How much tax rebates you will get on investments

The government proposed changes in tax rebates that individual taxpayers enjoy on their investments in five sectors, and welfare spending in 17 pre-defined sectors.

Taxpayers having up to Tk15 lakh in annual taxable income are enjoying 15% rebate on their investments up to 25% of their annual taxable income, while the rebate is 10% for taxpayers whose taxable income is above Tk15 lakh in a year.

The finance minister has proposed to make the rebate 15% for all and reduce the allowable limit from 25% to 20%.

The ceiling of the investment considered for rebate is unchanged at Tk1 crore.

The proposed change is going to reduce the rebate for small taxpayers while the large taxpayers are going to enjoy more tax rebate on less investments.

For example, an individual showing Tk15 lakh in annual taxable income has been enjoying rebate up to Tk56,250 a year against his or her investments up to Tk3.75 lakh in listed scrips, open-end mutual funds, national savings certificates, life insurance premium, Treasury bonds or in deposit pension schemes by a bank or non-bank financial institution having an annual ceiling of Tk60,000.

If the Finance Bill is finally approved in the parliament, the National Board of Revenue (NBR) would consider up to Tk3 lakh investments in the selected sectors for 15% tax rebate and the same taxpayer would enjoy up to Tk45,000 in tax rebate.

The small taxpayers' tax burden is set to increase by Tk11,250, while inflation is making their lives tougher and the government left the limit for tax-free annual income unchanged.

Rich taxpayers on the other hand, would be entitled to more tax rebate on even lower investments.

Investments for tax rebates is going to reduce from the small taxpayers, while it is also likely to drop from rich taxpayers unless a large number of them freshly opt for the increased rebate.

For not increasing tax burden on the middle-class taxpayers and encouraging large taxpayers to invest more, I would request the government to keep the 25% limit in investments allowed for tax rebate unchanged. 

Md Abdul Kader Nabil is the senior manager at LankaBangla Securities and member at Dhaka Taxes Bar Association