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Increased tax on savings tools: Limited income people to receive fatal blow

  • Published at 09:55 pm June 16th, 2019
Representational image of National Savings Certificate of Bangladesh Collected

Nation Board of Revenue (NBR) officials said the rule was supposed to be effective from July 1

Families which survive on profits from savings certificates are set to receive a fatal blow as the government plans to increase tax to 10% from existing 5% on the proceeds from the tools.

Retired persons, limited income families, senior citizens and some other particular groups of people are allowed to buy the tools at higher interest rate while the government utilizes the fund for meeting budget deficit.

Experts have criticized the proposed tax increase as they think it will hit hard people dependent on the tools and urge the government to withdraw all taxes on them.

Criticizing the move, adviser to a caretaker government AB Mirza Azizul Islam said: “The government is helping some retired and low income people by allowing them to invest in saving certificates, so increasing tax will not be fair."

If the government wants to discourage people from buying saving certificates, it should limit selling the tools to a particular number, he suggests.

Agreeing with Azizul, Dhaka University Professor Abu Ahmed says most of those who invest in saving tools may have no taxable income but they are paying 5% source tax.

“This is very pathetic,” he says, adding that the increase in tax will hit them badly.

Former NBR chairman Mohammad Abdul Mazid fears the tax increase will cause hardship to the investors who invests their lifetime savings.

They come to saving certificates as they cannot trust banks and capital markets in current situation, he argues.

The government is actually under pressure as every year it has to pay a large amount as interest of the certificates so it increase the duty to discourage the high sales of the certificates, he points out.

Finance Minister AHM Mustafa Kamal on Thursday placed the budget before parliament, where he said spoke on digitalization of saving tools management but did not say anything about the tax increase.

However, the budget document (Finance Bill for FY2019-20) said that tax at source (TDS) would be 10% on profit from saving tools.

Nation Board of Revenue (NBR) officials said the rule was supposed to be effective from July 1.

Anyone who wants to cash the profit from previous investment after June will have to pay 10% TDS, NBR officials clarified, suggesting that the investors withdraw their profit by June to avoid new tax rate.

Currently people are getting various types of profit rates based on tools category — family savings certificate offers 11.52% profit, pension savings 11.76%, five-year savings certificate 11.28%, three-months profit-based saving certificates 11.04%, and the three-year post office savings certificate offers 11.28%.