The National Board of Revenue (NBR) has withdrawn its proposal to impose direct advance income tax on battery-run auto-rickshaws and motorcycles in the proposed budget for fiscal year 2026–27, but is moving to broaden tax compliance through mandatory filing requirements for selected vehicle owners.
Instead of direct taxation, the revenue authority is pursuing a compliance-based approach aimed at expanding the tax base without triggering public backlash, according to officials familiar with budget discussions.
Under the revised plan, owners of motorcycles above 165cc will be required to submit proof of income tax return filing (PSR) for registration and renewal. Individuals operating multiple battery-run auto-rickshaws as a business will also be brought under mandatory tax return filing obligations.
Officials said the shift follows the withdrawal of an earlier proposal to impose advance income tax directly on motorcycles and battery-run auto-rickshaws after criticism from riders and concerns over public reaction.
A senior income tax official at the NBR, speaking on condition of anonymity as the budget proposal is yet to be finalised, said the authority initially planned direct taxation for both vehicle categories.
“Motorcycles and auto-rickshaws are widely used by ordinary people for daily commuting and livelihoods. Imposing direct taxes could have created social and economic pressure,” the official said.
“However, owners of high-end motorcycles or individuals running multiple auto-rickshaws as commercial ventures have greater financial capacity and should be brought into formal tax compliance.”
Under the revised proposal, motorcycles with engine capacities exceeding 165cc will no longer face annual advance income tax. Instead, owners must provide proof of tax return submission during registration or renewal.
Officials said motorcycles in this category are largely used for personal mobility or lifestyle purposes rather than income-generating activities such as ride-sharing services.
“These motorcycles are generally not used in ride-sharing operations and are often considered premium assets,” another NBR official said. “Requiring tax return filings ensures accountability without imposing an unpopular direct tax.”
The measure effectively brings high-capacity motorcycle owners—many of whom are outside the tax system—into formal compliance requirements.
The NBR also plans to include owners of multiple battery-run auto-rickshaws within the tax framework.
While single-vehicle operators using auto-rickshaws for livelihoods will remain exempt, those operating fleets for commercial purposes will be required to submit annual income tax returns.
Revenue officials said the sector has long remained outside formal taxation despite significant cash flow, with many investors owning dozens of vehicles and leasing them to drivers on daily rental arrangements.
“Single auto-rickshaw operators should not be burdened,” an NBR official said. “But those earning business income from multiple vehicles should be accounted for under the tax system.”
According to draft budget documents, the NBR initially proposed a tiered annual advance income tax system for motorcycles.
The original proposal included exemption for motorcycles up to 110cc, Tk2,000 annually for 111cc–125cc, Tk5,000 for 126cc–165cc, and Tk10,000 for motorcycles above 165cc.
Following consultations and stakeholder concerns, the rates were later revised to Tk1,000, Tk3,000 and Tk5,000 respectively.
However, the latest decision indicates the NBR has now abandoned direct taxation entirely.
Officials said the shift was influenced in part by protests from motorcyclists, who submitted a memorandum to the NBR chairman on May 17 demanding withdrawal of the advance tax proposal.
They argued motorcycles are no longer luxury goods but essential transport for commuters, students, small business owners and ride-sharing drivers.
Motorcyclists also noted they already pay registration fees, road tax, fitness certification, insurance, and fuel-related taxes.
“Motorcycles are not a luxury anymore—they are part of people’s daily survival,” said Md Rabiul Islam, a ride-sharing rider in Dhaka. “If new taxes were imposed, it would become difficult for many of us to continue.”
Sabiha Rahman, a private sector employee who commutes by motorcycle, said women increasingly rely on motorcycles for safer and faster mobility.
“Motorcycles have given many women greater independence in commuting,” she said. “Any policy should consider practical realities.”
According to Bangladesh Road Transport Authority (BRTA) data, the country currently has 4.87 million registered motorcycles.
Officials estimate that if the government had imposed direct taxes averaging Tk2,000–Tk5,000 per motorcycle, annual revenue could have exceeded Tk15 billion (Tk1,500 crore).
However, authorities appear reluctant to pursue a politically sensitive measure affecting millions of middle- and lower-middle-income users.
Motorcycle owners already pay substantial registration and road-related fees. For motorcycles between 50cc and 125cc, registration costs stand at approximately Tk9,291, while those above 125cc require Tk11,764, in addition to periodic road tax payments.
The policy shift also comes as the government moves closer to finalising the “Electric Three-Wheeler Management Policy 2025,” which aims to bring more than five million battery-run rickshaws under formal registration.
The draft policy proposes mandatory registration, tax token collection, and fitness certification.
Under the proposal, an individual would not be allowed to register more than three medium-speed electric auto-rickshaws or five slow-moving units under a single name.
Abdul Karim, an auto-rickshaw driver in Gazipur, said the distinction between workers and business owners is important.
“Those of us driving one vehicle struggle to survive. But people running many auto-rickshaws as a business should be accountable,” he said.
Mohammad Humayun Kabir, a private car owner, said broader compliance could improve fairness in the system.
“We pay taxes regularly for private vehicles. If premium motorcycle owners and commercial auto-rickshaw operators are also brought into the system, it creates better balance,” he said.
Analysts said the move signals a shift toward a softer but broader enforcement strategy that relies less on immediate taxation and more on expanding formal financial reporting.
While direct taxation has been shelved, officials said the compliance net around motorcycles and commercial auto-rickshaws is effectively tightening through alternative mechanisms.
