Bangladesh: Consolidation of Salary Allowances under the Income Tax Act 2023

The Income Tax Act 2023 of Bangladesh has brought important reforms to streamline tax compliance and increase transparency.  One significant change is the consolidation of salary allowances.

Previously, employees claimed separate exemptions for house rent, medical, and conveyance allowances. Each required specific documentation, making tax returns complex. Under the new Act, these are merged into a single exemption cap of up to BDT 4,50,000 annually or one-third of gross salary, whichever is lower.

This change simplifies tax calculations, reduces paperwork, and clarifies the process during assessments. While it benefits many taxpayers, those who earlier enjoyed higher individual exemptions might see a slight increase in taxable income. 

Overall, the consolidation reflects the government's move towards a simpler and more transparent tax system, aligning with modern global practices.

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Reference/Citation

Income Tax Act, 2023 (Schedule: 6, Part: 1 Section: 27)

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