Vol. 5 Num 1111 Mon. July 16, 2007  

Tax on savings certificate income irks small savers

Small savers have expressed disappointment over the imposition of tax on savings instruments income.

A number of savers were found complaining about the new tax when they drew income from their savings instruments at the Bangladesh Bank's Motijheel office yesterday.

The government imposed 10 percent tax deductible at source on annual income exceeding Tk 25,000 from savings instruments in the current fiscal year's budget. The new tax is applicable to savings certificates, which were sold since January 1, 2004.

The small savers who bought savings instruments after January 1, 2004 said they are not supposed to pay any taxes on income from the instruments.

The tax imposition with effect from 2004 is a breach of contract, added the small savers.

"I bought a savings instrument in July 2005 when the interest rate was comparatively lower than that in December the same year when the government increased the interest rate. But, the bank did not give me the higher interest as I bought in July," Ehsar Uddin, a lawyer, told journalists in the central bank's Motijheel office.

"So, why should I pay the tax since I bought the instrument in 2005 when there was no tax?" he questioned.

The National Revenue Board (NBR) on July 10 issued an order relating to the tax on savings certificates. The tax came into effect on July 1 this year.

The central bank on July 11 asked the commercial banks to execute the NBR order. The central bank also asked the commercial banks to follow the new tax measures in paying interest on income of savings instruments approved by the government.

Under the tax structure, small savers who earn an interest income less than Tk 25,000 annually will have to make a declaration.