Tax-free threshold to rise gradually
The government has drawn up a long-term plan to gradually raise the tax-free income threshold for individual taxpayers over the coming years, while also considering changes to the personal income tax structure.
According to the National Board of Revenue (NBR), the tax-exempt income ceiling is projected to increase to Tk4 lakh in fiscal years 2028-29 and 2029-30 before rising further to Tk4.5 lakh in FY2030-31.
Despite calls from business groups during the interim administration to increase the threshold in the current FY2025-26, the government kept the tax-free limit unchanged at Tk3.5 lakh. However, it has already decided to raise the threshold to Tk3.75 lakh in FY2026-27.
At the same time, policymakers are reviewing the existing tax slab structure. While the higher exemption limit is expected to provide relief to lower-income earners, some taxpayers with incomes just above the tax-free threshold could face a higher tax burden under the proposed system.
Under the plan under consideration, the current 5 per cent tax slab would be removed. Instead, annual income above Tk4.5 lakh would be taxed at 10 per cent on the next Tk3 lakh, 15 per cent on the following Tk4 lakh, 20 per cent on the next Tk5 lakh, 25 per cent on the subsequent Tk2 lakh and 30 per cent on the remaining income.
At present, taxpayers pay 5 per cent tax on the first Tk1 lakh earned above the tax-free threshold of Tk3.5 lakh. As a result, an individual with an annual income of Tk4.5 lakh pays Tk5,000 in tax. Under the proposed structure, if the tax-free threshold rises to Tk3.75 lakh and the lowest tax rate is increased to 10 per cent, tax on the remaining Tk75,000 would amount to Tk7,500.
Bangladesh currently has around 12.8 million Tax Identification Number (TIN) holders. Of these, approximately 4.6 million taxpayers had submitted returns by March of the current fiscal year.
NBR officials said the planned increase in the tax-free threshold is linked to the government’s intention to introduce a new pay scale for public sector employees in the upcoming budget.
Policymakers are concerned that any wage adjustment could add to inflationary pressures, making higher tax exemptions necessary to cushion lower-income taxpayers.
Several existing tax benefits are also expected to remain in place. The tax-free income ceiling of Tk5.25 lakh granted to “July Fighters” is likely to continue, while agricultural income may remain exempt up to Tk5 lakh to support farm production.
In addition, tax exemptions for financial assistance received by employees for the treatment of serious illnesses—including kidney, liver, cancer and heart diseases—as well as brain surgery and organ transplantation, are expected to be retained.
Economists have offered mixed views on the government’s long-term tax strategy.
M Masrur Riaz, chairman of Policy Exchange Bangladesh, said the tax-free threshold should be increased immediately given that inflation has remained elevated since 2022. He argued that if inflation moderates in the coming years, the need for further increases may diminish.
Meanwhile, Snehasish Barua, chartered accountant and director of SMAC Advisory Services Ltd, welcomed the move towards advance tax planning but cautioned against fixing tax rates too far ahead. He said announcing tax structures two to three years in advance could help both individuals and businesses plan effectively, a practice followed in many countries.
However, he stressed that tax thresholds should ideally be adjusted annually to reflect inflation and changes in living costs.
