The government has proposed raising the tax-free income threshold for individual taxpayers and allowing income tax returns to be filed year-round, in a move aimed at providing relief to salaried and middle-income groups.
From the next fiscal year, the tax-free income limit for individual taxpayers will be increased from Tk 350,000 to Tk 375,000 (three lakh seventy-five thousand). The proposal also introduced a major change in income tax administration, allowing returns to be submitted throughout the year instead of within a fixed filing period.
Finance Minister Amir Khasru Mahmud Chowdhury announced the measures on Thursday while presenting the national budget for FY2026–27 in parliament. He said the revised tax-free threshold will remain in effect for FY2026–27 as well as FY2027–28.
Finance ministry officials said the higher exemption limit is expected to provide partial relief to low- and middle-income taxpayers amid rising living costs driven by inflation.
Higher exemption limits for special categories
The tax-free income threshold has also been raised for several special categories of taxpayers.
Under the proposal, the limit for female taxpayers and those aged over 65 has been set at Tk 425,000. For third-gender taxpayers and persons with disabilities, the threshold has been set at Tk 500,000. For gazetted freedom fighters and individuals injured in the July Mass Uprising 2024 who are officially recognized as “July fighters,” the exemption limit has been fixed at Tk 525,000.
Parents or legal guardians of persons with disabilities will receive an additional tax-free allowance of Tk 50,000 for each dependent child or ward.
Bangladesh currently has around 12.8 million Tax Identification Number (TIN) holders, of whom about 4–4.2 million file income tax returns annually.
Five percent tax slab removed
The budget also proposes a restructuring of the personal income tax system, including the abolition of the long-standing 5% tax slab.
Under the new structure, taxable income above the exemption threshold will be charged at 10% for the first Tk 300,000, 15% for the next Tk 400,000, 20% for the next Tk 500,000, 25% for the next Tk 2,000,000, and 30% on the remaining income.
Tax experts said that while the structure simplifies the system, the removal of the 5% slab may increase the tax burden for some taxpayers.
Year-round filing with incentives and penalties
The government is introducing year-round income tax return filing as the most significant change in tax administration, with incentives for early submission.
According to the proposal, taxpayers filing returns between July and September will receive a 5% tax rebate or up to Tk 25,000. Filing between October and December will carry no additional rebate or penalty.
However, filings between January and March will require an additional payment of 2% of tax or a minimum of Tk 3,000. Returns submitted between April and June will incur an additional 5% tax or a minimum of Tk 5,000.
Inflation pressures cited
In the FY2023–24 budget, the tax-free income threshold was increased from Tk 300,000 to Tk 350,000. It has remained unchanged over the past three years, even as inflation reduced real incomes.
According to the Bangladesh Bureau of Statistics (BBS), inflation stood at 9.42% in May, the highest in 16 months. Economists have long argued that the tax-free threshold should be adjusted in line with inflation.
Stakeholders said the latest budget partially reflects those demands, but they added that while the increase provides some relief to low- and middle-income taxpayers, it is not sufficient to fully offset the impact of high inflation.