Deductions not admissible in certain circumstances (Section 30)- As per ITO 1984.

 

 

Certain payments are not allowable for tax purposes as detailed below:

(i)           Payment of salaries if tax is not deducted;

(ii)          Salary payment made to any employee who does not have TIN number (if it is required by law);

(iii)        Salary payment after Tax Day to an employee if the employee is required to file the return of income but fails to file the same on or before the Tax Day or the approved extended date;

(iv)        Salary payment to an employee for whom the statement under section 108A was not provided;

(v)          Head office expenses or intra-group expense debited in excess of the 10% of net profit disclosed in the statement of accounts;

(vi)        Payments of royalty, technical know-how fee and technical assistance fee in excess of 10% for first three years and 8% for subsequent years of net profit from business or profession, excluding any profit or income of subsidiary or associate or joint venture disclosed in the statement of accounts;

(vii)       Any payment by way of salary or remuneration made otherwise than by crossed cheque or bank transfer by a person to an employee having monthly gross salary of Tk. 15,000 or more;

(i)           Any expenditure by way of incentive bonus exceeding 10% in aggregate of the net profit disclosed in the statement of accounts;

(ii)          Any expenditure by way of overseas travelling exceeding 0.50% of the disclosed turnover;

(iii)        Provisions for deduction not admissible in certain circumstances have been introduced as follows:

 

(a)     any payment by way of commission paid or discount made to its shareholder director by a company.

(b)     any payment by way of any rent of any property, whether used for commercial or residential purposes, otherwise than by a crossed cheque or bank transfer.

(c)     any payment by a person exceeding Tk. 50,000 or more, otherwise than by a cheque or bank transfer excluding:

 

-       payment for the purchase of raw materials;

-       salary or remuneration made to any employee, without prejudice to an obligation referred to in clause (i); and

-       any payment for government obligation i.e. municipal tax, payment for electricity, WASA and gas.

 

(iv)         Any expenditure by way of promotional expenses exceeding 0.50% of the disclosed turnover. Promotional expense is defined as “any expenditure incurred for giving any benefits to any person both in cash and non-cash for the purpose of business promotion”.

 

Provisions of section 30 shall apply for insurance business as well in allowing management expenses or any other expenses under Fourth Schedule of tax ordinance.

 

 

Allowable perquisites as per ITO 1984.

 

Perquisite has been defined as follows:

Perquisite means -

(i)         Any payment made to an employee by an employer in the form of cash or in any other form excluding basic salary, festival bonus, incentive bonus, arrear salary, advance salary, leave encashment and overtime, and

 

(ii)       Any benefit, called by whatever name, provided to an employee by an employer, whether convertible into money or not; other than contribution to a recognised provident fund, approved pension fund, approved gratuity fund and approved superannuation fund.

 

Provided that the provision of this clause shall not be applicable to an employer where perquisites were paid to an employee in pursuance of any Government decision published in the official Gazette to implement the recommendation of a Wage Board Constituted by the Government.

 

Limit of allowable perquisites has been fixed at Tk. 550,000 per employee. The value of perquisites paid/provided to an employee in excess of Tk. 550,000 in an assessment year shall be disallowed in company's assessment.

 

Deemed income- U/S-19 of ITO 1984.

 

Items of deemed incomes are contained in section 19 of the Income Tax Ordinance 1984. Major instances of deemed income are discussed below:

 

§   House rent

If rent free accommodation is provided to the employee, the rental value or 25% of the basic salary, whichever is less, is included in income. If accommodation is provided at a concessional rate, the actual payment by employee is excluded from the above. Tax exempted house rent receivable in cash is Tk. 25,000 per month or 50% of basic salary, whichever is lower.

§   Conveyance allowance

Tax exempt conveyance allowance receivable in cash is a maximum of Tk. 30,000 per annum. If the employer provides conveyance for personal or private use, an amount equal to 5% of the employee’s basic salary or Tk. 60,000, whichever is higher, is added with total income.

§   Loan

Any amount of loan or gift exceeding Tk. 500,000 received other than through bank transfer by an assessee, being an individual, shall be treated as income under the head ‘Income from Other Sources’ in the year it was received.

 

When abovementioned loan or gift shown as income is subsequently repaid or settled, such repaid or settled amount will be deducted from the total income of that income year.

 

Bank transfer refers to transfer from the account of the giver to the account of the receiver and such accounts are maintained in a bank or a financial institution legally authorised to operate accounts.

§   Medical expenses:

Where any amount is received or receivable by the employee by way of hospitalisation, medical expenses or medical allowance, the amount so receivable or received exceeds 10% of basic salary or Tk. 120,000 annually, whichever is less, shall be included in his income.

In case of an employee being a person with disability, the medical expense exceeding Tk. 1,000,000 shall be include in his total income.