BBA Program Course Title: Taxation Course Code: A408 Course Outline Introduction of Faculty

BBA program
Course title: Taxation

Course code: A408
Course Outline
Introduction of faculty:
Name: Aminur Rahman

Education : B.A (Hons) in Economics from
Dhaka University;
MBA from IBA (1980).
Service career: Joined BCS (Taxation) service in 1982
& retired as Member , National Board of Revenue in 2011.
Contact address : E-mail: amin_iba_tax@hotmail.com

Cell No: 01715 021791
Purpose : Tax plays an important role in post tax profit of an enterprise. It also has
an important bearing on cash flow of a business. The purpose of this course is to
introduce business graduates with the philosophy , rational, economic implication
as well as application of tax. This will help business executives in better
management of the enterprise.
Course material & reference: (1) Handout provided by the faculty
(2) Modern Public Finance: Bernerd P. Herber
(3) Public Finance A Normative Approach: S.Ganguly
(4) Income Tax Ordinance,1984
(5) Income Tax Rules,1984
(6) Value Added Tax Act
Grading Criteria: 2 Quiz: 10 % marks
Attendance: 10 % marks
2 Assignments : 10% marks
Mid term: 30 % marks
Final: 40 % marks
Total : 100% marks
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Course Outline:
Definition of tax
Tools of Govt. to influence the economy
How tax influences business
Type and classification of tax
Difference between types of taxes
Authorities of tax
Legal foundation of income tax
Some concepts of income tax
Heads of income
Computation of total income and calculation of tax
Filing of income tax return
Tax concessions
Assessment of income
Tax deduction at source
Accounting profit vs. Fiscal profit
Role of Government in the Economy

1.
Allocation of resources between different lines of production in a way that economic

welfare of the community is maximized [allocation].
2.
To distribute national income in side a way that it leads to maximum total satisfaction of
the community [distribution].
3.
To maintain the total volume of effective demand and thus national income at such a level
that there is full employment without either deflationary or inflationary tendency
[stabilization].
Explanation :
1.
Allocation:
How much resource is to be allocated by the government for the provision of social
goods for which there are no market eg. defence, flood control, highways etc.
&
How to distribute the cost of provision of the goods among the individuals in an optimum
manner (by means of to taxation). Individuals do not reveal their preference for social
goods they do not bid for such goods. Since the preference remains indeterminate,
allocation also become indeterminate.
attempts made to determine preference :
(i)
benefit approach
(ii)
process of voting.
Once the preference is determined then allocation can be done.
2.
Distribution:
Use the government revenue expenditure to bring about 'ideal' distribution of economic
welfare.
'Ideal' generally means equality between man to man. What is equality after all ?
Whether equality of income or equality of wealth or equality of welfare or equality of
opportunity.
Since others are difficult to determine equality of income is being pursued.
3.
Stabilization:
(i)
when private investment + consumption inadequate to full employment state
increase its expenditure or induce private sector to increase expenditure by tax
reduction.
(ii)
when private investment + consumption cause inflation state decreases

expenditure or induce private sector to cut expenditure.
Tools of government to influence the economy

Fiscal policy -Tax
Monetary Policy - Money supply.
Essence of Monetary Policy:
Exchange rate
Interest rate
Money supply
Essence of Fiscal Policy:
Tax
Subsidy
Tax:
a: When employment is low:
Tax is reduced on business which are labour intensive.
b.
When wealth is concentrated:

Incremental tax rate on high income groups or high property tax.
c.
When economic activity is skewed between places:

Tax holiday for less developed areas and high rate for developed areas.
d.
When balance of payment is in disfavor:

High tax on import, low tax or tax free on export.
Money Supply:
a.
When there is inflation:
Increase interest rate, squeeze credit.
b.
When there is recession:

Reduce interest rate, liberalize credit.
c.
When gap between export & import :

Devalue currency or increase L/C margin high import duty, tax free export.
How tax influences business
1.
In attaining growth
Tax collected is spent for payment of salary, bills to

contractors who spent this money to buy goods &
services. In other words creates effective demand.
Thus indirectly it creates market for the tax payer
4
and enlarges its business.

2.
In redistribution of income
If income is concentrated in few hands large

majority will have no money to buy goods. As a
result traders will have inadequate sale. By taxing
rich it also creates business for rich people.
3.
Facilitate utility
Tax money is used to build roads, bridges, water &

electricity supply thereby easing access to market,
or supply of run the machinery.
4.
Set priority
Vary tax rates to encourage or discourage some

sector of economy.
Definition of tax :
Oxford dictionary:
Money compulsorily levied by state on person, property or business.
Collins dictionary:
Money we pay to the government so that it can pay for public goods and services.
Mitras legal Dictionary:
`Tax is not correlated to a particular service rendered but intended to meet the expense of
the government.
Justice Oliver Wendal Homes:
Chief Justice, USA: Tax is what we pay for a civilized Society.
Hugh Dalton:
"A tax is a compulsory contribution imposed by a public authority, irrespective of the
exact amount of service rendered to the taxpayer in return, and not imposed as penalty for any
legal offence."
Every type of tax has defined its our arena in the law.
For example in the Income Tax Ordinance, 1984 tax was defined tax as follows :
[Section 2(62) "tax" means the income tax payable under this Ordinance and
includes any additional tax, excess profit tax, penalty, interest, fee or other charges
leviable or payable under this Ordinance;]
From the definition the following aspects are revealed:/var/www/apps/conversion/tmp/scratch_2/286616786.doc
(a)
Tax is not voluntary contribution. The payer does not have the option of not
paying or paying at lower rate. It is a compulsory levy.
(b)
It is levied by the state or local authority
(c)
It is levied on goods, services, person or property
(d)
Tax so collected is used to pay for public service.
What are Canons of Taxation ?
Canons of Taxation are the main basic principles (i.e. rules) set to build a 'Good Tax System'.
Canons of Taxation were first originally laid down by economist Adam Smith in his famous book
"The Wealth of Nations".
In this book, Adam smith only gave four canons of taxation. These original four canons are now
known as the "Original or Main Canons of Taxation".
As the time changed, governance expanded and became much more complex than what it was at
the Adam Smith's time. Soon a need was felt by modern economists to expand Smith's principles
of taxation and as a response they put forward some additional modern canons of taxation.
Adam Smith's Four Main Canons of Taxation

A good tax system is one which is designed on the basis of an appropriate set of principles
(rules). The tax system should strike a balance between the interest of the taxpayer and that of
tax authorities. Adam Smith was the first economist to develop a list of Canons of Taxation.
These canons are still regarded as characteristics or features of a good tax system.
Image Credits Washuugenius.
Adam Smith gave following four important canons of taxation.

7
1. Canon of Equity
The principle aims at providing economic and social justice to the people. According to this
principle, every person should pay to the government depending upon his ability to pay. The rich
class people should pay higher taxes to the government, because without the protection of the
government authorities (Police, Defence, etc.) they could not have earned and enjoyed their
income. Adam Smith argued that the taxes should be proportional to income, i.e., citizens should
pay the taxes in proportion to the revenue which they respectively enjoy under the protection of
the state.
2. Canon of Certainty
According to Adam Smith, the tax which an individual has to pay should be certain, not arbitrary.
The tax payer should know in advance how much tax he has to pay, at what time he has to pay
the tax, and in what form the tax is to be paid to the government. In other words, every tax
should satisfy the canon of certainty. At the same time a good tax system also ensures that the
government is also certain about the amount that will be collected by way of tax.
3. Canon of Convenience
The mode and timing of tax payment should be as far as possible, convenient to the tax payers.
For example, land revenue is collected at time of harvest income tax is deducted at source.
Convenient tax system will encourage people to pay tax and will increase tax revenue.
4. Canon of Economy
This principle states that there should be economy in tax administration. The cost of tax
collection should be lower than the amount of tax collected. It may not serve any purpose, if the
taxes imposed are widespread but are difficult to administer. Therefore, it would make no sense
to impose certain taxes, if it is difficult to administer.
Additional Canons of Taxation

Activities and functions of the government have increased significantly since Adam Smith's time.
Government are expected to maintain economic stability, full employment, reduce income
inequality & promote growth and development. Tax system should be such that it meets the
requirements of growing state activities.
Accordingly, modern economists gave following additional canons of taxation.
5. Canon of Productivity
It is also known as the canon of fiscal adequacy. According to this principle, the tax system
should be able to yield enough revenue for the treasury and the government should have no need
to resort to deficit financing. This is a good principle to follow in a developing economy.
6. Canon of Elasticity
According to this canon, every tax imposed by the government should be elastic in nature. In
other words, the income from tax should be capable of increasing or decreasing according to the
requirement of the country. For example, if the government needs more income at time of crisis,
the tax should be capable of yielding more income through increase in its rate.
7. Canon of Flexibility
It should be easily possible for the authorities to revise the tax structure both with respect to its
coverage and rates, to suit the changing requirements of the economy. With changing time and
conditions the tax system needs to be changed without much difficulty. The tax system must be
flexible and not rigid.
8. Canon of Simplicity
The tax system should not be complicated. That makes it difficult to understand and administer
and results in problems of interpretation and disputes. In India, the efforts of the government in
recent years have been to make the system simple.
9. Canon of Diversity
This principle states that the government should collect taxes from different sources rather than
concentrating on a single source of tax. It is not advisable for the government to depend upon a
single source of tax, it may result in inequity to the certain section of the society; uncertainty for
the government to raise funds. If the tax revenue comes from diversified source, then any
reduction in tax revenue on account of any one cause is bound to be small.
Requirement of a Good Tax Structure / System
The tax structure is a part of economic organisation of a society and therefore fit in its overall
economic environment. No tax system that does not satisfy these basic condition can be termed a
good one.
However, the state should pursue mainly following principles in structuring its tax system :1. The primary aim of the tax should be to raise revenue for public services.
2. People should be asked to pay taxes according to their ability to pay and assessment of
their taxable capacity should be made primarily on the basis of income and property.
3. Tax should not be discriminatory in any aspect between individuals and also between
various groups.
10
Types & classification of tax
Classification of tax
Direct/Indirect tax:
Sl. No.
1.
2.
3.
Difference factor
levied on
Incidence
Examples
4.
Enforcing agency
5.
Purpose
Direct tax
Indirect tax
person
goods, services
cannot be shifted
is shifted
income tax, gift tax, foreign travel value added tax, customs duty
tax
Income tax department
Customs, Excise &VAT
department
Equity
Protection of domestic
industries
Personal income tax/Corporate tax:

Sl.
No.
1.
2.
3.
4.
Difference factor Personal income tax
Corporate tax
levied on
Tax rate
Threshold level
(Tax free limit)
Purpose
Revenue priorities
individuals, partnership firm Companies

Calibrated
Flat rate
Exist
Does not exist
Revenue, Equity
Types of tax in Bangladesh :
Non-NBR tax
NBR tax
11
NBR & Non-NBR Tax:
FY
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
Tax
revenue
(bl tk)
555.3
639.6
790.5
952.28
1,074.10
1,160.36
NBR tax
(bl tk)
Non-NBR tax
(bl tk)
530.0
610.0
756.0
915.95
1,033.39
1,14.26
25.3
29.6
34.5
36.33
40.71
46.10
Items of NBR tax:
Income tax
Value added tax
Import duty
Export duty
Excise duty
Supplementary duty
Foreign travel tax
Composition of NBR tax:

FY
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
Income
tax
135.38
165.60
221.0
280.61
377.10
438.48
VAT
201.16
227.95
282.74
343.04
396.26
445.43
Import
duty
95.70
104.30
108.88
126.34
132.93
152.19
Items of Non-NBR tax:
Non-judicial stamp
Motor vehicle tax
Land revenue
Liquor duty
Structure of direct tax administration:

1 (a) Ladder of tax offices
12
Export
duty
0.27
0,30
0.40
(figures in billion taka)

Excise duty
SD
Others
2.37
2.61
2.75
4.50
9.97
91.21
104.85
135.54
162.20
161.89
210.14
4.18
4.69
4.77
6.71
9.59
NBR
Tax Zones (31)
Headed by
Commissioner
Tax Ranges (127)
Headed by
Joint Commissioner or Additional Commissioner.
Tax Circles (649)
Headed by
Deputy Commissioner /
Assistant Commissioner /
Extra Assistant Commissioner

(b) Support structures:
i.
ii.
iii.
iv.
Appeals [7 Zones].
Training.
Survey.
Internal Control (Inspection).

2 (a) Job of zone office:
Administration of Zone;
Monitor tax collection;
Dispose revision application of taxpayers.
(b) Job of range office:

Supervise of circle office;
Re-assessment of erroneous assessment.
(c) Job of circle office:
(i)
Receive income tax return ;
(ii)
Assessment of income & levy of tax;
(iii)
Recovery of tax;
(iv) Action against non-filers & tax evaders.
(d) Type of Circles (on the basis of class of taxpayers):
(i)
Companies Circle (for Companies & its Directors);
(ii)
Salaries Circle (for salaried persons);
(iii) Contractors Circle (for contractors);
(iv) Business Circle (for territory based business).
13

3. Composition of NBR:
Chairman (1): Grade -1

Member(16): Grade -2
1st Secretary() Grade-4
2nd Secretary () Grade-6

4. Ladder of post in taxation cadre:
Member, NBR (8) Grade-2
Commissioner of Taxes ( ) Grade -3
Additional Commissioner of Taxes ( ) Grade -4
Joint Commissioner of Taxes ( ) Grade -5
Deputy Commissioner of Taxes ( ) Grade - 6
Assistant Commissioner of Taxes ( ) Grade - 9
Extra Assistant Commissioner of Taxes ( ) Grade
Inspector of Taxes ( ) Grade.
5. Total manpower: 8,932
14
Tax theories
Basis of tax:
Whom to tax
At what rate
Two basic principles:
Benefit approach
Ability to pay approach
Benefit Approach:
The benefit approach or its variant, the voluntary exchange principle, as developed by De
Viti de Marco and Erik Lindahl.
Hypothesis:
The state should supply social goods up to that point where the peoples total demand for
such goods is equal to the total supply
The cost of provision of the social goods is fully covered by the prices.
The goods should be paid for by their users in proportion to the benefits they derive from
such goods.
15
The result is plotted in above graph 3.1 in which the amounts of social goods which might be
provided by the state are measured on the horizontal axes, the aa curve shows on the left vertical
axis the percentage share of the cost which individual A is willing to bear as larger amounts of
social goods are provided and the bb curve shows on the right inverted vertical axis the
percentage share of the cost which individual B is willing to bear as larger amounts of social
goods are provided. The curves have been drawn on the usual assumption of diminishing
marginal utility which an individual derives from successive increments of the consumption of
any commodity. Supposing that initially AB amount of social goods are provided by the state and
individual A is being made to continue BJ percentage share of the cost and individual B is
being made to contribute HJ percentage share of the cost, both A and B under the circumstances
would vote for a large amount of social goods, since at AB amount of social goods A is actually
willing to contribute a higher percentage share of the cost, viz, BC and B is also willing to
contribute a higher percentage share, viz, HD. If, on the other hands, AI amount of goods are
provided A will be willing to contribute only IM percentage share of the cost and B will be
willing to contribute only LK percentage share of the cost so that their total voluntary
percentage share of the contribution, IM + LK, will be less than 100% of the cost by KM. Thus
by a process of trial and error it will be found that only at AE amount of social goods the
percentage share of the cost willingly contributed by A and B, i.e., EF+GF will be exactly
equal to 100% of the cost, or, in other words, only at AE output the total cost of provision of the
16
social goods would be just (and only just) covered by the contributions(in the form of tax
payments) willing made by A and B who derive benefit from the social goods in question. Hence
AE will be the optimum amount of social goods and EF and GF percentage share of the cost
would be the optimum tax liability of A and B respectively.
Ability to Pay Approach:

J.S. Mill rejected the benefit principle of taxation as it would mean that the poor would have to
pay most of the taxes
Stated alternatively, the ability to pay principle requires that the sacrifice made by all the
individuals while paying taxes should be equal.
Hypothesis:
I.
The marginal utility of income is cardinally measurable.
II.
The marginal utility of income decreases as income increases.
III.
All persons have the same relationship between their units of income and units of
marginal utility whatever by their levels of income.
IV. If assumption (III) is not correct, then interpersonal comparison of utility can be made.
Suppose that the MU and TU schedules show respectively the marginal and total utilities derived
by
two
individuals(who
would
17
be
called
ri
ch
man and poor man, the former having an income larger than the latter) which they derive
from income, the same schedules, by assumption, applying to both. Suppose further that, to
begin with, the rich man has an income of OR, and the poor man has an income of OP, the total
utility derived by them from their income being respectively AB and CD. Let us assume that the
state has decided to raise from the two individuals a total sum of Rt in tax. Under equal absolute
sacrifice principle, the tax liability of the rich man
will be RR and that of the poor man will be PP (note, RR + PR= Rt), for in that case the
absolute loss of sacrifice made by the two individuals (defined as the absolute reduction in the
total utility derived by the individuals from their income) will be the same, the reduction of total
utility from income of the rich man in the post-tax situation being BE, the corresponding amount
of the poor man being DF; and BE=DF. But note that though BE=df, BE/BADF/DC. In other
words, in this method of distribution of the tax burden though the equal absolute sacrifice
principle is being satisfied, equal proportional sacrifice principle is not being fulfilled. In order,
therefore, to raise the same amount of tax according to equal proportional sacrifice principle, the
rich mans tax liability should be increased to RR ,and the poor mans liability should be
reduced to PP, (note, RR+ PP= Rt), so that in the post-tax situation BG/BA (i.e., the rich
mans proportional sacrifice)= DH/DC (i.e. the poor mans proportional sacrifice). But, again,
note that in this distribution of the tax share though the equal proportional
sacrifice principle is being satisfied, the equal marginal sacrifice principle
(and ipso facto the least aggregate sacrifice principle) is not being satisfied,
for in the post-tax situation the marginal utility of income of the rich man is
18
not equal to that of the poor man . Therefore, if the equal marginal sacrifice
principle is accepted, the rich mans tax burden should be increased further to RR and the poor
mans share should be reduced further to PP (note, RR + PR =Rt) so that in the post-tax
situation the marginal utility of income of both the individuals becomes equal, namely RP.
Tax shifting and incidence:
Major criteria influencing tax shifting:
a. Market structure.
b. Unrealized profits
c. Industry cost conditions
d. Price elasticity
e. Type of tax &
f. Political jurisdiction.
Market structure
Pure (Perfect) Competition.
The purely competitive (Perfectly competitive) market is characterized by:
Large Number of buyers and sellers.
Goods are humongous.
Individual buyers and sellers cant influence price.
The, purely competitive (perfectly competitive) market is characterized by many sellers and
buyers of homogeneous (non differentiated) goods.$ Figure 7-1 indicates the initial pretax
equilibrium for a purely competitive firm and for a purely competitive industry, at point a for the
firm, in Figure a, and at point a' for the industry, in Figure b. The firm is producing an output of
25 units and selling at a price of $10, as determined by the intersection of its marginal cost curve,
MC, with marginal revenue (MR) and price (AR), as the latter is set by the industry. v. Then,
assume that an excise tax of $5 per unit is imposed on the good.
19
The individual firm can initiate no effort on its own to shift the tax forward via a higher selling
price, since it has no control over price. It completely lacks -power due to the homogeneity of its
product and the fact that it is one of many sellers. Thus, any forward shifting which may occur
can take place only through industry forces. In the immediate or market period this will not
occur. Industry forces, however, may allow partial shifting of the tax in the short run, though.
The overall possibility of shifting is reduced by the inability of the individual firm to influence
price. Any shifting which does occur through industry forces in the short run would not involve
the exit of hunts from the industry. Yet. In the long run, under constant-cost supply conditions,
the tax %- be fully shifted forward to the consumer, due to the action of industry forces in the
form of an exodus of some firms from the industry.
Thus, over the long run, some marginal firms will leave the industry because the industry
determined short-run price increase is not equal to the new excise tax burden. When this occurs,
the industry supply schedule will shift upward until market price has risen sufficiently so that the
representative firm again can earn a normal profit. This is demonstrated for the industry in
Figure, at point V where the industry supply Curve-, S, has shifted upward by file amount of the
tax to become due to post tax supply schedule, St. Industry price increases from $IO to $ 15, and
the firm can now sell all of its output 11 the higher price. The burden of the tax has thus been
fully shifted forward though, significantly, this has .not occurred through monopoly power by the
individual firm, but instead through the operation of long-run competitive industry forces. For
the purpose of the example. Such To ward shifting assumes constant factor prices and hence the
impossibility of backward shifting. The final equilibrium price ($ 15)
Tax shifting and incidence (in monopoly)
20
As depicted in Figure, the pure monopoly firm, which is identical with the industry since no
competitors exist, is in pretax equilibrium, producing output OX, charging price OP, and caring
monopoly profits PABC. Assume first that an excise tax is imposed on the economic good
produced 1.y the monopoly. As a result, the marginal cost curve, MC, and the average cost curve,
AC, shift upward and become MC' and AC1, respectively. Thus, a new post tax equilibrium is set
at output OX' and price OP1, which yields monopoly profits equal to the rectangle P'DEF. This
profit rectangle is smaller than the profit rectangle PABC which existed before the excise tax was
imposed. Hence, the pure monopoly firm in this case does not fully shift the excise tax. In fact,
the extent to which it can shift any part of the tax will be determined by numerous factors (some
of which will be discussed below), such as industry cost conditions and the price elasticities of
product demand and resource supply. Importantly, however, the pure monopoly firm could
initiate a price change on its own due to the absence of competitors, and it could do so in any
time period, which will tend to enhance its forward tax.
Shifting potential since tax shifting can be attained only through a price change? In Figure 7-2,
the portion of the tax home by the monopolist is equal to the difference between the larger pretax
and the smaller post tax profit rectangles. Meanwhile, the upward movement in absolute price
from P to P' is an indicator of the amount of tax per unit chat is shifted forward.
Tax shifting & unrealized profit:

Next, assume that a corporation (business) income tax is imposed on the profits of a pure
monopoly firm. In this instance. The tax is levied on a surplus or residual amount, that is, on the
profits of the
I the comparative shift ability of an excise tax by a pure competition Am as opposed to a pure
monopoly rim. In different time periods. May be summarized as follows.
Time period
Short-run ..........
Long-run................
Pure competition
Little, if any shitting and
through industry forces only
full shifting, and through
industry forces only
(Constant cost conditions)
Pure monopoly
Shifting, to varying degrees
Possible through firm
monopoly power
Shifting, to varying degrees
Possible through firm
monopoly power
The long run apart from the MC MR point due to the possible presence of monopoly profits.
21
Thus, an imperfectly competitive firm which is not operating at the profit-maximizing point will
be in a position to possibly shift a corporation (business) income tax, if there exists a buffer area
of unrealized profits within which price-output rearrangements cart be made. Figure 7-3, which
is described later, demonstrates this phenomenon.
First, however, the critical question must be asked: Why would a firm choose not to maximize
profits at the MC = MR point? Such considerations as imperfect market and production
knowledge, the fear of antitrust action, the fear of an unfavorable public image, the fear of
attracting new entrants two the industry, the Fear Of Stimulating union wage demands, and
public utility regulation may prevent a fine or benchmarks as: maximization of gross receipts
(sales); achievement of a target rate of return on investment; maintenance of
stable prices on
goods produced by the firm; application of a percentage markup price over

Figure 7-3
Unrealized profits as a necessary contrition for shifting a business income tax by

a firm in impeded competition
Explanation:
Rectangle PABC= Maximum profits where MC = MR at output X
Rectangle PDEC= profits at output X1 which is a position of suboptimal profits.
The excess of PABC over PVEC - Unrealized Prate. thus allowing the possibility of shifting the
burden of a profits tax as price is increased toward P and output is decreased toward the profit
maximization output X
22
Price elasticity
Price elasticity of product demand.
In Figure 75, the S curve represents the supply and curve D represents the demand for the
good. Constant-cost conditions of supply are assumed. In Figure 7-5a, demand is relatively
elastic throughout the relevant portion of the demand curve, while in Figure 7-5b demand is
relatively inelastic throughout the relevant portion. In Figure 7-5c, the demand for the good is
perfectly (completely) inelastic throughout the entire curve. When the excise tax is imposed, the
price of the good is initially increased by
the amount of the- tax -
The most likely occurrence of tax shifting is shown in Figure 7-5c, where the demand is
perfectly inelastic, since there is no quantity reaction as the price increases from p to p. The
initial quantity. X, and the post tax quantity.
Tax shifting and elasticity
23
In Figure 75, the S curve represents the supply and curve D represents the demand for the
good. Constant-cost conditions of supply are assumed. In Figure 7-5a, demand is relatively
elastic throughout the relevant portion of the demand curve, while in Figure 7-5b demand is
relatively inelastic throughout the relevant portion. In Figure 7-5c, the demand for the good is
perfectly (completely) inelastic throughout the entire curve. When the excise tax is imposed, the
price of the good is initially increased by
the amount of the- tax .
The most likely occurrence of tax shifting is shown in Figure 7-5c, where the demand is
perfectly inelastic, since there is no quantity reaction as the price increases from p to p. The
initial quantity. X, and the post tax quantity.
Tax shifting and type of tax:

characteristics as
(1) whether it is direct or indirect and (2) broad
based or narrow based,
Generally speaking the more direct the tax, the more
difficult shifting becomes.
Hence, direct taxes such as the personal income tax
24
are not especially conducive to the rather market

transactions that are necessary for the successful for
ward shifting of a tax. In contrast, indirect taxes such
as general retail sales and excise taxes are more
closely associated with further market transactions
and are thus more conducive to forward shifting.
In terms of the extent of the tax base, the more broad
based a tax, the easier it tends to be to shift the tax.
Oppositely, the more narrow based the tax, the more
difficult tax shifting becomes.
Tax shifting and political jurisdiction:
The geographical nature of the political unit which
levies a tax also helps to determine its shiftablity.
In this context, a political unit may be a local, state,
national, or even international government.
Generally, the narrower the geographical limits of a
political unit, the more difficult it is to shift a tax.
For example, a new (or increased) general retail
sales tax in a city may lead to consumption
readjustments.
25
Legal Foundation of Income Tax

(i)
Income Tax Ordinance, 1984
(ii)
Income Tax Rules, 1984
(iii)
Avoidance of Double Taxation Treaty (with 27 countries)
(iv)
SROs
(v)
Finance Act/Ordinance
Income Tax Ordinance, 1984 comprises Substantive Law
23 Chapters
7 Schedules
295 Sections
Income Tax Rules, 1984 (Forms & Procedures) Subsidiary Law

97 Rules
SROs tax concessions
Double Taxation Avoidance Agreements 33 Countries.
26
Some concepts of income tax

Taxpayers Residential Status
Resident
Individual
conditions
182 days (Respective year) or 90 days
(respective year) +365 days ( Previous 4 years)
Control & Management wholly or partly in Bangladesh in the year.
Control & Management wholly in Bangladesh in the year.
HUF, Firm, AOP

Company
Taxpayers Status and Residence

Implication of Residential Status
Type of Income
Domestic
income
Foreign income
Tax rate for
other than
companies
Investment tax
rebate for
individuals
Resident
Taxable
Non -resident
Taxable
Taxable
Nil, 10%, 15%, 20%,
25%,30%
Not taxable
30%
Available
Not available
TIN:
Stands for Tax payers Identification Number. According to section 184B every tax payers will be
given a TIN. This is actually registration number of taxpayers. It is a 10 (ten) digital number.
Basic Principles of Charging Income Tax
Income tax shall be imposed on total income of the income year of any person and payable in the
assessment year at the tax rate determined by the Finance Act.
Taxpayer
Tax-base
Tax Period
Tax rate
:
:
:
:
Assessee-every person
Total income
Income year
Prescribed at Finance Act and 2nd schedule of income Tax
Ordinance, 1984
27
Person [section 2(46)]

Person includes:
Individual
Firm (partnership firm)
Association of Person (AOP)
Hindu Undivided Family (HUF)
Local authority
Company
Every other Artificial Juridical Person.
Tax Period
Income year [section 2(35)]:
Income year is the year used to determine the tax-base of income tax (for separate source
of income). Following are the provisions.
Normally this is the financial year (1st July of one year to 30th June of next year).
Any year (not exceeding 12 month) as opted by the assessee.
For a newly set up business, it may less than 12 months for the first year of
business.
For any person or a class of persons as may be prescribed.
For share of income from a partnership firm, firms income year is applicable.
Tax Period
Income year [section2(35)]/ assessment year {section 2(9)} :
Income year ended on

30.06.2015
31.12.2014
13.04.2015
21.11.2014
Income year
1.07.2014 to 30.06.2015
1.1.2014 to 31.12.2014
Bengali year 1421
22.11.2013 to 21.11.2014
28
Assessment year
2015-2016
2015-2016
2015-2016
2015-2016
Heads of Income
Heads of income [section-19]
(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
Salaries [Sec.-21]
Interest on securities [Sec.-22]
Income from house property [Sec.-24]
Agricultural income [Sec.-26]
Income from business or profession [Sec.-28]
Capital gain [Sec.-31]
Income from other sources [Sec.-32]
Tax is levied on sum of income from all sources in a year. The sum amount is known as
total income.
Income form salaries [Section-21]
Includes
- arrear salary
- advance salary
Includes
- Benefit paid in kind

for example:
(i) leave fare assistance
(ii) free transport
(iii) free accommodation.
Includes
(i) leave encashment

(ii) pension
(iii) gratuity
(iv) fees, commission, allowances, profit in addition to salary
(v) Director's remuneration/fees
29
Some components of salary income

(i)
Basic salary
Festival
Incentive
Profit
(ii)
Bonus
(iii)
House Rent allowances
(iv)
Medical allowances
(v)
Batman allowances
(vi)
Hill allowances
(vii)
Gas allowances
(viii)
Conveyance allowances
(ix)
Entertainment allowances
(x)
Companies contribution to provident fund
(xi)
Foreign allowances
(xii)
Leave encashment
Computation of salary income

Basis :
(i) Some income of salary partly/ fully exempted
(ii) Notional income is taken for some benefits
Exemptions
10% of
Medical allowance
basic salary
or Tk.
120,000
,whichever
is lower
Servant allowance
Leave allowance
Honorarium / Reward/ Fee
Overtime allowance
Bonus / Ex-gratia
30
Other allowances Car allowance

Employers contribution to
Recognized Provident Fund
Interest accrued on Recognized
Provident Fund
Deemed income for transport
facility
5% of basic
pay or Tk.
60,000
whichever is
higher
25% of
Deemed income for free

furnished/unfurnished
accommodation
Other, if any (give detail)
Net taxable income from salary
basic pay
XXXXXXXXX
X
Notional income:
Free accommodation
Free transport
- 25% of basic salary.

- 5% of basic salary.
Income from house property [section-24]:

Characteristics
(i)
Recipient is the owner of the property .
(ii) Irrespective of commercial/residential use commercial/residential .
(iii) Property is to be a building .
(iv) Property is let out .
(v) Let out may be partial (partly self occupied). In such case ,rent of partial
building.
(vi) Let out for a part of the year in such case rent is to be taken for the part
period.
Rental receipt
Monthly rent period for which rented.
Expenses against rental receipt (section 25)
(i)
Repair and maintenance (residential: 25% of gross rent; commercial:
31
30% of gross rent)

(ii) Interest on loan for construction/reconstruction/renovation [Note: interest
not principal]
(iii) Municipal/City Corporation holding tax
(iv) Land rent (khajna)
(v) Insurance premium (if any)
[Note: (a) Depreciation not admissible.
(b) In case of partial let out other than repair & maintenance ala expenses are
to be calculated proportionately]
House property income = Rental receipt - Expense.
Schedule-2 (House Property income)
Location and
description of
property
Particulars
Tk.
Tk.
1. Annual rental income

2. Claimed Expenses :
Repair, Collection, etc.
Municipal or Local Tax
Land Revenue
Interest on
Loan/Mortgage/Capital
Charge
Insurance Premium
Vacancy Allowance
Other, if any
Total =
3. Net income ( difference between item 1 XXXXXXXX
and 2)
Agriculture income [section-26]:

Value of yield = Yield per acre of crop Area (acre) Price of crop
Cost of yield = 60% of value
Net income from agriculture = value of yield - cost of yield.
32
Income form business or profession [Section-28]
Admissible expenditure against receipt or sale [sec. 29]:

Office/factory rent
Repair and maintenance
Interest on loan (project/working capital)
Insurance premium
Transport/freight
Trade license/renewals/municipal tax
Salary to staff
Bad debt written off
Other business related expenditure.
Restriction of business expense:
Tax to be withhold while making payment for expanses;
Depreciation declining value method rate as per 3rd schedule
Maximum limit for- entertainment
- leave fare assistance
-perquisite (benefit paid to an employee)
- head office expenses (10% of net profit)
- incentive bonus(10% of net profit)
- overseas travelling (1% of turnover)
Capital gain [Section-31]
Capital gain (sec. 31) = receipt form sale of capital asset - (cost of acquisition =
development cost)
Income form other sources [Section-33]
Income form other sources
(a)
Dividend
(b) Interest from bank deposit.
Tax is levied on total income which is the sum of income from all sources
Present tax rate
33
(b) Interest from bank deposit.

Investment tax rebate[section 44(2) and 6th Schedule Part B] :
A resident individual can get a tax rebate @15% on certain investment.
Rebate is available for investment up to 30% of total income subject to a
maximum of Tk 15 million.
The prescribed area of investment are
Schedule-3 (Investment tax credit)
(Section 44(2)(b) read with part B of Sixth Schedule)
Tk ........................................
1. Life insurance premium

2. Contribution to deferred annuity
3. Contribution to Provident Fund to which
Provident Fund Act, 1925 applies
4. Self contribution and employers
contribution to Recognized Provident Fund
5. Contribution to Super Annuation Fund
6. Investment in approved debenture or
debenture stock, Stock or Shares
7. Contribution to deposit pension scheme
8. Contribution to Benevolent Fund and Group
Insurance premium
9. Contribution to Zakat Fund
10. Others, if any ( give details )
Total
Present tax rate:
(a) For companies:
Mobile Phone
45%
Cigarette Manufacturer
Banks, Leasing, Insurance,NBFI
Merchant Bank
Private Limited
Listed with Stock Exchange
45%
40%
37.5%
35%
25%
34
Tk ........................................
Tk ........................................
Tk ........................................
Tk ........................................
Tk ........................................
Tk ........................................
Tk ........................................
Tk ........................................
Tk ........................................
Tk ........................................
Inter corporate dividend

(b)
20%
For others (individual, partnership) being resident:
Ladies & senior citizens:

First tk 3,00,000 Nil
Next tk 4,00,000 - 10%
Next tk 5,00,000 - 15%
Next tk 6,00,000 - 20%
Next tk 30,00,000-25%
Balance
- 30%
Minimum tax : Tk. 4,000.
Others:
First tk 2,50,000 Nil
Next tk 4,00,000 - 10%
Next tk 5,00,000 - 15%
Next tk 6,00,000 - 20%
Next tk 30,00,000 -25%
Balance
- 30%
(c ) For individual being non-resident -30%.

Calculation of tax:
Company( considering Bank ,NBFI) :
Net profit as per P&L A/C
Deduct:
(a) Depreciation
(b) Excess perquisite
(c) Excess claim of Head Office Expense
(d) Other inadmissibles , if any
Resultant income:
Add:
Depreciation as per Third Schedule
Income subject to tax:
Tax @40% :
Individual (considering employee) :
Income from salary:

Tk 9,58,000
Income from house property : Tk .332,000
Income from other sources:
(a) Dividend
Tk. 81,500
Less:Exempted Tk. 25,000
Tk.56,500
(b) Bank interest
Tk. 17,570
Total income :
Tax on first
Balance :
Tk. 13,64,070
Tk. 2,50,000 @ 0%
Tk. 11,14,070
35
= Nil
Tax on next
Tk. 400,000 @10% = Tk. 40,000
Balance :
Tk. 7,14,070
Tax on next
Tk. 500,000 @ 15% = Tk. 75,000
Tax on balance
Tk. 2,14,070 @ 20% = Tk. 42,814
Gross tax
= Tk. 1,57,814
Less : Investment tax rebate
(a) Employers contribution to P.F :
Tk. 38,600
(b) Employees contribution to P.F :
Tk. 38,600
(c) Life insurance premium :
Tk. 18,280
(d) Sanchaypatra purchase :
Tk. 80,000
(e) Investment in share of listed company: Tk.1,12,000
Total investment :
Tk. 2,87,480
(This is within Tk. 1.50 crore & 30% of total income
of Tk.13,64,070 i.e Tk.4,09,221)
Tax rebate @ 15% on Tk 2,87,480
Net tax
Less: Tax deducted at source on
= Tk. 43,122
= Tk. 1,14,692
Tax concessions
1. Purpose:
(a) Encourage savings;
(b) Encourage investment ;
(c ) Encourage export;
(d) Encourage certain sectors of the economy;
02. Type of concessions:
(a) Rebate in tax payable;
(b) Exemption from tax;
(c) Exemption from tax deduction at source;
(d) Reduction in rate of tax.
03. Legal instrument for tax concession:
(a) Chapter VI of the Income Tax Ordinance,1984;
(b) Part A of the 6th schedule of the Income Tax Ordinance,1984;
(c) Part B of the 6th schedule of the Income Tax Ordinance,1984;
(d) Income Tax Rules,1984;
(e) Statutory Rules& Orders (SRO).
04. Revenue loss due to such tax concessions:
According to annual reports of NBR loss of revenue due to tax concession were as
follows:
Financial year
Rev loss from tax
Rev loss from
Total rev loss
holiday
concession by SRO
(in billion taka)
(in billion taka)
(in billion taka)
2011-12
2.6068
1.0385
3.6453
2012-13
1.9759
2.3621
4.3380
36
05. Some items of tax concession

(a) Tax rebate.- Available to resident individuals
- Maximum limit on which tax rebate is available is minimum of the following:
Actual investment
30% of total income
Tk. 15 million
- Items illegible for investment
Schedule-3 (Investment tax credit)
(Section 44(2)(b) read with part B of Sixth Schedule)
Tk
1. Life insurance premium
......................
TK.........................
2. Contribution to deferred annuity
....
3. Contribution to Provident Fund to which Provident Fund Tk
Act, 1925 applies
.....................
4. Self contribution and employers contribution to Recognized
TK.........................
Provident Fund
.
5. Contribution to Super Annuation Fund
6. Investment in approved debenture or debenture stock,
Stock or Shares
7. Contribution to deposit pension scheme
8. Contribution to Benevolent Fund and Group Insurance
premium
Tk .........................
..
Tk .........................
..
Tk .......................
Tk ....... ................
Tk .........................
..
Tk..........................
Tk ........................
9. Contribution to Zakat Fund

10. Others, if any ( give details )
Total
(b) Tax holiday.- Has to be a company registered in Bangladesh.
- Has to be a newly set up industry in prescribed 18 sector.
- Paid up capital not less than Tk. 2 million.
- Period of holiday
Located in Dhaka or
Chittagong Division
Period of exemption
1st & 2nd year
3rd year
4th year
5th year
Rate of exemption
100% of income
60% of income
40% of income
20% of income
37
Located in other
division
Period of exemption
1st & 2nd year
3rd year
4th year
5th year
6th year
7th year
Rate of exemption
100% of income
70% of income
55% of income
40% of income
25% of income
20% of income
Has to be a company registered in Bangladesh.

Has to be a newly set up physical infrastructure industry in prescribed 16 sector.
Paid up capital not less than Tk. 2 million.
Period of holiday
Period of exemption
1st & 2nd year
3rd year
4th year
5th year
6th year
7th year
8th year
9th year
10th year
Rate of exemption
100% of income
80% of income
70% of income
60% of income
50% of income
40% of income
30% of income
20% of income
10% of income
(c) full exemption from tax.(i) service charge of micro credit operation of NGO[ para 1A part A of 6th Schedule].
(ii) Income of local government[ para 3 part A of 6th Schedule].
(iii)TA, DA[ para 5 part A of 6th Schedule].
(iv) Foreign employees in Embassy[ para 7 part A of 6th Schedule].
(v) Pension[ para 8 part A of 6th Schedule].
(vi) Dividend up to Tk. 25,000[ para 11A part A of 6th Schedule].
(vi) Gratuity up to Tk. 25 million[ para 20 part A of 6th Schedule].
(vii) Provident Fund[ para 21 part A of 6th Schedule].
(viii) ) Dividend up to Tk. 25,000 of mutual Fund Unit[ para 22A part A of 6th Schedule].
(ix) Income of indigenous Hillman[ para 27 part A of 6th Schedule].
(x) 50% of export income[ para 28 part A of 6th Schedule].
(xi) Agriculture income upto Tk 0.2 mollion[ para 29 part A of 6th Schedule].
(xiii) Income from certain software business[para 33 part A of 6th Schedule].
(xiv) Income of SME[para 39 part A of 6th Schedule].
(xv) Foreign income of a Bangladesh citizen brought in through banking channel[para 48
part A of 6th Schedule].
(xvi) Income of coal based Private power generation company for 15 years(SRO No 213 of
01/07/2013).
(xvii) Income from capital gains from transaction of shares of listed companies by
individuals(SRO No 217 of 18/08/2014).
(d) Reduction in rate of tax,(i) 5% on Income from capital gains from transaction of shares of listed companies by
companies/partnership firms(SRO No 217 of 18/08/2014).
(ii) Any new industry setup outside city corporation 20%concession in rate any old industry
relocated outside city corporation 20% concession old industry located outside city
corporation 10% concession (SRO No 185 of 01/07/2014).
(f) Exemption from tax deduction at source.On import of 217 specific items [Rule 17A of Income Tax Rules,1984].
06. Evaluation of tax concession:
NBR made an evaluation of tax holiday in 1998. Where in it is found that
(a) The priority of tax holiday in investment decision is much lower in the order. Investor is
more concerned about infrastructure, availability of gas/electricity, law & order etc.
38
(b) Though Dhaka & Chittagong Division gets less concession than other Divisions, still
investors are investing more in Dhaka/Chittagong Division.
(c) During tax holiday period , taxpayers have a tendency to show inflated income.
(d) Some taxpayers swap income of non-tax holiday income to tax-holiday income.
(e) Some tax concession do not reach intended person. For example tax waiver on seeds did
not reach farmers.
1.
Ans:
Submission of Income Tax Return

Who is required to submit income tax return ?
(a) all companies (whether having any business in the year or not).
(b) (i)
(ii)
all individuals, firms etc, having income over tax free limits.
persons residing in a City Corporation, Pourashava, divisional
headquarter or district headquarter &
owns a building which is more than one storied & plinth area
exceed 1600 sft.
owns a motor car
member of a club registered under
(iii) runs a business or profession having trade license and operates bank
a/c.
(iv) registered professional (doctors, lawyers, chartered accountant);
(v)
member of chamber of commerce or trade association;
(vi) a candidate for election of, union parishad. Pourashava & City
Corporation or MP;
(vii) participant of a public tender;
(viii) surveyors of a general insurance;
(ix) opens a letter of credit;
(x)
owns a credit card;
(xi) sponsor director of a company;

(xii) marriage registrar,
(xiii) ISD telephone holder.
(xiv) sanction a loan exceeding TK 5,00,000 by commercial Bank or leasing
company.
39
2.
Ans:
Where to submit the income tax returns ?

In respective tax circles
or
Taxpayers Service Wing (in case of L T U)
3.
Type of circle: Companies Circle

Salaries Circle
Business Circle
Contractors Circle
4.
Ans:
When to submit income tax return ?

In case of companyYear ending on 31st December-by 15th july
(example 31-06-2004 by 15-7-2005)
Year ending on 30th June-by 31st December
(example 30-6-2005 by 31-12-2005)
In case of individual, firm etc. (other than company)
by 30th September
5.
Whether time for submission of return car be extended On application DCT can
extend time up to 3 months & with permission of Joint/Additional Commissioner
further 3 months.
6.
What should accompany the income tax return ?
Ans : (i) In case of companyAudited statement of accounts.
Evidence payment of admitted tax
(ii)
In case of individualStatement of assets & Liabilities (part of return)

life style form (part of return)
Evidence payment of admitted tax
7.
Is the return submission acknowledged ?
Ans : Tax authority will sign & affix seal the acknowledgment receipt
(part of return-0 tear it and hand it over to tax payer or his authorized
representative instantly.
8.
Whether revised return can be submitted ?
Ans : Tax prayer is entitled to submit revised return ay time before assessment (u/s 78).
This will result cancellation of the original return.
9.
Where the return is available ?
Ans : At your respective tax to office or NBR website www.nbr-bd.org
10..
What is the price of the return ?
Ans : Free
11.
What is the consequence of failure to file return in time ?
40
Ans : Penalty u/s 124 amounting Tk 1000+50 for each day of default.
12.
Filing up of income tax return;
Ans : Income Tax return has been revised. The new return comprises of 3 parts, 5
schedules.
The salient items arePage-1: [ part-1]
Identification, particulars, namely photograph name address, father's/
husband's name, mother's name, status, date of birth, TIN, circle-7. one
assessment year etc.
Page-2:
Page-3:
List of documents enclosed

[part-11]
Summary of income from different source, total income, tax payable,
tax paid, exempted income, tax paid last year,
Page-4:
[part-111]
Schedule-1: Details of Salary income including exempted items.
Schedule-2: Details of house property income.
Page-5:
Schedule-3: Details of investment tax credit Acknowledgement Slip.
Page-6:
verification
(Declaration
Acknowledgement Slip.
of
correctness)
and
signature.
Page 7-8: Statement of assets & liabilities.

Page-9:
Life style form.
Page-10: Instructions.
Procedure of assessment of income

1. Assessment means determination of income & tax payable by a taxpayer.
2. The matter of assessment is incorporated in Chapter IX of the Ordinance .
3. There are as many as 17 sections of assessment . Some commonly used assessment methods
are discussed below:(a) Universal self assessment (section 82BB):
Assessment made by taxpayer himself .
Return to be correct ,complete and signed by taxpayer.
Return to be filed within stipulated time .
Tax payable on the basis of income disclosed paid on or before submission .
Receipt of return is treated order of assessment .
Tax authority may select some returns for audit .
In such case DCT will issue notice ,examine accounts and assess income after audit .
41
(b)Final discharge of tax liability (section 82C ):

Tax deducted or collected in certain cases is the final discharge ; no further demand
or refund .
Income is computed at tax deducted and tax rate ratio.
20 items of deducted tax is under this purview. Major items are : supplier &
contractor , commercial import , stock exchange members ,real estate , transfer of
property .
(a) Spot assessment ( section 82D ):
Fixed tax for small business & professionals.
Tk 3, 000 for capital upto Tk 5,00,000.
Tk 5, 000 for capital. between Tk 5,00,00 to Tk 8,00,000.
Simplified form of return.
One stop service made on the spot.
(b) Assessment after hearing[section 83(2)]:
DCT examines return.
Calls for hearing to explain return.
Calls to produce books of accounts & evidences.
After hearing & examining books of accounts & records assess income.
(c) Best judgement assessment (section 84):
No return has been filed.
Taxpayer or his representative did not appear for hearing .
DCT makes the assessment of income on the basis of records available to him
and local enquiry.
(d) Income escaping assessment (section 93):
It has been previously assessed.
Any income has escaped assessment; or
Any income has been under assessed ; or
Has been assessed at too low rate ; or
Excessive relief or refund has been made .
Definite evidence any of the above is in the possession of DCT.
DCT will reopen the case & make reassessment.
42
Tax deduction at source

1.
Tax deduction law is available in :
(a) Chapter VII of the Income Tax Ordinance
(b) SRO's
(i) Registration & renewal of fitness of car Jeep (new)

(ii) Registration & renewal of vehicles for carrying goods and people
(iii) Registration of renewal of fitness of inland water transport.
2.
Tax deduction under chapter VII

(a) Section 49 states the list of tax deductions
(b)
Tax deducted of source is treated as advance tax.
(c)
Three parameters of tax deduction

(i) Deducting/collecting authority (who has the responsibility)
(ii)
When to deduct/collect
(iii) Rate of deduction/collection

3.
Consequence of failure to deduct tax of paying authority

(a) The respective expenditure of paying authority is disallowed & added to profit
(sec- 30)
(b)
4.
The paying authority is treated as assessee in default. Tax + penalty @ 2% per

month can be recovered from him (sec - 57)
Some items of tax deduction :

(a) salary : Employer will deduct tax on probable salary income of the year. Tax
on such salary is divided by 12 and deducted from each months salary [sec50]
(b)
supplier/contractor : (i)
(ii)
Threshold : 2,00,000
rate : Rate 1% - 5%
(iii) rate applicable on cumulative amount

(iv) the computation is confined by each
paying authority.
(v)
(c)
The computation is confined in a

financial year. [section 52A, Rule- 16]
Professional to Technical service

(i) Rate: 10%
(ii)
Professional services means legal, engineering, architectural,

accounting, technical consultancy, interior decoration, advertising.
43
(d)
(iii) Technical serves means managerial, technical on consultancy service

(does not include construction, assembly, mining). [section 52A].
Import:
(i) rate 5%
(ii)
withholding authority: Customs authority
(iii) A list of exempted items

(iv) on application board my reduce or waive tax deduction [section 53, rule17A]
(e)
Interest on Bank deposit: rate: 10%
(f)
Rented property
(i) Threshold : Tk 20,000
(ii)
7.
3%
5%
Time limit for tax deduction at source (rule-13)

(i) To be deposited to good exchequer with in 3 weeks from deduction
(ii)
8.
rate :
Tk 20,001 --- Tk 40,000 :
Tk 40,000 + & above :
DCT, in case of salary, with permission of IJCT may allow payment of tax
deducted on 15 September, 15 December, 15 March, 15 June.
Manner of payment of tax deducted at source (rule- 14)
by treasury challan in Sonali/Bangladesh Bank
Accounting profit:
Is the profit as per books of accounts which is maintained according to accounting
principles. It comes from Profit & Loss Account.
Fiscal profit :
Is the profit according to tax law.
Operating profit :
This is the profit for operates before changes.
Why accounting profit varies from fiscal profit.
(i)
Depreciation rate & perquisite
(ii)
Restriction in some expenditure

-
Royalty
Head office expenses
44
Perquisite
Free sample
Entertainment.
Incentive bonus
45

BBA Program Course Title: Taxation Course Code: A408 Course Outline Introduction of Faculty

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BBA Program Course Title: Taxation Course Code: A408 Course Outline Introduction of Faculty

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BBA program

Course title: Taxation

Name: Aminur Rahman

Contact address : E-mail: amin_iba_tax@hotmail.com

Role of Government in the Economy

Allocation of resources between different lines of production in a way that economic

when private investment + consumption cause inflation state decreases

Tools of government to influence the economy

When wealth is concentrated:

When economic activity is skewed between places:

When balance of payment is in disfavor:

When there is recession:

When gap between export & import :

Tax collected is spent for payment of salary, bills to

and enlarges its business.

If income is concentrated in few hands large

Tax money is used to build roads, bridges, water &

Vary tax rates to encourage or discourage some

It is levied by the state or local authority

It is levied on goods, services, person or property

Tax so collected is used to pay for public service.

What are Canons of Taxation ?

Adam Smith's Four Main Canons of Taxation

Image Credits Washuugenius.

Adam Smith gave following four important canons of taxation.

Additional Canons of Taxation

Requirement of a Good Tax Structure / System

Types & classification of tax

Personal income tax/Corporate tax:

Difference factor Personal income tax

individuals, partnership firm Companies

Types of tax in Bangladesh :

NBR & Non-NBR Tax:

Items of NBR tax:

Composition of NBR tax:

Items of Non-NBR tax:

Structure of direct tax administration:

(figures in billion taka)

Tax Ranges (127)

Tax Circles (649)

Structure of direct tax administration:

Structure of direct tax administration:

(b) Job of range office:

Structure of direct tax administration:

Chairman (1): Grade -1

Structure of direct tax administration:

Two basic principles:

Ability to Pay Approach:

Tax shifting and incidence (in monopoly)

Tax shifting & unrealized profit:

goods produced by the firm; application of a percentage markup price over

Unrealized profits as a necessary contrition for shifting a business income tax by

Tax shifting and elasticity

the amount of the- tax .

Tax shifting and type of tax:

are not especially conducive to the rather market

Legal Foundation of Income Tax

Income Tax Ordinance, 1984

Income Tax Rules, 1984

Avoidance of Double Taxation Treaty (with 27 countries)

Income Tax Rules, 1984 (Forms & Procedures) Subsidiary Law

SROs tax concessions

Double Taxation Avoidance Agreements 33 Countries.