Personal Tax Changes Through Finance Ordinance 2025

What are the personal tax changes for the individual taxpayers that will increase or decrease your tax for the assessment year 2025-26?

In this article, we will only focus on personal tax changes through Finance Ordinance 2025. You can read another article to know details about corporate tax changes for financial year 2025-26 and in the last article, Value Added Tax (VAT) and Supplementary Duty (SD) tax have been covered.

So, let’s start to know about the personal tax changes in 2025 for individual taxpayers!

Tax-free Threshold and Slab-wise Tax Rates

Individual taxpayers’ tax-free threshold remains unchanged for the assessment year 2025-26. So, when you file your tax return from 1 July 2025, then you have to follow BDT 350,000 if you are a male taxpayer. For female and more than 65 years old male taxpayers the tax-free limit is BDT 400,000. So there is no good news about the tax-free threshold.

However, the slab-wise tax rates are almost the same except the last slab which is maximum tax rate 30% and for this tax rate, only the higher income taxpayers will be affected.

The government has proposed the 2026-27 and 2027-28 assessment years tax-free limit and slab-wise tax rates for individuals but for these changes you have to wait another year.

And another update is that, 2025-26 is the last assessment year for the individual taxpayers to pay minimum tax if the net tax liability falls below the minimum tax determined based on the taxpayers residential location.

From 2026-27 assessment year, minimum tax shall be BDT 5,000 for all taxpayers irrespective of residential address.

The above is the general tax update for personal tax. You may know, salaried persons are the highest number of taxpayers in Bangladesh. And there are few significant changes for this group that will impact their tax calculations.

Salaried Person Tax Changes

You may know that a salaried person deducts 1/3 of total salary income or BDT 450,000; whichever is lower. But Finance Ordinance 2025 extended this the maximum ceiling to BDT 500,000. So, if you are a highly paid employee then you can enjoy this additional BDT 50,000 exemption benefit.

Another change will increase the tax burden for the salaried person who avails the car facilities from the employer. As per section 33, the following amount will be added with the salary income on a monthly basis depending on the car capacity while calculating your tax.

1. 1500cc – monthly BDT 15,000
2. 1501cc – 2000cc – monthly BDT 20,000
3. 2001cc – 2500cc – monthly BDT 30,000
4. Above 2500cc – monthly BDT 50,000

Rental Income Changes

From 2025-26, the rental income computation will be easier compared to previous years but the tax burden may be increased depending on how the advance or prepayment are received from tenants.

As per section 37, following formula shall be followed while computing the rental value of the house property –

A = (B+C+D)-E

In the above, B means “annual rental value of house property” which is actual rent received amount and the annual rental value of house property; whichever is higher shall be the rental value.

Other changes recommended in section 39 of the Income Tax Act 2023, any advance received in cash exceeding BDT 500,000 which shall be adjusted with rent will be considered as special rental income in the year of receipt.

Advance amount shall be adjusted within five years or contract term; whichever is lower otherwise shall be considered as income in that year. If any amount refunded later then such amount shall be deductible from rental income.

Consequences for failure to file tax return within 30 November

Previously, no tax exemptions were provided to the taxpayers who failed to file tax returns within the prescribed deadline. But the Finance ordinance 2025 relaxes the conditions which will give tax benefits for a certain group of taxpayers.

As per section 76, any amount received from government pension fund, government superannuation fund upto BDT 2.5 crore, contribution to approved provident fund, gratuity fund and pension fund, remittance from non-resident Bangladeshi working abroad and gift received from spouse, parents and children are excluded.

That means, the above-mentioned income shall enjoy the tax exemption benefit even if they fail to submit their tax return within the due date. However, it is better to follow the tax law to avoid any non-compliance. Because non-compliance may impose penalties which will raise your tax burden.

As per section 174, a taxpayer has to pay a penalty at 2% per month following the formula in this section. Like section 76, there are positive changes for the taxpayers who will fail to file tax return within the due date.

Till last assessment year, an exemption was considered while calculating the interest for failure to file tax return within a certain date. But the Finance Ordinance 2025 relaxed this condition. Now any amount received from government pension fund, government superannuation fund upto BDT 2.5 crore, contribution to approved provident fund, gratuity fund and pension fund, remittance from non-resident Bangladeshi working abroad and gift received from spouse, parents and children excluded and exemption of salary portion will be excluded.

So, if any salaried person fails to submit a tax return within the due date then he will be eligible to claim the 1/3 or BDT 500,000; whichever is lower as exemption. This will help to reduce the interest amount. But the tax rebate benefit will not be eligible to claim which is the significant amount to reduce tax amount for the taxpayer.

Other Major Personal Tax Changes

As per section 264 of the Income Tax Act 2023, Proof of Submission of Return (PSR) is required to file while obtaining credit card, post office savings bank account exceeding BDT 500,000, savings certificate exceeding BDT 500,000, trade license obtaining etc.

From now on, only the Tax Identification Number (TIN) will be fine to get the above services. If you want to check your eligibility then there is a long list under the above section, you can check there.

The taxpayers who have only income from agriculture were eligible to enjoy additional BDT 200,000 tax free exemption benefits. But Finance ordinance 2025 extended this limit to BDT 500,000. So the total tax-free threshold will jump to BDT 850,000 means no tax on this amount.

Similar to above, the tax-free limit will be BDT 500,000 for the taxpayers who have income from any income from poultry, hatchery, poultry feed, dairy products production.

You know, a huge number of young people are earning money by providing ITES services and per the sixth schedule of Income tax Act 2023, they are enjoying tax facilities from this earning. However, they are required to maintain 100% transactions for their income, expenses and investments.

But this condition relaxed in this budget 2025 and now only 100% income shall be received through bank transfer. The other two heads are excluded from the condition which will relieve this young generation.