Income Tax Act 2023 Bangladesh: Rates, Returns, Withholding, Appeals and the 2026 Changes

Income Tax Act 2023 Bangladesh: the law as it stands in 2026

The Income Tax Act 2023 Bangladesh framework replaced the Income Tax Ordinance 1984 and now governs every individual, company, firm and non-resident with income connected to Bangladesh. It changed the vocabulary of tax, built a new withholding and proof-of-return architecture, and has been reshaped every year since by finance legislation, most recently the Finance Ordinance 2025 issued by the interim government and the Finance Act 2026 passed by the elected Parliament in June 2026. For anyone who learned tax under the 1984 Ordinance, a great deal of practice has moved.

This guide explains the Act as it stands in October 2026: its structure and key concepts, residence and permanent establishment, rates for individuals and companies, minimum and turnover tax, return filing and the new rebate and additional-tax windows, advance tax, the withholding regime, proof of submission of return, penalties and interest, audit and assessment, refunds, appeals and alternative dispute resolution, the institutional reform of the National Board of Revenue, and a practical compliance calendar.

Summary: The Income Tax Act 2023 taxes income by reference to a July to June tax year, applies progressive rates to individuals with a Tk 4 lakh general threshold under the Finance Act 2026, and taxes most unlisted companies at 27.5 per cent, or 25 per cent where all transactions run through banks. Withholding at source, proof of return, timed filing rebates and penalties, and pre-deposits on appeal are the levers that drive compliance.

Key point: Individuals no longer face a single tax day. Under the Finance Act 2026, returns filed from 1 July to 30 September earn a 5 per cent rebate capped at Tk 25,000, returns filed by 31 December attract neither rebate nor penalty, and later returns attract additional tax. Online filing is now compulsory for most individuals.

At a glance

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Table of Contents

Income Tax Act 2023 Bangladesh: structure and key concepts

The Act consolidated and rewrote the income tax law that had been built up under the 1984 Ordinance over four decades. The most visible change is conceptual. The old distinction between an income year and an assessment year has given way, for most purposes, to the tax year, generally running from 1 July to 30 June; banks, insurance companies and financial institutions use a calendar year, and foreign-parented subsidiaries may align with their parent's financial year.[3] Finance legislation and practitioner guidance still refer to assessment years when setting rates, so both terms continue to appear in practice.[5]

How the Act is organised

The Act groups the charge to tax, heads of income, computation, returns, assessment, recovery, appeals and offences in a single code, supported by schedules that carry rates, exemptions and withholding details. Deduction and collection of tax at source sits in Part 7, which is the part most businesses deal with every month.[3] [6] Exemptions for particular kinds of income, including nil withholding on foreign-remitted income brought in by Bangladeshi citizens, are found in the Sixth Schedule.[8]

Annual amendment

The Act is amended every year through the budget. The Finance Ordinance 2025 was issued on 2 June 2025 and modified by the Various Finance Related (Amendment) Ordinance 2025 on 26 June 2025. The Finance Bill 2026 was presented on 11 June 2026, passed on 29 June 2026 and received presidential assent on 30 June 2026.[6] [10] Reading the Income Tax Act 2023 Bangladesh text without these amendments will give the wrong answer on rates, filing windows and appeal deposits.

Who is taxable: residence and permanent establishment

Individuals

An individual is resident for a tax year if he or she stays in Bangladesh for 183 days or more in that year, or for 90 days or more in that year and 365 days or more in the four preceding years.[9] Residents and non-resident Bangladeshi citizens are taxed at the progressive rates; non-resident individuals who are not Bangladeshi citizens are taxed at the maximum rate of 30 per cent.[1] Since the Finance Act 2026, a non-resident individual without a permanent establishment need not file a return.[5]

Companies and other entities

A company is resident if it is incorporated under Bangladeshi law or if its control and management are undertaken wholly in Bangladesh. Firms and other associations of persons are resident where control and management are carried out wholly or partly in Bangladesh.[14]

Permanent establishment and the digital economy

The permanent establishment definition covers the familiar fixed places of business, construction and installation sites, service provision through personnel and dependent agents. It now also reaches a significant digital or online presence, with a threshold of 100,000 users or subscribers in Bangladesh.[14] [6] Foreign platforms selling into Bangladesh should assess this test, alongside any applicable tax treaty, before the next tax year begins.

Tax rates for individuals in 2026

The progressive slabs are the same across the current schedule: after the tax-free threshold, the next Tk 3 lakh is taxed at 10 per cent, the next Tk 4 lakh at 15 per cent, the next Tk 5 lakh at 20 per cent, the next Tk 20 lakh at 25 per cent and the balance at 30 per cent.[1] From later years in the Finance Act 2026 schedule, a 35 per cent top band applies to the highest incomes.[1] [7]

Thresholds

The Finance Act 2026 fixed a multi-year path for the general tax-free threshold: Tk 4 lakh for FY2026-27 and FY2027-28, Tk 4.5 lakh for FY2028-29 and FY2029-30, and Tk 5 lakh for FY2030-31. Parliament raised these figures from the original budget proposal of Tk 3.75 lakh, Tk 4 lakh and Tk 4.5 lakh.[10] Higher thresholds apply to women and senior citizens aged 65 or over (Tk 4.5 lakh in the current schedule), persons with disabilities and third-gender taxpayers (Tk 5.25 lakh) and gazetted war-wounded freedom fighters (Tk 5.5 lakh), with a further Tk 50,000 for a parent or guardian of a person with a disability.[1]

Minimum tax and surcharge

An individual whose income exceeds the threshold pays a minimum tax of Tk 5,000, or Tk 1,000 for a new taxpayer.[1] A wealth surcharge applies on top of the tax: nil up to net wealth of Tk 4 crore, then 10 per cent of tax for net wealth above Tk 4 crore up to Tk 10 crore, or for owning more than one car or house property above 8,000 square feet, rising through 20 and 30 per cent to 35 per cent of tax above Tk 50 crore.[1]

Other individual changes

The 2026 budget reduced the qualifying amount for the investment rebate, taxes dividends received by individuals at 15 per cent, exempts freelancing and content-creation income, and treats loans or deposits above Tk 5 lakh received outside banking channels as income from other sources.[5] Medical expenses reimbursed under group insurance policies are now exempt.[7] Our guide to income tax rates in Bangladesh works through the slabs with examples.

Corporate tax rates and turnover tax

For the current schedule, which PwC records as running from assessment year 2026-27 to 2030-31, the main corporate rates are as follows.[4]

• Listed companies: 22.5 per cent where at least 10 per cent of paid-up capital was offered through an IPO, or 20 per cent if all transactions are by bank transfer; 25 per cent, or 22.5 per cent, where less than 10 per cent was offered.
• Other companies: 27.5 per cent, reduced to 25 per cent where all transactions are by bank transfer.
• Banks, insurers and financial institutions: 37.5 per cent if listed and 40 per cent if not.
• Tobacco and mobile operators: 45 per cent, with 40 per cent for a mobile operator that lists by offering 10 per cent of its capital.
• Firms, associations and trusts: 27.5 per cent; cooperative societies 20 per cent.
• Private universities and specified colleges: 5 per cent, reduced from 10 per cent by the Finance Act 2026.[10]

Turnover tax

Where tax payable on profits is lower, turnover tax applies regardless of profit or loss: 3 per cent for tobacco manufacturers, 2.5 per cent for carbonated or sweetened beverages, 1.5 per cent for mobile operators, 0.2 per cent for a manufacturing undertaking in its first three years of commercial production and 1 per cent in other cases.[4] Turnover tax does not apply to VAT, supplementary duty and certain other receipts.[6] For loss-making businesses, turnover tax is often the largest single income tax cost, and it should be modelled before pricing contracts. See our analysis of corporate income tax in Bangladesh.

Filing returns under the Income Tax Act 2023 Bangladesh regime

Individuals: the new filing windows

Individuals may file at any time during the tax year, but timing now changes the bill. Returns filed between 1 July and 30 September receive a rebate of 5 per cent of tax, capped at Tk 25,000; returns filed between 1 October and 31 December receive no rebate and pay no additional tax; returns filed from 1 January to 31 March pay additional tax of 2 per cent, with a Tk 3,000 minimum; and returns filed from 1 April to 30 June pay 5 per cent, with a Tk 5,000 minimum.[2] [11]

First-time filers are due by 30 June after the end of the income year, and residents returning from abroad in specified cases have 90 days from their return.[2]

Why this matters

The windows replace the old practice of repeated deadline extensions. In December 2025 the NBR used its power under section 334 of the Act, with government approval, to extend the individual deadline for tax year 2025-26 from 31 December 2025 to 31 January 2026, after an earlier move from 30 November.[12] Under the current structure, the incentive to file early and the cost of filing late are built into the law.

Online filing

Online filing has been available since 9 September 2024. From 28 June 2026, individuals must file exclusively through the NBR's e-return platform, subject to exceptions for taxpayers aged 65 or over, persons with certified disabilities, Bangladeshi taxpayers abroad, legal representatives of deceased taxpayers and foreign nationals working in Bangladesh.[2] The NBR launched the e-return service for tax year 2026-27 on 22 July 2026, with payment by bank transfer, card or mobile financial services.[11] Our guide to income tax return filing in Bangladesh walks through the process.

Companies

A company's return is due on the 15th day of the ninth month after the end of its income year, or on 15 September if that date would fall earlier.[3] A company filing within the two months before its due date earns a 5 per cent rebate capped at Tk 25,000, and a company filing late within the rest of the tax year pays additional tax of 2 per cent, with a Tk 25,000 minimum. The Finance Act 2026 repealed the NBR's power to extend the company filing date by one month.[3] [5]

Supporting documents

Companies and other entities with turnover above Tk 10 crore or capital above Tk 5 crore must file audited financial statements certified by a chartered accountant and a certified income computation sheet; smaller firms and associations need a certified computation sheet.[3] An individual return without the statement of assets and liabilities and living expenses is treated as incomplete, and since the Finance Act 2026 a return is incomplete without the acknowledgment of the taxpayer's withholding return where one is due.[2] [5]

Advance tax, interest and payment

Under the Income Tax Act 2023 Bangladesh rules, advance tax is payable in four instalments, on or before 15 September, 15 December, 15 March and 15 June. The Finance Act 2026 raised the threshold for compulsory advance tax from Tk 6 lakh to Tk 10 lakh of income.[2] [5] Any balance is paid on self-assessment before the return is filed, by electronic challan through designated banks or mobile payment apps.[2] [3]

Where tax paid is less than 75 per cent of assessed tax, simple interest runs on the shortfall at 10 per cent a year, or 15 per cent if the return was filed late, from 1 July following the year until assessment or for two years, whichever is shorter. A shortfall in advance tax can attract a penalty equal to the amount short-paid.[3] The Finance Act 2026 limits the additional 50 per cent interest on an advance tax shortfall to cases where the return is filed after the end of the assessment year.[5]

Withholding tax: the engine of the Act

Most income tax under the Income Tax Act 2023 Bangladesh system is collected before the taxpayer files anything. Part 7 of the Act requires a long list of payers to deduct or collect tax at source on payments to suppliers, contractors, service providers, landlords, employees, investors and non-residents.[3] Our guide to withholding tax in Bangladesh covers the rates in detail.

Selected rates

For residents, current rates include 10 per cent on commissions and fees, 5 per cent on payments to contractors and suppliers by default, 10 per cent on services by default, 10 per cent on rent, 15 per cent on share transfers, 3 per cent on electricity purchases and 25 per cent on lottery income. For non-residents, salaries and artists' fees are subject to 30 per cent, capital gains to 15 per cent and unlisted payments to 20 per cent.[8] Dividends are withheld at 15 per cent for resident individuals and 20 per cent for other residents.[8]

Finance Act 2026 changes

The Finance Act 2026 raised withholding on lottery and online-game income to 25 per cent, cut it on export cash subsidies to 5 per cent, on electricity purchases to 3 per cent and on inward remittances for services to 5 per cent, introduced 0.5 per cent on purchases of gold and other precious items and 0.2 per cent advance tax on goods sold to retailers, and limited withholding verification to the current and two preceding income years.[5] Withholding suffered by a non-resident without a permanent establishment is final tax.[5] [8]

Withholding returns and identification

Withholders file quarterly returns by the 25th day of the month after each quarter.[8] The Withholder Identification Number is being replaced by the TIN, and the Finance Act 2026 extended withholding return filing to specified non-corporate deductors and treats individuals with business turnover above Tk 10 crore as specified persons for withholding purposes.[5] [8]

Consequences of default

If deduction rules in Part 7 are not followed, the under-deducted amount can be taxed in the payer's hands with an additional 50 per cent.[3] The Finance Act 2026 also provides for additional tax of 150 per cent of a withholding or deposit default, without disallowing the related expenditure.[5] For finance teams, withholding failures are now among the most expensive errors under the Act.

Proof of submission of return

The Income Tax Act 2023 Bangladesh regime makes the proof of submission of return a gateway document. Individuals must produce it to obtain a range of specified services, and e-filing generates the proof instantly.[2] [11] The withholding system reinforces it: if a resident payee cannot show proof of return, the applicable withholding rate generally increases by 50 per cent, except for persons exempt from filing.[8] The Finance Act 2026 requires proof for the latest tax year to be displayed.[5]

Parliament also stepped back from extending the gatekeeping further. Proposals to make a TIN mandatory for opening most bank accounts, and for registering partition deeds and property mutations, were dropped before the Finance Bill 2026 was passed.[10] Businesses should still verify the payee's proof of return before every significant payment, because the withholding consequence falls on the payer.

Penalties for late and defective returns

The penalty structure under the Income Tax Act 2023 Bangladesh regime combines timing charges, additional tax and interest.[2] [3] [5]

• Filing-window charges: 2 or 5 per cent additional tax for individuals filing after 31 December, and 2 per cent for companies filing after the due date.
• Delayed return filed voluntarily: additional tax of 10 per cent of tax payable or Tk 5,000, whichever is higher.
• Return filed after a reassessment notice deadline: 15 per cent of tax payable or Tk 10,000, whichever is higher.
• Interest: 10 or 15 per cent a year where payments fall below 75 per cent of assessed tax.
• Withholding defaults: additional tax as described above.

Filing late can also cost incentives and deductions that require filing within the prescribed timelines.[3] Our guide to the tax compliance checklist sets out the controls that prevent these charges.

Audit, assessment and NBR powers

Returns are accepted on filing, but the Board selects returns for audit under its guidelines and gives final approval. The Deputy Commissioner of Taxes issues the audit notice and report; the taxpayer may file a revised return; a satisfactory response ends the audit, and an unsatisfactory one leads to assessment under section 183 or 184.[2] [3] Assessment is mandatory for delayed returns and for returns filed after audit selection.[2]

Time limits

The Board has two years from the end of the relevant year to select a return for audit, and the audit must be completed within one year from the end of the year of selection.[2] [3] The Finance Act 2026 widened reassessment so that it can reach undisclosed income older than six years and discontinued businesses.[5] Records must be retained for six years, or for companies for the period required by the Companies Act 1994.[3]

Anti-avoidance

The Deputy Commissioner may counteract abusive arrangements by enhancing income, amending liability, adjusting refunds or revoking benefits, starting with a notice that explains the suspected abuse and calls for documents.[3] Our article on tax audits in Bangladesh explains how to respond.

Refunds

For individuals whose income comes only from employment, financial assets or agriculture, refunds are processed automatically within 120 days of filing.[2] [7] Excess tax deducted or paid can be refunded or adjusted, with refunds payable within 60 days of application and recourse to the Commissioner or the Board for delay.[6]

Appeals and ADR under the Income Tax Act 2023 Bangladesh framework

A taxpayer who disputes an assessment moves through three tiers: the Commissioner of Taxes (Appeals), the Taxes Appellate Tribunal and the High Court Division. Each tier now requires a pre-deposit of part of the disputed tax: 1 per cent of the difference between assessed and admitted tax at the Commissioner (Appeals) stage, 3 per cent at the Tribunal, reduced from 10 per cent, and 10 per cent at the High Court Division, reduced from 15 or 25 per cent.[6] The Finance Act 2026 discontinued the waiver of pre-deposit.[5]

Powers on appeal

The Commissioner (Appeals) may now set aside a case, and a taxpayer may file a revised return after a Tribunal order setting aside an assessment.[5] Both changes make the first appeal a more useful forum for correcting procedural failures in an assessment.

Alternative dispute resolution

The Act's alternative dispute resolution route remains available, and the Finance Act 2026 extended it to Tribunal orders as well as pending appeals, while tightening recovery of tax admitted in ADR.[5] ADR is worth considering where the dispute turns on facts, valuation or documentation, and where the taxpayer can accept a negotiated figure in exchange for speed and certainty. Our tax disputes practice advises on appeal and ADR strategy.

The NBR and the 2025 revenue reform

The Act is administered by the National Board of Revenue under the Ministry of Finance. In May 2025 the interim government issued the Revenue Policy and Revenue Management Ordinance 2025, which provided for the NBR to be replaced by a Revenue Policy Division and a Revenue Management Division, separating tax policy from collection.[13] The ordinance drew criticism from civil society and protests by tax and customs officers, including a strike on 29 June 2025 that temporarily closed Chattogram port, and its implementation was held back while amendments were considered.[13]

For taxpayers, the institutional change does not alter the substantive tax rules in the Act, and current practitioner guidance reviewed in July 2026 continues to describe the Board as the body that selects audits and administers the regime.[3] Anyone dealing with rulings, refunds or audits should nonetheless confirm which authority is responsible at the time.

Incentives and exemptions worth knowing

• Solar power: income of producers operating their own solar power centres is exempt until 30 June 2035.[5] [6]
• Edible oil: manufacturers using local oilseeds receive a phased exemption of 100, 50 and 25 per cent over ten years.[5]
• Freelancers and content creators: qualifying income is exempt; see our freelancer tax guide.[5]
• Start-ups: the growth period was extended to nine years.[5]
• Joint development: landowners are taxed at 15 per cent on the net gain from cash, flats or other benefits.[6]
• Hill districts: exemptions for indigenous communities now extend to salary income.[10]

Compliance calendar under the Income Tax Act 2023 Bangladesh

The dates below assume a July to June tax year. Taxpayers with a different year should adjust accordingly.

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The table below summarises the main obligations and consequences. On a phone, scroll it sideways.

Practical priorities for 2026-27

Three priorities stand out. First, individuals should file between July and September where possible, because the rebate is now real money and late filing carries a statutory charge. Second, businesses should review withholding processes, proof-of-return checks and quarterly returns, because withholding defaults carry the heaviest additional tax. Third, anyone with a dispute should budget for the pre-deposit at each appellate tier and consider ADR at the right moment.[5] [6]

The Income Tax Act 2023 Bangladesh regime rewards early, documented compliance and penalises improvisation. Our tax compliance practice, corporate tax practice and tax disputes practice advise individuals, foreign investors and companies, and our overview of tax law in Bangladesh covers VAT and customs alongside income tax. To discuss a specific matter, contact TRW.

Frequently asked questions

What is the tax year under the Income Tax Act 2023?

Generally 1 July to 30 June. Banks, insurance companies and financial institutions use the calendar year, and foreign-parented subsidiaries may align with their parent.[3]

What is the tax-free income threshold in 2026?

The Finance Act 2026 sets Tk 4 lakh for general taxpayers for FY2026-27 and FY2027-28, rising to Tk 4.5 lakh and then Tk 5 lakh in later years, with higher thresholds for women, senior citizens and other categories.[1] [10]

Is there still a tax day for individuals?

Individuals now file within windows: a 5 per cent rebate up to Tk 25,000 for July to September, no charge for October to December, and additional tax of 2 or 5 per cent for later filing.[2] [11]

When must a company file its return?

By the 15th day of the ninth month after the end of its income year, or 15 September if that is earlier.[3]

What is the corporate tax rate for a private limited company?

27.5 per cent, reduced to 25 per cent where all transactions are made by bank transfer, subject to turnover tax where that is higher.[4]

What is the minimum tax for individuals?

Tk 5,000 where income exceeds the threshold, or Tk 1,000 for a new taxpayer.[1]

Is online filing compulsory?

For most individuals, yes, from 28 June 2026, with exceptions including taxpayers aged 65 or over, persons with disabilities, Bangladeshis abroad and foreign nationals working in Bangladesh.[2]

What happens if a payee cannot show proof of return?

The applicable withholding rate generally increases by 50 per cent, unless the payee is exempt from filing.[8]

How much must I deposit to appeal a tax assessment?

One per cent of the disputed difference before the Commissioner (Appeals), 3 per cent before the Taxes Appellate Tribunal and 10 per cent before the High Court Division, with no waiver.[5] [6]

Has the NBR been abolished?

A 2025 ordinance provided for the NBR to be replaced by separate revenue policy and revenue management divisions, but implementation was held back amid opposition, and current guidance still refers to the Board administering the Act.[3] [13]