Government's revenue authority halved the tax on capital-gains from sales of shares by individual investors in the stock market.
The fiscal perks spurred instant stocks rebound.
The National Board of Revenue (NBR) has issued a notification by lowering the tax rate to 15 per cent on capital-gains above Tk 5.0 million from trading in shares on the stock exchanges, says a press statement.
Meanwhile, substantial price hikes of selective large-cap stocks, including blue chips, helped the benchmark index of the Dhaka Stock Exchange (DSE) surge almost 62 points or 1.18 per cent to settle at 5,252, after losing more than 8 points the day before.
As per the Income Tax Act 2023, individual investors are subject to paying tax at regular rate on the capital-gains between July 1, 2024 and June 30, 2025, if the latter sell shares within five years of investment.
Under this provision, tax rate on capital-gains is maximum 30 per cent if the amount exceeds Tk 5.0 million.
Also, wealthy taxpayers have to pay surcharges at a maximum 35-percent rate.
However, the total tax incidence surges to 40.50 per cent on a stock investor due to these provisions, with tax and surcharge combined.
To resolve such a high tax rate, the tax policy wing of the NBR has allowed individual investors to enjoy 15-percent tax on their gains from capital investment in stocks, irrespective of selling period being within or after five years.
From now on, individual taxpayers would be able to pay 15-percent tax on their capital gains above Tk 5.0 million earned between July 1, 2023 and June 30, 2025.
In case of net wealth of an individual taxpayer exceeding Tk 40 million, Tk 100 million, Tk 200 million and Tk 500 million, surcharge on payable taxes would be 10 per cent, 20 per cent, 30 per cent and 35 per cent.
As per new SRO, an individual taxpayer, having net wealth above Tk 500 million, would be required to pay tax at a rate of 15 per cent if he earns his capital- gains from stock market above Tk 5.0 million. He also has to pay a 35-percent surcharge on this 15-percent payable tax.
The TTI on the taxpayer would come to 20.25 per cent inclusive of tax and surcharge.
In case of net assets below Tk 5.0 million, individual taxpayers would be able to enjoy lower taxes.
The circular would be valid for the tax year 2025-26.
Mominul Islam, Chairman of the Dhaka Stock Exchange (DSE), appreciates the prompt response of the interim government for revival of the country's capital market.
"Such prompt action would give a positive impression among the stock-market investors on the government stand to support investors through necessary reforms," he says.
Many of the investors were driven away from the stock market to higher-stakes treasury bills and bonds who may consider coming back again responding to the government support.
"We held meetings with the NBR only eight days back. Also, Bangladesh Securities and Exchange Commission recently sought NBR's support on tax waiver," he told the FE writer, in praise of the prompt response.
Md Saiful Islam, President of DSE Brokers Association of Bangladesh, also hails the move as the beginning though the investors have demanded full waiver of taxes.
"We demand a vital legal amendment in income-tax provision to allow investors carry forward capital losses for three consecutive years," he says.
Currently, investors cannot carry forward capital losses in a tax year to the subsequent years to make adjustments.
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