Budget 2020-2021

Summary of Proposed Changes

in
Income Tax

Compiled By: Masum Gazi

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 Table of Contents

1. TAX RATES ............................................................................................................................................... 1

1.1 TAX RATES FOR INDIVIDUAL AND OTHERS ...................................................................................................................... 1

1.1.1 INCOME TAX SLABS ................................................................................................................................................ 1
1.1.2 TAX FREE LIMITS ................................................................................................................................................... 1
1.1.3 MINIMUM TAX ....................................................................................................................................................... 1
1.1.4 TAX REBATE FOR SMALL AND COTTAGE INDUSTRIES ................................................................................................ 1
1.1.5 INVESTMENT TAX REBATE...................................................................................................................................... 2
1.1.6 RATES OF SURCHARGE ........................................................................................................................................... 2
1.1.7 CORPORATE TAX RATES ......................................................................................................................................... 3

2. COMPUTATION OF INCOME: ................................................................................................................... 5

2.1 CAPITAL GAIN ON SALE OF BUSINESS OR UNDERTAKING ................................................................................................................... 5

2.2 CHARGE OF TAX ON THE DIFFERENCE OF INVESTMENT, IMPORT AND EXPORT MADE .................................................................. 5
2.3 CONDITIONS AND LIMITATIONS OF CARRY FORWARD OF LOSS, ETC.- ......................................................................................... 6

3. TAX INCENTIVE FOR INVESTMENT OF UNDISCLOSED PROPERTY ..................................................... 6

3.1 SPECIAL TAX TREATMENT IN RESPECT OF INVESTMENT IN SECURITIES. ........................................................................................ 6

3.2 SPECIAL TAX TREATMENT IN RESPECT OF UNDISCLOSED PROPERTY, CASH, ETC. ......................................................................... 6
3.3 SPECIAL TAX TREATMENT IN RESPECT OF INVESTMENT IN BUILDING OR APARTMENT ............................................................... 6

4. LIMITS OF ALLOWABLE EXPENDITURES FOR BUSINESS OR PROFESSION ........................................ 6

4.1 ROYALTY, TECHNICAL SERVICE FEE, TECHNICAL KNOW-HOW FEE .................................................................................................. 6

4.2 OVERSEAS TRAVELLING ........................................................................................................................................................................... 6
4.3 PROMOTIONAL EXPENSE ......................................................................................................................................................................... 7

5. TAX EXEMPTIONS & ALLOWANCES ....................................................................................................... 7

5.1 TAX EXEMPTION FOR NEWLY ESTABLISHED INDUSTRIAL UNDERTAKING SET UP BETWEEN 1 JULY, 2019 AND JUNE,
2024:................................................................................................................................................................................................................ 7
5.2 EXEMPTION BY 6TH SCHEDULE PART-A ................................................................................................................................................. 7

6. INCOME SUBJECT TO TAX DEDUCTION/COLLECTION AT SOURCE (TDS/TCS) .................................. 7

6.1 DEDUCTION AT SOURCE FROM INTEREST OR PROFIT ON SECURITIES.............................................................................................. 7

6.2 DEDUCTION FROM PAYMENT TO CONTRACTORS ................................................................................................................................. 7
6.3 DEDUCTION AT SOURCE FROM PAYMENT OF CERTAIN SERVICES ..................................................................................................... 8
6.4 DEDUCTION AT SOURCE FROM COMPENSATION AGAINST ACQUISITION ..................................................................................... 8
6.5 DEDUCTION OF TAX FROM ANY INCOME REMITTED FROM ABROAD IN CONNECTION WITH ANY SERVICE, REVENUE
SHARING, ETC. .................................................................................................................................................................................................. 8
6.6 DEDUCTION OF TAX FROM RECEIPTS IN RESPECT OF INTERNATIONAL PHONE CALL. .............................................................. 8
6.7 COLLECTION OF TAX FROM IMPORTERS ........................................................................................................................................... 8
6.8 DEDUCTION FROM PAYMENT ON ACCOUNT OF LOCAL LETTER OF CREDIT. ................................................................................ 9
6.9 COLLECTION OF TAX FROM EXPORT OF CERTAIN ITEMS ................................................................................................................ 9
6.10 COLLECTION OF TAX FROM MEMBER OF STOCK EXCHANGES. ....................................................................................................... 9
6.11 DEDUCTION FROM INCOME OF NON-RESIDENTS............................................................................................................................. 9

7. ADVANCE INCOME TAX ........................................................................................................................... 9

7.1 ADVANCE PAYMENT OF TAX BY NEW ASSESSEES................................................................................................................................. 9

7.2 ADVANCE TAX FOR THE OWNERS OF PRIVATE MOTOR CAR. .............................................................................................................. 9

8. RETURN AND STATEMENTS ................................................................................................................... 9

8.1 RETURN OF INCOME ................................................................................................................................................................................. 9

8.2 RETURN OF WITHHOLDING TAX. ......................................................................................................................................................... 10
8.3 STATEMENTS OF ASSETS, LIABILITIES AND LIFE STYLE. ................................................................................................................. 10
8.4 ONE PAGE RETURN ................................................................................................................................................................................ 10
10.1 PENALTY FOR FAILURE TO FILE RETURN, ETC. .............................................................................................................................. 10
10.2 APPEAL TO THE APPELLATE TRIBUNAL.- ........................................................................................................................................ 10
10.3 PERSON REQUIRED TO OBTAIN E-TIN .............................................................................................................................................. 11
10.4 POWER OF NBR TO EXTEND TIME LIMIT ......................................................................................................................................... 11
10.5 AMENDMENT OF 1ST SCHEDULE PART-B........................................................................................................................................ 11
 1. Tax Rates

1.1 Tax Rates for Individual and others

1.1.1 Income Tax Slabs

Rates of income tax for individual (including non-resident Bangladeshi), Hindu undivided family,
partnership firm, fund, trust, NGO and every other artificial juridical person (except business of
cigarette, bidi, jorda, gul and all tobacco products) are proposed as follows:
Assessment year 2020-2021 Assessment year 2019-2020
Annual income Income tax rate Annual income Income tax rate
First Tk. 3,00,000 Nil First Tk. 2,50,000 Nil
Next Tk. 1,00,000 5% Next Tk. 4,00,000 10%
Next Tk. 3,00,000 10% Next Tk. 5,00,000 15%
Next Tk. 4,00,000 15% Next Tk. 6,00,000 20%
Next Tk. 5,00,000 20% Next Tk. 30,00,000 25%
Balance amount 25% Balance amount 30%

Tax rate for an association of persons has been proposed at the rate of 32.5% previously it was
same as like individual slab rate.

1.1.2 Tax free Limits

Proposal has been made to change the existing tax-free thresholds of income. A comparison
between existing tax-free limits and proposed changes is below:
Tax-free limit of income Proposed Existing
Normal assessee Tk. 3,00,000 Tk. 2,50,000
Male assessee aged 65 years or more and all Tk. 3,50,000 Tk.3,00,000
female assessee
Handicapped Tk. 4,50,000 Tk. 4,00,000
Gazetted war wounded freedom fighter Tk. 4,75,000 Tk. 4,25,000
Any one of parents or legal guardians of Additional Tk. 50,000 of the above
handicapped child applicable tax-free limit for each
handicapped child

1.1.3 Minimum Tax

Minimum tax for any individual category of taxpayer is proposed same as like before which is
shown below:
Sl. No. Location of taxpayer Minimum tax (Taka)
Dhaka North City Corporation, Dhaka South City
1. 5,000
Corporation and Chittagong City Corporation
2. Other City Corporations 4,000
3. Areas other than City Corporation 3,000

1.1.4 Tax Rebate for Small and Cottage Industries

If an individual taxpayer is the owner of small and cottage industry and is engaged in
manufacturing in less or least developed area, he/she shall get tax rebate is proposed same as like
before which is shown below:
Compiled By: Masum Gazi 1
 Particulars Rate of tax rebate
Where in the concerned year the volume of
5% of income tax payable on income from
production is between 15% to 25% more than
the small and cottage industry
that of the previous year
Where in the concerned year the volume of
10% of income tax payable on income from
production is more than 25% above of that of
the small and cottage industry
the previous year

1.1.5 Investment tax rebate

Investment tax rebate for individual assessee same as like before which is as follows:

Total income Investment tax rebate

on eligible amount*
Up to Tk 1.5 million 15%
Over Tk 1.5 million 10%

*Eligible amount is the lowest of the following:

a) Actual investment; or
b) 25% of total income; or
c) Tk 1.5 Core

Additional tax rebate of Tk. 2,000 has been proposed to all the taxpayers who will file their income
tax returns online for the first time.

1.1.6 Rates of surcharge

Individuals having net wealth above Tk. 3 crore has to pay surcharge as like before at the following
rates on their net tax payable:

Assessment Year 2020-2021 Assessment Year 2019-2020

Total net worth Rate Minimum Total net worth Rate Minimum
Up to Tk. 3 crore Nil Surcharge Up to Tk. 3 crore Nil Surcharge
Tk. Tk.
More than Tk. 3 crore More than Tk. 3 crore
but not more than Tk. but not more than Tk.
5 crore; 5 crore;
Or, taxpayer having Or, taxpayer having
more than 01 motor more than 01 motor
vehicles in his/her vehicles in his/her
10% 10%
own name; own name;
Or, taxpayer having 3,000 Or, taxpayer having 3,000
house property in city house property in city
corporation corporation
measuring more than measuring more than
8,000 square feet 8,000 square feet
More than Tk. 5 crore 15% More than Tk. 5 crore 15%
but not more than Tk. but not more than Tk.
10 crore 10 crore

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 More than Tk. 10 crore 20% More than Tk. 10 crore 20%
but not more than Tk. but not more than Tk.
15 crore 15 crore
More than Tk. 15 crore 25% 5,000 More than Tk. 15 crore 25% 5,000
but not more than Tk. but not more than Tk.
20 crore 20 crore
More than Tk. 20 crore 30% More than Tk. 20 crore 30%

For assessee having net wealth more than Tk. 50 crore, minimum surcharge will be higher of 0.1%
of net worth or 30% of tax payable on total taxable income.

Manufacturers of cigarette, bidi, jorda, gul and all other tobacco products shall pay 2.5% surcharge
on the income earned from the said business as like before.

1.1.7 Corporate tax rates

A brief picture of corporate tax rates proposed for the assessment years 2020-2021 comparative
with assessment year 2019-2020 is shown in the table below:

Assessment years
Sl. No. Particulars
2020-2021 2019-2020
Publicly traded companies (except banks, insurance
companies, financial institutions, merchant banks,
i. 25% 25%
mobile phone operators and tobacco-based product
manufacturing companies)
Non-listed companies including branch offices
(except banks, insurance companies, financial
ii. institutions, merchant banks, mobile phone operators 32.5% 35%
and tobacco-based product manufacturing
companies) *
i) Mobile phone operator companies (not publicly
45% 45%
traded) *
ii) Mobile phone operator companies (publicly traded
iii.
by transfer of 10% share of paid-up capital through
40% 40%
stock exchange of which maximum 5% must be
through pre-initial public offering)
Banks, insurance companies, financial institutions
iv. 37.5% 37.5%
(except merchant banks) which are publicly traded
Not publicly traded banks, insurance companies,
v. 40% 40%
financial institutions (except merchant banks)
vi. Merchant banks 37.5% 37.5%
Manufacturing companies of cigarette, bidi, jorda, gul
vii. 45% 45%
and all tobacco products
Any person other than companies engaged in
viii. manufacturing of cigarette, bidi, jorda, gul and all 45% 45%
tobacco products
Any dividend received from a Bangladeshi registered
ix. 20% 20%
company or profit repatriation by a foreign company
Compiled By: Masum Gazi 3
 Assessment years
Sl. No. Particulars
2020-2021 2019-2020
who is not registered in Bangladesh
A Co-operative society registered under the Co-
x. 15% 15%
operative Society Act, 2001

Individual
xi. An association of person 32.5%
Tax Slabs

*Non-listed companies will receive rebate of 10% in the year of listing if they list at least 20% of
their paid-up capital through initial public offering.
School, College, University and NGO would be subject to excess income tax of 5%, if special
arrangement facilitating the disabled persons was not made.

If an assessee appoints minimum 10% physically handicraft individual of total employee as an

appointment authority then such assessee shall get 5% tax rebate on income tax payable.

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 Reduced rates of Corporate Tax determined by SROs.
Reduced rate of corporate tax is same as like before which is follows:

Assessment year
Sl. No. Particulars
2020-2021 2019-2020

Manufacturer & exporter of Knitwear and Woven

i. Garments without having green building certification 12% 12%
*

Manufacturer & exporter of Knitwear and Woven

ii. 10% 10%
Garments having green building certification *

Textiles Industries [Manufacturer of yarn related to

production of fabrics, (dying, finishing & conning of
iii. yarn), (Manufacturing, dying, finishing & printing of 15% 15%
fabrics or engagement in any other activity in similar
nature) **
iv. Manufacturer of Jute Products *** 10% 10%
Private Universities, Private medical college, Private
dental college, Private engineering college or Private
v. 15% 15%
college engaged in imparting education on
information technology****

* The deadlines of SRO No. 217-Law/Income Tax/2019 dated 23 June 2019 is proposed to extend
another 2 years.
** Vide SRO No. 218-Law/Income Tax/2019 dated 23 June 2019 which is valid till 30 June, 2022.
**** Vide SRO No. 314-Law/Income Tax/2019 dated 03 August 2019 which is valid up to
assessment year 2022-2023.
***** Vide SRO No. 268-Law/Income Tax/2010 dated 01 July 2010.

2. Computation of Income:

2.1 Capital gain on sale of business or undertaking

Selling of business or undertaking entirely would be now measured with fair market value and
capital gain would be computed therefrom in following way:

Higher of consideration received or fair market value less-

• any expenditure directly connected with transfer; and

• the book value of assets less value of liabilities taken up as on the date of transfer [Section
2(30), 31A and 32A];

2.2 Charge of tax on the difference of investment, import and export made

Difference between actual and shown investment, import and export made will be subject to
income tax of equal to 50% of the difference [Section 16H];

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 2.3 Conditions and limitations of carry forward of loss, etc.-

An Association of Persons will be able to adjust its business loss against its income from any other
head. But the proportionate loss cannot be adjusted by its members with their own income, nor
can it be carried forward by the members for the purpose of setting off. [Section 42 (3A) & (3B)];

3. Tax Incentive for Investment of Undisclosed Property

3.1 Special Tax Treatment in respect of investment in Securities.

No authority including income tax authority will not raise any question to the source of income for
any investment made between 1 July, 2020 and 30 June, 2021 in listed securities tradable in capital
market, if the assessee pays tax @ 10% on the amount so invested subject to following conditions:
• A declaration in respect of such investment shall be made in the prescribed form;
• Such sum shall not be withdrawn from the capital market within three years from the day of
such investment.

‘securities’ means stocks, shares, mutual fund units, bonds, debentures and other securities of the
companies tradable in the capital market. [Section 19AAAA]

3.2 Special Tax Treatment in respect of undisclosed property, cash, etc.

Subject to paying certain rate of income tax based on location of property, no authority including
income tax authority will raise any question on investment in
• Land;
• Building
• bank deposits
• financial schemes and instruments
• all kinds of deposits or saving deposits
• saving instruments or certificates

The provisions of this section shall not apply to cases where any proceeding has been drawn under
any provision of this Ordinance or any other laws by thirtieth June, 2020. [Section 19AAAAA]

3.3 Special Tax Treatment in Respect of Investment in Building or Apartment

Special tax treatment for any building/apartment will now be applicable previously it was only for
residential buildings/apartments. [Section 19BBBB];

4. Limits of allowable expenditures for Business or Profession

4.1 Royalty, technical service fee, technical know-how fee

In the case of a holding company/group of companies, profit for income of subsidiary or associate
or joint venture would be excluded from net profit from business or profession for the
computation of allowable limit of royalty, technical service fee, technical know-how fee, technical
assistance fee or any fee of similar nature. [Section 30(h)]

4.2 Overseas travelling

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 Overseas travelling will be allowed up to 0.50% of disclosed turnover previously it was 1.25%.
[Section 30(k)];
4.3 Promotional expense

Promotional expense will be allowed up to 0.50% of the disclosed turnover.

For the purpose of this clause, promotional expense means any expense incurred by way of giving any
benefit in kind or cash or in any other form to any person for the promotion of business or profession.”
[Section 30(p)]

5. Tax Exemptions & Allowances

5.1 Tax exemption for newly established industrial undertaking set up between 1 July, 2019
and June, 2024:

Some new industries will be brought under the umbrella of Tax Holiday, which are:
• electrical transformer;
• artificial fiber;
• automobile parts or components manufacturing;
• automation & robotics design;
• artificial intelligence-based design and/or manufacturing;
• nanotechnology based products manufacturing;
• aircraft heavy maintenance services including parts manufacturing [Section 46BB (2)]

5.2 Exemption by 6th Schedule Part-A

• Pension only from Govt. and approved funds will be eligible for exclusion from total income.
[Para 8]
• Gratuity up to Tk. 2.5 Core only from Govt. and approved funds will be eligible for exclusion
from total income. [Para 20]
• Exclusion of total income derived from zero coupon bond will be withdrawn. [Para 40]
• Income earned by alternative investment fund recognized by BSEC will be excluded from total
income. Previously this exclusion was applicable for income earned from alternative
investment fund. [Para 54]

6. Income subject to tax deduction/collection at source (TDS/TCS)

6.1 Deduction at source from interest or profit on securities

Deduction at source from interest or profit on securities will be at the time of making payment or
credit previously it was on upfront basis [Section 51];

6.2 Deduction from payment to contractors

• Reduction in rates of income tax to be deducted at source in the case of local supply has been
proposed. This proposed change may be done by SRO for rule 16. [Ref: Salient Features
published by NBR];
• 0.5% tax to be deducted at source instead of 5% at current highest rate in case of scrap sale
has been proposed. 0.5% tax to be deducted at source instead of 5% at current highest rate

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 in the case of scrap sale has been proposed. This proposed change may be done by SRO for
rule 16. [Ref: Salient Features published by NBR]

• The amount of deduction at source for distributors will be calculated B-A:

Where,
A=the amount of tax paid under section 53E
B= {the selling price of the company to the distributor or other person as referred in section
53E (3)} x 7% x 5%. Previously it was the amount of tax applicable under this section if no tax
were paid under section 53E. [Section 52]

6.3 Deduction at source from payment of certain services

• Any sharing economy platform including ride sharing service (though it has already been
there), coworking space providing service and accommodation providing service will be
subject to deduction of income tax at source at the rate of 3% or 4% based on base value of
contract;

• Wheeling charge for electricity 2% or 3% based on base value of contract. [Section 52AA];

6.4 Deduction at source from compensation against acquisition

Deduction at source from compensation against acquisition of property will be increased from
• 2% to 6% where the immovable property is situated in any city corporation, paurashava, or
cantonment board;
• 1% to 3% where the immovable property is situated outside the above area. [Section 52C]

6.5 Deduction of Tax from any income remitted from abroad in connection with any service,
revenue sharing, etc.

Any income remitted from abroad by way of fee, service charges, commission or remuneration,
called by whatever name or by way of revenue sharing of any name and nature for-

• Providing any service rendered in Bangladesh;

• Rendering any service of performing any task by a resident person in favour of a foreign
person;
• allowing the use of any online platform for advertisement or any other purposes;
will be subject to deduction of income tax @ 10%.
But foreign remittance earned in abroad as per para 48 of 6th Schedule, Part A and IT Enabled Service
as per para 33 of 6th Schedule, Part A will be excluded. [Section 52Q];

6.6 Deduction of tax from receipts in respect of international phone call.

BTRC’s income from international phone call will be subject to deduction of tax @ 7.5%. [Section
52R]

6.7 Collection of Tax from Importers

Reduction in rates of income tax to be collected at import stage has been proposed. This proposed
change may be implemented through SRO for Rule 17A. [Ref: Salient Features published by NBR];

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 6.8 Deduction from payment on account of local letter of credit.
Purchase or procurement of rice, wheat, potato, onion, garlic, peas, chickpeas, lentils, ginger,
turmeric, dried chillies, pulses, maize, coarse flour, flour, salt, edible oil, sugar, black pepper,
cinnamon, cardamom, clove, date, cassia leaf, computer or computer accessories, jute, cotton,
yarn and all kinds of fruits through local letter of credit or financing agreement which were not
subject to deduction of income tax under a local letter of credit will now attract 2% tax deduction
at source. [Section 52U]

6.9 Collection of tax from export of certain items

Export of goods will attract deduction of income tax at source @ 0.5% [Section 53BB & 53BBBB];

6.10 Collection of tax from Member of Stock Exchanges.

In the case of transaction of shares and mutual fund in the stock exchange, tax @ 0.05% will be
deducted at source and in the case of transaction of other securities, 10% tax will be deducted on
commission received or receivable. [Section 53BBB]

6.11 Deduction from income of non-residents

Dividend to any non-resident fund or trust would be subject to deduction of income tax @ 20%,
previously it was at the rate of 30% [Section 56].

7. Advance Income Tax

7.1 Advance payment of tax by new assessees

For a new assessee, if his total income exceeds Tk. 6,00,000; then he will be liable to pay advance
income tax; which was previously Tk. 4,00,000 [Section 68];

7.2 Advance tax for the owners of private motor car.

Advance tax for motor vehicle will be increased. A comparison between existing tax and proposed
tax has been outlined below:

Serial Type and engine capacity Existing amount Proposed amount of

No. of tax (BDT) tax (BDT)
1. A car or jeep not exceeding 1500 cc 15,000 25,000
2. A car or jeep exceeding 1500 cc but 30,000 50,000
not exceeding 2000 cc
3. A car or jeep exceeding 2000 cc but 50,000 75,000
not exceeding 2500 cc
4. A car or jeep exceeding 2500 cc but 75,000 1,25,000
not exceeding 3000 cc
5. A car or jeep exceeding 3000 cc but 1,00,000 1,50,000
not exceeding 3500 cc
6. A car or jeep exceeding 3500 cc 1,25,000 2,00,000
7. A microbus 20,000 30,000

8. Return and Statements

8.1 Return of income

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 • Any person participating in shared economic activities by providing motor vehicle, space,
accommodation or any other assets or owning any licensed arms will submit income tax
return
• Any individual, who is required to have 12-digit TIN under section 184A will mandatorily
submit income tax return (except who has no taxable income but is required to have e-TIN
for selling a land or obtaining a credit card) [Section 75];

8.2 Return of withholding tax.

Now, University, English Medium School, local authority, artificial juridical person will be
required to submit withholding tax return [Section 75A];

8.3 Statements of assets, liabilities and life style.

Limit of gross wealth will be increased to Tk. 40 lakh (which was Tk. 25 lakh) for the mandatory
submission of statement of assets, liabilities & expenses. A person, not being a shareholder
director, may opt not to submit statement of expenses if his total income does not exceed Tk. 4
lakh (previously it was Tk. 3 lakh) [Section 80];

8.4 One Page Return

One-page return has been proposed to be introduced for marginal assesses. [Ref: Salient Features
published by NBR];

9. ASSESSMENT

9.1 Minimum Tax:

• TDS from professional service, technical services fee or technical assistance fee and wheeling
charge for electricity transmission would be subject to minimum tax [Section 82C];

• Any individual having gross receipt of Tk. 3 crore or more would be subject to minimum tax
on gross receipt @ 0.50% [Section 82C];

10. Others:

10.1 Penalty for failure to file return, etc.

Failure to submit return under section 103A (air transport business of non-resident) would
cause to impose penalty under section 124(2);

10.2 Appeal to the Appellate Tribunal.-

If the Commissioner of Taxes agrees to waive the mandatory payment of 10% tax for filing
appeal to Tribunal of an assessee, he will give such order within 30 days from the date of receipt
of such application of the assessee [Section 158(2)];

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 10.3 Person Required to Obtain e-TIN
Obtainment of e-TIN has been made mandatory for participants in Zilla Parishad election or
shared economic activities providing motor vehicle, space accommodation or any other assets.
[Section 184A]

10.4 Power of NBR to Extend Time Limit

The National Board of Revenue (NBR) will be bestowed power upon them in order to extend or
condone any time limit as per provision of the Ordinance due to epidemic, pandemic or any other
acts of God. [Section 184G];

10.5 Amendment of 1st schedule Part-B

Local authority will be included as employer to be meant for approved provident fund and
approved gratuity fund. [1st Schedule, Part B];

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