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Illustration explaining the rules for determining capital gains under Section 61 of the Bangladesh Income Tax Act 2023. |
Other matters in determination of capital gains under Section 61 | Bangladesh Income Tax Act -2023
Other Matters Relating to the Determination of Capital Gains
(1) If the fair market value (FMV) of a capital asset exceeds the consideration value declared by the assesses by more than 15%, the Deputy Commissioner of Taxes (DCT) may determine the FMV of that asset, subject to obtaining prior approval from the Inspecting Joint Commissioner.
(2) Where the fair market value of an asset is more than 25% higher than its declared acquisition value, the Deputy Commissioner of Taxes may, in accordance with the procedure prescribed by the Board, offer to purchase the asset at the declared acquisition value.
(3) Any capital gain arising from the transfer of all capital assets of a partnership firm to a new company incorporated under the Companies Act, 1994 (Act XVIII of 1994) shall be exempt from tax, provided that the entire consideration received from the transfer is invested in the equity shares of the newly formed company.
(4) Notwithstanding anything contained in Section 58, where, in the course of business reorganization by a firm, any net wealth of the company or intangible asset is transferred as a result of such reorganization, such transfer shall be exempt from tax, subject to the following conditions:
(a) Before the reorganization, all the assets and liabilities of the firm become the assets and liabilities of the company;
(b) Before the reorganization, all the partners of the firm become shareholders of the company in proportion to their capital accounts in the firm, and their shareholding remains in the same proportion;
(c) The partners do not receive, directly or indirectly, any consideration or benefit other than shares in the company;
(d) The aggregate shareholding of the partners in the company remains at least 50% (fifty percent) of the total voting power of the company and continues to be maintained for a period of five (5) years from the date of the reorganization.
(5) If any of the conditions specified in sub-section (4) is not complied with, the exemption granted under that sub-section in respect of the transfer of the relevant net wealth or intangible asset shall be deemed never to have been allowed. Accordingly, any gain or profit arising from such transfer shall be taxable in the hands of the transferee company for the relevant income year:
Provided that, where the transferee company proves to the satisfaction of the Deputy Commissioner that there were reasonable grounds for the failure to comply with the conditions and that it has remedied the default before the reassessment, the Deputy Commissioner may allow the exemption under this section after giving the company a reasonable opportunity of being heard.
(6) Where a company is formed as a result of a firm reorganization under sub-section (4), then, notwithstanding anything contained elsewhere in this Ordinance, the accumulated losses and unabsorbed allowances of the firm shall be deemed to be the accumulated losses and unabsorbed allowances of the successor company.
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Frequently Asked Question (FAQ):
Q1. What are the other
matters in determination of capital gains under Section 61?
Section 61 provides additional rules for determining capital gains, including
the use of fair market value when the declared consideration is significantly
lower than the asset's actual value.
Q2. When can the tax
authority determine the fair market value of an asset?
The Deputy Commissioner of Taxes may determine the fair market value of an
asset, with prior approval from the Inspecting Joint Commissioner, when the
fair market value exceeds the declared consideration by more than 15%.
Q3. Why is fair market
value important in capital gains calculation?
Fair market value helps ensure that capital gains are calculated accurately and
prevents undervaluation of assets for tax purposes.
Q4. Who approves the determination of fair
market value under Section 61?
The determination of fair market value must receive prior approval from the
Inspecting Joint Commissioner before being applied by the Deputy Commissioner
of Taxes.