Surcharge on income tax in Bangladesh – Surcharge which can also be referred to as an additional charge, fundamentally represents a tax imposed on an existing tax. This additional fee is computed based on the payable tax rather than the total income generated. Specifically, in the context of income tax, a surcharge serves as an extra amount that is to be paid on top of the regular income tax liability.
To elaborate further, suppose there is a surcharge rate of 10% applied to an established tax rate of 30%. In this scenario, the surcharge effectively increases the overall tax rate to 33%. In other words, if the initial tax obligation on income was 30%, the inclusion of the 10% surcharge results in a revised total tax rate of 33%. This mechanism allows for the government to implement targeted increases on specific tax liabilities, contributing to a nuanced and flexible approach in taxation policy.
Background of Surcharge on income tax in Bangladesh
The concept of a surcharge, essentially an additional tax, was existed here before the country gained independence. In those earlier years, it took the form of what was then known as the wealth tax. However, in 1996, the government made the decision to abolish the wealth tax. Subsequently, in 2011, the government reintroduced the surcharge as a substitute for the erstwhile wealth tax.
Initially, the imposition of the surcharge was targeted at individuals possessing assets exceeding Tk. 2 crore. Over time, the government made adjustments to this threshold, eventually raising it to its current level of Tk. 4 crore.
Types of Surcharge on income tax in Bangladesh
Presently, within the taxation system, there exist three distinct categories of Surcharge on income tax in Bangladesh. Here are the details of those three categories:
(a) Wealth Surcharge:
Wealth Surcharge, which is dependent upon the valuation of an individual’s assets. In the event that an individual possesses assets exceeding Tk. 4 crore, they are obligated to pay a surcharge amounting to 10% of the net tax payable. Moreover, a parallel criterion for the imposition of this surcharge is met if an individual owns more than one vehicle or has made investments in House Property within the boundaries of any city corporation area, provided that the property exceeds 8000 square feet. As such, the application of this surcharge is dual-faceted, involving both the assessment of net wealth value and the fulfillment of specified conditions.
Rate of wealth surcharge for the year 2023-24 are as follows:
| Net worth Value | Rate of Surcharge |
| Up to Tk. 4 Crore | Nil |
| More than Tk. 4 crore up to Tk. 10 crore; or | 10% |
| √ Having more than one motor vehicles; or | |
| √ Having housing property of more than 8,000 Sft in any city corporation | |
| More than Tk. 10 crore up to Tk. 20 crore | 20% |
| More than Tk. 20 crore up to Tk. 50 crore | 30% |
| More than Tk. 50 crore | 35% |
(b) Surcharge on tobacco products:
In addition to the Wealth Surcharge, there exists another category of surcharge within the Bangladesh taxation system, specifically aimed at entities engaged in the business of tobacco products, including cigarettes, biri, jardi, gul, and similar items. According to Schedule 2 of Finance Act 2023, if an entity operates a business involving the aforementioned tobacco-related products, it is required to pay a surcharge at a rate of 2.5% on the net tax payable. This targeted surcharge is designed to address the unique considerations associated with businesses in the tobacco industry, reflecting the government’s effort to collect more taxes from this kind of economic activity.
(c) Surcharge on vehicles:
A recently introduced form of surcharge is the Environmental Surcharge, implemented by the Government in the year 2023. According to the provisions outlined in the Finance Act 2023, individuals or entities with more than one vehicle are obligated to pay an Environmental Surcharge specifically for the second vehicle and any subsequent ones. For a detailed understanding of the environmental surcharge applied to vehicles, kindly refer to the information provided in the following post:
Carbon Tax in Bangladesh – Environmental Surcharge on vehicles
Minimum Surcharge
The inception of the minimum surcharge concept dates back to the Assessment Year (AY) 2015-2016, as introduced by the Finance Act of 2015. This provision remained in effect until the Assessment Year (AY) 2020-21, representing a notable aspect of the taxation framework in Bangladesh during that period. However, through the enactment of the Finance Act in 2021, the government made a significant decision to repeal the minimum surcharge provision. Consequently, as of the latest update, there is no longer the existence of the minimum surcharge concept within the Bangladesh tax system.
How will net wealth be calculated?
Surcharge on income tax in Bangladesh – In accordance with Schedule 2 (Part 2) of Finance Act 2023, the application of surcharge is contingent upon the assets and liabilities, as mandated by Section 167 of the Income Tax Act of 2023. The determination of the surcharge rate takes into account the net wealth value, necessitating an understanding of how this value is calculated.
The computation of net wealth is intricately linked to the submission of Statements of Assets and liabilities along with the income tax return. It is noteworthy that individuals are not required to separately calculate the net wealth amount, as this information is systematically captured under the “Statement of Assets and Liabilities,” commonly referred to as “IT 10B.” The net assets figure is precisely outlined under serial number 5 of the income tax return, denoted as IT-11GA (2023).
To ascertain whether an individual is liable to pay the surcharge, attention should be directed to serial number 5. If the value at serial number 5 exceeds Tk. 4 crore, the individual is obligated to pay the surcharge. Furthermore, individuals possessing more than one motor vehicle or those who have invested in house property within a city corporation area with a size exceeding 8,000 square feet are also subject to Wealth Surcharge based on their assets.
What will be considered under “motor vehicles”
This blog post repeatedly references “motor vehicles,” and it is important to clarify the scope of this term. According to Schedule 2 (Part 2) of the Finance Act 2023, the definition of motor vehicles encompasses all types of vehicles except for buses, minibuses, coasters, prime movers, trucks, lorries, truck lorries, pickup vans, human haulers, auto-rickshaws, and motorcycles.
For the purposes of the surcharge outlined in the aforementioned schedule, if an individual possesses more than one motor vehicle, they are required to pay the surcharge. It is crucial to note that this surcharge requirement applies even if the net wealth value of the individual does not exceed Tk. 4 crore. Therefore, the definition of “motor vehicles” explicitly excludes certain specific vehicle types, emphasizing the inclusion of a wide range of vehicles under the surcharge provision while excluding those mentioned categories.
How to pay the Surcharge on income tax in Bangladesh?
The payment of surcharge is seamlessly integrated with the process of settling other income tax liabilities that an assessee is required to pay. There are no distinct formalities or separate procedures for paying the surcharge. Instead, if an individual or entity is liable to pay surcharge, the amount should be included and paid along with the regular income tax payable.
Furthermore, the payment mode for the surcharge aligns with that of income tax. This means that the established channels and methods used for remitting income tax payments can also be utilized for paying the surcharge amount.
Illustrative Example 1
Illustrative Example 2
Mr. Aftab Rahman is CEO of a Multinational Company. For the Financial Year 2022-23 his income and assets details are as follows:
| Source of Income | Amount | |
| Salary Income: | ||
| Basic Salary | 9,600,000 | |
| Festival bonus | 2,400,000 | |
| House rent allowance | 5,760,000 | |
| Medical allowance | 1,152,000 | |
| Employers contribution to RPF | 960,000 | |
| Other source of income: | ||
| Interest of Bangladesh Shanchaypatra | 351,000 | |
| Bank Interest (tax deduction Tk. 27,000) | 270,000 | |
| Dividend (tax deduction Tk. 12,000) | 120,000 | |
| FDR Interest (Tax deduction Tk. 56,600) | 560,000 | |
| Total | 21,173,000 | |
| Investment details: | ||
| DPS installments payment | 420,000 | |
| FDR investment | 750,000 | |
| Share purchase in listed companies | 1,600,000 | |
| Purchase of Land | 12,500,000 | |
| Purchase Bangladesh Sanchaypatra | 500,000 | |
| Note: | ||
| 1. | Assume Tk. 4,080,400 was deducted from his salary during the year 2022-2023 | |
| 2. | Assume bank deducted Tk. 35,100 from Shanchaypatra interest | |
| 3. | He also contributed the same amount (Tk. 960,000) to the RPF | |
| 3. | His employer gave him a car of 3000cc for personal and office use. | |
Solution of Illustrative Example 2
How to show Wealth Surcharge in Income tax return?
Thus far, we have elucidated the methodology for calculating the surcharge amount in accordance with the provisions outlined in the Finance Act 2023. Now, let’s delve into the practical aspect of this process by illustrating how to complete the income tax form. To demonstrate this procedure, we will utilize the information from the Illustrative Example 2 provided earlier.
Step 1: Show surcharge amount under “Net wealth Surcharge”
The surcharge amount, once calculated, must be explicitly presented in the designated section, namely serial number 17(a) labeled as “Net Wealth Surcharge” on the income tax form.
Step 2: Show surcharge payment under “Tax paid with this return”
As we discussed earlier in this blog post, it’s important to pay the surcharge before submitting your income tax return. To do this, you need to display the surcharge amount in a specific section, which is serial number 23 labeled “Tax paid with this return.” You should add the surcharge amount to the tax payable and include the total in this section. This ensures that the surcharge is accounted for and paid along with your income tax before you submit your return.
Conclusion - Surcharge on income tax in Bangladesh
Besides income tax, some individuals may also be subject to an extra levy known as a Surcharge. This blog post thoroughly discusses the specifics of Surcharge on income tax in Bangladesh. For any queries, please feel free to post them in the comment section.
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