Bangladesh Bank has issued a firm directive to all scheduled commercial banks operating across the country, commanding strict compliance with statutory tax deduction rules on deposit interest and profits, alongside the prompt remittance of withheld funds to the national treasury.
The regulatory order was formally issued on Monday, 10 August, via a circular distributed by the Banking Regulation and Policy Department-1 of Bangladesh Bank. Addressed directly to the chief executives and managing directors of all scheduled banks, the instruction follows the discovery of widespread errors, omissions, and compliance oversights regarding tax deduction at source under the Income Tax Act, 2023.
Financial regulators highlighted that irregular calculation rates applied by commercial banks have created severe accounting discrepancies during subsequent tax audits and reconciliation procedures. More critically, improper deductions and delayed transfers have deprived the national exchequer of substantial public revenue.
Statutory Duties Under the Income Tax Act, 2023
To eliminate recurring operational oversights, the central bank underscored specific legal duties established under Section 102 of the Income Tax Act, 2023. The provision obliges banking institutions to deduct tax at source at prescribed rates across all interest and profit disbursements arising from savings accounts, fixed deposits, term schemes, or related financial products, adjusted according to the specific tax status of the recipient.
Furthermore, Bangladesh Bank highlighted Section 142 of the Act, which enforces a mandatory financial penalty on account holders who fail to submit valid proof of filing their annual tax returns. In such cases, commercial banks are legally required to raise the standard tax deduction rate by 50 per cent.
“Tax deducted at source by banks can under no circumstances be retained in general ledgers or intermediate accounts beyond the statutory limits. Banks must ensure accurate record-keeping, maintain proper documentation, and submit required statements alongside treasury chalan copies to the relevant authorities.”
— Bangladesh Bank Directive
Mandatory Timelines for Treasury Remittance
Pursuant to Rule 8 of the Income Tax Rules, 2023, the central bank reiterated explicit, mandatory schedules governing the transfer of collected funds to the government treasury, preventing commercial entities from holding public money:
July to May Deductions: Taxes collected from July through May within a given fiscal year must be deposited into the national treasury within two weeks following the end of the respective month.
Early June Deductions: Revenue withheld between 1 June and 20 June must be transferred within seven days of the deduction date.
Late June Deductions: Taxes collected during the final days of June must be remitted to the treasury on the immediate next working day.
Central bank officials emphasized that withheld funds must never be parked within general ledgers or internal suspense accounts past these clear deadlines. Invoking statutory authority under Section 45 of the Bank Company Act, 1991, Bangladesh Bank cautioned that non-compliance will invite swift administrative enforcement and formal regulatory penalties.