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| corporate practice bd |
Tax credit investment refers to the practice of investing in projects or activities that qualify for various tax credits offered by governments. Tax credits are incentives provided by governments to promote specific economic, social, or environmental goals. These credits reduce the amount of taxes an individual or company owes, effectively lowering their tax liability.
Investing in tax credits can be an attractive option for individuals or businesses looking to reduce their tax burden while also supporting activities that align with their values or financial goals. Tax credit investments often involve areas such as renewable energy, affordable housing, historic preservation, research and development, and more.
Here's how tax credit investments generally work:
- Eligibility:
Certain projects or activities are eligible for specific tax credits based on government policies and regulations. These could be federal, state, or local tax credits.
- Investment:
Investors provide funds to support the eligible project or activity. These funds are used to finance the project's development, construction, or other qualifying expenses.
- Tax Credit Allocation:
In return for their investment, investors receive tax credits. These credits can be used to offset their tax liability, either in the year they were earned or in future years.
- Benefits:
Tax credit investments can lead to reduced taxes, potentially generating significant savings. The projects funded by these investments can also have positive social, environmental, or economic impacts.
- Risks and Returns:
As with any investment, there are risks involved. The success of the project or activity and the eventual realization of the expected tax benefits can vary. Investors need to carefully evaluate the potential risks and returns before committing funds.
It's important to note that the specific rules and regulations surrounding tax credit investments can vary widely depending on the jurisdiction and the type of tax credit. Additionally, tax laws and policies can change over time, so investors should stay informed and seek advice from tax professionals or financial advisors before making tax credit investments.
Common types of tax credit investments include Renewable Energy Tax Credits (such as the Investment Tax Credit for solar energy), Low-Income Housing Tax Credits, Historic Rehabilitation Tax Credits, and New Markets Tax Credits, among others. Each of these credits serves a specific purpose and encourages investment in different sectors of the economy.
Any
tax payers shall be entitled to a credit from the amount of tax payable
if he/she invests during the income year in the following items: Under 6 schedule(Part-03) of Income Tax Act-2023
|
Serial no |
Area of Investment |
Investment Limit(If any) |
|
01 |
Life Insurance Premium or Contractual Deferred Annuity Paid in Bangladesh |
10% policy value |
|
02 |
Contribution to Deposit Pension Scheme |
1,20,000 |
|
03 |
Investment in Government Securities, Unit Certificate, Mutual Fund, ETF or Joint Investment Scheme Unit Certificate |
5,00,000 |
|
04 |
Investment in Securities listed with Approved Stock Exchange |
No Limit |
|
05 |
Contribution to Provident Fund to which Provident Fund Act, 1925 applies |
No Limit |
|
06 |
Self & Employer’s Contribution to Recognized Provident Fund |
No Limit |
|
07 |
Contribution to Super Annuation Fund |
No Limit |
|
08 |
Contribution to Benevolent Fund / Group Insurance Premium |
No Limit |
|
09 |
Contribution to Zakat Fund |
No Limit |
|
10 |
Others, if any (provide detail) |
No Limit |
Investment Tax credit (Part-6, 1st Chapter, Section-78)
The eligible investment amount will be the lower of .
(a) 15% of Actual investment or, ****
(b) 3% of Taxable Income or, ****
(c) Tk.10,00,000