Changes in Income Tax Laws
Wednesday, 22 July 2009
M. A. Baree, FCA
Under the Finance Act, 2009, a new section -- Section 121A in the Income Tax Laws -- restores the power of the Commissioner. This power was earlier curtailed under the Finance Act 2007 through repealing sec. 121. The new section is similar to old section 121, except that the time limit of one year from the date of the order, when the Commissioner could not on his own motion has not been included as a pre-condition. As a result, the Commissioner would now enjoy a free time to exercise this regained power.
Sec. 156: Appellate decisions by the Appellate Joint Commissioner or the Commissioner (Appeals): The time limit to pass appellate orders by the Appellate Joint Commissioners and Appellate Commissioners has been extended to 150 days, which was 90 days earlier.
Sec. 158: Appeal to the Appellate Tribunal: 10% of the amount representing the difference between the taxes as determined on the order of the Appellate Joint Commissioner or Appellate Commissioner and the amount of tax payable on the basis of return u/s 74 has to be paid by the assessee before filing an appeal to the Tribunal. This has now been reduced to 5.0%.
Sec. 160: Reference to the High Court Division: Two provisos, repealed in the Finance Act 1995, have been added to sub-section 1 of this section. These are: (i) Required to pay of 10%; the amount representing the difference between tax as determined by the Appellate Joint Commissioner or the Commissioner (appeals) and as determined by the Appellate Tribunal has been newly imposed upon the assessee before filing a reference case.
(ii) However, the National Board of Revenue (NBR) may on an application made in this behalf, modify or wave such requirement.
Sec. 184A: Requirement of Tax Identification Number (TIN) certificate:
Two new clauses have been added to this section as follows: (n) Submitting a plan for construction of building to Rajuk, CDA and RDA; and, (o) Issuance of drug license
Besides, Tk. one thousand for obtaining a TIN certificate has been fixed by amending this section and rule 64B.
The First Schedule, Part C: Approved Gratuity Fund: The time limit for the approval of gratuity fund by the Board has been extended to four months from earlier three months.
The Third Schedule: Depreciation Allowance: (i) Bangladeshi made computer software would now be entitled to 50% normal depreciation allowance.
(ii) Tk 10 lakh limit as a deemed cost of a motor vehicle not plying for hire has been raised to Tk 20 lakh.
The Sixth Schedule, Part A: Exclusion from total income: Para 38 has been replaced with a new paragraph 38 as follows:
"Any income derived from any building which at the minimum, is five storeyed having ten flats at least built between July 01, 2009 and June 30, 2014 for ten years from the date of completion excepting those buildings situated within City Corporation, Cantonment Board, Tongi Upazila, Narayangonj Pourashava, Gazipur Pourashava and any other pourashava under Dhaka district shall be excluded from total income computation."
Para 41 has been newly added as follows: "Any income received by an assessee as interest or profit from pensioners' saving certificate."
The Sixth Schedule, Part B: Exemption and Allowances: Paragraph 23 has been newly added as follows: Any sum invested in the purchase of one computer or one laptop by an individual assessee.
The Eighth Schedule: Deduction and Collection at source: This is a new Schedule summarising the various provisions regarding collection and deduction of tax at source. Preparation and publication of this Schedule is undoubtedly a significant achievement. All kinds of users would be highly benefited by this inclusion.
SRO No 171-Law/2009: Presumptive tax on bus, truck etc.:
Amount of investment in any transport referred to above, will be exempt from tax when 200% of tax as determined is paid at the time of registration. Further, income arising from any one of the transports can be shown in the return of an assessee proportionately to his income and tax in total. In case this exceeds, tax as per Schedule would be levied.
SRO No 172-Law/Income Tax 2009: Tax reduction (Tax Holiday): The tax of newly set up industries will be reduced on fulfillment of the following: (a) The industry must be set up between July 01, 2009 and June 30, 2012. (b) The industry must be a registered company under the Companies Act 1994 which will be engaged in agro-processing (fruit processing, packed baby corn processing, fruit juice, rubber products, textile spinning, textile machinery production, garment industries, backward and forward linkage to garment industries, leather goods) and such other numerous industries; (c) Income of industries in Dhaka and Chittagong (other ) will be subject to income tax @ 5.0%, 10% and 15% in the first and second, third and fourth and fifth years respectively. Industries in Rajshahi, Khulna, Sylhet, Barisal and Rangamati, Bhandarban and Khagrachari in Chittagong division will pay tax @ 5.0%, 10% and 15% in the first, second and third years, fourth, fifth and sixth years and seventh year respectively; (d) Such industries will not be a reorganised unit of an existing one or division thereof or any new industry set up by transferring machinery or establishing from an existing industry in Bangladesh; (e) The industry will not also be an extended unit of an existing industry; (f) The industry will not be entitled to claim accelerated depreciation allowance under Third Schedule, Para 7; and (g) The industry must submit income tax return every year to the concerned circle with audited accounts within time as specified in its memorandum.
SRO No 173-Income Tax/2009: presumptive tax on inland passenger vessels, cargo carriers, coasters and dump barges:
(i) Above-mentioned taxes will be paid before the renewal of survey certificate; (ii) Registration or renewal of survey certificate will not be issued before payment of tax as above; (iii) Income earned from the above can be shown in the Income-tax return for which no additional tax shall be payable, but the income will not exceed income chargeable to tax under this head; (iv) This SRO shall not be applicable to oil tanker.
SRO No 187-Law/2009: Advance tax on private car, jeep or microbus: Advance income tax will be payable on the above at the time of registration or renewal of fitness certificate:
Above tax can be adjusted against actual tax liability on total income of the concerned owners. However, government, semi-govt., autonomous bodies and foreign embassies and missions will be outside the provisions of this SRO.
SRO No 188-Law/Income tax 2009-tax exemption for private power generation: This SRO replaces SRO No 114-Law/99 and exempts income of private power generation from income tax commencing commercial production within June 30, 2012; (1) The exemption will be granted for 15 years from the date of commercial production; (2) Foreign nationals working in the company shall be exempt from income tax on remuneration for three years from the date of arrival; (3) Interest paid in foreign debt taken by the company will be exempted from tax; (4) Royalties and technical know-how or technical assistance fee will also be exempted; and (5) There will not be any capital gain tax on the transfer of shares.
SRO No 189-Law/Income-tax: Collection of tax from importers: By replacing rule 17A with a new rule, 17A income tax at the import stage has been set (as before) at 3.0% on the value of the imported goods excepting 215 items. Those include ICT, pisiculture, fertiliser, sugar, edible oil, fuel, leather, Ms rod, and aviation and capital machinery. Besides, another 18 items have also been exempted from AIT. These include mainly seeds, fruits, boulders, limestone, coal and timber etc.
Rule 17I: Collection of tax on transfer of property: This rule replaces earlier rule 17I.
Rate of Tax: Some minor changes have been made in the Finance Act 2009 on the rate of tax. These are:
(a) Tax-free income limit for female assessees and others of 65 years or over age has been increased to Tk 1,80,000. Further, the limit for handicapped assesees has been set at Tk 2,00,000.
(b) Tax rate for banks, insurance companies and other financial institutions has been reduced to 42.5% from 45%.
(c) Minimum tax for all limited companies will be Tk 5,000, irrespective of profit or loss.
(d) Investment ceiling for tax rebate for individuals has been raised to Tk 10,00,000 from Tk 5,00,000.
To close, it is reiterated again that the amendments and changes, contained in Finance Act 2009, are too many. Some are policy-led; some are rectification of past inconsistencies in tax law whereas many of them are ritualistic and bureaucratic turns and twists without any long-term vision. If change is not required or envisaged why are changes brought about too frequently? Revision power of the Commissioner is an example. It was with our tax law for ages but repealed suddenly two years back and has been replaced this year. Payment of tax before filing appeal to the Tribunal or reference application to the High Court Division is another example of frequent changes. Policymakers should bear in mind the large social cost of learning, un-learning and relearning process of law. Concluded.
The writer is partner, Hoda Vasi Chowdhury & Co. He may be reached at e-mail: mabaree@hodavasi.com
Under the Finance Act, 2009, a new section -- Section 121A in the Income Tax Laws -- restores the power of the Commissioner. This power was earlier curtailed under the Finance Act 2007 through repealing sec. 121. The new section is similar to old section 121, except that the time limit of one year from the date of the order, when the Commissioner could not on his own motion has not been included as a pre-condition. As a result, the Commissioner would now enjoy a free time to exercise this regained power.
Sec. 156: Appellate decisions by the Appellate Joint Commissioner or the Commissioner (Appeals): The time limit to pass appellate orders by the Appellate Joint Commissioners and Appellate Commissioners has been extended to 150 days, which was 90 days earlier.
Sec. 158: Appeal to the Appellate Tribunal: 10% of the amount representing the difference between the taxes as determined on the order of the Appellate Joint Commissioner or Appellate Commissioner and the amount of tax payable on the basis of return u/s 74 has to be paid by the assessee before filing an appeal to the Tribunal. This has now been reduced to 5.0%.
Sec. 160: Reference to the High Court Division: Two provisos, repealed in the Finance Act 1995, have been added to sub-section 1 of this section. These are: (i) Required to pay of 10%; the amount representing the difference between tax as determined by the Appellate Joint Commissioner or the Commissioner (appeals) and as determined by the Appellate Tribunal has been newly imposed upon the assessee before filing a reference case.
(ii) However, the National Board of Revenue (NBR) may on an application made in this behalf, modify or wave such requirement.
Sec. 184A: Requirement of Tax Identification Number (TIN) certificate:
Two new clauses have been added to this section as follows: (n) Submitting a plan for construction of building to Rajuk, CDA and RDA; and, (o) Issuance of drug license
Besides, Tk. one thousand for obtaining a TIN certificate has been fixed by amending this section and rule 64B.
The First Schedule, Part C: Approved Gratuity Fund: The time limit for the approval of gratuity fund by the Board has been extended to four months from earlier three months.
The Third Schedule: Depreciation Allowance: (i) Bangladeshi made computer software would now be entitled to 50% normal depreciation allowance.
(ii) Tk 10 lakh limit as a deemed cost of a motor vehicle not plying for hire has been raised to Tk 20 lakh.
The Sixth Schedule, Part A: Exclusion from total income: Para 38 has been replaced with a new paragraph 38 as follows:
"Any income derived from any building which at the minimum, is five storeyed having ten flats at least built between July 01, 2009 and June 30, 2014 for ten years from the date of completion excepting those buildings situated within City Corporation, Cantonment Board, Tongi Upazila, Narayangonj Pourashava, Gazipur Pourashava and any other pourashava under Dhaka district shall be excluded from total income computation."
Para 41 has been newly added as follows: "Any income received by an assessee as interest or profit from pensioners' saving certificate."
The Sixth Schedule, Part B: Exemption and Allowances: Paragraph 23 has been newly added as follows: Any sum invested in the purchase of one computer or one laptop by an individual assessee.
The Eighth Schedule: Deduction and Collection at source: This is a new Schedule summarising the various provisions regarding collection and deduction of tax at source. Preparation and publication of this Schedule is undoubtedly a significant achievement. All kinds of users would be highly benefited by this inclusion.
SRO No 171-Law/2009: Presumptive tax on bus, truck etc.:
| Particulars | up to 10 years oldyearly tax (Tk) | Above 10 years oldyearly tax (Tk) |
| 52 and above seater bus | 7,000 | 3,500 |
| 52 or less seater bus | 5,000 | 2,500 |
| AC and double decker bus | 10,000 | 5,000 |
| AC minibus, coaster etc. | 5,000 | 3,000 |
| Other minibus and coaster | 4,000 | 2,000 |
| Prime mover used in container transport | 7,000 | 4,000 |
| Tank or tank lorry exceeding 5 tonne capacity | 5,000 | 3,000 |
| Tank or tank lorry below 5 tonne capacity but not below 1.5 tonne | 3,000 | 1,500 |
| Truck, pick up, all kinds of human hauler, maxi, auto rickshaws for carrying of goods with capacity of 1.5 tonne or less | 1,000 | 500 |
Amount of investment in any transport referred to above, will be exempt from tax when 200% of tax as determined is paid at the time of registration. Further, income arising from any one of the transports can be shown in the return of an assessee proportionately to his income and tax in total. In case this exceeds, tax as per Schedule would be levied.
SRO No 172-Law/Income Tax 2009: Tax reduction (Tax Holiday): The tax of newly set up industries will be reduced on fulfillment of the following: (a) The industry must be set up between July 01, 2009 and June 30, 2012. (b) The industry must be a registered company under the Companies Act 1994 which will be engaged in agro-processing (fruit processing, packed baby corn processing, fruit juice, rubber products, textile spinning, textile machinery production, garment industries, backward and forward linkage to garment industries, leather goods) and such other numerous industries; (c) Income of industries in Dhaka and Chittagong (other ) will be subject to income tax @ 5.0%, 10% and 15% in the first and second, third and fourth and fifth years respectively. Industries in Rajshahi, Khulna, Sylhet, Barisal and Rangamati, Bhandarban and Khagrachari in Chittagong division will pay tax @ 5.0%, 10% and 15% in the first, second and third years, fourth, fifth and sixth years and seventh year respectively; (d) Such industries will not be a reorganised unit of an existing one or division thereof or any new industry set up by transferring machinery or establishing from an existing industry in Bangladesh; (e) The industry will not also be an extended unit of an existing industry; (f) The industry will not be entitled to claim accelerated depreciation allowance under Third Schedule, Para 7; and (g) The industry must submit income tax return every year to the concerned circle with audited accounts within time as specified in its memorandum.
SRO No 173-Income Tax/2009: presumptive tax on inland passenger vessels, cargo carriers, coasters and dump barges:
| Tax payable (Tk) | |
| (a) Motor car up to 150 cc | 3,000 |
| (b) Motor car up to 2000 cc | 4,000 |
| (c) Motor car above 2000 cc | 7,000 |
| (d) Jeep up to 2800 cc | 6,000 |
| (e) Jeep above 2800 cc | 8,000 |
| (f) Microbus | 3,000 |
(i) Above-mentioned taxes will be paid before the renewal of survey certificate; (ii) Registration or renewal of survey certificate will not be issued before payment of tax as above; (iii) Income earned from the above can be shown in the Income-tax return for which no additional tax shall be payable, but the income will not exceed income chargeable to tax under this head; (iv) This SRO shall not be applicable to oil tanker.
SRO No 187-Law/2009: Advance tax on private car, jeep or microbus: Advance income tax will be payable on the above at the time of registration or renewal of fitness certificate:
Above tax can be adjusted against actual tax liability on total income of the concerned owners. However, government, semi-govt., autonomous bodies and foreign embassies and missions will be outside the provisions of this SRO.
| Particulars | Not exceeding10 years old Tax (Tk) | Exceeding10 years old tax (Tk) |
| (a) Inland passenger vessel | Tk 50 per passenger carried during day time | Tk 25 per passenger carried during day time |
| (b) Inland cargo vessel or coaster | Tk 75 per gross tonne | Tk 35 per gross tonne |
| (c) Inland cargo dump barge | Tk 60 per gross tonne | Tk 28 per gross tonne |
SRO No 188-Law/Income tax 2009-tax exemption for private power generation: This SRO replaces SRO No 114-Law/99 and exempts income of private power generation from income tax commencing commercial production within June 30, 2012; (1) The exemption will be granted for 15 years from the date of commercial production; (2) Foreign nationals working in the company shall be exempt from income tax on remuneration for three years from the date of arrival; (3) Interest paid in foreign debt taken by the company will be exempted from tax; (4) Royalties and technical know-how or technical assistance fee will also be exempted; and (5) There will not be any capital gain tax on the transfer of shares.
SRO No 189-Law/Income-tax: Collection of tax from importers: By replacing rule 17A with a new rule, 17A income tax at the import stage has been set (as before) at 3.0% on the value of the imported goods excepting 215 items. Those include ICT, pisiculture, fertiliser, sugar, edible oil, fuel, leather, Ms rod, and aviation and capital machinery. Besides, another 18 items have also been exempted from AIT. These include mainly seeds, fruits, boulders, limestone, coal and timber etc.
Rule 17I: Collection of tax on transfer of property: This rule replaces earlier rule 17I.
Rate of Tax: Some minor changes have been made in the Finance Act 2009 on the rate of tax. These are:
(a) Tax-free income limit for female assessees and others of 65 years or over age has been increased to Tk 1,80,000. Further, the limit for handicapped assesees has been set at Tk 2,00,000.
(b) Tax rate for banks, insurance companies and other financial institutions has been reduced to 42.5% from 45%.
(c) Minimum tax for all limited companies will be Tk 5,000, irrespective of profit or loss.
(d) Investment ceiling for tax rebate for individuals has been raised to Tk 10,00,000 from Tk 5,00,000.
To close, it is reiterated again that the amendments and changes, contained in Finance Act 2009, are too many. Some are policy-led; some are rectification of past inconsistencies in tax law whereas many of them are ritualistic and bureaucratic turns and twists without any long-term vision. If change is not required or envisaged why are changes brought about too frequently? Revision power of the Commissioner is an example. It was with our tax law for ages but repealed suddenly two years back and has been replaced this year. Payment of tax before filing appeal to the Tribunal or reference application to the High Court Division is another example of frequent changes. Policymakers should bear in mind the large social cost of learning, un-learning and relearning process of law. Concluded.
The writer is partner, Hoda Vasi Chowdhury & Co. He may be reached at e-mail: mabaree@hodavasi.com