Source tax on bank deposit interests of companies doubles

The government has proposed to double the deduction at source from interests on bank deposits of companies from the next fiscal year with a view to thwarting any possible attempts to evade tax by keeping such savings unreported during returns submission.

The new budget for FY23 proposed raising the rate of source tax to 20% from the existing 10% from interests on savings deposits, fixed deposits or any term deposits maintained by company taxpayers with any banks or non-bank financial institutions interest.

"Deduction at source is regarded as the cornerstone of income tax collection.  The same is true for our country too. Therefore, rationalizing the rate of source tax carries immense importance in formulating revenue policy. In view of this, and in line with the existing corporate tax rate, I propose to raise the rate of source tax on bank interest for company taxpayers to 20% from that of 10%, and to raise the rate of source tax on export proceeds to 1% from that of 0.5%. Also, to support materializing our dream of building a digital Bangladesh, I propose to reduce the rate of source tax on the payments made to non-residents on account of bandwidth payment to 10% from 20%. With a view to discouraging making payments of bills to non-residents through illegal channels, except for certain services, I propose to reduce the rate of collecting source tax from the other non-schedular payments to be paid to non-residents from 30% to 20%. Also, to expand the scope for collecting source tax, I propose to impose 5% source tax on lease rent of waterbodies except for the ones owned by the government," the finance minister said during his budget speech.

The deduction will remain at 10% for individual depositors and public universities or educational institutions whose teachers are enlisted for monthly pay order, while the current 5% source tax will continue to be levied on recognised provident fund, approved gratuity fund, approved superannuation fund or pension fund.

Finance Minister AHM Mustafa Kamal has placed the Tk6,78,064 crore national budget for FY23 at Jatiya Sangsad according top priority to safeguarding marginal people from inflation fuelled by the Russia-Ukraine conflict.

This is the fourth budget of the third consecutive term of the government led by Prime Minister Sheikh Hasina and also the overall 51st budget of the country.

The proposed budget is Tk74,383 crore higher than the original budget size of the FY2021-22 fiscal year, which was Tk6,03,681 crore.