How to Prepare and Submit Withholding Tax Return in Bangladesh?

Withholding tax, commonly known as Tax Deducted at Source (TDS), is an important tax compliance requirement in Bangladesh. Where a person or entity is required to deduct or collect tax at source, the deducted or collected tax must be deposited with the Government and properly reported through a withholding tax return.

The Income Tax Act, 2023 contains the main provisions relating to withholding tax in Part 7, which specifies the circumstances in which tax is required to be deducted or collected at source. The applicable rates are prescribed under the relevant provisions of Part 7, together with the applicable Withholding Tax Rules and notifications. The NBR currently lists the Withholding Tax Rules, 2026 and the Withholding Tax Rules, 2026 (Amendment).

Who Is Required to Submit a Withholding Tax Return?

Section 177 of the Income Tax Act, 2023 deals specifically with the return of withholding tax.

Under section 177(1), companies, firms and associations of persons, along with certain specified entities such as private hospitals, clinics and diagnostic centres, are required to submit a return of tax deducted or collected at source under Part 7.

The return is to be submitted to the Deputy Commissioner of Taxes having jurisdiction over the assessee and must contain the prescribed particulars, information, schedules, statements and supporting documents.

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What Is Included in a Withholding Tax Return?

A withholding tax return should provide a consolidated record of the tax deducted or collected by the withholding entity.

The preparation should generally include:

Details of payments made during the relevant period
Nature of each payment
Relevant TDS section under Part 7
Gross amount of payment
Applicable withholding tax rate
Amount of tax deducted or collected
Details of the payee
TIN and other required identification information
Date and details of deposit of the deducted tax
Details of withholding tax certificates issued

The TDS records should be reconciled with the books of accounts, payment records and tax deposit records before submission.

How to Prepare a Withholding Tax Return?

1. Identify Payments Subject to TDS

First, review all payments made during the relevant period and identify payments on which tax is required to be deducted or collected.

Depending on the nature of the payment, Part 7 may require withholding tax on salary, rent, professional services, contracts, commissions, interest, payments to non-residents and other specified payments.

The applicable section and rate should be determined for each type of payment.

2. Calculate and Deduct the Applicable Tax

After identifying the relevant provision, calculate the applicable TDS and deduct or collect the required amount at the time prescribed under the Act.

Section 142 should also be considered where its conditions for applying a higher rate of deduction or collection are applicable.

3. Deposit the Withheld Tax

The deducted or collected tax must be deposited with the Government within the prescribed time.

The relevant treasury challan or electronic payment record should be retained and reconciled with the TDS ledger.

4. Prepare and Reconcile the Return

Before filing the withholding tax return, reconcile:

Total payments subject to TDS;
TDS deducted or collected;
TDS deposited with the Government; and
TDS certificates issued to payees.

Any difference should be investigated and corrected before submission.

Deadline for Withholding Tax Return

Under section 177(3) of the Income Tax Act, 2023, a withholding tax return is required to be submitted quarterly in respect of the preceding three months.

The applicable filing deadlines are:

Period covered by the return	Filing deadline
July, August and September	25 October
October, November and December	25 January
January, February and March	25 April
April, May and June	25 July

For example, the withholding tax return covering TDS deducted or collected during July, August and September must be submitted by 25 October.

Where any of the above deadlines falls on a weekly holiday or public holiday, the return may be submitted on the next working day.

Therefore, although the withholding tax return is filed quarterly, the withholding entity should maintain its TDS records, deduction calculations, payment records and tax deposit records on an ongoing basis so that the quarterly return can be prepared and reconciled accurately.

Withholding Tax Return Form

The withholding tax return must be submitted in the form prescribed by the NBR under section 177.

The return should be accompanied by the relevant particulars, information, schedules, statements, accounts, appendices and documents required under the law.

Audit of Withholding Tax Return

A withholding tax return can also be subject to audit.

Section 186 of the Income Tax Act, 2023 specifically deals with the audit of withholding tax returns. The Deputy Commissioner of Taxes, with the approval of the Commissioner, may select withholding tax returns filed under section 177 for audit.

During the audit, the tax authority may examine, among other matters:

Whether tax was deducted or collected at the correct rate and amount and in the manner prescribed under Part 7 and the relevant rules;
Whether the deducted or collected tax was properly deposited with the Government within the prescribed time; and
Whether the required withholding tax certificates were furnished.

Where the audit identifies non-compliance, the Deputy Commissioner of Taxes may take appropriate action, including action under sections 143, 144 and 266.

Penalty for Failure to Submit Withholding Tax Return

Failure to submit a withholding tax return can result in a separate penalty.

Under section 266(2)(a), where a person, without reasonable cause, fails to file or furnish any return or information required under section 177, the Deputy Commissioner of Taxes may impose a penalty of:

10% of the tax imposed on the last assessed income or BDT 5,000, whichever is higher.

Where the default continues, an additional penalty of BDT 1,000 for every month or fraction of a month during which the default continues may also be imposed.

This penalty for failure to file the withholding tax return is separate from the consequences that may arise from failure to deduct, collect or deposit tax at source.

Consequences of Incorrect TDS or Failure to Deposit Tax

Apart from the penalty for failure to file the return, a withholding entity may face additional consequences where it fails to deduct tax, deducts tax at an incorrect amount or rate, or fails to deposit deducted tax with the Government.

These matters can be examined during an audit under section 186, and the Act specifically refers to sections 143 and 144 as provisions under which action may be taken following an audit.

Therefore, filing the withholding tax return alone is not sufficient. The underlying TDS deduction, payment and certificate requirements must also be properly complied with.

Conclusion

Preparing a withholding tax return in Bangladesh requires more than simply reporting the amount of TDS deposited. The withholding entity should first identify the payments subject to tax under Part 7 of the Income Tax Act, 2023, determine the correct rate, deduct or collect the tax, deposit it within the prescribed time, issue the required certificates and reconcile all records before submitting the return under section 177.

The return may subsequently be selected for audit under section 186, and failure to comply with the withholding tax return requirement may result in penalties under section 266.

Since withholding tax rates and procedures are subject to changes through the Income Tax Act, Finance Acts, Withholding Tax Rules and NBR notifications, the applicable provisions should always be checked for the relevant income year.