Tax Deduction at Source (TDS)
Understanding Bangladesh's Comprehensive Withholding Tax System
What is TDS?
Legal Framework
Key Benefits
• Reduced tax evasion
• Simplified compliance
• Advance tax payment
• Better tax administration
Every person responsible for deducting or collecting tax must obtain a Withholder Identification Number (WIN) from the National Board of Revenue (NBR).
Legal Framework & Requirements
Compliance Foundation for TDS Implementation
Income Tax Act 2023
Comprehensive legislation governing TDS across all payment categories and sectors in Bangladesh.
Withholding Tax Rules 2024
Detailed implementation rules, rate schedules, exemptions, and administrative procedures.
WIN Registration
Mandatory Withholder Identification Number for all entities responsible for tax deduction.
PSR Requirement
Proof of Submission of Return requirement with penalty provisions for non-compliance.
Income Tax Act 2023
Withholding Tax Rules 2024
Every person responsible to deduct or collect tax is required to obtain a WIN. This includes:
- Government entities
- Private companies
- Banks and financial institutions
- Individual employers
- Professional service providers
For residents, the TDS rate is increased by 50% of the applicable rate if the payee fails to submit PSR to the payer. This encourages tax return filing compliance.
Requirement | Description | Penalty for Non-Compliance |
---|---|---|
WIN Registration | Mandatory for all withholders | Administrative penalties |
TDS Deduction | At prescribed rates and times | Interest and penalties |
TDS Deposit | Within specified timeframes | Interest on delayed payment |
TDS Certificate | Issue to payees | Administrative action |
TDS Categories Overview
Major Classifications and Payment Types
Employment & Salary
Regular salaries, government salaries, participation funds, and welfare contributions.
Business Contracts
Supply of goods, manufacturing, construction, and execution of contracts.
Professional Services
Consultancy, technical services, legal services, and professional fees.
Financial Instruments
Interest on deposits, securities, dividends, and insurance commissions.
Import & Export
Import duties, export proceeds, and international trade services.
Special Categories
Real estate, mobile operators, shipping, and digital services.
TDS rates and procedures differ significantly between resident and non-resident payees. Non-residents typically face higher withholding rates and different compliance requirements.
Salary & Employment TDS
Employment-Related Tax Deductions
Category | Section | Rate | Description |
---|---|---|---|
Regular Salaries | Section 86 | Average Rate | Tax on total taxable salary divided by 12 months |
Government Salaries | Section 86(3) | Average Rate | Special provisions for government employees |
Participation Fund | Section 88 | 10% | Workers' Participation Fund contributions |
Welfare Fund | Section 88 | 10% | Workers' Welfare Foundation Fund |
Average Rate Calculation
Exemptions & Allowances
- Deduct TDS monthly from salary payments
- Issue TDS certificates to employees
- Deposit TDS within prescribed timeframes
- Maintain proper records and documentation
Business & Contract TDS
Supply Chain and Contract Execution
Supply Category | TDS Rate | Section Reference |
---|---|---|
MS Billets & Scrap | 0.50% | Section 89 |
Oil Marketing Companies | 0.60% | Section 89 |
Oil Dealers/Agents | 1.00% | Section 89 |
Essential Commodities | 1.00% | Section 89 |
All Fruits | 2.00% | Section 89 |
Cement, Iron Products | 2.00% | Section 89 |
Gas Transmission | 3.00% | Section 89 |
Manufacturing Services | 7.00% | Section 89 |
Tobacco Products | 10.00% | Section 89 |
Different rates apply based on contract values:
- Up to BDT 2 lac: Nil
- BDT 2-5 lac: 1%
- BDT 5-15 lac: 2.5%
- BDT 15-25 lac: 3.5%
- BDT 25 lac-3 crore: 4%
- Above BDT 3 crore: 5%
Professional Services TDS
Technical and Professional Service Payments
Service Type | TDS Rate | Section | Special Conditions |
---|---|---|---|
Advisory/Consultancy | 10% | Section 90 | Professional advice services |
Technical Services | 10% (e-TIN) / 15% (No e-TIN) | Section 90 | Technical assistance and support |
Catering Service | 10% (commission) / 2% (gross) | Section 90 | Food and catering services |
Cleaning Service | 10% | Section 90 | Cleaning and maintenance |
Security Service | 10% | Section 90 | Private security services |
Manpower Supply | 10% | Section 90 | Human resource services |
Media Services | 10% (commission) / 0.65% (gross) | Section 90 | Media buying and creative |
Transport Services | 5% | Section 90 | Vehicle rental and transport |
Internet Service | 10% | Section 90 | Internet and connectivity |
Mobile Network | 12% | Section 90 | Mobile operator services |
e-TIN Benefits
Commission vs Gross
- Banks and financial institutions may have different rates
- Some services require specific documentation
- Cross-border services may have additional requirements
- Regular vs one-time service providers may be treated differently
Financial & Investment TDS
Banking, Securities, and Investment Income
Financial Instrument | TDS Rate | Section | Payee Type |
---|---|---|---|
Interest on Securities | 5% | Section 106 | All payees |
Interest on Savings | 10% | Section 105 | Individuals |
Interest on Fixed Deposits | 10% / 20% | Section 102 | Individual / Company |
Dividends (with e-TIN) | 10% | Section 117 | Individuals |
Dividends (without e-TIN) | 15% | Section 117 | Individuals |
Company Dividends | Company Rate | Section 117 | Companies |
Insurance Commission | 5% | Section 100 | All payees |
LC Commission | 5% | Section 96 | All payees |
Bangladesh Bank Bills | Maximum Rate | Section 107 | All payees |
Deposit Interest Rates
Company/Trust/AoP: 20%
Educational Institutions: 10%
Local LC Rates
Distributor financing: 1%
Computers/accessories: 2%
Essential commodities: 1%
No withholding tax on interest on pensioners' savings certificate if cumulative investment doesn't exceed BDT 5 lakh at year-end.
Import/Export & International TDS
Cross-Border Trade and International Services
Transaction Type | TDS Rate | Section | Basis |
---|---|---|---|
Import of Goods | 0% - 20% | Section 120 | Based on HSN code |
Export Proceeds | 1% | Section 123 | Total export value |
Foreign Service Payments | 7.5% | Section 124 | Service charges/fees |
Freight Forward (Commission) | 10% | Section 124 | Commission only |
Freight Forward (Gross) | 2.5% | Section 124 | Total bill amount |
Foreign Buyer Agent | 10% | Section 116 | Commission/remuneration |
Export Cash Subsidy | 10% | Section 112 | Subsidy amount |
International Gateway | 1.5% - 7.5% | Section 108 | Revenue/payments |
HSN Code Based Import
Software & Digital Services
Regular Rate: 7.5% for other digital services
- 1.5% of total revenue received by IGW operator
- 7.5% of revenue paid to ICX, ANS, BTRC and others
- 7.5% on whole amount paid or credited
No tax on income earned by Bangladeshi citizens abroad and brought into Bangladesh as per foreign remittance laws (Para 17, Part I, Sixth Schedule).
Special Categories & Updates
Sector-Specific Rates and FY 2024-25 Changes
Special Category | TDS Rate | Section | Calculation Basis |
---|---|---|---|
Mobile Phone Operators | 20% | Section 98 | Payment amount |
Real Estate to Land Owner | 15% | Section 115 | Payment to land owner |
Real Estate Developer | BDT 1,600-6,500/sqm | Section 126 | Per square meter |
Property Transfer | 15% | Section 134 | Gain on transfer |
Shipping Business | 5% / 3% | Section 132 | Freight received |
Lottery Income | 20% | Section 118 | Prize amount |
Brick Manufacturer | BDT 80,000-220,000 | Section 130 | Based on brickfield size |
Trade License Renewal | BDT 500-3,000 | Section 131 | Fixed amount by area |
FY 2024-25 Key Updates
• New Withholding Tax Rules 2024
• Enhanced digital service provisions
• Revised real estate rates
• Updated mobile operator rates
Digital Economy Focus
- Residential: BDT 1,600 per square meter
- Non-residential: BDT 6,500 per square meter
- Land with building: 5% of deed value
- Property lease: 4% of lease amount
Compliance & Best Practices
Framework for Effective TDS Management
Filing Requirements
• Annual withholding statements
• TDS certificate issuance
• Quarterly reconciliation
• Digital filing mandatory
Key Deadlines
• Monthly returns: By 15th of next month
• TDS certificates: Within 2 months
• Annual statements: By June 30
• Penalty for delays applies
Common Mistakes
• Missing PSR verification
• Late deposit and filing
• Inadequate documentation
• Wrong payee classification
Best Practices
• Verify payee TIN status
• Use digital platforms
• Regular compliance audits
• Professional consultation
Bangladesh's TDS system continues to evolve with digitalization, expanded coverage, and enhanced compliance mechanisms. Stay updated with NBR circulars and professional guidance for optimal compliance.