Investors to get refund of excess source tax deducted on savings certificates

• For investments below Tk 500,000, source tax should be 5 per cent, but 10 per cent was deducted.

• In two months, excess tax of Tk 250 million was deducted from 1.45 million small investors.

The government deducted 10 per cent source tax on profits from savings certificates with cumulative investments up to Tk 500,000 in December and January, instead of the prescribed 5 per cent. The authorities have now initiated steps to refund the excess tax.

According to the rules, source tax on profits from savings certificates with cumulative investments up to Tk 500,000 is 5 per cent. Profits from pensioner savings certificates with investments below Tk 500,000 are exempt from source tax. For investments above Tk 500,000, source tax is 10 per cent in all cases. These rates were set by a notification issued on 28 August 2019 by the internal resources division of the finance ministry and remain in effect.

Despite this, without any new announcement, 10 per cent source tax was being deducted on profits from savings certificates up to Tk 500,000 since December. Investors with less than Tk 500,000 in investment discovered the issue when withdrawing profits from banks. Compared with November, they received Tk 100 to Tk 150 less in profits in December.

According to sources at the Internal Resources Division (IRD), at least 1.45 million people have investments of less than Tk 500,000. Excluding pensioner savings certificate holders, if 1 million investors are considered, and an average of Tk 125 per month was deducted as excess tax, nearly Tk 250 million was over-deducted in two months.

Following investor complaints over the excess tax deductions, contact was made last Monday with NBR chairman Abdur Rahman Khan. He told Prothom Alo that steps are being taken to resolve the issue and that for investors with less than Tk 500,000; source tax will remain at 5 per cent.

On Tuesday, NBR sent a letter to the director general of the National Savings Directorate, Rawshan Ara Begum. The letter stated that, as before, no source tax will be deducted on profits from pensioner savings certificates up to Tk 500,000. According to the 2019 notification, source tax on profits from investments up to Tk 500,000 will remain 5 per cent. However, under section 105 of the Income Tax Act 2023, if an individual’s total investment across all types of savings certificates exceeds Tk 500,000; a 10 per cent source tax will be applicable on the profits.

To implement the clarification, the National Savings Directorate on the same day sent a letter to Ziaul Abedin, national programme director of the Strengthening Public Financial Management Program to Enable Service Delivery (SPFMS), which operates under the finance division of the Ministry of Finance.

The complication began on 17 August 2025. On that day, DG of the National Savings Directorate, Rawshan Ara Begum, wrote to the NBR chairman stating that the law regarding source tax deduction on profits from individual investments was unclear and sought clarification. Subsection (1) of section 105 of the Income Tax Act 2023 mentions 10 per cent tax on profits from savings certificates purchased from old-age, pension, gratuity, recognised provident funds, or workers’ profit-sharing funds. However, NBR had not given any response on the matter.

On 27 March 2024, Md Shahjahan bought a three-month profit-based savings certificate worth Tk 500,000 from Sonali Bank’s Ramna branch in Dhaka. On 3 February 2025, he purchased a pensioner savings certificate worth Tk 1.5 million.

His son, Md Nazmul Hossain, appealed to the National Savings Directorate on 4 October, reporting that source tax was either being incorrectly deducted or undercharged. Referring to this, on 26 November, the National Savings Directorate sent a letter to SPFMS programme director Ziaul Abedin instructing that a 10 per cent tax deduction should be applied in accordance with section 105(1) of the Income Tax Act 2023. SPFMS then updated its software with the 10 per cent rate and informed the banks.

Prothom Alo sought comments from Rawshan Ara Begum and Ziaul Abedin on the issue, but they did not respond.

According to NBR sources, since the 2019 notification remains in effect, the excess tax deducted from investors with less than Tk 500,000 will be refunded. Arrangements will be made for online applications with supporting documents. NBR chairman Md Abdur Rahman Khan said that this rule will remain in force until the previous notification is revoked. Customers will receive refunds of the excess tax deducted, and steps are being taken to return their money.