The Institute of Chartered Secretaries of Bangladesh (ICSB)

Course Name: Direct and Indirect Tax Laws Session: July-December-201

Sub!ect Code: DITL 202 "Le#el-II$ Lecture Syno%sis-01
Course Teac&er: 'bdulla-'l-(a&mud )CS* )C'* )C('* (+'* LL,+
Direct Tax
Income Tax Ordinance,1984:
Direct tax:
' tax t&at is %aid directly by an indi#idual or or-ani.ation to t&e im%osin- entity, ' tax%ayer %ays a
direct tax to t&e -o#ernment /or di//erent %ur%oses* includin- income tax* wealt& tax* %ro%erty tax*
ca%ital -ain tax* -i/t tax* cor%orate0com%any tax* etc, ' direct tax cannot be s&i/ted to anot&er
indi#idual or entity, T&e indi#idual or or-ani.ation u%on w&ic& t&e tax is le#ied is res%onsible /or t&e
/ul/illment o/ t&e tax %ayment,
Advantage and disadvantages of direct tax:
In case o/ direct tax* t&e tax-%ayer is t&e tax-bearer, T&e im%act i,e, t&e initial burden and its
incidence i,e, t&e ultimate burden o/ direct tax is on t&e same %erson,
Advantages/merits of direct taxes:
)ollowin- are t&e im%ortant ad#anta-es or merits o/ direct taxes:
1 !"uit#: T&ere is social !ustice in t&e allocation o/ tax burden in case o/ direct taxes as t&ey are
based on t&e %rinci%le o/ ability to %ay, 1ersons in a similar economic situation are taxed at t&e
same rate, 1ersons wit& di//erent economic standin- are taxed at a di//erent rate, 2ence* t&ere
is bot& &ori.ontal and #ertical e3uity under direct taxation, 1ro-ressi#e direct taxation can
reduce income ine3ualities and brin- about ade3uate social 4 economic !ustice,
$ Certaint#: 's /ar as direct taxes are concerned* t&e tax %ayer is certain as to &ow muc& &e is
ex%ected to %ay* as t&e tax rates are decided in ad#ance, T&e -o#ernment can also estimate
t&e tax re#enue /rom direct taxes wit& a /air accuracy, 'ccordin-ly* t&e -o#ernment can ma5e
ad!ustments in its income and ex%enditure,
% &elativel# elastic: T&e direct taxes are relati#ely elastic, 6it& an increase in income and
wealt& o/ indi#iduals and com%anies* t&e yield /rom direct taxes will also increase, 7lasticity
also im%lies t&at t&e -o#ernment8s re#enue can be increased by raisin- t&e rates o/ taxation,
'n increase in tax rates would increase t&e tax re#enue,
' Creates (u)lic consciousness: T&ey &a#e educati#e #alue, In t&e case o/ direct taxes* t&e
tax%ayers are made to /eel directly t&e burden o/ taxes and &ence ta5e 5een interest in &ow
%ublic /unds are s%ent, T&e tax%ayers are li5ely to be more aware about t&eir ri-&ts and
res%onsibilities as citi.ens o/ t&e state,
* !conomical: Direct taxes are -enerally economical to collect, )or instances* in t&e case o/
%ersonal income tax* t&e tax can be deducted at source /rom t&e income or salaries o/ t&e
indi#iduals, T&ere/ore* t&e -o#ernment does not &a#e to s%end muc& in tax collection as /ar as
%ersonal income tax is concerned,
+ Anti,inflationar#: T&e direct taxes can &el% to control in/lation, Durin- in/lationary %eriods* t&e
-o#ernment may increase t&e tax rate, 6it& an increase in tax rate* t&e consum%tion demand
may decline* w&ic& in turn may reduce in/lation,
1a-e 1 o/ -
Disadvantages/demerits of direct taxes:
T&ou-& direct taxes %ossess abo#e mentioned merits* t&e economist &a#e critici.ed t&em on t&e
/ollowin- -rounds:
1 Tax evasion: T&e tax e#asion is due to &i-& tax rates* documentation and /ormalities* %oor
and corru%t tax administration, It is easier /or t&e businessmen to e#ade direct taxes, T&ey
in#ariable su%%ress correct in/ormation about t&eir incomes by mani%ulatin- t&eir accounts
and e#ade tax on it, In less de#elo%ed countries li5e +an-lades&* due to &i-& rate o/
%ro-ressi#e tax e#asion 4 a#oidance are extensi#e and led to rise in blac5 money,
2. Ar)itrar# rates: T&e direct taxes tend to be arbitrary, Critics %oint out t&at t&ere cannot be any
ob!ecti#e basis /or determinin- tax rates o/ direct taxes, 'lso* t&e exem%tion limits in t&e case
o/ %ersonal income tax* wealt& tax* etc,* are determined in an arbitrary manner, ' %recise
de-ree o/ %ro-ression in taxation is also di//icult to ac&ie#e, T&ere/ore* direct taxes may not
always /ul/ill t&e canon o/ e3uity,
% Inconvenient: Direct taxes are incon#enient in t&e sense t&at t&ey in#ol#e se#eral %rocedures
and /ormalities in /ilin- o/ returns, )or most %eo%le %ayment o/ direct tax is not only
incon#enient* it is %syc&olo-ical %ain/ul also, 6&en %eo%le are re3uired to %ay a si.eable %art
o/ t&eir income as a tax to t&e -o#ernment* t&ey /eel #ery muc& &urt and t&eir %ro%ensity to
e#ade tax remains &i-&,
' .arro/ coverage: T&ere is a narrow co#era-e o/ direct taxes, It is estimated t&at only one
and &al/ %ercent o/ t&e %o%ulation %ay %ersonal income tax, Due to low co#era-e* t&e
-o#ernment does not -et enou-& /unds /or %ublic ex%enditure,
* Affects ca(ital formation: T&e direct taxes can a//ect sa#in-s and in#estment, Due to taxes*
t&e net income o/ t&e %eo%le -ets reduced, T&is in turn reduces sa#in-s, 9eduction in sa#in-s
results in low in#estment, T&e low in#estment a//ects ca%ital /ormation in t&e country,
+ !ffect on /illingness and a)ilit# to /or0: 2i-&ly %ro-ressi#e direct taxes reduce %eo%le8s
ability and willin-ness to wor5 and sa#e, T&is in turn may &a#e a ne-ati#e im%act on
in#estment and %roducti#e ca%acity in t&e economy, I/ tax burden is &i-&* %eo%le8s
consum%tion le#el -ets ad#ersely a//ected and t&is &as an im%act on t&eir ability to wor5 and
sa#e, 2i-& taxes also discoura-e %eo%le /rom wor5in- &arder in order to earn and sa#e more,
1 Sectoral im)alance: T&ere is sectoral imbalance as /ar as direct taxes are concerned,
Certain sectors li5e t&e cor%orate sector is &ea#ily taxed* w&ereas* t&e a-riculture and ot&er
sectors are less taxed,
In direct tax* burden o/ tax cannot be s&i/ted, T&e disad#anta-e o/ direct taxation are mainly due to
administrati#e di//iculties and ine//iciencies, T&e extent o/ direct taxation s&ould de%end on t&e
economic state o/ t&e country, ' ric& country &as -reater sco%e /or direct taxation t&an a %oor
country, 2owe#er* direct taxation is an im%ortant as%ect o/ t&e modern /inancial
Tax:
:Tax; means t&e income tax %ayable under t&e Income Tax <rdinance* 1=>? and includes any
additional tax* excess %ro/it tax* %enalty* interest* /ees or ot&er c&ar-es le#iable or %ayable under
t&e Income Tax <rdinance* 1=>? @section 2 "A2$B,
Income Tax s&ould be deducted considerin- t&e -round o/ Income Tax deduction at source* i,e,
ad#ance tax and ot&er related sections 4 rules o/ Income Tax <rdinance* 1=>?, Income tax is a
direct tax* since t&e %erson on w&om it is le#ied &imsel/* &as to bear t&e incidence, T&ere is no
sco%e o/ s&i/tin- t&e incidence to someone else at least t&eoretically,
1a-e $ o/ -
Definition (section,$):
$(1) Agricultural income means-
a$ any income deri#ed /rom any land in +an-lades& and used /or a-ricultural %ur%oses:
"i$ by means o/ a-riculturalC or
"ii$ by t&e %er/ormance o/ any %rocess ordinarily em%loyed by a culti#ator to render
t&e %roduce o/ suc& land /it to be ta5en to mar5etC or
"iii$ by t&e sale o/ t&e %roduce raised in t&e land by t&e culti#ator w&ere no %rocess
ot&er t&an to renderin- t&e %roduce mar5etable &as been %er/ormedC or
"i#$ by -rantin- a ri-&t to any %erson to use t&e land /or any %eriod,
b$ it also includes any income deri#ed /rom any buildin- w&ic&:
"i$ is occu%ied by t&e culti#ator o/ suc& land w&ere any %rocess is carried on to
render to %roduce o/ land mar5etableC
"ii$ is on or in t&e immediate #icinity o/ suc& land andC
"iii$ is re3uired by t&e culti#ator /or dwellin- or store&ouse or ot&er &ouse by reason o/
t&is connection o/ suc& land,
$(%) Annual value s&all be deemed to be-
a$ in relation to any %ro%erty let out*
"i$ t&e sum /or w&ic& %ro%erty mi-&t reasonably be ex%ected to let /rom year to yearC
or
"ii$ any amount recei#ed by lettin- out /urniture* /ixture* /ittin-s etc,C or
"iii$ w&ere t&e annual rent in res%ect t&ereo/ is in excess o/ t&e sum re/erred to in
%ara-ra%& "i$ t&e amount o/ t&e annual rent,
$(1) Assessee means a %erson by w&om any tax or ot&er sum o/ money is %ayable under t&is
<rdinance and includes-
a$ e#ery %erson in res%ect o/ w&om any %roceedin- under t&is <rdinance re-ardin-
assessment o/ income* %ayment o/ re/und etc,C
b$ e#ery %erson w&o is re3uired to /ile a return under t&e <rdinanceC
c$ e#ery %erson w&o desires to be assessed and submits &is return o/ income under t&is
<rdinanceC
d$ e#ery %erson w&o is deemed to be an assessee or an assessee in de/ault under any
%ro#ision o/ t&is <rdinance,
$(-) 2Assessment3 wit& its -rammatical #ariations and co-nate ex%ressions include re-
assessment and additional or /urt&er assessment,
$(4) 2Assessment #ear3 means t&e %eriod o/ twel#e mont&s commencin- on t&e /irst day o/
July e#ery yearC and includes any suc& %eriod w&ic& is deemed under t&e %ro#isions o/ t&is
<rdinance to be assessment year in res%ect o/ any income /or any %eriod,
$(1') 2Business3 includes any trade* commerce or manu/acture or any ad#enture or concern in
t&e nature o/ trade* commerce or manu/acture,
$(1*) 2Ca(ital asset3 means %ro%erty o/ any 5ind &eld by an assessee w&et&er or not
connected wit& &is business or %ro/ession but does not include-
a$ any stoc5-in-trade "not bein- stoc5s and s&ares$ consumable stores or raw materials
&eld /or t&e %ur%oses o/ &is business o/ %ro/essionC
b$ %ersonal e//ects t&at is to say* mo#able %ro%erty "includin- wearin- a%%arel* !ewellery*
/urniture* /ixture* e3ui%ment and #e&icles$ w&ic& are &eld exclusi#ely /or %ersonal use
by and are not used /or %ur%oses o/ t&e business or %ro/ession o/ t&e assessee or any
member o/ t&is /amily de%endent on &im and
c$ a-ricultural land in +an-lades& not bein- land situate-
"i$ in any area is com%rised wit&in t&e !urisdiction o/ D&a5a* C&itta-on-*
Narayan-an!* Da.i%ur* Narsin-di* (uns&i-an! and (ani5-an! districts or
"ii$ in any area wit&in suc& distance not bein- more t&an /i#e miles /rom t&e local
limits o/ 9'JEF* CD'* FD'* 9D'* a City Cor%oration* munici%ality* 1auras&a#a or
cantonment board re/erred to in %ara-ra%& "i$ as t&e -o#ernment may &a#in-
1a-e % o/ -
re-ard to t&e extent o/ and sco%e /or urbani.ation o/ t&at area and ot&er rele#ant
considerations s%eci/y in t&is be&al/ by noti/ication in t&e o//icial -a.ette,
$(1+) 2Charita)le (ur(ose3 includes relie/ o/ t&e %oor* education* medical relie/ and t&e
ad#ancement o/ any ob!ect o/ -eneral %ublic utility,
$($5) 2Com(an#3 means a com%any as de/ined in t&e Com%anies 'ct* 1=1 "GII o/ 1=1$ or
Com%anies 'ct* 1==? "HGII o/ 1==?$ and includes-
a$ a body cor%orate establis&ed or constituted by or under any law /or t&e time bein- in
/orceC
b$ any nationali.ed ban5in- or ot&er /inancial institution* insurance body and industrial or
business enter%riseC
bb$ an association or combination o/ %ersons called by w&ate#er name i/ any o/ suc&
%ersons is a com%any as de/ined in t&e Com%anies 'ct* 1=1 "GII o/ 1=1$ or
Com%anies 'ct* 1==? "HGII o/ 1==?$C
bbb$ any association or body incor%orated by or under t&e laws o/ a country outside
+an-lades& C and
c$ any /orei-n association or body Inot incor%orated by or under any lawJ w&ic& t&e
+oard may by -eneral or s%ecial order declare to be a com%any /or t&e %ur%oses o/
t&is ordinance,
$($+) 2Dividend3 includes-
any %ayment by a %ri#ate com%any o/ any sum by way o/ ad#ance or loan to a s&are&older
or any %ayment by any suc& com%any on be&al/* or /or t&e indi#idual bene/it o/ any suc&
s&are&older* to t&e extent to w&ic& t&e com%any in eit&er case %ossesses accumulated
%ro/itC
any %ro/it remitted outside +an-lades& by a com%any not incor%orated in +an-lades&
under Com%anies 'ct* 1==?C
t&e di#idend &owe#er does not include amon-st ot&ers as enumerated in t&e di//erent sub-
clauses::
"i$ any ad#ance or loan made to a s&are&older in t&e ordinary course o/ its business
w&ere t&e lendin- o/ money is substantial %art o/ t&e business o/ t&e com%anyC
"ii$ any di#idend %aid by a com%any w&ic& is set o// by t&e com%any a-ainst t&e
w&ole or any %art o/ any sum %re#iously %aid by it and treated as di#idend wit&in
t&e meanin- o/ sub-clause to t&e extent to w&ic& it is so set o//C
"iii$ any bonus s&are issued by a com%any,
$(%5) 26air mar0et value3 means in relation to ca%ital assets-
a$ t&e %rice w&ic& suc& asset would ordinarily /etc& on sale in t&e o%en mar5et on t&e
rele#ant day and w&ere a suc& %rice is not ascertainable t&e %rice w&ic& t&e De%uty
Commissioner o/ Taxes may wit& t&e a%%ro#al in writin- o/ t&e Ins%ectin- Join
Commissioner* determineC
b$ t&e residual #alue recei#ed /rom t&e lessee in case o/ an asset leased by a /inancial
institution &a#in- license /rom t&e +an-lades& +an5 on termination o/ lease
a-reement on maturity or ot&er sub!ect to t&e condition t&at suc& residual #alue %lus
amount reali.ed durin- t&e currency o/ t&e lease a-reement toward t&e cost o/ t&e
asset is not less t&an t&e cost o/ ac3uisition to t&e lessor /inancial institution,
$(%') 2Income3 includes-
a$ any income %ro/it or -ains /rom w&ate#er source deri#ed c&ar-eable to tax under any
%ro#ision o/ t&is <rdinanceC
b$ any loss o/ suc& income %ro/its or -ainsC
c$ t&e %ro/it and -ains o/ any business o/ insurance carried on by mutual insurance
association com%uted in accordance wit& %ara-ra%& > o/ t&e /ourt& sc&eduleC
d$ any sum deemed to be income or any income accruin- or arisin- or recei#ed or
deemed to accrue or arise or be recei#ed in +an-lades& under any %ro#ision o/ t&is
ordinanceC
1ro#ided t&e amount re%resentin- t&e /ace #alue o/ any bonus s&are or t&e amount o/ any
bonus s&are or t&e amount o/ any bonus declared issued or %aid by any com%any
1a-e ' o/ -
re-istered in +an-lades& under t&e Com%anies 'ct* 1==? to its s&are&olders wit& a #iew
to increase its %aid-u% s&are ca%ital s&all not be included as income o/ t&at s&are&older,

$(%*) 2Income #ear3 in res%ect o/ any se%arate source o/ income* means-
a$ t&e /inancial year immediately %recedin- t&e assessment yearC or
b$ w&en t&e accounts o/ t&e assessee are closed on a date wit&in t&e /inancial year* t&e
twel#e mont&s endin- on t&e date on w&ic& accounts are closedC or
c$ w&en a business is newly set u% in t&e /inancial year* t&e %eriod /rom t&e date o/ t&e
settin- u% o/ t&e business u%to t&e end o/ t&e /inancial year or u%to t&e date o/ closin-
t&e accounts wit&in t&e /inancial yearC or
d$ w&en business is newly set u% in t&e twel#e mont&s immediately %recedin- t&e
/inancial year and t&e accounts o/ t&e assessee &a#e been made u% to any date wit&in
t&e /inancial year* t&e %eriod /rom t&e date o/ t&e settin- u% o/ t&e business to t&e date
o/ closure o/ accounts i/ t&e %eriod does not exceed twel#e mont&sC
i/ any %eriod &as been %rescribed by t&e +oard bein- t&e income year* t&en t&e %eriod
/rom t&e date o/ t&e settin- u% o/ t&e business and endin- on t&e last day o/ t&at
%eriod as determined by t&e +oardC or
e$ t&e +oard or ant aut&ority aut&ori.ed by t&e +oard may determine any %eriod as t&e
income year or any %erson or class o/ %ersons or any business or %ro/essionC and
/$ in res%ect o/ t&e s&are income o/ a /irm* /irmKs income year is t&e income year o/ t&e
%artnerC
it may be mentioned t&at w&ere an assessee &as once been assessed in res%ect o/ a
%articular source o/ income or w&ere &e &as exercised &is o%tion in res%ect o/ newly
set u% business* &e s&all not be entitled to c&ar-e t&e income year wit&out t&e consent
o/ t&e De%uty Commissioner o/ Taxes u%on suc& conditions as may be im%osed by
t&e De%uty Commissioner o/ Taxes, It may /urt&er be mentioned t&at an assessee &as
t&e o%tion to &a#e se%arate income year /or eac& se%arate source o/ income,
$(%-) 2Interest3 means interest %ayable in any manner in res%ect o/ any money borrowed or
debt incurred "includin- a de%osit* claim or ot&er similar ri-&t or obli-ation$ and includes
any ser#ice /ee or ot&er c&ar-es in res%ect o/ t&e money borrowed or debt incurred or in
res%ect o/ any credit /acility w&ic& &as not been utili.ed,
$('5) 27ar0et value3 in res%ect o/ a-ricultural %roduce* means-
a$ w&ere suc& %roduce is ordinarily sold in t&e mar5et in its raw state or a/ter a%%lication
to it o/ any %rocess em%loyed by a culti#ator to render it /it to be ta5en to t&e mar5et*
t&e #alue calculated accordin- to t&e a#era-e %rice at w&ic& it &as been sold durin-
t&e year %re#ious to t&at in w&ic& t&e income deri#ed /rom suc& %roduce /irst becomes
assessableC and
b$ w&ere suc& %roduce is not ordinarily sold in t&e mar5et in its raw state* t&e a--re-ate
o/-
"i$ t&e ex%enses o/ culti#ationC
"ii$ t&e land de#elo%ment tax or rent %aid /or t&e lands in w&ic& it was -rownC and
c$ suc& amount as t&e De%uty Commissioner o/ Taxes /inds* &a#in- re-arded to t&e
circumstances o/ eac& case* to %resent a reasonable rate o/ %ro/it on t&e sale o/ t&e
%roduce in 3uestion as a-ricultural %roduce,
$('$) 2.on,resident3 means a %erson w&o is not a resident
$('*) 28er"uisite3 means-
a$ any %ayment made to an em%loyee by an em%loyer in t&e /orm o/ cas& or in any ot&er
/orm excludin- basic salary* /esti#al bonus* incenti#e bonus not exceedin- ten %er cent
o/ disclosed %ro/it o/ rele#ant income year* arrear salary* ad#ance salary* lea#e
encas&ment or lea#e /are assistance and o#ertime* and
b$ any bene/it* w&et&er con#ertible into money or not* %ro#ided to an em%loyee by an
em%loyer* called by w&ate#er name* ot&er t&an contribution to a reco-ni.ed %ro#ident
/und* a%%ro#ed %ension /und* a%%ro#ed -ratuity /und and a%%ro#ed su%erannuation
/undC
1a-e * o/ -
$('+) 28erson3 includes an indi#idual* a /irm* an association o/ %ersons* a 2indu undi#ided
/amily* a local aut&ority* a com%any and e#ery ot&er arti/icial !uridical %ersonC
$('-) 28rinci(al officer3 used wit& re/erence to a local aut&ority* a com%any* any ot&er %ublic
body or any association o/ %ersons* includes-
a$ mana-in- director* mana-er* secretary* treasurer* a-ent or accountant "by w&ate#er
desi-nation 5nown$ or any o//icer res%onsible /or mana-ement o/ t&e a//airs or o/ t&e
accounts o/ t&e aut&ority* com%any* body or associationC and
b$ any %erson connected wit& t&e mana-ement or t&e administration o/ t&e local
aut&ority* body or association u%on w&om t&e De%uty Commissioner o/ Taxes &as
ser#ed a notice o/ &is intention to treat &im as %rinci%al o//icer t&ereo/,
$(*5) 28rofits in lieu of salar#3 includes-
a$ t&e amount o/ com%ensation due to* or recei#ed by* an assessee /rom &is em%loyer at
or in connection wit& t&e termination o/* or t&e modi/ication o/ any terms and
conditions relatin- to* &is em%loymentC and
b$ any %ayment due to or recei#ed by an assessee /rom a %ro#ident or ot&er /und to t&e
extent to w&ic& it does not consist o/ contributions by t&e assessee and t&e interest on
suc& contributions,
$(*$) 2&ecogni9ed (rovident fund3 means a %ro#ident /und w&ic& &as been and continues to
be* reco-ni.ed by t&e Commissioner in accordance wit& t&e %ro#isions o/ 1art + o/ t&e
)irst Sc&eduleC
$(**) 2&esident3 in res%ect o/ any income year* means-
a$ an indi#idual w&o &as been in +an-lades&-
"i$ /or a %eriod o/* or /or %eriods amountin- in all to* one &undred and ei-&ty-two days
or more in t&at yearC or
"ii$ /or a %eriod o/* or %eriods amountin- in all to* ninety days or more in t&at year
&a#in- %re#iously been in +an-lades& /or a %eriod o/* or %eriods amountin- in all
to* t&ree &undred and sixty-/i#e days or more durin- /our years %recedin- t&at
yearC
b$ a 2indu undi#ided /amily* /irm or ot&er association o/ %ersons* t&e control and
mana-ement o/ w&ose a//airs is situated w&olly or %artly in +an-lades& in t&at yearC
and
c$ a +an-lades&i com%any or any ot&er com%any t&e control and mana-ement o/ w&ose
a//airs is situated w&olly in +an-lades& in t&at yearC
$(*-) 2Salar#3 includes-
a$ any wa-esC
b$ any annuity* %ension or -ratuityC
c$ any /ees* commissions* allowances* %er3uisites or %ro/its in lieu o/* or in addition to*
salary or wa-esC
d$ any ad#ance o/ salaryC
e$ any lea#e encas&ment,
Summar#:
8articulars Section 8articulars Section
Agricultural income 2"1$ Income #ear 2"L$
Annual value 2"$ Interest 2">$
Assessee 2"M$ 7ar0et value 2"?0$
Assessment 2">$ .on,resident 2"?2$
Assessment #ear 2"=$ 8er"uisite 2"?L$
Business 2"1?$ 8erson 2"?A$
Ca(ital asset 2"1L 8rinci(al officer 2"?>$
Charita)le (ur(ose 2"1A$ 8rofits in lieu of salar# 2"L0$
Com(an# 2"20$ &ecogni9ed (rovident fund 2"L2$
Dividend 2"2A$ &esident 2"LL$
6air mar0et value 2"0$ Salar# 2"L>$
1a-e + o/ -
Income 2"?$ Tax 2"A2$
Tests to determine residence :setion,$(**);:
'n indi#idual would be resident in +an-lades& in any income year i/ &e &as been in +an-lades&
/or a total %eriod o/ 1>2 days or more durin- t&at income year or
/or a total %eriod o/ =0 days or more in t&e income year %lus AL days or more in all durin-
/our years %recedin- to t&at year,
Two conditions are not mutually inclusi#e, In ot&er words* /ul/illment o/ any is su//icient to be
resident but under "ii$ t&ere are two conditions w&ic& are mutually inclusi#e,
!xam(le,1:
(r, H* a /orei-n national stays in +an-lades& /or >L days durin- /inancial year 2012-201,
Determine &is residential status /or t&e assessment year 201-201? on t&e assum%tion t&at &e
stayed in +an-lades& %re#iously as /ollows:
Sco(e of total income:
Assessment #ears Da#s of sta#
200M-200> 1A
200>-200= A0
200=-2010 1>1
2010-2011 0L
2011-2012 AL
2012-201 100
Ans:
In t&e /inancial year 2012-201 (r, H stayed in +an-lades& /or >L days* so &e does not satis/y t&e
/irst test o/ 1>2 days, Now* let us see w&et&er &e satis/ies t&e second test, Ender t&is* &e &as to
stay in +an-lades& in t&e concerned year /or at least =0 days* w&ic& &e did not* so /urt&er
calculation is not necessary, <n two tests* (r, H was a non-resident /or t&e /inancial year 2012-
201 and corres%ondin- assessment year 201-201?,
2owe#er /or /urt&er ex%lanation let us assume t&at (r, H stayed in +an-lades& in t&e /inancial
year 2012-201 /or =L days, 2ere a-ain &e does not /ul/ill t&e /irst test o/ 1>2 days, +ut since &e
stayed /or more t&an =0 days we &a#e to see &is %osition /or /our years immediately %recedin-
/inancial year 2012-201 or assessment year 201-201?,
Assessment #ears Da#s of sta#
2012-201 100
2011-2012 AL
2010-2011 0L
200=-2010 1>1
Total +*1
Now* &e would be a resident since a%%lyin- t&e second test &e stayed /or more t&an AL days
durin- /our years immediately %recedin- years,
!xam(le,$:
(r, +rown a +ritis& national was in +an-lades& /rom 11,12,200L to 11,0,200A &is %re#ious stay in
+an-lades& was as /ollows:
i$ Durin- t&e /inancial year 200?-0L /rom 01-0=-200? to 1L-12-200?C
ii$ Durin- t&e /inancial year 200-0? /rom 1A-11-200 to 1L-01-200?C
iii$ Durin- t&e /inancial year 2002-0 /rom 01-01-200 to 0-0?-200C
i#$ Durin- t&e /inancial year 2001-02 /rom 1-0>-2001 to 1L-11-2001
Determine &is residential status /or t&e assessment year 200L-200A,
1a-e 1 o/ -
Ans:
(r, +rown a +ritis& national was in +an-lades& /rom 11,12,200L to 11,0,200A is as /ollows:
Assessment #ears Da#s of sta#
200L-200A 10A
200?-200L A1
200-200? 120
2002-200 MM
In t&e assessment year 200L-200A (r, +rown stayed in +an-lades& /or 10A days* so &e does not
satis/y t&e /irst test o/ 1>2 days, Ender t&e second test* &e stayed /or more t&an =0 days, So* we
&a#e to see &is %osition /or /our years immediately %recedin- assessment year 200L-200A, +ut* we
&a#e only t&ree %recedin- years and total stayed "A1N120NMM$ O 2L> days w&ic& is below t&an t&e
AL days, <n two tests* (r, +rown was a non-resident /or t&e /inancial year 200?-200L and
corres%ondin- assessment year 200L-200A,
Basis of charge and sco(e of total income:
Charging sections (section 1+< 1+A< 1+B< 1+C = 1+CCC):
T&is section is a c&ar-in- section w&ic& im%oses income tax u%on a %erson in res%ect o/ &is
income, T&e c&ar-eability o/ income to tax &as to be in accordance wit& and sub!ect to t&e
%ro#isions o/ t&e <rdinance, T&e income &as to be brou-&t under any o/ t&e &eads o/ income
under section-20 and can be c&ar-ed to tax only i/ it is so c&ar-eable under t&e com%utin- section
corres%ondin- to t&at &ead o/ income,
Income tax is a tax on a %erson in relation to &is income and is not a c&ar-e on t&e income u%on
w&ic& it is le#ied, T&e liability to tax arises by #irtue o/ t&is c&ar-in- section w&ic& does not de%end
on assessment order only 3uanti/ies t&e liability w&ic& is /inally created by t&e c&ar-in- section,
Basic (rinci(les:
)ollowin- basic %rinci%les can be deduced /rom t&e analysis o/ t&e c&ar-in- section:
Income tax is to be c&ar-ed at t&e rate or rates /ixed /or t&e year by t&e annual )inance
'ctC
T&e c&ar-e is on e#ery %erson as stated in section-,2"?A$ i,e an indi#idual* a /irm* an
association o/ %ersons* a 2indu undi#ided /amily* a local aut&ority* a com%any and any
ot&er arti/icial !uridical %ersonC
T&e Income taxed is t&at o/ t&e income year and not o/ t&e assessment year, 2owe#er*
t&ere are exce%tions /or a discontinued business* /or %ersons lea#in- +an-lades& w&en
income year is t&e assessment year and /or certain income under section->2"C$C
T&e tax is le#ied on t&e total income o/ t&e assessee com%uted in t&e manner laid down in
s%eci/ied sections and sub!ect to t&e %ro#isions o/ t&is <rdinance,

Charges of income tax (section,1+):

Income Tax is c&ar-eable /or eac& :assessment year; be-innin- on t&e 1
st
day o/ !uly eac& year at
any rates as %ro#ided by an 'ct o/ 1arliament and is %ayable in res%ect o/ t&e :total world income
o/ t&e income yearK in t&e case o/ a PresidentK or Ptotal incomeK o/ t&e income year in t&e case o/ a
non-resident,
Charge of minimum tax (section,1+CCC):
7#ery /irm &a#in- -ross recei%ts o/ more t&an T5, L0 lac or e#ery com%any s&all irres%ecti#e o/ its
%ro/its or loss in an assessment year /or any reason w&atsoe#er* includin- t&e sustainin- o/ a loss*
t&e settin- o// o/ a loss o/ earlier year or years or t&e claimin- o/ allowances or deductions
"includin- de%reciation$ allowed under t&is <rdinance be liable to %ay minimum tax at t&e rate o/
.ero %oint /i#e .ero "0,L0Q$ %ercent o/ t&e amount re%resentin- suc& /irmKs or com%anyKs -ross
recei%ts /rom all sources /or t&at year,
T&e end
1a-e - o/ -