- Sukuk investors to enjoy income tax exemption by next fiscal year
- Individuals with investment in govt securities now enjoy the facility
- Sukuk bonds will also be considered govt security
- The Sharia-compliant bond was launched last year to raise dev funds
To foster investment, the government has decided to offer income tax exemption on Sukuk bonds, an Islamic asset-backed security instrument, at the individual level.
Individual taxpayers will be able to enjoy the facility by the next fiscal year.
On October 6, the Ministry of Finance had sent a letter to the National Board of Revenue (NBR), saying, "for the first time, a number of taxpayers have invested in Sukuk bonds issued by the government in the 2020-21 financial year.
"An individual taxpayer is entitled to income tax exemption, for investment in government securities such as treasury bonds. Sukuk is also an Islamic security of the government, like treasury bonds. But there was no provision included to facilitate the investment of individual taxpayers in Sukuk for income tax rebates."
Therefore, the letter concluded, it was logical for Sukuk investments to enjoy the same facilities as treasury bonds.
Earlier, at a Cash and Dataset Management Committee (CDMC) meeting of the Finance Department of the finance ministry, it was decided that a letter would be sent to the NBR in this regard, mentioning that the "Sukuk bonds would be considered government security."
Sources said Abdur Rauf Talukder, senior secretary, Finance Department presided over the meeting, where it was also decided that VAT on Sukuk would be removed to attract investment.
Requesting anonymity, an NBR official said they had received the letter and were now reviewing the decision by the CDMC.
According to the Income Tax Ordinance, 1984, investment in government securities would be considered for the tax rebate.
According to chapter VI of the Income Tax Ordinance, 1984, if the annual income of a taxpayer is less than Tk15 lakh, the tax exemption rate will be 15% of the investment amount and when the income is more than Tk15 lakh, the rate will be 10% of the investment.
Currently, the government provides tax rebates for investment up to 25% of total annual income in nine sectors, including savings certificates.
The sectors in which tax exemptions are currently available are: life insurance premiums; contributions to provident fund by government officials; employer and officer contributions to recognised provident funds; contributions to welfare funds and group insurance funds; contributions to the Super Innovation Fund; deposits of maximum Tk60,000 per annum in public and private banks; purchase of savings certificates; investing in shares, stocks, mutual funds or debentures of companies listed on the stock exchange; and investment in government-approved treasury bonds.
In the last fiscal year, for the first time, the government issued Sukuk bonds aiming to raise funds for development projects.
In this regard, Bangladesh Bank raised Tk8,000 crore through the bond in two phases, selling those at a 4.69% profit rate. This money was being invested in the government's water treatment project.
Ordinary investors are allowed to invest in Sukuk bonds, if they purchase bonds worth at least Tk10,000. There is no upper limit.