TDS and AIT Calculation in Bangladesh

Tax at source is how NBR collects a large share of Bangladesh's income tax. For a business, TDS and AIT calculation is a daily task: every payment to a supplier, landlord or consultant can carry a deduction, and every import or export shipment usually carries AIT. Getting the calculation wrong costs money on both sides, either through under-deduction exposure or through tax credits that are never claimed.

This page explains how to calculate TDS on payments you make, how AIT works on your own transactions, and how both flow into the annual return. It is written for accountants and business owners who handle payments and supplier bills every day. For reporting deductions to NBR, see our withholding return page.

TDS vs AIT: what is the difference?

Both are tax collected in advance under the Income Tax Act 2023. TDS is deducted by the payer from a payment to someone else: the employer deducts it from salary, a company from a supplier bill. AIT is commonly collected by an authority or intermediary at the time of a transaction, for example by customs at import or export, by BRTA at vehicle registration or renewal, or at the sub-registry when land is transferred.

For the person who suffers the deduction, TDS and AIT are usually credits against final tax liability. In some cases the law treats them as minimum tax or final settlement, meaning no refund or further credit is available. Knowing which is which matters for both pricing and returns.

How to calculate TDS on a payment

• Identify the nature of the payment: supply of goods, contract work, service, rent, professional or technical fee, commission, interest, payment to a non-resident and so on
• Find the provision in the Act and the rate in the current Finance Act or rules for that payment type and, where relevant, payment size
• Check whether the payee has a valid e-TIN or PSR where the law sets different treatment, and whether a reduced-rate or exemption certificate has been issued by the tax authority
• Determine the base: generally the gross payment, and for some supplies the amount excluding VAT where the rules say so
• Deduct at the earlier of payment or credit to the payee's account, as the Act requires

Depositing TDS and issuing certificates

Deducted tax must be deposited to the government treasury within the time limit in the Act, through A-challan, e-payment or a bank challan, under the correct economic code and the deducting entity's e-TIN. Then a certificate of tax deduction is issued to the payee giving the amount, date and challan details. Salaried employees receive an annual certificate; suppliers usually receive one per payment or per period.

Remember VAT deducted at source is separate: that is calculated under the VAT and SD Act 2012, deposited separately and evidenced by a Mushak 6.6 certificate.

AIT on imports, exports and other transactions

Importers pay AIT with customs duties at the time of clearance, at rates set in the Finance Act and rules that vary by the type of goods. Exporters typically suffer tax deducted from export proceeds by the bank. Vehicle owners pay AIT with BRTA fees, and land sellers pay tax at registration. Collect the documentary evidence each time: the bill of entry, bank certificate, BRTA receipt or registration document, because these are what allow you to claim credit in your return.

Common TDS and AIT calculation errors

• Applying the supply rate to a payment that is actually a service, or vice versa
• Splitting invoices to stay under a threshold
• Not deducting on advance payments to contractors
• Depositing under the wrong economic code, so the credit cannot be traced
• Losing AIT credit because import or export documents were not filed
• Treating minimum or final tax deductions as refundable

How the process works

1. Map payment typesWe classify your regular payments and transactions by TDS and AIT category.
2. Build a rate chartA rate chart is prepared from the current Finance Act and rules for your business.
3. Check sample paymentsWe test recent payments to identify under- or over-deduction.
4. Deposit and certifyYour team gets a challan and certificate routine with correct economic codes.
5. Track creditsAIT and TDS suffered by your business are recorded and claimed in the annual return.

Typical timeline: Setting up a TDS and AIT rate chart and checking recent transactions typically takes one to two weeks, depending on the variety of your payments.

How Tax & VAT Associates helps

• Payment classification and current TDS rate chart for your business
• Review of past deductions with correction plan
• Challan and certificate templates with correct codes
• AIT credit register for imports, exports, vehicles and property
• Payroll TDS calculation support
• Advice on reduced-rate or exemption certificate applications where eligible

Frequently asked questions

Related services

Last reviewed: 6 October 2026. Bangladesh tax and regulatory rules change with each Finance Act, SRO and authority circular. This page is general guidance; confirm current requirements for your case before filing.