BASICS OF TAXATION

(I ncome Tax Ordinance, 1984):

Updated till Finance Act. 2013
by Prof. Mahbubur Rahman
Of all the direct taxes, Income Tax ranks foremost. By nature and heritage, many of us
tend to be just free riders in the society. We are little emotional and sometimes
unreasonable in demanding more and more state services without the mentality to
yield our due share to the cost of the exchequer. Tax laws and personnel connected
therewith are many often thought to be inimical by the taxpayers. But its a reality that
to safeguard our existence and interest in the society, every one of us must pay tax
according to our abilities to keep the statecraft running.
Taxation is not only a major means of public finance but also it plays a crucial role in
ensuring a social and economic justice. The incidence of direct taxes Viz. Income-
Tax, gift-tax cannot be shifted on others and it has to be borne by the person on whom
it is levied. My efforts today will be to enlighten the participants of this course on the
different aspects of the direct taxes. We shall confine ourselves to the contents only
without going into the details of relevant sections of the laws which can be had from
the IT. Ordinance, 1984 as amended from time to time through annual Finance Act.
I ncome-Tax:
Income Tax is a dynamic but mostly a practical subject. It is indeed a difficult task to
acquire within this short time at least a working knowledge of income tax especially
when the laws of it originate frommore than one source, such as:
1. Income-Tax Ordinance, 1984 as amended from time to time through annual
Finance Act - Part I
2. Income-Tax manual - Part II
3. Supplementary Regulatory Order (SRO), Circulars, Notifications etc.
4. Precedents of decided Case laws.

Classification of Taxpayers: Corporate and Non-Corporate

For the purpose of socio-economic stabilization, taxpayers have been classified either
as corporate or non-corporate. Companies, banks, corporations and other statutory
bodies have been taken as corporate and the rest e.g. Individuals, firms, H.U.F, A.O.P
are designated as non-corporate.
Tax rates, residential status, tax exemptions, rebates etc. and in many other areas, the
two groups of taxpayers also differ.
Tax is levied on income. But what is income? The term income is easy to
understand but difficult to define in view of the complexities of tax laws. For our
discussion today, we shall confine it to any sort of receipts in the form of money or
moneys worth chargeable to tax under any provision of the IT.
Ordinance. Otherwise, anything that comes in except those which are excluded
by tax laws, are included in income. [Income: Any sort of receipts either in cash
or in kinds unless exempted by Law]
Sec. 2(34): Income includes-
Any income, profits or gains, from whatever source derived, chargeable to tax
under IT Ordinance; 84;
Any loss of such income, profits or gains;
The profits and gains of any business of insurance carried on by a mutual
insurance association computed in accordance with the IT Ordinance; 84:
Any sum deemed to be income, or any income arising or received or deemed to
accrue or arise or be received in Bangladesh.

New provision; 2002: Provided however, that Bonus or Bonus Shares issued/ declared
by a company shall not be included as income of the recipient shareholder.
Income may be assessable or non- assessable. Non-assessable are totally ignored
by tax laws Viz. pension income, receipts of accumulated balance from recognized
provident fund etc. as have been declared as non-assessable income by the Govt. from
time to time. Assessable income is again divided into taxable and non-taxable income.
Non-taxable income is taken into total income for taxation rate purpose but no tax is
to be paid on this part of income, rather, a proportionate rebate is allowed on this
income as is included in the total income. Non-taxable income like share income of
partnership firm, share income from Hindu Undivided Family etc. (Salary income of
Govt. servant was deemed to have been tax paid till 30.06.2010 but it has been made
taxable by Finance Act. 2011) are included in the total income of the tax payers only
to raise the income ceiling and the tax rates as and when applicable. For example, a
tax payer with an income of Tk.220,000/- would not be at all taxable (below taxable
ceiling) but it shall be taxable due to inclusion of his share income of a firm (already
taxed at firms stage), say another Tk.180,000/-. But with the inclusion of his non-
taxable income (taxed share income), the total income works out Tk.4000,000/- and
the tax as per Finance Act., 20013 is Tk.18,000/-. But he has not to pay Tk.18,000/-
rather, a proportionate rebate for this inclusion of the said non-taxable income
(18,000/4000,000) X 1,80,000/=8,100/- is to be deducted from the tax payable i.e. net
tax Tk.(18,000-8,100)=9,900 remains to be payable instead of Tk.18,000/- as
calculated above on his total income of Tk.400,000/-.
The inclusion of Non-Taxable income into the total income may give rise to higher
income ceiling with higher taxes or it may give rise to higher rates of taxes of the
existing tax payers.

Who is to pay tax? Residential Status Sec. 2(55)
Taxability of a person is determined on the basis of his residential status. Anyone
staying in the taxable territory for 182 days or more in the income year or 365 days at
a time or consecutively within 04 years immediately before the income year just
preceding the assessment year plus a minimum of 90 days in the income year, shall be
deemed to be resident. Otherwise, a non-resident.
Non-resident except a Bangladeshi non-resident has to pay tax at the maximum rate
of 25% irrespective of total income. Moreover, a Non-Resident shall not be entitled to
any sort of tax rebate like investment tax rebates etc.

Companies and other statutory bodies shall be resident if their control and
management is wholly situated in Bangladesh. HUF, firms or other Association of
Persons shall be resident in Bangladesh if its control and management is situated
wholly or partly in Bangladesh in that year.

Assessment year means the Govt. financial year just following the income year when
the assessment is to be made.

Who and when to submit return & where?
Any assessee being taxed at any time within the last 03 years and assesses having got
taxable income for the current year shall have to submit I.T. return. Admitted tax has
to be deposited along with return (Sec. 74). A person owing a building of more than
one story and with a plinth area of more than 1600 sft. Or a motor car or having an
ISD telephone connections, contesting the elections of local bodies or of the
Parliament or being a member of a club registered under VAT ACT, 1991, has also to
submit IT return (Sec.75 (1)/(75)(1A).
In the case of an individual, such returns including the returns under Universal Self
Assessment, shall be accompanied by particulars of his personal and family
expenditures as per the prescribed form IT-10BB.
Penalty for non-submission of return (Sec.124):
Any person failing to file the return within time may have to pay a penalty of 10% of
the last assessed tax but in no case it shall be lesser than Tk.1000/- plus in cases of
continuous defaults, a further sum ofTk.50/- per day till the default continues.
For assesses other than companies and statutory bodies, the last date fixed by law for
submission of return is 30th September each year. The companies, banks and other
statutory bodies like TCB, BCIC, Grameen Bank etc. have to submit their returns
within 06 months from the end of its income year or within the next 15th July,
whichever is later. Non submission of returns within due date unless extended by the
NBR or by the Dy. Commissioner of Taxes in individual cases for a maximum
periods of six months, shall entail a mandatory penalty as stated before and in
addition, a summary assessment by the Deputy Commissioner of Taxes (DCT) may
be made u/s 84 ex-parte to the best of his judgment. However, the DCT shall not
extend any time in case of a return under Universal Self Assessment u/s 82BB. The
return has to be submitted to the income tax circle concerned. The whole of the
taxable territories have been divided into Zones, Ranges and Circles. For example,
Dhaka Zones 1 to 8, Chittagong Zones 1 to 3, Rajshahi & Khulna Zones etc. Zones
and Ranges are headed by Commissioners and Addl./Joint commissioners and the
Circles by Deputy/ Asst. Commissioners on the basis of its revenue importance. An
assessee has to file the return to the concerned income tax circle under whose
jurisdiction the assessee falls as per order of the Tax Authorities.
Total I ncome and its Sources (Sec.43)
Any income subjected to tax must fall within a definite source as defined U/S 20 of IT
Ordinance, 84. These are income from salaries, profession or vocation, interest on
securities, house property income, agriculture, capital gains and income from other
sources. Except the last two heads, all others are more or less self-explanatory. An
income from other sources is one, which cannot be attributed to any of the defined
sources as above. For example, income from gambling, lotteries, dividends, royalties
or any income deemed to be as such for reasons of investments and expenses not
being adequately explained. Trading Liabilities and personal loans/gifts over
Tk.500,000 unless received through a crossed cheque or bank transfer, shall be
deemed to be income of the assessee on the 4th year if it is not paid off within three
years from the end of the income year when it was accrued/received (Sec.19(21).
Interest received from Fixed Deposits in Postal Savings Banks or any other scheduled
Banks, Dividend income are also specified as income from other sources u/s 33 and
included in the total income.
Sec. 43(2):
All non-taxable income shall be included in total income but not the non-assessable
income. Non-assessable income is totally ignored for tax purposes.
Sec. 43(4):
Income of wife or minor children shall have to be included in total income of the
husband or father unless it can be reasonably explained. The only exception is in the
case of wife or minor child when such income arises from assets transferred by way of
registered gift by the husband or father.
Capital Gains (Sec. 31):
Capital gains arise as a result of disposal of capital assets except personal effects like
wearing apparel, jewellery, furniture, equipments and vehicles. It also does not
include gains from agricultural lands beyond five miles of the radius of an urban area,
call it municipality, city corporation or otherwise. The law provides that if the sale
value shown falls short of the fair market value by more than 15%, the DCT may,
with prior approval of his joint commissioner, estimate the fair market value. If this
difference goes further to more than 25%, the Govt. may opt to buy it as per the
provisions of Income Tax Ordinance 1984. All these are there just to check the gross
under valuation of properties so sold off.
The rates of capital gains tax have also been simplified. Capital gains arising out of
disposal of assets within five years of acquisition shall fetch tax at normal rate along
with other income. If the gains as such, accrue after five years the tax payable by an
individual shall be the normal tax along with other income or the normal tax on other
income if there be any, plus 15% on the portion of capital gains, whichever is
beneficial for the tax payer. A company shall pay tax on capital gains @ 15%. It has
been also provided that tax deducted at source @ 3% in city corporation areas, 2% in
municipal areas and 1% else where on the Deed Value at the time of registration of
the sale deed. It is further provided that the capital gain arising from sale of lands
where from tax at has been realized by the sub-register at the aforesaid rates shall not
be further taxed because, taxes so deducted shall be deemed to be the final discharge
of tax liability under this head u/s 82C except where the same capital gains have been
reinvested under sub section 10 of section 32 in the equity of a new industry.
a. If the sale proceeds of the scrapped assets fall below the written down value,
the deficiency shall be deemed to be obsolescence allowance u/s 19(16).

** The excess of sale proceeds over the written down value, subject to deduction of a
maximum depreciation amount allowed so far, shall be taken to be the capital gain u/s
31 and the deducted amount of depreciation shall be deemed to be a business income
u/s 28.
** Capital gains arising to an individual from the transfer of Govt. securities and stock
and shares of public limited companies listed with the stock exchanges of Bangladesh
are exempted from tax. This exemption shall also be available to a Non-resident if
similar benefit is available for him in his home country. Sec.32(7) further specifies
that Capital gains arising from transfer of shares and stocks to a company shall be
however, taxed at a concessional rate of 10% from assessment (F.A. 2010).


Total I ncome:
Tax is levied on the basis of total income of an assessee i.e. taxpayer. For individuals,
Firms etc., the minimum ceiling for taxable limit has been now fixed at Tk.200,000/-
from the asst. year of 2012-2013.For companies, banks and other statutory bodies,
there is nothing like minimum tax ceiling, which means otherwise that these bodies
will have to pay tax for any amount of income. The rate is also different as is
prescribed by annual Finance Act. Taxability of a resident shall be determined on the
basis of his total world income; and its the local income only for a non-resident
taxpayer. From 2008-2009 to 2010-2011, the minimum ceiling for tax exemptions for
a non-corporate tax payers was Tk. 1,65,000/- and for Ladies and senior persons aged
65 years and above, it was Tk.1, 80,000/-. But for 2012-2013 assessment year, the two
groups as above shall enjoy the minimum tax exemption ceiling at Tk.200,000 &
Tk.225,000/- respectively. A retarded person shall enjoy tax exemption ceiling of
Tk.275,000 for 2012-2013. But from 2013-2014, the rates have been changed to
220,000, 250,000 & 300,000 for individuals, women & Sr. citizen over 65 and the
retarded person respectively. The next slabs for calculation of taxes for these tax
payers shall remain to be Tk.3,00,000/-, 4,00,000/-, 3,00,000/- and the maximum rate
of 25% as before.
Total world income means any income arising to a Resident anywhere in the world
Tax rates have been given at the end of this write up.
Assessment year is the year when the assessments are made. Assessment year must
conform to a govt. financial year. It is the year just following the income year.
Income year is the year when the income is earned. Different tax payers may have
different income year but each tax payer must fall within a particular assessment year.
Income year is otherwise the year just preceding the assessment year.
Assessment:
Assessment means the computation of total income and the determination of tax
liability of a taxpayer. The assessment order shall be framed within 30days from
the end of the hearing and the DCT shall communicate to the assessee the same
order within next 30days.
Section 81: Provisional assessment may be made by the Dy. Commissioner of Taxes
on the basis of return submitted or where no return has been submitted, on the basis of
the latest assessed income. Regular assessment in such cases shall have to be made
subsequently.
Section 82: Where the Dy. Commissioner of Taxes has the reason to believe that the
return submitted is correct and complete, he may assess and accept the total income
shown as per return.
Section 82B: Assessment as per IT return if the Board so directs the Deputy
Commissioner of Taxes to do so
Section 82BB: Universal Self Assessment - if the return submitted by an assessee
appears to be correct and complete, the DCT shall accept it as it is. And the receipt
given as acknowledgement to the submission of the said return shall be deemed
to be as an assessment order of the DCT. However, any such return is also
subjected to audit only on the prior approval of the NBR.
Section 83: Assessments after hearing of cases: notices are issued, compliance is
asked for, accounts and evidences are verified and the assessments are finally made
subject to other norms and procedures (Normal Assessment).

Sec. 84: Best judgment assessment: For non-submission of returns or for non-
compliance of notices after the assessment proceedings began, the DCT shall
complete the assessment to the best of his judgment and determine the total income
and tax payable.
If the best judgment assessment of the DCT lacks of proper evaluation of legal and
factual aspects in the opinion of the Board, the actions of the DCT shall be construed
as misconduct. [Sec. 84(2)]
Sec.30: No expenses shall be allowed u/s29 from income earned through Business or
profession unless certain tax regulations are obliged by the tax payer i.e. non
deductions of taxes & VAT at source (TDS) from specified heads. For example; TDS
from Salaries, House Rents, Imports, Payment to Contractors and on Supplies of
goods and services etc.
Sec.30A: The DCT cannot disallow any claim of the assessee without ascribing
specific reasons for any such disallowance of any item of expenditure. (Finance Act,
2002.)
Sec.93: For concealment of income/underassessment or for undue relief having been
enjoyed in the past, the Deputy Commissioner of Taxes, subject to certain conditions
and restrictions may re-open the case within 06 years (FA 2012) from the end of year
of completion of the assessment and determine the income of that year and may
further start penal proceedings as per law leading to imprisonments or fine or the both.
Sec.94: Assessments shall be made within 02 years from the end of the assessment
year in which the income was first assessable (in case of Audit/re-opened cases)
otherwise, after the expiry of 06 months from the end of the assessment year in which
the return is submitted (normal assessment). However, in a case where transfer pricing
is involved, the assessment shall be made within 03years from the end of the
concerned assessment year.

Sec. 94(4): If the DCT fails to give effects to appellate decision within 30 days, it
shall be construed as misconduct.

Sec. 123 to 131:
Sec. 164 to 171:
These sections deal with the penalties and prosecutions for various offences and
irregularities committed by the taxpayers in respect of their income tax assessments.
The punishment ranges between monetary penalties to 05 years imprisonment but in
no case, the minimum imprisonment shall be less than 03 months.

Appeals by aggrieved tax payers:
An aggrieved assessee, other than a company, may prefer an appeal to the appellate
Joint/Addl. Commissioner of Taxes within 45 days from the date of receipt of the
impugned assessment order. (Sec.153)
An appeal fee of Tk.200 (Finance Ordinance, 2007) to be deposited to govt. a/c under
code no.1-1143-0010-1876 and the admitted liability U/S 74 shall have to be paid
before filing the appeal. A company will file the appeal direct to the Commissioner of
Appeals with similar conditions. Sec. 153(1A)

The aforesaid appeals shall be deemed to have been accepted unless an order is passed
by the appellate authorities within 150 days from the end of the month in which the
appeal was filed [sec.156(6)]
Sec. 121A: Revisional powers of the Commissioner
This section was deleted by Finance Ordinance, 2007, but again reintroduced by
Finance Act. 2009. The Commissioner may call for any case record wherein the order
has been passed by any officer subordinate to him and may pass an order as he deems
fit. On the other hand, the tax payer may also file a revision petition to the
Commissioner of Taxes within 60 days from the date of receipt of the impugned order
along with a fee of Tk.200/-. The undisputed tax under sec. 74 has also to be paid
before filing the petition.
The aforesaid review petition shall be deemed to have been accepted unless an order
is passed by the Commissioner within 60 days from the date of filing the review
petition. This revision petition is subject to the condition that the applicant has to
forgo the right to further appeals to Appellate Joint/Addl. Commissioner of taxes or
the Commissioner of taxes (Appeals) or to the Taxes Appellate Tribunal as stated
earlier.

Taxes Appellate Tribunal: (Sec.158)
Taxes Appellate Tribunal shall be constituted by members being recruited from
amongst retired members, NBR, retired Commissioners of Taxes, existing
Commissioners of Taxes, Chartered Accountants & ICMAs with at least 08 years
practice, retired District and session Judge and practicing Tax Lawyers of enormous
experience. Subject to norms, procedures and limitations, an assessee can appeal to
Tribunal within 60 days and on payment of an appeal fee of Tk.1000/- to be deposited
to govt. a/c against the orders of the Appellate Commissioners/Additional
commissioners/Joint commissioners of taxes. The appeal shall be deemed to have
been accepted unless any order is passed on such appeal by the Tribunal within 06
months from the end of the month in which the appeal was filed.
Provided however, that no appeal shall lie to the Tribunal unless 10% of the amount
representing the difference between the tax as determined on the basis of the order in
the 1st appeal (revised assessment u/s156) and the tax payable u/s74 as per return is
paid. It is further provided that the Commissioner of Taxes may however, waive such
payment of taxes u/s 158(2) in a manner as he deems fit on cogent grounds (F. Act.
2011).
Reference to the Honble Supreme Court. (Sec.160, 162)
Such references only on questions of law may be made within 90 days and on
payment of a fee Tk.2,000/-
Provided however that no reference under sub sec. 01 shall lie against the order of the
Taxes Appellate Tribunal unless the following taxes have been paid.
25% of the difference between taxes payable under sec. 74 and the taxes due
after the disposal of the case by the Tribunal (taxes u/s. 159) when such taxes
does not exceed Tk.10,00,000/-,
50% of the difference between taxes payable under sec. 74 and the taxes due
after the disposal of the case by the Tribunal when such taxes exceeds
Tk.10,00,000/-

Conclusion:
Tax laws are highly cumbersome and full of juggleriess of repetitions and renewals,
which have made it difficult for a commoner to understand. A BCS (Taxation) Cadre
officer has to undergo 02 years probation before being posted to the charge of
assessments. Therefore, I have no reason to be very much enthusiastic as to the sort of
ongoing knowledge the participants may gather from this sort of short lived course so
hopefully organized by the management of this great institute.

Rates of Taxes as per Finance Act, 2009.
I ndividual / Firm / Hindu Undivided Family / Association of Person (AOP)
First Tk.165,000 -----------------------------------Nil
Next Tk.275,000 ---------------------------------@ 10%
Next Tk.325,000-----------------------------------@ 15%
Next Tk.375,000-----------------------------------@ 20%
On the balance ----------------------------------@ 25%
Provided however, that a lady tax payer or a Senior person
over 65 shall enjoy the initial exemption of Tk.180,000/-
Provided further that an assessee who paid taxes in the
maximum rate in the last year shall get a rebate @ 10% on
the additional tax attributable to any excess income shown at
more than 10% this year over last year.

Rates of Taxes as per Finance Act, 2011.
I ndividual / Firm / Hindu Undivided Family / Association of Person (AOP)
First Tk.180,000 ----------------------------------------Nil
Next Tk.300,000 -----------------------------------@ 10%
Next Tk.400,000-------------------------------------@ 15%
Next Tk.3000,000------------------------------------@ 20%
On the balance ------------------------------------@ 25%
Rates of Taxes as per Finance Act, 2012.
I ndividual / Firm / Hindu Undivided Family / Association of Person (AOP)
First Tk.200,000 ----------------------------------------Nil
Next Tk.300,000 -----------------------------------@ 10%
Next Tk.400,000-------------------------------------@ 15%
Next Tk.3000,000------------------------------------@ 20%
On the balance ------------------------------------@ 25%
Rates of Taxes as per Finance Act, 2013.
I ndividual / Firm / Hindu Undivided Family / Association of Person (AOP)
First Tk.220,000 ----------------------------------------Nil
Next Tk.300,000 -----------------------------------@ 10%
Next Tk.400,000-------------------------------------@ 15%
Next Tk.3000,000------------------------------------@ 20%
On the balance ------------------------------------@ 25%

Provided however, that a lady tax payer or a Senior person
of 65 and above shall enjoy the initial exemption of
Tk.250,000 and a retarded person shall enjoy the minimum
ceiling of Tk.300,00. Other slabs remain as usual.

Non-residents except a Bangladeshi Non-resident, (NRB) shall be charged to tax at
the maximum rate of 25%. The NRB shall be taxed at normal rates as applicable to a
resident of Bangladesh.
But in no case, tax shall be lesser than Tk.3,000 in any city
corporation areas, Tk.2,000 in municipalities and Tk.1,000
in other places.

Tax Rates for Corporate Tax payers as per Finance
Ordinance, 2011

Public Ltd. Companies listed with the Stock
Exchange 27.5%
Private Ltd.
Companies 37.5%
Banks, Insurance Companies and other Financial Institutions 42.5%
Mobile Phone Operators Companies 45%
Finance Act. 2012: There was no change in the tax rates as above.
Finance Act. 2013: Corporate tax rates also remain to be the same as above.
But if any Mobile Company offers at least 5% of its shares in the Stock Market as
IPOs, in that case, tax rate shall be @40% Dividend income shall be taxed @ 20%
(for the corporate assesses) other conditions remain unaltered as last year.
As per Finance Act. 2011, every company irrespective of shown Profit or Loss, shall
pay a minimum tax of 0.50% of the amount representing such companys gross
receipts from all the sources for that year.
An investment tax rebate @15% on 30% of the total income excluding the employers
contribution to Provident Fund (Part B of First Schedule) or Tk.150,00,000/-
whichever is less, shall be enjoyed by an individual taxpayer. But a corporate Tax
Payer is not eligible for any such benefit of investment tax rebate.
Wealth Tax had been abolished (Finance, Act, 1999). But again a surcharge has been
introduced @10% of the tax payable by a person whose total wealth as per IT-10B
exceeds Tk. 02 Crore and @15% of the tax payable if the said total wealth exceeds
Tk.10 Crore for any income year (F.A.2013).

The income earned abroad by a Bangladeshi citizen and the same being remitted
through proper banking channel is totally tax exempted vide SRO. 216-Laws/Income
tax/2004 dated 13.7.2004.
Public Ltd. Companies listed with the Stock Exchange will enjoy a rebate of 10%
from tax payable if it declares dividend of 20% or more in any year.
Provided further that if a Public Ltd. Co. does not declare a minimum of 10%
dividend, it will pay tax @ 37.5%.
Public Ltd. Company declaring dividend of less than 15% of the paid up
capital in any year shall fetch an additional tax of 5% on the reserve so
made with undistributed profit of the year.

Corporate rates of income tax for ready-made garments industries has
been reduced from 30% to 10% by Finance Act, 2003.
Tax rate for textile industries: @ 20%.

Assesses other than the above i.e. individuals firms etc. used to get an initial
exemption of Tk.40,000 (non-assessable) from dividends and the balance was
to be taxed at normal rate applicable to that assessee. This ceiling of exemption
had been raised to Tk.100,000 by Finance Act, 2001. And again reduced to
Tk.25,000 by Finance Act, 2002. Again total exemptions of dividend has been
allowed by Finance Act, 2003. But in the F.A.2012, an exemption of Tk.5,000
from dividend was again introduced and this exemption of Tk.5,000 has again
been raised to Tk.10,000 by F.A.2013 i.e. effective from asst. year: 2013-2014.
From now onward, there will be an exemption of Tk.10,000 and the balance if
there be any shall be added to total income. Dividend income shall be taxed @
20% for Corporate tax payers (Companies etc.) and an individual shall be
taxed at normal rates as applicable to him/her.
50% of income earned through export business shall be non-assessable.
Income from Software development is exempted up to 30 June, 2014

Taxability of interests on saving Certificates

Interests credited/paid to the holders of Saving Certificates of any category other than
Wage Earners Development Bond, USD premium bond etc. were subjected to 05%
deduction of tax at source till 31.12.2003 and the taxes so deducted were considered
to be the final discharge of tax liability u/s 82c(4).
But Certificates purchased after 31.12.2003 were immuned from such deductions of
taxes at source till 30.06.2007. The interests earned there from were as usual added to
total income and taxed accordingly.
Finance Act. 2011 had brought another amendment to sec. 52D whereby interests on
any saving instruments including Wage Earners Development Bond, USD premium
bond shall be subjected to a 5% deduction of tax at source and the provision for final
discharge of tax liability u/s 82C was also withdrawn. Even the interest from
pensioners savings certificate shall be taxed as usual with 5% tax deduction as
aforesaid. But no tax is deductable u/s 52D if the savings instruments are purchased
by an approved superannuation fund or pension fund or gratuity fund or a recognized
provident fund or a workers profit participation fund.
Henceforth, all such interests shall face tax deductions@5% for onward credit from
the tax payable.
======0=======