Tax Exemptions in Bangladesh (2026): Exempt Income, Tax Holidays, Zones, Startups and Certificates

Tax exemptions in Bangladesh: how the 2026 framework works

Tax exemptions in Bangladesh still reach almost every kind of taxpayer: salaried employees and pensioners, savers and small investors, farmers, SMEs, software houses, freelancers, startups, manufacturers and zone enterprises. What has changed is how they are granted and how easily they are lost. The Income Tax Act 2023 sets out the exempt income list in the Sixth Schedule and the tax holiday rules in Part 6, the Finance Act 2026 added and removed reliefs from 1 July 2026, and a tax expenditure policy in force since July 2025 now pushes new exemptions through Parliament rather than through executive orders.[1] [2] [11]

This guide is the all-taxpayer view: the exempt income list, the status of tax holidays, zone and park packages after the Invest Bangladesh merger, startup incentives, exemption and reduced withholding certificates, and sunset dates. Treaty rates and foreign-owned structures are covered in our guide to tax incentives for foreign investors in Bangladesh.

Summary: Exempt income is listed in Part 1 of the Sixth Schedule to the Income Tax Act 2023, deductions and the investment rebate in Parts 2 and 3, and the general tax holiday in Part 4. The general holiday window for new industrial undertakings closed in June 2025, but sector, energy, zone and startup reliefs remain, most with fixed sunset dates between 2027 and 2035. Every exemption depends on filing on time, withholding properly and receiving exempt income through banks, and payers will not apply a nil or reduced withholding rate without an NBR certificate.

Key point: An exemption is a conditional right, not a status. Section 76(5) of the Income Tax Act 2023 removes it for any year in which the taxpayer misses the return deadline, fails its withholding obligations or receives exempt income outside the banking system, and section 76(4) bars retrospective exemption. Most lost reliefs are lost through compliance failures, not policy change.

At a glance

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Table of Contents

Who grants tax exemptions in Bangladesh

The legal source of an exemption decides how secure it is. Part 6 of the Income Tax Act 2023, headed "Exemption, deduction and tax holiday", contains three routes: income excluded by the Act itself through the Sixth Schedule, exemptions granted by the National Board of Revenue by gazette notification under section 76(1), and approved tax holiday entities under sections 81 to 85.[1] A relief written into the Schedule can only be changed by a Finance Act. A relief granted by statutory regulatory order (SRO) can, in principle, be cancelled by another notification under section 76(3).[1]

Section 76(2) adds that an exemption promised by any other law or instrument does not operate unless it is also notified under section 76(1), so a licence, allotment letter or project agreement promising "tax-free" status is not, on its own, an exemption.[1] Section 76(8) bars a second exemption for the same source after a fixed-term exemption ends, or on amalgamation, demerger or acquisition, unless the existing period is extended by law or notification.[1]

The tax expenditure policy since July 2025

A Tax Expenditure Policy and Management Framework took effect in July 2025. It removed the NBR's power to grant exemptions from VAT, supplementary duty and advance tax, and Article 4 provides that only Parliament may approve tax exemptions, except in specific cases; an October 2025 ordinance restored the Government's power to grant VAT exemptions by special order.[11] New tax exemptions in Bangladesh therefore now arrive mainly through the annual Finance Act.[2]

The Sixth Schedule: exempt income after the Finance Act 2026

Section 77(1) excludes Part 1 income from total income, but it still counts as a source of funds and qualifies only if shown in the relevant column of the return with its source and amount.[1] The list below follows the authentic English text of October 2025 and the Finance Act 2026 changes.[1] [2] [3]

Employment, retirement and pensions

• Employment allowance: one-third of income from employment or Tk 500,000, whichever is lower, is tax-free.[3]
• Pensions: pensions from the Government or an approved pension fund, and pension under the Universal Pension Scheme, are excluded.[1]
• Gratuity: gratuity from the Government or an approved gratuity fund is exempt up to Tk 2.5 crore (Tk 25 million).[1] [3]
• Provident funds: contributions received by recognised and approved funds, and income they distribute after tax at fund level, are excluded.[1]
• Reimbursements: duty-related expenses reimbursed by an employer are excluded, and from 2026-27 so are medical expenses reimbursed under group insurance.[1] [2]

Savings, bonds and capital gains

• Pensioners' savings certificates: interest is exempt where the accumulated investment at the end of the income year does not exceed Tk 5 lakh.[1] [3]
• Remittance bonds: income from the Wage Earners Development Bond and the US dollar, euro and pound sterling premium and investment bonds is exempt.[1] [3]
• Offshore banking: interest or profit from Offshore Banking Units under the Offshore Banking Act 2024 is exempt in the hands of depositors and non-resident lenders.[3]
• Listed securities: an individual's capital gain of up to Tk 50 lakh from transferring shares or units of a listed company or fund is excluded, but not gains on sponsor, director or placement shares.[1] [3]
• Funds: income of BSEC-recognised mutual funds, alternative investment funds, REITs and ETFs is excluded at fund level.[1]

Farmers, regions, gifts and foreign income

• Small farmers: agricultural income of up to Tk 2 lakh is excluded for an individual farmer whose only other income is from cultivation and up to Tk 20,000 of interest or profit.[1]
• Hill districts: income of indigenous and ethnic community members in Rangamati, Bandarban and Khagrachari derived solely from economic activity in those districts is excluded.[1]
• Foreign income: income earned abroad by a Bangladeshi citizen and brought into Bangladesh in line with foreign remittance law is exempt.[1] [3]
• Family gifts: assets received as gifts from a spouse, parents, siblings or descendants are excluded if shown in the returns of both giver and recipient, and the giver need not disclose a gift remitted from abroad through banks.[3] From 2026-27, loans from close relatives later waived or converted into gifts are also exempt if both returns report them.[2]

Small business, co-operatives and social sectors

• SMEs: an SME producing goods is exempt where annual turnover does not exceed Tk 50 lakh, or Tk 70 lakh where it is owned by women; the Finance Act 2026 extends the higher limit to businesses owned by persons with disabilities and adds an SME registration condition.[1] [2] [3]
• Co-operatives: section 79 exempts co-operative income from crop production, cottage industry and marketing of members' agricultural produce. A cottage industry must have plant and machinery of no more than Tk 25 lakh and no more than 15 workers.[1]
• Social sectors: specified income of MPO-listed educational institutions and public universities, elderly care homes, approved charities and NGO Affairs Bureau-approved persons, and revolved microcredit service charges of entities registered with the Microcredit Regulatory Authority is excluded.[1]

IT services, freelancing and content creation

Clause 21 of Part 1 excludes business income of a resident or a non-resident Bangladeshi individual from 19 listed digital activities, among them AI and blockchain solutions, software as a service, cyber security, software development, mobile apps, call centres, digital archiving and IT freelancing, for 1 July 2024 to 30 June 2027. All income, expenditure and investment of the business must pass through bank transfer.[1] [3]

The Finance Act 2026 widened the position for individuals by exempting income from freelancing and content creation.[2] The budget speech presented the change as extending the exemption from IT-related freelancing to all freelance work and all forms of content creation, including earnings from platforms such as YouTube and Facebook, and as removing VAT on those services.[14] Conditions, withholding mechanics and the interaction with the 2027 ITES sunset are covered in our guide to freelancer tax in Bangladesh.

Deductions and the investment rebate

Part 2 of the Sixth Schedule lists donations deducted from total income, subject to section 77(2): the donation must appear in the return and cannot exceed 10 per cent of total income.[1] The Finance Act 2026 adds donations to the Centre for Zakat Management.[2]

Part 3 governs the investment rebate for resident individuals and non-resident Bangladeshis under section 78. For 2026-27 it is the lower of 3 per cent of taxable income (excluding exempt, reduced-rate and final-tax income), 10 per cent of eligible investment, or Tk 750,000.[3] The Finance Act 2026 uncapped unit and mutual fund investment, added rebates for donations to eleven named charities until 30 June 2030, and introduced a clawback on early encashment of certain securities.[2] [3] Slab rates and the tax-free threshold are covered in our guide to income tax rates in Bangladesh.

Tax holidays under the Income Tax Act 2023: current status

A tax holiday is a time-limited exemption on business income, usually on a sliding scale. Under section 81 an approved entity must be a statutory body or a Bangladeshi company with paid-up capital of at least Tk 20 lakh, must not be formed by reorganising an existing business or use previously used plant, and must keep separate accounts.[1] Section 82 requires the application within six months of commercial operation, with deemed provisional approval if the Board does not decide within 60 days.[1] The approval and related-party rules, analysed in our foreign investor incentives guide, apply equally to Bangladeshi-owned companies.

The general Part 4 holiday has closed to new projects

Part 4 covers more than 30 manufacturing activities, from active pharmaceutical ingredients, agricultural machinery and automobiles to LED televisions, mobile phones, plastic recycling, robotics, AI systems and aircraft heavy maintenance. The exemption runs for five years (90, 80, 60, 40 and 20 per cent) or ten years (from 90 per cent down to 25 per cent), depending on location, and does not apply to activity in city corporation areas, district headquarter municipalities or the three hill districts.[1] The decisive condition is timing: the entity must begin commercial production between July 2020 and June 2025.[1]

Neither the PwC nor the Rahman Rahman Huq summary of the Finance Act 2026 reports a reopening of that window, and in June 2026 zone investors asked the Government to "reinstate" a ten-year holiday.[2] [3] [13] A project starting production now should assume no general holiday unless a specific notification covers it.

Sector exemptions still open until 2030

Separate NBR orders give ten-year business income exemptions to specified technology goods, hospitals, home appliances, agro-processing, agricultural machinery, light engineering and automobiles, with commercial operation by 30 June 2030; automobile makers then receive ten years at a 10 per cent rate.[3] Manufacturers of freezers, refrigerators, motorcycles, air conditioners and compressors can use a 20 per cent rate until 30 June 2032.[3]

Energy and food: the 2025 and 2026 holidays

A November 2024 gazette gives renewable power producers a fifteen-year holiday (100 per cent for ten years, 50 per cent for three and 25 per cent for two) if commercial production starts between 1 July 2025 and 30 June 2030, and requires a no objection certificate from the Power Division for each plant.[10] From the Finance Act 2026 cycle, own-financed solar producers receive a full exemption on income up to 30 June 2035, and edible oil manufacturers using locally grown oilseeds receive 100 per cent for five years, 50 per cent for three and 25 per cent for two.[2] [3]

Exporters and accelerated depreciation

Export income is not exempt, but it is relieved. Individuals, firms and Hindu undivided families exporting goods have 50 per cent of that income exempted, other exporters pay 12 per cent, and LEED-certified exporters and jute products pay 10 per cent; the governing SRO runs to 30 June 2028.[3] [8] Plant and machinery used in manufacturing, tourism or sports outside the Dhaka and Chittagong City Corporations now qualifies for 60 and 40 per cent accelerated depreciation over two years, with twelve months to apply to the NBR.[2] Our guide to corporate income tax in Bangladesh sets out the base rates these reliefs sit against.

Economic zone, hi-tech park and EPZ exemptions

Location still produces the longest tax exemptions in Bangladesh. Income tax reliefs come from NBR orders and customs and VAT reliefs from separate SROs, so a zone enterprise should hold a copy of each instrument rather than rely on a brochure.[4] [5]

Economic zones

Investors in economic zones receive a ten-year sliding holiday on business income from manufacturing and services: 100 per cent for the first three years, then 80, 70, 60, 50, 40, 30 and 20 per cent, provided commercial operation starts by 30 June 2035. Developers receive 100 per cent for ten years, then 70 and 30 per cent. Units are exempt from customs duty, regulatory duty, supplementary duty and VAT on imported capital machinery and parts, and from VAT on gas, water, electricity and procurement provider services.[4]

Hi-tech parks

Investors in hi-tech parks regulated by the Bangladesh Hi-Tech Park Authority receive 100 per cent exemption for seven years from commercial operation and 70 per cent for the next three, again for operations starting by 30 June 2035. Developers have the same twelve-year schedule as zone developers, with matching customs relief on imported capital machinery and VAT relief on electricity and procurement provider services.[5] For a software or electronics company facing the June 2027 ITES sunset, a park is one of the few long-term tax exemptions in Bangladesh still open.

Export processing zones and Free Trade Zones

BEPZA lists a five- to ten-year tax holiday, duty-free import of machinery, construction materials and raw materials, duty-free export, and exemption from dividend tax during the holiday period.[6] The Finance Act 2026 amended the Customs Act 2023 to create Free Trade Zones, with no bonded warehouse licence, permission for manufacturing, trading and re-packing, and duty-free raw materials with deferred duty on domestic sales.[2] BEZIA has asked that Free Trade Zone benefits should not exceed those already given to economic zone investors.[13]

What the Invest Bangladesh merger changed

Invest Bangladesh began operating on 23 August 2026, formed by merging BIDA, BEZA and the PPP Authority; BEPZA and the Bangladesh Hi-Tech Park Authority were not part of the merger.[7] Because zone income tax holidays rest on NBR notifications under the Income Tax Act, the merger does not by itself cancel them; what changes is the authority issuing zone status. See our analyses of the Invest Bangladesh Act 2026 framework and investment approvals in 2026.

Startup tax incentives in Bangladesh

The startup sandbox sits in Part 2 of the Eighth Schedule to the Income Tax Act 2023 and was widened by the Finance Act 2026. It switches off the rules that usually make an early-stage company pay tax while it loses money.[1] [2]

Who qualifies

A startup is a company incorporated under the Companies Act 1994 with annual turnover not exceeding Tk 100 crore (Tk 1 billion), engaged in deploying or commercialising new products, processes or services driven by innovation, technology or intellectual property, and not formed by amalgamation or demerger. It must be registered with the NBR to use the sandbox.[1] [3] Rahman Rahman Huq's 2026 summary identifies two categories: deep tech startups in AI, fintech, scientific research, engineering innovation or significant IP, and standard startups engaged in innovation in products, services, processes or business models.[3]

What the growth years give

• Nine growth years: the Finance Act 2026 extended the growth period to nine years after incorporation, replacing the earlier three- and five-year periods.[1] [2] [3]
• No turnover tax: the turnover tax rate during the growth period is nil, down from the 0.1 per cent minimum tax in the 2025 text.[1] [2]
• No expense disallowances: sections 55 and 56 do not apply in computing business income, and the additional 50 per cent tax for withholding non-compliance does not apply.[1] [3]
• Losses survive funding rounds: growth-year losses carry forward for nine years even after new investment or a change of shareholding.[2] [3]
• Light reporting: only the income tax return and withholding return are required if the tax authority is given read-only digital access to systems or books.[1] [3]

VAT relief and registration

From 1 July 2026, supplies by a startup as defined in the Income Tax Act are exempt from VAT, as are VAT on imported services and VAT on rent; the budget speech set these VAT exemptions to run until 30 June 2035.[2] [14] Supplies by registered startups are also outside VAT deduction at source.[3] The 2025 text required companies incorporated after 1 July 2023 to register by 30 June of the year following incorporation, and a late registration may forfeit the sandbox altogether, so founders should register in the first year and confirm the window against the amended text.[1] Corporate structuring, shareholder agreements and funding are covered in our guide to startup law in Bangladesh.

Tax exemption certificate: how to obtain one

A tax exemption certificate turns an exemption into cash flow. Exempt income is still withheld at the full rate unless the payer holds a certificate for a nil or lower rate, and Rahman Rahman Huq's 2026 guidance is that payers should not apply a reduced rate without one; the NBR is expected to respond within 30 days.[3] Payers insist because deducting at a lower rate is a default under the Act, and the Finance Act 2026 set additional tax for withholding defaults at 150 per cent.[1] [2]

The statutory certificate powers

• Salary (section 86(5)): the Deputy Commissioner of Taxes may certify nil or lower deduction for the rest of the year where tax already paid covers the expected liability.[1]
• Interest (section 104(2)): the Board may certify nil or reduced deduction on interest paid to a resident.[1]
• Power generation (section 114(2)): an exempt power producer may obtain nil or proportionately reduced deduction for the income year.[1]
• Exporters (section 123(2)): the Board may certify that export proceeds be credited without deduction or at a reduced rate for a specified period.[1]
• Non-residents (section 119(2)): the Board may, within 30 days of a complete application, certify nil or reduced tax because of a treaty or any other reason.[1]

For contractor and service payments under sections 89 and 90, the rates are prescribed, and withholding agents in practice ask for an NBR certificate before deducting less for an exempt entity such as an ITES company, a holiday entity or a zone unit. Rates for each payment type are covered in our guide to withholding tax in Bangladesh.

Exporters: the proportional method

Exporters face a special rule. The 50 per cent exemption and the 12 and 10 per cent rates cannot be used as the basis for a reduced withholding certificate; an exporter with a rate below 12 per cent under another order uses a proportional method prescribed by SRO and NBR notification.[8] When that mechanism was introduced, certificates issued up to 3 March 2024 became invalid and new certificates had to be obtained under section 123.[9]

Preparing the application

The application goes to the NBR, or for salary to the Deputy Commissioner of Taxes, and must prove the legal basis of the exemption, the applicant's compliance and the payments covered. In our experience a complete file includes the TIN certificate, return and withholding return acknowledgements, audited accounts, the SRO, approval or registration relied on, the payer list with projected receipts, and any earlier certificate. Certificates are time-limited, so apply again before each income year starts on 1 July. These are the tax exemptions in Bangladesh where paperwork, not entitlement, decides cash flow.

Sunset dates: when tax exemptions in Bangladesh expire

Almost every relief has an end date. NBR officials have said fixed-term incentives cannot be cancelled early under the tax expenditure policy, which makes the stated term the most valuable feature of an exemption.[12] The table collects the principal dates; on a phone, scroll it sideways.

A commercial-operation deadline, such as the 2030 sector date or the 2035 zone date, governs entry; on the wording of the orders, a project that starts in time runs its full schedule. An income-period date, such as 30 June 2027 for ITES, ends the exemption for everyone unless a Finance Act extends it.[1] [3]

Keeping an exemption: the annual compliance gate

Section 76(5) denies any exemption under the Act in a year in which the taxpayer fails to file the return by the tax day, fails to comply with sections 166 and 171, fails to file withholding returns and meet Part 7, or receives receipts and income from an exempt source other than by bank transfer, subject to limited exceptions for agricultural receipts up to Tk 1 crore and family gifts.[1]

Turnover tax still applies to exempt businesses, reduced in proportion to the exemption, and manufacturers pay 0.2 per cent of gross receipts for their first three years.[3] [2] A holiday entity's income is computed separately, and its losses cannot be set off against taxable sources.[1] Our tax compliance checklist sets out the annual calendar.

How to claim tax exemptions in Bangladesh step by step

The process starts before the first sale and repeats every year. We use this sequence with clients claiming tax exemptions in Bangladesh, whatever the relief.

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Mistakes that cost taxpayers their exemptions

• Leaving exempt income out of the return: section 77 requires excluded income to be shown with its source, and omission undermines the wealth reconciliation.[1]
• Accepting cash: a single year of exempt receipts outside the banking system removes the exemption for that year.[1]
• Missing a window: the six-month holiday application, the twelve-month accelerated depreciation application and the startup registration deadline are all strict.[1] [2]
• Restructuring mid-holiday: amalgamation, demerger or acquisition ends further exemption for that source.[1]
• Paying without a certificate: a payer who deducts less than the prescribed rate without a certificate becomes liable for the shortfall and additional tax.[1] [2]

Each is avoidable with a register of instruments, deadlines and certificates. Our tax compliance practice runs that register for clients.

Withdrawals, disputes and what to watch in 2026-27

SRO-based exemptions can be withdrawn. On 18 December 2024 the NBR cancelled freight income exemptions for Bangladesh-flagged ocean-going ships due to run to June 2030, and on 7 January 2025 it scrapped a 10 per cent rate for air conditioner and refrigerator manufacturers due to run to 2032. Writ petitions followed, and the High Court Division stayed the SRO withdrawing incentives for local investors.[12] In November 2025 NBR officials told the IMF that only open-ended facilities, not those with a specified rate and period, could be withdrawn.[12]

A refused or cancelled exemption can be challenged: by reconsideration within four months of a holiday decision, by appeal against assessment and, where a withdrawal is arbitrary or retrospective, by writ.[1] The Finance Act 2026 cut the appeal pre-deposit to 1 per cent before the Commissioner (Appeals), 3 per cent before the Tribunal and 10 per cent before the High Court Division.[2] Our tax disputes team handles these challenges.

Three questions will shape tax exemptions in Bangladesh over the next year: whether the ITES exemption is extended beyond June 2027, whether the general Part 4 holiday is reopened as zone investors have asked, and how the NBR implements the startup and freelancer reliefs.[1] [13] TRW's tax incentives practice maps reliefs, prepares holiday, startup and certificate applications and defends exemptions on assessment.

Frequently asked questions

What income is tax-exempt in Bangladesh?

Part 1 of the Sixth Schedule lists it. Key items include government and approved pensions, gratuity up to Tk 2.5 crore, interest on pensioners' savings certificates up to Tk 5 lakh, remittance bond income, listed-share gains up to Tk 50 lakh, small farmers' income, foreign income remitted home, small SME income and listed IT services income.[1] [3]

Do I need to show exempt income in my tax return?

Yes. Section 77 requires excluded income to be shown in the relevant column of the return with details of its source and amount. It is not taxed, but it counts as a source of funds.[1]

Is the general tax holiday still available?

Not for new projects. Part 4 of the Sixth Schedule requires commercial production between July 2020 and June 2025. Sector exemptions to 2030, renewable and solar holidays and zone packages remain.[1] [3] [10]

How long do economic zone and hi-tech park holidays last?

Ten years in both. Economic zone investors start at 100 per cent for three years and step down to 20 per cent; hi-tech park investors receive 100 per cent for seven years and 70 per cent for three. Operations must start by 30 June 2035.[4] [5]

Did the Invest Bangladesh merger end zone tax exemptions?

No change has been announced. The merger combined BIDA, BEZA and the PPP Authority from August 2026; BEPZA and the hi-tech park authority were not merged, and zone tax holidays rest on NBR notifications.[7] [4]

What tax benefits do startups get?

A registered startup has nine growth years with nil turnover tax, no expense disallowances, losses that survive new funding, light reporting and, from 1 July 2026, VAT exemption on its supplies, imported services and rent.[2] [3]

Who issues a tax exemption certificate?

The NBR, for interest, export proceeds, power payments and non-residents; the Deputy Commissioner of Taxes, for salary.[1]

How long does the NBR take to issue a certificate?

Section 119(2) refers to 30 days for non-residents, and the NBR is expected to respond to other applications within 30 days. Apply before the year's first payment.[1] [3]

Is freelancing income tax-free in 2026?

The Finance Act 2026 exempts income from freelancing and content creation, and listed IT services income is exempt to 30 June 2027 if all transactions pass through banks.[2] [1]

Can an exemption be cancelled after it is granted?

Yes. Section 76(5) removes it for any non-compliant year, section 85 allows cancellation of a holiday for breach of conditions, and SRO-based reliefs can be withdrawn by notification, although fixed-term withdrawals have been challenged in court.[1] [12]