Clarity sought on tax on interest of businesses

Finance Minister AMA Muhith has proposed amendment to the existing law to clarify provision regarding income tax on profit earned from other businesses by microcredit organisations other than microfinance.
Referring to Paragraph 1 of Schedule VI of the Income Tax Act, 1984, the minister said the provision lacks some clarity.
"Many microcredit organisations are running other businesses and the interest received from these businesses is not exempted from payment of taxes. The relevant provision of the law lacks some clarity on this. I propose to amend Paragraph 1 of Schedule VI of the Income Tax Act, 1984," he said in his budget speech.
Regarding a probable government decision on imposing 10 per cent tax on microcredit operation, the country's microfinance operators urged the government to review the decision on imposing tax on net income of microfinance institutions (MFIs). Recently they held meetings and seminars against the government move.
To appease them, Mr Muhith, in his budget speech, said microcredit organisations are not required to pay any taxes on their accrued interest income. This system will continue.
The National Board of Revenue (NBR) took a move in 2005 to impose 10 per cent tax, but later shelved the plan in the face of opposition from different quarters, including microfinance operators. There are 735 MFIs in the country now.
According to the Microcredit Regulatory Authority (MRA), the total outstanding loan is around Tk 248 billion and savings Tk 168 billion in the microfinance sector. The total clients of this sector number 35 million that accelerates overall economic development process of the country.
Contacted, Microcredit Regulatory Authority (MRA) director Sazzad Hossain told the FE that many MFIs run business activities under microcredit umbrella. This has to be sorted out. These activities are not charity at all, he pointed out.