Income Tax

 The tax imposed on a person or entity under the orbit of Income Tax Law is called income tax.
 Characteristics:
 It is a Direct tax
 It is Charged on total income of a person
 It is Charged on the income of the income year at the rate applicable in assessment year
 It is payable in the year following the income year
 It is generally charged on revenue income of a person
 It is a tax charged on a person for income that comes within the preview of relevant Income Tax Law
 The rate of income tax is determined by the government .

Constituents of Income Tax Ordinance in Bangladesh:

 Income Tax Ordinance (xxxvI).1984
 Income Tax Rules
 Finance Act
 Rules framed by NBR, Bangladesh
 Orders ,notes, instructions , circulars
 Income Tax Case Laws
 Income Tax
 Arguments in favor of income tax:
 Justice can be maintained
 Redistribution of income
 Low cost of administration
 Real budget estimation
 Instrument of fiscal policy
 Increase political consciousness
Arguments in against of income tax:
Difficult to define income
Ambiguous tax provision
Allegation about harassment
Hostile
Not compatible
Rise to arbitrary decision
Discourage savings, Investment and production
Income Tax

Role of income tax in the economic development of Bangladesh:

Tax holiday scheme

Tax holiday for tourist industry
Depreciation allowance
Investment allowance
Tax concession for small and cottage industry
Tax incentive for encouraging savings
Tax incentive for foreign investment
Allowance for scientific research
Tax incentives for remittance to Bangladesh
 Income and its classification
 Income:
Income as per sec. 2(34) of income tax ordinance ,1984 includes the following-
 Any income ,receipt, profits or gains from whatever sources is derived which are chargeable to tax
 Any amount which is subject to collection or deduction at source
 Any loss of such income ,profits or gains
 The profits and gains of any business of insurance carried on by a mutual insurance association
 Any sum deemed to be income accruing or arising or received or deemed accrue or arise or received in
BD
 Any amount on which tax is imposed
 Any amount which is treated as income under the provision of this ordinance
Income means what comes in the hand of a person in terms of money or money’s worth as a result of
mental, physical and financial efforts during a period ,which has usual characteristics of income
and is within the preview of relevant income tax law.
 Income and its classification
Characteristics :
1.Periodic return
2. Received from third party
3. Definite source
4. Revenue receipt
5. Tainted with illegality
6. Money or money form
7. Received or accrued
 Income and its classification
Classification :
A. Non-assessable income
• Income from charitable and religious institution
• Voluntary contribution
• Income from local authority
• Income from provident fund or worker participation fund
• Special allowance
• Income received by the trustee
• Income of employees of foreign mission
• Pension, dividend , gratuity
B. Assessable income
• Tax free income
a)income from partnership firm
b)income from association
• Tax credit income
• Tax payable income
Income and its classification

Distinguish between capital receipt and revenue receipt:

Why we should distinguish them?
1.Sources of receipt
2. Isolated transaction
3.Nature of receipt
4. Surrender of rights
Distinguish between capital expenditure and revenue expenditure
1.Fixed and circulating capital
2. Purpose of expenditure
3.Nature of liability discharged
4. Nature of expenditure
 On investment allowance /tax credit income , rebate will be allowed On:
LOWER OF
Actual investment
Or
1.5 crore
Or
25% of (total income-employers contribution to RPF)

Allowable rate:
1. Total income within 10 lakh @ 15% of allowable investment
2. Total income within (10-30)lakh
15% on 1st 2.5lakh, 12 % on rest
3. Total income above 30 lakh
15% on 1st 2.5lakh, 12 % on next 5lskh, 10% on balance