Income Tax Ordinance

THE FIRST SCHEDULE - PART B

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THE FIRST SCHEDULE PART B

THE FIRST SCHEDULE
PART B
RECOGNISED PROVIDENT FUNDS
[See section 2(52)]

1. Definition.-

For the purposes of this Part,-

(a) "accumulated balance due" to an employee means the balance to his credit, or such portion thereof as may be claimable by him under the regulations of the fund, on the day he ceases to be an employee of the employer maintaining the fund;


(b) "annual accretion" to the balance to the credit of an employee means the increase to such balance in any year, arising from contributions and interest;


(c) "balance to the credit" of an employee means the total amount to the credit of his individual account in a provident fund at any time;


(d) "contribution" means any sum credited by or on behalf of any employee out of his salary, or by an employer out of his own money to the individual account of an employee, but does not include any sum credited as interest;


(e) "employee" means an employee participating in a provident fund but does not include a personal or domestic servant;


(f) "employer" means-
 

1[(i)  a  company,  firm,  other  association  of  persons,  a  Hindu  undivided family or an individual engaged in a business or profession the profits and gains whereof is assessable to tax under the head "Income from business or profession", maintaining a provident fund for the benefit of his or  its employees]; or


2[(ii)  any  diplomatic,  consular  or  trade  mission  or  office  of  any intergovernmental  organization  located  in  Bangladesh,  maintaining  a provident fund for the benefit of Bangladeshi employees of such mission or office;]


(g) "recognized provident fund" means a provident fund which has been and continues  to  be  recognised  by  the  Commissioner,  in  accordance  with  the provisions of this part;


(h) "regulations of a fund" means the special body of regulations governing the constitution and administration of a particular provident fund; and


(i)  "salary"  includes  dearness  allowance  if  the  terms  of  employment  so provides, but excludes all other allowance and perquisites.


2.  According  and withdrawal  of  recognition  of  provident funds.-

3[(1) The Commissioner shall, within 4[forty five days] from the date of receipt of the application  by  him  for  according  recognition  to  any  provident  fund,  accord such  recognition,  failing  which  the  provident  fund  shall  be  deemed  to  have been accorded recognition, and the Commissioner may, if, in his opinion, the provident fund contravenes any of the conditions specified in paragraph 3 and the rules made by the Board in that behalf,  withdraw such recognition at any time.]


(2)  An  order  according  recognition  shall  take  effect  on  such  date  as  the Commissioner may fix in accordance with any rules the Board may make in this behalf, such date not being later than the last day of the financial year in which the order is made.


(3) An order according recognition to a provident fund shall not, unless the Commissioner  otherwise  directs,  be  affected  by  the  fact  that  the  fund  is subsequently amalgamated with another provident fund on the occurrence of an amalgamation of the undertaking in connections with which the two funds are maintained or that it subsequently absorbs the whole or a part of another provident  fund  belonging  to  an  undertaking  which  is  wholly  or  in  part transferred to or merged in  the undertaking of the employer maintaining the first mentioned fund.

(4) An order withdrawing recognition shall take effect from the day on which it is made.


(5) The  Commissioner  shall  neither  refuse  nor  withdraw  recognition  of  any provident fund, unless the applicant is given a reasonable opportunity of being heard.


3. Conditions to be satisfied by a recognised provident fund.-

In order that a provident  fund  may  receive  and  retain  recognition,  it  shall  satisfy  the conditions  set  out  below  and  any  other  conditions  which  the  Board  may prescribe-

(a) all employees shall be employed in Bangladesh or shall be employed by an employer whose principal place of business is in Bangladesh:


Provided  that  the  Commissioner  may,  if  he  thinks  fit  and  subject  to  such conditions,  if  any,  as  he  thinks  proper  to  attach  to  the  recognition,  accord recognition  to  a  fund  maintained  by  an  employer  whose  principal  place  of business  is  not  in  Bangladesh  notwithstanding  that  a  proportion  not exceeding ten per cent of the employees is employed outside Bangladesh;


(b) the contributions of an employee in any year shall be a definite proportion of  his  salary  for  that  year,  and  shall be  deducted  by  the  employer  from  the employee's  salary  in  that  proportion  at  each  periodical  payments  of  such salary  in  that  year  and  credited  to  the  employee's  individual  account  in  the
fund;


(c) the contributions of an employer to the individual account of an employee in any year shall not exceed the amount of the contributions of the employee in  that  year,  and  shall  be  credited  to  the  employee's  individual  account  at intervals not exceeding one year:


Provided that, subject to any rules which the Board may make in this behalf, the Commissioner may, in respect of any particular fund, relax the provisions of this clause-

(i)  so as to permit the payment of larger contributions by an employer to the individual accounts of employees whose salaries do not, in each case, exceed five hundred taka per mensem; and

(ii) so as to permit the crediting by employers to the individual accounts of employees of periodical bonuses or other contributions of a contingent nature, where the calculation and payment of such bonuses or other contributions is provided for on definite principles by the regulations of the fund;


(d) the fund shall consist of contributions as above specified and of donations, if  any,  received  by  the  trustees,  of  accumulations  thereof,  and  of  interest, credited in respect of such contributions, donations and accumulations, and of securities purchased therewith and of any capital gains arising from the sale, exchange or transfer of capital assets of the fund, and of no other sums;


(e) the fund shall be vested in two or more trustees or in the official trustee under  a  trust  which  shall  not  be  revocable  save  with  the  consent  of  all  the beneficiaries;


(f) the employer shall not be entitled to recover any sum whatsoever from the fund,  save  in  cases  where  the  employee  is  dismissed  for  misconduct  or voluntarily leaves his employment otherwise than on account of ill health or other unavoidable cause before the expiration of the term of service specified in this behalf in the regulations of the fund:


Provided  that  in  such  cases  the  recoveries  made  by  the  employer  shall  be limited  to  the  contributions  made  by  him  to  the  individual  account  of  the employee,  and  to  interest  credited  in  respect  of  such  contributions  and accumulations thereof, in accordance with the regulations of the fund;


(g) the accumulated balance due to an employee shall be payable on the day he ceases to be an employee of the employer maintaining the fund;


(h) save as provided in clause (g), or in accordance with such conditions and restrictions as the Board may prescribe, no portion of the balance to the credit of an employee shall be payable to him.

4. Annual  accretion  deemed  to  be  income  received  by  the  employee.- 

The annual  accretion  in  any  year  to  the  balance  at  the  credit  of  an  employee participating  in  a  recognised  provident  fund  shall  be  deemed  to  have  been received by him in that year and shall be included in his total income for that year, and, subject to the exemptions specified in paragraph 5 shall be liable to tax5[.

Provided that, for the purposes of section 44(3), out of such annual accretion only the employee's own contributions shall be included in his total income.]


5. Exemption  of  annual  accretion  from  tax.- 

(1)  An  employee  shall  not  be liable  to  pay  tax  on  contribution  to  his  individual  account  in  a  recognised provident fund,  in  so  far as  the aggregate  of  such  contributions in any  year does not exceed one-third of his salary for that year.


(2)  Interest  credited  on  the  accumulated  balance  of  any  employee  in  a recognised provident fund shall be exempt from payment of tax, if and in so far as it does not exceed one-third of the salary of the employee for the year concerned and in so far as it allowed at a rate not exceeding such rate as the Board may, by notification in the official Gazette, fix in this behalf.


6. Exemption  of  accumulated  balance  from  tax.- 

Where  an  employee participating in a recognised provident fund has rendered continuous service with his employer for a period of not less than five years, and the accumulated balance  due  to  him  becomes  payable,  such  accumulated  balance  shall  be exempt from payment of tax and shall be excluded from the computation of his total income:


Provided  that  the  Commissioner  may  allow  such  exemption  and  exclusion where the employee has rendered continuous service with the employer for a period  of  less  than  five  years,  if  in  his  opinion,  the  service  has  been terminated  by  reason  of  the  employee's  ill  health,  or  by  the  contraction  or discontinuance of the employer's business, or other cause beyond the control of the employee.


7. Tax on accumulated balance.-

Where exemption from payment of tax is not allowed under paragraph 6, the Deputy Commissioner of Taxes shall calculate the total of the various sums of tax which would have been payable by the employee in respect of his total income for each of the years concerned if the fund had not been a recognised provident fund, and the amount by which such total exceeds the total of all sums paid by or on behalf of such employee by way of tax for such years shall be payable by the employee in addition to any tax for which he may be liable for the income year in which the accumulated balance due to him becomes payable.

8.   Deduction at source of tax on accumulated balance due.- 

The trustees of a recognised provident fund, or any other person authorised by the regulations of the fund to make payment of accumulated balance due to employees shall, at  the  time  an  accumulated  balance  due  to  an  employee  is  paid,  deduct therefrom  any  tax  payable  under  paragraph  7  and  any  tax  payable  under paragraph  10(4),  and the provisions  of  Chapter  VII  shall,  so  far  as  may  be, apply  as  if  accumulated  balance  was  income  chargeable  under  the  head "Salaries".


9. Accounts of recognised provident funds.- 

(1) The accounts of a recognised provident fund shall be maintained by the trustees of the fund and shall be in such form and for such periods and shall contain such particulars as the Board may prescribe.


(2)  The  accounts  shall  be  open  to  inspection  at  all  reasonable  times  by  the income  tax  authorities,  and  the  trustees  shall  furnish  to  the  Deputy Commissioner of Taxes such abstracts thereof as the Board may prescribe.


10. Treatment  of  balance  in  newly  recognised  provident  funds.-

(1)  Where recognition is accorded to a provident fund with existing balance, an account shall  be  made  of  the  fund  up  to  the  day  immediately  preceding  the  day  on which the recognition takes effect, showing the balance to the credit of each employee on such day, and containing such further particulars as the Board may prescribe.


(2) The account shall also show in respect of the balance to the credit of each employee  the  amount  thereof  which  is  to  be  transferred  to  that  employee's account in the recognised provident fund, and such amount (hereinafter called his  transferred  balance)  shall  be  shown  as  the  balance  to  his  credit  in  the recognised provident fund on the date on which the recognition of the fund takes effect, and sub-paragraph (4) and (5) shall apply thereto.


(3)  Any  portion  of  the  balance  to  the  credit  of  an  employee  in  the  existing fund which is not transferred to the recognised fund shall be excluded from the accounts of the recognised fund and shall be liable to tax in accordance with the provisions of this Ordinance other than this Part.

(4) Subject to such rules as the Board may  make in this behalf, the Deputy Commissioner of Taxes shall make a calculation of the aggregate of all sums comprised in a transferred balance which would have been liable to tax if this part had been in force, from the date of institution of the fund, without regard to any tax which may have been paid on any such sum, and such aggregate, if any,  shall be deemed to be income received by the employee in the income year in which the recognition of the fund takes effect, and shall be included in the  employee's  total  income  for  that  income  year,  and  for  the  purposes  of assessment, the remainder of the  transferred balance shall be disregarded, but
no other exemption or relief, by way of refund or otherwise, shall be granted in respect of any sum comprised in such transferred balance :


Provided  that,  in  cases  of  serious  accounting  difficulty,  the  Commissioner shall have power, subject to the said rules, to make a summary calculation of such aggregate.


(5)  Notwithstanding  anything  contained  in  paragraph  3(h),  an  employee  in order to enable him to pay the amount of tax assessed on his total income as determined  under  sub-paragraph  (4),  shall  be  entitled  to  withdraw  from  the balance to his credit in the recognised provident fund a sum not exceeding the difference between such amount and the amount to which he would have been assessed if the transferred balance had not been included in his total income.


(6)  Nothing  in  this  paragraph  shall  affect  the  rights  of  the  persons administering an unrecognised provident fund or dealing with it, or with the balance  to  the  credit  of  any  individual  employee,  before  recognition  is accorded, in any manner which may be lawful.


11. Treatment  of  fund  transferred  by  employer  to  trustee.- 

(1)  Where  an employer who maintains a provident fund (whether recognised or not) for the benefit of his employees and has not transferred the fund  or any portion of it, transfers  such  fund  or  portion  to  trustees  in  trust  for  the  employees participating in the fund, the amount so transferred shall be deemed to be of the nature of capital expenditure.


(2)  When  an  employee  participating  in  such  fund  is  paid  the  accumulated balance due to him therefrom, any portion of such balance as represents his share in the amount so transferred to the trustee (without addition of interest, and  exclusive  of  the  employee's  contributions  and  interest  thereon)  shall,  if the employer has made effective arrangement to secure that tax shall be deducted at source from the amount of such share when paid to the employee, be deemed to be an expenditure by the employer within the
meaning  of  section  29(1)  (xxvii),  incurred  in  the  income  year  in  which  the accumulated balance due to the employee is paid.


12. Provisions of this Part to prevail against regulations of the fund.-

Where there is a repugnance between any regulation of a recognised provident fund and any provisions of this Part or of the rules made thereunder, the regulation shall, to the extent of the repugnance, be of no effect; and the Commissioner may  at  any  time,  require  that  such  repugnance  shall  be  removed  from  the regulations of the fund.


13.  Appeals.-

(1)  An  employer  objecting  to  an  order  of  the  Commissioner refusing  to recognise  or  an  order  withdrawing  recognition from  a  provident
fund may prefer an appeal, within sixty days of the date of such order,   to the Board.


(2) The appeal shall be in such from and shall be verified in such manner as may be prescribed.


14. Provisions relating to rules.-

In addition to any power conferred by this Part, the Board may make rules-

(a) prescribing the statements and  other information to be submitted with an application for recognition;
(b)  limiting  the  contributions  to  a  recognised  provident  fund  by employees of a company who are shareholders in the company;
(c)  providing  for  the  assessment  by  way  of  penalty  of  any consideration  received  by  an  employee  for  an  assignment  of  or creation  of  a  charge  upon  his  beneficial  interest  in  a  recognised provident fund;
(d)  determining  the  extent  to  and  the  manner  in  which  exemption from payment of tax may be granted in respect of  contributions and interest  credited  to  the  individual  accounts  of  employees  in  a provident fund from which recognition has been withdrawn;

(e) regulating the investment or deposit of the moneys of a recognised provident fund ; and
(f) generally, to carry out the purposes of this Part, and to secure such further  control  over  the  recognition  of  provident  funds,  and  the administration of recognised provident fund, as it may deem requisite.

15.   Application of this Part.-

This Part shall not apply to any provident fund to which the Provident Fund Act, 1925 (XIX of 1925), applies.

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1Subs. by F.A. 1997

2Ins. by F.A. 1987, re-numbered as sub-clause (ii) by F.A. 1996
3Subs. by F.A. 1995
4Subs. for "six moths" by F.A. 2002 again subs. for "thirty days" by F.O. 2008

5Subs. by F.A. 2017 ane ometted by 2017