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Dhaka Tribune


What's in the new income tax bill?

To put it simply, this is a measure taken to increase the very low tax base of Bangladesh

Update : 14 Jun 2023, 07:27 PM

The Income Tax Ordinance 1984 is the current governing law for income tax in Bangladesh and is the successor of the Income Tax Act 1922. 

Although it undergoes amendments every financial year through promulgation of the Finance Acts, the government has taken the decision of replacing the current law with a new one. 

With this objective in mind, the National Board of Revenue (NBR) prepared a draft of the new Income Tax Act 2023 and formed a review committee for evaluating the draft and incorporating necessary changes. 

The review committee finalized its comments on the draft Income Tax Act 2023 and the report was presented to the NBR on November 21 last year. 

It should be noted that the draft Income Tax Bill 2023 is largely a Bangla translation of the Income Tax Ordinance 1984, which is currently in force with modifications and inclusions to reflect the changes in the tax payment system and overall tax management keeping in mind the local peculiarities of Bangladesh and the international best practices. 

On January 23, the draft received in principle approval from the Cabinet.

Key takeaways from the new bill 

  • The draft Income Tax Bill 2023 sets out the parameters which NBR will use to determine whether any claimed expenditure should be allowed or disallowed.
     The primary objective of this new inclusion is to curb the discretionary powers of the tax officials in deciding on disallowance of any claimed expenditure.
     It was felt that including specific yardsticks with respect to the issue of allowance of deductible expenses would serve two purposes - first, it will bring more certainty for the taxpayer to make an informed decision about claiming a particular expenditure and second, give the tax officials some parameters within which they would operate while dealing with any claimed expenses.
     These parameters are based on the commercial rationale behind the claimed expenditure such as (a) whether the expense was incurred for the purpose of generating income; (b) whether these are revenue expenditure (as opposed to capital expenditure); and (c) whether there was reasonable justification for incurring the expenditure.
     In other words, the tax officials will have to decide the deductibility of any expenditure on the basis of the commercial reasons of a taxpayer.
  • Electronic refund of excess tax to the taxpayer whereby the taxpayer is entitled to refund of excess tax (paid to NBR) through electronic bank transfer within 60 days calculated from the date of completion by the Deputy Commissioner of Taxes of the processing of the tax return filed by the taxpayer under the self-assessment method.
     This new feature is inserted to encourage more citizens to file tax returns and pay income taxes.
     It is hoped that this will also increase the tax net.
  • The concept of general anti-avoidance rule (GAAR) is inserted for the first time to deal with abusive tax arrangements.
     A new definition of the term “tax benefits” is inserted to capture what is abusive tax arrangement.
     This will help NBR to detect and tackle tax planning that are aimed solely to achieve a tax advantage without any underlying business objective. 


There are some concerns about new inclusions in the draft Income Tax Bill regarding submission of assets and liability statements if a taxpayer travels abroad in an income year. 

To put it simply, this is a measure taken to increase the very low tax base of Bangladesh. 

Studies show that weak economic development and tax are correlated.

In one study, it is shown that in FY22, only 1.4% of Bangladeshi people filed tax returns. 

The number is 5.8% in neighbouring India. 

However, it is equally true that increasing the tax base is a politically sensitive topic. 

Successive Bangladesh governments have taken several measures to increase the tax base but due to several (and connected) structural and institutional problems, such measures did not bring the desired result. 

In this regard, consideration must be given to the concept of “tax morality” under which NBR must create the necessary trust factor in its system for taxpayers to cooperate and comply with their tax obligations. 

If taxpayers trust their government, representatives, and justice system then taxpayers are more willing to fulfill their tax duties. 

Thus, the new inclusions and the new Income Tax Bill 2023 will only work if NBR projects itself as an organization that deals with taxpayers fairly and justly. 


Junayed Chowdhury is a barrister and advocate of the Supreme Court of Bangladesh 

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