Withdrawal of 5.0pc upfront source tax proposed

The finance minister has proposed withdrawal of existing 5.0 per cent upfront source tax (TDS) on treasury bills and bonds in the next budget to help boost the country's securities market.

In his budget speech on Thursday, Finance Minister AMA Muhith made the proposal for the fiscal year (FY) 2015-16.   

The government imposed 5.0 per cent upfront source tax on interest on its securities - both treasury bills and bonds - in the current FY 2014-15.

"An effective bond market can make significant contribution to macroeconomic management. The government has taken diverse steps to create a vibrant bond market," said the finance minister in his budget speech.

"In order to promote bond market, I propose withdrawal of existing 5 per cent upfront source tax (TDS) on interest income of treasury bonds and treasury bills," he said.

"The existing 5.0 per upfront tax on interest on the securities has been hampering the growth of securities market, particularly the secondary one," a central banker told the FE.

He said the move will help boost the growth of the market if the proposal is finally implemented.

    rezamumu@gmai.com