Chapter 9

Income From Agriculture

Instructor: ATM Adnan

Assistant Professor
Department of Business Administration
Faculty of Business Studies
BGMEA University of Fashion and Technology (BUFT)
 Agriculture
Generally the term Agriculture refers to the production
of goods through the growing of plants, animals and other
forms. It also refers to field cultivation of the ground.

Crops or trees of spontaneous growth in forests or any

other places where there is no human effort, is not
considered as agriculture.
 Scope of Income from Agricultural Income
According to section 2(1) of the income Tax Ordinance 1984,
agricultural Income means
1. Any income derived from any land in Bangladesh and
used for agricultural purposes-
a) By means of agriculture; or
b) By the performance of any processes ordinarily employed
by a cultivator to render marketable the produce of such
land .
c) By the sale of the produce of the land raised by the
cultivator in respect of which no process, other than that to
render the produce marketable, has been performed.
d) By granting a right to any person to use the land for any
period
 Scope of Income from Agricultural Income

1. Any income from any building which

a) Is occupied by the cultivator of any such land as is referred
to in sub-clause- In which any process is carried on to
render marketable any such produce aforesaid.
b) Is required by the cultivator as the dwelling house or store-
house or other out-house by the reason of his connection
with such land.

From the above discussion it can be said that any income

derived from any land or building in Bangladesh that is used
for agricultural purposes will be considered under the head
“Agricultural Income”.
 Other Scopes of Income from Agricultural Income
There are some other scopes of agricultural income under the
considerations of income process. These are:

1. Gain from the sale of the machinery or plant exclusively used for
agricultural purposes (excluding Capital Gain)

Here such a gain is the excess of sale proceeds over written down
value of any machinery or plant exclusively used for agricultural
purpose.
But it is to be noted here that, such a gain can not be more than the
difference between original costs and written down value of the
machinery or plant.
 Gain from the sale of the machinery or plant exclusively used
for agricultural purposes -Illustration
Mr. Basu is the owner of a pump machine which was
purchased for Tk. 40,000. Now to acquire an advance
technology in the irrigation plant he sold the pump machine
for Tk. 42,000. At the time of sales the amount of Accumulated
depreciation of the pump machine was Tk. 18,000.
Agricultural income from the sale proceed should be:
Cost of Machine Tk. 40,000
Accumulated Depreciation (At the time of sale) Tk. 18,000
Written down value Tk. 22,000
Sale proceeds Tk. 42,000
Total Gain Tk. 20,000
Capital Gain (Sales Proceed – Cost price) Tk. 2,000
Gain to be considered as agricultural Income
(Total Gain –Capital Gain) Tk. 18,000
 Other Scopes of Income from Agricultural Income
2. Compensation money received against demolished machinery or
plant exclusively used for agricultural purposes
Where any insurance, salvage or compensation money are received
in any income year in respect of any machinery or plant which
having been used by the assessee exclusively for agricultural
purpose is discarded, demolished or destroyed and the amount of
such money exceed the written down value of such machinery or
plant, shall be deemed to be the income of the assessee as
“Agricultural Income” in the income year.

**It is to be noted that such compensation money does not exceed the
difference between the original cost and the written down value less
the scrap value
Compensation money received against demolished machinery or
plant exclusively used for agricultural purposes- Illustration
Mr. Tareq had a tractor which was purchased for Tk. 40,000. Due to
an accident the tractor was destroyed and the insurance company
has given a compensation of Tk. 30,000. at the time of destruction
accumulated depreciation of the tractor was Tk. 15,000 and the scrap
value is tk. 1,000. Agricultural income from the insurance claim
proceeds should be;
Cost of the machine Tk. 40,000
Accumulated Depreciation (At the time of sale) Tk. 15,000
Written down value Tk. 25,000
Compensation received Tk. 3,0000
Scrap Value Tk. 1,000
Amount to be considered as agricultural Income
(Total Compensation – (WDV - Scrap Value)
[30,000 – (25000 - 1000)] Tk. 6,000
 Other Scopes of Income from Agricultural Income
3. Income from sale of Tea
Agricultural income derived from the sale of tea grown and
manufactured by the assesse shall be computed in the
prescribed manner [section -26(2)]**

**At present , 60% of the sale proceeds from the sale of tea are
considered as agricultural income and rest of the 40% is as business
and profession
 Other Scopes of Income from Agricultural Income
4. Other agricultural income by notifications (rubber, tobacco,
sugar)
Where the board, by notification in the official gazette, so
direct, agricultural income from the sale of rubber, tobacco,
sugar or any other produce grown and manufactured by the
assesse.

**At present , 60% of the sale proceeds from the sale of rubber are
considered as agricultural income and rest of the 40% is as business
and profession
 Characteristics of Agricultural Income
From the various provisions of the ITO, 1984, various definitions mentioned in
dictionaries and case decisions, The following characteristics are relevant to
agricultural income:

1. It must derive from any agricultural land situated in Bangladesh. Land

is located outside the country, it will be considered as foreign income.
2. It must come from fundamental agricultural work like field cultivation
or cultivation of the ground, in the sense of tilling of the land, sowing
seeds, planting and similar basic and subsequent operation on the
field.
3. Marketing of the agricultural goods should be through the ordinary
process. The produce raised from the land may not have a market in its
native form. It may become necessary to perform a process on the
produce to make it marketable or saleable.
 Characteristics of Agricultural Income

4. Income may come from any building situated in the agricultural

land or adjacent vacant agricultural land.
5. Income may come from gain or sale or discarded value of the of
machinery or plant used for agricultural purpose.
6. Some income may partially be considered as agricultural income
such as sale of tea, jute, rubber tobacco etc.
 Classification of Agricultural Income

Considering the provisions of the ITO, 1984, agricultural income can

be classified into following categories:

1. Fully Agricultural income.

2. Partially Agricultural income.
3. Other Agricultural income.
 Classification of Agricultural Income

Fully Agricultural Income: According to the provisions under Section

2(1), 26(1), 19(17), & 19(19) of the ITO, 1984, the following incomes
Fully Taxable:

• Any income derived from any land or building situated in

Bangladesh and used for agricultural purposes.

• Gain from the sale of the machinery or plant exclusively used for
agricultural purposes.

• Compensation money received against demolished machinery or

plant exclusively used for agricultural purposes (Equipment
insurance).
 Classification of Agricultural Income
Partly Agricultural Income: According the Provision under Section 26(2) &
26(3) of ITO, 1984, the following incomes are partly considered as
agricultural income with the standard proportionate rate:
Nature of partly To be considered as To be considered Reference
agricultural agricultural income as income from
income business or
profession
Income from tea 60% 40% Sec 26(2) rule
garden 31
Income from 60% 40% Sec 26(3) rule
rubber garden 32
Income from 60% (if further 40% if further Sec 26(3) rule
tobacco/ processing is done by process is done ,or 32
sugarcane/ other the assesse) or, nothing
similar products 100% if sold directly
Industry after production
 Other Agricultural Income

In addition to above sources of incomes, the following incomes are

also considered under the head of agricultural income:

• Income from cattle rearing

• Income from sale of palm or date juice
• Income from sale of seeds of grass if grown by human effort
• Income from agro-co-operative society which was organized for
farming and cattle rearing
• Income from land or asset used for processing the agricultural
commodities to make them marketable.
 Other Agricultural Income

• Income from land leased for agro work.

• Income from sale of herbal or medical plants.
• Income from cultivation of flower and fruits
• Income from sale of honey if produced in agriculture land using
special technologies like special box for honey-comb
• Income from dairy farm, provided;
(a) assessee is the owner of the cattle.
(b) Milk is processed by the assessee.
(c) cattle are reared in cattle rearing farm.
• Income from poultry farm if they are reared in agricultural land.
 Non- Agricultural Income
• Income from ferry ghat, mooring terminal and fishing
• Income from sale of produce that has no agricultural work like
forest trees, wild grass, fruit and flowers.
• Income from salt production by flooding the land with sea water
and then extracting salt.
• Income from cutting and selling of timber on contract.
• Interest on arrear on rent for agricultural income.
• Income from letting out vacant land not used for agricultural
purpose.
• Sale of soil used for brick fields.
• Income from sale of water for irrigation.
• Income from butter and cheese making.
• Income from salary working in agro firm and a lot more indirect
agricultural income.
 Non- Agricultural Income
• Sale of stones from quarries
• Income from salaries for working as an agricultural
supervisor/manager
• Income from sale of crops which has been purchased from others
for resale
• Income from dairy and poultry firm established for business
purpose*.
• Fish hunting or fish anchor etc
• Dividend paid by a company out of its agricultural income.
 ADMISSIBLE EXPENSES (section-27)
According to section27 of the ITO, 1984, following expenses are allowed to be
deducted from the revenues under income from agriculture;
• Land Rent or development tax: Any land development tax or rent
paid in respect of the land used for used for the agricultural
purposes.

• Local tax: Any tax, local rate paid in respect of the agricultural
land is subject to allowable deduction

• Insurance premium: Any sum paid as premium in order to affect

any insurance against loss of, or damage to the land any crop to
be raised from or cattle to be reared on the land
 ADMISSIBLE EXPENSES (section-27)
• Production cost: According to section 27(1)(c) allowable deduction as
production costs include –
• For cultivating the land or raising livestock thereon.
• For performing any process ordinarily employed by a cultivator to
render marketable the produce of the land.
• For transporting the produce of the land or the livestock
raised thereon to the market.
• For maintaining agricultural implements and machinery in
good repair and for providing upkeep of cattle for the purpose
of cultivation, processing and or transportation as aforesaid;
**Where the book of account in respect such account is not properly
maintained, production cost will not be the amount claimed by the assesse rather
it will be 60% of the market value of the fully agricultural produce (not partly or
others agricultural income.)
** Moreover no deduction on amount of cost of production shall be admissible
under this clause if the agricultural income is derived by the owner of the land
from the share of the produce raised through the system of sharing crops such as
Adhi, barga, bhag.
 ADMISSIBLE EXPENSES -Example
Mr., Ovi’s agricultural incomes are from –sale of rice (200 mounds @ 600/
mound), sale of Robi crops Tk. 55,000, share from Barga Tk. 20,000, Mr ovi
claimed the following expenses as allowable against these incomes;
Expenses Rice Robi Crops Barga
Cost of Seeds 25,000 8,000 2,000
Cost of fertilizer 12,000 3,000
Cultivation costs 18,000 1,500
Repair Expenses 10,500
Total 65,500 12,500 2,000
Mr. Ovi failed to provide proper books of account for Robi crops relating to such expenses.
Calculate the income for Mr. ovi
Expenses Rice Robi crops Barga
Sales revenue 120,000 55,000
Share of Barga 20,000
Less Production cost 65,500 33,000* Nil
Agricultural Income 54,500 22,000 20,000
*60% of 55,000, no deduction is allowable for Barga.
 ADMISSIBLE EXPENSES (section-27)
•Maintenance cost for irrigation plant: Any sum paid in respect of
maintenance of any irrigation or protective work or other capital
asset; and such maintenance includes current repair and in the case
of protective embankments(ব ধ াঁ ), all such work may be necessary
from year to year for repairing any damage or destruction caused by
flood or other natural causes.
•Depreciation: Depreciation expenses are relating to all the assets
and facility from which agricultural income is derived as consider as
allowable deduction.
•Pucca Building (10%), Kutcha and Pucca Building (15%), Kuccha Building (20%),
Temporary Structure (0%), Pucca Wall ((5%) and Fencing with other substantial
material (10%)
•Interest on mortgage: Where the land is subject to a mortgage or
the capital charge for the purpose of reclamation or improvement,
the amount of any interest paid in respect of such mortgage or
charge
 ADMISSIBLE EXPENSES (section-27)
• Interest on borrowing capital: Where the land has been acquired,
reclaimed or improved by use borrowed capital, the amount of
any interest paid in respect of such capital.
• Losses from the Sale of Demolished Machinery: Where any
machinery or plant which has been used by the assesse exclusively for
the agricultural purposes has been discarded, demolished or destroyed
in the income year, the amount of losses from such destruction is
allowable expense. But maximum limit of such are:
• When no insurance or compensation has been received;
Maximum limits = written down value – scrap value
• When insurance or compensation has been received;
Maximum limits = (written down value – scrap value) –
amount of insurance or compensation money received.
 ADMISSIBLE EXPENSES (section-27)
• Losses on sale or exchange of machineries: When any machinery
or plant which has been used by the assesse.
• Other expenses: any other expenditure, not being the nature of
capital expenditure or personal expenditure lay out wholly and
exclusively for the purpose of delivering agricultural income from
the land is allowable.
 SET OFF and CARRY FORWARD of LOSSES
•Net agricultural income is derived from deducting the admissible
expenses from the total gross agricultural income,
But in any assessment year if the allowable expenses is greater than
the amount of gross agricultural income then it will be considered
as net loss.
According to the ITO 1984, such loss can be set off against his
income from any other head excluding “Capital Gain”.
Where for any assessment year, such loss has not been set off, it
shall be carried forward to the next following assessment year and
 It shall be set off against agricultural Income
 If the loss can not be wholly so set off the amount not so set off
shall be carried forward to the next assessment year and so on
for not more than 6 successive assessment year.
 NON-ASSESSABLE Agricultural Income
• According to the various provision of the ITO, 1984, the following
agricultural incomes are non-assessable subject to some
conditions:
 Agricultural income is not exceeding Tk. 200,000 is non-
assessable for an individual assesse, where only source of his
income is agriculture.
Explanation:
Total Income of Mr. Hasan in the income year 2017-18 is Tk. 650,000 and his only
source of income is agriculture. In this case up to Tk. 200,000 is non-assessable
and he is also eligible to enjoy the normal non-assessable limit of Tk. 300,000 (in
case of woman, elderly citizens of more than 65 years old Tk. 350,000, for
disabled persons Tk. 375,000 and
His taxable total income will be Tk. 150,000 (650,000-200,000-
300,000).
**In case of Having income from other heads such exemption of up to Tk. 200,000
will not be applicable.
 NON-ASSESSABLE Agricultural Income
 Any income thus including agricultural income of an indigenous
Hillman of any of the hill district of Rangamati, Bandarban and
Khagrachari, which has been derived solely from economic
activities undertaken within the said hill districts.
 Reduced tax rate for Poultry Firm:
 Income from Poultry, Shrimp and fish Hatchery, fisheries firm will
be taxed at Following rate; Income Tax Rate
On first Tk. 10 Lac Nil
On Next Tk. 10 Lac 5%
For the Rest of the amount 10%

 Income from Poultry firm will be taxed at Following rate;

Income Tax Rate
On first Tk. 20 Lac Nil
On Next Tk. 10 Lac 5%
For the Rest of the amount 10%
 Reduced Tax rate for Certain Agricultural Income
• Any income from Palleted poultry feed,
• production of Palleted poultry feed for fish, shrimp & cattle,
• production of seeds, marketing of locally produced seeds,
• cattle farming, dairy farming,
• frog farming,
• horticulture,
• silk tree plantation, silk worm farming,
• bee keeping,
• mushroom farming, floriculture is taxable at a reduced rate as
follows,
Income Tax Rate
On first Tk. 10 Lac 3%
On Next Tk. 10 Lac 10%
For the Rest of the amount 15%
 Illustration 01
Agricultural Income Mr. Zahir for the income year ended 30th June
2019 are
Sale of paddy 150 Maunds (মণ) @ Tk. 600 Per maund;
Sale of Jute 100 maunds @ Tk. 800 per maund;
Sale of rabi crops Tk. 65000; Sale of Tea. 70,000;
Income from Borga Tk. 20,000 and
lease of agricultural land Tk. 30,000.
Related expenses are cost of seeds and fertilizer Tk. 40,000;
cultivation costs Tk. 65,000; transportation costs Tk. 15,000;
ordinary processing costs Tk. 25,000; land revenue paid Tk. 7,000;
Union parishad tax Tk. Tk. 4,400; crop insurance premium Tk. 5,600;
allowable depreciation Tk. 3,000 and interest on borrowed fund Tk.
2,800
• Compute taxable income for Mr. Zahir considering a)He didn’t
keep proper books of accounts, b)He kept necessary books of
 Illustration 01 Requirement (a)
Income from Agriculture Tk. Tk. Tk.
Income from sale of paddy (150*600) 90,000
Income from sale of Jute (100*800) 800,00
Income from sale of Rabi Crops 65,000
Sale of tea (70000 *60%) 42,000
Income from Borga 20,000
Lease of agricultural land 30,000 327,000
Less : Admissible Expenses
1. Production Cost (235,000 *60%) 141,000
2. Land revenue Paid 7,000
3. Union Parishad Tax 4,400
4. Crop insurance Premium 5,600
5. Allowable depreciation 3,000
6. Interest on borrowed fund 2,800 163,800
Total Income from Agriculture 163,200
A. 90,000 + 80000+ 65,000= 235,000 * 60% = 141,000. B = production expense= (40000 + 65000+ 15000+
25000) = 145,000 No partly agri income will be considered for production expenses
 Illustration 02
Income from Mr. Hossain for the year ended 30th June, 2018 includes, sale of
jute 300 maunds @Tk. 700 per maund; sale of rice 225 maunds @ Tk. 550
maund; income from lease of agricultural land Tk.48,000; income from ferry
ghat tk.27,000; income from tea garden Tk.80,000 and income from sale of
honey Tk. 20,000. Expenses relating to these income are: land revenue paid
Tk.9,000; union parishad tax Tk. 6,800; crop insurance premium Tk.11,500;
allowable depreciation Tk. 8,000; Interest on mortgage loan Tk. 4750 and
maintenance cost for irrigation plant Tk. 7,200. Mr. Hossain had a weighing
machine which was purchased at Tk. 18,000. It has become obsolete and has
been discarded at Tk. 9,500. At the time of sales the written down value of
the machine was Tk. 13,000. moreover, he has also sold a tractor at a price of
Tk. 42,000 ( cost Tk. 40,000, accumulated depreciation Tk. 3,000). In addition
to this he had a pump machine which was destroyed by fire and the
insurance compensation amount of Tk. 10,000, (Cost Tk.20,000; accumulated
depreciation Tk. 12,000, scrap value Tk. 2,000). When asking for proper
books of accounts Mr. Hossain failed to provide any supporting documents
for production costs, although he claimed Tk. 210,000 as production costs.
Compute Income for Mr. Hossain.
 Illustration 02 Solution
Income from Agriculture Tk. Tk. Tk.
Income from sale of Jute (300*700) 210,000
Income from sale of Rice (225*550) 123,750
Income from lease of Agricultural Land 48,000
Income from tea Garden (80000 *60%) 48,000
Income from sale of honey 20,000
Gain on sale of tractor (42000-37000*-2000*) 3,000
Gain on Insurance compensation (10000 - 6000*) 4,000
456,750
Less: Admissible Expenses:
1. Production Cost (210,000+123,750)=333,750 200,250
*60%
2. Land Revenue paid 9,000
3. Union Parishad Tax 6,800
4. Crop Insurance Premium 11,500
5. Allowable depreciation 8,000
6. Interest on mortgage loan 4,750
 Illustration 02 Solution
Income from Agriculture Tk. Tk. Tk.
Maintenance cost of irrigation plant 7,200
Losses due to discard of machine (WDV 13,000 – 3,500
Sales price 9,500)
Total Expense 251,000

Total Agricultural Income (456,750 – 251,000) 205,750

Income from Business or Profession

Income from Tea Garden (80000 * 40%) 32,000
Capital Gain
Capital Gain from Tractor 2,000
Income from Other Sources
Income from Ferry Ghat 27,000
Total Income 266,750
 Exercise 03
Compute taxable income and tax liability of Mr. Jamir Ali, a 71 years old
farmer of Bhola District, from the following particulars related to the income
year ended on 30.06.18; assuming that his only source of income is
Agriculture and are from sale of paddy 200 mound @ tk. 400 per mound,
sale of jute 150 mound @ tk. 600 per mound, sale of robi crops Tk. 60,000;
income from agricultural cooperative society which was organized for
farming Tk. 25,000; income from lease of agricultural land Tk. 200,000;
Income from Borga Tk. 225,000; Income from sale of herbal or medicinal
plants Tk. 30,000; Income from lease of storehouse used for storing crops Tk.
20,000; Income from sale of tobacco to BATBC Tk. 20,000; Income from sale
of sugarcane to government sugar mill Tk. 35,000.
Mr. Jamir Ali had a pump machine which was purchased for Tk. 40,000. To
acquire an advance technology in the irrigation plant he has sold the pump
machine for Tk. 40,000. at the time of sale the accumulated depreciation of
the pump machine was Tk. 18,000.
Moreover, he also has a weighing machine which was purchased at Tk.
18,000. It has become obsolete due to a fire and the insurance company has
given a compensation of Tk. 8,500. at the time of the fire written down value
of the machine was Tk. 13,000 and the scrap value was Tk. 1,000
 Exercise 03 cont…
He did not maintain the books of account properly but expenses claimed by
him includes: Production cost Tk. 200,000; Land revenue paid Tk. 8,000;
Interest on loan Tk. 2,500; Union Parishad tax Tk. 4,000; purchase of tractor
Tk. 70,000; maintenance of agricultural equipment and maintenance of
irrigation plant Tk. 12,000.
In addition to that, during the year Mr. Jamir ali also made different
investment and expenses, which includes; Family expenses Tk. 50,000; Life
insurance premium (policy value Tk. 200,000). Tk. 25,000; purchase of
unlisted company’s share Tk. 25,000; donation to presidents relief fund Tk.
20,000; donation to a local club Tk. 6,000; donation to government Zakat
fund Tk. 30,000; and purchase of gold Tk. 27,000.
 Illustration 03 Solution
Mr. Jamir Ali’s Calculation of Agricultural Income
Income from Agriculture (section 24) Tk. Tk. Tk.
Income from sale of paddy (200 * 400) 80,000
Income from sale of Jute (150 * 600) 90,000
Sale of Robi Crops 60,000
Income from sale of Agricultural Co-Operative Society 25,000
Income from lease of agricultural land 200,000
Income from Barga 225,000
Income from sale of herbal medicinal plant 30,000
Income from lease of storehouse used for storing crops 20,000
Income from sale of tobacco to BATBC* 20,000
Income from sale of sugarcane to govt. sugar mill* 35,000
Gain on sale of pump machine* (see note:1) 18,000
Total Income 803,000
Note1: Cost of Machine Tk. 40,000, Accumulated depreciation @ POS Tk. 18,000, Written
down value(WDV) = (40,000-18,000)=22,000, Sale price 40,000, So,
Total Gain: [sales price –WDV]=Tk. 18,000; Capita Gain: (Sales price – cost)=0
** 100% sales to other party, no further processing
 Illustration 03 Solution
Mr. Jamir Ali’s Calculation of Agricultural Income
Income from Agriculture (section 24) Tk. Tk. Tk.
Total Income 803,000
Less: Admissible Expenses:
Production Cost (see note 2 & 4): 189,000
Land revenue paid 8,000
Interest on Loan 2,500
Union Parishad Tax 4,000
Maintenance of Irrigation plant 12,000
Loss from destruction of weighing machine (note 3) 3,500
Total Expenses 219,000
Agricultural Income 584,000
Less: Exemption up to Tk. 200,000 (only income source) 200,000
Total Net Income 384,000
Note 2: Allowed Production cost: 60% of (sale of paddy-80,000 + sale of jute-90,000+ sale of
robi crops-60,000, sale of herbal or medicinal plants -30,000+ Sale of tobacco-20,000+ sale of
sugarcane-35,000= Tk. 315,000) =Tk. 189,000
 Illustration 03 Solution

Note3
Mr. Jamir Ali’s Calculation of Investment Allowance
Particulars Tk. Tk.
Insurance premium (own) 25,000
Maximum Limit: 200,000 * 10% 20,000 20,000
Donation to president's relief fund 20,000
Donation to govt. Zakat fund 30,000
Actual Investment 70,000
Allowable investment: Lower of Maximum Limit of 15,000,000
Investment Or, 30% of total income = 80,3000 *30% 240,900 240,900
So, investment allowance allowed for tax credit 70,000
Tax credit/rebate @ 15% on allowance investment (70,000 10,550
*15%)
Note 3: WDV of weighing machine Tk. 13,000 (less) Scrap Value Tk.1000 (less)
compensation received Tk. 8,500 =Loss of discarding the machine =Tk. 3,500
Note 4: Since further processing was absent in case of tobacco and sugarcane, the
entire amount have been considered as agricultural income.
 Illustration 03 Solution

Mr. Jamir Ali’s Calculation of Tax liability

Income Slot Rate Tk.
On the First Tk. 350,000 (note 5) 0% Nil
On the next 34,000 5% 1,700
Less: Investment Allowance 10,500
Net tax Liability (8800)
As the calculated tax liability is less than the minimum tax liability amount, the net
tax liability of Mr. Jamir Ali will be Tk. 3,000 for the assessment year 2018-19.

Note 5: As assessee is more than 65 years old, the minimum non-assessable limit
is Tk. 350,000
 Exercise 04
Compute taxable income and tax liability for Mr. Taleb Ali from the income
year ended on June 2018. Consider his income from following sources,
Sale of paddy 1000 mounds @ Tk. 400/mound; sale of jute 500 Mound @
Tk. 600/mound. Sale of robi crops Tk. 160,000; income from lease of
agricultural land Tk. 100,000; Income from fisheries tk. 125,000; income
from mushroom farming tk. 130,000; income from sale of tea Tk. 200,000;
and income from dairy farming Tk. 120,000.
He did not maintain the books of account properly but claimed expenses of
production cost Tk. 200,000; Land revenue paid Tk. 8,000; Interest on Loan
Tk. 2,500, Union parishad tax Tk. 4,000; Purchase of tractor Tk. 70,000 and
maintenance of irrigation plant Tk. 12,000.
In addition to it, during the year, mr. taleb ali also incurred investment
expenses, which includes family expense tk. 50,000; life insurance premium
(policy value Tk. 200,000) Tk. 25,000; purchase of cow for dairy firm Tk.
125,000; donation to prime ministers higher education fund Tk. 20,000;
purchase of 5 year Bangladesh savings certificate tk. 100,000; donation to
govt. zakat fund Tk. 30,000 and purchase of gold Tk. 27,000
 Illustration 04 Solution
Mr. Taleb Ali’s Calculation of Agricultural Income
Income from Agriculture (section 24) Tk. Tk. Tk.
Income from sale of Paddy (1000 * 400) 400,000
Income from sale of jute (500 * 600) 300,000
Sale of Robi Crops 160,000
Income from lease of agricultural land 100,000
Income from sale of tea (200,000 *60%) 120,000
Total 1,080,000
Agricultural Income on which reduced tax rate (3%) is
applicable:
Income from Fisheries 125,000
Income from Mushroom Farming 130,000
Income from Dairy Farming 120,000
Total 375,000 1,455,000
Less: Admissible Expenses;
1. Production Cost (860,000 * 60%) 516,000
2. Land Revenue Paid 8,000
 Illustration 04 Solution
Mr. Taleb Ali’s Calculation of Agricultural Income
Interest on Loan 2,500
Union parishad tax 4,000
Maintenance of irrigation plant 12,000
Total 542,500
Total Agricultural Income 912,500
Income from Business and Profession (40% * 200,000) 80,000
Total Income 992,500

Calculation of Investment Allowance

Insurance Premium (own) Tk. 25,000
Maximum Limit (10% of Policy Vale) 200,000 * 10% Tk. 20,000 20,000
Donation to PM’s higher Education fund 20,000
Purchase of 5 years Bangladesh savings certificate 100,000
Donation to govt. zakat fund 30,000
Actual Investment 170,000
 Illustration 04 Solution

Mr. Taleb Ali’s Calculation of Tax liability

Rate Tk. Amount Total
Income
On first Tk. 300,000 0% Nil 0 992,500
On next 100,000 5% 5,000 5,000 617,500
(reg)
On next 217,500 10% 21,750
On reduced rate income 3% 11,250
375,000
Total 38,000

Less: Investment Rebate 25,500

Net Tax payable 12,500

Maximum Limit of Investment: lower of Tk. 15,000,000 or 30% of total Income –

992,500 * 30% = 297,750
So Investment allowance will be 170,000 * 15% =25,500