Relaxation of mandatory tax reporting for loans and credit cards
The National Revenue Board (NBR) has relaxed the provision of mandatory submission of tax returns for obtaining loans up to Tk 20 Lakh.
Borrowers will not need to submit proof of tax return in case of loans up to Tk 20 lakhs and for credit card transactions up to Tk 2 lakhs, under the student category. The easing condition, however, will not be applicable for those with taxable income, according to a notice issued with immediate effect by the NBR tax authority on Sunday.
In a bid to increase the number of tax returns, the Minister of Finance in the FY23 National Budget made the submission of tax returns mandatory for borrowing more than Tk 5 lakh, acquiring credit cards and take advantage of various public and private services.
Previously, an entrepreneur could take out a loan from banks by submitting only an electronic taxpayer identification number (e-TIN) and relevant documents.
After the announcement, NBR tax officials said it is now up to the banks to check whether the person applying for a loan has taxable income.
Wishing not to be named, a senior official in the BNR’s tax wing told Business Standard: “If the bank deems the person to have taxable income based on the information mentioned in the Know Your Customer (KYC) , it is then the responsibility of the bank concerned to look into the matter of the tax return.In this case, if there is a gross error, the bank will have to take responsibility for it.
So how the banks will implement this decision remains to be seen.
Earlier, after NBR’s mandatory tax filing decision in the last budget, small borrowers faced problems in getting loans. The BNR has been asked by several parties to reconsider the decision.
In a letter sent to the Ministry of Industry after the adoption of the budget, the SME Foundation stated that because of this initiative by the NBR, the possibility of taking out SME loans will be more restricted for new entrepreneurs and marginal entrepreneurs.
Apart from this, the mandatory reporting of credit card holders has created additional complications for those without taxable income, including many students, which has raised fears of reduced credit card sales among bank representatives.
NBR officials said there are a large number of TIN holders in the country, but only a third of them file declarations. That is why a number of measures were taken in the last budget to force people to file returns.