Mandatory tax return filing relaxed for loans, credit cards

The National Board of Revenue (NBR) has relaxed the provision of mandatory submission of tax returns for obtaining loans up to Tk 20 Lakh.

Borrowers will not need to submit proof of income tax returns in case of taking loans up to Tk20 lakh and for credit card transactions up to Tk2 lakhs, in the student category. The relaxed condition, however, will not be applicable for those who have taxable income, according to a notification issued with immediate effect by the tax authority of NBR on Sunday.

In a bid to increase the number of tax returns, the finance minister, in the national budget for FY23, made submission of tax returns mandatory for borrowing over Tk5 lakh, acquiring credit cards and availing of various public and private services.

Earlier, an entrepreneur could take a loan from banks by only submitting an Electronic Taxpayer's Identification Number (e-TIN) and relevant documents.

After the announcement, tax officials of NBR said it is now the responsibility of the banks to check whether the person, seeking a loan, has taxable income.

Wishing not to be named, a senior official of the NBR's Tax Wing told Business Standard, "If the bank feels that the person has taxable income based on the information mentioned in the Know Your Customer (KYC) form, then it is the responsibility of the concerned bank to look into the issue of submitting tax returns. In this case, if there is any gross mistake, the bank will have to take responsibility."

Thus, how would the banks implement this decision remains to be seen.

Earlier, after the mandatory tax return filing decision of NBR in the last budget, small borrowers had to face problems in taking loans. The NBR was requested by several parties to reconsider the decision.

In a letter sent to the Ministry of Industries after the passing of the budget, the SME Foundation stated that because of this initiative of NBR, the scope of taking SME loans will be narrower for new and marginal-level entrepreneurs.

Apart from this, mandatory return submission of credit card holders created additional complications for those who have no taxable income, including many students, prompting fear of reduced credit card sales among bank representatives.

NBR officials said there is a large number of TIN holders in the country, but only one-third of them file returns. That is why several measures were taken in the last budget in a bid to force people to submit returns.