Five percent source tax remains for savings certificates up to five lakh taka: NBR

The National Board of Revenue (NBR) has clarified that the source tax on profits from investments in savings certificates of up to five lakh taka will remain at 5 per cent, not 10 per cent. The confusion arose last month when tax was deducted at the 10 per cent rate for these investments.

A letter regarding this was sent to the Director General of the Department of National Savings on Tuesday. Md Abdur Rahman Khan, Secretary of the Finance Ministry's Internal Resources Division and Chairman of the NBR, confirmed the matter.

Sources at the Department of National Savings stated that previously, the source tax on profits from savings certificates was 5 per cent for investments up to five lakh taka, and 10 per cent for higher amounts. However, the Income Tax Act 2023 set the source tax rate at 10 per cent for all cases, with an exemption effective until last December. From January, the withdrawal of this exemption led to a 10 per cent tax deduction for everyone, resulting in lower profits for investors with less than five lakh taka in January.

Discontent arose among investors as no notification was issued regarding this change. They demanded the reinstatement of the old tax rate and the refund of the extra amount deducted.

The NBR's letter stated that according to the 2019 notification, if an individual's total investment across all types of savings certificates does not exceed five lakh taka, the source tax rate on the profit will be 5 per cent.

Furthermore, if an individual's total investment in only pensioner savings certificates is limited to five lakh taka within an income year, no source tax will be applicable on that profit. In this case, the source tax rate will be zero per cent.

Conversely, as per Section 105 of the Income Tax Act 2023, if an individual's total investment exceeds five lakh taka, a source tax of 10 per cent will be applicable on the profit earned.

The NBR also clarified that, as per previous rules, no source tax will be deducted on the profit from pensioner savings certificates up to five lakh taka.

It may be noted that while the government issued a notification on December 31 reducing the profit rates on savings certificates, it was revoked four days later. Consequently, the profit rates effective from July to December 2025 remain in force for the first six months of this year.

Currently, there are two tiers for savings certificate investors—the first tier for investments below 7.5 lakh taka and the second tier for higher amounts. Depending on the scheme, the profit rates on savings certificates range from a maximum of 11.82 per cent to 11.98 per cent.