FBCCI to call for rise in tax free income limit to Tk4.5 Lakh 

The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), the country's apex trade body, will be advocating for an increase in the tax-free income limit by Tk1 lakh to Tk4.5 lakh in a meeting with the National Board of Revenue (NBR) on Thursday (4 April).

The body is also likely to propose an increase in the tax-free threshold for women and senior citizens to Tk5 lakh, as the nation is experiencing high inflation.

The trade body is going to submit the proposal during a consultative committee meeting with NBR, where Finance Minister Abul Hassan Mahmood Ali will also be present. The meeting, set to take place at a hotel in the capital, will host the country's top business leaders.

"We [FBCCI] will propose an increase in the tax-free income limit by Tk1 lakh due to the significant inflationary pressures experienced by taxpayers over the last two years," a top FBCCI official told The Business Standard.

A team from the International Monetary Fund (IMF) has also advocated for increasing the tax-free income limit by Tk1.5 lakh to Tk5 lakh in a meeting with the NBR on 14 March. The global lending agency also suggested shrinking tax exemption facilities that individual taxpayers enjoy and restructuring the tax rates.

The current tax-free income limit stands at Tk3.5 lakhs. In the fiscal year 2023-24, the government had raised the tax-free income limit by Tk50,000 from Tk3 lakh.

Income tax rates currently stand at 5 percent for the next Tk1 lakh, 10 percent for the subsequent Tk3 lakh, 15 percent for the next Tk4 lakh, 20 percent for the following Tk5 lakh, and 25 percent for the remainder of the income.

Two changes were introduced in the 2020-21 fiscal - the reduction of the tax rate for taxpayers in the highest slab and lowest slabs. 

Currently, there are over one crore TIN holders in the country, of which 37 lakh filed returns last year.

Experts have also opined that the tax free income limit should be increased, emphasising the need to adjust thresholds to reflect the eroding purchasing power of citizens due to continuous inflation. 

Dr Syed Md Aminul Karim, former NBR member of income tax policy, told The Business Standard, "The real income of people has decreased due to persisting high inflation. Therefore, the tax-free income limit should be increased to at least Tk4 lakh."

Pointing out that taxpayers with high income should pay taxes at a higher rate, he said, "During our time, the maximum slab was 30 percent. But in the year of Covid [2020] it was reduced to 25 percent. It should not have been done. It should be reverted back to the previous rate."

A copy of FBCCI's written proposal has been obtained by The Business Standard. 

The proposal includes the withdrawal of existing source tax on essential commodities to alleviate the burden on low-income individuals amidst the current inflationary environment.

At present, there is a provision of 2 percent source tax deduction on supply of rice, wheat, potato, onion, garlic, gram, pulses, turmeric, pepper, maize, flour, flour, salt, edible oil, sugar, and all kinds of fruits.

Additionally, FBCCI may suggest easing conditions for obtaining Proof of Submission of Return (PSR) for service providers and increasing the limit of transactions outside the banking channel from Tk50,000 to Tk5 lakhs. 

At present, it is mandatory for service providers to obtain PSR from a taxpayer for availing any of the 43 services. Failure to do so results in disallowance of the expenditure, resulting in tax being payable on it along with 50 percent added penalty.

Other proposals include reducing source tax on exports and revising provisions related to taxpayer files.