The authorities would consider private provident fund (PF) as a taxable entity and impose corporate income tax on it from July 1, 2023.
However, the government's provident fund would likely be exempted from the tax.
The Income Tax Bill-2023 has withdrawn the exemptions for the private provident fund and imposed mandatory provisions on submission of tax returns.
With the new provisions, net receipt of a taxpayer from the private provident fund would be substantially reduced from the upcoming fiscal year (FY).
Non-introduction of the private sector pension or universal pension scheme has already created worries among the employees approaching retirement.
Such cut in the provident fund benefits, which employees usually withdraw after retirement, might intensify their miseries, tax experts said.
From FY 2023-24, a provident fund would be treated as a company.
Currently, provident funds are tax-exempt like other government's funds that do not require submitting tax returns.
However, a provident fund should be an approved one by the tax commissioner of the National Board of Revenue (NBR) to get tax exemptions.
Currently, the bank deducts 5.0 per cent tax on the provident fund's interest income which is considered final settlement of tax on the amount.
An analysis, conducted by Snehasish Mahmud & Co, showed that net income for distribution from the provident fund would be reduced to Tk 0.725 million under the new income tax act from Tk 0.9 million in case of having an income of Tk 10 million.
There would be an extra aggregate tax burden worth Tk 0.175 million on the provident fund recipients.
doulotakter11@gmail.com