Outcry over tax on private provident funds

Staff Reporter :
The employees and the entrepreneurs of the private sectors have expressed their resentment as they will have to pay tax on earnings from provident funds and gratuity funds from this fiscal year.

They said provident funds and gratuity were retirement benefits for those working in the private sector.

Such funds offer a kind of social protection, any imposition of tax on them would reduce retirement benefits, they opined.

As per the new tax law, the tax rate from the earnings from these funds will 27.5 per cent alike corporate tax.

However, the tax authority has exempted similar tax for the government employees in the new tax law, which many have questioned and criticized the provision.

The new income-tax act came into effect on July 1, 2023 after it had got through parliament during the budget session for fiscal year 2023-24.

From the current fiscal year, the private companies and firms will have to file tax returns on the income earned from the Employee Welfare Fund.

Not only that, this income has to be taxed at the rate of 27.5 per cent.

As per the tax law, filing of returns in private sectors’ provident fund, gratuity fund and workers’ dividend fund has been made mandatory and tax exemption has been withdrawn.

Md Abdul Mazid, former chairman of the National Board of Revenue (NBR), told The New Nation, “It will have a negative impact, although the provision has been made mandatory as some times the firms don’t give accurate information in this regard.”

TIM Nurul Kabir, Executive Director of the Foreign Investors’ Chamber of Commerce & Industry, said there were many other avenues to collect tax.

“Employees benefit from provident funds after their retirement.

So, the authority should not slap taxes on retirement benefit,” he added.

He said while levying the tax, the government has not treated provident funds of the private and public sectors equally.

“It is discriminatory,” he said, adding that they would appeal to the tax authority for the withdrawal of the tax on income from provident funds.

“Generally employees benefit from provident fund after retirement.

So the government should not tax retirement benefits.

Again the provision of taxation has not treated private and public sector provident funds equally, which is discriminatory,” he added.