All you need to know about the Minimum Tax of Bangladesh 24

Table of Contents

What is Minimum Tax?

The minimum tax refers to the least amount of tax that a taxpayer is required to pay in specific circumstances. Regardless of the potential tax deductions, losses, or adjustments, a taxpayer cannot bypass the requirement to pay the minimum tax.

The purpose of minimum tax is to ensure that there is a base level for the tax liability of an individual or business. No matter how many deductions or credits are claimed, or even if a business experiences losses in a given year, the minimum tax establishes a lower limit of tax liability that the taxpayer must pay to the government.

Types of Minimum Tax

We in this blog post will try to cover all sorts of minimum tax that are currently in effective in Bangladesh. Please note our discussion based on Finance Act 2024. If you are reading this post during a time when the provisions of the Finance Act 2024 are no longer applicable, please ensure you update yourself accordingly.

(a) Location-Based Minimum Tax

This particular type of minimum tax is exclusively relevant to individual taxpayers and is determined by the geographical location of the taxpayer. It only applies when the taxpayer’s income exceeds the tax-free threshold. Below is the minimum tax rate according to different locations as per Finance Act 2024:

Location of the assessee	Taka
Assessees residing in Dhaka (both) and Chattogram City Corporation area	5,000
Assessees residing in other City Corporation area	4,000
Assessees residing in other than City Corporation area	3,000

Points to note:

- The minimum tax rate for a taxpayer will be determined based on the location where the taxpayer is residing, regardless of where income is earned.
- If a taxpayer resides in multiple locations during the same income year, the minimum tax applicable to the location where the taxpayer resided the longest will apply to them.
- For business income, the head office of business operation will be considered the taxpayer’s location for the purpose of minimum tax.
- If a salaried taxpayer works in multiple locations during an income year, the location where the salaried taxpayer worked the longest will be considered applicable location for the purpose of minimum tax.
- If the taxpayer is a non-resident, the address the non-resident taxpayer is using in Bangladesh will be considered their location.
- If the amount of tax payable for a taxpayer with income above tax-exempted threshold is less than the applicable minimum income tax, or if, after considering investment tax rebate, the tax payable is less than the applicable minimum income tax or zero (even if negative), the taxpayer must pay the applicable minimum tax.

Consider below two examples to understand this type of minimum tax in details:

Example 1

For the year ended 30 June 2023, Mr. Parves has following income source. Please note he is residing in Uttara area.

Source of Income	Amount
Salary Income:
Basic Salary	375,000
Festival bonus	46,875
House rent allowance	187,500
Medical allowance	45,000
Conveyance allowance	15,000
Total	669,375

Solution 1

Calculation of Tax Payable
Components of Income	Amount	Amount	Amount
Income from Employment:
Basic Salary	375,000
Festival bonus	46,875
House rent allowance	187,500
Medical allowance	45,000
Conveyance allowance	15,000
Total		669,375
Less: Tax Exemption (1/3 of Salary or Tk. 450,000 whichever is lower)		223,125
Taxable Income from Employment			446,250
Total Taxable Income			446,250
Gross tax liability as per Slab
Particulars	Income	Rate	Amount
On first	350,000	0%	–
On next	96,250	5%	4,813
On next	–	10%	–
On next	–	15%	–
On next	–	20%	–
On Balance	–	25%	–
Total	446,250		4,813

As the total taxable amount exceeds tax-free threshold limit so minimum tax will be applicable in the given secenario. Here mimimum tax will be Tk. 5,000 as Mr. Parves is residing in Dhaka City Corporation area.

Example 2

For the year ended 30 June 2023, Mr. Manik has following income source. Please note he is residing in Uttara area.

Source of Income	Amount
Salary Income:
Basic Salary	520,000
Festival bonus	60,000
House rent allowance	234,000
Medical allowance	62,400
Conveyance allowance	20,000
Contribution to RPF	52,000
Total	948,400

Investment details:

He also contributed same amount to RPF	52,000
Purchase of Bangladesh Sanchayapatra	100,000
Share purchase (listed companies)	115,000

Solution 2

Calculation of Tax Payable
Components of Income	Amount	Amount	Amount
Income from Employment:
Basic Salary	520,000
Festival bonus	60,000
House rent allowance	234,000
Medical allowance	62,400
Conveyance allowance	20,000
Contribution to RPF	52,000	948,400
Less: Tax Exemption (1/3 of Salary or Tk. 450,000 whichever is lower)		316,133
Taxable Income from Employment			632,267
Total Taxable Income			632,267

Gross tax liability as per Slab
Particulars	Income	Rate	Amount
On first	350,000	0%	–
On next	100,000	5%	5,000
On next	182,267	10%	18,227
On next	–	15%	–
On next	–	20%	–
On Balance	–	25%	–
Gross tax liability	632,267		23,227

Less: Investment Tax Rebate (lower one) :-
(a) 3% of Total income excluding minimum tax applicable income
3% of Tk. 632,267		18,968

(b) 15% of Actual Investment :
Actual Investment
Share purchase (listed companies)	115,000
Purchase Bangladesh Shanchaypatra	100,000
Both contribution to RPF	104,000
Total actual investment	319,000
15% of Tk. 319,000		47,850

(c) Taka 1,000,000		1,000,000
So, investment tax rebate (lower of (a), (b) or (c) )			18,968
Tax payable after investment tax rebate (23,227 – 18,968)			4,259

As the total taxable amount exceeds tax-free threshold limit so minimum tax will be applicable in the given secenario. Here mimimum tax will be Tk. 5,000 as Mr. Manik is residing in Dhaka City Corporation area.

(b) Minimum tax based on gross receipts

In Bangladesh’s taxation system, there is a specific minimum tax based on gross receipts. As per Section 163(5) of the Income Tax Act 2023, the following entities are required to pay this minimum tax:

- Every company or trust;
- Partnership firms or AOP with gross receipts exceeding Tk. 50 lakh;
- Individual taxpayers with gross receipts exceeding Tk. 3 crore;

The applicable rates of minimum tax on gross receipts for the assessment year 2024-25 are as follows:

Sl No.	Classes of assessee	Rate of minimum tax
1	Manufacturer of cigarette, bidi, chewing tobacco, smokeless tobacco or any other tobacco products	3% of the gross receipts
2	Manufacturer of Carbonated Beverage and sweetened beverage	3% of the gross receipts
3	Mobile phone operator	2% of the gross receipts
4	Individual tax prayer other than Manufacturer of cigarette, bidi, chewing tobacco, smokeless tobacco or any other tobacco products	0.25% of the gross receipts
5	Any other cases	0.60% of the gross receipts

Notes:

Provided that, in the case of an industrial enterprise engaged in manufacturing goods, where serial no. 5 of the said schedule is applicable, the rate for the first 3 (three) years of commercial production shall be 0.1% (zero point one percent) of such earnings.

Example 3

Ms. Sonia Kabir is involved in a trading business. In the income year 2023-24, she imported finished goods with a value of Tk. 2.50 crore and subsequently sold these goods for Tk. 3.50 crore. During the import, Customs collected a tax of Tk. 65,000 from her under section 120 of the Income Tax Act 2023. Throughout the year, Ms. Kabir reported a net profit of Tk. 10.50 lakh from her trading business, with no other sources of income. Her business is located in Mirpur, Dhaka.

Determine the Tax payable of Ms. Sonia Kabir.

Solution 3

Calculation of Tax liability
Components of Income	Amount	Amount	Amount
Income from Business:
Income from Trading business			1,050,000
Total Taxable Income			1,050,000

Gross tax liability as per Slab
Particulars	Income	Rate	Amount
On first (as female)	400,000	0%	–
On next	100,000	5%	5,000
On next	400,000	10%	40,000
On Balance	150,000	15%	22,500
Total tax as per slab	1,050,000		67,500

Calculation of tax liability			Amount
i) Tax as per slab (as above)			67,500
ii) Minimum Tax based on gross receipts (0.25% on Tk. 3.50 core)			87,500
iii) Minimum Tax considering TCS (tax paid at customs stage)			65,000
Tax liability (Higher of three)			87,500

(c) Minimum tax based on TDS or TCS

Another type of minimum tax in Bangladesh Taxation System is the Minimum Tax based on TDS (Tax Deducted at Source) or TCS (Tax Collected at Source). Per Section 163(2) of the Income Tax Act 2023, 40 specific sections related to TDS and TCS have been classified under this category.

Tax amount collected or deducted under 40 sections will be considered as minimum tax. Meaning when you submit income tax return you are not entitled to get refund of the tax so collected or deducted already.

Example 4

PQR Limited sells office furniture to corporate offices. During the year ended 30 June 2024, financial information for his business is as follows:

- Total turnover was Tk. 4 core.
- As per the audited Financial Statements, the reported profit before tax (PBT) is Tk. 30 lac
- As per income tax computation taxable profit stands Tk. 3,565,820
- Moreover, during the year customer deducted tax Tk. 1,427,000

Determine the tax payable of PQR Limited.

Solution 4

Particulars	Amount
Taxable Income	3,565,820
Tax rate	25.00%
(a) Tax as per Rate (Tk. 3,565,820×25% considering cashless)	891,455
(b) Minimum tax as per 163(2) based on TDS	1,427,000
(c) Minimum tax as per 163(5) based on gross receipts @0.60% on 4 core	240,000
So, tax payable (Higher one of (a), (b) & (c) )	1,427,000

List of TDS or TCS Section that categorised under minimum tax

Below is the comprehensive list of TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) sections that are categorized under the Minimum Tax classification. This list is intended to provide clarity on the components that are considered part of the Minimum Tax.

Serial No	Name of Source	Section	Person responsible for deduction or collection	Rate	Minimum Tax?
1	Income from Employment	86	Person responsible for making the payment of salary	Average rate	No
1	Income from Employment from Govt or any other authority	86(3)	Drawing and Disbursing Officer (DDO)	Average rate	No
2	Remuneration to members of Parliament	87	Person responsible for making the payment	Average rate	No
3	Payment to Workers’ Participation Fund & Benevolent Fund	88	Person responsible for making the payment	10%	Yes
4	Payment to contractors, suppliers etc.	89	Person responsible for making the payment	Refer to Rule 3 of TDS Rules 2024	Yes
5	Payment in case of services	90	Person responsible for making the payment	Refer to Rule 4 of TDS Rules 2024	Yes
6	Payment for Intangible assets	91	Person responsible for making the payment	10%; and 12% (if base value exceeds Tk. 25 lacs)	Yes
7	Advertising income of Media Broadcasting	92	Specific person	5%	Yes
8	Payment to actors, actresses, producers, etc.	93	Person responsible for making the payment	10%	No
9	Commission, discount, fees etc.	94	Person responsible for making the payment	1.5%, 3%, 5%, 10%	Yes
10	Travel agent	95	Person responsible for making the payment	0.30%	Yes
11	Amount received as commission on account of letter or credit	96	Person responsible for opening letter of credit	5%	No
12	Amount received as commission on account of local Letter of Credit (LC)	97	Lender, bank or financial institution	3%, 2%, 1%	No
13	Payments by cellular Mobile Phone operators	98	Chief Executive Officer (CEO) of company	20%	No
14	Payment in excess of premium paid on Life Insurance Policy	99	Person responsible for making the payment	5%	No
15	Amount of Insurance commission	100	Person responsible for making the payment	5%	Yes
16	Fees, etc. of surveys of general insurance company	101	Person responsible for making the payment	15%	Yes
17	Interest on saving deposit and fixed deposit etc.	102	Person responsible for making the payment of interest or profit	20%, 10%	Yes
18	Interest income of resident	104	Specific person	10%	No
19	Profit of saving instruments	105	Person responsible for paying profit	10%	Yes
20	Interest on securities	106	Person responsible for issuing Securities	5%	Yes
21	Discount on the real value of Bangladesh Bank bills	107	Person responsible for making payment on account of discount or deduction	Maximum rate	No
22	Receipts in respect of international phone cell	108	Person responsible for making the payment	1.5%, 7.5%	Yes
23	From rent	109	Tenant (Person responsible for making the payment)	5%	No
24	For rendering of services from convention hall, conference centre, etc.	110	Tenant (Person responsible for making the payment)	5%	Yes
25	Compensation against acquisition of property	111	Person responsible for giving compension	6%, 3%	Yes
26	Export cash subsidy	112	Any person responsible for making the payment	10%	Yes
27	Purchase of power	114	Bangladesh Power Development Board or any person engaged in the distribution of eletricity	6%	Yes
28	Income received by the land owner from Real Estate Developer	115	Person engaged in Real estate or Land Development business	15%	Yes
29	Commission or remuneration paid to agent of foreign buyer	116	Bank	10%	Yes
30	Dividend	117	Company incorporated in Bangladesh or Principal Officer (Chief Executive) of any Company	10%, 15%	Yes
31	Income from lottery, etc.	118	Person responsible for making the payment	20%	Yes
32	Income of non-residents	119	Payee	Refer to Rule 5 of TDS Rules 2024	Minimum tax as per Section 119(3)
33	From importers	120	Commissioner, Customs or any other officer empowered for the purpose	Refer to Rule 8 of TDS Rules 2024	Yes
34	Export manpower	121	Director General of Bureau of Manpower, Employment and Training	10%	Yes
35	Clearing and Forwarding Agents	122	Commissioner, Customs	10%	Yes
36	Export income	123	Exporter	1%	Yes
37	Income remitted from aboard in connection with any service, revenue, sharing etc.	124	Person responsible for payment or deposit to the person’s account	10%, 7.5%, 2.5%	Yes
38	In case of Land transfer	125	Registration Officer responsible for the registration of deed documents	Refer to Rule 6 of TDS Rules 2024	Yes
39	Real Estate or Land Developer in case of Buildings or Apartments constructed for residential purposes	126	Person responsible for registering any deed documents for the transfer of Land or Building or Apartment	Refer to Rule 7 of TDS Rules 2024	Yes
40	Commission on Govt. stamp, court fees and cartridge paper	127	Person responsible for the payment	10%	Yes
41	Lease of property	128	Responsible for registration under the Registration Act, 1908 (Act No. XVI of 1908)	4%	Yes
42	Cigarette manufacturers	129	Person responsible for the sale of bandrolls	10%	Yes
43	Brick manufacturers	130	Any person responsible for the renewal of permit	80,000 120,000 160,000 220,000	No
44	Issuance or Renewal of Trade License	131	Person responsible for Renewal	500 1,000 2,000	No
45	Shipping business of a Resident	132	Authorized Commissioner of Customs or any other authority	3% 5%	Yes
46	Sales by public auction	133	Any person responsible for the transfer of title to goods or property or permission to exercise any right	10% 1%	Yes
47	Transfer of share	134	Person responsible for registering the transfer of shares in the company	15%	Yes
48	Transfer of securities including sponsor, director and placement share	135	Shareholder or any director or any holding company sponsor or stock sponsor or under permission to transfer units of mutual fund listed on stock exchange or sponsor or holder of any mutual fund	10%	Yes
49	Transfer of share of shareholder of stock exchanges	136	Chief Executive Officer of Stock Exchange	15%	Yes
50	Member of stock exchanges	137	Chief Executive Officer of Stock Exchange	0.05%	Yes
51	Motor vehicles plying commercially	138	Person or Authority responsible for registration or renewal of fitness of motor vehicles	Refer to Section 138	Yes
52	Operations of marine vessels	139	Person responsible under the Inland Shipping Ordinance, 1976 (Ordinance No. LXXII of 1976)	Refer to Section 139	Yes

Tax paid at the time of vehicle registration or fitness renewal will be Minimum Tax

According to Section 153(1) of Income Tax Act 2023, the owner of a motor vehicle is required to pay advance tax (commonly referred to as a “Tax Token”) when registering the vehicle or renewing its fitness certificate. The amount of advance tax depends on the vehicle’s engine capacity (CC) or power (kW). As stated in Section 153(7) of Income Tax Act 2023, the advance tax paid under this section is non-refundable, meaning it is generally regarded as minimum tax. To find out the applicable tax rates for this purpose, please click on the link below:

- Rate of vehicle tax/ amount of tax token under Section 153 of the Income Tax Act 2023.

Final Tax Settlement

Final tax refers to a tax that is directly deducted or collected at the source from an assessee’s income, such as when they earn interest from government bonds (Sanchaypatra) or received export cash subsidy. Once this tax is deducted or collected, the assessee is not required to pay any additional tax when they file their income tax return. In other words, the tax obligation for this particular income is fully discharged with the initial deduction or collection, which is why it is known as a “Final Tax Settlement.”

Final tax is only applicable to certain categories of income here in Bangladesh. Here is the list of Section which fall under Final Tax:

Serial No	Name of Source	Section	TDS Rate	Reference	Applicable
1	Interest on saving deposit and fixed deposit etc.	102	20%, 10%	SRO NO. 253-Law/Income Tax-09/2024, dated 23 August 2023	Only for the assessee exempted from return filling u/s 166(2)
2	Profit of saving instruments	105	10%	SRO NO. 253-Law/Income Tax-09/2024, dated 23 August 2023	Only for Individual Assessee
3	Compensation against acquisition of property	111	6%, 3%	SRO NO. 17-Law/Income Tax-24/2024, dated 30 January 2024	Only for Individual Assessee (for AY 2023-24 only)
4	Export cash subsidy	112	10%	SRO NO. 253-Law/Income Tax-09/2024, dated 23 August 2023	Any assessee
5	In case of Land transfer	125	Refer to Rule 6 of TDS Rules 2024	SRO NO. 286-Law/Income Tax-16/2023, dated 11 October 2023	Only for Individual Assessee

Conclusion

We have made an effort to address the effects of minimum tax in multiple contexts. We hope this comprehensive explanation has shed light on how the minimum tax provisions impact the determination of income tax liability. If you have any questions or need further clarification, please feel free to contact us in the comments section.