BRPD Circular Letter No. 09: Deduction of Income Tax at Source on Commission Received by Selling Prize Bonds and Saving Certificates

Ref No.: DM/SP-04/2014-278 Banking Regulation and Policy Department Bangladesh Bank Head Office Dhaka. May 21, 2014

BRPD Circular Letter No. 09 Dated: 07 Jyestha, 1421

To, Managing Director / Chief Executive Officer All Scheduled Banks operating in Bangladesh.

Dear Sir,

Subject: Deduction of Income Tax at Source on Commission Received for Selling Prize Bonds and Various Saving Schemes.

A copy of the letter No. 08.01.0000.030.06.003.2013.11(2) dated March 02, 2014, from the National Board of Revenue on the subject mentioned above is reprinted here for your information and necessary action.

2. You are requested to follow the instructions given below and ensure their compliance in all your branches.

Thanking you,

Yours faithfully,

(Md. Anowarul Islam) Deputy General Manager Phone: 9530094

Government of the People's Republic of Bangladesh National Board of Revenue Revenue Bhaban, Segun Bagicha, Dhaka. (Tax Policy Branch)

File No.: 08.01.0000.030.06.003.2013.11(2) Date: 02.03.2014

Reference:

1. Letter from the Office of the Controller of National Savings No. F-2(141)-Jasp(Policy)/07/397, dated: 20.02.2014.
2. Letter from Bangladesh Bank No. DM/SP-04/2014-278, dated: 12.02.2014.

With reference to the subject and references cited above, your attention is invited.

After examining the referenced letters, the Tax Policy Branch of the National Board Revenue issues this clarification:

1. The commission received by scheduled banks for the sale of prize bonds and saving certificates of saving schemes sold by them is received in consideration of service provision. The Income Tax Ordinance, 1984 primarily prescribes the deduction of tax on commission received in consideration of supply of goods under Section 53. In this context, the deduction of tax under Section 53 is not applicable on the commission received by scheduled banks for the sale of prize bonds and saving certificates.

2. However, with effect from July 1, 2011, Section 52AA of the Income Tax Ordinance, 1984 has been enacted to provide that, except for the specific services listed in Appendix 'B' of the Income Tax Ordinance, 1984, a withholding tax of 10% must be deducted on any payment made for the provision of any other service.

3. Therefore, a withholding tax of 10% must be deducted on the commission received by scheduled banks for the sale of prize bonds and saving certificates of saving schemes sold by them, on or after July 1, 2011.

Signed,

Sahela Siddika Second Secretary (Tax Law-I)

Subject: Deduction of Income Tax at Source on Commission Received for Selling Prize Bonds and Various Saving Schemes by Scheduled Banks.