Advance tax on savings certificate profits increased, how far will returns fall

The government has increased the rate of advance tax on profits earned from Sanchayapatra (savings certificates). From now on, authorities will deduct advance tax at a rate of 10 per cent when investors withdraw profits from any type of savings certificate.

Under the advance tax proposal included in the Finance Bill presented in the Jatiya Sangsad (National Parliament) on Thursday, beneficiaries of savings certificates will receive less profit in hand than before.

The measure is expected to increase financial pressure on middle-income households.

Before this budget announcement, authorities deducted tax at source at a rate of 5 per cent on profits from savings certificates with investments of up to Tk 1 million (10 lakh).

The 5 per cent tax previously deducted from savings certificate profits was treated as the final tax liability. The proposed budget has abolished that final tax liability system. As a result, the tax rate will double to 10 per cent.

Many middle-income families and pensioners invest in savings certificates. A significant number of them rely on the profit earned from these investments to meet household expenses. The higher advance tax will reduce the amount of profit they receive.

For example, the profit rate on Family Savings Certificates for investments of up to Tk 750,000 stands at 11.93 per cent. For every Tk 100,000 invested, an investor earns a monthly profit of Tk 994.17.

After deducting tax at source at 5 per cent, the investor receives approximately Tk 945. With the tax rate now doubled, the investor will receive less than Tk 900.

Speaking to Prothom Alo, M Masrur Reaz, chairman of Policy Exchange Bangladesh said, “The doubling of the tax rate on savings certificate profits will increase pressure on the middle class. A large segment of the country’s middle-income population uses income from savings certificates to run their households. If the authorities deduct more money from these profits than before, these people will face greater financial strain. The government should withdraw this additional advance tax to provide relief to the middle class.”

Sources at the National Board of Revenue (NBR) said that the government introduced this change through the Finance Bill 2026. It amended Section 163 of the Income Tax Act 2023.

The amendment redesignates tax deducted at source as advance tax and abolishes the final tax liability system.

In addition, if a taxpayer pays more advance tax than the actual income tax due after annual adjustment, the authorities will refund the excess amount.

Under the amended provision, authorities will deduct advance tax at a rate of 10 per cent from savings certificate profits.

After a taxpayer submits a tax return, if the advance tax deducted from savings certificate profits exceeds the actual income tax payable, the taxpayer will receive a refund of the excess amount.

To claim the refund, the taxpayer must submit an application and provide a bank account number. Following verification, the Income Tax Wing of the NBR will refund the excess amount within 120 days.

However, many middle-income savings certificate investors do not have a Taxpayer Identification Number (TIN). Many of them also do not have taxable income and therefore do not submit annual tax returns.

Nevertheless, because of the amendment to Section 163 of the Income Tax Act, authorities will deduct a higher amount of advance tax from them than before.

At present, the National Savings Directorate offers four types of savings certificates: Family Savings Certificates, Pensioner Savings Certificates, Five-Year Bangladesh Savings Certificates, and Quarterly Profit-Based Savings Certificates.

Apart from Family Savings Certificates, both individuals and institutions may invest in the other schemes.

Depending on the maturity period, interest rates on savings certificates currently range from 11.77 per cent to 11.98 per cent.

Responding to a question during the post-budget press conference held on Friday at Osmani Memorial Auditorium in the capital, Finance Secretary Md Khairuzzaman Mozumder said, “We have not introduced anything new regarding savings certificates in this year’s budget.”