Three major financial losses for individual taxpayers
If an individual taxpayer fails to file a tax return by Tax Day, he or she will face three major financial losses that will significantly increase their tax liability.
The National Board of Revenue (NBR) has extended the Tax Day by two months to 31 January 2024 and it is important to confirm the tax return submission by the day to avoid the huge financial loss.
According to Income Tax Act 2023, taxpayers don't need to apply for a time extension and you may submit your tax return anytime but you will lose the tax benefits.
Let's discuss three major financial losses that will impact your tax amount:
No tax rebate benefit
The tax rebate facility is provided on the investment allowance which reduces an individual's tax liability equivalent to 15 percent of investment allowance or 3 percent of taxable income, whichever is lower.
Suppose, your taxable income is Tk 600,000 and on this amount, the tax rebate shall be Tk 18,000. You will lose this tax rebate amount due to failure of tax filing by Tax Day.
No tax exemption benefit
According to tax law, there are several incomes that are exempted from tax and are excluded from taxable income. Therefore, you don't need to pay tax.
Suppose, a salaried person is eligible to avail exemption at one-third of total salary income but the maximum ceiling is Tk 450,000. IT service providers also enjoy full tax exemption facilities on certain IT services.
In the above cases, they will lose this tax exemption, meaning you will have to pay tax on the full income amount.
Interest at 4% monthly on full tax amount
Till last year, the rate of interest was 2 percent but from this year it will be 4 percent on a monthly basis. Even a fraction of a month will be considered as a full month.
Suppose, if you submit a tax return on March 14, 2024. Then you will have to pay interest on your tax amount at 4 percent for two months.
In addition, any tax paid at source or as advance tax to the government coffer shall not be excluded from the tax liability. This means you will have to pay interest on the full tax amount. Previously, taxpayers could exclude the tax payment amount as they have already paid to the government coffer.
On the one hand, you are losing tax rebates and tax exemption facilities. On the other hand, you will have to pay tax at 4 percent on the full tax amount as discussed above, which will impact your tax liability significantly.
Jasim Uddin Rasel is author of Smart Money Hacks