You have failed to file your income tax return. What do you think will happen? If tax officials take strict action, you could face a fine of up to Tk 50,000. They could even disconnect your gas and electricity supplies.
Bangladesh has more than 12.5 million holders of Taxpayer Identification Numbers (TINs). Around five million taxpayers file returns each year, while the remaining 7.5 million do not.
Under the law, not every TIN holder must file a return. Anyone with taxable income must do so. Returns are also required to access 45 types of public and private services.
National Board of Revenue (NBR) officials believe that a large number of people with taxable income have failed to file returns. Let us look at the penalties for failing to submit an income tax return.
What happens if you fail to file a return?
Under the Income Tax Act, taxpayers may face five types of penalties and complications. These include:
1. A fine of up to Tk 50,000
If a taxpayer fails to submit a return within the stipulated deadline, tax officials can take action under Section 266 of the Income Tax Act.
The section states that if a taxpayer fails to file an income tax return, officials may impose a penalty equivalent to 10 per cent of the tax payable on the taxpayer’s most recently assessed income.
However, the penalty must be at least Tk 1,000 and cannot exceed Tk 50,000. If the failure continues, officials may impose an additional penalty of Tk 50 for each day of non-compliance. A taxpayer may also face a fine of Tk 50,000 for failing to provide return-related information when requested as part of an investigation.
2. No tax relief available
Taxpayers who fail to file their returns within the stipulated deadline will not qualify for tax exemptions and reliefs. Under Section 174 of the Income Tax Act, the scope of tax relief will be restricted.
You may have previously received tax relief by investing each year in government-designated schemes, including savings certificates. However, if you fail to submit your return within the prescribed deadline, you will no longer qualify for these tax benefits.
3. An additional 2 per cent tax
Taxpayers who fail to submit their returns within the stipulated deadline must pay an additional tax at the rate of 2 per cent per month on the tax imposed.
4. Disconnection of gas and electricity supplies
If you fail to file your income tax return on time, tax officials have the authority to disconnect the gas and electricity supplies to your home. They can also disconnect gas and electricity supplies to industrial facilities if their owners fail to file the required income tax returns.
The authorities can disconnect not only electricity but also gas, water and any other state-provided utility services.
5. Complications in receiving salaries
The law makes income tax return filing mandatory for officials in specified senior pay grades, equivalent to first-class government officers, in both public and private sector employment. Therefore, failure to submit a return within the stipulated deadline may create complications in receiving salaries and allowances.
Employers may request a copy of the submitted return and, in its absence, may announce deductions or withholding of salaries and allowances. The same requirement applies to mid-level officials in the private sector.
What is the deadline for filing a return?
From the current financial year, taxpayers can file their returns throughout the year. Those who file during the first three months (July–September) can qualify for tax relief.
Taxpayers who file between October and December must pay the tax assessed without the benefit of that relief. Those who file between January and June must pay the applicable tax along with penalties.
Therefore, taxpayers will face return-related penalties, additional tax and other punitive measures only after the relevant financial-year deadlines have passed.