Savers brace for hassles

Until the current fiscal year, a bank account-holder requires paying a 10 per cent withholding tax on the interest earnings on deposits if the individual furnishes banks with the taxpayer identification number (TIN).

Any failure is subject to a 15 per cent deduction on the interest income.

But from the next fiscal year starting on July 1, the account-holder with more than Tk 10 lakh credit balance will have to show the proof of submission of income tax returns to be eligible for the reduced rate.

If the person fails to comply with the rules, the rate of deduction will be 50 per cent higher, according to the tax-related rules proposed by the National Board of Revenue (NBR) for FY23.

The same rule will apply to the people who want to open a savings account of over Tk 5 lakh at post offices or buy savings certificates worth more than Tk 5 lakh.

The proof of returns could be an acknowledgement receipt of tax returns, a certificate generated from the online submission of returns, or the tax payment certificate issued by the field offices of tax.

Once the new measure comes into effect, holders of more than 16 lakh bank accounts as well as thousands of holders of savings certificates and accounts in post offices will have to submit the proof of tax return filing.

These accounts had Tk 10,48,047crore as deposits as of December 31, data from the Bangladesh Bank showed.

Analysts say the new rule will increase hassle for the account-holders and savers, including those who don't have taxable income, and may even discourage people to keep money in banks.

A senior official of the NBR said the tax authority seeks to introduce the new rule as it found that only 26 lakh TIN-holders submit tax returns regularly although the number of registered taxpayers is 75 lakh.

The government aims to increase the number of TIN-holders to one crore in order to raise the tax-to-GDP ratio. Bangladesh has one of the lowest ratios in the world although the number of people belonging to the middle class and above is about four crore.

Many people who have more than Tk 10 lakh in banks or Tk 5 lakh as an investment in state-sponsored savings instruments and deposits in postal savings accounts have taxable income. This is why the tax authority has tightened the rule, said the NBR official.

In order to give relief to marginal taxpayers, the NBR has exempted investments below Tk 5 lakh in savings certificates from paying the tax on interest earnings.

Individual taxpayers will be able to get the acknowledgement receipt if they submit tax returns online. In such cases, they will not need to visit tax offices to file returns and get the receipt.

Syed Md Aminul Karim, a former member of tax policy of the NBR, said the new rule would increase hassle for the people who do not have taxable incomes.

There are many people who have not bought savings certificates or entered into businesses even after obtaining TINs for the purposes, he said.

"There are many homemakers who do not have taxable incomes. Their cost, both in terms of time and money, for compliance will increase," he said, suggesting that the tax authority open a dedicated cell at field offices in order to provide services so that people can comply.

Alamgir Hossain, another former member for tax policy of the revenue board, suggested the NBR reconsider the provision, especially for the individuals who don't have any taxable income.

Snehasish Barua, a partner of Snehasish Mahmud & Co, a chartered accountancy firm, said the proof of return contains some personal information of a taxpayer and many taxpayers may feel discouraged to disclose them as confidentiality will be breached.

"Currently, many bank account-holders don't have any TIN. As such, they don't file income tax returns."

Barua suggested increasing the limit of bank credit balance and starting initially with an electronic TIN and then asking for the proof of return.

He recommended the government develop an automated system or an app so that banks can examine the acknowledgement receipt through the platform. 

"This will ease the process."