Bangladesh Bank on Wednesday asked all scheduled banks operating in the country to take necessary steps on deduction of source tax at the rate of 5 per cent on interest income from investment on savings instruments worth up to Tk 5 lakh with effect from August 28.
The National Board of Revenue on August 28 issued a gazette notification slashing the tax from 10 per cent imposed in the budget for the current fiscal year 2019-2020.
Though the gazette notification did not mention any date about the effectiveness of the reduced tax rate, income tax wing on September 2, in a letter to National Savings Directorate, said that the tax rate became effective from the date of issuance of the SRO.
The central bank, in an instruction to managing directors and chief executive officers of all scheduled banks in the country, informed the decision of the revenue board and asked them to take measures in line with the decision of the NBR.
According to the NBR gazette notification, 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.
NBR chairman MD Mosharraf Hossain Bhuiyan initially announced 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 NBR fixed the effective date as August 28 as the tax on savings instruments was considered as final settlement and there was no scope for adjustment.
There will be no tax 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.
The tax rate will be 10 per cent if the investment in the sector exceeds Tk 5 lakh, it said.
Investment on pensioners’ savings certificates up to Tk 5 lakh has been enjoying tax exemption over the last few years.
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