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NSC sales dip by 57pc in July due to higher tax

Staff Correspondent | Published: 00:00, Sep 03,2019

 
 

The net sales of national savings certificates fell by 57.10 per cent or Tk 2,875.57 crore in July, the first month of the current fiscal year (2019-2020), compared with that in the same month in last fiscal year (2018-19) due to an increase in tax on income from the investment in the instruments.

In July this year, the government sold NSCs worth Tk 6,091.33 crore against repayment of Tk 3,931.15 crore, taking the net sales of the government’s borrowing tools to Tk 2,160.17 crore against Tk 5,034.74 crore in the same month last year, according to a report of Department of National Savings.

Due to the fall in NSC sales and to meet the expenditure, the government borrowed Tk 26,248.52 crore from the banking system in just 51 days of the current fiscal year.

The government’s net borrowing from the banking system in the first 51 days of the current fiscal year (2019-2020) almost touched its net borrowing from the source in the entire last fiscal year (2018-2019).

Banks officials said that the increase in tax on interest income from investment on savings instruments might be the reason for the fall in NSC sales in July.

In the Finance Bill-2019, the government 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.

Taking the low earning peoples’ dependency on income from NSCs into consideration, the government has slashed the tax at source on interest income from investment on NSC worth up to Tk 5 lakh to 5 per cent from 10 per cent with an effect from August 28.

Although the bankers have been pressing for reducing the interest rates on NSCs for the implementation of single digit interest rates in the banks, the government kept its position unchanged even in this fiscal year.

Besides the issue of increased tax, online sales of NSCs became another discouraging factor for the high net worth individuals in purchasing the investment tools in an apprehension of facing punitive measures, officials said.

The central bank has already cautioned the high net worth individual along with entities in purchasing NSCs beyond the allowable limit, resulting in a sharp fall in NSCs sales.

In FY19, the government’s net sales of savings certificates reached Tk 49,939.48 crore against the net sales of Tk 46,530.30 crore in FY18.

The government is giving interest at the rates between 11.04 per cent and 11.76 per cent against the NSCs.

In the budget for FY20, the revenue collection target was set at Tk 3,77,810 crore, leaving deficit at Tk 1,45,380 crore.

For deficit financing, the government has planned to borrow Tk 63,848 crore from overseas sources and the rest Tk 77,363 crore from domestic sources mainly from banks and saving certificates.

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