Bangladesh: Tax-free limit of stock capital gain to be raised to Tk 20 lakh

Dhaka, June 27 (New Age): The government is likely to increase the limit of tax-free capital gains from stock investment for individual investors to Tk 20 lakh from the proposed Tk 10 lakh amid protest from the investors, officials of the National Board of Revenue said.
The government may also reduce the proposed tax on realised capital gains and increase the slabs of gains bowing down the tremendous pressure from the stock market players, they said.
In the last moment, the revenue officials on Thursday prepared an amendment proposal of the Finance Bill-2014 following the instruction from the finance minister Abul Maal Abdul Muhith.
According to the proposal, individual investors will have to pay tax at the rate of 2 per cent on capital gains from Tk 20 lakh to Tk 50 lakh in the coming fiscal year of 2014-15.
Tax will be imposed at the rate of 3 per cent on capital gains above Tk 50 lakh, officials said.
Earlier on June 5, Muhith proposed in the finance bill to impose tax on capital gains for the first time in the country.
The proposed tax rate was 3 per cent on capital gains above Tk 10 lakh but less than 20 lakh, 5 per cent for above Tk 20 lakh.
Tax-free limit of capital gains was proposed at Tk 10 lakh.
Earlier this week, finance minister in a meeting with the NBR officials organised for finanlising amendment of the finance bill categorically instructed for not to change the proposed tax rate and tax-free limit.
By this time, Bangladesh Securities and Exchange Commission, Dhaka Stock Exchange and Chittagong Stock Exchange mounted pressure on the NBR and lobbied with the government high-ups to withdraw the proposed tax.
The country’s two bourses also reacted sharply to the ups and downs in the capital market.
Experts also criticised the decision saying that though the imposition of tax on higher capital gain was right but it was not the right time to do so and the decision would put a negative impact on the already volatile market.
Muhith, returning from Jeddah on Thursday morning, asked the revenue officials for changing the tax rate and tax-free threshold, officials said.
By the evening, the amendment was sent to the law ministry for vetting, they said.
The proposed amendment is final and it will not be changed unless the prime minister instructs otherwise, officials said.
The NBR also finalised an upward revision of the proposed tax exemption limit on dividend income increasing the amount to Tk 20,000 from the proposed Tk 15,000.
Currently, stock investors enjoy tax exemption on dividend up to Tk 10,000.
NBR officials said that the government imposed tax on realised gains to boost revenue collection from the sector.
The initiative was just and fair taking the amount of realised gains into consideration.
‘An investor who has high capital gains from the capital market should pay tax and the proposed slab at Tk 10 lakh capital gains in a year for imposing tax was reasonable,’ an official said.
Small investors who are dominating in the market would not be affected by the decision, he said.
Finance minister was also convinced and decided to not to change the proposal till Sunday, but he has to bow down to the pressure from beneficiaries to review the proposal, he said.
There are approximately 29.79 lakh beneficiary owner’s accounts in the country.
The revenue board expected to collect nearly Tk 200 crore from tax on capital gains. Now the amount will be significantly low.