Miss. Fariha Salsabil
Overview of Gratuity fund
Gratuity is a separation benefit that is provided to an employee upon termination of his employment from the employer. According to The Bangladesh Labour (Amendment), Act 2015 “Gratuity” refers to wages of at least 30 (thirty) days, at the rate of the final salary received by a worker, for each year of completion of duties or for hours worked over 06 (six) months or, in the year where he served more than 10 (ten) years, the wages of 45 (forty-five) days according to the last salary he received, which is payable to the worker. such action when leaving the job; This is in addition to any compensation, wages, or compensation in lieu of notice payable by an employer as a result of the termination of a worker’s employment for various reasons under this Act.
Approved Gratuity Fund
Pursuant to Section 2(5A) of Income Tax Ordinance 1984, Approved Gratuity Fund refers to those funds which have been and continue to be approved by the National Board of Revenue in accordance with the provisions of Part C of the First Schedule of Income Tax Ordinance 1984.
Requirements for approval –
Rule 3 of Income Tax Ordinance, 1984, Part C of First Schedule states that for the gratuity fund to receive and maintain approval it must meet the following specified conditions and any other conditions that the National Board of Revenue may prescribe-
(a) this fund must be a fund established under an irrevocable trust in connection with a trade or business done in Bangladesh and not less than 90% of the employees of such trade or business or enterprise must be employed in Bangladesh.
(b) the fund’s sole objective is to provide a gratuity to employees in the trade or business upon retirement on or after the specific age of or when they become incapacitated prior to retirement, or put termination of their employment after a minimum period of service specified in the fund regulations or to the widows, children or dependents of such employees upon their death.
(c) the employer in the trade or undertaking shall be a contributor to the fund and;
(d.) All benefits granted by the fund are payable only in Bangladesh.
Request of approval
As per Rule 4, Part C of First Schedule the request for approval of the gratuity fund must be sent in writing by the trustees of the fund to the National Board of Revenue, and must be accompanied by a copy of the fund’s establishment deed and two copies of the fund’s charter and when the fund is established. the fund existed for one or more years prior to the year in which the request for approval was made, as well as two copies of the fund’s accounts relating to the previous year(s) (not more than three years immediately preceding the year in which he made the aforesaid request) for which these accounts were established. The Board may request additional information as it deems appropriate
2.) If any change in the law, the purpose of the constitution or the subject of the condition, or the provisions of the fund is made any time after the date of the request for approval, the trustees. The trustee of the fund shall immediately notify the Deputy Commissioner of Taxation referred to in subparagraph (1), and in the absence of such notice, any approval is given, unless The National Board of Revenue orders otherwise, shall be deemed to have been withdrawn from the effective date of the change.
Tax exemption on Gratuity fund income
As per Rule 5 of Income Tax Ordinance 1984, Part C First Schedule, income from the investments or deposits of an approved discretionary fund and any capital gains from the transfer of capital assets from the fund are tax-free.
Treatment of employer contributions
As per Rule 6 of Income Tax Ordinance 1984 Part C, First Schedule, any amount paid by the employer to contribute to the approved bonus fund will be deducted when calculating the employer’s income, profits, and profits for the purposes of assessment.
Employer contributions, taking into account his income
As per Rule 7 of Income Tax Ordinance 1984, Part C, First Schedule, when employer contributions (including interest, if any) are returned to the employer, such refunded amount is considered for tax purposes as income. of the employer for the ‘year of earnings in for which they are reimbursed. If the employer (due to dismissal) dismisses the employer and the employee has worked for the employer for at least one year (continuously), the employer may have to pay wages. In addition, in the event that his employer dismisses an employee, due to physical or mental incapacity,, a gratuity may be provided to him if he completes at least one year of service continuously with that employer. A gratuity may also be granted in the event that the employer terminates the employment of a permanent employee (but not by the termination of the contract). In addition, in the event an employee permanently resigns from his or her service, an employee may be required to pay a gratuity.
Providing information on gratuity funds
According to Rule 8 of Income Tax Ordinance 1984 Part C, First Schedule, the trustee of the Gratuity Fund and employers contributing to the Gratuity Fund must provide for the return of such within the time period specified in the notice if required by the notice of tax under the Deputy Minister. Names, details, or information likely to be requested by the Minister of Taxation.
- The Board shall, within four months from the date of receipt of the application by it for according approval to any gratuity fund, accord such approval, failing which the gratuity fund shall be deemed to have been accorded approval, and the Board may, if, in its opinion, the gratuity fund contravenes any of the conditions specified in paragraph 3 and the rules made by the Board in that behalf, withdraw such recognition at any time.
- The National Board of Revenue has the power to withdraw recognition from any gratuity fund if it finds a breach of the following conditions. The Board may withdraw recognition at any time if the board finds that the fund contravenes any of the conditions specified in paragraph 3 and rules made by the Board.
- The decision granting or denying approval will take effect on the date specified by the NBR (National Board of Revenue) in writing to the fund’s trustees.
- The Board may not refuse or revoke the approval of any Compensation Fund without giving the authorities of the Fund an opportunity to hear appropriate opinion.