Mandatory submission of income tax return, more steps required

Budget of financial year 2022-23 has been passed in parliament. Proposed replacement of section 184A of Income Tax Ordinance, 1984 has also been passed unchanged. Through replacing this section evidence of submitting income tax return has been made mandatory for 38 services. As per practice it has come into effect from 1st July, 2022. Among those 38 sectors purchase of savings instruments (commonly known as sanchaypatra) is a very important one for people of different levels.

According to replaced provisions (xxi) and (xxii) of sub-section 3 of section 184A evidence of submitting income tax return for purchase of sanchaypatra and opening postal savings account exceeding Tk. 5,00,000/- is mandatory. Considering exigency of the matter Directorate of National Savings has issued a letter to Governor, Bangladesh Bank and Director General, Posts regarding compliance of this provision on 7th July mentioning that in such cases the investor has to produce proof of submitting income tax return as supporting evidence. Here evidence includes –

(a) Acknowledgement slip of submission of income tax return or

(b) System generated certificate containing name and TIN of the person and the year for which return has been submitted or

(c) Certificate issued by the DCT containing name and TIN of the person and the year for which return has been submitted.

As mentioned in paragraph 2 of the letter, as per sub-section 9 of section 184A, in case of institutional investment TIN is to be produced in lieu of evidence of filing return. There is a little obscurity here because system generated TIN certificate is initially issued by NBR. Afterwards, if necessary, TIN certificate containing more details is to be collected from circle offices signed by DCT. Probably this line refers to system generated TIN certificate issued by NBR Moreover, there is another problem in this line because in replaced section 184A there is no sub-section 9. It contains 7 sub-sections. This matter should be resolved.

According  section 184A(3)(xxiii) and the letter no proof of submitting income tax return for purchase of sanchaypatra up to Tk. 5,00,000/- will be required. But computer system (server) of Bangladesh Bank still (upto 13-7-2022) demands TIN certificate for issuing sanchaypatra exceeding Tk. 2,00,000/-. So, concerned officials of Bangladesh Bank are confused. It is not so complex a problem. It may be solved easily. This decision will exempt many small investors from filing income tax return at least for purchasing sanchaypatra and opening postal savings account up to Tk. 5,00,000/-.

Submitting income tax return, initially or subsequently, is not so easy a process. Recently, through YouTube, a person has suggested the way of avoiding the complexities of submitting return. If anybody intends to purchase sanchaypatra for Tk. 10,00,000/- he will have to produce evidence of submitting return mandatorily. But if he purchases sanchaypatra upto Tk. 5,00,000/- in two names (own and another viz. father, mother, brother, sister, son, daughter or anyone else whom he prefers) jointly he will not have to produce any such evidence. Legally, there is nothing wrong in it because law, i.e. replaced section 184A, itself has provided such opportunity of segregation. At present profit/interest of savings certificate is directly deposited to bank account of the purchaser through EFT system. So, a bank account is required for purchasing sanchaypatra but opening a bank account is not so tough. As declared by finance minister, this mandatory provision has been introduced for the purpose of increasing number of returns. The just introduced provision will to some extent hamper the initiative.

There is opportunity to purchase sanchaypatra jointly by two persons. It has not been mentioned in such cases whose evidence of submitting return is to be produced. However, it may be assumed that evidence of both the purchasers will be required if the value exceeds Tk. 5,00,000/.

Directorate of National Savings deserves thanks for clarifying the matter for both service providers and service receivers. Beyond this there are more than 40 other departments where proof of submitting income tax return will be required mandatorily for getting services. Those departments may also take similar initiatives for their service-seekers. Clarification may be displayed at visible place of the office or public notice may be issued/published.

According to section 184A(3)(xxii) proof of submitting income tax return  will be required for opening and continuing any kind of bank account if credit balance exceeds Tk. 10,00,000/- but no date of balance has been mentioned. Balance may exceed Tk. 10,00,000/- or decrease on different dates. At present 61 scheduled banks (nationalised, private, foreign) are working in Bangladesh with more than 11,000 branches having around 8.5 million accounts (FRED economic data, 2019) of different types. According to statistics of Bangladesh Bank, up to March 2021 number of bank accounts having deposit exceeding taka one crore was 94,272.

Though some of those accounts are owned by government, semi-government, autonomous organisations, NGOs, firms and companies, it is easily intelligible that number of bank accounts having Tk. 10,00,000/ credit balance is much higher. Huge number of such account holders (also bankers) are not yet aware of this newly introduced mandatory provision of law. It will be a Herculean task for banks to collect such evidence from their depositors.  Moreover, there are non-banking financial institutions also.

According to section 184A(6) the service providing officer will verify the authenticity of proof of submitting return in the manner as prescribed by NBR but that manner has not yet been framed. For this reason purchase of sanchaypatra or getting any other service will be delayed. Concerned officials will not take the risk of providing service without verification. They will wait for the guideline of NBR. It is beyond doubt that time is required to be habituated with the application of any new law. To avoid procrastination and to make the law effective quick initiative from concerned offices is required. Connectivity between income tax offices (circles) and other concerned departments needs to be increased and accelerated.

The writer is a former Commissioner of Taxes. He can be contacted at chinmayprasunbiswas@yahoo.com