10pc tax deduction not applicable to interest income before July 01
Saturday, 21 July 2007
Doulot Akter Mala
The government's recent decision on deduction of 10 per cent tax at source from savings instruments, interest earning has created confusion among small investors.
The National Board of Revenue (NBR) has been receiving a large number of queries from the people owning savings instruments.
Most of the investors have been seeking clarifications over the imposition of tax on income from the savings instruments, sources said.
The government imposed the 10 per cent tax, deductible at source, on annual income exceeding Tk 25,000 from savings instruments though the finance ordinance 2007.
It will deduct the tax at source on the interest of savings instruments generated on July 1, 2007 and beyond said an NBR order, dated July 10, addressing the Director of the National Saving Directorate.
The NBR has made it clear that the investors will not have to pay tax on interest income generated during the period from July 2004 to June 30, 2007.
There is a misconception among the investors as well as banks about payment of tax on their interest income received since 2004.
The government has introduced the measure to increase tax revenue earnings.
However, the move has created panic among the fixed income group, which is largely dependent on such income from savings instruments for their living.
Under the new tax measure, the investors having interest income worth less than Tk 25,000 annually will have to make a declaration to the savings instruments issuing departments that they have not purchased such instruments from any other institutions and that the total interest income from the same will not exceed Tk 25,000 annually.
However, the total interest income from such savings instruments will be subjected to tax deduction at a rate of 10 per cent if the investors or taxpayers concerned express their inability to make such declaration.
The investors do not have to pay further tax on the interest of the savings instruments, as the government will deduct it from the source, a NBR source said.
Earlier, taxpayers had to pay tax in higher ceiling due to inclusion of income of the savings instruments. But from now on, they will only pay 10 per cent tax on the income of savings instruments.
The existing income tax ceilings are 10 per cent, 15 per cent and 25 per cent for income starting from Tk 150,000 and above.
The NBR order has made it clear that an income taxpayer will not have to pay tax for the second time on interest income from savings instruments if they disclose it in their tax returns that tax has been deducted at source.
The taxpayers must mention the value of savings instruments in their individual tax returns, the NBR directives said.
They also have to mention in the tax returns the sources of income at the time of fresh investment in such instruments, it added.
The government will deduct 5.0 per cent tax at source from interest of the saving instruments purchased from June 11, 1999 to December 31, 2003, the NBR directives said.
Currently, the following government approved savings instruments are on sale: 5-year Bangladesh Sanchaya Patra, 3-year Savings Certificate (interest paid on quarterly-basis) and 5-year Pensioners Sanchaya Patra (interest paid on quarterly-basis) bearing interest rates of 12 per cent, 11.50 per cent and 12.50 per cent respectively.
The government's recent decision on deduction of 10 per cent tax at source from savings instruments, interest earning has created confusion among small investors.
The National Board of Revenue (NBR) has been receiving a large number of queries from the people owning savings instruments.
Most of the investors have been seeking clarifications over the imposition of tax on income from the savings instruments, sources said.
The government imposed the 10 per cent tax, deductible at source, on annual income exceeding Tk 25,000 from savings instruments though the finance ordinance 2007.
It will deduct the tax at source on the interest of savings instruments generated on July 1, 2007 and beyond said an NBR order, dated July 10, addressing the Director of the National Saving Directorate.
The NBR has made it clear that the investors will not have to pay tax on interest income generated during the period from July 2004 to June 30, 2007.
There is a misconception among the investors as well as banks about payment of tax on their interest income received since 2004.
The government has introduced the measure to increase tax revenue earnings.
However, the move has created panic among the fixed income group, which is largely dependent on such income from savings instruments for their living.
Under the new tax measure, the investors having interest income worth less than Tk 25,000 annually will have to make a declaration to the savings instruments issuing departments that they have not purchased such instruments from any other institutions and that the total interest income from the same will not exceed Tk 25,000 annually.
However, the total interest income from such savings instruments will be subjected to tax deduction at a rate of 10 per cent if the investors or taxpayers concerned express their inability to make such declaration.
The investors do not have to pay further tax on the interest of the savings instruments, as the government will deduct it from the source, a NBR source said.
Earlier, taxpayers had to pay tax in higher ceiling due to inclusion of income of the savings instruments. But from now on, they will only pay 10 per cent tax on the income of savings instruments.
The existing income tax ceilings are 10 per cent, 15 per cent and 25 per cent for income starting from Tk 150,000 and above.
The NBR order has made it clear that an income taxpayer will not have to pay tax for the second time on interest income from savings instruments if they disclose it in their tax returns that tax has been deducted at source.
The taxpayers must mention the value of savings instruments in their individual tax returns, the NBR directives said.
They also have to mention in the tax returns the sources of income at the time of fresh investment in such instruments, it added.
The government will deduct 5.0 per cent tax at source from interest of the saving instruments purchased from June 11, 1999 to December 31, 2003, the NBR directives said.
Currently, the following government approved savings instruments are on sale: 5-year Bangladesh Sanchaya Patra, 3-year Savings Certificate (interest paid on quarterly-basis) and 5-year Pensioners Sanchaya Patra (interest paid on quarterly-basis) bearing interest rates of 12 per cent, 11.50 per cent and 12.50 per cent respectively.