FY26 Budget: Real estate black money tax set to rise fivefold

Special Correspondent :

In a move to curb the flow of undisclosed wealth into the real estate sector, the government is set to propose a significant increase in tax rates on black money investments in the forthcoming national budget for FY2025-26.

According to officials from the National Board of Revenue (NBR), the revised tax rates -potentially up to five times higher than current levels – aim to align taxation more closely with actual market values and deter the use of illicit funds in property transactions.

The proposed budget, scheduled for presentation by the finance adviser on 2 June, is expected to break from the long-standing policy of granting immunity to individuals investing undeclared funds in real estate. Under the new framework, such investments may come under increased scrutiny from relevant regulatory bodies, heightening legal risks for those attempting to legalise black money through property purchases.

At present, fixed taxes on undisclosed funds used to purchase apartments in affluent Dhaka neighbourhoods – such as Gulshan, Banani, Baridhara, and Motijheel – stand at Tk6,000 per square metre for properties exceeding 200 square metres, and Tk4,000 for smaller units. These rates may increase by as much as fivefold, potentially raising the tax burden on a 200-square-metre apartment in Gulshan from Tk8 lakh to Tk40 lakh.

In more modest urban locations, where the gap between deed value and market value is narrower, a threefold increase is anticipated.

A senior NBR official, speaking on condition of anonymity, explained, “Under the current scheme, the effective tax rate on black money in prime areas is just 8 per cent. The proposed changes would bring the rate much closer to prevailing market conditions.”

Additionally, the upcoming budget may revise the method of tax calculation in the real estate sector, shifting from a per-square-metre model to a per-square-foot system. This change is expected to better reflect industry norms and improve the precision of tax assessments.

Despite the proposed tax hikes, some analysts argue that the black money legalisation scheme still offers more favourable terms than those available to regular taxpayers. Towfiqul Islam Khan, Senior Research Fellow at the Centre for Policy Dialogue (CPD), noted, “Even if the tax increases fivefold, the effective tax rate based on market value would still be around 10 per cent, which remains low.”
A CPD analysis following the previous budget indicated that the average effective tax rate on black money investment in real estate stood at just 2.38 per cent.
“While the tax increase is a step in the right direction,” Khan added, “the facility to whiten black money should not exist at all.”
In FY2022-23, the government allowed widespread legalisation of undeclared funds with full indemnity, resulting in declarations totalling over Tk20,000 crore – much of which is believed to have been channelled into the real estate sector. However, official figures for FY2023-24 have yet to be released by either the NBR or the Real Estate and Housing Association of Bangladesh (REHAB).

As the June budget approaches, the government faces the challenge of striking a delicate balance between combating illicit wealth and sustaining a vital economic sector. Whether the proposed tax hikes will effectively curb the use of black money or merely push it further underground remains to be seen.