Assignment

on
Taxation
Topic:
1. Collection of revenue is the backbone of economic development of a country.
2. Importance of tax in the industrial development of Bangladesh (Tax holiday
scheme)
3. Assessee and the determination of residential status of an assessee.
4. Taxable income, Investment allowance, Tax rebate, Tax liabilities.
5. Statement showing the total taxable income from the salary and house property

Submitted To : Mrs.Akhter Jahan

Associate Professor
BBA, FBA, USTC

Submitted By
Name : Rabiul Karim
ID : 1600
Semester : 5th Semester
Batch : 43rd Batch

Submission Date: 24/12/2020

Faculty of Business Administration

University of Science and Technology Chittagong
 Collection of revenue is the backbone of economic development of
a country

Tax revenue : Tax revenue is defined as the revenues collected from taxes on income and profits, social
security contributions, taxes levied on goods and services,
Income tax, Revenue receipts and percentage of income tax to revenue receipts

Particulars 2014-2015 2015-2016 2016-2017 2017-2018 2018- 2019-

2019 2020

1) Income tax 48,618 51,796 71,940 85,176 99,701 1,13,912

2) Tax Revenue 1,40,667 1,55,400 2,10,402 2,48,190 2,96,201 3,27,630

3) Revenue receipts 1,63,371 1,77,400 2,42,752 2,87,991 3,39,280 3,77,180

4) % of Income Tax to 34.55 33.33 34.19 34.32 37.66 35.41

Total Tax

5) % of Income tax to 29.74 29.20 29.64 29.58 29.38 30.20

Revenue

Adverse Impact of Income tax

 As it is a tax on the person in relation to his income, it can discourage savings. Person may prefer
leisure than to extra work for income and savings. It can thus adversely affect investment.

 High tax rate can indirectly lessen production and encourage shifting of tax on the production
cost thereby giving rise to higher cost of product
 Progressive tax rate adversely affect capital formation.

Role of Income Tax in the Economic Development of Bangladesh :

Income tax can play a vital role in socio-economic development of a country. In one hand, revenue
collected through income tax can be used to defray the cost of running administration of the country and
perform social & development activities. On the other hand, policy measures, techniques and provisions
of Income Tax Act can be used as a means of industrial & economic development of the country. In this
connection it may be mentioned that tax is an important source of Govt. revenue. For defense,
maintenance of law and order, administration, and overall development of the country, govt. needs huge
money and Income tax is an important source in many developed countries. It may be mentioned here that
Income tax GDP ratio vary from country to country and sector to sector. Bangladesh is that at present
only about 25 lakh assessee is found to have TIN (Tax Identification Number which in only 1.57% of the
population. Many of this people also found not to submit Tax return Govt. needs to give attention to this
problem along with increasing income tax assessee.
Math and Solution :

Mr.X is a marketing executive of a multinational company. His per month salary is 90,000 Tk.
He invested tk 15,000 in purchasing a share, he has a life insurance premium of tk 20,000.
He donated tk 10000 in relief fund. He purchased laptop for 50,000 tk. He contributed tk 5000 to recognized
provident fund .
Compute : Taxable income, Investment allowance, Tax rebate, Tax liabilities

Total taxable income is 90000 x 12 = 1080000 Tk

Investment allowance:

Particular TK
1. Purchase share 15,000
2. Insurance premium 20,000
3.Donation 10,000
4.Purchased laptop 50,000
5.Provient fund (5000x2) 10,000
Actual investment 105,000

Calculate tax rebate:

a) 25% of total taxable income excluding employee’s contribution to R.P.F = (1,080,000-5000) x 25%
= 268,750 Tk

b) Maximum Amount = 1 core 50 lac

c) Actual investment = TK 105000

d) The tax rebate will be 15% of lowest amount = 105000 x 15% = 15750 Tk

Calculation the total liability:

Slab Rate % Amount

1st, 250000 0% Nil
2nd 400000 10% 40000
Balance,430000 15% 64500
Total tax liability 104,500
The Tax Rebate (15750)
Net tax liability 88750
 Importance of tax in the industrial development of Bangladesh (Tax holiday
scheme)
What is tax?
A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or
legal entity) by a governmental organization in order to fund government spending and various public
expenditures

Importance of Taxes
• Health
Without taxes, government contributions to the health sector would be impossible. Taxes go to funding
health services such as social healthcare, medical research, social security, etc.

• Education
Education could be one of the most deserving recipients of tax money. Governments put a lot of importance
in development of human capital and education is central in this development. Money from taxes is
channeled to funding, furnishing, and maintaining the public education system.
• Governance
Governance is a crucial component in the smooth running of country affairs. Poor governance would have
far-reaching ramifications on the entire country with a heavy toll on its economic growth. Good governance
ensures that the money collected is utilized in a manner that benefits citizens of the country. This money
also goes to pay public servants, police officers, and members of parliaments, the postal system, and others.
Indeed, with a proper and functioning form of government, there will be no effective protection of public
interest.
Corporate Tax Rate:

The tax law imposes income tax at 25 percent on listed entities and 32.5 [1] percent for non-listed entities.
Corporate tax rate changes announced this year include:

 an additional surcharge of 2.5 percent on income of companies in the tobacco sector

 a reduction of the corporate income tax rate for companies in the readymade garments sector to 15
percent (from 20 percent)
 a further 1 percent rate reduction (to 14 percent) for companies in the readymade garments sector
that have an internationally recognized green building certificate.

Certain companies remain taxed at different rates. For example:

 Banking companies, insurance companies and non-banking financial institutions are taxed at 40
percent if they are listed and 42.5 percent if non-listed.
 Cigarette manufacturers and mobile phone operator are taxed at 45 percent (before the additional
surcharge on cigarette manufacturers noted above)
 Companies engaged in production and export of knitwear and woven garments enjoy reduced
corporate tax rates of 20 percent, and companies that produce or export jute products are taxed at
10 percent.
Generally, a company's export earnings are 50 percent exempt.

For companies, the tax day (i.e. tax return due date) is now the 15th day of seventh month following the
end of income year; alternatively, where that fifteenth day is before 15 September, the tax day is 15
September of the year following the end of the income yea

Tax Holiday:

Tax holiday refers to a system through which new industries setup are exempted fully or partly from paying
income tax period. Such facility is provided for selected industries on fulfilling certain conditions.

Till 2018 in Bangladesh such new industries were exempted fully from tax payment which varied from 4
years to 12 years viz :

a. Industries in Special Economic Zone = 12 years.

b. Industries in under developed areas = 9 years.
c. Industries in Rajshahi,Sylhet,Barisal.Hill tracts = 5 years
d. Industries in Developed are, viz. Dhaka & Chittagong = 4 years

Areas where industries are setup Tax exemption Rate

i) Dhaka, Chittagong & Mymenshing i) First year of start commercial production =

Division (Excepting Hill tracts of Chittagong) 90%
ii) 2nd year = 80%
iii) 3rd year = 60%
iv) 4th year = 40%
v) 5th year = 20%

ii) Rajshahi, Khulna, Sylhet, Barisal & i) 1st & 2nd year of starting commercial
Rangpur Division (except city corporation) production=90%
area & Rangamati, Khagrachari and ii) 3rd year = 80%
Bandarban. iii) 4th year = 70%
iv) 5th year = 60%
v) 6th year = 50%
vi) 7th year = 40%
vii) 8th year = 30%
viii) 9th year = 20%
ix) 10th year=10%
 Assessee and the determination of residential status of an assessee.

Assessee:
Assessee is the person, who pays the tax

In the context of income tax in Bangladesh, section 2(7) of the income tax ordinance,1984 defines
assessee as a person by whom any tax or other sum of money is payable under the ordinance and includes
:

• Person against whom income tax case is going on .

• Person who is required to file tax return .

• Person who desire to be assesse and submits his income tax return.

• Persons who are required to file tax return under finance act from time to time

Residential status of an assesse

• In general residential status means the standing of an individual as to his residence in the taxable
territory and for firm and company. the standing of the location of their management and control
during relevant income year.

• under the income tax law in Bangladesh and many other Countries of the World, income tax
levied on the basis of residential status of tax payer. in other words, the tax liability of an assessee
depends upon

Determining Residential Status

Individual : The tests of residence for induvial assessee are given in sec 2 (55) of income tax ordinance.
to be a resident assessee, an individual must fulfill one of the following conditions :

 If he stays in the country for a period of at least 182 days during the income year

 If he stays in the country for at least 90 days during the income year and also had been in the
country for a period of at least 365 days during four years preceding the income year.

Under sec 2 (44), if any assessee fails to fulfil any one of the above two conditions becomes non-
resident for that particular year.

Firm: Firm will be treated as residents in Bangladesh if the control and management of their affairs is
situated in the country. Here control and management means defacto control not the dejure control.

On the other hand, if the control management of these assessees are from outside of Bangladesh, they will
be treated as non-resident.

Company: To be a resident, a company should fulfil one of the following conditions:

  It should be a company registered in Bangladesh under the companies act of 1913 or 1994 or 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. so a Bangladeshi company
will always be treated as resident.

 In the case of other companies, they will be treated as residents if the control and management of
their affairs are situated wholly in Bangladesh. here also control means defacto control and not
dejure control and the place of control lies there where the directing powers situate

Taxable income, Investment allowance, Tax rebate, Tax liabilities.

Taxable income: Taxable income is the amount of income used to calculate how much tax an individual
or a company owes to the government in a given tax year. It is generally described as adjusted gross income

Key Note :
 Taxable income is the amount of a person’s gross income that the government deems subject to
taxes.
 Taxable income consists of both earned and unearned income.
 Taxable income is generally less than gross income, having been reduced by deductions and
exemptions allowed by the IRS for the tax year.

Investment allowance
The investment allowance, permits investors to deduct from taxable income a certain percentage of the cost
of eligible assets in addition to depreciation allowances. The total deductions thus may exceed the cost of
an eligible asset over its lifetime.
Tax liability
Tax liability is the total amount of tax debt owed by an individual, corporation, or other entity to a taxing
authority like the Internal Revenue Service (IRS). In other words, it is the total amount of tax you're
responsible for paying to the taxman.

Mathematical Problem
Mr.X is a marketing executive of a multinational company. His per month salary is 90,000 Tk.
He invested tk 15,000 in purchasing a share, he has a life insurance premium of tk 20,000.
He donated tk 10000 in relief fund. He purchased laptop for 50,000 tk. He contributed tk 5000 to recognized
provident fund .
Compute : Taxable income, Investment allowance, Tax rebate, Tax liabilities
Step 1 :
Total taxable income is 90000 x 12 = 1080000 Tk

Step 2 :
Investment allowance:

Particular TK

1. Purchase share 15,000

2. Insurance premium 20,000

3.Donation 10,000

4.Purchased laptop 50,000

5.Provient fund (5000x2) 10,000

Actual investment 105,000

Step 3 :
Calculate tax rebate:
a) 25% of total taxable income excluding employee’s contribution to R.P.F = (1,080,000-5000) x 25%
= 268,750 Tk
b) Maximum Amount = 1 core 50 lac
c) Actual investment = TK 105000
d) The tax rebate will be 15% of lowest amount = 105000 x 15% = 15750 Tk
Step : 4
Calculation the total liability:

Slab Rate % Amount

1st, 250000 0% Nil

2nd 400000 10% 40000

Balance,430000 15% 64500

Total tax liability 104,500

The Tax Rebate (15750)

Net tax liability 88750

 Statement showing the total taxable income from the salary and house
property

Income from Salary

Income from salary includes wages, pension, annuity, gratuity, fees, commission, and profits, leave
encashment, annual accretion and transferred balance in recognized Provident Fund (PF) and contribution
to employees’ pension account.
Income from House Property

Income from House Property covers the rent earned from the House property which is chargeable to tax.
Sometimes, the owner may have to pay tax on 'deemed rent' in case the property is not let out. ... The
property may be used for any purpose except used by the owner for the purpose of running his business or
profession.

Math and Solution :

Mr Karim Ullah is a manager of an organization. During the year 2018-2019 he had the following income
from his salary

1. Basic salary 100000 Per month

2. Two bonus equivalent to one basic salary each
3. Dearness allowance 20% of basic salary
4. House rent allowance Tk.35000 per month
5. Entertainment allowance Tk.2000 per month
6. Medical allowance Tk.1000 per month
7. He received 3 months advance salary for certain family expenses

He contributes 10% of his B.S to the recognized provident fund. He purchase approved savings certificate
for TK.40,000 and paid insurance premium TK 15000 for the year. Policy value is TK 125000. Employer
deduct TK 300 per month for conveyance provided by the office. His other income reported to be 150000

Compute his Total taxable income from salary

 Mr.Karim Ullah

Income year 2018-2019

Assessment year 2019-2020

Statement showing total taxable income from salary (Sec-021)

Particulars Tk Tk
1.Basic Salary 100000x12 1200000
2.Bonus 100000x2 200000
3.Decarness allowance 1440000 x 20% 288000
4.House rent allowance
Total allowance 35000x12 420000
Less exempted
25000x12 = 300000
Or 50% of BS = 1200000x50%=600000 300000 120000
(Which is less)
5.Entertainment allowance 2000x12 24000
6.Medical Allowance
Total allowance 10000x12 120000
Less, 10% of Basic salary (1200000x10%) 120000 Nil
(Which is less)
7.Advance Salary 100000x3 300000
8.Contribution to R.P.F 1200000x10% 120000
9.Car allowance (1200000x7.5%) 90000
Less. Deduction (300x12) 3600 86,400
10.Other income 150000

Total taxable income from salary 2,464,400

 Statement Showing the Total Taxable Income from House Property

Question:

Mrr Hossain has a house at Nasirabad , Chittagong. The house is let out at tk. 50000 per month. He spends
the following amounts of the house for the year 2018-19

1. White house of the house tk 28000

2. Mosaic tk 120000

3. Rent collection expense tk 5000

4. City corporation tax tk 6000

5. Land revenue paid tk 5000 ( TK 2000 still due)

6. Salary of guard tk 60000

7. Loan repayment to IFIC tk 20000 (including tk 2000 is interest)

8. Fire insurance premium tk 10000

The owner bears the water and gas bill of the tenant, which amounted to tk. 20000 for the year.
Compute taxable income of Mr. Hossain for the house
 Mr.Hossain

Income year: 2018-2019

Assessment year: 2019-2020

Statement showing total taxable income from House Property (Sec-24-25)

Particulars Amount (Tk) Amount (Tk)

Annual value

Rental value = 50000x12 600000

Less, cost of gas and water bill paid by owner 20000 580000

Actual rental value =

Annual value ( M. V or ARV-the higher one)

Less Allowable deductions

1
1. Repair = of AV 145000
4
2. City Corp Tax 6000
3. Land revenue 2000
4.Interest on Loan 2000
5.Fire insurance premium 10000

165000

Total income from House Property 415000