Introduction

For the government to fund public services, infrastructure development, and other necessary expenses, taxes are an essential component of any nation’s economic system. One important piece of law that governs the taxation of income received by individuals, corporations, and other entities in Bangladesh is the Income Tax Act 2023. To address the nation’s challenges and adapt to the evolving economic landscape, the act was revised in 2025. By highlighting its main features and ramifications for taxpayers, this article seeks to offer a thorough overview of key changes to the Income Act 2023 (ITA 2023)

Background and purpose of the Act

For almost forty years, the Income Tax Ordinance of 1984 has been in effect. Many changes and complications in the old law resulted from the substantial evolution of the Bangladeshi economy, legal system, and international taxation practices over this time. It became increasingly clear that an updated, comprehensive, and straightforward income tax law was required.

The main motivations behind the ITA 2023 were

• Simplifying and Modernising
• Complying with Global Best Practices
• Extending the Tax System and Improving Revenue Collection
• Encouraging Economic Growth and Investment
• Ensuring equitable distribution of the Tax Burden
• Improving Transparency and Reduction of Complexities
• The process of digitisation

Changes in 2025 Affecting the Income Tax Act, 2023

Although the Income Tax Act, 2023, was a substantial shift in and of itself, the Finance Ordinance 2025 and the Revenue Policy and Revenue Management Ordinance 2025 brought about several substantive and significant administrative reforms in 2025.

A.     Administrative changes

To enhance the efficiency, accountability, and transparency of Bangladesh’s revenue collection system, the following changes have been made through the Revenue Policy and Revenue Management Ordinance 2025.

1. Abolition of NBR/IRD: The traditional National Board of Revenue (NBR) and Internal Resources Division (IRD) are formally dissolved.
2. Establishment of new division: Two new bodies, namely the Revenue Policy Division (RPD) and the Revenue Management Division (RMD), have been established.
   • The Revenue Policy Division (RPD): This division is dedicated to developing tax policy, encompassing the drafting of legislation, negotiation of treaties, and conducting research.
   • The Revenue Management Division (RMD): It is responsible for operational tax administration, which includes compliance enforcement, assessment, collection, audits, and taxpayer services.

B.   Terminological changes

1. Tax Day definition: Under Section 2, Clause 80KA, the well-known phrase ‘Tax Day,’ which most people understood to be November 30th for individual taxpayers, has been removed from the official vocabulary. Through the modification, the return filing deadline has been added. Although they are now more flexible and clear, the due dates remain essentially the same. As per the term due date of the filing return, it is as follows:
   • The deadline for filing returns for natural persons and Hindu Undivided Family (HUF)

taxpayers is still November 30th for the relevant assessment year.

• The deadline for all other assessments, including those for businesses and firms, is now clearly set as the fifteenth day of the ninth month following the end of the fiscal For organisations with varying income year-ends, this offers more precise guidance.
• Individual taxpayers now specifically have the option to ask the Commissioner of Taxation for a 90-day extension of the return filing deadline. For people who are faced with unforeseen situations, this offers greater flexibility.

2.   Amendment of the Definition of “Dividend”

In Section 2, Clause (81) of the Income Tax Act, 2023, after Sub-clause (e) of the proviso, the following new Sub-clause (u) has been inserted—

“(u) where, for the purpose of carrying out a specific activity, a joint venture distributes its post-tax profits among partners other than natural persons, such distributed portion.”

That is, if a joint venture formed for a specific purpose distributes its post-tax profits among partners other than natural persons, such distributed portion shall not be treated as a dividend from the assessment year 2025–26. The amended provision will be applicable from the tax year 2025–2026.

3. Fair Market Value: Under section 2(48), the definition of ‘Fair Market Value’ has been revised, which now refers to the price an asset or business would fetch on the open market or the price determined by the Deputy Commissioner of Taxes with approval. It also includes the residual value received from the lessee if an asset is leased by a financial institution, subject to the lease agreement’s terms.

4.   Replacement of the Definition of “Commissioner”

According to Section 2, Clause (19) of the Income Tax Act, 2023, “Commissioner” means the Tax Commissioner or the Tax Commissioner (Large Taxpayers Unit) as referred to in Section 4.

Through the Finance Ordinance, 2025, this definition has been replaced. Under the new definition, “Commissioner” means the Tax Commissioner as referred to in Clause (26Ka).

5.   Amendment of the Definition of “Annual Value”

In Section 2, Clause (62), Sub-clause (a) of the Income Tax Act, 2023, the following Sub-clause

(a) has been substituted in place of the existing one—

(a) the reasonable annual rent of any property.

6. Repeal of Section 20 regarding taxation on differences in import, export, or investment: Through the Finance Ordinance, 2025, Section 20 of the Income Tax Act, 2023, has been repealed. As a result, there will no longer be any provision for imposing tax on differences in import, export, or investment.

7.   Amendment of Section 21 regarding penalties on undisclosed foreign assets in returns:

In Sub-section (1) of Section 21 of the Income Tax Act, 2023, after the words “resident Bangladeshi,” the words “taxpayer or one who is or was a Bangladeshi by birth” have been inserted. This amendment has broadened the scope of application of Section 21.

For the next assessment year, particular adjustments to tax rates, exemptions, and compliance requirements are introduced by the yearly Finance Ordinance, 2025. The Finance Ordinance 2025 has suggested several significant modifications to the ITA 2023 for the evaluation year 2025–2026 and later years:

C.   Taxation of Individuals

Individuals are categorized into various tax bands according to their income levels under the Income Tax Act 2023. Because the tax rates are progressive, those with greater incomes pay higher taxes. Additionally, the act permits a number of tax credits, exemptions, and deductions that lower an individual’s overall tax obligation.

1. Individual taxpayer rate:

• The tax rate of 30% for non-residents remains unchanged except for non-resident

2.   Individual tax-free threshold:

3. ​minimum taxpayer

For a taxpayer living in Dhaka North City Corporation, Dhaka South City Corporation, Chittagong City Corporation, or another city corporation, the current minimum tax is unaltered, except for corporation taxpayers:

4.  ​Surcharge

Rich individual taxpayers in Bangladesh pay a surcharge at specific rates based on their income tax. The fiscal year 2025–2026 states that there won’t be any surcharges up to Tk 4 crore. There will be a minimum 10% surcharge, though, if a natural person with a net worth of more than Tk 4 crore owns 8,000 square feet of property and one car. 25% for those with net worth between Tk. 20 and Tk. 50 crores, and 20% for those with net worth between 10 and 20 crore. There is a 35 per cent surcharge for those with net worth over Tk 50 crore. This figure stays the same for the 2026–2027 and 2027–2028 proposed years.

5.  ​Rates of Environmental Surcharge:

The prices are determined by the engine capacity (CC or KW) of the car. There has been virtually no change in these rates since the last Finance Act (which was incorporated into the ITA 2023).

Rate of the Environmental Surcharge (2025–2026)

For the proposed 2026-2027 & 2027-2028, the rates remain the same.

6.  ​Employment benefits and taxes

Benefits from the job, like insurance premiums and expenses for artificial limbs and brain surgery, will not be counted as income. Additionally, benefits associated with motor vehicles and transportation will not be counted as employee income; however, to encourage thrift among Bangladeshi workers, the tax rate on the use of luxurious or larger-engine cars has increased significantly. In addition, the premium paid for the group insurance under section 49 will be considered an employee expense rather than falling under the prerequisite category.

7.  ​Tax on Rental Income

To encourage the rent transaction through banks and restrict the cash-based home rental system in Bangladesh, the new Finance Ordinance, 2025, has the following instructions:

• Within five years or the duration of the contract, the advance rent paid by bank transfer will be adjusted. In contrast to this provision, advance rent exceeding 0.5 million a year not received through the bank will be considered special The advance’s

unadjusted amount will be deductible on the return. However, rental income is exempt from this deduction, which permits tax liability and provides flexibility in handling it.

8. Workers’ Welfare Fund: A 10% tax must be subtracted when money is paid to or credited to beneficiaries from the fund. And to evaluate such an act, section 234 of the Labour Act of 2006 will be applied.

D.   Company Taxation

1. The following categories apply to publicly traded companies:
   • The current tax rate for publicly traded companies (those with more than 10% of paid-up capital issued through an IPO) is 20%. However, in case of contravention, the tax rate can be increased up to 22.5%. This rate remains the same for the proposed year.
   • The current tax rate for publicly traded companies (with less than 10% of paid-up capital issued through an IPO) is 22.5%. However, in case of contravention, the tax rate can be increased up to 25%. As the proposed year is 27.5%, without the mandatory application of any condition.
2. The tax rate for other than public companies defined under section 2(31) is 25%. However, in case of contravention, the tax rate can be increased up to 27.5%. This remains unchanged with the removal of the condition.
3. A 15% tax will be imposed on the income of private universities, private medical colleges, private dental colleges, private engineering colleges, or private colleges solely dedicated to imparting education on ICT. This rate remains unamended in the proposed year

Provided that if any educational institute fails to make appropriate arrangements for the person with disabilities, a surcharge tax rate of 2.5% will be imposed on such institute.

22. The tax rate of a One Person Company (OPC) is 20%. However, in case of any contravention, the tax rate can be increased up to 22.5%, and the tax will be applicable. In the next proposed year, this rate increased to 27.5% regardless of compliance with the condition.

Tax Rate on Banks and Financial Institutions: For the proposed year, the tax rate of 37.5% applies to publicly traded banks, insurance companies, and financial institutions (apart from merchant banks). However, a 40% tax is still in place for financial institutions, insurance providers, and banks that are not publicly traded. In addition, Merchant Bank will now pay a tax rate of 27.5% instead of the present 37.5%.

Tax Rate on Tobacco-Producing Companies: Currently, businesses that produce various tobacco products, including cigarettes, bidi, chewing tobacco, and gul, are subject to a tax of 45% + 2.5% (surcharge), which has not been altered.

Tax Rate on Mobile Traded Company: Companies that are publicly traded as mobile operators will be subject to a 40% tax. However, non-publicly traded mobile operator companies are subject to a tax rate of 45%, which remains unchanged by the proposed amendment.

E.   Withholding tax return

The withholding tax return has been raised from 1% to 1.5% under section 97. Instead of filing the withholding income tax return monthly, it must be done quarterly. The deadline is the 25th of the month following the end of each quarter, and there is no chance for a time extension. In addition, government directors and ministries are exempt from filing withholding tax returns under the new amendment.

F.  Tax Exemption:

The tax exemption and investment rebate have undergone the following modifications:

• Tax exemption through SRO will apply to a class of people rather than a particular
• All other conditions for ineligibility for expedition have been removed except the failure to file a return by the due date.
• Awards received from any foreign government will fall under the exemption category. This exemption extended to international awards like the Cannes Film Award, Booker Prize, Nobel Prize, Pulitzer Prize, Grammy Awards, Emmy Awards, Golden Globe, Ramon Magsaysay Award, Simon Bolivar Prize, and Academy Awards.
• Gifts from parents, spouse, and
• Agricultural income and income from poultry, seed marketing, dairy products, sericulture farming, frog farming, and shrimp and fish hatcheries up to 5 million is exempted if the assessee has no other income source.

Apart from that, under 174, certain exemptions can still be claimed with delayed interest.

• Pensions from the government, national pension plans, and universal pension
• Foreign remittance
• Income from the provident fund and gratuity
• Employment income

G.   Indirect Tax (VAT Exemption)

• Advance tax rates have been raised for commercial importers from 5% to 5% and decreased for manufacturers importing raw materials from 3% to 2%.
• Changes to the VAT rate:
  • Higher VAT rates for specific manufacturing stages and online sales of goods

• Liquefied natural gas (LNG), computer monitors, aircraft lease rent, and packaged liquid milk are now exempt from VAT.

• Rates for larger balances remain unchanged, while positive changes are made for bank account balances up to Taka 5 lakh.

H.   Investment Rebate:

An investment tax refund is available to both resident and non-resident individual taxpayers. The minimum amount of this refund is BDT 1 million, 15% of the real qualifying investment, or 3% of the total taxable income. Premiums paid for life insurance, payments to provident and superannuation programs, purchases of authorised securities, and gifts to government savings plans or charity organisations are all considered qualified investments. Even buying a single laptop or PC is eligible. These clauses are meant to encourage saving and particular economic endeavors in Bangladesh.

I.   TDS (Tax Deduction at Source)

 TDS on certain services (Under Section 90—Residents)

TDS on certain services (under Section 119—Non-Residents)

TDS on certain services

Timeframe for TDS Submission:

Sub-section (3) of Section 177 (as substituted): The return of tax deducted or collected at source shall be furnished every quarter within the following due dates of the financial year, namely:

Explanation: With effect from the Assessment Year 2025–2026, the return of tax deducted or collected at source shall be furnished quarterly instead of monthly.

J.   Tax Return

1. Tax Return

A tax return is a particular document on which a taxpayer reports their yearly income, outlays, and investments. A taxpayer computes their entire taxable income and the tax due on it using this form, which they then submit to the National Board of Revenue (NBR).

2.  Individuals who are required to file tax:

According to Section 265 of the Income Tax Act, 2023, it is mandatory for certain individuals or entities to file a tax return. Generally, those who are required to file include:

• An individual earning more than the tax-free income

• Anyone who had tax assessed in any of the last 3

• A company, or a director/shareholder/employee of a

• A partnership firm, or a partner in such a

• An employee in an executive or managerial

• A government

• A non-resident individual with a permanent business establishment in

• Anyone eligible to be registered as a taxpayer (under Section 261).

• Anyone required to show proof of tax return filing (under Section 264).

3.  ​Methods for filing a Tax return

Currently, there are two main methods for filing a tax return in Bangladesh:

• Manual Method: Filling out the prescribed form and submitting it directly to the tax
• E-Return Method: Filing the return online using the e-return portal on the National Board of Revenue’s website.

4.  ​Failure to File a Tax Return

Failure to file a Tax return in the due time has the following consequences.

1. Penalty under Section 266 for non-compliance;
2. Tax exemption application under Section 174;
3. Monthly 2% interest for unpaid taxes;
4. Being disconnected from utility services;
5. Complications/difficulties in salary and

5.  ​Entities that do not need to file a Tax Return

The following persons/entities shall not be required to file a return, namely:

• Any educational institution—

• Which is a Bangla-medium primary or pre-primary school, government secondary or higher secondary school, or an educational institution enlisted under the Monthly Payment Order (MPO) scheme; and

• Which does not have an English version

• Government universities;

• Bangladesh Bank;

• Bangladesh Telecommunication Regulatory Commission (BTRC);

• Bangladesh Securities and Exchange Commission (BSEC);

• Any organisation, authority, commission, institute, board, academy, or similar body established by any law or government order, which does not engage in any commercial activities and which receives regular funding from the Government for meeting its operational expenses, either wholly or partially;

• Orphanages, shelters for orphans, and any institution established for religious purposes;

• Any non-resident individual who has no fixed base in Bangladesh;

• Any fund;

• Any person exempted by the Board through a notification in the official Gazette from filing a

K.   Miscellaneous:

The income of a spouse or minor child: If the spouse or minor child is not a taxpayer, but has their own income, then such income of the spouse or child shall be included in the taxpayer’s total income.