Five penalties for not filing an income tax return: from fines to having gas and electricity disconnected

A taxpayer who does not file an income tax return can face five kinds of trouble. If tax officials take a strict line, the fine can reach Tk 50,000, and even gas and electricity connections can be cut off.

The country has more than 12.5 million Taxpayer Identification Number (TIN) holders. About 5 million taxpayers file returns each year; the remaining 7.5 million do not.

Under the law, not every TIN holder is obliged to file a return. A return must be filed if one has taxable income, and a return is also required to obtain 45 kinds of government and private services. NBR officials believe a large number of people have not filed despite having taxable income.

The first penalty is a fine. If a return is not filed by the deadline, tax officials can act under Section 266 of the Income Tax Act. Under that section, a fine of 10 percent of the tax charged on the taxpayer's last assessed income can be imposed, subject to a minimum of Tk 1,000 and a maximum of Tk 50,000. If the failure continues, an additional fine of Tk 50 for each day can also be imposed.

Failing to provide return information when it is sought in an investigation can also draw a fine of Tk 50,000.

Second, tax exemption benefits will not be available if the return is not filed on time. Under Section 174 of the Income Tax Act, the scope of exemption will be narrowed. The rebate normally available each year for investment in government-approved sectors, including savings certificates, will not be available if the return is late.

Third, if the return is not filed by the deadline, additional tax must be paid at a rate of 2 percent per month on the assessed tax.

Fourth, tax officials have been given the power to cut off a home's gas and electricity connections if the return is not filed on time. For factory owners who do not file their establishment's return, their gas and electricity connections can also be cut. Not only electricity — gas, water and any other state utility connection can be disconnected.

Fifth, filing a return has been made mandatory for government and private employees up to a specified high grade (first-class officers). If the return is not filed on time, complications can arise in receiving salary and allowances. Offices ask for a copy of the filed return, and have even announced that salary and allowances will be withheld without it. The same rule applies to mid-level officials in the private sector.

From the current fiscal year, returns can be filed all year round. Filing in the first three months (July-September) brings the tax rebate. Filing between October and December means paying the tax as assessed. Filing from January to June adds a fine on top of the tax. In other words, once the fiscal year passes, fines, extra tax and other punitive measures will be applied over returns.