Dhaka Bureau: The new income tax law has been raised in the form of a bill for passage in the National Parliament. There are no major fundamental changes in the new law compared to the existing Income Tax Ordinance. However, some changes have been made.
Such as changing the definition of the company; filing source tax returns to the company every month; the obligation to file proof of return includes five more areas; disclosure of assets when traveling abroad, etc. Again, the option of canceling the Tax Identification Number (TIN) has been kept. A tax exemption of up to 4.5 lakh taka has also been proposed for house rent, travel, and treatment.
On Thursday, Finance Minister AHM Mustafa Kamal raised the ‘Income Tax Bill 2023’ in the National Parliament. Later, the bill was sent to the Parliamentary Standing Committee on Finance Ministry for examination and a report within five days. The Income Tax Act has 25 chapters, 345 sections, and 8 schedules.
The draft Income Tax Act was finalized by the National Board of Revenue (NBR) late last year. Bangladesh is taking a loan of 3.7 billion dollars from the International Monetary Fund (IMF). The government has taken the initiative to pass the Income Tax Act to fulfill the conditions of the IMF.
This year’s income tax law has changed the definition of company. Various organizations, including NGOs, industrial and trade organizations, foundations, associations, cooperative societies, and educational institutions, are included in the definition of a company. Tax rates and other regulations of these organizations must be followed as a company.
At present, companies deducting tax at source from various sectors are required to submit returns to the NBR detailing the source tax twice a year. All companies other than local authorities, autonomous bodies, any authority of government, schools, firms, private associations, private hospitals, clinics, and diagnostic centers are required to file the previous month’s withholding tax return by the 15th of every month.
Currently, 38 government and private services require proof of an annual income tax statement or return submission. The new law has added five more sectors to this list. These are: 1. of the landlord while taking rent or lease in the City Corporation area by the specified person; 2. when the service or product is received by the specified person from the supplier of that product or service; 3. To open and maintain bank accounts of trusts, funds, foundations, NGOs, microcredit disbursing organizations, societies, and cooperative societies; 4. to register, license, register, or maintain a vendor or deed writer in stamps, court fees, and cartridge paper; 5. Capital Development Authority, Chittagong Development Authority, Khulna Development Authority, Rajshahi Development Authority, Gazipur Development Authority, Cox’s Bazar Development Authority, or other such authorities constituted by the government from time to time or other city corporations, when submitting the building design application for approval to the municipality.
On the other hand, the proposed budget for the fiscal year 2023–24 states that, even if the total income of a taxpayer who is required to file a return does not exceed the tax-free limit, the minimum amount of tax will be two thousand rupees regardless of the amount of income.
The new law requires a taxpayer to submit a statement of assets if he or she goes abroad in any tax year for reasons other than medical or religious travel abroad for religious purposes, including Hajj. Apart from this, if a taxpayer buys assets outside the country, he has to file a statement of assets. A statement of assets has to be submitted even if the shareholder is a director of a company. These three new conditions have been added to the asset statement filing.
The existing Income Tax Ordinance currently has three conditions for the submission of a statement of assets while filing an income tax return. A statement of assets is mandatory only if one of these three conditions applies. The conditions are: 1. If the total assets amount in the financial year is 40 lakh taka; 2. If owning a motor vehicle; 3. If owning a house, property, or apartment in the city corporation area. If you invest in these assets, you have to pay the return of the assets as per the existing law.
Apart from this, if the tax officials come to know with proof that someone has assets abroad, then the new law provides for the imposition of a penalty against those assets. The new Income Tax Act provides for the cancellation of TINs. But there are a few conditions. One of these is if there is no taxable income for three consecutive years and no future taxable income due to physical disability; if it ceases to exist due to death, termination, extinction, or similar reasons; if it leaves Bangladesh permanently; or if it has no income-earning activities in Bangladesh.
According to the new law, a taxpayer will be exempt from tax on all allowances up to Tk 4.5 lakh or two-thirds of the annual gross income, whichever is less. In this year’s budget, it has been proposed to cancel the notification of how much tax exemption is available on these allowances.
A few changes have also been made in the rules for availing of the investment tax rebate. For example, 3 percent of the taxpayer’s total income, 15 percent of the total investment as per the rules, or Tk 10 lakh, whichever is less, will be the amount of the investment tax rebate. Apart from this, the new law proposes to make legal provisions for restructuring, mergers, and demergers that are tax neutral. Apart from this, a startup sandbox has been proposed to strengthen the startup environment, which was introduced last time. Apart from this, provisions have been inserted to curtail the discretionary powers of tax officials.
