Tax-free income limit remains unchanged amid high inflation

Representational image of national budget

Finance minister Abul Hassan Mahmood Ali has proposed to retain tax-free individual income limit at Tk 350,000 and a new tax rate of 30 per cent on income over Tk 2 million.

He placed the proposal while unveiling the national budget for the fiscal year 2024-25 in the parliament on Thursday.

He said, “I propose to keep the tax-free income thresholds of natural individual taxpayers and firms unchanged for the financial year 2024-25. At the same time, it is proposed to increase the existing maximum tax rate from 25 per cent to 30 per cent for natural individual taxpayers and firms with tax slab adjustments.”

The minister said he proposes to retain the proposed tax rate for 2024-25 for the assessment year 2025-26 to facilitate the expansion of trade, improve investor confidence in the country's tax system and encourage local and foreign investment, thereby introducing a prospective tax system in Bangladesh.

Taxpayers can do proper tax planning and help increase tax compliance through a prospective tax system, he added.

The minister also propose to keep the tax-free income threshold for women, senior citizens, physically challenged persons, members of the third gender and war wounded freedom fighters unchanged,

Besides, the tax-free income limit for women and senior citizens above 65 is Tk 400,000, for physically challenged persons and third gender Tk 475,000 and the tax-free income threshold for war wounded freedom fighters is Tk 500,000.

However, the income tax-free threshold would be increased for parents or legal guardians of physically challenged child or adapted child by Tk 50,000 for each child.

Different quarters demanded an increase in tax-free income limits for individuals as inflation was over 9 per cent for 15 months straight until May. Food inflation also crossed 10 per cent last month.