Bangladesh Government have recently published Finance Bill 2016 which includes the proposed budget for 2016-17. In the finance bill, Finance minister suggested several changes in existing taxation laws. Individual and corporate tax rates and rebates will be reformed if the proposed bill is passed in the National Assembly. Here, We like to let you know about current changes in tax law applicable for individuals which will be effective from July 2016.
- Tax rebate:
In earlier years, actual investment for tax rebate was 30% of the total taxable income and tax rebate was 15% on the allowable actual investments. However, this year government has reduced the investment celling up to 20% of the total income and tax rebate as following manner:
Total income Amount eligible for credit:
i. For total income up to 10 lakh, 15% of the actual investment;
ii. For total income above 10 lakh but below 30 lakh, 15% of the first 2 lakh of actual investment and 12% on the rest of the actual investment;
iii. For total income above 30 lakh, 15% of the first 2 lakh of the actual investment; 12% of the next 4 lakh of the actual investment; and 10% on the rest of the actual investment;
You should know that Income tax Ordinance, 1984 considers following items as actual investments and allows investment rebates:
- Payment for insurance premium up to 10% of the policy value;
- Any amount paid as contribution to the provident fund;
- Amount deposited to any DPS up to 60,000;
- Purchase of Laptop with value up to 100,000 and computer with value up to 50,000;
- Investment in secondary shares of company, mutual fund or debentures;
- Any investment in purchase of government treasury bond;
- Any amount of donation to the govt. Zakat Fund;
- Payment to any benevolent fund for family members;
- Any donation to establishments by Aga Khan Development Network;
- Any donation to educational or philanthropic institutions approved by NBR.
If you have not made any investment yet, we encourage you to do so and obtain proper documentations to claim tax rebate.
- Submission of tax return:
Up to last year, individual assesses were required submit tax return by 30th September but there were several extension of the time limit. However, from July 2016, government has announced 30th October as “tax day” for individual assesses. Individuals are required to submit their tax returns before or by the tax day. There will not be any time extension to submit tax return from this year onward. Anyone who fails to submit their return before ‘Tax Day’ will be charged with penalty of 2% interest per month.
It should be noted that while submitting the return, you are also required to submit a statement of lifestyle which requires your total assets & liabilities as of 30 June 2016.
We encourage you to submit the tax return before 30th October 2016. In order to do so, you should collect the necessary information and documents to support your tax returns. Supporting documents includes:
1) A copy of passport size photograph;
2) Copy of 12 digit TIN certificates;
3) Bank statement for July 2015 to June 2016;
4) DPS statements for July 2015 to June 2016;
5) Salary statements from your employers with mentioning total TDS deducted;
6) TDS deduction certificate by banks for FDRs & DPSs
7) Supporting documents of your assets & liabilities;
8) Supporting documents of investments made by you;
9) Supporting for any other income and expenses (e.g. rent/ agriculture) - Tax Rates:
Tax rates for individual will remain unchanged for the Assessment Year 2016-17. Resident Tax payers (not necessarily Bangladeshi Citizen) & Non-Resident Bangladeshi individual tax payers will avail the tax slabs where other individual tax payers (non-residents other than non-resident Bangladeshi) will pay tax at the highest tax rate which is currently 30%.
We will discuss about more changes in Budget 2016-17 in other posts. Stay Tuned!