Tax-free income ceiling to hit Tk4.5 lakh by FY31

The government is set to unveil a five-year roadmap for individual income tax thresholds in the upcoming national budget. According to National Board of Revenue (NBR) sources, the tax-free income ceiling will gradually rise to Tk450,000 by fiscal year 2030-31.

If approved, the measure will mark a shift toward a more predictable tax regime, giving taxpayers a much clearer picture of their future financial obligations.

The Five-Year Trajectory According to NBR officials, the current tax-free threshold of Tk375,000 will remain unchanged for the 2026-27 and 2027-28 fiscal years, honoring the framework set in last year's budget.

The ceiling is then projected to increase to Tk400,000 for FY29 and FY30, before rising again to Tk450,000 in FY31. A senior NBR official, speaking to The Business Standard on the condition of anonymity, confirmed this timeline.

Experts Welcome Predictability, Warn on Inflation Tax experts broadly support the initiative, noting that a multi-year roadmap significantly improves certainty for personal financial planning. However, many caution that the proposed limits fail to reflect the reality of prolonged inflation.

Dr. Syed Md Aminul Karim, a former NBR member, called the advance announcement a positive step but expressed reservations about the amounts. "The proposed limit may not be adequate considering the rate at which inflation has increased. However, the government must also balance this with protecting revenue collection," he said.

Snehasish Barua, managing director of SMAC Advisory Limited, warned against fixing thresholds too far into the future without tying them to inflation rates.

"While prospective tax rates aid planning, international best practices generally limit this window to two or three years and include automatic inflation adjustments," Barua explained. "Locking brackets until 2031 could push citizens into higher tax thresholds as prices rise, reducing disposable income. Furthermore, expanding only the tax-free threshold while keeping other slabs unchanged places an unfair burden on middle-income taxpayers."

Ongoing Budget Discussions NBR Chairman Abdur Rahman Khan recently held a second round of budget discussions with Prime Minister Tarique Rahman. Following the prime minister's directives, several proposed measures were revised to better serve the public interest.

Under the current structure, individual taxpayers pay 10% on the first Tk300,000 above the initial Tk375,000 tax-free limit. The subsequent brackets are taxed at 15% (next Tk400,000), 20% (next Tk500,000), and 25% (next Tk20 lakh). Any remaining income is taxed at 30%. Senior citizens, women, and freedom fighters remain entitled to additional tax concessions.