The Institute of Chartered Accountants of Bangladesh (ICAB)

Business Planning:
Taxation & Compliance
(Covering The Income Tax Act, 2023; The Value Added Tax Act, 2012;
The Customs Act, 2023 and The Finance Act, 2024)

Workbook
For CA Professional Level Exams
The Institute of Chartered Accountants of Bangladesh (ICAB)

Business Planning:
Taxation & Compliance
(Covering The Income Tax Act, 2023; The Value Added Tax Act, 2012;
The Customs Act, 2023 and The Finance Act, 2024)

Workbook
For CA Professional Level Exams
 Business Planning: Taxation & Compliance
The Institute of Chartered Accountants of Bangladesh

The Study materials have been produced by the Education and Student Affairs Division of the Institute
of Chartered Accountants of Bangladesh.

First edition 2018

Second edition 2019
Third edition 2020
Fourth edition 2021
Fifth edition 2022
Sixth edition 2023
Seventh edition 2024

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or
transmitted in any form or by any means, graphic, electronic or mechanical including photocopying,
recording, scanning or otherwise, without the prior written permission of the publisher.

The content of this publication is intended to prepare students for the ICAB examinations, and should
not be used as professional advice.

Disclaimer: To the extent permitted by applicable law ICAB expressly disclaims all liability howsoever
arising from this publication or any translation thereof whether in contract or otherwise (including, but
not limited to, liability for any negligent act or omission) to any person in respect of any claims or losses
of any nature including direct, indirect, incidental or consequential loss, punitive damages, penalties
or costs.

While every effort is made to ensure the accuracy and completeness of the information provided,
unintentional errors or omissions may occur. The content is provided "as is" without warranties of any
kind. We appreciate the understanding of all readers and encourage to notify us of any inaccuracies
so that they can be corrected in future editions.

ii Business Planning: Taxation & Compliance ICAB 2024

 President - ICAB
FOREWORD

I am delighted to know that ICAB is going to publish a Study Manual on Business Planning: Taxation &
Compliance for our Professional Level students. This Study Manual contains updated Income Tax, Value
Added Tax and Customs laws with required examples/ illustrations necessary for better understanding
of the amendments made in the laws since publication of the last manual. Students will get this updated
manual with changes of relevant laws/rules readily available to enhance their knowledge to sit for the
examinations.

It also gives me immense pleasure that this updated manual incorporating the changes in tax laws
covering the Income Tax Act, 2023, the Finance Act, 2024, the Value Added Tax and Supplementary
Duty Act, 2012, the Customs Act, 2024 and related SROs will help the students a lot.

I would like to thank, Mr. Mahmudul Hasan Khusru FCA, the Chairman and all the Committee Members
of the Board of Studies (BoS) of ICAB for their tireless support and co-operation for this publication. I
offer my special thanks and express gratitude to Mr. Ranjan Kumar Bhowmik FCMA, Ex-Member,
National Board of Revenue(NBR), Government of Bangladesh (GoB), Mr. Mohammad Fakhrul Alam,
Director General, Customs Intelligence & Investigation Directorate, NBR, GoB, Mr. Snehasish Barua FCA,
Partner, Snehasish Barua & Co., Chartered Accountants, Mr. Rakesh Saha FCA, Partner, Ernst & Young
Advisory Services Bangladesh Limited & Mr. Muhammad Abu Hanif Meah FCA, Partner, Hanif & Arif,
Chartered Accountants for applying their professional skill and expertise in preparing and reviewing this
Manual.

ICAB, the regulator of the accountancy profession in Bangladesh, acknowledges the need, and supports
the move for such updating of various Study Manuals from time to time. Being a member of the
International Federation of Accountants (IFAC) and having twinning arrangements with the Institute of
Chartered Accountants in England and Wales (ICAEW), ICAB is obliged to standardize its students'
training lines. In this regard, ICAB has updated the Study Manuals to cater to the continuous needs of
CA Students. The publication of this Manual will provide necessary guidance to the CA Examinees to
prepare themselves with updated knowledge in taxation for their examinations as well as of their
technical and professional expertise.

I would like to thank the members of the Institute, Vice President (Education & Examination), Mr. MBM
Lutful Hadee FCA, Chief Executive Officer, Chief Operating Officer, Officials of Education and Students'
Affairs Division of ICAB and also those who were involved in publication of the Manual.

Mohammed Forkan Uddin FCA

President, ICAB

ICAB 2024 Introduction iii

 Contents
CA Overview v-ix
Syllabus x-xx

01 Sources and structure of Bangladesh income tax law 1-30

02 Tax Administration and Taxes Appellate Tribunal 31-40
03 Charge of income tax 41-50
04 Income from employment 51-70
05 Income from financial property 71-78
06 Income from rent 79-88
07 Income from agriculture 89-102
08 Income from business 103-124
09 Capital gain 125-134
10 Income from other sources 135-144
11 Depreciation allowances 145-156
12 Set off and carry forward of losses 157-164
13 Exemption and allowances 165-176
14 Deduction or collection of tax at source 177-188
15 Advance payment of tax 189-196
16 Return of income 197-206
17 Assessment 207-222
18 Assessment of individuals 223-262
19 Assessment of partnership firms 263-274
20 Assessment of companies 275-308
21 Liability in special cases and assessment of non-residents 309-316
22 Special provisions relating to avoidance of tax 317-324
23 Powers of income tax authorities including search and seizure 325-332
24 Penalty and prosecution 333-338
25 Recovery of tax 339-346
26 Double taxation relief 347-386
27 Transfer pricing 387-408
28 Refunds 409-412
29 Appeal and reference 413-422
30 Ethics 423-440
31 Tax planning 441-452
32 Gift tax 453-458
33 Value Added Tax - Portion 459-536
34 Customs - Portion 537-954

iv Business Planning: Taxation & Compliance ICAB 2024

CA OVERVIEW
The ICAB chartered accountancy qualification, the CA, is one of the most advanced learning and
professional development programmes available. Its integrated components provide an in-depth
understanding across accountancy, finance and business. Combined, they help build the technical
knowledge, professional skills and practical experience needed to become an ICAB Chartered
Accountant.

Each component is designed to complement each other, which means that students can put theory into
practice and can understand and apply what they learn to their day-to-day work.
The four components are:

ICAB constantly reviews the content of the CA qualification to reflect real life business challenges.
Today's most urgent business challenges range from sustainability, to rapid changes in technology and
the role of ethics in the profession. We work closely with employers, tuition providers, academics and
examiners to ensure that the CA equips the chartered accountants of the future with the skills and
knowledge they need to meet these challenges and to be successful.

THE CA QUALIFICATION AND SUSTAINABILITY

PRACTICAL WORK ETHICS AND

EXPERIENCE PROFESSIONAL
SCEPTICISM

CA Qualification

ACCOUNTANCY,
FINANCE AND PROFESSIONAL
BUSINESS MODULES DEVELOPMENT

Finance and accounting professionals need to move beyond simply measuring and reporting the impact
of climate change, environmental regulation, supply chain pressure and rising energy costs. They must
focus on understanding those implications and integrating them into financial management and
business planning. ICAB has been at the forefront of this movement over the past decade and has
adapted the CA qualification to reflect that. We see its role as not simply integrating knowledge and
understanding the broader implications of environmental, social and governance issues into
organisations, but also seeding this thinking into the mindset of our members.

ICAB 2024 Introduction v

 Our syllabus and ethical and professional development framework contribute towards creating ICAB
Chartered Accountants who recognise that sustainability is at the core of what they do and are capable
of actively using their business skills to analyse how to make the new sustainable economy work for their
business.

THE CA QUALIFICATION AND TECHNOLOGY

Rapid growth in technology has automated many compliance elements of accountancy. But, with
technology also comes complexity and risk. Accountants need to adapt and develop new skills to
manage these technological changes such as data analytics, automation and cyber security.

While there are many new technology capabilities that have broad application across the business and
consumer environment, four trends have the greatest potential to transform the accountancy profession:
Artificial intelligence, Blockchain, Cyber security and Data (ABCD of technology).

These and other innovations are likely to have a significant impact on the way that accountants access,
move and manage business finances.

Technology can provide information more quickly and often more accurately than humans, but it cannot
replicate human intelligence and quality decision making. Therefore, chartered accountants hold a key
role in data analytics, in validating the source of the data, interpreting and analysing the outputs.
Technology provides opportunities for chartered accountants to use their professional skills to add value
to their clients and/or the businesses in which they work.

As routine and compliance work reduces, there is greater focus on the development of skills which equip
professionals to work with the outputs of automated processes, with other specialists, and in a changing
world.

We believe that skills such as analysis, interpretation, professional scepticism, communication,

collaboration, adaptability, resilience, and commerciality are essential for tomorrow’s business leaders;
these are imbedded throughout the CA exams and professional development framework.

THE CA QUALIFICATION AND ETHICS

Culture and values are central to long-term success. How a business adopts an ethical approach towards
its staff, shareholders, customers and regulators, as well as within its own operations, has a bigger impact
than any performance measure or operational improvement.

Demonstrating a clear commitment to ethical behaviour is one of the main drivers of better
performance; it delivers an advantage when recruiting, it adds value to a brand, and it instils trust and
confidence in partners, suppliers and others that the organisation is well run and resilient.

Achieving that is not a matter of simple knowledge. Few ethical challenges will have simple right and
wrong responses. They require technical understanding, rigorous appraisal and skillful handling.
Accountants must have the necessary skills to apply professional judgement in a given situation, taking
into account what has been learned as a CA student about their ethical responsibilities as a Chartered
Accountant.

There will be unique ethical challenges throughout any Chartered Accountant’s process of learning and
career. They serve a variety of masters: senior management, external stakeholders, regulators; and

vi Business Planning: Taxation & Compliance ICAB 2024

above all the public interest responsibility of their profession. Because of the rigorous and effective
training (and continued professional development) chartered accountants can speak up and take a lead.

None of this can happen without one critical element: professionalism. That goes beyond merely
knowing the Code of Ethics: it means embodying the right behaviours and having the ability and
willingness to push back against those who might compromise the integrity of the business.

That confidence comes from a qualification that prioritises not only technical knowledge of the ethical
framework but also challenges accountants with scenarios that accurately reflect the ethical dilemmas a
Chartered Accountant may face in business.

PROFESSIONAL DEVELOPMENT

Adding value Communication

Technical Decision

CA
Competence Making

Teamwork Problem
Solving

Ethics and
Professionalism

ICAB Chartered Accountants are known for their professionalism and expertise. Professional
development prepares students to successfully handle a variety of different situations that they
encounter throughout their career. The CA qualification improves students’ ability and performance in
seven key areas:
• Adding value – add value to the organisation, team or role in order to achieve objectives
• Communication – communicate effectively at all levels, using oral, written and presentational skills
to achieve positive outcomes
• Decision making – gather, interpret and evaluate data to make effective decisions
• Ethics and professionalism – behave ethically and sustainably while respecting others to uphold the
values of the organisation and the accountancy profession
• Problem solving – analyse a problem, generate options and make recommendations to arrive at
appropriate solutions

ICAB 2024 Introduction vii

 • Teamwork – work collaboratively as a member or leader of a team to achieve shared goals
• Technical competence – seek, learn and use technology and technical information to support the
achievement of organisation or team goals
There are 17 exams over three levels – Certificate, Professional and Advanced.

CERTIFICATE LEVEL

There are seven exams at this level that introduce the fundamentals of accountancy, finance and
business. Students may be eligible for credit for some exams if they have studied a qualification we
recognise.

The Certificate Level exams are each 1.5 hours long except Business Laws and Information Technology
which are 1 hour long and can be sat four times in the year.

PROFESSIONAL LEVEL

The next seven exams build on the fundamentals and test students’ understanding and ability to use
technical knowledge in real-life scenarios. The exams are taken in three times in the year.

The Professional Level exams are 3.5 hours long.

The Professional Level exams are flexible and can be taken in any order to fit with a student’s day-to-day
work. The Business Planning: Taxation & Compliance and Business Strategy and Technology exams in
particular help students to progress to the Advanced Level.

viii Business Planning: Taxation & Compliance ICAB 2024

The suite of Business Planning: Taxation & Compliance and Business exams is based on the same
syllabus structure and skills frameworks, and will give students the opportunity to demonstrate their
learning and use this in the context of taxation.

Financial Accounting and Reporting is in the contexts of IFRS Standards.

ADVANCED LEVEL

The Corporate Reporting and Strategic Business Management & Leadership exams test students’
understanding and strategic decision-making at a senior level. They present real-life scenarios, with
increased complexity and implications from the Professional Level exams.

The Case Study tests all the knowledge, skills and experience gained so far. It presents a complex
business issue which challenges students’ ability to problem solve, identify the ethical implications and
provide an effective solution.

The Advanced Level exams are taken three times in the year.

The Corporate Reporting and Strategic Business Management & Leadership exams are 3.5 hours long.
The Case Study exam is 4.5 hours long.

If a student is studying the CA independently, they should consider their future ambitions while selecting
which exams to sit.

FLEXIBILITY

There are no regulations stipulating the order in which students must attempt the exams, allowing CA
Firms to design Articleship programmes according to business needs. The exception to this rule is the
Case Study. For attempting Case Study, students must be attempted the other subjects of Advanced
Level.
Students have the unlimited attempts at all levels of exams.

CREDIT FOR PRIOR LEARNING (CPL)

Students with previous qualifications may be eligible to apply for CPL for modules which have been
allowed by ICAB. For more information, visit https://www.icab.org.bd/page/credit-for-prior-learning-
cpl-exemption.

DATA ANALYTICS

Chartered Accountants are increasingly using more advanced approaches to interrogate client data. To
respond to this, ICAB has incorporated data analytics software within the Audit and Assurance and
Corporate Reporting modules.

Embedding data analytic techniques within our exams ensures that we continue to reflect the current
and future workplace and will also help to develop students' judgement, professional scepticism and
critical thinking skills.

ICAB 2024 Introduction ix

 SYLLABUS
PROFESSIONAL LEVEL
Business Planning: Taxation & Compliance - 100 Marks

MODULE AIM

To develop students’ understanding of the critical aspects of Bangladesh Taxation; application of the
knowledge gained at the Certificate Level study in the areas of tax compliances, tax principles,
management, administration, computation, collections, payments, return preparation, filing, dispute
issues and Value Added Tax (VAT) rules.

On completion of this module, students will be able to:

• recognize the ethical issues arising while performing tax work and identify the obligations the
Bangladesh system of taxation imposes on taxpayers and the implications for taxpayers of
noncompliance;
• deal with tax research, tax compliances, tax planning, and decision making in complex tax
scenario and calculate tax payable by individuals, and businesses;
• deal with provisions of double taxation relief, transfer pricing and other important areas of
international taxation;
• calculate the amount of VAT and other indirect taxes payable by businesses.

METHOD OF ASSESSMENT

The Business Planning: Taxation & Compliance module is assessed by a 3-hour written exam. The
questions cover the areas of the syllabus in accordance with the weightings set out in the specification
grid. Students will be assessed through computations, advice, planning and problem solving in case-
based scenario.

Students will be assessed based on latest tax legislation, rules, regulations, etc. in a way that exams in
November-December session may cover changes up to August and exams in May-June session may
cover changes up to February of the respective year.

SPECIFICATION GRID

This grid shows the relative weightings of subjects within this module and should guide the relative
study time spent on each. The marks available in the assessment will equate to the weighting ranges
below.

Weighting
Syllabus area
Range*
A. Income Tax
A1. Critical aspects of income tax, administrative functioning, dispute resolution,
10-15
gift tax including ethical aspects in income tax practice.
A2. Tax planning for individual, business or profession 25-30
A3. International taxation: Treaties and transfer pricing 10-15
B. Value Added Tax 30-35
C. Customs 15-20

*Total marks in examination will be 100.

Following learning outcomes should be read with in conjunction with the relevant sections of the
technical knowledge grids.

x Business Planning: Taxation & Compliance ICAB 2024

A. Income Tax

A1. Critical aspects of income tax, administrative functioning, dispute resolution, gift tax including
ethical aspects in income tax practice

Students will be able to identify critical aspects of Bangladesh income tax system, structure of tax
administration, different aspects of tax compliance and dispute resolution process in Bangladesh
Income Tax Regulations. In the examination, students may be assessed through problem solving in
complex scenario in following areas:

a) Sources and structure of Bangladesh income tax law

Objective and importance of income tax; role of income tax in economic development of Bangladesh;
Bangladesh tax structure; scope of Bangladesh income tax; sources of tax law and practice;
legislation; Case Law; NBR Publications; structure of Income Tax Act, 2023; the concept of income;
capital or revenue; tax residence; tax and income tax; tax liability on income; different rates of tax;
changes in Finance Act; changes through SROs and other notifications.

b) Administration and Tribunal

Various income tax authorities; appointment of income tax authorities; subordination and control of
income tax authorities; jurisdiction of income tax authorities; exercise of jurisdiction by successor;
officers to follow instruction of the board; guidance to the deputy commissioner of taxes; exercise of
assessment functions; system of Tax Zone and Circles; powers of income tax authorities;
establishment of Appellate Tribunal; exercise of power of the tribunal by Benches; decision of Bench;
exercise of Power by one member; taxes Appellate Tribunal’s procedures; organization structure of
income tax authorities.

c) Return, statement, and furnishing certain information

Return of income; Form of submission of return; signature and verification of return; tax day; delay
interest for filing return after tax day; documents to be submitted along with the return of income;
return of withholding tax; obligation to furnish annual information return; concurrent jurisdiction;
notice; filing of revised return; production of accounts and documents; statement of assets, liabilities,
and expenditure and life style statement; production of other information; requirement of furnishing
certain information regarding payment of salary, dividend, interest and etc.; any other requirements
of return, statement, furnishing information under income tax Act.

d) Assessment

Provisional assessment; assessment on the basis of correct return; self-assessment; minimum tax; spot
assessment; assessment on the basis of hearing; assessment on the basis of report of the chartered
accountant; best judgment assessment; income escaping assessment; any other types of assessment
as per income tax Act; limitation for assessment.

e) Tax appeal and references

Appeal against order of DCT and IJCT; tax payment before appeal; fees for appeal; time limits for
appeal; appeal before the Appellate Joint Commissioner or the Commissioner [Appeals]; appeal
against order of TRO; appeal to Tax Appellate Tribunal; reference to high court division of the
Supreme Court; appeal to appellate division; certified copy.

ICAB 2024 Introduction xi

 f) Alternative Dispute Resolution

Alternative Dispute Resolution (ADR); eligibility for application; application procedure for ADR;
procedures of disposal by the ADR; eligibility for appointment as Facilitator; decision of the ADR;
effect of agreement; limitation of appeal where agreement is not concluded; fees to be paid to
facilitator.

g) Power of tax authorities

Power to call for information; power to inspect registers of companies; power of survey; additional
powers of enquiry and production of documents; power of search and seizer; power to verify
deduction or collection of tax; retention of seized assets; application of retained assets; power of IJCT
to revise orders of DCT; revisional power of commissioners; power to take evidence on oath.

h) Gift Tax

Imposition of Gift Tax, exempted gifts, methods of determining value of the gifts, submission of return,
payment of tax, any other important provisions related to gift tax.

i) Ethics and law

• The five fundamental principles and guidance given in the ICAB Code of Ethics for Professional
Accountants;
• Legal and ethical issues arising from tax work undertaken and explain the significance of these
issues;
• Fundamental principles, threat and safeguards;
• Ethical conflict resolution;
• Confidentiality and disclosure of information;
• Conflict of interest;
• Basic principles of taxation work;
• Anti-money laundering;
• Tax planning, tax avoidance, and tax evasion.

A2. Income tax of individuals, business or profession

Students will be able to deal with computations, professional advice, tax planning and problem
solving in complex case-based scenario in various areas of individual and corporate tax including but
not limited to taxation of companies having both manufacturing and trading activities, minimum tax
as per section 163 and non-163, reduced rate and full rate, export income and local income, carry
forward and losses, discontinued operations, amalgamation or merger and acquisition, business
restructuring, and etc.

In the examination, students may be assessed through problem solving, tax planning, tax research
and writing professional advice in following areas:

(a) Charge of tax

Charge of income tax; charge of surcharge; charge of additional tax; charge of minimum tax; scope
of the total income; income deemed to accrue or arise in Bangladesh; special tax treatment in respect
of some expenditure, investments etc.

xii Business Planning: Taxation & Compliance ICAB 2024

 (b) Heads of income

• Income from employment

Concept of salary and perquisites; valuation of perquisites, allowances, and benefits to be
included in income from salary; contribution to different types of provident funds, and other
funds; non assessable income under the head salaries.

• Income from financial assets

Scope of interest on securities; nature of securities; types of securities; cum-interest vs. ex-
interest; bond washing transaction through sale and buy back of securities; expenses
admissible; tax free securities.

• Income from rent

Scope of property; computation of annual value; Impact of self-occupancy; allowable
deductions; non-assessable income; formalities to be followed by landlord; tax to be deducted
at source from house property.

• Income from agriculture

Basics of agricultural income; characteristics of agricultural income; categories of agricultural
income; non-agricultural income; income from agricultural house property; allowable
deductions; non-assessable agricultural income.

• Income from business

Scope of income from business and profession; allowable deduction in computing income from
business and profession; expenses not admissible income from business and profession; capital
and revenue expenditure; test for determining an expenditure as either capital or revenue
nature; balancing charge; compensation received from insurance company; fractional income
in certain cases; entertainment expense; foreign travel allowance of employees; free sample
distribution; perquisites; expenses allowed up to a certain percentage; expenses which are
capital expenditure as per IFRSs but allowable as revenue expenses as per ITA; minimum Tax.

• Capital gains
Determination of fair market value; Offer to buy the capital assets by the Government; Transfer
of capital assets used in the business; Tax exempted capital gains; No exemption on certain
assets if investment allowance is received; Tax rate in respect of capital gain; Special tax rates on
capital gain from sale of shares of listed companies; Apportionment of sale proceeds between
original cost and subsequent improvements.

• Income from other sources

Identify income from other sources; royalty; fees for technical services; income from letting of
factory building along with machinery; deemed income; allowable deductions; inadmissible
deductions.

(c) Depreciation allowances

Basics of depreciation allowances; depreciation allowance for different heads of income;

depreciation allowance on assets used for agricultural purpose; depreciation allowance on
assets used in business or profession; types of depreciation allowances; normal depreciation
allowance; initial depreciation allowance; other depreciation allowance; written down value of
assets for depreciation purpose; disposal of assets and treatment of gain or loss; amortization of
license fees; limitation in respect of depreciation allowance; assignment of unabsorbed
depreciation; computation of depreciation allowance.

ICAB 2024 Introduction xiii

 (d) Set-off and carry-forward of losses

Set off of losses; procedure to set off; carry forward of business losses; set off and carry forward
of loss in speculation business; set off and carry forward of loss under the head ‘capital gains’;
set off and carry forward of loss from agriculture; carry forward of loss of firm and partner; carry
forward of loss of succeeded business or profession; carry forward of unabsorbed depreciation;
carry forward of loss of tax holiday undertaking; procedures of carry forward.

(e) Exemptions and tax holiday

Tax holiday schemes; exemption under Part 6; types of business eligible for tax holiday;
categories of industries within the meaning of industrial undertaking; categories of infrastructure
within the meaning of physical infrastructure facilities; conditions for eligibility; application
procedure and its disposal by the NBR; withdrawal and cancellation of tax holiday; period of tax
holiday for industrial undertaking; period of tax holiday for physical infrastructure facilities;
conditions to be fulfilled after getting tax holiday; documents to be submitted with tax holiday
application; tax exemption of industry set up at EPZ; special tax exemptions/reduced rates/
concessions in respect of certain industries.

(f) Payment of tax before assessment

Deduction or collection at source; advance payment of tax; person responsible for tax deduction
at source; time limit for payment of tax deducted at source; manner of payment of tax deducted
at source; issuance of certificates for tax deducted at source; rates of TDS; TDS treated as
minimum tax under section 163; other important areas related to TDS; consequence of failure
to deduct; requirement to pay advance tax; computation of advance tax; installments of advance
tax; estimate of advance tax; advance payment of tax by different types of assessee; failure to
pay installments; levy of simple interest for failure to pay advance tax; credit of advance tax;
interest payable by Government on excess payment of advance tax; interest payable by assessee
on deficiency in payment of advance tax; payment of tax on the basis of return.

(g) Income tax of individuals

Definitions; scope of income of individual assessee; residential Status; non assessable and tax
credit income; tax rate of individuals; investment allowances; minimum Tax; computation of total
income and tax liability of individuals; preparation and filing return of income of individuals;
assessment procedures.

(h) Income tax of companies

Definitions; residential status of companies; tax rates; exemptions and allowances; computation
of taxable income and tax liability of companies; set-off and carry forward of losses; minimum
Tax; tax credit; corporate social responsibilities; preparation and filing return of income;
assessment procedures.

(i) Income tax of partnership firms

Assessment of partnership firms; special provisions regarding assessment of partnership firms;

rate of tax applicable to firm; set-off and carry forward of firm’s losses; computation of partners
shares in the firm’s profit or loss; liability of a firm for unrecoverable tax due from partners.

(j) Assessment of non-residents and liabilities in special cases

Liability of representative in certain cases; persons to be treated as agent; right of representative

to recover tax paid; liability of firm for unrecoverable tax due from partners; liability of partners

xiv Business Planning: Taxation & Compliance ICAB 2024

 for discontinued business of a firm; liability of directors for unrecoverable tax of private
companies; liability of liquidator for tax of private companies under liquidation; liability of tax in
case of shipping business of non-residents; liability of tax in case of air transport business of non-
residents; taxation of discontinued operation, merger and acquisition and etc.

(k) Special provisions relating to avoidance of tax

Avoidance of tax through transactions with non-residents; avoidance of tax through transfer of
assets; avoidance of tax by transactions in securities; tax clearance certificates required for
persons leaving Bangladesh; form of tax clearance and exemption certificates.

(l) Recovery of tax

Tax to include Penalty, Interest, etc.; notice of demand; penalty for default in payment of tax;
certificate for recovery of tax; method of recovery by Tax Recovery Officer; power of withdrawal
of certificate and stay of proceeding; validity of certificate for recovery; recovery of tax through
collector of district; recovery of tax through special magistrates; other methods of recovery.

(m) Refunds

Requirement to issue refund voucher; entitlement to refund; claim of refund; correctness of

assessment, etc., not to be questioned; refund on the basis of appeal order; form of claim and
limitation; interest on delayed refund; adjustment of refund against tax.

(n) Appeal and references

Appeal against order of DCT and IJCT; tax payment before appeal; fees for appeal; time limits
for appeal; appeal before the Appellate Joint Commissioner or the Commissioner [Appeals];
appeal against order of TRO; appeal to Tax Appellate Tribunal; reference to high court division
of the Supreme Court; appeal to appellate division.

(o) Penalty, offences and prosecutions

Penalty for not maintaining accounts in the prescribed manner; penalty for failure to file return,
certificate, statement, accounts of information; penalty for using fake TIN; penalty for failure to
pay advance tax; penalty for non-compliance with notice; penalty for failure to pay tax on the
basis of return; penalty for concealment of income; bar to impose penalty without hearing;
previous approval of IJCT for imposing penalty; penalty to e prejudice to other liability; any other
penalty as per income tax Act.

Punishment for non-compliance of certain obligations; punishment for false statement;

punishment for improper use of TIN; punishment for using fake audit report; punishment for
obstructing income tax authority; punishment for unauthorized employment; punishment for
concealment of income; punishment for disposal of property to prevent attachment; punishment
for disclosure of protected information; sanction for prosecution; power to compound offenses;
trial by special judge.

(p) Accounting

Methods of accounting; change of accounting method; requirement of a company to furnish

audited accounts.

ICAB 2024 Introduction xv

 A3. International taxation: Treaties and transfer pricing

Students will be able to understand implications of key provisions in treaties and transfer pricing
regulations in Bangladesh, undertake strategic planning, identify transfer pricing compliance
requirements and deal with compliance process including identification of international transactions,
selecting most appropriate method, using transfer pricing databases to determine arm’s length price
and etc.

In the examination, students may be assessed through problem solving, strategic planning and writing
professional advice in following areas:

(a) Double Taxation Relief and Treaties

 Meaning of Double Taxation;

 Agreement of Avoidance of Double Taxation;
 Relief in respect of income arising outside Bangladesh;
 Methods of avoiding double taxation;
 Tax treaty and OECD Model Tax Convention;
 Enforceability of the treaties;
 Interpretations of the important concepts used in treaties;
 Important areas addressed in treaties between Bangladesh and other countries;
 Understanding difference in the definition of ‘Permanent Establishment’ in ITA, 2023, traditional
treaties, and OECD model tax convention;
 Attribution of profits to a Permanent Establishment;
 How is business profit of a foreign company carrying out activities in Bangladesh through a
Permanent Establishment to be taxed in Bangladesh?
 How are capital gains, dividend etc. taxed using treaties?
 Provision for obtaining certificate from NBR to avail treaty benefit;
 Other commonly used provisions of treaties.

(b) Transfer Pricing

 Concept of transfer pricing;

 Overview of OECD guidelines related to transfer pricing;
 Transfer pricing regulations in Bangladesh;
 Understanding ‘International Transaction’ in ITA, 2023;
 Who are required to comply with transfer pricing regulations in Bangladesh?
 What are the compliance requirements under transfer pricing regulations in Bangladesh?
 Arm’s length price;
 Methods of determining arm’s length price;
 Application of different methods of determining arm’s length price;
 Selection of most appropriate method for different nature of transactions;
 Benchmarking and use of databases;
 Comparability adjustments;
 Transfer pricing adjustment;
 Submission of statement of international transactions;
 Maintenance of transfer pricing documentations;
 Key contents of a transfer pricing documentation report;
 Certificate from an accountant;
 Assessment of transfer pricing cases;
 Penalties in transfer pricing regulation;
 Recent developments in transfer pricing global best practice;
 Strategic planning in different areas of international taxation.

xvi Business Planning: Taxation & Compliance ICAB 2024

B. Value Added Tax

Students will be able to identify various compliance requirements under Value Added Tax (VAT)
system in Bangladesh, compute VAT payable, and deal with compliance process in relation to VAT.
They will be able to design industry specific Standard Operating Procedure (SOP) for major industries
in Bangladesh. In the examination, students may be assessed through complex scenario in following
areas:

A) Concept of Value Added Tax

Similarities and dissimilarities between VAT and Income Tax; advantages of VAT over Sales Tax and
Excise Duty; impact of VAT on national development; role of VAT chain in establishing financial
integrity; tax expenditure; distortions in Bangladesh VAT system; introduction of online VAT systems.

B) VAT Planning

Planning for the components of VAT SOP for major 5-6 industries considering rates, place of
imposition, registration, threshold, exemptions, zero rating, VAT administration, cross-border
transaction, accounting, return filing, central or branch registration, compliance checklist and
Complex areas for each industry.

C) VAT Compliance Issues

(i) Registration

Central and branch registration; Conditions for branch registration; preparation of registration
application; Submission of application; Registration suspension and cancellation; Transferring
Commissionerate; Updating registration information, Shifting Enlistment to Registration and
vice versa; VAT Agent, VAT Consultant, Registration and enlistment related forms; DOs &
DON’Ts checklist for registration.

(ii) VAT Assessment

Valuation: Preparation of value Declaration for major industries; Use of Fair market price for
value determination, Valuation for services; Value declaration form preparation for
manufacturer, commercial trader and service renderer. Review process for value declaration;
Preparation a review application in case of increase value by commissioner; Art of presenting
arguments before commissioner during personal hearing; Price determination in various special
case, Costing and Valuation; Declared value versus transaction value complexity in ledger
adjustment, DOs & DON’Ts checklist for valuation.

Output Tax: Determining adjustment process for real-time price and declared value in case of
differences; Case studies; DOs & DON’Ts checklist for output tax calculation.

Input Tax Credit: Critical situations for credit: payment through banking channel, in case of bank
guarantees, bartered transaction, partial credit for different situations; credit mechanism for real
estate sector, construction sector, etc., DOs & DON’Ts checklist for credit.

Adjustments: Debit note and credit note; defining different scenarios of adjustment and
developing checklist of legal & procedural requirements for each adjustment; DOs & DON’Ts
checklist for adjustments.

Net Tax Calculation & Payment: Determination of net tax using different set of business
transaction for different industries.

ICAB 2024 Introduction xvii

 (iii) VAT Accounting

Invoices: Issuance of different types of invoice in different situations; designing invoices for
different industries and technologies like POS, ECR/EFD; use of software and integration with
NBR system;, use of Electronic Fiscal Device (EFD), Electronic Fiscal Printer (EFP), and Point of
Sale (POS) software, list of NBR enlisted software, special provisions for invoice: utility services,
telco services, banking services, ride sharing services, C&F service, Insurance service, etc., DOs
& DON’Ts checklist for invoicing system.

Inventory: Case study and practical exercise on the filling up of the inventory register (Purchase
Register & and Sales Register) with different data set of different industries from both Goods and
service sectors. Maintaining different forms, filing process, adjustment for input-output
coefficient mismatch, DOs & DON’Ts checklist for inventory management.

Account Current: Ways of reducing account current balance to reasonable amount; Migration
from 1991 VAT act-based account current to new system under 2012 act-based system; Prepaid
Vs Postpaid system in VAT system; Process of maintaining account current, DOs & DON’Ts
checklist for cash flow management.

Other books of records Debit Note: Develop SOP for use of debit note, credit note, commercial
books of records.

(iv) Return Filing

Preparation for backward excel based calculations for each component of return; data extraction
from General Ledger for preparing return; synchronizing existing software with return; relation
for return with price declaration form, invoice, inventory registers, account current and other VAT
and commercial documents.

D) Zero rates

Process: Develop SOP for Exports (Deemed and Direct exports) including bonded warehouse.
Duty Drawback: DOs & DON’Ts checklist for drawback; Parallel Cash incentive and drawback.

E) Refund

Develop SOP for refund process covering critical situations.

F) Litigation

Case Management: Techniques of reviewing case, Seizure report and SCN and preparing review
check list; Art of writing a good reply for SCN; Presenting in Hearing; Techniques of giving good
arguments and counter logic in hearing; code of conduct in quasi-judicial courts.

Appeal: Reviewing Adjudication order, preparing a good petition; Presenting in Hearing; Techniques
of giving good arguments and counter logic in hearing; code of conduct in quasi-judicial courts.

G) VAT Audit

Dealing audit

H) Miscellaneous

Different relevant issues.

xviii Business Planning: Taxation & Compliance ICAB 2024

VAT on Cross-border Transactions

 Place of taxation rules;

 Modes of cross-border transactions;
 Electronic transactions;
 Taxation in different situations and design the solutions;
 Future threats of VAT.

Skills How skills are assessed?

Assimilating and using information: Candidates may be required to identify tax
• Understand the situation and the implication, and compute tax liability in given
requirements scenario; demonstrate technical skills, use
• Identify and use facts, figures and relevant accurate calculations to illustrate a solution; and
information decision making in complex tax scenarios.
• Identify and priorities key issues
Structuring problems and solutions Candidates may be required to identify tax
• Structure data in accordance with the implication, and compute tax liability in given
requirements scenario; demonstrate technical skills, use
• Apply technical knowledge and skills to accurate calculations to illustrate a solution; and
develop evidence-based solution decision making in complex tax scenarios.

Applying Judgment Candidates may be required to critically evaluate.

Apply professional skepticism fact, figures and tax implication in given tax.

Demonstrate critical thinking scenarios, assess alternative options and consequences of various
courses of action.

Concluding, recommending and Candidates may be required to analyze given

communicating: circumstances, determine tax implications,
Apply technical knowledge to support develop solution and reach a reasoned
conclusion; conclusion.
Present analysis and recommendations in
accordance with the requirements;
Present solution in a clear and concise style.

ICAB 2024 Introduction xix

xx Business Planning: Taxation & Compliance ICAB 2024
 Chapter 1
Sources and structure of
Bangladesh income tax law

Introduction

Examination context

Topic list

1.1 Introduction
1.2 Bangladesh tax structure
1.3 Sources of tax law and practice
1.4 Scope of Bangladesh income tax
1.5 Structure of Income Tax Act, 2023
1.6 Objectives and importance of income tax
1.7 Role of income tax in economic development of
Bangladesh
1.8 Some definitions & important concepts relating to tax
1.9 The concept of income
1.10 Capital or revenue
1.11 Tax and income tax
1.12 Different rates of tax
1.13 Liability to pay tax
1.14 Tax liability on income
1.15 Some significant issues of income tax
 Introduction

Learning objectives

 Identify the objectives of tax in terms of economic, social justice and environmental issues;
 Recognize which taxes apply to different taxpayers e.g., individual, partners and companies;
 Identify the sources of tax law;
 Get the idea about the income and income tax;
 Know the history of income tax;
 Recognize different rates of income tax applicable to individual, corporate and others;
 Understand the concept of capital and revenue expenditure;
 Identify the residential status of an assessee.

Practical significance

Every person in Bangladesh is affected by our tax system in some ways, often on a daily basis and without
even realizing it. We pay tax on the money we earn and, on the things, we buy and this tax is of course used
by the government to pay for our development purpose such as schools, hospitals, roads and so on.

In Bangladesh we have an annual budget cycle which begins with the pre-budget report in late May/early
June and ends with the enactment of a Finance Act in June every year. This is supplemented by a huge
body of case laws and practical interpretation.

The Income Tax Act, 2023 (“ITA, 2023”), Value Added Tax and Supplementary Duty Act, 2012, Customs
Act, 2023 are the main sources of tax law. The National Board of Revenue (NBR), a statutory body is the
highest authority for the purpose of these Acts.

Income of different types are taxed at different rates. Before calculating income tax liability, one should
have the concept of income, tax, tax rate and other relevant issues. Residential status has significance for
determining tax liability.

One way of helping people to deal with complexity in the tax system is to use technology. Presently people
can use computerized system to calculate tax on his/her taxable income. NBR is actively incorporating
automated processes to streamline and enhance tax compliance procedures.

Stop and think

It is likely that you have been paying tax personally on your various sources of income/gains for some time.
Have you stopped to think about how this affects the actions that you take?

Working context

The impact of taxation on the overall economy and the society is increasing day by day. Tax is charged on
different types of assesses like individual, companies and others. The volume and complexity of tax law is
now such that many business houses have to spend considerable amounts of money and time just on tax
administration and planning. Many business decisions will have tax consequences. Most large corporate
houses operate their business on a global basis.

Without advice from an accountant, a business can easily find itself paying too much tax and missing
deadlines. It is important to have a good overall feel for the tax system early in your studies so that you
know where to look for the detailed rules when you actually need them later on.

Syllabus links

The topics covered in this chapter are essential background knowledge which will underpin the whole of
your Taxation studies.

2 Business Planning: Taxation & Compliance ICAB 2024

 Examination context C
H
A
P
Exam requirements T
E
In the examination, candidates may be required to: R

 Identify the social justice principles being applied for taxation purposes;
 Understand which taxes apply to different taxpayers; 1
 Identify the sources of tax law in Bangladesh;
 Define some terminologies relating to income tax;
 Determine the residential status of an assessee based on given information;
 Identify the five-tier tax rate for individual and other tax rates for other assesses.

Question practice

For question practice on these topics, go to the suggested questions and answers covering the
basic idea about taxation.

1.0 Objectives
Section overview

 Taxation system of Bangladesh has developed gradually and has been changed by
successive governments in accordance with their political philosophy;
 Governments use taxation to encourage or discourage certain types of economic activity;
 Taxation may be used to promote social justice but there is no political consensus on what
is meant by this term;
 Environmental concerns have led to changes in taxation policy;
 Income tax is tax on income;
 The Act got its root from the then British India in 1860;
 Different tax rates are applicable for different types of assessee and classes of income;
 Income tax is levied on income and not on capital receipts;
 The distinction between capital and revenue receipts is much more difficult than between
capital and revenue expenditure;
 Residential status is very vital for determining tax liability.

1.1 Introduction

Among direct taxes, income tax is one of the main sources of revenue of Bangladesh
Government to generate funds for running its administration and also funding development
expenditure. Income tax is broadly classified in two categories namely “personal income tax”
and “‘corporate income tax”. “Personal income tax” is tax on income of individuals, partnership
firms etc. It has a progressive rate i.e., rate of tax increases as income increases. While “corporate
income tax’’ is tax on income of companies. It has a flat rate i.e.; rate of tax is same irrespective
of level of income. Income tax is basically imposed on the principle of ability to pay. “The more

ICAB 2024 Sources and structure of Bangladesh income tax law 3

 a taxpayer earns the more he should pay''- is the basic principle of charging income tax. It aims
at ensuring equity and social justice.

Bangladesh taxation system has developed over centuries from the then British India in 1860 to
the present condition on a piecemeal basis. The system, however, developed on the basis of
generally accepted canons and there had been efforts towards rationalizing the tax
administration for optimizing revenue collection, reducing tax evasion and preventing revenue
leakage through system loss.

In the fiscal scheme of our country, at present, income tax is levied along with other direct and
indirect taxes like VAT, Excise duty, Customs duty, Gift tax etc.

Direct tax and Indirect tax

Direct taxes are those taxes incidence of which cannot be shifted on others. The person paying
the tax shoulders the entire burden of tax. This is basically tax on person (both physical & legal
person).

Whereas indirect taxes are those taxes incidence of this is shifted by the person paying the tax
to others like his customers. These are basically tax on goods or services.

1.2 Bangladesh tax structure

The tax structure of Bangladesh consists of both direct taxes (income tax, gift tax, foreign travel
tax, land development tax, non-judicial stamp, registration, immovable property tax, etc.) and
indirect taxes (customs duty, excise duty, motor vehicle tax, narcotics and liquor duty, VAT,
Turnover tax, SD, etc.). Analysis of revenue collection activities in Bangladesh reveals that tax
revenue accounts for 85% of government revenue.

In the national budget, tax revenue is classified in two categories (on the basis of tax enforcing
agency). They are NBR tax and non-NBR tax. The nomenclatures of NBR tax are income tax; value
added tax, excise duty, turnover tax, export duty, import duty, regulatory duty, supplementary
duty, foreign travel tax, gift tax etc. The share of NBR tax to total tax revenue is around 96%.

The nomenclatures of non-NBR tax are land revenue, non-judicial stamp, motor vehicles tax,
registration fees, narcotics and liquor duty etc.

The significant features of Bangladesh tax system are as follows:

A) Multiple tax system

The tax system of Bangladesh consists of various types of taxes which are as follows:

(1) Taxes on income and profit

 Income tax – Company;
 Income tax – Persons other than company.

(2) Taxes on property & capital transfer

 Gift tax;
 Land Revenue;
 Stamp Duty - non judicial.

4 Business Planning: Taxation & Compliance ICAB 2024

 (3) Taxes on goods and services
 Customs Duties (both on import and export); C
 Excise Duties; H
 Value Added Tax (VAT); A
 Turnover tax; P
 Supplementary Duty (usually on luxurious and socially undesirable items); T
 Road tax; E
 Electricity Duty; R
 Narcotics Duty;
 Other taxes and duties (travel tax).
1
B) Tax administration in Bangladesh

National Board of Revenue (NBR) is the supreme authority for tax administration in
Bangladesh and collects around 85% of total revenue for the country. Various reform
measures have been taken and still in consideration to make the tax system of the country
more effective and efficient.

C) Tax avoidance behavior of the taxpayers

The culture of tax compliance is low. Due to weakness of enforcement the level of tax evasion
& avoidance remains high. The reliance on indirect taxation has been treated as one of the
main obstacles in attaining economic progress in Bangladesh since only a few tax payers
share the burden of taxes. Despite NBR's untiring effort, the progress is not still satisfactory.
People especially corporate entities use various measures to evade tax using loopholes of
the current tax system.

D) Narrow tax base

Our tax base is too narrow and the tax law is full of exemptions and allowances. Agricultural
sector provides employment for around 60 percent of the population contributes only 20
percent of GDP and virtually pays little in the form of income tax. Narrow tax base remains a
big obstacle in augmenting tax revenue.

From the above discussion, it is clear that attaining an optimal tax structure is one of the most
important issues for the government of Bangladesh to increase the revenue generation from
taxes for accelerating growth and to improve the quality of life of the citizens. A long-term
sustainable solution to enhance transparency, promote growth, improve tax compliance and
thus to increase tax to GDP ratio is a much desirable issue in the context of Bangladesh.

Furthermore, the tax collection in Bangladesh is more skewed towards collection on indirect
tax. In OECD countries the trend is normally opposite where direct tax contributes more than
60% of the total tax collection of the country. These also somewhat indicate inefficient tax
structure of the country.

1.3 Sources of tax law and practice of income tax

A. Legislation

The legislations behind income tax regulation are as follows:

1 Income Tax Act, 2023
2 Income Tax Rules,1984
3 Finance Act of the respective year and its clarification given by the NBR

ICAB 2024 Sources and structure of Bangladesh income tax law 5

 4 Double Taxation Avoidance Agreements (DTAA)
5 Statutory Rules and Orders (SRO).

B. Case laws

Over the years, many hundreds of tax cases have been brought before the courts where the
interpretation of the tax law is not clear.

Decisions made by the honorable judges to resolve these cases form case laws. Many
judgments are precedent for future cases which means that they must be followed unless
superseded by legislation or the decision of higher court.

C. NBR publications

The National Board of Revenue (NBR) is a statutory body having the highest executive
authority and empowered to make necessary rules relating to income tax matters. NBR
makes available some forms, notifications, brochures, and guidelines of income tax, VAT
and customs duty through its websites and other forms of communication for public at large.
NBR also issues instructions & guidance to subordinate tax office which is a binding on them.
There are many SROs and circulars on income tax and VAT published by NBR providing
guideline for tax purpose.

1.4 Scope of Bangladesh income tax

Some provisions, rules and regulations have to be kept in mind in order to determine income
tax. These are as follows:

(a) The Income Tax Act, 2023: The Income Tax Act, 2023 came into force on 22nd June 2023. It
is divided into 25 chapters with numerous sections, sub-sections, clause, sub-clause, proviso
and eight schedules.

(b) Income Tax Rules, 2024: The procedural matter required to implement the tax regulations
is incorporated in Income Tax Rules. NBR is empowered to make or amend rules.
Additionally, Rules for Tax Deducted at Source, 2024 and Rules for Income Tax Return
Preparer, 2023 have already been issued by NBR.

(c) Finance Act: To give effect to the various proposals in the annual budget covering the areas
of direct and indirect taxes. It contains:
 tax rates.
 amendments of the clause/sub-section/section/schedule in laws relating to government
tax or non-tax revenue.
 insertion of new clause/sub-section/section/schedule in the existing laws relating to
government tax or non-tax revenue.
 deletion of old clause/sub-section/section/schedule in the existing laws relating to
government tax or non-tax revenue.
 introduction of new laws relating to government tax or non-tax revenue.
 Refinement of existing law.

(d) SRO (Statutory Rules and Order): SROs are subordinate law. Section 343 of the Income Tax
Act, 2023 empowers NBR to issue Rules whereas section 76(1) of the Income Tax Act, 2023
empowers to issue notification via government gazette to exempt tax of a class of persons.

6 Business Planning: Taxation & Compliance ICAB 2024

 (e) Income tax case law: During assessment proceedings, dispute may arise between the NBR
and the assessee over the interpretation of some of the provisions of the act and rules. The C
assessee can go the court objecting the NBR's interpretation, and the judgments given by H
the courts act as guidance to the assessing officers and the assessee in similar nature in the A
future. P
T
1.5 Structure of Income Tax Act, 2023 E
R
The Income Tax Act, 2023 came into force on 22nd June 2023. A brief description regarding the
workbook is enumerated below:
1
I. The Income Tax Act, 2023 - Chapters and sections

Part Title Sections

1 Preliminary 1-3
2 Tax administration 4-12
3 Taxes Appellate Tribunal 13-17
4 Charge of income tax 18-28
5 Computation of income 29-75
6 Exemptions, deletion, and tax holiday 76-85
7 Payment of tax 86-162
8 Minimum tax 163-164
9 Return, statements, and documents 165-179
10 Assessment of tax and audit 180-196
11 Limitation of time 197
12 Collection of information 198-211
13 Recovery of evaded tax 212-213
14 Collection, refund and adjustment 214-229
15 Prevention of tax avoidance 230-243
16 International treaty management 244-251
17 Agency, representative and related issues 252-260
18 Registration of taxpayers 261-265
19 Penalty 266-284
20 Revision, appeal and reference 285-308
21 Protection of information 309
22 Criminal offences and prosecution 310-326
23 Authorized representative 327
24 Electronic tax management 328
25 Miscellaneous 329-345

ICAB 2024 Sources and structure of Bangladesh income tax law 7

 II. The Income Tax Act, 2023 - Schedules

SL # Schedule Title
1 First Schedule Special rate of investment
2 Second Schedule Approved funds
3 Third Schedule Depreciation, depletion, and amortization
4 Fourth Schedule Computation of the profits and gains of insurance business
5 Fifth Schedule Computation of profits and gains from mineral deposits in
certain cases
6 Sixth Schedule Tax exemption, rebate, and credit
7 Seventh Schedule Special tax rate
8 Eight Schedule Special provisions

III. The Income Tax Rules, 2023

The IT Rules, 2024, comprises rules to supplement various sections and provisions of the
Income Tax Act, 2023. National Board of Revenue (NBR) enjoys flexibility to amend or
change any rules through the notification in the official gazette.

IV. Rules of Tax Deducted at Source, 2024

The TDS rules have been published to align with the new tax law, which has essentially
replaced certain provisions in the IT Rules, 1984 concerning tax deduction, source
collection, and related statements.

V. Rules of Income Tax Return Preparer, 2023

This is in line with the appointment, terms of activities, and related provisions for Income Tax
Return Preparers, which constitute a new addition in the tax legislation.

1.6 Objectives and importance of income tax

Taxation is one of the major sources of revenue to Government. The main objectives of taxation
are (a) to meet the country's development expenditure (b) to accomplishing some economic and
social objectives, such as redistribution of income, encouraging savings, price stabilization and
discouraging consumption of harmful and socially undesirable goods. Importance of income tax
is as follows:

(a) Revenue collection: Income tax is a major source of revenue for the government. In
Bangladesh, income tax revenue accounts for nearly 35% of total tax revenue. Therefore, the
first and foremost aim of income tax is to raise public revenue to meet the ever-increasing
public expenditure.

(b) Re-distribution of income: An effective, efficient and fair taxation system can reduce
inequalities in income and wealth. This is possible by taxing rich people heavily and to confer
benefit to the poorer section through progressive income tax.

(c) Increase in savings: An effective and efficient tax system encourages people to save through
providing tax credit facilities on investment allowance.

8 Business Planning: Taxation & Compliance ICAB 2024

 (d) Increase in capital investment: An effective and efficient tax system encourages local and
foreign investors to invest in the country through providing various facilities like tax credit C
facilities on investment allowance, tax holiday scheme, depreciation allowance, tax H
incentives etc. A
P
(e) Economic development: The income tax revenue can be used by the government to ensure T
the economic development of the country. It can be used to build the infrastructure, to invest E
in social security programs, in various poverty elevation programs. The incentive to R
investment also encouraging production & there by growth of GDP.

So, from the above discussion it is clear that, income tax plays a very significant role in the
1
economic development of a country. For this reason, various reform strategies have been taken
to modernize NBR.

1.7 Role of income tax in economic development of Bangladesh

As it has been discussed before, taxation is one of the major sources of public revenue to meet
a country's revenue and development expenditures with a view to accomplishing some
fundamental economic and social objectives, such as redistribution of income, price stabilization
and discouraging harmful consumption. The contribution of income tax is playing a pivotal role
in the economic development of Bangladesh. The government of Bangladesh has taken various
measures to modernize the tax system and imposed various provisions in the Income Tax Act,
2023. Some of the provisions are as following:

(a) Tax holiday scheme: As per Section 81, read in conjunction with Part 4 of Schedule Six of the
Income Tax Act, 2023, an industrial undertaking established for the production of specific
goods shall be eligible for tax holiday up to 10 years, subject to varying rates. This
arrangement is commonly referred to as the Tax Holiday Scheme. The primary aim of
implementing this scheme is to foster economic growth via industrialization, thereby
attracting investments in targeted sectors.

(b) Income tax exemptions to exporters' income: From July 1, 2023, to June 30, 2028, a 50%
exemption will be granted for income derived from export conducted by individuals,
partnership firms, and Hindu Undivided Families (HUFs). For other taxpayers, the applicable
tax rate will be 12%, with a reduced rate of 10% applicable to income from export derived
from Leadership in Energy and Environmental Design (LEED) certified factories. This
arrangement is outlined in SRO No. 210, dated June 26, 2023.

(c) Certain IT-enabled services are eligible for tax exemption: In accordance with Paragraph
21 of Part One of Schedule Six, specific information technology-based services are granted
tax exemption from July 1, 2024, to June 30, 2027, with the aim of fostering growth within
the IT sector.

(d) Accelerated depreciation allowance: Accelerated Depreciation allowance is allowed on the

new machineries used in various industries at a specified rate (50% of the cost in the first
year, 30% in the 2nd year and remaining 20% in the 3rd year).

(e) Tax incentives for small & medium industries: As per Paragraph 24 of Part One of Schedule
Six, tax incentives are granted on the income and profits of small and medium enterprises,
aimed at promoting investments in industries that hold the potential to make substantial
contributions to the economy.

ICAB 2024 Sources and structure of Bangladesh income tax law 9

 (f) Tax incentives for encouraging savings: The government also encourages savings
providing tax rebate and investment tax credit facilities on certain types of investment and
expenses such as, purchase of shares and debentures, savings certificate, DPS, insurance
premium, provident fund etc.

(g) Tax exemptions in certain expenditures: Certain expenditures to enhance social welfare like
contribution to president's/prime minister's relief fund; Government Zakat fund, Ahsania
Mission Cancer Hospital etc. are exempted from tax payment. These provisions also
encourage people to spend in certain social development program.

(h) Tax incentives for foreign investors: For· attracting foreign investors various concessions like
tax holiday, tax exemptions for interest, royalty, technical assistance and fees, remittance to
own country have been allowed.

(i) Allowance for scientific research: For developing new products, technologies in the
industrial sectors certain allowance is allowed. Tax rebate is given on the cost of relevant
scientific research.
(j) Tax incentives for remittance to Bangladesh: A significant number of Bangladeshi people
work abroad and to encourage them remittances through banking channel has been
declared tax exempted.

So, it can be said that to ensure the economic development of the country certain provisions
have been introduced in the ITA, 2023. These provisions encourage not only foreign investors
but also the local entrepreneurs.

1.8 Some definitions & important concepts relating to tax

1. Assessee [u/s 2(22)]: "assessee", means any taxable income earner and includes following
person, namely –

(a) a person by whom any tax or other sum of money is payable under IT Act, 2023;
(b) every person whose income, or income of any other person assessable;
(c) person for whom proceedings under IT Act,2023 have been taken to determine the
amount due to him;
(d) person by whom a minimum tax is payable;
(e) person liable to file or furnish any return, document or statement;
(f) person desires to be assessed and file return;
(g) person deemed to be an assessee or assessee in default under this IT Act, 2023;
(h) person against whom any proceedings under the Act have been taken.

2. Assessment year [u/s 2(24)]: "assessment year" means the period of 12 months
commencing on the first day of July every year; and includes any such period which is
deemed, under the provisions of this Act, to be the assessment year in respect of any income
for any period.

3. Business [u/s 2(70)]: "business" includes—

(a) Any trade, commerce or goods manufacture;

(b) Any trade, commerce or production of goods related risk undertaken or endeavor;
(c) Exchange of goods or services of any for profit or not for profit entity;
(d) Any profession or occupation.

10 Business Planning: Taxation & Compliance ICAB 2024

 4. Capital asset [u/s 2(77)]: "capital asset" means
C
(a) Property of any kind held by an assessee; H
(b) Any business or undertaking entirely or unit wise; A
(c) Any share or stock. P
T
However, following matters shall not include— E
R
(a) any stock-in-trade, consumable stores or raw materials held for the purposes of his business;
(b) personal effects, that is to say, movable property (including wearing apparel, jewellery,
furniture, fixture, equipment and vehicles), which are held exclusively for personal use by,
1
and are not used for purposes of the business or profession of the assessee or any member
of his family dependent on him.

However, any gain from sale of personal effects will be taxable under the head “Income from
Other Sources” as per Finance Act,2024.

5. Charitable purpose [u/s 2(43)]: "charitable purpose" means –

(a) Relief for the poor, education relief, medical relief; and
(b) The improvement and extension of any purpose of general public utility.

Provided that the improvement or extension of any general-public utility shall not be
deemed to be a charitable purpose –

(i) Unless it is approved by the Commissioner of Taxes;

(ii) If it is involved in any of the following activities -
• Any activities in the nature of trade, commerce or business whatever its nature or
type
• If any services rendered in exchange of consideration and the total value of
consideration exceeds Tk. 1 (one) crore in any income year.

6. Child [u/s 2(84)]: "child", in relation to any individual, includes a step-child and an adopted
child of that individual.

7. Company [u/s 2(31)]: "company" means a company as defined in the Companies Act, 1994
(VIII of 1994)] and includes-

(a) The liaison office, representative office or branch office of a foreign establishment;
(b) Any permanent establishment of any foreign entity or person;
(c) Any association or body registered under or by the laws of any country outside
Bangladesh;
(d) Any bank, insurance or financial institution;
(e) Any industrial and commercial organization, foundation, society, co-operative society
and any educational institution;
(f) Any organization registered with NGO Affairs Bureau or Microcredit Regulatory
Authority;
(g) Any firm, Association of Person, joint venture, called by whatever name if it is formed
under the Companies Act, 1994 or a foreign entity;
(h) Statutory Government Authority, Local Authority, Autonomous Body;
(i) Any entity established or constituted by or under any law for the time being in force;
(j) All entities other than individual person, firms, AOP, Trusts, HUF and Funds;

ICAB 2024 Sources and structure of Bangladesh income tax law 11

 (k) Any such foreign association or body not incorporated by or under any Act, which may
be declared as a company by the Board by general or special Order for the purpose of
this Act.

8. Deputy Commissioner of Taxes [u/s 2(17)]: "Deputy Commissioner of Taxes" means a

person appointed to be a Deputy Commissioner of Taxes u/s 4, and includes a person
appointed to be a Transfer Pricing Officer, Assistant Commissioner of Taxes, an Extra
Assistant Commissioner of Taxes and a Tax Recovery Officer.

9. Dividend [u/s 2(81)]: "dividend" includes—

(a) any distribution by a company of accumulated profits, whether capitalized or not, if such
distribution entails the release by the company to its shareholders of all or any part of its
assets or reserves;
(b) any distribution by a company, to the extent to which the company possesses
accumulated profits, whether capitalized or not, to its shareholders of debentures,
debenture-stock or deposit certificates in any form, whether with or without interest;
(c) any distribution made to the shareholders of a company on its liquidation to the extent
to which the distribution is attributable to the accumulated profits of the company
immediately before its liquidation, whether capitalized or not;
(d) any distribution by a company to its shareholders on the reduction of its capital, to the
extent to which the company possesses accumulated profits, whether such
accumulated- profits have been capitalized or not;
(e) any profit remitted outside Bangladesh by a company not incorporated in Bangladesh
under the Companies Act, 1994 (VIII of 1994);
(f) any distribution of profit of a mutual fund or an alternative investment fund
(g) any payment by any company of any sum (whether as representing a part of the assets
of the company or otherwise) by way of advance or loan to a shareholder or any payment
by any such company on behalf, or for the individual benefit, of any such shareholder,
to the extent to which the company, in either case, possesses accumulated profit.

But does not include—

(i) a distribution made in accordance with sub-clause (c) or sub-clause (d) in respect of any
share including preference share for full cash consideration, or redemption of debentures
or debenture-stock, where the holder of the share or debenture is not entitled in the event
of liquidation to participate in the surplus assets;
(ii) 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 company;
(iii) Any dividend paid by a company which is set off by the company against the whole or any
part of any sum previously paid by it and treated as dividend within the meaning of sub-
clause (e) to the extent to which it is so set off;
(iv) any bonus share issued by a company.

10. Employer [u/s 2(47)]: "employer" includes a former employer.

11. Employee [u/s 2(25)]: "employee", shall include directors or managing directors and any
person performing management affairs of the company or business irrespective of their
designation. Employee also includes any person receiving salary from the employer and
working under the direction of the employer, including all persons receiving income from
employment as per section 32, but does not include any daily labour and tea garden labour.

12. Fair market value [u/s 2(48)]: "fair market value" means, value determined by the Board.

12 Business Planning: Taxation & Compliance ICAB 2024

 13. Fees for technical services [u/s 2(30)]: "fees for technical services" means any consideration
including any lump sum consideration for the rendering of any managerial, technical or C
consultancy services (including the provision of services of technical or other personnel) but H
does not include: A
P
(a) Consideration for any construction, assembly, mining or like project undertaken by the T
recipient, or E
(b) Consideration which would be income of the recipient classifiable under the head R
"Income from Employment’.

14. Income [u/s 2(13)]: "income" includes--

1
(a) any income, profits or gains, from whatever source derived, chargeable to tax under any
provision of this Act;
(b) any amount which is subject to collection or deduction of tax at source under any
provision of this Act;
(c) any loss related to income, profits or gains;
(d) the profits and gains of any business of insurance carried on by a mutual insurance
association computed in accordance with paragraph 8 of the Fourth Schedule;
(e) 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 Act;
(f) any such money, payment or transaction on which a tax is imposed.

15. Income year [u/s 2(15)]: "income year”, means financial year immediately preceding the
assessment year and includes:
(a) the period beginning with the date of setting up of a business and ending with the
thirtieth day of June following the date of setting up of such business;
(b) the period beginning with the date on which a source of income newly comes into
existence and ending with the thirtieth day of June following the date on which such
new source comes into existence;
(c) the period beginning with the first day of July and ending with the date of
discontinuance of the business or dissolution of the unincorporated body or liquidation
of the company, as the case may be;
(d) the period beginning with the first day of July and ending with the date of retirement or
death of a participant of the unincorporated body;
(e) the period immediately following the date of retirement, or death, of a participant of the
unincorporated body and ending with the date of retirement, or death, of another
participant or the thirtieth day of June following the date of the retirement, or death, as
the case may be;
(f) in the case of bank, insurance financial institution or any financial institution the period
of 12 months commencing from the first day of January of the relevant year.

Provided that the DCT may allow a different financial year for a company which is a subsidiary,
including a subsidiary thereof, or holding company of a parent company incorporated outside
Bangladesh or a branch or liaison office thereof if such company requires to follow a different
financial year for the purpose of consolidation of its accounts with the parent company.
16. Person [u/s 2(69)]: "person" includes an individual, a firm, an AOP, a HUF, a trust, a fund, a
company.

17. Recognized Provident Fund [u/s 2(90)]: "recognized provident fund" means a provident
fund which has been, and continues to be, recognized by the Commissioner of Taxes in
accordance with the provisions of Part 3 of the Second Schedule.

ICAB 2024 Sources and structure of Bangladesh income tax law 13

 18. Resident [u/s 2(45)]: "resident", in respect of any income year, means
(a) an individual who has been in Bangladesh-
(i) for a period amounting in all to, 183 days or more in that year; or
(ii) for a period of, or periods amounting in all to, 90 days or more in that year having
previously been in Bangladesh for a period of, or periods amounting in all to 365 days
or more during 4 years preceding that year;
(b) a HUF, firm· or other association of persons, the control and management of whose
affairs is situated wholly in Bangladesh in that year; and
(c) a Bangladeshi company or any other company the control and management of whose
affairs is situated wholly in Bangladesh in that year;
(d) a trust, a fund or an entity, the control and management whose affairs is situated wholly
in Bangladesh in that year.

19. Royalty [u/s 2(79)]: "royalty" means consideration (including any lump sum consideration
but excluding any consideration which is classifiable as income of the recipient under the
head "capital gains") for --
(a) 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 mark or similar property;
(b) the imparting of any information concerning the working of, or the use of, a patent,
invention, model, design, secret process or formula, or trade mark or similar property;
(c) the use of any patent, invention, model, design, secret process or formula, or trade mark
or similar property;
(d) the imparting of any information concerning technical, industrial, commercial, or
scientific knowledge, experience or skill;
(e) any transfer of rights, including copyright or licensing of the film, other than sale,
distribution or exhibition of the cinematograph film;
(f) the rendering of any services in connection with any of the aforesaid activities.

20. Tax [u/s 2(21)]: "tax" means the tax payable on income and includes any additional tax,
excess profit tax, penalty, super tax, interest, fee or other charges leviable or payable under
this Act.

21. Tax Day [u/s 2(23)]: Tax Day means

(a) In case of an assessee other than company 30th day of November;
(b) In case of company 15th day of the 7th month following the end of the income year or the
15th day of September following the end of the income year where the said 15th day falls
before the 15th day of September;
(c) 30 June following the end of the income year in case of individual assessee who has
never filed a return before;
(d) In case of individual assessee residing abroad, the 90th day from the date of his return
to Bangladesh, if such person –
 Stays outside Bangladesh on leave for higher education or on deputation or lien for
employment; or
 Stay outside Bangladesh with valid visa and permitted for the purpose of earnings;
(e) If the Tax Day is holiday, then automatically it would be the next working day.
22. Total income [u/s 2(78)]: "total income" means the total amount of income referred to in
section 26 computed in the manner laid down in this Act, and includes any income which,
under any provision of this Act, is to be included in the total income of an assessee.

23. Transfer [u/s 2(93)]: "transfer", in relation to a capital asset, includes the sale, exchange or
relinquishment of the asset, or the extinguishment of any right therein, but does not include-

14 Business Planning: Taxation & Compliance ICAB 2024

 (a) any transfer of the capital asset under a gift, bequest, will or an irrevocable trust;
(b) any distribution of the assets of a company to its shareholders on its liquidation; and C
(c) any distribution of capital assets on the dissolution of a firm or other association of H
persons or on the partition of a Hindu undivided family. A
P
24. Year [u/s 2(59)]: "year" means a financial year. T
E
1.9 The concept of income R

Concept of income in the Income Tax Act, 2023 is an inclusive definition but not exhaustive. It
describes sources of income, but it refrains from saying what is income. It is also important to 1
note that the word ‘income’ used in ITA, 2023 is not limited only to ‘profit or gains’ and hence in
order to consider as income it is not necessary that it should constitute or provide a profit or gain
to the assessee.

The illegality of income does not exempt it from tax, the revenue shall not be concerned with
the tainting of illegality of income or its source.

There is no exhaustive definition of “income” in the Income Tax Act, 2023. The term income is
easy to understand but difficult to define. What is taxed, as so often has been pointed out under
the income tax law, is nothing that is real; it is the statutory income measured in a way.

The object of the Act is to tax “income”. The term is expanded in many sections into income,
profits and gains; but the expansion is more a matter of words than of substance. The word
“income” is an expression of elastic ambit and the courts when describing income have almost
always qualified their description by saying that it is not exhaustive.

From various judicial decisions, the following are held to be characteristics of income:

(a) Income should be received in the form of money or money’s worth;

(b) Income should be in the form of revenue nature;
(c) It should arise from some definite source or a source with some sort of regularity;
(d) It should be derived from a person other than the recipient;
(e) Income tainted with illegality is also classified as taxable income under tax law.

Income is a more general term than profits or gains. The words “income, profits and gains” are
used in a distinctive sense, and the word “income” is not limited by the word “profits” and
“gains”. A receipt may be taxable as income, although it may contain no element of profits or
gain. Profits or gains mean something which is interest or fruit, as opposed to principal or tree.
“Gains” is really equivalent to “profits”. The profit of a trade or business is the surplus by which
the receipts from the trade or business exceed the expenditure necessary for the purpose of
earning these receipts.

Section 2(13) of the Income Tax Act, 2023 gives a definition of income as under:
‘Income’ includes-

(a) any income, profits or gains, from whatever source derived, chargeable to tax under any
provision of this Act;
(b) any amount which is subject to collection or deduction of tax at source under any provision
of this Act;
(c) any loss of such income, profits or gains under sub-clause (a);

ICAB 2024 Sources and structure of Bangladesh income tax law 15

 (d) the profits and gains of any business of insurance carried on by a mutual insurance
association computed in accordance with paragraph 8 of the Fourth Schedule;
(e) 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 Act;
(f) any amount, payment, or transaction on which a tax is imposed.

To understand the true nature of income, the following two case decisions can be referred to:

(a) Shaw Wallace & Co case:

“Income in the Act connotes a periodical monetary return coming in with some sort of
regularity or expected regularity from a definite source. The source need not be
continuously productive, but it must be one where object is the production of a definite
return, excluding anything a mere windfall. Income is essentially the product of something
which is often loosely spoken as ‘capital’. It is not correct to say that every receipt which is
not a capital is assessable. On the other hand, it is only receipts that are of the nature of
income receipts that are assessable…….”

(b) Rani Amrit Kunwar case:

“Income, in order to be taxable, need not arise from any business activity, investment of
enforceable obligation to pay, but may arise from voluntary or customary payments. Nor is
it necessary that it should be the result of some outlay on the part of the assessee……”

Therefore, for the purposes of the Income Tax Act, 2023, income is a periodical monetary
return coming in with some sort of regularity or expected regularity from a definite source,
not excluded by the Act.

Total income: section 2(78)

Section 2(78) defines the term “total Income” as follows: “total income” means the total
amount of income referred to in section 26 computed in the manner laid down in the Act,
and includes any income which, under any provision of the Act is to be included in the total
income of an assessee.

1.10 Capital or revenue

Difference between capital and revenue is of vital importance. Income tax is levied on income
and not on capital receipts. While ascertaining the profits of a business or profession, the
revenue expenditure is deductible from the trading receipts, not the capital expenditure. Courts
have often observed that it may conclusively be judged that a receipt is a capital or a revenue
receipt. Decided cases merely illustrate and not all are perfect guides.

The distinction between capital and revenue receipts is much more difficult than between capital
and revenue expenditure. There are no hard and fast rules which may help in determining
whether a receipt is a capital or a revenue receipt.

Whether expenditure is incurred solely to earn profit or whether it is a capital expenditure

depends in each case on the nature of business, commercial practice, the nature of the
expenditure and other relative circumstances. No rigid rules can be laid down in this connection.

16 Business Planning: Taxation & Compliance ICAB 2024

 Debt versus equity
C
Debt and equity classification is also very important for tax purposes because servicing of debt H
through interest payment is an allowable tax deduction but servicing of equity through dividend A
is not allowable tax deduction. In order to maximize tax benefit at times corporates structure P
their balance sheet gearing or debt-equity mix in such way that it can achieve highest tax benefit. T
E
1.11 Tax and income tax R

Income tax is tax on income. Section 2(21) of the Income Tax Act, 2023 defines tax as follows:
"tax" means tax payable on income and includes any additional tax, excess profit tax, penal tax,
1
super tax, penalty, interest, fees, or other charges leviable or payable under the Act".

1.12 Different rates of tax

The different tax rates for different types of assessee for the assessment year 2024-25 are as
follows:

(1) Tax rates for individual, partnership firm and Hindu Undivided Family:

The threshold limit of total Income not liable to Income tax for the assessment year 2024-25
stands at Tk. 3,50,000.

Tax exempted ceiling of income for female assessee, and senior citizens ageing 65 or above is
Tk. 4,00,000 and that for 3rd gender assessee, handicapped/disabled persons is Tk. 4,75,000
and for gazated war wounded freedom fighter is Tk. 5,00,000 for the assessment year 2024-25.
The threshold limit in case of parents or legal guardian of any person with disability will be Tk.
50,000 more for each disabled dependent. If both father and mother of the disabled person is
assessee then any one will avail this benefit.

The 6 tier tax rates for the assessment year 2024-25 are given below:

Tier Income slab Tax rate

1 First Tk. 350,000 0%
2 Next Tk. 100,000 5%
3 Next Tk. 400,000 10%
4 Next Tk. 500,000 15%
5 Next Tk. 500,000 20%
6 On rest of income 25%

(2) Tax rates for companies

Applicable tax rates for companies for the Assessment year 2024-25 are as follows:

Nature of company Tax rates

Publicly traded Transferred over 10% of share capital by IPO 22.5%
company* Transferred up to 10% of share by IPO 25.0%
Non-publicly traded company as defined in section 2(31)* 27.5%

ICAB 2024 Sources and structure of Bangladesh income tax law 17

 One person company (OPC)* 22.5%
Bank, insurance, Listed 37.5%
financial institutions Non-listed 40.0%
Marchant bank 37.5%
Cigarette/tobacco manufacturer 45.0%
Mobile operators Non-listed 45.0%
Listed (by offering at least 10% of share capital and 40.0%
pre-initial public placement shall not exceed 5%)

*Company tax rate shall be 2.5% lower if all income received, and every single transaction for
above Tk. 5,00,000 and annual expense & investment over Tk. 3,600,000 are made through bank
transfer.

(3) Tax rates for Trust, Fund, Association of Persons (AoP) and other taxable entity, other than
company, shall be 27.5% subject to above conditions.

(4) Tax rate on dividend income for assessment year 2024-25:

 For company receiving dividend -

(i) If dividend received from a company registered under Company Act 1994 or any profit
emitted outside Bangladesh by a foreign company, the tax rate on dividend income will
be 20%.
(ii) 10% to 15% on profit remitted outside Bangladesh by a foreign company resides in a
country with whom there is Double Taxation Avoidance Agreement with Bangladesh.

 For assessee other than companies -

(i) Resident and non-resident Bangladeshi individual, firm etc. –Normal slab rate.
(ii) Non-resident foreign individual- @ 30%.

(5) Tax rate for non-resident foreigner is straight 30%.

(6) Tax rate on income from capital gain (Paragraph 1 of the Seventh Schedule):
(1) Companies @ 15%.
(2) Other assessee: In the event of the sale of capital assets within 5 years of acquisition, the tax
will be levied at the regular slab rate. If the sale of capital assets occurs after 5 years of
acquisition, tax rate 15% will be applicable on the capital gains.

(7) Tax rate on winning from lotteries, puzzles, card, online games, or similar games is 25%.

1.13 Liability to pay tax

A. Individuals

 Income tax: An individual may be liable to pay tax on the following income:
− income from employment
− income from rent
− income from agriculture
− income from business
− capital gain

18 Business Planning: Taxation & Compliance ICAB 2024

 − income from financial asset, and
− income from other sources C
H
An individual used to be taxed annually on his total income at the rate prescribed at the Finance A
Act enacted every year. P
T
B. Partnership E
R
A partnership is a group of persons carrying on a business together with a view to making profit.

Partnership firm is taxable. Tax is to be calculated at normal slab rate like individual. Share
1
income from the partnership firm is to be added with each partner’s personal income. After tax
computation of the partner a portion of tax to be deducted at average rate based on taxed share
income as per section 80.

C. Companies

A company is a legal person who is legally separated from its owners (shareholders) and its
managers (directors). For the purpose of income tax, the meaning of company is defined under
section 2(31) of the Income Tax Act, 2023.

A company is liable to pay income tax; the rate being determined with reference to the Finance
Act enacted in every financial year.

1.14 Tax liability on income

The tax is payable in the following year i.e., assessment year on income earned during an income
year. However, there are provisions for payment of taxes in advance during the income year,
such as deduction of taxes at source and advance payment of taxes under Part -7 of the ITA,
2023.

Under section 2 (15) "income year”, means financial year immediately preceding the assessment
year and includes:

(a) the period beginning with the date of setting up of a business and ending with the thirtieth
day of June following the date of setting up of such business;
(b) the period beginning with the date on which a source of income newly comes into existence
and ending with the thirtieth day of June following the date on which such new source
comes into existence;
(c) the period beginning with the first day of July and ending with the date of discontinuance
of the business or dissolution of the unincorporated body or liquidation of the company, as
the case may be;
(d) the period beginning with the first day of July and ending with the date of retirement or
death of a participant of the unincorporated body;
(e) the period immediately following the date of retirement, or death, of a participant of the
unincorporated body and ending with the date of retirement, or death, of another
participant or the thirtieth day of June following the date of the retirement, or death, as the
case may be;
(f) in the case of bank, insurance, financial institution or its affiliates, the period of 12 months
commencing from the first day of January of the relevant year.

ICAB 2024 Sources and structure of Bangladesh income tax law 19

 Provided that the DCT may allow a different financial year for a company which is a subsidiary,
including a subsidiary thereof, or holding company of a parent company incorporated outside
Bangladesh or a branch or liaison office thereof if such company requires to follow a different
financial year for the purpose of consolidation of its accounts with the parent company.

1.15 Some significant issues of income tax

Assessment year:

Assessment year means the year following the financial year, i.e., income year. Thus, the
assessment year always begins on 1st July and ends on 30th June every year. This period is also
known as the financial year. Accordingly, it is the current financial year in which income of the
immediately preceding financial year (known as income year) is assessed.

As per section 2(24) of the ITA, 2023; the term "assessment year" means the period of twelve
months commencing on the first day of July every year and includes any deemed assessment
year as per provision of the Act.

From the following example, we can see how to find out the assessment year:

Accounting year ended on Income year Assessment year

30.06.2024 (except bank, insurance, and financial 2023-24 2024-25
institution)
31.12.2023 (For bank, insurance and financial 2023 2024-25
institution)

Exceptions to the rule of assessment year:

Generally, income is taxed in the subsequent year to the income year. But, in certain cases, to
protect the interests of revenue, the income is taxed in the year of earning itself. Thus, in those
cases the assessment year and the income year are the same. The exceptions to the normal rule
of assessment year are discussed as under:

(a) Income of discontinued business [section 191]: Where any business or profession is
discontinued in any assessment year, the income of the period from the expiry of the last
income year up to the date of such discontinuance may be charged to tax in that assessment
year.

(b) Persons leaving Bangladesh [section 193]: When it appears to the Assessing Officer that an
individual may leave Bangladesh and has no intention to return, the total income of such
individual for the period from the expiry of the income year in relation to the current
assessment year up to the probable date of his departure from Bangladesh is chargeable to
tax in current assessment year itself.

(c) Income of non-resident shipping companies and airlines [section 259 and 260]: Section
259 and 260 of the ITA, 2023, provides for the taxation of income of non-resident shipping
companies and airlines in the year in which they earn their income in Bangladesh, provided
that such companies do not have any representative here.

20 Business Planning: Taxation & Compliance ICAB 2024

 Different classes of assessee:
As per ITA, 2023, assessee is a person who is liable to pay any sum under the Income Tax Act, C
2023 or in respect of whom the proceedings have been under this Act. The below diagram H
depicts the different classes of assessee: A
P
Individual T
E
Firm R

Hindu Undivided Family

1

Association of Persons

Trust

Fund

Entity

Local Authority

Company

Artificial Juridical Person

Resident
Non - resident
Bangladeshi
Non - resident

Non - resident
foreigner

Residential status of an assessee:

Section 2(45) defines the term ‘resident’” as follows: - ‘Resident’, in respect of any income year,
means-

(a) An individual who has been in Bangladesh-

(i) for a period of, or for periods amounting in all to, 183 days or more in that year; or
(ii) for a period of, or for periods amounting in all to 90 days or more in that year having
previously been in Bangladesh for a period of, or for periods amounting in all to 365
days or more during 4 years preceding that year;
(b) a Hindu un-dividend family, firm or other association of persons, the control and
management of whose affairs is situated wholly or partly in Bangladesh in that year; and

ICAB 2024 Sources and structure of Bangladesh income tax law 21

 (c) a Bangladeshi company or any other company the control and management of whose affairs
is situated wholly in Bangladesh in that year; and, under section 2(4), ‘non-resident’ means
a person who is not a resident.

It is important to note here that the concept of resident as defined in the Income Tax Act has
nothing to do with the nationality of a particular individual. A foreign national may be treated as
‘Resident’ for a particular year if he or she fulfills the legal requirements as above, whereas a
Bangladeshi national may be treated as a ‘Non-resident’ if he, or she does not fulfill the said
requirements.

To test residential status of an individual, the following flow chart will be helpful:

Non - resident Non - resident

Bangladeshi (NRB) Foreigner (NRF)

Yes No

Is the assesseeis Bangladeshi citizen?

An individual
stays in
Bangladesh for -
Non - resident
No No
No Yes
183 days or more 90 days or more 365 days or more
during the income during the during 4 immediately
year? income year? preceding years?

Yes Yes

Resident

In case if an individual is found to be resident in more than one country due to his/her physical
presence, normally ‘tie breaker rule’ is applied. As per this rule first it need to be ascertained
which country is his/her citizenship. If it is found that he/she is a citizen of both countries, then it
shall be ascertained where is his/her habitual residence is.
Bangladeshi resident company

Section 2(61) defined Bangladeshi company as those company formed and registered under
the Companies Act 1994 as well as established or constituted by or under any Bangladeshi law
and having its registered office in Bangladesh. As per Section 2(45(c)) of ITA, 2023 all such
Bangladeshi company as well as any other company the ‘control and management’ of whose
affairs is situated wholly in Bangladesh in that year shall be treated as Bangladesh resident.

Control and management

Control and Management normally involve holding of directors meeting, physical undertaking
and subjects of trade etc. It can happen that a company is resident in one country but the trading
is undertaken in another country. In India the term used is "place of effective management",

22 Business Planning: Taxation & Compliance ICAB 2024

 which means a place where key management and commercial decisions that are necessary for
the conduct of business of an entity as a whole are, in substance made. Control of a business not C
necessarily means from where the actual trading or physical business activities are conducted. H
A fundamental case on this matter is De Beers Consolidated Mines Ltd v Howe where a South A
African incorporated mineral company is determined as having resident of London, UK. This P
matter is also elaborated further in various avoidance of double taxation treaty prepared under T
OECD guidelines. E
R
Taxation implication of resident or non-resident

Determination of residential status of an assessee has a significance bearing on the tax liability
1
as incidence of income tax varies according to the residential status of an assessee. In this regard
we can consider the following issues:

I. To determine the amount of total income: Determination of total income is different for
residents and non-residents. Global income of a resident is deemed as his “total income”.
Whereas only income earned in Bangladesh of a non-resident is deemed as his “total
income”.

II. To determine minimum limit of taxable income: A resident and non-resident Bangladeshi
has to pay tax if his total income is more than Tk. 3,50,000 as per the Finance Act (in case of
women, and elderly citizens being 65 years old, the limit is Tk. 4,00,000, for 3rd gender and
disable persons the limit is Tk. 4,75,000 and for war wounded freedom fighter the limit is Tk.
5,00,000). The threshold limit in case of parents or legal guardian of any person with
disability will be Tk. 50,000 more for each dependent. If both father and mother of the
disable person is assessee then anyone will avail this benefit. But for a non-resident foreigner
such minimum limit is not applicable.

II. Tax rate: For an individual being a resident or non-resident Bangladeshi tax is calculated
using the rates applicable for various levels of income. Such as, for first Tk. 3,50,000 @ 0%,
for next Tk. 1,00,000 @ 5%, next Tk. 400,000 @10%, next Tk. 500,000 @15%, next Tk. 500,000
@ 20% and rest of the income @25%. But a non-resident foreign individual has to pay tax
straight @ 30%.

III. Investment tax credit: An individual being a resident or non-resident Bangladeshi gets tax
credit on investment allowance. But, for a non-resident foreigner no investment tax credit is
applicable.

IV. Tax liability: The average tax rate applicable for a resident and non-resident Bangladeshi is
less than that of a non-resident foreigner since tax is calculated using different tax rates (such
as 5%, 10%, 15%, 20% and 25%). But a non-resident foreigner must pay tax straight @30%.

Thus, determination of residential status of an assessee has a significant bearing on the tax
liability as total income; and tax rate are found to vary according to the residential status of an
assessee.

Impacts of residential status in assessing income:

Determination of residential status of an assessee has a significant bearing on the tax liability as
incidence of income tax varies according to the residential status of an assessee as per section
26 of the ITA, 2023. Therefore, the scope of total income varies according to the residential
status of an assessee. These provisions may be summarized as under:

ICAB 2024 Sources and structure of Bangladesh income tax law 23

 To be taxed or not
Particulars of income
Resident Non-resident
Income received or deemed to be received in Taxable Taxable
Bangladesh
Income accrued or arose or deemed to accrue or arise in Taxable Taxable
Bangladesh
Income accrued or arose outside Bangladesh Taxable Non-taxable

Worked example – 1.1

Mr. Uzzal, an Indian citizen, stayed in Bangladesh from 1st August 20X1 to 31st December 20X1
and left for London. What will be his residential status in the income year?

Solution

Mr. Uzzal is a non-resident since his stay in Bangladesh during income year is [31 +30+31
+30+31] = 153 days which is less than required 183 days.

Worked example – 1.2

Mr. Arif, a Bangladeshi citizen, stayed in Bangladesh from 1st July 20X1 to 31st December 20X1
and left for Japan. What will be his residential status in the income year?

Solution

Mr. Arif is a resident because he resides in Bangladesh during the income year is
[31+31+30+31+30+31] = 184 days, which is more than required 183 days.

Worked example – 1.3

Mr. Akash stayed in Bangladesh from 1st September 20X1 to 31st January 20X2 and left for
Trinidad. He came back on 1st May 20X2 and still staying in Bangladesh. What will be his
residential status in the income year?

Solution

Mr. Akash is a resident because he resides in Bangladesh September 20X1 to January 20X2
[30+31+30+31+31] = 153 days and from 1st May to 30th June 20X2 [31+30] = 61 days. In total
he stayed for [153+61] =214 days in the income year, which is more than required 183 days.

Worked example – 1.4

Mr. Rakesh Jason, a citizen of USA, has been staying in Bangladesh since 1st January 2018. He
leaves Bangladesh on 16 July 2021 on a visit to USA and returns on 1st March, 2022. What will
be his residential status in the income year 2021-22?

24 Business Planning: Taxation & Compliance ICAB 2024

 Solution
C
His stay in Bangladesh during the income year 2021-22 is: H
July 2021—18 A
March 2022—31 P
April 2022—30 T
May 2022—31 E
June 2022—30 R

Total staying—140 days

1
His stay in proceeding 4 income years:
2020-21—365
2019-20—366
2018-19—365
2017-18—181 [from 1st January 2018 to 30th June 2018]

Total stay—1,277 days

As his stay was more than 90 days in the income year 2021-22 and more than 365 days in the
preceding 4 years, he is a resident.

Worked example – 1.5

Mr.Juris Reinhards, a British citizen comes every year to Bangladesh for 100 days since 2017-18
income year:

(a) Determine his residential status for the income year 2021-22.
(b) Will your answer be different if he comes to Bangladesh for 90 days instead of 100 days
every year?

Solution
(a) He is a resident as he stayed in Bangladesh for 100 days (more than required 90 days) in the
income year 2021-22 and 400 days (100 x 4) (more than required 365 days) in the preceding
4 income years i.e., 2017-18, 2018-19, 2019-20 and 2020-21.
(b) Yes, the answer will be different. He will, in this case, be a non-resident as he stayed in
Bangladesh for 90 days (equal to required minimum 90 days) in the income year 2021-22
but 360 days (90 x 4) (less than required 365 days) in the preceding 4 income years i.e.,
2017-18, 2018-19, 2019-20 and 2020-21 as he failed to fulfill the required conditions.

Worked example – 1.6

Mr. Jashim Uddin was outside Bangladesh from 20thAugust, 2020 for an employment contract
valid for two years, i.e., from 1stAugust, 2020 to 31st July, 2022. Mr. Jashim Uddin did not come
to Bangladesh at any time during the year 2021. He finally came to Bangladesh on 10th January,
2022 and did not go back. Determine his residential status for the income year 2021-22.

ICAB 2024 Sources and structure of Bangladesh income tax law 25

 Solution

Total number of days Mr. Jashim Uddin stayed in Bangladesh during respective years:

2021-22 (From 10th January, 2022 to 30th June, 2022): [22+28+31+30+31+30) = 172 days.
2020-21 (From 1st July, 2020 to 20th August, 2020): [31 +20) = 51 days.
2019-20 (From 1st July, 2019 to 30th June, 2020) = 365 days
2018-19 (From 1st July, 2018 to 30th June, 2019) = 365 days
2017-18 (From 1st July, 2017 to 30thJune, 2018) = 365 days

Mr.Jashim Uddin is a resident since he fulfills the second condition. His duration of stay in
Bangladesh during the income year 2021-22 is 172 days which is more than required 90 days in
that year, and [51+365+365+365) =1,146 days during previous 4 years which is more than
required 365 days.

Worked example – 1.7

Mr. Jayed provides the following particulars of his period of stay in Bangladesh over last 6 years:

Year Days
2016-17 40
2017-18 55
2018-19 182
2019-20 200
2020-21 94
2021-22 110

(a) Determine his residential status for the income year 2021-22.
(b) What will happen if he stays for 85 days in the year 2021-22?
(c) What will happen if he stays for 80 days in the year 2019-20?
(d) What will happen if he stays for 185 days in the year 2021-22 and total 360 days during last
four years?

Solution

a) Mr. Jayed is a resident since he fulfills the second condition. His period of stay in Bangladesh
during the income year 2021-22 is 110 days which is more than required 90 days in that
year, and [55+182+200+94] = 531 days during previous 4 years which is more than required
365 days.
b) Mr. Jayed would be a non-resident since he doesn't fulfill the second condition. His stay in
Bangladesh during income year 2021-22 is 85 days which is less than required 90 days in
that year, although he stayed [55+182+200+94] = 531 days during previous 4 years which
is more than required 365 days.

c) Mr. Jayed is a resident since he fulfills the second condition. His stay in Bangladesh during
income year 2021-22 is 110 days which is more than required 90 days in that year and his
total stay during previous four years is 411 days [55+182+80+94] which is more than the
required 365 days.

26 Business Planning: Taxation & Compliance ICAB 2024

 d) Mr. Jayed would be a resident since he fulfills the first condition. His stay in Bangladesh
during income year 2021-22 is 185 days which is more than required 182 days of the first C
condition. In such a case, it is not important to know regarding his stay during 4 preceding H
years. A
P
Worked example – 1.8 T
E
Alex Associates is a partnership firm whose:
R
(a) Control and management of affairs is situated wholly in Bangladesh.
(b) Control and management of affairs is situated partly in Bangladesh.
(c) Control and management of affairs is situated wholly outside Bangladesh. 1
Determine the residential status of the firm.

Solution

(a) Resident; since control and management of affairs is situated wholly in Bangladesh.
(b) Non-resident; since control and management of affairs is not situated wholly in Bangladesh.
(c) Non-resident; since control and management of affairs is situated wholly outside
Bangladesh.

Worked example – 1.9

HSBC is non-banking financial institution in Bangladesh whose:

(a) Control and management of affairs is situated wholly in Bangladesh.
(b) Control and management of affairs is situated partly in Bangladesh.
(c) Control and management of affairs is situated wholly outside Bangladesh.

Solution

(a) Resident; since control and management of affairs is situated wholly in Bangladesh.
(b) Non-resident; since control and management of affairs is situated partly in outside
Bangladesh.
(c) Non-resident; since control and management of affairs is situated wholly outside
Bangladesh.

Worked example – 1.10

Mr. Akanda has earned following income from various sources during the year 2023-24:
1. Salary income earned and payable in Bangladesh Tk.100,000.
2. Profit of Tk.40,000 from a business in London.
3. Profit of Tk.60,000 from a business in Singapore. The Business has been managed and
controlled wholly from Singapore.
4. Profit of Tk. 70,000 from a business in Dubai has not yet been brought in Bangladesh.

Compute the amount of total income of Mr. Akanda, assuming that he is a—

(a) Resident;
(b) Non-resident

ICAB 2024 Sources and structure of Bangladesh income tax law 27

 Solution

Mr. Akanda
Computation of total income

Particulars Resident Tk. Non-resident Tk.

Income earned in Bangladesh: Salary income 100,000 100,000
Foreign income: Profit from business in London 40,000 -
Profit from business in Singapore 60,000 -
Profit from business in Dubai 70,000 -
Total income 270,000 100,000

Worked example – 1.11

The following are the particulars of income of Mr. Zaman for the income year 2023-24:
1. Rent from a property in Dhaka received in India Tk. 40,000
2. Income from a business in USA controlled from Bangladesh Tk. 150,000
3. Income from a business in Dhaka controlled from Pakistan Tk. 180,000
4. Rent from a property in Canada received there but subsequently remitted to Bangladesh Tk.
60,000
5. Interest from bank deposits in Canada Tk. 20,000

Gifts received from his parents Tk. 45,000 which has been included in the returns of the both
parties.

Compute total income of Mr. Zaman, assuming that he is a—

(a) Resident;
(b) Non-resident

Solution

Mr. Zaman
Computation of total income

Non-resident
Particulars Resident Tk.
Tk.
Rent from property in Bangladesh (wherever paid) 40,000 40,000
Income from business in USA controlled from 150,000
Bangladesh (as income accrues outside Bangladesh)
Income from business in Dhaka controlled from Pakistan 180,000 180,000
(as it is received in Bangladesh)
Interest on bank deposits at Canada 20,000

Total income 390,000 220,000

28 Business Planning: Taxation & Compliance ICAB 2024

 Note-1: Rent from a property in Canada received there but subsequently remitted to
Bangladesh Tk. 60,000 is exempted from payment of tax as per 6th Schedule (Part –1) para-17. C
H
Note-2: Gift from parents is tax free income if it is shown in the returns of both recipient and the A
donor. P
T
Worked example – 1.12 E
R
From the following particulars of Mr. Rahman for the income year 2023-24, compute total
income if he is resident or non-resident:
1
(a) Income from employment received in Bangladesh for services rendered in Afghanistan Tk.
40,000
(b) Income from profession in Bangladesh, but received in Nepal Tk. 150,000
(c) Profits earned from business in Chittagong Tk. 60,000
(d) Property income in South Africa Tk.1,80,000 (out of which Tk. 90,000 was remitted to
Bangladesh)
(e) Income from agriculture in Bhutan Tk. 20,000

Solution

Mr. Rahman
Computation of total income

Particulars Resident Tk. Non-resident Tk.

Income in Bangladesh
(a) Income from employment received in 40,000 40,000
Bangladesh
(b) Income from profession accrues in Bangladesh, 150,000 150,000
(c) Profits earned from business in Chittagong 60,000 60,000
Foreign income:
(a) Property income in South Africa 90,000 -
(b) Income from agriculture in Bhutan 20,000
Total income 360,000 250,000

ICAB 2024 Sources and structure of Bangladesh income tax law 29

30 Business Planning: Taxation & Compliance ICAB 2024
 Chapter 2
Tax Administration and
Taxes Appellate Tribunal

Introduction

Examination context

Topic list

2.1 Various income tax authorities

2.2 Appointment of income tax authorities
2.3 NBR and its functions
2.4 Subordination and control of income tax authorities
2.5 Power and functions of income tax authorities
2.6 Taxes Appellate Tribunal
2.7 Alternate Dispute Resolution (ADR)

Self-assessment questions
 Introduction

Learning objectives

 Identify the different income tax authorities;

 Powers and functions of NBR and other income tax authorities;
 Powers and functions of the Taxes Appellate Tribunal.

Practical significance

The income tax authorities are outlined in section 4 of the Act. Each class of authorities has
definite functions and responsibilities.

Taxes Appellate Tribunal is not the income tax authority. The power and functions of the Tribunal
are normally exercised by its Benches constituted by the President of the Taxes Appellate
Tribunal.

Understanding of the structure of income tax authorities and the Tribunal’s procedures are
essential for both tax advisers and the assessee for dealing the tax matters when required.

Stop and think

Do you have the clear idea of the income tax authorities? Did you know that in case of practical
income tax cases, the knowledge on the tax authorities is very important?

Working context

The knowledge on the administrative structure of income tax authorities and the Tribunal’s
procedures covered by this chapter are important for both the taxpayers and tax advisers to deal
with it.

On behalf of assessee, the accountants are sometimes required to assist in submission of tax
return, hearing to the court etc., so they should have a clear idea about income tax authorities
and its powers and functions and the Tribunal’s procedures in their mind to assist their clients in
resolving relevant tax issues.

Syllabus links

The topics covered in this chapter are important to your understanding of income tax authorities
and The Taxes Appellate Tribunal.

32 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Show the structure of various income tax authorities;

 Discuss the appointment procedures of income tax authorities;
 Mention the powers and functions of different income tax authorities;
 Identify the Taxes Appellate Tribunal.
C
Question practice H
A
For question practice on this topic, please go to the suggested answers of this chapter. P
T
E
2.0 ADMINISTRATION AND TRIBUNAL R

Section overview
2
 Income tax authorities have been divided into 15 classes for the purposes of the Act.
 NBR is the highest income tax authority and Inspector is the lowest authority.
 Each class of authorities has definite powers and functions.
 Government shall constitute a Taxes Appellate Tribunal consisting of a President and other
members.
 The procedures followed by the Taxes Appellate Tribunal in disposing of the appeals.
 The procedure followed by the Alternate Dispute Resolution (ADR) to resolve disputes.

2.1 Various income tax authorities

Depending on the functions, income tax authorities may be classified into two major groups,
namely,

(a) Administrative: Executive looking after the overall tax administration;

(b) Quasi-Judicial: They are not income tax authority, only exercising judicial function in appeal
cases.

ICAB 2024 Tax Administration and Taxes Appellate Tribunal 33

  Deputy Commissioner of Taxes
 Assistant Commissioner of Taxes
 Extra Assistant Commissioner of Taxes
 Inspector of Taxes

2.2 Appointment of income tax authorities: section 5

(1) Income tax authorities shall be appointed in accordance with applicable law, rules and
regulations [section 5(1)].
(2) Board may appoint any person as income tax authorities in accordance with rules as may be
prescribed [section 5(2)].
(3) Board may appoint required number of employees, subject to organizational structure
[section 5(3)].

2.3 NBR and its functions

National Board of Revenue (NBR) is the highest executive tax authority. It is a statutory body and
its members are appointed by the Government to manage, control and supervise the whole
income tax department. The NBR is empowered to make necessary rules concerning income tax
matters. It cannot act by issuing any instructions to be construed as interference to the authority
of judicial personnel like the Commissioner of Taxes (Appeals), Appellate Additional
Commissioner of Taxes, Appellate Joint Commissioner of Taxes and the Taxes Appellate
Tribunal when they exercise their judicial powers.

34 Business Planning: Taxation & Compliance ICAB 2024

 Main functions of the NBR

1. To declare any foreign un-incorporated association as a company for the purposes of the
Act. [section, 2(31) (Ta)];
2. To delegate powers of any income tax authority to another income tax authority [section 6];
3. To determine the functions of the Director General (Inspection), the Director General
(Central Intelligence Cell), to determine and re-determine area of income tax authority, to
transfer of power and jurisdictions of one income tax authority to another income tax
authority [section 8];
4. To determine the place of assessment of assessee by issuing order [section 8];
5. To issue orders, directions or instructions to all officers and other persons engaged in the
performance of any functions under the Act. [section 10];
6. To direct to deposit withheld income tax to the Government exchequer within the specified
time. [sec 146]; C
7. To recognize and authorize practicing chartered accountant, practicing cost and H
management accountant, practicing chartered secretaries, income tax practitioner and
A
practicing members of other bodies for appearance in income tax matters as authorized
P
representative of the assessee. [section 327];
T
8. To take disciplinary action against any authorized representative in case of professional
E
misconduct. [section 327];
9. To allow tax holiday or tax exemption to approved undertakings and cancel them. [section R
85];
10. To accord and withdraw recognition to Superannuation Fund, Gratuity Fund and Pension
Fund. [2nd Schedule part 1, 2 & 3]; 2
11. To reward employees of the tax department or any other person for detection of tax evasion
and collection therefrom. [section 340].

2.4 Subordination and control of income tax authorities: section 7

Board, by issuing order may make rules related to subordination and control of income tax
authorities.

2.5 Power and functions and jurisdiction of income tax authorities: section 8

As per section 8, subject to the provision of the Act,

(1) member (tax) can apply such power and implement such act which power and act can be
done by the Board under this act.

(2) the Director-General of Inspection shall perform the following functions, namely:

(i) carry out inspection of income tax cases;

(ii) Make proposal for rectification of tax policy and development of tax administration area
based on inspection;
(iii) Furnish report including comments and recommendations as prescribed by the Board.
(iv) Other functions as may be assigned to them by the Board.

(3) the Director General of Central Intelligence Cell shall perform the following functions,
namely: -

(i) Carry out intelligence works to gather information about taxpayers;

ICAB 2024 Tax Administration and Taxes Appellate Tribunal 35

 (ii) Analyze information gathered through intelligence work vis-a-vis concerned income tax
records;
(iii) Detect tax evasions, concealments of income and offences as described in part 13 and
15;
(iv) Carry out investigations to prove tax evasion or concealment or any other irregularities
relating to taxes and to collect evidences in support of tax offences or tax frauds for
recovery of tax with penalty and to suggest prosecutions in fit cases;
(v) To carry out functions as authorized by any other law.

(4) The Board, by order may determine and re-determine area of income tax authority, to
transfer of power and jurisdictions of one income tax authority to another income tax
authority;
(5) Abovementioned transfer can be made any level of normal activities and subsequent
activities can be taken at which level such transfer was made;
(6) The Board, by order may fix the place of assessment of the assessee.

Exercise of jurisdiction by successor: section 9

Where, in respect of any proceeding under the Act, an income tax authority is succeeded by
another, the income tax authority so succeeding may continue the proceeding from the stage at
which it was left by his predecessor.

Officers etc. to follow instructions of the Board: section 10

All officers and other persons engaged in the performance of any functions under the Act 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.

However, no order, directions or instructions shall be given so as to interfere with the discretion
of the Appellate Joint Commissioner or the Commissioner (Appellate) in the exercise of their
appellate functions.

Guidance to the Deputy Commissioner of Taxes: section 11

In the course of any proceedings under the Act, the Deputy Commissioner of Taxes may be
assisted, guided or instructed by any income tax authority to whom he is subordinate or any
other person authorized in this behalf by the Board.

Exercise of assessment functions by the Inspecting Joint Commissioners and the Inspecting
Additional Commissioners: section 12

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 specified persons of classes or persons
within his jurisdiction, to the effect that power and activities of any income tax authority shall be
exercised by the immediate superior income tax authority.

Any abovementioned order shall be deemed to have been made immediately to the higher
income tax authority.

36 Business Planning: Taxation & Compliance ICAB 2024

2.6 Taxes Appellate Tribunal

Establishment of Appellate Tribunal: section 13

(1) For the purpose exercising the functions of the Taxes Appellate Tribunal under the Act, the
Government shall establish a Taxes Appellate Tribunal consisting of a President and such
other members as the Government may, from time to time, appoint.

A person shall not be appointed as a member of the Taxes Appellate Tribunal unless-
(i) he was or is a member of the Board; or
(ii)he is, was or has been a District Judge; or
(iii)
he was a Commissioner of Taxes; or
(iv)he is a tax lawyer under section 327 and practiced professionally in income tax offices
for a period not less than 10 years; or C
(v) he is a professional legislative expert having experience for a period not less than 10 H
years in the process of drafting and making financial and tax laws; or A
P
(2) The Government shall appoint a member of the Appellate Tribunal to be the President T
thereof who is a member of the Board or holds current charge of a member of the Board.
E
R
Exercise of power of the Tribunal by Benches: section 14

(1) Unless the president in any particular case or class of cases otherwise directs, the powers
and functions of the Appellate Tribunal shall be exercised by Benches of the Appellate 2
Tribunal, hereinafter referred to as Bench, to be constituted by the President;
(2) A Bench shall be so constituted that it has not less than two members;
(3) At least one member of every Bench constituted under sub-section (1) shall be appointed
from below person:
a) Member of National Board of Revenue, or
b) Commissioner of Taxes.

Decision of Bench: section 15

(1) Subject to the provisions of sections (2) and (3), the decision of bench in any case or on any
point shall be given in accordance with the opinion of the majority of its members.
(2) Any point on which the members of a Bench are equally 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 majority of the
members of the Appellate Tribunal who have heard it including those who first heard it.
(3) Where there are only two members of the Appellate Tribunal and they differ in any case, the
Government 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 majority of the members of the Taxes Appellate Tribunal as constituted with
such additional member.
Exercise of power by one member: section 16

Notwithstanding anything contained in section 14, the Government may direct that the powers
and functions of the Appellate Tribunal shall be exercised by any one of its members, or
members or by two or more members jointly or severally.

ICAB 2024 Tax Administration and Taxes Appellate Tribunal 37

 Regulation of procedure of the Appellate Tribunal: section 15

(1) Subject to the provisions of the Act, 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. [section 15];

(2) A Bench shall hold its sittings at its headquarters or such other place as the President may
consider convenient [TATP Rule 3];

(3) A Bench shall hear and determine such appeals and applications made under the Act as the
President may, by general or special order, direct [TATP Rule 4];

(4) The office of the Tribunal shall, subject to any special order of the President, observe the
same office hours and holidays as office of the Supreme Court (High Court Division) at Dhaka
[TATP Rule 5];

(5) The language of the Tribunal shall be English [TATP Rule 6].

Taxes Appellate Tribunal’s procedures

The procedures followed by the Taxes Appellate Tribunal in disposing of the appeals have been
specified in the Taxes Appellate Tribunal (Procedure) Rules, 1985 (TATP Rules).

2.7 Alternate Dispute Resolutions (ADR)

Alternate Dispute Resolution in ITA, 2023 to resolve any dispute of an assessee lying with any
income tax authority, Taxes Appellate Tribunal, or Court. This is done to simplify and speed up
dispute resolution process. The whole process is summarized in following figure:

38 Business Planning: Taxation & Compliance ICAB 2024

 C
H
A
P
T
E
R

ICAB 2024 Tax Administration and Taxes Appellate Tribunal 39

 An assessee may apply for resolution of the dispute through the ADR process if aggrieved by an
order of an income tax authority or if a dispute is pending before any income-tax authority,
tribunal or court. In case of any pending dispute, the assessee is required to get permission from
the authority where it is pending in writing before applying for ADR and if approval is received
and assessee applies for ADR, the matter shall remain stayed during ADR 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 authorized representative, with the Commissioner's Representative
for the concerned dispute under the facilitation and supervision of such Facilitator.

Upon receiving the application of ADR, the Facilitator shall forward a copy of the application to
the respective Deputy Commissioner of Taxes and also call for his opinion on the grounds of the
application. If the Deputy Commissioner of Taxes fails to give his opinion regarding fulfillment
of the conditions, the Facilitator may notify in writing the applicant and the Commissioner of
Taxes or the Commissioner's Representative to attend the meetings for settlement of disputes
on a date mentioned in the notice. Where an agreement is reached, either wholly or in part,
between the assessee and the Commissioner's Representative, the Facilitator shall record, in
writing, the details of the agreement sign and shall communicate the same to the assessee and
the concerned Deputy Commissioner of Taxes.

However, where no agreement is reached or the dispute resolution is ended in disagreement

between the assessee and the concerned Commissioner's Representative for noncooperation
of either of the parties, the Facilitator shall communicate it within fifteen days from the date of
disagreement, to the applicant and the Board, the concerned court, Tribunal, appellate authority
and income tax authority, as the case may be, about such unsuccessful dispute resolution.

Where 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 tax
authority. Where an agreement is not reached, the assessee may prefer an appeal in following
manner:

Dispute arises out of an order of Appeal to

Deputy Commissioner of Taxes Appellate Joint Commissioner of Taxes, or
Appellate Additional Commissioner of
Taxes, or Commissioner of Taxes (Appeals)
Appellate Joint Commissioner of Taxes, or Taxes Appellate Tribunal
Appellate Additional Commissioner of Taxes,
or
Commissioner of Taxes (Appeals)

The assessee-applicant may also appeal to the respective appellate authority or court from
where he has got permission to apply for ADR.

Self-assessment questions

1. Who are the income tax authorities?

2. Discuss the powers and functions of the Commissioner of Taxes.
3. Discuss briefly the powers and functions of the Deputy Commissioner of Taxes.
4. How Taxes Appellate Tribunal works?
5. What are the qualifications required for appointment as a Member of the Taxes Appellate
Tribunal?
6. How ADR can be used to resolve the disputes?

40 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 3
Charge of income tax

Introduction
Examination context
Topic list

3.1 Charge of income tax

3.2 Surcharge
3.3 Charge of additional tax
3.4 Charge of minimum tax for companies
3.5 Charge of minimum tax for partnership firm
3.6 Charge of minimum tax for individual
3.7 Charge of 10% tax on stock dividend
3.8 Charge of 10% tax on retained earnings
3.9 Charge of 50% tax on the difference of investment,
import, export
3.10 Scope of the total income
3.11 Income deemed to accrue or arise in Bangladesh
3.12 Same income shall not include twice in total income
3.13 Special tax treatment in respect of some investments
 Introduction

Learning objectives

 Identify the ways of charging income tax;

 Illustrate the charge of surcharge, additional tax and minimum tax;
 Recognize the scope of total income;
 Recognize the different types of deemed income.

Practical significance

Income tax shall be charged levied, paid and collected at different rates in respect of the total
income in accordance with the provisions of the Act. It may be deducted at source, or paid or
collected in advance. The rates of tax can vary on the basis of income and types of assessee. The
assessee may be required to pay surcharge, additional tax or minimum tax depending on the
situation. Reduced tax rate is also applicable in certain cases.

The scope of total income of a resident and non-resident includes the sources and forms of
income of these persons of any income year.

Stop and think

Think about different ways of charging income tax and identify the similarity and differentiation
of the scope of income of a resident and a non-resident. Do you realize that the different types
of unexplained investment will be deemed as income under different heads? Do you
acknowledge about the special tax treatment in respect of some investment?

Working context

Before determining individual and corporate tax, the rate of tax and the scope of total income
need to be identified. Based on residential status the scope of total income varies. Unexplained
investments are also taxable under respective heads.

An accountant will be expected to understand the scope of total income, deemed income,
applicable tax rate, and special tax treatment and to give advice on how the total income of
individual and company can be determined. This can also suggest their clients to take the facility
of special tax treatment by investing in those specific areas.

Syllabus links

You will be familiar with the charge of income tax and to prepare for the application level and
also for the case study.

Detailed knowledge on this issue helps you to understand the progression level and stage of
your study.

You will be using this knowledge again when you tackle the taxation paper later on in the
Professional Stage and it will also underpin the technical aspects at the Advanced Stage.

42 Business Planning: Taxation & Compliance ICAB 2024

 Examination context
Exam requirements

In the examination, candidates may be required to:

 Clarify how income tax shall be charged;

 Define the surcharge, withholding tax, additional tax and minimum tax;
 Determine scope of total income depending on the residential status;
 Identify the income deemed to accrue or arise in Bangladesh;
 Recognize different unexplained investment etc., deemed to be taxable income;
 Demonstrate the different category of investment for which special tax treatment are
allowed.

Question practice

For question practice on these topics, go to the suggested question and answer.

Examiner's comments on how students tackle questions

Students need to take care of the sources of total income including different classes of
unexplained investment, as these are required for calculation of total income of an assessee.

3.0 CHARGE OF TAX C

H
Section overview A
P
 Tax shall be charged at the rate or rates according to the Finance Act; T
 The rates of tax can be varied on the basis of income and types of assessee; E
 The assessee may be required to pay surcharge, simple interest, minimum tax etc.; R
 Tax may be deducted at source, or paid or collected in advance;
 Unexplained investments can be considered under the scope of total income;
 The scope of total income of a resident and non-resident are different. 3
Any income has to be brought under respective heads of income under section 30 and can be
charged to tax only if it is so chargeable under the computing section corresponding to that
head of income. The liability to tax arises by virtue of this charging section which does not
depend on assessment; assessment order only quantifies the liability which is finally created by
the charging section. Following basic principles can be deduced from the analysis of the
charging section:

(i) Income tax is to be charged at the rate or rates fixed for the year by the Finance Act. The
liability to tax does not arise until the annual Finance Act is passed [Kamakhya Narayan Singh
V CIT (1946) ITR 683]. Section 339 provides that if on the first day of July in any year provision
has not been made by any Act for the charging of income tax for that year, the provision in
force in the immediately 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.

ICAB 2024 Charge of income tax 43

 (ii) Income should be calculated with reference to the income year but tax rate/rates should be
the rate/rates applicable to respective assessment year. The use of the expression charged
both in the Finance Act and Income Tax Act does not mean that the income is charged to
income tax under both the Act and Act. They are used in different senses. The tax will be
charged in accordance with and subject to the provisions of the Income Tax Act and the said
charge shall be in accordance with the rates prescribed in the Finance Act [Kesoram
Industries and Cotton Mills LTD V C. W. T Calcutta (1466) ITR, 767].

(iii) The income to be taxed is the income of the income year and not of the assessment year.
Since tax is levied on the actual income of the income year, the sources must be taken as
they existed during the income year it is immaterial whether the source of income actually
exists in the assessment year [Muthappa Chettian V CIT (1945) ITR, 311]. However, there are
exceptions for a discontinued business, for persons leaving Bangladesh etc. when income
year is the assessment year

(iv) The charge is on every person as stated in section 2 (69) eg. an individual, a firm, an
association of persons, a Hindu undivided family, a local authority, a trust, a fund, a company
and any other artificial juridical person. Estoppel is a rule of evidence, not a cause of action
and it cannot be the basis of liability under the Income Tax Act. So, an assessment cannot
be made on a stranger to the income, merely he agrees or desires to be assessed on it [Asit
Kumer Ghose V CIT, ITR, 576].

(v) The tax is levied on the total income of the assessee computed in the manner laid down in
specified sections and subject to the provisions of this Act. It will be for the assessee to
produce materials to hold that a receipt is of a casual or capital nature not chargeable to tax
and for the Revenue to consider the materials and arrive at a reasonable conclusion.

(vi) Tax 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. Next, there is the assessment
liability that does not depend on the assessment. That ex-hypothesis has already been fixed.
But assessment particularizes the exact sum which a person is liable to pay. Lastly, the
recovery comes if the person taxed does not pay voluntarily.

3.1 Charge of income tax: section 18

(1) Income tax shall be levied, imposed, paid or collected on the basis of total income of any
person in any income year;

(2) Subject to the provision of this Act, income tax shall be levied, impose, paid or collected at
the assessment year wise prescribed rate provided by any act passed by the Parliament;

However, income tax to be charged in respect of the income of a period other than the
income year, income tax shall be charged, levied, paid and collected accordingly.

(3) Under the provision of this Act, following taxes may be levy, impose, paid or collected,
namely: -

a. Tax at source;
b. Advance income tax;
c. Minimum tax; and
d. Any other tax.

44 Business Planning: Taxation & Compliance ICAB 2024

 (4) Subject to the provision of this Act, a surcharge or any other charge shall be levied, imposed
or collected at such rate and in such manner as may be prescribed by Act passed by the
Parliament;

(3) Notwithstanding anything contained in this section (i.e., section 18), tax shall be charged at
the rates specified in the part 7 and seventh schedule in respect of-

(i) any income computed as ’capital gains’;

(ii) any income computed as ‘dividend income’; and
(iii) any receipt by wining of lottery, crossword puzzles, card games, online games or such
nature game.

3.2 Surcharge on individual taxpayers

In accordance to Finance Act 2024 surcharge shall be payable in addition to the tax on income
for the individual taxpayer based on disclosed net wealth in the tax return over Tk. 4 crore.
Wealth surcharge is to be paid on tax payable at the following rate:

Total net worth Rate

Up to BDT 40m 0%
More than BDT 40m but less than BDT 100m, or 10%
Assessee has more than one motor vehicle in his own name, or
has house property over 8,000 sq. ft.
More than BDT 100m but less than BDT 200m 20%
More than BDT 200m but less than BDT 500m 30%
More than BDT 500m 35% C
H
Illustration—1
A
P
Tax liability after investment tax rebate Tk. 45,000
T
Net wealth as per last assessment year Tk. 20,78,000
E
Accretion in net wealth during current year Tk. 8,23,000
R
Net wealth up to this assessment year Tk. 29,01,000
Owner of motor car/house property No motor car/house property
Wealth Surcharge Nil (net wealth is less than Tk. 4 crore and 3
no motor car/house property)
Total tax liability (no surcharge) Tk. 45,000

Illustration—2

Tax liability after investment tax rebate Tk. 160,000

Net wealth as per last assessment year Tk. 2,86,23,000
Accretion in net wealth during current year Tk. 1,44,08,000
Net wealth up to this assessment year Tk. 4,30,31,000
Wealth Surcharge Tk. 16,000 (10% of Tk. 160,000)
Total tax liability (including surcharge) Tk. 176,000 (Tk. 160,000 + Tk. 16,000)

ICAB 2024 Charge of income tax 45

 Illustration—3

Tax liability after investment tax rebate Tk. 8,00,000

Net wealth as per last assessment year Tk. 8,81,23,000
Accretion in net wealth during current year Tk. 24,08,000
Net wealth up to this assessment year Tk. 9,05,31,000
Wealth Surcharge Tk. 80,000 (10% of Tk. 8,00,000)
Total tax liability (including surcharge) Tk. 8,80,000 (Tk. 8,00,000 + Tk. 80,000)

3.3 Charge of additional tax: section 19

Notwithstanding anything contained in any other provision of Income Tax Act, 2023, where 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 Tk.5,00,000 whichever is higher.

Illustration-1

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:

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

3.4 Charge of minimum tax for companies: section 163

(1) The tax deducted or collected under section 88-92, 94-95, 100-102, 105, 106, 108, 110-118,
120-129 and 132-139 shall be deemed to be the minimum tax on the income from the
source(s) on which tax has been deducted or collected.

However, tax deducted with respect to import of good by an industrial undertakings as raw
materials under section 120 except by an industrial undertaking engaged in producing
cement, iron or iron product, ferro alloy products or perfumes, carbonated beverage,
powder milk, aluminium goods, ceramics goods, and toilet water shall not be minimum tax.

(2) Further, every company shall be liable to pay minimum tax as follows based on the gross
receipt:

Rate of minimum
Types of companies
tax on gross receipt
Manufacturer of cigarette, bidi, chewing tobacco, smokeless tobacco 3%
or any other tobacco products.
Carbonated beverage, sweetened beverage producer 3%
Mobile phone operator 2%
In any others case 0.60%

46 Business Planning: Taxation & Compliance ICAB 2024

 However, rate of minimum tax shall be 0.10% for an industrial undertaking engaged in
manufacturing of goods (except for tobacco, beverages) for the first three years since
commencement of production.

Where both (1) and (2) applies, minimum tax shall be higher one. Minimum tax determined
under (1) shall not be refunded nor be adjusted. However, if minimum tax under (2) become
higher than minimum tax computed under (2) then the excess minimum tax amount can be
adjustable against the refunds in earlier years. Any surcharge, additional interest or any
additional amount is payable under this Act shall be payable in addition to the minimum tax.

Illustration—1

In the assessment year 2024-25, company X reports loss of Tk. 10,00,000 with annual turnover
of Tk. 1,00,00,000. The company is required to pay Tk. 60,000 (0.60% of Tk. 1,00,00,000) as
minimum tax. Remember, the company has made a loss, still it requires to pay tax.

Illustration—2

In the assessment year 2024-25, company X, a publicly traded company, reports taxable profit
of Tk. 1,00,000 with annual turnover of Tk. 1,00,00,000. The company is required to pay Tk.
60,000 (0.60% of Tk. 1,00,00,000) as minimum tax. Because tax on regular income at regular rate
amounts to Tk. 20,000 that is lower than Tk. 60,000.

Illustration—3

In the assessment year 2024-25, company X, a publicly traded company, reports taxable profit
of Tk. 10,00,000 with annual turnover of Tk. 1,00,00,000. Tax liability of the company will be Tk. C
2,00,000 (20% of Tk. 10,00,000) applying regular tax rate which is higher than minimum tax of H
Tk. 60,000 (0.60% of Tk. 1,00,00,000). A
P
Illustration—4 T
E
In the assessment year 2024-25, company A, a publicly traded company, reports total income of R
Tk. 3,00,000 from business, house property and other sources. Annual assessed business
turnover is Tk. 10,00,000, property income Tk. 2,00,000 and receipt from other sources i.e.,
interest on bank deposit Tk. 1,20,000.
3
Here, the gross receipt of the company would be:

Heads of receipts Amount (Tk.)

(a) Receipts derived from the sale of goods (turnover) 10,00,000
(b) Income from house property (rental receipts not known) 2,00,000
(c) Income from other sources (interest on bank deposit) 1,20,000
Total 13,20,000

Tax liability on regular income at regular tax rate is Tk. 60,000 (20% of Tk. 3,00,000). However,
minimum tax is Tk. 7,920 (0.60% of Tk. 13,20,000). As regular tax is higher than minimum tax, tax
liability of the company will be Tk. 60,000.

ICAB 2024 Charge of income tax 47

 3.5 Charge of minimum tax for partnership firm: section 18 (3) and section 163

Every partnership firm having gross receipts of more than Tk. 50,00,000 will also be required to
pay minimum tax @0.60% on its gross receipt or tax calculated on the basis of total income
whichever is higher.

3.6 Charge of minimum tax for individual: section 18 (3) and section 163

Every individual having gross receipts of Tk. 3,00,00,000 or above will also be required to pay
minimum tax @0.25% on its gross receipt or tax calculated on the basis of total income whichever
is higher. But if an individual engaged in tobacco manufacturing or mobile phone operation
then the rate would be 3% or 2% respectively.

3.7 Charge of 10% tax on stock dividend: section 23

Company incorporated under the Companies Act, 1994 and listed in the stock exchange, if
declare or distribute stock dividend exceeding the amount of cash dividend in an income year,
shall have to pay tax @ 10% on the whole amount of such stock dividend.

3.8 Charge of 10% tax on retained earnings, reserves, surplus etc.: section 22

Company incorporated under the Companies Act, 1994 and listed in the stock exchange, if
transfers an amount exceeding 70% of the net income after tax in an assessment year to the
retained earnings or any fund or reserve or surplus, shall have to pay tax @ 10% on the whole
amount so transferred.

3.9 Charge of 50% tax on the difference of investment, import and export: section 20

(a) 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.

(b) 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.

3.10 Scope of the total income: section 26

In case of resident taxpayers, all income accrues, or arise, or deemed to accrue or arise, received
or deemed to be received by him or on behalf of him in Bangladesh and outside of Bangladesh
shall be included in the total income.

However, for non-resident only income accrues, or arise, or deemed to accrue or arise or
received, deemed to be received by him or on behalf of him in Bangladesh shall be the total
income.

3.11 Income deemed to accrue or arise in Bangladesh: section 27

The following income shall be deemed to accrue or arise in Bangladesh, namely:

(1) Income from employment earned in Bangladesh, or received by a Bangladeshi national from
the government or a local authority for any services, irrespective of the place of payment.

48 Business Planning: Taxation & Compliance ICAB 2024

 (2) any income accruing or arising, whether directly or indirectly, through or from-

a. any permanent establishment in Bangladesh;

b. any property, asset, right or other source of income including intangible property in
Bangladesh; or
c. transfer of any assets situated in Bangladesh:
d. the sale of any goods or services by any electronic means to purchasers in Bangladesh
or
e. any intangible property used in Bangladesh.

Explanation. - For the purpose of above clause: -

(a) Shares of a resident company shall be deemed to be property in Bangladesh.

(b) Intangible property registered in Bangladesh, or owned by a non-resident but has a
permanent establishment in Bangladesh to which the intangible property is
attributed shall be deemed to be property in Bangladesh.
(c) Transfer of shares of a non-resident company shall be deemed to be the transfer of
an asset situated in Bangladesh to the extent that the value of the share transferred
is directly or indirectly attributable to the value of any assets in Bangladesh.

(3) any divided paid outside Bangladesh by a Bangladeshi company;

(4) any income by way of interest payable by the government, or by any resident except interest
on debt or money borrowed from outside Bangladesh and used in a business or in a source
of income situated outside Bangladesh; or by any non-resident on the money borrowed for
the business or for any source of income in Bangladesh;
C
(5) any income by way of fees for technical services payable by the government, or by any
H
resident except service rendered for the business outside Bangladesh, or by any non-
resident for the service provided for business in Bangladesh;
A
P
(6) any income by way of royalty payable by the government, or by any resident except right, T
assets or information or service received for the business outside Bangladesh, or by any non- E
resident for the right, assets or information or service utilised in the business in Bangladesh; R

(7) Insurance or reinsurance premium accrued or payable by a resident or non-resident against

any risk within Bangladesh. 3

3.12 Same income shall not include twice in total income: section 28

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.

3.13 Special tax treatment in respect of some investments

a) Investment in residential building/apartment. – Frist Schedule, Part 1, para 1:

Any sum invested by a person in purchase or construction of residential building or
apartment will be deemed to have been explained if he pays tax at the prescribed rate per
square meter before the completion of assessment.

ICAB 2024 Charge of income tax 49

 b) Special tax treatment in respect of disclosure of undisclosed property – Frist Schedule, Part
3, para 2:

− Any taxpayer may disclose any fixed property being land and building up-on paying specific
amount of taxes. Further, securities, cash, bank deposit, financial schemes and instruments,
all types of deposits and savings deposits can also be disclosed by paying tax @ 15% of the
value of assets between July 1, 2024 to June 30, 2025. Tax amount shall be 100% more if
the structure, house, building, or floor space is built for commercial purposes. No agency
shall raise any questions about the source of money.

50 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 4
Income from
employment

Introduction

Examination context

Topic list

4.1 Scope of income from employment

4.2 Valuation of perquisite, allowances and benefit
4.3 Determination of income derived from employee share scheme
4.4 Provident fund
4.5 Non-assessable income under the head “income from
employment
4.6 Tax rebate on certain investment
4.7 Salient points in assessment of income from salaries
 Introduction

Learning objectives

 Identify the different heads of income;

 Computation of income from ‘employment’;
 Definition of perquisites, allowances and benefits under employment income;
 Identify the allowable deduction under head ‘income from employment’;
 Concept of provident fund and other funds related to salary;
 Understanding investment allowance and computing tax rebate on that;
 Computing tax liability of salaried person.

Practical significance

Income from employment is very important for many reasons. This is a common head of income
for most of the individual taxpayers. It can even be said that individual taxation depends on this
head of income. Government collects a significant portion of tax under this head. Thus, tax law
covering income from employment is very significant and scope of learning is also wide. This
chapter carries significance for corporate practitioners also in the sense that this expense in
certain conditions cannot be shown as expense. The application of perquisites and its impact on
computing company tax is also very important. Income from employment is the first head of
income out of 7 heads of income. Out of the 7 heads, this is a very common head of income.
Again, this head encompasses different technical and conceptual issues like perquisites,
provident fund and other funds where clear understanding is very important as a tax practitioner
and tax professional.

Computing taxable income under the head income from employment, computing investment
allowance and testing the amount for maximum limit, computing tax rebate on investment
allowance, understanding the tax credit on tax deducted at sources and finally computing net
tax liability of an individuals are some note able points that is covered in this chapter and thus
this chapter become very significant for the CA students. This chapter lays the foundation of the
following chapters also.

You will find the details of the above issues in this chapter with some practical examples.

Stop and think

Do you realize that the computation of taxable income under the head ‘income from
employment’ is one of the basic requirements for determining tax liability? Can you calculate
the taxable income from salary? Do you understand the application of investment allowance in
computing final tax liability?

Working context

In practice, as the accountants are sometimes required to prepare their clients' tax returns, they
need to advice the clients on how to calculate the taxable income for any income year. Before
advising the clients, accountants should have the clear concept relating to the admissible and
inadmissible expenses so that they can deduct or add the expenses in determining the taxable
income.

52 Business Planning: Taxation & Compliance ICAB 2024

 As individual assessee is abundant and most of the individual assessee has income under the
head, understanding this chapter is very useful in practical life.

Syllabus links

The topics covered in this chapter are very important for computing taxable income which is
required for solving practical problems at this level.

C
H
A
P
T
E
R

ICAB 2024 Income from employment 53

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Identify the different heads of income;

 Define the concept of salaries;
 Recognize the perquisites, allowances and benefits under salary income;
 Recognize the income assessable under the head;
 Illustrate the exemptions allowed in determining taxable income under the head;
 Understand investment allowance and tax rebate on that;
 Compute final tax liability on salary income.

Question practice

For question practice on these topics go to the suggested answers covering this chapter and
also this workbook.

Examiner's comments on how students tackle questions

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 tax liability. Clear concept and
understanding of each content of this chapter will help candidates to resolve any problems
relating to computation of taxable income.

4.0 INCOME FROM EMPLOYMENT

Section overview

 There are seven heads of income;

 Total income and taxable income may not be the same;
 Tax free ceiling of allowances;
 Computation of total income from employment;
 The perquisites and allowances need to be considered in determining salary income;
 Treatment of provident fund and other funds;
 Scope of investment allowance and tax rebate on that.
 Computing tax liability.

Heads of income: section 30

All incomes shall, for the purpose of charge of income tax and computation of total income, be
classified and computed under the following heads of income, namely:

(a) Income from employment;

(b) Income from rent;
(c) Income from agricultural;
(d) Income from business;

54 Business Planning: Taxation & Compliance ICAB 2024

 (e) Income from capital gains;
(f) Income from financial assets;
(g) Income from other sources.

Aggregation of income: section 31

Income of a person shall include the share of profit or loss of a firm or association of persons in
which he is a partner or a member, as well as the income of a dependent spouse or minor child
over whom he has reasonable control and intends to include the income. However, inclusion of
income shall not be applied if the spouse or child is assessed separately.

4.1 Scope of income from employment: section 32

According to section 32(1), the following income of an assessee is classified and computed
under the head “salaries”, and thereby 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 who is not a shareholder director;
(b) traveling allowances and daily allowances received and expended wholly and solely for the
performance of the duties of the job.

Explanation:

i) Salary:

There is no exhaustive definition of “salary” in the Act. An inclusive definition has, however, been
given in section 32(2) of the Income Tax Act, 2023 as follows: - ‘salary’ means any amount of any
nature received by employee from employment and shall include followings, namely –

(a) any salary, wages or remuneration; C

(b) Any allowance, holiday allowance, leave encashment, bonus, fee, commission, overtime; H
(c) advance salary; A
(d) gratuity, annuities, pensions or its supplements; P
(e) Perquisites; T
(f) receipt in lieu of salary or wages or receipt in addition to salary or wages. E
R
ii) ‘Receipt in lieu of salary or wages’ or ‘receipt in addition to salary or wages’ includes:

(a) any compensation received on account of termination of employment called by whatever 4

name;
(b) remaining portion of provident fund or any other fund exceeding employee’s contribution;
(c) received amount or fair market value of benefits received as a result of changes in the terms
of employment contract;

ICAB 2024 Income from employment 55

 (d) received amount or fair market value of received benefit on joining the job or under any
condition of the employment.

ii) Perquisite:

‘Perquisite’ means any payment or benefit, including incentive bonues, given by the employer
to the employee, but shall not include the following payment, namely –

(a) Basic salary, arrears salary, advance salary, festival bonus, leave encashment and overtime;
(b) Contribution to recognized provident fund, approved pension fund, approved gratuity fund
and approved superannuation fund.

iii) Basis Salary:

‘Basic Salary’ means monthly or otherwise payable salary on the basis of which other allowances
and benefits are determined, however, shall not include following allowances or benefits,
namely: -

(a) All types of allowance, perquisite, annuity, bonus & benefits; and
(b) Contributions made by the employer to various funds of the employee.

4.2 Valuation of perquisite, allowances and benefit: section 33

Perquisite, allowance and benefit which are not paid in monetary value, monetary value of such
perquisite, allowance and benefit will be determined as below:

Perquisite, allowance,
Monetary value
benefits etc.
− Where rent is fully paid by employer or accommodation is
provided by employer, annual value shall be included to
Accommodation income from employment.
− 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.
Car benefit − In case of motor car up to 2,500 CC, monthly BDT 10,000 shall
be added to the income from employment.
− In case of motor car exceeding 2,500 CC, monthly BDT 25,000
shall be added to the income from employment.
Any other perquisite, Monetary value of fair market value of perquisite, allowance or
allowance or benefit benefit.

Illustration—1

Mr. X is paid a monthly basic salary of Tk. 40,000 and a dearness allowance of Tk. 3,000 per
month. He has also been provided with a rent-free accommodation. The employer has similar
flat in the same building which is rented outside at Tk. 20,000 per month. However, monthly
reasonable rent of the flat is Tk. 25,000. How much amount will be added to his income from
employment?

56 Business Planning: Taxation & Compliance ICAB 2024

 Annual rental value of similar flat (Tk. 20,000 ×12 months) Tk. 240,000
Annual reasonable rent of similar flat (Tk. 25,000 ×12 months) Tk. 300,000
Amount to be added to income from employment (higher one) Tk. 300,000

Illustration—2

Mr. X has been paid a monthly basic salary of Tk. 40,000. Besides this, he has been provided
with accommodation at a concessional monthly rate of Tk. 10,000. The employer has similar flat
in the same building which is rented outside Tk. 20,000 per month. However, monthly
reasonable rent of the flat is Tk. 25,000. How much will be added with taxable income due to
availing this opportunity from the employer?

Annual rental value of similar flat (Tk. 20,000 ×12 months) Tk. 240,000
Annual reasonable rent of similar flat (Tk. 25,000 ×12 months) Tk. 300,000
______________________________________________________________________________
Annual value of accommodation (higher one) Tk. 300,000
Less: amount paid by employee (10,000 X 12) Tk. 120,000
______________________________________________________________________________
Amount to be added to income from employment Tk. 180,000

4.3 Determination of income derived from employee share scheme: section 34

1. Employee share scheme means any agreement or arrangement under which a company –

(a) May issue share to employee of the company or its affiliated company;
(b) Shares can be issued to the trustee of a trust and subsequently the trustee can issue the
share to any employee of the said company or any of its affiliates as per the trust deed.

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

3. 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. C
H
4. If the right or opportunity to acquire shares under the employee share scheme is sold or A
transferred by the employee, income shall be added to the ‘Income from Employment’ P
according to A – B, where – T
A = Sale or transfer value of right or opportunity to acquire share; E
B = Amount paid to for right or opportunity to acquire share. R

Illustration
4
On 1 January 2020 ABC Limited granted option over 10,000 of its shares to Mr. X, one of its
senior employees. One condition of the share option was that Mr. X must work for the ABC
Limited for upcoming 3 years. Mr. X continued to be employed by ABC Limited during 2020,
2021 and 2022.

ICAB 2024 Income from employment 57

 Since the condition was met, ABC limited granted 10,000 shares to Mr. X on 31 December 2022.
The fair value of share on 31 December 2020, 2021 and 2022 was Tk 100, 120, and 110
respectively.

It should be noted that Mr. X paid Tk. 60,000 as share transfer fee as per condition of the above
scheme.

How much amount will be added to the income from employment of Mr. X.

Fair market value of share at the grant date (10,000 X 110) Tk. 1,100,000
Less: Cost of acquiring the share Tk. 60,000
_______________________________________________________________________________
Amount to be added to income from employment Tk. 1,040,000

4.4 Provident fund

Provident fund is the fund where funds are accumulated during the active period of employees
for his financial 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. When an employee leaves his service either on
retirement or for any other reason, he gets back 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 post-
employment period. There are three types of provident fund:

General Provident Fund [GPF]

Statutory Provident Fund

Contributory Provident Fund

Provident Fund Recognized Provident Fund

Unrecognized Provident Fund

General Provident Fund [GPF]

General 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 1925,
General Provident Fund Rules 1979 and Contributory Provident Fund Rules 1979. Government
employees who are permanently transferred to the pensionable jobs, they contribute to general
provident fund where government as an employer contributes nothing. On the other hand,
government employees who have no benefits from pension, they contribute to contributory
provident fund where both government bodies and the employee contribute. Generally, most
of the government employees of our country are pensionable.

58 Business Planning: Taxation & Compliance ICAB 2024

 Points to remember at the time of tax computation:

a. Since employer does not contribute to general provident fund there is no question of its
inclusion with salary. But where government bodies contribute to contributory provident
fund, government’s contribution will be included with salary.
b. Employee’s contribution to statutory/general (government) provident fund will be
considered as investment allowance.
c. Accumulated balance of GPF at the credit of employees when received will not be included
in his total income. It is excluded from total income under Para 7, Part 1 of Sixth Schedule of
the Income Tax Act, 2023.

Recognized Provident Fund [RPF]

Recognized Provident fund is constituted under the conditions mentioned in Part 3 of Second
schedule in the Income Tax Act, 2023 and approved by the Commissioner of Taxes. These funds
are available in non-government organizations 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 NBR may prescribe:

(a) All the employees shall be employed in Bangladesh or shall be employed by an employer
whose principal place of business or head office is in Bangladesh. In case of exceptional
situation, the recognition criteria will depend on the Commissioner’s judgment.
(b) Employer must deduct a certain percentage from the salary of employee and deposit the
same to the fund.
(c) Employer will also contribute the same amount as deducted from the employee.
(d) The fund will constitute taking the contribution of both the employer and employee.
(e) The fund will be managed by trustee of two or more persons.
(f) Employer will not be entitled to take any amount from the fund.
(g) Employee will receive the amount deposited to his account including principal and interest
at the time of leaving the job.

Points to remember at the time of salary income computation:

a. Only, employer’s contribution to RPF shall be included in the total salary income of the
employee as per law.
b. Both employers and employee’s contribution to RPF are considered to be a part of
investment allowance.
c. Accumulated balance at the credit of employee in the RPF, when received shall be excluded C
from total employment income. H
A
Unrecognized Provident Fund P
T
Unrecognized provident fund is not the recognized or statutory fund. This fund is not constituted
E
under Part 3, Second Schedule in the Income Tax Act, 2023 or under any other applicable acts
R
or laws and is not approved by the Commissioner of Taxes. In this fund, both the employees and
employer contribute and generally it is found in nongovernment organization. In this case, the
employers’ contribution and interest thereon is not included in the total income of the employee.
At the time of the employee’s retirement, the accumulated balance of the UPF except 4
employees’ own contribution is included in the total income.

ICAB 2024 Income from employment 59

 Points to remember at the time of tax computation:

a. Employer as well as employee may contribute to this provident fund, but employer’s
contribution will not be added in computing taxable salary income.
b. At the time of employee’s retirement, the accumulated balance of this fund minus the
employee’s own contribution is taxable and will be added with salary.

Approved Superannuation Fund

This type of fund is created for granting pension and other benefit to the employees on their
retirement, or after a specified 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 1, Second Schedule of
the Income Tax Act, 2023. Both employee and employer contribute to the fund. The contribution
of the employer is added to the income of the employee.

Approved Gratuity Fund

If the employer agrees to constitute a gratuity fund for the benefit of the employees on the job
contract, then the employer contributes to the gratuity fund for the benefit of the employees in
the event of retirement. The approved gratuity fund is approved by the NBR and run under the
conditions mentioned in at Second Schedule, Part 2. Employee contributes nothing in this fund.
The contribution by the employer is considered as income of employee. But the amount
received up to Tk.2.5 crore from approved gratuity fund is tax free.

Worker’s Profit Participation Fund [WPPF]

It is established under the Bangladesh Labour Act, 2006 (Act. XXXXII of 2006). Any payment
received by any worker from this fund, shall be excluded from the total income.

4.5 Non-assessable income under the head “income from employment”:

In Part 1 of Sixth Schedule of the Income Tax Act, 2023, some income relating to salary have
been mentioned as non-assessable:

i) One third of income from employment or Tk. 450,000 (whichever is lower) shall be deducted
from ‘Income from Employment’ (Sixth Schedule, Part 1, Para 27);
ii) Reimbursement of expenses of an employee wholly and necessarily incurred in performance
of duties and it was convenient for the employer to make expenses through the employee
(6th Schedule, Part 1, para 14);
iii) The income of any employee of inter-governmental organization or any international
organization tax of which is exempted by under any Act passed by the parliament or under
any agreement signed by the Government. (Sixth Schedule, Part 1, Para 1);
iv) Remuneration received form the concern Government by virtue of their employment by
Ambassador, High Commissioner, Envoy, Minister, Charge the Affairs, Commissioner,
Councilor, Consul the Career, Secretary, Advisor or Attaché of Embassy, High Commission,
Legation or commission of a foreign State. (Sixth Schedule, Part 1, Para 2);
v) Any income received by a trade commissioner or other official representative in Bangladesh
of a foreign State (not holding office as such in an honorary capacity) as his official salary, if
the official salary of the corresponding officials, if any, of the Government, resident for similar
purposes in the country concerned, enjoy a similar exemption in that country. (Sixth
Schedule, Part 1, Para 2);

60 Business Planning: Taxation & Compliance ICAB 2024

 vi) Any income by a member of the staff of any of the officials referred to above (i.e. ii and iii),
as his official salary, when such member is not a citizen of Bangladesh and is either a subject
to the country represented or a subject of some other foreign State and is not engaged in
any business or profession or employment in Bangladesh otherwise than as a member of
such staff, and the country represented has made corresponding provision for similar
exemptions in the case of member of the staff of the corresponding officials of the
Government of the People’s Republic of Bangladesh in that country. (Sixth Schedule, Part 1,
Para 2);
vii) Any pension due or received from the Government. (Sixth Schedule, Part 1, Para 4);
viii) Any gratuity up to taka two crore fifty lakh. (Sixth Schedule, Part 1, Para 5);
ix) From recognized provident fund, approved superannuation fund, pension fund, approved
gratuity fund-
a) Any contribution received by the employee and employer; and
b) Income distributed to the beneficiary thereof from which the fund is liable to tax
Provided that the amount received by the taxpayer as gratuity from by approved gratuity
fund does not exceed the limit two crore fifty lakh. (Sixth Schedule, Part 1, Para 6);
x) Any income from a provident fund established under the Provident Fund Act, 1925. (Sixth
Schedule, Part 1, Para 7);
xi) any amount received by any employee of a government body, local authority or autonomous
or semi-autonomous body and their controlled units or institutions on voluntary retirement
under any scheme approved by the Government for this purpose. (Sixth Schedule, Part 1,
Para 8).

In addition to above, Board or Government exempted some employment income through

issuing SROs, namely -

a) According to SRO 182-law/99, dated 1 July 1999, if salary tax is paid by employer, tax
shall not be applicable on such paid tax.

b) According to SRO 298/2015 dated 8 October 2015, foreign expatriate having technical
knowledge employed by any company, operating for production of goods or rendering
service in any Economic Zone (as declared and established under section 5 and 4
respectively, of Bangladesh Economic Zone Act 2010), 50% of tax payable by him/her
will be exempted from income tax for 3 years from appointment by said company.

4.6 Tax rebate on certain investment

According to section 78 of Income Tax Act, 2023, resident individual and non-resident C
Bangladeshi shall be entitled to tax rebate as under: H
A
Lower of:
P
T
(i) 0.03 X A; or
E
(ii) 0.15 X B; or
R
(iii) Tk 10 lakh.

Where,
A = Computed total income excluding tax-exempted income, income subject to reduced tax 4
rate, income subject to minimum tax.

B = Total investment and expenditure of the taxpayer as per Part 3 of Sixth Schedule.
4.7 Items included in investment allowance related to salary income:

ICAB 2024 Income from employment 61

 From basic salary, the employer can deduct a certain amount of money under various heads
according to the contract between employer and employee. Of those some of the deductions
are included in the items of investment allowance for which tax rebate is admissible: As per the
regulations of Part 3 of Sixth Schedule of the Income Tax Act, 2023, the following salary items
are considered as a part of the investment allowance:

i) Any sum deducted from salary to a deferred annuity or for making provisions for his wife or
children, provided that the sum so deducted shall not exceed one-fifth of the salary. (Para 3)
ii) Employee’s contribution to a General Provident Fund [GPF]. (Para 4)
iii) Employee’s and Employer’s contribution to RPF (Para 5)
iv) Ordinary annual contribution to approved superannuation fund. (Para 6)
v) Employee’s contribution to a benevolent fund or group insurance scheme. (Para 12).

Computation of taxable income from salary at a glance:

Description Amount that will be added with salary

1. Basic salary Full
2. Dearness allowance Full
3. Bonus Full
4. Commission and fees Full
5. Advance salary Full
6. Arrear salary Full, provided that, it was not taxed in earlier years
7. Leave encashment Full
8. Approved Pension Nothing, since fully tax free
9. Approved Gratuity Amount exceeding Tk.2.5 crore
10. Annuity Full
11. Profit in lieu of salary Full
12. Profit in addition to salary Full
13. Education allowance for children Full
14. Employer’s contribution to RPF Full
15. Employer’s contribution to Full
employee’s life insurance policy
16. Entertainment allowance Full
17. Medical allowance Full except the amount for treatment of heart,
kidney, eye, liver and cancer.
18. Traveling allowance Unspent amount.
19. Special allowance Nothing, if given and spent for official purpose.
20. House rent allowance Full
21. Rent free accommodation Annual value
22. Accommodation at concessional Difference between annual value and amount
rate received from employee
23. Conveyance allowance Full
24. Transport / conveyance facility Motor car up to 2,500 CC monthly 10,000 shall be
added to the income, if motor car exceeds 2,500
CC monthly 25,000 shall be added to the income
26. Free tea, coffee or light beverage in Nothing
office premises

62 Business Planning: Taxation & Compliance ICAB 2024

 Description Amount that will be added with salary
27. Free dress, telephone, power, gas, Full
water in office etc.
28. Servant allowance Full
29. Compensation Full
30. Allowance received as head of the Fully tax free if it spent for office purpose.
department / Charge allowance.
31. Overtime Full
32. Residence telephone bills / utility Full
bills / club bills reimbursed

4.7 Salient points in assessment of income from salaries

(i) Tax is payable by an assessee under the head “Income from Employment” in respect of any
salary or wages, any annuity, pension or gratuity and any fees, commission, perquisites or
profits in lieu of, or in addition to, any salary or wages, and any advance salary;
(ii) Tax is levied on salaries which are due, whether paid or not, as well as on salaries which are
paid, whether due or not;
(iii) Relationship of employer and employee must exist between the payer and the recipient of
salaries. The employer may be Government, a local authority, a company or any other public
body or association or any private employer;
(iv) Death-cum-retirement benefits or gratuities and certain payments from funds are
completely exempt from tax;
(v) Income chargeable under the head “Income from Employment” is to be computed after
making certain deductions;
(vi) The provisions regarding different types of provident funds and payment of life insurance
premium are very important and are to be carefully studied to find out the correct income
tax on income chargeable under the head “Income from Employment”;
(vii) Salaries are subject to deduction of tax at source. Hence, income tax is to be paid on Salaries
for a particular assessment year at the rates applicable thereto.

Worked Examples and Solutions

Worked example—1
C
From the following data compute total income and tax payable by Mr. Amit Bhowmik for the
H
income year ended 30 June 20X1:
A
Elements of salary
P
T
Basic salary: @ Tk 20,000 p.m. 2,40,000 E
Bonus: 2 months’ Basic Pay R
Free furnished accommodation of which annual value was 200,000:
Performance bonus: Tk. 450,000.
Employer’s contribution to RPF: @ 10% of basic salary 4
Car (2,000 CC): partly used for office and partly for personal purpose
Life insurance premium paid by Mr. Amit Bhowmik 6,000

ICAB 2024 Income from employment 63

 Solution 1:

Mr. Amit Bhowmik

Computation of total income and tax liability

Income from “salaries” u/s 32:

Basic salary @ Tk. 20,000 p.m. for 12 months 2,40,000

Free furnished accommodation – Annual value 200,000
Car benefit (monthly 10,000 as 2,000 CC) 120,000
Employer’s contribution to RPF – 10% of Basic 24,000
Bonus - 2 months basic 40,000
Performance bonus 450,000
Total income from employment before exemption 1,074,000
Less: Exemption (lower of 1/3 of total employment income or 450,000) 358,000
Total income from employment 716,000

Calculation of tax liability:

On first Tk. 3,50,000 @ 0% 0

On next Tk.1,00,000 @ 5% 5,000
On next Tk. 266,000 @ 10% 26,600
Gross tax liability 31,600
Less: Tax rebate (note1) (-)8,100
A. Tax liability after investment rebate 23,500
B. [Minimum tax] 5,000
Tax liability (Higher of A and B) 23,500

Note – 1: Actual investments made:

Contribution to RPF by both employee and employer Tk. 48,000
Life insurance premium paid Tk. 6,000
Total investment Tk. 54,000
Maximum limit [as per section 44(3)]:
Lower of i) Tk 21,480 (0.03 X 716,000) or ii) Tk 8,100 (0.15 X 54,000) and iii) Tk
10 lakh.

Worked example—2

Mr. Milky, CEO of a Multinational company in Bangladesh, has got the following income for the
income year ended 30 June 2024. You are required to calculate the total income and tax payable
of Mr. Milky.

(a) Basic pay of Tk.150,000 per month sent directly to his bank account.
(b) Rent free accommodation provided by the company annual value of which is Tk 600,000.
(c) Full time company car (3,000 CC) for his own use and for his family.
(d) Company pays Tk. 100,000 p.m. for his three school going children which is paid to the
school authority directly.
(e) He received two festival bonus equivalents to basic pay during the festival time which he
spent partly for his family and partly for the poor people in his village.

64 Business Planning: Taxation & Compliance ICAB 2024

 (f) Driver's salary was Tk. 10,000 p.m. paid to his driver's bank account.
(g) Company paid Tk. 300,000 to him during the year being the reimbursement of various utility
bills of his house.
(h) Medical allowance Tk. 5000 p.m. His actual expense is more than this.
(i) He was paid Tk. 1,000,000 for his overseas travels for the official trip out of which he saved
25% during the year.
(j) Bill paid for international club Tk. 295,000.
(k) He received interest on securities Tk. 175,000 on his investments.
(l) He has got one house of his own at Baridhara and he received total Tk. 12,00,000 as rent
from letting it out to a foreigner.
(m) He paid Tk. 1,50,000 as LIP for himself.
(n) He invested Tk. 15,00,000 on Govt. bond and primary shares of listed companies.
(o) Received cash dividend (net of TDS) Tk. 2,02,500/ during the year.
(p) TDS from salary Tk. 700,000.

Solution 2:

Mr. Milky
Computation of total income and tax liability

Income from employment: Tk. Tk.

Basic salary @ Tk. 150,000 p.m. Tk. 150,000 × 12 18,00,000
Free accommodation – Annual value 6,00,000
Car benefit (3,000 CC) Tk. 25,000 × 12 300,000
Fee to school going children Tk. 100,000 × 12 12,00,000
Festival bonus Tk. 150,000 × 2 3,00,000
Reimbursement of utility bills 3,00,000
Savings from official oversees travel Tk. 1,000,000 × 25% 2,50,000
Club bills paid by the company 2,95,000
Total income from employment 5,054,000
Less: Exemption (lower of 1/3 of total employment income or 450,000) 450,000
Taxable income from employment 4,595,000
Income from “Income from financial asset”
Interest on securities 175,000
Cash dividend Tk. 2,02,500 ×100/90 225,000
Income from rent
Annual value 1,200,000 C
Less: Repair and maintenance @ 25% 300,000 900,000 H
Total income 5,895,000 A
P
Income tax liability: Tk. T
On first Tk. 3,50,000 @ 0% - E
On next Tk. 1,00,000 @ 5% 5,000 R
On next Tk. 4,00,000 @ 10% 40,000
On next Tk. 5,00,000 @ 15% 75,000
4
On next Tk. 5,00,000 @ 20% 100,000
On balance Tk. 4,045,000 @ 25% 1,011,250
Gross tax on liability 1,231,250
Less: Investment tax rebate (note 1) 176,940

ICAB 2024 Income from employment 65

 Tax liability after investment tax rebate 1,054,310
Less: Tax deducted at sources
On cash dividend @10% 22,500
TDS by company employer 700,000
Net tax payable 331,810

Note 1:

Actual investments made:

Investment in Government Bonds and Primary Shares Tk. 1,500,000

Life insurance premium Tk. 150,000

Total investment Tk. 1,650,000

Tax rebate:
i) 0.03 X 5,895,000 Tk. 176,940
ii) 0.15 X 1,650,000 Tk. 247,500
iii) Tk. 1,000,000 Tk. 1,000,000

Lower one— Tk. 176,940

Worked example—3

Mr. Mallik is a service holder. Following are the particulars of his income from salary for the year
ended on 30th June 2024:

(a) Basic salary Tk. 25,000 per month.

(b) Dearness allowance - 10% of Basic salary.
(c) Two festival bonus - each equal to one month's basic salary.
(d) He has been provided with a rent-free quarter, the annual value of which is Tk. 180,000.
(e) He has been provided with a car (2,000 CC) for both office and private use.
(f) Medical allowance - Tk. 250 per month.
(g) During the year he received Tk. 6,000 as traveling allowance.
(h) He is given a servant allowance of Tk. 200 per month.
(i) He contributes 1% of his basic salary to the Group Insurance Scheme.
(j) He deposited Tk. 500 per month on a Deposit Pension Scheme.

Compute total income from salary and investment allowance.

Solution 3:

Assessee: Mr. Mallik

Computation of total income

Heads of income Tk. Tk.

Income from employment (section - 32):
i) Basic salary (25,000x12) 3,00,000
ii) Dearness allowance (3,00,000x10%) 30,000
iii) Festival bonus (25,000x2) 50,000
iv) Rent free accommodation (Annual value) 180,000

66 Business Planning: Taxation & Compliance ICAB 2024

 v) Conveyance facility (Monthly 10,000) 120,000
vi) Medical allowance (250x12) 3,000
vii) Traveling allowance 6,000
viii) Servant allowance (200x12) 2,400
Total employment income before exemption 6,91,400
Exemption (lower of 1/3 of total employment income or 230,467
450,000)
Total income from employment 460,933

Investment: (actual)

Particulars Amount (Tk.)

Employee's contribution to Group Insurance Scheme 1% of B.S. (3,00,000x1%) 3,000
Contribution to DPS (500x12) 6,000
Total 9,000

Worked example—4

On July 2024, Mr. Syful Hoque’s basic salary falls on Tk. 10,000 in the scale of 10,000-200x12-
12,000. His date of yearly increment is on 1st April. He received dearness allowance @ 10% of
basic salary and medical allowance Tk. 300 per month. During the year his actual amount of
medical expense was Tk. 3,000. He received two bonus equivalents to one month's basic salary-
one received before the date of increment and another after increment.

He contributes 10% of his basic salary to a recognized provident fund from which he has also
received an interest of Tk. 1,500 @ 14% on which the fund was taxable. His employer also
contributes the same amount to the RPF. He has been provided with a rent-free quarter of which
annual value is Tk. 300,000 and a car (1,500 CC) for both official and personal purpose. During
the year he has also received an entertainment allowance of Tk. 5,000 of which Tk. 4,500 has
actually been spent. His investments during the year were as follows:

a) Purchase of shares of a listed company Tk. 2,000.

b) Purchase of gold Tk. 10,000.
c) Payment of his life insurance premium Tk. 4,000 (Policy value Tk. 35,000)
d) Purchase of books and magazine Tk. 3,000.
e) Contribution to a Deposit Pension Scheme Tk. 500 on a monthly basis.

Compute total income and tax liability of Mr. Syful Hoque. C

H
Solution 4: A
P
Mr. Syful Hoque T
Computation of total income and tax liability E
R
Heads-of income Tk. Tk. Tk.
Income from employment:
i) Basic salary [(10,000x9) + (l0,200x3)) 1,20,600 4
ii) Dearness allowance (1,20,600xl0%) 12,060
iii) Medical allowance (300x12) 3,600
iv) Bonus [10,000+10,200) 20,200
v) Employer's contribution to RPF [1,20,600x10%] 12,060

ICAB 2024 Income from employment 67

 vi) Interest on RPF@14% 1,500
Less: Exempted as per 6th schedule part 1 para 6 1500 -
vii) Rent free accommodation (Annual value) 300,000
viii) Car facility (2,500 CC) (10,000x12) 120,000
ix) Entertainment allowance 5,000
Total income before exemption 605,720
Less: (lower of 1/3 of total employment income or (201,907)
450,000)
Total income from employment 403,813

Computation of investment allowance:

Particulars Amount (Tk.)

1. Purchase of shares of listed company 2,000
2. Employee's and employer's contribution to RPF (12,060x2) 24,120
3. Payment of life insurance premium 4,000; maximum (10% of the policy
value i.e., 10% of 35,000 = 3,500) 3,500
4. Contribution to Deposit Pension Scheme (500x12) 6,000
Total 35,620

Computation of tax liability:

Amount Tax rate Tax

First Tk 350,000 0% Nil
Remaining Tk 53,813 5% 2,691
Gross tax liability 2,691
Less: Investment rebate (5,343)
Tax Liability (minimum tax) 5,000

Computation of investment rebate:

Lower of i) Tk 12,114 (0.03 X 403,813) or ii) Tk 5,343 (0.15 X 35,620) and iii) Tk 10 lakh.

Worked example—5

Mr. Zaman Hoque was the HR Manager of Axiata Bangladesh Ltd. On July 2023, his basic salary
was Tk.52,000 in the scale of 40,000-4,000x8-72,000. His date of yearly increment is on 26th
March. He was terminated from Axiata Bangladesh ltd. on 30th April, 2024 and Joined Grameen
phone Ltd. on 1st June of the same year. During the income year his income from Axiata
Bangladesh Ltd and Grameen phone Ltd. are as follows:

From Axiata Bangladesh Ltd.:

He received dearness allowance @ 10% of basic salary and medical allowance Tk. 2,000 per
month. He received two festival bonus each equivalent to one month's basic salary in the month
of September and April respectively. He contributes 10% of his basic salary to a recognized
provident fund. He has been provided with a rent-free quarter of which reasonable rental value
was Tk 450,000 (per year) and a full-time car (2,000 CC) by the employer. During the year he has
also received an entertainment allowance of Tk.1,000 per month. He has received compensation
for the termination of Tk. 2,00,000 and unapproved gratuity of Tk. 1,00,000. Moreover, his
accumulated balance from the RPF was Tk. 1,80,000.

68 Business Planning: Taxation & Compliance ICAB 2024

 From Grameen Phone:

His basic salary is Tk. 60,000 per month with 40% house rent allowance and Tk. 5,000 medical
allowance per month. He is also entitled to receive Tk. 4,000 conveyance allowance per month.
He contributes 10% of his basic salary to a recognized provident fund. His employer also
contributed the same.

His taxable income from other sources was Tk. 213,119 during the year. During the year total
TDS from various sources of his income was Tk. 20,000. Moreover, his refund claims of Tk. 10,000
for excess payment of tax in the last assessment year was to be adjusted with current year’s tax
liability. His investments during the year were as follows:

a. Purchase of savings certificate Tk. 100,000.

b. Payment of his life insurance premium Tk. 20,000 (Policy value Tk. 5,00,000)
c. Contribution to DPS Tk. 3,000 per month.

Compute total income and tax liability of Mr. Zaman Hoque for the assessment year 2024-25.

Solution 5:

Mr. Zaman Hoque

Computation of total income and tax liability

Heads of income Tk. Tk.

Income from salaries:
(a) Basic salary (Note 1) 584,774
(b) Dearness allowance (Axiata) (5,24,774x10%) 52,477
(c) Medical allowance (Total)[(2,000x10) + 5,000] 25,000
(d) Bonus [52,000+56,000] 108,000
(e) Employer's contribution to RPF (Total) [5, 84,774x 10%] 58,477
(f) Rent free accommodation (Axiata): (450,000x (10/12)) 375,000
(g) Car facility (Axiata) (10,000 X 10) 100,000
(h) Entertainment allowance (Axiata) (l,000x10) 10,000
(i) Compensation (Axiata) 2,00,000
(j) Gratuity (Axiata) 100,000
(k) Accumulated balance of RPF (Axiata) 180,000 C
(l) House rent allowance (Grameen phone) (60,000x40%) 24,000 H
(m) Conveyance allowance 30,000 A
Total 1,647,728 P
Less: (lower of 1/3 of total employment income or 450,000) (450,000) T
Income from employment 1,197,728
E
R
Income from other sources 213,119
Total income 1,410,847
4

ICAB 2024 Income from employment 69

 Computation of Investment allowance

Particulars Amount (Tk,)

1. Purchase of savings certificate 100,000
2. Payment of life insurance premium 20,000; maximum (10% of the policy
value i.e., 10% of 5,00,000 = 50,000) 20,000
3. Contribution to DPS (3,000 x12) 36,000
4. Employee's and employer's contribution to RPF (58,477x2) 116,954
Total 272,954

Investment rebate: Lower of i) Tk 42,325 (0.03 X 1,410,847) or ii) Tk 40,943 (0.15 X 272,954) and
iii) Tk 10 lakh.

Tax liability:

Income Rate Tax

On the first 350,000 0% -
On the next 100,000 5% 5,000
On the next 400,000 10% 40,000
On the next 500,000 15% 75,000
On balance 60,847 20% 12,169
Total 132,169
Less: Investment tax rebate (40,943)
Less: TDS (20,000)
Previous Refund adjustment (10,000)
Net tax liability 61,226

Note:

1. Total basic salary:

From Axiata:
Basic salary from July 23 to February 24= [Tk. 52,000 x 8] = Tk. 4,16,000
Basic salary for the month March 24 = [(52,000"25/31) + (56,000"6/31)] = Tk. 52,774
Basic salary for the month April 24 = Tk. 56,000
= Tk. 5,24,774
From Grameen phone:
Basic salary for the month June 24 = Tk. 60,000

Total basic salary for the income year 2023-24 = Tk. 5,84,774

Self-assessment question

1. (a) What is meant by “perquisite” under the Income Tax Act,2023?

(b) Does it include employer’s contribution to a recognized provident fund?
(c) Discuss the allowable perquisites limit under the Act.

2. A question may arise why employer’s contribution to RPF is once added to income and again
rank 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 tax rate.

70 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 5
Income from financial
asset
Introduction

Examination context

Topic list

5.1 Scope of income from financial assets

5.2 Definition of securities
5.3 Nature of securities
5.2 Bond washing transactions through sale and buy back of securities
5.3 Types of securities
5.4 Interest grossing up

Worked examples
 Introduction

Learning objectives

 Understanding the head ‘Income from financial asset’;

 Compute the taxable income under the head ‘Income from financial asset’;
 Knowing different type of securities available in Bangladesh;
 Identify the allowable deductions under the head ‘Income from financial asset’;
 Illustrate the allowable, inadmissible and not permissible deductions in determining the
income from ‘Income from financial asset’;
 Define cum-interest, ex-interest and bond washing transactions.

Practical significance

Income from financial asset is the sixth head of income. It is very important to know interest
bearing financial asset available in market and how this income is brought under the purview of
taxation. Though the revenue from this source is not so significant to the Government, still this
chapter comprises some technicalities over which professional accountants should have
sufficient expertise.

Application of cum and ex interest and bond washing transaction in computing taxable interest
income is very important and necessitates professional judgment and competence. These topics
are explained in this chapter.

This chapter has practical significance in a sense that the students will interact with the capital
market directly. Approved commercial securities are traded in the market and thus the
professional accountants can play a significant role in computing tax liability of individuals and
corporate as well.

You will find the details of the above issues in this chapter with some practical examples.

Stop and think

Do you realize that the computation of taxable income under the head ‘Income from financial
asset’ is one of the seven heads of income and includes some complexity? Do you feel that you
are in a position to compute tax liability under this head independently? Can you visualize the
scope of tax avoidance and remedies in this regard?

Working context

In practice, as the accountants are sometime required to prepare their clients' tax returns, they
need to advise the clients on how to calculate the taxable income from different heads for a
particular year. Before advising the clients, accountants should have the clear concept relating
to the admissible and inadmissible expenses and exemptions so that they can deduct or add
the expenses in determining the taxable income.

Syllabus links

The topics covered in this chapter are very important for computing taxable income which is
required for solving sample practical problems at this level.

You will also be able, using this knowledge, to plan tax in such a way that tax can be minimized.

72 Business Planning: Taxation & Compliance ICAB 2024

 Examination context C
H
A
P
Exam requirements T
E
In the examination, candidates may be required to: R

 Identify income under the head ‘Income from financial asset;

 Define the concepts of interest-bearing financial asset or securities; 5
 Recognize the allowable expenses and inadmissible expenses under the head;
 Define different types of securities;
 Calculate taxable income under the head ‘Income from financial asset;
 Understand the application of ex and cum interest;
 Handle situations like bond washing transactions.

Question practice

For question practice on these topics go to the suggested answers covering this chapter and
also this workbook.

Examiner's comments on how students tackle questions

Candidates have to be prepared well for this area as this chapter consists of one concept on
computation of income which is vital for calculating tax liability. Clear concept and
understanding of each content of this chapter will help candidates to resolve any problems
relating to computation of income.

5.0 INCOME FROM FINANCIAL ASSETS

Section overview

 There are seven heads of income. Income from financial asset is one of them;
 There are some allowable, inadmissible and not permissible deductions under different
heads of income;
 Computation of taxable income from financial asset is very important;
 Grossing up of interest on financial asset;
 Tax shall be payable when an assessee actually received interest on financial asset;
 The two main methods of accounting are cash system and mercantile system;
 An assessee may be allowed to set off of losses but carry forward not allowed.

5.1 Scope of ‘Income from financial asset’

As per section 62 of the Income Tax Act, 2023, Income classifiable under the head “Income from
financial asset” includes:

(i) Interest, profit or discount of the Government or Government approved securities;

(ii) Interest, profit or discount of debentures or other securities issued by or on behalf of a local
authority or a company;

ICAB 2024 Income from financial asset 73

 (iii) Interest or profit receivable from deposit into any bank or financial institute called whatever
name, and financial product or schemes;
(iv) Dividend.

5.2 Definition ‘Securities’

Section 2 (87) specifies that ‘Securities’ shall include –

(a) Treasury bills, bonds, savings certificate, debenture, sukuk or shariah-based securities or
similar instruments issued by the Government.
(b) Share or stock issued by any company or legal entity or issuer, deed issued by way of
mortgage or charge or hypothecation, bonds, debenture, derivatives, units of any joint
investment scheme including mutual funds or alternative investment fund, sukuk or similar
shariah based deed, and purchase right or warrant to accept the aforesaid deed.

Provided that it shall not include any currency or note, draft, cheque, bill of exchange, bank
acceptance, trade receivable or trade payable.

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.

Timing of tax on ‘Income from financial asset’

According to section 63 of the Income Tax Act, 2023, in the income year in which a person
receives income from financial asset or in the income year in which such income credited to the
account, whichever occurs first, it shall be included in that income year.

Allowable deductions from ‘Income from financial asset’

Deductions permissible in the determination of income from financial asset as per section 64
are:

(i) Any amount deducted (other than income tax) against interest or profit by bank or financial
institute;
(ii) Interest paid on borrowed money solely for the purpose of earning from ‘Income from
financial asset';
(iii) Any other expenditure (in addition to above) incurred solely for the purpose of earning the
income from financial asset.

Non-allowable deductions

According to section 65 of the Income Tax Act, 2023, following expenditure shall not be treated
as allowable expenditure for the purpose of computing ‘Income from financial asset’:

(i) Any interest payable outside Bangladesh from which withholding income tax has not been
deducted or paid in accordance with the provision of this Act;
(ii) Interest or commission paid on income from exempted financial assets;
(iii) Any expenditure of a capital or personal nature.

74 Business Planning: Taxation & Compliance ICAB 2024

5.3 Nature of securities
C
Dealings of securities may have various purposes from the part of the investors. For example, it H
may take any of the following three natures: A
P
T
Trading securities
E
R
Securities Available for sale securities

5
Held to maturity securities

Trading securities are those types of securities where the main purpose is to earn profit through
trading (buying and selling) of securities. However, held to maturity securities are those types of
securities where investment is made for a specific time period. However, available for sale
securities fall in between which is not an investment for long time or where the dealing is not so
frequent. The investors wait for a while to see how to maximize profit on the deal. As interest on
securities is a separate head of income, even if the securities are held as trading assets within
the course of business undertaken by a bank or an insurance company or a stock broker, the
interest must be charged under this head and not under section 45 as income from business or
profession or under section 66 as income from other sources [Central Exchange Bank LTD. V.
C.I.T. (1955) I.T.R. 167].

5.4 Bond washing transactions through sale and buy back of securities

When some transactions happened between two parties to wash out the impact of interest on
taxable income and thus avoiding the taxes 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 tax avoidance. In this
case, securities are sold cum interest with an agreement to re-sell or retransfer the securities.
Securities are sold to a person whose income is less than the minimum taxable limit and then he
doesn’t need to pay any tax on interest on securities since his income is less than the taxable
limit. On the other hand, since securities are capital asset, no tax will be given on the disposal
value of the securities by the seller. In this way both the seller and buyer can avoid tax.

To prevent the avoidance of tax in this manner, section 242 of the Income Tax Act, 2023 provides
that where a security owner transfers the securities on the eve of due date of interest and
reacquires them eventually, the interest received by the transferee/purchaser will be deemed as
income of the transferor/seller and, accordingly, it will be included in the total income of the
transferor/seller and not the transferee/purchaser. There is wide scope to avoid tax in this way
and Section 242 has given sufficient authority to the DCT to handle those cases of tax avoidance.
It should be mentioned here that stocks/shares are also defined as securities at section 242.

5.5 Types of securities

In terms of taxability, securities may be classified as either Government securities (securities

issued or approved by the Government) or Commercial securities (securities issue by others).

ICAB 2024 Income from financial asset 75

 Tax free
Government
Less t ax
Approved
Securities
Debenture
Commercial Unapproved
Zero coupon bonds

Government securities: Securities issued or approved by the Government fall under this
category. It may be tax free if tax is not imposed on interest or may be less tax on the reasoning
that the assessee will enjoy some exemption on interest income.

Tax free: Any income received by an assessee form Wage earners development bond, US dollar
premium bond, US dollar investment bond, Euro premium bond, Euro investment bond, Pound
starling investment bond or Pound starling premium bond is exempted income tax under Sixth
Schedule, Part 1, Para 18.

Tax deductible Government securities: These are the government securities including treasury
bill/bond and Islamic securities on which tax is to be deducted at source at the time of payment
on maturity at maximum rate.

Commercial securities: Securities issued by or on behalf of a local authority or a company and

approved by the SEC will be considered as commercial securities. These types of securities may
be either debenture or zero-coupon bonds.

Debenture: These are the securities issued by or on behalf of a local authority or a company and
approved by the SEC. Thus, debentures are approved securities.

Zero-coupon bond: A Zero-coupon bond is such type of bond where coupon (interest) is zero.
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 benefit
of buying such security to the owner. Any income derived from Zero-coupon bond received by
a person other than Bank, Insurance or any Financial Institution is fully tax free [Sixth Schedule,
Part 1, Para 25].

5.6 Interest grossing up

As tax is deductible from interest on securities at the time of maturity, so net interest needed to
be grossed-up to get before tax income.

Worked example

Worked example—1

ABC Bank Ltd. a Bangladeshi listed bank received interest on Treasury Bond Tk.10,00,000/
during the calendar year 20X1. Bangladesh Bank neither deducts tax at upfront system or at the
time of maturity.

Calculate income under the head ‘Income from financial asset’ and tax to be paid.

76 Business Planning: Taxation & Compliance ICAB 2024

 Solution 1:
C
ABC Bank Ltd. H
Computation of income from financial assets under section 62: A
P
Interest on securities (Treasury Bond) Fully taxable as it is not tax-free-------------Tk.10,00,000 T
E
Tax @ 37.5% comes at Tk.3,75,000 (No tax credit as there was no TDS) R
Worked example—2
5
Mr. Jamal Kaiser has the following interest income from investments in securities during the
income year 2023-24:

1. Tk. 100,000 from interest on Bangladesh Wage Earner's Development Bond (Purchased on
1" September, 2017).
2. Tk. 200,000 from Bangladesh Investment Bond (Purchased on 30th June,20X0). Tax @ 5%
was deducted at that time at upfront system. That’s why no further tax was deducted at the
time of maturity on 30th June,2024.
3. On 31st March, 2024, 3 years Zero Coupon Bond of Tk. 50,000 was matured and he has
received the amount as maturity value, whether the acquisition price of the same was Tk.
35,000. The collection fee of Tk. 500 was charged in this regard by his bank.

Compute income from interest and tax payable by Mr. Jamal Kaiser for the income year 2023-24.

Solution 2:

Mr. Jamal Kaiser

Computation of total income

Tk. Tk.
Income from financial assets (section: 62):
(1) Interest form tax free government securities (wage earner
development Bond) 1,00,000
Less: tax free as per 6th schedule (part-A) para-24A 1,00,000 -
(2) Interest on Bangladesh Investment Bond 2,00,000
(3) Interest on zero coupon bond 15,000
Less: exemption (full) As per 6th Schedule (Part-A) Para-40 15,000 -
Taxable income from financial asset 2,00,000

Income tax liability is zero as income is below taxable ceiling of Tk.3,50,000, assuming he has no
other income source

Self-assessment question

1. What incomes are included in “Income from financial asset” under the Income Tax Act, 2023?
2. Is interest on private loan is an income from financial assets?
3. What deductions are allowable from such income under the Act?
4. What are the tax-free securities?

ICAB 2024 Income from financial asset 77

78 Business Planning: Taxation & Compliance ICAB 2024
 Chapter 6
Income from rent

Introduction

Examination context

Topic list

6.1 Definition
6.2 Income from rent
6.3 Allowable deductions in computing ‘Income from rent’
6.4 Special income from rent
6.5 Formalities to be followed by the landlord receiving monthly
rent more than Tk.25,000
6.6 Tax to be deducted at source from house property

Worked examples
 Introduction

Learning objectives

 Identify the income under the head ‘Income from rent’;

 Compute the taxable income under this head;
 Knowing annual value and its computation;
 Identify the allowable deductions under the head;
 Identify non-assessable income under the head;
 Deemed income from rent;
 TDS from house rent in case of commercial use;
 Computation of net tax liability from rent income.

Practical significance

Income from rent is the second head of income and very significant for income tax professionals.
It includes some conceptual issues and technicalities that require clear understanding about the
topic.

Annual value is the value representing the gross rent from house property. It is the higher value
of annual rent and reasonable rent determined by the tax authority. Annual rent is again adjusted
for different expenses and TDS. These computations require some rationality on part of the
tenants and landlords.

Scope of allowable deductions is another difficulty. Capitalized expenses cannot be deducted

and in case of partly let out properties, expenses are deducted proportionately. Repairs and
maintenance are considered separately depending on the status of the property as either
commercial or residential due to its significance. Advance receipts from the tenants are
considered as income and at the time of refund it has got separate treatment. All of these
adjustments are very technical and sometimes require professional judgment and this is the
reason why the chapter is practically significant.

You will find the details of the above issues in this chapter with some practical examples.

Stop and think

Do you realize that the computation of taxable income under the head ‘Income from rent’ is one
of the basic requirements for determining tax liability? Can you determine the taxable income
under the head? Do you understand application of tax deducted at sources by the tenants?

Working context

In practice, as the accountants are sometimes required to prepare their clients' tax returns, they
need to advise the clients on how to calculate the taxable income for any income year under
different heads. Before advising the clients, accountants should have the clear concept relating
to the admissible and inadmissible expenses in different heads of income so that they can
deduct or add the expenses in determining the taxable income.

Syllabus links

The topics covered in this chapter are very important for computing taxable income which is
required for solving sample practical problems at this level.

80 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Have clear concept of rent income;

 Define annual value;
 Recognize the allowable deductions and allowances;
 Know self-occupancy and its impact in computing taxable income under the head;
 Identify tenant’s expenses borne by the landlord and landlord’s expenses borne by the
C
tenants;
H
 Know TDS rate and its application in computing net tax liability;
A
 Determine interest on borrowed capital and installments for loan taken during construction
period;
P
 Adjustment of advance received from tenants; T
 Know impact of capitalized expenses in computing house property income; E
 Know the application of vacancy allowance and allowances for un-collectible rents; R
 Computing repairs and maintenance expenses in different cases;
 Know the treatment of unspent number of repairs and maintenance;
 Know the residential and commercial use of house property and its impact on computing 6
taxable income;
 Understand different status of a house property; fully let out, partly let out and self-occupied;
 Know penal measures if the landlord does not follow rules/instructions by the NBR;
 Compute net tax liability.

Question practice

For question practice on these topics go to the suggested answers covering this chapter and
also this workbook.

Examiner's comments on how students tackle questions

Candidates have to be prepared well for this area as this chapter consists of core concept on
computation of income under the head ‘income from rent’ which is vital for calculating total tax
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.

6.0 INCOME FROM RENT

Section overview

 Income from rent is the second head of income;

 Rent of 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;
 House property may be let out for residential purpose or commercial purpose;
 Actual rent will be adjusted for expenses and TDS;

ICAB 2024 Income from rent 81

  Tenants are sometimes allowed to deduct taxes before giving rent to the landlords;
 Landlords can claim allowances for vacancy and uncollected rents;
 Security deposits received from tenants that are not adjustable with rents are not considered
as income.

6.1 Definition

Section 35 provides the definitions in relation to income from rent as:

“House property" means a house, building, or apartment, including furniture, fixtures, and
fittings integral thereto, along with the land on which the house is built, but shall not include
buildings used as warehouses or factory buildings rented as an integral part of renting plant and
machinery.

“Rent out” means granting the right to use a property without transferring ownership or control,
but does not include renting out a property by a scheduled bank, investment bank, finance
company, mudaraba, or leasing company.

“Property” includes house property, land, furniture, fixtures, factory buildings, business
premises, machinery, personal vehicles, and other capital assets that can be rented out.

Section 2(62) defines the “annual value” as the value in relation to any property let out shall be
reasonable yearly rental value or the amount of annual rent, whichever is higher.

6.2 Income from rent

Income from rent shall be the amount of rental value of a property reduced by allowable
expenses. However, this provision shall not be applicable in case any portion of the property
used for business purposes of business of the owner.

Income from rent of assets shall be computed under this Section irrespective of the nature of
trade, commerce, or business except for hostel, hotel, motel or resort.

Computation of total rental value:

As per section 37, computation of the rental income in a year shall be represented by the formula
A=(B+C+D+E)- F, where:
A = Total rental value;
B = Annual value or rent received, whichever is higher;
C = Amount of advance adjusted during the income year, provided non-adjustable advance
shall not be included;
D = Additional amount or benefits received other than salami or premium;
E = Service charge, repair & maintenance charge or any other amount paid by the tenant;
F = Vacancy allowances only allowed by producing electricity bills as proof of vacancy.

Except house property, total rental value of others property shall be computed as below:
A=(B+C+D), where:
A = Total rental value;
B = Annual value or rent received, whichever is higher;
C = Amount of advance adjusted during the income year, provided non-adjustable advance
shall not be included;

82 Business Planning: Taxation & Compliance ICAB 2024

 D = Income for using the property otherwise, or additional amount or benefits from the property.

6.3 Allowable deductions in computing ‘Income from rent’

Following expenses shall be deductible in computing rental income of own house property,
namely –

(a) Insurance premium paid;

(b) Interest on loans from banks or finance companies for acquisition, construction, renovation,
or reconstruction of property. However, interest on loans before rental income starts can be
split into three equal instalments in the next three income years [no deduction is allowed
after the said 3 years].
(c) Taxes, fees, charges not in the nature of capital expenses;
(d) The amount mentioned in the below table for expenses related to repair, collection of rent,
water and sewerage, electricity, maintenance and other basic services: C
H
Nature of property Deductible as % of total rental value A
House property used for commercial purpose 30% P
House property used for non-commercial purpose 25% T
E
Further, expenses shall be allowed proportionately if the property is partially rented out or R
rented out for a portion of the income year.

Deduction admissible from the rental income of other property [except house property]: 6

(a) Deductions mentioned in Section 49 to 55 of this Act shall be admissible.

(b) Expenses shall only be admissible if payment is made through bank transfer except for
allowances under 3rd Schedule.

6.4 Special income from rent

Section 39 mandates that special income from rent shall include any unspent amount of repair
and maintenance [Section 38(1)(e)], and disallowances of expenses mentioned in Section 38(2)
except for accounting adjustments.

No expenses shall be admissible against the special income from rent, nor any adjustment or
carry forward of loss, allowances under the 3rd Schedule, and general tax rate shall be applied
to this income.

Illustration—1
Mr. B. Rahman owns a 5 storied residential house with 3 flats in each floor. He occupied all the
flats in second floor for his own residence purpose. Other flats are let out for residential purpose
and monthly rent of each flat is Tk. 8,000. Yearly reasonable rent of the whole house is Tk.
1,600,000. Compute annual value.

Annual value:

Actual rent [Tk. 8,000 ×3 ×4 ×12] Tk. 1,152,000

Reasonable rent [Tk. 1,600,000 × 12/15] Tk. 1,280,000
Annual value will be actual rent or reasonable rent whichever is higher: Tk. 1,280,000

ICAB 2024 Income from rent 83

 Illustration—2

Mr. B Rahman owns a 5 storied residential house with 3 flats in each floor. He occupied all the
flats in second floor for his own residence purpose. Other flats are let out for residential purpose
and monthly rent of each flat is Tk. 8,000 including Tk. 1,000 for water, gas and electricity bill of
the tenant. Yearly reasonable rent of the whole house is Tk. 1,600,000. Compute annual value.

Annual value:

Actual rent [Tk. 7,000 ×3 ×4 ×12] Tk.1,008,000

Yearly reasonable rent for 4 floors [(Tk. 1,600,000/5)*4] Tk.1,280,000
Annual value is the higher one Tk. 1,280,000

Illustration—3

Mr. B. Rahman owns a 5 storied residential house with 3 flats in each floor. He occupied all the
flats in second floor for residence purpose. Other flats are let out for residential purpose and
monthly rent of each flat is Tk. 8,000. In addition to monthly rent, tenants also bear municipal
tax@ Tk. 10,000 per tenant annually. Yearly reasonable rent of the whole house is Tk. 1,600,000.
Compute income from rent.

Annual value:

Actual rent [Tk. 8,000 ×3 ×4 ×12] Tk.1,152,000

Reasonable rent cum Annual vale [(Tk. 1,600,000/5)*4] Higher one- Tk. 1,280,000
Add: Landlord’s exp. borne by the tenant [Tk. 10,000 ×3 ×4] Tk. 120,000
Total rental value Tk. 1,400,000
Less: Municipal tax (-)Tk. 120,000
Less: Repair & Maintenance (25% of total rental value) (assume it is actual) (-)Tk. 350,000
Income from rent Tk. 930,000

6.5 Formalities to be followed by the landlord receiving monthly rent more than
Tk.25,000

In case of let out property if the gross monthly rent exceeds Tk. 25,000 the owner shall have to:

(a) Maintain bank account and deposit entire monthly rent directly to the account (Irrespective
of part or full of rent is received in cash);
(b) Maintain a register about tenants, house rent received from the tenants.

According to section 267 of the Income Tax Act, 2023, if he fails to do so then penalty may be
imposed by the income tax authority @ 50% of tax on house property income or Tk. 5,000
whichever is higher.

6.6 Tax to be deducted at source from rent

As per section 109, the tenant or lessee of a house property, hotel, guest house, vacant
premises, plant, machinery, or private reservoir shall deduct tax @ 5% from the rent.

84 Business Planning: Taxation & Compliance ICAB 2024

 If, after assessment, it is found that no tax or a lesser amount of tax is payable by the owner, the
full or excess amount shall be refunded. However, no deduction or a deduction at a lower rate
shall be applied upon the production of a certificate from the Deputy Commissioner of Taxes.

In this context, 'rent' includes any payment with respect to a lease, tenancy, or any contract or
agreement for the use of furniture, fixtures, buildings, including land.

Worked examples and solutions

Worked example—1:

Mr. Mushtaque Ahmed’s house is let out at Tk. 10,000 per month. Income year ended on 30
June. Tenant quitted the house on 31 March in the same financial year and owed Tk. 20,000 for
rent being unpaid which was recovered later. House remained vacant for 3 months during the
alterations. The owner claimed the following deductions: C
Tk. H
Actual cost of repairs 15,000 A
Alterations expenses 30,000 P
Interest on mortgage 12,000 T
Fire insurance premium 5,000 E
Municipal tax 10,000 R

Required: Compute his income from rent of house property.

6
Solution 1:

Mr. Mushtaque Ahmed

Computation of income from rent
Tk.
Rental value 12x10,000 1,20,000
Reasonable rent not given -
Annual value, higher one- 1,20,000
Less: expenses
Repair & maintenance (25%x120,000)/12*9 22,500
Interest 12,000
Fire Insurance premium 5,000
Municipal tax 10,000
Vacancy allowance 3x10,000 30,000
79,500
Income from rent 40,500
Special rental income (unspent repair) [section 39(1)] 22,500-15,000 7,500
Total income 48,000

Note, alternation expense is capital expenditure.

Worked example—2:

Mr. Faruq owns a residential house at Santinagar, Dhaka, which was constructed 10 years back
with a loan of Tk. 20,00,000 from House Building Finance Corporation. The house has been let
out for commercial purpose @ Tk. 150,000 per month. The reasonable rent of the house is Tk.
15,00,000.

ICAB 2024 Income from rent 85

 The following expenses were incurred in the income year for that house:

1. Repair expense Tk. 44,000;

2. City Corporation Tax Tk. 35,000;
3. Rent collection expenses Tk. 12,000;
4. Fire insurance premium Tk. 8000 per quarter;
5. Bank interest Tk. 300,000

Compute income from house property.

Solution 2:

Mr. Faruq
Computation of income from rent
Tk.
Actual rent 12x150,000 18,00,000
Reasonable rent 15,00,000
Annual value, higher one 18,00,000
Less: Expenses
Repair & maintenance 30%x1,800,000 5,40,000
City Corporation tax 35,000
Insurance premium 8000x4 32,000
Interest on loan 3,00,000
9,07,000
Income from rent 8,93,000
Special rental income [section 39(1)] 540,000-44,000-12,000 4,84,000
Total income 13,77,000

Note
Since the house is let out for commercial purpose, repair and maintenance expense is
considered as 30% of the annual value. Here actual spending for repair expenses and collection
expenses is less than 30%. So, the unspent amount [Tk.5,40,000-44,000-12,000=4,84,000] will
be treated as special rental income as per section39(1).

Worked example—3:

Mr. Marwari has a house at Mohakhali C/A with an area of 4,800 square feet. He let out this house
to a computer firm at a monthly rent of Tk. 600,000. The reasonable rent per square feet at
Mohakhali commercial area is Tk.120 per month. The following expenses were incurred in the
income year for that house:

1. Repair expense Tk. 1,590,000;

2. City Corporation Tax Tk. 15,000;
3. Fire insurance premium Tk. 90,000;
4. Night guard's salary Tk. 96,000;
5. Installation of electricity line Tk. 325,000;

During the year Mr. Marwari paid installment of house loan to HSBC Tk.1,670,500 (out of which
principal amount is Tk. 640,000). According to agreement, the owner bears the water and gas
bill of the tenant which amounted to Tk. 20,000 for the year. Compute income from rent from
the house property.

86 Business Planning: Taxation & Compliance ICAB 2024

 Solution 3:

Mr. Marwari
Computation of income from rent
Tk.
Actual rent 600,000x12 72,00,000
Reasonable rent 4,800x120x12 69,12,000
Annual value, higher one 72,00,000
Less: Expenses
Repair & maintenance 30%x7,200,000 21,60,000
City Corporation tax 15,000
Insurance premium 90,000
C
Interest on loan 1,670,500-640,000 10,30,500
H
32,95,500 A
Income from rent 39,04,500 P
Special rental income [section 39(1)] 2,160,000-1,590,000-96,000-20,000 4,54,000 T
Total income 43,58,500 E
R
Note: installation of electricity line is a capital expenditure, so this is not admissible.

Worked example 4 6

Mr. Jamilur Rahman is the owner of a five-storied building at Lalmatia. He resides with his family
in the 2nd floor and all other floors (in each floor there are two units) are let out for residential
purpose at a monthly rent of Tk. 10,000 per flat including Tk. 1,000 as WASA and DESA bill. The
reasonable rent of the house is Tk. 1,000,000. Mr. Jamilur Rahman also receives Tk. 450,000 as
security money from the tenant which is not adjustable against rent of the units during the
income year.

Mr. Rahman claims the following deductions for the entire building:
1. Repair expenses Tk. 130,000;
2. Land tax Tk. 2,000;
3. Insurance premium Tk. 16,000;
4. Caretaker and Night guard salary Tk. 24,000;
5. Municipal tax Tk. 22,000;
6. Alteration cost for ground floor Tk. 30,000.

Mr. Rahman has taken a building renovation loan of Tk. 1,500,000 at a flat interest rate of 18%
from City Bank Limited at the beginning of the income year. Compute income from rent for the
income year.

ICAB 2024 Income from rent 87

 Solution 4

Mr. Jamilur Rahman

Computation of income from rent
Tk.
Actual rent 10,000x4x2x12 9,60,000
Reasonable rent (1,000,000/5)x4 8,00,000
Annual value, higher one 9,60,000
Less: Expenses
Repair & maintenance [25%x960,000/5)x4] 1,92,000
Municipal tax [(22,000/5)x4] 17,600
Insurance premium [(16,000/5)x4] 12,800
Interest on loan [(18% of 1,500,000/5)x4] 2,16,000
Land tax [(2,000/5)x4] 1,600
4,40,000
Income from rent 5,20,000

Note:
1. the amount received as security money not adjustable against rent is not included as income
from rent
2. expenses are allowed proportionately.
3. alteration cost is a capital expenditure hence not allowable.

Self-assessment questions

(a) Define “Annual Value” of a property under the Income Tax Act, 2023.
(b) Is the ‘Annual value’ of a property to be determined when it is occupied by its owner for
residential purposes?
(d) What are the allowable deductions from annual value in determining the ‘Income from rent
of a house property’ under the Act?
(e) If any owner of the house received house rent more than Tk. 25,000 per month then what
formalities to be maintained by him? What may happen if he does not follow the rules?

88 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 7
Income from agriculture

Introduction

Examination context

Topic list

7.1 Basic principles of income from agriculture

7.2 Characteristics of income from agriculture
7.3 Special agricultural income
7.4 Non-agricultural income
7.5 Income from agricultural house property
7.6 General allowable deductions in computing income from
agriculture
7.7 Calculation of special deductions in case of non-
maintenance of books of accounts
7.8 Depreciation allowance
7.9 Non-assessable agricultural income

Worked examples
 Introduction

Learning objectives

 Identify income from agriculture.

 Compute the taxable income under the head ‘income from agriculture’.
 Identify different types of agricultural income.
 Identify the allowable deductions under the head.
 Illustrate the non-assessable income under the head.
 Identify the area of reduced tax rate.
 Identify partly agricultural income and partly business income.
 Compute net tax liability in different situations.

Practical significance

The head ‘Income from agriculture’ has good potential for increasing the revenue to the
Government in Bangladesh due to its significance. Bangladesh is an agricultural country and its
agriculture sector has significant contribution to GDP every year. But collection of tax from this
head is insignificant. Here, professional accountants can play an important role by devising the
way of collecting tax under the head through simplification and modernization of tax laws and
process.

This chapter presents different form of agricultural income, allowable deductions, and non-
assessable income under the head, non-agricultural income, and other related topics. A clear
understanding on each topic presented in the chapter will make the students expert to give
opinions to their clients in tax related issues.

You will find the details of the above issues in this chapter with some practical examples.

Stop and think

Do you realize that the computation of taxable income under the head ‘income from agriculture’
is one of the basic requirements for determining tax liability? Can you determine the taxable
income under the head? Can you compute net tax liability of an assessee having income under
the head?

Working context

In practice, as the accountants are sometime required to support to prepare their clients' tax
returns, they need to advise the clients on how to calculate the total taxable income for any
income year. Before advising the clients, accountants should have the clear concept relating to
the admissible and inadmissible expenses so that they can deduct or add the expenses in
determining the taxable income.

Syllabus links

The topics covered in this chapter are very important for computing taxable income which is
required for solving sample practical problems at this level.

You will be also using this knowledge when you tackle the taxation paper later on in the
Professional Stage and it will also underpin the technical aspects at the Advanced Stage.

90 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Define income from agriculture;

 Identify different types of agricultural income;
 Compute the taxable income under the head ‘Income from agriculture’;
 Differentiate fully, partly and other agricultural income;
 Identify the allowable deductions under this head;
 Illustrate the non-assessable income under this head;
 Know the application of reduced tax rate and areas where this tax rate is applicable;
 Define non-agricultural income and its impact on computing total income and tax liability;
 Compute net tax liability in different situations.

Question practice

For question practice on these topics go to the suggested answers covering this chapter and
also this workbook.

Examiner's comments on how students tackle questions

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 tax liability. Clear concept and C
understanding of each content of this chapter will help candidates to resolve any problems H
relating to computation of agricultural income. A
P
7.0 INCOME FROM AGRICULTURE T
E
Section overview
R

 Income from agriculture is one of the important heads of income;

 The total income may not be taxable income; 7
 There are some allowable, inadmissible and not permissible deductions under the head;
 Some income under the head is not assessable;
 On some specific classes of income under the head is taxed at a reduced rate;
 Depreciation allowance on agricultural property is different;
 A part of the gain on sale of agricultural asset will be reported as income from agriculture;
 It is very important to know non-agricultural income and partly agricultural income;
 Advance tax need not be payable on agricultural income up to Tk 8 lakh.

7.1 Scope of income from agriculture

According to section 40 of the Income Tax Act, 2023 –

1. Income earned by a person from any activities related to agriculture shall be classified under
the head ‘Income from agriculture’;

ICAB 2024 Income from agriculture 91

 2. 40% of proceeds from tea and rubber production or process by any person shall be
considered as business income and 60% shall be considered as ‘income from agriculture’;
3. Agriculture means any kind of horticulture, animal husbandry, natural use of land, poultry
and fish farms, reptile farms, nurseries, any kind of cultivation on land or water, egg and milk
production, timber, grass and shrubs, production of fruit, flower and honey and production
of seed shall be included.

7.2 Characteristics of agricultural income

a) 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 Gopal Saran Narain Singh V CIT 1935,
ITR 237 (P.C) or of other thing which is charged upon the land. The annual receipt would not
be agricultural income.
b) The land on which agricultural income is assessed must be situated in Bangladesh.
c) The land must be used for agricultural purpose. Unless there is some measure of cultivation
of the land, some expenditure of skill 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
flowers growing on land naturally without any human skill 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 grazing or pasturing animals required 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.
d) No advance tax is payable on agricultural income up to Tk 800,000 under section 154.

7.3 Special agricultural income

According to section 41 of the Income Tax Act, 2023 _

1. Without prejudice to the section 40 of ITA, 2023, the provision of section 41 shall be applied
to compute special agricultural income.
2. As per section 41(2), if an asset is sold in any income year after being used by the assessee
for agricultural purpose under section 40, it shall be computed as follows, namely –

If sale proceeds is more than the acquisition Income from capital gain = A - B
value Income from agriculture = B - C
If sale proceeds is not more that acquisition Income from agriculture = A - C
value but exceeds written down value (WDV)

3. As per section 41(3), 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 agricultural work, exceeds the WDV, the said amount shall be included under the head
‘Income from agriculture’ as below, namely –

If insurance, salvage or compensation value Income from capital gain = A - B

is more than the acquisition value Income from agriculture = B - C
If insurance, salvage or compensation value Income from agriculture = A - C
is not more that acquisition value but
exceeds written down value (WDV)

4. For the purpose of section 41, –

92 Business Planning: Taxation & Compliance ICAB 2024

 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

5. If difference between sale proceeds or salvage/compensation value and WDV of the asset
being used in agricultural purpose is negative i.e., loss, the loss shall be treated as allowable
expense for the purpose of computation of ‘Income from agricultural’.

7.4 Non-agricultural income

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.

(i) Income from ferry ghat and mooring terminal;

(ii) Income from sale of produce that grow up in the agricultural land without agricultural
works e.g., forest trees, wild grass, fruit and flowers grown spontaneously and without
human effort;
(iii) Income from salt production by flooding the land with sea water and then extracting salt
there from;
(iv) Income from cutting and selling of timber on contract;
(v) Interest on arrear of rent for agricultural land;
(vi) Income from letting out vacant land not used for agricultural purpose;
(vii) Royalty / ground rent against lease of land for mining, potteries, quarries etc.;
(viii) Sale of soil used for brick field;
(ix) Income from sale of water used for irrigation;
(x) Income from sale of forest trees, flowers, bamboo, wild grass, reeds or fruits produced
naturally without any agricultural work; C
(xi) Sale of stones from quarries; H
(xii) Income from salary for working as an agricultural supervisor / manager; A
(xiii) Income from sale of crops which has been purchased from others for resale; P
(xiv) Income from dairy firm established for business purpose; T
(xv) Income from poultry firm established separately for business purpose; E
(xvi) Income from fisheries established for business purpose; R
(xvii) Fish hunting, ship anchor etc.;
(xviii) Income derived from butter and cheese making;
(xix) Income received as commission for working as middleman in agro products; 7
(xx) Remuneration received by managing agent at a fixed percentage of net profit from a
company having agricultural income;
(xxi) Interest received by an assessee against loan in the form of agricultural produce (xxii)
Dividend paid by a company out of its agricultural income.

7.5 Income from agricultural property

When 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 become
agricultural by reason of only in direct connection with agricultural land [Premier Construction
Co. V.C.LT. 1948 I.T.R. 380, 384].

ICAB 2024 Income from agriculture 93

 7.6 General allowable deductions in computing income from agriculture

As per section 42 of ITA, 2023, in computing ‘Income from agriculture’ in any income year, the
amount wholly and exclusively expended (not capital or personal expenditure) for the purpose
of agriculture, shall be treated as allowable deduction. And following deduction shall be treated
as general allowable deduction, namely –

(a) Any tax, land development tax or khajana paid on land or ground used for agricultural
purpose;
(b) Rent payable for land or ground used for agricultural purpose, development and
maintenance expense and cultivation expense;
(c) Interest or profit payable on loan taken for agricultural purpose;
(d) Repair and maintenance of machinery and equipment used for agricultural purpose, rearing
of livestock for cultivation, processing or transport related expenditure;
(e) Insurance premium;
(f) Expenditure for protecting agriculture from natural calamities or other damages;
(g) Depreciation and amortization expense as per third schedule of this Act;
(h) Where animal which was used for agricultural purpose has died or become permanently
disabled, the difference between purchase price and sale proceeds of animal or its meat;
(i) Any expenditure (not in capital nature) incurred in connection with a visit abroad as a
member of any Government sponsored agricultural delegation;
(j) Any expenditure incurred on training to Bangladeshi citizens related to such scheme as
approved by the Board;
(k) Expenditure incurred in conducting scientific research related to agriculture or expenditure
incurred in conducting such scientific research whereby the research is conducted wholly
and exclusively of the purpose of agricultural development of the taxpayer in Bangladesh.

Note that only so much of expenditure related to income from agriculture shall be treated as
allowable expenditure.

7.7 Calculation of special deductions in case of non-maintenance of books of

accounts

According to section 43 of the Income Tax Act, 2023, where it appears that, -

(a) The assessee does not apply accounting system regularly;

(b) The assessee is applying a method on the basis of which it appears to the DCT that it is not
possible to arrive at a conclusion as to the income of the assessee;
(c) The assessee has failed to maintain accounts and transactions; or
(d) Accounts or transaction maintained by the assessee are not verifiable.

In such case, notwithstanding anything contained in any other section, 60% of market value of
the agricultural produced shall be treated as allowable expenditure.

Note that above provision shall not apply in case where the owner receive income from Adhi,
Borga, Bhaga, or share.

Section 44 of ITA, 2023 states that if withholding tax is not applied (where applicable) on any
expenditure, such expenditure shall not be treated as allowable expenditure. Additionally, the
provision of section 55 of ITA, 2023 as if the provision was related to ‘income from agricultural’.

94 Business Planning: Taxation & Compliance ICAB 2024

7.8 Depreciation allowance

According to part 1 of Third Schedule of ITA, 2023, depreciation allowance in respect of any
capital asset, works or physical infrastructure owned by a taxpayers used for agricultural
purpose, depreciation shall be allowed as per below table:

Assets Rate
1. A building or structure constructed by brick, concrete, steel or similar material 5%
2. House constructed by tin, bamboo or similar materials 10%
3. Permanent fence 10%
4. Tube – well 10%
5. Tank 10%
6. Irrigation works, channels, pipes 10%
7. Agricultural instruments made by wood or bamboo 20%
8. Weight machine 10%
9. Tractors, oil engines and light machinery 10%
10. Truck, delivery van, other motor vehicle 10%
11. Piper pumping equipment 20%
12. Non-mechanical van 15%
13. Steam engine 10%
14. Factory machinery 15%
15. Any such common instrument, tools, plant and other property 10%

7.9 Non-assessable agricultural income

C
According to Sixth Schedule, Part 1, Para 20 of ITA, 2023, income up to Tk 200,000 of any H
individual assessee under the head ‘Income from agricultural’ shall be exempted from tax if the A
said individual – P
T
(a) Is a farmer by profession; E
(b) Does not have any income other than following income, namely – R
(i) Income arising land cultivation;
(ii) Income not more than 20,000 from bank interest.
7
Illustration—1

Mr. Rajib reports Tk. 12,00,000 as income from agriculture during the income year ended on
June 30. He has no income from other sources. In this case, Mr. Rajib will pay taxes on Tk.
650,000 only. His non-assessable income is Tk. 5,50,000 (Tk. 3,50,000 + Tk. 2,00,000). It is
assumed that Mr. Rajib doesn’t fall in elderly citizen or disable category.

Worked examples and solutions

Worked example 1

Relevant information regarding the agricultural income of Mr. Jamal Ahmed for the year ended
on June 30, 20X1 is given below:

ICAB 2024 Income from agriculture 95

 Sale of paddy 150 maunds @ Tk. 600 per maund
Sale of jute 100 maunds @ Tk. 800 per maund
Sale of rabi crops Tk. 65,000
Income from barga Tk. 20,000
Lease rental of agricultural land Tk. 30,000

Expenses relating to this income are as follows:

Cost of seeds and fertilizer Tk. 40,000

Cultivation cost 65,000
Transportation cost 15,000
Ordinary processing cost 25,000
Land revenue paid 7,000
Crop insurance premium 5,600
Allowable depreciation 3,000
Interest on borrowed fund 2,800

Compute total income of Mr. Jamal Ahmed assuming that:

(a) he did not maintain proper books of accounts

(b) he maintained necessary books of accounts

Solution 1:

Mr. Jamal Ahmed

Computation of agricultural income

(a) When books of accounts are not maintained:

Income from agricultural : Tk.
Sale of paddy (150xTk. 600) 90,000
Sale of jute (100xTk. 800) 80,000
Sale of rabi crops 65,000
Income from barga 20,000
Lease rental of agricultural land 30,000
2,85,000
Less: Admissible expenses:
1. Production cost (235,000 x 60%) 1,41,000
3. Union parisad tax 4,400
4. Crop insurance premium 5,600
5. Allowable depreciation 3,000
6. Interest on borrowed fund 2,800
1,56,800

Total income from agriculture 1,28,200

(b) When proper books of accounts are maintained:

Income from agricultural: Tk.

Income from sale of paddy (150 x 600) 90,000
Income from sale of jute (100 x 800) 80,000
Income from sale of rabi crops 65,000

96 Business Planning: Taxation & Compliance ICAB 2024

 Income from Borga 20,000
Lease of agricultural land 30,000
2,85,000
Less: Admissible expenses:
1. Production cost-
Cost of seeds and fertilizer 40,000
Cultivation costs 65,000
Transportation cost 15,000
Ordinary processing cost 25,000
1,45,000
2. Land revenue paid 7,000
4. Crop insurance premium 5,600
5. Allowable depreciation 3,000
6. Interest on borrowed fund 2,800
1,63,400

Total income from agriculture 1,21,600

Worked example 2

Mr. Sanjib Majumder is a farmer who owns agricultural land which is used three times a year to
produce agricultural goods. Such cultivation is mainly done for commercial purpose; however,
a very insignificant part is consumed by him. He is an elderly citizen (age more than 65 years)
and has reported income from no other sources. During the income year ended on June 30,
2024, he has reported following information relating to income from agriculture:

Agricultural
Volume of production Self-consumption Market price
produce C
Paddy 215 maunds 15 maunds Tk. 700 per maund H
Potato 112 maunds 12 maunds Tk. 180 per maund A
Cereals 835 kgs 35 kgs Tk. 115 per kg P
T
In addition to above income, he also produced seasonal vegetables (beans) during winter on E
the surroundings of his agricultural land. Total production was 256 kgs and sold at the rate of R
Tk. 16. Out of the total production, 16 kgs are used for self-consumption and reported Tk. 1,200
as cost of bean production.
7
He also has reported Tk. 95,000 income from poultry firm and fulfills all conditions to be non-
assessable. He has also reported Tk. 180,000 income from fisheries.

Expenses relating to agricultural produce like paddy, potato and cereals are as follows:

Cost of seeds and fertilizer Tk. 36,500

Labour charge 40,000
Maintenance costs of agricultural equipment 4,000
Union parisad tax 5,800
Crop insurance premium 8,200
Depreciation on tractor @ 20% 14,000

Mr. Majumder has borrowed Tk. 50,000 from Rajshahi Krisi Unnayon Bank at an interest rate of
12% per annum on 15th October 2019. Allowable depreciation for tractor as per the Third

ICAB 2024 Income from agriculture 97

 Schedule of the ITA, 2023 is 10%. Cost of seeds and fertilizer includes Tk. 1,500 spent against
Borga. He maintains books of accounts properly.

Solution 2:
Mr. Sanjib Majumder
Computation of agricultural income

Agricultural income :
Market price of paddy production (215 x 700) [note-1] 150,500
Market price of potato (112 x 180) 20,160
Market price of cereals (835 x115) 96,025
Market price of seasonal vegetables (256 x16) 4,096 270,781
Income from poultry farm 95,000
Less: exempted upto Tk.10,00,000 95,000 -
Income from fisheries Tk. 1,80,000
Less: exempted upto Tk.10,00,000 1,80,000 -
Less: Admissible expenses:
1. Production cost-
Cost of seeds and fertilizer 36,500
Labour charge 40,000
Maintenance of agricultural equipment 4,000
80,500
2. Union parisad tax 5,800
3. Crop insurance premium 8,200
4. Allowable depreciation (note 2) 7,000
5. Interest on borrowed fund (note-3) 4,250
6. Cost of bean production 1,200
106,950
Total 163,831
Less: exemption as per 6thschedule, part-1, Para 20 200,000
Total income (36,169)

Notes:

1. Market price of the produce is to be taken as sales proceeds. So self-consumption has not
been taken into consideration, rather whole produce has been multiplied by market price
to arrive sale proceeds.
2. Allowable depreciation = (14,000/.20) x .10 =7,000
3. Interest on borrowed fund = (50,000 x 12%) x 8.5/12 = 4,250
4. As agriculture is the only source of income for Mr. Sanjib Majumder, he is allowed to get
maximum Tk. 2,00,000 exemption as per 6thschedule, part-1, Para 20 in assessing his total
income.
5. As total income of Mr.Sanjib Majumder doesn’t exceed the non-assessable limit of Tk.
4,00,000; he will have no tax liability.

98 Business Planning: Taxation & Compliance ICAB 2024

 Worked example 3

From the following particulars of income, compute the total income Mr. Jibon Karmaker for the
income year 2023-24.

1. Sale of paddy: (250 maunds @ Tk. 500) Tk. 125,000

2. Sale of jute: (100 maunds @ Tk. 400) 40,000
3. Sale of rabi crops: 50,000
4. Annual rental from leasing agricultural land 20,000
5. Sale of forest timber and bamboo 6,000
6. Income from tea garden 30,000
7. Income from rubber garden 40,000
8. Income from tobacco industry 30,000
9. Income from sugar industry 50,000
10. Income from poultry farm 35,000
11. Income from cattle rearing 3,000
12. Income from sale of palm and date Juice 6,000
13. Income from sale of honey 5,000

Expenses for cultivation are as follows:

Rice and rabi Jute
crops
Cost of seeds and fertilizer 25,000 7,000
Labor charge 5,000 2,000
Cost of hiring pump machine 3,000 1,000
Repair expense of equipment 500 - C
Transportation cost 2,000 500 H
A
Mr. Karmaker maintains proper books of accounts P
for rice and rabi crops, however, he maintains no T
books for jute. E
Other expenses as incurred were as follows: R
Union parisad tax 2,000
Land revenue 1,000
7
Crop insurance premium 2,500
Allowable depreciation 9,000
Maintenance cost of irrigation plant 4,000
Insurance premium – Tractor 7,000

He had a pump machine which was purchased at Tk. 25,000. It has become obsolete and has
been discarded at Tk.12,000. As on the date of discard, the written down value after charging
depreciation on the basis of prescribed rate at the ITA, 2023 amounted to Tk. 10,000.

He has taken agricultural loan of Tk. 50,000 @ 8% interest from Bangladesh Krishi Bank.

Mr. Karmaker has a tractor which was purchased for Tk. 250,000 on which he has an active
insurance policy. During the income year, the tractor becomes out of order and he filed a claim
with insurance company. After proper scrutiny, he receives Tk. 82,000 from insurance company
as coverage. However, depreciation charged so far on the tractor as per IT Act is Tk. 150,000.

ICAB 2024 Income from agriculture 99

 Solution 3:

Mr. Jibon Karmaker

Computation of total income

Income from agricultural: Tk. Tk. Tk.

Sale of rice (250 x 600) 125,000
Sale of jute (100 x 400) 40,000
Sale of rabi crops 50,000
Annual lease rental 20,000
Income from tea garden (30,000 x 60%) 18,000
Income from rubber garden (40,000 x 60%) 24,000

Income from poultry farm 35,000

(-) Exemption (full) 35,000 -
Income from cattle rearing 3,000
Income from sale of palm and date juice 6,000
Income from sale of honey 5,000
Gain from sale of obsolete equipment
(Sales - WDV = 12,000 - 10,000) 2,000
293,000
Less: admissible expenses
1. Production expenses:
Cost of seeds & fertilizer 25,000
Labor charge 5,000
Cost of pump machine hire 3,000
Repair expanses of agricultural equip. 500
Transportation cost 2,000
Production costs for rice & rabi crops 35,500
Costs of jute production (40,000 x 60%) 24,000 95,000

2. Union parisad Tax 2,000

3. Land revenue 1,000
4. Crop insurance premium 2,500
5. Allowable depreciation 9,000
6. Maintenance cost of irrigating plant 4,000
7. Insurance premium – Tractor 7,000
8. Loss from tractor (Tk. 100,000 – Tk. 82,000) 18,000
9. Interest from borrowed fund (50,000 x 8%) 4,000 47,500
142,500

100 Business Planning: Taxation & Compliance ICAB 2024

 Income from business: 150,500
Income from tea garden (30,000 x 40%) 12,000
Income from rubber garden (40,000 x 40%) 16,000
Income from tobacco (direct 45% tax will be imposed) 30,000
Income from sugar industry 50,000 108,000
(Fully business income as NBR not yet segregate this income)
Income from other sources
Sale of forest timber and bamboo 6,000
Total income 2,64,500

Self-assessment questions

1. Define ‘agricultural income’ under the Income Tax Act, 2023.

2. Discuss the allowable deductions as per section 42 and 43 of the Act in computing the
taxable income under the head ‘income from agriculture’.
3. How will you compute the income in respect of tea and rubber industries?
4. What are the different types of agricultural income?
5. On what categories of agricultural income, taxes are imposed at a reduced rate?

C
H
A
P
T
E
R

ICAB 2024 Income from agriculture 101

102 Business Planning: Taxation & Compliance ICAB 2024
 Chapter 8
Income from business

Introduction

Examination context

Topic list

8.1 Meaning of business

8.2 Scope of income under the head ‘income from business’
8.3 Special area of business income
8.4 Some specific guidelines
8.4 Allowable deductions
8.5 General allowable deduction in computing income from
business
8.6 Special allowable deduction in computing income from
business
8.7 Allowable bad debt expense
8.8 Computation of special deduction of interest or profit
8.9 Special limit for allowable interest
8.10 General conditions for allowable deduction
8.11 Deduction not admissible in certain cases
8.12 Computation of special business income
8.13 Capital and revenue expenditure
8.14 Illustrations of some important concepts

Worked examples and solutions

 Introduction

Learning objectives

 Identify income from business;

 Compute the taxable income under the head ‘income from business’;
 Identify the allowable deductions under the head;
 Identify the expenses that are inadmissible;
 Identify the complexity of computing income from business and profession;
 Identify the expenses admissible up to a certain limit;
 Compute net tax liability in different situations.

Practical significance

The head ‘Income from business’ is very important to tax authority. A significant part of tax
revenue government collects from this head. This head also includes lot of complex issues on
which clear understanding is required to practice tax. This chapter lays the basic foundation of
corporate tax assessment.

This chapter presents an idea of how conventional profit and loss account can be adjusted with
applicable tax laws. It presents the scope of income under the head, admissible expenses,
inadmissible expenses and other related issues.

Some expenses are admissible up to a certain limit. These are explained with some examples.
Other complex issues like perquisites, balancing charge etc. are simplified with examples.

You will find the details of the above issues in this chapter with some practical examples.

Stop and think

Do you realize that the computation of taxable income under the head ‘income from business’
is one of the basic requirements for determining tax liability? Can you determine the taxable
income under the head? Can you compute net tax liability of an assessee having income under
the head?

Working context

In practice, as the accountants are sometime required to support to prepare their clients' tax
returns, they need to advise the clients on how to calculate the taxable income for any income
year. Before advising the clients, accountants should have the clear concept relating to the
admissible and inadmissible expenses so that they can deduct or add the expenses in
determining the taxable income.

Syllabus links

The topics covered in this chapter are very important for computing taxable income which is
required for solving sample practical problems at this level.

104 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Define income from business.

 Identify different scope of income under the head.
 Compute the taxable income under the head ‘income from business.
 Illustrate the income cannot be reported under the head.
 Identify the allowable deductions under the head.
 Illustrate the expenses admissible up to a certain limit.
 Compute net tax liability under the head.

Question practice

For question practice on these topics go to the suggested answers covering this chapter and
also this workbook.

Examiner's comments on how students tackle questions

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 tax liability. Clear concept and
understanding of each content of this chapter will help candidates to resolve any problems
relating to computation of income from business and profession.

8.0 INCOME FROM BUSINESS

Section overview

 Scope of income from business;

 The gross income may not be taxable income;
 There are some allowable, inadmissible and not permissible deductions under the head;
 Computation of income under the head is very significance; C
 Any amount of perquisites, entertainment allowance, and free sample are admissible but up H
to a certain ceiling; A
 Depreciation allowance is very important factor for determining profit; P
 Revenue expenditure and capital expenditure is considered differently. T
E
8.1 Meaning of business R

“Business” defined in section – 2(70) as including –

8
• 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

ICAB 2024 Income from business 105

 According to Oxford Advanced Learner’s Dictionary, business means the activity of making,
buying, selling or supplying goods or services for money.

8.2 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:

(a) Any profit and gain from a business carried on or deemed to be carried on by the assessee
during the income year;
(b) Income derived from any trade or professional association or other association of like nature
on account of specific services performed for its members;
(c) 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;
(d) Any management fee incurred by any management company including Mudaraba
management company;
(e) Any amount due to the lessor bank, insurance or financial institution against the lease of any
asset owned by itself or other;
(f) Realized gain from currency exchange as per Third Schedule of this Act;
(g) Any income received during the income year from any discontinued business.

8.3 Special area of business income

1. Income from special area of business income shall be computed as below:

2. If any asset used in the business of the assessee is sold in any income year:

If sale proceeds is more than the acquisition value Income from capital gain = A - B
Income from business = B - C
If sale proceeds is not more that acquisition value Income from business = A - C
but exceeds written down value (WDV)

3. 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 under the head ‘Income from agriculture’ as
below, namely –

If insurance, salvage or compensation value is Income from capital gain = A - B

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

It should be noted that the business in which the asset is used prior to the sale shall be
deemed to be carried on by the assessee in the income year to which the asset is sold

106 Business Planning: Taxation & Compliance ICAB 2024

 Further, if an asset is exported or transferred outside Bangladesh after being used in the
assessee’s business, the date of such export or transfer shall be deemed to the date of sale
of the asset and the purchase price of the asset shall be deemed to be the sale proceeds.

4. Where during any income year an assessee, being an exporter of garments, transfers to any
person, the export quota or any part thereof allotted to him by the Government, such portion
of the export value of the garments exportable against the quota so transferred as may be
prescribed for this purpose shall be deemed to be income of the assessee for that income
year, classifiable under the head “Income from business”

5. Any expenditure on account of 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, in the subsequent
income year the unpaid interest or profit amount shall be treated as ‘income from business’.

Provided that if any such interest or profit (which has been treated as business income under
above provision) 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.

6. If in computing income under this ‘Income from business’ in any income year any trading
liability is take in account and –

(a) if any subsequent income is received by the assessee in respect of trading liability in the
said 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;

(b) 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.

7. If a loss, credit or any expense is deducted in computing income from business in any
income year and if in any subsequent income year, the assessee receives any benefit in
respect of such deducted loss, credit or expense, the monetary value of that benefit shall be
treated as income from business in the income year in which the benefit is received.
C
8. In case of filing return under section 180 of ITA, 2023, any deficiency in the initial capital H
shown at any time within 5 years after the year in which the return is filed shall be treated as A
income from business. P
T
9. In computing the income of a financial institution, interest or profit income on loans classified
E
by the Bangladesh Bank as bad loans or doubtful loans shall be credited as profit and loss
R
in the income year, or in the income year in which they actually received, whichever is earlier,
income from business of the financial institution shall be included.

8
8.4 Some specific guidelines

In line with section 47 of ITA, 2023, some typical companies should compute taxable income as
per the guidelines given in different schedules as mentioned below:
Fourth Schedule: The profits and gains from insurance business and the tax payable thereon

ICAB 2024 Income from business 107

 Fifth Schedule: The profits and gains from the exploration and production of natural gas,
petroleum and other minerals and the tax payable thereon.

Further, as per section 48 of ITA, 2023, any speculation business carried on by any person shall
be treated as separate and distinct business from the other business of that parson.

8.5 General allowable deduction in computing income from business

According to section 49 of ITA, 2023, subject to the provision the Act, in computing the income
from business in any income year, following expenses shall be included in the general
deduction, namely –

(a) Expenditure on purchase of raw materials, inventory, goods for the purpose of business and
use in business and any depreciated inventory expense;
(b) 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.
(c) Rent, development and maintenance expense payable for land or grounds used for
business purpose;
(d) All such expenses, welfare expenses or remuneration which are treated under the head
‘income from employment’;
(e) Repair and maintenance expenses;
(f) Insurance premium incurred and paid for business purpose;
(g) Cost of electricity and other services including fuel;
(h) Goods transportation, clearing and forwarding charges;
(i) Sales related commission, brokerage, discount or warranty charge related to expenses;
(j) Advertising and camping expenses;
(k) Expenditure for employee training;
(l) Conference, hotel and accommodation expense of sales representatives;
(m) Conveyance and travel expense;
(n) Internet service, postal and telecommunications expense;
(o) Legal, audit and other professional services expenditure;
(p) Entertainment and hospitality related expenses;
(q) Realized foreign exchange loss as per Third Schedule;
(r) Subscription to any club or trade association, including entry fees for use facilities;
(s) Any expenses incurred in connection with travel abroad as a member of a trade delegation
sponsored by the Government;
(t) Royalty, technical fees, head office expenses;
(u) Payable to Workers Profit Participation Fund (not exceeding 5% of disclosed net business
profit).
(v) Other expenses incurred wholly and exclusively for the business purpose.

8.6 Special allowable deduction in computing income from business

According to section 50 of ITA, 2023,

1. Following expenses shall be deductible subject to the permissible limits and conditions set
out in the Third Schedule, namely –

108 Business Planning: Taxation & Compliance ICAB 2024

 (a) General depreciation allowance;
(b) Initial depreciation allowance;
(c) Accelerated depreciation allowance;
(d) Amortization allowance; and
(e) Research and development expense.

2. If an asset mentioned in the Third Schedule is sold in any income year and the sale proceeds
is less than the WDV, the difference between WDV and sale proceeds shall be allowable
deduction in computing ‘income from business’;
3. Allowable bad debt expenditure under section 51 of ITA, 2023 shall be deducted from
income from business;
4. Allowable interest expense under section 52 and 53 of ITA, 2023 shall be deducted from
income from business.

8.7 Allowable bad debt expense

According to section 51 of ITA, 2023,

1. In case of 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.

8.8 Computation of special deduction of interest or profit

According to section 52 of ITA, 2023,

1. Any payment of interest, or as the case may be, payment of profit share, on any capital C
borrowed for the purpose of business shall be treated as allowable business expenditure. H
2. If it is found that any part of the borrowed money has been used for any other purpose A
outside the business or any part of the assets acquired by the borrowed money has been P
transferred outside the business to any other place where the investment is not the business T
of the transferor, the part of the money or assets which is in the business purpose, interest E
or profit shall be allowable expense at the rate proportionate to the portion utilized in the R
business purpose.

8.9 Special limit for allowable interest 8

According to section 53 of ITA, 2023,

1. Notwithstanding anything contained in any other provision in ITA, 2023, interest

expenditure shall be approved as per procedure and limit prescribed by the Board in case

ICAB 2024 Income from business 109

 of a resident person (other than bank and financial institution) received loan from associated
entity as defined under section 233.
2. Above provision shall not be applied in case of interest paid not exceeding Tk 1,500,000.

8.10 General conditions for allowable deduction

According to section 54 of ITA, 2023,

1. If in any income year any such expenditure is allowed as deduction which represents in
whole or in part an asset, no further deduction shall be allowable in respect of that asset in
the same income year;
2. In approving any expenditure under section 49 of ITA, 2023, the commercial reasonableness
of the expenditure shall be considered and following matters shall be taken into account in
considering the commercial reasonableness, 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.

8.11 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 –

(a) Any expenditure or payment in respect of which the provisions of Part 7 of ITA, 2023 have
not been duly complied with;
(b) Interest, salary, commission or gratuity paid by any firm or association to any partner of the
firm or any member of the association;
(c) Payment of any commission or discount by a company to a shareholder director;
(d) Any amount in excess of 1,000,000 paid to an employee in respect 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.

(e) Exceeding 10% of the net business profit disclosed in the financial statements in relation to
the total amount of expenses for royalty, license fee, technical service fee, technical know-
how fee, technical assistance fee or any fee of similar nature;
(f) Head office or intra-group expenditure, by whatever name called, incurred by any such
company not registered in Bangladesh exceeding 10% of net business profit disclosed in
the financial statements;
(g) Amount exceeding 0.5% of business turnover disclosed in the financial statements in respect
of expense related to foreign travel

Provided that this shall not apply if the assessee travels abroad for rendering any service to the
Government. Provided further that the limit provided above shall not apply if evidence is
produced in support of the additional amount is commercial reasonable.

110 Business Planning: Taxation & Compliance ICAB 2024

 (h) Exceeding amount to the limit stated below as entertainment expenses –
1. 4% of first 1,000,000 of assessed business income excluding entertainment expense;
2. 2% of remaining assessed business income excluding entertainment expense.
(i) Distribution of free sample exceeding the following limit:

% of turnover
Assessed turnover Pharmaceutical Food, cosmetics and
Other industry
industry toiletries
Up to Tk. 5 crore 2% 1% 0.50%
Exceeding Tk. 5 crore, 1% 0.5% 0.25%
but up to Tk. 10 crore
Exceeding Tk. 10 crore 0.50% 0.25% 0.10%

(j) Amount exceeding 0.5% of business turnover in respect of promotional expenditure (other
than advertising).
(k) Any such amount treated as ‘Income from employment’ of the employee is paid through
other than banking channel;
(l) If any amount which is treated as ‘Income from rent’ is paid through other than banking
channel;
(m) Payment of any amount in respect of raw material exceeding Tk 500,000 paid through other
than banking channel;
(n) In case of all types of expenses than (k), (l) and (m) above if any amount exceeding Tk 50,000
is paid though other than banking channel;
(o) Any amount paid to any such person who is required to submit proof of submission return
under clauses 25, 26, 28, 29, 36, 37, 42 and 43 of sub-section 3 of section 264 fails to collect
proof of submission return;
(p) Any expenditure in capital or personal nature;
(q) Any deductions or deduction created against any liabilities not specifically determined;
(r) All expenditure not related to business activities;
(s) Any depreciation and interest for Right of Use as per IFRS. Provided that in case of rent
development and maintenance expense paid for the assets used for business purpose shall
be allowable expense;
(t) Impairment less;
(u) Any amount paid to unapproved fund which was required to be approved under this Act;
(v) All unsubstantiated expenses if the accounts were not maintained in prescribed manner;
C
For the purpose of above – H
A
(i) ‘Net business profit’ means the business profit directly carried on by an entity, does not P
include profit derived from any subsidiary, associate or joint venture; T
(ii) ‘Promotional expense’ means business expenses claimed against the providing of goods, E
money or the benefits to any person for the purpose of business, but shall not include R
advertising expense.

8.12 Computation of special business income 8

According to section 56 of ITA, 2023,

All expenses disallowed as per clauses other than clause (d) to (j), (q), (s) and (t) of Section 55
[Deduction not admissible in certain cases] shall be considered as special business income. No

ICAB 2024 Income from business 111

 expenses, set off or carry forward of losses and expenses under the 3rd Schedule [Depreciation,
depletion and amortization] shall be allowed against the special business income, and tax at the
regular rate shall be paid.

8.13 Capital and revenue expenditure

Capital expenditure

All expenditure incurred in acquisition 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
expenditure. Such expenditure retains a permanent value of the business except for the wear
and tear which the assets undergo on account of their use. If an amount is expended on an
existing asset, its value is increased. It will be regarded as capital expenditure. Expenditure
incurred in obtaining a license to secure an agency will be a capital one though the agency might
not have become secured. Any expenditure incurred for the following purposes will be capital
expenditure:
(1) For acquiring fixed assets, e.g., land, building, machinery, furniture etc. held for use in the
business. The cost of a fixed assets will include all expenses incurred up to the time the
assets become ready for use, e.g., legal charges, broker’s charges, freight, import duty,
clearing, carriage, cartage and erection charges;
(2) For retaining capital assets;
(3) For improvement and extension of fixed assets, cost of making additions to building,
machinery, plant and furniture etc. and other improvements of assets;
(4) For increasing in any way, the profit earning capacity of a business, e.g., the cost of shifting
the business to better and more suitable premises;
(5) For raising money for capital purposes, e.g., brokerage and commission paid for
procuring loans;
(6) Cost of constructing a factory or installing machinery;
(7) Cost of equipment and apparatus;
(8) Cost of machinery, plant and furniture;
(9) Expenses incurred in connection with the erection of buildings and plants;
(10) Amount spent on the construction of reservoir;
(11) Expenditure incurred on improvements to property, as distinguished from mere repairs;
(12) Expenditure incurred in respect of reconstruction of business premises or converting the
same from one type to another;
(13) Price paid for the purchases of copyright or patent right.

Revenue expenditure

All expenditure incurred in buying goods for resale or converting raw materials to manufactured
articles or incidental to the conduct and financing of the business, is treated as revenue
expenditure. 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 expenditure. Expenditure incurred
for any of the following purposes will be regarded as revenue expenditure:

(1) For purchasing assets with a view to re-selling them at profit or manufacturing them in a
saleable condition, e.g., goods, raw materials and stores;
(2) For maintaining capital assets in good working order, e.g., repairs and renewals of buildings;
(3) For meeting day-to-day expenses of carrying on a business, e.g., salaries, wages, rents etc.

112 Business Planning: Taxation & Compliance ICAB 2024

 Tests for determining an expenditure as either capital or revenue nature

If the money comes from circulating capital, it will be revenue expenditure; if it emanates from
fixed capital, it will be capital expenditure.
If the answer to any of the following questions is in the affirmative, it is a capital expenditure,
otherwise it is revenue expenditure:

(a) Does the expenditure result in the acquisition or retention of a capital asset?
(b) Is there an addition or improvement to fixed assets?
(c) Has it in any way improved income-generating capacity of the business?
(d) Has it been incurred to raise any capital sum for business?

The following expenses which, prima facie, are of a revenue nature, become capital under
certain circumstances as under:

(1) Raw materials and stores when utilized in making a fixed asset;
(2) Wages and salaries when paid in connection with the installation or construction of a fixed
asset. Thus, when a company manufactures a machine for its own use, the wages and salaries
of persons employed on the work will be capital expenditure;
(3) Carriage and freight expenses incurred in connection with the acquisition of fixed assets;
(4) Cost of repairs incurred in putting a second-hand fixed asset into a proper operational state;
(5) Legal charges incurred in connection with the acquisition of fixed assets, e.g., building,
machinery, plant etc. and expenses incurred in clearing encumbrances thereon.

A particular item of expenditure 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 expenditure represents cost of improvements or additions etc. and how much of it is in
the nature of pure repairs.

The following types of expenditure have been held to be capital expenditure:

(1) Preliminary expenses incurred for floating or acquiring a business;

(2) Expenses incurred for raising of capital;
(3) Cost of shifting business from one place to another with a view to increasing its revenue-
earning capacity;
(4) Lump sum payments made to retiring directors of a company in order to restrain them from
entering into competition with the business of the company.
C
8.14 Illustrations of some important concepts H
A
Balancing charge P
T
Balancing charge is the revenue gain earned by a business at the time of disposal of any E
building, machinery and plant used for the purpose of business or profession. Total gain on R
disposal is the difference between sale proceeds and written down value (WDV) 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 different amount of sale proceeds 8
applied on same asset, different concept is exemplified below:

ICAB 2024 Income from business 113

 XYZ Company owns an asset originally purchased for Tk. 100,000. The company recently
disposes the asset when written down value of the asset amounts to Tk. 56,000. Assuming
different sale proceeds, the concepts are presented below:

Total gain Capital gains Revenue gain Revenue loss

Sale proceeds (Sale proceeds (Sale proceeds - (Total gain – (WDV – Sale
- WDV) cost) Capital gains) proceeds)
(a) 120,000 64,000 20,000 44,000 -
(b) 90,000 34,000 - 34,000 -
(c) 50,000 - - - 6,000

Compensation received from insurance company

When any building, machineries or plant used for the purpose of business or profession is
demolished, destroyed or discarded and insurance compensation is received, amount equal to
balancing charges is reported as income from business or profession. The application is similar
to balancing charge, the only difference is that the asset is not disposed rather destroyed and
thus the amount is received from insurance company as compensation money.

Let’s assume the same asset. The asset is now destroyed and there is an active policy covering
the risk of the asset. And the company lodged claim with different amount of compensation
money received as shown below:

Compensation Total gain Capital gain Revenue Revenue loss

received (Compensation (Compensation gain (Total (WDV –
received - received - cost) gain – Capital Compensation
WDV) gains) received)
(a) 130,000 74,000 30,000 44,000 -
(b) 100,000 44,000 - 44,000 -
(c) 40,000 - - - 16,000

Fractional income in certain cases (transfer of garments export quota, tea, rubber)

In certain cases, income from business is assessed as a certain percentage of total income. These
are:

1. 40% of the income derived from the sale of tea grown and manufactured by the seller in
Bangladesh (section 40);
2. 40% of the income derived from the sale of rubber grown and manufactured by the seller in
Bangladesh (section 40);

Let’s assume that XYZ Company has income from the following sources as mentioned below:

1) Income derived from the sale of tea grown and manufactured by the company, Tk. 500,000.
2) Income derived from the sale of rubber grown and manufactured by the company, Tk.
300,000.

114 Business Planning: Taxation & Compliance ICAB 2024

 Income from
Sources Computation
business
From sale of tea 40% of Tk. 500,000 200,000
From sale of rubber 40% of Tk. 300,000 120,000
Total income from business Tk. 320,000

Entertainment expenses

Any amount representing entertainment expense is not allowed for deductions. For allowable
deductions under the head, the following bases and percentages.

Income, profits and gains of the business and profession Allowable rate
(Before charging such allowance)
On the first Tk. 10 lakh of assessed profit 4%
On the balance / rest of the assessed profit 2%

For example, XYZ Company reports Tk. 89,00,000 as profit for the year ended June 30, 2024
after charging Tk. 150,000 as entertainment allowance. Compute the amount of allowable
entertainment expense.

On first profit of Tk. 1,000,000 4% Tk. 40,000

On balance of Tk. (89,00,000+1,50,000-10,00,000) 80,50,000 2% 1,61,000
On total profit Tk. 9,050,000 (before charging entertainment expense) 2,01,000

Thus, allowable amount of entertainment expense is Tk. 201,000 but as the claim is lower so
claimed entertainment will be allowed Tk. 150,000.

Free sample distribution

Expenditure on distribution of free sample is admissible up to the percentage as given below:

In respect of
Ceiling of turnover pharmaceutical
industries
(a) Turnover up to Taka 5 crore 2%
(b) Turnover in excess of TK. 5 crore but up to TK. 10 crore Straight 1 %
(c) Turnover in excess of Taka 10 crore Straight 0.50%
C
H
Perquisites A
P
Perquisite to any employee for any year is allowed up to Tk. 10,00,000. If actual perquisite given T
to an employee exceeds Tk. 10,00,000; such amount exceeding Tk. 10,00,000 will be E
disallowed. For example, let’s assume that Mr. X enjoys the following benefits during the income R
year ended on 30th June, 2024 from his employer:

Items Tk.
8
1. Basic salary 12,00,000
2. House rent allowance 8,00,000
3. Festival bonus –equal the two months basic salary 84,000
4. Leave encashment 42,000

ICAB 2024 Income from business 115

 5. Conveyance allowance 1,55,000
6. Contribution to Recognized Provident Fund @ 10% 50,400
7. Servant’s wages 20,000
8. Children educational allowance 50,000
9. Performance bonus 40,000
10. Bungalow utilities 25,000
Compute the amount of perquisites to be disallowed.

Actual perquisites received:

1. House rent allowance 8,00,000

2. Conveyance allowance 1,55,000
3. Servants wages 20,000
4. Children educational allowance 50,000
5. Performance bonus 40,000
6. Bungalow utilities 25,000
Total 10,90,000
Allowable perquisites 10,00,000
Excess perquisites to be disallowed 90,000

Expenses allowed up to a certain percentage:

It is important to remember that some expenses, where there is a scope of reporting higher
amount, are permitted but up to certain limit. Amount exceeding that limit is not allowed and
thus taxable. These expenses are enumerated below:

Expenses Allowable limit

Head Office expenses by a company not incorporated in 10% of disclosed
Bangladesh net business profit
Royalty, technical services fee, technical knowhow fee or technical 10% of disclosed net
assistance fee business Profit
Overseas travelling expense 0.50% of turnover

Worked example—1:

State with reasons whether the following expenses are fully or partly admissible as deduction
while computing income from business or profession:

1. Stock-in-trade was lost in fire, amounting to Tk. 12,000 and was debited to Profit and Loss
Account.
2. Amount spent on a successful suit filed against a person for infringing trade mark of the
assessee - Tk. 10,000.
3. Interest paid to bank Tk. 15,000 in connection with overdraft obtained for paying dividend.
4. Overseas traveling expense Tk. 60,000; The amount of disclosed turnover and disclosed net
profit is Tk. 40,00,000 and Tk. 20,00,000 respectively.
5. Incentive bonus Tk. 300,000; The amount of disclosed turnover and disclosed net profit is
Tk. 40,00,000 and Tk. 20,00,000 respectively.
6. Salary paid to two employees @ Tk. 20,000 per month; one is paid in cash and another
through bank transfer.

116 Business Planning: Taxation & Compliance ICAB 2024

 7. Royalty paid Tk. 2,00,000; The amount of disclosed turnover and disclosed net profit is Tk.
40,00,000 and Tk. 20,00,000 respectively.
8. Salary expense of a firm Tk. 100,000 of which Tk. 40,000 is paid to a partner as salary.
9. Installation cost of an IPS, Tk. 50,000.
10. Penalty paid for violating income tax law Tk. 25,000.
11. Repair expense of the hired premises paid Tk. 50,000. The building is used both for office
and residence at an equal proportion.
12. Insurance premium paid Tk. 25,000, of which Tk. 5,000 is the life insurance premium of the
owner.

Solution 1:

1. Loss of stock-in-trade is an admissible business loss as per section 49 (ka) of ITA, 2023.
2. Litigation / legal expense is an admissible expense as it is spent for protecting business
interest. However, any legal expense for illegal purpose is not allowable.
3. Interest expense on overdraft taken for business purpose is admissible expense.
4. Overseas traveling expense is admissible up to 0.50% of the disclosed turnover, so here
admissible expense is Tk. 20,000 (0.50% of Tk. 40,00,000) and rest of Tk. 40,000 will be
inadmissible.
5. Incentive bonus is admissible expense.
6. Out of total salary expense Tk. 480,000, Tk. 240,000 is admissible as it has been paid through
bank transfer and the remaining Tk. 240,000 is not admissible as it has been paid in cash
violating section 30(i).
7. Royalty is admissible up to 10% of disclosed net profit, so here admissible amount is Tk.
200,000 (10% of Tk. 20,00,000).
8. Out of total salary expense Tk.100,000, Tk. 60,000 is admissible as it has been paid to
employees and rest of Tk. 40,000 is inadmissible as it has been paid to a partner of the
partnership firm violating section 55(k).
9. Installation cost of an IPS not admissible, as it is a capital expenditure.
10. Not admissible as the penalty is imposed for violation of law.
11. Out of total repair expense of Tk. 50,000, Tk. 25,000 is admissible which is for the portion of
office use and the rest Tk. 25,000 is inadmissible as half portion of the house has been used
for residence.
12. Out of total insurance premium of Tk. 25,000, Tk. 20,000 is admissible which is for the
protection of business interest and the rest of Tk. 5,000 is inadmissible as it is given for
personal interest of the owner.
C
Worked example—2: H
A
The Profit and Loss Account of Janani Traders owned by Mr. Rajon Majumder for the year ended P
on June 30, 20X1 is given below: T
E
Janani Traders R
Profit and Loss Account
For the year ended on June 30, 2024
8
Debit Taka Credit Taka
Salary 380,000 Gross profit 1,950,000
Commission 70,000 Interest on securities 180,000
Rent of premises 132,000 Interest on bank deposit 32,000

ICAB 2024 Income from business 117

 Fund embezzlement 30,000 Recovery of bad debt 18,000
Donations 150,000 Gain on sale of furniture 27,000
Bad debt 80,000
Life Insurance premium 50,000
Depreciation on furniture 40,000
Provision for income tax 38,000
Repair expense 26,000
License renewal fee 4,000
Penalty and fine 37,000
Bonus 80,000
Royalty 70,000
Interest on Bank Loan 45,000
Household expenses 22,000
Net profit 953,000
2,207,000 2,207,000

Other information:

1. Salary includes Taka 87,000 paid to the owner.

2. Fund embezzlement occurred after office hour.
3. Donations include Taka 70,000 paid to a charitable hospital that is not approved by the
Board
4. Life insurance premium is the payment against the insurance policy in the owner's name.
5. Tax depreciation amounts to Taka 30,000.
6. Furniture sold for Tk. 78,000 that was originally purchased for Tk. 70,000. Written down
value of the furniture on the date of sale was Tk. 51,000.

Compute income from business of Janani Traders for the year ended on June 30, 2024.

Solution 2:
Janani Traders
Computation of business income for the assessment year 2024-25

Particulars Taka Taka

Profit as per P/L Account 9,53,000
Add: Inadmissible expenses
1. Salary [Note-1] 87,000
2. Fund embezzlement [Note-2] 30,000
3. Donations [Note-3] 70,000
4. Life insurance premium [Note-4] 50,000
5. Depreciation (to be considered later on) 40,000
6. Provision for income tax 38,000
7. Penalty and fine 37,000
8. Household expense 22,000 3,74,000
Less: Tax depreciation (30,000)

118 Business Planning: Taxation & Compliance ICAB 2024

 Less: Non-business income
1. Interest on securities 1,80,000
2. Interest on bank deposit 32,000
3. Capital gain on sale of furniture [Note-7] 8,000 (2,20,000)
Income from business 10,77,000

Notes:
1. Salary paid to the owner is not admissible expense.
2. Fund embezzlement occurred after office hour is not allowable expenditure as per case law.
3. Donation Tk. 70,000 to un- approved organization not allowable.
4. Life insurance premium is inadmissible as this is personal expense.
5. Royalty is admissible up to an amount equal to 10% of the disclosed net profit i.e., 10% of
Tk. 9,53,000 i.e., Tk. 95,300. Thus, actual royalty payment Tk.70,000 is admissible because it
is within the admissible limit.
6. Capital gain on sale of furniture was Tk. 8,000 (Tk. 78,000 – Tk. 70,000). This amount should
be considered as income under the head ‘Capital Gains’. Actual revenue gain is Tk.19,000
but shown Tk.27,000, so Tk. 8,000 is to be deducted to arrive real income from business.

Worked example—3:

The Trading and Profit & Loss Account of Jahur and Brothers for the year ended on June 30,
20X1 is given below:

Jahur and Brothers

Trading & Profit and Loss Account
For the year ended on June 30, 2024

Debit Taka Credit Taka

Opening stock 80,000 Sales 14,50,000
Purchases 7,00,000 Closing stock 1,60,000
Wages 60,000
Depreciation on machinery 15,000
Power and fuel 10,000
Gross profit c/f 7,45,000
16,10,000 16,10,000 C
H
Gross profit b/f 7,45,000 A
P
Salaries 1,20,000 Compensation received 80,000
T
Rent, rates and taxes 18,000 Bad debt recovered 27,000 E
Annual membership fee 40,000 Interest and discount 25,000 R
received
Legal expenses 15,000 Interest on commercial 80,000
securities 8
Underwriting commission 30,000 Dividend on listed 60,000
company’s share
Purchase of trademarks 80,000 Commission 28,000
Bad debts 30,000

ICAB 2024 Income from business 119

 Accounting fees 40,000
Depreciation - office building 35,000
Penalties 18,000
Donation to flood relief fund 50,000
Gratuity to employees 1,36,000
Advance income tax 35,000
Loss on sale of office furniture 18,000
Dowry paid to the daughter 70,000
Miscellaneous expense 30,000
Net profit 2,80,000
10,45,000 10,45,000

Other information:
1. Salaries include Taka 20,000 as salaries paid to the owner.
2. Recovered amount of bad debt was previously allowed as bad debt expense.
3. Legal expense is incurred for filing and continuing a case against competitors for protecting
the interest of the business.
4. Penalties were due to avoidance of tax payment at an earlier period.
5. Annual membership fee is the fee paid to trade union for the interest of the business.
6. Compensation money is received from insurance company against a claim lodged due to
destroy of machinery originally purchased for Tk. 70,000 with a written down value of Tk.
50,000.
7. Tax depreciation was calculated as follows:
a. Depreciation on machinery Taka 25,000
b. Depreciation on office building Taka 50,000

Compute the income from business and also total income of Jahur and Brothers for the year
ended on June 30, 2024.

Solution 3:

Jahur and Brothers

Computation of total income

Particulars Tk. Tk.

Income from business:
Net profit as per Profit and Loss Account 280,000
Add: Inadmissible expenses
(1) Salaries paid to owner 20,000
(2) Underwriting commission 30,000
(3) Purchase of trademarks 80,000
(4) Penalties 18,000
(5) Advance income tax 35,000
(6) Dowry paid to the daughter 70,000
(7) Accounting Depreciation (to be considered later on)
On machinery 15,000
On office building 35,000 50,000 303,000
583,000

120 Business Planning: Taxation & Compliance ICAB 2024

 Less: Tax Depreciation allowance (As per tax law)
On machinery 25,000
On office building 50,000 75,000
508,000
Less: Non-business Income
(1) Interest on commercial securities 80,000
(2) Capital gains (Tk. 80,000 – Tk. 70,000) 10,000
(3) Dividend on X Ltd.’s share 60,000 150,000
Taxable income from business 358,000
Capital gain 10,000
Income from financial asset
interest on securities 80,000
cash dividend 60,000 140,000
Total income 508,000

Worked example—4:

For the income year ended on June 30, 2024, Gaco Pharmaceutical Company reports net profit
of Tk. 17,983,000. A close scrutiny of its books of accounts reveals the following items:

1. Salary and allowances include perquisites of five directors as mentioned below:

Director 1 Director 2 Director 3 Director 4 Director 5

Tk.405,000 Tk.475,000 Tk.580,000 Tk.625,000 Tk.455,000

2. Amount paid to a contractor of Tk. 85,000 without deducting tax at source.

3. Profit includes Tk. 85,000 as gain on sale of asset. The original cost of the asset was Tk.
70,000 and on the date of sale, the written down value of the asset was Tk. Tk. 50,000.
4. The company lodged a claim against the demolishing of an asset and recovered Tk. 70,000.
The cost was Tk. 80,000, however, the written down value of the asset was Tk. 50,000.
5. The company has income of Tk. 420,000 from tea grown and manufactured in Bangladesh
which was not considered at the time of computing profit.
6. The company has transferred export quota of garments to another company whose export
value is estimated as Tk. 800,000. No income is reported in profit and loss account.
C
7. Entertainment expense charged was Tk. 450,000. H
8. Finance director received foreign travel allowance of Tk. 500,000 which is charged against the A
profit. He has also received similar allowance in last year and it was allowed at that time. P
9. Expense for free sample distribution is shown as Tk. 340,000. Reported turnover for the year T
is Tk. 87,953,000. E
R
10. Royalty expense charged Tk. 112,000.
11. Depreciation charged Tk. 253,000 whereas tax depreciation is Tk. 180,000.
8
Compute income from business, considering the information given above.

ICAB 2024 Income from business 121

 Solution 4:

Gaco Pharmaceutical Company

Computation of income

Particulars Taka Taka

Income from business and profession:
Net profit as per Profit and Loss Account 17,983,000
Add: Inadmissible expenses
1. Excess perquisites 105,000
2. Payment to contractor without TDS 85,000
3. Capital Gain for consideration at separate head (Tk. 85,000 –
15,000
Tk. 70,000)
4. Entertainment 450,000
5. Foreign travel allowance (note-2) 500,000
6. Depreciation (to be considered later on) 253,000 1,408,000
19,391,000
Less: Depreciation allowance (As per tax law) 180,000
Entertainment (note-1) 404,220 584,220
18,806,780
Add: Income from tea garden (40% of Tk. 420,000) 168,000
Income from transferring export quota (3% of Tk. 800,000) 240,000 408,000
Taxable Income from business 19,214,780

Notes:
1. Allowable entertainment expense is – 1,000,000 @ 4% + 18,211,000 @ 2% = 40,000 +
364,220 = Tk. 404,220.
2. Foreign travel allowance is allowable for once in every two years. As last year, the director
received such allowance and it was considered at that time, so nothing to be allowed this
year.
3. Expense for free sample distribution is within the allowable limit. So nothing to be
disallowed as it is within limit.
4. Royalty expense is within the limit. Thus, the whole amount is admissible.

122 Business Planning: Taxation & Compliance ICAB 2024

 Self-assessment questions

1. The Income statement with selective notes thereon of Zian Ltd for the year ended on June
30, 2024 is as under:

Zian Ltd
Income statement
For the year ended on June 30, 2024

Particulars Taka
Net sales 15,000,000
Less: Cost of goods sold 8,800,000
Gross profit 6,200,000
Add: Gain on sale of building (Note 1) 2,200,000
4,000,000
Less: Administrative and selling & distribution expenses (Note 2) 2,400,000
Net profit 1,600,000

Other information:
1. The Cost of the Building was Taka 8,000,000 and the amount of accumulated depreciation
up to the date of sale was Taka 2,700,000 and sold for Taka 7,500,000.
2. Administrative and selling & distribution expenses:
Salaries and wages Taka 1,562,000
Fines and penalties 125,000
Rents, rates & taxes 80,000
Provision for bad and doubtful debts 60,000
Legal charges 37,000
Underwriting commission 120,000
Incentive bonus 40,000
Cost of issuing shares 100,000
Audit fees 60,000
Overseas traveling expense 100,000
Depreciation 116,000
Total 2,400,000
3. Salary and wages include Taka 180,000 as payment to the owners and Taka 520,000 as
payment classified as perquisites.
4. The fines and penalties are charged by a local court for involvement in illegal business
transactions. C
5. Legal charges have been incurred for defending a suit for breach of a trading contract. H
6. Tax depreciation amounts to be Taka 80,000. A
P
Compute income from business or profession of Zian Ltd for the year ended on June 30, 2024.
T
E
R

ICAB 2024 Income from business 123

124 Business Planning: Taxation & Compliance ICAB 2024
 Chapter 9
Capital gains

Introduction

Examination context

Topic list

9.1 Basic principles of capital gain

9.2 Some definitions
9.3 Computation of capital gain
9.4 Other matters in determining capital gain
9.5 Tax exempted capital gains
9.6 Tax rate in respect of capital gain
9.7 Special tax rates on capital gain from sale of shares of
listed companies
9.8 Apportionment of sale proceeds between original cost
and subsequent improvements

Worked examples
 Introduction

Learning objectives

 Identify capital gain.

 Compute the taxable income under the head ‘capital gain’.
 Identify the allowable deductions under the head.
 Identify tax exempted capital gains.
 Identify the complexity of computing income from capital gains.
 Identify special reduced tax rate on capital gain earned by individuals.
 Compute tax liability on capital gains in different situations.

Practical significance

The head ‘capital gain’ is very significant 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 period, what
are the powers of DCT regarding the value of declared sale proceeds are some important points
covered in the chapter.

Capital gains tax rate is different than the regular tax rates applicable to individuals and other
assesses. Thus, the assessment and computation of tax liability is to a greater extent different 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 expenses,
inadmissible expenses and other related issues.

You will find the details of the above issues in this chapter with some practical examples.

Stop and think

Do you realize that the computation of taxable income under the head ‘capital gain’ is one of the
basic requirements for determining tax liability? Can you determine the taxable income under
the head? Can you compute net tax liability of an assessee having income under the head?

Working context

In practice, as the accountants are sometime required to support to prepare their clients' tax
returns, they need to advise the clients on how to calculate the total taxable income for any
income year. Before advising the clients, accountants should have the clear concept relating to
the admissible and inadmissible expenses so that they can deduct or add the expenses in
determining real capital gain.

Syllabus links

The topics covered in this chapter are very important for computing taxable income which is
required for solving sample practical problems at this level.

126 Business Planning: Taxation & Compliance ICAB 2024

 Examination context C
H
A
P
Exam requirements T
E
In the examination, candidates may be required to: R

 Define capital gain.

 Identify different scope of income under the head. 9
 Compute taxable capital gain.
 Illustrate non-taxable capital gains.
 Identify the allowable deductions under the head.
 Illustrate the power of the DCT if he believes that the declared value at which the capital
asset is transferred is lower than fair market value.
 Compute net tax liability under the head.

Question practice

For question practice on these topics go to the suggested answers covering this chapter and
also this workbook.

Examiner's comments on how students should tackle questions

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 tax liability. Clear concept and
understanding of each content of this chapter will help candidates to resolve any problems
relating to computation of income from capital gain.

9.0 CAPITAL GAIN

Section overview

 There is no capital gain tax on transfer of personal effects rather it would be taxed under the
head income from other sources.
 Gain on sale of shares of listed companies for individual taxpayers is tax free up to Tk. 50 lac.
 There is no capital gain tax on the transfer of land and buildings to a new company formed
to set up an industry.
 In determining the transfer value, income tax authority may consider the fair market value if
he beliefs that transfer value is lower than fair market value.
 Capital loss can only be set off against any other capital gain during the year.
 Gain tax rate is 15 % in the case of company.

9.1 Basic principles of capital gain

Chapter six provides that tax shall be payable by an assessee under the head “capital gain” in
respect of any gain arising from the transfer (i.e. sale, exchange or relinquishment, etc.) of any
capital asset. Such gain shall be deemed to be the income of the income year in which the sale,
exchange, relinquishment, etc. took place.

ICAB 2024 Capital gains 127

 Any gain arising from transfer of a capital asset (both movable and immovable) as defined in
section 2(77) of the Income Tax Act, 2023 is chargeable to income tax in accordance with
Seventh Schedule of the Act which prescribe rates of income tax on capital gain.

Capital Transfer Capital Capital

asset gain gain tax

[As per [Sale, exchange,

section relinquishment] [As per [As per
Chapter six ] Seventh
2(77)]
[As per section Schedule]
2(93)]

9.2 Some definitions

Capital asset

A capital gain arises only due to the transfer of capital asset. Capital asset is defined in section
2(77) of ITA, 2023. 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.

Sale or transfer price in open market

According to section 58(2) of ITA, 2023, the sale or transfer price in open market means the
open market sale or transfer price of an asset, higher of A and B below, where –

A = Amount received or accrued form transfer of asset, and

B = Fair market value of the asset on the transfer date.

Acquisition cost of the asset

According to section 58(2) of ITA, 2023,

1. Acquisition cost of an asset shall be the sum of the following costs –

a. Any expense which are solely related to the transfer of ownership of the asset.
b. Purchase price of the asset, and
c. Expenditure on the development of such asset, if any, other than expenditure allowed
under section 38, 42, 49, 50 or 64.
2. In case the asset was acquired as below:
a. Under any gift, donation or bequest.
b. Succession, inheritance.
c. Under transfer of a trust.
d. Any distribution of capital asset through winding up of a company.
e. By way of distribution of capital asset in case of separation of firm or AOP, HUF.

In such case the fair market value on the date of acquisition of ownership of the asset shall be
considered as acquisition value of the asset.

128 Business Planning: Taxation & Compliance ICAB 2024

 Transfer
C
According to section 2(93) of ITA, 2023, ‘Transfer’, in relation to a capital asset, includes the sale, H
exchange or relinquishment of the asset, or the extinguishment of any right therein, but does A
not include: P
T
a) Any transfer of the capital asset under a gift, bequest, will or an irrevocable trust. E
b) Any distribution of the assets of a company to its shareholders on its liquidation, and R
c) Any distribution of capital assets on the dissolution of a firm or other association of persons
or on the partition of a Hindu undivided family [section 2(66)].
9
9.3 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.

9.4 Other matters in determining capital gain

As per section 61 of ITA, 2023,

1. If the fair market value of any asset is more than 15% of the value disclosed by the assessee,
the DCT, with the prior approval of Additional Commissioner of Taxes, may determine the
fair market value of the asset.
2. If the fair market value of any asset is more than 25% of the value disclosed by the assessee,
the DCT, as per the manner prescribed by the Board, may offer to purchase the asset at the
disclosed value.
3. Capital gain arising from the transfer of all assets of a partnership firm to a new company
incorporated under the Companies Act, 1994 shall be exempted from tax if the
consideration of the transfer of all assets is invested in the equity of the new company.

Fair market value is DCT will

higher than the determine value
consideration by more taking approval
than 15% from IJCT
If DCT determines
different value than
the value stated by
the transferor

Fair value is higher than Government may

the consideration by offer to buy the
more than 25% capital asset

Illustration-1

Mr.Jashim declared the price of a piece of land at Tk. 3,000,000 on 15th July, 2023; however, the
DCT estimates the fair value of the land to be Tk. 3,500,000 i.e. more than 15% of the declared
value. He can with the prior approval of the IJCT, determine the fair value at Tk. 3,500,000 and
can compute capital gain or loss accordingly rejecting thereby Mr.Jashim’s declared value.

ICAB 2024 Capital gains 129

 Further the Government may offer to buy the land when in the opinion of the DCT; the fair market
value of the said land is say, Tk. 4,000,000 i.e., at least 25% more than the declared value.

The manner to be followed in connection with the purchase of a capital asset by the Government
under section 61(2) of the Act shall be as follows:

(1) Where the DCT has reason to believe that any immovable property is being transferred by
a person (hereinafter referred to as the transferor) to another person (person hereinafter
referred to as the transferee) and the fair market value of such property exceeds the declared
value by more than twenty-five 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 object
of facilitating the reduction or evasion of the liability of the transferor to pay the tax under
the Act in respect of any income arising from the transfer or any other taxes or duties, he
may, subject to the provisions of this rule, initiate proceedings for the acquisition of such
property by the Government.

(2) The DCT shall initiate proceedings for acquisition of immovable property under rule 40 by
giving a notice to that effect in the official Gazette and a copy of such notice shall also be
published in the two leading newspapers of wide circulation where such property is located;
a copy of such notice shall also be served on the transferor, the transferee and the person in
occupation of the property. However, no such proceedings shall be initiated after the expiry
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 Registration Act, 1908.

(3) Objection against the acquisition of the immovable property in respect of which a notice has
been published in the official Gazette and the newspapers may be made in writing by the
transferor or the transferee to the DCT within 60 days of the publication of the notice in the
official Gazette or newspapers.

(4) The DCT shall fix a date and place for the hearing of the objections against the acquisition
and shall give notice of the same to every person who has made such objection. However,
notice shall also be given to the transferee of such property even if he has not made any
such objection.

(5) After hearing the objections, if any, after taking into account all the relevant materials on
record, if the Deputy Commissioner of Taxes is satisfied that-

(a) The fair market value of such property exceeds the consideration paid therefore by more
than twenty-five per cent of such consideration, and
(b) The consideration for such transfer as agreed to between the parties has not been truly
stated in the instrument of transfer with such object as is referred to in clause (1); he may
make an order for the acquisition of the property under this rule.

(6) Any person aggrieved by an order made under rule 40(5) may prefer an appeal under the
Act to the Appellate Joint Commissioner of Taxes.

(7) As soon as may be after the order of acquisition of any immovable property has been made
under Rule-40(5) and after the disposal of appeal, if any, the DCT 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 authorized by him in writing in
these behalf within 30 days of the service of the notice.

130 Business Planning: Taxation & Compliance ICAB 2024

 (8) If any person refuses or fails to comply with a notice under rule 40(7), the DCT or any other
person duly authorized by him under that clause may take possession of the immovable C
property and may, for that purpose, requisition the services of any police officer to assist him H
and it shall be the duty of such officer to comply with such requisition and may use such A
force as may be necessary. P
T
(9) When the possession of the immovable property is surrendered or delivered under rule
E
40(7), the DCT or the person duly authorize by him in that behalf or, as the case may be,
R
when the possession thereof is taken under rule 40(8), the Government shall tender as
consideration a sum equal to the aggregate of the amount of the declared value for its
transfer plus 10% of the said amount to the transferor and the property shall vest absolutely
in the Government free from all encumbrances. However, nothing in rule 40(9) shall operate 9
to discharge the transferor or the transferee or any other person (not being the Government)
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.

(10)Notwithstanding anything contained in rule 40(9), if any dispute arises as to the

apportionment of the amount of consideration amongst persons claiming to be entitled
thereto, the Government shall deposit in the principal civil court of original jurisdiction the
amount required to be tendered under rule 40(9) and refer such dispute for decision of the
court and the decision of the court thereon shall be final.

9.5 Tax exempted capital gains

When capital gains arise from the transfer of capital asset of a firm to a new company registered
under the Companies Act, 1994 and the whole amount of capital gain is invested in the equity
of the said company by the partners of the firm, then the capital gain shall not be charged to tax
in the year of transfer. Further, as per six schedule, capital gain from the transfer of listed
securities by an individual other than shareholder director or placement shareholder shall be
exempted up to Tk. 50 lakh.

9.6 Tax rate in respect of capital gain

Capital gain tax is different than regular tax and is prescribed in Seventh Schedule of Income
Tax Act, 2023.

Capital gains in the hands of a company other than the capital gain arising out of disposal of
share will be taxed as a block of income separate from other income of the assessee company
at a flat rate of 15% regardless of the period of holding of the asset from the date of its
acquisition.

If the assessee is other than a company and the asset is transferred before the expiry of five years
from the date of its acquisition, the capital gains will be taxed at usual tax rate applicable to the
assessee’s total income including the capital gains. If the asset is transferred at any time after the
expiry of five years from the date of its acquisition, the capital gains will be taxed @ 15%. Thus,
in short, the rates can be specified as below:

Capital gain arises to Tax rate

(a) company @ 15%
(b) person other than company
i) due to disposal within 5 years at regular slab rate
ii) due to disposal after 5 years at 15%

ICAB 2024 Capital gains 131

 9.7 Tax rates on capital gain from sale of shares of listed companies

According to para 36 of 6th Schedule, part 1, capital gain up to Tk. 50 lakh shall be exempted
from tax for the individual from transfer of shares of listed companies, shares of funds or units.
However, this exemption shall not apply in case of transfer of sponsor’s or director’s or
placement shares and units.

9.8 Apportionment of sale proceeds between original cost and subsequent

improvements

Since capital gain tax differs 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

Mr. Jarin bought a building within the jurisdiction of Dhaka Municipality 8 years back for Tk. 65
million on which he also incurred another Tk. 35 million as improvements 4 years ago. He sold
the property in mid-June, 2020 for Tk. 180 million.

Now, sale proceeds of Tk. 180 million should be apportioned between original cost and
improvements due to different capital gain tax rate applicable for transfer made within 5 years
and after five years. Such apportionment is made below proportionately:

On original cost: Tk. 180 million × 65/100 = Tk. 117 million

On improvement: Tk. 180 million × 35/100= Tk. 63 million

Now capital gains and tax on capital gain will be computed as below:

Original cost Improvements

Cost 65,000,000 35,000,000
Sale proceeds 117,000,000 63,000,000
Capital gain assessed 52,000,000 28,000,000
Capital gain tax rate 15%

Improvement part has been disposed of within 5 years of acquisition and thus Tk. 28 million
would be included with the total income of the assessee. Original cost part has been held for 8
years and the tax on it, would be taxed at15% on capital gain.

Worked examples and solutions

Worked example—1:

Mr. Ershad has recorded the following transactions for the year ended on June 30, 2024. You
are required to comment on implication of capital gain and capital gain tax on each of the
following transactions independently.

(a) Sold a 3-storied building for Tk. 3,000,000 in December 2023, which was purchased on
March 2013 for Tk. 1,800,000. In January 2017, the building was extended at a total cost of
Tk. 500,000. The fair value of the building in December 2023 was Tk. 3,200,000.

132 Business Planning: Taxation & Compliance ICAB 2024

 (b) Sold an agricultural land situated outside the jurisdiction of Cumilla Cantonment Board at a
total price of Tk. 2,000,000 which was purchased 5 years back at a total price of Tk. C
1,000,000. H
(c) Sold a machine, purchased at a price of Tk. 80,000 for the purpose of his business, at a price A
of Tk. 150,000 at fair market value. Another Tk. 30,000 was spent to improve the machine. P
At the time of sale, the machine had accumulated depreciation amounting to Tk. 60,000. T
E
Solution 1: R

(a) Calculation of capital gains from the sale of building:

9
Sale proceeds or fair market value whichever is higher 32,00,000
Less:
Cost of acquisition 18,00,000
Cost of extension 5,00,000
Capital gain 9,00,000

Here, capital gain will be taxed at 15% as transfer is made after 5 years (both original cost and
extension work).

(b) Gain on sale of agricultural land is equally taxable. As it was sold after 5 years it would be
taxed @ 15%.

(c) Calculation of capital gain from the sale of machine:

Sale proceeds or fair market value whichever is higher 1,50,000

Less:
Cost of acquisition 80,000
Cost of improvement 30,000
Capital gain 40,000

Worked example—2:

Mr. Ashiqur Rahman purchased an apartment in November 2018 for Tk. 1,600,000. He has paid
1% brokerage fee and subsequently spent another Tk. 500,000 for the renovation of the house.
On 1st July, 2023 he entered into an agreement to sell the property to Mr. Anowar for a
consideration of Tk. 5,000,000 and received earnest money (advance money) of Tk. 100,000.

As per the terms of the agreement, the balance payment should be made within 90 days of the
agreement otherwise the earnest money will be forfeited. As Mr. Anowar could not make the
payment within the stipulated time the amount of Tk. 100,000 was forfeited by Mr. Rahman.
Subsequently on 10th June, 2024, Mr. Rahman sold the apartment to Mr. Abdur Rahman for Tk.
5,500,000. He also paid 2% brokerage fee on sale of the apartment. The fair market value of the
house on the date of sale was Tk. 5,200,000. Calculate taxable capital gains for the assessment
year 2024-25.

ICAB 2024 Capital gains 133

 Solution 2:

Computation of taxable capital gain:

Particulars Taka Taka

Income under "capital gain":
Full value of consideration received against capital asset:
(Including the forfeited amount of Tk. 100,000) 5,600,000
Fair Market Value at the time of transfer, 5,200,000
Disposal vale of the capital asset (whichever is higher) 5,600,000
Less - Allowable deductions
Brokerage fee for sale (5,500,000 x 2%) 110,000
Cost of acquisition [1,600,000 + (1,600,000 xl %)] 1,616,000
Cost of improvements of the asset 500,000 2,226.000
Capital gain 3,374,000

Self-assessment questions

1. Explain the terms “capital asset”, “cost of acquisition” and “fair market value” under the
Income Tax Act, 2023.
2. State the capital gain exempted from payment of tax under the ITA, 2023.
3. Mr. Hasan has purchased a machine at a total cost of Tk. 500,000 on 23'" April 2015 for the
purpose of his profession. In addition, he has paid Tk. 10,000 as legal fees. He has spent an
additional sum of Tk. 50,000 for improvement of the machine.

On 30th December 2023, he sold the machine at Tk. 600,000 when the accumulated
depreciation was Tk. 126,000 in his books of accounts. But in the opinion of DCT the fair market
value on that date amounts to Tk. 650,000. He incurred advertisement cost of Tk. 20,000 and
1.5% as brokerage commission on the sale value. He has taxable income of Tk. 230,000 from all
other sources.

Compute capital gain, total income, and specify tax rate thereon.

134 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 10
Income from other
sources

Introduction

Examination context

Topic list

10.1 Special area of income from other sources

10.2 Royalty
10.3 Fees for technical service
10.4 Income from letting of factory building along with machinery
10.5 Allowable deductions
10.6 Inadmissible expenses
 Introduction

Learning objectives

 Identify income from other sources.

 Compute the taxable income under the head ‘income from other sources.
 Identify the allowable deductions under the head.
 Identify tax exempted income under the head.
 Introduce the complexity of computing income from other sources.
 Explain the application of TDS and Grossing Up of income in certain cases.
 Compute tax liability on income from other sources in different situations.

Practical significance

The head ‘income from other sources’ is very significant due to its importance as a residual head
of income. Income that doesn’t fall under any other head comes under the scope of this head.
Thus, it is important to know different categories of income coming under the head.

Royalty income, fees for technical services, income from letting factory building along with
machineries are some incomes coming under this head.

Tax usually deducted at sources as per law in some categories of income under this head. These
incomes are required to be grossed up before reporting them in return of income.

The chapter, as usual, also presents the scope of income under the head, admissible expenses,
inadmissible expenses and other related issues.

You will find the details of the above issues in this chapter with some practical examples.

Stop and think

Do you realize that the computation of taxable income under the head ‘income from other
sources’ is one of the basic requirements for determining tax liability? Can you determine the
taxable income under the head? Can you compute net tax liability of an assessee having income
under the head?

Working context

In practice, as the accountants are sometime required to support to prepare their clients' tax
returns, they need to advise the clients on how to calculate the total taxable income for any
income year. Before advising the clients, accountants should have the clear concept relating to
the admissible and inadmissible expenses so that they can deduct or add the expenses in
determining the taxable income.

Syllabus links

The topics covered in this chapter are very important for computing taxable income which is
required for solving sample practical problems at this level.

136 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Define income from other sources.

 Identify different scope of income under the head.
 Compute the taxable income under the head.
 Identify the allowable deductions under the head.
 Introduce grossing up of income in certain cases and illustrate its impact on computing C
taxable income. H
 Compute net tax liability under the head. A
P
Question practice T
E
For question practice on these topics go to the suggested answers covering this chapter and
R
also this workbook.

Examiner's comments on how students should tackle questions

10
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 tax liability. Clear concept and
understanding of each content of this chapter will help candidates to resolve any problems
relating to computation of income from other sources.

10 INCOME FROM OTHER SOURCES

Section overview

 Income from other sources is the last and residual head of income.
 The total income may not be taxable income.
 There are some admissible and not admissible deductions under the head.
 Royalty and fees for technical services are significant sources of income under the head.
 On some income under the head, tax is deducted at sources at specified rates.
 Grossing up of income is important to report taxable income.
 There are some admissible and inadmissible deductions under the head.

According to section 66 of ITA, 2023, following income shall be considering as ‘Income from
other sources:

(a) Royalty, license fee, technical know-how fee, income from granting right to use of intangible
asset.
(b) Cash incentive paid by the Government.
(c) Any such income which is not classified under section 30.

ICAB 2024 Income from other sources 137

 10.1 Special area of income from other sources

According to section 67 of ITA, 2023,

1. Without prejudice to the section 66, in special cases, the provision of section 67 shall apply
in computing ‘income from other sources’ in accordance with the provision of chapter eight;
2. Where any sum is found credited in the books of an assessee maintained for any income
year and the assessee offers no explanation about the nature and source thereof, or the
explanation offered is not, in the opinion of the Deputy Commissioner of Taxes, satisfactory,
the sum so credited shall be deemed to be his income for that income year classifiable under
the head “Income from other sources”;
3. Where any assessee owns any asset or incurs any debt or incurs any expenditure any such
transaction which affect the asset of the assessee, in such case if (A+B+C) is greater than
(D+E+F) an amount equal to (A+B+C) – (D+E+F) shall be included as income of the assessee
under the head ‘Income from other sources’. Where –

A = Increase in net asset

B = Actual cost incurred
C = Other expenditure from fund other than A and B above
D = Gross assessed income
E = Assessed tax exempted income
F = Other acceptable receipts of fund other than D and E.

4. Where any assets, not being stock-in-trade or financial asset, are purchased by an assessee
from any person and the Deputy Commissioner of Taxes has reason to believe that the price
paid by the assessee is less than the fair market value thereof, the difference between the
price so paid and the fair market value thereof, the difference between the price so paid and
the fair market value shall be deemed to be income of the assessee classifiable under the
head “Income from other sources”;
5. Where 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 Government or any person, such amount shall be deemed
to be the income of such assessee for that income year classifiable under the head “Income
from other sources”;
6. Where 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 shall be
deemed to be income of the assessee of the income year in which it is received and
classifiable under the head “Income from other sources”;
7. Where any payment made for acquiring any asset or constitutes any asset and tax has not
been deducted therefrom in accordance with Part 7, such payment shall be deemed to be
the income of the person responsible for making the payment under this Ordinance and
classifiable under the head “Income from other source” in the income year in which the
payment was made;
8. Where any benefit 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 benefit shall be deemed to be his income for that income year
classifiable under the head “Income from other sources’.

Provided that above provision shall not apply in the following cases:
(a) Waiver of loan or interest to natural persons granted by any financial institution
registered under the Scheduled Bank or Financial Institution Act, 1993;

138 Business Planning: Taxation & Compliance ICAB 2024

 (b) Benefit not exceeding Tk 1,000,000 on account of any margin loan or waiver of interest
arising thereon 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 thereunder against an individual assessee investment in any securities traded on
the stock exchange.

9. Where any benefit 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 benefit shall be deemed to be his income for that income year
classifiable under the head “Income from other sources”.

10. Where a company, not listed with any stock exchange, 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 deemed to be the income
of such company for that income year and be classifiable under the head "Income from other C
sources". H
A
Provided that this provision shall not apply if any asset or service other than cash are received P
as paid-up capital in accordance with the Companies Act, 1994. T
E
11. Where any company assessee borrows any amount form any other person other than R
through banking channel, such amount shall be deemed to be income of the assessee in
the income year in which the loan was received and it shall be treated as ‘Income from other
sources’. 10
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.

12. Where an assessee, being a company, purchases directly or on hire one or more motor car
or jeep and value of any motor car or jeep exceeds ten percent of its paid up capital together
with reserve and accumulated profit], then fifty percent of the amount that exceeds such ten
percent of the paid up capital together with reserve and accumulated profit] shall be
deemed to be the income of such assessee for that income year classifiable under the head
"Income from other sources".

13. Where any individual assessee receives any advance, loan, donation or any other form of
deposit exceeding Tk 500,000 from any other person other than crossed check or bank
transfer, the amount so received shall be treated as income from other source.

Provided that above provision shall not apply in following cases –

(a) If such amount is received from spouse, parent or child and the same is shown in the
return of both the recipient and payer;
(b) Any deposit received by bank, financial institution and any organizations registered with
the NGO Affairs Bureau or Microcredit Regulatory Authority.

14. Where an assessee, not being an assessee engaged in real estate business during any
income year, purchases on credit any material for the purpose of construction of building or
house property or its unit and fails to pay the sum or any part thereof representing the
liability in respect of such purchase, the sum or any part thereof, which has not been paid
within two years from the end of the income year in which the purchase was made, shall be
deemed to be the income of the assessee for the income year immediately following the
expiry of the said two years and be classifiable under the head "Income from other sources”.

ICAB 2024 Income from other sources 139

 15. Where an assessee files an amended return under section 175, 180 or 212 and shows in the
amended return any such income which is exempted or subject to a reduced tax rate,
amount equal to A-B shall be treated as income from other sources, where –

A = Amount shown in the revised or corrected return which is tax exempted or subject to
reduced tax rate;
B = Income shown in original return

Provided that above provision shall not apply in case where the banking medium is attached
and appropriate evidence is produced.

10.2 Royalty

As per section 2 (79) of ITA, 2023, royalty means consideration (including any lump sum
consideration but excluding any consideration which is classifiable as income of the recipient
under the head "capital gains") for –

(a) 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 mark or similar property.
(b) the imparting of any information concerning the working of, or the use of, a patent,
invention, model, design, secret process or formula, or trade mark or similar property.
(c) the use of any patent, invention, model, design, secret process or formula, or trade mark or
similar property.
(d) the imparting of any information concerning technical, industrial, commercial, or scientific
knowledge, experience or skill.
(e) the transfer of all or any rights, including granting of a license, in respect of any copyright,
literary, artistic or scientific work, including films 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 exhibition of cinematograph films.
(f) the rendering of any services in connection with any of the aforesaid activities

Tax deducted at sources on royalty income

If the royalty is paid by the government or any other authority, corporation or body, company
(including banking and insurance company), or any co-operative bank or any registered NGO,
10% (where base amount does not exceed Tk. 25 lakh) or 12% tax will be deducted at source
under section 91 and such amount as deducted will be considered as final payment of tax
liability as per section 163 (minimum tax). Thus, grossing up is required if royalty income is
received after TDS.

Illustration

Let’s assume that Mr. Bhowmik has received a net amount of Tk. 90,000 as royalty income from
the government during the income year 2021-22. He has taken a total of 18 months to complete
the work. Thus, royalty income may be allocated between this year and the immediately
preceding year after grossing up as follows:

Grossed Up Income: Tk. 90,000/1-0.1 = Tk. 100,000 This income will be allocated as follows:
Income year 2020-21: Tk. 50,000
Income year 2021-22: Tk. 50,000

140 Business Planning: Taxation & Compliance ICAB 2024

10.3 Fees for technical services

According to section 2(30) of ITA, 2023, fees for technical services means any consideration
(including any lump sum consideration) for rendering of any managerial, technical or
consultancy services (including the provision of services of technical or other personnel) but
does not include consideration for any construction, assembly, mining or like project undertaken
by the recipient, or consideration which would be income of the recipient classifiable under the
head salaries.

Tax deducted at sources on fees for technical services

If the fees for professional or technical services is paid by the specified persons as mentioned at
section 90, tax at 10% to be deducted at source [TDS Rule]. However, the rate would be 50%
higher if the recipient does not have any TIN. Grossing up is required to report gross income. C
H
Illustration:
A
P
Let’s assume that Soft Tech Solutions received Tk. 90,000 as technical fee from BRTA during the
T
year. As the income was generated from a government authority, tax has been deducted at
source @ 10% (assuming they have TIN) and thus the gross income to be reported by Soft Tech E
Solutions would be Tk. 100,000 (Tk. 90,000/1-0.1). R

10.4 Income from letting of factory building along with machinery

10
Income from letting of machinery, plant or furniture belonging to the assessee and also building
inseparable from the mentioned assets is taxable as income from rent, instead of other sources.

10.5 Allowable deductions

As per section 68 of ITA, 2023,

1. Subject to the provisions of ITA, 2023, in computing the income of a person under the head
‘Income from other sources’ in any income year, such expenditure incurred by such person
solely for the purpose of earning the relevant income, is not a capital or personal
expenditure, shall be treated as allowable expense.
2. Except sub-section 5 and 6 of section 67, no expenditure shall be allowed in computing
income under any other sub-section of section 67.
3. In allowing expenditure under 1 above, the reasonableness of such expenditure shall be
considered.

10.6 Inadmissible deductions

As per section 69, of ITA, 2023:

1. Expenditure allowed in whole or in part against any asset under this chapter in any income
year shall not be allowed against the same asset.
2. The provision mentioned in section 55 relating to limitation of authorization of expenditure
shall apply to such case in this chapter.

ICAB 2024 Income from other sources 141

 Worked example—1

Mr. Abdur Rahman has reported the following income for the income year ended on June 30,
2024. Compute total income of Mr. Rahman.

(1) Dividend from a Private Limited Company 9,000

(2) Interest on Fixed Deposit 5,400
(3) Interest on Savings Certificate 18,000
(4) Interest on Post Office Savings Bank account 1,800
(5) Remuneration for exam script evaluation and invigilation 1,000
(6) Prize bond lottery 25,000
(7) Income from sale of fish of pond 1,000
(8) Sale of forest tree and bamboo 1,500
(9) Income from copyright 4,000
(10)Honorarium as director 10,000
(11)Gift from marriage anniversary 5,000
(12)Income from license 2,000

During the year he has purchased jewellery of Tk. 125,000 the source of which has not been
explained to the DCT. During the year he has paid Tk. 200 as license renewal fee and Tk. 800 as
interest on loan taken to purchase the shares of private limited company.

Solution 1
Assessee: Mr. Abdur Rahman
Computation of total income

Income from financial asset :

1. Dividend from Pvt. Ltd. Co. (9,000/1-0.1) 10,000
2. Interest on fixed deposits (5,400/1-0.1) 6,000
3. Interest on savings certificate (18,000/1-0.1) [final u/s 163] 20,000
4. Interest on Post Office Savings Bank (1,800/1-0.1) 2,000 38,000
Less: Interest on loan for purchase share (800)
37,200
Income from other sources:
Remuneration for exam script evaluation 1,000
Prize bond lottery 25,000
Income from sale of fish of pond 1,000
Sale of forest tree and bamboo 1,500
Income from copyright 4,000
Honorarium as director 10,000
Income from license 2,000
Unexplained investment at jewellery and marriage gift [125,000+5,000] 130,000 174,500
211,700
Less: Allowable deductions (license renewal fee) (200)
211,500

Notes:
1. Assuming copyright has been received from an individual, where no TDS is applicable.
2. Income from marriage anniversary is also income as per budget,2024.

142 Business Planning: Taxation & Compliance ICAB 2024

 Worked example—2

Mr. Joarder Hossain has reported the following income for the income year 2023-24. Compute
taxable income of Mr. Hossain.

1. Dividend from ICB Mutual Fund (gross amount) 30,000

2. Profit on Islami Bank Mudaraba Savings Scheme 2,700
3. Interest on savings certificate (gross) 30,000
4. Income from royalty of a book (time of completion – 10 months) 2,000
5. Prize of winning crosswords (no tax was deducted) 2,000
6. Income from letting out household machineries 1,000
7. Sale of forest timber 1,500
8. Income from a newspaper for column writing 5,000
9. Income from unused leased land 2,000
10. Honorarium for attending a symposium 30,000 C
11. Income from private tuition in a Coaching Center 10,000 H
12. Royalty income from a publisher 1,800 A
P
During the year he spent Tk. 200,000 on a party in Hotel Radisson, the source of expenditure T
remained unexplained to the DCT. He has also visited Singapore incurring a total cost of Tk. E
100,000 and purchased a Diamond set of Tk. 200,000 for his wife for which the source of the R
money was not satisfactory to the DCT. During the year he has paid Tk. 2,000 as commission for
collecting the dividend and Tk. 8,000 as interest on loan taken to purchase ICB mutual fund.

Solution 2: 10

Mr. Joarder Hossain

Computation of total income

Income from financial asset: Tk. Tk.

1. Dividend from ICB Mutual Fund 30,000
2. Profit on Islami Bank Scheme (2,700/1-0.1) 3,000
3. Interest on savings certificate [final tax-SRO 253/2023] 30,000 63,000
Less: Allowable deductions:
- Commission for collecting dividend 2,000
- Interest on loan 8,000 10,000
53,000
Income from other sources:
4. Income from royalty of a book 2,000
5. Prize of winning crosswords 2,000
6. Income from letting out household machineries 1,000
7. Sale of forest timber 1,500
8. Income from newspaper column writing 5,000
9. Income from unused leased land 2,000
10. Honorarium for attending a symposium 30,000
11. Income from private tuition in a coaching center 10,000
12. Royalty income from publisher (1,800/1-0.1) 2,000
13. Unexplained investments:
- Party in hotel 200,000
- Travel to Singapore 100,000
- Purchase of diamond jewellery 200,000 555,500
608,500

ICAB 2024 Income from other sources 143

 Self-assessment questions

1. What is meant by “dividend” under the Income Tax Act, 2023?

2. What are the items assessable as “income from other sources” under the Act?
3. Mr. Joynal Akand has earned the following income during the income year 2023-24.

Dividend from preference shares of a Public Limited Company 45,000

Dividend from ICB Mutual Fund 18,000
Income from underwriting shares of a Company 30,000
Income from mooring terminal 40,000
Interest on Savings Bank Deposit 27,000
Honorarium received as a director to be a member of the Board 10,000
Prize of winning Red Crescent lottery 36,000
Income from betting/housie 48,000
Interest on loan given to a friend 15,000
Income from consultancy work not related to his profession 40,000
Income from participating in a training program 20,000
Income from birthday party 50,000
Income from royalty of a book [which took two years to write the book] 90,000

During the year he spent Tk. 200,000 to purchase a piece of land, Tk. 90,000 to purchase a
motorcycle and the explanation given regarding the source of expenditure was unsatisfactory
to the DCT. Through investigation, the DCT has also identified an FDR of Tk. 500,000 in a local
bank, source of which has also remained explained.

He has also visited India incurring a total cost of Tk. 100,000 and purchased a Diamond set for
Tk. 100,000 for his wife for which the source of the money was also unexplained. During the year
he has paid Tk. 1,500 as commission for collecting the dividend. His other expenditures during
the year are as follows:

Purchase of books and magazine 15,000

Donation to President's Relief Fund 30,000
Contribution to a deposit pension scheme 80,000
Purchase of a cow for Eid Ul Azha 15,000
Purchase of a Laptop 130,000
Purchase of shares from secondary market 200,000

Compute total income and tax liability of Mr. Joynal Akand for the assessment year 2024-25.

144 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 11
Depreciation and
Amortization
Introduction

Examination context

Topic list

11.1 Basics of depreciation allowances

11.2 Depreciation allowance for different heads of income
11.3 Depreciation allowance on assets used for agricultural purpose
11.4 Depreciation allowance on assets used in business or profession
11.5 Determination of purchase price of an asset
11.6 Types of depreciation allowance
11.7 Normal depreciation allowance
11.8 Initial depreciation allowance
11.9 Accelerated depreciation allowance
11.10 Arrangements relating to profit or loss and sale or transfer
of asset
11.11 Amortization
11.12 Carry-forward of depreciation allowance

Worked examples
 Introduction

Learning objectives

 Explain depreciation allowance.

 Compute depreciation allowance.
 Define balancing charge and capital gain.
 Identify different types of depreciation allowances.
 Differentiate accounting depreciation and tax depreciation.
 Identify different rates of accelerated depreciation for different assets.
 Define written down value and its application at acquisition and disposal of assets.
 Explain gain and losses of assets in disposal.

Practical significance

Depreciation 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 significant.

Accounting depreciation and tax depreciation may not be the same. If it is not same then it
generates deferred taxation. And it is very important for professional accountants to practice
deferred taxation. This chapter presents different types of depreciation allowances, investment
allowance and other related topics.

It also presents a definition of written down value with the application of gain and loss on
disposal of assets. It also presents different exceptions to the common rule.

You will find the details of the above issues in this chapter with some practical examples.

Stop and think

Do you realize that the computation of depreciation allowance is one of the important issues for
determining tax liability? Can you determine the taxable income under the heads ‘income from
agriculture’ and ‘income from business and profession’ after allowing tax depreciation
allowance?

Working context

In practice, as the accountants are sometime required to support to prepare their clients' tax
returns, they need to advise the clients on how to calculate the total taxable income for any
income year. Before advising the clients, accountants should have the clear concept relating to
the admissible and inadmissible expenses so that they can deduct or add the expenses in
determining the taxable income.

Syllabus links

The topics covered in this chapter are very important for computing taxable income which is
required for solving sample practical problems at this level.

146 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Define depreciation allowance.

 Compare depreciation allowance and investment allowance.
 Define written down value, balancing charge, industrial undertaking and capital gain.
 Presents different rates of depreciation for different types of assets.
 Explain rates of depreciation for plant, machinery, ships and other exceptional assets.
 Understanding the difference between accounting depreciation and tax depreciation.
 Define written down value and its application at acquisition and disposal of assets.
 Explain gain and loss of assets in disposal.

Question practice

For question practice on these topics go to the suggested answers covering this chapter and
also this workbook.

Examiner's comments on how students should tackle questions

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 tax liability. Clear concept and
C
understanding of each content of this chapter will help candidates to resolve any problems
H
relating to computation of income under the heads ‘income from agriculture’ and ‘income from
A
business or profession’.
P
T
11 DEPRECIATION ALLOWANCE E
R
Section overview

 Depreciation is allowed on cost but investment allowance is over and above cost and 11
depreciation allowance.
 Any Government 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 Tk. 30 lakhs is to be scaled down in proportion to
Tk. 30 lakhs 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 exceeding original cost is capital gain and should be taxed accordingly.
 Depreciation is calculated on reducing balance method (WDV) on all assets other than
accelerated depreciation or on ships and vessel where cost is used.
 Balancing charge is the revenue gain and should be taxed separately.
 Accounting depreciation and tax depreciation are different and it creates deferred taxes.

ICAB 2024 Depreciation and Amortization 147

 11.1 Basics of depreciation allowances

Besides various expenditure allowed under section 50 in arriving at the profit 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.

Normally accountants charge depreciation on fixed assets other than lands in calculating profit
or loss of business or profession periodically. This is a normal wear and tear of fixed asset caused
by use, defluxion 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 tax authorities
allow and tax authorities also do not consider accounting depreciation in computing
depreciation allowed under tax laws. It may be that accountant has not charged any depreciation
on fixed assets or charged whole of a particular fixed asset in a year, but to the tax man, it is
immaterial since he would add back accounting depreciation and deduct tax depreciation in his
assessment process.

Some basic rules or concepts used in the calculation and granting of depreciation allowances
are stated below:

(i) It is allowed on fixed assets other than land i.e., buildings, plant and machinery, furniture
and fittings, equipment etc.

(ii) Assets must be used in the relevant income year in business or profession. It may be used
for the whole year or for just one day in the year. The allowance is given for the whole year
without time apportionment. However, it would be on proportionate basis when assets or
some of these are used for private purpose and business purpose.

(iii) Ownership 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 operating lease, or any other
arrangement of hire purchase purpose, the lessor retains the ownership. He is thus allowed
full tax depreciation though the assets have been used by the assessee.

(iv) It is obligatory on the part of the assessee to furnish the prescribed particulars in respect of
depreciation claim. If the prescribed particulars are not furnished, the DCT may even refuse
to grant any allowance for depreciation. However, 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.

(v) Aggregate depreciation allowed shall not exceed cost and the law deals with the subject of
cost elsewhere.

(vi) No depreciation is allowed in the year the asset is sold, discarded or demolished even when
it was used for major or most part of the year. However, balancing allowances is allowed in
that year when WDV of the asset is greater than the proceeds.

(vii) Third Schedule prescribes different rates of depreciation allowances for different classes of
assets. On ocean going ships and vessels the rate of depreciation is based on actual cost
and accelerated depreciation on plant and machinery is also based on cost not WDV, in all
other cases, it is based on written down value (WDV) of the asset.

148 Business Planning: Taxation & Compliance ICAB 2024

 (viii) Cost of motor vehicle used in the business or profession is restricted up to Tk. 30 Lakhs for
the purpose of depreciation allowance calculation.

(ix) No depreciation is allowed on assets before the commencement of business i.e.,

commercial production.

(x) While acquiring the asset, the assessee receives any capital grant or Government subsidy or
any assistance from any other authority or person such amount shall be excluded from the
acquisition cost for the calculation of depreciation allowance.

(xi) Fluctuation in the foreign exchange rate is given effect to determine the cost base of any
asset acquired with money borrowed and payable in foreign currency.

(xii) Depreciation is not treated as an expense unlike the matching of cost with revenue by the
accountants. However, it is given as a specific case for the diminution in capital assets used
in business or profession. Since, it is not treated as a cost by the tax people, tax profit or loss
is calculated first without having regard to depreciation allowance.

If there is any profit, depreciation is set off against that. If not or if insufficient to absorb the whole,
the balance is and can be carried forward indefinitely as unabsorbed depreciation. But in case
of loss, it can be carried forward only for six years and when cannot be set off within that, is
regarded a capital loss. This facility of carry forward of unabsorbed depreciation is extended to
all tax holiday or exempted enterprises when however, they cannot carry forward their business
losses beyond the holiday or exempt period.

11.2 Depreciation allowance for different heads of income

Income Tax Act, 2023 prescribes depreciation allowances for fixed assets used in different heads C
of income as follows: H
A
a) Agricultural income P
b) Income from business T
E
11.3 Depreciation allowance on assets used for agricultural purpose R

Sl. Rate of depreciation

Capital asset 11
No. (%)
1) A building or structure constructed by brick, concrete, steel or 5
similar material
2) House constructed by tin, bamboo or similar materials 10
3) Permanent fence 10
4) Tube – well 10
5) Tank 10
6) Irrigation works, channels, pipes 10
7) Agricultural instruments made by wood or bamboo 20
8) Weight machine 10
9) Tractors, oil engines and light machinery 10
10) Truck, delivery van, other motor vehicle 10
11) Piper pumping equipment 20
12) Non-mechanical van 15

ICAB 2024 Depreciation and Amortization 149

 13) Steam engine 10
14) Factory machinery 15
15) Any such common instrument, tools, plant and other property 10

Depreciation allowances on fixed assets used for agricultural purposes are allowed at
prescribed rates as given in Third Schedule. The schedule is produced below:

Third Schedule
[Para 1]

11.4 Depreciation allowance on assets used in business

According to para 2 of Third Schedule, Part 1,

1. 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.
2. Above depreciation allowance normal depreciation allowance and initial depreciation
allowance for the relevant income year used by the assessee for business purpose shall be
on the depreciated value of the said asset subject to basis, rate, limitation, qualification, and
condition prescribed in Part 1 of Third Schedule.
3. Where the asset was not used fully in the business of an assessee, depreciation allowance
shall be allowed proportionately.
4. Depreciation allowance shall not be allowed on any asset unless the return of the assessee
reflects a claim that the asset is used for business purpose.
5. Where the asset is not fully used for business purpose, in computing the depreciated value
of the asset (WDV), the asset shall be deemed to have been fully used for business purpose.
6. The total deduction allowed against any asset shall not exceed the purchase price of said
asset.
7. Depreciation of asset owned by a particular leasing company and leased to any other person
shall be deductible only against the lease rental income arising from such lease.
8. 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.
9. No allowance shall be admissible under this part if –
a. Information or documents as prescribed by the Board or required by DCT was not
submitted at the time of filing return;
b. Such assets were not used in the relevant income year.
10. For the purpose of this Part 1 of Third Schedule, ‘specified leasing company’ means any
leasing company, banking company, or any finance company which is engaged in leasing
business.

11.5 Determination of purchase price of an asset

According to Para 3 of Part 1 of Third Schedule,

1. The purchase price of any motor vehicle shall be considered not more than Tk. 30 lakh 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. In computing the purchase price of any asset, the value of 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.

150 Business Planning: Taxation & Compliance ICAB 2024

 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 –
a. Adding exchange rate fluctuation loss or exchange rate hedging expense;
b. Deducting the exchange rate fluctuation gain.

11.6 Types of depreciation allowance

As per Third Schedule of ITA, 2023, depreciation allowances may be classified as under:

Reference Types of allowances

Para 4, Third Schedule Normal depreciation allowance
Para 5, Third Schedule Initial depreciation allowance
Para 6, Third Schedule Accelerated depreciation allowance on plant and machinery

11.7 Normal depreciation allowance

As per para 4 of Part 1, Third Schedule, normal depreciation allowance is allowed at the
following rates:

Rate ( % of the
SL.
Classification of assets written
No.
down value)
1 Building (unless otherwise specified in this table) 5
2 Factory building 10 C
3 Furniture and fittings 10 H
4 Office equipment 10 A
5 Machinery, plant and equipment (unless otherwise specified in this 10 P
schedule) T
6 Ocean-going ships E
(a) New 5 R
(b) Old at the time of purchase whose age is –
(i) Not more than 10 years 10
(ii) More than 10 years 20 11
7 X-ray, electrotherapeutic and other medical equipment including 20
its spare parts
8 Battery operated appliances and rechargeable batteries 30
9 Equipment used for production and display of audio-visual 20
products
10 All types of motor vehicle not plying for hire 10
11 All types of motor vehicle plying for hire 20
12 Computer hardware including printers, monitor and ancillary item 25
13 Professional and reference books 25
14 Aircraft, aero-engines and aerial photographic equipment 30
15 Molds used in manufacture of glass or plastic goods or concrete 30
pipe
16 Mineral oil concerns -
(a) Below ground installation 100

ICAB 2024 Depreciation and Amortization 151

 (b) Above ground installations, that is to say, portable boilers, 25
drilling tools, well-head tanks and rigs
17 Bridge 2
18 Road 2
19 Flyover 2
20 Pavement runway, taxiway 2.5
21 Apron, tarmac 2.5
22 Boarding bridge 10
23 Communication, navigation aid and other equipment 5
24 Any such physical asset not mentioned in this schedule 10

11.8 Initial depreciation allowance

According to para 5 of part 1 of Third Schedule, 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:

(a) In the case of building 10%

(b) In the case of machinery or plant other than ships or motor vehicles not 25%
plying for hire

Notes: Initial depreciation allowance will not be applicable in case of –

(a) any motor vehicle not plying for hire, and

(b) any machinery or plant which has previously been used in Bangladesh.

11.9 Accelerated depreciation allowance

According to para 6 of part 1 of Third Schedule,

1. Where machinery or any asset covered 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:

Rate of accelerated
SL no Year of commencement of commercial operation
depreciation
1 First income year 50%
2 Second income year 30%
3 Third income year 20%

4. Accelerate depreciation allowance shall be allowed subject to following conditions, limits

and qualification, namely –

a. The relevant asset is owned by the industrial undertaking and has not previously been
used in Bangladesh;

152 Business Planning: Taxation & Compliance ICAB 2024

 b. Ownership and management of industrial undertaking –
i Managed by law for the time being in force or by body corporate established under
the law having its head office in Bangladesh.
ii Carried on by a company as defined in the Companies Act, 1994 having its
registered office in Bangladesh and having an authorized and paid-up capital of at
least TK 20 lakh on the date of commencement of commercial production.
c. The industrial undertaking –
i TIN holder;
ii Maintenance its books of accounts in accordance with the provision of this Act;
iii Maintain separate and distinct accounts;
iv File its return in accordance with the provision of this Act.
d. Follow the procedure described below, namely –
i 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;
ii A declaration to the effect 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.

11.10 Arrangements relating to profit or loss and sale or transfer of asset

According to para 7 of part 1 of Third Schedule, where any asset is sold or transferred by an C
assessee in any income year, no depreciation allowance shall be allowed under this Third H
Schedule against such asset in that income year. A
P
11.11 Amortization T
E
1. Computation of Amortization: According to para 1 of part 2 of Third Schedule, the R
amortization allowance shall be computed on straight line basis.
2. Amortization of license fee: where a resident company pays any amount as license fee for
the purpose of obtaining permission from an authority approved by the Government to carry 11
on business for two or more years, it shall be deducted from the income of the business of
the company at the proportionate rate up to the last year of the last year of license period.
3. Amortization of pre-commencement expense: Rate of amortization of pre-commencement
expense shall be 20%.
4. Amortization of research and development expenditure: Amortization rate of research and
development expenditure shall be 10%.
5. Amortization of computer software and applications: The rate of amortization of computer
software and application shall be as follows:
a. 20% in respect of any software and applications developed in Bangladesh;
b. 10% in respect of any software and applications developed outside Bangladesh.
6. Amortization of disallowed expenditure: If any expenditure claimed by the assessee is
disallowed treating as capital expenditure, 10% amortization on such disallowed
expenditure shall be allowable in subsequent assessment years.

ICAB 2024 Depreciation and Amortization 153

 11.12 Carry-forward of depreciation allowance

According to section 71 of ITA, 2023,

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.
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 deprecation.
4. Allowable depreciation can be carry-forward till fully adjusted.

Worked examples and solutions

Worked example—1

Company X, whose accounting year is ended on June 30 each year, has purchased a machine
for Taka 20 lakhs on 29 June, 2021 and sold the same on 1st April 2024 for Tk. 25 lakhs. Compute
balancing charge and capital gain.

Solution 1

Assessment year Rate of depreciation Depreciation Written down value

2,000,000
2021-22 10% 200,000 1,800,000
2022-23 10% 180,000 1,620,000
2023-24 10% 162,000 1,458,000

Total gain: Sale proceeds – Written down value = Tk. 2,500,000 – Tk. 1,458,000 = Tk.1,042,000
Capital gain = Sale proceeds – Original cost = Tk. 2,500,000 – Tk. 2,000,000 = Tk. 500,000
Balancing charge = Total gain – Capital gains = Tk. 1,042,000 - Tk. 500,000 = Tk. 542,000

Notes:

1. Difference between sales price and original cost is capital gain to be assessed in 2024-25
assessment year.
2. Balancing charge equals to depreciation allowances so far enjoyed i.e. Tk. 542,000
(200,000+ 180,000 + 162,000).
3. The company received the depreciation allowance in 2021-22 assessment year, for just
buying the machine one day before its year end. Had it been 1st July, 2021, the allowance
would have started from the assessment year 2022-23 i.e. corresponding income year 2021-
22. Similarly, on disposal giving rise to balancing charge and capital gain, it has delayed the
tax impact by one year just by completing the sale on 1st April, 2024 instead of 30 June,
2023.

154 Business Planning: Taxation & Compliance ICAB 2024

 Worked example—2

Company X bought a machine for Tk. 50 lakhs on 10th July, 2021 to be used in its expansion unit
in Savar, Dhaka. The investment is qualified for accelerated depreciation under Third Schedule.
The company sold the machine on 15 January, 2024 for Tk. 20 lakhs, The Company’s year ends
on 30th June. Calculate depreciation for the relevant assessment years.
Solution 2

Assessment year 2022-23

Cost Allowance
Machine 5,000,000
Accelerated depreciation allowance (3rd Schedule) (50%) 2,500,000 2,500,000
2,500,000

Assessment year 2023-24

Accelerated depreciation allowance (30%) 1,500,000

Written down value 1,000,000

Assessment year 2024-25

Sale proceeds 2,000,000

No depreciation in the year of disposal nil
Less: WDV 1,000,000
Revenue gain from sale of machine 1,000,000
C
Notes:
H
A
Difference between accounting and tax profits arises mainly because of timing what accountants
P
charge in the accounts as depreciation and what tax law allows. Since, both the way calculates
on the cost as the upper limit, there would be no difference in the long run. However, after tax T
results of companies differ significantly from year to year or across the industry because of the E
taxation anomaly. R

To remove this problem and to show an even after-tax results year after year companies can
maintain deferred taxation account in accordance with IAS 12 (Accounting for income tax). 11

Self-assessment questions

1) Enumerate different types of depreciation allowance?

2) What is the basic difference between depreciation allowance and investment allowance?
An asset was bought some years back for Tk. 10,00,000, the WDV of which was Tk. 600,000. Find
out the tax implication,
a) If it was sold for Tk. 11,50,000.
b) If it was sold for Tk. 8,50,000.
c) If it was sold for Tk. 4,50,000.

ICAB 2024 Depreciation and Amortization 155

156 Business Planning: Taxation & Compliance ICAB 2024
 Chapter 12
Set off and carry forward
of losses

Introduction

Examination context

Topic list

12.1 Introduction to set off and carry forward of losses

12.2 Set off and carry forward losses
12.3 Carry-forward of unabsorbed depreciation allowance

Worked examples
 Introduction

Learning objectives

 Define set off and carry forward of losses.

 Identify possible areas of set off of losses.
 Identify the heads of loss permissible for carry forward.
 Identify the situations when carry forward is not permissible.
 Explain maximum years when carry forward is possible.
 Differentiate carry forward of losses by individuals, firms and partners.
 Explain the carry forward of losses by undertakings enjoying tax holiday facilities.
 Illustrate the concept of set off and carry forward of losses in different situations.

Practical significance

Set off and carry forward of losses is very important and practically significant to compute total
income of any year. These are the benefits enjoyed by assesses to cover up their losses before
paying taxes to the government.

Set off means the coverage of loss under one head against another head in a specific year. Carry
forward is the transferring of loss of a year to the succeeding year or years for coverage if set off
was not possible or insufficient. Such set off and carry forward facility can be availed provided
that certain conditions are fulfilled. This chapter presents such guidelines.
After carry forward, losses from any head cannot be set off 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.

Subject to some conditions, an assessee is allowed to set off and carry forward of losses. The
carry forward of losses under different heads of income are varied.

You will find the details of the above issues in this chapter with some practical examples.

Stop and think

Do you realize that the understanding of set off and carry forward of loses is important for
computation of total income? Can you determine the total income from different heads of
income after set off and carry forward of losses?

Working context

In practice, as the accountants are sometimes required to support to prepare their clients' tax
returns, they need to advise the clients on how to calculate the total income for any income year.
Before advising the clients, accountants should have the clear concept relating to set off and
carry forward of losses in determining the total income.

Syllabus links

The topics covered in this chapter are very important for computing total income which is
required for solving sample practical problems at this level.

158 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, students may be required to:

 Understanding provisions regarding set off and carry forward of losses.

 Identify possible areas of set off of losses.
 Identify carry forward of losses from income from agriculture.
 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 capital gains.
 Identify carry forward of losses from income from house property.
 Identify carry forward of losses from income of a partnership firm.
 Identify the situations when carry forward is not permissible.
 Explain maximum years when carry forward is possible.
 Explain the application of unabsorbed depreciation and its impact on income from business
and profession.
 Differentiate carry forward of losses by individuals, firms and partners.
 Explain the carry forward by undertakings enjoying tax holiday facilities.
 Illustrate the concept of set off and carry forward of losses in different situations.

Question practice

For question practice on these topics go to the suggested answers covering this chapter and
also this workbook.

Examiner's comments on how students should tackle questions

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 tax liability. Clear concept and
understanding of each content of this chapter will help candidates to resolve any problems C
relating to set off and carry forward of losses. H
A
12 SET OFF AND CARRY FORWARD OF LOSSES P
T
E
Section overview
R
 Loss arising in one head of income can be set off against profit arising under any other head
except from capital gain or loss on business, speculative business and tobacco business.
 Balance of loss, if remains, can be carried forward to be set off against profit under same 12
head for six years.
 Unabsorbed depreciation brought forward together with current year's depreciation
allowance forms total depreciation charge for the year.
 Unabsorbed depreciation can be carried forward indefinitely i.e., without time limit of six
years.

ICAB 2024 Set off and carry forward of losses 159

 12.1 Introduction to set off and carry forward of losses

Tax is imposed on income and thus, if loss is generated from any heads; government offers
sufficient options to make the assessee well off enough so that tax may be collected. Two such
options are:

a) Set off
b) Carry forward and then set off

Logically, set off considers only one year whereas carry forward includes subsequent year or
years. As assessee have multiple sources of income, it is very common that loss will not generate
from each head. Thus, losses from one head may be adjusted with income from other heads so
that net figure results income and tax can be imposed on it. However, if the total income from
all head’s results losses, set off cannot be done practically. In such a situation, loss of one year
can be carried forward to subsequent year or years for set off. This chapter presents these two
issues in detail.

12.2 Set off and carry-forward of losses: section 70

According to section 70 of ITA, 2023,

1. Subject to the provision of 2 (below), 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 –

SL no Source or head of loss As can be adjusted

1. Capital loss Only with capital gain
2. Business loss Only with income from business
3. Loss from speculation business Only with income from speculation business
4. 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
under section 163(2) 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.

12.3 Carry-forward of unabsorbed depreciation allowance

According to section 71 of ITA, 2023,

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.
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 deprecation.
4. Allowable depreciation can be carry-forward till fully adjusted.

160 Business Planning: Taxation & Compliance ICAB 2024

 Example:

A, B, and C were partners in a firm sharing profits in the ratio of 3:2:1. During income year 20X2-
-X3, B retired and partner A and C continued in the ratio of 3:1. Up to that year brought forward
loss of the firm amounted to Tk. 300,000. Net profit for the current year amounted to Tk. 500,000.

Here is a case of change in the constitution of the firm. The firm cannot set off retiring partner's
share of loss against its profit for the current assessment year 20X3-X4, which is (2/6 × Tk.
300,000) = Tk. 100,000 nor C can individually set off or carry forward his share of the loss.

Assessment year 20X3-X4

Tk.
Net profit 500,000
Brought forward of previous year’s loss 200,000
Adjusted profit 300,000

Above set-off loss arising from partnership firm is not allowed under section 70(4) of ITA, 2023
against the income of a partner.

Worked examples

Worked example—1

Mr. Amir Hossain has the following income in different income years. Calculate his total income
after considering provisions relating to set off and carry forward of losses.

2019-20 2020-21 2021-22

Interest on securities 20,000 30,000 20,000
Income from house property 1,30,000 1,20,000 1,30,000
Income from agriculture (1,70,000) (30,000) 40,000
Income from speculative business - (40,000) 50,000
Capital gain 25,000 - -

Solution 1:
Mr. Amir Hossain
Income year: 2019-20
Assessment year 2020-21 C
H
Taxable Carry A
Sources of income Set off
income forward P
Interest on securities 20,000 T
Income from house property 1,30,000 E
Income available to set off losses from 1,50,000 1,50,000 R
agriculture
Income from agriculture (1,70,000) (1,70,000)
Income available after set off (20,000) 12
Carry forward (losses from agriculture) 20,000
Income after set off & carry forward of losses -
Income from capital gains 25,000
Total income 25,000

ICAB 2024 Set off and carry forward of losses 161

 Mr. Amir Hossain
Income year: 2020-21
Assessment year: 2021-22

Taxable Carry
Sources of income Set off
income forward
Interest on securities 30,000
Income from house property 1,20,000
Income available to set off losses from agriculture 1,50,000 1,50,000
Income from agriculture (30,000)
Set off: Current year loss Income after set off 1,20,000 (30,000)
1,20,000
Carry forward: last year loss from agriculture 20,000
Carry forward: Income from speculative business 40,000
Income after set off & carry forward of losses 1,20,000

Mr. Amir Hossain

Income year: 2021-22
Assessment year: 2022–23

Taxable Carry
Sources of income Set off
income forward
Interest on securities 20,000
Income from house property 1,30,000
Income available to set off losses from agriculture 1,50,000
Income from agriculture 40,000
Set off: Losses carried forward from earlier year (20,000)
Remaining income from agriculture after set off 20,000 20,000
Income from speculation 50,000
Set off: Losses carried forward from last year (40,000)
Remaining income from speculation after set off 10,000 10,000
Income after set off & carry forward of losses 1,80,000

Worked example—2

Mr. Jamshed Sowdagor reports the following income for the income year ended on June 30,
2023.

Income from business and profession Tk. 500,000

Income from house property Tk. 100,000
Capital gains Tk. 50,000
Income from speculative business Tk. 80,000

However, he has some losses carried forward from earlier years (income years) with the following
details:

Heads Amount of losses Year of origin

Income from business and profession Tk. 80,000 2016-17
Capital gain Tk. 50,000 2011-12
Income from speculative business Tk. 40,000 2013-14
Unabsorbed depreciation Tk. 50,000 2009-10

162 Business Planning: Taxation & Compliance ICAB 2024

 Solution 2:

Mr. Jamshed Sowdagor

Income year: 2022-23
Assessment year: 2023-24

Sources of income Tk. Tk. Tk.

Income from business and profession 500,000
Set off: Losses carried forward from 2016-17 80,000
Unabsorbed depreciation 50,000 130,000
Taxable income from business and profession 370,000
Income from house property 100,000
Capital gains 50,000
Set off: not allowed as it exceeds 6 years 50,000
Income from speculation business 80,000
Set off: Losses carried forward from 2013-14 40,000 40,000
Total income on which tax to be applied 560,000

Self-assessment questions

1) What is the difference between set off and carry forward of losses and condition associated
with that?
2) What are the conditions for loss carry forward of a partnership firm? Can a partner claim loss
adjustment of the firm against his personal income?
3) How many years a speculative business loss can be carried forwarded?

C
H
A
P
T
E
R

12

ICAB 2024 Set off and carry forward of losses 163

164 Business Planning: Taxation & Compliance ICAB 2024
 Chapter 13
Exemption and allowances
(Tax holiday/other exemptions)

Introduction

Examination content

Topic list

13.1 Exemption from tax: Section 76

13.2 Exclusion from gross income: Section 77 (1) and Sixth Schedule, Part 1
13.3 Subtract from gross income: Sixth Schedule, Part 2
13.4 General tax relief in respect of certain investment and
expenditure: section 78 and Sixth schedule part 3
13.5 Tax Holiday
13.6 Fiscal and other incentives to foreign investors in
Bangladesh
13.7 Corporate tax holiday for IT Hardware Producers
13.8 Corporate tax holiday for agro based industries
13.9 Corporate tax holiday for producer of light engineering
products
13.10 Corporate tax holiday for producer of certain home
and kitchen appliances
13.11 Corporate tax holiday for training institutions
13.12 Corporate tax holiday for private hospitals
13.13 Corporate tax holiday for producers of automobiles
 Introduction

Learning objectives

 Identify the area of investment for tax holiday scheme.

 Recognize the conditions for enjoying tax holiday.
 Determine the tax holiday income

Practical significance

Income from some newly established industrial undertakings are exempted from tax liability on
the basis of fulfilling some conditions. To get the facility of tax holiday, the undertakings need to
comply with some conditions and if any conditions are not fulfilled in the course of making
assessment of an exempted assessee, the exemption will be withdrawn and the DCT shall
determine the tax payable on such income.

The tax holiday and special tax exemptions or tax concessions are provided to different types of
business and industrial undertaking to encourage those businesses and industries for overall
development of the country. Significant exemption on income from export sales also a good
initiative of government to promote the export oriented Bangladeshi companies.

Stop and think

When you want to start a new business, you can consider the opportunity of tax holiday or special
tax exemption given by the Government. You can be the part of the development of the country
and at the same time you can get the tax holiday facility to enrich your business.

Working context

Accountants are sometimes required by the entrepreneur for giving advice on how the business
can be newly started or expanded along with the tax holiday or special tax exemption facility.
Chartered accountants can help their clients regarding new business or expansion of their
business in such way that the clients can enjoy the tax holiday opportunity. Accountants should
have the detailed knowledge on the area of tax exempted business and the updates of the rules
and regulations for getting tax holiday and other special tax exemption facility so that they can
rightly advise their clients enjoying that facility.

Syllabus links

The topics covered in this chapter imply the area of industry and investments from where you
can get tax holiday benefit with the conditions to get that benefit.

166 Business Planning: Taxation & Compliance ICAB 2024

 Examination context C
H
A
P
Exam requirements T
E
In the examination, students may be required to: R

 Recognize the different industrial undertakings for taking tax holiday facility.
 Illustrate the various conditions for getting tax holiday. 13
 State the way of computing tax holiday income.
 Mention the reasons for withdrawal and cancellation of tax holiday.
 Define the exemption of tax liability for Bangladeshi exporting industries.
 Mention the different types of business considered for special tax exemptions.

Question practice

For question practice on these topics, go to the suggested answers covering this chapter.

13 EXEMPTION AND TAX HOLIDAY

Section overview

 Assessee enjoying some non-assessable income.

 Assessee enjoying tax rebate on investment allowance.
 Some newly established industrial undertakings are enjoying tax holiday.
 There are some conditions to get the tax holiday facility.
 The purpose of tax holiday is to encourage industrial and other development of the country
in many sectors like physical infrastructure, textile, hospital, exporting industries etc.
 Tax holiday income shall be computed like the computation of income from business or
profession.
 Tax holiday may be cancelled or withdrawn if one or more conditions not fulfilled.

13.1 Exemption from tax: Section 76

According to section 76 of ITA, 2023,

1. The board, may by notification in the official gazette, grant exemption from tax to any
person or class of person.
2. In case where exemption from tax has been granted to a person under the provision of this
Act, if tax exemption is not granted by a notification under section 76(1) of ITA, 2023 such
provision shall not be operative.
3. The Board may cancel any tax exemption by issuing a notification under section 76.
4. No tax exemption under this Act shall be granted retrospectively.
5. Notwithstanding anything contained in Part 6 and any other provision of this Act, no person
shall be exempt from tax under this Act in any assessment year if he fails to comply with the
following conditions, namely –

a. Filing the return within the Tax Day; or

b. Filing return in compliance with the provision of section 166 and 171; or

ICAB 2024 Exemption and allowances (Tax holiday/other exemptions) 167

 c. Deduction of tax at source, collection, deposit or filing of return relating thereto and
compliance with the provision of part 7. Or
d. Bank transfer of all receipts and income from any tax exempted source.

Provided that above provision (d above) shall not apply in case where the head of receipt
is treated as ‘income from agriculture’ and the total amount of receipt does not exceed
Tk 1 crore in any income year, or donation as per para 34 of part 1 of the 6th Schedule.

6. In computing income from a tax exempted source of a person, any expenditure disallowed
under section 55, as the case may be, shall be deemed to be income from the said income
head of the person and tax shall be payable on the said income at the regular rate.
7. An exempted person can surrender the full or partial exemption facilities and pay tax at the
regular rate.
8. If any source of income enjoys tax exemptions as per the Act for a certain period, then the
income from the same source shall not be exempted from tax again or for any other periods,
even in the case of merger, demerger, or acquisition. However, if the exemption period is
extended by the Act or any circular, then this provision shall not apply.

13.2 Exclusion from total income: Section 77 (1) and Sixth Schedule, Part 1

Any income or class of income or the income of any person or class of persons specified in Part
1 of the Sixth Schedule shall be exempt from payment of tax as per section 77(1). Following
items as specified in Part 1 of the Sixth Schedule of the ITA, 2023, are exempted from tax:

(1) Income of any intra-government or international organization and its employees exempted
from tax by any act or treaty.
(2) Any income under-
(a) remuneration of an ambassador, high commissioner, envoy, minister, charged affairs,
commissioner, councilor, consul, the career, secretary, advisor, or attaché of a foreign
state, high commission, legation, or commission of a foreign state.
(b) salary of a trade commission or government representative stationed in Bangladesh if
similar exempted is allowed in the concerned country.
(c) salary of office staff of the person referred to in (a) and (b) where he is not a citizen of
Bangladesh and not engaged in business or profession in Bangladesh, and similar
exemption is applied to the officials of the Bangladesh government in his country.
(3) Grants, taxes, fees or duties received by a government or local authorities.
(4) Pension from the government pension fund.
(5) Income up to Tk. 2 crore 50 lakh from the approved gratuity fund.
(6) Employees’ or employer’s contribution to the recognized provident fund, approved
superannuation fund, pension fund and gratuity fund, and after-tax income of the funds to
its beneficiaries but maximum amount from gratuity fund shall be Tk. 2 crores 50 lakh.
(7) Income of a provident fund approved under the Provident Fund Act, 1923.
(8) Amount received from an approved scheme for voluntary retirement by the employee of
government, local authority, autonomous or semi-autonomous bodies and their units or
institutions.
(9) Interest of pensioners’ savings certificate where accumulated investment does not exceed
Tk. 5 lakh at the end of income year.

168 Business Planning: Taxation & Compliance ICAB 2024

 (10) Income of mutual fund, alternative investment fund, real estate investment fund and
exchange treaded fund approve by Bangladesh Security and Exchange Commission. C
(11) Income from house property of trust or other legal obligations (not applicable for private H
organization registered under the Bureau of NGO Affairs) formed for charitable or religious A
purpose if said income— P
(a) used in Bangladesh for charitable or religious purpose in the income year. T
E
(b) income accumulated and keep separated and informed DCT about the purpose and
duration of reserve not exceeding 10 years and invested in government securities, R
deposited in a Post Office Savings Bank account or any bank where government owns
51% or more shares.
13
(12) Contribution of religious organization, or charitable organization approved by the
Commissioner and expended for religious or charitable purpose, as well as contribution
received by person approved by the NGO Affairs Bureau.
(13) Service charge (includes interest or share of profit) from microcredit of an organization
registered with the Microcredit Regulatory Authority if the income is revolving only as
microcredit, organization shall not engage in any activity other than microcredit (applicable
from assessment year 2026-27).
(14) Reimbursement of expenses of an employee wholly and necessarily incurred in performance
of duties and it was convenient for the employer to make expenses through the employee.
(15) After tax income of the trust or funds received by the beneficiary of trust or member of funds.
(16) Sum received by a member of a Hindu undivided family where tax has been paid by the
family.
(17) Income earned abroad and brought through the official channel by a Bangladeshi citizen.
(18) Income from Wage earners development bond or US dollar premium and investment bond
or Euro premium and investment bond, or Pound Starling premium and investment bond.
(19) Income of an individual being an indigenous Hillman derived from solely the economic
activities in hill districts.
(20) Agricultural income up to Tk. 2 lakh for an individual assessee whose only source of income
is agriculture and received interest not exceeding BDT 20,000 in an income year.
(21) Income of following business of a person being resident or non-resident Bangladeshi
between July 2024 to June 2027 subject to 100% income, expenses and investment shall be
made through bank transfer—
(a) AI based solution development
(b) Block chain based solution development
(c) Robotic process outsourcing
(d) Software as a service
(e) Cyber security service
(f) Digital data analytics and data science
(g) Mobile application development service
(h) Software development and customization
(i) Software test lab service
(j) Web listing, website development and service
(k) IT assistance and software maintenance service
(l) Geographical information service
(m) Digital animation development
(n) Digital graphic design
(o) Digital data entry and processing
(p) E-learning platform and e-publications
(q) IT freelancing

ICAB 2024 Exemption and allowances (Tax holiday/other exemptions) 169

 (r) Call centre service
(s) Document conversion, imaging and digital archiving.
(22) Income from export of handicraft between July 2020 to June 2024.
(23) Tax paid by the government on behalf of petroleum exploration company under Profit
Sharing Contract.
(24) Income of Small and Medium Enterprise (SME) engaged in production of any goods having
turnover up to Tk. 50 lakh or Tk. 70 lakh where SME is owned by women.
(25) Income from an approved zero-coupon bond (not applicable for the assessee being a bank,
insurance and finance companies).
(26) Income, other than income from financial assets, of an MPO enlisted educational institute
runs the government curriculum.
(27) One-third of income from employment or Tk. 4 lakh 50 thousand, whichever is lower.
(28) Income, other than interest or dividend, of a public university.
(29) Honorarium or allowance from Bangladesh freedom fighter welfare trust, or any welfare
allowance received from the government.
(30) Any reward from the government.
(31) Income derived from the operation of elderly care home.
(32) Distributed taxed dividend to a company if the distributing company maintain separate
account for the taxed dividend.
(33) Business income of a Bangladeshi flag carrier ocean-going ship until June 2030 if received
in foreign currency and remitted upon complied with the rules.
(34) Donation from spouses, parents or children if shown in the return of donor and recipient.
However, condition to show in the return shall not be applicable if donation received from
outside country through banking channel.
(35) Capital gain by a natural person excluding sponsor, director shareholder or placement
holder, up to BDT 5m from transferring listed shares of company or funds or units.

13.3 Subtract from gross income: Sixth Schedule, Part 2

As per section 77 (2) and Sixth Schedule, Part 2, following income shall be deducted from the
total income, namely –

1. Assessee in any income year by bank transfer –

a. Any income donated to any fund established under or by the Prime Minister’s Education
Assistance Trust Act, 2012 subject to following maximum limit –
i 10% of the income of the company or Tk. 8 crores whichever is lower;
ii 10% of the come of the other than company or Tk. 1 crore whichever is lower.
b. Income donated to any girl’s school or college approved by the ministry of education;
c. Income donated to any technical or vocational training institute approved by the ministry
of education.
2. Income donated by the assessee in any income year through banking transfer to any national
level organization involved in research and development for agriculture, science,
technology and industrial development.
It should be noted that above exclusion is subject to following condition as provided by
section 77(2) of ITA, 2023,
(a) The donation is reflected in the return or particulars or documents annexed to the return;
(b) The total amount of the donation made under part 2 of Sixth Schedule does not exceed
10% of the total income disclosed before considering donation;
(c) Details of the source and amount of income shall be submitted with the return.

170 Business Planning: Taxation & Compliance ICAB 2024

13.4 General tax relief in respect of certain investment and expenditure: section 78
and Sixth schedule part 3 C
H
Subject to the provision of this Act and subject to the limits, conditions and qualifications set out A
in part 3 of the Sixth Schedule, any investment made or by the resident individual and P
nonresident Bangladeshi shall be eligible for rebate from tax on total income as per below – T
(a) 0.03 X A; or E
(b) 0.15 X B; or R
(c) Tk. 1,000,000.

Whichever is lower. 13

Where, A = Total income excluding tax exempted income, income subject to reduced tax rate
and income subject to minimum tax.

B = Total investment and expenditure of the assessee as per Part 3 of Sixth Schedule in any
income year.

The following items should be considered as investment allowance to enjoy tax rebate facility as
per Sixth Schedule (Part-3):

1. Life insurance premium [Para –1]:

Any sum paid in Bangladesh by an assessee to effect on insurance or a contract for deferred
annuity on the life of himself, spouse or minor child, provided that such payment shall not
exceed 10% of the sum assured (excluding bonus or other benefits).

Provided that not rebate under this para shall be allowed unless the premium or the life
insurance policy or contractual deferred annuity is paid in Bangladesh.

2. Life insurance premium paid by a Hindu Undivided Family [Para –2]:

Any sum paid in Bangladesh by a HUF to effect on insurance on the life of any male member
of the family or the wife of any such member.

Provided that not rebate under this para shall be allowed unless the premium or the life
insurance policy or contractual deferred annuity is paid in Bangladesh.

3. Deduction from the salary of Government employee for deferred annuity [Para –3]:
Any sum not exceeding one-fifth of the salary deducted from the salary payable by the
Government 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.

4. Contribution to Provident Fund [Para –4]:

Any contribution by an assessee to any provident fund to which the Provident Fund Act,
1925 applies.

5. Employer’s and Employee’s contribution to a Recognized Provident Fund [Para –5]:

Any sum paid to a recognized provident fund by the assessee and the employer, where the
assessee is a participant subject to the limits laid down in Part 3 of the Second Schedule.

ICAB 2024 Exemption and allowances (Tax holiday/other exemptions) 171

 6. Contribution to Superannuation Fund [Para –6]:
Any sum paid by the assessee as ordinary annual contribution to approved superannuation
fund in which assessee is a participant to the fund.

7. Investment in Savings Certificate etc. [Para –7]:

Any sum invested by an assessee other than a company in the following:
a. Any Government securities not exceeding Tk. 500,000;
b. Unit certificates and mutual fund, ETF or mutual scheme certificate issued by any
financial institution or ICB or asset management or fund management not exceeding Tk.
500,000;
c. Deposit in a deposit pension scheme or monthly savings scheme sponsored by any
scheduled bank or financial institution not exceeding 120,000;

8. Investment in listed securities [Para –8] :

Any sum invested by an assessee, invest, through of any securities listed with any stock
exchange.

9. Donation to a charitable hospital [Para –9]:

Any sum paid as donation to NBR approved charitable hospital established outside the city
corporation area, provided the donation is made after one year of establishment of the
hospital.

10. Donation to organizations set up for the welfare of disabled people [Para –10]:
Any sum paid as donation to an organization set up for the welfare of disabled people,
provided the donation is made after one year of establishment of the organization and is
approved by the Social Welfare Department and the NBR.

11. Donation to Govt. Zakat Fund [Para –11]:

Any sum paid by an assessee as Donation/Zakat to the Zakat Fund established by or under
the Zakat Fund Management Act, 2023.

12. Contribution to Benevolent Fund and Group Insurance Scheme [Para –12]:
Any sum paid by an assessee to make 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 NBR.

13. Contribution to philanthropic or educational institution [Para –13]:

Any sum paid by an assessee as donation to Philanthropic or Educational Institution
approved by the government for this purpose.

14. Donation to national level institution set up in memory of the liberation war [Para-14]:
Any sum paid by an assessee as donation to a national level institution set up in memory of
liberation war.

15. Donation to national level institution set up in memory of Father of the Nation [Para15]:
Any sum paid by an assessee as donation to a national level institution set up in memory of
Father of the nation.

172 Business Planning: Taxation & Compliance ICAB 2024

13.5 Tax Holiday
C
13.5.1 Income of approved tax holiday entity H
A
According to section 81 of ITA, 2023, P
T
1. Subject to the provisions of this Act, income under the head ‘Income from business’ earned E
by an approved tax holiday entity shall be fully or partially exempted under Part 4 of the R
Sixth Schedule and chapter 10 subject to limits, conditions and qualification for the
prescribed period.
2. Any tax exempted income shall not be included in the total income of the assesse, however, 13
shall be shown in the relevant part of the return.
3. An approved tax holiday entity shall be granted tax exemption under sub-section 1 of
section 81 subject to following conditions, namely –
(a) The entity is owned and operated by such person who – is a statutory body established
by or under law having its head office in Bangladesh, and is a company as defined in the
Companies Act, 1994 and having its registered office in Bangladesh and having paid-
up capital not less than Tk. 2,000,000.
(b) The entity is not formed by separating from any such business which is already existence
or by reorganization;
(c) Any factory, machinery, equipment or any other important immovable property if
previously not used by any entity in Bangladesh;
(d) Said entity – Obtained TIN, shall maintained books of accounts in accordance with the
provisions of this Act, and maintained books of accounts separately.
Explanation – for the purpose of this section, ‘approved tax holiday entity’ means an entity in
an income year from income is derived from business and which –
(a) Has been approved by the Board for partial or full tax exemption;
(b) Is allowed for such tax exemption or deduction in the relevant income year.

13.5.2 Approval of tax holiday entity by the board

According to section 82 of ITA, 2023,

1. A business entity shall submit an application in the manner prescribed by the Board within
the six months of commencement of its commercial activities for availing tax holiday benefit.
2. Within 60 days from the date of receipt of the application, the Board shall, by order in
written, give a decision on the application filed under section 82(1).
3. If the board fails to give a decision within the period mentioned above (i.e., 60 days from
application receipt), the application for tax holiday shall be deemed to have been granted
and the business entity shall be deemed to be a tax holiday entity until the Board gives a its
decision on this.
4. The board shall not cancel the application without giving reasonable opportunity of being
heard.
5. If any applicant is aggrieved by the decision of the Board, the said applicant may appeal to
the Board within 4 months of the receipt of the decision and the Board may reconsider the
previous order and issue an appropriate order.

ICAB 2024 Exemption and allowances (Tax holiday/other exemptions) 173

 6. Without prejudice to the provisions of 1 above, the Board may grant and review approvals
under this section or make rules on any matter as it thinks fit for the purpose of ensuring tax
compliance of tax holiday entities.

13.5.3 Transactions with associated entities

According to section 83 of ITA, 2023,

1. Where an approved tax holiday entity enters into a transaction with any of its associated
entity and if the DCT is satisfied that –
a. Transactions are not at open market price; and
b. The income of any associated entity in any income year is less than the actual income as
a result of such transaction.

In such case the income to which the associated entity is understated shall be treated as income
of the tax holiday entity and shall be classified under ‘income from other sources’ for the said
income year.

13.5.4 Computation of income of approved tax holiday entity

According to section 84 of ITA, 2023,

1. Income of an approved tax holiday entity shall be computed separately from any other
business;
2. Income of the approved tax holiday entity shall be computed in the same manner under the
heard ‘income from business’;
3. Only the normal depreciation as per Part 1 of the Third Schedule shall be allowed in
computing the income from business of an approved tax holiday entity;
4. The computed loss of an approved tax holiday entity for any income year shall not be set off
against the profit of any other entity or source/head of the assessee which is not an approved
tax holiday entity;
5. Tax holiday benefit shall not be applicable to the income arising from said entity as a result
of disallowance under section 55 and such income shall be taxed at the regular rate.

13.5.5 Cancellation of tax exemption

According to section 85 of ITA, 2023,

1. Where it appears from any proceedings taken under this Act that an approved tax holiday
entity has failed to comply with any of the conditions set out in this chapter, the DCT shall
not grant the exemption to the approved tax holiday entity and he can determine tax liability
for the said entity in the regular manner and rate in the said income year.
2. The tax holiday entity may submit a written application to the Board against the cancellation
order within one year from the order receipt date. The board may issue an appropriate
order.
3. Notwithstanding anything contained in this chapter, the Board may, in the public interest,
cancel wholly or suspend any exemption under this section by notification in the Official
Gazette.

174 Business Planning: Taxation & Compliance ICAB 2024

13.5.6 Types of business eligible for tax holiday.
C
As per par 4 of Sixth Schedule following undertakings are eligible for tax holiday under Industrial H
Undertakings: A
1. Active pharmaceuticals ingredient industry and radio pharmaceuticals industry; P
T
2. Agriculture machineries;
E
3. Automatic bricks; R
4. Automobile;
5. Barrier contraceptive and rubber latex;
13
6. Basic components of electronics (e.g. resistance, capacitor, transistor,
7. integrated circuit, multilayer PCB etc.);
8. Bi- cycle including parts thereof;
9. Bio-fertilizer;
10. Biotechnology based agro products;
11. Boiler including parts and equipment thereof;
12. Compressor including parts thereof;
13. Computer hardware;
14. Furniture;
15. Home appliances (blender, rice cooker, microwave oven, electric oven, washing machine,
induction cooker, water filter etc.);
16. Insecticide or pesticide;
17. Leather and leather goods;
18. LED TV
19. Locally produced fruits and vegetables processing;
20. Mobile phone
21. Petro-chemicals;
22. Pharmaceuticals;
23. Plastic recycling;
24. Textile machinery;
25. Tissue grafting;
26. Toy manufacturing;
27. Tyre manufacturing;
28. Electrical Transformer
29. Artificial fiber or manmade fiber manufacturing
30. Automobile parts and components manufacturing
31. Automation and Robotics design, manufacturing including parts and components
32. Artificial Intelligence based system design and/or manufacturing
33. Nanotechnology based products manufacturing
34. Aircraft heavy maintenance services including parts manufacturing,
35. Locally produced fruits and vegetables processing and preservation,

ICAB 2024 Exemption and allowances (Tax holiday/other exemptions) 175

 36. Tissue grafting, biotechnology and development of radioactive (diffusion) application
industry (i.e. improvement of polymer quality or degradation of polymers or preservation of
food or sterilization of medical devices)
37. Any other category of industries as the Govt. may notify in the official Gazette,

Note that approved tax holiday entity shall be located in Bangladesh and shall commence
commercial production between July 2020 and June 2025.

If any tax holiday entity is situated in any district (outside City Corporation area) other than
Dhaka, or Chittagong Division and Rangamati, Bandarban or Khagrachari District, then it shall
be exempted from tax for 10 years from the commencement of commercial production at the
rates mentioned below:

Year of commercial production Exempted income

First year 90%
Second year 90%
Third year 75%
Fourth year 75%
Fifth year 50%
Sixth year 50%
Seventh year 50%
Eighth year 25%
Ninth year 25%
Tenth year 25%

If the approved tax holiday entity is located in Dhaka or Chittagong division (outside the city
corporation area), it shall be eligible for tax exemption at the rate mentioned in the below table
for a period of 5 years from the month of commencement of commercial production, namely –

Year of commercial production Exempted income

First year 90%
Second year 80%
Third year 60%
Fourth year 40%
Fifth year 20%

Further, government has granted tax holidays for many industries and business via SRO to
promote foreign direct investment and ensure development of certain industries.

Self-assessment questions

1) What is the condition to be fulfilled to get permission for tax-holiday?

2) What is the limit for investment in mutual fund, unit fund and government securities for
investment tax credit?

176 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 14
Deduction/collection of
tax at source

Introduction

Examination context

Topic list

14.1 Person responsible for tax deduction at source

14.2 Time limit for payment of tax deducted at source
14.3 Manner of payment of tax deducted at source
14.4 Issuance of certificate for tax deducted at source
14.5 Rates of TDS at a glance
14.6 TDS as minimum tax u/s 163
14.7 Other issues relating to TDS
 Introduction

Learning objectives

 Recognize different classes of income from where tax is deducted or collected at source.
 Mention the time limit and manner of payment of tax deducted at source.
 Explain the consequence of non-deduction of tax at source where deduction is required by
law.
 Define the computation, estimation and payment procedures of TDS.
 Mention the income heads that come under final settlement.

Practical significance

There are two methods of collecting taxes, one is direct method and another is tax deducted at
source. The ordinary method of collection is direct collection of tax from the assessee. Deduction
of tax at source is provided for in certain specified cases. If default is made in the deduction of
taxes at source, the tax may be collected from the assessee directly, and further the person who
is liable to deduct but has not deducted the tax under this section, may be held personally liable
and treated as an assessee in default in respect of the tax.

This chapter presents areas of taxes deducted at source and related provisions as per income
tax Act. Section 163 and its application are included in details here. For computing taxable
income and tax liability this chapter is very important.

Stop and think

There are so many sources where tax is required to be deducted or collected at the time of
payment

Working context

In corporate sectors, normally there are many payments made every day where deductions of
tax at source are required by tax law. In some cases, the accountants are asking for advice on
how and when the deductions need to be done. Accountants can provide the service to their
clients on tax deduction at source so that the clients can avoid any penalty for non-compliance
of tax law in this regard.

Detailed knowledge about the payment of tax before assessment in compliance with tax law can
help accountants to support their clients significantly.

178 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Identify the classes of income from where tax is deducted or collected at source.
 Recognize the different amounts and rates of tax deducted at source.
 Identify the responsibility for deduction of tax at source.
 Define the time limit for payment of tax at source.
 Mention the manner of payment of tax deducted at source. C
 Explain the result of deduction or non-deduction of tax at source where deduction is H
required by law. A
 Identify the areas where tax deducted at source is considered as final payment of tax liability P
under section 163. T
E
Question practice
R
For question practice on these topics, go to the suggested answers covering this chapter.

Examiner's comments on how students should tackle questions 14

Candidates need to remember the different amount and rates of tax deducted at source while
preparing for exam. In practical problem at case study level, both tax deduction at source and
calculation of advance tax may be asked.

14 PAYMENT OF TAX BEFORE ASSESSMENT

Section overview

 There are two methods of collecting taxes, direct tax and tax deducted at source (TDS).
 There are many classes of income from where tax is deducted or collected at source.
 TDS shall be paid to the credit of the Government normally within 2 weeks from the end of
the month of deduction or collection except in the month of June and also in case of salary.
 Rate of TDS are varied.
 The deducted tax in some cases is treated as minimum tax.
 Tax deducting authority will be held liable for failing to deduct taxes and failing to deposit
the same with government.
 Credit of TDS.

14.1 Person responsible for tax deduction at source: Section 140

Tax to be deducted or collected at source under Part 7 of ITA, 2023 in respect of any income
shall be deducted in accordance with the provisions of the Act by the person responsible for
making payment which constitutes the income of the payee.

(a) “Person responsible for making payment” means—

ICAB 2024 Deduction/collection of tax at source 179

 (i) in the case of payments constituting income classifiable under head the ‘income from
employment’ not being payment made by the Government, the employer himself or, if
the employer is a local authority, company or institution, such authority, company or
institution, including the principal officer thereof.
(ii) in the case of payment constituting income classifiable under head ‘income from
financial property’ not being payment made by or on behalf of the Government, the
authority, company or other institution issuing the security, and
(iii) in the case of payment of any other sum which constitutes an income of the payee
chargeable to tax under the Act, the payer himself, or if the payer is a company or other
institution, such company or institution including the principal officer thereof.

(b) “Specific person” means—

(i) Company, firm, association of person, trust or fund.

(ii) Public-private partnership.
(iii) Foreign contractor, foreign enterprise, or entity registered outside Bangladesh.
(iv) Hospital, clinic, or diagnostic center.
(v) E-commerce platform having over Tk. 1 crore annual turnover.
(vi) Hotel, resort, motel, restaurant, convention center, community center, transport agency
having over Tk. 1 crore turnover.
(vii) Person other than farmer, engaged in tobacco leaf, cigarette, bidi, jorda, gul or other
tobacco product production and distribution.

14.2 Time limit for payment of tax deducted at source: Rule 9 of TDS Rules, 2024

Time of deduction or collection Date of payment to the credit of the government

(a) In the month of July to May Within 2 weeks from the end of the month
(b) On any day from 1 to 20 June Within 7 days after deduction
(c) On any day of June The next day of the deduction
(d) Last day of June Same day

14.3 Manner of payment of tax deducted at source: Rule 10 of TDS Rules, 2023

The person responsible for making deduction or collection of tax under Part 7 of the ITA, 2023
shall pay the amount of tax so deducted or collected to the credit of the Government within the
time specified in rule 9 by-
(a) A-Challan, or
(b) E-payment in the manner as specified by the Board.

14.4 Issuance of certificate of tax deducted or collected at source: Rule 11 of TDS

Rules, 2023

 Certificate for payment of Salary (excluding salary from the government) shall be provided
as per Schedule 2 of the rule.
 Certificate regarding deduction of tax under any Section (except Section 86) shall be
provided as per Schedule 3.
 Certificate for tax collection under Part VII shall be provided as per Schedule 4.
 A-Challan as proof of payment of tax shall be attached with the certificate.
 Certificate shall be issued within 2 weeks after the month of deduction or any suitable time
to settle the tax liability of the person from whom tax has been deducted.

180 Business Planning: Taxation & Compliance ICAB 2024

  Bill of entry, registration document, bank statement, payment receipt or information
regarding tax deduction or collection shall be treated as certificate, but not applicable for
deduction from salary.

14.5 Rates of TDS at a glance

Section Source of income Rates

86 Income from employment Average rate
87 Remuneration of Members of Parliament Average rate
88 Receipt from Worker profit participant fund 10%
89 Payment to contractor, supplier etc. Note-1
90 Payment for services Note-2
91 Payment for use of intangible property 10% - 12%
C
92 Advertisement (except media buying agency) 5%
H
93 Payment to actors, actresses, producer, etc. 10%
A
94 Commission, discount or fees, etc. 1.5% - 10%
P
95 Payment to travel agent 0.30%
T
96 Commission on Letter of Credit 5%
E
97 Deduction from money received as commission on letter of cred 1%-3%
R
98 Payment made by cellular Mobile phone operator 20%
99 Excess payment over premium for a life insurance policy 5%
100 Insurance commission 5%
14
101 Fees of surveyors of a general insurance company 15%
102 Interest on savings deposit and fixed deposit etc. 10% - 20%
103 Deleted -
104 Interest income of resident other than bank interest 10%
105 Interest on saving certificates 10%
106 Interest on securities 5%
107 Discount on the real value of Bangladesh Bank bills Maximum rate
108 International gateway service in respect of phone call 1.5% - 7.5%
109 Rental income 5%
110 Rent of convention hall, conference centre etc. 5%
111 Compensation against acquisition of property 3% - 6%
112 Export cash subsidy 10%
113 Deleted -
114 Purchases of electricity 6%
115 Payment to landlord by the real estate developer 15%
116 Commission or remuneration paid to foreign buyer’s agent 10%
117 Dividend income 10% - 15%
118 Income from lottery 20%
119 Deduction form income of non-resident Note-5
120 Collection of tax from importers TDS Rule 8
121 Export of manpower 10%
122 Commission of clearing & forwarding agents 10%
123 Collection of tax from exporter 1%
124 Payment from overseas for service, revenue sharing etc. 7.5% - 10%
125 Transfer of assets TDS Rule 6
126 Real estate or land developer TDS Rule 7

ICAB 2024 Deduction/collection of tax at source 181

 127 Commission on govt. stamp, court fee, cartridge paper etc. 10%
128 Lease property 4%
129 Cigarette manufacturer manually 10%
130 Bricks manufacturer Tk. 80,000–
220,000
131 Trade license and its renewal Tk. 500 – 3,000
132 Shipping business of resident 3% - 5%
133 Sale through public auction 1% - 10%
134 Transfer of share of a non-listed company by a resident 15%
135 Collection of tax from transfer of security 10%
136 Transfer of share by the shareholders of stock exchange 15%
137 Collection of tax from member of stock exchange 0.05%
138 Collection of tax from commercially playing motor vehicle Different rates
139 Inland ship operation Different rates

Note-1: Deduction from the payment to contractor, supplier etc.—section 89

(a) 10% for supply of tobacco related products including cigarette, bidi, jordha, tobacco leaf
and gul.
(b) 7% of base value for supply of service of manufacturing, process or conversion, building,
construction, engineering and similar works.
(c) In other cases, tax shall be deducted at the following rates:

Serial Particular Rate

1. For industrial undertakings producing MS billet and locally procured 0.5%
MS scraps
2. Petroleum oil and lubricant oil supplied by oil marketing companies 0.6%
3. Oil supplied by dealers or agents except patrol pump of oil 1%
marketing companies
4. Supply of paddy, rice, wheat, potato, fish, meat, onion, garlic, peas, 1%
chickpeas, lentils, ginger, turmeric, dried chilies, pulses, maize, flour,
coarse flour, salt, edible oil, sugar, black pepper, cinnamon,
cardamom, clove, date, cassia leaf, jute, cotton and yarn.
5. All kinds of fruits. 2%
6. Companies engaged in producing cement, iron, or iron products, 2%
ferro alloy products except MS Billets
7. Oil supply by companies engaged in oil refinery 2%
8. Companies engaged in gas distribution 2%
9. Companies engaged in gas transmission 3%
10. Supply of 33kv to 500kv Extra High Voltage Power Cable by local 3%
company having Vertical Continuous Vulcanization
11. Supply of books to a person except any government bodies or units 3%
12 Supply of recycled led 3%
13. Supply of raw materials to a the manufacturing industry 3%
13.. Supply of other goods not mentioned in serial 1 to 12, and supply of 5%
other goods and services under section 89

182 Business Planning: Taxation & Compliance ICAB 2024

  No deduction for supply of oil and gas by the petrol pump.
 Where any imported goods on which tax has been paid as per section 120 [Collection of tax
on account of import of goods] is supplied, tax at source shall be tax require to be deducted
under Section 89 as reduced by the tax already paid under section 120.
 Where any goods on which tax has been paid at source under Section 94 [Tax at source from
commission, discount, fees, etc.] is supplied, tax at source shall be tax require to be
deducted under Section 89 as reduced by the tax already paid under Section 94. However,
in case of goods supplied by any distributor under a contract as mentioned in Section 94,
tax require to be deducted under Section 89 [Deduction from contractor, supplier etc.]
referred above would be computed as {the selling price as per section 94} x5% x10%.
 In case, income of a payee is exempted or is subject to reduce rate of tax and if the payee
makes an application, the Board may issue a certificate for nil deduction or deduction at a
reduced rate.
C
Note-2: Payment for services—section 90
H
SL. Source of income Rates
A
P
1. Advisory or consultancy service 10%
T
2. Professional service, technical services fee, or technical assistance fee 10%
E
3. Catering, cleaning, collection and recovery, private security service,
R
manpower, creative media, event management, training, courier,
packing and similar service etc.
(a) On commission 10%
(b) On total bill amount 2% 14
4. Media buying agency service
(a) On commission or fees 10%
(b) On total bill amount 0.65%
5. Indenting commission 8%
6. Meeting fees, training fees, or honorarium 10%
7. Mobile network operators, technical support service providers, etc. 12%
8. Credit rating service 10%
9. Motor garage or workshop 8%
10. Private container port or dockyard service 8%
11. Shipping agency commission 8%
12. Stevedoring/berth operation commission/terminal or ship handling
operator 10%
(a) On commission amount 5%
(b) On total bill amount
13. (a) Transport, car rental, catering and repair and maintenance 5%
services,
(b) Sharing economic platform including ride sharing service, working
space service, housing service etc.
14. Wheeling charge for electricity transmission 3%
15. Internet services 10%
16. Agent, distributor, agency, or channel partner etc. of mobile financial 10%
services provider
17. Commission of freight forwarding agency 10%
18. On gross bill of freight forwarding with or without commission 2.5%
19. Other a service which is not subject to deduction of tax under any 10%
Section of the Act.

ICAB 2024 Deduction/collection of tax at source 183

  No deduction in case other services not mentioned in serial 1 to 18 provided by a bank,
insurance, finance company and mobile financial service provider.
 If the amount for services in serial 3, 4 and 12 shows both commission and fees and gross
bill, tax shall be higher of (i) tax calculated on commission or fees applying relevant rate, and
(ii) B x C x D {B=Gross bill, C=10% for serial 3, 2.5% for serial 4, and 5% for serial 12, D=rate
of tax applicable for commission}.
 No deduction or deduction at a lower rate shall be apply upon producing a certificate issued
by the Board for exemption in favour of a payee.

Note-3: Deduction form income of non-resident—section 119

Serial Description of payment Rate of tax

1. Advisory or consultancy service 20%
2. Pre-shipment inspection services 20%
3. Professional or technical services, technical knowhow or technical 20%
assistance
4. Architecture, interior design, landscape design, fashion design, 20%
process design
5. Certification, rating etc 20%
6. Charge or rent for satellite, airtime, or frequency, rent for channel 20%
broadcast
7. Legal services 20%
8. Management service including event management 20%
9. Commission 20%
10. Royalty, license fee or payments related to intangibles 20%
11. Interest 20%
12. Advertising broadcasting 20%
13. Advertisement making or digital marketing 15%
14. Air transport or water transport other than mentioned in Section 259 7.5%
and 260
15. Contractor or subcontractor or sub-sub-contractor in manufacturing, 7.5%
process and conversion, construction, engineering or similar works
16. Supplier 7.5%
17. Capital gain 15%
18. Insurance premium 10%
19. Rental of machinery, equipment etc. 15%
20. Dividends:
 Company, fund, and trust 20%
 Any other person 30%
21. Artist, singer, or player 30%
22. Salary or remuneration 30%
23. Exploration or drilling in petroleum operations 5.25%
24. Survey for coal, oil, or gas exploration 20%
25. Fees etc. of survey of general insurance company 5.25%
26. Any service for making connectivity between oil or gas field and its 5.25%
export point
27. Bandwidth payment 10%
27. Courier service 15%
28. Any other payment 20%

184 Business Planning: Taxation & Compliance ICAB 2024

  Where any capital gain arises from the transfer of any share of a company, the authority shall
not give effect of the transfer if tax on such capital gain has not been paid.
 Board may issue a certificate, within 30 days from the date of receipt of application
accompanied by all the documents, for not to deduct tax or deduct tax at lower rate per tax
treaties or any other reasons.
 No deduction shall be applied in the following cases:
- Payment to foreign country or foreign government agency.
- Subscription to any professional bodies.
- Expenses for liaison office.
- International marketing and product development expenses.
- Tuition fees.
- Any security deposits.

14.6 TDS as minimum tax: section 163 C

H
The following 37 heads of deduction shall be deemed to be the minimum tax u/s 163: A
P
Section Source of income T
88 Receipt from Worker profit participant fund E
89 Deduction of tax from the payment to contractors, suppliers etc R
90 Deduction from the payment in case of services
91 Payment for use of intangible property
92 Advertisement (except media buying agency) 14
94 Commission, discount or fees, etc.
95 Payment to travel agent
100 Insurance commission
101 Fees of surveyors of a general insurance company
102 Interest on savings deposit and fixed deposit etc.
105 Interest on saving certificates
106 Interest on securities
108 International gateway service in respect of phone call
110 Rent of convention hall, conference centre etc.
111 Compensation against acquisition of property
112 Deduction of tax from export cash subsidy
113 Deleted
114 Purchases of electricity
115 Payment to landlord by the real estate developer
116 Commission or remuneration paid to foreign buyer’s agent
117 Dividend income
118 Income from lottery
120 Collection of tax from importers
121 Export of manpower
122 Commission of clearing & forwarding agents
123 Collection of tax from exporter
124 Payment from overseas for service, revenue sharing etc.
125 Transfer of assets

ICAB 2024 Deduction/collection of tax at source 185

 126 Real estate or land developer
127 Commission on govt. stamp, court fee, cartridge paper etc.
128 Lease property
129 Cigarette manufacturer manually
132 Shipping business of resident
133 Sale through public auction
134 Transfer of share of a non-listed company by a resident
135 Collection of tax from transfer of security
136 Transfer of share by the shareholders of stock exchange
137 Collection of tax from member of stock exchange
138 Collection of tax from commercially playing motor vehicle
139 Inland ship operation

However, tax deducted from the following sources shall not be minimum tax:

 Under section 89 from a contractor or subcontractor of an oil company, an oil marketing

company and its dealer or agent excluding petrol pump station, company engaged in oil
refinery and any company engaged in gas transmission or distribution.
 Tax deducted with respect to import of good by an industrial undertakings as raw materials
under section 120 except by an industrial undertaking engaged in producing cement, iron
or iron product, ferro alloy products or perfumes, carbonated beverage, powder milk,
aluminium goods, ceramics goods, and toilet water shall not be minimum tax.

Income for which minimum tax is applicable shall be determined in regularly manner and tax
shall be computed by using applicable rate, if tax so calculated is higher than the minimum tax,
the higher amount shall be payable. However, income from below sources shall be final
settlement of taxes (SRO- 253/ August 23, 2023):

Serial Source of income Section Eligible person

1. Interest on fixed and savings 102 Person exempted from submission
deposits of return u/s 166(2)
2. Income from savings certificate 105 All-natural person
3. Export cash subsidy 112 All taxpayers

Minimum tax for an individual having gross receipt of Tk. 3 crore or more, or a firm or association
of person having gross receipts exceeding Tk. 50 lakh, or a company shall be as follows:

Serial Classes of assessee Rate of minimum tax

1. Manufacturer of cigarette, bidi, chewing tobacco, 3% of the gross receipts
smokeless tobacco, or any other tobacco products
2. Carbonated and sweetened beverage producers 3% of the gross receipts
3. Mobile phone operator 2% of the gross receipts
4. Natural person except manufacturer of cigarette, bidi, 0.25% of the gross receipt
chewing tobacco, smokeless tobacco, or any other
tobacco products
4. Any other cases 0.60% of the gross receipts
Rate of minimum tax shall be 0.10% for an industrial undertaking engaged in manufacturing of
goods for the first three years since commencement of production. Here, gross receipt means
all receipts derived from any heads of income.

186 Business Planning: Taxation & Compliance ICAB 2024

 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.

14.7 Other issues relating to TDS

C
Consequence of failure to deduct, collect, etc.—section 143 H
A
A person who fails to deduct or collect tax at source or deducts at a lesser rate or amount, or
P
fails to pay the deducted tax or pays less than the tax deducted to the government, or fails to
T
comply with any other provision of this Part shall be treated as a taxpayer in default, and shall be
liable to pay, with other consequences: E
R
− Amount of tax that has not been deducted or collected.
− Amount requires to be deducted as reduced by the amount actually deducted, or
− Amount collected but not paid to the government, and 14
− A penalty amount not exceeding BDT 1m for other non-compliances.

In addition to the above amount, person shall be liable to pay an additional amount at 2% per
month on amount (except the penalty amount) calculated for the period from the date of
deduction or collection to the date of payment; however, period shall not exceed 24 months.

Deputy Commissioner of Taxes shall take necessary action for realization of payment after giving
reasonable opportunity of being heard;

Person responsible for making payment or approving the payment or granting approval,
clearance, registration permits, as the case may be, shall be jointly or severally liable to pay taxes,
penalty or additional amount.

No realization of amount shall be made if meanwhile amount has been paid by the person from
whom deduction was due.

Certificate of tax deduction etc., section 145

Every person who deducts or collects tax as required by the provisions of Part 7 of ITA, 2023
shall, at the time of making any payment in relation to which tax has been deducted or collected,
furnish to the person to or from whom such payment or collection has been made, a certificate
to the effect that the tax has been deducted or collected specifying therein-

(a) The name and TIN of the person from whom tax has been deducted or collected.
(b) the amount deducted or collected.
(c) section reference under which tax has been deducted.
(d) the particulars of the payment, and
(e) such other particulars as may be prescribed.

ICAB 2024 Deduction/collection of tax at source 187

 Payment to Government of tax deducted: section 146

All sums deducted or collected as tax under the provisions of Part 7 shall be paid within the
prescribed time by the person making the deduction or collection to the credit of the
Government or as the Board may direct [Please see Rule of TDS Rules, 2024].

Save as provided in the Act, no person shall charge, withhold, deduct, or collect any sum, directly
or indirectly as tax and where any sum is so charged withhold, deducted or collected, it shall be
paid in the manner provided.

Credit of tax deducted or collected at source: section 150

Any deduction or collection of tax made and paid to the account of the Government in
accordance with the provisions of this Part shall be treated as a payment of tax of the person
from whose income the deduction or collection was made.

Credit shall be given in determining tax liability in an income year in which tax has been
deducted and collected. Where tax is paid at source by a person on behalf of another person,
the credit referred above shall be given in determining the tax liability of that other person.

Payment of tax where no deduction is made: section 151

The tax under the Act shall be payable by the assessee direct-

(a) in any case where tax has not been deducted or collected as required by, and in accordance
with, the provisions of this Part;
(b) in any case where the amount deducted or collected is found, after regular assessment, to
be less than the tax due from the assessee to the extent of deficiency; and
(c) in the case of income in respect to which no provision has been made for deduction or
collection of tax under the provisions of this Part.

Self-assessment questions:

(a) Discuss the various types of income from which tax is required to be deducted or collected
at source under the provisions of the Income Tax Act, 2023.

(b) State the provisions regarding information to be furnished to the Tax Authorities in
connection with payment of salary, interest, dividend, collection of tax from property,
payment to nonresident, and other sources under the provisions of the Income Tax Act,
2023.

(c) Mention the application for final payment of tax liability under section 163.

(d) What are the consequences of failure of deducting taxes in time at prescribed rates or failure
of depositing deducted taxes within time?

188 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 15
Advance payment of tax

Introduction
Examination context
Topic list

15.1 Requirement to pay advance tax

15.2 Computation of advance tax
15.3 Payment of advance tax by new taxpayers
15.4 Failure to pay installments of advance tax
15.5 Credit of advance tax
15.6 Levy of interest for failure to pay advance tax
15.7 Interest payable by Government on excess payment of
advance tax
15.8 Interest payable by the assessee on deficiency in
payment of advance tax

Worked Examples
 Introduction

Learning objectives

 Recognize different classes of assesses required to pay advance tax.

 Mention the time limit and manner of payment of advance tax.
 Explain the basis and methods of computing advance tax.
 Define the consequences of non-payment or insufficient payment of advance tax.
 Mention the situation when government will pay simple interest @ 10% to assessee.

Practical significance

Depending on assessed or provisionally assessed income, an assessee may require to pay

advance tax. In some cases, the new assessee also requires to pay advance tax. The calculation
of amount, rate, estimation and instalment of advance tax are guided by the Act. The assessee
shall get the credit of advance tax. In case of excess or deficit payment of advance tax an
assessee may receive or pay the interest from or to the Government. Tax paid in advance shall
be adjusted at the time of tax payment on the basis of the return.

Payment of advance tax is important as failure of doing so will make the assessee being ‘assessee
in default’. Advance tax is a requirement and it reduces tax burden at the end of the year. Thus,
it is helpful to the assessee as a method of tax planning. Professional accountants are required
to help their clients in that regard.

Stop and think

Advance tax is required to pay on total income excluding income from agriculture and capital
gain. Both old and new taxpayers are required to pay advance tax if they fulfil the threshold limit
set by tax law. Do you think how advance payment of tax is made?

Working context

In corporate sectors, advance payment of taxes is very common as in many cases income
exceeded the threshold limit of Tk. 600,000. In some cases, the accountants are asking for advice
on how and when the advance taxes should be paid. The service for estimation and calculation
of advance tax is required by some assessee. Chartered Accountants can provide the service to
their clients relating to payment of advance tax so that the clients can avoid any penalty for non-
compliance of tax law in this regard.

Detailed knowledge about the payment of advance tax in compliance with tax law can help
accountants to support their clients significantly.

Syllabus links

You will also meet this area of taxation at advance stage.

190 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Define the requirement of advance payment of tax.

 Demonstrate how the computation, estimation and payment procedures of advance tax are
made.
 Describe the consequences of payment or not payment of advance tax.
 Identify different classes of assesses required to pay advance tax.
 Mention the time and installments of payment of advance tax.
 Illustrate the application of 75% test to compute simple interest in case of deficit.

Question practice

For question practice on these topics, go to the suggested answers covering this chapter.

Examiner's comments on how students should tackle questions

Candidates need to remember the methods of computing advance tax, basis of advance tax,
75% test, computation of simple interest @ 10% on deficit amount of tax and other complexities.
In practical problem at case study level calculation of advance tax may be asked for with different
dates when instalment falls due. C
H
15 ADVANCE PAYMENT OF TAX A
P
Section overview T
 An assessee, both old and new, may require to pay advance tax. E
 Advance taxes are paid on income excluding income from agriculture upto 8 lakhs, capital R
gain and one-time income.
 The assessee shall get the credit for advance tax.
 If the amount of advance tax paid along with TDS if less than 75% of due tax, assessee is 15
required to pay simple interest @10% on such deficit.
 Government will also pay simple interest @10% if advance tax for any reason exceeds due tax.
 If the assessee fails to pay advance tax, he will be the assessee in default.

15.1 Requirement to pay advance payment of tax: Section 154

Subject to the provisions of this section, if the total income of a person in the last assessed
income year exceeds BDT 600,000, advance tax on income shall be paid by the taxpayer in every
current financial year, hereinafter referred to as 'advance tax'.

Nothing in section 154(1) shall apply in the following cases:

(a) Taxpayers earns not more than Tk. 800,000 from cultivation of land only;
(b) Income classifiable under the heads ‘capital gains’ and ‘one-time income which is not
expected to be earned in the current financial year’.

ICAB 2024 Advance payment of tax 191

 15.2 Computation of advance tax: Section 155

The amount of advance tax payable by an assessee in a financial year shall be the amount equal
to the tax 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 tax required to be deducted or
collected at source in accordance with the preceding provisions of Part 7.

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 upon
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 with DCT and make necessary
adjustment of the advance tax payment based on estimates.

15.3 Payment of advance tax by new taxpayers: Section 156

If the income of an assessee who has not assessed previously, exceeds Tk. 600,000 in the income
year immediately following the assessment year, he shall before the 15th of June of every
financial year submit an estimated total income and advance tax payable to the DCT, and pay
instalments as per manner prescribed in section 155(2).

15.4 Failure to pay installments of advance tax: Section 157

Where, an assessee who is required to pay advance tax fails to pay any instalment of such tax, 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 instalment.

15.5 Credit of advance tax: Section 158

Any sum, other than a penalty or interest, paid by or recovered from an assessee as advance tax,
shall be treated as a payment of tax in respect of the income of the period which would be the
income year for an assessment for the year next following the year in which it was payable and
shall be given credit for in the assessment of tax payable by the assessee.

15.6 Levy of interest for failure to pay advance tax: Section 160

Where, in respect of an assessee who is required to pay advance tax, it is found in the course of
regular assessment that advance tax has not been paid in accordance with the provisions of this
Part, there shall be added, without prejudice to the consequences of the assessee being in
default under section 157, to the tax as determined on the basis of such assessment, simple
interest thereon calculated at the rate and for the period specified in section 162.

15.7 Interest payable by Government on excess payment of advance tax: Section

161

The Government shall pay simple interest at 10% per annum on the amount by which the
aggregate sum of advance tax paid during a financial year exceeds the amount of tax payable
by him as determined on regular assessment.

192 Business Planning: Taxation & Compliance ICAB 2024

 The period for which interest shall be the first day of July 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
first day of July, whichever is earlier.

15.8 Interest payable by the assessee on deficiency in payment of advance tax: Sec
162

Where, in any financial year, an assessee has paid advance tax on the basis of his own estimate
and the advance tax so paid together with the tax deducted at source, if any, under this Part is
less than 75%, of the amount of tax payable by him as determined on regular assessment, the
assessee shall pay, in addition to the balance of tax payable by him, simple interest @ 10% per
annum on the amount by which 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.

The period to compute interest shall be the period from the first day of July of the assessment
year to the date of regular assessment or a period of two years from the said first day of July of
the assessment year whichever is shorter.

Notwithstanding anything contained in sections 162(1) and (2) where-

(a) where tax is paid under section 173, or

(b) provisional assessment has been made under section 185 but regular assessment has not
been made, the simple interest shall be calculated in accordance with the following
provisions-

i. up to the date on which tax under-section 173 or provisionally assessed, was paid; C
ii. thereafter, such simple interest shall be calculated on the amount by which the tax so H
paid falls short of the said assessed tax. A
P
Where, as a result of appeal, revision or reference, the amount on which interest was payable
T
under section 162(1) has been reduced, the amount of interest payable shall be reduced
E
accordingly and the excess interest paid, if any, shall be refunded together with the amount of
R
tax that is refundable.

Illustration 1
15
For the assessment year 2024-25, an assessee has latest assessed income of Tk. 1,000,000. But
he wants to pay advance tax for the year on the basis of his own estimate that amounts to Tk.
800,000. Regular tax rate is 27.5%. Regular assessment for the assessment year 2024-25 was
completed on February 28, 2024 resulting Tk. 1,200,000 profit including Tk. 80,000 from capital
gain and Tk. 220,000 from agricultural income.

Calculate the amount of excess or shortfall in payment of advance tax and explain the
consequences for the same.

Income eligible to apply advance tax as per regular assessment is Tk. 900,000 (Tk. 1,200,000 –
Tk. 80,000 – Tk. 220,000), excluding capital gain and agricultural income.

Tax liability as per regular assessment (27.5% of Taka 900,000) = Tk. 247,500
Advance tax paid (27.5% of Taka 800,000) = Tk. 220,000
Shortfall Tk. 27,500

ICAB 2024 Advance payment of tax 193

 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 taka 247,500) Tk. 185,625

Advance tax paid actually Tk. 247,500

Shortfall in case of 75% test- nil

Consequence: In this case, the assessee is required to pay the shortfall of Tk. 27,500 only. There
is no question of charging simple interest as 75% is covered.

Illustration 2

ABC Ltd., a newly incorporated manufacturing company in Bangladesh, estimates its first taxable
income for the fiscal year 2024-2025 based on the following details:

• Sales Revenue from operations: 15,000,000

• Rental Income from property: 500,000
• Interest Income from bank deposits: 300,000
• Allowable expenses (including depreciation, salaries, utilities, etc.): 5,000,000

Calculation:

Taxable Income: 10,800,000

Annual Tax Liability @ 27.5%: 2,970,000
Quarterly Advance Tax: 742,500

194 Business Planning: Taxation & Compliance ICAB 2024

 Advance tax Payable

By

New tax payer Old tax payer

If the latest
If the present assessed income
income likely to exceeds Tk.
exceed Tk. 600,000
600,000

Yes No Yes No

Advance tax No advance Advance tax No advance

payable Tax Payable payable Tax Payable

Does advance Advance tax = Tax paid on the basis of last

tax paid plus
assessed income – TDS, if any
TDS >75% of
tax determined? C
H
Does advance A
Yes No
tax paid plus TDS P
>75% of tax T
No simple interest, simply the determined? E
unpaid amount of tax will be paid R
Yes No

Assessee will pay the unpaid amount 15

of tax plus simple interest @ 10% if No penalty, simply the balance of
such amount falls short than 75% of tax will be paid
assessed tax
Assessee will pay the unpaid amount of
tax plus simple interest @ 10% if such
amount falls short than 75% of assessed
tax

Worked examples and solutions

Worked example 1

DCT did the assessment for an individual assessee for the assessment year 2024-25 computing
total income of Tk. 20,50,000. Assessee paid AIT Tk. 1,00,000. Last assessed income of the
assessee for the assessment year 2023-24 was Tk. 20,00,000. Compute remaining tax to be paid
by the assessee along with simple interest for short-payment of advance tax.

ICAB 2024 Advance payment of tax 195

 Solution 1:

Tax and simple interest calculation:

On Tk. 3,50,000 --------------------- nil
On next Tk. 1,00,000 ----------------- @5% ----------- 5,000
On next Tk. 4,00,000 ----------------- @10% --------- 30,000
On next Tk. 5,00,000 ----------------- @15% --------- 75,000
On next Tk. 5,00,000 ----------------- @20% --------- 100,000
On balance Tk. 1,50,000 ------------ @25% ---------- 37,500
Total tax = Tk. 2,47,500

Calculation of simple interest:

75% of Tk. 2,47,500 comes at Tk. 1,85,625
Less: AIT paid Tk. 1,00,000
Shortfall to qualify 75% = Tk. 85,625
Simple interest @10% = Tk. 8,563 [considering 1 year]

Remaining tax to be paid Tk. (247,500 – 100,000) = 147,500 + Simple interest Tk. 8,563 =Total
Tk. 156,063.

Worked example 2

Mr. Taif, a resident of Bangladesh, estimates his annual taxable income for the fiscal year 2024-
2025 to be Tk. 18,00,000. Calculate the quarterly advance tax Mr. Taif needs to pay.

Solution:

Total annual tax liability = 2,10,000

Quarterly advance tax = 2,10,000 / 4 = 52,500

Conclusion: Therefore, Mr. Taif needs to pay 52,500 as quarterly advance tax based on his
estimated annual taxable income of 18,00,000.

Self-assessment question

1. Discuss briefly the provisions of the Income Tax Act, 2023 with regard to the following:
(a) The assessee who are required to pay advance tax and the nature of incomes which are
to be left out of consideration for this purpose;
(b) The basis on which advance payments of tax should be calculated for old assessee and
new assessee, and the due dates of payment thereof;
(c) The interest payable by Government on excess payment and interest chargeable to
assessee on shortfall, in respect of advance payment of tax.

2. In what situation, government will pay interest to assessee?

ABC & Co Ltd. calculated advance tax for the income year 2023-24 as per the latest assessed
income of taka 1,000,000. Regular assessment for the assessment year 2022-23 was completed
on June 30, 2023 and profit assessed amounts to taka 700,000. Applicable tax rate is 27.5%.
Calculate simple interest payable by the government (if any) on excess payment of advance tax.

196 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 16
Return of income

Introduction

Examination context

Topic list

16.1 Requirement to file return of income

16.2 General rules for filing of return
16.3 Signature and verification of return
16.4 Due date of submission of return of income
16.5 Obligation to file return under self-assessment mode
16.6 Regarding payment of income tax and surcharge on or before
the date of filing return
16.7 Computation of tax in case of filing of return after tax day
16.8 Filing of assets and liabilities statement
16.9 Filing of life style statement
16.10 Return of withholding tax
16.11 Concurrent jurisdiction
16.12 Notice for filing return
16.13 Filing of revised return in respect of normal return
16.14 Production of accounts and documents
16.15 Production of other information
16.16 Return Form
 Introduction

Learning objectives

 Explain the requirement to file return of income.

 State the procedure of filing the return.
 Identify the forms and documents to be submitted with the return of income.
 Mention the information required to be provided with return.
 Prescribe different return forms.

Practical significance

Every person shall file or caused to be filed a return of his income or the income of any other
person in respect of which he is assessable to tax. There are some rules and guidelines for
submission of return. The total procedure covering the time limitation for submitting the return,
documents and information to be provided with the return of income and duly filled 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.

Learning of income tax is finally reflected in submitting the form of return where income from
different heads is reported and net tax liability is computed. This is the reporting of assesses to
the income tax authority disclosing relevant information.

Stop and think

Do you realize that submission of return is an obligatory responsibility for every assessee by any
means? Do you know that the production of supporting accounts, forms and documents and
timely submission of return with authenticated declaration about the true information are very
significant?

Working context

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.

Detailed understanding about the rules and procedures for filing return give the opportunity to
the accountants in practice to help their as tax advisers.

Syllabus links

The topics covered in this chapter are very important for students, accountants, tax advisers and
even for the assessee at large for compliance with the tax rules and procedures regarding
submission of return.

198 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, students may be required to:

 Define the requirement to file return of income.

 Mention the due date of submission of return.
 Identify the forms, documents and information to be submitted with return.
 Define the term of IT 10B and IT 10BB in case of filing return.

Question practice

For question practice on these topics, go to the suggested answers covering this chapter.

Examiner's comments on how students should tackle questions

Students have historically prepared well for this area of the syllabus.

16 RETURN AND STATEMENT

Section overview

 An assessee shall file or cause to be filed a return of income in the prescribed form.
 The return of income shall be signed and verified.
 Return shall be submitted within Tax Day.
 The DCT can serve notice u/s 172/212 for filing return if not submitted within Tax Day.
 The return for individual assessee shall be accompanied by IT-10B and IT-10BB.
 Form of return for individual assessee and company is different. Moreover, different return
form is applicable for different types of assessee. A separate form for spot assessment also
available.
 Tax Day is different for company and other than company.
C
H
16.1 Requirement to file return of income: Section 166 A
P
(1) Every person shall file a return with the DCT for the relevant income year, if- T
E
(a) if his total income during the income year exceeded the maximum amount which is not
R
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; 16
(c) if the person is a company, shareholder director or a shareholder employee of a
company, a firm, a partner of a firm, AOP, Non-resident company having PE in
Bangladesh, NGO, MCO, Co-operative society an employee holding the position of

ICAB 2024 Return of income 199

 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, not being an institution established solely for charitable purpose, has an
income during the relevant income year which is subject to tax exemption or lower tax
rate under Chapter 1 of Part 6;

(e) any person registrable as a taxpayer under section 261;

(f) 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
curriculum, 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, Government Provident Fund and
Government Pension Fund, any non-resident natural person who has no fixed base in
Bangladesh and persons exempted from filing returns by the Board, by notification in the Official
Gazette. [Section 166 (2)].

16.2 General rules for filing of return: Section 169 (1-4)

The return shall be furnished in the prescribed form setting forth therein such particulars and
information including the prescribed schedules, statements, accounts, appendices or
documents.

(1) The following documents shall be attached with the return of the company or any person
deriving income from execution of long-term contracts, namely:

(i) audited financial statements;

(ii) criteria prescribed by the Board, time to time, the proof of definite standard; and
(iii) a separate calculation sheet explaining the difference between the profit and loss shown
in the financial statements and the income shown in the return.

(2) In the case of any such entity having international transactions in any income year, a
statement relating to international transactions under section 238 shall be filed with the
return.

(3) 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.

16.3 Signature and verification of return: Section 169 (5)

The return of income shall be signed and verified-

(i) in the case of a natural individual taxpayer, by the individual himself; where the individual is
absent from Bangladesh, by the individual concerned or by some person duly authorized
by him in this behalf; and when the individual is mentally incapacitated from attending to his
affairs, by his guardian or by any other person competent to act on his behalf;

200 Business Planning: Taxation & Compliance ICAB 2024

 (ii) in the case of Hindu undivided family, by the Karta, and, where the Karta is absent from
Bangladesh or is mentally incapacitated from attending to his affairs by any other adult
member of such family;
(iii) in the case of a company or local authority, by the principal officer thereof;
(iv) in the case of a firm, by any partner thereof, not being a minor;
(v) in the case of any other association, by any member of the association or the principal officer
thereof; and
(vi) in the case of any other person, by that person or by some person competent to act on his
behalf.

16.4 Due date of submission of return of income: Section 171

Every taxpayer shall file their income return on or before the tax day, as specified in the following
table.:

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

A company which is a subsidiary or holding company, branch, Within 15th of the 7th month
representative or liaison office of a parent company from the end of the income
incorporated outside Bangladesh if such company requires to year
follow a different financial year for the purpose of consolidation
of its accounts with the parent company*
All other company* 15th January
Other than company* 30th November
Individual taxpayer never filed return previously 30th June following the end
of the income year
Individual taxpayer residing outside Bangladesh for higher Within 90th day from the
education or on deputation or employment under lien or date of his return of
residing outside Bangladesh with a valid visa and permit for the Bangladesh
purpose of earning money

* The next working day following the Tax Day, if the day is a public holiday. [Section 2(23)]
- In case of submission of return on or before Tax Day, the return shall be submitted after
payment of income tax as per section 173.
- In case of submission of return after Tax Day, the return shall be submitted after payment of
income tax as per section 174. C
H
A
16.5 Obligation to file return under self-assessment mode: Section 170 P
T
All persons who are legally required to file a return under Section 166 shall file return by self- E
assessment method as specified in Section 180. R

16.6 Regarding payment of income tax and surcharge on or before the date of filing
return: Sec 173 16

(1) Every person who is required to file a return under section 166, 172, 175, 191, 193 or 212
shall pay the tax payable on or before the date of filing the return.

ICAB 2024 Return of income 201

 (2) The tax payable shall be calculated as A−B, where:

A = On the basis of return or the provisions of sub-section (5) of section 163 tax payable by
the taxpayer, whichever is higher;
B = Tax at source or advance tax as per the provisions of Part 7.

(3) The amount paid under sub-section (1) shall be deemed to have been paid as tax payable
by the taxpayer after assessment of regular tax.

(4) If any person, without reasonable cause, fails to pay the tax payable under sub-section (1),
he shall be deemed to be an assessee in default.

16.7 Computation of tax in case of filing of return after Tax Day: Section 174

If any taxpayer fails to file the return within the Tax Day under section 166, the taxpayer shall,
without prejudice to the liability arising under other provisions of this Act, be liable to pay tax in
following manner:

A = [B + (B – C) x D x 2%], where –

A = Total amount of tax payable.

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

C = Aggregate of advance tax and tax at source paid by the taxpayer in the said income year.

D = Number of months determined as under, namely –

i. number of months after the Tax Day has passed which maximum 24 months; and
ii. any fraction of the month shall also be counted as 1 month.

16.8 Filing of assets and liabilities statement: Section 167

(1) Subject to other provisions of this section, every natural individual taxpayer shall
compulsorily file statement of assets and liabilities, if such person -

a) owner of total assets of more than Tk. 50 (fifty) lakh as on the last date of the income
year; or
b) own a motor vehicle at any time during the income year; or
c) has made an investment in a house property or an apartment in the city corporation
area; or
d) owns any asset abroad at any time during the income year; or
e) a shareholder becomes a director of a company:

Provided that, all public servants shall compulsorily file the statement of assets and
liabilities.

202 Business Planning: Taxation & Compliance ICAB 2024

 (2) Every resident Bangladeshi natural individual taxpayer shall file in his return all assets and
liabilities situated in Bangladesh and outside Bangladesh.

(3) Every non-resident Bangladeshi natural individual taxpayer shall file in his return all assets
and liabilities situated in Bangladesh.

(4) Every such natural individual taxpayer who is not a Bangladeshi shall file in his return all
assets and liabilities situated in Bangladesh.

(5) Even if the filing of a statement of assets and liabilities under sub-section (1) is not mandatory
for an individual taxpayer, he may voluntarily file a statement of assets and liabilities.

(6) Assets and liabilities statement of an individual taxpayer includes assets and liability of
spouse or minor children if they do not have separate TIN.

(7) The DCT may, by notice in writing, require any person to furnish a statement of asset and
liability in any income year, if -

(a) the said person did not file the statement of assets and liabilities in the relevant income
year; or
(b) assets and liability statement appear to be required for determining the tax liability of
the said taxpayer for the relevant income year.

16.9 Filing of life style statement: Section 168

(1) Every natural individual taxpayer shall compulsorily file life style statement if such person -

(a) the income of the said person exceeds BDT 5 (five) lakh in the relevant income year;
(b) the person owns a motor vehicle at any time during the relevant income year
(c) the person derives any income from the business;
(d) the person becomes a shareholder director of a company; or
(e) the person invests in house property or apartment within the city corporation area in the
relevant income year.

(2) The DCT may, by notice in writing, require any person to furnish a statement of life style in
any income year, if -

(a) the said person did not file the statement of life style in the relevant income year; or
(b) life style statement appears to be required for determining the tax liability of the said C
taxpayer for the relevant income year. H
A
16.10 Return of withholding tax: Section 177 + Section 186 P
T
(1) The following persons shall file a return of tax deducted or collected under the provisions of E
part 7 in such form as may be prescribed by the Board: R

(a) 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 16
secondary or higher secondary school, or any educational institution subject to a
monthly payment order (MPO);

(b) firm; (c) AOP; (d) private hospitals; (e) clinic (f) diagnostic center.

ICAB 2024 Return of income 203

 (2) Return under sub-section (1) -
(a) shall submitted under the concern jurisdiction of the DCT
(b) the relevant details and information and schedules, statements, accounts, appendices
or documents shall be submitted in the prescribed form;
(c) signed and executed to be done in the manner described in sub-section (5) of section
169;

(3) The return under sub-section (1) shall be filed at the following times, namely -

(a) the applicable return for the preceding month shall be filed by the 25th day of every
month; and
(b) the next working day where the 25th day of any month is a weekly or public holiday;

(4) [Time extension provision has been removed by the Finance Act, 2024.]

(5) The Board may, by notification in the Official Gazette, prescribe the area, form and manner
of filing returns in electronic readable or computer readable medium.

The DCT may select a number of withholding tax returns with the approval of the Commissioner
of taxes for audit and may take action under Sections 143, 144 and 266. 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. [Section 186]

16.11 Concurrent jurisdiction: Section 178

The Board may, by general or a special order in writing, direct that in respect of all or any
proceedings relating to receiving of return or revised return and issuance of acknowledgement
thereof, the powers and functions of the DCT shall be concurrently exercised by such other
authority as may be specified by the Board.

16.12 Notice for filing return: Section 172

The DCT may, at any time after expiry of the date specified in section 171, direct any person, by
a notice in writing, to file a return of his income, if -

(a) the person is required to file a return under section 166; or

(b) the total income of such person is chargeable to tax in the relevant income year.

Subject to sub-section 1, 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.

16.13 Special provisions relating to normal returns and revised returns: Section 175

(1) Subject to the provisions of sections 182 and 212, the following returns shall be deemed to
be normal returns, namely -

(a) amended return filed under sub-section (10) of section 182;

(b) returns filed in pursuance of the issue of notice under sub-section (3) of section 212.

(2) If an amended return is filed under any provision of this Act by the tax day, tax shall be paid
in accordance with section 173.

204 Business Planning: Taxation & Compliance ICAB 2024

 (3) If an amended return is filed under any provision of this Act after the tax day, no such
exemption shall be claimed in the amended return which was not claimed in the original
return and no fresh exemption shall be claimed, it will be canceled and taxed at regular rate.

(4) Return or revised return shall not be filed during assessment of tax on appeal or order of
Tribunal. Provided that, in cases where the taxpayer has not filed any return, the return shall
be filed on appeal or on the basis of the order passed by the Tribunal, as the case may be.

16.14 Production of accounts and documents: Section 179

(1) The DCT may, by notice in writing, require an assessee who has filed a return under section
166, 175 or 176, or to whom a notice has been issued, the return of any such taxpayer as
may be considered necessary for the purpose of audit proceedings or assessment of tax,
may cause to produce such record, books, accounts, statements and documents,
information or electronic records, not being earlier than 3 years prior to the income year.

(2) DCT may issue notice for production of any record, statement, account, document,
information or electronic record or any part thereof by electronic means.

(3) The account, statement, document, information or electronic record should be submitted
before the specified date mentioned in the notice.

16.15 Production of other information as per different sections at the time of

submission of return or in other circumstances

Monthly withholding tax return Within 25th day of next month

Advance income tax 15th September, December, March & June
Corporate tax return 15th day of the 7th month following the end of the income
year, or the 15th day of September following the end of
income year where the said 15th day falls before the 15th
day of September
Statement of international Submit with corporate tax return
transaction
Conditions:
• Information regarding salary to be attached with the WHT return in September.
• Information regarding submitting tax return by employees to be attached with the return in
April. C
H
16.16 Return Form A
P
IT-11GA 2023 — For individual person T
IT-11GHA 2023 — For company taxpayer E
IT-11CHA 2023 — For taxpayers other than individual and company
R
IT-11GAGA — For spot assessment
IT-10B—Statement of assets, liabilities and expenditure
IT-10BB—Statement of lifestyle
16
"Tax returns can be filed online using https://etaxnbr.gov.bd."

ICAB 2024 Return of income 205

206 Business Planning: Taxation & Compliance ICAB 2024
 Chapter 17
Assessment

Introduction
Examination context
Topic list

17.1 Introduction to assessment

17.2 Provisional assessment u/s 185
17.3 Assessment on the basis of correct return u/s 183
17.4 Self-assessment u/s 180
17.5 Return process u/s 181
17.6 Consequences of filing of incomplete return u/s 176
17.7 Audit u/s 182
17.8 Minimum tax on income of certain person u/s 163
17.9 Minimum tax on gross receipts u/s 163
17.10 Spot assessment u/s 195
17.11 Best judgment assessment u/s 184
17.12 Various specialized assessments
17.13 Limitation for assessment u/s 197
17.14 Bar to question assessment u/s 196
 Introduction

Learning objectives

 Illustrate the various types of assessment.

 Identify the conditions, rules and procedure for different classes of assessment.
 Define the limitation for assessment.

Practical significance

Assessments of income and tax liability are very significant for every assessee. There are different
types of assessment such as provisional assessment, assessment on the basis of correct return,
self-assessment, minimum tax on income of certain persons, spot assessment, best judgment
assessment etc.

Even there are various specialized/emergency assessments such as assessment in case of

discontinued business, person leaving Bangladesh, deceased person, income escaping
assessment etc. So, there is no way to avoid tax assessment if there is taxable income.

For every classes of assessment there are either some conditions, rules and procedures
specified for assessee and/or for tax authorities.

Stop and think

Did you realize how important is the assessment for any assessee either individual or company?
Do you think nobody can avoid tax assessment in any way if he is required to be assessed under
tax law?

Working context

Assessment of tax is very important for every assessee. An assessee must require 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 different types of
assessments, accountants’ support sometime very significant to complete the assessment of
their clients.

Many clients are requiring the support for correct assessment from accountants in every year.
Detailed knowledge of accountants on conditions, rules and procedures for different
assessments has the importance in case of required support for clients’ tax assessment in many
ways.

Syllabus links

The topics covered in this chapter have the significance for professional study as you can utilize
the knowledge throughout the application level and case study and also in your practical life.

208 Business Planning: Taxation & Compliance ICAB 2024

 Examination context C
H
A
P
T
Exam requirements E
R
In the examination, students may be required to:

 Identify the different types of assessment.

 Define the provisional assessment.
17
 Characterize the assessment on the basis of correct return.
 Define the assessment under which tax liability shall be deemed as finally discharge tax
liabilities.
 Define the specialty of self-assessment.
 Recognize the rules and procedures for spot assessment.
 Illustrate the assessment after hearing and best judgment assessment.
 Define the assessment of partnership firms.
 Typify the assessment in case of change in constitution of a firm and constitution of new
successor firm.
 Typify the assessment in case of succession to business otherwise than on death and
assessment of discontinued business.
 Define the assessment in case of partition of Hindu undivided family.
 Characterize the assessment in case of persons leaving Bangladesh, deceased person and
income escaping assessment.
 Identify the limitation for doing assessment.

Question practice

For question practice on these topics, go to the suggested answers covering this chapter.

17 ASSESSMENT
Section overview

 There are different classes of assessment of total income and tax payable.
 The conditions, rules and methods of various assessments are different.
 It is not easy for any person to escape assessment who is required to be assessed.
 There are certain limitations of assessment.

17.1 Introduction to assessment

Assessment to tax is an important stage in the whole cycle for tax collection. It is used to mean,
sometimes, the computation of income, sometimes the determination of the amount of tax
payable and sometimes the whole procedure laid down in the Act for imposing liability upon
the tax payer [C.I.T.V Khemchand Rahdas. 1938 I.T.R 441, 416(PC)]. The meaning to be assigned
to the word “assessment” has to be understood in each section with reference to the context in
which it has been used [A.N. Lakshman Shenoy V.I.T.O. 958 I.T.R 275, 941(SC)].

ICAB 2024 Assessment 209

 17.2 Provisional assessment: Section 185

(1) The DCT may assess the provisional tax on the total income of the taxpayer in any income year.

(2) Provisional assessment shall be made at the following times, namely -

(i) the return is to be filed at any time during the relevant tax year; or
(ii) the return not filed on the tax day or any day before the tax day for the relevant
assessment year.

(3) Provisional assessment shall be done on the basis of the following matters, namely -
(i) in the case mentioned in clause (a) of sub-section (2), on the basis of return and accounts
& documents, if any;
(ii) in the case mentioned in clause (b) of sub-section (2), any readily available information
or material and at the best judgement of the DCT.

(4) In making a provisional assessment under this section, the DCT shall proceed as follows -
a) rectify any arithmetical errors in the return, accounts and documents;
b) on the basis of the information available from the return, accounts and documents under
section 70 & 71 any loss set off and carry forward or carry forward of unabsorbed
depreciation allowance.

(5) For the purpose of payment and recovery, the tax as determined to be payable upon
provisional assessment shall have effect as if it were determined upon regular assessment.

(6) In computing the tax payable under this section, the following amount shall be credited,
namely
a) any tax deducted or collected at source and paid to the Government; and
b) any paid advance tax.

(7) Where any amount is paid against the tax claim by way of provisional assessment, tax credit
for that amount shall be given in computing the tax payable under regular assessment for
the same tax year.

(8) Nothing done or suffered by reason or in consequence of any provisional assessment made
under this section shall prejudice the determination on merit of any issue which may arise in
the course of regular assessment.

(9) There shall be no right of appeal against a provisional assessment under this section.

17.3 Assessment by the Deputy Commissioner of Taxes: Section 183

(1) The DCT may, subject to this section, determine the income-tax payable in respect of the
returns, documents or any other provision of this Act in the following cases, namely:-

(a) if any return or amended return filed by any person is considered as a normal return
under section 175; or
(b) person is taxable under Section 182(12); or
(c) person is taxable under section 212 or 213; or
(d) if any person is liable to pay income-tax under any provision of this Act.”

The DCT may, under this section, assess the tax or any other amount on the basis of the
relevant returns or documents.

210 Business Planning: Taxation & Compliance ICAB 2024

 (2) Where a return or a revised return has been filed and the DCT is satisfied, without requiring
the presence of the assessee or the production of any evidence, he shall assess the total C
income of the assessee and determine the tax payable, subject to the following conditions: H
A
a) such return shall be filed on or before the date specified in section 171; P
b) the amount of tax payable shall be paid on or before the date on which the return is T
filed; E
c) such return does not show any loss or lesser income than the last assessed income, R
d) if tax is determined on the basis of such return does not result in refund; and
e) such return shall mention Taxpayer’s Identification Number;
17
(3) Where the DCT is not satisfied without requiring the presence of the person who filed the
return or the production of evidence, the DCT shall give notice to the person to the effect
that –

(a) shall appear before the DCT, in person or by an authorized representative, on the date
and time specified in the notice; or
(b) to submit necessary evidence in support of the return mentioned in the notice

(4) Where the taxpayer complies with the notice given under sub-section (3), the DCT shall
initiate the assessment process.

(5) The DCT may require further hearing or necessary evidence during the assessment
proceedings of the taxpayer and in such case the notice shall specify the matters to be heard
and the consequences arising out of failure to comply.

(6) The DCT shall not disallow any expenditure shown by the taxpayer without giving an
opportunity of hearing.

(7) The DCT shall, after considering the evidence presented at the hearing, issue an order for
assessment of tax in writing or by specified electronic means and shall inform the said order
to the taxpayer within 30 days.

(8) If the taxpayer fails to comply with the notice given under sub-section (3) or (5), the DCT may
determine the tax based on best judgement under section 184.

17.4 Self-assessment: Section 180

Income, tax and other obligations shall be treated automatically completed if a return is
submitted upon complying the general provisions of submitting return [Section 169] and paying
taxes [Section 173 & 174).

A revised return with an explanation to correct the original return with respect to undisclosed
income, tax credit or others may be submitted. However, no revised return shall be allowed:

• After 180 days of submitting original return.

• After submitting 1" revised return, or
• If the returns selected for audit.

No question on the source of initial business capital shall be made for a new individual taxpayer,
if:

ICAB 2024 Assessment 211

 Income shown is not exempted and exceeds the tax-free limit, and is not lower than 20% of initial
capital.

Submit return by the Tax Day upon payment of tax, provide proof of existence of the business,
and confirm in writing that the return is not a belated return.

17.5 Return process: Section 181

(1) The DCT shall process the “self-assessment return” or revised return filed under section 180
in the following manner, namely -

(a) any mathematical error in the return filed or in the said return or if any incorrect claim is
observed in the light of any information contained in any statement or documents filed
with the return, the same shall be computed as adjusted income;
(b) the tax payable under this Act and any other sum shall be calculated on the basis of
clause (a); and
(c) shall determine the tax payable or refundable by providing advance tax paid including
tax at source and credit of tax paid under this Act.

(2) If as a result of the return process, the amount of income, tax or other significant sum shown
in the “self-assessment return” or revised return filed under section 180 differs, the DCT shall
issue a written notice to the taxpayer as under, which -

(a) inform the tax payer of the difference amounting to the computation of income, tax,
refundable tax or other related matters as a result of the return process attached to the
notice;
(b) give an opportunity to the taxpayer to explain his position in writing regarding the
excess liability arising in the return process or reduction of return within the period
specified in the notice; and
(c) within the period specified in the notice, as applicable, he shall be afforded the following
opportunities, namely -
i filing revised return adjusting the difference mentioned in the notice; and
ii payment of taxes and other dues due as a result of said process.

(3) Where a notice is given under sub-section (2), the DCT -

(a) within 90 days after confirming the fulfilment of the conditions mentioned below send
the revised return acceptance letter, namely -

(i) Whether the revised return has been filed in accordance with the proviso to clause
(c) of sub-section (2).
(ii) whether any tax or other amount payable under this Act as a result of the process
has been paid on or before the filing of the amended return; and
(iii) whether the difference referred to in sub-section (2) has been appropriate adjusted
in the return

(b) If any of the conditions mentioned in clause (a) is not fulfilled, after the expiry of the date
specified in the notice given under sub-section (2), a demand notice shall be issued with
a statement of income, tax, refundable tax or other related matters;
(c) The notice of claim mentioned in clause (b) shall be issued within 6 months from the
date of service of notice under sub-section (2).

212 Business Planning: Taxation & Compliance ICAB 2024

17.6 Consequences of filing of incomplete return: Section 176
C
(1) In case of filing of any return or revised return, if the provisions of section 169 or any direction H
issued by the Board are not followed, the said return or revised return shall be deemed to A
be incomplete. P
T
(2) If the return or revised return is considered to be incomplete, the DCT shall, with the reasons E
specified, send a notice to the taxpayer to submit the relevant information, verification, R
statement or document within the time specified in the notice.

(3) If a taxpayer fails to fully comply with the notice given under sub-section (2), the return or 17
amended return, which was deemed to be incomplete —

(a) failure to comply with sub-sections (2) and (5) of section 169 shall be deemed to be null
and void as if it had not been filed and in the case of such nullity or nullity the
Commissioner of Excise shall take the following steps, namely: -

i sending to the taxpayer a notice of cancellation or invalidity of the return filed;

ii notifying the Additional Commissioner of Taxes in writing of the cancellation or
invalidity’

(b) in other cases an audit under section 182 may be elected.”

(4) The return or revised return shall be deemed to have been completed on the date of filing
if the taxpayer has fully executed the contents of the notice given under sub-section (2).

(5) A return shall not be deemed complete merely by reason of acknowledgment of receipt.

17.7 Tax Audit: Section 182

(1) The Board or any authority under the Board with the approval of the Board may, in the
manner prescribed by the Board, select returns for audit from among the returns or
amended returns filed under section 180 and forward the same to the concerned DCT for
the purpose of audit.
(2) Except in the cases set out below, if any return or revised return filed under section 180 for
a assessment year shows a total income of at least 15% (fifteen percent) more than the total
income of the immediately preceding assessment year, the return shall be liable under sub-
section (1) cannot be selected for audit, namely: -
(a) return or amended return of any bank, insurance or finance company;
(b) any such return or amended return in support of which no bank statement has been filed
in support of taking any type of loan from any source other than banks and finance
companies totaling Tk. 5 (five) lakhs in the relevant year;
(c) any return or revised return showing total or partial tax-exempt income;
(d) any return or amended return showing such income to which the reduced rate of tax is
applicable;
(e) any return or revised return in respect of which refund of tax is claimed or refund of tax
is created;
(f) Taxpayer—

ICAB 2024 Assessment 213

 i fails to submit the necessary documents in support of compliance with the
provisions of Part 7 in the relevant year; or
ii failure to fully comply with the notice sent under sub-section (2) of section 176 makes
election for audit under clause (b) of sub-section (3) of section 176; or
iii failure to file a return under section 177;

(15e) within two (2) years after the end of the assessment year in which the return is filed, the
return may be selected or approved for audit.

17.8 Minimum tax: Section 163

As per Income Tax Act, 2023, minimum tax shall be payable by an assessee in accordance with
Section 163 on the basis of higher of the following:

- Income tax on the basis of normal calculation of tax liability;

- Tax deducted or collected at sources from certain sections as specified in section 163; and
- Minimum tax on the basis gross receipts.

The following 40 heads of deduction shall be deemed to be the minimum tax as per section 163:

Serial Section Source of income Rates

1 88 Deduction from payment to participation/welfare fund 10%
& WPPF
2 89 Payment to contractor, supplier etc. Note-1
3 90 Payment for services Note-2
4 91 Payment for use of intangible property 10% - 12%
5 92 Advertisement (except media buying agency) 5%
6 94 Commission, discount or fees, etc. 3% - 10%
7 95 Payment to travel agent 0.30%
8 100 Insurance commission 5%
9 101 Fees of surveyors of a general insurance company 15%
10 102 Interest on savings deposit and fixed deposit etc. 10% - 20%
11 104 Interest income of resident other than bank interest 10%
12 105 Interest on saving certificates 10%
13 106 Interest on securities 5%
14 108 International gateway service in respect of phone call 1.5% - 7.5%
15 110 Rent of convention hall, conference center etc. 5%
16 111 Compensation against acquisition of property 3% - 6%
17 112 Export cash subsidy 10%
18 114 Purchases of electricity 6%
19 115 Payment to landlord by the real estate developer 15%
20 116 Commission or remuneration paid to foreign buyer’s 10%
agent
21 117 Dividend income 10% or 15%
22 118 Income from lottery 20%
23 120 Collection of tax from importers TDS Rule 7

214 Business Planning: Taxation & Compliance ICAB 2024

 24 121 Export of manpower 10%
25 122 Commission of clearing & forwarding agents 10% C
H
26 123 Collection of tax from exporter 1%
A
27 124 Payment from overseas for service, revenue sharing etc. 7.5%/2.5%/10%
P
28 125 Transfer of assets TDS Rule 6 T
29 126 Real estate or land developer Different rates E
30 127 Commission on stamp, court fee, cartridge paper etc. 10% R
31 128 Lease property 4%
32 129 Cigarette manufacturer manually 10%
17
33 132 Shipping business of resident 3% - 5%
34 133 Sale through public auction 1% - 10%
35 134 Transfer of share of a non-listed company by a resident 15%
36 135 Collection of tax from transfer of security 10%
37 136 Transfer of share by the shareholders of stock exchange 15%
38 137 Collection of tax from member of stock exchange 0.05%
39 138 Collection of tax from commercially playing motor Different rates
vehicle
40 139 Inland ship operation Different rates

However, tax deducted under section 120 from import of good by an industrial undertakings as
raw materials except an industrial undertaking engaged in producing cement, iron or iron
product, ferro alloy products, perfumes, carbonated beverage, milk powder, aluminum
products, and ceramic products and toilet waters shall not be minimum tax.

Income from the above 40 heads for which minimum tax is applicable shall be determined in
regular manner and tax shall be calculated by using regular rate on such income. If the tax so
calculated is higher than the minimum tax, the higher amount shall be payable on such income.

No need to compute income through back calculation from the following 3 sources and its final
tax as per SRO No. 253-Law/Incometax-09/2023:

Sl. Sources of income Section Amount taken as Applicable person

No income
1. Interest on savings deposit 102 Gross interest Return submission is not
and fixed deposit etc. mandatory u/s 166(2)
2. Interest on saving 105 Actual gross cash All individual taxpayer
certificates subsidy
3. Export cash subsidy 112 Gross bank All taxpayer
interest

ICAB 2024 Assessment 215

 17.9 Minimum tax on gross receipts
Minimum tax for an individual having gross receipt of Tk. 30 million or more, or a firm or
association of person having gross receipts exceeding Tk. 5 million, or a company or a trust shall
be as follows:

SL. Classes of assessee Rate of minimum

tax on gross receipt
1 Manufacturer of cigarette, biri, chewing tobacco, smokeless 3%
tobacco or any other tobacco products
2 Carbonated beverage 3%
3 Mobile phone operator 2%
4 Individual’ assessee other than manufacturer of cigarette, biri, 0.25%
chewing tobacco, smokeless tobacco or any other tobacco
products
5 Others 0.60%
6 In case of newly manufacturing industries [for the first 03 years of 0.10%
commencement of its commercial production]

17.10 Spot assessment: Section 195

(1) The DCT may assess the tax of any person on the spot, if such person -

(a) has taxable income;

(b) there is an obligation to file a return;
(c) has an obligation to comply with any provision of this Act;
(d) failure to enforce or comply with any provision of this Act.

(2) The Commissioner of Taxes may, in his jurisdiction, delegate to any DCT subordinate to him
the power to assess tax under this section.

17.11 Best judgment assessment: Section 184

(1) Subject to the other provisions of this section, the DCT may determine the tax based on his
best judgement of a taxpayer in the following cases, namely -

(a) where a person has failed to comply with the notice given under section 172 and has
not filed any return or amended return under section 175; and
(b) where any person fails to comply with a notice given under section 172, 175, sub-
sections (3) and (5) of 183, section 193 or 212;

(2) After considering the facts and issues received and after properly evaluating the legal and
factual aspects of the case, the best judgement shall be determined.

(3) The tax assessment order passed under this section shall reflect the best judgement
assessment of tax by the DCT.

(4) The DCT shall pass the best judgement assessment order in writing or by certain electronic
means and shall notify the same to the taxpayer within 30 days from the date of passing such
order.

216 Business Planning: Taxation & Compliance ICAB 2024

17.12 Various specialized assessments
C
1. Assessment of firms: Section 187 H
A
In determining the taxation of any firm or AOP – P
(a) first, the total income of the firm or AOP has to be determined and then the tax is to be T
assessed on the basis of total income; and E
(b) thereafter the after-tax income is pro-rated among the partners or members R

2. Assessment in case of change in constitution of a firm: Section 188

17
(1) Where, at the time of assessment of a firm, it is found that a change has occurred in the
constitution of the firm, the assessment shall be made on the firm as constituted at the time
of making the assessment.
(2) Under sub-section (1) for the purpose of inclusion in the total income of the partners for any
assessment year, be apportioned between the partners who, in such income year, were
entitled to receive the same and when the tax assessed upon a partner cannot be recovered
from him, it shall be recovered from the firm as constituted at the time of making the
assessment.
(3) For the purposes of this section, there is a change in the constitution of a firm-
(a) where all the partners continue with a change in their respective shares or in the
shares of some of them, or
(b) 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.

3. Assessment in case of new successor firm: Section 189

Where, at the time of assessment on a firm, it is found that a new firm has been constituted to
succeed the firm to which the assessment relates and it cannot be covered by section 188,
separate assessments shall be made on the predecessor firm and the successor firm in
accordance with the provisions of section 190 relating to assessment in case of succession to
business.

4. Assessment in case of succession to business otherwise than on death: Section 190

(1) Where, 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 profession-
(a) the predecessor shall be assessed, in respect of the income of the income year in which
the succession took place, for the period up to the date of succession, and
(b) the successor shall be assessed, in respect of the income of the income year, for the
period after the date of succession.
(2) Notwithstanding anything contained in sub-section (1), where the predecessor cannot be
found, the assessment of the income year in which the succession took 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 like manner and to the same extent as it would have been made on the
predecessor; and the provisions of the Act shall, so far as may be, apply accordingly.

ICAB 2024 Assessment 217

 (3) Where any sum payable under this section in respect of the income of a business or
profession cannot be recovered from the predecessor, the Deputy Commissioner of Taxes
shall record a finding to that effect, 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.

5. Assessment in case of discontinued business: Section 191

(1) Subject to the provisions of section 189, where a business is discontinued during a financial
year, the tax shall be assessed for that year.

(2) In determining the tax for any income year under sub-section (1), the income shall be
computed for the period from the beginning of the income year in which the business
ceased to the date on which the business ceased.

(3) Any person discontinuing any business or profession in any financial year shall give to the
Deputy Commissioner of Taxes a notice of such discontinuance within 15 days thereof; 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 financial
year shall be deemed to be the assessment year in respect of the income of the said period.
(4) Where, a person fails to give the notice required by sub-section 3, the Deputy Commissioner
of Taxes may direct that a sum shall be recovered from him by way of penalty not exceeding
the amount of tax subsequently assessed on him in respect of any income from the business
or profession up to the date of its discontinuance.
(5) Where, an assessment is to be made under sub-section 1, the Deputy Commissioner of
Taxes may serve -
(a) on the person whose income is to be assessed;
(b) in the case of a firm, on the person who was a partner of the firm at the time of
discontinuance of the business or profession; and
(c) in the case of a company, on the principal officer of the company; a notice to furnish
within such time, not being less than 7 days, a return of his total income giving such
particulars and information as are required to be furnished with a return to be filed under
section 169 along with such other particulars, records and documents as may be
specified in the notice.

(6) The provisions of the Act shall, so far as may be, apply to a notice under sub-section 5 for
the purpose of assessment of tax as if it were a notice under section 172.

6. Assessment in case of partition of a Hindu Undivided Family (HUF): Section 192

(1) A Hindu family hitherto assessed as a Hindu undivided family shall be deemed, for the
purposes of the Act, to continue to be a Hindu undivided family except where, and in so far
as, a finding of partition has been given under this section in respect of that family.
(2) Where, at the time of an assessment of a Hindu undivided family, it is claimed by any
member thereof that a partition has taken place amongst the members of the family; the
Deputy Commissioner of Taxes shall make an enquiry there into after giving notice to all the
members of the family.
(3) On the completion of the enquiry, the Deputy Commissioner of Taxes shall record a finding
as to whether there has been a partition of the joint family property, and, if there has been
such a partition, the date on which it has taken place.

218 Business Planning: Taxation & Compliance ICAB 2024

 (4) In the case of a finding under sub-section 3 that the partition of the undivided family took
place after the expiry of the income year, the total income of the income year of the C
undivided family shall be assessed as if no partition has taken place; and each member or H
group of members of the family shall, in addition to any tax for which he or it may be A
separately liable, be jointly and severally liable for the tax on the income of the family so P
assessed. T
(5) In the case of finding under sub-section 3 that the partition of the undivided family took E
place during the income year, the total income of the undivided family in respect of the R
period up to the date of partition shall be assessed as if no partition had taken place; and
each member or group of members of the family shall, in addition to any tax for which he or
it may be separately liable, be jointly and severally liable for the tax on the income of that 17
period as so assessed.

(6) Notwithstanding anything contained in this section, if the Deputy Commissioner of Taxes
finds after completion of the assessment of Hindu undivided family that the family has
already affected a partition, the tax shall be recoverable from every person who was a
member of the family before the partition; and every such person shall be jointly and
severally liable for tax on the income of the family so assessed.

(7) For the purposes of this section, the several liabilities of any member or group of members
of a Hindu undivided family shall be computed according to the partition of the property of
the undivided family allotted to him or it at the partition.

(8) The provisions of this section shall, so far as may be, apply in relation to the levy and
collection of any penalty, interest, fine or other sum in respect of any period up to the date
of the partition of a Hindu undivided family as they apply in relation to levy and collection of
tax in respect of any such period.

7. Assessment in case of person leaving Bangladesh: section 193

(1) Where it appears to the Deputy Commissioner of Tax that any person may leave Bangladesh
during the current financial year or shortly after its expiry and that he has no intention of
returning, an assessment may be made in that year, tax can be determined on the basis of
the total income of such person if-

(a) he has been previously assessed, for the period from the expiry of the last income year
of which income has been assessed to the probable date of his departure from
Bangladesh; and
(b) he has not been previously assessed, of the entire period of his stay in Bangladesh up
to the probable date of his departure there from.

(2) Assessment under sub-section 1 shall be made-

(a) in respect of each completed income year included in the period referred to in sub-
section 1, at the rate at which tax would have been charged had it been fully assessed;
and
(b) in respect of the period from the expiry of the last of the completed income years to the
probable date of departure, at the rate in force for the financial year in which such
assessment is made and that financial year shall be deemed to be the assessment year
in respect of the income of the said period.

ICAB 2024 Assessment 219

 (3) For the purpose of making an assessment under this section, the Deputy Commissioner of
Taxes may serve a notice upon the person concerned requiring him to file, within such time,
not being less than seven days, as may be specified in the notice-
(a) a return in the same form and verified in the same manner as a return under section
166 setting forth, along with such other particulars as may be required by the notice,
his total income for each of the completed income years comprised in the relevant
period referred to in sub-section 1; and
(b) an estimate of his total income for the period from the expiry of the last of such
completed income year to the probable date of his departure from Bangladesh.
(4) All the provisions of the Act shall, so far as may, apply to the notice under sub-section 3 for
purpose of assessment of tax as if it were a notice under section 172.

8. Assessment of income of a deceased person: Section 194

(1) Where a person dies, his legal representative shall be liable to pay any tax or other sum
payable under the Act which the deceased would have been liable to pay if he had not died,
in the like manner and to the same extent as the deceased; and the legal representative of
the deceased shall, for the purposes of the Act, be deemed to an assessee. However, before
deeming the legal representative of the deceased to be an assessee, a notice to that effect
shall be issued to him by the Deputy Commissioner of Taxes.
(2) For the purposes of making an assessment of the income of the deceased and recovery of
tax-
(a) any proceeding taken against the deceased before his death shall be deemed to have
been taken against the legal representative and may be continued from the stage at
which it stood on the date of the death of the deceased; and
(b) any proceeding which could have been taken against the deceased, if he had not died,
may be taken against the legal representative; and all the provisions of the Act shall, so
far as may be, apply accordingly.
(3) The liability of legal representative under the Act shall be limited to the extent to which the
estate of the deceased is capable of meeting the liability.
(4) For the purposes this section and other provisions of the Act in which the rights, interest and
liabilities of the deceased are involved, ‘legal representative’ includes an executor, an
administrator and any person administering the estate of the deceased.
9. Escaped Payment: Section 212
The following situations shall be deemed to have escaped payment:
 The income or any part of income has escaped assessment
 The income has been under assessed
 Excessive loss, relief, deduction or allowance in the return has been claimed
 Tax liability has been shown or computed lower by
[a] Concealment/misreporting of any income
[b] Concealment/misreporting of any assets
[c] Concealment/misreporting of any expenditure
[d] Concealment/misreporting of any particulars u/s 167 or 168

220 Business Planning: Taxation & Compliance ICAB 2024

  Income has been under assessed or has been assessed at a lower rate than due tax rate
C
 Taxable income has been shown as tax exempted income.
H
 Excessive depreciation allowance or any other allowance has been claimed A
 Tax has been paid or computed lower than due amount by reason of lower tax base P
T
E
Preconditions:
R
i) Section 212 can be initiated by the DCT if he has reason to believe that any sum payable by
an assessee has escaped payment.
17
ii) Before initiating the proceeding under section 212 previous approval in writing from the
IJCT is to be taken, where return has been filed under sub-section 1 of section 180 or the
assessment of tax for the relevant assessment year has been completed under any other
provision of the Act.

iii) Notice under section 212 can be issued

 At any time where no return was filed and no assessment was made
 Before 6 years from the end of the assessment year in which the notice is issued

17.13 Limitation for assessment: section 197

(1) Subject to the provisions of sections 197(2) and (3), the assessment or return process must
be completed before the expiration of the following periods:
[a] For the return process under section 181, within 2 years after the end of the assessment
year in which the return is filed.
[b] Within 2 years after the end of the assessment year in which the return has been selected
for audit under subsection (1) of section 182.
[c] Within 1 year following the end of the assessment year in which any return is considered
a normal return.
[d] Within 3 tax years after the end of the relevant tax year in which the income first became
assessable under section 235.
(2) An assessment under section 212 may be made within two years from the end of the year in
which notice under section 212(1) was issued;
(3) Notwithstanding anything contained under this section, limiting the time within which any
action may be taken, or any order or assessment may be made, order or assessment, as the
case may be, to be made on the assessee or any other person in consequence of, or to give
effect to, any finding or direction contained in an order under section 213, 285, 289, 292,
294 or 295 or, in the case of a firm, an assessment to be made on a partner of a firm in
consequence of an assessment made on the firm or an agreement made on the basis of
agreement reached under section 304, may be made within 30 days from the date on which
the order was communicated and such revised order shall be communicated to the assessee
within 30 days next following.
(4) Where an order of assessment has been set aside by any authority in that case the
assessment shall be made within 60 days from the date on which the order was
communicated to him.

ICAB 2024 Assessment 221

 (5) Where, by an order under sections 213, 285, 289, 292, 294 or 295, any income is excluded
from the total income of the assessee for an assessment year, and another assessment of
such income for another assessment year shall, for the purposes of this section, be deemed
to be one made in consequence of, or to give effect to, any finding or direction contained
in the said order.
(6) Where, by an order under sections 213, 285, 289, 292, 294 or 295, any income is excluded
from the total income of one person and held to be the income of another person, an
assessment of such income of such other person, shall, for the purposes of this section, be
deemed to be one made in consequence of or to give effect to, any finding or direction
contained in the said order.
(7) Where the DCT fails to give effect to any finding or direction contained in an order referred
to in sub-section 3 within the period stipulated therein, such failure of the DCT shall be
construed as misconduct.

17.14 Bar to question assessment: Section 196

(1) No authority other than the authorities mentioned in section 4 or the Taxes Applied Tribunal
established under this Act or Bangladesh Supreme Court shall have right to question any
assessment made under the Act. Any action taken in violation of this provision shall be null
and void and have no legal effect.

(2) Any action taken in violation of the provision of sub-section (1) shall be null and void and
have no legal effect.

222 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 18
Assessment of individuals

Introduction
Examination context
Topic list

18.1 Definition of individuals

18.2 Scope of income of individual assessee
18.3 Non-assessable and tax credit income
18.4 Grossing up of income
18.5 Tax rate of individuals
18.6 Assessment procedure
18.7 Specimen form of computation of total income and tax
liability
 Introduction

Learning objectives

 Illustrate the assessment of individuals.

 Identify different heads of income.
 Differentiate non-assessable and tax credit income.
 Define grossing up of income.
 State the procedure of assessment
 Prescribe a specimen format of computing total income and net tax liability.
 Define the time limitation for assessment.

Practical significance

Assessment of income and tax liability is very significant for every assessee. Assessing the
income of individual assessee and tax liability thereof is important for individual assesses. This
chapter recapitulates the taxable income, non-assessable income, tax credit income, grossing
up of income, applicable tax rates and related issues required for completing the assessment of
individuals. Application of double taxation relief, set-off and carry forward of losses, minimum
tax on the basis of TDS as per 163, rebate for income from a partnership firm are exemplified.
Professional accountants are required to have sufficient expertise on all of these issues.

Stop and think

Did you realize how important is the assessment for individual? Can you do the assessment of
individual assessee independently?

Working context

Assessment of tax is very important for every assessee. An assessee must require 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 different types of
assessments, accountants’ support sometime very significant to complete the assessment of
their clients.

Many clients are requiring the support for correct assessment from accountants in every year.
Detailed knowledge of accountants on the technicalities of computation of total taxable income
and tax liability thereof for individual assessee is very important in case of providing support for
clients’ tax assessment.

Syllabus links

The topics covered in this chapter have the significance for professional study as you can utilize
the knowledge throughout the application level and case study and also in your practical life.

224 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Do the assessment of individuals.

 Identify taxable income across different heads.
 Computing investment allowance, eligible amount and investment tax rebate.
 Identify non-assessable income and its application in computing taxable income.
 Apply TDS under section 163 showing its impact on total income. C
 Identify the procedure of assessment H
 Compute net tax liability after due credit of TDS, investment tax rebate and others. A
P
Question practice
T
E
For question practice on these topics, go to the suggested answers covering this chapter.
R

18 ASSESSMENT OF INDIVIDUALS
18
Section overview
 Scope of income for individuals is different from firm or company.
 Applicable tax rates for individuals are different from company.
 Some income of individual assessee is non-assessable.
 On some investment/donation, the assessee enjoys investment tax rebate.
 For TDS, assessee will get full tax credit at the time of computing net tax liability.
 With certain terms and conditions, loss under one head can be set-off against income under
another head
 If loss under one head cannot be set-off completely, it can be carried forward to succeeding
6 years to set-off against the income under the same head.

18.1 Definition of individual

The word ‘individual’ has special meaning in income tax law. To look at its reference in tax law,
we should look at two definitions, i.e., assessee and person.

"Assessee", means a person by whom any tax or other sum of money is payable under ITA, 2923,
and includes -
(a) every person in respect of whom any proceeding under ITA, 2023 has been taken 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 person;
(b) every person who is required to file a return under section 166, 191 or 193;
(c) every person who desires to be assessed and submits his return of income under ITA, 2023;
and
(d) every person who is deemed to be an assessee, or an assessee in default, under any
provision of ITA, 2023 [Section 2(22)].

ICAB 2024 Assessment of individuals 225

 "Person" includes an individual, a firm, and an AOP, a HUF, a trust, a fund, a company, an entity
[Section 2 (69)].

Thus, the word ‘assessee’ means a person that includes an individual who is liable to pay tax as
per Income Tax Act, 2023. This chapter represents the assessment of income of individuals and
computation of tax liability of an individual assessee.

18.2 Scope of income of individual assessee

As per section 30 of ITA, 2023, for the purpose of charging income tax and computation of total
income, all incomes shall be classified and computed under the following heads of income,
namely:

(a) Income from employment

(b) Income from rent
(c) Agricultural income
(d) Income from business
(e) Capital gains
(f) Income from financial assets
(g) Income from other sources

18.3 Non-assessable income and tax rebate on investment allowance:

Across the 7 heads as mentioned at section 30, some categories of income are declared as non-
assessable. Thus, at the time of assessment, it is important to know the items of non-assessable
income so that it can be excluded at the time of computing taxable income. Whereas investment
tax rebate facility can be availed by the taxpayer on investment at allowable sectors. The list of
non-assessable income and investment allowance is given in the following schedules that are
subject to change from time to time through Finance Act:
 Non-assessable Income: Sixth Schedule, Part A & Part B
 Investment allowance on which tax rebate is applicable: Sixth Schedule, Part C

The economic rationality of these provisions is embedded in the equation: Y = C+I

Where, Y represents income, C represents consumption and I represent investment.
To reduce the tax burden, some specific income from specific sources is declared non-
assessable on which no tax is imposed. Again, to discourage consumption and motivate
investment, some investments are allowed for claiming investment tax rebate.

18.4 Grossing up of income

Another important issue is the grossing up of income which is received by the assessee after
TDS at specified rate. The equation used to gross up income is given below:

Gross income = Net income X 100/ 100 – Rate of tax deducted at source

Thus, for grossing-up income, it is important to know the rate of TDS. Only income received after
tax is required to gross-up. Grossed up income should be included in calculating taxable
income, however, tax already deducted or paid will be claimed as credit at the time of
computing net tax liability.

226 Business Planning: Taxation & Compliance ICAB 2024

18.5 Tax rate of individuals

Individuals are taxed as per the 5-tier taxation system in Bangladesh. However, these rates are
same for every individual including Bangladeshi non-residents, HUF and Partnership Firm.
Current rates applicable to individuals on total taxable income for the assessment year 2024-25
are:

Income tier Rates

On the first Tk. 3,50,000 Nil

On the next Tk. 1,00,000 5%
On the next Tk. 4,00,000 10%
On the next Tk. 5,00,000 15%
On the next Tk. 5,00,000 20%
On the balance 25% C
H
Note: A
a) The non-assessable income limit will be as follows: P
T
For women, and elderly male citizens being 65 years of age or Tk. 4,00,000 E
more R
3rd gender assessee, handicapped or disabled persons Tk. 4,75,000
For Gazetted war wounded freedom fighter Tk. 5,00,000
The threshold limit in case of parents or legal guardian of any person with disability 18
will be increased by BDT 50,000. If both father and mother of the disabled person is
assessee then any one will avail this benefit.

b) If the aggregate income of an individual assessee exceeds Tk. 16,50,000 (Tk. 3,50,000 + Tk.
1,00,000 + Tk. 4,00,000 + Tk. 5,00,000 + Tk. 5,00,000), he will be charged @ 25% on such
income as it exceeds Tk.18,50,000.
c) However, the minimum tax would be Tk. 5,000 or Tk. 4,000 or Tk.3,000 depending on the
location of the assessee.
d) Only individual assessee having net wealth exceeding Tk. 4 crore as per statement of assets
& liabilities is liable to pay surcharge @10% on income tax payable and in case net wealth
exceeds Tk. 10 crore but does not exceed 20 crore then surcharge is to be paid @20%, if
wealth exceeds Tk. 20 crore but does not exceed 50 crore then surcharge is to be paid
@30%, and if it exceeds 50 crore then the rate of surcharge will be 35%.
e) However, the rate of tax would be straight 30% (at maximum rate) if the individual assessee
is classified as non-resident foreigner (NRF).

18.6 Procedure of assessment

Step 1: Compute taxable income under different heads.
[Don’t forget to exclude non-assessable income and grossing up of income at the time of
computing taxable income in specified areas]
Step 2: Compute allowable investments made
[Don’t forget to test actual investment so that it must not exceed the maximum limit. If it exceeds
maximum limit, allowable investment would be the lower one]

ICAB 2024 Assessment of individuals 227

 Step 3: Compute net tax liability
[Don’t forget to consider tax credit due to TDS, refund adjustment, rebate, foreign tax credit and
rebate on income from partnership firm]

18.7 Specimen form of computation of total income and total tax liability

Sources of income and particulars BDT BDT BDT

1. Employment (Section 32 - 34):
Basic Salary ***
Dearness allowance ***
Annuity ***
Employees share scheme (Fair market value less acquisition cost) ***
Festival bonus / performance bonus ***
Leave encashment / Compensation ***
Employer’s contribution to recognized provident fund ***
Entertainment allowance ***
Medical allowance ***
House-rent allowance ***
Advance salary / outstanding salary ***
Conveyance allowance ***
Car facility: up to 2500 CC - 10,000 pm; above 2500 CC - 25,000 pm ***
Rent free accommodation: Annual rental value ***
Accommodation at a concessional rate:
The annual rental value less: rent paid by the employee ***
Taxable portion of interest on recognized provident fund ***
Retirement allowance / gratuity / pension ***
Less: exempted pension full, gratuity up to Tk.2.5 crore ***
Other benefits (actual or fair value) ***
Total income from employment ***
Less: 1/3 of total income from employment or 4,50000, whichever is (***) ***
lower

2. Income from rent (section 35 -39):

Annual value:
Rental value ***
Add: TDS (If any) ***
Add: Owner’s expenses paid by the tenant ***
Less: Tenant’s expenses paid by the owner ***
Actual rental value ***
Higher of annual value and actual rental value ***
Add: Advance rent ***
Add: Any receipts or sum other than rental value or advance rent ***
Less: Adjusted advance rent which received previously ***
Less: Vacancy allowance ***
Rental income ***
Less: admissible expenses:
1.Repair & maintenance expenses

228 Business Planning: Taxation & Compliance ICAB 2024

 [Collection charge, sewerage bill, salary of guard, liftmen, caretaker etc.] ***
[Admissible limit: Residential house: 25%, Commercial house: 30%] ***
2.Land development tax ***
3.Insurance Premium ***
4.Interest payable on house building Loan ***
5.Annual tax [Municipal or local authority tax] *** ***
Special rental income (Any unspent amounts on repairs and maintenance ***

3. Agricultural income (section 40-43): ***

Sale of crops
Income from any land or building used for agricultural purposes ***
Income from granting a right [‘Borga’] ***
Income from tea garden or rubber garden [60%] ***
Revenue profit by sale of discarded or demolished agricultural ***
C
machineries
H
Other income relating to agriculture *** ***
A
Less: Admissible expenses – P
1. Land development tax *** T
2. Any taxes [local taxes, etc.] *** E
3. Production costs R
Cost for cultivating the land or raising live-stock ***
Ordinary processing costs to make crop marketable ***
Transportation cost of crops or livestock to market *** 18
Maintenance cost of agricultural equipment & up keeping of cattle for ***
cultivation
[If proper books of accounts are not maintained, an expenditure ***
equivalent to 60% of sales proceeds may be allowed as an admissible
expense.]
4. Insurance premium ***
5. Repair and maintenance of irrigation plant ***
6. Depreciation
7. Interest on mortgage loan ***
8. Interest on borrowed capital ***
9. loss due to discard/demolish of agricultural machineries ***
10. Other revenue expenses *** (***) ***

4. Income from business or profession (section 44-56):

Net profit as per Profit and Loss Account ***
Add: Inadmissible expenses as per section 54 and 55 ***
Add: Income under the head of business and profession that are not ***
included earlier
Less: Expenses that are allowed (not debited in P/L a/c) ***
Total Income ***
Less: Income that are not from business or profession (already credited *** ***
in P/L a/c.)

5. Capital gain (section 57 - 61): ***

Sale proceeds of capital assets, or ***
Fair market value at the time of transfer, whichever is higher ***

ICAB 2024 Assessment of individuals 229

 Less – Allowable deductions
(a) Expenditure incurred to transfer the capital asset(s) ***
(b) Cost of acquisition ***
(c) Capital expenditure incurred for improvements of the asset(s)
*** (***) ***

6. Income from financial assets (section 62-65):

(a) Interest from government securities ***
(b) Interest from government securities
(Full amount will be added if TDS at upfront system) ***
Less: Admissible expenses :
Bank charge and commission **
Interest on borrowed fund ** ***

(c) Interest from securities based on Islamic principles ***

(To be grossed-up if TDS at the time of payment)
Less: Admissible expenses -
Bank charge and commission **
Interest on borrowed fund ** ***

(d) Interest from Wage earner Development Bond ***

Less: exemption (full as per para-18) ***
***
(e) Interest from zero-coupon bond ***
Less: exempted – (full as per para-25) ***
***
(f) Income from dividend ***
(g) Interest from bank deposit / profit from Islami Bank [Interest received ***
X 100/90]
(h) Interest on Savings Certificate [Interest received X 100/90] ***
(i) Interest on Post Office Savings Bank account [Interest received X *** ***
100/90]
(j) Income from mutual / unit fund [Dividend received X 100/90]

7. Income from other sources (section 66 - 69):

***
Any commission/fee received from parties other than employer ***
Royalty fees/Technical know how fees ***
Income from cash incentive
Income from prize bond / lottery / quiz competition / crossword ***
Commission / fee as Director of any company ***
Non-agricultural income like sale of forest trees, sale of fruits, sale of ***
honey,
sale of fish of pond (other than firm) etc.
Income from invigilation & exam script evaluation ***
Income from writing articles / columns in newspapers *** ***
Income from participating in radio / TV/ cultural /training programs (***) ***
Income from lease of non-agricultural land ***

230 Business Planning: Taxation & Compliance ICAB 2024

 Income from tuition
Income from underwriting commission for sale of shares and securities.
Income from patent / license ***
Income from rent of boat / mooring terminal ***
Income from letting out household appliances like furniture, machineries ***
etc.
Unexplained investments deemed to be income
Any other income not classified under any head ***
Less- Allowable deductions u/s 68:
Interest on loan taken to purchase share ***
Any other related revenue expenditure *** ***
***
8. Share of profit in a partnership firm
C
9. Income of spouse or dependent minor child ***
H
A
Total income ***
P
T
Calculation of tax liability: E
Amount R
Tk. Rates
(Tk.)
On first 3,50,000 0% -
On next 1,00,000 5% ***** 18
On next 4,00,000 10% *****
On next 5,00,000 15% *****
On next 5,00,000 20% *****
On remaining balance ****** 25% *****
Total ****** *****
Less: Investment tax rebate *****
Less: Tax rebate on income from partnership firm *****
Less: Foreign tax credit *****
Less: Tax deducted at source/Advance tax paid *****
Less: Previous Tax refund adjustment *****
Net tax liability *****

Worked example

Example 1

Mr. Jamshed Hasan is an executive of a private firm. He furnished the following information for
the income year 2023-24. Compute his total income and tax liability for the assessment year
2024-25.

Income from salaries:

i. Basic salary Tk. 33,000 per month.

ii. Festival bonus equivalent to two months basic salary.
iii. House rent allowance Tk. 15,000 per month.
iv. Entertainment allowance @ 5% of basic salary.
v. Medical allowance Tk. 2,000 per month (actual annual expense Tk. 18,000).

ICAB 2024 Assessment of individuals 231

 vi. Conveyance allowance Tk. 1,500 per month.
vii. Contribution to RPF both by employee and employer @ 10% of basic salary.

Agricultural income:

i. Sale of crops Tk. 2,70,000.

ii. Income from sale of fish of pond Tk. 45,000 [not fish farming]

Income from business Tk.32,000

Income from financial asset:

i. Interest from fixed deposit Tk. 27,000 [net of tax].

ii. Interest from savings deposit Tk. 18,000 [net of tax].
iii. Interest received on post office savings bank Tk. 9,000 [net of tax].

Income from other sources:

Income from lease of non-agricultural land Tk. 35,000

Actual investment made by Mr. Jamshed Hasan during the year is given below.

i. Life Insurance Premium paid Tk. 20,000; Policy value Tk. 2,00,000
ii. Donation to local club Tk. 2,000;
iii. Gift to wife Tk. 20,000;
iv. Donation to a local mosque Tk. 5,000;
v. Investment in primary shares of listed companies Tk. 60,000;
vi. Purchase of Savings Certificate Tk. 100,000;
vii. Donation to a charitable Hospital Tk. 10,000;
viii. Purchase of furniture Tk. 15,000;
ix. Donation to Apollo Hospital Tk. 30,000;
x. Donation to Govt. Zakat Fund Tk. 5,000.

Mr. Jamshed Hasan has Tk. 8,500 refund adjustment from last year and a carry forward of loss
from agriculture of Tk. 60,000 for last three years.

Solution 1:
Mr. Jamshed Hasan
Computation of total income
[assessment year 2024-25]

Sources of income Amount Amount Amount

1. Income from employment (section: 32):
Basic salary (33,000 X 12) 3,96,000
Festival bonus (33,000 X 2) 66,000
House rent allowance (15,000 X 12) 1,80,000
Entertainment allowance @ 5% 19,800
Medical allowance (2,000 X 12) 24,000
Conveyance allowance (1,500 X 12) 18,000
Employer’s contribution to RPF 39,600
743,400

232 Business Planning: Taxation & Compliance ICAB 2024

 Less: Exempted - 1/3 of income from total
247,800 4,95,600
employment or 450,000, whichever is lower

2. Agricultural income (section: 40):

Sale of crops 2,70,000
Less: Admissible expenses –
Cost of production (2,70,000 X 60%)
1,62,000
assuming no books of accounts maintained
1,08,000
60,000
Less: carry forward of previous loss
48,000
3. Income from business (section:44)
Business Income 32,000
C
H
4. Income from financial assets (section: 62): A
Interest from fixed deposit (27,000 X 100/90) 30,000 P
Interest from savings bank account (18,000 X T
20,000
100/90) E
Interest on post office savings bank (9,000 X R
10,000 60,000
100/90)

4. Income from other sources (section: 66): 18

Income from sale of fish of pond 45,000
Lease rental of non-agricultural land 41,000
86,000
Total income 7,21,600

Calculation of allowable investment

Amount
Life insurance premium (maximum up to 10% of policy value) 20,000
Investment in primary share of listed companies 60,000
Contribution to RPF (Tk. 39,600 × 2) 79,200
Purchase of savings certificate 100,000
Donation to:
Charitable hospital (assuming govt. approved) 10,000
Govt. Zakat fund 5,000
Actual investment 2,74,200
Maximum limit:
15% of actual investment; 41,130
3% of total income (7,21,600-50,000(min. tax bank int.) =6,71,600 X 3%); 22,148
Or 10,00,000 10,00,000
Whichever is lower allowable for investment 20,148

ICAB 2024 Assessment of individuals 233

 Calculation of tax liability:
Income Rates Amount
On first Tk. 3,50,000 0% -
On next Tk. 1,00,000 5% Tk. 5,000
On balance Tk. 2,71,600 10% 27,160
Total Tk. 7,21,600 32,160
Less: Investment tax rebate (20,148)
Less: Tax deducted at source (6,000)
Less: Previous year’s refund 8,000 carry forward (6,012)
Net Tax liability nil

Notes:

1. Tax deducted at source includes Tk. 5,000 on interest from bank deposit, and Tk. 1,000 on
post office savings bank.
2. The carry forward remaining refund adjustment is (8,000−6,012) Tk. 1,988

Example 2

Mrs. Jarin Huq is the general manager of a private company. Her sources of income for the year
ended 30th June, 2024 were as follows:

Salaries:

Basic salary per month Tk. 45,000

Medical allowance per month (actual exp. Tk. 19,000) 2,000
House rent allowance per month 30,000
Conveyance allowance per month 3,000
Share scheme received (Fair value less cost of acquisition) 50,000
Employer’s Contribution to RPF 10% of Basic

Income from financial asset:

Dividend from listed company Tk. 25,000

Interest received from government securities Tk 40,000

Income from rent:

Annual rent received Tk. 2,80,000

Municipal value 3,00,000

Expenses related to the house for the year:

Repair and Maintenance Tk. 1,00,000
Municipal tax Tk. 3,000

Agricultural income: Sale of crops Tk. 3,00,000

During the year, Mrs. Huq incurred the following investment and expenses:

Life insurance premium 48,000

Donation to local mosque 40,000
Purchase of share from IPO of listed companies 44,000

234 Business Planning: Taxation & Compliance ICAB 2024

 As per the list of assets and liabilities as at 30/6/2024, Mrs. Huq’s net asset value Tk. 6 crore.
From the above particulars of Mrs. Huq compute total income and tax liability for the assessment
year 2024-25.

Solution 2:
Mrs. Jarin Huq
Income year: 2023-24
Assessment year: 2024-25
Computation of total income

Sources of income Amount Amount Amount

1. Income from employment (section: 32):
Basic salary (45,000 X 12) 5,40,000
Medical allowance (2,000 X 12) 24,000
C
House rent allowance: 30,000 X 12 3,60,000 H
Conveyance allowance (3,000 X 12) 36,000 A
Income from share scheme 50,000 P
Employer’s contribution to RPF 54,000 T
10,64,000 E
Less: Exempted - 1/3 of income from total R
employment or 450,000, whichever is lower 3,54,667 7,09,333

2. Income from rent (section: 35): 18

Actual rental value 2,80,000
Municipal value/reasonable rent 3,00,000 3,00,000
Annual value (whichever is higher)
Less: Admissible expenses –
Repair and maintenance (3,00,000 × 25%) 75,000
Municipal tax 3,000 78,000 2,22,000
3. Agricultural income (section: 40):
Sale of crops 3,00,000
Less: Admissible expenses –
Cost of production (3,00,000 × 60%) being no
1,80,000
books of accounts are maintained 1,20,000

4. Interest on financial assets (section: 62):

Dividend income
25,000
Interest from government securities 65,000
40,000
Total income 11,16,333

ICAB 2024 Assessment of individuals 235

 Calculation of allowable investment
Amount
Life insurance premium 48,000
Contribution to RPF [both] 1,08,000
Share purchase from listed companies 44,000
Actual investment 2,00,000
Maximum limit:
15% of actual investment
30,000
3% of total income (11,16,333-25,000(min. tax dividend) =10,91,333 x 3%)
32,740
Or 10,00,000
10,00,000
Whichever is lower is the allowable investment allowance 30,000

Calculation of tax liability:

Rates Amount
On first Tk. 3,50,000 0% -
On next Tk. 1,00,000 5% Tk. 5,000
On next Tk. 4,00,000 10% 30,000
On balance 2,66,333 15% 39,950
Total 11,16,333 84,950
Less: Investment tax rebate 30,000

54,950
5,495
Add: Wealth Surcharge (54,950 X 10%) 60,445
Tax liability

Notes:
1. It is assumed that the house property has been let out for residential purpose and so the
repair and maintenance expense is considered as 25% of rental value.
2. Production cost is considered as 60% of the selling price of the crops in absence of any
books of accounts.

Worked example 3

Mr. Anu Ahmed has the following income for the income year ended on 30th June, 2024:

Income from salaries

Mr. Anu Ahmed received basic salary of Tk. 18,500 from the month of April, 2024 following the
scale of his salary 17,000 – 1,500 – 20,000. Before that his basic salary per month was Tk. 17,000
as the date of annual increment is 1st April every year. Besides basic salary he received dearness
allowance @ 15% of his basic salary; Entertainment allowance and medical allowance @ 20% and
@10% of basic salary respectively; Annual bonus Tk. 36,000; house rent allowance Tk. 11,000
per month; conveyance allowance Tk. 1,250 per month. He contributes 10% of basic salary to a
recognized provident fund (RPF) and his employer also contributes the same in the fund. During
the year he received Tk. 15,000 as interest on provident fund and the rate of interest was 12.5%.

236 Business Planning: Taxation & Compliance ICAB 2024

 Income from financial assets

Mr. Ahmed received interest on Govt. Securities Tk.1,00,000.

Income from business

Due to the economic problem and huge competition, his business results a loss of Tk. 80,000
this year which he likes to set-off against income from the sources mentioned above.

Capital gain

He has sold a machine at taka 150,000 before the expiry of 5 years which was purchased at a
price of taka 80,000 for the purpose of his business. Another 30,000 taka was spent to improve
the machine. At the time of sale, the machine had accumulated depreciation amounting to taka
60,000. C
H
Mr. Ahmed made and incurred the following investments and expenses during the year: A
P
1. Life insurance premium Tk. 6,000; policy value Tk. 70,000. T
2. Purchase of books Tk. 6,000 and purchase of scientific instruments Tk. 10,000. E
3. Purchase of primary shares of Listed Company Tk. 20,000. R
4. Donation to religious institutions Tk. 8,000; donation to Govt. Zakat Fund Tk. 7,500; donation
to president’s relief fund Tk. 28,000; donation to a local club Tk. 9,000; donation to a blind
school Tk. 15,000;
18
5. Purchase of a piece of land worth Tk. 70,000 in the name of his wife and a sum of Tk. 5,000
was spent for its registration.
6. Spent a sum of Tk. 15,000 as educational expenses of his children.
7. Purchase of ICB unit certificate Tk. 20,000.
8. Purchase of gold Tk. 20,000.
9. Contribution to group insurance scheme Tk. 2,000.

Ascertain his total income and tax to be paid for the assessment year of 2024-25.

Solution 3:
Mr. Anu Ahmed
Income year: 2023-24
[Assessment year: 2024-25]
Computation of total income

Heads of income Amount Amount Amount

1. Income from salaries (section: 21):
Basic salary (Note – 1) 2,08,500
Dearness allowance @ 15% 31,275
Entertainment allowance @ 20% 41,700
Medical allowance @ 10% 20,850
Annual bonus and fees 36,000
House rent allowance: (11,000 X 12) 1,32,000
Conveyance allowance (1,250 X 12) 15,000
Employer’s contribution to RPF 20,850 5,06,175

ICAB 2024 Assessment of individuals 237

 Interest from RPF 15,000
Less: exempted –up to:
33% of total salary from employment
(5,06,175 x 33%) (Para 5, Part 3 of 2nd Schedule) 1,67,038 -
5,06,175
Less: Exempted - 1/3 of income from total
1,68,725 3,37,450
employment or 450,000, whichever is lower

2. Income from business (section: 44)

Loss from business -80,000
Revenue gain from sale of machine as per sec.
60,000
46 (Cost Tk.1,10,000- WDV Tk.50,000)
-20,000
[Carry forward business loss 20,000]

3. Capital gain (section: 57)

Sale proceeds 1,50,000

Less: Cost of acquisition 80,000
Cost of improvement 30,000 1,10,000 40,000
Capital gain

4. Income from financial assets (section: 62): 1,00,000

Total income 4,77,450

Amount Amount
1. Life Insurance premium Tk. 6,000
Maximum: 10% of Tk. 70,000 7,000 Tk.6,000
2. Purchase of primary shares of listed Company 20,000
3. Donation to Govt. Zakat fund 7,500
4. Purchase of ICB unit certificate 20,000
5. Contribution to group insurance 2,000
6. Contribution to RPF (20,850 X 2) 41,700
Total allowable investment 97,200
Maximum limit of investment tax credit:
(a) 15 % of actual investment 14,580
(b) 3% of total income = (4,77,450 x 3%) 14,324
(c) 10,00,000 10,00,000
Whichever is lower 14,324
Thus, allowable investment for tax rebate 14,324

238 Business Planning: Taxation & Compliance ICAB 2024

 Calculation of tax liability:
Rates Amount
On first Tk. 3,50,000 0% -
On next Tk. 1,00,000 5% 5,000
On balance Total 27,450 10% 2,745
4,77,450 7,745
Less: Investment tax rebate (14,324)
(6,579)

Net Tax liability [minimum tax] 5,000

Notes:

1. After increment on April 1, 2024 Mr. Ahmed receives basic salary of Tk. 18,500 whereas
before increment, he received basic salary of Tk. 17,000. So, his basic salary for the income C
year is (17,000 X 9 + 18,500 X 3) = Tk. 2,08,500. H
2. Assuming he already enjoyed tax credit in the year of investment at securities at upfront A
system. P
3. As the capital asset is sold within 5 years of acquisition, regular tax rate has been applied as T
per 7th schedule. E
4. It is assumed that the revenue gain on sale of machinery is not included in income from R
business and profession. Thus, the business loss of Tk. 80,000 is set off against income under
the same head first and the balance is carry forward as per section 70 of ITA, 2023.
18
Worked example 4

Mr. Joynal Abedin works as an officer in a Multinational Company, headquartered in USA. His
sources of income for the year ended on 30th June, 2024 were as follows:

a. Income from salaries:

1. Basic salary Tk. 15,000 per month.
2. Dearness allowance 10% of the basic salary
3. Two bonuses equivalent to two month’s basic salary.
4. Medical allowance Tk. 1,000 per month (actual expense Tk. 10,000)
5. Entertainment allowance Tk. 200 per month
6. He has been provided with a free 2,500 CC car both for official and personal use.
7. He has also been provided with a rent-free quarter municipal value of which is Tk.
80,000.
8. Travelling allowance as a part of his service contract Tk. 1,00,000; from where he saved
Tk. 10,000.
9. He contributes 10% of his basic salary to a Recognized Provident Fund. His employer
also contributed the same
10. During the year, he received interest of Tk. 1,800 @ 12% from RPF.
11. He has taken Tk.21,500 as advance in the month of June, 2023 to meet up some of his
financial difficulties.

b. Income from financial assets:

Mr. Abedin received interest on Govt. Securities Tk.1,00,000. Tax deducted at source @ 10%.
Bank also charged Tk. 400 to collect the interest.

ICAB 2024 Assessment of individuals 239

 c. Income from house property:

He owns a two-storied house at Dhanmondi. He stays in one floor with his family and another
floor is let out for residential purpose @ Tk. 9,000 per month. The municipal value of the
house is Tk. 2,00,000 per annum. During the year he spent the following expenses:

Repair expense Tk. 2,000

Fire Insurance premium Tk. 4,000
Land development tax Tk. 1,500
Sewerage and utilities expense Tk. 1,000
Payment of HB Loan installment (including interest of Tk. 500) Tk.5,000

During the year, the house has remained vacant for two months.

d. Agricultural income:
Sale of crops Tk. 5,000
Income from borga Tk. 2,000

e. Share of profit from partnership firm Tk. 10,000

f. Income of spouse and minor children dependent on him Tk. 40,000

g. He won a lottery of Tk. 3,00,000 (tax deducted at source @ 20% - Tk. 60,000 from it)

h. During the year Mr. Abedin visited South Korea as a consultant and generated income of Tk.
5,00,000 and he paid income tax @ 25% in South Korea. He brought 2,50,000 to Bangladesh
through bank. From another visit to Russia, he generated income of Tk. 3,00,000 and paid
income tax there @ 20%.

i. Income from business

Profit from sole-proprietorship business Tk. 4,000. Last year’s loss carried forwarded Tk.
1,000.

j. Income from other sources:

1. Interest income from FDR Tk. 4,500

2. Profit from Islami bank Tk. 900
3. Dividend from ICB Mutual Fund Tk. 31,500
4. Cash dividend from a listed company shares Tk. 1,800
5. Sale of forest timber Tk. 2,000

Investment claimed by Mr. Abedin:

1. Payment of life insurance premium Tk. 8,000 (Policy value Tk. 100,000)
2. Purchase of a listed company’s primary share Tk. 5,000
3. Purchase of books and magazines Tk. 1,000
4. Purchase of a share of co-operative society Tk. 2,000
5. Contribution to President’s Relief Fund Tk. 3,000
6. Contribution to Govt. Zakat Fund Tk. 2,500
7. Purchase of Furniture Tk. 15,000

Based on the above information, compute Mr. Abedin’s total income and tax liability for the
assessment year 2024-25.

240 Business Planning: Taxation & Compliance ICAB 2024

 Solution 4:
Mr. Joynal Abedin
Income year: 2023-24
Assessment year: 2024-25
Computation of total income

Heads of income Amount Amount Amount

1. Income from employment (section: 32):
Basic salary (15,000 X 12) 1,80,000
Dearness allowance (1,80,000 × 10%) 18,000
Bonus (15,000 × 2) 30,000
Medical allowance (1,000 × 12) 12,000
Entertainment allowance (200 X 12) 2,400
Car facility [2500 CC] (10,000 x 12) 1,20,000 C
Rent free accommodation: annual rental value 80,000 H
Travelling allowance 1,00,000 A
P
Less: Exempted – up to actual expense (Para 14, 90,000
10,000 T
Part A of 6th Schedule)
E
Advance salary 21,500 R
Employer’s contribution to RPF (10% of Tk.
18,000
180,000)
4,91,900 18
Interest on RPF 1,800
Less: exempted – up to:
33% of total salary from employment 1,62,327 -

(491,900 x 33%) (Para 5, Part 3 of 2nd Schedule)

4,91,900
Less: Exempted - 1/3 of income from total
1,63,967
employment or 450,000, whichever is lower
3,27,933
2. Income from rent (section: 35):
Actual rental value (9,000 × 12) 1,08,000
Municipal value (2,00,000 / 2) 1,00,000
Annual value (whichever is higher) 108000
Less : Vacancy allowance (9,000× 2) 18,000 90,000

Less: Admissible expenses –

Repair and maintenance (25% × 90,000) 22,500
Fire Insurance premium (4,000 / 2) 2,000
Land development tax (1,500 / 2) 750
Interest on loan (500 / 2) 250 25,500 64,500
19,500

ICAB 2024 Assessment of individuals 241

 3. Agricultural income (section: 40):
Sale of crops 5,000
Income from borga 2,000
7,000

Less: Production cost (5,000 × 60%) 3,000 4,000

4. Income from business (section: 44): 4,000

Profit from sole-proprietorship business
Less: Set-off of previous year’s loss 1,000 3,000

5. Income from financial asset (Section 62):

Interest on government securities 1,00,000

Less: collection charge charged by the bank (400) 99,600
Profit from Islami Bank (900 × 100/90) 1,000
Interest on fixed deposit (4,500 × 100/90) 5,000
Dividend from ICB Mutual Fund (31,500 ×
35,000
100/90)
Cash dividend of listed Co. (1,800 × 100/90) 2,000 1,42,600

6. Share of profit in a partnership firm

10,000
(assuming untaxed being the figure is very low)

7. Income of spouse and minor children

40,000
dependent on him

8. Income from other sources (section: 66):

Sale of forest timber 2,000
Prize Bond Lottery (TDS is minimum tax u/s 163) 3,00,000 3,02,000

9. Foreign income:
[a] Income from South Korea (As there is DTAA
between Korea and Bangladesh foreign tax 5,00,000
credit will be allowed as per sec 244:
Less: Brought to Bangladesh through official
channel
(exempted as per 6th schedule part-1) 2,50,000 2,50,000

[b] Income from Russia:(As there is no DTAA

between Bangladesh and Russia, so no foreign
tax credit will be allowed as per section 246. 3,00,000 5,50,000
Because NBR not yet prescribed any rules in this
behalf)
Total income 14,13,533

242 Business Planning: Taxation & Compliance ICAB 2024

 Calculation of eligible amount of investment

Amount
Life insurance premium Tk. 8,000
Share of listed companies 5,000
Contribution to Govt. zakat fund 2,500
Contribution to RPF (18,000 ×2) 36,000
Actual investment 51,500
Maximum limit of allowable investment: 7,725
15% of actual investment (51,500 x 15%) 19,128
3% (total income– min. tax u/s 163) = (14,13,533 – 3,00,000-1,42,600) X 3%
Or, 10,00,000 10,00,000

Thus, eligible amount of investment for tax rebate would be 7,725

C
Calculation of tax liability: Income Rates Amount H
On first Tk. 3,50,000 0% - A
On next Tk. 1,00,000 5% 5,000 P
On next Tk. 4,00,000 10% 40,000 T
On balance Tk. 2,63,533 15% 39,530 E
On lottery income Tk. 3,00,000 25% 75,000 R
Total 14,13,533 1,59,530
Less: Investment tax rebate (7,725)
18
151,805
No Tax credit for profit on partnership firm (assuming this
nil
small figure is untaxed)
151,805
Less: Double taxation relief [as per sec 244)] [note-5] 25,000
1,21,380
Less: Tax deducted at source [note-1] 64,300
Net tax liability 57,080

Notes:
1. TDS includes Tk. 500 on interest on fixed deposit, Tk. 100 on profit from Islami Bank, Tk.
3,500 on dividend from ICB mutual fund, Tk. 200 on dividend of listed company and Tk.
60,000 on winning of lottery. Altogether it comes Tk. 64,300
2. Both contributions to RPF are eligible investment allowance.
3. Purchase of books, Contribution to President’s Relief Fund, shares of co-operative society
and furniture is not considered as investment allowance as these are not items of 6th
schedule (Part-C)
4. Average rate of tax = (1,51,805/14,13,533 ) say, 10%
5. Double taxation relief: Tax relief –
[a] On income from South Korea (as per DTAA) 25% of 2,50,000 = Tk. 62,500
Maximum relief for DTAA country is at an average rate of the country (2,50,000 X 10%)
Tk.25,000

ICAB 2024 Assessment of individuals 243

 [b] On income from Russia :( As there is no DTAA between Bangladesh and Russia, so no
foreign tax credit will be allowed as per section 246)

Question No. 5:

The following are the particulars of income of Mr.Fazal for the year ended 30th June, 2024.

a) Salary Tk.12,000/- per month (basic)

b) Dearness Allowance 40% of basic pay but maximum of Tk.4,000 per month
c) Entertainment Allowance Tk.400 per month.
d) Bonus-equivalent to basic salary of two months.
e) Income from Commercial Securities Tk.6,098/-.
f) Honorarium as part time advisor Tk.20,000/-
g) Income from Partnership Business Tk.50,000/-(taxed).
h) Income from Agricultural Land (sale of crops) Tk.10,000/-
i) Royalty from books Tk.7,000.
j) Received birth day presentation Tk.5,000.
k) Interest on pensioner savings certificate Tk.10,000.

Mr. Fazal was provided with a free-furnished quarter annual rental value Tk. 36,000. He also owns
a house which is let out at Tk.10,000 per month. The reasonable rent of the house is Tk.1,00,000.
He spent Tk.7,500/- for repair and Tk.30,000 for alternation. He also paid Tk.4,000 for Municipal
Tax, Tk.2,000 for fire insurance premium, Tk.3,000 for collection charges. He claimed 2 months
vacancy allowance.

Other Particulars of Mr. Fazal are as follows:

a) He contributed 10% of his basic salary to a recognized provident fund to which his employer
contributed equal amount.
b) He insured his own life for Tk.75,000 and for the life of his wife for Tk.50,000. He paid
insurance premiums on the above policies Tk.6,000 and Tk.4,000 respectively.
c) Purchased Sanchay Patra for Tk.20,000.
d) He spent Tk.8,000 on education for two college going children.

Required to calculate:

i) Total taxable income

ii) Investment tax rebate
iii) Tax to be paid.

Answer to question no.5:

Computation of Total income of Mr. Fazal

Income Year: 2023-24
Assessment Year: 2024-25

Particulars Tk. Tk. Tk. Tk.

1. Income from employment: Sec 32
a) Basic Salary: Tk.12,000 Monthly 12,000x12 1,44,000
b) Dearness allowance: 40% of Basic pay
48,000
Maximum: 4,000 pm x12

244 Business Planning: Taxation & Compliance ICAB 2024

 c) Entertainment Allowance: 400 x 12 4,800
d) Bonus (2 month’s Basic Salary) 12,000 x 2 24,000
e) Free Furnished Quarter: Annual rental value 36,000
f) Employer’s contribution to RPF: 10% of B. S. 14,400 271,200
Less: Exempted - 1/3 of income from total
90,400 180,800
employment or 450,000, whichever is lower
2. Income from rent: Sec.35
Wholly let out house:
Annual Rental Value: 10,000x12 1,20,000
Or, reasonable rent (Higher one is A.V.) 1,00,000 1,20,000
Less: admissible deductions:
i) Repair 25% of R.V. (including collection
30,000
charge)
C
ii) Municipal tax 4,000
H
iii) Insurance Premium 2,000 36,000 84,000 84,000
A
P
3. Income from Agriculture: Sec. 40 - T
Sale of crops 10,000 E
Less Cost of production @ 60% 6,000 4,000 R

4. Income from Business: Sec.44

Income from Partnership Business (taxed 18
50,000
income)

5. Income from financial assets (section 62)

Income from Commercial Securities 6,098

6. Income from Other Sources: Sec. 66

a) Honorarium as advisor 20,000
b) Royalty from books 7,000 27,000
c) Birth Day Gift 5,000
Total Income 3,56,898

Investment Tax Rebate: Sec. 78

Particulars Tk. Tk.

a) Actual Investment:
i) Employee and employer contribution to RPF: 14,400 x 2 28,800
ii) Savings certificate purchase 20,000
iii) Life Insurance Premium
Self: 6,000 or, 10% of Policy amount 7,500 (i.e., 10% of Tk.
6,000
50,000) (Lower)
Wife: 4,000 Or, 10% of Policy amount 5,000 (i.e., 10% of Tk.
4,000
50,000) (Lower)
Total investment 58,800

ICAB 2024 Assessment of individuals 245

 b) Investment tax rebate:
(a) 3% of T.I. =3,56,898 X 3% 10,707
(b) Tk. 10,00,000 10,00,000
(c) Actual investment Tk. 58,800 X 15% 8,820
Lower amount is the eligible for investment tax rebate 8,820

Tax calculation:
Total Income Tk. 351,898
Tax on 1st Tk. 3,50,000= Nil
Tax on next Tk.1,898 x 5% 95
95
Less: Investment tax rebate 8,820
Minimum tax will be 5,000
Less: Rebate on income from partnership firm at average rate
710
(50,000x5,000/351,898)
Net tax payable 4,290

Note:
1) Income from Commercial Securities needs not to be grossed-up assuming TDS was at
upfront system during the year of purchase. Moreover, TDS information is not given in the
question.
2) The vacancy allowance was not included in the Income Tax Return because the proof of the
electricity bill was not submitted.
3) Rebate would be calculated at the average rate of tax out of the “Income from Partnership
Business” (taxed) to arrive at the Net tax calculation as per section 80 of ITA, 2023.
4) Royalty income from books is taxable u/s 66 of ITA, 2023.
5) Education expense for Children is not an item of investment allowance.
6) Interest on pensioner savings certificate is tax free up to investment of Tk. 5 lakh. As the
interest income figure is only Tk.10,000, so I assume that investment was within that non-
taxable ceiling.

Question No.6

Mr. A. Quader works as Manager Finance in a reputed financing company. The following are the
details of income of Mr. A. Quader for the year ended June 30, 2024.
(a) Salary Income:

Basic Salary - Tk. 35,000 p.m., Bonus – 2 months basic salary, House rent allowance – 40% of
basic salary, Medical allowance – Tk. 2,500 p.m., Conveyance allowance – Tk. 3,000 p.m.,
Concessional passage within Bangladesh – Tk. 1,30,000, Subscription to RPF – 10% (Employer’s
contribution is also the same), Interest accrued Tk. 85,000 on RPF balance calculated @ 16%.

(b) Income from Rent:

[1] Mr. Quader has one residential house-one half of which is let out at a monthly rent of Tk.
12,000 and the other half is self-occupied. Following expenditures were incurred by Mr.
Quader: Municipal tax Tk.22,000; Repairs and maintenance Tk.55,000; Insurance premium
Tk.16,000; Salary of caretaker Tk.36,000

246 Business Planning: Taxation & Compliance ICAB 2024

 [2] Income from shop rent Tk. 2,500 per month

(c) Income from Land:

[1] Sale of paddy from agricultural land given on Barga system – Tk.1,12,000.
[2] Sale proceeds from trees of spontaneous growth in Mr. Quader’s land Tk. 12,000

(d) Income from Business:

[1] Share of profit from a partnership firm Tk. 67,000

[2] Business Income Tk. 70,000 (after allowing current year’s depreciation Tk. 20,000)

The following sums have been brought forward from the preceding year:
• Unabsorbed depreciation Tk. 80,000
• Business loss Tk. 50,000 C
H
(e) Capital Gains: A
P
1. Profit on sale of shares of MNC Ltd (A Private Ltd. Co.) Tk. 40,50,000 T
2. Sale of Shop (Deed Value Tk. 1,82,500), Original cost Tk. 30,750 and tax deducted at source E
at the time of registration Tk. 5,650 to be assessed u/s. 163. R
3. Profit on sale of shares of ERZ Ltd. Tk. 23,30,500 (A Publicly Listed Co.)

(f) Interest income and dividend income (Net @ 10% tax deduction at source):
18
(1) From Leasing Company Tk. 8,33,500
(2) On Bank Fixed Deposit Tk. 1,25,250
(3) On Bank Savings Account Tk. 55,700
(4) On cash dividend Tk. 11,115

During the year Mr. Quader made the following investments –

(1) Life insurance premium Tk.65,000 (Policy Value Tk.500,000)
(2) Investment in shares of a listed company Tk. 120,000
(3) Donation to charitable institutions as approved by NBR Tk.33,000.

Requirement: Compute Mr. Quader’s total income and tax liability for the assessment year
2024-25.
Answer to question No. 6:

Mr. A. Quader
Income Year: 2023-24
Assessment year: 2024-25

Computation Total Taxable Income

Tk. Tk. Tk.
Income from employment: (u/s 32)
Basic salary (35,000 Tk. Per month) 4,20,000
Bonus (2 months basic) 70,000
House rent (40% of basic salary) 1,68,000

ICAB 2024 Assessment of individuals 247

 Medical allowance 30,000
Conveyance allowance 36,000
Concessional passage within Bangladesh 1,30,000
Less: Exempted (Assumed that it is as per
employment contract and actually spent as per 6th 1,30,000 -
schedule)
Employer’s contribution to RPF (10% of basic) 42,000
7,66,000
Interest accrued on PF @16% p.a. 85,000
Less: Exempted (766,000 x 33%) (Para 5, Part 3 of
2,52,780 -
2nd Schedule)
7,66,000
Less: Exempted - 1/3 of income from total
2,55,333
employment or 450,000, whichever is lower
Taxable income from employment 5,10,667

Income from rent: (u/s 35)

1,44,000
Annual value (as it seems reasonable)
Less: Admissible deductions

Repair and maintenance (25% of annual value) 36,000

Municipal tax (1/2 of Tk. 22,000) 11,000
Insurance premium (1/2 of Tk. 16,000) 8,000 89,000
-
Income from special rent (36000-91000)
Shop rent (as it seems reasonable) 30,000
Less: Repair and maintenance (30% of annual value) 9,000
21,000
Income from Rent 1,10,000
Income from special rent (9000-0) 9,000
Income from agriculture: (u/s 40)
Sale of paddy on Adhi system 1,12,000 1,12,000
(To be added direct as he did not cultivate)
Income from business: (u/s 44)
Share of profit of partnership firm 67,000
(assumed that firm’s income is below taxable so
partner will have to pay tax on this income at regular
tax rate)
Business income 70,000
Less: Business loss b/f (assuming loss from same
50,000 20,000
business)
87,000
Less: Unabsorbed depreciation (from Tk.80,000) 20,000
Total income from business 67,000

248 Business Planning: Taxation & Compliance ICAB 2024

 Capital gains: (u/s 57)
Profit on sale of shares of MNC Ltd (A Private Ltd. Co. 40,50,000
Profit on sale of shares of ERZ Ltd (Publicly listed Co.) 23,30,500
Less: Exempted fully as per 6th Schedule 23,30,500 -

Capital Gain on sale of shop [1,82,500 -30,750] 1,51,750 42,01,750

Capital Gains

Income from financial assets (u/s 62)

Int. from leasing company (gross, TDS @ 10%) 9,26,111
Int. on Bank Fixed deposit (gross, TDS @ 10%) 1,39,167
Int. on savings bank a/c (gross, TDS @10%) 61,889
C
Cash dividend (gross) assumed from listed co. 12,350 11,39,517
H
A
Income from other sources: (u/s 66) P
Sale proceeds from trees 12,000 T
Total income 61,61,934 E
R
Computation of Investment Tax Rebate Tk.
Employee’s and Employer’s contribution to RPF 84,000
18
Life insurance premium actual Tk. 65,000 but
50,000
allowed up to 10% of policy value Tk. 5,00,000)
Investment in shares of listed companies 120,000
Donation approved by NBR 33,000
Total 287,000

Allowable limit of investment:

Lower of -
3% of total income excluding income u/s 163
Tk. (61,61,934 – 1,82,500) x 3% 179,383
15% of actual investment 43,050
Maximum limit 10,00,000
Tax rebate on investment (Lower one), Tk. 43,050

Total Tax
Computation of tax liability Tax
income rate
First up to Tk. 3,50,000 3,50,000 0% -
Next up to Tk. 1,00,000 1,00,000 5% 5,000
Next up to Tk. 4,00,000 4,00,000 10% 40,000
Next up to Tk. 5,00,000 4,00,000 15% 75,000
Next up to Tk. 5,00,000 5,00,000 20% 100,000
On balance Tk. 3,83,136 79,434 25% 19,859
Total except Profit on sale of shares of MNC
Ltd. (A Private Ltd. Co.) Tk. 4,050,000 and sale 1,929,434 239,859
of shop Tk. 1,82,500

ICAB 2024 Assessment of individuals 249

 Add: Tax applied on shop sale 1,82,500 5,650
Add: Tax on Capital Gain on sale of shares of
MNC Ltd. (A Private Ltd. Co.) assuming that it
was sold after 5 years. So, tax rate will be 15% 607,500
4,050,000 15%
as per 7th schedule.)
Total tax payable
Less: TDS 853,009
(1) From sale of land u/s 163 5,650
(2) TDS from Interest from leasing company 92,611
(3) TDS on Interest on Bank Fixed deposit 13,917
(4) TDS on cash dividend 1,235
6,189 (119,602)
733,407
Less: Investment tax rebate on investment (43,050)
Tax payable 690,357

Question No.7
Mr. Samual Gomez works in Bangladesh as an officer in a Multinational Company,
headquartered in the USA. His sources of income for the year ended on 30th June, 2024 were
as follows:
a. Income from employment:
(1) Basic Salary Tk.15,000 per month.
(2) Dearness allowance 10% of the basic salary
(3) Two bonuses equivalent to two months‟ basic salary
(4) Medical allowance Tk.20,000 per year (actual expense for the year Tk.10,000)
(5) Entertainment allowance Tk.200 per month
(6) He has been provided with a free car (2500 CC) both for official and personal uses.
(7) He has also been provided with a rent-free quarter, municipal value of which is Tk.80,000 p.a.
(8) Travel allowance as a part of his contract Tk.100,000 p.a. from where he saved Tk.10,000.
(9) He contributes 10% of his basic salary to RPF. His employer also contributed the same.
(10) During the year, he received interest of Tk. 1,800 @ 12% on RPF.
(11) He has taken one month’s basic salary as advance in the month of June to meet up some of
his financial difficulties.
b. Income from financial assets:
(1) Interest on government securities Tk.3,000.
(2) Interest on less-tax government securities Tk.2,700.
(3) Interest on approved debentures Tk.27,300. He has borrowed Tk.20,000 @ 10% interest to
purchase it. Bank also charged Tk.400 to collect the interest.
(4) Interest income from FDR Tk.4,500 (net of TDS @ 10%)
(5) Profit from Islami bank Tk.900 (net of TDS @ 10%)

250 Business Planning: Taxation & Compliance ICAB 2024

 (6) Cash Dividend from ICB Mutual Fund Tk.31,500 (net of TDS @ 10%)
(7) Cash Dividend from a listed company shares Tk.1,800 (net of TDS @ 10%)

c. Income from House Properties:

He owns a two-storied house in Dhanmondi. He stays in one floor with his family and another
floor is let out for residential purpose at a rate of Tk.9,000 per month. The municipal value of the
house is Tk.200,000 per annum. During the year he spent the following expenses for the whole
house:

Repair expense Tk.2,000, Insurance expense Tk.4,000, Land development tax Tk.1,500
Sewerage and utilities expense Tk.1,000, Payment of DBH Loan Installment Tk.5,000 (including
interest of Tk.500).
During the year, the house has remained vacant for two months. C
H
d. Agricultural income: Sale of crops Tk.5,000 and Income from barga Tk.2,000
A
e. Share of profit from a partnership firm Tk.10,000 (firm paid no tax thereon)
P
f. Income of spouse and minor child Tk.40,000
T
g. He won Prize Bond lottery of Tk.300,000 [tax deducted at source @ 20% from it]
E
R
h. Foreign Income

During the year Mr. Gomez visited South Korea as a consultant and generated income of
Tk.500,000 and he paid income tax @ 25% in South Korea. He brought Tk.250,000 to 18
Bangladesh through bank. From another visit to Uganda, he generated income of Tk.300,000
and paid income tax there @ 20%. Bangladesh has DTAA (Double Taxation Avoidance
Agreement) with South Korea, but not with Uganda.

i. Income from business: Profit from sole-proprietorship business Tk.4,000; last year’s loss
carried forwarded Tk.1,000.
j. Income from other sources:
(1) Sale of forest timber Tk.2,000

Investment claimed by Mr. Gomez:

(1) Payment of life insurance premium Tk. 8,000 (Policy value Tk.100,000)
(2) Purchase of a listed company’s primary share Tk.5,000
(3) Purchase of books and magazines Tk.1,000
(4) Purchase of a share of co-operative society Tk.2,000
(5) Contribution to Government Zakat Fund Tk.2,500
(6) Purchase of Furniture Tk.15,000

Requirement: Based on the above information, calculate Mr. Samual Gomez’s total income and
tax liability for the assessment year 2024-25

Answer to question No. 7:

Mr. Samual Gomez

Income Year: 2023–24
Assessment Year: 2024–25
Computation of Total Income

ICAB 2024 Assessment of individuals 251

 Heads of Income Amount Amount Amount
1. Income from Salary (Section: 32):
Basic salary (15,000 X 12) 1,80,000
Dearness allowance (1,80,000 × 10%) 18,000
Bonus (15,000 × 2) 30,000
Medical allowance 20,000
Entertainment allowance (200 X 12) 2,400
Car facility (10,000 X 12) 1,20,000
Rent Free Accommodation: Rental value 80,000
Travel allowance 1,00,000
Less: Exempted – up to actual expense 90,000 10,000
Advance salary 15,000
Employer’s contribution to RPF (10% of
18,000
Tk.180,000)
4,93,400
Interest from RPF 1,800
Less: exempted – up to: 33% of total
1,62,822 -
salary from employment
4,93,400
Less: Exempted - 1/3 of income from total
1,64,467 3,28,933
employment or 450,000, whichever is lower

2. Income from rent (Section: 35):

Actual rental value (9,000 × 12) 1,08,000
Municipal value (2,00,000 / 2) 1,00,000
Annual value (whichever is higher) 1,08,000
Less: Vacancy allowance (9,000 × 2) 18,000 90,000
Less: Allowable deductions
Repair and maintenance (25% × 1,08,000) 27,000
Insurance (4,000 / 2) 2,000
Land development tax (1,500 / 2) 750
Interest on loan (500 / 2) 250 250 30,000 60,000
25,000
Special income from rent (27,000 – 2,000)

3. Agricultural Income (Section: 40):

Sale of crops 5,000
Less: Allowable deductions: Production cost 60% 3,000 2,000
Income from barga 2,000
4,000
4. Income from Business (Sec:44):
Profit from sole-proprietorship business
Less: Carry forward of previous year’s loss 4,000
1,000 3000
Share of profit from partnership firm (below taxable) 10,000

252 Business Planning: Taxation & Compliance ICAB 2024

 5. Income from financial assets (Sec.62):
Interest on government securities 3,000
Int. on less-tax Govt. securities (2,700 × 100/95) 2,842
Interest on approved debentures 27,300
Less: Allowable expenses:
Bank Charge -400
Interest on loan -2,000 26,900

Interest on FDR (4,500 × 100/90) 5,000

Profit from Islami Bank (900 × 100/90) 1,000
Dividend from ICB Mutual Fund (31,500 × 100/90) 35,000
Dividend of listed Public Ltd. Co. (1,800 × 100/90) 2,000
75,742 C
6. Income of spouse or minor child 40,000 H
7. Income from other sources (Section: 66): A
Sale of forest timber 2,000 P
Prize Bond Lottery [income u/s 163] 3,00,000 T
E
3,02,000
R
8. Foreign Income:
Income from South Korea 5,00,000
Less: Brought to Bangladesh through official channel 18
th
(exempted as per 6 schedule (part-A) para-17 of
ITA,2023). On remaining Tk.2,50,000 foreign tax
credit will be applicable as per sec.244
2,50,000 2,50,000
Income from Uganda:(As there is no DTAA between
Bangladesh and Uganda, so no foreign tax credit will
3,00,000
be allowed as per section 246 as NBR not yet
prescribed any rules in this behalf)
5,50,000
Total Income 13,98,675

Calculation of Allowable investment allowance

Particulars Amount
Life insurance premium 8,000
Share purchase 5,000
Contribution to Govt. Zakat Fund 2,500
Contribution to RPF (18,000 × 2) 36,000
Actual investment 51,500
Maximum limit of allowable investment:
3% (total income –income under 82C) = (13,98,675– 3,00,000) X 3% 10,98,675
15% of actual investment 7,725
or 10,00,000 10,00,000
Thus, allowable investment allowance for tax rebate would be 7,725

ICAB 2024 Assessment of individuals 253

 Calculation of Tax liability:

Particulars Rate Amount

On first Tk. 3,50,000 0% 0
On next Tk. 1,00,000 5% 5,000
On next Tk. 4,00,000 10% 40,000
On balance Tk. 248,675 15% 37,301
Total 1,098,675 82,301
+ tax on prize bond lottery @ 25% on Tk.3,00,000
75,000
[163 income]
157,301
Less: Investment tax rebate 7,725
149,576
No Tax credit as firm’s income was below taxable Nil
149,576
Less: Double taxation relief (foreign tax credit as per
sec 244 Average tax rate in Bangladesh is
(1,35,826/13,73,675) i.e.,
10%. Tax relief on income from South Korea (as per
DTAA) 30% of 2,50,000 = Tk. 75,000 but maximum
25,000
relief is at an average rate of the country (2,50,000 X
10%) = Tk. 25,000
124,576
Less: TDS [142+500+100+3,500+200+60,000] 64,442

Net tax payable 60,134

Question No.8

Mr. Rafiq is a Finance Manager of a multi-national company. His income for the Assessment Year
2024-25 were as under:

[1] Basic Salary- Tk. 60,000 per month.

[2] House Rent Allowance- 60% of the Basic Salary.
[3] Medical Allowance- 10% of the Basic Pay.
[4] Entertainment Allowance- 10% of the Basic Salary.
[5] Employer’s Contribution to Recognized Provident Fund- 10% of the Basic Salary.
[6] Bonus- equivalent to 2 month’s Basic Salary.
[7] Mr. Rafiq was provided with a servant at monthly salary of Tk.8,000 each.
[8] He is entitled to two months’ Basic Salary as a Gratuity at the time of retirement.
[9] He is also entitled to a full-time 2500 CC car. Car related expenses are borne by the
company.

254 Business Planning: Taxation & Compliance ICAB 2024

 His other incomes were as follows:

[1] Dividend from a company listed in the Dhaka Stock Exchange Tk.150,000.
[2] Dividend from Private limited company Tk.60,000.
[3] Interest from 5 years’ Bangladesh Sanchaya Patra Tk.75,000.
[4] Interest from Savings Bank A/c. Tk.40,000 (Gross) from which 10% tax was deducted.

He has a house from which he earns monthly rental income of Tk.60,000. He paid Municipal Tax
of Tk.4,000 per quarter. Interest paid on the Bank Loan was Tk.180,000 per annum. Actual
Repair & maintains expense Tk. 1,80,000

Mr. Rafiq contributed Tk.72,000 to Provident Fund. Interest accrued on the P.F. Balance was
Tk.40,000. He paid Life Insurance Premium of Tk.56,000. He purchased 5 years’ Bangladesh
Sanchaya Patra Tk.190,000.
C
Compute Total Income and Tax Liability thereon of Mr. Rafiq for the Assessment Year 2024-25 H
A
Answer to question No. 8: P
T
Mr. Rafiq E
Computation of Total Income R
Assessment year 2024-25

Income from employment Amount Amount 18

Basic Salary - Tk.60,000 per month (60,000 x 12) 7,20,000

Bonus - 2 months’ Basic (60,000 x 2) 1,20,000
House Rent - 60% of Basic (60% x 60,000 x 12) 4,32,000
Entertainment - 10% of Basic (10% x 720,000) 72,000
Medical Allowance - 10% of Basic 72,000
Employer’s Contribution to P.F - (10% x 720,000) 72,000
Full Time Car Entitlement 1,20,000
Salary of servant - 8,000 x 12) 96,000
17,04,000
Less: Exempted - 1/3 of income from gross salary
or 450,000, whichever is lower (4,50,000) 12,54,000

(ii) Income from Rent

Annual Value - 60,000 per month (60,000 x 12) 7,20,000
Less:
(1,80,000)
(1) Repairs & Maintenance is 25% of Annual value
(2) Municipal Tax 4,000 per quarter= 4,000 x 4 (16,000)
(3) Interest on Bank Loan (1,80,000) 3,44,000

(iii) Income from financial asset

Interest from 5 years’ Bangladesh Sanchaya Patra 75,000

ICAB 2024 Assessment of individuals 255

 Dividend from Listed Company 1,50,000
Dividend from Private Ltd. Company 60,000
Int. on Savings Bank Account 40,000 3,25,000

Total Income 19,23,000

Tax calculation:

Total Income Tax Rate Income Tax

On income 3,50,000 0% NIL
On the next Tk. 1,00,000 5% 5,000
On the next Tk. 4,00,000 10% 40,000
On the next Tk. 5,00,000 15% 75,000
On the next Tk 5,00,000 20% 1,00,000
On the balance 73,000 25% 18,250
19,23,000 238,250
Less: Tax rebate on Investment (Note) (-) 47,940
1,90,310

Less: [1] 10% TDS on Saving Bank Account -4,000

[2] 10% tax deducted on Sanchaya Patra -7,500
[3] 10% tax deducted on cash dividend -15,000
Net tax payable 1,63,810

1. The salary of servant will be included to his income from employment as perquisite.

2. Investment allowance is limited to Tk. 10,00,000 or 3% of total income excluding any income
where minimum tax is applicable u/s 163 and any income where reduced tax rate is
applicable or 15% of actual investment, whichever is less. Here, his total income is Tk.
19,23,000-3,25,000=15,98,000 and 3% of this amount will be Tk. 47,940. But his investment
is as follows:

(i) P. F. Contribution (Tk. 72,000 x 2) 144,000

(ii) L.I.P. 56,000
(iii) 5 years Sanchaya Patra 190,000
390,000

15% of actual investment 390,000 x 15% = 58,500. Thus, lower one 47,940 allowable tax
rebate on investment

3. Gratuity will be considered when it is received. Any amount up to taka two crore fifty lac
received by an assessee as gratuity is exempted from payment of tax.

4. Interest accruing to or derived by a recognized provident fund is tax free up to a certain limit.
I assume that it is within the limit. So, it is exempted.

256 Business Planning: Taxation & Compliance ICAB 2024

 Question No.9

Mr. Abedin’s salary during the financial year 2023-24 is as follows:

Particular Amount in Taka

Basic salary 15,00,000/-
Bonus 300,000/-
House rent 750,000/-
Medical allowance 150,000/-
Conveyance allowance 100,000/-

Mr. Abedin is also the owner of a 3 storied residential building in Dhaka. During the financial
year 2023-24, he received total rent Tk. 10,80,000/-, and paid city corporation tax Tk.50,000/,
land tax TK.500/-and for repair and maintenance Tk. 270,000. C
Mr. Abedin also received FDR interest Tk.200,000/-, Tk.250,000/- as interest from savings H
certificate and Tk.100,000/- as dividend from listed companies. A
P
Mr. Abedin purchased savings certificate of Tk.500,000/- during the year.
T
Tax of Tk.180,000/- has been deducted from Mr. Abedin’s salary during the year and other E
deduction of tax at sources has been made properly. R
Mr. Abedin’s net asset as on 30/06/2024 is Tk.4,00,00,000/-. As per life style form, Mr. Abedin’s
family expenditure other than taxes is Tk.11,46,537/-. He paid advance tax Tk.3,50,000/-u/s 154
for the assessment year 2024-25 and Tk.30,000/- to pay off the tax liability u/s 173 at the time of 18
submitting return for the assessment year 2023-24.
For the assessment year 2024-25 compute the following with regard to Mr. Abedin:

(1) Salary income;

(2) House property income;
(3) Income from other sources;
(4) Income u/s 163;
(5) Total Income and tax payable;
(6) Investment allowance and investment tax credit;
(7) Amount of tax deducted at sources;
(8) Net tax payable including surcharge, if any.
(9) Keeping in view the provision of Income Tax Act, 2023, compute the maximum amount of
net asset that Mr. Abedin may have as on 30/06/2024.

Solution to the Q. No. 9

Salary Income

Pay and Allowance Amount (taka) Exempted portion Taxable salary

Basic salary 15,00,000 1/3 of 28,00,000 or
Bonus 300,000 450,000 whichever
House Rent Allowance 750,000 is lower 23,50,000
Medical Allowance 150,000
Conveyance Allowance 100,000
Taxable Income from Salary 28,00,000 450,000 23,50,000

ICAB 2024 Assessment of individuals 257

 House Property Income
► Annual Value [a] 10,80,000
Less: Repair & Maintenance
(1/4th of annual value) 2,70,000
City corporation tax 50,000
Land tax 500
[b] 3,20,500

Net House property income [a-b] 7,59,500

Income from financial asset

► FDR interest 2,00,000
► Cash dividend 1,00,000
► Interest on savings certificate 2,50,000
5,50,000

Total Income of Mr. Abedin

Source of Income Amount (Tk.)

Income from employment 23,50,000
Income from financial assets u/s 163 5,50,000
House Property Income 7,59,500
Total Income 36,59,500

Tax Calculation

Income Tax Rate Amount of Tax

On the first tk. 3,50,000 0% 0
Next tk. 1,00,000 5% 5,000
Next tk. 4,00,000 10% 40,000
Next tk. 5,00,000 15% 75,000
Next tk. 5,00,000 20% 1,00,000
Next tk. 1,559,500 25% 389,875
Interest on securities u/s 163 Tk. 250,000 10% 25,000
Tax chargeable on total Income 634,875

Calculation of Investment Tax Credit:

Investment Amount (Tk.)

Purchase of savings certificate 500,000
Total Investment 500,000
Investment Allowed for tax credit (Actual Investment Tk. 500,000 X 15% = 75,000
75000 or 3% of TK. 3,109,500 i.e., 93,285 or Tk. 10,00,000 (whichever is
lower)
Investment Tax credit 75,000

258 Business Planning: Taxation & Compliance ICAB 2024

 Tax Calculation Tk. Tk.
Tax chargeable on Total Income: 634,875
Less: Investment tax credit 75,000
Tax payable 559,875
Add: Surcharge: 10% 55,988
Less :Tax credit (TDS & AIT):
(1) Advance Income Tax paid 350,000
(2) TDS on salaries 180,000
(3) TDS on FDR interest 20,000
(4) TDS on dividend 15,000
(5) TDS on Interest on S/C 25,000 590,000
Net tax payable 25,863

Reconciliation of Wealth Statement C

H
Particular Amount (Tk.) A
Net assets as on 30/06/2024 4,23,97,963 P
T
Net assets as on 30/06/2023 4,00,00,000
E
Apparent Wealth Accretion 23,97,963
R
Tax deducted at source 2,35,000
Tax paid u/s 173 during the previous year 30,000
Advance tax paid 350,000 18
Family expenditure 11,46,537
Real wealth Accretion 41,59,500

Source of Fund

Source of fund Amount (Tk.)

Taxable income 36,59,500
Non-taxable income
House Rent allowance 300,000
Medical allowance 120,000
Conveyance allowance 30,000
Total 4,50,000
Total sources of fund 41,59,500

Reconciliation of Wealth Statement

Total Accretion + Family Expenses + Tax Payment 41,59,500

Total Sources of Fund 41,59,500
Deemed income as income from other sources -0-

Wealth Surcharge

Tax Payable TK. 559,875

Net assets as on 30/06/2024 4,23,97,963
Surcharge payable: 559,875 @ 10%) TK 55,988

ICAB 2024 Assessment of individuals 259

 Question No.10:
Mr. Faizan is the Head of Taxation of RX Limited. During the financial year 2023-24 he earned
following income:
Income from Employment:
[1] Mr. Faizan received Taka 12,00,000 as cash salary out of which basic pay was 60%, medical
allowance was 20%, transport allowance was 15% and education allowance for children
was 5%.
[2] The company provided him with a 2500 CC full time car for official and his family use.
[3] He was also provided with a residential house against which the company incurred rental
expense of Taka 3,10,000.
[4] Though the company has a Recognized Provident Fund, Mr. Faizan did not apply for
becoming the member of that Fund. As per the Provident Fund Rules, the contribution to
the Fund by the employer is 8% of basic pay.
Income from Rent:
He leased out a house with an annual rent of Taka 1,20,000. He spent Taka 30,000 as repair
and maintenance, Taka 5,000 as municipal tax and Taka 2,500 as fire insurance premium.
Income from Agriculture:
Mr. Faizan owned 25 bigha agricultural land in his village. By cultivating paddy in 10 bigha
land, he generated income of Taka 1,20,000. The rest of the land he rented out for a cash
consideration of Taka 1,60,000. He owned a power tiller to cultivate the land, the tax
depreciation of which was Taka 12,000 and maintenance cost was Taka 6,000. He paid land
development tax Taka 25,000 and interest Taka 2,00,000 against the bank loan taken for the
purpose of buying land.
Income from Financial Assets:
He received interest from Coupon Bond and FDR Taka 10,000 (Gross) and Taka 98,100 (net)
respectively. He also received dividend Taka 22,500 (net) by purchasing share from secondary
market at a value of Taka 1,00,000 on 1 January 2024.
In addition, he made the following transactions relating to financial year 2023-2024:
[1] Donation made to the Zakat Fund Taka 10,000,
[2] Purchased share of a private limited company Taka 20,000
[3] Life Insurance Premium paid Taka 15,000.
The company also deducted Taka 1,28,000 from his salary in the last 12 months as withholding
tax against salary income.
Please compute total income and tax liability of Mr. Faizan for the assessment year 2024-25
considering the above information.

Solution to the question no.10:

Computation of total income and tax liability of Mr. Faizan for the assessment year 2024-25:

Mr. Faizan
Computation of total income and tax liability
For the Income year 2023-24 [Assessment year 2024-25]

260 Business Planning: Taxation & Compliance ICAB 2024

 A] Computation of total income
Tk. Tk. Tk.
a) Income from employment:

[1] Basic pay- (Taka 12,00,000 x 60%) 7,20,000

[2] Medical allowance (Taka 12,00,000 x 20%) = 2,40,000
[3] Transport allowance cash- (Tk. 12,00,000 x 15%) 1,80,000
[4] Education allowance- (Taka 12,00,000 X 5%) 60,000.00
[5] Rent free house facility: Annual Rental value 3,10,000
[6] Deemed income against full time car facility 1,20,000
16,30,000
Less: Exempted - 1/3 of income from total 4,50,000
employment or 450,000, whichever is lower
11,80,000
C
[B] Income from house property:
H
Annual value of the house: A
Rental value or reasonable rent – higher one 1,20,000 P
(In absence of information about reasonable rent, T
it is assumed that rental value is higher than E
reasonable rent) R

Less: Admissible expenses

Repair and maintenance – 25% of annual value (30,000) 18
Municipal tax (5,000)
Fire Insurance premium (2,500)
Total allowable expenses (37,500) 82,500
[C] Income from Agriculture:
Sale proceeds of crops 1,20,000
Cash consideration against granting right to use 1,60,000
land
2,80,000
Less: Admissible expenses
Production cost – 60% of income from cultivation (72,000)
Depreciation of power tiller (12,000)
Land development tax (25,000)
Interest on borrowed capital (2,00,000)
Total allowable expenses -3,09,000
Taxable income under the head of agricultural (29,000) Nil
income
(This loss is eligible to be set off as per section 70)

[D] Income from financial assets

i) Interest on Zero Coupon Bond [Fully tax-free as
per 6th Schedule (Part-1) para 25]
ii) Interest on FDR (Taka 98,100/90 X 100) 1,09,000
ii) Dividend from listed company (Tk. 22,500/90 X 25,000
100)
Taxable income from other sources of income 1,34,000
Total income (a+b+c+d) 13,96,500

ICAB 2024 Assessment of individuals 261

 B] Eligible investment allowance for tax credit:
Investment in shares of listed company on 1,00,000
01/01/2024
Life Insurance premium 15,000
Donation to Zakat Fund assuming Govt. Zakat 10,000
Fund
Actual investment 1,25,000
15% of actual investment 18,750
3 % of total income[13,96,500-1,34,000] x 3% 37,875
Eligible investment allowance is lower of 15% of 10,00,000
actual investment, 3% of total income and Taka 1
million.
Therefore, allowable investment allowance 18,750

C] Tax liability
Tax on total income:
On first Taka 3,50,000 @ 0% nil
On next Taka 1,00,000 @ 5% 5,000
On next Taka 4,00,000 @ 10% 40,000
On next Taka 5,00,000 @ 15% 75,000
On next Taka 46,500 @ 20% 9,300
Gross tax liability 1,29,300
Less: Investment tax credit (1,25,000 X 15%) (18,750)
Tax liability 1,10,550
Less: Tax deducted at sources:
[1] From salary 1,28,000
[2] From FDR interest 10,900.00
[3] From cash dividend 2,500.00 1,41,400
Balance tax payable/(refund) (30,850)

Note:

[1] Since, Mr Faizan was not the member of the RPF, his employer did not contribute anything
for this purpose. So employer’s contribution to RPF is not added with salary income.
Similarly, investment tax credit is also not given because there is no contribution.
[2] Investment in shares in private limited companies is not eligible for investment tax rebate as
per 6th Schedule (Part-C) of ITA, 2023. So, it is not considered in calculating investment tax
rebate.
[3] There is bar to set-off agricultural loss against any income during the year. So, loss from
agriculture is could not set-off rather kept for carry forward as per section 70 of ITA, 2023.
[4] In computing agricultural income maintenance cost of Tk. 6,000 is not deducted because it
is already considered within 60% cost of production.

262 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 19
Assessment of
partnership firms

Introduction
Examination context

Topic list

19.1 Assessment of partnership firm

19.2 Special provisions regarding assessment of firms
19.3 Procedure of assessment of firms
19.4 Rate of tax applicable to firm
19.5 Set-off and carry forward of firm’s losses
19.6 Computation of partners’ share in the firm’s profit or loss
19.7 Liability of a firm for unrecoverable tax due from partners

Worked examples
 Introduction

Learning objectives

 Illustrate the assessment of partnership firm.

 Identify the scope of income of a firm.
 Specify major provisions regarding the assessment of firm.
 Identify rates for taxing income of a firm.
 State the procedure of assessment of income of firm and its partner.

Practical significance

Assessment of firm and tax liability computation is very significant for every assessee firm.
Assessing the income of firm and tax liability thereof is important for persons owning partnership
firm and managing it. This chapter recapitulates the scope of total income, non-assessable
income, tax credit income, grossing up of income, applicable tax rates and related issues
required for completing the assessment of firms. Application of tax rebate by partners on
income from partnership firm is exemplified. Professional accountants are required to have
sufficient expertise on all of these issues.

Stop and think

Did you realize how important is the assessment for firms? Can you do the assessment of firms
independently?

Working context

Assessment of tax is very important for every assessee firm. An assessee must require 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 different
types of assessments, accountants’ support sometime very significant to complete the
assessment of their clients.

Many clients are requiring the support for correct assessment from accountants in every year.
Detailed knowledge of accountants on the technicalities of computation of taxable income and
tax liability thereof for individual assessee is very important in case of required support for
clients’ tax assessment.

Syllabus links

The topics covered in this chapter have the significance for professional study as you can utilize
the knowledge throughout the application level and case study and also in your practical life.

264 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Do the assessment of firms and partners as well.

 Identify total income of a firm after deducting allowable expenses.
 Computing investment allowance and tax credit.
 Identify non-assessable income and its application in computing total income.
 Identify the procedure of assessment
 Compute net tax liability after tax rebate due to investment allowance,
 Tax rebate at average rate on income from firm at the time of computing total income of
partners.

Question practice

For question practice on these topics, go to the suggested answers covering this chapter.

19 ASSESSMENT OF PARTNERSHIP FIRMS

Section overview
C
H
 Scope of income of firm is different from other assessee.
A
 Applicable tax rate of firm is different from companies.
P
 On some investments, the firm enjoys investment tax rebate.
 For TDS, the firm will get full credit at the time of computing net tax liability.
T
 With certain terms and conditions, loss under one head can be set off against income under E
another head/heads R
 If loss under one head cannot be set off completely, it can be carried forward to succeeding
6 years to set off against the income under the same head.
19
19.1 Assessment of partnership firms
The word firm includes a partnership firm. Like individuals, firm’s income is also assessed to
compute tax payable by the firm. One point is very important to remember that assessment of
partnership firm and partners are done separately. In tax law, partnership firm and partners are
totally different, have different income though the tax rates are same with some exceptions.

19.2 Special provisions regarding assessment of firms

A firm can be assessed –

 Under section 183: Determination of tax by DCT on the basis of return
 Under section 184: Best judgment assessment
 Under section 187: Taxation of firms and individuals

ICAB 2024 Assessment of partnership firms 265

 A firm can also be assessed in special cases –
 Under section 188: Assessment in case of change in the constitution of a firm
 Under section 189: Assessment in case of constitution of new successor firm
 Under section 190: Assessment in case of succession of business otherwise death
 Under section 191: Assessment in case of discontinued business

19.3 Procedure of assessment of firms

As the assessment of firm and its partners are sometimes non-detachable, it is important to
remember to assess their income separately. Otherwise, there is a strong possibility of
integrating partners’ income with that of the partnership firm to whom they are the partners. It is
advised to follow the procedures as mentioned below to avoid possible mistakes.
For the firm

(1) Start with the accounting profit as computed in partnership Profit and Loss Account.
(2) Adjust the profit in line with –
Section 45: Income from business or profession
Section 49: Deductions from income from business or profession
Section 55: Deduction not admissible in certain circumstances specially section 56
(3) The profit so computed will be taxable profit of the firm and taxable in the hand of the firm.
However, such profit (obviously before tax) will be distributed among the partners as per
their respective profit and loss sharing ratio.
(4) The profit as calculated above is taxable provided that the total income exceeds the present
exemption limit, i.e., Taka 3,50,000. (assessment year 2024-25)
(5) The firm may also claim tax rebate on lower of 3% of total income or 15% of allowable
investment (if any) or Tk 10 lakhs like individual.
For partners
(6) Partners’ taxable income will be share of profit or loss as computed in step 3. The total
income will be taxed as per the individual tax rates. Income from firm is to be considered as
tax free income because tax on this part is already paid by the firm, and partners will get
rebate at average rate on their partnership income from tax so computed as per section 80
of ITA, 2023. They may also claim rebate for qualifying amount of investment allowance, if
any, in normal way.
Note: Firms may not be required to pay tax if income is less than Taka 3,50,000 or carry forward
and set-off previous years’ losses. In such a situation, partners will pay tax in a normal way but
cannot claim any rebate on share of profit received from firm, as firm has not paid any tax on
such profit.

19.4 Rate of tax applicable to firm

Income of a firm is taxable at the same rate applicable to individuals which are as follows:

Income slab Applicable tax rates

On first Tk. 3,50,000 Nil
On next Tk. 1,00,000 5%
On next Tk. 4,00,000 10%

266 Business Planning: Taxation & Compliance ICAB 2024

 On next Tk. 5,00,000 15%
On next Tk. 5,00,000 20%
On balance 25%

It is to be mentioned here that the minimum amount of tax should not be less than Taka 5,000
or 4,000 or 3,000 depending on the location if income exceeds Tk.3,50,000.

19.5 Set-off and carry forward of firm’s losses

(1) In case of losses sustained by a firm under any head of income shall be set off only against
the income of the firm under any other head and not against the income of any of the
partners of the firm [U/s - 70(4))].
(2) Any loss from business can be carried forward for setting of against such income, if any, for
6 consecutive years (U/s - 70).
(3) If there is any loss from any speculation business, it should be set off in the same year against
income from other speculative businesses, it can be carried forward for 6 consecutive years
to set off only against the income from such speculative business (U/s - 70).
(4) If there is any loss under the head ‘capital gain’ can be carried forward for 6 consecutive
years (U/s - 70).
(5) If there is any loss under the head ‘agricultural income’ can also be carried forward for setting
off against income from this head for 6 consecutive years (U/s - 70).

19.6 Computation of partners’ share in the firm’s profit or loss [section 31(2)]

To compute partner’s share in the firm’s profit or loss, we need to adjust any interest, salary,
commission or remuneration. Then the balance will be distributed among the partners as per
the respective profit and loss sharing ratio. So, the share of a partner in a firm will be taken to be C
any salary, interest, commission or other remuneration payable to him by the firm in the income H
year increased or decreased respectively by his share in the balance of the profit or loss of the A
firm. P
T
As per section 31(2) of ITA, 2023, if a person is a partner in a firm or a member of an AOP, his E
share of income of the said firm or AOP shall be determined by the following formula, namely - R

A = B + (C – D) x E%, where –
19
A = part of the person's income from the firm or AOP,
B = salary, interest, commission or other remuneration received by the said person from the said
firm or AOP,
C = total income of the said firm or AOP,
D = the sum of salary, interest, commission or other remuneration payable by the said firm or
AOP to all partners or members,
E = the percentage of shares of the person in the said firm or AOP.

If the partners have their individual income with the shared income from the firm, such shared
income should be added with other individual income to compute the partners’ total taxable
income. If the firm has already been taxed, partners will not pay tax on such shared income
(Section 80 of ITA, 2023). But, this addition of shared income to the partners’ other income may
enhance the rate of tax for such other income or may bring the partners within the ambit of
taxation where such partners’ individual income was below the taxable limit.

ICAB 2024 Assessment of partnership firms 267

 19.7 Liability of a firm for unrecoverable tax due from partners (section 255):

Where any tax payable by partner of a firm in respect of his share of the income from the firm
cannot be recovered from him, the Deputy Commissioner of Taxes shall notify such amount of
the tax to the firm. Upon notification, the firm so notified shall be liable to pay the said tax and,
for the purposes of recovery thereof, shall be deemed to be an assessee in respect of such tax.

Worked examples

Example 1: Ronob, Sanob and Manob are the three equal partners of Ronob & Brothers. The
profit and loss account for the year ended on June 30, 2024 was given below:

Ronob & Brothers

Profit and Loss Account
For the year ended on June 30, 2024

Particulars Amount (Tk.) Particulars Amount (Tk.)

Office Rent 72,000 Gross profit 8,00,000
Utilities 48,000
Commission [including commission paid to 88,000
Partner Manob Tk.25,000]

Advertisements Income Tax 22,000

20,000
Interest on capital:
Ronob – 30,000
Sanob – 20,000
Manob – 30,000 80,000

Salaries:
Ronob – 26,000
Manob – 24,000 50,000
Net Profit 4,20,000
8,00,000 8,00,000

Other information:

1. Tax @5% was deducted at source from office rent.

2. Tk. 25,000 of commission is given to Mr. Manob for his special assignment.
3. Partners have income from different sources as follows:

Sources Mr. Ranob Mr. Sanob Mr. Manob

Income from house property 1,60,000 - 1,40,000
Income from interest on securities 50,000 1,80,000 -
Agricultural income - - 50,000
Income from other sources 25,000 25,000 25,000

268 Business Planning: Taxation & Compliance ICAB 2024

 Required:

1. Compute total income of the firm

2. Compute tax liability of the firm.
3. Distribute firm’s income among the partners.
4. Compute total income of the partners.
5. Compute net tax liability of the partners.

Solution 1:

Requirement 1: Total income of the firm

Particulars Amount (Tk.) Amount (Tk.)

Net profit as per Profit and Loss A/C Add: Inadmissible exp: 4,20,000
Distribution to the partners violating section 56:
Interest on capital:
Ronob – 30,000
Sanob – 20,000
Manob – 30,000
80,000
Salaries:
Ronob – 26,000
Manob – 24,000 50,000

Commission:
Manob – 25,000 25,000 1,55,000
Income tax (as it is not an expense rather appropriation of C
profit and not allowed as expense) H
Total income of the firm 20,000 A
5,95,000 P
T
Requirement 2: Tax liability of the firm E
R
Income Slabs Tax rate Amount (Tk.)
On first Tk. 3,50,000 0% Nil
On next Tk. 1,00,000 5% 5,000 19
On next Tk. 1,45,000 10% 14,500
19,500

Requirement 3: Distribution of firm’s income among the Partners

Particulars Partners Total Amount left

to be
Ronob Sanob Manob distributed
Amounts to be distributed 5,95,000
Interest on capital 30,000 20,000 30,000 80,000 5,15,000
Salaries 26,000 24,000 - 50,000 4,65,000
Commission - - 25,000 25,000 4,40,000
Profit (1:1:1 ratio) 1,46,666 1,46,666 1,46,667 4,40,000
Total amount allocated 2,02,666 1,90,666 2,01,667 5,95,000

ICAB 2024 Assessment of partnership firms 269

 Requirement 4: Total income of the partners

Heads of Income Ronob Sanob Manob

Income from interest on securities 50,000 1,80,000 -

Income from house property (less actual repairs @
25%) assuming it was let out for residential purpose. 1,20,000 1,05,000
Agricultural income (less cost of cultivation @ 60%) 20,000
Income from partnership firm 2,02,666 1,90,666 2,01,667
Income from other sources 25,000 25,000 25,000
Total income 3,97,666 3,95,666 3,51,667

Requirement 5: Net tax liability of the partners

Amount of tax
Income slab Rate
Ronob Sanob Manob
On first Tk. 3,50,000 0% Nil Nil Nil
On next Tk. 47,666 5% 2,383
Tk. 45,666 5% 2,283
Tk. 1,667 5% 83
2,383 2,283 83
Less: Tax rebate on firm’s income at
average rate
Ronob (2,02,666/3,97,666 x 2,383) 1,214
Sanob (1,90,666/3,95,666 x 2,283) 1,100
Manob (2,01,667/3,51,667 x 83) 48
1169 1183 36
Net tax liability

[1] All partners will have to pay minimum tax as their income exceeds the minimum taxable
ceiling depending on the location.
[2] Section 55 will not be applicable for non-deduction of tax at source from office rent, as
partnership firm was deducted tax properly.

Worked example 2

Asha, Pasha, and Rasha are three equal partners of a firm, Asha, Pasha & Rasha Associates. For
the income year ended June 30, 2024, the firm produces the following information for the
purpose of computing total income and tax liability of the firm as well as its partners.

(a) The firm owns a commercial building partly (one half) occupied by the firm to operate its
own business and partly (another half) let out at a monthly rent of TK 35,000. Reasonable
rent of the building is TK 800,000. During the year, the firm has also earned TK 40,000 as
advance and TK. 10,000 as first year’s rent from a company by letting its top floor to hoard a
commercial advertisement.

(b) The firm is engaged with trading of garments supplies which resulted following gross
margin amount for the year:

270 Business Planning: Taxation & Compliance ICAB 2024

 Particulars Amount (TK) Amount (TK)
Sales 5,000,000
Less Cost of goods sold Beginning inventory 800,000
+ Purchase 4,200,000
Cost of Goods available for sale 5,000,000
- Ending inventory 1,000,000
Cost of goods sold 4,000,000
Gross margin 1,000,000

(c) Other relevant information is given below:

Stocks are always valued at 2% above cost. Analysis also reveals that purchase amount is
overstated by TK 200,000 for the year. Total operating expenses charged during the period
amounted to TK 450,000 which included following items among other things:

(i) Maintenance to building:

Amount (TK) Amount (TK)

Let –out portion 30,000
Portion used for business 50,000

(ii) Municipal Taxes: Total amount of municipal taxes paid for the year was TK 40,000 out of
which the tenant bears TK 10,000. And for repair and maintenance Tk. 150,000 paid.
(iii) Annual contribution to Cotton Dealers Association, a trade association is TK 10,000.
(iv) Donation to approved charitable institute TK 500,000. C
(v) All the partners were active and took part in running business. Salaries paid to the partners H
were TK 40,000 to Asha, TK 50,000 to Pasha and TK 30,000 to Rasha. A
(vi) Legal charges amount to a total of TK 50,000 including a fine of TK 10,000 charged due to P
its attachment with illegal form of business. T
E
(vii) The firm charged TK 15,000 against profit to write-off uncollectible amount of receivable
which is not allowed by the DCT. R
(viii) The firm incurred a loss of TK 50,000 from speculative business.
(ix) Accounting depreciation charged was TK 38,000 which was TK 3,000 higher than tax 19
depreciation.
(d) Asha had no other income during the year; however, Pasha and Rasha were also partners of
another firm. The respective income of Pasha and Rasha from the firm for the year ended
30th June 2023 are as under:

Partners Salary Interest Profit/ (Loss)

Pasha Rasha TK 40,000 TK 10,000 TK (50,000)
TK 60,000 TK 20,000 TK 20,000

(e) Rasha had income from interest on approved commercial securities of TK 30,000. Bank
charged TK 300 as collection fee and TK 3,000 as interest on money borrowed from the
bank for investment in approved commercial securities.

Compute tax liability of ‘Asha, Pasha & Rasha Associates’ for the assessment year 2024-25
and total income in the hands of partners from all sources.

ICAB 2024 Assessment of partnership firms 271

 Solution 2
(a) Computation of total income of the firm:

Particulars Taka Taka Taka

(1) Income from house property (U/s - 36)
Annual value 420,000
Actual rent (12 months @ TK 35,000) 10,000
Add: municipal tax borne by the tenants or 430,000
Reasonable rent (800,000/2) 400,000

Whichever is higher Less: 430,000

Repairs and maintenance (30% of annual value) 129,000
Municipal tax for let-out portion (1/2 of 40,000) 20,000

149,000
Net income from house property 281,000

(2) Income from business (u/s - 45) Gross profit

as per Trading Account 1,000,000
Add: Overstatement of opening stock
(TK 800,000/1.02*0.02) 15,686
Overstatement of purchase 200,000
215,686
Less: Overstatement of Closing Stock
(TK 1,000,000/1.02*0.02) (-)19,608
196,078
1,196,078
Less: Operating expenses (450,000)
746,078
Add: Inadmissible Expenses
1.Contribution to Aga Khan Dev. Network 50,000
2.Municipal tax– ½ 20,000
3.Salaries to partners u/s 55 1,20,000
4.Legal charges 10,000
5.Bad debt Write-off which is not allowed 15,000
6.Loss on speculative transactions 50,000
7.Accounting depreciation 38,000 3,03,000
Less: Admissible expenses 10,49,078
Tax depreciation 35,000
Net income from business 10,14,078
(3) Income from other sources (U/s - 66)
From display of advertisement 50,000
Total income of the firm 13,45,078

Computation of investment allowance:

Investment tax credit facility is only applicable for natural individual person only. As it is a
partnership firm. So, investment tax credit is allowed on donation to charitable organization.

272 Business Planning: Taxation & Compliance ICAB 2024

 Computation of tax liability of the firm:

Income slabs Tax rate Amount (Tk..)

On first Tk. 3,50,000 0% Nil

On next Tk. 1,00,000 5% 5,000
On next Tk. 4,00,000 10% 40,000
On next Tk. 4,95,078 15% 74,262

On total Tk. 13,45,078 119,262

Net tax liability

Allocation of after-tax profit among the partners [ 13,45,078-1,19,262=12,25,816]

Particulars Partners Total Amount

left to be
Asha Pasha Rasha distributed

Amounts to be distributed
Salaries 40,000 50,000 30,000 1,20,000 12,25,816
Profit (allocated on 1:1:1 ratio) 3,68,605 6,68,605 3,68,606 11,05,816 11,05,816
Total amount allocated
4,08,605 4,18,605 3,98,606 12,25,816

Total Income in the hands of the partners:

C
Heads of income Asha Pasha Rasha
H
1. Income from this firm 100,000 A
2. Income from another firm 3,68,605 3,68,605 3,68,606 P
3. Income from interest on securities 26,700 T
Total income 3,68,605 3,68,605 4,95,306 E
R

19

ICAB 2024 Assessment of partnership firms 273

274 Business Planning: Taxation & Compliance ICAB 2024
 Chapter 20
Assessment of
companies
Introduction
Examination context
Topic list

20.1 Companies
20.2 Method of accounting
20.3 Residential status of companies
20.4 Submission of return
20.5 Set-off and carry forward of losses
20.6 Return of tax deducted at source
20.7 Advance payment of tax
20.8 Applicable tax rates for companies
20.9 Tax credit
20.10 Corporate Social Responsibility (CSR)
20.11 Scope of income

Worked examples
 Introduction
Learning objectives

 Define different type of companies.

 Illustrate the assessment of companies.
 Identify the scope of income of companies.
 Specify major provisions regarding the assessment of companies.
 Identify rate for tax on varieties of income of a company.
 State the procedure of assessment of company’s income.
 Specify the special provisions of assessing income of bank, insurance and leasing
companies.

Practical significance

Corporate assessment is full of complexities that require special skill to handle. Understanding
corporate accounting and converting it in line with the requirements of tax authorities is the first
hurdle. Assessable income, non-assessable income, rebate, application of CSR, applying
different rates for capital gain, dividend income and other income are some of the complexities.

As professional accountants mostly serve corporate houses, this chapter becomes mostly
significant for them. Again, corporate tax planning, now-a-days, becomes a norm which
necessitates extra skill on part of the qualified accountants. Government also requires this type
of services from professional accountants due to the reasoning of maximizing its income.

Other common requirements like TDS, set-off and carry forward of losses, DTAA, grossing up of
income are also applied in this chapter.

Stop and think

Did you realize that the assessment of companies is very important from every perspective? Are
you confident enough to do the assessment of companies independently?

Working context

Assessment of tax is very important for every class of assessee. An assessee must require 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 different
types of assessments, accountants’ support sometime very significant to complete the
assessment of their clients. In case of corporate client, this chapter becomes very significant.

Many companies are requiring the support for correct assessment from accountants in every
year. Detailed knowledge of accountants on the technicalities of computation of total income
and tax liability thereof for corporate assessee is important in case of required support for tax
assessment.

Syllabus links

The topics covered in this chapter have the significance for professional study as you can utilize
the knowledge throughout the application level and case study and also in your practical life.

276 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Do the assessment of corporate house.

 Identify total income of a company after adjusting expenses.
 Computing tax rebate in different scenario.
 Identify non-assessable income and its application in computing total income.
 Identify the procedure of assessment.
 Compute net tax liability after giving tax credit.
 Do the specialized assessment of bank, insurance and leasing companies.

Question practice

For question practice on these topics, go to the suggested answers covering this chapter.

20 ASSESSMENT OF COMPANIES
Section overview

 Scope of income for company is different from other assessee.

 Applicable tax rates for company are different from other assessee.
 Capital gain and dividend income of companies are taxable at different rates.
 Assessment of banks, insurance and leasing companies are to some extent different.
 Companies will enjoy tax rebate for CSR activities in specific areas.
 Company assessee will enjoy some common benefits like set-off and carry forward of losses,
tax rebate, TDS adjustments, credit of advance tax etc.

20.1 Companies

Assessment of companies means applying the assessment procedures on the income of C

companies. Company has a definite meaning in the Income Tax Act, 2023. For the purpose of H
company tax assessment, some related definitions are produced below: A
P
"Company" means a company as defined in the Companies Act, 1994 and includes - T
E
(a) liaison office, representative office or branch office of a foreign company; R
(b) fixed establishment of a foreign entity or person;
(c) any association or body incorporated by or under the laws of a country outside Bangladesh;
(d) any bank, insurance or financial institutions; 20
(e) any industry and trade organization, foundation, society, cooperative society and any
educational institution;
(f) any organization registered with NGO Bureau or Micro Credit Regulatory Authority;

ICAB 2024 Assessment of companies 277

 (g) any firm, association of persons, joint venture, or combination of persons, called by whatever
name, if any of such persons is a company as defined in the Companies Act, 1994 or a
foreign entity;
(h) statutory government authority, local authority, autonomous body;
(i) a body corporate established or constituted by or under any law for the time being in force;
(j) all entities other than natural person, firm, association of persons, trust, hindu undivided
family, and funds;
(k) any foreign association or body, not incorporated by or under any law, which the Board may,
by general or special order, declare to be a company for the purposes of this Act.

Companies Act 1994 defines ‘company’ to mean a company formed and registered under the
act or an existing company [U/s – 2(c) of Companies Act, 1994]. Again, ‘existing company’ means
a company formed and registered under any law relating to companies in force at any time
before the commencement of the act, and is in operation after commencement of the act [U/s –
2(h) of Companies Act, 1994].

However, at the time of prescribing the rate of taxes, companies are classified as –

1) Bank, Insurance, Financial Institutions

2) Merchant Bank
3) Mobile Phone Operator Company
4) Publicly traded company
5) Non-publicly traded company
6) Tobacco Manufacturing Company
7) One Person Company (OPC)

As per the provision of Income Tax Act, computing profit and loss for some specialized business
shall be as follows:

 4th Schedule - Computation of the profits and gains of insurance business

 5th Schedule–Part 1 Computation of profits and gains from the exploration and production
of petroleum and the determination of the tax thereon

 5th Schedule–Part 2 Computation of profits and gains from the exploration and extraction
of mineral deposits (other than oil and gas) in Bangladesh

Due to the typical nature of business, Income Tax Act prescribes different methods of
computation of profit and loss from these businesses.

Whatever the definitions or classifications made, profits or gains from any type of companies are
taxable at specified rates.

20.2 Method of accounting

Section 73 of ITA, 2023 Every person excluding natural individual and HUF and person having
income form long term contract shall submit income statement and balance sheet for the income
year, and certified by a chartered accountant to the effect that the accounts are maintained and
the statements are prepared and reported in accordance with International Accounting
Standards (IAS), the International Financial Reporting Standards (IFRS), related laws of
Bangladesh for the time being in force and in accordance with the specific standards set out be

278 Business Planning: Taxation & Compliance ICAB 2024

 the Board time to time, and are audited by in accordance with the Bangladesh Standards on
Auditing.

As per Section 75(2), where accounts of a taxpayer have not prepared and maintained in
accordance with the provision of section 73, DCT can compute tax on such basis and such
manner he/she thing fit.

So it is very important that before taking any action under Section 75(2) the DCT need to
demonstrate that a non-compliance of Section 73 has actually occurred.

20.3 Residential status of companies

Residential status of companies is different from an individual and Income Tax Act, 2023
prescribes different rules for that. On the basis of residential status applicable for companies,
there may be Bangladeshi or foreign companies. The provisions for deciding the residential
status of companies are given below:

"Resident", in respect of any income year, means a Bangladeshi company or any other company
the control and management of whose affairs is situated wholly in Bangladesh in that year
[section– 2(45)(c)]. And, "non-resident" means a person who is not a resident [section – 2(4)].
Thus, to be resident:

1. The company should be a Bangladeshi company, i.e., formed and registered under the
Companies Act, 1994 and includes a body corporate established or constituted by or under
any law for the time being in force in Bangladesh having in either case its registered office
in Bangladesh; or

2. Any other company the control and management of whose affairs are situated wholly in
Bangladesh in that year.

If any of the two conditions have not been fulfilled, the status of such a company will be non-
resident.

20.4 Submission of return

A company assessee shall have to file return of income setting forth therein its total income by
the 15th day of the 7th month following the end of the income year, or the 15th day of September
following the end of income year where the said 15th day falls before the 15th day of September. C
H
The return should be prepared in a prescribed form by inserting necessary descriptions and A
information, attaching schedules, statements, accounts, annexures, and documents, and signed P
by the principal officer as defined in section 2(54) of ITA, 2023. T
E
20.5 Set-off and carry forward of losses and unabsorbed depreciation R

Where a loss is assessed under any specific head of income, the company is permitted to set-off
the loss against its income assessed under different heads in the same year. However, losses 20
incurred under the categories of capital gains, business, speculative business, or losses related
to the business of tobacco products cannot be set-off against any income from other heads. In
cases where the loss cannot be entirely set-off, the remaining unabsorbed loss will be carried
forward and set-off against income under the same heads over six consecutive assessment years.

ICAB 2024 Assessment of companies 279

 Moreover, losses from any sources or heads where tax is exempted, or where tax is applied at a
reduced rate, or where they are subject to a minimum tax requirement, cannot be set-off or
carried forward.

Unabsorbed depreciation can be carried forward for an unlimited period. It is important to note
that losses shall be carried forward and set off first; subsequently, unabsorbed depreciation
needs to be utilized for set-off until it is fully absorbed.

20.6 Return of tax deducted at source

In accordance with the section 177 of the ITA, 2023, every company including other withholding
entities, shall file a return of tax deducted or collected at source (also called as withholding tax)
to the DCT where the company is being assessed. Such return shall be prepared in the
prescribed form and signed and verified by the principal officer of the company. Such return
shall be filed by 25th day of the next month following the month of deduction.

20.7 Advance payment of tax

Every company shall have to pay advance tax in four equal installments falling on 15th
September; 15th December.; 15th March and 15th June of each financial year if the latest assessed
income exceeds Tk. 6,00,000. However, cigarette manufacturing company will pay advance tax
monthly @ 3% on net sale.

On failure of payment of any installment, the company will be deemed to be an assessee in

default. Penalty may be imposed for such default. If a company estimates that its income during
any financial year will be less than the last assessed income, it may submit an estimate of income
and pay the advance tax accordingly.

If the amount of advance tax together with the tax deducted at source, if any, is less than 75%
of the tax payable on the basis of regular assessment, simple interest @10% per annum is
leviable on the amount by which the tax so paid and deducted falls short of 75% of the assessed
tax. On the other hand, the company is entitled to receive interest @10% on the amount by which
the aggregate sum of advance tax paid during a financial year exceeds the amount of the tax
payable on the basis of regular assessment. However, interest will be 50% higher if the person
failed to submit return on or before the Tax Day.

20.8 Applicable tax rates for companies

Charge of minimum tax: section 163(5)

Notwithstanding anything contained in any other provisions of ITA, 2023, an individual having
gross receipt of Tk. 3 crore or more, or a firm or association of person having gross receipts
exceeding Tk. 5m, or a company or a trust , shall, irrespective of its profits or loss in an
assessment year for any reason whatsoever, including the sustaining of a loss, the setting off of
a loss of earlier year or years or the claiming of allowances or deductions (including
depreciation) allowed under this Act, be liable to pay minimum tax @ 0.60% of the amount
representing gross receipts from all sources for that year. However, the rate of minimum tax for
tobacco manufacturing company and carbonated beverage 3%, mobile phone operator 2%
and, natural person except manufacturer of cigarette, bidi, chewing tobacco, smokeless
tobacco, or any other tobacco products 0.25%

280 Business Planning: Taxation & Compliance ICAB 2024

 Moreover, if any new industry engaged in manufacturing of goods, then the rate will be 0.10%
instead of 0.60% which would be effective for first 3 years.

For the purposes of this section, 'gross receipts' means-

(a) all receipts derived from the sale of goods;

(b) all fees or charges for rendering services or giving benefits including commissions or
discounts;
(c) all receipts derived from any heads of income.

Illustration

Xerox Mchine Ltd. is a Private Limited Company registered in Bangladesh. Following

information are related to the income year 2023-24:

Net operating income Tk. 12,50,000

Interest income Tk. 2,50,000
Total income Tk. 15,00,000

Sales revenue / turnover for the year is reported at Tk. 2,00,00,000. Applicable income tax rate
is 27.5%. Calculate tax liability of Xerox Machine Ltd. for the assessment year 2024-25.

Solution:

Income tax at regular rate i.e., 27.5% is Tk. 4,12,500 (15,00,000 X 27.5%).
Gross receipts of the company: (Tk. 2,00,00,000 + Tk. 250,000) = Tk. 2,02,50,000 Minimum tax
= (Tk. 2,02,50,000 X 0.60%) = Tk. 1,21,500.

Since, the regular tax is greater than the minimum tax; the tax liability of Xerox Machine Ltd. will
be Tk. 4,12,500.

Corporate tax rate at a glance

Conditional Listed company tax rate 20% for the assessment year 2024-25: 22.5%

[1] More than 10% paid-up capital through IPO

[2] Tax rate shall be 2.5% lower if all income and receipts, and all expenses and
investment over Tk. 0.5m for a single transaction and total Tk. 3.6m in a year shall C
be made through bank transfer H
A
Conditional Listed company tax rate 22.5% for the assessment year 2024-25: P
T
[1]10% or less than 10% paid-up capital through IPO E
[2] Tax rate shall be 2.5% lower if all income and receipts, and all expenses and 25% R
investment over Tk. 0.5m for a single transaction and total Tk. 3.6m in a year shall
be made through bank transfer
20

ICAB 2024 Assessment of companies 281

 Conditional One Person Company tax rate 22.5% for the assessment year 2024- 22.5%
25:

[1] All sales/receipts must be through banking channel

[2] Tax rate shall be 2.5% lower if all income and receipts, and all expenses and
investment over Tk. 0.5m for a single transaction and total Tk. 3.6m in a year shall
be made through bank transfer
Otherwise the tax rate would be 25%

Conditional tax rate of non-listed companies for the assessment year 2024-25 25%

[1] All sales/receipts must be through banking channel

[2] Tax rate shall be 2.5% lower if all income and receipts, and all expenses and
investment over Tk. 0.5m for a single transaction and total Tk. 3.6m in a year shall
be made through bank transfer
Otherwise the tax rate would be 27.5%

Banks, insurance and other financial institutions (except merchant banks) if not 40%
publicly listed
Banks, insurance and other financial institutions (except merchant banks) if 37.5%
publicly listed
Merchant banks 37.5%
Cigarette, zarda, bidi, gul or any other tobacco product manufacturing 45%
companies (companies, firms and individuals) irrespective of listing status
Income surcharge in addition to above tax is applicable on business income. 2.5%
Mobile phone operator companies if not publicly listed 45%
Mobile phone operator companies that convert themselves into a publicly 40%
traded company by transfer of at least 10% shares through stock exchanges, of
which maximum 5% may be through Pre-Initial Public Offering Placement

[If mobile phone operator companies listed at least 20% of their paid up capital
through IPO, they shall receive a rebate of 10% in the year of listing.
Any trust, fund, AOP and other taxable entity other than company 27.5%

Cooperative societies registered under Cooperative Society Act, 2001 20%

Private universities, Private medical college, Private dental college, Private 15%
engineering college or Private college engaged in imparting education on
information technology

20.9 Corporate Social Responsibility [SRO 229- dated 04-07-2011, SRO.223 dated
27/06/2012 and SRO 186- dated 01-07-2014]

Allowable limit: Maximum limit of allowable expenditure under the head Corporate Social
Responsibility (CSR) is 20% of total income or Tk. 12,00,00,000; or actual CSR whichever is lower.
If actual expenditure exceeds this limit, such amount exceeding the limit cannot be used to
compute tax rebate.

282 Business Planning: Taxation & Compliance ICAB 2024

 Tax rebate: Tax rebate will be computed @ 10% on such expenditure for CSR within the
maximum limit.

Conditions: To claim tax rebate against CSR, the company must fulfill the following conditions:

1. Must pay salaries and allowances to its worker regularly and must have waste treatment plant
if it involves with the production of industrial goods;
2. Must pay income tax, VAT and duty timely and must repay institutional loans;
3. Can only donate money to the institutions recognized by the government for the purpose
of CSR;
4. Must fulfill all rules as per Bangladesh Labour Law, 2006.
5. Amount spent for CSR will not be considered as business expenditure.
6. Documents in support of actual CSR expenditure to be submitted to the concerned DCT.
7. Submit CSR plan to NBR and obtain exemption certificate.

However, no company can charge such expenditure on account of CSR in manufacturing or

profit and loss account. Such company shall also submit sufficient documents with DCT to prove
whether the expenditure claimed as CSR is really spent.

Areas of CSR

To encourage the companies to contribute towards the society, a new provision has been
introduced in 2009 through an SRO and thereafter the area has been expanded in 2010 and
further modified in 2011.In the year 2012 two new areas have been included and one area
shifted to 6th Schedule (Part-A) Para-47. In 2014 one new area has been added. The present
areas are:

1. Donation through any government bodies to reduce the misery of people of areas affected
by natural calamities like Cyclone, Earthquake, Hurricane, Flood etc.;
2. Donation to the institutions engaged in the establishment of old home and its management;
3. Donation to any social organization engaged in the Welfare of mentally or physically disable
people;
4. Donation to the educational institutions engaged in educating street / homeless children;
5. Donation to such institutions engaged in housing projects for people living in slums;
6. Donation to social organizations involved in building public awareness on women-right and
against dowry system;
7. Donation to organizations involved in feeding and rehabilitating orphan / homeless
children; C
8. Donation to organizations involved in research on liberation war, campaign to uphold the H
spirit of liberation war and welfare of freedom fighters; A
9. Donation to organizations engaged in maintaining healthy sewerage systems in Chittagong P
hill tract, alluvial land, river breakage areas; T
10. Donation to organizations engaged in the treatment of hare-lipped, cataract; cancer, E
leprosy; R
11. Donation to individuals and organizations engaged in providing Medicare services to the
Acid Victims
12. Donation to specialized hospital providing free medical services to poor patients and work 20
for improving the quality of treatment e. g., hospitals for Cancer, Lever, Kidney, Thalassemia,
Eye and Cardio.
13. Donation to public universities;

ICAB 2024 Assessment of companies 283

 14. Donation to any government recognized educational institution established for providing
educational scholarship and financial assistance to poor freedom fighters’ children along
with promoting technical and vocational education to the poor merITArious students;
15. Donation to government or MPO included private educational institution engaged in
establishing lab for training computer or IT or implementing English education programs;
16. Donation to organizations engaged in providing technical and vocational training to
unskilled or semi-skilled workers for exporting manpower;
17. Donation to organizations engaged in the development of infrastructure and training for
sports at national level;
18. Donation to national level museum established or to be established for preserving the
memory of education war;
19. Donation to national level institutions engaged in protecting the memory of the father of the
nation; and
20. Donations made to non-profit voluntary social welfare organizations engaged for running
rehabilitation center, creation of awareness and treatment of HIV, AIDS and Drug addicted
21. Donations made to non-profit voluntary social welfare organizations engaged for running
rehabilitation center for recovered children/women of cross boarder trafficking.
22. Donation to Govt. approved fund for helping victims of natural disaster or for any
tournament or for any national level program.

20.11 Scope of income of a company

Income of a company should be computed with reference to the following sections:
Section 45: Income from business
Section 46: Special areas of business income
Section 49: General allowable deductions in computation of income from business
Section 50: Special allowable deduction in computation of income from business
Section 55: Deduction not admissible in certain circumstances

However, company may have income from following sources with respect to application of tax:
b) Dividend income
c) Capital gain
d) Other income

Worked examples and solutions

Example 1
M/s. John Morris Inc. is a multinational company doing business in Bangladesh. The company
filed return of income for the assessment year 2024-25 showing net income of Tk. 30,00,000.
Examination of the audited statement of accounts filed with the return of income revealed the
following:
1. Salary includes Tk. 3,30,000 paid to one Director working at the head office at California. He
never visited Bangladesh and no tax, as such, has been deducted at the time of making the
payment.
2. Head office expenses charged Tk. 11,00,000. No evidence could be produced other than
HO auditors’ certificate.
3. Fine of Tk.11,000 paid for violation of customs law charged to P & L Account.
4. Two Nissan Petrol Jeep purchased for Tk. 55,00,000 each during the year. Depreciation @
10% charged on the full cost of the vehicles.

284 Business Planning: Taxation & Compliance ICAB 2024

 5. To procure business Tk.10,00,000 has been paid as commission to a local agent. In making
the payment, the provision of section 94 of the Income Tax Act, 2023 has not been complied
with.
6. The company sold a motor vehicle for Tk. 4,65,000. Original cost of the vehicle was Tk.
5,25,000 and the WDV was Tk. 3,25,000. This has not been reflected in the accounts.
7. Tk.15,000 donated to an un-recognized school.
8. Miscellaneous expenses include Tk. 7,22,000 paid as salaries to three servants who are
working at the residence of the Managing Director.
9. Conveyance expenses include Tk. 3,20,000 paid for air ticket of wife and son of the
Managing Director for the visit of the neighboring countries.
10. Interest expense claimed at Tk. 33,50,000. The company has outstanding bank loan of Tk.
10 crore. The company advanced Tk. 75,00,000 interest-free loan to a sister-concern in
Bangladesh.

From the above information compute the total income of the company for tax purpose.

Solution 1
M/s John Morris Inc.
Computation of total income
Assessment year 2024-25

Particulars: - Amount (Tk.) Amount (Tk.)

Net income 3,000,000
Add: Inadmissible expenses 330,000
Director’s salary {55(a)} [note-1]
Excess depreciation charged on motor vehicle [note-6] 500,000
Donation to an un-recognized school 15,000
Excess perquisites {55(f)} [note-7] 42,000
Revenue gain on sale of motor car [note-5] 140,000
Fine for violation of customs law [note-2] 11,000
Interest on bank loan [note-3] 1,196,429
Head office expense [note-8] 1,100,000 3,334,429
Adjusted profit 6,334,429
Deduct: head office expense – 10% of disclosed net profit (-)3,00,000
Total income 6,034,429 C
H
Notes: A
(1) Salary paid to a non-resident director without TDS is inadmissible expense u/s 55(a) with P
reference to section 119. T
(2) Fine or penalty for breach of law is not allowable expenditure u/s 49 and 54 of ITA,2023.
E
R
(3) Interest on borrowed capital is allowed when taken for business purposes. But borrowed
fund was given to the sister concern which is not used for the company’s business and
therefore, proportionate interest has been disallowed as per section 52 of ITA,2023.
20
(4) Section 94 of ITA, 2023 requires deduction of tax at source on the payment of commission
for product distribution, not for procurement of business for the company. So as there is
nothing wrong in this case, nothing to be disallowed.

ICAB 2024 Assessment of companies 285

 (5) Difference between sale proceeds of the motor vehicle and its WDV of Tk. 1,40,000 is
business gain.
(6) Under the Third Schedule for depreciation purpose cost of each motor vehicle is restricted
to Tk. 30,00,000 each and 10% depreciation on two cars therefore should be Tk. 6,00,000
whereas on Tk. 55,00,000 the company claimed depreciation of Tk. 11,00,000. So excess
depreciation of Tk. 5,00,000 has been added back.
(7) Servant's salary and travel ticket fare are perquisites to the managing director of a total sum
of Tk.7,22,000+Tk.3,20,000= 10,42,000. As per section 55(d) perquisites are allowable up
to Tk.10,00,000 per employee per year. Therefore, the excess perquisites of Tk. 42,000 have
been added back.
(8) Head office expense is allowed up to 10% of the disclosed net profit u/s 55(f).

Worked example 2

The profit and loss account of Care Pharmaceuticals for the year ended on June 30, 2024 reports
net income of taka 20,00,000. A scrutiny of accounts and supporting documents revealed the
following facts:
(a) During the year the company sold some of its pharmaceutical supplies that remained
unused for a long time in the storeroom. The company sold the supplies at a loss of taka
150,000 as the expiry period is very close and charged such loss against current year’s profit.
(b) The company recovered taka 20,000 from bad debt which was written off in earlier year and
was allowed by the tax authority. The amount so recovered is credited to sundry debtors
account.
(c) Office rent paid in cash Tk. 80,000
(d) The company has a trading liability with one overseas company to the tune of taka 1,50,000
which has been totally waived by the overseas company under special agreement during
this year.
(e) During the year, the company sold one equipment for taka 1,80,000 which was purchased
at a total cost of taka 1,30,000 and had a WDV of taka 90,000 on the date of sale. The
company reports taka 90,000 as gain on sale of equipment in the credit side of profit and
loss account.
(f) Due to a sudden fire on the factory building, the extended portion of the building is totally
destroyed and compensation received from the insurance company total taka 2,50,000. In
addition, the company realized an additional sum of taka 30,000 by selling the scrap. The
extension of the building was constructed at a total cost of taka 4,00,000 and depreciation
charged to date amounts to taka 50,000.
(g) The company sold a scientific apparatus used for scientific research for taka 80,000 which
was originally purchased at taka 1,50,000 and fully depreciated. The sale proceed is not
recorded at all.
(h) The company had export quota for exporting garments to EU countries. As the company has
recently changed the line of operation (switched from garments manufacturing to
pharmaceuticals), it transferred the export quota to another garment manufacturer for a sum
of taka 70,000. This income is not reported at all.
(i) The company is entitled initial depreciation taka 5,00,000 for new machinery installed and
run commercial production during the year but they did not claim any initial depreciation.
(j) Incentive bonus paid to the field representatives at the rate of 4 month’s pay taka 3,00,000.
But the general practice of giving incentive bonus for the similar business is two month’s
pay.
(k) Sum of taka 1,20,000 donated to an institution for scientific research which is not approved
by NBR.

286 Business Planning: Taxation & Compliance ICAB 2024

 (l) Sum of taka 5,00,000 expended for establishing a hospital for the benefit of employees. The
health benefit was provided by the company without taking any charge from the employees.
(m) Salary of taka 5,00,000 and rent of taka 80,000 were paid without deducting tax at source.
(n) Payment of brokerage and commission of taka 60,000 made to a non-resident without
deducting tax at source.
(o) Annual perquisites enjoyed by MD, Chairman and 5 members of Board of Directors
amounted to taka 74,50,000.
(p) Normal accounting depreciation charged taka 2,50,000 but tax depreciation amounts to
taka 3,00,000 excluding the amount of initial depreciation on machinery.
(q) Value of the free sample distributed claimed taka 2,00,000. Annual turnover during the year
was taka 80,00,000.
(r) Cash salary & rent paid Tk. 100,000
(s) Sum of taka 50,000 expended to train employees (Bangladeshi citizen) in connection with a
scheme approved by the Board.
(t) The company expended a sum of taka 2,00,000 for visits abroad as a member of trade
delegation sponsored by the government.
(u) Annual membership fee of taka 1,50,000 is paid to Bangladesh Pharmaceutical Society
which is a professional body recognized by the Board.
(v) Expenditure on publicity and advertisement during the year taka 3,00,000.
(w) Entertainment claimed taka 1,50,000.

Required: Compute the total income of the company for the assessment year 2024-25.

Solution 2:

Care Pharmaceuticals
Status: Resident Company
Income year: 2023-24 [Assessment year: 2024-25]

Particulars Tk. Tk.

Income from business :
Net profit as per Profit & Loss Account 2,000,000
Add: Inadmissible expenses
Excess bonus paid to field representatives [note] 100,000
Payment for scientific research not approved by NBR 120,000
Salary and rent paid without TDS 580,000
Payment to non-resident without TDS 60,000 C
Excess perquisites [note] 450,000 H
Accounting depreciation for separate consideration 250,000 A
Excess amount of free sample ceiling [note] 40,000 P
Cash salary & rent [note] 100,000 1,700,000 T
3,700,000 E
Less: Expenses admissible R
Initial depreciation on machinery (1st year) 500,000
Tax depreciation (normal) 300,000
Loss on fire [3,50,000-2,80,000] [note] 70,000 870,000 20
2,830,000
Add: Income not credited to P/L Account
Bad debt recovered [note-2] 20,000
Rent paid in cash [note] 80,000

ICAB 2024 Assessment of companies 287

 Waiver of a trading liability [note] 150,000
Sale proceeds of scientific apparatus [note] 80,000
Income from transferring export quota [note] 70,000 400,000
3,230,000
Add: Revenue profit on sale of equipment 40,000
Less: Gain on sale of equipment [note] (90,000)
Add: Entertainment to be considered separately 150,000
Less: Admissible entertainment [note] (86,600)
Taxable income under the head business 3,243,400
Capital gain 50,000
Total income 3,293,400

Notes:
1. Loss on sale of supplies is an allowable deduction because supplies does not fall under the
definition of capital asset as per section 2(77).
2. Amount of bad debt recovered will be treated as current year’s income and should be
credited to the profit and loss account, because bad debt was allowed earlier as expense.
3. Inadmissible expenses as office rent paid in cash u/s 55(l).
4. As the company received waiver of a trading liability during this year, it should be treated as
deemed income u/s 46(8).
5. Computation of total gain, Capital Gain and Revenue Gain from the sale of equipment:

Particulars Tk. Tk.

1. Sale proceeds 180,000
2. Initial costs 130,000
3. Capital gain (1-2) 50,000
4. Written down value (cost less depreciation) 90,000 90,000
5. Revenue gain (2-4) 40,000
Gain on sale of equipment as shown in P/L Account (1-4) 90,000

6. As the insurance compensation received taka 2,50,000 plus scrap value Tk. 30,000 is less
than the amount of written down value of the building taka 3,50,000, the difference
Tk.70,000 will be deducted from business income as per section 46(3) of ITA, 2023.
7. Sale proceeds of the asset used for scientific research shall be the deemed income in the
year of sale.
8. As export value is not given in the question, so 3% of export value is not possible to be taken
as income as per Rule-30A. There is no way to take different amount as income other than
income shown by the company and that’s why shown income is accepted.
9. The amount spent for hospital is allowable deduction as it charges nothing after giving
services to the employees.
10. Allowable amount of perquisites to MD, Chairman and 5 Directors will be taka 70,00,000
(taka 10,00,000 × 7). Thus, excess amount of perquisite taka 4,50,000 (taka 74,50,000 – taka
70,00,000) to be disallowed.
11. The allowable rate of free sample for a pharmaceutical industry is 2% for annual turnover up
to taka 5 crore. The turnover of the company was taka 80,00,000 and free sample allowed is
taka 1,60,000 (2% of taka 80,00,000). Thus, excess amount of taka 40,000 (taka 2,00,000 –
taka 1,60,000) is disallowed.

288 Business Planning: Taxation & Compliance ICAB 2024

 12. Inadmissible expenses as salary and rent paid without bank transfer u/s 55.
14: Amount of admissible entertainment allowance:

On the first 10,00,000 At 4% 40,000

On the balance 23,30,000 At 2% 46,600
Total 86,600

Worked example 3

The profit and loss account of Star Ltd. a listed Public Limited Company is given below for the
income year 2023-24.

Star Ltd.
Profit and Loss Account
For the year ended on June 30, 2024

Particulars Tk. Particulars Tk.

Cost of goods sold 1,500,000 Sales 3,500,000
Salaries [Note-1] 700,000 Dividend 120,000
Rent 150,000 Interest 30,000
Advertisement 200,000 Gain on sale of Asset [Note-4] 40,000
Interest on Loan 80,000 Interest on Tax-Free Securities 15,000
Utility Expenses 60,000 Interest on Foreign Investment 20,000
Donation 150,000
Transportation 110,000
Audit Fee 200,000
Bad Debt 90,000
Contribution to RPF 70,000
Income Tax paid in Advance 30,000
Fines paid to Customs 20,000
Annual Membership 15,000
Legal Expenses [Note-3] 25,000
Insurance Premium 35,000
Sundry Expenses 12,000
Depreciation [Note-2] 65,000
Net Profit 2,13,000 C
Total 37,25,000 Total 37,25,000 H
A
Determine the taxable income of the company and net tax liability thereof. Consider the given P
data below and assume that: T
E
[1] Salaries are paid in cash without any cheque or bank transfer. Tk.4,50,000 of salaries R
fromTk.7,00,000.

[2] Tax depreciation amounts to Tk. 50,000 20

[3] Legal expenses are paid due to the infringement of trademarks

ICAB 2024 Assessment of companies 289

 [4] The company has sold an asset for Tk.1,00,000 that the company has purchased 4 years
back at a cost of Tk.80,000 with a written down value of Tk.60,000 till date.

Solution:
Star Ltd. [Status: Resident Company]
Income year: 2023-24 [Assessment Year: 2024-25]

Income from Business or profession: Tk.

Net Profit as per Profit and Loss Account 213,000
Less: Non-business income for consideration at respective head:
[1] Dividend 120,000
[2] Interest 30,000
[3] Interest on tax-free securities 15,000
[4] Interest on foreign investment 20,000
[5] Capital gain on sale of asset (1,00,000-80,000) 20,000 205,000
8,000
Add: Inadmissible Expenses
[1] Salaries (for violation of section 55(a) 450,000
[2] Donation (Condition to get CSR also not fulfilled) 150,000
[3] Income Tax (as income tax is not an expense) 30,000
[4] Fine (inadmissible expense due to violation of law) 20,000
[5] Legal expense (due to infringement of other’s trademark) 25,000
[6] Accounting Depreciation 65,000 740,000
748,000
rd
Less: Tax Depreciation as per 3 schedule 50,000

Income from business 698,000

Capital Gain (1,00,000-80,000) 20,000
Income from financial assets:
[1] Cash Dividend [no exemption] 120,000
[2] Interest 30,000
[3] Interest on foreign investment 20,000 170,000

Total Income 888,000

Tax calculation:

Tax on total income excluding cash dividend & capital gain (22.5% of
Tk. 7,48,000) (assuming conditions to avail 20% tax rate not fulfilled)
168300
Tax on dividend (20% of Taka 1,20,000) 24,000
Tax on capital gain (15% of Tk.20,000) 3,000
Total tax 195,300

290 Business Planning: Taxation & Compliance ICAB 2024

 Minimum tax on gross receipts @0.60%
On sales Tk.35,00,000 @0.60% 21,000
On receipts from sale of assets Tk.1,00,[email protected]%=600x15/22.5 400
On dividend receipts Tk.1,20,000 @0.60%= 720x20/22.5 640
On interest receipts Tk. 50,000 @0.60% 300
Total 22,340
Tax liability, higher one. 195,300

Less: Advance tax paid 30,000

Less: TDS on cash dividend (1,20,000x20%) 24,000
Less: TDS on bank interest (30,000x10%) 3,000
Net tax liability 138,300

Note: (1) Due to lack of information foreign tax credit is not possible to allow on interest on
foreign investment as per section 244 or 246
Note: (2) There is no separate implication of section 56 here because tax @ 22.5% already
imposed on income including disallowances u/s 55.

Worked example 4

XYZ Pharmaceuticals Limited, a pharmaceutical manufacturing company, commenced its

operations in 2016. The audited profit & loss statement of the company for the year ended 30
June, 2024 is as follows:

Particulars Tk.
Net sales 12,000,000
Cost of Sales (10,200,000)
Gross Profit 1,800,000
Other Operating Income 1,600,000
Administrative Expenses (14,500,000)
Selling and Marketing Expenses (74,500,000)
Other Operating Expenses (1,000,000)
Profit from Operations (86,600,000)
Financial Expenses (25,000,000)
C
Foreign exchange gain/ (loss) (2,200,000)
H
Interest income 12,000
A
Profit/ (Loss) before Tax (113,788,000) P
Other information: T
E
(i) Depreciation booked in the accounts during the year Tk. 30 million. As per tax law R
depreciation for the year would be Tk. 50 million.
(ii) Royalty charged to expense during the year was Tk. 9.60 million (8% of net sales).
(iii) Expense incurred for free sample distribution was Tk. 5 million. 20
(iv) Out of the total employees of the company 10 employees’ salaries include perquisites on
an average Tk. 10,50,000 each, 10 employees’ salaries include perquisites on an average
Tk. 800,000 each. No other employee’s salaries have perquisites more than Tk. 10,00,000.

ICAB 2024 Assessment of companies 291

 (v) Provision for gratuity charged during the year Tk. 1,000,000, whereas gratuity paid during
the year Tk. 900,000.
(vi) The company contributed to the employees’ provident fund during the year Tk. 1,500,000.
The provident fund is duly recognized by concerned Commissioner of Taxes.
(vii) There was entertainment expense of Tk. 250,000 charged during the year.
(viii) Financial expense includes Tk. 2 million for the interest paid on the foreign loan received
from its overseas parent company. The rate of interest is LIBOR+4.50. The transfer pricing
officers of NBR have assessed that the arm’s length rate of interest of the similar loan should
LIBOR+3.0 [Assume the LIBOR rate was 0.50]

Required:
(i) Compute total income of the company.
(ii) Compute net tax liability of the company for the year.

Solution:

Computation of total income of XYZ Pharmaceuticals Ltd. for the assessment year 2024-25:

Taka Taka
Net profit (loss) before tax as per accounts (113,788,000)
Add:
Accounting depreciation 30,000,000
Royalty expenses 9,600,000
Free samples for consideration as per section 55(jha) 5,000,000
Excess perquisites (10,50,000-10,00,000) X 10 500,000
Provision for gratuity made during the year 1,000,000
Entertainment expenses 250,000
Interest on foreign loan as per accounts 2,000,000
48,350,000
Less:
Tax depreciation 50,000,000
Samples expenses (Note-1) 1,600,000
Gratuity paid during the year 900,000
Interest on foreign loan allowed (2000/5% X 3.5%) 1,400,000
Entertainment expenses (Note 2) Nil
Royalty expenses (Note-3) Nil
(53,900,000)
Total income (108,238,000)

Notes:

1. Free sample expenses computed @ 2% on 5 crore, 1% on next 5 crores and 0.5% on balance
Tk. 2 crore of turnover [Section 55(jha)]
2. As there is no taxable profit, no entertainment will be allowed as per Section 55(ja)
3. Royalty is allowed up to 8% of disclosed net profit. As disclosed net profit is negative so
royalty also not allowed (Sec 55uma).
4. Any expenditures disallowed under Section 55 be taxed at the regular rate, except expenses
related to perquisites, royalty, entertainment, free sample distribution. Therefore, not
separate tax will be applicable on those disallowances.

292 Business Planning: Taxation & Compliance ICAB 2024

 Computation of tax liability of the company

Tax on calculated loss Nil

Tax on gross receipts as per section 163(5) (12 crore X 0.60%) Tk. 7,20,000
Therefore, the net tax liability of the company for the AY 2024-25 will be Tk. 720,000

Worked example 5

The Statement of Profit or Loss and Other Comprehensive income of ABC Ltd. is given below
for the income year 2023-24:

ABC Limited

Statement of Profit or Loss and Other Comprehensive income

For the year ended on June 30, 2024

Particulars Taka Particulars Taka

Cost of goods sold 2,100,000 Turnover 4,800,000
Salary and allowances 850,000 Dividend income 160,000
Publicity 300,000 Interest 40,000
Interest on Bank Loan 90,000 Gain on sale of Asset 60,000
Electricity, Gas and Water 72,000 Interest on Tax-Free Securities 20,000
Donation and Subscription 160,000 Interest on Foreign Investment 30,000
Conveyance 140,000
Audit Fee 220,000
Rent 457,000
Bad Debt 100,000
Contribution to Provident Fund 80,000
Income Tax paid in Advance 40,000
Fines paid to Customs 28,000
Annual Membership Fee 20,000
Legal Expenses 30,000
Insurance Premium 36,000
Miscellaneous Expenses 18,000
Depreciation 75,000
Net Profit 294,000 C
Total 5,110,000 Total 5,110,000 H
A
P
ABC Ltd. is a Public Limited Company. Salaries are paid in cash without any cheque or bank T
transfer. Tk. 600,000 of salaries from Tk. 8,50,000 falls under the category of gross salary more E
than Tk.10,000; tax depreciation amounts to Tk.60,000; legal expenses are paid due to the R
infringement of trademarks and the company has sold an asset for Tk.120,000 that the company
has purchased 3 years back at a cost of Tk.100,000 with a written down value of Tk.70,000 to
date. Determine the taxable income and tax liability thereof of ABC Ltd.
20

ICAB 2024 Assessment of companies 293

 Answer to the question no 5:

ABC Limited
Status: Resident Company
Computation of total income
Income Year: 2023-24; Assessment Year: 2024-25

Particulars Tk. Tk.

Net Profit as per Profit and Loss Account 294,000

Less: Items to consider seperately:

[1] Dividend income 160,000
[2] Interest income 40,000
[3] Gain on sale of fixed asset 60,000
[4] Interest on tax-free securities 20,000
[5] Interest on foreign investment 30,000 310,000
(16,000)
Add: Inadmissible Expenses
[1] Salary and allowances u/s 55(tha) being paid in cash 600,000
[2] Donation (assuming not paid to Govt. approved institution) 160,000
[3] Fine paid to Customs (as fine is not allowable exp. u/s 54) 28,000
[4] Legal Expenses (as it was incurred for law violation) 30,000
[5] Advance Income Tax (because tax is not expenditure) 40,000
[6] Depreciation (for consideration as per 3rd schedule) 75,000 933,000
917,000
Add: Revenue gain from sale of fixed asset (100,000-70,000) 30,000 30,000
Less: Tax Depreciation (as per 3rd schedule) 60,000
Taxable income from Business 887,000
Capital Gain on sale of Asset (120,000-100,000) 20,000
Income from financial assets:
[1] Cash Dividend 160,000
[2] Interest 40,000
[3] Interest on foreign investment 30,000 230,000
Total Income 1,137,000

Computation of Tax Liability:

Tax on total income excluding dividend and capital gain

Tk. Tk.
[1] (22.5% of Tk. 9,57,000 assuming publicly traded company) 215,325
[2] Tax on dividend (20% of Taka 160,000) 32,000
[3] Tax on Capital Gain (15% of taka 20,000) 3,000
Gross tax liability 250,325
Less:

294 Business Planning: Taxation & Compliance ICAB 2024

 [1] AIT 40,000
[2] TDS on bank interest @10% 4,000
[3] TDS on cash dividend @20% 32,000 76,000
174,325
Note: There is no separate implication of section 56 here because tax @ 22.5% already
imposed on business income including disallowances u/s 55. Assumed the company
transferred over 10% of share capital using IPO and conditions to avail 20% tax rate not fulfilled.
Worked example 6

Star Consumer Limited is a private limited company engaged in manufacturing and marketing
of cosmetic products. The income statement of the company for the income year 2023-24 is as
follows:

Debit Taka Credit Taka

Opening stock 80,00,000 Revenue 7,50,00,000
Purchase 4,30,00,000 Closing stock 60,00,000
Factory overhead Depreciation 30,00,000
Gross profit (c/d) 20,00,000
2,50,00,000
8,10,00,000 8,10,00,000
Salaries and wages 69,70,000 Gross profit (b/d) 2,50,00,000
Office rent 11,00,000 Interest on FDR (Gross) 3,00,000
Legal expenses 3,20,000 Dividend (Net of tax) 40,000
Sample expenses 1,80,000 Bad debt recovery Gain 95,000
Bad debt 1,20,000 from sale of old machine 2,75,000
Head office expenses 8,00,000
General expenses 1,20,000
Research cost 2,60,000
Interest paid 1,30,000
Annual subscription to MCCI 20,000
Tax expenses 36,27,500
Net profit 1,20,62,500
Total 2,57,10,000 2,57,10,000

Other information:
a. Raw materials costing Taka 1,70,000 was purchased from Mr. X by making payment through C
cash. H
b. Depreciation allowance as per 3rd Schedule of the ITA, 2023 is Taka 18,00,000. A
c. Office rent was paid in cash after deducting tax at source. P
d. Legal expenses included Taka 1,00,000 paid to a consultant without deducting tax at source. T
e. Salaries included excess perquisite of Taka 2,10,000. E
f. General expenses included Taka 60,000 paid for Director’s family expenses. R
g. A five years old machine having cost of Taka 5,00,000 and book value of Taka 3,00,000 was
sold for Taka 5,75,000.
h. A sum of Taka 1,70,000 included in salary was related with gratuity provision. 20
i. A business loss of Taka 1,67,00,000 was carried forward from previous year for setting off
against current year profit, if any.

Based on these information, compute total income and tax liability of the company as per
Income Tax Act, 2023, for the income year 2023-24.

ICAB 2024 Assessment of companies 295

 Answer to the question no 6:

Star Consumer Limited

Computation of total income and tax liability
Income year: 2023-24 [Assessment year: 2024-25]

A] Computation of total income

Tk. Tk.
1. Income from Business or Profession (under Sec-44)

N.P. before tax as per accounts (Taka 1,20,62,500 + 36,27,500) 15,690,000

Less: Non-business income to be considered in appropriate

heads:
[1] Interest on FDR 300,000
[2] Dividend income (net) 40,000
[3] Capital Gain from sale of old machine 75,000 (415,000)
15,275,000

Add: Expenses to be considered separately:

[1] Provision for gratuity (Note-3) 170,000
[2] Accounting Depreciation 2,000,000
[3] Sample expenses 180,000
[4] Head office expenses 800,000 3,150,000

Add: Inadmissible expenses:

[1] Rent paid in cash- section 55(ta) 1,100,000
[2] Consultancy fee – section 55(ka) 100,000
[3] Excess Perquisites-section 55(gh) 210,000
[4] Director’s family expenses [being personal] as per sec. 54 60,000 1,470,000
19,895,000

Less: Admissible expenses as per law:

[1] Tax depreciation 1,800,000
[2] Sample expenses (Note-1) 180,000
[3] Head office expenses (10% of disclosed net profit or actual
800,000 (2,780,000)
expense whichever is lower)
17,115,000

Less: Loss carried forward from previous year [as per sec. 70] (16,700,000)

Taxable Income from business 415,000

2. Capital gain
Capital gain on sale of old machine (Note-2) 75,000

296 Business Planning: Taxation & Compliance ICAB 2024

 3. Income from financial asset under section-62
[1] Interest on FDR 300,000
[2] Cash Dividend income [Gross] 50,000
840,000

B] Calculation of Tax liability

[1] On business income Taka 4,15,000 X 27.5% (assuming

114,125
conditions to avail 25% tax rate not fulfilled) or
Alternative minimum tax on gross receipts 453,570
[7,50,00,000+95,000+5,00,000] = 7,55,95,000 x 0.60%
Higher one- 453,570
Add: Tax u/s 56 on disallowances u/s 55 = 12,00,000 X 27.5 330,000 783,570

[2] On capital gain @ 15% (Taka 75,000 X 15%) [note-4] 11,250

[3] On interest income @ 30% (Tk. 3,00,000 x 30%) [note-5] 90,000
[4] On dividend income @ 20% (Taka 50,000 X 20%) [note-6] 10,000
Total tax liability 894,820

Notes:

1) Free Sample Expenses:

On Turnover up to Taka 5,00,00,000 @ 1% 5,00,000
On Turnover Taka 2,50,00,000 @ 0.5% 1,25,000
Maximum limit of sample cost 6,25,000
[As claim is less than Tk. 6,25,000, so actual claim is allowed]

2) Business profit and capital gain from sale of old machine:

Selling price 5, 75,000
Less: Written down value (3,00,000)
Total gain or profit 275,000
Capital gain- difference between selling price and original cost 75,000
Business profit- difference between original cost and book value 2,00,000 C
H
3) Provision for gratuity is not allowed as expenses in the year when provision is made; rather A
it is allowed when actual payment is made. P
4) Alternative minimum tax on capital gain comes at Tk. 75,000 x 0.60%=450 x 15/27.5=248 T
whereas regular tax on capital gain comes at Tk.11,250. So regular tax will be applicable as E
it is higher. R
5) Alternative minimum tax on interest income comes at Tk. 3,00,000 x 0.60%=1,800 whereas
regular tax on bank interest comes at Tk.1,05,000. So regular tax will be applicable as it is
higher. 20

6) Alternative minimum tax on cash dividend comes at Tk. 50,000 x 0.60%=300 x 20/27.5=218
whereas regular tax on dividend comes at Tk.10,000. So regular tax will be applicable as it
is higher.

ICAB 2024 Assessment of companies 297

 Worked example 7

From the following profit & loss account of Oman Bank Ltd., a non-resident bank, for the year
ended on 31/12/2023, compute total income and tax liability

Salaries and allowances - 22,00,000/- Interest and commission- 1,20,00,000/-

Interest on deposit- 40,00,000/- Capital Gain from sale of 10,00,000/-
shares of listed
companies-
Royalty 3,00,000/-
Head office exp. (as per 3,00,000/-
allocation by head office)
Bad debt- 6,00,000/-
Provision for bad debt- 4,00,000/-
Audit fee - 2,00,000/-
Depreciation - 15,00,000/-
Technical fee - 1,00,000/-
Scholarship to poor students- 8,00,000/-
Special reserve- 2,00,000/-
Advertisement - 7,00,000/-
Entertainment - 8,00,000/-
Travelling expense: -
Within the country – 50,000/-
Outside the country (including
head office tour) - 4,50,000/-
Net profit- 4,00,000/-
1,30,00,000/- 1,30,00,000/-

Additional information:

(1) Royalty paid TK. 3,00,000/- parent company.

(2) Tax at source was not deducted from car workshop bill of TK. 2,00,000/-
(3) Provision for bad debt is within 1% of classified loan.
(4) Tax depreciation as per tax law is TK. 10,00,000/-
(5) Advertisement bill paid to advertisement agency for periodic advertisement to private TV
channel. No VAT was deducted therefrom though tax at source was deducted properly.

298 Business Planning: Taxation & Compliance ICAB 2024

 Solution 7:

Oman Bank
Computation of total income
For the year ended on 31st Dec. 2023
(Assessment year: 2024-25)

Tk. Tk.
A. Income from business:

Net profit as per Profit and Loss a/c: - 400,000

Less: Capital gain from sale of shares of listed companies (1,000,000)
Business loss: (600,000)
Less: - Disallowances of expenditure for separate consideration:
(1) Depreciation (for consideration as per 3rd Schedule) 1,500,000
(2) Entertainment (for consideration as per Section 55ja) 800,000
(3) Head office exp. (allowable up to 10% of disclosed net profit) 260,000
(4) Technical fee (allowable up to 10% of disclosed net profit) 60,000
(5) Overseas travelling (for consideration as per 30(k)) 450,000
(6) Royalty (for consideration as per 55uma)) 300,000 (3,370,000)

Income: 2,770,000
Add: - Inadmissible expenditure:
(1) Car workshop bill payment Tk. 2,00,000
Out of total car maintenance of Tk.5,00,000, car workshop bill
payment was Tk. 2,00,000 where from no tax at source was
deducted. So, for non-deduction of tax at source, car workshop bill
payment is disallowed as per provision of section 55 of ITA: 200,000
(2) Provision for bad debt Tk. 4,00,000/-
Provision for bad debt was allowable expenditure for banking
companies up to assessment year 2006-07. As there is no such
provision is allowable deduction u/s 49, so disallowed such
provision fully– 400,000
(3) Scholarship to poor students Tk. 8,00,000
C
As it is not business-related expenditure so disallowed fully. 10%
H
rebate facility is applicable in case of CSR if it is disbursed through
A
Govt. approved educational institution and after fulfillment of other
conditions. As there is no such information in the question so the P
bank will not be entitled to get 10% CSR rebate facility. 800,000 T
E
(4) Special reserve: - Tk. 2,00,000
R
Reserve is not an item of P & L. Moreover, there is no information
about the nature of such reserve and whether it is Govt. approved
or not. So, disallowed fully - 200,000
20
(5) Advertisement Tk. 7,00,000
Allowable fully -
1,600,000

ICAB 2024 Assessment of companies 299

 Less:
(1) Tax depreciation (as per 3rd schedule) 1,000,000
(2) Royalty 40,000
(3) Overseas travelling 0.50% of disclosed turnover 60,000 (1,100,000)
Income base on which entertainment will be allowed 3,270,000

Less: Entertainment (as per section 55)

on 1st the 10,00,000@ 4% 40,000
on balance 22,70,000@ 2% 45,400 (85,400)

Income from banking business 3,184,600

B. Capital gain:
Capital gain from sale of listed companies shares 1,000,000
Total income 4,184,600

The calculation of tax liability

On Tk 31,84,600 Tax @ 40% 1,273,840
On Tk.10,00,000 tax @ 15% 150,000
1,423,840

Note: There is no separate implication of section 56 here because tax @ 40% already imposed
on disallowances u/s 55.

Worked example 8:

Prime Leasing is a public limited company listed with Dhaka Stock Exchange. It has recently
submitted its income tax return for the accounting year ending on 31 December 2023 showing
net profit before tax of Tk. 11,37,25,000.

Further examination of the file, records and documents revealed the following:
(a) Depreciation on leased assets charged in the accounts of Tk. 3,80,50,000 and loss on
disposal of leased assets was Tk. 29,88,000 this arose out of the shortage of residual value
of returned or repossessed assets plus rentals received on the lease of these assets over the
original cost of the assets.
(b) Provision for used assets and term finance has been made in the accounts at Tk. 51,35,500
and Tk.19,13,900 respectively. This has been provided in accordance with FID Circular No.
8 issued by the Bangladesh Bank.
(c) Tax depreciation for the relevant year is 5,85,00,000.
(d) Balances of statutory reserve and paid-up share capital on 1.1.2021 were Tk. 1,86,00,000
and Tk.12,00,00,000 respectively.
(e) Excess perquisites amounted to Tk. 6,95,000
(f) Legal expenses included Tk. 80,000 for professional fees for the acquisition of company's
new office at Dhanmondi.
(g) Net profit included dividend received on investments of Tk. 19,98,000.

300 Business Planning: Taxation & Compliance ICAB 2024

 You are required to compute

(a) total income

(b) tax liability of the company for the relevant assessment year.

Solution 8
Prime Leasing
Assessment year: 2024-25
Computation of total income and tax liability

Particulars Tk. Tk.

Net income 113,725,000
Less: Dividend income (to be considered separately) (1,998,000)
111,727,000
Add: Inadmissible expenses
Accounting depreciation on leased assets 38,050,000
Disallowed loss on disposal of leased assets 2,988,000
Provision for used assets 5,135,500
Provision for term finance 1,913,900
Excess perquisites as per section 55ga 695,000
Legal fee for capital asset 80,000 48,862,400
160,589,400
Less: Tax depreciation (58,500,000)
Business income 102,089,400
Income from financial assets [cash dividend] 1,998,000
Total income 104,087,400

Tax liability computation

Tax on dividend income (20% on 1,998,000) 399,600
Tax on balance income Tk. 102,089,400 @37.5% 38,283,525
Total 38,683,125

Notes:
1. Loss on disposal of leased assets is not allowable. C
H
2. No provision for bad or doubtful lease or finance is allowed.
A
3. There is no separate implication of section 56 here because tax @ 37.5% already imposed P
on disallowances u/s 55. T
E
Assessment of insurance companies R

It is a common knowledge that the true profit of life insurance business cannot correctly be
determined under the ordinary method of accounting. Hence the Act has provided for a special 20
method of computing the profits of a company doing insurance business. By virtue of section
47, the assessment of insurance company is completely governed by the rules contained in the
Fourth Schedule of the Act. Therefore, the following provisions are implicitly excluded while
computing the profits of an insurance company:

ICAB 2024 Assessment of companies 301

 a. Sections 35 to 39 relating to the computation of income chargeable under the head "income
from rent".
b. Sections 44 to 56 relating to the computation of profits and gains from business or
profession.
c. Sections 57 to 61 relating to the computation of income chargeable under the head “capital
gains".
d. Sections 62 to 65 relating to the computing of income chargeable under the head "income
from financial assets".
e. Section 66 to 69 relating to the computation of income under the head "income from other
sources".
f. Section 150 relating to the giving of credit of tax deducted at source.

Thus, the profits and gains of insurance business from all sources are to be computed artificially
under one income in accordance with the provisions in the Fourth Schedule and not under
different heads of income. In the Schedule assessment of insurance business has been
discussed under 3 different heads:

Para 2: Computation of profits and gains of life insurance business

Para 6: Computation of profits and gains of other insurance business
Para 7: Profits and gains of non-resident person

Assessment of life insurance business:

The profits and gains of life insurance business are to be taken as the greater of the following:
(a) Net external incomings i.e., gross external incomings of the income year from that business
less the management expenses of that year;
(b) Annual average surplus, i.e., the annual average of the surplus arrived at by adjusting the
surplus or deficit disclosed by the actuarial valuation in respect of the last inter valuation
period ending before the commencement of the assessment year subject to the following
exclusions.
(i) any surplus or deficit included therein which was made in any earlier inter valuation period
and
(ii) any expenditure or allowance which is not deductible under the provisions of sections 39to
54 in computing income chargeable under the head 'Income from business or profession'.

Thus, the assessable profits under the first method would vary from year to year. The annual
average actuarial surplus under the 2nd method would be constant during the inter-valuation
period.

Gross external incomings:

The expression 'gross external incomings' is defined in Para 9 of the Schedule as meaning the
full amount of incomings from interest, dividends, fines and fees and all other incomings from
whatever source derived including profits from revisions and on the sale or granting of annuities
but excluding the following:
(a) premium received on policy;
(b) interest and dividends in any annuity funds; and
(c) profits on the realization of investments

302 Business Planning: Taxation & Compliance ICAB 2024

 Management expenses:

The expression "management expenses" has been defined in Para 9 of the Schedule as meaning
the full amount of the expenses including commissions, incurred exclusively for the purpose of
life insurance business plus a fair proportion of the expenses incurred in the general
management of the whole business. The following expenses are excluded from the above
definition:
(a) bonuses or other sums paid to or reserved on behalf of policyholders
(b) depreciation of and losses on the realization of investments and
(c) any other expenditure or allowance other than those allowed U/S 50.

However, the maximum limit of such management expense is prescribed in Para 2:

(a) 7.5 percent of the premium on single premium life insurance policies, Plus
(b) 7.5 percent of the first year's premiums on policies under which less than 12 annual Plus
premiums are payable,
(c) 90 percent of the first year's premium in respect of all other life insurance policies, Plus
(d) 12 percent of all renewal premiums received during the income year.

Annual average surplus:

The other alternative method of computing profits of a life insurance business is based on annual
average surplus determined by the actuarial valuation. Subject to certain adjustments the
actuarial valuation forms the basis of computation of profits or gains.

(a) Amount paid to or reserved for or expended on behalf of the policyholders:

The first adjustment to be made to the surplus is to allow 75% of the amounts paid to or reserved
for or expended on behalf of policyholders as a deduction there from. If the amount so kept for
policyholders which was allowed as a deduction in the past is not actually so paid, the amount
so allowed in the past will be added back to the profits for the period in which the amount ceases
to be so reserved.

(b) Appreciation or depreciation of investments:

Any amount either written off or reserved by the insurance company in the accounts or through C
the actuarial valuation balance to meet depreciation or loss on the realization of investments H
should be allowed if the same is wiped out by a rise in a subsequent year either within or after A
the same inter-valuation period. P
T
(c) Interest on tax free Government securities E
R
Interest received in respect of any securities of the Government which have been issued with the
condition that interest thereon shall not be liable to tax.

Credit for tax deducted at source: 20

Where for any year an assessment of the profits and gains of life insurance business is made in
accordance with the annual average of a surplus disclosed by a valuation for an inter-valuation
period exceeding 12 months, then in computing the tax payable for that year, credit for tax

ICAB 2024 Assessment of companies 303

 deducted at source shall not be given u/s 150 for the tax paid in the income year, but credit shall
be given for the annual average of the tax paid from interest on securities or otherwise during
such period.

Worked example 9

According to the last actuarial valuation at 31 December 2023, the Pioneer Life Insurance Co.
Ltd. had a surplus of Tk. 10,00,000. There was a deficit of Tk. 3,00,000 in the preceding actuarial
valuation. 60% of the surplus was reserved for bonus to the policyholders. The company had the
following income in the income year 2022:

1. Premium Tk. 20,00,000

2. Interest on tax free government securities Tk. 1,00,000
3. Dividend Tk. 1,50,000
4. Fines and fees Tk. 80,000
5. Profits on sale of shares Tk. 90,000
6. Profits on granting annuities and reversion Tk. 1,50,000

Management expenses claimed and admitted by the DCT are Tk. 2,50,000. During the
undervaluation period, the company paid income tax at source of Tk. 3,00,000. Some of the
share investments have depreciated in value during the year by Tk. 60,000. Determine the
income of life insurance business of the company for the income year 2023.

Solution 9

Pioneer Life Insurance Co. Ltd.

Assessment year: 2024-25

Actuarial surplus: Amount (Tk.)

Surplus as per 2023 valuation 10,00,000
Add: Deficit on earlier valuation 3,00,000
13,00,000
Add: Income tax deducted at source 3,00,000
16,00,000
Less: Reserve for bonus (75% x 10,00,000 x 60%) 4,50,000
Adjusted surplus 11,50,000

Annual average surplus 2,30,000

Add: Profit on sale of shares 90,000
3,20,000
Less: Depreciation of share investment 60,000
Adjusted annual average 2,60,000

Gross external earnings

Interest on securities 1,00,000
Dividend 1,50,000
Fines and fees 80,000
Profit on annuities and reversions 1,50,000
4,80,000
Less: Management expenses 2,50,000
Net external earnings 2,30,000

304 Business Planning: Taxation & Compliance ICAB 2024

 For income tax purpose for the assessment year 2024-25, adjusted annual average of Tk.
2,60,000 being higher of the two would be the assessed amount.

Assessment of General Insurance Company

(1) Forth Schedule governs the computation of income of insurance business both life and
general.
(2) Admissibility of business expenditure under section 50 and inadmissibility/ceiling of
admissibility under section 55 apply in general insurance business too.
(3) Para 6(2) of Forth Schedule permits a general insurance company to transfer 10% of the net
premium income of that year to a fund created to meet exceptional losses and such transfer
is an admissible deduction.
(4) Para 6(3) of Forth Schedule sets the mechanism for the upper limit of the fund which is, the
amount of the fund should be equal to the premium income of the year or average premium
of the immediate 3 years preceding whichever is higher.

Worked example 10

Following is the profit and loss account of Sonar Bangla Insurance Co. Ltd. for the year ended
on 31 December 2023:

Amount Amount
Directors' fee 48,000 Interest, dividend, rent 1,97,26,029
Audit fees 1,35,000 Profit transferred from other 1,72,73,952
Registration, renewal etc. 2,05,331 revenue accounts
Advertisement 32,40,251 Other Income 9,832
Depreciation 7,92,127
Interest on overdraft 1,81,198
Balance transferred to
Appropriation Account 3,23,57,906
3,70,09,813 3,70,09,813

Further scrutiny of the relevant papers, files and documents revealed the following:
(1) Gross premium received during the year was Tk.12,56,07,426 and in three years
immediately preceding were Tk. 13,12,12,308, Tk. 13,68,87,085 and Tk. 13,55,80,109 C
respectively. H
(2) Net premium income of the year was Tk. 6,44,41,296 and the balance brought forward on A
reserve for exceptional loss was Tk.10,19,45,720. P
T
(3) Accounting depreciation Tk. 7,92,127 whereas as per tax law this has been computed at Tk. E
9,19,029.
R
(4) Gratuity charged in the accounts Tk. 7,79,845 but actually paid Tk. 6,25,860.
(5) Analysis of the dividend, rent etc. revealed that an amount of Tk. 64,88,284 being interests
on various bank deposits has been included therein. 20

Calculate taxable profit and tax liability of the company for the relevant assessment year:

ICAB 2024 Assessment of companies 305

 Solution 10

Sonar Bangla Insurance Co. Ltd.

Assessment year: 2024-25

Particulars Amount (Tk.) Amount (Tk.)

Net profit as per accounts 3,23,57,906
Less: Income for separate treatment 1,32,37,745
Dividend
Interest 64,88,284 1,97,26,029
1,26,31,877
Add: Inadmissible deductions 7,92,127
Accounting depreciation
Gratuity provision 7,79,845 15,72,022
1,42,03,899
Less: Admissible expenses
Tax depreciation 9,19,029
Gratuity actually paid 6,25,860
Reserve for exception loss 64,44,130 79,89,019

Business income 62,14,880

Dividend income 1,32,37,745
Income from financial assets 64,88,284
Total income 2,59,40,909

Computation of tax liability

Tax on dividend income 1,32,37,745 @ 20% 26,47,549
Tax on business income 62,14,880 @ 37.5% 23,30,580
Tax on financial assets 64,88,284 @ 37.5% 24,33,107
Total tax liability 74,11,236

Notes:
(1) Dividend is taxable @20%
(2) Gratuity actually paid is allowed.
(3) Reserve for exceptional losses: -

Preceding three years

Current year
2020 2021 2022
Gross premium income 12,56,07,426 13,55,80,109 13,68,87,085 13,12,12,308
Average of 3 years Tk.13,45,59,834

Since average of three years premium income is higher than the premium of Tk.12,56,07,426
(current year's gross premium), the reserve for exceptional losses can be built up to that amount.

Opening balance in exceptional loss reserve Tk. 10,19,45,720

Transfer admissible - l0% of net premium income of Tk. 6,44,41,296 64,44,130
Balance carried forward 10,83,89,850

306 Business Planning: Taxation & Compliance ICAB 2024

 Non-resident carrying insurance business in Bangladesh: (Para 7) the profits and gains of the
branches in Bangladesh of a nonresident insurance company may be deemed to be the
proportion of the total world income of the company corresponding to the proportion which its
premium income derived from Bangladesh bears to its total premium income. The total world
income of nonresident life insurance companies whose profits are periodically ascertained by
actuarial valuation shall be computed in the manner laid down in these paragraphs for the
computation of profits and gains of the life insurance business carried on in Bangladesh.

For example, ALICO Bangladesh Ltd. is incorporated in USA and it carries on insurance business
in Bangladesh for several years through branches. For the year ended 31 March 2023 its audited
world income has been taka 950 million against a total premium income for the same year of
taka 3,250 million. In Bangladesh it earned premium income of taka 60 million. Therefore, profits
earned in Bangladesh is computed as taka 17.54 million (950/3250×60).

Question No. 11

ACB Ltd, a construction company, is engaged in a project with the Government of Bangladesh
for the construction of the Dhaka to Kushtia Highway Road, valued at 100 Crore and to be
completed within 4 years. The contract price is subject to a tax deduction at source under
Section 89 of the Income-Tax Act, 2023, at a rate of 7%.

The company will receive payments as follows: Tk 10 crore in the 1st year, Tk 30 crore in the 2nd
year, Tk 40 crore in the 3rd year, and Tk 20 crore in the 4th year. The company's incremental
performance is 0% by the end of the 1st year, 20% by the end of the 2nd year, 60% by the end
of the 3rd year, and 100% by the end of the 4th year. The net profit before tax for ACB Ltd is Tk
0 in the 1st year, Tk 5 crore in the 2nd year, Tk 9 crore in the 3rd year, and Tk 15 crore in the 4th
year. Compute the net tax payable for each year.

Solution 11:
Amount in Crore
Turnover Advance tax to
Unadjusted as per Adjustable be adjusted
Amount Tax deducted Taxable Regular Net tax after
Year tax carry section tax from with next
received at source profit tax adjustment
forward 74 of ITA, TDS year’s tax
2023 payable
1 2 3= 4 5 6 7= 8= 9= 10 = 3+4-8
(2 x 7%) (6 × (5 x 7%) 7–8
27.5%)
1 10 0.7 0 0 0 0 0 0 0.7 C
2 30 2.1 0.7 20 5 1.375 1.4 0 (Note 1) 1.4 H
3 40 2.8 1.4 40 9 2.475 2.8 0 (Note 2) 1.4 A
4 20 1.4 1.4 40 15 4.125 2.8 1.325 0 (Note 3)
P
T
Note:
E
R
1. The 1.4 crore deducted under Section 89 in Year 2 is considered minimum tax under Section
163(2).
2. The 2.8 crore deducted under Section 89 in Year 3 is considered minimum tax under Section 20
163(2).
3. No adjustable tax in subsequent years.

ICAB 2024 Assessment of companies 307

 Question No 12:

A Recognized Provident Fund invested Tk 60,00,000 in an FDR (F-1) with a tenure of 3 years
starting on 1 July 2022 at an interest rate of 11%. The principal and interest are payable after 3
years on 30 June 2025. As of 30 June 2024, for financial statement preparation under IFRS, the
interest income from F-1 is recorded at Tk 660,000.

Additionally, Tk 80,00,000 was invested in another FDR (F-2) on 1 July 2021, also at an interest
rate of 11%. The principal and interest are due on 30 June 2025 after 4 years. For the financial
statements prepared for June 2024, the interest income on an accrual basis for F-2 is reported
as Tk 880,000.

From another FDR named F-3, the fund received interest totaling Tk 30,00,000 as of 30 June
2024, with tax deducted at source amounting to Tk 300,000. The interest from F-3 has not been
previously taxed.

Compute the tax payable on income from financial assets of the fund for the assessment year
2024-25.

Solution 12:

Accrued income as per financial statement (6,60,000 + 8,80,000) = 1,540,000

Add: Interest received from F-3 as per section 63 = 30,00,000
Less: Accrued income as per section 63 = 1,540,000
Taxable income = 30,00,000
Tax @ 15% = 450,000
Tax deducted under section 102 @ 10% = 300,000
Tax payable under section 173 = 150,000

308 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 21
Liability in special cases and
assessment of non-residents

Introduction

Examination context

Topic list

21.1 Liability of representative in certain cases

21.2 Persons to be treated as agent
21.3 Right of representative to recover tax paid
Liability of firm or association for unrecoverable tax due
21.4
from partners or members
Liability of partners, etc., for discontinued business of a
21.5
firm, etc.,
Liability of directors for unrecoverable tax of private
21.6
companies
Liability of liquidator for tax of private companies under
21.7
liquidation
Liability to tax in case of shipping business of non-
21.8
residents
Liability to tax in case of air transport business of non-
21.9
residents
 Introduction

Learning objectives

 Define the liability of a representative in certain cases in respect of income.

 Recognize the persons to be treated as agent.
 Identify the right of representative to recover tax paid.
 Recognize the tax liabilities of different persons such as firms or association, partners,
directors, liquidator in certain cases
 Define the liability to tax in case of shipping and air transport business of non-residents.

Practical significance

There is no option to avoid the liability for payment of tax. In certain cases, the representative of
any person in respect of income is liable to take some responsibilities especially for assessment.
There is a list of persons who shall be treated as agent in relation to a non-resident.
Representative who paid tax on account of his liability has some right to recover the sum so paid
from the person on whose behalf it is paid.

There are different types of liabilities. Firm or association has liability for unrecoverable tax due
from partners or members. Partners have liability for discontinued business of a firm. Directors
have liability for unrecoverable tax of private limited companies. Liquidator has liability for tax of
private companies under liquidation. The principal or the agent has liability to tax in case of air
transport business of non-residents.

Stop and think

It is obvious that liability of tax cannot be ignored under tax law. The agents or representatives
or other persons in certain cases are liable to pay tax on behalf of other persons.

Working context

The agents or representatives or other persons as defined in this chapter in relation to liabilities
are sometime seeking expert opinion in this respect. Accountants can give support to their
clients. As tax experts, accountants can also help in recovering tax liability from the
representative or agent by providing his expertise in this regard.

Syllabus links

The topics covered in this chapter are fundamental to your understanding of income tax.

310 Business Planning: Taxation & Compliance ICAB 2024

 Examination context C
H
A
P
Exam requirements T
E
In the examination, candidates may be required to: R

 Identify the liability of a representative in certain cases in respect of income.

 Identify the persons to be treated as agent. 21
 Illustrate the right of representative to recover tax paid.
 Liability of firm or association for unrecoverable tax due from partners or members.
 Mention the liability of partners, etc., for discontinued business of a firm, etc.
 Define the liability of directors for unrecoverable tax of private companies.
 Identify the liability of liquidator for tax of private companies under liquidation.
 Define the liability to tax in case of shipping business of non-residents.
 Define the liability to tax in case of air transport business of non-residents.

Question practice

For question practice on these topics, go to the suggested answers covering this chapter.

Examiner's comments on how students should tackle questions

Candidates have to remember to recognize the different types of liabilities of representative,

agents and persons in different cases.

21 LIABILITY IN SPECIAL CASES AND ASSESSMENT OF

NON-RESIDENTS
Section overview

 There is no option to avoid the liability for payment of tax under tax law.
 Liability shall be taken by the representative or agent in certain cases.
 There is a list of persons who shall be treated as agent of a non-resident.
 Representative may have the right to recover the tax he paid.
 There are some procedures to recover tax liabilities of different assessee.
 Non-residents doing shipping business in Bangladesh will pay tax @ 8% on gross fare, which
is considered as the final discharge of tax liability.
 Non-residents doing air transport business in Bangladesh will pay tax @ 3% on gross receipt
which is considered as the final discharge of tax liability.

21.1 Liability of representative in certain cases: Section 252

(1) Every person who is a representative of another person in respect of any income:

(a) be subject to the same duties, responsibilities and liabilities as if such income were
received by, or accruing to, or in favour of, him beneficially;
(b) be liable to the assessment in his own name; and

ICAB 2024 Liability in special cases and assessment of non-residents 311

 (c) be deemed to be the assessee for all purposes of ITA, 2023.

(2) A person, who is assessed as a representative in respect of any income, shall not, in respect
of the same income, be assessed under any other provision of ITA, 2023.

(3) Nothing shall prevent either the direct assessment of the person for whom, or on whose
behalf or for whose benefit, the representative is entitled to receive any income or recovery
from such person of the tax payable in respect of such income.

As per section 252 of Income Tax Act, 2023, the following categories of persons may act as the
representative of persons as specified:

Represented by Representative of
the guardian or manager or trustee minor, lunatic or idiot
the Administrator-General, the Official Trustee, or any Any person who earns
receiver, manager or other person appointed by or under
any order of a Court,
the trustee or trustees appointed under a trust Any person who actually earns
or recipient of benefits
Agent under section 253 Non-resident

21.2 Persons to be treated as agent: Section 253

(1) For the purposes of this Act, the following persons shall, subject to the provisions of sub-
section (2) and (3) be treated as agent in relation to a non-resident, namely –

(a) any person in Bangladesh -

i. who is employed by or on behalf of, the non-resident;
ii. who has any business connection with the non-resident;
iii. who holds, or controls the receipts or disposal of any money belonging to the non-
resident;
iv. who is a trustee of the non-resident; or
v. from or through whom the non-resident is in receipt of any income, whether
directly or indirectly;
(b) any person whether a resident or non-resident, who has acquired, by means of transfer,
a capital asset in Bangladesh from a person residing outside Bangladesh; and
(c) any person who, for any other reasonable cause, is declared or treated as an agent of
the non-resident.

(2) An independent broker in Bangladesh, who in respect of any transaction, does not deal
directly with, or on behalf of, a non-resident principal but deals with, or through, a
nonresident broker, shall not be treated as an agent in relation to a non-resident in respect
of such transaction if -

(a) the transaction is carried on in the ordinary course of business through the nonresident
broker; and
(b) the non-resident broker is carrying on such transaction in the ordinary course of
business.

(3) No person shall be treated under this Act as an agent in relation to a nonresident unless he
has been given by the Deputy Commissioner of Taxes an opportunity of being heard.

312 Business Planning: Taxation & Compliance ICAB 2024

21.3 Right of representative to recover tax paid: Section 254
C
(1) A representative who, on account of his liability u/s 252, pays any sum, shall be entitled to H
recover the sum so paid from the person on whose behalf it is paid, or to retain out of any A
moneys that may be in his possession or may come to him in his possession or may come to P
him in his capacity as a representative, an amount equivalent to the sum so paid. T
E
(2) A representative, or any person who apprehends that he may be assessed as a R
representative, may retain, out of any money payable to the beneficiary on whose behalf he
is liable to tax u/s 252, a sum not exceeding his estimated liability.
21
(3) In the event of any disagreement between the beneficiary and the representative or, as the
case may be, the person apprehensive of being assessed as representative, as to the amount
to be retained under sub-section (2), such representative or person may secure from the
DCT a certificate stating the amount to be so retained pending the settlement of the liability
and the certificate so obtained shall be the warrant for retaining that amount.

21.4 Liability of firm or AOP for unrecoverable tax due from partners or members:
Section 255

(1) Where any tax payable by partner of a firm or a member of an AOP in respect of his share of
the income from the firm or AOP, as the case may be, cannot be recovered from him, the
DCT shall notify the amount of the tax to the firm or AOP.

(2) Upon notification of the amount of tax under sub-section (1), the firm or AOP so notified
shall, notwithstanding anything contained in any other law for the time being in force, be
liable to pay the said tax and shall, for the purposes of recovery thereof, be deemed to be
an assessee in respect of such tax; and the provisions of ITA, 2023 shall apply accordingly.

21.5 Liability of partners for discontinued business: Section 256

(1) Where any business or profession carried on by a firm or an AOP has been discontinued, or
where a firm or an AOP is dissolved, assessment of the total income of the firm or AOP may
be made as if no such discontinuance or dissolution had taken place; and all the provisions
of ITA, 2023 shall, so far as may be, apply accordingly.

(2) Where an assessment is made under sub-section (1) in respect of a firm or an AOP, every
person who was a partner of the firm or member of the association at the time of
discontinuance of business, or as the case may be, dissolution of the firm or association, and
the legal representative of any such person who is deceased, shall be jointly and severally
liable for the amount of tax found payable by the firm or association upon such assessment
and shall, for the purpose of recovery of such tax, including penalty and other sum payable,
be deemed to be an assessee; and the provisions of ITA, 2023 shall apply accordingly.

21.6 Liability of directors for unrecoverable tax of private companies: Section 257

(1) Where any private company is wound up and any tax assessed on the company, whether
before, or in the course of, or after its liquidation, in respect of any income of any income
year cannot be recovered, every person who was, at any time during the relevant income
year, a director of that company, shall, notwithstanding anything contained in the
Companies Act 1994, be jointly and severally liable to pay the said tax and shall, for the

ICAB 2024 Liability in special cases and assessment of non-residents 313

 purposes of recovery thereof, be deemed to be an assessee in respect of such tax and the
provisions of ITA, 2023 shall apply accordingly.

(2) Notwithstanding the provisions of sub-section (1), the liability of any person there under in
respect of the income of a private company shall cease if he proves to the DCT that non-
recovery of tax from the company cannot be attributed to any gross neglect, misfeasance or
breach of any duty on his part in relation to affairs of the company.

21.7 Liability of liquidator for tax of private companies under liquidation: Section
258

(1) A liquidator of a private company which is wound up, whether under the orders of a court
or otherwise, shall, within 30 days after he has become such liquidator, give notice of his
appointment as such to the DCT having jurisdiction to assess the company.

(2) The DCT shall, after making such enquiries or, calling for such information as he may
consider necessary, notify to the liquidator, within 3 months of the date of receipt of the
notice under sub-section (1), the amount which, in his opinion, would be sufficient to provide
for any tax which is then, or is likely thereafter to become, payable by the company.

(3) On being notified under sub-section (2), the liquidator shall set aside an amount equal to
the amount so notified and shall not, before he sets aside such amount, part with any of the
assets of the company except for the purpose of payment of tax payable by the company or
for making payment to secure such credITArs as are entitled under the law to priority of
payment over debts due to the Government on the date of liquidation.

(4) The liquidator shall be personally liable for payment of the tax on behalf of the company to
the extent of the amount notified, if any, under sub-section (2), if he -

a) fails to give notice as required by sub-section (1): or

b) contravenes the provisions of sub-section (3)

(5) Where there are more liquidators than one, the obligations and liabilities of a liquidator shall
attach to all the liquidators jointly and severally.

(6) This law shall have effect notwithstanding anything to the contrary contained in any other
law for the time being in force.

(7) In this section, “liquidator” includes any person who has been appointed to be the receiver
of the assets of the company under liquidation.

21.8 Liability to tax in case of shipping business of non-resident: Section 259

(1) Where a non-resident carries on the business of operation of ships as the owner or charterer
thereof (hereinafter in this section referred to as the principal) tax shall be levied and
collected in respect of such business in accordance with the provisions of this section.

(2) Before departure from any port in Bangladesh of any ship, the master of the ship shall
prepare and furnish to the DCT a return showing-

314 Business Planning: Taxation & Compliance ICAB 2024

 (a) the amount paid or payable whether in or out of Bangladesh to the principal, or to any
person on his behalf, on account of the carriage of passengers, livestock, mail or goods C
shipped at the port since the last arrival of the ship; and H
(b) the amount received, or deemed to be received in Bangladesh by, or on behalf of, the A
principal on account of the carriage of passengers, livestock, mail or goods shipped at P
any port outside Bangladesh. T
E
(3) On receipt of the return, the DCT shall determine the aggregate of the amounts referred to R
in sub-section (2) and, for this purpose, may call for such particulars, accounts or documents,
as he may require and the aggregate of the said amounts so determined, shall be deemed
to be income received in Bangladesh by the principal from the said business chargeable to
21
tax under ITA, 2023 under the head "Income from business or profession", and tax thereon
shall be charged @ 8% of such income.

(4) Where the DCT is satisfied that it is not possible for the master of the ship or the principal to
furnish the return required under subsection (2) before the departure of the ship from the
port and the principal has made satisfactory arrangements for the filing of the return and
payment of the tax by any other person on his behalf, the DCT may, if the return is filed within
30 days of the departure of the ship, deem the filing of the return by the person so
authorized by the principal as sufficient compliance with subsection (2).

(5) No port clearance shall be granted to the ship until the Commissioner of the Customs or any
other officer duly authorized to grant the same, is satisfied that the tax payable under sub-
section (3) has been duly paid or that satisfactory arrangements have been made for the
payment thereof.

(6) The tax paid shall be deemed to be the final discharge of the tax liability of the assessee
under IT Act,1984 and the assessee shall not be required to file the return of total income
under section 166 nor shall he be entitled to claim any refund or adjustment on the basis of
such return.

21.9 Liability to tax in case of air transport business of non-residents: Section 260

(1) Notwithstanding anything contained in this Act, where a non-resident person carries on the
business of operation of aircraft, as the owner or charterer thereof (hereinafter in this section
referred to as “the principal”), and any aircraft owned or chartered by him calls on any airport
in Bangladesh, the aggregate of the receipts arising from the carriage or passengers,
livestock, mail or goods loaded at the said airport into that aircraft shall be deemed to be
income received in Bangladesh by the principal from the said business chargeable to tax
under the head “Income from business or profession”, and tax thereon shall be charged at
the rate of 3% of such income.

(2) The principal or an agent authorized by him in this behalf shall prepare and furnish to the
DCT, within 45 days from the last day of each quarter of every financial year, that is to say,
the thirtieth day of September, the thirty-first day December, the thirty-first day of March and
the thirtieth day of June, respectively, return in respect of each quarter as aforesaid showing
-

(a) the amount paid or payable whether in or out of Bangladesh to the principal, or to any
person on his behalf, on account of the carriage of passengers, livestock, mail or goods
loaded at the said airport; and

ICAB 2024 Liability in special cases and assessment of non-residents 315

 (b) the amount received, or deemed to be received, in Bangladesh by, or on behalf of, the
principal on account of the carriage of passengers, livestock, mail or goods at any airport
outside Bangladesh.

(3) On receipt of the return, the DCT may, after calling for such particulars, accounts or
documents, as he may require, determine the aggregate of the amounts referred to in sub-
section (2), and charge tax as laid down in sub-section (1).

(4) Where, the principal fails to pay the tax payable under sub-section (1) for more than 3
months, the Commissioner of Taxes may issue to the authority by whom clearance may be
granted to that aircraft, a certificate containing the name of the principal and the amount of
tax payable by him; and on receipt of such certificate, the said authority shall refuse
clearance from any airport in Bangladesh to any aircraft owned or chartered by such person
until the tax payable has been paid.

(5) The tax paid as per this section shall be deemed to be the final discharge of the tax liability
of the assessee under ITA, 2023 and the assessee shall not be required to file the return of
total income under section 166 nor shall he be entitled to claim any refund or adjustment
on the basis of such return.

Thus, sections 259 and 260 of ITA, 2023, prescribe the tax rates on income of non-residents
involved with shipping and air transport business which may be mentioned below:

Business Income tax rate Return submitted by Status

Shipping 8% Master of ship Final discharge of tax liability
Air transport 3% Principal or agent Final discharge of tax liability

316 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 22
Special provisions relating
to avoidance of tax

Introduction

Examination context

Topic list

22.1 Avoidance of tax through transactions with non-residents

22.2 Avoidance of tax through transfer of assets
22.3 Avoidance of tax by transactions in securities
22.4 Tax clearance certificate required for persons leaving
Bangladesh
22.5 Production of certificate of tax clearance or exemption
certificate
22.6 Exemption from production of tax clearance certificate
 Introduction

Learning objectives

 Identify the measure in case of avoidance of tax through transactions with nonresidents
 Define the avoidance of tax through transfer of assets and transaction in securities
 Recognize the conditions and rules for tax clearance certificate required for persons leaving
Bangladesh.
 Demonstrate the different forms for tax clearance and tax exemption certificate.
 Mention the conditions for exemption from production of tax clearance certificate.

Practical significance

The tax authorities have some measures in case of avoidance of tax through transactions with
non-residents, transfer of assets and transaction in securities. The tax authorities can determine
the reasonable amount of income in certain cases of such avoidance.

Subject to some exceptions and conditions, a person who is not domiciled in Bangladesh, or a
person who being domiciled in Bangladesh at the time of his departure is required to obtain a
tax clearance certificate or tax exemption certificate as the case may be.

Stop and think

There are some measures with tax authorities in case of avoidance of tax in certain cases. Do you
think that any person can still avoid tax by any means?

Working context

In case of avoidance of tax through transaction with non-resident or otherwise, either intentional
or unintentional, the tax clients are facing many problems from tax authorities. Sometimes they
think that the measures taken by tax authorities are not in line with justice. In such a case
accountant can help them by providing the expert service in this regard.

The accountants also can support by giving advice to his client in case of tax
clearance/exemption certificate required for him while leaving Bangladesh.

Syllabus links

The topics covered in this chapter are fundamental to your understanding of income tax.

318 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Identify the measure in case of avoidance of tax through transactions with nonresidents
 Define the avoidance of tax through transfer of assets.
 Define the avoidance of tax through transaction in securities.
 Mention the conditions and rules for tax clearance certificate required for persons leaving
Bangladesh. C
 Exhibit the different forms of tax clearance and tax exemption certificates H
 Recognize the conditions for exemption from production of tax clearance certificate. A
P
Question practice T
E
For question practice on these topics, go to the suggested answers covering this chapter.
R

22 SPECIAL PROVISIONS RELATING TO AVOIDANCE 22

OF TAX
Section overview

 The tax authorities have some measures against avoidance of tax.

 Tax authorities can determine the reasonable amount of income in certain cases of tax
avoidance.
 Tax clearance or exemption certificate is required for some person leaving Bangladesh at
the time of his departure.
 There are some conditions for exemption from production of tax clearance certificate.

22.1 Avoidance of tax through transactions with non-residents: Section 240

Where any business is carried on between a resident and a non-resident and it appears to the
DCT that, owing to the close connection between them, the affairs of business is so arranged
that the business transacted between them produces to the resident either no profits or profits
less than the ordinary profits which might be expected to yield in that business, the DCT shall
determine the amount of income which may reasonably be considered to have accrued to the
resident from such business and include such amount in the total income of the resident.

22.2 Avoidance of tax through transfer of assets: Section 241

(1) Any income which becomes payable to a non-resident by virtue, or in consequence, of any
transfer of assets, whether alone or in conjunction with associated operation, shall be
deemed to be the income of the person who-

ICAB 2024 Special provisions relating to avoidance of tax 319

 (a) has acquired, by means of such transfer or associated operations, any right by virtue, or
in consequence, of which he has the power to enjoy, whether forthwith or in future, the
income which becomes so payable to the non-resident, or
(b) has received or is entitled to receive at any time, for reasons attributable to such
transactions or associated operations, any sum paid or payable by way of loan or
repayment of loan or any other sum, not being a sum paid or payable as income or for
full consideration of money or money’s worth.

(2) The income which becomes payable to a non-resident and is deemed under sub-section (1),
to be the income of the person referred to therein shall be so deemed for all purposes of
ITA, 2023 whether such income would or would not have been chargeable to tax apart from
the provisions of this section.

(3) The provisions of this section shall not operate if it is shown to the satisfaction of the DCT -

(a) that neither the transfer nor any associated operation had for its purpose, or for one of
its purposes, the avoidance of liability to taxation; or
(b) that the transfer and all associated operations were bona fide commercial transaction
and were not designed for the purpose of avoiding liability to taxation.

(4) Where any person has been charged to tax on any income which is deemed under sub-
section (1) to be his income, that income shall not again be deemed to form part of his
income for the purpose of ITA, 2023 if it is subsequently received by him whether as income
or in any other form.

(5) A person shall, for the purposes of this section, be deemed to have power to enjoy the
income payable to a non-resident if-

(a) such income is in fact so dealt with as to be calculated to ensure at any time for the
benefit of such person in any form; or
(b) the receipt or accrual of such income operates to increase the value of any assets held
by such person or for his benefit; or
(c) such person receives or is entitled to receive at any time any benefit provided or to be
provided-
(i) out of such income; or
(ii) out of money which is, or will be, available for the purpose by reason of the effect or
successive effects of associated operations on such income and on any assets
representing the income; or
(d) such person has, by means of the exercise of any power of appointment, revocation or
otherwise, power to obtain for himself, with or without the consent of any other person,
the beneficial enjoyment of such income; or
(e) such person is able to control, directly or indirectly, the application of such income, in
any manner whatsoever.

(6) In determining whether a person has power to enjoy income, regard shall be had to the
substantial result and effect of the transfer and any associated operation, and to all benefits
which may at any time accrue to such person as a result of the transfer and associated
operations irrespective of the nature or form of the benefit.

Explanation: For the purposes of this section—

(a) ‘assets’ includes property or rights of any kind and ‘transfer’ in relation to assets being rights,
includes creation of those rights;

320 Business Planning: Taxation & Compliance ICAB 2024

 (b) ‘Associated operation’, in relation to any transfer, means an operation of any kind effected
by any person in relation to-

(i) any of the assets transferred; or

(ii) any income arising from such assets; or
(iii) any assets representing, directly or indirectly, any of the assets transferred, or the
accumulation of the income arising from such assets;

(c) ‘benefit’ includes a payment of any kind;

(d) references to assets representing any assets transferred, or any income or accumulation of
income arising there from, includes references to shares in or obligation of any company to
which, or the obligation of any other person to whom, any such assets or that income or
accumulation of income is or has been transferred, and
(e) anybody corporate incorporated outside Bangladesh shall be treated as if it were a non-
C
resident.
H
A
22.3 Avoidance of tax by transactions in securities: Section 242 P
T
(1) Where the owner of any securities sells or transfers those securities and buys them back or
E
re-acquires them, or buys or acquires similar securities, and the result of the transaction is
R
that any interest becoming payable in respect of the original securities sold or transferred
by the owner is not receivable by the owner, the interest payable as aforesaid shall be
deemed, for all purposes of ITA, 2023 to be the income of such owner and not of any other
person, whether the interest payable as aforesaid would or would not have been chargeable 22
to tax apart from the provisions of this subsection.

(2) Where any person has had for any period during an income year any beneficial interest in
any securities and the result of any transactions within that year relating to such securities or
the income thereof is that no income is received by him, or that the income received by him
is less than the sum which the income would have amounted to, had the income from such
securities accrued from day to day, and been apportioned to the said period, then the
income from such securities for the said period shall be deemed to be the income of such
person.

(3) Where, any person carrying on a business which consists wholly or partly in dealing in
securities buys or acquires any securities from any other person and either sells back or re-
transfers those securities, or sells or similar securities, to such other person, and the result of
the transactions is that the interest becoming payable in respect of the securities bought or
acquired by him is receivable by him but is not deemed to be his income by reason of the
provisions of section 242(1), no account shall be taken of the transactions in computing for
any of the purposes of ITA, 2023 any income arising from, or loss sustained, in the business.

(4) The DCT may, by notice in writing, require any person to furnish him, within such time, not
being less than 28 days, as may be specified in the notice, such particulars in respect of all
securities of which such person was the owner, or in which he had beneficial interest at any
time during the period specified in the notice, as the DCT may consider necessary for the
purpose of ascertaining whether tax has been borne in respect of the interest on all those
securities and also for other purposes of this section.

ICAB 2024 Special provisions relating to avoidance of tax 321

 Explanation: For the purposes of this section-

(a) ‘interest’ includes dividend;

(b) securities shall be deemed to be similar if they entitle their holders to the same right against
the same persons as to capital and interest and the same remedies for the enforcement of
these rights, notwithstanding any difference in the total nominal amounts of the respective
securities or in the form in which they are held or in the manner in which they can be
transferred.

22.4 Tax clearance certificate required for persons leaving Bangladesh: Section 243

(1) A person who is not domiciled in Bangladesh, or a person who being domiciled in
Bangladesh at the time of his departure is not, in the opinion of an income tax authority likely
to return to Bangladesh, shall not leave Bangladesh without obtaining from the DCT
authorized in this behalf by the NBR-

(a) a tax clearance certificate, or

(b) if he has intention of returning to Bangladesh, an exemption certificate which shall be
issued only if the DCT is satisfied that such person has such intention; and such
exemption certificate may be either for a single journey or for all journeys within the
period specified in the certificate [section 107(1)].

(2) The owner or charterer of any ship or aircraft, who issues any authority to any person referred
to in sub-section (1) for travel by such ship or aircraft from any place in Bangladesh to any
place outside Bangladesh unless such person has a certificate required by that section, shall-

(a) be liable to pay the amount of tax, if any, which has or may become due and payable
by such person and also to a penalty which may extend to two thousand taka; and
(b) be deemed, for the purposes of recovery of such tax and penalty, to be an assessee in
default, and all the provisions of this Act shall apply accordingly.

Explanation: For the purposes of section 243-

a) ‘exemption certificate’, in relation to any person, means a certificate to the effect that such
person is exempt from the requirement of having a tax clearance certificate for the purpose
of the journey or journeys specified therein;
b) ‘owner’ or ‘charterer’ includes any representative, agent or employee who may be
empowered by the owner or charterer of a ship or aircraft to issue an authority to travel by
the ship or aircraft; and
c) ‘tax clearance certificate’, in relation to a person, means a certificate to the effect that such
person has no liability under ITA, 2023 and the Gift-tax Act, 1990, or that satisfactory
arrangements have been made for the payment of all or any of such taxes which are or may
become payable by which person.

22.5 Production of certificate of tax clearance or exemption certificate before any

officer of immigration or customs [Rule 62]:

(1) Subject to the provisions of rule 63, every person who is not domiciled in Bangladesh shall
be required to produce a tax clearance certificate or exemption certificate to an officer of
immigration or customs for examination before he leaves Bangladesh.

322 Business Planning: Taxation & Compliance ICAB 2024

 (2) In the case of a person who claims to be domiciled in Bangladesh, the officer of immigration
or customs may accept any of the following evidences of nationality, namely:

a) a passport issued by the Government; or

b) a certificate of nationality or domicile issued by a District Magistrate or the Government.

22.6 Exemption from production of tax clearance certificate [Rule 63]:

The following exceptions are made under section 243 of Income Tax Act, 2023 namely:

(1) all person below the age of 18 years [rule 63(a)].

(2) passengers who can show by the dates stamped on their passports or by other reliable
evidence; that-
C
i they have not spent more than 90 days at a time in Bangladesh, and H
ii they have not spent more than 90 days in any financial year in Bangladesh [rule 63(b)]. A
P
(3) all members of diplomatic, trade or commercial missions appointed by foreign
T
Governments, trade commissioners and consul democratic and all full-time employees of
E
such diplomatic missions, trade commissioners and consular officers [rule 63(f)].
R
(4) all officers and employees of foreign Government visiting Bangladesh on duty [rule 63(g)].
(5) the wives and dependents of persons covered by rules 63(f) and (h) [rule 63(h)].
22
(6) Woman who gives a declaration to the effect that she is wholly dependent upon her
husband, parent or guardian and has no independent source of income [rule 63(i)].

ICAB 2024 Special provisions relating to avoidance of tax 323

324 Business Planning: Taxation & Compliance ICAB 2024
 Chapter 23
Powers of income tax
authorities including search
and seizure

Introduction

Examination context

Topic list

23.1 Introduction
23.2 Power to call for information
23.3 Power to inspect registers of companies
23.4 Power of survey
23.5 Enquiries and inspection
23.6 Power of search and seizure
23.7 Power to verify deduction or collection of tax
23.8 Retention of seized assets
23.9 Application of retained assets
23.10 Power of IJCT to revise orders of DCT
23.11 Revisional power of Commissioner
23.12 Power to take evidence on oath, etc.
 Introduction

Learning objectives

 Identify the power of respective income tax authorities to call for information.
 Identify the power to inspect the registers of company
 Recognize the power of survey.
 Demonstrate the additional power of enquiry and requiring the production of documents.
 Power of search and seizure.
 Power to verify withholding taxes.
 Right to retain the seized assets and application thereof.
 Power of revision of orders.
 Power to take evidence on oath.

Practical significance

To carry out the responsibilities and ensure compliance in adopting different rules, respective
income tax authorities have been given sufficient powers. Such powers may be to call for
information, inspect the registers, conduct survey, require for documents, search and seizure,
verify deduction and collection of taxes, retaining seized assets, revise orders and take evidence
of oath.

For different assesses, it is very important as they require to know the power of authorities so
that they can comply with the specific requirements.

Stop and think

Respective income tax authorities enjoy required powers to carry out their job smoothly. Do you
think that you know all of such powers applicable to different income tax authorities?

Working context

Powers of income tax authorities are very important for both income tax authorities and assesses.
Accountants can provide valuable advises to clients in case of non-compliance and any type of
failures if they know the power of income tax authorities properly. It will be helpful for the client
to avoid excessive penalty or other types of punishment. It is also an important part of tax
planning.

The accountants can also support by giving advice to his client in case of powers already
exercised by income tax authorities for non-compliance or failures.

Syllabus links

The topics covered in this chapter are fundamental to your understanding of income tax.

326 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Mention the power of income tax authorities to call for information

 Identify the power to inspect the registers of company
 Demonstrate the additional power of enquiry and requiring the production of documents
 Power of search and seizure
 Power to verify the deduction and collection of taxes.
 Right to retain the seized assets and application thereof.
 Power of revision of orders.
 Power to take evidence on oath.

Question practice

For question practice on these topics, go to the suggested answers covering this chapter.

23 POWERS OF INCOME TAX AUTHORITIES

INCLUDING SEARCH AND SEIZURE
C
Section overview H
A
 The tax authorities enjoy powers to exercise required jobs and responsibilities. P
 Tax authorities have powers to search and seize assets and retain them. T
 Tax authorities may verify the documents of withholding taxes. E
 Tax authorities may revise the orders already passed in respective cases. R

23.1 Introduction
23
Income tax authorities enjoy the power of search and seizure of books of accounts, records,
documents and moveable properties after searching through the business premises, residential
building, vessel, aircraft, or any other places belonging to a person. This chapter covers required
provisions under ITA, 2023 regarding such power of income tax authorities.

23.2 Power to call for information: Section 200

Officials holding a rank not lower than that of Deputy Commissioner of Taxes (DCT) are
authorized to request information by issuing a notice in accordance with the prescribed manner
and time stipulated in the notice, as part of their duties under this Act. Furthermore, any officer
with a rank not lower than that of DCT is entitled to request information to facilitate the resolution
of investigations pertaining to disputed matters or ongoing proceedings under this Act. Such
requests should adhere to the manner and timeline specified in the written notice or
communicated through electronic means.

ICAB 2024 Powers of income tax authorities including search and seizure 327
 However, officers operating under the Commissioner of Tax are prohibited from soliciting
information from banks or financial institutions without obtaining the prior approval of the
Commissioner of Taxes.

23.3 Power to inspect records of business: Section 202

Any income tax authority has the right to require an individual or business to furnish records or
copies of records that are pertinent to any investigation or ongoing proceeding concerning
unresolved matters under the Income Tax Act, 2023.

23.4 Power of survey: Section 205

Section 205 of the Income Tax Act, 2023, empowers the Board or the Commissioner of Taxes to
grant authorization to income tax authorities for conducting surveys to evaluate the tax liability
of person under the Act. This authorization allows income tax authorities to enter premises
where business operations occur or rental income is generated. The entry is subject to specific
conditions: during business hours for places of business activities and between sunrise and
sunset for other cases. Within these premises, the income tax authority is authorized to
undertake several actions, including collecting copies or summaries from income, assets, or
liability records, securing and inventorying income-related records, documenting statements
from relevant individuals, and making necessary inquiries.

Individuals associated with the business or residing in the premises are obligated to cooperate
by providing access to records and documents, facilitating inspections, and offering information
as required for the proceedings under the Act. Notably, while income tax authorities possess
considerable powers for inspection and inquiry, they are restricted from removing cash, stock,
or valuable items from the premises, except as specified under section 206 of the Act. No
income tax authority without permission of Commissioner of Taxes shall hold the seized items
for more than one month. Income tax authority except Tax Inspector, shall have same power
vested under section 223(1) in case of non-cooperations in performing duties under this section.

23.5 Enquiries and inspection: Section 204

Inspecting income tax authority may make any enquiry which they consider necessary as
respects any person liable, or believed by them to be liable, to assessment under ITA, 2023 or
require any such person or any other person in relation to such enquiry to appear before him at
the time and place as directed for providing any information or to produce or cause to be
produced necessary documents.

Board will publish a workbook in support of enquiries and inspections to fulfil the purpose of
this section.

23.6 Power of search and seizure: Section 206

Section 206 of the Income Tax Act, 2023 lays out the provisions regarding the power of search
and seizure. According to this section, when the inspecting income tax authority has reasonable
belief based on information in the possession of the Board or inspecting income tax authority,
he can exercise the powers mentioned in subsection (3). These powers include the authority to
enter and search various locations, such as buildings, vessels, vehicles, and aircrafts, where there
is suspicion that specific items like books of accounts, documents, electronic records, money,
bullion, jewelry, or other valuables subject to the Income Tax Act have been concealed.

328 Business Planning: Taxation & Compliance ICAB 2024

 The authorized officer is empowered to break locks if necessary, search individuals, seize
relevant items, place marks of identification on documents, and even access electronic records
by bypassing password protection.

The authorized officer can also seek assistance from police officers, government officials, or
professional experts. If seizure isn't possible, the officer can issue an order preventing the
removal or disposal of the items. Statements made during the search can be used as evidence
in proceedings under the Act, and the possession of items found during a search is considered
evidence of ownership and accuracy. Procedures for copying seized documents, retaining them,
and objections to retention are defined, with specific time limits. The Code of Criminal
Procedure, 1898, applies to search and seizure processes, and the term "proceeding" includes
pending and future actions under the Act.

23.7 Power to verify deduction or collection of tax: Section 147

Authority empowered in writing from the Commissioner of Taxes or Direct General, Tax
Inspector or DG, Central Intelligence Cell for the purpose of verification of tax deducted and
collected at source can:
(a) In relation to a person or entities, get access to any place, goods, accounts or record of
economic activities kept in any means, any encrypted or formatted data kept in computer
systems, electronic record or systems and extract them, break password to get access,
analyze information, books of accounts, documents, image or inputs, mark or stamp on the
books of accounts and other documents, get an extract or copy them, seize of kept in hold
of the same, order someone to do or not to do activities;
(b) can accompany appropriate expertise or agencies;
C
(c) authorities are empowered to fine a person up to Tk. 50,00,000 in case any barrier,
H
noncooperation caused in performing the above works;
A
(d) for failure to comply with this section, DCT may realize tax and penalty upon recording the P
person’s explanation, if available. T
E
23.8 Retention of seized assets: Section 209 R

(1) When any money, bullion, jewelry, or other valuable article or item (referred to as 'assets') is
seized under section 206 and handed over to the Deputy Commissioner of Taxes (DCT), the 23
provisions of sub-section (2) shall be applied:

(2) The DCT shall, within 90 days of the seizure, provide the individual concerned with a fair
opportunity to present their case and conduct an inquiry. Based on this, the DCT will make
a decision using their best judgment to estimate undisclosed income or income from assets.
They will then calculate the associated tax and other charges, including taxes in default.

(3) This 90-day period shall not include any time resulting from orders or sanctions.

(4) In cases where the income and related tax cannot be determined for the income year
connected to the seized assets or any portion thereof, the DCT may consider the income
year in which the assets were seized.

(5) Upon obtaining permission from the Commissioner of Taxes, the DCT may issue a notice to
demand the amount determined under sub-section 2(b).

ICAB 2024 Powers of income tax authorities including search and seizure 329
 (6) If the person takes satisfactory measures to pay the demanded amount, the DCT shall
release the seized assets. Otherwise, they may take appropriate actions as they deem fit.

(7) If satisfactory measures are not taken to settle the demanded amount, the person shall be
deemed a defaulter for the unpaid sum. The DCT may retain a portion of the asset that is
sufficient to cover the defaulted demand.

(8) If the person to whom the demand notice is served feels aggrieved, they have the right to
submit written complaints. Upon being given a reasonable opportunity for a hearing, the
DCT shall issue an appropriate order.

23.9 Application of retained assets: Section 210

(1) Where the assets retained under sub-section (7) of section 206 consist solely of money, or
partly of money and partly of other assets, -

(a) the DCT shall first apply such money towards payment of the amount in respect of which
the person concerned is deemed to be an assessee in default under that sub-section;
and thereupon such person shall be discharged of his liability to the extent of the money
so applied; and

(b) where, after application of the money under clause (a), any part of the amount referred
to therein remains unpaid, the DCT may recover the amount remaining unpaid, by sale
of such of the assets as do not consist of money in the manner movable property may
be sold by a Tax Recovery Officer (TRO) for the recovery of tax; and for this purpose, he
shall have all the powers of a TRO under ITA.

(2) Nothing contained in sub-section (1) shall preclude the recovery of the amount referred to
in section 206 (7) by any other mode provided in ITA for the recovery of any liability of an
assessee in default.

(3) Any assets or proceeds thereof which remain after the discharge of the liability in respect of
the amount referred to in section 206 (7) shall forthwith be made over or paid to the persons
from whose custody the assets were seized.

23.10 Power of IJCT to revise order of DCT: Section 213

The IJCT may request information from the DCT (Deputy Commissioner of Taxes) and review
the records of any proceeding under the Income Tax Act. If the IJCT believes that any order
issued by the DCT is erroneous, to the extent that it adversely affects the interests of the revenue,
the IJCT may, after giving the assessee an opportunity to be heard, and after conducting any
necessary inquiry, issue an appropriate order. This order could involve enhancing or modifying
the assessment, cancelling the assessment, or directing a fresh assessment to be conducted
within four years from the date of the order that is being considered for revision.

Nothing in section 212 shall bar any proceeding under this section in applicable cases. Here,
return shall deem to be erroneous if:

(a) heads of income is wrong in the order;

(b) in developing order, provision of law have been wrongly interpreted;
(c) provide orders without verifications where it was necessary to verify;
(d) issue order upon accepting tax rebate without verifying that;

330 Business Planning: Taxation & Compliance ICAB 2024

 (e) provide order without complying with orders, instruction under section 10;
(f) it is certainly confirmed upon seeing the order that order was erroneous.

23.11 Revisional power of Commissioner: Section 285

(1) The Commissioner may on an application made by the assessee, call for the record of any
proceeding under ITA in which an order has been passed by any authority subordinate to
him and may make such enquiry or cause such enquiry to be made and, subject to the
provisions of ITA, may pass such order thereon, not being an order prejudicial to the
assessee, as he thinks fit.

(2) The application for revision of an order under ITA passed by any authority subordinate to
the Commissioner shall be made within 60 days of the date on which such order is
communicated to the assessee or within such further period as the Commissioner may
consider fit to allow on being satisfied that the assessee was prevented by sufficient cause
from making the application within the said 60 days.

(3) The Commissioner shall not exercise his power in respect of any order-

(a) where an appeal against the order lies to the AJCT or to the Commissioner (Appeals) or
to the Appellate Tribunal and the time within which such appeal may be made has not
expired or the assessee has not waived his right of appeal; or
(b) where the order is pending on an appeal before the AJCT or it has been made the
subject of an appeal to the Commissioner (Appeals) or to the Appellate Tribunal.

(4) No application under sub-section (1) shall be entertained unless-

C
(a) it is accompanied by a fee of two hundred taka; and H
(b) payment of recognized tax. A
P
Explanation- The "undisputed portion of the tax" means the tax payable under section 173. T
E
(5) For the purposes of this section, an order by the Commissioner declining to interfere shall R
not be construed as an order prejudicial to the assessee.

(6) Notwithstanding anything contained in IT Act, an application for revision made under sub- 23
section (1) shall be deemed to have been allowed if the Commissioner fails to make an order
thereon within a period of 60 days from the date of filing the application.

(7) For the purposes of this section, the AJCT shall be deemed to be an authority subordinate
to the Commissioner to whom the DCT, whose order was the subject-matter of the appeal
order under revision, is subordinate.

23.12 Power to take evidence on oath, etc.: Section 211

(1) The DCT, the IJCT, the Commissioner, the DG, Central Intelligence Cell, the Commissioner
(Appeals) and the Taxes Appellate Tribunal shall, for the purposes of IT Act, have the same
powers as are vested in a Court under the Code of Civil Procedure, 1908 (Act V of 1908),
when trying a suit in respect of the following matters, namely:

(a) discovery and inspection;

ICAB 2024 Powers of income tax authorities including search and seizure 331
 (b) enforcing the attendance of any person and examining him on oath or affirmation;
(c) compelling the production of accounts or documents (including accounts or documents
relating to any period prior or subsequent to the income year); and
(d) issuing commissions for the examination of witness.

(2) The DCT shall not exercise his powers under this section for the purpose of enforcing the
attendance of an employee of a scheduled bank as a witness or compelling the production
of books of account of such a bank except with the prior approval of the Commissioner.

(3) Any authority mentioned in sub-section (1) may impound and retain in its custody for such
period as it considers fit, any books of accounts or other documents produced before it in
any proceeding under ITA.

(4) DCT shall not size any documents related to the income without record the reason, or
without permission of chief commissioner or commissioner, he shall not retain income
related document for more than 15 days excluding public holidays.

(5) Any proceeding under IT Act, before any authority mentioned in sub-section (1), shall be
deemed to be a judicial proceeding within the meaning of section 193 and 128, and for the
purposes of section 196, of the Penal Code (Act XLV of 1860).

(6) Proceeding or any order under this section shall be consider as the order of the civil court.

332 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 24
Penalty

Introduction

Examination context

Topic list

24.1 Introduction
24.2 Penalty for not maintaining accounts in the prescribed manner
24.3 Penalty for failure to file return, certificate, statement, accounts or
information
24.4 Penalty for using fake Tax-payer's Identification Number
24.5 Penalty for failure to pay advance tax
24.6 Penalty for non-compliance with notice
24.7 Penalty for failure to pay tax on the basis of return
24.8 Penalty for concealment of income
24.9 Penalty for default in payment of tax
24.10 Bar to imposition of penalty without hearing
24.11 Previous approval of IJCT for imposing penalty
24.12 Orders for penalty to be sent to DCT
24.13 Penalty to be without Prejudice to other liability
24.14 Revision of penalty based on revised income
24.15 Offences and prosecution
 Introduction

Learning objectives

 Mention the different non-compliances of tax law for which penalties are imposed.
 Identify the penalties due to non-compliance of tax law in certain cases.
 Define the measures against any order of penalty.

Practical significance

If any person without any reasonable cause failed to comply with tax law in certain cases the tax
authorities may impose penalty on that person. There are requirements by tax law such as
maintaining of accounts in the prescribed manner, filing of return, statements, accounts or
information, payment of advance tax, compliance with notices, payment of tax on the basis of
return etc. Non-compliance of these requirements may cause to penalties payable by the
persons for such non-compliances. Concealment of income and default in payment of tax are
also caused penalties.

No penalties mentioned here shall be made on any person unless such person has been heard
or has been given a reasonable opportunity of being heard. The imposition of any penalty on
any person shall be without prejudice to any other liability.

Stop and think

Did you realize how important it is to ensure the compliance of the requirements of tax law
mentioned in this chapter for avoiding penalties? The penalties can be quite extensive in some
cases.

Working context

You need to know the consequences for non-compliance of the requirements of tax law in this
chapter. You must keep it in mind that the penalties may be massive and imposition of penalties
for such non-compliance can also harm the reputation of the assessee and his financial
sustainability.

The accountants can help the clients to comply with all the requirements of tax law in this regard
so that the clients can avoid any such penalties and retain the esteem from tax authorities and
stakeholders.

Syllabus links

The topics covered in this chapter are very important as it is dealt with the legal requirement of
tax law.

334 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Identify the penalty for not maintaining accounts in the prescribed manner.
 Identify the penalty for failure to file return, statement, accounts or information.
 Identify the penalty for failure to pay advance tax and failure to pay tax on the basis of return.
 Identify the penalty for non-compliance with notice, concealment of income and default in
payment of tax.
 Mention the bar to impose penalty.
 Demonstrate the authority and procedures for imposition of penalty.

Question practice

For question practice on these topics, go to the suggested answers covering this chapter.

Examiner's comments on how students should tackle questions

Candidates must remember the requirements of tax law in relation to imposition of penalty in
case of non-compliance with the amount or rate of penalties.

24 IMPOSITION OF PENALTY
Section overview

 Penalties can be imposed on any person for non-compliance of certain tax law.
 The amount and rate of penalties can be varied in case to case.
 Unless giving reasonable opportunity of being heard, no penalties shall be imposed other
than a few.

24.1 Introduction C
H
Penalty is the outcome of non-compliance of any provisions of ITA in any manner. Such penalties
A
are important to encourage compliance and establish equity at the time of imposing penalty. As
P
per Part 19 of The Income Tax Act, 2023 a penalty may be imposed on following grounds:
T
a) for not maintaining accounts in the prescribed manner E
b) for failure to file return, statement, accounts or information R
c) for using fake Tax-payer's Identification Number (TIN)
d) for failure to pay advance tax
e) for non-compliance with notices 24
f) for failure to pay tax based on return
g) for concealment of income
h) for default in payment of tax

ICAB 2024 Penalty 335

 Each of the above-mentioned failures or non-compliances is offence and subject to specific
penalty as per the provisions laid down in Part 19 of ITA, 2023 except penalty for default in
payment of tax (h) above on which penalty is imposed as per the provisions laid down in section
275 of ITA, 2023.

24.2 Penalty for not maintaining accounts in the prescribed manner: Section 267

Where any person, who does not have income from tangible assets, has, without reasonable
cause, failed to comply with the provisions of any order or rule made in pursuance of, or for the
purposes of section 72(3), the DCT may impose on him a penalty—

(a) of a sum not exceeding one and a half times the amount of tax payable by him; and
(b) Where the total income of such person does not exceed the maximum amount on which tax
is not chargeable, of a sum not exceeding Tk. 5,000.

Where any person who has the income from tangible assets, without reasonable cause, failed to
comply with the provisions of any order or rule made in pursuance of, or for the purposes of
section 72(3), the DCT may impose on him a penalty up to 50% of tax payable on the income of
tangible assets or Tk. 5,000, whichever is higher.

24.3 Penalty for failure to file return, statement, accounts or information: Section
266

(1) Where any person has, without reasonable cause, failed to file a return of income required
by or under sections 166, 172, 191, 193 and 212, the DCT may impose upon such person a
penalty amounting to 10% of tax imposed on last assessed Income subject to a minimum of
Tk. 1,000, and in the case of a continuing default a further penalty of Tk. 50 for every day
during which the default continues.

However, total amount of such penalty will not exceed Tk. 5,000 in case an individual who
was not previously assessed. And in case of existing individual assessee maximum penalty
will not exceed 50% of last assessed tax or Tk.1,000 whichever is higher.

(2) For non-submission of statement or return u/s 177, DCT may impose penalty at 10% of last
assessed tax or Tk. 5,000/ whichever is higher, and Tk. 1,000 per month or portion thereof
for continuing default.

(3) For not providing certificate u/s 145, DCT may impose penalty for up to Tk. 5,000 and Tk.
1,000 per month or portion thereof for continuing default.

(4) For failure to provide information u/s 200, income tax authority who sougth such information
may impose penalty up to Tk. 50, 000 and Tk. 500 per day for continuing default.

24.4 Penalty for using fake TIN: Section 268

Where a person has, without reasonable cause, used TIN of another person or used fake TIN on
a return of income or any other documents where TIN is required under ITA, the DCT may
impose a penalty not exceeding Tk. 20,000 on that person.

336 Business Planning: Taxation & Compliance ICAB 2024

24.5 Penalty for failure to pay advance tax: Section 269

Where, during any proceeding in connection with the assessment of tax, the DCT is satisfied that
any person has—

(a) without reasonable cause, failed to pay advance tax as required by section 154; or
(b) furnished under section 155 any estimate of tax payable by him which he knew, or had
reason to believe, to be untrue, he may impose upon such person a penalty of a sum not
exceeding the amount by which the tax actually paid by him falls short of the amount that
should have been paid.

24.6 Penalty for non-compliance of notice: Section 270

Where any person has, without reasonable cause, failed to comply with any notice issued under
section 167, 168, 179, 181, 183 or 212 the DCT may impose on him a penalty not exceeding the
amount of tax chargeable on the total income of such person.

24.7 Penalty for failure to pay tax based on return: Section 271

Where, in the course of any proceeding under the Act, the DCT is satisfied that any person has
not paid assessed tax, he may impose upon such person a penalty of a sum not exceeding 25%
of such portion of the tax as has not been paid.

24.8 Penalty for concealment of income: Section 272

Where, in the course of any proceeding under the Act, any authority is satisfied that any person
has, either in the said proceeding or in any earlier proceeding relating to an assessment in
respect of the same income year, provide information in relation to his income, assets, liabilities,
expenses or other important information regarding payable amount incorrect that led evasion
of payable amount, may be penalized as:

a= evaded amount x 15%

b= evaded amount x 10% x c
c= period of false information commencing from the year of occurrence and the year on which
it is discovered.

24.9 Penalty for default in payment of tax: Section 275 C

H
Where an assessee is in default or is deemed to be in default in making payment of tax, the DCT A
may direct that, in addition to the amount of tax in arrears, a sum not exceeding that amount P
shall be recovered from the assessee by way of penalty. T
E
24.10 Bar to imposition of penalty without hearing: section 280 R

No order imposing a penalty under this Part shall be made on any person unless such person
has been heard or has been given a reasonable opportunity of being heard. 24

24.11 Previous approval of IJCT for imposing penalty: Section 281

The DCT shall not impose any penalty under this Chapter without the previous approval of the
IJCT except in the cases referred to in section 266, 275, 276, 277, 278, and 279.

ICAB 2024 Penalty 337

 24.12 Orders for penalty to be sent to DCT: Section 282

The Taxes Appellate Tribunal or any income tax authority other than DCT himself making an
order imposing any penalty under this Part shall forthwith send a copy of the order to the
concerned DCT, and thereupon all the provisions of the Act relating to the recovery of penalty
shall apply as if such order were made by the DCT.

24.13 Penalty to be without Prejudice to other liability: Section 283

The imposition on any person of any penalty under this Part shall be without prejudice to any
other liability which such person may incur, or may have incurred, under the Act or under any
other law for the time being in force.

24.14 Revision of penalty based on revised income: Section 284

DCT shall revise the penalty order during the process of income revision, as per the order issued
under this Act. The amount of penalty cannot be increased without providing a reasonable
opportunity for the assessee to be heard. If a revised penalty order is not issued and the taxpayer
lodges an application requesting the DCT to revise the penalty amount, and if the revised order
is not issued within 180 days from the date of the application, then the order will be deemed as
revised.

24.15 Offences and prosecution

IT Act 2023 presents the rules for punishment through sections 164 to 168 due to specified types
of offences committed by different classes of assessee. Such punishments in line with the
offences are presented below:

No prosecution for an offence punishable under any provisions shall be instituted except with
the previous sanction of the Board. The Board may compound such offence either before or
after the institution of any proceedings or prosecution for a punishable offence.

Section Offence Punishment

311 Non-compliance of with imprisonment for a term which may extend to one year,
certain obligations or with fine, or both
312 Evade tax with imprisonment for a term which may extend to 5 years,
but shall not be less than 6 months, or with fine, or both
313 False statement with imprisonment for a term which may extend to 5 years,
upon verified but shall not be less than 6 months, or with fine, or both
314 False certificate with imprisonment for a term not exceeding one year, but
shall not be less than 3 months
315 Failed to deduct or with imprisonment which may extend to one years, or with
collect tax at source fine, or with both
and deposit to
treasury
316 False audited with imprisonment for a term not exceeding 5 years, but
financial statements shall not be less than 6 months
317 Misuse of TIN with imprisonment for a term which may extend to 1 year, or
with fine up to Tk. 100,000 or both
318 For distracting with imprisonment for a term which may extend to 1 year, or
income tax authority with fine or both

338 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 25
Recovery of tax

Introduction

Examination context

Topic list

25.1 Notice of demand

25.2 Penalty for default in payment of tax
25.3 Certificate for recovery of tax
25.4 Method of recovery by Tax Recovery Officer (TRO)
25.5 Power of withdrawal of certificate and stay of proceeding
25.6 Validity of certificate for recovery not open to dispute

25.7 Recovery of tax through Collector of District

25.8 Other modes of recovery
 Introduction

Learning objectives

 Define the notice of demand.

 Identify the penalty for default in payment of tax.
 Define the certificate for recovery of tax.
 Identify the different methods and modes of recovery of tax.

Practical significance

A notice of demand in the prescribed form shall be served upon the assessee specifying the
sum payable and the time within which it is payable where any tax is payable in consequence of
any assessment made or any order passed under or in pursuance of the Act.

An assessee in default or is deemed to be in default in making payment of tax may be directed

to pay penalty in addition to tax in arrears. For recovery of tax from an assessee in default, a
certificate for recovery of tax may be issued. The TRO upon receipt of that certificate can recover
the tax in compliance with the method and mode of recovery as specified. Tax can also be
recovered by the Collector of Districts or through Special Magistrates. There are other modes
of recovery mentioned in this chapter.

Stop and think

Do you have the idea about the method and mode of recovery of tax by the tax authority? Do
you know about notice of demand and penalty for default in payment of tax?

Working context

The tax authority has some procedures to recovery of taxes. They can serve notice of demand;
they can issue certificate for tax recovery. They can recover tax even through Collector of District
or Special Magistrate. They have also other modes of recovery. So, it is not easy for any assessee
to get rid of from payment of tax. Besides an assessee in default or is deemed to be in default in
making payment of tax may be penalized.

Accountants can suggest their clients to pay the tax on the basis of assessment in due time. They
can aware the clients that making default in payment of tax may cause to penalty in addition to
tax payable.

Syllabus links

The topics covered in this chapter are fundamental to your understanding of income tax.

340 Business Planning: Taxation & Compliance ICAB 2024

 Examination context C
H
A
P
Exam requirements T
E
In the examination, candidates may be required to: R

 Define the notice of demand.

 Identify the penalty for default in making payment of tax. 25
 Define the certificate for recovery of tax.
 Identify the method of recovery by TRO.
 Define the power of withdrawal of certificate and stay of proceeding.
 Define the recovery of tax through Collector of District.
 Define the recovery of tax through Special Magistrates.
 Identify other modes of recovery.

Question practice

For question practice on these topics, go to the suggested answers covering this chapter.

25 RECOVERY OF TAX
Section overview

 Notice of demand can be served upon the assessee for recovery of tax
 Default assessee may be directed to pay penalty in addition to tax in arrears.
 Certificate of recovery may be issued for tax recovery from default assessee.
 Tax can also be recovered by the Collector of Districts or through Special Magistrates.
 There are different methods and modes of recovery of tax.

25.1 Notice of demand: Section 214

(1) Where any tax is payable in consequence of any assessment made or any order passed
under or in pursuance of the Act, the DCT shall serve upon the assessee a notice of demand
in the prescribed form specifying therein the sum payable and the time within which, and
the manner in which, it is payable, together with a copy of an assessment order.

(2) Where any tax is refundable in consequence of any assessment made or any order passed
under this Act, the DCT shall inform the assessee about the amount refundable and process
of refund in the notice so served under subsection (1) unless the refundable amount is
adjusted with outstanding under section 225.

(3) No adjustment shall be made against any dues without giving the opportunity of hearing.

(4) Where the assessee upon whom a notice of demand has been issued under section 214(1)
makes an application in this behalf before the expiry of the date of payment specified in the
notice, the DCT may extend the time for payment or allow payment by installments subject
to such conditions, including payment of interest on the amount payable, as he may think fit
in the circumstances of the case.

ICAB 2024 Recovery of tax 341

 (5) If the sum payable is not paid within the time specified in the notice of demand issued under
sub-section (1) or, as the case may be, within the time as extended under sub-section (4),
the assessee shall be deemed to be in default.

(6) Where the assessee has presented an appeal under this Act in respect of the assessment or
imposition of the tax or of the amount thereof, the DCT shall treat the assessee as not being
in default for so long as such appeal is not disposed of.

(7) If, in a case where payment by installment has been allowed under sub-section (4), the
assessee commits default in paying any one of the installments within the time fixed thereof,
the assessee shall be deemed to be in default as to the whole of the amount then
outstanding, and the other installments shall be deemed to have been due on the same date
as the installment in respect of which default has actually been committed was due for
payment.

(8) Where an assessee has been assessed in respect of income arising outside Bangladesh in a
country the laws of which prohibit or restrict the remittance of money to Bangladesh, the
DCT shall not treat the assessee as in default in respect of that part of the tax which is due in
respect of such amount of income as cannot, by reason of the prohibition or restriction, be
brought into Bangladesh, and shall continue to treat the assessee as not in default in respect
of such part of the tax until the prohibition or restriction is removed.

(9) For the purposes of this section, income shall be deemed to have been brought into
Bangladesh if it has been or could have been utilized for the purposes of any expenditure
actually incurred by the assessee outside Bangladesh or if the income, whether capitalized
or not, has been brought into Bangladesh in any form.

25.2 Penalty for default in payment of tax: Section 275

Where an assessee is in default or is deemed to be in default in making payment of tax, the DCT
may direct that, in addition to the amount of tax in arrears, a sum not exceeding that amount
shall be recovered from the assessee by way of penalty.

25.3 Certificate for recovery of tax: Section 216

1. When an assessee is in default or in deemed to be is default in making payment of tax, the

DCT may forward to the TRO a certificate for recovery of the tax, under his signature
specifying the amount of arrears due from the assessee; and such certificate may be issued
notwithstanding that proceedings for recovery of the arrears by any other mode have been
taken.

2. A certificate under sub-section (1) may be forwarded to—

(a) the TRO within whose jurisdiction the assessee carried on his business or profession, or
the principal place of business or profession of the assessee is situate; or
(b) the TRO within whose jurisdiction the assessee resides, or any movable or immovable
property of the assessee is situate; or
(c) the TRO who has jurisdiction in relation to the assessee whose income is assessable by
the DCT forwarding the certificate.

342 Business Planning: Taxation & Compliance ICAB 2024

25.4 Method of recovery by Tax Recovery Officer (TRO): Section 217
C
1. Upon receipt of certificate forwarded to him under section 216, the TRO shall proceed, in H
accordance with the rules made in this behalf by the Board, to recover from the assessee the A
amount specified in the certificate by one or more of the following modes, namely- P
T
(a) attachment and sale, or sale without attachment, of any movable or immovable property E
of the assessee; R
(b) arrest of the assessee and his detention in prison;
(c) appointment of a receiver for the management of the movable and immovable
properties of the assessee. 25

2. While recovering under sub-section (1) the amount specified in the certificate forwarded to
him, the TRO may also recover in the same manner from the assessee in default, in addition
to such amount, any cost and charges, including expenses on the service of any notice or
warrant, incurred in the proceedings for the recovery of the tax in arrears.

3. If the TRO to whom a certificate is forwarded under section 216 is not able to recover the
entire amount by the sale of movable and immovable properties of the assessee within his
jurisdiction, but has information that the assessee has property within the jurisdiction of
another TRO, he may send the certificate to such other TRO or to the TRO within whose
jurisdiction the assessee resides; and the TRO to whom the certificate has been so sent shall
proceed to recover under Chapter XVI the amount remaining un-recovered as if the
certificate was forwarded to him by the DCT.

25.5 Power of withdrawal of certificate and stay of proceeding: Section 218

1. The DCT shall have power to withdraw or correct any clerical or arithmetical error in the
certificate by sending an intimation to that effect to the TRO.

2. Where the order giving rise to a demand of tax for which a certificate for recovery has been
issued has been modified in appeal or other proceedings under this Act and, as a
consequence thereof, the demand is reduced but the order is the subject matter of further
proceedings under this Act, the DCT shall stay the recovery of such part of the amount of
the certificate as pertains to the said reduction for the period for which the appeal or other
proceedings remain pending.

3. Where a certificate for recovery has been issued and subsequently the amount of
outstanding demand is reduced as a result of appeal or other proceedings under this Act,
the DCT shall, when the order, which was the subject matter of such appeal or other
proceeding, has become final and conclusive, amend the certificate or withdraw it, as the
case may be.

4. The DCT shall communicate to the TRO any orders of cancellation, correction, stay of
proceeding, withdrawal or amendment, as the case may be, of a certificate for recovery.

25.6 Validity of certificate for recovery not open to dispute: Section 219

When the DCT forwards a certificate for recovery under section 216 to a TRO, it shall not be
open to the assessee to dispute before the TRO the correctness of the assessment, and the TRO
shall not entertain any objection to the certificate on any ground whatsoever.

ICAB 2024 Recovery of tax 343

 25.7 Recovery of tax through Collector of District: Section 220

1. The DCT may forward to the Collector of District in which the office of the DCT is situate or
the district in which the assessee resides or owns property or carries on business or
profession, a certificate under his signature specifying the amount of arrears due from an
assessee, and the Collector, on receipts of such certificate, shall proceed to recover, from
such assessee the amount specified therein as if it were an arrear of land revenue.

2. Without prejudice to any other powers which the Collector of District may have in this behalf,
he shall, for the purposes of recovery of the amount specified if the certificate for recovery
forwarded to him under sub-section (1), have the powers which a Civil Court has under the
Code of Civil Procedure, 1908, for the purposes of recovery of an amount due under a
decree.

3. The DCT may, at any time, recall from the Collector of District a certificate forwarded to him
under sub-section (1) and upon such recall, all proceeding commenced in pursuance of the
certificate shall abate. However, the recall of a certificate shall not affect any recoveries made
by the Collector before the recall as if the certificate had not, to the extent of such recovery,
been recalled; nor shall the recall of a certificate issued at any time prevent the recovery, by
issue of a fresh certificate, of any amount which was recoverable at the time the certificate
so recalled was issued.

25.8 Other modes of recovery: Section 221

(1) Notwithstanding the issue of a certificate for recovery of tax under section 216 or section
220, the DCT may also recover the tax in the manner provided in sub-section (2) or (3).

(2) For the purpose of recovery of tax payable by an assessee which is not disputed in appeal
to any appellate forum, the DCT may, with the previous approval of the Commissioner, after
giving the assessee an opportunity of being heard, stop movement of any goods and
services from the business premises of such assessee and also shutdown such business
premises till the recovery of the tax referred to above or any satisfactory arrangement has
been made for the recovery of such tax.

(3) For the purposes of recovery of any tax payable by an assessee, the DCT may, by notice in
writing, require following person to deposit the amount or deduct tax and deposit to the
treasury:

i. To whom any money or goods of the assessee is due or may become due;
ii. Who holds or controls the receipt or disposal of, or may subsequently hold, or control
the receipt or disposal of, any money or goods of the assessee;
iii. Who hold, supervise or operate any assets of any kind of the assesses on his behalf;
iv. Who hold, supervise or operate any assets of a non-resident assessee as an agent or
may subsequently hold, supervise or operate;
v. Who is responsible to disburse income from employment to the assessee;
vi. Who is responsible to pay rental income to the assessee.

(4) Person who has paid any sum as required by sub-section (3) shall be deemed to have paid
such sum under the authority of the assessee and the receipt by the DCT shall constitute a
good and sufficient discharge of the liability of such person to the assessee to the extent of
the sum specified in the receipt.

344 Business Planning: Taxation & Compliance ICAB 2024

 (5) If the person to whom a notice under sub-section (3) is sent fails to make payment or to make
deductions in pursuance of the notice, he shall be deemed to be an assessee in default in C
respect of the amount specified in the notice and proceedings may be taken against him for H
realization of the amount as if it were an arrear of tax due from him; and the provisions of A
this Chapter shall apply accordingly. P
T
(6) The DCT may at any time amend or revoke any notice issued under sub-section (3) or extend E
the time for making any payment in pursuance of such notice. R
(7) DCT may direct respective authority to disconnect or stop providing gas, electricity, water,
or other services for the purpose of recovering arear tax and authority shall stop or
25
disconnect the services within 21 days upon receiving notice.

(8) Person shall be deemed to be the defaulter if he fails to comply with the notice and shall be
personally liable.

(9) Peron shall restore the connection as discussed in the sub-section (7) upon getting
permission from DCT.

(10)In any area with respect to which the Commissioner has directed that any arrears may be
recovered by any process enforceable for the recovery of an arrear of any municipal tax or
local rate imposed under any enactment for the time being in force in any part of
Bangladesh, the DCT may proceed to recover the amount due by such process.

(11)Commissioner shall determine the process and responsibility of the concern authorities to
recover tax as per statutory act or VAT and SD Act 2012, or Customs Act 1969 with the
municipal tax, local tax, and other taxes under sub-section (10)

Self-assessment question

Discuss briefly the salient features of the various provisions of the Income Tax Act, 2023 relating
to recovery of tax by the Tax Authorities.

ICAB 2024 Recovery of tax 345

346 Business Planning: Taxation & Compliance ICAB 2024
 Chapter 26
Double taxation relief

Introduction

Examination context

Topic list

26.1 Double taxation – some basic concepts

26.2 Agreement of avoidance of double taxation
26.3 Relief In respect of income arising outside Bangladesh
26.4 Comparative picture of Double Tax Avoidance and tax relief
26.5 Methods of avoiding double taxation? How the methods work
26.6 Tax treaty
26.7 Some other concepts used in DTAA
26.8 Other topics in International Taxation
 Introduction

Learning objectives

 Define the agreement to avoid double taxation.

 Recognize the tax relief in respect of income arising outside Bangladesh.

Practical significance

The Government of Bangladesh may enter into an agreement with the Government of any other
country for the avoidance of double taxation and the prevention of fiscal evasion with respect to
income taxes. The agreement can provide some provisions for implementation such as relief
from the tax payable, recovery of tax leviable under the Act and under the corresponding law in
force in that country etc.

If any person who is resident in Bangladesh in any year proves that he has paid tax on any income
for any income year outside Bangladesh in any country with which there is no reciprocal
agreement for relief or avoidance of double taxation, tax shall be deducted from the tax payable
by him under the Act, subject to such rules as the NBR may make in this behalf, a sum equal to
the tax calculated on such doubly taxed income at the average rate of tax of Bangladesh or the
average rate of tax of the said country, whichever is the lower.

Stop and think

Do you realize the impact of agreement to avoid double taxation? Do you know the list of
countries with which Bangladesh has agreement to avoid double taxation? Do you know about
the relief in respect of income arising outside Bangladesh?

Working context

Accountant can help their clients by giving advice with procedures to avoid double taxation.
They should have the updated knowledge on various agreements for avoidance of double
taxation with different countries. Based on the provisions of these agreements they can support
their clients in this regard.

348 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Define the agreement to avoid double taxation.

 Recognize the provision mentioned in agreement to avoid double taxation.
 Identify the relief in respect of income arising outside Bangladesh.
 List the name of countries with whom Bangladesh has agreement for avoidance of double
taxation. C
H
Question practice A
P
For question practice on these topics, go to the suggested answers covering this chapter. T
E
26 DOUBLE TAXATION RELIEF INCLUDING TAX TREATIES R

Section overview
26
 For the avoidance of double taxation, Bangladesh enters into agreement with many
countries.
 Double taxation agreement also prevents the fiscal evasion with respect to income taxes.
 Under double taxation relief system, the payable tax will be the sum equal to the tax
calculated on such doubly taxed income at the average rate of tax of Bangladesh or the
average rate of tax of the foreign country, whichever is the lower.

26.1 Double taxation – some basic concepts

What is double taxation?

Double taxation means taxing the same income twice, once in the home country and again in
the host country. For example, a Bangladeshi citizen may have income arose in India which is
once taxed in India and again in Bangladesh.

How does double taxation arise?

Double taxation may arise in the following two ways:

(i) The jurisdictional connections used by different countries may overlap with each other. For
example, Mr. Rolex, a resident under the Bangladesh Income Tax Act, 2023 must pay tax on
his total world income in USA also as citizen of USA (Residential jurisdiction).

(ii) The taxpayer or his income may have connections with more than one country. For example,
Mr. Rahamat, a Bangladeshi citizen, has income from Romania on investments and dividend
income from France in addition to income from Bangladesh. He has to pay tax on his total
world income in Bangladesh and also on income earned in Romania and France (Source
jurisdiction).

ICAB 2024 Double taxation relief 349

 What are the broad objectives of Bangladesh DTAA?

The major objectives of Bangladesh DTAA are as follows:

(i) To obtain a more effective relief from double taxation compared to relief allowed under
unilateral measures.
(ii) To create a favorable climate for the inflow of FDI in Bangladesh.
(iii) To make special tax incentives provided by Bangladesh fully effective for the taxpayers of
the capital exporting countries.
(iv) To prevent tax evasion.
(v) To foster long term, mutually beneficial economic relationship with others specially the
developed countries.

Which model of avoidance of double taxation agreement is followed in Bangladesh?

There are two models of avoidance of double taxation agreement viz., UN Model and OECD
Model. Bangladesh generally follows UN model of avoidance of double taxation agreement
which consists of the following 29 articles:

Article Heading Main Contents

1. Scope of the convention To whom applicable
2. Taxes covered Specific taxes covered
3. General definitions Person, company, enterprise, international
traffic, competent authority
4. Resident Resident of a contracting state
5. Permanent establishment (PE) What constitutes /does not constitute PE
6. Income from immovable Immovable property and income there from
property
7. Business profits Determination and taxation of profits arising
from business carried on through PE
8. Shipping, inland waterways, Place of deemed accrual of profits and mode
transport and air transport of taxation thereon
9. Associated enterprises Enterprises under common management and
taxation of profits arising there from
10. Dividends Definition and taxation of dividends
II. Interest Definition and taxation of interest
12. Royalties Taxation of royalties, country where taxable
13. Capital gains Taxation of capital gains, country where
taxable
14. Independent personal services Types of services, country where taxable
15. Dependent personal services Definition, country where taxable
16. Directors' fees and Definition, country where taxable
remuneration for top level
managerial officials
17. Income earned by entertainers Types of activities, mode and country where
and athletes taxable
18. Pension and social security Country where taxable
payments
19. Remuneration and pensions in Type of remuneration, country where taxable
respect of Government servants

350 Business Planning: Taxation & Compliance ICAB 2024

 20. Payment received by students Taxation and related exemptions
and apprentices
21. Other income Residual article to cover incomes not covered
under articles, mode of taxation and country
where taxable
22. Capital (tax on wealth) Mode of taxation, country where taxable
24. Non-discrimination Equitable basis of taxing nationals and citizens
of foreign state
25. Mutual Agreement Procedure Where taxation is not as per provisions of the
convention, a person may present his case to
competent authority of respective states
26. Exchange of information Competent authorities to exchange
information for carrying out the provisions of
the convention, methodology for the same C
27. Diplomatic agents and consular Privileges of this category to remain H
officers unaffected A
28. Entry into force Effective date from which the convention
P
comes into force,
T
29. Termination of treaty Time and notice period mode
E
R
Besides the above clauses, DTAAs normally contain a Protocol or Memorandum, which is like a
supplement to the Treaty. This is attached normally at the end of the treaty, which clarifies
borderline issues, and rectifies unintended omissions.
26
The other model, OECD model, is mostly followed amongst 29 OECD countries. The
fundamental difference between these two is essentially one; UN model is based on taxing the
income on source principle whereas OECD model is on resident principle. Since FDI flows from
developed to developing countries, the latter tends to benefit the developed countries.

What impact double taxation in general, would have on global economic activities?

(a) It hampers free flow of capital and technology across borders and
(b) It becomes a prohibitive burden on concerned taxpayers leading to decline in foreign
investments.

What are the effects of DTAA in Bangladesh?

The effects of an agreement entered by virtue of section 244 of Income Tax Act, 2023 would be:

1. If no tax liability is imposed under the Act, the question of resorting to DTAA would not arise.
No provision of DTAA can possibly fasten a tax liability which is not imposed by the Act. The
treaties with all intent and purpose, can lessen the vigor of double taxation cannot, however,
enhance it.

2. In case of a difference in the provisions of the Act and those of the DTAA, to the extent they
are more beneficial to the provisions of the Act, will override the Act which is the
fundamental concept in treaty override.

What are the differences between double tax relief and double tax avoidance?

Double tax relief means granting of relief in respect of income on which income tax has been
paid under the Bangladesh tax laws and in other country.

ICAB 2024 Double taxation relief 351

 Double taxation avoidance means avoidance of double taxation on income under the tax laws
of the two countries. One important distinction between the two is that in the case of avoidance
of double taxation the assessee does not have to pay the tax first to claim refund later, but he
would be obliged to do so in the case of relief against double taxation.

The other distinction is that no benefit is given unless otherwise stipulated in the DTAA, but relief
can be awarded unilaterally against double tax even when there exists no DTAA. Section 244 of
the Income Tax Act, 2023 empowers the DCT to grant such relief, subject to such rules as the
NBR may make in this behalf.

Firstly, as per section 244 of Income Tax Act, 2023, where Bangladesh Govt. has entered any
DTAA, the provisions of that agreement would normally apply to the case of an assessee covered
by such agreement. However, if the relevant provisions in the Bangladesh Income Tax Act are
more favorable, then to that extent he can seek applications of the provisions of the Act as
against those of the agreement.

26.2 Agreement to avoid double taxation: section 244

This section confers the right to GOB to enter into an agreement with the government of any
other country for the avoidance of double taxation and the prevention of fiscal evasion with
respect to income tax and may, by Gazette Notification, make such provisions as may be
necessary to implement the agreement.

Income tax policy section of NBR is entrusted to negotiating the Double Taxation Avoidance
Agreement (DTAA) with foreign countries to promote foreign direct investment in Bangladesh.
DTA is an agreement between two countries seeking to avoid double taxation by defining the
taxing rights of each country regarding cross border flows of income, providing for tax credits
or exemptions to eliminate double taxation.

At present, Government of Bangladesh has entered into Double Taxation Avoidance Agreement
(DTAA) with 34 countries as stated below:

Name of the Date of effect in

Sl. No SRO
Countries Bangladesh (assessment \
year commencing on or
No. Date
after)
1 U.K. 227-L/80 08/07/1980 01/07/1978
2 Singapore 124-L/82 21/04/1982 01/01/1980
3 Sweden 382-L/83 19/10/1983 01/07/1984
4 Korea 433-L/84 02/10/1984 01/07/1984
5 Canada 247-L/85 06/06/1985 01/07/1982
6 Pakistan 221-L/88 11/07/1988 01/01/1980
7 Romania 348-L/88 23/11/1988 01/07/1989
8 Sri Lanka 365-L/88 10/12/1988 01/07/1989
9 France 2-L/89 04/01/1989 01/07/1989
10 Malaysia 67-L/90 15/02/1990 01/01/1982
11 Japan 235-L/91 06/08/1991 01/07/1992
12 India 45-L/93 27/02/1993 01/07/1993
13 Germany 1-L/94 01/01/1994 01/01/1990
14 Netherlands 267-L/94 14/09/1994 01/07/1995
15 Italy 63-L/97 12/03/1997 01/07/1980

352 Business Planning: Taxation & Compliance ICAB 2024

 16 Denmark 72-L/97 17/03/1997 01/07/1997
17 China 114-L/97 13/05/1997 01/07/1998
18 Belgium 11-L/98 14/01/1998 01/07/1998
19 Thailand 222-L/98 07/09/1998 01/07/1999
20 Poland 39/L/99 03/03/1999 01/07/2000
21 Philippines 56/L/2004 04/03/2004 01/07/2004
22 Vietnam 301-L/2004 18/10/2004 01/07/2005
23 Turkey 308/L/2004 31/10/2005 01/07/2004
24 Norway 20-L/2006 12/02/2006 01/07/2006
25 Indonesia 60-L/2007 20/04/2007 01/07/2007
26 USA 71-L/2007 10/05/2007 01/07/2007
27 Switzerland 52-L/2010 23/02/2010 01/07/2008
28 Oman 16-L/2009 02/02/2009 01/07/2009
29 Myanmar 313-L/2012 18/10/2012 01/07/2012 C
30 Mauritius 122-L/2012 09/05/2012 01/07/2012 H
31 Saudi Arabia 103-L/2012 15/04/2012 01/10/2011 A
32 UAE 313-L/2012 05/09/2012 01/07/2012 P
33 Belarus 189-L/2014 08/07/2014 01/07/2014 T
34 Kuwait 376-L/2018 25/12/1018 01/7/2019 E
Bahrain 301-L/2017 16/10/2017 01/7/2018 R
35
36 Bhutan 56-L/2020 20/02/2020 01/7/2020
37 Nepal 57-L/2020 20/02/2020 01/7/2020
38 Czech Republic 304-L/2020 10/11/2020 01/7/2021
26

Comparative Rates in Double Taxation Avoidance Agreement.

Maximum tax Maximum Maximum tax

Sl. Name of the Permanent
rate for tax rate for rate for
No. Country Establishment
dividend Interest Royalties
1 U.K 183 days 10%/15% 7.5%/10% 10%
2 Singapore 183 days 15% 10% 10%
3 Sweden 183 days 10%/15% 10% 10%
4 Korea 183 days 10%/15% 10% 10%
5 Canada 183 days 15% 10% 10%
6 Pakistan 183 days 15% 15% 15%
7 Romania 183 days 10%/15% 10% 10%
8 Sri Lanka 183 days 15% 15% 15%
9 France 183 days 10%/15% 10% 10%
10 Malaysia 183 days 15% 15% 15%
11 Japan 6 months 10%/15% 10% 10%
12 India 183 days 10%/15% 10% 10%
13 Germany 183 days 15% 10% 10%
14 Netherlands 6 months 10%/15% 10% 10%
15 Italy 183 days 10%/15% 10%/15% 10%/15%
16 Denmark 183 days 10%/15% 10% 10%
17 China 6 months 10% 10% 10%
18 Belgium 183 days 15% 15% 10%
19 Thailand 183 days 10%/15% 10%/15% 15%
20 Poland 183 days 10%/15% 10% 10%

ICAB 2024 Double taxation relief 353

 21 Philippines 6 months 10%/15% 15% 15%
22 Vietnam 6 months 15% 15% 15%
23 Turkey 12 months 10% 10% 10%
24 Norway 6 months 10%/15% 10% 10%
25 Indonesia 183 days 10%/15% 10% 10%
26 USA 183 days 10%/15% 10% 10%
27 Switzerland 183 days 10%/15% 10% 10%
28 Oman Only airlines
29 Myanmar 6 months 10% 10% 10%
30 Mauritius 12 months 10% 0% 0%
Saudi 6 months 10% 7.5% 10%
31 Arabia
32 UAE 6 months 5%/10% 10% 10%
33 Belarus 6 months 10%/12% 7.5% 10%
34 Kuwait 183 days 5%/10% 10% 10%
35 Bahrain 183 days 10%/15% 10% 10%
36 Bhutan 183 days 10%/15% 10% 10%
37 Nepal 183 days 10%/15% 10% 15%
Czech 6 months 10%/15% 10% 10%
38 Republic

26.3 Relief In respect of income arising outside Bangladesh: section 246

This section empowers DCT to allow relief to an assessee in respect of any income accrued or
arisen in any other country with which Bangladesh does not have DTAA. The assessee must
prove that he has suffered tax on that income by way of deduction or otherwise, then the DCT
may, subject to such rules as the NBR may make in this behalf, deduct from the tax payable by
the assessee a sum equal to tax calculated on such doubly taxed income at the average rate of
tax of Bangladesh or the average rate of tax at the said country, whichever is lower. Average rate
of tax means the rate arrived at by dividing the amount of tax calculated on the total income by
such income.

26.4 Comparative picture of Double Tax Avoidance and tax relief

Double tax avoidance and tax relief as presented in sections 244 and 246 respectively in ITA,
2023 have conceptual difference which is presented in the table below:

Heading of
Ref. Income Tax advantages
the section
Section Arises from Avoidance of Tax calculated as per rate in the agreement, but it
244 those countries Double will not be more than the tax amount calculated
with whom Taxation on the basis of the average tax rate applicable in
there is DTAA Bangladesh (considering foreign income in total
income) on the foreign income.
Section Arises from Relief Tax calculated on such doubly taxed income at
246 those countries the average rate of tax of Bangladesh or the
with whom average rate of tax of the said country, whichever
there is no is lower subject to such rules as the NBR may
DTAA make in this behalf.

354 Business Planning: Taxation & Compliance ICAB 2024

 Illustration 1:

Mr. Nazim, a Bangladeshi resident, received net interest income of Tk. 450,000 from Indonesia
after deduction of 10% of tax at source during the year ending on 30 June 2024. His other
income in Bangladesh amounts to Tk. 400,000 for the same year. Compute the net tax liability
of Mr. Nazim.

Solution

Mr. Nazim
Assessment year: 2024-25

Heads of income Amount (Tk.)

Income from Bangladesh sources 4,00,000
Foreign income (Tk. 450,000/0.90) 5,00,000 C
Total income 9,00,000 H
A
Computation of tax liability:
P
Tier of income Rate Amount (Tk.) T
On first Tk. 3,50,000 0% Nil E
On next 1,00,000 5% 5,000 R
On next 4,00,000 10% 40,000
On balance 50,000 15% 7,500
Tk. 9,00,000 52,500 26
Thus, the average tax rate in Bangladesh is 5.83% (Tk. 52,500 / Tk. 9,00,000 × 100). So, the
maximum limit of tax credit will be Tk. 29,167 (Tk. 5,00,000 × 5.83%) though he already paid Tk.
50,000 tax in Indonesia as because tax credit would be lower of tax at average rate that is 29,167
or tax already paid at foreign country 50,000 whichever is lower. Mr. Nazim will have to pay Tk.
23,333 (Tk. 52,500 – Tk. 29,167) as remaining tax in Bangladesh.

Illustration 2:

Mr. Khan Jahan records the income for the income year 2023-24 as income from Bangladesh
Tk. 2,000,000; income from Sweden Tk. 600,000; income from Singapore Tk. 400,000; and
income from Russia Tk. 1,000,000. The income tax rate for foreigners in Sweden is 30%, but he
has paid tax @ 25% as per DTAA. 20% tax has been paid in Russia for the income generated in
Russia and 25% tax has been paid in Singapore for the income generated in Singapore. Show
the application of double taxation relief due to these foreign incomes for the assessment year
2024-25.

Solution 2:

Mr. Khan Jahan

Computation of total income
For the assessment year 2024-25

Particulars Tk. Tk.

1. Income from Bangladesh 2,000,000
2. Income from Sweden 600,000
3. Income from Russia [No DTAA] 1,000,000
4. Income from Singapore 400,000
Total income 4,000,000

ICAB 2024 Double taxation relief 355

 Mr. Khan Jahan
Computation of tax payable in Bangladesh

Particulars Rate. Tk.

On first 3,50,000 0% -
On next 1,00,000 5% 5,000
On next 4,00,000 10% 40,000
On next 5,00,000 15% 75,000
On next 5,00,000 20% 1,00,000
On balance 2,150,000 25% 537,500
Total Tax 757,500
Less: Double taxation relief (Note-5) 1,90,000
Net tax payable 567,500

Notes:

1. Average tax rate in Bangladesh = [(757,500 /4,000,000) ×100] = 19%

2. No tax relief from income from Russia (as there is no DTAA and as NBR not yet prescribed
any rule as per section 246 in this behalf)
3. Tax relief from income from Sweden (DTAA exists) = (6,00,000 ×25%) = Tk. 150,000.
However, maximum limit is Tk. 114,000 (6,00,000 ×19%).
4. Tax relief from income from Singapore (DTAA exists) = @ 25% or average tax rate i.e.19%
whichever is lower = (400,000 ×19%) = Tk. 76,000
5. Total double taxation relief is = Tk. (1,14,000 + 76,000) = Tk. 1,90,000

Illustration 3:

Mrs. Roma Chowdhury, a dual citizen (Bangladeshi by birth and Canadian nationality through
immigration) is a differently abled (disabled) person, was working as a consultant in a reputed
company in Sri Lanka during 1st July 2022 to 31st October 2023. After spending consultancy
stint and vacation in India, Mrs. Chowdhury returned to Bangladesh on 31st December 2023.
Mr. Chowdhury started consultancy and supply business in Bangladesh effective from 1st
February 2024. For the purpose of consultancy business, Mrs. Chowdhury frequently traveled
abroad.

Accordingly, Mrs. Chowdhury has sought your advice as to how she should file his tax return in
compliance with the prevailing tax laws. In relation to this, Mrs. Chowdhury shared you the
following information:

Income from abroad:

Description Amount
Ex-employer in Sri-Lanka remitted performance bonus:
Accrued for the year 2022 760,000
Accrued for the year 2023 (December) 1,140,000

The amount was net-off tax @ 24%, credited to her bank account in Canada on 2,700,000
1st March’24 (Bangladesh and Sri Lanka have a double tax avoidance treaty)
Consultancy fees remitted net-off tax @ 10% by an Indian Company on 28th
February 2024 for services provided in India in November-December'23
credited to her bank account in Canada (Bangladesh and India have a double
tax avoidance treaty)

356 Business Planning: Taxation & Compliance ICAB 2024

 Consultancy services provided in Bangladesh:
Amount
Description (Taka)
For consultancy services provided from 1st April 2024 to 30th June’24 fees 3,000,000
earned from a public limited company on which, the company deducted tax
at source @ 10% under the tax law.
Supply of computer hardware and accessories to Company Y on 15th May 6,000,000
2024, amount received during same period on which Tk. 200,000 being 5%
was already deducted as tax at import stage under the tax law.

Act by customs authorities at import point on 1st March 2023 and Company Y
mentioned that they will deduct tax @ 5% on the total supply value u/s 89 of
the ITA, 2023
Note: This Supply business will be assessed 163 of the ITA, 2023 C
H
Expenses made by Mr. Chowdhury during 2023-24 income year A
Description Amount P
(Taka) T
Expenses relevant for supply business including material cost 5,000,000 E
Expenses relevant for non-supply business 2,000,000 R
Bank interest for working capital for non-supply business 500,000
Bank interest for a home loan of Tk. 50 lacs 450,000
26
On account of purchase of Bangladesh savings certificate 3,000,000

Required:

Considering the withholding taxes provisions as per Income Tax Act, 2023 compute:

(1) Total income for the income year 2023-24.

(2) Tax liability for the income year 2023-24.

Solution-3

Mrs. Chowdhury
Income Year 2023-24
Assessment Year: 2024-25
Computation of total income

Heads of Income Note Amount Amount

(Taka) (Taka)
Income from employment
Remittance by ex-employer in Sri-Lanka for performance bonus 2 15,00,000
Total Income from Salary 15,00,000

Income from Business

Consultancy Fee:
Consultancy fees remitted by Indian Company on 3 30,00,000
28th February 2024 for services provided in India in
November-December 2023 credited to his bank account in
Canada after deduction of tax @ 10% at source

ICAB 2024 Double taxation relief 357

 Consultancy fees earned in Bangladesh (tax at source 30,00,000
@ 10% of the tax law applicable)
Less: Admissible expenses
Expenses relevant for non-supply business 20,00,000
Bank interest for working capital for non-supply business 5,00,000 (25,00,000)

Total income on consultancy business =5,00,000

Supply business:
(withholding tax is the minimum tax u/s 163)
Supply of computer hardware and accessories to Company 60,00,000
Y executed on 15th May 2024
Less: Admissible expenses
Expenses for supply business including material cost (50,00,000)
Total Income from Supply business =10,00,000
Total Income [Requirement (i)] 60,00,000

Calculation of Tax liability considering the rate applicable for Disabled person:

Tax Amount
Income Slab Rate
(Taka)
on 1st 4,75,000 0% -
Next 1,00,000 5% 5,000
Next 4,00,000 10% 40,000
Next 5,00,000 15% 75,000
Next 5,00,000 20% 1,00,000
Next 25,25,000 25% 6,31,250
On supply (u/s 163) withholding tax being higher 10,00,000 minimum tax 3,00,000
(Note 4) [5% of
60,00,000]
On local consultancy (u/s 163) withholding tax 5,00,000 minimum tax 3,00,000
being higher [10% of
30,00,000]
Total 60,00,000 14,51,250
Rebate: (45, 00,000x3%) (75,000)
Net tax liability after tax rebate 13,76,250
Less: Double taxation relief (Foreign Tax credit) :
Withholding tax credit allowed on Salary income in Sri Lanka (Note-5) (3,44,100)
Withholding tax credit allowed on Consultancy income in India (Note-6) (3,00,000)
Less: Tax deducted at source in Bangladesh (Note-7) (6,00,000)
Net Tax liability [Requirement (ii)] 1,32,150

358 Business Planning: Taxation & Compliance ICAB 2024

 Calculation of Eligible amount for investment allowances under Income Tax Act, 2023:

Description Amount
Investment in Sanchaya Patra [maximum 5 lac] 5,00,000
Total Actual Investment 5,00,000
Tax rebate on investment:
3% of total income - income u/s 163 = 1,35,000
(6,000,000-1,500,000)= 45,00,000x3%=
Or 15% on actual investment 75,000
or Tk. 10,00,000
Thus, eligible amount is lower one 75,000
C
Note:1 H
A
Mrs. Chowdhury arrived in Bangladesh on 31st December 2023; hence for the purpose of the
P
AY 2024-25, Mrs. Chowdhury's status would be Resident because he stayed total
T
[1+31+29+31+30+31+30] =183 days. Additionally, Mrs. Chowdhury is also a disabled person
E
as per definition of the ITA, 2023.
R
Note: 2

Mrs. Chowdhury is a resident tax payer in Bangladesh. Salary income of Taka 1,000,000 (grossed 26
up: 760,000/ (1-76%)) accrued for the year 2022 should not be within the scope of total income
u/s 26 of the ITA, 2023. Because, this income was generated beyond this tax period, when his
status was non-resident

Salary income of Taka 1,500,000 (grossed up: 1,140,000/(1-76%)) accrued or arises to him
outside Bangladesh for the income year 2023-2024 should be within the scope of total income
u/s 26 of the ITA, 2023. Because, this income was generated within the same tax period, when
his status was resident

Note-3

Consultancy income of Taka 3,000,000 (grossed up: 2,700,000/(1-90%)) accrued or arises to him
outside Bangladesh for the income year 2023-24 should be within the scope of total income u/s
26 of the ITA, 2023. Because, this income was generated within the same tax period, when his
status was resident. Whether the money was received in Canada or not, it does not matter, as
Resident tax payer's income is assessed on global income basis.

Note-4

Tax liability for Supply business (u/s 163) Amount (Taka)

Profit as per normal calculation 1,000,000
Tax as per 25% slab, or 250,000
Total withholding tax, treated as minimum tax 300,000
u/s 163
Whichever is higher 300,000
Thus, tax liability for Supply business u/s 163 300,000

ICAB 2024 Double taxation relief 359

 Note-5
Withholding tax credit allowed on Salary income in Sri Lanka
Gross salary earned Taxable in Bangladesh 1,500,000
Withholding tax in Sri Lanka @ 24% 360,000
Average tax rate in Bangladesh including foreign income 22.94%
(13,76,250/6,000,000)
Maximum credit allowed @ 22.94% as it is lower[15,00,000x22.94%] 3,44,100
Credit to be allowed (lower of maximum allowed vs. actual) 3,44,100

Note-6
withholding tax credit allowed on Consultancy income in India
Gross consultancy fee earned Taxable in Bangladesh 3,000,000
Withholding tax in India @ 10% 300,000
Average tax rate in Bangladesh including foreign income 22.94%
(13,76,250/6,000,000)
Maximum credit allowed @ 10% as it is lower 300,000
Credit to be allowed (lower of maximum allowed vs. actual 300,000

Note-7
Withholding tax in Bangladesh:
On consultancy services to be provided from 1st 300,000
April 23 to 30th June 24 (Taka 3,000,000 X 10%)
On Supply business:
Tax paid at import point u/s 120 200,000
Tax to be withheld u/s 89 (Taka 6,000,000 x 5%) 300,000
Less: Tax paid at source u/s 120 (as per section 89) 200,000 1,00,000 300,000
Total withholding tax in Bangladesh 600,000

Illustration 4:

Asia limited, Singapore has opened a liaison office in Bangladesh. Initially, they have hired 3
employees and expect to hire more people in future. The entity has finalized the total benefits
per employee. The GM of the entity has heard that, proper structuring of salary components
(e.g., basic, house rent, etc.) in Bangladesh can bring in tax benefits to the employee. One of the
newly joined employees is asking for salary payment in cash. S/he said that, cash payments are
not subject to withholding tax in Bangladesh.

The GM wants to be fair in tax practice. He also wants to avail the maximum tax benefits for
himself and the other employees. The entity does not have any fixed payroll structure ratio.
Below is the salary pay structure plan.

360 Business Planning: Taxation & Compliance ICAB 2024

 Pay structure
Asia Ltd. - Bangladesh Liaison Office

Name: Mr. Kei San

Position: General Manager
Gender: Male
Monthly salary: Tk. 500,000.
Joining date: 1st July 2023

Required

Calculate the most tax efficient salary structure ratio for Mr. Kei - San that will result in withholding
tax per month. The comparison is shown below:
C
Particulars Ratio 1 Ratio 2 Ratio 3
H
Basic Salary 50% 40% 40%
A
House rent allowance 30% 30% 30% P
Medical Expenses 10% 20% 10% T
Conveyance Allowance 10% 10% 20% E
100% 100% 100% R

Solution-4
26
In every situation taxable income and withholding tax are same because his yearly salary is Tk.
60,00,000. Whereas non-taxable ceiling is 1/3rd of gross salary or Tk.4,50,000 which is lower and
same in every situation and his taxable salary will be 60,00,000-4,50,000 = 55,50,000 in all
situation. Accordingly withholding tax in every situation will also be the same. Tax planning will
not work here due to high salary.

Illustration 5:

Mr. Z an individual, working for a large food company having compliant tax practices, has come
to you to seek your advice on the following:

For the Assessment Year 2024-25 Mr. Z received Taka 190,000 from the Workers’ Profit
Participation Fund established under Bangladesh Labor Act, 2006 after deduction of 10% tax as
per ITA.

In connection with the above, while discussing about this withholding tax (which was not
applicable earlier) with one of his colleagues, he told that although there is tax applicable on
income from Workers’ Profit Participation Fund but it is in fact exempted from income taxes as
per the Bangladesh Labor Act, 2006 for the workers. For the Assessment Year 2024-25, while
assessed Mr. Z’s total income is already at the highest slab of tax rate without this income from
Workers’ Profit Participation Fund.

Mr. Z is requiring following advice from you:

i) What would be his legal position based on the tax laws and labor law? If he has to pay taxes
on income from Workers’ Profit Participation Fund,
ii) Tax liability considering the withholding taxes and exemption if any as per the tax laws
(ignore investment allowances)

ICAB 2024 Double taxation relief 361

 Solution-5

(i) The legal position on the taxability on income from Workers’ Profit Participation Fund
based on the tax laws and labor law:

On the application of withholding taxes:

It is correct that as per Bangladesh Labor Act, 2006 (“Labor Act”) it has been mentioned
that income from Workers’ Profit Participation Fund is exempted from taxes for the
workers defined under the said Labor Act.

However, while introducing this withholding tax provision u/s 88 of tax law, taking into
account such provisions in other laws, it is clearly mentioned that notwithstanding
anything contained in any other provisions of ITA or any other laws being in force in
respect of exemption from tax on payments from Workers’ Profit Participation Fund
…withholding taxes @10% shall be applicable. Hence, it is clear that the Income Tax law
has an overriding authority over the labor law in this regard.

On the application of income taxes:

As per Income tax law, exemptions are considered only when there is expressed
provision as per Sixth Schedule Part 1 (Exclusions from total Income) or through a SRO
irrespective of any exemption given under other laws.

This is because; section 3 of the Act has given the Act an overriding authority on other
laws. Hence, any income from Workers’ Profit Participation Fund shall be taxable subject
to exemption allowed as per the Sixth Schedule Part 1 (Exclusions from total Income) or
any SRO thereof.
(ii) If he has to pay taxes on income from Workers’ Profit Participation Fund, net tax liability
of Mr. Z on income from Workers’ Profit Participation Fund considering the withholding
taxes and exemption if any:

Description Amount
Gross income from WPPF (190,000/(90%) 211,111
Tax @ 25% (being in the highest slab) 52,778
Tax already deducted u/s 88 (21,111)
Net Tax liability 31,666

Illustration 6:

A multinational Tobacco Company i.e., MTC Co. has been running their tobacco business in
Bangladesh for some time. The company is a private limited company. Now it is contemplating
to explore the possibility of introducing new product(s)/service line(s) of non-tobacco nature
along with their existing tobacco business. Hence, the company has considered the following
options and asked for the certain queries under each option:

Option A: Integration of the new product/service line within the existing business which will be
producing and marketing both tobacco and non-tobacco product/service lines.

Option B: Setting up a separate local subsidiary which will be owned by existing company i.e.
MTC Co.

362 Business Planning: Taxation & Compliance ICAB 2024

 Option C: Setting up a legal entity which will be owned by the non-resident parent company of
the existing company in Bangladesh.

Besides, the company has outlined some specific queries under each option which have been
outlined below:

Queries for Option A:

(i) Whether the income generated from non-tobacco business would be taxed separately or the
tax rate of current tobacco business would be imposed on non-tobacco business as well?

Queries for Option B:

(i) How would the cost of the management team be allocated to the subsidiary as most of the
C
management work of the subsidiary would be done by the Parent company management
team.
H
(ii) What is the tax implication on the charge of management fees to the subsidiary company? A
(iii) What would be the tax implication of the subsidiary company considering the two scenarios: P
T
1. If its legal status is a listed company E
2. If its legal status is a private limited company R

(iv) How would the dividend income be treated in the financial statements of the Parent
company and what would be the tax implication therein along with the net income of 26
Ultimate parent company situated in JAPAN, upon distribution of dividend.

(v) Would the parent company and subsidiary company both require to submit tax return? If so,
would there be a requirement to submit tax return for the consolidated profit as well.

The company has approached Mr. X, the partner of a one of the reputed CA firms for an expert
opinion with optimal tax structure on the above-mentioned business options and queries
pertained to them. You are currently acting the role of a senior manager in the firm since long
as a qualified Chartered Accountant. And the partner of the firm has delegated the assignment
to you.

Requirements:

Explanation of each option mentioned above in the light of Income Tax Act, 2023. This should
also include the following:

▪ Double tax treaty benefits if any in case of repatriation of dividend to ultimate parent
company, situated in JAPAN, of the tobacco Co. Assume 100% foreign holding
▪ Financial analysis considering the new company to be considered as a subsidiary of MTC as
a private entity and as a public entity
▪ Financial analysis considering the new company to be considered as a subsidiary of MTC or
of non-resident parent entity of MTC as a private entity

ICAB 2024 Double taxation relief 363

 Solution-6

Option-A

(i) Would the income generated from non-tobacco business be taxed separately or would the
tax rate of current tobacco business be imposed on non-tobacco business as well?

As per my understanding, current business income being generated from Tobacco, is subject
to corporate tax @ 45% along with income surcharge @ 2.5% which in total comes to 47.5%.
However, as for the income to be generated from non-tobacco business, regular rate of tax will
be applicable which is 22.5% being a publicly listed company, if you can evidently categorize
your new product stream as non-tobacco.

Now question comes, as to whether authority will allow you to effectively use different rates for
each of your segregated business lines.

In my view, there is a perception risk of operating both the product lines under the umbrella of
Tobacco business, where the tax authority may impose the tax rate of 47.5% on the overall
income generated from each product stream, due to the principal business of tobacco company
to manufacture and sale of tobacco products. However, from my practical experience, where an
assessee who generated income from more than one business, one business income was
subject to tax at regular rate @ 25% and another business was subject to tax at reduced rate.

An example has been furnished outlining the tax impact based on what have been discussed
above:

With segmentation
With no
Non-
segmentation Tobacco Total
Tobacco
Revenue 2,000 1,600 400 2,000
Less: Operating Expenses (400) (320) (80) (400)
Profit Before Tax 1,600 1,280 320 1,600
Corporate Tax (Tobacco 47.5%; (760) (608) (80) (688)
Non-Tobacco 25%)
Profit After Tax 840 672 240 912

Available for profit repatriation (72.91%) 612 665

WHT thereon (10% as there is DTTA) (61) (66)
Net Available for profit repatriation 551 598

Option-B

(i) How would the cost of the management team be allocated to the subsidiary as most of the
management work of the subsidiary will be done by the Parent company management
team.

If the company intends to establish a separate legal subsidiary for the new business, as per
my understanding, it is very unlikely that the tax authority will accept the allocation of
management cost incurred by the Parent company to the subsidiary, unless the company
invoices the subsidiary on an agreed management fee basis, which is applied consistently

364 Business Planning: Taxation & Compliance ICAB 2024

 in terms of calculation mechanism. In such case, the company needs to maintain
documentation to support the cost allocation.

Here, question comes as to whether the company can be engaged in rendering such
management services. In my view it is possible provided that there is an object clause in
MoA.

(ii) Tax & VAT implications on management fees:

TDS implication:

As per section 90 of the ITA, 2023, any company (in this case the new subsidiary company)
responsible for making any payment which constitutes as income of the payee shall deduct
tax at source at the applicable rate.
C
Hence, management fees will be subject to tax deduction at source (TDS) @ 10% as per
H
section 90. A
P
Corporate tax implication: T
E
Such income will be considered as other income for the Parent company. Hence, such R
income will be subject to corporate tax @ 20% or 22.5% being a publicly traded company.

(iii) What would be the tax implication of the subsidiary company depending on its listing 26
status.

Tax on Business income

Business income of the private limited company is subject to corporate tax @ 25%, and as
for publicly listed company, the tax rate is 20%. This is to reiterate that, if the new line of
business is considered as non-tobacco business, in that case, regular rate of tax will be
applicable.

(iv) How would the dividend income be treated in the financial statements of the Parent
company and what would be the tax implication therein.

Treatment of dividend income:

As per International Accounting Standard (IAS) 1, dividend income should be presented as

non-operating income in the financial statements of the Parent company (i.e. MTC).

Tax implication on dividend income of Foreign Parent Company:

As per section 117 of ITA, 2023, any company, at the time of paying dividend to a
shareholder, is required to deduct tax on the amount of such dividend, at the rate applicable
to a company. Please note that, the law applies in case of payment of dividend to both
resident and non-resident shareholder.

If the income of the new subsidiary is to be distributed as dividend income to the Parent
company, then with reference to section 117 as mentioned above, tax shall be deducted
@20% on the dividend income distributed to MTC, which is the final tax for the Parent
company on dividend income as the rate of tax on dividend income is also 20%.

ICAB 2024 Double taxation relief 365

 However, if the parent company further distributes the dividend income to its foreign
shareholder situated in JAPAN, as per section 119 of ITA, 2023, such payment shall be
subject to a further withholding tax @ 20%. A reduced rate of 10% in place of 20% may be
applicable because there is DTAA with JAPAN. But this is subject to obtaining certificate
from NBR as per section 119.

An example has been furnished below showing the various level of taxation and the ultimate
net income in the hand of ultimate Parent company, situated in JAPAN.

With Non-Listed Subsidiary With Listed Subsidiary

Subsidiary Subsidiary
(Parent Consolidated (Parent Consolidated
Company Company
Company) Financials Company) Financials
(X) (X)

Revenue 400 1,600 2,000 400 1,600 2,000

Cost (80) (320) (400) (80) (320) (400)
Profit Before Tax 320 1,280 1,600 320 1,280 1,600
Corp. Tax (Non-listed (96) (608) (704) (72) (608) (680)
subsidiary 30%; Listed
22.5%; Tobacco Co. 47.5%)
Divisible Profit before 224 672 896 248 672 920
Dividend Income
(Dividend to Parent)/ (224) 224 - (248) 248 -
Dividend from X
WHT (20%) on Dividend (45) (45) (50) (50)
Income from X
Divisible Profit of Parent - 851 851 - 870 870

Available for Ultimate 620 634

parent (72.91%)
WHT (10%) (62) (63)
Net Income for Ultimate 558 571
Parent

(v) Would the parent company and subsidiary company both require to submit tax return? If
so, would there be a requirement to submit tax return for the consolidated profit as well.

With reference to section 73 of ITA, 2023 states that, every public or private company (as
defined under Companies Act 1994) shall be required to furnish a copy of audited financial
statements as certified by a chartered accountant at the time of filing the return of income. In
addition to that, as per section 166 of the ITA, 2023, submission of tax return must be
accompanied by audited financial statements.

According to the above laws, both the subsidiary company and the parent company’s
financial statement must be audited by a chartered accountant.

There is no provision in the ITA, 2023 for separate audit of the consolidated financial
statement and separate tax return submission for the consolidated financial statement.
Illustration 7:

366 Business Planning: Taxation & Compliance ICAB 2024

 A multinational company “Fantastic Limited” is owned by a China based company and by a
Sarkar family in Bangladesh. The China based company holds 45% shares and Sarkar family
holds 55% (of which Mr. Sarkar himself holds 35% and the rest are equally divided between his
two sons) shares in Fantastic Limited. The Sarkar family has decided to transfer their shares and
a German based company (GZR Inc.) has expressed their interest to buy the shares of Sarkar
family in Fantastic limited. Please note that the China based company and the German based
company are the concern of same holding company.

The acquirer company has contemplated the following options as part of the consideration to
be given to the Sarkar Family against the purchase of the shares:

Option A:

• Dividend of USD 2,000,000 equivalent to BDT 170,000,000 will be distributed out of

previous year’s retained earnings (estimated around 4 years’ earnings) to Sarkar Family and C
to the China based company on the basis of their proportion of shares the “Fantastic H
Limited”. A
• The acquirer company will provide USD 2,135,000 equivalent to BDT 181,475,000 to P
purchase the shares of Sarkar Family in the “Fantastic Limited”. T
E
Option B: R
• No dividend will be distributed rather the acquirer company would like to add the cash part
of USD 1,020,000 equivalent to BDT 86,700,000 along with the original purchase price of
USD 2,135,000 equivalent to BDT 181,475,000 which in total comes to USD 3,135,000 26
equivalent to BDT 268,175,000 for the purchase of shares from Sarkar Family held in the
“Fantastic Limited”

Note: Total number of shares held in Fantastic Limited is 20,000. Face value of the share is
valued @ Tk. 250 per share. And the current fair value of the share is valued @ Tk. 25,000
applying the market value approach. Mr. Sarkar from the Sarkar Family approached one of the
Partners of your CA firm and you have been assigned to cater the queries from tax point of view.

Requirements:

(i) Tax implication on dividend distribution assuming that there is tax treaty between BD and
China.
(ii) Capital Gain Tax implication.
(iii) Analysis of pros and cons of the proposed option from financial aspects on the basis of
below mentioned scenario.
(iv) Recommendations.

Please note that, your analysis and recommendation should take into account the following tax
implication on the basis of assumptions mentioned below under two scenarios:

Scenario-1

• Consider the yearly income of Mr. Sarkar of Tk. 25,000,000

• Consider the dividend income and capital gain earned from option A.
• Share disposal took place within 5 years from the date of acquisition.
Scenario-2

• Consider the yearly income of Mr. Sarkar of Tk. 25,000,000

ICAB 2024 Double taxation relief 367

 • Consider capital gain earned from option B.
• Share disposal took place after 5 years from the date of acquisition.

Solution-7

(i) Tax implication on dividend distribution

Dividend Repatriation to China Based Company:

As per section 119 of the ITA, 2023, repatriation of dividend is subject to tax deduction at source
@ 20%. Since there is double taxation avoidance agreement (DTAA) between Bangladesh and
China, dividend repatriation to China Based Company will be subject to tax @ 10%.

Dividend distribution to Sarkar Family:

As per section 117 of ITA, 2023, distribution of dividend to Sarkar family will be subject to tax
deduction at source @ 10%.

Please note that this source tax is not the final tax. However, this tax can be adjusted with total
tax liability. Calculation of tax liability depends on the threshold level of income on the basis of
slab rate which are as follows:

Male Female Tax rate

First 350,000 First 400,000 Nil
Next 100,000 Next 100,000 5%
Next 400,000 Next 400,000 10%
Next 500,000 Next 500,000 15%
Next 500,000 Next 500,000 20%
Rest of the income Rest of the income 25%

(ii) Capital Gain tax implication

As per section 57 of ITA, 2023, tax shall be payable by an assessee under the head “Capital
gains” in respect of any profits and gains arising from the transfer of a capital asset and such
profits and gains shall be deemed to be the income of the income year in which the transfer took
place.

As per 7th Schedule of the ITA, 2023, tax payable on capital gain will be depending upon the tax
slab rate applicable for the individual on his total income if the disposal of shares takes place
within 5 years from the date of acquisition.

However, if the disposal of shares takes place after five years from the date of acquisition, in that
case, tax @ 15% on the capital gain which will be applicable.

(iii) Analysis of pros and cons of the proposed option from financial aspects

• Dividend entitlement of Sarkar family will be compensated as purchase consideration on the

disposal of shares.
• Capital route is tax effective as compared to dividend route if:

1. The individual holds the share more than five years and if
2. The individual is now at higher tax bracket

368 Business Planning: Taxation & Compliance ICAB 2024

 Now let us analyze the two routes from tax exposure point of view:

Scenario-1

Yearly usual income of Mr. Sarkar is Tk. 25,000,000. He is expected to earn capital gain of Tk.
61,766,250 from the disposal of shares held in Fantastic Ltd and dividend income of Tk.
59,500,000. This is to note that the share disposal took place within 5 years from the date of
acquisition. Hence, total income comes to Tk. 146,266,250. Now let us calculate the tax payable.

Male (Amount in Tk.) Tax rate Tax payable

First 350,000 Nil Nil
Next 100,000 5% 5,000
Next 400,000 10% 40,000
C
Next 500,000 15% 75,000
H
Next 500,000 20% 100,000
A
Remaining 144,416,250 25% 36,104,063
P
Total 146,266,250 36,324,063 T
E
That means, capital gain is taxable @ 25% as share disposal took place within 5 years. R

Scenario-2
26
Yearly usual income of Mr. Sarkar is Tk. 25,000,000. He is expected to earn capital gain of Tk.
92,111,250 from the disposal of shares held in ABC Co. This is to note that the share disposal
took place after 5 years from the date of acquisition. Hence, total income comes to Tk.
117,111,250. Now let us calculate the tax payable.

Male (Amount in Tk.) Tax rate Tax payable

First 350,000 Nil Nil
Next 100,000 5% 5,000
Next 400,000 10% 40,000
Next 500,000 15% 75,000
Next 500,000 20% 100,000
Remaining 23,150,000 25% 5,787,500
Remaining 92,111,250 (Capital Gain) 15% 13,816,688
Total income 117,111,250 19,824,188

(iv) Recommendations:

Upon considering the pros and cons of the two options, option B seems lucrative from tax
savings point of view but from income perspective option-A seems more feasible as compared
to option B.

Illustration 8:

Since 2016, “ABC Co.” a branch of a Spanish Company situated in India has been working with
XYZ Co. in India as a Joint Venture (JV) for the Bangladeshi Government providing consultancy
services for the design and construction supervision of the Construction of the Dual Gauge
Railway Track between Dhaka – Tongi and Tongi- Joydebpur sections.

ICAB 2024 Double taxation relief 369

 ABC Co. performed the design services from India but now there is an important part of the
works (construction supervision) to be carried out in Bangladesh (with Indian and Bangladeshi
staff). Until now, the project has been carried out through an Indian Joint Venture (the
Government received a financing for the Project and one of the requirements from the Bank was
to be registered in India) formed by XYZ Co. and ABC Co.

Below are the salient points of the project:

• The Project was awarded to an Indian Consortium (not company) formed by ABC Co. (50%)
and XYZ Co. (50%).
• The project is divided into 3 stages: Stage 1 – Detailed Design, Stage 2 – Construction
Supervision, Stage 3 – Development Phase
• Stage 1 is already completed
• Duration of stage 2 is 3 years (tentatively). It was started in July 2021.
• Duration of stage 3 is 6 months (tentatively).
• XYZ Co. has developed its part of the work since the beginning of the Project
• For the performance of stages 2 and 3, ABC Co. and XYZ Co. have established a JV in India.
• The price is going to be paid in USD & BDT.
• 5 Indian engineers to be located in Dhaka (3 from ABC Co. and 2 from XYZ Co.)
• One or some local subcontract/s
• The project is financed by a bank situated in India. Invoices are issued to the Client
(Bangladesh Railways) but payment is done in India by the Indian Bank, including the BDT
component that the bank converts into USD at a fixed rate (100 BDT/US) for payment.

Now the JV is considering to set up either a branch or a company in Bangladesh to carry out the
phase 2 and 3 of the project.

Requirements:

(i) Whether the establishment of a branch office will trigger PE from local tax point of view and
from the perspective of Double Tax Treaty agreement?
(ii) Whether PE risk if any can be averted if JV hires own employees instead of opening a branch
office or a company i.e., JV?
(iii) Should the income generated through PE be subject to tax in Bangladesh and if so, then
how it should be taxed in the light of ITA, 1984?
(iv) Advising any other way out to avoid PE risk, if any?

Solution-8

(i) Whether the establishment of a branch office will trigger PE from local tax point of view
and from the perspective of Double Tax Treaty agreement?

From local tax point of view:

As per new section 2(92) of the ITA, 2023, permanent establishment, in relation to income
from business or profession, means a place or activity through which the business or
profession of a person is wholly or partly carried on, and includes-

(a) a place of management;

(b) a branch;
(c) an agency;

370 Business Planning: Taxation & Compliance ICAB 2024

 (d) an office;
(e) a warehouse;
(f) a factory;
(g) a workshop;
(h) a mine, oil or gas well, quarry or any other place of exploration, exploitation or extraction
of natural resources;
(i) a farm or plantation;
(j) a building site, a construction, assembly or installation project or supervisory activities
in connection therewith;
(k) the furnishing of services, including consultancy services, by a person through
employees or other personnel engaged by the person for such purpose, if activities of
that nature continue (for the same or a connected project) in Bangladesh; and
(l) any associated entity or person (hereinafter referred to as “Person A”) that is
commercially dependent on a non-resident person where the associated entity or
C
Person A carries out any activity in Bangladesh in connection with any sale made in
Bangladesh by the non-resident person;” H
A
From DTAA perspective: P
T
Article 5 of the DTAA between India and Bangladesh defined the meaning of "permanent E
establishment" which are as follows: R
(a) a place of management;
(b) a branch;
(c) an office; 26
(d) a factory;
(e) a workshop;
(f) a warehouse, in relation to a person providing storage facilities for others and
(g) a mine, an oil or gas oil, a quarry or other place of extraction of natural resources;
(h) a building site or construction or installation project constitutes a permanent
establishment only if it lasts more than 183 days

Hence, establishment of a branch office will trigger PE from both local tax point of view and
from the perspective of Double Tax Treaty agreement.

(ii) Whether PE risk if any can be averted if JV hires own employees instead of opening a
branch office from local tax and DTAA perspective?

As discussed above, as per serial no. (k) of section 2(92) of the ITA, 2023, furnishing of
services, including consultancy services, by a person through employees or other personnel
engaged by the person for such purpose, if activities of that nature continue (for the same
or a connected project) in Bangladesh shall constitute PE in Bangladesh. Hence, PE risk
cannot be averted if JV hires own employees instead of opening a branch office.

In addition to that, from the perspective of DTAA, stay period of more than 183 days shall
constitute PE. Since, the project will run for more than three (3) years, hence, PE risk cannot
be averted from DTAA perspective even.

(iii) Should the income generated through PE be subject to tax in Bangladesh and if so, then
how it should be taxed in the light of ITA, 2023?

As per section of 27 of the ITA, 2023, any income accruing or arising, whether directly or
indirectly, through or from any permanent establishment in Bangladesh shall be taxable in
Bangladesh.

ICAB 2024 Double taxation relief 371

 (iv) Advising any other way out to avoid PE risk, if any?

As per para 5 of the DTAA, an enterprise of a Contracting State shall not be deemed to have
a permanent establishment in the other Contracting State merely because it carries on
business in that other State through a broker, general commission agent or any other agent
of an independent status, where such persons are acting in the ordinary course of their
business.

This means that, if the JV outsource the full function to an independent third party to carry
out the onsite services, in that case, JV will not be exposed to PE in Bangladesh from DTAA
perspective.

Illustration 9:

A Sweden based company i.e., CNPC Co. has sold electrical power generators to a
Bangladeshi Company i.e., PQR Co. The seller needs to deliver the services for the electrical
power generators supplied to PQR Co. The Sweden based Co. has a subsidiary in
Bangladesh called MNC Limited which can provide the service to PQR Co. on behalf of
CNPC Co. Alternatively, CNPC Co. can also appoint an independent subcontractor to
deliver those service to PQR Co.

To render the services to PQR Co., engineers of both CNPC Co. and independent
subcontractors are necessary regardless of the transaction structure CNPC Co. chooses.

The entity has considered the following options to carry out the onshore services in
Bangladesh:

- Option-1: The contract will be signed between CNPC and MNC. As per the contract,
MNC will deliver the onshore services to PQR.

- Option-2: There will be a contract between MNC and PQR only to render services to
PQR.

- Option-3: There will be a contract between CNPC and PQR. PQR will bring the
employees of CNPC employees under their banner

- Option-4: There will be a contract between CNPC and PQR. CNPC sub contracts to
Independent 3rd party (3P) to deliver the services to PQR Co.

Requirements:

(i) Withholding tax and corporate tax implication, transfer pricing implications and DTAA
implication (if any) for each of the option.

(ii) Recommendations for the management of the company.

Solution-9

(I) Withholding tax and Corporate tax implication and DTAA implication (if any) for each of
the option.

372 Business Planning: Taxation & Compliance ICAB 2024

 Option-1 (Agreement between CNPC and MNC):

Withholding Tax

The banker of MNC, at the time of crediting service amount from CNPC, shall deduct
withholding tax @ 10% as per section 124 of the ITA, 2023 from the proceeds.

Corporate Income Tax

From MNC Perspective:

Service value will be considered as income from business for MNC and it will be taxed at
standard corporate tax rate of 27.5% or 25% on income from business i.e., after deducting
allowable business expenditure from the service value. However, minimum corporate income
C
tax of MNC will be 0.6% on gross receipts.
H
MNC can adjust the withholding tax deducted by Bank with its corporate tax payable at year end A
provided corporate tax liability of MNC is higher than the amount of withholding tax deducted. P
If the TDS is higher than corporate tax liability, in that case, the excess amount cannot be claimed T
as refund as because tax suffered at source u/s 124 is considered to be minimum tax u/s 163 of E
the ITA, 2023. R

From CNPC Perspective:

26
As per section 2(92) of the ITA, 2023, if an associated entity or person is commercially dependent
on a non-resident person to carry out the services in a connected project, in that case, such
activities shall constitute PE in Bangladesh.

Here, since MNC is commercially dependent on CNPC a non-resident entity, in that case, CNPC
is likely to be exposed to Bangladesh tax through the creation of PE with reference to section 27
of the ITA, 2023.

If CNPC is exposed to Bangladesh tax, in that case, question will come how the income will be
determined. In such case, the DCT can determine the income of the non-resident as per rule.

Transfer Pricing

MNC will be exposed to the transfer pricing regulation if it enters into contract with CNPC to
deliver service to PQR as it is an inter-company cross-border jurisdictional transaction. MNC will
be required to submit transfer pricing return (TP return) called “Statement of International
Transaction” along with the corporate tax return. In TP return, MNC will be required to declare
the amount of international transactions and respective transfer pricing methods. MNC will also
be required to keep detailed documentation related to transfer pricing. If the total amount of
international transactions during an income year exceeds BDT Thirty (30) million (approximately
Euro 300K) then tax authority may ask MNC to provide a report from Chartered Accountants or
Cost and Management Accountants on its Transfer Pricing Compliance.

ICAB 2024 Double taxation relief 373

 Option-2 (Agreement between MNC and PQR):

Withholding Tax

Construction Work is done through the Contract and as such would require tax deduction at
source under section 89 of ITA, 2023 and related rule when payment is made to MNC by PQR.
The current withholding tax rate is for such type of payment of amounting contract value of
service is @ 7% which is much lower than option 1.

Corporate Income Tax

Service value will be considered as income from business for MNC and it will be taxed at
standard corporate tax rate of 25% or 27.5% on income from business i.e., after deducting
allowable business expenditure from the service value.

MNC can adjust the withholding tax deduction at source with its corporate tax payable at year
end provided corporate tax liability of MNC is higher than the amount of withholding tax
deducted. If the TDS is higher than corporate tax liability, in that case, the excess amount cannot
be claimed as refund as because tax suffered at source u/s 89 is considered to be minimum tax
u/s 163 of the ITA, 2023.

From CNPC Perspective:

There will be no tax implication under option-4 from CNPC perspective

Transfer Pricing

MNC will not be exposed to transfer pricing regulation.

Option-3 (Agreement between CNPC and PQR):

Withholding Tax

Question comes whether the service will be considered as technical know-how fee or technical
assistance fee. If this is so considered and PQR signs an agreement with the Government to
establish an electricity power plant run by other than coal subject to fulfillment of the conditions
of “Private Power Generation Policy of Bangladesh” then usually no tax is payable on technical
know-how fee or technical assistance fee.

If this is not so considered, PQR might be required to deduct tax on the amount payable to
CNPC.

Corporate Income Tax

Generally, there will not be any Corporate Income tax for CNPC or MNC in Bangladesh on the
transaction. But, Permanent Establishment of CNPC in Bangladesh may be created if CNPC
renders the service through the secondment of employees as per section 2(92) of the ITA, 2023
and if their stay in Bangladesh in aggregate exceeds 183 days in any 12-month period
commencing or ending in the fiscal year concerned.

Hence, position of CNPC is likely to be exposed.

374 Business Planning: Taxation & Compliance ICAB 2024

 And as per amended section of 27 of the ITA, 2023, any income accruing or arising, whether
directly or indirectly, through or from any permanent establishment in Bangladesh shall be
taxable in Bangladesh.

Option-4 (Agreement between CNPC and Third party):

There will be no tax implication under option-4 from CNPC perspective.

Implication of DTAA:

As per article 5 of the DTAA between Bangladesh and Sweden, meaning of PE is as follows:
a. a place of management;
b. a branch;
c. an office; C
d. a factory; H
e. a workshop; A
f. a warehouse, in relation to a person providing storage facilities for others and P
g. a mine, an oil or gas oil, a quarry or other place of extraction of natural resources; T
h. a building site or construction or installation project constitutes a permanent establishment E
only if it lasts more than 183 days
R
As per Article 6 of the said agreement, an enterprise of a Contracting State shall not be deemed
to have a permanent establishment in the other Contracting State merely because it carries on
business in that other State through a broker, general commission agent or any other agent of 26
an independent status, where such persons are acting in the ordinary course of their business
and their business and their activities do not fall within the meaning of sub-paragraph (c) of
paragraph 5.

Contradiction between DTAA and ITA, 2023:

Definition of PE incorporated in the Income Tax Act, 2023 and definition of PE in respective
DTAA seems to be contradictory in couple of aspects. For example, the following two items are
included in the definition of DTAA as provided in the ITA, 2023 which are not included in the
DTAA:

- the furnishing of services, including consultancy services, by a person through employees

or other personnel engaged by the person for such purpose, if activities of that nature
continue (for the same or a connected project) in Bangladesh; and any associated entity or
person (hereinafter referred to as “Person A”) that is commercially dependent on a non-
resident person where the associated entity or Person A carries out any activity in
Bangladesh in connection with any sale made in Bangladesh by the non-resident person.

Furthermore, if we look at the definition of PE given in the DTAA in relation to a building site,
construction, assembly or installation projects, PE will be constituted if number of days lasts
more than 183 days whereas in the Income Tax Act, 2023 there is no such days mentioned.
Hence it is implied that even single day presence might create PE in Bangladesh to meet the
purpose as mentioned above as per the definition given in the Income Tax Act, 2023.

Again, if we look at the relevant Article of the DTAA in relation to the Engagement of
Independent third party it will not create a PE in Bangladesh whereas as per the definition given
in the Income Tax Act, 2023, Engagement of Independent third party will create PE as explained
above.

ICAB 2024 Double taxation relief 375

 Now the question comes which will prevail in any contradictory scenario between DTAA and
Income Tax Act, 2023 from local law perspective.

Section, 244 of the ITA, 2023 states that, agreement signed between the two contracting states
and the provision shall have effect notwithstanding anything contained in any other law. This
implies that provisions of the DTAA shall prevail of the Income Tax Act, 2023 if such matter is
expressly covered in the DTAA.

However, the real challenge are those cases which are not expressly covered in the DTAA and
interpretation is required thereon. In such case, the tax authority normally disallow DTAA benefit
and impose tax as per the ITA, 2023.

(ii) Recommendations:

Upon considering the above-mentioned scenario, CNPC in all the way will be exposed for
Bangladesh tax except option-4. Hence the only way forward is that CNPC can no way be
involved in rendering installation and maintenance work rather to engage the third party to
render the activities.

Illustration 10:

The Owners of a project undertaken by a world-renowned hotel company in Bangladesh wants

to remit Royalty fees and P&S charges (“Reimbursable”) to the company “XYZ” based in Hong
Kong. The payment will be made to the company based in Singapore.

Permission is required from Bangladesh Investment Development Authority (BIDA) or

Bangladesh Bank in order to remit money abroad. The client informed that approval from BIDA
and BB are granted on the basis that withholding tax has to be deducted on Royalty fees and
reimbursable by the authorized bankers to the company in accordance with domestic tax law.

Payment of such reimbursable cost with deduction of tax from Bangladesh will become cost to
the company. And hence, the company wants to gross up the reimbursable charges inclusive of
WHT as such treatment is not prohibited in Bangladesh. Besides, this treatment is followed by
other hotels and industries.

In this regard, the hotel company XYZ is contemplating the following options and seeks expert
opinion in the light of Bangladesh tax law and regulations:

Option 1: Grossing up P & S charges (reimbursable) inclusive of WHT.

Option 2: Setting up a local entity to receive the P & S charges (reimbursable) in Bangladesh
and subsequent repatriation of the payment to XYZ as dividend.

Option 3: Setting up a local entity to receive both Royalty fees and P & S charges (reimbursable)
in Bangladesh and subsequent repatriation of the payment to XYZ as dividend.

Requirement:

(i) Withholding tax and Corporate tax implication and DTAA implication if any of each option.
And the answer should include the financial analysis if any along with recommendations.

376 Business Planning: Taxation & Compliance ICAB 2024

 Solution-10

(i) Withholding tax and Corporate tax implication and DTAA implication if any of each option.
And the answer should include the financial analysis if any.

Option-1 (Grossing up P & S charges (reimbursable) inclusive of WHT)

WHT implication:

As per section 119 of the ITA, 2023, any payment made by a resident in Bangladesh to a non-
resident will be subject to withholding tax in Bangladesh at the applicable rate.

Hence, the payment of P & S charges to the hotel company based in Singapore will be subject
to tax deduction at source (TDS) @ 20%. C
H
An example has been furnished below: A
P
If XYZ grosses up the fee of Tk. 100 on the basis of applicable tax rate, in that case, invoice T
amount will stand at Tk. 125 (100/.80) and the company will receive net amount of Tk. 100 after E
deduction of tax of Tk. 25 (125*20/100). R

If the fee is grossed up and tax and VAT is deducted at source at the applicable tax rate, in that
case, the assessing officer is unlikely to raise question as to the extent of such expenses. 26

DTAA implication:

Currently there is no DTAA agreement between Bangladesh and Hong Kong, hence DTAA
benefit cannot be availed on the payment of P & S charges (reimbursable).

Option 2: Setting up a local entity to receive P & S charges in Bangladesh WHT implication:

As per section 90 of the ITA, 2023, payment made to a resident by a specified person on account
of services mentioned therein will be subject to tax deduction at source at the applicable rate(s).

Payment of reimbursement expenses is not subject to tax deduction at source if the

reimbursement is related to professional fees. But in other cases, law is silent which implies that
reimbursement is subject to tax deduction at source except on professional fees. Hence,
payment made to the local entity of Marriott by the owners on account of P & S charges will be
subject to TDS @ 10%. Please note that tax suffered at source by the local entity of XYZ is tax
creditable against its corporate tax liability.

Corporate tax implication:

Income of the local entity of the XYZ will be subject to corporate tax @ 25% or 27.5%. As
mentioned above, tax suffered at source can be tax creditable with the corporate tax liability.

Local entity of XYZ can repatriate the remaining income (after payment of corporate tax) to XYZ
in the form of dividend. Please note that with reference to section 119 of the ITA, 2023, dividend
payment will be subject to TDS @20%.

ICAB 2024 Double taxation relief 377

 An example has been furnished below:

Particulars TK.
Income 100
Corporate tax @ 27.5% (assuming that conditions to avail 25% tax rate not 27.5
fulfilled)
Less: AIT 10
Net tax payable 17.5
Profit after tax (PAT) 82.5
Withholding tax on dividend @ 20% 16.5
Net remittance as Dividend 66

DTAA implication:

Please note that as per section 119 of the ITA, 2023, there is a provision to apply to NBR to obtain
reduced rate certificate or non-deduction certificate in the light of tax treaty. We note that the
payment is to be remitted to Hong Kong. There is currently no Double Taxation Avoidance
Agreement (DTAA) between Bangladesh and Hong Kong. Hence, no DTAA benefit can be
availed on the payment of Dividend.

Option 3: Setting up a local entity to receive both Royalty fees and P & S charges
(reimbursable) in Bangladesh

WHT implication:

Under Option 3, if the local entity of XYZ receives payment of royalty fees in addition to P&S
charges, payment of royalty fee will be subject to tax deduction at source @ 10% u/s 90 of the
ITA, 1984. P&S charge already discussed in option 2.

Corporate tax implication:

As we have discussed in Option 2, income of the local entity of XYZ will be subject to corporate
tax @ 27.5%. And tax suffered at source can be tax creditable against the corporate tax liability.
Local entity of XYZ can repatriate the remaining income (after payment of corporate tax) to XYZ
in the form of dividend. Please note that as per section 119 of ITA, 2023 dividend payment will
be subject to TDS @20%.

DTAA implication:

Please note that as per section 119 of the ITA, 2023, there is a provision to apply to NBR to obtain
reduced rate certificate or non-deduction certificate in the light of tax treaty. We note that the
payment is to be remitted to Hong Kong. There is currently no Double Taxation Avoidance
Agreement (DTAA) between Bangladesh and Hong Kong. Hence, no DTAA benefit can be
availed on the payment of Dividend.

An example has been furnished below:

Particulars TK.
Income 200
Corporate tax @ 27.5% 55

378 Business Planning: Taxation & Compliance ICAB 2024

 Less: AIT 20
Net tax payable 35
Profit after tax 125
Withholding tax on dividend @ 20% 25
Net remittance as Dividend 100

Summary of the options discussed:

Net reimbursable Net Royalty fees Total net

Particulars
receivable (TK) receivable (TK) Payment (TK)
Option 1 100 80 180
Option 2 66 80 146
C
Option 3 100
H
A
Upon considering the aforementioned facts, it is recommended to opt for option 1.
P
T
26.5 Methods of avoiding double taxation E
There are four methods of avoiding double taxation. These are – R

(i) Unilateral relief

(ii) Bilateral relief 26
(iii) Multilateral relief
(iv) Non-tax treaties

Unilateral relief

Under this system whether the income is subject to tax abroad or not is immaterial, relief is given
by way of tax credit for the tax paid abroad.

Under Section 246 of the Income Tax Act, 2023, tax credit method is followed. A resident in
Bangladesh who has paid income tax in any country with which Bangladesh does not have a
treaty for the relief or avoidance of double taxation is allowed credit against his Bangladesh
income tax for an amount equal to Bangladesh coverage rate i.e. average rate or the foreign
rate whichever is lower, applied to the doubly taxed income. This is done as follows:

(a) Where the foreign tax is equal to Bangladesh tax, full amount of foreign tax will be given
credit.
(b) Where the foreign tax exceeds the Bangladesh tax, the liability to Bangladesh tax is nil.
However, no refund in respect of the excess amount is allowed.
(c) Where foreign tax is less than Bangladesh tax, the difference would be payable by the
taxpayer.
The basic principle to remember is that credit/relief will never exceed the Bangladesh income
tax on the concerned income calculated at average rate.

Bilateral relief

It may take one of the following two forms:

ICAB 2024 Double taxation relief 379

 Firstly, the treaty may apply exempting method, the country in question refraining from
exercising jurisdiction to tax a particular income.

For instance, the country of source where PE is located is assigned an exclusive jurisdiction to
tax the profits of the establishment. In turn it may agree to refrain from exercising its jurisdiction
to tax the owner of these profits.

Alternatively, the treaty may provide relief from double taxation by redacting the tax ordinarily
due in one or both of the contracting states on that income which is subject to double taxation.

For instance, the country, which is the source of a dividend, often agrees to reduce the
withholding rate normally applicable to dividends paid to non-resident and the country of
residence agrees to give tax credit or similar relief for the tax paid in the source country. In such
a case, both the countries exercise the rights to jurisdiction, while mutually agreeing for
adjustments, many DTAAs combine both the methods of relief.

Multilateral treaties

These are similar to bilateral treaties achieved through agreement between many countries i.e.
EEC.

Non-tax treaties

These are not direct tax treaties but are of friendship, co-operation cultural exchange, political
and diplomatic relations, but which consequently may reflect upon tax matters
.
26.6 Tax treaty

What is tax treaty and how does it work?

‘Treaty’ as commonly understood is a formally concluded and ratified agreement between

independent nations. Tax treaties are generally a matter of bargain and prolonged negotiations
centering on economic interests of the countries involved.

What is the scope of tax treaties in determining jurisdiction?

Normally tax treaty between two countries covers-

(i) Persons (ii) Taxes (iii) Territory (iv) Time

The treaty, generally applies to residents of the contracting states. Each country retains the
power to tax its citizens and residents on their total world income (Status jurisdiction) and tax
others, non-citizens, non-residents only on their income in the country (Source jurisdiction).
However, the treaty provisions protect the taxpayer from suffering double taxation on the same
income.
How does a treaty become a law?

The agreement entered into becomes a part of domestic law only when it has sanction of the
constitutions of the nations which are parties to it. The power to legislate is conferred on our
Parliament and therefore, the Government has authority to enter into DTAA. However, all treaties
are also required to be formally approved by official gazette notification.

380 Business Planning: Taxation & Compliance ICAB 2024

26.7 Some other concepts used in DTAA

Treaty override

The executive of the state has been given rights under our Constitution to enter into DTAAs. This
is an executive power exercisable by the Govt. like legislative and judicial powers. As the power
to enter into DTAAs comes from the Constitution, the relevant article thereof will have the effect
of the DTAA overriding the Act, as the executive also has to exercise jurisdiction keeping in mind
DTAA obligations and commitments made thereon. It is now an undisputed proposition that
DTAA overrides the Act.

For this very reason, Section 144(2) has referred to the wording “notwithstanding anything
contained in any other law for the time being in force” to give effect of DTAA provision over
domestic law, instead of saying “notwithstanding anything contained in any other provisions of C
this Act”. H
A
Treaty shopping
P
T
Just as the domestic law can, sometimes, be used more than fairly to the advantage of a
taxpayer, the DTAA too can be exploited through popularly known means of “Treaty Shopping”. E
A non-resident seeking shelter under a DTAA is still open to domestic assessment when the tax R
authorities feel that, he is taking an undue advantage of provisions of the DTAA or has structured
the commercial arrangement in such a way so as to avail the DTAA benefit otherwise not
available to him. The authorities may then deny the benefits of the DTAA. The most common 26
form of Treaty Shopping is setting up of a dummy enterprise. This is set up by say, Company A,
in one of the Contracting States, to avail DTAA benefits, which the company, not being a resident
of either Contracting States, would otherwise not be entitled to. In such a case, the Court can lift
the corporate veil.

Attribution Rule

The basic requirement to bring the business profits to tax they should be capable of being
attributable to the Permanent Establishment (PE) or residency. The question to be asked is the
enterprise trading with the country on a regular basis? If yes, what is the nature of establishment
in Bangladesh? If the income arises out of the business activity carried on in that state and if it
can be attributed to the PE, it can be taxed to that extent of attribution.

Certain established and accepted rules are to be followed in the determination of such income.
Generally, the expenses that can or cannot be considered will depend upon the taxation laws of
each state.

Force of attraction rule

It means all income arising from all source in a country where the foreign enterprise maintains a
PE is subject to tax in that country irrespective of whether the said income is attributable to the
PE or not. Therefore, profits arising from transactions outside PE are also taxable. As per this rule
not only the profits attributable to the sale of same or similar kind of goods is brought to tax and
any other income from sources within the country are also regarded income attributable to the
PE.

ICAB 2024 Double taxation relief 381

 Exchange of Information amongst Two Countries

(1) The competent authorities of the Contracting States shall exchange such information as is
necessary for the carrying out of this Convention and of the domestic laws of the Contracting
States concerning taxes covered by this Convention in so far as the taxation thereunder is in
accordance with this Convention. Any information so exchanged shall be treated as secret
and shall not be disclosed to any persons or authorities other than those concerned with the
assessment or collection of the taxes which are the subject of the Convention.

(2) In no case shall the provisions of paragraph (1) of this Article be construed so as to impose
on one of the Contracting States the obligation:

(a) To carry out administrative measures at variance with the laws or the administrative
practice of that or of the other Contracting State.

(b) To supply particulars which are not obtainable under the laws or in the normal course of
the administration of that or of the other Contracting State;

(c) To supply information which would disclose any trade, business, industrial, commercial
or professional secret or trade process, or information, the disclosure of which would be
contrary to public policy.

Students should carefully note the following main objectives of DTAA:

a) Any income earned by a resident of a contracting state in the other contracting state cannot
escape from tax assessment in both the contracting states.
b) Any income earned by a resident of a contracting state in the other contracting state cannot
be taxed in both the contracting states.
c) Conditions of taxability and rates of tax payable of a resident of a contracting state in respect
of incomes from various heads earned in the other contracting state.

26.8 Other topics of International Taxation

26.8.1 Tax havens

There are some common misconceptions about ‘Tax Havens’. Many people consider any
jurisdiction with nil or very low tax rate as ‘tax haven’ which may not always be correct.

As per the definition provided by OECD, Tax haven refers to a country which imposes a low or
no tax is used by corporations to avoid tax which otherwise would be payable in a high-tax
country. According to OECD report, tax havens have the following key characteristics:

- No or only nominal taxes;

- Lack of effective exchange of information; and
- Lack of transparency in the operation of the legislative, legal or administrative provisions

As per the International Consortium of Investigative Journalist (ICIJ), who were responsible for
publishing leaked documents in the name of ‘Paradise Papers’ and the Panama Papers’ tax
havens, or offshore financial centers, are generally countries or places with low or no corporate
taxes that allow outsiders to easily set up businesses there. Tax havens also typically limit public
disclosure about companies and their owners. Because information can be hard to extract, tax
havens are sometimes also called secrecy jurisdictions.

382 Business Planning: Taxation & Compliance ICAB 2024

 Tax havens are speeded all over the world. Some are independent countries like Bermuda,
Panama, Mauritius, Cyprus etc. and some are territories like British Virgin Islands (BVI), Cayman
Islands, etc.

So, Tax haven nations are those with nil or moderate level of taxation and/or offering liberal tax
incentives for export activities, shipping business. These tax havens attract investments as the
corporate tax rate is low. They may also exempt dividends and capital gains on the transfer or
exchange of movable assets like shares and sometime immovable properties like land, building,
plants etc. Besides these, tax haven countries may also pursue absolute secrecy and easy
exchange control policies to attract offshore investors.

There are two types of tax haven—

1. Nil tax haven

C
2. Nil tax outside haven countries
H
26.8.2 Thin capitalization A
P
A company is typically financed (or capitalized) through a mixture of debt and equity. ―Thin T
capitalization refers to the situation in which a company is financed through a relatively high level E
of debt compared to equity. Thinly capitalized companies are sometimes referred to as ―highly R
leveraged or ―highly geared.

Why is thin capitalization significant? 26

The way a company is capitalized will often have a significant impact on the amount of profit it
reports for tax purposes. Country tax rules typically allow a deduction for interest paid or payable
in arriving at the tax measure of profit. The higher the level of debt in a company, and thus
amount of interest it pays, the lower will be its taxable profit. For this reason, debt is often a more
tax efficient method of finance than equity.

Multinational groups are often able to structure their financing arrangements to maximize these
benefits. Not only are they able to establish a tax-efficient mixture of debt and equity in
borrowing countries, they are also able to influence the tax treatment of the lender which
receives the interest - for example, the arrangements may be structured in a way that allows the
interest to be received in a jurisdiction that either does not tax the interest income, or which
subjects such interest to a low tax rate.

Example 1: Debt to equity investment of 1 to 1.

Company X, a corporation from Country A, establishes group affiliate Company Y in Country B

with an investment of $50 in equity capital and a loan of $50 from Company X at a 10% interest
rate. Company Y generates pre-tax and pre-interest operating income of $15 for year 2020, and
pays interest to Company X at 10% i.e. an interest payment of $5. The post-interest taxable profit
of Company Y is $10 and, taxed at a 30% tax rate, generates tax revenue of $3 for Country B and
net profit of $7 for Company Y.
Example 2: A debt to equity investment of 9 to 1.

Company X, a corporation from Country A, establishes another group affiliate Company Z in

Country C with an investment of 10 in equity capital and a loan of $90 from Company X at a 10%
interest rate. Company Z also generates pre-tax and pre-interest income of $15 for year 2020,
and pays interest to Company X at 10% i.e. a total interest payment of $9. The remaining taxable

ICAB 2024 Double taxation relief 383

 profit of Company Z is $6 and taxed at a 30% tax rate, which generates tax revenue of $1.8 for
Country C and $5.20 for Company Y.

Apparently, it would indicate that Company Y in Country B is more profitable as it is earning $7

in year 2020 against $5.20 earned by Company Z in Country C. However, if the interest payment
is also considered than it would appear that Company Y could remit $12 (interest $5 + Profit $7)
but Company Z’s remittance is $14.20 (interest $9 + Profit $5.20). The excess amount of
remittance by Company Z is due to the additional tax benefit taken on interest payment.

What are ―thin capitalization” rules?

As described above, the manner in which a company is capitalized can have a significant effect
on the amount of profit it reports, and thus the amount of tax it pays.

For this reason, country tax administrations often introduce rules that place a limit on the amount
of interest that can be deducted in calculating the measure of a company’s profit for tax
purposes. Such rules are designed to counter cross-border shifting of profit through excessive
debt, and thus aim to protect a country’s tax base. From a policy perspective, failure to tackle
excessive interest payments to associated enterprises gives MNEs an advantage over purely
domestic businesses which are unable to gain such tax advantages.

Thin capitalization rules typically operate by means of one of two approaches:

a) determining a maximum amount of debt on which deductible interest payments are

available; and

b) Determining a maximum amount of interest that may be deducted by reference to the ratio
of interest (paid or payable) to another variable.

26.8.3 The Base Erosion and Profit Shifting (BEPS)

The international tax landscape has changed dramatically in recent years. With political support
of G20 Leaders, the international community has taken joint action to increase transparency and
exchange of information in tax matters, and to address weaknesses of the international tax
system that create opportunities for BEPS. The internationally agreed standards of transparency
and exchange of information in the tax area have put an end to the era of bank secrecy. With
over 130 countries and jurisdictions currently participating, the Global Forum on Transparency
and Exchange of Information for Tax Purposes has ensured consistent and effective
implementation of international transparency standards since its establishment in 2009.

At the same time, the financial crisis and aggressive tax planning by multinational enterprises
(MNEs) have put BEPS high on the political agenda. With a conservatively estimated annual
revenue loss of USD 100 to 240 billion, the stakes are high for governments around the world.
The impact of BEPS on developing countries, as a percentage of tax revenues, is estimated to
be even higher than in developed countries.

Domestic tax base erosion and profit shifting (BEPS) due to multinational enterprises exploiting
gaps and mismatches between different countries’ tax systems affects all countries. Developing
countries’ higher reliance on corporate income tax means they suffer from BEPS
disproportionately.

384 Business Planning: Taxation & Compliance ICAB 2024

 Business operates internationally, so governments must act together to tackle BEPS and restore
trust in domestic and international tax systems. BEPS practices cost countries 100240 billion USD
in lost revenue annually, which is the equivalent to 4-10% of the global corporate income tax
revenue.

Working together in the OECD/G20 BEPS Project, over 60 countries jointly delivered 15 Actions
to tackle tax avoidance, improve the coherence of international tax rules and ensure a more
transparent tax environment.

26.8.4 Anti-Avoidance Rules against International Tax Planning

The main anti-avoidance rules against international tax planning in place among OECD and G20
countries are based on five main dimensions. Anti-avoidance rules can effectively reduce tax
planning by multinational enterprises (MNEs). Also strong anti-avoidance rules can reduce the
C
impact of tax planning on market concentration and increase the sensitivity of tax-planning
MNEs’ investment to changes in the corporate tax rate. H
A
Strong rules reduce manipulation of debt location. Finally, strong anti-avoidance rules can P
reduce the strategic tax-motivated location of patents. T
E
The main types of anti-avoidance rules against international tax planning can be described as R
follows:

1. Transfer price rules require that cross-border transactions between related firms should be 26
valued at market price (so-called “arm’s-length” principle). When no comparable transaction
exists, different valuation methods can be used, for instance based on cost plus a fixed mark-
up or using economic models to split the relevant profit among entities.

2. Thin capitalization rules and rules limiting interest deductibility disallow the deduction of
certain interest expenses when the debt-to-equity or the interest-to-earnings ratio of the
debtor is considered excessive. These rules apply either to total or related-party debt.

3. Controlled foreign company (CFC) rules aim at eliminating the deferral of tax on certain
income by using lower-tax foreign affiliates or the exemption on certain mobile foreign
source income.

4. General anti-avoidance rules (GAARs) prohibit “aggressive” tax avoidance, for instance, by
denying tax benefits from a transaction that lacks economic substance.

5. Withholding taxes on interest, royalties and dividends are not anti-avoidance rules in a strict
sense, but they can also influence firms’ profit shifting opportunities. For instance,
withholding taxes on interest payments can discourage the use of (internal) debt for tax
planning. Withholding taxes on royalties can discourage the allocation of royalties to certain
jurisdictions to gain a tax advantage.

26.8.5 International tax disputes

International tax disputes are between the taxes authorities of two different countries. They result
from differing interpretations of the provisions of a tax treaty between the two countries.
However, they mainly affect taxpayers with cross-border economic activities, usually
transnational corporations (TNCs) commonly known as multinational company (MNC) operating
in at least Two or more than countries.

ICAB 2024 Double taxation relief 385

 Most disputes concern the allocation of profits of MNCs, and the growth has occurred as
enforcement of transfer pricing rules has strengthened. Developing countries have been
introducing transfer pricing rules and are now improving enforcement. So MNCs fear there will
be more disputes. This fear may be justified, since the OECD Transfer Pricing Guidelines are
complex and do not provide clarity. They require tax officials to identify the functions performed
by each part of the MNC, by analyzing its business model. This requires specialized knowledge
and involves discretionary and subjective judgements.

Double Tax treaties are normally incorporated into domestic law. So, taxpayers can go to court
if they disagree with how a treaty rule is applied. But tax treaties also give them the right to
complain to the competent authority in the relevant national tax administration. The competent
authority is obliged either to resolve the issue, or, under the mutual agreement procedure
(MAP), to consult with the competent authority of the Double Tax treaty partner.

Under the MAP, the competent authorities must ‘endeavor’ to solve the problem – but are not
obliged to do so. The MAP is totally secret. Even the existence of a claim is not made public. Tax
advisers prefer the MAP over court cases, which generally are public. But they complain that the
MAP takes too long, and does not guarantee an outcome. They have long urged that unresolved
disputes should go to binding third party arbitration.

When a MAP request is submitted, the Competent Authority (CA) will need some preliminary
information to consider whether the case is eligible for MAP. The information necessary to
process a MAP depends on the nature and complexity of the case. If the main focus of the case
is on the interpretation and application of a particular article in the tax treaty, the taxpayer may
not need to prepare any documentation other than some basic information about the case. On
the other hand, if the case is highly factual and complex and therefore requires rigorous analysis
and evaluation of facts and circumstances, the CAs involved in the process would need a
considerable amount of information to examine the case properly. In either situation, it should
be stressed that at the initial stage of MAP it would be enough to establish the taxpayer’s
eligibility for MAP, therefore it would not be necessary to review the substantive basis of the
case. Accordingly, documentation the taxpayer has to provide at this stage would be considered
in light of what information the CA needs to confirm the eligibility of the case for MAP.

386 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 27
Transfer pricing

Introduction
Examination context
Topic list

27.1 Concept of transfer pricing

27.2 Introduction of transfer pricing regulations in Bangladesh
27.3 Important definitions relating to transfer pricing
27.4 Arm’s length price

27.5 Factors to be considered in judging uncontrolled international

transaction
The factors to be considered for the most appropriate method
27.6 Reporting of information relating to international transaction
27.7 Assessment of transfer pricing cases
27.8 Penalties in transfer pricing regulation
 27.1 Concept of transfer pricing

Transfer pricing is the setting of prices of goods & services sold between controlled legal
entities.

If a subsidiary company sells goods to a parent company; the cost of those goods is the transfer
price. Suppose a company ‘A’ purchases goods for Tk. 1,000 and sells it to an associate company
B for Tk. 2,000 who then sells in the open market for Tk. 4,000. Had A sold it directly in open
market it could earn a profit of Tk.3,000. By routing through B the profit is restricted to Tk. 1,000.
The profit of Tk. 2,000 is shifted to country of B. The goods are transferred on an arbitrary price
(transfer price) and not open market price.

The expression “transfer pricing” thus refers to prices of transaction between associated
enterprises which may take place under different condition from those between two
independent enterprises. The effect of transfer pricing is that the parent company or a subsidiary
tends to declare insufficient taxable income or excessive loss in transaction because corporate
tax rate varies between countries. Multinational companies tend to reduce their tax burden by
shifting profit of countries where tax rate is higher to country where tax rate is lower.

Transfer pricing may occur in transaction of (a) goods (b) service (c) use of property (including
intangible property). This may occur:

(a) Between two related enterprises.

(b) Through transaction in foreign currency.

Most countries including Bangladesh have taken policy of ‘arm’s length price’ to combat transfer
pricing.

27.2 Introduction of transfer pricing regulations in Bangladesh

The incorporation of transfer pricing regulations into the Income Tax Act occurred as a
significant development with the Finance Act, 2012. Addressing this complex matter, Chapter II
of Part 15 (section 233 to 239) of the Income Tax Act of 2023, along with Rule 71, 72, 73, 74, 75,
and 75A from the Income Tax Rules of 1984, comprehensively encompasses the framework for
transfer pricing regulations. These regulations are strategically introduced beforehand, serving
multiple objectives. Firstly, they provide taxpayers with adequate time to meticulously prepare
their records in compliance with the regulations. Secondly, these regulations afford the tax
authority the necessary time to establish and consolidate a robust database. Lastly, a critical facet
involves training tax officials and enhancing their capacity to effectively implement the transfer
pricing regulations.

In accordance with these regulations, the scope of transfer pricing extends to two pivotal
scenarios—it applies to international transactions involving associated enterprises, ensuring that
transactions between these interconnected entities adhere to fair market values, and the transfer
pricing regulations come into play when at least one of the enterprises involved is non-resident.
This comprehensive approach ensures the integrity of financial transactions and the equitable
distribution of taxes in cross-border economic activities.

388 Business Planning: Taxation & Compliance ICAB 2024

27.3 Important definitions relating to transfer pricing

(a) Associated enterprise: An "associated enterprise" refers to an enterprise that shares a

certain relationship with another enterprise during a given income year. This relationship is
defined by several criteria. First, if one enterprise engages in the management, control, or
capital aspects of another enterprise, either directly, indirectly, or through intermediaries,
they are considered associated. Similarly, if one enterprise holds shares with more than 25%
of the voting power in the other or provides cumulative borrowing exceeding 50% of the
recipient's book value of total asset or gives cumulative guarantees exceeding 10% of the
recipient's total book value of borrowing, shall be considered as associated enterprise.
Moreover, if one enterprise appoints over half of the other's board members, has practical
decision-making influence, or appoints or shares executive directors or members, then it
would become associated enterprise.

This definition also encompasses situations where the same individual participates in the
management, control, or capital of both enterprises, directly or indirectly, or holds
controlling shares exceeding 25% of voting power, or appoints over 50% of board members
or executive directors or members.

(b) International transaction: “International transactions”—transaction between associated

enterprises, either or both of whom are non-resident, in any nature having a bearing on the
profits, income, losses, assets, financial position or economic value and includes—
(i) a mutual agreement or arrangement for allocation or apportionment or contribution of
cost, expenses incurred or to be incurred in connection with benefit, service or facility
provided;
(ii) a transaction entered in by an enterprise with a person, irrespective of whether such C
other person is a non-resident or not’ other than associated enterprise, if there exists a H
prior agreement between such other person and associated enterprise or the terms of
A
the relevant transaction are determined in substance between such other person and
P
the associated enterprise.
T
(c) Property: “Property” includes goods, articles, things or items, patent, invention, formula, E
process, design, pattern, know-how, copyright, trademark, trade name, brand name, R
literary, musical, or artistic composition, franchise, license or contract, method, program,
software, database, system, procedure, campaign, survey, study, forecast, estimate,
customer list, technical data, any aspects of advertising and marketing, any item which has 27
substantial value, or any other intangible property;

(d) Transaction: “Transaction”−any arrangement, understanding or action, whether formal or

written or intended to be legally enforceable or not;

27.4 Arm’s length price—the basis of determining transfer pricing

Price shall be determined based on nature, availability of information, functions performed,

assets employed, risk assumed etc. by applying most appropriate method like—

(a) Comparable uncontrolled price method;

(b) Resale price method;
(c) Cost plus method;
(d) Profit split method;
(e) Transactional net margin method;
(f) Any other method that yields a result consistent with the arm's length price.

ICAB 2024 Transfer pricing 389

 Where most appropriate method applied is a method other than (d) and (f), the dataset of the
arm’s length price consists six or more entries, arm’s length range beginning from the 30% and
ending on the 70% of the dataset shall be constructed and arm’s length price shall be:

• actual price if the price belongs to the said range;

• if actual price is outside the range, then arm’s length price shall be the median of the dataset.

In case the dataset is less than six entries, the arm’s length price shall be the arithmetical mean
of all the values included in the dataset. Arm's length price shall not result lower income basis
the international transaction actually undertaken. DCT may determine arm's length price if he
think the price has not been determined as per provision or fails to maintain required documents
or the price computation is not reliable or incorrect.

27.4.1 Comparable uncontrolled price method:

1. the price charged or paid for property transferred or services provided in an uncontrolled
transaction or a number of transactions of comparable circumstances is identified;
2. if the price so identified differs from the price of the international transaction, the differential
amount is calculated;
3. the price of international transaction is then adjusted by the said differential amount;
4. the adjusted price under sub-clause (iii) is taken to be the arm's length price of the property
transferred or services rendered in the international transaction.

27.4.2 Resale price method:

(i) the price at which the said property or service is resold to an independent enterprise is
identified;
(ii) the price, as identified in sub-clause (i), is reduced by a comparable normal gross margin;
(iii) the price so arrived at is then adjusted for other unique costs (such as customs duty)
associated with the purchase of the property or services;
(iv) the price so arrived at is then adjusted to take into account the material differences
(differences that could materially affect the gross margin in open market condition) such as
functions performed, risks involved, assets employed, time gap between the original
purchase and the resale and accounting practices between the international transactions
and the comparable uncontrolled transactions, or between the enterprises undertaking
such transactions;
(v) the adjusted price under sub-clause (iv) shall be taken to be the arm's length price of the
property purchased or the service obtained in the international transaction.

27.4.3 Cost plus method:

(i) the direct and indirect costs incurred in the supply of property or the provision of services,
hereinafter referred to as cost base, are determined;
(ii) a comparable profit mark-up (based on comparable accounting policies) is identified;
(iii) appropriate adjustment is then made to the comparable profit mark-up adjusted to take into
account the material differences (differences that could materially affect the mark-up in open
market condition) such as functions performed, risks involved, assets employed, contractual
terms and market conditions between the international transactions and the comparable
uncontrolled transactions, or between the enterprises undertaking such transactions.
(iv) the adjusted profit mark-up under sub-clause (iii) is then added to the cost base;
(v) the sum so arrived at is taken to be the arm’s length price of the property transferred or
services provided in the international transaction.

390 Business Planning: Taxation & Compliance ICAB 2024

27.4.4 Profit split method:

(i) the combined profit, arising from international transaction or transactions and divisible
among the associated enterprises, is identified.
(ii) the combined profit is then divided among the associated enterprises by using the following
approaches:

(a) each of the associated enterprises is allocated a basic return based on the basic
functions (manufacturing, distribution, service provision etc.) each enterprise performed
and determined by reference to market returns earned by independent enterprise in
similar transaction. This basic return does not usually account for the return that would
be generated by any unique and valuable assets possessed by the associated
enterprises. The residual profit (which may be attributable to such unique assets),
calculated by deducting the sum of basic returns allocated to associated enterprises
from the combined profit, is then apportioned to the associated enterprise based on
their relative contribution and taking into consideration how independent enterprises in
similar circumstances would have divided such residual profit; or

(b) basic return is not allocated to the associated enterprises; the combined profit is divided
among the associated enterprises based on the relative contribution of each the
associated enterprises to that profit;

(iii) the profit thus allocated to the assessee under sub-clause (ii) is taken to be the arm’s length
price.

27.4.5 Transactional net margin method:

C
The net profit margin earned by the associated enterprise from the international transaction with H
the associated enterprise is computed having regard to an appropriate base such as costs, sales A
or assets; P
T
(i) the net profit margin earned by an independent enterprise or enterprises from comparable E
uncontrolled transaction or a number of such transactions is computed having regard to the R
same base;
(ii) appropriate adjustment is then made to the net profit margin referred to in sub-clause (ii) to
take into account the differences, that can materially affect the net profit margin, between
27
the international transactions and the comparable uncontrolled transactions, or between the
enterprises undertaking such transactions;
(iii) the adjusted net profit margin under sub-clause (iii) is then applied to the base as referred
to in sub-clause (i) to arrive at the arm’s length price in relation to the international
transaction.

27.5 Factors to be considered in judging uncontrolled international transaction

(1) The factors to be considered in judging uncontrolled international transaction is described

in rule 71. These are as follows:

(a) the characteristics of property, services or intangible properties involved in the

transaction:

(i) the case of tangible property: physical features, quality and reliability, availability,
volume and timing of property transferred;

ICAB 2024 Transfer pricing 391

 (ii) in the case of services provided: the nature and extent of the services;
(iii) in the case of intangible property: the type of intangible, the form of transaction, the
expected benefits, the duration of protection, the degree of protection, etc.;

(b) the functions performed, the risks assumed and the assets employed, especially the
functions, risks and assets that are materially significant in determining the price or
margin in relation to the international transaction;

(a) the contractual terms (whether or not such terms are formal or written) dictating the
allocation of responsibilities, risks and benefits between enterprises involved in the
international transaction;
(b) economic circumstances, that affect the international transaction and uncontrolled
transactions, including geographic location, the size and level of markets; the extent of
competition in the market, the availability of substitute goods and services, the
purchasing powers of consumers, government orders and policies and the timing of the
transaction;
(c) Any other factors that have material effect on the international transaction and
uncontrolled transaction.

(2) An uncontrolled transaction shall be deemed to comparable to an international transaction

if:
(i) there are no material differences in respect of cost, price or margin between the
transactions being compared or between the enterprises undertaking such transactions;
or
(ii) reasonably accurate adjustments can be made to eliminate any material differences in
the transactions.

(3) In analyzing the comparability, data relating to the relevant financial year (in which the
international transaction has been entered into) shall be considered.

Provided that data relating to a period prior to the financial year may also be considered if
such data bears such facts which could have an influence on the analysis of comparability.

27.6 The factors to be considered for the most appropriate method

The factors to be considered for the most appropriate method are described in rule72:

(a) the nature and class of the international transaction, and of enterprises entering into the
international transaction;
(b) the comparability factors (industry, functions, risks, contractual terms, market level) that are
materially significant in determining the price or margin in relation to the international
transaction;
(c) the quality (availability, coverage, validity and reliability) of relevant data;
(d) the reliability of assumptions in the method;
(e) the sensitivity of results in the deficiency in data and assumptions;
(f) the extent to which the reliable and accurate adjustments can be made to eliminate the
differences, if any, between the international transaction and the comparable uncontrolled
transaction or between the enterprises entering into such transactions.

392 Business Planning: Taxation & Compliance ICAB 2024

27.7 Reporting of information relating to international transaction

According to section 237 every person having international transaction will keep information
and maintain record as per rule 73 as under:

(a) Ownership profile of the multinational group in which the assessee enterprise is a member.
Profile should include information on groups global organizational structure, showing in
details the name, location, legal status and country of tax residence of the enterprises in the
group with whom the assessee enterprise have international transactions, and ownership
linkages among them;
(b) business profile of the group including the line of business, industry dynamics, and market
and economic environment in which the group operates, and the business model and
strategies of past, present and future;
(c) brief business profiles of each of the member of the group;
(d) information on the business relationship (purchase and sells of goods, provision of services,
use of assets and intangibles etc.) among the members of the groups;
(e) consolidated financial statement of the group;
(f) profile of the assessee enterprise and each of the associated enterprises operating in
Bangladesh, including tax and VAT registration number, IRC & ERC numbers, address,
locations of activity centers etc.;
(g) business profile of the assessee enterprise and each of the associated enterprises operating
in Bangladesh including the line of business, industry dynamics, and market and economic
environment in which the assessee enterprise operates, and the business model and
C
strategies of past, present and future of the assessee enterprise;
H
(h) brief description of the functions performed, risks assumed and assets employed or to be A
employed by the assessee and by the associated enterprises involved in the international P
transaction; T
(i) financial statements of the assessee enterprise and each of the associated enterprises E
operating in Bangladesh; R
(j) information on economic and market analyses, forecasts, budgets or any other financial
estimates prepared by the assessee enterprise and each of the associated enterprises
operating in Bangladesh either for whole business or for any segment or line of product;
27

(k) details of all transactions with the associated enterprises;

(l) contracts, terms and agreements of the transactions with associated enterprises;
(m) segment financial statements with respect to the transactions with associated enterprises;
(n) the manner of choosing tested party including the rationale for the choice;
(o) details of comparable including the manner in which the comparable have been screened
and the adjustment made to achieve comparability;
(p) details of comparability analysis;
(q) the manner of choosing tested party including the rationale for choice;
(r) information on transfer pricing method chosen considered for determining the arm’s length
price including the justification stating why the method is considered most appropriate;

ICAB 2024 Transfer pricing 393

 (s) records showing the calculations and workings regarding the determination of the arm’s
length price/margin including the explanation of any assumption;
(t) any assumption, policy and price negotiations which may have an effect on the
determination of the arm’s length price;
(u) information on any adjustment made to transfer prices to align them with arm’s length prices
determined under these rules and consequent adjustment made to the total income for tax
purposes;
(v) any other information, data or document, including information or data relating to the
associated enterprise, which may be relevant for determination of the arm’s length price.

The information specified above shall be supported by authentic documents, which may include
the following:

(a) Official publications, reports, studies and data bases from the Government of the country of
residence of the associated enterprise, or of any other country;
(b) Reports of market research studies carried out and technical publications brought out by
institutions of national or international repute;
(c) Price publications including stock exchange and commodity market quotations;
(d) Published accounts and financial statements relating to the business affairs of the associated
enterprises;
(e) Agreements and contracts entered into with associated enterprises or with unrelated
enterprises in respect of transactions similar to the international transactions;
(f) Letters and other correspondence documenting any terms negotiated between the
assessee and the associated enterprise;
(g) Documents normally issued in connection with various transactions under the accounting
practices followed.

The information and documents specified shall be kept and maintained for a period of eight
years from the end of the relevant assessment year.

According to section 238, every person, having international transaction is required to furnish
information regarding international transaction in prescribed form. Such form is prescribed in
rule 75A.This information in prescribed form is to accompany annual tax return.

27.8 Assessment procedure of transfer pricing issues:

The chronology of processing of international transaction by tax authority is stated in section

236. According to section 236:

(a) DCT with prior approval of NBR refers a case to TPO for determination of arm’s length price.
(b) TPO will then on approval of NBR proceed to determine arm’s length price in relation to
international transaction. He will then serve notice to taxpayer to produce evidences in
support international transaction.
(c) TPO will then determine arm’s length price in relation to international transaction
considering evidences produced and all other related information he will send his report to
the DCT.
(d) DCT will then assess total income &taxes payable on the basis of report of TPO and all other
relevant matter.

394 Business Planning: Taxation & Compliance ICAB 2024

27.9 Penalties in transfer pricing regulation:

1. According to section 277 income tax authority may impose a penalty up to 1% of

international transaction for failing to furnish information or not maintaining records.
2. According to section 276 income tax authority may impose a penalty up to 1% of
international transaction for failing to comply with requisition of a notice.
3. According to section 278 income tax authority may impose a penalty up to 2% of the value
of such international transaction for non-submission of statement of international transaction
as per section 238.
4. According to section 279 income tax authority may impose a penalty up to BDT 3 lakh for
failing to furnish report of chartered accountant as per section 239.

Question no. 1

a) FruitCo, a company based in Bangladesh, produces a unique non-alcoholic beverage called

"FruitMountain." It sells this beverage to high-end nightclubs across Asia through associated
distributors, who report a gross margin of 10%. The market price for one can of "Fruit
Mountain" is USD 100.FruitCo does not sell the beverage to independent distributors in
Bangladesh or other Asian countries. There is a comparable beverage called "Nature Valley"
produced by JuiceCo, a local company in Bangladesh. The market price for one can of
"Nature Valley" is also USD 100. Distributors of "Nature Valley" report a gross margin of 12%
per can sold. Requirements:

i) Calculate Arm’s length price following Resale Price method. [Marks 4] C

ii) Highlight two key challenges under Resale Price method. [Marks 2] H
A
b) Khidmah and Pious, based in UAE, brews a very exclusive non-alcoholic beverage called
P
“the Miarge”. It sells this beverage to high-end clubs and restaurants across the Middle east
T
and Asia via associated distributors. The market price for one can of “the Mirage” is USD 20
E
in UAE. Khidmah and Pious is contemplating to incorporate a subsidiary in Bangladesh to
import and distribute its product in Bangladesh. There are comparable distributors in UAE
R
that sell “the Cheers”. This is a competing alcoholic beverage produced by Jinn & Juice, a
company based in the Netherlands. The market price for one can of “the Cheers” in UAE is
also USD 20. Distributors of the Cheers report gross profit of 5% per can across middle east 27
and Asia. Price of one can of “the Cheers” in Bangladesh is BDT 3,000. Customs duty in
Bangladesh per can is BDT 310.

Requirement: Propose an arm’s length import price per can for Bangladesh subsidiary of
Khidmah and Pious adopting resale price method. [Marks 3]

c) Rising Construction Co. Ltd. is a construction company of China and established a branch
office in Bangladesh. It has won a river bank construction project floated by Bangladesh
Water Development Board. Due to the ongoing crisis of foreign currency in Bangladesh, the
head office of the branch paid a designing fee of USD 2,000,000 for the project from its own
fund to an independent Chinese designing firm. The head office would recover it from the
branch at actual cost (i.e. without any profit) when the branch would be able to pay the same
in USD. The branch recognized a designing fee expense and corresponding liability to its
head office in its financial statements.

ICAB 2024 Transfer pricing 395

 Requirement: Suggest the appropriate TP method and code for this transaction for reporting it
in the statement of international transactions of the branch as supported by logics you think fit.

Answer to the Question 1(a) (i):

To determine the arm's length transfer price for the supply of "Fruit Mountain" to the associated
distributors in Bangladesh, we can consider comparable distributors of a competing non-
alcoholic beverage in the local market. Based on this information, we can use the Resale Price
Method (RPM) to determine the arm's length transfer price for "Fruit Mountain" in Bangladesh.
The RPM compares the resale price charged by the distributors to the end customers to an
appropriate gross margin percentage. Hence,

Arm's Length Resale Price = Market Price - Gross Margin

Arm's Length Resale Price = USD 100 - USD 12
Arm's Length Resale Price = USD 88

Answer to the Question 1(a) (ii):

• Identifying Comparable Transactions: Finding reliable and comparable transactions

between unrelated parties can be challenging, especially if the product or service being sold
is unique or specialized. It requires careful analysis and consideration of various factors such
as product characteristics, market conditions, and contractual terms.

• Determining the Appropriate Resale Price Margin: Calculating the appropriate resale price
margin can be complex. It involves analyzing comparable transactions to determine the
range of resale price margins observed in the market. Factors such as industry-specific
characteristics, economic conditions, and functions performed by the distributor need to be
considered.

Answer to the Question 1(b):

Particulars Amounts in BDT

Market price of one can of the Cheers 3,000
Gross margin of associated distributors (150)
Customs duty imposable at import stage (310)
Arm's length import price 2,540

Answer to the Question 1(c):

The core objective of transfer pricing regulations is to impose tax based on fair price of
transactions between associated enterprises. Since the branch would reimburse the designing
fee to the head office at actual cost i.e. without any profit, the transaction is already in arm’s
length. No specific transfer pricing method is to applied to determine fair price of the
transaction. The appropriate TP method would be the “Other method” as mentioned in Section
235(‘Cha’) of the ITA, 2023 and for the purpose of reporting the transaction in the statement of
international transactions of the branch, the TPM code would be 6.

Question no 2

XYZ Bangladesh Ltd. a 100% Chinese equity-held ‘A’ category private company, operating as
export-oriented(deemed) security label products factory in Savar EPZ and enjoying 10-year tax
holiday, have related party transactions. You are an ACA, working as deputy to the CA Firm’s tax

396 Business Planning: Taxation & Compliance ICAB 2024

 partner who specializes in TP. Tax partner advised XYZ as to the appropriate methods for pricing
international transactions. He filed tax return of XYZ Bangladesh Ltd. for income year ended
30.06.2024 together with Statement u/s 238 of the Act, Rule 75A; selected extracts are:

Particulars of International Transactions (XYZ Bangladesh Ltd. For y/e 30.06.2024)

PART – I Tangible property of revenue and capital nature transactions

Expense TPM Revenue TPM

Item %
(‘000) Code (‘000) Code
Export of F/G 15% 150,000 TNMM
Import of R/M 50,000 OTHER 10%
Import of Machineries 200,000 TNMM 75%
Service-related Expense TPM % Revenue TPM
transactions Code Code

Management Fee 10,000 TNMM 100%

PART – II

Interest free loans, advances and investments (figures in ‘000 taka)

Item Opening Increase Decrease Closing
Balance Balance
Due to Assessee ---- 5,000 --- 5,000
Current accounts and similar items (figures in thousand taka)
Item Opening Increase Decrease Closing
C
Balance Balance
Accounts Payable 35,000 50,000 -- 85,000
H
A
Accounts Receivable 65,000 50,000 115,000 P
T
E
Exports of F/G to AE are same „label products‟. The import of R/M includes semi-finished label R
papers of high specifications which are available only with one Chinese supplier; the AE in
question has global volume contract with Chinese Supplier. Machineries include state-of-the-art
printers from proprietary sources. Management fee is shared cost of technical team sitting in 27
China under a Management Service Agreement with assessee. „Due to Assessee‟ includes
remittance made to Paris trading office of the company to support its initial set-up cost (opened
in June 2022). This new trading office is set up to secure nominations for its label products from
EU customers who source apparel products from Bangladeshi suppliers. DCT referred the case
for y/e 30.06.2024 to TPO u/s 236. TPO served a notice to XYZ Bangladesh Ltd. u/s 236 (2)
requiring to explain:

1. Why assessee relied on TNMM and ‘OTHER’ method for reported/selected transactions with
AEs?
2. Why TP adjustment should not be given on management fee paid to AE in Shanghai?
3. Why TP adjustment should not be given on interest-free remittance to AE in Paris?
4. Why TP adjustment should not be given for interest on overdue receivable from AEs?

ICAB 2024 Transfer pricing 397

 Long working with TP specialist tax partner brought you experience on TP advisory. NBR formed
TP cell comprising of proven high-caliber officials from department. TP regulations are new in
Bangladesh. NBR advertised for a short-term consultant (preferably CA) to seek technical
supports to the cell in these initial days. You got this one-year engagement at NBR to work as
Consultant at TP Cell, to begin from August, 2024.
Requirements:
a) Your tax partner wants you to draft explanations in ref to TPO notice. Cover reasons why
‘TNMM’ and ‘OTHER’ methods are used by XYZ Ltd in its reported transactions as opposed
to other methods.
b) Draft explanation for your partner covering the reasons as to why TP adjustments should not
be given for reported management fee, interest-free remittance and overdue receivable.
During incumbency at NBR, you will support TP team with your findings identifying potential
adjustments involving critical returns. Assume, you are tasked by TP head to provide findings on
a return filed by your ex-Tax partner. Answer your position covering ethical threats, if any, and
your possible actions.
Solution 2(a)
A TP study on XYZ Ltd was carried out, ready for submission to tax authority. At XYZ Ltd.,
operating margin is taken as profit level indicator (PLI) when using TNMM method. Rule 70(1) of
the IT Rules, 1984 was taken as guidance and thus the selected methods were decided for given
international transactions. TNMM uses objective measures of profitability, called Profit Level
Indicators (PLI) to evaluate whether the price of controlled transactions is at arm’s length and so
it was taken as appropriate for finished goods sale (export), raw material import and
Management fee. At XYZ Ltd. when using Transactional net margin method (TNMM) for
determining selling price of ‘label products’, PBIT margin on export sales from sale transactions
with AEs were compared with the PBIT margin on sale from export transaction with unrelated
customers. Adjustments for difference in functional analysis between transactions with AEs and
unrelated parties were also given.
Similarly, for purchase of materials from AEs, PBIT margin on cost from transactions of purchase
raw material transactions with AEs were compared with the PBIT margin on cost from
transactions of purchase raw material transactions with unrelated suppliers. As the raw materials
semi-finished, of high specifications and they are sourced from selected Chinese suppliers
under the global volume contract with AEs in Shanghai, the scope of comparability with
uncontrolled transactions were less. However, as the r/m is procured under global volume
contract with AE, the price of raw material received by XYZ Ltd. was already competitive.
TNMM was used for Management fee also on the ground of simplicity. When doing this, the PBIT
margin-Management fee to AE at XYZ Ltd. was compared with the PBIT margin-Management
fee relationship practiced by unrelated competitors in the same industry sector (Label Products).
Such comparison revealed the size of management fee at XYZ is lower than that practiced at
uncontrolled competitors.
Application of TNMM for export sale, r/m purchase and management fee thus made the
operations simple, objective and so the prices are duly in arm’s length. Net margin under TNMM
is less affected by transactional difference than in the case with price under CUP method. Net
margin is also a better indicator than gross margin which is used in the case of CPM and RPM.
PSM better suits service industry.
Use of ‘OTHER’ method was used for transactions with AEs for purchase of machineries. These
are state-of-the art machines, purchased from proprietary sources to maintain the quality of label
products. As the source is ‘proprietary’ and having no other alternative, no ALP pricing methods

398 Business Planning: Taxation & Compliance ICAB 2024

 could be applied but the price of the supplier was taken as it is, i.e., the method falls under
‘OTHER’. Section 235(1)(f) allows using ‘any other method’ where it can be demonstrated that
none of the specific five methods can be reasonably applied to determine ALP for given
international transaction. XYZ had to resort to section 235 for ‘machinery import from proprietary
source.

Solution 2(b)

Rule 70(1) was duly complied when determining the ALP methods for the three items of
international transactions. Further grounds why TP adjustments should not be given on those
three items:

Management Fee to AE in Shanghai, China

• Management fee is paid to AE using TNMM method which is the most reliable measure on
merit, duly being backed by Rule 70(1) of the IT Act.
• Management fee paid is still lower than size of the item practiced by the uncontrolled
competitors in the same industry of label products export, revealed by TNMM approach.
• Pricing method has been determined after a detailed TP study, submitted with tax return.
• The payment is well documented and the amount within the limit of section 55(e) of
ITA,2023.
• The amount paid to AE is towards sharing of the cost of the technical team in China (head
quarter), well documented, and under a formalized agreement duly approved by BIDA. The
management fee recovers proportionate cost of AE without any savings, as revealed by TP
study FAR analysis.

Remittance to AE in Paris C
H
• New trading office in Paris was set up to market, coordinate and secure nominations of the A
EU retainers for the assessee’s label products, which will be a direct increase of assessee’s P
export.
T
• AE in Paris, being non-resident, cannot make any local borrowing there. The only option for
E
initial set up cost was funding from the assessee. This remittance is also approved by
R
Bangladesh Bank.
• Fund remitted to start the set-up could otherwise be treated as ‘capital expenditure’ whereas
the remittance has been recognized as repayable loan to AE. This means better protection
to the assessee. 27
• Financial support made to AE comes under the ordinary business practice of assessee’s
operations. This is a one-off assistance and amount is not very large. Assessee’s business is
not ‘lending’. Therefore, there cannot be any interest charge on the funds remitted.
• The decision to support AE in Paris was duly approved by the BOD for greater business
cause.

Receivable from AE

• Receivable with AE is in the ordinary course of assessee’s business operations, not

extraordinary.
• Receivable is not alone with AE, other parties also have receivable balance as per payment
term. Such receivable is unavoidable in business.
• The annual increase figure of receivable is for an amount which is equally off-set by the
payable to AE. The net effect on assessee is well balanced.
• There is no term of interest charge on the receivable with the AEs when sale was done.

ICAB 2024 Transfer pricing 399

 Solution 2(c)

As NBR consultant, I shall be in the character of a PAIB. Working on a file of my ex-tax partner’s
client at my incumbency at TP cell may be an issue of ‘conflict of interest’ which may create
threats to objectivity and other fundamental principles, such as, integrity, confidentiality and
good reputation of my profession. I shall be subject to NBR contractual terms, policies and
procedure of NBR and the Govt. Secrecy law. I shall be exposed to ‘familiarity threats’ for my
long association with ex-tax partner plus a threat of ‘self-interest’ for the likely slide of my image
if I fail to do a just job at TP cell.

The threats are significant. No safeguard seems to be relevant. I have to a firm position. As a TP
Cell consultant, I shall draw an ethical wall both in fact and appearance under the circumstances.
I shall remain objective, confidential at all times and shall not allow any undue influence
including any familiarity pressure in my mind to override my professional judgment. I shall not
allow conflict of interest but shall disclose to my TP cell boss the fact of my relationship with ex-
tax partner and the tasked file in hand. If I am still tasked to do the job, on merit, I shall bring
change in my conduct with my ex-tax partner during my incumbency at TP Cell. Major threats as
mentioned could thereby be managed well.

Question no 3

A Bangladeshi entity X Ltd, purchases certain finished goods from an associated enterprise in
Singapore Y Pvt. Ltd, which it sold to an independent enterprise in Bangladesh XY Ltd at Tk.
575,000 (inclusive of 15% VAT). Another entity BB Ltd in Bangladesh around same time procured
similar goods from an independent enterprise in Singapore SS Pvt. Ltd at Tk. 440,000 (inclusive
recoverable VAT of Tk. 40,000), which was sold to another Independent party ZA Ltd at Tk.
690,000 (inclusive of 15% VAT) with an associated freight cost Tk. 35,000 and insurance cost of
Tk. 15,000.

Required:

i) Determine the most appropriate method for determining the Arm’s length price and explain
why this should be applied.
ii) Compute the Arm’s length purchase price of X Ltd.

Answer to the question no-3

Requirement: 3 (i)

Most appropriate method for this transaction would be Transactional Net Margin Method
(TNMM).

The reasons behind selecting TNMM as the most appropriate method:

 General, marketing and administrative expenses are like establishment costs and therefore
they do not directly affect the prices of the goods in the market
 TNMM tests the net margins of the tested party as oppose to gross margins in case of Resale
Price Method RPM or Cost Plus Method
 TNMM becomes inevitable where the assessee has interlinked transactions of purchase and
sale from/to related parties where they cannot be benchmarked isolated.

400 Business Planning: Taxation & Compliance ICAB 2024

 Requirement: 3 (ii)

Independent Enterprise transaction:

Description Amount (Taka)

Sales by BB Ltd excluding VAT (690,000X (100/115) 600,000
Material cost (purchased from independent enterprise):
Total cost including VAT 440,000
(-) Recoverable VAT 40,000
Material cost without VAT 400,000
Freight 35,000
Insurance 15,000
Operating profit 150,000
Operating Profit in % 25%

Arm’s Length price computation of X Ltd:

Description Amount
Sales by X Ltd to independent enterprise excluding VAT 500,000
(575,000X (100/115)
(-) Operating profit margin @ 25% 125,000
Arm’s length purchase price from associated enterprise 375,000

Question no 4 (A) [CUP Method]

Bio Chem Limited (A German Company) sold 500 vaccines to its subsidiary Bio Chem BD Limited
(Bangladeshi Company) for $200 each on CIF (Cost, Insurance & Freight) basis. It sells the
C
vaccine to Beximco Pharma in Bangladesh also at $190 each on FOB basis. Transportation cost
H
from Germany to Chittagong port is $3.5 for each vaccine. Insurance cost for the transportation
A
is $2500 for all 500 vaccines. The subsidiary in Bangladesh incurs additional cost of $5.5 for
P
packaging of the vaccine while the parent takes the responsibility for packaging to other
subsidiaries for which the cost is $15 for each vaccine. T
E
Please compute the Arm's Length price for the vaccine in Bangladesh and the required R
adjustment required.

Solution 4 (A): 27

Arm's length price determination for transaction between Parent and Subsidiary

Particulars Amount
Unit price charged to Bio chem BD Limited (AE) $ 200.00

Unit price charged to Independent Customer (Third party) $ 190.00

Add: Cost of Transportation $ 3.50
Add: Cost of Insurance $ 5.00
Adjusted unit price* $ 198.50

Arm's length price per unit using internal CUP $ 198.50

Transfer pricing adjustment in US$ (500*($200-$198.50)) $ 750.00

Transfer pricing adjustment in BDT (1 US$ = 110 Taka) BDT 82,500

ICAB 2024 Transfer pricing 401

 Question 4 (B):

External CUP

The German entity sells the same vaccine to other subsidiaries at the following price:

Market Selling Price (Vaccines)

USA $ 225.00
China $ 215.00
Brazil $ 210.00

Solution 4 (B):

Arm's length price determination for transaction between Parent and Subsidiary

There is no specific guidance on how to determine External CUP using external price when
multiple prices are available. Common practice is using average of selling prices. Using average
selling price of the above three market:

Particulars Amount
Average price per unit using external CUP $ 216.67
Packing cost incurred by parent $ 15.00
Arm's length price per unit using external CUP (Average Price) $ 201.67

Unit price charged to Bio chem BD Limited (AE) $ 200.00

Less: Packaging Cost (B) $ 5.50
Adjusted unit price charged to Bio chem BD Limited by AE (A-B) $ 194.50

Transfer Pricing adjustment is not required because AE charged lower price than the external
selling prices of the same product to other subsidiaries.

Resale Price Method (RPM)

Question 5:

Ryans Bangladesh Limited trades IT related product only. Ryans purchases all its laptop from
Dell Limited (A related Party). It also purchases its laptop from HP Limited but without warranty.
Warranty cost for laptop is BDT 1,500.

Particulars Dell Limited (AE) HP Limited

Purchase price of Ryans 15,000 19,000
Selling price of Ryan 18,000 26,000
Other expenses 1,000 1,500

Calculate the arm's length price of each laptop it procures from the related party.

402 Business Planning: Taxation & Compliance ICAB 2024

 Solution 5:

Details of the Gross Profit Margin is as follows:

Particulars Dell Limited (AE) HP Limited

Selling price of Ryan 18,000 26,000
Less: Purchase price of Ryans 15,000 19,000
Less: Other expenses 1,000 1,500
Gross Margin 2,000 5,500
Gross Margin on Sales 11% 21%

Calculation of ALP is as follow:

Particulars Amount (Tk)

Selling price of Ryan 18,000
Less: Other expenses 1,000
Less: Arm's length resale margin @21% 3,780
Add: Warranty Cost 1,500
Adjusted Arm's Length Price 14,720
Price Paid to AE 15,000
Adjustment per product 280

Cost Plus Method (CPM)

Question 6:
C
Executive Cover Limited (ECL) manufactures I-phone cases for its associated enterprise. IPhone
H
cases are manufactured by several other companies including Candy Casing Limited (CCL). Both
A
CCL & ECL manufactures the same product
P
Details of the transactions of both the parties are given below: T
E
Particulars ECL CCL R
Selling price 12,000 13,000
Manufacturing cost 8,000 8,250
Cost of packaging - 250 27

ECL manufactures 15,000 I-phone cases for its AE during the year. Please calculate the arm's
length price of each I-phone cases and required adjustment.

Solution 6:

Details of the Gross Profit Margin are as follows:

Particulars ECL CCL

Selling price 12,000 13,000
Less: Manufacturing cost 8,000 8,250
Less: Cost of packaging Nil 250
Gross Margin 4,000 4,500
Total Cost 8,000 8,500
Mark up on cost 50% 53%

ICAB 2024 Transfer pricing 403

 Calculation of ALP is as follow:

Particulars ECL
Total Cost 8,000
Add: Arm's length Mark Up @53% 4,240
Adjusted Arm's Length Price 12,240
Selling Price to AE 12,000
Adjustment per I-phone Case 240
Total Transfer Pricing adjustment 3,600,000

Profit Split Method

Question 7:

Kevlin Private Limited of India sells all of its manufactured goods to Kevlin Private Bangladesh
Limited (AE of KPL India) and after further processing KPL (Bangladesh) sells those products to
the customers all over Bangladesh.

Profit & Loss Statement of KPL (India) and KPL (Bangladesh)

Particulars KPL(India) KPL(Bangladesh)

Sales $55 $ 100
Purchase $ (10) $ (55)
Manufacturing costs $ (15) $ (20)
Gross Profit $ 30 $ 25
Research & Development $ (15) $ (10)
Operating expenses $ (10) $ (10)
Operating Profit $5 $5

It is established, for both jurisdictions, that third-party comparable manufacturers without

unique and valuable intangibles earn a return on manufacturing costs (excluding purchases) of
10% (ratio of net profit to the direct and indirect costs of manufacturing).

Recalculate Arm's length profit of KPL (India) and KPL (Bangladesh) using profit split method.

Solution 7:

Calculation of residual profit:

Particulars KPL (India) KPL (Bangladesh) Total

Total operating profit earned by KPL (India & $ 5.00 $ 5.00 $ 10.00
Bangladesh)
Less: Return on manufacturing costs $ 1.50 $ 2.00 $ 3.50
(Manufacturing cost x 10%)
Residual profit $ 3.50 $ 3.00 $ 6.50
Proportion of R & D Cost $15 $ 10 $ 25.00
Percentage of Proportion of R&D Expenses 60% 40%
(R&D expense / Total R & D Expense x 100%)

Calculation of Residual Profit (Operating Profit) $ 5.40 $ 4.60

(Return on Manufacturing cost + Proportion of R&D Expense X Total Residual Profit)

404 Business Planning: Taxation & Compliance ICAB 2024

 Adjusted Profit & Loss Statement of KPL (India) and KPL (Bangladesh)

Particulars KPL (India) KPL (Bangladesh)

Sales $ 55.40 $ 100.00
Purchase $ (10.00) $ (55.40)
Manufacturing costs $ (15.00) $ (20.00)
Gross Profit $ 30.40 $ 24.60
R&D $ (15.00) $ (10.00)
Operating expenses $ (10.00) $ (10.00)
Operating Profit $ 5.40 $ 4.60

Transaction Net Margin Method (TNMM):

Question 8:

Tiger IT Bangladesh Limited (TIL-BD) procures software (Data X) from Gameloft Singapore
Limited at BDT 1,500. The company incurs promotional expense of BDT 600 and sells the
software to its customer at BDT 3,000.

Tiger IT Bangladesh Limited (TIL-BD) also procures its software (Foto Z) from Tiger IT UK Limited
(TIL-UK) at BDT 700. The company incurs promotional expense of BDT 200 per software and
sells the software at BDT 1,200 to its customer.

Please find the arm's length price for the software assuming the difference in product is
immaterial.
C
H
Solution 8:
A
Computation of Net Profit Margin P
T
Particulars Data X E
Sales Price BDT 3,000 R
Less: Purchase price BDT 1,500
Less: Promotional Expense BDT600
27
Net Profit BDT 900
Net Profit Margin Ration (% of sale) 30%

Calculation of ALP is as follow:

Particulars Amount
Sales price of Foto Z (A) BDT 1,200
Net Profit Margin Ratio 30%
Net Profit Margin (B) [A X Net Profit Margin Ratio] BDT 360
Total Cost (A-B) BDT 840
Less: Promotional Expense BDT 200
Adjusted Arm's Length Price per software BDT 640
Price Paid to AE BDT 700
Transfer pricing adjustment per software BDT 60

ICAB 2024 Transfer pricing 405

 Question 9:

A company (ABC Ltd) has received interest free loan of BDT 15,000,000 from its parent (XYZ Ltd)
as working capital on 10 December 2022. The company repaid the loan on 01 May 2023. The
financial year of the company is from July 2023 to June 2024.

Now, the group CFO is in the view that, the TP return is not required to file as the there is no
closing balance in the financial statements. He approached your tax partner for opinion on
whether this need to be file or not.

You are required to prepare a memorandum for the tax partner for the above queries.

Solution 9:

To,
Tax Partner.
ABC & Co.
Chartered Accountants

Subject: Memorandum on filing Statement of International Transactions under Section 233(5)

Dear Sir,

As per Section 233 (5), international transaction means in the nature of Purchase, Sale, Lease of
tangible or intangible property, provision of services, lending money, borrowing of money
between associated enterprises.

As the ABC Limited (subsidiary) received interest free loan from XYZ limited (Parent) it falls under
international transaction for which TP return must be filed as per section 233(5). Though there is
no closing Balance but as the transaction incurred during this year, it must be reported under
Part-II Interest Free loan, advances and investments.

However, as the transaction for the year is less than BDT 30,000,000, so no certificate from a
qualified chartered accountant is required. Also, there is no need to mention transfer pricing
method rather it can be considered only as disclosure.

Question 10:

A German based research institute developed a vaccine for protecting the children from harmful
seasonal flue which was not developed by any other entity in the world. The German based
institute will supply the vaccine to Bangladesh at fixed value of USD 250, the rate is the same for
the supply to other country by the institute.

Now, the entity wants to open a subsidiary in Bangladesh and approaches your firm for the
transfer pricing implication and method.

You are required to prepare a memorandum for the tax partner for the above queries.

406 Business Planning: Taxation & Compliance ICAB 2024

 Solution 10:

To,
Tax Partner.
ABC & Co.
Chartered Accountants

Subject: Memorandum on Transfer Pricing Method and Implication for newly developed
vaccine

Dear Sir,

As per section 238, the subsidiary needs to file the TP return for purchasing the vaccine from its
parent based in Germany.

In case of determining the transfer pricing method, we need to take into the fact that, this is a
very unusual product (Vaccine) and the vaccine is being sold by the institute to all other countries
at a fixed price. As the subsidiary will act as only as a distributor and resale the product, the
Transfer pricing method would be “Comparable uncontrolled Price” TPM code: 01”.

Also, as the vaccine is supplied to all the countries of the world at the same rate ($250), there
will not be any transfer pricing adjustment.

Question No.11:

Expo Ltd. is a foreign subsidiary company of BGD Ltd. The Company sells air conditioners to
Expo Ltd. at a price of Tk. 40,000 each for sale to its dealers in Vietnam. In other States, BGD C
Ltd. is directly selling to their dealers at Tk. 45,000 with a warranty of two years (Tk. 3,500 for H
each air conditioner). Expo Ltd. does not offer such warranty. Quantity sold to Expo Ltd. is A
10,000 units and to dealers of BGD Ltd. is 5,000 units. Discuss the method to be applied to P
arrive at the Arm’s Length Price (ALP) and compute the ALP. How is the assessment of BGD Ltd. T
going to be affected? E
R
Solution 11:

Expo Ltd. and BGD Ltd. are associated enterprise as Expo Ltd is subsidiary of BGD Ltd.
27
Comparable product (Air Conditioner) is sold to dealers (Uncontrolled transactions). Hence, in
given circumstances Comparable Uncontrolled Price (CUP) Method for determining arm’s
length price can be applied.

Particulars Amount (Tk.)

Sale price charged to Dealers of BGD Ltd. 45,000
Less cost of warranty included in price 3,500
Arm’s length price 41,500
Actual price paid by Expo Ltd. to BGD Ltd. 40,000
Difference per unit 1,500 1,500
Addition required to be made in the computations of the total income 15,000,000
of BGD Ltd. (1500 x 10,000 units)

Tk. 15,000,000 is to be shown as adjustment for Arm’s length price for international transaction
u/s 235.
Question No.12:

ICAB 2024 Transfer pricing 407

 TTT Ltd. Singapore holds 27 % shares in Blackrock Ltd. Bangladesh. Further, Tihami Ltd. USA
holds 32% shares in Blackrock Ltd. Bangladesh. Blackrock Ltd. Bangladesh develops software
and does both onsite and offsite consultancies. Tihami Ltd USA has a worldwide presence.

Tihami Ltd. USA received an order from SA Ltd. USA for developing a software product. In order
to execute the same, TTT Ltd. Singapore, Tihami Ltd. USA & Blackrock Ltd. Bangladesh has
contributed integrally to the development of the software product. Tihami Ltd USA finally
delivers the product to SA Ltd. USA and receives consideration of $50,000.

Tihami Ltd. USA in turn pays to TTT Ltd. Singapore and Blackrock Ltd. Bangladesh a sum of
$10,000 and $12,000 respectively to keeps the balance to itself. In the entire transaction a profit
of $10,000 is earned. Blackrock Ltd. Bangladesh incurred total cost of $9500 in executing its
functions relating to above project.

On the basis of functions performed, risks assumed and assets employed, the relative
contribution may be taken at 50%, 20 %, 30% for Blackrock Ltd. Bangladesh, TTT Ltd. Singapore,
Tihami Ltd USA respectively. Calculate the arm's length price and the profit that requires
adjustment.

Solution 12: The ALP shall be determined as under:

Particulars Amount in USD

Price charged by Tihami Ltd USA to SA Ltd. USA $ 50,000
Blackrock Ltd. Bangladesh’s share of revenue $ 12,000
TTT Ltd. Singapore’s share of revenue $ 10,000
Tihami Ltd USA’s share of revenue $ 28,000
Combined total profits $ 10,000
Evaluation of relative contribution:
Blackrock Ltd. Bangladesh 50% of $10,000 $ 5,000
TTT Ltd. Singapore 20% of $10,000 $ 2,000
Tihami Ltd USA 30% of $10,000 $ 3,000
Total cost of Blackrock Ltd. Bangladesh $ 9,500
Income of Blackrock Ltd. Bangladesh on ALP (9,500+ 5000) $ 14,500
Actual revenue of Blackrock Ltd. Bangladesh $ 12,000
Increased income in USD $ 2,500
Increased income in BDT (2,500 x 110) BDT 275,000

408 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 28
Refunds

Introduction

Examination context

Topic list

28.1 Direct refund

28.2 Entitlement to refund
28.3 Claim of refund for deceased or disabled persons
28.4 Correctness of assessment not to be questioned
28.5 Refund on the basis of appeal order
28.6 Form of claim and limitation
28.7 Adjustment of refund against tax
 Introduction

Learning objectives

 Recognize the requirement to issue refund voucher

 Define the entitlement of refund.
 Recognize the claim of refund for deceased or disabled persons
 Define the refund on the basis of orders in appeal
 Calculation of interest on delayed refund
 Define the adjustment of refund against tax

Practical significance

When any amount of tax is refundable as per tax law the DCT shall issue refund voucher unless
such refund is set off against tax. The refund shall be entitled when the amount of tax paid
exceeds the properly chargeable tax or when income of one person included in income of
another person.

Where through death, incapacity, insolvency, liquidation or other cause, a person, is unable to
claim or receive any refund due to him, the legal representative shall be entitled that refund. In
case of refund on the basis of orders in appeal, the amount is payable within 30 days. Interest
is also payable if there is delay in payment of refund more than 2 months from the claim of
refund. In certain cases, the refundable amount can be adjusted against tax.

Stop and think

Excess payment of tax is refundable or adjustable against tax. Do you think that refundable tax
can be received or adjusted even in some cases with interest?

Working context

Excess payment of tax by a taxpayer may be incurred in many ways. Refund of such tax is a legal
right for that taxpayer. Accountants support to calculate and claim the refundable tax on behalf
and in favour of the clients that is sometime very essential.

Detailed knowledge on the refund procedures can help accountants to provide this service to
their clients.

410 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Identify the requirement to issue refund voucher.

 Mentioned who are entitled to refund.
 Recognize the claim of refund for deceased or disabled persons.
 Recognize the refund on the basis of appeal order.
 Calculate interest on delayed refund.
 Mention how refund is adjustable against tax.

Question practice

For question practice on these topics, go to the suggested answers covering this chapter.

Examiner's comments on how students should tackle questions

Candidates have historically prepared well for this area of the syllabus. Better prepared
candidates are able to perform well in the more difficult areas.

28 REFUNDS
Section overview

 DCT shall issue refund voucher when any amount of tax is refundable unless such refund is
adjustable against tax.
 Legal representative of a disable person shall be entitled to get refund.
 Refund on the basis of appeal order is payable within 60 days of receiving such revised order
from the DCT.
 Interest is also payable in case of delay in payment of refund.
 Refundable amount can be adjusted against tax.

28.1 Direct refund : Section 215(3):

Irrespective of any provisions within this law or any other legislation, in cases where a return is C
filed under self-assessment, the DCT shall execute electronic transfers to the taxpayers bank H
account within 60 days for any refunds resulting from the return processing carried out under A
the self-assessment method. P
T
28.2 Entitlement to refund: Section 224 E
R
Where a person can demonstrate to the DCT that the tax amount paid by him or on his behalf
or deemed to be paid by him or on his behalf, for a given year exceeds the rightful amount
chargeable under the Act for that specific year, is eligible to receive a refund for the surplus
amount. 28

In a situation where income of a person is encompassed within the total income of another
person through any provision of the Act, solely the latter person shall be entitled to claim a
refund concerning that particular income.

ICAB 2024 Refunds 411

 28.3 Claim of refund for deceased or disabled persons: Section 227

Where through death, incapacity, insolvency, liquidation or other cause, a person, is unable to
claim or receive any refund due to him, his legal representative, or the trustee, guardian or
receiver, as the case may be, shall entitled to claim or receive such refund for the benefit of such
person or estate.

28.4 Correctness of assessment etc. not to be questioned: Section 228

In any claim for refund under this chapter, it shall not be open to the claimant to question the
correctness or validity of any assessment or other matter which has become final and conclusive
or to ask for a review of the same, and the claimant shall not be entitled to any relief on any such
issue raised except refund of the tax paid in excess.

28.5 Refund on the basis of appeal order: Section 229

Where, as a result of any order passed in appeal or other proceeding under this Act, refund of
any amount becomes due to an assessee, the DCT shall refund the amount, unless set off against
tax or treated as payment of tax as per provisions of section 225 to the assessee, within 60 days
from the date on which the refund has become due without his having to make any claim in that
behalf.

28.6 Claim for refund: Section 226

If a refund arises through legal proceedings or any official order, and it is not electronically
transferred to the taxpayer's bank account, the taxpayer has the option to claim the said refund
according to the prescribed procedure. Form prescribed under Rule 36 for the application for
the return of income tax.

28.7 Adjustment of refund against tax: Section 225

Where, according to the provisions in this Act, the Income Tax Ordinance, 1984, the Gift-tax Act,
1990, or the Wealth-tax Act, 1963, there is a determined refund or repayment owed to a person,
the entirety or a portion of the owed amount might be offset against the tax liability of that
person as per this Act.

Refunds that are utilized to settle outstanding tax obligations shall be considered as tax refunds
issued to the taxpayer, and the DCT will duly document this adjustment.

Question

A refund of tax becomes due to an assessee on reduction of total income in appeal filed by him,
but the DCT does not take any action to make the refund. What are the remedies open to the
assessee?

Answer

1. The aggrieved assessee can file appeal to the AJCT or the Commissioner (Appeals) against
the refusal of the DCT to make the refund.
2. The assessee can apply to the DCT to adjust the refundable amount against his arrear tax
demand, if any, u/s 226 of the Income Tax Act, 2023.

412 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 29
Appeal, Tribunal, reference,
Revision and ADR

Introduction

Examination context

Topic list

29.1 First appeal

29.2 Appeal against the order of Tax Recovery Officer (TRO)
29.3 Second appeal to Taxes Appellate Tribunal
29.4 Reference application to the High Court Division of the Supreme
Court
29.5 Summary of appeal and reference
29.6 Revision power of the Commissioner of Taxes
29.7 Alternative Dispute Resolution (ADR)

Self-assessment questions
 Introduction

Learning objectives

 Identify the conditions and procedures for different appeal, tribunal and references.
 Mention the different orders of tax authorities for which an assessee may be aggrieved.
 Define various appeals to the different appeal authorities in different situations.
 Identify the decisions or results of appeal come from different appeal stages.

Practical significance

An assessee not being a company or an assessee being a company in respect of certain cases
aggrieved by any order of a DCT or IJCT can appeal to the AJCT or the Commissioner (Appeals)
against such order. Appeal can also be made to the AJCT against the order of TRO.

An assessee may appeal to the Taxes Appellate Tribunal if he is aggrieved by an order of an

AJCT or the Commissioner (Appeals). The Taxes Appellate Tribunal may, after giving both the
parties an opportunity of being heard, pass such orders on the appeal as it thinks fit. The Taxes
Appellate Tribunal may dispose of the appeal if the appellant does not appear when the appeal
is called for hearing.

The assessee or the Commissioner may refer any question of law arising out of the order of the
Taxes Appellate Tribunal communicated to him to the High Court Division. The High Court
Division of the Supreme Court shall pass such orders as are necessary to dispose of the case in
conformity with the judgment delivered by it.

For the appeal and reference, the appellant need to comply with some conditions and maintain
some procedures to make his appeal valid.

Stop and think

The aggrieved parties in certain cases can appeal to the different appeal authorities. Do you
think that the appeal and reference procedures are enough to get the proper judgment by the
aggrieved parties under the Act?

Working context

The appeal and reference procedure under tax law is the most complex and risky area for the
aggrieved parties. The assessee being a client is sometimes very much required the service from
an accountant. Accountants being tax expert can provide the practical and useful advice and
service to their clients in such cases.

Detailed and reasonable knowledge on appeal and reference can help accountants to provide
practical service to their clients in this regard.

414 Business Planning: Taxation & Compliance ICAB 2024

 Examination context C
H
A
P
Exam requirements T
E
In the examination, candidates may be required to: R

 Identify the conditions for appeal made by the assessee against order of the DCT.
 Recognize the procedures of appeal before AJCT or the Commissioner (Appeals). 29
 Demonstrate the decision in appeal by the AJCT or the Commissioner (Appeals).
 Identify the appeal against order of the TRO
 Define the appeal to the Taxes Appellate Tribunal.
 Identify the disposal of appeal by the Taxes Appellate Tribunal.
 Define the reference to the High Court Division of the Supreme Court.
 Mention the decision of the High Court Division of the Supreme Court
 Identify the appeal to the Appellate Division of the Supreme Court against the judgment of
the High Court Division.

Question practice

For question practice on these topics, go to the suggested answers covering this chapter.

Examiner's comments on how students should tackle questions

Candidates have prepared well for this area of the syllabus.

29 APPEAL AND REFERENCE

Section overview

 There are different orders of tax authorities by which an assessee may be aggrieved.
 The aggrieved assessee can appeal to appropriate appeal forum
 The aggrieved tax authority can also file appeal in certain cases.
 Appeal can be filed to different appeal authorities including Taxes Appellate Tribunal
 Appeal can also be preferred to the High Court Division of the Supreme Court.
 There are some procedures of filing appeal including time limitation.
 Judgment by the AJCT or the Commissioner (Appeals) or Taxes Appellate Tribunal.
 The Taxes Appellate Tribunal can also dispose the appeal if the appellant does not appear
when the appeal is called for hearing.
 The High Court Division shall pass such orders as are necessary to dispose of the case in
conformity with the judgment delivered by it.
 The assessee can prefer application to the Alternative Dispute Resolution (ADR) instead of
appeal, Tribunal or Higher Court.

29.1 First appeal: Section 286, 287, 288 & 289

Any taxpayer aggrieved by the order of any income tax authority regarding the following matters
may appeal to the respective appellate tax authority i.e., Commissioner of Taxes (Appeals) and
Appellate Joint Commissioner of Taxes—

ICAB 2024 Appeal, Tribunal, reference, Revision and ADR 415

 (a) assessment of income;
(b) computation of tax liability or refund;
(c) set off or carry forward of loss;
(d) imposition of penalty or interest;
(e) charge and computation of surcharge or any other sum;
(f) credit of tax;
(g) payment of a refund.

Appeal in the following cases shall be made to the Commissioner of Taxes (Appeals):

(a) appeal by a company;

(b) appeal against an order under section 213;
(c) appeal against any order of adjustment or penalty involving international transactions.

No appeal in respect of an income which is computed as a share of the taxed income. Further,
no appeal where return has filled but the assessed tax has not been paid and where return has
not filled and 10% of tax as determined by DCT has not been paid. However, appeal may be
granted if tax paid before the filing of appeal with sufficient reasons.

Appeal under section 286 shall be filed in a prescribed form and manner along with a fee of BDT
200 and filed within 45 days from the date of serving demand notice in relation to any
assessment or penalty, and in other cases, from the date of an order is served. However,
appellate authority may admit an appeal after expiry of said period if satisfied by the reason for
delay.

Appellate authority shall fix a day and place for hearing and give notice to the appellant and the
DCT. The appellate authority may allow the appellant to go into any ground of appeal which was
not included earlier mistakenly, before or at the time of hearing. Appellate authority may enquire
or ask for particulars or direct further enquiry to be made by the DCT before disposing of appeal.
Appellate authority shall not admit any documents or evidence which was not produced before
the DCT unless satisfied with reasons.

Appellate income tax authority in disposing an appeal, may confirm, reduce, enhance, set aside
or annual the assessment or penalty or pass any order as he thinks fit. Order of appeal shall be
communicated to the appellant, DCT and Commissioner within 30 days of the date of passing
such order. An appeal shall be deemed to have been allowed if Appellate income tax authority
fails to make an order within 150 days from the end of the month of filing of appeal.

Question

Can the first appellate authority dismiss an appeal for non-appearance of the appellant on the
hearing date of appeal?

Answer

The first appellate authority is not empowered to dismiss an appeal for having the appellant
absent on the hearing date. The appellate authority should pass an appellate order on merit
after examination of the assessment records made available by the concerned DCT.

29.2 Appeal against order of Tax Recovery Officer (TRO): Section 290

Any person aggrieved by an order of the TRO under section 217 may, within 30 days from the
date of service of the order, appeal to the IJCT to whom the TRO is subordinate, and decision
of the IJCT on such appeal shall be final.

416 Business Planning: Taxation & Compliance ICAB 2024

29.3 Second appeal: Section 291 and 292
C
Appeal against the order of AJCT or the Commissioner of Taxes (Appeals) as the case may be H
filed with the Taxes Appellate Tribunal. A
P
Such appeal by an assessee must be filed, within 60 days of the communication of the appeal T
order, in the prescribed form accompanied by a fee of Tk. 1,000. In the case of appeal filed by E
an assessee the tax to be paid @10% of the amount representing difference between the taxes R
determined on the basis of the order of the AJCT or the CT (Appeals) and assessed tax.

However, on the basis of an application filed by the Assessee, the Commissioner of Taxes of the 29
relevant Zone of the Assessee, may reduce the requirement of paying such 10% disputed tax if
the grounds of application appear reasonable to him. Normally such ground can be ‘significant
distress/hardship’ for the assessee.

The DCT can file an appeal to the Taxes Appellate Tribunal with the prior approval of the
Commissioner of Taxes.

Appeal shall be deemed to have been allowed if Tribunal fails to deliver an order within 180
days from the end of the month of filing the appeal. However, if an additional member is
appointment to hear the case because of differences of opinion by the two members then the
period shall be 240 days.

The Taxes Appellate Tribunal shall communicate its order on the appeal to the assessee and to
the Commissioner of Taxes within 30 days from the date of such order.

Question

Can the Taxes Appellate Tribunal pass an order ex-parte for non-appearance of the appellant
on the hearing date of appeal?

Answer

If the appellant does not appear when the appeal is called for hearing, the Tribunal may dismiss
the appeal for default. If the appellant makes on application within 30 days of such order of
dismissal, for restoration of the appeal on the ground that notice of the appeal was not served
on him or that the service was not valid in law or that he was prevented by sufficient cause from
appearing on the hearing day and the Tribunal if satisfied, the order of dismissal shall be vacated
and a fresh date of appeal hearing be fixed and disposed of on merit.

29.4 Reference to the High Court and Appellate Division of the Supreme Court:
Section 293, 294 and 295

The assessee or the Commissioner may within 90 days from the date of receipt of the order of
the Taxes Appellate Tribunal refer to the High Court Division of the Supreme Court in the
prescribed form and manner, question of law arising out of the order of the tribunal. Provided
that no reference by an assessee shall be entertained unless the assessee has paid the following
tax at-

a. 15% of the difference between the tax as determined on the basis of the order of the Taxes
Appellate Tribunal and the assessed tax where tax demand does not exceed one million
taka;

ICAB 2024 Appeal, Tribunal, reference, Revision and ADR 417

 b. 25% of the difference between the taxes as determined on the basis of the order of the Taxes
Appellate Tribunal and the assessed tax where tax demand exceeds one million taka.

Provided that the Board may, on an application made in this behalf, modify or waive, in any case,
the requirement of such payment.

Section 293(3) has specified the documents need to be submitted along with the reference
application submitted to the High Court Division.

The High Court Division shall, upon hearing any case referred to it under this section, decide the
question of law raised thereby and shall deliver its judgment thereon stating the grounds on
which such decision is founded. The judgment of the Court shall be send to the Registrar to the
Appellate Tribunal which shall pass such orders as are necessary to dispose of the case in
conformity with the judgment.

It is important to note that notwithstanding a reference made under section 293, tax shall be
payable in accordance with the assessment made in the case unless recovery thereof has been
stayed by the High Court Division. Therefore, it shall be noted that while filing such reference
application by an assessee should also be made to stay the demand of disputed tax.

An appeal shall lie to the Appellate division against a judgment of the High Court Division if the
High Court Division certifies that the order to be fit for appeal to the Appellate Division. Provision
of the Code of Civil Procedure, 1908 relating to the appeals to the Appellate Division shall so far
as may be, apply in regard to the appeals under Section 295 in the like manner as they apply in
the case of appeals from decrees of the High Court Division.

29.5 Summary of appeal and reference

A close scrutiny of above discussions reveals the following situations for easy understanding:

Appeal against the

Appeal by Appeal to Time limit
order of -
Tax Recovery Officer Any person aggrieved Inspecting Joint Within 30 days
by an order of the /Additional
TRO Commissioner of Taxes
Deputy Commissioner Any aggrieved Appellate Within 45 days
of Taxes assessee, not being a Joint/Additional
company Commissioner of Taxes
Any partner Appellate Within 45 days
Joint/Additional
Commissioner of Taxes
Any aggrieved Commissioner of Taxes Within 45 days
assessee, being a (Appeals)
company
Inspecting any assessee Commissioner of Taxes Within 45 days
Joint/Additional aggrieved (Appeals)
Commissioner of Taxes

418 Business Planning: Taxation & Compliance ICAB 2024

 Appellate Any assessee or the Taxes Appellate Within 60 days
Joint/Additional Commissioner of Tribunal C
H
Commissioner of Taxes Taxes
or the Commissioner A
of Taxes (Appeals) P
T
Taxes Appellate The assessee or the High Court Division of Within 90 days
E
Tribunal Commissioner of the Supreme Court (for
R
Taxes reference only)

29.6 Revision power of the Commissioner of Taxes: Section 285 29

An assessee may also file revision petition before the Commissioner of Taxes within 60 days of
receipt of Order of the DCT or AJCT/AACT, who are subordinate to the Commissioner, on
payment of fees of taka 200 along with payment of assessed tax liability. Revision petition will
be deemed to have been allowed the Commissioner fails to make an order within 60 days from
the date of filing of the application for revision.

29.7 Alternative Dispute Resolution (ADR): Section 297

Any dispute of an assessee lying with any income tax authority, Taxes Appellate Tribunal or
Supreme Court may be resolved through ADR. Assessee can also go directly to the ADR against
the assessment or re-assessment done by the DCT. If the case in pending an Appeal, Tribunal
or Supreme Court then also an assessee can prefer ADR taking permission from the concerned
appeal forum. After obtaining such permission from the appeal forum, the appeal (both from
assessee and department) shall remain stayed during the ADR negotiation process.

Procedure to file application to ADR:

 4(four) set of application in the prescribed form shall have to be submitted to the respective
appeal authority.
 Fee Tk. 500/- per year is to be paid and copy of which is to be attached with the ADR
application.
 Application for ADR is to be filed within 30 days from the date of receiving demand notice
or the date of receiving permission from the appeal authority /court as the case may be.
 Where the case is under process at appeal/tribunal/court, then the copy of permission is to
be attached with the application of ADR.
 Assessee shall not be eligible for application to ADR if he does not file return of income for
the concerned year and does not pay tax as per return.

Procedure of disposal by the ADR:

(1) Board will nominate a facilitator from the panel of facilitators and convey it to the applicant,
facilitator and the concerned Commissioner of Taxes. Board may, however, change the
facilitator if any objection raised by the applicant or by the tax department.

(2) Upon receiving the application of ADR, the Facilitator shall forward a copy of the application
to the respective DCT and call for his opinion on the grounds of the application and also
whether the conditions of return submission and tax payment as per return by the assessee
have been complied with.

ICAB 2024 Appeal, Tribunal, reference, Revision and ADR 419

 (3) If the DCT fails to give his opinion regarding fulfillment of the above-mentioned conditions
within 5 working days from receiving the copy, the Facilitator may deem that the conditions
thereto have been fulfilled.

Panel of Facilitators:

NBR will form a panel of facilitators. The following persons shall be eligible for appointment as
a facilitator by the NBR:

 An expert retired income tax official not below the rank of Joint Commissioner.
 A retired official of judicial service not below the rank of District Judge.
 A Chartered Accountant practiced income tax for a period not less than 8 years.
 A Cost and Management Accountant practiced income tax for a period not less than 10
years.
 An Income Tax Practitioner within the meaning of section 327 and practiced income tax for
a period not less than 20 years.
 A professional legislative expert not below the rank of Deputy Secretary.
 A business man expert at income tax law.

Methodology to be followed by the Facilitator to mitigate the dispute:

1. The Facilitator will notify in writing both the applicant and the Commissioner of Taxes or the
Commissioner’s Representative to attend the meeting for settlement of disputes.
2. He may adjourn the meeting from time to time;
3. He may call for records or evidences from the DCT or from the applicant with a view to settle
the dispute;
4. Before disposing of the application, he can cause to make such enquiry by any income tax
authority as he thinks fit.
5. The Facilitator will assist the applicant assessee and the Commissioner’s representative to
agree on resolving the dispute or disputes through consultations and meetings.
6. Dispute may be resolved by an agreement either wholly or in part where both the parties of
the dispute accept the points for determination of the facts or laws applicable in the dispute.
7. Where an agreement is reached, either wholly or in part, between the assessee and the
Commissioner`s Representative, the Facilitator shall record, in writing, the details of the
agreement.
8. The recording of every such agreement shall describe the terms of the agreement including
any tax payable or refundable and any other necessary and appropriate matter and the
manner in which any sums due under the agreement shall be paid and such other matters
as the Facilitator may think fit to make the agreement effective.
9. The agreement shall be void if it is subsequently found that it has been concluded by fraud
or misrepresentation of facts.
10. The agreement shall be signed by the assessee and the Commissioner`s Representative and
the facilitator.
11. Where no agreement, whether wholly or in part, is reached or the dispute resolution is
ended in disagreement between the applicant-assessee and the concerned Commissioner`s
Representative for non-cooperation of either of the parties, the Facilitator shall communicate
it, in writing recording reasons thereof, within 15 days from the date of disagreement, to the

420 Business Planning: Taxation & Compliance ICAB 2024

 applicant and the Board, the concerned court/ Tribunal/ appellate authority and income tax
authority, as the case may be, about such unsuccessful dispute resolution. C
H
12. Where the agreement is reached, recorded and signed accordingly containing time and
mode of payment of payable dues or refund, as the case may be, the Facilitator shall A
communicate the same to the assessee and the concerned DCT for compliance with the P
agreement. T
E
13. No agreement shall be deemed to have been reached if the Facilitator fails to make an R
agreement within 2 months from the end of the month in which the application is filed.
14. Where there is a successful agreement, the Facilitator shall communicate the copy of the
agreement to all the parties within 15 days from the date on which the Facilitator and the 29
parties have signed the agreement.

Effect of agreement:

(1) Where 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 by the department.

(2) Every agreement shall be conclusive as to the matters state therein and no matter covered
by such agreement shall be reopened.

Limitation for appeal where agreement is not concluded.

(1) Where an agreement is not reached wholly or partially, the assessee may prefer an appeal-

(a) to the Appellate Joint Commissioner of Taxes or Appellate Additional Commissioner of

Taxes or Commissioner of Taxes (Appeals) as the case may be, where the dispute arises
against the order of the DCT.
(b) to the Taxes Appellate Tribunal where the dispute arises against the order of the
Appellate Joint Commissioner of Taxes or Appellate Additional Commissioner of Taxes
or Commissioner of Taxes (Appeals), as the case may be; and
(c) to the Court from where the assessee-applicant has got permission to apply for ADR.

(2) In computing the period of limitations for filing appeal the time elapsed between the filing
of the application and the decision or order of the ADR shall be excluded.

Fees to be paid to Facilitator

The facilitator is entitled to receive fees from both the assessee and the Govt. The quantum of
fees is to be computed in the following manner:

The fee is Tk.50,000/- but not less than Tk.5,000/-. 50% of fee is to be paid by the Govt. or Govt.
approved agency and remaining 50% by the assessee.

Recently, the NBR issued SRO No. 243-Law/Incometax-37/2024 on June 27, 2024, concerning
the Income Tax Alternative Dispute Resolution Rule, 2024.

Self-assessment questions

(a) What are the various Income Tax Appellate Authorities under ITA, 2023?

ICAB 2024 Appeal, Tribunal, reference, Revision and ADR 421

 (b) What are the time limits and relaxation thereof, if any, in respect of the following matters
under the ITA, 2023?
I) Filing of appeal to the AJCT u/s. 286;
ii) Filing of appeal to the Commissioner of Taxes (Appeals) u/s.286;
iii) Filing of appeal to the Taxes Appellate Tribunal u/s. 291;
iv) Filing of reference application to the High Court Division and appeal to the Appellate
Division of the Supreme Court u/s. 293, 294 and 295.
(c) Discuss the provisions relating to service of notice u/s. 335 of the IT Act.
(d) Differentiate between question of fact and question of law?
(e) “Taxes Appellate Tribunal is the highest fact-finding Authority” - Do you agree with this
statement?
(f) What is the procedure to file application to the ADR?
(g) Time limits have been prescribed in sections 289 and 292 to dispose of appeals filed with
the AJCT/CT and Appellate Tribunals, respectively. However, no time limit has been
prescribed to dispose of reference to the High Court Division and Appeal to the Appellate
Division under sections 293, 294 and 295. What could be the reason for not giving any time
limits in sections 293, 294 and 295.

422 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 30
Ethics

Introduction

Examination context

Topic list

30.1 Fundamental principles

30.2 Threat and safeguards framework
30.3 Ethical conflict resolution
30.4 Disclosure of information
30.5 Conflict of interest
30.6 Basic principles of taxation work
30.7 Tax authorities’ errors
30.8 Anti-money laundering
30.9 Tax evasion Vs. tax avoidance
 Introduction

Learning objectives

Identify the guidance given in the IFAC Code of Ethics for Professional Accountants in relation
to tax practice with regard to:

• Identify ethical issues arising from tax work undertaken, explain the relevance and
importance of these issues and provides guidance in given scenarios
• Differentiate between tax avoidance and tax evasion
• Judge when to refer matters for specialist help

Practical significance

Belonging to a professional body requires adherence to a code of ethics and have had claims
for breaches of confidentiality. This is part of what differentiates a Chartered Accountant from
unqualified accountants. Clients, members of the public, and the government recognize that we
are required to adhere to exacting standards and so expect a certain standard of behavior from
us.

Money laundering has been a major problem in the past and as part of new laws designed to
combat this, professionals are required to participate in its prevention by reporting certain
suspicions relating to the proceeds of crime.

Stop and think

Accountants have been penalized for non-compliance with the Code of Ethics. Even in the short
time, that the anti-money laundering regulations have existed, accountants have been
prosecuted. It is essential that professional accountants should act ethically in all of their work.

What sort of questions should you ask a potential client apart from the obvious ones? Should
you always do what the client wants whether you agree or not?

Working context

Ethical considerations underpin all of your studies as well as your work experience. You will often
make ethical decisions without even realizing it, but sometimes you may find yourself in a
quandary and be unsure how to act. This is when the Code of Ethics will be of assistance. You
need to know what to look out for and how to act. You should always take particular care in
relation to client confidentiality; not always an easy task.

Syllabus links

The topics covered in this chapter are essential knowledge for the whole of your Taxation
studies. They will ensure that advice and communication is appropriate and in keeping with the
requirements of the ICAB.

424 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, students may be required to:

• Apply the five fundamental principles to given scenarios

• Determine safeguards to be put in place when threats are made to the fundamental
principles
• Advise on the ethical resolution of conflicts
• Give appropriate guidance relating to conflicts of interest and money laundering C
H
Question practice A
P
For question practice on these topics, go to the end of this workbook covering this chapter T
E
30.1 Fundamental Principles R

Section overview
30
 The International Federation of Accountants (IFAC) has produced a Code of Ethics for
professional accountants (IFAC Code).
 ICAB has adopted and published IFAC Code of Ethics for ICAB Members.
 The IFAC Code aims to ensure high quality ethical standards for use by professional
accountants around the world.
 Part A of the IFAC Codes (the Codes) establishes the fundamental principles of professional
ethics for accountants.

Definition

Professional accountant: A member of the ICAB.

The Codes require a professional accountant to comply with the following five fundamental
principles:

 Integrity
 Objectivity
 Professional competence and due care
 Confidentiality
 Professional behavior

The purpose of this chapter is to provide background information which will assist your
understanding of the framework of the Bangladesh taxation system, why governments impose
tax and the principles of taxation.

The Bangladesh taxation system has developed over centuries from the then British India in
1860 to the present condition on a piecemeal basis. Successive ruler and governments have
changed the taxation system in accordance with their need.

ICAB 2024 Ethics 425

 Integrity

Definition

Integrity: Requires all professional accountants to be straightforward and honest in professional

and business relationships.

A professional accountant should not be associated with any information where he believes that
the information:

 Contains a materially false or misleading statement

 Contains statements or information furnished recklessly
 Omits or obscures information required to be included where such omission or obscurity
would be misleading

Objectivity

Objectivity: Imposes an obligation on professional accountants not to compromise their

professional or business judgment because of bias, conflict of interest or the undue influence of
others.

Relationships that bias or unduly influence the professional judgment of the professional
accountant should be avoided.

Professional competence and due care

Professional competence and due care: Require professional accountants to:

Maintain professional knowledge and skill at the level required to ensure that clients or
employers receive competent professional service based on current developments in practice,
legislation and techniques; and
Act diligently in accordance with applicable technical and professional standards when
providing professional services.

Competent professional service requires competence to be achieved in two phases:

Attainment of professional competence; and Maintenance of professional competence,

requiring a continuing awareness and understanding of relevant issues.

Steps should be taken to ensure that those working for the professional accountant have
appropriate training and supervision.

Any limitations relating to the service being provided must be made clear to clients and other
users to ensure that misinterpretation of facts or opinions does not take place.

Confidentiality

Confidentiality: Imposes an obligation on professional accountants to refrain from:

Disclosing outside the firm confidential information acquired as a result of professional and
business relationships without proper and specific authority or unless there is a legal or
professional right or duty to disclose; and

426 Business Planning: Taxation & Compliance ICAB 2024

 Using confidential information acquired as a result of professional and business relationships to
their personal advantage or the advantage of third parties.

A professional accountant should maintain confidentiality even in a social environment. The

professional accountant should be alert to the possibility of inadvertent disclosure, particularly
in circumstances involving long association with a business associate or a close or immediate
family member.

A professional accountant should also consider the need to maintain confidentiality of

information within the firm. All reasonable steps should be taken to ensure that staff under the
professional accountant's control and persons from whom advice and assistance is obtained
respect the professional accountant's duty of confidentiality.

A professional accountant should also maintain confidentiality of information disclosed by a

C
prospective client or employer.
H
The need to comply with the principle of confidentiality continues even after the end of A
relationships between a professional accountant and a client or employer. When a professional P
accountant changes employment or acquires a new client, the professional accountant is T
entitled to use prior experience. The professional accountant should not, however, use or E
disclose any confidential information either acquired or received as a result of a professional or R
business relationship.

Professional behavior 30

Professional behavior: Imposes an obligation on a professional accountant to comply with

relevant laws and regulations and avoid any action that may bring discredit to the profession.

This includes actions which a reasonable and informed third party, having knowledge of all
relevant information, would conclude negatively affects the good reputation of the profession.

Professional accountants should be honest and truthful and should not:

Make exaggerated claims for the services they are able to offer, the qualifications they possess,
or experience they have gained
Make disparaging references or unsubstantiated comparisons to the work of others

30.2 Threats and safeguards framework

Section overview

 The circumstances in which professional accountants operate may give rise to specific
threats to compliance with the five fundamental principles.
 The Codes provide a framework to help identify, evaluate and respond to these threats.
 The professional accountant is then able to apply safeguards to eliminate the threats or
reduce them to an acceptable level.
 As a result, compliance with the five fundamental principles is not compromised.

Threats

The professional accountant is obliged to evaluate any threat as soon as he knows, or should be
expected to know, of its existence.

ICAB 2024 Ethics 427

 Both qualitative and quantitative factors should be taken into account in considering the
significance of the threat.

Most threats to compliance with the fundamental principles fall into the following categories:

 Self-interest threats, which may occur as a result of the financial or other interests of a
professional accountant or of an immediate or close family member
 Self-review threats, which may occur when a previous judgment needs to be reevaluated by
the professional accountant responsible for that judgment
 Advocacy threats, which may occur when a professional accountant promotes a position or
opinion to the point that subsequent objectivity may be compromised
 Familiarity threats, which may occur when, because of a close relationship, a professional
accountant becomes too sympathetic to the interests of others
 Intimidation threats, which may occur when a professional accountant may be deterred from
acting objectively by threats, actual or perceived

Safeguards

If a professional accountant cannot implement appropriate safeguards, he should decline or

discontinue the specific professional service involved, or where necessary resign from the client.

Safeguards that may eliminate or reduce such threats to an acceptable level fall into two broad
categories:

 Safeguards created by the profession, legislation or regulation.

 Safeguards in the work environment.

Safeguards created by the profession, legislation or regulation include, but are not restricted to:

 Educational, training and experience requirements for entry into the profession
 Continuing professional development requirements
 Corporate governance regulations
 Professional standards
 Professional or regulatory monitoring and disciplinary procedures
 External review by a legally empowered third party of the reports, returns, communications
or information produced by a professional accountant

Certain safeguards may increase the likelihood of identifying or deterring unethical behavior.
Such safeguards, which may be created by the accounting profession, legislation, regulation or
an employing organization, include, but are not restricted to:

 Effective, well publicized complaints systems operated by the employing organization, the
profession or a regulator, which enable colleagues, employers and members of the public
to draw attention to unprofessional or unethical behavior
 An explicitly stated duty to report breaches of ethical requirements

The nature of the safeguards to be applied will vary depending on the circumstances. In
exercising professional judgment, a professional accountant should consider what a reasonable
and informed third party, having knowledge of all relevant information, including the
significance of the threat and the safeguards applied, would conclude to be unacceptable.

428 Business Planning: Taxation & Compliance ICAB 2024

30.3 Ethical conflict resolution

Section overview

 To ensure compliance with the fundamental principles a professional accountant may need
to resolve a conflict in applying the principles.
 The conflict resolution process may be formal or informal.
 In both cases the same steps are to be followed.

Conflict resolution process

When initiating either a formal or informal conflict resolution process, a professional accountant
should consider the following five factors:
C
 Relevant facts H
 Relevant parties
A
 Ethical issues involved
P
 Fundamental principles related to the matter in question
T
 Established internal procedures
 Alternative courses of action E
R
Having considered these issues, the appropriate course of action can be determined which
resolves the conflict with all or some of the five fundamental principles. If the matter remains
unresolved, the professional accountant should consult with other appropriate persons within 30
the firm for help in obtaining resolution.

Where a matter involves a conflict with, or within, an organization, a professional accountant

should also consider consulting with those charged with governance of the organization.

It is advisable for the professional accountant to document the issue and details of any
discussions held or decisions taken, concerning that issue.

If a significant conflict cannot be resolved, a professional accountant may wish to obtain

professional advice from the relevant professional body or legal advisors, and thereby obtain
guidance on ethical and legal issues without breaching confidentiality.

If, after exhausting all relevant possibilities, the ethical conflict remains unresolved, a
professional accountant should, where possible, refuse to remain associated with the matter
creating the conflict.

The professional accountant may determine that, in the circumstances, it is appropriate to

withdraw from the engagement team or specific assignment, or to resign altogether from the
engagement or the firm.

Interactive question 1: Ethical conflict resolution [Difficulty level: Exam standard]

Mr. X, a member of the ICAB, is the reporting accountant of a pension company. Over the years
he has developed a close working relationship with the finance director Mr. Y.

Recently he has become concerned about the financial controls within the company being
overridden by Mr. Y, with the possibility of substantial funds being withdrawn from the company
bank account. Mr. X discussed this at a formal end of audit meeting with Mr. Y, who assured him

ICAB 2024 Ethics 429

 that the issue would be rectified immediately but that she felt there was no real issue and the
controls were overridden for good reasons.

Mr. X is not satisfied with the explanations given and wishes to take further steps to resolve the
ethical conflict.

Requirement: Outline the options open to Mr. X

Answer

Mr. X may first approach the other directors of the company in order to resolve the ethical
conflict with Mr. Y. If this course of action does not give Mr. X sufficient comfort that the conflict
is resolved he will have to consider going outside the company.

Mr. X may obtain professional advice from the ICAB or the legal advisors, and thereby obtain
guidance on ethical issues without breaching confidentiality. Mr. X should consider obtaining
legal advice to determine whether there is a requirement to report.

If the ethical conflict remains unresolved, Mr. X should refuse to remain associated with the
matter creating the conflict. He may determine that, in the circumstances, it is appropriate to
resign altogether from the engagement.

30.4 Disclosure of information

Section overview

 Part A of the Codes contains a section relating to confidentiality.

 The confidentiality section explains when a professional accountant may disclose
information to third parties without threatening the fundamental principle of confidentiality.

When to disclose

A professional accountant may disclose confidential information if:

 Disclosure is permitted by law and is authorized by the client or the employer  Disclosure
is required by law, for example:
 Production of documents or other provision of evidence in the course of legal proceedings,
or
 Disclosure to the appropriate public authorities of infringements of the law, e.g. under
antimony laundering legislation
 There is a professional duty or right to disclose, when not prohibited by law:
 To comply with the quality review of a member body or professional body
 To respond to an inquiry or investigation by a member body or regulatory body
 To protect the professional interests of a professional accountant in legal proceedings
 To comply with technical standards and ethics requirements

Factors to consider regarding disclosure

In deciding whether to disclose confidential information, professional accountants should

consider the following:

430 Business Planning: Taxation & Compliance ICAB 2024

  Whether the interests of all parties, including third parties whose interests may be affected,
could be harmed if the client or employer consents to the disclosure of information by the
professional accountant
 Whether all the relevant information is known and substantiated, to the extent it is
practicable to do so. When the situation involves unsubstantiated facts, incomplete
information or unsubstantiated conclusions, professional judgment should be used in
determining the type of disclosure to be made, if any
 The type of communication that is expected and to whom it is addressed; in particular,
professional accountants should be satisfied that the parties to whom the communication is
addressed are appropriate recipients

Worked example: Disclosure of information:

You have just obtained Mr. Jamal as a client. He has a source of income which may or may not
C
be taxable depending on his personal circumstances which are uncertain.
H
Requirement: Discuss the ethical considerations you must bear in mind when deciding whether A
to disclose the income on his tax returns. P
T
Solution E
R
There is a possible legal obligation to disclose the source to Tax Authorities, but the situation is
unclear.
30
You must use your professional judgment, based on all facts. If disclosure is not to be made the
exact reasons for non-disclosure should be recorded and Mr. Jamal advised of the reason for
nondisclosure.

If you decide that disclosure is required, the client should be notified. If he does not accept the
advice, you should decide whether you can continue to act for Mr. Jamal

Interactive question 2:

You are a Chartered Accountant and working in Y Ltd. (“Company”) as a tax manager. The
Company is engaged in the business of export of the goods manufactured by it. The bank,
through which export proceeds of Y Ltd. is received, deducts tax at the specified rate from the
total export proceeds in accordance with the provisions of section 123 of the Income Tax Act,
2023. Export income of Y Ltd. falls under the scope of section 163 of the ITA, 2023. Generally,
the Company does not have additional income from export as referred to in section 163 of the
ITA, 2023.

In the income year 2023-24, a warehouse owned by the company was leased out to another
company for a term of 3 years. Y Ltd. received rent on the warehouse for the income year 2023-
24 but no tax was deducted at source from the rent paid by the lessee. The management of Y
Ltd. is thinking of assessment of income of the company for the income year 2022-23 under
section163 of the ITA, 2023, upon considering the tax collected at source by the bank from the
export proceeds as minimum tax. In a meeting with the management team of Y Ltd. on tax issues,
you have been asked to consider whether it is possible to ignore income from house property
so that no demand for additional income tax arises. To discuss the issue further, a meeting would
be held next week.

ICAB 2024 Ethics 431

 Requirements

(a) Prepare a briefing note as regards tax evasion, tax avoidance and professional ethics to be
followed by a Chartered Accountant rendering taxation services.
(b) Enumerate the steps should be taken to deal with unethical request from the management,
if any.

Solution

(a) Briefing Note for the Management Team

Subject: Tax Evasion, Tax Avoidance and Professional Ethics to be followed by a Chartered
Accountant rendering Taxation Services.

Tax Evasion:

Tax evasion is unlawful dodging in tax payments by tax payers. It is a process whereby a person
illegitimately pays less tax than the law mandates. Tax evasion often entails taxpayers
deliberately misrepresenting the true state of their affairs to the tax authorities to reduce their
tax liability and includes dishonest tax reporting, such as declaring less income, profits or gains
than the amounts actually earned, overstating deductions or suppressing turnover.

Tax Avoidance:

On the other hand, tax avoidance is the process whereby a person plans his or her finances so
as to apply all exemptions and deductions provided by tax laws to reduce taxable income.
Through tax avoidance, a person takes advantage of all legal opportunities to minimize his or
her tax. Tax avoidance must be distinguished from Tax Evasion, which is the employment of
unlawful methods to circumvent the payment of taxes. Tax evasion is a crime; tax avoidance is
the legal way to reduce tax burden.

Professional Ethics to be followed by a Chartered Accountant rendering Taxation Service:

A professional accountant rendering taxation service is entitled to put forward the best position
in favor of his employer provided the service is rendered with professional competence, does
not in any way impair integrity and objectivity, and is in the opinion of the professional
accountant consistent with the law. Doubt may be resolved in favor of the employer if there is
reasonable support for the position. A professional accountant should not hold out to an
employer the assurance that the tax return prepared and the tax advice offered are beyond
challenge. Instead, the professional accountant should ensure that the employer are aware of
the limitations attaching to tax advice and services so that they do not misinterpret an expression
of opinion as an assertion of fact. A professional accountant should not be associated with any
return or communication in which there is reason to believe that it:

(i) Contains a false or misleading statement;

(ii) Contains statements or information furnished recklessly or without any real knowledge of
whether they are true or false; or
(iii) Omits or obscures information required to be submitted and such omission or obscurity
would mislead the revenue authorities.

(b) In light of the aforementioned academic discussion, I will take following steps if there is any
unethical request from my employer:

432 Business Planning: Taxation & Compliance ICAB 2024

 (i) I will put my tax advice on record, either in the form of a letter or in a memorandum, while
providing the requested opinions on ignoring/concealing income from house property.
(ii) I will let my employer know the consequences of error/omission/concealment of income as
provided in the income tax laws for the time being in force and will recommend that
appropriate disclosure be made to the revenue authorities.
(iii) If my employer does not accept my suggestion, I will inform them that it is not possible to
act for them in connection with the evasion of tax or pertinent return of income.
(iv) I will follow the established policies of Y Ltd. to seek a resolution of such conflict.
(v) If those policies do not resolve the ethical conflict, I will bring the problem to the notice of
the next higher reviewing level such as the Executive Committee, Board of Directors or
Shareholders. I will also seek counseling and advice on a confidential basis with an
independent advisor to obtain an understanding of possible courses of action.
(vi) If the ethical conflict still exists, I will consider whether continued association with Y Ltd. in
any capacity is consistent with professional responsibilities and as a last resort I may have no
C
other recourse on the tax evasion issue than to resign and to submit an information
memorandum to an appropriate representative of Y Ltd. H
A
30.5 Conflicts of interest P
T
Section overview E
R
 Part B of both the IFAC Code and the ICAEW Code illustrate how the fundamental principles
are applied in certain situations for professional accountants in public practice.
 One of the illustrations given in part B contains details relating to conflicts of interest. 30

The threat of a conflict of interest

A professional accountant should take reasonable steps to identify circumstances that could
pose a conflict of interest. These may give rise to threats to compliance with the fundamental
principles.
A conflict may arise between the firm and the client or between two conflicting clients being
managed by the same firm. For example, where a firm acts for:

• A Client which has specific interests which conflict with those of the firm;
• Financial involvements between the client and the firm e.g., where a loan is made by or to a
client;
• Both a husband and wife in a divorce settlement;
• A company and for its directors in their personal capacity; or
• Two competing business

Evaluation of threats includes consideration as to whether the professional accountant has any
business interests or relationships with the client or a third party that could give rise to threats. If
there are other than clearly insignificant, safeguards should be considered and applied as
necessary.

Safeguards

Depending upon the circumstances giving rise to the conflict, safeguards should ordinarily
include the professional accountant in public practice:

 Notifying the client of the firm's business interest or activities that may represent a conflict
of interest

ICAB 2024 Ethics 433

  Notifying all known relevant parties that the professional accountant is acting for two or more
parties in respect of a matter where their respective interests are in conflict
 Notifying the client that the professional accountant does not act exclusively for any one
client in the provision of proposed services (for example, in a particular market sector or with
respect to a specific service)

In each case the professional accountant should obtain the consent of the relevant parties to act.

Where a professional accountant has requested consent from a client to act for another party
(which may or may not be an existing client) and that consent has been refused, then he must
not continue to act for one of the parties in the matter giving rise to the conflict of interest.

The following additional safeguards should also be considered:

 The use of separate engagement teams

 Procedures to prevent access to information (e.g. strict physical separation of such teams,
confidential and secure data filing)
 Clear guidelines for members of the engagement team on issues of security and
confidentiality
 The use of confidentiality agreements signed by employees and partners of the firm
 Regular review of the application of safeguards by a senior individual not involved with
relevant client engagements

Where a conflict of interest poses a threat to one or more of the fundamental principles that
cannot be eliminated or reduced to an acceptable level through the application of safeguards,
the professional accountant should conclude that it is not appropriate to accept a specific
engagement or that resignation from one or more conflicting engagements is required.

Interactive question 2: Conflict of interest (Difficulty level: Exam standard)

A professional Accountant in Public Practice has had two partners, Mr. S and Mr. R as clients for
many years. Mr. S is intending to sell his share of the partnership to Mr. R so that can continue as
a sole trader. Both have asked if you will be their advisor.

Requirements

Outline the accountants’ position with regard to the potential conflict of interest.

Answer

The firm should not usually act for both parties in a transaction. However, this can cause
particular problems where both have previously been clients.

There are available options,

The firm has three options,

 To act for both
 To act for one
 To act for neither

In a situation where there is an element of doubt, the latter is probably the preferred course of
action.

434 Business Planning: Taxation & Compliance ICAB 2024

30.6 Basic principles of taxation work

Section overview

• One of the topics included in the statement is an explanation as to the accountant's

relationship with the client.

Agent or principal

It is very important that it is understood when an accountant is acting as an agent on behalf of a

client and when he is acting as the principal. The two different capacities carry different degrees
of risk and potential liability.

An explanation as to when an accountant is acting in each capacity should be given in a client

engagement letter. The letter should also explain the scope of the client's and the accountant's
responsibilities in each case. C
H
Agent A
P
An accountant acts as agent when he merely prepares documents on behalf of a client. The
client retains responsibility for the accuracy of the document itself. The accountant is thus an T
agent when performing tax compliance work such as preparing and submitting a tax return on E
behalf of a client. The client would be required to sign the return prior to its submission. R

The accountant takes no responsibility for any information which he passes on to the tax
authorities when acting as an agent. The accountant is not normally liable if any of the 30
information proves to be incorrect.

Acting as an agent is therefore considered to be a low risk activity.

Principal

An accountant acts as principal when he provides advice to the client as to the taxation
consequences of different courses of action. The accountant takes full responsibility for the
advice given and may be liable to the taxpayer in the event the advice turns out to be incorrect
or inappropriate.

Where an accountant does not have the professional skill required to act as a principal in a
particular case, he may still accept the engagement. However, he must ensure that the opinion
of a suitably qualified accountant is sought.

Acting as a principal is therefore considered to be a high-risk activity.

30.7 Tax authority’s errors

Section overview

One of the topics included in the statement is Tax Authority’s errors.

Tax authority’s errors

It may be apparent to the professional accountant that a mistake has been made by Tax
Authorities, such as:

 The raising of an inadequate assessment

 An under collection of tax or interest
 An over repayment of tax or interest

ICAB 2024 Ethics 435

 The mistake may be:

 Misinterpretation of law
 A calculation or clerical error
 A misunderstanding on the part of tax Authorities of the facts as presented

Professional accountants are advised to include in their letters of engagement authority to

advise Tax Authorities of errors, so that consent from the client is not needed. Where no such
authority has been obtained, the procedure set out below must be followed.

Where the accountant becomes aware that Tax Authorities, in full possession of the facts, has
made a material error in dealing with the affairs of a client, the professional accountant should
seek the client's authority to write to Tax Authorities for correction of error.

In cases of a Tax Authorities error, the professional accountant should refer the matter to the
client. The client should be:

 Asked to authorize the professional accountant to advise Tax Authorities of the error; and
 Warned of the possible legal consequences if he is reluctant to give the authority sought,
including interest and penalties and possible criminal prosecution; and

Advised that if consent is not given, the accountant will consider taking independent legal
advice with a view to:

 Notifying Tax Authorities in any event, and notifying the client of his action; and
 Ceasing to act for the client.

The professional accountant should ensure that a written record is kept of all advice given to
clients in connection with Tax Authorities errors.

If a professional accountant is specifically asked by Tax Authorities to agree a figure, he must

agree what he believes to be the correct figure; this may be a figure negotiated in the course of
discussions following full disclosure of the facts and circumstances. He may not accept a figure
he knows to be incorrect, and he does not need to seek his client's authority to disclose to Tax
Authorities its errors in this case.

30.8 Anti-money laundering

Section overview

 Money Laundering Prevention Act, 2002 has been published with the purpose of combating
money laundering
 Accountants should comply the requirement relating to money-laundering

Money laundering

Definition

Money laundering is the process of changing large amounts of money obtained from crimes,
such as drug trafficking into origination from a legitimate source.

Money Laundering is the process by which criminals attempt to conceal the true origin and
ownership of the proceeds of criminal activities. If successful, the money can lose its criminal
identity and appear legitimate.

436 Business Planning: Taxation & Compliance ICAB 2024

 In terms of section 2 (tha) of Money Laundering Prevention Act, 2002, "Money Laundering
means:

(a) Properties acquired or earned directly or indirectly through illegal means;

(b) Illegal transfer, conversion, concealment of location or assistance in the above act of the
properties acquired or earned directly or indirectly through legal or illegal means."

In this Act, “Properties means movable or immovable properties of any nature and description”.

The term Money Laundering is used for a number of offences involving the proceeds of crime
or terrorist funds. It now includes possessing, or in any way dealing with, or concealing, the
proceeds of any crime.

Someone is engaged in money laundering under where they:

C
 Acquire or earn properties directly or indirectly through illegal means H
 Transfer, convert, conceal location or assist in the above act of the properties acquired or A
earned directly or indirectly through legal or illegal means
P
Where a professional accountant suspects that a client is involved in money laundering, he T
should report this to the authorities. E
R
Tax related offences

Tax related offences are not in a special category. The proceeds or monetary advantage arising 30
from tax offences are treated no differently from the proceeds of theft, drug trafficking or other
criminal conduct.

Anti-money laundering procedures

Business needs to maintain some procedures:

Appoint a Money Laundering Reporting Officer (MLRO) and implement internal reporting
procedures

 Train staff to ensure that they are aware of the relevant legislation, know how to recognize
and deal with potential money laundering, how to report suspicions to the MLRO, and how
to identify clients
 Establish internal procedures appropriate to deter and prevent money laundering, and
make relevant individuals aware of the procedures
 Verify the identity of new clients and maintain evidence of identification
 Maintain records of client identification, and any transactions undertaken for or with the
client
 Report suspicions of money laundering

Records of client identification and transactions also need to be maintained for few years.

Client confidentiality in relation to money laundering

An accountant should disclose confidential information without client consent in certain

circumstances. In order to disclose confidential information, the accountant must have
knowledge or suspicion, or reasonable grounds for knowledge or suspicion, that a person has
committed a money laundering offence.

ICAB 2024 Ethics 437

 Disclosure without reasonable grounds for knowledge or suspicion will increase the risk of a
business or an individual being open to an action for breach of confidentiality. Punishment for
money laundering

If any person is engaged in Money Laundering in any way he will be regarded as a person who
has committed a crime and the concerned accused for that crime will be sentenced to
imprisonment for at least a period of six months and a maximum of seven years and will be fined
for an amount not exceeding double the amount involved in the crime.

30.9 Tax evasion vs. tax avoidance

Section overview

 Tax evasion is illegal and tax avoidance is legal.

 Tax evasion could lead to prosecution for both the client and his accountant
 Tax avoidance through legal procedure

Tax evasion

Tax evasion consists of seeking to mislead tax authorities by either:

Suppressing information to which tax authorities is entitled, for example by:

- Failing to notify tax authorities of a liability to tax
- Understating income or gains
- Omitting to disclose a relevant fact Or

Providing tax authorities with deliberately false information, for example by:

- Deducting expenses that have not been incurred

- Claiming capital allowances on plant that has not been purchased

Minor cases of tax evasion are generally settled out of court via the payment of penalties.
However, there is a statutory offence of evading income tax that can be dealt with in a
magistrate’s court.

Serious cases of tax evasion, particularly those involving fraud, continue to be the subject of
criminal prosecutions which may lead to fines and/or imprisonment on conviction.

Furthermore, tax evasion offences will fall within the definition of money laundering and in
certain cases individuals may be prosecuted under one of the money laundering offences. This
includes both the under declaring of income and the over claiming of expenses.

If the assets of any clients were derived from illegal activities or if the client has committed tax
evasion that considered under money laundering, a threat to compliance with the fundamental
principles would be created. In such situations, the professional accountant may consider
seeking legal advice and he should report this to the authorities.

Tax avoidance

Tax avoidance is not defined, but is broadly any legal method of reducing the tax burden.
The distinction between tax evasion and tax avoidance is usually obvious as avoidance has no
intention of misleading tax authorities.

438 Business Planning: Taxation & Compliance ICAB 2024

 The accountant should take care in situations, for example, where a client believes that his tax
avoidance has been successful and so does not submit a tax return.

Example-1

(a) You have been invited by the organizers of a seminar to deliver lecture on the responsibilities
of a Chartered Accountant rendering professional tax services. The organizers of the seminar
informed you about the average understanding level of the participants. According to the
organizers, the participants might have perception that a Chartered Accountant rendering
professional tax services is obliged to act absolutely in the interest of his/her client/employer.

Requirements:
Prepare handouts addressing the following issues for distribution at the seminar to be held next
month:
C
i) Responsibilities of a practicing Chartered Accountant to the public while rendering tax
advisory services. H
A
ii) Guidance for a Chartered Accountant, working in the tax department of a company, on P
conflict of loyalties. T
E
Answer-1 (a): R

(a) Responsibilities of a practicing Chartered Accountant to the public while rendering tax
advisory services 30

A distinguishing mark of a profession is acceptance of its responsibility to the public. The

accountancy profession’s public consists of clients, credit grantors, governments, employers,
employees, investors, the business and financial community, and others who rely on the
objectivity and integrity of professional accountants to maintain the orderly functioning of
commerce.

This reliance imposes a public interest responsibility on the accountancy profession. The public
interest is defined as the collective well-being of the community of people and institutions the
professional accountant serves.

Professional accountants have an important role in society. Investors, credITArs, employers and
other sectors of the business community, as well as the government and the public at large rely
on professional accountants for sound financial accounting and reporting, effective financial
management and competent advice on a variety of business and taxation matters. The attitude
and behavior of professional accountants in providing such services have an impact on the
economic well-being of their community and country.

It is in the best interest of the worldwide accountancy profession to make known to users of the
services provided by professional accountants that they are executed at the highest level of
performance and in accordance with ethical requirements that strive to ensure such
performance. Tax experts help to establish confidence and efficiency in, and the fair application
of, the tax system. A professional accountant’s responsibility is not exclusively to satisfy the needs
of an individual client or employer. The standards of the accountancy profession are heavily
determined by the public interest. As such, a Chartered Accountant in practice, who advises on
tax matters, also bears significant responsibilities to the public.

ICAB 2024 Ethics 439

 (b) Guidance for a Chartered Accountant, working in the tax department of a company, on
conflict of loyalties

Employed professional accountants owe a duty of loyalty to their employer as well as to their
profession and there may be times when the two are in conflict. An employee’s normal priority
should be to support his or her organization’s legitimate and ethical objectives and the rules and
procedures drawn up in support of them. However, an employee cannot legitimately be
required to:

(a) Break the law;

(b) Breach the rules and standards of their profession;
(c) Lie to or mislead (including misleading by keeping silent) those acting as auditors to the
employer; or
(d) Put their name to or otherwise be associated with a statement which materially
misrepresents the facts.

Differences in view about the correct judgment on accounting or ethical matters should normally
be raised and resolved within the employee’s organization, initially with the employee’s
immediate superior and possibly thereafter, where disagreement about a significant ethical
issue remains, with higher levels of management or non-executive directors.

If employed accountants cannot resolve any material issue involving a conflict between their
employers and their professional requirements they may, after exhausting all other relevant
possibilities, have no other recourse but to consider resignation. Employees should state their
reasons for doing so to the employer but their duty of confidentiality normally precludes them
from communicating the issue to others (unless legally or professionally required to do so).

440 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 31
Tax Planning

Topic List

31.0 What does tax planning really mean?

31.1 How tax planning and financial planning are connected?

 31 What does tax planning really mean?
Tax planning is the art of arranging affairs in ways that postpone or avoid taxes. By employing
effective tax planning strategies, anyone can have more money to save and invest or more
money to spend or both. It’s choice.

Put another way, tax planning means deferring and flat-out avoiding taxes by taking advantage
of beneficial tax-law provisions, increasing and accelerating tax deductions and investment tax
rebates, and generally making maximum use of all applicable area under our beloved IT
Act,1984.

Of course, we should not change your financial behavior solely to avoid taxes. Truly effective tax
planning strategies are those that permit us to do what we want while reducing tax burden along
the way.

Thus, ‘tax planning’ means dealing with the tax matters of a taxpayer with a view to maximizing
the after-tax rate of return on investments after ensuring voluntary tax compliance. For this
purpose, each taxpayer has to

1. Ensure that proper records are kept;

2. Deduct tax at source where it is necessary;
3. Pay advance tax in time, if applicable;
4. File returns in time;
5. Comply with notices received from the tax authorities; and
6. Be aware of legal remedies where it does not have its rights under the law recognized.

Tax planning takes maximum advantage of the exemptions, deductions, rebates, reliefs and
other tax concessions allowed by taxation statutes, leading to the reduction of the tax liability of
the tax payer.

31.1 How tax planning and financial planning are connected?

Financial planning is the art of implementing strategies that help us to reach our financial goals,
be they short-term or long-term. That sounds pretty simple. However, if the actual execution was
simple, there would be a lot richer folks.

Tax planning and financial planning are closely linked, because taxes are such a large expense
item as we go through life. If we become really successful, taxes will probably be our single
biggest expense over the long haul. So, planning to reduce taxes is a critically important piece
of the overall financial planning process.

Problem-1

Mr. Shin, Chief Financial Officer (CFO) of Techno world Inc., a Singapore based IT company has
appointed you as tax consultant and sought your opinion on the areas of tax planning so as to
prepare an effective business plan.

Techno world wants to expand its business in Bangladesh by providing IT based solutions in
many industries along with BPO services. It wants to set up a liaison office. But it has been
advised by BIDA to incorporate a company in Bangladesh with 100% equity ownership to run
the business.

442 Business Planning: Taxation & Compliance ICAB 2024

 In the first year it has a plan of selling BDT 1Bn of IT and BDT 500 Mn of BPO services with 10%
increment in each of the following two years. If the service charges are remitted from
Bangladesh, the purchaser will deduct 20% of withholding tax of it and 15% VAT will be borne
by the service recipient. Techno world achieves 20% income before tax on net proceeds and
has 25% corporate tax rate in Singapore. If it incorporates a company in Bangladesh, the services
it will deliver will fall under ITES (information technology enable services) and in accordance of
business plan it will achieve 30% Income before tax. Under double taxation avoidance
agreement, Dividend from Bangladesh to Singapore is subject to maximum 15% tax
withholding.

Requirement:

Give your opinion to Techno world elaborating the aspects of the above-mentioned options with
demonstrating financial impact.

Answer to problem no-1:

Mr. Shin,
Chief Financial Officer (CFO) Techno world Inc.

Subject: Opinion regarding tax planning and techniques

Dear Sir,

We refer your letter dated 15 April 2023 where you have narrated a plan of business with
Bangladesh and requested us to provide our opinion on the areas of tax planning which will
enable you to prepare an effective business plan. We are submitting the following analysis and C
suggestions which will curtail the tax burden for your prospective business complying the tax H
legislations presently enforced in Bangladesh. A
P
Techno world wants to expand its business in Bangladesh by providing IT based solutions in T
many industries along with BPO services. Initially it wants to set up a liaison office. It has been E
advised by BIDA to incorporate a company in Bangladesh with 100% equity ownership to run
R
the business. Hence, there are two options in hands, namely, selling services from abroad where
liaison office will play a coordination role and setting a local fully owned subsidiary of Techno
world to deliver the services to Bangladeshi customers locally.
31
Relevant tax regulations in Bangladesh:

(a) As per para (21) of 6th Schedule, Part 1 of ITA, 2023, income derived from some business of
a person being resident or non-resident Bangladeshi between July 2024 to June 2027 shall
be exempted income, subject to services includes--Software development; Software or
application customization, Nationwide Telecommunication Transmission Network (NTTN),
Digital content development and management, Digital animation development, Website
development, Website services, Web listing, IT process outsourcing, Website hosting,
Digital graphic design, Digital data entry and processing, Digital data analytics, Geographic
information service (GIS), IT support and software maintenance service, Software test lab
service, Call Centre service, Overseas medical transcriptions, Search Engine Optimization
service, Document conversion, imaging and digital archiving, Robotic process outsourcing,
Cyber security services, Cloud service, System Integration, E-learning platform, E-book
publications, Mobile application, development service; and IT Freelancing.

ICAB 2024 Tax Planning 443

 (b) Under Finance Act 2024, the corporate tax rate of a non-listed company is 27.5%.
(c) Under section 117 of ITA, 2024, the tax deduction rate on payment of dividend is 20%.
(d) Based on article 24 of Double Taxation Avoidance Treaty between Singapore and
Bangladesh, Tax deducted at source in Bangladesh will be eligible to take credit in
Singapore to the extent of tax computed on the same income.
(e) As per sec 119 of ITA, 2023, foreign remittance on account of IT solutions and BPO related
services to a non-resident Bangladeshi is subject to deduction of tax at source @ 20% under
the category of Technical service fees or Technical knowhow fees.
(f) As per VAT law, for the import of services, service recipient will be responsible to pay VAT
and will be eligible for input VAT credit against the treasury challan of the deposit of VAT.

Analysis of tax legislations applicable for Techno world:

Techno world has two alternatives for doing business here in Bangladesh. It can sell services
from abroad where liaison office will play a coordination role or set a local fully owned subsidiary
of Techno world Singapore to deliver the services to Bangladeshi customers locally.

From the perspective of tax laws, if it sells services to Bangladesh from Singapore, it will receive
the proceeds in Singapore, which will be remitted by the service recipients in Bangladesh. This
remittance will be subject to withholding tax @ 20% as per ITA, 2023 after which the net
proceeds will be remitted to Techno world from Bangladesh. In Singapore, Techno world will
be eligible to take the credit of tax deducted at source in Bangladesh. VAT will be borne by the
service recipient and will be eligible for input VAT credit. It will incur cost neither to Techno world
nor to the service recipients in Bangladesh.

If Techno world Singapore sets a local fully owned subsidiary in Bangladesh, it will be subject
to 27.5% corporate tax rate. Moreover, in accordance with double taxation avoidance treaty
between Singapore and Bangladesh, the payment of dividend from Bangladesh is subject to
15% tax withholding in Bangladesh which we can assume will be available for full foreign tax
credit by Techno world in Singapore.

Outcome in Business plan after tax impacts:

Techno world sells services to Bangladesh from Singapore

Particulars Equation Year 1 Year 2 Year 3
Gross proceeds A 1,500,000,000 1,650,000,000 1,815,000,000
Tax deduction at source in B 300,000,000 330,000,000 363,000,000
BD @ 20%
Remittance i.e.Net C=A-B 1,200,000,000 1,320,000,000 1,452,000,000
proceeds
Income before tax (20% on D 240,000,000 264,000,000 290,000,000
net proceeds)
Corporate tax (25%) E 60,000,000 66,000,000 72,500,000
Credit on corporate tax on F 60,000,000 66,000,000 72,500,000
business from BD under
DTAA
Net profit after tax for D-E+F 240,000,000 264,000,000 290,000,000
Techno world

444 Business Planning: Taxation & Compliance ICAB 2024

 Techno world sets a fully owned subsidiary in Bangladesh
Particulars Equation Year 1 Year 2 Year 3
Gross proceeds A 1,500,000,000 1,650,000,000 1,815,000,000
Income before tax (30% B 450,000,000 495,000,000 544,500,000
on Gross proceeds)
Corporate tax rate in BD C 123,750,000 136,125,000 149,737,500
(27.5%)
Income after tax / Gross D=B-C 326,250,000 358,875,000 394,762,500
dividend income of
Techno world
Withholding tax on E 43,875,000 48,262,500 53,088,750
dividend (15%)
Net remittance of F=D-E 282,375,000 310,612,500 341,673,750
dividend to Techno world
Corporate tax of Techno G= 25% of 81,562,500 89,718,750 98,690,625
world (25%) on dividend D
Withholding tax credit on H=E 43,875,000 48,262,500 53,088,750
dividend taken by Techno
world under DTAA
Additional tax in I=G-H 37,687,500 41,456,250 45,601,875
Singapore
Net profit after tax for J=F-I 244,687,500 269,156,250 296,071,875
Techno world

Suggestions: C
H
From the above table of business plan analysis, it is found that, for the first three years in A
Singapore Techno world will earn Tk. 794,000,000 if it sells services from Singapore to P
Bangladesh and Tk. 809,915,625 if it sets a fully owned subsidiary in Bangladesh. T
E
Hence, after putting the taxation impacts, considering the change in financial of Techno world, R
Singapore, you should opt to set a local fully owned subsidiary of Techno world Singapore to
deliver the services to Bangladeshi customers locally.
31
Thank you very much for taking us to your confidence. Should you require any clarification,
please do not hesitate to contact us.

Thanking you,
------------------

Question No.2:

You are a practicing-chartered accountant and focused on taxation areas. Before finalizing
business plan for the year ended 31 December 2024, ABC Ltd. (“Company”) wants to know the
effect of section 56 on computation of minimum tax and carry forward of unabsorbed
depreciation. In this regard, the Company has requested you to help them based on the
following situations:

ICAB 2024 Tax Planning 445

 AY 2025-2026
Particulars Situation-1 Situation-2 Situation-3 Situation-4
Tk. (‘000) Tk. (‘000) Tk. (‘000) Tk.(‘000)
Net income before tax as per audited 125 (30) (20) 500
financial statements
Expenditures would be disallowed 50 50 50 50
due to non-availability of appropriate
evidences
Excess perquisites 25 25 25 25
Depreciation allowances as per the 10 10 10 10
audited FS
Depreciation allowances as per the 30 30 30 30
3rd schedule
Unabsorbed depreciation - 25 50 50
allowances (opening balance)
Cash payment of salary & office rent 80 80 80 80
Loan taken without banking channel 25 25 25 25
TDS from sources mentioned in sec. 50 50 50 50
163

Other information:

1) Income of the Company falls under the sources mentioned in section 163;
2) The Company plans to make a partial of adjustment of Tk. 5,000/= out of total depreciation
allowance available in situation-4;
3) Apply 27.5% corporate tax rate and minimum tax at the rate of 3%.

Requirement: You are requested to compute tax liability for each of the illustrations provided in
the above table along with opinion on the issues in question from the standpoint of the ITA,
2023.

Solution 2:

The Chief Financial Officer

………………………………..
Dhaka, Bangladesh
……November 2024

Dear Sir:

Computation of tax liability and pertinent issues

Please refer to your request dated …………. for providing professional opinion(s) on the issue(s)
raised therein. In this connection, our analysis focuses on the following provisions of tax laws:

According the provision of section 56 of the ITA, 2023, any expenditures disallowed under
Section 55, except expenses related to perquisites, head office or intra-group expenses, royalty,
license fee, technical service fee, technical know-how fee, technical assistance fee, foreign travel,
entertainment, free sample distribution, promotional expenditure, deduction against liability,
impairment loss, Right of Use assets be taxed at the regular rate, and any adjustments,
allowances, or setting off of losses shall not be applicable in this case and the tax shall be payable

446 Business Planning: Taxation & Compliance ICAB 2024

 thereon at the regular rate. It is notable that section 56 of the ITA, 2023, has been inserted to
ensure collection of tax from the expenditures inadmissible under the provisions of section 55
of the same Act. In this connection, section 76 of the ITA, 2023, may be discussed here. As per
the said section, notwithstanding anything contained in section 76(6) or any other section, any
disallowance of expenditure under section 55, in calculating the income of a source or of a
person that is exempted from tax or is subject to a reduced rate of tax, shall be treated as income
for that source or of that person, as the case may be, and tax shall be payable on such income
at the regular rate. Section 76 as referred to above deals with exemption from tax, reduction in
tax rate, tax credit entitlement, etc.

In light of the aforementioned provisions of tax laws, we have reviewed the tax implications for
business of the Company on the basis of situations provided by you and presented below:

AY 2025-2026
Particulars Note Situation-1 Situation-2 Situation-3 Situation-4
Tk. (‘000) Tk. (‘000) Tk. (‘000) Tk.(‘000)
Net income before tax as per audited financial 1 125 (30) (20) 500
Expenditures would be disallowed due to non- 2 50 50 50 50
Excess perquisites 3 25 25 25 25
Total income before allowing depreciation (1+2+3) 200 45 55 575
Depreciation allowances as per the audited FS a 10 10 10 10
Depreciation allowances as per the 3rd schedule b 30 30 30 30
Net effect of depreciation 5 (b-a) 20 20 20 20
Unabsorbed depreciation allowances (opening
6 - 25 35 5
balance)
Depreciation allowances for the year 7 (5+6) 20 45 55 25
Income form business (excluding u/s 56) 8 (4-7) 180 - - 550
Unabsorbed depreciation allowances to be carried - - 15 45
C
Special business income u/s 56 9 80 80 80 80
Loan taken without banking channel 10 25 25 25 25
H
Total taxable income 11 285 105 105 655 A
Calculation of tax liability: P
Gorss recepits 12 5,000 5,000 5,000 5,000 T
Minimum tax on gorss recepits @3% 13 150 150 150 150 E
Income from business @27.5% 14 50 - - 151
R
Loan taken without banking channel 15 7 7 7 7
Regular tax excluding u/s 56 16 56 7 7 158
TDS u/s163 17 50 50 50 50
Tax payable (Higher of 13,14 & 16) 18 150 150 150 158 31
Tax on special business income @27.5% 19 22 22 22 22
Assessed tax liability 20 (18+19) 172 172 172 180

As regards carry forward of unabsorbed depreciation, section 71 of the ITA, 2023, states that
where, in making an assessment for any year, full effect cannot be given to the allowances
referred to in section 49 owing to there being no profits or gains chargeable for that year or such
profits or gains being less than the allowance then, subject to the provisions of section 158, the
allowance or part of the allowance to which effect 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.

While addressing limitation in respect of allowance for depreciation, 3rd Schedule of the ITA,
2023, provides that where full effect cannot be given to depreciation allowances under the
aforementioned Schedule 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, subject first to

ICAB 2024 Tax Planning 447

 carrying forward of the loss, if any, under section 70, the allowances or the part thereof to which
effect 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 adjusted against the profits.

In light of the, partial adjustment of unabsorbed depreciation allowance is not permitted by tax
laws if there is sufficient taxable profit from business for making full adjustment.

Should you have further queries in this regard, please contact us.

Yours faithfully,

Question no 3

Palak Sawdagar is an employee of GB Limited, earning a monthly salary of Taka 190,000, while
his wife, Ms. Sumi Sawdagar, works at PC Limited, a registered company under the Companies
Act 1994. Mr. Palak Sawdagar is a shareholding of PC Limited with a 20% ownership stake and
he has not engaged in any executive role.

Ms. Sumi Sawdagar receives a monthly salary of Taka 75,000 from PC Limited, along with a pick
and drop facility using a car with a 1500cc engine capacity, provided by her employer. She holds
a Taxpayers’ Identification Number (TIN) but has never filed a tax return in the past. PC Limited
has advised her to submit a tax return on time for the assessment year 2024-25 and provide
proof of submission to comply with recent changes in tax law as she holds an executive role in
the company.

Palak Sawdagar owns a house rented for Taka 35,000, including Taka 5,000 as a service charge,
with a market rental value of Taka 40,000 per month. The house was constructed at a cost of
Taka 60,00,000, fully financed by HSBC Bank with a 12% annual interest rate in the year 2020.
Mr. Palak Sawdagar paid bank interest amount of Taka 72,000 in the fiscal year 2021-22, Taka
68,000 in the fiscal year 2022-23, and expecting interest expenses of Taka 65,000 for the fiscal
year 2023-24. The house became ready for rental in July 2023, and Ms. Sumi Sawdagar has been
paying a monthly premium of Taka 5,200 for house insurance, along with a city corporation tax
of Taka 1,200 per month. While reconciling rent received from the tenant with the bank
statement, Mr. Palak Sawdagar discovered that he did not receive rent in January and February
2024 due to the house being vacant in those two months he forgot to record that.

Mr. Palak Sawdagar, using a Toyota sedan car purchased in 2016 at Taka 15,00,000, decided to
purchase another sedan car for Ms. Sumi Sawdagar at a cost of Taka 30,00,000, to be financed
through a bank loan. A tax consultant informed him that owning more than one car at a time
would increase his tax burden; therefore, he transferred his existing car to Ms. Sumi Sawdagar
at a value of Taka 5,00,000 on January 15, 2024, and decided to purchase the new car in March
2024. Considering the duty imposed by the government on imports of luxurious items, including
sedan cars, Mr. Palak Sawdagar estimated the market value of the transferred car to be Taka
20,00,000.

Mr. Palak Sawdagar pays Taka 15,000 per month for family insurance to MetLife, and PC Limited
covers children’s education expenses at a monthly cost of Taka 10,000, which Mr. Palak
Sawdagar has been considering as his income. Furthermore, Mr. Palak trusts only in risk-free
investments, therefore, he has invested an amount equivalent to Taka 10,00,000 in Government
securities in the income year 2023-24

448 Business Planning: Taxation & Compliance ICAB 2024

 Requirements:

i) Suggest tax planning strategy to minimize the Sawdagar family's tax liabilities for the
assessment year 2024-25, considering provisions of the Income Tax Act, 2023, and the
Finance Act, 2023, and quantify the amount of tax they can save.

ii) PC has initiated deducting tax at source at a 50% higher rate from the salary disbursed in
the month of December as Ms. Sumi Sawdagar failed to provide proof of submitting return
on or before 30 November 2024. Explain tax consequence if she submits return at a later
date of the Tax Day and suggest way forward in relation to excess deduction at source.

Answer to the Question 3(i):

Existing tax position of Mr. Palak Sawdagar Amount

Salary income from GB 1,90,000 x12 22,80,000
Less: 1/3rd of salary or 450,000 [lower one] 4,50,000
18,30,000
Other income from PC Limited 10,000 x12 1,20,000
Income from rent (Note-1) 3,68,333
Total income in IY 2023-24 23,18,333

Tax of Mr. Palak Income % Amount

On Taka 350,000 0% -
Next 100,000 5% 5,000
C
Next 400,000 10% 40,000
H
Next 500,000 15% 75,000
A
Next 500,000 20% 100,000 P
Rest 468,333 25% 117,083 T
Total 2,318,333 337,083 E
Investment tax credit (Note-5) 69,550 R
Tax liabilities 267,533

31
Note-1: Income from rent
Rental value 35,000 x12 4,20,000
Annual value 40,000 x12 4,80,000
Higher one 4,80,000
Less:
Interest IY 2023-24 65,000
1/3rd of Previous year's interest (Note-2) 46,667
1,11,667
Income from rent 3,68,333

ICAB 2024 Tax Planning 449

 Note-2: Previous year's interest
IY 2021-22 72,000
IY 2022-23 68,000
1,40,000
1/3rd of interest can be claimed in IY 2023-24 46,667

Note 3: The electricity bill proof was not provided, so the vacancy could not be considered
for a deduction.

Note-4: Gain tax will not be applicable on sale of personal belongings like personal Car

Note-5: Investment by Palak Sawdagar

Family Life Insurance 15,000 x12 1,80,000
Government securities 5,00,000
Total 6,80,000

Allowable investment tax credit:

3% of income 69,550
15% of investment 1,02,000
Taka 10,00,000 10,00,000
Lower one 69,550

Existing tax position of Ms. Sumi Sawdagar

Salary 75,000 x12 9,00,000
Less: 1/3rd of salary or 450,000 [lower one] 3,00,000
Taxable salary income 6,00,000

Tax of Ms. Sumi Income % Amount

On Taka 4,00,000 0% -
Next 1,00,000 5% 5,000
Next 1,00,000 10% 10,000
Total 15,000
Investment tax credit -
Tax liabilities 15,000

Note-6: Pick and drop facility is not considered as car benefit thus no income is added.

Tax planning for Sawdagar Family:

Mr. Palak is paying tax at the highest slab rate. He has invested 1 million in securities, but he
is not receiving the full tax benefit as the allowable investment in government securities is Tk.
500,000. To optimize his investment tax credit, he could consider gift of Tk. 500,000 to his
wife so that she can invest in Govt. securities. Ms. Sumi is paying insurance premiums and city
corporation tax for the house property owned by her husband. These expenses can be
covered by Mr. Palak, and they will qualify as allowable expenses against rental income,
potentially reducing the tax liability. Expenses borne by PC Limited for Mr. Palak's children
can be attributed to his wife, as she is subject to a lower tax rate compared to Mr. Palak.

450 Business Planning: Taxation & Compliance ICAB 2024

 Overall tax savings due to tax planning
Mr. Palak Amount
Previous income 23,18,333
Less: Other income from PC 1,20,000
Adjustment for rent income:
Insurance Premium 62,400
City corporation tax 14,400
Total 21,21,533

Reduction in taxable income 1,96,800

Tax save @ 25% 49,200
Less: investment tax credit lost 5,904
Total tax savings of Mr. Palak Sawdagar 43,296

Ms. Sumi Amount

Previous income 9,00,000
Children education expenses from PC Limited 1,20,000
10,20,000
Less: 1/3rd of salary or 450,000 [lower one] 3,40,000
Taxable income 6,80,000

Tax liability Income Rate Amount

first 4,00,000 0% - C
H
next 1,00,000 5% 5,000
A
Rest 1,80,000 10% 18,000
P
Total 23,000 T
Less: Investment tax credit @ 3% 20,400 E
Net tax [minimum tax] 5,000 R

Tax savings of Ms. Sumi

Previous 15,000
31
Now 5,000
Total 10,000

Thus amount of total tax saved by Sawgadar family is (43, 296 + 10,000) = 53,296

Answer to the Question 3(ii):

In general, monthly 2% delay interest on net tax liability shall be paid if return is not submitted
within the Tax Day. Moreover, investment tax credit, tax exemptions and reduce tax rate facility
shall not be eligible and tax shall be paid at usual tax rate.

However, Tax Day for submitting return of an individual is 30 November following the income
year unless otherwise allowed by the tax authority through official gazette. Moreover, Tax Day
for a new individual taxpayer submitting first time return is 30 June following the income year.

ICAB 2024 Tax Planning 451

 Since, Ms. Sumi Sawdagar is going to submit her tax return first time, her return submitting
deadline will expire on 30 June 2025. Therefore, deducting tax at a higher rate for not producing
proof of submission of return shall not be applicable for Ms. Sumi. She should communicate
specific provision of this law with her employer requesting them for deducting tax at source as
usual.

452 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 32
Gift Tax

Introduction

Examination context

Topic List

32.1 Meaning of gift

32.2 Valuation of gift

32.3 Gift Tax Authorities

32.4 Gift Tax Return

32.5 Gift Tax Rate

32.6 Exemption from gift tax

32.7 Limitation of implementing gift tax law

 Introduction

The Gift Tax Act, 1963, which was repealed in 1985 has been re-introduced under the name
“The Gift Tax Act, 1990” with the provisions almost similar to those in the act of 1963 but with
more liberal exemptions. The gift tax is chargeable on gifts executed by any person in a financial
year with effect from the 1st day of July. 1990 at the rates prescribed in the Schedule.

454 Business Planning: Taxation & Compliance ICAB 2024

 Examination context

Exam requirements

In the examination, candidates may be required to:

 Identify the nature of gift

 When gift is taxable
 Who will bear gift tax- donor or receiver
 When gift tax is payable

32.1 Meaning of Gift

“Gift” means the transfer of any immovable or movable property by one person to another
voluntarily and without any consideration of money or money’s worth.

32.2 Valuation of Gift:

The value of the property transferred as gift, other than cash, shall be determined in terms of its
value to be obtained had the property been sold in the open market on the date of gift. Where
the value of the property is not determinable at this process, its value shall be determined as per
rules.

32.3 Gift Tax Authorities

The following income tax authorities are also the gift tax authorities: -

(1) Commissioner of Taxes,

(2) Appellate Additional/Joint Commissioner of Taxes,
(3) Inspecting Additional/Joint Commissioner of Taxes,
(4) Deputy Commissioner of Taxes and
(5) Tax Recovery Officer

32.4 Submission of gift tax return

C
Any person making a taxable gift during any financial year requires to submit gift tax return to H
the Deputy Commissioner of Taxes (DCT) before the fifteenth day of September of the A
corresponding assessment year. Tax based on Gift tax return is to be paid on or before P
submission of return. T
E
32.5 Rate of Gift Tax R

On the first Taka 5,00,000/- of taxable gift ---- 5%

On the next Taka 10,00,000/- of taxable gift ---- 10% 32
On the next Taka 20,00,000/- of taxable gift ---- 15%
On the balance of taxable gift ---- 20%

ICAB 2024 Gift Tax 455

 32.6 Exemption from Gift Tax:

Gift tax shall not be applicable under Gift Tax Act for gifts made by any person in respect of the
following:

(1) Where the gifted property is situated outside Bangladesh.

(2) Where the gift is made to the Government or any local authority.
(3) Where the gift is made to the following funds or institutions for charitable purposes:

i Any educational institution (including polytechnic institute) either run by the

Government or recognized by any Education Board or any university established under
the law in force in Bangladesh.
ii Any hospital recognized or run by the Government or any local Authority or any hospital
that receives charity from the Government.
iii Any flood or disaster management fund either established or approved by the
Government.
iv Any Government approved religious or charitable institution (other than private
religious institution or fund which does not ensure the benefit of the public as a whole)
up to 20% of total income or Tk. 1,00,000/ whichever is lower.

(4) Where the gift is made to any dependent relative up to Tk. 20,000/- on the occasion of
his/her marriage.
(5) Where the gift is made to any dependent (other than wife) by way of insurance premium up
to Tk. 20,000/-
(6) Gift made under a will.
(7) Gift in contemplation of death.
(8) Gift made to son, daughter, father, mother, spouse, own brother and sister.

In addition to the above exemptions, no gift tax shall be applicable for any gift made by any
person in a financial year not exceeding Tk. 20,000/. The Government may by notification in the
official gazette exempt any class of gift or any class of person from gift tax.

32.7 Limitation of implementing gift tax law:

Gift tax law will, however, not apply in case of gifts made by:

(1) A body corporate established or constituted by or under any law.

(2) Any institution or fund, income of which is exempt from payment of income tax as per
provision of Paragraph 11 and 12 of Part 1 of the Sixth Schedule of the Income Tax Act, 2023.
(3) As per provision of Paragraph 35 of Part 1 of the Sixth Schedule of the Income Tax Act, 2023
income is exempt from tax when a capital asset is received as a gift from a spouse, parent,
or child, provided that both the donor and the recipient report it in their tax returns.
However, if the gift is transferred from abroad through banking channels, the donor does
not need to show it in their tax return.

456 Business Planning: Taxation & Compliance ICAB 2024

 Question:

Gifts Within Bangladesh, Mr. Harun made several gifts: he gifted a piece of land valued at Tk.
800,000 to his dependent sister, and a share of a firm valued at Tk. 1,000,000 to his brother in
contemplation of death. He also provided Tk. 800,000 in cash to his youngest daughter to start
a business. Additionally, he made donations totaling Tk. 510,000 to various organizations,
including the Prime Minister's Relief Fund, Khulna University, Dhaka Ahsania Mission, and Aga
Khan Development Network. Mr. Harun gifted a house in Khulna valued at Tk. 2,500,000 to his
wife and a motor car costing Tk. 800,000 to his younger brother on the occasion of his marriage.
Furthermore, he gave a house in Khulna to a friend, valued at Tk. 10,00,000, but received Tk.
200,000 in consideration for it.

Gift Outside Bangladesh, Mr. Harun donated a furnished flat in India worth Tk. 500,000 to his
wife and also gave office furniture from his Dubai business office, valued at Tk. 460,000, to his
son-in-law upon withdrawal of his investment from the Dubai.

Calculate Mr. Harun’s taxable gift and the corresponding gift tax for the income year 2023-2024.

Solution:

Mr. Harun

Computation of Taxable Gift

Income Year: 2023 - 2024
Assessment Year: 2024 - 2025

Particulates Amount Amount

Gift to dependent sister a piece of land 800,000
Less: Fully Exempted [U/s 4(1)(h)] 800,000 -

Gift to brother the share of firm in contemplation of death 1,000,000

Less: Fully exempted [U/s 4(1)(g) or (h)] 1,000,000 -

Cash donation to daughter for starting business 800,000

Less: Fully Exempted [U/s 4(1)(h)] 800,000 -

Donation to approved sectors 330,000

Less: Fully Exempted [U/s 4(1)(c)] 330,000 C
H
Donated a house at Khulna to his wife 2,500,000 A
Less: Fully Exempted [U/s 4(1)(h)] 2,500,000 P
T
Gift to the brother in the event of marriage 800,000 E
Less: Fully Exempted [U/s 4(1)(h)] 800,000 - R

Gift to a friend with inadequate consideration:

32
Value of the property 1000,000
Consideration received 200,000 800,000

ICAB 2024 Gift Tax 457

 Gift outside Bangladesh:
Donation of a flat to wife in India 500,000
Donation of furniture to son-in-law in Dubai 460,000
Total value of gift outside Bangladesh 960,000
Less: Fully Exempted [U/s 4(1)(a)] 960,000 -
Total 800,000
Less: General Exemption [U/s 4(2)] 20,000
Taxable Gift 780,000
Computation of Gift tax:
on first Tk. 500,000 @5% 500,000 5% 25,000
on balance @ 10% 280,000 10% 28,000

Total Gift Tax Tk. 53,000

458 Business Planning: Taxation & Compliance ICAB 2024

 Chapter 33
Value Added Tax

Introduction

Examination context

Topic List

30.0 Value Added Tax (VAT) system in Bangladesh

30.1 Introduction
30.2 Statutory definitions
30.3 VAT Registration & Turnover Tax Enlistment
30.4 Imposition of VAT
30.5 Manner of VAT Collection
30.6 Assessment of Net Payable Tax by the Taxpayer &
Payment Thereof
30.7 Input Tax Credit
30.8 Withholding VAT
30.9 Carryforward of Negative Net Amount & Refunds
30.10 Supplementary Duty (SD)
30.11 Books & Documents to be maintained for VAT purposes
30.12 Submission of VAT Return
30.13 VAT Authorities & Officers
30.14 Consequence of Non-compliance
30.15 Recovery of Arrear Tax
30.16 Audit and Investigation
30.17 Offence, Trial & punishment
30.18 Appeals, Revisions & Miscellaneous
Annexure A Summary of Mushak Forms
Annexure B Table showing list of VAT Rates
Annexure C Comparison between VAT & Turnover Tax
 Introduction

Learning objectives

 Understanding the concept of VAT, Turnover Tax and Supplementary Duty

 Getting familiar with the relevant rules and procedures of VAT, Turnover Tax and
Supplementary Duty
 Computation of cost for calculating VAT and computing VAT payable
 Understanding VAT rates (including reduced tax rate and specific tax amount) and base
value
 Documentation under VAT system
 Knowing the consequences of non-compliance of VAT rules and regulations

Practical significance

Value Added Tax (VAT) is an important source of revenue financing to the Government of
Bangladesh. In financial year 2024-2025, it comprises more than 38% of government tax revenue
and thus the Government heavily relies on VAT for raising fund for running a big administration.
VAT is the tax that is paid on the value added by the respective taxpayer. VAT is regulated by
the Value Added Tax and Supplementary Duty Act, 2012, Value Added Tax and Supplementary
Duty Rules, 2016, and SROs, notifications, orders, explanations made there-under. Unless
exempted, VAT is chargeable and payable on all goods imported, produced and services
rendered in Bangladesh @ 15% except on exports and deemed exports on which tax is imposed
at zero percent. Some person in some cases required to register for the purposes of VAT by
submitting application with some documents. Determination of cost on which VAT will be
computed is very important to VAT practitioners. Method and time of payment of VAT need to
be followed as per the Act and Rules. Various books of accounts and documents are required to
be maintained for VAT purposes. On certain goods and services, VAT is applicable @ reduced
rates or fixed amount which have been detailed in 3rd schedule of the VAT & SD Act 2012. In an
economy like Bangladesh where a significant portion of Government revenue comes from VAT,
knowing VAT with all technicalities is very significant. VAT & SD Act also addresses required rules
and provisions for Turnover Tax and Supplementary Duty.

There are some differences between VAT and Turnover Tax. Turnover Tax is a tax on the turnover
of a manufacturer or producer of taxable goods or a trader of taxable goods or a provider of
taxable services, as the case may be, who is not required to register for the purposes of VAT.
The rate of turnover tax has now been re-fixed at 4% on turnover. There are some guidelines,
rules and procedures on Turnover tax relating to registration, payment, books of accounts and
documents to be maintained and penalties.

Input tax is the amount VAT paid earlier by a taxpayer on his inputs. For claiming credit of input
tax some conditions are required to be fulfilled.

Supplementary duty is an indirect tax, in addition to VAT, on luxuries, not essential and not
socially desirable goods and services. The rate of supplementary duty varies from 5% to 500%.

460 Business Planning: Taxation & Compliance ICAB 2024

 Stop and think
C
Think about other types of tax and VAT. Do you realize the significance of VAT, Turnover Tax and H
Supplementary Duty? A
P
Working context T
E
The revenue collection through VAT is increasing sharply day by day. Supplementary Duty also R
has significance as sources for revenue to the Government. On the other hand, Turnover Tax is
not very significant as a source of revenue. Different methods, rules, conditions and procedures
relating to VAT and other taxes are very important to know.
33
Clients are sometime expecting expert opinion in calculating VAT and other legal procedures
relating to VAT and other taxes from accountants. Hence, accountants should have clear concept
with practical exposure in this area, so that they can take the opportunity to provide the expert
service to their clients.

ICAB 2024 Value Added Tax 461

 Examination context

Exam requirements

In the examination, candidates may be required to:

a. Demonstrate the concept of VAT, Turnover Tax and Supplementary Duty and identify the
application of tax rate.
b. Explain the registration procedures, method of computation of VAT payable, time of
payment of VAT and Turnover Tax.
c. Identify documents required for VAT administration.
d. Identify the different schedule for VAT and Supplementary Duty.
e. Identify the VAT authorities and their power and functions.
f. Explain the consequences for non-compliance of VAT rules and regulation.

Question practice

For practicing question on these topics please go through the suggested answers at the end of
this workbook.

Examiner's comments on how students tackle questions

Candidates need to be careful on different VAT bases and rates for computing VAT payable with
the respective dates of payments and the adjustments of VAT deducted/collected at sources
with VAT payable to compute the net amount.

30 Value Added Tax (VAT) System in Bangladesh

Section overview

 VAT is the tax on the value added by a taxpayer.

 Unless exempted, VAT is usually payable @ 15%.
 Some persons are not required to be registered under VAT Act.
 VAT will be paid by the importer, suppliers and provider of taxable services.
 On certain services VAT is applicable as per reduced rate or fixed amount.
 There are some specific method and time of payment of VAT.
 Some books of accounts and documents are required to be maintained by the VAT payer.
 There are clear differences between VAT, Turnover Tax and Supplementary Duty.
 The rate of Turnover Tax is 4%.
 Input tax is the amount of VAT paid earlier by a taxpayer on his inputs.
 Supplementary duty is an output tax, in addition to VAT on luxury goods and services those
are not essential and not socially desirable.
 Supplementary duty may vary from 5% to 500% for goods and from 10% to 30% for services.

462 Business Planning: Taxation & Compliance ICAB 2024

30.1 Introduction
C
Value Added Tax (commonly known as VAT) is the tax on the value-added amount by a taxpayer. H
In an economy where value addition is significant and value is added at different levels, A
Government has sufficient rationality to impose such taxes. P
T
VAT is an important type of indirect tax where impact and incidence of taxes fall on different E
persons. If tax burden can be shifted to another person then it is called indirect tax. The ultimate R
burden of VAT falls on final consumers as different persons have the mechanism to shift the
burden onto the shoulders of others. For example, the traders, on whom VAT is charged, transfer
the tax burden to subsequent traders until the goods reach the final buyers or customers who 33
cannot shift the incidence or burden to anyone else. VAT is levied on expenditure rather on
income and that is why it is sometimes called expenditure tax.

In Bangladesh, up to 30 June 2019, VAT was regulated by the Value Added Tax Act, 1991, Value
Added Tax Rules 1991; Finance Acts and various rules, regulations and notifications issued
under this Act. In the Parliament the new Value Added Tax and Supplementary Duty Act, 2012
(hereinafter referred to as the VAT and SD Act) (Act No. 47 of 2012) has already been enacted
on 10 December 2012. Moreover, in order to implement the Act, NBR issued Value Added Tax
and Supplementary Duty Rules 2016 (hereinafter referred to as the VAT and SD Rules) on 3
November 2016. Chapter two, chapter twelve and chapter fifteen, and sections 128, 132, 134,
and 135 of the new Act came into force at once. But the remaining provision of the Act along
with the Rules came into force from July 2019 vide SRO No. 168-Ain/2019/25-Mushak dated 13
June 2019 and SRO No. 169-Ain/2019/25-Mushak dated 13 June 2019 respectively.

Unless exempted by the First Schedule under section 15(3) of the VAT & SD Act, VAT is
chargeable and payable on all goods and services imported, produced or rendered in
Bangladesh @ 15% except on exports and deemed exports on which tax is imposed at zero (0)
percent.

The zero rate is an actual tax rate of VAT, the same as 15 percent. An entity may claim refund of
VAT paid on purchases and can be claimed against the liability i.e., zero. On the other hand, an
entity cannot claim any rebate/credit of VAT on purchase to produce exempted goods and has
no tax liability against which to offset it and thereby pays tax on input which must be wholly
passed on or absorbed. In this way, the zero rate allows an entity complete exemption because,
for instance, the entity can claim full amount of tax he has paid on his input and, therefore, pays
no tax, while all the previous stages have passed their tax liability fully forward. Initially it will
involve the required cost of administration without yielding any revenue. But this will bring all
economic activities under the VAT system which will help achieving the ultimate objective of
having an elastic tax system for the country.

When VAT (output tax) is imposed on “full value”, taxpayer pays VAT (output tax) at 15%; and
when VAT (output tax) is imposed on “estimated added value”, the taxpayer pays VAT (output
tax) at 1.5%, 2%, 2.4%, 4.5%, 5%, 7.5%, or 10% or Fixed amount.

VAT is computed as a percentage of the value added on goods or services. It is charged on the
value of consumption, applied at each point of transactions of goods or services from primary
production to final consumption. At every stage one has to pay as well as collect VAT before
reaching the stage of the final consumption. So, everyone, except the final consumer, does not
have to bear any VAT from his own account. Because whatever the person other than the final
consumer has paid as VAT at the time of purchase, he shall collect that amount of VAT from the
persons who shall buy his goods or services and also collect tax on value which is added by him

ICAB 2024 Value Added Tax 463

 before selling. Value addition by the seller is the difference between the selling prices of the
goods or services (Output) and the cost of raw materials (input) purchased. The amount of value
addition may consist of processing cost, such as wages, overheads etc. and profit. Thus, VAT
collection increases at every stage because of the value addition that is maximized at the final
stage. This value addition stops when any goods or a service is purchased for final consumption
and the consumer has to bear the full amount of VAT. At each point of transaction, the tax is
passed onto the shoulder of next person in the form of higher price, which consists of selling
price plus VAT. This process illustrates that a business does not bear VAT. Being at the final point
in the chain of total transaction, the final consumer bears the whole amount of the tax. The basic
procedure of VAT system is explained below with an example assuming five layers of
transactions from importer to final consumer.

Value

Value of Output / Sales /

VAT Paid on input / Import

VAT Levied on Output /

VAT Paid / Payable at

price
Value of Input / Import /
Raw materials (excluding

addition
Supplier / Consumer

invoice
Processing Cost

Sales / supplies
/Raw materials

different stage
including VAT
supplies

Total
Profit
VAT)

E = F = G = H =
A B C D I = (G-F)
(B+C+D) (B×15%) (E×15%) (E+G)
Importer: 100 10 20 130 15.00 19.50 149.50 19.50*
Producer: 130 35 15 180 19.50 27.00 207.00 7.50
Wholesaler: 180 5 20 205 27.00 30.75 235.75 3.75
Retailer: 205 5 15 225 30.75 33.75 258.75 3.00
Final 225 - - - - - - -
consumer:
Total 33.75
*Including VAT paid at import stage

The above table illustrates the computation of VAT at different stages. Except for importer, VAT
payable in column (I) is computed by deducting VAT paid on input (F) from VAT levied on output
(G). In case of importer, the process has started from him in this illustration and importer himself
is responsible to pay total VAT to the Government Treasury at this stage. However, the importer
has collected the total VAT paid to Government from his customer i.e. the producer. In other
cases, such as producer who is responsible for payment of VAT of Tk. 7.50, this amount has been
computed by deducting the VAT paid by the producer at input purchase stage (Tk. 19.50) from
the VAT levied on sale (Tk. 27) which is to be collected from the wholesaler. In other words, this
is exactly 15% of value addition (C+D) by the producer (15% of Tk. 50) as in all other cases except
importer and final consumer.

Though the above illustration gives a view that VAT is a very simple system of taxation for the
taxpayer and Government but practically this illustration reflects the system partially. Because in
Bangladesh, exceptions in VAT system are observed due to the presence of reduced rate, fixed
amount of VAT and VAT exemption etc.

464 Business Planning: Taxation & Compliance ICAB 2024

 Under the reduced rate system, reduced amount (lower than the standard rate of 15%) are
allowed to be collected from the consumers (who may or may not be the final consumers) and C
the seller cannot set off his/her input tax against his/her output tax. H
A
In case of VAT exemption, VAT is exempted at output stage and VAT paid at input stage cannot P
be set off and should be treated as cost. However, in case of zero-rated VAT (for export), the T
amount paid as VAT at input purchase stage can be recovered. E
R
Turnover tax

The VAT and SD Act has provisions for levying and collecting turnover tax. 'Turnover' refers to
33
the total amount received or due by a person against the supply of taxable goods or services at
a given time. Manufacturers and suppliers of any taxable goods or service providers (excluding
goods / services covered under compulsory registration) have no obligation to accept VAT
registration if their annual turnover is not more than Tk. 3 (three) crore. All those entities have to
be listed under turnover tax and pay turnover tax at the rate of 4% on the prescribed annual
turnover.

Supplementary Duty

Supplementary duty is also levied under the Value Added Tax and Supplementary Duty Act.
Supplementary duties are usually imposed on luxury goods, not essentials and socially
unwanted goods or services. The VAT registered person also collects supplementary duty where
applicable at the time of collection of VAT and at the time of submission of VAT deposits to the
exchequer in a separate account through treasury challan. Since the supplementary duty paid
by a registered person is not considered as input tax, he cannot avail an input tax rebate against
the supplementary duty. However, if the goods or services are exported, the input tax can be
refunded along with the supplementary duty (decreasing adjustment allowed) paid on the
goods used in the production or service of the exported goods.

For the financial year 2024-25, there are 19 levels of supplementary duty through the Second
Schedule to the VAT Act (Section 55 of the VAT and SD Act). These are 0%, 5%, 10%, 15%, 20%,
25%, 30%, 40%, 45%, 55%, 60%, 66%, 100%, 150%, 200%, 250%, 300%, 350% and 500%.

30.2 Statutory definitions

30.2.1 Statutory definitions as per VAT & SD Act 2012

Important terms relating to VAT are defined in section 2 of the VAT & SD Act. Some of the
definitions are presented below with specific references:

(1) "Economic activity" means any activity carried on regularly or continuously for making
supply of any goods, services or immovable property, and

(a) also includes the following activities, namely-

(i) any business, profession, vocation, means of earning livelihood, manufacture or

undertaking of any kind, whether or not for profit;
(ii) Supply of any goods, service or property made under any lease, license, or a similar
arrangement,
(iii) any one-off initiative in the nature of a commercial activity or enterprise; or
(iv) any activity carried out at the beginning or at the end of such an activity; but

ICAB 2024 Value Added Tax 465

 (b) shall not include the following activities, namely-

(i) any service rendered by an employee to his employer;

(ii) any service rendered by any director of a company:
provided that the services rendered by a director, who holds the office of the
directorship for the purposes of the business of the company, shall be regarded as
an economic activity;
(iii) any recreational pursuit or hobby carried on a non-commercial basis; or
(iv) any prescribed activity carried on by the Government without any commercial
motive; [section 2(6)].

(2) "Advance tax" means any tax payable in advance under section 31(2) on a taxable import;
[section 2(8)].

(3) "Resident" means an individual who –

(a) normally lives in Bangladesh; or

(b) stays in Bangladesh for more than 182 (one hundred and eighty-two) days in a current
calendar year; or
(c) stays in Bangladesh for more than 90 (ninety) days in a calendar year and stayed in
Bangladesh for more than 365 (three hundred and sixty-five) days during the four
immediately preceding calendar years; and also includes the following entity, namely—
i a company, if it is incorporated under the prevalent laws of Bangladesh or its center
of control and management is in Bangladesh;
ii a Trust, if a Trustee thereof is a resident of Bangladesh or the center of control and
management of the Trust is in Bangladesh;
iii an association of persons other than a Trust, if it is formed in Bangladesh or its center
of control and management is in Bangladesh;
iv all government entities; or
v a property development joint venture; [section 2(15)].

(4) "Input" means input means all raw materials, laboratory reagents, laboratory equipment,
laboratory accessories, any particular used as fuel, packing materials, services, machines and
parts of machines.
Following goods and services will not be considered as input:
(a) Land, labour, building, office equipment and fixtures, buildings/ infrastructures
construction, maintenance, repair, renovation
(b) All furniture, office supplies, stationary materials, refrigerator, air conditioner, fan,
lighting materials, generator purchase and repair
(c) Interior design, architecture planning and design
(d) Purchase, Lease and rental payments for transportation
(e) Travelling, entertainment, goods and services related to employee welfare related
activities
(f) Rentals for office premises, showrooms or similar place of business establishments,
called by whatever name
Provided that goods or service purchased or acquired by the trader as per third schedule of
the VAT and SD Act, 2012 will also be included in the definition of input. [section 2(18Ka)]

466 Business Planning: Taxation & Compliance ICAB 2024

 (5) "Input tax" means the VAT (except advance tax) paid by any registered person at import
stage at the time of import of goods or service as input and VAT paid against local purchase C
or collect of goods or service as input; [section 2(19)]. H
A
(6) "Output tax" means the VAT and supplementary duty payable by any registered person for P
the following activities, namely— T
E
(a) supply of any taxable goods, service or immovable property by such person; or R
(b) import of any taxable service by such person; [section 2(20)].

(7) “Withholding Entity” means:

33
a) a Government entity;
b) a non-government organization approved by the NGO Affairs Bureau or the Directorate-
General of Social Welfare;
c) a bank, insurance company or a similar financial institution;
d) a educational institution of secondary level or above;
e) a limited company; or
f) any person or organization with an annual turnover of more than 10 Crore Taka. [section
2(21)]

(8) "Import" means bringing in any goods from outside to within the geographical boundary of
Bangladesh; [section 2(16)].

(9) "Imported service" means service supplied from outside Bangladesh; [section 2(17)].

(10) "Electronic Service" means the following services, when provided or delivered on or
through a telecommunications network, a local or global information network, or similar
means, namely—

• websites, web-hosting, or remote maintenance of programs and equipment

• software and the updating thereof delivered remotely
• images, texts, and information delivered
• access to databases
• self-education packages
• music, films, and games; and
• political, cultural, artistic, sporting, scientific and entertainment broadcasts and telecasts
and events, including telecasts; [section 2(18)].

(11) "Tax" means VAT, turnover tax, supplementary duty, and shall in relation to realization of
arrears, also include any interest, monetary penalty or fine; [section 2(24)].

(12) "Tax Invoice" means a document issued by any supplier under section 51; [section 2(25)].

(13) "Tax assessment" means an assessment of net payable tax by any tax payer under chapter
five; [section 2(27)].

(14) "Tax determination" means determination of tax by appropriate officer under chapter
eleven; [section 2(28)].

(15) "Tax fraction" means the following fraction, namely:

ICAB 2024 Value Added Tax 467

 R
where R is the VAT rate specified in section 15(3); [section 2(29)].
100 + R

(16) "Tax period" means-

(i) in relation to VAT and supplementary duty, one month of the Christian Calendar; or
(ii) in relation to turnover tax, every three- month- period ending on 31 March, 30 June, 30
September or 31 December; [section 2(30)].

(17) "Taxable import" means any import, other than an exempt import; [section 2(31)].

(18) "Taxable supply" means a supply other than an exempted supply, which is made through
the process of economic activities; [section 2(32)].

(19) "Tax rate" means, depending on the context-

a. VAT rate specified in section 15(3);

b. supplementary duty rate specified in section 55(4);
c. turnover tax rate specified in section 63(1); [section 2(33)].

(20) “Company” means an entity incorporated as a company under any law prevailing in
Bangladesh or in any other country [section 2(38)].

(21) "Centrally registered entity" means entity centrally registered under section 5; [section
2(37)].

(22) “Credit note” means any document issued by the taxpayer in support of a decreasing
adjustment. [section 2(39)]

(23) "Turnover" means, in relation to a person, all the money received or receivable by such
person within a prescribed time or tax period against the supply of taxable goods or the
rendering of taxable services manufactured, imported or purchased by means of his
economic activities; [section 2(42)].

(24) “Debit note” means any document issued by the taxpayer in support of an increasing
adjustment. [section 2(44)]

(25) "Enlistment threshold" means the limit of Taka 50 (fifty) lakh as turnover of an economic
activity of any person in a 12 (twelve) month- period, but does not include the following,
namely-

(a) the value of an exempted supply;

(b) the value of sale of a capital asset;
(c) the value of a sale of an organization of economic activities or any portion thereof; or
(d) the value of a supply made as a consequence of permanently closing down an economic
activity; [section 2(48)].

(26) “Fixed place" means any of the following places at or through which economic activities
inside or outside Bangladesh are carried on, namely—

a) a place of management;
b) a branch, an office, a factory, or a workshop;

468 Business Planning: Taxation & Compliance ICAB 2024

 c) a mine, a gas well, a quarry for extraction of stones or any other similar mineral resource;
or C
d) a location of any construction or installation project; [section 2(52)]. H
A
(27) "Registration threshold" means the limit of Taka 3 (three) Crore as turnover of an economic P
activity of any person in a 12 (twelve) month-period, but does not include the following, T
namely- E
R
(a) the value of an exempted supply;
(b) the value of sale of a capital asset;
(c) the value of a sale of an organization of economic activities or any portion thereof;
33
(d) the value of a supply made as a consequence of permanently closing down an economic
activity;
provided that this registration threshold shall not apply while registering any person
under clause (gha) of sub-section (2) of section 4 [section 2(57)].

(28) "Fair market price" means—

(a) the consideration for a supply arrived at on the basis of a normal relation between a
buyer and a seller, who are not associated with each other;
(b) if it is not possible to arrive at a fair market price as prescribed in clause (a) above, it
would then be the consideration of a similar supply made previously under similar
circumstances;
(c) if it is not possible to arrive at a fair market price by the above means, it may be
determined by the Board on the basis of an objective approximation of considerations
arrived at in the course of normal business relations among buyers and sellers, who are
not associated with one another; [section 2(58)].

(29) "Consideration" means the money paid or payable, whether directly or indirectly, in
consequence of, or as an inducement to, a supply, or the fair market price of a thing paid or
payable in lieu of cash, and also includes the money realized or realizable on the following
accounts, namely—

(a) any tax imposed under this or any other Act that is—
i) payable by the supplier on, or by reason of, a supply; and
ii) included in, or added to, the price charged to the recipient;
(b) any money realized as service charge; or
(c) any money payable in relation to a loan agreement under finance lease or hire purchase
and included in the consideration for supply of goods under hire purchase or finance
lease; but does not include any discount in price given at the time of a supply; [section
2(59)]

(30) “Supply of goods” means-

a) the transfer of right of goods through sale, exchange, or sale otherwise; or

b) giving the right to use the goods on lease, rent, installment, hire purchase or by any
other means, and it also includes the sale of goods under finance lease. [section 2(61)].

(31) "Deemed export" would mean to include one or more of the following supplies, namely—

(a) supply of any goods or service in a prescribed manner against foreign currency and
destined for consumption outside Bangladesh;

ICAB 2024 Value Added Tax 469

 (b) supply of any goods or service in a prescribed manner within the territory of Bangladesh
against foreign currency through an international tender; or
(c) supply of any goods or service in a prescribed manner within the territory of Bangladesh
against foreign currency under cover of a local letter of credit; [section 2(62)].

(32) "Representative" means—

(a) for a mentally or physically challenged individual, a guardian or a manager appointed

by him;
(b) for a company other than a company in liquidation, the chief executive officer of the
company or any person appointed by the chief executive officer;
(c) for a partnership, a partner thereof;
(d) for a Trust, any Trustee of the Trust or an executor or administrator of such Trust;
(e) for an association of persons, its chairman, secretary or the treasurer;
(f) for a government entity, the chief executive officer of the entity or any person appointed
by the chief executive officer;
(g) for a foreign government, an officer appointed by such foreign government;
(h) for a non-resident, any VAT Agent appointed by him;
(i) VAT consultant appointed by any person; or
(j) any other prescribed representative; [section 2(63)].

(33) "Manufacturing" means—

(a) transforming or reshaping of any substance by processing individually or in combination

with any other substance, material or components of production for changing,
transforming or reshaping it into a different specific substance or goods so that it
becomes useable differently or specifically;
(b) any incidental or related processes required to complete the production of goods;
(c) any printing, publication, lithography or engraving processes;
(d) any assembling, mixing, cutting, liquefaction, bottling, packaging or repackaging; or
(e) all processes adopted for production or manufacture of goods, including intermediary
or an incomplete process; [section 2(65)]

(34) "Increasing adjustment" means any of the following adjustments, namely-

(a) an increasing adjustment in respect of withholding tax;

(b) an increasing adjustment required for an annual re-calculation;
(c) an increasing adjustment if a payment is not made through banking channels;
(d) an increasing adjustment for goods put to a private use;
(e) an increasing adjustment on being registered;
(f) an increasing adjustment on cancellation of registration;
(g) an increasing adjustment for a change in the VAT rate
(h) an increasing adjustment for less paid VAT in any earlier tax period;
(i) an increasing adjustment for the payment of any interest, monetary penalty, fine, fee,
etc.; or
(j) any other prescribed increasing adjustment; [section 2(71)].

(35) “Person" means any natural person, and also includes the following entities, namely-

a) a company;
b) an association of persons
c) a government entity a foreign government or a department designated, or any official
appointed, by it
d) an inter-state or international organization

470 Business Planning: Taxation & Compliance ICAB 2024

 e) a joint venture for property development or any other similar initiative; or
C
f) other business organization; [section 2(74)].
H
(36) "Association of persons" means any partnership, Trust or any similar association of persons, A
but does not include any company or unincorporated joint venture; [section 2(75)]. P
(37) "Business identification number" means a unique business identification number T
mentioned in the VAT registration certificate or turnover tax certificate issued to a registered E
or enlisted person; [section 2(76)]. R
(38) "Value" means-

a. the value of import specified in section 28; or 33

b. the value of supply specified in section 32; [section 2(78)].
(39) "Value added tax" or "VAT" means the value added tax imposed under section 15; [section
2(79)].
(40) "Export" means any supply from inside to outside the geographical limits of Bangladesh in
exchange of foreign currency, and also includes a “deemed export”. [section 2(82)]
(41) "Adjustment event" means any of the following events, namely—

(a) cancellation of any supply;

(b) alteration of the consideration for any supply;
(c) return of any supplied goods, in part or in full, to the supplier;
(d) conversion of a supply into a zero-rated or an exempted one as a result of an alteration
in the nature of such supply; or
(e) any other prescribed event; [section 2(87)].
(42) "Supplementary duty" means the supplementary duty imposed under section 55; [section
2(89)].
(43) "Goods subject to supplementary duty" means any goods specified in the second schedule;
[section 2(90)].
(44) "Service subject to supplementary duty" means any service specified in the second
schedule; [section 2(91)].
(45) “Withholding tax deduction certificate" means a document specified in section 53; [section
2(92)].
(46) "Government entity" means –

a. a government or any of its ministries, divisions, or attached departments;

b. a semi- government entity or an autonomous body;
c. a state-owned enterprise; or
d. a local authority, council, or a similar organization; [section 2(93)].
(47) "Supply" means any supply, and it includes the following namely-

a. supply of goods;
b. a supply of immovable property;
c. a supply of services; or
d. a combination of supplies of the above clauses (a), (b) and (c); [section 2(94)].

ICAB 2024 Value Added Tax 471

 (48) "Time of supply" means—

(a) in relation to supply of goods, the time when the possession of the goods are conferred
or they are removed;
(b) in relation to supply of services, the time when the services are rendered, generated,
transferred or assigned; or
(c) in relation to supply of any immovable property, the time when the property is delivered
or created or transferred or assigned; [section 2(96)].

(49) "Associate" means such a relation between two persons as would make one act or
reasonably expected to act in accordance with the intention of the other, or make both act
or reasonably expected to act in accordance with the intention of a third person, and it also
includes the following persons, namely—

(a) a partner of a partnership;

(b) a shareholder of a company;
(c) a Trust and a beneficiary of such Trust; or
(d) a joint venture for property development and the landowner as a partner of that joint
venture, builder, or other related person;
(e) representative, VAT Agent, distributor, licensee or persons with similar relationship
Provided that persons with employment relations does not include in this [section 2(97)].

(50) "Service" means any service but does not include any goods, immovable property and
money; [section 2(99)].

(51) "Supply of service" mean such a supply as is not a supply of goods, money or immovable
property, which, without prejudice to the generality shall include the following, namely-

a. a grant, assignment, termination, or conferment of a right

b. making a facility, an opportunity, or an advantage available
c. an agreement to perform an act, to refrain from performing an act or accepting a
situation or to tolerate an act or a situation; and
d. the issuance, transfer or conferment of a license, permit, certificate, concession,
authorization, or a similar right; [section 2(100)].

(52) "Immovable property" means title or right on immovable property where irrespective of
whether land, or any building established on land or any structure permanently attached or
established on it or not; [section 2(101)].

(53) "Supply of immovable property" means to include the following supplies-

a) An interest in, or right over, land;

b) A personal right consisting of an invitation to confer a right or interest on land;
c) Issuance of a license to occupy land including supply of residential accommodation or
a contractual right exercisable over, or in relation to, land;
d) A right to acquire anything mentioned in clause (a) (b) and (c) or the option to exercise
that right in future; [section 2(102)].

(54) "Decreasing adjustment" means any of the following adjustments, namely—

(a) a decreasing adjustment for the money paid as advance tax;

(b) a decreasing adjustment in respect of withholding taxes against provided supply by
supplier;

472 Business Planning: Taxation & Compliance ICAB 2024

 (c) a decreasing adjustment applicable as a result of an annual re-calculation;
(d) a decreasing adjustment against credit note issue; C
(e) a decreasing adjustment where there is a decrease in the VAT rate; H
(f) a decreasing adjustment claimed for a negative net amount carried forward from a A
previous tax period; P
(g) a decreasing adjustment allowed for VAT overpaid in a previous tax period; T
(h) any other prescribed decreasing adjustment. [section 2(103)]. E
R
30.2.2 Statutory definitions as per VAT & SD Rule 2016

(1) "Import value" means the value ascertained as per section 25 and 25A of the Customs Act,
33
1969 (IV of 1969); [rule 2(kha)].

(2) "Contract manufacturer" means the manufacturer, who manufactures goods under contract
in exchange of consideration, using input supplied by the brand owner or his own input;
[rule 2(khakha)].

(3) "Related person" means two persons registered or enlisted under the Act, who hold a
minimum of 50 (fifty) percent shares of the same ownership; [rule 2(cha)].

(4) "Backward linkage industry" means any industrial undertaking which supplies goods or
services against Inland Back-to-Back LC or Inland LC in foreign currency to any registered
person who is under an obligation in the Inland Back-to-Back LC to supply goods or services
to an Actual exporter in exchange of foreign currency; [rule 2(chacha)].

(5) "Actual exporter or exporter" means such person or establishment who directly exports to
Export Processing Area or outside Bangladesh its produced goods or services or goods or
services collected otherwise, observing the formalities laid down in the provisions of Export
Policy Order published from time to time by the Government and foreign exchange related
provisions published from time to time by Bangladesh Bank; [rule 2(chhachha)].

(6) "Supply under barter process" means such a supply which is transacted between two
related persons; [rule 2(neo)].

30.3 VAT Registration & Turnover Tax Enlistment

When registrations are required for the purposes of VAT

(1) Each of the following persons shall, from the first day of a month, be required to be
registered for VAT, namely—

(a) a person whose turnover exceeds the registration threshold (i.e. Tk. 3 crore) within a 12
(twelve)- month-period closing at the end of the month preceding that month; or
(b) a person whose estimated turnover exceeds the registration threshold (i.e. Tk. 3 crore)
within the succeeding 12 (twelve)- month-period beginning at the start of the preceding
month.

Example: Assume that today is 15 July 2024. XYZ Ltd prepared its financial statements for YE 30
June 2024 and reported sales revenue is Tk. 30,500,000

ICAB 2024 Value Added Tax 473

 Assume that today is 27 July 2024. ABC Ltd prepared its financial statements for the month of
June 2024 and reported sales of Tk. 2,000,000. However, the company is expecting its average
revenue per month will be Tk. 2,700,000 for next 11 month.

XYZ 1: Actual sales: XYZ Ltd. is required to obtain VAT registration.

ABC 2: Projected sales: ABC Ltd. is required to obtain VAT registration.

Mandatory Registration

Every person carrying on the following economic activities must be registered for VAT
regardless of the turnover threshold, if he—

(a) supply or manufacture or import goods or services which are subject to supplementary duty
in Bangladesh;
(b) supply goods or service or both against any contract or work order or through participating
in the tender;
(c) Involved in any export and import business
(d) Establish branch office or liaison office or project office of a foreign organization
(e) Appointed as VAT agent
(f) Engaged in economic activities related to supplies, manufactures or imports of specific
goods or services or in any specific area as determined by the National Board of Revenue
(NBR)

Additionally, as per General Order (GO) No.17/Mushak/2019 dated 17 July 2029, mandatory
VAT registration is applicable for those who manufacture goods, supply services and, goods as
per Table 1, 2 & 3 respectively of the said GO, irrespective of their turnover being below the
VAT registration threshold.

Example

SL Content Example
1 Table-1 Manufacturer of goods Chocolate, noodles, biscuit, soap, detergent, plastic
goods, leather goods, wooden goods, all kinds of
goods made of ceramic and porcelain, electric bulb
2 Table-2 Service provider Construction firm, consultancy firm and supervisory
firm, procurement provider, human resources supply
or management organization, ITES
3 ► Super shop, shopping mall Table 3: Cement, all kinds of goods made of ceramic
irrespective of place and porcelain, GP Sheet/ CI Sheet, MS products,
► Goods under table-3 in case of sanitaryware, aluminum fittings, all kinds of electric
supply at trading stage by and electronics goods including air conditioner,
organization situated within refrigerator, television.
the area of district town and
city corporation

Unit or Central Registration

(1) If any person preserves centrally all accounts, tax deposit and VAT records in automated
system through software and records of economic activity relating to the supply of identical
or similar goods or service or both from two or more places, then, may take one central VAT
registration in prescribed conditions and procedures.

474 Business Planning: Taxation & Compliance ICAB 2024

 Provided that in spite of the supply of identical or similar goods or services, if accounts, tax
payment and records of economic activities of a unit is maintained separately then separate C
registration shall have to be taken for each unit. H
A
Any person, involved in supply under special schemes of tobacco products as per section P
58, cannot obtain central registration. T
E
On the other hand, there is a guideline for cigarette manufacturer as to transfer of input, R
machinery, spare parts and supply of manufactured cigarette (Nothi No.
08.01.0000.068.24.002.15/250 dated 31 August 2021)
33
NBR has also issued an SRO No. 263-Ain/2019/79-Mushak dated 18 August 2019 which
further specifies the following conditions required to be satisfied for obtaining central VAT
registration:

Applicability

a. As per (Ka) of sub-rule (2) of the said SRO if any manufacturer produces and supplies
identical or similar goods from one or more places.
b. As per (Kha) of sub-rule (2) of the said SRO, if any commercial importer after importing
goods supplies the same through its owned and controlled sales unit.
c. As per (Ga) of sub-rule (2) of the said SRO, if any trader supplies procured or collected goods
through its owned and controlled sales unit.
d. As per (Gha) of sub-rule (2) of the said SRO, if any service provider provides services of
identical or similar nature through their various owned and controlled branches.
e. As per (Uma) of sub-rule (2) of the said SRO, where a manufacturer, after manufacturing,
supplies goods from one or more places through self-owned and controlled sales center
after paying 15% VAT or reduced rate or specific tax as mentioned in the third schedule
provided that it will not be applicable in case of conditional SRO, where exemption is
granted at manufacturing stage for additional part of specific rate
f. As per (cha) of sub-rule (2) of the said SRO, where a manufacturer, after manufacturing,
supplies goods from one or more places after paying applicable VAT through different self-
owned and controlled sales center or depot or warehouse.

As per the SRO No. 263-Ain/2019/79-Mushak dated 18 August 2019, “Similar Goods” means
homogeneous according to nature of consumption/use, such as medicine, electronics goods,
food, cosmetics, toiletries, plastic goods etc. and its packaging or intermediate input.

Example 1: ABC Company owns 2 factories, 1 central depot, 3 regional depots and 6 sales
depots. Factory-1 manufactures mobile phones and laptops of different model and price.
Factory-2 also manufactures TV, fridge and some other kinds of electronic items. The products
manufactured by the two factories are first transferred to the central depot, which are then stored
in regional depots. Finally, these products are sold to distributors via the sales depots. All books
of accounts and records are maintained centrally in automated system through software.

Question: Will the company be eligible for central registration?

Solution: The company maintains the records of economic activity centrally in automated system
through software and manufactures, stores and supplies “similar goods” (i.e., as it is categorized

ICAB 2024 Value Added Tax 475

 as electronics items) from all their factories, central depot, regional depots and sales depots
respectively. Hence, ABC company is eligible to obtain central registration for all their units.

Implication of central registration in case of intercompany goods and service transfer:

If goods and services are transferred within units of centrally registered company, then this kind
of movement will not be treated as a supply, therefore input/output tax will not arise against the
supply.

Procedure for VAT registration

Each person who has obligation to take registration, prior to the passage of 15 days from the
day on which obligation for registration has been transpired shall submit application for VAT
registration to the concerned Divisional Officer in form “Mushak-2.1” along with required
information. The application can also be made online.

Documents to be submitted for VAT registration are as follows:

(a) Trade License;

(b) Partnership deed/ MOA, AOA/ Relevant ownership certificate.
(c) TIN Certificate (if any);
(d) IRC/ERC Certificate (if any);
(e) Incorporation certificate.
(f) List of all related selling centers in the case of “central registration”;
(g) List of all input along with HS code;
(h) BIDA Permission/registration certificate (for manufacturer);

476 Business Planning: Taxation & Compliance ICAB 2024

 (i) Passport and e-TIN of shareholders.
(j) Bank Solvency Certificate. C
H
Upon successful submission of Mushak-2.1, the Divisional Officer will issue a certificate of VAT A
registration in “Mushak-2.3” containing a business identification number. P
T
At the time of obtaining online VAT registration, the concerned officer may: E
R
• Physically visit the registered company address in order to check all the relevant documents.
• If the entity does not physically exist in the registered address and any important information
provided is proved to be false information, then the officer will recommend to commissioner
33
for cancelation of VAT registration

VAT registration by non-resident

A non-resident having no fixed place in Bangladesh and providing electronic service, etc. to the
unregistered person in Bangladesh is required to take VAT registration as non-resident. There
is a definition of electronic service in section 2(18) of the VAT and SD Act.

Appointment of VAT agent by non-resident

A non-resident, who does not carry on an economic activity from a fixed place in Bangladesh,
shall appoint a VAT agent.

Such VAT Agent of a non-resident shall ensure all responsibilities and carry out all activities of
the non-resident. However, the non-resident shall be liable for the payment of all dues including
taxes, fines, penalties, and interests that may be imposed on the non-resident.

The VAT registration of the economic activities by a VAT agent shall be in the name of the
principal.

Use of Business Identification Number (BIN)

a) All imports- exports except baggage imports.

b) Registration of land or building in the name of registered or enlisted person.
c) Obtaining Import Registration Certificate (IRC) and Export Registration Certificate (ERC).
d) Making any supply to a withholding entity.
e) Participation in any tender.
f) Enlistment in any organization.
g) Approval of Bond License.
h) Approval of bank loan in favor of registered or enlisted person.
i) In any other case determined by an order of the Board.

Voluntary VAT Registration

Any person making a taxable supply in the process of economic activities, who is not required
to be registered, may apply for voluntarily registration to the Commissioner.

Once one obtains voluntary VAT registration, all the provisions of the VAT & SD Act, 2012 shall
be binding on them as on other registered persons and, they will need to continue being
registered for at least 1 year from the date of registration before being eligible for cancellation.

ICAB 2024 Value Added Tax 477

 Enlistment for Turnover Tax

Concept of Turnover Tax

Turnover Tax is a tax, as an alternative to VAT, on the turnover of a manufacturer or producer of

taxable goods or a trader of taxable goods or a provider of taxable services, as the case may be,
whose turnover is within the turnover threshold as mentioned in section 2(48) of the VAT & SD
ACT, 2012.

Turnover Tax is administered under VAT and SD Act and Rules. It is a liberal and easier tax
treatment for the small enterprises (supplies and services).

Turnover means, in relation to a person, all the money received or receivable by such person
within a prescribed time or tax period against the supply of taxable goods or the rendering of
taxable services manufactured, imported or purchased by means of his economic activities

Turnover Tax means the tax payable on the said total money under section 63 of VAT & SD Act,
2012.

Person eligible for enlistment for Turnover Tax

If a person’s yearly turnover exceeds Tk. 50 lac (enlistment threshold) but is not more than tk. 3
Crore (registration threshold), such person is exempt from VAT, but is liable to pay Turnover Tax.

Please note that the amount of revenue will be calculated for 12 months- period closing at the
end of each quarter.

Example: Assume ABC Ltd. is incorporated in 20 February 2023 and turnover will be as follows:

Accumulated
Timeline Turnover (Tk.)
turnover (Tk.)
31 March 2023 0 0
30 June 2023 1,000,000 1,000,000
30 September 2023 1,200,000 2,200,000
31 December 2023 1,500,000 3,700,000
31 March 2024 2,000,000 5,700,000

At the quarter ended 31 March 2024, total turnover exceeds the enlistment threshold limit Tk.
5,000,000 therefore “ABC Ltd.” needs apply for enlistment within 30 days from end of the
quarter i.e., 30 April 2024.

Procedure for Enlistment for Turnover Tax

If the annual turnover of any supplier of goods or provider of services is above Tk. 50 lac and
does not exceed Tk. 3 Crore, he may apply to the Divisional Officer of VAT in form Mushak-2.1
for enlistment for the purposes of turnover tax. If the Divisional Officer is satisfied as to the
turnover, he will issue the certificate of Enlistment in form Mushak-2.3 within 3 working days of
the application.

Once enlisted, no renewal for enlistment is required. No fee is payable for enlistment for the
purposes of turnover tax.

478 Business Planning: Taxation & Compliance ICAB 2024

 If, after enlistment, the turnover of an enlisted person exceeds Tk. 3 Crore during a continuous
period of 12 months, he will need to apply within next 30 days after the end of 12 months for C
VAT registration to the VAT Divisional Officer in form Mushak-2.1. H
A
Registration or enlistment, by the Commissioner, Suo moto, of persons required to be P
registered or enlisted: T
E
If, after proper enquiry, the Commissioner is satisfied that a person was required to be registered R
or enlisted but failed to make an application, he shall‚ Suo moto‚ register such person for VAT or
enlist him for turnover tax and issue the appropriate certificate.
33
Responsibility of a registered or enlisted person to display certificates:

Every registered or enlisted person shall display the VAT registration certificate or turnover tax
certificate, or a certified copy thereof, in such a fixed place of his economic activity as makes it
easily visible.

Cancellation of VAT Registration:

Registered person may apply for cancellation of VAT registration to the respective divisional
officer through Form “Mushk-2.4”, If-

a) He fails to commence economic activity following registration.

b) He closes his economic activity.
c) His economic activity has been declared as exempted.
d) His annual turnover falls below the limit of registration for 2 consecutive years.

If any application is filed under Sub-Rule (1), the Divisional Officer after proper enquiry about
the matter-

(a) If he considers the reasons for the cancellation of registration to be proper, shall suspend
the registration temporarily and make him informed; or

(b) If he does not consider the reasons for the cancellation of registration to be proper or if the
application is incomplete or if for any other reason deems that it is not proper to cancel the
registration, he will suspend the registration temporarily or take any other decision by giving
the person an opportunity of being heard and inform him.

Within 15 (fifteen) days of submission of final return, if the information contained therein are
found to be proper following its verification, the Divisional officer shall cancel the registration.

If registration of a registered person is cancelled, then he shall:

 Refrain from using or issuing tax invoice, withholding VAT certificate, receipt, credit note,
debit note, etc. at the earliest
 Return the VAT registration certificate and all its certified copies to the respective officer and
pay the arrears of tax and submit his final VAT return

Cancellation of Turnover Tax Enlistment:

An enlisted person may file application to the divisional officer in form “Mushak-2.4” for
cancellation of his enlistment for the following reasons, namely-

ICAB 2024 Value Added Tax 479

 a. if he ceases to carry on any economic activity;
b. if the turnover of his economic activity remains below the enlistment threshold
proportionately for three consecutive tax periods.

If an application is filed under Sub-Rule (1), the Commissioner following proper enquiry-

a) shall inform the person after temporarily suspending his enlistment if there are valid reasons
for the cancellation of his enlistment; or

b) if the reasons for the cancellation or enlistment are not proper or if the application is
incomplete or if for some other reasons it is not proper to cancel the enlistment, the
Commissioner shall inform the person temporarily suspending his enlistment or taking any
other lawful decision after giving him an opportunity of being heard.

If the enlistment of any enlisted person is temporarily suspended, he–

(a) will desist from all the activities related to Turnover Tax immediately; and
(b) will return to the Divisional officer enlistment certificate as well as all its attested copies within
15 (fifteen) days of temporary suspension and if there is arrear due, he will pay it and will
submit final Turnover Tax return.

Informing changes in registration/enlistment:

Every registered or enlisted person, is required to inform the Divisional officer regarding any
change in following areas relating to his economic activity in form “Mushak-2.1” for online
submission and in form “Mushak-2.4” for hard copy application within 15 days of change of
information:

 name or type of the business or any other commercial name;

 address or any other contact details;
 places of his economic activity;
 any bank account of such person;
 nature of one or more of the economic activities;
 transfer in ownership or partnership;
 any other prescribed information.

Informing change in place of business:

If and registered or enlisted person needs to change the place of business, he has to submit
application to the respective Divisional Officer where he is registered or enlisted 15 (fifteen) days
prior to that change.

30.4 Imposition of VAT

VAT shall be imposed and payable on the taxable import and taxable supply; and the payable
amount of VAT shall be assessed and determined by multiplying the applicable VAT rate with
the value of the taxable import or of the taxable supply.

The rate of VAT

As per section 15 of VAT & SD Act, VAT shall be imposable at:

• 15% on taxable import or taxable supply

480 Business Planning: Taxation & Compliance ICAB 2024

 • Reduced rate of VAT or specific amount of VAT for the specific goods or service mentioned
in the 3rd Schedule of VAT & SD Act, 2012 C
• 15% VAT instead of reduced rate of VAT or specific amount of VAT as per 3rd Schedule H
A
Particulars Rate P
Standard Rate 15% T
Reduced Rate 5%, 7.5%, 10%, Specific Tax amount E
Other than Standard Rate 2% for: R
• Petroleum nature products
• 1-1,600sqft for Building Construction firm
• Land Development Organization 33
• Flat re-registration
2.4% - Medicine
4.5% - for 1,601sqft above for Building
Construction firm
Trade VAT (except traders of Petroleum 5%
nature products and Medicine)
Wholesale traders 1.5%

Provision related to Wholesale traders-

Wholesaler is such trader, who sells the same types limited variety of goods in a single Challan
to the retailer or wholesaler at a large amount and the place at which it is traded is known as
wholesale market. However, If the wholesaler also sells goods to the final consumer in a lower
quantity of amount, he will be treated as Wholesaler.

However, the percentage of retail sell cannot exceed more than 20% of total sales of a tax period.
VAT rate for Wholesale traders is 1.5% on its sales.

Conditions

 Applicable for wholesale selling of Clothes (including Saree, lungi, three-pieces etc.) and
paper related goods;
 Certificate according to Annexure-Kha has to be received from the Divisional officer based
on approval of respective Commissioner;
 No refund of AT

VAT records:

• Issuance of tax invoice in chronological manner in form Mushak- 6.3(ka) as per Annexure-Ga
during supply of goods
• Maintaining records in form Mushak -6.2.1(Ka) as per Annexure-Gha
• Submission of VAT return in form Mushak-9.1 after end of tax period.

Persons liable to pay VAT

• In relation to taxable import – the importer

• In relation to any taxable supply in Bangladesh – the supplier
• In relation to any taxable supply of imported service – the recipient of supply
• In relation to other cases – Supplier or recipient of supply

ICAB 2024 Value Added Tax 481

 Supplies made in Bangladesh:

The following supplies shall be treated to be made in Bangladesh namely—

a. any supply made by any resident;

b. any supply made by a non-resident carrying on an economic activity at or through a fixed
place in Bangladesh;
c. any supply other than one mentioned in clause (b) made by a non-resident if the supply-
(i) relates to immovable property and land attached to it situates in Bangladesh;
(ii) relates to any goods that is transferred, conferred, installed or assembled in Bangladesh;
(iii) is made to an unregistered person and relates to-
a) the services are physically performed in Bangladesh by a person who is in Bangladesh at the
time of supply;
b) the services are directly related to land located in Bangladesh;
c) the services are radio or television broad-casting or telecasting services received at an
address in Bangladesh;
d) the services are electronic services delivered to a person located in Bangladesh at the time
of supply;
e) the supply is of a telecommunications service that is initiated by a person who is located in
Bangladesh at the time of supply, other than a telecommunications supplier or a person who
is global roaming while temporarily in Bangladesh.

VAT Agent of non-residents

Appointment of agent is related with particular services as mentioned under sub-clause (e) of
clause (ga) of sub-section (1) of section 17.

Such VAT Agent of a non-resident shall bear all responsibilities and carry out all activities of the
non-resident.

However, the non-resident shall be liable for the payment of all dues including taxes, fines,
penalties, and interests that may be imposed on the non-resident.

An online application in the form “Mushak-3.1” is needed to be made to the Director General,
Customs, Excise and VAT Training Academy in order to be appointed as VAT Agent.

For example-

Non-residents providing electronic services viz. following services on or through a

telecommunications network, a local or global information network, or similar means in
Bangladesh are required to appoint a VAT Agent in case of providing services to VAT
unregistered person:

• websites, web-hosting or remote maintenance of programmes and equipment

• Software and updating thereof by way of remote delivery of services
• Images, texts and information delivered
• Access to databases
• Self-education packages
• Music, films and games and
• Political, cultural, artistic, sporting scientific and entertainment broadcasts and telecasts and
events, including telecasts

482 Business Planning: Taxation & Compliance ICAB 2024

 VAT on imported services reverse charged to recipient
C
Supply of imported service shall be taxable supply, if: H
A
• Recipient is VAT registered or required to be registered, and acquires such service in the P
process of economic activities T
• Such service is provided in Bangladesh by the registered or required to be registered E
person in the process of an economic activity and is taxable at a rate other than the zero- R
rate;

Example: JPZ Company will import consultancy services from UK.

33
If the supply is made in Bangladesh at 0% then the supply of imported service will not be treated
as taxable supply with regards to reverse charged.

Now if we assume that the applicable VAT rate is 7.5% or 15% or any other rate for the said
service in Bangladesh, then it will be treated as taxable supply with regards to reverse charged.

Point to Note: VAT payable by the recipient of a taxable supply of imported services is both
Output tax and Input tax of that person, which needs to be shown as such in the VAT Return.

Payment of VAT on imported services

In case where the recipient of supply of imported services is:

Unregistered/Un-enlisted: The bank/financial institution shall deduct VAT at source at the

applicable rate at the time of remitting the payment against importation of service, and shall
deposit the VAT amount to the Government Exchequer through Treasury Challan

Registered/Enlisted: the recipient shall be liable to deposit the applicable VAT amount. Bank
shall deposit on the registered person’s behalf only if he cannot provide or there is no treasury
challan for the payment of the corresponding VAT amount; or if the amount so deposited is less
than the required amount, in which case bank shall collect and deposit the remaining balance
to the Government Exchequer. However, there is requirement to deposit output VAT @15% on
imported service directly to the Govt treasury as treasury challan is required for taking input tax
credit on such service.

NBR has issued SRO No. 240-Ain/2021/163-Mushak dated 29 June 2021 on VAT Deduction at
source (VDS) to further provide clarification on payment of VAT on imported services.

Zero-rated goods/services supply

The following supplies are zero-rated supply:

In case of goods:

• Supply of goods for export not applicable to any goods re-imported or intended for re-
import
• Goods located outside Bangladesh at the time of supply (such goods are not assembled,
installed or imported into Bangladesh, by the supplier)

ICAB 2024 Value Added Tax 483

 • Supply of Goods anywhere outside Bangladesh after it is imported but before it is entered
for home consumption (such goods shall be deemed to have been located outside
Bangladesh at the time of supply)
• Supply of any goods to a Tourist or to a Visitor (For consumption outside Bangladesh and
Seller holds a license to sell duty-free goods)
• Supply of Goods outside Bangladesh on lease, hire, under license or other supplies relating
to use of such goods (If goods remain outside Bangladesh during the whole of the specified
period)
• Supply of a goods usable for repair, maintenance, cleaning, renovation, modification or
other similar work of any goods under specific terms and conditions
• Supply of goods for the repair or replacement of a goods under warranty under specific
terms and conditions
• Supply of a goods usable for repair, maintenance, cleaning, renovation, modification or
other similar work of any goods (Physically affecting an ocean-going ship or an aircraft or
any other vessel of the like kind engaged in international transport)
• Supply of stores, or of spare parts relating to an aircraft or an ocean-going ship engaged in
international transport (Stores or parts are for use, consumption, or sale on the aircraft or the
ship during a flight or a voyage)

In case of services:

• Supply of service directly related to any land situated outside Bangladesh

• Supply of service physically given on goods situated outside Bangladesh
• Supply of a service of repair, maintenance, cleaning, renovation, modification etc. of any
goods under specific terms and conditions
• Supply of service where value of service is included in the customs value of an imported
goods under specific terms and conditions
• Export of service outside Bangladesh
• Supply of a service outside Bangladesh for the protection of intellectual property rights and
relating to filing of a case, its prosecution, conferment of right, its protection, transfer,
transfer of right, Licensing or enforcement of rights
• Supply of telecommunications service by a telecommunications supplier to a non-resident
telecommunications supplier
• supply of a service in favour of A goods under warranty of repair or replacement under
specific terms and conditions
• Supply of insurance services to the international transport of goods
• Supply of services of repair, maintenance, cleaning, renovation, modification, or otherwise
physically affecting an aircraft or an ocean-going ship engaged in international transport
• A supply to a non-resident and a non registered, of services directly connected to the
operation or management of an ocean-going ship or an aircraft engaged in international
transport

Point to note:

• If any supply is both exempted and zero-rated, then the said supply shall be treated as zero-
rated.
• 0% on export of any goods whether re-imported or intended to be re-imported shall not be
applicable

484 Business Planning: Taxation & Compliance ICAB 2024

 Supply of goods for export
C
Examples of Deemed Export H
A
1. Work order obtained vide international tender by a VAT registered person in Bangladesh:
P
• For supplying any goods or services within Bangladesh through letter of credit or T
agreement in foreign currency E
• Subject to submitting certain documents to the Divisional officer R

2. Performance of partial activity (included in the work order obtained in international tender
by any organization located outside Bangladesh) by a VAT registered person in Bangladesh 33
• Against letter of credit established in foreign currency
• For supplying any goods or services within Bangladesh
• Subject to submitting certain documents to the Divisional officer

VAT exemptions

The following supplies shall be exempted from VAT:

• Any supply or import specified in the 1st Schedule of VAT & SD Act 2012
• Goods or services subject to Turnover Tax
• Supply in respect of receiving exempt supplies or future right of purchase or sale
• As per SRO No. 137-Ain/2024/243-Mushak dated 27 May 2024, goods at import stage listed
in Table-1, Goods at both import and manufacturing stage listed in Table-2, Goods at
manufacturing stage listed in Table-3, services listed in Table-4 and goods at trading stage
listed in Table-5 and at Manufacturing and Trading stage for goods of SRO No. 128-
Ain/2020/79/Customs dated 03 June 2020 for entity enjoying concessionary benefit subject
to conditions.
• Exemption above the amount or rate as mentioned in tables of SRO No. 320-Ain/2019/82-
Mushak dated 13 October 2019.

Table-1 Manufacturing Stage

• Cement sheet- 5%
• Ferromanganese and Ferro-silico- manganese alloy- Tk. 1000/MT
• Ferro-silico- alloy- Tk. 1200/MT

Table-2 Trading Stage

• MS product- Tk. 200/MT

Table-3 Service Stage

• Credit rating agency- 7.5%

Imposition of Turnover Tax

Turnover tax shall be @ 4% of turnover.

As per section 45(2) of the VAT & SD Act, the net payable tax assessed in the process outlined
under sub-section (1) of section 45 shall, in the prescribed manner, be paid by the taxpayer
before filing the return for such tax period and as per Rule 25(1) of the VAT & SD Rule, the

ICAB 2024 Value Added Tax 485

 registered or enlisted person, after determining the net tax of a specific tax period shall pay it to
the government treasury in specific code of accounts. So turnover tax is required to be paid
quarterly before turnover return submission.

No input tax credit is allowed for both the seller and buyer of goods or services enlisted for
Turnover Tax.

30.5 Manner of VAT Collection

A.1: On Imports

VAT on the taxable imports shall be collected in the same manner and at the same time as the
customs duty collects on such imports under the Customs Act even if import duty is not
imposable on such import.

Determination of value of taxable imports

In case of importation of goods, the amount on which the VAT will be payable, will be
determined by adding:

a. the value of goods determined for the imposition of import duty as per Customs Act; and
b. Customs Duty (CD), Regulatory Duty (RD), Supplementary Duty (SD), or other duties and
taxes {except Advance tax (AT), and Advance Income Tax (AIT)} payable on the import of the
goods, if any.

Calculation of value of taxable supply at import stage:

The value of goods assessed for the purpose of imposing import duties under the Customs Act,
i.e. Assessable Value (AV) is determined under section 27 of the Customs Act, 2023.

Other duties and taxes are Safeguard Duty (SGD), Countervailing Duty (CVD), and Antidumping
Duty (ADD) etc.

Example: AV is Tk 50,000, CD @25%, RD @3%, SD @20%, VAT @15%, AT @5%

Tax Type Base value Formula Base Value Tax Rate Tax Amount
CD AV 50,000 25 12,500
RD AV 50,000 3 1,500
SD AV+CD+RD 64,000 20 12,800
VAT AV+CD+SD+RD 76,800 15 11,520
AT AV+CD+SD+RD 76,800 5 3,840
42,160

486 Business Planning: Taxation & Compliance ICAB 2024

 A.2: Re-imported goods after being exported
C
Determination of value of re-imported goods H
A
The value for assessment of VAT shall be: P
T
• The combination of the value to the extent that it is enhanced as a result of the repairmen, E
and R
• The expenses incurred on their insurance, freight and landing charges

Provided that the forms, features, characteristics and the qualitative standards of the goods
33
remain unchanged after such repairs.

A.3: Imports for exports

A goods brought for export, without being released for consumption inside Bangladesh, shall
not be liable to pay any VAT.

Advance Tax

Advance Tax (AT) @ 5% shall be payable on the value of the taxable import at the same time and
in the same manner as VAT is payable.

Every registered or enlisted importer who has paid advance tax at import stage can make
decreasing adjustment (except wholesale traders paying 1.5% on its sales) of the total AT paid
in the same tax period or within next four tax period.

The rate of advance tax applicable on the import of raw materials used for
manufacturing/production purposes is 3%.

The following documents are required to be submitted to the customs house station to avail the
benefit:

 Attested copy of VAT registration certificate as manufacturer

 Attested copy of Input-Output Coefficient submitted to Divisional office
 Attested copy of updated Industrial IRC
 Certificate for submission of VAT Return of previous 12 tax periods or specified tax periods
in applicable cases from the VAT online system. If VAT return submission certificate is not
possible to get from VAT online system, then certificate issued from the respective divisional
Officer shall be submitted.

Any unregistered person who has paid AT may also claim refund by applying to the
Commissioner in prescribed form.

Conditions and procedure for claiming refund of AT paid:

• Importer is the ultimate consumer of the imported goods.

• File an application to any nearest Commissioner in “Mushak-4.1” form within 120 (One
hundred and twenty) days from the date on which advance tax has been paid. The
Commissioner, after verifying the received application if found to be proper shall issue a
crossed check after approving the refund in favor of the applicant within 15 (fifteen) days of
the receipt of the application or issue an order to transfer the approved money to the bank
account of the applicant

ICAB 2024 Value Added Tax 487

 AT exemption

• Any import specified in the 1st Schedule of VAT & SD Act 2012
• Goods specified as per SRO No. 151-Ain/2021/148-Mushak dated 03 June 2021 (SRO
related with AT exemption)

However, for VAT exempted goods as per SRO No. 137-Ain/2024/243-Mushak dated 27 May
2024, there is no exemption for AT.

B: On General Supplies

Determination of value of taxable supply

Section 32 of VAT & SD Act, states that, subject to the provision of this section, the value of a
taxable supply shall be the consideration for such supply, reduced by an amount equal to the
tax fraction of that consideration.

Example 1: The price of a laptop is Tk. 50,000. VAT is applicable at @15%. What is the value of
the taxable supply?

Particulars Tk
Price 50,000
VAT fraction (@15%) 15/115
VAT 6,522 (50,000 x 15/115)
Value of taxable supply 43,478 (50,000 – 6,522)

Example 2: The price of a mobile phone is Tk. 50,000. If Supplementary Duty (SD) @10% is
applicable, then what is the total Tax payable?

Particulars Tk
Price 50,000
VAT fraction (@15%) 15/115
VAT 6,522 (50,000 x 15/115)
Value of taxable supply 43,478 (50,000 – 6,522)
SD 3,953 (43,478 x 10/110)

Determination of value of taxable supply between associated entities

The value of taxable supply of goods or service which a registered person makes to an associate
will need to be at the fair market price of such supply, reduced by the tax fraction of that price.

The value of a taxable supply a registered person makes to an associate shall be the fair market
price of such supply, reduced by the Tax fraction of that price, if-

• Such supply is made for no consideration or for a consideration that is lower than the Fair
Market price; and
• Such associate would not be entitled to a credit for all of the input tax arising out of such
supply.

488 Business Planning: Taxation & Compliance ICAB 2024

 Determining fair market price
C
NBR has further issued SRO No. 180-Ain/2019/37-Mushak dated 13 June 2019, which H
prescribes regarding fair market price as follows: A
P
(Ka). Where the buyer and seller are not associated parties, and that the fixation of the price of T
supply is not influenced by their non-association but is based on the normal buyer-seller E
relationship, then such price will be treated as fair market price for the said supply. R
(Kha). Where the buyer and seller are associates and that the price at which the supply of
identical or similar goods is made is equal to earlier determined price of the said supply or, if it
33
does not change below or more than 10% of the earlier determined price, in that case, the price
will be treated as fair market price

(Ga). Where the buyer and seller are associates and that the price at which the supply of identical
or similar goods is made is not equal to earlier determined price of the said supply or, if it
decreases or increases more than 10% of the earlier determined price, in that case, the fair
market price will need to be determined based on the five methodologies prescribed in this
SRO.

The five methods are as follows:

(1) Comparative method

(2) Deductive method
(3) Computed method
(4) Holistic method
(5) Objective approximation method*

*Serial No. (5) can be applied without following the sequences upon approval from the
Additional Commissioner or the Joint Commissioner. In such case, the committee to be formed
by the Additional Commissioner or the Joint Commissioner will consider the average prices of
minimum three and not exceeding seven identical or similar products of which price was earlier
determined at the time of transaction between non-associated parties.

Determining fair market value

Non-Associates

ICAB 2024 Value Added Tax 489

 Associates

Non applicability of Fair Market Value determination rules

• Unit price as determined by any offices or agencies of Govt. for Medicine and Petroleum
nature products, shall be deemed to be fair market value

• In case of supply of any goods or service through tender, price mentioned in the tender shall
be considered as fair market value

Determination of value of supply without consideration

Any registered person can make a supply of a maximum of Tk. 20,000 amount as sample in a
fiscal year.

Example: Company “ABC Ltd.” launches a new product. To promote the product, they decide
to give some products as sample to its customer worth Tk. 50,000 for one fiscal year.

VAT Implication is as follows:

No VAT on Tk. 20,000.

For remaining Tk. 30,000 will treat as a taxable supply.

Cases where determining fair market value is applicable

Determining fair market value is applicable in case of the following situations within the purview
of VAT & SD Act:

490 Business Planning: Taxation & Compliance ICAB 2024

  For determining the value of free samples within the allowable limit of BDT 20,000 per fiscal
year C
 Determining the value of consideration of services imported from or supplied by associated H
person A
 Determining the value of taxable supply made to an associate in exchange of zero P
consideration or price below fair market price and also where the associate cannot claim full T
input tax rebate E
 Supply of service or of immovable property to an employee without consideration or at a R
value less below fair market price
 Quantity of goods subject to SD which have not been previously accounted properly and
are being identified during an audit investigation
33
 Any goods or services which have supplied without any consideration or with inadequate
consideration on which SD is imposable

Declaration of Input-Output Coefficient

Every registered or enlisted person are required to file prior to manufacture or supply of goods,
input-output coefficient in form “Mushak-4.3” to the Divisional Officer.

Conditions

100% export-oriented Industrial undertakings are not required to submit input-output

coefficient in Mushak-4.3 form.

ICAB 2024 Value Added Tax 491

 Time of payment of VAT on taxable supply

Section 33 of VAT & SD ACT, provides relevant provisions regarding the time of payment of VAT.

The VAT imposed on a taxable supply shall become payable on the earliest occurrence of any
of the following events:

• when such supply is made

• when a tax invoice for such supply is issued
• when a part or the whole of the consideration is received
• When supply made for personal use or for any other use.

Progressive or periodic supplies

If any supply is considered as progressive or periodic supply, VAT imposed on such supply shall
be payable on the earliest occurrence of any of the following events:

• when separate invoices are issued for each such supply;

• when receivable consideration against each such supply is received in part or in full;
• when the price against the series of supplies becomes payable;

If a progressive or periodic supply of water, gas, fuel or electricity is made through a distribution
network‚ the imposed VAT shall become payable within 90 days from the date on which invoices
against each such supply are issued.

C: On Special Supplies

1. Sale of an establishment as a going concern

VAT will not be imposed if:

• Sale of a business which is acquired with an intent to carry on as a going concern will not be
considered as a supply made in Bangladesh.
• A part of a running business establishment which is capable of being operated separately‚
such part shall be regarded as a separate economic activity and will fall under the scope of
running business.

Method of selling a going concern

Seller and purchaser of any going concern shall submit continuous and unconditional bank
guarantee of a scheduled bank of an amount equivalent to all payable tax and arrears to the
Commissioner by a joint application in form “Mushak-4.2” before a minimum of 15 (fifteen) days
of the sale of such business. Upon receipt of the application, the Commission will provide his
approval to the sale of the going concern within 7 days, subject to verification of the submitted
bank guarantee.

The seller of the going concern shall furnish to the purchaser of such business the following
information, viz: –

(a) latest updated information regarding ownership;

(b) complete financial statements;
(c) statement of all properties;

492 Business Planning: Taxation & Compliance ICAB 2024

 (d) statement of all debts;
(e) information regarding cases; C
(f) statement of registration, license etc. of different government agencies; and H
(g) other related information. A
P
2. Supply of prepaid telecommunications products or services T
E
Where a telecommunications supplier supplies a prepaid telecommunications product or a R
service at a discount to a telecommunications intermediary, the consideration for such a supply
shall be assessed inclusive of the discount.
33
Where a telecommunications intermediary buys and sells a prepaid telecommunications
product‚ such sale shall not be treated as a taxable supply.

Example: PQR Ltd. is a telecommunication products intermediary who is buying airtime from GP
and Robi and selling the same to distributors as well as subscriber. PQR is purchasing airtime
value of Tk. 100 at 95 from GP/Robi and selling the same to distributors at Tk. 97 or subscribers
at Tk. 100.

As GP/Robi pays VAT at the time of selling the products to PQR, PQR as well as distributors of
PQR will not be liable to pay any VAT.

3. Value of in-kind benefits given to an employee or officer

Where a person, registered or required to be registered:

• Makes a supply of an in-kind benefit in lieu of cash to any of his employees or officers, the
price of such in-kind benefits shall be taxable.
• Supplies to any of his officers or employees a service or an immovable property without a
consideration or at a price less than the fair market price, the value of such service or such
immovable property shall be its fair market price.

4. Lay-by Sales

Where a supply of goods is made under a lay-by agreement—

(a) the output tax on such supply shall become payable when payments for such supply are
made and, in each tax period, taxes shall be assessed and paid at the time of payment of the
price; and

(b) the amount of assessed output tax in each tax period shall be the tax-fraction of the
payments made in that period.

5. Treatment of cancelled Transaction

If a transaction is cancelled‚ and a portion of the consideration previously received is retained

by the supplier, then the tax applicable on the portion thus retained may be adjusted while
making adjustments.

If a transaction for any supply is cancelled and the supplier realizes any money from the recipient
as a consequence of the cancellation, the amount shall be treated as the consideration for the
supply in the tax period in which it is realized, and taxes shall be payable.

ICAB 2024 Value Added Tax 493

 6. Sale of property in satisfaction of a debt

Where a person (the creditor) makes a supply of the property of another person (the debtor) in
full or partial satisfaction of a debt owed by the debtor to the creditor‚—

a. the supply is deemed to have been made by the debtor;

b. the creditor is liable to pay the VAT, if any, payable on the supply; and
c. the VAT is payable in priority to the satisfaction of the debt and the return to the debtor of
any part of the proceeds that is surplus to the debt.

The debtor is jointly and severally liable with the creditor for the VAT payable.

A creditor who is not registered but is required to pay VAT because of this section shall pay the
VAT at such time, and in such manner and mode, as the Board prescribes.

7. Second-hand goods purchase for resale

Second-hand goods are classified as goods (with the exception of precious metal or goods
made from precious metal) which have been used previously.

Second-hand goods are subject to VAT, although such VAT can be adjusted against output VAT
if such goods are purchase for the purpose of reselling (without any manufacturing activities).
Therefore, VAT imposable on second-hand goods that are not bought for resale will be a cost.

30.6 Assessment of Net Payable Tax by the Taxpayer & Payment Thereof

The amount of net tax payable by a taxpayer for any tax period shall be assessed in the following
manner:

Net VAT = Output Tax – Input Tax (Credit) + Increasing Adjustment – Decreasing Adjustment

Case study: Net VAT calculation

New Bangla Private Ltd. (NBPL) is an enterprise registered with Dhaka North VAT
Commissionerate and engaged in shoe manufacturing. They imported raw materials from Japan
paying VAT of Tk 300,000 and Advance Tax of Tk. 60,000. They have purchased raw materials
from ABC Ltd. For Tk 2,500,000

NBPL purchased another type of raw materials from a registered proprietorship firm MS Hasan
Traders (HT) having value of Tk 200,000 and payment is done through account payee cheque.
AB Legal submitted an invoice of Tk 200,000 without issuing Form Mushak-6.3.

They sold goods with 100 invoices aggregating to Tk 7,000,000 to their customers. Out of 100
customers, 3 of them refunded some goods worth of Tk 300,000.

All these transactions took place in July 2024.

Calculate net VAT for this tax period.

494 Business Planning: Taxation & Compliance ICAB 2024

 Solution:
C
Input Tax (IT) H
Output Tax (OT)
(a) VAT at import = 300,000 A
=Total taxable sales x tax fraction
=7,000,000 x 15/115 (b) From ABC = 2,500,000 x 15/115 P
=913,043.48 = 326,086.96 T
(c) From HT = 200,000 x 15/115 E
=26,086.96 R

Total = 652,173.92
Net Tax = OT – IT + IA – DA
= 913,043.48 - 652,173.92 33
+ 26,086.96 - 99,130.43
= 187,826.09

Decreasing Adjustments (DA)

AT = 60,000
Increasing Adjustment (IA)
Goods Returned = (300,000 x
=VDS from AB legal
15/115) = 39,130.43
=200,000 x 15/115
Total = 99,130.43
=26,086.96

Note: As per SRO No. 240-Ain/2021/163-Mushak dated 29 June 2021, VDS amount needs to
be deposited separately.

30.7 Input Tax Credit

A registered person shall be entitled to an input tax credit of paid VAT against the VAT imposed
on a taxable supply.

Conditions for claiming Input tax credit

Registered person can’t claim Input tax credit unless the following conditions are met-

• Importer issues invoice tax invoice with bill of entry number. And description of the goods
in tax invoice (“Mushak-6.3”) must match with bill of entry.
• Output VAT on supply must be @ 15% (except export).
• Input has to be mentioned in “Input-Output Coefficient declaration” (“Mushak-4.3”) as input.
• Input tax credit must be claimed in same tax period or next four tax period.
• Inputs needs to be recorded on purchase register (“Mushak-6.1” or “Mushak-6.2.1”).
• Full payment made through MFS or banking medium, if taxable supply value exceeds Tk. 1
lakh (Other than intracompany transaction).

Point to note: Input tax credit can only be claimed through VAT Return.

Input Tax credit not allowable under following circumstances:

(a) Other than intracompany transaction, if the value of a taxable supply exceeds Tk. 100,000
(one lakh) only and the consideration against such supply is paid through means other than
by banking medium or Mobile Banking medium

ICAB 2024 Value Added Tax 495

 (b) imported services for which output VAT has not been shown in the VAT Return separately in
terms of section 20
(c) claim of input tax credit which have not been made either in the tax period in which VAT has
been paid or within the four succeeding tax periods
(d) VAT paid on the goods or services under the custody or possession or supervision of another
person except contract manufacturing
(e) VAT paid on inputs that have not been entered into the Purchase Register or Combined
Purchase and Sale Register prescribed by the Rules
(f) If name, address and BIN of both the purchaser and seller does not mention in Tax invoice
(Mushak-6.3)
(g) when supply is received from the importer, if the invoice issued by the importer does not
contain the Bill of Entry number of the concerned import consignment and when there is no
match between the commercial description of the goods supplied in the invoice issued by
the importer and description in the Bill of Entry
(h) input tax involved with Bank Guarantee portion, in case of raw-materials or goods released
furnishing Bank Guarantee, until, the causes for which Bank Guarantee was furnished have
been finally settled
(i) input tax paid on inputs used in manufacturing of exempted goods or rendering of
exempted services
(j) Turnover Tax paid under the purview of turnover tax
(k) Supplementary Duty paid on goods or service used in the manufacture of goods or
rendering of service
(l) VAT paid at a specified rate or at a rate less than 15% (except in case of export)
(m) Input tax paid against such inputs or goods not declared in the Input-Output Coefficient
Declaration
(n) Additional input tax credit will not be allowed if a new Input-Output Coefficient Declaration
is not submitted in case of a change in the total price of the input by 7.5%.
(o) if supplies goods or service below its input price
(p) purchase of passenger vehicle or entertainment services, provided that, input VAT credit
may be allowed when such purchases are part of normal course of the economic activities
of the person (e.g. dealer or charterer of vehicles),
(q) such acquisition relates to a person’s membership or right of entry in a club, association, or
society, of a sporting, social, or recreational nature
(r) Acquisition of transportation services (up to 80% of the VAT paid)

Documents required for claiming Input tax credit

A registered person shall, in support of his claims for input tax credit at the time of filing of
returns, be in possession of the flowing documents, namely—

• in case of an import - a bill of entry bearing the name of the importer, address and the
business identification number;
• in case of a supply - a tax invoice (“Mushak-6.3”) issued by the supplier;
• In case of imported service- a copy of treasury challan
• In case of Gas, Water, Electricity, Telephone bill, Bank, Insurance and Port, bill are
considered as Tax invoice
• In case of electricity bill- Invoice issued by Bank, mobile banking service provider and digital
payment gateway organization against paid electricity bill, will be treated as tax invoice as
per defined terms and procedures

496 Business Planning: Taxation & Compliance ICAB 2024

 Partial Input Tax Credit
C
Where a registered person pays or is liable to pay a part of the consideration for a taxable supply, H
any Input tax credit to which the person is entitled to, shall be calculated on the basis of the A
amount of the consideration such person pays or is liable to pay. P
T
Where, standard rated or reduced rated or specific amount of tax or exempted or zero-rated or E
some of such or all of such goods or services are supplied by a registered person, VAT paid on R
input will be taken as credit in case of supply of zero rated and standard rated goods and
services only and in such case, the registered person will be admissible input tax credit against
receipt of goods or services as inputs in pursuance of section 46, provided that after the end of
33
the relevant tax period, increasing adjustment taken against supply of reduced rated or specific
amount of tax or exempted or some of such or all of such goods or services will be disclosed in
the VAT return.

If a VAT registered person is not entitled to the input tax credit in full, then the entitlement of
Input Tax credit against total imports and acquisitions shall be calculated using the following
formula:

I X T/A

Where-
I = Total Input Tax Credit during the Tax Period
T = Value of all supplies where registered person is eligible to take ITC in terms of section
46 during any tax period
A = The value paid against all supplies during the Tax period

Example:

Total Supply (A) = Total Taxable Supply @15% (T) + Exempted Supply
TK. 160,000 = TK. 120,000 + TK. 40,000

Total Input Tax Credit (I) = TK. 15,000

Partial Input Tax Credit = I x T/A = 15,000 x (120,000/160,000)

Therefore, Partial Input Tax Credit = TK. 11,250

Point to note: The Board may determine when and how T/A fraction shall be rounded up or
down to full number;

If result of T/A is > 0.90 = ↑ 1 (one)

If result of T/A is < 0.10 = ↓ 0 (zero)

Input Tax credit granted will be provisional and need an annual adjustment after end of every
Calendar year.

ICAB 2024 Value Added Tax 497

 Adjustment shall be made in the 3rd Tax Period of the Next Calendar Year or any previous Tax
Period as determined by the Commissioner.

30.8 Withholding VAT

VAT deduction/collection at source

 If a supplier makes a supply, which is not exempted or zero- rated, to a withholding entity
under an agreement, tender or work order or by any other means, the withholding entity
shall withhold VAT at source at specified rate as determined by the rule from the
consideration payable to the supplier.

 If a supplier is not registered or enlisted, and if a tax invoice is not issued, the withholding
entity shall not receive any supply from such supplier and shall pay against such supply to
the supplier. However, if the withholding entity purchase from an unregistered entity it will
have to bear the VAT

 NBR issued SRO No. 240-AIN/2021/163-Mushak dated 29 June 2021, according to which,
Withholding Entities are required to deduct VAT at source (VDS) in case of the following list
of services irrespective of the applicable rate of VAT:

Service
SL No. Description Rate of VDS
Code
01 S001.10 AC Hotel 15%
S001.10 Non-AC Hotel 7.5%
S001.20 Restaurant 5%
02 S002.00 Decorators and Caterers 15%
03 S003.10 Motor Vehicles Garage and Workshop 10%
04 S003.20 Dockyard 10%
05 S004.00 Construction Firm 7.5%
06 S007.00 Advertising Firm 15%
07 S008.10 Printing Press 10%
08 S009.00 Auctioneers 15%
09 S010.10 Land Development Organization 2%
10 S010.20 Building a. Up to 1- 1600 sq. feet 2%
Organization b. More than 1600 sq.feet 4.5%
Construction c. Re-registration irrespective of 2%
size
11 S014.00 Indenting Organization 5%
12 S015.10 Freight Forwarders 15%

498 Business Planning: Taxation & Compliance ICAB 2024

 Service
SL No. Description Rate of VDS
Code C
13 S020.00 Survey Firm 15% H
14 S021.00 Plant and Capital Equipment Rent 15% A
Providing Organization P
15 S024.00 Furniture Furniture Manufacturer (In case of 7.5% T
Distributors supply directly from factory to E
consumer, 15%) R
Furniture Sales center (if challan 7.5%
having VAT paid at 7.5% on
manufacturing stage, otherwise 33
15%)
16 S028.00 Courier and Express Mail Service 15%
17 S031.00 Repairing or servicing of taxable goods in exchange 10%
of money by a person, organization or agency
18 S032.00 Consultancy and supervisory firm 15%
19 S033.00 Lessor 15%
20 S034.00 Audit and accounting firm 15%
21 S037.00 Procurement provider 7.5%
22 S040.00 Security Services 15%
23 S043.00 Television and online broadcast program provider 15%
24 S045.00 Legal Advisors 15%
25 S048.00 Transport a. In the case of petroleum 5%
Contractor transportation
b. In any other cases 10%
26 S049.00 Rent-A-Car service provider 15%
27 S050.10 Architect, Interior Designers or Interior decorators 15%
28 S050.20 Graphic Designer 15%
29 S051.00 Engineering firm 15%
30 S052.00 Sound and Lighting instrument renter 15%
31 S053.00 Participants in board meetings 10%
32 S054.00 Advertisement Broadcasting agency through Satellite 15%
channel
33 S058.00 Rental of chartered planes or helicopters 15%
34 S060.00 Purchaser of auctioned goods 15%
35 S065.00 Clearing and maintaining agencies of Building, Floor 10%
and Premises
36 S066.00 Lottery Ticket Seller 15%
37 S067.00 Immigration advisor 15%
38 S071.00 Event management 15%
39 S072.00 Human resource supplier or management 15%
organization
40 S099.10 Information Technology Enabled Services 5%
41 S099.20 Other Miscellaneous services 15%
42 S099.30 Sponsorship services 15%
43 S099.60 Credit Rating Agency 7.5%

Technical Note: VDS must be adjusted in the same tax period in which the VAT was deducted
on the supply of goods or within the next 3 months following the month of payment. It cannot
be adjusted after such time has elapsed. Mushak-6.6 is required in case of decreasing
adjustment for VDS.

ICAB 2024 Value Added Tax 499

 Goods/services that are exempted from VDS:

• Goods supplied by manufacturers at any VAT rate accompanied with Tax Invoice (Mushak-
6.3)
• Provision of services that are subject to VAT @ any rate and are not mentioned in the
Mandatory VDS list (as above) as per SRO No. 240-Ain/2021/163-Mushak dated 29 June
2021.
• Supply of utilities such as fuel, gas, water (WASA), electricity, telephone, mobile bill
• Supply of goods and services which are exempted under the 1st Schedule of the VAT & SD
Act, 2012
• Supplies that are considered zero rated within the purview of section 21 of the VAT & SD
Act, 2012
• If furniture manufacturer, Advertisement agency and Advertisement Broadcasting agency
through Satellite channel issues an invoice duly attested by RO with the rate of 15%.
• Invoice issued from EFD and SDC wherein name and BIN number of purchasers are
incorporated.

VDS Against Import of Service from Outside the Geographical Area of Bangladesh

(1) For unregistered person – the bank is responsible for collecting VAT @ 15% on the imported
price from the unregistered person at the time of remitting the fund abroad and deposit to
the Government Treasury
(2) For registered person – Bank shall not collect VAT @ 15% on import of service, provided that
the registered person submits a copy of the treasury challan for the payment of
corresponding amount of VAT on imported service.

Provision of VAT Deduction at Source (VDS) for sub-contract project

If under any project, VAT payable by any service recipient is collected at source or deducted and
deposited to the government treasury in prescribed manner while paying service value or
commission by service recipient or as the case may be by the person paying the service value or
commission and if that service provider appoints any sub-contractor, agent or any other service
rendering person with the purpose of providing a part of the total service, in such case, as VAT
will not be applicable in this case, VAT shall not be collected at source again from such sub-
contractor, agent or any other service rendering person appointed by the service provider,
subject to submission of documentary evidence of collection or deduction of VAT payable
primarily on the service and deposit of the same to the government treasury. Please note, the
rule does not apply in case of purchase of goods under the project.

Deposit of Withheld VAT by the VAT Registered Withholding Entity

Any person responsible for deducting VAT at source shall be liable to deposit deductible VAT
against concerned Commissionerate code within 7 days of the next tax period. Simple interest
at the rate of 2% per 6 months shall be recoverable, if the person failed to collect, deduct and
deposit the same.

Issuing Withholding VAT certificate (Mushak-6.6) to the supplier

Certificate to the supplier shall be issued in three copies:

(i) Main copy to the respective VAT Circle Office (along-with Original TR Challan)
(ii) 2nd copy to the Supplier
(iii) 3rd copy for preservation of 5 years

500 Business Planning: Taxation & Compliance ICAB 2024

 Timeline for Issuing Certificate to the Supplier-
C
• As per sub-clause (Ao) of clause (Cha) of sub-rule (1) of Rule 40 of the VAT & SD Rules, H
2016and as per rule 6(3) of SRO No. 240-Ain/2021/163-Mushak dated 29 June 2021, A
Within 3 working days of deposit of VDS amount to the Govt. Treasury P
T
Adjustments for Withholding VAT E
R
Person Adjustment
For Supplier Decreasing adjustment made in the VAT Return (Mushak-9.1), subject to
receiving Withholding VAT certificate (Mushak-6.6). 33
Decreasing adjustment need to be taken within 4 tax period from the date
of payment
For Withholding Increasing adjustment made in the relevant month’s VAT Return (Mushak-
Entity 9.1). VDS amount shall be deposited separately and VDS deposited shall
be adjusted with relevant month’s net VAT liability.

30.9 Carry forward of negative net amount and refunds

Net tax amount = Output Tax – Input Tax (Credit) + Increasing Adjustment – Decreasing
Adjustment

If, in a tax period, the sum of input tax and the receivable decreasing adjustments exceeds the
sum of output tax, supplementary duty and increasing adjustments for such tax period, resulting
in a net negative payable amount of money, then—
the excess amount of money shall be carried forward and may be deducted over the following
6 (six) tax periods, .

Example: Suppose XYZ is a limited company. For the current month:

1. Total output VAT & SD payable is Tk. 100,000

2. Total input tax credit is Tk. 26,600 (Tk. 10,000 for imported goods, Tk. 10,000 for locally
procured services, Tk 5,000 @5% VAT for Electricity & Newsprint @ Tk. 1,600 per metric ton)
3. VAT deducted at source by the company is Tk. 100,000
4. Tk. 250,000 was paid as Advance Tax (AT).

Particulars Amount Amount

Total of Payable Output Tax & SD (A) Tk. 100,000
Less: Total Input Tax Credit (B) Tk. 26,600
C = (A - B) Tk. 73,400
Add: Total Increasing Adjustment (D) Tk. 100,000
E = (C + D) Tk. 173,400
Less: Total Decreasing Adjustment (F) Tk. 250,000
Net Payable Tax G = (E - F) Tk. -76,600 *
* As per SRO No. 240-AIN/2021/163-Mushak dated 29 June 2021, VDS
amount shall be deposited separately. In such cases, negative net payable tax
i.e. carry forward amount will be Tk. 76,600.

ICAB 2024 Value Added Tax 501

 Tk. 76,600

Carry Forward & Refund mechanism

Conditions for applying for refund without carry forward

If the net VAT payable of a registered person is in the negative, such person will be entitled to a
refund of such amount if the Commissioner is satisfied that:

(a) fifty percent or more of such person’s turnover is or will be derived from zero-rated supplies
(b) fifty percent or more of such person’s expenditure on inputs is on imports or acquisitions
used in the manufacture of zero-rated supplies
(c) the nature of such person’s economic activity regularly results in excess input tax credits (the
economic activity to which sub-section (2) of section 68 does not apply)
(d) If paid SD during import of input against export is allowed for decreasing adjustment and
SD is not applicable in case of local supply by the exporter

502 Business Planning: Taxation & Compliance ICAB 2024

 Application process for the refunded amount
C
No refund of money shall be made, until the applicant files all the VAT returns up to the current H
tax period. A
P
T
E
R
Once the application is received

The Commissioner shall apply the refund first in reduction of any outstanding liability for taxes
33
including interest, monetary penalties, or fines payable under the Act.

Remainder of money does not exceed Tk. 50,000

Yes No

May accord permission to treat as Commissioner will refund the amount

decreasing adjustment within 3 months of application

Application for getting refund amount shall need to be made to the Commissioner in form
“Mushak-9.1”. Upon approval of the application, the Commissioner shall deposit the returnable
amount to the applicant’s bank account or issue a crossed check in favor of the applicant.

Refund or adjustment of taxes paid in excess

If a person pays taxes in excess of what is shown as payable tax in the return for a tax period, he
will be entitled to claim refund for the excess payment, within such time on such terms and in
such manner as may be prescribed through an application, or show as a decreasing adjustment
in the next return.

30.10 Supplementary Duty (SD)

Luxury goods non-essential and socially undesirable goods and the other goods and services
upon which supplementary duty is imposed which is justified in the public interest.

Imposition of SD

SD is imposable on the import of goods, goods manufactured in Bangladesh and on the supply
of services rendered in Bangladesh, given that they are subject to SD in Bangladesh.

SD on the supply of goods or services shall be payable at only one stage of the supply chain.

Points to note:

- No SD is imposable on goods imported for the purpose of export, and not for home
consumption.
- No SD is imposable on the supply of goods or services that are zero-rated.

ICAB 2024 Value Added Tax 503

 Persons liable to pay SD:

Every person specified below is liable to pay SD namely:

a. In case of import of goods: the importer

b. In case of supply of goods in Bangladesh: the supplier
c. In case of supply of services rendered in Bangladesh: the supplier of such services

Determining the rate/amount of SD payable

The amount of payable supplementary duty shall be‚—

(a) if a rate of supplementary duty is specified for the goods or services subject to such duty in
column (4) of the 2nd Schedule of VAT & SD Act, the amount arrived at by multiplying the
dutiable value of the goods or services by such rate; or
(b) if a specific amount of supplementary duty is specified against a goods or service, subject
to supplementary duty, in column (4) of the said 2nd Schedule, such amount.

Determining the value for imposition of SD

Goods & Services: At Import stage

The value that is arrived at by adding customs duty and regulatory duty (if any) with the value on
which customs duty is leviable under section 27 of the Customs Act, 2023.

Value for SD = Assessable Value (AV) + Customs Duty (CD) + Regulatory Duty (RD)

Goods & Services: At local stage

In relation to a supply of goods or services subject to supplementary duty, the value of such
taxable supply shall be arrived at by deducting the supplementary duty from the total
consideration of such supply, reduced by an amount equal to the tax fraction of that
consideration.

Value of SD = Total consideration of supply x {1-(15/115)} x {1-(10/110)}

Where rate of VAT is 15% and rate of SD is 10%

Exceptions

Provided that if the supply of any goods or service subject to supplementary duty is made
without any consideration or with inadequate consideration‚ the value for imposition of
supplementary duty on such goods or service shall be arrived at by deducting supplementary
duty from the tax fraction of the fair market price of such supply; and

In relation to any goods where VAT is imposed on the basis of retail prices, the retail price
described in section 58(2) of the VAT & SD Act, 2012 shall be regarded as the value for
imposition of supplementary duty.

504 Business Planning: Taxation & Compliance ICAB 2024

 List of Major items on which SD is imposable:
C
Goods: Import stage H
A
 Fresh and chilled tomato, fresh and dried nut, fresh and dried fruits, spices, finished P
chocolate T
 Marble, granite, cement, petroleum products E
 Detergent powder, mosquito coil, printed PVC sheet R
 Toilet paper, tissue paper, woven fabrics, carpet
 Diamond, imitation jewelry
 Explosive powder, revolver, pistol and other firearms.
33
 Liquor, motor vehicle
 TV, refrigerator, VCP, VCR, VCD, DVD

Goods: Local stage

 Cigarettes, Bidi, Zarda and Gul,

 Personal deodorants and antiperspirants, Shampoo
 paints
 Ceramic sink, basin, pedestal basin, commode or its parts, any type of pan and other fittings
and fixtures of bathroom
 Other filament lamp, except ultra violet/infra-red lamp.
 Carbonated Beverage and energy drink, fruit juice and fruit drink
 Mineral water (up to 3 liter)

Services: Local stage

 Satellite channel distributor

 Telephone (services provided by using SIM/RIM card of mobile phone only)
 Organization renting out chartered aircraft or helicopter
 Service by BRTA

Rate of SD on Tobacco products at manufacturing stage mentioned in below table-

H.S. Code Description of Maximum Retail Price Rate of

goods SD (%)
2402.20.00 Cigarettes Slab of maximum retail price of cigarette
Containing per 10 sticks (subject to condition of not
Tobacco supplying cigarettes containing flavouring
capsule below medium slab)
lower slab - at Taka 50 and above 60
medium slab - at Taka 70 and above 65.5
high slab - at Taka 120 and above 65.5
premium slab - at Taka 160 and above 65.5
2402.90.00 (a) Hand-made Bidi 8 stick per packet Taka 6 30
(without filter) 12 Stick per packet Taka 9 30
25 stick per packet Taka 18 30
(b) Hand-made Bidi 10 stick per packet Taka 10 40
(with filter) 20 stick per packet Taka 19 40
SRO No. 155-Ain/2020/116-Mushak dated 11 June 2020 as amended through SRO No.
145-Ain/2024/251-Mushak dated 27 May 2024 w.e.f. 06 June 2024

ICAB 2024 Value Added Tax 505

 Special Schemes for Tobacco and Alcoholic goods- MRP

Rate of SD
H. S. Code Description of goods Maximum Retail Price
(%)
2402.20.00 Cigarettes Slab of maximum retail price of
Containing Tobacco,
cigarette per 10 sticks (subject to
manufactured condition of not supplying cigarettes
mechanically containing flavouring capsule below
medium slab)
lower slab - at Taka 50 and above 60
medium slab - at Taka 70 and above 65.5
high slab - at Taka 120 and above 65.5
premium slab - at Taka 160 and 65.5
above
2402.90.00 (a) Hand-made Bidi Taka 6 (8 stick per packet) 30
(without filter) Taka 9 (12 Stick per packet) 30
Taka 18 (25 stick per packet) 30
(b) Hand-made Bidi Taka 10 (10 stick per packet) 40
(with filter) Taka 19 (20 stick per packet) 40
SRO No. 147-Ain/2020/108-Mushak dated 11 June 2020 as amended through SRO No. 144-
Ain/2024/250-Mushak dated 27 May 2024 w.e.f. 06 June 2024

Decreasing adjustment for SD

Any person importing goods subject to supplementary duty may make a decreasing adjustment
for the supplementary duty paid by him on the import if the goods is in compliance with the
conditions of a drawback of duties under the Customs Act. In order to do so, he will need to
make any application to the Commissioner in form “Mushak-7.1” within 6 months of the date on
which the goods have been exported or the goods have been loaded into a ship, an airplane or
in the other means of transport.

Collection of SD on supplies

At Import stage

The supplementary duty on imported goods subject to such duty shall be collected at the same
time and in the same manner as the customs duty on such goods is collected. In relation to an
import of goods, for the purposes of collecting and paying the supplementary duty, the
provisions of the Customs Act, 2023 shall (with necessary modifications and adaptations) apply
in such a way as if the supplementary duty payable on imports were a customs duty.

At Local stage

SD on the supply of goods or service become payable at the same time when VAT becomes
payable on such supply.

Point to note: Every person who is liable to pay SD, will need to include the information relating
to the SD in their VAT return.

506 Business Planning: Taxation & Compliance ICAB 2024

30.11 Books and documents to be maintained for VAT purposes
C
Any registered person is responsible to properly maintain the below mentioned documents H
whichever applicable to them at their respective place or places of operations: A
P
1. Mushak-6.1: Books of Accounts for purchase T
2. Mushak-6.2: Books of Accounts for sale E
3. Mushak-6.3: Tax Invoice R
4. Mushak-6.4: Invoice for contractual manufacturing
5. Mushak-6.5: Invoice of transfer of goods between branch units that are centrally registered
6. Mushak-6.6: Certificate for VAT deduction at source. 33
7. Mushak-6.7: Credit Note.
8. Mushak-6.8: Debit Note.
9. Mushak-6.9: Turnover Tax invoice
10. Mushak-6.10: Invoice data for purchase/sales over BDT 200,000.

These books and documents shall be maintained at the business place for at least 5 years along
with all documents and other records relating to his economic activities in case authorities assess
the tax liability and other obligations.

Debit Notes & Credit Notes

In a case where debit notes or credit notes are issued additional forms need to be filled Mushak-
6.7 and Mushak-6.8 respectively. The following information must be provided in the forms:

(a) serial number of the credit note, or debit note

(b) date and time of its issue
(c) Name, address and BIN Number of the supplier
(d) the serial number, date and time of the relevant original tax invoice
(e) the nature of the adjustment
(f) the effect on the amount of VAT
(g) Name, address and BIN number (If applicable) of recipient if effect of payable VAT is more
than BDT 5000 on supply

Please note that if a credit note does not contain information specified in (g) above, no
decreasing adjustment can be claimed in support of the note.

Subject of documents (Books of Accounts)

The under mentioned books of accounts is prepared and maintained as per prescribed rules:

 Purchase Accounts book (Mushak-6.1)

A registered person shall preserve in Mushak-6.1 accounts of all his purchases related to his
economic activity

 Sales Accounts book (Mushak-6.2)

A registered person shall preserve in Mushak-6.2 accounts of all his purchases related to his
economic activity

ICAB 2024 Value Added Tax 507

  Purchase-sales account (Mushak-6.2.1)

If a registered person purchases the goods which he supplies without any processing, then
he shall preserve in Mushak-6.2.1 form accounts of all his purchase-sale of those goods.

 Tax invoice (Mushak-6.3)

Every registered supplier shall issue two copies of serially numbered Tax invoice on or
before the date when VAT becomes payable on the supply provided, which should contain
the following information:

(i) Date and time of the issue of the invoice

(ii) Name, address and BIN of the supplier
(iii) Name, address and BIN (in case where the value of the supply is above TK.25,000) of
the buyer
(iv) Description of the goods/services
(v) Quantity of the goods supplied
(vi) Value of supply (excluding VAT)
(vii) The rate of VAT applicable for the supply
(viii) Amount of VAT payable
(ix) Summation of value of supply and VAT payable
(x) Fiscal yearwise serially numbered tax invoice

 Invoice for contractual manufacturing (Mushak-6.4)

For the purpose of manufacturing contractual goods, the owner shall have to transfer the
input of the goods to be manufactured to the contract manufacturer in Form “Mushak-6.4”.
Similarly, the contract manufacturer shall issue form “Mushak-6.4” at the time of transferring
the manufactured goods to the owner.

 Invoice for transfer of goods for entity with Central Registration (Mushak-6.5)

In case where a registered person transfers the goods from his own branch to another
branch (including warehouse), shall have to issue invoice in form Mushak-6.5. Please note
that, this is applicable in case of central registration.

Books and documents required to be maintained for Turnover Tax purposes

1 Purchases and sales register in form Mushak-6.1 & 6.2 respectively or where applicable
Mushak-6.2.1;
2 Turnover tax invoice (Mushak–6.9) in serially numbered;
3 Treasury challan in favor of payments of turnover tax; and
4 Turnover Tax return in form Mushak-9.2.

 Submission of information related to purchase-sale (Mushak-6.10)

Statement of purchases / sales more than BDT 0.2 million (Mushak-6.10) will be submitted
on or before submitting monthly VAT return (Mushak-9.1).

508 Business Planning: Taxation & Compliance ICAB 2024

30.12 Submission of VAT return
C
Every registered and enlisted person or required to be enlisted or registered, is required to file H
for VAT return in Mushak-9.1 and Mushak-9.2 (for Turnover Tax) forms respectively which A
provides a summary of his tax liability for a certain tax period (generally an English calendar P
month) and in case of turnover tax payer in quarterly in which the following important matters of T
his business activities are reflected: E
R
• Aggregation of sales
• Accounts of payable taxes
• Aggregation of purchase 33
• Accounts of deduction at source / rebate /
• Final accounts and balance
• Accounts of deduction by supplier at source

Information on the payment of any supplementary duty should be included in the VAT return.

Submission of VAT return should be made through online (except online to the concerned local
VAT office-circle office) no later than 15 days after the end of the tax period under prescribed
form and procedure.

If the 15th day is a holiday, monthly VAT return can be submitted on the next working day.
Moreover, for reasons of epidemic, pandemic, acts of God or war, the Board, in public interest,
with prior approval of the government, by an order, can extend the time limit for submission of
return for that period of danger exempting from collection of interest and fine.

Late filing of return

Application can be made to the Commissioner for extending the time for filing return to up to 1
month from due date. Note that the application in form Mushak-9.3 must be submitted within 7
days after the end of the tax period.

If the Commissioner considers the reasons mentioned in the application as valid, he shall grant
his approval within 7 (seven) days of receiving the application. If the Commissioner does not
give his decision within the specified time, it shall be deemed to have been approved.

Unless the late submission of return is approved by the concerned Commissioner, registered or
enlisted person shall be liable to pay a fine under Clause (f) of Sub-Section (1) of Section 85 and
interest of 1% under Section 127 for delay period, which is also payable if the late submission of
return is granted approval.

Example: If tax period is the month of September, the date of submission shall be no later than
the 15th of the following month, hence 15 October. If time extension is required the application
through Mushak-9.3 must be made within 7 October, i.e. 7 days from the end of the tax period.

If for the above-mentioned case the return is not filed on time and no application is made for the
extension of time Tk. 5,000 fine and 1% monthly interest will be payable for delay period. In case
an application is made only interest will be payable.

ICAB 2024 Value Added Tax 509

 Amendments to return

In case of any errors in a VAT return already filed, Section 66 allows you to make an application
in the form Mushak-9.4 to file an amended return. The Board will determine to allow any
decreasing adjustments which arise due to the amendments. No monetary penalty will be
charged.

The submitted return may be amended in the following cases:

(a) If there is any clerical error;

(b) If the amount of tax paid is less because of some errors in calculation;
(c) If the amount of tax paid is more because of some errors in calculation; or
(d) If any other types of error are committed excepting forgery.

VAT return cannot be amended due to failure towards decreasing adjustment or input tax credit
within time

Application for amendment–

(a) Can be submitted within 4 (four) years of submission of the relevant return;
(b) Cannot be submitted if the VAT authority starts any audit or enquiry or in any other manner
the error is discovered.

The Commissioner shall give his decision on the said application within 30 (thirty) days of
receiving such an application if net tax of the concerned tax period requires to be lessened
through amendment of return. In case, the application is not approved within the specified time
period, it shall be deemed to have been approved.

In case any request of amendment of return is submitted by the taxpayer before the receipt of
the audit notice and because of the submission of amended return the amount of net payable
tax is increased, in that case–

(a) interest will have to be calculated on the applicable less paid tax under Section 127; and
(b) to pay the less paid tax along with the interest, no penalty or fine can be imposed for reasons
of amendment of return.

Where a request to amend the return is submitted by the taxpayer before the receipt of audit
notice and because of the amendment of return the amount of net payable tax decreases, in that
case–

(a) In case of VAT return: The taxpayer will be able to make a decreasing adjustment equal to
the additional amount within the tax period determined by the Commissioner;
(b) In case of Turnover Tax return: The taxpayer will be able to deduct an amount from his
payable Turnover Tax equal to the additional amount within the tax period determined by
the Commissioner; or
(c) In case of withholding entity: Will receive tax refund according to the Act as determined by
the Commissioner.

510 Business Planning: Taxation & Compliance ICAB 2024

30.13 VAT authorities & officers
C
The following are the VAT authorities under section 78 of the VAT & SD ACT, 2012: H
A
1. Chief Commissioner; P
2. Commissioner; T
3. Commissioner (Appeal); E
4. Commissioner (LTU); R
5. Director General, Central Intelligence Cell;
6. Director General, VAT Audit, Intelligence and Investigation Directorate;
7. Director General, Customs, Excise and VAT Training Academy 33
8. Director General, Duty Exemption and Drawback Office
9. Additional Commissioner or Additional Director General or Director (CIC);
10. Joint Commissioner or Joint Director (CIC) or Director;
11. Deputy Commissioner or Deputy Director;
12. Assistant Commissioner or Assistant Director;
13. Revenue Officer;
14. Assistant Revenue Officer;
15. Any other officer appointed by the Board.

Duties and responsibilities of the VAT Authority.

The Board shall, under the provisions of this Act, carry out all the functions, including the policy
making functions, and discharge all the duties and exercise all the powers of the VAT Authority.

SRO No. 183-Ain/2019/40-Mushak dated 13 June 2019 of NBR delegated power of

Commissioner.

The VAT officials shall perform, while remaining under the control, surveillance and supervision
of the Board, all or any of the functions, discharge all or any of the responsibilities and duties,
and exercise all or any of the powers described below, namely:

a) tax collection and activities relating to keeping accounts thereof;

b) application of the provisions of this Act and the rules made thereunder and administrative
functions; and
c) any other function or duties and responsibilities assigned to them by the Board to carry out
the purposes of this Act.

Subject to such limitations and conditions as may be determined by the Board‚ by a general or
special order, the VAT officers shall, under the provisions of this Act or the rules made
thereunder, perform all:

• such functions, discharge such responsibilities and duties, and exercise such powers as may
be bestowed upon them; and an official junior in rank and status shall perform all such
functions, discharge all such responsibilities and duties, and exercise all such powers as may
be given by an officer senior in rank and status to such official; and

• such functions, discharge such responsibilities and duties, and exercise such powers
through an arrangement whereunder a senior officer may perform all the duties and
responsibilities of a junior officer.

ICAB 2024 Value Added Tax 511

 30.14 Consequences of non-compliance

Non-compliance covers a wider range of situations starting from registration to the collection
and payment of VAT as per the provisions mentioned in VAT & SD Act. According to Section 85
of the VAT & SD Act an assessed may be penalized for the following offences:

If any person:

Sl.
Non-compliances or irregularities Amount of monetary penalty
No.
(a) Non-compliance or irregularity for not applying for 10 (ten) thousand taka only
registration or enlistment within the prescribed
time-limit;
(b) Non-compliance or irregularity for not displaying 10 (ten) thousand taka only
the registration or turnover tax certificate in a
visible place;
(c) Non-compliance or irregularity for not informing 10 (ten) thousand taka only
the Commissioner of the change in the information
of the economic activity;
(d) Non-compliance or irregularity for not applying for 10 (ten) thousand taka only
cancellation of registration or enlistment within the
prescribed time-limit
(e) Non-compliance or irregularity for not abiding by 10 (ten) thousand taka only
the provision of section 9(5);
(f) Non-compliance or irregularity for not filing the 5 (five) thousand taka only
VAT or turnover tax return within the prescribed
time period;
(g) Non-compliance or irregularity for not making Half or equal of the amount of
inclusion of the output tax in the return; output tax not included;
(h) Irregularities for taking more input tax credit thanHalf or equal of the amount of
entitlement in the return; input tax irregularly taken;
(i) Irregularity relating to making an increase of a Twice the amount of increased
decreasing adjustment or making a decrease of an decreasing adjustment or Half
increasing adjustment in the return; or equal of the amount of
decreased increasing
adjustment;
(j) Non-compliance or irregularity for not issuing tax 10 (ten) thousand taka only
invoice, credit note, debit note, combined tax
invoice and withholding certificate;
(k) Non-compliance or irregularity for not keeping 10 (ten) thousand taka only
records in the prescribed manner;
(l) Non-compliance or irregularity for not furnishing 10 (ten) thousand taka only
fixed security;
(m) Irregularity for willingly evading or attempting to Half or equal of the amount of
evade assessment and payment of taxes; taxes evaded.
(n) Non-compliance or irregularity for not filing the 10 (ten) thousand taka only
input-output coefficient within the prescribed time
period;
(o) If a company claim exemption through SRO without 100,000
complying the conditions said in the SRO, they will
be penalized

512 Business Planning: Taxation & Compliance ICAB 2024

 Penalty for unintentional VAT avoidance:
C
No penalty will be imposed when unintentionally VAT avoidance occurred. H
A
Declaration of temporary abstention from giving supply: P
T
Any registered or enlisted person desirous of temporary abstention from giving taxable supply, E
he shall minimum of 48 hours before such abstention inform it to the Divisional Officer and the R
Divisional Officer or the officer nominated by him within 24 hours shall take on site accounts of
input in stock and goods prepared or services of the registered or enlisted person.
33
If any registered or enlisted person remains abstained from making taxable supply and if
subsequently wants to commence it again, has to inform to the concerned Divisional Officer on
the proceeding working day of such commencement.

If a registered entity is temporary closed, VAT authority will not impose any penalty for non-
submission of return during the closing period.

The following Table shows the monetary limits of the VAT officers in initiating a proceeding for
adjudication:

SL
Officer Power
No.
(a) Revenue Officer Value of goods or value of taxable service not exceeding
Tk. 5 lakh only
(b) Assistant Commissioner Value of goods or value of taxable service not exceeding
Tk. 20 lakh only
(c) Deputy Commissioner Value of goods or value of taxable service not exceeding
Tk. 30 lakh only
(d) Joint Commissioner Value of goods or value of taxable service not exceeding
Tk. 50 lakh
(e) Additional Commissioner Value of goods or value of taxable service not exceeding
Tk. 1 Crore
(f) Commissioner Value of goods or value of taxable service exceeding Tk.
1 Crore

30.15 Recovery of Arrear Tax

Where any amount of VAT, supplementary duty, turnover tax, interest, monetary penalty or fine
remains payable by a defaulting taxpayer, the Commissioner shall initiate a proceeding for the
recovery of such arrear taxes from such defaulter.

An arrear tax shall become payable, if:

a) the amount of arrear taxes is shown as payable on a return and remains unpaid;
b) the amount of arrear taxes is shown in the notice of tax determination served on the taxpayer
and the defaulting taxpayer fails to pay it by the last date specified in such notice; or
c) an amount of arrear tax becomes payable on the disposal of any proceeding under this Act.

The Commissioner shall, if an arrear tax becomes payable by a defaulting taxpayer, send a notice
to such defaulting taxpayer for the recovery of such taxes.

ICAB 2024 Value Added Tax 513

 In a proceeding relating to the recovery of arrear taxes, and in relation to fixing the liability and
the amount of such taxes, such notice shall be treated to be the conclusive proof.

The Commissioner shall, in matters of recovery of arrear taxes, take the following actions,
namely:

a) deduct, in the prescribed manner, the amount of arrear tax from the money the defaulting
taxpayer may have under the control of any authority of Income Tax, Customs, VAT or Excise;
b) direct any person or associate or financial institution or bank holding any money of the
defaulting taxpayer to pay the amount by such person or bank;
c) issue an order directing to stop the supply of any goods or any service from the business
premises of the defaulting taxpayer;
d) lock the business identification number in the Bill of Entry processing system in the Custom
House to stop clearance of imported goods of the defaulting taxpayer;
e) issue an order, in the prescribed manner, directing to freeze the bank accounts of the
defaulting taxpayer;
f) issue an order directing to seal the business premises of the defaulting taxpayer or seal such
business premises within the prescribed time and in the prescribed manner;
g) recover the arrear taxes by attaching and selling, in the prescribed manner, any of the
defaulting taxpayer’s immovable property and by seizing and selling any of his movable
property; or
h) take a take a security deposit from a guarantor of the defaulting taxpayer in such manner
and on such terms as may be prescribed.

In relation to the recovery of arrear taxes by a Customs Commissioner, such arrear taxes shall be
collected in the same way as Customs duty on imports is collected.

Consequence of VAT defaulter

VAT authority may request WASA, Gas, Electricity provider to disconnect the line if defaulter
entity unable to pay the tax

Power of VAT officer under the Code of Civil Procedure

In relation to the recovery of money under the Code of Civil Procedure, an officer of VAT, duly
empowered in this behalf and subject to the provisions of this Act, shall have the same powers
as those of a Civil Court for the recovery of arrear taxes.

Change in jurisdiction for recovery of arrear tax

Where a defaulting taxpayer resides in, or has an economic activity or a property within, the
jurisdiction of any other Commissioner, the Commissioner may make a request to such other
Commissioner to recover the arrear tax, and such Commissioner shall, on such request, recover
the arrear tax in such a manner as if the tax were an arrear in his jurisdiction.

514 Business Planning: Taxation & Compliance ICAB 2024

30.16 Audit and Investigation
C
In order to prevent tax evasion, the Commissioner or the Director-General may conduct audit H
and investigation into all affairs of a taxpayer’s economic activities. A
P
An officer of VAT, duly empowered by the Commissioner or the Director-General, shall, after T
conducting the audit and investigation in accordance with the procedure laid down in the Audit E
Manual, submit an (final) audit report to the Commissioner or the Director-General in form R
“Mushak-13.3”.

If tax liability of any taxpayer for the audited period is identified, then the Commissioner or 33
Director-General shall determine the tax liability after considering the interest payable on such
unpaid tax and, will refer to the concerned officer for initiating next proceedings for the
collection of the unpaid tax.

Notwithstanding anything contained in section 73, in case of 100% export-oriented industries,

the Commissioner cannot demand any arear tax for any tax period, more than three years before
the concerned tax period for realization of arrear tax

Tax Determination timeline

Tax Determination procedure should be completed within 120 days of submission of the Written
explanation.

Powers of the VAT officers

An Officer of VAT, duly authorized in this respect, and for authorized purposes, may, through
service of a notice, ask for the following information from any person, namely:

(a) necessary information relating to any person for conducting the audit and the investigation;
or
(b) any document or evidence under the custody of any person.

Such an authorized VAT officer shall have the following powers, namely:

(a) to make copies of any record;

(b) to seize any record in the prescribed manner;
(c) to seal any record or good; and
(d) to take steps, in the prescribed cases and manner, to freeze bank accounts of any person.

In relation to the seizure of any record, document or a goods, those shall be returned, under
such procedure as may be prescribed, to such person from whom they were seized.

Powers and functions of the Customs Officers

Every Customs Officer, in applying, and giving effect to, any provision of this Act or any rule
made thereunder, shall have the following responsibilities, namely:

a) to collect VAT and advance tax imposed on taxable imports; and

b) to collect supplementary duty payable on imports of goods subject to supplementary duty

ICAB 2024 Value Added Tax 515

 A Customs Officer shall be entitled to exercise the powers conferred upon him by the Customs
Act in such a manner as if the provisions of imposition of Customs duty on importable goods
under the Customs Act is applicable to the VAT and supplementary duty imposed under this
Act.

Supervised supply, observation and surveillance

Where a taxpayer does not comply with the provisions of this Act with an intention of evading
payment of supplementary duty, an Officer of VAT may, under orders from the Commissioner
or Director General observe, and keep surveillance on, any supervised supply, in a prescribed
manner, at any place relating to his economic activities subject to supplementary duty to
determine the actual tax liability of such taxpayer.

30.17 Offence, Trial & Punishment

Offences relating to VAT registration certificate or turnover tax certificate and tax invoice, and
punishment thereof, whoever dishonestly:

• makes or uses a fake VAT registration certificate, turnover tax certificate or integrated tax
invoice and withholding certificate bearing a forged or false business identification number;
or
• makes or uses a forged or false tax invoice, credit note, debit note, integrated tax invoice
and withholding certificate;
• evades payment of the payable tax otherwise; or
• claims a tax refund without such person being entitled to such refund,

Shall be punished with imprisonment for a term which may extend to one year, or with a fine
equal to the amount of tax payable, or with both.

• If any person gives any false information regarding online VAT registration or enlistment
then the VAT authority will take action under the applicable law.

Offence and punishment relating to false or misleading statement or description

Whoever dishonestly makes a false or misleading statement or description in any tax document
submitted to any VAT officer shall be punished with imprisonment for a term which may extend
to 6 (six) months, or with a fine equal to the amount of tax payable, or with both.

Offence and punishment for obstructions

Whoever, with a mala fide intention, obstructs or attempts to obstruct any VAT officer in
discharging his duties under this Act or any rule made there under shall be punished with
imprisonment for a term which may extend to 6 (six) months, or with a fine which may be not
less than 10 (ten) thousand taka and not more than 2 (two) lakh taka, or with both.

Offence committed by any company, association of persons or property development joint

venture

If an offence is committed by any company or association of persons or property development

joint venture, every director, partner, chief executive, manager, secretary, official, employee,
representative or VAT Agent thereof having involvement with such offence shall be deemed to
have committed such offence unless he proves that such offence was committed without his
knowledge or he tried his best to prevent the commission of such offence.

516 Business Planning: Taxation & Compliance ICAB 2024

 No imprisonment, except for paying fine, shall be imposable upon the director, partner, chief
executive, manager, secretary, official, employee, representative or VAT Agent of such C
company, on whom the same judicial proceeding is lodged against as that of the company. H
A
• Activities in production, marketing, transport of fake, forged or used stamp and banderole P
• Activities in production, storage, transport, marketing and sales of products through using T
fake, forged or used stamp and banderole.
E
• Production, storage, transport, marketing and sales of products without banderole and
R
stamp which are legally required to be used

Prior approval before filing a case

33
Without the prior approval of the Commissioner, no case in respect of any offence shall be filed
in any court.

Fine additional to the tax payable

The fine imposed as punishment by a Judicial Magistrate or a Metropolitan Magistrate shall be

in addition to VAT, supplementary tax, turnover tax or monetary penalty.

30.18 Appeals, Revisions & Miscellaneous

Appeals & Revisions

Appeal to Commissioner

A person may lodge an appeal in the prescribed manner to the Commissioner (Appeal) within
90 (ninety) days from the date of issue of decision or order. Time extension may be possible for
60 days.

At the time of filing appeal, person shall pay 10% of the tax specified in the order (except the
penalty amount).

The Commissioner shall dispose of the appeal within a period not exceeding 1 year.

Appeal to Customs, Excise and VAT Appellate Tribunal

A person may lodge an appeal in the prescribed manner to the Appellate Tribunal within 90
(ninety) days from the date of issue of decision or order.

Applicant will have extra 60 days upon discretion of the president, Appellate Tribunal to appeal
if he/she fails to appeal within 90 days

At the time of filing appeal, person shall pay 10% of the tax specified in the order (except the
penalty amount). If payment has been made in the Commissioner Appeal stage, then no
disputed VAT will be required to be deposited.

In case where the Appellate Tribunal fails to dispose of the appeal within a period of two years,
the appeal shall be deemed to have been granted by the Appellate Tribunal.

Appeal to the High Court Division of the Supreme Court

A person may prefer an appeal to the High Court Division of the Supreme Court against any
question of law arising by the decision or order.
At the time of filing appeal, a person shall pay 10% of the tax specified except penalty amount.

ICAB 2024 Value Added Tax 517

 ADR

An Assessee can choose ADR to resolve his/her issues even if the case is pending at the
honorable High Court division and Appellate division.

The authority must settle the case within 90 days of ADR application

Miscellaneous

Imposition of Interest

If a person fails to pay a tax payable to the Commissioner on or before the due date of payment,
s/he shall be liable to pay an interest at a simple rate of one (1) percent per month (up to 24
months) on the amount of payable tax, from the next day after the date the payment becomes
due to the date the payment is made.

If a person pays an interest and an amount to which the interest relates is found not to have been
payable, the interest paid on such amount shall be refundable to such person.

Interest shall be payable in additional to any monetary penalty or fine.

However, 2% bi-annual interest penalty shall be imposed for withholding VAT payable.

Appointment of VAT Consultant

Any person may be appointed from among Chartered Accountant or Chartered Secretary or
licensed VAT consultant for providing advice to a taxpayer or for representing him in any
proceedings.

An application for VAT Consultant license will need to be made by eligible persons online in
form “Mushak-18.1” to the Board.

Following the approval of the application, applicants are required to sit for examination
according to the specified syllabus defined by the order of the Board, as well attend a viva.

The Board shall issue a VAT Consultant license in the form of a card in form “Mushak-18.1Ka”.

In order to obtain VAT Consultant license:

 VAT registration is not required before application

 Application fee is Tk. 5,000
 Not required to renew the license

Maintenance of VAT Software

As per General Order (GO) No. 16/Mushak/2019 dated 30 June 2019 it is mandatory for every
registered organization having turnover of more than Tk. 5 crore in previous fiscal year to
maintain all books account and documents related with VAT in a VAT software as approved by
NBR. Hence, if the turnover of each registration unit exceeds Tk. 5 crore, in that case, you will be
required to implement VAT software. Entities are allowed to use their own software, as long as
it complies with the specifications as prescribed by NBR subject to obtaining approval from NBR.

Further, in case of taking central VAT registration, maintaining VAT records through software is
mandatory.

518 Business Planning: Taxation & Compliance ICAB 2024

 Tax accounting during transition
C
The VAT imposed on a taxable supply shall be payable on the day of introduction of this Act, if: H
A
(a) A supply has been or is made after the day of introduction; and P
(b) A tax invoice for a supply was issued or the price of the supply was paid, or both the actions T
were completed before the day of introduction E
R
No VAT would be payable if such person has already paid VAT on the supply under the VAT Act,
1991 (previous Act), and included that VAT in a return submitted to the Commissioner under that
Act.
33
Submission of audit report

 Limited companies are required to submit previous year’s audited Financial Statement
including income-expenditure within 6 months of the current fiscal year. Permission for time
extension up to 6 more months can be granted upon application to the Commissioner.

 Chartered Accountant firm will be liable to assist VAT officials to discharge their
responsibility

Annexure A: Summary of important Mushak Forms

Form Name Description

Mushak 2.1 Registration form for VAT or Turnover Tax
Mushak 2.2 VAT Registration form for Non-resident
Mushak 2.3 Registration Certificate for VAT/enlistment certificate for Turnover Tax
Mushak 2.4 Cancellation or Changes to Registration/Enlistment
Mushak 2.5 Change in information or new inclusion of information after VAT registration
or turnover tax enlistment
Mushak 3.1 Application for VAT Agent
Mushak 3.2 VAT Agent Registration certificate
Mushak 4.1 Application for refund of paid Advance Tax at import stage
Mushak 4.2 Joint application for transfer of liabilities for Purchase-Sale of Running
Business
Mushak 4.3 Declaration of Input-Output Coefficient
Mushak 4.4 Disposal of unused or unusable input
Mushak 4.5 Dispose of damaged or destroyed goods in accident
Mushak 4.6 Dispose and supply of wastage or by products
Mushak 6.1 Purchase account book
Mushak 6.2 Sales account book
Mushak 6.2.1 Purchase-Sales account
Mushak 6.3 Tax Invoice
Mushak 6.4 Invoice for Contractual Manufacturing
Mushak 6.5 Invoice for transfer of goods for entity with Central Registration
Mushak 6.6 Withholding VAT certificate
Mushak 6.7 Credit note
Mushak 6.8 Debit note
Mushak 6.9 Turnover Tax invoice
Mushak 6.10 Information of purchase-sale invoices exceeding BDT 200,000/-
Mushak 7.1 Application for adjustment of supplementary duty

ICAB 2024 Value Added Tax 519

 Mushak 9.1 VAT Return
Mushak 9.2 Turnover Tax Return
Mushak 9.3 Application for late submission of VAT return
Mushak 9.4 Application for amendment of VAT return

Annexure B: Table showing list of VAT rates

VAT Rate
Import stage 15%
Export stage 0%
Local supply 15%

Special or Reduced rates:

Goods & Services as per Table-3 of 3rd Schedule of VAT & SD Act, 10%
2012
Goods & Services as per Table-2 of 3rd Schedule of VAT & SD Act, 7.5%
2012
Goods & Services as per Table-1 of 3rd Schedule of VAT & SD Act, 5%
2012
Trading stage as per Paragraph 3 of 3rd Schedule of VAT & SD 5%
Act, 2012
For Building Construction companies as per Paragraph 3 of 3rd 4.5% (for 1,601sqft and
Schedule of VAT & SD Act, 2012 above) 2% (1-1,600sqft)
For Medicine at local trading stage as per Paragraph 3 of 3rd 2.4%
Schedule of VAT & SD Act, 2012
For diesel, kerosene, octane, petrol, furnace oil and LP Gas as 2%
per Paragraph 3 of 3rd Schedule of VAT & SD Act, 2012

Specified Amount (example):

Newsprint paper Tk. 1,600/ton
Thread Tk. 3/Kg
Bricks of different grades Tk. 500, Tk. 600, Tk. 800
Scrap/Ship Scrap Tk. 1,000 per metric ton
M.S. Product of different grades Tk. 1,400, Tk. 1,200, Tk.
1300, Tk. 2,200 per ton
Supplier of sim card Tk. 300 per sim card
Advance Tax 3-5%
Turnover Tax 4%

Supplementary Duty on goods and services:

At Import stage as per Table-1 of 2nd Schedule 10%, 20%, 30%, 45%, 60%,
100%, 150%, 200%, 250%,
300%, 350%, 500%
At Local supply stage as per Table-2 of 2nd Schedule 0%, 5%, 10%, 15%, 25%,
30%, 40%, 55%, 66%
At service stage as per Table-3 of 2nd Schedule 10%, 15%, 20%, 25%, 30%

520 Business Planning: Taxation & Compliance ICAB 2024

 Annexure C: Comparison between VAT & Turnover Tax
C
Particulars VAT Turnover Tax H
A
1. Type Registration Enlistment P
2. Tax rate Taxpayer pays VAT at 15%, Taxpayer pays turnover tax at 4% on T
which may be "full" invoice value of the "full" invoice value. E
or reduced value or specific rate R
or amount as the case may be.
3. Rebate/ Credit Taxpayer can take rebate/credit Taxpayer cannot take rebate/credit
against input tax of input tax paid by him. on input tax paid by him. 33
4. Rebate/ Credit of The purchaser can take The purchaser cannot take credit on
VAT paid by rebate/credit on the VAT paid by the VAT paid by him earlier.
purchaser him earlier.
5. Tax payment The taxpayer pays VAT before The taxpayer pays quarterly.
submitting VAT return on
monthly basis.
6. Books and The taxpayer maintains purchase The taxpayer maintains purchase
documents register, sales register and register, sales
prescribed invoices. register and prescribed invoices

7. Return The taxpayer submits return in The taxpayer submits return in Form
form VAT-9.1 monthly within VAT- 9.2 quarterly within 15th from
15th of next month after each tax the end of each quarter. (March 31,
period (Christian calendar June 30, September 30 or
month). December 31)

Chapter Two- Registration

1. You are a tax adviser and one of your clients is seeking advice regarding registration. The
client currently has a central office through which they provide consulting services, one
warehouse and a factory which is involved in the manufacturing and assembling of certain
equipment sold by the central office, for which the factory receives a percentage of the total
revenue. The client also imports heavy machineries and equipment, which are stored at the
warehouse before being sold. The factory currently charges Output VAT @15% and
operates under the input VAT rebate system, whereas the central office charges output VAT
ranging from 5% to 15% and does not claim rebate on input VAT.

Determine whether the client should obtain unit or central registration based on the nature
of their operations.

Solution: NBR has issued SRO No. 263-Ain/2019/79-Mushak dated 18 August 2019, which
specifies the following conditions required for obtaining central registration:

As per (Ka) of sub-rule (2) of the said SRO, if any manufacturer supplies identical or similar
goods from one or more places.

As per (Kha) of sub-rule (2) of the said SRO, if any commercial importer after importing
goods, sells or supplies the same through its owned and controlled sales depot.

ICAB 2024 Value Added Tax 521

 As per (Ga) of sub-rule (2) of the said SRO, if any trader sells or supplies its procured and
collected goods through its own sales unit.

As per (Gha) of sub-rule (2) of the said SRO, if any service provider provides services of
identical or similar nature through their various owned branches.

As per (Uma) of sub-rule (2) of the said SRO, where a manufacturer, after manufacturing,
supplies goods from one or more places through self-owned and controlled sales center
after paying 15% VAT or reduced rate or specific tax as mentioned in the third schedule
provided that it will not be applicable in case of conditional SRO, where exemption is
granted at manufacturing stage for additional part of specific rate

As per (cha) of sub-rule (2) of the said SRO, where a manufacturer, after manufacturing,
supplies goods from one or more places after paying applicable VAT through different self-
owned and controlled sales center or depot or warehouse.

Furthermore, the SRO defines “similar goods” as similar in nature of consumption or use,
e.g.: medicines, electronics products, Food, cosmetic, toiletries, plastic products etc. and
their packaging or intermediate materials

If clause (Ka) and (Uma) of the aforementioned SRO are considered, then central registration
is unlikely to apply for the client because of the following reason:

 The factory manufactures equipment and the central office provides consulting services and
they are not similar or identical as per the nature of their consumption or use.

Hence, the client would need to opt for unit registration.

VAT Imposition

Determining the taxable supply at import stage and comparison between Trade and Credit
VAT system

2. One of your clients plans to import cosmetic products and supply the same to small retailers
through a channel of distributors. As per the VAT & SD Act, there are two options available
for application of VAT at the time of supplying the imported goods to the distributors, i.e.
applying the Trade VAT system where Output VAT will be fixed @5%, or the credit method
where Output VAT will be fixed @15%.

In relation to the above for doing a simulation, you have been given following information
on the product per unit:

Description (per unit) Amount (TK.)

Selling price inclusive of VAT 300
Commercial Value 82
Customs Duty 25%
Regulatory Duty 3%
Supplementary Duty 60%
VAT 15%
Advance Income Tax 5%
Advance Tax 5%
Operational cost 20
Profit ?

522 Business Planning: Taxation & Compliance ICAB 2024

 Requirement:
C
Advise your client on the best option they should consider in view of the overall financial H
aspects of the options. A
P
Solution:
T
Calculation of Assessable Value: E
R
The assessable value is determined by the actual price, i.e. the price actually paid at the time
and place of importation, with addition of (a) freight actually paid, (b) landing charge/local
cost and (c) insurance expenditure. 33

Particulars Tk.
Commercial value 82
Freight (20% of Commercial value) 16.4
Insurance (1% of C&F value) 1
Landing charge [1% *(Cost + freight+ Insurance)] 1
Assessable Value (AV) 100

Calculation of Total Tax Incidence (TTI):

Types of Duty Calculation Amount (Tk.)

Customs Duty (CD) AV*25% 25
Regulatory Duty (RD) AV*3% 3
Supplementary Duty (SD) (AV+CD+RD)*60% 76.80
VAT (AV+CD+RD+SD)*15% 30.72
Advance Income Tax (AIT) AV*5% 5
Advance Tax (AT) (AV+CD+RD+SD)*5% 10.24
TTI AV+CD+RD+SD+VAT+AIT+AT 250.76

Client can adjust or claim rebate against VAT (subject to payment of output VAT @ 15%), AT,
and AIT.

As per section 31 of the VAT and SD Act, 2012 and rule 19 of the VAT & SD Rules, 2016,
every importer who is VAT registered may claim decreasing adjustment for AT in the VAT
return of the same tax period or within the next four tax period.

Additionally, with reference ITA, 2023, importer will be eligible to claim tax credit for the
advance income tax (AIT) paid at import stage against their corporate tax liability.

Client may also claim rebate on their input VAT with the submission of bill of entry along
with conditions prescribed u/s 46 of VAT & SD Act. However, this is to note that to avail the
input tax credit, they will need to sell their products @ 15% VAT. This means that applying
reduced VAT rate @ 5%, will not allow the company to claim input VAT rebate.

As per section 46 of VAT & SD Act, rebate on input tax can be claimed in the VAT return
subject to meeting the major conditions stated as follows:

 Output VAT on supply must be @ 15%.

 Input has to be mentioned in “Input-Output Coefficients declaration” (Mushak-4.3).
 Input needs to be booked on purchase register (Mushak-6.2.1) in the instant case

ICAB 2024 Value Added Tax 523

 Comparison between Trade VAT and Credit VAT System:

Particulars Output VAT @5% Output @15%

Cost of Sale 250.76 250.76
Less: AT as a decreasing adjustment 10.24 10.24
Less: Rebate on Input VAT 30.72
Total VAT Claimable/Rebate 10.24 40.96
Less: AIT claimable 5.00 5.00
Net Cost of the product 235.52 204.80

Particulars Output VAT @5% Output @15%

Selling Price (VAT inclusive) 300 300
Selling Price (VAT exclusive) 286 261
Net Cost of Product 236 205
Income 50 56
Less: Operational cost 20 20
Net profit 30 36
Output VAT payable 14.29 39.13
Net VAT payable 4 (2)

It appears from the above calculation, it will be more beneficial for the client to operate
under credit VAT system, as the net income is Tk.36 when Output VAT is @15%, but the net
income reduces to Tk.30 when Output VAT is @5%.

Implication of reverse charged

3. XYL Ltd, a company incorporated in Bangladesh, has entered into an offshore contract with
Xavier A.S., a company based in USA to render onshore consultancy services in Bangladesh.
Please note that XYL Ltd is VAT registered.

Based on the above background, XYL Ltd has sought your professional opinion about
implication of VAT at the time of make payment to XYL A.S.

Solution:

As per section 2(17) of the VAT & SD Act, the transaction constitutes as import of service,
and as per section 15(3) of the VAT & SD Act, importation of taxable goods or services will
be subject to VAT @15%. Furthermore, as per clause (Ga) of section 16 of the VAT & SD Act,
service recipient is liable to pay VAT against importation of service.

Now section 20 of the VAT & SD Act, 2012 prescribes regarding tax payment in case of
reverse charged on import of service, according to which if the supply of service is subject
to zero rated VAT, then the supply of imported service will not be treated as taxable supply
with regard to reverse charged. Hence the service shall be treated as taxable supply with
regards to reverse charged and 15% VAT shall be applicable.

VAT deduction mechanism at the time of remitting the payment

NBR issued SRO No.240-Ain/2021/163-Mushak dated 29 June 2021 which provides

guidelines on payment of VAT on imported services, according to which, XYL Ltd shall be
liable to deposit the VAT to the Government Exchequer. Bank shall deposit the VAT on XYL’s

524 Business Planning: Taxation & Compliance ICAB 2024

 behalf only if they are unable to provide treasury challan for the payment of the
corresponding VAT, or if the amount so deposited by XYL is less than the required amount, C
in which case bank shall collect and deposit the remaining balance to the Government H
Exchequer. A
P
VAT implication on Export of service T
E
4. KZY Bangladesh, a subsidiary of KZY Singapore, offers inspection services to foreign apparel R
brands. The parent company KZY Singapore, collects orders from apparel brands in
Singapore and places the inspection requests to KZY Bangladesh. In response to such
requests, KZY Bangladesh inspects the quality of clothing manufactured in the export
33
oriented RMG factories in Bangladesh and accordingly sends the inspection report to KZY
Singapore. KZY Bangladesh receives the payment from KZY Singapore in foreign currency
for the services rendered.

Should KZY Bangladesh consider the service rendered to KZY Singapore as a zero-rated
supply of service?

Solution:

As per section 24(5) of the VAT and SD Act, the supply of a service shall be zero-rated if it is
exported outside Bangladesh.

Further, as per section 24(6) of the VAT and SD Act, subject to the provisions of section 24(5),
the supply of a service shall be zero-rated, if—

a) the recipient of such a supply is—

i. a non-resident who stays outside Bangladesh at the time of supply of the service; or
ii. a resident and receives such service, in effect, staying outside Bangladesh at the time of
the supply of the service; and

b) such service is not—

i. directly related to any land situated in Bangladesh;

ii. physically given on any goods situated in Bangladesh at the time of the supply;
iii. provided, by global roaming services, to a person temporarily outside Bangladesh.

KZY Bangladesh, renders services to a non-resident based in Singapore. However, the

inspection service rendered by KZY Bangladesh involves physical inspection of finished
products or raw materials in RMG factories situated in Bangladesh. With reference to section
24(6)(b)(ii) for a service, to be qualified as zero-rated supply, it should not be physically given
on any goods situated in Bangladesh at the time of the supply.

Please do note that the VAT law has not separately defined the meaning of services which
should fall within the purview of the “services which are physically given to any goods
situated in Bangladesh”. But from our plain reading and apparent understanding of section
24(6)(b)(ii) of the said Act, the services rendered by KZY Bangladesh are unlikely to qualify
as a zero-rated supply as the services are physically performed on the “goods” situated in
Bangladesh. Hence, the services are more likely to be subject to VAT per VAT and SD Act,
2012.

ICAB 2024 Value Added Tax 525

 VAT on online sales

5. Medova.com works as an online platform for specialized doctors to offer services to their
patients through online during the ongoing pandemic. Medova.com charges 15% service
fee to the doctors on the consultation fee charged to the patients. Therefore, for a
consultation fee of Tk. 1,000 the service fee comes to Tk. 150 (Gross) and the remaining Tk.
850 is reimbursed to the doctors. In addition to that, the patient will be charged a processing
fee of 5% as visit fee.

The entity maintains individual bank accounts to collect consultation fee and processing fee
from the patient. For ease of tracking, the entity maintains separate bank account to
reimburse the doctor’s portion of the consultation fee received from the patients.

In the statement of financial performance of Medova.com there are two sources of revenue:
Tk. 150 as a service fee from the doctors and processing fee of Tk. 50 from the patients,
hence total revenue comes to Tk. 200 (VAT inclusive).

Requirements:

As a VAT advisor to Medova.com, you have been requested to provide opinion on the
following issues as per the provisions of the VAT & SD Act and the VAT & SD Rules:

a) How much VAT shall Medova.com be subject to against their invoice to doctors?
b) How much VAT shall Medova.com be subject to against their invoice to patients?
c) Are there any implications of withholding VAT?

Solution:

a) Medova.com currently charges 15% service fee to the doctors against the service
provided by them. Such service can be classified under the service code S099.20 as
“Other miscellaneous service” as per SRO No. 186-AIN/2019/43-Mushak, dated 13 June
2019, and shall be subject to 15% VAT.

If Tk. 150 service fee is VAT inclusive, then, the VAT comes to Tk. 20 (150*15/115).

b) Medova.com currently charges processing fee of 5% to patients. The service so

provided can be classified under the service code S099.20 as “Other miscellaneous
service” as per SRO No. 186-AIN/2019/43-Mushak, dated 13 June 2019, and shall be
subject to 15% VAT.

If Tk. 50 processing fee is VAT inclusive, hence VAT payable on the invoice value (VAT-
6.3) comes to Tk. 6.5 (50*15/115).

Explanation for Solution a) & b):

Medova.com is rendering the services to both the doctors and patients through an online
app.

Such services used to fall within the purview of service code S079.00 “Social media and
virtual business” which has been defined vide SRO No. 186-Ain/2019/43-Mushak dated 13
June 2019. “Social media and virtual business” means the buy and sale or transfer of those
goods or services rendered through the use of electronics network or web based or app

526 Business Planning: Taxation & Compliance ICAB 2024

 based mobile applications or social media based apps or through the use of similar medium
i.e. advertisement, establishment of transport communication or e-commerce without any C
owned sale or business center. Such service code will be subject to 7.5% VAT with reference H
to section 15 of the VAT and SD Act, 2012 However, the service code S079.00 has been A
omitted from VAT and SD Act 2012 vide SRO No. 234-Ain/2019/70-Mushak dated 30 June P
2019. Therefore, service code S079.00 will not be applicable in this instant. T
E
Now question is if such service should fall within the purview of “Sale of goods through R
online” under the service code S099.60. Sale of goods or services through online is subject
to VAT @ 5% with reference to section 15 and 3rd Schedule of the VAT and SD Act, 2012.
“Sale of goods through online” has been defined as follows vide SRO No. 234-Ain/2019/70-
33
Mushak dated 30 June 2019: “Sale of goods through online” means the buy and sale of
those goods, through the use of electronic network, which has been bought from the
manufacturer or from the service renderer with the payment of VAT and which does not have
any sales center. Within the purview of the definition, Medova.com will have to make sure
that the services being rendered to both the doctors and patients has been taken from other
service renderer with the payment of VAT. But this is not the business modality happening
in Medova.com’s case. Hence, service code S099.60 “Sale of goods through online” is
unlikely to be applicable and accordingly VAT @ 5% should not be applicable.

Such services are likely to be considered under the service code S099.20 “Other
Miscelleneous Services”. Please note that service code S099.20 “any other services” is
subject to VAT @ 15% through SRO No. 149-Ain/2020/110-Mushak dated 11 June 2020.

Hence, rendering service to both the doctors and patients through online apps should be
categorized under the service code S099.20 as any other service and VAT @ 15% should be
applied.

c) Withholding implications for Patients:

Patient being an individual is outside the purview of VAT withholding entity. Hence, payment
will not suffer VAT deduction at source.

Withholding implications for Doctors:

Medova.com collects the consultation fees from the patients and reimburse the entitlement
of the doctors after keeping their own income. Hence, there is no scope for deduction at
source. At the same time, it is worthwhile to mention that even if the payment mode was
from the doctors to the Medova.com, doctor being an individual is outside the purview of
withholding entity.

Therefore, there shall be no withholding implications in both cases.

ICAB 2024 Value Added Tax 527

 VDS implication on sub-contract project

6. Luminous Ltd currently works as contractor in many government projects. In order to

complete the projects, Luminous Ltd also hires sub-contractors to do part of the work.
Luminous Ltd receives the full payment against the work done, which it then pays to sub-
contractors on proportionate basis.

Advise Luminous Ltd in light of VAT & SD Act and relevant SROs, regarding the treatment of
VAT deduction at source (VDS) when making payment to sub-contractors.

Solution:

As per section 49(5) of the VAT & SD Act, if under any project, VAT payable by any service
recipient is collected at source or deducted and deposited to the government treasury in
prescribed manner while paying service value or commission by service recipient or as the
case may be by the person paying the service value or commission and if that service
provider appoints any sub-contractor, agent or any other service rendering person with the
purpose of providing a part of the total service, in such case, as VAT will not be applicable
in this case, VAT shall not be collected at source again from such sub-contractor, agent or
any other service rendering person appointed by the service provider, subject to submission
of documentary evidence of collection or deduction of VAT payable primarily on the service
and deposit of the same to the government treasury. Please note, the rule does not apply in
case of purchase of goods under the project.

In order to avail this benefit, documents providing evidence of early stage’s

collection/deduction of VAT and the deposition of such VAT to the Government Treasury
must be submitted.

Hence in light of the aforementioned section, if Luminous Ltd, being the main contractor of
a project, can provide proof of the VAT deduction by the project owner, i.e. “Mushak-6.6”
provided by the project owner, then VAT would not be applicable on the transaction with
Luminous Ltd. and sub-contractor and Luminous Ltd shall make payment to the sub-
contractors without deduction of VAT.

VAT Return

7. PARACOM is involved in the business of publishing books. On the sale of books, PARACOM
collects VAT @ 15% from its customers. The following transactions have been shared with
you from the accounts department of PARACOM to compute the VAT liability for the month
of September 2024.

Particulars Amount VAT Rate VAT

Books exported to Vietnam 500,000 0%
Books sold to local distributors 1,500,000 15%
Books sold to SSF at reduced rate 60,000 7.5%
(SSF will deduct VAT at source however SSF has not
paid during September)
Exempted goods used as raw materials 50,000 Exempted
Paper imported from India 300,000 15%
AT paid on paper paid from India 300,000 3%
Other raw materials procured from local suppliers at 200,000 15%
standard rate

528 Business Planning: Taxation & Compliance ICAB 2024

 Services procured at standard rate 150,000 15%
Purchase air-conditioner for office 60,000 7.5% C
Repair of factory premises 20,000 7.5% H
VAT deducted at source from suppliers during 8,000 A
September P
Issuance of debit note during September 6,000 T
VAT paid against office rent 5,000 E
Issuance of credit note 8,000 R

a) Calculate Net VAT payable when submitting the VAT return for the month of September
2023 33

Solution:

a)
Output VAT = 225,000+4,500 =229,500
Input VAT = 45,000+30,000+22,500 = 97,500
Increasing Adjustment = 8,000+6,000+5,000 = 19,000
Decreasing Adjustment = 9,000+8,000 = 17,000
Net VAT liability = Output VAT + Increasing Adjustment – Input VAT – Decreasing
Adjustment = 229,500+19,000-97,500-17,000 = 134,000

Additional information:

The accounts department will not be able to submit the VAT return within 15th October.
After their CFO returns on 14th November, they will be able to submit the return for the
month of September on 15th November.

b) What will be the VAT liability if they have not filed for time extension to the authority?

Solution:

b)
Net VAT Liability = 134,000
Interest due to late filing of return as per section 127 = 1% * 134,000 = 1,340
Late payment penalty as per section 85 = 5,000
Total VAT liability for the month of September = 134,000+1340+5,000 = 140,340

Invoicing

8. In reference to question 2, what are the compliance requirements with respect to

documentation that the client needs to maintain when suppling goods between the three
units.

Solution:

As per rule 1(c), of Rule-40 of the VAT & SD Rules, 2016, every registered supplier shall, at
the date when VAT becomes payable on the taxable supply, issue, on or before such date,
a tax invoice in “Mushak-6.3” form against each supply.

Since the client is required to obtain unit registration, hence within the purview of Rule 40 of
VAT & SD Rules, 2016, supply of goods/services between each of the three locations will be

ICAB 2024 Value Added Tax 529

 considered as taxable supply and accordingly Mushak-6.3 will be required to be issued as
and when the supply is made.

VAT Audit

9. Mr. Abedin is the Managing Director of Xoom Limited. Xoom Limited manufactures and sells
animal food. Xoom Limited obtained its VAT registration on 20 June 2023. Mr. Abedin has
operated under the assumption that animal food is VAT exempted. Hence, to this date he
has not submitted any VAT return or maintained any documentation for VAT purposes.

Recently local VAT authority paid a visit to Xoom Limited’s premises and have asked for their
audited financial statements. Xoom Limited’s latest financial year ended on 31 December
2023, and the FS is as follows: -

Xoom Limited
Statement of Financial Position
As at 31 December 2023

In Taka 31-Dec-23
Assets
Non-current assets
Property, plant & equipment 500,000,000
Total non-current assets 500,000,000
Current assets
Advance, deposit & prepayments 5,000,000
Cash & cash equivalents 20,000,000
Total current assets 25,000,000
Total assets 525,000,000

Equity
Share capital 510,000,000
Share money deposit 10,000,000
Retained earnings
Total equity attributable to equity holders 520,000,000

Non-current liabilities
Lease liability 3,000,000
Total non-current liabilities 3,000,000

Current liabilities
Payable for expenses 1,500,000
Provision for tax 5000,000
Total current liabilities 2,000,000
Total equity and current liabilities 525,000,000

Xoom Limited

530 Business Planning: Taxation & Compliance ICAB 2024

 Statement of Comprehensive Income
For the year ended 31 December 2023 C
H
In Taka 31-Dec-23 A
P
Revenue 70,000,000
T
Cost of sales 50,000,000
E
Gross profit 20,000,000 R

Administrative expenses 5,000,000

Operating profit 1,5000,000 33

Other income/(loss) -
Finance expenses
Profit before income tax 1,5000,000

Income tax expenses

Current tax
Deferred tax -
Profit for the year
Other comprehensive income -
Total comprehensive Profit for the year

Please note that, vendors of Xoom Limited are all VAT registered and provide tax invoice
along with their supply. However, Xoom Limited does not deduct any VAT from any vendors.

Requirement:

Assume that you are a VAT advisor and today’s date is 3 July 2024. Mr. Abedin wishes to
know what the consequences are that Xoom Limited may face following the VAT audit.

Solution:

Xoom Limited manufactures animal food, which is likely to fall under H.S Code No. “23.09”.
As per the First and the Third Schedule of VAT & SD Act, there is no H.S Code No. 23.09
listed there, meaning that such goods are not exempted from VAT by the Act. However, the
Government through issuance of SRO No. 137-Ain/2024/243-Mushak dated 27 May 2024
has further exempted certain goods and services. The goods under the “H.S. Code No.
23.09” are listed in the Table-2 of the said SRO, meaning that animal feed is exempted from
VAT at import and manufacturing stage subject to maintaining compliance with the
conditions mentioned in the SRO. To avail this exemption benefit, Xoom will need to comply
with the provision of section 51, 53, 54, 64 and 107 of the VAT & SD with regards to the
maintenance of accounts, Tax Invoice and submission of documents. If Xoom fails to comply
the conditions then they will be penalized as per section 85(1).

As per section 51, 53, 54, 64 and 107 of the VAT & SD Act, Xoom Limited must maintain the
following documents:

• Mushak-6.1: Books of Accounts for purchase

• Mushak-6.2: Books of Accounts for sale

ICAB 2024 Value Added Tax 531

 • Mushak-6.3: Tax Invoice
• Mushak-6.6: Certificate for tax deduction at source.
• Mushak-6.7: Credit Note
• Mushak-6.8: Debit Note
• Mushak-6.10: Invoice data for purchase/sales over BDT 2,00,000

Furthermore, they must submit monthly VAT return (Mushak-9.1), to be able to avail the
exemption. Since Xoom Limited does not maintain any documentation, the VAT authority
may penalize the company BDT 100,000 as per section 85(1).

Furthermore, as per section 2(21) of the VAT and SD Act, Xoom shall be considered as a
withholding entity and consequently they are required to withhold VAT as per SRO No. 240–
Ain/2021/163-Mushak dated 29 June 2021. Given that, they currently do not withhold any
VAT from the vendors, VAT authority should ask them to pay VDS as per the SRO and may
also impose 2% half yearly interest on the VDS payable amount.

Additionally, they haven’t submitted any VAT returns up until now. And following the
inspection, they will be required to submit all the previous VAT returns along with the
penalty of BDT 5,000 for every late submission of VAT return as per section 85(1) of VAT and
SD Act.

Trader vs. Procurement provider

10. Zaber Enterprise is a trading company selling and distributing foreign manufactured
specialty chemicals in Bangladesh. AZ Ltd is the principal supplier of Zaber Enterprise, who
imports the products from Thailand and supplies to Zaber Enterprise while charging VAT
@5%. Zaber Enterprise sells the goods to customers who are mainly limited companies who
uses the chemicals for production purposes.

Requirement:

a. At what rate of VAT should Zaber Enterprise deduct VAT at source when making
payment to AZ Ltd?
b. At what rate of VAT, customer of Zaber Enterprise shall deduct VAT at source?
c. When will Zaber Enterprise be required to deposit VDS amount to the Government
Exchequer?

Solution:

a. Currently, AZ Ltd follows trade VAT system and issues Mushak-6.3 to Zaber Enterprise
while applying VAT @5%.

Therefore, Zaber Enterprise, being a withholding entity will deduct VAT at source @7.5%
in accordance with Rule 3(1) of the VDS Guidelines.

b. Same argument shall apply as mentioned under response to “a”, that is Zaber Enterprise
will be considered as procurement provider within the purview of the amended
definition of procurement provider given under SRO No. 240-Ain/2021/163-Mushak
dated 29 June 2021. Hence customers will deduct VAT @7.5% when making payment
to Zaber Enterprise.

532 Business Planning: Taxation & Compliance ICAB 2024

 c. As per the guidelines provided under SRO No. 240-Ain/2021/163-Mushak dated 29
June 2021, Zaber Enterprise is required to deposit the VAT deducted at source to the C
Government Exchequer within 7 days of the following month of making payment to the H
supplier. A
P
ITES T
E
11. KZ Ltd is a VAT registered entity, planning to procure digital content development and R
management services from LETO Solutions Ltd., against which LETO Solutions will be raising
an invoice (i.e., Mushak-6.3) applying VAT @5%, while considering this as IT Enabled
Services (ITES).
33
The Finance Manager of KZ Ltd has now approached you to clarify whether LETO Solutions
is right to raise an invoice applying VAT @5%.

Requirement:

Provide clarification whether the service will be considered as ITES while stating relevant
provisions of the law.

Solution:

The service provided by LETO Solutions Ltd, will be considered as ITES within the purview
of VAT & SD Act. Further, since digital content development and management services has
been specifically mentioned under service code No. S099.10, the applicable VAT rate in that
case is 5%. KZ Ltd, being a withholding entity, should deduct VAT @5% when making
payment to LETO Solutions Ltd in the light of SRO No. 240-Ain/2021/163-Mushak dated 29
June 2021.

Refund

12. Azur Bangladesh paid input VAT of Tk 500,000,000 in August 2024 but output VAT was Tk
350,000,000. This has created a refund of Tk 150,000,000 for the month of August 2024.
They have approached you to advise on how they can utilize the refund in the light of VAT
and SD Act, 2012?

Solution:

As per section 68 of the VAT & SD Act, if in a Tax period, the sum of input tax and the
decreasing adjustment exceeds the sum of output tax, supplementary duty and increasing
adjustment for such VAT period, resulting in net negative payable amount money, in which
case the excess amount of money shall be carried forward and may be deducted over the
following six Tax periods, after which any remaining excess money shall be refunded in
accordance with the provision of this section.

Furthermore, if the remaining excess money exceeds BDT 50,000, in which case, the
Commissioner shall refund the amount within 3 months of application.

Hence, Azur Bangladesh can claim back the refund from VAT authority if they have the
refund amount of more than BDT 50,000 after adjusting for 6 Tax periods.

ICAB 2024 Value Added Tax 533

 Application for getting refund amount shall need to be made to the Commissioner through
form “Mushak-9.1”. Upon approval of the application, the Commissioner shall deposit the
returnable amount to the applicant’s bank account or issue a crossed check in favor of the
applicant.

Filling out Mushak-4.3 (Input-Output coefficient)

13. The following information is available on a single product of a manufacturing company:

No. Item Name Price per unit

1 Raw Materials 20.00
2 Salary & Allowance 1.50
3 Laboratory Equipment 2.00
4 Stationery Item Purchase 0.50
5 Electricity Bill 0.10
6 Gas Bill 0.20
7 Bank Interest 0.65
8 Machinery Items 0.60
9 Transport Service 1.00
10 Wrapping Materials 0.50
11 Wages 0.70
12 Advertising Expense 0.45
13 Overhead Expense 2.00
14 Laboratory Re-agent 1.00
15 Depreciation of Machineries 0.85
16 Commission charges paid 1.00
17 Other Expense 0.15
18 WASA Bill 0.10
19 Entertainment Expense 0.20
20 Profit 5.50

Requirement:

Please complete Form Mushak-4.3. In this case, what is the cost of materials, value addition
and production? What is the rate of value addition? What will be the cost of each unit of
product and what will be the selling price?

Solution:

The material and value addition will be displayed as follows:

Cost Per Value

No. Item Name Input Price
Unit addition
1 Raw Materials 20.00 20.00
2 Salary & Allowance 1.50 1.50
3 Laboratory Equipment 2.00 2.00
4 Stationery Purchase 0.50 0.50
5 Electricity Bill 0.10 0.10
6 Gas Bill 0.20 0.20
7 Bank Interest 0.65 0.65
8 Machinery Items 0.60 0.60

534 Business Planning: Taxation & Compliance ICAB 2024

 9 Transport Service 1.00 0.80 0.20
10 Wrapping Materials 0.50 0.50 C
11 Wages 0.70 0.70 H
12 Advertising Expense 0.45 0.45 A
13 Overhead Expense 2.00 2.00 P
14 Laboratory Re-agent 1.00 1.00 T
15 Depreciation of Machineries 1.85 1.85 E
16 Commission charges paid 1.00 1.00 R
17 Other Expense 0.15 0.15
18 WASA Bill 0.10 0.10
19 Entertainment Expense 0.20 0.20 33
20 Profit 5.50 5.50
Total 25.75 14.25 40.00

Hence, cost of material is Tk. 25.75, value addition is Tk. 14.25, production cost per unit is
Tk. 40.00.
VAT @15% will be applicable at the time of supply {40+ (40x15%) = Tk. 46.00}, therefore
selling price will be Tk {46.00- (46x15 / 115)} or {46.00-6.00} or Tk. 40.00.
Rate of value addition: (14.25 / 25.75) x100 = 55.34%

Note: As per section 46(2)(Gha) of VAT & SD Act, 80% of transport expenses will be
considered as input. Hence 80% of transport cost is 1.00x80% = Tk. 0.80 and (1.00-0.80) or
Tk. 0.20 is considered as value addition.

ICAB 2024 Value Added Tax 535

536 Business Planning: Taxation & Compliance ICAB 2024
 Chapter 34
Customs Portion
(Covering The Customs Act, 2023 and
The Finance Act, 2024)
 Syllabus of Customs Portion
Business Planning: Taxation & Compliance

Session Contents Reference Page

Session-1 Important Sections of Customs Act Section-4, 5, 6, 7, 8, 9, 17, 18, 19, 543-555
2023: Appointment of Customs Officer, 20, 23, 24, 28, 32, 33, 35, 101, 102,
Duty and Power of Customs officer, 103, 104, 105, of Customs Act,
Delegation of Power, Assistance, Port 2023.
Declaration, Landing Station,
Prohibition, Goods Dutiable,
Counterveiling duty, Anti-dumping
duty, Safeguard duty, Fee for Customs
service, Duty Reduction, Time of
Payment of duty, Misdeclaration,
Deferred payment, Temporary Import
and system, Inward & Outward
Processing and system.
Session-2 (i) General rules for the interpretation First Schedule of 556-559
of the Harmonized System (GIR). Customs Act, 2023
) Classification of goods & Procedure. Explanatory Notes
(iii) Section, Chapter, Heading, Sub-
heading Notes
) Rules of using dot (.) and dash(-).
Session-3 Article VII of GATT/WTO Valuation Section-27 of Customs Act 560-593
Agreement, Valuation Rules-2000 of Article VII of GATT (WTO
NBR, Tariff value and minimum value of Agreement on Customs Valuation-
imported goods for calculation of ACV)
duties-taxes.
Customs Valuation (Determination
of Value of Imported Goods) Rules-
2000 (SRO no. 57-Law/2000/1821/
Customs, dated 23/02/2000).
Tarif Value and Minimum Value
(SRO no. 202- Law/2024/54/
Customs, dated 29/05/2024)
Session-4 Exemption (concession) of duties and Section-25 of Customs Act 594-651
taxes for import of Capital Machinery Exemption of duties- taxes
(General, EPZ, EZ, High-Tech Park) and (machinery & parts)
import of Raw Material by VAT
SRO-no.162-Law/2024/14/Customs,
compliant Industry (General).
dated 29/05/2024(General)
SRO-no.56-Law/2017/Customs,
dated 24/05/2021(EPZ)
SRO-no.184-Law/2024/36/Customs,
dated 29/05/2024(EZ)
SRO-no.187-Law/2024/39/Customs,
dated 29/05/2024 (HTP)
Exemption of duties- taxes
(industrial raw material)
SRO-no.164-Law/2024/16/Customs,
dated 29/05/2024 (General)

538 Business Planning: Taxation & Compliance ICAB 2024

 Session-5 Customs Warehousing System in Section 11, 12, 108-134 of Customs 652-754
Bangladesh. Act.
Direct & Deemed Exporter(except
General Bond, Special & Supervised readymade garments) Rules-2024
Bond, Duty Paid Bond, Duty Free Bond, (SRO-no.212-Law/2024/64/Customs,
Diplomatic Bond, Commishariate, Home dated 29/05/2024)
Consumption Bond, Deemed Exporter, Direct Readymade Garments
Other issues of warehousing bond Exporter Rules-2024 (SRO-no.213-
system. Law/2024/65/Customs, dated
29/05/2024)
Session-6 Customs Warehousing System in Section 11, 12, 108-134 of Customs 652-754
Bangladesh. Act
(Warehouse License Rule. Industries Warehouse Licensing Rules, 2024
entitled to get Bond license, (SRO no.209- C
Documents required for bond license, Law/2024/61/Customs, H
Import Entitlement, Co-efficient, UD, UP
dated 29/05/ 2024) A
etc.)
General Bond Rules, 2024 (SRO no. P
210-Law/2024/62/Customs, T
Dated:29.05.2024 E
Time to keep goods in Warehouse R
Rules (SRO no. 211-
Law/2024/63/Customs
Dated:29.05.2024
34
Annual Import Entitlement of Direct
& Deemed exporter (except
readymade garments) Rules-2024
(SRO no.214-
Law/2024/66/Customs,
Dated:29/05/2024)

Session- 7 Vessel and Cargo declaration, Place of Section-48, 49, 8 1 - 9 5 of Customs 755-763
Vessel arrival, Goods declaration & its Act.
registration, Examination and
Assessment of goods, Duty Payment,
Section-18, 24, 30 -32 of Customs
Clearance of goods, Provisional
Act.
Assessment, Re-assessment, Goods
handover to Govt. & it’s disposal Goods declaration, Assessment and
(Auction etc), Goods Dutiable, Date for re-assessment Rules
Duty, Value & Exchange rate. (SRO no. 206-Law/2024/58/Customs
Dated: 29.05.2024)

ICAB 2024 Customs Portion 539

 Session-8 764-775
Refund and Duty drawback Section-34, 36 - 40 of Customs
Act.
Duty Drawback Rules- 2021
(SRO no. 266-
Law/2021/45/Customs, dated 05
/08/2021)

Transshipment and Transit Section-135-140 :

776-784

Section- 141-145
Customs Transit and
Transhipment Rules-2021 (SRO no.
136-Law/2021/125/Customs, dated
25/05/2021)
Session-9 785-803
Adjudication, Adjudicating Authority, Section-202 -211, 216 -219, 220-
Adjudication Process. 234
Appeal, Appeal Authority, Appeal Customs (ADR)Rules- 2012
Process and Revision,
(SRO-no.54-
Alternative Dispute Resolution (ADR) Law/2012/2379/Customs, dated:
23/02/2012)
Session-10 804-812
Brief overview on WCO and WTO Post Clearance Audit Order no-
WTO-Trade Facilitation Agreement 221(1)/2018/Customs
(WTO-TFA), dated:31/05/2018
Post Clearance Audit (PCA)
Session-11 813-915
Trade Facilitation: Customs Ruling (Advance) Rules-
2016 SRO-no.188-
Advance Ruling (AR)
Law/2016/37/Customs, dated
Authorized Economic Operator (AEO)
02/06/2016
National Single Window (NSW)
Authorized Economic Operator
(recognition) Rules-2024
SRO-no.217-
Law/2024/67/Customs, dated
04/06/2024
Session-12
Overall Review of the Previous Sessions

540 Business Planning: Taxation & Compliance ICAB 2024

 Course Objectives
This course will create an opportunity for the students of Professional level to have an overview of
Customs and allied acts and its implementation from theoretical, as well as practical perspectives.
Special attention will be given to the Customs Act. The session will be facilitated through
PowerPoint presentations, group discussions and practical exercise that will help the participants
to comprehend the lectures spontaneously.
Session-1:
Session Overview:
Every country in the world has a Customs Act and other allied Acts that denotes sovereignty of
that country. In Bangladesh, the Customs Act, 2023 provides the legal basis for Bangladesh
Customs to perform its functions effectively. This class is designed to assist students to have an
idea on some important legal provisions (sections) of Customs Act.
Session-2: C
H
Session Overview: A
The World Customs Organization (WCO) is the apex body for international Customs matters like P
HS Convention. Therefore, the participants need to have a clear idea about this organization to
T
understand national, as well as international Customs. General rules for the interpretation of the
Harmonized System (GIR) is the basis or main principle for classification of internationally traded E
goods. The class will discuss the rules and principles of H.S. Classification, using dot (.) and dash R
(-).
Session-3: 34
Session Overview:
Customs valuation of imported/exportable goods is critical for international business. Therefore,
the business communities need to have a clear idea about valuation process of goods. Valuation
rules will help the participants to know how to determine Customs value to calculate duties levied
on imported/exported goods. The class will highlight Article VII of GATT/ WTO valuation
agreement and methods of valuation and its practical implications.
Session-4:

Session Overview:
Customs duty exemptions or any concession on tariff will be discussed in this class as participants
need to have a clear idea about the customs tariff policy. The class will also help the students to learn
the basic public finance policy including impact of tariff on economy and the process of tariff
determination or exemption. Moreover, the class will help the students learn about the national
budget preparation, along with the role of legislative and executive. Process of Customs Act and
SRO preparation and amendment will also be discussed.

Session Overview:
The concept of customs warehousing is very important for the participants to understand the
warehousing system of Bangladesh. The Export Processing Zones (EPZ), Special Economic Zones
(SEZ) and export sectors are enjoying Customs warehousing facilities. Industries enjoying
warehousing facilities don’t need to pay any duties-taxes on importation of their raw material to
be used for production of exported goods. The class will discuss the overall management and
warehousing process.

ICAB 2024 Customs Portion 541

 Session-7:
Session Overview:
Customs administration facilitate trade through proper assessment of revenue and timely
clearance of goods. This class will discuss Cargo and Goods declaration, assessment and clearance,
duty collection, examination and reporting system. Also discuss various import taxes like Customs
Duty, Regulatory Duty, Supplementary Duty, Value Added Tax, Advance Tax, Advance Income
Tax, Surcharge etc that is levied on imported or exported goods.

Session-8:

Session Overview:
Transshipment and Transit are very important issue in international trade. Transshipment is a
process where a cargo is unloaded from one vessel and loaded them into another to complete a
journey to the final destination. Transit is a customs procedure that allows goods to be moved
across international borders under customs control. The Session will help students to have an idea
on Transshipment and Transit, its process and benefits. Refund of excess paid duty-taxes and Duty
drawback against export will also be discussed.

Session-9:

Session Overview:
Offence is the contravention or failure to comply with any provision of the Customs Act or rule by
any person with which it was his obligation to comply. Offences and penalties are mentioned in
section-171 of the said Act. Adjudication is a legal course of action under Customs act observed
to settle cases filed by Customs. Any person aggrieved by any decision of Customs may appeal
against such order to appropriate authority within three months. Any dispute lying with Customs
authority, Appeal authority or Court may be resolved through ADR. Participants will be able to
learn above issues through this class session.

Session-10:

Session Overview:
The World Trade Organization (WTO) is the apex body for regulating international trade across
the globe. WTO has concluded Trade Facilitation Agreement (TFA) for smooth and well secured
movements of goods across the countries. World Customs Organization (WCO) is the apex
authority of all Customs Administrations in the world. Development and upgradation of H.S.Code
system, Customs Valuation, Simplification and Harmonization of Customs procedures are the
main function of WCO. The main functions of these organizations are to create a trade and
investment friendly environment without barriers at borders.
Session-11:

Session Overview:
WTO -Trade Facilitation Agreement (TFA) is for ensuring smooth and well secured movements of
goods across the countries. This class will highlight this agreement and discuss on Advance
Ruling (AR), Authorized Economic Operator (AEO), Post Clearance Audit (PCA) and National
Single Window (NSW) system as these phenomenons are going to be the most important factor
for the business around the Globe.

542 Business Planning: Taxation & Compliance ICAB 2024

 C
H
A
P
T
E
R

Session-01
34

Important Legal Provisions (Sections) of Customs Act, 2023

ICAB 2024 Customs Portion 543

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ǃǍǕǍƪƓ ǯǂǀƷ-ǚǛӎɳ̶Ͱ͉ӆƲ ȟƶdžƾdžǂӒǃLJƷǍ˨ҶǍƿƶƾdžǃǍƿdžƓ

ǞƓƤdž̙Ƽǂ ƤƼȟƤƳȟdž LJƷǍǕdžƦƓ- ƠƚƙƚǍƷƾƜǍʸΚӆƾƲƤǍ˾, ǯƺdžư ȟ, ƙǍƵǀ͏džƾdž, ƜɳƙǍƵǍǀƜLĴLJƥƳ

ǯƤdžǍƷdžƠƿdžƤdžƺdžƤdžƽ ȟɈǍƼƾƫΓǯƽǯƤdžǍƷdžΕLJɳǍƤLJƷ˨ƺLJƲ ȟƳƸǍƵLJƷǍǕdžƦɛƵdžƷƤLJƾǍƳƸdžLJƾǍƺ, ƽƴdž:-
(Ƥ) ƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ;
(ƥ) ƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ (ƙLJƸƿ);
(Ʀ) ƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ (ƺ˅);
(Ƨ) ƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ (Ƥdž̙ƼǂӒΙdžǕƷƢƘƻɇˉƾLjƲLJƷƾLjɻdž);
(ƨ) ƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ (ƺdžƖƿdžǍƵǀLJǂǍʊƿƜƚƷǍưdž);
(Ʃ) ƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ Ƥdž̙ƼǂҢLJƕ ƤΕƺ̝džƸƷdž ;
(ƪ) LJưǍƾɰƾǯƫƷdžǍƾƿ (Ƥdž̙ƼǂǯƦdžǍǕˍdžƢƳƵˉ);
(ƫ) LJưǍƾɰƾǯƫƷdžǍƾƿ (Ƥdž̙ƼǂǯƾǕdžƳƢɛƳɇƸȟƲ);
(Ƭ) LJưǍƾɰƾǯƫƷdžǍƾƿ (Ƥdž̙Ƽǂ, ƠɼdžƚƫƢƻɇdžƮɛLJǀɻƲƠƤdžǍưLJƼ);
(ƭ) LJưǍƾɰƾǯƫƷdžǍƾƿ (ǯƤˌLjǕǯƦdžǍǕˍdžǯǂƿ);
(Ʈ) ƘɇdžLJưǀƷdžƿƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ, ƘɇdžLJưǀƷdžƿLJưǍƾɰƾǯƫƷdžǍƾƿƺdžLJưǍƾɰƾ ǍƤˌLjǕǯƦdžǍǕˍdžǯǂƿ ;
(Ư) ƫǍǕ˂ƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂƺdž LJưǍƾɰƾƺdžƫǍǕ˂LJưǍƾɰƾ ǍƤˌLjǕǯƦdžǍǕˍdžǯǂƿ ;
(ư) ǯưӅɪƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂƺdž ƜƸ-ƸLJƾƩdžƿƤ;
(Ʊ) ƘɇdžLJǂ̙ɇdž˂ƤLJƼǀƷdžƾƘƺƤdž̙ƼǂƺdžƘɇdžLJǂ̙ɇdž˂LJưǍƾɰƾ; 
(Ʋ) ƾdžƫ·ƤƼȟƤƳȟdž;
(Ƴ) ǂǃƤdžƾLjƾdžƫ·ƤƼȟƤƳȟdž; ƠƺƖ
(ƴ) ǂǃƤdžƾLjƾdžƫ·ƤƼȟƤƳȟdžƸƽ ȟdžǍǕƾLJƷǍ˨ƷǍǃƠƚͱƸƘΓǯƽǯƤdžǍƷdžƸƵƺLjƾƤdž̙ƼǂƤƼȟƤƳȟdžƓ

ǟƓƤdž̙ƼǂƤƼȟƤƳȟdžƦǍƲƾɻƼƳdžƢƤƳȟΕƓ- ǯƤdžǍƷdžƤdž̙ƼǂƤƼȟƤƳȟdžƠƚƙƚǍƷƾ͏džƾdžƘƴƺdžƘƶLjǍƷƳdžǃdžǍƤ
ɛƵʯɻƼƳdžɛǍǕdžƦƺdžƳdžǃdžƾƜƸƾƘLJƸȟƳƤƳȟΕƸdžƿƷƤLJƾǍƺƷ; ƠƺƖLJƳLJƷ, ƳdžǃdžƾƘƶ̜ƷǯƽǯƤdžǍƷdžƤƼȟƤƳȟdžǍƤ
ɛƵʯǂƤƿɻƼƳdžɛǍǕdžƦƠƺƖƳdžǃdžƾƜƸƾƘLJƸȟƳǂƤƿƤƳȟΕǂ˫džƵƷƤLJƾǍƳƸdžLJƾǍƺƷ:

ƳǍƺǀƳȟƴdžǍƤǯƽ, ǯƺdžư ȟ, ǂdžƶdžƾƲƘƴƺdžLJƺǍǀǁƙǍƵǀ͏džƾdž, ƜɳɻƼƳdžɛǍǕdžƦƢƤƳȟΕƸdžƿǍƷƾƜƸƾǯƽͱƸ

ƜƸӔɳLJƺǍƺƩƷdžƤLJƾǍƺǯǂƚͱƸǂLjƼdžLJƷƶ ȟdžƾƲƠƺƖǀƳȟƙǍƾdžƸƤLJƾǍƳƸdžLJƾǍƺƓ

ǠƓɻƼƳdžƘƸȟƲƓ- (Ǜ) ƠƚƙƚǍƷƾƜǍʸΚӆƾƲƤǍ˾ǯƺdžư ȟ, ǯƽǂƤƿɻƼƳdžɛǍǕdžƦƢƤdžƽ ȟǂ˫džƵƷƤLJƾǍƳ

ƸdžLJƾǍƺ, ǯƩǕdžƾΖdžƷ, ƫdžƳLjǕƾdžƫ·ǯƺdžư ȟƺdžǯɻɖƼƳ, ǂƵΝ(Ƥdž̙Ƽǂ), ƫdžƳLjǕƾdžƫ·ǯƺdžư ȟǯǂƚǂƤƿɻƼƳdžɛǍǕdžƦ
ƢƤdžƽ ȟǂ˫džƵƷƤLJƾǍƳƸdžLJƾǍƺƷƓ

544 Business Planning: Taxation & Compliance ICAB 2024

 (ǛƤ) ǯƺdžư ȟ, ƙǍƵǀ͏džƾdž, ƙǍƵǍǀƜLĴLJƥƳǂLjƼdžƢǀƳȟǂdžǍƸǍɻ, ǯƤdžǍƷdžƤdž̙ƼǂƤƼȟƤƳȟdžǍƤƳdžǃdžƾƘΕƺLJǃƳ
ƜʎƳƾƸǍƵƾƫΓLJƷƶ ȟdžLJƾƳƵdžLJǕ͉ƢɻƼƳdž ƘƸȟƲƤLJƾǍƳƸdžLJƾǍƺƓ

(ǜ) ǯƺdžư ȟ, ǂƾƤdžLJƾǯƦǍƫǍƮɛʗdžƸƷ͏džƾdž, ɛʗdžƸǍƷƜLĴLJƥƳǀƳȟƢǂLjƼdžǂdžǍƸǍɻ, ǯƤdžǍƷdžƤdž̙ƼǂƤƼȟƤƳȟdžƾ

ƫΓLJƷƶ ȟdžLJƾƳƵdžLJǕ͉ƘΓǯƽǯƤdžǍƷdžǂƾƤdžLJƾƤƼȟƤƳȟdžƾƜƸƾƘƸȟƲƤLJƾǍƳƸdžLJƾǍƺ:

ƳǍƺǀƳȟ ƴdžǍƤǯƽ, ƶdžƾdžǢƠƾƘƶLjƷǯƧdžLJǁƳƤdž̙Ƽǂƺˍƾ, Ƥdž̙ƼǂLJƺƼdžƷƺˍƾ, ̝ƿƤdž̙Ƽǂǯ̙ǀƷƠƾ

ǯɻǍɖƜɳͱƸɻƼƳdžƘƸȟƲƤƾdžƽdžƚǍƺƷdžƠƺƖƤdž̙ƼǂƸʺLJƳɛǍǕdžǍƦƵdžLJǕ͉ɛdž˖Ƥdž̙ƼǂƤƼȟƤƳȟdžƾƤdžǍƫǃ̜ǍɻƸ
ƺdžLJƷǕˈƲƙǍƾdžƸǍƽdžΌǃƚǍƺƷdžƓ

ǡƓƤdž̙ƼǂƤƼȟƤƳȟdžƦƲǍƤǂǃdžǕƳdžƓ- Ƥdž̙ƼǂƤƼȟƤƳȟdžƤҸƤ ȟ ƠƚƙƚǍƷƾƘƶLjƷƵdžLJǕ͉ƸdžƿǍƷƾǯɻǍɖǂƾƤdžLJƾ,

ƙƶdž-ǂƾƤdžLJƾɛLJƳ̎džƷ, ·džǕ͉ǀdžLJǂƳǂƖ̝dž, LJƺLJƶƺʺǂƖ̝dž, ƙLJƴ ȟƤɛLJƳ̎džƷ, LJǀɻdžɛLJƳ̎džƷƠƺƖǯƺǂƾƤdžLJƾɛLJƳ̎džƷ C
ƺdžǂƖ̝džƾƤƼȟƤƳȟdžƢƤƼȟƩdžƾLjƦƲǂǃdžǕƳdžƤLJƾǍƺƷƓ H
A
ǢƓƤdž̙Ƽǂƺˍƾ, Ƥdž̙ƼǂLJƺƼdžƷƺˍƾ, ƚƳɇdžLJƵǯƧdžǁƲdžƓ- (Ǜ) ǯƺdžư ȟ, ǂƾƤdžLJƾǯƦǍƫǍƮɛʗdžƸƷ͏džƾdž,- P
T
(Ƥ) ǯƽǂƤƿƺˍƾƢLJƺƼdžƷƺˍǍƾƙƼƵdžLJƷҍƳƸΏƺdžƸΏǍɢLJƲƷdžƼdžǍƷdžǃǕƠƺƖƾ˖džLJƷƳΕƸΏƺdžƸΏǍɢLJƲ E
ǯƺdžƬdžƚƤƾdžǃǕ, ǯǂƚǂƤƿƺˍƾƢLJƺƼdžƷƺˍƾǍƤ, ƽƴdžɈǍƼ, Ƥdž̙ƼǂƺˍƾƢƤdž̙ƼǂLJƺƼdžƷƺˍƾLJǃǂdžǍƺ; R
(ƥ) ǯƽ̝džǍƷ̝ƿƸǍƴƘƴƺdžƘƻɇˉƾLjƲƫƿƸǍƴƙƼƵdžLJƷҍƳƸΏƷdžƼdžǍƷdžǃǕƺdžƾ˖džLJƷƳΕƸΏǯƺdžƬdžƚƤƾdžǃǕ
ƘƴƺdžǯƽǯƤdžǍƷdžƸΏƺdžƸΏǍɢLJƲƷdžƼdžǍƷdžƺdžǯƺdžƬdžƚƤƾdžǃǕ, ǯǂƚǂƤƿ̝džƷǍƤ̝ƿƤdž̙Ƽǂǯ̙ǀƷƘƴƺdž 34
Ƥdž̙ƼǂƘƻɇˉƾLjƲƤǍ˂ƚƷdžƾLJưǍƸdžƘƴƺdžƤdž̙ƼǂƘƻɇˉƾLjƲǯƷǒ-ƤǍ˂ƚƷdžƾƮdžLJƼȟƷdžƿLJǃǂdžǍƺ; ƠƺƖ
(Ʀ) ǯƤdžƷǯƤdžƷͰǍƮƾƼdžΒǍƼ, ǂƾƤdžLJƾǯƦǍƫǍƮɛʗdžƸƷ͏džƾdžLJƷƶ ȟdžLJƾƳ, ǯƤdžƷƸΏƺdžƸΏǍɢLJƲ̝ƿƸǍƴƺdžƘƻɇˉƾLjƲ
ƫƿƸǍƴƺdžǯƤdžƷ̝ƿƤdž̙Ƽǂǯ̙ǀƷƺdžƤdž̙Ƽǂǯ̙ǀƷƺdžǯƤdžƷǂLjƼdžˉLJƵǕdžƙƼƵdžLJƷƺdžƾ˖džLJƷƤƾdžƽdžƚǍƺ,
ƜǃdžLJƷƶ ȟdžƾǍƲƾƜǍʸǍΚǯƤdžǍƷdžͰƮǍƤƤdž̙ƼǂͰƮLJǃǂdžǍƺ- ǯƧdžǁƲdžƤLJƾǍƳƸdžLJƾǍƺƓ

(ǜ) ǯƤƺƿǯǂǂƤƿ̝džƷǍƤƤdž̙ƼǂƺˍƾLJǃǂdžǍƺǯƧdžǁƲdžƤƾdžƽdžƚǍƺ, ǯƽǂƤƿ̝džƷǃƚǍƳƺdžƖƿdžǍƵǍǀƾǯƤdžǍƷdž

LJƷƶ ȟdžLJƾƳ Ƥdž̙Ƽǂ ƺˍǍƾƾ ǂLJǃƳ ƜƸ̳ƿLjǕ ƺdžLJƲƫɇ ƸLJƾƩdžƿƷdž Ƥƾdž ǃǕ ƠƺƖ, Ơƚ ƙƚǍƷƾ ƜǍʸΚ ӆƾƲƤǍ˾, ƽdžǃdž
Ƥdž̙ƼǂǃdžƜǂƠƺƖƜǃdžƾǂLjƼdžƷdžLJǃǂdžǍƺƦΏǃǕƓ

ǣƓƘƺƳƾƲ̝džƷƘӂǍƼdžƵƷƠƺƖƤdž̙Ƽǂǯ̙ǀǍƷƾǂLjƼdžƷdžƢǂƼǕǂLjƼdžLJƷƶ ȟdžƾƲƤLJƾƺdžƾɻƼƳdžƓ- ǯƺdžư ȟ, ǂƾƤdžLJƾ

ǯƦǍƫǍƮɛʗdžƸƷ͏džƾdž-
(Ƥ) ǯƤdžǍƷdžƤdž̙Ƽǂǯ̙ǀǍƷƾǂLjƼdžƷdžLJƷƶ ȟdžƾƲƤLJƾǍƳƸdžLJƾǍƺ;
(ƥ) ǯƤdžǍƷdžƤdž̙Ƽǂǯ̙ǀǍƷƸΏƺdžƸΏǍɢLJƲǯƺdžƬdžƚƠƺƖƥdžƿdžǂƤLJƾƺdžƾƫΓƽƴdžƽƴ̝džƷLJǃǂdžǍƺƘӂǍƼdžƵƷ
ƤLJƾǍƳƸdžLJƾǍƺ; ƠƺƖ
(Ʀ) ǯƺǂƾƤdžLJƾ ƥdžǍƳƾ ǂLJǃƳ ƙǍƿdžƩƷdž ƠƺƖ ƜƸӔɳ ƤҸƸȟ Ǎɻƾ ǂLJǃƳ ǂƼͧǕӆƺ ȟƤ Ƥdž̙Ƽǂ ǯ̙ǀǍƷƾ Ƥdžƽ ȟɈƼ
ƸLJƾƩdžƿƷdžƾǂƼǕǂLjƼdžLJƷƶ ȟdžƾƲƤLJƾǍƳƸdžLJƾǍƺƓ

ǛǡƓLJƷLJǁʺƤƾƲ(prohibition) ƠƺƖLJƷǕˈƲƓ– (Ǜ) ƙƸdžƳƳƺƿƺӬƘΓǯƤdžǍƷdžƙƚǍƷLJƻˑͱƸƽdžǃdžLJƤҜƚ

ƴdž̲ƤƷdžǯƤƷ, LJƷ˨ƺLJƲ ȟƳǯƤdžǍƷdžƸΏƙƼƵdžLJƷƺdžƾ˖džLJƷƤƾdžƽdžƚǍƺƷdž, ƽƴdž:-
(Ƥ) ƷƤƿƶdžƳƺӑɘdž;
(ƥ) ƫdžƿƺdžƷƤƿƤdžǍƾLJ˓ǯƷdžƮƠƺƖƘΓǯƤdžǍƷdžƷƤƿɘΕ;

ICAB 2024 Customs Portion 545

 (Ʀ) ǯƤdžǍƷdžƘ̈LjƿӅ̜Ƥ, ӅLJ̜Ƥdž, ƤdžƦƫ, ɓƚƖ, ɛLJƳҍLJƳ, ƙǍƿdžƤLJƩɖ, ƩƿLJʎɖƺdžƺͼ, LJƻLJưƢƺdžƘLJưƢǯƾƤLJư ȟƖ,
LJǂLJưƘƴƺdžƘΓǯƤdžǍƷdžƼdžΒǍƼǯƾƤLJư ȟƖ;
(Ƨ) ƺΓɛdžƲLj(ǂƖƾɻƲƢLJƷƾdžƸʯdž) ƙƚƷ, ǜǚǛǜ(ǜǚǛǜǂǍƷƾǝǚƷƖƙƚƷ) ƠƾLJƺƶdžƷƿʌƷƤLJƾǕdžƙLJƷƳƸΏ;
(ƨ) ƷƤƿǯƻǒǍƦdžLJƿƤLJƷǍƵ ȟǀƤƸΏ;
(Ʃ) ƵʨLJƺLJƶƾƙƢƳdžƶLjƷƷƤƿǯɑưƼdžƤȟӔɳƸΏƘƴƺdžǯɑưƼdžƤȟƙƚƷ, ǜǚǚǣ(ǜǚǚǣǂǍƷƾǛǣƷƖƙƚƷ) Ơƾƶdžƾdž
ǜƠƾƵƹdž(ǟ) ƠƾǂƖʗdžƘӂƽdžǕLjLJƼΐdžǯɑưƺƲ ȟƷdžǂƖƺLJƿƳƸΏ;
(ƪ) ƺdžƖƿdžǍƵǍǀƾƺdžLJǃǍƾɛͼƳƥʨƸΏǂӒǃ(piece-goods) (ƽdžǃdžǂdžƶdžƾƲƳǰƵƧ ȟɇƺdžƥʨLJǃǂdžǍƺLJƺɈǕƤƾdž
ǃǕ), ƽLJƵƷdžƺdžƖƿdžǍƵǍǀƙƸdžƳƳɛǍƽdžƫɇɛLJƼƳ(standard)LJƼƮdžǍƾƺdžƘΓǯƤdžǍƷdžƸLJƾƼdžǍƸƜǃdžƾɛҍƳ
ǰƵƧ ȟɇǂƖ΋džǕɛLJƳɪƥǍʨӟ̡̌ƻdžǍƺ̙ɇdž˫ӔɳƺdžƘΓǯƤdžǍƷdžƻdžǍƺӑLJɘƳƴdžǍƤ;
(ƫ) ƺdžƖƿdžǍƵǍǀƺƿƺӬǯƸǍƮ˂ƙƚǍƷƾ ƠƾƘƶLjƷǯƤdžǍƷdžǯƸǍƮ˂Ơƾ·͉džLJƶƤdžƾLjƾ·͉ƿʌƷƤLJƾǕdžɛͼƳҍƳƸΏ;
(Ƭ) ƺdžƖƿdžǍƵǍǀƺƿƺӬƤLJƸƾdžƚƮƙƚǍƷƾ ƘƶLjƷǯƤdžǍƷdžƤLJƸƾdžƚƮƠƾ·͉džLJƶƤdžƾLjƾ·͉ƿʌƷƤLJƾǕdžɛͼƳҍƳ
ƸΏ;
(ƭ) ƘΓǯƤdžǍƷdžƙƚǍƷƾƘƶLjƷLJƷLJǁʺǯƤdžǍƷdžƸΏ; ƠƺƖ
(Ʈ) ǯƺdžư ȟƤҸƤ
ȟ , ǂƼǕǂƼǕ, ǂƾƤdžLJƾǯƦǍƫǍƮɛʗdžƸƷ͏džƾdž, LJƷLJƵ ȟ̌ҍƳǯƤdžǍƷdžƸΏƓ

(ǜ) ǂƾƤdžƾ, ǂƼǍǕ ǂƼǍǕ, ǂƾƤdžLJƾ ǯƦǍƫǍƮ ɛʗdžƸƷ ͏džƾdž, ǯƤdžǍƷdž ƸΏ ƺdžƖƿdžǍƵǍǀƾ ƘƻɇˉǍƾ ƙƷǕƷ ƺdž
ƺdžƖƿdžǍƵǍǀƾƺdžLJǃǍƾǯƷƢǕdžLJƷǕˈƲƤLJƾǍƳƸdžLJƾǍƺƓ

ǛǢƓʹ˴ǍƽdžΌƸΏƓ- (Ǜ) ƠƚƙƚǍƷƾƘΓdžΓLJƺƶdžƷǂdžǍƸǍɻ, ƙƼƵdžLJƷҍƳƺdžƾ˖džLJƷƳΕǂƤƿƸǍΏƾƜƸƾ

ɛƴƼƳƹLJǂǍƿƺdžƙƸdžƳƳƺƿƺӬƘΓǯƤdžǍƷdžƙƚǍƷƾƘƶLjƷLJƷƶ ȟdžLJƾƳǃdžǍƾƤdž̙Ƽǂʹ˴ɛǍƵǕǃƚǍƺ:

ƳǍƺǀƳȟƴdžǍƤǯƽ, ǯƺdžư ȟƤҸƤ
ȟ LJƺLJƶ͏džƾdžLJƷƶ ȟdžLJƾƳƸʺLJƳǍƳ, ƠƚƙƚƷƺdžƙƸdžƳƳƺƿƺӬƘΓǯƤdžǍƷdžƙƚǍƷƾ
ƘƶLjƷǯƤdžǍƷdžƤdž̙ƼǂƤƼȟƤƳȟdžƤҸƤ ȟ ƙǍƾdžƸƲLjǕǯƤdžǍƷdžʹ˴ƢƤƾƙǍƾdžƸƺdžƙƵdžǕƤƾdžǃƚǍƺƷdž, ƽLJƵǯƤdžǍƷdž
ƠƤɪƩdžƿdžǍƷƾƸΏӒΙǜ(Ҽƚ) ǃdžƫdžƾƮdžƤdžƾƘLJƶƤƷdžǃǕƓ
(ǜ) ǂƾƤdžƾ, ǂƾƤdžLJƾǯƦǍƫǍƮɛʗdžƸƷ͏džƾdž, ǯƽƚͱƸǂƼLjƩLjƷƼǍƷƤLJƾǍƺǯǂƚͱƸǀƳȟ, ǂLjƼdžƺdžLJƺLJƶ-LJƷǍǁƶ
ƙǍƾdžƸǂdžǍƸǍɻ, ɛƴƼƳƹLJǂǍƿLJƺLJƷLJƵ ȟ̌ǂƤƿƺdžǯƽǯƤdžǍƷdžƸǍΏƾƜƸƾƜɳƳƹLJǂǍƿLJƷƶ ȟdžLJƾƳƤdž̙ƼǂʹǍ˴ƾ
ǂǍƺ ȟdžʎǃdžǍƾƾLJ͏̶ǍƲƾƘLJƶƤƷǕ, ƠƼƷǃdžǍƾǯƾ̶ǍƿƮLJƾʹ˴ƙǍƾdžƸƤLJƾǍƳƸdžLJƾǍƺƓ
Εdž΋džƓǯƤdžǍƷdžƸǍΏƾƜƸƾǯƾ̶ǍƿƮLJƾʹǍ˴ƾǃdžƾƜɳƸǍΏƾƜƸƾɛƴƼƳƹLJǂǍƿLJƷƶ ȟdžLJƾƳƙǍƾdžƸǍƽdžΌ
Ƥdž̙Ƽǂʹ˴ǃdžǍƾƾƘLJƶƤǃƚǍƳƸdžLJƾǍƺ, ƳǍƺƜɳǯƾ̶ǍƿƮLJƾʹ˴ƜɳƳƹLJǂǍƿƾǂǍƺ ȟdžʎƤdž̙Ƽǂʹ˴ǃdžǍƾƾLJ͏̶ǍƲƾ
ƘLJƶƤǃƚǍƳƸdžLJƾǍƺƷdžƓ
(ǝ) ƜƸƶdžƾdž(ǜ) ƠƾƘƶLjƷƙǍƾdžLJƸƳǯƾ̶ǍƿƮLJƾʹ˴ƜƸƶdžƾdž(Ǜ) ƘƴƺdžƙƸdžƳƳƺƿƺӬƘΓǯƤdžǍƷdžƙƚǍƷƾ
ƘƶLjƷƙǍƾdžLJƸƳʹǍ˴ƾƘLJƳLJƾɳǃƚǍƺƓ
(Ǟ) ƜƸƶdžƾdž(ǜ) ƠƾƘƶLjƷƫdžLJƾҍƳǯƤdžǍƷdžɛʗdžƸƷӆǍƺ ȟƾLJǃƳƤƾdžƷdžǃƚǍƿ, ǯƽƚƘƴ ȟ-ƺӬǂǍƾƜǃdžƫdžLJƾƤƾdž
ǃƚǕdžǍƪǯǂƚƘƴ ȟ-ƺӬǂƾǂƼdžƸƷdžǍˉ(on the expiry) Ɯǃdž·ǕƖLJɈǕƻdžǍƺƾLJǃƳǃƚǕdžƽdžƚǍƺƓ

ǛǣƓƤdžƜ˂džƾǍƻƚLJƿƖʹ˴ƙǍƾdžƸƓ- (Ǜ) ƽLJƵǯƤdžǍƷdžǯƵǀƺdžƠƿdžƤdžǯƤdžǍƷdžƸǍΏƾɛͼƳƺdžƜӬƸdžƵƷƘƴƺdžƜɳ

̝džƷǃƚǍƳƾ˖džLJƷǍƳɛƳɇɻƺdžƸǍƾdžɻƻdžǍƺ, ƜɳƸΏƸLJƾƺǃǍƲƻҶLJȟ ƤǂǃƘΓǯƤdžǍƷdžƻҶLJȟ ƤɛƵdžƷƤǍƾ, ƳdžǃdžǃƚǍƿ,
ƜɳƸΏǯƽǯƵǍǀɛͼƳ, ƜӬƸdžLJƵƳƺdžLJƻˑƻdžǍƺɛdž˖, ǯǂƚǯƵǀǃƚǍƳǂƾdžǂLJƾƙƼƵdžLJƷƤƾdžǃƜƤƺdžƷdžǃƜƤƠƺƖ

546 Business Planning: Taxation & Compliance ICAB 2024

ƜǃdžɛͼƳҍƳƺdžƜӬƸdžLJƵƳǯƵǀǃƚǍƳƾ˖džLJƷƾǂƼǍǕǯƽƘƺ̝džǕLJƪƿ, ǯǂƚƘƺ̝džǕƺdžɛͼƳƤƾƲ, ƜӬƸdžƵƷ͏džƾdžƺdž
LJƻˑƻdžǍƺƸLJƾƺLJƳȟƳƘƺ̝džǕƙƼƵdžLJƷƤƾdžǃƜƤƷdžǯƤƷ, ƜɳƸΏƙƼƵdžLJƷƾƹǍƿƘӂͱƸǯƵǀLjǕLJǀ˾ɻLJƳɊ̜ǃƚǍƿ
ƺdžǃƚƺdžƾǂ˯džƺƷdžƴdžLJƤǍƿƠƺƖƙƼƵdžLJƷƾǂLJǃƳǯƵǀLjǕƜɳLJǀǍ˾ƾɻLJƳƾƤdžƽ ȟƤdžƾƲǂ˫ƤȟƴdžLJƤǍƿƺdžƖƿdžǍƵǀǯɑư
Ơ˅΍džLJƾƹƤLJƼǀǍƷƾӟƸdžLJƾǀɈǍƼ, ǂƾƤdžƾ, ǂƾƤdžLJƾǯƦǍƫǍƮɛʗdžƸƷ͏džƾdž, ƜǃdžƾƜƸƾƜɳƻҶLJȟ ƤƾƘLJƶƤƷǍǃ,
ƠƚͱƸƸLJƾƼdžƲƤdžƜ˂džƾǍƻƚLJƿƖʹ˴ƙǍƾdžƸƤLJƾǍƳƸdžLJƾǍƺƓ

Εdž΋džƓ- ƠƚƶdžƾdžƾƜǍʸΚӆƾƲƤǍ˾, ƻҶLJȟ ƤɛƵdžƷƤƾdžǃƚǕdžǍƪƺLJƿǕdžƦΏǃƚǍƺ, ƽLJƵ-

ȟ  ɛƵʯ ƙLJƴ ȟƤ ǂǃdžǕƳdž
(Ƥ) ƾ˖džLJƷƤdžƾƤ ƺdž ƜӬƸdžƵƤ ǯƵǍǀƾ ƘƻɇˉǍƾ ǂƾƤdžƾ ƺdž ǯƤdžǍƷdž ǂƾƤdžLJƾ ɛLJƳ̎džƷ ƤҸƤ
ƴdžǍƤ, ǯƽƥdžǍƷ-
(Ƙ) ǂƾƤdžǍƾƾǯƤdžǍƷdžɛƩLJƿƳƤdžƽ ȟɈƼ, ƽdžǃdžǍƳǂƾdžǂLJƾƳǃLJƺƿǃ̜džˉƾ(ǯƤdžǍƷdžƘӂƵdžƷ, ƞƲƠƺƖƘƖǀLjƵdžLJƾ
ӒƿƶƷɛƺdžǃǂǃ) ƘƴƺdžƳǃLJƺƿƺdžƵdžǕƺdžƜƻǍǕƾǂ˯džΕ(potential) ǂƾdžǂLJƾǃ̜džˉƾǂƖLJ̈̌ƴdžǍƤ; C
H
(ƙ) ǂƾƤdžLJƾ ƾdžƫ·, ƽdžǃdž ƘΓLJƺƶƻdžǍƺ ɛdžΔ ƴdžƤdž ǂǍʮƢ ƪdžǓ ǯƵǕdž ǃǕ ƺdž ƙƵdžǕ Ƥƾdž Ʒdž ǃǕ (ƙLJƴ ȟƤ A
ɛǍƲdžƵƷdžǂǃ); P
T
(ƚ) ǂƾƤdžƾǂdžƶdžƾƲƘƺƤdžƯdžǍƼdžΕLJƳǍƾǍƤƘΓǯƽǯƤdžǍƷdžƸΏƺdžǯǂƺdžɛƵdžƷƤǍƾƘƴƺdžƸΏɈǕƤǍƾ; E
R
(ƛ) ƜƸ-Ƶƹdž(Ƙ) (ƙ) ƺdž(ƚ) ǯƳƺLJƲ ȟƳƠƤƺdžƠƤdžLJƶƤƶƾǍƷƾƤdžƽ ȟɈƼ, ƽdžǃdžǂƩƾdžƩƾǂƾƤdžǍƾƾƜƸƾΓ̜
ƴdžǍƤ, Ƴdžǃdž ƸLJƾƩdžƿƷdžƾ ƫΓ ǂƾƤdžƾ ǯƤdžǍƷdž Ƙƴ ȟdžǕƷ ɛLJɈǕdžǕ ƳǃLJƺƿ ǂƾƺƾdžǃ ƤǍƾ Ƙƴƺdž ǯƤdžǍƷdž
ǯƺǂƾƤdžLJƾǂƖ̝džƾƜƸƾƵdžLJǕ͉Γ̜ƤǍƾƘƴƺdžLJƷǍƵ ȟǀɛƵdžƷƤǍƾ, ƽdžǃdžƾɛƩLJƿƳƸʺLJƳɛҍƳƘǍƴ ȟ 34
ǂƾƤdžƾƤҸƤ ȟ ǂƩƾdžƩƾƘӂӡƳƸʺLJƳǃƚǍƳLJƻˑƷdžǃǕ; Ƙƴƺdž
(ƥ) ǂƾƤdžƾǯƽǯƤdžǍƷdžƶƾǍƷƾƙǕƺdžӒΙǂǃdžǕƳdžɛƵdžƷƤǍƾƺdžƺǃdžƿƾdžǍƥ, ƽdžǃdžƜɳǯƵǀǃƚǍƳǯƤdžǍƷdžƸǍΏƾ
ƾ˖džLJƷӍLJʺƺdžƜɳǯƵǍǀǯƤdžǍƷdžƸǍΏƾƙƼƵdžLJƷɥdžǍǂɛƳɇɻƺdžƸǍƾdžɻƻdžǍƺǂǃdžǕƤǃǕƠƺƖƚǃdžƾƹǍƿǯƤdžǍƷdž
ӟLJƺƶdžɛƵʯǃǕƓ
(ǜ) ƻҶLJȟ ƤƾƸLJƾƼdžƲLJƷƶ ȟdžƾƲǂdžǍƸǍɻ, ǂƾƤdžƾ, ƠƚƶdžƾdžƾLJƺƶdžƷƠƺƖƳƵƶLjƷɛƲLjƳLJƺLJƶƘӂǂdžǍƾǂdžƼLJǕƤƻdžǍƺ
ɛdžɮLJƿƳƻҶLJȟ ƤƾƘLJƶƤƷǍǃƠƚͱƸƤdžƜ˂džƾǍƻƚLJƿƖʹ˴ƠƚƜƸ-ƶdžƾdžƾƘƶLjǍƷƙǍƾdžƸƤLJƾǍƳƸdžLJƾǍƺ, ƠƺƖƽLJƵ
ƜɳƤdžƜ˂džƾǍƻƚLJƿƖʹ˴ƸƾƺƳ̭ƤdžǍƿLJƷƶ ȟdžLJƾƳƻҶLJȟ ƤƾƸLJƾƼdžƲǃƚǍƳƘLJƶƤǃǕ, ƳdžǃdžǃƚǍƿǂƾƤdžƾ-
(Ƥ) ƜɳƻҶLJȟ ƤLJƷƶ ȟdžƾǍƲƾLJƺǁǕLJƺǍƺƩƷdžǕƾdžLJƥǕdžƠƺƖƽƴdžǀLjɋǂ˯ƺƜɳLJƷƶ ȟdžƾǍƲƾƸǍƾƜɳƤdžƜ˂džƾǍƻƚLJƿƖ
ʹ˴ɥdžǂƤLJƾǍƺ; ƠƺƖ
(ƥ) ƠƚͱƸɥdžǂƤLJƾƺdžƾƹǍƿǯƽƸLJƾƼdžƲƘLJƳLJƾɳƤdžƜ˂džƾǍƻƚLJƿƖʹ˴ƙƵdžǕǃƚǕdžǍƪƜǃdžǯƹƾƳɛƵdžƷƤLJƾǍƺƓ

(ǝ) ƜƸ-ƶdžƾdž(Ǜ) ƺdž(ǜ) ƠƾƘƶLjƷƤdžƜ˂džƾǍƻƚLJƿƖʹ˴ƙǍƾdžLJƸƳǃƚǍƺƷdž, ƽLJƵƷdžƚǃdžLJƷͱLJƸƳǃǕǯƽ-

(Ƥ) ƻҶLJȟ ƤǯƤdžǍƷdžƾ˖džLJƷǂɻƼƳdžƾǂLJǃƳǂ˫LJƤȟƳ; ƺdž
(ƥ) ƻҶLJȟ Ƥƾ˖džLJƷҍƳƸΏƜӬƸdžƵǍƷΕƺǃdžǍƾƾǯɻǍɖƙƼƵdžLJƷҍƳƤϲƩdžƼdžǍƿƾƸLJƾƺǍƳȟ̝džƷLjǕƤϲƩdžƼdžǍƿƾΕƺǃdžƾ
ǂ˫LJƤȟƳ; Ƙƴƺdž
(Ʀ) ƸΏɛͼƳƤƾƲ, ƜӬƸdžƵƷƺdžƾ˖džLJƷǍƳLJƷǍǕdžLJƫƳƤLJƳƸǕǂLjLJƼƳǂƖ΋ƤΕLJɳǍƤƻҶLJȟ ƤɛƵdžƷƤƾdžǃƚǕdžǍƪ,
ƽLJƵƷdžƜɳƻҶLJȟ Ƥ-
ȟ ƺdžƳdžǃdžƾƸǍɻƸLJƾƩdžLJƿƳƦǍƺǁƲdžƤdžǍƽ ȟƾƫΓ; ƺdž
(Ƙ) ɛͼƳƤƾƲ, ƜӬƸdžƵƷƺdžƾ˖džLJƷǍƳLJƷǍǕdžLJƫƳΕLJɳƤҸƤ

ICAB 2024 Customs Portion 547

 (ƙ) ƾ˖džLJƷƤdžƾƤǯƵǍǀƾƘƻɇˉǍƾǯƤdžǍƷdžƘƷɊǂƾƠƿdžƤdžƾǂǃdžǕƳdžƾƫΓ; ƺdž
(ƚ) ӃƳƷƸLJƾǍƺǀƦƳƙƺΚƤƳdžƾǂLJǃƳLJƺΑƼdžƷӟLJƺƶdžLJƵƾƘLJƻǍƽdžƫƷƜˑǕƷƤǍ˾ǂǃdžǕƳdžƾƫΓ-ɛƵdžƷ
ƤƾdžǃǕƓ

(Ǟ) ƽLJƵǂƾƤdžƾƠƚƘLJƻƼƳǯƸdžǁƲƤǍƾǯƽ, ƻҶLJȟ ƤӟLJƺƶdžɛdž˖ƸΏҶƿƷdžӒƿƤ·˾ǂƼǍǕƾƼǍΒLJƺӅƿƸLJƾƼdžǍƲ

ƙƼƵdžLJƷƾƹǍƿ̝džƷLjǕLJǀǍ˾ƾ·džƴ ȟǃdžLJƷǃƚǕdžǍƪ, ƽdžǃdžӆƾƲƤƾdžƤɬƷƠƺƖǯƽǍɻǍɖƜɳ·džƴ ȟǃdžLJƷƾӅƷƾdžӍLJʯǯƾdžƶ
ƤLJƾƺdžƾ ƫΓ ӏƳdžǍƸɻƻdžǍƺ ƤdžƜ˂džƾǍƻƚLJƿƖ ʹ˴ ƙǍƾdžƸ Ƥƾdž ɛǍǕdžƫƷ, Ƴdžǃdž ǃƚǍƿ ǯǂƚǍɻǍɖ ǂƾƤdžƾ, ǂƾƤdžLJƾ
ǯƦǍƫǍƮ ɛʗdžƸƷ ͏džƾdž, ƜƸ-ƶdžƾdž (ǜ) Ơƾ ƘƶLjƷ Ƥdžƚ˂džƾǍƻƚLJƿƖ ʹ˴ ƙǍƾdžǍƸƾ ӆƺ ȟƺƳ̭ ǯƤdžǍƷdž ƳdžLJƾƥ ǃƚǍƳ
ӏƳdžǍƸɻƻdžǍƺƤdžƜ˂džƾǍƻƚLJƿƖʹ˴ƙǍƾdžƸƤLJƾǍƳƸdžLJƾǍƺ; ƳǍƺƜǃdžƜɳƜƸ-ƶdžƾdžƾƘƶLjƷɛʗdžƸƷƫdžLJƾƾƳdžLJƾƥ
ǃƚǍƳǣǚ(Ʒ͡ƚ) LJƵǍƷƾӆǍƺ ȟǃƚǍƺƷdžƠƺƖ, ƙƸdžƳƳƺƿƺӬƘΓǯƤdžǍƷdžƙƚǍƷƽdžǃdžLJƤҜƚƴdž̲ƤƷdžǯƤƷ, Ɯɳʹ˴
ƠƚƜƸ-ƶdžƾdžƾƘƶLjƷƫdžƾLjҍƳɛʗdžƸǍƷƜLĴLJƥƳƳdžLJƾƥǃƚǍƳɛǍƵǕǃƚǍƺƓ

(ǟ) ƠƚƶdžƾdžƾƘƶLjƷƙǍƾdžƸǍƽdžΌƤdžƜ˂džƾǍƻƚLJƿƖʹ˴ƠƚƙƚƷƘƴƺdžƙƸdžƳƳƺƿƺӬƘΓǯƤdžǍƷdžƙƚǍƷƾ
ƘƶLjƷƙǍƾdžLJƸƳƘΓdžΓʹǍ˴ƾƘLJƳLJƾɳǃƚǍƺƓ

(Ǡ) ӆǍƺ ȟƚɛƳɇdžǃdžƾƤƾdžƷdžǃƚǍƿ, ƠƚƶdžƾdžƾƘƶLjƷƙǍƾdžLJƸƳƤdžƜ˂džƾǍƻƚLJƿƖʹ˴, ƙǍƾdžǍƸƾƳdžLJƾƥǃƚǍƳ

ǟ(ƸϲƩ) ƺӬǂƾǂƼdžLJ˖ƾƸƾƘƤdžƽ ȟƤƾǃƚǕdžƽdžƚǍƺ:

ƳǍƺǀƳȟ ƴdžǍƤǯƽ, ǂƾƤdžƾӅƷLJƺ ȟǍƺƩƷdžƤLJƾǕdžƽLJƵƠƚƘLJƻƼƳǯƸdžǁƲƤǍƾǯƽ, Ɯɳʹ˴ɛƳɇdžǃdžǍƾƾƹǍƿ

ƻҶLJȟ ƤƤdžƽ ȟɈƼƠƺƖ·džƴ ȟǃdžLJƷƘΕdžǃƳƴdžLJƤǍƳƘƴƺdžƜǃdžǍƵƾӅƷƾdžӍLJʯƧɪǍƳƸdžǍƾ, ƳdžǃdžǃƚǍƿǂƾƤdžƾ, ǂƼǕǂƼǕ,
Ơƚʹ˴ƙǍƾdžǍƸƾǯƼǕdžƵƘLJƳLJƾɳǟ(ƸϲƩ) ƺӬǂǍƾƾƫΓǯƼǕdžǍƵƾƫΓӍLJʺƤLJƾǍƳƸdžLJƾǍƾ:

ƙƾƢǀƳȟ ƴdžǍƤǯƽ, ƽLJƵƜLĴLJƥƳǟ(ƸϲƩ) ƺӬǂƾǯƼǕdžƵǂƼdžLJ˖ǃƢǕdžƾӆǍƺ ȟƙƾ˯ǃƢǕdžǯƤdžǍƷdžӅƷLJƺ ȟǍƺƩƷdž

Ƥdžƽ ȟɈƼƜɳǯƼǕdžƵƜʯLjƲ ȟǃƢǕdžƾӆǍƺ ȟҚǓdžˉƷdžǃǕ, ƳdžǃdžǃƚǍƿ, ӅƷLJƺ ȟǍƺƩƷdžƾƹƿdžƹƿǂdžǍƸǍɻ, ƤdžƜ˂džƾǍƻƚLJƿƖ
ʹ˴Ǜ(ƠƤ) ƺӬǂǍƾƾƘLJƶƤƷǍǃ, ƠƚͱƸƘLJƳLJƾɳǂƼǍǕƾƫΓƺƿƺӬƴdžLJƤǍƺƓ

(ǡ) ǂƾƤdžƾ, ǂƼǕǂƼǕǯƽͱƸɛǍǕdžƫƷƼǍƷƤLJƾǍƺǯǂƚͱƸƳƵǍˉƾƸƾƜƸ-ƶdžƾdž(Ǜ) ƺdž(ǜ) ƠƜLĴLJƥƳƻҶLJȟ Ƥƾ

ƸLJƾƼdžƲ LJƷͱƸƲ Ƣ LJƷƶ ȟdžƾƲ ƤLJƾǍƺ ƠƺƖ ƠƚͱƸ ƸΏ ǀƷdžɳƤƾƲ Ƣ ƙƼƵdžLJƷƾ Ƹƾ Ơƚ ƶdžƾdžƾ ƘƶLjƷ ƙǍƾdžLJƸƳ
ƤdžƜ˂džƾǍƻƚLJƿƖʹ˴LJƷͱƸƲƢƙƵdžǕƤLJƾƺdžƾƫΓLJƺLJƶɛƲǕƷƤLJƾǍƳƸdžLJƾǍƺƓ

(Ǣ) ƠƚƶdžƾdžƾƘƶLjƷƤdžƚ˂džƾǍƻƚLJƿƖʹ˴ƙǍƾdžǍƸƾǯƤdžǍƷdžƤdžƽ ȟɈƼʹͰƤƾdžƽdžƚǍƺƷdž, ƽLJƵƷdžǯƤdžǍƷdž̝džƷLjǕ

LJǀ˾ƤҸƤȟ ƘƴƺdžƜǃdžƾƸɻǃƚǍƳǯƸǀҍƳLJƿLJƥƳƙǍƺƵƷɛdžLJ˖ƾƸƾƘƴƺdž·-ɛǍƲdžLJƵƳǃƚǕdžƺdžƖƿdžǍƵǀǯɑưƠ˅
΍džLJƾƹƤLJƼǀƷǂƾƤdžƾǍƤƘƺLJǃƳƤǍƾǯƽ, ǯƤdžǍƷdžLJƷLJƵ ȟ̌ƙƼƵdžLJƷҍƳƸǍΏƾƜƸƾɛƳɇɻƘƴƺdžƸǍƾdžɻƻҶLJȟ Ƥƾ
ƤdžƾǍƲӡ̌·džƴ ȟǃdžLJƷƾҾΚƼdžƷɛƼdžƲƾLJǃǕdžǍƪƓ

ǜǚƓƘɇdžLJ˂-ưdžLJ˫Ɩʹ˴ƙǍƾdžƸƓ- (Ǜ) ƽLJƵǯƤdžǍƷdžǯƵǀƘƴƺdžƠƿdžƤdž, ƘƳƗƸƾƠƚƶdžƾdžǕƾ˖džLJƷƤdžƾƤǯƵǀ

ƘƴƺdžƠƿdžƤdžƺLJƿǕdžƜLĴLJƥƳ, ǃƚǍƳǯƤdžǍƷdžƸΏƜǃdžƾ·džƻdžLJƺƤӒΙƘǍƸɻdžƤƼӒǍΙƺdžƖƿdžǍƵǍǀƾ˖džLJƷƤƾdžǃǕ
ƠƺƖ Ɯɳ ƾ˖džLJƷƾ ƹǍƿ ǯƵǀLjǕ ƘӂͱƸ LJǀ˾ ɻLJƳɊ̜ ǃǕ ƺdž ɻLJƳɊ̜ ǃƚƺdžƾ ǂ˯džƺƷdž ƴdžǍƤ, Ƴdžǃdž ǃƚǍƿ ǂƾƤdžƾ,
ƺdžƖƿdžǍƵǀǯɑưƠ˅΍džLJƾƹƤLJƼǀǍƷƾӟƸdžLJƾǀɈǍƼ, ǂƾƤdžLJƾǯƦǍƫǍƮɛʗdžƸƷ͏džƾdž, ƜɳƸΏƙƼƵdžLJƷƾǯɻǍɖ, ưdžLJ˫Ɩ
ƼdžLJƫȟǍƷƾƘLJƶƤƷǍǃƠƚͱƸƸLJƾƼdžƲ, ƘɇdžLJ˂-ưdžLJ˫Ɩʹ˴ƙǍƾdžƸƤLJƾǍƳƸdžLJƾǍƺƓ

Εdž΋dž- ƠƚƶdžƾdžƾƜǍʸΚӆƾƲƤǍ˾, ǯƤdžǍƷdžƸǍΏƾǯɻǍɖ-

548 Business Planning: Taxation & Compliance ICAB 2024

(Ƥ) “ưdžLJ˫ƖƼdžLJƫȟƷ” Ƙƴ ȟƜǃdžƾƾ˖džLJƷӒΙƠƺƖ·džƻdžLJƺƤӒǍΙƾƼΒƤdžƾƸdžƴ ȟƤɇ;
(ƥ) “ƾ˖džLJƷӒΙ” Ƙƴ ȟƾ˖džLJƷƤdžƾƤǯƵǀƺdžƠƿdžƤdžǃƚǍƳƾ˖džLJƷҍƳƸǍΏƾӒΙƠƺƖǯƽ̝džǍƷǯƤdžǍƷdžƾ˖džLJƷӒΙ
Ʒdžƚƺdžƾ˖džLJƷƤdžƾƤƠƺƖƙƼƵdžLJƷƤdžƾƤƺdžǯƤdžǍƷdžҸƳLjǕƸǍɻƾƼǍΒǂ˫NjɳƳdž (association) ƺdžǯƤdžǍƷdž
ɻLJƳӆƾƲΕƺ̝džƾƤdžƾǍƲƽƥƷƾ˖džLJƷӒΙLJƺ͵džǂǍƽdžΌǃǕƷdžƳƥƷǯƽӒǍΙƙƼƵdžLJƷҍƳƸΏǯƤdžǍƷdžLJƷƾǍƸɻ
ǯɈƳdžƾLJƷƤƮɛƴƼӅƷƗLJƺɈǕǃǕǯǂƚӒǍΙƾLJƻLJʯǍƳƘƴƺdžǯƽƘƺ̝džǕƸΏƙƼƵdžLJƷƤƾdžǃƚǕdžǍƪ, ǯǂƚ
Ƙƺ̝džǕ ƽLJƵ ǯƤdžǍƷdž LJƷƾǍƸɻ ǯɈƳdžƾ LJƷƤƮ ӅƷƗLJƺɈǕ Ʒdž ǃǕ, Ƴdžǃdž ǃƚǍƿ ƜƸ-ƶdžƾdž (Ǡ) Ơƾ ƘƶLjƷ ɛƲLjƳ
LJƺLJƶƼdžƿdžƘӂǂdžǍƾLJƷƶ ȟdžƾƲǍƽdžΌӔLJɳǂƖƦƳLJƻLJʯǍƳƾ˖džLJƷӒΙLJƷƲ ȟǕƤƾdžƽdžƚǍƺ;
(Ʀ) “·džƻdžLJƺƤӒΙ” Ƙƴ ȟ-
(Ƙ) ƜƸ-ƶdžƾdž (Ǡ) Ơƾ ƘƶLjƷ ɛƲLjƳ LJƺLJƶƼdžƿdž ƘӂǂdžǍƾ ƾ˖džLJƷƤdžƾƤ ǯƵǍǀ Ƙƴƺdž ƠƿdžƤdžǕ ǯƻdžǍƦƾ ƫΓ
ǂƼƫdžƳLjǕƸǍΏƾ (like product) ǂdžƶdžƾƲΕƺǂdžɛLJɈǕdžǕLJƷͱLJƸƳҶƿƷLjǕӒΙ; Ƙƴƺdž C
H
(ƙ) ƾ˖džLJƷƤdžƾƤǯƵǍǀƾƺdžƠƿdžƤdžƾ̝džƷLjǕƺdžƫdžǍƾƽƥƷ·džƻdžLJƺƤΕƺǂdžɛLJɈǕdžǕǂƼƫdžƳLjǕƸǍΏƾǯƤdžǍƷdž A
LJƺɈǕƴdžǍƤƷdž, ƘƴƺdžƽƥƷLJƺǍǀǁƺdžƫdžƾƸLJƾLJ̝LJƳƾƤdžƾǍƲƘƴƺdžƾ˖džLJƷƤdžƾƤǯƵǍǀƾƺdžƠƿdžƤdžƾ P
(territory)̝džƷLjǕƺdžƫdžǍƾ·˾ƸLJƾƼdžƲLJƺɈǍǕƾƤdžƾǍƲƜɳLJƺɈǕƽƴdžƽƴҶƿƷdžƘӂƼdžƵƷƤǍƾƷdž, T
ƳƥƷ·džƻdžLJƺƤӒΙǃƚǍƺ- E
R
(i) ƜƸ-ƶdžƾdž(Ǡ) ƠƾƘƶLjƷɛƲLjƳLJƺLJƶƼdžƿdžƘӂǂdžǍƾƾ˖džLJƷƤdžƾƤǯƵǀƺdžƠƿdžƤdžƺdžǯƤdžǍƷdžƜƸӔɳ
ҸƳLjǕ ǯƤdžǍƷdž ǯƵǀ ǃƚǍƳ ƾ˖džLJƷҍƳ ǂƼƫdžƳLjǕ ƸǍΏƾ LJƷͱLJƸƳ ҶƿƷLjǕ ɛLJƳLJƷLJƶ͉ӒƿƤ ӒΙ;
Ƙƴƺdž 34

(ii) ƜƸ-ƶdžƾdž(Ǡ) ƠƾƘƶLjƷɛƲLjƳLJƺLJƶƼdžƿdžƘӂǂdžǍƾƜɳƸǍΏƾƜӬǂǯƵǍǀƾƜӬƸdžƵƷΕǍǕƾǂLJǃƳ

ӔLJɳǂƖƦƳƸLJƾƼdžƲɛǀdžǂLJƷƤ, LJƺɈǕƢǂdžƶdžƾƲΕǕƠƺƖӑƷdžƹdžƺdžƺƵӔLJɳǂƖƦƳǂƖǍƽdžƫƷǂǃ
ƜɳƸǍΏƾƜӬƸdžƵƷΕǕ:
ƳǍƺǀƳȟƴdžǍƤǯƽ, ƜӬǂǯƵǀ(country of origin) ΕƳLjƳƘΓǯƤdžǍƷdžǯƵǀǃƚǍƳƸΏƙƼƵdžLJƷƾǯɻǍɖ
ƽLJƵƾ˖džLJƷƤdžƾƤǯƵǍǀƾƼdžΒǍƼƸΏǯƤƺƿ̝džƷdžˉLJƾƳǃǕ(transhipped) ƘƴƺdžƠƚͱƸƸΏƾ˖džLJƷƤdžƾƤǯƵǍǀ
ƜӬƸdžLJƵƳƷdžǃǕ, ǯǂƚǯɻǍɖƜӬǂǯƵǍǀƾӒǍΙƾLJƻLJʯǍƳƸǍΏƾ·džƻdžLJƺƤӒΙLJƷƶ ȟdžLJƾƳǃƚǍƺƓ
(ǜ) ǯƤdžǍƷdžƸǍΏƾǯɻǍɖ·džƻdžLJƺƤӒΙƠƺƖưdžLJ˫ƖƼdžLJƫȟƷLJƷͱƸƲƷdžǃƢǕdžƸƽ ȟˉǂƾƤdžƾƠƚƶdžƾdžƾLJƺƶdžƷ
ƠƺƖƳƵƶLjƷɛƲLjƳLJƺLJƶƘӂǂdžǍƾǂdžƼLJǕƤƻdžǍƺɛdžɮLJƿƳƜɳӒΙƠƺƖưdžLJ˫ƖƼdžLJƫȟƷLJƻLJʯǍƳƠƚͱƸƸΏƺdžƖƿdžǍƵǍǀ
ƙƼƵdžLJƷƾƜƸƾƘɇdžLJ˂-ưdžLJ˫Ɩʹ˴ƙǍƾdžƸƤLJƾǍƳƸdžLJƾǍƺƠƺƖƽLJƵƜɳƘɇdžLJ˂-ưdžLJ˫Ɩʹ˴ƸƾƺƳ̭ƤdžǍƿLJƷƶ ȟdžLJƾƳ
ƼdžLJƫȟƷǃƚǍƳƘLJƶƤǃǕ, ƳdžǃdžǃƚǍƿǂƾƤdžƾ-
(Ƥ) ƜɳͱƸLJƷƶ ȟdžƾǍƲƾLJƺǁǕLJƺǍƺƩƷdžǕƾdžLJƥǕdžƠƺƖƜɳͱƸLJƷƶ ȟdžƾǍƲƾƸƾƽƴdžǀLjɋǂ˯ƺƠƚɛƤdžƾƘɇdžLJ˂-ưdžLJ˫Ɩ
ʹ˴ɥdžǂƤLJƾǍƺ; ƠƺƖ
(ƥ) ƠƚͱƸɥdžǂƤLJƾƺdžƾƹǍƿƙƵdžǕҍƳƘLJƳLJƾɳƘɇdžLJ˂-ưdžLJ˫Ɩʹ˴ƽƳҧ̲ƘLJƳLJƾɳƙƵdžǕƤƾdžǃƚǕdžǍƪ, ƳƳҧ̲
ǯƹƾƳɛƵdžƷƤLJƾǍƺƓ

(ǝ) ƽLJƵǂƾƤdžƾƳƵˉdžƶLjƷưdž˫ҍƳǯƤdžǍƷdžƸǍΏƾǯɻǍɖƠƚͱƸƘLJƻƼƳǯƸdžǁƲƤǍƾǯƽ, ưdžLJ˫ƖƠƾƤdžƾǍƲ

LJǀǍ˾ƾ·džƴ ȟǃdžLJƷƾƚLJƳǃdžǂƾLJǃǕdžǍƪƘƴƺdžƾ˖džLJƷƤdžƾƤưdžLJ˫ƖƩƩ ȟdžƤǍƾƠƺƖƚǃdžǍƳ̝džƷLjǕLJǀǍ˾ƾ·džƴ ȟǃdžLJƷƧǍƮƼǍƼȟ
ƙƼƵdžLJƷƤdžƾƤƫdžLJƷǍƳƷƺdžƳdžǃdžƾƫdžƷdžƜLJƩƳLJƪƿ, ƳdžǃdžǃƚǍƿǂƾƤdžƾ, ǂƾƤdžLJƾǯƦǍƫƮɛʗdžƸƷ͏džƾdž, ƜƸ-ƶdžƾdž(ǜ)
Ơƾ ƘƶLjƷ ƘɇdžLJ˂-ưdžLJ˫Ɩ ʹ˴ ƙǍƾdžǍƸƾ ӆƺ ȟƺƳ̭ ǯƤdžǍƷdž ƳdžLJƾƥ ǃƚǍƳ ӏƳdžǍƸɻƻdžǍƺ ƘɇdžLJ˂-ưdžLJ˫Ɩ ʹ˴ ƙǍƾdžƸ

ICAB 2024 Customs Portion 549

 ƤLJƾǍƳƸdžLJƾǍƺ; ƳǍƺƳdžǃdžƜɳƜƸ-ƶdžƾdžƾƘƶLjƷɛʗdžƸƷƫdžLJƾƾƳdžLJƾƥǃƚǍƳƷ͡ƚLJƵǍƷƾӆǍƺ ȟǃƚǍƺƷdžƠƺƖ, ƙƸdžƳƳ
ƺƿƺӬƘΓǯƤdžǍƷdžƙƚǍƷƽdžǃdžLJƤҜƚƴdž̲ƤƷdžǯƤƷ, Ɯɳʹ˴ƠƚƜƸ-ƶdžƾdžƾƘƶLjƷƫdžƾLjҍƳɛʗdžƸǍƷƜLĴLJƥƳǃdžƾ
ƢƳdžLJƾƥǃƚǍƳɛǍƵǕǃƚǍƺƓ

(Ǟ) ƠƚƶdžƾdžƾƘƶLjƷƙǍƾdžƸǍƽdžΌƘɇdžLJ˂-ưdžLJ˫Ɩʹ˴ƠƚƙƚƷƺdžƙƸdžƳƳƺƿƺӬƘΓǯƤdžǍƷdžƙƚǍƷƾƘƶLjƷ
ƙǍƾdžLJƸƳƘΓdžΓʹǍ˴ƾƘLJƳLJƾɳǃƚǍƺƓ

(ǟ) ӆǍƺ ȟƚɛƳɇdžǃdžƾƤƾdžƷdžǃƚǍƿ, ƠƚƶdžƾdžƾƘƶLjƷƙǍƾdžLJƸƳƘɇdžLJ˂-ưdžLJ˫Ɩʹ˴, ƙǍƾdžǍƸƾƳdžLJƾƥǃƚǍƳǟ

(ƸϲƩ) ƺӬǂƾǂƼdžLJ˖ƾƸƾƘƤdžƽ ȟƤƾǃƚǕdžƽdžƚǍƺ:

ƳǍƺǀƳȟƴdžǍƤǯƽ, ǂƾƤdžƾƸƽ ȟdžǍƿdžƩƷdžƤLJƾǕdžƽLJƵƠƚƘLJƻƼƳǯƸdžǁƲƤǍƾǯƽƜɳʹ˴ƘƤdžƽ ȟƤƾ(cessation)

ƤLJƾƺdžƾƹǍƿưdžLJ˫ƖƠƺƖ·džƴ ȟǃdžLJƷƘΕdžǃƳƴdžLJƤǍƳƘƴƺdžƜǃdžǍƵƾӅƷdžƾdžӍLJʯƧɪǍƳƸdžǍƾ, ƳdžǃdžǃƚǍƿǂƾƤdžƾ,
ǂƼǕǂƼǕ, ƠƚͱƸʹ˴ƙǍƾdžǍƸƾǯƼǕdžƵƘLJƳLJƾɳǟ(ƸϲƩ) ƺӬǂǍƾƾƫΓǯƼǕdžǍƵƾƫΓӍLJʺƤLJƾǍƳƸdžLJƾǍƺ:

ƙƾƢǀƳȟ ƴdžǍƤǯƽ, ƽLJƵƜLĴLJƥƳǟ(ƸϲƩ) ƺӬǂƾǯƼǕdžƵǂƼdžLJ˖ǃƢǕdžƾӆǍƺ ȟƙƾ˯ǃƢǕdžǯƤdžǍƷdžƸƽ ȟdžǍƿdžƩƷdž

Ƥdžƽ ȟɈƼƜɳǯƼǕdžƵƜʯLjƲ ȟǃƢǕdžƾӆǍƺ ȟҚǓdžˉƤƾdžƷdžǃǕ, ƳdžǃdžǃƚǍƿ, Ƹƽ ȟdžǍƿdžƩƷdžƾƹƿdžƹƿǂdžǍƸǍɻ, ƘɇdžLJ˂-ưdžLJ˫Ɩ
ʹ˴ƘƷLJƶƤƠƤƺӬǂƾƘLJƳLJƾɳǂƼǍǕƾƫΓƺƿƺӬƴdžLJƤǍƺƓ

(Ǡ) ǂƾƤdžƾ, ǂƼǕǂƼǕ, ǯƽͱƸɛǍǕdžƫƷƼǍƷƤLJƾǍƺǯǂƚͱƸƳƵǍˉƾƸƾƜƸ-ƶdžƾdž(Ǜ) ƺdž(ǜ) ƠƜLĴLJƥƳưdžLJ˫Ɩ

ƠƾưdžLJ˫ƖƼdžLJƫȟƷLJƷͱƸƲƢLJƷƶ ȟdžƾƲƤLJƾǍƺƠƺƖƠƚƶdžƾdžƾƜǍʸΚӆƾƲƤǍ˾LJƺLJƶɛƲǕƷƤLJƾǍƳƸdžLJƾǍƺƠƺƖƜƸLJƾ-
ƜɳɻƼƳdžƾǂdžƼLJɊƤƳdžЀʫƷdžƤLJƾǕdž, ƜɳͱƸLJƺLJƶƼdžƿdžǕƠƚƶdžƾdžƾƘƶLjƷƘɇdžLJ˂-ưdžLJ˫Ɩʹ˴džǍƾdžƸǍƽdžΌƸΏǯƤdžƷ
ƜƸdžǍǕǀƷdžɳƤƾdžƽdžǕƠƺƖƜɳƸΏǂ˫LJƤȟƳƾ˖džLJƷӒΙ, ·džƻdžLJƺƤӒΙƠƺƖưdžLJ˫ƖƼdžLJƫȟƷLJƤƻdžǍƺLJƷƶ ȟdžƾƲƤƾdž
ƽdžǕ, ƜǃdžƾƸʺLJƳƠƺƖƜɳƘɇdžLJ˂-ưdžLJ˫Ɩʹ˴LJƷͱƸƲƠƺƖƙƵdžǍǕƾLJƺƶdžƷƤLJƾǍƳƸdžLJƾǍƺƓ

(ǡ) ƠƚƶdžƾdžƾƘƶLjƷƘɇdžLJ˂-ưdžLJ˫Ɩʹ˴ƙǍƾdžǍƸƾǯƤdžǍƷdžƤdžƽ ȟɈƼƙƾ˯ƤƾdžƽdžƚǍƺƷdž, ƽLJƵƷdžǯƤdžǍƷdž̝džƷLjǕ

LJǀ˾ƤҸƤ ȟ ƘƴƺdžƜǃdžƾƸɻǃƚǍƳǯƸǀҍƳLJƿLJƥƳƙǍƺƵƷɛdžLJ˖ƾƸƾƘƴƺdž·-ƜǍΑdžǍƦǂƖҒǃLjƳƸƽ ȟdž˖ɛƼdžǍƲƾ
LJƻLJʯǍƳƺdžƖƿdžǍƵǀǯɑưƠ˅΍džLJƾƹƤLJƼǀƷǂƾƤdžƾǍƤƘƺLJǃƳƤǍƾǯƽǯƤdžǍƷdžLJƷLJƵ ȟ̌ƙƼƵdžLJƷҍƳƸǍΏƾưdžLJ˫ƖƠƾ
ƤdžƾǍƲǯƵǀLjǕLJǀǍ˾ƾ·džƴ ȟǃdžLJƷƾҾΚƼdžƷɛƼdžƲƾLJǃǕdžǍƪƓ

ǜǝƓǯǂƚƹƦdžư ȟʹ˴ƙǍƾdžƸƓ- (Ǜ) ǂƾƤdžƾƜƸӔɳƳƵˉƤLJƾǕdžƽLJƵǂͤ̌ǃǕǯƽ, ǯƤdžǍƷdžƸΏƺdžƖƿdžǍƵǍǀƠƚͱƸ

ǯƺLJǀ ƸLJƾƼdžǍƲ ƠƺƖƠƚͱƸǀǍƳȟ ƙƼƵdžLJƷƤƾdž ǃƚǍƳǍƪƽdžǃdž ̝džƷLjǕ LJǀǍ˾ƾ ̶ͰƳƾ ·džƴ ȟǃdžLJƷ ƧƮdžƚǍƳ ƸdžǍƾ Ƙƴƺdž
·džƴ ȟǃdžLJƷƧƮdžƚƺdžƾΈƼLJƤƾӡLJ̌ƤLJƾǍƳƸdžǍƾ, ƳdžǃdžǃƚǍƿǂƾƤdžƾ, ǂƾƤdžLJƾǯƦǍƫǍƮɛʗdžƸƷ͏džƾdž, ƜɳƸǍΏƾƜƸƾ
ǯǂƚƹƦdžư ȟʹ˴ƙǍƾdžƸƤLJƾǍƳƸdžLJƾǍƺ:

ƳǍƺǀƳȟ ƴdžǍƤǯƽ, ǂƾƤdžƾ, ǂƾƤdžLJƾǯƦǍƫǍƮɛʗdžƸƷ͏džƾdž, ƜǃdžƾLJƺǍƺƩƷdžǕǯƽͱƸǂƖƦƳƼǍƷǃǕ, ǯǂƚͱƸ

ǀƳȟ, ǂLjƼdžƺdžLJƺLJƶ-LJƷǍǁƶƙǍƾdžƸǂdžǍƸǍɻ, ǯƽǯƤdžǍƷdžƸΏǍƤƙǍƾdžƸƲLjǕǯǂƚƹƦdžư ȟʹ˴ǃƚǍƳǂћƲ ȟƺdžƙƖLJǀƤ
ƘΕdžǃLJƳɛƵdžƷƤLJƾǍƳƸdžLJƾǍƺƓ

(ǜ) ƜƸ-ƶdžƾdž(Ǜ) ƠƾƘƶLjƷ·džƴ ȟǃdžLJƷƺdž·džƴ ȟǃdžLJƷƾΈƼLJƤLJƷƶ ȟdžƾǍƲƾLJƺǁǕɪƘLJƷ̑ˑƴdžƤdžƘƺ̝džǕ, ƽLJƵLJƷƶ ȟdžLJƾƳ

ƸʺLJƳǍƳƸLJƾƩdžLJƿƳɛdžƴLJƼƤLJƷƶ ȟdžƾǍƲǯƵƥdžƽdžǕǯƽ, ƺLJƶ ȟƳƙƼƵdžLJƷ̝džƷLjǕLJǀǍ˾ƾ̶ͰƳƾ·džƴ ȟǃdžLJƷƤLJƾǕdžǍƪƘƴƺdž
·džƴ ȟǃdžLJƷƾΈƼLJƤӡLJ̌ƤLJƾǕdžǍƪ, ƳdžǃdžǃƚǍƿƳίLJƻLJʯǍƳǂƾƤdžƾǂdžƼLJǕƤǯǂƚƹƦdžư ȟʹ˴ƙǍƾdžƸƤLJƾǍƳƸdžLJƾǍƺ:

550 Business Planning: Taxation & Compliance ICAB 2024

 ƳǍƺǀƳȟ ƴdžǍƤǯƽ, ƽLJƵҚǓdžˉLJƷƶ ȟdžƾǍƲƾƸƾǂƾƤdžƾƠƚͱƸƘLJƻƼƳǯƸdžǁƲƤǍƾǯƽ, ƺLJƶ ȟƳƙƼƵdžLJƷǯƤdžǍƷdž
̝džƷLjǕLJǀǍ˾ƾ·džƴ ȟǃdžLJƷƧƮdžǕƷdžƚƺdž·džƴ ȟǃdžLJƷƾΈƼLJƤӡLJ̌ƤǍƾƷdžƚ, ƳdžǃdžǃƚǍƿǂƾƤdžƾƜɳͱǍƸƙƵdžǕҍƳʹ˴
ǯƹƾƳɛƵdžƷƤLJƾǍƺ:

ƙƾƢǀƳȟ ƴdžǍƤǯƽ, ǂdžƼLJǕƤǯǂƚƹƦdžư ȟʹ˴, ƙǍƾdžǍƸƾƳdžLJƾƥǃƚǍƳǜǚǚ(ҼƚǀƳ) LJƵƺǍǂƾƘLJƶƤƺƿƺӬ

ƴdžLJƤǍƺƷdžƓ

(ǝ) Ơƚ ƶdžƾdžƾ ƘƶLjƷ ƙǍƾdžLJƸƳ ʹ˴ ƠƚƙƚǍƷƾ ƘƶLjƷ Ƙƴƺdž ƙƸdžƳƳ ƺƿƺӬ ƘΓǯƤdžǍƷdž ƙƚǍƷƾ ƘƶLjƷ
ƙǍƾdžLJƸƳʹǍ˴ƾƘLJƳLJƾɳǃƚǍƺƓ

(Ǟ) ӆǍƺ ȟƚɛƳɇdžǃdžƾƤƾdžƷdžǃƚǍƿ, ƠƚƶdžƾdžƾƘƶLjƷƙǍƾdžLJƸƳʹ˴ƙǍƾdžǍƸƾƳdžLJƾƥǃƚǍƳǞ(Ʃdžƾ) ƺӬǂƾ

ǂƼdžLJ˖ƾƸƾƘƤdžƽ ȟƤƾǃƚǕdžƽdžƚǍƺ: C
H
ƳǍƺǀƳȟƴdžǍƤǯƽ, ƽLJƵǂƾƤdžƾƠƚƘLJƻƼƳǯƸdžǁƲƤǍƾǯƽ, ̝džƷLjǕLJǀ˾Ɯɳ·džƴ ȟǃdžLJƷƘƴƺdž·džƴ ȟǃdžLJƷƾΈƼLJƤƾ A
ǂLJǃƳƥdžƸƥdžƢǕdžǍƷdžƾƫΓΕƺ̝džɊǃƲƤLJƾǕdžǍƪƠƺƖƜɳǯǂƚƹƦdžư ȟʹ˴ƙǍƾdžƸƺǃdžƿƴdžƤdžɛǍǕdžƫƷ, ƳdžǃdžǃƚǍƿ P
T
ǂƾƤdžƾƜɳƙǍƾdžǍƸƾǯƼǕdžƵƺdžǓdžƚǍƳƸdžLJƾǍƺ: E
R
ƙƾƢǀƳȟƴdžǍƤǯƽ, ǯƤdžǍƷdžƘƺ̝džǍƳƚƜɳǯǂƚƹƦdžư ȟʹ˴ƜǃdžɛƴƼƙǍƾdžǍƸƾƳdžLJƾƥǃƚǍƳǛǚ(Ƶǀ) ƺӬǂƾ
ǂƼǍǕƾƘLJƶƤƙǍƾdžƸƤƾdžƽdžƚǍƺƷdžƓ
34
(ǟ) ƠƚƶdžƾdžƾƜǍʸΚӆƾƲƤǍ˾, LJƺLJƶɛƲǕƷƤƾdžƽdžƚǍƺƓ

Εdž΋džƓ- ƠƚƶdžƾdžƾƜǍʸΚӆƾƲƤǍ˾-
(Ƥ) “̝džƷLjǕLJǀ˾” Ƙƴ ȟǯǂƚǂƤƿƜӬƸdžƵƷƤdžƾLjƦƲ-
(Ƙ) ƽdžǃdžƾdžǂћƲ ȟƻdžǍƺǯƤdžǍƷdžƘӂͱƸƸΏƺdžǯƤdžǍƷdžɛƳɇɻƻdžǍƺɛLJƳǍƽdžƦLjƸΏƺdžƖƿdžǍƵǍǀƜӬƸdžƵƷƤǍƾƷ; Ƙƴƺdž
(ƙ) ƽdžǃdžǍƵƾƺdžƖƿdžǍƵǍǀǯƤdžǍƷdžƘӂͱƸƸǍΏƾƺdžǯƤdžǍƷdžɛƳɇɻƻdžǍƺɛLJƳǍƽdžƦLjƸǍΏƾǯƼdžƮǂLJ˰LJƿƳƜӬƸdžƵǍƷƾ
ƸLJƾƼdžƲƺdžƖƿdžǍƵǍǀƜɳƸǍΏƾǯƼdžƮƜӬƸdžƵǍƷƾƠƤɪɛƶdžƷLJǃΝdžƦƯƷƤǍƾ;
(ƥ) “̶ͰƳƾ ·džƴ ȟǃdžLJƷ” Ƙƴ ȟ ƠƚͱƸ ǯƤdžǍƷdž ·džƴ ȟǃdžLJƷ, ƽdžǃdž ǯƤdžǍƷdž ̝džƷLjǕ LJǀǍ˾ƾ Ƙƺ̝džƷǍƤ ƿɻɇƷLjǕ ƼdžɖdžǕ
ƻdžƾǂdžΖǃLjƷƤǍƾ; ƠƺƖ
(Ʀ) “̶ͰƳƾ·džƴ ȟǃdžLJƷƾΈƼLJƤ” Ƙƴ ȟ̶ͰƳƾ·džƴ ȟǃdžLJƷƾǯƤdžǍƷdžӟ̡̌ƠƺƖƘƳɇdžǂˑҢLJƕ ƤƓ

ǜǞƓƤdž̙ƼǂǯǂƺdžƾƫΓLJƹƓ- (Ǜ) ǯƺdžư ȟǯƤdžǍƷdžLJƷLJƵ ȟ̌ΕLJɳƾƘӂ̳ǍƿɛƵʯLJƷ˨ͱƸǯǂƺdžƾƫΓLJƹɛƵdžǍƷƾ

LJƷǍƵ ȟǀɛƵdžƷƤLJƾǍƳƸdžLJƾǍƺ, ƽƴdž:-
(Ƥ) ƸΏǯƺdžƬdžƚƺdžƥdžƿdžǍǂƾƫΓLJƷƶ ȟdžLJƾƳ̝džƷΕƳLjƳƘΓǯƤdžǍƷdž̝džǍƷƺdžƠƳίǂƖɈdžˉƤdžƽ ȟɈƼƸLJƾƩdžƿƷdžƾƫΓ
LJƷƶ ȟdžLJƾƳƤƼȟǂƼǍǕƾƺdžLJǃǍƾǯƤdžǍƷdžƸΏǯƺdžƬdžƚƺdžƥdžƿdžǂƤƾdž;
(ƥ) ƠƚƙƚǍƷƾƘƶLjƷƤdžƽ ȟɈƼƸLJƾƩdžƿƷdžƾƫΓLJƷƶ ȟdžLJƾƳƤƼȟǂƼǍǕƾƺdžLJǃǍƾƺdžLJƷƶ ȟdžLJƾƳƤdž̙Ƽǂǯ̙ǀƷΕƳLjƳ
ƘΓǯƤdžǍƷdž̝džǍƷǯƤdžǍƷdžƸǍΏƾǯƧdžǁƲdž, ǂƳɇƳdžɛLJƳƸdžƵƷƺdžƪdžǓƤƾdž;
(Ʀ) Ƥdž̙ƼǂƤƼȟƤƳȟdžƾƳʮdžƺƶdžǍƷƾɛǍǕdžƫƷLjǕƳdžƾLJǃǕdžǍƪƠƚͱƸǯƤdžǍƷdžƤdž̙ƼǂƺǍ˅ưƢǕɇdžƾǃdžƜǂƺdžƘ̝džǕLj
ǂƖƾɻƲdžƦdžǍƾǯƤdžǍƷdžƸǍΏƾƼdžLJƿƤƺdžƙƼƵdžLJƷƤdžƾƤƤҸƤȟ ɛǍƺǀƺdžƸǍΏƾǃɇdž˅LJƿƖƺdžƷӑƷdžǂƖɊǃƤƾdž;

ICAB 2024 Customs Portion 551

 (Ƨ) Ơƚ ƙƚǍƷƾ ƘƶLjƷ ǯƤdžǍƷdž ǯƺǂƾƤdžLJƾ ƢǕɇdžƾǃdžƜǂ ɛLJƳ̎dž ƺdž ƺˍǍƾƾ ǂLjƼdžƷdžƾ ƼǍΒ ƸΏ ƷdžƼdžǍƷdž Ƣ
ȟ
ƫdžǃdžƫLjƤƾǍƲƾƫΓƤdžǍƦdž-ǯƺdžƮƺdžǯƤdžǍƷdžƠǍƫ˂LJǃǂdžǍƺƺdžLJƲLJƫɇƤǯƿƷǍƵǍƷƾƫΓǯƤdžǍƷdžƿdžƚǍǂ˓ɛƵdžƷƺdž
ƷƺdžǕƷǂƖɈdžˉ;
(ƨ) ǯƤdžǍƷdžΕLJɳƾƘӂǍƾdžǍƶƾǯɛLJɻǍƳƳΐ, ƹƾƼƺdžƵLJƿƿǂƾƺƾdžǃǂƖɈdžˉ;
(Ʃ) ǂƳɇƳdžɛLJƳƸdžƵǍƷƾƜǍʸǍΚƸǍΏƾƷӑƷdžǂƖɊǃƢƸƾLjɻdžƤƾdž, ƺdžƸΏ͓ƖǂƤLJƾƺdžƾƫΓƤdž̙ƼǂƤƼȟƤƳȟdž
ΕƺǃdžǍƾƾΕǕΕƳLjƳƘΓǯƤdžǍƷdžΕǕƫLJǓƳƴdžƤdžƾǯɻǍɖ; ƠƺƖ
(ƪ) ɑdžƷLJƫƮƺdžɑdž˓LJǀƸǍƼ˂ǂƖɈdžˉƤdžƽ ȟɈƼ:

ƳǍƺǀƳȟƴdžǍƤǯƽ, ƜɳͱǍƸƙǍƾdžLJƸƳǯƤdžǍƷdžLJƹƠƾƸLJƾƼdžƲǂ˯džΕɛǀdžǂLJƷƤΕǕƠƺƖɛƵʯǯǂƺdžƾΕǍǕƾ
ƘLJƶƤǃƚǍƺƷdžƓ

(ǜ) ƠƚƶdžƾdžƾƜǍʸΚӆƾƲƤǍ˾, LJƺLJƶɛƲǕƷƤƾdžƽdžƚǍƺƓ

(ǝ) ӟ̡̌ƻdžǍƺLJƻˑͱƸLJƤҜƜǍ̂ƥƷdžƴdžLJƤǍƿ, ʹ˴ɛƳɇƸȟƲƺdžƸLJƾǍǀdžƶLJƺƿLJͯƳƤƾƲǂ˫LJƤȟƳLJƺƶdžƷdžƺLJƿ

ΕƳLjƳ, ƠƚƙƚƷƢLJƺLJƶƾƘƶLjƷƘΓǂƤƿɛǀdžǂLJƷƤƢɛǍǕdžƦΕƺ̝džǂƖɈdžˉLJƺƶdžƷdžƺLJƿ, ƠƚƶdžƾdžƾƘƶLjƷɛǍƵǕ
LJƹƠƺƖƜɳLJƹƸLJƾǍǀdžǍƶƾƫΓƵdžǕLjΕLJɳƾǯɻǍɖ, ƠƚͱǍƸɛǍƽdžƫɇǃƚǍƺǯƽƷƜɳLJƹǯƤdžǍƷdžƤdž̙Ƽǂʹ˴, ƠƺƖ
Ơƚ ƶdžƾdžƾ ƜǍʸΚ ӆƾƲƤǍ˾, Ƥdž̙Ƽǂ ʹǍ˴ƾ ƸLJƾƼdžƲ ǂƖLJ̈̌ LJƷͱƸƲLjǕ Ƶʨ, Ɯɳ ʹ˴ ƺdž̜LJƺƤ ƸǍɻ ɛǍƵǕ ƺdž
ƸLJƾǍǀdžƶǍƽdžΌǃƜƤƺdžƷdžǃƜƤ,ƠƚƶdžƾdžƾƘƶLjƷɛǍƵǕǯƤdžǍƷdžLJƹɛƵdžǍƷƾǯɻǍɖɛǍƽdžƫɇƠƤƚƸʺLJƳƘӂǂdžǍƾ
LJƷͱLJƸƳǃƚǍƺƓ
ǜǢƓ ɻLJƳɊ̜, ƘƺƷLJƳɛdž˖, LJƷǍƥϲƫ Ƙƴƺdž ͓Ɩǂɛdž˖ ƸǍΏƾ ʹ˴ ɥdžǂƤƾƲ Ɠ- (Ǜ) ǯƽǍɻǍɖ ƼdžLJƿƤ ƤҸƤ
ȟ 
ƙǍƺƵǍƷƾӠǍɖǯƤdžǍƷdžƙƼƵdžLJƷҍƳƸǍΏƾɛƴƼƸƾLjɻdžƤdžǍƿƘɇdžLJǂ̙ɇdž˂ƤLJƼǀƷdžƾƘƺƤdž̙ƼǂƸƵƼƽ ȟdžƵdžƾLJƷǍ˨
ƷǍǃƷƠƚͱƸƤƼȟƤƳȟdžǂͤ̌ǃƷǯƽ-
(Ƥ) ƘƺƳƾƲƤdžǍƿƘƴƺdžƳdžǃdžƾӆǍƺ ȟǯƽǯƤdžǍƷdžǂƼǍǕƸΏɻLJƳɊ̜ƺdžƘƺƷLJƳɛdž˖ǃƚǕdžǍƪ; ƺdž
(ƥ) ƘƺƳƾǍƲƾƸƾ, LJƤͤƜɳƸƾLjɻdžƾӆǍƺ ȟǯƽǯƤdžǍƷdžǂƼǕǯƤdžǍƷdžҼƧ ȟƮƷdžƺdžɛdžҍLJƳƤҼǍƽ ȟdžƦƺdžǰƵƺҼLJƺ ȟƸdžƤ(act
of God)͏džƾdž, ƽdžǃdžƼdžLJƿƤƘƴƺdžƳdžǃdžƾƠǍƫǍ˂ƾǯƤdžǍƷdžƚʑdžҍƳƤƼȟ, ƘƺǍǃƿdžƘƴƺdžΕƴ ȟƳdžƾƤdžƾǍƲƷǍǃ,
ƸΏɻLJƳɊ̜ǃƚǕdžǍƪ;
ǯǂƚǍɻǍɖƼdžLJƿǍƤƾLJƿLJƥƳƙǍƺƵƷɈǍƼƜɳƸǍΏƾӒΙƽƴdžƽƴƤƼȟƤƳȟdžƤҸƤ
ȟ LJƷͱƸƲƤƾdžǃƚǍƺƠƺƖƸǍΏƾ
ƜɳͱƸɥdžǂҍƳӒΙLJƷͱƸǍƲƾƘӂƸdžƳƘӂǂdžǍƾƼdžLJƿƤǍƤʹ˴ƘΕdžǃLJƳɛƵdžƷƤƾdžǃƚǍƺƓ

(ǜ) ǯƽǍɻǍɖǯƤdžǍƷdžƙƼƵdžLJƷҍƳƸǍΏƾƼdžLJƿƤƤҸƤ ȟ LJƿLJƥƳƻdžǍƺƙǍƺƵǍƷƾӠǍɖ ƤLJƼǀƷdžƾ Ƙƺ Ƥdž̙Ƽǂ

ƠƚƼǍƼȟ ǂͤ̌ǃƷǯƽ, ƙƼƵdžLJƷƾƸƾLJƤͤǯƵǀLjǕǯƻdžǍƦƾƜǍʸǍΚƥdžƿdžǍǂƾӆǍƺ ȟҼƧ ȟƮƷdžƺdžɛdžҍLJƳƤҼǍƽ ȟdžƦƘƴƺdž
ǰƵƺҼLJƺ ȟƸdžǍƤƾ ƹǍƿ ƸΏ ɻLJƳɊ̜, ƘƺƷLJƳɛdž˖, LJƷǍƥϲƫ Ƙƴƺdž ͓Ɩǂɛdž˖ ǃƚǕdžǍƪ ǯǂƚ ǯɻǍɖ Ɯɳ ɻLJƳ, ƘƺƷLJƳ,
LJƷǍƥϲƫ Ƙƴƺdž ͓ƖǍǂƾ ǂƳɇƳdž ɛƼdžǍƲƾ ƫΓ ǂƤƿ ɛǍǕdžƫƷLjǕ Ƴΐ ƜƸ̝džƸƷӆƺ ȟƤ ƸǍΏƾ ƼdžLJƿƤ ƤҸƤ ȟ  ǯƸǀҍƳ
ƙǍƺƵƷɈǍƼƤLJƼǀƷdžƾƘƺƤdž̙ƼǂƠƤƫƷƽƴdžƽƴƤƼȟƤƳȟdžƤҸƤ ȟ ƜɳƸǍΏƾӒΙLJƷͱƸǍƲƾƘӂƼLJƳɛƵdžƷƤLJƾǍƳ
ƸdžLJƾǍƺƷƠƺƖƸǍΏƾƼdžLJƿƤǍƤƜɳͱƸӒΙLJƷͱƸǍƲǯƽǃdžǍƾӒΙɥdžǂƸdžƚǕdžǍƪǯǂƚƙӂƸdžLJƳƤǃdžǍƾƜɳƸǍΏƾ
ƜƸƾɛǍƵǕƘƴƺdžƸLJƾǍǀdžLJƶƳʹ˴ƘΕdžǃLJƳƺdžǯƹƾƳɛƵdžƷƤLJƾǍƳƸdžLJƾǍƺƷƓ

(ǝ) ǯƽǯɻǍɖƤLJƼǀƷdžƾƘƺƤdž̙ƼǂƠƾǂͤLJ̌ƼǍƳǯƵƥdžƽdžǕǯƽ, ƢǕɇdžƾǃdžƜǂҍƳǯƤdžǍƷdžƸΏǯƵǀLjǕǯƻdžǍƦƾ

ƫΓƥdžƿdžǍǂƾӆǍƺ ȟǯƤdžǍƷdžҼƧ ȟƮƷdžƺdžɛdžҍLJƳƤҼǍƽ ȟdžƦƘƴƺdžǰƵƺҼLJƺ ȟƸdžǍƤɻLJƳɊ̜ǃƚǕdžǍƪ, ǯǂƚǯɻǍɖƜɳɻLJƳƾ

552 Business Planning: Taxation & Compliance ICAB 2024

ǂƳɇƳdžɛƼdžǍƲƾƫΓǂƤƿɛǍǕdžƫƷLjǕƳΐƜƸ̝džƸƷӆƺ ȟƤƸǍΏƾƼdžLJƿƤƤҸƤ ȟ ǯƸǀҍƳƙǍƺƵƷɈǍƼƤLJƼǀƷdžƾƘƺ
Ƥdž̙Ƽǂ ƠƤƫƷ ƽƴdžƽƴ ƤƼȟƤƳȟdž ƤҸƤ
ȟ  Ɯɳ ƸǍΏƾ ӒΙ LJƷͱƸǍƲƾ ƘӂƼLJƳ ɛƵdžƷ ƤLJƾǍƳ ƸdžLJƾǍƺƷ ƠƺƖ ƸǍΏƾ
ƼdžLJƿƤǍƤƜɳͱƸӒΙLJƷͱƸǍƲǯƽǃdžǍƾӒΙɥdžǂƸdžƚǕdžǍƪǯǂƚƙӂƸdžLJƳƤǃdžǍƾʹ˴ƘΕdžǃLJƳɛƵdžƷƤƾdžǃƚǍƺƓ

ǝǜƓʹ˴, ƤƾƢӟƵƸLJƾǍǀdžǍƶƾǂƼǕǂLjƼdžƓ- (Ǜ) ƠƚƙƚǍƷƾƘΓdžΓLJƺƶdžƷǂdžǍƸǍɻ, ǯƤdžǍƷdžʹ˴, ƤƾƢ

ƘΓdžΓƩdžƫȟƸLJƾǍǀdžǍƶƾƫΓƵdžǕLjΕLJɳǍƤƜǃdžƘƺLJǃƳƤƾǍƲƾLJƺʗLJ˖ǍƳƘΓǯƤdžǍƷdžƳdžLJƾƥɛƵdžƷƤƾdžƷdžǃƚǍƿ, Ǜǚ
(Ƶǀ) LJƵǍƷƾƼǍΒƜɳʹ˴, ƤƾƢƘΓdžΓƩdžƫȟɛǍƵǕǃƚǍƺƓ

(ǜ) ƽLJƵǯƤdžǍƷdžʹ˴, ƤƾƺdžƘΓdžΓƩdžƫȟ ƸLJƾǍǀdžǍƶƾƫΓƵdžǕLjΕLJɳƶdžƾdžǝǟƠƾƜƸ-ƶdžƾdž(ǜ) ƠƾƘƶLjƷ

LJƺƿͯƸLJƾǍǀdžǍƶƾƫΓƘӂƼLJƳɛdž˖ǃƷ, ƳdžǃdžǃƚǍƿƜɳƜƸ-ƶdžƾdžǕƜLĴLJƥƳǯƼǕdžǍƵƾƼǍΒƸLJƾǍǀdžƶƤƾdžƽdžƚǍƺƓ

(ǝ) ǯƤdžǍƷdžʹ˴, ƤƾƺdžƘΓdžΓƩdžƫȟ ɛǍƵǕƳdžLJƾǍƥƾƼǍΒƸLJƾǍǀdžLJƶƳƷdžǃƚǍƿ, Ɯɳʹ˴, ƤƾƺdžƘΓdžΓ C

ƩdžǍƫȟƾƜƸƾ, ƜǃdžƸLJƾǍǀdžƶǍƽdžΌƺdžɛǍƵǕǃƚƺdžƾǂƺ ȟǍǀǁƳdžLJƾƥǃƚǍƳƙƾ˯ƤLJƾǕdžƜǃdžƸLJƾǍǀdžLJƶƳǃƚƺdžƾƳdžLJƾƥ H
Ƹƽ ȟˉǯƼǕdžǍƵƾƫΓƺdžLJǁ ȟƤǛǚ(Ƶǀ)ǀƳdžƖǀǂdžƶdžƾƲӟǍƵƾǃdžǍƾӟƵƸLJƾǍǀdžƶƤLJƾǍƳǃƚǍƺƓ A
P
T
(Ǟ) ǯƤdžǍƷdžʹ˴, ƤƾƺdžƘΓdžΓƩdžƫȟǯƤdžǍƷdžƸΏƪdžǍǓƾƸƾƺǍƤǕdžƴdžLJƤǍƿ, ƜɳLJƷƶ ȟdžLJƾƳƺǍƤǕdžƾƘLJƳLJƾɳ
E
LJǃǂdžǍƺ, ƜɳƸΏƪdžǍǓƾƳdžLJƾƥǃƚǍƳƜɳLJƷƶ ȟdžLJƾƳƺǍƤǕdžƘƺLJǃƳƤƾǍƲƾƳdžLJƾƥƸƽ ȟˉƺdžLJǁ ȟƤǛǚ(Ƶǀ) ǀƳdžƖǀǃdžǍƾ R
ӟƵƶdžƽ ȟƤƾdžǃƚǍƺ:
ƳǍƺǀƳȟ ƴdžǍƤǯƽ, ǯƺdžư ȟ, ǂƾƤdžƾƤҸƤ
ȟ LJƷƶ ȟdžLJƾƳƷLjLJƳƼdžƿdžƘӂǂdžǍƾ, ƽLJƵƚǃdžLJƷƶ ȟdžƾƲƤǍƾǯƽ, ƶdžƽ ȟҍƳӟƵ 34
ƸLJƾǍǀdžǍƶƾƹǍƿǂƖLJ̈̌ΕLJɳ̶ͰƳƾƘƴ ȟǎƷLJƳƤɻLJƳƾǂ˰ljƥLjƷǃƚǍƺƷ, ƳdžǃdžǃƚǍƿǯƺdžư ȟƜɳͱƸӟƵƶdžƽ ȟƤƾdžǃƚǍƳ
LJƺƾƳƴdžLJƤǍƳƸdžLJƾǍƺƓ
ǝǝƓƘǂƳɇLJƺӍLJƳ, ƚƳɇdžLJƵƓ- (Ǜ) ǯƤdžǍƷdžΕLJɳƤdž̙ƼǂǂƖLJ̈̌LJƷ˨ƺLJƲ ȟƳǯƤdžǍƷdžLJƺǁǍǕƘǂƳɇƳΐƺdžLJƺӍLJƳ
ƺdž, ǯɻɖƼƳ, ƵLJƿƿƵdžLJƥƿƤLJƾǍƺƷƷdž, ƽƴdž:-
(Ƥ) Ƥdž̙ƼǂƤƼȟƤƳȟdžƾLJƷƤƮǯƤdžǍƷdžǯƧdžǁƲdž, ǯƷdžɪǀ, ɛƳɇǕƷƸɖƘƴƺdžƘΓǯƽǯƤdžǍƷdžƵLJƿƿƵdžLJƥƿƺdž·džɻƾƤƾdž
ƘƴƺdžƘƸȟƲƤƾdžƺdžƘƸȟƲƤLJƾƺdžƾΕƺ̝džƤƾdž;
(ƥ) ƠƚƙƚƷƺdžLJƺLJƶƾƘƶLjƷǯƤdžǍƷdžɛǍ̆ƾƜʯƾɛƵdžǍƷƺdžΒƺdžƶƤƳdžƾLJǃǕdžǍƪƠƚͱƸǯƤdžǍƷdžƤdž̙ƼǂƤƼȟƤƳȟdž
ƤҸƤȟ LJƫʗdžLJǂƳɛǍ̆ƾƫƺdžǍƺǯƤdžǍƷdžǯƧdžǁƲdžɛƵdžƷƤƾdž; Ƙƴƺdž
(Ʀ) ƚǍƿɯLJƷƤƼdžΒǍƼǯƤdžǍƷdžǯƧdžǁƲdž, ƵLJƿƿ, ƳΐƘƴƺdžǯƾƤư ȟǯɛƾƲƤƾdžƘƴƺdžƜǃdžǍƵƾǂƹƮƤLJƸƜƸ̝džƸƷ
ƤƾdžƓ

(ǜ) ƜƸ-ƶdžƾdž (Ǜ) Ơ ƜLĴLJƥƳ ǯƤdžǍƷdž ƘǂƳɇ Ƴΐ ƺdž LJƺӍLJƳ ƺdž ƵLJƿƿ ƵdžLJƥǍƿƾ ƤdžƾǍƲ Ƙƴƺdž ǯƤdžǍƷdžͱƸ
ǯƽdžƦǂdžƫǍǀƾƤdžƾǍƲƽLJƵǯƤdžǍƷdžʹ˴ƘƴƺdžƩdžƫȟƙǍƾdžƸƤƾdžƷdžǃǕƘƴƺdžƤƼƙǍƾdžLJƸƳǃǕƘƴƺdžӎƿɈǍƼǯƹƾƳ
ɛƵdžƷƤƾdžǃǕ, ƳdžǃdžǃƚǍƿǯƽΕLJɳƜɳƤdžƾǍƲǯƤdžǍƷdžƘƴ ȟƸLJƾǍǀdžǍƶƾƫΓƵdžǕƺʺƳdžǃdžƾƜƸƾǯƷdžɪǍǀƜLĴLJƥƳ
ƸLJƾƼdžƲƘƴ ȟLJƳLJƷǯƤƷƸLJƾǍǀdžƶƤLJƾǍƺƷƷdžƜǃdžƾƤdžƾƲƵǀȟdžǍƷdžƾƫΓƵdžLJƺƷdžƼdžǂͯLJƿƳǯƷdžɪǀƫdžLJƾƤLJƾǍƳǃƚǍƺƓ

(ǝ) ƜƸ-ƶdžƾdž(ǜ) ƠƺLJƲ ȟƳΕLJɳƾƽLJƵǯƤdžǍƷdžƺɳΕƴdžǍƤ, ƳdžǃdžǃƚǍƿƽƴdžƽƴƤƼȟƤƳȟdžƳdžǃdžLJƺǍƺƩƷdžӆƺ ȟƤ

ƜɳΕLJɳƤҸƤ ȟ ɛǍƵǕʹǍ˴ƾƸLJƾƼdžƲLJƷƶ ȟdžƾƲƤLJƾǍƺƷ, ƽdžǃdžǯƷdžɪǍǀƜLĴLJƥƳƘǍƴ ȟƾƸLJƾƼdžƲǃƚǍƳǯƺLJǀǃƚǍƺƷdž,
ƠƺƖƜɳΕLJɳƠƚͱǍƸLJƷƶ ȟdžLJƾƳƸLJƾƼdžƲƘƴ ȟƸLJƾǍǀdžƶƤLJƾǍƺƷƓ

(Ǟ) ƜƸ-ƶdžƾdž(ǜ) ƠƾƘƶLjƷǯƤdžǍƷdžǯƷdžɪǀƫdžLJƾƾǯɻǍɖǯƤdžǍƷdžǂƼǕǂLjƼdžƴdžLJƤǍƺƷdžƓ

ICAB 2024 Customs Portion 553

 ǝǟƓʹ˴, ƤƾƢƩdžƫȟƫƼdžƠƺƖLJƺƿLJͯƳƸLJƾǍǀdžƶƓ- (Ǜ) ƘɇdžLJǂ̙ɇdž˂ƤLJƼǀƷdžƾƘƺƤdž̙ƼǂƸƵƼƽ ȟdžƵdžƾLJƷǍ˨
ƷǍǃƷƠƚͱƸƤdž̙ƼǂƤƼȟƤƳȟdžǯƤdžǍƷdžƺdžLJƲLJƫɇƤɛLJƳ̎džƷƺdžǂƾƤdžLJƾǂƖ̝džƾǯɻǍɖƽLJƵƳdžǃdžƾLJƺǍƺƩƷdžǕƽƴdžƽƴǃǕ
ƳdžǃdžǃƚǍƿƤdž̙Ƽǂʹ˴ƺdžƩdžƫȟ ǯƽƻdžǍƺƠƺƖƽƥƷɛǍƵǕǃǕǯǂƚƻdžǍƺƠƺƖƳƥƷƸLJƾǍǀdžǍƶƺdžΒƤLJƾƺdžƾƸLJƾƺǍƳȟ
ƜɳɛLJƳ̎džƷƺdžǂƖ̝džƾǂLJǃƳƜɳʹ˴ƠƺƖƩdžǍƫȟƾƩƿLJƳLJǃǂdžƺƾɻƲƤLJƾǍƳƸdžLJƾǍƺƷ, ǯƽLJǃǂdžƺƠƤƼdžǍǂƾƘLJƳLJƾɳ
ƷǍǃƠƚͱƸLJƺƾLJƳǍƳLJƷ̑LJʯƤLJƾǍƳǃƚǍƺ, ƠƺƖƜɳɛLJƳ̎džƷƺdžǂƖ̝džƠƚͱƸƸLJƾƼdžƲƘƴ ȟƫƼdžɛƵdžƷƤLJƾǍƺƺdž
ƫdžƼdžƷƳ ƵdžLJƥƿ ƤLJƾǍƺ, ƽdžǃdž ǂƖLJ̈̌ ƤƼȟƤƳȟdžƾ LJƺǍƺƩƷdžǕ ǯƽ ǯƤdžǍƷdž ǂƼǍǕ ǯƽ ƸLJƾƼdžƲ ʹ˴ ƺdž Ʃdžƫȟ ɛǍƵǕ Ƴdžǃdž
LJƼƮdžƚƺdžƾƫΓƽǍƴ̌ǃǕƓ

(ǜ) ƶdžƾdž ǣǡ ƘӂǂdžǍƾ ɻƼƳdžɛdž˖ ƚǍƤdžǍƷdžLJƼƤ ƘƸdžǍƾƮǍƾƾ Ƽƽ ȟdžƵdžɛdž˖ ǯƤdžǍƷdž ΕLJɳ, LJƺLJƶ ͏džƾdž LJƷƶ ȟdžLJƾƳ
ƸʺLJƳǍƳ, Ƹƽ ȟdž˖ΌdžƾdžLJ˂ɛƵdžƷǂdžǍƸǍɻ, ƳdžǃdžƾƘӂ̳ǍƿƪdžǓҍƳƸǍΏƾǯɻǍɖɛǍƵǕʹ˴ƢƤƾƸLJƾǍǀdžƶLJƺƿLJͯƳ
ƤLJƾƺdžƾƘӂǍƾdžƶʗdžƸƷƤLJƾǍƳƸdžLJƾǍƺ, ƳǍƺƜɳͱƸLJƺƿǍͯƾƘӂǍƾdžƶƜɳƪdžǍǓƾƳdžLJƾƥǃƚǍƳǛǞ(ǯƩǒʸ) LJƵǍƷƾ
ƘLJƶƤǃƚǍƺƷdžƓ

(ǝ) ǯƺdžư ȟ, LJƺǍǀǁ ƙǍƵǀ ͏džƾdž, ƫƷ·džǍƴ ȟ, ǯƤdžǍƷdž ǂƾƤdžLJƾ ƺdž ƙƶdž-ǂƾƤdžLJƾ ɛLJƳ̎džƷ Ƙƴƺdž LJƺLJƶƺʺ ǂƖ̝dž
Ƥdž̙Ƽǂʹ˴ƺdžƘΓdžΓƩdžƫȟ ƸLJƾǍǀdžƶΕLJƳǍƾǍƤǯƺdžư ȟƤҸƤ ȟ LJƷƶ ȟdžLJƾƳLJƷLJƵ ȟ̌ǂƼǕǂLjƼdžƾƼǍΒƜɳʹ˴ƠƺƖƩdžƫȟ
ƸLJƾǍǀdžƶƤLJƾƺdžƾΌdžƾdžLJ˂ƵdžLJƥƿӆƺ ȟƤƸΏƥdžƿdžǂǯƷƢǕdžƾƘӂƼLJƳɛƵdžƷƤLJƾǍƳƸdžLJƾǍƺƓ

ǛǚǛƓƘ̝džǕLjƙƼƵdžLJƷƸʺLJƳƓ- (Ǜ) ƠƚƘΒdžǍǕƾLJƺƶdžƷdžƺLJƿƠƺƖLJƺLJƶ͏džƾdžLJƷƶ ȟdžLJƾƳǀƳȟdžƺLJƿƢLJƺLJƶ-LJƷǍǁƶ

ǂdžǍƸǍɻ, LJƺLJƶǍƳƺLJƲ ȟƳƙƼƵdžLJƷҍƳƸΏƺdžƖƿdžǍƵǍǀƘ̝džǕLjΕƺǃdžƾƠƺƖƸƾƺƳ̭ǍƳӅƷƗƾ˖džLJƷƾƜǍʸǍΚƘ̝džǕLj
ƙƼƵdžLJƷƸʺLJƳƾƘƶLjƷƙƼƵdžLJƷʹ˴ƢƤƾƸLJƾǍǀdžƶΕƳLjƳƪdžǓƤƾdžƽdžƚǍƺƓ

(ǜ) ǯƤdžǍƷdžƸΏLJƷ˨ƺLJƲ ȟƳǀƳȟǂdžǍƸǍɻ, Ƙ̝džǕLjƙƼƵdžLJƷƸʺLJƳƾƘƶLjƷΓ̜ƤƾdžƽdžƚǍƺ, ƽƴdž:-

(Ƥ) ƜɳƸΏΕƺǃdžǍƾƾƤdžƾǍƲ·džƻdžLJƺƤƘƺƩǕΕƳLjƳƸǍΏƾǯƤdžǍƷdžƸLJƾƺƳȟƷƤƾdžƽdžƚǍƺƷdž;
(ƥ) ƸǍΏƾɛҍLJƳƺdžƜǃdžƾƘƻLǰΕƺǃdžǍƾƾƤdžƾǍƲ, ǀƷdžɳƤƾǍƲƾƜƸdžǍǕƾƘƺƳȟƼdžǍƷƜLĴLJƥƳƸʺLJƳƾǯƤdžǍƷdžͱƸ
ƘƸΕƺǃdžǍƾƾǯɻɖΕƳLjƳ, ƘΓǯƽǯƤdžǍƷdžǯɻǍɖƚǃdžLJƷLJ̃ƳƤƾdžǂ˯ƺǯƽ, ƜɳƸʺLJƳǂ˫džƵǍƷƾƸƾƜɳ
ƸΏǀƷdžɳƤƾdžƽdžƚǍƺ;
(Ʀ) ƠƚƙƚǍƷƾƘΓdžΓLJƺƶdžǍƷƺdžLJƺLJƶǍƳLJƻˑͱƸLJƤҜƜǍ̂ƥƷdžƴdžLJƤǍƿ, ƜɳƸǍΏƾƜƸƾƙǍƾdžƸƲLjǕǯƤdžǍƷdžʹ˴
ƢƤƾƸLJƾǍǀdžƶLJƷLJ̃ƳƤLJƾƺdžƾƫΓǯƤdžǍƷdžΌdžƾdžLJ˂ɛƵdžƷ;
(Ƨ) LJƺLJƶǍƳƜLĴLJƥƳƸʺLJƳǍƳǂӑƵǕʹ˴ƘΕdžǃLJƳƾƫΓƙƺΚƤƳdžǂӒǃӆƾƲ; ƠƺƖ
(ƨ) ƸΏǯƧdžǁƲdžƠƺƖƪdžǍǓƾƫΓɛǍǕdžƫƷLjǕƙӂ̎džLJƷƤƳdžǂ˫ˑƤƾƲƓ

(ǝ) ǂƾƤdžƾ, LJƺLJƶ ͏džƾdž LJƷƶ ȟdžLJƾƳ ƸʺLJƳǍƳ, ǯƤdžǍƷdž ƸǍΏƾ ƫΓ Temporary Admission (ATA)
Carnet ƸʺLJƳǂǃǯƽǯƤdžǍƷdžƘ̝džǕLjƙƼƵdžLJƷƸʺLJƳƾƘӂƼLJƳɛƵdžƷƤLJƾǍƳƸdžLJƾǍƺƓ

Εdž΋džƓ- Ơƚ ƶdžƾdžƾ ƜǍʸΚ ӆƾƲƤǍ˾, “Temporary Admission (ATA) Carnet” Ƙƴ ȟ Istanbul
Convention on Temporary Importation Ơ ƺLJƲ ȟƳ Admission Temporaire/Temporary
Admission (ATA) Carnet ƸʺLJƳƓ

ǛǚǜƓƘ̝džǕLjƙƼƵdžLJƷƸʺLJƳƾƸLJƾǂƼdžLJ˖Ɠ- (Ǜ) ǯƤdžǍƷdžƸΏӅƷƗƾ˖džLJƷǃƢǕdžƾƸƾƘ̝džǕLjƙƼƵdžLJƷƸʺLJƳƾ

ƸLJƾǂƼdžLJ˖ƧɪǍƺƓ

554 Business Planning: Taxation & Compliance ICAB 2024

 (ǜ) ƽƴdžƽƴƤƼȟƤƳȟdžƤҸƤ ȟ ƘӂƼLJƳƠƺƖǯƺdžư ȟƤҸƤ
ȟ LJƷƶ ȟdžLJƾƳǀƳȟ ƢLJƺLJƶ-LJƷǍǁƶǂdžǍƸǍɻ, Ƙ̝džǕLjƙƼƵdžLJƷ
ƸʺLJƳƾLJƷ˨ƺLJƲ ȟƳƻdžǍƺƸLJƾǂƼdžLJ˖ƧɪǍƺ, ƽƴdž:-
(Ƥ) ǯƵǀLjǕǯƻdžǍƦƾƫΓƸΏǯƧdžǁƲdžƵdžLJƥƿƤƾdžǃƚǍƿ; ƺdž
(ƥ) ǂƾƤdžǍƾƾLJƷƤƮƸΏǃ̜džˉƾƤƾdžǃƚǍƿƓ

(ǝ)Ƙ̝džǕLjƙƼƵdžLJƷƸʺLJƳƾƸLJƾǂƼdžLJ˖ƾǯƼǕdžƵLJƺLJƶ͏džƾdžLJƷƶ ȟdžLJƾƳǃƚǍƺ:

ƳǍƺ ǀƳȟ ƴdžǍƤ ǯƽ, ǯƺdžư ȟ ƤҸƤ

ȟ  ǂƾƤdžLJƾ ǯƦǍƫǍƮ ɛʗdžƸƷ ͏džƾdž LJƷƶ ȟdžLJƾƳ ΕLJƳɈƼLj ƸLJƾLJ̝LJƳǍƳ, ƽLJƵ Ɯɳ
ǯƼǕdžǍƵƾƼǍΒƘӂǍƼdžLJƵƳΕƺǃdžƾǂ˫ˑƤƾdžƷdžƽdžǕ, ƳdžǃdžǃƚǍƿƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ, ǂƖLJ̈̌ƙƼƵdžLJƷƤdžƾƤ
ƤҸƤȟ ӔLJɳǂʊƳƘӂǍƾdžǍƶƾǯɛLJɻǍƳ, ƜɳǯƼǕdžƵƘƷLJƶƤǠ(ƪǕ) ƼdžǍǂƾƫΓӍLJʺƤLJƾǍƳƸdžLJƾǍƺƷƓ
C
ǛǚǝƓƚƷƢǕdžư ȟƢƙƜƮƢǕdžư ȟɛǍǂLJǂƖƸʺLJƳǂƼdžLJ˖ƾǯƼǕdžƵƓ- ƠƚƘΒdžǍǕƺLJƲ ȟƳƚƷƢǕdžư ȟɛǍǂLJǂƖ(inward H
processing)ƠƺƖƙƜƮƢǕdžư ȟɛǍǂLJǂƖ (outward processing)ƸʺLJƳ, Ǡ(ƪǕ) Ƽdžǂƺdžǯƺdžư ȟƤҸƤ ȟ ƺLJƶ ȟƳ A
ǯƼǕdžǍƵƾƼǍΒǂƼdž˖ƤLJƾǍƳǃƚǍƺƓ P
T
E
ǛǚǞƓƚƷƢǕdžư ȟɛǍǂLJǂƖƸʺLJƳƓ- ƠƚƙƚǍƷƾǯǁdžǓǀƘΒdžǍǕƜLĴLJƥƳǯɻɖΕƳLjƳƠƺƖƠƚƘΒdžǍǕƜLĴLJƥƳ
R
ƙƺΚƤƳdžƠƺƖƸΏǯƧdžǁƲdžƢƪdžǓǂƖɈdžˉɛǍǕdžƫƷLjǕƙӂ̎džLJƷƤƳdžǂ˫džƵƷǂdžǍƸǍɻ, LJƺLJƶ͏džƾdžLJƷƶ ȟdžLJƾƳƸʺLJƳǍƳ,
ƤLJƼǀƷdžƾƘƺƤdž̙ƼǂǯƼƾdžƼƳ, ƙƖLJǀƤƸLJƾƺƳȟƷƺdžɛǍǂLJǂƖƠƾƫΓƺdžƖƿdžǍƵǍǀƘ̝džǕLjƻdžǍƺƙƼƵdžLJƷҍƳƸǍΏƾ
ƜƸƾɛǍƽdžƫɇƙƼƵdžLJƷʹ˴ƢƤƾƸLJƾǍǀdžƶLJƷLJ̃ƳƤLJƾƺdžƾƿǍɻɇ, ΕdžƖƤΌdžƾdžLJ˂ɛƵdžƷǂdžǍƸǍɻ, ƜɳƸΏƚƷƢǕdžư ȟ 34
ɛǍǂLJǂƖƸʺLJƳƾƘƶLjƷʹ˴ƢƤƾƸLJƾǍǀdžƶΕLJƳǍƾǍƤƪdžǓƤLJƾǍƳƸdžLJƾǍƺƷƓ

ǛǚǟƓ ƙƜƮƢǕdžư ȟ ɛǍǂLJǂƖ ƸʺLJƳƓ- (Ǜ) Ơƚ ƘΒdžǍǕ ƜLĴLJƥƳ ƙƺΚƤƳdž ƠƺƖ ƸΏ ǯƧdžǁƲdž Ƣ ƪdžǓ ǂƖɈdžˉ
ɛǍǕdžƫƷLjǕƙӂ̎džLJƷƤƳdžǂ˫džƵƷǂdžǍƸǍɻ, LJƺLJƶ͏džƾdžLJƷƶ ȟdžLJƾƳƸʺLJƳǍƳ,ƺdžƖƿdžǍƵǍǀɛͼƳƺdžƜӬƸdžLJƵƳƸΏ, ǯƵǀLjǕ
ǯƻdžǍƦƾƫΓƪdžǓƤƾdžƙƼƵdžLJƷҍƳƸΏ, ƽdžǃdžLJƺǍƵǍǀǯƼƾdžƼƳ, ƙƖLJǀƤƸLJƾƺƳȟƷƺdžɛǍǂLJǂƖƠƾƫΓƘ̝džǕLjƻdžǍƺ
ƾ˖džLJƷƾƫΓƘLJƻǍɛƳ, ƳdžǃdžƙƜƮƢǕdžư ȟɛǍǂLJǂƖƸʺLJƳƾƘƶLjƷΓ̜ƤƾdžƽdžƚǍƺƓ

(ǜ) ƙƜƮƢǕdžư ȟ ɛǍǂLJǂƖ ƸʺLJƳƾ ƘƶLjƷ Γ̜ҍƳ ƸΏ ǃƚǍƳ ǯƼƾdžƼƳҍƳ, ƸLJƾƺLJƳȟƳ ƺdž ɛLJɈǕdžƫdžƳ ƸΏ
ƺdžƖƿdžǍƵǍǀǯƹƾƳƙƷdžǃƚǍƿ, ƺdžƖƿdžǍƵǀǃƚǍƳƜɳƸΏLJƺǍƵǍǀǯɛƾƲƠƺƖƺdžƖƿdžǍƵǍǀǯƹƾƳƙLJƷƺdžƾǯɻǍɖǂƖLJ̈̌
ƸLJƾƺǃƲ, ǯƺdžƬdžƚ, ǃɇdž˅LJƿƖƩdžƫȟƠƺƖLJƺƼdžΕǕǂǃƺdžƖƿdžǍƵǍǀƾƺdžLJǃǍƾҒǃLjƳƜɳƤdžƽ ȟɈǍƼƾΕǍǕƾLJƻLJʯǍƳƙƼƵdžLJƷ
ʹ˴ƢƤƾLJƷͱLJƸƳǃƚǍƺƓ

(ǝ) ƜƸ-ƶdžƾdž(ǜ) ƠƽdžǃdžLJƤҜƚƴdž̲ƤƷdžǯƤƷ, ƤLJƼǀƷdžƾƘƺƤdž̙ƼǂƽLJƵƠƚƼǍƼȟǂͤ̌ǃƷǯƽ, Ƙ̝džǕLjƻdžǍƺ

ƾ˖džLJƷҍƳ ƸΏ, ǯƤdžǍƷdž ΌdžƾdžLJ˂ ƺdž ƢǕdžǍƾLJ˂ ǃƚǍƳ ƜʼNJƳ ǯƤdžǍƷdž ҙLJɳƦƳ ƺdž LJƺLJƶƺʺ ƺdžΒƺdžƶƤƳdž Ƙƴƺdž ǯƤdžǍƷdž
ɛͼƳƫLJƷƳƺdžƳdžӬƸƽ ȟӆƲ ȟ͇ɪƾƤdžƾǍƲƩdžƫȟӑɳƻdžǍƺǯƼƾdžƼƳƤƾdžǃƚǕdžǍƪ, ƳdžǃdžǃƚǍƿƜɳƸΏƺdžƖƿdžǍƵǍǀǯƹƾƳ
ƙƷdžǃƚǍƿ, ƜɳҙLJɳ, ƢǕdžǍƾLJ˂ƺdžΌdžƾdžLJ˂ƾǂLjƼdžƸƽ ȟˉɛǍƽdžƫɇƙƼƵdžLJƷʹ˴ƢƤƾƸLJƾǍǀdžƶΕƳLjƳƪdžǓƤƾdž
ƽdžƚǍƺƓ

(Ǟ) Ƙ̝džǕLjƾ˖džLJƷҍƳƸǍΏƾƜƸƾɛƳɇƸȟƲƸLJƾǍǀdžLJƶƳǃƚǍƿƙƜƮƢǕdžư ȟɛǍǂLJǂƖƠƾƘӂƼLJƳɛƵdžƷƤƾdžƽdžƚǍƺ

ƷdžƓ

ICAB 2024 Customs Portion 555

 Session-02
General Rules for the Interpretation of the Harmonized
System (GIR)/ H.S. Classification
Legal Provisions

556 Business Planning: Taxation & Compliance ICAB 2024

 General Rules for the Interpretation of the
Harmonized System (GIR)

GENERAL RULES FOR THE INTERPRETATION OF THE HARMONIZED SYSTEM

Classification of goods in the Nomenclature shall be governed by the following principles:
1. The titles of Sections, Chapters and sub-Chapters are provided for ease of reference only; for legal
purposes, classification shall be determined according to the terms of the headings and any relative
Section or Chapter Notes and, provided such headings or Notes do not otherwise require, according to
the following provisions:
2. (a) Any reference in a heading to an article shall be taken to include a reference to that article incomplete
or unfinished, provided that, as presented, the incomplete or unfinished article has the essential
character of the complete or finished article. It shall also be taken to include a reference to that article
complete or finished (or falling to be classified as complete or finished by virtue of this Rule), C
presented unassembled or disassembled. H
A
(b) Any reference in a heading to a material or substance shall be taken to include a reference to mixtures
or combinations of that material or substance with other materials or substances. Any reference to P
goods of a given material or substance shall be taken to include a reference to goods consisting T
wholly or partly of such material or substance. The classification of goods consisting of more than E
one material or substance shall be according to the principles of Rule 3. R
3. When by application of Rule 2 (b) or for any other reason, goods are, prima facie, classifiable under two
or more headings, classification shall be effected as follows:
(a) The heading which provides the most specific description shall be preferred to headings providing 34
a more general description. However, when two or more headings each refer to part only of the
materials or substances contained in mixed or composite goods or to part only of the items in a set
put up for retail sale, those headings are to be regarded as equally specific in relation to those goods,
even if one of them gives a more complete or precise description of the goods.
(b) Mixtures, composite goods consisting of different materials or made up of different components, and
goods put up in sets for retail sale, which cannot be classified by reference to 3 (a), shall be classified
as if they consisted of the material or component which gives them their essential character, insofar
as this criterion is applicable.
(c) When goods cannot be classified by reference to 3 (a) or 3 (b), they shall be classified under the
heading which occurs last in numerical order among those which equally merit consideration.
4. Goods which cannot be classified in accordance with the above Rules shall be classified under the
heading appropriate to the goods to which they are most akin.
5. In addition to the foregoing provisions, the following Rules shall apply in respect of the goods referred to
therein:
(a) Camera cases, musical instrument cases, gun cases, drawing instrument cases, necklace cases and
similar containers, specially shaped or fitted to contain a specific article or set of articles, suitable for
long-term use and presented with the articles for which they are intended, shall be classified with
such articles when of a kind normally sold therewith. This Rule does not, however, apply to containers
which give the whole its essential character;
(b) Subject to the provisions of Rule 5 (a) above, packing materials and packing containers presented
with the goods therein shall be classified with the goods if they are of a kind normally used for packing
such goods. However, this provision is not binding when such packing materials or packing
containers are clearly suitable for repetitive use.
6. For legal purposes, the classification of goods in the subheadings of a heading shall be determined
according to the terms of those subheadings and any related Subheading Notes and, mutatis mutandis,
to the above Rules, on the understanding that only subheadings at the same level are comparable. For
the purposes of this Rule the relative Section and Chapter Notes also apply, unless the context otherwise
requires.

ICAB 2024 Customs Portion 557

 Dot & Dash used in the H.S. Code system and their Rules
Heading 01.04 Live sheep and goat
Sub-heading
0104.10 – Sheep
0104.20 – Goat
HS Code
0104.10.00 – Sheep
0104.20.00 – Goat
x Rules of using Dot
x Rule-1: Dot is used to write HS Heading, Sub-heading and H.S.Code
x Rule-2: While writing HS Heading (i.e. 4 digits level) only one Dot is used after first
two digits (i.e. after chapter no.).
Example: Heading 01.04
x Rule-3: While writing H.S. Sub-heading (i.e. 6 digits level) only one Dot is used
after first four digits (i.e. after heading).
Example: Sub-heading 0104.10
x Rule-4: While writing H.S.Code (i.e. 8 digits level) one Dot is used after heading and
another one Dot is used after sub-heading
Example: H.S.Code 0104.10.00
x Rules of using Dash
x Rule-1: Dash is used to write the description of goods against HS sub-heading
and H.S.Code
Example:
x Essential oils of citrus fruit:( 3301.10) 3301.12.00 -- Of orange
x 3301.13.00 -- Of lemon 3301.19.00 -- Other
x Rule-2: Maximum 4 “Dashes” can be used.
Example:
- filtering or purifying machinery and apparatus for liquids. (8421.20)
8421.21 -- for filtering or purifying water.
8421.22 -- for filtering or purifying beverages other than water.
8421.23 -- oil or petrol filters for internal combustion engines.

558 Business Planning: Taxation & Compliance ICAB 2024

 8421.29 --- other.
(8421.21) --- for filtering or purifying water.
8421.21.10 --- Sterilizers for laboratory use.
8421.21.20 --- domestic type water purifying apparatus/machine.
8421.21.90 --- other.
(8421.21.90) --- other.
8421.21.91 --- filtering or purifying machinery to be used with swimming pools.
8421.21.92 --- Water purifying machine (industrial type).
8421.21.93 --- effluent (waste water) treatment plant.
8421.21.94 --- carbon filter, filter housing…. by IRC holder VAT…industry.
8421.21.95 --- sewage treatment plant (STP).
8421.21.99 --- other. C
H
A
x Rule-3: Change in 5th to 8th digit of H.S.Code indicates Dash. One change P
indicates one dash (-), two change two dashes (- -) and so on. T
Here change means change in ground state (00.00) to any number among 1 to 9. E
R
x Ground state in 5th to 8th digit is 00.00 (3303.00.00 Perfumes and toilet waters)
x Change in 5th digit indicates one dash
34
Example: 3305.10.00 – Shampoo
x Change in 5th and 6th digits indicate two dashes
Example: 3307.41.00 -- Agarbatti………….
x Change in 5th, 6th and 7th digits or only 7th digit indicate three dashes
Example:
8421.21.10 --- Sterilizers for laboratory use
3210.00.10 --- Paints and varnishes…….

x Change in 5th, 6th, 7th and 8th digit or 5th, 7th and 8th digit
or 7th and 8th indicate four dashes
Example:
8421.21.92 ---- Water purifying machine
2941.90.11 ---- Azithromycin (Compacted)
2501.00.91 ---- Denatured salt (coloured)

ICAB 2024 Customs Portion 559

 Session-03
Customs Valuation (Article VII of GATT)
(Including tariff value and minimum value)
Legal Provision & General Overview

Annexure-A
Customs Valuation
(Determination of Value of Imported Goods) Rules-2000
(SRO no-57-Law/2000/1821/Customs, Dt: 23.02.2000)

Annexure-B
Tariff Value and Minimum Value
(SRO no-202-Law/2024/54/Customs, Dt: 29.05.2024)

560 Business Planning: Taxation & Compliance ICAB 2024

 Session-03
Customs Valuation (Article VII of GATT)
(Including tariff value and minimum value)
Legal Provision & General Overview

ƸǍΏƾƤdž̙ƼǂӒΙ
Ƥdž̙Ƽǂ ƙƚǍƷƾ ƶdžƾdž-ǜǡƓ ʹ˴džǕǍƷƾ ƜǍʸǍΚ ƸǍΏƾ Ƥdž̙Ƽǂ ӒΙ (assessable value)Ɠ- (Ǜ) ǯƤdžǍƷdž
ƸǍΏƾƜƸƾƤdž̙Ƽǂʹ˴ƜǃdžƾӒǍΙƾLJƻLJʯǍƳƙǍƾdžƸƲLjǕǃƚǍƿƠƚƶdžƾdžƾƘΓdžΓLJƺƶdžƷƘӂƽdžǕLjLJƷͱLJƸƳƜɳ
ƸǍΏƾӒΙƚǃƚǍƺƤdž̙ƼǂӒΙƓ
C
(ǜ) ƠƚƙƚǍƷƾƘƶLjƷɛƲLjƳLJƺLJƶƘӂǂdžǍƾƽLJƵǯƤdžǍƷdžƙƼƵdžLJƷҍƳƸǍΏƾƜƸƾƤdž̙Ƽǂʹ˴ƜǃdžƾӒǍΙƾ
H
LJƻLJʯǍƳƙǍƾdžƸƲLjǕǃǕ, ƳdžǃdžǃƚǍƿǯǂƚӒΙǃƚǍƺLJƺLJƷƼǕӒΙƘƴ ȟdžӬɛҍƳƸǍɻƸLJƾǍǀdžLJƶƳƺdžƸLJƾǍǀdžƶǍƽdžΌӒΙ A
ƺdž Ɯɳ ӒǍΙƾ LJƷƤƮƳƼ LJƷͱƸƲǍƽdžΌ ǂƼҶΙ ӒΙ ǯƽ ӒǍΙ ǂћƲ ȟ ɛLJƳǍƽdžLJƦƳdžӒƿƤ Ƙƺ̝džǕ ƙˉƫȟdžLJƳƤ ƺdžLJƲƫɇ P
ɛLJɈǕdžǕƜɳƸΏƘƴƺdžƘӂͱƸƸΏƙƼƵdžLJƷƾǂƼǕƠƺƖ̝džǍƷƘƸȟǍƲƾƜǍʸǍΚǂdžƶdžƾƲƳLJƺɈǕƤƾdžǃǕƺdžLJƺɈǍǕƾ T
ɛ̜džƺƤƾdžǃǕ, ǯƽƥdžǍƷLJƺǍɈƳdžƠƺƖǯɈƳdžƾƼǍΒƠǍƤƘǍΓƾΕƺǂdžǍǕǯƤdžǍƷdž·džƴ ȟƴdžǍƤƷdžƠƺƖLJƺɈǕƺdžLJƺɈǍǕƾ E
R
ɛ̜džƺƚӒΙLJƷͱƸǍƲƾƠƤƼdžɖLJƺǍƺƩɇLJƺǁǕǃǕƓ
Εdž΋džƓ- Ơƚ ƜƸ-ƶdžƾdžƾ ƜǍʸΚӆƾƲƤǍ˾, “ƙƼƵdžLJƷƾ ̝džƷ” Ƙƴ ȟ Ƥdž̙Ƽǂ ƺˍƾ, Ƥdž̙Ƽǂ LJƺƼdžƷƺˍƾ Ƙƴƺdž
Ƥdž̙Ƽǂǯ̙ǀƷ, ǯƽƥdžǍƷƶdžƾdžǢǝƠƾƘƶLjƷƸΏǯƧdžǁƲdžLJƷƺLJːƳǃǕƓ 34

(ǝ) ǯƤdžǍƷdžƾ˖džLJƷҍƳƸΏƺdžƘӂͱƸƸΏƾ˖džLJƷƾǂƼǕǯƽӒǍΙǂћƲ ȟɛLJƳǍƽdžLJƦƳdžӒƿƤƘƺ̝džƶLjǍƷǂdžƶdžƾƲ

ƺdžLJƲƫɇɛLJɈǕdžǕLJƺɈǕƺdžLJƺɈǍǕƾɛ̜džƺƤƾdžǃǕ, ǯǂƚӒΙ, ƺdžƖƿdžǍƵǍǀƾǯƽƤdž̙Ƽǂǯ̙ǀǍƷƾƼdžΒǍƼƸΏƾ˖džLJƷ
ǃƚǍƺǯǂƚƤdž̙Ƽǂǯ̙ǀƷƸƽ ȟˉƸLJƾƺǃƷΕǕǂǃ, ǃƚǍƺƾ˖džLJƷҍƳƸǍΏƾƤdž̙ƼǂӒΙ:
ƳǍƺǀƳȟƴdžǍƤǯƽ, ǂƾƤdžƾ, ǂƾƤdžLJƾǯƦǍƫǍƮɛʗdžƸƷ͏džƾdž, ǯƤdžǍƷdžƾ˖džLJƷҍƳƸǍΏƾƾ˖džLJƷӒΙLJƷƶ ȟdžƾƲƤLJƾǍƳ
ƸdžLJƾǍƺ, ƽdžǃdž Ɯɳ LJƷƶ ȟdžLJƾƳ ӒΙ Ɯɳ ƸǍΏƾ ǯƧdžLJǁƳ ӒΙ ƘǍƸɻdž ƘLJƶƤ ǃƢǕdžƾ ǯɻǍɖ, Ɯɳ ƸǍΏƾ Ƥdž̙Ƽǂ ӒΙ
LJƷͱƸǍƲƾƜǍʸǍΚΕƺΉƳǃƚǍƺƓ
(Ǟ) ǯƤdžǍƷdžƙƼƵdžLJƷҍƳƺdžƾ˖džLJƷҍƳƸǍΏƾӒΙLJǃǂdžƺƤLJƾƺdžƾƫΓӑɘdžƾLJƺLJƷƼǕǃdžƾǃƚǍƺ, ǯƽƼdžǍǂƶdžƾdž
ǢǝƠƾƘƶLjƷƸΏǯƧdžǁƲdžLJƷƺLJːƳǃǕƜǃdžƾӆƺ ȟƺƳ̭ƼdžǍǂƾҸƳLjǕǂ˖džǍǃƾǯǀǁƤdžƽ ȟLJƵƺǍǂƾӆǍƺ ȟƾǝǚ(LJɖǀ) LJƵƺǂ
ǂƼǍǕLJƺΑƼdžƷƦǓLJƺLJƷƼǕǃdžƾƠƺƖƜɳǃdžƾǯƺdžư ȟƤҸƤȟ ƘƴƺdžƠƳҼǍʸǍΚǯƺdžư ȟƤҸƤȟ ɻƼƳdžɛdž˖ƤƼȟƤƳȟdžƤҸƤ ȟ 
LJƷƶ ȟdžƾƲƤƾdžǃƚǍƺƓ
(ǟ) Ơƚ ƶdžƾdžǕ ƽdžǃdž LJƤҜƚ ƴdž̲Ƥ Ʒdž ǯƤƷ, ǂƾƤdžƾ, ǂƾƤdžLJƾ ǯƦǍƫǍƮ ɛʗdžƸƷ ͏džƾdž, ӒΙ LJƻLJʯƤ (ad
valorem) Ƥdž̙Ƽǂ ʹ˴ ƙǍƾdžƸǍƽdžΌ ǃǕ ƠƼƷ ǯƤdžǍƷdž ƙƼƵdžLJƷҍƳ Ƙƴƺdž ƾ˖džLJƷҍƳ ƸǍΏƾ ƜƸƾ Ƥdž̙Ƽǂ ʹ˴
ƙǍƾdžƸǍƲƾƜǍʸǍΚ΍džLJƾƹӒΙƘƴƺdžӃɇƷƳƼӒΙLJƷƶ ȟdžƾƲƤLJƾǍƳƸdžLJƾǍƺ:
ƳǍƺǀƳȟƴdžǍƤǯƽƚǯɻǍɖƙƼƵdžLJƷҍƳƺdžƾ˖džLJƷҍƳǯƤdžǍƷdžƸǍΏƾǯƧdžLJǁƳӒΙƠƚƜƸƶdžƾdžƾƘƶLjǍƷLJƷƶ ȟdžLJƾƳ
΍džLJƾƹӒΙƘƴƺdžӃɇƷƳƼӒǍΙƾǯƩǍǕƘLJƶƤǃǕ, ǯǂƚǯɻǍɖƜɳƸǍΏƾƤdž̙Ƽǂʹ˴ƙǍƾdžLJƸƳǃƚǍƺƸΏɪƾǯƧdžLJǁƳ
ӒǍΙƾLJƻLJʯǍƳƓ Εdž΋džƓƠƚƶdžƾdžƾƜǍʸΚӆƾƲƤǍ˾,
(Ƥ) “LJƺLJƷƼǕǃdžƾ” ƺLJƿǍƳƺdžƖƿdžǍƵLJǀӑɘdžǰƺǍƵLJǀƤӑɘdžǕƺdžǰƺǍƵLJǀƤӑɘdžƺdžƖƿdžǍƵLJǀӑɘdžǕͱƸdžˉǍƾƾƫΓLJƺΑƼdžƷ
ƺdžƫdžƾǃdžƾƘӂƽdžǕLjLJƷƶ ȟdžLJƾƳLJƺLJƷƼǕǃdžƾǍƤӋƬdžƚǍƺ”;

ICAB 2024 Customs Portion 561

 (ƥ) “ǰƺǍƵLJǀƤӑɘdž” ƠƺƖ“ƺdžƖƿdžǍƵǀӑɘdž” ƺLJƿǍƳ Foreign Exchange Regulation Act, 1947 (Act No.
VII of 1947) ƠƽƴdžɈǍƼ "foreign currency" ƠƺƖ"Bangladesh currency" ǯƽƚƘǍƴ ȟΕƺΉƳ
ǃƚǕdžǍƪǯǂƚƘǍƴ ȟӋƬdžƚǍƺ;
Overview on Valuation of Imported or Exported Goods.
Ź Provisions relating to valuation of imported goods are contained under Section 27 of the
Customs Act 2023, read with Customs Valuation (Determination of Price of Imported Goods)
Rules, 2000 (‘Valuation Rules’). The above provisions lay down the valuation of goods under
the following 2 categories:
a) Goods on which customs duty is leviable by reference to their value – under section 27 of
the Customs Act read with Valuation Rules.
x As per rule 3(i) of Valuation Rules, the ‘Transaction Value’ of imported goods is taken
as the assessable value for computation of import duties.
‘Transaction Value’ has been defined under rule 4 of the valuation rules to mean the
price actually paid or payable for the goods when sold for export to Bangladesh (with
certain adjustments specified in rule 10 of valuation rules), subject to conditions, inter-
alia, that the buyer and seller are not related.
x In cases where the buyer and seller are related, rule 4(2) of the valuation rules provide
that the transaction value is accepted subject to the following conditions:
x Examination of the circumstances of the sale of imported goods indicate that the
relationship did not influence the price. However, in case the customs officer not below
the rank of Assistant Commissioner upon the available information consider the value has
been influenced due to the relationship then the matter will have to be solved by informing
the reasons in writing and giving a reasonable opportunity to the importer.
x the importer demonstrates that the declared value of the goods being valued with close
approximates to one of the following values ascertained at or about the same time of
import:
i. The transaction value of identical goods, or of similar goods, in sales made to
unrelated buyers in Bangladesh;
ii. The deductive value for identical goods or of similar goods;
iii. The computed value for identical goods or of similar goods.
Provided that in applying the values used for comparison due account shall be
taken of demonstrated difference in commercial levels, quantity and other
adjustments in accordance with the provisions of rule 10 and the cost incurred by
the seller in sales in which the seller and buyer are not related.
Explanation:
As per Rule 2(d) of Valuation Rules, “Related” means only those persons, who-
a) are an officer or director of another’s business;
b) are legally recognized business partner of a same business;
c) is an employer and the other is officer or employee;
d) owns 5% or more of each other’s business share directly or indirectly;
e) controls one another directly or indirectly;
f) are (both) controlled directly or indirectly by a third party;
g) jointly controls a third party directly or indirectly;
h) are sole agent or sole distributor or sole concessionaire of another’s business;
i) members of the same family.

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 x In terms of rule 3(ii) of Valuation Rules, in cases where the value cannot be determined
as per above, then the value shall be determined by proceeding sequentially through
rule 5 to rule 9 of the valuation rules, as below:

Rule 5 : Transaction value of identical goods

Rule 6 : Transaction value of similar goods
Rule 7 : Deductive value
Rule 8 : Computed value
Rule 9 : Residual Method [i.e., the value shall be etermined using reasonable
means consistent with the principles and general provisions of these rules
and on the basis of price data available in Bangladesh]

a. Goods on which customs duty is leviable based on fixed tariff value or minimum value –
under section 27(5) of the Customs Act. C
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x Section 27(5) of the Customs Act empowers the Government to fix tariff values or
A
minimum values for any goods imported or exported as chargeable with customs-duty ad
valorem. P
T
x The Government has issued Statutory Regulatory Orders (SROs) specifying the tariff E
value, minimum value and the unit of measurement of specified goods for the purpose R
of payment of customs duty. (SRO no. 202-Law/2024/54/Customs dated 29 May 2024
of IRD, MoF, GoB)
x The above section further provides that any imported or exported goods, the declared 34
value of which is higher than its tariff value fixed under the above sub- section, shall be
chargeable with customs duties on the basis of its declared value.
Thus, in case of these specified goods, the valuation for the purpose of payment of customs
duty would be the assessable value would be higher of declared value or the minimum value
and is not dependent whether the imports are made from related party or independent
buyers.

In general, duties and taxes, collected at import stage, are given below.
• Customs duty – levied on goods specified in First Schedule of Customs Act, 2023
[Bangladesh Customs Tariff]
• Regulatory duty – levied on imported goods where the rate of customs duty is 25%. In
addition, other rates are listed for specified imported goods
• Advance Income Tax (AIT) - levied on all imported goods (unless specifically exempted)
• Supplementary Duty (SD) - levied on goods imported under the 2nd Schedule of VAT &
SD Act
• Value added tax (VAT) - levied on all imported goods (unless specifically exempted)
• Advance Tax (AT) - levied on all imported goods (unless specifically exempted)
• Surcharge- levied only on tobacco and tobacco related product and Mobile phone.
However, these duties and taxes may be reduced by special duty reduction programs and
trade preferences and may be increased by amending the existing Customs Act or by means
of antidumping or countervailing duties or safeguard duties.
Note:SRO no 202-Law/2024/54/customs date: 29.05.2024 has been amended by SRO no. 238-
Law/2024/80/Customs, dated 26.06.2024. Through this amendment only TABLE-2
of SRO no 202-Law/2024 was replaced. Accordingly the SRO no 202-Law/2024 was modified and
attached below as ANNEXURE-B.

ICAB 2024 Customs Portion 563

 Session-03
Customs Valuation (Article VII of GATT)
(Including minimum value and tariff value)

Annexure-A
Customs Valuation
(Determination of Value of Imported Goods) Rules-2000
(SRO no-57-Law/2000/1821/Customs, Dt: 23.02.2000)

564 Business Planning: Taxation & Compliance ICAB 2024

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ICAB 2024 Customs Portion 565

566 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 567

568 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 569

570 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 571

572 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 573

574 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 575

 Session-03
Customs Valuation (Article VII of GATT)
(Including minimum value and tariff value)

Annexure-B
Tariff Value and Minimum Value
(SRO no-202-Law/2024/54/Customs, Dt: 29.05.2024)

576 Business Planning: Taxation & Compliance ICAB 2024

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ICAB 2024 Customs Portion 577

578 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 579

580 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 581

582 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 583

584 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 585

586 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 587

588 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 589

590 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 591

592 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 593

 Session-04
Exemption of Duties & Taxes on Import of Capital
Machinery, Construction Material and Raw Material
Legal Provision & General Overview
Annexure-C
Exemption of duties & taxes on import of machinery and parts or
both (General)

(SRO no-162-Law/2024/14/Customs, Dt: 29.05.2024

Annexure-D
Exemption of duties & taxes for the organizations situated at EPZ on
import of machinery, parts & construction material

(SRO no-56-Law/2017/Customs, Dt: 14.03.2017

Annexure-E
Exemption of duties & taxes for the organizations situated at EZ on
import of machinery, parts & construction material

(SRO no-184-Law/2024/Customs, Dt: 29.05.2024

Annexure-F
Exemption of duties & taxes for the organizations situated at High-
tech Park on import of machinery, parts & construction material

(SRO no-187-Law/2024/Customs, Dt: 29.05.2024

Annexure-G
Exemption of duties & taxes on importation of raw material (General)

(SRO no-164-Law/2024/16/Customs, Dt: 29.05.2024

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ICAB 2024 Customs Portion 595

596 Business Planning: Taxation & Compliance ICAB 2024
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Session-04 H
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Exemption of Duties & Tasex on Import P
of Capital Machinery and Raw Material T
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R

Annexure-C
34
Exemption of duties & taxes on import of machinery and
parts or both (General)

(SRO no-162-Law/2024/14/Customs, Dt: 29.05.2024)

ICAB 2024 Customs Portion 597

598 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 599

600 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 601

602 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 603

604 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 605

606 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 607

 Session-04
Exemption of Duties & Tasex on Import
of Capital Machinery and Raw Material

Annexure-D
Exemption of duties & taxes for the organizations
situated at EPZ on import of machinery, parts &
construction material

(SRO no-56-Law/2017/Customs, Dt: 14.03.2017)

Including SRO’s by which above SRO was amended

608 Business Planning: Taxation & Compliance ICAB 2024

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H
A
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ICAB 2024 Customs Portion 609

610 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 611

612 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 613

614 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 615

616 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 617

618 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 619

620 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 621

622 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 623

 Session-04
Exemption of Duties & Tasex on Import
of Capital Machinery and Raw Material

Annexure-E
Exemption of duties & taxes for the organizations
situated at EZ on import of machinery, parts &
construction material

(SRO no-184-Law/2024/Customs, Dt: 29.05.2024)

Including SRO’s by which above SRO was amended

624 Business Planning: Taxation & Compliance ICAB 2024

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ICAB 2024 Customs Portion 625

626 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 627

 Session-04
Exemption of Duties & Tasex on Import
of Capital Machinery and Raw Material

Annexure-F
Exemption of duties & taxes for the organizations
situated at High-tech Park on import of machinery,
parts & construction material

(SRO no-187-Law/2024/39/Customs, Dt: 29.05.2024)

Including SRO’s by which above SRO was amended

628 Business Planning: Taxation & Compliance ICAB 2024

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ICAB 2024 Customs Portion 629

630 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 631

 Session-04
Exemption of Duties & Tasex on Import
of Capital Machinery and Raw Material

Annexure-G
Exemption of duties & taxes on importation of raw
Material (General)

(SRO no-164-Law/2024/16/Customs, Dt: 29.05.2024)

632 Business Planning: Taxation & Compliance ICAB 2024

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ICAB 2024 Customs Portion 633

634 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 635

636 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 637

638 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 639

640 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 641

642 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 643

644 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 645

646 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 647

648 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 649

650 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 651

652 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 653

 Session-05 & 06
Warehousing System in Bangladesh
Legal Provision & General Overview
Annexure-H
100% Export Oriented Industries (except RMG) (Temporary Importation….) Rules-2024

(SRO no-212-Law/2024/64/Customs Dt: 2 9 .05.2024

Including SRO’s by which above SRO was amended

Annexure-I
100% Export Oriented RMG Industries (Temporary Importation….) Rules-2024

(SRO no-213-Law/2024/65/Customs Dt: 2 9 .05.2024

Including SRO’s by which above SRO was amended

Annexure-J
Warehouse Licencing Rules-2024
(SRO no-209-Law/2024/61/Customs Dt: 2 9 .05.2024
Including SRO’s by which above SRO was amended

Annexure-K
General Bond Rules-2024
(SRO no-210-Law/2024/62/Customs Dt: 2 9 .05.2024
Annexure-L
Time to Keep Goods in Warehouse Rules-2024
(SRO no-211-Law/2024/63/Customs Dt: 2 9 .05.2024
Annexure-M
Annual Import Entitlement Rules-2024
(SRO no-214-Law/2024/66/Customs Dt: 2 9 .05.2024
Including SRO’s by which above SRO was amended

654 Business Planning: Taxation & Compliance ICAB 2024

 Session-05 & 06
Warehousing System in Bangladesh
General Overview

Warehouse facility, applicability and terms and conditions

As per Warehouse Licensing Rules, 2024 (SRO no.-209-Law/2024/61/Customs, dated 29 May 2024
of NBR), the following enterprises can obtain Warehouse License or Bond Registration.

Direct export oriented industry.

Deemed export oriented industry.
Diplomatic, Duty Free, Duty Paid bond and Commishariate. C
Direct and deemed export oriented industry located at government or private Export Processing H
A
Zones (EPZ).
P
Direct and deemed export oriented industry established at Export Processing Area and Domestic T
commercial Processing Area of the Economic Zone. E
Direct and deemed export oriented industry established at High Tech Park R

In order to avail the warehousing facility, interested enterprises will have to obtain a Warehouse
License from the Commissioner of Customs (Bond) or any other Commissioner of Customs. To obtain
34
a warehouse license, applicants need to fill up a bond license application form and submit the same
with necessary documents and application fee to the respective Commissionerate.
Warehouse facilities are subject to yearly import entitlement. Yearly import entitlement is allowed
based on production capacity of capital machinery and previous year’s performance (i.e., export and
usage of raw materials) of the warehouse keeper.

The validity of the license will be 03 (three) years from the date of its issuance. While audit of the
company shall be completed in every year.

In case of import of materials under general bond

Upon execution of General Bond and after obtaining the license, the company will be able to import
raw materials without paying duties and taxes, keep the raw material in warehouse, use and export
the finished product. According to the types of warehouse License, the value of General Bond will be
-

General Bond of BDT 10,000,000 for deemed exporter;

eneral Bond of BDT 30,000,000 for direct exporter;
General Bond of BDT 30,000,000 for both direct and deemed exporter; and
General Bond of BDT 30,000,000 for diplomatic, duty free, duty paid and Commishariate.

Provided that licensing authority may increase the value of General Bond with the purview of import
and export, if necessary.

ICAB 2024 Customs Portion 655

 Ź Utilization Declaration (UD)/Utilization Permission (UP)

Utilization Declaration (UD) is the declaration of use of raw materials, where Utilization
Permission (UP) is the permission of use of raw materials.

In case of export oriented readymade garments industry, the UD is issued by Bangladesh

Garments Manufacturers and Exporters Association (BGMEA) and Bangladesh Knit
Manufacturers and Exporters Association (BKMEA).
Plastic goods (goods under related heading of Chapter 39 of the First Schedule of The Customs
Act, 2023) are being manufactured by members of Bangladesh Plastic Goods Manufacturers and
Exporters Association (BPGMEA) and Paper carton and other plastic goods (products under
related heading of Chapter 39 and 48 of the First Schedule of The Customs Act, 2023) are being
manufactured by members of Bangladesh Garments Accessories & Packaging Manufacturers &
Exporters Association (BGAPMEA).

In case of other export oriented industries, the UP is issued by the Customs Bond
Commissionerate or concerned VAT Commissionerate.

656 Business Planning: Taxation & Compliance ICAB 2024

 Session-05 & 06
Warehousing System in Bangladesh
Legal Provisions

ƢǕɇdžƾǃdžƜLJǂƖ
ǛǛƓ ǂƾƤdžLJƾ ƢǕɇdžƾǃdžƜǂ LJƷƶ ȟdžƾƲƓ ƤLJƼǀƷdžƾ Ƙƺ Ƥdž̙Ƽǂ (ƺ˅) Ƙƴƺdž ǯƺdžư ȟ ƤҸƤ
ȟ  ɻƼƳdžɛdž˖ ǯƤdžǍƷdž
ƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ, ǂƼǕǂƼǕ, ǯƽǯƤdžǍƷdžƢǕɇdžƾǃdžƜLJǂƖǯ̙ǀƷǍƤǂƾƤdžLJƾƢǕɇdžƾǃdžƜǂLJƷƶ ȟdžƾƲƤLJƾǍƳ
ƸdžLJƾǍƺ, ǯƽ̝džǍƷʹ˴ƙǍƾdžƸǍƽdžΌƸΏƤdž̙Ƽǂʹ˴ƸLJƾǍǀdžƶΕLJƳǍƾǍƤƫƼdžƾdžƥdžƽdžƚǍƺƓ
C
ǛǜƓǯƺǂƾƤdžLJƾƢǕɇdžƾǃdžƜǍǂƾƿdžƚǍǂ˓ɛƵdžƷ, ̝LJƦƳ, ƺdžLJƳƿ, ƚƳɇdžLJƵƓ- (Ǜ) ƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ (ƺ˅) Ƙƴƺdž
H
ǯƺdžư ȟƤҸƤ
ȟ ɻƼƳdžɛdž˖ǯƤdžǍƷdžƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ, ƜƸ-ƶdžƾdž(ǜ) ƠƾLJƺƶdžƷǂdžǍƸǍɻ, ǯƤdžǍƷdžƢǕɇdžƾǃdžƜLJǂƖǯ̙ǀǍƷ, A
ǯƤdžǍƷdžƻƺƷƺdžƻƺǍƷƾƘƖǀLJƺǍǀǁƺdžƙƺʺǯƤdžǍƷdž̝džƷǍƤ(enclosure), LJƷ˨ƺLJƲ ȟƳƜǍʸǍΚǯƺǂƾƤdžLJƾƢǕɇdžƾǃdžƜǂ P
LJǃǂdžǍƺƸLJƾƩdžƿƷdžƾƫΓƿdžƚǍǂ˓ɛƵdžƷƤLJƾǍƳƸdžLJƾǍƺƷ, ƽƴdž:- T
E
(Ƥ) ƿdžƚǍǂLJ˓ƤҸƤ
ȟ ƺdžƳdžǃdžƾƸǍɻƙƼƵdžLJƷҍƳʹ˴ƙǍƾdžƸǍƽdžΌƸΏƼҟƵƾdžƥdž; R
(ƥ) ǂƾƤdžLJƾƢǕɇdžƾǃdžƜǍǂƼҟƵƾdžLJƥƺdžƾƼƳӟLJƺƶdžƷdžƚƠƚͱƸǯƽǯƤdžǍƷdžƙƼƵdžLJƷҍƳƸΏƼҟƵƾdžƥdž;
Ƙƴƺdž
34
(Ʀ) ƙƼƵdžLJƷҍƳʹ˴ƙǍƾdžƸǍƽdžΌƸΏǃƚǍƳǂћƲ ȟƺdžƙƖLJǀƤƻdžǍƺƸΏɛLJɈǕdžƤƾƲƺdžɛͼƳƤƾdžƓ

(ǜ) ƠƚƶdžƾdžƾƜǍʸΚӆƾƲƤǍ˾LJƷ˨ƺLJƲ ȟƳLJƺǁǍǕLJƺLJƶɛƲǕƷƤƾdžƽdžƚǍƺ, ƽƴdž:-

(Ƥ) ǯƺǂƾƤdžLJƾƢǕɇdžƾǃdžƜǍǂƾƿdžƚǍǂ˓ƼИƾƢǯƺǂƾƤdžLJƾƢǕɇdžƾǃdžƜǍǂƾΕƺ̝džƸƷdž;
(ƥ) ǯƺǂƾƤdžLJƾ ƢǕɇdžƾǃdžƜǍǂƾ ƸLJƾƩdžƿƷdž Ƣ Ɯǃdžƾ ɛҍLJƳ ƠƺƖ ƢǕɇdžƾǃdžƜǍǂ ƼҟƵǍƽdžΌ ƸǍΏƾ ƜƸƾ ǀƳȟ,
ǂLjƼdžƺʺƳdžƺdžLJƺLJƶLJƷǍǁƶ; ƠƺƖ
(Ʀ) ƢǕɇdžƾǃdžƜǍǂƾƙƼƵdžLJƷɛdžΔƳdžƓ

(ǝ) ƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ (ƺ˅) ƺdžǯƺdžư ȟƤҸƤ

ȟ ɻƼƳdžɛdž˖ƘΓǯƤdžǍƷdžƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ, Ơƚ ƶdžƾdžƾƘƶLjƷ
ɛdž˖ƿdžƚǍǂLJ˓ǍƤƢǕɇdžƾǃdžƜǍǂƼҟƵҍƳƸǍΏƾƜƸƾƙǍƾdžƸƲLjǕʹ˴ƢƤƾƸLJƾǍǀdžƶLJƷLJ̃ƳƤLJƾƺdžƾƜǍʸǍΚ, ΌdžƾdžLJ˂
ɛƵdžǍƷƾƫΓLJƷǍƵ ȟǀɛƵdžƷƤLJƾǍƳƸdžLJƾǍƺƷƓ

(Ǟ) ƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ (ƺ˅) ƺdžǯƺdžư ȟƤҸƤ

ȟ ɻƼƳdžɛdž˖ƘΓǯƤdžǍƷdžƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ, ƜƸ-ƶdžƾdž(Ǜ) Ơƾ
ƘƶLjƷɛƵʯƿdžƚǍǂ˓LJƷ˨ƺLJƲ ȟƳǯƽǯƤdžǍƷdžƤdžƾǍƲ̝LJƦƳƺdžƺdžLJƳƿƤLJƾǍƳƸdžLJƾǍƺƷ, ƽƴdž:-
(Ƥ) ƿdžƚǍǂLJ˓ƠƚƙƚƷƺdžƳƵƶLjƷɛƲLjƳLJƺLJƶƾǯƤdžǍƷdžLJƺƶdžƷƺdžƿdžƚǍǂǍ˓ƾǯƤdžǍƷdžǀƳȟƻʊƤLJƾǍƿ; ƺdž
(ƥ) ƫƷ·džǍƴ ȟǯƤdžǍƷdžƿdžƚǍǂ˓̝LJƦƳƺdžƺdžLJƳƿƤƾdžƜƸӔɳLJƺǍƺLJƩƳǃƚǍƿƓ

(ǟ) ƜƸ-ƶdžƾdž(Ǟ) ƠƾƵƹdž(ƥ) ƠƾƘƶLjƷƿdžƚǍǂ˓̝LJƦǍƳƾǯɻǍɖ, LJƺǁǕɪLJƷ̑LJʯƷdžǃƢǕdžƸƽ ȟˉƿdžƚǍǂLJ˓ǍƵƾ

Ƙӂ̳ǍƿǂƖLJ̈̌ƙƚǍƷƾƘƶLjƷƚӟɇҍƳΕƺǂdžǀƷdžɳƤƾƲƷͯƾ(LJƺƙƚƠƷ) ̝LJƦƳƴdžLJƤǍƺƓ

(Ǡ) ƜƸ-ƶdžƾdž(Ǟ) ƠƾƘƶLjƷƿdžƚǍǂ˓̝LJƦƳ ƺdžƺdžLJƳƿƤƾdžǂǍʮƢ, ǯƤdžǍƷdžƿdžƚǍǂLJ˓ƾLJƷƤƮƠƚƙƚǍƷƾƘƶLjƷ

ǯƤdžǍƷdžǂƾƤdžLJƾƸdžƢƷdžƴdžLJƤǍƿ, ƜɳƸdžƢƷdžƙƵdžǕƤdžƽ ȟɈƼƘΕdžǃƳƴdžLJƤǍƺƓ

ICAB 2024 Customs Portion 657

 ǛǚǢƓƤdž̙ƼǂƢǕɇdžƾǃdžƜLJǂƖƸʺLJƳƓ– ƠƚƘΒdžǕƠƺƖƳƵƶLjƷɛƲLjƳLJƺLJƶƾƘƶLjƷƙƺΚƤƳdž, ǀƳȟdžƺLJƿƢLJƺLJƶ-
LJƷǍǁƶƠƺƖƸΏǯƧdžǁƲdžƢƪdžǍǓƾƫΓɛǍǕdžƫƷLjǕƙӂ̎džLJƷƤƳdžǂ˫džƵƷǂdžǍƸǍɻ, ƙƼƵdžLJƷҍƳƸΏ, ƠƚƘΒdžǍǕƾ
ƘƶLjƷɛƵʯǯƤdžǍƷdžƜǍʸǍΚƤdž̙ƼǂƢǕɇdžƾǃdžƜLJǂƖƸʺLJƳƾƘƶLjƷ, ƙƼƵdžLJƷʹ˴ƢƤƾƸLJƾǍǀdžƶΕƳLjƳǯƽǯƤdžǍƷdž
ƢǕɇdžƾǃdžƜǍǂΓ̜ƤƾdžƽdžƚǍƺƓ
ǛǚǣƓƢǕɇdžƾǃdžƜLJǂƖƺ˅Ɠ- (Ǜ) ƠƚƙƚǍƷƾƘΓdžΓLJƺƶdžǍƷƽdžǃdžLJƤҜƚƴdž̲ƤƷdžǯƤƷ, ƢǕɇdžƾǃdžƜǂƸʺLJƳƾƘƶLjƷ
ǯƤdžǍƷdžƸΏΓ̜ƤLJƾƺdžƾǯɻǍɖǂƖLJ̈̌ƙƼƵdžLJƷƤdžƾƤ, ƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ (ƺ˅) ƺdžƠƳҼǍʸǍΚɻƼƳdžɛdž˖ƘΓ
ǯƽǯƤdžǍƷdžƤLJƼǀƷdžƾǂƖLJ̈̌ƙƼƵdžLJƷƤdžƾƤǍƤǯƽͱƸLJƷƶ ȟdžƾƲƤLJƾǍƺǯǂƚͱƸƸLJƾƼdžƲƘƴ ȟ, ǀƳȟƢǂLjƼdžƺdžLJƺLJƶ-LJƷǍǁƶ
ǂdžǍƸǍɻƠƤɪǂdžƶdžƾƲƺ˅ƵdžLJƥƿƤLJƾǍƺƷƓ
(ǜ) ƠƚƶdžƾdžƾƘƶLjƷǯƤdžǍƷdžƙƼƵdžLJƷƤdžƾƤƤҸȟƤǯƤdžǍƷdžƸǍΏƾǯɻǍɖǂ˫džLJƵƳƺ˅ƜɳƸΏƘΓǯƤdžǍƷdžΕLJɳƾLJƷƤƮ
ǃ̜džˉƾƺdžƜǃdžƘΓƢǕɇdžƾǃdžƜǍǂƘƴƺdžƢǕɇdžƾǃdžƜLJǂƖǯ̙ǀǍƷƘƸǂdžƾƲƤƾdžǂǍʮƢƤdžƽ ȟƤƾƴdžLJƤǍƺ:

ƳǍƺǀƳȟ ƴdžǍƤǯƽ, ǯƽǯɻǍɖǂƤƿƸΏƺdžƜǃdžƾƘƖǀLJƺǍǀǁƘΓΕLJɳƾLJƷƤƮǃ̜džˉƾƤƾdžǃǕ, ǯǂƚǯɻǍɖ

ƽƴdžƽƴƤƼȟƤƳȟdžǃ̜džˉƾɊǃƲƤdžƾLjΕLJɳƾLJƷƤƮǃƚǍƳƠƤɪӃƳƷƺ˅ɊǃƲƤLJƾǍƳƸdžLJƾǍƺƷƠƺƖƘƳƗƸƾǃ̜džˉƾ
ɊǃƲƤdžƾLjΕLJɳƤҸƤ ȟ ӃƳƷǂ˫džLJƵƳƺǍ˅ƾǂƼƸLJƾƼdžƲƵdžǕǃƚǍƳǃ̜džˉƾɊǃƲƤdžƾLjΕLJɳƤҸƤ
ȟ ǂ˫džLJƵƳƺ˅Ƙƺӑɳ
ǃƚǕdžǍƪƺLJƿǕdžƦΏǃƚǍƺƓ
ǛǛǚƓƢǕɇdžƾǃdžƜLJǂƖΕdžƖƤΌdžƾdžLJ˂Ɠ- ƢǕɇdžƾǃdžƜLJǂƖƠƾƫΓƸΏƥdžƿdžǂǂ˫LJƤȟƳƺ˅ǂ˫džƵǍƷƾLJƺǁǍǕƠƚ
ƙƚǍƷƾ ƘΓdžΓ LJƺƶdžǍƷ ƽdžǃdž LJƤҜƚ ƴdž̲Ƥ Ʒdž ǯƤƷ, ǯƺdžư ȟ Ƙƴƺdž ǯƺdžư ȟ ǃƚǍƳ ƠƳίLJƺǁǍǕ ɻƼƳdžɛdž˖ ƤLJƼǀƷdžƾ Ƙƺ
Ƥdž̙Ƽǂ, ƺ˅ƵdžLJƥǍƿƾƘLJƳLJƾɳΕƺ̝džLJǃǂdžǍƺƸǍΏƾƜƸƾƙǍƾdžƸƲLjǕʹǍ˴ƾƘƷLJƶƤƸLJƾƼdžƲƘǍƴ ȟƾƫΓLJƷƶ ȟdžLJƾƳ
ƸʺLJƳǍƳΕdžƖƤΌdžƾdžLJ˂ɛƵdžƷƤLJƾƺdžƾLJƷǍƵ ȟǀ ɛƵdžƷƤLJƾǍƳƸdžLJƾǍƺƷƓ
ǛǛǛƓ ƢǕɇdžƾǃdžƜǍǂ ƸΏ ǯɛƾƲƓ- ǂƖLJ̈̌ ƙƼƵdžLJƷƤdžƾƤ ǯƺdžư ȟ ƤҸƤ
ȟ  ƫdžƾLjҍƳ ƠƳƵ&ǂƖɈdžˉ LJƺLJƶƾ LJƺƶdžƷƼǍƳ
ƢǕɇdžƾǃdžƜLJǂƖƠƾƫΓƥdžƿdžǂҍƳƸΏǯƽƢǕɇdžƾǃdžƜǍǂƫƼdžɛƵdžǍƷƾƫΓLJƷƶ ȟdžLJƾƳǃƚǍƺǯǂƚƢǕɇdžƾǃdžƜǍǂƸΏƫƼdž
ɛƵdžƷLJƷLJ̃ƳƤLJƾǍƺƷƓ
ǛǛǜƓ ƢǕɇdžƾǃdžƜǍǂ ƸΏ ɊǃƲƓ- ǯƺdžư ȟ ƤҸƤ
ȟ  LJƷƶ ȟdžLJƾƳ Ƥdž̙Ƽǂ ƢǕɇdžƾǃdžƜǂ ƸʺLJƳ ɛLJƳƸdžƿƷӆƺ ȟƤ ƢǕɇdžƾǃdžƜǂ
ȟ ƸΏɊǃƲ, ǂƖƾɻƲƢǃɇdž˅LJƿƖƠƾƤdžƽ ȟɈƼǂ˫džLJƵƳǃƚǍƺƓ
ƾɻƤƤҸƤ
ǛǛǝƓƢǕɇdžƾǃdžƜǍǂƾLJɻƳƸǍΏƾƜƸƾLJƷǕˈƲƓ- (Ǜ) ƢǕɇdžƾǃdžƜǂҍƳǂƤƿƸΏƽƴdžƽƴƤƼȟƤƳȟdžƾLJƷǕˈǍƲƴdžLJƤǍƺƓ

(ǜ) Ƥdž̙Ƽǂ ƺ˅ ƤLJƼǀƷdžǍƾƮ, Ƥdž̙Ƽǂ ǯƦdžǍǕˍdž Ƣ ƳƵˉƘLJƶƵ˖ƾ ƺdž Ƥdž̙Ƽǂ ӒΙdžǕƷ Ƣ ƘƻɇˉƾLjƲLJƷƾLjɻdž
ƤLJƼǀƷdžǍƾǍƮƾƘɇdžLJǂ̙ɇdž˂ƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ ƸƵƼƽ ȟdžƵdžƾLJƷǍ˨ƷǍǃƷƠƚͱƸǯƤdžǍƷdžƤƼȟƤƳȟdžǯƤdžǍƷdžƢǕɇdžƾǃdžƜǍǂƾ
ǯƽǍƤdžǍƷdžƘƖǍǀɛǍƺǀƠƺƖƜǃdžǍƳƾLJɻƳƸΏ, ǯƾƤư ȟ, LJǃǂdžƺƸɖƠƺƖƵLJƿƿƸɖƸƾLjɻdžƤLJƾǍƳƸdžLJƾǍƺƷƓ
ǛǛǞƓƢǕɇdžƾǃdžƜǍǂƾLJɻƳΔdžǍƤƫǯƥdžƿdžƠƺƖƸƾLjɻdžƤLJƾƺdžƾɻƼƳdžƓ- (Ǜ) ƽƴdžƽƴƤƼȟƤƳȟdžǯƽǯƤdžǍƷdžǂƼǍǕ
LJƿLJƥƳƙǍƵǀ͏džƾdžLJƷǍƵ ȟǀɛƵdžƷƤLJƾǍƳƸdžLJƾǍƺƷǯƽ, ǯƤdžǍƷdžƢǕɇdžƾǃdžƜǍǂǂƖƾLJɻƳǯƤdžǍƷdžƸΏƺdžΔdžǍƤƫǯƥdžƿdž,
ƢƫƷƤƾdžƺdžƸƾLjɻdžƤƾdžǃƚǍƺ, ƠƺƖƜɳǯƤdžǍƷdžƸΏƠƚͱǍƸǯƥdžƿdž, ƢƫƷƤƾdžƺdžƸƾLjɻdžƤLJƾƺdžƾƸƾƜǃdžLJƳLJƷ
ǯƽͱƸƜƸӔɳƼǍƷƤLJƾǍƺƷǯǂƚͱƸƻdžǍƺLJǂƿӔɳƘƴƺdžƼdžƤȟӔɳƤƾdžƚǍƳƸdžLJƾǍƺƷƓ
(ǜ) ǯƤdžǍƷdžƸΏƸƾLjɻdžƾƸƾƜɳͱƸLJǂƿӔɳƺdžƼdžƤȟӔɳƤƾdžǃƚǍƿƜǃdžƽƴdžƽƴƤƼȟƤƳȟdžƾƘӂƼLJƳΕLJƳǍƾǍƤ
ӅƷƾdžǕǯƥdžƿdžƽdžƚǍƺƷdž, ƠƺƖƠƚͱƸƘӂƼLJƳɈǍƼƜɳƸΏǯƥdžƿdžǃƚǍƿLJƳLJƷƽLJƵƜƸӔɳƼǍƷƤǍƾƷ, ƳdžǃdžǃƚǍƿ
ΔdžǍƤƫǂӒǃӅƷƾdžǕLJǂƿӔɳƘƴƺdžƼdžƤȟӔɳƤLJƾƺdžƾΕƺ̝džƤLJƾǍƺƷƓ

658 Business Planning: Taxation & Compliance ICAB 2024

 ǛǛǟƓƢǕɇdžƾǃdžƜǍǂƾLJɻƳƸǍΏƾƼdžLJƿǍƤƾƢǕɇdžƾǃdžƜǍǂɛǍƺǀdžLJƶƤdžƾƓ- ƽƴdžƽƴƤƼȟƤƳȟdžƾƘӂƼLJƳɈǍƼƘLJƹǂ
ƩƿdžƤdžƿLjƷǯƽǯƤdžǍƷdžǂƼǍǕƠƤƫƷƤdž̙ƼǂƤƼȟƤƳȟdžƾƜƸLJ̝LJƳǍƳƢǕɇdžƾǃdžƜǍǂǂƖƾLJɻƳƸǍΏƾƼdžLJƿǍƤƾƸǍΏƾ
LJƷƤƮƽdžƢǕdžƾɛǍƺǀdžLJƶƤdžƾƴdžLJƤǍƺƠƺƖƽƴdžƽƴƤƼȟƤƳȟdžƾLJƷƤƮƠƳҼǍʸǍΚLJƿLJƥƳƻdžǍƺƙǍƺƵƷƤƾdžǃƚǍƿƠƤƫƷ
Ƥdž̙ƼǂƤƼȟƤƳȟdžǍƤƜɳƼdžLJƿǍƤƾǂʊLjǃƢǕdžƾƫΓLJƷǍǕdžƦƤƾdžƽdžƚǍƺƓ

ǛǛǠƓƢǕɇdžƾǃdžƜǂҍƳƸǍΏƾƼdžLJƿǍƤƾΕƺ̝džɊǃǍƲƾɻƼƳdžƓ- (Ǜ) ƽƴdžƽƴƤƼȟƤƳȟdžƾƘӂǍƼdžƵƷɈǍƼ, LJƺLJƶ͏džƾdž

LJƷƶ ȟdžLJƾƳƸʺLJƳǍƳ, LJƹƸLJƾǍǀdžƶƤLJƾǕdžǯƤdžǍƷdžƸǍΏƾƼdžLJƿƤƜǃdžƢǕɇdžƾǃdžƜǂƤƾǍƲƾӆǍƺ ȟƺdžƸǍƾ-
(Ƥ) ɻLJƳɊ̜ƺdžƘƺƷLJƳɊ̜ƸΏƘƺLJǀ̌ƸΏǃƚǍƳӇƴƤƤLJƾǍƳƸdžLJƾǍƺƷ;
(ƥ) ƸǍΏƾǂƖƾɻƲ, LJƺɈǕ, ƾ˖džLJƷƘƴƺdžΕƺLJ̝ƳƤLJƾƺdžƾƜǍʸǍΚƸΏƺdžƪdžƚƤLJƾǍƳƺdžƜǃdžƾƸdžɖƸLJƾƺƳȟƷ
ƤLJƾǍƳƸdžLJƾǍƺƷ;
(Ʀ) ƸǍΏƾƘƺƩǕ, ƘƺƷLJƳƘƴƺdžɻLJƳǯƾdžƶƤLJƾƺdžƾƫΓǯƽͱƸɛǍǕdžƫƷǃǕǯǂƚͱƸƸʺLJƳǍƳƸΏƠƺƖ C
ƜǃdžǍƵƾƙƶdžǍƾƾ(container) LJƺǁǍǕΕƺ̝džɊǃƲƤLJƾǍƳƸdžLJƾǍƺƷ; H
A
(Ƨ) LJƺɈǍǕƾƫΓƸΏɛƵǀȟƷƤƾdžƚǍƳƸdžLJƾǍƺƷ; ƺdž P
T
(ƨ) ƽƴdžƽƴƤƼȟƤƳȟdžǯƽͱƸƘӂǍƼdžƵƷƤǍƾƷƸǍΏƾǯǂƚͱƸǯƤdžǍƷdžƷӑƷdžǯƵǀLjǕǯƻdžǍƦƾƫΓƸΏǯƧdžǁƲdž
E
ƵdžLJƥƿƘƴƺdžǯƧdžǁƲdžΕƳLjƳƠƺƖʹ˴ƸLJƾǍǀdžƶӆƺ ȟƤƘƴƺdžƸLJƾǍǀdžƶΕƳLjƳ, ƳǍƺӒƿƸLJƾƼdžǍƲƾƧdžƮLJƳƾ R
ƜƸƾǯǀǁƸƽ ȟˉɛǍƵǕǃƚǍƿƜǃdžƾʹ˴ƸLJƾǍǀdžƶӆƺ ȟƤ, ɊǃƲƤLJƾǍƳƸdžLJƾǍƺƷƓ

(ǜ) ǯƤdžǍƷdžƸΏƜɳͱƸӇƴƤҍƳƠƺƖƽƴdžƽƴƘƴƺdžƘӂǍƼdžLJƵƳΔdžǍƤǍƫӅƷƗΔdžǍƤƮƫdžƳƤLJƾƺdžƾƸƾƜɳ 34
ƸǍΏƾƼdžLJƿǍƤƾƘӂǍƾdžƶɈǍƼƜƸӔɳƤƼȟƤƳȟdžƠƚƻdžǍƺӇƴΞƤƾƲƘƴƺdžӅƷƗΔdžǍƤƮƫdžƳƤƾǍƲƾƸǍƾǯƤdžǍƷdžƺƫȟɇ,
ɻLJƳɊ̜ƘƴƺdžƜ͏NjʯƸΏƘƺLJǀ̌ƴdžLJƤǍƿƜǃdž, ƘƴƺdžƘӂͱƸƘӂǍƾdžƶɈǍƼ, ʹ˴ƙǍƾdžǍƸƾƜƸǍƽdžƦLjƷǍǃƠƚͱƸǯƤdžǍƷdž
ƸΏ, ͓ƖǂƤLJƾƺdžƾΕƺ̝džɊǃƲƤLJƾǍƳƘƴƺdžƘӂƼLJƳɛƵdžƷƤLJƾǍƳƸdžLJƾǍƺƷ, ƠƺƖƜǃdžƾƜƸƾɛǍƵǕʹ˴ƼƢ̲ƹ
ƤLJƾǍƳƸdžLJƾǍƺƷƓ

ǛǛǡƓƢǕɇdžƾǃdžƜǍǂƾLJɻƳƸǍΏƾɛͼƳƤƾƲƠƺƖƘΓdžΓƤdžƽ ȟɈƼƓ- (Ǜ) LJƺLJƶƠƺƖƶdžƾdžǛǜƠƾƙƢƳdžǕƚӟɇҍƳ

ƿdžƚǍǂǍ˓ƾ ǀƳȟɛLJƳƸdžƿƷǂdžǍƸǍɻ, ǯƤdžǍƷdžƢǕɇdžƾǃdžƜǂҍƳƸǍΏƾƼdžLJƿƤƜɳƸΏ͏džƾdžǯƤdžǍƷdžɛͼƳƤƾƲɛLJɈǕdžƺdž
ƘΓƤdžƽ ȟɈƼƸLJƾƩdžƿƷdžƤLJƾǍƳƸdžLJƾǍƺƷƓ

(ǜ) ǯƽǍɻǍɖ ƜƸ-ƶdžƾdž (Ǜ) Ơƾ ƘƶLjƷ ƸLJƾƩdžLJƿƳ Ƥdžƽ ȟɈƼ Ƙƴƺdž ɛLJɈǕdžǕ ƸǍΏƾ ǯƤdžǍƷdž ƘƸƩǕ ƺdž ƺƫȟɇ ǃǕ
ǯǂƚǍɻǍɖ LJƷ˨ƺLJƲ ȟƳLJƺƶdžƷdžƺLJƿɛǍƽdžƫɇǃƚǍƺ, ƽƴdž:-
(Ƥ) ƽLJƵƜɳƤdžƽ ȟɈƼƘƴƺdžɛLJɈǕdž͏džƾdžƜӬƸdžLJƵƳƸǍΏƾǂћƲ ȟƺdžƙƖLJǀƤƾ˖džLJƷƤƾdžǃǕƳdžǃdžǃƚǍƿ
ƾ˖džLJƷҍƳƸǍΏƾǯɻǍɖƸLJƾƩdžLJƿƳƤdžƽ ȟɈƼƘƴƺdžɛLJɈǕdžǕǯƽƸLJƾƼdžƲƢǕɇdžƾǃdžƜǂҍƳƸΏƘƸƩǕƺdž
ƺƫȟɇǃƚǕdžǍƪƜǃdžƾƫΓǯƤdžǍƷdžʹ˴ƙǍƾdžƸƤƾdžǃƚǍƺƷdž:
ƳǍƺǀƳȟƴdžǍƤǯƽ, ƜɳƘƸƩǕƺdžƺƫȟɇ͓ƖǂƤLJƾǍƳǃƚǍƺLJƤƖƺdžƜǃdžǍƵƾƜƸƾʹ˴ƸLJƾǍǀdžƶƤLJƾǍƳ
ǃƚǍƺ, ǯƽƷƜǃdžƜɳƘƺ̝džǕƺdžƖƿdžǍƵǍǀƙƼƵdžLJƷƤƾdžǃƚǕdžǍƪ;
(ƥ) ƽLJƵƜɳƤdžƽ ȟɈǍƼƘƴƺdžɛLJɈǕdžǕƜӬƸdžLJƵƳƸǍΏƾǂћƲ ȟƺdž ƙƖLJǀƤǯƵǀLjǕǯƻdžǍƦƾƫΓƢǕɇdžƾǃdžƜǂ
ǃƚǍƳƥdžƿdžǂƤƾdžǃǕ, ƳdžǃdžǃƚǍƿǯƵǀLjǕǯƻdžǍƦƾƫΓƜɳƸǍΏƾǯƽƸLJƾƼdžƲƥdžƿdžǂƤƾdžǃǕƳdžǃdžƾ
ƜƸƾ, ƠƺƖƢǕɇdžƾǃdžƜǂҍƳƸǍΏƾǯɻǍɖLJƺLJƶ͏džƾdžLJƷƶ ȟdžLJƾƳƸʺLJƳǍƳƸLJƾƩdžLJƿƳƤdžƽ ȟɈƼƺdžɛLJɈǕdžǕ
ӡ̌ƘƸƩǕҍƳƺͼƺdžƺƫȟɇǯƵǀLjǕǯƻdžǍƦƾƫΓƥdžƿdžǂƤƾdžǃƚǍƿƳdžǃdžƾƜƸƾƙƼƵdžLJƷʹ˴ƢƤƾ
ƙǍƾdžƸƤƾdžǃƚǍƺ:

ICAB 2024 Customs Portion 659

 ƳǍƺǀƳȟƴdžǍƤǯƽ, ƠƚƙƚǍƷƾƘΓƶdžƾdžǕLJƻˑͱƸLJƺƶdžƷdžƺLJƿǂǍʮƢƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ (ƺ˅)
Ƙƴƺdžǯƺdžư ȟƤҸƤ
ȟ ɻƼƳdžɛdž˖ƘΓǯƤdžǍƷdžƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ ƠƚƵƹdžƾƘƶLjƷʹ˴džǕǍƷƾƜǍʸǍΚ
ӒΙLJƷͱƸƲƤLJƾǍƺƷƓ

ǛǛǢƓƠƚƙƚǍƷƜLĴLJƥƳLJƺƶdžƷΕƳLjƳƢǕɇdžƾǃdžƜǂǃƚǍƳǯƤdžǍƷdžƸΏƺdžLJǃƾƷdžƤƾdžƓ- ǯƵǀLjǕǯƻdžƦƺdžƾ˖džLJƷƾ
ƫΓ ƥdžƿdžǂ Ƙƴƺdž ƘΓ ǯƤdžǍƷdž ƢǕɇdžƾǃdžƜǍǂ ƘƸǂdžƾƲ Ƙƴƺdž Ơƚ ƙƚǍƷ ΕƺLJ̝Ƴ ƘΓ ǯƤdžǍƷdž ɛLJɈǕdž ΕƳLjƳ,
ƢǕɇdžƾǃdžƜǂҍƳǯƤdžǍƷdžƸΏƢǕɇdžƾǃdžƜǂǃƚǍƳƺdžLJǃǍƾǯƷƢǕdžƽdžƚǍƺƷdžƓ

ǛǛǣƓ Ƥdž̙ƼǂƢǕɇdžƾǃdžƜLJǂƖƠƾǯƼǕdžƵƓ- (Ǜ) ǯƺdžư ȟ, LJƺLJƶǯƼdžƳdžǍƺƤ, ƢǕɇdžƾǃdžƜǍǂƸΏǂƖƾɻǍƲƾǯƼǕdžƵLJƷƶ ȟdžƾƲ

ƤLJƾǍƺ:

ƳǍƺ ǀƳȟ ƴdžǍƤ ǯƽ, ǯƺdžư ȟ LJƺLJƻˑ ǯɢLJƲƾ ƢǕɇdžƾǃdžƜǍǂƾ ƫΓ ƢǕɇdžƾǃdžƜLJǂƖ ƸʺLJƳƾ ƸLJƾǂƼdžLJ˖ƾ LJƺLJƻˑ ǯƼǕdžƵ
LJƷƶ ȟdžƾƲƤLJƾǍƳƸdžLJƾǍƺƓ

(ǜ) ƜƸ-ƶdžƾdž(Ǜ) ƠƺLJƲ ȟƳƢǕɇdžƾǃdžƜLJǂƖƸʺLJƳƾƸLJƾǂƼdžLJ˖ƾǯƼǕdžƵƢǕɇdžƾǃdžƜLJǂƖƸʺLJƳƾƙƢƳdžǕƙƼƵdžLJƷҍƳ

ƸΏƪdžǍǓƾƳdžLJƾƥǃƚǍƳƦƲƷdžƤƾdžǃƚǍƺƓ

ǛǜǚƓƿdžƚǍǂ˓ƺdžLJƳƿǃƚǍƿƸΏƘƸǂdžƾƲƓ- ƽLJƵǯƤdžǍƷdžǯƺǂƾƤdžLJƾƢǕɇdžƾǃdžƜǍǂƾƿdžƚǍǂ˓ƺdžLJƳƿƤƾdžǃǕ, Ƴdžǃdž

ǃƚǍƿƜǃdžǍƳƢǕɇdžƾǃdžƜǂҍƳǯƤdžǍƷdžƸǍΏƾƼdžLJƿƤƜɳƺdžLJƳƿƤƾǍƲƾǯƷdžɪǀɛƵdžǍƷƾƳdžLJƾƥǃƚǍƳǛǚ(Ƶǀ) LJƵƺǍǂƾ
ȟ  ƘӂǍƼdžLJƵƳ ǯƤdžǍƷdž ƺLJƶ ȟƳ ǂƼǍǕƾ ƼǍΒ ƢǕɇdžƾǃdžƜǂ ǃƚǍƳ ƸΏ ƘΓ ǯƤdžǍƷdž
ƼǍΒ Ƙƴƺdž ƽƴdžƽƴ ƤƼȟƤƳȟdž ƤҸƤ
ƢǕɇdžƾǃdžƜǍǂƘƸǂdžƾƲƤLJƾǍƺƷƘƴƺdžƜǃdžǯƵǀLjǕǯƻdžǍƦƾƫΓƘƴƺdžƾ˖džLJƷƾƫΓƥdžƿdžǂƤLJƾǍƺƷƓ

ǛǜǛƓƠƤƚƤdž̙Ƽǂǯ̙ǀǍƷƠƤƢǕɇdžƾǃdžƜǂǃƚǍƳƘΓƢǕɇdžƾǃdžƜǍǂƸΏƘƸǂdžƾǍƲƾɻƼƳdžƓ- ƢǕɇdžƾǃdžƜǂҍƳ
ƸǍΏƾƼdžLJƿƤƶdžƾdžǛǛǣƠƾƘƶLjƷƢǕɇdžƾǃdžƜLJǂƖǯƼǕdžǍƵƾƼǍΒǯƺdžư ȟƤҸƤ ȟ LJƷƶ ȟdžLJƾƳƹƾǍƼƙǍƺƵƷƤLJƾǕdžƠƺƖ
ƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ (ƺ˅) Ƙƴƺdžǯƺdžư ȟƤҸƤ ȟ ɻƼƳdžɛdž˖ƘΓǯƤdžǍƷdžƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ ƘƴƺdžƤLJƼǀƷdžƾƘƺ
Ƥdž̙Ƽǂ (ƺ˅) ƤҸƤ ȟ  Ƙƴƺdž ǯƺdžǍư ȟƾ ɻƼƳdžɛdž˖ ƘΓ ǯƤdžǍƷdž ƤLJƼǀƷdžƾ ƤҸƤȟ  ƠƳҼǍʸǍΚ ɻƼƳdžɛdž˖ ƘΓ ǯƤdžǍƷdž
ƤƼȟƤƳȟdžƾ ƘӂƼLJƳɈǍƼ Ɯɳ ƤLJƼǀƷdžƾ ǯƽͱƸ LJƷǍƵ ȟǀ ɛƵdžƷ ƤLJƾǍƺƷ ǯǂƚͱƸ ǀƳȟdžƺLJƿǍƳ ƠƺƖ ƫdžƼdžƷƳ ǯƸǍǀƾ Ƹƾ
ƢǕɇdžƾǃdžƜǂҍƳƸΏƠƤƚƤdž̙Ƽǂǯ̙ǀǍƷƾƠƤƢǕɇdžƾǃdžƜǂǃƚǍƳƘΓƢǕɇdžƾǃdžƜǍǂƘƸǂdžƾƲƤLJƾǍƳƸdžLJƾǍƺƷƓ

ǛǜǜƓƸΏƠƤƢǕɇdžƾǃdžƜLJǂƖǯ̙ǀƷǃƚǍƳƘΓƢǕɇdžƾǃdžƜLJǂƖǯ̙ǀǍƷƘƸǂdžƾǍƲƾɻƼƳdžƓ- ǯƤdžǍƷdžƢǕɇdžƾǃdžƜLJǂƖ
ǯ̙ǀǍƷƢǕɇdžƾǃdžƜǂҍƳƸǍΏƾƼdžLJƿƤ, ƜɳƸΏƶdžƾdžǛǛǣƠƾƘƶLjƷƢǕɇdžƾǃdžƜLJǂƖǯƼǕdžǍƵƾƼǍΒ, ǯƺdžư ȟƤҸƤ
ȟ LJƷƶ ȟdžLJƾƳ
ƹƾǍƼƠƺƖƸʺLJƳǍƳǯƽƸΏƘƸǂdžƾƲƤƾdžǃƚǍƺƜǃdžƾLJƺƺƾƲƠƺƖǯƽƤdž̙Ƽǂǯ̙ǀǍƷƘƸǂdžLJƾƳǃƚǍƺƜǃdžƾƷdžƼ
ƜǍ̂ƥӆƺ ȟƤƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ (ƺ˅) Ƙƴƺdžǯƺdžư ȟƤҸƤ
ȟ ɻƼƳdžɛdž˖ƘΓǯƤdžǍƷdžƤLJƼǀƷdžǍƾƾLJƷƤƮƙǍƺƵƷƤLJƾǕdž
ƘΓǯƤdžǍƷdžƢǕɇdžƾǃdžƜLJǂƖǯ̙ǀǍƷƢǕɇdžƾǃdžƜLJǂƖƠƾƜǍʸǍΚƢǕɇdžƾǃdžƜǂҍƳƸΏƘƸǂdžƾƲƤLJƾǍƳƸdžLJƾǍƺƷƓ

ǛǜǝƓƦˉǍΕƾƤdž̙Ƽǂǯ̙ǀǍƷǯƸǒƕƪdžƚƺdžƾƸƾƸΏɛƴƼƙƼƵdžLJƷƾƸǍΏƾƼƳƠƤƚƙƚƷǂӒǍǃƾƘƶLjƷǃƚǍƺƓ-
ƢǕɇdžƾǃdžƜǂҍƳƸΏƦˉǍΕƾƤdž̙Ƽǂǯ̙ǀǍƷǯƸǒƕƪdžƚƺdžƾƸƾƜǃdžɛƴƼƙƼƵdžLJƷƾƸƾƠLJˁƠƺƖƢǕɇdžƾǃdžƜLJǂƖƤLJƾƺdžƾ
ƘӂͱƸƸʺLJƳǍƳƠLJˁƠƺƖƢǕɇdžƾǃdžƜLJǂƖƤƾdžǃƚǍƺƠƺƖǯǀǍǁƜLĴLJƥƳƸǍΏƾƠLJˁƠƺƖƢǕɇdžƾǃdžƜLJǂƖǯƽǂƤƿƙƚƷ
ƠƺƖLJƺLJƶ͏džƾdžLJƷǕLJˈƳǃǕ, ƜǃdžƜɳƙƚƷƠƺƖLJƺLJƶ, ƽƳҽƾɛǍƽdžƫɇǃǕ, ƠƾƘƶLjƷǃƚǍƺƓ

660 Business Planning: Taxation & Compliance ICAB 2024

 ǛǜǞƓƢǕɇdžƾǃdžƜǍǂƾLJɻƳƸǍΏƾɻLJƳǃƚǍƿƺdžƘƺƷLJƳƧɪǍƿƜǃdžƾӅƷƗʹ˴džǕƷƓ- ӒΙLJƻLJʯƤʹ˴ƙǍƾdžƸǍƽdžΌ
ǯƤdžǍƷdžƸΏƢǕɇdžƾǃdžƜLJǂƖƠƾƫΓƪdžǓƤLJƾƺdžƾƸƾǃƚǍƳǯƵǀLjǕǯƻdžǍƦƾƫΓƥdžƿdžǂƤLJƾƺdžƾӆƺ ȟƸƽ ȟˉǯƤdžǍƷdžƘLJƷƺdžƽ ȟ
ҼƧ ȟƮƷdžƘƴƺdžƤdžƾǍƲƽLJƵɻLJƳɊ̜ƘƴƺdžƘƸƩdžLJǕƳǃǕ, ƳdžǃdžǃƚǍƿƼdžLJƿƤƚʑdžƤLJƾǍƿɻLJƳɊ̜ƘƴƺdžƘƸƩdžLJǕƳ
Ƙƺ̝džǕ ƜǃdžǍƵƾ ӒΙ ǯƤdžǍƷdž Ƥdž̙Ƽǂ ƤƼȟƤƳȟdž ƤҸƤȟ  LJƷͱƸƷ ƤƾdžƚǍƳ ƸdžLJƾǍƺƷ ƠƺƖ ƳƵӂǂdžǍƾ ƜǃdžǍƵƾ ƜƸƾ
ƙǍƾdžƸǍƽdžΌ ʹ˴ ɥdžǂҍƳ ӒǍΙƾ ƘӂƸdžǍƳ ɥdžǂ Ƥƾdž ǃƚǍƺ ƠƺƖ ƼdžLJƿǍƤƾ ǯ·ʑdžǕ ɛƴǍƼ ǂ˫džLJƵƳ ƺ˅ ɛLJƳ̝džƸƷ
ƤLJƾƺdžƾƫΓɥdžǂҍƳʹǍ˴ƾLJ͏̶ƲƸLJƾƼdžƲƘǍƴ ȟƾƠƤɪӃƳƷƺ˅ǂ˫džƵƷƤƾdžƽdžƚǍƺƓ

ǛǜǟƓƜ͏džǕLj(Volatile) ƸǍΏƾǯɻǍɖƪdžǓƓ- ƽƥƷƠƚͱƸǯƤdžǍƷdžǯɢLJƲƾƠƺƖƺƲ ȟƷdžƾƢǕɇdžƾǃdžƜǂҍƳƸΏ, ƽdžǃdžƾ

Ɯ͏džLJǕƳdž ƠƺƖ ƜǃdžǍƵƾ ƼҟƵ ɛLJɈǕdž LJƺǍƺƩƷdžӆƺ ȟƤ ǯƺdžư ȟ, ǂƾƤdžLJƾ ǯƦǍƫǍƮ ɛʗdžƸƷ ͏džƾdž, LJƷƶ ȟdžƾƲ ƤǍƾ, Ƴdžǃdž ƽLJƵ
ƢǕɇdžƾǃdžƜǂǃƚǍƳƘƸǂdžƾǍƲƾǂƼǕƸLJƾƼdžǍƲƤƼƸdžƢǕdžƽdžǕƠƺƖƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ (ƺ˅) Ƙƴƺdžǯƺdžư ȟƤҸƤ ȟ 
ɻƼƳdžɛdž˖ƘΓǯƤdžǍƷdžƤLJƼǀƷdžƾƽLJƵǂͤ̌ǃƷǯƽ, ƜɳƧdžƮLJƳ·džƻdžLJƺƤƘƸƩǍǕƾƤdžƾǍƲƧɪǕdžǍƪ, ƳƥƷƜɳƧdžƮLJƳƾ
ƜƸƾǯƤdžǍƷdžʹ˴ƙǍƾdžƸƤƾdžƽdžƚǍƺƷdžƓ C
H
ǛǜǠƓ ƢǕɇdžƾǃdžƜǂ ǃƚǍƳ ƘǂʊƳƻdžǍƺ ƘƸǂdžLJƾƳ ƺdž LJƷLJƵ ȟ̌ ǯƼǕdžǍƵƾ ǯƺLJǀ ǂƼǍǕ ƾdžLJƥƺdžƾ ƘӂǍƼdžƵƷɛdž˖ ƺdž A
ɻLJƳɊ̜ƺdž͓Ɩǂɛdž˖ƺdžƷӑƷdžLJǃǂdžǍƺҒǃLjƳƸǍΏƾƜƸƾʹ˴Ɠ- LJƷ˨ƺLJƲ ȟƳƸΏǂӒǍǃƾǯɻǍɖƽƴdžƽƴƤƼȟƤƳȟdžƵdžLJƺƷdžƼdžƫdžLJƾ P
ƤLJƾǍƳ ƸdžLJƾǍƺƷ ƠƺƖ ƠƚͱƸ ƵdžLJƺƷdžƼdžƾ ǯɛLJɻǍƳ ƸΏǂӒǍǃƾ ƼdžLJƿƤ ƜǃdžǍƵƾ ǯɻǍɖ ɛǍƵǕ ǂӑƵǕ ƻdžǓdž, ƫLJƾƼdžƷdž, ӟƵ ƠƺƖ T
ƘΓdžΓƩdžƫȟǂǃƜǃdžǍƵƾƜƸƾƙǍƾdžƸƲLjǕǂӑƵǕƸLJƾƼdžƲʹ˴ƘLJƺƿǍͯƸLJƾǍǀdžƶƤLJƾǍƺƷ, ƽƴdž:- E
R
(Ƥ) ƶdžƾdžǛǛǢƿʌƷƤLJƾǕdžƘƸǂdžLJƾƳƢǕɇdžƾǃdžƜǂҍƳƸΏ;
(ƥ) ƶdžƾdžǛǜǚƠƾƘƶLjƷƘƸǂdžƾǍƲƾƫΓƘӂǍƼdžLJƵƳǂƼǍǕƾƼǍΒƢǕɇdžƾǃdžƜǂǃƚǍƳƘƸǂdžƾƲƷdžƤƾdžƸΏ;
34
(Ʀ) ǯƽǂƤƿƸǍΏƾǯɻǍɖƶdžƾdžǛǚǣƘƴƺdžƠƚƙƚǍƷƾƘƶLjƷɛƲLjƳLJƺLJƶƼdžƿdžƘӂƽdžǕLjƺ˅ǂ˫džLJƵƳǃƚǕdžǍƪ
ƠƺƖƽdžǃdžǯƵǀLjǕǯƻdžǍƦƾƫΓƘƴƺdžƾ˖džLJƷƾƫΓƥdžƿdžǂƤƾdžǃǕƷdžƚƘƴƺdžƠƚƙƚǍƷƾLJƺƶdžƷƘӂǂdžǍƾ
ƘƸǂdžƾƲƤƾdžǃǕƷdžƚƘƴƺdžƽdžǃdžƶdžƾdžǛǛǠƠƺƖǛǛǡƠΕƺLJ̝ƳǃǕƷdžƚƘƴƺdžƶdžƾdžǛǜǣƠƜLĴLJƥƳ
LJƺƶdžƷ ΕƳLjƳ ƘΓƻdžǍƺ ɻLJƳɊ̜ Ƙƴƺdž ͓Ɩǂɛdž˖ ǃƚǕdžǍƪ Ƙƴƺdž ƽƴdžƽƴ ƤƼȟƤƳȟdžƾ ǂͤLJ̌ƼǍƳ ƽdžǃdžƾ
LJǃǂdžƺɛƵdžƷƤƾdžǃǕƷdžƚǯǂƚǂƤƿƸΏ; ƠƺƖ
(Ƨ) ƶdžƾdžǛǛǠƠƾƘƶLjƷƷӑƷdžLJǃǂdžǍƺҒǃLjƳƸΏƓ

ǛǜǡƓ ʹ˴, ƚƳɇdžLJƵƸLJƾǍǀdžǍƶΕƴ ȟƳdžƾǯɻǍɖƸʺLJƳƓ- (Ǜ) ƽLJƵǯƤdžǍƷdžƼdžLJƿƤƶdžƾdžǛǜǠƠƾƘƶLjƷƵdžLJƺҍƳǯƤdžǍƷdž

Ƙƴ ȟƸLJƾǍǀdžƶƤLJƾǍƳΕƴ ȟǃƷ, ƳdžǃdžǃƚǍƿƽƴdžƽƴƤƼȟƤƳȟdžƶdžƾdžǛǚǣƠƾƘƶLjƷǂ˫džLJƵƳƺǍ˅ƾƜƸƾƘƴƺdžLJƺLJƶ͏džƾdž
LJƷƶ ȟdžLJƾƳƤdžƽ ȟɈƼɊǃƲƤLJƾǍƳƸdžLJƾǍƺƷƘƴƺdžƢǕɇdžƾǃdžƜǍǂƾLJɻƳƼdžLJƿǍƤƾƸΏƘƴƺdžƸΏɛͼƳƤƾǍƲΕƺΉƳǯƤdžǍƷdž
ƤdžƾƥdžƷdž, ƽˈƸdžLJƳƘƴƺdžǯƼLJǀƷdžLJƾƘƴƺdžƜɳΕLJɳƾƼdžLJƿƤdžƷdžƶLjƷƘΓǯƤdžǍƷdžƸΏƠƺƖǂ˫LJʯƾƠƚͱƸƘƖǀƽdžǃdž
ƵdžLJƺƙƵdžǍǕƾƫΓƸƽ ȟdž˖LJƺǍƺLJƩƳǃƚǍƺƳdžǃdžƙƮƤƤƾdžƚǍƳƸdžLJƾǍƺƷ, ƠƺƖƘLJƺƿǍͯƜɳͱƸƙƮǍƤƾLJƿLJƥƳǯƷdžɪǀ
ƼdžLJƿƤǍƤɛƵdžƷƤLJƾǍƳǃƚǍƺƓ

(ǜ) ƜƸ-ƶdžƾdž(Ǜ) ƠƜLĴLJƥƳǯƷdžɪǍǀƾƳdžLJƾƥǃƚǍƳǛǟ(ƸǍƷƾ) LJƵƺǍǂƾƼǍΒƵdžLJƺӆƾƲƤƾdžƷdžǃƚǍƿƜɳͱƸ

ƙƮƤҍƳƸΏLJƺɈǕƤƾdžƽdžƚǍƺƓ

(ǝ) ƜƸ-ƶdžƾdž(ǜ) ƠƾƘƶLjƷLJƺɈǕƿʺƘǍƴ ȟƾLJƷƮƸLJƾƼdžƲLJƿLJƸƺʺƤLJƾǕdžƺǍ˅ƾLJƺƸƾLjǍƳǂƼͧǕƤƾdžǃƚǍƺƠƺƖ

ƺǍ˅ƾƵdžǕǂћƲ ȟLJƼƮdžƚƺdžƾƸƾƜ͏Njʯ, ƽLJƵƴdžǍƤ, ƶdžƾdžǜǝǡƘӂǂdžǍƾLJƺLJƿƺǍˍƫƸʺLJƳǍƳΕƺLJ̝ƳǃƚǍƺƓ

(Ǟ) ƸǍΏƾǯƤdžǍƷdžǃ̜džˉƾƺdž·͉-LJƷǍǕdžƦ(assignment) ƠƾƜƸƾƸdžƢƷdžƙƵdžǍǕƾƫΓƽƴdžƽƴƤƼȟƤƳȟdžǍƤƠƚ

ƶdžƾdžǕƺLJƲ ȟƳƸʺLJƳƘӂƽdžǕLjƤdžƽ ȟɈƼɊǃƲƤƾdžǃƚǍƳLJƷӍʯƤLJƾǍƳƸdžLJƾǍƺƷdžƓ

ICAB 2024 Customs Portion 661

 ǛǜǢƓǯƾƤư ȟǂƖƾɻƲƓ- ƢǕɇdžƾǃdžƜǂƾɻƤƢǕɇdžƾǃdžƜǍǂɛǍƺǀҍƳƸǍΏƾƫΓǯƺdžư ȟƤҸƤ
ȟ LJƷƶ ȟdžLJƾƳƸʺLJƳǍƳ
̙ƤLJƤLJƸƖƠƾLJǃǂdžƺǂǃǂƤƿǯƾƤȟưǂƖƾɻƲƤLJƾǍƺƷƓ

ǛǜǣƓҼƧ ȟƮƷdžǕ͓Ɩǂɛdž˖ ƢǕɇdžƾǃdžƜǂҍƳƸǍΏƾʹ˴ƼƢ̲ƹƤLJƾƺdžƾɻƼƳdžƓ- ƶdžƾdžǛǚǣƠƾƘƶLjƷƺ˅ǂ˫džLJƵƳ

ǃƚǕdžǍƪƠƺƖǯƵǀLjǕǯƻdžǍƦƾƫΓƥdžƿdžǂƤƾdžǃǕƷdžƚ, ƠƚͱƸǯƤdžǍƷdžƢǕɇdžƾǃdžƜǂҍƳƸΏ, ƽLJƵǯƤdžǍƷdžƘLJƷƺdžƽ ȟҼƧ ȟƮƷdžǕ
͓Ɩǂɛdž˖ǃǕ, ƳdžǃdžǃƚǍƿƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ (ƺ˅) Ƙƴƺdžǯƺdžư ȟƤҸƤȟ ɻƼƳdžɛdž˖ƘΓǯƤdžǍƷdžƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ
ƳdžǃdžƾLJƺǍƺƩƷdžƺǍƿƜǃdžƾƜƸƾɛǍƵǕʹ˴ƼƢ̲ƹƤLJƾǍƳƸdžLJƾǍƺƷ:

ƳǍƺǀƳȟƴdžǍƤǯƽ, ƽLJƵǯƺǂƾƤdžLJƾƢǕɇdžƾǃdžƜǍǂƜɳƸΏ͓Ɩǂɛdž˖ǃǕ, ƳdžǃdžǃƚǍƿƜɳͱƸ͓ƖǍǂƾƧƮƷdžƜƵƧdžƮǍƷƾƸƾ

ǝ(LJƳƷ) ƤƼȟLJƵƺǍǂƾƼǍΒƽƴdžƽƴƤƼȟƤƳȟdžƾLJƷƤƮƠƳƵ&LJƺǁǍǕLJƿLJƥƳǯƷdžɪǀɛƵdžƷƤLJƾǍƳǃƚǍƺƓ

ǛǝǚƓƢǕɇdžƾǃdžƜǂƾɻǍƤƾƵdžLJǕ͉Ɠ- ǂƾƤdžLJƾƢǕɇdžƾǃdžƜǍǂƾLJɻƳƸǍΏƾǯɻǍɖƢǕɇdžƾǃdžƜǂƾɻƤƠƺƖǯƺǂƾƤdžLJƾ
ƢǕɇdžƾǃdžƜǍǂƾLJɻƳƸǍΏƾǯɻǍɖƿdžƚǍǂ˓ƶdžƾLj, ƜɳƸǍΏƾʹ˴džǕƷƤdžƾLjƤdž̙ƼǂƤƼȟƤƳȟdžƤҸƤ ȟ ƜLĴLJƥƳƸLJƾƼdžƲ,
ƢƫƷƘƴƺdžƸLJƾƼdžƸƘӂǂdžǍƾ, ɛǍƽdžƫɇǯɻǍɖƶdžƾdžǛǜǟƠΕƺLJ̝Ƴ·džƻdžLJƺƤƘƸƩǍǕƾƤdžƾǍƲƸLJƾƼdžǍƲƧdžƮLJƳƾƫΓ
ƪdžǓɛƵdžƷӆƺ ȟƤ, ƢǕɇdžƾǃdžƜǍǂƜǃdžǍƵƾƽƴdžƽƴɊǃƲƠƺƖƜɳ̝džƷǃƚǍƳǂƾƺƾdžǃƠƺƖƜɳ̝džǍƷƫƼdžƴdžƤdžƤdžƿLjƷ
ǂƼǍǕLJƷƾdžƸƵǯǃƹdžƫǍƳƾƫΓƵdžǕLjƴdžLJƤǍƺƷ:

ƳǍƺǀƳȟƴdžǍƤǯƽ, ƢǕɇdžƾǃdžƜǍǂƸΏɛǍƺǀƤƾdžǍƷdžƾƘƴƺdžƜɳ̝džƷǃƚǍƳƺdžLJǃǍƾƿƚƺdžƾƘƴƺdžƜɳ̝džǍƷƫƼdžƴdžƤdžƤdžƿLjƷ
ǂƼǍǕǂƖƧɪƳǯƤdžǍƷdžƘƸƩǕƘƴƺdžɻLJƳƾƫΓǯƤdžǍƷdžƼdžLJƿƤƽƴdžƽƴƤƼȟƤƳȟdžƺdžǯƤdžǍƷdžǂƾƤdžLJƾƢǕɇdžƾǃdžƜǍǂƾƾɻǍƤƾLJƷƤƮ
ɻLJƳӆƾƲƵdžLJƺƤLJƾƺdžƾƘLJƶƤdžƾLjǃƚǍƺƷƷdž, ƽLJƵƷdžƚǃdžɛƼdžLJƲƳǃǕǯƽ, ƜɳƘƸƩǕƺdžɻLJƳƢǕɇdžƾǃdžƜǂƾɻƤƺdžǯƤdžǍƷdž
Ƥdž̙ƼǂƤƼȟƤƳȟdžƾƚʑdžҍƳƤƼȟƺdžƘƺǍǃƿdžƾƤdžƾǍƲǂƖƧɪƳǃƚǕdžǍƪƓ

ǛǝǛƓƢǕɇdžƾǃdžƜǍǂƸΏƫƼdžƾdžLJƥƺdžƾLJƺǁǍǕLJǂʺdžˉɊǃǍƲƾɻƼƳdžƓ- ƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ (ƺ˅) Ƙƴƺdžǯƺdžư ȟ

ƤҸƤȟ ɻƼƳdžɛdž˖ƘΓǯƤdžǍƷdžƤLJƼǀƷdžƾƘƺƤdž̙Ƽǂ ƢǕɇdžƾǃdžƜǍǂƾǯƤdžαƘƖǍǀ, ǯƤdžαƸʺLJƳǍƳƠƺƖƤLjǀǍƳȟǯƤdžǍƷdž
ƸΏƫƼdžƾdžƥdžƽdžƚǍƺƠƺƖǯƤdžαǯƤdžαɛƤdžǍƾƾƸΏƠƚͱƸǯƤdžǍƷdžƢǕɇdžƾǃdžƜǍǂƫƼdžƾdžƥdžƽdžƚǍƺƳdžǃdž, ǂƼǕǂƼǕ,
LJƷƶ ȟdžƾƲƤLJƾǍƳƸdžLJƾǍƺƷƓ

ǛǝǜƓƸLJƾƺǃƲ, ΔdžLJƤƖ, ƚƳɇdžLJƵƾΕǕƼdžLJƿƤƤҸƤ

ȟ ƺǃƷƓ- ǂƾƤdžLJƾƢǕɇdžƾǃdžƜǍǂƸΏɊǃƲƘƴƺdžƜɳ̝džƷǃƚǍƳ
ƜǃdžƘƸǂdžƾƲƺdžƺƵƸLJƾƺǃƲ, ΔdžLJƤƖƠƺƖƼҟǍƵƾΕǕƽLJƵƽƴdžƽƴƤƼȟƤƳȟdžƘƴƺdžƢǕɇdžƾǃdžƜǂƾɻƤƸLJƾǍǀdžƶƤǍƾƷ,
ƳdžǃdžǃƚǍƿƜǃdžƸǍΏƾƜƸƾƙǍƾdžƸƲLjǕǃƚǍƺƠƺƖƼdžLJƿƤƤҸƤ ȟ ƺǃƷƤƾdžǃƚǍƺ, ƠƺƖƶdžƾdžǛǜǡƠƜLĴLJƥƳƸʺLJƳǍƳ
ƼdžLJƿǍƤƾLJƷƤƮǃƚǍƳƙƵdžǕǍƽdžΌǃƚǍƺƓ

ȟ
ǛǝǝƓǀƳȟ ǂƖǍƽdžƫƷ, ƸLJƾƺƳȟƷ, LJǀLJƴƿƤƾdž, ƚƳɇdžLJƵƾɻƼƳdžƓ– ƠƚƘΒdžǍǕƾƘˉƦƳǯƤdžǍƷdžLJƺƶdžǍƷƾǂLJǃƳ
ǂdžƼʛΝӆƲ ȟ ǃƢǕdž ǂdžǍƸǍɻ, ǯƺdžư ȟ, ǂƾƤdžLJƾ ǯƦǍƫǍƮ ɛʗdžƸƷ ͏džƾdž, ǯƤdžǍƷdž ǀƳȟ Ƙƴƺdž ƺdžΒƺdžƶƤƳdž ǂƖǍƽdžƫƷ Ƙƴƺdž
ƸLJƾƺƳȟƷƤLJƾǍƳƸdžLJƾǍƺ, ƠƺƖǯƤdžǍƷdžLJƺǍǀǁɛǍǕdžƫƷLJƼƮdžƚƺdžƾƫΓƽƴdžƽƴLJƺǍƺƩƷdžƤLJƾǍƿƜǃdžƾǯƤdžǍƷdžLJƺƶdžƷ
LJǀLJƴƿƤLJƾǍƳƸdžLJƾǍƺƓ

ǛǝǞƓƤdž̙ƼǂƢǕɇdžƾǃdžƜǂƸʺLJƳƾƸLJƾǂƼdžLJ˖Ɠ- ǯƤdžǍƷdžƤdž̙ƼǂƢǕɇdžƾǃdžƜǂƸʺLJƳƾLJƷ˨LJƿLJƥƳƻdžǍƺƸLJƾǂƼdžLJ˖
ƧɪǍƺ, ƽƴdž:-
(Ƥ) ƜɳƸʺLJƳƾƘƶLjƷɛǍǕdžƫƷLjǕǀƳȟdžƺLJƿƢƙӂ̎džLJƷƤƳdžɛLJƳƸdžƿƷǂdžǍƸǍɻ, LJƷ˨LJƿLJƥƳƜǍʸǍΚǯƤdžǍƷdž
Ƥdž̙ƼǂƸʺLJƳƾƘƶLjƷƸΏƪdžǍǓƾƼdžΒǍƼ, ƽƴdž:-
(Ƙ) ǯƵǀLjǕǯƻdžǍƦƾƫΓƸΏƪdžǓƤƾƲ; ƺdž
(ƙ) ̝džǕLjƾ˖džLJƷƤƾƲ;
(ƥ) ǂƾƤdžǍƾƾLJƷƤƮƸΏǃ̜džˉǍƾƾƼdžΒǍƼƓ

662 Business Planning: Taxation & Compliance ICAB 2024

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34
Annexure-H
100% Export Oriented Industries (except RMG) (Temporary Importation….) Rules-2024

(SRO no-212-Law/2024/64/Customs, Dt: 29.058.1993)

Including SRO’s by which above SRO was amended

ICAB 2024 Customs Portion 663

664 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 665

666 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 667

668 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 669

670 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 671

672 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 673

674 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 675

676 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 677

678 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 679

 Session-05 & 06
Warehousing System in Bangladesh

Annexure-I
100% Export Oriented RMG Industries (Temporary Importation....) Rules-2024

(SRO no-213-Law/2024/65/Customs, Dt: 29.05.2024)

Including SRO’s by which above SRO was amended

680 Business Planning: Taxation & Compliance ICAB 2024

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ICAB 2024 Customs Portion 681

682 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 683

684 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 685

686 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 687

688 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 689

690 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 691

692 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 693

694 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 695

696 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 697

698 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 699

700 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 701

702 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 703

704 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 705

706 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 707

 Session-05 & 06
Warehousing System in Bangladesh

Annexure-J
Warehouse Licencing Rules-2024

(SRO no-209-Law/2024/61/Customs, Dt: 29.05.2024)

Including SRO’s by which above SRO was amended

708 Business Planning: Taxation & Compliance ICAB 2024

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ICAB 2024 Customs Portion 709

710 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 711

712 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 713

714 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 715

716 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 717

718 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 719

720 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 721

722 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 723

724 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 725

726 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 727

728 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 729

730 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 731

732 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 733

734 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 735

736 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 737

738 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 739

740 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 741

742 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 743

744 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 745

746 Business Planning: Taxation & Compliance ICAB 2024
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Warehousing System in Bangladesh
34

Annexure-K
General Bond Rules-2024

(SRO no-210-Law/2024/62/Customs, Dt: 29.05.2024)

ICAB 2024 Customs Portion 747

748 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 749

750 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 751

752 Business Planning: Taxation & Compliance ICAB 2024
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Warehousing System in Bangladesh
34

Annexure-L
Time to Keep Goods in Warehouse Rules-2024

(SRO no-211-Law/2024/63/Customs, Dt: 29.05.2024)

ICAB 2024 Customs Portion 753

754 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 755

756 Business Planning: Taxation & Compliance ICAB 2024
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Annual Import Entitlement Rules-2024 34

(SRO no-209-Law/2024/61/Customs, Dt: 29.05.2024)

Including SRO’s by which above SRO was amended

ICAB 2024 Customs Portion 757

758 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 759

760 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 761

762 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 763

764 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 765

766 Business Planning: Taxation & Compliance ICAB 2024
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Session-07 P
T
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Goods Dutiable, Customs Assessment & R
Clearance Procedure, Re-Assessment
34
Legislative Provisions

Annexure-N
Goods declaration, Assessment and
Re-assessment Rules-2024

(SRO no-206-Law/2024/58/Customs, Dt: 29.05.2024)

ICAB 2024 Customs Portion 767

768 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 769

770 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 771

772 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 773

774 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 775

 Session-07

Goods Dutiable, Customs Assessment &

Clearance Procedure, Re-Assessment

Legislative Provisions
Annexure-N
Goods Declaration, Assessment and Re-assessment Rules-2024

(SRO no-206-Law/2024/58/Customs, Dt: 29.05.2024)

776 Business Planning: Taxation & Compliance ICAB 2024

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ICAB 2024 Customs Portion 777

778 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 779

780 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 781

782 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 783

784 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 785

786 Business Planning: Taxation & Compliance ICAB 2024
 C
Session-08 H
A
Refund and Duty drawback P
T
Transshipment and Transit E
R
Legal Provisions
34

Annexure-O
Duty Drawback Rules-2021
(SRO no-266-Law/2021/45/Customs, Dt: 05.08.2021)

Annexure-P
Customs Transit & Transhipment Rules-2021
(SRO no-136-Law/2021/125/Customs, Dt: 05.08.2021)

ICAB 2024 Customs Portion 787

788 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 789

790 Business Planning: Taxation & Compliance ICAB 2024
 C
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P
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E
Session-08 R

Refund and Duty drawback

34
Transshipment and Transit

Annexure-O
Duty Drawback Rules-2021
(SRO no-266-Law/2021/45/Customs, Dt: 05.08.2021)

ICAB 2024 Customs Portion 791

792 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 793

794 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 795

796 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 797

798 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 799

800 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 801

802 Business Planning: Taxation & Compliance ICAB 2024
 C
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Session-08 R

Refund and Duty drawback

34
Transshipment and Transit

Annexure-P
Customs Transit & Transhipment Rules-2021
(SRO no-136-Law/2021/125/Customs, Dt: 05.08.2021)

ICAB 2024 Customs Portion 803

804 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 805

806 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 807

808 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 809

810 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 811

 Session-09

Adjudication, Adjudication Process, Appeal,

Appeal Process
Alternative Dispute Resolution (ADR)

Annexure-Q
Customs (Alternative Dispute Resolution) Rules-2012
(SRO no-54-Law/2012/2379/Customs, Dt: 23.02.2012)

812 Business Planning: Taxation & Compliance ICAB 2024

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34

ICAB 2024 Customs Portion 813

814 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 815

816 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 817

818 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 819

820 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 821

 Session-09

Adjudication & Adjudication Process.

Appeal & Appeal Process
Alternative Dispute Resolution (ADR)

Annexure-Q
Customs (Alternative Dispute Resolution) Rules-2012
(SRO no-54-Law/2012/2379/Customs, Dt: 23.02.2012)

822 Business Planning: Taxation & Compliance ICAB 2024

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34

ICAB 2024 Customs Portion 823

824 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 825

826 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 827

828 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 829

830 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 831

832 Business Planning: Taxation & Compliance ICAB 2024
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Session-10 R

Brief Overview on WTO and WCO

34
WTO-Trade Facilitation Agreement
Post Clearance Audit (PCA)

Annexure-R
Post Clearance Audit
PCA Order No-221(1)/2018/Customs, Dt: 31.05.2018

ICAB 2024 Customs Portion 833

834 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 835

836 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 837

 Session-10

Brief Overview on WTO and WCO

WTO-Trade Facilitation Agreement
Post Clearance Audit (PCA)

Annexure-R
Post Clearance Audit (PCA)
PCA Order No-221(1)/2018/Customs, Dt: 31.05.2018

838 Business Planning: Taxation & Compliance ICAB 2024

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ICAB 2024 Customs Portion 839

840 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 841

 Session-11

Trade Facilitation & Customs Modernization

(Advance Ruling/Authorized Economic
Operator/National Single Window-NSW)

Annexure-S
Customs Ruling (Advance) Rules-2016
(SRO no-188-Law/2016/37/Customs, Dt: 02.06.2016)

Annexure-T
Authorized Economic Operator (Recognition) Rules-2024
(SRO no-217-Law/2024/67/Customs, Dt: 04.06.2024)

842 Business Planning: Taxation & Compliance ICAB 2024

 C
H
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T
Session-11 E
R
Trade Facilitation & Customs Modernization
Advance Ruling/Authorized Economic Operator 34

Annexure-S
Customs Ruling (Advance) Rules-2016
(SRO no-188-Law/2016/37/Customs, Dt: 02.06.2016)

ICAB 2024 Customs Portion 843

844 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 845

846 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 847

848 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 849

850 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 851

852 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 853

854 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 855

856 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 857

858 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 859

860 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 861

862 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 863

 Session-11

Trade Facilitation & Customs Modernization

Advance Ruling/Authorized Economic Operator

Annexure-T
Authorized Economic Operator (Recognition) Rules-2024
(SRO no-217-Law/2024/67/Customs, Dt: 04.06.2024)

864 Business Planning: Taxation & Compliance ICAB 2024

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ICAB 2024 Customs Portion 865

866 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 867

868 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 869

870 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 871

872 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 873

874 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 875

876 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 877

878 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 879

880 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 881

882 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 883

884 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 885

886 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 887

888 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 889

890 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 891

892 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 893

894 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 895

896 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 897

898 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 899

900 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 901

902 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 903

904 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 905

906 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 907

908 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 909

910 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 911

912 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 913

914 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 915

916 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 917

918 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 919

920 Business Planning: Taxation & Compliance ICAB 2024
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34

ICAB 2024 Customs Portion 921

922 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 923

924 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 925

926 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 927

928 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 929

930 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 931

932 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 933

934 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 935

936 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 937

938 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 939

940 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 941

942 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 943

944 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 945

946 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 947

948 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 949

950 Business Planning: Taxation & Compliance ICAB 2024
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ICAB 2024 Customs Portion 951

952 Business Planning: Taxation & Compliance ICAB 2024
 National Single Window (NSW):
At present, import-export of Bangladesh's international trade requires the
approval of various government departments simultaneously. In this case, as
the automation of most of the offices is not completed, the importers and
exporters have to submit the same type of documents manually over and over
again. As it costs more time and money to go to various government offices
and obtain clearances. Bangladesh ranks 176 out of 190 countries in the Ease
of Doing Business ranking. Moreover, Bangladesh approved Tread Facilitation
Agreement in 2016 to remove non-tariff barriers and also ratified UNESCAP's
Cross-border Paperless Trade. In this situation, the National Single Window
was adopted in Bangladesh in order to facilitate traders and business entities
by using electronic methods through a single platform to conduct import- C
export related activities quickly. H
A
Aims and Objectives of NSW: P
T
• It will speed up international business in e-commerce and online
E
channels R
• Will bring dynamism in international cargo clearance system
• Businesses costs and time will be lessened
• There will be coordination and transparency in cargo clearance. 34
User-friendly electronic processes will keep registered individuals
/organizations and government agencies operational and automated
• Will provide assurance to registered individuals/organizations and
government agencies in intonational business related approvals,
licenses, certifications and customs procedures
• It will strengthen the relationship between importer-exporter and the
government; and in this process make the trade more dynamic.
• Also, applications, certificates, licenses and permits etc. in respect of
import, export and transit will be received, sent and processed through
online
• Complete electronic system will be adopted in cargo clearance by NSW
Solution and ARMS Software system
• All types of fees (duties and taxes) can be paid online
• Interconnectivity will be established through Advance Programming Interface
(API) with various government agencies/regulatory authorities.
• Existing systems of all concerned organizations will be automated.

ICAB 2024 Customs Portion 953

 Probable Questions on Customs Portion

Session-1 1. Define the term 'Customs Port' according to The Customs Act
2. Explain 'Smuggle' as per Customs Act. Write Of Prohibited Item.
3. What is Cargo declaration? What are the basic information in a Cargo
declaration?
4. Define " Agens". Explain the function of a C & F agent.
Session-2 1. Mention full form of H.S.Code and why it is needed?
2. Explain classification rule 1, 3, & 5.
3. Explain classification rule 2, 4, & 6.
4. What is section, chapter and reading notes?
Session-3 1. What is GATT valuation agreement?
2. Describe basic features of section 27 of Customs Act?
3. What is minimum, tariff and transaction value?
4. Explain briefly different methods of valuation?
Session-4 1. Legal Authority to grant exemption from duty? Explain with example
2. What is Capital Machinery and what duty benefit is allowed?
3. Explain Raw material and its duty benefits.
4. Why duty benefit on raw material is required? Explain.

1. What is Warehousing? Explain Diplomatic bond.

Session-5 2. What is bonding period? Mention bonding periode for different bond.
3. What are the basic documents required for getting Bond license?
4. How Entitlement of a bonded industry is determined

1. What is untrue statement as per Customs Act?

Session-6 2. What is unauthorized entry in the customs computer System?
3. Explain Commishariate & Duty Paid bond.?
4. What is UD and UP? Explain.
Session-7 1. When provisional assessment of duty is applicable and how it is done?
2. Explain the procedure of Re assessment?
3. Mention 10 (ten) important fields of a Goods Declaration Form.
4. How the assessable value for VAT at Import stage is determined?
Session-8 1. What is Transit and Transhipment?
2. Explain the procedure of Transit and Transhipment?
3. What is refund? when and how refund is claimed?
4. What is Duty drawback? Explain the procedure of Duty drawback.
Session-9 1. Penalty for goods taken out of any customs station without entry?
2. Under section 33 what kind of penalty will be applicable?
3. What is Adjudication? Explain the process of adjudication.
4. What is Appeal? When, how and where appeal can be filed?
Session-10 1. What are the basic functions of WTO?
2. What is WCO? How does it works?
3. Describe ADR and process of ADR.
4. Explain the term " Facilitator" and its Qualifications?
Session-11 1. What is Trade Facilitation and its impact on Trade and Investment?
2. Define Advance Ruling and process of getting Advance Ruling.
3. Briefly discuss the benefits of an Authorized Economic Operator.
4. How National Single Window will facilitate trade?

954 Business Planning: Taxation & Compliance ICAB 2024

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