As its rule for the landlords to take their house rents through the banking channel evokes a low response, the National Board of Revenue (NBR) has decided to get tough to enforce the rule.
“We’re waiting for the deadline for the income tax return submission to be over. After that, we’ll launch our drive in this regard,” an NBR official told UNB seeking anonymity.
The government from July 1 this year made it mandatory to collect the house rent if it goes above Tk 25,000 through the banking channel aiming to bring both the landlords and the tenants under the tax net.
According to the rule, anyone having the ownership of any property used for commercial or residential purposes have to collect his or her monthly rent over Tk 25,000 through a bank account in any scheduled bank. “But the response to the order has so far been very low,” said the NBR official.
According to him, the government can collect thousands of crore taka as tax from over 150,000 buildings in the country’s nine city corporations.
From now on, the NBR will penalise house owners at the rate of 50 percent of taxes payable on incomes derived from the house property or Tk 5,000, whichever is higher, for not transacting the house rent through banks, according to the finance bill 2014.
NBR officials said although the order took effect in July this year, it took for them more than two months to make rules in this regard, while the taxpayers need some time more to understand the new rules.
“Anyway, we have so far taken a soft line because of the Nov 2 tax return submission deadline. Once it’s over, well get tough about the payment of house rents through banks,” said the NBR official.
Meanwhile, the NBR has tightened rules for businesspersons and professionals who rent out property on commercial or residential purposes. These people will now have to pay rents through crossed cheques or bank transfers. “Or else, the rents will not be admissible as expenses,” the NBR said in a notice.
It said the rental of any property—building, apartment, office space, shop and factory—will fall under the rule that means businesspeople and professionals will have to pay more tax if they do not pay such rents through banks. The expenses, claimed by taxpayers as rental payments for property, will then be treated as income and entail tax, according to taxmen.
NBR officials said those who will fall under the professional category include physicians, lawyers and engineer, with effect from July 1 this year.
The NBR has also tightened rules for constructing houses through borrowing. The tax authority says it will only allow expenses for interest payments on bank loans taken for building homes. Interest payment expenses on money borrowed from other sources will not be granted as allowable expenses, meaning that the taxpayers will have to pay tax on their claims of interest expenses if the loans are taken from sources other than banks or financial institutions.
The tax collecting authority has detected that some 166,500 flat owners and traders are still out of the tax net despite having taxable incomes. Of them, 45,600 are home owners, mainly in Dhaka City, and the rest are traders.
The budget for the current fiscal set an overall revenue collection target of Tk 1,82,954 crore. Of the target, the NBR share is estimated at Tk 1,49,720 crore, up Tk 24,720 crore than the last fiscal’s. The NBR aims to collect a record Tk 57,500 crore via direct taxes in fiscal 2014-15, up 34 percent from Tk 42,915 crore collected a year ago.