Finance Minister Amir Khosru Mahmud Chowdhury has proposed raising the tax-exempt income threshold for individual taxpayers to Tk3.75 lakh for the upcoming fiscal year, providing a measure of relief to low and middle-income families.
The announcement was made during the budget presentation in the National Parliament on Thursday. The new limit, increased from the existing Tk 3.5 lakh, is set to remain in effect until the 2027-28 fiscal year.
This move continues a trend initiated in last year’s budget by Salehuddin Ahmed, finance adviser of the then-interim government, which the current BNP-led government has chosen to maintain.
Special categories and exemptions
The budget retains and enhances benefits for specific groups of taxpayers. The tax-free threshold for women and taxpayers aged 65 and above has been set at Tk4.25 lakh. For third-gender taxpayers and persons with disabilities, the limit is Tk5 lakh.
In a significant inclusion, the threshold for gazetted freedom fighters and “July Warriors” – those injured in the July 2024 mass uprising – has been raised to Tk 5.25 lakh.
Parents or legal guardians of persons with disabilities will receive an additional Tk 50,000 exemption for every child or dependent, added to their existing personal limit.
Restructuring tax slabs
The government has also restructured the income tax rates, notably abolishing the 5 per cent tax slab previously applied to the first Tk1 lakh of taxable income. Under the new structure, income exceeding the tax-free threshold will be taxed as follows:
- First Tk3 lakh: 10%
- Next Tk4 lakh: 15%
- Next Tk5 lakh: 20%
- Next Tk20 lakh: 25%
- Remaining income: 30%
Analysts suggest that while the threshold increase offers relief, the restructured slabs may lead to an increased tax burden for some. Currently, there are 1.28 crore Taxpayer Identification Number (TIN) holders in Bangladesh, of whom 40 to 42 lakh file annual returns.
Year-round filing and incentives
Starting from the next fiscal year, taxpayers will be permitted to file their income tax returns throughout the year. To encourage early compliance, the government has introduced a quarterly incentive and penalty system:
- July–September: Filing in the first quarter entitles taxpayers to a rebate of 5 per cent of the payable tax or Tk 25,000, whichever is lower.
- October–December: No incentives or penalties; taxpayers pay the calculated tax.
- January–March: A penalty of 2 per cent of the payable tax or Tk 3,000, whichever is higher, will be applied.
- April–June: A penalty of 5 per cent of the payable tax or Tk 5,000, whichever is higher, will be applied.
Economic context
The adjustment comes at a time when real income has declined due to persistent inflationary pressures. While the tax-free limit was last raised to Tk 3.5 lakh in 2023, inflation has averaged 10 per cent over the past three years.
According to the Bangladesh Bureau of Statistics (BBS), inflation reached 9.42 per cent in May, the highest in 16 months, significantly increasing the cost of living for those just above the tax-exempt threshold.
