Budget 2025-26: Tax-free income threshold likely to rise

Staff Report :

The National Board of Revenue (NBR) is considering a modest increase in the tax-free income threshold in the forthcoming budget for the fiscal year 2025-26, aiming to provide relief to individual taxpayers amidst persistent inflationary pressures.

According to sources within the NBR, the revenue authority is contemplating raising the threshold by up to Tk50,000. Currently, the tax-exempt income ceiling stands at Tk350,000 for general individual taxpayers, Tk400,000 for women and senior citizens aged over 65, Tk475,000 for persons with disabilities, and Tk500,000 for war-wounded freedom fighters.

The last adjustment was made in the FY2023-24 budget, when the general exemption limit was increased by Tk50,000 from Tk300,000.

“We are planning to propose an increase of Tk25,000 to Tk50,000,” said a senior NBR official, speaking on condition of anonymity. “The proposal will be submitted to the finance adviser for approval before being incorporated into the Finance Bill or issued as an ordinance.”

He added that the move is being considered in response to sustained inflationary pressure that has reduced real incomes across the population.
Bangladesh has been grappling with elevated inflation for over three years.

According to the Bangladesh Bureau of Statistics, the inflation rate stood at 9.35 percent in March 2025, hovering around 10 percent in recent years.
Amid this economic backdrop, economists and business groups have repeatedly called for an upward revision of the tax-free income ceiling.

In March, the Centre for Policy Dialogue (CPD), a leading economic think tank, recommended a Tk50,000 increase. The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) went further, demanding an increase of Tk100,000 during a meeting held on 30 April.

“Given the current inflation and declining real incomes, we recommended increasing the tax-free threshold by Tk100,000,” said FBCCI Administrator Md. Hafizur Rahman, speaking at the meeting attended by Finance Adviser Dr. Salehuddin Ahmed.

Professor Mustafizur Rahman, Distinguished Fellow at the CPD, noted that inflation has risen by over 20 percent in the past two years, while incomes – particularly among salaried individuals, informal sector workers, and low-income earners – have not kept pace.

“As a result, people’s real purchasing power has diminished. Raising the tax-free income limit would offer some much-needed relief, particularly to those on lower incomes,” he remarked.

At present, individual income tax in Bangladesh is structured as follows: 5 percent on the next Tk100,000 above the tax-free threshold, 10 percent on the following Tk400,000, 15 percent on the next Tk500,000, 20 percent on the subsequent Tk500,000, 25 percent on the next Tk2,000,000, and 30 percent on income exceeding that amount.

The proposed revision, if approved, is expected to be included in the upcoming national budget set to be presented in June.