Small savers won\\\'t get tax exemption on interest

Doulot Akter Mala | Published: February 24, 2015 00:00:00 | Updated: November 30, 2024 06:01:00

The government has backtracked on its move to exempt small savers having bank balance below Tk 0.5 million from paying tax as the National Board of Revenue (NBR) has estimated a considerable amount of revenue loss.
The NBR has estimated that income tax wing will count a loss of nearly Tk 5.73 billion in terms of revenue collection if the government exempts small depositors from paying tax at source on interest.
Currently, all bank depositors, including small savers, having Taxpayer's Identification Number (TIN), have to pay 10 per cent tax at source on their profits they earn from bank deposits.
In case of not having TINs, the bank depositors have to pay an additional 5.0 per cent tax at source. But bank depositors who have deposits below Tk 0.1 million don't need to pay additional 5.0 per cent tax on their interest.
However, the paid tax is adjustable with the actual payable tax at the time of submission of annual tax returns.
The issue came up for review of the tax authority after Finance Minister AMA Muhith in November last sought opinion of the NBR on the impact of exemption from payment of 10 per cent advance income tax (AIT) to savings accountholders having deposits below the ceiling of Tk 0.5 million.
In its review, the NBR found 90 per cent of the savings accountholders have deposits below Tk 0.5 million as large depositors usually prefer Fixed Deposit Receipt (FDR).
The board sent a summary on AIT to the finance minister. In the summary, signed by NBR chairman Nojibur Rahman, the NBR feared that the tax burden might be shifted to other sector to cope with the loss of revenue if the exemption is offered.
Officials said the finance minister recently approved the summary, dated February 17, by giving his consent to the review of NBR.
The NBR collected about Tk 51.20 billion as AIT in the fiscal year (FY) 2013-14 from interest of different bank deposits. Of the amount, around Tk 6.14 billion was collected only from savings accountholders.
The income tax wing also collected data from Islami Bank Bangladesh Ltd in FY 2013-14. Ismali Bank has over 4.84 million savings accountholders. Of them, some 1.93 million have balance above Tk 0.5 million while over 4.65 million have below the said amount.
The NBR received Tk 3.72 billion as AIT from bank depositors having balance below Tk 0.5 million while Tk 260 million from the large ones.
"Many bank depositors may take the advantage of exemption limit by spreading their deposits in different banks to evade tax. The strategy would cause loss of revenue," the NBR said in the summary.
Currently, the tax-free threshold is Tk 0.22 million for individual taxpayers. The NBR believes that a person who has deposit of Tk 0.5 million must have taxable income as he is capable of saving the amount after annual expenditures, the statement said.
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