It is an obligation to the people of any country to pay taxes on income earned. Income can be in a form of any money, property, or services received but there are exceptions for both individuals and businesses. As we all know that debt financing brings some tax benefit for business entities, it is tough for individuals to utilize the tax benefit from interest payment. But good news is individuals can lower the exposure to taxation by investing in different places.
While an investment strategy shouldn’t be based solely on taxes, it should still consider any opportunities to manage, defer, and reduce taxes.
Tax can be managed considering the losses, the timing of investments, and investment selection.
Taxes can be differed by use of tax-deferred accounts.
Taxes can be reduced by donating for charity
Majority of people invest in life insurance policies, Provident Fund, equity-linked savings schemes etc. According to National Board of Revenue (NBR) allowable investment is - actual investment or 30% of total (taxable) income or BDT 15 million whichever is less. Tax rebate amounts to 15% of allowable investment. Along with different investment options, donation can be another way to get tax rebate. Donation to any recognized institutes by NBR allows individual to lessen the tax burden. Though people might be more interested to go for investment rather than donation.
Government Savings certificate or treasury bonds are a good option for investment for anybody. Some of the financial institutes offers pension funds which is also tax exempt. People might want to consider about these alternative investment option rather than traditional ones. EMI of homeloan consists of two components - Principal and Interest between which, principal qualifies for rebate. Considering these available option anyone can significantly minimize the tax payment.
Corporate Social Responsibility (CSR) and sustainability have been at the forefront of most companies’ agendas for quite some time- it is no longer a “nice to have” but a “need to have.” The fact that millennial have a high level of social awareness and they are entering into the formal job market, gives most corporations solid reason to be “purpose-driven”. Giant corporations like Google, Microsoft are deemed as the world’s most reputable companies for CSR activities. Having said that, Financial Institutions are coming in the front row in the realm of CSR and sustainability.
In Bangladesh, the banking sector is embracing a bunch of initiatives to address social/environmental issues. IDLC CSR Guideline confers to International Standards and has maintained signatory membership status with both United Nations Global Compact (UNGC) and United Nations Environment Programme Finance Initiative (UNEPFI) since 2011. In the past few years, commercial banks of Bangladesh have witnessed a splendid CSR expenditure in areas of education, health and disaster management. The CSR outlay took a leap in 2018 to BDT 904.7 crore from BDT 743.9 crore in 2017, triggering 21% y-o-y growth. In order to raise the banking sector’s spirit to be engaged in sustainable CSR initiatives, Bangladesh Bank determined some areas of tax exemption related to CSR for Financial Institutions. When that is a good start to make the financial sector more people and community-oriented, it has to be kept in mind that whether these initiatives are bringing infrastructural development for the long term benefit rather than being just a one-off initiative.
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