Tax on Capital Assets in Bangladesh – The requirement to show proof of submission of a return or PSR is stipulated under Section 264 of Income Tax Act 2023. According to Section 264 of ITA 2023, proof of submission of a return or PSR is necessary in case of 43 types of services, including but not limited to taking a loan exceeding 20 lakh, obtaining a credit card, serving as a director of a company, receiving a salary, and selling or purchasing property (land, building, or apartments) exceeding Tk. 10 lakh.
Requirement to show Proof of submission return or PSR at the time of land, building or apartment sale or registration
According to Serial No. 7 of Section 264(3) of the Income Tax Act 2023, the submission of a PSR is necessary at the time of sale, lease, transfer, BAINA NAMA(বায়নানামা), and AM MOKTAR NAMA(আমমোক্তারনামা) of land, building, or apartment located within a City Corporation, Pourashava, or Cantonment Board if the value of such property exceed Tk. 10 lakh. Furthermore, Rule 6(6) and Rule 6A(4) of the TDS Rules 2023 provide detailed clarification of this provision. According to Rule 6(6) and Rule 6A(4) of the TDS Rules 2023, a PSR is required at the time of registration of land, infrastructure, house, flat, apartment, or floor space.
Who have to submit PSR
In accordance with Section 264 of Income Tax Act 2023 and Rule 6 & 6A of TDS Rules 2023, both the purchaser and the seller of the property are required to present proof of submission of return (PSR) at the time of registration. It is important to note that failure to provide proof of submission of return (PSR) will result in the registering authority declining to proceed with the registration of the deed of transfer.
What is mean by “Transfer”?
In the above discussion, you may have observed the frequent use of the term “transfer” across various sections. You might wonder what falls under the definition of “transfer.”
It’s important to note that the definition of “transfer” is provided in clause 93 of Section 2 of the Income Tax Act 2023. According to this clause, in case of capital assets, “transfer” shall include sale, exchange, relinquishment, or extinguishment of any title to the asset. However, “transfer” shall not include the transfer of capital assets if such transfer occurs by way of donation, under a will, bequest, or an irrevocable trust.
In which case submission of PSR is not required for Land sale
According to the definition, transfer made through donation, under a will, bequest, or an irrevocable trust are not considered as “transfer.” Therefore, the submission of PSR is not applicable in such cases. This implies that if you are the recipient or provider of property through donation, under a will, bequest, or an irrevocable trust, you are not obligated to submit PSR or TIN. The registering authority will not request you to file PSR or TIN under the legal framework.
Clarification from Directorate of Registration (RD)
On May 9, 2024, the Directorate of Registration issued an ‘Office Order’ stating that the submission of PSR is not necessary in the case of transfer made through donation, under a will, bequest, or an irrevocable trust. The order explicitly cites the definition of “transfer” provided in Clause 93 of Section 2 of the Income Tax Act 2023. Additionally, it refers to Rule 6 & 6A of the TDS Rules 2023 regarding the requirement to present PSR.
By referring to section 2(93) of Income Tax Act 2023, the Directorate of Registration has instructed registering officers to adhere to the provisions of the Income Tax Act during the registration process. To view the order, please click on the link below.
Tax collection on Property Transfer
No tax collection for the below transfer
Please be aware that tax collection under Rule 6 of TDS Rules 2023 does not apply in the following cases:
- Registration of deeds of distribution according to succession or partnership (উত্তরাধিকার বা শরিকানা মোতাবেক বন্টননামা দলিল নিবন্ধন);
- Registration of Waqf or deeds of endowed property (ওয়াক্ফ বা দেবোত্তর দান দলিল নিবন্ধন);
- Registration of deeds under Heba, donation, under a will, bequest, or an irrevocable trust (পণ বা পণের বিকল্প কোনো সুবিধাবিহীন দলিল, যেমন: হেবা, দান, উইল, অছিয়ত বা এওয়াজ অথবা বিনিময় দলিল নিবন্ধন);
Conclusion – Tax on Capital Assets in Bangladesh
The submission of PSR and tax collection are covered under Rule 6 & 6A of the TDS Rules 2023. Tax collection and PSR submission are not applicable if the transfer occurs through donation, under a will, bequest, or an irrevocable trust.
Reference or source - Tax on Capital Assets in Bangladesh
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