New Income Tax Rates, Tax-Free Limit & Key Changes Explained
The Government of Bangladesh has introduced several important changes to the individual income tax structure through the proposed Finance Act 2026. The new budget aims to simplify taxation, expand the tax base, and increase revenue collection.
One of the most significant changes is the increase in the tax-free income limit to BDT 3,75,000 and the abolition of the previous 5% tax slab. Taxpayers should understand these changes to ensure proper tax planning and compliance.
In this article, we explain the latest income tax rates in Bangladesh for Assessment Year 2026-27, special tax-free thresholds, and key budget highlights.
Latest Income Tax Rates in Bangladesh 2026-27
Under the proposed Budget 2026, individual taxpayers will be taxed according to the following slab rates:
| Taxable Income Slab | Tax Rate |
|---|---|
| First Tk. 3,75,000 | 0% |
| Next Tk. 3,00,000 | 10% |
| Next Tk. 4,00,000 | 15% |
| Next Tk. 5,00,000 | 20% |
| Next Tk. 20,00,000 | 25% |
| Remaining Income | 30% |
The new tax structure eliminates the earlier 5% slab and introduces a simplified six-tier system.
Tax-Free Income Limit in Bangladesh 2026
General Taxpayers
- Tax-free income threshold: Tk. 3,75,000
Women Taxpayers and Senior Citizens (65+)
- Tax-free income threshold: Tk. 4,25,000
Persons with Disabilities and Third Gender Taxpayers
- Tax-free income threshold: Tk. 5,00,000
Gazetted Freedom Fighters and Gazetted July Warriors
- Tax-free income threshold: Tk. 5,25,000
These enhanced thresholds are intended to provide relief to special categories of taxpayers.
Key Income Tax Changes in Budget 2026
Increase in Tax-Free Income Limit
The exemption limit for general taxpayers has increased from Tk. 3,50,000 to Tk. 3,75,000.
Abolition of the 5% Tax Slab
Previously, taxpayers paid 5% tax on the first Tk. 1,00,000 after the exemption threshold.
Under Budget 2026:
- The 5% slab has been removed.
- The next Tk. 3,00,000 will be taxed directly at 10%.
This change may increase the tax burden for some middle-income earners.
Reduction in Tax Rebate Rate
The proposed Finance Act reduces the investment rebate rate:
- Previous rate: 15%
- Proposed rate: 10%
This change affects investments in:
- DPS
- Life Insurance
- Sanchayapatra
- Approved Savings Instruments
Sanchayapatra Interest to be Included in Total Income
Interest earned from savings certificates will be treated as part of total income.
Tax deducted at source (TDS) will no longer be considered final tax. Instead, it will be adjustable as Advance Tax.
Minimum Tax Fixed at Tk. 5,000
The proposed budget sets a minimum income tax of Tk. 5,000 for individual taxpayers irrespective of rural or urban location.
Mandatory TIN and BIN Requirements
The Finance Act proposes:
- TIN mandatory for personal bank accounts.
- BIN/VAT Registration mandatory for business bank accounts.
This move aims to widen the tax net and strengthen compliance.
Example of Income Tax Calculation
Suppose your annual taxable income is Tk. 12,00,000.
Calculation
First Tk. 3,75,000 → Tax Free
Next Tk. 3,00,000 × 10% = Tk. 30,000
Next Tk. 4,00,000 × 15% = Tk. 60,000
Remaining Tk. 1,25,000 × 20% = Tk. 25,000
Total Tax = Tk. 1,15,000
Who Will Be Affected by Budget 2026?
The new tax structure will affect:
- Salaried employees
- Professionals
- Business owners
- Consultants
- Freelancers
- Investors
- Sanchayapatra holders
Middle-income taxpayers may experience a higher tax burden because of the elimination of the 5% slab and the reduction in tax rebate benefits.
Comparison: Old vs. New Income Tax Slabs in Bangladesh
Budget 2026 introduces a simplified income tax structure with a higher tax-free threshold and fewer tax slabs. The table below highlights the key differences between the previous and new tax regimes.
| Feature | FY 2024-25 (Old) | FY 2025-26 / AY 2026-27 (New) |
|---|---|---|
| Tax-Free Income Limit | Tk. 3,50,000 | Tk. 3,75,000 |
| Number of Tax Slabs | 7 | 6 |
| Tax Rates | 5% – 30% | 10% – 30% |
| Minimum Tax | Tk. 2,000 – Tk. 5,000 | Tk. 5,000 |
| Structure | More Complex | Simpler and Easier to Follow |
| Lowest Tax Rate | 5% | 10% |
| Highest Tax Rate | 30% | 30% |
The proposed tax regime aims to simplify compliance while gradually increasing the tax-free income threshold for individual taxpayers. However, the abolition of the 5% slab means some middle-income taxpayers may face a higher effective tax burden.
Frequently Asked Questions (FAQs)
What is the tax-free income limit in Bangladesh in 2026?
The tax-free threshold for general taxpayers is Tk. 3,75,000.
What is the income tax exemption for women taxpayers?
Women taxpayers and individuals aged 65 years or above enjoy a tax-free limit of Tk. 4,25,000.
What is the highest income tax rate in Bangladesh?
The maximum individual income tax rate remains 30%.
Has the 5% tax slab been abolished?
Yes. Budget 2026 proposes abolishing the 5% tax slab.
What is the minimum income tax?
The minimum tax has been proposed at Tk. 5,000.
Conclusion
Budget 2026 introduces significant reforms to the personal income tax system in Bangladesh. While the increase in the tax-free threshold provides some relief, the removal of the 5% slab and reduction in investment rebates may increase tax liabilities for many individuals.
Taxpayers should review their income structure, investments, and tax planning strategies to remain compliant and optimize their tax position under the new Finance Act 2026.
