The National Board of Revenue (NBR) has recently announced a significant reduction in the withholding tax on interest earned from National Savings Certificates (NSC), a popular savings instrument in Bangladesh. Under the new guidelines, interest on NSC investments of up to BDT 500,000 will now attract a 5 per cent withholding tax, down from the previous rate of 10 per cent.
A senior NBR official confirmed on Tuesday that the board has formally communicated the decision to the Director General of the National Savings Department. The letter specifically clarifies that pensioners investing in NSCs with amounts up to BDT 500,000 will continue to enjoy tax-free interest benefits. For investments exceeding BDT 500,000, the standard 10 per cent withholding tax will remain applicable.
This clarification comes in response to complaints that, since January, a 10 per cent tax had been incorrectly levied on interest from NSC investments below BDT 500,000. The new directive resolves these discrepancies, ensuring that small investors and pensioners benefit from the reduced tax rate, alleviating prior confusion and financial burden.
Earlier this year, the government had temporarily lowered interest rates on certain NSC schemes for the first six months, a move that drew criticism from investors. Following public concern, the rates have now been restored to their original levels, allowing investors to continue earning the expected returns.
NSCs remain a highly trusted savings vehicle in Bangladesh, particularly among retirees and conservative investors, providing capital security alongside fixed returns. NBR’s revised withholding tax structure is expected to encourage investment among small and medium-income savers by reducing their tax burden and boosting confidence in government-backed savings instruments.
The revised withholding tax framework is summarised as follows:
| Investment Amount (BDT) | Interest Withholding Tax | Remarks |
|---|---|---|
| Up to 500,000 | 5% | Pensioners remain tax-exempt; general investors pay 5% |
| Above 500,000 | 10% | Standard withholding tax applies |
Economic analysts have welcomed the NBR’s clarification. They suggest that this step will strengthen investor confidence, encourage household savings, and increase participation in government-supported investment schemes, particularly among smaller investors who rely on NSCs for steady, secure returns.