Taxation Scenerio

What is Income Tax?

An income tax is a government levy (tax) imposed on individuals or entities (taxpayers) that vary with the income or profits (taxable income) of the taxpayer. Details vary widely by jurisdiction. Many jurisdictions refer to income tax on business entities as company’s tax or corporation tax. Partnerships generally are not taxed; rather, the partners are taxed on their share of partnership items. Tax may be imposed by both a country and subdivisions thereof. Most jurisdictions exempt locally organized charitable organizations from tax.

Income tax generally is computed as the product of a tax rate times taxable income. The tax rate may increase as taxable income increases (referred to as graduated rates). Tax rates may vary by type or characteristics of the taxpayer. Capital gains may be taxed at different rates than other income. Credits of various sorts may be allowed that reduce tax. Some jurisdictions impose the higher of an income tax or a tax on an alternative base or measure of income.

Taxation Scenario in Bangladesh

In Bangladesh, the principal taxes are Customs Duty, Value-Added-Tax (VAT), Supplementary Duty and personal income taxes and corporate income. The standard rate of VAT is 15% levied on transaction value of most of the imports and supplies of goods and services. The top income tax rate for individuals is 25%. For the 2011/12 tax year (July 1, 2011–June 30, 20112) the top corporate rate was 45%. However, publicly traded companies registered in Bangladesh are charged a lower rate of 27.5%. Banks, financial institutions and insurance companies are charged the 45% rate. All other companies are taxed at the 37.5% rate. Effective 1 July 2011,

The National Board of Revenue (NBR) is the central authority for tax administration in Bangladesh. Administratively, it is under the Internal Resources Division (IRD) of the Ministry of Finance (MoF). MoF has 4 Divisions, namely, the Finance Division the Internal Resources Division...