Income from Business or

Profession
(AY 2015-16)

Key Words / Outline

Issues Covered:
Regulatory Framework
Scope of Income from Business or Profession:
u/s 28
Allowable Deductions: u/s 29
Inadmissible Expenses: u/s 30
Provision for Disallowance u/s 30A
Non-Assessable Incomes
Computation of Income from Business or
Profession

 Income from Business or Profession:

Regulatory Framework

Sections

28, 29, 30. 30A, 19(15), 19(16), 19(18), 19(20),

19(23), 19(14), 26(3)
Subsections of sec. 2: (14), (49)
TDS (Tax Deducted at Source): 50, 56 &
provisions in general

Rules
Schedules
Third Schedule

30, 31, 32, 65, 65A, 65C, 30A

Para-2, 3, 5, 9, 10
(ineffective Para- 5A, 7, 7A, 8)
Sixth Schedule: Part A Para-28, 33, 35, 36, 42, 44-46
Sixth Schedule: Part B Not applicable

Statutory Definitions
Definition of Business u/s 2(14)
Business includes
Trade, commerce or manufacture or
Adventure or concern in the nature of trade, commerce
or manufacture
Definition of Profession u/s 2(49)
Profession includes a vocation.

Scope of Income from Business or Profession: u/s 28

Profit or gains of any business or profession
Income derived by any trade or professional association or other
similar association
Value of any benefit or perquisite arising from business or profession
Deemed income from business or profession
Partially income from business or profession
Following incomes are to be included in Income from Business or
Profession:
1. Profit or gains of any business or profession carried on or deemed to
be carried on by the assessee [u/s 28(1)(a)].
2. Income derived by any trade or professional association or other
association of like nature on account of specific services performed
for its members [u/s 28(1)(b)].
3. Value of any benefit or perquisite, whether convertible into money or
not, arising from business or profession [u/s 28(1)(c)].
4. Deemed income from business or profession u/s 19:
Subsequent receipt back of any loss, bad debt or expenditure [u/s
19(15)(a) and 28(1)(d)].
Interest on loan from commercial or specialised banks or share of
profit to Islamic bank unpaid for 3 years [u/s 19(15)(aa) and 28(1)(d)].

Scope of Income from Business or Profession: u/s 28

4.

Deemed income from business or profession u/s 19: contd

Benefit received from any trading liability [u/s 19(15)(b) and 28(1)
(d)].
Trading liability unpaid for three years [u/s 19(15)(c) and 28(1)(d)].
Revenue profit or depreciation recovery from disposal of any
building, machinery or plant used for business or profession [u/s
19(16) and 28(1)(e)]; [if loss, may be deductible as obsolescence
allowance u/s 29(1)(xi) for sale/transfer by way of exchange or
compulsory acquisition by a legally competent authority, or export
outside Bangladesh; otherwise, considered as capital loss & not
deductible]
Maximum amount = Original Cost Written down value (WDV).
Insurance, salvage or compensation money received on discarding,
demolishing or destroying any building, machinery or plant used for
business or profession [u/s 19(18) and 28(1)(f)]; [if loss, may be
deductible as obsolescence allowance u/s 29(1)(xi)]
Maximum amount = (Original Cost WDV) Scrap value.
Sale proceeds of any capital expenditure on scientific research
which is allowed as a deduction u/s 29(1)(xx) [u/s 19(20) and 28(1)
(g)].

Scope of Income from Business or Profession: u/s 28

5.

Export value of garments exportable against the export quota which

has been transferred [u/s 19(23) and 28(1)(h)]. Under rule 30A, an
amount equal to 3% of the export value of the garments exportable
against the export quota transferred by the assessee shall be
deemed to be his income u/ 19(23).
6. Profits and gains from any insurance business carried on by a
mutual insurance association the income of which is to be
computed under paragraph-8 of Fourth Schedule [u/s 19(14)].
7. Partially income from business or profession [u/s 26(3) and Rules
30, 31 and 32]:
(i) 40% of income from sale of tea [under rule 31]
(ii) 40% of income from sale of rubber [under rule 32]
(iii) Tobacco, sugarcane or other agricultural produce used as raw
materials in any industrial production process the income of which
is to be computed under the head Income from Business or
Profession as follows [under rule 30]:
Business income = (Sale value of the concerned agricultural produce
recorded in the accounts of the business)
(Market value of the agricultural produce used as raw materials).

Non-asssessable Income from Business or Profession

Sixth Schedule, Part-A:
Para-27: Income of an individual, being an indigenous Hillman of any of the hill districts
of Rangamati, Bandarban and Khagrachari, derived from economic activities within the
hill districts
Para-28: 50% of the export income except in case of an assessee, who is enjoying
exemption of tax or reduction in rate of tax by any notification .
Para-33: Any income derived from the business of software development or Nationwide
Telecommunication Transmission Network (NTTN) or Information Technology Enabled
Services (ITES) for the period from 01.07.2008 to 30.06.2024.
Para-35: Any income derived from the export of handicrafts for the period from
01.07.2008 to 30.06.2019.
Para-36: Any amount paid by the Government as tax on behalf of a petroleum exploration
company engaged in exploration of petroleum products in Bangladesh under Production
Sharing Contract (PSC) with the Government of Bangladesh.
Para-39: Income derived from any Small and Medium Enterprise (SME) engaged in
production of any goods and having an annual turnover of not more than Tk 24 lakh
Para-42: Income from poultry farming for the period from 01.07.2011 to 30.06.2015 subject
to some conditions
Para-44: Income from cinema hall or Cineplex will be tax free fully or partly for 5 or 7 years if
it starts commercial exhibition within 01/07/2012 to 30/06/2019

Non-asssessable Income from Business or Profession

Sixth Schedule, Part-A: .. contd
Para-45: Income from industry producing rice bran oil will be tax free fully or partly for 5 or 7
years if it starts commercial production within 01/07/2012 to 30/06/2019.
Para-46: Fifty (50%) of income from production of corn/maize/sugar beet will be tax free
Para-49: Income of an assessee donated by a crossed cheque or bank transfer to any
girls school or girls college approved by the Ministry of Education of the government
[FA 2014]
Para-50: Income of an assessee donated by a crossed cheque or bank transfer to any
Technical and Vocational Training Institute approved by the Ministry of Education of the
government [FA 2014]
Para-51: Income of an assessee donated by a crossed cheque or bank transfer to any
national level institution engaged in the Research & Development (R&D) of agriculture,
science, technology and industrial development [FA 2014]
Para-52: Any income from other sources (except interest and dividend) of Monthly Pay
Order (MPO) enlisted educational institution or any other educational institution if it
follows national curriculum and Government rules and regulations [FA 2015]
Para-53: Any income from other sources (except interest and dividend) received by any
public university or any professional institute established under any law and run by
professional body of Chartered Accountants or Cost and Management Accountants or
Chartered Secretaries [i.e., ICAB, ICMAB or ICSB] [FA 2015]

Allowable Deductions from Income from Business

or Profession: u/s 29
1. Rent for the premises used for business or profession [u/s 29(1)(i)].
2. Repair expense incurred by the assessee:
For the hired premises in which the business or profession is carried on
[u/s 29(1)(ii)].
For the buildings, machinery, plant or furniture used for business or
professional purposes [u/s 29(1)(vi)].
3. Interest payment or profit shared with an Islamic bank in respect of capital
borrowed for business or profession [u/s 29(1)(iii)].
4. Amount credited to any persons profit sharing account or deposit with an
Islamic bank by way of distribution of profit by that Islamic bank [u/s 29(1)
(iv)]. Applicable for banks.
5. Amount up to 5% of total income carried to any special reserve (the
aggregate amount in which does not exceed the paid up share capital)
created by Government approved financial institutions for any approved
purposes [u/s 29(1)(v)]. Permanent difference with accounting income, an
appropriation of income in accounting.
6. Insurance premium on buildings, machinery, plant or furniture, stocks or
stores used for business or professional purposes [u/s 29(1)(vii)].

Allowable Deductions from Income from Business

or Profession: u/s 29
7. Depreciation on the assessees building, machinery, plant or furniture or
bridge or road or fly over owned by a physical infrastructure undertaking
(from AY 2010-11) used for business or professional purposes as per Third
Schedule [u/s 29(1)(viii)]:
Initial depreciation allowance: From assessment year 2002-03, under
paragraph 5A of the Third Schedule, initial depreciation allowance is
allowed for the first year at 10% on the cost of building and 25% on the
cost of machinery or plant (other than ships or motor vehicles not plying
for hire or any machinery or plant which has previously been used in
Bangladesh).
Accelerated depreciation allowance: From AY2014-15, under para 7B of
the Third Schedule, 50%, 30% and 20% of cost of plant and machinery is
admissible as accelerated depreciation allowance for first, second and
third years respectively, for new industrial undertakings (set up between
01.07.2014 and 30.06.2019) in cases of industrial undertaking referred to
in sec. 46B.
Normal depreciation allowance: The normal depreciation allowance under
paragraph 3 of the Third Schedule is allowed at the specified rates on
written down value of the concerned asset.

Allowable Deductions from Income from Business

or Profession: u/s 29
8. Amortization of license fees as admissible under para 10A of Third
Schedule under straight line method [u/s 29(1)(viiia)].
9. Obsolescence allowance [equal to excess of written down value (WDV)
over sale proceeds or scrap value] :
For building, machinery or plant after having been used for business or
professional purposes, discarded, demolished or destroyed or the assets
sold/transferred by way of exchange or compulsorily acquired by a legally
competent authority, or exported outside Bangladesh [u/s 29(1)(xi)].
Obsolescence allowance will be computed under Para-10(c) of Third
Schedule. [see also sec. 19(18) & 19(16)]
10. Write-off allowance [equal to the difference between the original cost of the
animal and the money from sale or other disposition of the carcass]: For
dead or useless animal used for business or professional purposes
otherwise than as stock-in-trade)[u/s 29(1)(xii)].
11. Land development tax or rent, local rates or municipal taxes for the
premises used for business or professional purposes [u/s 29(1)(xiii)].
12. Bonus including festival bonus and commission paid to employee
(Bonus other than festival bonus and commission is reasonable with reference to
general practice of similar business or profession, profit of the organization and the
pay and other conditions of service of the employee) [u/s 29(1)(xiv)].

Allowable Deductions from Income from Business

or Profession: u/s 29
13. Bad debts:

Bad debts actually written off in the income year as an established

irrecoverable item [u/s 29(1)(xv)].
Bad debts prematurely written off but allowed as a deduction in subsequent
year when established to have been irrecoverable [u/s 29(1)(xvi)]. Temporary
difference with accounting.
Bad debts actually written off in an income year but which became
irrecoverable in earlier income year (not falling beyond 4 years immediately
preceding the income year in which it has been written off) allowed as a
deduction in such earlier income year [u/s 29(1)(xvii)]. Temporary difference
with accounting.

14. Expenditure on Scientific research or for research institute :

Revenue expenditure on scientific research in Bangladesh related
business [u/s 29(1)(xix)].
Capital expenditure on Scientific research in Bangladesh related to
business [u/s 29(1)(xx)]. Temporary difference with accounting, where first
recognized as asset, then depreciation/amortization thereon.
Amount paid to approved Scientific Research Institute, Association or other
body or to approved University, College, Technical, School or other
Institute for the purpose of Scientific research or technical training related
to relevant business class [u/s 29(1)(xxi)].

Allowable Deductions from Income from Business

or Profession: u/s 29

15. Expenditure on Educational Institution or Hospital for employees :

Expenditure laid out or expended on any Educational Institution or Hospital
established for the benefit of assessees employees their families and
dependents or on the training of industrial workers: (a) Revenue
expenditure [u/s 29(1)(xxii)], and (b) Capital Expenditure [u/s 29(1)(xxiii),
Temporary difference with accounting, where first recognized as asset,
then depreciation thereon].
16. Expenditure on training of Bangladeshi citizens in connection with a
scheme approved by NBR [u/s 29(1)(xxiv)].
17. Expenditure (not being capital or personal) on visits abroad as a member
of a trade delegation sponsored by the Government [u/s 29(1)(xxv)].
18. Annual membership subscription to a registered trade organization or to a
professional institution [u/s 29(1)(xxvi)].
19. Residuary / Omnibus Clause :
Any expenditure (not being capital or personal) made exclusively for business
or professional purposes [u/s 29(1)(xxvii)].
(a) Cost of raw materials, stores and spare parts consumed,
(b) Printing and stationery,
(c) Postage, telegrams and telephones,
(d) Traveling and conveyance,

Allowable Deductions from Income from Business

or Profession: u/s 29
19.
(e)
(f)
(g)
(h)
(i)
(j)

Residuary / Omnibus Clause : contd

Law charges and expenses,
Audit fees,
Losses arising in the regular course of business,
Loss of stock due to fire, flood etc.
Provision for retirement benefits to employees,
Exchange loss, etc.

Limitations on deduction [u/s 29(2)]:

Where any premises, building, machinery, plant (where plant includes ships,
vehicles, books, scientific apparatus and surgical and other instruments or
equipments used for business or professional purposes), or furniture is
not wholly used for business or professional purposes, the deduction
allowable from Income from Business or Profession is the fair proportional
part of the amount which would be allowable if such premises, building,
machinery, plant or furniture was wholly so used.

Inadmissible Expenses: Sec. 30

[(1) Payment to owners; (2) Payment without TDS; and (3) Payment
beyond prescribed limit]
1.Payment of salary, if tax thereon has not been deducted at source u/s
50 [vide u/s 30(a)].
2.Any payment subject to deduction of income tax or VAT (value added
tax), but these taxes are not deducted at the time of payment [u/s 30(aa)].
3.Payment of interest, salary, commission or remuneration made by a
firm or an AOP (association of persons) to its partners or members [u/s
30(b)].
4.Payment of brokerage or commission to a non-resident person without
deduction of tax at source u/s 56 [vide u/s 30(c)].
5.Payment to employees provident fund or other funds unless effective
arrangement has been made for deduction of tax at source while making
the payments from the fund which are taxable under the head Salaries
[u/s 30(d)].
6.Payment of perquisites or other benefits to an employee in excess of
Tk. 4,50,000 [u/s 30(e)]. But this provision is not applicable to employer
where perquisites or other benefits were paid to an employee according
to Government decision published in the official Gazette to implement the
recommendation of a Wage Board constituted by the Government
[Proviso to sec. 30(e)].

Inadmissible Expenses: Sec. 30

7. Entertainment expenditure exceeding the limits specified below as per
Rule 65 [vide u/s 30(f)(i)]:*
Sl.
a)
b)

Profits, income and gains

before considering
entertainment expenditure
First Tk. 10 lakh
On the balance

Admissible deduction
4% of the above profit, income and gains
2% of the above profit, income and gains

8. Expenditure on foreign travels of employees and their dependents

(spouse and minor children including step and adopted children) for
holidaying and recreation exceeding the limit under Rule 65A [vide u/s
30(f)(ii)]: 3 months basic salary, or th of the actual expenditure,
whichever is less and the foreign travels shall not be oftener than once in
every 2 years.
9. Publicity and advertisement (illegal and capital type) [u/s 30(f)(iii)].

Inadmissible Expenses: Sec. 30

10. Distribution of free samples exceeding the following limit as per Rule 65C
[vide u/s 30(f)(iv)]:
Turnover
Up to Tk. 5 crore
Exceeding Tk. 5 crore, but
up to Tk. 10 crore
Exceeding Tk. 10 crore

Deduction for expenses for free sample as % of turnover

Pharmaceutical Industry
Other Industry
2%
1%

1.5%
0.75%

0.5%

0.375%

11. Head Office expenses: Expenditure exceeding 10% of the net profit
disclosed in the statement of accounts under the head of Head Office
expenses by a company, not incorporated in Bangladesh under the
Companies Act 1994 [u/s 30(g), inserted by the FA 2003]. Here, the profit
will be profit before charging this expenditure.*
12. Royalty or technical expenses: Payment by way of royalty, technical
services fee, technical know how fee or technical assistance fee
exceeding 8% of the net profit disclosed in the statement of accounts
[u/s 30(h)].
13. Salary not through bank: Payment by way of salary or remuneration made
otherwise than by crossed cheque or bank transfer by a person to an
employee having gross monthly salary of Taka 15,000 or more [u/s 30(i),
inserted by the FA 2006].

Inadmissible Expenses: Sec. 30

14. Incentive bonus: Expenditure by way of incentive bonus exceeding
10% of the net profit disclosed in the statement of accounts [u/s
30(j), FA06].
15. Overseas traveling: Expenditure by way of overseas travelling
exceeding 1% of the disclosed turnover [u/s 30(k), inserted by the FA
2006].
16. Commission paid or discount made to its shareholder director by a
company [u/s 30(l); FA 2012].
17. Payment otherwise than by a crossed cheque: any payment
exceeding Tk 50,000 except (i) payment for raw materials; (ii) salary
or remuneration to an employee up to Tk 15,000 p.m.; (iii) payment for
Govt obligation [u/s 30(m); FA2012].
18. any payment by way of any rent of any property, whether used for
commercial or residential purposes, otherwise than by a crossed
cheque or bank transfer [u/s 30(n); FA2014].
19. Other non-deducible allowances :
Personal gifts to employees (but not gratuity)
Fines for violation or non-compliance of any law of the land
Income tax (including fines and penalties etc.)

Inadmissible Expenses: Sec. 30

19. Other non-deducible allowances : contd
Expenditure on inland leave or travel of employees when provided
beyond the terms and conditions of service of employees
Law charges incurred for defending or in connection with violation or
non-compliance of any law or Government policy or in connection with
the criminal cases, mortgage suits, capital reduction and winding up of
company
Loss on speculation
Transfer to reserves [except as allowed u/s 29 (1)(v) for Government
approved financial institutions]
Provision for bad and doubtful debts [excepts as allowed u/s 29(1)
(xviiia) up to AY 1990-91 and u/s 29(1)(xviiiaa) up to AY 2006-07 for
commercial banks and specialised banks]
Contribution to sinking fund.

Inadmissible Expenses: Sec. 30

Ambiguity on Turnover:
Distribution of free samples based on turnover u/r 65C & u/s 30(f)(iv)
Overseas traveling based on disclosed turnover u/s 30(k)
Guideline: Use the turnover as net sales [Sales excluding VAT less Sales returns and allowances less
Sales discount] shown in trading account or income statement.
Ambiguity on Profit:
Entertainment expenditure based on profits, income and gains before considering entertainment
expenditure u/r 65 & u/s 30(f)(i)
Head Office expenses based on net profit disclosed in statement of accounts u/s 30(g)
Royalty or technical expenses based on net profit disclosed in statement of accounts u/s 30(h)
Incentive bonus based on net profit disclosed in statement of accounts u/s 30(j)
Guideline: Starting with pretax accounting net profit and adjusting for other disallowances
Incentive bonus or Head Office expenses: If actual amount 10% of pretax net profit disclosed in
profit & loss account or income statement, no adjustment required; if actual amount > 10% of pretax net
profit, add extra amount
Royalty or technical expenses: If actual amount 8% of pretax net profit disclosed in profit & loss
account or income statement, no adjustment required; if actual amount > 8% of pretax net profit, add
extra amount
Add actual Entertainment expenditure, then obtain A [the profit after charging Incentive Bonus,
Head Office expenses and Royalty or technical expenses but before charging Entertainment
expenditure]
If actual amount of Entertainment expenditure (4% of first Tk. 10 lakh of A + 2% of balance of
A), deduct actual amount; if actual amount > (4% of first Tk. 10 lakh of A + 2% of balance of A), deduct
(4% of first Tk. 10 lakh of A + 2% of balance of A)

Provision for Disallowance: Sec. 30A

Provision for Disallowance u/s 30A: Notwithstanding contained in
sections 28, 29, and 30, the Deputy Commissioner of Taxes (DCT)
shall not make any disallowance or deduction for any year from
any claim made by an assessee in the trading account or profit or
loss account without specifying reason for such disallowance or
deduction [inserted by FA 2002].

Some Changes in relation to Income from Business or

Profession by FA 2015:
(a) Set-off of losses [new proviso to Section 37]: Loss at any head could not
be set-off against income from manufacturing of cigarette.
(b) One new head in the tax depreciation schedule [Third Schedule]: A new
head included in the tax depreciation schedule: Imported computer
software @ 10%.
(c) Notional cost price of motor car not plying for hire for depreciation
purpose enhanced [sub-clause (a) of clause (6) of paragraph 11 of Third
Schedule amended]: National cost price of motor car not plying for
hire is enhanced from Tk. 20,00,000 to Tk.25,00,000 for the purpose of
tax depreciation.

Questions??