Description: Bangladesh’s personal income tax policy explained, including progressive rates, residency requirements, and special provisions for FY 2021-22.
Content Overview
Content Overview
- Definition of Residency for Taxation
- Progressive Tax Rates and Surcharge
- Tax Rebate for Investments
- Provisions for Foreign Nationals
- Special Provisions for Third Gender Individuals
- Filing Deadlines and Financial Year
Understanding Tax Residency in Bangladesh
Tax residency plays a key role in determining your personal income tax liability in Bangladesh. As per the existing rules, a person is considered a resident for tax purposes if:
- They stay in Bangladesh for at least 182 days in a fiscal year, or
- They are present in Bangladesh for at least 90 days in a fiscal year and 365 days over the previous four years.
Non-residents are also subject to tax, but typically at different rates and under specific provisions applicable to foreign nationals.
Progressive Income Tax Rates for Individuals
Bangladesh follows a progressive tax system, which means that the tax rate increases as income increases. The current (FY 2021-22) tax slabs for individual taxpayers are:
- First BDT 300,000 – 0%
- Next BDT 100,000 – 5%
- Next BDT 300,000 – 10%
- Next BDT 400,000 – 15%
- Next BDT 500,000 – 20%
- On the balance – 25%
A surcharge is applied to wealthy individuals with net wealth exceeding a specific threshold. This surcharge helps address wealth inequality and support social development initiatives.
Investment Tax Rebates
Taxpayers in Bangladesh may reduce their tax liability by taking advantage of investment tax rebates. Eligible investments include:
- Life insurance premiums
- Investment in government securities
- Deposits in pension schemes and provident funds
- Tuition fees for children (in specified cases)
The rebate is usually a percentage of the total eligible investments, capped based on the taxpayer’s income level.
Foreign Nationals and Taxation
Foreigners working or residing in Bangladesh are also subject to personal income tax. However, Bangladesh has signed Double Taxation Avoidance Agreements (DTAAs) with many countries to ensure that foreign nationals are not taxed twice on the same income.
Typically, expatriates who reside in Bangladesh and earn income from local sources must file their returns in accordance with the country’s tax regulations.
Special Provisions for Third Gender Community
In an inclusive move, the Bangladesh government proposed a special provision in the FY 2021-22 budget. It set a higher tax-free income threshold of BDT 350,000 for individuals identifying as third gender. This aims to support economic empowerment and social inclusion for this marginalized group.
Accounting Year and Filing Deadlines
In Bangladesh, the standard accounting year for individual taxpayers is from July 1 to June 30. For foreign companies and entities with substantial foreign equity, a different fiscal year may be allowed.
Tax returns must be filed by:
- January 15 – for fiscal years ending on June 30
- July 15 – for fiscal years ending on December 31
Timely submission ensures compliance and avoids penalties.
Conclusion
Navigating personal income tax in Bangladesh is relatively straightforward, especially with the progressive structure and available rebates. Staying informed about annual changes in the Finance Act can help taxpayers—both local and foreign—plan better and remain compliant. Additionally, the government’s efforts to make the tax system inclusive mark a significant step toward a fair and equitable economy.
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