Basis of Residence for Taxation
Tax Treatment On the Basis of Residence
Incidence of Tax on Non-Resident
Tax Exemption
Investment Allowance for Tax Rebate
Tax Exemptions on Capital Gains
Deduction of Tax at Source
Rates of Income Tax for the Assessment year 2002-2003

(1) Basis of Residence for Taxation

Under the Income Tax Ordinance a person is charged to tax on the basis of his residential status in Bangladesh during the relevant 'income year'. An individual is treated as a resident in Bangladesh in respect of any income year;

(a) If he or she has been in Bangladesh for a total period of 182 days or more in that year; or

(b) If he or she has been in Bangladesh for a period of or for periods amounting in all to ninety days or more in that year having previously been in Bangladesh for a period of or for periods amounting in all to three hundred sixty-five days or more during four years preceding that year.

If individual fails to fulfill the above conditions, he or she will be treated as a 'Non-Resident' for the purpose of taxation.

It is important to note here that the concept of residence as defined in the Income Tax Ordinance has nothing to do with the nationality of a particular individual. A foreign national may be treated as a 'Resident' for a particular year if 'he or she fulfills the legal requirements as above, whereas a Bangladeshi national may be treated as a 'Non-Resident' if he, or she does not fulfill the legal requirements.

(2) Tax Treatment On the Basis of Residence

Any individual resident assessee will be liable to tax for all his income, profits and gains from whatever sources derived irrespective of the place of receipt or accrual, be it inside Bangladesh or outside.

(3) Incidence of Tax on Non-Resident

A person who is non-resident is liable to tax on the incomes, profits and gains which are received or deemed to have been received or are deemed to accrue or arise to him in Bangladesh.

A Non-Resident assessee is not entitled to any sort of allowance and relief as are admissible to resident assessee for the purpose of tax rebate. A non-resident assessee other than Bangladeshi non-resident is liable to tax on his total income at 25%. A Bangladeshi non-resident is subject to tax at normal rate as applicable in the case of a resident assessee.

The remittance to Bangladesh through official channel, of income earned abroad by the residents in Bangladesh will be exempted from tax.

(4) Tax Exemptions

(a) Interest on Securities: Interest on Securities of the Government received by individual upto a maximum of Tk 25,000 (Twenty five thousand taka only).

(b) Interest on debentures - Any interest not exceeding Tk. 25,000/- received by an assessee other than a company on debentures approved by the Securities and. Exchange Commission for the purpose of this paragraphs.

The exemption together with any exemption available in respect of interest on securities shall not exceed Tk. 20,000/-.

(c) Dividend income

Dividend income not exceeding Tk. 25,000/- received by an assessee other than a company.

(5) Investment Allowance for Tax Rebate

(a) Investment in Stock and Shares - Investment in the acquisition of any stock or shares of a company or a body corporate by an assessee, not being a company:

(i) Company: A company listed with a Stock Exchange in Bangladesh.

(ii) Body corporate: Established by or under an Act of Parliament.

(b) Investment in debentures or debenture-stocks

Investment by an assessee other than a company in the purchase of approved debentures or debentures-stocks subject to the conditions that -

(i) The assessee is the first allottee of such debentures or debenture-stocks.

(ii) Exemption is allowable on the amount which is in excess of the sale proceeds received during the year and in the preceding two years in the aggregate or of the cost price of debenture-stocks purchased in the year and the preceding two years whichever is greater, out of disposal of debentures or debenture-stocks purchased during the year and the preceding two years.

(c) Investment in Unit Certificate etc.

Investments in such savings certificates or instruments as the Board may specify in this behalf; Unit Certificate and mutual fund certificate of Investment Corporation of Bangladesh and such Government Securities including Development Loans or Bonds and shares of such Investment Companies as may be specified by the National Board of Revenue in this behalf.

The period for retention of the above mentioned instruments have been fixed at five years from the date of purchase or the maturity period, as the case may be. Where the instruments are disposed of in any income year before the prescribed period, tax credit allowed in respect of such instruments will be collected back as tax for the income year and be added to tax for that year.

(d) Inclusion of Income For Rate Purpose

(i) Share of income from an association of persons (other than a Hindu undivided family, a company or a firm) on which tax has been paid by the association.

(ii) Share of income from a firm on which tax has been paid by the firm.

(a) Transfer of stocks and shares:

Capital gains which arises from transfer of stocks and shares of public companies listed with a Stock Exchange in Bangladesh is exempted from tax.

(b) Transfer of stocks and shares of a public company by a non-resident:

Capital gains which arises to an assessee, being a non-resident from transfer of stocks or shares of a public company as defined in the Companies Act,1913 or Companies Act,1994 is exempted from tax provided such assessee is entitled to similar exemption in the country in which he is a resident.

(7) Deduction of Tax at Source

The payment of dividend to both resident and non-resident assessee is subject to deduction of tax at source.

(a) In the case of non-resident assessee-

(i) if the shareholder is a company, at the rate applicable to a company;
(ii) If the shareholder is a person other than a company, at the maximum rate i.e. 25%.

(b) In the case of resident assessee-

(i) if the shareholder is a company, at the rate applicable to a company;
(ii) if the shareholder is a person other than a company, at the rate of 10% if the amount exceeds Tk. 25,000/-

(8) Rates of Income Tax for the Assessment year 2002-2003

A. In the case of every individual including Bangladeshi non-resident, Hindu undivided family, firm, association of persons and every artificial juridical person, not being a case to which paragraph (b) applies-

Provided that the minimum tax shall in no case be less than Tk.1,200/-.

Tax Credit is allowable at 15% of the investment allowance equal to 20% of total income or Tk. 200,000/- whichever is less. However if investment is made in IPOs then allowable limit will be Tk. 225,000 instead of Tk. 200,000.

B. In the case of every company and local authority and in every case in which under the provisions of the Income Tax Ordinance, 1984 (XXXVI of 1984), income tax is to be charged at the maximum rate-

Bank, Insurance and financial institution tax rate will remain unchanged i.e. 40%
Explanation - The term "publicly traded company", as used in this paragraph, means a public limited company which fulfills the following conditions:

(i) The sponsors and the members of the Board of Directors shall not purchase any share in benami.

(ii) The shares of the company are listed in a Stock Exchange before the end of the year for which assessment is to be made.

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This page is last updated on 20 July, 2002