No relief in tax-free income limit, corporate tax to increase

The government has no plans to offer significant tax relief for ordinary taxpayers in the upcoming budget despite high inflation and decline in people’s real income.

As of Saturday’s decisions, there will be no change to the individual tax-free income threshold—meaning the limit will not be increased.

Corporate taxes may rise for businesses. Specifically, the corporate tax rate will go up for unlisted companies in the stock market. Additionally, the fixed rate tax that must be paid regardless of profit or loss may also increase.

There may be some tax relief in certain areas. For instance, the minimum tax for individuals might be slightly reduced. Taxes on buying and selling land may also be lowered. In some cases, the requirement to file an income tax return might be lifted.

Finance adviser Salehuddin Ahmed will present the national budget for the fiscal year 2025–26 tomorrow, Monday. He will deliver the budget through a televised address to the nation. This will be the first budget of the interim government formed after the July uprising. It appears that the government is not making major changes to the tax policy in the budget, only some minor adjustments.

According to sources at the finance ministry, the tax-free income threshold for individual taxpayers will remain unchanged for the 2025–26 fiscal year. However, there may be a proposal to raise the top tax rate for the wealthiest individuals to 30 per cent, up from the current 25 per cent.

At present, the tax-free income threshold for individual taxpayers is Tk 350,000 per year. This means that no tax is payable on annual income up to that amount. For incomes above that, tax is calculated after deducting Tk 350,000 from the total income. When this threshold is increased, it typically provides some financial relief to taxpayers.

Many had recommended raising the threshold, noting that Bangladesh’s tax-free limit is relatively low while inflation remains high.

Sources said that, as of yesterday, there are no plans to offer tax relief in the upcoming budget. However, the budget may include a declaration that the tax-free income threshold will be increased to Tk 375,000 in the following two fiscal years. For individuals officially recognised as injured in the July uprising, the threshold may be raised to Tk 525,000.

There may be some relief in the form of a reduced minimum tax to encourage new taxpayers. Currently, the minimum tax ranges from Tk 3,000 to Tk 5,000 depending on location. This could be reduced to Tk 1,000 for new taxpayers.

At present, there are 11.1 million Tax Identification Number (TIN) holders across the country. Of these, only about 4 million submit returns annually—indicating that a relatively small portion of registered individuals actually pay taxes.

Zahid Hussain, former lead economist at the World Bank’s Dhaka office, told Prothom Alo that increasing the tax-free income threshold during this period of high inflation would have provided much-needed relief for lower-income taxpayers. With inflation already straining household budgets, any relief would have been helpful.

In the next fiscal year, significant changes are expected regarding proof of income tax return filings. Currently, proof of return submission is required to access 45 different services. This number is being reduced. For instance, the requirement will be lifted for certain services, including the purchase of savings certificates. However, the obligation to show tax return proof will remain in place for obtaining credit cards.

The scope of tax-free donations may be expanded to include not only spouses, parents, and children, but also biological brothers and sisters. This means that donations made to one’s own siblings would be exempt from taxation.

For private sector employees, the maximum deductible amount used to calculate taxable income is set to increase. Currently, up to Tk 450,000 in income—including various allowances—can be excluded from taxation. This threshold may be raised to Tk 500,000, offering some relief to salaried workers.

To simplify tax compliance for employers, the maximum approved limit for employee perquisites (various financial benefits) may be raised from Tk 1 million to Tk 2 million.

Additionally, income earned by the National Pension Authority and benefits received by individuals from the authority’s universal pension scheme will be exempt from taxation.

Corporate taxes are expected to rise in the upcoming budget. For companies that are not listed on the stock exchange, the corporate tax rate may be increased by 2.5 percentage points to 27.5 per cent. However, if transactions are conducted through formal channels such as banks, the corporate tax rate would remain at 25 per cent—though meeting those conditions may be challenging.

For companies listed on the stock market, the existing 20 per cent corporate tax rate will remain unchanged. The finance adviser may also propose reducing the tax rate for merchant banks—from the current 37.5 per cent to 27.5 per cent—as they operate as intermediaries in the capital market. Additionally, the tax rate on the total value of securities transactions by brokerage houses could be lowered.

Currently, businesses with an annual turnover exceeding Tk 30 million are required to pay a minimum tax of 0.6 per cent on gross receipts, regardless of profit or loss. This rate may be raised to 1 per cent, meaning companies would have to pay 1 per cent tax on their total revenue from the sale of goods or services.

Currently, the tax rate on land purchases is relatively high. The finance adviser may propose reducing this rate in the upcoming budget to discourage the creation of black money. At present, many people underreport the value of land to evade taxes, which contributes to the growth of unaccounted wealth.

According to sources at the National Board of Revenue (NBR), the tax rates on land transactions may be revised to 6 per cent, 4 per cent, and 3 per cent, depending on the location. These rates are currently 8 per cent, 6 per cent, and 4 per cent.

The opportunity to legalise undisclosed (black) money through the purchase of flats and land may remain in place. However, the applicable tax rates could be increased significantly based on location. Authorities may also retain the right to question the source of funds used in such transactions.

In the budget speech, the finance adviser may also announce taxes and penalties on laundered money and undisclosed overseas assets. Reportedly, individuals who were originally Bangladeshi citizens but later renounced their citizenship—and who fail to properly pay taxes on income earned in Bangladesh while transferring funds abroad through various means—could face new tax and penalty measures.

The threshold for excise duty on bank deposits may be raised in the upcoming budget. Currently, no excise duty is charged on bank account balances up to Tk 100,000. This limit may be increased to Tk 300,000. Additionally, the tiers for applying excise duty could be restructured.

If, at any point during the calendar year (January to December), a bank account balance reaches or exceeds the threshold for excise duty, the account holder is required to pay the applicable duty at a specified rate.

Due to an increase in Value Added Tax (VAT), the prices of refrigerators, air conditioners, and mobile phones are likely to rise.

Conversely, adjustments in customs duties could lead to reduced prices for buses, microbuses, sugar, imported butter, soft drinks, glossy (art) paper, and cricket bats. However, the prices of items such as steel rods, facewash, lipstick, and chocolates may go up due to increased duties.

The government has already announced the Annual Development Programme (ADP) for the upcoming budget, and it appears that education and healthcare have not been given top priority. Moreover, the recommendations of the White Paper Drafting Committee and the Taskforce on Economic Strategy Reform are largely absent from the budget plans. On the taxation front as well, no major changes are evident.

Selim Raihan, Professor of Economics at the University of Dhaka and a member of the government-formed Taskforce on Economic Strategy Reform, told Prothom Alo: “If the government formed through the July uprising ends up preparing the budget with minor tweaks to the old template, I will be disappointed. The interim government had a unique opportunity to set an example for the next political administration. They could have presented a budget focused on employment generation and public welfare, grounded in a spirit of reducing inequality.”

He added that citing a lack of time would not be an acceptable excuse: “The government has had nine months to prepare.”