The government is likely to increase the rate of tax deducted at source from profit earned through savings instruments in the upcoming fiscal year (FY), 2019-20.
The at-source tax rate for the government's savings tools might be revised upward to around 7.0-8.0 per cent from the existing 5.0 per cent in the budget for FY 20, sources said.
On the other hand, a set of tax incentives might be offered in the budget for the capital market investors to make the market vibrant. The tax-free limit of dividend income for the investors might be increased to Tk 50,000 from the existing Tk 25,000.
The government might also make submission of Taxpayers Identification Number (TIN) mandatory for the owners of house property or apartment as well as commercial connection holders at the time of payment of their electricity bills.
The house property or apartment owners have to submit a copy of TIN with their electricity bills that will be verified by the power distribution entities.
The National Board of Revenue (NBR) will generate a tracking number to ensure compliance.
Finance Minister A H M Mustafa Kamal is likely to propose the tax measures in his budget speech scheduled to be delivered on June 13. Currently, the investors of savings certificates enjoy three major benefits, including reduced rate of tax as finally paid tax (final settlement) on income from the certificates, investment rebate, and high-yield rates compared to those of the bank depositors.
Official sources said the source tax on savings certificates is likely to see the hike after many years, as the government, despite several attempts, has failed to cut the high yield rates of the tools.
They also said the source tax was 10 per cent on the yield of savings certificates until 2011. The government reduced the tax to 5.0 per cent that year after it had planned to cut the high rates of yield.
Currently, bank deposit rates vary from 6.5 per cent to 11.0 per cent, while the investors of savings certificates get return on their investment at rates between11.04 per cent and 11.76 per cent.
The bank depositors, who have TIN, have to pay 10 per cent source tax on their interest amount, while the tax rate is 15 per cent in case of not having TIN.
Officials concerned said the income tax authority will not make TIN mandatory in the budget for the investors of savings tools. The National Savings Directorate (NSD) has already made it mandatory on their part.
High yield rates of savings certificates encourage the investors to buy these tools instead of depositing money with banks.
Following higher-than-expected sales, the government has been forced to revise upward the target of its net borrowing from the savings instruments to Tk 450 billion from Tk 261.97 billion in the current FY.
In July-March period of FY 19, net sales of the government's savings certificates stood at Tk 397.33 billion, up from Tk 367.09 billion in the corresponding period of the previous year.
Higher sales of savings certificates also pushed up the government's interest payment by more than 23 per cent in the period, according to the NSD data.
Officials said the NBR has decided to increase the tax rate again, as the yield rates of savings certificates have been unchanged for the last eight years.
However, the source tax will remain as finally paid tax on the income derived from savings certificates. The investors will not have to pay any tax on the income apart from the source tax.
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