Top bankers seek investment ceiling on govt securities lifted, capital gains on T-bills waived

The Association of Bankers Bangladesh Limited (ABB) has proposed a series of tax relief measures and policy reforms, including removing the investment cap on government securities for individuals and exempting capital gains from treasury bills and bonds.

In its pre-budget recommendations for the 2026-27 fiscal year, the association presented a 14-point proposal to the National Board of Revenue (NBR) during a meeting in Dhaka today (1 April).

The pre-budget discussion was attended by NBR Chairman Md Abdur Rahman Khan and senior officials of the revenue authority.

ABB Chairman and Managing Director of City Bank Mashrur Arefin urged authorities to introduce measures aimed at strengthening the financial sector and encouraging investment.

Among its key proposals, the ABB called for the withdrawal of the existing Tk5,00,000 ceiling on individual investment in government securities for tax rebate purposes, arguing that the restriction limits investors from fully utilising available tax benefits and discourages participation in a traditionally safe investment segment.

The association noted that instruments such as treasury bills, bonds, savings certificates, debt securities and Shariah-based sukuk remain highly attractive to investors, but the cap has reduced incentives, adversely affecting government cash flow.

The ABB also proposed that capital gains earned from treasury bills and bonds be made tax-free, instead of being taxed at the current rate of 15%. It argued that such a move would help develop a vibrant bond market and attract foreign investors, thereby supporting foreign exchange reserves.

In addition, the bankers' body recommended recognising provisions against non-performing loans as allowable expenses for tax purposes, reducing corporate tax rates to 30% or below, and removing limits on corporate social responsibility (CSR) expenditure.

Under current rules, CSR spending is capped at 10% of total income or Tk8 crore, whichever is lower, with only 10% tax rebate. The ABB suggested treating such expenditure as fully tax-deductible and lifting the ceiling altogether, stating that increased CSR spending would contribute to broader socio-economic development, including in education, healthcare, disaster management and environmental protection.

The association further called for the withdrawal of the requirement to submit proof of submission of income tax return for accessing banking services such as loans and fixed deposits, and reinstating the previous system of electronic Taxpayer Identification Number (e-TIN) submission.

At present, individuals without taxable income must submit proof of submission of income tax return to obtain loans exceeding Tk20 lakh or to open and maintain fixed deposits above Tk10 lakh.

The ABB argued that this requirement has negatively affected retail and CMSME (cottage, micro, small and medium enterprise) clients, pushing many towards informal lenders due to fewer documentation requirements.

It warned that such a trend could drive CMSMEs outside the tax net, whereas facilitating easier access to formal banking could boost future tax revenues, including income tax, VAT and excise duties, while also generating employment.

'Super tax' on stock dividends

The ABB also sought the withdrawal of the 10% "super tax" on stock dividends and retained earnings transfers by listed companies. Currently, companies face additional tax if stock dividends exceed cash dividends or if retained earnings transferred exceed 70% of post-tax net income.

The association argued that such taxes hinder banks' ability to strengthen their capital base, noting that scheduled banks are required to maintain a minimum capital adequacy ratio of 12.5% of risk-weighted assets.

The ABB also urged the NBR to allow provisions against classified and unclassified loans to be treated as tax-deductible expenses, recalling that such provisions were recognised as allowable expenses under earlier tax regulations before the 2006-07 fiscal year.