BRPD-1 Circular Letter No. 27: Deduction of source tax at the applicable rate on interest/profit paid on deposits in accordance with the Income Tax Act, 2023 and timely deposit thereof into the Government Treasury

Managing Director/Chief Executive Officer All Scheduled Banks Operating in Bangladesh

Dear Sir,

It has been observed that various banks are committing deviations in the deduction of source tax on interest/profit paid on deposits and in depositing the deducted tax into the Government Treasury within the specified time, in accordance with the Income Tax Act, 2023. Failure by banks to follow the legal rates and procedures in withholding tax is causing various problems in subsequent tax reconciliation and inspection programs, and in many cases, the government is losing revenue due to incorrect tax deduction.

2. Now, you are instructed to exercise greater caution to comply with the following provisions of the Income Tax Act, 2023 for the deduction of source tax at the applicable rate on interest/profit paid on deposits and the timely deposit of the deducted tax into the Government Treasury:

2.1. In accordance with Section 102 of the Income Tax Act, 2023, banks must deduct source tax at the applicable rate on interest/profit paid on savings deposits, fixed deposits, term deposits, or any other deposits by the bank, depending on the type of recipient;

2.2. In accordance with Section 142 of the Income Tax Act, 2023, if the taxpayer fails to submit proof of filing tax return (Tax Deduction Certificate or TIN) in the case of tax deduction or collection, the rate of source tax deduction or collection shall be 50% (fifty percent) higher than the applicable rate;

2.3. In accordance with the instructions contained in Section 8 of the Withholding Tax Rules, 2023, the amounts deducted or collected in accordance with the provisions of Part Seven of the Act must be deposited into the Government Treasury within the following time limits:

Serial No.	Time of Deduction and Collection	Date of Deposit into Government Treasury
a.	For any deduction or collection between July of the previous year and May of the current year	Within 02 (two) weeks after the end of the month of deduction or collection
b.	For any deduction or collection on any day from June 1st to June 20th of the previous year	Within 07 (seven) days after the day of deduction or collection
c.	For any deduction or collection on any other day in June of the previous year	On the following day after deduction or collection

2.4. The source tax deducted by the bank must not be kept in the General Ledger or any other account beyond the time limit specified in Section 8 of the Withholding Tax Rules, 2023. Banks must ensure that the tax is deposited into the Government Treasury within the specified time, that information related to source tax deduction is properly preserved, and that necessary statements and copies of challans are submitted to the competent authority;

2.5. Furthermore, in the case of deduction of source tax and deposit into the Government Treasury, the Income Tax Act, 2023 and other applicable provisions of the Withholding Tax Rules, 2023 must be followed properly.

3. This instruction is issued under the powers conferred by Section 45 of the Bank Company Act, 1991.

Yours faithfully,

(Gazi Md. Mahfuzul Islam) Director (BRPD-1) Phone: 9530252

Bangladesh Bank Head Office Motijheel, Dhaka-1000 Bangladesh.

Ref No: BRPD-1.BPD-1(27) Banking Regulation and Policy Department-1 10 August 2026

BRPD-1 Circular Letter No.-27 Date: --------------------- 26 Srabon 1433