Income Tax in Bangladesh: A Detailed Overview
Income tax is a significant source of revenue for the government in Bangladesh and is governed by the Income Tax Ordinance, 1984, along with subsequent amendments and rules. The National Board of Revenue (NBR) is the apex authority responsible for collecting and administering income tax in the country.
Tax Year and Residential Status
The tax year in Bangladesh generally runs from July 1st to June 30th of the following year. However, the tax year is from January 1st to December 31st for banks, insurance companies, and financial institutions.
Taxation of individuals primarily depends on their residential status during the relevant tax year. An individual is considered a resident in Bangladesh if they meet any of the following criteria:
- They have been present in Bangladesh for 182 days or more in the tax year.
- They have been present in Bangladesh for 90 days or more in the tax year and have been in Bangladesh for a total of 365 days or more during the four preceding years.
A non-resident is taxed only on income that is accrued or arises, or deemed to be accrued or arisen, in Bangladesh, or received or deemed to be received in Bangladesh during the year. Resident individuals are taxed on their worldwide income.
Income Tax Slabs and Rates for Individuals (FY 2024-2025)
Bangladesh follows a progressive income tax system with different tax slabs and rates for individuals. The tax rates vary based on the total income of the individual. The current tax slabs for resident individuals and Non-Resident Bangladeshis (NRBs) for the financial year 2024-2025 are as follows:
| Total Income (BDT) | Tax Rate (%) |
|---|---|
| First 350,000 | 0 |
| Next 100,000 | 5 |
| Next 400,000 | 10 |
| Next 500,000 | 15 |
| Next 500,000 | 20 |
| Next 2,000,000 | 25 |
| On the rest | 30 |
Special Exemption Limits:
- Women and Senior Citizens (65 years or above): First BDT 400,000 is tax-free.
- Taxpayers with Disabilities: First BDT 475,000 is tax-free.
- War Wounded Gazette Freedom Fighters: First BDT 500,000 is tax-free.
- Third-Gender Taxpayers: First BDT
- Parents or Legal Guardian of a Person with Disability: Additional BDT 50,000 exemption.
Non-Resident Individuals (NRIs) who are not Bangladeshi citizens are taxed at a flat rate of 30%.
Types of Income
Under Bangladesh tax laws, income is categorized into the following sources:
- Income from Employment: This includes salaries, wages, allowances, perquisites, pensions, and other benefits derived from employment.
- Income from Rent: Income earned from renting out any property after deducting allowable expenses (e.g., standard deduction of 25% for non-commercial and 30% for commercial properties covering rent collection, utilities, service charges, and repairs).
- Agricultural Income: Income derived from agricultural activities.
- Income from Business or Profession: Profits and gains from carrying on any business or profession.
- Capital Gains: Profits arising from the transfer of capital assets (e.g., land, buildings, shares). Capital gains from the transfer of stocks and shares of publicly listed companies (except government securities) are taxed at 10% for resident companies and 15% for non-resident shareholders.
- Income from Financial Assets: This includes interest, dividends, etc. Dividends paid by a Bangladeshi company are generally taxable at 20%. Interest income is taxed at regular rates, while interest on pensioners’ savings certificates (if cumulative investment does not exceed BDT 500,000) is exempt.
- Income from Other Sources: This is a residual category that includes income not falling under the above heads, such as winnings from lotteries, word games, income from undisclosed sources, etc. Borrowing of any amount from any person other than through a banking medium is taxable under this category in the year of borrowing. Still, it is deductible in the year of repayment.
Tax Rebates and Allowable Deductions
Taxpayers in Bangladesh can avail tax rebates on certain eligible investments and expenditures, subject to specific limits. Generally, a rebate of 15% is allowed on the eligible investment amount, with the ceiling for the eligible amount being 20% of the total income or a maximum of BDT 1 crore, whichever is lower. Common eligible investments include:
- Life insurance premiums
- Contributions to provident funds, recognized superannuation funds, and gratuity funds
- Investments in government securities and savings certificates
- Investments in shares and debentures of listed companies
- Contributions to Deposit Pension Schemes (DPS)
- Investments in mutual funds
- Donations to approved charitable organizations
- Purchase of computers or laptops
Certain expenditures are also allowed as deductions from total income before calculating tax liability. These may include specific allowances or exemptions as per the Income Tax Ordinance and related rules.
Surcharge
A surcharge is levied on the income tax payable by wealthy individuals based on their net wealth or specific criteria:
| Net Wealth / Criteria Rate | e of Surcharge on Tax Payable |
|---|---|
| Up to BDT 40 million | Nil |
| Above BDT 40 million to BDT 100 million OR Ownership of more than one motor car OR Ownership of house property exceeding 8,000 sq. ft. | 10% |
| Above BDT 100 million to BDT 200 million | 20% |
| Above BDT 200 million to BDT 500 million | 30% |
| Above BDT 500 million | 35% |
Minimum Tax
A minimum tax regime applies to individuals having gross receipts exceeding BDT 3 million. The final tax liability will be the higher of:
- The regular tax calculated on total income.
- The total amount of withholding tax deducted under certain sections.
- 0.25% of the gross receipts.
Additionally, a minimum tax is payable based on the location if the total income exceeds the tax-free threshold:
| Area | Minimum Tax Payable (BDT) |
|---|---|
| Dhaka North & South City Corporation, Chittagong City Corporation | 5,000 |
| Other City Corporations | 4,000 |
| Other areas (not City Corporations) | 3,000 |
Tax Administration and Compliance
Individuals liable to pay income tax in Bangladesh must obtain a Tax Identification Number (TIN) and file an income tax return within the stipulated time. The due date for filing the individual income tax return is November 30th following the end of the income year (June 30th).
- September 15th (25%)
- December 15th (25%)
- March 15th (25%)
- June 15th (25%)
The NBR has introduced an e-Return system, allowing online filing of tax returns. Electronic tax payment can also be made through designated banks or mobile payment applications.