Parliament has removed the Tk5 lakh annual cap on tax-rebatable investment in mutual funds, reversing a restriction introduced in 2023 after the asset management industry argued it discouraged investment through professionally managed funds.
The change was approved on Monday when Parliament passed the Finance Bill with 64 amendments.
The Tk5 lakh ceiling, introduced in 2023, applied to allowable investments in mutual funds and government securities eligible for tax rebate.
Asset managers had long opposed the cap, saying it discouraged investment through professional fund managers and left the mutual fund industry with a shallow investor base.
The Finance Act removed the ceiling for mutual fund investments, allowing them to qualify for tax rebate without the product-specific limit.
The relief, however, comes with a broader reduction in investment tax incentives.
The maximum tax rebate on allowable investments has been reduced to Tk7.5 lakh from Tk10 lakh while the rebate rate was cut to 10 per cent from 15 per cent.
The Finance Act also capped allowable investments eligible for tax rebate at 3 per cent of a taxpayer’s annual taxable income, effectively limiting the maximum qualifying investment to Tk75 lakh.
The changes allow investors to claim tax rebates on larger mutual fund investments while reducing the overall tax benefit available under the investment rebate regime.
The revisions form part of broader changes to the personal income tax framework under the Finance Act for fiscal 2026-27.
The Finance Act raised the tax-free income limit to Tk4 lakh a year, from Tk3.5 lakh. However, every taxpayer will end up by paying Tk5,000 more as the 5 per cent tax slab for the first Tk1 lakh income over the tax-free threshold has been removed.
From Tk4 lakh to Tk7 lakh income, a 10 per cent tax will be applicable from this tax year.
