What documents are required for an income tax audit in Bangladesh?

For an income tax audit, individual taxpayers should prepare documents such as salary slips, bank statements, TDS certificates, rental agreements, property deeds, loan agreements, bills, vouchers, and other evidence supporting income and expenses, as outlined in the Income Tax Act, 2023.

How should I prepare for an income tax audit?

To prepare for an income tax audit, ensure all income sources (employment, rent, agriculture, business, etc.) are accurately reported, maintain organized records of bills, vouchers, and bank statements, and comply with the Income Tax Act, 2023. Seek professional assistance if needed and respond to audit notices promptly.

What is the Income Tax Act, 2023, and how does it apply to audits?

The Income Tax Act, 2023, is the legal framework governing income tax in Bangladesh. It outlines the rules for filing returns, allowable deductions, and audit procedures. During an audit, taxpayers must provide evidence to support their returns as per sections like 37, 38, 39, 54, 55, and others.

How can I ensure compliance with tax audit requirements?

To ensure compliance, maintain transparency, provide accurate information, and submit all required documents like bank statements, TDS certificates, and expense proofs. Follow the guidelines of the Income Tax Act, 2023, and consult a tax expert if necessary.

What happens if I fail to provide documents during a tax audit?

Failure to provide required documents during a tax audit may lead to disallowance of claimed expenses or income, resulting in additional tax liabilities or penalties. Ensure all documents are organized and submitted within the specified time to avoid complications.

Instructions for Individual Taxpayers Facing Tax Audit For PDF Whatsapp message : +8801833732194

Instructions for Individual Taxpayers Facing Tax Audit

The following guidelines are designed to assist individual taxpayers in effectively participating in the tax audit process for their income tax returns and preparing the necessary documents and evidence. Ensure compliance with the Income Tax Act, 2023, and related regulations by carefully following these instructions. Transparency and accurate information are crucial during the audit process.

6.1. Income from Employment

Salary Consistency: Verify that your salary income aligns with the deposits shown in your bank statements. Retain and submit salary slips, bank statements, employer certificates, and TDS (Tax Deducted at Source) certificates during the audit.
Interest on Personal Loans: Disclose the annual interest paid on personal loans for flats, houses, cars, or other purposes in the lifestyle statement (IT-10BB) or return. Submit loan agreements, interest payment receipts, and bank statements during the audit.
Government Employees: For government employees, calculate salary income as per SRO No. 225-Law/Income Tax-7/2023 (dated July 13, 2023). Prepare salary details and tax deduction certificates for the audit.
Loans as Shareholder: If you are a shareholder in a private limited company and have taken a loan, it may be considered a dividend under Section 2(81)(f). Submit loan agreements, the company’s financial statements, and shareholding proof during the audit.

6.2. Income from Rent

Reasonableness of Annual Value: Ensure the annual rental income is consistent with the property’s location, floor space, and prevailing market rental rates. Submit property deeds, rental agreements, and local rental rate information during the audit.
Bank Deposits: For monthly rent exceeding BDT 25,000, deposit it into a bank account and submit bank statements. Provide proof of rent deposits during the audit.
Legal Compliance: File returns in accordance with Sections 37, 38, and 39 of the Income Tax Act. Prepare rental agreements and expense details for the audit.
Rental Information: Ensure rental income from properties is reported at a reasonable market rate. Submit property details and rental amounts during the audit for reference in investigation reports and tax assessment orders.

6.3. Income from Agriculture

Land Quantity Consistency: Ensure the agricultural income aligns with the land area reported in the return. Submit land ownership deeds, khatian, porcha, and land revenue payment receipts during the audit.
Realistic Data: Report land area, crop type, production costs, purchase-sales quantities, and gross and net income realistically. Submit production details, sales receipts, and expense invoices during the audit.

6.4. Income from Business

Deductions under Section 54: Claim business expenses as per the conditions of Section 54. Retain bills, vouchers, and invoices for submission during the audit.
Compliance with Section 55: As an individual taxpayer, adhere to the clauses and sub-clauses of Section 55. Submit expense and benefit details during the audit.
Bank Deposit Consistency: Ensure deposits in bank accounts align with reported sales, receipts, or income. Prepare bank statements and accounting records for the audit.
Turnover and Tax Payment: Accurately report turnover (sales or receipts) and submit proof of tax payment (challan, TDS certificates) during the audit.
Import Business: For import businesses, submit all Bills of Entry, bank statements, and ASYCUDA++ data during the audit.
Initial Capital for New Taxpayers: For first-time business or professional income filers, declare at least 20% of initial capital as taxable income and submit proof of tax payment. Prepare evidence of capital transfers for the relevant tax year or the next four years for the audit.
Business Loan Investments: If a loan taken for business purposes is invested elsewhere, submit details and evidence during the audit.
Capital Consistency: Ensure business capital reported in the Statement of Assets, Liabilities, and Expenses (IT-10B) is accurate and consistent with the previous tax year. Prepare accounting records and certificates for the audit.

6.5. Capital Gains

Previous Returns: Confirm that sold assets were reported in previous tax returns. Submit asset ownership deeds and copies of prior returns during the audit.
Capital Asset Nature: Prove that the sold asset is a capital asset. Submit sales agreements during the audit.
Supporting Documents: Submit sales agreements, payment proofs, and bank statements to support capital gains during the audit.
Tax Calculation under Section 46(2): Calculate tax on capital or business income as per Section 46(2). Prepare tax calculation details for the audit.
Seventh Schedule: Calculate tax on capital gains as per the Seventh Schedule and submit evidence during the audit.

6.6. Income from Financial Assets

Investment Disclosure: Accurately disclose government or approved securities, debentures, bank deposits, or other investments in IT-10B. Submit investment certificates during the audit.
Income Proof: Report income from financial assets supported by interest certificates and bank statements.
Expense Claims under Sections 64 and 65: Claim expenses as per Sections 64 and 65. Submit expense certificates during the audit.
Tax Deduction at Source: Ensure tax is deducted at source on income from financial assets as per Part 7 of the Income Tax Act. Submit TDS certificates during the audit.

6.7. Income from Other Sources

Investment Disclosure: Report investments or balances from other sources in the tax return. Submit investment source details and evidence during the audit.
Section 67 Compliance: Accurately report income from other sources as per Section 67. Submit agreements and receipts during the audit.
Non-Allowable Expenses: Avoid claiming expenses or benefits not allowable under Section 68. Submit expense details for review during the audit.

6.8. Income from Exempt Sources

Gifts or Donations: For gifts or donations received in the tax year, submit the donor’s declaration, copies of their tax returns, and bank statements during the audit. Comply with the Gift Tax Act, 1990.
Exempt Income Validity: Ensure tax-exempt income is valid as per issued orders under the Income Tax Act. Submit evidence as per Section 67(15) during the audit.
Section 76 Compliance: Submit evidence for tax-exempt income as per Section 76.
Sixth Schedule: Follow Parts 1 and 2 of the Sixth Schedule for reporting exempt income. Prepare certificates and details for the audit.

6.9. Income Subject to Reduced Tax Rates

Income Source Validity: Prove the existence of income sources like fisheries, livestock, poultry, or hatcheries. Submit farm photos and production records during the audit.
Trade License and Certificates: Submit trade licenses and government certificates for fisheries, livestock, poultry, or hatcheries during the audit.
Land or Waterbody Ownership: Report ownership of land, ponds, or waterbodies used for farming in IT-10B. Submit ownership deeds or lease agreements during the audit.
Leased Property Documents: For leased land, ponds, or waterbodies, submit lease agreements, owner’s porcha, khatian, and updated revenue payment proofs during the audit.
Production Consistency: Ensure reported production aligns with government guidelines. Prepare production records for the audit.
Expense Consistency: Ensure expenses for fish fry, poultry chicks, feed, medicine, pesticides, wages, etc., are reasonable and supported by bills and vouchers. Submit these during the audit.

6.10. Income from Remittance / Cash Incentives

Proof of Overseas Stay: Submit proof of overseas stay for remittances (e.g., visa, passport, work contract) during the audit.
Legal Channel: Ensure remittances are sent through government-approved channels. Submit bank certificates and transaction details during the audit.
Remittance Proof: Submit bank statements and sender’s certificates as proof of remittances during the audit.
Actual Earner: Report remittances in your own tax records. If sent to another’s account, provide explanations and evidence (e.g., gift, loan) during the audit.
Cash Incentives: Submit bank certificates and TDS proofs for cash incentives during the audit.

6.11. Statement of Assets, Liabilities, and Expenses (IT-10B)

Capital Support: Submit accounting records and bank statements to support reported business capital during the audit.
Asset and Liability Consistency: Ensure reported assets and liabilities are consistent with the previous tax year. Submit prior returns and accounting records during the audit.
Immovable Property Additions: Submit deeds and purchase proofs for immovable property additions during the audit.
Other Asset Additions/Disposals: Submit evidence for additions or disposals of vehicles or other assets during the audit.
Investment Details: Submit certificates for investment additions or disposals (e.g., share certificates, bank deposit documents) during the audit.
Cash/Bank Balance: Submit bank statements or certificates to support reported cash or bank balances during the audit.
New Loans/Liabilities: Submit loan agreements and repayment details for new loans or liabilities during the audit.

6.12. Statement of Lifestyle Expenses (IT-10BB)

Expense Consistency: Ensure expenses reported in IT-10BB are consistent with the previous tax year. Submit prior returns and expense details during the audit.
Family Members: Ensure expenses are reasonable based on the number of family members. Submit family member details and expense proofs during the audit.
Income Consistency: Verify that expenses align with reported income. Submit income source and expense details during the audit.
Asset Consistency: Ensure expenses align with reported assets. Submit asset details (IT-10B) during the audit.
Residence: Report whether you live in your own or rented property. Submit rental agreements or ownership deeds during the audit.
Personal Vehicle: Submit ownership deeds and purchase proofs for personal vehicles during the audit.
Tax Payment: Submit challan copies and proofs of tax payments during the audit.
Education Expenses: For children studying in English-medium institutions, private colleges/universities, or abroad, submit education expense receipts and certificates during the audit.
Utility Bills: Report reasonable electricity, gas, water, and telephone bills. Submit bill copies and payment proofs during the audit.

General Instructions

Document Retention: Organize and retain all evidence (bills, vouchers, agreements, bank statements, TDS certificates) for easy submission during the audit.
Transparency and Accuracy: Maintain transparency and provide accurate information during the audit to avoid complications.
Professional Assistance: Seek help from a tax expert or chartered accountant for guidance on the Income Tax Act and audit process.
Response to Audit Notice: Submit required documents and information within the specified time upon receiving an audit notice. Avoid delays.
Legal Knowledge: Familiarize yourself with the Income Tax Act, 2023, and related regulations. Obtain detailed information from the National Board of Revenue website (www.nbr.gov.bd) if needed.