Bangladesh Income Tax Law Chapter 1 PDF

Chapter 1 Sources and structure of Bangladesh income tax law Contents 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 Inco...

Chapter 1 Sources and structure of Bangladesh income tax law Contents 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 Page | 15  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, 1969 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. Page | 16 Syllabus links The topics covered in this chapter are essential background knowledge which will underpin the whole of your Taxation studies. Examination context Exam requirements In the examination, candidates may be required to:  Identify the social justice principles being applied for taxation purposes.  Understand which taxes apply to different taxpayers.  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. 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 a taxpayer earns the more he should pay''- is the basic principle of charging income tax. It aims at ensuring equity and social justice. Page | 17 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. As per the National Budget 2023, the tax revenue target for the fiscal year 2023-24 has been set by the government to Tk. 4,30,000 crore which was Tk. 3,70,000 crore in the revised budget of fiscal year 2022- 23. From the analysis of the National Budget 2023-24, it can be revealed that in the fiscal year 2023-24 revenue collections from Value Added Tax (VAT) have been estimated at around Tk. 1,63,837 crore (38.10% of total tax), from income tax at Tk. 1,53,260 crore (35.64%), from import & other duty at Tk. 52,200 crore (12.14%) and from supplementary duty at Tk. 60,703 crore (14.12%). 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: I. Taxes on income and profit 1. Income tax - Company 2. Income tax – Persons other than company II. Taxes on property & capital transfer 1. Gift tax 2. Narcotics Duty Page | 18  3. Land Revenue 4. Stamp Duty - non judicial III. Taxes on goods and services 1. Customs Duties (Both on import and export) 2. Excise Duties 3. Value Added Tax (VAT) 4. Turnover tax 5. Supplementary Duty (usually on luxurious and socially undesirable items) 6. Road tax 7. Electricity Duty 8. Other taxes and duties (Foreign travel tax) 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. Page | 19  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 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: I. The Income Tax Act, 2023: The Income Tax Act, 2023 came into force on 22nd June 2023. It is divided into 25 parts with numerous sections, sub-sections, clause, sub-clause, proviso and eight schedules. II. Income Tax Rules, 1984: 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, 2023 and Rules for Income Tax Preparer, 2023 have already been issued by NBR. III. 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. Page | 20  - Refinement of existing law. IV. 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 person or a class of persons. V. 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 assessee can go the court objecting the NBR's interpretation, and the judgments given by the courts act as guidance to the assessing officers and the assessee in similar nature in the future. 1.5 Structure of Income Tax Act, 2023 The Income Tax Act, 2023 came into force on 22nd June 2023. A brief description regarding the manual is enumerated below: 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 Page | 21 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, 1984 The IT Rules, 1984, 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, 2023 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. Page | 22 (c) Increase in savings: An effective and efficient tax system encourages people to save through providing tax credit facilities on investment allowance. (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 facilities on investment allowance, tax holiday scheme, depreciation allowance, tax incentives etc. (e) Economic development: The income tax revenue can be used by the government to ensure the economic development of the country. It can be used to build the infrastructure, to invest in social security programs, in various poverty elevation programs. The incentive to 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 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 and a physical infrastructural facility established for the production of specific goods and operation of designated facilities shall be eligible for tax exemption for a duration of 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, 2020, to June 30, 2024, 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. Page | 23 (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 include following person, namely – (a) a person by whom any tax or other sum of money is payable under this Act, (b) every person whose income, or income of any other person with whose income is assessable; (c) person for whom proceedings under this Act have been take to deternine the amount due to him or another person. (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 Act; (h) person against whom any proceeding under this Act have been taken. 2. Assessment year [u/s 2(24)]: "assessment year" means the period of twelve 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 assessment year in respect of any income for any period; 3. Business [u/s 2(14)]: "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 4. Capital asset [u/s 2(15)]: "capital asset" means (a) Property of any kind held by an assessee, (b) Any business or undertaking entirely or unit wise; (c) Any share or stock However, following mantter shall not include – Page | 24  (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, and are not used for purposes of the business or profession of the assessee or any member of his family dependent on him; 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 purpose utility shall not be deemed to be a charitable purpose – (i) Unless it is approved by the NBR; (ii) If it is involves in any of the following activities -  Any activities in the nature of trade, commerce or business whatever its natute or type  If any services rendered in exchange of consideration and the total value of consideration exceeds Tk 20 lakhs 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 Authrity; (g) Any firm, Association of Person, joint venture, called wherever name if any member of is company undre 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 (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; Page | 25  (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 a private 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", in relation to a company, includes the managing director, or any other director or other person, who irrespective of his designation, performs, any duties or functions in connection with the management of the affairs of the company; 12. Fair market value [u/s 2(48)]: "fair market value" means, value determined by the Board. 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 consultancy services (including the provision of services of technical or other personnel) but does not include: (a) Consideration for any construction, assembly, mining or like project undertaken by the recipient, or (b) Consideration which would be income of the recipient classifiable under the head "Income from Employment’ ; 14. Income [u/s 2(13)]: "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 related to income, profits or gains mentioned under a above; (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. Page | 26  (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; or 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 in accordance with the provisions of Part 3 of the Second Schedule; 18. Resident [u/s 2(55)]: "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; Page | 27  (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 tranfer of rights, including copyritht or licensing of the film, other than sale, distribution or exhibition of the cinematograph flim; (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, penalty tax, 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 – I. Stays outside Bangladesh on leave for higher education or on deputation or lien for employment; or II. 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- (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) 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; 24. Year [u/s 2(59)]: "year" means a financial year. 1.9 The concept of income 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 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 Page | 28 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 words “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); (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. Page | 29 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. Debt versus equity Debt and equity classification is also very important for tax purposes because servicing of debt through interest payment is an allowable tax deduction but servicing of equity through dividend is not allowable tax deduction. In order to maximize tax benefit at times corporates structure their balance sheet gearing or debt-equity mix in such way that it can achieve highest tax benefit. 1.11 Tax and income tax 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, 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 2023-24 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 2023-24 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 2023-24. The threshold limit in case of parents or legal guardian of any person with disability will be Tk. 50,000 more. If both father and mother of the disabled person is assessee then any one will avail this benefit. Page | 30 The 6 tier tax rates for the assessment year 2023-24 are given below: Tier Income slab Tax rate 1 First Tk. 350,000 0% 2 Next Tk. 100,000 5% 3 Next Tk. 300,000 10% 4 Next Tk. 400,000 15% 5 Next Tk. 500,000 20% 6 On rest of income 25% If the assessee is an owner of any small and cottage industry or engaged in such kind of activities at less developed / least developed area as specified by the NBR, he/she will be eligible to have a tax rebate on such income at following rates: (a) If production / turnover increase by more than 15% but less than 25% comparing to previous year, then 5% tax rebate will be allowed; (b) If production / turnover increase by more than 25% comparing to previous year, rate of rebate will be 10%. (2) Tax rates for companies Applicable tax rates for companies for the Assessment year 2023-24 are as follows: Nature of company Tax rates Publicly traded Transferred over 10% of share capital by IPO 20.0% company* Transferred up to 10% of share by IPO 22.5% Non-publicly traded company* 27.5% 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 pre- 40.0% initial public placement shall not exceed 5%) *Company tax rate shall be 2.5% higher if all income is not received, and every single transaction for above Tk. 500,000 and annual expense & investment over Tk. 3,600,000 are not 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 2023-24: (a) 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%. Page | 31  (ii) 10% to 15% on profit remitted outside Bangladesh by a foreign company with whom there is Double Taxation Avoidance Agreement with Bangladesh. (b) For assessee other than companies - (i) Resident and non-resident Bangladeshi individual, firm etc. –Normal slab rate. (ii) Non-resident foreigner 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 at 15%. (2) Other assesses: 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, a tax rate of 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 - agricultural income - income from business - capital gain - income from financial property, and - income from other sources An individual used to be taxed annually on his total income at the rate prescribed at the Finance Act enacted every year. B. Partnership 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. Share 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 Sixth Schedule, Part-1, and Paragraph-15. 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. Page | 32 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; or 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 30.06.2021 (other than bank, insurance, and financial 2020-21 2021-22 institution) 31.12.2020 (For bank, insurance and financial 2020-21 2021-22 institution) Page | 33 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. Different classes of assessee: As per ITA, 2023, assessee is a person who is liable to pay any sum under the Income Tax Act, 2023 or in respect of whom the proceedings have been under this Act. The below diagram depicts the different classes of assessee: Page | 34  Individual Firm Hindu Undivided Family Association of Persons Trust Fu nd 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 (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. Page | 35 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 assessee is Bangladeshi citizen? An individual stays in Bangladesh for - Non - resident No No 183 days or more No 90 days or more Yes 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", 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 necessarily means from where the actual trading or physical business activities are conducted. A fundamental case on this matter is De Beers Consolidated Mines Ltd v Howe where a South African incorporated mineral company is determined as having resident of London, UK. This matter is also elaborated further in various avoidance of double taxation treaty prepared under OECD guidelines. Taxation implication of resident or non-resident Page | 36 Determination of residential status of an assessee has a significance bearing on the tax liability 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. 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. 300,000 @10%, next Tk. 400,000 @15%, next Tk. 500,000 @ 20% and rest of the income @25%. But a non-resident foreign individual has to pay tax @ 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 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 @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: To be taxed or not Particulars of income Resident Non-resident Income received or deemed to be received in Bangladesh Taxable Taxable 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 2022 to 31st December 2022 and left for London. What will be his residential status in the income year 2022-23? Page | 37 Solution Mr. Uzzal is a non-resident since his stay in Bangladesh during income year 2022-23 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 2022 to 31st December 2022 and left for Japan. What will be his residential status in the income year 2022-23? Solution Mr. Arif is a resident because he resides in Bangladesh during 2022-23 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 2022 to 31st January 2023 and left for Trinidad. He came back on 1st May 2023 and still staying in Bangladesh. What will be his residential status in the income year 2022-23? Solution Mr. Akash is a resident because he resides in Bangladesh September 2022 to January 2023 [30+31+30+31+31] = 153 days and from 1st May to 30th June 2023 [31+30] = 61 days. In total he stayed for [153+61] =214 days in the income year 2022-23, 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? Solution His stay in Bangladesh during the income year 2021-22 is: July 2021 18 March 2022 31 April 2022 30 May 2022 31 June 2022 30 Total staying 140 days 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 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 resident. Page | 38 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 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. 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? Page | 39 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. 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 condition. In such a case, it is not important to know regarding his stay during 4 preceding years. Worked example – 1.8 Alex Deliveries is a partnership firm 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. 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 – 1.09 DBH 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 2021-22: 1. Salary income earned and payable in Bangladesh Tk.100,000. 2. Profit of Tk.40,000 from a business in London. Page | 40  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 Solution Mr. Akanda Income year: 2022-23; Assessment year: 2023-24 Computation of total income Particulars Resident Tk. Non-resident Tk. 1. Income earned in Bangladesh: Salary income 100,000 100,000 2. Foreign income: Profit from business in London 40,000 - 60,000 - Profit from business in Singapore 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 2021-22: 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 6. Gifts received from his parents Tk. 45,000 Compute total income of Mr. Zaman, assuming that he is a (a) Resident; (b) Non-resident Page | 41 Solution Mr. Zaman Income year: 2022-23 Assessment year: 2023-24 Computation of total income Particulars Resident Tk. Non-resident Tk. 40,000 40,000 Rent from property in Bangladesh (wherever paid) Income from business in USA controlled from Bangladesh ---------- 150,000 (as income accrues outside Bangladesh) Income from business in Dhaka controlled from Pakistan (as it is 180,000 180,000 received in Bangladesh) Interest on bank deposits at Canada 20,000 ---------- Total 3,90,000 2,20,000 income 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. Note-2: Gift is not income. Worked example – 1.12 From the following particulars of Mr. Rahman for the income year 2021-22, compute total income if he is resident or non-resident: 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 Income year: 2022-23 Assessment year: 2023-24 Computation of total income Particulars Resident Tk. Non-resident Tk. Income in Bangladesh (a) Income from employment received in Bangladesh 40,000 40,000 (b) Income from profession accrues in Bangladesh, 150,000 150,000 (c) Profits earned from business in Chittagong 60,000 60,000 Foreign income: 90,000 ---------- (a) Property income in South Africa (b) Income from agriculture in Bhutan 20,000 ---------- Total income 360,000 250,000 Page | 42