable property
ta'% etc5 and indirect 3customs duty% e'cise duty% motor vehicle ta'% narcotics
and li<uor duty% :AT% S0% foreign travel ta'% IT% electricity duty% advertisement
ta'% etc5 ta'es. Analysis of revenue collection activities in Bangladesh reveals
that ta' revenue accounts for ." percent of government revenue and direct
ta'es represent only about #/P of total ta'es.
As per the $ational Budget !"##8#!% the ta' revenue target for the &scal year
!"##8#! has been set by the government to T;. /+-..+ billion which was T;.
-,".*! billion in the &scal year !"#"8##. From the analysis of the $ational
Budget !"##8#!% it can be seen that in the &scal year !"##8#! revenue
collections from value added ta' 3:AT5 have been estimated at around T;.
)*)."* billion 3)+..#P of total ta'5% from import duty at T;. #!,.)* billion
3#).#/P5% income ta' at T;. !-+.,# billion 3!..-- P5% supplementary duty at
T;. #,!.!" billion 3#,./)P5 and others ".-"P of this aggregate target.
The signi&cant features of Bangladesh ta' system are as follows?
A5 ultiple ta' system? The ta' system of Bangladesh consists of various
types of ta'es which are as follows?
I. Ta'es on Income and Pro&t
#. Income ta' 8 Company
!. Income ta' F Persons other than Company
II. Ta'es on Property L Capital Transfer
#. 2state 0uty
!. (ift Ta'
). $arcotics 0uty
*. 7and 6evenue
+. Stamp 0uty 8 non =udicial
,. 6egistration
III. Ta'es on (oods and Services
#. Customs 0uties
!. 2'cise 0uties
). :alue Added Ta' 3:AT5
*. Supplementary 0uty 3on lu'ury items and in addition to :AT5
+. Ta'es on :ehicles
,. 2lectricity 0uty
-. Bther Ta'es and 0uties 3travel ta'% turn over ta'% etc.5
B5 Inade<uate and stagnant revenue yield relative to (0P?
The ratio of ta' revenue to (0P is very low comparing to other developing
countries. >e can see the status of the ratio of ta' revenue to (0P of
Bangladesh in the following table for the last si' years?
Revenue as #
of %&P
'(()*
(+
'((+*
(,
'((,*
(-
'((-*
(.
'((.*
/(
'(/(*
//
Total revenue #".. #".+ ##.# ##.! ##.+ #!."/
Ta' 6evenue ..- ..) ... /." /.) #"."*
$on8ta'
6evenue
!.# !.! !.) !.! !.! !."+
C5 Gigh8ratio of indirect to direct ta' revenue?
An analysis of the revenue from the e'isting ta'es shows that the indirect
ta'es pre8dominate the revenue yield of the country. ore than -"P of the
ta' revenue are from indirect ta'es which is clear from the following table?
Revenue " in
Crore$
'(()*
(+
'((+*
(,
'((,*
(-
'((-*
(.
'((.*
/(
'(/(*
//
Total revenue **%.,. */%*-! ,"%+)/ ,/%#." -/%*.* /+.#..
Ta' 6evenue ),%#-+ )/%!*- *.%"#! ++%+!, ,)%/+, -/."+!
$on8ta' 6evenue .%,/) #"%!!+ #!%+!- #)%,+* #+%+!. #,.#)+
P of Ta' to
6evenue
.".,)P -/.))P -/.)#P .".!,P .".*,P
.).""P
0irect Ta' 30T5 .%)") #"%!-+ #!%+"! #+%*,! #/%+#, !+./-*
P of 0T to Total
Ta'
!!./+P !,.#.P !,."*P !-..+P )".+#P )!./"P
Indirect Ta' 3IT5 !-%.-! !.%/-! )+%+#" *"%",* **%**" +)."-.
P of IT to total
ta'
--."+P -)..!P -,./,P -!.#+P ,/.*/P
,-.#"P
05 0ominance of :AT and Import duty?
It has been seen that the dominance of :AT and import duty in ta'
revenue sector is increasing day by day. oreover% in order to increase
revenue collection from domestic sources% : AT networ; has been widened
in recent years. From the following table we can see their dominance?
# Collection
from
'(()*
(+
'((+*
(,
'((,*
(-
'((-*
(.
'((.*
/(
'(/(*
//
:AT )*.)P )*./P )+.*P ),.!P )+.,P )+.--P
Import duty !!..P !#.#P #/.)P #-.!P #,.)P #).--P
Income ta' #/.!P !!.-P !!./P !*.*P !+./P !-./,P
Supplementary
duty
#-.-P #+.+P #,.,P #,.*P #,.*P #-.#+P
Bther ta'es and
duties
"..P "..P #."P "..P ".-P ".,"P
2'cise duty ".+P ".+P ".*P ".*P ".*P ".)+P

25 Ta' administration in Bangladesh?
$ational Board of 6evenue 3$B65 is the central authority for ta'
administration in Bangladesh and collects almost ." percent of total
revenue for the country. :arious reform measures have been ta;en and
still in consideration to ma;e the ta' system of the country more e1ective
and eEcient.
F5 Ta' avoidance behavior of the Ta'payers?
The heavy reliance on indirect ta'ation has been treated as one of the
main obstacles in attaining economic progress in Bangladesh since only a
few ta' payers share the burden of ta'es. 0espite $B6Ds untiring e1ort%
the progress is not still satisfactory. People and corporate &rms use various
measures to evade ta' using loopholes of the current ta' system.
(5 $arrow Ta' base?
Bur ta' base is too narrow and the ta' law is full of e'emptions and
allowances. Agricultural sector provides employment for around ,"
percent of the population contributes only !+ percent of (0P and virtually
pays little in the form of income ta'.
From the above discussion% it is clear that attaining an optimal ta' structure
is one of the most important issues for the government of Bangladesh to
increase the revenue generation from ta'es for accelerating growth and to
improve the <uality of life of the citi9ens. A long8term sustainable solution to
enhance transparency% promote growth% improve ta' compliance and thus to
increase ta' to (0P ratio is a much desirable issue in the conte't of
Bangladesh.
'-9 Sources of ta, la/ and *racticeB
A- Legislation
The basic rules of Bangladesh ta'ation system are based on the Income Ta'
Brdinance #/.* and the Income Ta' 6ules #/.*. The :alue Added Ta' Act
#//# is the main source of :AT laws. The ta' legislation is amended each year
by the %inance Act. This is based on proposals in the Budget each year. The
Finance Act generally relates to the income year and assessment year starting
on Muly of that year. Therefore% the Finance Act !"## relates mainly to the
assessment year !"##8!"#!.
B- Case la/
Bver the years% many hundreds of ta' cases have been brought before the
courts where the interpretation of statute law is unclear.
0ecisions made by =udges to resolve these cases form case law. any
=udgments are precedent for future cases which means that they must be
followed unless superseded by legislation or the decision of a higher court.
C- NB# )u3lication
The $ational Board of 6evenue 3$B65 is a statutory body having the highest
e'ecutive authority and empowered to ma;e necessary rules concerning
income ta' matters and is authori9ed to give any interpretation of any
provision in any section of the Brdinance. $B6 ma;es available some forms%
noti&cations% brochures% and guidelines of income ta'% :AT and customs
through its websites and other forms of communication for public at large.
There are many S6Bs and circulars on income ta' and :AT published by $B6
providing guideline for ta' purpose.
'-: Sco*e of Bangladesh Inco4e Ta,
Some provisions% rules and regulations have to be ;ept in mind in order to
determine income ta' on the income of an assessee in Bangladesh. They are
as follows?
I. T!e 0ncome Tax 1rdinance2 /.-34 The Income Ta' Brdinance% #/.* came
into force on #st Muly% #/.* as Income Ta' anual I. It has !) Chapters%
#.- sections% numerous subsections and seven schedules containing
provisions regarding assessment% penalty% appeal etc.
II. 0ncome Tax Rules2 /.-34 Income Ta' 6ules% #/.* has framed various rules
for the administration of the Income Ta' Brdinance% #/.* as provided
therein.

III. Finance Act4 To give e1ect to the various proposals in the annual budget
covering the areas of direct and indirect ta'es% Finance Act is issued. It
contains various applicable ta' rates and other amendments of the Income
Ta' Brdinance and 6ules% #/.*.
I:. 5R1 "5tatutory Regulatory 1rders$4 According to the Section #.+ of the
Income Ta' Brdinance% #/.*% $B6 can issue certain circulars as and when
necessary. The provisions of these S6Bs are also to be considered at the
time of computing income ta' li;e the provisions of Income Ta' Brdinance
and 6ules.
:. 0ncome Tax Case Law4 In the course of assessment proceedings% there may
sometimes arise a dispute between the $B6 and the assessee over the
interpretation of some of the provisions of the act and rules. The assessee
can go the court ob=ecting the $B6Ds interpretation% and the =udgments
given by the courts act as guidance to the assessing oEcers and the
assessee in similar circumstances in the future.
'-@ Structure of Inco4e Ta, Ordinance= 'CD:B
The Income Ta' Brdinance% #/.* came into force on #
st
Muly% #/.* as
Income Ta' anual #. It has !) Chapters% #.- sections% numerous sub8
sections and seven schedules containing provisions regarding assessment%
penalty% appeal etc. A brief description regarding these enumerated below?
I- The Inco4e Ta, Ordinance= 'CD: > Cha*ters and Sections
II- The Inco4e Ta, Ordinance= 'CD:>Schedules
SL
#
Schedule Title
' First
Schedule:
Part-A Approved Superannuation Fund or Pension Fund
Part B
Part - C
6ecogni9ed Provident Fund
Approved (ratuity Fund
2 Second
Schedule:
6ates of income ta' in certain special cases
9 Third
Schedule:
Computation of 0epreciation Allowance
: Fourth
Schedule:
Computation of the Pro&ts and (ains of
Insurance Business
Chapte
r
Title Sections
' Preliminary 1-2
2 Administration 3-1
9 Ta'es Appellate Tribunal 11-1!
: Charge of Income Ta' 1"-1#
@ Computation of Income 2-$3
E 2'emption and Allowances $$-$%
F Payment of Ta' before Assessment $&-%$
D 6eturn and Statement %!-&
C Assessment &1-#$
'& 7iability in Special Cases #!-13
'' Special Provisions relating to avoidance of ta' 1$-1%
'2 6e<uirement of furnishing certain information 1&-11
'9 6egistration of &rms 111 'o(itted)
': Powers of Income Ta' Authorities 112-122
'@ Imposition of Penalty 123-133
'E 6ecovery of Ta' 13$-1$3
'F 0ouble Ta'ation 6elief 1$$-1$!
'D 6efunds 1$"-1!2
'DA Settlement of Cases
1!2A-1!2*
'o(itted)
'DB Alternate 0ispute 6esolution 1!2F-1!2S
'C Appeal and 6eference 1!3-1"2
2& Protection and Information 1"3
2' B1ences and Prosecution 1"$-1%1
22 iscellaneous 1%2-1&$
29 6ules and 6epeal 1&!-1&%
@ Fi+th
Schedule:
Part-A Computation of Pro&ts and (ains from 2'ploration
and production of petroleum and the determination
of ta' thereon.
Part- B Computation of Pro&ts and (ains from 2'ploration
and 2'traction of ineral deposits in Bangladesh
3e'cept oil and gas5.
E Si,th
Schedule:
Part-A 2'clusions from total Income
Part - B 2'emptions and allowances for assessees being
resident and nonresident Bangladeshi
F Se-enth
Schedule
Computation of relief from income ta' by way of
credit in respect of foreign ta'
III- The Inco4e Ta, #ules= 'CD:
The IT 6ules% #/.*% comprises si'ty nine rules to supplement various sections
and provisions of the IT Brdinance% #/.*. $ational Board of 6evenue 3$B65
en=oys Ae'ibility to amend or change any rules through the noti&cation in the
oEcial ga9ette.
'-E O3<ecti+es and I4*ortance of Inco4e Ta,B
Ta'ation is one of the ma=or sources of revenue to (overnment to meet a
countryDs revenue and development e'penditures with a view to
accomplishing some economic and social ob=ectives% such as redistribution of
income% price stabili9ation and discouraging consumption of harmful and
socially undesirable goods. Some ma=or ob=ectives and importance of income
ta' are as follows?
a(#e+enue collectionB Income ta' is a ma=or source of revenue for the
government. In Bangladesh% income ta' revenue accounts for nearly #.
percent of total government revenue. Therefore% the &rst and foremost aim
of income ta' is to raise public revenue to meet the ever increasing public
e'penditure.
3(#e>distri3ution of inco4eB An e1ective% eEcient and fair ta'ation
system can reduce ine<ualities in income and wealth. This is possible by
ta'ing rich people heavily and to confer bene&t to the poorer section
through progressive income ta'.
c( Increase in sa+ingsB An e1ective and eEcient ta' system encourages
people to save through providing ta' credit facilities on investment
allowance.
d(Increase in ca*ital in+est4entB An e1ective and eEcient ta' system
encourages local and foreign investors to invest in the country through
providing various facilities li;e ta' credit facilities on investment
allowance% ta' holiday scheme% depreciation allowance% ta' incentives etc.
e("cono4ic de+elo*4entB The income ta' revenue can be used by the
government to ensure the economic development of the country. It can be
used to build the infrastructure% to invest in social security programs% in
various poverty elevation programs.
So% from the above discussion it is clear that income ta' plays a signi&cant
role in the economic development of a country. For this reason various reform
strategies have been ta;en to moderni9e $B6.
'-F #ole of Inco4e Ta, in "cono4ic De+elo*4ent of BangladeshB
As it has been discussed before% ta'ation is one of the ma=or sources of public
revenue to meet a countryDs revenue and development e'penditures with a
view to accomplishing some fundamental economic and social ob=ectives%
such as redistribution of income% price stabili9ation and discouraging harmful
consumption. The contribution of income ta' is playing a pivotal role in the
economic development of Bangladesh. The government of Bangladesh has
ta;en various measures to moderni9e the ta' system and imposed various
provisions in the Income Ta' Brdinance% #/.*. Some of the provisions are as
following?
a(Ta, ;olida6 Sche4eB According to Section *+% *, and *- of the ITB%
#/.*% an industrial enterprise established within prescribed time limit in
the prescribed area shall be e'empted from ta' for period% i.e. * to #!
years. This is ;nown as Ta' Goliday Scheme. The main ob=ective of this
scheme is to ensure economic development through industriali9ation
attracting investment in some speci&c sectors e.g. tourism industries.
3(In+est4ent allo/anceB Investment allowance is given on the investment
in new machineries 3li;e machineries of new Fishing Boats L passenger
boats5 Q !"P% if they are established in $B6 speci&ed areas it is !+P. This
provision is also attracting investors.
c( Accelerated De*reciation Allo/anceB 0epreciation allowance is
allowed on the new machineries used in various industries at a speci&ed
rate 3#""P in &rst year for speci&ed areas% and ."P in &rst and !"P in the
second year for industries established in other areas.5
d(Ta, incenti+es for S4all G Cottage IndustriesB According to Section
*-3b53ii5 ta' incentives are allowed on the income and pro&t of cottage
industries to encourage investment in cottage industries which can
contribute to the economy signi&cantly.
e(Ta, incenti+es for encouraging sa+ingsB The government also
encourages savings providing ta' credit facilities on certain types of
investment and e'penditures. Such as% purchase of shares and
debentures% savings certi&cate% 0PS% insurance premium% provident fund
etc.
f( Ta, e,e4*tions in certain e,*endituresB Certain e'penditures to
enhance social welfare li;e contribution to presidentDs4prime ministerDs
relief fundI (overnment Ra;at fund% Ahsania ission Cancer Gospital etc.
are e'empted from ta' payment. These provisions also encourage people
to spend in certain social development program.
g(Ta, incenti+es for foreign in+estorsB ForS attracting foreign investors
various concessions li;e ta' holiday% ta' e'emptions for interest% royalty%
technical assistance and fees% remittance to own country have been
allowed as per the ITB% #/.*.
h(Allo/ance for scienti0c researchB For developing new products%
technologies in the industrial sectors certain allowance is allowed. Ta'
rebate is given on the cost of relevant scienti&c research.
i( Ta, incenti+es for re4ittance to BangladeshB A signi&cant number of
Bangladeshi people wor; abroad and to encourage them remittances
through ban;ing channel has been dec#ared ta' e'empted.
So% it can be said that to ensure the economic development of the country
certain provisions have been introduced in the ITB% #/.*. These provisions
encourage not only foreign investors but also the local entrepreneurs.
'-D So4e De0nitions G I4*ortant Conce*ts #elating to Ta,B
/6 Agricultural income 7895 '"/$:? Tagricultural incomeT means8
3a5 Any income derived from any land in Bangladesh and used for
agricultural purposes
3i5 By means of agricultureI or
3ii5 By the performance of any process ordinarily employed by a cultivator to
render mar;etable the produce of such landI or
3iii5 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
mar;etable% has been performedI or
3iv5 by granting a right to any person to use the land for any periodI or
3b5 Any income derived from any building which8
3i5 is occupied by the cultivator of any such land as is referred to in sub8
clause 3a5 in which any process is carried on to render mar;etable any
such produce as aforesaidI
3ii5 is on% or in the immediate vicinity of such landI and
3iii5 is re<uired by the cultivator as the dwelling house or store8house or
other outhouse by reason of his connection with such land.
'6 Annual ;alue 7895 '"<$:? Tannual valueT shall be deemed to be
3a5 in relation to any property let out8
3i5 the sum for which property might reasonably be e'pected to let from
year to year and any amount received by letting out furniture% &'ture%
&ttings etc.I or
3ii5 where the annual rent in respect thereof is in e'cess of the sum referred
to in paragraph 3i5% the amount of the annual rent.
<6 Appellate =oint Commissioner 7895 '"3$:? TAppellate Moint CommissionerT
means a person appointed to be an Appellate Moint Commissioner of Ta'es J4S
) Uand includes an Appellate Additional Commissioner of Ta'esV Uand also a
person appointed to hold current charge of an Appellate Moint Commissioner of
Ta'esV.
36 Assessee 7895 '",$:? TAssesseeT% means a person by whom any ta' or other
sum of money is payable under this Brdinance% and includes8
3a5 every person in respect of whom any proceeding under this
Brdinance has been ta;en for the assessment of his income or the income of
any other person in respect of which he is assessable% or of the amount of
refund due to him or to such other personI
3b5 every person who is re<uired to &le a return J4S -+% J4S ./ or J4S /#I
3c5 every person who desires to be assessed and submits his return of
income under this BrdinanceI and
3d5 every person who is deemed to be an assessee% or an assessee in
default% under any provision of this BrdinanceI
)6 Assessment 7895 '"-$:? TassessmentT% with its grammatical variations and
cognate e'pressions% includes re8assessment and additional or further
assessmentI
+6 Assessment >ear 7895 '".$:? Tassessment yearT means the period of twelve
months commencing on the &rst day of Muly every yearI and includes any such
period which is deemed% under the provisions of this Brdinance% to be
assessment year in respect of any income for any periodI
,6 Business 7895 '"/3$:? TbusinessT includes any trade% commerce or
manufacture or any adventure or concern in the nature of trade% commerce or
manufactureI
-6 Capital asset 7895 '"/)$:? Tcapital assetT means property of any ;ind held by
an assessee% whether or not connected with his business or profession% but
does not include8
3a5 any stoc;8in8trade 3not being stoc;s and shares5% consumable stores
or raw materials held for the purposes of his business or professionI
3b5 personal e1ects% that is to say% movable property 3including wearing
apparel% =ewellery% furniture% &'ture% e<uipment and vehicles5% which are
held e'clusively for personal use by% and are not used for purposes of the
business or profession of the assessee or any member of his family
dependent on himI and
3c5 agricultural land in Bangladesh% not being land situate8
3i5 in any area which is comprised within the =urisdiction of municipality
3whether ;nown as a municipality% municipal corporation% town% or by any
other name5 or a cantonment Board and which has a population of not less
than ten thousand according to the last preceding census of which the
relevant &gures have been published before the &rst day of the income
yearI or
3ii5 in any area within such distance not being more than &ve miles from
the local limits of any municipality or cantonment board referred to in
paragraph 3i5% as the (overnment may having regard to the e'tent of% and
scope for% urbanisation of that area and other relevant considerations%
specify in this behalf by noti&cation in the oEcial (a9ette.
.6 C!arita?le Purpose 7895 '"/+$:? Tcharitable purposeT includes relief of the
poor% education% medical relief and the advancement of any ob=ect of general
public utilityI
/(6 C!ild 7895 '"/-$:? TchildT% in relation to any individual% includes a step8child
and an adopted child of that individualI
//6 Company 7895 '"'($:? TCompanyT means a company as de&ned in Uthe
Companies Act% #/#) 3:II of #/#)5 or the Companies Act% #//* 3:III of #//*5V
and includes8
3a5 a body corporate established or constituted by or under any law for the
time being in forceI
3b5 any nationali9ed ban;ing or other &nancial institution% insurance body
and industrial or business enterpriseI
3bb5 an association or combination of persons% called by whatever name% if
any of such persons is a company as de&ned in Uthe Companies Act%
#/#) 3:II of #/#)5 or the Companies Act% #//* 3:llI of #//*5I
3bbb5 any association or body incorporated by or under the laws of a
country outside BangladeshI andIV
3c5 any foreign association or body% Unot incorporated by or under any lawV%
which the Board may% by general or special order% declare to be a
company for the purposes of this BrdinanceI
/'6 &eputy Commissioner of Taxes 7895 '"'<$:? T0eputy Commissioner of Ta'esT
means a person appointed to be a 0eputy Commissioner of Ta'es J4S )% and
includes a person appointed to be an Assistant Commissioner of Ta'es% an
2'tra Assistant Commissioner of Ta'es and a Ta' 6ecovery BEcerI
/<6 &ividend 7895 '"'+$:? T0ividendT includes88
3a5 any distribution by a company of accumulated pro&ts% whether
capitali9ed or not% if such distribution entails the release by the company
to its shareholders of all or any part of its assets or reservesI
3b5 any distribution by a company% to the e'tent to which the company
possesses accumulated pro&ts% whether capitali9ed or not% to its
shareholders of debentures% debenture8stoc; or deposit certi&cates in
any form% whether with or without interestI
3c5 any distribution made to the shareholders of a company on its
li<uidation to the e'tent to which the distribution is attributable to the
accumulated pro&ts of the company immediately before its li<uidation%
whether capitali9ed or notI
3d5 any distribution by a company to its shareholders on the
reduction of its capital% to the e'tent to which the company possesses
accumulated pro&ts% whether such accumulated8 pro&ts have been
capitali9ed or notI
3dd5 any pro&t remitted outside Bangladesh by a company not
incorporated in Bangladesh under the Companies Act% #//* 3:III of
#//*5I
3e5 any payment by a private company of any sum 3whether as
representing a part of the assets of the company or otherwise5 by way of
advance or loan to a shareholder or any payment by any such company
on behalf% or for the individual bene&t% of any such shareholder% to the
e'tent to which the company% in either case% possesses accumulated
pro&tI but does not include88
3i5 a distribution made in accordance with sub8clause 3c5 or sub8
clause 3d5 in respect of any share including preference share for full cash
consideration% or redemption of debentures or debenture8stoc;% where
the holder of the share or debenture is not entitled in the event of
li<uidation to participate in the surplus assetsI
3ii5 any advance or loan made to a shareholder in the ordinary course
of its business% where the lending of money is a substantial part of the
business of the companyI 3iiia5 any bonus share issued by a company.
/36 @mployer 7895 '"',$:? TemployerT includes a former employerI
/)6 @mployee 7895 '"'-$:? TemployeeT% 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 a1airs of the companyI
/+6 Fair MarAet ;alue 7895 '"<($:? Tfair mar;et valueT means% in relation to capital
asset8
3a5 the price which such asset would ordinarily fetch on sale in the
open mar;et on the relevant day% and% where such price is not
ascertainable% the price which the 0eputy Commissioner of Ta'es may%
with the approval in writing of the Inspecting Moint Commissioner%
determineI
3b5 the residual value received from the lessee in case of an asset
leased by a &nancial institution having license from the Bangladesh Ban;
on termination of lease agreement on maturity or otherwise sub=ect to
the condition that such residual value plus amount realised during the
currency of the lease agreement towards the cost of the asset is not less
than the cost of ac<uisition to the lessor &nancial institution.
/,6 Fees for Tec!nical 5ervices 7895 '"</$:? Tfees for technical servicesT means any
consideration 3including any lump sum consideration5 for the rendering of any
managerial% technical or consultancy services 3including the provision of services
of technical or other personnel5 but does not include consideration for any
construction% assembly% mining or li;e pro=ect underta;en by the recipient% or
consideration which would be income of the recipient classi&able under the head
TSalariesTI
/-6 0ncome 7895 '"<3$:? TincomeT includes88
3a5 any income% pro&ts or gains% from whatever source derived%
chargeable to ta' under any provision of this Brdinance under any head
speci&ed in J4S !"I
3b5 any loss of such income% pro&ts or gainsI
3c5 the pro&ts and gains of any business of insurance carried on by a
mutual insurance association computed in accordance with paragraph .
of the Fourth ScheduleI
3d5 any sum deemed to be income% or any income accruing or
arising or received% or deemed to accrue or arise or be received in
Bangladesh under any provision of this Brdinance.
/.6 0ncome >ear 7895 '"<)$:? Tincome yearT% in respect of any separate source of
income% means?
3a5 the &nancial year immediately preceding the assessment yearI
or
3b5 where the accounts of the assesses have been made up to a
date within the said . &nancial year and the assesses so opts% the twelve
months ending on such dateI or
3c5 in the case of a business or profession newly set up in the said
&nancial year% the period beginning with the date of the setting up of the
business or profession and 8
3i5 ending with the said &nancial yearI or
3ii5 where the accounts of the assesses have been made up to a date
within the said &nancial year and the assesses so opts% ending on
that dateI or
3d5 in the case of a business or profession newly set up in the
twelve months immediately preceding the said &nancial year 8
3i5 if the accounts of the assessee have been made up to a date
within the said &nancial year and the period from the date of the
setting up of the business or profession to the &rst8mentioned
date does not e'ceed twelve months% then% at the option of the
assesses% such period% or
3ii5 if any period has been determined under sub8clause 3e5% then the
period beginning with the date of the setting up of the business or
profession and ending with the last day of that period% as the case
may beI or
3e5 in the case of any person or class of persons or any business
or profession or class of business or profession such period as may be
determIDled by the Board or by such authority as the Board may
authori9e in this behalfI
3f5 in respect of the assesseeDs share in the income of a &rm of which
the assessee is a partner and the &rm has been assessed as such% the
period determined as the income year for the assessment of income of
the &rmI
3g5 where in respect of a particular source of income an assessee
has once been assessed or where in respect of a business or profession
newly set up% an assessee has once e'ercised the option under sub8
clause 3b5 or sub8clause 3c5 3ii5 or sub clause 3d5 3i5 then% he shall not% in
respect of that source% or% as the case may be% business or profession% be
entitled to vary the meaning of the e'pression Tincome yearT as then
applicable to him% e'cept with the consent of the 0eputy Commissioner
of Ta'es upon such conditions as the 0eputy Commissioner of Ta'es may
thin; &t to impose.
'(6 0nterest 7895 '"<-$:? TInterestT means interest?payable ill any manner in respect
of any money borrowed or debt incurred 3including a deposit% claim or other
similar right or obligation5 and includes any service fee or other charge in respect
of the money borrowed or debt incurred or in respect of any credit facility which
has not been utili9edI
'/6 MarAet ;alue 7895 '"3($:? Tmar;et valueT% in respect of agricultural produce%
means?
3a5 where such produce is ordinarily sold in the mar;et in its raw
state or after application to it of any process employed by a cultivator to
render it &t to be ta;en to the mar;et% 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 &rst becomes
assessableI and
3b5 where such produce is not ordinarily sold in the mar;et in its
raw state% the aggregate of
3i5 the e'penses of cultivationI
3ii5 the land development ta' or rent paid for the lands in which it was
grownI and
3iii5 such amount as the 0eputy Commissioner of Ta'es &nds%
having regard to the circumstances of each case% to represent a
reasonable rate of pro&t on the sale of the produce in <uestion as
agricultural produceI
''6 Bon*resident 7895 '"3'$:? Tnon8residentT means a person who is not a residentI
'<6 PerCuisite 7895 '"3)$:? Tper<uisiteT means 8
3i5 any payment made to an employee by an employer in the form of
cash or in any other form e'cluding basic salary% festival bonus% incentive
bonus not e'ceeding ten percent of disclosed pro&t of relevant income
year% arrear salary% advance salary% leave encashment or leave fare
assistance and overtime% and
3ii5 any bene&t whether convertible into money or not% provided to an
employee by an employer% called by whatever name% other than
contribution to a recogni9ed provident fund% approved pension fund%
approved gratuity fund and approved superannuation fundI
'36 Person 7895 '"3+$:? TpersonT includes an individual% a &rm% an association of
persons% a Gindu undivided family% a local authority% a company and every other
arti&cial =uridical personI
')6 Pro&ts in lieu of salary UJ4S !3+"5V? Tpro&ts in lieu of salaryT includes88
3a5 the amount of compensation due to% or received by% an
assessee from his employer at% or in connection with% the termination of%
or the modi&cation of any terms and conditions relating to% his
employmentI and
3b5 any payment due to% or received by% an assesses from a
provident or other fund to the e'tent to which it does not consist of
contributions by the assesses and the interest on such contributionsI
'+6 RecogniDed Provident Fund 7895 '")'$:? Trecogni9led provident fundT means a
provident fund which has been% and continues to be% recogni9ed by the
Commissioner in accordance with the provisions <f Part B of the First ScheduleI
',6 6esident UJ4S !3++5V? TresidentT% in respect of any income year% means
3a5 an individual who has been in Bangladesh8
3i5 for a period of% or for periods amounting in all to% one hundred and
eighty two days or more in that yearI or
3ii5 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 si'ty8&ve days
or more during four years preceding that yearI
3b5 a Gindu undivided family% &rmS or other association of persons%
the control and management of whose a1airs is situated wholly or partly
in Bangladesh in that yearI and
3c5 a Bangladeshi company or any other company the control and
management of whose a1airs is situated wholly in Bangladesh in that
yearI
'-6 Royalty 7895 '")+$:? TroyaltyT means consideration 3including any lump sum
consideration but e'cluding any consideration which is classi&able as income of
the recipient under the head TCapital gainsT5 for 88
3a5 transfer of all or any rights% including the granting of a license
in respect of a patent% invention% model% design% secret process or
formula% or trade mar; or similar propertyI
3b5 the imparting of any information concerning the wor;ing of% or
the use of% a patent% invention% model% design% secret process or formula%
or trade mar; or similar propertyI
3c5 the use of any patent% invention% model% design% secret process or
formula% or trade mar; or similar propertyI
3d5 the imparting of any information concerning technical%
industrial% commercial% or scienti&c ;nowledge% e'perience or s;illI
3e5 the transfer of all or any rights% including granting of a license%
in respect of any copyright% literary. artistic or scienti&c wor;% including
&lms or video tapes for use in connection with television or tapes for use
in connection with radio broadcasting% but not including consideration for
sale% distribution or e'hibition of cinematograph &lmsI or
3f5 the rendering of any services in connection with any of the
aforesaid activitiesI
'.6 Tax 7895 '"+'$:? Tta'T means the income ta' payable under this Brdinance and
includes any additional ta'% e'cess pro&t ta'% penalty% interest% fee or other
charges leviable or payable under this BrdinanceI
<(6 Total income 7895 '"+)$:? Ttotal incomeT means the total amount of income
referred to in section #- computed in the manner laid down in this Brdinance%
and includes any income which% under any provision of this Brdinance% is to be
included in the total income of an assesseeI
</6 Transfer 7895 '"++$:? TtransferT% in relation to a capital asset% includes the sale%
e'change or relin<uishment of the asset% or the e'tinguishment of any right
therein% but does not include8
3a5 any transfer of the capital asset under a gift% be<uest% will or
an irrevocable trustI
3b5 any distribution of the assets of a company to its shareholders
on its li<uidationI and 3c5 any distribution of capital assets on the
dissolution of a &rm or other association of persons or on the partition of
a Gindu undivided familyI
<'6 >ear 7895 '"+.$:? TyearT means a &nancial year.
'-C The Conce*t of Inco4e
There is no e'haustive de&nition of OincomeW in the Income Ta' Brdinance #/.*
3Brdinance5. The term income is easy to understand but diEcult to de&ne. >hat
is ta'ed% as so often has been pointed out under the Income Ta' 7aw% is nothing
that is realI it is the statutory income measured in a particular way.
The ob=ect of the Brdinance is to ta' OIncomeW. The term is e'panded in sec. !.
and )# into income% pro&ts and gainsI but the e'pansion is more a matter of
words than of substance. The word OincomeW is an e'pression of elastic ambit and
the courts when describing income have almost always <uali&ed their description
by saying that it is not e'haustive.
From various =udicial decisions% the following are held to be characteristics of
income?
3a5 Income should be received in the form of money or moneyKs worth.
3b5 Income should be in the form of revenue nature.
3c5 It should arise from some de&nite source or a source with some sort
of regularity.
3d5 It should be derived from a person other than the recipient.
3e5 Income tainted with illegality is also classi&ed as ta'able income
under ta' law.
Income is a more general term than pro&ts or gains. The words Oincome% pro&ts
and gainsW are used in a distinctive sense% and the word OincomeW is not limited
by the words Opro&tsW and OgainsW. A receipt may be ta'able as income% although
it may contain no element of pro&ts or gain. Pro&ts or gains mean something
which is in the nature of interest or fruit% as opposed to principal or tree. O(ainsW
is really e<uivalent to Opro&tsW. The pro&t of a trade or business is the surplus by
which the receipts from the trade or business e'ceed the e'penditure necessary
for the purpose of earning these receipts.
Section !3)*5 of the Income Ta' Brdinance #/.* gives a de&nition of Income as
under?
XIncomeK Includes8
a5 Any income% pro&ts and gains% from whatever source derived% chargeable
to ta' under any provision of the ordinance under any head speci&ed in
section !"I
3b5 Any loss of such income% pro&ts or gainsI
3c5 The pro&ts and gains of any business of insurance carried on by a mutual
insurance association computed in accordance with paragraph . of the
Fourth ScheduleI
3d5 Any sum deemed to be income% or any sum accruing or arising or
received% in Bangladesh under any provision of the BrdinanceI
But the amount of any bonus share or the amount of bonus declared to rise paid
up share capital shall not be included as income of that shareholder.
To understand the true nature of income% the following two case decisions can be
referred to?8
a( Sha/ .allace G Co CaseB
OIncome in the Brdinance connotes a periodical monetary return coming
in with some sort of regularity or e'pected regularity from a de&nite
source. The source need not be continuously productive% but it must be
one where ob=ect is the production of a de&nite return% e'cluding
anything in the nature of a mere windfall. Income is essentially the
product of something which is often loosely spo;en as XcapitalK. It is not
correct to say that every receipt which is not a capital is assessable. Bn
the other hand% it is only receipts that are of the nature of income
receipts that are assessableYY.W
3( #ani A4rit 5un/ar CaseB
OIncome% in order to be ta'able% need not arise from any business
activity% investment of enforceable obligation to pay% but may arise from
voluntary or customary payments. $or is it necessary that it should be
the result of some outlay on the part of the assesseeYYW
Therefore% for the purposes of the Income Ta' Brdinance #/.*% income is a
periodical monetary return coming in with some sort of regularity or e'pected
regularity from a de&nite source% not e'cluded by the Brdinance.
Total Inco4eB Sec 2E@(
Section !3,+5 de&nes the term Ototal IncomeW as follows? Ototal incomeW means
the total amount of income referred to in section #- computed in the manner laid
down in the Brdinance% and includes any income which% under any provision of
the Brdinance is to be included in the total income of an assessee.
'-'& Ca*ital or #e+enue
0i1erence between capital and revenue is of vital importance. Inco4e ta, is
le+ied on inco4e and not on ca*ital recei*ts- >hile ascertaining the
pro&ts of a business or profession% the revenue e'penditure and not the
capital e'penditure is deductible from the trading receipts. Courts have often
observed that it may conclusively be =udged that a particular receipt is a
capital or a revenue receipt. 0ecided cases merely illustrate and not all are
perfect guides.
The distinction between capital and revenue receipts is much more diEcult
than between capital and revenue e'penditure. There are no hard and fast
rules which may help in determining whether a particular receipt is a capital
or a revenue receipt.
>hether a particular e'penditure is incurred solely to earn pro&t or whether it
is a capital e'penditure depends in each case on the nature of business%
commercial practice% the nature of the e'penditure and other relative
circumstances. $o rigid rules can be laid down in this connection.
'-'' Ta, and Inco4e Ta, B
Income ta' is a ta' on income. Section !3,!5 of the Income Ta' Brdinance
#/.* de&nes ta' as follows? Tta'T means the income ta' payable under the
Brdinance and includes any additional ta'% e'cess pro&t ta'% penalty% interest%
fee or other charges leviable or payable under the Brdinance.T Therefore%
income ta' is any ta'% additional ta'% e'cess pro&t ta'% penalty% interest% fee
or other charges leviable or payable on any income or deemed income under
the Brdinance.
'-'2 DiAerent #ates of Ta,B
The di1erent rates of ta' for di1erent types of assessee for the assessment
year !"##8!"#! are as follows?
Ta, #ates for Indi+idual= %ir4s= Association of )ersons AO)(= ;indu
Undi+ided %a4il6 ;U%( and Arti0cial Huridical )ersonB
a(The limit of Total Income $BT liable to Income Ta' for the Assessment year
!"##8#! stands at T;. #."%""".
Ta' e'empted ceiling of income for Female assessee% senior citi9ens at age
,+ or above will be TH. !""%""" and that for handicapped4disabled persons
will be T;. !+"%""" for the assessment year !"##8!"#!.
The comparative FI:2 Tier ta' rates for two assessment years are given
below?
Tier
Assessment Cear? !"#" 8## Assessment Cear? !"##8#!
7evel of
Income
Slap Ta'
6ate
7evel of
Income
Slap Ta'
6ate
# Jp to
TH.#,+%"""
First
T;.#,+%"
"P Jp to T;.
#."%"""
First
T;.#."%"
"P
"" ""
! T;.#,+%"""8
T;.**"%"""
$e't
T;.!-+%"
""
#"P T;. #."%""#8
T;.*."%"""
$e't
T;.)""%"
""
#"P
) T;.**"%"""8
T;.-,+%"""
$e't
T;.)!+%"
""
#+P T;.*."%""#8
T;..."%"""
$e't
T;.*""%"
""
#+P
* T;.-,+%"""8
T;.#%#*"%"""
$e't
T;.)-+%"
""
!"P T;..."%""#8
#%#."%"""
$e't T;.
)""%"""
!"P
+ Above
T;.#%#*"%"""
Bn above !+P Above
T;.#%#."%"""
Bn
above
!+P
The minimum amount of income ta' is T;. !%"""I
3(S4all and cottage industriesB If the assessee is an owner of any small
and cottage industry or engaged in such ;ind of activities in a $B6
speci&ed less developed 4 least developed area% he4she will be eligible to
have a ta' rebate on such income at following rates?
ii5 If production 4 turnover increases by more than #+P but less than !+P
comparing to previous year% +P rebate on ta' applicable on such
income will be allowedI
iii5 If production 4 turnover increases by more than !+P comparing to
previous year% such rate of rebate will be #"P.
In order to avail the above opportunities% the industries be located in the
O7ess 0eveloped AreasW and O7east 0eveloped AreasW as speci&ed by $B6
in accordance of I.T.B. #/.*.
Ta, #ates for Co4*anies
Applicable ta' rates for companies for the Assessment year !"#"8!"## are as
follows?

a( )u3licl6 Traded Co4*an6B
3i5 Q !-.+PI however% such company is eligible to claim #"P
rebate on such payable ta' if it declares dividends at a rate
higher than !"P. if at least #"P dividend is declared and paid
within ," days of such declaration with a further rebate of #"P
of Ta' Payable in case of dividend of more than !"P is declared
and paid within ," days of such declaration.
3ii5 Q )-.+P if declared dividend is less than #"P or the declared
dividend is not paid within S2C stipulated time 3," days of such
declaration5.
3( Non>)u3licl6 Traded Co4*anies > I 9F-@J-
c( Ban2= Insurance and %inancial Institutions > I :2-@J-
d(Cigarette 4anufacturing co4*anies > I :2-@J-
Gowever% the rate will be reduced to )+P if such company is publicly traded.
d( Mo3ile )hone O*erator Co4*an6 > I :@J-
Provided t!at if t!e mo?ile p!one operator company turned into a
pu?licly traded company ?y oEering at least /(# "it must not include
Pre 0nitial Pu?lic 1Eering Placement at a rate !ig!er t!an )#$ of its paid
up capital t!roug! stocA exc!anges2 t!en t!e tax rate will come down to
<)#6
Inter>Cor*orate Ta, #ate Ta, #ate on Di+idend( for 2&''>'2
assess4ent 6ears
3a5 Company
3i5 If dividend declared by a company registered under Company Act
#//* or any pro&t remitted outside Bangladesh by a company not
incorporated in Bangladesh under Company Act #//*% the rate on
such dividend or pro&t is !"P.
3ii5 #"P to #+P in relation to a non8resident company resident of a
country with whom there is 0ouble Ta'ation Agreement with
Bangladesh.
3b5 Individual
3i5 6esident F at a rate applicable to his total income
3ii5 $on8resident 8 Q !+P
3iii5 #+P if the non8resident is resident of a country with whom there is
0ouble Ta'ation Agreement with Bangladesh.
Ta, #ate for Non>#esident
Ta' rate for non8resident 3Bther than $on 6esident Companies and $on8
6esident Bangladeshi5 is ma'imum that is Q !+P.
Ca*ital $ain Ta, #ate )aragra*h 2 of the Second Schedule(
a( Ca*ital gain on Ca*ital assets other than Shares referred to in
clause 3( 3elo/B
3#5 Companies? Q #+P.
3!5 Bther assessees?
3i5 0isposal within + years? at regular rates applicable to assesseeKs
total income including capital gains.
3ii5 0isposal after + years? at regular rates applicable to total
income 3including capital gains5 or at #+P% whichever is lower.
3( Ca*ital gain on Sale of SharesB
3i5 Shares of Public 7isted Companies? $o capital gain ta' 36ef. section
)!3-55
3ii5 Shares of Private 7imited Companies? Q #"P.
3iii5 (ain received by $on8resident on Sale of Shares of Public
Companies if the assessee is entitled to similar e'emption in the
country in which he is a resident.
Ta, #ate on .inning referred to in Section 'C'9(
As per Paragraph ) of the Second Schedule the ta' rate on winnings is the
rate applicable to total assesseeKs income 3including O>inningsW5 or !"P%
whichever is lower.
'-'9 Lia3ilit6 to ta,
A- Indi+iduals
An individual may be liable to the following ta'es?
Income ta' 3IT5% for e'ample
8 income from salary
8 income from interest on securities
8 income from house property
8 agricultural income
8 income from business or profession which he operates as a sole trader or
as a member of a partnership &rm
8 capital gains and
8 income from other sources
:alue added ta' 3:AT5 as the supplier of goods and services 3if a sole
trader5 or as the &nal consumer of goods or services
An individual is ta'ed annually on his income at the rate determined with
reference to the Finance Act enacted in every &nancial year.
B- )artnershi*s
A partnership is a group of persons carrying on a business together with a
view to ma;ing a pro&t.
2ach partner is liable to ta' on his share of income of the partnership in an
income year% but not for ta' on the shares of income of the other partners.
The partners are also liable to the following ta'es?
Income ta' of employees deducted at source
:alue added ta' 3:AT5 as the supplier of goods and services or as the &nal
consumer of goods or services
C- Co4*anies
A company is a legal person which is legally separate from its owners
3shareholders5 and its managers 3directors5. For the purpose of income ta' the
meaning of company is de&ned under section !3!"5 of Income Ta' Brdinance
#/.* 3hereinafter referred to as the Brdinance5.
A company is liable to the following ta'es?
Corporation ta' 3CT5 on its income
Income ta' of employees deducted at the time of payment of salaries and
remuneration
:alue added ta' 3:AT5 as the supplier of goods and services or as the &nal
consumer of goods or services
A company is liable to corporation ta'% the rate being determined with
reference to the Finance Act enacted in every &nancial year.
'-': Ta, Lia3ilit6 on Inco4e
The ta' is payable on income earned during an income year in the following
year i.e. assessment year. Gowever% there are provisions for payment of ta'es
in advance during the income year% such as deduction of ta'es at source 3Sec
*.5% advance payment of ta' u4s ,* etc.
Jnder Sec !3)+5% Inco4e 6ear means8
a5 the &nancial year 3Muly to Mune5 immediately preceding the assessment year.
b5 If the accounts of an assessee 3generally engaged in business or profession5
have been made up to a date within the said &nancial year% the period ending
on that date.
c5 If% a business or profession is newly set up in the said &nancial year% the
period from the starting up of business or profession to the end of the
&nancial year or where the accounts have been made up to a date within the
said &nancial year% the period ending on that date.
d5 The Board may determine such period as income year in the case of any
person or class of persons or any business or profession or class of business
or professions 3such as industrial units under various Sector Corporations5.
e5 If the assessee is a partner of a &rm and the &rm has been assessed as such%
the period determined as the income year for the assessment of income of
the &rm.
f5 An assessee engaged in business or profession% once adopted a period as
income year cannot change the income year without the consent of the
0eputy Commissioner of Ta'es upon such conditions as the 0eputy
Commissioner of Ta'es thin;s &t to impose.
$ormally% income year of an individual% e'cept engaging in business or
profession ends on )"
th
Mune of a year. An income year cannot e'ceed a period
of twelve calendar months.
'-'@ So4e signi0cant issues of inco4e ta,
Assess4ent 6earB
Assessment year means the year following the &nancial year% i.e. income year.
Thus% the assessment year always begins on #
st
Muly and ends on )"
th
Mune every
year. This period is also ;nown as the &nancial year. Accordingly% it is the current
&nancial year in which income of the immediately preceding &nancial year
3;nown as income year5 is assessed.
As per section !3/5 of the ITB% #/.*I the term TAssessment yearT means the
period of twelve months commencing on the &rst day of Muly every year.
From the following e'ample% we can see how to &nd out the assessment year?
2'ample #
2'ample !
Inco4e 6ear Assess4ent 6ear
"#."#.". to )#.#!.". !""/ 8 !"#"
"#.").". to )#.#!.". !""/ 8!"#"
"#."..". to )#."-."/ !"#" 8 !"##
",ce*tions to the rule of Assess4ent YearB
(enerally% income is ta'ed in the subse<uent year to the income year. But% in
certain cases% to protect the interests of revenue% the income is ta'ed in the
year of earning itself. Thus% in those cases the assessment year and the
income year are the same. The e'ceptions to the normal rule of assessment
year are discussed as under?
a(Inco4e of discontinued 3usiness KSection DC2(LB >here any
business or profession is discontinued in any assessment year% the income
of the period from the e'piry of the last income year upto the date of such
discontinuance may be charged to ta' in that assessment year.
3()ersons lea+ing Bangladesh KSection C;2(3(LB >hen it appears to
the Assessing BEcer that an individual may leave Bangladesh and has no
intention to return% the total income of such individual for the period from
the e'piry of the income year in relation to the current assessment year
upto the probable date of his departure from Bangladesh is chargeable to
ta' in current assessment year itself.
c( Inco4e of non>resident shi**ing co4*anies KSection '&22(LB
Section #"!3!5 of the ITB% #/.*% provides for the ta'ation of income of
non8resident shipping companies in the year in which they earn their
income in Bangladesh% provided that such companies do not have any
representative here.
.or2ed ",a4*le >'-'
An assessee closes its annual accounts consistently on )"
th
Mune. Gis
assessment for the accounting year ended )"
th
Mune !"#" was completed. The
assessee has decided to change its account closing date on )#
st
0ecember
Accounting 6ear
ends on
Inco4e
6ear
Assess4ent
6ear
)".",.!""- !"",8 "- !""-8 ".
)"."/.!""- !""-8 ". !"".8 "/
)#.#!.!""- !""-8 ". !"".8 "/
)#.").!"". !""-8 ". !"".8 "/
)#."-.!"". !"".8 "/ !""/8 #"
from the ne't year. 0etermine the date when should the assessee close its
ne't year end accounts.
Solution
Jpon ta;ing approval from the 0eputy Commissioner of Ta'es% the assessee
can close its ne't annual accounts for si' months period on )#
st
0ecember
!"#" and the income arising therefrom would be assessed in the assessment
year !"##8#!.
.or2ed ",a4*le >'-2
An assessee regularly closes its annual accounts on )#
st
0ecember and his
last assessment for the assessment year !"##8#!% corresponding to the
accounting year ended )#
st
0ecember% !"#" was completed. The assessee
has decided to change its ne't annual accounts on )"
th
Mune. 0etermine the
date when should this assessee close its ne't annual accounts.
Solution
Gere the assessee would not be allowed to close its ne't annual accounts on
)"
th
Mune !"##. Because assessment of income arising therefrom becomes
assessable in the assessment year !"##8#! when assessment for this
assessment year had already been completed based on the accounts ended
)#
st
0ecember !"#". As such he would be re<uired to close ne't annual
accounts on )"
th
Mune !"##% which would comprise a period of eighteen
months.
.or2ed ",a4*le M '-9
Can an assessee change its annual accounts closing dateN If so% under what
conditionsN
Solution
An assessee is allowed
to change its annual
accounts closing date
upon ta;ing approval
from the 0eputy
Commissioner of Ta'es
and on such conditions
as the 0eputy
Commissioner of Ta'es
thin;s &t to impose. As
for e'ample% if due to
change of accounting
year% the assesseeKs
ta' burden is reduced
the 0eputy
Commissioner of Ta'es
is entitled to charge
ta' at a higher rate
applicable for the
assessment year had
no change in closing
date of accounts
occurred.
DiAerent classes of
assesseeB
As per ITB% #/.*%
assessee is a person
who is liable to pay
any sum under the
Income Ta'
Brdinance% #/.* or in
respect of whom the
proceedings have
been under this
Brdinance. The below
diagram depicts the
di1erent classes of
assessee?
#esidential status
of an assesseeB
Section !3++5 de&nes
the term XresidentKW as
follows?8 X6esidentK% in respect of any income year% means8
3a5 an individual who has been in Bangladesh8
3i5 for a period of% or for periods amounting in all to% one hundred and
eighty8two days or more in that yearI or
3ii5 for a period of% or for periods amounting in all to ninety days or
more in that year having previously been in Bangladesh for a period
Individual
Company
Firm
7ocal Authority
Arti&cial Mudicial Person
Association of Person
Gindu Jndivided Family
$on8resident
Bangladeshi
$on8resident
Foreigner
6esident
$on8
resident
O
n

t
h
e

b
a
s
i
s

o
f

P
e
r
s
o
n
O
n

t
h
e

b
a
s
i
s

o
f

R
e
s
i
d
e
n
t
i
a
l

S
t
a
t
u
s
A
s
s
e
s
s
e
e
of% or for periods amounting in all to three hundred and si'ty8&ve
days or more during four years preceding that yearI
3b5 a Findu un*dividend family% &rm or other association of persons% the
control and management of whose a1airs is situated wholly or partly in
Bangladesh in that yearI and
3c5 a Banglades!i company or any ot!er company the control and
management of whose a1airs is situated wholly in Bangladesh in that
yearI
and% under section !3*!5% Xnon8residentK means a person who is not a
resident.
It is important to note here that the concept of resident as de&ned in the
Income Ta' Brdinance has nothing to do with the nationality of a particular
individual. A foreign national may be treated as X6esidentK for a particular year
if he or she ful&ls the legal re<uirements as above% where as a Bangladeshi
national may be treated as a X$on8residentK if he% or she does not ful&ll the
said re<uirements. To test residential status of an individual% the following Aow
chart will be helpful?

Ta,ation i4*lication of resident or non>resident
0etermination of residential status of an assessee has a signi&cance bearing
on the ta' liability as incidence of income ta' varies according to the
residential status of an assessee. In this regard we can consider the following
issues?
I. To determine t!e amount of total income? 0etermination of total income is
di1erent for residents and non8residents. A resident considers global
income as his total income but a non8resident does not consider income
from other countries in his total income.
An individual
stays in
Bangladesh for -
182 days or more
of an income
year?
Resident
Yes
90 days or more
of an income
year?
No
Yes
3! days or more
during " immediate
#receding years?
Yes
No
No
Non-resident
$s the assessee is Bangladeshi citi%en?
Non resident
Bangladeshi &N'B(
Non resident
)oreigner &N')(
Yes No
II. To determine minimum limit of taxa?le income? A resident and non8resident
Bangladeshi has to pay ta' if his total ta'able income is more than T;.
#%,+%""" as per the Brdinance 3in case of women% elderly citi9ens being
more than ,+ years old% the limit is T;. #%."%""" and disable persons the
limit is T;. !%""%""""5. But for a non8resident foreigner such minimum limit
is not applicable.
III. Tax rate4 For a resident an non8resident Bangladeshi ta' is calculated using
the rates applicable for various levels of income. Such as% for &rst T;.
#%,+%""" Q "P % for ne't T;. !%-+%""" Q #"P. But a non8resident foreigner
has to pay ta' at ma'imum rate i.e. Q !+P.
I:. 0ncome tax re?ate? A resident and non8resident Bangladeshi assessee gets
income ta' rebate on investment allowance and on ta' e'empted income
from gross ta' liability. But% for a non8resident foreigner no ta' rebate is
applicable.
:. Tax lia?ility? The average ta' rate applicable for a resident and non8resident
Bangladeshi is less than that of a non8resident foreigner since ta' is
calculated using di1erent lower ta' rates 3such as #"P% #+P% !"P L !+P5.
But a non8resident foreigner has to pay ta' at ma'imum rate i.e. Q !+P.
Thus% determination of residential status of an assessee has a signi&cant
bearing on the ta' liability as total income% ta'able income and ta' rate are
found to vary according to the residential status of an assessee.
.(pacts o+ re s idential status in assessin/ inco(e :
0etermination of residential status of an assessee has a signi&cant bearing on
the ta' liability as incidence of income ta' varies according to the residential
status of an assessee as per Section #- of the ITB% #/.*. Therefore% the scope
of total income varies according to the residential status of an assessee.
These provisions may be summari9ed as under?
Particulars o+ inco(e
To 0e ta,ed or not
1esident 2on-resident
Income received or deemed to be received in
Bangladesh
Ta'able Ta'able
Income accrued or arose or deemed to accrue or
arise in Bangladesh
Ta'able Ta'able
Income accrued or arose outside Bangladesh Ta'able $on8ta'able
.or2ed ",a4*le M '-:
r. J99al% an Indian citi9en% stayed in Bangladesh from #st August% !""/ to )#st
0ecember% !""/ and left for 7ondon. >hat will be his residential status in the income
year !""/8#"N
Solution
r. J99al is a non8resident since his stay in Bangladesh during income year !""/8#"
is U)# Z)"Z)# Z)"Z)#V [ #+) days which is less than re<uired #.! days.
.or2ed ",a4*le M '-@
r. Arif% a Bangladeshi citi9en% stayed in Bangladesh from #T Muly% !""/ to )#st
0ecember% !""/ and left for Mapan. >hat will be his residential status in the income
year !""/8#"N
Solution
r. Arif is a resident since his stay in Bangladesh during !""/8#" is
U)#Z)#Z)"Z)#Z)"Z)#V [
#.* days which is more than re<uired #.! days. .
.or2ed ",a4*le M '-E
r. A;ash stayed in Bangladesh from #T September% !""/ to )#st Manuary% !"#" and
left for Trinidad. Ge came bac; on #T ay !"#" and still staying in Bangladesh. >hat
will be his residential status in the income year !""/8#"N
Solution
r. A;ash is a resident since his stay in Bangladesh during !""/
U)"Z)#Z)"Z)#Z)#V [ #+) days and in !"#" from #st ay to )"th Mune U)#Z)"V [
,# days. In total he stayed for U#+)Z,#V [!#* days in the income year !""/8#"
which is more than re<uired #.! days.
.or2ed ",a4*le M '-F
r. 6a;esh Mason% a citi9en of JSA% has been staying in Bangladesh since #st Manuary%
!"",. Ge leaves Bangladesh on #, Muly% !""/ on a visit to JSA and returns on #st
arch% !"#". >hat will be his residential status in the income year !""/8#"N
Solution
Gis stay in Bangladesh during the income year !""/8#" is?
Muly% !""/ #.
arch% !"#" )#
April% !"#" )"
ay% !"#" )#
Mune% !"#" )"
Total staying ':& da6s
Gis stay in proceeding * income years?
!"".8"/ ),+
!""-8". ),,
!"",8"- ),+
!""+8", #.# UFrom #
st
Manuary% !"", to )"
th
Mune% !"",V
'=2FF da6s
As his stay was more than /" days in the income year !""/8#" and more than ),+
days in the preceding * years% he is a resident.
.or2ed ",a4*le M '-D
r. Muris 6einhards% a British citi9en has been coming to Bangladesh for #"" days
every year since !""+8",?
3a5 0etermine his residential status for the income year !"#"8##.
3b5 >ill your answer be di1erent if he has been coming to Bangladesh for
/" days instead of #"" days every yearN
Solution
3a5 Ge is a resident as he stayed in Bangladesh for #"" days 3more than
re<uired /" days5 in the income year !"#"8## and *"" days 3#"" ' *5
3more than re<uired ),+ days5 in the preceding * income years i.e. !"",8
"-% !""-8".% !"".8"/% !""/8#".
3b5 Ces. Ge will% in this case% be a non8resident as he stayed in
Bangladesh for /" days 3e<ual to re<uired /" days5 in the income year
!"#"8## but )," days 3/" ' *5 3less than re<uired ),+ days5 in the
preceding * income years i.e. !"",8"-% !""-8".% !"".8"/% !""/8#". Ge
doesnDt ful&ll any of the re<uired conditions.
.or2ed ",a4*le M '-C
r. Mashim Jddin was outside Bangladesh from !"
th
August% !"". for an employment
contract valid for two years% i.e. from #
st
August% !"". to )#
st
Muly% !"#". r. Jddin
did not come to Bangladesh at any time during the year !"". and !""/. Ge &nally
came to Bangladesh on #"
th
Manuary% !"#" and did not go bac;. 0etermine his
residential status for the income year !""/8#".
Solution
Total number of days r. Jddin stayed in Bangladesh during respective years?
!""/8#" 3From #"
th
Manuary% !"#" to )"
th
Mune% !"#"5? U!!Z!.Z)#Z)"Z)#Z)"5 [
#-! days.
!"".8"/ 3From #
st
Muly% !"". to !"
th
August% !"".5? U)# Z!"5 [ +# days.
!""-8". 3From #
st
Muly% !""- to )"
th
Mune% !"".5 [ ),+ days
!"",8"- 3From #
st
Muly% !"", to )"
th
M line% !""-5 [ ),+ days
!""+8", 3From #
st
Muly% !""+ to )"
th
Mune% !"",5 [ ),+ days
r. Jddin is a resident since he ful&lls the second condition. Gis stay in Bangladesh
during the income year !""/8#" is #-! days which is more than re<uired /" days in
that year% and U+# Z),+Z),+Z),+5I #%#*, days during previous four years which is
more than re<uired ),+ days.
.or2ed ",a4*le M '-'&
r. Mayed provides the following particulars of his stay in Bangladesh over a period of
last &ve years?
Year Da6s
!""+8", *"
!"",8"- ++
!""-8". #.!
!"".8"/ !""
!""/8#" /*
!"#"8## ##"
a5 0etermine his residential status for the income year !"#"8##.
b5 >hat will happen if he stays for .+ days in the year !"#"8##N
c5 >hat will happen if he stays for ." days in the year !"".8"/N
d5 >hat will happen if he stays for #.+ days in the year !"#"8## and total ),"
days during last four yearsN
Solution
a5 r. Mayed is a resident since he ful&lls the second condition. Gis stay in
Bangladesh during income year !"#"8## is ##" days which is more than
re<uired /" days in that year% and U++Z#.!Z!""Z/*V [ +)# days during
previous four years which is more than re<uired ),+ days.
b5 r. Mayed would be a non8resident since he doesnDt ful&ll the second condition.
Gis stay in Bangladesh during income year !"#"8## is .+ days which is less
than re<uired /" days in that year% although he stayed U++Z#.!Z!""Z/*V [
+)# days during previous four years which is more than re<uired ),+ days.
c5 r. Mayed is a resident since he ful&lls the second condition. Gis stay in
Bangladesh during income year !"#"8## is ##" days which is more than
re<uired /" days in that year% but his total stay during previous four years is
*## days U++Z#.!Z."Z/*V which is more than the re<uired ),+ days.
d5 r. Mayed would be a resident since he ful&lls the &rst condition. Gis stay in
Bangladesh during income year !"#"8## is #.+ days which is more than
re<uired #.! days of the &rst condition. In such a case% it is not important to
;now regarding his stay during four preceding years.
.or2ed ",a4*le M '-''
0r. Gannan Sar;er wor;s as a professor in a university in Australia. Ge left Bangladesh in
#//,. After - years of that% he &rst visited Bangladesh in the year !""). After wards he
visited Bangladesh every year to see his parents. The following table is providing the
information about the time period he stayed in Bangladesh in di1erent years from !"") to
!"#". 0etermine his residential status during these income years?
Year
2&&9>
&:
2&&:>
&@
2&&@>
&E
2&&E>
&F
2&&F>
&D
2&&D>
&C
2&&C>
'&
0ate of
entrance
#,."/."
)
#!.#"."
*
##."!."
,
"/.#!."
,
"#."-."
-
!..#!."
.
#+."-.
"/
0ate of e'it !..")."
*
#/.")."
+
#*.")."
,
"#.")."
-
!.."/."
-
!..",."
/
#!.").
#"
Solution
Year 2&&9>
&:
2&&:>
&@
2&&@>
&E
2&&E>
&F
2&&F>
&D
2&&D>
&C
2&&C>
'&
&ate of
entrance
#,."/."
)
#!.#"."
*
##."!."
,
"/.#!."
,
"#."-."
-
!..#!."
.
#+."-."
/
&ate of exit !..")."
*
#/.")."
+
#*.")."
,
"#.")."
-
!.."/."
-
!..",."
/
#!.").#
"
&ays of
staying in
current >ear
#+Z)#Z
)"Z)#Z
)#Z!/Z
!.[#/+
!"Z)"Z
)#Z)#Z
!.Z#/[
#+/
#.Z#*[
)!
!)Z)#Z
!.Z#[.
)
)#Z)#Z
!.[/"
*Z)#Z!
.Z)#Z)
"Z)#Z!
.[#.)
#-Z)#Z
)"Z)#Z
)"Z)#Z
)#Z!.Z
#![!*#
&ays of
staying in
previous 3
years
" #/+ #/+Z#+
/[)+*
#/+Z#+
/Z)![)
.,
#/+Z#+
/Z)!Z.
)[*,/
#+/Z)!
Z.)Z/"
[),*
)!Z.)Z
/"Z#.)
[)..
Residential
5tatus
6esident $on8
resident
$on8
resident
$on8
resident
6esident 6esident 6esident
.or2ed ",a4*le M '-'2
Ale' 0eliveries is a Partnership Firm whose
a5 control and management of a1airs is situated wholly in Bangladesh.
b5 control and management of a1airs is situated partly in Bangladesh.
c5 control and management of a1airs is situated wholly in outside Bangladesh.
0etermine the residential status of the &rm.
Solution
a5 6esidentI since control and management of a1airs is situated wholly in
Bangladesh.
b5 6esidentI since control and management of a1airs is situated partly in
Bangladesh.
c5 $on8residentI since control and management of a1airs is situated wholly in
outside Bangladesh.
.or2ed ",a4*le M '-'9
0BG is non8ban;ing &nancial institution in Bangladesh whose
a5 control and management of a1airs is situated wholly in Bangladesh.
b5 control and management of a1airs is situated partly in Bangladesh.
c5 control and management of a1airs is situated wholly in outside Bangladesh.
Solution
a5 6esidentI since control and management of a1airs is situated wholly in
Bangladesh.
b5 $on8residentI since control and management of a1airs is situated partly in
outside Bangladesh.
c5 $on8residentI since control and management of a1airs is situated wholly in
outside Bangladesh.
.or2ed ",a4*le M '-':
r. Abdul has earned income from various sources in the income year !"#" 8 ##
which are as following?
#. Salary income earned and payable in Bangladesh T;. #""%""".
!. Pro&t of T;. *"%""" from a business in 7ondon has been brought in Bangladesh.
The business has been managed and controlled from Bangladesh.
). Pro&t of T;. ,"%""" from a business in Singapore has not yet been brought in
Bangladesh.
The Business has been managed and controlled wholly from Singapore.
*. Pro&t of T;. -"%""" from a business in 0ubai has not yet been brought in
Bangladesh. The
Business has been managed and controlled wholly from Bangladesh.
Compute the amount of total income of r. Abdul% assuming that he is a
a5 6esidentI
b5 $on8resident
Solution
r. Abdul
Income year? !"#"8##I
Assessment year? !"## 8 #!
Computation of Total Income
)articulars
#esident
T2-
Non>resident
T2-
#. Income earned in Bangladesh? Salary Income #""%""" #""%"""
!. Foreign income?
Pro&t for business in 7ondon which has been
brought in Bangladesh
*"%""" 8
Pro&t for business in Singapore which has not yet
been brought in Bangladesh
,"%""" 8
Pro&t for business in 0ubai which has been
brought in Bangladesh
-"%""" .
Total inco4e 2F&=&&& '&&=&&&
.or2ed ",a4*le M '-'@
The following are the particulars of income of r. Raman for the income year !"#"8
##?
#. 6ent from a property in 0ha;a received in India T;. *"%"""
!. Income from a business in JSA controlled from Bangladesh T;. #+"%"""
). Income from a business in 0ha;a controlled from Pa;istan T;. #."%"""
*. 6ent from a property in Canada received there but subse<uently remitted
to Bangladesh T;. ,"%"""
+. Interest from deposits with a Bangladeshi ban; received in Canada T;.
!"%"""
,. (ifts received from his parents T;. *+%"""
Compute the amount of total income of r. Raman% assuming that he is a
a5 6esidentI
b5 $on8resident
Solution
r. Raman
Income year? !"#"8##
Assessment year? !"##8#!
Computation of Total Income
)articulars
#esident
T2-
Non>resident
T2-
#.
Income earned 4deemed to accrue4arise in
Bangladesh?
6ent from property in Bangladesh *"%""" *"%"""
Income from business in JSA controlled from
Bangladesh
#+"%""" #+"%"""
Income from business in 0ha;a controlled from
Pa;istan
#."%""" #."%"""
Interest form deposits !"%""" !"%"""
!. Foreign income?
6ent from property in Canada ,"%""" 8
Total inco4e :@&=&&& 9C&=&&&
$ote? (ifts received from parents is not regarded as income.
.or2ed ",a4*le M '-'E
The following are the particulars of income of r. 6ahman for the income year !"#"8
##?
#. Salary income received in Bangladesh for services rendered in Afganistan T;.
*"%"""
!. Income from profession in Bangladesh% but received in $epal T;. #+"%"""
). Property income in South Africa 3out of which T;. /"%""" was remitted to
Bangladesh5 T;. #."%"""
*. Pro&ts earned from business in Chittagong T;. ,"%"""
+. Agricultural income in Bhutan T;. !"%"""
Solution
r. 6ahman
Income year? !"#"8##
Assessment year? !"##8#!
Computation of Total Income
)articulars
#esident
T2-
Non>resident
T2-
#.
Income earned 4deemed to accrue4arise in
Bangladesh?

Salary income received in Bangladesh for services
rendered in Afganistan
*"%""" *"%"""
Income from profession in Bangladesh% but
received in $epal
#+"%""" #+"%"""
Pro&ts earned from business in Chittagong
Interest
,"%""" ,"%"""
Foreign income?
Property income in South Africa #."%""" #."%"""
Agricultural income in Bhutan !"%""" !"%"""
Total inco4e :@&=&&& 2@&=&&&
Chapter !
Ad4inistration and Tri3unal

Contents
Introduction
2'amination conte't
To*ic List
!.# :arious Income Ta' Authorities
!.!
Appointment of income Ta' Authorities
!.)
$B6 and Its Functions
!.* Subordination and Control of Income Ta' authorities
!.+
Power and Functions of Income Ta' Authorities
!.,
Ta'es Appellate Tribunal
!.-
Alternate 0ispute 6esolution
Self8Assessment \uestions
Introduction
Learning o3<ecti+es
Identify the di1erent income ta' authorities
6ecognise the power and functions of $B6 and other income ta'
authorities
Hnowing the functions and formulations of the Ta' Appellate Tribunal.
)ractical signi0cance
There are presently #+ classes of income ta' authorities. 2ach class of
authorities has de&ned functions and responsibilities.
To e'ercise the functions of Appellate Tribunal (overnment there e'ists a
Ta'es Appellate Tribunal. The power and functions of that Tribunal are
normally e'ercised by its Benches constituted by the president of the Tribunal.
Jnderstanding of the structure of income ta' authorities and the TribunalKs
procedures are essential for both ta' advisers and the assessees for dealing
the ta' matters when re<uired.
Sto* and thin2
0o you have the clear idea of the income ta' authoritiesN 0id you ;now that
in case of practical cases relating to income ta' in life% the ;nowledge on the
ta' authorities is very importantN
.or2ing conte,t
The ;nowledge on the administrative structure of income ta' authorities and
the TribunalKs procedures covered by this chapter are important for both the
ta' payers and ta' advisers in many times in case of necessity.
Bn behalf of assessee the accountants sometime re<uired to support the
submission of ta' return% hearing to the court etc% so they should have a clear
picture of income ta' authorities and its power and functions and the
TribunalKs procedures in their mind to assist their clients in resolving relevant
ta' issues.
S6lla3us lin2s
The topics covered in this chapter are important to your understanding of
income ta' authorities and Ta'es Appellate Tribunal.
Cou will be using this ;nowledge again when you tac;le the Ta'ation paper
later on in the Professional Stage and it will also underpin the technical
aspects at case study level.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Show the structure of various income ta' authorities
0iscuss the appointment procedures of income ta' authorities
ention the power and functions of di1erent income ta' authorities
Identify the Appellate Tribunal.
?uestion *ractice
For <uestion practice on this topic go to the suggested answers covering this
chapter.
2-& ADMINIST#ATION AND T#IBUNAL
Section O+er+ie/
There shall be #+ classes of income ta' authorities for the purposes of the
Brdinance.
$B6 may appoint di1erent ta' authorities% e'ecutive ministerial oEcers
and sta1 as it thin;s &t.
2ach class of authorities has de&ned power and functions.
(overnment shall establish a Ta'es Appellate Tribunal consisting of a
President and other members.
The procedures followed by the Ta'es Appellate Tribunal in disposing of the
appeals have been speci&ed in the Ta'es Appellate Tribunal 3Procedure5
6ules% #/.+.
The procedure followed by the Alternate 0ispute 6esolution to resolve
disputes.
2-' !arious Inco4e Ta, AuthoritiesB
0epending on the functions% income ta' authorities may be classi&ed into
two ma=or groups% namely%
I. Administrative? 2'ecutive loo;ing after the overall ta' administration
II. Mudicial? Mudicial e'ercising =udicial function in appeal cases
Inco4e Ta, Authorit6
Ad4inistrati+e
$ational Board of 6evenue
Hudicial
Appellate Tribunal
Chief Commissioner of Ta'es
0irectors8(eneral of Inspection 3Ta'es5
Commissioner of Ta'es 37arge Ta'payer
Jnit5
0irector (eneral 3Training5
0irector (eneral 3Central Intelligence
Cell5
Commissioner of Ta'es
T
o
p

i
d
d
l
e
B
o
t
t
o
m
0eputy Commissioners of Ta'es
Ta' 6ecovery BEcer
Assistant Commissioners of Ta'es
2'tra Assistant Commissioners of Ta'es
Inspectors of Ta'es
Commissioner of Ta'es 3appeal5
Appellate Additional
Commissioners of Ta'es
Appellate Moint Commissioner of
Ta'es
The Commissioner of Ta'es and sometimes% the 0eputy Commissioner of
Ta'es en=oy and e'ercise <uasi8=udicial powers.
2-2 A**oint4ent of Inco4e Ta, AuthoritiesB Sec :
3#5 Sub=ect to the rules and orders of the (overnment regulating the terms
and conditions of service of persons in public services and posts%
appointment of income ta' authorities shall be made in accordance with
the provisions of the Brdinance USection *3#5V.
3!5 The Board may appoint Chief Commissioner of Ta'es% 0irector (eneral%
Central Intelligence Cell as many 0irector8(eneral of Inspection%
Commissioners 3Appeals5% Commissioners% Moint Commissioners of Ta'es%
0eputy Commissioners of Ta'es% Ta' 6ecovery BEcers and Assistant
Commissioners of Ta'es such other e'ecutive or ministerial oEcers and
sta1 as it many thin; &t USection *3!5V.
3)5 $otwithstanding anything contained in the Brdinance% the Board may% with
the approval of the government% appoint one or more persons having
appropriate professional s;ill and e'perience to perform such functions as
may be speci&ed by an order issued in this behalf% and the person or
persons so appointed shall be deemed to be an income ta' authority for
the purposes of the Brdinance USection *3!A5V.
3*5 Sub=ect to such orders or instructions as the Board may from time to time%
issue in this behalf% any other income ta' authority may appoint any
income ta' authority subordinate thereto and such other e'ecutive or
ministerial oEcers and sta1 as may be necessary for assistance in the
e'ecution or its functions USection *3)5V.
2-9 NB# and Its %unctions
$ational Board of 6evenue 3$B65 is the highest e'ecutive authority. It is a
statutory body and its members are appointed by the (overnment to manage%
control and supervise the whole income ta' 0epartment. The $B6 is
empowered to ma;e necessary rules concerning income ta' matters and is
authori9ed to give any interpretation to any provision in any section of the
Brdinance. It cannot act by issuing any instructions to be construed as
interference to the authority of =udicial personnel li;e the Commissioner of
Ta'es 3Appeals5% Appellate Additional Commissioner of Ta'es% Appellate Moint
Commissioner of Ta'es and the Commissioner of Ta'es when they e'ercise
their =udicial powers.
Main functions of the NB#
#. To declare any foreign unincorporated association as a company for the
purposes of the Brdinance. USec% !3!"53c5V
!. To determine a period to be an income year of any person. USec. !3)+53e5.
). To delegate powers to the Inspecting Additional Commissioner of Ta'es to
e'ercise the powers of a Commissioner and to the Appellate Additional
Commissioner of Ta'es to e'ercise the powers of a Commissioner
3Appeals5 USec *AV
*. To determine the functions of the 0irector (eneral of Inspection% the
Commissioner 3Appeals5% the Appellate Moint Commissioner% the
Commissioner 37TJ5% the Inspecting Moint Commissioner and to determine
the =urisdiction of Income Ta' authorities. USec ,V
+. To issue orders% directions or instructions to all oEcers and other persons
engaged in the performance of any functions under the Brdinance. USec .V
,. To determine place of assessment when =urisdiction of an assesee falls
more than in one 9one. USec #-)AV
-. To direct to ma;e payment of ta' deducted at source within the speci&ed
time. USec +/V
.. To recogni9e and authori9e Chartered Accountant% cost and management
accountant% income ta' practitioner and members of other accounting
bodies for appearance in income ta' matters as authori9ed representative
of the assessee. USec #-* 3!5V
/. To ta;e disciplinary action against any authori9ed representative in case of
professional misconduct. USec #-* 3)5V
#". To allow ta' holiday or ta' e'emption to approved underta;ings. USec
**L*+V
11* To accord and withdraw recognition to Super Annuation Fund% Pension Fund
and (ratuity Fund. U#
st
Schedule part A% B L CV
#!. To reward employees of the ta' department or any other person for
furnishing information leading to ta' evasion. USec #.*V
2-: Su3ordination and Control of Inco4e Ta, AuthoritiesB Sec @
3#5 The Chief Commissioner of Ta'es% 0irector8(eneral of Inspection%
Commissioners 3Appeals5 and Commissioner shall be subordinate to the
Board.
3!5 The Additional Commissioner of Ta'es% Moint Commissioner of Ta'es and
Inspectors shall be subordinate to the Commissioners%

or the
Commissioners 3Appeals5% as the case may be% within whose =urisdiction
they are appointed to perform their function. Gowever% no order% direction
or instruction shall be given so as to interfere with the discretion of the
Appellate Moint Commissioners or the Commissioners 3Appeals5% in the
e'ercise of their appellate functions.
3)5 The 0eputy Commissioners of Ta'es and Inspectors shall be subordinate to
the Inspecting Moint Commissioner within whose =urisdiction they perform
their functions.
3*5 The Inspectors shall be subordinate to the 0eputy Commissioners of Ta'es
within whose =urisdiction they perform their functions.
2-@ )o/er and %unctions of Inco4e Ta, Authorities
Hurisdiction of Inco4e Ta, AuthoritiesB Sec E
As per section ,3#5% sub=ect to the provision of the Brdinance8
3aa5 the 3irector-4eneral o+ .nspection shall perform the following
functions% namely?
3i5 carry out inspection of income ta' casesI
3ii5 investigate or cause investigation to the carried out in respect of
cases involving lea;age of revenue or evasion of ta'esI
3iii5 carry out audit of cases of oEces involving income ta' cases onlyI
3iv5 furnish annual report about the wor;ing of income ta' oEcers dealing
with revenue matters to the Board by the thirty day of 0ecember
following the end of the &nancial year to which it relatesI and
3v5 such other functions as may be assigned to them by the Board
3aaa5 the 3irector 4eneral o+ Central .ntelli/ence Cell shall perform the
following functions% namely?8
3i5 carry out intelligence wor;s to gather information about ta'payersI
3ii5 analyse information gathered through intelligence wor; vis8a8vis
concerned income ta' recordsI
3iii5 detect ta' evasions% concealments of income and o1ences as
described in chapter ]]I of Income Ta' Brdinance #/.*I
3iv5 carry out investigations to prove ta' evasion or concealment or any
other irregularities relating to ta'es and to collect evidences in
support of ta' o1ences or ta' frauds for recovery of ta' with penalty
and to suggest prosecutions in &t casesI
3v5 to carry out functions as authorised by any other law.
3b5 the Commissioners or the Commissioner 3Appeals5 and the Appellate Moint
Commissioners shall perform their functions in respect of such areas% or
such incomes or classes of incomes% as the Board may assign to
themUSection ,3#53b5VI
3c5 the Commissioner 37arge Ta'payer Jnit5 shall perform his functions in
respect of such areas% or such persons% or such cases or classes of cases
or such incomes or classes of incomes% as the Board may assign to
himUSection ,3#53bb5VI
3d5 the Inspecting Moint Commissioners and the 0eputy Commissioners of
Ta'es shall perform their functions in respect of such areas% or such
persons for classes of persons% or such cases or classes of cases% or such
incomes or classes of incomes as the Commissioners to whom they are
subordinate may assign to themUSection ,3#53c5VI and
3e5 other incomes ta' authorities shall perform such functions as may be
assigned to them by the income ta' authority to whom they are
subordinate USection ,3#53d5V.
3!5 3a5 Any area or other =urisdiction or functions assigned to an income ta'
authority under section ,3#5 may be modi&ed or varied% or may be
transferred to any other income ta' authority with respect to areas%
persons or classes of persons or cases or classes of case% or
proceeding or classes of proceedingsI
3b5 any such transfers as is referred to in section ,3!53a5 may be made at
any stage of the proceedings and further proceedings may be
commenced from the stage at which such transfer ta;es place.
3)5 >here more income ta' authorities than one have been assigned the
same functions in respect of any area% or persons or classes of persons%
or cases or classes of cases% or incomes or classes of incomes% they shall
perform those functions in accordance with such allocation or distribution
of wor; as the authority assigning the functions may ma;e.
3*5 The powers of the Board% Commissioners and 0eputy Commissioner of
Ta'es% to assign any case to any authority% or to transfer any case from
one authority to another or to perform any function or functions under
this section% shall include the power in respect of all or any proceedings
relating to such caseI and e'cept as provided in section ,3+5% no such
assignment% transfer or performance of functions shall be called in
<uestion by or before any court or other authority.
3+5 Any person aggrieved by any order passed under section , may% within
thirty days of such order% ma;e a representation8
3a5 to the Inspecting Moint Commissioner if the order was passed by a
0eputy Commissioner of Ta'esI
3b5 to the Commissioner% the Commissioner 3Appeals5% if the order was
passed by an Inspecting Moint CommissionerI and
3c5 to the Board if the order was passed by a Commissioner I and any
order passed on such representation shall be &nal.
",ercise of Hurisdiction 36 SuccessorB Sec F
>here% in respect of any proceeding under the Brdinance% an income ta'
authority is succeeded by another% the income ta' authority so succeeding
may continue the proceeding from the stage at which it was left by his
predecessor.
ONcers etc= to follo/ Instructions of the BoardB Sec D
All oEcers and other persons engaged in the performance of any functions
under the Brdinance shall% in the matter of discharging those functions%
observe and follow such orders% directions or instructions as the Board may
issue from time to time. Gowever% no order% directions or instructions shall be
given so as to interfere with the discretion of the Appellate Moint Commissioner
or the Commissioner 3Appellate5 in the e'ercise of their appellate functions.
$uidance to the De*ut6 Co44issioner of Ta,esB Sec C
In the course of any proceedings under the Brdinance% the 0eputy
Commissioner of Ta'es may be assisted% guided or instructed by any income
ta' authority to whom he is subordinate or any other person authorised in this
behalf by the Board.
",ercise of Assess4ent %unctions 36 the Ins*ecting Hoint
Co44issioners and the Ins*ecting Additional Co44issionerB Sec
'&
The Commissioner may% with prior approval of the Board% by general or a
special order in writing% direct that in respect of all or any proceedings relating
to speci&ed persons of classes or persons within his =urisdiction% the powers
and function of the 0eputy Commissioner of Ta'es% the Inspecting Moint
Commissioner % the Inspecting Additional Commissioner and the
Commissioner under the Brdinance shall be e'ercised by the Inspecting Moint
Commissioner% the Inspecting Additional Commissioner% the Commissioner
and the Board% respectively and for the purpose of any proceedings in respect
of such cases or persons referred in the Brdinance or the rules made
thereunder to the 0eputy Commissioner of Ta'es% the Inspecting Moint
Commissioner% the Inspecting Additional Commissioner or the Commissioner
shall be deemed to be references to the Inspecting Moint Commissioner% the
Inspecting Additional Commissioner% the Commissioner and the Board%
respectively.
2-E Ta,es A**ellate Tri3unal
"sta3lish4ent of A**ellate Tri3unalB Sec ''
3#5 For the purpose e'ercising the functions of the Appellate Tribunal under
the Brdinance% the (overnment shall establish a Ta'es Appellate Tribunal
consisting of a President and such other members as the (overnment
may% from time to time% appoint USection ##3#5V.
3!5 A person shall not be appointed as a member of the Ta'es Appellate
Tribunal unless8
3i5 he was or is a member of the BoardI or
3ii5 he was Commissioner of Ta'esI or
3iii5 he is a chartered accountant and practiced professionally for a
period not less than . yearsI or
3iv5 he is a cost and management accountant and practiced
professionally for a period not less than . yearsI or
3v5 he is an income ta' practitioner within the meaning of section
#-*3!53f5 and practiced professionally for a period not less than !"
yearsI or
3vi5 he is a professional legislative e'pert having e'perience for a
period not less than . years in the process of drafting and ma;ing
&nancial and ta' lawsI or
3vii5 he is an advocate and practiced professionally for not less than #"
years in any income ta' oEce. USection ##3)5V
3i'5 he is% was or has been a 0istrict Mudge.
3)5 The (overnment shall appoint a member of the Appellate Tribunal to be
the President thereof USection ##3*5V.
",ercise of )o/er of the Tri3unal 36 BenchesB Sec '2
3#5 Jnless the president in any particular case or class of cases otherwise
directs% the powers and functions of the Appellate Tribunal shall be
e'ercised by Benches of the Appellate Tribunal% hereinafter referred to
as Bench% to be constituted by the President.
3!5 A Bench shall be so constituted that it has not less than two members.
Decision of BenchB Sec '9
3#5 Sub=ect to the provisions of sections #)3!5 and 3)5% the decision of bench in
any case or on any point shall be given in accordance with the opinion of
the ma=ority of its members.
3!5 Any point on which the members of a Bench are e<ually divided shall be
stated in writing and shall be referred by the president to one or more
other members of the Appellate Tribunal for hearing and the point shall be
decided according to the ma=ority of the members of the Appellate Tribunal
who have heard it including those who &rst heard it.
3)5 >here there are only two members of the Appellate Tribunal and they
di1er in any case% the (overnment may appoint an additional member of
the Appellate Tribunal for the purpose of hearing of the case and the
decision of the case shall be given in accordance with the opinion of the
ma=ority of the members of the Appellate Tribunal as constituted with such
additional member.
",ercise of )o/er 36 one Me43erB Sec ':
$otwithstanding anything contained in section #!% the (overnment may direct
that the powers and functions of the Appellate Tribunal shall be e'ercised by
any one of its member% or members or by two or more members =ointly or
severally.
#egulation of )rocedure of the A**ellate Tri3unalB Sec '@
3#5 Sub=ect to the provisions of the Brdinance% the Appellate Tribunal shall
regulate its own procedure and the procedure of its Benches in matters
arising out of the discharge of its function including the places at which a
Bench shall hold its sittings. USection #+V
3!5 A Bench shall hold its sittings at its head<uarters or such other place as
the President may consider convenient UTATP 6ule )V.
3)5 A Bench shall hear and determine such appeals and applications made
under the Brdinance as the President may% by general or special order%
direct UTATP 6ule *V.
3*5 The oEce of the Tribunal shall% sub=ect to any special order of the
President% observe the same oEcers hours and holidays as the oEce of
the Supreme Court 3Gigh 0ivision5 at 0ha;a UTATP 6ule +V.
3+5 The 7anguage of the Tribunal shall be 2nglish UTATP 6ule ,V.
Ta,es A**ellate Tri3unalOs )rocedures
The procedures followed by the Ta'es Appellate Tribunal in disposing of the
appeals have been speci&ed in the Ta'es Appellate Tribunal 3Procedure5 6ules%
#/.+ 3TATP 6ule5.
9-F Alternate Dis*ute #esolutions
Finance Act !"## introduces new chapter titled Alternate 0ispute 6esolution in
IT Brdinance #/.* to resolve any dispute of an assessee lying with any
income ta' authority% Ta'es Appellate Tribunal% or Court. This is done to
simplify and speed up dispute resolution process. The whole process is
summari9ed in following &gure?
National Board of Revenue
(NBR)
Facilitator
Concern -
Income Tax Authority
Tribunal
Court
Where the order has been
passed or dispute is
pending
Aggrieved by an
order of any Income
Tax Authority
With pending
dispute before any
Income tax
authority, tribunal or
court
Assessee
Assessee
Apply for
permission to start
ADR process
Received the
permission to start
ADR process
Apply for
ADR process
Select/appoint
the facilitator
and determine
his
responsibility
Respective
DCT
Forward copy
of application
Yes No Arrange meeting for
settlement
Assessee himself or
along with authorized
representative
Respective DCT or
Representative
Agreement is
reached wholly
or partly
No
Facilitator should
communicate the
result within 15
days from the date
of disagreement to
all related parties
Yes
Facilitator should
record details of
the result and
communicate to
the assessee and
the respective DCT
Result is fnal and
cannot be challenged
Assessee may appeal
to the proper authority
Proper
reply
ADR shall not
continue
An assessee may apply for resolution of the dispute through the A06 process
if aggrieved by an order of an income ta' authority or if a dispute is pending
before any income8ta' authority% tribunal or court. In case of any pending
dispute% the assessee is re<uired to get permission from the authority where it
is pending in writing before applying for A06 and if approval is received and
assessee applies for A06% the matter shall remain stayed during A06
negotiation process.
To resolve dispute in an alternative way% the Board may select or appoint
Facilitator and determine his duties and responsibilities. The assessee shall be
allowed to negotiate himself personally or along with an authori9ed
representative% with the CommissionerDs 6epresentative for the concerned
dispute under the facilitation and supervision of such Facilitator. Jpon
receiving the application of A06% the Facilitator shall forward a copy of the
application to the respective 0eputy Commissioner of Ta'es and also call for
his opinion on the grounds of the application. If the 0eputy Commissioner of
Ta'es fails to give his opinion regarding ful&llment of the conditions% the
Facilitator may notify in writing the applicant and the Commissioner of Ta'es
or the CommissionerDs 6epresentative to attend the meetings for settlement
of disputes on a date mentioned in the notice. >here an agreement is
reached% either wholly or in part% between the assessee and the
CommissionerDs 6epresentative% the Facilitator shall record% in writing% the
details of the agreement% sign and shall communicate the same to the
assessee and the concerned 0eputy Commissioner of Ta'es.
Gowever% where no agreement is reached or the dispute resolution is ended in
disagreement between the assessee and the concerned CommissionerDs
6epresentative for noncooperation of either of the parties% the Facilitator shall
communicate it within &fteen days from the date of disagreement% to the
applicant and the Board% the concerned court% Tribunal% appellate authority
and income ta' authority% as the case may be% about such unsuccessful
dispute resolution.
>here an agreement is reached% it shall be binding on both the parties and it
cannot be challenged in any authority% Tribunal or court either by the assessee
or any other income ta' authority. >here an agreement is not reached% the
assessee may prefer an appeal in following manner?
0ispute Arises out of an order of Appeal to
0eputy Commissioner of Ta'es Appellate Moint Commissioner of Ta'es
B6
Appellate Additional Commissioner of
Ta'es
B6
Commissioner of Ta'es 3Appeals5
Appellate Moint Commissioner of
Ta'es
Ta'es Appellate Tribunal
B6
Appellate Additional
Commissioner of Ta'es
B6
Commissioner of Ta'es 3Appeals5
The assessee8applicant may also appeal to the respective appellate authority
or court from where he has got permission to apply for A06.
Self>Assess4ent ?uestions
#. >hat are the various Income Ta' AuthoritiesN
!. 0iscuss the powers and functions of the Commissioner of Ta'es.
). 0iscuss brieAy the powers and functions of the 0eputy Commissioner of
Ta'es.
*. Gow is the Income Ta' Appellate Tribunal constitutedN
+. >hat are the <uali&cations re<uired for appointment as a ember of the
Appellate TribunalN
,. Gow A06 can be used to resolve the disputesN

Chapter )
Charge of Ta,
Contents
Introduction
2'amination conte't
To*ic List
).# Charge of Income Ta'
).! Charge of Surcharge
).) Charge of Additional Ta'
).* Charge of 2'cess Pro&t ta'
).+ Scope of the total Income
)., Income deemed to Accrue or Arise in Bangladesh
).- Jn8e'plained investments etc% 0eemed Income
).. Special Ta' Treatment in respect of Some Investments
Introduction
Learning o3<ecti+es
Identify the ways of charging income ta'
Illustrate the charge of surcharge% additional ta' and e'cess pro&t ta'
6ecognise the scope of total income
6ecognise the di1erent types of deemed income
)ractical signi0cance
Income ta' shall be charged levied% paid and collected at di1erent rates in
respect of the total income in accordance with provisions of the Brdinance. It
may be deducted at source% or paid or collected in advance. The rates of ta'
can vary on the basis of income and types of assessee. The assessee may be
re<uired to pay surcharge% additional ta' or e'cess pro&t ta' depending on
the situation.
Finance Act !"## repealed some opportunities given by the Finance Act !"#"
to the investors in certain cases of investment in the form of special ta'
treatment.
The scope of total income of a resident and non8resident includes the sources
and forms of income of these persons of any income year.
Sto* and thin2
Thin; about di1erent ways of charging income ta' and identify the similarity
and di1erentiation of the scope of income of a resident and a non resident. 0o
you reali9e that the di1erent types of une'plained investment will be deemed
as income under di1erent headsN Are you ac;nowledged about the special ta'
treatment in respect of some investmentN
.or2ing conte,t
Before determining individual and corporate ta'% the rate of ta' and the scope
of total income need to be identi&ed. Based on residential status the scope of
total income varies. Jne'plained investments are also ta'able under
respective heads. The opportunities given by the Finance Act !"#" to the
investors in certain cases of investment in the form of special ta' treatment
were withdrawn by Finance Act !"##.
An accountant will be e'pected to understand the scope of total income%
deemed income% applicable ta' rate% special ta' treatment and to give advice
on how the total income of individual and corporate can be determined. This
can also suggest their clients to ta;e the facility of special ta' treatment by
investing in those mentioned areas.
S6lla3us lin2s
Cou will be familiar with the charge of income ta' and to prepare for the
application level and also for the case study.
0etailed ;nowledge on this issue helps you to understand the progression
level and stage of your study.
Cou will be using this ;nowledge again when you tac;le the Ta'ation paper
later on in the Professional Stage and it will also underpin the technical
aspects at the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Clarify how income ta' shall be charged
0e&ne the surcharge% additional ta' and e'cess pro&t ta'
a;e clear the scope of total income of any income year of any person
Identify the income deemed to accrue or arise in Bangladesh
6ecognise di1erent une'plained investment etc% deemed to be ta'able
income
0emonstrate the di1erent category of investment for which special ta'
treatment are allowed
?uestion *ractice
For <uestion practice on these topics go to the suggested <uestions and
answers covering this chapter at the end.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates need to ta;e care of the sources of total income including di1erent
classes of une'plained investment as these are re<uired for calculation of
ta'able income of an assessee.
9-& C;A#$" O% TAX
Section O+er+ie/
Ta' shall be charged at any rate or rates according to the Brdinance.
The rates of ta' can be varied on the basis of income and types of
assessee.
The assessee may be re<uired to pay surcharge% additional ta' or e'cess
pro&t ta'.
Ta' may be deducted at source% or paid or collected in advance.
Jne'plained investments can be considered under the scope of ta'able
income.
The scope of total income of a resident and non8resident are di1erent.
9-' Introduction
Any income has to be brought under respective heads of income under S. !"
and can be charged to ta' only if it is so chargeable under the computing
section corresponding to that head of income. The liability to ta' arises by
virtue of this charging section which does not depend on assessmentI
assessment order only <uanti&es the liability which is &nally created by the
charging section. Following basic principles can be deduced from the analysis
of the charging section?
3i5 Income ta' is to be charged at the rate or rates &'ed for the year by the
Finance Act. The liability to ta' does not arise until the annual Finance Act
is passed UGamaA!ya Barayan 5ing! ; C0T "/.3+$ 0TR +-<:6 Section #.)
provides that if on the &rst day of Muly in any year provision has not been
made by any Act for the charging of income ta' for that year% the provision
in force in the immediate preceding year or the provision proposed in the
Finance Bill then before Parliament% whichever is more favorable to the
assessee% shall apply until the new Finance Act is passed.
3ii5 Income should be calculated with reference to the income year but ta'
rate4rates should be the rate4rates applicable to respective assessment
year. The use of the e'pression charged both in the Finance Act and
Income Ta' Brdinance does not mean that the income is charged to
income ta' under both the Act and Brdinance. They are used in di1erent
senses. The ta' will be charged in accordance with and sub=ect to the
provisions of the Income ta' Brdinance and the said charge shall be in
accordance with the rates prescribed in the Finance Act UGesoram
0ndustries and Cotton Mills LT& ; C6 6 T Calcutta 3#*,,5 IT6% -,-V.
3iii5The income ta'ed is that of the income year and not of the assessment
year. Since ta' is levied on the actual income of the income year% the
sources must be ta;en as they e'isted during the income year it is
immaterial whether the source of income actually e'ists in the assessment
year UMut!appa C!ettian ; C0T "/.3)$ 0TR2 <//V6 Gowever% there are
e'ceptions for a discontinued business% for persons leaving Bangladesh
when income year is the assessment year and for certain income under S.
.!3C5.
3iv5The charge is on every person as stated in S. ! 3*,5 i. e. an individual% a
&rm% an association of persons% a Gindu undivided family% a local authority%
a company and any other arti&cial =uridical person. 2stoppel is a rule of
evidence% not a cause of action and it cannot be the basis of liability under
the Income Ta' Brdinance. So% an assessment cannot be made on a
stranger to the income% merely he agrees or desires to be assessed on it
UAsit Gumer %!ose ; C0T2 0TR2 ),+V.
3v5 The ta' is levied on the total income of the assessee computed in the
manner laid down in speci&ed sections and sub=ect to the provisions of this
Brdinance. It will be for the assessee to produce materials to hold that a
receipt is of a casual or capital nature not chargeable to ta' and for the
6evenue to consider the materials and arrive at a reasonable conclusion.
3vi5Ta' is imposed in three stages. There is the declaration of a liability that is
the part of the statute which determines who is liable in respect of what.
$e't% there is the assessment liability that does not depend on the
assessment. That e'8hypothesis has already been &'ed. But assessment
particulari9es the e'act sum which a person is liable to pay. 7astly% the
recovery comes if the person ta'ed does not pay voluntarily.
9-2 Charge of Inco4e Ta,B Sec 'E
3#5 >here an Act of Parliament provides that income ta' shall be charged for
any assessment year at any rate or rates% income ta' at that rate or those
rates shall% sub=ect to the provisions of that Act% be charged levied% paid
and collected in accordance with the provisions of the Brdinance in respect
of the total income of the income year or income years% as the case may
be% of every person. Gowever% where under the provision of the Brdinance
income ta' is to be charged in respect of the income of a period other than
the income year% income ta' shall be charged% levied% paid and collected
accordingly.
3!5 >here under the provisions of the Brdinance income ta' to be deducted at
source% or paid or collected in advance% it shall be deducted% paid and
collected accordingly.
3)5 $otwithstanding anything contained in section #,3#5% income ta' shall be
charged at the rates speci&ed in the Second Schedule in respect of8
3i5 a non8resident person% not being a companyI
3ii5 any income classi&able under be headK Capital gainsKI and
3iii5 any income by way of XwinningsK referred to in section #/3#)5.
9-9 Charge of SurchargeB Sec 'EA
3#5 >here any Act of Parliament enacts that a surcharge on income shall be
charged for any assessment year at any rate or rates% surcharge at that rate
or those rates% sub=ect to the provisions of that Act% 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.
3!5 All the provisions of the Brdinance relative to charge% assessment%
deduction at source% payment in advance% collection% recovery and refund of
income ta' shall% so far as may be% apply to the charge% assessment%
deduction at source% payment in advance% collection% recovery and refund of
the surcharge.
Surcharge on Indi+iduals re*orting net /ealth of 4ore than T2- 2
crores
Finance Act !"## introduces surcharge at the rate of #"P on ta'es payable
before charging such surcharge for individual assessees who reports net
wealth valuing more than T;. ! crore in Form #"B 3Statement of Assets and
7iabilities5 at the time of submitting ta' return.
Illustration #
$et ta' liability T;. *+%"""
$et wealth as per last assessment
year
T;. !"%-.%"""
Accretion in net wealth during
current year
T;. .%!)%"""
Total net wealth up to this
assessment year
T;. !/%"#%"""
Surcharge
$il 3net wealth is less than T;. !
crore5
Total ta' liability T;. *+%"""
Illustration !
$et ta' liability T;. #,"%"""
$et wealth as per last assessment
year
T;. #%.#%!)%"""
Accretion in net wealth during
current year
T;. !*%".%"""
Total net wealth up to this
assessment year
T;. !%"+%)#%"""
Surcharge T;. #,%""" 3#"P of T;. #,"%"""5
Total ta' liability
T;. #-,%""" 3T;. #,"%""" Z T;.
#,%"""5
9-: Charge of Additional Ta,B Sec 'EB
$otwithstanding anything contained in section *,A% where a public limited
company% not being a ban;ing or insurance company% listed with any stoc;
e'change in Bangladesh% has not issued% declared or distributed dividend or
bonus share e<uivalent to at least #+P of its paid8up capital to its
shareholders within a period of , months immediately following any income
year% the company shall be charged Q +P on the undistributed pro&ts in
addition to ta' payable under the Brdinance.
For the purpose of section #,B% undistributed pro&t means accumulated pro&t
including free reserve.
Illustration
Company A is listed with 0ha;a Stoc; 2'change 30S25 and declares cash
dividend of #"P for the year ending on Mune )"% !"##. An e'tract of balance
sheet is provided below to compute additional ta'?
6eserves?
(eneral 6eserve !*%""%""%"""
Stoc;holdersK 2<uity?
Paid up capital #""%""%""%
"""
Additional paid up
capital
#%""%""%""
"
6etained earnings !+%""%""%"
""
#!,%""%""%""
"
Total 6eserve and Stoc;holdersK
2<uity
#+"%""%""%""
"

The company is liable to pay additional ta' as it fails to declare dividend of at
least #+P of paid up capital. The amount of additional ta' will be at the rate
of +P on following?
6etained 2arnings !+%""%""%""
"
7ess? 0ividend declared
#"P of T;.
#""%""%""%"""
#"%""%""%""
"
Jndistributed pro&t #+%""%""%"
""
Free 6eserve !*%""%""%"
""
Total Jndistributed Pro&t )/%""%""%"
""
Additional ta' Q +P #/%+"%"""

9-@ Charge of ",cess )ro0t Ta,B Sec 'EC
>here a ban;ing company operating under the Ban;ing Company Act% #//#
shows pro&t in its return of income for an income year at an amount
e'ceeding +"P of its paid8up capital as de&ned in the said Act together with
reserve% the company% in addition to ta' payable under the Brdinance% shall
pay an e'cess pro&t ta' for that year Q #+P on so much of the pro&t as it
e'ceeds +"P of the aggregate of the capital and reserve as aforesaid.
Illustration
]CR Ban; 7td.% a scheduled ban;% operates in Bangladesh under the Ban;ing
Company Act% #//#. For the year ended Mune )"% !"##% the ban; reports T;.
)+)%""%""%""" pro&t in its return of income with the following information in
its Balance Sheet?
Stoc2holdersO "8uit6B
Paid up Capital *+"%""%""%
"""
Statutory 6eserve !"%""%""%"
""
Bther 6eserve #+%""%""%"
""
Surplus in Pro&t L 7oss
Account
+""%""%""%
"""
Total Stoc2holdersO "8uit6 CD@=&&=&&=&
&&

]CR Ban; is liable for e'cess pro&t ta' for the year due to reporting e'cess
pro&t i.e.% in e'cess of +"P of paid up capital and reserve. The amount of ta'
will be computed as under?
Paid up Capital *+"%""%""%""
"
Statutory 6eserve !"%""%""%"""
Bther 6eserve #+%""%""%"""
Total paid up capital and reserve *.+%""%""%"
""
+"P of total paid up capital and
reserve
!*!%+"%""%"
""
Pro&t as per return )+)%""%""%"
""
2'cess pro&t shown ##"%+"%""%"
""
2'cess pro&t ta' Q #+P #,%+-%+"%""
"
9-E Charge of Mini4u4 Ta,B Sec 'ECCC
$otwithstanding anything contained in any other provisions of this Brdinance%
every company shall% irrespective of its pro&ts or loss in an assessment year
for any reason whatsoever% including the sustaining of a loss% the setting o1 of
a loss of earlier year or years or the claiming of allowances or deductions
3including depreciation5 allowed under this Brdinance% be liable to pay
minimum ta' at the rate of 9ero point &ve 9ero 3".+"P5 per cent of the
amount representing such companyDs gross receipts from all sources for that
year.
For the purposes of this section% Dgross receiptsD means8
3a5 all receipts derived from the sale of goodsI
3b5 all fees or charges for rendering services or giving bene&ts including
commissions or discountsI
3c5 all receipts derived from any heads of income.
Illustration #
In the assessment year !"##8#!% Company ] reports loss of T;. #"%""%"""
with annual turnover of T;. #%""%""%""". The company is re<uired to pay T;.
+"%""" 3".+"P of T;. #%""%""%"""5 as minimum ta'. 6emember% the company
has made a loss% still it re<uires to pay ta'.
Illustration !
In the assessment year !"##8#!% Company ] reports ta'able pro&t of T;.
#%""%""" with annual turnover of T;. #%""%""%""". The company is re<uired to
pay T;. +"%""" 3".+"P of T;. #%""%""%"""5 as minimum ta'. Because ta' on
regular income at regular rate amounts to T;. !-%+"" that is lower than T;.
+"%""". Ta' in no case can be lower than the minimum ta'.
Illustration )
In the assessment year !"##8#!% Company ] reports ta'able pro&t of T;.
#"%""%""" with annual turnover of T;. #%""%""%""". Ta' liability of the
company will be T;. !%-+%""" 3!-.+P of T;. #"%""%"""5 applying regular rate
which is higher than minimum ta' of T;. +"%""" 3".+"P of T;. #%""%""%"""5.
Illustration *
In the assessment year !"##8#!% Company A reports total income of T;.
)%""%""" from business% house property and other sources. Annual assessed
business turnover is T;. #"%""%"""% property income T;. !%""%""" and receipt
from other sources i.e. interest on ban; deposit T;. #%!""%"".
Gere% the gross receipt of the company would be?
;eads of #ecei*ts
A4ount
T5(
3a
5
6eceipts derived from the sale of goods
3Turnover5
#"%""%"""
3b
5
Income from house property !%""%"""
3c
5
Income from other sources 3interest on ban;
deposit5
#%!"%"""
Total
#)%!"%"
""
Ta' liability on regular income at regular rate is T;. .!%+"" 3!-.+P of T;.
)%""%"""5. Gowever% minimum ta' is T;. ,%,"" 3".+"P of T;. #)%!"%"""5. As
regular ta' is higher than minimum ta'% ta' liability of the company will be T;.
.!%+"".
9-F Charge of ta, on sale of share at a *re4iu4 o+er face +alueB Sec 'E"
$otwithstanding anything contained in any other provisions of the ITB#/.* or
any other law% where a company raises its share capital through boo; building
or public o1ering or rights o1ering or placement or preference or in any other
way at a value in e'cess of face value% the company shall be charged% in
addition to ta' payable under the ITB#/.*% ta' at the rate of three percent
3)P5 on the di1erence between the value at which the share is sold and its
face value.
Illustration?
Company ] got permission to issue #"%""%""" of its common shares of TH #"
par value at TH. #+ through private placement. Gere% total premium per share
in T;. + 3T;. #+ F T;. #"5 and total amount of premium on sale will be T;.
+"%""%""" 3#"%""%""" shares Q T;. +5. The company is re<uired to pay ta'es
on premium Q )P and thus the amount of ta' will be T;. #+"%""" 3)P of T;.
+"%""%"""5.
9-D Sco*e of the Total Inco4eB Sec 'FB
3#5 The total income of any income year of any person includes8
3a5 in relation to a person who is a resident% all income% from whatever
source derived% which8
3i5 is received or deemed to be received in Bangladesh by or on
behalf of such person in such yearI or
3ii5 accrues or arises% or is deemed to accrue or arise to him in
Bangladesh during that yearI or
3iii5 accrues or arises to him outside Bangladesh during that year%
and
3b5 in relation to a person who is a non8 resident% all income % from
whatever source derived% which8
3i5 is received or deemed to be received in Bangladesh by or on
behalf of such person in such yearI or
3ii5 accrues or arises% or is deemed to accrue or arise to him in
Bangladesh during that year.
3!5 $otwithstanding anything contained in section #-3#5% where any amount
consisting of either the whole or a part of any income of a person has
been included in his total income or the basis that it has accrued or
arisen% to him 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.
9-C Inco4e Dee4ed to Accrue or Arise in BangladeshB Sec 'D
The following income shall be deemed to accrue or arise in Bangladesh%
namely?
3#5 any income which falls under the head XsalariesK% wherever paid if8
3a5 it is earned in BangladeshI or
3b5 it is paid by the (overnment or a local authority in Bangladesh to a
citi9en of Bangladesh in the service of such (overnment or
authorityI
3!5 any income accruing or arising% whether directly or indirectly% through or
from8
3a5 any business connection in BangladeshI
3b5 any property% asset% right or other source of income in BangladeshI
or
3c5 transfer of capital assets in Bangladesh?
3)5 any divided paid outside Bangladesh by a Bangladeshi companyI
3*5 any income by way of interest payable8
3a5 by the (overnment? or
3b5 by a person who is a resident% e'cept where the interest 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 ma;ing or earning any
income from any source outside BangladeshI or
3c5 by a person who is a non8resident 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 purpose of ma;ing or earning any income from any
source in Bangladesh.
3+5 any income by way of fees for technical services payable8
3a5 by the (overnment? or
3b5 by a person who is a resident% e'cept 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 purpose of
ma;ing or earning any income from any source outside BangladeshI
or
3c5 by a person who is non8 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 purpose of ma;ing or earning
any income from any source outside Bangladesh.
3,5 any income by way of royalty payable8
3a5 by the (overnment? or
3b5 by a person who is a resident% e'cept where royalty is payable in
respect of any right% property or information used or services
utilised for the purpose of a business or profession carried on by
any such person outside Bangladesh or for the purpose of ma;ing
or earning any income from any source outside BangladeshI or
3c5 by a person who is a non8resident% where royalty is payable in
respect of any right% property or information used or services
utilised for the purpose of a business or profession carried on by
any such person in Bangladesh or for the purpose of ma;ing or
earning any income from any source in Bangladesh
>hen the person entitled to such income is not resident in Bangladesh% he
may be charged to ta' in his own name or in the name of his agent. The
0eputy Commissioner of Ta'es must give hearing to a person whom he wants
to treat as agent of the non8resident person.
A person treated as an agent of a non8resident is empowered under the law to
deduct and retain any amount% which may be due as ta' from the non8
resident person.
Gowever% 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.
9-'& Un>",*lained In+est4ents= inco4e or e,*enditure
There are some une'plained cash credits% investments% e'penditure
including possession of money% bullion% =ewellery% etc with an assessee
shall be deemed to be his income under the Income Ta' Brdinance #/.*.
The deemed incomes have been speci&ed in section #/ of the Brdinance.
' Une,*lained Cash Credit KSection 'C'(LB >here any sum is found
credited in the boo;s of an assessee% maintained for any income year and
the assessee o1ers no e'planation about the nature and source thereof% or
the e'planation o1ered is not in the opinion of the 0eputy Commissioner
of Ta'es% satisfactory% the sum so credited shall be deemed to be his
income for that income year classi&able under the head XIncome from
other sources.
2 DiAerence 3et/een actual and recorded +alues of in+est4ents=
4one6= 3ullion= <e/eller6 or other +alua3le article KSection 'C2(LB
>here% in any income year% the assessee has% made investments or is
found to be the owner of any bullion% =ewellery or other valuable article
and the 0eputy Commissioner of Ta'es &nds that the amount e'pended on
ma;ing such investments or in ac<uiring such bullion% =ewellery or other
valuable article e'ceeds the amount recorded in this behalf in the boo;s of
account maintained by the assessee for any source of income and the
assessee o1ers no e'planation about the e'cess amount or the
e'planation o1ered is not% in the opinion of the 0eputy Commissioner
Ta'es% satisfactory% the e'cess amount shall be deemed to be the income
of the assessee for such income year classi&able under the head XIncome
from other sourcesX.
9 Une,*lained e,*enditure KSection 'C9(LB >here% in any income year%
the assessee has incurred any e'penditure and he o1ers no e'planation
about the nature and source of the money for such e'penditure% or the
e'planation o1ered is not in the opinion of the 0eputy Commissioner of
Ta'es% satisfactory% the amount of the e'penditure shall be deemed to be
the income of the assessee for such income year classi&able under the
head XIncome from other sourcesK.
: Unrecorded in+est4ents KSection 'C:(LB >here% in the &nancial year
immediately preceding the assessment year% the assessee has made
investments which are not recorded in the boo;s of accounts% if any%
maintained by him for any source of income% and the assessee o1ers no
e'planation about the nature and source of fund for the investmentsI or
the e'planation o1ered is notI in the opinion of the 0eputy Commissioner
of Ta'es% satisfactory% the value of the investments shall be deemed to be
the income of the assessee for such &nancial year classi&able under the
head KIncome from other sourcesK.
@ Unrecorded 4one6= 3ullion= <e/eller6 or other +alua3le article
KSection 'C@(LB >here% in the &nancial year immediately preceding the
assessment year% the assessee is found to be the owner of any money%
bullion% =ewellery or other valuable article which is not recorded in the
boo;s of account% if any% maintained by him for any source of income% and
the assessee o1ers no e'planation about the nature and source of fund for
the ac<uisition of the money% bullion =ewellery or other valuable article% or
the e'planation o1ered is not in the opinion of the 0eputy Commissioner
of Ta'es satisfactory% =ewellery or other valuable article% shall be deemed
to be the income of the assessee for such &nancial year classi&able under
the head XIncome from other sourcesK.
E Inco4e recei+ed fro4 discontinued 3usiness B KSection M 'CE(L
Income received during any income year from discontinued business is
income of the said income year as income from business or profession.
F Declaration of di+idend B KSection M 'CF(L Any dividend declared or
distributed by a company shall be deemed to be the income of the income
year in which it is received and shall be included in the total income of the
assessee of that year.
D DiAerence 3et/een fair +alue and *a64ent against assets
KSection 'CD(LB >here any assets% not being stoc;8in8trade or stoc;s%
and shares% purchased by an assessee from any company and the 0eputy
Commissioner of Ta'es has reason to believe that the price paid by the
assessee is less then the fair mar;et value thereof% the di1erence between
the price so paid and the fair mar;et value thereof% shall be deemed to be
income of the assessee classi&able under the head XIncome from other
sourcesK.
C Sala4i or *re4ia recei*ts KSection 'CC(LB >here any lump sum
amount is received or receivable by an assessee during any income year
on account of salami or premia receipts by virtue of any lease% such
amount shall be deemed to be income of the assessee of the income year
in which it is received and classi&able under the head XIncome from other
sourcesK. Gowever% at the option of the assessee such amount may be
allocated for the purpose of assessment proportionately to the years
covered by the entire lease period% but such allocation shall in no case
e'ceed &ve years.
'& $ood/ill 4one6= co4*ensation or da4ages for cancellation or
ter4ination of contracts and licenses KSection 'C'&(LB >here any
amount is received by an assessee during any income year by way of
goodwill money or receipt in the nature of compensation or damages for
cancellation or termination of contracts and licenses by the (overnment of
any person% such amount shall be deemed to be the income of such
assessee for that income year classi&able under the head XIncome from
other sourcesK.
'' Bene0t or ad+antage fro4 cancellation of inde3tedness KSection
'C''(LB >here any bene&t or advantage% whether convertible into money
or not% is derived by an assessee during any income year on account of
cancellation of indebtedness% the money value of such advantage or
bene&t shall be deemed to be the income of such assessee for that income
year classi&able under the head XIncome from other sourcesK.
'2 Co44ission and co4*ensation fro4 4anaging agenc6 KSection
'C'2(LB Any managing agency commission including compensation
received during any income year by an assessee for termination of
agencies or any modi&cation of the terms and conditions relating thereto
shall be deemed to be his income for that income year classi&able under
the head XIncome from other sourcesK.
'9 .innings fro4 /agering contracts KSection 'C'9(LB Any amount is
received by an assessee during any income year by way of winnings from
lotteries% crossword pu99les% card games and other games of any sort or
from gambling or betting in any form or of any nature whatsoever shall be
deemed to be his income for that income year classi&able under the head
XIncome from other sourcesK.
': Dee4ed *ro0t and gains of 4utual insurance association KSection
'C':(LB Any pro&ts and gains derived in any income year from any
business of insurance carried on by a mutual insurance association
computed in accordance with the provisions of paragraph . of the Fourth
Schedule shall be deemed to be the income of such association for that
income year.
'@ #eco+er6 fro4 loss= 3ad de3t= e,*enditure or trading lia3ilit6
KSection 'C'@(LB >here% for the purpose of computation of income of an
assessee under section !.% any deduction has been made for any year in
respect of any loss% bad debt% e'penditure or trading liability incurred by
the assessee% and8
3a5 subse<uently% during any income year% the assessee has received%
e'cept as provided in Section #/3#+53aa5% whether in cash or in any
other manner whatsoever% any amount in respect of such loss% bad
debt or e'penditure% the amount so received shall be deemed to be his
income from business or profession during that income yearI
3aa5 Such amount on account of any interest which was to have been
paid to any commercial ban; or the Bangladesh Shilpa Ban; or the
Bangladesh Shilpa 6in Sangstha or on account of any share of pro&t
which was to have been paid to any ban; run on Islamic principles and
which was allowed as a deduction in respect of such e'penditure
though such interest or share of pro&t was not paid by reason of the
assessee having maintained his accounts on mercantile basis% with
three years after e'piry of the income year in which it was allowed%
shall% to such e'tent as it remains unpaid% be deemed to be income of
the assessee from business or profession during the income year
immediately following the e'piry of the said

three years. Gowever%
where any interest or share of pro&t is paid in a subse<uent year% the
amount so paid shall be deducted in computing the income in respect
of that year
3b5 the assessee has derived% during any income year% some bene&t in
respect such trading liability% the value of such bene&t% if it has not
already been treated as income under Section #/3#+53c5% shall be
deemed to be his income from business or profession during that
income year.
3c5 such trading liability or portion thereof has not been paid within three
years after e'piration 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 e'piry of
the said three years. Gowever% where the trading liability is paid in a
subse<uent year% the amount so paid shall be deducted in computing
the income in respect of that year.
Illustration
Suppose an assessee has debited the Pro&t and 7oss Account by
Crediting trading liability for goods and services received during the
assessment year !""#8"! and such e'penses claimed was allowed in
assessment for that year% if such trading liability was not paid during
the ne't ) years 3Assessment years !""!8") to !""*8"+5% that trading
liability will be added bac; as income in assessment for the assessment
year !""+8", only and not in any other year.
'E )ro0t fro4 sale of 0,ed assets of 3usiness or *rofession KSection
'C'E(LB >here any building% machinery or plant having been used by an
assessee for purpose of any business or profession carried on by him is
disposed of during any income year and the sale proceeds thereof e'ceeds
the written down value% so much of the e'cess as does not e'ceed the
di1erence between the original cost and the written down value shall be
deemed to be the income of the assessee for that income year classi&able
under the head XIncome from business or professionK.
Illustrations
3a5 Cost of an asset FT;. #""%"". >ritten down value on the year of sale8
T;. ,"%""". Sale of the asset F T;. #""%""". Pro&t on sale of &'ed asset
will amount to T;. *"%""" 3#""%""" 8,"%"""5.
3b5 Cost of an asset FT;. #""%""". >ritten down value on the year of sale
T;. ,"%""". Sale of the asset FT;. #!"%""". In this case% pro&t on sale of
&'ed asset will amount to T;. *"%""" and capital gain u4s )! will
amount to T;. !"%""".
It is apparent that pro&t on sale of &'ed asset 3balancing charge5 under
no circumstances shall e'ceed the di1erence between cost of the asset
and written down value of the asset. In other words% ta' department
ta;es by way of revenue what it has allowed as depreciation allowance
in the past. In may be noted that no depreciation allowance is
allowable in the year when the asset is sold as per income ta'
provision.
?uestion
ABC 7td% purchased a machine in the year !""! at T;. +%"""%""" and sold
the same in $ovember !"", at T;. )%+""%""". The written down value is
T;. )%"""%""". The year end of the company is 0ecember.
Calculate the business pro&t or losses and also the capital pro&t or losses%
if any% for the relevant assessment year. 3P2 FI Session ay FMune% !""+5
Solution Assess4ent 6ear
2&&F>&D(
Sale of the machine [T;. )%+""%"""
7ess? >ritten down value )%"""%"""
Pro&t on Sale 3Balancing charge5 +""%"""
It is assumed that written down value of T;. )%"""%""" was wor;ed out as
per &scal rate. Pro&t on sale is within the di1erence between the original
cost and written down value of the asset sold.
Note
This section mentions pro&t from sale of building% machinery or plant.
Gence any pro&t on sale of furniture will remain outside the ambit of
ta'ation under Income Ta' Brdinance #/.*. Bn the same to;en% any loss
on sale of furniture is not an allowable e'pense.
'F )ro0t fro4 sale of agricultural assets KSection 'C'F(LB >here any
machinery or plant e'clusively used by an assessee for agricultural
purposes has been disposed of in any income year and the sale proceeds
thereof e'ceeds the written down value% so much of the e'cess as does
not e'ceed the di1erence between the original cost and the written down
value shall be deemed to be the income of the assessee for that income
year classi&able under the head XAgricultural incomeK
'D )ro0t out of insurance= sal+age or co4*ensation 4one6 fro4 0,ed
assets of 3usiness or *rofession KSection 'C'D(LB >here any
insurance% salvage or compensation moneys are received in any income
year in respect of any building% machinery or plant having been used by an
assessee for purpose of any business or profession is discarded
demolished or destroyed and the amount of such moneys e'ceeds the
written down value of such building% machinery or plant so much of the
e'cess as does not e'ceed the di1erence 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 classi&able under the head X
Income from business or professionK.
",a4*le T2-
>0: of machine discarded !"%"""
Briginal cost of the machine ."%"""
Insurance money received )"%"""
Gere the di1erence between insurance money and the >0: is T;. #"%"""
which would be treated as business income. If salvage or insurance money
received were T;. #""%"""% entire depreciation allowed earlier i.e. 3."%"""8
!"%"""5 [ T;. ,"%""" would be treated as business income and the
di1erence between insurance or salvage value and original cost% would be
capital gain i.e. 3#""%"""8."%"""5 [ T;. !"%""".
'C )ro0t out of insurance= sal+age or co4*ensation 4one6 fro4
agricultural assets KSection 'C'C(LB >here any insurance% salvage or
compensation moneys are received in any income year in respect of any
building% machinery or plant which having been used by the assessee
e'clusively for agriculture purpose is discarded% demolished or destroyed
and the amount of such moneys e'ceeds the written down value of such
machinery or plant so much of the e'cess as does not e'ceed the
di1erence 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 classi&able under the head XAgricultural incomeK
2& )ro0t on sale of ca*ital ite4s of scienti0c research KSection
'C2&(L? >here an asset representing e'penditure of a capital nature of
scienti&c research within the meaning of section !/3#53''5 is disposed of
during any income year% so much of the sale proceeds as does not e'ceed
the amount of the e'penditure allowed under the said clause shall be
deemed to be the income of the assessee for that income year classi&able
under the head XIncome from business or professionK.
2' Loan #ecei*t other/ise than 36 cross che8ue KSection 'C2'(LB
>here any sum% or aggregate of sums e'ceeding ta;a &fty thousand is
claimed or shown to have been received as loan by an assessee during
any income year from any person% not being a ban;ing company or a
&nancial institution% otherwise than by crossed che<ue drawn on a ban;%
has not been paid bac; in full within three years from the end of the
income year in which it is claimed or shown to have been received% the
said sum or part thereof which has not been paid bac;% shall be deemed to
be the income year of the assessee for the income year immediately
following the e'piry of the said three years and be classi&able under the
head XIncome from other sourcesK. Gowever% where the loan referred to in
section #/3!#5 is paid bac; in a subse<uent income year% the amount so
paid shall be deducted in computing the income in respect of that
subse<uent year.
22 Loan or $ift #ecei*t KSection 'C2'A(LB >here any sum is claimed to
have been received by an assessee as loan or gift during any income year
from a person who has transferred the sum from the initial capital of his
business or profession shown in his return &led under section .)A% the
amount of such loan or gift so was received by the assessee shall be
deemed to be his income of the year in which such loan or gift was
received and shall be classi&able under the head OIncome from other
sources.W
29 Transfer of Initial Ca*ital KSection 'C2'B(LB >here any sum% shown
as initial capital of business or profession in return of income &led under
section .!BB% is transferred by a person partly or fully within the period of
limitation stipulated in the said section% the sum so transferred shall be
deemed to be his income of the year in which such sum was transferred
and shall be classi&able under the head TIncome from other sourcesT.
2: ;ouse #ent Securit6 De*osit KSection 'C22(LB >here an assessee%
being the owner of a house property% receives from any person to whom
such house property or any part thereof is let out any amount which is not
ad=ustable against the rent payable% the amount so received shall be
deemed to be income of the assessee for the income year in which it is
received and be classi&able under the head XIncome from house propertyK.
Gowever% where such or part thereof is refunded by the assessee in a
subse<uent income year the amount so refunded shall be deducted in
computing the income of the assessee in respect of that income year.
2@ ",*ort ?uota KSection 'C29(LB >here during any income year an
assessee% being an e'porter of garments% transfers to any person% the
e'port <uota or any part thereof allowed to him by the (overnment% such
portion of the e'port value of the garments e'portable against the <uota
so transferred as may be prescribed for this purpose shall be deemed to
be income of the assessee for that income year% classi&able under the
head XIncome from business or professionK. For the purposes of section
#/3!)5 of the Brdinance% an amount e<ual to )P of the e'port value of the
garments e'portable against the e'port <uota transferred by an assessee
shall be deemed to be his income for the income year during which the
transfer too; placeU6ule )"AV.
",a4*le
A;lima (arments 7T0. transferred its e'port <uota of certain items to
Taslima (arments 7T0. in the year !"")8!""*. The e'port value of the
<uota transferred has been T;. #" million and for the transfer A;lima
charged T;. * million to Taslima.
As per 6ule )"A the value of the transfer is )P ^ #" million [ .) million.
Therefore% T;. )%""%""" would be A;limaKs income for income year !"")8
!""*. But it has reali9ed T;. *""%""". T;. )""%""" is income from business.
The balance T;. #""%""" may not be ta'ed. Gowever% it is certain that the
company will be ta'ed on full deemed value even when money received on
the transfer falls short of it.
There is a ta' rebate of +"P on the e'port of garments by companies
registered in Bangladesh but A;lima cannot claim the rebate for the value
received on the transfer of <uota since it has not e'ported therefore% the
amount will be ta'ed at full rate.
2E "8uit6 recei+ed fro4 shareholders in cash KSection 'C2:(LB >here
an assessee% being a private limited company or a public limited company
not listed with a stoc; e'change% increases its paid up capital by issuing
shares in an income year% the amount so received as increased paid up
capital% not being received by crossed che<ue or ban; transfer% shall be
deemed to be the income of such assessee for that income year
classi&able under the head TIncome from other sourcesW.
2F Loan recei+ed /ithout crossed chec2 or 3an2 transfer KSection 'C
2E(LB >here an assessee% being a company% receives any amount as loan
from any other company otherwise than by a crossed chec; or by ban;
transfer% the amount so received shall be deemed to be the income of
such assessee for that income year in which such loan was ta;en and shall
be classi&able under the head TIncome from other sourcesT.
2D Bu6ingP;iring 4otor carP<ee* 36 a co4*an6 KSection 'C2F(LB
>here an assessee% being a company% purchases directly or on hire one or
more motor car or =eep and value of any motor car or =eep e'ceeds ten
percent of its paid up capital% then &fty percent of the amount that
e'ceeds such ten percent of the paid up capital shall be deemed to be the
income of such assessee for that income year classi&able under the head
TIncome from other sourcesT.
9-'' S*ecial Ta, Treat4ent in res*ect of So4e In+est4ents
i( In res*ect of in+est4ent in the *urchase of 3ond under
Bangladesh Infrastructure %inance %und > Sec 'CC
$otwithstanding anything contained in any other provision of the ITB
#/.*% no <uestion as to the source of any sum invested by any person in
the purchase of bond issued or caused to be issued under Bangladesh
Infrastructure Finance Fund during the period between the &rst day of Muly%
!"#" and thirtieth day of Mune% !"#! 3both days inclusive5% shall be raised if
the assessee pays% before the &ling of return of income for the relevant
income year% ta' at the rate of ten per cent on such sum invested.
ii(In res*ect of in+est4ent in the *urchase of Bangladesh
$o+ern4ent Treasur6 Bond > Sec 'CD
$o <uestion as to the source of any sum invested by any person% being an
individual% in the purchase of Bangladesh (overnment Treasury Bond shall
be raised if such person pays% before the &ling of return of income for that
income year as per provisions laid down in sub8section 3!5 of section -+%
ta' at the rate of ten per cent on such sum invested.
Chapter *
Inco4e fro4 salaries
Contents
Introduction
2'amination conte't
To*ic List
>or;ed 2'amples and Solutions
*.# Geads of Income
*.! Income from Salaries
*.) Provident Fund
*.* $on8assessable Incomes under the Gead OSalaryW
*.+ Items Included in Investment Allowance 6elated to Salary Income
*., Salient Points in Assessment of Salaries
Introduction
Learning o3<ecti+es
Identify the di1erent heads of income.
Compute the total ta'able income under the head XIncome from SalaryK.
0e&ne the per<uisites% allowances and bene&ts under salary income.
Identify the allowable deduction under di1erent components of salary
income.
Identify the non8assessable income under XsalaryK
0e&ne the concept of provident fund and other funds related to salary.
Jnderstanding investment allowance and computing ta' rebate on that.
Computing ta' liability of an individual who en=oys income from salary.
)ractical signi0cance
Income from salary is very important for a lot of reasons. This is a common
head of income for most of the individual ta' payers. It can even be said that
individual ta'ation depends on this head of income. (overnment collects a
signi&cant portion of ta' under this head. Thus% ta'ation laws covering income
from salary is very rich and scope of learning is also enlarged. This chapter
carries signi&cance for corporate practitioners also in a sense that this
e'pense in certain conditions cannot be shown as e'pense. The application of
per<uisites and its impact on computing ta'es is very important.
Income from salary is the &rst head of income. To compute ta'able income of
an individual% it pays a signi&cant role. But if the seven heads% this is a very
common head of income. Again% this head encompasses di1erent technical
and conceptual issues li;e per<uisites% provident funds and other funds and
li;e where clear understanding is very important as a ta' practitioner and
professional.
Computing ta'able income under the head income from salary% computing
investment allowance and testing the amount for ma'imum limit% computing
ta' rebate on investment allowance% understanding the ad=ustment of ta'
deducted at sources and &nally computing net ta' liability of an individuals
are some mentionable points that is covered in this chapter and thus the
chapter become very signi&cant for the students. This chapter lays the
foundation of coming chapters also.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the computation of ta'able income under the head
Xincome from salaryK is one of the basic re<uirements for determining ta'
liabilityN Can you determine the ta'able income from salaryN 0o you
understand the application of investment allowance in computing &nal ta'
liabilityN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the total ta'able income for any income year. Before advising the clients%
accountants should have the clear concept relating to the admissible and
inadmissible e'penses so that they can deduct or add the e'penses in
determining the ta'able income.
As individual assessees are abundant and most of the individual assessees
have income under the head% understanding this chapter becomes a must for
wor;ing in practical life.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Identify the di1erent heads of income.
0e&ne the concepts of salaries.
6ecognise the per<uisites% allowances and bene&ts under salary income.
6ecognise the income assessable under the head.
Illustrate the e'emptions allowed in determining ta'able income under the
head.
Jnderstanding investment allowances and ta' rebate on that.
Computation of ta' liability.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
core concept on computation of income which is vital for calculating ta'
liability. Clear concept and understanding of each contents of this chapter will
help candidates to resolve any problems relating to computation of income.
:-& INCOM" %#OM SALA#I"S
Section O+er+ie/
There are seven heads of income.
Total income may not be ta'able income.
There are some allowable% inadmissible and not permissible deductions
under the head.
Computation of ta'able income from salary.
The per<uisites and allowances need to be considered before determining
salary income.
Jnderstanding provident fund and other funds.
Scope of investment allowance% ta' rebate on that.
Computing net ta' liability.
:-' ;eads of Inco4eB Sec 2&
Save as otherwise provided in the Brdinance% all incomes shall% for the
purpose of charge of income ta' and computation of total income% be
classi&ed and computed under the following heads of income% namely?
3a5 Salaries.
3b5 Interest on securities.
3c5 Income from house property.
3d5 Agricultural income.
3e5 Income from business or profession.
3f5 Capital gains.
3g5 Income from other sources.
:-2 Inco4e fro4 Salaries
i( Conce*t of SalariesB Sec 2@D(
There is no e'haustive de&nition of OsalaryW in the Brdinance. An inclusive
de&nition has% however% been given in Section !3+.5 of the Income Ta'
Brdinance #/.* as follows? 8 XsalaryK includes8
3a5 any wagesI
3b5 any annuity% pension or gratuityI
3c5 any fees% commissions% allowances% per<uisites or pro&ts in lieu of% or in
addition to% salary or wagesI
3d5 any advance of salaryI
3e5 any leave encashmentI
The following income of an assessee is classi&ed and computed under the
head OSalariesW% and thereby chargeable to ta'% namely8
3a5 any salary due from an employer to the assessee in the income year%
whether paid or notI
3b5 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 himI and
3c5 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 ta' for any earlier
income yearUSection !#V.
Salary once included in any year on due basis or advance payment basis is
not includible in the income of any other year. It is not logical to pay ta'es on
same income in multiple years.
ii( )er8uisites
Per<uisite has been de&ned in the B'ford dictionary as any casual
emolument% fee or pro&t attached to an oEce or position% any addition to
salary and wages. Gowever% as per Section !3*+5 of IT Brdinance #/.*%
OPer<uisiteW means 8
Any payment made to an employee by an employer in the form of cash or
in any other form e'cluding basis salary% festival bonus% incentive bonus
not e'ceeding ten percent of disclosed pro&t of relevant income year%
arrear salary% advance salary% leave encashment or leave fare assistance
and overtime% and
Any bene&t% whether convertible into money or not% provided to an
employee by an employer% called by whatever name% other than
contribution to a recogni9ed provident fund% approved pension fund%
approved gratuity fund and approved superannuation fund.
From the above de&nitions% it can be deduced that per<uisite includes F
a. The value of rent free accommodationI
b. The value of any concession in the matter of rent respecting any
accommodationI
c. Any sum payable by the employer% whether directly or indirectly% as
insurance premium for the assessee or his spouse or any of his
dependent child.
d. The value of any bene&t provided free of cost or at a concessionary rate%
and
e. The sum paid by an employer in respect of any obligation of an
employee.
Thus the phrase Xper<uisiteK signi&es some additional bene&t in addition to
the amount that may be legally due by way of contract for service rendered.
iii( !aluation of )er8uisites= Allo/ances and Bene0ts Includi3le
as Inco4e in the Cases of Salaried )ersonsB #ule 99
3#5 2'tent of per<uisites% allowances and bene&ts includible as income under
the head OsalaryK has been prescribed in rules ))A to ))M of the Income
Ta' 6ules% #/.*.
3!5 For the purpose of determination of value of per<uisites% allowances and
bene&ts%8
3a5 OBasic salaryW means the pay and allowances payable monthly
or otherwise but does not include?
3i5 dearness allowance or dearness pay unless it enters into the
computation of superannuation or retirement bene&ts of the
employee concerned.
3ii5 employerKs contribution to a recogni9ed provident fund or
fund to which the Provident Fund Act% #/!+ applies and the
interest of an employee in such fund.
3iii5 allowances which are e'empt from the payment of ta'I and
3iv5 allowances% per<uisites% annuities and bene&ts as referred
to in rule8))3#5.
3b5 TemployeeT% 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 a1airs of the company
;ouse #ent Allo/ance #ecei+a3le in cashB #ule 99A
>here the house rent allowance is receivable by the employee in cash% the
amount% if any% by which the house rent allowance so receivable e'ceeds
+"P of the basic salary or T;.#+%""" per month% whichever is less% shall be
included in his income.

Illustration
r. ] is paid a monthly basic salary of T;. +"%""" and house rent
allowance of T;. !"%""". Gis ta'able income from house rent allowance
will be computed as?
;ouse #ent Allo/ance
Actual 3T;. !"%""" _#! months5
!*"%""
"
2'emption?
+"P of Basic 3T;. +"%""" _#! months _
+"P5
)%""%""
"
Br% T;. #+%""" _#! months
#%."%""
"
>hichever is lower
#%."%""
"
Amount added with ta'able income ,"%"""
#ent %ree Acco44odationB #ule 99B
3#5 >here the employee is provided with rent free accommodation% the
rental value of the accommodation or !+P of the basic salary of the
employee% whichever is less% shall be included in his income.
3!5 >here the accommodation is provided to the employee at a
concessional rate% the di1erence between the rent actually paid by him
and the amount determined to be includible in an employeeKs salary under
rule ))B3#5 shall be added to his income.

Illustration #
r. ] is paid a monthly basic salary of T;. *"%""" and a dearness
allowance of T;. )""" per month. Ge has also been provided with a rent
free accommodation which his employer rented for a monthly rent of T;.
!"%""". Gow much of the house rent will be added with ta'able incomeN
Includi3le a4ount of ;ouse #ent /ith Ta,a3le Inco4e
!+P of Basic 3T;. *"%""" _#! months _
!+P5
#%!"%""
"
Br% 6ental value 3T;. !"%""" _#!
months5
!%*"%""
"
>hichever is lower
#%!"%""
"

3$ote? dearness allowance by de&nition is not a part of basic salary5
>hen the accommodation is given by the employer at a concessional rate
the di1erence between the rent actually paid by him and lower of !+P of
basic salary and rental value shall be added with salary.
Illustration !
To &t the situation% let us change the earlier problem slightly. r. ] has
been paid a monthly basic salary of T;. *"%""". Besides he has been
provided with accommodation at a concessional monthly rate of T;.
#"%""". Actual monthly rent of the accommodation is T;. !"%""". Gow
much will be added with ta'able income due to availing this opportunity
from the employerN
Includi3le a4ount of ;ouse #ent /ith Ta,a3le Inco4e
!+P of Basic 3T;. *"%""" _#! months _
!+P5
#%!"%""
"
Br% 6ental value 3T;. !"%""" _#!
months5
!%*"%""
"
>hichever is lower
#%!"%""
"
Concessional rent paid 3T;. #"%""" _#!
months5
#%!"%""
"
Amount to be added with ta'able income "
Con+e6ance Allo/ance recei+a3le in cash /ith no Con+e6ance
%acilit6B #ule 99C
>here no conveyance is provided by the employer and the conveyance
allowance is receivable by the employee in cash% the allowance so
receivable in e'cess of T;. !*%""" annually shall be included in his income.

Illustration

r. ] is an oEcer in a private ban; in 0ha;a. Ge has his own car and is
paid T;. *"%""" annually in cash as conveyance allowance. Gow much of
this allowance will be added with ta'able salary incomeN
Includi3le a4ount of Con+e6ance Allo/ance /ith
Ta,a3le Inco4e
Actual allowance *"%"""
2'emption? up to !*%"""
Ta'able income #,%"""
$othing would be added if he received less than T;. !*%""" annually.
3$ote? The car is his own and not provided by his ban;.5
Con+e6ance %acilit6 )ro+ided ",clusi+el6 for )ersonal or )ri+ate
UseB K#ule 99DL
>here the conveyance is provided by the employer for the use of the
employee partly or e'clusively for personal or private purpose% there shall
be included in the employeeKs income% an amount e<ual to -.+"P of the
employeeKs basic salary.
Illustration
r. ] is paid a basic salary of T;. +"%""" per month. Ge has also been
provided with a car by his employer the cash price of which was T;. .
la;hs two years ago. Ge uses the car appro'imately ."P for personal uses
and !"P for oEce uses. -.+P of basic salary i.e. T;. )%-+" per month
would be added with salary as ta'able income and will be ta'ed at regular
rate.
Additional Con+e6ance Allo/anceB #ule 99"
>here a cash allowance is receivable by an employee in addition to the
per<uisite mentioned in rule ))0% the whole amount of such allowance
plus the amount determined under rule ))0 shall be included in his
income.
Illustration
r. ] receives T;. )%""" monthly as conveyance allowance. Ge also en=oys
a full time oEcial car for both his personal and oEce purpose. Gis basic
salary is T;. *.%""" per month. >hat will be the impact for these bene&ts
in cash and ;ind on computing ta'able income of r. ]N
Includi3le a4ount of Con+e6ance Allo/ance and %acilit6 /ith
Ta,a3le Inco4e
Actual allowance 3T;. )%""" _#!
months5
),%"""
-.+P of Basic 3T;. *.%""" _#! months
_ -.+P5
*)%!""
Ta'able income -/%!""
%ree or Concessional *assage for tra+el a3road or /ithin
Bangladesh B #ule 99$
3#5 >here free or concessional passage for travel abroad or within
Bangladesh is provided by the employer to an employee 3including the
members of his house8hold and dependents5% there shall be included in
his income of the employee8
3i5 >here the passage is provided in accordance with the terms of
employment% an amount e<ual to the sum by which the cash
payments% if any made by the employer e'ceeds the actual
e'penditure incurred by the employeeI and
3ii5 >here the passage is not in accordance with the terms of
employment% the whole of the amount paid in cash% if any% or if no
cash payment is made% the amount which would have been e'pended
by the employee had the free or concessional passage% as the case
may be% not been provided by the employerI
>here free concessional passage for travel abroad is availed by the
employee more than once in two years% the whole of amount paid to him in
cash% if any% for such additional passage or if no cash payment is made% the
amount which would have been e'pended by him had the additional
passage not been provided by the employer% shall be included in his
income.
3!5 >here the transport is provided free of cost or at a concessional rate
by an underta;ing engaged in the transport of passengers or the
carriage of goods to any employee of the underta;ing 3including the
members of his household and dependents5 in any conveyance owned or
chartered by the underta;ing for the purpose of the transport of the
passengers or carriage of goods% nothing shall be added in his income.
Illustration #
r. ] is an employee of (( Airlines traveled to Bang;o; recently along
with his wife% children and mother in law who is dependent on him. As a
term of the service contract all return tic;ets were provided by the
employer. Besides he was also given T;. !%""%""" to meet the
e'penditure abroad which also is a part of the service contract. The value
of the return tic;ets were T;. /"%""". Ge has spent T;. #%+"%""" on the
trip. Gere% himself% his spouse% children and mother in law are all <uali&ed
to get the privilege under the service contract. Ge has been given the
return tic;ets free so nothing is to be added with salary but cash amount
of T;. !%""%""" would be fully included with the salary income since the
above rule provides for passage or passage money and not for other
travel e'penditure.
Illustration !
r. ]% an employee of a multinational in 0ha;a% has been given T;.
#%""%""" as a travel passage to J.H. with his spouse as per terms of
employment. Bn the return tic;ets he saved T;. !+%""" by Aying the
cheapest airlines available in the sector.
2'cess of cash over the actual passage i.e. T;. !+%""" would be added
with his salary income.
Illustration )
r. ] has been given +"P passage assistance to JSA amounting to T;.
*"%""" which however% was paid by his employer not as a lien of his
contract but out of satisfaction on his performance.
Since the concessional passage has not been a part of service contract
the full amount would be added with salary.
"ntertain4ent Allo/anceB #ule 99;
>here any amount is payable to the employee by way of entertainment
allowance% the whole of the amount so payable shall be included in his
income. $o addition on this account shall% however% be made if free tea%
co1ee% beverages or the li;e thereof are provided at the oEce premises
during the course of wor;.
Medical ",*ensesB #ule 99I
>here any amount is payable to the employee by way of hospitali9ation
or medical e'penses% the amount% if any% by which the sum receivable by
him e'ceeds the actual e'penditure incurred by him shall be included in
his income. Any reimbursement of medical e'penditure will not be
included in total income.
Illustration #
r. ] receives T;. +%""" per month as medical allowance. 0uring a year%
r. ] produces documents showing that his actual medical e'penditure
was T;. !+%""". Thus% the e'cess amount of T;. )+%""" 3T;. ,"%""" F T;.
!+%"""5 will be included in ta'able income.
Illustration !
r. ]% was seriously ill and hospitali9ed. Gis medical bill was T;. .+%"""
which was reimbursed by his employer upon submission. In this situation%
r. ] will add nothing with his ta'able income.
Other Bene0tsB #ule 99H
>here any bene&t or annuity not covered by the provisions of rule ))A to
rule ))I is provided to the employee% the members of his household or his
dependents% there shall be included in his income an amount e<ual to the
amount which would have been e'pended by the employee in obtaining
such bene&t or annuity from an independent source in the same or near
locality% had it not been so provided% as reduced by the amount% if any%
e'pended wholly% necessarily and e'clusively in the performance of the
duties of the oEce held by him or actually paid by him in cash.
Jnder clause 3b5 of rule ))3!5 a shareholder director of company is to be
treated as an employee and hence to be entitled to the above allowances.
But these bene&ts can be claimed from salary income of one company
only.
Illustration #
r. ]% a director of a multinational in 0ha;a% had to attend a regional
management conference arranged by the group in Singapore and has
been paid T;. !%""%""" by the company to meet his wee;long e'penses in
Singapore. Ge actually spent T;. #%-"%""".
Gere% the bene&t of T;. !%""%""" has been given to r. ] wholly%
necessarily and e'clusively in the performance of his duty as a company
director% out of which he spent T;. #%-"%""". Therefore% under this sub8
rule% balance T;. )"%""" unspent would be added with salary.
Illustration !
r. ]% a manager% has been given an annuity by his employer to pay him
and his wife an annuity of T;. #%""%""" for ten years after his retirement
in two years time. The whole cost was borne by the company which has
been T;. +%""%""". Jnder this 6ule the whole amount would be added
with the salary. If for instance% +"P of the annuity cost is borne by him
then balance +"P i.e. T;. !%+"%""" would be added with his salary.
Test of Deter4ent )er8uisites
)articulars Sala
r6
)er8uisit
es
Non
e
Basic Salary
0earness allowance
Festival bonus
Performance bonus
7eave encashment
2mployerKs contribution to PF
Interest on PF
(ratuity credited
Special allowance in the performance of duties
Commission
Insurance premium borne by the employer
Incentive bonus by the employer
Gouse rent cash
Gouse free or at concession
2ntertainment
Conveyance Fcash
Car for personal use
Free ride from oEce
7eave passage
2ntertainment for the purpose of employer
edical8cash allowance
edical reimbursement
Travel reimbursement
Gouse rent paid in cash
Any other obligation of the employee 3Gouse
servant% mali etc.5

Basic )rinci*les
Anything paid in cash as &'ed sum forms part of the salary and any obligation
of the employee borne by the employer is per<uisite.
Illustration
From the following particulars of + employees of a company calculate the
per<uisites not admissible 3e'cess per<uisites5 as business e'penditure J4S )"
3e5.
"4*lo6ee A D C D "
# Basic Salary ),"%"""
)!"%""
"
)#"%""
"
!."%""
"
!-"%""
"
! Festival Bonus #."%"""
#,"%""
"
#+"%""
"
#*"%""
"
#)"%""
"
) Gouse 6ent Allowance 8
!""%""
"
!""%""
"
#."%""
" 8
* Conveyance Allowance #!"%"""
#""%""
"
#""%""
"
#""%""
"
#""%""
"
+ Contribution to 6PF ),%""" )!%""" )#%""" !.%""" !-%"""
, 2ntertainment Allowance *.%""" ),%""" ),%""" ),%""" )"%"""
- Free Accommodation !*"%""" 8 8 8
!""%""
"
. Telephone Bill #!%,+" /%."" #"%."" 8 8
/ Jtilities ,,%""" ,"%""" ,"%""" ,+%""" ,/%"""
#"
Total Income 3Total of # to
/5
#%",!%,+
"
/#-%."
"
./-%."
"
.!/%""
"
.!,%""
"
A Salary 3#Z!Z)Z+5 +-,%"""
-#!%""
"
,/#%""
"
,!.%""
"
*!-%""
"
B Per<uisites 3*Z,Z-Z.Z/5 *.,%,+"
!"+%."
"
!",%."
"
!"#%""
"
)//%""
"
C Per<uisites Allowed !+"%"""
!+"%""
"
!+"%""
"
!+"%""
"
!+"%""
"
0 2'cess Per<uisites 3B8C5 !),%,+" 8 8 8
#*/%""
"
$otes?
3i5 In the computation of total income of the company e'cess per<uisites
would be added J4S !/3e5.
3ii5 The basic principle is whatever paid in cash and in the form of a bene&t
monthly is a salary and should not constitute per<uisites.
3iii5 J4S !/3e5 per<uisites are allowable up to T;. !%+"%""" per employee.
:-9 )ro+ident %undB
Provident fund is the fund where funds are accumulated during the active
period of employees for his &nancial protection at the end of his service life%
amount contributed by the employee or the employer or both employee and
employer. The amount lying in the fund is invested in trust securities that
yield fair but secured returns. >hen an employee leaves his service either on
retirement or for any other reason% he gets bac; the money standing to the
credit of his provident fund account. In case of death of the employee% the
amount is refunded to his nominee. Provident fund is a social security
measure provided to employees for his rainy days of post8employment period.
There are three types of provident fund?
Statutor6 or $o+ern4ent *ro+ident fundB Statutory or (overnment
provident fund is controlled and maintained by the government for the
government employees. Such fund is constituted and run by the government
under Provident Fund Act #/!+% (eneral Provident Fund 6ules #/-/ and
Contributory Provident Fund 6ules #/-/. (overnment employees who are
permanently transferred to the pensionable =obs% they contribute to general
provident fund where government as an employer contributes nothing. Bn the
other hand% government employees who have no bene&ts from pension% they
contribute to contributory provident fund where both government and the
employee contribute. (enerally most of the government employees of our
country are pensionable.
Points to remem?er at t!e time of tax computation4
a. Since employer does not contribute to general provident fund there is no
<uestion of its inclusion with salary. But since government contributes to
contributory provident fund% governmentKs contribution will be included
with salary.
b. 2mployeeKs contribution to statutory 4 government provident fund will be
included in investment allowance.
c. Accumulated balance of (PF at the credit of employees when received% is
neither included in his total income nor ta'ed. It is e'cluded from total
income under Para !#3a5% Part A of Si'th Schedule of the ITB% #/.*.

#ecogniQed )ro+ident fundB 6ecogni9ed Provident fund is constituted under
the conditions mentioned in Part B% First schedule in the Income Ta'
Brdinance% #/.* and approved by the commissioner of ta'es. These funds are
available in non8government organi9ations where both employees and
employer contribute the same amount. In order that a provident fund may
receive and retain recognition% it shall satisfy the conditions set out below and
any other conditions which the $B6 may prescribe?
a5 All the employees shall be employed in Bangladesh or shall be
employed by an employer whose principal place of business or head
oEce is in Bangladesh. In case of e'ceptional situation the recognition
criterias will depend on the CommissionerKs =udgment.
Provident
Fund
Statutory Provident
Fund
6ecogni9ed Provident
Fund
Jnrecogni9ed Provident
Fund
(eneral Provident Fund
Contributory Provident
Fund
b5 2mployer must deduct a certain percentage from the salary of
employee and deposit the same to the fund.
c5 2mployer will also contribute the same amount as deducted from the
employee.
d5 The fund will constitute ta;ing the contribution of both the employer
and employee.
e5 The fund will be managed by trustee of two or more persons.
f5 2mployer will not be able to ta;e any amount from the fund.
g5 2mployee will receive the amount deposited to his account including
principal and interest at the time of leaving the =ob.
Points to remem?er at t!e time of tax computation4
a. Bnly% employerKs contribution to 6PF and interest thereon are included in
the total salary income of the employee as per the rules.
b. Both employerKs and employeeKs contribution to 6PF are considered to be
a part of investment allowance.
c. Accumulated balance at the credit of employee in the 6PF% when received
shall be e'cluded from total salary income under Para !#3b5% Part A of Si'th
Schedule of the ITB% #/.*.
UnrecogniQed )ro+ident %undB Jnrecogni9ed provident fund is not the
recogni9ed or statutory fund. This fund is not constituted under Part B% First
schedule in the Income Ta' Brdinance% #/.* or under any other applicable
acts or laws and is not approved by the commissioner of ta'es. In this fund%
both the employees and employer contributes and generally it is found in non8
government organi9ation. In this case% the employersK contribution and
interest thereon is not included in the total income of the employee. At the
time of the employeeKs retirement% the accumulated balance of the JPF
e'cept employeesK contribution and interest thereon is included in the total
income.
Points to remem?er at t!e time of tax computation4
a. 2mployer may contribute as well as employee to this provident fund% but
nothing will be added in the salary income.
b. At the time of employeeKs retirement% the accumulated balance of this fund
minus the employeeKs contribution plus interest thereon is ta'able and will
be added with salary.
A**ro+ed Su*erannuation %und AS%(B
This type of fund is created for granting pension and other bene&t to the
employees on their retirement% or after a speci&ed age or his death. This fund
is run by the individual name of the employees. This fund is approved and run
under the provisions of Part A% First Schedule of the ITB% #/.*. Both employee
and employer contribute to the fund. The contribution of the employer is
added to the income of the employee. But interest on this fund and any
amount received from it is not added to income.
A**ro+ed $ratuit6 %und A$%(B
If the employer agrees to constitute a gratuity fund for the employees on the
contract of =ob% then the employer contributes to the gratuity fund for the
bene&t of the employees in the event of retirement. The approved gratuity
fund is approved by $B6 and run under the conditions mentioned in in First
Schedule% Part C. 2mployee contributes nothing in this fund. The contribution
of the employer is considered as income of employee. But interest on this
fund and any amount received from it is not added to income.
.or2erOs )artici*ation %und .)%(B
It is established under the Companies Pro&t 3wor;ers participation5 Act% #/,.
3Act. ]II of #/,.5. Any payment received by an employee from this fund%
sub=ect to prescribed limits and conditions% shall be e'cluded from the total
income as provided under Para !#3d5% Part A of Si'th Schedule to the Income
Ta' Brdinance% #/.*.
:-: Non>assessa3le Inco4es under the head RSalar6SB
In Part A of Si'th Schedule of the ITB% #/.*% some incomes relating to salary
have been mentioned as non8assessable?
a( All e4*lo6ees= 4ainl6 for all Bangladeshi residentsB
i5 Any income from a provident fund established under the Provident
Fund Act% #/!+ or wor;ers participation fund. 3Para *5
ii5 Any special allowance% bene&ts or per<uisite speci&cally granted to
meet some oEcial e'penses. 3Para +5
iii5 Pension 3Para .5
iv5 (ratuity 3Para !"5
v5 Any receipt from government and recogni9ed provident fund% approved
superannuation fund and a wor;erKs participation fund. 3Para !#5
vi5 Interest on recogni9ed provident fund if it does not e'ceed #4)
rd
of basic
salary or interest amount computed Q #*.+P per annum. 3Para !+5
vii5 Any amount received by an employee of a government organi9ation% a
local authority% or an autonomous or semi8autonomous body at the
time of his retirement. 3Para !,5
3( %or foreign e4*lo6eesB
i5 Any income received by any ambassador% high commissioner% envoy%
minister% charge daEer% commissioner% counselor% secretary% advisor of
an embassy or high commission. 3Para -5
ii5 Salary of foreign technician employed by a Bangladeshi &rms.3Para #+5
iii5 Ta' liability of an employer computed on the salary of a foreign
technician as per Para #+. 3Para #,5
iv5 Salary of a foreign technician and ta' paid by the employer on his
salary who wor;s in a $B6 approved Consultancy or 2ngineering &rm.
:-@ Ite4s included in In+est4ent Allo/ance related to Salar6 Inco4eB
From basic salary% the employer can deducts a certain amount of money
under various heads according to the contract between employer and
employee. Bf those some of the deductions are included under the head
Investment Allowance? As per the rules e'plained in the Part B of Si'th
Schedule of the ITB% #/.*% the following items are considered as a part of the
Investment Allowance?
i5 Any income deducted to a deferred annuity or for ma;ing provisions for his
wife or children% provided that the sum so deducted shall not e'ceed one8
&fth of the salary. 3Para )5
ii5 2mployeeKs contribution to a (overnment4Statutory Provident Fund. 3Para
*5
iii5 2mployeeKs and 2mployerKs contribution to a 6PF. 3Para +5
iv5 Brdinary annual contribution to approved superannuation fund. 3Para ,5
v5 2mployeeKs contribution to a benevolent fund or group insurance scheme.
3Para #-5
Co4*utation of Ta,a3le Inco4e fro4 Salar6 at a glanceB
Descri*tion
A4ountP)ercentage that /ill 3e added
to salar6
#. Basic Salary Full
!. 0earness Allowance Full
). Bonus Full
*. Commission and fees Full
+. Advance salary Full
,. Accrued Salary Full% provided that it was not ta'ed in earlier
period
-. 7eave encashment Full
.. Pension $othing% since fully e'empted
/. (ratuity $othing% since fully e'empted
#". Annuity Full
##. Pro&t in lieu of Salary Full
#!. Pro&t in addition to Salary Full
#). 2ducation Allowance for
children
Full
#*. 2mployerKs contribution to 6PF Full
#+. 2mployerKs contribution to
Approved Superannuation
Fund
Full
#,. 2mployerKs contribution to
Approved (ratuity Fund
Full
#-. 2mployerKs contribution to life
insurance policy
Full
#.. 2ntertainment Allowance Full
#/. edical Allowance 2'cess over actual. If no actual% nothing.
!". Traveling Allowance 2'cess over actual.
!#. Special Allowance $othing% if given for oEcial purpose.
!!. Gouse 6ent Allowance Actual allowance less e'emptions of T;.
#+""" p. m. 3annually T;. #%."%"""5 or +"P
of basic salary whichever is less.
!). 6ent Free Accommodation 6ental value or !+P of basic whichever is
less
!*. Accommodation at
concessional rate
6ental value or !+P of basic whichever is
less% minus deducted rent
!+. Conveyance Allowance Actual amount less e'emption of T;. !*%"""
on an annual basis.
!,. Transport 4 conveyance facility -.+P of basic salary if conveyance facility is
given for personal% both personal and oEcial
purpose. $othing will be added if it is given
only for oEcial purpose.
!-. Interest on 6PF Actual Interest less e'empted to the e'tent of
the interest Q #*.+P rate or #4)
rd
of basic
salary% whichever is less.
!.. Free tea% co1ee or lunch in
oEce premises
$othing
!/. Free dress% telephone% power%
gas% water in oEce etc.
$othing
)". Free careta;er% sweeper etc. $othing
)#. Servant allowance Full
)!. Compensation Full
)). Allowance received as Gead of
the department 4 Charge
allowance.
Full
)*. Bvertime Full
)+. 6esidence telephone bills 4
utility bills 4 club bills
reimbursed
Full
:-E Salient )oints in Assess4ent of Salaries
3a5 Ta' is payable by an assessee under the head OSalariesW in respect of any
salary or wages% any annuity% pension or gratuity and any fees%
commission% per<uisites or pro&ts in lieu of% or in addition to% any salary or
wages% and any advance of salary.
3b5 Ta' is levied on salaries which are due% whether paid or not% as well as on
salaries which are paid% whether due or not.
3c5 6elationship of employer and employee must e'ist between the payer and
the recipient of salaries. The employer may be (overnment% a local
authority% a company or any other public body or association or any
private employer.
3d5 0eath8cum8retirement bene&ts or gratuities and certain payments from
funds are completely e'empt from ta'.
3e5 Income chargeable under the head OSalariesW is to be computed after
ma;ing certain deductions.
3f5 Salaried persons can have their assessments completed under self
assessment scheme of the return showing higher income than the last
assessment income.
3g5 The provisions regarding di1erent types of provident funds and payment of
life insurance premium are very important and are to be carefully studied
to &nd out the correct income ta' on income chargeable under the head
OSalariesW.
3h5 Salaries are sub=ect to deduction of ta' at source. Gence% income ta' is to
be paid on Salaries for a particular assessment year at the rates applicable
thereto.
:-F .or2ed ",a4*les and Solutions
.or2ed ",a4*le '
From the following data co4*ute the total inco4e and ta, *a6a3le by r. Amit
for the year ended )" Mune !"##?8
"le4ents of Salar6 #ule T2-
Basic salary Q T; #"%""" p.m. #%!"%"""
Bonus ! monthsK Basic Pay
Free furnished
accommodation
2mployeeKs contribution
to 6PF
Q #"P of basic salary
Car partly used for business and partly for
personal purpose
7ife insurance premium
,%"""
Solution 'B
r. Amit
Income Ta' Assessment Cear !"##8#!
Income for year ended on )" Mune !"##
Co4*utation of Total Inco4e and Ta, Lia3ilit6
Inco4e fro4 RsalariesS uPs 2'B T;.
Basic salary Q T;. #"%""" p.m. for #! months #%!"%""
"
Free Furnished Accommodation F !+P of basic )"%"""
Car Q -.+P of basic salary 3note F #5 /%"""
2mployerKs Contribution to 6PF F #"P of Basic #!%"""
Bonus F ! months basic !"%"""
Total ta'able income #%/#%""
"
Inco4e ta, Lia3ilit6B
Bn &rst T;. #%."%""" Q "P "
Bn ne't T;. ##%""" Q #+P #%,+"
Total on T;. #%/#%""" #%,+"
7ess? Ta' Credit Q #"P of T;. )"%""" 3note !5 )%"""
$et ta' payable 3note )5 !%"""
$ote F #? Conveyance used partly for personal and partly for business is not
e'empted rather added with salary to an amount that is e<ual to -.+P
of basic and thus ta'able.
$ote F !? Actual Investments made?
Contribution to 6PF by both employee and employer T;.
!*%"""
7ife insurance premium paid
,%"""
Total investment T;.
)"%"""
a'imum 7imit?
!"P of T;. #-/%""" 3total ta'able income e'cluding employerKs
contribution to 6PF5 T;. )+%."" or T;. #%""%""%"""% whichever is less
T;. )+%.""
Thus% allowable investment allowance will be T;. )"%""" on which #"P
ta' rebate is calculated.
$ote F )? inimum ta' liability is T;. !%""" for individual. Thus ta' liability% in no
case can be lower than T;. !%""".
.or2ed ",a4*le 2
r. il;y% C2B of a ultinational company in Bangladesh% has got the following
income for the income year ended )" Mune !"##. Cou are re<uired to calculate the
total income and ta' payable of r. il;y
3a5 Basic pay of T;.#+"%""" P.. sent to his ban; account.
3b5 6ent free accommodation fully furnished by the company.
3c5 Full time company car for !* hrs for his own use and for his family.
3d5 Company pays T;. #""%""" p4m. for his three school going children which is
paid to the school authority directly.
3e5 Ge received two festival bonuses e<uivalent to basic pay during the festival
time which he spent partly for his family and partly for the poor people in his
village.
3f5 0riverDs salary was T;. #"%""" p4m paid to his driverDs ban; account.
3g5 Company paid T;. )""%""" to him during the year being the reimbursement of
various utility bills of his houseI
3h5 7and and mobile bill paid T;. +""" p4m
3i5 Ge was paid T;. #%"""%""" for his overseas travels for the oEcial trip out of
which he saved !+P during that income yearI
3=5 Bill paid for international club T;. !+"%"""
3;5 Ge received interest on securities T;. #+"%""" on his investmentsI
3l5 Ge has got one house of his own at Baridhara and he received total T;.
#!""%""" as rent
3m5 Ge paid T;. #+"%""" as 7IP by himself
3n5 Ge invested T;. #+""%""" on (ovt. bonds and primary shares of various
companiesI
3o5 6eceived dividend T;. #+"%""" during the year.
3ICAB adapted5
Solution 2B
Mr- Mil26
Inco4e ta, assess4ent 6ear 2&''>2&'2
Accounting 6ear ended 9& Hune 2&''
Co4*utation of total inco4e and ta, lia3ilit6
Inco4e fro4 RsalariesS uPs 2'B T;.
Basic salary Q T;. #+"%""" p.m. for #!
months
T;. #+"%""" _ #! #.%""%"
""
Free Furnished Accommodation F !+P
of basic
T;. #.%""%"""
_!+P
*%+"%""
"
Car Q -.+P of basic salary 3note F #5 T;. #.%""%"""
_-.+P
#%)+%""
"
Fee to school going children T;. #%""%""" _
#!
#!%""%"
""
Festival Bonus T;. #+"%""" _ ! )%""%""
"
6eimbursement of Jtility Bills )%""%""
"
Savings from BEcial Bversees Travel T;. #"%""%""" _
!+P
!%+"%""
"
Bills paid for International Club !%+"%""
"
Total income from salaries *,%.+%"
""
Inco4e fro4 RInterest on SecuritiesS uPs 22>29
Interest on Securities T;. #+"%"""
_#""4/"
#%,,%,,
-
Inco4e fro4 R;ouse )ro*ertiesS
uPs 2:>2@
Annual value #!%""%"
""
7ess? Allowable e'penses 8
6epair and maintenance Q !+P )%""%""
"
/%""%""
"
Inco4e fro4 Other Source uPs
99>9:(
0ividend Income T;. #%+"%"""
_#""4/"
#%,,%,,
-
Total Ta,a3le Inco4e @C='D=9
9:
Inco4e ta, Lia3ilit6B
Bn &rst T;. #%."%""" Q "P "
Bn ne't T;. )%""%""" Q #"P )"%"""
Bn ne't T;. *%""%""" Q #+P ,"%"""
Bn ne't T;. )%""%""" Q !"P ,"%"""
Bn balance T;. *-%).%))* Q !+P ##%.*%+
.*
Total on T;. +/%#.%))* #)%)*%+
.*
7ess? Ta' Credit Q #"P of T;.
##%.)%,,- 3note !5
#%#.%),
-
Total ta' liability #!%#,%!
#-
7ess? Ta' 0educted at Sources
Bn interest on securities #,%,,-
Bn dividend income #,%,,- ))%))*
$et Ta' Payable ##%.!%.
.)
$ote F #? Conveyance used partly for personal and partly for business is not
e'empted rather added with salary to an amount that is e<ual to -.+P
of basic and thus ta'able.
$ote F !? Actual Investments made?
Investment in (overnment Bonds and Primary Shares T;.
#+%""%"""
7ife insurance premium paid
#%+"%"""
Total investment T;.
#,%+"%"""
a'imum 7imit?
!"P of T;. +/%#.%))* 3total ta'able income e'cluding employerKs
contribution to 6PF5 T;. ##%.)%,,- or T;. #%""%""%"""% whichever is less
T;. ##%.)%,,-
Thus% allowable investment allowance will be T;. ##%.)%,,- on which
#"P ta' rebate is calculated.

.or2ed ",a4*le 9
r. alli; is a service holder. Following are the particulars of his income from
salary for the year ended on )"
th
Mune !"##?
a. Basic salary T;. !+%""" per month.
b. 0earness allowance 8 #"P of Basic salary
c. Two festival bonuses 8 each e<ual to one monthDs basic salary
d. Ge has been provided with a rent8free <uarter% the annual rectal
value of which is T;. +"%""".
e. Ge has been provided with a car for both oEce and private use.
f. edical allowance 8 T;. !+" per month.
g. 0uring the year he received T;. ,%""" as traveling allowance.
h. Gis contribution to a statutory provident fund Q #"P of basic salary.
i. Interest on provident fund Q #)P on accumulated balance
e<uivalent to T;. !%+"".
=. Ge is given a servant allowance of T;. !"" per month.
;. Ge contributes #P of his basic salary to the (roup Insurance
Scheme.
l. Ge has paid T;. +"" per month on a 0eposit Pension Scheme.
Compute ta'able income from salary and investment allowance.
Solution 9B
AssesseeB Mr- Malli2
Inco4e ta, assess4ent 6ear 2&''>2&'2
Accounting 6ear ended 9& Hune 2&''
Co4*utation of total inco4e and ta, lia3ilit6
;eads of Inco4e= T T2- T2- T2-
Inco4e fro4 Salaries See > 2'(B
i5 Basic salary 3!+%"""'#!5
)%""%"
""
ii5 0earness allowance 3)%""%"""'#"P5 )"%"""
iii5 Festival bonus 3!+%"""'!5 +"%"""
iv5 6ent free accommodation?
6ental value i.e. +"%""" or !+P of Basic salary
i.e. -+%""" whichever is lower +"%"""
v5 Conveyance facility
3-.+P of Basic
Salary5
!!%+""
vi5 edical allowance 3!+"'#!5 )%"""
7ess? e'empted 3actual
e'pense5
) %"""
vii5 Traveling allowance ,%"""
7ess? e'empted 3actual
e'pense5
, %"""
viii5 Servant allowance 3!""'#!5 !%*""
Total :=@:=C&&
In+est4ent Allo/anceB Actual(
7- )articulars
A4ount
T2-(
2mployeeDs contribution to Statutory Provident Fund% #"P of B.S.
3)%""%"""'#"P5 )"%"""
2mployeeDs contribution to (roup Insurance Scheme #P of B.S.
3)%""%"""'# P5
)%"""
Contribution to 0PS 3+""'#!5 ,%"""
Total 9C=&&&
NoteB
#. If actual e'pense regarding medical and travel is not given% then the
full amount of such allowances can be considered as e'pensed and
be deducted as e'emption.
!. 2mployer i.e. the government does not contribute to the statutory
provident fund.
.or2ed ",a4*le :
Bn Mune !"##% r. Anil AmbaniDs basic salary falls on T;. #"%!"" in the scale of
/%,""8!""'#!#!%""". Gis date of yearly increment is on #
st
April. Ge received
dearness allowance Q #"P of basic salary and medical allowance T;. )"" per
month. 0uring the year his actual amount of medical e'pense was T;. )%""". Ge
received two bonuses e<uivalent to one monthDs basic salary8one received
before the date of increment and another after increment. Ge contributes #"P of
his basic salary to a recogni9ed provident fund from which he has also received
an interest of T;. #%+"" Q #+P interest. Gis employer also contributes the same
amount to the 6PF. Ge has been provided with a rent8free <uarter and a car for
both oEcial and personal purpose. 0uring the year he has also received an
entertainment allowance of T;. +%""" of which T;. *%+"" has actually been spent.
Gis investments during the year were as follows?
a. Purchase of shares of a listed company T;. !%""".
b. Purchase of gold T;. #"%""".
c. Payment of his life insurance premium T;. *%""" 3Policy value T;.
)+%"""5
d. Purchase of boo;s and maga9ine T;. )%""".
e. Contribution to a 0eposit Pension Scheme T;. +"" on a monthly
basis.
Compute ta'able income and ta' liability of r. Anil Ambani for the assessment
year !"##8#!.
Solution :B
AssesseeB Mr- S6ful ;o8ue
Inco4e ta, assess4ent 6ear 2&''>2&'2
Accounting 6ear ended 9& Hune 2&''
Co4*utation of total inco4e and ta, lia3ilit6
= >;eads>of Inco4e T2- T2- T2-
Inco4e fro4 Salaries See > 2'(B
i5 Basic salary U3#"%"""'/5 Z 3l"%!""')55 #%!"%,""
ii5 0earness allowance 3#%!"%,""'l"P5 #!%","
iii5 edical Allowance 3)""'I!5 )%,""
7ess? e'empted 3actual e'pense5 ) %""" ,""
iv5 Bonus U#"%"""Z #"%!""5 !"%!""
v5 2mployerDs contribution to 6PF
U#%!"%,""'lBPV
#!%","
vi5 Interest on
6PFQ#+P
#%+""
7ess? 2'empted ma'imum Q #*.+P i.e.
U3#%+""4#+^#*.+5 [ #%*+"V or one8third of
B.S. i.e.
*"%!"" whichever is lower # %*+ " +"
vii56ent free accommodation 3#%!"%,""'!+P5 )"%#+"
viii5 Conveyance facility 3#%!"%,""'-.+P5 /%"*+
i'5 2ntertainment
allowance
+%" ""
Total 2= &C=FE @
Computation of Investment Allowance?
)articulars A4ount T2-(
#. Purchase of shares of listed company !%"""
!. 2mployeeDs and 2mployerDs contribution to 6ecogni9ed
Provident
Fund 3#!%","'!5
!*%#!"
).
Payment of life Insurance Premium *%"""I ma'imum 3#"P
of the
policy value i.e. #"P of )+%""" [ )%+""5 )%+""
*. Contribution to 0eposit Pension Scheme 3+""'#!5 ,%"""
Total
9@=E2&
a'imum limit of the investment allowance? !"P of Total income e'cluding
employerDs contribution to 6PF and interest on the accumulated balance of 6PF
i.e. U3!%"/%-,+ 8 #!%"," +"5 ' !"PV [ *#%/+) or T;. #"%""%""%""" whichever is
less. So% the re<uired amount of investment allowance on which #"P ta' rebate
will be applicable is T;. )+%,!".
Ta, lia3ilit6
6ate Amount 3T;.5
Bn the &rst T;. #%."%""" "P $il
Bn the ne't !/%-,+ #"P !%/--
Total 2 =&C =FE@ !%/--
7ess? investment ta' credit 3)+%,!" '#"P5 )%+,!
Net ta, lia3ilit6 @D@(
Since the computed ta' liability is less than the minimum amount of ta' i.e. T;.
!%"""% the net ta' liability of r. Syful Go<ue for the assessment year !"##8#!
will be T;. !%""".
.or2ed ",a4*le @
r. Raman Go<ue was the G6 anager of A'iata Bangladesh 7td. Bn Muly !"#"%
his basic salary was T;. +!%""" in the scale of *"%"""8*%"""'.8-!%""". Gis date
of yearly increment is on !,
th
arch. Ge was terminated from A'iata Bangladesh
ltd on )"
th
April% !"## and Moined (rameenphone 7td on #
st
Mune of the same
year. 0uring the income year his income from salary from A'iata Bangladesh 7td
and (rameenphone 7td. >ere as follows?
%ro4 A,iataB
Ge received dearness allowance Q #"P of basic salary and medical allowance
T;. !""" per month. Ge received two festival bonuses each e<uivalent to one
monthDs basic salary in the month of September and April respectively. Ge
contributes #"P of his basic salary to a recogni9ed provident fund. Ge has been
provided with a rent8free <uarter and a full time car by the employer. 0uring the
year he has also received an entertainment allowance of T;. #%""" per month.
Ge has received compensation for the termination of T;. !%""%""" and gratuity of
T;. #%""%""". oreover% his accumulated balance from the 6PF was T;. #%."%""".
%ro4 $ra4een*honeB
Gis basic is T;. ,"%""" per month with *"P house rent allowance and T;. +%"""
medical allowance per month. Ge is also entitled to receive T;. *%"""
conveyance allowance per month. Ge contributes #"P of his basic salary to a
recogni9ed provident fund% his employer also contributes the same.
Gis ta'able income from other sources were T;. !%""%""" during the year. 0uring
the year the total I0S from various sources of his income was T;. !"%""".
oreover% his refund claims of T;. #"%""" for additional payment of ta' in the
last assessment year was to be ad=usted with current years ta' liability. Gis
investments during the year were as follows?
a. Purchase of a laptop T;. #%#"%""".
b. Payment of his life insurance premium T;. !"%""" 3Policy value T;.
+%""%"""5
c. Contribution to 0PS T;. )%""" per month.
Compute ta'able income and ta' liability of r. Ahmed for the assessment year
!"##8#!.
Solution @B
AssesseeB Mr- Ua4an ;o8ue
Inco4e ta, assess4ent 6ear 2&''>2&'2
Accounting 6ear ended 9& Hune 2&''
Co4*utation of total inco4e and ta, lia3ilit6
;eads of Inco4e T2- T2-
Income from Salaries 3Sec 8 !#5?
i5 Basic salary 3$ote #5 +%.*%--*
ii5 0earness allowance 3A'iata5
3S%!*%--*'l"P5
+!%*--
iii5 edical Allowance 3Total5U3!%"""'l"5 Z
+%"""V
!+%"""
7ess? 2'emption? Actual e'pense !+ %""" 8
iv5 Bonus U+!%"""Z+,%"""V #%".%"""
v5 2mployerDs contribution to 6PF 3Total5
U+% .*%--*' #"PV +.%*--
vi5 6ent free accommodation 3A'iata5?
!+P of B.S. 3+%!*%--*'!+P5 #%)#%#/*
vii5 Conveyance facility 3A'iata5
3+%!*%--*'-.+P5
)/%)+.
viii5 2ntertainment allowance 3A'iata5
3l%"""'l"5
#"%"""
i'5 Compensation 3A'iata5 !%""%"""
'5 (ratuity 3A'iata5 #%""%"""
7ess? 2'emption? Full # %""%""" .
'i5 Accumulated balance of 6PF 3A'iata5 #%."%"""
7ess? 2'emption? Full # %."%""" 8
'ii5 Gouse 6ent Allowance 3(rameenphone5
3,"%"""'*"P5 !*%"""
7ess? 2'empted T;. #+%""" per month or
+"P
of Basic salary i.e. )"%""" whichever is
lower
#+%"""
'iii5Conveyance allowance *%""" /%"""
7ess? 2'empted 8 Jpto T;% !*%"""
!*%"""
.
>>>>>>>>>
Inco4e fro4 Other
Sources
##%/)%!."
Total Inco4e !%""%""" %
#)%/)%!."
Co4*utation of In+est4ent Allo/ance
)articulars A4ount T2=(
#. Purchase of laptop 3allowable up to T;. #""%"""5 #%""%"""
!.
Payment of life Insurance Premium !"%"""I ma'imum
3#"P of the
policy value i.e. #"P of +%""%""" [ +"%"""5 !"%"""
). Contribution to 0PS 3)%""" '#! ),%"""
*. 2mployeeDs and 2mployerDs contribution to 6PF #%#,%/+*
3+.%*--'!5
Total 2=F2=C@:
a'imum limit of the investment allowance? !"P of Total income e'cludingK
employerKs contribution to 6PF and interest on the accumulated balance of 6PF
i.e. 33#)%/)%!."8+.%*--5 ' !"P5 [ !%,,%,/#or T;. #"%""%""%""" whichever is less%
So% the re<uired amount of investment allowance on which #"P ta' rebate will
be applicable is T;. !%,,%,/#.
Ta, lia3ilit6B
#ate
A4ount
T2-(
Bn the &rst T;. #%."%""" "P $il
Bn the ne't )%""%""" #"P )"%"""
Bn the ne't *%""%""" #+P ,"%"""
Bn the ne't )%""%""" !"P ,"%"""
Bn the ne't !%#)%!." !+P +)%)!"
Total #)%/)%!." !%")%)!"
7ess? Investment ta' credit 3!%,,%,/# '#"P5 3!,%,,/5
T0S 3!"%"""5
6efund ad=ustment 3#"%"""5
Net ta, lia3ilit6 '=:E=E@'
NoteB
#. Total Basic Salary?
From A'iata?
B. S. from Muly #" to February ## [ UT;. +!%""" ' .V [
T;. *%#,%"""
B. S. for the month arch ## [ U3+!%"""T!+4)#5 Z 3+,%"""T,4)#5V [ T;.
+!%--*
B. S. for the month April ## [
T;. +,%"""
[ T;. +%!*%--*
From (rameenphone?
B. S. for the month Mune ##
[ T;. ,"%"""
Total Basic salary for the income year !"#"8## [
T;. +%.*%--*
!. Since conveyance allowance is received from a separate company% the
e'emption limit has considered.
). In the month of ay he was not employed. So% Basic salary for the month
of ay is not available.
Self Assess4ent ?uestion
#. 3a5 2'plain what is meant by Oper<uisiteW under the Income Ta' Brdinance #/.*N
3b5 0oes it include employerKs contribution to a recogni9ed provident fundN
3c5 0iscuss the allowable per<uisites under the Brdinance.
!. A <uestion may arise why employerKs contribution to 6PF is once added to income
and again ran; for investment allowance of an assessee. This device is meant to
raise total income so that the assessee is put into higher slab of income ta' rate.
Chapter +
Inco4e fro4 interest on
securities
Contents
Introduction
2'amination conte't

To*ic List
>or;ed 2'amples and Solutions
+.# Introduction
+.! $ature of Securities
+.) Cum8Interest vs. 2'8Interest
+.* Bond >ashing Transactions
+.+ Types of Securities
+., Interest (rossing Jp
+.- 2'penses Admissible
+.. 2'emption
Introduction
Learning o3<ecti+es
Jnderstanding the head XInterest on SecuritiesK.
Compute the ta'able income under the head XInterest on SecuritiesK.
Hnowing di1ering types of securities traded in Bangladesh.
Identify the allowable deductions under the head XInterest on SecuritiesK.
Illustrate the allowable% inadmissible and not permissible deductions in
determining the income from XInterest on SecuritiesK.
0e&ne cum8interest% e'8interest and bond washing transactions.
)ractical signi0cance
Income from interest on securities is the second head of income. It is very
important to ;now interest bearing securities traded in mar;et and how this
income is brought under the purview of ta'ation. Though the revenue from
this source is not so signi&cant to the (overnment% still this chapter comprises
some technicalities over which professional accountants should have the
e'pertise.
Application of cum and e' interest and bond washing transaction in computing
ta'able interest income is very important and necessitates professional
=udgment and competence. These topics are e'plained in this chapter.

This chapter has practical signi&cance in a sense that the students will
interact with the capital mar;et directly. Approved commercial securities are
traded in the mar;et and thus the professional accountants can play a
signi&cant role in computing ta' liability of individuals and corporate as well.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the computation of ta'able income under the head
Xinterest on securitiesK is one of the seven heads of total income and includes
some comple'ityN 0o you feel that you are in a position to compute ta'
liability under this head independentlyN Can you visuali9e the scope of ta'
avoidance and remedies in this regardN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the ta'able income from di1erent heads for the income year. Before advising
the clients% accountants should have the clear concept relating to the
admissible and inadmissible e'penses and e'emptions so that they can
deduct or add the e'penses in determining the ta'able income.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
Cou will be also using this ;nowledge when you tac;le the ta'ation paper later
on in the Professional Stage and it will also underpin the technical aspects at
the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Identify income under the head Xinterest on securitiesK.
0e&ne the concepts of interest bearing securities.
6ecogni9e the allowable e'penses and inadmissible e'penses under the
head.
0e&ne di1erent types of securities.
Calculate ta'able income under the head Xinterest on securitiesK.
Jnderstand the application of e' and cum interest.
Gandle situations li;e bond washing transactions.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
one concept on computation of total ta'able income which is vital for
calculating ta' liability. Clear concept and understanding of each contents of
this chapter will help candidates to resolve any problems relating to
computation of income.
@-& INT"#"ST ON S"CU#ITI"S
Section O+er+ie/
There are seven heads of income.
The total income may not be ta'able income.
There are some allowable% inadmissible and not permissible deductions
under di1erent heads of income.
Computation of salary and business income has the most signi&cance.
The per<uisites and allowances need to be considered before determining
salary income
0epreciation allowances is very important for determining some business
pro&t
Ta' shall be payable on capital gains in respect of any pro&ts arising from
the transfer of a capital assets e'cept some cases.
The two main methods of accounting are cash system and mercantile
system.
An assessee may be allowed to set o1 and carry forwarded of losses.
@-' Introduction
Sco*e
As per section !! of ITB #/.*% Income classi&able under the head OInterest on
SecuritiesW includes?
3i5 Interest receivable by the assessee on any security of the (overnment
or approved by the (overnmentI
3ii5 Interest receivable by him on debentures or other securities of money
issued by or on behalf of a local authority or a company.
Section F !! deals with interest on securities issued by 3i5 the (overnment% 3ii5
a local authority% or 3iii5 a company. 0ebentures or other securities issued by a
company also fall within the scope of this section.
",clusion
All other securities% e. g. securities issued by a foreign (overnment% etc. are
outside the ambit of this section% and interest thereon would be charged u4s
!. or )). The shares of a company cannot be called securities for money.
0ividends on shares would be ta'able u4s !. if they are received in the course
of carrying on a business in shares% and in other cases% under the residuary
head of sec. )).
.hen )a6a3le
Jnder Section !!% ta' is payable in respect of interest XreceivableK by the
assessee on securities. But interest on securities becomes income only when
it is actually received and not when it is due or capable of being received by
the assessee. The word XreceivableK in this section has reference to the
<uantum of interest ta'able and not to the date of ta'ability. If interest is
actually received some times after it become due and receivable% the date of
ta'ability is the date when it is received and not the date when it becomes
due.
Allo/a3le Deductions
0eductions permissible in the determination of income from interest on
securities as per section !) are?
3i5 Commission or charges deducted from interest by a ban; realising the
interest on behalf on the assesseeI
3ii5 Interest payable on money borrowed for the purpose of investment in the
securities. To claim relief for interest on borrowed fund% such fund must be
borrowed solely for investment in securities and should be so used
throughout% even if the moneys borrowed for business purpose are
invested in securities for a period under some legal compulsion% no
deduction for interest under this section is allowed U0ndian 5teams!ip Co6
;6 C0T "/.)<$ 06 T6R6 33-:6
Gowever% deduction on account of interest or commission in respect of the
ta'8free (overnment securities shall not be allowed. 7i;ewise% deduction will
not be allowed in respect of interest payable outside Bangladesh on which ta'
has not been paid or deducted.
@-2 Nature of Securities
0ealings of securities may have varied purpose from the part of the investors.
For e'ample% it may ta;e any of the following three natures?
Trading securities are those types of securities where the main purpose is to
earn pro&t through trading 3buying and selling5 of securities. Gowever% held to
maturity securities are those types of securities where investment is made for
a long time period. Gowever% available for sale securities fall in between which
is not an investment for long time or where the dealing is not so fre<uent. The
investors wait for a while to see how to ma'imi9e pro&t on the deal. As
interest on securities is a separate head of income% even if the securities are
held as trading assets with in the course of business underta;en by a ban; or
an insurance company or a stoc; bro;er% the interest must be charged under
this head and not under S. !. as income from business or profession or under
Securitie
s
Trading Securities
Available for Sale
Securities
Geld to aturity Securities
S. )) as income from other sources UCentral @xc!ange BanA LT&6 ;6 C606T6
"/.))$ 06T6R6 /+,:.
@-9 Cu4>Interest +s- ",>Interest
Securities purchased with cum8interest means buying the securities with the
option of interest% i.e.% buying it before the date when interest on the securities
falls due. And when it is purchased after the due date of interest on such
securities% it is securities purchased with e'8interest. Interest on securities is
deemed to accrue on a certain date and not on a day to day basis. >hen
securities are bought cum interest% ta' is assessable on the whole amount of
interest when received subse<uently and no deduction is allowed in respect of
interest paid by the assessee with the purchase price. Similarly% the seller of
securities cum interest is not assessable on the amount of interest included in
the sale price of securities. There is wide scope to avoid ta' through
systematically buying and selling securities =ust on the eve of the payment of
interest and S.#", has given suEcient authority to the 0CT to handle those
cases of ta' avoidance. The basic principle to note however is that to be
assessed on the interest on securities the assessee does not have to be owner
of the securities throughout the period for which such interest arises and paid
of. 2ven one day of ownership is enough to attract the provisions of the section.
To understand the application of cum and e' interest% letKs assume that it
ta;es #" days to close boo;s prior to coupon payment date. Therefore if the
coupon date is the )#st 0ecember each year% the boo;s closed date would be
listed as the !#st 0ecember 3there are e'ceptions5. The day prior to the Boo;s
Closed date is ;nown as the last date to register 37065 8 this is the date on
which the holders of the bond are designated to receive the coupon.
2ssentially% the issuer or central depositary 3or settlement agent5 will establish
who owns the bond on the 706 date and the coupon will be paid to this
person on the coupon date irrespective of whether they actually own the bond
on Coupon payment date.
>here?
706 [ 7ast date to register 7C0 [ 7ast coupon date
$C0 [ $e't coupon date BC0 [ Boo;s closed date
This boo;s closed period is referred to as the e'8interest period 3or =ust e'
period5 i.e. the date when the purchaser of the bond is not entitled to the ne't
coupon. A bond which is trading cum interest simply means that the
purchaser will receive the ne't coupon% the whole amount.
",a4*leB
r. ] holds #+P debenture of B0T +""%""" on which coupon becomes due on
)#
st
0ecember each year. Bn $ovember )"% !"#"% r. ] sold the debenture to
r. C cum interest. r. ] charges the B0T as computed below.
BDT
Face :alue +""%"""
Interest 0ue at the date of
transaction
U+""%"""_#+P_/4#!V +,%!+"
7C0 706 BC0 $C0
Cum Interest 2' Interest
Selling Price ++,%!+"
r. ] will collect the interest due for the holding period 3from Manuary to
$ovember5 from r. C. r. C will receive the full amount of interest on
0ecember )#
st
and include the same with ta'able income on which ta' will be
payable by him at regular rate. Gowever% r. ] will pay no ta'es on interest as
this is capital gain to him and this is not ta'able.
@-: Bond .ashing Transactions
>hen some transactions happened between two parties to wash out the
impact of interest on ta'able income and thus avoiding the ta'es on that
mutually by both of the parties% such type of transaction is referred to as bond
washing transaction. It is a smart way of ta' avoidance. In this case% securities
are sold cum interest with an agreement to re8sell or re8transfer the securities.
Securities are sold to a person whose income is less than the minimum
ta'able limit and then he doesnKt need to pay any ta' on interest on securities
since his income is less than the ta'able limit. Bn the other hand since
securities are capital asset% no ta' will be given on the disposal value of the
securities by the seller. In this way both the seller and buyer avoid ta'es.
To prevent the avoidance of ta' in this manner% Section #",3#5 of the ITB%
#/.* provides that where a security owner transfers the securities on the eve
of due date of interest and reac<uires them eventually% the interest received
by the transferee4purchaser will be deemed as income of the transferor4seller
and% accordingly% it will be included in the total income of the transferor4seller
and not the transferee4purchaser. There is wide scope to avoid ta' in this way
and Section #", has given suEcient authority to the 0CT to handle those
cases of ta' avoidance.
@-@ T6*es of Securities
In terms of ta'ability% securities may be classi&ed as either (overnment
securities 3securities issued or approved by the (overnment5 or Commercial
securities 3securities issue by others5.
$o+ern4ent SecuritiesB Securities issued or approved by (overnment fall
under this category. It may be ta' free if ta' is not imposed on interest or may
be less ta' on the reasoning that the assessee will en=oy some e'emption on
interest income.
Ta, Free: These are the securities issued by the government for which no ta'
is paid hence it is declared ta'8free. USi'th Schedule% Part A% Para !*V. Income
from interest on ta'8free government securities is not included in computation
of ta'able income. 2'amples of these securities are >age8earners
Securities
(overnmen
t
Commercial
Ta' Free
7ess Ta'
0ebenture
Rero Coupon
Bond
Approved
Jnapprove
d
0evelopment Bond% $ational Bond% Treasury Bill% J.S. 0ollar Premium Bond
etc.
Less Ta,: These are the government securities on which ta' is deducted at
source at speci&ed rate Ucurrent T0S rate is '&JV. So the assessee receives
the net amount of interest and it is grossed up before including in the total
income.
Co44ercial SecuritiesB Securities issued by or on behalf of a local authority
or a company and approved by the S2C will be considered as commercial
securities. These types of securities may be either debenture or 9ero coupon
bonds.
3e0enture: These are the securities issued by or on behalf of a local
authority or a company and approved by the S2C. Thus% these de are
approved securities. Gowever% for any reason% if any securities issued are not
approved by the S2C% these will be unapproved debenture. These types of
debentures are not common in Bangladesh.
5ero-Coupon Bond: A Rero8coupon bond is such type of bond where coupon
3interest5 is 9ero. This type of securities is initially sold at a price lower than its
face value and the owner receives the face value at maturity. Thus% the gap
between the purchase price and face value is the bene&t of buying such
security to the owner. Any income derived from Rero8coupon bond received by
a person other than Ban;% Insurance or any Financial Institution is fully
e'empted from ta' USi'th Schedule% Part A% Para *"V. The price of a 9ero8
coupon bond can be calculated by using the following formula?
P [ 4 3#Zr5
n
Gere P represents price% represents maturity valueI r represents investorDs
re<uired annual yield 4 ! and n is the number of years until maturity ' !.
",a4*leB
If you want to purchase a Company ]CR 9ero8coupon bond that has a B0T
#%""" face value and matures in three years% and you would li;e to earn #"P
per year on the investment% using the formula above you might be willing to
pay?

B0T #%""" 4 3#Z."+5
,
[ B0T -*,.!!
Thus the income from investment in 9ero8coupon bond here will be B0T
!+).-. 3B0T #%""" F B0T -*,.!!5.
5.6 Interest $rossing U*
>hen interest is received after deducting ta' at source% it is re<uired to gross
up. The amount of interest received is not the total interest income and thus
the amount of ta' already paid should be added bac; to compute actual
interest income. The process is named as interest grossing up. Gowever%
grossing up is not re<uired if ta' is not deducted at source. The following
formulae may be used to compute gross interest?
Rate TDS of Fraction
Interest Net
Interest Gross

=
1
2'ample?
Say% net interest received is B0T /%""" after deducting ta'es Q #"P. (ross
interest is B0T #"%""" 3B0T /%""" 4 # 8 ".#5. Gere%
$et Interest
6eceived
Ta' deducted at source (ross Interest Income
B0T /%""" B0T #%""" U3B0T /%"""4#8".#5
_".#V
B0T #"%"""
@-F ",*enses Ad4issi3le
As per section !) of ITB #/.*% the following e'penses are admissible for
deduction to compute income ta'able under the head?
#. Ban2 co44issionPcharges for collection of interestB If such interest
is collected through ban; and eventually ban; charges the client for
collecting interest% such amount can be deducted for computing ta'able
income with the following two e'ceptions?
a- This deduction is not permissible if such charge is made for collecting
interest of such securities on which ta' cannot be imposed. 2'? ta' free
government securities% 9ero coupon bond.
3- If ban; commission is charged for purchasing securities% it will not be
considered as an allowable e'pense.
!. Interest on 3orro/ed ca*ital for in+est4ent in securitiesB Any
interest on money borrowed for the purpose of investment in the securities
by the assessee will be an allowable e'pense. But interest on borrowed
capital for investment in ta'8free government securities and 9ero8coupon
bond is not allowable e'pense as interest on these securities is not
ta'able.
@-D ",e4*tion
Interest income is e'empted from ta'es in following occasions as per ITB%
#/.*?
Securities ",e4*tion
Li4it
#eference
Ta'8free government
securities
Fully e'empted Si'th Schedule% Part A%
Para !*
Rero8coupon bond Fully e'empted Si'th Schedule% Part A% Para
*"
.or2ed ",a4*le and Solution
.or2ed ",a4*le 'B
s. AnanyaKs investments during the year ended )" Mune !"## were?
#. T;. .%""%""" ,P (overnment Securities.
!. T;. ,%""%""" .P 0ha;a City Corporation 0ebentures.
). T; #!%""%""" /P Gousing Bonds.
*. T;.#*%""%""" ,P (overnment Treasury Bills.
Gis ban; charged T;. #"%""" as commission for collecting interest. Ge paid T;.
-+%""" as interest on a loan which he too; for the purpose of purchasing Gousing
Bonds.
Calculate his income under Section !! and !).
Solution 'B
Ms- Anan6aOs
Inco4e Ta, Assess4ent Year 2&''>'2
Inco4e for 6ear ended on 9& Hune 2&''
Co4*utation of Interest Inco4e under Section 22 and 29

'-,P (overnment Securities U.""%""" _ ,4#""V *.%"""
2-.P 0CC 0ebenture U,""%""" _ .4#""V *.%"""
9-/P Gousing Bonds U#%!""%""" _ /4#""V #".%"""
:-,P (ovt. Treasury Bills U#%*""%""" _ ,4#""V .*%"""
Total Income !..%"""
7ess? Admissible 2'penses
Ban; Commission #"%"""
Interest on 7oan -+%""" .+%"""
Total Ta'able Income !")%"""
.or2ed ",a4*le 2B
Investment of r. Adil 6ahman in di1erent securities for the year ended Mune )"%
!"## is given below?
a5 Income from interest on ta'8free government securities T;. !"%"""
b5 Investment in #)P ta'8free government securities% T;. +""%"""
c5 Income from interest on less8ta' government securities T;. !-%"""
d5 Investment in #"P less8ta' government securities% T;. *""%"""
e5 Income from interest on approved commercial securities T;. )"%"""
f5 Investment in #"P approved commercial securities% T;. !""%"""
g5 Income from interest on unapproved commercial securities T;. /%"""
h5 Investment in ,P unapproved commercial securities% T;. )""%"""
i5 Investment of T;. *-.%""" is made in 9ero coupon bond with the face value of T;.
+""%""".
Solution 2B
Mr- Adil #ah4an
Assess4ent 6earB 2&''>2&'2
Inco4e 6earB 2&'&>2&''
Co4*utation of Total Inco4e

T;. T;.
Income from Interest on securities 3Sec 8 !! L !)5
3i5 Interest on ta' free government securities !"%"""
Interest on #)P ta' free government securities
3+""%""" ' #)P5
,+%"""
.+%"""
7ess? e'empted 8 full .+%""" nil
3ii5 Interest on less ta' government securities 3!-%""" '
#""4#"" 8 #"5
)"%"""
Interest on #"P less ta' government securities
3*""%"""'#"P5
*"%"""
-"%"""
3iii5 Interest on approved commercial securities )"%"""
Interest on #"P approved commercial securities 3!""%"""
' #"P5
!"%"""
+"%"""
3iv5 Interest on unapproved commercial securities /%"""
Interest on ,P unapproved commercial securities 3)""%"""
' ,P5
#.%"""
!-%"""
3v5 Income from 9ero8coupon bond UT;. +""%""" F T;. *-.%"""V !!%"""
7ess? e'emption 8 full !!%""" nil
Total ':F=&&&
.or2ed ",a4*le 9B
Information regarding investment made in di1erent securities by r. ] during the
income year ended on Mune )"% !"## is given below?
Securities 0ate of
Investment
Investment Interest
Ta'8free (overnment Securities arch !.% !""/ #!"%""" #*%*""
7ess8ta' (overnment Securities February #+%
!"#"
#+"%""" #,%!""
^
#*P Approved Commercial
Securities
$ovember !#%
!"#"
*."%"""
#!P Approved Commercial
Securities
Muly "#% !"#" ,""%""" -!%"""
Rero Coupon Bond Muly "#% !""/ *."%"""
]CR Company Stoc; Manuary #+% !"## !,"%"""
^
This amount is received after deducting ta'es Q #"P at source.
Other Infor4ationB
#. #*P approved commercial securities were purchased e'8interest from the
secondary mar;et. Interest on this security falls due on Bctober )# each year.
!. #!P approved commercial securities were purchased from primary mar;et on
which interest falls due on Mune )" each year.
). Face value of 9ero coupon bond is was T;. +""%""" and T;. !"%""" was
already reported as interest in the year of purchase.
*. ]CR Company Stoc; is purchased through IPB.
+. All interest is collected through ban; account and the ban; charges T;. /%"""
for the service.
,. r. ] has made following borrowings for investment in di1erent securities?
Securities 0ate of
Borrowing
Amount of
borrowing
6ate
Ta'8free (overnment
Securities
arch !.% !""/ #""%""" .P
7ess8ta' (overnment
Securities
February #+%
!"#"
#+"%""" /P
#*P Approved Commercial
Securities
$ovember !#%
!"#"
*""%""" #"P
#!P Approved Commercial
Securities
Muly "#% !"#" +""%""" #"P
Rero Coupon Bond Muly "#% !""/ *""%""" #!P
]CR Company Stoc; Manuary #+%
!"##
!""%""" #+P
6e<uirements?
Compute the amount of ta'able income under the head Xinterest on securitiesK and
also mention any item of investment allowance.
Solution 9B
Mr- X
Assess4ent 6earB 2&''>2&'2
Inco4e 6earB 2&'&>2&''
Co4*utation of Total Inco4e
T;. T;.
Inco4e fro4 Interest on Securities Sec > 22 G 29(
Interest on ta' free govt. securities #*%*""
7ess? e'empted F full Unote #V #*%*"" nil
Interest on less ta' govt. securities as grossed up 3note !5 #.%""" 8
LessB allowable e'penses
Ban; charges 3note )5 3#%**"5
Interest on borrowing 3/P of T;. #+"%"""5
3#)%+"
"5
)%","
Interest on #!P approved commercial securities -!%"""
LessB allowable e'penses
Ban; charges 3note )5 3,%)""5
Interest on borrowing 3#"P of T;. +""%"""5
3+"%""
"5
#+%-""
Total ta'able income #.%-,"
Ite4s of In+est4ent Allo/ance
#. #!P Approved Commercial Securities T;. ,""%"""
!. ]CR Company Stoc; T;. !,"%"""
Provided that the total amount doesnKt e'ceed the ma'imum limit
NotesB
#. $o deduction is allowed in ta' free government securities as no ta' is
imposed on such income and thus F no deduction.
!. Interest on less ta' government securities is grossed up as the amount of
interest received is the net interest after charging #"P ta'es. Thus the gross
interest income will be T;. #.%""" 3T;. #,%!"" 4 # F "./5.
). Total ban; charges of T;. /%""" is allocated among di1erent securities
proportionately as computed below?
Securities Interest )ro*ortion Ban2
Charges
Ta'8free (overnment Securities #*%*"" #*P #%!,"
7ess8ta' (overnment Securities #,%!"" #,P #%**"
#!P Approved Commercial
Securities
-!%""" -"P ,%)""
Total '&2=E&& '&&J C=&&&
*. There will be no interest income from #*P approved commercial securities as
it has been purchased e'8interest.
+. There will be no income from 9ero coupon bond during this income year.
,. Investment in stoc; is not within the scope of this chapter.
.or2ed ",a4*le :B
r. Mamal Haiser% a non8resident Bangladeshi% is a Permanent 6esident of Canada.
Gowever% he has investments in Bangladesh managed by his relatives. The
information regarding his investments in securities during the income year !"#"8##
are given below?
#. T;. #""%""" in #"P Bangladesh >age 2arnerDs 0evelopment Bond 3Purchased on
#T September% !""/5.
!. T;. !""%""" in .P Canadian T Bill in Canada 3Purchased on #st Muly% !"#"5.
). Interest on #"P less la' government securities T;. !%-"". The Ban; has
deducted T;. #"" as collection fee.
*. #*P Be'imco 0ebentures were purchased from 0S2 at a cost of T;. !)"%""" on
#
st
Manuary% !"## 3Face value is T;. !""%"""5. In this regard% he has sold #)P ACI
0ebenture at T;. #+"%""" on the same day 3The ac<uisition price was T;.
#)"%"""% Face value T;. #!+%"""5. Interest is paid on )"
th
Mune each year by the
companies on an annual basis. The ban; has charged him T;. +"" as transaction
fee.
+. #!P debentures of ABC 7td. of the face value of T;. +""%""" 3interest is payable
on )#
st
0ecember on an annual basis5 were sold e'8interest on 0ecember "#%
!"#" and T;. -""%""" #+P debenture of ]CR ltd was purchased e'8interest%
borrowing the additional sum from $CC Ban; Q #"P interest. The Ban; has
charged him T;. #%""" as commission for the settlement of the purchase and
sales and T;. #%+"" for collecting interests. The due dates of payment of interest
on #+P ]CR 0ebenture are September )" and arch )#.
,. The 0CT identi&ed that he has transferred #"P unapproved debenture of T;.
#""%""" to his friend on #+th Mune% !"## 3interest is paid on )"th Mune on an
annual basis5 and bought it bac; on )
rd
Muly% !"## at T;. #"+%""". The 0CT has
identi&ed the matter as Bond >ashing.
-. Bn )#T arch% !"## ) years Rero Coupon Bond of T;. +"%""" was matured and
he has received the amount as maturity value% whether the ac<uisition price of
the same was T;. )+%""". The collection fee of T;. +"" was charged in this
regard by his ban;.
0etermine ta' payable income for r. Mamal Haiser from interest on securities for the
income year !"#" 8 !"##.
Solution :B
Mr- Ha4al 5aiser
Assess4ent 6earB 2&''>2&'2
Inco4e 6earB 2&'&>2&''
Co4*utation of Total Inco4e
T;. T;.
Inco4e fro4 Securities SecB 22 G 29(B
Interest form ta' free government securities #"%"""
7ess? e'emption 3full5 #"%"""
8
Interest from less ta' government securities 3!%-"" '
#""4/"5
)%"""
7ess? Admissible e'penses 3collection fee5 #""
!%/""
8
Interest from approved commercial securities ."%+""
7ess? Admissible e'penses #"%/-/
,/%+!#
Interest from un8approved commercial securities #"%"""
Interest on 9ero coupon bond #+%"""
7ess? 2'emption 8 full #+%"""
8
Total D2=:2'
.or2ings and NoteB
#. #"P Bangladesh >age 2arnerDs 0evelopment Bond is a ta'8free government
security. Interest is considered for the whole year as it was on hand from the &rst
day of the I4C !"#"8##.
!. As he is a non8resident% interest on Canadian T Bill will not come under the scope
of his total income% as it is income earned outside Bangladesh. In Case of
resident% the interest would have to be considered under the head TForeign
incomeT instead of TIncome from Interest on SecuritiesT% as it is a security issued
by foreign authority.
). Income from approved debentures is calculated as follows?
3a5 Interest on securities is paid always on face value. So% Interest on #+P
Be'imco 0ebenture is 3!""%""" ' #*P5 [ T;. !.%""". As the &nal holder% he well
get the whole interest. Similarly% as he has sold the #)P ACI debenture in the
secondary mar;et% he is no more eligible to receive any interest on it as he is not
the &nal holder. This is an e'ample of cum8interest. Transaction fee for purchase
and sell of securities is not an admissible e'pense.
3b5 #!P debentures of ABC 7td. bearing the face value of T;. +""%""" were sold
before the due date of interest. So% the &nal holder is entitled to get the interest
on such debentures. In this regard% no income by way of interest arises in the
hand of r. Mamal Haiser. Gowever% the sale being e'8interest% the total sale price
is T;. +""%""" plus interest accrued for ## months 3#
st
Manuary% #" to )"
th
$ovember% #"5 i.e. T;. ++%""" 3+""%""" ' #!P ' ##4#!5 [ T;. +++%""". The
surplus received T;. ++%""" 3+++%""" 8 +""%"""5 would be deemed to be income
chargeable under the head TCapital gainsT.
3c5 The amount of additional sum borrowed to purchase #+P ]CR 0ebentures at
face value e'8interest is calculated as follows?
Particulars T;.
F: of #+P ]CR 0ebentures -""%"""
Add? Payment for accrued interest for the period Bctober "#% #" to
$ovember )"% #" UT;. -""%""" ' #+P ' !4#!V
#-%+""
Total cost -#-%+""
7ess? Amount received from sale of ABC 0ebenture +++%"""
Borrowings from Ban; 3Bn 0ecember "#% !"#"5 #,!.+""
3d5 After the ac<uisition% interest on #+P ]CR debentures received in the I4C
!"#"8## is only on )#
st
arch% !"## for si' months% as he receives the interest on
a semi8annual basis. So% the interest amount received on #+P debentures is
3-""%""" ' #+P ' #4!5 8 T;. +!%+"". The ne't interest will be received on
September )"% !"## which doesnDt fall in I4C !"#"8##.
3e5 So% the Total interest received from approved debentures in the #4C !"#"8##
will be?
Interest on #*P Be'imco 0ebenture [ T;. !.%"""
Interest on #+P ]CR 0ebenture [ T;. +!%+""
T;. ."%+""
Admissible e'penses?
Ban; collection fee for interests [ T;. #%+""
Interest on loan 3#,!%+"" ' #"P ' -4#!5
3From 0ecember "#% "/ to Mune )"% #"5 [ T;. /%*-/
T;. #"%/-/
"* As the sale of unapproved debentures is considered as bond washing transaction
by the 0CT% the interest amount will be considered as the income of r. Mamal
Haiser.
Self>Assess4ent ?uestion
#. 3a5 >hat incomes are included in OInterest on SecuritiesW under the Income Ta'
Brdinance #/.*. Is interest on private loan is an interest on securitiesN
3b5 >hat deductions are allowable from such income under the BrdinanceN
Chapter ,
Inco4e fro4 house *ro*ert6
Contents
Introduction
2'amination conte't
To*ic List
>or;ed 2'amples and Solutions
,.# Introduction
,.! Annual :alue
,.) Self Bccupancy
,.* Allowable 0eductions
,.+ $on Assessable Income
,., Ta' 0eduction at Source from Gouse Property
Introduction
Learning o3<ecti+es
Identify the income under the head XIncome from Gouse PropertyK.
Compute the total ta'able income under the head.
Hnowing annual value and its computation.
Identify the allowable deduction under the head.
Identify non8assessable income under the head.
2'plain ta' deducted at sources under the head in di1erent situations.
Compute net ta' liability.
)ractical signi0cance
Income from house property is the third head of income and very signi&cant
for income ta' professionals. It includes some conceptual issues and
technicalities that re<uire clear understanding about the topic.
Annual value is the value representing the income from house property. It is
the higher value of actual rent and municipal value. Actual rent is again
ad=usted for di1erent e'penses and T0S. These computations re<uire some
rationality on part of the tenants and landlords.
Scope of allowable deductions is another diEculty. Capitali9ed e'penses
cannot be deducted and in case of partly let out properties% e'penses are
deducted proportionately. 6epairs and maintenance is considered separately
depending on the status of the property as either commercial or residential
due to its signi&cance. Advance receipts from the tenants are considered as
income and at the time of refund% it has got separate treatment. All of these
ad=ustments are very technical and sometimes re<uire professional =udgment
and this is the reason why the chapter is practically signi&cant.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the computation of ta'able income under the head
XIncome from Gouse PropertyK is one of the basic re<uirements for determining
ta' liabilityN Can you determine the ta'able income under the headN 0o you
understand application of ta' deducted at sources by the tenantsN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the ta'able income for any income year under di1erent heads. Before
advising the clients% accountants should have the clear concept relating to the
admissible and inadmissible e'penses in di1erent heads of income so that
they can deduct or add the e'penses in determining the ta'able income.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
Cou will be also using this ;nowledge when you tac;le the ta'ation paper later
on in the Professional Stage and it will also underpin the technical aspects at
the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne the concepts of house properties
Identify the income under the head XIncome from Gouse PropertyK.
0e&ne the concepts of Annual :alues.
6ecognise the allowable deductions and allowances.
Hnowing self occupancy and its impact in computing ta'able income under
the head.
Identify tenantKs e'penses born by landlord and landlordKs e'penses born
by tenants.
Hnowing T0S rates and its application in computing net ta' liability.
0etermine interest on borrowed capital and installments for loan ta;en
during construction period.
Ad=ustments of advances received from tenants.
Impact of capitali9ed e'penses.
Hnowing the application of vacancy allowance and allowances for un8
collectible rents.
Computing repair and maintenance e'penses in di1erent cases.
Hnowing the residential and commercial use of house property and its
impact on computing ta'able income.
Jnderstanding di1erent status of a house propertyI fully let out% partly let
out and self occupied.
Compute net ta' liability.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
core concept on computation of income under the head Xincome from house
propertyK which is vital for calculating total ta' liability. Clear concept and
understanding of the contents presented in this chapter will help candidates
to resolve any problems relating to computation of income from the head.
E-& INCOM" %#OM ;OUS" )#O)"#TY
Section O+er+ie/
Income from house property is the third head of income.
Gouse property may be fully let out% partly let out or self occupied.
There are some allowable and some inadmissible deductions under the
head.
Computation of income under the head.
Gouse property may be let out for residential purpose or commercial
purpose.
Annual value is the higher one between actual rent and municipal value.
Actual rent will be ad=usted for e'penses and T0S.
Tenants are sometimes allowed to deduct ta'es before giving rent to the
landlords.
7andlords can claim allowances for vacancy and uncollected rents.
Advances received from tenants that is not ad=ustable with rents and
considered as income.
E-' Introduction
Sco*e
Gouse
Property
7et But Self
Bccupied
Fully Partly
Ta'able $ot Ta'able
6esidenti
al
Commerci
al
Ta,a3le Inco4e
Annual :alue 3A:5
Less
Ad4issi3le ",*ensesB
6epair L aintenance
For 6esidential F !+P of A:
For Commercial F )"P of A:
Bther 2'penses
Less
Allo/ancesB
:acancy Allowance
Allowance for Jncollectible 6ent
*6uals
Ta,a3le Inco4e
Section F !* is con&ned to Xbuildings and lands appurtenant thereto which
may be conveniently called Xhouse properlyK. Ta' under this section is levied
upon owner% legal or bene&cial% and not upon the occupant. It is levied not
upon the actual income from the property but upon statutory or arti&cial
income represented by bona&ed annual value of the property.
Income from house property is ta'able on the basis of its annual value of any
property% whether used for commercial or residential purposes consisting of any
building% furniture% &'ture% &ttings etc.
E-2 Annual +alue
Annual value has been de&ned in Section !3)5 of the Brdinance. Jnder Section
!3)5 3a5 Kannual valueK shall be deemed to be 8 3a5 in relation to any property let
out83i5 the sum for which property might reasonably be e'pected to let from
year to year and includes any amount received by letting out furniture% &'ture%
&ttings etcI or 3ii5 where the annual rent in respect thereof is e'cess of the sum
referred to in section !3)53a53i5% the amount of the annual rent.
Thus% annual value is not necessarily be the annual rental income disclosed by
an assessee but the value determined as such by the ta' authorities. If the
annual rent is higher than the value as determined by the ta' authorities on
the basis of the e'pected rent% annual rent is considered as the annual value.
>here the property is owned by two or more persons and their respective
shares are de&nite and ascertainable% the owners are assessable on their
respective share of income from the property and not as an association of
persons.
Thus the annual value will be the higher one between actual rent and
municipal value. Actual rent is the amount of rent received or deemed to be
received by the owner. It may re<uire some ad=ustments as shown below?
?uic2 $uide
Tenants 2'penses 32'penses for temporary
occupancy5
>ASA bill% (as bill% 2lectricity
bill
7andlords 2'penses 32'penses for
ownership5
Property Ta'es% Insurance
Premium
Annual
:alue
Actual 6ent unicipal
:alue
Gigher one
Ad=usted for
#. TenantsK e'pense born by the
landlord
!. 7andlordsK e'pense born by the
7ess
Add
Add
Illustration '
r. Brahman owns a + storied residential house with ) Aats in each story. This
is a fully let out house property and monthly rent of each Aat is T;. .%""".
unicipal value of the house is T;. #%,""%""". Compute annual value.
Annual !alueB
Actual 6ent UT;. .%""" _) _+ _#!V T;. #%**"%"""
unicipal :alue T;. #%,""%"""
Annual :alue% whichever is higher T;. #%,""%"""
Illustration 2
r. Brahman owns a + storied residential house with ) Aats in each story. Ge
occupied all the Aats in second Aoor for residence purpose. Bther Aats are let
out for residential purpose and monthly rent of each Aat is T;. .%""".
unicipal value of the house is T;. #%,""%""". Compute annual value.
Annual !alueB
Actual 6ent UT;. .%""" _) _* _#!V T;. #%#+!%"""
unicipal :alue U3T;. #%,""%""" _ #+54#!V T;. #%!."%"""
Annual :alue% whichever is higher T;. #%!."%"""
Illustration 9
r. Brahman owns a + storied residential house with ) Aats in each story. Ge
occupied all the Aats in second Aoor for residence purpose. Bther Aats are let
out for residential purpose and monthly rent of each Aat is T;. .%""" including
T;. #%""" for water% gas and electricity bill. unicipal value of the house is T;.
#%,""%""". Compute annual value.
Annual !alueB
Actual 6ent UT;. .%""" _) _* _#!V T;.
#%#+!%"""
7ess? TenantsK e'pense born by landlord UT;. #%"""
_) _* _#!V
T;.
#**%"""
Actual 6ent after Ad=ustment T;.
#%"".%"""
unicipal :alue U3T;. #%,""%""" _ #+54#!V T;.
#%!."%"""
Annual :alue% whichever is higher T;.
#%!."%"""
Illustration :
r. Brahman owns a + storied residential house with ) Aats in each story. Ge
occupied all the Aats in second Aoor for residence purpose. Bther Aats are let
out for residential purpose and monthly rent of each Aat is T;. .%""". In
addition to monthly rent% tenants also bear property ta'es and other ta'es at
the rate of T;. #"%""" per tenant annually. unicipal value of the house is T;.
#%,""%""". Compute annual value.
Annual !alueB
Actual 6ent UT;. .%""" _) _* _#!V T;.
#%#+!%"""
Add? 7andlordsK e'pense born by tenant UT;.
#"%""" _) _*V
T;.
#!"%"""
Actual 6ent after Ad=ustment T;.
#%!-!%"""
unicipal :alue U3T;. #%,""%""" _ #+54#!V T;.
#%!."%"""
Annual :alue% whichever is higher T;.
#%!."%"""
Illustration @
r. Brahman owns a + storied building which is let out to a business house.
After deducting ta'es% r. Brahman receives T;. #%/""%""" annually. r.
Brahman is responsible to pay for all gas% electricity and water bills which
amount to T;. ."%""" annually. Gowever% as per the agreement% the business
house is re<uired to pay all ta'es and insurance premium for the building
which amounts to another T;. #."%""". unicipal value of the house is T;.
!%"""%""". Compute annual value. U$ote? Applicable T0S rate is +PV
Annual !alueB
Actual 6ent T;.
#%/""%"""
Add? 7andlordsK e'pense born by tenant T;.
#."%"""
Add? Ta' deducted at sources U3T;. #%/""%"""4#8
"."+5 _ "."+V
T;.
#""%"""
7ess? TenantsK e'pense born by landlord 3T;.
."%"""5
Actual 6ent after Ad=ustment T;.
!%#""%"""
unicipal :alue T;.
!%"""%"""
Annual :alue% whichever is higher T;.
!%#""%"""
E-9 Self Occu*anc6
The house property may be occupied by the owner either for residential or
business purpose. In such cases% the following points are important to note
down?
a5 If self occupied for residential purpose? Annual value is not re<uired to be
determined since there is no income from house property and no ta' as
well.
b5 If self occupied for business purpose? It is assessed under the head
Xincome from business and professionK as per section !.. Ge is not entitled
to claim deductions under this section% however% can claim depreciation on
such property.
E-: Allo/a3le Deductions
As per section !+% while determining the net income under Income from house
property% the following deductions are allowable?
3i5 Any sum payable to (overnment as land development Ta' or rent on
account of the land comprised in the property.
3ii5 Any premium paid to insure the property against ris; of damage or
destruction
3iii5Interest on mortgage or other capital charge for the purpose of
reconstruction% e'tension or improvement of the house property.
3iv5Annual charge not being a capital charge
3v5 (round rent.
3vi5Interest payable on capital borrowed for the purpose of ac<uisition%
construction% reconstruction% repair or renovation of the house property.
Provided t!at w!ere t!e property or a portion t!ereof is self occupied and
acCuired2 constructed2 renewed or reconstructed wit! ?orrowed capital2
t!e amount of any interest2 paya?le on suc! ?orrowed capital not
exceeding taAa twenty laA!2 s!all ?e deducted from total incomeH
3vii5 >here the property has been constructed with borrowed capital and no
income was earned during the period of construction% interest payable
during that period on such capital% in three e<ual proportionate
installments for subse<uent ) years for which income is assessable from
that property.
3viii5 In respect of e'penditure for repairs% collection of rent% water and
sewerage% electricity and salary of darwan% security guard% pump8man% lift8
man and careta;er and all other e'penditure related to maintenance and
provision of basic services?
3a5 an amount e<ual to !+P of the annual value of the property in
respect of all e'penses mentioned in 3i5 above where the property is
used for residential purposeI
3b5 an amount e<ual to )"P of the annual value of the property in
respect of all e'penses mentioned in 3i5 above where the property is
used for commercial purpose.
3vi5 Proportionate vacancy allowance of the period for which the property
remains wholly unoccupied and in case of partly let out property such
portion of annual value appropriate to the vacant part as is proportionate
to the period of the vacancy of such part.
Interest or annual charge payable outside Bangladesh shall not be
allowed as deduction on which ta' has not been paid or deducted at
source.
E-@Non Assessa3le Inco4e
The following incomes from house property are non8assessable?
'- Annual value of the house used by the owner for his personal purpose i.e.
for his own residence or for the purpose of his business or profession
USection !*3#5V.
2- >here% the whole or part of the property is let out% a sum e<ual to such
portion of the annual value appropriate to the vacant part as is
proportionate to the period of the vacancy of such part USection !+3#53= L
;5V
9- Any income derived from house property held under trust or other legal
obligation wholly used for religious or charitable purposes USi'th Schedule%
Part A% Para #3#5V
:- Any income derived from any building% not less than &ve storied% having at
least ten Aats% constructed at any time between Muly "#% !""/ to Mune )"%
!"#* 3both days inclusive5% for ten years from the date of completion of
construction of the building% if it is situated in any area of Bangladesh
other than the areas of City Corporation% Cantonment Board% Tongi Jpa9ila%
$arayangan= Paurashaba% (a9ipur Pourashava and any Pourashaba under
0ha;a district USi'th Schedule% Part A% Para ).V
@- Any income derived from any building which is situated in a land occupied
and used for agricultural purpose% e.g. used by the cultivator4farmer as the
dwelling house or store house or other8out house by reason of his
connection with such land USection !3#53b5V
E-E Ta, Deduction at Source fro4 ;ouse )ro*ert6
>here the tenant in respect of a house property is the government or any
authority having the power to deduct ta'es% shall deduct ta' as advance ta'
from the rental amount following the rate as prescribed in 6ule #-B of the
Income Ta' 6ules% #/.*. But such amount of ta' is sub=ect to refund if income
of the owner is not ta' payable or if amount of advance ta' is more than the
ownerKs total ta' liability. $o such deduction is re<uired when the owner holds
certi&cate stating that there is no assessable income against this assessee.
According to Section +)A of the ITB% #/.* F
'- >here% the (overnment or any authority% corporation or body% including its
units% the activities or the principal activities of which are authori9ed by
any Act% Brdinance% order or instrument having the force of law in
Bangladesh or any company as de&ned in clause 3!"5 of Section !% or any
ban;ing company or any co8operative ban; established by or under any
law for the time being in force or any non8governmental organi9ation run
or supported by any foreign donation or assistance or any university or
medical college or dental college or engineering college% is a tenant in
respect of a house property% the tenant shall deduct ta' from the house
rent paid or payable as advance ta' such amount as may be prescribed.
2- >here% after the assessment made for the relevant year% it is found that no
ta' was payable by the owner of the house property or the amount of ta'
deducted is in e'cess of the amount payable% the amount deducted shall
be refunded%
3a5 if no ta' was payable% in full% or
3b5 if the amount deducted is in e'cess of the amount payable% to the
e'tent of the e'cess deduction to the owner of the house property.
9- >here the 0eputy Commissioner of Ta'es% on an application made in this
behalf% gives a certi&cate in the prescribed form to an owner of house
property that% to the best of his belief% the owner is not li;ely to have any
assessable income during the year or the income is otherwise e'empted
from payment of income ta' under any provisions of this Brdinance%
payment referred to in sub8section 3#5 shall be made without any
deduction until the certi&cate is cancelled.
1ate o+ T3S +ro( house propert7 F
According to 6ule #-B of the Income Ta' 6ules% #/.*% for the purposes of
ma;ing a deduction of ta' under Section +)A of the ITB% #/.*% every person
mentioned in that section who is responsible for ma;ing any payment to the
owner of a house property on account of house rent shall deduct an amount
calculated on such payment at the rates laid down in the schedule below?
Serial
no-
A4ount of *a64ents
#ate of
TDS
#. >here the monthly payment is less than T;. !"%""" $il
!. >here the monthly payment e'ceeds T;. !"%""" but
does not e'ceed T;. *"%"""
)P
). >here the monthly payment e'ceeds T;. *"%""" +P
.or2ed ",a4*les and Solutions
.or2ed ",a4*le 'B
r. ushta<ue AhmedKs house is let out at T;. #"%""" a month. Accounting year
ended on )" Mune !"##. Tenant <uitted on )# arch !"## and owed T;. !"%""" for
rent being unpaid. Gouse remained vacant for ) months during the alterations. The
owner wishes to claim the following deductions?
Ta2a
Cost of repairs #+%"""
Alterations e'penses )"%"""
Interest on mortgage #!%"""
Fire insurance premium +%"""
unicipal ta'es #"%"""
7egal action to recover unpaid rent which was later reali9ed F T;. ,%""".
#e8uiredB Calculate his income under Section !* of the Brdinance

Solution 'B
Mr- Mushta8ue Ah4ed
Income Ta' Assessment Cear !"##8#!
Income for year ended on )" Mune !"##
Co4*utation of Total Inco4e under Section 2:
Annual +alueB
Actual 6ent 3T;. #"%""" _ #! months5 #!"%"""
unicipal value nil
!ic!ever is !ig!er #!"%"""
LessB Allowable 0eductions
6epair and aintenance F !+P of T;.
#!"%"""
)"%"""
Interest on ortgage #!%"""
Fire Insurance Premium +%"""
unicipal Ta'es #"%"""
:acancy Allowance 3T;. #"%""" _ )5 )"%"""
Total &eductions .-%"""
Ta,a3le inco4e under the head ))%"""
.or2ed ",a4*le 2B
r. Faru< owns a residential house at Santinagar% 0ha;a% which was constructed #"
years bac; with a #+P loan of T;. !"%""%""" from Gouse Building Finance
Corporation. The house has been let out for commercial purpose at T;. #+"%""" per
month. The municipal value of the house is T;. #+%""%""".
The following e'penses were incurred in the income year !"#" 8 !"## for that house?
#. 6epair e'pense T;. **%"""I
!. City Corporation ta' T;. )+%"""I
). 6ent collection e'penses T;. #!%"""I
*. Fire insurance premium T;. .""" per <uarterI
Compute income from house property for the assessment year !"##8#!.
Solution 2B
Mr- %aru8
Inco4e 6earB 2&'& > 2&''
Assess4ent 6earB 2&''>2&'2
Calculation of Total Inco4e
Co4*utation of Total Inco4e under Section 2:
Annual +alueB
Actual 6ent 3T;. #+"%""" _ #! months5 #.%""%""
"
unicipal value #+%""%""
"
!ic!ever is !ig!er #.%""%"
""
LessB Allowable 0eductions
6epair and aintenance F )"P of T;.
#.%""%"""
*+"%"""
City Corporate Ta' )+%"""
Fire Insurance Premium 3T;. .%""" _ * 5 )!%"""
Interest on borrowed fund 3#+P of T;.
!"%""%"""5
)""%"""
Total &eductions .#-%"""
Ta,a3le inco4e under the head /.)%"""
NotesB
#. Since the house is let out for commercial purpose% repair and maintenance
e'pense is considered as )"P of the annual value. Gere actual spending for
repair e'penses and collection e'penses is not relevant.
!. Annual e'penses should be deducted from the annual value of the house. So &re
insurance premium is converted to annual &gure by multiplying * with <uarterly
premium.
.or2ed ",a4*le 9B
r. arwari has a house at oha;hali C4A with an area of *%."" s<uare feet. Ge let
out this house to a computer &rm at an annual rent of T;. ,""%""". The municipal
value per s<uare feet at oha;hali C4A is T;. #!". The following e'penses were
incurred in the income year !"#" 8 !"## for that house?
#. 6epair e'pense T;. /"%"""I
!. City Corporation ta' T;. #+%"""I
). Fire insurance premium T;. /%"""I
*. $ight guardDs salary T;. -%"""I
+. Installation of electricity line T;. !+%"""I
0uring the year r. arwari paid installment of loan to GBFC T;. ,-%+"" 3principal
amount is T;. ,*%"""5. According to the agreement the owner bears the water and
gas bill of the tenant which amounted to T;. !"%""" for the year. Compute income
from house property for the income year ended )"
th
Mune !"##.
Solution 9B
Mr- Mar/ari
Inco4e 6earB 2&'&>2&''
Assess4ent 6earB 2&''>2&'2
Calculation of Total Inco4e
Co4*utation of Total Inco4e under Section 2:
Annual +alueB
Actual 6ent ,%""%""
"
7ess? TenantsK e'pense born by the landlord !"%"""
6evised Actual 6ent +%."%""
"
unicipal value 3*%."" _ T;. #!"5 +%-,%""
"
!ic!ever is !ig!er +%."%""
"
LessB Allowable 0eductions
6epair and aintenance F )"P of T;.
+%."%"""
#-*%"""
City Corporate Ta' #+%"""
Fire Insurance Premium /%"""
Interest on borrowed fund 3T;. ,-%+"" F T;.
,*%"""5
)%+""
Total &eductions !%"#%+"
"
Ta,a3le inco4e under the head )%-.%+"
"
NotesB
#. Since the house is let out for commercial purpose% repair and maintenance
e'pense is considered as )"P of the annual value. Gere actual spending for such
a purpose is not considerable.
!. Installation of electricity line is a capital e'penditure% so this is not admissible.
.or2ed ",a4*le :B
r. Pa;rasi is the owner of three houses at (ulshan% 0ha;aI Hhulsi% ChittagongI and
ia Ba9ar% Comilla. 0etails of these houses are given below?
0etails
Gouse at
(ulshan
Gouse at
Hhulsi
Gouse at
ia Ba9ar
$umber of stories ) # !
$umber of Aats in each story ! # *
6ental status Fully let out
Self
Bccupied
Partly let out
T;. T;. T;.
unicipal value 3annual5 /%""%""" #%!"%""" -%""%"""
6ental value 3each Aat per month5 #!%""" 8 -%"""
2'penses incurred?
6epair and maintenance ."%""" !+%""" ,+%"""
Insurance premium 3<uarterly5 !%""" 8 #%+""
Salary of guard #+%""" +%""" -%"""
(round rent !%""" )%""" 8
7ocal government ta' 3per
month5
#%!"" ,"" +""
Interest on borrowed fund +%""" *%"""
In (ulshan% 0ha;a one Aat remain vacant for two months period and in ia
Ba9ar% Comilla two Aats are occupied by his sons who are fully dependent on
him. Gouse at (ulshan has been let out for residential purpose while house at
ia Ba9ar has been let out to a commercial &rm. Compute income from house
property for the income year ended )"
th
Mune !"##.
Solution :B
Mr- )a2rasi
Inco4e 6earB 2&'& > 2&''
Assess4ent 6earB 2&''>2&'2
Calculation of Total Inco4e
Co4*utation of Total Inco4e under Section 2:
;ouse at $ulshanB
Annual +alueB
Actual 6ent 3#!%""" ' #! ' ) ' !5 .%,*%""
"
unicipal value 3*%."" _ T;. #!"5 /%""%""
"
!ic!ever is !ig!er /%""%""
"
LessB Allowable 0eductions
6epair and aintenance F !+P of T;.
/%""%"""
!!+%"""
(round 6ent !%"""
Insurance Premium 3!%""" ' *5 .%"""
7ocal (overnment Ta' 3#%!"" ' #!5 #*%*""
Interest on borrowed fund +%"""
:acancy Allowance U3/%""%""" ' #4,5 '
!4#!V
!+%"""
Total &eductions !%-/%*"
"
,!"%,""
;ouse at Mia BaQarB
Annual +alueB
Actual 6ent 3,%""" ' #! ' ) ' !5 +%"*%""
"
unicipal value 3T;. -%""%""" _ ,4.5 +%!+%""
"
!ic!ever is !ig!er +%!+%""
"
LessB Allowable 0eductions
6epair and aintenance F )"P of T;.
+%!+%"""
#+-%+""
Insurance Premium U3#%+"" ' *5 ' ,4.5 *%+""
7ocal (overnment Ta' U3+"" ' #!5 ' ,4.5 *%+""
Interest on borrowed fund U*""" ' ,4.V )%"""
Total &eductions #%,/%+"
"
)++%+""
Total Ta,a3le inco4e under the head /-,%#""
NotesB
#. Gouse at Hhulsi is occupied by the owner% so it is fully e'empted.
!. The Aats occupied by the son are e'empted as they are fully dependent on
the owner.
.or2ed ",a4*le @B
r. Mamilur 6ahman is the owner of a &ve8storied building at 7almatia. Ge resides
with his family in the !
nd
Aoor and all other Aoors 3in each Aoor there are two units5
are let out for residential purpose at a monthly rent of T;. #"%""" per Aat including
T;. #%""" as >ASA and 02SA bill. The municipal value of the house is T;. #%"""%""".
r. Mamilur 6ahman also receives T;. *+"%""" as advance from the tenant of the
units during the income year ended on Mune )"% !"##.
r. 6ahman presents the following information for deduction?
#. 6epair e'penses T;. #)"%"""I
!. 7and development ta' T;. !!%"""I
). Insurance premium T;. #,%"""I
*. Careta;er and $ight guard salary T;. !*%"""I
+. (round rent T;. !%"""I
,. Alteration cost for ground Aoor T;. )"%""".
r. 6ahman has ta;en a B62 3Balancing% oderni9ation% 6evamping and 2'pansion5
loan of T;. #%+""%""" at a Aat interest rate of #.P from 0elta B6AC Gousing 30BG5
limited on 0ecember #+% !""/. 0uring the year one of the tenants in the ground Aoor
leave the house without paying rent for one month. r. 6ahman even after ta;ing
necessary legal action fails to collect this rent. Besides% the same Aat remained
vacant for another two months during the year. Compute income from house
property for the income year ended )"
th
Mune !"##.
Solution @B
Mr- Ha4ilur #ah4an
Inco4e 6earB 2&'&>2&''
Assess4ent 6earB 2&''>2&'2
Calculation of Total Inco4e
Co4*utation of Total Inco4e under Section 2:
Annual +alueB
Actual 6ent 3T;. #"%""" _ * _ ! _ #!5 /%,"%""
"
7ess? TenantsK e'pense born by the landlord 3T;.
#%""" _ * _ ! _ #!5
/,%"""
6evised Actual 6ent .%,*%""
"
unicipal value 3#"%""%""" _ *4+5 .%""%""
"
!ic!ever is !ig!er .%,*%""
"
AddB Advance 6eceived 3note #5 *%+"%""
"
Total Inco4e #)%#*%"
""
LessB Allowable 0eductions
6epair and aintenance F !+P of T;. .%,*%""" !#,%"""
7and 0evelopment Ta' !!%"""
Insurance Premium #,%"""
(round 6ent !%"""
:acancy Allowance 3T;. .%,*%""" _ #4._ !4#!5 #.%"""
Allowance for Jncollectible 6ent 3T;. .%,*%""" _
#4._ #4#!5
/%"""
Interest on borrowed fund 3#.P of T;. #%+""%"""5 !-"%"""
Total &eductions +%+)%""
"
Ta,a3le inco4e under the head -%,#%""
"
Note 'B The amount received in advance is deemed to be the income of the
assessee for the income year in which it is received and be classi&ed under the head
OIncome from Gouse PropertyW.
.or2ed ",a4*le EB
r. 6ana a9umder is the owner of a two8storied building at 0hanmondi where he
stays with his family in ground Aoor and another Aoor has been let out to a
government authority at a gross monthly rent of T;. )"%""". Gowever% he has ta;en
a #)P loan of T;. +""%""" on $ovember "#% !"#" from GBFC for moderni9ation of
the building and the Aoor remained vacant for two months during the moderni9ation
period. It is again let out to the same authority from Manuary #% !"## at a gross
monthly rent of T;. +"%""". The government authority deducts ta' at source at
prescribed rates before paying the rent to him. The municipal value of the house is
T;. /""%""".
The following e'penses were incurred in the income year !"#" 8 !"## for that house?
#. 6epair e'penses T;. +"%"""I
!. City Corporation ta' T;. !!%"""I
). Insurance premium T;. #,%"""I
*. Careta;er and $ight guard salary T;. !*%"""I
+. 7and revenue paid T;. !%""".
Compute income from house property for the income year ended )"
th
Mune !"##.
Solution EB
Mr- #ana MaQu4der
Inco4e 6earB 2&'& > 2&''
Assess4ent 6earB 2&'' > 2&'2
Calculation of Total Inco4e
Co4*utation of Total Inco4e under Section 2:
Annual +alueB
Actual 6ent 3T;. !#%/"" _ ,5 Z 3T;. *-%+"" _ ,5 *%#,%*"
"
unicipal value 3/%""%""" _ #4!5 *%+"%""
"
!ic!ever is !ig!er *%+"%""
"
LessB Allowable 0eductions
6epair and aintenance F )"P of T;. *%+"%""" #)+%"""
City Corporation Ta' !!%"""
Insurance Premium #,%"""
7and 6evenue !%"""
:acancy Allowance 3T;. *%+"%""" _ !4#!5 -+%"""
Interest on borrowed fund 3note #5 ),%###
Total &eductions !%.,%##
#
Ta,a3le inco4e under the head #%,)%..
/
Note 'B Interest for the vacant period will be charged in three e<ual installments in
three consecutive years. Gowever% interest for the other months 3from Manuary ##5
will be charged in this income year.
Interest on loan for the vacant period F ! months U3T;. +""%""" _ #)P
_ !4#!5 _#4)V
)%,##
Interest for occupancy period U3T;. +""%""" _ #)P _ ,4#!5 )!%+""
Total interest charged for the year ),%###
Gowever% T;. )%,## of interest will again be accounted for in ne't two years.
.or2ed ",a4*le FB
s. 6osnee 6oy owns two housesI one at Sutrapur and another at 7albagh. From the
following particulars compute her income form house property for the income year
!"#"8!"## and also ta' liability for the assessment year !"## 8 !"#!.
;ouse at Sutra*urB This is a three storied building 3in each Aoor there are two
Aats5. Bne of the Aats in &rst Aoor is used as residence by s. 6oy and the other Aat
in the same Aoor is used by her daughter8in8law who pays nothing for it. All other
Aats were let out at a monthly rent of T;. .%""" each. The municipal value of the
house is T;. *%."%""". She has also received T;. #%""%""" as advance from the
tenants which is not ad=ustable to rents. 2'penses of the house for the year were as
follows?
>hite wash e'pense
T;. !"%"""
6ent collection e'pense )%"""
City corporation ta'% <uarterly
!%*""
7and revenue paid #!%"""
Salary of guard% monthly
+""
7oan repayment to GBFC 3including interest T;. *%!""5 *!%+""
Installation of generator
#+%"""
The owner bears the water and gas bill of the tenants which amounted to T;. )"%"""
for the year. Bne Aat remains vacant for two months during the year and she li;es to
claim vacancy allowance.
;ouse at Lal3aghB
The house is let out to a private ban; branch and received monthly rent of T;.
*-%+"" net of T0S Q +P. DThe municipal value of the house is T;. ,%!+%""".
2'penses of the house for the year were as follows?
Fire insurance premium
T;. !+%"""
unicipal ta'es
#!%"""
Cost of alteration
++%"""
(round rent #"%"""
7egal e'penses
#!%"""
According to the terms of the agreement the tenants are to bear the cost of repair
which amounted to T;. #+%""" for the year. 0uring the year% s. 6oy incurred the
following investments and e'penses?
Family e'penses
T;. )%+"%"""
Insurance premium?
Bwn 3policy value T;. +%""%"""5
*"%"""
Spouse 3policy value T;. +%""%"""5
,"%"""
Investment in shares in secondary mar;et !+%"""
0onation to the PresidentDs relief fund !"%"""
0onation to a local club
,%"""
0onation to (overnment Ra;at fund
)"%"""
0onation to a os<ue
#"%"""
Solution FB
Ms- #osnee #o6
Inco4e 6earB 2&'& > 2&''
Assess4ent 6earB 2&''>2&'2
Calculation of inco4e fro4 house *ro*ert6
Co4*utation of Total Inco4e under Section 2:
;ouse at Sutra*urB
Annual +alueB
Actual rent 3.""" ' + ' #!5
*%."%""
"
7ess? Tenants e'penses paid by
landlord
)"%"""
6evised actual rent
*%+"%""
"
unicipal :alue 3*%."%""" ' +4,5
*%""%""
"
!ic!ever is !ig!er
*%+"%""
"
AddB Advance 6eceived
#%""%""
"
+%+"%""
"
LessB Allowable 0eductions
6epair L maintenance 3*%+"%""" ] !+P5
#%#!%+"
"
City Corporation Ta' 3!*"" ' * ' +4,5 .%"""
7and revenue paid 3#!""" ' +4,5 #"%"""
Interest paid to GBFC 3*%!"" ' +4,5 )%+""
:acancy allowance `3*%+"%"""4+5 ' !4#!5a #+%"""
!+%"""
Total &eductions
#%-*%""
"
)%-,%"""
;ouse at Lal3aghB
Annual +alueB
Actual 6ent UT;. *-%+"" ' #!V
+%-"%""
"
Add? T0S U+%-"%""" ' +4#""8+V )"%"""
7andlordKs e'pense paid by
tenant
#+%"""
Actual 6ental :alue
,%#+%""
"
unicipal value
,%!+%""
"
!ic!ever is !ig!er
,%!+%""
"
LessB Allowable 0eductions
#5 6epair L aintenance 3,!+""" ' )"P5
#%.-%+"
"
!5 Fire Insurance Premium !+%"""
)5 unicipal Ta' #!%"""
*5 (round rent #"%"""
!%)*%+"
"
)%/"%+""
Total inco4e
F=EE=@&&
Calculation of in+est4ent allo/ance for ta, creditB
Actual In+est4entB
Insurance premium
Bwn *"%"""
a'imum limit 3+%""%""" ' #"P5 +"%""" *"%"""
Spouse ,"%"""
a'imum limit 3+%""%""" ' #"P5 +"%""" +"%"""
0onation to presidentDs relief fund !"%"""
0onation to (overnment Ra;at fund )"%"""
Total In+est4ent '=:&=&&&
Ma,i4u4 li4it of in+est4ent allo/anceB
!"P of T;. -%,,%+"" 3Total income 8 employerDs
contribution to 6PF 8 interest from 6PF5
#%+)%)""
Br% 7ump sum #""%""%"""
!ic!ever is lower '@9=9&&
Thus% allowable amount of investment allowance is 8 #*"%"""
Investment ta' credit 3#%*"%""" ' #"P5 ':=&&&
Calculation of Ta, lia3ilit6B
6ate
Amount
3T;.5
Bn the &rst T;. !%""%""" "P $il
Bn the ne't )%""%""" #"P )"%"""
Bn the balance !%,,%+"" #+P )/%/-+
Total F=EE=@&& EC=CF@
7ess? investment ta' credit #*%"""
++%/-+
7ess? T0S )"%"""
Net ta, lia3ilit6 2@=CF@
Self>Assess4ent ?uestions
3a5 0e&ne OAnnual :alueW of a property under the Income Ta' Brdinance #/.*.
3b5 Is the XAnnual valueK of a property determined when it is occupied by its
owner for residential purposesN
3c5 >hat are the allowable deductions from annual value in determining the
XIncome from house propertyK under the BrdinanceN
Chapter -
Agriculture inco4e
Contents
Introduction
2'amination conte't
To*ic List
>or;ed 2'amples and Solutions
-.# Basics of Agricultural Income
-.! Characteristics of Agricultural Income
-.) Categories of Agricultural Income
-.* $on8agricultural Income
-.+ Income from Agricultural Gouse Property
-., Allowable 0eductions
-.- $on8assessable Agricultural Income
-.. Special Ta' 6ates
Introduction
Learning o3<ecti+es
Identify agricultural income.
Compute the ta'able income under the head XIncome from AgricultureK.
Identify di1erent types of agricultural income.
Identify the allowable deductions under the head.
Illustrate the non8assessable income under the head.
Hnow the application of reduced ta' rate.
Identify partly agricultural and partly business income.
Compute net ta' liability in di1erent situations.
)ractical signi0cance
The head XIncome from AgricultureK has huge potential for ma'imi9ing the
revenue to the (overnment in Bangladesh due to its signi&cance. Bangladesh
is an agricultural country and its agriculture sector has signi&cant contribution
to (0P every year. But collection of ta' from this head is insigni&cant. Gere%
professional accountants can play an important role by devising the way of
collecting ta' under the head through simpli&cation and moderni9ation of ta'
laws and process.
This chapter presents di1erent form of agricultural income% allowable
deductions% non8assessable income under the head% non8agricultural income%
and other related topics. A clear understanding on each topics presented in
the chapter will ma;e the students e'pert to give opinions to their cliens[ts in
ta' related issues.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the computation of ta'able income under the head
Xincome from agricultureK is one of the basic re<uirements for determining ta'
liabilityN Can you determine the ta'able income under the headN Can you
compute net ta' liability of an assessee having income under the headN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the total ta'able income for any income year. Before advising the clients%
accountants should have the clear concept relating to the admissible and
inadmissible e'penses so that they can deduct or add the e'penses in
determining the ta'able income.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
Cou will be also using this ;nowledge when you tac;le the ta'ation paper later
on in the Professional Stage and it will also underpin the technical aspects at
the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne agricultural income.
Identify di1erent types of agricultural income.
Compute the ta'able income under the head XIncome from AgricultureK.
0i1erentiate fully% partly and other agricultural income.
Identify the allowable deductions under the head.
Illustrate the non8assessable income under the head.
Hnow the application of reduced ta' rate and areas where this ta' rate is
applicable.
0e&ne non8agricultural income and its impact on computing total table
income and ta' liability.
Compute net ta' liability in di1erent situations.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
core concept on computation of income which is vital for calculating ta'
liability. Clear concept and understanding of each contents of this chapter will
help candidates to resolve any problems relating to computation of
agricultural income.
F-& INCOM" %#OM A$#ICULTU#"
Section O+er+ie/
Income from agriculture is one of the important heads of income for the
government.
The total income may not be ta'able income.
There are some allowable% inadmissible and not permissible deductions
under the head.
Some income under the head is not assessable.
Bn some speci&c classes of income under the head is ta'ed at a reduced
rate.
0epreciation allowance on agricultural property is di1erent.
A part of the gain on sale of agricultural asset will be reported as income
from agriculture.
It is very important to ;now non8agricultural income and partly agricultural
income.
An assessee will en=oy T;. +"%""" as non8assessable income in addition to
"P ta'ed income if he has income from agriculture only.
$o advance ta'es are payable under the head.

F-' Basics of Agricultural Inco4e
OAgricultural incomeW is de&ned in Section !3#5 of IT Brdinance #/.*. Jnder
the section% Xagricultural incomeK means8
3a5 any income derived from any land in Bangladesh and used for agricultural
purposes8
3i5 by means of agricultureI or
&ii( by performance of any process ordinarily employed by a cultivator to
render the produce mar;etableI or
3iii5by 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 mar;etable%
has been performedI or
3iv5 by granting a right to any person to use the land for any periodI or
3b5 any income derived from any building which8
3i5 is occupied by the cultivator of any such land as is referred to in
section !3#53a5 in which any process is carried on to render mar;etable
any such produce as aforesaidI
3ii5 is on% or in the immediate vicinity of such landI and
3iii5is re<uired by the cultivator as the dwelling house or store house or
other out8house by reason of his connection with such land.
Sco*e
The following income of an assessee shall be classi&ed and computed under
the head Xagricultural incomeK under section !,3#5% namely?8
3a5 any income derived by the assessee which comes within the meaning
of Xagricultural incomeK as de&ned in section !3#5I
3b5 the e'cess amount 3sale proceeds of any plant or machinery used
e'clusively for agricultural purpose in e'cess of the written down value5
referred to in section #/3#-5I
3c5 the e'cess amount 3insurance% salvage or compensation moneys
received in respect of plant or machinery used e'clusively for
agricultural purpose which has been discarded% demolished or
destroyed% in e'cess of the written down value5 referred to in section
#/3#/5I
F-2 Characteristics of Agricultural Inco4e
a5 Income should be derived from land. A person may transfer his agricultural
land to another in consideration of a life annuity as was in the case of
%opal 5aran Barain 5ing! ; C0T /.<)2 0TR '<, "P6C $ or of other thing which
is charged upon the land. The annual receipt would not be agricultural
income.
b5 The land on which agricultural income is assessed must be situated in
Bangladesh.
c5 The land must be used for agricultural purpose. Jnless there is some
measure of cultivation of the land% some e'penditure of s;ill and labor
upon it% it cannot be said to be used for agricultural purposes. Income from
the sale of forest trees% bushes% bamboos% fruits and Aowers growing on
Agricultural
Income
Agricultural
7and
Buildin
g
>ith
Agricultur
al Process
>ithout
Agricultur
al Process
Fully
Agricultural
Income
Partly
Agricultural
Income
Bther
Agricultural
Income
Incom
e
$on8agricultural
Income
7easing
6ent
Adhi
Borga
Bhag
T
h
r
o
u
g
h
Paddy%
Potato% Mute%
Cereals%
:egetables
etc
Tea% 6ubber%
and Bther
Semi
agricultural
produce
Pro&t from
sale of
assets%
cattle
rearing%
poultry%
&sheries% etc
(oods produced
without agricultural
process% forest trees
and timbers% honey
from honey comb
land naturally without any human s;ill and labour is not agricultural
income. Income derived from the sale of wild grass or trees of
spontaneous growth is not agricultural income. But land leased for gra9ing
or pasturing animals re<uired for agricultural purpose is used for
agricultural purposes and income from lease is agricultural income
irrespective of whether the grass on the land is cultivated or grown
naturally.
d5 $o advance ta' is payable on agricultural income.
F-9 Categories of Agricultural Inco4e
Such income may come from agricultural land or any building ad=acent to
agricultural land that is used for agricultural purposes. Income from
agriculture may be generated from agricultural land due to running
agricultural process or giving the right to do so to others through contract.
.ith Agricultural )rocess
If a person owns agricultural land and actively involves with the agricultural
process to produce agricultural goods commercially% it results income from
agriculture. It may fall in either of the three categories?
a5 Fully agricultural income
b5 Partly agricultural income
c5 Bther agricultural income
%ull6 Agricultural Inco4eB >here the owner of the land follows the
conventional process of cultivation through ploughing land and ali;e% the
goods are produced commercially and sold in the mar;etI it becomes fully
agricultural income. For e'ample? production of paddy% potato% =ute etc.
)artl6 Agricultural Inco4eB If it re<uires industrial process before selling
agricultural produce in the mar;et% it will be considered as partly agricultural
income. As per section !,3!5% !,3)5% 6ules )# and )!% income derived from the
sale of tea and rubber falls in this category. The following table gives the full
reference of partly agricultural income?
Inco4e generates
fro4
Agricultural
Inco4e
Inco4e fro4
Business or
)rofession
#eferen
ce
Tea ,"P *"P
Sec
!,3!5
6ule )#
6ubber 4Tobacco 4
Sugar 4 Bther similar
products
Sec
!,3)5
6ule )!
3a5 If only agricultural
process is involved
#""P $othing
3b5 If both agricultural
and industrial
process is involved
,"P *"P
In the case of income which is partially agricultural income and partially
income from business% in determining that part of income which is from
business% the mar;et value of any agricultural produce which has been raised
by the assessee or received by him in ;ind and which has been utili9ed as raw
material in such business or the sale proceeds of which are included in the
accounts of the business shall be deducted and no further deduction shall be
made in respect of any e'penditure incurred by the assessee as a cultivator
or receiver of the produce in ;ind.
For the purpose% Xmar;et valueK in respect of agricultural produce% means8
3a5 where such produce is ordinarily sold in the mar;et in its raw state or
after application of any process employed by a cultivator to render it &t to
be ta;en to the mar;et% 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 &rst becomes assessableI and
3b5 where such produce is not ordinarily sold in the mar;et in its raw state%
the aggregate of8
3i5 the e'penses of cultivationI
3ii5 the land development ta' or rent paid for the lands in which it was
grownI and
3iii5 such amount as the 0eputy Commissioner of Ta'es &nds% having
regard to the circumstances of each case% to represent a reasonable
rate of pro&t on the sale of the produce in <uestion as agricultural
produce
In computing such income from business% an allowance shall be made in
respect of8
3a5 the cost of planting bushes in replacement of bushes that have died or
become permanently useless in an already planted area% unless such area
has previously been abandoned?
3b5 the e'penditure incurred in the income year by the assessee in
connection with the development of the new areas for bringing them
under tea cultivation.
Other Agricultural Inco4eB Bther than the agricultural income speci&ed
above% some other income may be generated from typical agricultural process
due to the e'panded de&nition of agriculture in agricultural economics. This
type of income will fall under this classi&cation. Some of such agricultural
income is e'empli&ed below?
3i5 Income from cattle rearing
3ii5 Income from sale of palm =uice and date =uice
3iii5 Income from sale of seeds and grass% if grown by human e1ort
3iv5 Income from agricultural cooperative society which was organi9ed for
farming and cattle rearing
3v5 Income from land or assets used for processing the agricultural
commodities to ma;e them mar;etable
3vi5 Income from sale of herbal or medicinal plants
3vii5 Income from cultivation of Aower and fruits
3viii5 Income from sale of honey if produced in agricultural land using special
technologies li;e special bo' for Goney8comb.
3i'5 Income from dairy farm% provided F
a5 assessee is the owner of the cattle
b5 cattle are reared in cattle rearing &eld
c5 il; is processed by the assessee
3'5 Income from poultry farm if they are reared in agricultural land
3'i5 Income from &sheries
.ithout Agricultural )rocess
Sometimes the assessee may have income from agricultural land even
without agricultural process. Some of the e'amples may be li;eI
3i5 Income form land leased for agricultural purposes
3ii5 Income from any system of sharing of crop generally ;nown as adhi%
barga or bhag.
F-: Non Agricultural Inco4e
Sometimes% we may be confused with some income not generated from
agriculture but may be closely related to that. A possible list is given below
and any income from these sources should be considered as income from
other sources.
3i5 Income from ferry ghat and mooring terminal
3ii5 Income from sale of produce that grow up in the agricultural land without
agricultural wor;s e.g. forest trees% wild grass% fruit and Aowers grown
spontaneously and without human e1ort
3iii5Income from salt production by Aooding the land with sea water and then
e'tracting salt therefrom
3iv5Income from cutting and selling of timber on contract
3v5 Interest on arrear of rent for agricultural land
3vi5Income from letting out vacant land not used for agricultural purpose
3vii5 6oyalty 4 ground rent against lease of land for mining% potteries% <uarries
etc.
3viii5 Sale of soil used for bric; &eld
3i'5Income from sale of water used for irrigation
3'5 Income from sale of forest trees% Aowers% bamboo% wild grass% reeds or
fruits produced naturally without any agricultural wor;
3'i5Sale of stones from <uarries
3'ii5 Income from salary for wor;ing as an agricultural supervisor 4 manager
3'iii5 Income from sale of crops which has been purchased from others for
resale
3'iv5 Income from dairy &rm established for business purpose
3'v5 Income from poultry &rm established separately for business purpose
3'vi5 Income from &sheries established for business purpose
3'vii5Fish hunting% ship anchor etc.
3'viii5 Income derived from butter and cheese ma;ing
3'i'5 Income received as commission for wor;ing as middleman in agro
products
3''5 6emuneration received by managing agent at a &'ed percentage of net
pro&t from a company having agricultural income.
3''i5 Interest received by an assessee against loan in the form of agricultural
produce
3''ii50ividend paid by a company out of its agricultural income
F-@ Inco4e fro4 agricultural house *ro*ert6
>hen the property is occupied by the cultivator or the recipient where any
process as may be described agricultural% is carried therein by the recipient of
agricultural income% or in the immediate vicinity of agricultural land% and is
used as a dwelling house by the cultivator or the recipient of agricultural
income% in connection with the land% any income from such house property is
regarded as agricultural income. But non agricultural income does not
becomes agricultural by reason of only in direct connection with agricultural
land UPremier Construction Co6 ;6C6LT6 /.3- 06T6R6 <-(2 <-3:6
F-E Allo/a3le Deductions
As per section !- of IT Brdinance #/.*% the following e'penditures are
admissible deductions at the time of determining income from agriculture?
3i5 any land development ta' or rent paid in respect of the land used for
agricultural purposes.
3ii5 any ta'% local rate or cess paid in respect of such land.
3iii5 where the land is sub=ect to a mortgage or other capital charge for the
purposes of reclamation or improvement% the amount of any interest
paid in respect of such mortgage or charge.
3iv5 any sum paid in respect of the maintenance of any irrigation or
protective wor; or other capital assets. Such rate is given below?
Assets #ate
#. Pucca building #"P
!. Hutcha and Pucca Building #+P
). Hucha building !"P
*. Temporary structure $4A^
+. Pucca walls +P
,. Fencing of substantial material #"P
-. Tube8well #+P
.. Tan;s #"P
/. Pucca irrigation channel #+P
#
".
Hucha irrigation channel !"P
#
#.
Hucha irrigation wells )).))
P
#
!.
Pucca irrigation wells +P
#
).
Bulloc; drawn iron implements #+P
#
*.
Bulloc; drawn wooden or leather implements and small
other hand4implements
!+P
#
+.
>eighing machine #"P
#
,.
Tractors and oil engines and thin implements #+P
#
-.
Power pumping machinery !"P
#
..
Factor made cart of iron material with rubber tyre #+P
#
/.
Country cart !"P
!
".
Steam engine #"P
!
#.
>or;shop tools #+P
!
!.
(eneral 3machinery% implements% plants and other
assets5 not provided above #"P

3vi5 any sum paid as premium in order to e1ect any insurance against loss
of% or damage to% such land or any crops to be raised or cattle to be
reared thereon.
3vii5 any e'penditure incurred in cultivating such land or raising livestoc;
thereon.
3viii5 any e'penditure incurred in performing any process for rendering the
produce of such land &t to be ta;en to mar;et .
3i'5 any e'penditure incurred in transporting such produce or livestoc; to
mar;et .
3'5 any e'penditure incurred in maintaining agricultural implements and
machinery in good form and in providing for the up;eep of cattle for
the purpose of such cultivation% process% or transport.
3'i5 any interest paid in respect of capital borrowed for the purpose of
ac<uisition% reclamation and improvement of such land.
3'ii5 where no boo;s of account have been maintained in respect of
agricultural income derived from land% deduction for cost of production
shall be an amount e<ual to ,"P of the mar;et value of the produce of
the land% instead of allowance as admissible under the aforesaid items
3vii5% 3viii5% 3i'5 and 3'5.
3'iii5 where the agricultural income is derived according to the local XbargaK
or XbhagK or XadhiK system% no deduction on account of cost of
production shall be admissible under this clause.
3'iv5 in respect of any machinery or plant used e'clusively for agricultural
purpose which has been sold% transferred by way of e'change%
ac<uired% discarded% demolished or destroyed in the previous year% the
loss on sale of such plant and machinery will also be allowed sub=ect to
certain conditions as provided for in the Brdinance.
3'v5 any other e'penditure not being in the nature of capital or personal
e'penditure% laid out wholly and e'clusively for the purpose of deriving
such income from such land.
0eduction in respect of interest will not be allowed unless ta' has been paid
or deducted in accordance with the provisions of Chapter :II of the Brdinance.
F-F Non>assessa3le Agricultural Inco4e
Some mentioned income under the head is non8assessable as per di1erent
provisions of IT Brdinance and 6ules. These are mentioned below?
#. Agricultural income is non8assessable up to T;. +"%""" for an individual
assessee if his only source of income is agriculture USi'th Schedule% Part A%
Para !/V. This T;. +"%""" is in addition to regular non8assessable limit of
T;. #."%""" 3in case of woman% elderly citi9ens of more than ,+ years of
old T;. !""%""" and for disable persons T;. !+"%"""5.
Illustration '
r. 6a=ib reports T;. !+"%""" as income from agriculture during the income
year ended on Mune )"% !"##. Ge has no income from other sources. In this
case% r. 6a=ib will pay ta'es on T;. !"%""" only. Gis non8assessable
income is T;. !)"%""" 3T;. #."%""" Z T;. +"%"""5. It is assumed that r.
6a=ib doesnKt fall in elderly citi9en or disable category.
!. Any income including agricultural income of an indigenous Gillman of any
of the hill districts of 6angamati% Bandarban and Hhagrachari% which has
been derived solely from economic activities underta;en within the said
hill districts USi'th Schedule% Part A% Para !-V.
). Sub=ect to the conditions made hereunder any income from poultry for the
period from the 0rst da6 of Hul6= 2&'' to the thirtieth da6 of Hune=
2&'9 USi'th Schedule% Part A% Para *!V8
3a5 if such income e'ceeds T;. #%+"%"""48 an amount not less than #"P
of the said income shall be invested in the purchase of (overnment
bond or securities within si' month from the end of the income
yearI
3b5 the person shall &le return in accordance with the provisions of
Section -+3!53c5 of the ITB% #/.*I and
3c5 no such income shall be transferred by way of gift or loan within
&ve years from the end of the income year.
*. Agricultural produce used for self consumption.
F-D S*ecial Ta, #ate
Any income from &sheries% pelleted poultry feed% production of seeds%
mar;eting of locally produced seeds% cattle farming% dairy farming%
horticulture% frog farming% mushroom farming% Aoriculture% bee ;eeping%
sericulture for the period from the &rst day of Muly% !"## to the thirtieth day of
Mune% !"#) will be ta'ed at a reduced rate of +P US6B !).87aw8IT4!"## dated
Muly ",% !"##V.
Note
Some basic operations li;e application of human s;ill and labor on the land
are re<uired to constitute agriculture. Thus spontaneous growth of forest trees
without the aid of any human agency is not regarded as agriculture.
.or2ed ",a4*les and Solutions
.or2ed ",a4*le '
6elevant information regarding the agricultural income of Mamal Ahmed for the year
ended on Mune )"% !"## is given below?
Sale of Paddy #+" maunds Q T;. ,"" per maund
Sale of Mute #"" maunds Q T;. ."" per maund
Sale of 6abi crops T;. ,+%"""
Sale of Tea T;. -"%"""
Income from Barga T;. !"%"""
7ease rental of Agricultural land T;. )"%"""
2'penses relating to these income are as follows?
Cost of seeds and fertili9er T;. *"%"""
Cultivation costs ,+%"""
Transportation costs #+%"""
Brdinary processing costs !+%"""
7and revenue paid -%"""
Crop insurance premium +%,""
Allowable depreciation )%"""
Interest on borrowed fund !%.""
Compute ta'able income for Mamal Ahmed assuming that
3a5 he did not ;eep proper boo;s of accounts
3b5 he ;ept necessary boo;s of accounts
Solution 'B
3a5 >hen proper boo;s of accounts were not maintained?
Ha4al Ah4ed
Inco4e 6earB 2&'& > 2&''
Assess4ent 6earB 2&'' > 2&'2
Calculation of Total Inco4e
Inco4e fro4 Agriculture Section > 2E G 2F(B
Income from sale of paddy 3#+" ' T;. ,""5 /"%"""
Income from sale of =ute 3#"" ' T;. .""5 ."%"""
Income from sale of rabi crops ,+%"""
Sale of Tea 3T;. -"%""" ' ,"P5 *!%"""
Income from Barga !"%"""
7ease 6ental of Agricultural land )"%"""
)%!-%""
"
LessB Ad4issi3le e,*ensesB
#. Production costs 3!)+%""" ' ,"P5
#%*#%""
"
). Jnion parisad ta' *%*""
*. Crop insurance premium +%,""
+. Allowable depreciation )%"""
,. Interest on borrowed fund !%.""
#%+,%."
"
#%-"%!""
Inco4e fro4 Business and )rofessionB
Sale of Tea 3-"%""" ' *"P5 !.%"""
Total Ta'able Income #%/.%!""
3b5 >hen proper boo;s of accounts were maintained?
Ha4al Ah4ed
Inco4e 6earB 2&'& > 2&''
Assess4ent 6earB 2&'' > 2&'2
Calculation of Total Inco4e
Inco4e fro4 Agriculture Section > 2E G 2F(B
Income from sale of paddy 3#+" ' ,""5 /"%"""
Income from sale of =ute 3#"" ' .""5 ."%"""
Income from sale of rabi crops ,+%"""
Sale of Tea 3-"%""" ' ,"P5 *!%"""
Income from Borga !"%"""
7ease of Agricultural land )"%"""
)%!-%""
"
LessB Ad4issi3le e,*ensesB
#. Production costs8
Cost of seeds and fertili9er *"%"""
Cultivation costs ,+%"""
Transportation costs #+%"""
Brdinary processing costs !+%"""
#%*+%"
""
!. 7and revenue paid -%"""
*. Crop insurance premium +%,""
+. Allowable depreciation )%"""
,. Interest on borrowed fund !%.""
#%,)%*"
"
#%,)%,""
Inco4e fro4 Business and )rofessionB
Sale of Tea 3-"%""" ' *"P5 !.%"""
Total Ta'able Income #%/#%,""
.or2ed ",a4*le 2
r. 6upom o=umder is a farmer who own agricultural land which is used three times
a year to produce agricultural goods. Such cultivation is mainly done for commercial
purposeI however% a very insigni&cant part is consumed by him. Ge is an elderly
citi9en 3age more than ,+ years5 and has reported income from no other sources.
0uring the income year ended on Mune )"% !"##% he has reported following
information relating to income from agriculture?
Agricultural
)roduce
!olu4e of
)roduction
Self
Consu4*tion
Mar2et *rice
Paddy !#+ maunds #+ maunds T;. -"" per
maund
Potato ##! maunds #! maunds T;. #." per
maund
Cereals .)+ ;gs )+ ;gs T;. ##+ per ;g
In addition to above income% he also produced seasonal vegetables 3beans5 during
winter on the surroundings of his agricultural land. Total production was !+, ;gs and
sold at the rate of T;. #,. But of the total production% #, ;gs are used for self
consumption and reported T;. #%!"" as cost of bean production.
Ge also has reported T;. /+%""" income from poultry &rm and ful&lls all conditions to
be non8assessable.
Ge has also reported T;. #."%""" income from &sheries.
2'penses relating to these incomes are as follows?
Cost of seeds and fertili9er T;.
),%+""
7abor charge *"%"""
aintenance costs of agricultural e<uipments *%"""
Jnion parisad ta' +%.""
Crop insurance premium .%!""
0epreciation on tractor Q !"P #*%"""
r. o=umder has borrowed T;. +"%""" from 6a=shahi Hrisi Jnnayon Ban; at an
interest rate of #!P per annum on #+
th
Bctober !"#". Allowable depreciation for
tractor as per the Third Schedule of the ITB% #/.* is at the rate of #+P. Cost of seeds
and fertili9er includes T;. #%+"" spent against Borga. Ge maintains boo;s of accounts
properly.
Solution 2B
Mr- #u*o4 Mo<u4der
Inco4e 6earB 2&'&>2&''
Assess4ent 6earB 2&''>2&'2
Calculation of Total Inco4e
Inco4e fro4 Agriculture Section > 2E G 2F(B
Income from sale of paddy 3!"" ' -""5
#%*"%""
"
Income from sale of potato 3#"" ' #."5 #.%"""
Income from seasonal vegetables 3!*" '#,5 )%.*"
Income from poultry farm /+%"""
7ess? e'emption 3full5 /+%""" 8
Income from &sheries 3considered separately at the
time of computing ta' liability at a reduced rate of
+P5
#."%"""
)%*#%.*
"
7ess? Admissible e'penses?
#. Production costs8
Cost of seeds and fertili9er ),%+""
7abor charge *"%"""
aintenance of agricultural e<uipment *%"""
."%+""
!. Jnion parisad ta' +%.""
). Crop insurance premium .%!""
*. Allowable depreciation 3note #5 #"%+""
+. Interest on borrowed fund 3note8!5
,. Cost of bean production
*%!+"
#%!""
#%#"%*+
"
Total
!)#%)/
"
7ess? e'emption 3up to +"%"""5 +"%"""
Total inco4e
'D'=9
C&
NotesB
#. Allowable depreciation [ 3#*%"""4.!"5 ' .#+ [#"%+""
!. Interest on borrowed fund [ 3+"%""" ' #!P5 ' ..+4#! [ *%!+"
). As agriculture is the only source of income for r. 6upom o=umder% he is allowed
to get ma'imum T;. +"%""" e'emption in assessing his ta'able income.
*. As total income of r. 6upom o=umder doesnKt e'ceed the non8assessable limit
of T;. !""%"""I he will have no ta' liability. Thus% imposing ta' at a lower rate for
income from &sheries will have no implication here for computing ta' liability.
.or2ed ",a4*le 9
From the following particulars of income% compute the ta'able income r. Mibon Harma;er
for the income year !"#" 8!"##.
#. Sale of Paddy? !+" maunds Q T;. +"" per maund T;.
#!+%"""
!. Sale of Mute? #"" maunds Q T;. *"" per maund *"%"""
). Sale of 6abi Crops?
+"%"""
*. Annual lease rental from leasing agricultural land !"%"""
+. Sale of forest timber and bamboo
,%"""
,. Income from Tea garden
)"%"""
-. Income from 6ubber garden
*"%"""
.. Income from Tobacco industry
)"%"""
/. Income from Sugar industry
+"%"""
#". Income from Poultry farm
)+%"""
##. Income from cattle rearing
)%"""
#!. Income from sale of Palm and 0ate Muice
,%"""
#). Income from sale of Goney
+%"""
2'penses for cultivation are as follows?
#ice and #a3i cro*s Hute
Cost of seeds and fertili9er T;. !+%"""
T;.
-%"""
7abor charge +%""" !%"""
Cost of hiring pump machine )%""" #%"""
6epair e'pense of e<uipments +"" 8
Transportation cost !%""" +""
r. Harma;er maintains proper boo; for 6ice and 6abi crops% however% he maintains no
boo; for =ute.
Bther e'penses as incurred were as follows?
Jnion parisad ta' T;. !%"""
7and revenue #%"""
Crop insurance premium !%+""
Allowable depreciation /%"""
aintenance cost of irrigation plant
Insurance Premium 8 Tractor
*%"""
-%"""
Ge had a pump machine which was purchased at T;. !+%""". It has become obsolete
and has been discarded at T;.#!%""". As on the date of discard% the written down
value after charging depreciation on the basis of prescribed rate at the ITB% #/.*
amounted to T;. #"%""".
Ge has ta;en agricultural loan of T;. +"%"""Q .P interest per annum from
Bangladesh Hrishi Ban;.
r. Harma;er has a tractor purchased for T;. !+"%""" on which he has an active
insurance policy. 0uring the income year% the tractor becomes out of order and he &led a
claim with insurance company. After proper scrutiny% he receives T;. .!%""" from
insurance company as coverage. Gowever% depreciation charged so far on the tractor as
per IT Brdinance is T;. #+"%""".
Solution 9B
Mr- Hi3on 5ar4a2er
Inco4e 6earB 2&'&>2&''
Assess4ent 6earB 2&''>2&'2
Calculation of Total Inco4e
Inco4e fro4 Agriculture Section > 2E G 2F(B
Sale of rice 3!+" ' ,""5
#%!+%""
"
Sale of Mute 3#"" ' *""5 *"%"""
Sale of rabi crops +"%"""
Annual lease rental !"%"""
Income from tea garden 3)"%""" ' ,"P5 #.%"""
Income from rubber garden 3*"%""" ' ,"P5 !*%"""
Income from Tobacco industry 3)"%""" ' ,"P5 #.%"""
Income from Sugar industry 3+"%""" ' ,"P5 )"%"""
Income from poultry Farm )+%"""
385 e'emption 3full5 )+%""" 8
Income from cattle rearing )%"""
Income from sale of Palm and 0ate =uice ,%"""
Income from sale of honey +%"""
(ain from sale of obsolete e<uipment
3sales 8 >0: [ #!%""" 8 #"%"""5 !%"""
)%*#%"""
7ess? admissible e'penses
#. Production e'penses?
Cost of seeds L Fertili9er !+%"""
7abor charge +%"""
Cost of pump machine hire )%"""
6epair e'panses of agricultural e<uip. +""
Transportation cost !%"""
Production costs for rice L 6abi Crops )+%+""
Costs for =ute 3*"%""" ' ,"P5 !*%"""
+/%+""
!. Jnion parisad Ta' !%"""
). 7and 6evenue #%"""
*. Crop insurance premium !%+""
+. Allowable 0epreciation /%"""
,. aintenance cost of irrigating plant *%"""
-. Insurance Premium F Tractor -%"""
.. 7oss from tractor 3T;. #""%""" F T;. .!%"""5 #.%"""
.. Interest from borrowed fund 3+"%""" ' .P5 *%""" *-%+""
#"-%"""
!%)*%"""
Inco4e fro4 Business or *rofessionB
Income from tea garden 3)"%""" ' *"P5 #!%"""
Income from rubber garden 3*"%""" ' *"P5 #,%"""
Income from Tobacco industry 3)"%""" ' *"P5 #!%"""
Income from Sugar industry 3+"%""" ' *"P5 !"%"""
,"%"""
Inco4e fro4 Other Sources
Sale of forest timber and bamboo ,%"""
Total Inco4e
9=&&=&&
&
.or2ed ",a4*le :
Compute ta'able income and ta' liability of r. 2;hlash ia from the following
particulars related to the income year ended on )"
th
Mune% !"##?
)articulars BDT
Sale of Paddy U!"" maunds Q T;. *"" per maundV ."%"""
Sale of Mute U#+" maunds Q T;. ,"" per maundV /"%"""
Sale of 6abi Crops ,"%"""
Income from agricultural cooperative society which was organi9ed
for farming
!+%"""
Income from lease of agricultural land #""%"""
Income from Barga #!+%"""
Income from sale of herbal or medicinal plants )"%"""
Income from lease of storehouse used for storing crops !"%"""
Income from sale of tobacco to BATC !"%"""
Income from sale of sugarcane to (overnment Sugar mill )+%"""
Income from &sheries #+"%"""
r. 2;hlash ia had a drum seeder which was purchased for T;. *"%""". Gowever% he
has sold the seeder for T;. )"%""" when the accumulated depreciation of the
machine was T;. !"%""" in his boo;. oreover% he also had a weighing machine
whichD was purchased at T;. #.%""". It has become obsolete and has been discarded
at T;. /%+"". At the time of sale the written down value of the machine was T;.
#)%""".
Ge didnDt maintain the boo;s of accounts properly. 2'penses claimed by him are as
follows?
Production costs !""%"""
7and revenue paid .%"""
Interest on loan !%+""
Jnion parisad ta' *%"""
Purchase of tractor -"%"""
aintenance of the irrigation plant #!%"""
In addition to it% during the year r. 2;hlash ia also incurred the following
investments and e'penses?
Family e'penses +"%"""
7ife Insurance premium 3policy value T;. !""%"""5 !+%"""
Purchase of unlisted companyDs share !+%"""
0onation to presidentDs relief fund !"%"""
0onation to a local club ,%"""
0onation to (overnment Ra;at fund )"%"""
Purchase of (old !-%"""
Solution :B
Mr- "2hlash Mia
Income year? !"#" 8 !"##
Assessment year? !"## 8 !"#!
Calculation of Total Income
Inco4e fro4 Agriculture Section > 2:(B
Income from sale of Paddy 3!"" ' *""5 ."%"""
Income from sale of Mute 3#+" ' ,""5 /"%"""
Sale of 6abi Crops ,"%"""
Income from Agricultural Co8operative Society !+%"""
Income from lease of agricultural land #""%"""
Income from Barga #!+%"""
Income from sale of herbal or medicinal plants )"%"""
Income from lease of storehouse used for storing crops !"%"""
Income from sale of tobacco to BA TC !"%"""
Income from sale of sugarcane to (overnment Sugar mill )+%"""
(ain on sale of drum seeder UT;. )"%""" F 3T;. *"%"""8
T;.!"%"""5V
#"%"""
Income from &sheries 3considered separately at the time of
computing ta' liability at a reduced rate of +P5
#+"%"""
-%*+%"""
LessB Admissible e'penses?
#. Production costs 3$ote 8 #5 #./%"""
!. 7and revenue paid .%"""
). Interest on loan !%+""
*. Jnion parisad ta' *%"""
+. aintenance of irrigation plant #!%"""
,. 7oss from sale of weighing machine 3$ote 8 !5 )%+""
!%#/%"""
Total inco4e @2E=&&&
Calculation of In+est4ent allo/anceB
Actual In+est4ent Made
Insurance premium
Bwn T;. !+%"""
a'imum limit? !%""%""" ] #"P !"%"""
T;. !"%"""
0onation to presidentDs relief fund !"%"""
0onation to (overnment Ra;at fund )"%"""
Actual In+est4ent F&=&&&
a'imum limit of investment?
7ump sum of
T;.
#%""%""%"""
Br% !+P of Total ta'able income 3!+P of T;.
+%!,%"""5
#%)#%+""
!ic!ever is lower #)#%+"""
Thus% allowance amount for investment allowance is T;. -"%"""
Ta' rebate Q #"P on allowable investment is 3-"%"""
' #"P5 T2- F=&&&
Calculation of Ta, lia3ilit6B
a5 Income on which regular rate is
applicable
Income Slab
6ate Amount 3T;.5
Bn the &rst T;. #%."%""" "P $il
Bn the balance #%/,%""" #"P #/%,""
b5 Income on which reduced ta' rate is
applicable
Income from &sheries #%+"%""" +P -%+""
Total +%!,%""" !-%#""
7ess? investment ta' credit -%"""
$e't ta' liability !"%#""
NotesB
#. Allowable production cost?
Total sale proceeds from produced goods?
a5 Sale of paddy ."%"""
b5 Sale of =ute /"%"""
c5 Sale of rabi crops ,"%"""
d5 Sale of herbal or medicinal plants )"%"""
e5 Sale of tobacco !"%"""
f5 Sale of sugarcane )+%"""
)#+%"""
Production cost [ 3)#+%""" ' ,"P5 [ #./%"""
!. 7osses due to discard of weighing machinery?
>0: of the machine T;. #)I"""
0isposable price /%+""
7oss from sale of weighing machine )%+""
). Since further processing8 was absent in case of tobacco and sugarcane% the
entire amounts have been considered as agricultural income.
Self>Assess4ent ?uestions
#. 0e&ne XAgricultural incomeK under the Income Ta' Brdinance #/.*.

!. 0iscuss the allowable deductions as per section !- of the Brdinance in
computing the ta'able income under the head XAgricultural incomeK.
). Gow will you compute the income in respect of Tea and 6ubber industriesN
*. >hat are the di1erent types of agricultural incomeN
+. Bn what categories of agricultural income% ta'es are imposed at a reduced
rateN
)ro3le4B
Compute ta'able income and ta' liability of r. Mulhash Hhan% a ,- years old farmer%
from the following particulars related to the income year ended on )"
th
Mune% !"##?
Sale of Paddy !"" maunds Q T;. *"" per maund
Sale of Mute #+" maunds Q T;. ,"" per maund
Sale of 6abi Crops T;. ,"%"""
Income from agricultural co8operative society
which was organi9ed for farming T;. !+%"""
Income from lease of agricultural land T;. #""%"""
Income from Barga T;. #!+%"""
Income from sale of herbal or medicinal plants T;. )"%"""
Income from lease of storehouse used for storing
crops
T;. !"%"""
Income from tobacco industry T;. !"%"""
Income from sale of sugar T;. )+%"""
Income from sale of tea T;. !"%"""
r. Athar Ali had a pump machine which was purchased for T;. *"%""". To ac<uire an
advance technology in the irrigation plant he has sold the pump machine for T;.
*!%""". At the time of sale the amount of accumulated depreciation of the pump
machine was T;. #.%""". oreover% he also had a weighing machine which was
purchased at T;. #.%""". It has become obsolete and has been discarded at T;.
/%+"". At the time of sale the written down value of the machine was T;. #)%""".
Ge didnKt maintain the boo;s of accounts properly. 2'penses claimed by him are as
follows?
Production costs !""%"""
7and revenue paid .%"""
Interest on loan !%+""
Jnion parisad ta' *%"""
Installation of irrigation plant -"%"""
aintenance of the irrigation plant #!%"""
In addition to it% during the year r. Athar Ali also incurred the following investments
and e'penses?
Family e'penses T;. +"%"""
7ife Insurance premium 3policy value
T;. )%""%"""5
!+%"""
Purchase of debenture from primary
mar;et
!+%"""
0onation to Aga Hhan 0evelopment
$etwor;
!"%"""
0onation to a local mos<ue ,%"""
0onation to (overnment Ra;at fund )"%"""
Purchase of Furniture !-%"""
Chapter .
Inco4e fro4 3usiness or *rofession
Contents
Introduction
2'amination conte't
To*ic List
>or;ed 2'amples and Solutions
..# eaning of Business and Profession
..! Scope of Income under the head XIncome from Business and
ProfessionK
..) Some Speci&c (uidelines
..* Allowable 0eductions
..+ 0eduction not Admissible
.., Capital and 6evenue 2'penditure
..- Illustrations of Some Important Concepts
Introduction
Learning o3<ecti+es
Identify income from business and profession.
Compute the ta'able income under the head XIncome from Business and
ProfessionK.
Identify the allowable deductions under the head.
Identify the e'penses that are inadmissible.
Introduce the comple'ity of computing income from business and
profession.
Identify the e'penses admissible up to a certain limit.
Compute net ta' liability in di1erent situations.
)ractical signi0cance
The head XIncome from Business and ProfessionK is very important to ta'ing
authority. A signi&cant part of ta' revenue government collects from this
head. This head also includes lot of comple' issues on which clear
understanding is re<uired to practice ta'. This chapter lays the basic
foundation of corporate assessment and ta'ation.
This chapter presents an idea of how conventional pro&t and loss account can
be ad=usted with applicable ta' laws. It presents the scope of income under
the head% admissible e'penses% inadmissible e'penses and other related
issues.
Some e'penses are admissible up to a certain limit. These are e'plained with
some e'amples. Bther comple' issues li;e per<uisites% balancing charge etc.
are simpli&ed with e'amples.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the computation of ta'able income under the head
Xincome from business and professionK is one of the basic re<uirements for
determining ta' liabilityN Can you determine the ta'able income under the
headN Can you compute net ta' liability of an assessee having income under
the headN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the total ta'able income for any income year. Before advising the clients%
accountants should have the clear concept relating to the admissible and
inadmissible e'penses so that they can deduct or add the e'penses in
determining the ta'able income.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
Cou will be also using this ;nowledge when you tac;le the ta'ation paper later
on in the Professional Stage and it will also underpin the technical aspects at
the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne income from business and profession.
Identify di1erent scope of income under the head.
Compute the ta'able income under the head XIncome from Business and
Profession.
Illustrate the income cannot be reported under the head.
Identify the allowable deductions under the head.
Illustrate the e'penses admissible up to a certain limit.
Compute net ta' liability under the head.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
core concept on computation of income which is vital for calculating ta'
liability. Clear concept and understanding of each contents of this chapter will
help candidates to resolve any problems relating to computation of income
from business and profession.
D-& INCOM" %#OM BUSIN"SS AND )#O%"SSION
Section O+er+ie/
Scope of income from business and profession is very big.
The total income may not be ta'able income.
There are some allowable% inadmissible and not permissible deductions
under the head.
Computation of income under the head is very signi&cance.
Any amount of per<uisites% entertainment allowance% and free sample are
not admissible.
0epreciation allowances is very important for determining pro&t
6evenue e'penditure and capital e'penditure is considered di1erently.
D-' Meaning of Business and )rofession
RBusinessS de&ned in Section F !3#*5 as including any trade% commerce or
manufacture% or any adventure or concern in the nature of trade% commerce
or manufacture.
According to B'ford Advanced learnerKs 0ictionary% business means the
activity of ma;ing% buying% selling or supplying goods or services for money.
Section !3*/5 de&nes a profession as 8 Dprofession includes a vocationD.
Profession involves the idea of an occupation using intellectual s;ill% or any
manual s;ill as distinguished from an operation which is substantially the
production or sale arrangements for the production or sale of commodities.
Following are the characteristics of a profession?
a. mastering of particular intellectual s;ill ac<uired through rigorous
education and trainingI
b. adherence to common code of conduct or professional ethicsI
c. acceptance of a social duty of due care and service.
Profession is therefore% a broader term di1erent from a vocation% trade or
commerce. The characteristics mentioned above are absolutely essential to
call any activity as professional which may not be so rigorously re<uired in a
vocation% occupation or trade. Further in a profession mental and intellectual
contents are much higher than mechanical s;ill re<uired in a vocation or
occupation.
D-2 Sco*e of Inco4e under the head VInco4e fro4 Business and
)rofessionO
Scope of income under the head XIncome from Business and ProfessionK
encompasses the following areas as per di1erent sections of IT Brdinance%
#/.*?
a(%ull6 Inco4e fro4 Business or )rofession
Section !.3#5
3a5
pro&ts and gains of any business or profession carried on by
the assessee
Section !.3#5
3b5
income derived from any trade or professional association or
other association of li;e nature
Section !.3#5
3c5
value of any bene&t or per<uisite arising from business or the
e'ercise of a profession
Section !.3#5
3d5
L Section
#/3#+5
receipt of any loss% bad debt or e'penditure already chargedI
unpaid amount of interest or share of pro&t to certain ban;s
after three years of chargeI bene&t derived in respect of
trading liability that remains unpaid for three years
Section !.3#5
3e5 L Section
#/3#,5
income from the disposal of any building% machinery or plant
used for purpose of any business or profession carried on by
him
Section !.3#5
3f5 L Section
#/3#.5
income from any insurance% salvage or compensation
moneys received in respect of any building% machinery or
plant used for the purpose of business or profession
Section !.3#5
3g5 L Section
#/3!"5
Income from the disposal of an asset representing
e'penditure of a capital nature on scienti&c research
Section !.3#5
3h5 L Section
#/3!)5
Income from the transfer of e'port <uota by an assessee
being an e'porter of garments
3()artl6 Inco4e fro4 Business or )rofession
Section !,3!5
L 6ule )#
Income from the sale of Tea
Section !,3)5
L 6ule )!
Income from the sale of 6ubber 4Tobacco 4 Sugar 4 Bther
similar products
D-9 So4e S*eci0c $uidelines
In line with section !.3!5 some typical companies should compute ta'able
income as per the guidelines given in di1erent schedules as mentioned below?
Fourth Schedule The pro&ts and gains from insurance business and the
ta' payable thereon
Fifth Schedule F
Part A
The pro&ts and gains from the e'ploration and
production of petroleum 3including natural gas5 and the
ta' payable thereon
Fifth Schedule F
Part B
The pro&ts and gains of any business which consists of
or includes the e'ploration and e'traction of such
mineral deposits of wasting nature% not being petroleum
and natural gas% as may be speci&ed
The amount of interest which is not brought in the pro&t and loss account and
;ept in suspense account relating to classi&ed bad and doubtful debts of
Bangladesh Shilpa Ban;% Bangladesh Shilpa 6in Sangstha% Investment
Corporation of Bangladesh and any commercial ban; including the
Bangladesh Hrishi Ban; and the 6a=shahi Hrishi Jnnayan ban; shall be
chargeable to ta' in the income year in which it is credited to the pro&t and
loss account for that year or as the case may be% it is actually received%
whichever is earlier USection !.3)5V.
D-: Allo/a3le Deductions
The e'penditures which are deductible in determining income from business
or profession liable to ta' have not been enumerated e'haustively. A few
heads of allowable e'penditures have been speci&ed under Section !/3#5 but
many other e'penses can be claimed to be admissible under section !/3#5
3''vii5 which is generally ;nown as OomnibusW clause.
The allowable deductions which have been speci&cally mentioned in section
!/3#5 are mentioned below?
3i5 6ent for the premises used for the purpose of business or profession
USection !/3#5 3i5V.
Provided t!at if a su?stantial part of t!e premises is used ?y t!e
assessee as a dwelling !ouse2 t!e amount s!all ?e a proportionate part
of t!e rent !aving regard to t!e proportionate annual value of t!e part
so used6
3ii5 6epairs to hired business premises is the assessee bears the e'pense
USection !/3#5 3ii5V.
Provided t!at if a su?stantial part of t!e premises is used ?y t!e
assessee as a dwelling !ouse2 t!e amount s!all ?e a proportionate part
of t!e sum paid for suc! repair !aving regard to t!e proportionate
annual value of t!e part so used6
3iii5 Ban; interest paid or any pro&t shared with a ban; run on Islamic
principles in respect of capital borrowed of the purpose of business or
profession USection !/3#5 3iii5V.
Provided t!at if any part of suc! capital relates to replenis!ing t!e cas!
or to any ot!er asset transferred to any ot!er entity2 w!en lending of
money is not t!e ?usiness of transferor2 t!e amount s!all ?e
proportionate part of t!e interest so paid or t!e proft so s!ared !aving
regard to t!e proportion of suc! capital so used6
3iv5 Share of pro&t paid by a ban; run on Islamic principles USection !/3#5
3iv5V.
3v5 An amount not e'ceeding +P of the pro&t transferred to Special 6eserve
by ban;s and &nancial institutions approved by the (overnment USection
!/3#5 3v5V.
3vi5 6epairs to own buildings% plants% machinery% furniture or other &'ed
assets USection !/3#5 3vi5V.
3vii5 Insurance premium for insurance against ris; of damage etc. of
buildings% plant furniture or other &'ed assets used in business or
profession USection !/3#5 3vii5V.
3viii5 0epreciation of building% machinery% plant or furniture being owned by
the assessee and used for business or profession as per Third Schedule
USection !/3#5 3viii5V.
3i'5 Investment allowance for a passenger vessel or a &shing trawler which is
entitled to special depreciation is allowable at !"P of the original cost
sub=ect to stipulated conditions USection !/3#5 3i'5V.
3'5 >here any building% machinery or plant which% after having been used by
the assessee for the purpose of his business% has been discarded%
demolished or destroyed in any income year or any such asset has been
sold% transferred by way of e'change or compulsorily ac<uired by a
legally competent authority or e'ported outside Bangladesh in any
income year% an obsolescence allowance to the e'tent and computed in
the manner speci&ed in paragraph #" of the Third Schedule USection
!/3#5 3'i5V.
3'i5 Bbsolescence allowance and allowance on account of death or useless
animals used for the purpose of business or profession otherwise than as
stoc; in trade USection !/3#5 3'ii5V.
3'ii5 7and development ta' or rent% local rate or municipal ta' USection !/3#5
3'iii5V.
3'iii5 Bonus paid to employees including festival bonus USection !/3#5 3'iv5V.
3'iv5 The amount of bad debt which is established to have become
irrecoverable% under the stated circumstances USection !/3#5 3'v5V.
3'v5 The amount of bad debt written o1 as irrecoverable but deduction not
allowed on the ground that it was not then irrecoverable% the amount
which was established to be irrecoverable USection !/3#5 3'vi5V.
3'vi5 The amount of bad debt having been irrecoverable in an earlier year is
allowable for the earlier year under certain circumstances and with the
consent of the assessee USection !/3#5 3'vii5V.
3'vii5In respect of provision for bad and doubtful debt made by Bangladesh
Shilpa Ban; or Bangladesh Shilpa 6in Songstha for overdue loan% a sum
e<ual to &ve percent of such overdue loan or the amount of actual
provision for such bad or doubtful debt in the boo;s of the assessee%
whichever is the less USection !/3#5 3'viiia5V.
Provided t!at t!e deduction s!all ?e allowed only in respect of t!e
assessment years /.-,*..2 /.--*-. and /..(*./6
Provided furt!er t!at if any amount out of t!e amount so allowed is
ultimately recovered2 t!e same s!all ?e deemed to ?e a proft of t!e
year in w!ic! it is recovered6
3'viii5 Provision for bad and doubtful debt and interest thereon made by a
commercial ban; including the Bangladesh Hrishi Ban; and the 6a=shahi
Hrishi Jnnayan Ban; of a sum e<ual to #P of the outstanding loan
including interest thereon or the amount of actual provision% whichever is
less% sub=ect to the speci&ed conditions USection !/3#53'viiiaa5V.
Provided t!at t!e deduction s!all ?e allowed only in respect of t!e
assessment years /..(*./2 /../*.'2 /..'*.<2 /..<*.32 /..3*.)2 /..)*
.+2 /..+*.,2 /..,*.-2 /..-*..2 /...*'(((2 '(((*'((/2 '((/*'(('2
'(('*'((<2 '((<*'((32 '((3*'(()2 '(()*'((+ and '((+*'((,6
Provided t!at t!e provision of t!is clause s!all apply only in respect of
loan w!ic! t!e Banglades! BanA !as classifed as ?ad and dou?tful
de?ts6
0f any amount out of t!e provision for ?ad and dou?tful de?t and interest
t!ereon w!ic! !as ?een allowed is ultimately recovered2 t!e amount so
recovered s!all ?e deemed to ?e proft of t!e year in w!ic! it is
recovered6
Provided t!at no deduction under t!is clause s!all ?e allowed in respect
of *
a5 Any amount representing grant allowed by the (overnment in the
form of #+8Cear Special Treasury Bonds.
b5 Any loan advanced to any (overnment Brgani9ation or Body
Corporate or any other loan guaranteed by the (overnment.
c5 Any debt representing loans advanced to any director of the ban;% his
nominees or dependents.
3'i'5 Any e'penditure% not being capital e'penditure% laid out or e'pended on
scienti&c research related to the business USection !/3#5 3'i'5V.
3''5 Any e'penditure of a capital nature laid out or e'pended on scienti&c
research related to the business sub=ect to the stipulated conditions
USection !/3#5 3''5V.
3''i5 Any sum paid to scienti&c research institute or other speci&ed bodies
carrying out scienti&c research approved by the Board sub=ect to the
stipulated conditions USection !/3#5 3''i5V.
3''ii5Any sum% not being of capital nature laid out or e'pended on any
educational institute or hospital established for the bene&t of employees
sub=ect to the stipulated condition USection !/3#5 3''ii5V.
3''iii5 2'penditure 3including capital e'penditure incurred on any educational
institution or hospital for the bene&t of employees and their dependents
is deductible provided no charge is made for the services rendered by
such hospital or institution. 2'penditure incurred on the construction%
maintenance or running of any institute for the training of industrial
wor;ers will be similarly deductible USection !/3#5 3''iii5V.
3''iv5 Any e'penditure laid out or e'pended on the training of citi9ens of
Bangladesh in connection with a scheme approved by the $ational Board
of 6evenue USection !/3#5 3''iv5V.
3''v52'penses incurred in connection with visits abroad in a Trade 0elegation
sponsored by (overnment USection !/3#5 3''v5V.
3''vi5 Subscriptions paid to registered trade organi9ations annual
membership subscription paid to registered trade organi9ation or to a
recogni9ed professional institution is allowable e'penditure for the
purpose of computation of income from business USection !/3#5 3''vi5V.
3''vii5 Any e'penditure% not being in the nature of capital e'penditure or
personal e'penses of the assessee laid out or e'pended wholly and
e'clusively for the purpose of the business or profession of the assessee
USection !/3#53''vii5V.
Allo/a3le Deductions )ro*ortionatel6
>here any premises% building% machinery% plant or furniture is not wholly used
for business or profession% any deduction allowable under section !/3!5 will be
allowed proportionately.
D-@ Deduction not Ad4issi3le
The following e'penditures are not admissible deductions in the determination
of income from business or profession under the circumstances as stated
against each item?
3a5 Payment of salaries if ta' is not deducted at the time of payment and
paid thereon in accordance with section +" of Chapter :II USection
)"3a5V.
3b5 Any payment made by an assessee to any person if ta' thereon has
not been deducted and credited in accordance with the Chapter8:II and
:at thereon has not been collected or deducted and credited in
accordance with the :AT Brdinance #//#USection )"3aa5V.
3b5 Payment of interest% salary% commission or remuneration by a &rm or
an association of persons to any partner of the &rm or any member of
the association% as the case may be USection )"3b5V.
3c5 Bro;erage or commission paid to a non8resident if ta' has not been
deducted there from under section +, USection )"3c5V.
3d5 Payment to a provident or other fund unless e1ective arrangement has
been made for deduction of ta' at source while ma;ing the payments
from the fund which are ta'able under the head OSalariesW USection
)"3d5V.
3e5 Amount of per<uisites or other bene&ts paid to any employee in e'cess
of T;. !+"%""" USection )"3e5V.
In this regard% Xper<uisiteK means 8
i. Any payment made to an employee by an employer in the form of
cash or in any other form e'cluding basic salary% festival bonus%
arrear salary% advance salary% leave encashment or leave fare
assistance and over time% and
ii. Any bene&t% called by whatever name% provided to an employee by
an employer% whether convertible into money or not but other than
contribution to8
3a5 recogni9ed provident fundI
3b5 approved pension fundI
3c5 approved gratuity fundI
3d5 approved superannuation fund.
3f5 Any e'penditure in respect of the following as is in e'cess of the
amount or rate prescribed in this behalf and as is not% in the cases of
sales and services liable to e'cise duty% supported by e'cise stamp or
seal% namely?
3a5 entertainmentI
3b5 foreign travels of employees and their dependents for holidaying
and recreationI
3c5 publicity and advertisementI and
3d5 distribution of free samples.
3g5 Any e'penditure e'ceeding ten percent of the pro&t under the head of
Gead BEce e'penses by a company not incorporated in Bangladesh
under Company Act% #//*I
3h5 Any payment by way of royalty% technical services fee% technical ;now8
how fee or technical assistance fee e'ceeding si' percent of the pro&tI
3i5 Any payment by way of salary or remuneration made otherwise than
by crossed chec; or ban; transfer by a person to any employee having
gross monthly salary of ta;a &fteen thousand or moreI
3=5 Any e'penditure by way of incentive bonus e'ceeding ten per cent of
the disclosed net pro&tI
3;5 Any e'penditure by way of overseas traveling e'ceeding one percent of
the disclosed turnover.
D-E Ca*ital and #e+enue ",*enditure
Ca*ital ",*enditure
All e'penditure incurred in ac<uisition of an asset of a permanent nature which
is held for the purpose of carrying on business% such as land% building% plant%
furniture etc. is called capital e'penditure. Such e'penditure retains a
permanent value of the business e'cept for the wear and tear which the assets
undergo on account of their use. If an amount is e'pended on an e'isting asset%
its value is increased. It will be regarded as capital e'penditure. 2'penditure
incurred in obtaining a license to secure an agency will be a capital one though
the agency might not have become secured. Any e'penditure incurred for the
following purposes will be capital e'penditure?
3#5 For ac<uiring &'ed assets% e.g. land% building% machinery% furniture etc.
held for use in the business. The cost of a &'ed assets will include all
e'penses incurred up to the time the assets become ready for use% e.g.
legal charges% bro;erKs charges% freight% import duty% clearing% carriage%
cartage and erection chargesI
3!5 For retaining capital assetsI
3)5 For improvement and e'tension of &'ed assets% cost of ma;ing additions to
building% machinery% plant and furniture etc. and other improvements of
assetsI
3*5 For increasing in any way the pro&t earning capacity of a business% e.g. the
cost of shifting the business to better and more suitable premisesI
3+5 For raising money for capital purposes% e.g. bro;erage and commission
paid for procuring loansI
3,5 Cost of constructing a factory or installing machineryI
3-5 Cost of e<uipment and apparatusI
3.5 Cost of machinery% plant and furnitureI
3/5 2'penses incurred in connection with the erection of buildings and plantsI
3#"5 Amount spent on the construction of reservoirI
3##5 2'penditure incurred on improvements to property% as distinguished
from mere repairsI
3#!5 2'penditure incurred in respect of reconstruction of business premises
or converting the same from one type to anotherI
3#)5 Price paid for the purchases of copyright or patent right.
#e+enue ",*enditure
All e'penditure incurred in buying goods for resale or converting raw materials
to manufactured articles or incidental to the conduct and &nancing of the
business% is treated as revenue e'penditure. Cost of goods purchased for the
business in which a person deals% sums paid as rent% salaries and wages%
repairs etc. are instances of revenue e'penditure. 2'penditure incurred for
any of the following purposes will be regarded as revenue e'penditure?
3#5 For purchasing assets with a view to re8selling them at pro&t or
manufacturing them in a saleable condition% e.g. goods% raw materials and
storesI
3!5 For maintaining capital assets in good wor;ing order% e.g. repairs and
renewals of buildingsI
3)5 For meeting day8to8day e'penses of carrying on a business% e.g. salaries%
wages% rents etc.
Tests for deter4ining an e,*enditure as either ca*ital or re+enue
nature
If the money comes from circulating capital% it will be revenue e'penditureI if
it emanates from &'ed capital% it will be capital e'penditure.
If the answer to any of the following <uestions is in the aErmative% it is a
capital e'penditure% otherwise it is revenue e'penditure?
3!5 0oes the e'penditure result in the ac<uisition or retention of a capital
assetN
3)5 Is there an addition or improvement to &'ed assetsN
3*5 Gas it in any way improved income8generating capacity of the businessN
3+5 Gas it been incurred to raise any capital sum for businessN
The following e'penses which% prima facie% are of a revenue nature% become
capital under certain circumstances as under?
3#5 6aw materials and stores when utili9ed in ma;ing a &'ed assetI
&2( >ages and salaries when paid in connection with the installation or
construction of a &'ed asset. Thus% when a company manufactures a
machine for its own use% the wages and salaries of persons employed on
the wor; will be capital e'penditureI
&3( Carriage and freight e'penses incurred in connection with the ac<uisition
of &'ed assetsI
3*5 Cost of repairs incurred in putting a second hand &'ed assets into a proper
operational stateI
3+5 7egal charges incurred in connection with the ac<uisition of &'ed assets%
e.g. building% machinery% plant etc. and e'penses incurred in clearing
encumbrances thereon.
A particular item of e'penditure may be of both capital and revenue nature%
e.g.% the combined cost of repairs% renewals etc. The amount should be
apportioned after deciding how much of the total e'penditure represents cost
of improvements or additions etc. and how much of it is in the nature of pure
repairs.
The following types of e'penditure have been held to be capital e'penditure?
3#5 Preliminary e'penses incurred for Aoating or ac<uiring a businessI
3!5 2'penses incurred for raising of capitalI
3)5 Cost of shifting of business from one place to another with a view to
increasing its revenue8earning capacityI
3*5 7ump sum payments made to retiring directors of a company in order to
restrain them from entering into competition with the business of the
company.
D-F Illustrations of So4e I4*ortant Conce*ts
Balancing Charge
Balancing charge is the revenue gain earned by a business at the time of
disposal of any building% machinery and plant used for the purpose of
business or profession. Total gain on disposal is the di1erence between sale
proceeds and written down value 3>0:5 of the asset. If the sale proceed is
higher than the original cost% it results capital gain. And balancing charge
results once capital gain is deducted from total gain. At di1erent amount of
sale proceeds applied on same asset% di1erent concept is e'empli&ed below?
]CR Company owns an asset originally purchased for T;. #""%""". The
company recently disposes the asset when written down value of the asset
amounts to T;. +,%""". Assuming di1erent sale proceeds% the concepts are
presented below?
Sale
Proceeds
Total (ain
3Sale
Proceeds 8
>0:5
Capital (ain
3Sale
Proceeds 8
cost5
6evenue (ain
3Total gain F
Capital gain5
7oss 3>0: F
Sale
proceeds5
3a5 #!"%""
"
,*%""" !"%""" **%""" nil
3b5 /"%""
"
)*%""" nil )*%""" nil
3c5 +"%""
"
nil nil nil ,%"""
Co4*ensation #ecei+ed fro4 Insurance Co4*an6
>hen any building% machineries or plant used for the purpose of business or
profession is demolished% destroyed or discarded and insurance compensation
is received% amount e<ual to balancing charges is reported as income from
business or profession. The application is similar to balancing charge% the only
di1erence is that the asset is not disposed rather destroyed and thus the
amount is received from insurance company as compensation money.
7etKs assume the same asset. The asset is now destroyed and there is an
active policy covering the ris; of the asset. And the company lodged claim
with di1erent amount of compensation money received as shown below?
Compensat
ion
6eceived
Total (ain
3Compensatio
n 6eceived 8
>0:5
Capital (ain
3Compensatio
n 6eceived 8
cost5
6evenue (ain
3Total gain F
Capital gain5
7oss 3>0: F
Compensation
6eceived5
3a5 #)"%""" -*%""" )"%""" **%""" nil
3b5 #""%""" **%""" nil **%""" nil
3c5 *"%""" nil nil nil #,%"""
%ractional inco4e in Certain Cases e,*ort +alue of gar4ents= tea=
ru33er= to3acco(
In certain cases% income from business or profession is assessed as a certain
percentage of total income. These are?
a5 Part of income from tobacco% sugar or other agricultural products that
needs industrial process to ma;e it mar;etable. Gere% income from
business will be? Final Sale Proceeds F Fair value of the raw materials
produced. 36ule )"5
b5 )P of the e'port value of the garments e'portable against the e'port
<uota as transferred to any assessee 36ule )"A5
c5 *"P of the income derived from the sale of tea grown and manufactured
by the seller in Bangladesh 36ule )#5
d5 *"P of the income derived from the sale of rubber grown and
manufactured by the seller in Bangladesh 36ule )#5
7etKs assume that ]CR Company has income from the following sources as
mentioned below?
a5 The company has a tobacco &eld where tobacco leaves are produced and
transferred to the manufacturing plant to produce cigarettes and other
tobacco goods. It is assumed that the fair value of tobacco leaves would
be T;. *+"%""" and the company sold the tobacco goods for T;. #%#+"%""".
b5 The company has transferred a part of its e'port <uota of garments to
another company that may generate a total of T;. #%+""%""" e'port value.
c5 Income derived from the sale of tea grown and manufactured by the
company% T;. +""%""".
d5 Income derived from the sale of rubber grown and manufactured by the
company% T;. )""%""".
Sources Co4*utation Inco4e fro4
Business
From sale of Tobacco T;. #%#+"%""" F T;.
*+"%"""
T;. -""%"""
From transfer of e'port
<uota
)P of T;. #%+""%""" *+%"""
From sale of Tea *"P of T;. +""%""" !""%"""
From sale of 6ubber *"P of T;. )""%""" #!"%"""
Total income from Business T;. #%",+%"""
"ntertain4ent ",*enses
Any amount representing entertainment e'pense is not allowed for
deductions. For allowable deductions under the head% the following bases and
percentages are prescribed in 6ule ,+.
.nco(e8 pro9ts and /ains o+ the 0usiness and
pro+ession '0e+ore char/in/ such allo:ance)
Allo:a0le
rate
Bn the &rst T;. #" la;h
Bn the balance 4 rest of the amount
*P
!P
For e'ample% ]CR Company reports T;. .%/""%""" as pro&t for the year ended
Mune )"% !"## after charging T;. #+"%""" as entertainment allowance.
Compute the amount of allowable entertainment e'pense.
Bn &rst pro&t of T;. #%"""%""" Q
*P
T;. *"%"""
Bn balance of T;. .%"+"%""" Q
!P
#,#%"""
Bn total pro&t T;. /%"+"%""" 3including entertainment
e'pense5
!"#%"""

Thus% allowable amount of entertainment e'pense is T;. !"#%""".
%oreign Tra+el Allo/ance of "4*lo6ees
Foreign travels for holidays and recreation of an employee and his dependants
for once in every two years to the e'tent of ) months basic or three8fourths of
the actual e'penditure% whichever is less% shall be admissible. But in this
regard% payment e'ceeding T;.#"%""" shall not be allowed as a deduction
unless such payment is made by a crossed chec; on a ban; or by a crossed
ban; draft 36ule ,+A5.
Consider the following information to compute the allowable amount of
foreign travel allowance for r. ] who has =oined the company during the year
and availing the bene&t for the &rst time.
Basic Salary of r. ] T;. ,"%"""
Actual 2'penditure !""%"""
Such payments are made through crossed chec;.
Allowable amount of foreign travel e'pense?
) months basic salary Q T;. ,"%""" T;. #."%"""
)4*
th
of actual e'penditure T;. #+"%"""
>hichever is less T;. #+"%"""
Thus% T;. !""%""" is not allowable rather T;. #+"%""" will be allowable
e'pense.
%ree Sa4*le Distri3ution
2'penditure on distribution of free sample is admissible up to the percentage
as given below 36ule ,+C5?
Ceiling of Turno+er In res*ect of In #es*ect
)har4aceuti
cal
Industries
of Other
Industries
a( For a turnover up to Ta;a + crore at the
rate of
3( For a turnover in e'cess of Ta;a + crore
but up to Ta;a #" crore at the rate of
c( For a turnover in e'cess of Ta;a #" crore
at the rate of
! P
# P
".+"P
#.+" P
".-+P
".)-+P
For e'ample% letKs assume that the turnover of ]CR Company is given in the
table below. Assuming the company as pharmaceutical and others% the
allowable deduction for free sample distribution would be?
Turno+er
Pharmaceutical Bthers
6ate Amount
3T;.5
6ate Amount 3T;.5
a5 If turnover is T;.
*%""%""%"""
!P .%""%""" #.+"P ,%""%"""
b5 If turnover is T;.
.%""%""%"""
#P .%""%""" ".-+P ,%""%"""
c5 If turnover is T;.
#!%""%""%"""
".+"P ,%""%""" ".)-+P *%+"%"""
)er8uisites
Per<uisite to any employee is allowed up to T;. !+"%""". If actual per<uisite
given to an employee e'ceeds T;. !+"%"""I such amount e'ceeding T;.
!+"%""" is not allowed U3Section )"3e5V.
For e'ample% letKs assume that r. ] en=oys the following bene&ts during the
income year ended )"
th
Mune% !"## from his employer?
#. Basic Salary T;.
+"*%"""
!. Gouse rent allowance )""%"""
). Festival bonus Fe<ual the two months basic salary .*%"""
*. 7eave encashment *!%"""
+. Conveyance allowance )"%"""
,. Contribution to 6ecogni9ed Provident Fund Q #"P +"%*""
-. Servants wages !"%"""
.. Children educational allowance +"%"""
/. 7eave fare assistance *"%"""
#". Bungalow utilities !+%"""
Compute the amount of per<uisite disallowed.
Actual )er8uisites #ecei+ed
#. Gouse rent allowance T;.
)""%"""
!. Conveyance allowance )"%"""
). Servants wages !"%"""
*. Children educational allowance +"%"""
+. Bungalow utilities !+%"""
:alue of Per<uisites 6eceived *%!+%"""
Allowable per<uisites !%+"%"""
2'cess per<uisites disallowed #%-+%"""
This clearly tantamount to double ta'ation% once in the hands of the employee
3e'cess allowances received over allowable limit5 and again by the employer.
",*enses Allo/ed u* to a Certain )ercentage
It is important to remember that some e'penses% where there is a scope of
reporting higher amount% are permitted but up to certain limit. Amount
e'ceeding that limit is not allowed and thus ta'able. These e'penses are
reported below?
#eference ",*enses Allo/a3le
li4it
Section
)"3g5
Gead BEce 2'penses by a company not
incorporated in Bangladesh
#"P of Pro&t
Section
)"3h5
6oyalty% technical services fee% technical
;nowhow fee or technical assistance fee
.P of Pro&t
Section
)"3=5
Incentive bonus #"P of pro&t
Section
)"3;5
Bverseas traveling e'pense #P of
turnover

Instances of so4e e,*enses /hich are ca*ital as *er $enerall6
Acce*ted Accounting )rinci*les 3ut allo/a3le as re+enue e,*enses
as *er Inco4e Ta, *ro+ision
)articulars Accounting
)rinci*le
Inco4e Ta,
)ro+ision
3a5 2'tension e'penditure for bringing new
areas under cultivation for tea and rubber
companies
Capital 6evenue
under 6ule )#
and )!
3b5 Building constructed for educational
Institution or hospital or Institute for the
bene&t of employees and their
dependents free of cost and giving
training to industrial wor;ers 3Sec !/3#5
3''iii5
Capital 6evenue u4s
!/3i5 3''ii5
3c5 2'penditure of capital nature e'pended
on scienti&c research in Bangladesh 3Sec
!/3#53''5
Capital 6evenue u4s
!/3i5 3''5
.or2ed ",a4*les and Solutions
.or2ed ",a4*le 'B
State with reasons whether the following e'penses are fully or partly admissible
as deduction while computing income from business or profession?
#. Stoc;8in8trade was lost in &re% amounting to T;. #!%""" and was debited to
Pro&t and 7oss Account.
!. Amount spent on a successful suit &led against a person for infringing trade
mar; of the assessee 8 T;. #"%"""I
). Interest paid to ban; T;. #+%""" in connection with overdraft obtained for
paying dividendI
*. Bverseas traveling e'pense T;. +"%"""I The amount of disclosed turnover
and disclosed net pro&t is T;. *"%""%""" and T;. !"%""%""" respectivelyI
+. Incentive bonus T;. )%""%"""I The amount of disclosed turnover and
disclosed net pro&t is T;. *"%""%""" and T;. !"%""%""" respectivelyI
,. Salary paid to two employees Q T;. !"%""" per monthI one is paid in cash
and another through ban; transfer.
-. 6oyalty paid T;. !%""%"""I The amount of disclosed turnover and disclosed
net pro&t is T;. *"%""%""" and T;. !"%""%""" respectivelyI
.. Salary e'pense of a &rm T;. #""%""" of which T;. *"%""" is paid to a partner
as salaryI
/. Installation cost of an IPS% T;. +"%"""I
#". Penalty paid for violating income ta' law T;. !+%""".
##. 6epair e'pense of the hired premises paid T;. +"%"""% The building is used
both for oEce and residence at an e<ual proportion.
#!. Insurance premium paid T;. !+%"""% of which T;. +%""" is the life insurance
premium of the owner.
Solution 'B
#. 7oss of stoc;8in8trade is an admissible e'pense and is allowed to the full
amount.
!. 7itigation 4 legal e'pense is an admissible e'pense and is allowed to the full
amount as it is spent for protecting business interest. Any legal e'pense for
illegal purpose is not allowable.
). Interest e'pense on overdraft ta;en to meet business e'penses is
admissible e'pense and allowed to the full amount.
*. Bverseas traveling e'pense is admissible up to #P of the disclosed
turnover% so here the e'pense is admissible T;. *"%""" 3#P of T;.
*"%""%"""5 and rest of T;. #"%""" will be inadmissible.
+. Incentive bonus is admissible up to #"P of the disclosed net pro&t% so here
the admissible amount is up to T;. !""%""" 3#"P of T;. !"%""%"""5 and rest
of T;. #""%""" is inadmissible.
,. Bf total salary e'pense T;. *."%"""% T;. !*"%""" is admissible as it has
been paid through ban; transfer and rest of T;. !*"%""" is inadmissible as it
has been paid in cash.
-. 6oyalty is admissible up to .P of disclosed net pro&t% so here of total T;.
!""%""" admissible amount is up to T;. #,"%""" 3.P of T;. !"%""%"""5 and
rest of T;. *"%""" is inadmissible.
.. Bf total salary e'pense T;.#""%"""% T; ,"%""" is admissible as it has been
paid to employees and rest of T;. *"%""" is inadmissible as it has been paid
to a partner of the &rm.
/. $ot admissible% as it is a capital e'penditure.
#". $ot admissible as the penalty is imposed for violating laws.
##. Bf total repair e'pense of T;. +"%"""% T;. !+%""" is admissible which is for
the proportion of oEce use and the rest T;. !+%""" is inadmissible as half
proportion of the house has been used for residence.
#!. Bf total insurance premium of T;. !+%"""% T;. !"%""" is admissible which is
for the protection of business interest and the rest of T;. +%""" is
inadmissible as it is given for personal interest of the owner.
.or2ed ",a4*le 2B
The Pro&t and 7oss Account of Manani Traders owned by r. 6a=on o=umder for the
year ended on Mune )"% !"## is given below?
Hanani Traders
Pro&t and 7oss Account
For the year ended on Mune )"% !"##
De3it Ta2a Credit Ta2a
Salary )."%""" (ross Pro&t
#%/+"%""
"
Commission -"%""" Interest on Securities #."%"""
6ent of Premises #)!%"""
Interest on ban;
0eposit )!%"""
Fund 2mbe99lement )"%""" 6ecovery of Bad 0ebt #.%"""
0onations #+"%"""
(ain on Sale of
Furniture !-%"""
Bad debt ."%"""
7ife Insurance Premium +"%"""
0epreciation 2'pense
Furniture *"%"""
Provision for income ta' ).%"""
6epair e'pense !,%"""
7icense renewal fee *%"""
Penalty and Fine )-%"""
Bonus ."%"""
6oyalty -"%"""
Interest on Ban; 7oan *+%"""
Gousehold e'penses !!%"""
$et Pro&t /+)%"""

2=2&F=&
&&
2=2&F=&
&&
Other Infor4ationB
#. Salary includes Ta;a .-%""" paid to the owner.
!. Fund embe99lement occurred after oEce hour.
). 0onations include Ta;a ."%""" paid to a charitable hospital that is approved
under Paragraph ##A of Part B of the Si'th Schedule of ITB% #/.*.
*. 7ife insurance premium is the payment against the insurance policy
purchased in the ownerDs name.
+. Ta' depreciation amounts to Ta;a )"%""".
,. Furniture sold for T;. -.%""" that was originally purchased for T;. -"%""".
>ritten down value of the furniture on the date of sale was T;. +#%""".
#e8uiredB Compute the income from business or profession of r. Shaiham for
the year ended on Mune )"% !"#".
Solution 2B
AssesseeB Hanani Traders
Inco4e YearB 2&'&>''
Assess4ent YearB 2&''>'2
)articulars Ta2a Ta2a
Income from Business and Profession?
Pro&t as per P47 Account /+)%"""
Add? Inadmissible 2'penses
#. Salary .-%"""
!. Fund 2mbe99lement )"%"""
). 0onations -"%"""
*. 7ife insurance premium +"%"""
+. 0epreciation 2'pense 3to be treated later on5 *"%"""
,. Provision for Income Ta' ).%"""
-. Penalty and &ne )-%"""
.. Gousehold e'pense !!%""" )-*%"""
#%)!-%""
"
7ess? 0epreciation 2'pense 3As per ITB5 )"%"""
7ess? $on8Business Income
#%!/-%""
"
#. Interest on Securities #."%"""
!. Interest on Ban; deposit )!%"""
). Capital (ain on Sale of Furniture .%""" !!"%"""
Ta,a3le Inco4e fro4 Business or
)rofession
'=&FF-&&
&
NotesB
#. Salary paid to the owner is not an admissible e'pense.
!. As fund embe99lement occurred after oEce hour% this is not allowed.
). 0onations of Ta;a -"%""" are not made to the approved organi9ation and so
these are not allowed.
*. 7ife insurance premium is inadmissible as this is a personal e'pense.
+. 6oyalty is admissible up to an amount e<ual to .P of the disclosed net pro&t
i.e. .P of T;. /+)%"""% i.e. T;. -,%!*". Thus actual payment is admissible.
,. Bonus is admissible up to an amount e<ual to #"P of the disclosed net pro&t
i.e. #"P of T;. /+)%"""% i.e. T;. /+%)"". Thus actual payment is admissible.
-. Capital gain on sale of furniture was T;. .%""" 3T;. -.%""" F T;. -"%"""5. This
amount should be considered as income under the head XCapital (ainK.
.or2ed ",a4*le 9B
The Trading and Pro&t L 7oss Account of ;ahur and Brothers for the year ended
on Mune )"% !"## is given below?
Hahur and Brothers
Trading L Pro&t and 7oss Account
For the year ended on Mune )"% !"##
De3it Ta2a Credit Ta2a
Bpening Stoc; ."%""" Sales
#%*+"%""
"
Purchases -""%""" Closing Stoc; #,"%"""
>ages ,"%"""
0epreciation on
achinery #+%"""
Power and Fuel #"%"""
(ross Pro&t -*+%"""

'=E'&=&&
&
'=E'&=&
&&
Salaries #!"%""" (ross Pro&t -*+%"""
6ent% 6ates and Ta'es #.%""" Compensation 6eceived ."%"""
Annual embership Fee *"%""" Bad 0ebt 6ecovered !-%"""
7egal 2'penses #+%""" Interest and 0iscount 6eceived !+%"""
Jnderwriting
Commission )"%"""
Interest on Ta'8Free Commercial
Securities ."%"""
Purchase of Trademar;s ."%""" 0ividend on ] 7tdDs Share ,"%"""
Bad 0ebts )"%""" Commission !.%"""
Accounting Fees *"%"""
0epreciation 8 oEce
building )+%"""
Fines and Penalties #.%"""
0onation to Flood 6elief
Fund +"%"""
(ratuity to 2mployees #),%"""
Advance Income Ta' )+%"""
7oss on sale of oEce
furniture #.%"""
0owry paid to the
0aughter -"%"""
iscellaneous 2'pense )"%"""
$et Pro&t !."%"""

'=&:@=&&
&
'=&:@=&
&&

Other infor4ationB
#. Salaries include Ta;a !"%""" as salaries paid to the owner.
!. 6ecovered amount of bad debt was previously allowed as bad debt e'pense.
). 7egal e'pense is incurred for &ling and continuing a case against competitor
for protecting the interest of the business.
*. Fines and penalties were due to avoidance of ta' payment at an earlier
period.
+. Annual membership fee is the fee paid to union for the interest of the
business.
,. Compensation money is received from insurance company against a claim
lodged due to destroy of machinery originally purchased for T;. -"%""" with a
written down value of T;. +"%""".
-. Ta' depreciation was calculated as follows?
a. 0epreciation on achinery
Ta;a !+%"""
b. 0epreciation on BEce Building Ta;a
+"%"""
#e8uiredB Compute the income from business or profession and total ta'able
income of Mahur and Brothers for the year ended on Mune )"% !"##.
Solution 9B
AssesseeB Hahur and Brothers
Inco4e YearB 2&'&>''
Assess4ent YearB 2&''>'2
)articulars Ta2a Ta2a
Income from Business and Profession?
$et Pro&t as per Pro&t and 7oss Account
!."%""
"
Add? Inadmissible 2'penses
3#5 Salaries !"%"""
3!5 Jnderwriting Commission )"%"""
3)5 Purchase of Trademar;s ."%"""
3*5 Fines and Penalties #.%"""
3+5 Advance income ta' )+%"""
3,5 0owry paid to the 0aughter -"%"""
3-5 0epredation 2'penses 3to be treated later on5
Bn achinery #+%"""
Bn BEce Building )+%"""
)")%""
"
+.)%""
"
7ess? 0epreciation 2'pense 3As per ITB5
Bn achinery !+%"""
Bn BEce Building +"%""" -+%"""
+".%""
"
7ess? $on8Business Income
3#5 Interest on Ta' Free Commercial Securities ."%"""
3!5 Capital gain from compensation 3T;. ."%""" F #"%"""
T;. -"%"""5
3)5 0ividend on ] 7tdKs Share ,"%"""
#+"%""
"
Ta'able Income from Business or Profession
)+.%""
"
Add? $on8business Income
Income From Interest on Securities
Interest on Ta' Free Commercial Securities ."%"""
7ess? 2'empted fully ."%""" nil
Capital (ain
Compensation received #"%"""
Income from Bther Sources
0ividend on ] 7tdKs Share ,"%"""
Total Ta,a3le Inco4e
:2D=&
&
.or2ed ",a4*le :B
For the income year ended on Mune )"% !"##% (aco Pharmaceutical Company reports
net pro&t of T;. #-%/.)%""". A close scrutiny of its boo;s of accounts reveals the
following items?
#. Salary and allowances includes per<uisites of &ve directors as mentioned
below?
0irector # 0irector ! 0irector ) 0irector * 0irector +
T;.
#."%
"""
T;.
!+"%
"""
T;.
!."%
"""
T;.
)!+%
"""
T;.
!)"%
"""
!. Amount paid to a contractor of T;. .+%""" without deducting :AT at
prescribed rate.
). Pro&t includes T;. .+%""" as gain on sale of asset. The original cost of the
asset was T;. -"%""" and on the date of sale% the written down value of the
asset was T;. T;. +"%""".
*. The company lodged a claim against the demolishing of an asset and
recovered T;. -"%""". The cost was T;. ."%"""% however% the written down
value of the asset was T;. +"%""".
+. The company has income of T;. *!"%""" from tea grown and manufactured
in Bangladesh which was not considered at the time of computing pro&t.
,. The company has transferred e'port <uota of garments to another company
whose e'port value is estimated as T;. .""%""". $o income is reported in
pro&t and loss account.
-. 2ntertainment e'pense charged was T;. *+"%""".
.. Finance director received foreign travel allowance of T;. +""%""" and
charged against the pro&t. Ge has also received an allowance in last year
and it was deducted for ta' purpose.
/. 2'pense for free sample distribution is shown as T;. )*"%""". 6eported
turnover for the year is T;. .-%/+)%""".
#". 6oyalty e'pense charged is T;. ##!%""".
##. 0epreciation charged is T;. !+)%""" whereas ta' depreciation is T;.
#."%""".
Compute ta'able income from business and profession% considering the information
above.
Solution :B
AssesseeB $aco )har4aceutical Co4*an6
Inco4e YearB 2&'&>''
Assess4ent YearB 2&''>'2
)articulars Ta2a Ta2a
Income from Business and Profession?
$et Pro&t as per Pro&t and 7oss Account
#-%/.)%""
"
Add? Inadmissible 2'penses
#. Salaries 3per<uisites e'ceeding T;. !+"%"""5 #"+%"""
!. Paid to contractor .+%"""
). (ain on sale of asset 3Capital gain? T;. .+%""" F
T;. -"%"""5
#+%"""
*. 2ntertainment e'pense -"%)*"
+. Foreign travel allowance +""%"""
,. 2'penses of free sample #"%#-,
-. 0epredation 2'penses 3to be treated later on5 !+)%"""
#%").%+#,
#/%"!#%+#
,
7ess? 0epreciation 2'pense 3As per ITB5 #."%"""
#.%.*#%+#
,
Add? Income from tea 3*"P of T;. *!"%"""5 #,.%"""
2'port value of garments 3)P of T;. .""%"""5 !*"%""" *".%"""
Ta'able Income from Business or Profession
#/%!*/%+#
,
NotesB
#. Allowable entertainment e'pense is F #%"""%""" Q *P Z #,%/.)%""" Q !P [
*"%""" Z ))/%,," [ T;. )-/%,,". Thus% entertainment e'penses disallowed is
T;. -"%)*".
!. Foreign travel allowance is allowed for once in every two years. As last year%
the director received the allowance and deducted% this year this e'pense is
not allowed.
). 2'pense for free sample distribution allowed is T;. )!/%.!* 3".)-+P of T;.
.-%/+)%"""5. Thus% disallowed e'pense is T;. #"%#-, 3T;. )*"%""" F T;.
)!/%.!*5.
*. 6oyalty e'pense allowed is T;. #%*).%,*" 3.P of T;. #-%/.)%"""5. Thus% the
whole amount is admissible.
Self>Assess4ent ?uestions
#. State the main provisions of Sections !. and !/ of the Income Ta' Brdinance
#/.* relating to computation of income under the head Xincome from business or
professionK.
!. State the provisions of the Income Ta' Brdinance #/.* relating to?
3i5 Bbsolescence allowanceI and
3ii5 Balancing charge.
). 3a5 It is said that the list of allowances under Section !/ of the Income Ta'
Brdinance for computation of income under the head Xincome from business
or professionK is not e'haustive. >rite your comments on the above
statement.
3b5 7ist the inadmissible e'penses under section )" of the Brdinance.
*. The Income Statement with selective notes thereon of Rian 7td for the year ended
on Mune )"% !"## is as under?
Uian Ltd
Inco4e State4ent
%or the 6ear ended on Hune 9&= 2&''
)articulars Ta2a
$et Sales
7ess? Cost of (oods Sold
(ross Pro&t
Add? (ain on Sale of Building 3$ote #5
7ess? Administrative and Selling L 0istribution 2'penses 3$ote !5
Net )ro0t
#+%"""%"
""
.%.""%""
"
,%!""%""
"
!%!""%""
"
*%"""%""
"
!%*""%""
"
'=E&&=&
&&
Other infor4ationB
#. The Cost of the Building was Ta;a .%"""%""" and the amount of accumulated
depreciation up to the date of sale was Ta;a !%-""%""" and sold for Ta;a
-%+""%""".
!. Administrative and Selling L 0istribution 2'penses?
Salaries and >ages Ta;a #%+,!%"""
Fines and Penalties #!+%"""
6ents% 6ates L Ta'es ."%"""
Provision for Bad and 0oubtful 0ebts ,"%"""
7egal Charges )-%"""
Jnderwriting Commission #!"%"""
Incentive Bonuses *"%"""
Cost of Issuing Shares #""%"""
Audit Fees ,"%"""
Bverseas Traveling 2'pense #""%"""
0epreciation 2'pense ##,%"""
Total 2=:&&=&&&
). Salary and wages includes Ta;a #."%""" as payment to the owners and Ta;a
+!"%""" as payment classi&ed as per<uisites.
*. The &nes and penalties are charged by a local court for involvement in illegal
business transactions.
+. 7egal charges have been incurred for defending a suit for alleged breach of a
trading contract.
,. Ta' depreciation amounts to be Ta;a ."%""".
#e8uiredB Compute the income from business or profession of Rian 7td for the year
ended on Mune )"% !"##.
Chapter /
Ca*ital gains
Contents
Introduction
2'amination conte't
To*ic List
>or;ed 2'amples and Solutions
/.# Basics of Capital gains
/.! Some statutory de&nitions
/.) Computation of capital gains
/.* Ta' e'empted capital gains
/.+ $o e'emption on certain assets if investment allowance is received
/., Ta' rates in respect of capital gains
/.- Special Ta' 6ates on income earned from selling shares and stoc;s
/.. Apportionment of sale proceeds between original cost and
subse<uent improvements
Introduction
Learning o3<ecti+es
Identify income from capital gain.
Compute the ta'able income under the head XCapital (ainK.
Identify the allowable deductions under the head.
Identify ta' e'empted capital gains.
Introduce the comple'ity of computing income from capital gain.
Introduce special ta' rate of capital gains earned by certain individuals on
certain gains.
Compute ta' liability on capital gain in di1erent situations.
)ractical signi0cance
The head Xcapital gainK is very signi&cant in terms of understanding and
applications. Transfer of capital assets is very common in business. Thus% in
what situations% transfer of capital assets will result capital gain% what may
happen if the gain is reinvested within a certain time limit% what are the
powers of 0CT regarding the value of declared sale proceeds are some
important points covered in the chapter.
Capital gain ta' rate is di1erent than the regular rates applicable to
individuals and other assesses. Thus% the assessment and computation of ta'
liability is to a greater e'tent di1erent in case of capital gain. These points are
also addressed with due importance.
The chapter% as usual% also presents the scope of income under the head%
admissible e'penses% inadmissible e'penses and other related issues.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the computation of ta'able income under the head Xcapital
gainK is one of the basic re<uirements for determining ta' liabilityN Can you
determine the ta'able income under the headN Can you compute net ta'
liability of an assessee having income under the headN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the total ta'able income for any income year. Before advising the clients%
accountants should have the clear concept relating to the admissible and
inadmissible e'penses so that they can deduct or add the e'penses in
determining the ta'able income.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
Cou will be also using this ;nowledge when you tac;le the ta'ation paper later
on in the Professional Stage and it will also underpin the technical aspects at
the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne income from capital gain.
Identify di1erent scope of income under the head.
Compute the ta'able income under the head capital gain.
Illustrate the income cannot be reported under the head.
Identify the allowable deductions under the head.
Illustrate the power of 0CT if he believes that the declared value at which
the capital asset is transferred is not right.
Compute net ta' liability under the head.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
core concept on computation of income which is vital for calculating ta'
liability. Clear concept and understanding of each contents of this chapter will
help candidates to resolve any problems relating to computation of income
from capital gain.
C-& CA)ITAL $AINS
Section O+er+ie/
There is no capital gain ta' on personal e1ects and agricultural land 3with
certain restrictions5% shares including bonus shares in listed companies.
There is no capital gain ta' on the transfer of land and buildings to a new
company formed to set up an industry.
In determining the transfer value% income ta' authorities may consider the
fair mar;et value if it considers appropriate.
Capital loss can only by set o1 against capital gain.
It is ta'ed at the rate of #+ P in the case of company.
$on8residents are e'empt in case of capital gains on stoc;s and shares
provided they en=oy the same in their own countries.
C-' Basics of Ca*ital $ains
Section F )# provides that ta' shall be payable by an assessment under the
head OCapital (ainsW in respect of any pro&ts arising from the transfer 3i.e.
sale% e'change or relin<uishment% etc.5 of a capital assets. Such pro&ts and
gains shall be deemed to be the income of the income year in which the sale%
e'change% relin<uishment% etc. too; place.

Any gains arising from transfer of a capital asset 3both movable and
immovable5 as de&ned in section !3#+5 of the Income Ta' Brdinance #/.* is
chargeable to income ta' in accordance with paragraph ! of the Second
Schedule of the Brdinance which prescribe rates of income ta' on capital
gains.
C-2 So4e Statutor6 De0nitions
Ca*ital Assets
Capital gain arises only due to the transfer of capital asset. Capital asset is
de&ned in section !3#+5 of ITB #/.*. Capital asset means property of any ;ind
held by an assessee% whether or not connected with his business of
profession% but does not include8
Ca*ital
Asset
UAs per
section
!3#+5V
Transfer
USale%
e'change%
relin<uishme
ntV
UAs per
section !3,,5V
Ca*ital
$ain
UAs per
sections
)#% )!V
Ca*ital
$ain Ta,
UAs per
Para ! of
Second
ScheduleV
3a5 Any stoc;8in8trade 3not being stoc;s and shares5% consumable stores or
raw materials held for the purposes of his business or professionI
3b5 Personal e1ects% that is to say% movable property 3including wearing
apparel% =ewellery% furniture% &'ture% e<uipment and vehicles5% which are
held e'clusively 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 himI and
&c( Agricultural land in Bangladesh% not being land situated8
3i5 in any area which is comprised within the =urisdiction of 0ha;a%
$arayangan= and (a9ipur districts% Chittagong 0evelopment Authority
3C0A5% Hhulna 0evelopment Authority 3H0A5% 6a=shahi 0evelopment
Authority 360A5% a City Corporation% unicipality% Paurashava%
Cantonment BoardI or
&ii( in any area within such distance not being more than &ve miles from
the local limits of 6a=dhani Jnnayan Hartripa;ya 36AMJH5% Chittagong
0evelopment Authority 3C0A5% Hhulna 0evelopment Authority 3H0A5%
6a=shahi 0evelopment Authority 360A5% a City Corporation%
unicipality% Paurashava% Cantonment Board referred to in paragraph
3i5% as the (overnment may having regard to the e'tent of% and scope
for% urbanisation of that area and other relevant considerations% specify
in this behalf by noti&cation in the oEcial (a9etteI USection !3#+5V.
%air Mar2et !alue
In relation to capital asset% fair mar;et value means F
3a5 the price which such asset would ordinarily fetch on sale in the open
mar;et on the relevant day% and% where such price is not ascertainable% the
price which the 0eputy Commissioner of Ta'es may% with the approval in
writing of the Inspecting Moint Commissioner% determineI
&+( the residual value received from the lessee in case of an asset leased by a
&nancial institution having license from the Bangladesh Ban; on
termination of lease agreement on maturity or otherwise sub=ect to the
condition that such residual value plus amount realised during the
currency of the lease agreement towards the cost of the asset is not less
than the cost of ac<uisition to the lessor &nancial institution USection
!3)"5V.
Transfer
Transfer% in relation to a capital asset% includes the sale% e'change or
relin<uishment of the asset% or the e'tinguishments of any right therein% but
does not include?
a5 Any transfer of the capital asset under a gift% be<uest% will or an
irrevocable trustI
b5 Any distribution of the assets of a company to its shareholders on its
li<uidationI and
c5 Any distribution of capital assets on the dissolution of a &rm or other
association of persons or on the partition of a Gindu undivided family
USection !3,,5V.
C-9 Co4*utation of Ca*ital $ains
Section )! of ITB #/.* e'plains the methodology of computing capital gains. In
line with the provisions of that section% computation of capital gains is
presented below?
3a5 The income under the head OCapital gainsW shall be computed after ma;ing
the following deduction from the full value of the consideration received or
accruing from the transfer of the capital asset or the fair mar;et value
thereof% whichever is higher% namely?
3a5 Any e'penditure incurred solely in connection with the transfer of the
capital assetI and
&+( The cost of ac<uisition of the capital asset and any capital e'penditure
incurred for any improvements thereto but e'cluding any e'penditure
in respect of which any allowance is admissible under any provisions of
sections !)3deductions from interest on securities5% !/ 3deductions
from income from business or profession5 and )* 3deductions from
income from other sources5.
3b5 For the purpose of section )!% Ocost of ac<uisition of the capital assetW
means8
3i5 >here it was ac<uired by the assessee by purchase% the actual cost of
ac<uisitionI and
3ii5 >here it becomes the property of the assessee8
3a5 Jnder a deed of gift% be<uest or willI or
3b5 Jnder a transfer on a revocable or irrevocable trustI or
3c5 Bn any distribution of capital assets on the li<uidation of a
companyI or
3d5 Bn any distribution of capital assets on the dissolution of a &rm or
other association of persons or the partition of a Gindu undivided
family.
The actual cost of ac<uisition to the previous owner of the capital asset as
reduced by the amount of depreciation% if any% allowed to the previous
ownerI and where the actual cost of ac<uisition to the previous owner
cannot be ascertained% the fair mar;et value at the date on which the
capital asset became the property of the previous owner.
Gowever% where the capital asset is an asset in respect of which the
assessee has obtained depreciation allowance in any year% the cost of
ac<uisition of the capital asset to the assessee shall be its written down
value increased or diminished% as the case may be% by any ad=ustment
made under section #/3#,5 or 3#-5 or section !-3#5 3i5 or section !/3#5 3'i5?
>here the capital asset became the property of the assessee by
succession% inheritance or devolution% the actual cost of ac<uisition of the
capital asset to the assessee shall be the fair mar;et value of the property
prevailing at the time the assessee became the owner of such property.
If 0CT opines
di1erent fair
value than the
value stated by
transferor
Fair value is higher
than the
consideration by
at least #+P
Fair value is higher
than the
consideration by
at least !+P
0CT will
determine the
value
(overnment
may o1er to
buy the
capital asset
Deter4ination of %air Mar2et !alue
>here in the opinion of the 0eputy Commissioner of Ta'es% the fair mar;et
value of a capital asset transferred by an assessee as on the date of the
transfer e'ceeds the full value of the consideration declared by the assessee in
respect of the transfer of such capital asset by an amount of not less than #+P
of the value so declared% the fair mar;et value of the capital asset shall% with
the previous approval of the Inspecting Moint Commissioner of Ta'es% be ta;en
to be determined USection )!3)5V.
OAer to Bu6 the Ca*ital Assets 36 the $o+ern4ent
>here in the opinion of the 0eputy Commissioner of Ta'es% the fair mar;et
value of a capital asset transferred by an assessee as on the date of the
transfer e'ceeds the declared value thereof by more than !+P of such
declared value% the (overnment may o1er to buy the said asset in such
manner as the $ational Board of 6evenue may prescribe USection )!3*5V.
Illustration
r. Mashim declared the price of a piece of land as T;. )%"""%""" on #+
th
Muly%
!"#"% however% the 0CT estimates the fair value of the land to be T;.
)%+""%""" i.e. more than #+P of the declared value. Ge can with the prior
approval of the IMCT% determine the fair value at T;. )%+""%""" and can
compute capital gain or loss accordingly re=ecting thereby MashimKs declared
value. Further the (overnment may o1er to buy the land when in the opinion
of the 0CTI the fair mar;et value of the said land is say% T;. *%"""%""" i.e. at
least !+P more than the declared value. It is not clear whether in this case%
(overnment would actually buy or uses the pre8emption right to deter under8
declaration.
Since the 0CT is not the proper valuers% applications of the provisions may
delay or complicate the process of property transfer.
The manner to be followed in connection with the purchase of a capital asset
by the (overnment under section )!3*5 of the Brdinance shall be as follows?
3#5 >here the 0eputy Commissioner of Ta'es has reason to believe that any
immovable property is being transferred by a person 3hereinafter referred
to as the transferor5 to another person 3person hereinafter referred to as
the transferee5 and the fair mar;et value of such property e'ceeds the
declared value by more than twenty8&ve per cent% and the consideration
for such transfer as agreed to between the parties has not been truly
stated in the instrument of transfer with the ob=ect of facilitating the
reduction or evasion of the liability of the transferor to pay the ta' under
the Brdinance in respect of any income arising from the transfer or any
other ta'es or duties% he may% sub=ect to the provisions of this rule% initiate
proceedings for the ac<uisition of such property by the (overnment.
3!5 The 0eputy Commissioner of Ta'es shall initiate proceedings for
ac<uisition of immovable property under rule *" by giving a notice to that
e1ect in the oEcial (a9ette and a copy of such notice shall also be
published in the two leading newspapers of wide circulation where such
property is locatedI a copy of such notice shall also be served on the
transferor% the transferee and the person in occupation of the property% if
the transferee is not in occupation thereof Gowever% no such proceedings
shall be initiated after the e'piry of a period of two years from the end of
the month in which the instrument of transfer in respect of such property
is registered under the 6egistration Act% #/"..
3)5 Bb=ection against the ac<uisition of the immovable property in respect of
which a notice has been published in the oEcial (a9ette and the
newspapers may be made in writing by the transferor or the transferee to
the 0eputy Commissioner of Ta'es within si'ty days of the publication of
the notice in the oEcial (a9ette or newspapers.
3*5 The 0eputy Commissioner of Ta'es shall &' a date and place for the
hearing of the ob=ections against the ac<uisition and shall give notice of
the same to every person who has made such ob=ection. Gowever% notice
shall also be given to the transferee of such property even if he has not
made any such ob=ection.
3+5 After hearing the ob=ections% if any% after ta;ing into account all the
relevant materials on record% if the 0eputy Commissioner of Ta'es is
satis&ed that8
3a5 The fair mar;et value of such property e'ceeds the consideration paid
therefore by more than twenty8&ve per cent of such consideration% and
3b5 The consideration for such transfer as agreed to between the parties
has not been truly stated in the instrument of transfer with such ob=ect
as is referred to in clause 3#5I he may ma;e an order for the ac<uisition
of the property under this rule.
3,5 Any person aggrieved by an order made under rule *"3+5 may prefer an
appeal under the Brdinance to the Appellate Moint Commissioner of Ta'es.
3-5 As soon as may be after the order of ac<uisition of any immovable
property has been made under rule *"3+5 and after the disposal of appeal%
if any% the 0eputy Commissioner of Ta'es may by notice in writing% order
any person who may be in possession of the immovable property to
surrender or deliver possession thereof to him or any other person duly
authori9ed by him in writing in these behalf within )" days of the service
of the notice.
3.5 If any person refuses or fails to comply with a notice under rule *"3-5% the
0eputy Commissioner of Ta'es or any other person duly authori9ed by him
under that clause may ta;e possession of the immovable property and
may% for that purpose% re<uisition the services of any police oEcer to
assist him and it shall be the duty of such oEcer to comply with such
re<uisition and may use such force as may be necessary.
3/5 >hen the possession of the immovable property is surrendered or
delivered under rule *"3-5% the 0eputy Commissioner of Ta'es or the
person duly authorised by him in that behalf or% as the case may be% when
the possession thereof is ta;en under rule *"3.5% the (overnment shall
tender as consideration a sum e<ual to the aggregate of the amount of the
declared value for its transfer plus #"P of the said amount to the
transferor and the property shall vest absolutely in the (overnment free
from all encumbrances. Gowever% nothing in rule *"3/5 shall operate to
discharge the transferor or the transferee or any other person 3not being
the (overnment5 from any liability in respect of such encumbrances% and
notwithstanding anything contained in any other law% such liability may be
enforced against the transferor or the transferee or such other person by a
suit for damages.
3#"5 $otwithstanding anything contained in rule *"3/5% if any dispute arises
as to the apportionment of the amount of consideration amongst persons
claiming to be entitled thereto% the (overnment shall deposit in the
principal civil court of original =urisdiction the amount re<uired to be
tendered under rule *"3/5 and refer such dispute for decision of the court
and the decision of the court thereon shall be &nal.
Transfer of ca*ital asset used in the 3usinessB Sec 92@(
A capital gain arising from transfer of a capital asset being buildings or lands
which immediately before the date on which transfer too; place was being
used by the assessee for the purposes of his business or profession shall be
e'empted from payment of the income ta' up to the e'tent and upon
ful&llment of the conditions as mentioned below?8
3a5 A new capital asset for the purposes of his business or profession has to be
purchased within a period of one year before or after the date of transfer.
3b5 The declaration shall have to be &led for e'emption before the assessment
is made.
3c5 >hen the capital gain is greater than the cost of the new asset% the capital
gain up to the e'tent of cost of ac<uisition of the new asset shall be
e'empted and the balance shall be charged to ta'. In determining the
depreciation on such asset% cost shall be ta;en to be nil.
3d5 >hen the capital gain is e<ual or less than the cost of the new asset% no
ta' shall be charged on the capital gain.
The time8limit for purchase of the new asset can be e'tended by the 0eputy
Commissioner of Ta'es with prior approval of the Inspecting Moint
Commissioner of Ta'es.
Illustration 'B
7et us assume that a gain of T;. #%"""%""" is reali9ed by Company ] on
transfer of a building which was used by the company for running its business.
Gowever% within one year% the company has ac<uired another building costing
T;. #%+""%""". Show the implication of capital gain ta'.
(ain on transfer of building #%"""%"""
Cost of the new building #%+""%"""
Capital gain chargeable to ta' nil
0epreciation allowance will be available on cost additional
investment
+""%"""
Gowever% if the new building was purchased for T;. #%"""%"""% then
(ain on transfer of building #%"""%"""
Cost of the new building #%"""%"""
Capital gain chargeable to ta' nil
0epreciation allowance will be available on cost additional
investment
nil
Again% if the new building was purchased for T;. .""%"""% then
(ain on transfer of building #%"""%"""
Cost of the new building .""%"""
Capital gain chargeable to ta' !""%"""
0epreciation allowance will be available on cost additional
investment
nil
Illustration 2B
]CR Company sold a piece of land on #+ Muly% !"#" for T;. !" million. It incurred
advertisement cost of T;. ."%""" and paid T;. )""%""" bro;erage commission.
It bought the land + years bac; at a cost of T;. ) million% stamp duty and legal
costs were T;. *""%""" and T;. /"%""" respectively. Bn )" $ovember% !"#" it
has bought another price of land in 0ha;a at a cost of T;. #" million inclusive of
legal costs. The Company has duly informed the 0CT about its intention to roll
over the capital gain to new land purchased.
XYU Co4*an6
Assess4ent 6ear 2&''>2&'&
Co4*utation of Ca*ital gainB
Sale price of land !"%"""%""
"
7ess? Commission on sale )""%"""
Advertisement ."%""" )."%""
$et sale proceeds #/%,!"%""
"
0educt Cost of ac<uisition?
Purchase price )%"""%"""
Stamp duty *""%"""
7egal costs /"%""" )%*/"%"""
Capital gain #,%#)"%""
"
Investment made under Sec. )!3+5 3#"%"""%"
""5
Capital gain assessed ,%#)"%"""
Ta' value of new assets 3>0:5 would be $il and capital gain ta' is T;. /#/%+""
i.e. #+P on T;. ,%#)"%""".
7et us further assume that the cost of new land is T;. !+ millions% all inclusive
and now the rollover would be?
Cost of new asset
T;. !+%"""%"""
Investment made under Sec. )!3+5 3#,%#)"%"""5
Ta' written down value carried forward .%.-"%"""
For second land% the ac<uisition cost would be T;. .%.-"%""" and on its
disposal% if any% in future capital gain would be calculated accordingly.
C-: Ta, ",e4*ted Ca*ital $ains
Some capital gains are non8assessable and thus e'empted from ta'. These
are 8
a( Transfer of ca*ital assets used for the *ur*ose of 3usinessB Sec
92@(
If the capital gains% arising out of transfer of capital assets used in the
business or profession% is used fully or in part to purchase a new capital
asset within a period of one year before or after the date of transfer and if
the assessee elects in writing before the assessment for rolling over the
gain on new asset.
3( Transfer of $o+ern4ent securities and shares of *u3lic>listed
co4*aniesB Sec 92F(
Capital gains which arise from transfer of (overnment securities and
stoc;s and shares of public companies listed with a Stoc; 2'change in
Bangladesh are e'empted from ta'.
&c( Transfer of ca*ital 3eing 3uildings and lands to a ne/ co4*an6B
Sec 92'&(
>hen buildings and lands are transferred to a new company for setting up
an industry and the whole amount of capital gain arising out of such
transfer is invested in the e<uity of the said company% then the capital
gain shall not be charged to ta' as income of the year of the transfer.
d( Transfer of ca*ital asset of a 0r4 to a ne/ co4*an6B Sec 92''(
>hen capital gain arises from the transfer of capital asset of a &rm to a
new company registered under the Companies Act% #/#)4#//* and the
whole amount of capital gain is invested in the e<uity of the said
company by the partners of the &rm% then the capital gain shall not be
charged to ta' as income of the year of the transfer.
C-@ No e,e4*tion on certain assets if in+est4ent allo/ance is
recei+edB Sec 92'2(
$o e'emption is allowable on Capital gains which arises from transfer of the
following capital assets as is attributable to the cost of ac<uisition of such
capital asset in respect of which any investment allowance referred to in
paragraphs #% !% )% *% +% ,% .% /% #" and ## of Part XBK of the Si'th Schedule
was at any time allowed% notwithstanding the e'emptions available under
sections )!3+5% 3-5% 3#"5 and 3##5?8
#. Insurance sum or deferred annuity 3Paragraphs 3#5% 3!5 and 3)5 of Part XBK
of the Si'th Schedule5
!. Provident fund under the Provident Fund Act #/!+ 3Paragraph 3*5 of Part
XBK of the Si'th Schedule5
). 6ecogni9ed Provident Fund 3Paragraph 3+5 of Part XBK of the Si'th Schedule
*. Approved Superannuation Fund 3Paragraph 3,5 of Part XBK of the Si'th
Schedule5.
+. Primary Stoc;s and Shares of a public company listed with a Stoc;
2'change in Bangladesh 3Paragraph 3.5 of Part XBK of the Si'th Schedule5.
,. Primary Shares or Stoc; 3Paragraph 3/5 of Part XBK of the Si'th Schedule5
-. Primary 0ebenture or 0ebenture Stoc; 3Paragraph 3/5 of Part XBK of the
Si'th Schedule5
.. Savings Certi&cate% Jnit Certi&cate% utual Fund Certi&cate% (overnment
securities and shares of investment companies 3Paragraph 3#"5 of Part XBK
of the Si'th Schedule5.
/. Balance in 0eposit Pension Scheme 3Paragraph 3##5 of Part XBK of the Si'th
Schedule5
C-E Ta, rates in res*ect of ca*ital gains
Capital gain ta' is di1erent than regular ta' and is prescribed in Para ! of
Second Schedule of Income Ta' Brdinance% #/.*.
Capital gains in the hands of a company other than the capital gains arising
out of disposal of share will be ta'ed as a bloc; of income separate from other
income of the assessee company at a Aat rate of #+P regardless of the period
of holding of the asset from the date of its ac<uisition.
If the assessee is other than a company and the asset is transferred before
the e'piry of &ve years from the date of its ac<uisition% the capital gains will
be ta'ed at the usual rate applicable to the assesseeKs total income including
the capital gains. If the asset is transferred at any time after the e'piry of &ve
years from the date of its ac<uisition% the capital gains will be ta'ed at the
usual rate applicable to the assesseeKs total income including the capital gains
or at the rate of &fteen percent whichever of the two is lower. Thus% in short
the rates can be speci&ed as below?
Ca*ital gain
arises to
Situations )ercentage
3a5 company Q #+P
3b5 person other
than company
i5 due to disposal within
+ years
At regular rate
ii5 due to disposal after +
years
At regular rate or Q #+P%
whichever is lower
C-F S*ecial Ta, #ates on inco4e earned fro4 selling shares and stoc2s
As per S6B !,/8AI$4IT4!"#" circulated on Muly "#% !"#"% special ta' rate is
proposed for income from sale of stoc;s and shares by speci&ed persons as
mentioned below?
The following reduced ta' rates will be applicable on the income earned from
transaction of securities 3e'cluding government securities5 listed in the Stoc;
2'changes?
Sl
-
Nature of Ta,*a6erOs inco4e
Ta,
rate
3a
5
Any income earned from trading of shares4securities by a
co4*an6 de&ned as per section !3!"5 and by a 0r4 de&ned
as per Section !3)!5
#"P
3b
5
Any income earned from trading of shares4securities by any
S*onsor Shareholder P Director of a Ban2= %inancial
Institution= Merchant Ban2= Insurance Co4*an6= Leasing
Co4*an6= )ortfolio Manage4ent Co4*an6= Stoc2 Dealer
or Stoc2 Bro2er Co4*an6
+P
3c
5
Any income earned from trading of shares4securities by any
Shareholder Ue'cluding the Sponsor Shareholders40irectors
mentioned in above Sl. 3b5V having #"P or more shares of the
total paid up capital of a company 4 companies listed at any
time during the income year
+P
#. If a shareholder mentioned in Sl. 3b5 is a Company or Firm% then ta' rate will
be #"P% same as mentioned in Sl. 3a5.
!. In case of transferring the shares by any Sponsor Shareholder 4 0irector
mentioned in Sl. 3b5% ta' will be deducted at the rate of @J on the di1erence
between transfer value and cost of ac<uisition of the securities as per
Section +) of the ITB% #/.*.
). The income from trading of shares of all other types of ta'payersK e'cluding
those mentioned in the above lists is e,e4*ted from ta'.
*. Gere% the term OSecuritiesW will include any stoc;s% shares% mutual fund
units% bonds% debentures or other securities of any listed company tradable
in the stoc; e'changes of the country 3e'cluding the securities issued by the
government5.
+. This S6B is e1ective from Muly "#% !"#".
C-D A**ortion4ent of sale *roceeds 3et/een original cost and su3se8uent
i4*ro+e4ents
Since capital gain ta' di1ers in rates in case of assessee other than a company
depending on the length of period the property is held by the assessee% it is
essential to assign capital gain on them separately.
Illustration
r. Marin bought a building within the =urisdiction of 0ha;a unicipality . years
bac; for T;. ,+ million on which he also incurred another T;. )+ million as
improvements * years ago. Ge has sold the property in mid Mune% !"## for T;.
#." million.
$ow% sale proceeds of T;. #." millions should be apportioned between original
cost and improvements due to di1erent capital gain ta' rate applicable for
transfer made within + years and after &ve years. Such apportionment is made
below proportionately?
Bn original cost? T;. #." millions _ ,+4#"" [ T;. ##- millions
Bn improvement? T;. #." millions _ )+4#"" [ T;. ,) millions
$ow capital gain and ta' on capital gain will be computed as below?
Original Cost I4*ro+e4en
ts
Cost ,+%"""%""" )+%"""%"""
Sale Proceeds ##-%"""%""" ,)%"""%"""
Capital gain assessed +!%"""%""" !.%"""%"""
Capital gain ta' rate 6egular rate or #+P% whichever is
lower
#+P
Improvement part has been disposed o1 within + years of ac<uisition and thus
T;. !. million would be included with the total income of the assessee. Briginal
cost part has been held for . years and the ta' on it% would be the lower of ta'
payable on the total income including capital gain and #+P.
.or2ed ",a4*les and Solutions
.or2ed ",a4*le 'B
r. 2rshad has recorded the following transactions for the year ended on Mune )"%
!"##. Cou are re<uired to comment on implication of capital gain and capital gain
ta'es on each of the following transactions independently.
3a5 Ge has sold a motorcar at T;. ,""%""" that he purchased in !""- at a cost of T;.
*""%""" and used solely for personal purposes.
3b5 Sale of a )8storied building for T;. )%"""%""" in 0ecember !"#"% which was
purchased on arch !""" for T;. #%.""%""". In Manuary !""*% the building was
e'tended at a total cost of T;. +""%""". The fair value of the building in
0ecember !"#" was T;. )%!""%""".
3c5 Sold an agricultural land situated outside the =urisdiction of Comilla Cantonment
Board at a total price of T;. !%"""%""" which was purchased + years bac; at a
total price of T;. #%"""%""".
3d5 Sold a machine% purchased at a price of T;. ."%""" for the purpose of his
business% at a price of T;. #+"%""" at fair mar;et value. Another T;. )"%""" was
spent to improve the machine. At the time of sale% the machine had accumulated
depreciation amounting to T;. ,"%""".
Solution 'B
3a5 The motorcar is a movable property and used e'clusively for personal purposes.
It does not fall under the de&nition of capital asset as per section !3#+5. Thus% he
is not re<uired to assess capital gain on this transfer and no ta'es as well.
3b5 Calculation of capital gain from the sale of building?
Sale proceeds or fair mar;et value whichever is higher T;. )%!""%"""
7ess?
Cost of ac<uisition T;. #%.""%"""
Cost of e'tension +""%"""
!%)""%"""
Capital (ain T;. /""%"""
Gere% capital gain will be ta'ed at regular rate or #+P% whichever is lower as
transfer is made after + years both original cost and e'tension wor;.
3c5 The land% being an agricultural land situated outside the =urisdiction of a
cantonment board% does not fall under the category of capital asset as per
section !3#+5. So% the capital gain arising from such transfer will not be ta'ed.
3d5 Calculation of capital gain from the sale of machine?
Sale proceeds or fair mar;et value whichever is higher T;. #+"%"""
7ess?
Cost of Ac<uisition T;. ."%"""
Cost of improvement )"."""
##"%"""
Ca*ital $ain T2-
:&=&&&
.or2ed ",a4*le 2B
r. Ashi<ur 6ahman purchased an apartment in $ovember !""- for T;. #%,""%""".
Ge has paid #P bro;erage fee and subse<uently spent another T;. +""%""" for the
renovation of the house. Bn #
st
Muly% !"#" he entered into an agreement to sell the
property to r. Anowar for a consideration of T;. +%"""%""" and received earnest
money 3advance money5 of T;. #""%""". As per the terms of the agreement% the
balance payment should be made within /" days of the agreement and if not the
earnest money will be forfeited. As r. Anowar could not ma;e the payment within
the stipulated time the amount of T;. #""%""" was forfeited by r. 6ahman.
Subse<uently on #"th Mune% !"##% r. 6ahman sold the apartment to r. Abdur
6ahman for T;. +%+""%""". Ge also paid !P bro;erage fee on sale of the apartment.
The fair mar;et value of the house on the date of sale was T;. +%!""%""". Calculate
ta'able capital gains for the assessment year !"##8#!.
Solution 2B
Calculation of Ta'able capital gains?
)articulars Ta2a Ta2a
Income under TCapital (ainsT 3Sec )#5?
Full value of consideration received against Capital Asset?
3including the forfeited amount of T;. #""%"""5 +%,""%"""
Fair ar;et :alue at the Time of Transfer% +%!""%"""
0isposal vale of the capital asset 3whichever is higher5
+%,""%""
"
7ess 8 Allowable 0eductions
Bro;erage fee for sale 3+%+""%""" ' !P5 ##"%"""
Cost of Ac<uisition U#%,""%""" Z 3#%,""%""" 'l P5V #%,#,%"""
Cost of improvements of the asset +""%"""
!%!!,.""
"
Capital (ain
)%)-*%""
"
.or2ed ",a4*le 9B
r. Mason runs a business of his own. Ge has purchased a piece of land at a cost of
T;. #"%"""%""" on #
st
Manuary !""* within the =urisdiction of Chittagong unicipality.
Ge has paid T;. +"%""" as &ndersD fee and another T;. #!"%""" as registration fee for
the land. Ge has sold the land on Muly #+% !"#" at price of T;. !!%"""%""". For the
sale% he has to pay bro;erage fee Q !P on the gross sales amount received. In 0CTKs
opinion% the fair mar;et value of the land at the time of sale is T;. !"%"""%""". Bn
Mune )"% !"## he has purchased another land at a cost of 3a5 T;. #"%"""%""" 3b5 T;.
#!%"""%""" and e'pressed his intention of getting roll over relief of capital gain on
new land in writing to 0CT. Ge also had T;. !""%""" as ta'able income from interest
on securities and T;. #""%""" from income from other sources.
Solution 9B
AssesseeB Mr- Hason
Assess4ent YearB 2&''>'2
Inco4e YearB 2&'&>''
)articulars Ta2a Ta2a a( Ta2a 3( Ta2a
Inco4e under TCa*ital $ainsT See
9'(B
Sale Proceeds of Capital Assets% or
!!%"""%"
""
Fair ar;et :alue at the Time of
Transfer% whichever is higher
!"%"""%"
""
!!%"""%""
"
Less > Allo/a3le Deductions
3a5 2'penditure incurred to transfer
the asset 3$ote !5 **"%"""
3b5 Cost of Ac<uisition 3$ote )5
#"%#-"%"
""
3c5 Capital e'penditure incurred for
improvement of the asset nil
#"%,#"
"""
Ca*ital $ain
##%)/"%""
"
##%)/"%"""
7ess? 6einvested (ain to claim rollover relief USec )!3+5V
#"%"""%""
"
##.)/"%"""
Ca*ital $ain Assessed Note :(
'=9C&=&&
&
nil
Ta' value of new asset nil ,#"%"""
Co4*utation of Ta,a3le Inco4eB
Income from Interest on Securities 3given5 !""%""" !""%"""
Capital (ains 3as calculated above5 #%)/"%""" nil
Income from Bther Sources 3given5 #""%""" #""%"""
Total Ta,a3le Inco4e #%,/"%""" )""%"""
Co4*utation of Ta, Lia3ilit6B
Ta,a3le Inco4e
#ate
A4ount of Ta,
Inco4e tier Case a( Case 3( Case a( Case 3(
Bn First Ta;a #%."%""" #%."%""" $il "" ""
Bn $e't Ta;a )%""%""" #%!"%""" #"P )"%""" #!%"""
Bn $e't Ta;a *%""%""" #+P ,"%"""
Bn $e't Ta;a )%""%""" !"P ,"%"""
Bn Balance Ta;a +%#"%""" !+P #!-%+""
Total
#,%/"%""
"
)%""%""" !%--%+"" #!%"""
Average Ta' 6ate U!%--%+""4#%,/"%"""V
U#!%"""4)""%"""5
#,.*!P *.""P
Flat 6ate #+.""P #+.""P
Ta' 6ate on Capital (ain 3note ,5 #+.""P nil
Ta' on Capital (ain 3#+P on #)%/"%"""5 !%".%+""
Ta' on remaining ta;a )""%""" will be at
regular rate 3)""%""8#."%"""5 ' #"P
#!%""" #!%"""
Net Ta, Lia3ilit6 22&=@&& '2=&&&
NotesB
#. The land <uali&ed as capital asset. Because% it is not an agricultural land and is
situated within the =urisdiction area as speci&ed.
!. 2'penditure incurred to transfer the capital asset% Ta;a **"%""" 3bro;erage fees
Q !P of T;. !!%"""%""".
). Cost of ac<uisition% T;. #"%#-"%""" 3cost #"%"""%""" Z &ndersD fees +"%""" Z
registration Fees #!"%"""5
*. In case of 3a5 as the investment was less than the capital gain% there will be
capital gains e<uivalent to di1erential amount and ta' have to pay on such
amount though the ta' value of the new asset will be nil. But in case of 3b5
investment is more than the capital gain and so there will be no capital gain left
to charge under the head and the ta' value of the new asset will be the
di1erence between the cost of new assets and capital gains rolled over 3ta;a
#!%"""%""" 8 ta;a ##%)/"%""5.
+. There is no revenue gain as the cost and written down value of the asset is same.
,. Gere% the assessee is a person other than a company and the asset is sold after +
years of purchase. So% as per rule% ta' rate will be the lower of average la' rate
computed on ta' on total income including capital gain and #+P Aat rate%
whichever is lower. So in case 3a5% applicable ta' rate on capital gain 3ta;a
#%)/"%"""5 will be #+P as this is the lower one and at regular rate on remaining
income. But in case of case 3b5% ta' will be applied at regular rate as there is no
income under the head Dcapital gainD.
Self>Assess4ent ?uestion
#. 2'plain the terms Ocapital assetW% Ocost of ac<uisitionW and Ofair mar;et valueW
under the Income Ta' Brdinance #/.*.
!. State the capital gains e'empted from payment of Income Ta' under the
Brdinance.
). r. Gasan has purchased a machine at a total cost of T;. +""%""" on !)DT April
!"", for the purpose of his profession. In addition% he has paid T;. #"%""" as legal
fees. Ge has spent an additional sum of T;. +"%""" for improvement of the
machine. Bn )"
th
0ecember !""/% he had sold the machine at a total price of T;.
,""%""" when the balance of allowable accumulated depreciation was T;. #!,%"""
in his boo;s of accounts. But the fair mar;et value on that date amounts to T;.
,+"%""" in the opinion of 0CT. Ge incurred advertisement cost of T;. !"%""" and
#.+P as bro;erage commission on the sale value. Ge has ta'able income of T;.
!)"%""" from other sources. Compute capital gain% total ta'able income% and
specify ta' rate thereon.
Chapter #"
Inco4e fro4 other sources
Contents
Introduction
2'amination conte't
To*ic List
>or;ed 2'amples and Solutions
#".# Introduction
#".! 0ividend
#".) Interest Income other than Interest on Securities
#".* 6oyalty
#".+ Fees for Technical Service
#"., Income from 7etting of Assets
#".- 0eemed Income under di1erent sub8sections of Section #/
#".. Allowable 0eductions
#"./ Inadmissible 0eductions
Introduction
Learning o3<ecti+es
Identify income from other sources.
Compute the ta'able income under the head XIncome from Bther SourcesK.
Identify the allowable deductions under the head.
Identify ta' e'empted income under the head.
Introduce the comple'ity of computing income from other sources.
2'plain the application of T0S and (rossing Jp of income in certain cases.
Compute ta' liability on income from other sources in di1erent situations.
)ractical signi0cance
The head Xincome from other sourcesK is very signi&cant due to its importance
as a residual head of income. Income that doesnKt fall under any other head
comes under the scope of this head. Thus% it is important to ;now di1erent
categories of income coming under the dead.
0ividend income% interest income 3in speci&c cases5% royalty income% fees for
technical services% income from letting machineries are some income coming
under the head. Some deemed income under section #/ will also be
considered as income from other sources.
Ta' is deducted at sources as per rules in some categories of income under
the head. These incomes are re<uired to be grossed up before reporting them
in return of income. Sometimes% these are considered as &nal settlement of
ta' liability under section .!C and it is important to ;now the impact on
computing ta'able income and ta' liability as well.
The chapter% as usual% also presents the scope of income under the head%
admissible e'penses% inadmissible e'penses and other related issues.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the computation of ta'able income under the head
Xincome from other sourcesK is one of the basic re<uirements for determining
ta' liabilityN Can you determine the ta'able income under the headN Can you
compute net ta' liability of an assessee having income under the headN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the total ta'able income for any income year. Before advising the clients%
accountants should have the clear concept relating to the admissible and
inadmissible e'penses so that they can deduct or add the e'penses in
determining the ta'able income.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
Cou will be also using this ;nowledge when you tac;le the ta'ation paper later
on in the Professional Stage and it will also underpin the technical aspects at
the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne income from other sources.
Identify di1erent scope of income under the head.
Compute the ta'able income under the head.
Identify T0S and &nal settlement of ta' liability under section .!C.
Identify the allowable deductions under the head.
Introduce grossing up of income in certain cases and illustrate its impact
on computing ta'able income.
Compute net ta' liability under the head.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
core concept on computation of income which is vital for calculating ta'
liability. Clear concept and understanding of each contents of this chapter will
help candidates to resolve any problems relating to computation of income
from other sources.
'&-& INCOM" %#OM OT;"# SOU#C"S
Section O+er+ie/
Income from other sources is the last and residual head of income.
The total income may not be ta'able income.
There are some allowable% inadmissible and not permissible deductions
under the head.
0ividend% interest% royalty and fees for technical services are signi&cant
sources of income under the head.
Bn some income under the head% ta' is deducted at sources at speci&ed
rates.
(rossing up of income is important to report ta'able income.
Sometimes ta' deducted at sources is considered as &nal payment of ta'
liability under section .!C.
There are some admissible and inadmissible deductions under the head.
'&-' Introduction
This is the residuary head of income as mentioned in Section !" of the Income
Ta' Brdinance #/.*.
The following income of an assessee is assessable under this head?
3#5 0ividend and interest.
3!5 6oyalties and fees for technical services.
3)5 Income from letting of machinery% plant or furniture and also of buildings
if letting of buildings is inseparable from the letting of the machinery%
plant or furniture.
3*5 0eemed income under section #/3#5% 3!5% 3)5% 3*5% 3+5% 3.5% 3/5% 3#"5% 3##5%
3#!5% 3#)5% 3!#5% 3!#A5 or 3!*5.
3+5 Income of any ;ind or from any source which is not classi&able under any
of the other heads speci&ed in Section !".
From the above points% income from other sources can broadly be categori9ed
as follows?
Categories Particulars 6eferences
Speci&ed
Income
0ividend% interest%
royalties% fees for
technical services% income
from letting of speci&ed
assets
Section )) 3a5% 3b5 and 3c5
0eemed
income
Income as speci&ed in
di1erent subsections of
section #/
Section ))3d5% Section #/3#5% 3!5%
3)5% 3*5% 3+5% 3.5% 3/5% 3#"5% 3##5%
3#!5% 3#)5% 3!#5% 3!#A5 and 3!*5.
6esidual
income
Any income that is not
classi&ed as income in
any other sections
Section )) 3e5
'&-2 Di+idend
Section !3!,5 de&nes dividend in this way F 0ividend includes 8
3a5 any distribution by a company out of accumulated pro&ts% whether
capitali9ed or not % if such distribution entails the release by the company
to its shareholders of all or any part of its assets or reserves USection !3!,5
3a5VI
3b5 any distribution by a company% to the e'tent to which the company
possesses accumulated pro&ts% whether capitali9ed or not% to its
shareholders of debentures% debenture8stoc; or deposit certi&cates in any
form% whether with or without interest USection !3!,53b5VI
3c5 any distribution made to the shareholders of a company on its li<uidation
to the e'tent to which the distribution is attributable to the accumulated
pro&ts of the company immediately before its li<uidation whether
capitali9ed or not USection !3!,53c5VI
3d5 any distribution by a company to its shareholders on the reduction of its
capital% to the e'tent to which the company possesses accumulated pro&ts
whether such pro&ts have been capitali9ed or not USection !3!,53d5VI
3e5 any pro&t remitted outside Bangladesh by a company not incorporated in
Bangladesh under the Companies Act% #//* USection !3!,53dd5VI
3f5 any payment by a private company of any sum 3whether as representing a
part of the assets of the company or otherwise5 by way of advance or loan
to a shareholder or any payment by any such company on behalf% or for
the individual bene&t% of any such shareholder% to the e'tent to which the
company% in either case% possesses accumulated pro&t% but does not
include 8
3i5 a distribution made in accordance with section !3!,53c5 or 3d5 in
respect of any share including preference share for full cash
consideration% or redemption of debentures or debenture8stoc;% where
the holder of the share or debenture is not entitled in the event of
li<uidation to participate in the surplus assetsI
3ii5 any advance or loan made to a shareholder in the ordinary course of its
business% where the lending of money is a substantial part of the
business of the companyI
3iii5any dividend paid by a company which is set o1 by the company
against the whole or any part of any sum previously paid by it an
treated as dividend within the meaning of section !3!,53e5 to the
e'tent to which it is so set o1.
3iv5any bonus share issued by a company USection !3!,53e5V.
",e4*tionB Any income from dividend of a mutual fund or a unit fund is
e'empted up to T;. !+%""" USi'th schedule% Part A% Para !!AV.
Ta, Deducted at SourcesB Ta' on dividend income will be deducted at
following rates?
T6*e of Assessee #esidential Status TDS
#ates
Company Both resident and non8resident !"P
Person other than
Company
6esident and non8resident
Bangladeshi
#"P
$on8resident foreigner !+P
$rossing u*B Ces. Gowever% it is important to ;now the rate of T0S before
grossing up.
IllustrationB
r. 6ole' is a non8resident foreigner and received T;. -%+"" as dividend from
a Public 7imited Company incorporated in Bangladesh. Gere% rate of T0S was
!+P and thus% after grossing up% the amount of gross dividend will be T;.
#"%""" 3-%+"" #""4-+5.
'&-9 Interest Inco4e other than Interest on Securities
All interest income other than those considered in XInterest on SecuritiesK are
considered under this category. All possible sources of income% e'emption
limit and T0S rates are given in the table below?
Sources of Interest inco4e TDS
rate
",e4*tion
#. Interest on Savings 4 Fi'ed
deposits from a Ban;% co8
operative ban;% non8ban;ing
&nancial institution% leasing
company% housing &nance
company
#"P
$o e'emption
2* Share of pro&t from any ban;
run on Islamic Principles.
#"P $o e'emption
). Interest on Savings
Certi&cates?
a. + years Bangladesh
Sanchayapatra
b. ) monthly pro&t based ) year
Bangladesh Sanchayapatra
c. Pensioner Sanchayapatra
d. Paribar Sanchayapatra
+P
$o e'emption
*. Interest on Post BEce Savings
Ban;
#"P $o e'emption
+. Interest on >age 2arnerKs
0evelopment Bond.
+P $o e'emption
,. Interest on $on86esident
Foreign
Currency 0eposit Account
$il Fully e'empted
,* Interest on 0PS 4 Contributory
Savings Scheme run by a
commercial Ban; and approved
by the government.
$il Fully e'empted
.. Interest on Bangladesh
Industrial
0evelopment Bond
#"P 2'empted up to T;.
!+%""". If the interest
amount e'ceeds T;.
!+%"""% #"P T0S is
allowed on the whole
interest amount and to be
considered as the &nal
payment of ta' as per
Section .!3c5.
/. JS 0ollar Premium Bond $il Fully e'empted
#". JS 0ollar Investment Bond $il Fully e'empted
$rossing u*B (rossing up is important for interest income across items #% !%
)% *% + and . where T0S is applicable. It is not re<uired for other * items 3,% -%
/ L #"5 which is fully e'empted from ta' and thus no ta' is deducted at
source.
Illustration
7etKs assume that r. Arshad has reported interest income
from the following sources for the ended Mune )"% !"##.
Compute grossed up income.
3i5 Interest on &'ed deposit T;. #.%""".
3ii5 Interest on savings account T;. /%"""
3iii5 Share of pro&t from Islami Ban; Bangladesh 7imited T;.
#)%+""
3iv5 Interest on Savings certi&cate T;. /%+""
3v5 Interest on Post BEce Savings Ban; T;. /%"""
3vi5 Interest on >age 2arnerKs 0evelopment Bond T;. *%-+"
3vii5 Interest on $on86esident Foreign Currency 0eposit
Account T;. #"%"""
3viii5 Interest on 0PS T;. +%"""
3i'5 Interest on Bangladesh Industrial 0evelopment Bond
a5 T;. !"%""" and
b5 T;. !-%"""
3'5 Interest on JS 0ollar Premium Bond T;. ,%"""
3'i5 Interest on JS 0ollar Investment Bond T;. .%"""
Co4*uting $rossed U* Inco4e
Sources of interest inco4e TDS #ate %or4ulae $rossed u*
inco4e
Interest on &'ed deposit #"P T;. #.%"""4#8
".#
T;. !"%"""
Interest on savings account #"P T;. /%"""4#8
".#
T;. #"%"""
Share of pro&t from IBB7 #"P T;. #)%+""4#8
".#
T;. #+%"""
Interest on Savings certi&cate +P T;. /%+""4#8
"."+
T;. #"%"""
Interest on Post BEce Savings
Ban;
#"P T;. /%"""4#8
".#
T;. #"%"""
Interest on >age 2arnerKs
0evelopment Bond
+P T;. *%-+"4#8
"."+
T;. +%"""
Interest on $on86esident Foreign
Currency 0eposit Account
Fully
2'empted
$4A $4A
Interest on 0PS Fully
2'empted
$4A $4A
Interest on Bangladesh Industrial
0evelopment Bond
T;. !"%""" Fully
2'empted
$4A $4A
T;. !-%""" #"P T;. !-%"""4#8
".#
T;. )"%"""
^
Interest on JS 0ollar Premium
Bond
Fully
2'empted
$4A $4A
Interest on JS 0ollar Investment
Bond
Fully
2'empted
$4A $4A
^
T;. )%""" of ta' paid is the &nal ta' liability on this income. $o further ta'es
is due on this income.
'&-: #o6alt6
As per section ! 3+,5 of ITB #/.*% royalty means consideration 3including any
lump sum consideration but e'cluding any consideration which is classi&able
as income of the recipient under the head TCapital gainsT5 for 8
3a5 transfer of all or any rights% including the granting of a licence in respect of
a patent% invention% model% design% secret process or formula% or trade
mar; or similar propertyI
3b5 the imparting of any information concerning the wor;ing of% or the use of%
a patent% invention% model% design% secret process or formula% or trade
mar; or similar propertyI
3c5 the use of any patent% invention% model% design% secret process or formula%
or trade mar; or similar propertyI
3d5 the imparting of any information concerning technical% industrial%
commercial% or scienti&c ;nowledge% e'perience or s;illI
3e5 the transfer of all or any rights% including granting of a licence% in respect
of any copyright% literary% artistic or scienti&c wor;% including &lms or video
tapes for use in connection with television or tapes for use in connection
with radio broadcasting% but not including consideration for sale%
distribution or e'hibition of cinematograph &lmsI or
3f5 the rendering of any services in connection with any of the aforesaid
activities
Gowever% section ),% gives the guideline of how income from royalties% literary
wor;s% etc. can be allocated among di1erent income years depending on the
time used for completing the wor;s. BrieAy% the guideline is as follows?
Time ta;en to complete the
wor;
Allocation on an e<ual basis among the income
years
7ess than #! months the income year in which it is received
ore than #! but less than
!* months
the income year in which it is received and the
immediately preceding income year
ore than !* months the income year in which it is received and the two
immediately preceding income years
Ta, Deducted at Sources on #o6alt6 Inco4e
If the royalty is paid by the government or any other authority% corporation or
body% company 3including ban;ing and insurance company5% or any co8
operative ban; or any registered $(B% #"P ta' will be deducted at source
under section +!A3!5 and such amount as deducted will be considered as &nal
payment of ta' liability as per section .!3c5.
Thus% grossing up is re<uired is royalty income is received after T0S.
Illustration
7etKs assume that r. Harma;er has received a lump sum amount of T;. /"%""" as
royalty income from the government during the income year !"#" 8 !"##. Ge has
ta;en a total of #. months to complete the wor;. Thus% the allocation of the royalty
income may be allocated between this year and the immediate preceding year after
grossing up as follows?
(rossed Jp Income? T;. /"%"""4#8".# [ T;. #""%"""
This income will be allocated as follows?
Income year !""/ F !"#"? T;. +"%"""
Income year !"#" F !"##? T;. +"%"""
Gowever% ta' on this income is already paid and no further ta' is payable
on this income.
'&-@ %ees for Technical Ser+ice
Fees for technical services means any consideration 3including any lump sum
consideration5 for the rendering of any managerial% technical or consultancy
services 3including the provision of services of technical or other personnel5
but does not include consideration for any construction% assembly% mining or
li;e pro=ect underta;en by the recipient% or consideration which would be
income of the recipient classi&able under the head Salaries Usection !3)#5V.
Ta, Deducted at Sources on %ees for Technical Ser+ice
If the fees for professional or technical services is paid by the government or
any other authority% corporation or body% company 3including ban;ing and
insurance company5% or any co8operative ban; or any registered $(B% #"P
ta' is deducted at source under section +!A3)5. (rossing up is re<uired to
report gross income.
IllustrationB
7etKs assume that Soft Tech Solutions received T;. /"%""" as technical fee
from B6TA during the current income year. As the income was generated from
a government authority% ta' has been deducted at source Q #"P and thus the
gross income to be reported by Soft Tech Solutions would be T;. #""%""" 3T;.
/"%"""4#8".#5.
'&-E Inco4e fro4 Letting of Assets
Income from letting of machinery% plant or furniture belonging to the assessee
and also building inseparable from the mentioned assets is ta'able as income
from other sources if the same is not chargeable to ta' under the head
OIncome from Business or Profession under section !.W or under the head
OIncome from Gouse Property under section !*W. In this case the letting does
not constitute a business activity.
'&-F Dee4ed Inco4e under diAerent su3>sections of Section 'C
Sectio Inco4e to 3e sho/n under the head VInco4e fro4 Other
n SourcesO
'C'( Une,*lained credits
Any sum credited in the boo;s of an assessee maintained for any
income year and the assesses o1ers no e'planation about the
nature and source thereof% or the e'planation o1ered is not
satisfactory
'C2( Une,*lained in+est4ents
>here the assessee has made investments or is found to be the
owner of any bullion% =ewellery or other valuable article and the 0CT
&nds that the amount e'pended on ma;ing such investments or in
ac<uiring such bullion% =ewellery or other valuable article e'ceeds
the amount recorded in this behalf in the boo;s of account
maintained by the assessee for any source of income and the
assessee o1ers no e'planation about the e'cess amount or the
e'planation o1ered is not satisfactory
'C9( Une,*lained e,*enditure
>here the assessee has incurred any e'penditure and he o1ers no
e'planation about the nature and source of the money for such
e'penditure% or the e'planation o1ered is not satisfactory
'C:( Unrecorded in+est4ents
>here% in the &nancial year immediately preceding the assessment
year% the assessee has made investments which are not recorded in
the boo;s of account% if any% maintained by him for any source of
income% and the assessee o1ers no e'planation about the nature
and source of fund for the investments% or the e'planation o1ered
is not satisfactory
'C@( Unrecorded 4one6= <e/eller6 etc-
>here% in the &nancial year immediately preceding the assessment
year% the assessee is found to be the owner of any money% bullion%
=ewellery or other valuable article which is not recorded in the
boo;s of account% if any% maintained by him for any source of
income% and the assessee o1ers no e'planation about the nature
and source of fund for the ac<uisition of the money% bullion%
=ewellery or other valuable article% or the e'planation o1ered is not%
in the opinion of the 0eputy Commissioner of Ta'es% satisfactory
'CD( )urchase of assets at a *rice lo/er than the fair 4ar2et
+alue
>here any assets% not being stoc;8in8trade or stoc;s% and shares%
are purchased by an assessee from any company and the 0eputy
Commissioner of Ta'es has reason to believe that the price paid by
the assessee is less than the fair mar;et value thereof% the
di1erence between the price so paid and the fair mar;et value
'CC( Sala4i or *re4iu4 for granting leases
>here any lump sum amount is received or receivable by an
assessee during any income year on account of salami or premium
receipts by virtue of any lease% such amount received
'C'&( $ood/ill 4one6 or co4*ensation
>here any amount is received by an assessee during any income
year by way of goodwill money or receipt in the nature of
compensation or damages for cancellation or termination of
contracts and licences by the (overnment or any person% such
amount received
'C''( Bene0t or ad+antage on account of cancellation of
inde3tedness
>here any bene&t or advantage% whether convertible into money or
not% is derived by an assessee during any income year on account
of cancellation of indebtedness the money value of such advantage
or bene&t
'C'2( Managing agenc6 co44ission
Any managing agency commission including compensation
received during any income year by an assessee for termination of
agencies or any modi&cation of the terms and conditions relating
thereto
'C'9( .inning fro4 lotteries= cross/ord *riQes etc-
Any amount received by an assessee during any income year by
way of winnings from lotteries% crossword pu99les% card games and
other games of any sort or from gambling or betting in any form or
of any nature whatsoever
I4*ortant
Ta' will be deducted at sources on such income Q !"P as per
section ++ and Second Schedule% Para ). Gowever% it will be
considered as &nal payment of ta' liability as per section .!C3!53t5.
'C2'( Un*aid loan
>here any sum% or aggregate of sums e'ceeding T;. #%""%""" is
claimed or shown to have been received as loan by an assessee
during any income year from any person% not being a ban;ing
company or a &nancial institution% otherwise than by a crossed
che<ue drawn on a ban;% and has not been paid bac; in full within
three years from the end of the income year in which it is claimed
or shown to have been received% the said sum or part thereof which
has not been paid bac;
'C2'
A(
Loan or gift recei+ed under so4e circu4stances
>here any sum is claimed to have been received by an assessee as
loan or gift during any income year from a person who has
transferred the sum within the period of limitation stipulated in the
rule made under this Brdinance% from the initial capital of his
business or profession shown in his return &led under section .)A%
the amount of such loan or gift so received by the assessee
'C2'
B(
Transfer of initial ca*ital
>here any sum% shown as initial capital of business or profession in
return of income &led under section .!BB% is transferred by a
person partly or fully within the period of limitation stipulated in the
said section% the sum so transferred
'C2:( Disclosing in+est4ent in e8uit6 of an unlisted co4*an6
>here an assessee% being a private limited company or a public
limited company not listed with a stoc; e'change% increases its paid
up capital by issuing shares in an income year% the amount so
received as increased paid up capital% not being received by
crossed chec; or ban; transfer
'C2E( Loan ta2en 36 a co4*an6 other/ise than 36 a crossed chec2
or 3an2 transfer
>here an assessee% being a company% receives any amount as loan
from any other company otherwise than by a crossed che<ue or by
ban; transfer% the amount so received
'C2F( )urchase or hire of car at a *rice e,ceeding '&J of *aid u*
ca*ital
>here an assessee% being a company% purchases directly or on hire
one or more motor car or =eep and value of any motor car or =eep
e'ceeds ten percent of its paid up capital% then &fty percent of the
amount that e'ceeds such ten percent of the paid up capital
'&-D Allo/a3le Deductions
As per section )*% followings are the allowable deductions from the income
classi&able as income from other sources as per section )).
3#5 Interest paid on money borrowed for the purpose of ac<uisition of shares
of a company. Interest payable outside Bangladesh on which ta' has not
been paid and from which ta' has not been deducted at source shall not
however be admissible deduction.
3!5 Any e'penditure% not being capital e'penditure or personal e'penses%
spent solely for the purpose of ma;ing or earning the relevant income.
3)5 >here income from other sources is derived from letting on hire any
machinery% plant or furniture is inseparable with buildings% allowance for
repairs% insurance premium% depreciation and obsolescence allowance are
admissible in the determination of income from business under section
!/3#5 3vi5% !/3#5 3vii5% and !/3#5 3'i5% respectively as if the income from
such letting on hire were income from business or profession.
Provided that the provisions of section #/ 3#,5 shall also be applicable for
the determination of any pro&ts where the sale proceeds of such
machinery% plants% furniture or building e'ceeds the written down value
thereof.
'&-C Inad4issi3le Deductions
As per section )*3*5% following two e'penses are not admissible?
3a5 Any interest chargeable under the Brdinance which is payable outside
Bangladesh on which ta' has not been paid and from which ta' has not
been deducted at source under section +,I or
&+( Any payment which is chargeable under the head OSalariesW if ta' has
not been paid thereon or deducted there from under section +".
.or2ed ",a4*les and Solutions
.or2ed ",a4*le '
r. Abdur 6ahman has reported the following incomes classi&able under the head
XIncome from Bther SourcesK for the income year ended on Mune )"% !"##. Compute
ta'able income of r. 6ahman.
0ividend from a Private 7imited Company
/%"""
Interest on Fi'ed 0eposits
+%*""
Interest on Savings Certi&cate
#/%"""
Interest on Post BEce Savings Ban;
#%.""
6emuneration for e'am script evaluation and invigilation #%"""
Pri9e of winning Pri9e bond lottery
!+%"""
Sale of Fish of Pond
#%"""
Sale of forest Tree and bamboo
#%+""
Income from copyright and royalty
*%"""
6emuneration as 0irector
#"%"""
Income from marriage anniversary
+%"""
Income from license
!%"""
0uring the year he has purchased =ewellery of T;. #!+%""" the source of which has
not been e'plained to the 0CT. 0uring the year he has paid T;. !"" as license
renewal fee and T;. ."" as interest on loan ta;en to purchase the shares of private
limited company.
Solution '
AssesseeB Mr- A3dur #ah4an
Assess4ent 6earB 2&''>2&'2
Inco4e 6earB 2&'&>2&''
Deter4ination of total inco4e
Inco4e fro4 Other Sources Sec > 99(B
#. 0ividend from Pvt. 7td. Co. 3/%"""4#8".#5 #"%"""
!. Interest on Fi'ed 0eposits 3+%*""4#8".#5 ,%"""
). Interest on Savings Certi&cate 3#/%"""4#8"."+5 !"%"""
*. Interest on Post BEce Savings Ban; 3#%.""4#8".#5 !%"""
+. 6emuneration for e'am script evaluation #%"""
,. Pri9e of Pri9e bond lottery !+%"""
-. 7ess? Final payment of ta' as per .!3c5 !+%""" 8
.. Sale of Fish of Pond #%"""
/. Sale of forest tree and bamboo #%+""
#". Income from copyright and royalty *%"""
##. 6emuneration as 0irector #"%"""
#!. Income from marriage anniversary +%"""
7ess? 2'empted 3full5 +%""" 8
#). Income from license !%"""
#*. Jne'plained investment to purchase =ewellery #!+%"""
#%.!%+""
7ess? Allowable deductions?
7icense renewal fee !""
Interest on loan ."" #%"""
Total '=D'=@&&
NotesB
#. Assuming copyright and royalty has been received from a person% hence no T0S
is allowed.
!. Income from marriage anniversary is a gift hence e'empted from income ta'.
.or2ed ",a4*le 2
r. Moarder Gossain has reported the following incomes for the income year !"#"8##
classi&able under the head XIncome from Bther SourcesK. Compute ta'able income of
r. Gossain.
0ividend from ICB utual Fund 3gross amount5 )"%"""
Pro&t on Islami Ban; udaraba Savings Scheme !%-""
Interest on Savings Certi&cate 3gross5
)"%"""
Income from royalty of a boo; 3time of completion F #" months5 !%"""
Income received from a part8time =ob
l"%"""
Pri9e of winning Crosswords
!%"""
Income from letting out household machineries #%"""
Sale of forest timber
#%+""
Income from rent of a shop owned by him
*%"""
(ain from loan amorti9ation
#"%"""
Income from a newspaper for column writing
+%"""
Income from unused leased land
!%"""
Gonorarium for attending a Symposium
)"%"""
Income from private tuition in a Coaching Center #"%"""
6oyalty income from a government authority
#%.""
0uring the year he spent T;. !""%""" on a party in Gotel 6adisson% the source of
e'penditure remained une'plained to the 0CT. Ge has also visited Singapore
incurring a total cost of T;. #""%""" and purchased a 0iamond set of T;. !""%""" for
his wife for which the source of the money was not satisfactory to the 0CT. 0uring
the year he has paid T;. !%""" as commission for collecting the dividend and T;.
.%""" as interest on loan ta;en to purchase the shares of public limited company.
Solution 2B
AssesseeB Mr- Hoarder ;ossain
Assess4ent 6earB 2&''>2&'2
Inco4e 6earB 2&'& > 2&''
Deter4ination of total inco4e
Inco4e fro4 Other Sources Sec > 99(B
#. 0ividend from ICB utual Fund )"%"""
7ess? 2'empted F Jp to T;. !+%""" !+%""" +%"""
!. Pro&t on Islami Ban; Scheme 3!%-""4#8".#5 )%"""
). Interest on Savings Certi&cate )"%"""
*. Income from royalty of a boo; !%"""
+. Income received from a part8time =ob #"%"""
,. Pri9e of winning crosswords !%"""
7ess? Final payment of ta' as per .!3c5 !%""" 8
-. Income from letting out household machineries #%"""
.. Sale of forest timber #%+""
/. Income from rent of a shop *%"""
#". (ain from loan amorti9ation #"%"""
##. Income from newspaper column writing +%"""
#!. Income from unused leased land !%"""
#). Gonorarium for attending a Symposium )"%"""
#*. Income from private tuition in a Coaching
Center
#"%"""
#+. 6oyalty income from government 3#%.""4#8".#5 !%"""
7ess? Final payment of ta' as per .!3c5 !%""" 8
#,. Jne'plained investments?
Party in hotel !""%"""
Travel to Singapore #""%"""
Purchase of 0iamond =ewellery !""%"""
+%""%""
"
,#)%+"
"
LessB Allowable deductions?
Commission for collecting dividend !%"""
Interest on loan .%""" #%"""
Total
,#!%+"
"
Self>Assess4ent ?uestion
#. >hat is meant by OdividendW under the Income Ta' Brdinance #/.*N
!. >hat are the incomes assessable as OIncome from Bther SourcesW under the
BrdinanceN
). r. Moynal A;and has earned the following incomes for the year !"#"8##.
0ividend from preference shares of a Public 7imited Company *+%"""
0ividend from ICB utual Fund
#.%"""
Income from underwriting shares of a Company
)"%"""
Income from mooring terminal
*"%"""
Interest on Savings Ban; 0eposit
!-%"""
Gonorarium received as a director to be a member of the Board #"%"""
Pri9e of winning 6ed Crescent 7ottery
),%"""
Income from betting4housie
*.%"""
Interest on loan given to a friend
#+%"""
Income from consultancy wor; not related to his profession *"%"""
Income from participating in a training program
!"%"""
Income from Birthday Party
+"%"""
Income from lump sum royalty of a boo; which too; him two years to write the
boo; /"%"""

0uring the year he spent T;. !""%""" to purchase a piece of land% T;. /"%""" to
purchase a motorcycle and the e'planation given regarding the source of
e'penditure was unsatisfactory to the 0CT. Through investigation% the 0CT has also
identi&ed an F06 of T;. +""%""" in a local ban; source of which has also remained
e'plained. Ge has also visited India incurring a total cost of T;. #""%""" and
purchased a 0iamond set for T;. #""%""" for his wife for which the source of the
money was also une'plained. 0uring the year he has paid T;. #%+"" as commission
for collecting the dividend. Gis other e'penditures during the year were as follows?
Purchase of Boo;s and aga9ine
#+%"""
0onation to PresidentDs 6elief Fund
)"%"""
Contribution to a deposit pension scheme
."%"""
Purchase of a cow for 2id ul A9ha
#+%"""
Purchase of a 7aptop
#)"%"""
Purchase of Shares from secondary mar;et
!""%"""
Compute ta'able income and ta' liability of r. Moynal A;and for the assessment
year !"##8#!.
Chapter ##
De*reciation allo/ances
Contents
Introduction
2'amination conte't
To*ic List
##.# Basics of 0epreciation Allowances
##.! 0epreciation Allowance for 0i1erent Geads of Income
##.) 0epreciation allowance on assets used for agricultural purpose
##.* 0epreciation allowance on assets used in business or profession
##.+ Types of 0epreciation Allowance
##., $ormal depreciation allowance
##.- Initial 0epreciation Allowance
##.. Bther depreciation allowance
##./ Investment allowance? Section !/3#5 3i'5 L 3'5
##.#" >ritten down value of assets for the purpose of depreciation
allowance? 3Para ##3+5 3a5 L 3b5 and ##3,5 3a5 of the third Schedule5
##.## 0isposal of assets and treatment of gains or losses thereof 3Para #"%
Third Schedule5
##.#! 7imitation in respect of 0epreciation Allowance 3Para /% Third
Schedule5
##.#) 0epreciation? >hether Compulsory or BptionalN
>or;ed 2'amples and Solutions
Introduction
Learning o3<ecti+es
2'plain depreciation allowance.
Compute depreciation allowance% investment allowance.
0e&ne balancing charge and capital gain.
Identify di1erent types of depreciation allowances.
0i1erentiate accounting depreciation and ta' depreciation.
0e&ne di1erent rates of accelerated depreciation for di1erent assets.
0e&ne written down value and its application at ac<uisition and disposal of
assets.
2'plain gain and losses of assets in disposal.
)ractical signi0cance
0epreciation allowance is very important in computing income from business
and profession. It is an allowable deduction in computing income from
agriculture and income from business and profession. Thus% computing
depreciation and understanding its implication is very signi&cant.
Accounting depreciation and ta' depreciation is not the same that generates
deferred ta'ation. And it is very important for professional accountants to
practice deferred ta'ation. This chapter presents di1erent types of
depreciation allowances% investment allowance and other related topics.
It also presents a de&nition of written down value with the application of gain
and loss on disposal of assets. It also presents di1erent e'ceptions to the
common rule.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the computation of depreciation allowance is one of the
important issues for determining ta' liabilityN Can you determine the ta'able
income under the heads Xincome from agricultureK and Xincome from business
and professionK after allowing depreciation allowanceN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the total ta'able income for any income year. Before advising the clients%
accountants should have the clear concept relating to the admissible and
inadmissible e'penses so that they can deduct or add the e'penses in
determining the ta'able income.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
Cou will be also using this ;nowledge when you tac;le the ta'ation paper later
on in the Professional Stage and it will also underpin the technical aspects at
the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne depreciation allowance.
Compare depreciation allowance and investment allowance.
0e&ne written down value% balancing charge% industrial underta;ing and
capital gain.
Presents di1erent rates of depreciation for di1erent types of assets.
2'plain rates of depreciation for plant% machinery% ships and other
e'ceptional assets.
Jnderstanding the di1erence between accounting depreciation and ta'
depreciation.
0e&ne written down value and its application at ac<uisition and disposal of
assets.
2'plain gain and losses of assets in disposal.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
core concept on computation of income which is vital for calculating ta'
liability. Clear concept and understanding of each contents of this chapter will
help candidates to resolve any problems relating to computation of income
under the heads Xincome from agricultureK and Xincome from business and
professionK.
''-& D")#"CIATION ALLO.ANC"
Section O+er+ie/
0epreciation is allowed on cost but investment allowance is over the
above cost and depreciation allowance.
Any (overnment subsidy or any grant from any authority received for the
purchase is to be deducted from cost.
Sale value of motor car costing more than T;. #" la;hs is to be scaled
down in proportion to T;. #" la;hs limit and the same with assets used
partly for business or profession and partly for private purpose of the
assessee.
Full depreciation is allowed in the year of purchase and none is allowed in
the year of disposal of asset.
Sale value e'ceeding original cost is capital gain and should be ta'ed
accordingly.
0epreciation is calculated on reducing balance method 3>0:5 on all assets
other than accelerated depreciation or on ships and vessel when cost is
used.
Balancing charge is the revenue gain and should be ta'ed separately.
Accounting depreciation and ta' depreciation are di1erent and it creates
deferred ta'es.
''-' Basics of De*reciation Allo/ances
Besides various e'penditure allowed under Sec. !/ in arriving at the pro&t or
loss on business or profession in an income year% allowances are also given for
depreciation of capital assets within prescribed rules and at prescribed rates.
$ormally accountants charge depreciation on &'ed assets other than lands in
calculating pro&t or loss of business or profession periodically. This is a normal
wear and tear of &'ed asset caused by use% deAu'ion of time or obsolescence%
the rates and method of depreciation depend on the particular accounting
policy followed by the assessee. In calculating accounting depreciation%
accountants should not consider what ta' authorities allow and ta' authorities
also do not consider accounting depreciation in computing depreciation
allowed under ta' laws. It may be that accountant has not charged any
depreciation on &'ed assets or charged whole of a particular &'ed asset in a
year% but to the ta' man% it is immaterial since he would add bac; accounting
depreciation and deduct ta' depreciation in his assessment process.
Some basic rules or concepts used in the calculation and granting of
depreciation allowances are stated below?
3i5 It is allowed on &'ed assets other than land i.e. buildings% plant and
machinery% furniture and &ttings% e<uipments etc.
3ii5 Assets must be used in the relevant income year in business or
profession. It may be used for the whole year or for =ust one day in the
year. The allowance is given for the whole year without time
apportionment. Gowever% it would be on proportionate basis when assets
or some of these are used for private purpose and business purpose.
3iii5 Bwnership of the assets must be with the concerned assessee in the
income year. This condition overrides prima facie that of use when in the
case of lease% &nance operative or any other arrangement of hire
purchase purpose% the lessor retains the ownership. Ge is thus allowed full
ta' depreciation though the assets have been used by the assesee.
3iv5 It is obligatory on the part of the asessee to furnish the prescribed
particulars in respect of depreciation claim 36ule *#5. If the prescribed
particulars are not furnished% the 0CT may even refuse to grant any
allowance for depreciation. Gowever% where the particulars furnished are
incomplete or inaccurate he cannot decline to grant allowance where he
should call for further information to complete his own depreciation
allowance.
3v5 Aggregate depreciation allowed shall not e'ceed cost and the law deals
with the sub=ect of cost elsewhere.
3vi5 $o depreciation is allowed in the year the asset is sold discarded or
demolished even when it was used for ma=or or most part of the year.
Gowever% balancing allowances is allowed in that year when >0: of the
asset is greater than the proceeds.
3vii5 Third Schedule prescribes di1erent rates of depreciation allowances for
di1erent classes of assets. Bn ocean going ships and vessels the rate of
depreciation is based on actual cost% in all other cases% it is bases on
written down value 3>0:5 of the asset.
3viii5 Cost of motor vehicle used in the business or profession is restricted to
T;. #" 7a;hs for the purpose of depreciation allowance calculation.
3i'5 $o depreciation is allowed on assets before the commencement of
business i.e. commercial production.
3'5 >hile ac<uiring the asset% the assessee receives any capital grant or
(overnment subsidy or any assistance from any other authority or person
such amount shall be e'cluded from the ac<uisition cost for the
calculation of depreciation allowance.
3'i5 Fluctuation in the foreign e'change rate is given e1ect to determine the
cost base of any asset ac<uired with money borrowed and payable in
foreign currency.
3'ii5 0epreciation is not treated as an e'pense unli;e the matching of cost with
revenue by the accountants. Gowever% it is given as a speci&c case for the
diminution in capital assets used in business or profession. Since% it is not
treated as a cost by the ta' people% ta' pro&t or loss is calculated &rst
without having regard to depreciation allowance. If there is any pro&t
depreciation is set o1 against that. If not or if insuEcient to absorb the
whole% the balance is and can be carried forward inde&nitely as
unabsorbed depreciation. But in case of loss% it can be carried forward
only for si' years and when cannot be set o1 within that% is regarded a
capital loss. This facility of carry forward of unabsorbed depreciation is
e'tended to all ta' holiday or e'empted enterprises when however% they
cannot carry forward their business losses beyond the holiday or e'empt
period.
''-2 De*reciation Allo/ance for DiAerent ;eads of Inco4e
Income ta' Brdinance #/.* prescribes depreciation allowances for &'ed
assets used in di1erent heads of income as follows?
a5 Agricultural Income
b5 Income from Business and Profession
''-9 De*reciation allo/ance on assets used for agricultural *ur*ose
0epreciation allowances on &'ed assets used for agricultural purposes are
allowed at prescribed rates as given in Third Schedule. The schedule is
produced below?
Third Schedule
K)ara 'L
Sl.
$o
.
Classi&cation of irrigation or
protective wor; or other
capital assets.
6ate4percentage of
the written down
value% e'cept as
otherwise indicated.
6emar;s
' 2 9 :
#5 Pucca buildings #"
!5 Hutcha and pucca buildings #+
)5 Hutcha buildings !"
*5 Temporary structure 8 $o rate is
speci&edI renewal
will be allowed as
revenue
e'penditure
+5 Pucca walls +
,5 Fencing of substantial
material
#"
-5 Tube8well #+
.5 Tan;s #"
/5 Pucca irrigation channel #+
#"5 Hutcha irrigation channel !"
##5 Hutcha irrigation wells )).))
#!5 Pucca irrigation wells +
#)5 Bulloc; drawn iron
implements
#+
#*5 Bulloc; drawn wooden or
leather implements and other
small hand4implements.
!+
#+5 >eighing machine #"
#,5 Tractors and oil engines and
thin implements.
#+
#-5 Power pumping machinery !"
#.5 Factory made cart of iron
material with rubber tyre
#+
#/5 Country cart !"
!"5 Steam engine #"
!#5 >or;shop tools #+
!!5 (eneral 3machinery%
implements% plants and other
assets5 not provided for
above speci&cally.
#"
''-: De*reciation allo/ance on assets used in 3usiness or *rofession
In computing the pro&ts and gains from business or profession% allowance is
admissible for depreciation on building% machinery% plant% furniture owned by
the assessee and used for the purpose of his business or profession. To claim
depreciation allowance% Para ! of Third Schedule speci&es the following
conditions?
3#5 In computing pro&ts and gains from business or profession% an allowance
for depreciation shall be made in the manner hereinafter provided in
respect of any building% machinery% plant or furniture owned by an
assessee or bridge or road or Ay over of a physical infrastructure
underta;ing and used for the purposes of business or profession carried on
by him.
3!5 >here any such building% machinery% plant or furniture or bridge or road or
Ay over of a physical infrastructure underta;ing is not wholly used for the
purposes of the business or profession% the allowance under sub8
paragraph 3#5 shall be restricted to the fair proportional part of the amount
which would be admissible if such building% machinery% plant or furniture
were wholly so used.
3)5 $o allowance under this paragraph shall be made unless8
3a5 at the time of &ling a return of total income such particulars as may be
prescribed and such further information or documents as the 0eputy
Commissioner of Ta'es may re<uire% are furnishedI and
(b) such building% machinery% plant or furniture or bridge or road or Ay over
of a physical infrastructure underta;ing has been so used during
income year.
''-@ T6*es of De*reciation Allo/anceB As per Third Schedule of IT Brdinance
#/.*% depreciation allowances may be classi&ed as under?
#eference T6*es of Allo/ances
Para )% Third
Schedule
$ormal depreciation allowance
Para +A% Third
Schedule
Initial depreciation allowance
Para -% Third
Schedule
Accelerated depreciation allowance on machinery
and plant
Para -A% Third
Schedule
Accelerated depreciation allowance on machinery
and plant
Para .% Third
Schedule
Special depreciation allowance on Ships
''-E Nor4al de*reciation allo/ance
$ormal depreciation allowance is allowed at the following rates that may be
amended by the Board from time to time by noti&cation in the oEcial (a9ette.
Gowever% no allowance under this paragraph shall be made for a leasing
company on such machinery% plant% vehicle or furniture given to any leasee on
&nancial lease.
SL-
No-
Classi0cation of Assets
#ateP*ercentage
of the .ritten
Do/n !alue=
e,ce*t as
other/ise
indicated
#e4ar2s
# ! ) *
#. 3a5 Buildings 3general5
3b5 Factory Buildings
#"
!"
!. Furniture and Fittings #"
). achinery and Plant?
#. (eneral 6ate !"
!. Special 6ate?
3a5 Ships
i5 Bcean going ships 3new5 #!
ii5 Bcean going ships
3second hand5% age at
the time of purchase 8
The
allowance is
to be
calculated on
the original
costs.
- less than #" years #!
- #" years or more !*
iii5 Inland ships including
steamers% motor vessels%
sails% tug boats% iron or
steel Aats for cargo
boats% wooden cargo
boats% motor launches
and speed boats
!*
3b5 3i5 Batteries% ]86ay and
electro8therapeutic apparatus
and accessories theretoI
3ii5 achinery used in the
production and e'hibition of
cinematographic &lmsI
3iii5 otor vehicles all sorts
not plying for hireI
!"
!"
!"
3iv5 otor vehicles all sorts
plying for hire.
!*
3v5 Computer and computer
e<uipment
)"
3vi5 Bangladeshi made
computer software
+"
3c5 3i5 Professional and
reference boo;sI
3ii5 Aircraft% aero8engines
and aerial photographic
apparatusI
3iii5 oulds used in the
manufacture of glass or
plastic goods or concrete
pipe.
)"
)"
)"
3d5 ineral oil concerns F
3i5 Below ground
installationsI
3ii5 Above ground
installations% that is to say%
portable boilers% drilling
tools% well head tan;s and
rigs.
#""
)"
3e5 physical infrastructure
underta;ing8
3i5 Bridge
3ii5 6oad
3iii5 Fly over
!
!
!
NoteB Any asset that fall under the description Xachinery and PlantK having
useful life not more than one year% allowance is not allowed though the cost of
renewal or replacement thereof shall be allowed as a revenue e'penditure.
3Para +% Third Schedule5
''-F Initial De*reciation Allo/ance
This depreciation allowance is applicable to any building newly constructed or
any machinery or plant installed in Bangladesh after the thirtieth day of Mune%
!""! at the rates mentioned below?
3a5 In the case of building #"P of the cost thereof to the
assessee
3b5 In the case of machinery or plant other
than ships or motor vehicles not plying
for hire
!+P of the cost thereof to the
assessee
NotesB
#5 Initial depreciation allowance will not be applicable in case of F
a5 any motor vehicle not plying for hire% and
b5 any machinery or plant which has previously been used in Bangladesh.
!5 $ormal depreciation allowance will also be applied for subse<uent years.
Thus% application of this depreciation allowance is only in addition to
normal depreciation allowance.
''-D Other de*reciation allo/ance
Para -% -A and . of the Third Schedule have also granted some depreciation
allowances which do not form part of the depreciation allowance in Sec !/
These areB
'(Accelerated de*reciation allo/ance on 4achiner6 and *lant )ara
F(
Jnder this accelerated depreciation is granted on plant and machinery used in
an industrial underta;ing at varying rates depending on the area as speci&ed
by $B6% in which such underta;ing is set up to the ful&llment of the of the
following?
3a5 The machinery or plant is not an oEce appliance or road transport
vehicle.
3b5 The asset is new which means not previously been used in Bangladesh
3second hand or reconditioned asset would not <ualify5.
3c5 The industrial underta;ing must be set up between # Muly% #/-- and
)" Mune% !"#! 3both days inclusive5
3d5 The industrial underta;ing is owned and managed by a Bangladeshi
company or a body corporate formed under any law and having its
registered oEces in Bangladesh.
3e5 The allowance is given to the class of industries as noti&ed by $B6.
3f5 The allowance shall be given to or from the year of commercial
production.
3g5 The particulars as re<uired for the purpose of claiming the accelerated
depreciation allowance have been furnished.
3h5 Application complete in all respects% is made to $B6 within , months
from the end of the month of commercial production together with a
declaration that the underta;ing is neither en=oying ta' holiday nor
has made any application thereof to $B6. 36ule *"5
$B6 is to give decision on the application within ) months of application.
achinery and plant granted accelerated depreciation allowance would not be
allowed any other depreciation allowance.
#ate of accelerated de*reciation allo/anceB
a. For the &rst year in which the underta;ings
starts commercial production?
+"P of the actual cost of
plant and machinery to the
assessee
b. For the ne't following second year )"P of the actual cost of
plant and machinery to the
assessee
c. For the ne't following second year !"P of the actual cost of
plant and machinery to the
assessee
For the purpose of this paraW industrial underta;ingW includes e'pansion of an
e'isting unit if such e'pansion constitutes?
Similar unit carrying on a identi&able industries but does not include an
underta;ing formed by splitting up or reconstruction of an e'isting
underta;ing or by the transfer of plant or machinery of an e'isting
underta;ing or by the transfer of plant or machinery of an e'isting business to
a new business in Bangladesh. achinery and plant includes physical
infrastructure which means? generation% transformation% conversion%
transmission and distribution or supply of electrical energy% or hydraulic
power or road% highway% bridge% airport or the system of railway or
telecommunication or such other public facility as may be speci&ed by the
Board by noti&cation in the oEcial ga9ette.
2(Accelerated de*reciation allo/ance for Re,*ansion unitS of and
underta2ing e,e4*ted under Section :EAB )ara FA(
Jnder Paragraph -A% accelerated depreciation is also allowable on machinery
and plant 3other than oEce appliances and road transport vehicles5 which
having not been previously used in Bangladesh% has been or is used.
3b5 in the e'pansion unit set8up between the &rst of Muly% #//+ and the
thirtieth day of Mune% !""+ 3both days inclusive5 in any e'isting
underta;ing en=oying e'emption from ta' under section ,*AI or
3c5 between the &rst day of Muly% #//+ and the thirtieth day of Mune% !""+ in
the treatment and disposal of to'ic and environmentally ha9ardous wastes
or in the collection or processing of biodegradable wastes or in the
research and development in any industrial underta;ing owned and
managed by a company as de&ned in clause 3!"5 of Section !.
3i5 for the &rst year in which the
e'pansion unit starts commercial
production or operation or % as
the case may be% the
underta;ing starts operation%
." percent of the actual cost of the
machinery or plant to the assesseeI
3ii5 for the ne't following year. !" percent of the actual cost of the
machinery or plant to the assesseee.
The meaning of Oe'pansion unitW for the purpose of this paragraph is the
same as has been given for the purpose of paragraph 3-5 of the Third
Schedule.
An application in the prescribed form furnishing therein the prescribed
particulars is re<uired to be submitted to the Board for the allowance under
this paragraph% within si' months from the end of the month of
commencement of commercial production or operation. 36ule *"A5
The Board shall decide on the application within three months from the date
of receipt of the application% failing which accelerated depreciation% shall be
deemed to have been allowed.
If any person is aggrieved by the BoardKs decision% he may &le application
within four months of the receipt of the decision for review of its earlier
decision by the Board.
9(S*ecial de*reciation allo/ance on shi*s )ara D(
The allowance is admissible on inland passenger vessel% &shing trawler and
ships ordinarily not paying in inland water% owned by the assessee and
brought into use for the &rst time in Bangladesh on any day between #
st
Muly%
#/.! and )"
th
Mune #//+ 3both days inclusive5 at the following rates?
3i5 for the &rst year *" percent of the original costI
3ii5 for the second year )" percent of the original costI
3iii5 for the third year )" percent of the original costI
The assets en=oying special depreciation will not be eligible for any other
depreciation under the Income Ta' Brdinance. Gowever% above provision has
become absolute since not e'tended after #//+.
''-C In+est4ent allo/anceB Section 2C'( i,( G ,(
The allowance is admissible to inland passenger vessel and &shing trawler%
which are entitled to special depreciation% at the rate of !" percent of the cost
for the year in which those are put to use for public utility.
The allowance is also admissible to plant and machinery 3other than oEce
appliances and road transport vehicles5 which are entitled to accelerated
depreciation for the year in which the underta;ing goes into commercial
production at !+ percent of the cost if the underta;ing is set up in speci&ed
areas and at !" percent of the cost if the underta;ing in set up in speci&ed
areas and at !" percent of the cost if the underta;ing is set up in other areas.
''-'& .ritten do/n +alue of assets for the *ur*ose of de*reciation
allo/anceB )ara ''@( a( G 3( and ''E( a( of the third Schedule(
Owritten down valueW means F
3a5 In the case of assets
ac<uired in the income
year%
Actual cost to the assessee.
3b5 In the case of assets
ac<uired before the
income year
Actual cost to the assessee less all
depreciation allowed under Income Ta'
Brdinance #/.* or the Income Ta' Act%
#/!!% in respect of the earlier year or
years.
NoteB In the case of motor vehicles% being passenger vehicles or sedan cars%
not plying for hire% the actual cost to the assessee shall be deemed not to
e'ceed ten la;hs Ta;a.
''-'' Dis*osal of assets and treat4ent of gains or losses thereof )ara '&=
Third Schedule(
>here in any income year% building% machinery or plant is disposed of by an
assessee8
3a5 $o depreciation allowance shall be allowed in respect of year of disposal.
3b5 >hen the sale proceeds e'ceed the written down value% the e'cess
amount limited up to the di1erence between the original cost and the
written down value% shall be income of the year from business or
profession.
The principle underlying the provision is that the depreciation allowed in
the past as e'penditure in determining income shall be treated as income
in the year of sale when the sale proceeds e'ceed the written down value.
3c5 when the sale proceeds are less than the written down value of the assets%
de&cit shall be e'penditure deductible from the pro&ts or gains of business
or profession of that year.
3d5 >hen sale proceeds e'ceed the original cost% di1erence between original
cost and >0: i.e. depreciation allowances previously granted would be
business pro&t and amount e'ceeding cost would be assessed under Sec.
)# as capital gain.
''-'2 Li4itation in res*ect of De*reciation Allo/ance )ara C= Third
Schedule(
3#5 The aggregate of the allowances for depreciation allowed in respect of any
asset% shall not e'ceed the original cost of the asset.
3!5 >here full e1ect cannot be given to depreciation allowances in the year in
which it is admissible there being no income chargeable for that year or
such income being less than the allowance admissible% then% sub=ect &rst
to carrying forward of the loss% if any% under section ).% the allowances or
the part thereof to which e1ect has not been given shall be added to the
amount of the allowance for the following year or% if no allowance is
admissible for such following year% shall be deemed to be allowance
admissible for such year and so on for succeeding years till such time as
the entire allowance on this account is ad=usted against the pro&ts.
''-'9 De*reciationB .hether Co4*ulsor6 or O*tional1
0epreciation is an allowance to the assessee% but not an obligation upon. It is
optional and cannot be thrust upon an assessee as assessee can choose not
to claim depreciation.
The implication of the above is important for ta' e'empted companies in 2PR
and those engaged in power generation privately. Since they are not re<uired
to submit IT returns annually they do not calculate &scal depreciation and
even if they were re<uired% have the choice to calculate or not to calculate.
Therefore% >0: of assets at the e'piry of e'emption period should logically be
ta;en as their original costs recorded during the e'emption period 3S6B $B.
#--8IT4!""!5.
AssesseeOs right
The assessee would not lose the right to carry forward and set o1 against
pro&ts of subse<uent years% unabsorbed depreciation if?
a5 he does not carry on the same business
b5 he does not carry on any business
c5 he uses the assets not for business but for earning income assessable
under other sources
d5 he does not use the asset at all and
e5 he ceases to be the owner of the asset.
)artnersO right
A partner of a &rm is entitled to set o1 his share of unabsorbed depreciation
from a defunct &rm against his other business income.
Assign4ent of una3sor3ed de*reciation
The unabsorbed depreciation allowance cannot be assigned to the transferee
of the business. If a business is ac<uired by another% the unabsorbed
depreciation allowance of the previous owner becomes a capital loss and
cannot be carried forward by the successor in business for set o1 against
pro&ts of subse<uent years.
A4alga4ation= 4ergers etc-
>hen a company mergers into another and has unabsorbed depreciation or
carried forward loss from earlier years% the right to carry them forward is lost
and the transferee company being a di1erent assessee% cannot claim to carry
forward either the unabsorbed depreciation or the losses of the merged
company.
Change of shareholding or the constitution of 0r4
0isentitlement of carry forward of loss upon a change in shareholding in a
company does not apply in case of unabsorbed depreciation. Similarly change
in the constitution of a &rm does not disentitle the &rm from unabsorbed
claim.
.or2ed ",a4*les and Solutions
.or2ed ",a4*le '
Company ]% whose accounting year is ended on arch )# each year% has
purchased a machine for Ta;a !" 7a;hs on )" arch% !"". and sold the same
on #
st
April !"## for T;. !+ la;hs. Compute balancing charge and Capital gain.
Solution '
Assessment
Cears
0epreciation 6ate 0epreciation >ritten 0own
:alue
!%"""%"""
!"".8"/ !"P *""%""" #%,""%"""
!""/8#" !"P )!"%""" #%!."%"""
!"#"8## !"P !+,%""" #%"!*%"""
Total $ainB Sale Proceeds F >ritten 0own :alue [ T;. !%+""%""" F T;.
#%"!*%""" [ T;. #%*-,%"""
Ca*ital $ain [ Sale Proceeds F Briginal Cost [ T;. !%+""%""" F T;. !%"""%"""
[ T;. +""%"""
Balancing Charge [ Total (ain F Capital (ain [ T;. #%*-,%""" 8 T;. +""%"""
[ T;. /-,%"""
$otes?
#. 0i1erence between sale price and original cost is capital gain to be
assessed in !"##8!"#! assessment year% corresponding income year
!"#"8!"##.
!. Balancing charge e<uals allowances so far en=oyed i.e. T;. /-,%"""
3*""%""" Z )!"%""" Z !+,%"""5.
). The company received the allowances in !"".8!""/ assessment year%
for =ust buying the machine one day before its year end. Gad it been #
st
April% !"".% the allowance would have started from the assessment year
!""/8!"#" i.e. corresponding income year !"".8!""/. Similarly% on
disposal giving rise to balancing charge and capital gain% it has delayed
the ta' impact by one year =ust by completing the sale on #
st
April% !"##
instead of )# arch% !"##.
*. It is assumed that the company is not entitled to initial% investment or
accelerated depreciation allowance.
.or2ed ",a4*le 2
Company ] bought a machine for T;. +" la;hs on #"
th
Muly% !"". to be used in
its e'pansion unit in Savar% 0ha;a. The investment is <uali&ed for both
accelerated depreciation under Third Schedule and Investment allowance
under Sec !/. It sold the machine on #+ Manuary% !"## for T;. !" la;hs% The
CompanyKs year ends on )" Mune. Calculate depreciation and other admissible
allowance for the relevant assessment years.
Solution 2
Assess4ent 6ear 2&&C>2&'&
Cost Allowanc
e
achine +%"""%"
""
Accelerated depreciation Allowance 3)
rd
Schedule5
3."P5
*%"""%"
""
*%"""%""
"
Investment allowance USec !/ 3!"P5V #%"""%""
"
+%"""%""
"
Assess4ent 6ear 2&'&>2&''
Accelerated depreciation Allowance 3!"P5 #%"""%""
"
>ritten down value $il
Assess4ent 6ear 2&''>2&'&
Sale proceeds !"%""%"""
Balancing charge 3!"%""%"""5 3!"%""%"
""5
NotesB
3#5 Balancing charge in the assessment year% corresponding to the year of
sale being income year !"#"8!"## would be treated as business pro&t or
income.
3!5 Investment allowance does not form part by de&nition% of the depreciation
and therefore% does not fall within ma'imum of cost for depreciation
allowance. In other words% it is allowed over and above #""P cost of
<ualifying assets.
3)5 Since investment allowance is not depreciation% on disposal it is not
recouped in the form of balancing charge. It is a net gain for the clever
assessee for ma;ing the =udicial investment. Gowever% it appears to be
defective provision in the ta' law.
3*5 In the year of purchase if the assets are sold% no depreciation is allowed
overriding the principle that depreciation is allowed even when the asset
has been used for a day during the income year.
0i1erence between accounting and ta' pro&ts arises mainly because of timing
what accountants charge in the accounts as depreciation and what ta' people
allow. Since% both the group calculates on the cost as the upper limit% there
would be no di1erence in the long run. Gowever% after ta' results of
companies di1er signi&cantly from year to year or across the industry because
of the ta'ation anomaly. To remove this problem and to show an even after
ta' results year after year companies can maintain deferred ta'ation account
in accordance with International Accounting Standard $o. #! 3Income Ta'es5.
Self>Assess4ent ?uestion
#5 >hat are the di1erent types of depreciation allowanceN
!5 >hat is the basic di1erence between depreciation allowance and
investment allowanceN
)5 An asset was bought some years bac; for T;. # million% the >0: of
which was T;. ,""%""". It was sold for T;. *""%""". >hat is the
implication of ta'N
Chapter #!
Set oA and carr6 for/ard of losses
Contents
Introduction
2'amination conte't
To*ic List
>or;ed 2'amples and Solutions
#!.# Introduction to Set o1 and Carry Forward of 7osses
#!.! Set o1 of 7osses? Sec )-
#!.) Procedures of Set B1
#!.* Carry Forward of Business 7osses? Sec ).
#!.+ Set o1 and Carry Forward of 7oss in Speculation Business? Sec )/
#!., Set o1 and Carry Forward of 7oss under the Gead XCapital (ainsK? Sec
*"
#!.- Carry Forward of 7oss under the Gead XAgricultural IncomeK? Sec *#
#!.. Carry Forward of 7oss of Firm and Partner
#!./ Carry Forward of 7oss of Succeeded Business or Profession
#!.#" Carry Forward of 7oss of Jnabsorbed 0epreciation
#!.## Carry Forward of 7oss of Ta' Goliday Jnits? Sec *,A3,5
#!.#! Procedures of Carry Forward
Introduction
Learning o3<ecti+es
0e&ne set o1 and carry forward of losses.
Identify areas where set o1 losses is possible.
Identify the heads of income permissible for carry forward against di1erent
heads.
Identify the situations when carry forward is not permissible.
2'plain ma'imum years when carry forward is possible.
0i1erentiate carry forward of losses by individuals% &rms and partners.
2'plain the carry forward by underta;ings en=oying ta' holiday facilities.
Illustrate the concept of set o1 and carry forward of losses in di1erent
situations.
)ractical signi0cance
Set o1 and carry forward of losses is very important and practically signi&cant
to compute ta'able income of any year. These are the bene&ts en=oyed by
assesses to cover up their losses before paying ta'es to the government.
Set o1 means the coverage of loss under one head against another heads in a
speci&c year. Carry forward is the transferring of loss of a year to the
succeeding years for coverage if set o1 was absent or insuEcient. Such set o1
and carry forward facility can be availed provided that certain conditions are
ful&lled. This chapter presents such guidelines.
7osses from any head cannot be set o1 against income from any other heads.
And losses cannot be carried forward for unlimited period. Thus% professional
accountants need clear understanding on each topic of this chapter.
Sub=ect to some conditions% an assessee is allowed to set o1 and carry
forwarded of losses. The carry forward of losses under di1erent heads of
income are varied.
Cou will &nd the details of the above issues in this chapter with some practical
e'ample.

Sto* and thin2
0o you reali9e that the understanding of set o1 and carry forward of loses is
important for computation of total ta'able incomeN Can you determine the
ta'able income from di1erent heads of income after set o1 and carry forward
of lossesN
.or2ing conte,t
In practice% as the accountants are sometime re<uired to support to prepare
their clientsD ta' returns% they need to advise the clients on how to calculate
the total ta'able income for any income year. Before advising the clients%
accountants should have the clear concept relating to set o1 and carry
forward of losses in determining the ta'able income.
The right practice of the option of set o1 and carry forward of losses
sometime help the assesse to reduce the current and future the ta' liability.
S6lla3us lin2s
The topics covered in this chapter are very important for computing ta'able
income which is re<uired for solving sample practical problems at this level.
Cou will be also using this ;nowledge when you tac;le the ta'ation paper later
on in the Professional Stage and it will also underpin the technical aspects at
the Advanced Stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Jnderstanding provisions regarding set o1 and carry forward of losses.
Identify areas where set o1 losses is possible.
Identify carry forward of losses from income from house property.
Identify carry forward of losses from income from business and profession.
Identify carry forward of losses from income from speculation business.
Identify carry forward of losses from income from capital gain.
Identify carry forward of losses from income of a partnership &rm.
Identify the situations when carry forward is not permissible.
2'plain ma'imum years when carry forward is possible.
2'plain the application of unabsorbed depreciation and its impact on
income from business and profession.
0i1erentiate carry forward of losses by individuals% &rms and partners.
2'plain the carry forward by underta;ings en=oying ta' holiday facilities.
Illustrate the concept of set o1 and carry forward of losses in di1erent
situations.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter and also this manual.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have to be prepared well for this area as this chapter consists of
core concept on computation of income which is vital for calculating ta'
liability. Clear concept and understanding of each contents of this chapter will
help candidates to resolve any problems relating to set o1 and carry forward
of losses.
'2-& S"T O%% AND CA##Y %O#.A#D O% LOSS"S
Section O+er+ie/
7oss arising in one head of income in any year can be set o1 against pro&t
arising under any other head e'cept capital loss or loss on speculative
transaction or property income in the same year.
Balance of loss% if remains% can be carried forward to be set o1 against
pro&t under same head for si' years.
Capital loss of T;. +%""" in a year cannot be carried forward nor can it be
set o1 against pro&t under any other head.
Jnabsorbed depreciation brought forward together with current yearDs
depreciation allowance forms total depreciation charge for the year.
Jnabsorbed depreciation can be carried forward inde&nitely i.e. without
time limit of si' years.
For carry forward and set o1 right the assessee and the broad character of
business must remain same.
12.1 Introduction to Set oA and Carr6 %or/ard of Losses
Ta' is imposed on income and thus% if loss is generated from any headsI
government o1ers suEcient options to ma;e the assessee well o1 enough so
that ta' may be collected. Two such options are?
a5 Set o1
b5 Carry forward and set o1
7ogically% set o1 considers only one year whereas carry forward includes
subse<uent years. As assessee have multiple sources of income% it is very
common that loss will not generate from each heads. Thus losses from one
head may be ad=usted with income from other heads so that net &gure results
income and ta' can be imposed on that. Gowever% if the total income from all
heads results losses% set o1 cannot be done practically. In such a situation%
loss of one year can be carried forward to subse<uent years for set o1. This
chapter presents these two issues in detail.

'2-2 Set oA of LossesB Sec 9F
>here% in respect of any assessment year% the net result of computation of
income under any head is a loss% the assessee shall% sub=ect to the other
provisions of the Brdinance% be entitled to have the amount of such loss set
o1 against his income% if any% assessable for that assessment year under any
other head.
Provided that any loss in respect of any speculation business or any loss under
the head OCapital gainsW or any loss from any other source% income of which is
e'empted from ta' shall not be so set o1% but shall% e'cluding any loss from
any other source% income of which is e'empted from ta'% in accordance with
the provisions of the Brdinance% be set o1% or be carried forward to
succeeding assessment year or years for set o1% against any income in
respect of speculation business or any income under the head OCapital gainsW.
Similarly any loss in respect of any income from business or profession shall
not be so set o1 against any income from house property.
Further% for the purposes of this section% the 0eputy Commissioner of Ta'es
shall in computing any loss% deduct any amount received in cash as subsidy
from the (overnment.
Provided further that any loss in respect of any income from business or
profession shall not be so set o1% or be carried forward to succeeding
assessment year or years for set o1% against any income from house property.
'2-9 )rocedures of Set OA
7osses from one head can be set o1 against income from other head3s5
sub=ect to the conditions as mentioned below?
'- The loss generated from one source under a particular head can be set
o1 against the other sources of income% if any% under the same head.
For e'ample% 7oss of software business can be set o1 against the
income from hardware business% as both are the sources of income
under the head OIncome from Business and ProfessionW.
2- If the loss generated from a source cannot be fully set o1 against the
income of other sources under the same head% it can be set o1 against
the income of other heads sub=ect to the prescribed conditions.
9- 7oss generated from any speculation business can only be set o1
against income from some other speculation businesses% if any.
:- Similarly% loss generated under the head OCapital gainW can only be set
o1 against any other income under the same head OCapital gainW.
@- $o set o1 of losses is allowed for any loss generated from ta' e'empted
income.
E- For the purpose of set o1 of losses the 0CT shall% in computing any loss%
deduct any amount received in cash as subsidy from the government.
F- Any loss under the head OIncome from Business or ProfessionW cannot
be set o1 against any income from house property.
D- In case of loss sustained by a &rm under any head can be set o1 only
against the income of the &rm under any other head and not against the
income of any of the partners of the &rm USection *!3)53a5V
The table produced below may be used as a short8cut guideline for set8o1?
Inco4e heads generating
losses
Set oA against
#. Salaries any head U(enerally loss is uncommonV
!. Interest on securities any head
). Income from house property any head
*. Agricultural income any head e'cept OCapital (ainW
+. Income from business or
profession
any head e'cept income from house
property and capital gainI
,. Capital gain income from OCapital gainW only
-. Income from other sources any head U(enerally loss is uncommonV
.. Speculation business income from speculation business only
/. Income e'empted from ta' Set o1 is not allowed
'2-: Carr6 %or/ard of Business LossesB Sec 9D
>here% for any assessment year% the net result of the computation of income
under the head XIncome from business or professionK is a loss to the assessee%
not being a loss sustained in a speculation business% and such loss has not
been wholly set o1 under section )-% so much of the loss as has not been so
set o1% the whole of the loss% where the assessee has no income under any
other head or has income only under the head XCapital gainsK% shall be carried
forward to the ne't following assessment year% and8
3a5 it shall be set o1 against the income% if any% from the business or
profession for which the loss was originally computed if such business or
profession continued to be carried on by him in the income yearI and
3b5 if the loss cannot be wholly so o1% the amount of the loss not so set o1
shall be carried forward to the ne't assessment year and so on for not
more than si' successive assessment years.
'2-@ Set oA and Carr6 %or/ard of Loss in S*eculation BusinessB Sec 9C
>here% for any assessment year% the result of computation of income in
respect of any speculation business carried on by the assessee is a loss% it
shall be set o1 only against the income% if any% from any other speculation
business carried on by him and assessable for that assessment year.
>here% for any assessment year% any loss computed in respect of a
speculation business has not been wholly set o1 section )/3#5% so much of the
loss as has not been so set o1% or the whole loss where the assessee has no
income from any other speculation business% shall% sub=ect to the provisions of
the Brdinance% be carried forward to the ne't following assessment year% and
3a5 it shall be set o1 against the income% if any% from any speculation business
carried on by him and assessable for that assessment yearI and
3b5 if the loss cannot be wholly so set o1% the amount of loss not so set o1
shall be carried forward to the ne't assessment year and so on for not
more than si' successive assessment years.
'2-E Set oA and Carr6 %or/ard of Loss under the ;ead VCa*ital $ainsOB Sec
:&
>here% in respect of any assessment year% the net result of computation of
income from any source under the head XCapital gainsK is a loss% it shall be set
o1 only against income from any other source falling under that head and
assessable for that year.
>here% for any assessment year% any loss computed under the head XCapital
gainsK has not been wholly set o1 under section *"3#5% so much of the loss as
has not been so set o1% or the whole loss where the assessee has no income
from any other source falling under that head% shall% sub=ect to the provisions
of the Brdinance% be carried forward to the ne't following assessment year%
and8
3a5 it shall be set o1 against income% if any% of the assessee under that head
and assessable for that yearI and
3b5 if the loss cannot be wholly so set o1% the amount of loss not so set o1
shall be carried forward to the ne't assessment year and so on for not
more than si' successive assessment year.
>here% in respect of any assessment year% the loss computed under the head
XCapital gainsK does not e'ceed &ve thousand ta;a it shall not be carried
forward and where it e'ceeds &ve thousand ta;a only so much of such loss
shall be carried forward as e'ceeds &ve thousand ta;a under section *"3)5.
'2-F Carr6 %or/ard of Loss under the ;ead VAgricultural Inco4eOB Sec :'
>here% for any assessment year% the net result of the computation of income
under the head XAgricultural incomeK is a loss to the assessee% and such loss
has not been wholly set o1 under section )-% so much of the loss as has not
been so set o1% or the whole of the loss% where the assessee has no income
under any other head or has income only under the head XCapital gainsK shall
be carried forward to the ne't following assessment year% and8

3a5 it shall be set o1 against agricultural income% if any% of the assessee
assessable for that assessment yearI and
3b5 if the loss cannot be wholly so set o1 the amount not so set o1 shall be
carried forward to the ne't assessment year and so on for not more than
si' successive assessment years.
'2-D Carr6 %or/ard of Loss of %ir4 and )artner
In the case of a &rm?
3a5 where the assessee is the &rm% the loss sustained by it under any head of
income shall be set o1 under section )- only against the income of the
&rm under any other head and not against the income of any of the
partners of the &rmI and
3b5 where the assessee is a partner of the &rm% he shall not be entitled to have
any loss sustained by the &rm carried forward and set o1 against his own
income USection *!3)5V.
In the case of a &rm% in the constitution of which a change has occurred8
3a5 the &rm shall not be entitled to set o1 so much of the loss proportionate to
the share of a retired or deceased partner as e'ceeds his share of pro&ts% if
any% of the income year in the &rmI and
3b5 a partner of the &rm shall not be entitled to the bene&t of any portion of
the said loss as is not apportioned to him USection *!3+5V.
'2-C Carr6 %or/ard of Loss of Succeeded Business or )rofession
>here any person carrying on any business or profession has been succeeded
in such capacity by another person otherwise than by inheritance% no person%
other than the person incurring the loss% shall be entitled to have the loss in
such business or profession set o1 against his income under any other head
USection *!3*5V.
",a4*leB
A% B% and C were partners in a &rm sharing pro&ts in the ratio of )?!?#. 0uring
income year !"#"8!"##% B retired and A and C continued in the ratios of )?#.
Jp to that year brought forward loss of the &rms amounted to T;. )""%""".
$et pro&t for the year amounted to T;. +""%""".
Gere is a case of change in the constitution of the &rm. The &rm cannot set o1
retiring partnerDs share of loss against its pro&t for the assessment year !"##8
!"#!% which is 3!4, _ T;. )""%"""5 [ T;. #""%""" nor C can individually set o1
or carry forward his share of the loss.
Assess4ent 6ear 2&''>2&'2
T2-
$et pro&t +""%"""
Brought forward loss
!""%"""
Ad=usted pro&t )""%"""
7et us assume the same facts as have been earlier e'cepting that A% B and C
retired when 0% 2 and F too; over the &rm.
It is a case of succession since none of the old partners is in new &rm and it is
not allowed to set o1 loss. To maintain continuity at least one partner must
continue before and after the change in partnership.
'2-'& Carr6 %or/ard of Loss of Una3sor3ed De*reciation
>here% in ma;ing an assessment for any year% full e1ect cannot be given to
the depreciation allowances referred to in section !/3#5 3viii5 owing to there
being no pro&ts or gains chargeable for that year or such pro&ts or gains
being less than the allowance then% sub=ect to the provisions of sub8section
3-5% the allowance or part of the allowance to which e1ect has not been given%
as the case may be% shall be added to the amount of the allowance for
depreciation for the following year and be deemed to be part of that
allowance or if there is no such allowance for that year% be deemed to be the
allowance for that year and so on for succeeding years USection *!3,5V .
>here% under section *!3,5% depreciation allowance is also to be carried
forward% e1ect shall &rst be given to the provisions of sections ). and )/3!5
USection *!3-5V.
'2-'' Carr6 %or/ard of Loss of Ta, ;olida6 UnitsB Sec :EAE(
>here the assessee sustains a loss from a ta' holiday underta;ing% it shall be
carried forward and set o1 against the pro&ts and gains of the said
underta;ing for the following year and where it cannot be wholly set o1% the
amount of the loss not so set o1% shall be carried forward for the ne't year
and so on% but no loss shall be carried forward beyond the ta' holiday period
speci&ed by the Board in the order issued under section *,A 3)5 or 3*5.
'2-'2 )rocedures of Carr6 %or/ard
7osses from particular heads can be carried forward to particular number of
years sub=ect to the provisions of IT Brdinance #/.*. Following points are
important to remember?
'- 7osses generated under the heads OIncome from Business and
ProfessionW% OSpeculation BusinessW% Capital (ainW and OAgricultural
IncomeW can be carry forwarded up to a period of si, successive years.
2- In any assessment year% if the business losses 3e'cluding losses of
speculation businesses5 have not been wholly set o1% it can be carried
forwarded to set o1 from the income of the same sources in subse<uent
si' years.
9- The loss from any business or profession can be carried forwarded only
if such business or profession is continued to be carried on by the
assessee in the subse<uent income years.
:- 7osses from speculation business can only be carried forwarded to set it
o1 only against income from speculation businesses in subse<uent si'
years.
@- Capital losses can be carried forwarded to set it o1 against the incomes
under the head OCapital gainW in subse<uent si' years. But the carried
forwarded amount will only be the e'cess of T;. +%""".
E- 7osses under the head OAgricultural incomeW can be carried forwarded
for a period of si' years and set o1 against agricultural income in
subse<uent si' years.
F- A successor8in8Business otherwise than by inheritance cannot claim to
carry forward the loss incurred by his predecessor8in8Business.
Following table gives a birdKs eye view of carry forward of losses?
Losses originated
fro4
Carried for/ard and set oA
against
)eriod of
3ene0ts
Business and
profession
Income from business and
profession
Si' succeeding
years
Speculation business Speculation business Si' succeeding
years
Capital gain Capital gain Si' succeeding
years
Agricultural income Agricultural income Si' succeeding
years
Ta' holiday units Pro&ts and gains of the said
underta;ing
>ithin holiday
period
Jnabsorbed
depreciation
Income from business and
profession
Jnlimited period

.or2ed ",a4*les and Solutions
.or2ed ",a4*le '
r. Amir Gossain has the following income in di1erent income years. Calculate his
ta'able income after considering provisions relating to set o1 and carry forward of
losses.
2&&D>2&&C 2&&C> 2&'& 2&'&>2&''
Income from Securities !"%""" )"%""" !"%"""
Income from Gouse
Property
#%)"%""" #%!"%""" #%)"%"""
Income from Agriculture 3#%-"%"""5 3)"%"""5 *"%"""
Income from Speculation 8 3*"%"""5 +"%"""
Income from Capital (ain !+%""" 8 8
Solution 'B
Mr- A4ir ;ossain
Inco4e 6earB 2&&D>2&&C
Assess4ent 6ear 2&&C>2&'&
Sources of inco4e
Ta,a3le
Inco4e
Set OA Carr6
%or/ard
Income from Securities !"%"""
Income from Gouse Property #%)"%"""
Income available to set o1 losses from
agriculture
#%+"%"""
#%+"%"""
Income from Agriculture 3#%-"%"""5
3#%-"%""
"5
Income available after set o1 3!"%"""5
Carry forward 3losses from agriculture5 !"%"""
Income after set o1 L carry forward of losses 8
Income from Capital gain !+%"""
Total inco4e 2@=&&&
Mr- A4ir ;ossain
Inco4e 6earB 2&&C>2&'&
Assess4ent 6earB 2&'&M2&''
Sources of inco4e
Ta,a3le
Inco4e
Set OA Carr6
%or/ard
Income from Securities )"%"""
Income from Gouse Property #%!"%"""
Income available to set o1 losses from
agriculture
#%+"%""" #%+"%"""
Income from Agriculture 3)"%"""5
Set o1? Current year losses 3)"%"""5
Income after set o1 #%!"%""" #%!"%"""
Carry forward? 7ast year losses from
agriculture
!"%"""
Carry forward? Income from Speculation *"%"""
Income after set o1 L carry forward of losses '=2&=&&&
Mr- A4ir ;ossain
Inco4e 6earB 2&'&>2&''
Assess4ent 6earB 2&''M2&'2
Sources of inco4e
Ta,a3le
Inco4e
Set OA Carr6
%or/ard
Income from Securities !"%"""
Income from Gouse Property #%)"%"""
Income available to set o1 losses from
agriculture
#%+"%"""
Income from Agriculture *"%"""
Set o1? 7osses carried forward from earlier
year
3!"%"""5
6emaining income from agriculture after set
o1
!"%""" !"%"""
Income from speculation +"%"""
Set o1? 7osses carried forward from last year 3*"%"""5
6emaining income from speculation after set
o1
'&=&&& '&=&&&
Income after set o1 L carry forward of losses '=D&=&&&
.or2ed ",a4*le 2
r. Mamshed Sowdagor reports the following income for the income year ended
on Mune )"% !"##.
Income from Business and Profession T;.
+""%"""
Income from Gouse Property #""%"""
Income from Capital (ain +"%"""
Income from Speculation Business ."%"""
Gowever% he has some losses carried forward from earlier years 3income years5
with the following details?
Geads Amount of
7osses
Cear of
Brigination
Income from Business and Profession T;. ."%""" !""-8".
Income from Capital (ain +"%""" !""!8")
Income from Speculation Business *"%""" !"")8"*
Jnabsorbed depreciation +"%""" !""#8"!
Solution 2B
Mr- Ha4shed So/dagor
Inco4e 6earB 2&'&>2&''
Assess4ent 6earB 2&''>2&'2
Sources of inco4e T2- T2- T2-
Income from Business and Profession +""%"""
Set o1? 7osses carried forward from
!""-8".
."%"""
Jnabsorbed depreciation +"%""" #)"%"""
Ta'able Income from business and
profession
)-"%"""
Income from house property #""%"""
Income from capital gain +"%"""
Set o1? not allowed as it e'ceed ,
years
8 +"%"""
Income from Speculation Business ."%"""
Set o1? 7osses carried forward from
!"")8"*
*"%""" *"%"""
Total ta'able income +,"%"""
Chapter #)
",e4*tion and allo/ances
Ta, holida6 P e,e4*tion(
Contents
Introduction
2'amination conte't
To*ic List
#).# 2'emption F Section ** and Si'th Schedule? Part A L Part B
#).! Ta' holiday scheme for newly established industrial underta;ings%
tourist industry and infrastructure facility
#).) 2'emption from Ta' of $ewly 2stablished Industrial Jnderta;ings Set8
up Between the Period of Muly% !"## to Mune% !"#)% etc. In Certain
Cases. Sec *,B
#).* 2'emption from ta' of newly established physical infrastructure facility
set up between the period of Muly% !"## and Mune% !"#)% etc. in certain
cases. Sec *,C
#).+ 2'emption of income of co8operative society
#)., Ta' holiday for hospital
#).- Concession to industries set up in any 2'port Process Rone
#).. Special ta' e'emptions 4 concessions in respect of certain business
Introduction
Learning o3<ecti+es
Identify the area of investment for ta' holiday scheme.
6ecognise the conditions for en=oying ta' holiday.
0etermine the ta' holiday income
)ractical signi0cance
Income from some newly established industrial underta;ings are e'empted
from ta' liability on the basis of ful&lling some conditions. To get the facility of
ta' holiday the underta;ings need to comply with some conditions and if any
conditions are not ful&lled in the course of ma;ing assessment of an
e'empted assesse% the e'emption will be withdrawn and the 0CT shall
determine the ta' payable for such year.
The ta' holiday and special ta' e'emptions or ta' concessions are provided to
di1erent types of business and industrial underta;ing to encourage those
businesses and industries for overall development of the country. Signi&cant
e'emption on income from e'port sales also a good initiative of government
to promote the e'port oriented companies.
Sto* and thin2
>hen you want to start a new business you can consider the opportunity of
ta' holiday or special ta' e'emption given by the (overnment. Cou can be the
part of the development of the country and at the same time you can get the
ta' holiday facility to enrich your business.
.or2ing conte,t
Accountants are sometime re<uired by the entrepreneur for giving advice on
how the business can be newly started or e'panded along with the ta' holiday
or special ta' e'emption facility. Being the mentorsK accountants can help
their clients regarding new business or e'pansion of their business in such
way that the clients can en=oy the ta' holiday opportunity to be bene&ted
economically.
Accountants should have the detailed ;nowledge on the area of ta' e'empted
business and the updates of the rules and regulation for getting ta' holiday
and other special ta' e'emptions facility so that they can rightly advise their
clients en=oying that facility in case of re<uirement.
S6lla3us lin2s
The topics covered in this chapter imply the area of industry and investments
from where you can get ta' holiday bene&t with the conditions for that
bene&t.
Cou will learn more about this area at application level and in case study of
advanced stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
6ecognise the di1erent industrial underta;ings for ta;ing ta' holiday
facility.
Illustrate the various conditions for getting ta' holiday.
State the computation of ta' holiday income.
ention the reasons for withdrawal and cancellation of ta' holiday.
0e&ne the e'emption of ta' liability for e'porting industries.
ention the di1erent types of business considered for special ta'
e'emptions.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.
'9-& TAX ;OLIDAY
Section O+er+ie/
Assessee en=oys some non8assessable income.
Assessee en=oys ta' rebate on investment allowances.
Some newly established industrial underta;ings are en=oying ta' holiday.
There are some conditions to get the ta' holiday facility.
The purpose of ta' holiday is to encourage industrial and other
development of the country in many sectors li;e tourism% infrastructural%
te'tile% hospital% e'porting industries etc.
Ta' holiday Income shall be computed li;e the computation of income from
business or profession.
Ta' holiday may be cancelled or withdrawn if one or more conditions not
ful&lled.

'9-' ",e4*tion M Section :: and Si,th ScheduleB )art A G )art B
Any income or class of income or the income of any person or class of persons
speci&ed in Part A of the Si'th Schedule shall be e'empt from the ta' as per
section **3#5. Following items as speci&ed in Part A of the Si'th Schedule of
the ITB% #/.*% are e'empted from ta'?
#. Income from property held under trust UPara F #V? Any income derived
from house property held under trust or other legal obligation wholly for
religious or charitable purpose and if part of the house is so held% the
income as set apart for application. Gowever% above provisions are not
applicable to an $(B registered with $(B A1airs Bureau. Gowever% where
any such income is not applied for charitable or religious purposes during
the income year% following conditions should be complied with to get the
ta' e'emptions?
3a5 There should be given a notice in writing to the 0CT specifying
purposes for which the income is being accumulated or set apart. But
the period of such accumulation should not be more than #" years.
3b5 The money so accumulated or set apart is either invested in any
(overnment Security or deposited in any post oEce Ban; Savings
Account or deposited in any account with scheduled ban; of which
&fty one percent or more shares are held by the government.
!. Income from micro credit operation of $(Bs UPara F #AV? Any income
derived from operation of micro credit by an $(B registered with $(B
A1airs Bureau.
). :oluntary contributions received by the 6eligious or Charitable Institutions
UPara F !V? Any income of a religious or charitable institution derived from
voluntary contributions and applicable solely to religious and charitable
purposes. It would however% not be applicable to a private religious trust
which does not ensure public welfare.
*. The income of a 7ocal government UPara F )V
+. Income of provident and other funds UPara F *V? Any income accruing to%
or derived by F
a5 a provident fund established under the Provident Fund Act% #/!+.
b5 A wor;ers participation fund established under the Companies Pro&ts
3>or;ers Participation5 Act% #/,.% sub=ect to any such conditions and
limits as may be prescribed.
,. Special allowances UPara F +V? Any special allowance% bene&t or per<uisite
speci&cally granted to meet e'penses wholly and necessarily incurred in
the performance of the duties of an oEce or employment of pro&t.
-. Income received by the trustees on behalf of speci&ed funds UPara F ,V?
Any income received by the trustees on behalf of a recogni9ed provident
fund% an approved superannuation fund and an approved gratuity fund.
.. Income of employees of Foreign issions UPara F -V? Any income received
by the following persons?
a5 Ambassadors% Gigh commissioners% envoys% ministers% charge de
a1airs% commissioners% counselors% consul de carriere% secretaries%
advisors or attachb of an embassy% high commission% legation or
commission of a foreign State.
b5 Trade commissioners or other oEcial representatives of foreign states%
if the oEcial salary of the corresponding oEcials of Bangladesh
(overnment en=oys a similar e'emption in that foreign country.
c5 Sta1 members or other oEcials employed in the oEces aforesaid
provided they are not engaged in any business or profession or other
employment.
/. Pension UPara F .V? Any pension due to% or received by% an assessee.
#". Income from newly Constructed Gouse UPara F #*V? Income from a newly
constructed residential house sub=ect to stipulated conditions and limits
as prescribed in paragraph #* of Part A of the Si'th Schedule of the ITB%
#/.*.
##. Share of Capital gains of a partner of a &rm UPara F #.V? Any income
received by a partner out of capital gains on which ta' has been paid by
the &rm.
#!. Income of a member of a Gindu Jndivided Family 3GJF5 UPara F #/V? Any
income received by a member of GJF out of income of the said family.
#). (ratuity UPara F !"V? Any income of an assessee representing payment
received as gratuity.
#*. Any payment received from Provident and other funds UPara F !#V? Any
payment from?
a5 A provident fund to which the Provident Funds Act% #/!+ applies.
b5 A recogni9ed provident fund% sub=ect to any such conditions and limits
as may be prescribed.
c5 An approved superannuation fund% sub=ect to any such conditions and
limits as may be prescribed.
d5 A wor;ers participation fund established under the Companies Pro&ts
3>or;ers Participation5 Act% #/,.% sub=ect to any such conditions and
limits as may be prescribed.
#+. 0ividend income from utual or Jnit fund UPara F !!AV? Income from
dividend of a mutual fund or a Jnit fund up to T;. !+%""".
#,. Interest on Ta' free government securities UPara F !*V? Any interest
classi&able under the head OInterest on securitiesW receivable by an
assessee on any security of the (overnment% which is issued with the
condition that interest thereon shall not be liable to ta'.
#-. Interest on the balance in a 6ecogni9ed Provident Fund UPara F !+V?
Interest credited on the accumulated balance of an employee in a
recogni9ed provident fund not e'ceeding one8third of the salary of the
employee for the concerned year and it is allowed at #*.+"P rate.
#.. Payment received on :oluntary retirement UPara F !,V? Amount received
by an employee of a (overnment organi9ation% a local authority% an
autonomous or semi8autonomous body including the units or enterprises
controlled by it% on a voluntary retirement scheme approved by the
government.
#/. Income of indigenous hillman UPara F !-V? Income received from economic
activities underta;en by indigenous Gillman in the hill districts of
6angamati% Bandarban and Hhagrachari.
!". Income from e'port business UPara F !.V? An amount e<ual to +"P of the
income of an assessee other than a company registered outside
Bangladesh derived from e'port business e'cepting the assessees who
are en=oying ta' e'emption or reduction thereon by any noti&cation.
!#. Agricultural income UPara F !/V? Agricultural income upto T;. +"%""" of an
individual assessee whose only source of income is agriculture.
!!. Income from IT business UPara F ))V? Income derived from the business of
software development and Information Technology 2nabled Services
3IT2S5 for the period from Muly "#% !"". to Mune )"% !"#). Provided that
the person shall &le income ta' return in accordance with the provisions
of Section -+3!53c5.
!). Income from &sheries% poultry etc. UPara F )*V? Sub=ect to the following
conditions% any income from &sheries% poultry% production of seeds%
mar;eting of locally produced seeds% cattle farming% dairy farming%
horticulture% frog farming% mushroom farming% Aoriculture% sericulture for
the period from Muly "#% !"". to Mune )"% !"##8
3a5 If such income e'ceeds T;. #%+"%"""48 an amount not less than #"P
of the said income shall be invested in government bonds or
securities within si' month from the end of the income yearI
3b5 The person shall &le income ta' return in accordance with the
provisions of Section -+3!53c5 of the ITB% #/.*I and
3c5 $o such income shall be transferred within &ve years from the end of
the income year? provided that income from &sheries as mentioned in
this paragraph shall not apply to a company.
!*. Income from e'port of handicrafts UPara F )+V? Any income derived from
the e'port of handicrafts for the period from Muly "#% !"". to Mune )"%
!"#).
!+. Ta' paid by the government on behalf of a petroleum company UPara F
),V? Any amount paid by the government as ta' on behalf of a petroleum
e'ploration company engaged in e'ploration of petroleum products in
Bangladesh under Production Sharing Contract 3PSC5 with the
(overnment of Bangladesh.
!,. Income of agricultural educational activities UPara F )-V? Income of any
private Agricultural College or private Agricultural Jniversity derived from
agricultural educational activities.
!-. Income of Building with speci&c characteristics UPara F ).V? Any income
derived from any building% not less than &ve storied% having at least ten
Aats% constructed at any time between Muly "#% !""/ to Mune )"% !"#*
3both days inclusive5% for ten years from the date of completion of
construction of the building% if it is situated in any area of Bangladesh
other than the areas of City Corporation% Cantonment Board% Tongi
Jpa9ila% $arayangan= Paurashaba% (a9ipur Pourashava and any
Pourashaba under 0ha;a district.
!.. Income of S2 UPara F )/V? Income derived from any Small and edium
2nterprise 3S25 engaged in production of any goods and having an
annual turnover of not more than ta;a twenty four la;h. Provided that the
person shall &le income ta' return in accordance with the provisions of
Section -+3!53c5.
!/. Income from Rero Coupon Bond UPara F *"V? Any income derived from
Rero Coupon Bond received by a person other than Ban;% Insurance or
any Financial Institution% sub=ect to the following conditions?
3a5 that the Rero Coupon Bond is issued by Ban;% Insurance or any
Financial Institution with prior approval of Bangladesh Ban; and
Securities and 2'change Commission.
3b5 that the Rero Coupon Bond is issued by any institution other than
Ban;% Insurance or any Financial Institution with prior approval of
Securities and 2'change Commission.
)". Income from poultry farming UPara F *!V? Sub=ect to the following
conditions% any income from poultry farming for the period from Muly "#%
!"## to Mune )"% !"#)8
3a5 If such income e'ceeds T;. #%+"%"""48 an amount not less than #"P
of the said income shall be invested in government bonds or
securities within si' month from the end of the income yearI
3b5 The person shall &le income ta' return in accordance with the
provisions of Section -+3!53c5 of the ITB% #/.*I and
3c5 $o such income shall be transferred by way of gift or loan within &ve
years from the end of the income year.
Ta, Credit Inco4e
An assessee shall be entitled to a credit from the amount of ta' payable on
his total income of an amount e<ual to ten percent of the sums speci&ed in
paragraphs in all paragraphs e'cluding paragraphs #+ and #, of Part B% Si'th
Schedule USection **3!53b5V. The following items should be considered as
investment allowance to en=oy ta' credit facility as per Part B% Si'th Schedule?
#. 7ife Insurance Premium Paid UPara F #V? Any sum paid in Bangladesh by an
assessee to e1ect an insurance or a contract for deferred annuity on the
life of himself% spouse or minor child% provided that such payment% in the
case of insurance% shall not e'ceed #"P of the sum assessed e'cluding
bonus or other bene&ts.
!. 7ife Insurance Premium Paid by a Gindu Jndivided Family UPara F !V? Any
sum paid in Bangladesh by a GJF to e1ect an insurance on the life of any
male member of the family or the wife of any such member.
). 0eduction from the salary of (overnment employee for deferred annuity
UPara F )V? Any sum not e'ceeding one8&fth of the salary deducted from
the salary payable by the (overnment or on its behalf to any individual in
accordance with the service conditions to secure a deferred annuity for
him or for his wife or children.
*. Contribution to Provident Funds UPara F *V? Any contribution by an
assessee to any provident fund to which the Provident Fund Act% #/!+
applies.
+. 2mployerKs and 2mployeeKs contribution to a 6ecogni9ed Provident Fund
UPara F +V? Any sum paid to a recogni9ed provident fund by the assessee
and the employer% where the assessee is a participant sub=ect to the
limits laid down in Part B of the Si'th Schedule.
,. Contribution to Superannuation Fund UPara F ,V? Any sum paid by the
assessee as ordinary annual contribution to approved superannuation
fund as a participant to the fund.
-. Investment in Savings Certi&cate UPara F #"V? Any sum invested by a non8
company assessee in the following if the investment are held for + years
from the date of purchase 4 up to its maturity?
a5 Savings Certi&cates or instruments speci&ed by the $B6I
b5 Jnit certi&cates and mutual fund certi&cates issued by ICB and its
subsidiariesI
c5 (ovt. securities including development loans4Bonds as speci&ed by the
$B6I
d5 Shares of Investment Companies as speci&ed by the $B6.
If the securities are disposed of by sale% transfer or in any other manner
within + years from the date of purchase or before the maturity thereof%
the ta' credit amount availed for such investment will be cancelled. This
amount has to be added to the ta' payable amount of the income year on
which such certi&cate was disposed i.e. the assessee has to pay bac; the
money.
.. Contribution to 0eposit Pension Scheme 30PS5 UPara F ##V? Any amount
not e'ceeding TA6+(2((( by an individual in any 0eposit Pension Scheme
sponsored by a Scheduled Ban;.
/. 0onation to a Charitable Gospital UPara F ##AV? Any sum paid as donation
to a charitable hospital established outside the city corporation% provided
the donation is made after one year of establishment of the hospital.
#". 0onation to Brgani9ations set up for the welfare of retarded people UPara
F ##BV? Any sum paid as donation to an organi9ation set up for the welfare
of retarded people% provided the donation is made after one year of
establishment of the organi9ation and is approved by the Social >elfare
0epartment and the $B6.
##. 0onation to Ra;at Fund UPara F #)V? Any sum paid by an assessee as
Ra;at to the Ra;at Fund or charitable fund established by or under the
Ra;at Fund Brdinance% #/.!.
#!. Contribution to Benevolent Fund and (roup Insurance Scheme UPara F
#-V? Any sum paid by an assessee to ma;e provision for his spouse%
children or other dependent person to a benevolent fund or any premium
paid under a group insurance scheme approved by the $B6.
#). Contribution to Aga Hhan 0evelopment $etwor; UPara F !#V? Any sum paid
by an assessee as donation to any socio8economic or cultural
development institution established by the Aga Hhan 0evelopment
$etwor; in Bangladesh.
#*. Contribution to Philanthropic or 2ducational Institution UPara F !!V? Any
sum paid by an assessee as donation to Philanthropic or 2ducational
Institution approved by the government for this purpose.
#+. Investment in Computer 4 7aptop UPara F !)V? Any sum invested in the
purchase of one computer 3Jpto T;. +"%"""5 or one laptop 3Jpto T;.
#%""%"""5 by an individual assessee.
#,. 0onation to national level institution set up in memory of the liberation
war UPara8!*V? Any sum paid by an assessee as donation to a national
level institution set up in memory of liberation war.
#-. 0onation to national level institution set up in memory of Father of the
$ation UPara8!+V? Any sum paid by an assessee as donation to a national
level institution set up in memory of Father of the nation.
#.. 0onation to Prime inisterKs Gigher 2ducation Fund UPara F !,V
#/. Investment in shares through IPB by an individual i.e. Primary share UPara
F !-V ? Any sum invested by an assessee% being an individual% in the
ac<uisition% through Initial Public B1ering 3IPB5% of any stoc;s of shares of
a company% mutual fund or debenture listed with any stoc; e'change.
!". Investment in (overnment Treasury Bond UPara F !.V? Any sum invested
by an assessee% being an individual% in the purchase of Bangladesh
(overnment Treasury Bond.
!#. Contribution to PresidentKs 6elief Fund US6B !+*47.+V
!!. Contribution to Prime inisterKs 6elief Fund US6B #!+47/# dated
"#."-.#//#V
!). Contribution to Ahsania ission Cancer Gospital US6B !"!4IT4!""+ dated
",."-.!""+V
!*. Contribution to Sylhet 0iabetic Society% Islamia 2ye Gospital and . A.
Ispahani Institute of Bphthalmology% Hidney FoundationI and $ational
Geart Foundation of Bangladesh US6B #"/4IT4!"", dated "-."+.!"",V
!+. Contribution to Child Gealth Foundation GospitalI Child Gospital% MessoreI
Gospital for Sic; Children% Sath;hira 36un by Child Gealth Foundation%
Bangladesh5I 0igonto emorial Cancer Gospital% 0ha;aI The 2$T L Gead8
$ec; Cancer Foundation of Bangladesh% 0ha;aI and $ational
0evelopment Foundation for 0isablesK% 0ha;a US6B )#,8AI$4!"".V
!,. Contribution to Matir Mano; Bangabondhu Shei;h u=ibur 6ahman emorial
Trust% 0ha;aI 6afatullah Community Gospital 36CG5% Thengamara% BograI
and Salvation for the 0eserving 3SF05% ani;gon= US6B ))8AI$4!""/ dated
"/.").!""/V
!-. Contribution to Asiatic Society of Bangladesh% 6amna% 0ha;a US6B )!8
AI$4!""/ dated "/.").!""/V
Gowever% Para #+ and #, is e'cluded from the above list as ta' shall not be
payable by an assessee in respect of any income or any sum speci&ed in
those paragraphs as per section **3!53a5. For 6eference% these two
paragraphs are presented below?
#. Income from Association of Persons? Any sum received by the assessee
out of the income of an association of persons other than a Gindu
Jndivided Family% company or &rm on which ta' has already been paid.
UPara F #+% Part B. Si'th ScheduleV
!. Income from a Firm? Any share of pro&t of a partnership &rm if ta' on such
pro&t or income has already been paid by the &rm. UPara F #,% Part B.
Si'th ScheduleV

As per section **3!53b5 of the ITB% #/.*% a resident and non8resident
Bangladeshi assessee will get ta' rebate of an amount e<ual to '&J of the
sums speci&ed in Part B of the Si'th Schedule. Gowever% as per Section **3)5%
ma'imum amount eligible for such rebate would be restricted to the lower of
the following?
2&J of the total income e'cluding employerKs contribution to 6PF and
interest on the accumulated balance of 6PF and any income u4s .!C% or
T2- '=&&=&&=&&&.

Illustration
An assesseeDs total ta'able income during income year !"#"8!"## amounted
to T;. #%"""%""" 3without deduction of investment allowance5. Ge has made
investments in allowable areas as per Part B% Si'th Schedule amounted T;.
*""%""". 2mployerKs contribution to recogni9ed provident fund was T;. ."%"""
and he has no income on which ta' is deducted at sources under section .!C.
Compute ta' rebate on investment allowance.
Actual investment made
? T;. *""%"""
a'imum limit?
!"P of ta'able income e'cluding employerKs contribution to 6PF and interest
on the accumulated balance of 6PF and any income u4s .!C? !"P of T;.
/!"%""" ? T;. #.*%"""
Br% ? T;.
#%""%""%"""
7ower one ? T;. #.*%"""
Thus% allowable amount for investment allowance is T;. #.*%""" and ta'
rebate will be #"P of T;. #.*%"""% i.e.% T;. #.%*"".
'9-2 Ta, ;olida6 Sche4e for ne/l6 esta3lished industrial underta2ings=
tourist industr6 and infrastructure facilit6B Sec :EA
Pro&ts and gains of an industrial underta;ing% tourist industry or physical
infrastructure facility 3hereinafter referred to as the said underta;ing5 set8up
in Bangladesh between # Muly #//+ and )" Mune !"". 3both days inclusive5
shall be e'empt from the ta' payable under section *,A3#5 of the Brdinance
for the period speci&ed below8
3a5 if the said underta;ing is set8up in% 0ha;a and Chittagong divisions
e'cluding the hill districts of 6angamati% Bandarban and Hhagrachari%
for a period of * years beginning with the month of commencement of
commercial production or operation of the said underta;ingI
3b5 if the said underta;ing is set8up in 6a=shahi% Hhulna% Sylhet and Barisal
divisions and the hill districts of 6angamati% Bandarban and
Hhagrachari% for a period of , years beginning with the month of
commencement of commercial production or operation of the said
underta;ing.
Industrial underta;ing% tourist industry% or physical infrastructure facility does
not include e'pansion of an e'isting underta;ing for the purpose of this
section 8
3i5 Tindustrial underta;ingT means an industry engaged in the production
of te'tile% te'tile machinery% high value garments% pharmaceuticals%
melamine% plastic products% ceramics% sanitary ware% steel from iron
ore% fertili9er% insecticide L pesticide% computer hardware% petro8
chemicals% basic raw materials of drugs% chemicals% pharmaceuticals%
agricultural machine% ship building% boilers% compressors and any other
category of industrial underta;ing as the (overnment may by
noti&cation in the oEcial (a9ette specify.
2'planation? Dhigh value garmentsD mean overcoats% =ac;ets and suits.
3ii5 Tphysical infrastructure facilityT means sea or river port% container
terminals% internal container depot% container freight station% 7$(
terminal and transmission line% C$( terminal and transmission line% gas
pipe line% Ayover% large water treatment plant L supply through pipe
line% waste treatment plant% solar energy plant% e'port processing 9one
and any other category of physical infrastructure facility as the
(overnment may by noti&cation in the oEcial (a9ette specifyI
3iii5 Ttourist industryT means residential hotel having facility of three star or
more and any other category of tourist industry facility as the
(overnment may by noti&cation in the oEcial (a9ette specify.
Conditions for Ta, ;olida6
The e'emption under section *,A3#5 shall apply to the said underta;ing if it
ful&lls the following conditions under section *,A3!5% namely?8
3a5 That the said underta;ing is owned and managed by88
3i5 a body corporate established by or under an Act of Parliament with
its head oEce in BangladeshI or
3ii5 a company as de&ned in the Companies Act% #/#)4#//* with its
registered oEce in Bangladesh and having a subscribed and paid
up capital of not less than T; #%""%""" on the date of
commencement of commercial production or operation?
3c5 That thirty per cent of the income e'empted under sub8section 3#5 is
invested in the said underta;ing or in any new industrial underta;ings
during the period of e'emption or within one year from the end of the
period to which the e'emption under that sub8section relates and in
addition to that another ten percent of the income e'empted under sub8
section 3#5 is invested in each year before the e'piry of three months from
the end of the income year in the purchase of shares of a company listed
with any stoc; e'change% failing which the income so e'empted shall%
notwithstanding the provisions of the Brdinance% be sub=ect to ta' in the
assessment year for which the e'emption was allowed.
Provided that the <uantum of investment referred to in this clause shall be
reduced by the amount of dividend% if any% declared by the company
en=oying ta' e'emption under this sectionI
Provided further that% the provision for purchase of shares of a company
listed with any stoc; e'change referred to in this clause shall not be
applicable in case of readymade garments industry% if it invests forty per
cent of the income e'empted under sub8section 3#5 in the said underta;ing
or in any new industrial underta;ing during the period of e'emption or
within one year from the end of the period to which the e'emption under
that sub8section relates.
It is to be noted that income to be invested mentioned as above means
total income for ta' purpose and not net pro&t as per pro&t and loss
account.
Illustration
Total income as per Computation of Income for ta' purpose T;. #%"""%"""
LessB dividend declared #""%"""
Balance /""%"""
3i5 to be invested in the said underta;ing or in any new industrial
underta;ing Q )"P% i.e.% T;. !-"%"""
3ii5 to be invested in the purchase of stoc; listed shares Q #"P% i.e.% T;.
/"%"""
3d5 that the said underta;ing is not formed by splitting up or by reconstruction
or reconstitution of business already in e'istence or by transfer to a new
business of any machinery or plant used in business which was being
carried on in Bangladesh at any time before the commencement of the
new businessI
3e5 that the said underta;ing is approved% and during the relevant income
year% stands approved by the Board for the purposes of section *,AI and
3f5 that the application in the prescribed form for approval for the purposes of
section *,A% as veri&ed in the prescribed manner% is made to the Board
within , months from the end of the month of commencement or
commercial production or operation.
Co4*utation of Ta, ;olida6 Inco4e
3#5 The pro&ts and gains of the underta;ing to which section *,A applies shall
be computed in the same manner as is applicable to income chargeable
under the head XIncome from business or profession USection *,A3+5V.
Gowever% in respect of depreciation% only the allowances for normal
depreciation speci&ed in paragraph ) of the Third Schedule shall be
allowed.
3!5 The pro&ts and gains of the said underta;ing shall be computed separately
from other income% pro&ts and gains of the assessee% if any% and where the
assessee sustains a loss from such underta;ing% it shall be carried forward
and set o1 against the pro&ts and gains of the said underta;ing for the
following year and where it cannot be wholly set o1% the amount of the
loss not so set o1% shall be carried forward for the ne't year and so on% but
no loss shall be carried forward beyond the period speci&ed by the Board
in the order issued under section *,A3)5 or 3*5 USection *,A3,5V.
3)5 Jnless otherwise speci&ed by the (overnment% nothing contained in
section *,A shall be so construed as to e'empt the following from ta'
chargeable under section *,AF
3a5 any dividend paid% credited or distributed or deemed to have been
paid% credited or distributed by a company to its share8holders out of
the pro&ts gainsI and
3b5 any income of the said underta;ing classi&able as XCapital gainsK
chargeable under the provisions of section )#I
3c5 any income of the said underta;ing resulting from disallowance made
under section )".
Note
A ta' holiday company is liable to pay ta' resulting from disallowance made
u4s )" in respect of the following.
3a5 Any payment of salaries chargeable to income ta'% if ta' at source has not
been deducted and paid to the (overnment Treasury.
3b5 Any payment paid by an assessee to any person if deductible ta' at source
has not been made and paid to the (overnment Treasury under Chapter
:II 3Section */5.
3c5 Any e'cess per<uisites u4s )"3e5 has been paid to the employees.
.or2ed ",a4*le
A ta' holiday companyKs Income was determined at T;. #%"""%""" without
considering disallowances u4s )" Uunder 3a5% 3b5 L 3c5 aboveV of T;. *""%""".
Solution
The ta' holiday company is liable to pay ta' on T;. *""%""".
.ithdra/al and Cancellation of Ta, ;olida6
3#5 >here any e'emption is allowed under section *,A and in the course of
ma;ing assessment% the 0eputy Commissioner of Ta'es is satis&ed that
any one or more of the conditions speci&ed in section *,A are not ful&lled%
the e'emption will stand withdrawn for the relevant assessment year and
the 0eputy Commissioner of Ta'es shall determine the ta' payable for
such year. USection *,A3.5V.
3!5 $otwithstanding anything contained in this section8
3a5 where the said underta;ing en=oying e'emption of ta' under section
*,A is engaged in any commercial transaction with another
underta;ing or company having one or more common sponsor
directors% and
3b5 during the course of ma;ing an assessment of the said underta;ing if
the 0eputy Commissioner of Ta'es is satis&ed that the said underta;ing
has purchased or sold goods at higher or lower price in comparison to
the mar;et price with intent to reduce the income of another
underta;ing or company.
The e'emption of ta' of that said underta;ing shall be deemed to have
been withdrawn for that assessment year in which such transaction is
made. USection *,A3!A5V.
3)5 Any such underta;ing approved under section *,A may% not later than one
year from the date of approval% apply in writing to the Board for the
cancellation of such approval% and the Board may pass such orders
thereon as it may deem &t.USection *,A3/5V.
3*5 $otwithstanding anything contained in section *,A% the Board may% in the
public interest% cancel or suspend fully or partially any e'emption allowed
under section *,A.USection *,A3#"5V.
Ta, ;olida6 not eligi3le in Certain Cases
A new industry% wherein investment of any sum by any person during the
period between the &rst day of Manuary% #//- and the thirty &rst day of
0ecember% #/// is e'empt from ta' without any <uestion as to the source of
the invested sum under section #/A shall not be eligible for ta' 8 holiday.
Such industry may however be considered for ta' holiday if the assessee pays
ta' at the rate of seven and a half per cent on the invested amount before the
&ling of return for the relevant income year 3Sec #/A5.
)rocedures of Ta, ;olida6
An application under section *,A3!53f5 of the Brdinance for approval for the
purposes of that section in respect of an industrial underta;ing% tourist
industry or physical infrastructure facility shall be made in the prescribed form
36ule +/A 3I5% in duplicate% duly signed and veri&ed by the anaging 0irector
or 0irector of the company.
'9-9 ",e4*tion fro4 Ta, of Ne/l6 "sta3lished Industrial Underta2ings
Set>u* Bet/een the )eriod of Hul6= 2&'' to Hune= 2&'9= etc- In Certain
Cases- Sec :EB
3#5 Sub=ect to the provisions of the IT Brdinance #/.*% income% pro&ts and
gains under section !. from an industrial underta;ing% tourism industry or
physical infrastructure facility 3hereinafter referred to as the said
underta;ing5 set8up in Bangladesh between the &rst day of Muly% !"## and
the thirtieth day of Mune% !"#) 3both days inclusive5 shall be e'empted
from the ta' payable under the Brdinance for the period% and at the rate%
speci&ed below?
if the said underta;ing is set8up in8
i) 0ha;a and Chittagong divisions% e'cluding 0ha;a% $arayangan=%
(a9ipur% Chittagong% 6angamati% Bandarban and Hhagrachari districts%
for a period of &ve years beginning with the month of commencement
of commercial production of the said underta;ing?
)eriod of ",e4*tion #ate of ",e4*tion
For the &rst two years 3&rst and second year5 #""P of income
For the ne't two years 3third and fourth year5 +"P of income
For the last one year 3&fth year5 !+P of income
3ii5 6a=shahi% Hhulna% Sylhet and Barisal divisions and 6angamati%
Bandarban and Hhagrachari districts% for a period of seven years
beginning with the month of commencement of commercial production
of the said underta;ing?
)eriod of ",e4*tion #ate of ",e4*tion
For the &rst three years 3&rst% second and
third year5
#""P of income
For the ne't three years 3fourth% &fth and si'th
year5
+"P of income
For the last one year 3seventh year5 !+P of income
3!5 For the purpose of this section%8
Industrial underta;ing means an industry engaged in the production of
active pharmaceuticals ingredient industry and radio pharmaceuticals
industry% barrier contraceptive and rubber late'% basic chemicals or dyes
and chemicals% basic ingredients of electronic industry 3e.g. resistance%
capacitor% transistor% integrator circuit5% bio8fertili9er% biotechnology%
boilers% compressors% computer hardware% energy eEcient appliances%
insecticide or pesticide% petro8chemicals% pharmaceuticals% processing of
locally produced fruits and vegetables% radio8active 3di1usion5 application
industry 3e.g. developing <uality or decaying polymer or preservation of
food or disinfecting medicinal e<uipment5% te'tile machinery% tissue
grafting% or any other category of industrial underta;ing as the
(overnment may% by noti&cation in the oEcial (a9ette% specify.
3)5 $otwithstanding anything contained in sub8section 3!5% for the
purpose of this section industrial underta;ing shall not include e'pansion
of an e'isting underta;ing.
3*5 The e'emption under sub8section 3#5 shall apply to the said
underta;ing if it ful&lls the following conditions% namely?8
3a5 that the said underta;ing is owned and managed by8
3i5 a body corporate established by or under any law for the time being
in force with its head oEce in BangladeshI or
3ii5 a company as de&ned in the Companies Act% #/#) 3:II of #/#)5 or
Companies Act% #//* 3Act $o. #. of #//*5 with its registered oEce
in Bangladesh and having a subscribed and paid up capital of not
less than two million ta;a on the date of commencement of
commercial production or operationI
3b5 that thirty percent of the e'empted income under subsection 3#5
is invested in the said underta;ing or in any new industrial
underta;ings during the period of e'emption or within one year from
the end of the period to which the e'emption under that sub8section
relates and in addition to that another ten percent of the e'empted
income under sub8section 3#5 is invested in each year before the e'piry
of three months from the end of the income year in the purchase of
shares of a company listed with any stoc; e'change% failing which the
income so e'empted shall% notwithstanding the provisions of the
Brdinance% be sub=ect to ta' in the assessment year for which the
e'emption was allowed?
Provided that the <uantum of investment referred to in this clause shall
be reduced by the amount of dividend% if any% declared by the company
en=oying ta' e'emption under this section.
Provided further that% the provision for purchase of shares of a
company listed with any stoc; e'change referred to in this clause shall
not be applicable in case of readymade garments industry% if it invests
forty per cent of the income e'empted under sub8section 3#5 in the said
underta;ing or in any new industrial underta;ing during the period of
e'emption or within one year from the end of the period to which the
e'emption under that subsection relates.
3c5 that the said underta;ing is not formed by splitting up or by
reconstruction or reconstitution of business already in e'istence or by
transfer to a new business of any machinery or plant used in business
which was being carried on in Bangladesh at any time before the
commencement of the new businessI
3d5 that the said underta;ing is approved% and during the relevant
income year% stands approved by the Board for the purposes of this
sectionI
3e5 that the application in the prescribed form for approval for the
purposes of this section% as veri&ed in the prescribed manner% is made
to the Board within si' months from the end of the month of
commencement of commercial production or operationI
3f5 that the said underta;ing obtained a clearance certi&cate for the
relevant income year from the 0irectorate of 2nvironmentI
3g5 that the said underta;ing maintains boo;s of accounts on a
regular basis and submits return of its income as per provisions laid
down in section -+ of this Brdinance.
3+5 $otwithstanding anything contained in this section% where a underta;ing
en=oying e'emption of ta' under this section is engaged in any
commercial transaction with another underta;ing or company having one
or more common sponsor directors% and during the course of ma;ing an
assessment of the said underta;ing if the 0eputy Commissioner of Ta'es
is satis&ed that the said underta;ing has purchased or sold goods at
higher or lower price in comparison to the mar;et price with intent to
reduce the income of another underta;ing or company% the e'emption of
ta' of that underta;ing shall be deemed to have been withdrawn for that
assessment year in which such transaction is made.
3,5 The Board shall give its decision on an application made under clause 3e5
of sub8section 3*5 within forty &ve days from the date of receipt of the
application by the Board% failing which the underta;ing shall be deemed
to have been approved by the Board for the purposes of this section?
Provided that the Board shall not re=ect any application made under this
section unless the applicant is given a reasonable opportunity of being
heard.
3-5 The Board may% on an application of any person aggrieved by any
decision or order passed under sub8section 3,5% if the application is made
within four months of the receipt of such decision or order% review the
previous decision or order and pass such order in relation thereto as it
thin;s &t.

3.5 The income% pro&ts and gains of the underta;ing to which this section
applies shall be computed in the same manner as is applicable to income
chargeable under the head DDIncome from business or professionDD?
Provided that in respect of depreciation% only the allowances for normal
depreciation speci&ed in paragraph ) of the Third Schedule shall be
allowed.
3/5 The income% pro&ts and gains of the underta;ing to which this section
applies shall be computed separately from other income% pro&ts and gains
of the assessee% if any% and where the assessee sustains a loss from such
underta;ing it shall be carried forward and set o1 against the pro&ts and
gains of the said underta;ing for the following year and where it cannot
be wholly set o1% the amount of the loss not so set o1% shall be carried
forward for the ne't year and so on% but no loss shall be carried forward
beyond the period speci&ed by the Board in the order issued under
subsection 3,5 or 3-5.
3#"5 Jnless otherwise speci&ed by the (overnment% nothing contained in
this section shall be so construed as to e'empt the following from ta'
chargeable under this section?8
3a5 any dividend paid% credited or distributed or deemed to have been
paid% credited or distributed by a company to its share8holders out of
the pro&ts and gainsI
3b5 any income of the said underta;ing classi&able as DDCapital gainsDD
chargeable under the provisions of section )#I
3c5 any income of the said underta;ing resulting from disallowance
made under section )".
3##5 >here any e'emption is allowed under this section and in the course of
ma;ing assessment% the 0eputy Commissioner of Ta'es is satis&ed that
any one or more of the conditions speci&ed in this section are not ful&lled%
the e'emption shall stand withdrawn for the relevant assessment year
and the 0eputy Commissioner of Ta'es shall determine the ta' payable
for such year.
3#!5 Any such underta;ing approved under this section may% not later
than one year from the date of approval% apply in writing to the Board for
the cancellation of such approval% and the Board may pass such order or
orders thereon as it may deem &t.
3#)5 $otwithstanding anything contained in this section% the Board may% in
the public interest% cancel or suspend fully or partially any e'emption
allowed under this section.
3#*5 The Board may ma;e rules regulating the procedure for the grant of
approval under sub8section 3,5% review under sub8section 3-5% furnish
information regarding payment of other ta'es by the said underta;ing%
and ta;e such other measure connected therewith or incidental to the
operation of this section as it as it may deem &t.
'9-: ",e4*tion fro4 ta, of ne/l6 esta3lished *h6sical infrastructure
facilit6 set u* 3et/een the *eriod of Hul6= 2&'' and Hune= 2&'9= etc- in
certain cases- Sec :EC
3#5 Sub=ect to the provisions of this Brdinance% income% pro&ts and gains
under section !. from physical infrastructure facility 3hereinafter referred
to as the said facility5 set up in Bangladesh between the &rst day of Muly%
!"## and the thirtieth day of Mune% !"#) 3both days inclusive5 shall be
e'empted from the ta' payable under this Brdinance for ten years
beginning with the month of commencement of commercial operation% and
at the rate% speci&ed below?
)eriod of ",e4*tion #ate of
",e4*tion
For the &rst &ve years 3&rst% second% third% fourth and
&fth year5
#""P of income
For the ne't three years 3si'th% seventh and eighth year5 +"P of income
For the last two years 3ninth and tenth year5 !+P of income
3!5 For the purpose of this section% Tphysical infrastructure facilityT means
deep sea port% elevated e'pressway% e'port processing 9one% Ayover% gas
pipe line% Gi8tech par;% Information and Communication Technology 3ICT5
village or software technology 9one% Information Technology 3IT5 par;%
large water treatment plant and supply through pipe line% 7i<ue&ed $atural
(as 37$(5 terminal and transmission line% mono8rail% rapid transit%
renewable energy 3e.g. energy saving bulb% solar energy plant% windmill5%
sea or river port% toll road% underground rail% waste treatment plant% or any
other category of physical infrastructure facility as the (overnment may%
by noti&cation in the oEcial (a9ette% specify.
3)5 The e'emption under sub8section 3#5 shall apply to the said facility if it
ful&lls the following conditions% namely?8
3a5 that the said underta;ing is owned and
managed by8
ii. a body corporate established by or under any law for the time being
in force with its head oEce in BangladeshI or
iii*a company as de&ned in Company Act% #//* with its registered
oEce in Bangladesh and having a subscribed and paid up capital of
not less than two million ta;a on the date of commencement of
commercial productionI
3b5 that thirty percent of the e'empted income under sub8section 3#5 is
invested in the said facility or in any new physical infrastructure facility
during the period of e'emption or within one year from the end of the
period to which the e'emption under that sub8section relates and in
addition to that% another ten percent of the e'empted income under
sub8section 3#5 is invested in each year before the e'piry of three
months from the end of the income year in the purchase of shares of a
company listed with any stoc; e'change% failing which the income so
e'empted shall% notwithstanding the provisions of this Brdinance% be
sub=ect to ta' in the assessment year for which the e'emption was
allowed?
)ro+ided that the 8uantu4 of in+est4ent referred to in this
clause shall 3e reduced 36 the a4ount of di+idend= if an6=
declared 36 the co4*an6 en<o6ing ta, e,e4*tion under this
sectionB
3c5 that the said facility is approved% and during the relevant income year%
stands approved by the Board for the purposes of this sectionI
3d5 that application in the prescribed form for approval for the purposes of
this section% as veri&ed in the prescribed manner% is made to the Board
within si' months from the end of the month of commencement of
commercial operationI
3e5 that the said facility maintains boo;s of accounts on a regular basis and
submits return of its income as per provisions of section -+ of this
Brdinance.
3*5 The Board shall give its decision on an application made under clause 3d5
of sub8section 3)5 within forty &ve days from the date of receipt of the
application by the Board% failing which the facility shall be deemed to have
been approved by the Board for the purposes of this section?
)ro+ided that the Board shall not re<ect an6 a**lication 4ade
under this section unless the a**licant is gi+en a reasona3le
o**ortunit6 of 3eing heard-
3+5 The Board may% on an application of any person aggrieved by any decision
or order passed under sub8section 3*5% if the application is made within
four months of the receipt of such decision or order% review the previous
decision% order or orders and pass such order in relation thereto as it
thin;s &t.
3,5 The income% pro&ts and gains of the facility to which this section applies
shall be computed in the same manner as is applicable to income
chargeable under the head TIncome from business or professionT?
)ro+ided that in res*ect of de*reciation= onl6 the allo/ances for
nor4al de*reciation s*eci0ed in *aragra*h 9 of the Third
Schedule shall 3e allo/ed-
3-5 The income% pro&ts and gains of the facility to which this section applies
shall be computed separately from other income% pro&ts and gains of the
assessee% if any% and where the assessee sustains a loss from such facility
it shall be carried forward and set o1 against the pro&ts and gains of the
said facility for the ne't year and where it cannot be wholly set o1% the
amount of the loss not so set o1% shall be carried forward for the following
year and so on% but no loss shall be carried forward beyond the period
speci&ed by the Board in the order issued under sub8section 3*5 or 3+5.
3.5 Jnless otherwise speci&ed by the (overnment% nothing contained in this
section shall be so construed as to e'empt the following from ta'
chargeable under this section ?8
3a5 any dividend paid% credited or distributed or deemed to have been
paid% credited or distributed by a company to its share8holders out of
the pro&ts and gainsI
3b5 any income of the said facility classi&able as TCapital gainsT chargeable
under the provisions of section )#I
3c5 any income of the said facility resulting from disallowance made under
section )".
3/5 >here any e'emption is allowed under this section and in the course of
ma;ing assessment% the 0eputy Commissioner of Ta'es is satis&ed that
any one or more of the conditions speci&ed in this section are not ful&lled%
the e'emption shall stand withdrawn for the relevant assessment year and
the 0eputy Commissioner of Ta'es shall determine the ta' payable for
such year.
3#"5 Any such facility approved under this section may% not later than one
year from the date of approval% apply in writing to the Board for the
cancellation of such approval% and the Board may pass such order or
orders thereon as it may deem &t.
3##5 $otwithstanding anything contained in this section% the Board may% in
the public interest% cancel or suspend fully or partially any e'emption
allowed under this section.
3#!5 The Board may ma;e rules regulating the procedure for the grant of
approval under sub8section 3*5% review under sub8section 3+5% furnish
information regarding payment of other ta'es by the said facility% and ta;e
such other measures connected therewith or incidental to the operation of
this section as it may deem &t.
'9-@ ",e4*tion of Inco4e of Co>O*erati+e Societ6B Sec :F
#5 Ta' shall not be payable by a co8operative society including a co8operative
society carrying on the business of ban;ing in respect of88
3a5 so much of its income as is derived by it as a result of such of its
dealings with its members as involve sale of goods% the lending of
money or the lease of buildings and land which is for the personal use
of such members% or where such member is a &rm or an association of
persons% for the personal use of the partners or members thereofI
3b5 the entire income from business carried on by it% if it is engaged in the
following88
3i5 agricultural or rural creditI
3ii5 cottage industryI
3iii5mar;eting of agricultural produce of its membersI
3vi5purchase of agricultural implements% seeds% livestoc; or other
articles intended for agriculture for the purpose of supplying them
to its membersI or
3v5 such processing% not being the performance of any manufacturing
operation with the aid of power% of the agricultural produce of its
members as is ordinarily employed by a cultivator to render
mar;etable the agricultural produce raised by himI
3c5 any income from interest and dividends derived from its investments
with any other co8operative societyI and
3d5 any income derived from the letting of godowns or warehouses for
the purpose of storage% processing or facilitating the mar;eting of
commodities belonging or meant for sale to its members.
For the purpose of section *-c
3a5 Xcottage industryK means an enterprise% not being owned by a =oint
stoc; company which ful&ls the following conditions% namelyc
3i5 it is basically an enterprise in which the owner is the investor% a
fulltime wor;er and the actual entrepreneurI
3ii5 the capital invested in plant% machinery and e<uipment does not
e'ceed T; )%""%""" at any time during the income yearI
3iii5the number of wor;ers% including the owner and the members of
his family% shall not on any one twenty8four hour day during the
income year% e'ceed &fteenI and
3iv5the owner of the enterprise or any member of his family does not
own any other industrial or commercial enterprise either in his
own name or in the name of any other personI and
3b5 Xmember of his familyK% in relation to the owner of an enterprise%
means the parents% spouse and children dependent on the owner and
employed in the enterprise% whether wor;ing full8time% or whether for
or without any wages% remuneration or compensation in any form.
!5 $othing contained in section *-3#5 shall apply to a co8operative society
carrying on such business of insurance as is carried on by a mutual
insurance association in respect of its pro&ts and gains to which paragraph
. of the Fourth Schedule applies.
'9-E Ta, ;olida6 for ;os*italB S-#-O- No- 2&:>AinPIt >2&&@ Dated E Hul6
2&&@
A newly established private hospital will be eligible for e'emption from income
ta' for &ve years sub=ect to the following conditions?
3#5 The hospital is owned by a company registered under the Companies Act%
#/#)4#//*.
3!5 The hospital is established between the period from #

Muly !""+ to )" Mune
!""..
3)5 The hospital is housed in a building constructed on the companyKs own
land.
3*5 The hospital has number of beds as mentioned below?
3a5 !"" beds in the case of general hospital.
3b5 +" beds in the case of speciali9ed hospital for heart% ;idney and cancer
patients.
3+5 #"P of the beds must be ;ept reserved for treatment of poor patients free
of charge.
The owner of the hospital en=oying e'emption from ta' shall &le return of
income to the concerned 0eputy Commissioner of Ta'es along with statement
of accounts and relevant documents L evidences in respect of the concerned
year of e'emption and the 0eputy Commissioner of Ta'es will determine the
income under sections !. and !/ along with the ownerKs income from other
sources% if any% and ma;e the income ta' assessment accordingly.
'9-F Concession to Industries set u* in an6 ",*ort )rocessing Uone
Based on compliance of some conditions% the concessions have been granted
to the industries set up in any 2'port Processing Rone% as follows?8
3#5 2'emption of pioneering industries? S.6.B. $o.!,,874., dated # Muly
#/.,?
3!5 2'emption of +"P of ta' on e'port sales of industries? S.6.B. $o. !,-8
74., dated # Muly #/.,
3)5 0ividend income of non8resident shareholders of companies having
industries set up in any 2'port Processing Rone? S.6.B. $o. !,.874.,
dated #

Muly #/.,?
3*5 Accelerated depreciation up to #""P for plant or machinery used in
speci&ed hitch electronic industry? S.6.B. $o. !,/874., dated # Muly #/.,?
3+5 2'emption of income of any industry set up in any 2'port Processing
Rone US6B $o !./47aw4./ dated #- August #/./V?.
'9-D S*ecial Ta, ",e4*tions P Concessions in #es*ect of Certain Business
3a5 As per S6B $o. ), 4 7aw4/- dated )
rd
February #//- provides for #+
years ta' e'emption from commencement of commercial production in
case of income of a Private Power (eneration Company.
3b5 As per S6B $o. !#*4I.T4!"") dated #/
th
Muly% !"") provisions have been
made for e'emption of any personKs income from agro8processing industry
from #
st
Muly% !""! to )"
th
Mune% !"",.
c5 As per S6B no. !#,4AI$4IT4!""+ dated #,
th
Muly% !""+% provision has been
made for e'emption of Bangladeshi residentKs income attributable to
software business up to )"
th
Mune% !"".. The person en=oying the
e'emption will have to furnish income ta' return for every year of the
e'emption period.
3d5 As per S6B $o. #--4I.T4!""! dated )
rd
Muly% !""! provision has been made
for ta'ing the income of new industrial underta;ing established during the
period from #
st
Muly% !""! to )"
th
Mune% !""+ at the rate !"P on ful&llment
of some conditions.
3e5 S6B no. !#,8AI$4IT4!""* dated #)
th
Muly% !""*? By this noti&cation the
(overnment has e'empted from income ta' any income accrued outside
Bangladesh to any person irrespective of his status as resident or non8
resident if such income is brought into Bangladesh under e'isting laws.
3f5 S6B no. !#-8AI$4IT4!""* dated #)
th
Muly% !""*? By this noti&cation the
(overnment has e'empted from income ta' any income accrued outside
Bangladesh to any person who is resident in Bangladesh% but not a
Bangladeshi citi9en if such income is brought into Bangladesh under
e'isting laws.
3g5 S6B no. !""48AI$4IT4!""+ dated ",."-.!""+ F Any person having not
previously declared any income can declare the same undisclosed income
from other sources during the period from "#."-.!""+ to )".",.!"", on
payment of -.+P ta' thereon and no <uestion as to the source of money
shall be raised. The declared income shall not be added with any income
from other sources previously shown in the return and ta' thereon have
been paid at normal rates in determination of total income declaring under
the Brdinance and the opportunity under this noti&cation shall not
constitute immunity from action if any ta;en previously under section /)
of the I.T. Brdinance. The declaration has to be made in prescribed form.
h5 2'emption on Income from Fish Farming% Poultry Farming% 0uc;ery% Cattle
Farming% 0airy Farming% Frog Farming% Gorticulture% Cultivation of ulberry%
Cocoon% ushroom and from Floriculture? S.6.B. )"/84/# 0ated / Bctober
#//#I S.6.B. $o. !"-8l4/) 0ated #. Bctober #//)I S.6.B. #!-8l4!""" 0ated
## ay !"""I and S.6.B. !#+4IT4!"") 0ated !" Muly !"")% S6B !",4Ain4It
0ated ,th Muly !""+
Chapter #*
)a64ent of ta, 3efore assess4ent
Contents
Introduction
2'amination conte't
To*ic List
#*.# 0eduction at Source and Advance Payment of Ta'
#*.! Income Sub=ect to 0eduction at Source
#*.) Person 6esponsible for Ta' 0eduction at Source? Sec */3)5
#*.* Time 7imit for Payment of Ta' 0educted at Source
#*.+ anner of Payment of Ta' 0educted at Source
#*., Issuance of Certi&cate for Ta' at Source
#*.- 6ates of T0S at a glance
#*.. Ta' on income of certain persons 3Final Settlement of ta'
liability5
#*./ Bther Issues relating to T0S
Introduction
Learning o3<ecti+es
6ecognise di1erent classes of income from where ta' are deducted or
collected at source.
ention the time limit and manner of payment of ta' deducted at source.
2'plain the result of deduction or not deduction of ta' at source where
deduction is re<uired by law.
0e&ne the computation% estimation and payment procedures of T0S.
ention the income heads that come under &nal settlement of ta' as per
section .!C.

)ractical signi0cance
There are two methods of collecting ta'es% one is direct method and another
is ta' deducted at source. The ordinary method of collection is direct
collection of ta' from the assessee. 0eduction of ta' at source is provided for
in certain speci&ed cases. The deducted ta' shall be credited accordingly with
the &nal payment of ta'. If default is made in the deduction of ta'es at
source% the ta' may be collected from the assessee directly% and further the
person who is liable to deduct but has not deducted the ta' under this
section% may be held personally liable and treated as an assessee in default in
respect of the ta'.
This chapter presents areas of ta'es deducted at source and related
provisions as per income ta' ordinance. Section .!C and its application are
detailed here. For computing ta'able income% ta' liability the importance of
this chapter is very signi&cant.

Sto* and thin2
There are so many sources where ta' is re<uired to be deducted or collected
at the time of payment. 0o you thin; how both ta' deducted at source and
advance payment of ta' are madeN
.or2ing conte,t
In corporate sectors% normally there are many payments made every day
where deductions of ta' at source are re<uired by ta' law. In some cases the
accountants are as;ing for advice on how and when the deductions need to
be done. Accountants can provide the service to their clients on ta' deduction
at source so that the clients can avoid any penalty for non8compliance of ta'
law in this regard.
0etailed ;nowledge about the payment of ta' before assessment in
compliance with ta' law can help accountants to support their clients
signi&cantly.
S6lla3us lin2s
Cou will also meet this area of ta'ation at application level and at case study
in advanced stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Identify the classes of income from where ta' are deducted or collected at
source.
6ecognise the di1erent amounts and rates of ta' deducted at source.
Identify the responsibility for deduction of ta' at source.
0e&ne the time limit for payment of ta' at source.
ention the manner of payment of ta' deducted at source.
2'plain the result of deduction or not deduction of ta' at source where
deduction is re<uired by law.
Identify the areas where ta' deducted at source is considered as &nal
payment of ta' liability under section .!C.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates need to remember the di1erent amount and rates of ta' deducted
at source while preparing for e'am. In practical problem at case study level
both ta' deduction at source and calculation of advance ta' may be as;ed.

':-& )AYM"NT O% TAX B"%O#" ASS"SSM"NT
Section O+er+ie/
There are two methods of collecting ta'es% direct ta' and ta' deducted at
source 3T0S5.
There are many classes of income from where ta' are deducted or
collected at source.
T0S shall be paid to the credit of the (overnment within three wee;s from
the date of such deduction or collection e'cept in case of salary.
6ate of T0S are varied.
The deducted ta' shall be credited accordingly with the &nal payment of
ta'.
Ta' deducting authority will be held liable for failing to deduct ta'es and
failing to deposit the same with government.
The assessee shall get the credit for T0S.
':-' Deduction at Source and Ad+ance )a64ent of Ta,B Sec :D
3#5 $otwithstanding that regular assessment in respect of any income is to be
made later in any assessment year% and without pre=udice to the charge
and recovery of ta' under the Brdinance after such assessment% the ta' on
income shall be payable by deduction or collection at source% or by way of
advance payment% in accordance with the provisions of this Chapter.
3!5 Any sum deducted or collected or paid by way of advance payment% in
accordance with the provisions of this chapter% shall for the purpose of
computing the income of an assessee% be deemed to be the income
received and be treated as payment of ta' in due time by the assessee.
':-2 Inco4e Su3<ect to Deduction at SourceB Sec :C
Ta' payable under the Brdinance shall be deducted or collected at source in
respect of the following income% namely8
3#5 income% classi&able under the head XSalariesKUSec */3#53a5VI
3!5 income from discount on the real value of Bangladesh Ban; bills USec
*/3#53aa5VI
3)5 income% classi&able under the head XInterest on securitiesKUSec */3#53b5VI
3*5 income derived on account of supply of goods% e'ecution of contracts or
services rendered USec */3#53c5VI
3+5 income derived by the importers and e'porters on account of import and
e'port of goods USec */3#53d5VI
3,5 income derived on account of indenting commission USec */3#53e5VI
3-5 income derived on account of winnings from lottery or crossword
pu99les% as referred to in section #/ 3#)5 USec */3#53f5VI
3.5 any income chargeable under the Brdinance which is paid or payable to
a non8resident USec */3#53g5VI
3/5 income% classi&able under the head XIncome from house propertyKUSec
*/3#53h5VI
3#"5 income derived on account of e'port of manpower USec */3#53i5VI
3##5 income derived on account of purchase by public auction USec */3#53=5VI
3#!5 income derived on account of acting in &lms USec */3#53;5VI
3#)5 income derived on account of shipping agency commission USec */3#5
3m5VI
3#*5 income derived from commission% discount or fees payable to
distributors for distribution or mar;eting or manufactured goods USec
*/3#53n5VI
3#+5 income derived on account of interest on saving deposits% &'ed deposits
and share of pro&ts on term deposits USec */3#53o5VI
3#,5 income derived on account of insurance commission USec */3#53p5VI
3#-5 income% classi&able under the head XCapital gainsKUSec */3#53<5VI
3#.5 income derived on account of fees for professional or technical
servicesUSec */3#53r5VI
3#/5 income derived on account of manufacture of cigarettes manually
without any mechanical aid whatsoever USec */3#53s5VI
3!"5 income derived from compensation against ac<uisition of property USec
*/3#53t5VI
3!#5 income derived on account of interest on saving instruments USec */3#5
3u5VI
3!!5 income derived on account of running of bric; &eld USec */3#53w5VI
3!)5 income derived on account of services rendered by the doctors USec
*/3#53'5VI
3!*5 income derived on account of commission of letter of credit USec */3#5
395VI
3!+5 income derived on account of survey by a surveyor of general insurance
company USec */3#539a5VI
3!,5 income derived on account of commission% remuneration or charges as a
foreign buyerKs agent USec */3#539c5VI
3!-5 income from dividendsUSec */3#539d5VI
3!.5 income derived on account of rendering certain services USec 3*/53#5
39e5VI
3!/5 income derived on account of shipping business of a resident USec 3*/5
3#539f5VI
3)"5 income derived on account of business of real estate and land developer
USec 3*/53#539g5VI
3)#5 income derived by an e'porter on account of e'port of any commodity
USec 3*/53#539h5VI
3)!5 income derived by a member of a stoc; e'change on account of
transaction of shares% debentures% mutual funds% bonds or securities USec
3*/53#539i5VI
3))5 income derived on account of courier business of a non8resident USec
3*/53#539=5VI
3)*5 on account of issuance or renewal of trade licence USec 3*/53#539m5VI
3)+5 income derived on account of trustee fees USec 3*/53#539n5VI
3),5 income derived on account of freight forward agency commission USec
3*/53#539o5VI
3)-5 income derived on account of rental power USec 3*/53#539p5VI
3).5 income derived on account of interest of Post BEce Savings Ban;
Account USec 3*/53#539<5VI
3)/5 income derived on account of rental value of vacant land or plant or
machinery USec 3*/53#539r5VI
3*"5 income derived on account of advertisement USec 3*/53#539s5VI
3*#5 income derived by foreign technician serving in a diamond cutting
industry USec 3*/53#539t5VI
3*!5 on account of issue of share at a premium USec 3*/53#539u5VI
3*)5 income derived from transfer of securities or mutual fund units by
sponsor shareholders of a company etc. USec 3*/53#539v5VI
3**5 deduction of ta' for services from convention hall% conference centre%
room or% as the case may be% hall etc. USec 3*/53#539w5VI and
3*+5 deduction of ta' from residents for any income in connection with any
service provided to any foreign person USec 3*/53#539'5V.
':-9 )erson #es*onsi3le for Ta, Deduction at SourceB Sec :C9(
Ta' to be deducted at source under section */3#5 in respect of any income
shall be deducted in accordance with the provisions of this chapter by the
person responsible for ma;ing payment which constitutes the income of the
payee. In terms of section */3)5% for the purpose of Chapter :II% Xperson
responsible for ma;ing paymentK% with its grammatical variations and cognate
e'pressions% means8
3a5 in the case of payments constituting income classi&able under head the
XSalariesK not being payment made by the (overnment% the employer
himself or% if the employer is a local authority% company or institution% such
authority% company or institution% including the principal oEcer thereofI
3b5 in the case of payment constituting income classi&able under head
XInterest on securitiesK not being payment made by or on behalf of the
(overnment% the authority% company or other institution issuing the
securityI and
3c5 in the case of payment of any other sum which constitutes an income of
the payee chargeable to ta' under the Brdinance% the payer himself% or if
the payer is a company or other institution% such company or institution
including the principal oEcer thereof.
':-: Ti4e Li4it for )a64ent of Ta, Deducted at SourceB #ule '9
All sums deducted or collected in accordance with the provisions of Chapter
:II of the Brdinance shall be paid to the credit of the (overnment within three
wee;s from the date of such deduction or collection by the person ma;ing the
deduction or collection% as the case may be. Gowever% the 0eputy
Commissioner of Ta'es may% in a special case and with the approval of the
Inspecting Additional Commissioner of Ta'es or the Inspecting Moint
Commissioner of ta'es% permit an employer to pay the ta' deducted from any
income chargeable under the head OSalariesW <uarterly on September #+%
0ecember #+% arch #+ and Mune #+.
':-@ Manner of )a64ent of Ta, Deducted at SourceB #ule ':
&a( )a64ents to su**liers and contractors? #ule ':2(
$otwithstanding anything contained in rule #*3#5 or rule #)% the person
responsible for ma;ing deduction% with respect to supply of goods or e'ecution
of contract under section +!% fees for professional or technical services under
section +!A% fees for services rendered by doctors under section +!(% house
property under +)A or commission or fees under section +)2 of the Brdinance%
shall issue a Che<ue e<uivalent to the amount of ta' deducted at source in
favour of the concerned 0eputy Commissioner of Ta'es and hand over the
same to the person from whom such ta' has been deducted and such person
shall deposit the Che<ue through income ta' challan form to Bangladesh Ban;
or the Sonali Ban;% as the case may be% and on production of the counter foil of
the challan% he shall be entitled to get his remaining dues on the concerned
accountI
&a( )a64ents to non>resident? #ule ':9(
>here ta' is deducted from payment made to a person who is not a resident
in Bangladesh% the person ma;ing such deduction shall deposit the deducted
amount through challan to the Bangladesh Ban; or the Sonali Ban;% as the
case may be.
c(Interest on sa+ing de*osits= 0,ed de*osits and ter4 de*ositsB #ule
'F;
3#5 For the purposes of ma;ing deduction of ta' under section +)F of the
Brdinance% each branch of a scheduled ban; including a co8operative
ban; shall deduct income ta' on interest or share of pro&t on saving
deposits or &'ed deposits or term deposits at the time of credit or
payment of the interest or the share of pro&t% whichever is earlier%
and report the total amount of ta' deducted to its head oEce.
3!5 The head oEce of each such ban; shall deposit the total amount of
ta' deducted by all its branches in the Bangladesh Ban;% in lump sum
under the head of account #4##*#4""""4"##8 Income Ta' F other than
companies% giving particulars as O0eduction of income ta' under
section +)F of the Income Ta' Brdinance #/.*W.
d( Transfer of *ro*ert6B #ule 'FI 2( to @(
3a5 The collection of ta' mentioned in sub8rule 3#5 shall be made through
0emand 0raft% Pay Brder or Challan mentioning one of the following
heads of account% namely?8
3#5 In the case of the district of 0ha;a% the Companies%
U#4##*#4""""4"#"#8Income Ta'8CompaniesVI and
3!5 In other cases% U#4##*#4""""4"###8 Income Ta' Bther than
Companies.V
3b5 The person responsible for registration of the document shall record on
the transfer document the amount of the ta' and the number and date
of the Challan% 0emand 0raft or Pay Brder% as the case may be.
3c5 The Challan% 0emand 0raft or Pay Brder shall be made in favour of or
credited to?8
a. in the case of the district of 0ha;a% the Commissioner of Ta'es%
Central Survey Rone% 0ha;aI
b. in the case of the district of Chittagong% the Commissioner of Ta'es%
Ta'es Rone8)% ChittagongI
c. in the case of the district of 6a=shahi% the Commissioner of Ta'es%
Ta'es Rone% 6a=shahiI
d. in the case of the district of Hhulna% Bagerhat and Sat;hira% the
Commissioner of Ta'es% Ta'es Rone% HhulnaI
e. in case of other districts?
a. if there e'ists no ta'es oEce% the 0eputy commissioner of
Ta'es under whose =urisdiction such district fallsI
b. if there e'ists only one ta'es oEce% the 0eputy
commissioner of ta'es of that districtI
c. if there e'ists more than one ta'es oEce% the 0eputy
Commissioner of Ta'es of Circle8# of that district.
3d5 The Commissioner of Ta'es and the 0eputy Commissioner of Ta'es
concerned shall verify the amounts of ta' so collected with challans
received by them from the Treasury BEces concerned.
e( Others? #ule ':'(
The person responsible for ma;ing deduction or collection under Chapter :II
of the Brdinance shall pay the amount of ta' so deducted or collected to the
credit of the (overnment by remitting it within the time speci&ed in rule #)
into the Bangladesh Ban; or the Sonali Ban;% as the case may be%
accompanied by an income ta' challan% blan; copies of which can be had
from the oEce of the 0eputy Commissioner of Ta'es for the purpose.
':-E Issuance of Certi0cate for Ta, at SourceB #ule 'D
a(Su**l6 of goods or e,ecution of contracts or 3( rent of house
*ro*ert6 or c( fees for *rofessional or technical ser+ices K#ule
'D'(LB
All paying authorities shall issue a certi&cate as re<uired under section +.
of the Brdinance to the person from whom ta' has been deducted under
*/3#53c5 3h5 or 3r5 of the ordinance within &fteen days of deduction.
3(OthersB #ule 'D2(
All paying and collecting authorities responsible for ma;ing deduction or
collection of ta' under chapter :II of the Brdinance% e'cept ta' in respect
of 3a5 supply of goods or e'ecution of contract or 3b5 rent of house property
or 3c5 fees for professional or technical services% shall furnish to the person
from whom such deduction or collection has been made a certi&cate in the
prescribed form.
c( Su**l6 of $oods and ",ecution of ContractsB Second )ro+iso to
#ule 'E
>here the Board gives a certi&cate in writing in the application of any
assessee or class of assesses that total income of such assessee or class
of assesses who is a recipient of any payment will be less than the
minimum liable to ta' or will be liable to a rate of ta' less than the rate
speci&ed in the rule% the person responsible for paying any amount on
account of the supply of goods or e'ecution of contract shall% unless such
certi&cate is cancelled by the Board pay the amount without deduction or
deduct the ta' at a rate less than the rate speci&ed in this rule. Gowever%
where the Board gives a permission in writing on the application of any
person responsible for paying any amount on account of the supply of
goods or e'ecution of contract under any foreign aided pro=ect in
Bangladesh% full payment of the bill may be made on production of the
copy of challan as proof of payment of ta' deductible from such bill% under
the Third Proviso of 6ule #,.
d(I4*orterB )ro+iso to #ule 'Fa
>here the Board is satis&ed that an importer is not li;ely to have any
ta'able income during any period or the income is otherwise e'empted
from payment of income ta' under any provision of the Brdinance% it may%
on application by such importer e'empt such person from payment of ta'
for the period during which income of such importer is not li;ely to be
assessable or is e'empted from payment of ta'.
e(Inco4e fro4 ;ouse )ro*ert6 K#ule ''aLB
The certi&cate under section +)A 3)5 of the Brdinance shall be issued by
the 0eputy Commissioner of Ta'es in the prescribed form.
':-F #ates of TDS at a glance

Sl-
;ead of TDS #ef- TDS #ate P A4ountP #e4ar2
#. Salaries
embers of Parliament
J4S +"
J4S +"B
Average of the rates applicable
to the estimated total income of
the payee under this head
!. 0iscount on the 6eal
:alue of Bangladesh
Ban; Bills
J4S +"A a'imum rate
). Interest on Securities J4S +# #"P
*. Payments for Supply of
(oods% 2'ecution of
Contracts
J4S +!
6ule #,
Jp to T;. !""%"""[ $il
From T;. !""%""# to +""%"""[
#P
From T; +""%""# to #%+""%"""[
!.+P
From T; #%+""%""# to
)"%"""%"""[*P
Above T;. )"%"""%"""[ +P
In case of oil supplied by oil
mar;eting companies? up to T;.
!""%"""[ $il% >here the
payments e'ceeds T;. !""%"""[
" .-+P
+. Indenting Commission J4S
+!3#5
6ule
#-3#5
-.+P
,. Shipping Agency J4S +P

Sl-
;ead of TDS #ef- TDS #ate P A4ountP #e4ar2
Commission +!3I5%
6ule
#-3!5
-. Fees for Services
6endered by 0octors
J4S
+!A3#5
#"P
.. 6oyalty and Technical
Hnow8Gow Fee
J4S
+!A3!5
#"P
/. Fees for Professional or
Technical Services
J4S
+!A3)5
#"P
#". Stevedoring agency L
Private Security service
or any services other
than services speci&ed
in this chapter
J4S
+!AA
#"P
##. Clearing and Forwarding
Agents
J4S
+!AAA
#"P
#!. Cigarette anufacturers J4S +!B ,P of the value of the banderols
#). Compensation Against
Ac<uisition of Property
J4S +!C !P of the amount of such
compensation% if property
situated within City Corporation%
Paurashava or Cantonment
Board% otherwise #P
#*. Interest on Saving
Instruments
J4S +!0 +P
#+. Bric; anufacturers J4S +!F T;. )"%"""48 for one section bric;
&eld. T;. *+%"""48 for two section
bric; &eld T;. ,"%"""48 for three
section bric; &eld.
#,. Commission on 7etter of
Credit
J4S +!I +P
#-. Collection of Ta' by City
Corporation or
Pourashava at the Time
of Issuing and 6enewal
of Trade 7icense
J4S +!H T;. +""48 for each trade license
#.. Collection of Ta' from
Freight Forward Agency
Commission
J4S +! #+P
#/. Collection of Ta' on
Account of 6ental Power
J4S +!$ *P
!". Collection of Ta' from a
Foreign Technician
Serving in a 0iamond
Cutting Industry
J4S +!B +P
!#. For services from
convention hall%
conference centre etc.
J4S +!P +P
!!. 0eduction of ta' from
resident for any income
in connection with any
J4S +!\ #"P

Sl-
;ead of TDS #ef- TDS #ate P A4ountP #e4ar2
service provided to any
foreigner
!). Collection of Ta' from
Importers and 2'porters
J4S +) +P
!*. 0eduction at Source
from Gouse Property
J4S +)A
6ule #-B
Jp to T;. !"%""" per month
Up.mV F$il From T;. !"%"""48 to
T;. *"%"""48 p.m. F )P ore than
T;. *"%"""48 p.m. 8+P
!+. Collection of Ta' from
Shipping Business of a
6esident
J4S
+)AA
+P of total freight received or
receivable in or out of
Bangladesh.
)P of total freight received or
receivable from services
rendered between two or more
foreign countries.
!,. 0eduction of Ta' from
Income 0erived on
Account of 2'port of
anpower
J4S +)B
6ule #-C
#"P
!-. Collection of Ta' from
2'port of Certain Items
J4S
+)BB
".,P of total e'port proceeds
!.. Collection of Ta' from
ember of Stoc;
2'changes
J4S
+)BBB
".#"P
!/. Collection of Ta' from
2'port of any (oods
e'cept Certain Items
J4S
+)BBBB
".-P of total e'port proceeds
)". Collection of Ta' on Sale
Price of (oods or
Property Sold by Public
Auction
J4S +)C
6ule
#-0
+P of the total sale proceeds.
)#. 0eduction or Collection
of Ta' at Source from
Courier Business of a
$on86esident
J4S
+)CC
#+P on the amount of service
charge accrued
)!. 0eduction From
Payment to Actors and
Actresses
J4S +)0 #"P
)). Commission% 0iscount or
Fees
J4S +)2 #"P
)*. Commission or
6emuneration Paid to
Agent of Foreign Buyer
J4S
+)22
-.+P
)+. Interest and Share of
Pro&t on Saving% Fi'ed
and Term 0eposits
J4S +)F%
6ule 8#-
#"P
),. Collection of Ta' from
Persons 2ngaged in 6eal
J4S +)FF 3i5 T;. !%""" per s<uare meter for
building or apartment for

Sl-
;ead of TDS #ef- TDS #ate P A4ountP #e4ar2
2state or 7and
0evelopment Business
residential purpose situated at
(ulshan odel Town% Banani%
Baridhara% oti=eel commercial
area and dil;usa commercial area
of 0ha;a and TH .%""" per s<
meter building for commercial
purpose. TH. #."" per S\ meter
for residential building situated at
0efense BEcers Gousing Society
30BGS5% 0hanmondi 6esidential
Area% 7almatia Gousing Society%
Jttara odel Town% Bashundhara
6esidential Area% 0ha;a
Cantonment Area% Harwan Ba9ar
Commercial Area of 0ha;a and
Hhulshi 6esindential Area%
Panchlaish 6esidential Area and
Agrabad of ChittagongI and TH
,%""" per S\ meter building used
for commercial purpose.
3ii5 T;. ."" per s<uare meter for
residential building or apartment
is situated in areas other than
areas mentioned in sub8clause 3i5
and TH. !%""" per S\ meter for
commercial building
!P of deed value from
September #% !""/ in case of
property situated in any city
corporation% paurashava or
cantonment board.

#P of deed value from
September #% !""/ in case of
property situated in places other
than any city corporation%
paurashava or cantonment
board.
)-. Insurance Commission J4S +)( +P
).. 6emuneration or Fees of
Surveyors of (eneral
Insurance Company
J4S
+)((
#+P
)/. Collection of Ta' on
Transfer% etc. of Property
J4S +)G 3a5>ithin =urisdiction of 0ha;a%
(a9ipur and $arayangan=
districts% C0A% H0A% 60A% other
city corporations% Paurashava%
Cantonment Board irrespective
of agricultural L nonagricultural
land 8 !P
3b5In any area other than the
areas mentioned in clause 3a5 for
other than agricultural land 8 #P.

Sl-
;ead of TDS #ef- TDS #ate P A4ountP #e4ar2
*". 0eduction at Source
from Interest on 0eposit
of Post BEce Savings
Ban; Account
J4S +) I #"P
*#. 0eduction at Source
from 6ental :alue of
:acant 7and or Plant or
achinery
J4S +) M
6ule
#-BB
Jp to T;. #+%""" per month% $ilI
From T;. #+%""# to )"%""" per
month% )PI ore than T;.
)"%""" per month% +P.
*!. 0eduction of Ta' from
Advertising Bill of
$ewspaper or aga9ine
or Private Television
Channel
J4S +) H )P
*). Collection of ta' from
sale of share at a
premium
J4S +) 7 )P
**. Collection of ta' from
transfer of shares by the
sponsor shareholders of
a company listed on
stoc; e'change
J4S +) +P
*+. Income from 0ividend J4S +* 6esident4non8resident
Bangladeshi Company Q!"P
6esident4non8resident
Bangladeshi Person other than
company Q#"P
$on8resident 3Bther than
Bangladeshi non8resident5
person other than a company
Q!+P
*,. Income from >innings J4S ++ !"P
*-. Income of $on86esidents J4S +, $on8resident Company Q
applicable to a company
$on8resident $on8Bangladeshi
Person other than a company Q
!+P
$on8resident Bangladeshi person
Q applicable to a resident
':-D Ta, on inco4e of certain *ersons %inal Settle4ent of ta, lia3ilit6(
UPs M D2C(
Ta' deducted on certain income is considered as &nal settlement of ta'es as
per section .!C of IT Brdinance #/.*. The provisions in this regard are as
follows?
'(Sub=ect to sub8sections 3)5% 3*5% 3+5% 3,5% 3-5% 3.5 and 3/5% notwithstanding
anything contained in any other provisions of this Brdinance% ta' deducted
or collected at source in accordance with the provisions mentioned in sub8
section 3!5 shall be deemed to be the &nal discharge of ta' liability from
that source.
2(The provisions referred to in sub8section 3#5 shall be the following% namely8
a( the amount representing the payments on account of supply of goods
or e'ecution of contract to which ta' is deductible under section +!I
3( the amount representing the payment on account of royalty% fees for
technical services for which ta' is deductible under section +!A3!5I
c( commission from clearing and forwarding agency business for which
ta' is deductible under section +!AAAI
d( the amount of the value of the banderols computed for the purpose
of collection of ta' on account of the manufacture of cigarettes under
section +!BI
e( the amount of compensation against ac<uisition of property under
section +!CI
f( the amount of salaries of a foreign technician serving in a diamond
cutting industry% for which ta' is deductible under section +!BI
g( the amount as computed for the purpose of collection of ta' under
section +) in respect of goods imported% not being goods imported by
an industrial underta;ing as raw materials for its own consumptionI
h( the amount received or receivable from shipping business of a
resident on which ta' is collectible under section +)AAI
i( the amount received on account of e'port of manpower on which ta'
is deductible under section +)BI
<( the amount received on account of e'port of certain items on which
ta' is deductible under section +)BBI
2( the amount received on account of transaction by a member of a
stoc; e'change for which ta' is collectible under section +)BBB I
l( the amount of auction purchase on which ta' is collectible under
section +)CI
4( the amount received on account of courier business of a non8resident
u4s +)CCI
n( the amount received from persons engaged in real estate or land
development business on which ta' is collectible under section +)FFI
o( the amount of remuneration or reward% whether by way of
commission or otherwise payable to an insurance agent on which ta'
is deductible under section +)(I
*( the amount representing the payment on account of survey by
surveyor of a general insurance company on which ta' is deductible
under section +)((I
8( the amount of the value of the property as mentioned in section +)G
for the purpose of collection of ta' under that sectionI
r( the premium received from raising of share at a premium over face
value under section +)7I
s( income derived from transfer of securities or mutual fund units by
sponsor shareholders of a company etc. under section +)I
t( the amount on account of winnings referred to in section #/3#)5 on
which ta' is deductible under section ++?
Provided that provisions of sub8section 3#5 shall not be applicable in the case
of clause 3a5 of this sub8section with respect to a contractor of an oil company
or a sub8contractor to the contractor of an oil company as referred to in rule
)/ of the Income8ta' 6ules% #/.*.
9(Ta' deducted or collected at source from the sources mentioned in sub8
section 3!5 shall not be ad=usted against refund due for earlier year or
years or refund due for the assessment year from any source other than
those mentioned in sub8section 3!5.
:(Income from the sources mentioned in sub8section 3!5 shall be determined
on the basis of the ta' deducted or collected at source and the rate or
rates of ta' applicable for the assessment year.
@(Income computed in accordance with sub8section 3*5 shall not be set o1
with loss computed under any other source for the assessment year or
with loss of earlier year or years.
E(Any income shown or assessed in e'cess of the amount determined in sub8
section 3*5 shall be liable to ta' at the rate or rates applicable for the
assessment year.
F(Any amount not admissible as allowances under section )" shall be added
to the income as referred to in sub8section 3*5.
D(Income referred to in sub8sections 3,5 and 3-5 shall be ta'able at the rate
or rates applicable for the year after determining income under sub8
section 3*5.
C(In addition to the ta' mentioned in this section% in accordance with the
provisions of the Finance Act% if any% the assessee shall pay surcharge.
Illustration
r. B% owner of a Bro;erage Gouse% has presented the following information in
the assessment year !"##8#!?
Income from Gouse Property T;.
!+"%"""
Income from other businesses T;.
!"+%"""
Ta' deducted at sources against bro;erage commission T;.
+"%"""
Income shown as bro;erage commission T;.
#"%""%"""
0etermine the total income of r. ] considering the provisions of the Section
.!3C5.
Solution
As T0S against bro;erage commission is a &nally settled ta' liability% so the
&rst step is to calculate total income e'cluding any item where ta' has been
settled &nally. So% total income e'cluding &nally ta' settled item?
Income from Gouse Property T;. !+"%"""
Income from other businesses T;. !"+%"""
T;. *++%"""
So% Ta' on such income will be?
Bn #
st
T;. #."%""" "P $il
Bn ne't T;. !-+%""" #"P T;. !-%+""
Total T;. !-%+""
$ow% income against &nally settled ta' liability of T;. +"%""" will be calculated
as follows on the basis of regular rate?
Bn the rest of !
nd
slab 3T;. )""%""" F T;. !-+%"""5 [ T;. !+%""" Q #"P [
T;. !%+""
So% T;. *-%+"" ta' will be for the )
rd
slab where ta' rate is #+P.
So% against this T0S of T;. *-%+"" the applicable income will be
3*-%+""4#+^#""5 [ T;. )#,%,,-
So% income against which T;. +"%""" &nally settled T0S will be 3T;. !+%""" Z
T;. )#,%,,- [ T;. )*#%,,-.
But As bro;erage commission T;. #"% ""%""" income has been shown i.e.
e'cess income has been shown by 3T;. #"%""%""" 8 T;. )*#%,,-5 [ T;.
,+.%))). So for this additional income of T;. ,+.%))) ta' will be charged on
regular rate.
':-C Other Issues relating to TDS
Conse8uences of %ailure to Deduct= etcB Sec @F
>here a person re<uired by or under the provisions of this Chapter to deduct%
collect or pay to the credit of the (overnment ta'% and in the cases mentioned
in section +*% the principal oEcer and the company of which he is the
principal oEcer% fails to pay the ta' in accordance with the provisions of this
Chapter% he or it shall 8
3a5 without pre=udice to any other conse<uences to which he or it may be
liable% be deemed to be an assessee in default in respect of the ta'I and
3b5 in addition to such ta'% pay an amount at the rate of two percent per
month of such ta' for the period commencing on the date following the
e'piry of the time within which it is to be paid under section +/ and
ending on the date of the actual payment of the ta'.
>here the 0eputy Commissioner of Ta'es in the course of any proceedings
under the Brdinance &nds any person% re<uired by or under the provisions of
this chapter to deduct% collect or pay to the credit of the (overnment ta'% who
has failed to deduct% collect or pay the ta' in accordance with the provisions
of this chapter% shall% notwithstanding the provisions of section #)-% ta;e
necessary action for realisation of such ta' alongwith the additional amount
payable under clause 3b5 of sub8section 3#5 from the person deemed to be an
assesssee in default under clause 3a5 of that sub8section.
Certi0cate of Deduction etc-= of Ta,B Sec @D
2very person who deducts or collects ta' as re<uired by the provisions of this
Chapter shall% at the time of ma;ing any payment in relation to which ta' has
been deducted or collected% furnish to the person to or from whom such
payment or collection has been made% a certi&cate to the e1ect that the ta'
has been deducted or collected specifying therein8
a5 the amount deducted or collectedI
b5 the rate at which deduction or collection has been madeI and
c5 such other particulars as may be prescribed.
)a64ent to $o+ern4ent of Ta, DeductedB Sec @C
All sums deducted or collected as ta' under the provisions of this Chapter
shall be paid within the prescribed time by the person ma;ing the deduction
or collection to the credit of the (overnment or as the Board may direct.
UnauthoriQed Deduction )rohi3itedB Sec E&
Save as provided in the Brdinance% no person shall charge% withhold% deduct
or collect any sum% directly or indirectly as ta' and where any sum is so
charged withhold% deducted or collected% it shall be paid in the manner
provided in section F +/.
)o/er to Le+6 Ta, /ithout )re<udice to other Mode of #eco+er6B
Sec E'
The power to levy ta' by deduction or collection under this Chapter shall be
without pre=udice to any other mode of recovery.
Credit of Ta, Deducted or Collected at SourceB Sec E2
Any deduction or collection of ta' made and paid to the account of the
(overnment in accordance with the provisions of this Chapter shall be treated
as a payment of ta' on behalf of the person from whose income the deduction
or collection was made% or of the owner of the security or of the shareholder%
as the case may be% and credit shall be given to him therefor on the
production of the certi&cate furnished under section F +. in the assessment% if
any made for the following year under the Brdinance ?
Provided that% if such person or such owner obtains% in accordance with the
provisions of the Brdinance% a refund of any portion of the ta' so deducted% no
credit shall be given for the amount of such refund ?
Provided further that where such person or owner is a person whose income is
included under the provisions of section *) 3*5 or 3+5 or section #"* or #"+ or
#", in the total income of another person% such other person shall be deemed
to be the person or owner on whose behalf payment has been made and to
whom credit shall be given in the assessment for the following year.
)a64ent of Ta, /here no Deduction is 4adeB Sec E9
The ta' under the Brdinance shall be payable by the assessee direct8
3a5 in any case where ta' has not been deducted or collected as re<uired by%
and in accordance with% the provisions of this Chapter I
3b5 in any case where the amount deducted or collected is found% after
regular assessment% to be less than the ta' due from the assessee% to the
e'tent of de&ciency I and
3c5 in the case of income in respect to which no provision has been made for
deduction or collection of ta' under the provisions of this Chapter.
Self>Assess4ent ?uestionsB
3a5 0iscuss the various types of income from which ta' is re<uired to be deducted or
collected at source under the provisions of the Income Ta' Brdinance #/.*.
3b5 State the provisions regarding information to be furnished to the Ta' Authorities
in connection with payment of salary% interest% dividend% collection of ta' from
property% payment to non8resident% and other sources under the provisions of the
Income Ta' Brdinance #/.*.
3c5 ention the application for &nal payment of ta' liability under section .!C.
3d5 >hat are the conse<uences of failure of deducting ta'es in time at prescribed
rates or failure of depositing deducted ta'es within timeN
Chapter #+
Ad+ance *a64ent of ta,
Contents
Introduction
2'amination conte't
To*ic List
>or;ed 2'amples and Solutions
#+.# 6e<uirement to pay advance payment of ta'
#+.! Computation of advance ta'
#+.) Installments of advance ta'
#+.* 2stimate of advance ta'
#+.+ Advance payment of ta' by new assesses
#+., Failure to pay installments
#+.- 7evy of interest for failure to pay advance ta'
#+.. Credit of advance ta'
#+./ Interest payable by (overnment on e'cess payment of
advance ta'
#+.#" Interest payable by the assessee on de&ciency in payment of
advance ta'
#+.## Payment of ta' on the basis of return
Introduction
Learning o3<ecti+es
6ecognise di1erent classes of assesses re<uired to pay advance ta'.
ention the time limit and manner of payment of advance ta'.
2'plain the bases and methods of computing advance ta'.
0e&ne the conse<uences of non8payment or insuEcient payment of
advance ta'.
ention the situation and when government will pay simple interest Q
#"P to assessee.

)ractical signi0cance
0epending on assessed or provisionally assessed income% an assessee may
re<uire to pay advance ta'. In some cases the new assessee also re<uires to
pay advance ta'. The calculation of amount% rate% estimation and installment
of advance ta' are guided by the Brdinance. The assessee shall get the credit
of advance ta'. In case of e'cess or de&cit payment of advance ta' an
assessee may receive or pay the interest from or to the (overnment. Ta' paid
in advance shall be ad=usted at the time of ta' payment on the basis of the
return.
Payment of advance ta' is important as failure of doing so will ma;e the
assessee being Xassessee in defaultK. Advance ta' is a re<uirement and it
reduces ta' burden at the end of the year. Thus% it is helpful to the assessee
as a method of ta' planning. Professional accountants are re<uired to help
their clients in that regard. So the practical signi&cance of this chapter
re<uires no e'tra mentioning.

Sto* and thin2
Advance ta' is re<uired to pay on total income e'cluding income from
agriculture and capital gains. Both old and new ta'payers are re<uired to pay
advance ta' if they ful&ll the threshold set by ta' laws. 0o you thin; how
advance payment of ta' is madeN
.or2ing conte,t
In corporate sectors% advance payment of ta'es is a must as it should e'ceed
the threshold of T;. *""%""". In some cases the accountants are as;ing for
advice on how and when the advance ta'es should be paid. The service for
estimation and calculation of advance ta' is re<uired by some assessee.
Accountants can provide the service to their clients on due payment of
advance ta' so that the clients can avoid any penalty for non8compliance of
ta' law in this regard.
0etailed ;nowledge about the payment of advance ta' in compliance with ta'
law can help accountants to support their clients signi&cantly.
S6lla3us lin2s
Cou will also meet this area of ta'ation at application level and at case study
in advanced stage.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne the re<uirement of advance payment of ta'.
0emonstrate how the computation% estimation and payment procedures of
advance ta' are made.
0escribe the conse<uences of payment or not payment of advance ta'.
Identify di1erent classes of assesses re<uired to pay advance ta'.
ention the time and installments of payment of advance ta'.
Illustrate the application of -+P test to compute simple interest in case of
de&cit.
?uestion *ractice
For <uestion practice on these topics% go to the suggested answers covering
this chapter.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates need to remember the methods of computing advance ta'% bases
of advance ta'% -+P test% computation of simple interest Q #"P on de&cit
amount of ta' and other comple'ities. In practical problem at case study level
calculation of advance ta' may be as;ed for with di1erent dates when
installment falls due.

'@-& AD!ANC" )AYM"NT O% TAX
Section O+er+ie/
An assessee% both old and new% may re<uire paying advance ta'.
Advance ta'es are paid on income e'cluding income from agriculture and
capital gain.
The assessee shall get the credit for advance ta'.
If the amount of advance ta' paid along with T0S is less than -+P of due
ta'% assessee is re<uired to pay simple interest Q#"P on such de&cit.
(overnment will also pay simple interest Q#"P if advance ta' for any
reason e'ceeds due ta'.
If the assessee fails to pay advance ta'% he will be the assessee in default.
'@-' #e8uire4ent to )a6 Ad+ance )a64ent of Ta,B Sec E:
3*,52'cept as provided in section ,*3!5% ta' shall be payable by an assessee
during each &nancial year by way of advance payment of ta'% hereinafter
referred to as Xadvance ta'K% in accordance with the provisions hereafter
made in this Chapter% if the total income of the assessee for the latest
income year in respect of which he has been assessed by way of regular
assessment% or has been provisionally assessed under the Brdinance% or
the Income8 ta' Act #/!! e'ceeds T; *%""%""".
3*-5$othing in section ,*3#5 shall apply to any income classi&able under the
heads XAgricultural incomeK and XCapital gainsK.
'@-2 Co4*utation of Ad+ance Ta,B Sec E@
3*.5The amount of advance ta' payable by an assessee in a &nancial year
shall be the amount e<ual to the ta' payable on his total income of the
latest income year as assessed on regular basis or provisionally% as the
case may be% as reduced by the amount of ta' re<uired to be deducted or
collected at source in accordance with the preceding provisions of this
Chapter.
3*/5The ta' payable under section ,+3#5 shall be calculated at the rates in
force in respect of the &nancial year referred therein.
'@-9 Install4ents of Ad+ance Ta,B Sec EE
Advance ta' shall be payable in four e<ual installments on the &fteenth day of
September% 0ecember% arch and Mune of the &nancial year for which the ta'
is payable. Gowever% if before the &fteenth day of ay of the year% an
assessment of the assessee is completed in respect of an income year% later
than that on the basis of which the ta' was computed under section ,+% the
assessee shall pay in one installment on the speci&ed date or in e<ual
installments on the speci&ed dates% if more than one falling after the date of
the said assessment% the ta' computed on the revised basis as reduced by the
amount% if any% paid in accordance with the original computation.
'@-: "sti4ate of Ad+ance Ta,B Sec EF
3+"5>here% an assessee who is re<uired to pay advance ta' under section ,*
estimates% at any time before the last installment is due% that the ta'
payable by him for the relevant assessment year is li;ely to be less than
the amount of ta' as computed under section ,+% he may% after giving to
the 0eputy Commissioner of Ta'es an estimate of the ta' payable by him%
pay such estimated amount of advance ta'% as reduced by the amount% if
any% already paid% in e<ual installments on the due dates of payment
under section ,,.
3+#5The assessee may furnish a revised estimate of such amount at any time
before any time before any of such installments become payable and may
thereby ad=ust any e'cess or de&ciency% by reference to the amount
already paid by him under this section% in any subse<uent installment or
installments payable in such &nancial year.
'@-@ Ad+ance )a64ent of Ta, 36 ne/ AssesseesB Sec ED
Any person who has not previously been assessed by way of regular
assessment under the Brdinance or the Income Ta' Act% #/!!% shall before the
&fteenth day of Mune in each &nancial year% if his total income% sub=ect to
section ,* 3!5% of the period which would be the income year for the
immediately following assessment year is li;ely to e'ceed T;. *%""%"""% send
to the 0eputy Commissioner of Ta'es an estimate of his total income and
advance ta' payable by him calculated in the manner laid down in section ,+
and shall pay such amount on such dates speci&ed in section ,, as have not
e'pired by installments which may be revised according to section ,-3!5.
'@-E %ailure to )a6 Install4ents of Ad+ance Ta,B Sec EC
>here% an assessee who is re<uired to pay advance ta' fails to pay any
installment of such ta'% as originally computed or% as the case may be%
estimated% on the due date% he shall be deemed to be an assessee in default
in respect of such installment.
'@-F Le+6 of Interest for %ailure to *a6 Ad+ance Ta,B Sec F&
>here% in respect of an assessee who is re<uired to pay advance ta'% it is
found in the course of regular assessment that advance ta' has not been paid
in accordance with the provisions of this Chapter% there shall be added%
without pre=udice to the conse<uences of the assessee being in default under
section ,/% to the ta' as determined on the basis of such assessment% simple
interest thereon calculated at the rate and for the period speci&ed in section
-).
'@-D Credit of Ad+ance Ta,B Sec F'
Any sum% other than a penalty or interest% paid by or recovered from an
assessee as advance ta'% shall be treated as a payment of ta' in respect of
the income of the period which would be the income year for an assessment
for the year ne't following the year in which it was payable and shall be given
credit for in the assessment of ta' payable by the assessee.
'@-C Interest )a6a3le 36 $o+ern4ent on ",cess )a64ent of Ad+ance
Ta,B Sec F2
3+!5 The (overnment shall pay simple interest at #"P per annum on the
amount by which the aggregate sum of advance ta' paid during a &nancial
year e'ceeds the amount of ta' payable by him as determined on regular
assessment.
3+)5 The period for which interest under section -!3#5 shall be &rst day of
Muly of the year of assessment to the date of regular assessment in respect
of the income of that year or a period of two years from the said &rst day
of Muly% whichever is shorter.
IllustrationB
r. 6obi calculated advance ta' for the income year !"#"8## as per the
latest assessed income of ta;a #%"""%""". 6egular assessment for the
assessment year !"##8#! was completed on Mune )"% !"#! and pro&t
assessed amounts to ta;a .""%""". Applicable ta' rate is *"P. Calculate
interest payable by the government on e'cess amount.
Calculation of e,cess ad+ance ta, *aidB
Amount of advance ta' paid on the basis of latest assessed income
3*"P of ta;a #%"""%"""5 T;. *""%"""
Advance ta' as per regular assessment 3*"P of ta;a .""%"""5 T;.
)!"%"""
2'cess of advance ta' paid T;. ."%"""
Interest payable by the government? 3#"P on ta;a ."%"""5 T;. .%"""
Note? Interest will be paid for a period from #
st
Muly !"## 3&rst day of
assessment year5 to Mune )" !"#! 3day of regular assessment5 or for a
ma'imum of ! years% whichever is shorter.
1!*10 Interest )a6a3le 36 the Assessee on De0cienc6 in )a64ent of
Ad+ance Ta,B Sec F9
3+*5 >here% in any &nancial year% an assessee has paid advance ta' on the
basic of his own estimate and the advance ta' so paid together with the
ta' deducted at source% if any % under this Chapter is less than seventy8&ve
per cent% of the amount of ta' payable by him as determined on regular
assessment% the assessee shall pay% in addition to the balance of ta'
payable by him% simple interest at #"P per amount on the amount by
which the ta' so paid and deduction falls short of -+P of the assessed ta'.
3++5 The period for which interest under section -)3#5 shall be payable shall
be the period from the &rst day of Muly of the year in which the advance
ta' was paid to the date of regular assessment in respect of the income of
that year or a period of two years from the said &rst day of Muly whichever
is shorter.
3+,5 $otwithstanding anything contained in sections -)3#5 and 3!5 8
i. where ta' is paid under section -*% or
ii. provisional assessment has been made under section .# but regular
assessment has not been made% the simple interest shall be calculated
in accordance with the following provisions8
#. up to the date on which ta' under8section -* or provisionally
assessed% was paidI
!. thereafter% such simple interest shall be calculated on the amount by
which the ta' so paid falls short of the said assessed ta'.
3+-5 >here% as a result of appeal% revision or reference% the amount on
which interest was payable under section -)3#5 has been reduced% the
amount of interest payable shall be reduced accordingly and the e'cess
interest paid% if any% shall be refunded together with the amount of ta'
that is refundable.
Illustration
For the assessment year !"##8#!% a certain assessee has latest assessed
income of ta;a #%"""%""". But% he wants to pay advance ta' for the year on
the basis of his own estimates that amounts to ta;a .""%""". 6egular ta'
rate is *"P. 0uring the year% ta' deducted at source was ta;a +"%""".
6egular assessment for the assessment year !"##8#! was completed on
February !.% !"#! resulting ta;a #%!""%""" pro&t including pro&t of ta;a
."%""" from capital gain and ta;a !!"%""" from agricultural income.
Calculate the amount of e'cess or shortfall and e'plain the conse<uences for
the same.
Income eligible to apply advance ta' as per regular assessment is
ta;a /""%""" 3ta;a #%!""%""" F ta;a ."%""" F ta;a !!"%"""5%
e'cluding capital gain and agricultural income.
Ta' liability as per regular assessment 3*"P of ta;a /""%"""5 T;.
),"%"""
Ta' paid in the form of Ta' deducted at sources T;. +"%"""
Advance ta' 3*"P of ta;a .""%""" F ta;a +"%"""5 T;. !-"%""" T;.
)!"%"""
ShortfallPDe0cit T2- :&=&&&
,)# test4 The de&cit or shortfall is re<uired to be tested for charging
interest.
-+P of ta' liability as per regular assessment 3-+P of ta;a ),"%"""5
T;. !-"%"""
Ta' paid actually T;. )!"%"""
ShortfallPDe0cit nil
Conse8uenceB In this case% the assessee is re<uired to pay the shortfall
of ta;a *"%""". There is no <uestion of interest resulting from -+P test.
'@-'')a64ent of Ta, on the Basis of #eturn KSee F:L
2very person who is re<uired to &le a return u4s -+% --% -.% ./3!5% /#3)5% or
/)3#5 shall pay the amount of ta' payable on the basis of such return as
reduced by the amount of any ta' deducted from his income u4s *. and ,* on
or before the return &led.
A person who without reasonable cause fails to pay ta' as re<uired under this
section% shall be deemed to be an assessee in default.
Advance Ta'
Payable
By
$ew ta'
payer
Bld ta'
payer
0oes latest
assessed
income
e'ceed T;.
*""%"""N
Ces $o
Advance
Ta'
Payable
$o
Advance
Ta'
Payable
Advance Ta' [ Ta' paid on the basis
of last assessed income F T0S% if any
0oes
advance ta'
paid plus
T0S -+P
of ta'
determinedN
Ces $o
$o penalty% simply the
balance of ta' will be paid
Assessee will pay the unpaid
amount of ta' plus simple
interest Q #"P as penalty on
such amount falls short than
-+P of assessed ta'
Is the
assessed
income
li;ely to
e'ceed T;.
*""%"""N
Ces
$o
Advance
Ta'
Payable
$o
Advance
Ta'
Payable
0oes
advance
ta' paid
plus T0S
-+P of ta'
determined
N
Ces $o
$o penalty% simply the
unpaid amount of ta' will
be paid
Assessee will pay the unpaid
amount of ta' plus simple
interest Q #"P as penalty on
such amount falls short than
-+P of assessed ta'
.or2ed ",a4*les and Solutions
.or2ed ",a4*le '
r. Alim Sei;h has the following records of assessment for various years?
Inco4e 6ears
Date of
assess4ent
Total assessed
inco4e
!"",8"-
!""-8".
!"".8"/
!""/8#"
!"#"8##
!#
st
of February%
!"".
#"
th
of arch% !"##
)"
th
of ay% !"#"
#+
th
of February !"##
$ot yet assessed
Ta;a ,""%"""
Ta;a #%+""%"""
Ta;a #%!""%"""
Ta;a #%!+"%"""
$4A
r. Sei;h% due to the changes of nature of income% wants to pay advance ta' on the
basis of his own estimate in lieu of latest assessed income. According to his own
estimate% total ta'able income amounts to ta;a #%!""%""" including ta;a #""%"""
from capital gain and ta;a !""%""" from agricultural income. Assessment for the
income year !"#"8## has been completed on !.
th
February !"#! and his actual
income amounts to ta;a #%.""%""" e'cluding capital gain and agricultural income.
For the income year !"#"8##% his ta' deducted at source was ta;a #""%""" and he
has paid further ta' of ta;a #+"%""" on )#
st
0ecember !"## J4s F -*. Applicable ta'
rate for r. Sei;h is *"P. 2'plain ta' implications.
Solution 'B
7atest assessed income in this case would be ta;a #%+""%""" 3IC !""-8".5 if advance
ta' was based on that. But% r. Sei;h paid advance ta' on the basis of his own
estimate. So% let us &rst compute the amount of advance ta' paid.
2stimated income of r. Sei;h e'cluding capital gain and agricultural income
T;. /""%"""
Amount of advance ta' payable 3*"P of ta;a /""%"""5 T;.
),"%"""
Advance Income Ta' to be paid per installment 3ta;a ),"%"""4*5 T;.
/"%"""
Advance ta' paid by r. Sei;h on the date of assessment T;.
#."%"""
3Because only two installments are made on #+
th
September and #+
th
0ecember
respectively5
7et us calculate the amount of shortfall4de&cit?
Ta' liability as per regular assessment 3*"P of ta;a #%.""%"""5 T;.
-!"%"""
Ta' paid in the form of
Ta' deducted at sources T;. #""%"""
Advance ta' paid 3as calculated above5 T;. #."%""" T;.
!."%"""
ShortfallPDe0cit T2-
::&=&&&
7ess? ta' paid J4s F -* T;. #+"%"""
6emaining 7iability T;.
!/"%"""
So% r. Sei;h would be re<uired to pay ta;a !/"%""" as additional ta'. $ow let us use
-+P test to decide whether he would be charged interest on the shortfall or not.
-+P of ta' liability as per regular assessment 3-+P of ta;a -!"%"""5 T;.
+*"%"""
Ta' paid actually T;. !."%"""
#e+ised ShortfallPDe0cit T2-
2E&=&&&
7ess? ta' paid J4s F -* T;. #+"%"""
#e4aining lia3ilit6 T2- ''&=&&&
So% r. Sei;h would be charged interest as per the -+P test for the following time
period?
Bn ta;a ##"%"""I interest will be charged Q #"P for a period from #
st
Manuary !"#!
to !.
th
February !"#! whereas on ta;a #+"%"""I interest will be charged at the same
rate but for a period from #
st
April !"## to )#
st
0ecember !"##. So% total interest
payable by r. Sei;h would be ta;a #)%".).)) U3##""""_#"P_!4#!5 Z
3#+""""_#"P_/4#!5V. Thus% total amount due by r. Sei;h to the government
amounts to ta;a )%")%".).)) 3!/"%""" Z#)%".).))5.
Self>Assess4ent ?uestion
#. 0iscuss brieAy the provisions of the Income Ta' Brdinance #/.* with regard to
the following?
3a5 The assessees who are re<uired to ma;e advance payments of ta' and the
nature of incomes which are to be left out of consideration for this purposeI
3b5 The basis on which advance payments of ta' should be calculated for old
assessees and new assessees% and the due dates of payment thereofI
3c5 The interest payable by (overnment on e'cess payment and interest
chargeable to assessee on shortfall% in respect of advance payment of ta'.
!. In what situation% government will pay interest to assesseeN
). r. Idris ia calculated advance ta' for the income year !""/8#" as per the latest
assessed income of ta;a #%"""%""". 6egular assessment for the assessment year
!"#"8## was completed on Mune )"% !"#! and pro&t assessed amounts to ta;a
-""%""". Applicable ta' rate is *"P. Calculate interest payable by the
government on e'cess amount.
Chapter #,
#eturn of inco4e and state4ents
Contents
Introduction
2'amination conte't
To*ic List
#,.# 6e<uirement to &le return of income
#,.! Form of submission of return of income
#,.) Signature and veri&cation of return
#,.* 0ue date of submission of return of income ta'
#,.+ 0ocument to be submitted along with the return if income
#,., 6eturn of withholding ta'
#,.- Bbligation to furnish Annual Information 6eturn
#,.. Concurrent =urisdiction
#,./ Certi&cate in place of return
#,.#" $otice for &ling return
#,.## Filing of revised return
#,.#! Production of accounts and documents
#,.#) Statement of assets and liabilities
#,.#* Production of other information as per di1erent Sections and 6ules at
the time of Submission of 6eturn or in other circumstances
Introduction
Learning o3<ecti+es
2'plain the re<uirement to &le return of income
State the procedures of &lling the return.
Identify the forms and documents to be submitted with the return of
income.
ention the information need to be provided with return.
Prescribe di1erent forms of return.
)ractical signi0cance
2very person shall &le or caused to be &led a return of his income or the
income of any other person in respect of which he is assessable to ta'. There
are some rules and guideline for submission of return. The total procedures
covering the time limitation for submitting the return% &lled forms% documents
and information to be provided with the return of income. 0uly &led return
need to have the declaration and authentication.
Production of accounts and documents% statements of assets and liabilities%
income statement% statement of individual regarding particulars of life style
are the essential elements in case of submission of return.
7earning of income ta' is &nally reAected in submitting the form of return
where income from di1erent heads is reported and net ta' liability is
computed. This is the reporting of assesses to the government authority
disclosing relevant information.
Sto* and thin2
0o you reali9e that submission of return is an obligatory responsibility for
every assessee by any meansN 0o you ;now that the production of supporting
accounts% forms and documents and timely submission of return with
authenticated declaration about the true information are very signi&cantN
.or2ing conte,t
In case of submission of return% the accountants can guide their clients how to
prepare their return with all supporting documents. Accountants should have
the clear understanding about the legal procedures for submission of return.
0etailed understanding about the rules and procedures for &ling return give
the opportunity to the accountants in practice to help their as ta' advisers.
S6lla3us lin2s
The topics covered in this chapter are very important for students%
accountants% ta' advisers and even for the assessee at large for compliance
with the ta' rules and procedures regarding submission of return.
>hen you tac;le the <uestions at application level and case study you will be
e'pected to be very familiar with the total procedures for submitting return.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
0e&ne the re<uirement to &le return of income.
ention the due date of submission of return of income.
Identify the forms% documents and information to be submitted with return.
0e&ne the term of IT #"B and IT #"BB in case of &lling return.
?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.
",a4iner7s co44ents on ho/ students tac2le 8uestions
Candidates have historically prepared well for this area of the syllabus.
'E-& #"TU#N AND STAT"M"NT
Section O+er+ie/
An assesse shall &le or cause to be &led a return of income in the
prescribed form.
The return of income shall be signed and veri&ed
6eturn shall be submitted within due date.
The 0CT can serve notice for &ling return after the due date for submission
of return.
The return shall be accompanied by certain documents including IT8#"B
and IT8#"BB
Form of return for individual assessee and company is di1erent.
0ue dates of submitting return is di1erent for di1erent classes of assesses.
'E-' #e8uire4ent to 0le #eturn of Inco4eB Sec F@'(= 'A( and 'B(
3#5 Save as provided in section -,% every person shall &le or cause to be &led%
with the 0eputy Commissioner of Ta'es% a return of his income or the
income of any other person in respect of which he is assessable to ta'
under the Brdinance8
3a5 if his total income during the income year e'ceeded the ma'imum
amount which is not chargeable to ta' under the Brdinance% or
3b5 if he was assessed to ta' for any one of the three years
immediately preceding that income year USection -+3#5V.
Gowever% any non8resident Bangladeshi may &le his return of income along
with ban; draft e<uivalent to the ta' liability% if any% on the basis of such
return% to his nearest Bangladesh ission and the ission will issue a
receipt of such return with oEcial seal and send the return to the Board
UProviso to Section -+3#5V.
3!5 A person who is not re<uired to furnish return under section -+3#5% shall &le
a return of his income during the income year on or before the speci&ed
date if he?
3a5 resides within the limits of a city corporation or of a municipality of
a divisional head<uarters or district head<uarters and who at any
time during the relevant income year ful&ls any of the following
conditions% namely8
3i5 owns a building which consists of more than one storey and the
plinth area of which e'ceeds one thousand si' hundred s<uare
feetI
3ii5 owns a motor carI
3iii5subscribes a telephoneI
3iv5owns a membership of a club registered under the :alue added
Ta' Act% #//#I
3b5 runs any business or profession having trade license from a city
corporation% a paurashava or a union parishad% and operates a ban;
accountI
3c5 has registered with a recognised professional body as a doctor%
dentist% lawyer% income ta' practitioner% chartered accountant% cost
and management accountant% engineer% architect or surveyor or
any other similar professionI
3d5 member of a chamber of commerce and industries or a trade
associationI
3e5 is a candidate for an oEce of any union parishad% paurashava% city
corporation% or a ember of ParliamentI
3f5 participates in a tender Aoated by the government% semi8
government% autonomous body or a local authorityI
3g5 has a ta'payerKs identi&cation number3TI$5 in accordance with the
provisions of section #.*AI and
3h5 any non8government organisation registered with $(B A1airs
Bureau.
2]P7A$ATIB$? In this sub8section% the term Xmotor carK means a motor car
as de&ned in section !3!+5 of the otor :ehicles Brdinance #/.) and
includes a =eep and a micro8bus U2'planation to Section -+3#A5V.
3)5 $otwithstanding anything contained in sections -+3#5 and 3#A5% every
company shall &le a return of its income or the income of any other person
for whom the company is assessable% on or before the date speci&ed in
section -+3!53c5USection -+3#B5V.
'E-2 %or4 of Su34ission of #eturn of Inco4e KSection F@2(A(L
The return under section -+3#5% 3#A5 and 3#B5 shall be furnished in the
prescribed form setting forth therein such particulars and information as may
be re<uired thereby including the total income of the assessee.
'E-9 Signature and !eri0cation of #eturn KSection F@2(3(L
The return of income shall be signed and veri&ed8
3i5 in the case of an individual% by the individual himselfI where the individual
is absent from Bangladesh% by the individual concerned or by some
person duly authorised by him in this behalfI and when the individual is
mentally incapacitated from attending to his a1airs% by his guardian or by
any other person competent to act on his behalfI
3ii5 in the case of Gindu undivided family% by the Harta% and% where the Harta
is absent from Bangladesh or is mentally incapacitated from attending to
his a1airs by any other adult member of such familyI
3iii5 in the case of a company or local authority% by the principal oEcer
thereofI
3iv5 in the case of a &rm% by any partner thereof% not being a minorI
3v5 in the case of any other association% by any member of the association or
the principal oEcer thereofI and
3vi5 in the case of any other person% by that person or by some person
competent to act on his behalfI
'E-: Due date of Su34ission of #eturn of Inco4eB Sec F@2(C(
3#5 The return of income shall be &led% unless the date is e'tended under
section -+3)58
3i5 in the case of a company% by the &fteenth day of Muly ne't following
the income year or% where the &fteenth day of Muly falls before the
e'piry of si' months from the end of the income year% before the
e'piry of such si' monthsI and
3ii5 in all other cases% by the thirtieth day of September ne't following
the income year.
&2( The last date for the submission of return as speci&ed in section -+3!5 may
be e'tended by the 0eputy Commissioner of Ta'es up to ) months from
the date so speci&ed and further e'tend the date up to three months with
the approval of the Inspecting Moint commissioner of Ta'es USection -+3)5V.
Illustration
%or Assessee 3eing a co4*an6
Accounting 6ear ended on Due date of %iling the
#eturn
)#.#!.!"#" By #+
th
Muly !"##
)#.").!"## By )"
th
September !"##
)".",.!"## By )#
st
0ec !"##
)#."-.!"## By #+
th
Muly !"#!
)"."/.!"## By #+
th
Muly !"#!
%or Assessee 3eing a *erson other than co4*an6
Income Cear Due date of %iling the
#eturn
!"#"8## By )"
th
September !"##
!"##8#! By )"
th
September !"#!
)#8#!8!"#" 3&rm5 By )"
th
September !"##
'E-@ Docu4ents to 3e Su34itted Along /ith the #eturn of Inco4e
KSection F@2(D(L
The return of income shall be accompanied by8
3i5 in the case of an individual% a statement in the prescribed form and
veri&ed in the prescribed manner giving particulars of his personal and
family e'penditure to be called life styleI and a statement in the
prescribed form and veri&ed in the prescribed manner giving particulars
speci&ed in section ." in respect of himself% his spouse% his minor children
and dependantsI and
3ii5 in the case of a company% a statement of accounts audited by a chartered
accountant.

'E-E #eturn of /ithholding ta, KSection F@AL
3#5 2very person% being a company% shall &le or cause to be &led% with the
0eputy Commissioner of Ta'es where he is being assessed% a return of
withholding ta' collected or deducted as per provisions of Chapter :II of
this Brdinance.
3!5 The return under sub8section 3#5 shall be8
3a5 furnished in the prescribed form setting forth therein such
particulars and information as may be re<uired therebyI
3b5 signed and veri&ed by the principal oEcer thereofI
3c5 &led <uarterly% unless the date is e'tended under sub8section
3)5% by the &fteenth day of Bctober% Manuary% April and Muly of the
&nancial year for which the ta' is deducted or collectedI
3d5 accompanied by a statement of deduction or collection of ta'
along with copy of treasury challans or payment orders.
3)5 The last date for the submission of return as speci&ed in sub8section 3!5
may be e'tended by the 0eputy Commissioner of Ta'es up to &fteen days
from the date so speci&ed.
'E-F O3ligation to furnish Annual Infor4ation #eturn KSection F@BL
3#5 (overnment may% by noti&cation in the oEcial ga9ette% re<uire any person
or group of persons responsible for registering or maintaining boo;s of
account or other documents containing a record of any speci&ed &nancial
transaction% under any law for the time being in force% to furnish an Annual
Information 6eturn% in respect of such speci&ed &nancial transaction.
3!5 The Annual Information 6eturn referred to in sub8section 3#5 shall be
furnished to the Board or any other income ta' authority or agency% in
such form% manner and within such time as may be prescribed.
'E-D Concurrent <urisdiction KSection F@CL
Board may% by general or a special order in writing% direct that in respect of all
or any proceedings relating to receiving of return of income and issuance of
ac;nowledgement thereof in accordance with the provisions of section -+% --%
-.% ./3!5% /#3)5 or /)3#5% the powers and functions of the 0eputy
Commissioner of Ta'es shall be concurrently e'ercised by such other authority
as may be speci&ed by the Board.
'E-C Certi0cate in *lace of return KSection FEL
>here the entire total income of an assessee during the income year
consisted of income classi&able under the head TSalariesT or any other
income from which the full amount of ta' payable by him has been deducted%
such assessee may% instead of &ling a return under section -+% &le a
certi&cate in such form as may be prescribed accompanied% where applicable%
by a statement referred to in section -+ 3!5 3d5 I and the certi&cate and
statement so &led shall be deemed for all purposes of this Brdinance to be a
return and statement &led under that section.
'E-'& Notice for %iling #eturnB Sec FF
3#5 The 0eputy Commissioner of Ta'es may% at any time after e'piry of the
date speci&ed in section -+% by a notice in writing% re<uirec
a. any person% other than a company% to &le a return of his total income
as provided in that section if% in the opinion of the 0eputy
Commissioner of Ta'es the total income of such person was% during the
income year% of such amount as to render liable to ta'I
b. any company to &le a return of its total income% if it is not &led.
3!5 The return under section --3#5 shall be &led within such period% not being
less than twenty8one days% as may be speci&ed in the notice or within such
e'tended period as the 0eputy Commissioner of Ta'es may allow.
'E-'' %iling of #e+ised #eturnB Sec FD
Any person who has not &led a return as re<uired by section -+ or -- or who
having &led return% discovers any omission or incorrect statement therein%
may% without pre=udice to any liability which he may have incurred on this
account% &le a return or a revised return% as the case may be% at any time
before the assessment is made.
'E-'2 )roduction of Accounts and Docu4entsB Sec FC
The 0eputy Commissioner of Ta'es may% by notice in writing% re<uire an
assessee who has &led a return under section -+% or to whom a notice has
been issued under section --% to produce or cause to be produced such
accounts% statements and documents on such date as may be speci&ed in the
notice% such accounts% statements and documents including those relating to
any period% not being earlier than three years prior to the income year% as he
may consider necessary for the purpose of ma;ing an assessment under the
Brdinance.
'E-'9 State4ent of Assets and Lia3ilities and life st6leB Sec D&
&1( The 0eputy Commissioner of Ta'es may% by notice in writing% re<uire an
assessee to &le by the date speci&ed in the notice statements giving
particulars in respect of the following unless they have already been
given in or with return &led under section -+% -- or -.% or with a
certi&cate &led under section -, namely?
3a5 the total assets% liabilities and e'penses of the assessee as on the
date or dates speci&ed in the noticeI
3b5 the total assets% liabilities and e'penses of the spouse% minor children
and dependents of the assessee as on the date or dates so speci&edI
and
3c5 any assets transferred by the assessee to any person during the
period or periods so speci&ed% and the consideration thereforeI
3d5 particulars of life style of the assessee.
3!5 The statements to be &led under sub8section 3#5 shall be prepared in such
form and veri&ed in such manner as may be prescribed.
'E-': )roduction of other infor4ation as *er diAerent Sections and #ules
at the ti4e of Su34ission of #eturn or in other circu4stances
J4s F #". L 6ule 8 !) Information regarding payment of salary
J4s F #"/ L 6ule 8 !" Information regarding payment of interest
J4s F ##" L 6ule 8 #/ Information regarding payment of dividend
6ule 8 #" Particulars to be furnished on interest on securities by
a person other than the (overnment
6ule 8 #! Particulars to be furnished by persons ma;ing
deductions at source
6ule 8 !# Statement of deduction of ta' under the head
OSalariesW where such deduction is not made by or on
behalf of the (overnment
6ule F !* % 6ule !+ L Form of 6eturn
!+A
6ule 8 *# Particulars for depreciation allowance
6ule 8 *- Furnishing of an abstract of the provident fund
account of an employee
6ule F +.B 6eturn% statements% etc.% that may be re<uired to be
furnished
%or4 of #eturn
%or Indi+iduals
IT ##(A Form of return of income under the income ta' ordinance #/.* for
individual and other ta'payers 3Bther than company5
IT #"B Statement of Assets and 7iabilities
IT #"BB Statement under section -+3!53d53i5 and section ." of the Income
Ta' Brdinance% #/.* regarding particulars of life style
%or Co4*an6
IT
##(GA
Form of return of income under the income ta' ordinance #/.* for
Company ta'payers only
Chapter #-
Assess4ent
Contents
Introduction
2'amination conte't
To*ic List
#-.# Introduction to Assessment
#-.! Provisional assessment
#-.) Assessment on correct return
#-.* Assessment under simpli&ed procedure
#-.+ Jniversal self assessment
#-., Ta' on income of certain persons
#-.- Spot assessment
#-.. Assessment after hearing
#-./ Assessment on the basis of report of a Chartered Accountant
#-.#" Best =udgment assessment
#-.## Presumptive ta' assessment on owners of road transport
#-.#! :arious specialised assessments
Introduction
Learning o3<ecti+es
Illustrate the various types of assessment.
Identify the conditions% rules and procedure for di1erent classes of
assessment.
0e&ne the limitation for assessment.

)ractical signi0cance
Assessments of income and ta' liability are very signi&cant for every
assessee. There are di1erent classes of assessment such as provisional
assessment% assessment on correct return% assessment under simpli&ed
procedures% assessment on the basis of return% universal self assessment%
deemed assessment for certain income of certain persons% spot assessment%
assessment after hearing% assessment on the basis of report of a chartered
accountant% best =udgement assessment etc. 2ven there are various
speciali9ed assessments such as assessment in case of discontinued business%
persons leaving Bangladesh% deceased person% income escaping assessment
etc. So there is no way to avoid the assessment for any assessee.
For every classes of assessment there are either some conditions% rules and
procedures speci&ed for assessee and4or for ta' authorities. Some limitation
for assessment also has signi&cance.
Sto* and thin2
0id you realise how important is the assessment for any assessee either
individual or companyN 0o you thin; nobody can avoid assessment in any way
if he is re<uired to be assessed under ta' lawN
.or2ing conte,t
Assessment of ta' is very important for every assessee. An assessee must
re<uire to be assessed in any way. Accountants have a great role to provide the
technical assistance to their client in case of assessment. As there are many
conditions% rules and procedures for di1erent types of assessments%
accountantsK support sometime very signi&cant to complete the assessment of
their clients.
any clients are re<uiring the support for correct assessment from
accountants in every year. 0etailed ;nowledge of accountants on conditions%
rules and procedures for di1erent assessments has the importance in case of
re<uired support for clientsK ta' assessment in many ways.
S6lla3us lin2s
The topics covered in this chapter have the signi&cance for professional study
as you can utili9e the ;nowledge throughout the application level and case
study and also in your practical life.
",a4ination conte,t
",a4 re8uire4ents
In the e'amination% candidates may be re<uired to?
Identify the di1erent classes of assessment.
0e&ne the provisional assessment.
Characterise the assessment on correct return and assessment on the
basis of return.
0e&ne the assessment under which ta' liability shall be deemed as &nally
discharged.
0e&ne the specialty of universal self assessment.
6ecognise the rules and procedures for spot assessment.
Illustrate the assessment after hearing and best =udgement assessment.
0e&ne the assessment on the basis of report of a chartered accountant.
6ecognise the presumptive ta' assessment on owners of road transport
with the rate of ta'.
0e&ne the assessment of &rms.
Typify the assessment in case of change in constitution of a &rm and
constitution of new successor &rm.
Typify the assessment in case of succession to business otherwise than on
death and discontinued business.
0e&ne the assessment in case of partition of Gindu undivided family.
Characterise the assessment in case of partition of persons leaving
Bangladesh% deceased person and income escaping assessment.
Identify the limitation for assessment.

?uestion *ractice
For <uestion practice on these topics go to the suggested answers covering
this chapter.
'F-& ASS"SSM"NT
Section O+er+ie/
There are di1erent classes of assessment of total income and ta' payable.
The conditions% rules and methods of various assessments are di1erent.
It is not easy for any person to escape assessment who is re<uired to be
assessed.
There are certain limitations of assessment.
'F-' Introduction to Assess4ent
Assessment to ta' is an important stage in the whole cycle for ta' collection.
It is used to mean% sometimes% the computation of income% sometimes the
determination of the amount of ta' payable and sometimes the whole
procedure laid down in the Act for imposing liability upon the ta' payer
UC606T6; G!emc!and Ra!das6 /.<- 06T6R 33/2 3/+"PC$:6 The meaning to be
assigned to the word OassessmentW has to be understood in each section with
reference to the conte't in which it has been used 7A6B6 LaAs!man 5!enoy
;606T616 .)- 06T6R ',)2 .3/"5C$:6
'F-2 )ro+isional Assess4entB Sec D'
3#5 The 0eputy Commissioner of Ta'es may% at any time after # Muly of the
year for which the assessment is to be made% proceed to ma;e% in a
summary manner% a provisional assessment of the ta' payable by the
assessee on the basis of the return and the accounts and documents% if
any% accompanying it and where no return has been &led% on the basis of
the last assessment including an assessment under this section.
3!5 In ma;ing a provisional assessment under this section% the 0eputy
Commissioner of Ta'es shall8
a5 rectify any arithmetical errors in the return% accounts and documentsI
b5 allow% on the basis of the information available from the return%
accounts and documents% such allowances as are admissible under the
Third Schedule and any loss brought forward under section ). or )/ or
*#.
3)5 For the purposes of payment and recovery% the ta' as determined to be
payable upon provisional assessment shall have e1ect as if it were
determined upon regular assessment.
3*5 The ta' paid or deemed to have been paid under Chapter :II% in respect of
any income provisionally assessed under sub8section 3#5% shall be deemed
to have been paid towards the provisional assessment.
3+5 Any amount paid or deemed to have been paid towards provisional
assessment under this section shall be deemed to have been paid towards
regular assessmentI and the amount paid or deemed to have been paid
towards provisional assessment in e'cess of the amount found payable
after regular assessment shall be refunded to the assessee.
3,5 $othing done or su1ered by reason or in conse<uence of any provisional
assessment made under this section shall pre=udice the determination on
merit of any issue which may arise in the course of regular assessment.
3-5 There shall be no right of appeal against a provisional assessment under
this section.
'F-9 Assess4ent on Correct #eturnB Sec D2
>here a return or a revised return has been &led under Chapter :III of ITB
#/.* and the 0CT is satis&ed% without re<uiring the presence of the assessee
or the production of any evidence% that the return is correct and complete% he
shall assess the total income of the assessee and determine the ta' payable
by him on the basis of such return and communicate the assessment order to
the assessee within thirty days ne't following?
Provided that8
a5 such return shall be &led on or before the date speci&ed in clause 3c5 of
sub8section 3!5 of section -+I
b5 the amount of ta' payable shall be paid on or before the date on which the
return is &ledI and
c5 such return does not show any loss or lesser income than the last assessed
income% or assessment on the basis of such return does not result in
refund.
'F-: Assess4ent Under Si4*li0ed )rocedureB Sec D2A
>here% an assessee% other than a public company as de&ned in the
Companies Act% #/#)4#//* who has previously been assessed for any
assessment year ended on or before the thirtieth day of Mune% #//+% &les a
return showing income for the income year relevant to the assessment year
commencing on or after the &rst day of Muly% #//+ and ending on or before the
thirtieth day of Mune% #//- and the income shown in such return is higher by
not less than #"P over the last assessed income and has also increased by at
least a further sum of #"P for each preceding assessment year in respect of
which the assessment is pending% the return &led by the assessee shall be
deemed to be correct and complete% and the 0eputy Commissioner of Ta'es
shall assess the total income of the assessee on the basis of such return and
determine the ta' payable by him on the basis of such assessment and
communicate the assessment order to the assessee within thirty days ne't
following% provided8
3a5 he has% at the time of &ling such return% made payment of the ta' on the
basis of the return% or ta;a twelve hundred% whichever is higher% and the
assessment on the basis of such return shall not result in any refundI and
3b5 the net accretion of his wealth% if he is not re<uired to submit statement of
assets and liabilities under section -+3!53b5% along with his disclosed family
e'penses and ta'es paid during the year% shall not e'ceed the income
disclosed for the year and the income or receipt% if any% e'empted from
ta'.
NoteB The assessment under this Section has e'pired on the assessment year
#//-8/..
'F-@ Uni+ersal Self Assess4entB Sec D2BB
>here an assessee furnishes a correct and complete return of income either
manually or electronically% Sub=ect to sub8section 3)5% the 0eputy
Commissioner of Ta'es shall received such return himself or cause to be
received by any other oEcial authori9ed by him and issue a receipt of such
return manually or electronically and the said receipt shall be deemed to be
an order of assessment for the assessment year for which the return is &led.
A return shall be ta;en to be complete% if it is &led in accordance with the
provisions of section -+3!5 or -+3)5 and ta' has been paid as per section -*.
$otwithstanding anything contained in sub8section 3#5 and section /)% the
Board or any authority subordinate to the Board% if so authorised by the Board
in this behalf% may select% in the manner to be determined by the Board% a
number of these returns &led under sub8section 3#5 and refer the returns so
selected to the 0eputy Commissioner of Ta'es for the purpose of audit and
the 0eputy Commissioner of Ta'es shall thereupon proceed% if so re<uired% to
ma;e the assessment under section .) or section .*% as the case may be
Pro-ided that a return o+ inco(e 9led under this section shall not 0e
selected +or audit :here such return sho:s at least t:ent7 per cent
hi/her inco(e than the inco(e assessed or sho:n in the return o+
the i((ediate precedin/ assess(ent 7ear and-
"a$ does not ha-e an7 inco(e :hich is e,e(pted +ro( ta,< or
"?$ does not ha-e receipt o+ 4i+t< or
"c$ does not ha-e loan other than +ro( a 0an= or 9nancial institution<
or
"d$ su( o+ accretion o+ net :ealth and sho:n e,penditure is co-ered
07 the inco(e>
$o <uestion as to the source of investment made by a new assessee deriving
income from business or profession shall be raised% if he shows income at
least not less than twenty &ve percent of the capital invested in business or
profession and pays ta' on such income before &ling return.
The initial capital investment or any fraction thereof shall not be transferred in
any manner or lent out within &ve years from the end of the assessment year
in respect of which assesseDs return of income has been &led under this
section.
'F-E Ta, on inco4e of certain *ersonsB Sec D2C
3#5 Sub=ect to sub8sections 3)5% 3*5% 3+5% 3,5% 3-5% 3.5 and 3/5% notwithstanding
anything contained in any other provisions of this Brdinance% ta' deducted
or collected at source in accordance with the provisions mentioned in sub8
section 3!5 shall be deemed to be the &nal discharge of ta' liability from
that source.
3!5 The provisions referred to in sub8section 3#5 shall be the following% namely8
a5 the amount representing the payments on account of supply of goods
or e'ecution of contract to which ta' is deductible under section +!I
b5 the amount representing the payment on account of royalty% technical
;now8how fee for which ta' is deductible under section +!A3!5I
c5 commission from clearing and forwarding agency business for which
ta' is deductible under section +!AAAI
d5 the amount of the value of the banderols computed for the purpose of
collection of ta' on account of the manufacture of cigarettes under
section +!BI
e5 the amount of compensation against ac<uisition of property under
section +!CI
f5 the amount of salaries of a foreign technician serving in a diamond
cutting industry% for which ta' is deductible under section +!BI
g5 the amount as computed for the purpose of collection of ta' under
section +) in respect of goods imported% not being goods imported by
an industrial underta;ing as raw materials for its own consumptionI
h5 the amount received or receivable from shipping business of a resident
on which ta' is collectible under section +)AAI
i5 the amount received on account of e'port of manpower on which ta' is
deductible under section +)BI
=5 the amount received on account of e'port of certain items on which ta'
is deductible under section +)BBI
;5 the amount received on account of transaction by a member of a stoc;
e'change for which ta' is collectible under section +)BBB I
l5 the amount of auction purchase on which ta' is collectible under
section +)CI
m5 the amount received on account of courier business of a non8resident
under section +)CCI
n5 the amount received from persons engaged in real estate or land
development business on which ta' is collectible under section +)FFI
o5 the amount of remuneration or reward% whether by way of commission
or otherwise payable to an insurance agent on which ta' is deductible
under section +)(I
p5 the amount representing the payment on account of survey by
surveyor of a general insurance company on which ta' is deductible
under section +)((I
<5 the amount of the value of the property as mentioned in section +)G
for the purpose of collection of ta' under that sectionI
r5 the premium received from raising of share at a premium over face
value under section +)7I
s5 income derived from transfer of securities or mutual fund units by
sponsor shareholders of a company etc. under section +)I
t5 the amount on account of winnings referred to in section #/3#)5 on
which ta' is deductible under section ++?
)ro+ided that *ro+isions of su3>section '( shall not 3e a**lica3le
in the case of clause a( of this su3>section /ith res*ect to a
contractor of an oil co4*an6 or a su3>contractor to the contractor
of an oil co4*an6 as referred to in rule 9C of the Inco4e>ta,
#ules= 'CD:-
3)5 Ta' deducted or collected at source from the sources mentioned in sub8
section 3!5 shall not be ad=usted against refund due for earlier year or
years or refund due for the assessment year from any source other than
those mentioned in sub8section 3!5.
3*5 Income from the sources mentioned in sub8section 3!5 shall be determined
on the basis of the ta' deducted or collected at source and the rate or
rates of ta' applicable for the assessment year.
3+5 Income computed in accordance with sub8section 3*5 shall not be set o1
with loss computed under any other source for the assessment year or
with loss of earlier year or years.
3,5 Any income shown or assessed in e'cess of the amount determined in sub8
section 3*5 shall be liable to ta' at the rate or rates applicable for the
assessment year.
3-5 Any amount not admissible as allowances under section )" shall be added
to the income as referred to in sub8section 3*5.
3.5 Income referred to in sub8sections 3,5 and 3-5 shall be ta'able at the rate
or rates applicable for the year after determining income under sub8
section 3*5.
3/5 In addition to the ta' mentioned in this section% in accordance with the
provisions of the Finance Act% if any% the assessee shall pay surcharge.
Ta3le sho/ing the TDS dee4ed to 3e the 0nal discharge of ta,
lia3ilit6
Sl-
W
;ead of TDS
#ef- of
SecP#ul
e
TDS #ate P A4ount
#. Payments for Supply
of (oods% 2'ecution
of Contracts
J4S +! Jp to T;. !""%"""[ $il
From T;. !""%""# to +""%"""[ #P
From T; +""%""# to #%+""%"""[
!.+P
From T; #%+""%""# to
)"%"""%"""[*P
Above T;. )"%"""%"""[ +P
In case of oil supplied by oil
mar;eting companies? up to T;.
!""%"""[ $il% >here the
payments e'ceeds T;. !""%"""[
" .-+P
!. 6oyalty and
Technical Hnow8Gow
Fee
J4S
+!A3!5
#"P
). Clearing and
Forwarding Agents
J4S
+!AAA
#"P
*. Cigarette
anufacturers
J4S +!B ,P of the value of the banderols
+. Compensation
Against Ac<uisition
of Property
J4S +!C !P of the amount of such
compensation% if property situated
within City Corporation%
Paurashava or Cantonment Board%
otherwise #P
,. Collection of Ta'
from a Foreign
Technician Serving
in a 0iamond
Cutting Industry
J4S +!B +P
-. Collection of Ta' J4S +) +P
Sl-
W
;ead of TDS
#ef- of
SecP#ul
e
TDS #ate P A4ount
from Importers and
2'porters
.. Collection of Ta'
from Shipping
Business of a
6esident
J4S
+)AA
+P of total freight received or
receivable in or out of
Bangladesh.
)P of total freight received or
receivable from services rendered
between two or more foreign
countries.
/. 0eduction of Ta'
from Income
0erived on Account
of 2'port of
anpower
J4S +)B #"P
#". Collection of Ta'
from 2'port of
Certain Items
J4S
+)BB
".,P of total e'port proceeds
##. Collection of Ta'
from ember of
Stoc; 2'changes
J4S
+)BBB
".#"P
#!. Collection of Ta' on
Sale Price of (oods
or Property Sold by
Public Auction
J4S +)C +P of the total sale proceeds
#). 0eduction or
Collection of Ta' at
Source from Courier
Business of a $on8
6esident
J4S
+)CC
#+P on the amount of service
charge accrued
#*. Collection of Ta'
from Persons
2ngaged in 6eal
2state or 7and
0evelopment
Business
J4S +)FF 3i5 T;. !%""" per s<uare meter for
building or apartment for
residential purpose situated at
(ulshan odel Town% Banani%
Baridhara% oti=eel commercial
area and dil;usa commercial area
of 0ha;a and TH .%""" per s<
meter building for commercial
purpose. TH. #."" per S\ meter
for residential building situated at
0efense BEcers Gousing Society
30BGS5% 0hanmondi 6esidential
Area% 7almatia Gousing Society%
Jttara odel Town% Bashundhara
6esidential Area% 0ha;a
Cantonment Area% Harwan Ba9ar
Commercial Area of 0ha;a and
Hhulshi 6esindential Area%
Panchlaish 6esidential Area and
Agrabad of ChittagongI and TH
Sl-
W
;ead of TDS
#ef- of
SecP#ul
e
TDS #ate P A4ount
,%""" per S\ meter building used
for commercial purpose.
3ii5 T;. ."" per s<uare meter for
residential building or apartment
is situated in areas other than
areas mentioned in sub8clause 3i5
and TH. !%""" per S\ meter for
commercial building
!P of deed value from September
#% !""/ in case of property
situated in any city corporation%
paurashava or cantonment board.

#P of deed value from September
#% !""/ in case of property
situated in places other than any
city corporation% paurashava or
cantonment board.
#+. Insurance
Commission
J4S +)( +P
#,. 6emuneration or
Fees of Surveyors of
(eneral Insurance
Company
J4S
+)((
#+P
#-. Collection of Ta' on
Transfer% etc. of
Property
J4S +)G 3a5>ithin =urisdiction of 0ha;a%
(a9ipur and $arayangan= districts%
C0A% H0A% 60A% other city
corporations% Paurashava%
Cantonment Board irrespective of
agricultural L nonagricultural land
8 !P
3b5In any area other than the
areas mentioned in clause 3a5 for
other than agricultural land 8 #P.
#.. Collection of ta'
from sale of share at
a premium
J4S +)7 )P
#/. Collection of ta'
from transfer of
shares by the
sponsor
shareholders of a
company listed on
stoc; e'change
J4S +) +P
!". Income from
>innings
J4S ++ !"P
'F-F S*ot Assess4entB Sec D2D and #ule M 9DBB
$otwithstanding anything contained in the Brdinance% where an assessee% not
being a company% who has not previously been assessed under the Brdinance%
carrying on any business or profession in any shopping centre or commercial
mar;et or having a small establishment% the 0eputy Commissioner of Ta'es
may &' the ta' payable by him in such manner and at such rate as may be
prescribed and the receipt obtained for payment of such ta' shall be deemed
to be an order of assessment under section .! USection .!0V.
#ule 9DBB
3a5 An assessee carrying on business within the limits of any City Corporation
shall pay ta' at the following rates8

6ate of ta' per annum
3i5 >here the initial capital does not
e'ceed T;.+%""%"""48 T;.#%!""48
3ii5 If the initial capital e'ceeds T;.+%""%"""48
but does not e'ceed T;.#"%""%"""48
T;.)%+""48
3b5 An assessee carrying on business within the limits of a unicipality of any
0ivisional Gead<uarter or 0istrict Gead<uarter shall pay ta' at the
following rates?8

6ate of ta' per annum
3i5 If the initial capital investment does not
e'ceed T;.+%""%"""48 T;. #%!""48
3ii5 If the initial capital e'ceeds T;.+%""%"""48
but does not e'ceed T;.#"%""%"""48
T;. !%+""48
3c5 An assessee carrying on profession as a lawyer or a doctor for a period
e'ceeding &ve years but not e'ceeding #" years shall pay ta' at the
following rates?8
6ate of ta' per
annum
3i5 >here profession is carried on within the
limits of any City Corporation
T;. !%"""48
3ii5 >here profession is carried on in any other area
T;.#%!""48
The assessee shall% with the help of the 0eputy Commissioner of Ta'es% &ll up
a return of income in form B as prescribed in rule !*3#5% which can be had
from the 0eputy Commissioner of Ta'es% and submit the same to the 0eputy
Commissioner of Ta'es on the spot.
The ta' &'ed under rule ).B shall remain in force for two subse<uent
assessment years% and the receipt of the payment of such ta' shall be
deemed to be an order of assessment under section .! of the Brdinance.
'F-D Assess4ent After ;earingB Sec D9
3#5 >here a return or revised return has been &led under Chapter :III and the
0eputy Commissioner of Ta'es is not satis&ed without re<uiring the
presence of the person who &led the return or the production of evidence
that the return is correct and complete% he shall serve on such person a
notice re<uiring him% on a date to be therein speci&ed% to appear before
the 0eputy Commissioner of Ta'es% or to produce or cause to be produced
before him or at his oEce% any evidence in support of the return.
3!5 The 0eputy Commissioner of Ta'es shall% after hearing the person
appearing% or considering the evidence produced in pursuance of the
notice under section .)3#5 and also considering such other evidence% if
any% as he may re<uire on speci&ed points% by an order in writing assess%
within thirty days after the completion of the hearing or consideration% as
the case may be% the total income of the assessee and determine the sum
payable by him on the basis of such assessment% and communicate the
order to the assessee within thirty days ne't following.
Students should carefully note that for completion of assessment u4s .)3!5%
the 0eputy Commissioner should issue the following notices.
3a5 $otice u4s .)3I5 8 6e<uiring further information about the return
&led
3b5 $otice u4s -/8 Production of boo;s of accounts and various
statements
In case of failure to serve any of the above notices% the assessment made
under this section is rendered defective and unenforceable. If the assessee
&les a revised return before the assessment is completed% the 0CT should
issue fresh notices u4s .)3#5 and -/.
'F-C Assess4ent on the Basis of #e*ort of a Chartered AccountantB Sec
D9AAA
3#5 >here a return or revised return is &led under Chapter :II by an assessee
being a company and the Board has reasonable cause to believe that the
return or revised return is incorrect or incomplete% the Board may appoint
a registered chartered accountant to e'amine the accounts of that
assessee.
3!5 The chartered accountant appointed under sub8section .)AAA3#5 shall
e'ercise the powers and functions of the 0eputy Commissioner of Ta'es as
referred to in section -/ and sections ##)3a5% 3b5% 3c5% 3d5 and 3e5.
3)5 The chartered accountant% after e'amination of the accounts of that
assessee% shall submit a report in writing to the Board alongwith &ndings
within a time as may be speci&ed by the Board.
3*5 Bn receipt of the report referred to in subsection .)AAA3)5% the Board shall
forthwith forward the report to the concerned 0eputy Commissioner of
Ta'es for consideration.
3+5 Bn receipt of the report under sub8section .)AAA3*5% the 0eputy
Commissioner of Ta'es shall serve a notice upon the assessee under
section .)3#5.
3,5 The 0eputy Commissioner of Ta'es shall% after hearing the person
appearing and considering the evidences produced including the &ndings
stated in the report received under section .)AAA3+5 and also considering
the other evidences% by an order in writing% assess within thirty days after
the completion of hearing or consideration% as the case may be% the total
income of an assessee and shall determine the sum payable by the
assessee on the basis of such assessment% and communicate the said
order to the assessee within thirty days from the date of such order.
'F-'& Best Hudg4ent Assess4entB Sec D:
3#5 >here any person fails8
3a5 to &le the return re<uired by a notice under section -- and has
not &led a return or revised return under section -.I or
3b5 to comply with the re<uirements of a notice under section -/ or
."I or
3c5 to comply with the re<uirements of a notice under section .)3#5I
the 0eputy Commissioner of Ta'es shall% by an order in writing% assess the
total income of the assessee to the best of his =udgment and determine the
sum payable by the assessee on the basis of such assessmentI and in the
case of a &rm% may refuse to register it or may cancel its registration if is
already registered% and communicate such order to the assessee within )"
days ne't following USection .*3!5V.
3!5 >here% in the opinion of the Board% a best =udgment assessment made by a
0eputy Commissioner of Ta'es under section .*3#5 shows lac; of proper
evaluation of legal and factual aspects of the case which has resulted in an
arbitrary and in=udicious assessment% the action leading to such assessment
made by the said 0eputy Commissioner of Ta'es shall be construed as
misconduct USection .*3!5V.
'F-'' )resu4*ti+e Ta, Assess4ent on O/ners of #oad Trans*ort
The (overnment has e'empted income from bus% mini8bus% coaster% prime
mover% truc;% tan; lorries% pic;8up van% human hauler% ma'i auto8ric;shaw used
for transportation of goods plying for hire provided the owner of the
vehicle4vehicles pays ta' on presumptive basis at the following rates%
mentioned in S.6.B. $o. !!#874// dated !-8"-8// and S6B $o. !"!874!"""
dated ")."-.!"""?8
A.6ate of presumptive ta' in the case of owners of bus% mini8bus% coaster% prime
mover% truc;% tan; lorry% pic;8up van% ma'i or auto8ric;shaw used for
transportation of goods?8
Categor6 #ate of
Ta,
For each bus having capacity of e'ceeding +! seats T;.
+%"""
For each bus having capacity up to +! seats *%"""
For each air8conditioned bus *%+""
For each mini8bus or coaster whether air8conditioned or not !%-""
Ta'i Cab FAC )%+""
Ta'i Cab F$on AC !%+""
For each prime8mover used as carrier of container +%"""
For each truc; or tan; lorry having capacity of e'ceeding +
tons
*%"""
For each truc; or tan; lorry having capacity of one and half ton
but not e'ceeding + tons
!%+""
For each truc; having capacity up to # and half ton or each
pic;8up van and all ;inds of human hauler% ma'i or auto8
ric;shaw for transportation of goods
-+"
B.6ate of presumptive ta' in the case of owners of bus% mini8bus% coaster% prime
mover% truc;% tan; lorry% pic;8up van% ma'i or auto8ric;shaw used for
transportation of goods after the e'piry of ten years from the date of
registration?8
Categor6 #ate of
Ta,
For each bus having capacity of e'ceeding +! seats T;.
!%"""
For each bus having capacity up to +! seats #%+""
For each air8conditioned bus #%.""
For each mini8bus or coaster whether air8conditioned or not #%"""
For each prime8mover used as carrier of container !%+""
For each truc; or tan; lorry having capacity of e'ceeding +
tons
!%"""
For each truc; or tan; lorry having capacity of one and half ton
but not e'ceeding + tons
#%"""
For each truc; having capacity up to # and half ton or each
pic;8up van and all ;inds of human hauler% ma'i or auto8
ric;shaw for transportation of goods
)""
C.$o <uestion will be raised by the 0eputy Commissioner of Ta'es as to the
source of investment in bus% mini8bus% coaster% prime mover% truc;% tan;
lorry% pic;8up van% ma'i or auto8ric;shaw used for transportation of goods if
additional ta' at !""P of the ta' mentioned in items A and B above is paid
as ta' on the investment at the time of the &rst registration of such
transport.
'F-'2 !arious S*ecialised Assess4ents
Assess4ent of %ir4sB Sec D@
3#5 $otwithstanding anything contained in the Brdinance% where the assessee
is a &rm and the total income of the &rm has been assessed under section
.!% .)% or .*% as the case may be% the ta' payable by the &rm shall be
determined on the basis of the total income of the &rm.
3!5 >henever any determination is made in accordance with the provisions of
section .+3#5% the 0eputy Commissioner of Ta'es shall% by an order in
writing% notify to the &rm8
a5 the amount of ta' payable by it% if anyI
b5 the amount of the total income on which the determination has been
basedI and
c5 the apportionment of the amount of income between the several
partners.
Assess4ent in Case of Change in Constitution of a %ir4B Sec DE
3#5 >here% at the time of assessment of a &rm% it is found that a change has
occurred in the constitution of the &rm% the assessment shall be made on
the &rm as constituted at the time of ma;ing the assessment?
Provided that
3a5 the income of the year shall% for the purpose of inclusion in the total
income of the partners% be apportioned between the partners who% in
such income year% were entitled to receive the sameI and
3b5 when the ta' assessed upon a partner cannot be recovered from him% it
shall be recovered from the &rm as constituted at the time of ma;ing
the assessment.
3!5 For the purposes of this section% there is a change in the constitution of a
&rm8
3a5 where all the partners continue with a change in their respective shares
or in the shares of some of them% or
3b5 where one or more persons who were partners continue to be so with a
change by cessation of one or more partners or addition of one or more
new partners.
Assess4ent in Case of Constitution of Ne/ Successor %ir4B Sec DF
>here% at the time of assessment on a &rm% it is found that a new &rm has been
constituted to succeed the &rm to which the assessment relates and it cannot
be covered by section .,% separate assessments shall be made on the
predecessor &rm and the successor &rm in accordance with the provisions of
section .. relating to assessment in case of succession to business.
Assess4ent in Case of Succession to Business Other/ise than on
DeathB Sec DD
3#5 >here% a person% carrying on any business or profession% has been
succeeded therein otherwise than on death by another person in any
income year% and the successor continues to carry on that business or
profession8
3a5 the predecessor shall be assessed% in respect of the income of the
income year in which the succession too; place% for the period up to the
date of succession% and
3b5 the successor shall be assessed% in respect of the income of the income
year% for the period after the date of succession.
3!5 $otwithstanding anything contained in section ..3#5% where the predecessor
cannot be found% the assessment of the income year in which the succession
too; place up to the date of succession and of the income year or years
preceding that year shall be made on the successor in the li;e manner and
to the same e'tent as it would have been made on the predecessorI and the
provisions of the Brdinance shall% so far as may be% apply accordingly.
3)5 >here any sum payable under this section in respect of the income of a
business or profession cannot be recovered from the predecessor% the
0eputy Commissioner of Ta'es shall record a &nding to that e1ect% and
thereafter the sum payable by the predecessor shall be payable by and
recoverable from the successor who shall be entitled to recover it from the
predecessor.
Assess4ent in Case of Discontinued BusinessB Sec DC
3#5 >ithout pre=udice to the provision of section .-% where any business or
profession is discontinued in any &nancial year% and assessment may be
made in that year% notwithstanding anything contained in section #,% on the
basis of the total income of the period between the end of the income year
and the date of such discontinuance in addition to the assessment% if any%
made on the basis of the income year.
3!5 Any person discontinuing any business or profession in any &nancial year
shall give to the 0eputy Commissioner of Ta'es a notice of such
discontinuance within &fteen days thereofI and such notice shall be
accompanied by a return of total income in respect of the period between
the end of the income year and the date of such discontinuance and that
&nancial year shall be deemed to be the assessment year in respect of the
income of the said period.
3)5 >here% a person fails to give the notice re<uired by sub8section ./3!5% the
0eputy Commissioner of Ta'es may direct that a sum shall be recovered
from him by way of penalty not e'ceeding the amount of ta' subse<uently
assessed on him in respect of any income from the business or profession
up to the date of its discontinuance.
3*5 >here% an assessment is to be made under section ./3#5% the 0eputy
Commissioner of Ta'es may serve8
3a5 on the person whose income is to be assessedI
3b5 in the case of a &rm% on the person who was a partner of the &rm at the
time of discontinuance of the business or professionI and
3c5 in the case of a company% on the principal oEcer of the companyI a
notice to furnish within such time% not being less than seven days% a
return of his total income giving such particulars and information as are
re<uired to be furnished with a return to be &led under section -+ along
with such other particulars% records and documents as may be speci&ed
in the notice.
3+5 The provisions of the Brdinance shall% so far as may be% apply to a notice
under section ./3*5 for the purpose of assessment of ta' as if it were a
notice under section --.
Assess4ent in Case of )artition of a ;indu Undi+ided %a4il6 ;U%(B
Sec C&
3#5 A Gindu family hitherto assessed as a Gindu undivided family shall be
deemed% for the purposes of the Brdinance% to continue to be a Gindu
undivided family e'cept where% and in so far as% a &nding of partition has
been given under this section in respect of that family.
3!5 >here% at the time of an assessment of a Gindu undivided family% it is
claimed by any member thereof that a partition has ta;en place amongst
the members of the family% the 0eputy Commissioner of Ta'es shall ma;e an
en<uiry thereinto after giving notice to all the members of the family.
3)5 Bn the completion of the en<uiry% the 0eputy Commissioner of Ta'es shall
record a &nding as to whether there has been a partition of the =oint family
property% and% if there has been such a partition% the date on which it has
ta;en place.
3*5 In the case of a &nding under section /"3)5 that the partition of the
undivided family too; place after the e'piry of the income year% the total
income of the income year of the undivided family shall be assessed as if no
partition has ta;en placeI and each member or group of members of the
family shall% in addition to any ta' for which he or it may be separately
liable% be =ointly and severally liable for the ta' on the income of the family
so assessed.
3+5 In the case of &nding under section /"3)5 that the partition of the undivided
family too; place during the income year% the total income of the undivided
family in respect of the period up to the date of partition shall be assessed
as if no partition had ta;en placeI and each member or group of members of
the family shall% in addition to any ta' for which he or it may be separately
liable% be =ointly and severally liable for the ta' on the income of that period
as so assessed.
3,5 $otwithstanding anything contained in this section% if the 0eputy
Commissioner of Ta'es &nds after completion of the assessment of Gindu
undivided family that the family has already e1ected a partition% the ta'
shall be recoverable from every person who was a member of the family
before the partitionI and every such person shall