Govt focuses on direct tax reforms

In the proposed budget for FY2025–26, the government has placed a strong emphasis on reforming the direct tax system to reduce inequality, boost domestic revenue, and ensure social justice.

Direct taxes — mainly income tax — are seen as a sustainable source of revenue that helps reduce reliance on foreign aid and loans.

The national budget of Tk7,89,999 for FY26 was announced by Finance Adviser Salehuddin Ahmed via a pre-recorded speech telecast today (2 June).

As Bangladesh prepares to graduate from the Least Developed Country (LDC) list to a middle-income country, it faces the challenge of losing trade benefits and concessional financing. 

In this context, the government says there is no alternative but to strengthen the income tax system to build a fair, equitable, and self-reliant economy.

To that end, a Medium- and Long-Term Revenue Strategy (MLTRS) has already been adopted, and tax services are being shifted to digital platforms. 

A new Tax Expenditure Policy and Management Framework has also been introduced to rationalise tax exemptions. 

Moving forward, indefinite tax breaks will be discouraged, and exemptions will require parliamentary approval.

Online tax filing gains traction 

Over 1.6 million individuals filed returns online this year after it was made mandatory for government employees in Dhaka, Narayanganj, Gazipur, as well as staff of banks and select companies. 

From next year, all individual taxpayers must file return online. The government also plans to introduce online return filing for corporate taxpayers soon.

In a move toward greater predictability, tax rates and surcharges have been fixed in advance for three fiscals — 2025–26, 2026–27, and 2027–28 — offering clarity to individuals and businesses alike.

To ease the burden on low- and middle-income earners, the tax-free income threshold will increase starting in the 2026–27 assessment year. 

For general taxpayers, it will rise from Tk350,000 to Tk375,000. Women and senior citizens will enjoy a threshold of Tk425,000, and persons with disabilities and third-gender taxpayers will have a Tk500,000 threshold. War-injured freedom fighters and those injured in the 2024 July Uprising will also receive higher thresholds of Tk525,000.

The tax slab structure has been adjusted accordingly. For example, income up to Tk375,000 will be tax-free, followed by progressive rates ranging from 10% to 30% based on income levels.

The minimum tax has been simplified. From the 2026–27 assessment year, any individual whose income exceeds the tax-free limit will pay a flat minimum tax of Tk5,000, regardless of where they live. However, to encourage tax compliance, new taxpayers will only need to pay a minimum of Tk1,000.