Are you looking for salient features of income tax for the year 2018-19?
What are the changes in income tax after passing Finance Act 2017?
From the July 01 the changes have been implemented in your finance or accounts related transactions.
Or are you a CA student?
Now are you preparing yourself for the next November-December 2017 exam?
Are you searching the changes in the finance act 2017-18 which will be appeared in the taxation question?
Don’t worry about it.
I have divided the changes into following major areas which will help you to see the changes at a glance:
- Tax rate
- Tax exemption
- Tax administration reforms
- Replace of section/schedule
- New section/schedule inserted
- Including specific rate in separate annexure.
You will find the changes below in bullet point under above mentioned each major area.
You already know that total expenditure has been estimated at BDT 400,266 crore for 2017-18 and the estimate of NBR revenue collection is BDT 248,190 crore.
NBR will collect the above huge volume of revenue from following four sources:
- Income and corporate tax
- Import and export duty
- Value Added Tax (VAT)
- Supplementary duty
Most of the people have said that the budget is very ambitious. Finance minister also agreed in his budget speech.
But he added that in terms of GDP, size of our government expenditure is one of the smallest in the world.
In 2016, the emerging and developing economies of the world spent around 30.8% of GDP on an average as government expenditure whereas ours were barely 13.5%.
He also expresses his expectation that the budget will be raised to 19% of GDP over the medium term.
So we could expect that in future the size of the budget will remain increase though the outcry of civil society.
Now the question is how the NBR will collect the revenue as target set in the budget 2017-18?
As per budget speech of finance minister in the national parliament of Bangladesh following steps will be implemented by NBR:
- Tax exemption and tax holiday facilities will be withdrawn gradually
- Reduction of the rate of tax rebate
- Expansion of tax administration
- Expansion of tax net and tax base
- Various reform initiatives will be taken such as automation, modernization of tax system
So let’s start to see the major changes in income tax by finance act 2017.
Slab wise tax rate for individual taxpayers and corporate tax rate remain unchanged in 2017-18.
Corporate taxpayers often complain that the tax rate is high compare to other countries but finance minister said that the government has done a close examination of that fact and is not supported.
He added that global average corporate tax rate is 24.29% but in our country the rate is 25% for publicly traded company.
He agreed the rate is high in other sectors but it is mainly for the purpose to encourage the non-listed companies to bring in the stock exchange.
The good news for the corporate sectors that are now paying tax more than 40% in future the rate will be down to 40%.
In the budget of 2017-18, RMG is the most benefited sector in terms of tax rate.
The major changes in the tax rates for individual and corporate taxpayers are:
- Individual taxpayers slab wise tax rate remain unchanged (Please see annexure 1).
- Minimum tax remain unchanged for individual taxpayers who have a total income exceeding tax exemption threshold:
- Dhaka North, Dhaka South and Chittagong City Corporation Taxpayers BDT 5,000
- Other City Corporation Taxpayers BDT 4,000
- Other places Taxpayers BDT 3,000
- Corporate tax rate remain unchanged (Please see the annexure 2).
- Withholding tax rate on readymade garments export has increased to 1% from 0.70%.
- Corporate tax rate on readymade garments reduced to 12% from 20%. Moreover reduced tax rate @ 10% if the factory of such company has an internationally recognized green building certificate.
There was a huge debate about tax exemption threshold in printing, electronic and social media over the month of June after budget proposed by the finance minister in the parliament.
Finance minister said in his budget speech that what will be the minimum threshold for tax exemption is an intellectual debate.
Expert in this sector said that inflation and per capita income are increasing each year. So the exemption threshold should be near BDT 300,000 in general cases.
But he supplemented another issue by remembering that in most developing countries, the tax exemption threshold ratio is about 100% of per capita GDP whereas in Bangladesh the ratio is more than 200%.
Therefore he has stuck in the threshold as before except following some exceptions.
- Tax exemption threshold for person with disability is BDT 400,000 in place of BDT 375,000.
- Tax exemption threshold remain unchanged in general cases.
- Tax exemption threshold for the parents or legal guardians of a person with disability is BDT 25,000 higher. For details tax exemption threshold for individual taxpayers please see the annexure 3.
- Conditional tax exemption for infrastructure sector such as tolled national highways, expressways, flyovers, elevated and at-grade expressways, subway constructed under PPP.
- Tax exemption extended for another 8 new information technology sector:
- Software or application customization
- Website development
- Website hosting
- Digital data analytics
- Software test lab services
- Overseas medical transcription
- Robotics process outsourcing
- Cyber security services
- Any investment from an alternative investment fund recognized by BSEC. But if the income from this fund is distributed then the income should be recognized as dividend and will be taxable.
- Any income of the BSEC for the Assessment Years starting from the first day of July, 2017 to the thirtieth day of June, 2022.
- Any amount in the nature of an honorarium or all allowance from Bangladesh Freedom Fighter Welfare Trust or any welfare allowance received by any person from the Government.
- Any reward received by any person from the Government.
- Limit the cost of bus or minibus to BDT 2,500,000 for allowing depreciation is to be waived of transportation service for students of an educational institute or the employees of a business entity.
- Any income derived from the operation of an elderly care home.
Surcharge is introduced by the government to combat the risk of increasing inequalities resulting from the continuous economic growth of country.
Finance minister confirms that surcharge will be maintained until the net wealth tax is enacted.
Besides the risk of inequalities, surcharge also implemented for the hazardous products which are harmful for health like tobacco products.
- Net wealth surcharge rate for individual taxpayers remain unchanged (Please see the annexure 4).
- 5% surcharge on the income from the business of producing cigarette, bidi, zarda, gul and other tobacco items.
The minimum surcharge is BDT 3,000 if the net wealth exceeds BDT 22,500,000.
Return, Tax Audit and Income Year
- Allowing a branch office, liaison office or a subsidiary office (including a subsidiary thereof) of a foreign parent company to maintain an income year uniform to its parent company.
- The return submission date for the companies which was on 15 July extended to 15 September.
- Introducing online submission of returns, appeal petitions, alternative disputes resolution (ADR) petitions and other applications
- Make optional to submit wealth statement for individual taxpayers who’s wealth will be exceeded BDT 25 lakh. But if any taxpayers have motor car or have apartment or investment in buying house then he should submit the statement.
- Make more easily, transparent and friendly tax audit.
- Make mandatory to submit return for an employee holding an executive or a management position in a business or profession.
Tax Administration Reform
Regularly reports on tax disputes are publishing in our media.
These tax disputes can be resolved by the businessmen with the help of taxmen if tax administrative reforms are implemented with the changes of business environment.
Finance minister said that modernization and automation of tax system will be implemented gradually to introduce global best practice in tax law and administration.
Therefore a number of reforms for the simplification of tax system and better NBR clarification have been proposed in the budget.
We all know that to collect the huge revenue through NBR, tax administration reform is essential.
And following reforms will be initiated during the current financial year.
- Introduction of e-TDS system under a central withholding tax unit with required number of withholding tax zones under the central unit.
- Establishment of a modern and fully automated tax information unit that will be connected to other systems and database of the country, automatically gather tax related information from those interconnectivity for the purpose of expanding tax net and combating tax evasion.
- Establishment of an appropriate administration setup for the international taxes that will deal with combating cross-border tax evasion, capital flight and facilitating recovery of such evade tax.
- System generated order, notice, requisition, certificate, communication, letter or an acknowledgement of receipt generated by computer or electronic system
- Accounts of taxpayers, statements, documents, data etc submission on electronic form or electronic media.
- Expending the area of tax registration.
- Rationalizing some tax deducting provisions and removing some application ambiguities.
- Expansion of scope of reopening of tax evasion cases and ensuring simplification, transparency and removal of ambiguities regarding disposal of such cases.
- Establish two new tax zones in Jessore and Kustia and gradually expand in all important districts.
- Establish tax circle offices in 103 new upazillas in addition to existing 87 Upazillas tax circle offices.
Amendment, replace and new section/schedule
You know that in each financial year, there was comparatively more changes in amendment of section/schedule than replace or inserted of new section/schedule in income tax.
Most of the amended of section/schedule are mentioned in the above major areas. For further clarification you may download the finance act 2017.
The accounts people are very much interested to know the Tax Deducted at Source (TDS) rates as changes in the finance act 2017.
The CA students or the people who are in the audit job also require the full list of TDS rates to check whether the responsible person has deducted the tax at source accurately.
Full list of TDS rates has been published in separate article.
Please keep your eyes on this blog.
Or you may hit the like button of my facebook page at the end of this article. You will get all updated alert of income tax in the page.
The section/schedule including the headline of replaced and new section/schedule is mentioned in the following paragraphs so that you could understand where the changes have happened.
It will help you to easily find out the changes in the income tax.
Replace of section/schedule
- 53E Deduction or collection at source from commission, discount, fees, etc.
- 79 Production of accounts and documents, etc
- 82BB Universal Self Assessment
- 93 Tax, etc. escaping payment
- 120 Power of Commissioner or Inspecting Joint Commissioner to revise the erroneous order
- 124AA Penalty for failure to verify Taxpayer’s Identification Number, etc.
- 184A Requirement of twelve-digit Taxpayer’s Identification Number in certain cases
- The Sixth Schedule Part A paragraph 33
New section/schedule inserted
- 133A Revision of penalty based on the revised amount of income
- 178A System generated notice, order, etc
- 178B Electronic filing, etc
- The Sixth Schedule Part A paragraph 54, 55, 56, 57 & 58
Please note that this article is developed to give an overview of the changes in income tax of Bangladesh and does not cover the area to reach a decision solely based on it.
So please rely on main tax related resources if any complexity arises during your decision making.
Annexure 1: Individual taxpayers tax rates other than companies
|On first BDT 250,000||
|On next BDT 400,000||
|On next BDT 500,000||
|On next BDT 600,000||
|On next BDT 3,000,000||
|On the balance of total income||
|Income of non-resident||
Annexure 2: Company Tax Rate
|Publicly Traded Company||
|Non- Publicly Traded Company||
Publicly traded Bank, Insurance and Financial Institute (other than Merchant Bank)
Newly established Bank, Insurance and Financial Institutions approved by government in 2013
|Non-publicly traded Bank, Insurance and Financial Institution||
|Publicly traded mobile phone company||
|Non- Publicly traded mobile phone company||
|Special Tax Rate|
|Cigarette, bidi, zarda, chewing tobacco, gul or any other tobacco products manufacturers||
|Income of Co-operative Society||
Annexure 3: Tax exemption threshold for individual taxpayers
Women and senior citizen aged 65 years and above
Person with disability
Gazette war-wounded freedom fighters
Annexure 4: Surcharge based on disclosed net wealth of individual taxpayer
Amount of net wealth
|Rate on income tax|
|Upto BDT 22,500,000||
|From BDT 22,500,001 to BDT 50,000,000||
|From BDT 50,000,001 to BDT 100,000,000||
|From BDT 100,000,001 to BDT 150,000,000||
|From BDT 150,000,001 to BDT 200,000,000||
|Where net wealth exceeds BDT 200,000,000||