Salary Tax (Income Tax) Calculation 2025-2026 (Bangladesh)

 

Salary tax calculation in Bangladesh for the fiscal year (FY) 2025-2026 (Assessment Year 2026-2027) is governed by the Income Tax Act, 2023, and the Finance Act 2025. There have been several updates to simplify the tax system and adjust the rates.

Key Rules and Changes for FY 2025-2026

Tax-Free Income Thresholds: The tax-free income limit has been revised for various categories of individual taxpayers.

General taxpayers: BDT 375,000
Women and senior citizens (aged 65+): BDT 425,000
Persons with physical disabilities and third-gender taxpayers: BDT 500,000
War-wounded gazetted freedom fighters: BDT 525,000
Parents/legal guardians of a physically challenged child: An additional BDT 50,000 is added to their tax-free income threshold for each child.

Revised Tax Slabs: The number of tax slabs has been reduced, and the rates have been adjusted to a new progressive structure.

First BDT 375,000: 0%
Next BDT 300,000: 10%
Next BDT 400,000: 15%
Next BDT 500,000: 20%
Next BDT 2,000,000: 25%
On the balance of total income: 30%

 Minimum Tax: A minimum tax of BDT 5,000 is applicable to individuals whose total income exceeds the tax-free limit, regardless of their location. For new taxpayers, the minimum tax is BDT 1,000.

Consolidation of Allowances: The Income Tax Act, 2023, simplified the tax exemption on certain allowances. Previously, there were separate exemptions for house rent, medical, and conveyance allowances. Under the new law, these are consolidated into a single exemption cap.

The exemption is the lower of BDT 450,000 or one-third of the annual gross salary. Any amount exceeding this limit is considered taxable.

Tax Rebate on Investment: Individuals can still claim a tax rebate on eligible investments. The amount of the rebate is the lowest of the following:

1. A certain percentage of your total taxable income (3% is a common figure, though it's important to check the specific rates in the latest SRO).
   
   A specific percentage (15%) of your actual allowable investment.
   
   BDT 1,000,000.

   The tax rebate reduces the total tax payable.

Step-by-Step Calculation of Salary Tax

Here is a general procedure to calculate your salary tax for FY 2025-2026:

Step 1: Calculate Total Annual Income Sum up all your income for the year, including basic salary, house rent allowance, medical allowance, festival bonuses, and any other allowances or benefits.

Step 2: Determine Taxable Income Subtract all eligible tax exemptions from your total annual income. This includes:

Your personal tax-free income threshold (e.g., BDT 375,000 for a general male taxpayer).

The consolidated exemption for allowances (the lower of BDT 450,000 or 1/3 of your gross salary).

Other specific exemptions as per the law (e.g., gratuity, provident fund).

Step 3: Apply the Tax Slabs Apply the progressive tax slab rates to your net taxable income calculated in Step 2. This will give you your gross tax payable.

Step 4: Calculate the Tax Rebate (if applicable) Determine your eligible tax rebate based on your investments. The final rebate amount will be the lowest of the three criteria mentioned above.

Step 5: Calculate Final Tax Payable Subtract the calculated tax rebate from the gross tax payable.

 Net Tax Payable = Gross Tax Payable - Tax Rebate

This final amount is your tax liability for the year. Remember to check if this amount is less than the minimum tax applicable to you. You also need to account for any tax that has already been deducted at source (TDS) by your employer throughout the year.

Example Calculation

Gross Annual Salary: BDT 1,400,000
Allowances: House Rent, Medical, Conveyance, etc.
Assumptions: General male taxpayer, not a senior citizen or physically challenged.

Calculation:

Exempt Income:

Tax-free income: BDT 375,000

Consolidated allowance exemption (the lower of BDT 450,000 or 1/3 of BDT 1,400,000 which is BDT 466,667): BDT 450,000.

Total Exempt Income: BDT 375,000 + BDT 450,000 = BDT 825,000.

 Taxable Income:

BDT 1,400,000 (Gross Salary) - BDT 825,000 (Exempt Income) = BDT 575,000

Gross Tax Calculation:

First BDT 375,000: BDT 0 (0% rate)
Next BDT 200,000 (BDT 575,000 - BDT 375,000): BDT 20,000 (10% rate)
Total Gross Tax: BDT 20,000

Tax Rebate Calculation (Example assumption: BDT 100,000 investment) 

3% of Taxable Income (3% of BDT 575,000) = BDT 17,250
15% of Actual Investment (15% of BDT 100,000) = BDT 15,000
Maximum limit: BDT 1,000,000
Lowest of the three is BDT 15,000. This is the tax rebate.

Final Tax Payable:

BDT 20,000 (Gross Tax) - BDT 15,000 (Tax Rebate) = BDT 5,000

Salary Tax (Income Tax) Calculation 2025-2026 by click following download button.