Department of Accounting & Information Systems

Assignment on: Major Differences between Income Tax Ordinance, 1984 and Income Tax
Act, 2023
Course Name: Corporate Tax Planning; Course Code: 7203
Submitted To
Mohammad Moniruzzaman, FCA, ACMA, AFHEA, PhD
Associate Professor
Dept. of Accounting & Information Systems
University Of Dhaka
Submitted By
Group: The Pace Makers
Section: B; Batch: 24th
Group Leader: Mst. Bristy Akter

Group Member’s Name ID

Md. Khairul Islam 24003

Mst. Bristy Akter 24006

Louish Paroi 24024

Umma Fatema Roksana 24126

Mohammad Kawser Ahmed 24129

Date of Submission: 6th August, 2023

i
“Assignment on: Major Differences between Income Tax Ordinance, 1984 and Income
Tax Act, 2023”

ii
Table of Contents
Overview of Income Tax Practice in Bangladesh ................................................................. 1

Major differences between Income Tax Ordinance, 1984 and Income Tax Act, 2023 ...... 3

Summary of the Income Tax Act, 2023 and Income Tax Ordinance, 1984 .......................... 4

Changes in the Head of Income ............................................................................................. 4

Individual’s Income Exempted Threshold ............................................................................. 5

Income from Employment ..................................................................................................... 5

Determination of Benefits (Section 33) ................................................................................. 6

No Minimum Tax .................................................................................................................. 7

Tax Exemption Benefits ........................................................................................................ 7

Tax Exemptions Defined ....................................................................................................... 7

Corporate Income Tax ........................................................................................................... 8

Changes in Areas Eligible for Investment Rebate ................................................................. 9

Removal of Tax Exemption on Dividend ............................................................................ 10

Tax Surcharge ...................................................................................................................... 10

Tax on Cars (Environmental Surcharge) ............................................................................. 11

Reporting Assets and Liabilities .......................................................................................... 11

Investment Allowances (Section 78) ................................................................................... 12

Exemption of Interest from Provident Fund ........................................................................ 12

Tax on Income from Exports ............................................................................................... 12

Inadmissible Expenses ......................................................................................................... 13

Compliance on Tax Deducted at source/Withholding tax ................................................... 13

VAT & Supplementary Duty ............................................................................................... 14

Proof of Submitting Return (PSR) of Income ..................................................................... 16

Depreciation & Amortization .............................................................................................. 16

Income from Agriculture ..................................................................................................... 16

iii
 Changes in Provisions of Minimum Tax ............................................................................. 17

Minimum Tax on Gross Receipt .......................................................................................... 18

Submission of Annual Return of Income ............................................................................ 18

Travel Tax ............................................................................................................................ 18

Installment of Advance Tax ................................................................................................. 20

Tax Deducted at Source (TDS) Rate ................................................................................... 20

Surcharge Exemption ........................................................................................................... 20

Repealing of e-TIN .............................................................................................................. 20

Tax Holiday Extension ........................................................................................................ 20

Income from Capital Gain ................................................................................................... 20

Less Documents Requirement ............................................................................................. 23

New Mathematical Formula ................................................................................................ 23

Long-Term Contract and Method of Accounting ................................................................ 23

Double Taxation Credit ....................................................................................................... 24

Refund of Excess Payment of Tax ....................................................................................... 24

Requirement of Audited Financial Statements .................................................................... 24

Submission of Annual Return of Income ............................................................................ 24

Income from Other Sources ................................................................................................. 24

Income from Financial Property .......................................................................................... 25

Loss Set Off & Carry Forward ............................................................................................ 25

Tax on Special Business Income and Disallowed Expenses ............................................... 25

Income from Rent ................................................................................................................ 25

Section Mapping Between Income Tax Ordinance- 1984 and Income Tax Act 2023 ..... 26

Experts Opinion about New Income Tax Act ..................................................................... 28

Impact of New Income Tax Act 2023 ................................................................................... 29

Criticism of New Income Tax Act 2023 ............................................................................... 31

iv
Conclusion .............................................................................................................................. 33

References ............................................................................................................................... 33

v
Overview of Income Tax Practice in Bangladesh
The term ‘tax’ has been derived from the French word ‘taxe’ which means ‘to charge’. Tax
was introduced to generate public and state revenues to cope with the situation after major
crisis like famine, devastation of war etc. In 1860, British Government tax was introduced in
the Indian sub-continent to reduce the revenue deficit caused by ‘Sepoy Mutiny’ of 1857 by
passing a bill to the Indian legislature entitled “An Act for Imposing Duties on Profits Arising
from Property, Professions, Trades and Offices”. Bangladesh as a part of Indian sub- continent,
inherited British-Indian tax system.

Income tax in the Indian sub-continent had its origin in 1886 via the Indian Income Tax Act
Through the political processes succeeded in abolishing some colonial legacy, the State
Government continued to follow the colonial tax system. Even after the liberation of
Bangladesh, the country followed the British-Indian income Tax Act 1922. Later, in 1984
Bangladesh introduced Income Tax Ordinance, 1984 which came into force on the 1st July,
1984.

A major reorganization and expansion of the Income Tax Department (ITD) took place in
1992, with a further expansion in 2001. The ITD acts as one of the two executive arms of the
National Board of Revenue for the collection of revenue. The ITD is divided into zones headed
by a commissioner. There are two types of zones, i.e. for making assessments and collection
of taxes (executive zone), and, for the hearing for appeals (appeals zone).

Recently, Bangladesh has adopted new Income Tax Act 2023 which has come into force on
the 1st July, 2023. The parliament of Bangladesh has repealed the Income Tax Ordinance, 1984
and enacted new Income Tax Act, 2023 effective from 22 June 2023.This Tax Alert briefly
explains the provisions introduced by Income Tax Act, 2023 enacted by the parliament of the
People’s Republic of Bangladesh which widens the scope of taxation, establishment of fiscal
discipline and other incidental matters. This act is a replacement of the Income Tax Ordinance,
1984 with extended areas of tax net with opportunities to taxpayers such as tax holiday for
newly established industry and infrastructure development in order to attract foreign direct
investment in Bangladesh.

The current fiscal regime of Bangladesh consists of direct and indirect taxation. Income Tax
comes under direct taxation. It is governed by the National Board of Revenue (NBR). Revenue
is also generated from non-NBR sectors and under the laws and acts of related ministries. The

1
NBR taxes include Customs Duty, Value Added Tax (VAT), Supplementary Duty (SD),
Personal Income Taxes (PIT) and Corporate Income Taxes (CIT).

Personal and Corporate Income Tax, the single largest source of direct tax, is governed by the
Income Tax Act 2023. The income tax laws consist of the following statutes;

- Income Tax Act 2023 – the parent statute;

- Income Tax Rules 2023;

- Finance Act;

- S.R.O. (Statutory Rules and Order)/Gazette Notification;

- Income Tax Circular;

- General or Special Order;

- Explanation/Office Memorandum;

- Verdicts of Appellate Tribunal for equivalent fact;

- Verdicts of the High Court Division on question of law; and

- Verdicts of the Appellate Division on judgment of the High Court Division.

Personal income tax is determined by combining Total taxable income from seven separate
heads. They are, Income from Salaries, Income from Household Property, Agricultural Income,
Income from Interest on Securities, Income from Business or Profession, Capital gain and
Income from other Sources. There are specific rules regarding each segment of income and tax
slabs for total net tax liability calculation. Corporate Income tax is applied on Bank, Insurance,
Financial Institutions, Merchant Bank, Mobile Phone Operator Company, Publicly Traded
Company, Non- Publicly Traded Company, Tobacco Manufacturing Company and One Person
Company. Corporate Income tax is determined at specified rate on Profit before Tax amount.
In computing net tax liability, there are adjustments of non-assessable income and expenses,
tax rebate etc.

2
Major differences between Income Tax Ordinance, 1984 and
Income Tax Act, 2023
The new Income Tax Act, 2023 was passed in parliament last week, and it is going to create
quite a stir in the coming days. This is the first complete overhaul since the Income Tax
Ordinance, 1984. There are many changes for individuals, companies, and even start-ups. Some
rules will be straightforward, while some will leave room for multiple interpretations, settling
on a consensus over time.

Instead of 'Income-tax Ordinance, 1984' made in English language, the Income-tax Act, 2023
has been made in Bengali language by making it more contemporary and modern. The contents
of the provisions have been converted into simple Bengali. The key features of new act is given
below;

 Conversion of existing Ordinance into simple Bangla.

 Aggregation & Synchronization of the Provisions relating to similar subjects in the
same chapter.
 Inclusion of Provisions as regards Accounting Procedures, Depreciation and
Amortization Rules, Capital Gains, Income from Intangible Assets, Transfer Pricing,
Alternative Dispute Resolution Provisions, etc., in the proposed Act.
 Proposal on Legal Provisions regarding Business Restructuring-Mergers & Demergers
[8th Schedule, Part-1].
 Proposal on Startup Sandbox to strengthen the Startup environment in Bangladesh [8th
Schedule, Part-2].
 Inclusion of Provisions to Reduce the Arbitrary Power of the Officers.
 Proposal on Provision for filing 12 Statements/Returns instead of 29
Statements/Returns to facilitate business and investment.
 Inclusion of Best International Practices to Simplify the Tax Compliance Proceedings.
 Proposal on various rules, including Earnings Stripping Rules (ESR), to prevent Tax
Evasion through various types of compromise and arrangement.

Here, we will go over the key changes that you have to keep in mind while filing your income
tax;

3
Summary of the Income Tax Act, 2023 and Income Tax Ordinance, 1984

The Income Tax Act, The Income Tax

Particulars
2023 Ordinance, 1984

345 187
Total Sections
8 7
Total Schedules
25 (Contain Different 23
Parts
Chapters)

Changes in the Head of Income

The Income Tax Ordinance, 1984

The Income Tax Act, 2023

Head of Income Reference Head of Income

Reference
Income from Section 21 Income from
Section 32
Employment Salaries

Income from Rent Section 24 Income from

Section 35
House Property

Income from Section 26 Agricultural

Section 40
Agriculture Income

Income from Section 28 Income from

Section 45
Business Business or
Profession

Capital Gain Section 31 Capital Gain

Section 57
Income from Section 22 Income from
Section 62
Financial Assets Securities

Income from Other Section 33 Income from Other

Section 66
Sources Sources

4
Individual’s Income Exempted Threshold

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

Tax Slab of Individual Income

AY 2022-2023 AY 2023-24

Level of Income Rate Level of Income Rate

Up to BDT 3,00,000 0% Up to BDT 3,50,000 0%

Next BDT 1,00,000 5% Next BDT 1,00,000 5%

Next BDT 3,00,000 10% Next BDT 3,00,000 10%

Next BDT 4,00,000 15% Next BDT 4,00,000 15%

Next BDT 5,00,000 20% Next BDT 5,00,000 20%

On Balance 25% On Balance 25%

Exempted income threshold for Individual taxpayers has been increased by BDT 50k, for
example from BDT 0.3m to BDT 0.35m for male and from BDT .35m to BDT 0.4m for female
taxpayers. In case of physically challenged and third gender taxpayers, the exempted limit is
BDT 0.475m. Furthermore, parents with physically challenged child will enjoy income
exemption limited by additional BDT 50k.

Income from Employment

Inclusion Exclusion

 Income Earned from Employee Share  Conveyance, Travelling and Daily

Schemes Allowance Received and Incurred
Fully and Exclusively for the
 Any Amount/Benefit received from
Performance of Official Duty
Any Previous/Future Employer

5
 Exemption Limit

The Income Tax Act, 2023 The Income Tax Ordinance, 1984

Deduct from Income from Employment Deduction from Salary:

;Lower of 1/3rd of Assessed Income or Tk. → House Rent Allowance: Lower of 50% of
4,50,000 BDT Basic Salary or 25,000 BDT

→ Conveyance Allowance: 30,000 BDT

→ Medical Allowance: Lower of 10% Basic

Salary or 1,20,000 BDT

Determination of Benefits (Section 33)

Allowances Criteria Value of Benefits

Accommodation Fully Paid or Arranged by Annual Value of

Facilities Employer Accommodation (Earlier, it was
lower of 25% of Basic Salaries
or AV)

Concessional Rate Difference between Annual

Value and Actually Paid

Motor Car Facilities Up to 2500 CC Monthly Tk. 10,000/-

Exceeding 2500 CC Monthly Tk. 25,000/-

Any Other Perquisites, N/A Monetary Value or Fair Market

Allowances or Facilities Value of Such Perquisites,
Allowances or Facilities

6
No Minimum Tax

The government recently introduced a significant measure to boost tax collection, imposing a
minimum tax of Tk 2,000 on all e-TIN holders. The aim was to encourage e-TIN holders to
file taxes, as currently, less than one-third of them do so. However, the government has since
retracted this decision and eliminated the Tk 2,000 minimum tax, avoiding further debate on
its fairness.

Minimum Tax Payable by Individuals:

Area of Residence Minimum Tax (BDT)

Dhaka North City Corporation 5,000

Dhaka South City Corporation 5,000

Chattogram City Corporation 5,000

Any Other City Corporation 4,000

Other Areas 3,000

Tax Exemption Benefits

To avail of tax exemption benefits, as specified in the Act or any SRO, taxpayers shall file of
their income tax returns on or before Tax Day.

Tax Exemptions Defined

Tax Exemptions encompasses various benefits, including tax rebates, holidays and exemptions
as well as payment of tax at a reduced rate. Additionally, it involves the exclusion of specific
income from the computation of total income.

7
Corporate Income Tax

Particulars Existing Tax Rates for AY Proposed Tax Rates for

2022-2023 AY 2023- 2024

Tax Rate Failure to

Comply with
Conditions

Publicly Traded Unchanged

Company that Issues
Shares worth more
20% 22.5%
than 10% of its Paid-
up Capital through
Initial Public Offering
- IPO

Publicly Traded Unchanged

Company that Issues
Shares worth 10% or
22.5% 25%
less than 10% of its
Paid-up Capital
through Initial Public
Offering - IPO

Non-publicly Traded 27.5% 30% Unchanged

Company

One Person Company 22.5% 25% Unchanged

(OPC)

Publicly Traded 37.5% N/A Unchanged

Bank, Insurance and
Financial Institution
(except Merchant
Bank)

8
Non-publicly Traded 40% N/A Unchanged
Bank, Insurance and
Financial Institution
(except Merchant
Bank)

Merchant Bank 37.5% N/A Unchanged

Private University,
Private Medical
College, Private
15% N/A
Dental College,
Private Engineering
College or Private
College Solely
Dedicated to
Imparting Education
on ICT

Changes in Areas Eligible for Investment Rebate

Heads The Income Tax Act, 2023 The Income Tax

Ordinance, 1984

Limit Ref. Limit Ref.

Govt. Treasury Bond 5,00,000 Para 7 N/A Para 28

BDT

Savings Certificates 5,00,000 Para 7 N/A Para 10

BDT

Unit Certificate/Mutual Fund 5,00,000 Para 7 N/A Para 10

BDT

9
 Govt. Securities 5,00,000 Para 7 N/A Para 10
BDT

Shares of Specified Deleted N/A Para 10

Investment Companies

Deposit Pension Scheme 1,20,000 BDT 60,000 BDT Para 11

(DPS)

Shares of Listed Companies N/A Para 8 Para 27

Removal of Tax Exemption on Dividend

One very interesting thing that is not getting much press is the removal of tax exemption on
dividend income from mutual funds and stocks. Previously, the first Tk 25,000 dividend
income from open-ended mutual funds was tax exempted. So was the first Tk 50,000 dividend
income from listed stocks. Starting now, these will be fully taxable.

Tax Surcharge

Tax surcharge is levied on total tax liability. But the percentage point is decided on one's net
asset value. It is crucial to remember that tax surcharge is not calculated as a percentage of total
assets. In general, the net asset limit for surcharge has been raised to Tk 4 crore from Tk 3
crore.

Surcharge (Net Wealth Attracting Surcharge has been Proposed to be Increased to BDT 4
Crore):

AY 2022-2023 AY 2023-2024

Total Net Wealth Rate Total Net Wealth Rate

Up to BDT 3 Crore Nil Up to BDT 4 Crore Nil

Over BDT 3 Crore up to Over BDT 4 Crore up

BDT 10 Crore to BDT 10 Crore

10
 10% 10%
Assessee having more Assessee having more
than 01 motor vehicle in than 01 motor vehicle
his/her own name or in his/her own name or
having at least 8,000 having at least 8,000
square feet of house square feet of house
property in any city property
corporation area

Over BDT 10 Crore up to 20% Over BDT 10 Crore 20%

BDT 20 Crore up to BDT 20 Crore

Over BDT 20 Crore up to 30% Over BDT 20 Crore 30%

BDT 50 Crore up to BDT 50 Crore

Over BDT 50 Crore 35% Over BDT 50 Crore 35%

Tax on Cars (Environmental Surcharge)

The Advance Income Tax (AIT) on cars remains unchanged. However, a new environmental
surcharge is applicable if an individual owns multiple cars. The surcharge is equivalent to the
AIT and is imposed on the car(s) with the highest cubic capacity (CC). Additionally, a CC-KW
equivalent has been introduced to accommodate electric cars, a timely decision. This surcharge
is ranging from BDT 25,000 to a maximum of BDT 0.35 million per additional car. This
surcharge cannot be set off with other tax or refunded.

Reporting Assets and Liabilities

Assets and liabilities are disclosed in a form called IT 10-B, which is often the most challenging
part of filing taxes. Unlike income, expenses, and rebates, which pertain to a specific income
year, IT 10-B is a comprehensive balance sheet representing a person's assets and liabilities
since they began filing income tax. Mistakes made in one year carry forward, causing future
complications. Previously, the form was mandatory for individuals meeting any of the
following conditions: 1) total assets exceeding Tk 40 lakh; 2) ownership of property in a city
corporation area; 3) ownership of a car; or 4) shareholding director of any company. It is crucial
for taxpayers to carefully review their IT 10-B and address any past issues. Furthermore,

11
starting this year, the government has the authority to audit tax files from previous years, as the
statute of limitation has been extended beyond the previous six-year limit.

Investment Allowances (Section 78)

The Income Tax Act, 2023 The Income Tax Ordinance, 1984

Lower of: 15% or 7.5% Lower of:

→ 3% of Total Assessed Income → Investment Made as Per 6th Schedule,

Excluding Exempted Income/Income on Part B
Which Reduced Rate or Minimum Tax is
→ 20% of Total Assessed Income
Applicable Excluding Exempted Income/Income on
→ 15% of Investment Made as per 6th Which Reduced Rate or Minimum Tax is
Schedule, Part 3 Applicable

→ BDT 10 Lac → BDT 1 Crore

Exemption of Interest from Provident Fund

The Income Tax Act, 2023 The Income Tax Ordinance, 1984

Deduction from Interest from Provident Fund

Lower of 33% of Income from Employment Lower of 1/3rd of Income from Salary or
(excluding interest from Provident Fund) or 14.5% as per the Statutory Regulatory Orders
Actual Interest (Para 5 of 2nd Schedule, Part (SRO) (Para 27 of 6th Schedule, Part-A)
3)

Tax on Income from Exports

Tax rate for export-oriented companies is 12% (10% for LEED certified factory) and 50% of
export income will be exempted for individual taxpayers till 2028.

12
Inadmissible Expenses

Expenses shall be disallowed in the following cases and be taxed separately at normal rates:

− Salary and rent paid in cash

− Payment for raw materials over BDT0.5k and other expenses over BDT 50k in cash

− Perquisite over BDT 1m.

− Royalty, license fee, technical fees etc. exceeding 10% of net business profit

− Head office or intra-group expenses exceeding 10% of net profit from business

− Entertainment more than 4% for first Tk. 1m income and 2% on rest of income

− Foreign travel expenses over 0.5% of business turnover

− Promotion expenses excluding advertisement over 0.50% of disclosed turnover

− Payment to any un-recognized fund

− Impairment loss and liabilities which are not specifically determined provisions etc.

Compliance on Tax Deducted at source/Withholding tax

Withholder Identification Number (WIN) is required for every withholding entity. The
deducted tax by the withholding entity should be deposited within 02 weeks of following month
where tax is deducted in July to May, within 07 days where tax is deducted at 1st to 20th days
of June and within next day of deduction at the rest of days of June. The mode of payment shall
be through Achallan or E- payment. Every withholding entity shall issue tax deduction
certificate within 02 weeks of the following month.

Withholding tax return need to submit within 15th days of next month. However, tax authority
may extend time for 15 days for submission of the WHT return. Previously, information
regarding salary and information regarding submitting tax return by employees were required
to be submitted separately however, now those should be submitted along with the monthly
WHT return in September and in April respectively.

13
VAT & Supplementary Duty

→ VAT on the purchase of any vehicle cannot be considered as an input anymore.

→ VAT consultants will now be eligible to represent any entity.

→ Invoices issued by a digital payment gateway shall be considered as a tax invoice subject to
fulfillment of certain conditions.

→ To obtain a VAT refund without carrying the balance forward, Supplementary Duty (SD)
at the import stage needs to be eligible for decreasing adjustment and goods subject to
Supplementary Duty (SD) cannot be supplied at the stage of local supply by the concerned
person.

VAT Rates Have Been Proposed to Be Increased for the Following Products:

Section Particulars Existing (2022- New (2023-24)

23)

Handmaid Biscuits 5% Per KG @ 5% Per KG @ 200 BDT

150 BDT
19.05

Biscuits 5% Per KG @ 5% Per KG @ 300 BDT

250 BDT

All Plastic
Tableware,
Kitchenware,
39.24 5% 7.5%
Household Products,
Hygienic and
Toiletries Products
and Other Similar
Products

48.18 Kitchen Towel and 5% 7.5%

Toilet Tissue

14
 76.15 Aluminum and 5% 7.5%
Aluminum Products

90.04 Sun Glass 5% 7.5%

→ VAT Rate for Confectionary Stores (Service code S022.00) has been proposed to be reduced
from 15% to 7.5%.

→ The definitions of “Online Retail Sale” and “Marketplace” have been newly introduced
under Service code S099.60 (e-commerce services).

→ Exporters Can Now Submit Application to the Commissioner without Submitting Process
Realization Certificate (PRC) to adjust the supplementary duty in cases of export of goods
through Mushak 7.1. 9

→ If an entity fails to claim the VAT credit or make adjustments within the stipulated timeline,
VAT returns cannot subsequently be amended/updated on a later date.

→ Only supplies which are eligible for input rebate can be included in the computation of
partial input tax rebate.

Supplementary Duty (SD) Rates Have Been Proposed to Be Increased for the Following
Products:

Section Particulars Existing (2022- Proposed (2023-

23) 24)

24.04 Products Containing 100% 150%

Tobacco, Reconstituted
Tobacco, Nicotine, or
Tobacco or Nicotine
Substitutes, Intended for
Inhalation without
Combustion; Other Nicotine
Containing Products Intended

15
 for the Intake of Nicotine into
the Human Body

48.13 Cigarette Paper Imported by - 150%

Other Importers

Proof of Submitting Return (PSR) of Income

For 43 specified services, PSR is mandatorily required. The key services are: obtaining loan
over Tk. 2m, opening post office saving accounts & purchasing saving certification over Tk.
0.5m; fixed deposit over Tk. 1m; opening bank account by trust, fund, foundation, NGO,
Microcredit Org, Cooperative society; purchasing land, building exceeding Tk. 1m in City
Corporation, Municipality & Cantonment board area; Trade license, IRC, ERC, Drug, Fire,
Environmental, BSTI; obtaining credit card; selling of goods and services using digital
platforms.

Depreciation & Amortization

Depreciation rate has been changed on certain items which are as:

− Initial depreciation: 10% on newly constructed buildings and 25% on newly installed
machineries or plants.

− Accelerated depreciation on machineries and plants: 50%, 30%, 20% on machineries and
plants used in new industrial undertakings over 03 years.

− Amortization: 20% of license fee, preliminary expense, software & computer application
made in BD; 10% on R&D, imported software & computer application.

Income from Agriculture

Provisions relating to the agriculture income remains almost same as previous. No expenses
will be allowed where TDS is not deducted appropriately where applicable.

16
Changes in Provisions of Minimum Tax

→ Deduction from payment to the Workers

Profit Participation Fund - WPPF [Section
88]
Inclusion of New Heads under Minimum
→ Deduction of tax from the Advertising Bill
Tax
of Media Broadcasting [Section 92]

→ Deduction of tax for rendering services

from Convention Hall, Conference Center,
etc. [Section 110]

→ Deduction of tax from Freight Forward

Agency Commission [Section 113]

→ Deduction of tax from Dividends [Section

117]

→ Collection of tax from Lease of Property

[Section 128]

→ TDS from compensation against

acquisition of property

→ TDS from interest on saving instruments

→ TDS from export cash subsidy

Deletion of List of Final Discharge of Tax → TDS from interest on saving deposits and
fixed deposit
Liabilities
→ Collection of tax on the transfer of
property

→ TDS from any sum paid by the real estate

developer to land owner

17
Minimum Tax on Gross Receipt

Minimum tax on gross receipt is applicable at following rates:

Individual (annual turnover exceeds Tk. 0.60% of total gross receipt

30m) or Firm/AoP (annual turnover exceeds
Tk. 5m)

Tobacco manufacturers 3%

Carbonated beverage 5%

Mobile phone operator 2%

Individual manufacturing cigarette 0.25%

New manufacturing industry (First 03 years) 0.10%

However, tax deducted at source is considered as minimum tax, i.e., tax deducted at source
shall not be adjusted, set off, and carry forward. The minimum tax rate was expected to reduce
but it increase in Tobacco Manufacturers. Previously, the rate is 1%, the present rate is 3 times
greater. The tax rate for Individual (annual turnover exceeds Tk. 30m) was 0.25% previously
which is increased to 0.60%.

Submission of Annual Return of Income

All taxpayers shall mandatorily submit the return under self- assessment scheme. However,
companies except banks, NBFI, insurance as well as person leaving Bangladesh may submit
the return under normal scheme. All return should be submitted within the Tax Day. No
provision for time extension for submitting the return of income.

Travel Tax

Proposed Amendments in Travel Tax, 2023:

Mode of Travel and AY 2022-23 AY 2023-24 Impact

Destination (BDT) (BDT)

Travelling by Air to North 4,000 6,000

America, South America,

18
Europe, Africa, Australia,
New Zealand, China, Japan,
Hong Kong, North Korea,
Vietnam, Laos, Cambodia,
Taiwan

Travel by Air to SAARC 1,200 2,000

Countries Cost of 'Travel by
Air’ and 'Travel to
Travel by Air to Any Other 3,000 4,000 Abroad' will Increase
Country

Travel by Air within N/A 200

Bangladesh

Travel by Road to Any 500 1,000

Country

Travel by Waterways to any 800 1,000

Country

However, the aforementioned rates of the proposed Travel Tax will be Half for Travelers
from 05 to 12 Years of Age.

Exemptions

 Traveler aged up to 05 Years;

 Traveler to Saudi Arabia for Hajj;
 Blind or Cancer Patients or Disabled Persons using Stretchers;
 Officials of the United Nations and their family members;
 Members with the Diplomatic Status of the diplomatic missions in Bangladesh and their
family members;
 Employees of the World Bank, German Technical Organization, and JICA, working in
Bangladesh and their family members;
 On-duty Crew of Aircraft;

19
  VISA-free Transit passengers who will not Stay in Bangladesh for More Than 72
Hours;
 Bangladeshi Citizen Working in Any Airline who is travelling abroad at free or
concessional fare.

Installment of Advance Tax

If taxable income of an income year exceeds BDT 0.6m then advance tax is required to be
deposit by 04 equal instalments on quarterly basis.

Tax Deducted at Source (TDS) Rate

TDS rates have been revised for various transactions: 10% (previously 5%) on receipt from
Workers Profit Participation Fund (WPPF), 5% (previously 4%) on advertisement, 15%
(previously 10%) on fees of surveyors of general insurance company, and 10% for any kind of
tobacco product supply. Failure to furnish the 'proof of submission of return' or non-receipt of
money by bank transfer leads to a 50% increase in the applicable tax rate.

Surcharge Exemption

Individual taxpayers with net worth up to BDT 40 million (previously BDT 30 million) are
exempt from surcharge. Additionally, an extra 2.5% surcharge is imposed on income from the
tobacco business.

Repealing of e-TIN

A provision has been introduced to repeal e-TIN. Individuals with no requirement to submit
income returns can apply for e-TIN deregistration.

Tax Holiday Extension

The new act extends the tax holiday period up to 10 years which previously was 05 years for
newly established industries and physical infrastructure, subject to specific conditions.

Income from Capital Gain

Capital gain is determined based on the value of consideration on asset transfer or fair market
value, reduced by the cost of acquisition and related direct expenses. However, no expense is
allowed where TDS is not deducted appropriately, if applicable. Transfer of land is also subject
to capital gains tax.
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Changes in the Provisions of Income from Business

References The Income Tax Act, 2023

Income from Business:

Fair Market Value of any benefit from the

relationship of any person's past, present
or prospective future business, whether it
is explained in monetary terms or not.

New Inclusion:

→ Any Management Fee by Management

Section 45 Company, including Mudaraba Company

→ Any amount receivable by the Lessor

Bank, Insurance or Financial Institutions

→ Realized Gains from Currency

exchange subject to the 3rd Schedule

→ Any income received from a

Discontinued Business

Section 46 (2) “Ka and Kha” do not include sale

proceeds (Capital Gain), and hence
application of the formula would be
challenging where asset is sold.

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Section 46 (11) Interest Income of a Financial Institution
(Bank) on Bad or Doubtful Debts will be
considered in the income year it was
credited or actually received.

Section 49 Admissible General Deductions:

→ Inventory Write-off

→ Duties Taxes, Municipal Taxes, Local

Taxes, Land Development Taxes, etc.,
Paid for Business Purposes excluding
Income Tax and Gift Tax

→ Realized Foreign Exchange Loss

Subject to 3rd Schedule

→ Payment to Workers Welfare

Foundation Fund Not Exceeding 5% of
Disclosed Net Business Profit

Section 51 Bad Debt Allowances:

→ All Reasonable Steps for Recovery of

Bad Debt

→ Bad Debt was Considered as Income in

Any Income Year

→ For Banks and Financial Institutions,

Bad Debt has been Confirmed as
Irrecoverable by Them and under IAS

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 Section 52 Proportionate Interest Expenses will be
Allowed:

→ If borrowed money is used outside

business

→ If asset acquired with borrowed money,

but transferred outside business

Section 53 Special Ceiling for Allowance of Interest:

→ Interest paid by a resident to an

associated enterprise will be allowed to
the extent and in the manner specified by
the National Board of Revenue (NBR).

→ Not applicable to interest not exceeding

BDT 15,00,000

Less Documents Requirement

29 types of documents are required to submit while filing a company's tax return. It is being
reduced to 12.

New Mathematical Formula

New mathematical formula has been prescribed to calculate the tax liability.

Long-Term Contract and Method of Accounting

Long term contract means contract for manufacturing, infrastructure, or construction over 06
months. Revenue shall be determined through output or input method as per accounting
standards. Expense shall be determined by comparing between estimated cost at beginning of
the contract and actual cost of the contract.

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Double Taxation Credit

Tax paid by the assesse in foreign country will be allowed to get credit of such tax if there is
double taxation agreement. If there is no double taxation agreement, tax paid in foreign country
may be credited subject to satisfaction of Deputy Commissioner of Tax (DCT).

Refund of Excess Payment of Tax

Excess payment of tax shall be paid to bank account of the taxpayer through electronic transfer
within 60 days which previously was 30 days from the closing the processing of return of
income.

Requirement of Audited Financial Statements

Firms, Association of Person (AoP), Fund, Long Term Contract having turnover exceeding
BDT 30m and every company shall submit audited financial statements along with the return
of income. Previously, it was in the case of a company, an audited statement of accounts and a
computation sheet explaining the difference between the profit or loss shown in the statement
of accounts and the income shown in the return.

Submission of Annual Return of Income

All taxpayers shall mandatorily submit the return under self-assessment scheme. However,
companies except banks, NBFI, insurance as well as person leaving Bangladesh may submit
the return under normal scheme. All return should be submitted within the Tax Day. No
provision for time extension for submitting the return of income. But previously, The National
Board of Revenue (NBR) is likely to extend the tax return submission deadline by a month if
responses from taxpayers were much lower than expectations.

Income from Other Sources

Regular source includes Royalty, technical fees, and income from transfer of right to use of an
intangible asset, cash incentives and any other income not classified in any income head.
Special areas include winning lottery, capital received in cash from company, loan taken
through non-banking channel, 50% of excess amount for purchasing motor car if it exceeds
10% of its capital and accumulated profit, unexplained credit, any advance, loan, gift received
over BDT 0.5m through nonbanking channel etc.

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Income from Financial Property

Income from financial property includes interest, gains and discount of government or
government approved securities as well as securities & debenture issued by company, interest
or profit from bank deposits, financial product or scheme and dividend. However, capital gains
from the transfer of financial assets will not be part of income from financial property.

Loss Set Off & Carry Forward

Loss from capital gain, business, speculative business, and tobacco business can be set off only
against the income of respective heads and loss can be carried forward for 06 successive years.

Tax on Special Business Income and Disallowed Expenses

Tax rate shall be regular on special business income and disallowed expenses. No adjustment,
loss set off or allowance is permitted.

Income from Rent

Income from rent shall be computed as before. In case of vacancy, landlord shall inform DCT
within 30 days and no repair& maintenance expense will be allowable in case of receiving
service charge from tenant. No expense shall be allowable if TDS is not deducted appropriately
where applicable.

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Section Mapping Between Income Tax Ordinance- 1984 and
Income Tax Act 2023

26
27
Experts Opinion about New Income Tax Act
The new law will remove a lot of complexities, according to Snehasish Barua, a tax consultant
and a member of the income tax review committee formed by the NBR. Shah Md Abdul
Khalque, senior additional secretary of the FBCCI and a member of the tax review committee,
said the draft income tax law has been formulated in a way that will increase direct tax and
reduce indirect tax. But he said NBR has to increase its capacity and go for automation if it
wants to reap the benefits of the draft income tax law. According to Snehasish Barua, Directors
of SMAC Advisory Service Ltd, the Act aligns with international best practices, introducing
share-based payment, demerger-related provisions, thin capitalization and General Anti
Avoidance Rule (GARR). He also mentioned that the implementation of the act will impose a
higher financial burden on businesses operating in Bangladesh. This increase in taxes is
expected to contribute to elevated costs associated with conducting business activities within
the country. As we are aiming towards graduation from LDC, our businesses must remain
competitive. The increased cost will pose a threat to competitiveness. Hope our policy maker
will look into these measures while enacting the law in the parliament.

The Finance minister AHM Mustafa Kamal said "In addition to reducing the discretionary
power of officials as much as possible, the proposed law has included accounting methods,
depreciation and amortization rules, provisions related to capital gains, income from intangible
assets, transfer pricing, alternative dispute resolution provisions, etc."

Dr. Iftekharuaman, executive director of Transparency International Bangladesh

(TIB) said that with the New Income Tax Act, Income Tax Bill, 2023 was enacted. The Anti-
Corruption Commission (ACC) has been inflicted such a mortal blow that it will now have to
struggle to swim in the deep sea of corruption with legs and hands tied. The bill provides that
the ACC cannot access tax, income, wealth and other related data of individuals under
investigation for alleged corruption without a court order, the timely securing of which, in the
abiding context, is likely to be a pipedream in most cases.

The ACC's expectations to catch the big fish or even small fries of corruption have thus been
further undermined, while the scope of impunity of the corrupt has been reinforced. This is also
rewarding news for forces outside and within the ACC who never wanted the commission to
be effective. This has to be treated as yet another evidence on how the ruling party's pledge of
zero tolerance against corruption, repeated quite often from the highest level, is blatantly
undermined.
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The expert opinion about the new income tax act 2023 is given below;

1. The provisions will increase the direct tax and decrease the indirect tax.
2. The act will impose a higher financial burden on businesses operating in Bangladesh.
3. The act will reduce the discretionary power of officials as much as possible, and align
the best international practice.
4. This law will impede Anti-Corruption Commission (ACC) activities.

Impact of New Income Tax Act 2023

According to expert opinion, the changes in the Income Tax Act 2023 that might adversely
impact the business are

The Income Tax Act, 2023 carries substantial importance for our nation, given the ongoing
changes in global and local economic conditions. The ramifications of this Act will have a
profound impact on the trajectory of our country's future.

Gradual withdrawal of minimum tax provisions in the new law, which was not withdrawn but
rather re-instated to the full extent, one of the key concerns is about the new act is that of a
minimum tax requirement for carbonated beverage industries. The government of Bangladesh
is planning to increase the turnover tax from 0.6 percent to 5.0 percent on the total gross receipt
for a fiscal year. This is a significant increase, as it is more than eight times the current rate.
This will drive the company to a price hike, which will ultimately reduce demand for the
product. If demand falls, total revenue collection might drop too since a significant portion
(43.75 percent) is collected through VAT and SD. This increase in taxes is expected to hinder
the growth of the industry. The minimum tax on telecom is expected to remain at 2 percent,
while the minimum tax on tobacco is expected to increase from 1.0 percent to 3.0 percent.

Under the new act, incentive bonuses have been classified as perquisites, resulting in an
augmented tax liability for companies. A company will have to pay tax on perquisites above
Tk 1.0 million. The inclusion of incentive bonuses in the perquisite will raise the total perquisite
expense, and the company will have to pay tax when it crosses the limit.

In the new act, the implementation of an environmental surcharge for a tax payer who has
multiple motor vehicles is a commendable measure. This surcharge serves as a deterrent to
discourage the ownership of multiple cars, which directly contributes to air pollution. This is
really good for the environment, but it adversely impacts our businesses. However, it is crucial
to recognize the potential adverse effects on businesses. Numerous companies rely on owning

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multiple cars for their operations, and subjecting them to the surcharge may lead to increased
expenses. If a company owns 101 vehicles over 1500 cc but less than 2000 cc, they will be
required to pay an additional tax of Tk 5.0 million, which is not adjustable against corporate
tax liability. A company cannot claim depreciation on a car over Tk 2.50 million (Increased to
Tk 3.0 million) and also needs to pay taxes if the cost exceeds a certain percentage of capital.
Consequently, it would be prudent for the government to explore the possibility of exempting
businesses from this surcharge.

In the new act, there is a limitation on the adjustment of losses with other sources of income,
which has generated considerable debate. Previously, companies were permitted to offset
losses from their businesses against income from other sources, leading to reduced tax
liabilities. However, the current proposition aims to restrict the adjustment of business losses
solely within the same income category. This could be a burden on companies, as they will be
required to pay tax despite having business losses. Now a company is required to deduct tax at
source and deposit it into the government exchequer within a stipulated time. They need to
submit withholding tax returns on a monthly basis. The withholding tax increases by 50 percent
if a company cannot collect proof of the submission of a return. Now this new law requires a
company to collect from eight (8) categories of suppliers and service providers. failing which,
business expenses will be disallowed. Already, a company is burdened with discharging a lot
of responsibilities on behalf of the government. Now these additional responsibilities, with a
potential disallowance, will become more burdensome for a company.

It has also been observed by the expert that the provision under the withholding tax section has
been withdrawn. They are not sure whether this will be covered under the rule. It is strongly
recommended by them to formulate the necessary rules for clarification, as certain provisions
will create ambiguity in the absence of rules and guidelines. The lack of guidelines in the Act
will increase the cost of doing business due to higher WHT compared to the legitimate tax
liability. They suggest that the government may follow the structure of the 2016 VAT rules,
wherein one can easily find the rules in the respective chapter.

Snehasish Barua said that, "the implementation of this act will impose a higher financial burden
on businesses operating in Bangladesh. This increase in taxes is expected to contribute to the
elevated costs associated with conducting business activities within the country. As we are
aiming towards graduation from LDC, our businesses must remain competitive. The increased
cost will pose a threat to competitiveness. I hope our policymakers will look into these
measures while implementing them."
30
Impact of New Income Tax Act 2023;

1. Minimum tax rate is increased for individual, firm or AOP, Carbonate Beverage and
Tobacco Industry.
2. Cost of products will increase and that will lower the product demand and hence
decrease the revenue collection from VAT.
3. Incentive bonus is classified as perquisites and maximum allowable expense is 1.0
million. Above that range of expense, the tax liability will be increased.
4. Environmental surcharge demotivates the motor uses which is good for environment
but the company which rely on motor, have to non-exempted expenses of
environmental surcharge.
5. The current proposition aims to restrict the adjustment of business losses solely within
the same income category and this is a burden which can be on companies, as they will
be required to pay tax despite having business.

Criticism of New Income Tax Act 2023

Currently the gravest concern for the Government of Bangladesh is to raise the tax to GDP
ratio. It has been the lowest here among the Asian countries. The ratio surges around 9%. But
this ratio should be increased to both comply with IMF requirement and shift the debt-based
economy to a more self-reliant one. But the new act, according to Aminul Islam, a former
member of the NBR, hardly provides for the required rise in tax to GDP ratio. He also added
that bringing the laundered and black money in the legal channel is a big challenge for
Bangladesh. But the new act has been silent about this crucial issue. It provides no provision
as per recapturing the black money and the money already sent abroad illegally.

Many specialists said that consultations from the taxpayers should have been heeded to before
finalizing the act. One of the criticisms of the act is that the authority responsible for tax
collection is also the authority that coded the act. Therefore many tax experts expressed the
concern whether the act will be natural and efficient.

"As this is a common act for all the citizens, solely NBR or any foreign agency shouldn’t be
responsible for coding the act. They might be asked to prepare the draft and then any
independent neutral organization should thoroughly review the act before it is finally adopted"
said Abdul Majid who is a former Chairman of NBR. Economists also remarked that the whole

31
tax paying system should be more simplified so that people don't have to bear the unnecessary
hassle. They urged for enhancing capability of NBR.

Besides the aforementioned issues, there are a number of things in the new act that raises
concern for companies such as increased tax on carbonated beverage industries, carbon tax on
cars, change in loss adjustment etc. These issues are addressed below:

Absence of Bilingual Versions;

The new act has been officially coded in Bengali. No official English version of the act has
been issued by authority. This lack of availability in an international language might be a cause
of difficulty for researchers and transnational parties of interest. It might aslo be a problem for
the FDI partners.

Significant Impact on Soft Drink industries:

The turnover tax of this industries has increased from 0.6 per cent to 5.0 per cent on the total
gross receipt for a fiscal year. That's a strike on the industry of roughly an eight percent leap in
the costing which will result in swift price hike of carbonated beverages. This will reduce the
overall demand and hence thwart the growth of the industry to a significant extent.

Surcharge of Cars:

The new act has put emphasis on adverse climate effects. It introduced carbon tax on companies
owning multiple private vehicles. This might raise a significant concern for companies which
have business operations mostly relying on cars. For example, a company owning 100 cars
over 1500cc shall have to pay additional amount of almost BDT 5 million.

Adjustment of Loss:

Previously companies were allowed to offset their business losses by income from other
sources. This provision allowed companies avoid tax because of loss. But the new act limited
the offsetting option to only same category income. Thus companies now will have to count
taxes despite incurring loss in a year.

Rise in Perquisite:

The revised act defines incentive bonuses as perquisite. This new provision rises total
perquisites for companies. Companies have to pay taxes for any perquisites above one million.
This will put further tax burden on employee oriented organizations who tend to offer
significant bonus plans for employees.

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Conclusion
In conclusion, the new tax code is likely to elicit mixed reactions initially. However, as time
passes and the uncertainties are resolved, a consensus will emerge, enabling a fair assessment
of its effectiveness in achieving its intended goals. The new income tax act has been simplified
and aligned with international best practices. With patience and adaptability, we can navigate
these changes and optimize our tax planning strategies. The new act said about reducing the
discretionary power of tax officials and increasing the scope of tax with some changes to ensure
tax compliance.

References
1. https://www.tbsnews.net/economy/budget/new-income-tax-act-many-changes-be-
introduced-
642474#:~:text=%22Instead%20of%20'Income%2Dtax,the%20budget%20speech%2
0on%20Thursday.
2. https://www.thedailystar.net/opinion/views/news/all-you-need-know-about-the-new-
income-tax-act-3355371
3. https://www.tbsnews.net/economy/income-tax-law-2023-comes-effect-654646
4. http://bdlaws.minlaw.gov.bd/act-672.html
5. https://nbr.gov.bd/uploads/news-scroller/Income_Tax_act.pdf

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