Final Tax - Tax on Sanchayapatra Interest 2023

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Introduction - Tax on Sanchayapatra Interest

Tax on Sanchayapatra Interest – Interest earned from Sanchayapatra is the final tax settlement under Income Tax Act 2023. We will discuss the details of tax calculation of Sanchayapatra interest income here.

What is Final Tax Settlement?

Final tax settlement is the amount of tax that has been deducted at source at the time of crediting income to the receiver. And the person who received the amount is not required to pay any extra tax from his own pocket at the time of final submission of income tax return. The tax deducted at source will be the final tax. As no additional tax is required to pay hence it is called final tax.

As final tax is related to TDS so to understand the final tax you also have to know about Tax Deduction at Source (TDS).

What is TDS?

TDS, an acronym for Tax Deduction at Source, involves the deduction of a specified percentage from payments made to any individuals. The responsibility for this deduction lies with the payer, who is obligated to withhold the applicable tax amount at the time of making the payment. Please note at the time of crediting Sanchayapatra interest respective bank deducts tax under Section 105 of Income Tax Act 2023. Current tax deduction rate is 10% under Section 105(1).

Scope of Final Tax

The scope of income to which the final tax applies is relatively limited. In Bangladesh, for individual assessee, the application of final tax is confined to just below specific cases as of now:

On Interest of Bangladesh Sanchayapatra (Govt. Securities); and
Sale of land
Compensation received from the Govt.

Is Final Tax concept new 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.

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 aims to guide you through the income tax computation process when dealing with income from Bangladesh Sanchayapatra. For the sale of land, a separate write-up will be provided in the future. Here, we present a comprehensive breakdown of the income tax calculation under the final tax framework. The process are 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 interest income from Bangladesh Sanchayapatra. At this stage, ignore Sanchayapatra interest income.

Step 2: Add Sanchayapatra Interest Income

Next, add the interest income from Bangladesh Sanchayapatra 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 Sanchayapatra interest. The step is to imagine a scenario where there is no Sanchayapatra interest, and calculate the tax liability accordingly.

Step 4: Add TDS amount as tax

Subsequently, add the Tax Deducted at Source (TDS) amount as tax payable to the gross tax liability determined in Step 3. Here, we incorporate the tax liability for Sanchayapatra interest.

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 Sanchayapatra interest income from this calculation.

Step 6: Account for TDS amount as tax paid

In the final stage, treat the TDS amount as tax paid, similar to any other TDS payment. Consequently, the process involves adding the TDS amount as tax liability in Step 4 and deducting the same TDS amount as tax paid in Step 6. Ultimately, no additional tax needs to be paid out of pocket for Sanchayapatra interest income. That’s why it is called “Final Tax”.

Let’s consider few examples to understand the steps involved

Illuastrative Examples

Example 1

Source of Income	Amount
Taxable income from Agricultural activity	620,000
Interest of Bangladesh Sanchayapatra	62,500
Bank Interest	12,000
Total	694,500

Note: Assume bank deducted Tk. 6,250 from Sanchayapatra interest

Solution of Example 1

Example 2

Source of Income	Amount
Taxable income from house rent	648,000
Interest of Bangladesh Sanchayapatra	50,000
Bank Interest	17,500
DPS Interest	22,500
FDR Interest	35,000
Total	773,000

Note: Assume bank deducted Tk. 5,000 from Sanchayapatra interest

Solution of Example 2

Example 3

Source of Income	Amount
Salary Income:
Basic Salary	540,000
Festival bonus	135,000
House rent allowance	324,000
Medical allowance	64,800
Conveyance allowance	45,000

Other source of income:
Interest of Bangladesh Sanchayapatra	75,000
Bank Interest	12,000
Dividend	20,000
Total	1,215,800

Note: Assume bank deducted Tk. 7,500 from Sanchayapatra interest

Solution of Example 3

Example 4

Source of Income	Amount
Salary Income:
Basic Salary	860,000
Festival bonus	215,000
House rent allowance	516,000
Medical allowance	103,200
Conveyance allowance	45,000

Other source of income:
Interest of Bangladesh Sanchayapatra	55,000
Bank Interest	22,000
Dividend	26,000
FDR Interest	156,000

Taxable income from House Rent	288,000
Taxable income from Agricultural Activity	373,000
Total	2,659,200

Note: Assume bank deducted Tk. 5,500 from Sanchayapatra interest

Solution of Example 4

Example 5 (Full Scenario)

Source of Income		Amount
Salary Income:
Basic Salary		698,500
Festival bonus		174,625
House rent allowance		419,100
Medical allowance		83,820
Employers contribution to RPF		69,850
Conveyance allowance		45,000

Other source of income:
Interest of Bangladesh Sanchayapatra		35,000
Bank Interest (tax deduction Tk. 2,700)		27,000
Dividend (tax deduction Tk. 1,200)		12,000
FDR Interest (Tax deduction Tk. 5,600)		56,000
Total		1,620,895

Investment details:
DPS installments payment		220,000
FDR investment		250,000
Purchase of Land		1,700,000
Purchase Bangladesh Sanchayapatra		100,000

Note:
1.	Assume Tk. 50,400 was deducted from his salary during the year 2022 -2023
2.	Assume bank deducted Tk. 3,500 from Sanchayapatra interest
3.	He also contributed the same amount (Tk. 69,850) to the RPF

Solution of Example 5

How to show in Income Tax Return?

Up to this point we have portrayed how to determine the income tax liability if anyone has Sanchayapatra interest. Now let’s fill up the income tax form. To show you the process we are considering the information of Example 5 above.

Step 1: Show interest income under “Income from financial assets”

Interest income from Bangladesh Sanchayapatra (Government securities) falls under the category of “Income from Financial Assets” according to Section 62 of the Income Tax Act 2023. So, we have to present Sanchayapatra interest income alongside other similar income derived from this source. Please note This income should be entered under serial number 6 of “Particulars of Income”.

Step 2: Report total Tax Amount in "Gross Tax Payable"

The total tax amount determined in Step 4, which includes the added TDS on Sanchayapatra interest, 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: TDS amount will be shown under “Tax deducted at source”

The amount of TDS deducted from Sanchayapatra interest 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 TDS deduction.

Conclusion - Tax on Sanchayapatra Interest

Tax on Sanchayapatra Interest is one of the most common sources of income generally found in personal income tax files. We hope the process as we outlined here will help you to determined the Tax on Sanchayapatra Interest.

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Final Tax – Tax on Sanchayapatra Interest 2023