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A major change in Bangladesh’s tax framework could raise tax liabilities for national savings certificate (NSC) investors and exporters from July 1, 2026, even though withholding tax rates remain largely unchanged.

Under the proposed Finance Bill 2026, taxes deducted at source on certain income categories will no longer be treated as final tax. Instead, they will be considered advance tax, requiring taxpayers to include such income in their total taxable earnings and settle tax based on applicable slab rates for individuals or corporate tax rates for businesses.

Currently, income from savings certificates and export cash incentives enjoys concessionary treatment. In most cases, this income is excluded from total taxable income, while tax deducted at source serves as the final settlement of tax liability.

The proposed change effectively ends that benefit.

For NSC investors, the budget proposes three key changes. First, investors who encash savings certificates before maturity will no longer qualify for investment tax rebates. Second, taxpayers with other income sources will have to pay tax on NSC profits at regular income tax rates instead of the current concessional 10 percent rate. Third, tax deducted at source on NSC interest will no longer be treated as final tax.

As a result, from July 1, taxpayers earning income from both savings certificates and other sources must include NSC interest in total taxable income and pay tax according to applicable tax slabs.

However, taxpayers whose only income comes from savings instruments will continue to enjoy the reduced 10 percent tax rate and may claim refunds if excess tax is deducted at source, according to a senior tax official.

Tax expert Lutful Hadee, an accounting professional, said the government could have kept the investment rebate unchanged, as savings certificates remain an important government borrowing instrument. Still, he described the restructuring of the tax collection method as justified.

Tax expert Snehasis Barua said the government is not changing deduction rates but altering the overall tax structure.

“This effectively shifts Sanchayapatra from a tax-sheltered haven into a progressive investment, meaning higher-income earners will face a larger tax bill on their savings interest,” he said.

The change is also expected to significantly affect exporters.

Although the budget proposes lowering source tax on export cash incentives, exporters may still end up paying more tax because the deducted amount will now be adjustable as advance tax rather than treated as final tax.

For green garment factories, which currently enjoy a 10 percent corporate tax rate, the effective additional burden could rise by 5 percentage points through adjustment of advance income tax (AIT) or during final tax return submission.

For other exporters paying 12 percent corporate tax, the additional burden could reach 7 percentage points.

This means exporters may face higher overall tax payments despite short-term cash flow relief from lower withholding rates.

Bangladesh Knitwear Manufacturers and Exporters Association President Mohammad Hatem said taxes on export cash incentives already create liquidity pressure, as receiving those incentives often involves lengthy and complicated approval procedures.

“If tax liabilities increase because of the change in the collection method, exporters will face additional difficulties,” he said.