Paying taxes is a duty of every citizen, but that doesn’t mean you should pay more than needed. In Bangladesh, the government allows taxpayers to enjoy tax rebates. With this, you can lessen your tax bill by investing or donating in specific institutions. By understanding these rules and planning wisely, you can cut your tax burden and grow your money. For that reason, I’ll explain all about tax rebates for you to get a clear idea in this simple guide. Let’s begin!
What Is a Tax Rebate?
A tax rebate is a reduction in the amount of income tax you have to pay. It is also given by the government when you make suitable investments or donations. Instead of paying the full planned tax, you get a reduction based on the money you put into certain funds, insurance, and so on. In simple words, if your tax payable is 100,000 Tk and a 20,000 Tk rebate, you’ll need to pay 80,000 Tk. Plus, the government uses this to inspire good financial habits to save for the future, buy insurance, or donate to welfare institutes.
How Tax Rebates Work?
In Bangladesh, if you invest money based on the rules mentioned in the Income Tax Law (Sixth Schedule, Part 3), it’s vital to pay tax rebates. For that, the taxpayer can count the rebate in 3 ways. The rule is to go for the lowest amount among these:
- 30% of total income.
- 15% of the total investment.
- 10,00,000 Tk.
So, whichever of these three options is smaller in your calculation, consider that amount as the tax rebate.
How Investments Can Reduce Your Tax Bill?
In Bangladeshi tax laws, you’ll find different ways to cut the tax bills through investments. For that, here are the tricks based on groups of people:
1. Single Income-Earner or Unmarried Individuals
As an unmarried or the only earning member in your family, you can lessen your tax bill by doing the following things:
- Contribute to the Universal Pension Scheme.
- Invest through your brand’s Provident Fund.
- Pick a Fixed Deposit Scheme in a scheduled bank.
- Go for a life insurance plan like MTB Fixed Deposit options.
Well, these options not only help you secure your future but also allow you to save tax legally. So, be sure to try it as a single folk.
2. Married Couples
For a married person, your family’s financial needs are bigger. In that case, the tax-saving investments can support your family while giving rebates. The options include:
- Family savings and insurance plans. These also give you coverage for life risks and help you grow your wealth.
- Investment in different financial vehicles. However, remember the rule that you can’t invest more than 15% of your total income per person to enjoy tax rebates.
3. Parents
If you are a parent, it’s vital to secure your children’s education. In that case, education insurance plans not only protect your child’s future but also save you taxes. Plus, it ensures that your child’s higher education is not affected by financial indecision. Besides, premiums paid for such policies are tax-deductible under the law. So, you save tax while building an education fund for your child.
4. Senior Citizens
For senior citizens, retirement security is most crucial. For that, investments that give income during old age can help lessen tax bills. Some common options are:
- Pensioner’s national savings certificate.
- Special bank savings accounts for retirees.
- Retirement insurance policies with daily income and medical support.
Since the old people often depend on savings, this trick can cut taxes and save on your investment. It also makes your life easier during retirement.
Where to Invest to Get Tax Rebates?
Based on the Income Tax Act 2023, you can get tax rebates mainly in two ways. And, these are made by making certain investments or giving donations to approved institutes. Let me share the places to do that below:
Investment Options for Tax Rebate
When you put your money into approved investment plans, the government allows you to pay less tax. These are the most common options:
- Life insurance premium.
- Provident Fund.
- Deposits into established future funds.
- Welfare or Insurance Funds.
- Superannuation Funds.
- Deposit up to 1,20,000 Tk per year in a DPS at a scheduled bank.
- Invest up to 5,00,000 Tk in government-approved securities.
- Buy shares or securities listed on Bangladeshi stock exchanges like DSE or CSE.
Donation Options for Tax Rebate
The government encourages people to donate to certain social, educational, and healthcare institutes. By donating on these, you will get a tax rebate:
- July Martyrs Memorial Foundation to honor the martyrs.
- Zakat Fund for religious charity.
- Hospitals approved by NBR.
- ICDDRB and CRP.
- Ahsania Cancer Hospital for better treatment.
- As-Sunnah Foundation for social welfare.
- Institutes for Disabled Welfare.
- Liberation War Museum.
6 Practical Tips to Maximize Your Tax Rebates!
There are a few life hacks that you can try out to lessen your tax bills and boost the rebates positively. Here are the details:
1. Plan Early in the Year
Do not wait until the tax deadline. Instead of that, you can just invest early in the financial year to increase your income and cut down on unnecessary stress.
2. Diversify Your Investments
Rather than putting all your money in one scheme, you can divide it between insurance, pension, and savings. This also lessens risk and improves long-term benefits.
3. Keep Records
You can maintain proper documents of your investments and donations. With receipts or certificates, your rebate claim can be accepted when you get the notice from NBR.
4. Do Not Exceed the Limit
Keep in mind that you can only get rebates up to a certain percentage of your total income. For most cases, the limit is 15% of your taxable income.
5. Consult a Tax Advisor
It’s no secret that tax rules can be complex and confusing to understand. In that case, you can talk to a professional tax consultant who can guide you about your respective situation.
6. Use DPS and Insurance Together
A DPS ensures fixed savings, while insurance gives you protection. For that reason, you should combine them to get both safety and tax rebates.
Ready to Invest for Tax Rebates?
Tax rebates in Bangladesh are about planning for tomorrow. By investing in the right schemes, you can lessen the tax bill, secure your family’s future, and support vital social causes. No matter if you are single, married, a parent, or retired, there are options made for your needs. Just be sure to invest wisely, stay within legal limits, and keep track of your records. So, instead of seeing taxes as a burden, think of them as an opportunity to grow your savings and build a better future. Hope you find this guide helpful to know the ins and outs of tax rebates. See you on the next guide!