Tax on land sale in Bangladesh – Income earned from the same of land is the final tax settlement under Income Tax Act 2023. We will discuss the details of Tax on land sale in Bangladesh here.
What is Final Tax Settlement?
Final tax is a tax that is deducted/ collected directly from a person’s income at the source, such as when they receive interest on government securities (Sanchaypatra) or sell land. The individual who receives the income does not need to make any additional tax payments when they file their income tax return. In other words, the tax burden on the receipt is limited to the tax deducted/ collected. This is why it is called “final tax.”
To understand final tax, it is important to understand the concept of Tax Deduction at Source (TDS) or Tax Collection at Source (TCS). TDS/ TCS is a system in which a specified percentage of tax is deducted or collected from payments made to individuals.
Scope of Final Tax
Final tax only applies to certain types of income. In Bangladesh, for individual taxpayers, final tax only applies to below types of income:
-
- Interest on Bangladesh Sanchayapatra (government securities)
- Sale of land
- Compensation received from the Govt.
Is Final Tax a New Concept in Bangladesh?
The concept of final tax is not a recent introduction in Bangladesh. It was previously incorporated in the Income Tax Ordinance of 1984. However, in the latest Income Tax Law, i.e. under the Income Tax Act 2023, there initially existed no provision for final tax. Subsequently, the National Board of Revenue (NBR) addressed this by issuing Statutory Regulatory Orders (SROs) on the matter. The following provides a comparative analysis of final tax under the Income Tax Ordinance of 1984 and the Income Tax Act of 2023.
Comparison of Final Tax under the Income Tax Ordinance of 1984 and the Income Tax Act of 2023
The following provides a comparative analysis of final tax under the Income Tax Ordinance of 1984 and the Income Tax Act of 2023.
| SL | Under Income Tax Ordinance 1984 | SL | Under Income Tax Act 2023 |
| 1 | Interest on Bangladesh Sanchayapatra | 1 | Interest on Bangladesh Sanchayapatra |
| 2 | Amount of Export cash subsidy | 2 | Amount of Export cash subsidy |
| 3 | Bank and FDR Interest for fund (RPF, RGF,ASF), ICAB, ICMAB, ICSB and other | 3 | Bank Interest and FDR Interest |
| 4 | Sale of property | 4 | Sale of property |
| 5 | Amount of compensation received from Govt. | 5 | Amount of compensation received from Govt. |
| 6 | Amount received from real estate developer by land owner |
Final Tax SROs
As previously mentioned, the National Board of Revenue (NBR) has issued Statutory Regulatory Orders (SROs) pertaining to the final tax settlement under the Income Tax Act 2023. The details of SROs are outlined below. To access and download the SROs, kindly click on the below link.
| SL | Issue Date | SRO Number | Description of SRO |
| 1 | 30-01-2024 | SRO NO. 17-Law/Income Tax-24/2024 | TDS under Section 111 (Compensation at the time of acquisition of property) will be considered as Final Tax Settlement_31 January 2024 |
| 2 | 11-10-2023 | SRO NO. 286-Law/Income Tax-16/2023 | Tax collection under section 125 will be final tax settlement for any income generated from transfer of capital asssets |
| 3 | 23-08-2023 | SRO NO. 253-Law/Income Tax-09/2023 | Final Tax Settlement of savings certificates, interest or profit and export cash subsudiy |
How to do Final tax calculation in income tax?
This blog post provides a comprehensive guide to understanding the imposition of tax on land sale in Bangladesh, specifically for individual assessees. Here, we present a comprehensive breakdown of the income tax calculation under the final tax framework. The process of determination of tax on land sale in Bangladesh is as follows:
Step 1: Consider final tax applicable income separately in Income tax computation
Initially, segregate the income subject to final tax in the income tax computation. Calculate the total taxable income as if there were no income from Land sale. At this stage, ignore land sale income.
Step 2: Add Land Sale Income
Next, add the Land sale income to the computation sheet. Since we excluded this income in Step 1, it is now included in the overall calculation.
Step 3: Determine gross tax liability as per income tax slab without final tax applicable income
At this stage, compute the gross tax liability based on the applicable income tax slab, excluding the income from sale of land. The step is to imagine a scenario where there is no income from sale of land, and calculate the tax liability accordingly.
Step 4: Add TCS amount as tax
Subsequently, add the Tax Collected at Source (TCS) amount as tax payable to the gross tax liability determined in Step 3. Here, we incorporate the tax liability for land sale.
Step 5: Don’t consider final tax applicable income under “3% of income” portion of Investment tax rebate part
In the Investment Tax rebate section, which requires determining 3% of the total income to claim an investment rebate, exclude capital gain income generated from sale of land from this calculation.
Step 6: Account for TCS amount as tax paid
In the final stage, treat the TCS amount as tax paid, similar to any other TDS/ TCS payment. Consequently, the process involves adding the TCS amount as tax liability in Step 4 and deducting the same TCS amount as tax paid in Step 6. Ultimately, no additional tax needs to be paid out of pocket for the capital gain income of land sale. That’s why it is called “Final Tax.”
Illustrative Examples (Tax on land sale in Bangladesh)
Example 1
| Source of Income | Amount |
| Taxable income from Agriculture | 620,000 |
| Income from Sale of land | 1,600,000 |
| Bank Interest | 27,500 |
| Total | 2,247,500 |
Note: Assume Registration Authority collected Tk. 96,000 at the time of land sell.
Solution of Example 1
Example 2
| Source of Income | Amount |
| Taxable income from house rent | 648,000 |
| Income from Sale of land | 2,500,000 |
| Bank Interest | 17,500 |
| DPS Interest | 22,500 |
| FDR Interest | 35,000 |
| Total | 3,223,000 |
Note: Assume Registration Authority collected Tk. 200,000 at the time of land sell.
Solution of Example 2
Example 3
| Source of Income | Amount |
| Salary Income: | |
| Basic Salary | 840,000 |
| Festival bonus | 210,000 |
| House rent allowance | 504,000 |
| Medical allowance | 100,800 |
| Conveyance allowance | 45,000 |
| Other source of income: | |
| Income from Sale of Land | 3,275,000 |
| Bank Interest | 62,000 |
| Dividend | 26,000 |
| Total | 5,062,800 |
Note: Assume Registration Authority collected Tk. 262,000 at the time of land sell.
Solution of Example 3
Example 4
| Source of Income | Amount |
| Salary Income: | |
| Basic Salary | 760,000 |
| Festival bonus | 190,000 |
| House rent allowance | 456,000 |
| Medical allowance | 91,200 |
| Conveyance allowance | 45,000 |
| Other source of income: | |
| Income from Sale of land | 4,500,000 |
| Bank Interest | 72,000 |
| Dividend | 16,000 |
| FDR Interest | 36,000 |
| Taxable income from House Rent | 384,000 |
| Taxable income from Agricultural Activity | 473,000 |
| Total | 7,023,200 |
Note: Assume Registration Authority collected Tk. 270,000 at the time of land sell.
Solution of Example 4
Example 5
| Source of Income | Amount | |
| Business Income: | ||
| Income from business (Sadia Enterprise) (Tax paid Tk. 180,000 on this income) |
2,000,000 | |
| Other source of income: | ||
| Realized gain from share business (as per Certificate of Security House) | 1,000,000 | |
| Unrealized gain from share business (as per Certificate of Security House) | 3,000,000 | |
| Sale of land (see below note) | 1,000,000,000 | |
| Total | 1,006,000,000 | |
Note:
- Purchase of secondary share Tk. 5,000,000
- Ms. Sadia got the land from his father on 21 January 2017 in HEBA value of Tk. 25 core. On 23 June 2023 he sold the land. Registration Authority collected Tk. 40,000,000 at the time of land sell. All the expenses related to title transfer have been borne by the purchaser.
Solution of Example 5
Note: The unrealized gain from share business Tk. 3,000,000 is excluded from income as there has been no actual transfer of assets. According to Section 59 of the Income Tax Act 2023, capital gain income is considered income for tax purposes when the transfer of assets occurs.
Example 6 (Full question)
| Source of Income | Amount | |
| Salary Income: | ||
| Basic Salary | 898,500 | |
| Festival bonus | 224,625 | |
| House rent allowance | 539,100 | |
| Medical allowance | 107,820 | |
| Employers contribution to RPF | 89,850 | |
| Conveyance allowance | 65,000 | |
| Other source of income: | ||
| Income from sale of land | 3,500,000 | |
| Bank Interest (tax deduction Tk. 2,300) | 23,000 | |
| Dividend (tax deduction Tk. 1,650) | 16,500 | |
| FDR Interest (Tax deduction Tk. 4,330) | 43,300 | |
| Total | 5,507,695 | |
| Investment details: | Amount | |
| DPS installments payment | 220,000 | |
| FDR investment | 250,000 | |
| Purchase of Laptop | 170,000 | |
| Purchase Bangladesh Shanchaypatra | 100,000 | |
| Note: | ||
| 1. | Assume Tk. 120,230 was deducted from his salary during the year 2022 -2023 | |
| 2. | Note: Assume Registration Authority collected Tk. 175,000 at the time of land sell | |
| 3. | He also contributed the same amount (Tk. 89,850) to the RPF | |
Solution of Example 6 (Full question)
How to show in Income Tax Return
Until now, we have comprehended the method of calculating income tax liability for individuals with regard to tax on land sale in bangladesh. Moving forward, let’s proceed to complete the income tax form. To illustrate this process, we will reference the details provided in Example 6 above.
Step 1: Show land sale income under “Capital Gain”
Land sale income falls under the category of “Capital Gain ” according to Section 57 of the Income Tax Act 2023. So, we have to present land sale income alongside other similar income derived from this source. Please note This income should be entered under serial number 5 of “Income from Capital Gain”.
Step 2: Report total Tax Amount in "Gross Tax Payable"
The total tax amount determined in Step 4 above, which includes the added TCS on land sale, should be showcased under “Gross Tax Payable.” This amount is to be recorded under serial number 12 in the Tax Computation section of the income tax return.
Step 3: TCS amount will be shown under “Tax deducted or collected at source”
The amount of tax collected at the time of title transfer is to be presented in the “Tax Deducted or Collected at Source (attach proof)” section, under serial number 20, within the “Particulars of Tax Payment” part of the income tax return. Ensure to attach supporting documentation as evidence of tax collection at source.
Tax Collection at Source (TCS) amount on Land Sale?
The rate of tax collection at source (TCS) has been explicitly specified in Special Regulatory Order (SRO) No. 206-Law/Income Tax-01/2023, issued on the 26th of June, 2023. In accordance with Rule 6 outlined in the aforementioned SRO, the following are the applicable TCS rates:
Table 1
| Serial | Moza | Tax rate for Category A | Tax rate for Category B | Tax rate for Category C | Tax rate for Category D | Tax rate for Category E |
| 1 | All Moza under Gulshan, Banani, Motijheel and Tejgaon Police Stations of Dhaka District | 8% of the value of the land mentioned in the deed or Tk. 1,500,000 per katha whichever is higher | 8% of the value of the land mentioned in the deed or Tk. 600,000 per katha whichever is higher | 8% of the value of the land mentioned in the deed or Tk. 1,500,000 per katha whichever is higher | 8% of the value of the land mentioned in the deed or Tk. 600,000 per katha whichever is higher | 6% of the value of the land mentioned in the deed or Tk. 500,000 per katha whichever is higher |
| 2 | All Moza under Dhanmondi, Wari, Tejgaon Industrial Thana, Shahbagh, Ramna, Paltan, Bangshal, Newmarket and Kalabagan Police Stations of Dhaka District | 8% of the value of the land mentioned in the deed or Tk. 1,000,000 per katha whichever is higher | 8% of the value of the land mentioned in the deed or Tk. 400,000 per katha whichever is higher | 8% of the value of the land mentioned in the deed or Tk. 1,000,000 per katha whichever is higher | 8% of the value of the land mentioned in the deed or Tk. 400,000 per katha whichever is higher | 6% of the value of the land mentioned in the deed or Tk. 300,000 per katha whichever is higher |
| 3 | All moza under Kafrul, Mohammadpur, Sutrapur, Jatrabari, Uttara Model Thana, Cantonment Thana, Chawkbazar Thana, Kotwali Thana, Lalbagh Thana, Khilgaon, Shyampur and Gendaria Thana of Dhaka District. | 8% of the value of the land mentioned in the deed or Tk. 500,000 per katha whichever is higher | 8% of the value of the land mentioned in the deed or Tk. 200,000 per katha whichever is higher | 8% of the value of the land mentioned in the deed or Tk. 500,000 per katha whichever is higher | 8% of the value of the land mentioned in the deed or Tk. 200,000 per katha whichever is higher | 6% of the value of the land mentioned in the deed or Tk. 150,000 per katha whichever is higher |
| 4 | Khilkhet, Airport, Uttara West, Mugda, Rupnagar, Bhashantek, Badda Thana, Pallabi Thana, Shahjahanpur, Mirpur Model Thana, Darus Salam Thana, Dakshinkhan Thana, Uttarkhan Thana, Turag Thana, Shah Ali Thana, Sabujbagh Thana, Kadmatoli Thana, Kamrangirchar Thana, Hazaribagh, Demra and all moza under Adabar Thana of Dhaka district; All moza under Joydevpur and Kaliganj Thana of Gazipur district and all moza under Narayanganj Sadar, Rupganj and Sonargaon Thana of Narayanganj district. | 8% of the value of the land mentioned in the deed or Tk. 400,000 per katha whichever is higher | 8% of the value of the land mentioned in the deed or Tk. 150,000 per katha whichever is higher | 8% of the value of the land mentioned in the deed or Tk. 400,000 per katha whichever is higher | 8% of the value of the land mentioned in the deed or Tk. 150,000 per katha whichever is higher | 6% of the value of the land mentioned in the deed or Tk. 100,000 per katha whichever is higher |
| 5 | Moza of Khulshi, Panchlaish, Pahartali, Halishahar and Kotwali Thana of Chittagong district; All Moza under Fatulla, Siddirganj, Bandar Police Thana in Narayanganj District and Gazipur Sadar, Basan, Konabari, Gacha, Tongi East and Tongi West Thana in Gazipur District. | 6% of the value of the land mentioned in the deed or Tk. 300,000 per katha whichever is higher | 6% of the value of the land mentioned in the deed or Tk. 100,000 per katha whichever is higher | 6% of the value of the land mentioned in the deed or Tk. 300,000 per katha whichever is higher | 6% of the value of the land mentioned in the deed or Tk. 100,000 per katha whichever is higher | 6% of the value of the land mentioned in the deed or Tk. 50,000 per katha whichever is higher |
| 6 | All moza under Dohar, Nawabganj, Keraniganj, Savar and Dhamrai upazilas of Dhaka district; All Moza under Akbar Shah, EPZ, Karnaphuli, Chawkbazar, Chandgaon, Doublemooring, Patenga, Panchlaish, Bandar, Baklia, Bayezid Bostami and Sadarghat Thana of Chittagong District and all Moza under Arai Hazar Police Station of Narayanganj District | 6% of the value of the land mentioned in the deed or Tk. 200,000 per katha whichever is higher | 6% of the value of the land mentioned in the deed or Tk. 80,000 per katha whichever is higher | 6% of the value of the land mentioned in the deed or Tk. 200,000 per katha whichever is higher | 6% of the value of the land mentioned in the deed or Tk. 80,000 per katha whichever is higher | 6% of the value of the land mentioned in the deed or Tk. 20,000 per katha whichever is higher |
Table 2
| Serial No | Moza | Tax Rate |
| 1 | All moza not included in Table-1 but belonging to City Corporations area other than Dhaka South, Dhaka North, Chittagong, Narayanganj and Gazipur City Corporations and any other development authority and all Municipalities located at District Headquarters. | 6% of the value of the land mentioned in the deed |
| 2 | All Moza belonging to the municipality not included in Serial No. 1 of Table 2 and Table 1 | 4% of the value of the land mentioned in the deed |
| 3 | All Moza belonging to the Upazilas (other than Municipalities) not included in Serial No. 1 and 2 of Table 2 and Table 1. | 2% of the value of the land mentioned in the deed |
In the above Tables:
- “Category A” means commercial areas under the control of Rajdhani Unnayan Kartripakkha, Chattogram Development Authority, Gazipur Development Authority, National Housing Authority, Public Works Department and Cantonment Board
- “Category B” means residential areas under the control of Rajdhani Unnayan Kartripakkha, Chattogram Development Authority, Gazipur Development Authority, National Housing Authority, Public Works Department and Cantonment Board
- “Category C” means commercial areas not under the control of Rajdhani Unnayan Kartripakkha, Chattogram Development Authority, Gazipur Development Authority, National Housing Authority, Public Works Department and Cantonment Board but established by developer or real estate developer
- “Category D” means residential areas not under the control of Rajdhani Unnayan Kartripakkha, Chattogram Development Authority, Gazipur Development Authority, National Housing Authority, Public Works Department and Cantonment Board but established by developer or real estate developer
- “Category E” means areas other than the area mentioned unfrt “Category A”, “Category B”, “Category C”, “Category d”
Please click here to browse TDS on Land rate in Bangla: https://www.taxvatpoint.com/tds-rules-bangla-rules-6-collection-of-tax-on-transfer-of-property/
Conclusion - Tax on land sale in Bangladesh
Based on the above calculation and illustrative example, it is evident that the amount collected as tax on land sale represents the ultimate tax liability for an individual. To ascertain the tax on land sale, one must comprehend the extent of tax that the authority will collect during the land registration process. Let’s discuss the TCS on land sale. Hope this post will help you to understand the mechanism of tax on land sale in Bangladesh.
Tax on land sale in Bangladesh - Source/ Reference:
- Income Tax Act 2023;
- TDS Rules 2023 (206-Law/Income Tax-01/2023, dated 26th of June, 2023);
- SRO No. 286-Law/Income Tax-16/2023, dated 11 Oct 2023;
- SRO No. 253-Law/Income Tax-09/2023, dated 23 August 2023;
- National Board of Revenue (NBR).
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