Invest in 9 sectors by June to receive tax relief next year

June has begun. It is the final month of the fiscal year. Taxpayers must complete their income tax calculations within June.

They must also finalise income and expenditure declarations, tax relief claims, and investment planning within the July–June tax cycle.

Therefore, anyone seeking investment-related tax relief must make the relevant investments by the end of June.

If you have cash available, you can invest in several government-approved sectors and claim tax relief. Doing so will reduce your tax liability at the end of the year and lower your overall tax payment.

Let us examine the sectors in which you can invest. The National Board of Revenue (NBR) has designated these sectors. According to the NBR, taxpayers who invest in these areas will qualify for tax relief.

The easiest and most popular investment option is government savings certificates. These instruments carry very little risk, while their profit rates generally exceed those offered on bank deposits.

As a result, middle-income taxpayers often choose to invest in savings certificates.

You may also qualify for tax relief if you save up to Tk 10,000 per month with a bank or financial institution.

The NBR allows this tax benefit on annual DPS (Deposit Pension Scheme) savings of up to Tk 120,000.

You can also receive tax relief by investing in the stock market. To qualify, you must purchase shares, mutual funds, or debentures issued by companies listed on the stock exchange.

Government officials benefit from reduced tax liability through contributions to provident funds because the NBR includes such contributions in its list of investment-related tax relief schemes.

The NBR also allows tax relief on contributions made by both employers and employees to recognised provident funds.

Other eligible sectors include life insurance premiums; contributions to welfare funds and group insurance funds; contributions to superannuation funds; and the purchase of securities worth up to Tk 500,000.

You should assess which investment option is the most practical and financially beneficial for your circumstances.

The tax relief amount will equal the lowest of the following three figures, 3 per cent of total income; 15 per cent of total eligible investment or Tk 1 million (10 lakhs).

If the legally allowable relief exceeds the tax payable on a taxpayer's total income, the taxpayer will not receive any additional tax relief. The amount of tax relief can never exceed the tax liability.

Taxpayers residing within the areas of Dhaka North City Corporation, Dhaka South City Corporation, and Chattogram City Corporation must pay a minimum tax of Tk 5,000.

Taxpayers living in other city corporation areas must pay a minimum tax of Tk 4,000, while those living outside city corporation areas must pay a minimum tax of Tk 3,000.

An Example can be given. Consider the case of government official Zahid Kabir. During one year, he earned a total income of Tk 364,000, including salary, allowances, and festival bonuses.

Throughout the year, he contributed Tk 41,400 to his provident fund, welfare fund, and group insurance fund. These contributions constitute his eligible investment.

According to the tax liability calculation, the first Tk 350,000 of income falls within the zero-tax bracket, meaning no tax applies.

Therefore, tax authorities will charge tax only on the remaining Tk 14,000. At the applicable rate of five per cent, his tax liability amounts to Tk 700.

Under the investment-related tax relief rules, three per cent of his total income (Tk 364,000) equals Tk 10,920; 15 per cent of his eligible investment (Tk 41,400) equals Tk 6,210; and the maximum allowable tax relief is Tk 1 million (10 lakh).

Among these three figures, Tk 6,210 is the lowest. Therefore, this amount represents Zahid Kabir's eligible tax relief.

However, under the Income Tax Act, Zahid Kabir, as a taxpayer residing within Dhaka City Corporation, must pay the minimum tax of Tk 5,000.

The law clearly states that the amount of tax relief can never exceed the taxpayer's tax liability.