Course: Taxation (A 408)

Overview of Income Tax

Key Words / Outline

Historical Perspective of Income Tax Laws in Bangladesh

Year
1798
186065

Important Events
First income tax in the world was introduced by British Prime Minister William Pitt
the Younger on 03.12.1798 w.e.f. Jan 1799 to defray the Napoleon War
expenditures.
Income-tax in the Indian subcontinent had its origin in 1860 when Mr. James
Wilson, the first Finance Member in India, introduced the Income-tax Bill entitled
An Act for imposing Duties on Profits arising from Property, Professions, Trades
and Offices. The Bill sought to raise additional finances in order to replenish the
revenue deficit caused by the Sepoy Mutiny of 1857. However, the tax levied was
eventually discontinued in 1865.

186778

In 1867, the tax was reimposed under the Licence Tax Act 1867 and after one year,
the tax was imposed in an improvement form as a certificate tax (Certificate Tax
Act 1868). In 1869, the certificate tax was converted into regular income-tax on a
wider coverage of assesses (under the Act IX of 1869). In 1873-74, when there was
a comfortable budgetary surplus, income-tax was altogether abolished.

187886
18861921

Five years later, the tax was again revived in the form of licence taxes (Licence Tax
Act 1877) and continued till the year 1885-86.
In 1886, the Government of India enacted the Indian Income-tax Act, 1886. In
1916, compelled by the necessity to replenish the finances damaged by the War of
1914-18, the Government made some enhancement in the rates of income-tax in the
graduated scale. In 1917, super tax was introduced. In 1918, the Income-tax Act
1886 was substantially amended to consolidate the law relating to income-tax.

Historical Perspective of Income Tax Laws in Bangladesh

Historical Perspective of Income Tax Laws in Bangladesh

Year
197184

Important Events
The declaration of independence of Bangladesh was made on 26 March 1971 and through an
armed struggle, the final victory was achieved on 16 Dec. 1971. The Constitution of
Bangladesh was adopted on 4 Nov. 1972. For the transitional period between 26 March 1971
and the commencement of the Constitution, in the article 150 of the Constitution,
Transitional and temporary provisions are set out in the Fourth Schedule to this
Constitution. As per para 13 of this Fourth Schedule, All taxes and fees imposed under any
law in force in Bangladesh immediately before the commencement of this Constitution shall
continue to be imposed but may be varied or abolished by law.
Thus, from 26.03.1971, income tax and capital gains tax were being collected under the
Income-tax Act, 1922 (Act XI of 1922) and the Income-tax Act 1922 was effective up to 30
June 1984.
Tax Administration:
26 March 1971 to 15 December 1971: The Central Board of Revenue Act, 1924 (IV of
1924), effective from 01 April, 1924; and
16 December 1971 and onwards: The National Board of Revenue Order, 1972 (Presidents
Order No. 76 of 1972), promulgated on 30 June 1972 with retrospective effect from 16
December, 1971.
The Finance Act 1972 repealed section 15BB on tax holiday. The Finance Act 1974 inserted
section 14A for tax holiday.
In 1976, tax on agricultural income was brought under the main income tax law. Under
section 5 of the Finance Ordinance 1976 (Ordinance No. XLV of 1976), the Agricultural
Income-tax Act, 1944 (Ben. Act IV of 1944) was repealed. In section 6 of the Income-tax Act
1922, new head of income was inserted Agricultural income and separate section (section
9A on Agricultural income) was inserted to provide scope and computational procedure.

Historical Perspective of Income Tax Laws in Bangladesh

Year
Important Events
1984 and In pursuance of the proclamation of 24th March 1982 and in exercise of all powers
onwards enabling him in this behalf, the President is pleased to make and promulgate the
Income Tax Ordinance, 1984 (XXXVI of 1984) which came into force on the 1st
July, 1984, to consolidate and amend the law relating to income tax. The Income-tax
Act, 1922 was repealed and replaced. The Income-tax Act, 1922 was effective up to
30.06.1984 and then it was replaced by the Income Tax Ordinance, 1984.
In the Income Tax Ordinance 1984, sections 45 and 46 are for tax holiday.
Taxable income [= Total income less Allowances] was the tax-base up to assessment
year (AY) 1991-1992, except for non-corporate non-resident taxpayers. Thereafter
Total income is the tax-base for all types of assessees.
Some Other Reforms in Income Tax:
LTU-Income Tax, created in 1999
Withholding tax being final discharge of tax liability u/s 82C since AY 1998-99
Universal self-assessment u/s 82BB since AY 2007-08
Self-assessment for non-corporate assessee u/s 83A from AY 1990-91 to AY 2007-08
Self-assessment for corporate assessee u/s 83AA from AY 1997-98 to AY 2007-08
Assessment on the basis of report of a chartered accountant u/s 83AAA from AY
2000-01
On-line return submission for LTU taxpayers since AY 2009-10

Historical Perspective of Income Tax Laws in Bangladesh

Year
Recent
steps
(201012)

Important Events
A Committee was formed by the NBR to prepare the revised
income tax laws on 14.07.2010. First draft (in the name of Direct
Tax Act 2012) prepared and hoisted in NBR website for public
opinion on 15.1.2011. Final draft is submitted by the Committee
on 05.9.2011 as the Direct Tax Code, 2012.
In the Budget Speech of 2012-13 (on 07.06.2012), the Finance
Minister mentioned: the Direct Tax Bill will be tabled before
the House within this calendar year.
Income tax payment procedure amended to facilitate e-payment
(inaugurated on 26.05.2012)
The new Act may be enacted as the Income Tax Act in 2013.

Basic Principles of Charging/Imposing Income Tax: Sec. 16

ASSESSMENT CYCLE under Income Tax Law

TDS [u/s 48-63]
/AIT [u/s 48, 64-73]

Assessee [u/s 2(7)]

Refund of Tax [u/s 146-152]

Preparation of Return
/Certificate [u/s 75, 76-80]

Recovery of Tax [u/s 138-143]

Appeal [u/s 153-159]
/Revision [u/s 120 & 121A]/
Reference [u/s 160-162]

Payment of tax as per

Return [u/s 74]
Tax Payment as per
Notice of Demand [u/s
135]

Submission of Return/
Certificate [u/s 75, 76-80]
Issuance of Notice of
Demand [u/s 135]
Assessment [u/s 91-94]
If further tax liability arises
due to TAX AUDIT

Compliance Obligations under Income Tax Laws

Following are the tax compliance

activities as per various sections the
Income Tax Ordinance 1984:
(1) Obligations as an assessee
(taxpayer):
(2) Obligations as a tax collector on
behalf of tax authority:
(3) Obligations as related persons.

Compliance Obligations under Income Tax Laws

(1) Compliance as an assessee (taxpayer):
Collection of TIN Certificate u/s 184B, 184A
Displaying of TIN Certificate u/s 184C
Advance income tax payment u/s 48, 64-73
Preparation of tax return u/s 75
Payment of tax as per tax return u/s 74
Filing of tax return and statements in prescribed forms u/s 75
Filing of revised return if any omission or incorrect statement in the
previously filed return discovered before the assessment is made u/s
78
Maintenance of accounts and documents: u/s 35
Production of accounts and documents on receipts of a notice from
the DCT: u/s 79
Cooperation with income tax authority during inspection (u/s 114),
survey (u/s 115), enquiry (u/s 116), search and seizure (u/s 117) and
verification regarding deduction or collection of tax at source (u/s
117A)

Compliance Obligations under Income Tax Laws

(1) Compliance as an assessee (taxpayer):
Compliance with various notices:

Notice of Demand u/s 135,

Notice to file return u/s 77,
Notice to produce accounts, statements and documents u/s 79,
Notice to file statement of assets, liabilities and life style u/s 80
[normally applicable for individual assessee],
Notice to attend hearing u/s 83(1) in case of assessment after
hearing,
Notice to inform re-assessment u/s 93(1),
Notice to file statement of assets, liabilities and life style u/s 80
[normally applicable for individual assessee],
Notice to file information u/s 113,
Notice to the transferor, the transferee and the person in
occupation of the immovable property to initiate the proceedings
for acquisition of the immovable property u/s 32(4) and u/r 42 if
the fair market value of the property exceeds the transferors
declared value and others], and so on.

Compliance Obligations under Income Tax Laws

(2) Compliance as a tax collector on behalf of tax
authority:
Collection of Tax Collection Account number u/s
184BB [Application Form prescribed u/r 64C]
TDS, if applicable, and deposit thereof to the
Treasury u/s 48-63
Giving documents of TDS with necessary information
u/s 58,
Filing Return of Withholding Tax u/s 75A quarterly by
15th day of Oct, Jan, April and July] and
Furnishing annual returns in case of payment of
salary (u/s 108), interest (u/s 109) and dividend (u/s
110).

Compliance Obligations under Income Tax Laws

(3) Compliance obligations of related persons of a
business entity.
Appearance on behalf of the assessee at any income
tax proceedings u/s 174,
Legal representative to be treated as deemed to be
assessee in case of a deceased person u/s 92,
Liability in certain cases (as a representative of
another person u/s 95, as an agent of a non-resident
principal u/s 96, 102 and 103A),
Filing a return of the income of any other person for
whom the company is assessable [u/s 75(1B)],
Joint liability in case of director of a private company
(u/s 100), and
Joint liability in case of liquidator of a private company
(u/s 101).

Enforcements/Consequences for Non-Compliance

In case of non-compliance with any of the above issues, a person may
face the following:
different types of enforcements by the tax authority such
as:
inspection of register of companies u/s 114,
survey entering any place of premises u/s 115,
enquiry and production of documents u/s 116,
search any place/vehicle and seizure of any
physical/electronic documents or property u/s 117,
verification of deduction or collection of tax u/s 117A,
best judgment assessment u/s 84
and thereafter
recovery of tax u/s 134-143,
imposition of penalty u/s 123-133, 137
prosecution u/s 134-171,
disallowances of deductions u/s 30,
disallowances of exemptions due to not having
appropriate evidence of the income,
imposition of penalty interest u/s 57 & 73, etc.

Grievance Mitigation Measures: What Taxpayers can do?

A taxpayer may
seek first appeal to the Appellate Joint Commissioner or the
Commissioner (Appeal) u/s 153-156 on payment of 10% of the tax
as determined by the DCT where return was not filed u/s 153(4) or
first & final appeal to the Inspecting Joint Commissioner u/s 157
against the order of Tax Recovery Officer and second appeal to the
Taxes Appellate Tribunal u/s 158-159 on payment of 10% of the
difference between tax as per the first appeal order and the tax
payable as per return u/s 74,
apply for revision u/s 121A subject to waiver of right to appeal, and
go for reference to High Court Division u/s 160-161 (if question of
law arises in the verdict of the Taxes Appellate Tribunal) on payment
of 25% (where tax demand up to Tk. 10 lakh) or 50% (where tax
demand exceeds Tk. 10 lakh) of the difference between the tax as
per Tribunal order and the tax payable as per Return u/s 74 and
reference to Appellate Division u/s 162 (if the High Court Division
allows).
But everything is costly and is subject to not only pecuniary costs, but also
political and psychic costs.

Questions??