NBR Halves Holding Tax on NSC Interest

The National Board of Revenue (NBR) has recently announced a reduction in the holding tax imposed on interest from National Savings Certificates (NSC), a move aimed at benefiting small and medium-income investors across Bangladesh. Under the revised regulations, interest on NSC investments up to BDT 500,000 will now attract a 5% holding tax, down from the previous 10%.

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 official letter clarifies that pensioners investing up to BDT 500,000 in NSCs will enjoy full exemption from interest tax. For investments exceeding BDT 500,000, the conventional 10% holding tax will continue to apply.

This clarification comes in response to reports that, since January, certain investors were mistakenly charged a 10% holding tax even on interest earned from NSC investments below BDT 500,000. The new directive rectifies this inconsistency, ensuring that small investors and pensioners can benefit from a lower tax rate.

Earlier this year, the government temporarily reduced interest rates on certain NSC schemes for the first six months, prompting criticism from investors. Following public concern, the rates have been restored to their original levels, allowing investors to receive the returns they anticipated.

NSCs remain one of the most trusted savings instruments in Bangladesh, particularly among retirees and conservative investors. Their appeal lies in capital security and guaranteed returns, which continue to instil confidence in domestic investors.

The updated holding tax structure is as follows:

Economists have welcomed NBR’s decision, noting that it is likely to strengthen investor confidence, encourage domestic savings, and boost participation in government-backed investment schemes, particularly among small-scale investors. By reducing the tax burden on lower-tier NSC investments, the move is expected to enhance financial inclusivity and provide modest savers with greater returns on their capital.

As the fiscal year progresses, observers anticipate that this policy adjustment will support a broader culture of prudent investment, while reinforcing NSCs as a reliable avenue for safe and stable savings.