Tax basics

What is income tax?

Income tax is the tax you pay the government on a year’s income. In Bangladesh the main law is the Income Tax Act 2023, administered by the National Board of Revenue (NBR). The income year runs from July to the following June. Salary, business, rent, bank interest and share dividends all add up to your total income.

Income tax in Bangladesh rises in steps, or slabs. Income up to a certain amount is not taxed at all (the tax-free threshold). The first band above it is taxed at a low rate, the next at a higher one, and so on. The key point: a higher rate applies only to the money in that higher band, not to your whole income.

Why it matters to an investor

• To measure real return: what reaches you is what is left after tax on interest, profit or dividends. Compare two investments on their after-tax return.
• To use rebates: certain investments qualify for a tax rebate that lowers your total tax. To understand it, you first need to know how tax is worked out.
• To understand tax taken at source: tax is deducted in advance from bank or sanchayapatra profit. It is set against your total tax, not an extra “penalty”.
• To keep your papers in order: some services and transactions ask for a TIN or proof of filing a return; which ones changes with the law over time.

The tax-free threshold and slabs

Under the Finance Act 2026, the tax-free threshold for general individual taxpayers is Tk 4 lakh for the 2026–27 income year, and the law sets it to rise in steps in later years. The threshold is higher for women, people aged 65 or over, people with disabilities, third-gender taxpayers and gazetted freedom fighters.

Above the threshold the rate rises like this: 10% on the next Tk 3 lakh, 15% on the next Tk 4 lakh, 20% on the next Tk 5 lakh, 25% on the next Tk 20 lakh, and 30% on the rest. If income is above the threshold, a minimum tax applies (generally Tk 5,000, less for new taxpayers). These limits and rates can change in almost every year’s budget; check the latest rules with the NBR and the Finance Act.

Tax at source: tax taken in advance

For many kinds of income, tax is taken off before the money reaches you. This is called tax deducted at source. For example, your employer deducts it from salary, the bank from FDR or savings account interest, the issuer from sanchayapatra profit, and the company from dividends, and each pays it to the government.

• At the end of the year your return works out your total tax, and the tax already deducted is subtracted from it. In some cases the tax at source is the final tax, with nothing more to pay.

Filing a return

A return tells the NBR your income, tax and assets for the year. From the 2026–27 tax year, online filing (e-return) is mandatory for general individual taxpayers; some groups, including older, disabled and non-resident taxpayers, may still file on paper. Filing between July and September earns a rebate of up to 5% of tax payable (capped at Tk 25,000), and filing after December means paying extra tax. Deadline rules change, so check the NBR’s announcements each year.

As of June 2026, about 12.8 million people in Bangladesh had a TIN, but only around 4.0–4.2 million filed a return each year.

Worked example

Common mistakes

• Thinking that moving into a new slab means your whole income is taxed at the higher rate. The higher rate applies only to the top part.
• Assuming you don’t need to file a return because tax was already deducted at source.
• Comparing investments on their headline rates without taking tax out.
• Not keeping income, investment and tax deduction certificates organised through the year, then rushing at the last minute.

Read alongside