Tax-free income limit to widen
The limit of tax-free income will be widened in the national budget for the next fiscal year considering the rise in cost of living, said finance ministry officials.
Besides, tax on savings instrument may be lowered in the next budget, they said.
The finance ministry is working on the budget for the fiscal 2011-12 which will be placed in the Jatiya Sangsad on June 9.
The ministry held a series of meetings with Prime Minister Sheikh Hasina at the Gano Bhaban on the budget proposals before she went abroad.
The tax-free income limit, which is now Tk 1.65 lakh, may range between Tk 1.90 lakh and Tk 2 lakh.
Now individuals pay 10 to 25 percent tax at different levels of income. The ceiling of taxable income may be upped in the next budget. For example, an individual may have to pay 10 percent tax on an income up to Tk 3 lakh, which is now Tk 2.75 lakh.
Business people and various quarters put forward proposals to the National Board of Revenue (NBR) to increase the ceiling of tax-free income.
The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) has recommended fixing the limit of tax-free income at Tk 2.25 lakh, which it said should be Tk 2.50 lakh for women and Tk 3 lakh for elderly citizens.
The proposal was raised in a meeting organised by the NBR and the FBCCI on Sunday.
The FBCCI said inflation has been on the rise for the last four years, and cost of living and prices of essentials went up shrinking people's purchasing power. It recommended reviewing the tax rate taking these matters into account.
Wishing anonymity, a finance ministry official said the prime minister has advised the NBR to consider increasing the limit of tax-free income.
Tax rate for savings instrument was increased with a cut on interest rates in the current budget. It resulted in a drastic fall in sales of savings instrument. The net sale of savings instrument between July and February in the current fiscal year fell by 65 percent, whereas it increased by 274 percent during the same period in the previous fiscal year.
People in middle income brackets thronged the stockmarket in the hope of making higher profits, as interest rates on savings instrument had been lowered. It made share prices surge but many investors lost their savings when the market crashed.
The government's borrowing from the banking system increased as the sale of savings instrument went down. The government borrowed Tk 11,382 crore from the banking system in 10 months in the current fiscal year, whereas it did not borrow any money, rather returned more than Tk 8,000 crore to banks in the previous fiscal year.
The finance ministry contemplates cutting by half the 10 percent tax on savings instrument imposed in the current budget. However, it has not yet decided whether interest rates will be increased.