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Sources of Income for computation of Total Income

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Sources of Income for computation of total Income & Tax Liability: For the purpose of computation of total income and charging tax thereon, sources of income can be classified into 7 categoric But according to IT rule- 24 it has been seen that Incomes are 10 catagories. Those are as follows :
*Salaries
*Interest on securities
*Income from house property
*Income from agriculture
*Income from business or profession
* Capital gains
*Income from other sources.
*Share of profit on partnership Firm
*Income from spouse or Minor child
*Foreign Income

Welcome to our Income Tax site

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Introduction,
By the grace of almighty Allah. Taxes are the most important source of revenue of the modern government. It is a compulsory levy,to be paid by the citizens who are liable to pay it, imposed by the government. many economists openion is that tax it is a compulsory payment to the government by taxpayer without expectation of any specified return. Refusal to pay tax is a punishable offence. Tax is not any fine or panelty. In order to acclerate economic development as well as to ensure the defense, adminstration, social welfare and other development activities govt. needs huge amount of resources. Taxation is a way to transfer the resources from private or non-govt. sector togovernment sector. Canons of taxation refer to the adminstrative aspects of a taxThere are four main cannons which are still recognized as classic . They are cannon of equality, cannon of certainty, cannon of economy and cannon of convenience.So as a citizen we have to gather knowledge about the tax

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Q Whats the Classification of Assessee?
According to Section 2(46) of the ITO, 1984, assessee can be classified into two broad categories:
1. On the basis of person, and
2. On the basis of Resident!?1
= Classification of Assessee - on the basis of person:
According to the provisions of the ITO, 1984, assessee is a person who is liable to pay any sum under the Income Tax Ordinance, 1984 or in respect of whom the proceedings have been initiated under this Ordinance. The term person includes:

i) Individual: An individual is a natural person including male, female, major, minor or even a lunatic. It refers to human being. However, the income of a minor or a lunatic can only be assessed in the ands of the legal guardian or manager acting as a deemed assessee (Shridhar Udai Nairain v. CIT, (1962) 45 1TR 577(AI1.)

ii) Firm: "Firm" has the same meaning as assigned to it in the Section IX of the Partnership Act, 1932. [Section 2(32))

iii) Association of Persons (AOP): An association of persons is the one in which two or more persons join for a common purpose or common action with a view to produce income, profits or gains

iv) Hindu Undivided Family (HUF): The expression "Hindu Undivided Family" is not defined by the Income Tax Ordinance, 1984 and is therefore understood in context of the definition of a Joint Hindu Family under the Hindu Law. A HUF is a coparcenary or tenancy in common consisting of all male persons descended from a common ancestor of stated degree of lineal proximity. It also includes, for certain limited purposes, wives and unmarried daughters of all such male members. They are joint in Mess, Worship and Residence; the family, as a whole is a unit of assessment.

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Q • Who is liable to pay the Tax or Who is called the assessee?
Ans : Assesses is a person who is liable to pay any sum under the Income Tax Ordinance, 1984 or in respect of whom the proceedings have been initiated under this Ordinance. According to Section 2(7) of the ITO, 1984, the term "Assessee" includes:

a) every person in respect of whom any proceeding under this Ordinance has beentaken for the assessment of his income or the income of any other person inrespect of which he is assessable, or of the amount of refund due to him or tosuch other person;

b) every person who is required to file a return under section 75, section 89 orsection 91;

c) every person who desires to be assessed and submits his return of incomeunder this Ordinance; and

d) every person who is deemed to be an assessee, or an assessee in default, underany provision of this Ordinance; Here, the term "person" includes an individual, a firm, an association of persons, a hindu undivided family, a local authority, a company and every other artificial judicial person. [Section 2(46)]

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Q. What are the definitions of " income" as per various court decisions ? Ans : (a) "`Income ` is what comes in from outside. no man can profit by dealing with himself" (CIT vs Construction ltd.1972 ) (b) "Income includes every kind of receipts or gains " (CIT vs Navin Chandra Mafatlal) (c) " Essentially the concepts of income indicates something which goes in to the pocket of the assessee &not what saves in its pocket" (Bhagwan Das vs Union of India) 1981.

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Q. What do we mean by "Income " according to income tax ordinance ?
Ans : The term income has not clearly been defined in the income tax ordinance 1994, rather,what to be incluted not to be included under the head Income has been explained. According to the section 2(34) of the ITO, 1984, income includes-

(a) Any income, profits or gains, from whatever source derived, chargeable to tax under any provision of this ordinance underany head specified in section 20 (i.e. salaries, interest on securities, income from house property, agricultural income, income from business or profession,capital gains & income from other sources )

(b) Any loss of such income, profit or gains;

(c) The profits & gains of any business of insurance carried on by a mutual association computed in accodance with paragraph 8 of fourth schedule.

(d)Any sum deemed to be income or any income accruing or arising or received or deemed to accrue or arise or be received in bangladesh under any provision of the ordinance

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www.bdsharemarketinfo.blogspot.com

Rules & Regulations for Determination of Income Tax

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Income Tax Ordinance, 1984- containing provisitions regarding assessment, Penalty,appeal etc.
Income Tax Rules, 1984-- containing administration of income tax ordinance,1984.
Finance Act-Containing various applicable tax rates & other ammendments of the income tax ordinance & amp; rules,1984.
SRO (Statutory Regulatory Orders ) Containing the issue of necessary circulars by NBR according to section 185 of income tax ordinance, these SRO`s are to be considered at the time of computing Income tax.
Income tax case Law :- In the course of assessment Proceedings,dispute may arse between NBR& amp; the asessee over the interpretation of some of the provisions of the act & rules, These disputes are solved by the court.

Specimen Form For Income From House Property

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Annual Value : Rental Value ********* Add: Tax deducted at source ********* Add : Owners expenses paid by the Tenant ********* Less : Tenants expenses paid by the Owner (********) ------------------ Actual rental value ********** Municipal value ********* ---------------- Higher of Actual rental value& Municipal Value ****** Less : dmissibleExpences : 1. Land development tax ********* 2.Insurancae Premium ********* 3. Interest on mortgage loan ********* 4. Municipal or local authority tax********* 5. Interest on borrowed capital ********* 6. Vacancy allowances ********* 7. Repair & Maintenance Expenses ********* ( 25% of rental value) ------------ ****** -------

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Why Income year is very important?

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An assessee has to pay tax on total income earned in the income year. Incomeearned in the previous or subsequent years to the income year will not beconsidered to compute total incme of the incomeyear.I
Investment allowance:- An assess will avail Tax credit facilities for anincome year only on the amount invested in the income year
Residential Status :- Residential status of an assess is determined on the basis of his stay in the income year, not in the assessment year.
The date of submitting the accounts of an assess is determined on the
basis of income year.

What is income year?

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What is income year?

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The Financial Year immediately preceding the assessment year or any other accounting period ( not exceed 12 months) as adopted by the assessee and ending withing the said financial year is the income year. Thus, If the assessment year is 2009-2010, Financial Year 2008-2009 is the income year.

What is tax rules ?

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Tax Rules are the Suppliment of various Sections & Provisions of Income Tax Ordinance,19884. National Board of Revenue ( NBR) enjoys flexibility to amend or change any rules through the notification in the official gazette.

Residential Status of an Individual

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a) Residential Status of an Individual:
According to Section 2(55)(a) of the ITO 1984, an individual will be a resident in any income year if he fulfills any of the following two conditions:
If he stays in Bangladesh for a period of, or for periods amounting in all to, onehundred and eighty-two [182] days or more in that year; or
for a period of, or periods amounting in all to, ninety days [90] or more in that yearhaving previously been in Bangladesh for a period of, or periods amounting in all to,three hundred and sixty-five days [365] or more during four years preceding that year;Here, it is not essential that an assessee should stay at the same place during this period (Kinlock v. I.R.C. 14 TC 736]. His stay of 182 days or more may not be a continuous one. It is sufficient if he stays for a minimum period of 182 days in aggregate in an income year. If none of the above two conditions are satisfied, such individual is non-resident in Bangladesh during that income year as per Section 2(42).

Residential Status of HUF, Firm and AOP:
According to Section 2(55)(b) of the ITO 1984, a Hindu undivided family, firm or other association of persons, will be a resident if the control and management of those affairs is situated wholly or partly in Bangladesh in that year. On the other hand, if the control and management of these bodies are situated wholly outside Bangladesh, they will be treated as non-resident.

Residential Status of Company:
According to Section 2(55)(c) of the ITO 1984, a Bangladeshi company or any other company, the control and management of whose affairs is situated wholly in Bangladesh in that year will be considered as resident. If the control and management of a company is situated partly or wholly outside Bangladesh, it will be considered as non-resident.

Effects of Residential Status in Assessing Income:
Determination of residential status of an assessee has a significant bearing on the tax liability as incidence of income tax varies according to the residential status of an assessee as per Section 17 of the ITO, 1984. Therefore, the scope of total income varies according to the residential status of an assessee. These provisions may be summarized as under:

To be tax ed or not                        Resident       Non-resident
Income received or deemed to be
   received in Bangladesh                 Taxable              Taxable
Income accrued or arose or
    deemed to accrue or arise in
     Bangladesh                                Taxable               Taxable
Income accrued or arose outside
    Bangladesh                                 Taxable            Non-taxable

Which incomes are "Income from other sources"

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Income from other sources are as followes ;

The income other than from salary, interest on securities,house property,Agricultural income, business or profession and capital gains will be included under the head "income from other sources"
Income from dividend and interest,Royalties & fees for technical services,from letting of machinery,plants or furniture belonging to the assessee etc.
Where the assessee has incurred any expenditure & he offers no satisfactory explanation about the nature &source of money , the amount of expenditure shall be deemed income of the assessee classifiable under the head "income from other sources"
Any income not classified under any head will be considered as income under this head.
Income from this head can be used to set off losses under other head except capital gain & speculation business.

Examples of income from other sources

1. Dividend from ICB Mutual fund/oher unit fund ******
Less : Exempted-upto Tk=25000.00 (****)

2. Dividend from public or private ltd compnay
Dividend received x 100/90 ******

3. Interest from bank deposit/profit from islami bank-
( intt. received x 100/90 ) *******

4. Interest from saving certificate- *******
Less: Final settlement (full) (*****)
5. Interest on post office saving bank & postal
saving certificate. *****
6. Any commisson /fee received from parties other
than employer. *******
7. Royalty income if tax is not deducted at source *******
8.Royalty income if tax is deducted at source(Exempted)
9.Income from prize bond/lottery/Quiz competition/
crossword. *******
Less : Exemption in full as final settlement (******)
10. Income/comission fee as remuneration of director. *******
11. Non agricultural income like sale of forest trees,
sale of fruits,sale of honey,sale of fish ofpond
(other than firm)etc. *******
12. income from invigilation & exam script evaluation. *******
13.Income from news articles/ column in newspapers. ******
14. Income from participating in radio/tv/cultural/
Traning programmes. *******
15.Income from lease of non - Agricultural land. *******
16.Income from tution. *******
17. Income from underwriting commission for sale of
shares &securities. *******

18. Income from non-resident husband/wife ( if not
Brought through banking channel) *******
19. Income from patent / licence *******

20. Income from rent of boat/mooring teminal. *******
21. Income from letting out appliences like furniture,
machineries etc *******
22. Unexplained investments *******
23. Any other income not classified under any head. *******
Less : Interest on loan taken to purchase share
Securities. (******)

Any revenue expenditure incurred for making
earnings. (******)
---------

Income Tax Rate for assessment year 2011-2012

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1. On First Tk. 1,80,000/ of total income = nil
2. On next Tk. 3,00,000/ of total income = 10%
3. on next Tk. 4,00,000/ of total income = 15%
4. on next Tk. 5,00,000/ of total income = 20%
5. on balance of total income = 25%
However in case of women, senior citizen of more than 65 years of old maximum non- assessable limit of total income is Tk. 2,00,000/and disabled persons Tk. 2,50,000/. Provided that , the minimum Tax is Tk. 2000/. Moreover if an assessee paying tax at a highest rate of 25%discloses at least10%higher income during the assessment year 2010-2011 than that of the previous year he will be allowed 10% tax rebate on the tax payable on that higher income.

Admissible Investments for Tax Rebate

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Types of investment qualified for the tax rebate are :-

Life insurance premium
Contribution to deferred annuity
Contribution to Provident Fund to which Provident
Fund Act, 1925 applies
Self contribution and employer's contribution to
Recognized Provident Fund
Contribution to Super Annuation Fund
Investment in approved debenture or
Stocks or Shares
Contribution to deposit pension scheme
Contribution to Benevolent Fund and Group
Insurance premium
Contribution to Zakat Fund
Donation to charitable hospital approved by
Board of Revenue
Donation to philanthropic or educational approved by the Government
Donation to socioeconomic or cultural development
Sestablished in Bangladesh by Aga Khan Development Network

Who Should Submit Income Tax Return

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• Who should submit Income Tax Return ? • If total income of any individual other than female taxpayers, senior taxpayers of 65 years and above and retarded taxpayers during the income year exceeds Tk 1,65,000/-. • If total income of any femate taxpayer, senior taxpayer of 70 years and above and retarded taxpayer during the incom year exceeds Tk 1,80,000/-. • If any person was assessed for tax during any of the 3 years immediately preceding the income year. • A person who lives in any city corporation/paurashava/divisional HQ/district HQ and owns a building of more than one storey and having plinth area exceeding 1,600 sq. feet/owns motor caras per motor vehicle act 1983,jeep & micro bus/owns membership of a club registered under \Law. • If any person subscribes a telephone. • If any person runs a business or profession having trade license. any professional registered as doctor, lawyer, income tax practitioner, Chartered Accountant, Cost and ManagementAccountant, Engineer, Architect and Surveyor etc. • Member of a Chamber of Commerce and Industries or a trade Association. • Any person who participates in a tender. • A person who has a Taxpayer's Identification Number (TIN). • Candidate for Union Parishad, Paurashava, City Corporation or Parliament. * Every Company must submit the Tax Return, wheather its taxable income have or have not.

Time To Submit Income Tax Return

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Time to Submit Income Tax Return: For Company By fifteenth day of July next following the income year or, where the fifteenth day of July falls before the expiry of six months the end of the income year, before the expiry of such six months. For Other than Company Unless the date is extended, by the Thirtieth day of September next following the income year.

Penalties For Non- submission of return

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Consequences of Non-Submission of Return • imposition of penalty amounting to 10% of tax on last assessed income subject to a minimum of Tk. 1,000/- • In case of a continuing default a further penalty of Tk. 50/- for every day of delay.

Assessment Procedure

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• Assessment Procedures • For a return submitted under normal scheme, assessment is made after hearing. • For returns submitted under Universal Self Assessment Scheme, the acknowledgement slip is determined to be anassessment order. Universal Self Assessment is of course subject to audit.

Deduction at source trated as Final Settlement

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Major areas for final settlement of tax liability:
Tax deducted at source for the following cases is treated as final discharge of tax liabilities. No additional tax is charged or refund is allowed in the following cases:-

Supply or contract work
Band rolls of hand made cigarettes
Import of goods
Transfer of properties
Export of manpower
Real Estate Business
Export value of garments
Local shipping business
Royalty, technical know-how fee
Insurance agent commission.
Auction purchase
Payment on account of survey by surveyor of a general insurance company
Clearing & forwarding agency commission.
Transaction by a member of a Stock Exchange.
Courier business
Export cash subsidy

Tax Recovery System

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Tax Recovery System: In case of non-payment of income tax demand the following measures can be taken against a taxpayer for realization of tax:- • Imposition of penalty • Attachment of bank accounts, salary or any other payment. • Filing of Certificate case to the Special Magistrate.

Advance Payment of Tax

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Advance Payment of Tax:
Every taxpayer is required to pay advance tax in four equal installments falling on 15th September; 15th December; 15th March and 15th June of each year if the latest assessed income exceeds Taka three lakh. Penalty is imposed for default in payment of any installment of advance tax.