Tax on profits of wage earners\\\' bonds bought before July 2011 exempted

Investors will enjoy tax exemption on profits from wage-earners' development bonds purchased before July 2011, the revenue board said Tuesday.

The National Board of Revenue (NBR) issued the directive to remove confusion regarding tax exemption facility for investors in wage earners' bonds.

The Board has sent the directives to all of its tax offices across the country in a bid to end confusion of both taxpayers and taxmen.

In the budget for fiscal year 2011-12, the government had imposed 5.0 per cent tax at source on profits of the wage earners' bonds and also made its interest income taxable.

Before that, income from wage earners' bonds was totally exempted from payment of tax.

Expatriate wage-earners, who invested in the bonds before July 2011, faced problems as many of the taxmen demanded tax on the interest amount accrued after July, 2011.

Abdur Rahman Khan, FCMA, First Secretary of the Income Tax (policy) wing said the tax authorities found many of the field-level taxmen confused over collection of tax on the profits of wage earners' bonds that were purchased before imposition of the tax.

"The government imposed 5.0 per cent tax at source of profits of wage earners' bonds and made the income taxable through scrapping the previous Statutory Regulatory Order (SRO). Cancellation of the SRO has created complexities over tax collection from the interest amount of purchased wage earners' bonds before July 2011," he said.

It will be a breach of contract with the investors in the wage earners' bonds as they made the investment under the previous conditions, he added.

Some taxpayers and lawyers requested the NBR to make the issue clear to resolve complexities in their respective tax files.

With the instruction of the NBR, taxmen will not consider the interest amount accrued after July 2011 at the time of encashment of the bonds purchased before the date.

Citing an example, the tax official said if an investor purchased five-year wage earners' bonds in July 2007 and encashed it in July 2012, he would not be required to pay tax on the interest amount earned after July 2011.   

The wage earner himself or his beneficiary can purchase the bonds with foreign currencies. The government employees working in Bangladesh missions abroad have also been entitled to purchase the bond.

The bond can be purchased from the Bangladesh Bank and only branches of scheduled banks that deal in foreign currency accounts both at home and abroad. There is no maximum limit for the bonds. It carries 12 per cent rate of profits after five years.