Bangladesh

Employment income

Income from employment includes financial receipts, salaries, and benefits that are received or due from employment income earned from an employee share scheme, arrear salary, and any amount or benefit received from a past or future employer.

Salary is broadly defined to include various forms of compensation, such as wages, allowances, bonuses, commissions, perquisites, and other similar payments. Receipts in lieu of salary or in addition to salary cover compensation for employment termination and other benefits not directly a part of the salary.

Perquisites, allowances, and benefits valuation

Monetary value of perquisites, allowances, and benefits valuation is determined as follows:

Accommodation benefits:

• Full annual value or rent paid by the employer.
• If rent is subsidised, the difference between annual value and paid rent.

Per vehicle benefits:

• BDT 10,000 per month for vehicles up to 2500 cc.
• BDT 25,000 per month for vehicles over 2500 cc.

Other perquisites:

• Monetary or FMV of any other perquisites, allowances, or benefits.

Equity compensation

If shares are received under any employee share scheme, the income (FMV as on the date of receipt minus the cost of acquiring such shares) will be taxable in the year in which the share is received.

The cost of acquisition will be the cost paid by the employee to acquire the shares or price paid for acquiring the right or opportunity to acquire the shares.

If the right or opportunity is sold, the sale price minus the cost of acquiring the right or opportunity will be the income of the seller.

Business income

Income from business encompasses various types of earnings that a taxpayer receives. These can be broadly categorised as follows:

• Profits and gains from active business.
• Income earned from rendering services by professional organisations.
• FMV of any benefit arisen in connection of business.
• Management fees.
• Lease income.
• Currency exchange gains.
• Income from discontinued business.

Each of these categories represents a different stream of income that is taxable under the heading of business income, subject to certain deductions and allowance of depreciation and business expenses. They cover a range of activities and circumstances, reflecting the diverse ways in which a business can generate income.

Capital gains

Capital gains refer to profits and gains arising from the transfer of capital assets. Capital assets include property held by an individual (whether or not connected to the business or profession) but do not include stock in trade (that are not stocks and shares), consumable stores or raw materials held for the purpose of business or profession, or personal effects held exclusively for personal use.

Transfer includes sale, exchange, or relinquishment of the assets or extinguishment of right in an asset. However, it does not include transfer under gift, bequest, will, or an irrecoverable trust, distribution of assets by a company to shareholders on liquidation, distribution of capital assets on the dissolution of a firm or other association of persons, or on partition of a Hindu Undivided Family (HUF).

Capital gains are computed after deducting the cost of acquisition of the asset and expenses related to the transfer from the higher of full value of consideration or FMV. Capital gains from the transfer of assets after not more than five years from the date of acquisition will be chargeable to tax at normal rates applicable to an individual. However, in case of transfer of listed shares, the tax rate of 15% will be applicable. Capital gains from the transfer of assets after five years from the date of acquisition will be chargeable at the rate of 15% or the amount of tax deducted at the time of registration under section 125 of the Income-tax Act, 2023 (the Act) (which would be treated as minimum tax under section 163 of the Act), whichever is higher.

Dividend income

Any dividend paid by a Bangladeshi company is deemed to accrue or arise in Bangladesh and is hence liable to tax in Bangladesh.

WHT on dividend is 10% in case of a resident individual (15% in case recipient does not have an e-TIN) and 30% in case of a non-resident individual. Dividend is taxable at normal slab rates in the hands of an individual taxpayer. The WHT deducted on dividend is considered as minimum tax in the hands of the recipient and is not eligible for a refund.

Interest income

Interest income is taxable in Bangladesh. Certain specified interest income is exempt from income tax.

Rental income

Any income earned from the renting of any property after deducting allowable expenses is taxable as ‘income from rent’. Property means house property, land, furniture, fixtures, factory buildings, business premises, machinery, personal vehicles, and any other tangible capital asset that can be rented.

House property refers to any house, building, or structure, which includes furniture, fixtures, and fittings that are an integral part of the house and the land upon which the house is situated. Buildings used solely as warehouses or factory buildings where rent is part of the payment for plant and machinery are not considered house property.

Allowable expenses from rental income include the following:

• Costs for insuring the property against loss or damage.
• Interest or profit paid on loans from banks or financial institutions for buying, constructing, renovating, or reconstructing the property.
• Any taxes, fees, or annual charges on the property, as long as they are not capital charges.
• Pre-rental period interest on loans for the property’s acquisition, construction, repair, or reconstruction before it was rented out.
• Standard deduction related to rent collection, utilities (water, sewerage, electricity, gas), service charges, repair, and maintenance, as well as other basic service charges:
  • House property used for commercial purposes: 30%.
  • House property used for non-commercial purposes: 25%.

When a house property is rented out only partially, the expenses related to the property can be claimed as deductions in proportion to the rental income received.

If a house property is rented out for only a portion of the income year, the expenses that can be claimed as deductions should be proportionate to the duration for which the property was rented.

Other income

‘Income from other sources’ generally encompasses various types of earnings, which include the following:

• Income earned through royalties, license fees, fees for technical know-how, and by allowing the rights to use any intangible property.
• Cash subsidy provided by the government.
• Income earned from the transfer of any property, other than mineral deposit and hydrocarbons and goodwill, created or originated naturally or by personal effort.
• Any gift, donation, or presentation.
• Winnings in lottery, word games, card games, online games, or games of any similar nature.
• Income from any source not classified under any other heading.

However, there are some special areas where any amount can be considered as income from other sources due to different reasons, including non-compliance with certain legal provisions, making transactions outside a banking channel, etc.

When calculating income from other sources for tax purposes, only certain types of expenses are permitted as deductions. These expenses must not be capital in nature (i.e. long-term investments) or personal expenses; they must be incurred solely for the purpose of generating the income under consideration. Additionally, when such expenses are considered for deduction, their reasonableness is taken into account to determine if they are appropriate and not excessive.

Any money received from winnings in lottery, word games, card games, online games, or games of any similar nature will be taxed at the rate of 25% on such receipts, and no deduction is allowed.

Exempt income

Certain income is eligible to be claimed as exempt from taxable income. The exemption can be based on income or investment. Some of them are detailed below.

Income-source based:

• Agricultural income, subject to certain conditions.
• Amounts received for medical expenses related to heart, kidney, eye, liver, and cancer operations of any employee who is not a shareholder director.
• Conveyance allowance, travel allowance, and daily allowance received and expended wholly and solely for the performance of office duties.
• Reimbursements of an employee by an employer if it was:
  • incurred wholly and necessarily for the performance of duties, and
  • convenient for the employer to incur such expenditure through the said employee.
• Income not exceeding BDT 25 million received by the taxpayer from the Government Gratuity Fund and approved Gratuity Fund.
• Income distributed among the beneficiaries of any recognised provident fund, approved superannuation fund, pension fund, and approved provident fund that is chargeable to the said fund.

Investment based:

• Income arising from investment in certain mutual funds, investment in government securities, etc.