Corporate Tax Planning (7203)

MBA, AIS

Including Important Sections of Income Tax Act 2023

Prepared by:

Ishtiaq Mainuddin
Graduate Student (MBA, AIS), University of Dhaka – 1000, Bangladesh
BBA (AIS), DU | CMA (IL II), ICMAB | CA (CL), ICAB
 Table of Contents
SUMMARY OF THE FINANCE BILL, 2023 OF BANGLADESH ........................................................ 4
FEATURES OF INCOME TAX ACT, 2023 ........................................................................................ 5
INITIALS ........................................................................................................................................... 6
CHARGE OF INCOME TAX ............................................................................................................. 6
Section 19: Charge of Additional Tax ............................................................................................ 6
Section 20: Charge of 50% Tax on the Difference of Investment, Import and Export ..................... 6
Section 22: Charge of 10% Tax on Retained Earnings, Reserves, Surplus etc. ............................ 6
Section 23: Charge of 10% Tax on Stock Dividend ....................................................................... 6
INCOME FROM EMPLOYMENT ...................................................................................................... 7
Section 32: Scope of Income from Employment ............................................................................ 7
Section 33: Valuation of Perquisite, Allowances and Benefit ......................................................... 7
Section 34: Determination of Income derived from Employee Share Schemes ............................. 7
Section 78: Tax Rebate on Certain Investment ............................................................................. 8
Part 3 of Six Schedule: Investment for Tax Credit ......................................................................... 8
INCOME FROM BUSINESS ........................................................................................................... 10
Definition – Section 2 (70) ........................................................................................................... 10
Important Sections .......................................................................................................................... 10
Section 45: Scope of Income under the Head ‘Income from Business’ ........................................ 10
Section 46: Special Area of Business Income ............................................................................. 10
Section 49: General Allowable Deduction in Computing Income from Business .......................... 12
Section 50: Special Allowable Deduction in Computing Income from Business ........................... 12
Section 51: Allowable Bad Debt Expense.................................................................................... 13
Section 52: Computation of Special Deduction of Interest or Profit .............................................. 13
Section 53: Special Limit for Allowable Interest ........................................................................... 13
Section 54: General Conditions for Allowable Deduction ............................................................. 13
Section 55: Deduction not Admissible in Certain Cases .............................................................. 13
Section 56: Computation of Special Business Income ................................................................. 15
Miscellaneous ............................................................................................................................. 15
CAPITAL GAIN ............................................................................................................................... 18
Definition – Section 2 (77) ........................................................................................................... 18
Acquisition Cost of the Asset ....................................................................................................... 18
Computation of Capital Gain ....................................................................................................... 18
INCOME FROM FINANCIAL PROPERTY ...................................................................................... 19
Section 62: Scope of ‘Income from Financial Property’................................................................ 19
Exclusion from Scope of 'Income from Financial Asset’ ............................................................... 19

2
INCOME FROM OTHER SOURCES .............................................................................................. 19
Section 67: Special Area of Income from Other Sources ............................................................. 19
SET OFF AND CARRY FORWARD OF LOSSES .......................................................................... 20
Section 70: Set Off and Carry-forward of Losses......................................................................... 20
Section 71: Carry-forward of Depreciation Allowance .................................................................. 20
ACCOUNTING METHOD ............................................................................................................... 22
Section 72: Accounting Method ................................................................................................... 22
Section 73: Submission of Audited Financial Statements for Person or Company Having Turnover
more than 3 Crores ..................................................................................................................... 22
TAX DEDUCTED AT SOURCES .................................................................................................... 22
Section 87-90, 94: Tax Deducted at Sources (TDS) .................................................................... 22
ADVANCE INCOME TAX (AIT) ...................................................................................................... 24
Section 154: Requirement to Pay Advance Payment of Tax........................................................ 24
Section 155: Computation of Advance Tax.................................................................................. 24
INTEREST ON ADVANCE INCOME TAX (AIT) .............................................................................. 24
Section 160: Levy of Interest for Failure to Pay Advance Tax...................................................... 24
Section 161: Interest payable by Government on excess payment of advance tax...................... 24
Section 162: Interest Payable by the Assessee on Deficiency in Payment of Advance Tax......... 25
MINIMUM TAX................................................................................................................................ 26
Section 163: Minimum Tax .......................................................................................................... 26
DEPRECIATION ALLOWANCE...................................................................................................... 28
2. Depreciation Allowance on Assets Used in Business .............................................................. 28
3. Determination of Purchase Price of an Asset .......................................................................... 28
4. Normal Depreciation Allowance............................................................................................... 29
5. Initial Depreciation Allowance .................................................................................................. 29
6. Accelerated Depreciation Allowance ....................................................................................... 29
AMORTIZATION ALLOWANCE ..................................................................................................... 31
SUBMISSION OF RETURN............................................................................................................ 31
Section 166: Requirement to File Return of Income .................................................................... 31
Section 169: General Rules for Filing of Return........................................................................... 32
Section 170: Obligation to File Return under Self-Assessment Mode .......................................... 32
Section 171: Due Date of Submission of Return of Income ......................................................... 32
Section 172: Notice for Filing Return ........................................................................................... 33
Section 174: Computation of Tax in case of Filing of Return after Tax Day ................................. 33
Section 177: Return of Withholding Tax (TDS) ............................................................................ 34
INTERNATIONAL BEST PRACTICES: IAS/IFRS & ITA 2023 ........................................................ 35

3
 SUMMARY OF THE FINANCE BILL, 2023 OF BANGLADESH

1. Personal Income Tax Rates for Individual (including Non-resident Bangladeshi), Partnership
Firm and Hindu Undivided Family:

Level of Income Rate

Up to BDT 3,50,000 Nil
Next BDT 1,00,000 5%
Next BDT 3,00,000 10%
Next BDT 4,00,000 15%
Next BDT 5,00,000 20%
On Balance 25%

2. Tax- Free Income Thresholds for Individuals (including Non-resident Bangladeshi),

Partnership Firms and Hindu Undivided Families:

Tax Exempted Income for BDT

General Tax Payers 3,50,000
Women & Senior Citizens above 65 Years of Age 4,00,000
Physically Challenged Persons 4,75,000
War-wounded Gazette Freedom Fighters 5,00,000
Third Gender Taxpayers 4,75,000
The Income tax-free threshold for parents or legal guardians of a physically
challenged child or dependent will be increased by BDT 50,000 for each
child/dependent.

3. Tax Rate for Non-resident Individuals: 30% (except Non-resident Bangladeshi)

4. Minimum Tax Payable by Individuals:

Area of Residence BDT

Dhaka North City Corporation, Dhaka South City

5,000
Corporation & Chattogram City Corporation

Any Other City Corporation 4,000

Other Areas 3,000

4
 5. Corporate Income Tax:

Tax Rates
Particulars Normal Rate Failure to
Comply with
Conditions
Publicly Traded Company that Issues Shares worth more
than 10% of its Paid-up Capital through Initial Public 20% 22.5%
Offering – IPO
Publicly Traded Company that Issues Shares worth 10%
or less than 10% of its Paid-up Capital through Initial Public 22.5% 25%
Offering – IPO
Non-publicly Traded Company 27.5% 30%
One Person Company (OPC) 22.5% 25%
Publicly Traded Bank, Insurance, Financial Institution
and Merchant Bank 37.5% N/A
Non-publicly Traded Bank, Insurance and Financial
Institution 40% N/A
Private University, Private Medical College, Private Dental
College, Private Engineering College or Private College 15% N/A
Solely Dedicated to Imparting Education on ICT

FEATURES OF INCOME TAX ACT, 2023

→ Conversion of existing Ordinance into simple Bangla.
→ Aggregation & Synchronization of the Provisions relating to similar subjects in the same chapter.
→ Inclusion of Provisions as regards Accounting Procedures, Depreciation and Amortization Rules,
Capital Gains, Income from Intangible Assets, Transfer Pricing, Alternative Dispute Resolution
Provisions, etc., in the proposed Act.
→ Proposal on Legal Provisions regarding Business Restructuring-Mergers & Demergers.
→ Proposal on Startup Sandbox to strengthen the Startup environment in Bangladesh.
→ Inclusion of Provisions to Reduce the Arbitrary Power of the Officers.
→ Proposal on Provision for filing 12 Statements/Returns instead of 29 Statements/Returns to
facilitate business and investment.
→ Inclusion of Best International Practices to Simplify the Tax Compliance Proceedings.
→ Proposal on various rules, including Earnings Stripping Rules (ESR), to prevent tax evasion
through various types of compromise and arrangement.

5
 INITIALS
1. Tax – Its Basics
2. Corporate Tax Planning – Introduction
3. International Tax Planning (Last Lecture)
Find the above lectures here:
https://drive.google.com/drive/folders/1mIK0hMeWwclB0MaRUp1oOra5XjaWLYXT?usp=drive_link

CHARGE OF INCOME TAX

Section 19: Charge of Additional Tax
If any person employs or allows any foreigner to work at his business or profession, without prior
approval of competent authority of the Govt. – Such person shall be charged additional tax @ 50% of
tax payable or BDT5,00,000 whichever is higher.
Example: Company B, a private limited company, employs one foreign employee to work at its factory
who has no valid work permit. Company B will be liable to pay additional tax in the following way:

Particulars BDT BDT

Income 2,00,00,000
Income tax @ 27.5%: 55,00,000
Additional tax @ 50% of tax or BDT 5,00,000 whichever is higher 27,50,000
Total tax to be paid 82,50,000

Section 20: Charge of 50% Tax on the Difference of Investment, Import and
Export
▪ If any assessee has shown any different amount at his income statement deviated from real
import or export value, then 50% tax will be charged on the difference between actual and
shown value.
▪ If any assessee has shown any investment but his actual investment found lower than the
disclosed investment, then 50% tax will be charged on the over-statement of investment.

Section 22: Charge of 10% Tax on Retained Earnings, Reserves, Surplus etc.
If in an income year, the total amount transferred to retained earnings or any fund or reserve or surplus
by any listed company which exceeds 75% of the net income after tax, then tax shall be payable
@10% of the total amount so transferred.

Section 23: Charge of 10% Tax on Stock Dividend

If in an income year, the amount of stock dividend declared or distributed by any listed company
exceeds cash dividend then tax shall be payable @10% on the whole amount of stock dividend.

6
 INCOME FROM EMPLOYMENT
Section 32: Scope of Income from Employment
According to section 32(1), the following income of an assessee is classified and computed under
the head “income from employment”, and chargeable to tax, namely-
a) Any financial receipts, salary and benefits received or receivable from employment;
b) Income earned from employee share scheme;
c) Any untaxed arrear salary;
d) Any amount or benefit received from any past or future employer.

According to section 32(2), income from employment shall not include the following receipt, namely:
a) Any amount received for medical expenses related to heart, kidney, eye, liver and cancer
operations of any such employee except a shareholder director;
b) Conveyance allowances, traveling allowances and daily allowances received and expended
wholly and solely for the performance of the duties of the job.

Section 33: Valuation of Perquisite, Allowances and Benefit

Perquisites, Allowances and Other
Monetary Value
Benefits
▪ Where rent is fully paid by employer or
accommodation is provided by employer,
annual value shall be included to income from
employment.
Accommodation
▪ Where accommodation is provided at a
concessional rate, the difference between the
rent actually paid by employee and annual
value shall be added to the income from
employment.
▪ Up to 2,500 CC, monthly BDT 10,000 shall be
added to the income from employment.
Car facilities
▪ In case of motor car exceeding 2,500 CC,
monthly BDT 25,000 shall be added to the
income from employment
Monetary Value of fair market value of any other
Any other perquisite, allowance or benefit
perquisite, allowance or benefit

Section 34: Determination of Income derived from Employee Share Schemes

1. If shares are received under an employee share scheme, income shall be added to the
‘Income from Employment’ according to A – B in the year in which the share are received,
where –
A = Fair market value of shares on the date of receipt
B = Cost of acquiring the shares

7
 2. Cost of acquiring the shares referred to above shall mean the sum of following cost:
a) If employee paid any amount to acquire the shares;
b) If employee paid any amount to acquire the right or opportunity of share.

3. If the right or opportunity to acquire shares under the employee share scheme is sold or
transferred by the employee, income shall be added to the ‘Income from Employment’
according to A – B, where –
A = Sale or transfer value of right or opportunity to acquire share;
B = Amount paid to for right or opportunity to acquire share.

Section 78: Tax Rebate on Certain Investment

According to section 78 of Income Tax Act, 2023, resident individual and non-resident Bangladeshi
shall be entitling to tax rebate as under:
Lower of:
a) 0.03 X A; or
b) 0.15 X B; or
c) BDT 10 Lacs.
Where,
A = Computed total income excluding tax-exempted income, income subject to reduced tax rate or
minimum tax.
B = Total investment and expenditure of the taxpayer as per Part 3 of Sixth Schedule.

Part 3 of Six Schedule: Investment for Tax Credit

1. Life insurance premium (10% of policy value)/contractual deferred annuity
2. Contribution to RPF by both employer and employee
3. Contribution to welfare fund/group insurance schemes
4. Contribution to superannuation fund
5. DPS (listed banks/financial institutions): Up to BDT 1,20,000 annually
6. Any types of Govt. Securities/Savings certificates: Up to BDT 5,00,000 annually
7. Shares, stock, mutual fund, debenture of any company listed in stock exchanges
8. Contribution to any institute established to commemorate father of nation/liberation war
9. Contribution to Zakat Fund
10. Contribution to any charitable hospital approved by board
11. Contribution to any institute for physically challenged
12. Contribution to Liberation Museum
13. Contribution to Ahsania Mission Cancer Hospital
14. Contribution to Asiatic Society Bangladesh
15. Contribution to icddr, b or CRP, Savar
16. Contribution to any institute for welfare or education purpose approved by Government

8
Example: Ms. Layla is an employee of planning ministry of Bangladesh. From July 1, 2022 to
June 30, 2023 her income and allowance are presented below (yearly) –

Basic salary 600,000 BDT

House rent allowance 300,000 BDT
2 Festival bonuses 100,000 BDT
Medical allowance 12,000 BDT
Bangla Noboborsho Allowance 11,500 BDT
She also has 10,000 BDT income from agriculture and 50,000 BDT Income from rent. Calculate her
taxable income.

Solution: Calculation of Taxable Income

Particulars Taxable Income

Income from Employment:
Basic Salary 700,000 BDT
Festival Bonus 100,000 BDT
Income from Rent 50,000 BDT
Income from Agriculture 10,000 BDT
Total Taxable Income 860,000 BDT

Note: Only basic salary and festival bonuses from income from employment are included in taxable
income of any government or public bodies employee as per S.R.O 370-Act/2015.

9
 INCOME FROM BUSINESS

Definition – Section 2 (70)

→ Any trade, commerce or manufacturing of goods
→ Undertake any risk or endeavor in any trade, commerce or production of goods
→ The exchange of goods or services of any for profit or not for profit entity
→ Any profession
According to Oxford Advanced Learner’s Dictionary, business means the activity of making, buying,
selling or supplying goods or services for money.

Important Sections
Section 45: Scope of Income under the Head ‘Income from Business’
Scope of income under the head ‘income from business’ encompasses the following areas as per
different sections of Income Tax Act, 2023:
1. Any profit and gain from a business carried on or deemed to be carried on by the assessee
during the income year;
2. Income derived from any trade or professional association or other association of like
nature on account of specific services performed for its members;
3. The fair market value of any benefit arising out of or in continuation of any person’s past,
present or potential future business relationship whether convertible into cash or not;
4. Any management fee incurred by any management company including Mudaraba
management company;
5. Any amount due to the lessor bank insurance or financial institution against the lease of any
asset owned by itself or other;
6. Realized gain from currency exchange as per Third Schedule of this Act;
7. Any income received during the income year from any discontinued business.

Section 46: Special Area of Business Income

Income from special area of business income shall be computed as below:
1. If any asset used in the business of the assessee is sold in any income year:
If sale proceeds are more than the Income from Capital Gain = A - B
acquisition value (Purchase Price) Income from Business = B - C

If sale proceeds are not more that acquisition

Income from Business = A - C
value but exceeds written down value (WDV)

2. If in any income year the amount received as insurance, salvage or compensation due to
the abandonment, destruction of any asset being used by the assesses in his business
exceeds the WDV, the said amount shall be included as per the following:

10
 If insurance, salvage or compensation value
Income from Capital gain = A - B
is more than the acquisition value (purchase
Income from Business = B - C
price)
Income from Business = A - C (if A>C)
If insurance, salvage or compensation value
is not more that acquisition value but
Allowable deduction under ‘income from
exceeds written down value (WDV)
business’ = C - A (if A<C)

For the purpose of above –

A = Sale proceeds of the asset or insurance, salvage or compensation value of the asset
B = Acquisition value of the asset
C = Written down value (WDV) of the asset after allowing depreciation under third
schedule

3. If an assessee (an exporter of garments) transfers the export quota or any part thereof
allotted to him by the Government to any person during any income year, such portion of the
export value of the garments exportable against the quota shall be classifiable under the head
“Income from business”.

4. Any interest or profit payable to any person is not paid within 3 years after the end of the
income year in which the deduction is made, the unpaid interest or profit amount shall be
treated as ‘income from business’ in the subsequent income year.

Provided that if any such interest or profit is paid in any subsequent year, the said payment
shall be excluded from the computation of income of the assessee in the relevant income year.

5. If an assessee receives any subsequent income in terms of trading liability in current income
year, the monetary value of that benefit shall be treated as income from business of the
assessee in the income year in which the benefit is received;

If the trading liability or any part thereof remains unpaid within 3 years after the end of the
income year in which the said trading liability has been taken, then the said unpaid trading
liability shall be treated as income from business of the assessee in the income year
following the completion of the said 3 years.

Provided that if any such trading liability treated as income is paid in any subsequent year,
such amount shall be excluded in computing the income of the assessee.

6. If a loss, credit or any expense is deducted in computing income from business in any
income year and if the assessee receives any benefit in respect of such deducted losses,
credit or expense in any subsequent income year, the monetary value of that benefit shall be
treated as income from business in the income year in which the benefit is received.

7. In case of filing return under section 180 of ITA, 2023, any deficiency in the initial capital
shown at any time within 5 years after the year in which the return is filed shall be treated
as income from business.

8. In computing the income of a financial institution, interest or profit income on loans classified
by the Bangladesh Bank as bad loans or doubtful loans shall be credited as profit and loss in

11
 the income year, or in the income year in which they actually received, whichever is earlier.
Such interest or profit shall be included in the income from business of the financial institution.

Section 49: General Allowable Deduction in Computing Income from Business

1. Expenditure on purchase of raw materials, inventory, goods for the purpose of business and
use in business and any depreciated inventory expense;
2. All taxes: duty-taxes, municipal taxes, local taxes, land development taxes or rents and
Government fees for the purpose of business not paid under ITA, 2023 or the Gift Tax Act
1990.
3. Rent, development and maintenance expense payable for land or grounds used for
business purpose;
4. All such expenses, welfare expenses or remuneration which are treated under the head
‘income from employment’;
5. Repair and maintenance expenses;
6. Insurance premium incurred and paid for business purpose;
7. Utilities: Cost of electricity and other services including fuel, internet service, postal and
telecommunications expenses;
8. Goods transportation, clearing and forwarding charges;
9. Sales related commission, brokerage, discount or warranty charge related to expenses;
10. Advertising and camping expenses;
11. Expenditure for employee training;
12. Conference, hotel and accommodation expense of sales representatives;
13. Conveyance and travel expense;
14. Legal, audit and the other professional services expenditure;
15. Entertainment and hospitality related expenses;
16. Realized foreign exchange loss as per Third Schedule;
17. Subscription to any club or trade association, including entry fees for use facilities;
18. Any expenses incurred in connection with travel abroad as a member of a trade delegation
sponsored by the Government;
19. Royalty, technical fees, head office expenses;
20. Payment to Workers Profit Participation Fund (not exceeding 5% of disclosed net
business profit).
21. Other expenses incurred wholly and exclusively for the business purpose.

Section 50: Special Allowable Deduction in Computing Income from Business

1. Following expenses shall be deductible subject to the permissible limits and conditions set out
in the Third Schedule, namely –
(a) General depreciation allowance;
(b) Initial depreciation allowance;
(c) Accelerated depreciation allowance;
(d) Amortization allowance; and
(e) Research and development expense.
2. Loss on sale of an assets.
3. Allowable bad debt expenditure under section 51 of ITA, 2023
4. Allowable interest expense under section 52 and 53 of ITA, 2023

12
Section 51: Allowable Bad Debt Expense
1. In case of individual other than bank and financial institution bad debt expenditure shall be
allowed, if –
(a) Bad debt or part of the bad debt is finalized as uncollectible and in the books of
accounts it is disclosed as written-off;
(b) All reasonable steps are taken for recovery before writing – off;
(c) Bad debt or part of bad debt is treated as income in any income year.
2. In case of bank and financial institution, bad debt expenditure shall be allowed if –
(a) Bad debt or part of bad debt is finalized as uncollectible by International
Accounting Standards (IASs) and the related bank and financial institution
disclosed as written-off in its books of accounts;
(b) All reasonable steps are taken for recovery before writing – off;
(c) Bad debt or part of bad debt is treated as income in any income year.

Section 52: Computation of Special Deduction of Interest or Profit

1. Any payment of interest and profit share on any capital borrowed for the purpose of
business shall be treated as allowable business expenditure.
2. If it is found that any part of the borrowed money has been used for any other non-business
purpose or any part of the assets acquired by the borrowed money has been transferred
outside the business or any other place where the investment is not for business purpose –
interest or profit shall be allowable expense at the rate proportionate to the portion used in
the business purpose.

Section 53: Special Limit for Allowable Interest

1. Interest expense on loan received from related party by a resident person (other than bank
and financial institution) shall be approved as per procedure and limit prescribed by the Board.
2. Above provision shall not be applied in case of interest paid not exceeding BDT 15,00,000.

Section 54: General Conditions for Allowable Deduction

1. If any expenditure is allowed as deduction in any income year which represents in whole or in
part an asset, no further deduction shall be allowable in terms of that asset in the same income
year;
2. In approving any expenditure as allowable under section 49 of ITA, 2023, the commercial
reasonableness of the expenditure shall be considered by considering the following matters,
namely –
(a) If the expenditure is incurred for the purpose of earning income from business;
(b) If the expenditure incurred is revenue in nature; and
(c) If the expenditure is reasonable in the circumstances.

Section 55: Deduction not Admissible in Certain Cases

According to section 55 of ITA, 2023, following deductions shall not be allowable in imputing income
from business, namely –
1. Any expenditure or payment related to which the provisions of Part 7 of ITA, 2023 have not
been duly complied with;

13
2. Interest, salary, commission or gratuity paid to any partner of the firm or any member of
the association;
3. Payment of any commission or discount to a shareholder director;
4. Any amount in excess of BDT 1,000,000 paid to an employee in terms of perquisites as
defined in section 32;
Provided that nothing shall apply in respect to the payment of wages to employees for
implementing the recommendations of Wage Board constituted by the Government, by
notification in the Government Gazette, on the basis of Government decision.
5. Royalty, license fee, technical service fee, technical know-how fee, technical assistance
fee or any fee of similar nature: Amount exceeding 10% of the net business profit disclosed
in the financial statements.
6. Head office or intra-group expenditure incurred by any such company not registered in
Bangladesh: Amount exceeding 10% of net business profit disclosed in the financial
statements;
7. Foreign travel: Amount exceeding 0.5% of business turnover disclosed in the financial
statements.
It shall not apply if the assessee travels abroad for rendering any service to the Government
or if evidence is produced in support of the additional amount is commercial reasonable.
8. Entertainment expense:
a. 4% of first 1,000,000 of assessed business income before charging entertainment
expense;
b. 2% of remaining assessed business income before charging entertainment expense.
9. Distribution of free sample exceeding the following limit (slab rate):
% of Turnover
Assessed Turnover Pharmaceutical Food, cosmetics
Other industry
industry and toiletries
Up to BDT 5 crore 2% 1% 0.50%
Exceeding BDT 5 1% 0.50% 0.25%
crore, but up to BDT
10 crore
Exceeding BDT 10 0.50% 0.25% 0.10%
crore

10. Promotional expenses (excluding advertising expenses): Amount exceeding 0.5% of

business turnover.
11. Any such amount treated as ‘Income from employment’ or ‘Income from rent’ of the
employee is paid through other than banking channel;
12. Payment of any amount in respect of raw material exceeding BDT 500,000 paid through
other than banking channel (For example, RBH purchased raw materials amounted BDT
575,000 without banking channel. So, the amount will be added in special business income,
not BDT 75,000).
13. In case of all types of expenses than (11) and (12) above if any amount exceeding BDT
50,000 is paid though other than banking channel;

14
 14. Any amount paid to any such person who is required to submit proof of submission return
but fails to collect proof of submission return;
15. Any expenditure in capital or personal nature;
16. Any liability which is not specifically identifiable;
17. All expenditure not related to business activities;
18. Any depreciation and interest for Right of Use as per IFRS. But in case of rent
development and maintenance expense payable for the land or premises used for business
purpose shall be allowable expense;
19. Impairment loss;
20. Any amount paid to unapproved fund;
21. All unsubstantiated expenses if the accounts were not maintained in prescribed manner;

Section 56: Computation of Special Business Income

1. All expenditure disallowed under Section 55 shall be treated as ‘special business income’.
2. Any expenditure, adjustment of losses, carry-forward and allowance under Third Schedule
shall not be allowed against any income treated as ‘special business income’ (Section 55) or
‘special area of business income’ (Section 46).

Miscellaneous
In certain cases, income from business or profession is assessed as a certain percentage of total
income. These are:
1. 3% of the export value of the garments exportable against the export quota in case the
export quota is transferred to other (Rule 30A)
2. 40% of the income derived from the sale of tea and rubber grown and manufactured by the
seller in Bangladesh (Section 40)

15
Critical Evaluation of the Distinctive Features of Section 55 of
ITA 2023 over Section 30 of ITO-1984, Their Changes and
Significance

Previous allowable limit as

Type of expense New allowable limit per ITA 2023
per ITO, 1984
Royalty, technical For first three years since
services fee, technical commencement of operation:
know-how fee or 10% of net profit
10% of net profit
technical assistance
fee or any other fee of For subsequent years:
similar nature 8% of net profit

0.5% of turnover;
Overseas travel the allowable threshold may be
0.5% of turnover
expense increased if the commercial rationality
of the said expense can be proven
Included under “promotional”
Fully allowed No longer falls under
Advertising expense expense; allowable limit was
“promotional” expense
0.5% of turnover
Salary expense is allowed as
Salary expense No cash payment is allowed cash payment up to BDT
20,000
Amortization of capital expenditure will
Capital expenditure
be allowed at the rate of 10% on an No clear provision
(i.e., CAPEX)
annual basis.

Depreciation and interest expense

Right-of-use assets charged under IFRS 16 will be allowed No specific provision
per actual payment.

Impairment loss (e.g., IAS 36) will be

Impairment loss No specific provision
disallowed
Provisions under IAS Any estimated liability (e.g., provision
No specific provision
37 under IAS 37) will be disallowed
Realized foreign
Allowed/tax deductible No specific provision
exchange loss
Workers’ Profit
Contribution paid by employer up to 5%
Participation Fund No specific provision
of net profit will be allowed.
(WPPF) expense

16
Example: The Audited Profit & Loss Statement of the Genex PLC and Phoenix PLC for the year
ended 30 June,2022 is as follows:

Particulars Genex PLC Phoenix PLC

Business Income/(Loss) 52,00,000 (32,80,000)
Royalty Expenses 7,00,000 4,50,000
Entertainment Expenses 6,00,000 5,00,000

For both the companies, Calculate the Maximum Amount of Allowable Royalty Expenses and
Entertainment Expenses.
Solution:
Genex PLC
Royalty Expenses:
Allowable Royalty Expenses = 52,00,000 × 10%
= 5,20,000 BDT
Notes: Royalty is allowed up to 10% of disclosed net profit as per section 55 (uma).

Entertainment Expenses:
Business Income before Entertainment Expenses = 52,00,000 + 6,00,000
= 58,00,000 BDT

Amount Tax Rate Tax (BDT)

First BDT 10,00,000 4% 40,000
For Balance (58,00,000 - 10,00,000) = BDT 48,00,000 2% 96,000
Maximum Allowable Entertainment Expenses 1,36,000

Notes: As per Section 55(ja) exceeding amount to the limit stated below as entertainment expense:
a. 4% of first 1,000,000 of assessed business income before charging entertainment expense;
b. 2% of remaining assessed business income before charging entertainment expense.

Phoenix PLC
Royalty Expenses:
Royalty is allowed up to 10% of disclosed net profit. As disclosed net profit is negative so royalty also
not allowed as per section 55 (uma).
Entertainment Expenses:
As there is no taxable profit, no entertainment will be allowed as per section 55 (ja).

17
 CAPITAL GAIN

Definition – Section 2 (77)

A capital gain arises only due to the transfer of capital asset. Capital asset means –
(a) Any nature or kind of property held by the assessee;
(b) Any business or undertaking as a whole or as a unit;
(c) Any share or stock.

Acquisition Cost of the Asset

→ Acquisition cost of an asset shall be the sum of purchase price, any expense which are solely
related to the transfer of ownership of the asset and any development expenses.
→ In case of gift, donation, bequest, succession, inheritance or under transfer of trust/any
distribution asset at liquidation or separation of firm, association of firm and Hindu undivided
family – FMV on the date of acquisition of ownership of the asset.

Computation of Capital Gain

Section 58 of ITA, 2023 states that capital gain shall be computed as the difference between the sale
or transfer price of the asset in the open market and acquisition cost of the asset. Tax rate is 15% in
case of Capital Gain.

Example: Taz Company PLC constructed a factory building in the year 2020 having a total cost of
BDT 5,00,000. It is insured for BDT 5,50,000. In the month of January 2021, it was destroyed by fire.
Till the year 2022-23 assessment year, depreciation of the building was charged at BDT 1,50,000.

Under the following conditions, find out the Capital Gain and Business Gain
• If 100% of insured amount could be recovered from insurance company.
• If 60% of insured amount could be recovered from insurance company.

Solution:

If 100% insured amount could be recovered from insurance company:

Written Down Value (WDV) = Cost – Accumulated Depreciation

= 5,00,000 – 1,50,000
= 3,50,000 BDT

Total Gain/(Loss) = Recoverable Amount – WDV

= 5,50,000 - 3,50,000
= 2,00,000 BDT

Capital Gain = Recoverable Amount – Cost

= 5,50,000 - 5,00,000
= 50,000 BDT

Business Gain = Total Gain - Capital Gain

18
 = 2,00,000– 50,000
= 1,50,000 BDT

If 60% insured amount could be recovered from insurance company:

Total Gain/(Loss) = Recoverable Amount – WDV

= (5,50,000 × 60%) - 3,50,000
= 3,30,000 - 3,50,000
= (20,000) BDT

Business Gain/(Loss) = Total Gain/(Loss)

= (20,000) BDT

INCOME FROM FINANCIAL PROPERTY

Section 62: Scope of ‘Income from Financial Property’
1. Interest, profit or discount of the Government or Government approved securities;
2. Interest, profit or discount of debentures or other securities issued by or on behalf of a local
authority or a company;
3. Interest or profit receivable from following sources, namely –
a) Deposit into any bank or financial institute called whatever name;
b) Any financial product or scheme;
4. Dividend.

Exclusion from Scope of 'Income from Financial Asset’

Capital gain arising from transfer of financial asset shall not be treated as ‘Income from financial
asset’. Such capital gain shall be treated as ‘Income from capital gain’ under section 57 of Income
Tax Act, 2023.

INCOME FROM OTHER SOURCES

Section 67: Special Area of Income from Other Sources
1. Where any amount is found credited in the books maintained by an assessee for any income
year and the assessee offers no explanation about the nature and source of that amount, or
the explanation offered is not satisfactory in the opinion of the DCT, this credited amount shall
be his income for that income year classifiable under the head “Income from other sources”.
2. Where any benefit or advantage is derived by an assessee during any income year in terms
of cancellation of indebtedness whether convertible into money or not, the money value of
such advantage or benefit shall be classifiable under the head “Income from other sources’
for that income year.
Provided that above provision shall not apply in the following cases:

19
 → Waiver of loan or interest to natural persons granted by any financial institution registered
under the Scheduled Bank or Financial Institution Act, 1993;
→ Benefit related to any margin loan or waiver of interest not exceeding BDT 1,000,000 by
a registered merchant banker and portfolio manager or stock broker in light of the
Bangladesh Securities and Exchange Commission Act, 1993 or the rules made against
an individual assessee investment in any securities traded on the stock exchange.
3. Where a non-listed company receives paid up capital from any shareholder during any income
year in any other mode excepting by crossed cheque or bank transfer, the amount so received
as paid up capital shall be classifiable under the head "Income from other sources".
Provided that this provision shall not apply if any asset or service other than cash are
received as paid-up capital in accordance with the Companies Act, 1994.
4. Where any company assessee borrows any amount form any other person other than through
banking channel, such amount shall be treated as ‘Income from other sources’ in the income
year in which the loan was received.
Provided that where such loan or any part thereof is repaid in any subsequent year, the amount
so repaid shall be excluded from the income in the said income year.

SET OFF AND CARRY FORWARD OF LOSSES

Section 70: Set Off and Carry-forward of Losses
1. The assessed loss of any head in an assessment year can be set off against any other head.
2. No loss mentioned in the below table can be adjusted against income of head or source other
than from that head or source, namely:

Source and Head of Loss As can be adjusted

Capital Loss Only with capital gain
Business Loss Only with income from business
Only with income from speculation
Loss from Speculation Business
business
Loss from Tobacco Business Only with income from tobacco business

3. The loss of any source or head to which tax is exempted, reduced tax rate or minimum tax
is applicable shall not be set-off or carry-forward.
4. The assessed loss of a firm or AOP shall be set-off only against the assessed income of the
firm or AOP and shall not be set-off against the income of any partner of the firm or AOP.
5. If the assessed loss of any head in an assessment year is not fully set-off with the income of
any other head or source of that year, set-off can be given in the next 6 successive years.

Section 71: Carry-forward of Depreciation Allowance

1. If any depreciation allowed under this Act is not fully charged as expenditure against the gross
income of an assessment year, it shall be added to the depreciation of the next assessment
year.

20
2. No depreciation allowance shall be carry-forward in case of failure to comply with any
provision of this Act.
3. Carry-forwarded loss shall be adjusted before charging carry-forwarded depreciation.
4. Allowable depreciation can be carry-forward till fully adjusted.

Example:
The following particulars of income of Mr. Adnan Mansur Khan are available for the assessment
year 2022-2023:

Income from Rent BDT 1,20,000

Income from Agriculture BDT 20,000
Business Income BDT 50,000
Income from Capital Gain BDT 70,000
The following sums have been brought forward from the preceding year:
Business Loss BDT 80,000
Loss from Agriculture BDT 60,000
Capital Loss BDT 90,000

Calculate his total income after considering provisions relating to set off and carry forward of losses.

Solution:
Calculating Total Income after Considering Provisions relating to Set off and Carry Forward of Losses:

Taxable Carry
Particulars Set off
Income Forward
Income from Rent 1,20,000
Income from Agriculture 20,000
Income Available to Set off Losses from Agriculture 1,40,000 1,40,000
Loss from Agriculture (60,000)
Set off: Losses Carried Forward from Earlier Year (60,000)
Income available After Set off loss from Agriculture 80,000 80,000

Income from Capital Gain 70,000 70,000

Capital Loss (90,000) (90,000)
Income Available After Set off Capital Loss - (20,000)
Carried Forward 20,000

Business Income 50,000 50,000

Business Loss (80,000) (80,000)
Income Available After Set off Business Loss - (30,000)
Carried Forward 30,000

Total Income After Set off & Carry Forward of Losses 80,000

21
 ACCOUNTING METHOD
Section 72: Accounting Method
1. The income of an assessee is computed regularly applied accounting methods, complying
with other provisions of the act.
2. If an assessee thinks it reasonable that a change is necessary in accounting methods, he or
she can apply to DCT for that change and DCT shall approve necessary changes to reflect
the true income after getting application from the assessee.
3. Board shall, by by-law, sets standard to evaluate accounting methods for any business, any
class of business or the income of any sources.
4. A company can prepare its books of accounts and financial statements in accordance with
IASs, IFRSs and other relevant laws of Bangladesh, not affecting any provisions of the act.

Section 73: Submission of Audited Financial Statements for Person or Company

Having Turnover more than 3 Crores
If an assessee have a turnover of any company, firm, AOP, fund or long-term contracts exceeding
BDT 3 Crores, have to submit its income tax return along with a copy of audited income statement
and balance sheet attested by a Chartered Accountant by stating that;

→ All the books of accounts and financial statements have been prepared and submitted in
accordance with IAS/IFRS/applicable laws and regulations of Bangladesh in that income year.
→ Applicable standards have been followed, provided by the Board from time to time.
→ All the books of accounts and financial statements have been audited as per ISA.

TAX DEDUCTED AT SOURCES

Section 87-90, 94: Tax Deducted at Sources (TDS)
Section Source of Income Rates
87 Remuneration of Members of Parliament Average Rate
88 Receipt from Worker profit participant fund 10%
89 Payment to contractor, supplier etc. 10%
90 Payment for services 20%
10%
→ Marketing & Distribution: 1.5%
→ Companies other than Oil
94 Commission, discount, fees, incentives etc. Company: 5% of selling price if
the price is less than retail price.
→ Tobacco: 3% of the differences
between selling price and retail
price.
123 Collection of tax from exporter 1%

22
Example: Snehasish Mahmood & Co. Chartered Accountants (SMAC) works as Statutory Auditor for
Banglalink Telecommunication PLC. SMAC did the audit for Banglalink for the year 2022-2023. They
charged 7,00,000 BDT as an audit fee. The VAT rate is 15% charged by the government. Besides,
Banglalink needs to pay a 20% withholding tax. Now show the journal entries for both taxes and what
is the implication of this event in the new ITA 2023.

Solution:
Banglalink Telecommunication PLC
1. Audit Fee Expenses: 8,05,0001
Audit Fee Expenses Dr. 8,05,000
Bank Cr. 6,65,000
Withholding Tax Payable2 Cr. 1,40,000

2. Withholding Tax Payable Dr. 1,40,000

Bank Cr. 1,40,000

Snehasish & Mahmood Co. Chartered Accountants (SMAC)

1. VAT Current Account Dr. 1,05,000
Bank Cr. 1.05.000

2. Bank Dr. 6,65,000

Advance Tax Dr. 1,40,000
Service Revenue Cr. 7,00,000
VAT Current Account Cr. 1,05,000

1
Notes: Calculation of VAT: 7,00,000*15% or 1,05,000 BDT
Audit Fee: 7,00,000+1,05,000 or 8,05,000 BDT
2
Withholding Tax: 7,00,000*20% or 1,40,000 BDT

SMAC will get the audit fee from Banglalink through invoice. If SMAC pays VAT 1,05,000 BDT
previously, then they will collect it from Banglalink in total 8,05,000 BDT. If Banglalink pays withholding
tax for SMAC, then they will pay the SMAC 5,60,000 BDT in TR-6 form within 14 days.

23
 ADVANCE INCOME TAX (AIT)
Section 154: Requirement to Pay Advance Payment of Tax
Advance Tax shall be payable by an assessee during each financial year by way of advance payment
of tax in accordance with the provisions of this act, if the total income of the assessee for the latest
income year exceeds BDT 6,00,000 in terms of which he has been assessed by way of regular or
provisional assessment under the Act.

Nothing shall apply in the following cases:

▪ Taxpayers earns not more than BDT 800,000 from cultivation of land only;
▪ Income classifiable under the heads ‘capital gains’ and ‘one-time income’ on which advance
tax is payable.

Section 155: Computation of Advance Tax

An assessee shall pay advance tax in a financial year an amount equal to the tax payable on his total
income of the latest income year assessed on regular or provisional minus the amount of tax deducted
or collected at source.

*** Advance tax shall be payable in four equal instalments (each for 25% of the payable
amount) on the fifteenth day of September, December, March and June of the financial year
for which the tax is payable.

*** In case, taxpayer failed to make full or part of any instalments, he shall pay next instalments
on adjusting the earlier unpaid amount. Where taxpayer estimate that the advance tax amount would
be lower in an income year, then he shall submit estimates to DCT and make necessary adjustment
of the advance tax payment based on estimates.

INTEREST ON ADVANCE INCOME TAX (AIT)

Section 160: Levy of Interest for Failure to Pay Advance Tax
An assessee is required to pay advance tax, but it is found in the regular assessment that advance
tax has not been paid in accordance with the provisions of this act, a simple interest thereon calculated
at the rate and for the period specified in section 162.

Section 161: Interest payable by Government on excess payment of advance

tax
The Government shall pay a simple interest of 10% annually on the amount by which the aggregate
amount of advance tax paid by an assessee during a financial year exceeds the amount of tax payable
as determined on regular assessment. Interest shall be paid for the period of First day of July of the
assessment year to the date of regular assessment in terms of the income of that year Two years
from the said first day of July, whichever is shorter!

24
Section 162: Interest Payable by the Assessee on Deficiency in Payment of
Advance Tax
In any financial year, if an assessee has paid advance tax on the basis of his own estimate and the
advance tax so paid plus the tax deducted at source under this act is less than 75% of the amount of
tax payable by him as determined on regular assessment, the assessee shall pay a simple interest
of 10% annually on the amount of the difference between the tax so paid and deduction falls
short of 75% of the assessed tax.

*** Interest shall be 50% higher if assessee failed to submit return on or before the Tax Day.

Interest shall be paid for the period of first day of July of the assessment year to the date of regular
assessment in terms of the income of that year or two years from the said first day of July, whichever
is shorter!

Where the amount on which interest was payable under this section has been reduced due to appeal,
revision or reference, the amount of interest payable shall be reduced accordingly. If any excess
interest paid, it shall be refunded along with the amount of tax that is refundable.

Example: Mr Safin is a businessman. For the assessment year 2021-22, his latest assessed income
is BDT 1,000,000. But he wants to pay advance tax for the year on the basis of his own estimate that
amounts to BDT 800,000. Regular tax rate is 30%. Regular assessment for the assessment year
2021-22 was completed on February 28, 2022 resulting BDT 1,200,000 profit including BDT 80,000
from capital gain and BDT 220,000 from agricultural income. Calculate the amount of excess or
shortfall in payment of advance tax and explain the consequences.

Solution:

Calculation of the amount of excess or shortfall in payment of advance tax and the consequences:

Particulars Amount Amount

Income as per regular assessment BDT 12,00,000
Less: Capital gain and agriculture income BDT 300,000
Income eligible to apply advance tax is BDT 900,000
Tax liability as per regular assessment (30% of taka 900,000) BDT 270,000
Advance tax paid (30% of taka 800,000) BDT 240,000
Shortfall BDT 30,000

75% test: The deficit or shortfall is required to be tested for charging simple interest.

75% of tax liability as per regular assessment (75% of BDT 270,000) BDT 2,02,500
Advance tax paid actually BDT 240,000

Since advance tax actually paid is greater than tax liability as per regular assessment, there is no
question of charging simple interest. The only requirement of the assesse is to pay the shortfall of
BDT 30,000. If the amount of tax paid is less than the tax liability as per regular assessment, he will
have to pay the unpaid amount plus a simple interest @10%.

25
 MINIMUM TAX
Section 163: Minimum Tax
1. Tax deducted from the following sources (TDS) shall not be minimum tax:
▪ TDS from a contractor/subcontractor/dealer/agent of an oil company/oil marketing
company/oil refinery company and any company engaged in gas transmission or
distribution excluding petrol pump station under section 89.
▪ TDS from import of raw materials by an industrial undertaking except cement, iron or iron
product, ferro alloy products, perfumes, carbonated beverage and toilet waters
companies.

2. Income from below sources shall be final settlement of taxes:

▪ Interest on fixed and savings deposits
▪ Income from savings certificates
▪ Export cash subsidy

3. Minimum tax for an individual having gross receipt of BDT 3 crores or more, or a firm/AOP
having gross receipts exceeding BDT 50 lakh, or a company shall be as follows:

Rate of Minimum Tax

Classes of Assessee
(% of gross receipts)
Manufacturer of cigarette, bidi, chewing tobacco, smokeless tobacco, or 3%
any other tobacco products
Carbonated beverage 5% (Now 3% by SRO)
Mobile phone operator 2%
Natural person except manufacturer of cigarette, bidi, chewing tobacco, 0.25%
smokeless tobacco, or any other tobacco products
Any other cases 0.60%
An industrial undertaking engaged in manufacturing of goods for the first 0.10%
three years since commencement of production

4. Where the assessee has an income from any sources that is exempted from tax or is subject to
a reduced rate tax, the gross receipt from such source shall be shown separately, and minimum
tax shall be calculated as follows:
▪ Minimum tax for receipts from the sources that are subject to regular tax shall be calculated
as per rates on gross receipt mentioned above;
▪ Minimum tax for receipts that are exempted or subject to reduced rate shall be calculated
by applying rates on gross receipt as reduced in proportion to the exemption or the
reduced rate of tax.

Minimum tax for the taxpayer shall be aggregated of the tax computed for both types of receipts.

Example: Naim PLC, a food manufacturing company, had gross return of BDT 2,00,00,000 at 30th
June, 2023. That includes, return from a source BDT 55,00,000 where applicable tax rate is 30%,
Export amount was BDT 95,00,000 on which tax applicable at 10%, Dividend earning from an
investment is 1500000. The company sold machineries of BDT 50,00,000 (acquisition price was
BDT40,00,000). What will be the tax liability for the company? (Mention related section)

26
Solution:

Minimum tax on gross return at regular rate:

Total gross return for regular rate = (55,00,000+15,00,000+10,00,000) or BDT 80,00,000

According to the section 163 (5), minimum tax should be = (80,00,000*0.6%) or BDT 48,000

Minimum tax on gross return on which reduced rate applicable:

Return from export = BDT 95,00,000

According to section 163 (5), minimum tax should be = (95,00,000*0.6%) * (10/30)

= BDT 19,0000

So, according to section 163 (5), total minimum tax should be = (48,000 + 19,000) or BDT 67,000

Example: British American Tobacco Bangladesh Company Limited (BATBC) showed annual turnover
of BDT 7,50,00,000 and disclosed profit in the financial statements is BDT 40,00,000. How will
minimum tax be computed?

Solution:
(a) Minimum tax on income from business = Profit × 45%
= 40,00,000 × 45%
= 18,00,000 BDT

(b) Minimum tax on gross receipts = Gross receipts × 3%

= 7,50,00,000 × 3%
= 22,50,000 BDT

Here, Annual Turnover is considered as the gross receipts.

Minimum tax for BATBC shall be the higher of (A) & (B) = 22,50,000 BDT
Notes:

• Corporate Tax Rate for Cigarette, Zarda, Bidi, Gul or any other tobacco product manufacturing
companies is 45%.
• Minimum tax on gross receipts for Manufacturer of Cigarettes, Bidi, Chewing Tobacco,
Smokeless Tobacco or Any Other Tobacco Products is 3% of gross receipts.

27
 DEPRECIATION ALLOWANCE

2. Depreciation Allowance on Assets Used in Business

Any depreciation allowance for the relevant income year on any asset used by an assessee and
owned by him for business purpose shall be granted on the basis, rates and limitation, qualification
and conditions set out in Part 1 of Third Schedule.

1. Where the asset was not used fully in the business of an assessee, depreciation allowance
shall be allowed proportionately.
2. Depreciation allowance shall not be allowed on any asset if the return of the assessee does
not reflect a claim that the asset is used for business purpose.
3. Where the asset is not fully used for business purpose, asset shall be deemed to have been
fully used for business purpose in computing the depreciated value of the asset (WDV).
4. The total deduction allowed against any asset shall not exceed the purchase price of said
asset.
5. Depreciation of asset owned by a particular leasing company (any leasing company, banking
company, or any financial institution which is engaged in leasing business) and leased to any
other person shall be deductible only against the lease rental income arising from such
operating lease.
6. No allowance shall be allowed to the lessor in respect of any such machinery, plant, vehicle
or furniture which has been given to any lessee on finance lease.
7. No allowance shall be admissible under this part if information or documents as prescribed
by the Board or required by DCT was not submitted at the time of filing return, or such assets
was not used in the relevant income year.

3. Determination of Purchase Price of an Asset

1. The purchase price of any motor vehicle shall be considered not more than BDT 3,000,000 if
said depreciation allowance is allowable for any passenger motor vehicle other than a bus or
minibus used for the transportation of students, teacher or employee of the assessee.
2. Any allowance, subsidy, rebate, or commission and assistance (other than interest-
bearing or interest fee loan) received by the assessee from the Government or any authority
or person shall be excluded in computing the purchase price of any asset.
3. Where the assessee acquires any used asset (other than motor vehicle), the acquisition cost
of the said asset shall not exceed its fair market value.
4. Where the acquisition of an asset involves foreign currency loan or foreign currency
engagement, the acquisition cost of said asset shall be computed after making the following
adjustments, namely
▪ Adding exchange rate fluctuation loss or exchange rate hedging expense;
▪ Deducting the exchange rate fluctuation gain.

28
4. Normal Depreciation Allowance
Classification of assets Rate (% of the written down value)
Building (unless otherwise specified in this table) 5%
Factory building, Furniture and fittings, Office
10%
equipment, machinery, Plant and equipment
Communication, navigation aid and other equipment 5%
Computer hardware including printers, monitors and
25%
ancillary items, professional and reference books

5. Initial Depreciation Allowance

Initial depreciation shall be allowed in respect of the income year in which the asset is first used
by an assessee for his business purpose or in the income year in which commercial production is
first stated, whichever occurs later.
Rate of initial depreciation shall be as below:

Particulars Rate (% of the acquisition value)

In the case of building 10%

In the case of machinery or plant other than ships or

25%
motor vehicles not plying for hire

Notes: Initial depreciation allowance will not be applicable in case of any motor vehicle not plying
for hire, and any machinery or plant which has previously been used in Bangladesh.

6. Accelerated Depreciation Allowance

1. Where machinery or any asset owned by the establishment is used in an industrial
undertaking situated in Bangladesh, accelerated depreciation allowance shall be allowed
at the rate specified under para 6 subject to the limits and conditions set out in part 1 of Third
schedule.
2. Accelerated depreciation allowance shall be allowed up to 3 years from the year of
commencement of commercial production of the industrial undertaking.
3. Accelerated depreciation shall be calculated on the purchase price of the asset concerned at
the rate specified in the below table:

Year of commencement of commercial operation Rate (% of the acquisition value)

First Income Year 50%
Second Income Year 30%
Third Income Year 20%

4. Accelerated depreciation allowance shall be allowed subject to following conditions, limits and
qualification, namely –
1. The relevant asset is owned by the industrial undertaking and has not previously
been used in Bangladesh;

29
 2. Ownership and management of industrial undertaking is managed by any law or by
body corporate established under the law having its head office in Bangladesh, and
carried on by a company having its registered office in Bangladesh with an authorized
and paid-up capital of at least BDT 2,000,000 on the date of commencement of
commercial production.
3. The industrial undertaking is a TIN holder, maintain its books of accounts & sperate
and distinct accounts, and file its return in accordance with the provision of this Act.
4. An application for accelerated depreciation allowance shall be made to the Board in
prescribed form and manner within 6 months from the last day of the month of
commencement of commercial production with a declaration that the industrial
establishment is not exempted from tax under any section of this Act and has not and
will not make any application to the Board for exemption from tax.
5. If accelerated depreciation allowance is allowed on any asset in any income year, no
normal depreciation or initial depreciation allowance shall be allowed.

7. Arrangements relating to Profit or Loss and Sale or Transfer of Asset

If any asset is sold or transferred in any income year, no depreciation allowance shall be allowed
against such asset in that income year.

Example: Your firm has tasked you with tax planning for clients and has recently forwarded the
following case to you for advice:

Ishtiaq Mainuddin Co. is a one-person company (OPC) which is expecting to generate a net profit
before tax of BDT 1,00,00,000 in the accounting year ending 30th June 2022. The company needs to
purchase a motor vehicle and a general-purpose machine, costing BDT 50,00,000 each, within a
period of maximum another sixty days. As on 16th April 2017, Ishtiaq Mainuddin Co. has a surplus
fund of BDT 50,00,000, which it can now use in purchasing any of the above two fixed assets. The
motor vehicle can be put in use within 3 days from the date of purchase. But the machine cannot be
put in use before the fourth week of July 2022.

What should the company do with BDT 50,00,000 additional fund currently in hand, giving due
consideration to the opportunities of tax savings? Your advice should be assumptions, if required.

Solution:
Motor Vehicle
Given that, Investment in Motor Vehicle: BDT 50,00,000
According to ITA 2023, eligible amount for depreciation allowance: BDT 30,00,000

So, eligible normal tax depreciation: 30,00,000 × 10%

= 3,00,000 BDT
Eligible initial tax depreciation: 30,00,000 × 25%
= 7,50,000 BDT

30
Total depreciation: 3,00,000 + 7,50,000
= 10,50,000 BDT
Tax savings on depreciation: 10,50,000 × 22.5%
= 2,36,250 BDT
Notes: Corporate Tax Rate for One-person company is 22.5%.

Machine
It seems that the machine will become operational after 30 June 2017 and will not be reflected in the
financial statements prior to that date. In this regard, Ishtiaq Mainuddin Co. won't be eligible for any
depreciation allowance.

AMORTIZATION ALLOWANCE
1. The amortization allowance shall be computed on Straight Line Basis.
2. The amortization allowance for License Fee: Proportionate Rate.
3. The amortization allowance for Pre-commencement expense: 20%
4. The amortization allowance for Research & Development expense: 10%
5. The amortization allowance for Computer Software & Applications: 20% (Developed in
Bangladesh), 10% (Outside Bangladesh).

SUBMISSION OF RETURN

Section 166: Requirement to File Return of Income

Every person shall file a return with the DCT for the relevant income year, if-

a) If his total income during the income year exceeded the maximum amount which is not
chargeable to tax under the Act;
b) If he was assessed to tax for any one of the three years immediately preceding that income
year;
c) If the person is a company, shareholder director or a shareholder employee of a company, a
firm, a partner of a firm, AOP, an employee holding the position of executive or manager of a
business, an employee of the Govt., an authority, or a non-resident having a permanent
establishment in Bangladesh;
d) If the person has an income during the relevant income year which is subject to tax exemption
or lower tax rate under Chapter 1 of Part 6 (not being an institution established solely for
charitable purpose);
e) Any person registrable as a taxpayer under section 261;
f) A person required to furnish proof of submission of return u/s 264.

**** However, return submission is not mandatory for any educational institution which is a
primary or pre-primary school or government secondary or higher secondary school teaching in
Bangali, or which is a MPO educational institution and which does not have an English version of the

31
curriculum, a public university, Bangladesh Bank, local authorities, statutory public authority or
jurisdiction, which has no income other than funds and interest income received from the Government,
any entity established or constituted by or under any law for the time being in force which has no
income other than funds from the Government.

Section 169: General Rules for Filing of Return

1. The return shall be furnished in the prescribed form including the prescribed schedules,
statements, accounts, appendices or documents.
2. The following documents shall be attached with the return of the company or any person
deriving income from execution of long-term contracts, namely:
a) Audited financial statements;
b) Criteria prescribed by the Board for the proof of definite standard from time to time;
c) A separate calculation sheet explaining the difference between the profit and loss
shown in the financial statements and the income shown in the return.
3. In the case of any such entity having international transactions in any income year, a
statement of international transactions under section 208 shall be filed with the return.
4. Any non-resident Bangladeshi may file his return of income along with proof of payment
of tax on the basis of such return to his nearest Bangladesh Mission and the Mission will
issue a receipt of such return with official seal and send the return to the Board.

Section 170: Obligation to File Return under Self-Assessment Mode

▪ All such persons subject to statutory obligation to file return under section 166 shall file return
in self-assessment mode under section 180.
▪ One-person companies, banks, insurance and financial institutions cannot submit return under
“Self-assessment”.
▪ Companies other than mentioned above and individuals leaving Bangladesh can file normal
returns (a return filed for assessment of tax under section 183 or 184).

Section 171: Due Date of Submission of Return of Income

The return of income shall be filed within Tax Day –

Bank, Insurance and other non-banking Financial Institution 15th September

A company which is a subsidiary or holding company, branch,

representative or liaison office of a parent company incorporated Within 15th of the 7th month
outside Bangladesh if such company requires to follow a different from the end of the income
financial year for the purpose of consolidation of its accounts with the year
parent company
All other company 15th January
Individuals 30th November
30th June following the end
Individuals who never filed return (First Timer)
of the income year

32
 Individual taxpayer residing outside Bangladesh for higher
Within 90th day from the
education or on deputation or employment under lien or residing
date of his return of
outside Bangladesh with a valid visa and permit for the purpose of
Bangladesh
earning money

Section 172: Notice for Filing Return

The DCT may direct any person by a notice in writing to file a return of his income at any time after
expiry of the date of return submission if the person is required to file a return, or the total income of
such person is chargeable to tax in the relevant income year.

The return shall be filed within such period specified in the notice, not being less than 21 days or
within such extended period as the DCT may allow.

Section 174: Computation of Tax in case of Filing of Return after Tax Day
If any taxpayer fails to file the return within the Tax Day under section 166, the taxpayer shall be liable
to pay tax in following manner:

C = A x (1 + 4% x B)
C = Total amount of tax payable, if the taxpayer files return on any day after Tax Day; or the tax
authority assesses the taxpayer’s tax on any day subsequent to the Tax Day.

A = The total amount of tax the taxpayer would have paid if he had filed the return within the
Tax Day, provided that the tax exempted income shall be included in the total income and shall be
taxed at the regular rate; and it shall not include any penalty or tax imposed or levied under this
Act other than minimum tax, surcharge and simple interest.

B = Number of months after the Tax Day has passed which maximum 24 month; and any fraction
of the month shall also be counted as 1 month.

Example: The applicable tax assessed on total income of Maymuna Akther for the income year ended
on 30 June 2022 was BDT 50,000. She paid advance tax of BDT 22,000 and TDS of BDT 5,000 in
the financial year of 2020-2021. She didn’t file the return on time. Later, for the tax year 2022-2023,
she filed the return on 15th August, 2024 under self-assessment method.

Calculate her Tax Liability.

Solution:

Given that, the applicable tax assessed on total income was BDT 50,000, and the sum of advance
tax and tax deducted at source (TDS) is BDT 22,000 plus BDT 5,000 equals to BDT 27,000.

From 1st December 2022 to 15th August 2024, it is 1 year, 8 months and 15 days. Consequently, the
taxpayer's tax shall be determined and paid as per the rules set out below:

C = A × (1 + 0.04 × B)

33
Where,

C = Total amount of tax payable

A = Total amount of tax the taxpayer would have paid if he had filed the return on the Tax Day (50,000 BDT)
B = Number of months (21 months). Fraction is considered as one month.

Calculation of Tax Liability:

Amount Tax Payable

Tax Payable [50,000 × (1 + 0.04 × 21)] 98,000
Less: Advance Tax (22,000)
Less: TDS (5,000)
Amount of Total Tax Payable 71,000

Amount of Total Tax Payable is BDT 71,000.

Section 177: Return of Withholding Tax (TDS)

1. The following persons shall file a return of tax deducted or collected (TDS) under the
provisions of part 7 in such form as may be prescribed by the Board:
▪ A company other than a local authority
▪ Autonomous body
▪ Any authority of the Government
▪ A primary or pre-primary school teaching in Bengali
▪ A government secondary or higher secondary school
▪ Any educational institution subject to MPO
▪ Firm/AOP
▪ Private hospitals, clinic and diagnostic center.

2. Return shall be submitted under the concern jurisdiction of the DCT with the relevant details
and information and schedules, statements, accounts, appendices or documents in the
prescribed form.

In addition, the return shall be filed by the 15th day of every month. If it is a weekly or public
holiday, then the next working day.

3. The DCT may extend the time for filing the return under this section by not more than 15
days from the due date or up to the last day of the said month.
4. The Board may prescribe the area, form and manner of filing returns in electronic readable
or computer readable medium by notification in the Official Gazette.

5. The DCT may select a number of withholding tax returns with the approval of the
Commissioner of taxes for audit and may take action. No such return shall be selected for
audit after the expiry of 4 years from the end of the year in which the return was filed.

34
 INTERNATIONAL BEST PRACTICES: IAS/IFRS & ITA 2023
→ IAS 21 – Realized and Unrealized Gains (Only Realized Gain is Allowable in ITA 2023)

→ IAS 36 – Impairment of Asset (Impairment Loss is not a part of Allowable Deduction in

“Income from Business”)

→ IAS 37 – Provisional and Actual Expenses/ IFRS 9 – Financial Instruments

Actual Expense: Allowable
Provision: Inadmissible

→ IAS 40 – Investment Property & IAS 16: Property, Plant & Equipment
Revaluation gain: Will not be income
Realized gain: Will be income

→ IFRS 2 – Share Based Payment (Added in “Income from Employment)

→ IFRS 15 – Long-term Contract (Cost Recovery Method is Used where in Accounting

Percentage of Completion is Used)

→ IFRS 16 – Lease
Actual rental expense: Admissible
Depreciation & Interest Expense under IFRS 16: Inadmissible

- The End –

Acknowledgement
I want to convey my sincere appreciation to Dr. Mohammad Moniruzzaman FCA, ACMA, AFHEA, Associate
Professor at the Department of Accounting & Information Systems, University of Dhaka – 1000, Bangladesh,
for his exceptional teaching and for imparting valuable knowledge during the course.

35