Tax Deduction at Sources

Tax deduction at source: In some specific areas, the paying authority is required to deduct tax at source before the income reaches to the hand of an assessee. In such a case, the assesses receives after-tax income in one sense though it is not a final settlement and the tax deducting or paying authority is working as an agent of the government.

Tax deduction at source (TDS) is sometimes termed as “withholding tax” as it remains withholding in the hand of the tax deducting authority until the amount so collected is not deposited to the government exchequer. It is a system introduced by Income Tax Department, where the person responsible for making specified payments such as salary, commission, professional fees, interest, rent, etc. is liable to deduct a certain percentage of tax before making payment in full to the receiver of the payment.

Income subject to deduction at source: Under ITO, a tax shall be deducted or collected at source in respect to the income, namely –

1. Income classifiable under the head “Salaries”,
2. Income from a discount on the real value of Bangladesh Bank,
3. Income classifiable under the head “Interest on security”,
4. Income derived on account of supply of goods, execution of contracts or services rendered.
5. Income derived by the importers and exporters on account of import and export of goods;
6. Income derived from the account of indenting;
7. Income derived from the account of winnings from lottery or crossed puzzles.
8. Any income chargeable under this Ordinance which is paid or payable to a non-resident.
9. Income classifiable under the head “Income from house property”,
10. Income derived on account of export of manpower.
11. Income derived on account of purchases by public auction.
12. Income derived from the account of acting in films,
13. Income derived on account of insurance commission,
14. Income classifiable under the head “Capital gain”,
15. Income derived from compensation against the acquisition of property.