Government Consults with State-Owned Banks on Income Tax for Employees

Employee Tax
Author: SRCO Business Insights | May 24, 2024

We bring you the latest developments regarding income tax regulations for employees of state-owned commercial banks (SoCBs). Sources reveal that the government is currently engaged in consultations with five SoCBs to implement taxes on various forms of income for their employees, based on SRO-370 under the Pay Scale 2015. This initiative aims to bolster revenue earnings for the government.

The finance division of the Ministry of Finance has formally requested the financial institutions division (FID) to take the necessary steps in this regard, signaling a proactive approach from the authorities.

Under the current system, employees are taxed on their basic salary exceeding Tk 16,000, as well as incentive and festival bonuses such as Eid bonuses. However, with the proposed implementation of SRO-370, employees would also be subject to taxation on additional sources of income like house rent, recreation allowances, and New Year allowances.

It is worth noting that government employees currently enjoy income tax exemptions on various benefits and allowances, except for festival allowances, basic salary, and bonuses.

The affected banks, including Sonali Bank, Janata Bank, Agrani Bank, Rupali Bank, and Bangladesh Development Bank, collectively employ around 40,000 individuals. Senior bankers are expressing concerns over the potential additional financial burdens resulting from these tax changes, with estimates suggesting significant annual tax liabilities for senior officials ranging from Tk 25,000 to Tk 260,000.

The introduction of SRO-371 within the National Pay Scale – 2015 had received approval from the boards of directors of the SoCBs, yet the National Board of Revenue (NBR) faces challenges in implementing it effectively to determine taxable incomes for bank employees.

Moreover, the ongoing discussions highlight the complexity of tax determination for officers and employees within state-owned institutions, requiring consultations with the Internal Resources Division for expert opinions, which are currently pending.

Despite these challenges, sources confirm that SoCBs have committed to adhering to the guidelines outlined in SRO-370 of the National Pay Scale – 2015 as approved by their respective boards of directors.

Stay tuned for more updates on this developing story as we continue to monitor the situation closely.

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