Income and its Classification

Definition of Income
“Income” includes-
a) any income, profits or gains, from whatever source derived, chargeable
to tax under any provision of this Ordinance under any head specified
in section 20 (i.e. salaries, interest on securities, income from house
property, agricultural income, income from business or profession,
capital gains and income from other sources);
b) any loss of such income, profits or gains;
c) the profits and gains of any business of insurance carried on by a
mutual insurance association computed in accordance with paragraph 8
of the Fourth Schedule;
d) any sum deemed to be income, or any income accruing or arising or
received, or deemed to accrue or arise or be received in Bangladesh
under any provision of this Ordinance.

- section 2(34) of the ITO

Characteristics of Income
Total Income
Total income of a resident include:
1. Income received or deemed to be received in
Bangladesh
2. Income accrues or arises or deemed to accrue or arise
in Bangladesh
3. Income accrues or arises outside Bangladesh
Total World Income
Relevant for a non resident only
Income accrues or arises outside Bangladesh is to be
added with the total income of a non-resident.
Classification of Income – on the
basis of assessment
 Non-assessable income:
 Those income which are not included in the computation of total
income of an assessee. For example, income from interest on
Deposit Pension Scheme.
Assessable income:
 Assessable incomes are those incomes, which are included in the
determination of the total income of an assessee. For example,
Receipt of Tk. 20,000 as bonus is assessable and hence included
under total income. The total of assessable incomes from various
sources is known as total income of an assessee.
Classification of Income – on the
basis of assessment(Cotd.)
Tax-free income:
Tax-free incomes are those incomes, which are included in the
determination of the total income of an assessee for computing total income
and applicable tax rates. However, tax rebate is allowed on average rate. For
example, Income from partnership firm, income from HUF etc.

Tax credit income:

Those incomes which are eligible for investment allowance for tax rebate. As
per section 44(2), tax rebate is allowed of an amount equal to 10% of the
sums eligible for tax rebate. However as per section 44(3), maximum amount
eligible for tax rebate would be restricted to the lower of 20% of the total
income excluding employer’s contribution to RPF and interest on the
accumulated balance of RPF or Tk. 1,00,00,000.

Tax payable income:

This is that part of total income for which the taxpayer actually pays tax.
Effects of classification of income on
assessment
Classification of income Effect on Total Income Effect on tax liability / tax rate
Non Assessable Income Not included decreases
Assessable income Included Increase
Tax-free Income Included which Increase the tax liability & allows
increase total income rebate at an average rate
Tax credit income Increases total income Decrease tax burden through
rebate.
Tax payable income included Actual tax liability depends on it
Investment Allowance as per
Part B, Sixth Schedule
 As per section 44(2)(b), a Resident and Non Resident Bangladeshi
assessee will get tax rebate of an amount equal to 10% of the sums
specified in Part B of the Sixth Schedule. However, as per section
44(3), maximum amount eligible for such rebate would be
restricted to the lower of the following:
 20% of the total income excluding employer’s contribution to
RPF and interest on the accumulated balance of RPF, or
 Tk. 1,00,00,000
Investment Allowance as per Part B,
Sixth Schedule
1. Life Insurance Premium Paid [Maximum 10% of Policy Value].
2. Life Insurance Premium Paid by a Hindu Undivided Family [Any
Sum paid in Bangladesh].
3. Deduction from the salary of Government employee for deferred
annuity [Maximum one-fifth of the salary].
4. Contribution to Provident Funds [Any contribution by an assessee
to any provident fund to which the Provident Fund Act, 1925
applies].
5. Contribution to a Recognized Provident Fund [on the contribution
made both by the assessee and the employer].
6. Contribution to Superannuation Fund[Any Sum]
7. Investment in Savings Certificate. [Any Sum]
8. Contribution to Deposit Pension Scheme (DPS)[Any sum not
exceeding Tk. 60,000]
Investment Allowance as per Part B,
Sixth Schedule(CONT.)
9. Donation to a Charitable Hospital [Any sum paid as donation to
a charitable hospital established outside the city corporation,
provided the donation is made after one year of establishment of
the hospital].
10. Donation to Organizations set up for the welfare of retarded
people.
11. Donation to Zakat Fund.
12. Contribution to Benevolent Fund and Group Insurance Scheme.
13. Contribution to Aga Khan Development Network.
14. Contribution to Philanthropic or Educational Institution
[approved].
15. Investment in Computer / Laptop [Para – 23]: Any sum invested
in the purchase of one computer (Upto Tk. 50,000) or one laptop
(Upto Tk. 1,00,000) by an individual assessee.
Investment Allowance as per Part B,
Sixth Schedule(CONT.)
16. Donation to national level institution set up in
memory of the liberation war
17. Donation to national level institution set up in
memory of Father of the Nation
18. Donation to Prime Minister’s Higher Education
Fund
19. Investment in shares through IPO by an individual
20. Investment in Govt. Treasury Bond
Investment Allowance as per Part B,
Sixth Schedule(CONT.)
21. Contribution to President’s Relief Fund.
22. Contribution to Prime Minister’s Relief Fund.
23. Contribution to Ahsania Mission Cancer Hospital.
24. Contribution to Sylhet Diabetic Society, Islamia Eye
Hospital and M. A. Ispahani Institute of
Ophthalmology, Kidney Foundation; and National
Heart Foundation of Bangladesh [SRO 109/IT/2006
dated 07.05.2006]
Investment Allowance as per Part B,
Sixth Schedule(CONT.)
25. Contribution to Child Health Foundation Hospital; Child
Hospital, Jessore; Hospital for Sick Children, Sathkhira (Run by
Child Health Foundation, Bangladesh); Digonto Memorial
Cancer Hospital, Dhaka; The ENT & Head-Neck Cancer
Foundation of Bangladesh, Dhaka; and National Development
Foundation for Disables’, Dhaka [SRO 316-AIN/2008]
26. Contribution to Jatir Janok Bangabondhu Sheikh Mujibur
Rahman Memorial Trust, Dhaka; Rafatullah Community
Hospital (RCH), Thengamara, Bogra; and Salvation for the
Deserving (SFD), Manikgonj [SRO 32-AIN/2009 dated
09.03.2009]
27. Contribution to Asiatic Society of Bangladesh, Ramna, Dhaka
[SRO 32-AIN/2009 dated 09.03.2009]