Govt levies 10pc tax on interest income from savings instruments
Thursday, 12 July 2007
FE Report
The government has levied 10 per cent tax, deductible at source, on annual interest income exceeding Tk 25,000 from saving instruments, official sources said.
The tax measure came into effect from July 1, 2007, the National Board of Revenue (NBR) said in an order, issued Tuesday.
The Bangladesh Bank (BB) communicated the order to the commercial banks Wednesday asking the chief executives of the banks to follow the new tax measure for paying interest on government approved savings certificates.
"We have issued a circular in accordance to the NBR's directive and asked the banks to properly follow the tax measures against savings instruments," a senior BB official told the FE Wednesday.
Under the new tax measure, the investors having earned an interest income less than Tk 25,000 annually will have to make a declaration to the sellers of the savings instruments 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 pensioners and fixed income groups are likely to suffer due to such tax measure," an official of a commercial bank told the FE, adding that the measure will help to increase government revenue earnings.
"Many might fed tempted to divert funds to the capital market through encashment of saving instruments," another bank official observed.
Currently, three government approved savings instruments are on sale.
The instruments are: 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.
Sources, however, said an income tax-payer would not have to pay tax for the second time on interest income from savings instruments if they disclose in thier tax returns that tax has been deducted at source.
"The taxpayers must mention the value of savings instruments in their individual tax returns," an NBR senior official told the FE, adding that the taxpayers have to mention in the tax returns the sources of income at the time of fresh investment in such instruments.
The government has levied 10 per cent tax, deductible at source, on annual interest income exceeding Tk 25,000 from saving instruments, official sources said.
The tax measure came into effect from July 1, 2007, the National Board of Revenue (NBR) said in an order, issued Tuesday.
The Bangladesh Bank (BB) communicated the order to the commercial banks Wednesday asking the chief executives of the banks to follow the new tax measure for paying interest on government approved savings certificates.
"We have issued a circular in accordance to the NBR's directive and asked the banks to properly follow the tax measures against savings instruments," a senior BB official told the FE Wednesday.
Under the new tax measure, the investors having earned an interest income less than Tk 25,000 annually will have to make a declaration to the sellers of the savings instruments 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 pensioners and fixed income groups are likely to suffer due to such tax measure," an official of a commercial bank told the FE, adding that the measure will help to increase government revenue earnings.
"Many might fed tempted to divert funds to the capital market through encashment of saving instruments," another bank official observed.
Currently, three government approved savings instruments are on sale.
The instruments are: 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.
Sources, however, said an income tax-payer would not have to pay tax for the second time on interest income from savings instruments if they disclose in thier tax returns that tax has been deducted at source.
"The taxpayers must mention the value of savings instruments in their individual tax returns," an NBR senior official told the FE, adding that the taxpayers have to mention in the tax returns the sources of income at the time of fresh investment in such instruments.