Income Tax Law in Bangladesh

Income tax law in Bangladesh is governed by the Income Tax Ordinance 1984, which outlines the legal framework for assessing, collecting, and managing income taxes. The law applies to individuals, businesses, and other entities, ensuring the government collects revenue to fund public services. Lawyer Dhaka is here to give an overview of the key aspects of income tax law in Bangladesh:

1. Tax Administration:

• National Board of Revenue (NBR): The primary tax authority responsible for administering the income tax laws, including the assessment, collection, and enforcement of taxes.
• Income Tax Offices: Located throughout the country, these offices assist taxpayers with filing returns, provide information on tax matters, and handle assessments and audits.

2. Taxable Income:

• Definition: Taxable income includes earnings from various sources, such as salaries, business or professional income, property income, capital gains, dividends, and other income.
• Exempt Income: Certain types of income are exempt from tax, such as agricultural income under specific conditions, some allowances for government employees, and income from charitable institutions.

3. Tax Rates:

• Individual Tax Rates: Progressive tax rates apply to individuals, with higher income brackets subject to higher rates. These rates are reviewed annually in the national budget.
• Corporate Tax Rates: Different rates apply to various types of businesses, such as publicly traded companies, private limited companies, and banks. Special rates or exemptions may apply to certain industries or zones, like export processing zones (EPZs).
• Minimum Tax: Regardless of profit or loss, certain taxpayers, particularly companies, are required to pay a minimum tax based on their turnover.

4. Filing and Payment of Taxes:

• Tax Year: The tax year in Bangladesh runs from July 1st to June 30th of the following year, coinciding with the fiscal year.
• Tax Returns: Individuals, businesses, and other entities must file an annual income tax return by November 30th following the end of the tax year. Extensions may be granted under certain conditions.
• Advance Tax: Taxpayers are required to pay tax in advance on estimated income for the year, payable in quarterly installments.
• Self-Assessment: Taxpayers may file returns under the self-assessment scheme, allowing for quicker processing and reduced scrutiny if the return is accurate and complete.

5. Deductions and Allowances:

• Personal Allowances: Certain personal allowances and rebates are available, such as for investments in savings instruments, donations to charitable organizations, and life insurance premiums.
• Business Deductions: Businesses can deduct certain expenses incurred in generating income, such as salaries, rent, utilities, depreciation of assets, and interest on loans.

6. Tax Credits and Incentives:

• Investment Credits: Tax credits may be available for investments in certain sectors, such as renewable energy, research and development, and export-oriented industries.
• Incentives for Special Economic Zones (SEZs) and EPZs: Businesses operating in these zones may benefit from tax holidays, reduced tax rates, and exemptions from specific duties and levies.

7. Withholding Tax:

• Source of Income: Certain payments, such as salaries, dividends, interest, and contract payments, are subject to withholding tax. The payer is required to deduct the tax at source and remit it to the NBR.
• Final Settlement: In some cases, withholding tax is considered a final tax, meaning no further tax is due on that income.

8. Tax Audits and Assessments:

• Audit Procedures: The NBR may audit taxpayers to ensure compliance with tax laws. Audits can result in additional tax assessments, penalties, or interest on unpaid taxes.
• Dispute Resolution: Taxpayers can appeal assessments or audit findings through the tax tribunal system or, if necessary, to higher courts.

9. Penalties and Offenses:

• Late Filing: Penalties are imposed for late filing of tax returns or failure to file. Interest may also be charged on late payments.
• Non-Compliance: Penalties and legal action can be taken for non-compliance with tax laws, such as tax evasion, underreporting income, or providing false information.
• Amnesty Programs: Occasionally, the government may introduce amnesty programs allowing taxpayers to declare previously undisclosed income with reduced penalties.

10. International Taxation:

• Double Taxation Agreements (DTAs): Bangladesh has agreements with several countries to avoid double taxation on income earned in multiple jurisdictions.
• Foreign Income: Residents are taxed on their worldwide income, but foreign tax credits may be available to avoid double taxation.

11. Digital Taxation:

• E-Commerce and Digital Services: As the digital economy grows, the NBR is increasingly focusing on taxing digital transactions, including online sales, digital services, and tech-based platforms.

12. Tax Reforms and Budget Changes:

• Annual Budget: The national budget, presented each year, often includes changes to tax rates, exemptions, and other tax policies. These changes take effect from the beginning of the new fiscal year.

Income tax law in Bangladesh is comprehensive, covering a wide range of income sources and providing mechanisms for tax collection and compliance. The law aims to ensure fairness in taxation while providing incentives for economic growth and development.