Advance income tax (AIT) for the readymade garment sector may rise and long-term stock investors may see gain tax halved as the finance minister AMA Muhith’s fifth budget incorporates a “look-good” tax package intended to make people happy.
The package, among other things, includes raising the tax-free individual income ceiling of Tk220,000, up by Tk 20,000 from the current level, top government sources said.
Garment factory owners may not be happy, but the finance minister is going to propose 0.2 to 0.4% increase in the AIT on apparel export incomes, which is now 0.8%. It was proposed at 1.5% in his budget speech last year, but was lowered to 0.8% amid hue and cry from the sector.
Some incentives for the share market are likely to be there on the finance minister’s plate, they said.
The new national budget will offer a number of tax benefits to help revamp the declining capital market by bringing in investors, which include tax rebate in mutual fund, tax at sources for brokerage houses, and tax free dividend.
Stock investors have long been suffering due to a prolonged sluggishness in the stock market.
The last budget of the present government is expected to give the investors a way out, offering them some tax benefits. All mutual funds may see a 10% tax rebate on dividend income. Currently only state-owned investment bank ICB enjoys the benefit, sources said.
They said the fiscal measures might include withdrawal of existing 0.05% tax at source from brokerage houses and exemption of the current 3% tax on premium value of shares.
The finance minister is expected to lower the gain tax to 5% from the current rate of 10% to benefit the long-term investors of the stock market.
Currently, the companies and firms pay 10% tax on capital gains.
The ceiling of tax-free dividend income may go up from Tk5,000 to Tk10,000.
However, the much-talked-about corporate tax for banks and financial institutions would not be lowered from its 42.5% in the proposed budget, according to preliminary proposals. But the rate may see a 5% reduction before passing the budget in parliament.