Source tax to be applied on mutual fund term deposit gains

The Bangladesh Bank (BB) issued instructions on Sunday for banks to adhere to the latest Income Tax Act-2023 which mandates the deduction of source tax from profits on term deposits of mutual funds.
The Banking Regulation and Policy Department (BRPD) of the central bank issued a circular in this regard responding to a letter from the National Board of Revenue (NBR) on August 01, 2023.
Speaking on condition of anonymity, a BB official said that the revenue board referred to section 102 of the Income Tax Act-2023, stipulating the mandatory imposition of source tax on profits derived from term deposits of mutual funds.
"That's why the BB issued the circular asking the banks to follow the laws," the official said.
Contacted, VIPB Asset Management's Chief Executive Officer Shahidul Islam said that mutual funds are not subject to taxation and are fully exempt from any form of taxation.
He said taxes are already deducted when a fund manager disburses dividends to unit holders.
"Thus, imposing source tax on profits from term deposits of mutual funds is yet another instance of treating the same income for multiple taxations.
"I think the NBR's move is not logical and certainly it will have a negative impact on the industry. It should be withdrawn," he added.
According to the Bangladesh Securities and Exchange Commission (BSEC), there are a total of 124 mutual funds under the management of 62 asset management companies in the country.
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