With the Sixth Schedule of the Income Tax law not mentioning any pension scheme contributions, the Universal Pension Scheme, which was launched by the government in August, has raised questions among stakeholders regarding the availability of tax exemptions against the investment.
They are now seeking a clarification from the National Board of Revenue (NBR) to this end.
Section 14(1) (d) of the Universal Pension Management Act 2023 states that pension contributions will be treated as investment and considered for tax relief, and the amount received for monthly pensions will be exempt from income tax.
However, Section 76(2) of the Income Tax Act 2023 mentions that if a person is exempted from tax by any other law or instrument, s/he should be exempted by the NBR gazette notification. Otherwise, such an exemption provision would not be adequate.
The Sixth Schedule (Part-3) of the Income Tax law mentions that life insurance premiums, contributions to provident funds, and investments up to Tk5 lakh in government securities or mutual funds, in DPS Tk1.20 lakh annually, and in the capital market will get a tax rebate or tax exemption on the investment amount.
In such a case, 15% of the invested amount in the mentioned sector or less than Tk10 lakh - which amount will be less - will get tax exemption. However, the Sixth Schedule does not mention pension scheme contributions.
Golam Mostafa, a member of the National Pension Authority, told The Business Standard, "We already talked to the NBR before the launch of the Universal Pension Scheme, and at that time it was very early to give such an exemption."
He further said the Universal Pension Scheme was launched on 17 August this year, and the investment will be calculated by the next income tax year (July to June).
Mostafa also mentioned that they will talk to the NBR seeking issuance of a Statutory Regulatory Order (SRO).
A senior official of the NBR, on the condition of anonymity, told TBS that they would analyse the issue after receiving any formal letter from the National Pension Authority or Ministry of Finance.
According to the National Pension Authority (NPA), some 12,970 people have registered for the Universal Pension Scheme as of 17 September, just a month since the programme was launched on 17 August.
The pension scheme has four sub-schemes – Probash, Pragati, Surokkha, and Samata.
Meanwhile, the Pragati scheme has garnered the highest registrants so far, mostly private officials and employees, and institutions.
According to the pension rules, in the universal pension system, the more money one puts in as a deposit, the greater the pension they will be able to draw at the end of the term.
For the lower-income people, who will deposit Tk500 monthly, there will be another Tk500 subsidy from the government at the beginning.
In all the schemes, there is an additional multifold profit for everyone at the end of the stipulated period.