Are you an individual taxpayer? Every year when you paid your tax to the NBR you think you are paying more tax? And you have heard that tax burden could reduce by following proper tax planning.
Guess you have heard about tax rebate. And also heard that it reduces tax burden significantly.
Yes you are exactly right.
To know about investment allowance and tax rebate, first you have to calculate your taxable income. Based on taxable income, investment allowance is determined on which tax rebate is calculated. And Finally, tax liability is calculated to file tax return.
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We everyone invests money or saves money after spending the money for daily requirements. But most of the people do not know where to invest for tax rebate.
Investment is always helpful for our future. Mainly we save money monthly by thinking that the little savings will help us in future in a capital expenditure.
It may be flat booking or plot booking or building own house. Whatever the use of it, always savings is helpful for us.
Many of us try to save money for the better education of children in future. Higher education in abroad is the main target and it requires huge amount of money.
Investment in education for the children is the best future investment in life. Because you doing all sort of things for the well being of your children.
You are doing all things I mean saving money. But if you invest money by knowing the best places where to invest than you could reduce your tax burden significantly.
It has two benefits after knowing where to invest your money. One, your tax burden will be reduced significantly. And two, your ultimate goal for future investment will be secured.
Government has encouraged taxpayers to invest money and get tax rebate. And therefore specified the areas where you could invest for tax rebate.
From this article we will know where to invest or donate money for investment allowance. And in another article we will learn how to calculate tax rebate.
Where to invest for tax rebate?
The area of investments have specified in the sixth schedule part B of Income Tax Ordinance (ITO) 1984. If you invest in the specified areas, your investment will be allowable for tax rebate.
There is a maximum ceiling of investment. There are three amounts specified and the minimum amount among such three amounts will be eligible for investment allowance.
But whatever the amount is, you are eligible to get maximum 20% of your total taxable income as investment allowance. And on such amount you will get tax rebate as prescribed rates set by the NBR.
In one of my previous article I have discussed on how to calculate TDS on salaries. After reading that article, you will be able to easily calculate your total taxable income.
How to calculate tax rebate will be discussed in future in another article but here we will only focus on where to invest for tax rebate.
Followings are the specified areas by the NBR where you could invest as your wish to get tax rebate:
01. Any sum paid by an individual taxpayer as insurance premium for own life or spouse or a minor child. But the premium will be up to 10% of the actual sum assured.
02. Contribution to any provident fund under Provident Fund Act, 1925.
03. Employer’s contribution to a recognized provident fund in which the taxpayer is also a participant.
04. Ordinary annual contribution to approved superannuation fund in which the taxpayer is also a participant.
05. Any amount invested in any stocks or shares of a listed company with a Stock Exchange in Bangladesh
06. Any sum invested in the purchase of debentures or debenture stocks of a company approved by the Bangladesh Securities and Exchange Commission (BSEC).
07. Any sum invested in the purchase of the following:
(a) NBR specified savings certificates or instruments
(b) Unit certificates and mutual fund certificates issued by any financial institution or the Investment Corporation of Bangladesh (ICB) and its subsidiaries;
(c) NBR specified Government securities including Development loans or Bonds; and
(d) NBR specified shares of investment companies.
08. Any Deposit Pension Scheme (DPS) with a schedule bank or a financial institution but not exceeding BDT 60,000 yearly.
09. Any sum invested in the purchase of Bangladesh Government Treasury Bond.
Above areas are only the investments which will increase your money in the future.
But we always try to do for the society. Donation in the specified areas will also be recognized for investment allowance.
Where to donate for tax rebate?
The name of organizations or places also mentioned in the sixth schedule part B of ITO 1984 where you could donate money to get tax rebate.
Followings are the areas where you could donate money for enjoying tax rebate:
01. Any sum paid as donation to a charitable hospital which is established out side the city corporation area one year before such payment and is approved by the NBR.
02. Any sum paid as donation to an organization set up for the welfare of retarded people, established at least one year before such payment and is approved by the Social Welfare Department and by the NBR.
03. Any sum paid as Zakat to the Zakat Fund or as donation or contribution to a charitable fund established by or under the Zakat Fund Ordinance, 1982.
04. Any sum paid as donation to any socio-economic or cultural development institution established in Bangladesh by the Aga Khan Development Network.
05. Any sum paid as donation to a philanthropic or educational institution which is approved by the Government.
06. Any sum paid as donation to a national level institution set up in memory of the liberation war.
07. Any sum paid as donation to a national level institution set up in memory of Father of the Nation.
08. Any sum paid as donation to Prime Minister’s Higher Education Fund.
The above are the few areas where you could invest for tax rebate. But most of the people donate money in the mosque, madrasha, orphanage centre or for the well being of neighbor.
You may also watch the below video about where to donate for tax rebate.
People know that if they donate their money in those places they will not get financial benefit from such areas. But they are doing it for their own satisfaction.
The main point is that what your goal is and whether you could achieve your goal is the ultimate focus.
11 Comments
Great initiative. Had you provided references to look for, it would be even better. E.g.
07. Any sum invested in the purchase of the following:
(a) NBR specified savings certificates or instruments
(b) Unit certificates and mutual fund certificates issued by any financial institution or the Investment Corporation of Bangladesh (ICB) and its subsidiaries;
where should I look for this? Or whats the validity of it. I am no Tax Expert. So would appreciate your feedback.
You got to the reference I mentioned in this article.
Mr. Jasim Rasel.
salamu Alaikum.
Your initiative regarding tax filing is highly appreciable. Last year I have filed my tax return by the help of your article. I need some help regarding tax filing.
I am working in a NGO.
Will you help me to prepare my tax return file?
Dearness Allowance will be fully taxable or partially ?
I have DPS 2000/- per month. How much I will get tax rebate ?
May Allah bless you.
Dr. Asad
01914332161
What about investment in Sanchaypatra?
Thanks for this informative article. However, I would like to know about the income tax calculation on interest after DPS maturity. Example .. I have monthly installment of tk 10000 for 10 years. After maturity, the total amount will be 21.5 lac. So after 10 years later, the base amount will be 12 lac and accumulated interest is 9.5 lacs. If the maturity year is on 2019, then how to calculate income tax for 9.5 lacs ( interest amount). Here to note that bank deducts the source tax 10% monthly basis. 9.5 lacs is after 10% source tax deduction. Appreciate if you could shed some light on it.
Suppose i purchased a 5 years sanchaypatra in 2016. Can i show it as investment in every year? Or i need to purchase new sanchaypatra each year to get rebate.
You need to purchase in each income year for getting tax rebate.
Does FDR fall into the category of tax rebate? I know if one buys Sanchaypatra if gets a rebate, does it apply for FDR in any scheduled bank too?
No.
You need to purchase in each income year for getting tax rebate.
Kindly elaborate tax rebate benefit for investing on Sanchaypatra