Employers have to ensure return submission on the withholding tax of their employees having taxable incomes to claim tax waiver on salary expenses.
As per provision, the tax benefit on salary expenses will be disallowed from December onwards if the private-sector employees failed to submit their tax returns or seek time extension by the designated tax day, November 30, every year.
The private firms will not be eligible to claim salary payments as expenses in case of having non-compliant employees who failed to submit tax returns within the stipulated timeframe or extended time with approval from the Deputy Commissioners of Taxes (DCTs).
An income tax 'Paripatra' or circular for the fiscal year 2017-18, published Monday, clarified the mandatory provision for private employees.
Employers claim tax exemption on the salary expenses of employees in their respective tax returns.
They will also have to check the tax-related status of employees who have taxable income before making payment to them. Salary expenses of private companies are tax-free.
Employers will have to pay tax on their expenses for staff salaries in case the employees do not file tax returns or not seek time extension despite having taxable incomes.
Individuals having above Tk 250,000 annual income have to pay tax and submit tax returns.
Relevant provision of the income tax ordinance says, 'Any payment made after the Tax Day by way of salary to an employee if the employee is required to file the return of income but fails to file the same on or before the Tax Day or obtain time extension, as the case may be...'
Employers will ensure tax-return submission if it is mandatory for an employee based on available information in the respective organisation.
Return submission is mandatory for individuals who are placed in executive and managerial posts with above Tk 16,000 monthly income, shareholder employee, have a private motor car, member of a professional body Returns of employees of corporate taxpayers will be scrutinized intensively while allowing salary expenditure as expenses in their tax returns, officials said.
"If non-compliance found, the expenses will be disallowed and tax would be imposed at their applicable rate on the amount," said one official explaining the conditionality tagged with the tax waiver for employers on account of the withholding tax paid by their staff members.