[🇧🇩] Budget for 2025- 2026

[Saif]

Dilemmas foreshadow budget making for funding holdback

Finance officials seem in dilemmas crafting the upcoming fiscal budget with uncertainty overshadowing budget-support credits worth some billion dollars from foreign development financiers, as IMF lending stays in holdback. Officials say initially they had planned to enhance net foreign borrowings

thefinancialexpress.com.bd

Budget-support credit worth $3.0b looks uncertain
Dilemmas foreshadow budget making for funding holdback

IMF naysay may echo thru other development partners

Syful Islam
Published :
May 10, 2025 00:17
Updated :
May 10, 2025 00:17

Finance officials seem in dilemmas crafting the upcoming fiscal budget with uncertainty overshadowing budget-support credits worth some billion dollars from foreign development financiers, as IMF lending stays in holdback.

Officials say initially they had planned to enhance net foreign borrowings for financing the 2025-26 budget compared to the current budget. Some US$3.0 billion in budget support from the pipeline was expected be available soon, amid an indication that in the next fiscal year the country also may get a significant amount as budget support from the development partners.

However, with the International Monetary Fund (IMF) showing restraint from releasing fourth and fifth tranches of a $4.7-billion lending programme, amounting to some $1.3 billion, Finance Division officials are now not certain whether or not the other development partners will extend their budget support.

"We are now not confident about getting the IMF's budget-support loan as the differences are not narrowing," a senior finance ministry official told the FE, as long-drawn negotiations ended sans deals.

If the IMF does not agree to release the tranches, he feels, the other development partners also may turn their back to Bangladesh. The bilateral and multilateral development partners usually follow IMF assessment before extending any financial support to any country.

According to the finance officials, presently, apart from IMF's $1.3 billion, there is a sum of $500 million from the World Bank, $500 million from the Asian Development Bank, 400 million from the Asian Infrastructure Investment Bank (AIIB), and $250 million from Japan International Cooperation Agency (JICA) as budget support in the pipeline.

In the current fiscal budget, the net foreign-borrowing target was set at Tk 907 billion which the budget officials had planned to enhance to Tk 1.0 trillion in the upcoming budget, sources said.

On the contrary, the budget officials were planning to lower borrowing from domestic sources to Tk 1.4 trillion in the next fiscal year from Tk 1.609 trillion in the outgoing one to help higher fund flow for private-sector investment.

However, with the changed financial scenario, officials involved in budget preparation are now in a quandary as to how to finance the next budget without harming private-sector investment if budget-support loans are not given by the development partners in the few days left before the new budget rollout.

On return from the spring meetings of the IMF and the World Bank late April, Finance Adviser of the interim government Dr Salehuddin Ahmed said: "IMF doesn't agree to pay the budget-support credit, we will prepare budget on our own."

The government has already decided to trim the size of coming budget compared to the current one taking into consideration the trend of financing from home and abroad.

Dr Zahid Hussain, a former lead economist at the World Bank's Dhaka office, says unless the government gets budget credits amounting to some $3.0 billion from the development partners, they will have to cut expenditure by any means or enhance revenue collection.

He thinks achieving the big revenue-earning target the government is setting for next fiscal year will be "largely impossible".

Also, Mr Hussain foretells, unless budget-support credit is available, the government will have to depend on project aid which is only available based on project implementation.

"In that case, the government will have to depend on financing from domestic sources that means banking sector only to dry-out funds for private-sector investments," he told The Financial Express.

Mr Hussain feels this was the high time the government made the exchange rate fully market- dependent.

He mentions that the governor has recently been saying that forex supply was very good, demand was not strong, current-account balance was in positive territory, and everything was stable.

The economist also points out that dollar price has gone three years down on the international market while crude oil, gas, and coal prices have fallen, and commodity price is projected to tumble by 12 per cent in 2025.

"Thus, there is no chance of exchange-rate volatility if the control is lifted," he says, adding, "As everything is stable, the government should have taken the chance and met the IMF's requirement."​

 

[Saif]

NATIONAL BUDGET FY26: Cash subsidy on exports to be slashed by Tk 1,000 crore

The government is likely to cut down on the cash incentive on exports by more than Tk 1,000 crore in the new financial year of 2025–26.

www.newagebd.net

NATIONAL BUDGET FY26: Cash subsidy on exports to be slashed by Tk 1,000 crore
Staff Correspondent 10 May, 2025, 22:32

The government is likely to cut down on the cash incentive on exports by more than Tk 1,000 crore in the new financial year of 2025–26.

Finance ministry officials said that Tk 8,000 crore was likely to be earmarked for cash subsidy to the exporters in the new budget to be announced on June 2.

The outgoing FY2024–25 budget kept Tk 9,025 crore for the same purpose.

Finance ministry officials said that this would be the second year in a row that they were reducing cash subsidies on exports as per the government policy to phase it out in near future.

Bangladesh will not be able to provide cash subsidies to the exporters once it is graduated from the least developed countries’ bloc in November 2026 as per the World Trade Organisation rules.

Ministry officials also said that exporters would be compensated for the losses of cash subsidy with policy support, such as, rebate on power bills, banks loan facilities and improving the ease of doing business.

The country is also trying to sign Free Trade Agreements with various countries to boost trade and economic cooperation in a bid to strengthen its LDC graduation.

Bangladesh has agreed to finalise a FTA with Singapore by the end of 2026, while negotiations are also underway for FTAs with China and Japan.

At present, 43 export items get cash incentive.

Ministry officials further said that the number of the items getting the cash incentives was likely to remain the same, while the rate would be slashed.

At present, cash assistance on the export earnings of apparel makers in all markets is 0.30 per cent.

The cash subsidy for entering into new markets is 2 per cent.

Agro products, potatoes and processed meat exporters enjoy 10 per cent incentive on export earnings, the highest among all sectors.

The government is providing 6 per cent case incentives on crust leather export.​

 

[Saif]

The upcoming budget should deliver economic stability

Controlling inflation should be a top priority for the interim government.

www.thedailystar.net

The upcoming budget should deliver economic stability

FILE ILLUSTRATION: REHNUMA PROSHOON

As Bangladesh approaches the fiscal year (FY) 2025-26, the country stands at a critical juncture. The interim government is set to unveil a new national budget, which is expected to reflect both the pressing need for economic stabilisation and structural reform. With the economy grappling with high inflation, low revenue mobilisation, rising unemployment, persistent inequality, and the impending graduation from Least Developed Country (LDC) status, the upcoming budget is poised to address these multifaceted challenges.

The formulation of the FY2025-26 budget occurs against a backdrop of significant economic and political upheaval. The ousting of the previous government in August 2024, following mass protests, led to the establishment of an interim administration on August 5, 2025, tasked with steering the country through turbulent times.

This is reflected in the World Bank's revised economic growth forecast for Bangladesh which dropped to 3.3 percent growth of Gross Domestic Product (GDP) for FY2024-25, marking the lowest rate in 36 years. This reduction is attributed to high inflation, reduced investment, a weak financial sector, and political instability. As of April 2025, the point-to-point inflation rate stood at 9.17 percent, with a 12-month average of 10.21 percent. Although this reflects a decline from last month's 9.35 percent (point-to-point) and 10.26 percent (12-month average) respectively, inflation is still high, persisting for almost three years now. To combat inflation, the central bank has maintained a tight monetary policy, keeping the policy rate at 10 percent. These economic challenges are compounded by the upcoming graduation from LDC status in 2026, which will result in the loss of various flexibilities, including the loss of preferential market access for Bangladeshi products in developed and some developing country markets and access to finance at flexible terms.

Amid these challenges, exports have shown resilience. Export receipts during October-December 2024 increased by 5.1 percent compared to July-September 2024 and by 20.2 percent compared to October-December 2023. This is due to increased export receipts from readymade garments, jute and jute manufacturers, and fish and shrimps. Despite these gains, the readymade garment sector could face headwinds due to new US tariffs and shifting global demand, potentially impacting future export performance.

In a departure from previous expansionary budgets, the interim government plans to present a contractionary budget totalling Tk 7.90 lakh crore for FY2025-26, down from Tk 7.97 lakh crore in the current FY2024-25. This reduction reflects a strategic shift towards fiscal prudence in response to mounting economic pressures. The projected budget deficit is expected to be equivalent to about 4.6 percent of GDP. To finance this deficit, the government plans to rely on a combination of foreign borrowing, bank loans, and savings certificates. Over half of the deficit is expected to be covered by external sources. The government will have to be cautious in bank borrowing as it will increase its debt burden. Besides, funds should be available to the private sector whenever needed.

One of the challenges, as in the previous years, will be the financing of the budget from domestic sources as Bangladesh's tax-to-GDP ratio remains one of the lowest globally, which is below 8 percent according to government data. This significantly constrains the government's fiscal capacity. To address this, the National Board of Revenue (NBR) has set a revenue collection target of Tk 4.99 lakh crore for FY2025-26. The government plans to broaden the application of the standard 15 percent value-added tax (VAT) rate and reduce tax exemptions. The government aims to generate additional revenue through new tax measures and administrative improvements. However, for efficient and enhanced tax collection, the government must initiate several reforms. Key initiatives to enhance revenue mobilisation include the separation of tax policy and administration within the NBR to reduce conflicts of interest and improve efficiency. Automation of NBR and skilled human resources are other necessary measures. Without deep reform measures, tax evasion cannot be controlled. Therefore, sufficient resource allocation should be made to enhance the institutional capacity of the NBR.

Controlling inflation should be a top priority for the interim government. The new budget plans to reduce inflation to 6.5 percent by the end of FY2025-26. To achieve this, fiscal and monetary policies must be aligned. Fiscal policy should be designed in a way that ensures adequate allocations are made to priority sectors while pursuing a contractionary fiscal policy. Fiscal prudence should be ensured by avoiding excessive borrowing from the banking sector. To control inflation, the government should also closely monitor markets, investigate market manipulation, and enforce anti-trust laws with a zero-tolerance policy to prevent price gouging and ensure fair competition. The allocation for social safety net should be increased to protect vulnerable people.

In the current context, the general population expects a budget that addresses their immediate economic hardships, particularly high inflation and unemployment. There is also a strong desire for increased transparency and accountability in government spending, as well as effective implementation of development projects. The public also expects the government to take decisive action against corruption and inefficiency, which have historically plagued budget execution. The interim government is in an advantageous situation to set an example by raking such action since this government has no electoral compulsion.

The FY2025-26 budget presents a critical opportunity for Bangladesh to recalibrate its fiscal policies and lay the groundwork for sustainable economic growth. By focusing on revenue mobilisation, inflation control, and strategic investments in key sectors, the interim government can navigate the current economic challenges and set the stage for a more resilient future. The success of this budget will depend on the government's commitment to transparency, accountability, and the effective implementation of its proposed measures.

Dr Fahmida Khatun is the executive director at the Centre for Policy Dialogue.​

 

[Saif]

Govt’s bank borrowing target may shrink in next budget

The government is planning to significantly reduce its bank borrowing target in the upcoming fiscal year as it aims to narrow the budget deficit by scaling down the overall budget size.

www.thedailystar.net

BUDGET FOR FY26

Govt’s bank borrowing target may shrink in next budget

The government is planning to significantly reduce its bank borrowing target in the upcoming fiscal year as it aims to narrow the budget deficit by scaling down the overall budget size.

The target is set to be slashed by nearly 25 percent in the budget for FY26, dropping to Tk 104,000 crore.

The budget deficit for the outgoing fiscal year is also likely to shrink by around Tk 30,000 crore to Tk 226,000 crore, according to a finance ministry official.

To manage the deficit in the upcoming budget, the government is expected to rely more on foreign borrowing rather than domestic sources, especially banks, as interest rates on foreign loans are comparatively lower.

The slow implementation of the Annual Development Programme (ADP) in the current fiscal year and efforts to curb inflation are also expected to contribute to a reduced bank borrowing target.

To manage the deficit in the upcoming budget, the government is expected to rely more on foreign borrowing rather than domestic sources

As a result, the national budget for FY26 is projected at Tk 790,000 crore -- Tk 7,000 crore less than the original budget for the current year, which would mark the first time in recent memory that the overall budget would see a contraction.

Zahid Hussain, a former lead economist at the World Bank's Dhaka office, said the government's move to reduce bank borrowing is linked to its lower deficit target.

"Bank borrowing should be reduced because if the government takes a large portion of available credit, the private sector won't have enough access to loans," he added.

The interest rate on treasury bonds and bills is currently very high. If banks have a greater opportunity to lend money to the government, they will be less inclined to invest in the private sector, he said.

"We will not implement the budget by borrowing from banks or printing money. This budget will be implementable," Finance Adviser Salehuddin Ahmed told journalists yesterday after a meeting of the advisory committee on public procurement.

He also said the upcoming budget would not have a large deficit, adding that the government would refrain from borrowing to finance mega projects.

Aided by bank borrowing, budget sizes have ballooned in recent years despite low revenue collection.

Total outstanding domestic borrowing stood at Tk 942,507 crore as of January 2025, up from Tk 722,591 crore in June 2021.

The government is set to borrow Tk 125,000 crore from domestic sources, including both banks and non-bank institutions in FY26. Of this, Tk 21,000 crore is expected to come from non-bank sources, such as savings instruments and treasury bond sales to corporates and individuals.

Even in the current fiscal year, the borrowing target was revised to Tk 117,000 crore from Tk 160,900 crore in the original budget due to low ADP implementation and the adoption of a tight fiscal policy.

Of this, bank borrowing was revised down to Tk 99,000 crore from the original Tk 137,500 crore.

However, bank borrowing stood at Tk 15,531 crore in the first seven months of the current fiscal year, falling far behind the revised target due to low ADP implementation.

Contrary to recent years, the government has not borrowed from the central bank during this period. Instead, it repaid Tk 59,486 crore.

"This is called quantitative tightening, which supports the implementation of a contractionary monetary policy and helps reduce inflation," Hussain said.

The government also repaid more than it borrowed from savings instruments during the same period. Sales of savings instruments stood at Tk 36,463 crore, while repayments against the principal amounted to Tk 43,476 crore.

Hussain said this was due to a decline in people's savings, driven by high inflation.

The government borrowed Tk 31,625 crore from treasury bills and bonds in the last seven months.

"This trend will be instrumental in introducing a secondary bond market," Hussain added.

However, the government's borrowing from commercial banks reached Tk 75,018 crore as of January this year.​

 

[Saif]

We must reduce deficit for sound budget management

Bangladesh experiences a deficit budget due to limited fiscal resources mobilisation.

www.thedailystar.net

We must reduce deficit for sound budget management

VISUAL: REHNUMA PROSHOON

Practically, in budget preparation of government accounts, three methods are commonly used: balanced, deficit and surplus budget. When government spending for a given fiscal year equals anticipated government revenue, the budget is considered balanced. This method is typically followed by economically sound countries such as Germany, South Korea, and Switzerland. The balanced budget is also referred to as a zero-based budget, where all expenses must be justified for each new period and are analysed for their needs and costs. On the other hand, a surplus budget occurs when government revenue exceeds expenditure. It is a rare occurrence. However, such budgets are occasionally observed in resource-rich countries such as Kuwait, Qatar, Oman, Denmark, Brunei and the UAE. But a budget deficit occurs when government expenses exceed revenue, and budget deficits affect the national debt and revenue collection by the tax authority. A budget deficit can lead to higher levels of borrowing, higher interest payments, and lower reinvestment, which will result in lower revenue during the following year. Economist John Maynard Keynes strongly favoured a deficit budget during the Great Depression of the 1930s. He argued and advocated for government intervention to curb unemployment and economic recession. He also debated that increased government spending was necessary to decrease unemployment, even if it meant a budget deficit.

Bangladesh, like many other developing countries, is experiencing a deficit budget due to limited fiscal resources mobilisation from internal sources. Besides, many industrialised countries also face similar long-term budgetary challenges and have run persistently large budget deficits in recent decades. These large and persistent budget deficits have generated considerable concern. There is a widespread perception that they reduce growth, and could lead to a crisis if they continue for long or become too large. Thus, it is important to examine the sources and effects of budget deficits.

Taking the last 30-years' total budget and deficit figures for Bangladesh from 1995 to 2024, a steady increase was found. The budget has grown from Tk 209.48 billion in 1995 to Tk 7,617.85 billion in 2024 (Budget data MoF). Similarly, the deficit also expanded significantly, from Tk 7.84 billion in 1995 to Tk 2,617.85 billion in 2024, indicating higher expenditure compared to revenue generation. It is also noticeable that, every five to eight years, the budget size more than doubled.

Bangladesh's budget has been experiencing a substantial deficit since the very beginning. The data between 1995 and 2024 also reflects this pattern on a year-to-year basis. Between 1995 and 2000, the largest deficit occurred in 1998 and the trend continued, with the deficit in 2024 marking a new peak.

When viewed from another perspective, the deficit as a percentage of the total budget from 1995 to 2024 highlights significant fluctuations, reflecting varying fiscal challenges over the years. The early years (1995-2000) show relatively lower deficits, the period from 2002 to 2010 exhibits moderate but volatile deficits, averaging around 30 percent, suggesting ongoing budgetary constraints. A gradual decline is observed from 2011 to 2019, with deficits stabilising below 30 percent. On the other hand, post-2020, the deficit accelerated again, peaking at 36.14 percent in 2023 before slightly decreasing in 2024.

Bangladesh's budget largely relied on deficit due to rising operating expenditures, import dependency, infrastructure development, and corruption-induced administrative inefficiencies. Consequently, the deficit-to-total-budget ratio remains high. However, despite this significant budgetary gap, the deficit-to-GDP ratio remains within the standard threshold of five percent. To offset this shortfall, the government borrows from both domestic and foreign sources. As a result, Bangladesh's vicious cycle of national debt has been accelerating year after year. Ironically, it is claimed that our deficit budget-to-GDP ratio remains within the standard level of five percent; however, there are concerns about the credibility of this figure due to possible exaggeration in GDP calculations (White Paper on Bangladesh Economy Report-2024). In reality, the actual deficit budget-to-GDP ratio is likely higher than the reported level.

Bangladesh should prudently shift towards a more balanced budget approach, incorporating zero-based budgeting to ensure maximum value from public funds. Furthermore, project selection, financing, and implementation must be administered with due diligence. Aside from operating expenses, capital expenditures under project financing should align with global cost competitiveness and incorporate appropriate technical expertise.

In 1925, US President Calvin Coolidge said, "I favor the policy of economy, not because I wish to save money, but because I wish to save people. The men and women of this country who toil are the ones who bear the cost of the Government. Every dollar that we carelessly waste means that their life will be so much the more meager. Every dollar we prudently save means that their life will be so much the more abundant. Economy is idealism in its more practical form." We strongly believe our policymakers will act accordingly.

Md. Mehdi Hasan Khan is pursuing Certified Internal Auditing (CIA) programme at Institute of Internal Auditors.

Md. Kamrul Hasan is pursuing CIA programme at Institute of Internal Auditors.​

 

[Saif]

Interest payments, subsidies soak up almost half of budget

Interest payments and subsidies have absorbed nearly half of Bangladesh’s total budget expenditure in the first seven months of the current fiscal year, underscoring growing fiscal stress and raising concerns over public finances.

www.thedailystar.net

Interest payments, subsidies soak up almost half of budget
These two areas of spending accounted for Tk 118,046cr, dwarfing most other priorities in the July-January period

Interest payments and subsidies have absorbed nearly half of Bangladesh's total budget expenditure in the first seven months of the current fiscal year, underscoring growing fiscal stress and raising concerns over public finances.

Between July and January, total government expenditure stood at Tk 246,583 crore, with Tk 118,046 crore -- roughly 48 percent -- channelled into interest servicing and subsidy payments, according to a January report from the finance ministry.

"This problem is structural," said Professor Mustafizur Rahman, a distinguished fellow at the local think tank Centre for Policy Dialogue (CPD).

"The difficulties we're seeing now are the result of longstanding structural problems in our economy. We've accumulated a lot of debt, and now the cost of servicing that debt is rising," he said.

Interest payments alone rose 27 percent year-on-year to Tk 75,902 crore in the July-January period.

Although the 2024-25 budget earmarked Tk 113,500 crore for servicing domestic and foreign loans, finance officials now say the figure may need to be revised upward due to rising yields on treasury bills and bonds, higher foreign interest rates, and continued depreciation of the local currency taka.

"At times, we've had overcapitalisation, and because of that, we've had to incur even more debt," Rahman said. "That's why debt servicing costs are increasing now."

Rahman stressed the need for greater prudence in fresh borrowing. "But we can't escape the debt that's already accumulated -- we have to carry that burden. It will have to be managed by future generations," he said.

BALLOONING SUBSIDIES

Subsidies also surged 53 percent year-on-year, reaching Tk 42,144 crore in the first seven months of FY25.

For the full fiscal year, the government had allocated Tk 88,000 crore for subsidies, but that figure is also expected to overshoot initial projections.

In the power sector alone, subsidy allocations are likely to rise from Tk 40,000 crore to as much as Tk 62,000 crore in the revised estimate. Fertiliser and gas subsidies are also set to climb.

"In the case of subsidies, we've had persistent problems with inclusion and exclusion. There hasn't been any meaningful reform or restructuring," said Rahman.

"What we're seeing now in these high percentages is the direct result of that," he added.

Donor agencies have long urged Dhaka to rationalise subsidies, particularly in the electricity sector. But finance ministry officials say reductions have proven difficult due to mounting arrears and sector-specific liabilities.

"Looking ahead, we can act," said Rahman. "For subsidies, we can undertake reforms and restructuring, apply sunset clauses, and take steps to reduce them," said Rahman.

The pressure on the budget has been compounded by a sharp rise in public debt. In fiscal year 2023-24, government debt grew by 13.3 percent year-on-year to Tk 18.3 lakh crore, equivalent to 36.3 percent of the country's gross domestic product.

As a result, rising interest payments are steadily eroding the government's capacity to invest in other areas.

Despite the expanding size of the national budget, set at Tk 797,000 crore for the current fiscal year, revenue mobilisation has remained flat.

The resulting mismatch has left the government increasingly reliant on domestic and external borrowing to meet its obligations, deepening the strain on fiscal space.

PRESSURE ON BUDGET

Development spending is already under pressure. Spending under the Annual Development Programme (ADP) fell to Tk 48,701 crore in the July-January period, compared with Tk 52,488 crore a year earlier.

Development expenditure under the revenue budget also dropped to Tk 1,650 crore from Tk 2,016 crore.

Fiscal analysts say Bangladesh is entering a delicate phase where both expenditure composition and revenue mobilisation must be addressed simultaneously.

"We can't do anything about the past," Rahman said. "But going forward, unless we increase our revenue-to-GDP ratio, we'll fall deeper into this debt trap."

"We must also address the problems with inclusion, exclusion, and targeting through reforms and better implementation efficiency," he added.​

 

[Saif]

Special allocation in budget to uphold spirit of July uprising

The allocation was discussed during a high-level meeting on the budget at the state guest house Jamuna on Saturday, with the chief adviser in chair.

en.prothomalo.com

Special allocation in budget to uphold spirit of July uprising
Special Correspondent Dhaka
Updated: 18 May 2025, 09: 28

The upcoming national budget for the 2025–26 fiscal year will have a special allocation to uphold and implement the spirit of the July uprising. A dedicated fund will be created to support initiatives related to the uprising.

The allocation was discussed during a high-level meeting on the budget at the state guest house Jamuna on Saturday, with chief adviser Professor Muhammad Yunus in chair. There is a tradition to hold such a meeting before finalising the national budget.

Among others, finance adviser Salehuddin Ahmed, planning adviser Wahiduddin Mahmud, special assistant to the chief adviser (finance ministry) Anisuzzaman Chowdhury, finance secretary Md Khairuzzaman Mozumde, revenue board chairman Abdur Rahman Khan, economic relations division secretary Shahriar Quader Siddiqui, planning secretary Iqbal Abdullah Harun, and financial institutions division secretary Nazma Mobarek.

Finance adviser Salehuddin Ahmed is all set to announce the budget on 2 June. The proposed budget size is Tk 7.90 trillion, slightly lower than the current budget of Tk 7.97 trillion.

According to meeting sources, the chief adviser expressed satisfaction when the finance adviser presented the overall preparations regarding the budget.

The government has already announced the formation of a department dedicated to the July uprising, in addition to establishing a July uprising memorial museum. Those who sustained injuries during the uprising are being treated at home and abroad, and the treatment support will continue.

Audio-visual documents of the student-led uprising will be collected from local and international sources and preserved officially. The government has also a plan to introduce a loan scheme for the families of those martyred in the July uprising.

All these initiatives will be financed from the special fund. However, the exact amount of the allocation could not be known as of Saturday.​

 

[Saif]

Tax-free income ceiling to rise, tax exemption in capital market

The annual tax-free income threshold for individual taxpayers is likely to be increased in the upcoming 2025-26 fiscal year. Currently, the annual income limit, exempted from tax, is up to Tk 350,000, which might be raised by Tk 25,000. That means, the new ceiling for the tax-free income limit...

en.prothomalo.com

Budget 2025-26
Tax-free income ceiling to rise, tax exemption in capital market
Special Correspondent Dhaka
Published: 19 May 2025, 23: 01

NBR building File photo

The annual tax-free income threshold for individual taxpayers is likely to be increased in the upcoming 2025-26 fiscal year. Currently, the annual income limit, exempted from tax, is up to Tk 350,000, which might be raised by Tk 25,000.

That means, the new ceiling for the tax-free income limit would be Tk 375,000.

Chief Adviser Professor Muhammad Yunus held a meeting with officials from the Ministry of Finance and the National Board of Revenue (NBR) regarding the next fiscal year’s budget on Monday afternoon.

The meeting took place at Jamuna, the official residence of the Chief Adviser. NBR Chairman Abdur Rahman Khan and other senior officials were present there.

Proposed changes to duties and taxes in the budget were discussed during the meeting.

Sources from the meeting said, both regulatory conditions and tax incentives may be eased to encourage enlisting of new companies in the stock market.

Speaking regarding this, NBR chairman Abdur Rahman Khan told Prothom Alo, “The main focus of the upcoming budget is to simplify the tax payment process. Filing returns online will be further encouraged.”

He added that the next budget will be both tax-friendly and investment-friendly.

Meeting sources revealed that the government has agreed in principle to increase the tax-free income threshold and has directed the NBR to take necessary steps.

Discussions were also held on the minimum tax amounts for individuals and companies.

The meeting also discussed setting a flat minimum tax of Tk 5,000 for individual taxpayers, regardless of whether they live in city corporations, municipalities, or rural areas.

Currently, the minimum tax varies between T 3,000 and Tk 5,000 depending on location.

Currently, there are 11.1 million (1 crore and 11 lakhs) Taxpayer Identification Number (TIN) holders in the country, but only around 4 million (40 lakhs) submit tax returns annually.

According to NBR sources, today’s meeting emphasised expanding the tax base and simplifying the tax filing process.

Measures will be proposed in the budget to further expand online return filing, and companies may be required to file returns online mandatorily.

Furthermore, currently, businesses with an annual turnover of over Tk 30 million (3 crore) must pay a 0.6 per cent tax regardless of profit or loss. This rate might be increased to 1 per cent.

Apart from this, local production of refrigerators and air conditioners may face higher VAT (Value Added Tax).

Currently, a 7.5 per cent VAT is imposed at the production level for these items. This could be increased to 15 per cent. Additionally, the VAT rate for mobile phones might also increase based on their value addition.​