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Published : 29 May 2025, 03:30 AM
As inflation bites hard on limited-income groups, the interim government plans to offer a small break by increasing the tax exemption limit, while the National Board of Revenue (NBR) pushes for higher tax rates that may cancel out the benefit.
Senior officials at the revenue board say they have received the government’s consent to increase the tax-free income limit for individual taxpayers by Tk 25,000 to Tk 375,000 in the next fiscal year.
Alongside this, the base tax rate is set to jump from 5 percent to 10 percent.
With the policy-level green light already in place, the NBR is now including this in the draft budget for final government review, said a senior official from the tax authority.
The move has drawn mixed reactions from taxpayers, particularly those in the middle-income bracket, who fear added financial pressure.
In addition to the changes in tax slabs, the NBR is also planning a small relief for new taxpayers. Under the new structure, first-time filers crossing the tax-free threshold may be required to pay as little as Tk 1,000 in tax.
The combined proposal to both raise the exemption limit and double the base tax rate, however, has not gone down well with some salaried professionals.
Private bank official Noor-e-Alam Nishan questioned the rationale behind the changes, saying they would “hurt” low to mid-level earners.
“What’s the point of raising the exemption by Tk 25,000 if the tax rate doubles?” he asked. “It’s unfair for people like us in the lower-middle income bracket.
“This year, if I get a 6–7 percent increment, I’ll fall into the taxable slab. If tax increases from that increment, it becomes a burden. A big burden.”
Former lead economist of the World Bank’s Dhaka office Zahid Hussain, however, described the new structure as an “improvement” over the current one.
“In comparison to the current system, the raised exemption followed by a higher tax rate appears better,” he said.
The economist added that any revenue loss from higher exemption would naturally have to be offset by increased direct tax collection.
On whether the government could have instead increased the tax burden only on higher income groups, he said: “That was certainly an option. But a line had to be drawn somewhere.
“And even in this structure, higher-income groups will bear more burden, because they too will pay more across the slabs.”
WHAT CHANGES ARE COMING?
Currently, the tax-free income limit for ordinary individual taxpayers is Tk 375,000.
Income between Tk 375,000 and Tk 475,000 is taxed at 5 per cent.
Under the new tax structure, the tax-free limit will rise to Tk 375,000, but the next slab’s rate will jump to 10 per cent.
This means someone earning Tk 450,000 a year will now pay 10 per cent tax on Tk 75,000.
To illustrate how this raises the tax burden for middle-income earners: if a person earns Tk 675,000 annually, one-third of this income remains tax-free.
The remaining Tk 450,000 is taxable.
Under the current system, tax on the Tk 100,000 between Tk 375,000 and Tk 475,000 would be Tk 5,000 at 5 per cent.
If the new budget proposal passes, the tax on the Tk 75,000 above Tk 375,000 will be Tk 7,500 at 10 per cent--an increase of Tk 2,500 in tax.
This income range typically represents the middle-income bracket.
Discussions on the new budget also include a proposal to raise the top tax rate to 30 percent for high-income earners.
WHAT’S IN PLACE, WHAT’S BEING REVISED
As it stands, general taxpayers are exempt from paying income tax on earnings up to Tk 350,000.
For female taxpayers, the threshold is Tk 400,000; for people with disabilities, Tk 475,000; and for gazetted freedom fighters, Tk 500,000.
According to the existing tax slabs:
• Income from Tk 350,001 to Tk 450,000 is taxed at 5 percent
• The next Tk 400,000 (up to Tk 850,000) is taxed at 10 percent
• The following Tk 500,000 (up to Tk 1.35 million) at 15 percent
• The next Tk 500,000 (up to Tk 1.85 million) at 20 percent
• The remaining amount is taxed at 25 percent
Under the new proposal:
• Tax-free income would be raised to Tk 375,000
• The next Tk 310,000 (up to Tk 685,000) would be taxed at 10 percent
• The next Tk 400,000 (up to Tk 1.08 million) at 15 percent
• The following Tk 500,000 (up to Tk 1.58 million) at 20 percent
• The next Tk 2 million (up to Tk 3.58 million) at 25 percent
The Income above that could be taxed at 30 percent, according to budget discussions.
RELIEF FOR NEW TAXPAYERS
The budget proposal also includes some relief for new taxpayers.
If their income crosses the tax-free threshold, they may pay a minimum of just Tk 1,000 in income tax.
The government is considering this step to bring more people under the tax net.
Currently, anyone earning just above Tk 350,000 must pay at least Tk 3,000–5,000 depending on where they live.
The new structure proposes that if a taxpayer earns Tk 380,000 annually, the taxable income above the exemption limit is Tk 5,000.
At 10 percent, that equates to only Tk 500 --but the minimum payable would be Tk 1,000.
If the income exceeds Tk 385,000, the person would pay 10 percent only on the excess amount beyond the tax-free limit.
