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Letter of Transmittal 3th January, 2013 Dr. Diman Kuman Chowdhury Professor Dept.

Business Studies University of Dhaka Subject: Submission of report Taxation Dear Sir, We have the honor to inform you that we have completed my report on Taxation in Bangladesh: Income from Agriculture for the purpose of partial fulfillment for the subjects of business taxation. As your valuable suggestion and guidance, we have tried our best to prepare this report properly. we sincerely believe that you will find this report very significant and informative. We, therefore, pray and hope that you would be kind enough to accept this internship report and oblige thereby extents your co-operation and advice.

Sincerely yours Md. Tariqul Islam Md. Sakhawat Depertment of Business Studies University of Dhaka

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Declaration We are the student of Depertment Business Studies of MBA program, Major in Accounting and Information System of University of Dhaka do hereby declare that the Report on Taxation in Bangladesh: Income from Agriculture is our work and has not been submitted by us before for any degree, diploma, title or recognition. The report was prepared under the supervision of Dr. Diman Kuman Chowdhury Report Supervisor, Department of Business Studies, University of Dhaka.

Sincerely yours .. Md. Tariqul Islam Md. Sakhawath Department of Business Studies Accounting and Information System University of Dhaka

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Certificate of the Supervisor This is to certify that students of Business Studies Department,24th Batch, bearing ID: WUB01/09/27/1119 under Department of Business Studies, University of Dhaka, have completed the Internship Report on Taxation in Bangladesh: Income from Agriculture, as a part of the requirement for passing this subject. We have gone through the report. He has accomplished the report by himself under my supervision.

I wish him every success in his future endeavor. Dr. Diman Kuman Chowdhury Professor Dept. Business Studies University of Dhaka

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Acknowledgement
Firstly, We would like to express our gratitude to almighty Allah to give us the strength to complete the report within the stipulated time. Though the following report is grouping work, we could never have reached the heights or explored the depths without the help, support, guidance and efforts of a lot of people. We want to thank our parents for making my studies possible and for never-ending support. Looking back on the last four months I must say I do not regret one single moment of it. I would cordially like to thank my supervisor Dr. Diman Kuman Chowdhury for his enthusiasm and unlimited zeal during preparing this report. He has given their helping hand that helped us a lot to prepare this internship report.

Executive Summary
We have completed our three months and developed my report based on our observation. This study has been focused on Taxation in Bangladesh: Income from Agriculture. The objective of the study is to evaluate how much we have learnt from the subject what we have been thought by our course professor. We have learned from this subject a lot Taxation in Bangladesh, income from salary, income from business/profession, income from securities, income from capital gain etc. Finaly, we have been known the topic of Taxation in Bangladesh: Income from Agriculture which is an important factor for the subject of Business taxation which has helped us for gaining massive knowledge in this related field.

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Table of Contents
Serial No 1
Letter of Transmittal Declaration Certificate of Supervisor Acknowledgement Executive Summary

Particulars

Page Number

Introduction Taxation History of tax in Bangladesh Tax Incentives Who is entitled to a Tax Holiday? Tax Structure in Bangladesh Types of Taxpayers in Bangladesh Income from Agriculture Scope of agricultural income Characteristics of Agricultural Income Classification of Agricultural income Admissible Expenses Non- Assessable Agricultural Income Conclusion......................................................

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Introduction
A tax is a financial charge or other levy imposed on an individual or a legal entity by a state or a functional equivalent of a state. Taxes consist of direct taxes and indirect taxes. Pecuniary burden laid upon individuals or property to support the government a payment exacted by legislative authority. Tax is not a voluntary payment or donation but an enforced contribution, exacted pursuant to legislative authority and is any contribution imposed by government whether under the name of VAT, Custom, Excise, or other name. Taxation means imposition of a non-penal yet compulsory levy for transfer of resources from private to public sector, imposed by the public representative based on pre-determined criteria and without reference to any specific commitment, in order to accomplish some nations economic and social objective. These are dues that we pay for the privileges of membership in an organized civil society. Tax is imposed in the assessment year based on income year. Total taxes in Bangladesh are divided into direct and indirect taxes. Direct taxes in Bangladesh consist of taxes on income (income tax, corporation tax, agricultural income tax) and taxes on property (wealth tax, gift tax, estate duty, capital gains tax, urban property tax, house rent, land revenue, registration and nonjudicial stamp). Table 2 shows that the direct taxes in general accounted for less than a fifth of the total tax revenue of the country in the recent years and the rest is accounted for by indirect taxes. According to section 20 of the income tax ordinance 1984, agricultural income is the fourth head among the seven heads of income. It is the most important sector in the economy of Bangladesh, whereas the contribution of tax from this sector is very insignificant. In Bangladesh, agricultural income was non-assessable up to 1976. It has brought under the tax net through the finance act 1976

Taxation
One of the major sources of public revenue to meet a countrys revenue and development expenditures with a view to accomplishing some economic and social objectives, such as redistribution of income, price stabilization and discouraging harmful consumption. It supplements other sources of public finance such as issuance of currency notes and coins, charging for public goods and services and borrowings. The term tax has been derived from the French word taxe and etymologically, the Latin word taxare is related to the term tax, which means to charge. Tax is a contribution exacted by the state. It is a no penal but compulsory and unrequited transfer of resources from the private to the public sector, levied on the basis of predetermined criteria. According to Article 152(1) of the Constitution of Bangladesh, taxation includes the imposition of any tax, rate, duty or impost, whether general, local or special, and tax shall be construed accordingly. Rate is a local tax imposed by local government on its residents or the property owners of the locality, a duty is a tax levied on a commodity, and an impost is a tax imposed for an entry into a country. Under the provision of article 83 of the Constitution, no tax shall be levied or collected except by or under the authority of an Act of Parliament. The imposition, regulation, alteration, remission or repeal of any tax is dealt with by the Money Bill, but except

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in case of reduction or abolition of any tax, the Money Bill cannot be introduced in the Parliament without the Presidents recommendation.

History of tax at Bangladesh


Bangladesh inherited a system of taxation from its past British and Pakistani rulers. The system, however, developed on the basis of generally accepted canons and there had been efforts towards rationalizing the tax administration for optimizing revenue collection, reducing tax evasion and preventing revenue leakage through system loss. To develop manpower for efficient tax administration, the government runs two training academies BCS (Tax) Academy at dhaka for direct tax training and Customs, Excise and Value Added Tax Training Academy at chittagong for indirect tax training. The national board of revenue (NBR) is the apex tax authority of Bangladesh and it collects around 93% of total taxes or 76% of total public revenues. The NBR portion of total taxes includes customs duty, value added tax (VAT), supplementary duty (SD), excise duty, income tax, foreign travel tax, electricity duty, wealth tax (collected as a surcharge of income tax since fiscal year 1999-2000), turnover tax (TT), air ticket tax, advertisement tax, gift tax and miscellaneous insignificant taxes. Other taxes (amounting to around 7% of total taxes or 5% of total revenues) are often referred to as non-NBR portion of tax revenue. These taxes include narcotics duty (collected by the Department of Narcotics Control, Ministry of Home Affairs), land revenue (administered by the Ministry of Land and collected at local Tahsil offices numbered on average, one in every two Union Parishads), non-judicial stamp (collected under the Ministry of Finance), registration fee (collected by the Registration Directorate of the Ministry of Law, Justice and Parliamentary Affairs) and motor vehicle tax (collected under the Ministry of Communication). Taxes are the major source of mobilizing internal resources of an economy. Bangladesh revenue structure has been burdened by taxes from indirect sources for long time and usually characterized by heavy import and excise duties. To cope with the challenge due to globalization, government of many such countries has to cut down such duties and levies. It seems that government might have to collect more money either through VAT (Value Added Tax) or from direct taxes. In Bangladesh VAT introduced in 1991 by replacing the sales taxes is still known as the vital reform in Bangladesh revenue structure. The remaining potential sector is the income taxes sharing almost all taxes coming through direct sources. In Bangladesh having a population of about 133 million, the number of registered taxpayers is only 1.25 million2 (which is only 0.94 percent of the total population). Tax base is too narrow and the tax law is full of exemptions and allowances. Agriculture sector provides employment for around 60 percent of the population contributes only 25 percent of GDP and virtually pays little in the form of income tax. There is always a controversy whether this sector is extra protected or not and if yes to continue for how long. There are many affluent people lying in the category of agricultural income and more such people avoiding taxes showing their entire income as a means of agriculture. It is widely known that very few people even among the registered taxpayers pay any tax in the form of income taxes in Bangladesh. Major share of income taxes come from the corporate sector and there is always an uneasy feeling having its higher rates. It has been said that, about 100 foreign investors pay 60 percent of the total revenue to the exchequer in Bangladesh. Taxes imposed are usually in progressive rates and maximum collection is done at
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source under withholding tax system. In Bangladesh, income tax for government employees is deemed paid by the employer that is by the government, considering the fact that they are underpaid. However, in case of private sectors, such payments are considered income, which creates additional tax burden for the employee of the private firms. This is discriminatory and obviously encourages employees of private firms to avoid or evade taxes. So, in reality very few people share the burden of income taxes in Bangladesh and thus it is a real problem for the government to distribute the tax incidence in a fair manner. Thus such a study is very important for designing the tax structure of Bangladesh in the light of the overall objectives of the development program of the country. Tax is Imposed in the Assessment Year on the Basis of Income Year Income year: Income year is the year when the income is earned Assessment Year: The Assessment is a period of 12 month just following he income year

Tax Incentives
In accordance with Income Tax Ordinance, Income Tax Rules and various SRO issued from time to time under the said ordinance/rules. Just mentioned tabulations shall articulate of particulars of such incentives:a) Under part A of sixth schedule: (Income totally exempt from tax) 1. Income from house property held under a trust or other legal obligation wholly for religious or charitable purpose (Para-1) 2. 3. 4. Any income derived from operation of micro credit by a NGO. (Para-2) Income of religious or charitable institutions derived from voluntary contributions. (Para-2) Income of a local government. (Para-2)

5. Any special allowances, benefits, or perquisites granted to meet expenses incurred for official duties. (Part-5) 6. Income received by trustees on behalf of a recognized provided fund, an approved superannuation fund and an approved gratuity fund. (Para-6) 7. Remuneration of Ambassadors etc. of Embassies of foreign states and their nonBangladesh employees. (Para-7)

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8.

Any pension due to or received by an assesses. (Part-8)

9. Interest on any securities of the Government received by an individual assesses up to Tk. 5,000/-. (Para-12) 10. Interest on debentures approved by the Securities and Exchange Commission received by an assesses not being a company up to Tk. 20,000/- (Interest on debentures together with on securities shall not exceed Tk. 20,000/-). (Para-13) 11. Salary received by or due of any person who is neither a citizen of Bangladesh nor was resident in Bangladesh in any of the four years immediately preceding the year in which he arrived in Bangladesh for a period not exceeding three years from the date of his arrival in Bangladesh, if such salary is received as a technician under a contract of service to be approved by the Board. This exemption will continue for another five years if the concerned technician continues to be employed by the same employer and tax on the salary of such technician is payable by the employer. (Para 15 & 16) 12. Any income received by an assesses in respect of any share of income out of the capital gains on which tax has been paid by the firm of which the assessee is a partner. (Para- 18) 13. Any sum received by an assesses as a member of a Hindu undivided family where such sum has been paid out of the income of the family. (Para-19) 14. Any income of an assesses representing payment as gratuity. (Para-20)

15. Any payment from provident fund to which PF Act. 1925 applies or from a recognized provided fund, an approved superannuation fund or a workers profit participation fund. (Para21) 16. Any income from dividend for which dividend distribution tax is payable by the company u/s 16D. (Para-22) 17. Any income from dividend of a mutual fund or a unit fund where such dividend does not exceed Tk. 25,000/-. (Para-22A) 18. Interest on securities receivable by an assesses on any security of the Govt. which is issued with the condition that the interest thereon shall not be liable to tax. (Para-24) 19. Any sum representing interest credited on the accumulated balance of an employee in a recognized provided fund. (Para-25) 20. Any amount received by a Govt. employee or an employee of autonomous or semi autonomous body including their units or enterprise at the time of voluntary retirement in accordance with any scheme approved by the Govt. in this behalf. (Para-26)

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21. Income of an indigenous Hillman being individual derived solely from economic activities undertaken within the hill districts of Rangmati, Banderban and Khagrachari (Para-27) 22. 50% of the income of an assesses (other than non-Bangladesh company) attributable to export sale (Para- 28) 23. Agricultural income not exceeding Tk. 50,000/- of an assessee being individual whose only source of income is Agriculture. (Para-29) 24. Any income of the mutual fund of the company issuing such mutual fund (Para-30)

25. Income from capital gains from transfer of machinery or plant used for the purpose of business or profession (Para- 31A). 26. Income on savings certificate is exempted up to Tk. 25,000/- where there is no deduction of tax at source (Para- 31B). b) Under part-B of sixth schedule. (Investment Allowances for resident assessee) An assessee shall be entitled to 15% tax credit from the amount of tax payable on his total income applicable on following admissible investment allowances:1. 2. 3. 4. 5. Life insurance premium for self, spouse or minor children (Para 1 & 2) Contributions by the salaried person to deferred annuity (Para-3) Contribution to any provident fund to which provident Fund Act. 1925 applies (Para-4) Contribution to a Recognized provident fund. (Para-5) Self contribution to approved superannuation fund (Para-6)

6. Investment in the new stocks or shares of public limited company listed with a stock exchange (Para-8) 7. 9) Investment in the new debenture or debenture stocks issued by approved companies (Para-

8. Savings certificate unit certificate mutual fund certificates development bounds, shares and such other Government securities as the Board may specify in this behalf (Para- 10) 9. Contribution to any DPS approved by the Govt. (Para- 11)

10. Donation to approved charitable hospital established outside city corporation area. (Para11A)

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11. Donation to approved organization set up for the welfare of the retarded people (Para11B) 12. Contribution to any Zakat Fund (Para- 13)

13. Contribution to a benevolent fund and group insurance premium if such fund or scheme of group insurance is approved by NBR (Para-17). 14. Donation to any socio economic or cultural development institution established in Bangladesh by Aga Khan Development Network (Para 21)

C. Under different sections of I.T. Ordinance 1984


1. Any investment made by an assessee, being an individual firm, association of persons or a private limited company between 01.07.2002 to 30.06.2005 in any trade, commercial or industrial venture, engaged in production of goods or services shall be exempted from tax and no question as to the source of such investment shall be raised. (Section 19AAA). 2. Capital gains arising from the sale of capital assets being used for business or profession if invested in the purchase of the new capital asset for the purpose of business or profession within one year before or after that sale (Sec 5) 3. Capital gains arising from the sale of govt. securities and stocks and share of public companies listed with a stock exchange (Sec. 32 (7). 4. Capital gains arising from the transfer of capital asset of a firm to a new company registered under the companies act. if the whole amount of the capital gain is invested in the equity of the said company by the partners of the said firm. (sec 32 (1) 5. Accelerated depreciation for newly set-up industries owned by Bangaldeshi companies @ 80% to 100% depending on its location in the first year in respect of machinery and plant not previously used in Bangladesh. (para-7 of the third schedule). In addition investment allowance @ 20% to 25% in respect of plant & machinery [Sec. 29 (1) (x)]. Accelerated depreciation & investment allowance are in lieu of tax holiday u/s 45.46 & 46A. 6. Income of co-operative societies (a) carrying on business of banking (b) engaged in (i) agriculture rural credit (ii) cottage industry (iii) processing and marketing etc. of agricultural produce of member (iv) supply of agricultural inputs to members (sec. 47 (1) (a) & 47 (1) (b) 7. Tax holiday for newly set-up industrial undertakings, physical infrastructure facilities and tourist industries for 5/7 years depending on location (sec.46A) 8. Concessionary rate of tax on capital gains @ 15% for sale of capital assets after five year of its acquisition. For companies tax rate is 25% fixed (Para 2 of the second schedule)

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9. Concessionary rate of tax on income from winnings from lotteries, cross word puzzles, card games 20% (Para 3 of the second schedule)

2. Incentive under I.T. Rules 1984 .


For salaried persons: House rent allowances up to Tk. 15,000/- per months or 50 of the basic pay which ever is less (rule 33A) conveyance allowances received in cash up to Tk. 24,000/- (rule 33C); The amount actually spent with respect to medial allowances (rule 331)

3. Incentives under different S.R.Os :


1. Salary or honorarium of the Prime Minister. Ministers state Minister and Deputy Minister, Member of Parliament, Judges of the Bangladesh supreme curt, Deputy Chairman and Member of the planning commission and member of the law committee. (SRO No. 440-L/76 dt 18.12.76 read with SRO No. 297-L/78 dt. 01.11.78) 2.Interest on money borrowed from abroad by Government, statutory bodies and industrial undertaking under certain condition (SRO 417A-/76 Date 29.11.76). 3. The difference between the official exchange rate and market rate of foreign currencies derived from encashment of remittance through official channel by Bangladeshi residing abroad (SRO 160/78 dt. 1.7.78). 4. a) Interest on deposits in the post office savings bank.

b) The yield of post office saving certificate without any limit. c) Scholarship to meet the cost of education: (SRO 297-L/80 dt. 31.12.80) 5. The interest and principal on purchase of Wage Earners Development Bonds (SRO160-L 81 dt. 25.05.81) 6. Monetary award granted from the cultural Heritage fund for outstanding contribution in the field of art and culture of the country (SRO 39-L/82 dt. 19.01.82) 7. Royalties for technical know-how fees received by any foreign collaboration, firm company and expert (SRO 227-L/82 dt 20.06.82) 8. The interest accruing on non-resident foreing currency deposit account (SRO 415-L/82 dt. 13.01.82). 9. Interest payable by the lasing company approved by the NBR on moneys borrowed by ii from source outside Bangladesh (SRO 403-L/85 dt. 10.09.85 10. Dividend paid by leasing company approved by NBR to the foreign shareholders of such company (SRO 404-L/85 dt. 10.09.85)
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11. Exemption of Income of such pioneering industry as may be specified by the Board for ten years (SRO 266-L/86 dt. 01.07.85 12. 50% of the tax attributable to export sales after the expiry of the tax exemption period of 5/10 year under SRO 181-1.81 dt. 12.5.81 or SRO 266-L/86 dt. 01.07.86 (SRO 267-L/86 dt. 01.07.86) 13. Dividend income o non resident shareholders during tax examption period of an industry setup in Export processing zone and also after the expiry of tax exemption period if the dividend incomes is re-invested in the same project. (SRO 268-L/86dt. 01.07.86) 14. Accelerated depreciation to the extent of 100 % of the cost of machinery in respect of hitech electronic industry as may be specified by the Board and setup in export processing zone within the tax exemption period (SRO 289-L/89 dt. 17.08.89) 15. Income from industrial undertaking set up in Export Processing Zone for ten years form the date of commercial production (SRO 289-L/89 dt. 17.08.89) 16. Income from industrial undertaking owned by a company and governed by the provision of Foreign Private Investment (Promotion & Protection) Act, 1980 as may be approved by the NBR and for such period as may be permitted by the Govt. (SRO 358-L/86 dt. 10.09.86) 17. Income of the Welfare Fund established under any law for the time being in force for the welfare of the Tea Garden Workers. (SRO 239-L/93 dt. 18.10.93) 18. Income of the investment companies run on commercial basis and established in Bangladesh under an agreement between G.O.B and may foreign Government or investment organization formed by the foreign Government for a period mentioned in he Agreement (SRO 32-L/90 dt 24.04.90) 19. Any amount of contribution to prime ministers relief fund (SRO 125-L/91 dt 05.05.91) 20. Contribution up to 5,00,000/- (five lakh) to the organizer of any national or international sports competition to be organized and help in Bangladesh. (SRO 202-L/91 dt. 01.07.91) 21. Income out of grants allowed by the government in the form of 15 years special Treasury bond to nationalized commercial banks and Rupali Bank Ltd. (SRO 257-L/92 dt. 28.11.92) 22. Income of the listed organizations runs by Senakallyan Sangstha (SRO 208-L/93 dt. 18.10.93 and SRO 216-L/216-4/2003 dt. 19.07.2003) 23. Interest on DPS run by a commercial bank and approved by the Government (SRO 54-L/95 dt. 04.04.95) 24. Income of such firm which is derived by it from the exercise of a profession and if such income depend wholly or mainly on personal qualification of its partners and its partners are

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prevented by law to from a company SRO 150-L/95 dt. 28.08.95 SRO- 183-L/98 dt. 19.08.98 and SRO 181-L/99 dt. 10.07.99) 25. Income of a stock exchange in Bangladesh (SRO 102-L/96 dt. 18.08.96) 26. Income out of investments in Bangladesh made by such Development finance organization as is established under an act of British Parliament and also finance by the British Government and having no partner and no registered under the companies act. (SRO 166-L/97, dt. 02.07.97) 27. Salary or honorarium of the person having status of Minister, State Minister, Deputy Minister/Deputy Chairman and Members of the planning commission. Such salary or honorarium is includible in the total income for rate purposes. (SRO No. 313-L/86 dt. 24.07.86) 28. Income attribution to export sales of handicrafts. Such income is not includible in assessees total income (SRO No. 191-L/97 dt. 19.08.97 in cancellation of SRO No. 313-L/86 dt. 24.07.86) 29. Salaries and allowance of expatriate personal employed in a foreign aided project established under an agreement between the Bangladesh Government foreign Government provided the expatriate personal are the citizens of such foreign country. (SRO 207-L/97 dt. 08.09.97) 30. Income of private sector power sector Generation Company for 15 years from the date of commercial production. Income of expatriate personnel working in such company for three years from the date of his arrival; interest on foreign loans received by such company; Royalties technical know-how fees and technical assistance fees payable by such company and capital gain on transfer of shares of such company. These exemptions will be available subject to the fulfillment of conditions laid down n the private sector power generation policy of Bangladesh (SRO No 14-l?99, dt. 03.02.97) 31. Tax on tax if the amount of tax payable on salary is paid by the employer (SRO No. 182L/99 dt. 01.07.99) 32. Income of newly established hospital for a period of five years subject to the fulfilment of certain condition. (SRO No. 182-L/99 dt. 07.07.99) 33. Fixed amount of tax on income from passenger launches, cargo, coaster and dumb barges paying in inland water ways. (SRO No. 176-L/2002 dt. 03.07.2002) 34. Fixed amount of tax on income from bus, minibus, coaster, prime mover, truck, tank lorries, pickup van, human hauler, maxi and auto rickshaw carrying goods (SRO No. 221-L/99 dt. 27.07.99) in cancellation of SRO No 199-L/99 dt. 03.09.98) (amended vide SRO No. 200L/2000 dt. 03.07.2000) 35. Interest on Bangladesh Shilpa Unnayan Bond issued by Nationalized Commercial Banks up to Tk. 25,000//- If the interest exceeds Tk. 25,000/- tax will be deducted @ 10% on the whole of interest and that will be final settlement of tax liability (SRO No. 154-L/99 dt. 10.06.99)

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36. 50% of the tax attributable to contribution up to certain limit in the approved sports organization (SRO 337-L/99 dt. 17.11.99) 37. Income of the financial institution engaged in prodding loan for house building for a period for five years from 1st July, 2000 (SRO 128-L/2000 dt. 11.05.2000) 38. Income of the District sport Association, Divisional Sports Association, National sport Association and National sport council (SRO No. 298-L/200 dt. 02.09.2000) 39. Concession rate of tax on income of local authority @ 25% (SRO 169-L/ 2001 dt. 28.06.2001) 40. Income of agro processing industry in also exemption from 01.07.2002 to 30.06.2006v (SRO No. 175-L/2002, dt. 03.07.2002 and SRO No. 214-L/2003 dt. 19.07.2003) 41. Reduced rate of tax @ 20% in case of newly set up industry under certain condition. (SRO No. 177- L/2002 dt. 03.07.2002) 42. The income of any university, or any other educational institution which is not operated commercially and also medical college, dental college, engineering college, and institution imparting education on information technology. (SRO No. 178-2/2002 dt. 03.07.2002) 43. Reduced rate of tax @ 10% of companies engaged in ready made garments industries on exports sale from 01.07.2003 to 30.06.2006 SRO No. 217-L/2003 dt. 19.07.2003) 44. Reduced rate of tax @ 20% of companies engaged in textiles industries from 01.07.2003 to 30.06.2006 (SRO No. 218-L/2003 dt 19.07.2003).

Who is entitled to a Tax Holiday?


Tax holiday is allowed to industries subject to the relevant rules and procedures set by the National Board of Revenue (NBR) for the following period according to the location of the establishment. In Dhaka and Chittagong Divisions (excluding 3 hill districts): 5 years. In other divisions (including 3 hill districts of Chittagong Division): 7 years. The period of such tax holiday will be calculated from the month of commencement of commercial production. The eligibility of tax holiday to be determined by the NBR and the time of the commencement of commercial production is certified by the respective sponsoring agencies. The industrial establishment should be registered under the companies Act. 1994. Tax holiday facility can be availed by industries coming into commercial production within 30 June 2000 A.D.

What are the other tax incentives in Bangladesh?


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Other tax incentives: Exemption of tax on interest of foreign loan. Exemption of tax on Royalty/Technical know-how. Tax exemption on capital gains. Avoidance of double taxation. Liberal investment allowance for tax assessment. An accelerated depreciation instead of a tax holiday of a tax holiday is allowed at the rate of 80 per cent of the actual cost of the machinery or plant from the year the plant starts production and 20 per cent for the following year provided the industry is located within a developed area. the depreciation is 10 per cent if the industry is set up in a location considered less than a developed area.

Tax Structure in Bangladesh


Total taxes in Bangladesh are divided into direct and indirect taxes. Direct taxes in Bangladesh consist of taxes on income (income tax, corporation tax, agricultural income tax) and taxes on property (wealth tax, gift tax, estate duty, capital gains tax, urban property tax, house rent, land revenue, registration and non-judicial stamp). Table 2 shows that the direct taxes in general accounted for less than a fifth of the total tax revenue of the country in the recent years and the rest is accounted for by indirect taxes. The first half of the Table 2 shows that the share of taxes on domestic goods and services hovered around a quarter of total tax revenue. Excise taxes declined very sharply as taken over by VAT since early nineties. Import duty has been declined throughout the last decade though still maintaining major share of taxes on foreign trade and more than 30 percent of the total tax revenue. VAT at import stage earning an average of 20 percent tax revenue however the total revenue from VAT is increasing steadily which seems the only positive sign for the country. The share of income taxes contributes to the entire direct taxes. The collection from income taxes is increasing for last few years but still insignificant compared to the total tax revenue. The later half of the Table 2 is adopted from the study of Ghafur and Chowdhury (1987) and Chowdhury (1994). The scenario is more alike with nineties in sharing indirect taxes for the tax revenue. However share of direct taxes has averaged a little improvement but not attained expected consistency as needed. Thus to combat with the upcoming challenges of globalization and expected rapid shrinking of tariffs, it seems now to overhaul the tax structure and to concentrate more on widening the tax base for VAT and income taxes. Figure 1 depicts a pictorial sketch analyzing a time series data for major taxes in Bangladesh. It shows that income tax first started increasing in early nineties but sharply declined in the middle and still trying to get its way back. A major reform of tax administration in the history of Bangladesh happened that time and a democratic government took over the paddle of the economy after a long military rule. No study has been done to measure the effect of democratic environment on the revenue administration and governance for Bangladesh; however it could be inferred that the sudden increase was due to the result of a transition towards good governance and major extension of income tax department. This analysis of revenue structure of Bangladesh shows that indirect taxes contribute the lions share in the overall revenue earnings

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and in fact, it accounts for more than sixty percent of the total revenue receipts. In other words, indirect taxes are still the primary source of generating internal resources for Bangladesh.

Types of Taxpayers in Bangladesh


Taxpayers in Bangladesh can be categorized into three main groups. Table 3 shows the scenario in detail. The elite group consists of corporate taxpayers those are about 3.02 percent of the total taxpayers. The next group consists of wage earners or salaried taxpayers and shares about 18.81 percent. The largest and the last group consists taxpayers of remaining all others and mainly those who have income from business and profession and shares about 78.17 percent.

Shares of Income Taxes


Corporate sector though has a poor number of taxpayers paying almost two third of total income taxes. Since FY 1990/91 to FY 1999/2000 it has contributed an average of 65.48 percent of total taxes from direct sources. Again about 60 percent of the corporate income taxes come from a small number of foreign companies in Bangladesh. Figure 2 shows the continuing trend of income tax collection from the two major sectors for the period of FY 1990/91 FY1999/2000.

Income from Agriculture


Generally the term of agriculture refers to the production of goods through the growing of plants, animals and other life forms. It also refers to field cultivation or cultivation of the ground, which involves a combination of both basic and subsequent operation. Any receipts out of cultivation of land and the use of buildings, premises, and land appurtenant thereto shall be considered as the income from agriculture after some considerations. The allowable deductions under agriculture are given below.

Agricultural income shall be determined after allowing a deduction of 60% from receipt from agriculture as agricultural expenses to avoid the no acceptable evidences of the production cost of cultivation. If the agriculturist does not have any other income source other than the agriculture then he or she will get exemption of more taka 50000 after the deduction of 60% of the receipts as the agricultural expense. There are some agricultural incomes which are also considered as the business income. As for example- income from tea garden is bifurcated between agricultural income and business income at the ratio of 60% and 40% consecutively. Income from rubber cultivation is also bifurcated at the same ratio.

Partly Agricultural Income


According the Provision under Section 26(2) & 26(3) of ITO, 1984, The following incomes are partly considered as agricultural income with the standard proportionate rate: Nature of partly auricular Income to be considered as agricultural income to be considered as income from business or profession
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In addition to above sources of incomes, the following incomes are alsoconsidered under the head of agricultural income: Income from cattle rearing Income from sale of palm or date juice Income from sale of seeds of grass Income from agro-co-operative society Income from land leased for agro work Income from sale of herbal or medical plants There are also some non-agricultural incomes: Income from ferry ghat Income from sale of produce that has no agricultural work like forest trees, wild grass,fruit and flowers Income from salt production on flooded land Income from sale of water for irrigation Income from poultry firm (till 2011) Nature of auricular income Income from tea garden To be considered from agriculture income 60% To be considered from business or profession 40% Reference

Section 26(2) rule 31

Income fron rubber garden Income from tobacco/ sugarcane and others

60%

40%

Section 26(3) rule 32

60%( If Further processing is done the assesse)

40% if further processing is done)

Section 26(3) rule 32

Income from butter and cheese makingy Income from salary working in agro firm and a lot more indirect agricultural income.

Admissible Expenses
As per Sec 27 ITO, 1984, in computing the taxable income under the head agricultural income , some expenses are allowed to be deducted from the revenues under this head. Those allowable allowances and deductions are as follows: Land Development Tax Local Tax
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(for agricultural operations) Production Cost Cultivating land or raising livestock Processing cost of operation to produce Transportation of the produce Maintenance of machineries used for production Up to 60% of the production cost is admissible Insurance premium Maintenance cost for irrigation plant Depreciation Interest on mortgage Interest on borrowed capital Losses for the sale of demolished machineries Losses on sale or exchange of machineries their expenses Non- Assessable Agricultural Income According to the various provision of the ITO, 1984, the following agricultural incomes are nonassessable subject to some conditions: 1. Agricultural is not exceeding Tk. 50,000 is non-assessable for an individual assessee, where only source of his income is agriculture. 2. Any income thus including indigenous Hillman from agriculture of any district of Khagrachari, Bandarban, Rangamati hilltracks, which have been solely derived from economic activities undertaken within the above hill tracks.3. Subject to the condition made hereunder any income from fisheries, poultry, cattle farming, floriculture, sericulture for the period from the first day of July,2008, to the 30Th day of June, 2011-i. Exempted income level is Tk. 150,000 and 10% shall be invested in government bondii. The person should file return the incomeiii. No such income shall be transferred within five years from the end of the income year.

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Conclusion
Agricultural income is the most important sector in the economy of Bangladesh, whereas the contribution of tax from this sector is very insignificant. It is because of some lack ness in infrastructure of NBR and local developmental issues. Following steps can be taken to make the agro- income more stable: Influence local member to set fair price Provide special training to the farmer Concern farmer to create crops insurance Develop communication and distribution system The heavy reliance on indirect taxation has been treated as one of the main obstacle in attaining economic progress in developing countries. The problem arises mainly due to the fact that only a few taxpayers share the burden of taxes. Bangladesh is exception which is also trying to reform its tax structure for long time through structural adjustment and growing demands have been placed on it to suggest towards a desirable tax system. A huge segment of the population living in acute poverty and disparity is also evident in income distribution. Tax burden is ultimately shared by a limited number of individual taxpayers and corporations. Thus attaining a broad based and optimal taxation system is a much desirable task for the government. This study tries to keep forward such an endeavor by analyzing the distribution of burden of income taxation in Bangladesh.

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