NBR mulls easing process of refunding Adavanced Income Tax

The National Board of Revenue (NBR) is considering introducing a system to refund Advance Income Tax (AIT) paid by individuals whose income falls below the tax exemption threshold.

To ensure hassle-free tax collection, the government has long imposed AIT on various income-generating sources such as interest on bank deposits, savings certificates, and other instruments. Financial institutions typically deduct AIT at a rate of 10 percent for individuals with a Taxpayer Identification Number (TIN) and 15 percent for those without.

However, concerns have been raised over the logic of deducting AIT from individuals who are not liable to pay income tax due to their low income.

“We are seriously considering this issue,” a senior NBR official told UNB speaking anonymously this week.“We are planning to introduce a system that allows such individuals to get refunds of the AIT they have paid.”

The matter came up during a recent pre-budget discussion, where NBR Chairman Md Abdur Rahman shared a personal example. “One of my university teachers called to ask why he is paying AIT on his savings certificates and bank interest when his income is below the taxable limit,” he had told the meeting.

The senior NBR official acknowledged that it is a fundamental question tied to the concept of tax justice. “We might even consider abolishing AIT on incomes that fall below the tax ceiling,” he added.

In the interim, he suggested that an automated refund system could help. Taxpayers who fall below the income tax threshold but have paid AIT can submit their annual tax return claiming a refund. “Once verified, we can refund the amount directly to the taxpayer’s bank account,” the official said.

However, he noted that a fully automated system is essential for seamless processing. The NBR is currently working on digitising its processes, including the introduction of the Integrated Tax Administration System (ITAS), which will allow for electronic filing, tracking, and refunding.

Under the current system, governed by the Income Tax Ordinance, 1984, taxpayers can claim refunds by filing Form-IT-11Ga (for individuals) or Form-IT-11Gha (for companies), along with supporting documents such as TDS certificates and payment challans.

Although the law provides for refunds, the process has been criticized for being slow and bureaucratic. Many taxpayers choose to adjust excess payments against future liabilities rather than wait for refunds.

The NBR hopes that ITAS will streamline the system, reduce delays, and foster greater taxpayer confidence. “Once the system is fully automated and integrated with the Bangladesh Bank, approved refunds will be deposited directly into taxpayers’ accounts, without any manual intervention,” the official said.

“There will be no physical interaction. Tax officials will verify everything through the interconnected system, ensuring transparency and efficiency,” he added.