Income Tax

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Definition of Tax

“Taxes are compulsory payment to government without expectation of direct return in benefit to the tax payer”

According to section 2 (62) of the ITO (Income Tax Ordinance) 1984: “Tax means the income tax payable under ordinance and includes any additional tax, excess profit tax, penalty, interest, fees or other charges leviable or payable under this ordinance.”

Characteristics of Tax

i. Tax is a payment to the government by the people.
ii. Payment of taxes is non-penal and compulsory; hence refusal to pay a tax is a punishable offence. iii. An element of sacrifice is there in the payment of a tax as they pay the taxes in order to ensure public interest. iv. The aim of tax collection is to finance the government expenditure to ensure public interest & welfare. v. It is one of the prime sources of revenue for the government. vi. Tax is not any fine or penalty.

vii. Tax can only be imposed by the government of a country.

Objective of Income Tax

i. To provide social welfare.
ii. Revenue collection.
iii. Re-distribution of income.
iv. Increase in saving
v. Increase in capital investment.
vi. Economical development.

Definition of Assessee

According to section 2(7) of the ITO, 1984, the term “Assessee” includes- “Every person in respect of whom any proceeding under this ordinance has been taken for the assessment of his income of any other person in respect of which he is assessable, or of the amount of refund due to him or to such other person.” Every person who is required to file a return under section 75, section 89 or section 91.

Classification of Assessee

|On the basis of person |On the basis of Residential Status | |Individual |Resident | |Company |Non-resident :- | |Firm |Non-resident Bangladeshi | |Local Authority |Non-resident Foreign | |Artificial Judicial Person | | |Association of Persons | |

Illustration

Mr. Jalal has earned income from various sources in the income year 2012-13. Which are as following: i. Salary income earned and payable in Bangladesh Tk. 100,000. ii. Profit of Tk. 40,000 from a business in London has been brought in Bangladesh. The business has been managed & controlled from London. iii. Profit of Tk. 60,000 from a business in Singapore has not yet been bought in Bangladesh. The business has been managed & controlled wholly from Singapore. iv. Fees for professional services of Tk. 70,000 for a consultancy in Dubai have not yet been brought in Bangladesh.

Compute the amount of total income of Mr. Jalal, assuming that he is a a. Resident
b. Non-resident

|Description |Resident |Non-resident | |Income earned in Bangladesh: | | | |Salary Income |100,000 |100,000 | |Foreign Income: | | | |Profit from Business in London |40,000 |...
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