Income Tax In Bangladesh

Understanding income tax in Bangladesh is essential for every responsible citizen and business owner. 

With the recent implementation of the Income Tax Act 2023 and subsequent updates in the Finance Act 2024 and Finance Ordinance 2025, the tax landscape has shifted toward automation and a broader tax net.

This guide provides a comprehensive overview of the current income tax system in Bangladesh, including the latest rates, filing procedures, and exemptions for the Assessment Year 2025–2026.

1. Who Must File an Income Tax Return?

Under the current law, filing a return is mandatory for individuals whose income exceeds the tax-free threshold. However, the National Board of Revenue (NBR) now requires a Proof of Submission of Return (PSR) for various essential services, making it nearly universal for:

• Every person with a Taxpayer Identification Number (TIN).
• Salaried employees in executive or managerial positions.
• Shareholder directors of a company.
• Individuals seeking trade licenses, car registrations, or bank loans over BDT 500,000.
• Professionals like doctors, lawyers, and chartered accountants.

2. Individual Income Tax Rates (AY 2025–26)

The tax structure in Bangladesh is progressive, meaning higher income earners pay a higher percentage. For the Assessment Year 2025–26, the tax-free limit has been increased to provide relief to lower-income groups.

Tax-Free Thresholds                                             

Note: Parents of disabled children receive an additional BDT 50,000 exemption per child.

Income Tax Slabs

Once the tax-free limit is crossed, the following slabs apply:

3. Corporate Tax Rates in Bangladesh

Corporate taxation depends on whether a company is publicly traded and its level of compliance with "cashless" transaction requirements (bank transfers).

    Publicly Traded Companies: 20% to 22.5%

    Non-Publicly Traded Companies: 25% to 27.5%

    One Person Companies (OPC): 20% to 22.5%

    Banks & Financial Institutions: 37.5% to 42.5%

    Tobacco Companies: 45% + 2.5% Surcharge

4. Mandatory Online Filing (e-Return)

Starting in 2025, the NBR has made online filing mandatory for most individual taxpayers, especially those in City Corporations and government employees.

Steps to File Online:

     Registration: Visit etaxnbr.gov.bd and register using your e-TIN and a bio metric-verified mobile number.

    Data Entry: Input your income from various sources (Salary, House Property, Business, etc.).

    Deductions & Rebates: Claim your investment rebates (e.g., Sanchayapatra, Life Insurance).

    Verification: The system automatically calculates your tax. Review the draft carefully.

    Submission: Submit the return and download the Acknowledgment Slip and Certificate.

5. Investment Tax Rebates and Deductions

Taxpayers can reduce their tax liability by investing in approved sectors. The rebate is generally 15% of the eligible investment.

Eligible Investments Include:

• Life Insurance premiums.
• Government Savings Certificates (Sanchayapatra).
• Listed Stocks and Mutual Funds.
• Contribution to Provident Fund (RPF) or
• DPS (up to BDT 1,20,000).

Calculation Rule: The allowable investment is the lowest of:

15% of Actual investment made.

3% of total taxable income.

BDT 10,00,000 ( Ten Lac).

6. Surcharge and Minimum Tax Wealth Surcharge

Wealthy individuals with net assets exceeding BDT 40 million (4 Crore) must pay a surcharge on their total tax. Rates range from 10% to 35% based on total net worth.

Minimum Tax

Even if the calculated tax is zero, a minimum tax is applicable for anyone living in specific areas:

Dhaka & Chattogram City Corporations: BDT 5,000

Other City Corporations: BDT 4,000

Other Areas: BDT 3,000

7. Environmental Surcharge

In Bangladesh, the Environmental Surcharge (often colloquially called the "Carbon Tax") was introduced under the Income Tax Act 2023. It specifically targets individual taxpayers who own more than one motor vehicle to discourage carbon emissions and promote environmental sustainability.

The surcharge is collected by the National Board of Revenue (NBR) during the registration or fitness renewal of the vehicle.

1. Who Must Pay?

The surcharge applies only to natural individual assesses who own more than one motor vehicle (specifically private cars, SUVs, or Jeeps).

Exempted Vehicles: It does not apply to motorcycles, auto rickshaws, buses, trucks, or other commercial vehicles.

Rule of Application: For a person with multiple cars, the surcharge is applicable to each vehicle after the first one. Usually, the vehicle with the lowest engine capacity is considered the "first" car to minimize the burden.

2. Surcharge Rates (AY 2025–26)

The amount is fixed based on the engine capacity (CC) or electric motor power (kW) of the vehicle:                                                 

3. Key Rules to Remember

Non-Adjustable: This surcharge is an "advance" payment but it cannot be adjusted against your regular income tax liability nor can it be refunded.

Surcharge vs. Wealth Surcharge: This is separate from the Wealth Surcharge (which is 10%–35% of your total tax if your net wealth exceeds BDT 4 crore). However, simply owning more than one car automatically triggers a minimum 10% Wealth Surcharge on your total tax, regardless of whether your wealth is below BDT 4 crore.

Electric Vehicles (EVs): While currently included based on kW ratings, recent proposals in the Finance Ordinance 2025 suggest potential exemptions for pure electric vehicles in upcoming years to encourage green energy.

8. Advance Income Tax (AIT) on motor vehicles

In Bangladesh, Advance Income Tax (AIT) on motor vehicles is a mandatory payment collected by the BRTA (Bangladesh Road Transport Authority) during the registration or annual fitness renewal of a vehicle.

This tax is considered an "advance" payment toward your total annual income tax liability. However, for most private car owners, it is non-refundable and cannot be adjusted if your calculated tax is lower than the AIT paid.

8.1. AIT Rates for Private Cars & Jeeps (AY 2025–2026)

The rates are determined primarily by the engine capacity (CC) or electric motor power (kW) of the vehicle.

8.2. Advance Tax for Commercial Vehicles

Under the Finance Ordinance 2025, advance tax rates for commercial vehicles have been updated to reflect current economic conditions.

8.3. Important Rules for Multiple Car Owners

If you own more than one motor vehicle, the tax burden increases significantly:

    50% Higher AIT: For every additional car after the first one, you must pay 50% more than the standard AIT rate. For example, if the second car is 1500cc, you will pay BDT 37,500 (25,000+50%) instead of BDT 25,000.

    Environmental Surcharge: As discussed previously, you will also have to pay a separate Environmental Surcharge (Carbon Tax) starting from BDT 25,000 on the second vehicle.

    Mandatory Surcharge: Owning a second car automatically triggers a 10% Wealth Surcharge on your total income tax, regardless of your total net assets.

9. Penalties for Non-Compliance

Failure to file a return by the Tax Day (typically November 30) can result in:

    A penalty of 10% of the last assessed tax (minimum BDT 1,000).

    A daily fine for continued default.

    Inability to access over 40 essential government and private services requiring PSR.

10. Conclusion

In conclusion, Income Tax In Bangladesh serves as the primary engine for sustainable infrastructure development and social welfare. For the 2025–2026 fiscal year, the system has evolved towards a "Digital First" approach, making e-filing mandatory for many to ensure transparency and efficiency.

With the general tax-free threshold increased to BDT 375,000, the progressive tax slabs (ranging from 10% to 30%) aim to promote social equity. Ultimately, staying compliant with Income Tax In Bangladesh is not just a legal obligation but a vital contribution to the nation's economic resilience.

Editing by-

Rajan Kumer Debnath

Income Tax and VAT Adviser 

Member: Dhaka Taxes Bar Association