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The government has raised the tax-free income threshold for individual taxpayers to Tk 400,000 for the next tax year, providing additional relief to millions of salaried and middle-income earners amid rising living costs.
The decision was approved through the Finance Bill, 2026, passed by the Jatiya Sangsad on Monday, revising the government’s original budget proposal that had kept the tax-exempt income limit at Tk 375,000.
Under the new provision, individuals with annual taxable income of up to Tk 400,000 during the 2026-27 tax year will not be required to pay income tax.
The revision came after Prime Minister Tarique Rahman proposed the change while participating in the budget discussion in Parliament, urging the government to ease the tax burden on ordinary citizens.
Responding to the prime minister’s recommendation, Finance Minister Amir Khasru Mahmud Chowdhury incorporated the revised proposal into the Finance Bill before it was passed by voice vote.
The government has also announced a phased plan to further increase the tax-free income threshold over the coming years. Under the revised roadmap, the exemption limit will remain at Tk 400,000 for the 2027-28 tax year, rise to Tk 450,000 for the 2028-29 and 2029-30 tax years, and increase to Tk 500,000 for the 2030-31 tax year.
The original budget had proposed a lower trajectory, with the threshold set at Tk 375,000 for FY2026-27, Tk 400,000 for the following two fiscal years and Tk 450,000 thereafter.
The increase in the tax-free income ceiling is expected to reduce the tax burden on low- and middle-income earners, particularly salaried employees facing higher household expenses due to inflation.
Tax analysts say the higher exemption limit will leave more disposable income in the hands of taxpayers, potentially supporting consumer spending while making the income tax system more equitable.
The revision was among several changes made to the proposed national budget following recommendations from the prime minister and feedback from lawmakers, businesses and other stakeholders.
Other key amendments included the withdrawal of the proposed investment disclosure provision, reducing the income tax rate for private universities from 10 percent to 5 percent, expanding tax benefits for indigenous communities, and introducing a range of duty and VAT concessions to support industries, exports and digital businesses.