The tax-free income ceiling has been raised after five years
The proposed budget for fiscal year 2020-2021 has come as a relief for individual taxpayers after the government raised the tax free income threshold for the first time in five years to relieve people from financial burdens amid the Covid-19 crisis.
While unveiling the proposed National Budget for FY2020-21 on Thursday, Finance Minister AHM Mustafa Kamal proposed to raise the ceiling for tax free income threshold at Tk3 lakh from the existing ceiling of Tk2.5lakh.
The government in FY2016 had set the ceiling at Tk2.5lakh for individual taxpayers and it remained unchanged since then.
“The unchanged status of the tax-exempted income threshold on the one hand, and the loss of real income due to inflation on the other, have created a feeling of discomfort among the genuine and valued taxpayers with regard to payment of taxes,” the finance minister said in his budget speech at the parliament.
He also identified that the valued taxpayers have been financially affected due to the global outbreak of the Covid-19 pandemic.
“Considering these factors, and also as a gift for ‘Mujib Borsho’, I propose to increase the tax-free income threshold and reduce the tax rate applicable for the taxpayers other than companies and local authorities, especially the individual taxpayers.
“This reduction of tax burden will hopefully add some comfort to the lives of the individual taxpayers, and will also make them feel encouraged to pay taxes regularly,” he added.
The tax free limit for women and senior citizens aged above 65 years has also been proposed to see a Tk50,000 hike to Tk350,000 from the existing Tk300,000.
The tax free ceiling of income tax for the specially-abled and gazetted freedom fighters were proposed to see Tk450,000 from Tk400,000 and Tk 475,000 from Tk425,000, respectively.
Parents or guardians of specially-abled children will enjoy additional tax-free income of Tk50,000 per specially-abled child. But only one parent or guardian can enjoy the benefit, in case both parents are working.
The minister also proposed to reduce the minimum tax rate for individuals from 10% to 5% and the maximum tax rate for individuals from 30% to 25%.
Tax free ceiling