How to Calculate Salary Tax in Bangladesh
In Bangladesh, income tax on salary is governed by the Income Tax Act, 2023 (previously under the Income Tax Ordinance, 1984). Every salaried individual whose income exceeds the tax-free threshold is liable to pay income tax as per the rates applicable for the relevant assessment year. This article outlines the process of calculating salary tax for individual taxpayers in Bangladesh for FY 2023–24.
Tax Year and Assessment Year
- Income Year: 1 July to 30 June (e.g., 1 July 2023 – 30 June 2024)
- Assessment Year: 2024–2025 (following the income year)
Step-by-Step Salary Tax Calculation
Step 1: Determine Gross Annual Salary
Include all components:
- Basic salary
- House rent allowance
- Medical allowance
- Conveyance allowance
- Festival bonuses
- Incentives, overtime
- Employer contributions (if taxable)
- Any other perquisites in cash or kind
Example:
| Salary Component | Monthly (BDT) | Annual (BDT) |
|---|---|---|
| Basic Salary | 40,000 | 480,000 |
| House Rent Allowance | 20,000 | 240,000 |
| Medical Allowance | 3,000 | 36,000 |
| Conveyance Allowance | 2,000 | 24,000 |
| Festival Bonus (2x Basic) | — | 80,000 |
| Total | 860,000 |
Step 2: Apply Allowable Exemptions
Under the Income Tax Act, 2023, the following exemptions apply (subject to conditions):
| Allowance Type | Maximum Exemption (Annual) |
|---|---|
| House Rent Allowance | Lowest of: actual received, 50% of basic, or BDT 300,000 |
| Medical Allowance | Up to BDT 120,000 (or actual, whichever is lower) |
| Conveyance Allowance | BDT 30,000 |
| Festival Bonus | Fully taxable |
Example Exemptions:
- House Rent: 50% of Basic = 240,000 → Allow full exemption (actual is also 240,000)
- Medical: Actual = 36,000 → Exempted
- Conveyance: 24,000 → Exempted (within BDT 30,000 limit)
Total Exemptions = 240,000 + 36,000 + 24,000 = BDT 300,000
Step 3: Calculate Taxable Income
Gross Salary – Exemptions = Taxable Salary
→ BDT 860,000 – BDT 300,000 = BDT 560,000
Step 4: Apply Tax Slab Rates
For Individual Male/Female (below 65 years) – FY 2023-24
| Taxable Income (BDT) | Tax Rate |
|---|---|
| First BDT 350,000 | 0% (tax-free limit) |
| Next BDT 100,000 | 5% |
| Next BDT 300,000 | 10% |
| Next BDT 400,000 | 15% |
| Next BDT 500,000 | 20% |
| Balance above | 25% |
Note: Tax-free limit is BDT 450,000 for women and senior citizens (65+).
Calculation:
- First BDT 350,000 → 0%
- Remaining BDT 210,000 →
- Next 100,000 @ 5% = BDT 5,000
- Remaining 110,000 @ 10% = BDT 11,000
- Total Tax = BDT 16,000
Step 5: Apply Tax Rebate (if eligible)
If you invest in savings instruments or insurance, you may claim a tax rebate of 15% on the eligible investment amount (maximum limit is 20% of total income or BDT 1.5 crore, whichever is lower).
Step 6: Deduct Advance Tax (if any)
Employers are required to deduct tax at source (TDS) every month and deposit it to the National Board of Revenue (NBR). Final tax liability is adjusted during return filing.
Tax Identification and Return Filing
- Individuals must have a Taxpayer Identification Number (TIN)
- E-return filing is mandatory for salaried persons earning above the tax-free threshold
- Submission Deadline: Usually 30 November of the assessment year
Surcharge (Wealth Tax)
If the net wealth exceeds BDT 4 crore, a surcharge is applicable ranging from 10% to 35% based on net asset value.
Penalties for Non-Compliance
| Non-Compliance | Penalty/Consequence |
|---|---|
| Failure to file return | BDT 5,000–20,000 or more |
| False return or concealment | Up to 50% of tax evaded + prosecution |
| No TIN while drawing salary | Higher TDS and denial of rebates/exemptions |
Summary
| Item | Value (Example) |
|---|---|
| Gross Salary | BDT 860,000 |
| Exemptions | BDT 300,000 |
| Taxable Salary | BDT 560,000 |
| Total Tax Payable | BDT 16,000 |
Salary tax in Bangladesh is calculated by adjusting exemptions from gross income and applying progressive tax rates. Timely return filing, accurate documentation, and understanding allowable rebates can significantly reduce tax liability and ensure compliance with NBR rules.
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