The interim government aims to boost revenue collection by expanding tax coverage rather than increasing tax rates in the upcoming national budget for the 2025-26 fiscal year (FY26), in an effort to provide relief amid rising inflation while ensuring greater tax compliance.
The National Board of Revenue (NBR) has prepared several proposals for the forthcoming budget, which is expected to be presented at the parliament on 2 June.
According to a senior NBR official, the budget will introduce multiple changes across income tax, customs duties, and value-added tax (VAT) policies.
Additionally, certain conditions related to investments in savings certificates and fixed deposit receipts (FDRs) may be relaxed to encourage savings.
One significant change under consideration is an increase in the tax-free income threshold for individuals, rising from Tk3.5 lakh to Tk3.75 lakh. However, tax rates themselves will remain unchanged, with existing income tax brackets ranging from 5% to 25% based on income levels. This is consistent with the NBR’s historical pattern, where the tax-free limit is raised every two to three years but is rarely reduced.
The minimum tax, currently unchanged despite periodic increases in the tax-free income limit, will be raised to Tk5,000 in the forthcoming budget. This means that taxpayers across city corporations, municipal areas, and rural regions will be subject to this minimum tax.
Further reforms are also planned for tax filing procedures. From the current fiscal year, it is expected that online filing of income tax returns will become mandatory for individual taxpayers, including government employees and staff of certain multinational corporations.
In the previous budget for FY24, the tax-free income limit rose from Tk3 lakh to Tk3.5 lakh. In FY21, it was increased from Tk2.5 lakh to Tk3 lakh, and in FY16, from Tk2.2 lakh to Tk2.5 lakh.
Apart from general taxpayers, the tax-free income limit is Tk4 lakh for female taxpayers, Tk4.75 lakh for disabled and third-gender taxpayers, and Tk5 lakh for gazetted war-wounded freedom fighters.
No reduction in corporate tax
The government has steadily reduced corporate tax rates over recent years. However, businessmen have repeatedly claimed they are not benefiting from these tax cuts. Nonetheless, corporate tax rates will not be lowered in the coming fiscal year.
Advance tax on 200 duty-free imported products
The proposed budget may introduce a 2% advance income tax (AIT) at the import stage on approximately 200 tax-exempt products. This measure is part of a phased withdrawal of tax exemptions and aims to increase tax compliance, potentially generating an additional Tk 2,000 crore in government revenue.
The new tax will cover key raw materials for the garment industry, such as cotton and man-made fibres, as well as staple food items including potatoes, onions, lentils, chickpeas, soybeans, and corn. Fertilisers, crude oil, sugar, and medical equipment will also be included.
Relaxation on savings certificates, FDR investments, land registration, and professionals regarding PSR
To encourage savings, the NBR may ease the requirement for purchasers of savings certificates and investors in FDRs to file income tax returns or submit Permanent Status Reports (PSRs). This condition may be relaxed in FY26, with a copy of the electronic Taxpayer Identification Number (e-TIN) taking its place. It is also reported that the PSR requirement may be eased for membership of certain professional organisations.
Land registration tax reduction
Sources within the NBR indicate some relaxation regarding land registration in the upcoming budget. Registration fees and taxes will be calculated as a percentage rather than by katha. Additionally, advance tax on land registration may be slightly reduced.
Special incentives in the capital market
NBR officials stated that withholding tax on transactions by brokerage houses in the capital market may be reduced. Furthermore, conditions for listing new companies on the capital market will be simplified, and tax exemptions may be offered.
Turnover tax increase
Currently, companies with an annual turnover exceeding Tk 3 crore must pay a 0.6% turnover tax. The proposed budget may raise this rate to 1%.
Over 100 US-imported products to receive duty exemptions
The government plans to reduce tariffs on at least 100 types of imported goods in the FY26 budget, aiming to lessen additional tariffs imposed by the United States.
VAT increase on air conditioners, refrigerators, and mobile phones
Following a doubling of corporate tax for refrigerator and air conditioner manufacturers just six months ago, the government now intends to raise the value-added tax (VAT) on these products, which may raise concerns among domestic manufacturers. Currently, VAT on refrigerators and air conditioners is 7.5% at the production stage. The NBR plans to increase this to 15% in FY26. Similarly, VAT on mobile phone manufacturing is proposed to increase from 5% and 7.5% to 7.5% and 10%, depending on the local value added.
Significant changes in baggage rules
The government is set to introduce major changes to baggage regulations for passengers returning from abroad. Whereas previously it was possible to bring gold duty-free multiple times a year, this will now be limited to once annually. It will also become mandatory to declare amounts exceeding $10,000 on a prescribed form.
Under current rules, passengers may bring 100 grams of gold jewellery or 200 grams of silver jewellery duty-free multiple times per year. Additionally, it is possible to bring 117 grams (about 10 bhoris) of gold bars, subject to a duty of Tk4,000 per bhori. The new proposal limits this concession to once per year.
Withdrawal of tax exemptions in the agricultural sector
As part of the plan to phase out tax exemptions, the upcoming budget may revoke the existing income tax benefits granted to the fisheries and poultry sectors.
Officials noted that income from these sectors is currently taxed at rates ranging from 3% to a maximum of 15%. However, under the new budget, income from these sectors may be subject to the regular tax rate, with a maximum of 30%.
Meanwhile, the proposed budget size for FY26 could reach Tk790,000 crore. The original budget size for the current FY25 stands at Tk797,000 crore.
Courtesy: Daily Sun.
Bd-pratidin English/Tanvir Raihan
