NBR to withdraw tax rebate on investment in capital market

FE Report (June 20, 2011)

The National Board of Revenue (NBR) is set to withdraw tax rebate facilities on investment in the capital market by individual taxpayers from the upcoming fiscal.

Currently, individual taxpayers can enjoy 10 per cent tax rebate facilities if they show investment in the share market in the tax return file.

In a reverse order, the revenue board is set to offer 10 per cent tax rebate on Deposit Premium Scheme (DPS) up to Tk 60,000 annual investment in all scheduled and commercial banks.

Depositors of the state-controlled banks - Sonali, Janata, Agrani, Rupali - are now enjoying the tax rebate on DPS.

In the Finance Bill-2011, the government also brought income of mutual fund issuing companies under tax net from the upcoming fiscal.

Issuer of mutual fund will have to pay income tax at the regular rate on their income on issuance of mutual fund.

The revenue board has also withdrawn tax-free ceiling up to Tk 20,000 for investment on debenture. From 2011-12 fiscal, people will have to pay tax on the entire interest amount of debenture.

Currently, the revenue board offers tax rebate on the amount that the taxpayer invests in the share market, both primary and secondary trading.

A senior revenue board official said the government has withdrawn the provision of tax benefit for investment in the share market in the Finance Bill-2011.

Officials said taxpayers will not get any tax rebate from 2011-12 fiscal by showing investment in the capital market, but individual taxpayers can enjoy tax-free facilities on capital gain.

Taxpayers who are now claiming tax rebate on investment in the capital market are subject to paying tax at the normal rate on capital gain, said a senior tax official.

The revenue board has withdrawn the provision to avoid any complexities on claiming tax benefit on capital gain.

The NBR official said the government did not impose any new tax on the capital market, but withdrew some existing tax benefits.

In a bid to come out of the widespread tax-exemption culture the revenue board has incorporated those measures in the Finance Bill-2011.

Tax officials said the measures will bring a significant amount of revenue in the upcoming fiscal from the capital market.

Former Finance Adviser AB Mirza Azizul Islam said the government is encouraging investment in banks with the measure rather than facilitating investment in the capital market.

"The capital market is now in a difficult situation, so the government should handle it carefully," he said.

Investment will be diverted to the banks in the reverse order with the measures, he said.

He hailed the government decision of not keeping mandatory rule of TIN (taxpayer identification number) on opening of Beneficiary Owner's (BO) account.