Finance minister Abul Maal Abdul Muhith has sought opinion from the National Board of Revenue on giving tax exemption to the small depositors having less than Tk 5 lakh deposits in banks. Muhith on November 18 asked the revenue board to give its opinion on a proposal to waive the small depositors from paying tax at source on interest and profit on deposits up to Tk 5 lakh in savings accounts.
He also asked the taxmen to identify the probable impact if the government offers the tax exemption to the group.
Revenue board officials said that income tax wing was now reviewing the issue and the opinion would be sent to the minister soon.
‘The revenue board may give a negative opinion on the proposal considering adverse impact on revenue collection and tax compliance issues,’ a high official of the NBR told New Age on Monday.
It will be very difficult to maintain discipline in the sector as many tricky taxpayers would deposit their money to different bank accounts dividing their total savings into several segments, he said.
Currently, depositors, irrespective of having taxpayers identification number or not, have to pay 10 per cent tax at source on interests and profits gained from saving deposit of which balance does not exceed Tk 1 lakh at any time in the year, according to article 53F of the Income Tax Ordinance-1984.
The tax rate at 15 per cent is imposed on those not having 12-digit TINs on interests and profits on any saving deposits, fixed deposits, term deposits maintained with any banks, non-banking financial institution, leasing company and housing finance company.
Taxpayers having 12-digit TINs have to pay tax at the rate 10 per cent.
Officials said that finance minister made the proposal only for depositors in savings accounts.
There are wide-spread criticism over the provision on deducting tax on interests on such a small deposits as most of the small savers are bound to pay the tax because of the provision though they have no taxable income as the existing tax-free income limit is set at Tk 2.20 lakh.
Small depositors even do not get refund as they do not have TINs, they said.
Earlier, Bangladesh Bank governor also requested the revenue board for withdrawing tax on interest and profit of bank deposits of up to Tk 5 lakh for depositors without TINs to encourage them to save more.
NBR officials said that such exemption might cause distortion in the system as a vested quarter could take advantage of the exemption.
The government will lose a considerable amount of tax with the exemption which may force the taxmen to impose other form of taxes on new sector, they said.
The NBR collected some Tk 614 crore from the sector in fiscal year 2013-14.
They said some bank depositors might also evade payment of tax by keeping less than Tk 5 lakh balances in several banks accounts.
-With New Age input
