Investment for Tax Purposes – If you are a taxpayer in Bangladesh, you must be aware of the allowable investment options to get investment tax allowance. Investing in the permitted sectors offers two-fold benefits: firstly, it allows you to save money for the future, and secondly, and perhaps more importantly, it reduces your eventual tax liability.
Why is investment required for tax purpose ?
Generally, we all want to legally reduce our tax burden by any means. In Bangladesh, you can lower your tax liability by investing in specific areas specified as allowable under Part 3 of the 6th Schedule of the Income Tax Act 2023. Investing in these allowable areas is one of the few options available to taxpayers in Bangladesh to reduce their tax obligations. Therefore, as part of your tax planning, you may be searching for available investment options. We are here to provide you with the precise legal requirements for allowable investments. Let’s proceed to the list.
Investment for Tax Purposes - Where to Invest to get tax rebate
The allowable investment options has been mentioned under Part 3 of 6th Schedule of Income Tax Act 2023. Below are the available options for tax purposes investment.
Life Insurance Premium (LIP)
Life Insurance Premium (LIP) is an allowable investment for tax purposes. The premium paid for yourself, your spouse, and minor children is allowable from tax perspective. The maximum allowable limit is 10% of the insurance policy’s value; (Ref: Para 2(1) of Part 3 of 6th Schedule)
Purchase Shanchaypatra
Investing Tk. 5 lakhs in the purchase of savings certificates (Shanchaypatra) or similar instruments is allowable investment in Bangladesh. Investing in Shanchaypatra a common choice for many due to the guaranteed rate of return, low risk, and minimal hassle during the purchase process. To buy them, you simply need to visit the bank, fill out a form, and provide the necessary documents with minimal formalities. It’s important to note that Shanchaypatra interest will be credited automatically to the bank account mentioned in the purchase Form; (Ref: Para 2(7)(a) of Part 3 of 6th Schedule)
Deposit Pension Scheme (DPS)
Investment of Tk. 120,000 in Deposit Pension Scheme (DPS) is allowable investment for tax purposes; (Ref: Para 2(7)(c) of Part 3 of 6th Schedule).
Investment in Capital Market
Investing any amount in the capital market qualifies as an allowable investment. Under the Income Tax Act 2023, there is no specified limit for stock market investment meaning you can invest any amount you wish. Furthermore, bear in mind that both primary and secondary share investments are eligible for claiming investment tax allowances; (Ref: Para 2(8) of Part 3 of 6th Schedule)
Investment in Govt. Treasury Bill, Bond or Debenture
Investing Tk. 5 lakhs in the purchase of govt. treasury bill, bond or debenture is also permitted for tax purposes. So you can plan to here as it allowable investment; (Ref: Para 2(7)(a) of Part 3 of 6th Schedule)
Investment in Security issued under SUKUK or Sharia-compliant
If you want to invest while adhering to Islamic principles, SUKUK bonds or Sharia-compliant bonds are the best options for tax savings. Such types of investment is allowable investment from tax perspective. Investing any amount in any SUKUK or Sharia-compliant securities is allowable for tax purposes subject to listing with Bangladesh Securities & Exchange Commission (BSEC). Currently, many financial institutions and merchant banks in our country offer these types of instruments; (Ref: Para 2(8) of Part 3 of 6th Schedule)
Unit Certificate/ Mutual Fund EFT etc.
Investing Tk. 5 lakhs in the purchase of Unit Certificates, Mutual Funds, ETFs, or units in joint investment schemes listed with BSEC is also permissible tax investment. Currently, many financial institutions and merchant banks in our country offer these types of instruments with attractive return rates. Consider these options for potential tax savings; (Ref: Para 2(7)(b) of Part 3 of 6th Schedule)
Purchase of Bond/ Debenture
In Bangladesh, currently Bond market is increasing day by day. To get investment tax credit you can invest any amount in a Bond or debenture listed with BSEC. Apart from Tax rebate, investment in a quoted bond or debenture will give you two possible sources of income firstly Interest income – which will flow to you at regular intervals if you hold the instruments till the date when interest is entitled, b) capital gain – if you sell the bond/ debentures at a higher rate in any given date. Please note capital gain on the sale of listed bond/ debenture is exempted from tax vide SRO no. 196-Law/Income Tax/2015, dated 30 June 2015; (Ref: Para 2(8) of Part 3 of 6th Schedule)
Contribution to Recognized Provident Fund (RPF)
Both self-contribution and the employer’s contribution to a Recognized Provident Fund (RPF) are eligible as tax investment. In this context, ‘recognized’ signifies approval by the National Board of Revenue (NBR). It’s important to note that this type of fund is applicable to all employees except government service holders; (Ref: Para 2(5) of Part 3 of 6th Schedule)
General Provident Fund
Contribution to any provident fund governed by the Provident Fund Act, 1925, is eligible as tax investment. It’s important to note that the Provident Fund Act, 1925, applies exclusively to government employees; (Ref: Para 2(4) of Part 3 of 6th Schedule)
Approved Superannuation Fund
Contributions to an Approved Superannuation Fund are eligible as tax investment, provided that the assessee is a participant in the fund; (Ref: Para 2(6) of Part 3 of 6th Schedule)
Approved Superannuation Fund
Contribution to Benevolent Fund and group insurance premium is also allowable tax investment; (Ref: Para 2(12) of Part 3 of 6th Schedule)
Conclusion - Investment for Tax Purposes
Above mentioned options are available to anyone as Investment for Tax Purposes. You can choose to invest anywhere as per your convenience and effort. For any details please connect with.
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