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Incentives for capital market: Raising tax-free dividend income limit for stock investors

  • Published at 06:47 pm June 13th, 2019
Representational photo Mehedi Hasan/Dhaka tribuen

Finance Minister AHM Mustafa Kamal came up with the proposal while he was announcing budget for the FY20 in the parliament

The tax-free dividend income for investors in the capital market has been raised to Tk50,000 from existing Tk25,000, with a view to incentivizing the small investors, and strengthening this sector.

Finance Minister AHM Mustafa Kamal came up with the proposal on Thursday, while he was announcing Tk5,23,190 crore budget for the FY20 in the parliament.

Mustafa Kamal said: “Dividend income from the listed companies shall be tax-free up to Tk50,000. Double taxation on dividends from listed companies will also be removed. Special incentives will continue for encouraging investment in the capital market.”

“Vigilance has been strengthened to ensure compliance in the capital market. We shall offer numerous incentives for the capital market in coming years,” he added. 

Dhaka Stock Exchange has proposed an exemption of tax on the dividends up to Tk1,00,000 from existing Tk25,000.

A 15% tax has been imposed on stock dividend distributed to the shareholders by any listed company in the proposed budget.

The minister said investors would expect cash dividends from their investment in the shares of a company but some companies were generally distributing stock dividend. 

So, such a tax was needed, he said.

The finance minister said strong economy needed a strong capital market. 

"If a country’s economy is strong, it means that its capital market is also strong. Capital market is the ideal platform to collect funds for long term industrial investment," he said. 

Mustafa Kamal proposed that if a financially solvent company wanted to merge or amalgamate with a financially sick company, scope could be created for that.

“Through the process, the depth and stability of the capital market will be enhanced,” said Mustafa Kamal.

To encourage the distribution of cash dividends, the finance minister proposed imposition of 15% tax on stock dividend distributed to the shareholders by any listed company.

He also proposed imposition of 15% additional tax on that much of retained earnings and reserves, when it would exceed 50% of the paid up capital of the company.

Read the full budget speech for FY20 here.

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