Black money whitening with 15% tax scrapped
An additional 10% penalty on the payable tax must be paid on undisclosed income
The interim government has scrapped the much-contested provision that allowed the legalisation of undisclosed income by paying a 15% tax.
There is still an opportunity to bring such money into the mainstream economy, but the process is now different – requiring payment of a higher tax rate than the regular one.
To avail of this facility, the applicable tax rate, which can be as high as 30%, must be paid, along with an additional 10% penalty on the payable tax.
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The National Board of Revenue (NBR) issued a Statutory Regulatory Order (SRO) in this regard today (2 September), terming the facility "discriminatory", stating that the provision was abolished to establish a fair and equitable revenue system.
This means the opportunity to legalise undisclosed money in the share market, cash, bank deposits, financial schemes, and instruments by paying a 15% tax has been revoked.
However, despite the cancellation of the 15% tax facility for undisclosed income, the existing facility to legalise money by paying a specific tax on the purchase of flats, houses, and land remains unchanged.
Additionally, the existing facility for money legalisation, along with the privilege of not being asked about the source of the money, will also remain in place. As a result, the opportunity to invest illegally earned money will effectively continue.
In the FY25 budget, the recently ousted Awami League government permitted the legalisation of black money with a 15% tax.
The decision faced intense public criticism as legitimate taxpayers are subject to income tax rates of up to 30% plus an additional surcharge. Critics argued that allowing black money to be whitened with a 15% tax could worsen financial sector irregularities.
For FY21, the then Hasina administration also allowed black money legalisation with a 10% tax.
According to NBR sources, a total of 11,839 people legalised about Tk20,500 crore in FY21 – the highest in the country's history in a single year – and the board received Tk2,064 crore in revenue from those investments.
