Govt clears FY26 budget, drops black money amnesty, keeps export support

The government yesterday approved the national budget for the upcoming fiscal 2025-26, ending the scope for legalising black money but continuing cash incentives for exports for another six months.

Despite withdrawing facilities that allowed undeclared money to be invested in the housing sector, the budget lowers the registration tax for flat and land transfers by nearly half.

Tax, VAT, and customs duty have been cut in several sectors, including reducing corporate tax from 15% to 10% for private universities, medical and dental colleges, the finance ministry confirmed at a press briefing following the Advisory Council's approval of the budget.

The government has also raised special allowances for public employees and pensioners, including armed forces personnel, judges, and MPO-listed teachers. This has increased the proposed allocation for social safety nets by an additional Tk10,000 crore.

The total size of the budget, however, remains unchanged at Tk7.9 lakh crore, with no revisions to revenue or deficit financing targets.

Finance Adviser Salehuddin Ahmed said, "Our biggest decision is to fully end the provision for legalising black money. We've withdrawn it entirely. While the real estate sector expressed concern, this move aligns with our commitment to transparency."

He added that a fivefold penalty had been proposed earlier for investing undisclosed funds in real estate, which the previous administration had allowed at low penalties.

NBR Chairman Abdur Rahman Khan clarified that the only remaining avenue for disclosing undeclared income is to pay 30% income tax plus a 10% penalty, as per current law.

$2.3b budgetary support in June

The finance adviser announced that $2.3 billion in budgetary support is expected this June from development partners, including Asian Development Bank ($900m), World Bank ($500m), Opec Fund ($110m), Japan International Cooperation Agency ($414m), and Asian Infrastructure Investment Bank ($400m).

An additional $5.1 billion in project support is also in the pipeline. "If these institutions had no confidence in us, they wouldn't provide this support," he said. "Still, we aim to reduce debt dependence and ensure value for money."

As parliament is inactive, the finance ministry received over 400 online opinions on the proposed budget. Most suggested expanding benefits for government employees and social safety.

On export subsidies, Salehuddin noted that as per WTO rules, LDC graduation requires phasing out incentives by 2029. Bangladesh has already halved rates in two phases and was due to make a third cut in July. However, that has been deferred to January 2026.

Finance Secretary Khairuzzaman Mozumder said the delay was due to trade disruptions in recent months and ongoing discussions with the United States over trade imbalances.

Salehuddin admitted that budget formulation was difficult under current conditions. "Many institutions are weak. We've faced criticism for sticking to a traditional approach. But remember, old roads often become highways – dirt tracks don't."

He argued that not all taxes and VAT could be slashed. "If we cut taxes in one area, we must increase them elsewhere. Our tax-to-GDP ratio is only 7.5%, even lower than Nepal's. We aim to raise it by 0.5% this year."

Tax, VAT, customs changes

According to NBR Chairman Abdur Rahman Khan, the tax rate has been cut from 15% to 10% for private universities, private medical and dental colleges, and IT-focused private engineering institutions.

Adviser Salehuddin dismissed claims that this tax causes tuition fee hikes, stating it applies only to surplus funds – not on student fees – and should be used to improve education and research.

To reduce registration costs, flat registration taxes have been cut. In prime areas, the rate dropped from 8% to 5%; in mid-tier areas, from 6% to 3%; and in others, from 4% to 2%.

For publicly listed companies, if at least 10% of paid-up capital is transferred via IPO or direct listing, and all income transactions are done through banks, the corporate tax rate will be 20%. Otherwise, it ranges from 25% to 27.5%.

Advance tax on refined petroleum imports has been reduced from 7.5% to 2%. VAT exemptions have been granted for recycled cotton from garment waste, pen ink, heart rings, and eye lenses.

On customs duties, the government will now assess petroleum product imports based on invoice value rather than tariff value. Crude oil import duties have been cut from 5% to 3%, and refined oil duties from 10% to 6%.

Import duties on solar inverters have been reduced from 10% to 1%, and for technically specified natural rubber (used in tyre manufacturing) from 10% to 5%.

Ten more medical instruments used in private hospitals and clinics will receive import duty waivers, making healthcare more accessible, according to the NBR chief.

Finance Secretary Mozumder said the new budget is smaller than the previous year's – a deliberate move to curb wasteful spending and de-prioritise politically driven projects. He also projected that inflation would fall to around 6% next year, allowing for a more expansionary budget if necessary.