Budget proposals bring relief for businesses, patients while expanding tax net

The proposed national budget includes a series of tax reforms aimed at reducing business costs, easing the burden on consumers and patients, and widening the tax net through measures.

Finance Minister Amir Khosru Mahmud Chowdhury today (11 June) unveiled a Tk9.38 lakh crore national budget for the fiscal year 2026-27 in parliament. 

Local cotton users' costs will decrease

One of the key proposals is to reduce the source tax on locally supplied cotton used for production. Currently, cotton suppliers pay a 1% source tax, which Khosru proposed to cut to 0.5%.

Industry insiders say the move could improve the competitiveness of local textile mills. However, the Bangladesh Textile Mills Association had sought a complete exemption from it.

Although current regulations allow businesses to adjust advance taxes against their final tax liabilities, many companies struggle to obtain refunds or adjustments due to lengthy and complex procedures. To address this, the proposed budget introduces a mechanism for refunding excess taxes.

Good news for kidney patients 

The government plans to withdraw the existing 5% advance income tax on imports of dialysis filters, a key medical consumable used in dialysis treatment. The measure could reduce the cost of each dialysis session by nearly Tk800, Khosru hoped.  

Healthcare experts say the initiative could give relief to patients who require regular dialysis. 

Tax cuts for persons with disabilities

The budget also proposes reducing advance income tax on imports of 15 categories of products and equipment used by persons with physical disabilities.

The tax rate is set to be cut by half, from the existing 2% to 1%, making assistive devices more affordable and accessible.

Gold buyers may benefit from lower taxes

Currently, the VAT on the sale of gold and gold jewellery is about Tk12,500 per bhori, which could drop to just Tk2,500.

In addition, advance income tax on the supply of gold jewellery is proposed to be slashed from 5% of the total value to 0.5%.

National Board of Revenue officials say the primary objective is to bring a large number of jewellery businesses into the formal tax system by lowering the tax burden. If global gold prices remain stable, the reduction in VAT and taxes could help to lower prices.

Refunds for excess tax deductions

Currently, individual taxpayers whose taxes are deducted at source often have no practical way of recovering excess deductions. Under the proposal, any excess tax identified after the annual assessment will be refunded to the taxpayers. 

A similar provision is being introduced for companies. At present, taxes deducted from annual sales are often treated as minimum tax liabilities, regardless of whether a company earns a profit or incurs losses. The proposed changes would allow companies to receive refunds if excess taxes cannot be adjusted against future profits within a specified timeframe.

Exporters to get tax relief

The source tax on cash incentives received by exporters is proposed to be reduced from 10% to 5%, a move aimed at easing pressure on export-oriented businesses amid challenging global trade conditions.

New tax on foreign loan interest

The budget proposes imposing a 10% tax on interest payments made against offshore or foreign-funded loans. Currently, such interest payments are exempt from tax. 

A previous attempt to impose a 20% tax faced strong opposition from authorities and was never implemented. 

Lower taxes on import of industrial raw materials

To support domestic manufacturing, the finance minister has proposed reducing advance income tax on imports of raw materials for industries producing goods for the local market as the rate would fall from 5% to 4%.

Tax rebates for 11 types of social welfare spending

The budget also introduces tax rebates for expenditures on 11 categories of charitable and public welfare activities which include healthcare, disability services, cancer treatment, autism support, diabetes care, thalassaemia programmes and broader social welfare initiatives.

NBR to gain access to banking, other databases

As part of efforts to strengthen tax compliance, institutions under the NBR will be granted access to data from banks and several other agencies.

The planned central data integration system will connect databases from banks, the National Identity system, utility service providers, sub-registry offices and other organisations.

NBR officials say the initiative is intended to improve monitoring of taxpayers' assets and financial transactions.

TIN mandatory for bank accounts

The budget also proposes making a taxpayer identification number mandatory for opening and operating most bank accounts to broaden the tax base and improve oversight of financial transactions.

Students, no-frills account holders, and individuals specifically exempted through government gazette notifications will remain exempt from the requirement.

Retailers face new withholding tax

Retailers purchasing goods from dealers, sub-dealers and commission agents must pay a withholding tax of 0.20% of the purchase value.

The tax will be collected by dealers and deposited into the government treasury. Businesses with TINs will be able to adjust the amount against their annual income tax liabilities.

However, tax experts warn that retailers may pass the additional cost on to consumers by incorporating it into product prices.

Recognition for top taxpayers

The proposed budget announced to honour 67 top taxpayers for their contribution to national revenue collection.