The finance minister on Thursday proposed an increase in the tax-free income limit for individual taxpayers, after five years, to Tk 3 lakh from the existing Tk 2.5 lakh giving relief to marginal taxpayers.
In his 2020–21 budget proposals, AHM Mustafa Kamal also proposed to cut both the minimum and maximum income tax rates to 5 per cent and 25 per cent respectively from the current 10 per cent and 30 per cent to give relief to both the rich and the low-income people.
Kamal also announced a number of steps, including making the submission of income tax returns mandatory for all those having the taxpayer identification number (TIN), with few exceptions, in a bid to expand the income tax net and enhance compliance.
There was also a proposal to raise the tax-free income threshold for women and senior citizens, physically challenged people, gazetted war-wounded freedom fighters to Tk 3.50 lakh, 4.50 lakh and Tk 4.75 lakh respectively from the current Tk 3 lakh, Tk 4 lakh and Tk 4.25 lakh.
The tax-free income limit was last increased in the FY2016.
A proposal offered a tax rebate of Tk 2,000 for the submission of income tax returns online for the first time to in order to promote the automation of the taxation system.
Kamal said that the tax-free income threshold, tax rates and tax slabs for individual taxpayers had remained unchanged since the FY2016 which created a feeling of discomfort among taxpayers while there was loss of real income due to inflation.
Taxpayers have also been financially affected due to the global outbreak of the COVID-19 pandemic.
‘Considering these factors, and also as a gift in the ‘Mujib Borsho’, I propose to increase the tax-free income threshold and reduce the tax rates,’ he said.
It will also encourage people to pay taxes regularly, he hoped.
According to the rearranged income and tax slabs, taxpayers will enjoy tax exemption on income of the first Tk 3 lakh and a 5 per cent tax will be applicable on the next Tk 1 lakh income.
The rate of income tax will go up progressively to 10 per cent on the next Tk 3 lakh income, 15 per cent on the next Tk 4 lakh, 20 per cent on the next Tk 5 lakh income and 25 per cent on the balance of the total income.
Currently, a 10 per cent tax is applicable on the income of Tk 4 lakh after the tax-exemption limit of Tk 2.5 lakh.
The proposed Finance Bill-2020 seeks to make the submission of income tax returns mandatory for all TIN holders, except for those who requires obtaining TINs for selling land and getting credit card but do not have taxable income.
Kamal said that around 50 per cent of the TIN holders could now easily afford not to submit tax returns due to lax in the existing provisions of the law.
The mandatory tax return submission will seal the scope for tax evasion and significantly increase the number of returns filers, he said.
In the current FY2020, only 22 lakh of some 50 lakh TIN holders filed income tax returns, according to NBR data.
The bill also proposed to introduce a new one-page-return-form for the marginal taxpayers.
Want stories like this in your inbox?
Sign up to exclusive daily email
More Stories from Country