Problems on Individual Taxation: AY 2020-21

Problem # IT-1
Mr. Kabir Hossain (age 56 years) has been working as the Finance Director of a reputed private
company in Dhaka. The monthly basic salary was Tk. 85,000 for July and August 2019 and thereafter
at Tk. 92,500 per month due to an increment. In addition to his basic salary, Mr. Kabir Hossain is
entitled to receive the following:
Ø Accommodation at concessional rent–Mr. Kabir Hossain pays Taka 10,000 per month out
of total monthly rent of Taka 40,000.
Ø Full time car plus Taka 8,000 cash allowance per month
Ø Entertainment allowance Taka 15,000 p.m.
Ø Servant allowance Taka 4,000 p.m.
Ø Life insurance premium Taka 35,000 p.a. (policy value Taka 300,000)
Ø Foreign tour allowance Taka 200,000 p.a. (exempted in income year 2018-19)
Ø Medical allowance Taka 7,000 p.m. (actual medical expenses Taka 80,000 for the year)
Ø Festival bonus – two months’ basic salary (one received in August 2019 and other in May
2020)
He contributes to his recognized provident fund at a rate of 10% of his basic salary. His
employer also contributes the same amount to the provident fund. Employer of Mr. Kabir
Hossain’s emloyer has already deducted tax of Tk. 310,800 on his salary income.
In income year 2019-20, Mr. Hossain’s other incomes include the following:
a. Interest on Securities: Mr. Hossain has purchased Government Bond and debenture in income
year 2019-20 on which he earned the income mentioned below:
(a) Interest on Government bond Taka 237,500 (after deduction of tax at source @ 5% u/s 51)
and
(b) Interest on corporate bond Taka 65,000 (no tax deducted at source).

Following were the expenses to earn the above income: (i) Bank collection charge on above
interest income @ 2% of cash amount received and (ii) Interest on borrowed capital Taka 7,500.

b. Income from House Property: Mr. Hossain has constructed a 5-storeyed building with 2 flats at
each floor. Starting from July 1, 2019, each flat has been let out for residential purpose at a
monthly rent of Tk. 20,000, although the reasonable rent per flat per month is Tk. 20,500. For the
house, Mr. Hossain claimed following expenses: Municipal tax Tk. 16,800; Accumulated interest
on borrowed capital up to June 30, 2019 (last date before letting out) Tk. 180,000; Interest on
borrowed capital for the current income year 2019-20 Tk. 65,000; Repair Tk. 80,000, collection of
rent Tk. 70,000, water and sewerage and electricity bill for common purpose Tk. 120,000 and
salary of darwan, security guard and pump-man Tk. 140,000.
One flat was vacant for 1 month and another flat was vacant for another 1 month in the current
income year. For this, Mr. Hossain has claimed due vacancy allowance.

c. Income from other sources: Mr. Hossain has an income from a lottery, Taka 250,000 gross
(subject to tax deduction at source @ 20% and the tax deducted considered as settled tax u/s
82C).
In income year 2019-20, Mr. Hossain purchased ICB Mutual Fund certificates of Taka 925,000.

Compute total income of Mr. Kabir Hossain and tax payable by him.

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Solution # IT-1
Name of the Assessee: Mr. Kabir Hossain
Personal Status: Individual
Residential Status: Resident
Income Year ending on: 30.06.2020
Assessment Year: 2020-2021

Heads of Income Taka

1. Salary: u/s 21 W-1 2,154,750
2. Interest on Securities: u/s 22 W-2 301,450
3. Income from House Property: u/s 24 W-3 1,662,200
4. Income from Other Sources: u/s 33 Lottery 250,000
Total Income 4,368,400

Tax Computation:
1. Income from Lottery 250,000 20% 50,000
2. Other Income: 4,118,400
Slabs Tax Rate
First 300,000 0% 0
Next 100,000 5% 5,000
Next 300,000 10% 30,000
Next 400,000 15% 60,000
Next 500,000 20% 100,000
Balance 2,518,400 25% 629,600 824,600
Total 4,118,400 Gross Tax 874,600

Less: Investment tax credit @ 10% on allowed investment 102,960

Statutory ceiling 15,000,000
Actual 1,174,000
25% of (TI –Income exempted or @ reduced rate or
Sec. 82C income) 1,029,600
Net Tax 771,640
Less: Tax deducted at Sources:
a. TDS by employer 310,800
b. TDS on Govt. Bond 12,500
c. TDS on Lottery Income 50,000 (373,300)
Tax payable before submission of Return 398,340
Workings:
W-1: Income from Salary:
Items of Salary Gross Exempted Taxable
Basic salary July-Aug 85,000 1,095,000 0 1,095,000
Sept-June 92,500
Accom. at concessional rent 480,000 273,750 120,000 153,750
273,750
Full-time car + Conv. Allowance Tk. 8,000pm 156,000 0 156,000
Higher of (5% of BS, ie 54,750 or 60,000) 60,000
Entertainment allowance 180,000 0 180,000
Servant allowance 48,000 0 48,000
Life insurance premium 35,000 0 35,000
Medical allowance 84,000 109,500 0
Exempted: 10% of BS or 120,000, lower one 0
Festival bonus 177,500 0 177,500
Foreign Tour Allowance 200,000 200,000
Employer's contribution to RPF 109,500 0 109,500
Salary Income 2,358,750 229,500 2,154,750

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 W-2: Interest on Securities:
Gross Income: Taka
a. Interest on Govt. Bond : Cash Tk. 237,500 250,000
b. Interest on Corporate Bond 65,000
315,000
Less: Allowable Deductions:
Bank collection charge @ 2% on cash amount (237,500+65,000) 6,050
Interest on borrowed capital 7,500 13,550
Interest on Securities 301,450

W-3: Income from House Property:

Annual Value:
Actual rent 2,400,000
or Reasonable rent 2,460,000
higher one 2,460,000
Add: Unspent portion of Repair and Maintenance u/s 19(30) 205,000
2,665,000
Less: Allowable Deductions:
Municipal tax u/s 25(1)(a) 16,800
Interest on borrowed capital up to the date first letting out
(for first 3 income years) [u/s 25(1)(gg)] 60,000
Interest on borrowed capital for current year u/s 25(1)(g) 65,000
Repair and maintenance expense u/s 25(1)(h) [1/4th of AV]* 615,000
Actual exp. (80,000+70,000+120,000+14,0000 = 410,000)
Vacancy allowance u/s 25(1)(j) & (k) 41,000 797,800
Income from House Property 1,662,200

W-4: Income from Other Sources:

(TDS u/s 55 &subject to s
Income from Lottery ec. 82C) 250,000
250,000
W-5: Total Investment allowance (actual)
a. Employee's contribution to RPF 109,500
b. Employer's contribution to RPF 109,500
c. Life Insurance Premium (10% of Policy value Tk. 300,000) 30,000
d. Purchase of ICB Mutual Fund Certificate 925,000
1,174,000

Problem # IT-2
Mrs. Amira Sultana FCA (age 45 years) has been working as the Finance Director of a reputed private
company in Dhaka. The monthly basic salary was Tk. 75,000 for July and August 2019 and thereafter
at Tk. 82,000 per month due to an increment. In addition to her basic salary, Mrs. Sultana is entitled to
receive the following:
Ø Monthly house rent allowance of Taka 48,000.
Ø Conveyance allowance Taka 18,000 per month
Ø Entertainment allowance Taka 10,000 p.m.
Ø Servant allowance Taka 3,000 p.m.
Ø Life insurance premium Taka 30,000 p.a. (policy value Taka 250,000)
Ø Medical allowance Taka 11,000 p.m. (actual medical expenses Taka 90,000 for the year)
Ø Festival bonus – two months’ basic salary (one received in August 2019 and other in May
2020)
She contributes to her recognized provident fund at a rate of 10% of her basic salary. Her
employer also contributes the same amount to the provident fund. Employer of Mrs. Sultana
has already deducted tax of Tk. 291,000 on her salary income.
In income year 2019-20, Mrs. Sultana’s other incomes include the following:

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 a. Interest on Government Bond and Debenture: Mrs. Sultana has purchased Government Bond
and debenture in income year 2018-19 on which she earned the income mentioned below:
(a) Interest on Government bond Taka 190,000 (after deduction of tax at source @ 5% u/s 51)
and
(b) Interest on debenture Taka 55,000 (no tax deducted at source).

Following were the expenses to earn the above income: (i) Bank collection charge @ 2% on cash
interest income and (ii) Interest on borrowed capital Taka 6,000.

b. Income from Savings Instruments: Mrs. Sultana has income from Bangladesh Sanchaypatra,
Taka 198,000 [after tax deduction at source @ 10% u/s 52D and the tax deducted considered
as minimum tax u/s 82C(2)(b) and rate of tax be as per the proviso to sec. 82C(2)(d)].

c. Income from House Property: Mrs. Sultana has constructed a 4-storeyed building with 2 flats at
each floor. Starting from July 1, 2019, each flat has been let out for residential purpose at a
monthly rent of Tk. 12,000, although the reasonable rent per flat per month is Tk. 12,500. For the
house, Mrs. Sultana claimed following expenses: Municipal tax Tk. 13,840; Accumulated interest
on borrowed capital up to June 30, 2019 (last date before letting out) Tk. 120,000; Interest on
borrowed capital for the current income year 2019-20 Tk. 32,000; Repair Tk. 80,000, collection of
rent Tk. 70,000, water and sewerage and electricity bill for common purpose Tk. 120,000 and
salary of darwan, security guard and pump-man Tk. 140,000.
One flat was vacant for 2 months in the current income year. For this, Mrs. Sultana has claimed
due vacancy allowance.

d. Capital Gain: Mrs. Sultana has earned taxable capital gain of Taka 70,000 from sale of a capital
asset acquired 7 years back (hence the capital gain being a long-term gain).

e. Income from Other Sources: Mrs. Sultana has earned interest on bank deposit of Tk. 32,760
(net of tax deducted at source @ 10% u/s 53F).

In income year 2019-20, Mrs. Sultana purchased shares of listed companies of Taka 1,000,000.
Compute total income of Mrs. Amira Sultana and tax payable by her.

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Solution # IT-2
Name of the Assessee: Mrs. Amira Sultana
Personal Status: Individual
Residential Status: Resident
Income Year ending on: 30.06.2020
Assessment Year: 2020-2021

Heads of Income Taka

1. Salary: u/s 21 W-1 1,907,000
2. Interest on Securities: u/s 22 W-2 464,100
3. Income from House Property: u/s 24 W-3 789,160
4. Capital Gain: u/s 31 70,000
5. Income from Other Sources: u/s 33 W-4 36,400
Total Income 3,266,660

Tax Computation: Amount Tax Rate Tax

1. Income from BD Sanchaypatra 220,000 10% 22,000
2. Long-term Capital Gain 15% or 15.54% 70,000 15% 10,500
3. Other Income: 2,976,660
Slabs Tax Rate Tax
First 350,000 0% 0
Next 100,000 5% 5,000
Next 300,000 10% 30,000
Next 400,000 15% 60,000
Next 500,000 20% 100,000
Balance 1,326,660 25% 331,665 526,665
2,976,660 Gross Tax 559,165

Less: Investment tax credit @ 10% on allowed investment (76,167)

Statutory ceiling 15,000,000
Actual 1,219,000
25% of (TI –Income exempted or @ reduced rate) 761,665
Net Tax 482,999
Less: Tax deducted at Sources:
a. TDS by employer 291,000
b. TDS on Govt. Bond 10,000
c. TDS on BD Sanchaypatra 22,000 (323,000)
Tax payable before submission of Return 159,999

Tax applicable on total income including LT Capital Gain:

Slabs Tax Rate Tax
First 350,000 0% 0
Next 100,000 5% 5,000
Next 300,000 10% 30,000
Next 400,000 15% 60,000
Next 500,000 20% 100,000
Balance 1,396,660 25% 349,165
Total income 3,046,660 Gross tax 544,165
Inv Tax Credit @ 10% on 706,665* 70,667
* 25% of (3,046,660-220,000) Net Tax 473,698
Average Tax Rate (ATR) 15.54%

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Workings:
W-1: Income from Salary:
Items of Salary Gross Exempted Taxable
Basic salary July-Aug 75,000 970,000 0 970,000
Sept-June 82,000
Cash House Rent Allowance 576,000 300,000 276,000
Less: Lower of 50% of BS or Tk. 25,000 pm
Cash Conv. allowance 216,000 30,000 186,000
Exempted up to Tk. 30,000
Entertainment allowance 120,000 0 120,000
Servant allowance 36,000 0 36,000
Life insurance premium 30,000 0 30,000
Medical allowance 132,000 97,000 35,000
Exempted: 10% of BS or 120,000, lower one 0
Festival bonus 157,000 0 157,000
Employer's contribution to RPF 97,000 0 97,000
Salary Income 2,334,000 427,000 1,907,000

W-2: Interest on Securities:

Gross Income: Taka
a. Interest on Govt. Bond : Cash Tk. 190,000 200,000
b. Interest on Debenture 55,000
c. Interest on Savings Instruments 198,000 220,000
475,000
Less: Allowable Deductions:
Bank collection charge @ 2% on cash amount 4,900
Interest on borrowed capital 6,000 10,900
Interest on Securities 464,100
W-3: Income from House Property:
Annual Value:
Actual rent 1,152,000
or Reasonable rent 1,200,000
higher one 1,200,000
Less: Allowable Deductions:
Municipal tax u/s 25(1)(a) 13,840
Interest on borrowed capital up to the date first letting out
(for first 3 income years) [u/s 25(1)(gg)] 40,000
Interest on borrowed capital for current year u/s 25(1)(g) 32,000
Repair and maintenance expense u/s 25(1)(h) [1/4th of AV]* 300,000
Vacancy allowance u/s 25(1)(j) & (k) 25,000 410,840
Income from House Property 789,160
*Actual Tk. 410,000 (=80,000+70,000+120,000+140,000)
W-4: Income from Other Sources:
Interest from Bank Deposit [32,760/(1-10%] (TDS u/s 53F) 36,400
Income from Business or Profession 36,400
W-5: Total Investment allowance (actual)
a. Employee's contribution to RPF 97,000
b. Employer's contribution to RPF 97,000
c. Life Insurance Premium (10% of 250,000) 25,000
d. Purchase of Listed Companies’ Shares 1,000,000
1,219,000

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Problem # IT-3

Mr. Akram Ahmed (age 66 years) is the Finance Director of reputed company. With respect to income
year 2019-2020, his particulars of income are as follows:
a. Salary income: Taxable salary income, Tk. 1,520,000; Tax deducted at source on salary income by
his employer, Tk. 430,000; Mr. Akram Ahmed’s contribution to his recognized provident fund, Tk.
140,000; and His employer’s contribution to recognized provident fund, Tk. 140,000.
b. Interest on Securities: Mr. Ahmed earned interest on securities as mentioned below:
(i) Interest on tax-exempt government securities Tk. 25,000;
(ii) Interest on taxable government securities Tk. 33,250 (tax deducted at source @ 5% u/s 51) and
(iii) Interest @ 12% on investment of Taka 100,000 in listed corporate bond; investment was made
in 2018-19 (tax deducted at source @ 5%).
Following were the expenses to earn the above income: (i) Bank charged Tk. 200 for collecting
interest on tax-exempt government securities; and (ii) Bank also deducted commission @ 4% for
collecting interest on taxable government securities and corporate bond.
c. Income from House Property: Mr. Ahmed has constructed a 5-storeyed building with 2 flats at
each floor. Starting from the beginning of August of the income year 2019-20, each flat has been
let out for residential purpose at a monthly rent of Tk. 18,000, although the reasonable rent per flat
per month is Tk. 18,500. For the house, Mr. Ahmed claimed following expenses: Municipal tax Tk.
18,900; Accumulated interest on borrowed capital up to the end of July of the income year 2019-20
(date of first letting out) Tk. 150,000; Interest on borrowed capital for the current income year Tk.
45,000; Repair Tk. 90,000, collection of rent Tk. 80,000, water and sewerage and electricity bill for
common purpose Tk. 130,000 and salary of darwan, security guard and pump-man Tk. 150,000.
One flat was vacant for 1 month and another flat was vacant for 2 months in the current income
year. For this, Mr. Ahmed has claimed due vacancy allowance.
d. Agricultural Income: Mr. Ahmed has shown following agricultural income:
(i) Income derived from the agricultural land (market value of crops) Tk. 475,000 and income
derived from his building (used for agricultural purposes) Tk. 48,000;
(ii) Expenses incurred on income from agricultural land (although no proper books of accounts
are not maintained): Land development tax Tk. 5,000; Rates imposed by Union Parishad Tk.
4,000; Crop insurance premium Tk. 12,000; Cost of the maintenance of capital assets Tk.
7,500; Depreciation as per the Third Schedule Tk. 39,000; Interest on mortgage of the land
Tk. 15,000; Honorarium of a caretaker-cum-bookkeeper Tk. 24,000; and Cost of production
(cultivation cost Tk. 190,000’, ordinary processing cost Tk. 60,000, transportation cost Tk.
40,000, and repair and maintenance cost Tk. 30,000).
(iii) Income from Rubber garden Tk. 185,000 (as computed according to income tax laws).
e. Other income: Mr. Ahmed has shown following income from other sources:
(i) Other business income Tk. 410,000 (as computed according to income tax laws);
(ii) Share of pre-tax income from a partnership firm Tk. 230,000, the firm has duly paid tax on its
income;
(iii) Income of spouse and minor children (not having separate tax files), Tk. 78,000.
(iv) Taxable capital gain from sale of capital asset purchased 2 years back Tk. 76,000.
(v) Interest of on Bank Deposit Tk. 76,860 (net of tax deducted at source @ 10% u/s 53F).
(vi) Foreign income of Tk. 272,000 (post-tax) from a country with which Bangladesh has a double
taxation avoidance agreement, on which Tk. 68,000 tax was paid abroad, but the income is
not yet brought in Bangladesh.

Mr. Ahmed purchased ICB mutual fund certificates during the current income at an amount of Tk.
500,000. He paid life insurance premium Tk. 45,000 p.a. (on life policy of Tk. 400,000) and also
paid Tk. 430,000 as advance income tax (AIT).

Required: Compute total income and tax payable by Mr. Ahmed for the relevant assessment year.

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Solution # IT-3
Name of the Assessee: Mr. Akram Ahmed
Personal Status: Individual
Residential Status: Resident
Income Year ending on: 30.06.2020
Assessment Year: 2020-2021
Heads of Income Taka
1. Salary: u/s 21 1,520,000
2. Interest on Securities: u/s 22 W-1 45,214
3. Income from House Property: u/s 24 W-2 1,415,600
4. Agricultural Income: u/s 26 W-3 250,000
5. Income from Business or Profession: u/s 28 W-4 484,000
6. Capital Gain: u/s 31 76,000
7. Income from Other Sources: u/s 33 W-5 85,400
8. Share of Income from Firm or AOP (where applicable) 230,000
9. Income of Minor or Spouse under section 43(4) 78,000
10. Total (Serial 1 to Serial 9) 4,184,214
11. Foreign Income 340,000*
12. Total Income 4,524,214
* Pre-tax amount (272,000+68,000)
Tax Calculation:
Slabs Tax Rate
First 350,000 0% 0
Next 100,000 5% 5,000
Next 300,000 10% 30,000
Next 400,000 15% 60,000
Next 500,000 20% 100,000
Balance 2,874,214 25% 718,554
4,524,214 Gross Tax 913,554
Less: Investment tax credit @ 10% on allowed investment 82,000
Statutory ceiling 10,000,000
Actual 820,000
20% of (TI - EC to RPF) 922,584
Net Tax 831,554
Tax rebate on tax-free
Less: income (42,274)
[(net tax/total income) x share of firm's income]
Less: Tax relief on foreign income (68,000)
(BD Tax Tk. 85,000* or foreign
tax Tk. 68,000 , lower one
* 340,000x25% last slab rate Tax liability 721,280
Less: Tax deducted at Sources:
a. TDS by employer 207,400
b. TDS on Govt. Bond 1,750
b. TDS on Corporate Bond 600
c. TDS on Bank Deposit 8,540 (218,290)
Less: Advance Income Tax (AIT) paid (430,000)
Tax payable before submission of Return 72,990
Total Investment allowance (actual)
a. Employee's contribution to RPF 140,000
b. Employer's contribution to RPF 140,000
c. Life Insurance Premium [actual Tk. 45,000; Policy value Tk. 400,000] 40,000
d. Purchase of ICB Mutual Fund Certificate 500,000
820,000

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Workings:
W-1: Interest on Securities:
Gross Income: Taka
a. Interest on tax-exempt govt. securities 25,000
Less: Exempted 25,000 nil
b. Interest on taxable govt. securities [33,250/(1-5%)] 35,000
c. Interest on Debenture (100,000x12%) 12,000x95%=11,400* 12,000 47,000
Less: Allowable Deductions:
Bank collection commission @ 4% on [33,250+11,400*] 1,786
Interest on Securities 45,214

W-2: Income from House Property:

Annual Value:
Actual rent (18,000*10*11) 1,980,000 higher one
or Reasonable rent
(18,500*10*11) 2,035,000 2,035,000
Add: Unspent portion of Repair and Maintenance u/s 19(30) 58,750
2,093,750
Less: Allowable Deductions:
Municipal tax u/s 25(1)(a) 18,900
Interest on borrowed capital up to the date first letting out
(for first 3 income years) [u/s 25(1)(gg)] 50,000
Interest on borrowed capital for current year u/s 25(1)(g) 45,000
Repair and maintenance expense u/s 25(1)(h) [1/4th of AV]* 508,750
Vacancy allowance u/s 25(1)(j) & (k) 55,500 678,150
Income from House Property 1,415,600
*Actual Tk. 450,000 (=90,000+80,000+130,000+150,000)

W-3: Agricultural Income:

Gross Income
Income derived from the agricultural land (MV of crops) 475,000
Income derived from his building (used for agricultural purposes) 48,000
523,000
Allowable Deductions:
Land development tax 5,000
Rates imposed by Union Parishad 4,000
Crop insurance premium 12,000
Depreciation as per the Third Schedule 39,000
Interest on mortgage of the land 15,000
Honorarium of a caretaker-cum-bookkeeper 24,000
Cost of production (proper books
not maintained) [60% of MV of crops] 285,000 384,000
139,000
Add: Partial agricultural income from Rubber (60%) 111,000
Agricultural Income 250,000
W-4: Income from Business or Profession:
Partial business income from Rubber (40%) 74,000
Other business income (given) 410,000
Income from Business or Profession 484,000
W-5: Income from Other Sources:
Interest of on Bank Deposit [76,860/(1-10%] 85,400
Income from Other Sources 85,400