The taxable income of a taxpayer and the tax rate depend on the residency status. Therefore, the first step in determining income tax is to determine the resident-non-resident status of a taxpayer.

Let’s see how to determine residency status and what is its impact on tax?👇

🏠 Step 1: Determine the residency status of the individual

The first step in preparing an income tax return is to determine the residency status of the taxpayer.

According to the Income Tax Act, 2023 —

If a person is not a resident of Bangladesh, then he will be considered a non-resident.

A person will be considered a resident of Bangladesh if he fulfills any of the following conditions:

• Has stayed in Bangladesh for 183 days or more in the relevant financial year, or
• Has stayed in Bangladesh for 90 days or more in the relevant financial year and has stayed in Bangladesh for a total of 365 days or more in the previous four financial years.

If neither of these two conditions is met, he will be considered a non-resident in that financial year.

🌎 Step 2: Determine the range of total income

The range of total income of the taxpayer also depends on his residency status.

In the case of a resident taxpayer: Both types of income earned in Bangladesh and earned abroad will be included in his total income.

In the case of a non-resident taxpayer: Only income earned in Bangladesh or received in Bangladesh will be included in his total income.

That is, the tax scope for a resident taxpayer is much wider, because foreign income is also included in it.

📊 Step 3: Determining Tax Liability

• Resident taxpayer: Tax is payable in stages according to income — 👉 Tax is determined according to slab rates (0%–30%).
• Non-resident taxpayer: The tax rate in their case is a maximum flat rate of 30% — That is, all income is taxed directly at a rate of 30%.

🌐 Step 4: Benefits of Double Taxation Avoidance Agreement (DTAA)

When a taxpayer pays tax on his income abroad and has to pay tax in Bangladesh on the same income, it is known as Double Taxation.

To avoid this double tax burden, Bangladesh has signed Double Taxation Avoidance Agreement (DTAA) with many countries.

Under this, taxpayers—

✅ Can claim Tax Credit against tax paid abroad, or

✅ Can get exemption as per the Tax Treaty signed between the two countries.

⚖️ Why is this important?

Whether you are a resident or a non-resident — this determination affects the amount of tax, the type of return you file, and even your eligibility for tax credits.

Therefore, taxpayers should —

1️⃣ Determine their residency status correctly,

2️⃣ Declare foreign income correctly,

3️⃣ Seek advice from an experienced tax professional if necessary.

A taxpayer’s residency status is not just a formal definition — it is the foundation of their tax planning, obligations, and benefits. Determining and declaring it correctly will not only keep you free from legal risks, but also help you build a legal and orderly financial position.

Author Giasuddin Chowdhury CAP, ITP