Money whitening provision ends, tax-free income threshold raised

The government has withdrawn a proposal that would have allowed people to legalise undisclosed money through property transactions after it drew widespread criticism.

It has also raised the tax-free income threshold and reduced corporate tax rates for private educational institutions from the levels proposed in the national budget for fiscal year 2026-27.

Parliament passed the revised Finance Bill 2026 yesterday after Finance Minister Amir Khosru Mahmud Chowdhury tabled these amendments.

Under the initial proposal, individuals would have been able to regularise the undisclosed portion of a property transaction by paying income tax at the applicable rate.

According to the provision, no authority would be allowed to question such disclosures. If legal proceedings had already been initiated, the taxpayer would have had to pay an additional 20 percent on top of the applicable tax.

During the budget discussion yesterday, Prime Minister Tarique Rahman called for the provision to be withdrawn.

The prime minister said many people in Bangladesh do not register land at its actual market value. Instead, land is often registered at a lower declared value, creating complications for taxpayers because the true purchase price is not shown in the registration documents.

He said the provision was intended to address that problem. “But some people have interpreted it as a scope for legalising undisclosed money. That is the perception held by many.”

Respecting that “public sentiment”, the prime minister requested the finance minister to withdraw the proposal.

Earlier, the interim government had abolished a similar Awami League-era provision that allowed undisclosed wealth to be legalised by paying a flat 15 percent tax.

CORPORATE TAX CUTS

Corporate tax for private universities, medical colleges, dental colleges, engineering colleges and ICT-dedicated institutions has been reduced from the proposed 10 percent to 5 percent.

The prime minister urged the institutions to use the tax savings to strengthen research, establish language laboratories and provide tuition-free education for poor and meritorious students.

The government has also relaxed the corporate tax regime for listed and non-listed companies by easing the public shareholding requirement.

Under the revised provision, listed companies with at least 10 percent of their paid-up capital held by the public, down from the previous requirement of more than 10 percent, will qualify for the preferential corporate tax rate of 20 percent if they meet the prescribed conditions.

Listed companies with less than 10 percent public shareholding will also benefit, as their corporate tax rate has been reduced from 25 percent to 22.5 percent, subject to compliance with the required conditions.

Non-listed companies will qualify for a reduced corporate tax rate of 25 percent, down from 27.5 percent, if they meet the government’s compliance requirements.

The government has also withdrawn its proposal to tax corporate dividend income at regular corporate tax rates, retaining the preferential 20 percent rate.

The earlier proposal would have pushed the tax on dividend income for banks as high as 37.5 percent.

TAX-FREE THRESHOLD UP

The tax-free income threshold has been raised to Tk 4 lakh for FY2026-27 and FY2027-28. It will increase to Tk 4.5 lakh in FY2028-29 and FY2029-30 before rising to Tk 5 lakh in FY2030-31.

Tax exemptions for ethnic communities have also been extended to cover salary income and now apply to ethnic people living in the plains as well as those in the three hill districts.

NO TIN FOR BANK ACCOUNT OPENING

The requirement to provide a tax identification number (TIN) when opening a bank account has been dropped after stakeholders argued that it could discourage financial inclusion.

Capital gains tax on gold has been cut from 15 percent to 5 percent. Value-added tax (VAT) on digital advertising across social media platforms, OTT platforms and online marketplaces has also been reduced from 15 percent to 5 percent.

VAT on locally assembled double-cabin pickup trucks and microbuses has likewise been cut from 15 percent to 5 percent.

On tariffs, the government has withdrawn the 10 percent supplementary duty (SD) on honey imports for manufacturing industries, reduced import duty on PVC and PET resin from 10 percent to 5 percent, scrapped the 10 percent regulatory duty on cold-rolled sheets, flat-rolled coated products and refined copper cathodes, and cut customs duty on raw cashew nuts from 15 percent to 5 percent.

Concessional duty facilities for manufacturers of LED lamps and prefabricated buildings have been extended till June 30, 2030.