Parliament on Monday substantially rewrote the proposed budget for fiscal 2026-27 before approving the Finance Bill with 64 amendments.
It raised the tax-free income threshold, scrapped the controversial provision to legalise undisclosed wealth, withdrew mandatory tax identification number (TIN) requirements for several public services, provided a value-added tax (VAT) relief for small shops, and expanded tax and duty relief for businesses.
Finance minister also announced that the government will repeal the most controversial 18(a) provision of the newly enacted Bank Resolution Act, retreating from a clause that critics said could have opened the door for controversial former bank owners to regain control of failed banks.
The bill was passed by voice vote after Finance Minister Amir Khosru Mahmud Chowdhury moved it in the House chaired by Speaker Hafiz Uddin Ahmad.
Lawmakers rejected an opposition proposal to send the bill for further public scrutiny before accepting 64 amendments.
Prime Minister and Leader of the House Tarique Rahman and Opposition Leader Shafiqur Rahman attended the sitting.
The overall budget framework to be passed on Tuesday remains broadly unchanged, with expenditure and revenue plans close to the originally proposed Tk9.38 lakh crore.
Tax relief for individuals, no room for black money
The Finance Bill raises the tax-free income threshold for individuals to Tk4 lakh from the proposed Tk3.75 lakh for the 2026-27 and the following tax year and includes a roadmap to increase it gradually to Tk5 lakh in 2030-31, Tk50,000 higher from the previous proposal.
A proposed property registration mechanism through paying additional tax on the difference between actual transaction prices and official mouza values after criticism that it could provide a route to legalise undisclosed wealth.
Another major reversal removes the proposed requirement to provide a TIN when opening bank accounts, registering inheritance deeds or transferring property ownership, exempting millions of people without taxable income from mandatory tax registration.
The bill replaces the existing tax treatment of individual dividend income with a fixed 15 per cent rate. Previously, dividends were added to total income and taxed at prevailing rates that could exceed 30 per cent.
Another relief, the 20 per cent tax on dividend income earned by companies remains unchanged, while income from zero-coupon bonds will continue to be exempt.
Tax rebate-applicable annual investment limit of Tk5 lakh has been withdrawn to encourage people to invest through professional asset managers.
Tax exemptions proposed for freelancing and content creation income remained.
Annual income of up to Tk70 lakh for women-owned and persons-with-disabilities-owned SMEs registered with the SME Foundation and Tk50 lakh for other SMEs will remain tax-free.
Employees’ benefits received under group insurance schemes have been exempted from tax, while donations to the Centre for Zakat Management have been added to the list of tax rebate-eligible contributions.
Landowners receiving flats, cash or other benefits from developers under joint development agreements will continue to pay capital gains tax, although payment may now be spread over three years.
Businesses receive tax and VAT relief
The revised bill introduced a package of tax and customs concessions across multiple sectors.
Income tax on private universities, private medical, dental and engineering colleges and private colleges offering only information technology education has been halved to 5 per cent.
VAT on online video streaming services, social media advertising and search engine advertising has been reduced to 5 per cent from 15 per cent.
All duties and VAT imposed on the shrimp industry have been withdrawn, alongside supplier-level VAT on fish and VAT on Bangladesh Telecommunication Regulatory Commission revenue-sharing payments.
Import duties have been reduced or removed on pharmaceutical ingredients, electrical wire, refined copper, chromium oxide, cold-rolled sheets, fire safety equipment, honey, cashew nuts and several other industrial raw materials. Existing tax benefits for raw materials used in LED lighting and prefabricated building production have also been extended.
The government also reversed its proposal to raise import duty on PVC and PET resin to 10 per cent from 5 per cent after manufacturers warned of higher costs for plastic and PVC goods producers.
Requirements relating to coefficient approval for manufacturing inputs have been relaxed.
VAT on locally manufactured double-cabin pickups and microbuses has been cut to 5 per cent from 15 per cent.
A new specific VAT regime has been introduced for jewellery, fixing VAT at Tk2,500 per bhori on gold and platinum jewellery, Tk100 per bhori on silver jewellery and Tk2,500 per gram on diamond jewellery. Sellers will also face 0.5 per cent withholding tax on the purchase value.
The proposed 15 per cent capital gains tax on gold sales has been reduced to 5 per cent.
Small grocery shops and traditional kitchen markets will remain outside the package VAT regime, although larger businesses will continue under a flat-rate capacity-based system.
Services imported from abroad will be treated as taxable supplies subject to 15 per cent VAT. The recipient will bear the tax liability, while banks and authorised foreign exchange dealers will collect and deposit the tax when processing overseas payments.
Business identification number (BIN) registration, or proof of registration, will become mandatory for opening and operating current or STD accounts, obtaining bank loans, renewing trade licences, securing electricity and gas connections, opening merchant accounts with mobile financial service providers, obtaining or renewing memberships of trade bodies and registering company-owned vehicles.
Manufacturers, importers, suppliers, distributors and commission agents will have to collect 0.2 per cent advance income tax when selling goods to retailers. Failure to collect the tax will require them to pay an equivalent amount.
The bill also creates separate tax categories for nicotine pouches and heated tobacco products, imposes specific VAT on domestically produced foreign liquor and unprocessed tobacco.
It also requires warehouse owners to cooperate with customs officials during inspections and introduces separate HS codes for desktop computers and processing units, with zero duty on desktop processing units and 5 per cent on other processing units.
Corporate tax structure retained as government bets on wider tax base
The Finance Bill largely preserves the corporate tax framework while extending incentives for companies using formal banking channels.
Listed companies with at least 10 per cent public shareholding through an IPO, direct listing, rights issue or repeat public offering (RPO) will continue to pay 22.5 per cent corporate tax, falling to 20 per cent if all transactions are conducted through banks.
Listed companies with less than 10 per cent public shareholding will pay 25 per cent, reduced to 22.5 per cent for fully bank-based transactions. By recognising RPOs for tax purposes, companies previously unable to qualify for lower rates because they floated less than 10 per cent through IPOs may now become eligible.
The corporate tax rate for other companies has been set at 27.5 per cent, or 25 per cent if all transactions pass through banking channels, extending a 2.5 percentage-point incentive previously available only to listed firms.
Tax rates remain unchanged at 37.5 per cent for listed banks, insurers and financial institutions and 40 per cent for unlisted ones. Tobacco manufacturers will continue to pay 45 per cent corporate tax, while listed mobile operators will remain at 40 per cent and unlisted operators at 45 per cent.
Listed companies distributing less than 30 per cent of post-tax net profit as dividends will face an additional 10 per cent tax on the shortfall, although banks, insurers and financial institutions are exempt because of separate regulatory requirements.
Businesses and associations exceeding prescribed capital or turnover thresholds must also submit audited financial statements.
The finance minister said the NBR had surpassed Tk4 lakh crore in revenue collection for the first time in the outgoing fiscal year and that the government expected to meet next year’s challenging revenue target by broadening the tax base rather than raising tax rates.
He said the government would continue separating revenue policy from revenue administration, automating tax collection, tackling evasion, easing business regulations and improving transparency and accountability.
The minister also highlighted measures to coordinate fiscal and monetary policy to curb inflation, strengthen foreign exchange reserves, stabilise the exchange rate, increase agricultural and industrial production and reduce advance tax on 60 essential commodities.
Inflation would gradually ease as supply chains improved, competition increased and action continued against artificial shortages and market manipulation, he added.
