Dhaka, Wednesday, 19 June 2019

Tax on savings tools may go up

2019-06-12
Tax on savings tools may go up

Staff Correspondent:The government may increase the tax at source on interest income from investment in national savings instruments in the next fiscal year as it looks to curb people’s appetite for the tools. The rate of withholding tax on the interest earnings from the savings instruments may go up from 5 percent to 7.5 percent or 10 percent, said officials of the finance ministry.

The increased rate will be announced by Finance Minister AHM Mustafa Kamal when he places his budget for 2019-20. He may also announce a set of incentives, including raising the tax-free dividend income for investors in the capital market to Tk 50,000 from existing Tk 25,000 with a view to reviving the market.

A set of administrative measures, including making taxpayer identification number (TIN) mandatory for payment of electricity bills for those with commercial connections and home owners are on the cards. The plan to increase the source tax on the interest incomes comes as the government’s borrowing from the high interest-bearing instrument is ballooning.

The net sales of national savings certificates stood at Tk 39,733 crore in July-March of 2018-19, up from Tk 36,709 crore a year earlier, according to data from the Department of National Savings.

In the first 11 months of the fiscal year, the government’s interest payment on savings certificates rose 23 percent to Tk 18,154 crore. The rate of the source tax was 10 percent until 2010-11 and the National Board of Revenue brought it down to 5 percent.

NBR officials said they would make TIN mandatory while paying of electricity bills in order to bring home owners and people with commercial connections under the income tax network. Currently, securing the TIN is mandatory for getting electricity connections but people in many cases do not file income tax returns. Under the proposed system, electricity distribution companies will ensure filing of TINs by the two types of consumers and verify the authenticity of TIN with the NBR’s electronic TIN database. The NBR database will provide a track number against the TINs and consumers will not need to provide TIN documents once the track number is issued.

The track number will help the NBR trace the TIN-holders in order to check whether they file tax returns or not.

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