The National Board of Revenue has asked banks and non-bank financial institutions to properly deduct source tax on interest income derived from various types of deposit and savings schemes following the provisions of the income tax law.
Income Tax Zone-1, Dhaka on January 8 issued a letter to the managing directors and chief executive officers of all the banks and NBFIs to clarify the provisions of the Income Tax Ordinance-1984 on deduction of source tax on interest income derived from deposits and savings instruments including national savings certificates.
Tax should be deducted every time the interest is disbursed to depositors or the interest is credited to their accounts instead of deducting the tax while crediting the interest finally on maturity, it said.
Officials said that the zone had issued the letter to remove confusion of banks and NBFIs regarding deduction of source tax from the sectors as the tax office had been receiving many queries from the institutions on applicability of the tax, method and time of deduction from the sectors.
There is nothing new in the letter and the issues are clearly mentioned in Section 53F of the ordinance, they said.
According to the letter, 10 per cent source tax will be applicable on interest from deposits if the depositor has a 12-digit taxpayers’ identification number. The tax rate for depositors with no TINs will be 15 per cent.
The tax rate on interest income from deposits of tax exempted funds such as pension fund, gratuity fund and provident fund will be 5 per cent.
The rate of deduction will be 10 per cent for interest on call money deposit and deposits received from foreign sources or in foreign currency.
The letter also requested the managing directors and CEOs to instruct the officials concerned to deposit the deducted tax to the government exchequer on time.
The Bangladesh Bank on Thursday also instructed all commercial banks to follow the instructions of the tax office.
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