Tax return mandatory for savings certificate refunds, land mutation

Advance tax deducted from the profits of savings certificates will not be refundable unless an income tax return is submitted. Even individuals without taxable income must now obtain a Taxpayer Identification Number (TIN) to claim these advance tax refunds.

Furthermore, proof of income tax return submission will be mandatory for the distribution and mutation of land and flats in urban areas. These processes cannot be completed without providing evidence of a submitted return.

However, income tax returns can be filed throughout the year starting from next year. Taxpayers will also be eligible for tax rebates if they file early.

The proposed budget for 2026-27 fiscal year has introduced mandatory return submissions in several new areas along with other changes. While some of these measures may increase pressure on taxpayers, others offer new facilities.

Finance Minister Amir Khasru Mahmud Chowdhury presented the budget for the upcoming fiscal year on 11 June.

Regarding these changes, Selim Raihan, Executive Director of the South Asian Network on Economic Modeling (SANEM), told Prothom Alo that the budget has simplified some aspects of tax returns while imposing new conditions in others.

He noted that any reform creates pressure for certain groups.

According to him, this budget may place an additional burden on middle-class savings certificate investors, as they will now have to file returns to claim their advance tax refunds.

The requirement of a TIN to open a bank account will also create pressure, he pointed out.

Selim Raihan added that such reforms in the income tax sector should not lead to harassment of taxpayers. Authorities must ensure close monitoring at the field level. He stressed the need to build trust among taxpayers.

Proof of income tax return submission will now be required for the distribution of land and flats and their mutation in urban areas. Without providing this proof, the distribution and mutation of properties cannot be completed.

The National Board of Revenue (NBR) has imposed this condition on property owners within city corporation, pourashava and cantonment board areas.

This change has been proposed through the Finance Bill in the proposed budget. Consequently, owners of flats and lands will have to show proof of filing income tax returns to secure ownership.

Currently, proof of a submitted income tax return is required to register the sale, lease, transfer, agreement (baina nama), or power of attorney for land, buildings or apartments.

NBR officials stated that it can be assumed that those who purchase land and flats in urban areas have a taxable income. Currently, the actual market value of land and flats in city corporation and municipality areas is quite high.

They noted that the prices are so steep that it is almost impossible for people whose income falls below the tax-free threshold to buy those.

Candidates contesting for the post of Union Parishad (UP) Chairman must now provide proof of submission of return (PSR). Without showing proof of an income tax return, individuals will not be eligible to contest the elections. This change has been introduced in the current budget.

This means that UP chairman candidates must file their income tax returns first. Subsequently, the proof of submission must be attached to the nomination papers along with other documents.

Furthermore, proof of return submission will now be required to become a director or sponsor shareholder of a company for resident taxpayers only. Non-resident directors and sponsor shareholders are exempt from this requirement.

Currently, proof of tax return is mandatory for 39 types of services. These include obtaining loans over Tk 2 million (20 lakh), renewing trade licenses in city corporation or municipality areas and renewing memberships with recognised professional bodies for physicians, dentists, lawyers, chartered accountants, cost and management accountants, chartered secretaries, tax lawyers, actuaries, engineers, architects and surveyors.

Proof of return is also required for obtaining residential gas and electricity connections in city corporation areas, purchasing savings certificates worth more than Tk 1 million (10 lakh) and during the registration, ownership transfer or fitness renewal of any motor vehicle except two- or three-wheelers.

Additionally, it is mandatory for obtaining or renewing licenses for hotels, restaurants, motels, community centres, convention halls, hospitals, clinics and diagnostic centres.

Under the proposed budget, the tax deducted at source from savings certificate profits is no longer a final tax liability. Instead, it can now be adjusted at the end of the year. If a taxpayer has paid more at the source than their actual applicable tax, they can claim a refund.

For instance, if Tk 30,000 in advance tax is deducted from an investor's profits over the year, but their final tax calculation shows a liability of only Tk 20,000 after various exemptions, they are now eligible to get the remaining Tk 10,000 back.

However, to reclaim this money, filing a tax return is now mandatory. Under current rules, a TIN is only required for investments exceeding Tk 1 million. This means small-scale investors, many of whom have no taxable income, must now obtain a TIN and file an annual return to get back the tax already deducted from their meagre profits.

To claim the refund, investors must provide their bank account details while filing their returns. Following verification, tax officials are expected to deposit the amount into the specified account within 120 days.

Data from the Department of National Savings shows there are approximately 1.4 million investors with holdings of less than Tk 500,000. Historically, many middle-class family members invested in these schemes without a TIN, assuming their income was below the taxable threshold. Now, they too are pulled into the tax net if they wish to recover their advance tax.

On the other hand, investors who already file returns despite having no taxable income stand to benefit. Previously, the tax deducted at source was considered a ‘final settlement’ and could not be recovered. Under the new rules, this money is finally refundable.

Under existing laws, the advance tax on savings certificates is 10 per cent. However, since 2019, the Department of National Savings has been deducting tax at a reduced rate of 5 per cent on profits from certain schemes (up to Tk 500,000), excluding the Pensioner Savings Certificate.

This shift has created uncertainty among investors regarding the new applicable rates. Some investors have already reported that they are yet to receive their profit payouts for the month of June.

Tax rebate benefits for investments have been curtailed in the current budget, with the maximum ceiling lowered and the calculation rate slashed. Under the new proposal, the maximum tax rebate an individual can claim has been reduced to Tk 750,000, down from the previous Tk 1 million.

The change has been proposed through an amendment to Section 78 of the Income Tax Act via the Finance Bill. Previously, the investment tax rebate was calculated as the lowest of three specific figures: 3 per cent of total taxable income, 15 per cent of the total investment or a maximum of Tk 1 million.

In the 2026-27 budget, while the 3 per cent of taxable income remains unchanged, the other two components have been tightened. The rebate will now be the lowest of: 3 per cent of total taxable income, 10 per cent of the total investment or a maximum of Tk 750,000.

This shift means high-income earners will no longer enjoy the same level of tax relief as before. For example, a taxpayer with an annual taxable income of Tk 30 million who invests Tk 10 million would have previously received the maximum Tk 1 million rebate. Under the new rules, that benefit drops to Tk 750,000, a direct loss of Tk 250,000 in potential tax savings.

Starting next fiscal year, taxpayers will be able to file their income tax returns throughout the year. However, those who submit their returns early will be eligible for higher tax rebates.

According to the proposed budget, filing in the first quarter (July–September) will earn a rebate of 5 per cent of the payable tax or Tk 25,000, whichever is lower. Submissions during the second quarter (October–December) will require only the standard tax payment, with no additional incentives provided.

Conversely, filing in the later half of the year will result in additional charges. Submission during the third quarter (January–March) will require an extra payment of 2 per cent of the payable tax or Tk 3,000, whichever is higher. For returns filed in the final quarter (April–June), this charge rises to 5 per cent of the payable tax or Tk 5,000, whichever is higher