Income Tax Series 02

111 Apr, 2024

Income Tax Series 02

Discussion Matter: Income from Employment (Section: 32)

Overview:

· Aggregation of Income

· Income Chargeable to Tax

· Income not chargeable to Tax

· Valuation of Perquisite, allowance & benefits

· Provident Fund (GPF, CPF, RPF, UPF)

· Approved Gratuity Fund

· Approved Superannuation Fund

· Approved Gratuity Fund

· Non-assessable income under head “Income from Employment”

· Tax Rebate on certain Investment

· Item Included in Investment Allowance relating to Income from employment (Part 3 of 6^th Schedule)

· Taxable Income at a glance

1. Aggregation of Income

· Partner of a partnership firm or Member of AOP (Association of Person)

· Spouse or Minor Child (if spouse or child is a separate tax payer then that income not applicable for aggregation)

2. Income Chargeable to Tax

· Any financial receipt, salary or benefits received or receivable

· Income earned from employee share scheme

· Untaxed arrear salary

· Any amount or benefit received from past or future employer.

3. Income not chargeable to Tax

· Any amount received for medical expenses related to heart, kidney, eye, liver & cancer operations (Who is not a shareholder director)

· Conveyance, Travelling & Daily allowance

4. Valuation of Perquisite, allowance & benefits

Accommodation:

· Fully paid by employer – Annual value shall be added with income from employment

· Provided at concessional rate – Difference between annual value and actual payment by employee

Car Benefit:

· Motor car up to 2500 CC – Monthly Tk. 10,000

· Motor car over 2500 CC – Monthly Tk. 25,000

Any Other Benefits:

· Monetary value or Fair market value of perquisite

5. Provident Fund (GPF, CPF, RPF, UPF)

Statutory PF		RPF	UPF
GPF	CPF	RPF	UPF
Nothing shall be added with salary income	Government Contribution shall be added with salary income	Employer Contribution shall be added with salary income	Employees subscription shall be added with salary income
Employee Contribution shall be considered as investment allowance	Employee Contribution shall be considered as investment allowance	Both Employees subscription & Employer’s contribution shall be considered as investment allowance	N/A
When received accumulated amount: Not include with salary income	When received accumulated amount: Not include with salary income	When received accumulated amount: Nothing include with salary income	When received accumulated amount: (The total fund amount – employees contribution) shall be include with salary income

6. Approved Superannuation Fund

· Employee & Employer both are contribute to the fund

· Employer contribution is added to the income from employment

7. Approved Gratuity Fund

· Only employer contribute in this fund and it treated as income for employee with his salary income after received accumulated amount

Provided that up to 2.5 crore amount is fully tax free.

8. Non-assessable income under head “Income from Employment”

· One-third of total income or Tk. 450,000 (Whichever is lower) (6^th schedule, part-1, para-27)

· Any pension due or received from government (6^th schedule, part-1, para-4)

· Any amount received by any employee of a government body, local authority, or autonomous body or semi-autonomous body and their controlled units or institution on voluntary retirement under any scheme approved by the government for this purpose (6^th schedule, part-1, para-8)

9. Tax Rebate on certain Investment

According to section 78 of ITA 2023, resident & non-resident Bangladeshi shall be entitle to Tax rebate on certain investment as under:

Lower of:

i. 3% of A , or

ii. 15% of B, or

iii. 10 Lakh

Here,

A= Computed total income excluding tax exempted income, income subject to reduced tax, income subject to minimum tax

B= Total investment and expenditure of the tax payer as part 3 of 6^th schedule

10. Item Included in Investment Allowance relating to Income from employment (Part 3 of 6^th Schedule)

· Any sum deducted from salary to a deferred annuity or for making provisions for his wife or children (Provided that, the sum so deducted shall not exceed one-fifth of the salary) (Para-3)

· Employees Contribution to GPF (Para-4)

· Employees & Employers Contribution to RPF (Para-5)

· Ordinary annual contribution to approved superannuation fund (Para-6)

· Employees contribution to benevolent fund or group insurance scheme (Para-12)

11. Taxable Income at a glance

Description	Amount that will be added with salary income
1. Basic Salary	Full
2. Dearness Allowance	Full
3. Bonus	Full
4. Commission and fess	Full
5. Advance Salary	Full
6. Arrear Salary	Full (Provided that, it was not taxed before)
7. Leave Encashment	Full
8. Approved Pension	Nothing
9. Approved Gratuity	Up to 2.5 crore
10. Annuity	Full
11. Profit in lieu of salary	Full
12. Profit in addition to salary	Full
13. Education allowance for children	Full
14. Employer’s Contribution to RPF	Full
15. Employer’s contribution to employees life insurance policy	Full
16. Entertainment Allowance	Full
17. Medical Allowance	Full
18. Travelling Allowance	Unspent Amount
19. Special Amount	Nothing (If spent it for official purpose)
20. House Rent allowance	Full
21. Rent free accommodation	Annual Value
22. Accommodation at concessional rate	Annual value – paid by employee
23. Conveyance Allowance	Full
24. Car Facility	Up to 2500 CC – Monthly Tk. 10,000 Above 2500 CC – Monthly Tk. 25,000
25. Free tea, coffee, & light beverage to office premises	Nothing
26. Free dress, telephone, power, gas, water etc.	Full
27. Servant Allowance	Full
28. Compensation	Full
29. Allowance received as head of department or charge allowance	Nothing (If spent it for official purpose)
30. Overtime	Full
31. Residence telephone bill, utility bill, club bill reimbursement	Full

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