Minimise your tax, maximise your wealth
Abdul Karim is not worried about the tax liability of Tk 51,500 because he has invested enough money in the specified areas and he knows that an investment allowance is the legal way to get a tax rebate. And this tax credit will help him reduce the tax significantly.
He paid a premium for his children's education. He knows that the life insurance premium paid by the taxpayer for dependent children or wife (if not a taxpayer) shall be eligible to get a tax rebate. But in the case of DPS (deposit pension scheme), it shall only be in the name of the taxpayer himself and the maximum yearly limit is Tk 60,000.
He writes down the Tk 120,000 as RPF (Recognised Provident Fund) because his company also contributes Tk 60,000 to the Fund which is the same as his contribution. Both contributions are considered as investment allowances.
He has got one figure to calculate the tax rebate but he has to find out two more figures. One is, 20 per cent of the taxable income of Tk 810,000 is Tk 162,000. He got taxable income from the second step. And another one is Tk 1 crore. Out of these three figures, the lower amount shall be the investment allowance.
Though he has invested Tk 200,000, he is eligible to get a tax rebate of 15 per cent on Tk 162,000. Karim always tries to invest more than the limit because he does not want to take the risk of losing the full benefit of the tax rebate.
However, his tax rebate amount shall be Tk 24,300 (Tk 162,000X15 per cent). He has to pay only Tk 27,200 instead of Tk 51,500. He has been successfully able to minimise his tax liability.
On the other hand, he will receive a big amount after the maturity of these investments, which will help him acquire assets like plots or apartments. Or, he may use the money for his children's higher education. So, the investment will also help him maximise his wealth.
Karim has got two figures in this step that shall be written down in the second part of the first page of the tax return form. He opens the page and writes tax rebate Tk 24,300 in serial no. 07 and tax payable Tk 27,200 in serial no. 08.
His company has already deducted Tk 2,000 as tax each month, or Tk 24,000 annually. It should also be excluded from the tax payable amount. He writes Tk 24,000 in serial no. 9(a). So, the difference amount is only Tk 3,200, which shall be paid with the tax return. This amount shall be written in serial. 10.
In the last line in serial 11, he writes the exempted amount of Tk 390,000, the amount he excluded from his total income while calculating the taxable income in the second step.
Under this line, there is a verification that shall be made by Abdul Karim mentioning his name, his father's name and the taxpayer identification number. He shall also sign the documents specifying the date of signature.
Finally, at the bottom of this page, he mentioned the enclosures he will attach with the tax form like the two pages he made while working in the second and third steps, the salary certificate, the tax challan, insurance premium receipts, and DPS statement.
So, the first page of the tax return form is completed. In the fourth step, he will prepare assets and liabilities statements from where he will know how wealthy he is.
The author is lead consultant of Taxpert, an online tax training centre.