The National Board of Revenue has issued a statutory regulatory order, slashing the tax at source on interest income from investment on savings instruments worth up to Tk 5 lakh to 5 per cent from 10 per cent with an effect from August 28.
The revenue board on Wednesday published a gazette notification in this connection. The NBR issued the SRO as per a finance ministry decision.
The reduced rate of source tax came into force from the date of gazette notification though NBR chairman MD Mosharraf Hossain Bhuiyan earlier on August 1 declared that the benefit would be effective from July 1 and investors would be able to adjust or get refund the additional tax deducted at 10 per cent since July 1.
Income tax officials said that as per income tax law source tax on savings instruments was considered as final settlement and there was no scope for adjustment.
Investors, however, expressed their dissatisfaction over the delay in gazette notification as by that time many investors paid the tax at 10 per cent while realising profits against their investments in savings tools.
Earlier on July 29, finance minister AHM Mustafa Kamal announced the decision of reducing the tax following demand from investors, particularly from small-scale investors. The issue was also discussed in parliament.
In the Finance Bill-2019, the government had increased the tax at source on savings tools by two fold to 10 per cent, irrespective of investment ceiling, to make it consistent with the bank interest rate.
Following widespread demands from the small savers, the NBR was forced to cut the tax rate for small investors up to the ceiling.
According to the SRO, small investors whose investment will not exceed Tk 5 lakh will enjoy the reduced rate of source tax on income from investment irrespective of the time of making investment.
The benefit will not be applicable if investment exceeds Tk 5 lakh and, in case of that, 10 per cent tax will be applicable to the total investment.
There will be no tax imposed on income or interest from pensioners’ savings certificates and wage earners development bonds if the total accumulated investment at the end of the relevant income year in such certificates and bonds does not exceed Tk 5 lakh, according to the SRO.
Investment on pensioners’ savings certificates up to Tk 5 lakh has been enjoying tax exemption over the last few years.
Currently, interest rate against bank deposits ranges from 6.5 to 11.0 per cent while investors of the savings certificates get returns up to 11.04 to 11.76 per cent.
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