Savers rush to banks as confusion rules

Thousands of savers rushed to the banks to take out their profit from investment in savings instruments as confusion ruled high about whether an increased 5 percent tax would be imposed if they do not encash profits before the start of the new fiscal year from July 1.

On Tuesday, a long queue was seen on the Bangladesh Bank premises with savers eager to take out profits on savings instruments.

The proposed budget for the next fiscal year imposes 10 percent tax at source on interest income from national savings instruments instead of the current 5 percent.

The government has proposed this measure to discourage sales of the high-yielding saving certificates.

This fiscal year, the government sold Tk 39,733 crore savings certificate with the highest interest rate of 11.52 percent in first nine months of current fiscal year as a way of financing its budget deficit.

The finance bill that proposes this increase in tax has said the measure will be effective from July 1, but confusion arose about whether the extra tax would be applicable on the profits already earned until the new fiscal year begins in July.

A report of a Bangla newspaper incensed the confusion and fear further that said the additional tax would be applicable unless the savers take out their profits before July.

High officials of both the authorities including National Board of Revenue (NBR) and Bangladesh Bank remained in dark about how and from when the extra tax would be applied.

It is a common practice that if any tax is imposed in the fiancé bill, it becomes effect from July 1, the first day of a fiscal year, said Mazharul Haque Bhuiyan, second secretary of the NBR.

But in case of savings instruments, it is not clear yet whether the new tax will be applicable if the incurred profit before June 30 is not realized, he said.

The NBR will sit with the Department of National Savings soon to resolve the confusion, he added. 

“We are facing difficulties to manage the huge rush of savers coming to encash their profits,” said Md. Masum Patwary, executive director of the Bangladesh Bank.

He said a confusion arises among people that if profit is not realized by June, it will come under calculation of new 5 percent tax.

“We did not get any clear instruction from the NBR in this regard but previous experience shows that new tax comes into effect on the profit incurred from the first day of July,” he said.

Mohammed Shirajul Haque, a 60 years old retired government officer, who was standing in the long queue at the Bangladesh Bank today to take out profit from savings certificates, said he came here after reading a media report.

“I got panicked that I will lose money unless I take out the profit. But if I encash my certificates now, I will lose a lot of money in interest,” he said.

There are fixed-term savings certificates which if encashed earlier yields lesser interests.

“If tax is charged on the previous years’ profit, that is a clear violation of the government’s agreement with me,” he said.

“When I bought the certificates, the terms and condition said the facilities would continue until the maturity period,” he added.