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ICAB CL Principles of Taxation study materials
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ICAB CL Principles of Taxation practice questions

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Question 1Taxation

Which body is responsible for administering the principal direct and indirect taxes in Bangladesh?

  1. Securities and Exchange Commission
  2. Bangladesh Bank
  3. National Board of Revenue Correct answer.
  4. Office of the Comptroller and Auditor General

Explanation

The National Board of Revenue, operating under the Ministry of Finance, is the statutory authority that assesses and collects income tax, value added tax, and customs duties in Bangladesh. Other bodies regulate banking, audit public accounts, or supervise capital markets rather than administer tax law.

Question 2Taxation

Under the Income Tax Act 2023, the income tax year of an assessee generally corresponds to which period?

  1. The period chosen freely by the assessee each year
  2. The financial year running from 1 July to 30 June Correct answer.
  3. The calendar year running from 1 January to 31 December
  4. The tax year running from 1 April to 31 March

Explanation

Bangladesh follows a July-to-June fiscal year, and the income year for most assessees is this financial year preceding the assessment year. The assessment year is the twelve months following the income year in which tax is assessed.

Question 3Taxation

A resident individual assesses total income of BDT 500,000 for the tax year. Applying the tax-free threshold for a general male assessee, what is the taxable amount above the threshold?

  1. BDT 500,000
  2. BDT 350,000
  3. BDT 150,000 Correct answer.
  4. BDT 200,000

Explanation

The tax-free threshold for a general male individual is BDT 350,000, so income above the threshold is BDT 500,000 minus BDT 350,000, equal to BDT 150,000. The threshold is higher for women, senior citizens, and persons with disabilities.

Question 4Taxation

Which of the following is generally treated as income from salary for an employee?

  1. Dividend received on shares held in a listed company
  2. Interest earned on a fixed deposit in a bank
  3. Basic pay and allowances received from the employer Correct answer.
  4. Profit on sale of a personal motor vehicle

Explanation

Income from salary includes basic pay, allowances, and perquisites received from an employer in connection with employment. Dividends, interest, and capital gains fall under separate heads of income.

Question 5Taxation

Value added tax in Bangladesh is levied primarily on which of the following?

  1. The annual profit of a company only
  2. The value added at each stage of supply of goods and services Correct answer.
  3. The total wealth held by a person at year end
  4. The import of goods only

Explanation

VAT is a multi-stage tax collected on the value added at each stage of the supply chain, with credit for input tax already paid. It applies broadly to goods and services, not just imports or company profits.

Question 6Taxation

Which authority issues the Tax Identification Number to an assessee in Bangladesh?

  1. The Bangladesh Investment Development Authority
  2. The National Board of Revenue through its field offices Correct answer.
  3. The Registrar of Joint Stock Companies
  4. The local municipal corporation

Explanation

A Tax Identification Number is issued by the National Board of Revenue through its tax circles and field offices. It is required for filing returns and for many financial and commercial transactions.

Question 7Taxation

Which of the following is an example of indirect tax?

  1. Gift tax on a transfer
  2. Capital gains tax on land sale
  3. Value added tax on a restaurant meal Correct answer.
  4. Income tax on salary

Explanation

Indirect taxes are levied on transactions and can be shifted to the consumer, such as VAT charged on a meal. Income tax, capital gains tax, and gift tax are direct taxes borne by the person assessed.

Question 8Taxation

For a company assessee, the standard rate of corporate income tax generally applies to which base?

  1. Only the declared dividend amount
  2. Only the paid-up capital
  3. Taxable income computed after allowable deductions Correct answer.
  4. Gross receipts without any deduction

Explanation

Corporate income tax is applied to taxable income, which is total income less allowable deductions and losses. Gross receipts, dividends, and capital are not the tax base for the standard corporate rate.

Question 9Taxation

An assessee earns rental income of BDT 600,000 from letting a building. What standard deduction is generally allowed from rental income before computing taxable rental income?

  1. No deduction is allowed
  2. 50 percent of the rental income
  3. 25 percent of the rental income Correct answer.
  4. 10 percent of the rental income

Explanation

Rental income from property is computed after allowing a statutory deduction, commonly 25 percent, for repairs and maintenance, plus certain other allowable outgoings. The net figure is then included in total income.

Question 10Taxation

Which of the following best describes the withholding tax mechanism in Bangladesh?

  1. The assessee voluntarily pays tax before filing a return
  2. Tax is collected only at the point of import
  3. A person making certain payments deducts tax at source and deposits it with the government Correct answer.
  4. The government refunds tax paid in advance

Explanation

Withholding tax requires the payer of specified types of income, such as salary or contract payments, to deduct tax at source and remit it to the government on behalf of the payee. The payee then claims credit for the tax deducted.

Question 11Taxation

An individual sells a capital asset held for several years at a gain. Which tax treatment generally applies to the gain?

  1. It is taxed only as business income
  2. It is taxed as salary income
  3. It is taxed as capital gains under a separate head Correct answer.
  4. It is exempt because the asset was held for years

Explanation

Gains arising from the transfer of capital assets are taxed under the head capital gains, with the gain computed as sale proceeds less the cost of acquisition and allowable expenses. Holding period and asset type may affect the applicable rate.

Question 12Taxation

Which of the following expenses is generally allowable as a deduction in computing business income?

  1. Income tax paid by the business
  2. Personal household expenses of the proprietor
  3. Revenue expenditure incurred wholly and exclusively for the business Correct answer.
  4. Capital expenditure on acquiring a new factory building

Explanation

Revenue expenses laid out wholly and exclusively for the purpose of the business are deductible. Personal expenses, income tax payments, and capital expenditure are not allowable as revenue deductions, although capital expenditure may attract depreciation.

Question 13Taxation

A taxpayer fails to file the required income tax return by the due date. Which consequence most accurately applies?

  1. The taxpayer's income becomes tax-free
  2. A penalty or additional tax may be imposed for late filing Correct answer.
  3. The taxpayer must pay only the original tax with no consequence
  4. The taxpayer is automatically exempt from tax for that year

Explanation

Late or non-filing of a return attracts statutory penalties and may result in additional tax or best-judgment assessment. Filing by the due date is a legal obligation, and non-compliance carries consequences.

Question 14Taxation

Which of the following best describes the purpose of advance income tax in Bangladesh?

  1. To replace the annual return entirely
  2. To tax only import transactions
  3. To refund excess tax to the assessee
  4. To collect tax in instalments during the income year based on estimated income Correct answer.

Explanation

Advance income tax requires certain assessees to pay tax in instalments during the income year based on estimated income. The advance payments are adjusted against the final tax liability when the return is filed.

Question 15Taxation

Which of the following is most likely to qualify as a tax-exempt income for an individual?

  1. A specified class of income expressly exempted by the income tax law Correct answer.
  2. Salary received from a private employer
  3. Business profit from a trading concern
  4. All income above the tax-free threshold

Explanation

Exemptions apply only to categories of income expressly listed as exempt in the income tax law, such as certain allowances or specified receipts. Ordinary salary and business profits remain taxable.

Question 16Taxation

A company distributes dividends to its shareholders. Which statement best describes the tax treatment of the dividend in the shareholder's hands?

  1. The dividend is generally taxable in the shareholder's hands, often with tax already deducted at source Correct answer.
  2. The dividend is taxed only when the shareholder sells the shares
  3. The dividend is taxed only as salary
  4. The dividend is always tax-free for the shareholder

Explanation

Dividends are taxable income for the recipient shareholder, and tax is commonly deducted at source by the distributing company. The shareholder accounts for the dividend in the return and claims credit for tax already deducted.

Question 17Taxation

Which of the following best explains the input tax credit mechanism under VAT?

  1. A registered person deducts VAT already paid on inputs from VAT charged on outputs Correct answer.
  2. A registered person claims a refund of all VAT without any supply
  3. A registered person pays VAT twice on the same supply
  4. A registered person is exempt from VAT on all purchases

Explanation

Under VAT, a registered person offsets input tax paid on purchases against output tax charged on sales, remitting only the net difference. This avoids cascading of tax through the supply chain.

Question 18Taxation

An assessee has business income of BDT 800,000 and allowable business expenses of BDT 300,000. What is the taxable business income?

  1. BDT 500,000 Correct answer.
  2. BDT 800,000
  3. BDT 1,100,000
  4. BDT 300,000

Explanation

Taxable business income equals gross business income less allowable revenue expenses, so BDT 800,000 minus BDT 300,000 gives BDT 500,000. Only expenses wholly and exclusively incurred for the business are deductible.

Question 19Taxation

Which of the following statements about the assessment year is correct?

  1. It is the same as the income year in all cases
  2. It is the year in which the assessee was born
  3. It is the year in which the business commenced
  4. It is the year following the income year in which income is assessed to tax Correct answer.

Explanation

The assessment year is the twelve-month period following the income year, during which the income of the preceding year is assessed and taxed. It is distinct from the income year in which the income was actually earned.

Question 20Taxation

Which of the following best describes the tax treatment of a gift received by an individual outside specified exempt categories?

  1. It is taxed only in the hands of the donor
  2. It may be treated as income of the recipient and taxed accordingly Correct answer.
  3. It is always exempt regardless of amount or relationship
  4. It is taxed only as capital gains

Explanation

Gifts that fall outside the specified exempt categories, such as gifts from close relatives or on prescribed occasions, can be treated as income of the recipient. The relationship and circumstances determine whether an exemption applies.

Question 21Taxation

A company has taxable income of BDT 1,000,000 and the applicable corporate tax rate is 25 percent. What is the tax liability before any credits?

  1. BDT 750,000
  2. BDT 100,000
  3. BDT 250,000 Correct answer.
  4. BDT 500,000

Explanation

Tax liability is computed by applying the applicable rate to taxable income, so 25 percent of BDT 1,000,000 equals BDT 250,000. Credits such as advance tax or withholding tax would then reduce the amount payable.

Question 22Taxation

Which of the following best describes the treatment of depreciation on plant and machinery used in a business?

  1. It is allowed only for personal assets
  2. It is never allowed as a deduction
  3. It is treated as salary income
  4. It is allowed as a deduction according to prescribed rates for the class of asset Correct answer.

Explanation

Depreciation on business assets is allowed as a deduction at prescribed rates depending on the class of asset. It provides relief for the wear and tear of capital assets used in producing business income.

Question 23Taxation

An assessee earns income in a foreign country and is resident in Bangladesh. Which principle generally governs whether that foreign income is taxed in Bangladesh?

  1. Foreign income is taxed only if remitted to Bangladesh
  2. Only domestic-source income is ever taxable for a resident
  3. Worldwide income is taxable for a resident, with relief for foreign tax paid Correct answer.
  4. Foreign income is always exempt for a resident

Explanation

A resident assessee is generally taxed on worldwide income, including foreign-source income. Relief is typically available for tax paid in the foreign country to prevent double taxation.

Question 24Taxation

Which of the following best explains the concept of a tax holiday in Bangladesh?

  1. A statutory exemption from tax for a specified period for qualifying industrial undertakings Correct answer.
  2. A refund of tax paid in prior years
  3. A reduction in the VAT rate for all goods
  4. A permanent exemption from all taxes for any business

Explanation

A tax holiday is a statutory incentive granting exemption from tax for a defined period to qualifying industrial undertakings, often in priority sectors or zones. It is time-limited and conditional, not a permanent or universal relief.

Question 25Taxation

An assessee understates income in a return. Which of the following best describes the likely consequence under the income tax law?

  1. Additional tax or penalty may be imposed for concealment or understatement Correct answer.
  2. The understatement is automatically corrected with no consequence
  3. The assessee becomes exempt from future filing
  4. The assessee's tax rate is permanently reduced

Explanation

Concealment or understatement of income is a compliance offence that can attract additional tax, penalty, and in serious cases prosecution. The law penalises deliberate underreporting to protect the integrity of the tax base.

Question 26Taxation

Which body administers the income tax law and collects income tax in Bangladesh?

  1. National Board of Revenue Correct answer.
  2. Bangladesh Bank
  3. Controller of Accounts
  4. Registrar of Joint Stock Companies

Explanation

The National Board of Revenue is the apex authority that administers the income tax law and collects income tax on behalf of the government. Field-level tax circles and zones operate under its direction. Bangladesh Bank handles monetary policy, not tax administration.

Question 27Taxation

What is the normal deadline for an individual to file an income tax return in Bangladesh for a given income year?

  1. 30 June of the assessment year
  2. 31 December of the income year
  3. 30 September of the income year
  4. 30 November of the assessment year Correct answer.

Explanation

An individual assessee is generally required to file the return by 30 November of the assessment year, which corresponds to the year following the income year. The date may be extended by the tax authority by notification. Filing after this date can attract late-filing consequences.

Question 28Taxation

Which of the following best describes the tax base for VAT in Bangladesh?

  1. The gross salary paid to employees
  2. The total profit earned by a business in a year
  3. The value added at each stage of supply of taxable goods and services Correct answer.
  4. The capital invested by the owners of a business

Explanation

VAT is levied on the value added at each stage of supply of taxable goods and services, with credit allowed for input tax already paid. This avoids cascading and ensures tax is collected on the incremental value. Profit, salary and capital are not the VAT base.

Question 29Taxation

Which of the following persons is generally required to obtain a Tax Identification Number in Bangladesh?

  1. Any person who pays tax or is required to file a return Correct answer.
  2. Only persons engaged in import or export trade
  3. Only companies registered under the Companies Act
  4. Only persons whose income exceeds the exemption threshold

Explanation

A TIN is required for any person who pays tax or is otherwise required to file a return, and it is also needed for specified transactions such as opening certain accounts or registering property. The obligation is not limited to those above the exemption threshold or to companies.

Question 30Taxation

Which of the following is a direct tax?

  1. Value Added Tax
  2. Income tax Correct answer.
  3. Supplementary duty
  4. Customs duty

Explanation

Direct taxes are levied on the income or wealth of a person and are generally borne by the same person who pays them. Income tax is the principal direct tax in Bangladesh. VAT, supplementary duty and customs duty are indirect taxes passed on through prices.

Question 31Taxation

A taxpayer's income year normally runs from which period?

  1. 1 October to 30 September
  2. 1 January to 31 December
  3. 1 July to 30 June Correct answer.
  4. 1 April to 31 March

Explanation

The income year under the income tax law generally runs from 1 July to 30 June, and the assessment year follows it. A taxpayer may, in specified cases, use a different year with approval. The default period is the July-June fiscal year.

Question 32Taxation

Which of the following best describes the role of a tax deducting authority under the withholding tax system?

  1. It audits the recipient's accounts annually
  2. It issues the TIN to the recipient
  3. It assesses the final liability of the recipient
  4. It collects tax from the recipient and deposits it with the government Correct answer.

Explanation

A deducting authority withholds tax at source when making a specified payment and deposits the deducted amount with the government. The recipient then claims credit for the tax deducted. The deducting authority does not determine the recipient's final liability.

Question 33Taxation

Which of the following best describes the treatment of a loss carried forward from a business?

  1. It may be set off against salary income of a later year
  2. It is permanently forfeited at the end of the year
  3. It is refunded in cash by the tax authority
  4. It may be set off against business income of a later year subject to conditions Correct answer.

Explanation

A business loss that cannot be fully set off in the same year may generally be carried forward and set off against business income of later years, subject to conditions on continuity and time limits. It is not refunded in cash. Carry-forward is not permitted against salary income.

Question 34Taxation

An assessee has taxable income of BDT 400,000 and the applicable tax rate is 10 percent, with no other adjustments. What is the tax payable?

  1. BDT 44,000
  2. BDT 4,000
  3. BDT 400,000
  4. BDT 40,000 Correct answer.

Explanation

Tax payable is computed by applying the rate to the taxable income, so 10 percent of BDT 400,000 equals BDT 40,000. No minimum or surcharge applies on these facts. The result is a straightforward multiplication.

Question 35Taxation

Which of the following best describes the minimum tax provision for a company in Bangladesh?

  1. An exemption granted to newly listed companies
  2. A floor amount of tax payable even if normal computation yields less Correct answer.
  3. A refund guaranteed when tax paid exceeds the liability
  4. A penalty imposed only for late filing

Explanation

The minimum tax operates as a floor, requiring a company to pay at least a specified amount based on gross receipts even where the normal computation produces a lower figure. It is not a refund or an exemption. It applies regardless of whether the return is filed on time.

Question 36Taxation

Which of the following best describes the treatment of capital gains on the transfer of a capital asset?

  1. The gain is taxed under the head capital gains when the asset is transferred Correct answer.
  2. The gain is treated as agricultural income
  3. The gain is always fully exempt from tax
  4. The gain is deductible from business income without limit

Explanation

Gains arising from the transfer of a capital asset are taxed under the separate head of capital gains. The computation generally takes the consideration received and deducts the cost of acquisition and allowable expenses. Capital gains are not automatically exempt.

Question 37Taxation

Which of the following best describes the tax treatment of a gratuity received by an employee on retirement?

  1. It is treated as capital gain
  2. It is exempt up to a specified limit subject to conditions Correct answer.
  3. It is exempt only if the employer is a government body
  4. It is always fully taxable as salary

Explanation

Gratuity received on retirement is generally exempt up to a prescribed limit, provided the conditions in the law are met. The exemption is not confined to government employees. Amounts above the limit remain taxable as salary.

Question 38Taxation

An assessee pays BDT 50,000 as advance income tax during the year and the final assessed liability is BDT 80,000. What is the balance payable after credit for advance tax?

  1. BDT 130,000
  2. BDT 30,000 Correct answer.
  3. BDT 50,000
  4. BDT 80,000

Explanation

Advance income tax paid is credited against the final liability, so the balance is BDT 80,000 minus BDT 50,000, which equals BDT 30,000. The advance payment is not added to the liability. Credit is given for tax already paid.

Question 39Taxation

Which of the following best describes the residence test for an individual under the income tax law?

  1. Residence depends on the location of the employer
  2. Residence depends on physical presence in Bangladesh for a specified period in the income year Correct answer.
  3. Residence depends on the currency used for payment
  4. Residence depends solely on citizenship

Explanation

An individual is generally treated as resident if present in Bangladesh for the prescribed number of days in the income year, or for a specified combination of days across years. Citizenship alone does not determine residence. A resident may still be a non-resident if the statutory day tests are not met.

Question 40Taxation

Which of the following best describes the treatment of a payment made to a non-resident for services rendered abroad and used in Bangladesh?

  1. It is taxable only in the non-resident's home country
  2. It is always exempt from tax in Bangladesh
  3. It is deductible without any withholding obligation
  4. It may attract withholding tax when it falls within the specified categories Correct answer.

Explanation

Payments to non-residents falling within specified categories may attract withholding tax in Bangladesh, and the payer must deduct and deposit the tax. The obligation depends on the nature of the payment and the statutory provisions. It is not automatically exempt.

Question 41Taxation

Which of the following best describes the tax treatment of income from a partnership firm?

  1. The firm is taxed as an individual
  2. The firm is taxed as a separate entity and partners are taxed on their share Correct answer.
  3. Only the partners are taxed and the firm has no obligation
  4. The firm is fully exempt and partners are taxed on all profits

Explanation

A partnership firm is generally treated as a separate tax entity and is assessed on its income, while partners are separately taxed on the share of profit distributed to them, subject to the applicable rules. The firm is not fully exempt. It is also not assessed as an individual.

Question 42Taxation

Which of the following best describes the role of a tax exemption notification?

  1. It applies only to non-residents
  2. It replaces the income tax law entirely
  3. It grants relief from tax for specified persons or income subject to conditions Correct answer.
  4. It creates a new tax on specified persons

Explanation

An exemption notification grants relief from tax for specified persons, income or transactions, usually subject to stated conditions and a time limit. It does not create new taxes or replace the statute. It may apply to residents and non-residents alike.

Question 43Taxation

Which of the following best describes the treatment of a provident fund contribution by an employer?

  1. It is exempt within prescribed limits subject to conditions Correct answer.
  2. It is treated as a capital gain
  3. It is always fully taxable in the employee's hands
  4. It is deductible only for non-residents

Explanation

An employer's contribution to a recognised provident fund is generally exempt within prescribed limits and subject to conditions. Amounts beyond the limits may be taxable. The treatment is not limited to non-residents.

Question 44Taxation

An assessee has rental income of BDT 500,000 and claims the standard deduction plus a repair allowance. Which principle governs the deduction?

  1. No deduction is allowed against rental income
  2. The deduction equals the entire rental income
  3. A statutory percentage deduction is allowed irrespective of actual expenditure Correct answer.
  4. Only actual expenses supported by vouchers are allowed

Explanation

Rental income is computed after allowing a statutory percentage deduction for repairs and maintenance, regardless of the actual amount spent. This is a fixed allowance rather than a voucher-based deduction. The allowance does not eliminate the entire rental income.

Question 45Taxation

Which of the following best describes the treatment of a bad debt in computing business income?

  1. It is deductible when it is written off as irrecoverable and conditions are met Correct answer.
  2. It is treated as a capital gain
  3. It is never deductible
  4. It is deductible only for non-residents

Explanation

A bad debt may be allowed as a deduction where it is written off as irrecoverable in the accounts and the statutory conditions are satisfied. The debt must generally have been included in income earlier or arisen in the ordinary course of business. It is not a capital gain.

Question 46Taxation

A company receives a dividend from another company in which it holds shares. Which statement best describes the treatment under the income tax law?

  1. The dividend is generally included in income, with credit or exemption as the law provides Correct answer.
  2. The dividend is always fully exempt for every recipient
  3. The dividend is treated as agricultural income
  4. The dividend is taxed only if the recipient is a non-resident

Explanation

A dividend received is generally included in the recipient's income, but the law may provide a credit for tax already deducted at source or an exemption in specified cases. The treatment depends on the recipient and the applicable provisions. It is not automatically exempt for all recipients.

Question 47Taxation

Which of the following best describes the effect of a tax holiday granted to an industrial undertaking?

  1. The undertaking enjoys a partial or full exemption from tax for a specified period Correct answer.
  2. The undertaking must pay double tax during the holiday
  3. The undertaking is permanently exempt from all taxes
  4. The undertaking is exempt only from VAT

Explanation

A tax holiday provides a partial or full exemption from income tax for a specified period, usually subject to conditions such as commencement of production within a set time. It is time-limited and does not amount to permanent exemption. It is generally directed at income tax rather than VAT.

Question 48Taxation

A company understates its income in a return, and the tax authority discovers the understatement during assessment. Which of the following best describes the likely consequence?

  1. Only a warning letter is issued with no financial effect
  2. The return is accepted without change
  3. Tax is imposed on the understated income together with a penalty and possible additional tax Correct answer.
  4. The company is automatically exempt from tax for the year

Explanation

Where income is understated, the tax authority may assess the additional income, impose tax on it, and levy a penalty and additional tax under the law. The return is not simply accepted as filed. The consequence is financial rather than merely a warning.

Question 49Taxation

An assessee claims a deduction for an expense that also benefits the owner personally. Which principle is most likely to be applied by the tax authority?

  1. The entire expense is allowed without question
  2. The expense is treated as exempt income
  3. The expense is automatically capitalised in full
  4. The personal element is disallowed and only the business portion is allowed Correct answer.

Explanation

Deductions are allowed only for expenses incurred wholly and exclusively for the purpose of the business. Where an expense has a personal element, the tax authority may apportion it and disallow the personal portion. The whole amount is not automatically allowed.

Question 50Taxation

A taxpayer disposes of an asset that was partly used for business and partly held for personal use. Which approach best reflects the likely tax treatment of the gain?

  1. The gain is apportioned between the business and personal portions under the applicable rules Correct answer.
  2. The gain is taxable only if the asset is immovable property
  3. The entire gain is exempt because of mixed use
  4. The entire gain is treated as salary income

Explanation

Where an asset is used partly for business and partly for personal purposes, the gain is generally apportioned so that only the business portion falls within the charge. The applicable rules determine the precise split. Mixed use does not by itself exempt the entire gain.