Tax on your final settlement

Which exit payments are taxed?

These rules come from practitioner guides (PwC and tax firms), not the gazette, so Pawna marks them as secondary.

How does Pawna work out the tax?

It adds the taxable exit payments to the salary you already earned this income year, works out the year’s tax with and without them, and shows the difference as the tax caused by leaving. The worked example below uses six months’ salary of 7,20,000 taka with a direct benefit of 2,40,000 and leave pay of 80,000.

The worked example in full

The worker earned 7,20,000 taka of salary from July to the exit, and leaves with a direct benefit of 2,40,000 and leave pay of 80,000.

• Paid directly by the employer, all 10,40,000 is salary. The tax for the year is 29,333 taka.
• If the 2,40,000 instead comes as gratuity from an NBR-approved fund, it drops out of taxable income, and the year’s tax falls to 13,333 taka.

Same money, about 16,000 taka more in the worker’s pocket, just from how it is paid.

What is still unclear?

How a provident fund payout is taxed when you were in the fund under five years, or the fund is not recognised, is not settled. Pawna leaves it out of the tax sum and shows it separately. Workers’ profit participation fund payments have 10% deducted at source, and whether that is final is also open.

What should I ask HR?

Whether the gratuity is paid from an NBR-approved fund, and whether the provident fund is recognised. The answers can change your take-home by tens of thousands.