Capital gain from govt securities coming under tax net

Institutional investors, including banks, insurance and non-banking financial institutions, will face tax on their capital gains from investments in government securities such as treasury bills and bonds, according to the new budget for fiscal 2022-2023.

At present, tax is levied from capital gains from non-government securities.

"As per existing provision, the capital gain earned from government securities is kept out of the purview of taxation. In line with other securities, I propose making such capital gain taxable," Finance Minister AHM Mustafa Kamal said during the budget speech on Thursday (9 June)

As per current rules capital gain from government securities like Treasury bills and bonds enjoy zero tax, while a 15% tax rate capital gain from non-govt securities.

Business leaders welcomed this move despite these measures might have an effect on those investors' annual earnings.

According to the Bangladesh bank data, During FY 2020-2021, the net issuance of T-bonds and T-bills was TK 51,100.00 crore and TK 11,514.67 crore, respectively.

The gross financing through T-bills for the financial year was BDT 111,203.62 crore, which was attributed to the cash management requirement of the government.

Individuals and institutions - banks, financial institutions, insurance companies, corporations, provident funds, pension funds, and mutual funds can buy treasury bills and bonds on the primary and secondary markets.

Government securities can also be traded in the secondary market via the Trader Work Station (TWS) and over-the-counter (OTC) in the MI module by all investors.

Talking to The Business Standard, Abul Kasem Khan, former president of Dhaka Chamber of Commerce and Industry, said this is a good initiative as all persons or institutions that have taxable income must pay tax. 

Economist Ahsan H Mansur said, "The government should be aware of the fact that banks, which are already paying 40% tax, do not face double taxation because of this new tax on capital gains."

Finance Minister AHM Mustafa Kamal has placed Tk6.78 lakh crore national budget for FY23 at Jatiya Sangsad according top priority to safeguarding marginal people from inflation fuelled by the Russia-Ukraine conflict.

This is the fourth budget of the third consecutive term of the government led by Prime Minister Sheikh Hasina and also the overall 51st budget of the country.

The proposed budget is Tk74,383 crore higher than the original budget size of the FY2021-22 fiscal year, which was Tk6,03,681 crore.