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Salary income: Sec.

21
Sections 21, 50, 172, 108, 18(1) Subsections of sec. 2: (5A), (6), (24), (27), (28), (45), (48), (50), (51), (52), (58) Rules 21-24, 33, 33A-33J, 43-58, ,58A-58F, Schedules Sixth Schedule (Part A, Part B) First Schedule (Part A, Part B, Part C) SROs SRO relating to employees tax on salary paid by employer
Statutory Definitions: Section 2(5A): Approved gratuity fund Section 2(6): Approved superannuation fund Section 2(24): Director or manager Section 2(27): Employer Section 2(28): Employee Section 2(45): Perquisite Section 2(48): Principal officer Section 2(50): Profits in lieu of salary Section 2(51): Public servant Section 2(52): Recognized provident fund Section 2(58): Salary

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Salary defined u/s 2(58) Salary includes Wages Annuity Pension exempted under para 8, Part A, Sixth Schedule Gratuity exempted under para 20, Part A, Sixth Schedule Fees Commission Allowance Perquisite defined u/s 2(45) Profit in addition to salary or wages Profit in lieu of salary or wages Profit in lieu of salary defined u/s 2(50) Advance of salary Leave encashment

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Conditions for identifying something received by employee as Salary (1) Employee-Employer relationship between the recipient and the payer (2) Payment of service, not payment for service (3) Holding a position in the office Perquisite defined in sec. 2(45) Perquisite means (i) anything (cash/noncash) received from employer except: Basic salary Festival bonus Incentive bonus not exceeding 10% of disclosed profit of relevant income year Arrear salary Advance salary Leave encashment Leave fare assistance and Overtime (ii) Any other benefit whether convertible into money or not, called by whatever name, other than employers contribution to a i. Recognized provident fund ii. Approved pension fund iii. Approved gratuity fund and iv. Approved superannuation fund.

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Profit in lieu of salary defined u/s 2(50) Profit in lieu of salary includes (a) compensation received due to termination or modification of terms and conditions of employment (b) payment from provident or other fund out of employers contribution Scope of Salary: Section 21 1. Salary due, paid or not 2. Advance salary (Salary paid though not due or before it became due) 3. Arrear salary, not taxed earlier

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Items of Salary and Extent of Taxability: Rules 33, 33A-33J


[Refer to Schedule-1 (Salaries) in Part-III of Income Tax Return Form u/r 24]

Pay & Allowances Basic pay [Basic salary defined u/r 33(2)(a)] Special pay Dearness allowance Conveyance allowance (without any car) Provision of car for personal and/or official purpose (without any cash allowance)
* Some amount may be deducted from salary

Rule 33 33 33 33C 33D

Taxability or Exemption Fully taxable Fully taxable Fully taxable Exempted up to Taka 18,000 Taxable amount: 7.5% of basic salary
Less: Amount deducted from salary

Provision of car for personal 33E and/or official purpose (with cash allowance) House rent allowance (cash) 33A Medical allowance Servant allowance Leave allowance Honorarium/Reward/Fee Overtime allowance Bonus/Ex-gratia Employers contribution recognized provident fund 33I

to
Para 25, Part A, Sixth Sch.

Taxable amount: 7.5% of basic salary plus Cash allowance Exempted: 50% of basic salary or Taka 15,000 per month, lower one Exempted: Actual medical or hospitalization expense Fully taxable Fully taxable Fully taxable Fully taxable Fully taxable Fully taxable
Exempted: 1/3rd of salary or 14.5% interest rate

Interest accrued on recognized provident fund

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Deemed income for free furnished/unfurnished accommodation


* Some amount may be deducted from salary

Rule 33B(1)

Taxable: 25% of basic salary less Cash house rent allowance waived
Less: Amount deducted from salary

Furnished/unfurnished accommodation with concessional rent Free or concessional passage for travel abroad Free or concessional passage for travel within Bangladesh Free or concessional passage provided by an organization doing transport business Entertainment allowance

Rule 33B(2)

Rule 33G Rule 33G Rule 33G

Taxable: 25% of basic salary less Cash house rent allowance waived less Rent paid by employee Exempted: once in every 2 years if provided as per terms of employment Exempted: if provided as per terms of employment Fully exempted

33H

Other benefits

33J

Fully taxable (except free tea, coffee, beverage or like provided during the office hour) Exempted: if provided for official purpose

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Basic salary defined u/r 33(2)(a) Basic salary means the pay and allowances payable monthly or otherwise, but does not include (i) dearness allowance or dearness pay unless it enters into the computation of superannuation or retirement benefits of the employee concerned; (ii) employers contribution to a recognized provident fund or a government provident fund and the interest credited on the accumulated balance of an employee in such fund; (iii) allowances which are exempt from the payment of tax; and (iv) allowances, perquisites, annuities and benefits referred to in sub-rule (1) of rule 33 [i.e., benefits mentioned in rules 33A to 33J].

Tax Deduction at Source from Salary: Sec. 50


Rule 21: Statement of Deduction of Tax under the head Salaries where such deduction is not made by or on behalf of the Government Rule 22: Commissioners power to permit employer to deduct tax under the head Salaries in lump sum every month and submit yearly statement Rule 23: Persons responsible for making payments under the head Salaries [Section 108: Information regarding payment of Salary] Rule 24: Return of Income [Form No. IT-11GA] Part-III: Schedules Showing Details of Income Schedule-1: (Salaries)

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First Schedule, Part B: Recognized Provident Fund Sec. 2(52): Recognized Provident Fund Rules 43-58: Provident Fund Conditions to be Satisfied by a Recognized Provident Fund: Para 3, Part B, First Schedule a. Employment of employees and place of business b. Employees contribution at a definite proportion c. Employers contribution not more than employees contribution d. Composition of the fund e. Operated under a board of trustees f. Bar on employer to recover any sum g. Accumulated fund to be paid to an employee on the day he ceases to be an employee h. NBRs restriction on payment of any portion of the accumulated balance First Schedule, Part C: Approved Gratuity Fund Sec. 2(5A): Approved Gratuity Fund Rules 58A-58F First Schedule, Part A: Approved Superannuation Fund or Pension Fund Sec. 2(6): Approved Superannuation Fund
Effects of Different Items of Provident Funds, Approved Superannuation Fund and Approved Gratuity Fund on Computation of Salary Income
Items of the Fund

Law applicable

Provident Fund ( PF ) Government PF Non-Government PF General PF Contributory PF Recognised PF Unrecognised (GPF) (CPF) (RPF) PF (URPF) Provident Provident Fund Part-B, First Fund Act, Act, 1925 & Schedule, Income 1925 & Contributory Tax Ordinance, --------

Approved Superannuation Fund (ASF) Part-A, First Schedule, ITO

Approved Gratuity Fund (AGF) Part-C, First Schedule, ITO

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Employees contribution

General Provident Rules, 1979 Added with salary as a part of basic salary [ ** A component of investment allowance (6th Schedule, Part-B, para-4) ] N/A ( Not applicable )

Provident Rules, 1979 Added with salary as a part of basic salary [ ** A component of investment allowance (6th Schedule, PartB, para-4) ]

1984 (ITO)

Added with salary as a part of basic salary [Para-4, 1st Sch., Part-B]. [** A component of investment allowance (6th Schedule, Part-B, para-5) ]

Added with salary as a part of basic salary [ ** Not a component of investment allowance ]

Employers contribution

Added with salary.

Interest on accumulated balance

Not to be added with salary.

Not to be added with salary.

Income from investments or deposits of fund & capital gains from transfer of capital assets of such fund Receipt of any money from the Fund

-------

-------

Added with salary [Para-4, 1st Sch., Part-B]. [** A component of investment allowance (6th Schedule, Part-B, para-5) ] Not to be added with salary up to 1/3 rd of salary or up to 14 % interest rate [Para25, 6th Sch., PartA; Para-5(2), 1st Sch., Part-B]. -------

Not to be added with salary.

Not to be added with salary, if it is an ordinary annual contribution [Para-5(3), 1st Sch., Part-A]; otherwise it shall be added with salary. [ ** A component of investment allowance (6th Sch., Part-B, para-6) ] Added with salary.

N/A ( Not applicable )

Added with salary.

Not to be added with salary.

-------

--------

-------

Not to be added with salary [Para-5(1), 1st Sch., Part-A ].

Not to be added with salary[Para-5, 1st Sch., PartC ].

Proceeds from the Fund due or received on maturity or at other time such as at the time of leaving the service

Not to be added with salary [Para-21, 6th Sch., Part-A.] Not to be added with salary.

Not to be added with salary [Para-21, 6th Sch., Part-A.] Not to be added with salary.

Not to be added with salary [Para21, 6th Sch., PartA.] Not to be added with salary, in case of 5-year continuous service or leaving service for any unavoidable reasons approved by Commissioner [Para-6, 1st Sch.,

Employers contribution & interest thereon to be added with salary. Employers contribution & interest thereon to be added with salary.

Not to be added with salary [Para-21, 6th Sch., Part-A.] Not to be added with salary.

Not to be added with salary.

Not to be added with salary.

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Balance of URPF transferred to a RPF

Not applicable.

Not applicable.

Employers contribution (including interest) repaid to employee

-------

-------

Part-B]. Usually not to be added, but part of balance remaining in URPF to be added with salary [Para-10(3), 1st Sch., Part-B].. -------

Amount not transferred to be added with salary.

Not applicable.

Not applicable.

-------

Added with salary [Para-6, 1st Sch., Part-A]

Added with salary [Para7, 1st Sch., Part-C]

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Exempted Salary Items: Part A, Sixth Schedule


Para-4: Para-5: Para-6: Para-7: Para-8: Para-15: Para-16: Para-17: Income of a Govt. provident fund (PF) and workers participation fund Special allowance, benefits or perquisite granted to meet official expenses [also see Rule 33J] Income of a recognized PF, an approved superannuation fund and an approved gratuity fund. Salary income of persons working in embassy, high commissioner, or other foreign mission Pension Salaries of a foreign technician employed in manufacturing industries for a maximum period of 3 years from the date of his arrival Tax paid by employer on salary of foreign technicians for a maximum period of 5 years after expiry of first 3 years of exemption Salaries of a foreign technician employed in Bangladeshi consulting and engineering firm in Bangladesh for a maximum period of 3 years from the date of his arrival and then for employer tax on salary for another maximum 5 years Gratuity. Payment from Govt. PF, recognized PF, approved superannuation fund or workers participation fund Interest on accumulated balance of an employee in a recognized PF up to 1/3rd of salary or 14.5% interest rate Amount received by an employee of a Government organization, a local authority, or an autonomous or semiautonomous body at the time of his voluntary retirement

Para-20: Para-21: Para-25: Para-26:

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Investment Allowance Items: Part B, Sixth Schedule


Para-3: Para-4: Para-5: Para-6: Para-17: Sum deducted from salary for a deferred annuity or of making provisions for his wife or children, up to deduction of 1/5th of salary. Contribution to any Govt. provident fund (PF) Assessee's and employer's contribution to a recognised PF Ordinary annual contribution to approved superannuation fund Payment by an assessee, to a benevolent fund or any group insurance premium

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Basic Salary or Basic Pay: Rule 33 Pay Scale: 4,800-250x4-5,800-EB-350x2-6,500 Date of joining: 1 September, 2000 Basic salary on 1 September 2000: Taka 4,800 Basic salary on 1 September 2001: Taka 5,050 Basic salary on 1 September 2002: Taka 5,300 Basic salary on 1 September 2003: Taka 5,550 Basic salary on 1 September 2004: Taka 5,800 Efficiency Bar (EB) successfully crossed Basic salary on 1 September 2005: Taka 6,150 Basic salary on 1 September 2006: Taka 6,500 Income Year: 2005-2006 (1 July 2005 to 30 June 2006) Basic salary on 1 July 2005: Taka 5,800 Basic salary on 1 September 2005: Taka 6,150
July-August, 2005: Monthly salary Taka 5,800 September-December 2005 and January-June 2006: Taka 6,150
Festival Bonus: Monthly basic salary of the month in which it is paid

November 2005: Taka 6,150 January 2006: Taka 6,150

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Salary Assessment-1:
Mr. Qader Box has been working as the Manager (Accounts) of a reputed private company getting his salary in pay-scale 20,0002,000326,000EB 2,500231,000. The monthly basic salary in the ending month of last income year (i.e., June of the last income year) was Tk. 28,500. The date of annual increment in the basic salary is 1st October. In addition to his basic salary, Mr. Box is entitled to receive entertainment allowance Tk. 3,000 per month, servant allowance Tk. 1,500 per month and medical allowance Tk. 1,000 per month and a full time car used both for private and official purposes. Mr. Box has also been provided a free-furnished quarter for his family accommodation. 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. Copute taxable salary income of Mr. Box.

Solution -1: Computation of Income from Salary


Pay & Allowances Rule Tk. 26,000 x 3 Tk. 28,500 x 9 7.5% x 334,500 Annual Taxable Amount (Taka) 334,500 25,088 Basic pay: 33 July-September Oct.-June Provision of car for 33D personal and/or official purpose (without any cash allowance) Medical allowance 33I Servant allowance Entertainment allowance 33H Employers contribution to recognized provident fund Deemed income for free Rule furnished/unfurnished 33B(1) accommodation Total Income from Salary

Tk. 1,000 x 12 less Exempted fully Tk. 1,500 x 12 Tk. 3,000 x 2 10% x 334,500 25% x 334,500

nil 18,000 36,000 33,450 83,625 178,163

Salary Assessment-2:

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Mr. X is a Manager receiving Taka 50,000 basic salary per month. He is entitled to receive the following benefits from his employer: Rent free accommodation Full time car Entertainment allowance Taka 10,000 p.m. Servant allowance Taka 5,000 p.m. Life insurance premium Taka 35,000 p.a. (on life policy of Taka 300,000) Medical allowance Taka 6,000 p.m. (actual medical expenses Taka 40,000 for the year) Festival bonus two months basic salary Besides he contributes 10% of his basic salary to his recognized provident fund and his employer also contributes the same amount to this provident fund. Last year he purchased shares of listed company of Taka 150,000. Employer of Mr. X has already deducted tax on his salary income Taka 140,000.

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Solution: Computation of Income from Salary


Pay & Allowances Rule Tk. 50,000 x 12 7.5% x 600,000 Basic pay 33 Provision of car for 33D personal and/or official purpose (without any cash allowance) Medical allowance 33I Servant allowance Bonus (Festival) Employers contribution to recognized provident fund Deemed income for free furnished/unfurnished accommodation Entertainment allowance Other benefits: Insurance premium Total Income from Salary Annual Taxable Amount (Taka) 600,000 45,000

Tk. 6,000 x 12 less Exempted Taka 40,000 Tk. 5,000 x 12 Tk. 50,000 x 2 10% x 600,000 25% x 600,000 10,000 x 12

32,000 60,000 100,000 60,000 150,000 120,000 35,000 1,202,000

Rule 33B(1) 33H 33J

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Computation of Tax Liability Total Income Tax Rate On first Taka 120,000 On next Taka 250,000 10% On next Taka 300,000 15% On next Taka 350,000 20% On balance Taka 182,000 25% Gross Tax on Total Income Taka 1,202,000 Less: Investment Tax credit @
15% on Taka 228,400

Amount of Tax Nil 25,000 45,000 70,000 45,500 185,500 34,260 151,240 140,000 11,240

Net Tax Payable Less: Tax deducted at source by employer Tax payable at the time of filing return u/s 74

Investment Allowance: Part B, Sixth Schedule Actual Amount Items Amount Para-1: Insurance premium (Actual Tk. 35,000, but 30,000
Para-5: Para-5: Para-8: Total allowed up to 10% of Tk. 300,000) Assessee's contribution to a recognised PF (10% of Tk. 600,000) Employer's contribution to a recognised PF (10% of Tk. 600,000) Investment in stocks

60,000 60,000 150,000 300,000

] Actual investment allowance Taka 300,000. Allowed investment allowance: Lower of the following two Taka 2 lakh 50 thousand

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20% of [Taka 1,202,000 Taka 60,000 Taka nil] = 20% of Taka 1,142,000 = Taka 228,400. i.e., Taka 228,400.

Investment tax credit = Taka 228,400 x 15% = Taka 34,260.

Salary Assessment-3: Mr. X is a Manager receiving Taka 35,000 basic salary per month. He is entitled to receive the following benefits from his employer: House rent allowance Taka 16,000 p.m. Cash conveyance allowance Taka 2,000 p.m. Entertainment allowance Taka 1,000 p.m. Medical allowance Taka 1,500 p.m. (actual medical expenses Taka 10,000 for the year) Festival bonus two months basic salary Besides he contributes 10% of his basic salary to his recognized provident fund and his employer also contributes the same amount to this provident fund. Last year he purchased shares of listed company of Taka 50,000. Employer of Mr. X has already deducted tax on his salary income without considering his investment in shares.

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Solution: Computation of Income from Salary


Pay & Allowances Basic pay House rent (cash) Rule 33 allowance 33A Annual Taxable Amount (Taka) Tk. 35,000 x 12 420,000 16,000x12=192,000 12,000 Less: Lower of 50%x420,000=210,000 or 15,000x12=180,000 ie, Taka 180,000 2,000 x 12 = 24,000 6,000 Less Taka 18,000 Tk. 1,500 x 12 = 18,000 8,000 Less Exempted Taka 10,000 Tk. 35,000 x 2 70,000 10% x 420,000 42,000 1,000 x 12 12,000 570,000

Cash conveyance allowance Medical allowance

33C 33I

Bonus (Festival) Employers contribution to recognized provident fund Entertainment allowance 33H Total Income from Salary

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Computation of Tax Liability Total Income Tax Rate On first Taka 120,000 On next Taka 250,000 10% On next Taka 200,000 15% Gross Tax on Total Income Taka 570,000 Less: Investment Tax credit @
15% on Taka 105,600

Amount of Tax Nil 25,000 30,000 55,000 15,840 39,160 42,400 3,240

Net Tax Payable Less: Tax deducted at source by employer Tax refundable at the time of filing return

Investment Allowance: Part B, Sixth Schedule Actual Amount Items Amount Para-5: Assessee's contribution to a recognised PF 42,000
Para-5: Para-8: Total (10% of Tk. 600,000) Employer's contribution to a recognised PF (10% of Tk. 600,000) Investment in stocks

42,000 50,000 134,000

Actual investment allowance Taka 134,000.


Allowed investment allowance: Lower of the following two

Taka 2 lakh 50 thousand 20% of [Taka 570,000 Taka 42,000 Taka nil] = 20% of Taka 528,000 = Taka 105,600. i.e., Taka 105,600.
Investment tax credit = Taka 105,600 x 15% = Taka 15,840.

Tax Deducted by Employer:


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Actual investment allowance Taka 84,000 [excluding investment in stocks].


Allowed investment allowance: Lower of the following two

Taka 2 lakh 50 thousand 20% of [Taka 570,000 Taka 42,000 Taka nil] = 20% of Taka 528,000= Taka 105,600. i.e., Taka 105,600. Investment tax credit = Taka 84,000 x 15% = Taka 12,600. Net tax for deduction by employee = Gross Tax Taka 55,000 Taka 12,600 = Taka 42,400 Salary Assessment-4: Mr. X is a Manager receiving Taka 35,000 basic salary per month. He is entitled to receive the following benefits from his employer: House rent allowance Taka 16,000 p.m. Cash conveyance allowance Taka 2,000 p.m. Entertainment allowance Taka 1,000 p.m. Medical allowance Taka 1,500 p.m. (actual medical expenses Taka 10,000 for the year) Festival bonus two months basic salary Besides he contributes 10% of his basic salary to his recognized provident fund and his employer also contributes the same amount to this provident fund. Last year his income from other sources was Taka 200,000 and he purchased shares of listed company of Taka 50,000. Employer of Mr. X has already deducted tax on his salary income without considering his investment in shares.
Interest on Securities : u/s 22 & 23
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Sections

22, 23, 109, 106 Subsections of sec. 2: (15), (30), (38) TDS (Tax Deducted at Source): [common sections 48 & 49], 51, 52D Rules 12 [u/s 49] Sixth Schedule, Para-12, Para-13, Para-24, Para-31B
Part A Sixth Schedule, Para-9, Para-10 Part B

Statutory Definitions: Section 2(15): Capital assets Section 2(30): Fair market value Section 2(38): Interest
Conditions of treating any income under the head Interest on Securities:
(a) (b) Income must be identified as interest Income must be on securities

Outside the scope of this head of income: Dividend income on share/stock or discount income on bond under the head Income from other sources Interest income on loan given under the head Income from other sources

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Scope of Interest on Security: Interest on any Government security or any security approved by Government, and ii) Interest on debenture or other security of money issued by or on behalf of a local authority or a company.
i)

Deductions from Interest on Security: u/s 23 i) ii) Banks commission or charges on realisation of the interest [u/s 23(1)(a)] Interest expense on money borrowed for investment in the securities [u/s 23(1)(b)] Limitations on deduction: No allowance or deduction shall be made on account of banks commission or charges, or interest expense in respect of, or allocable to tax-exempted Government security [Proviso to section 23(1)]. No deduction in respect of interest expense shall be allowed, if it is payable outside Bangladesh but tax has not been deducted or collected at source under sections 49(1)(g) & 56 and rule 12 [vide u/s 23(2) ]. Tax deducted at source from Interest on Security & Grossing-up that Interest: Sections 51 & 52D Interest on security is subject to tax deducted at source (TDS) under the provisions of sections 49(1)(b), 49(3)(b), 51 and 52D and rule 11. As per provision of section 51, TDS on interest on securities (other than debenture issued by or on behalf of a local authority or a company) shall be at 10% [up to FY 2004-2005 it was the maximum rate or the rate applicable whichever is higher, and the Deputy Commissioner of Taxes (DCT) could arrange to make the TDS at zero rate (if the interest-recipient has total income not exceeding minimum tax-exempted total income limit), or at lesser rate (if the interestrecipients total income is subject to tax-rate lower than the maximum rate)]. Under section 48(2), TDS shall be deemed to be the income received by the assessee and it shall be treated as payment of tax in due time by the assessee. So, interest on security net of tax or tax-deducted interest has to be grossedup. As per provision of section 52D, interest on savings instrument is subject to TDS at 5% from FY 2002-2003 (previous rate of TDS was 10%) if the savings instruments are purchased after 10-06-1999 and before 01-01-2004. This TDS u/s 52D is a settled tax liability u/s 82C.

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Formula for grossing-up:


Gross Interest = (Interest net of tax) / (1 Rate of TDS) .
Non-Assessable Income in respect of Interest on Security : Sixth Schedule, Part-A: Para-12: Para-13: Para-24: Para-31B: Interest income on taxable Government securities up to Taka 5,000 Interest income on debenture up to Taka 20,000 [ N.B.: For paragraphs 12 and 13, total exemption is up to Taka 20,000 ] Interest on tax- free Government security (totally). Interest on savings instrument not exceeding Taka 25,000, except for savings instruments (i) purchased after 10-06-1999 and before 01-01-2004 on which TDS (tax deducted at source) is made at 5% from FY 2002-2003 (previous rate of TDS was 10%), or (ii) purchased by an approved superannuation fund, pension fund, gratuity fund, recognized provident fund, or a workers participation fund u/s 52D [inserted by the Finance Act 2004].

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Classification of Securities for Computation of Interest on Security:


Major Classification Government Security: u/s 22(a) Subclassification Tax-free savings instrument TDS & requirement of grossing-up Non-assessable limit Subject to no TDS & no If not purchased after 10-06-1999 grossing-up required. and before 01-01-2004; If the interest does not exceed Taka 25,000 [Para-31B, Sixth Schedule, Part-A, applicable from AY 2004-2005]. Tax-free other Subject to no TDS & no Totally non-assessable, if issued with securities grossing-up required. the condition that interest thereon shall not be liable to tax [Para-24, Sixth Schedule, Part-A]. Taxable Subject to TDS & Fully taxable if the interest exceeds savings grossing-up required only if Taka 25,000 [Para-31B, Sixth instrument Schedule, Part-A, applicable from interest net of tax given. TDS at 5% from FY AY 2004-2005]. 2002-2003 (previous rate of TDS was 10%) if purchased after 10-06-1999 and before 01-01-2004 [sec. 52D]. Taxable other Subject to TDS & grossing- Non-assessable up to Taka 5,000 securities up required only if interest [Para-12, Sixth Schedule, Part-A] net of tax given. TDS at 10% [sec. 51(1)] Subject to no TDS & no Non-assessable up to Tk. 20,000, but grossing-up required [sec. joint non-assessable limit for taxable Debenture 51(3)]. Government security & debenture also up to Tk. 20,000 [Para-13, Sixth Schedule, Part-A]. Subject to TDS at 10% if the Totally assessable, i.e., no nonOther security is approved by the assessable limit. Securities of Government [sec. 51] and Money grossing-up required only if interest net of tax given.

NonGovernment Security (issued by a local authority or a company): u/s 22(a)

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Investment Allowance Items Part B, Sixth Schedule


Para-9: Investment in the purchase of debentures or debenture-stocks from primary market by a non-corporate assessee, up to lesser of following two:(a) Net investment in concerned income year ; (b) Net investment in last three income years. Para-10: Investment by a non-corporate assessee in the purchase of: (a) savings certificates or instruments; (b) ICB unit certificates and mutual fund certificates; (c) other Government securities (including Development loans or Bonds); and (d) shares of investment companies, but investment tax credit will be disallowed if sold within 5 years from the date of investment.

Example:
Mr. X has purchased the following securities on which he earned the income mentioned below: (a) Interest on Defence Savings Certificate (purchased in 2002) Taka 95,000 (after deduction of tax @ 5%) (b) Interest on Government bond Taka 180,000 (after deduction of tax @ 10%) (c) Interest on debenture Taka 55,000; Following were the expenses to earn the above income: Bank collection charge Taka 12,000 Interest on borrowed capital Taka 6,000.
Compute the income under the head Interest on securities.

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Solution:
Particulars Interest on Securities: u/s 22 Interest on Defence Savings Certificate [95,000/(1-5%)] Interest on Government bond [180,000/(1-10%)] Less: Nonaseessable under para 12 (Part A, Sixth Schedule) Taka Taka 100,00 0 200,000 5,000 195,000 55,000 15,000

Interest on debenture
Less: Nonaseessable under para 13 (Part A, Sixth Schedule) [20,000 5,000] Gross income under Interest on Securities Less: Allowable deductions u/s 23

40,000 335,000

Bank collection charge Interest on borrowed capital


Income under the head Interest on Securities

12,000 6,000

18,000 317,000

Total Income Tax Rate On income from DSC (Tk. 100,000 @ 5%)
On other income: Taka 217,000

Amount of Tax 5,000 Nil 9,700 14,700 5,000 9,700

On first Taka 120,000 On next Taka 97,000 Gross Tax on Taka 317,000 Less: TDS u/s 52D Net tax payable

10%

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