Tax Saving Investments in Bangladesh – As a taxpayer in Bangladesh, it’s essential to familiarize yourself with the eligible investment avenues to qualify for investment tax allowances. Opting for investments in allowable sectors not only enables you to accumulate savings for the future but also significantly mitigates your eventual tax obligations.
Why is investment required under tax perspective?
Invariably, individuals seek to legitimately lessen their tax responsibilities through various avenues. In Bangladesh, you can reduce your tax burden by taking investment tax rebate as per Section 78 of Income Tax Act 2023. For taking investment tax rebate you have to invest into allowed areas as outlined in Part 3 of the 6th Schedule of the Income Tax Act 2023.
Such investments represent limited strategies available to taxpayers in Bangladesh for tax alleviation. Consequently, as you strategize your tax management, you might be exploring available investment avenues. Our objective is to furnish you with the exact legal specifications concerning Tax Saving Investments in Bangladesh. Let’s delve into the list forthwith.
Tax Saving Investments in Bangladesh - Where to Invest to get tax rebate
The allowable Tax Saving Investments in Bangladesh has been mentioned under Part 3 of 6th Schedule of Income Tax Act 2023. Herein lie the available options for tax-oriented investments.
Life Insurance Premium (LIP)
In Bangladesh, Life Insurance Premium (LIP) stands as a permissible investment for tax savings. The premiums paid for yourself, your spouse, and minor children are considered allowable from a tax standpoint. However, there exists a maximum allowable limit of 10% of the insurance policy’s value; (Ref: Para 2(1) of Part 3 of 6th Schedule)
Purchase Shanchaypatra
In Bangladesh, investing Tk. 5 lakhs in savings certificates (Shanchaypatra) or similar instruments is considered an allowable investment. Many opt for Shanchaypatra due to its guaranteed rate of return, low risk, and the ease of purchase process. Purchasing them entails a straightforward procedure: visit the bank, complete a form, and submit the required documents with minimal formalities. It’s crucial to mention that Shanchaypatra interest is automatically credited to the bank account specified in the purchase form; (Ref: Para 2(7)(a) of Part 3 of 6th Schedule)
Deposit Pension Scheme (DPS)
A Tk. 120,000 investment in the Deposit Pension Scheme (DPS) is considered an allowable tax-saving investment in Bangladesh. Please note previously it was limited to Tk. 60,000 and then extends to 120,000 under Income Tax Act 2023; (Ref: Para 2(7)(c) of Part 3 of 6th Schedule).
Investment in Capital Market
Any investment made in the capital market is recognized as an allowable investment. According to the Income Tax Act 2023, there is no specified limit for stock market investments, allowing investors to allocate any desired amount. It’s important to note that both primary and secondary share investments are eligible for claiming investment tax allowances; (Ref: Para 2(8) of Part 3 of 6th Schedule).
Please note that a new Clause (Clause 36) has been introduced in Part 1 of the 6th Schedule by the Finance Act 2024. Under this newly added clause, capital gains up to Tk. 50 lac from the capital market will be exempt from tax. This means you not only receive a tax rebate but also benefit from full tax exemption on these gains.
Investment in Govt. Treasury Bill, Bond or Debenture
Investing Tk. 5 lakhs in government treasury bills, bonds, or debentures is also permissible for tax purposes. Therefore, you can consider this as an allowable investment option.; (Ref: Para 2(7)(a) of Part 3 of 6th Schedule)
Investment in Security issued under SUKUK or Sharia-compliant
For those seeking investments in line with Islamic principles, SUKUK bonds or Sharia-compliant bonds represent ideal options for tax savings. Such investments are permissible from a tax perspective. Investing any amount in SUKUK or Sharia-compliant securities is permitted for tax purposes, provided they are listed with the Bangladesh Securities & Exchange Commission (BSEC). Presently, numerous financial institutions and merchant banks in our country provide these types of instruments; (Ref: Para 2(8) of Part 3 of 6th Schedule)
Unit Certificate/ Mutual Fund EFT etc.
Investing Tk. 5 lakhs in Unit Certificates, Mutual Funds, ETFs, or units in joint investment schemes listed with BSEC is also considered permissible for tax purposes. Presently, numerous financial institutions and merchant banks in our country provide these instruments, offering attractive return rates. Consider these options for potential tax savings; (Ref: Para 2(7)(b) of Part 3 of 6th Schedule)
Purchase of Bond/ Debenture
The Bond market in Bangladesh is experiencing significant growth. To qualify for investment tax credit, you can invest any amount in a Bond or debenture listed with BSEC. Besides the tax rebate, investing in a quoted bond or debenture offers two potential income sources: firstly, Interest income, which accrues to you at regular intervals if you hold the instruments until the date when interest is due, and secondly, capital gain, if you sell the bond/debentures at a higher rate on any given date. It’s worth noting that capital gains from the sale of listed bonds/debentures are exempt from tax as per SRO no. 196-Law/Income Tax/2015, dated 30 June 2015; (Ref: Para 2(8) of Part 3 of 6th Schedule)
Contribution to Recognized Provident Fund (RPF)
Contributions made by both the individual and the employer to a Recognized Provident Fund (RPF) qualify as tax-deductible investments. Here, ‘recognized’ indicates approval by the National Board of Revenue (NBR). It’s crucial to highlight that this fund is applicable to all employees except government service holders; (Ref: Para 2(5) of Part 3 of 6th Schedule)
General Provident Fund
Investments made towards any provident fund regulated by the Provident Fund Act, 1925, are considered eligible for tax benefits. It’s essential to recognize that the Provident Fund Act, 1925, specifically pertains to government employees; (Ref: Para 2(4) of Part 3 of 6th Schedule)
Approved Superannuation Fund
Investments made into an Approved Superannuation Fund qualify as tax saving investments in Bangladesh, given that the taxpayer is a participant in the fund; (Ref: Para 2(6) of Part 3 of 6th Schedule)
Approved Benevolent Fund and Group Insurance Premiums
Contributions to Benevolent Fund and group insurance premiums are also considered tax saving investments in Bangladesh eligible for tax deductions; (Ref: Para 2(12) of Part 3 of 6th Schedule)
Conclusion - Tax Saving Investments in Bangladesh
The aforementioned options are accessible to all as Tax Saving Investments in Bangladesh. You have the flexibility to invest wherever suits you best according to your preferences and efforts. For further details, please feel free to reach out to us.
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Every time I read one of your posts, I come away with something new and interesting to think about. Thanks for consistently putting out such great content!
You have really created a wonderfully detailed picture of the taxation system in Bangladesh through this website. You have successfully answered several of not lol question that one may have, but you have gone beyond md offered your best guidance on how to make the most of subjects such as tax rebates, etc. Truly wonderfully crafted and professional work, which cannot normally be accessed in Bangladesh