The Cash Debt Management Committee of the finance ministry has asked the National Board of Revenue to take steps to review the existing income tax rebate against investment in national savings certificates and rationalise the scheme.
The committee took the decision to reduce the cost of debt management and risks arising from increased debt burden due to higher sales of savings certificates.
As per income tax law, investment on national savings certificates (NSCs) is one of the major sources of getting income tax rebate up to 15 per cent of eligible amount of investment.
There was no ceiling of investment in NSCs for getting tax rebate.
Treasury and debt management wing of Finance Division on May 13 sent a letter to Internal Resources Division senior secretary Md Mosharraf Hossain Bhuiyan, also NBR chairman, informing the decision of the committee and requested him to inform implementation progress of the decision.
In the letter, TDM wing said that the committee took the decision in its 42th meeting on March 31.
According to the decision of the committee, income tax rebate against investment in savings tools would have to rationalised to reduce the cost and risk of government’s debt management.
The net sales of national savings certificates (NSCs) stood at Tk 39,733 crore in first nine months (July-March) of current fiscal year 19, up from Tk 36,709 crore in the same period of previous FY 18, according to the Department of National Savings data.
NSCs worth Tk 4,131 crore were sold in March alone.
Sale of savings tools was increasing in recent years due to higher interest rates for investment in savings certificates and declining rates of interest on bank deposits.
Various types of NSCs yield interest up to 11.76 per cent.
The situation has been increasing the debt burden of the government as its interest payment on the investment increased 23 per cent in July-March.
The government spent Tk 18,154 crore in interest payments in the period.
In such situation, the government was mulling to review the yield rates along with rationalising the tax rebate to restraint the sales of NSCs.
According to the Income Tax Ordinance-1984, an individual taxpayer can get income tax rebate at the rate ranging from 10 per cent to 15 per cent by making investment and donation on 23 sectors including investment in NSCs, deposit pension schemes in banks, in capital markets and paying premium for life insurance.
A taxpayer can claim the rebate on investment of up to 25 per cent of his or her total income excluding tax exempted income and reduced rate applicable income or Tk 1.50 crore, or actual investment, whichever is lower.
NBR offers tax rebate at the rate of 15 per cent if the eligible amount of investment remains below Tk 10 lakh and the rate of rebate become as low as 10 per cent and 12 per cent if eligible investment amount become higher than Tk 10 lakh.
Tax rebate reduces the tax liability of a taxpayer at the rate of rebate from his or her original payable tax amount.
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