Rise in tax-free income limit unlikely

The tax-free income limit is not increasing in the coming budget as expected by the taxpayers. The government is unlikely to increase the tax-free income limit for individuals from the existing amount of Tk 300,000.

Businessmen and research organisations, however, suggested the government increase the tax-free income limit to give some respite in times of high inflation.

National Board of Revenue (NBR) sources said there would be no proposal to increase the tax-free income limit in the next 2022-23 fiscal year. But the government high-ups can take the ultimate decision regarding this during discussions in the parliament.

The tax-free income limit was revised from Tk 250,000 to the existing Tk 300,000 in FY 2021. Earlier in FY 2015, the amount was increased by Tk 30,000 from Tk 250,000.

The stakeholders made a demand to increase the tax-free income limit as inflation increased due to price hikes of commodities and a decrease in people’s income due to the Covid situation.

The inflation rate remains over 6 per cent in Bangladesh in last three months. This indicates the people's expenditure has increased. The spending has increased for the individuals whose income is slightly over Tk 300,000. But these individuals will have to pay as much tax as the previous year, which would add more pressure.

Every year some new taxpayers are added to the tax-net if the tax-free income limit remains static while some get exempted if tax-free income limit is increased. The number of Tax Identification Number (TIN) holders is over 7.5 million in the country. Although it is mandatory for all TIN-holders to submit tax returns every year, only around 2.5 million comply with the rules. The government may give a chance to the TIN-holders who do not submit their returns in the next budget. There is a provision of fine and interest on tax for non-filing of returns. In the next budget, the government might make a declaration about exempting those who did not file the returns in the past fiscal, provided they file tax returns in the new fiscal.

Center for Policy Dialogue’s (CPD) researcher Taufiqul Islam told Prothom Alo, “Every taka is important for the individuals whose income is slightly more than the tax-tree income limit. It is imperative to alleviate some pressure off them in this time of high inflation.”

A special scheme of whitening black money in the share market might be extended. The chance to whiten black money was not given in last year’s budget speech, but the wholesale opportunity was given during the finance bill. Value Added Tax (VAT) on data service of internet service providers might increase 5 per cent.

Advance tax might be reduced or withdrawn from some import-dependent industries such as cement, ceramics, beverage and edible oil. These sectors now have to pay 3-5 per cent advance tax.

Tax burden might increase for exporters. Tax at sources may increase to 1 per cent. As a result, source tax would increase much for the exporters, especially for readymade garments exporters.

At present, RMG exporters give 0.50 per cent tax at the sources. Tax officials deduct TK 0.5 for every Tk 100 export. The company can later adjust the deducted amount with their annual corporate tax.

Corporate tax rate is 12 per cent for the RMG sector now but the rate is 10 per cent if the factory is environment-friendly. Corporate tax is 30 per cent for other organisations. In this circumstance, the government might declare an overall decrease in the corporate tax rate. As a result, even if source tax gets increased, the exporters would have to give a decreased amount of corporate tax.

In 2005, 0.25 per cent source tax was imposed on export companies for the first time. The source tax was increased and decreased at different times. The RMG exporters suffer most if the source tax is increased.