What the effect of tax means
Most income from investing, such as FDR interest, sanchayapatra profit, share dividends or gains from selling shares, is taxed. In Bangladesh this tax is often deducted at source, meaning before the money reaches you. So many people don’t even notice that part of their return is going in tax.
So to compare two investments you need to look at the after-tax rate, not the before-tax one. One may offer a higher rate but leave you with less if it is taxed more heavily. Another may offer a lower rate yet leave you with more if its income is taxed less or exempt up to a limit.
Say Jamil puts Tk 2,00,000 in an FDR at 10% a year. At the end of the year the interest is Tk 20,000, but he has no TIN, so 15% is deducted at source: he receives Tk 17,000. His sister has a TIN, so on the same FDR 10% is deducted and she receives Tk 18,000. Same bank, same rate, a Tk 1,000 difference a year just because of the TIN. The numbers are only an example.
Why it matters to an investor
- To compare properly: different kinds of income are taxed at different rates. Without looking at after-tax returns you end up comparing apples with oranges.
- To understand your real gain: only after taking away tax, and then inflation, can you see the real growth of your money.
- Tax compounds too: tax taken every year no longer earns future returns. Over long periods even a small difference in rates becomes a large sum.
- The rules change: in Bangladesh almost every year’s Finance Act can change how investment income is taxed. Using last year’s numbers for today’s decision can mislead you.
Recent rules in Bangladesh (they can change)
The rates below come from the Income Tax Act 2023 and the Finance Acts of the years shown, and each year’s budget can change them. Check the latest rules from the National Board of Revenue (NBR) for the year you invest.
- Bank interest (FDRs, savings): since the 2012–13 fiscal year, tax at source has been 10% with a TIN and 15% without.
- Sanchayapatra profit: in recent years tax at source was 5% (on total holdings up to Tk 10 lakh) or 10%, treated as the final tax. From the 2026–27 fiscal year it counts as advance tax, so any excess can be claimed back through your return; the budget proposed a 10% deduction on all certificates.
- Share dividends: under the Finance Act 2026 (for 2026–27), individual investors pay a flat 15% on dividends as their final tax. Before that, 10–15% was deducted at source and more could be due depending on your tax bracket.
- Gains from selling listed shares (capital gains): under the NBR’s change of November 2024, gains up to Tk 50 lakh a year are tax-free and the part above that is taxed at 15%. The exemption does not cover sponsor, director or placement shares.
Understanding the legal ways tax is reduced
- Getting a TIN: in many cases a TIN means less tax deducted at source, and it also opens the way to claim back excess tax through a return.
- The investment tax rebate: making certain investments listed in the law can reduce your total income tax. Which investments count and the limits are set by the Income Tax Act and each year’s Finance Act.
- No capital-gains tax until you sell: even if a share rises, the gain is not taxed while you hold it. So frequent trading can raise both tax and costs.
Worked example
- Tk 1,00,000 is kept at 10% a year, with each year’s interest reinvested at the same rate, for 10 years.
- With no tax: about Tk 2,59,400 after 10 years.
- With 10% tax deducted each year (9% net): about Tk 2,36,700.
- With 15% tax deducted each year (8.5% net): about Tk 2,26,100.
Result: over 10 years the gap between 10% and 15% tax is about Tk 10,600, far more than the Tk 500 gap in the first year, because tax compounds. Take away inflation after that to see the real growth. The numbers are only an example.
Common mistakes
- Comparing only the advertised rates, not the after-tax rates.
- Not getting a TIN, and so letting tax be deducted at a higher rate year after year.
- Assuming last year’s tax rules apply to this year’s decision. The Finance Act changes them often.
- Putting money somewhere just to save tax, when its risk or term doesn’t fit your needs. A tax break is good, but it shouldn’t be the only reason for a decision.
What reaches your hand is your real return: always compare after-tax rates, and remember that tax rules can change with each year’s Finance Act.