Taxation Policy for the Non-Profit or Charitable Organization in Bangladesh

 

Any initiative or promotion for general public welfare will not be considered a charitable purpose-

(A) Unless it is approved by the Tax Commissioner; and

(B) If it is involved in any of the following activities-

(1) Any business or commercial activity, regardless of its nature or type; or

(2) If services are provided in exchange for goods and the total value of such goods exceeds 1 (one) crore taka in any tax year;

Clarification regarding the taxation of entities established for charitable purposes.

All taxable entities defined as ‘income’ under Section 2, Clause (63) of Income Tax Act, 2023 have a legal obligation to pay income tax. According to Clause 12 of Part 1 of the Sixth Schedule of Income Tax Act, 2023, any donation or grant received by a religious institution or an organization operating for charitable purposes approved by the Tax Commissioner and spent for religious or charitable purposes shall be deducted from total income. In other words, if such voluntary contributions or grants or donations are received by a religious institution or an organization operating for charitable purposes approved by the Tax Commissioner and spent for religious or charitable purposes, it will not be considered as taxable income in the hands of that institution. Moreover, if such voluntary contributions or grants or donations are received by any person approved by the NGO Affairs Bureau, that too will not be considered as taxable income in the hands of that person. However, in this case, Section 76, Sub-sections (5) and (6) of Income Tax Act, 2023 will always be applicable. Clause 12 of Part 1 of the Sixth Schedule is as follows:-

Any donation or grant if it is-

(a) Received by a religious institution or an organization operating for charitable purposes approved by the Tax Commissioner and spent for religious or charitable purposes; or

(b) Received by any person approved by the NGO Affairs Bureau.

 

Different Types of Charitable Organizations in Bangladesh

Any group of individuals intending to establish a charitable organization in Bangladesh for social welfare may opt for one of the following legal entities, based on their specific objectives, long-term goals, and operational capacities, as stipulated under the relevant laws:

  1. As a Society or Foundation: Register under the Societies Registration Act, of 1860, suitable for organizations focused on social, cultural, and educational activities. See detail guide>
  2. A Charitable Trust: Established under the Trust Act, of 1882, appropriate for entities aiming to provide financial assistance, healthcare, and educational support. See detail guide>
  3. As a Social Welfare Organization: Register under Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961 (Ord. No. XLVI of 1961). See detail guide>
  4. A Non-profit Trade Association:: Incorporated under the Companies Act, 1994, suitable for non-profit organizations intending to operate on a larger scale without issuing shares. See detail guide>

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