20200612 budget 2020 2021

Learn to enhance Confidence @ Mahamud Hosain FCA mmhosain@yahoo.com
Proposed
Budget
2020-2021
Contact, if needed.
Mahamud Hosain FCA
Managing Partner,
MMH & Co. Chartered Accountants
mmhosain@yahoo.com
+880 1713 24 58 58

Macro Economy

 Proposed Budget for 20-21 of Tk. 5.68 trillion compared to Tk. 5.01 trillion in last year (higher by
13.24% and Tk. 0.66 trillion than revised budget FY 19-20).
 2020-21 Budget is 17.9% of GDP [estimated GDP for 20-21 is Tk. 31.71 trillion and Tk.28.057 trillion FY
2019-21 (while original estimate was Tk. 28.858 trillion)].
 Sets a target of Tk. 3.78 trillion revenue earnings of which Tk. 3.30 trillion is expected from the NBR. It
will be a very challenging task.
 For 2020-21, revenue target has been proposed to increase by 8.6% from 19-20 revised budget.
 For 20-21, GDP Growth has been predicted to be 8.20% while in FY 2019-20, proposal was made to
revise it to 5.20% from Original 8.20%. Obviously, it is ambitious and would be very challenging to
achieve given considerable drop of demand in consumer level due to COVID-19 & drop in remittances
earnings.
 Budgeted deficit is Tk. 1.90 trillion which is 6% of GDP in comparison to 5.5% of revised budget and
5% in original budget 2019-20.
 Development budget has been estimated to be Tk. 2.05 trillion while in 2019-20 it was Tk. 1.92 trillion
(higher by 6.34%).
 GoB will borrow Tk. 1.0998 trillion from domestic sources and Tk. 0.888 trillion from foreign sources
which is respectively 12.98% and 39.53% higher than last year’s revised budget.
 Foreign grants estimated to increase to Tk. 0.04013 trillion from Tk. 0.03454 trillion (higher by 16%).
HIGHLIGHTS…

HIGHLIGHTS…allocation
 Operating and other expenditures is budgeted to Tk. 3.48 trillion in place of Tk. 2.95 trillion in 2019-20
(17.96% higher).
 Tk. 0.29247 trillion allocated for Health & Family Welfare which is 13.66% higher than last year and Tk.
0.10 trillion allocated to combat COVID-10.
 Disaster fund lowered to Tk. 0.09836 trillion & better be reviewed considering increases of natural
calamities.
 Allocation for Social safety Net increases to Tk. 0.95574 trillion which is 3.01% of GDP and definitely a
positive move but regard has to be given to assess adequacy of allocation of safety net packages other
than govt. employee retirement benefits.
 For subsidies and incentives, highest allocation is of 13.9% in view of sector wise allocation.
 Defense Ministry’s allocation remains as high as 8.2% despite the pandemic with an amount of Tk. 0.34842
trillion.
 Budget for Education remain somewhere same as FY 19-20 and allocated Tk. 0.664 trillion which is 2.09%
of GDP.
 Tk. 0.58 trillion is being kept for the interest recovery on internal loans.
 Tk. 0.042 trillion is allocated for loans and advances (net) to government institutions.
 For Health research Tk. 0. 01 trillion has been proposed.
 Hon'ble FM remain completely silent regarding crisis in mega projects during budget session, despite
major projects in transport sector being either halted or delayed due to the coronavirus outbreak.

 Cash incentive at a rate of 1% for RMG & 2% for Inward Remittances to continue.
 Tobacco products to become costlier in FY 2020-21.
 RMG sector to be allowed to pay tax at reduced rate @ 12% (RMG enterprise having green
factories to pay tax @ 10%) for further 2 years.
 To facilitate small and medium-size businesses, reduction of turnover tax from 4 percent to
3 percent has been proposed.
 Tax payment at export level has been proposed to be reduced from 1% to 0.5%.
 Simplification of Tax Return (1 pager).
 Whitening untaxed money through payment of tax @ 10% if invested in capital market and
maintain investment for 3 years.
 In-order to promote effective Bond Market, tax deduction at source has been proposed to
be at a rate of 10% on ascertained commission, while payment is made instead of upfront
payment on value of Bond/Sukuk transaction.
 ADP Implementation in 2019-20 is only 31.74% only till March 20.
HIGHLIGHTS…

HIGHLIGHTS…
 Whitening black money now to be more lucrative than ever. As a special scheme,
Significant relaxation is proposed by means of restricting/limiting jurisdiction of all
authorities regarding sources of untaxed money by individual tax payer:-
 if tax paid at a rate of 10% and investment made in movable property;
 If tax paid at lower rate, prior year investment in immovable properties, i.e.
Land, Building, Apartments could be declared in Tax return of current year.
 Proposed to reduce the tax rate by 2.5% for not publicly traded company (at present
35%) thus resulted reduction of the gap with publicly traded (which is 25%). This is,
indeed a good move. However, no reduction of tax rate for publicly traded company
may adversely impact to the pursuit of listing the stock into capital.
 Proposed to widen the scope of tax holiday through additional 7 industrial sector, ((i)
Electrical transformer; (ii) Artificial fiber or manmade fiber manufacturing; (iii) Automobile parts and
components manufacturing; (iv) Automation and Robotics design, manufacturing including parts and
components thereof; (v) Artificial Intelligence based system design and/ or manufacturing; (vi)
Nanotechnology based products manufacturing; (vii) Aircraft heavy maintenance services including
parts manufacturing).

HIGHLIGHTS…
 As a penalty, tax at a rate of 50% to be imposed on laundered money/capital flight/false
investment through over/under invoicing or other means.
 Proposed reduced rate of VAT collection at import stage on raw materials for manufacturing
industries of 4% from 5% which is a good move.
 Proposed to increase tax free income limit by Tk. 50,000 for each category of tax payers and
lowest tax rate of 5% (in place of 10% now) for the first Tk. 1 lac of taxable income and
abolishment of Super Tax rate of 30%. This proposal, if approved will result benefits mostly to
assessee having taxable income (i) lower than Tk. 20 lac; and (ii) higher of Tk. 60 lac. Meaning
middle class people (i.e. assessee) having taxable income between Tk. 20 lac to Tk. 60 lac
won’t have much of relief in term of direct tax. As always, middle class has been left out.
 Proposed to increase in excise duty on bank balance above Tk. 10 lac, which may turn to be
counter productive to the continuous pursuit in bringing discipline in financial transaction.
 Proposal of Tax deduction at a rate of 2% on local LC of commodities may results rise in price at
consumer level.
 Proposed increase of supplementary duty by 5 percent on all telecom-related services.

Graphical Presentation and
Sectoral Analysis

Sources of Fund & Income

Sector wise -Resources Distribution

Sector wise –Expenditures, incentives, etc.

Allocation of Funds- Operating Budget

Allocation of Funds-Development Budget

SupplementaryBudgetfor
2019-20
Comparison btw’n Budget
& Revised Budget FY 19-20:
Tax revenue reduced by
8% while actual
collection is only 47%
(up-to Mar 20) of revised
Budget.
Non Development
Revenue Expenditure
reduced by 5% and
expended 48% (up-to
March 20).
ADP achieved 31.5% (up-
to March 20) whereas
reduced to 5% from
original budget.

ProposedBudgetStructureforFY
2020-21
Comparison with Revised
Budget 19-20:
Targeted growth for Tax
revenue is 8.6%.
Non Development
Revenue Expenditure
increased by 13.2% .
ADP increased by 6.34%.
Budget Deficit increased
to 6% from revised target
of 5.5% and Originally it
was budgeted 5% for FY
19-20.
GDP estimated to Tk.
31.71 trillion from revised
Tk. 28.057 trillion.

AnnualDevelopmentProgramme
(SectoralAllocation)forFY2020-20
Comparison with
Revised Budget 19-20
Increased allocation
by 2.9% for Human
Resources
Reduced by 1.7% !!!
for Agricultural &
Rural Development
Reduced by 0.5%%
!!! for Energy
Infrastructure
Increased allocation
by 1.5% for
communication
Infrastructure
2020-21

Sectoral Allocation in Budget 2020-21

 SMEs: HPM has declared Light Engineering as the ‘Product of the Year’ for 2020. Therefore it is
proposed to reduce tax rate on import of raw materials of some products.
 Export Sector: It is proposed to reduce the existing duty rate on the import of certain products
(such as RFID Tag, Industrial Racking System, Cutting Table, etc.) to promote export-oriented
garments and textile industries.
 Footwear Industry: Hon'ble FM proposed to reduce the duty rate of three raw materials
imported by this industry.
 Electronics Industry: It is proposed to expand the existing concessionary duty benefit on the
import of raw materials by the refrigerator and air conditioner compressor manufacturing
industry.
 Shipbuilding Industry: It is proposed to withdraw the existing duty exemption on the
importation of dredgers.
 Detergent Industry: It is proposed to decrease the existing rate of customs duty of Linear Alkyl
Benzene Sulphonic Acid.
 Sanitary Napkin and Diaper Industry: It is proposed to expand the tax benefit on sanitary napkin
and diaper industry by decreasing the rate of customs duty on the import of a raw material.
Priority Sector/Incentivized Sector …2020-21

 Steel Industry: it is proposed to reduce the duty on the import of refractory cement to
promote the steel industry. In addition, further proposed to increase regulatory duty of three
raw materials (Ferro-Manganese, Ferro-Silicon, Ferro-Silico-Manganese) to protect the steel
raw materials manufacturing industry.
 Plastic and Packaging Industry: It is proposed to reduce the duty on the import of
photographic plates of plastic to promote the plastic and packaging industry .
 Paper Manufacturing Industry: It is proposed to reduce the duty on the import of washing and
cleaning agent for the paper industry.
 Lube-blending Industry: It is proposed to reduce the existing custom duty rate on the import
of base oil, the main raw material of the lube-blending industry.
 C.R. Coil Industry: It is proposed to increase the existing regulatory duty on the import of
finished products for the C.R. coil industry.
 LPG Cylinder and Auto Tank Industry: To provide incentives to the emerging LPG cylinder and
auto tank manufacturing industry, it is proposed to extend concessionary tax benefits on
several new raw materials and rationalize existing tax benefits.

 Health Sector : To combat the outbreak of the COVID-19, special notification has been
issued as an interim mechanism before budget to exempt all import duties and taxes on
coronavirus testing kits, masks and personal protective equipment (PPE) and on the raw
materials required to locally produce hand sanitizers, masks and PPE. To further
strengthen the health sector, It is propose to reduce import duty on essential raw
materials for locally producing Autoclave machines used for sterilizing medical
instruments.
 ICT Sector: To encourage cellular phone manufacturing and further strengthen the
industry, It is proposed to rationalize the existing import tax concessions and make it
more investment-friendly.
 It is proposed to reduce the duty rate on the import of electrical signaling equipment.

 Cash Incentive of 2 percent on remittance earnings by non-resident Bangladeshis
resulted a new record of US$ 16.56 billion in remittance inflows in just 11 months
surpassing the previous record of US$ 16.42 billion in 12 months.
 To boost Exports Of Readymade Garments, the government is providing 1 percent
cash incentive to exports of readymade garments (RMG) in all sectors since 1st July
2019.
 To Enhance Competitiveness of Our Industrial And Business Sector, the interest rate
on bank loans was reduced to a maximum rate of 9 percent from 1st April 2020.
 To introduce New Financial Tools in the banking and financial sector: (a) the Venture
Capital Guideline has been formulated; (b) the Bangladeshi Taka denominated ‘Bangla
Bond’ was introduced for the first time at the London Stock Exchange; and (c) Stamp
Duty on trust deeds in the bond market have been .
 As part of our budget commitment for year 2019-20, to reform the bank, financial and
revenue sectors, GoB has taken up the task of amending 10 existing laws, and drafting
6 new laws.
HIGHLIGHTS…2019-20

 So far about 2 lakh 20 thousand pensioners has been brought under online payment through
electronic fund transfer (EFT) system, the ongoing Mujib Borsho, all pensioners will be brought
under the EFT.
 As pursuit to bring discipline, GoB have DIGITISED the sales, profit encashment, etc. of
national savings certificates (NSCs) by introducing the 'National Savings Scheme Online
Management System'. Besides, the postal savings scheme and the postal banking system have
also been automated.
 As part of our commitment to Introduce Insurance Schemes in different sectors: (a) GoB has
introduced the livestock insurance scheme; (b) we have begun the task of formulating the
health insurance scheme for government employees; and (c) we will take steps to introduce
insurance in the agriculture sector.
 A total of 2 THOUSAND 620 secondary, higher secondary and technical education instituions
and madrasas have been brought under the Master Pay Order (MPO) system in the current
fiscal year.
 A Guideline has been prepared To Rehabilitate the affected people from the river erosion-
prone areas, and an allocation of Tk. 100 crore has been made.
HIGHLIGHTS…2019-20

Income Tax

High level snap shot
 Tax free limit increased by Tk. 50,000 for each category of assessee.
 Tax rate of 5% proposed for the first Tk. 1 lac of taxable income.
 Super Tax rate of 30% is proposed to abolish therefore highest tax rate of 25%
is about to get reinstated for individual tax payers.
 Tax rebate of Tk. 2,000 is proposed for all the taxpayers who will file their
income tax returns online for the first time.
 For not publicly traded company a reduction of tax rate by 2.5% has been
proposed.
 Surcharges and other tax rates remain unchanged, except above. Therefore,
Business enterprise would have to face challenges to survive in the era of
COVID-19 and post COVID-19.
 Reduction of withholding tax rate for 26 essential commodities incl. rice,
wheat, potato, onion has been proposed to be 2% from 5%, thus control the
commodities price & inflation.

High level snap shot
 A reduction of collection of tax at import level for sugar and garlic is proposed to be 2% from
5% thus control the commodities price at consumer level.
 A reduction of collection of tax at import level for wheat and raw materials for poultry is
proposed to 2% from 5%.
 A reduction of collection of tax at import level for raw materials for Ispat Industry (ferro
alloy) is proposed to 3% from 5%.
 Advance Tax Payment for registration & renewal of fitness for vehicle propose to increase
significantly.
 Proposal of imposing tax on payment of gratuity scheme, if not approved by NBR is against
the sprit and cannon tax therefore needs further review.
 Gain on transfer of Business or Undertaking will be subject to Capital Gain Tax (Sec 31A). This
needs to be review as due to COVID-19 (pandemic) impact, few enterprise may take the path
of reconstruction of entity through merger/amalgamation etc. as survival strategy.
 Tax at a rate of 50% to impose on difference between actual and disclosed of investment,
import and export amount is to be levied

Proposed Personal Tax Rate
General (Individual) Assessee Other than General
Assessee
Slide Courtesy of Mr. Sarker Nahidul Islam FCA, IFIC Bank
Nil
05%
10%
15%
20%
25%
Tax Rate
First Tk. 300,000
Next Tk. 100,000
Next Tk. 300,000
Next Tk. 400,000
Next Tk. 500,000
On Balance
Income
Non Residents at 30%
Women & Senior Citizen Tk. 350,000
Disabled Persons Tk. 450,000
Parents of Disabled Persons Tk. 350,000
Gazetted war-wounded
freedom fighters Tk. 475,000

Analysis of Proposed Personal Tax Rate Implication
Individual Tax Rate Change – for Yearly Income of Tk. 5,000,00.00 Effect 0.3%
Earlier
Slab Rate Tax
250,000 0% -
400,000 10% 40,000
500,000 15% 75,000
600,000 20% 120,000
3,000,000 25% 750,000
4,750,000 985,000
250,000 30% 75,000
5,000,000 1,060,000
New
Slab Rate Tax
300,000 0% -
100,000 5% 5,000
300,000 10% 30,000
400,000 15% 60,000
500,000 20% 100,000
1,600,000 195,000
3,400,000 25% 850,000
5,000,000 1,045,000
Diff
-
35,000
45,000
60,000
650,000
790,000
(775,000)
15,000
 This proposal, if approved, will results benefits mostly to the assessee having taxable income (i) lower than Tk.
20 lac; and (ii) higher of Tk. 60 lac. Meaning middle class people (i.e. assessee) having taxable income between
Tk. 20 lac to Tk. 60 lac won’t have much of relief in term of direct tax. As usual, middle class is left out!

Surcharge
Net worth (IT 10B & IT 10BB) Rate Minimum
Over Tk 30 million to Tk 50 million 10% Tk. 3,000
Over Tk 200 million 30% Tk. 5,000
Location Minimum
Dhaka & Chittagong City Corporations Tk. 5,000
Any other City Corporation Tk. 4,000
Other than City Corporation Tk. 3,000

Corporate Tax Rate
25% Listed Company 32.5%Non-Listed Company
37.5% Listed Bank, Insurance, FI 40%Non-Listed Bank, Insurance, FI
40% Listed Mobile Company 45%Non-Listed Mobile Company
45% Listed Cigarette Company 45%Non-Listed Cigarette Company
37.5% Merchant Banks 15%Co-operative Society
Change

Whitening
black money
now to be
more lucrative
than ever! As
Tax Payer to be
given amnesty
against tax
payment at
Low Rate
under Section
16 H & 19AAAA
19AAAA
Special tax on
Investment on
Security
(Undisclosed Income
19AAAAA
Special tax on
undisclosed
property
19BBBBB
Special tax on
investment in
residential building,
apartment
Special scheme of Amensty for Tax evaders +….
New insertion
New insertion
New insertion
No question on source of income, if pay
10% tax on investment in capital market
between 01-07-20 to 30-06-21, within 30
days of such investment. [lock in -3 Years]
Tk. 500 sq.ft to Tk. 20,000 sq.ft in case Land.
Tk. 300 sq.ft to Tk. 4,000 sq.ft in case of
building.
10% tax on liquid property i.e. cash and cash
equivalent.
Now, includes commercial also.
Existing ProposedSectionRemarks

Changes of Price

PRICE HIKE
 Ticket of Air conditioned Steamer
 Chartered (renting) Aircraft and Helicopter
 Cosmetics items
 Furniture
 Imported Onion
 Plastic products
 Cellular phone/service usages
 Registration and fitness of car/jeep
 Ceramics silk
 Imported Honey
 Cigarettes

 Gold
 mobile phone services
 Air conditioner
 Detergent
 Sanitary napkin & diaper
 Steel product (re-bar, etc.)
 LPG Cylinder
 Local Refrigerator and AC
PRICE DECLINES

Progress

এবার প্রস্তাববত বাজেজে…..
সরকারর অনুদানসহ আয় ধরা হয়য়য়ে ৩ লক্ষ ৪২ হাোর ০১৩ ক াটি ো া
এর ময়ধে এনরিআর আয় ধরা হয়য়য়ে ৩ লক্ষ ৪৫ হাোর (৯০.৩১%)
িেয় ধরা হয়য়য়ে ৫ লক্ষ ৬৮ হাোর ক াটি ো া।
ঘাটরি থাকয়ে বেবিবির ৬শতাাংশ । ক াে ঘােবত ১ লক্ষ ৯০ হাোর ক াটি ো া
প্রস্তারিি উন্নয়ন বযয় ধরা হয়য়য়ে ২ লক্ষ ০৫ হাোর ১৪৫ ক াটি ো া
অভ্েন্তরীণ িেিস্থা থথয়ক ঋণ ধরা হয়য়য়ে ১ লক্ষ ৯ হাোর ৯৮৩ ক াটি ো া।
থমাট থদশজ উৎপাদয়ন (বেবিবি) প্রিৃরির হার ধরা হয়য়য়ে ৮ দশব ২০ শতাাংশ।
বেবিবি ধরা হজয়জে ৩১ লক্ষ ৭১ হাোর ৮০০ ক াটি ো া । সাংজশাবধত
বাজেজে বেবিবি ব জয় ২৮ লক্ষ ০৫ হাোর ৭০০ ক াটি ো া বনধধারণ রা
হজয়বেল।
HIGHLIGHTS…

20200612 budget 2020 2021

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