Late tax return filers to face increased liabilities

Delayed submission of income tax returns will result in increased tax liability for taxpayers, coupled with penalties and interest charges, in accordance with the new Income Tax Law.

The final day for submitting tax returns is 30 November, a date also celebrated as Tax Day. Under the Income Tax Law that was passed in the parliament on 18 June this year, taxpayers who fail to submit their tax returns before Tax Day will face penalties, interest for late payments, and adjustments to their tax calculations.

As a consequence, individuals who fail to submit their returns on time will face a significant increase in their tax obligations this year, a senior official from the income tax wing of the National Board of Revenue (NBR) told The Business Standard on the condition of anonymity.

Per the updated law, individuals with an annual minimum taxable income of Tk3.5 lakh are obligated to submit income tax returns. Failure to submit returns intentionally or unintentionally will result in the denial of access to 43 different public and private services that require proof of submission of returns.

According to the new law, individuals who do not submit their returns by Tax Day will be subject to a monthly late payment interest of 4%. Additionally, a penalty of 10% will be imposed on the latest tax payable (based on the previous year's income) or Tk1,000, whichever is higher. This accompanies changes in the tax calculation process, requiring taxpayers to pay taxes on their total income.

Under this new provision, taxpayers will not qualify for income tax exemptions or rebates. Unlike the prior regulations, there is no provision for filing an application for an extended time. The previous rules allowed for an application with proper cause to a deputy commissioner of taxes for up to two months, with the possibility of another two-month extension granted by joint/additional commissioners of taxes.

Under the previous system, a 2% delayed payment interest was applicable for the extended time period, and taxes were computed based on the taxpayer's tax-exempt sector and a tax rebate of 7.5% instead of 15%.

The revised law now permits tax return submissions at any time during the year, subject to penalties and late payment interest. 

Dr Muhammad Abdul Mazid, former chairman of the NBR, told TBS that tax return submission within the deadline should be made mandatory.

Mentioning that the new law is intended to make the taxation system taxpayer-friendly, he observed that the withdrawal of the tax rebate facility and imposition of penalties for delayed tax return submissions will lead to complexities.

He suggested a reevaluation of these provisions and stressed the necessity of addressing taxpayer concerns while ensuring effective implementation of the law to enhance revenue collection.