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Bangladesh has introduced sweeping reforms to the taxation of government savings certificates (Sanchayapatra), allowing investors to claim refunds if excess tax is deducted from their profits while also rewarding taxpayers who file their income tax returns early.
The changes, brought under the Finance Act 2026, mark a significant shift in the country’s tax administration by making the system more transparent, equitable and taxpayer-friendly.
Under the previous system, a 10 per cent withholding tax deducted from profits earned on savings certificates was treated as the investor’s final tax liability. As a result, taxpayers could neither adjust the deducted amount against their actual tax liability nor claim a refund if they had overpaid.
From the 2026-27 fiscal year, however, the 10 per cent deduction will be treated as an advance tax payment. At the end of the tax year, the deducted amount will be adjusted against the taxpayer’s actual income tax liability.
If the tax deducted exceeds the amount payable based on the taxpayer’s total taxable income, the excess will either be refunded or adjusted against other tax obligations.
The reform is expected to particularly benefit taxpayers whose annual income falls below the tax-free threshold or whose effective tax rate is less than 10 per cent.
Tax expert Snehasish Barua said the withholding tax rate itself has not changed.
“The tax deducted at source remains 10 per cent. The only difference is that it will no longer be treated as the final tax. Instead, it will be considered advance tax, allowing eligible taxpayers to receive adjustments or refunds,” he explained.
Taxpayers whose effective tax rate exceeds 10 per cent will also benefit, as the deducted amount can now be adjusted against their total tax liability, with only the remaining balance payable at the time of filing annual returns.
According to Jafar Imam, First Secretary (Tax Information Management and Assessment) at the National Board of Revenue (NBR), the refund process will be fully digital.
When taxpayers submit their income tax returns online, the system will automatically determine whether they qualify for a refund. Eligible taxpayers will then complete an online refund application by providing their bank account details.
Following verification, the refund will be deposited directly into the taxpayer’s bank account within 120 days.
Officials say the paperless and faceless system will eliminate unnecessary interaction with tax officials, improve transparency and strengthen public confidence in tax administration.
For example, if an individual owns savings certificates worth Tk 5 million and earns Tk 500,000 in annual profit, Tk 50,000 will be deducted as withholding tax.
If the taxpayer’s final tax liability, calculated after applying the applicable tax slabs, is Tk 40,000, the remaining Tk 10,000 will either be refunded or adjusted against other tax dues. Under the previous system, this excess amount could not be recovered.
The Finance Act 2026 also introduces financial incentives for early submission of income tax returns.
Individuals filing returns between July 1 and September 30 will receive a 5 per cent discount on their payable tax, subject to a maximum benefit of Tk 25,000.
Returns submitted between October 1 and December 31 will neither receive a discount nor incur any penalty.
Late filing will attract penalties:
January 1-March 31: 2 per cent of payable tax, up to Tk 3,000.
April 1-June 30: 5 per cent of payable tax, up to Tk 5,000.
For instance, if a taxpayer earns Tk 450,000 annually, only Tk 50,000 will be taxable under the new tax-free threshold of Tk 400,000. If the tax payable is Tk 10,000, filing the return by September 30 will reduce the final tax bill to Tk 9,500 through the 5 per cent discount.
The government has also retained incentives for first-time taxpayers.
Individuals filing income tax returns for the first time will pay a minimum tax of Tk 1,000, while the minimum tax for other taxpayers will remain Tk 5,000.
The annual tax-free income threshold has been raised from Tk 350,000 to Tk 400,000.
Under the revised tax structure:
First Tk 400,000: Tax-free
Next Tk 300,000: 10%
Next Tk 400,000: 15%
Next Tk 500,000: 20%
Next Tk 2 million: 25%
Income above Tk 3.6 million: 30%
The reforms are aimed at aligning withholding taxes with actual tax liabilities, simplifying tax compliance and encouraging voluntary and timely tax return submissions through digital services and financial incentives.