Investment in Sanchay Patra
You are aware that the govt has imposed income tax deduction @10% at source on the interest income exceeding Tk 1,50,000/= PA from the Govt Securities/Sanchay Patra from the fiscal year--2007-8. It is possibly for the first time in the history of Bangladesh that the order has been made applicable on the interest income of Sanchay Patra purchased even in previous fiscal years (i.e. before 1-7-2007). While the NBR referred to the provisions of the Income Tax Ordinance 1984, it seems to have meticulously suppressed the fact that the govt through SRO No 178/Law/89 dated the 4th June, 1989 exempted tax on the income from Govt. Securities/Sanchay Patra U/S 44(4)(b) of the Ordinance with retrospective effect from 1976 which was in force till 30-06-2007. This decision of the govt has, therefore, frustrated the helpless investors, most of whom are retired persons, widows and similar others who have no alternative sources of income and are heavily dependent on such income.
In fact, most of such people invested their pension/gratuity/PF money in Securities/ Sanchay Patra in preference to banks & financial institutions, although the later give higher interest (up to 14%) in the hope that the govt would never betray them. But due to unilateral violation of the contract by the govt itself, people are now led to believe that they are not safe even in the hands of their govt! Since ordinary/retired people like us cannot even think of going against this arbitrary decision of the govt, they are compelled to stop further investments in Securities/Sanchay Patra and are also withdrawing money from such investments even before maturity. Consequently, sale of Sanchaya Patra has gone down by about 65% as per recent press reports. This will ultimately lead to higher borrowings by the govt from the banking system with adverse impacts on the economy.
The rationale or justification shown by the NBR for fixing the ceiling of Tk 1,50,000 (revised from earlier decision of Tk 25,000) tax-free interest income also does not sound logical from the practical point of view. For instance, taxable income of Tk 1,50,000/= for a service holder is arrived at after exempting house-rent allowance (up to 50% of salary or Tk 180,000/=PA whichever is less), conveyance allowance up to Tk 18,000, medical expenses etc. That means a service holder must have a total income of near about Tk 3,00,000 including house rent conveyance, medical allowance etc to arrive at a taxable income of Tk 1,50,000/= PA as per existing tax calculation rules. On the contrary, a retired person/widow who invests in Sanchay Patra, does not receive any such allowance.
Therefore, it would have been rational and logical to fix the ceiling of interest income at Tk 3,00,000/= (instead of Tk 1,50,000/=) from the interest income of Sanchay Patra if at all such a ceiling is to be imposed. Besides, the NBR had also set a limit earlier on investment in Sanchay Patra (up to Tk 50,00,000/= for single individual and up to Tk 100,00,000/= for joint investors). So, imposition of a further ceiling on the interest income from such investment instruments seems contradictory & irrational. People believe that the govt was ill advised to take such a self-defeating decision which is also unfair. The govt in this country does not render any social service benefits to its retired people who paid taxes during active service life unlike developed countries (with the exception of scanty pension money to pure public servants) and hence the decision to impose tax on their small income from saving instruments is unfortunate.
It is sincerely hoped that the Honourable Chief Adviser and the Finance Adviser, both of whom are well-known economists, would look deeply into the matter and review the whole issue sympathetically in the best interest of all concerned.
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