Tax-free income limit to go up to Tk 3 lakh

The government may increase the tax-free income limit for individual taxpayers after five years in fiscal 2020-21 to give relief to people in the lower-income bracket such that they can manage the economic hardship brought on by the pandemic better, said officials of the finance ministry yesterday.

The tax-free income threshold is likely to be Tk 3 lakh, up from Tk 2.5 lakh fixed back in fiscal 2015-16.

Besides, taxpayers in the lower income threshold are also likely to see a new slab -- 5 per cent -- next fiscal year as the government aims to increase the disposable income of taxpayers and their purchasing capacity in the initial slab.

Currently, the NBR collects tax from individual taxpayers on five rates beginning from 10 per cent for taxpayers with an annual income of between Tk 2.5 lakh and Tk 6.50 lakh.

The income tax rate goes up progressively to 15, 20, 25 and 30 per cent for taxpayers with higher annual income.

Some 30 per cent tax is levied on the taxpayers with an annual income of more than Tk 47.50 lakh, according to the National Board of Revenue (NBR).

Apart from the individual taxpayers, the government is also considering reducing the corporate income by 2.5 percentage points to 32.5 per cent for non-listed companies with the view to strengthening their capacity such that they recover from the devastating effect of the two-month-long lockdown enforced to slow the spread of coronavirus.

Companies typically provide more than 60 per cent of their total direct tax receipts to the state coffer and the government collects tax from companies in various categories -- from as low as 25 per cent for publicly listed companies to as high as 45 per cent from cigarette makers and non-listed mobile operators.

Some 40 per cent tax is applied on listed mobile phone operators. Grameenphone is the lone listed carrier at present.

And the tax rate for listed banks, financial institutions and insurance companies is 37.5 per cent. For non-listed banks, financial institutions and insurances, it is 40 per cent. 

Apart from the rates, the government imposes a reduced tax of as low as 5 per cent for manufacturers of air conditioners, refrigerators and motorcycle, 12 per cent for garment factories and 15 per cent for textile mills.

Besides, a host of sectors, such as electricity and information technology, are enjoying tax breaks.

Officials said medical equipment makers may come into the list of the tax benefit from next fiscal year.

Direct or income tax is the second biggest source of the total tax collected by the NBR.

The share of income tax was 33 per cent of total annual collection Tk 223,890 crore in fiscal 2018-19.

On Sunday, the NBR held a meeting with Prime Minister Sheikh Hasina in her official residence to discuss budget proposals for next fiscal year.  

The government expects the NBR to take tax measures that don't put any pressure on the common people and that protect domestic industries.  

The revenue generation target for the NBR would not go up by more than 5 per cent in fiscal 2020-21 from the original target of Tk 325,600 crore for this fiscal year.