(BANGLADESH) — Bangladesh’s FY 2025–26 Finance Ordinance raised tax-free income thresholds, increased deductions for salaried workers and cut several withholding taxes, offering its clearest relief to low-income earners, farmers and parts of the business sector.

The package also kept some tightening measures. It doubled the withholding tax on interest from securities to 10%, even as it lowered rates on essential goods, contractors, brokerage transactions and some land transfers.

Those changes leave the budget with a split character: lower tax pressure for some households and businesses, but a higher burden for some investors and a continued role for the minimum tax system.

At the center of the household measures, the government unified the minimum tax for individuals and Hindu Undivided Family taxpayers at Tk 5,000 for assessment years 2026–2027 and 2027–2028 if income exceeds the tax-free limit, regardless of location.

The ordinance also made agricultural income up to Tk 500,000 for an individual tax-free. That change gives direct relief to farmers and other taxpayers with smaller agricultural earnings.

Salaried individuals received another adjustment. The maximum allowable deduction rose from Tk 450,000 to Tk 500,000.

Ordinary taxpayers also stand to benefit from a higher tax-free threshold. Budget reporting put that increase at Tk 300,000 to Tk 350,000, with a roadmap to Tk 400,000 in later years.

The higher threshold extends beyond the general taxpayer category. Women taxpayers, people aged 65 and above, third-gender taxpayers, physically challenged individuals, gazetted freedom fighters, and gazetted “July warriors” wounded in the July 2024 uprising are also covered by upward adjustments.

Even with that relief, the continuing minimum tax rules limit how far the benefit goes. Some people below the normal tax-free ceiling can still owe tax if they fall into filing categories tied to the minimum tax structure.

Business measures in the FY 2025–26 Finance Ordinance cut the withholding tax on the supply of essential goods such as paddy, rice, wheat, potatoes, jute and raw tea leaves from 1% to 0.5%. The tax rate on contractors fell from 7% to 5%.

Those reductions should ease cash-flow pressure in sectors that work on thin margins and frequent transactions. They also lower collection at source on staple goods and routine contract work.

The ordinance widened the tax gap between listed and non-listed companies from 5% to 7.5%. That gives companies a stronger tax reason to list on the stock market.

Capital-market measures moved in both directions. The withholding tax on brokerage house transaction value dropped from 0.05% to 0.03%, while the withholding tax on interest from securities rose from 5% to 10%.

That combination supports trading activity but raises the cost on one stream of investment income. Investors who rely on securities interest face a higher rate even as transaction taxes ease.

Property transactions also received relief. The source tax on land transfer capital gains fell from 8%, 6% and 4% to 6%, 4% and 3%, depending on locality.

Other business-facing measures changed thresholds and exemptions. The allowable limit for employee perquisites rose from Tk 1 million to Tk 2 million, and the gross receipts threshold relevant to minimum tax calculation increased from Tk 3 crore to Tk 4 crore.

Domestic companies producing edible oil may receive a 10-year tax exemption. Companies in solar power generation and supply may receive income tax exemption on earnings accrued until 30 June 2035.

Women entrepreneurs could also see a higher tax-free turnover threshold. The budget proposes raising it from Tk 5 million to Tk 7 million.

Some of the package appears aimed less at headline tax cuts than at reducing compliance costs and drawing activity into the formal economy. Higher limits for employee perquisites and a higher gross-receipts threshold fit that pattern, because they reduce the number of cases caught by lower ceilings.

The same applies to lower withholding on essential goods and contract work. Those taxes often affect working capital first, long before final tax liability is settled.

Low-income taxpayers gain from a higher tax-free threshold and the unified Tk 5,000 minimum tax, though that relief remains partial because the minimum tax still applies once income crosses the threshold. Farmers benefit directly from the tax-free treatment of individual agricultural income up to Tk 500,000.

Salaried workers gain from the higher deduction cap and the broader upward shift in tax-free thresholds. The benefit is larger for workers whose taxable income sits close to those limits, because a relatively small change can alter how much income falls into tax.

Small businesses and suppliers of essential goods benefit from lower withholding rates and a higher threshold for minimum tax calculation. Employers also get more room under the employee perquisites limit, which should make payroll and benefits planning less restrictive.

Manufacturers in selected sectors stand to gain from targeted exemptions. Edible-oil producers could get a decade of tax relief, while solar power generation and supply companies may keep income tax exemptions on earnings through 30 June 2035.

Capital-market participants see a more mixed outcome. Brokerage houses and traders get a lower transaction-value tax, but investors earning interest from securities face a higher withholding rate of 10%.

The result is a budget that directs relief with more precision than breadth. In the FY 2025–26 Finance Ordinance, households near the lower end of the tax net, farmers with modest agricultural income, and selected businesses receive lighter terms, while some investors and taxpayers still meet the floor set by the minimum tax.