Tax Deduction Rate for FY 2025-26 in Bangladesh

Table of Contents

Introduction – Tax Deduction Rate for FY 2025-26 in Bangladesh

Tax Deduction Rate for FY 2025-26 in Bangladesh – Tax Deducted at Source (TDS) remains a vital part of income tax compliance under the Income Tax Act 2023. This responsibility continues to apply to a wide range of organizations—businesses, government bodies, NGOs, and even smaller entities with annual turnover over Tk. 1 crore. Since TDS covers many types of payments and transactions, it’s important for everyone involved to clearly understand which rates apply and when. This blog will walk you through the tax deduction rate for FY 2025-26 in Bangladesh in a simple and easy-to-follow manner.

What is TDS?

TDS (Tax Deducted at Source) is a system where tax is deducted at the time of making certain payments—such as for goods, services, or contracts. The organization or person making the payment (known as the withholding entity) must deduct tax at the applicable rate before paying the recipient.

For instance, suppose ABC Limited have to pay Tk. 100,000 to XYZ Net Limited for monthly internet services. Instead of paying the full amount, ABC Limited will deduct Tk. 5,000 as TDS and pay the remaining Tk. 95,000 to XYZ Net Limited. The deducted Tk. 5,000 will then be deposited to the government as tax on behalf of XYZ Net Limited. This is how the TDS system works in practice.

What is TCS?

TCS, or Tax Collection at Source, is a method where tax is collected by the authority at the time a transaction takes place. While TDS involves deducting tax from a payment being made, TCS is about collecting tax along with the payment itself.

A common example of TCS in Bangladesh is during the import of goods—Customs authorities collect tax directly at the point of entry. TCS is also applicable in other cases, such as when issuing or renewing certain certificates, or when transferring ownership of land, buildings, or apartments.

When Should Tax Be Deducted?

In Bangladesh, Tax Deducted at Source (TDS) is applied only at the time of making payment—not when the invoice is recorded in the accounts.

In most cases, there are two steps in a transaction: first, the invoice is recorded, and later, payment is made according to the agreed terms. It’s important to remember that TDS is not deducted at the time of recording the invoice—it must be deducted when the payment is actually made.

Who Needs to Deduct TDS ?

According to Section 140(3) of the Income Tax Act 2023, certain organizations and individuals are legally required to deduct tax when making payments. These are known as withholding entities. The following are required to deduct TDS:

- - Companies, firms, associations, trusts, or funds
  - Public-Private Partnerships (PPP)
  - Foreign contractors or enterprises, and organizations set up outside Bangladesh
  - Hospitals, clinics, and diagnostic centers
  - E-commerce platforms with annual turnover over Tk. 1 crore
  - Hotels, resorts, motels, restaurants, convention centers, community centers, and transport agencies with annual turnover over Tk. 1 crore
  - Any person (except farmers) involved in the production or supply of tobacco products like cigarettes, bidis, jorda, gul, etc.

These entities must deduct tax at the applicable rates whenever they make eligible payments to suppliers or service providers. If you are making any payment for goods or services, please check whether your organization is one of the entities listed above. If it is, make sure to deduct tax at the correct rate before making the payment.

Legal Reference for Tax Deduction or Tax Collection

TDS rates are outlined in Chapter 1 and 2 of Part 7 of the Income Tax Act 2023, while the TCS rates are specified in Chapter 3 of the same part. Here is the summary of TDS and TCS sections under Income Tax Act 2023:

Table of contents of TDS & TCS as per Income Tax Act 2023:
Part	Chapter	Tax Type	Sections
Part 7	Chapter 1	TDS	Section 86 -118
Part 7	Chapter 2	TDS	Section 119
Part 7	Chapter 3	TCS	Section 120 -139

Additionally, the National Board of Revenue (NBR) issued Tax Deduction Rules (TDS) to specify the TDS and TCS rates and the deadlines for depositing the deducted or collected tax. The TDS rates for the financial year 2025-2026 are detailed in SRO No. 161-Law/Income Tax-36/2024, dated 29 May 2024.

A comprehensive understanding of this SRO is essential for knowing the applicable TDS rates. Keep in mind that the NBR may update this SRO periodically, you can access the complete SRO, along with its latest amendments, here

- - Tax Deduction Rate for FY 2025-26 in Bangladesh.

Section wise Tax Deduction Rate for FY 2025-26 in Bangladesh

Here is the section-wise tax deduction rate for FY 2025-26 in Bangladesh:

Section Ref	Particulars		ITA 2023 Rate	TDS Rules Ref		Rate as per TDS Rules
Sec 86	Deduction of tax at source from income from employment		Average Rate	N/A		N/A
Sec 87	Deduction of tax from remuneration to members of parliament		Average Rate	N/A		N/A
Sec 88	Deduction from payment from workers’ participation fund		10%	N/A		N/A
Sec 89	Payment to contractors & subcontractors, Supply of goods, Manufacturing, process or conversion or printing, packaging or Binding		Not Exceeding 10%	Rule 3
	1	In case of an industrial undertaking engaged in production of MS Billets and & in case of locally procured MS Scarp			Table SL No. 1	0.5%
	2	In case of oil supply by oil marketing companies engaged in marketing of petroleum oil and lubricant			Table SL No. 2	0.6%
	3	In case of oil supply by a dealer or agent of a petroleum oil marketing company			Table SL No. 3	1%
	4	In the case of supply of paddy, paddy husk, rice, wheat, potatoes, cattle, fish, meat, onion, garlic, peas, chickpeas, lentils, ginger, turmeric, dried chillies, pulses, corn, flour, salt, edible oil, sugar, seeds, jute sticks, mustard, sesame, raw tea leaves, pepper, cardamom, cinnamon, cloves, bay leaves and jute			Table SL No. 4	0.5%
	5	In case of cotton and yarn supply			Table SL No. 5	1%
	6	In case of supply of all kinds of fruits			Table SL No. 6	2%
	7	In the case of subcontracts provided by 100% export-oriented garment industries			Table SL No. 7	1%
	8	In the case of industrial establishments engaged in the production of cement, iron or iron products, ferro alloy products, except MS billets			Table SL No. 8	2%
	9	In case of oil supply by any company engaged in oil refinery			Table SL No. 9	1.5%
	10	In case of company engaged in gas transmission			Table SL No. 10	3%
	11	In case of company engaged in gas distribution			Table SL No. 11	0.6%
	12	In case of supply of Extra High Voltage Power Cables ranging from 33 KV to 500 KV by local manufacturers having own Vertical Continuous Vulcanization line			Table SL No. 12	3%
	13	In case of supply of books to a person other than the Government, or any authority, corporation or body of the Government, including all of its attached and sub-ordinate offices			Table SL No. 13	3%
	14	In case of supply of recycled lead			Table SL No. 14	3%
	15	In case of supply of industrial raw materials to a manufacturer			Table SL No. 15	3%
	16	In the field of supplying raw materials used in the recycling industry			Table SL No. 16	1.5%
	17	In case of Manufacturing, process or conversion, civil works, construction, engineering or similar works			Table SL No. 17	5%
	18	In case of supply of tobacco products including cigarettes, bidi, zarda, tobacco leaves and gul			Table SL No. 18	10%
	19	a) In case of supply of goods not mentioned in the serial no. 1-18 in the table b) In any other cases mentioned under section 89			Table SL No. 19	5%
Sec 90	Deduction from the payment services		Not exceeding 20%	Rule 4
	1	Advisory or consultancy service			Table SL No. 1	(1) In case of natural person – 15% (2) In case of other than natural person – 7.5%
	2	Professional service			Table SL No. 2	(1) In case of natural person – 15% (2) In case of other than natural person – 7.5%
	3	Technical services fee, or technical know-how or technical assistance fee			Table SL No. 3	10%
	4	(i) Catering service;			Table SL No. 4	(1) on commission or fee 10% (2) on gross bill amount 2%
		(ii) Cleaning service
		(iii) Collection and recovery service;
		(iv) Private security service;
		(v) Manpower supply service;
		(vi) Creative media service;
		(vii) Public relations service;
		(viii) Event management service;
		(xi) Training, workshop, etc. organization and management service;
		(x) Courier Service
		(xi) Packing and Shifting Service
		(xii) any other service of similar nature
	5	Print and electronic media agency services			Table SL No. 5	(1) on commission or fee 10% (2) on gross bill amount 0.65%
	6	Indenting commission			Table SL No. 6	7.5%
	7	Meeting fees, training fees or honorarium			Table SL No. 7	10%
	8	Mobile network operator			Table SL No. 8	12%
	9	Credit rating agency			Table SL No. 9	10%
	10	Motor garage or workshop			Table SL No. 10	8%
	11	Private container port or dockyard service			Table SL No. 11	8%
	12	Shipping agency commission			Table SL No. 12	8%
	13	Stevedoring/berth operation commission			Table SL No. 13	(1) on commission or fee 10% (2) on gross bill amount 5%
	14	(i) Transport service, vehicle rental service, carrying service and repairs & maintenance services (ii) any other service under any sharing economy platform including ride sharing service, coworking space providing service and accommodation providing service			Table SL No. 14	5%
	15	Wheeling charge for electricity Transmission			Table SL No. 15	3%
	16	Internet Service			Table SL No. 16	5%
	17	Agent, distributor, agency or channel partner, called by whatever name, of mobile financial service provider			Table SL No. 17	10%
	18	On the gross bill with or without commission paid for the freight forwarder			Table SL No. 18	1.5%
	19	Any other services which is not mentioned in serial no. 1-18 above and not deductible under any other section of the ITA, 2023			Table SL No. 19	10%
Sec 91	Deduction from payment for Intangible assets		10%	N/A		N/A
Sec 92	Deduction of tax from advertising bill of media broadcasting		5%	N/A		N/A
Sec 93	Deduction from payment to actors, actresses, producers, etc.		10%	N/A		N/A
Sec 94	Deduction or collection at source from commission, discount, fees etc.		10%, 5% or 3%	N/A		N/A
Sec 95	Collection of tax from travel agent		0.30%	N/A		N/A
Sec 96	Deduction from the commission of letter or credit		5%	N/A		N/A
Sec 97	Deduction from payment on account of local letter of credit		3%, 1.5%, 2%, 1% or 0.5%	N/A		N/A
Sec 98	Deduction of tax from payments by cellular mobile phone operators		20%	N/A		N/A
Sec 99	Deduction of tax from any payment in excess of premium pain on life insurance policy		5%	N/A		N/A
Sec 100	Deduction from insurance commission		5%	N/A		N/A
Sec 101	Deduction at source from fees, etc. of surveys of general insurance company		15%	N/A		N/A
Sec 102	Deduction from interest on saving deposit and fixed deposit etc.		20% or 10%	N/A		N/A
Sec 104	Deduction from interest income of resident		10%	N/A		N/A
Sec 105	Deduction from interest of saving instruments		10%	N/A		N/A
Sec 106	Deduction at source from interest on securities		10%	N/A		N/A
Sec 107	Deduction at source from discount on the real value of Bangladesh Bank bills		Maximum Rate	N/A		N/A
Sec 108	Deduction of tax from receipts in respect of international phone cell		1.5% or 7.5%	N/A		N/A
Sec 109	Deduction of tax at source from rent		10%	N/A		N/A
Sec 110	Deduction of tax for rendering , services from convention hall, conference centre etc.		10%	N/A		N/A
Sec 111	Deduction at source from compensation against acquisition of property		6% or 3%	N/A		N/A
Sec 112	Deduction of tax at source from export cash subsidy		10%	N/A		N/A
Sec 114	Deduction of tax against purchase of power		4%	N/A		N/A
Sec 115	Deduction of tax from income received from real estate developer to land owner		15%	N/A		N/A
Sec 116	Deduction of tax from commission or remuneration paid to agent of foreign buyer		7.5%	N/A		N/A
Sec 117	Deduction of tax from dividends		10% or 15%	N/A		N/A
Sec 118	Deduction from income from lottery etc.		20%	N/A		N/A
Sec 119	Deduction or collection of tax from income of non-residents		Not Exceeding 30%	Rule 5
	1	Advisory or consultancy service			Table SL No. 1	(1) In case of natural person – 20% (2) In case of other than natural person – 10%
	2	Pre-shipment inspection service			Table SL No. 2	20%
	3	Professional service, technical services, technical know-how or technical assistance			Table SL No. 3	(1) In case of natural person – 20% (2) In case of other than natural person – 10%
	4	Technical services, technical know-how or technical assistance			Table SL No. 4	20%
	5	Architecture, interior design or landscape design, fashion design or process design			Table SL No. 5	20%
	6	Certification rating etc.			Table SL No. 6	20%
	7	Charge or rent for satellite, airtime or frequency, rent for channel broadcast			Table SL No. 7	20%
	8	Legal service			Table SL No. 8	20%
	9	Management service including event management			Table SL No. 9	20%
	10	Commission			Table SL No. 10	20%
	11	Royalty, license fee or payments related to intangibles			Table SL No. 11	20%
	12	Interest			Table SL No. 12	20%
	13	Advertisement broadcasting			Table SL No. 13	20%
	14	Advertisement making or Digital marketing			Table SL No. 14	15%
	15	Air transport or water transport not being the carrying services mentioned in section 259 and 260			Table SL No. 15	7.50%
	16	Contractor, sub-contractor, sub-sub-contractor of manufacturing, process or conversion, civil work, construction, engineering or works of similar nature			Table SL No. 16	7.50%
	17	Supply of goods			Table SL No. 17	7.50%
	18	Capital gain			Table SL No. 18	15%
	19	Insurance premium			Table SL No. 19	10%
	20	Rental of machinery, equipment etc.			Table SL No. 20	15%
	21	Dividend-			Table SL No. 21
		(a) Received by a company, fund and trust				20%
		(b) Received by any other person, not being a company, fund and trust				30%
	22	Amount received by Artist, singer or player			Table SL No. 22	30%
	23	Salary or remuneration			Table SL No. 23	30%
	24	Exploration or drilling in petroleum operations			Table SL No. 24	5.25%
	25	Survey for Coal, oil or gas exploration			Table SL No. 25	20%
	26	Fees, etc. of surveyors of general insurance company			Table SL No. 26	5.25%
	27	Any service for making connectivity between oil or gas field and its export point			Table SL No. 27	5.25%
	28	Bandwidth payment			Table SL No. 28	10.0%
	29	Courier Services			Table SL No. 29	15%
	30	Any other payments			Table SL No. 30	20%
Sec 124	Deduction of tax from any income remitted from aboard in connection with any service, revenue, sharing etc.		7.5% or 1.5%	N/A		N/A

Section wise Tax Collection Rate for FY 2025-26 in Bangladesh

Section	Particulars	ITA 2023 Rate	TDS Rules Ref	Rate as per TDS Rules
Sec 94(3)	From Distributors or any other person (where sale to distributor lower than MRP)	Price × 5% × 5%	N/A	N/A
Sec 120	From importers	Maximum 20%	Rule 8	For Rate – Refer to Rule 8
Sec 121	Export manpower	10%	N/A	N/A
Sec 122	Clearing and Forwarding Agents	10%	N/A	N/A
Sec 123	Export income	1%	N/A	N/A
Sec 125	In case of Land transfer	Maximum of – (i) 12 lac/ Decimal in case of Land (ii) 1000/sft in case of Apartment (iii) 10% of deed value	Rule 6	For Rate – Refer to Rule 6
Sec 126	Real Estate or Land Developer in case of Buildings or Apartments constructed for residential purposes	Maximum of – (i) 1600/ sft in case of Residential Apartment (ii) 6500/sft in case of Non-Residential Apartment (iii) 5% of deed value in case of Land related to Apartment	Rule 7	For Rate – Refer to Rule 7
Sec 127	Commission on Govt. stamp, court fees and cartridge paper	10%	N/A	N/A
Sec 128	Lease of property	4%	N/A	N/A
Sec 129	Cigarette manufacturers	10%	N/A	N/A
Sec 130	Brick manufacturers	80,000 120,000 160,000 220,000	N/A	N/A
Sec 131	Issuance or Renewal of Trade License	500 1,000 2,000	N/A	N/A
Sec 132	Shipping business of a Resident	3% 5%	N/A	N/A
Sec 133	Sales by public auction	10% 1%	N/A	N/A
Sec 134	Transfer of share	15%	N/A	N/A
Sec 135	Transfer of securities including placement share	For Rate – Refer to Section 135	N/A	N/A
Sec 136	Transfer of share of shareholder of stock exchanges	15%	N/A	N/A
Sec 137	Member of stock exchanges	0.03%	N/A	N/A
Sec 138	Motor vehicles plying commercially	For Rate – Refer to Section 138	N/A	N/A
Sec 139	Operations of marine vessels	For Rate – Refer to Section 139	N/A	N/A
Sec 153	Tax Collection from Motor vehicle owners	For Rate – Refer to Section 153	N/A	N/A

No TDS for Services Provided by Banks, Insurance, Financial Institutions, or Mobile Financial Service Providers

As per Rule 4 of the TDS Rules 2024, services provided by banks, insurance companies, financial institutions and Mobile Financial Service (MFS) providers (such as bKash, Rocket, Nagad, etc.) are exempted from tax deduction. This means that when you make payments to any bank or financial institution for their services, no tax deduction at source is required.

No TDS on Petrol or Gas Purchases

As per the Proviso of Rule 3 of the TDS Rules 2024, tax is not required to be deducted when purchasing oil from petrol stations. The same clause also states that gas purchases from gas stations are exempt from TDS. So, no tax shall be deducted at source in the case of supply of oil or gas by a petrol pump or CNG station.

50% Higher TDS for Cash Payments or No PSR

As per Section 142 of the Income Tax Act 2023, TDS rate will increase by 50% if the payment is made in cash instead of through a bank transfer. In addition, if the recipient is required to show a PSR (Proof of Submission of Return) but fails to provide it at the time of payment, the TDS rate will also go up by another 50%.

See the table below for a clear breakdown of how TDS rates change in these situations.

Nature of transactions	Normal TDS Rate	Bank Transfer	PSR	Applicable TDS rate
Purchase of Goods	5%	Yes	Yes	5%
Purchase of Goods	5%	No	Yes	7.50%
Purchase of Goods	5%	Yes	No	7.50%
Purchase of Goods	5%	No	No	10%
Security Service	10%	Yes	Yes	10%
Security Service	10%	No	Yes	15%
Security Service	10%	Yes	No	15%
Security Service	10%	No	No	20%

Gross Up Method when Tax is not Deducted

Under Section 141 of the Income Tax Act 2023 and Rule 13 of the TDS Rules 2024, if a payment is made without deducting tax, the amount from which tax will be deducted will be determined using the gross up method.

This method adjusts the payment so that tax is calculated as if it had been deducted. The formula is:

Base Amount = (100 × Payment) / (100 − TDS Rate)

This ensures that the government receives the correct amount of tax even if it wasn’t deducted during the transaction.

Example: Suppose ABC Limited buys office furniture from Jashim Furniture for Tk. 170,000, and Jashim Furniture informs that no amount should be deducted from their bill—that is, the full payment must be Tk. 170,000. The gross-up method will be used to calculate the tax that should have been deducted.

Gross-up Method Scenarios:

Payment	Bank Transfer	PSR	Normal TDS Rate	Applicable TDS rate	Base amount (100 × Payment) / (100 – TDS rate)	TDS Amount
(a)	(b)	(c)	(d)	(e)	(f)=(100×a)/(100-e)	(g)=f×e
170,000	Yes	Yes	5%	5%	178,947	8,947
170,000	Yes	No	5%	7.50%	183,784	13,784
170,000	No	Yes	5%	7.50%	183,784	13,784
170,000	No	No	5%	10%	188,889	18,889

Penalty for Non-Deduction or Non-Deposition of Tax

If an entity fails to deduct tax when it is legally required to do so, the entity will be treated as an assessee in default. In such cases, the organization must pay the tax that should have been deducted, along with interest at 2% per month on the unpaid amount until it is fully paid.

In addition to this, the tax authority may also impose a personal penalty of up to Tk. 10 lakh on the individual responsible for deducting the tax.

To learn more about TDS-related penalties, please see the section below:

- - Section 143 – Penalty for TDS non-compliance

Deadline to deposit the deducted or collected Tax

Any amount of tax deducted or collected at source under the Income Tax Act 2023 must be deposited into the government treasury within the prescribed time. According to Rule 9 of the TDS Rules 2024, the deducted or collected tax must be deposited following the timeline outlined below:

Time of deduction or collection	Date of payment
In case of deduction or collection made in any month from July to May of a year	Within 2 weeks from the end of the month
In case of deduction or collection made in any day from the 1st to 20th day of June of a year	Within 7 days from the date
In case of deduction or collection made in any other dates of the month of June of a year	Next following day
In case of deduction or collection made in last day of June of a year	On the same day

Conclusion - Tax Deduction Rate for FY 2025-26 in Bangladesh

TDS and TCS are more than just routine tasks—they are key responsibilities for businesses, institutions, and other withholding entities in Bangladesh. With updated rules and rates applying each year, staying informed is essential to avoid unnecessary penalties and ensure smooth financial operations.

The Income Tax Act 2023 and the TDS Rules 2024 lay out clear guidance on when tax should be deducted or collected, who is responsible, and how much to deduct. Whether you’re paying suppliers, hiring contractors, or managing operational expenses, understanding these rules helps you make the right decisions at the right time.

By following the applicable provisions and keeping up with NBR updates, you can ensure full compliance and avoid surprises in your tax obligations.