Income tax returns: Some key considerations and common pitfalls

The income tax return submission season for the assessment year 2026-27 is underway. Every year, many taxpayers view filing their income tax returns as a mere administrative formality.

In reality, the information provided in a return forms a critical financial record of an individual's income, expenses, investments, assets, liabilities and tax payments – a fact that many either overlook or fail to appreciate. Consequently, minor errors or discrepancies between documents often lead to significant legal and procedural complications later on.

Taxation sometimes triggers uncertainty, fear and concerns about harassment among citizens, largely fuelled by a lack of adequate statutory awareness. Given that procedural missteps during filing can expose taxpayers to legal liabilities, it is crucial to understand several key requirements before submitting an income tax return.

Key considerations

Year-round filing – incentives and penalties: In a major reform of Bangladesh's tax administration, taxpayers can now file income tax returns year-round. However, early filing is financially incentivised, whereas delayed filing beyond prescribed deadlines incurs statutory monetary penalties.

First quarter (July-September): Taxpayers filing in this quarter receive a rebate of 5% of their payable tax or Tk25,000, whichever is lower.

Second quarter (October-December): Returns filed during this period require payment of the exact computed tax, with no rebate available.

Third quarter (January-March): Submissions incur a penalty of 2% of the payable tax or Tk3,000, whichever is higher.

Fourth quarter (April-June): Delayed submissions in the final quarter carry a penalty of 5% of the payable tax or Tk5,000, whichever is higher.

Transparent disclosure of assets: Full and transparent disclosure of assets is mandatory for taxpayers required to submit an asset statement. Personal income, as well as all movable and immovable assets where applicable, must be explicitly stated. If an asset is omitted from an income tax return when disclosure is required, it risks being treated by tax authorities as undisclosed or acquired beyond known sources of income, making its subsequent inclusion difficult.

Taxpayers required to submit asset statements must clearly declare their bank deposits, savings certificates (Sanchayapatra), shares, debentures and all immovable properties. Failure to declare an asset when required exposes the taxpayer to legal scrutiny and allegations of asset concealment.

Example: Consider an individual with an investment of Tk1 crore in the stock market who omits this asset from their tax return despite being required to declare it. If discovered during an official inquiry or audit, the tax authority will question the concealment, which is exceptionally difficult to resolve without severe tax penalties and legal consequences.

Consistency between income and expenditure: Income tax returns demand structural alignment between reported income and lifestyle expenditure. A taxpayer's declared living expenses must logically reflect their reported earnings and other sources of funds. A significant unexplained mismatch between lifestyle expenditure and declared income serves as a primary trigger for regulatory scrutiny and potential legal action.

Complete documentation prior to filing e-Return: Data entry into the online e-Return portal should take place only after all supporting documentation is fully prepared and verified. Essential documents such as salary certificates for salaried individuals, house rent receipts and tenancy agreements, local municipal tax receipts, property purchase and sale deeds, Tax Deducted at Source (TDS) certificates and bank statements must be on hand prior to filing.

While data can technically be entered into the portal without supporting documents, in case of any subsequent discrepancy, the tax authority may require formal reconciliation and accountability from the taxpayer. Therefore, verifying income, expenditure, assets, liabilities and tax payments against underlying evidentiary documents beforehand is the most effective way to avoid future audits and complications.

Precautions for first-time return filers: First-time tax return filers must exercise heightened caution during e-Return data entry. Asset declarations, where required, must be complete and transparent from the outset. A common misconception among new taxpayers is that assets can be disclosed incrementally over several years rather than all at once. If detected by tax authorities, this practice can lead to legal penalties. Furthermore, returns may be selected for post-filing audits even a few years after submission. In such cases, returns containing undisclosed assets or discrepancies may expose taxpayers to substantial penalties.

Common tax return errors to avoid

Certain recurring mistakes in tax returns frequently lead to assessment disputes and administrative complications:

Reporting expenses exceeding total income: Claiming living expenses higher than declared earnings creates financial inconsistency and raises immediate questions regarding undisclosed income sources.

Declaring unrealistic cash in hand: Reporting disproportionately large cash holdings that are unsupported by income levels.

Incomplete real estate declarations: Omitting or misreporting details of immovable properties, such as flats or land located within city corporations, municipalities or other areas.

Misrepresenting gold and jewellery: Inaccurately reporting gold holdings without demonstrating the historical income required to acquire them.

Omitting financial investments: Failing to report Fixed Deposit Receipts (FDRs), Deposit Pension Schemes (DPS), savings certificates (Sanchayapatra) or other financial instruments where disclosure is required.

Failing to disclose loans: Omitting details of loans taken or extended to others. Undisclosed loan transactions may result in immediate regulatory scrutiny.

Misreporting multi-employer or professional income: Employees who changed jobs or worked for multiple employers within the same income year often disclose income from only one source or miscalculate total earnings. According to the NBR's 2026 e-Return FAQ, income from multiple employments can and must be entered separately under the relevant head. Similarly, professionals such as doctors and lawyers must declare their professional earnings under the designated "Business/Professional Income" section as directed by the NBR.

Rectifying errors post-submission

Discovering an error after submitting an e-Return does not mean the assessment is final. Under the NBR's 2026 e-Return guidelines, if an online return contains an error, a revised return may be filed within 180 days of the initial submission. However, only one revised return is permitted.

Therefore, thorough verification of all income, expenditure, asset, liability, TDS and advance tax entries against documentary proof prior to initial submission remains the safest approach for every taxpayer.

The author, Shah Ahmad Hossain, ACA (ICAEW), FCCA, is the CEO of Ahmad Mariyam Shah & Associates. He can be reached at ahmad.amsbd@gmail.com.