Are You Up to Date on Your Annual Salary Payment Statement

If you work in the accounts department and are responsible for processing employee salaries each month, you might not be aware of a crucial annual requirement: submitting a salary payment statement under Schedule (Cha), Rule 15 of Withholding Tax Rules 2024. Missing this can lead to penalties, so it’s essential to understand what’s required.

Who Needs to Submit This Statement and When?

Every person or entity responsible for making “salary” payments must furnish a statement to the Deputy Commissioner of Taxes (DCT). This statement needs to be prepared in a prescribed format and submitted to your tax circle in the month of September each year.

It’s worth noting that the DCT does have the discretion to extend this deadline, but it’s always best to aim for the original submission date.

Understanding the Importance of This Statement

We’ve previously discussed quarterly statements on Tax Deducted at Source (TDS), including those related to salary disbursements and other TDS information. If you missed those articles, be sure to catch up to understand all about monthly TDS statements!

Today, we’re diving deep into the annual salary payment statement, which comprehensively covers all information regarding salary payments, including TDS on salary payments throughout the year. Knowing how to accurately calculate TDS on employee salaries is therefore critical for preparing this statement.

Where to Find the Prescribed Format (Rule 15)

The specific format for this statement is provided under Rule 15, Schedule (Cha) of Withholding Tax Rules 2024. It requires you to submit the following key information to the tax authority:

• The name and address of every person who received salary payments or was due payments during the preceding financial year.
• The amount of payment made or due.
• The amount of tax deducted from the salary.
• Any other particulars as prescribed.

This information should be presented in a table format. Many find it helpful to prepare this table in an Excel sheet. This approach allows for easy editing and reuse in subsequent years, saving you time and effort. The prescribed format is divided into three main parts, and you can skip any sections that aren’t applicable to your company.

Part I: Detailed Employee Payment Information

This is the most extensive part of the salary payment statement, featuring 19 columns. Here, you’ll need to provide comprehensive information for all employees who have a Taxpayer Identification Number (TIN). This includes:

• The total salary amount, including all benefits disbursed to employees during the financial year.
• Details regarding investment allowance considerations as per tax law.
• The amount of tax rebate on such investment allowances.
• After factoring in all benefits, the total tax deducted and deposited to the government treasury.

Since this statement is due in September, it’s a good practice to begin its preparation after the financial year-end in June. This timing also aligns well with your year-end audit, as auditors often request a summary of your salary payments and tax deductions for the year. Preparing this statement after June can therefore serve a dual purpose, assisting both your audit and tax filing needs.

Part II: Payments to Employees Without TINs and Foreign Employees

This part is shorter but divided into two distinct tables:

Employees without a TIN: The first table requires salary information for employees who do not possess a TIN. Generally, employees whose salary falls below the tax-free limit are not required to obtain a TIN, with a few exceptions.

Important Note on Cash Payments: Be aware that no cash payment of salary is allowed under Income Tax Act 2023. If your company disburses any salary in cash, the total amount may be disallowed during the corporate tax assessment, leading to a 27.5% tax implication. Exercise caution with cash salary disbursements.

In this section, you’ll also need to calculate a ratio: the percentage of total salary payments disbursed to employees without TINs, relative to the overall salary payments for the year.

Foreign Employees: The second table in Part II focuses on salary payments made to foreign employees. If your company doesn’t have any foreign employees, you can simply skip this section. If you do, you’ll need to provide a similar ratio as for employees without TINs, indicating the proportion of salary paid to foreign employees.

Part III: Cash Reimbursements (In Addition to Part I Amounts)

The final section of the statement is dedicated to cash reimbursements made to employees, which are in addition to the amounts reported in Part I.

This typically includes expenses like travel advances or other out-of-pocket expenses for official purposes, which are later adjusted. However, many companies disburse such amounts directly to employee bank accounts or via account payee cheques. In such cases, this part of the statement would not be applicable, and you can skip it.

Penalties for Non-Submission

Now that you understand how to prepare the salary payment statement, it’s crucial to be aware of the consequences of failing to submit it.

As per Section 266, if any person fails to file or furnish statement under section 177 without reasonable cause, the Deputy Commissioner of Taxes (DCT) may impose a penalty.

The penalty amount will be the higher of 10% of the tax imposed on the last assessed income or BDT 5,000. Additionally, a further penalty of BDT 1,000 will be charged for every month (or fraction of a month) that the default continues.

To avoid these penalties, ensure you prepare and submit the statement before the deadline. If you link your monthly salary statements to this annual requirement, it will significantly simplify the year-end preparation process.