6 Tax Exempted Income elements for Service Holders In Bangladesh

Hi guys there are total 8 sources I have discussed 6 of them are tax exempted and 2 of them are confusing and we often confuse them with two of 6 exempted income elements.

1. Medical Allowance
2. House Rent allowance
3. Rent free accommodation ( Not Exempted )
4. Transportation/ Conveyance Allowance
5. Conveyance facility and cash ( Not Exempted )
6. Dividend
7. Income from Recognized Provident Fund
8. All income except certain income for Government employee

To check the rate we must look into Income Tax Rules or Income Tax Manual 2. To know the latest update we must check financial act and SROs and sixth schedule part A.
To understand the updates of rules: Focus if the sentence of Income Tax Manual contain excess words. If the sentence contains excess, this means the amount exceed x taka (Given money-exempted money) will be recorded. If the sentence doesn't contain excess, this means the amount x will be recorded. If you don't understand look at the example of 2nd point.

Math help:

1. Medical Allowance:

(rule 33I) For disable persons or suffering from critical diseases (such as Cancer, Heart Block etc) limit range is up to 10,00,000. (This is inapplicable for directors and top level management)

For normal people the tax exemption rate is the less of 120000 and 10% of basic.

2. House Rent Allowance in cash:

(rule 33a) Less of 50% of basic and 300000 taka annually will be exempted amount.

For example: 

[ This is for those who wants to learn from the source: In rules it is said that Where the house rent allowance is receivable by the employee in cash, the amount, if any by which the house rent allowance so receivable exceeds 50 percent of the basic salary or taka 300000 annually.]
Actual Given allowance 310000. Money exceed the exempted amount is ( Given money-exempted money) 310000-300000=10000. 10,000 will be recorded in Tax Return.         

3. Rent Free Accommodation/Accommodation Facility: (Not Exempted)

(rule 33b) Less of Rental Value and 25% of basic annually will be recorded. If the assessee pays a certain amount of money it will be deducted from recorded facility.

For Example:

 A company give rent free accommodation facility to Mr X. His annual income is 400000 and basic is 300000 and the rental value of the apartment is 200000 annually but his company pays for it. His company charge him 20000 Taka Annually for rent free accommodation.

Solution:

His basic is 300000 annually. 25% of his basic is 75000 Taka. His company charge him 20000 Taka. So it will be excluded from 75000 Taka. So, his rent free accommodation will be 55000 recorded as an income.   

4. Conveyance allowance:

(rule 33a) exempted amount 30000 annually. 

For Example:

Conveyance allowance was 35000. Exempted amount is always 30000. So, the amount conveyance allowance to be recorded as an income is 35000-30000 = 5000

5. Conveyance facilities and cash: (Not exempted)

(rule 33d,33e) These rules are not in action when conveyance facilities are used for private use even if it is used partially. Conveyance allowance in cash will be recorded in his income when conveyance facility is given.

For conveyance facility only: Higher of 60000 or 5% of basic annually will be recorded,

For additional conveyance allowance in cash: Higher of 60000 or 5% of basic annually + cash allowance. 

6. Dividend:

(Sixth Schedule part A)

TDS will be applicable on total dividend, but will eventually return to the receiver. 25000 is tax exempted amount. 

For Example:

Dividend for individual received was 28800 TK. 

Actual Amount: 28800/90*100 = 32000

Exempted amount = 32000-25000 = 7000

7. Income From Recognized Provident fund:

Less of accumulated balance of an employee in a recognised provident fund, in so far as it does not exceed one-third of the salary of the employee for the year concerned and 14.5% of total fund. I couldn't find this rate anywhere on internet but I found this rate in the 12th edition of Bangladesh Income Tax by Dr Nikhil Chandra Shil. 1st amount was mentioned in sixth schedule part A para 25.

For Example:

Interest is 2500. Rate is 10%. So, total fund = 2500/10*100=25000, Basic Salary is 240000.

Solution:

Exempted amount = either [ 240000/3 = 80000 ] or [ 2500/10*14.5 = 3625 ]. Lower one will be the exempted amount. So, the money was exempted 2500-3625=0. So, nothing will be included in tax return.  

At the time of withdrawal 50000 taka will be tax exempted. Sixth Schedule Part A para 21.

8. Taxable Income of Government Employees:

For Prime Minister, Speaker, Ministers, advisers with minister rank, Deputy speaker = Only Basic

For Judges of high court, and appellate division of supreme court = Only Basic

For other Government employees = Only basic, festive allowance and bonus.

Other Non-Assessable Income under The Head of Salary: (Sixth Schedule, Part A)

For All Bangladeshi Employees:

1. Any income from Provident fund established under the provident act 1925 or workers participation fund. ( Para 4 )
2. Any allowance for official purposes.
3. Pension (Para 8)
4. Gratuity up to 2.5 crore ( Para 20)
5. Any receipt from government, recognized provident fund, approved superannuation fund and a worker's participation fund not exceeding 50000 TK. (Para 21)
6. Any amount received by employee of local authority, government organization, autonomous or semi-autonomous body at the time of retirement. (Para 26)
7. Exempted elements mentioned above.

By Foreign Employees:

1. Salary of Ambassador, High commissioner, Envoy, Minister, Charge d'affairs, Commissioner, Counselor, Secretary adviser of an embassy or high commission ( Para 7)
2. Salary of Foreign technician employed by a Bangladeshi Firms. (Para 15)
3. Tax Liability of an employer computed on the salary of a foreign technician as per para 15. ( Para 16)
4. Salary of a foreign technician and tax paid by the employer on his salary who works in a NBR approved Consultancy or Engineering firm.

This information is presented by not a professional. So, before making the final move, please contact a professional.

End.