How to Calculate Income Tax in Bangladesh

Every year, millions of Bangladeshi taxpayers face the same questions: How much tax do I owe? Has anything changed this year? Am I claiming the rebates I am entitled to?

These are not trivial. Getting your tax calculation wrong — even by accident — can mean overpaying the government or, worse, underpaying and facing penalties later. For Assessment Year 2026-27 (Income Year 2025-26), the rules changed in meaningful ways: the tax-free threshold increased, the 5% entry-level slab was removed, a flat nationwide minimum tax took effect, and a new 30% top bracket appeared.

This guide walks you through everything — the slabs, the step-by-step calculation, worked examples, the investment rebate, and the common mistakes to avoid.

Important: This guide reflects the Finance Ordinance 2025 / FY 2025-26 budget, confirmed by the National Board of Revenue (NBR). Always verify the latest figures at etaxnbr.gov.bd before filing.

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The basics: tax year vs. assessment year

• Income Year (IY): the 12 months during which income is earned — 1 July 2025 to 30 June 2026.
• Assessment Year (AY): the year in which that income is assessed and the return filed — AY 2026-27, due by 30 November 2026.

This guide covers individual taxpayers — salaried employees, professionals, and freelancers — which is the largest group.

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Income tax slabs for AY 2026-27

What changed

The Finance Ordinance 2025 introduced two significant changes:

1. Tax-free threshold raised from ৳3,50,000 to ৳3,75,000 for general taxpayers.
2. The 5% entry slab eliminated. The previous first taxable bracket (৳1,00,000 at 5%) was removed. The first taxable slab now starts at 10%.

These slabs remain valid for both AY 2026-27 and AY 2027-28.

General taxpayer slabs

Tax-free threshold by category

Certain taxpayers get a higher tax-free threshold. Once it is exceeded, the same progressive slabs apply to the remaining income.

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How progressive taxation works

Bangladesh's system is progressive — higher portions of income are taxed at higher rates. Crucially, the higher rate applies only to the income within that slab, not to your entire income.

If you earn ৳8,00,000 annually, you do not pay 15% on all ৳8,00,000. You pay:

• 0% on the first ৳3,75,000

• 10% on the next ৳3,00,000 (= ৳30,000)

• 15% on the remaining ৳1,25,000 (= ৳18,750)

• Total: ৳48,750

• Marginal rate: the rate on your last taka — here, 15%.

• Effective rate: total tax ÷ total income — here, ৳48,750 ÷ ৳8,00,000 = 6.09%.

The effective rate is always lower than the marginal rate. That is the whole point of progressive taxation.

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Step-by-step calculation

Step 1: Calculate total annual income

Add every taxable source for the income year:

• Salary: basic + house rent allowance (HRA) + medical + transport + festival bonuses + all other components.
• Business or professional income: net profit from business or freelance work.
• Investment income: interest, dividends, capital gains.
• Rental income: income from property.
• Other income: any other taxable receipts.

Allowance exemptions: House rent allowance is partially exempt (the lower of 50% of basic or actual HRA, up to ৳25,000/month). Medical allowance up to ৳1,20,000/year is exempt. Include only the taxable portion.

Step 2: Determine your tax-free threshold

From the table above, based on your category.

Step 3: Calculate taxable income

Taxable income = Total income − Tax-free threshold − Allowance exemptions

If this is zero or negative, no slab tax is due — but watch the minimum-tax rule if your income exceeds the threshold.

Step 4: Apply the slabs

Apply the progressive slabs (10% → 15% → 20% → 25% → 30%) to your taxable income.

Step 5: Calculate the investment rebate

Eligible investments (DPS, life insurance, provident fund, Sanchaypatra, approved stock, Sukuk) earn a rebate equal to the lowest of:

1. 15% of eligible investment
2. 3% of total income
3. ৳10,00,000 (the maximum rebate)

Subtract the rebate from your slab tax.

Step 6: Compare with minimum tax and apply TDS

• If slab tax (after rebate) is below ৳5,000 but your income exceeds the threshold → pay ৳5,000 (৳1,000 for first-time filers).
• Deduct any Advance Income Tax (AIT) or Tax Deducted at Source (TDS) already paid.
• The balance is your tax payable.

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Worked examples

Example 1 — Monthly salary ৳30,000 (annual ৳3,60,000)

Income (৳3,60,000) is below the ৳3,75,000 threshold. No slab tax and no minimum tax.

Tax payable: ৳0

You may still need to file a return if you hold a TIN or need a return certificate.

Example 2 — Monthly salary ৳50,000 (annual ৳6,00,000)

• Taxable income = ৳6,00,000 − ৳3,75,000 = ৳2,25,000
• Slab tax = ৳2,25,000 × 10% = ৳22,500
• Investment ৳60,000 → rebate = lowest of ৳9,000 / ৳18,000 / ৳10,00,000 = ৳9,000
• Tax after rebate = ৳22,500 − ৳9,000 = ৳13,500

Tax payable: ৳13,500

Example 3 — Monthly salary ৳1,00,000 (annual ৳12,00,000)

• Taxable income = ৳12,00,000 − ৳3,75,000 = ৳8,25,000
• Slab tax = (৳3,00,000 × 10%) + (৳4,00,000 × 15%) + (৳1,25,000 × 20%) = ৳30,000 + ৳60,000 + ৳25,000 = ৳1,15,000
• Investment ৳1,50,000 → rebate = ৳22,500
• Tax after rebate = ৳1,15,000 − ৳22,500 = ৳92,500 (effective 7.7%)

Tax payable: ৳92,500

Example 4 — Monthly salary ৳2,00,000 (annual ৳24,00,000)

• Taxable income = ৳24,00,000 − ৳3,75,000 = ৳20,25,000
• Slab tax = ৳30,000 + ৳60,000 + ৳1,00,000 + (৳8,25,000 × 25%) = ৳3,96,250
• Investment ৳2,00,000 → rebate = ৳30,000
• Tax after rebate = ৳3,66,250 (effective 15.3%)

Tax payable: ৳3,66,250

Want to skip the arithmetic? Our income tax calculator reproduces every figure above instantly.

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Common calculation mistakes

1. Using the old ৳3,50,000 threshold instead of ৳3,75,000.
2. Applying the old 5% slab that no longer exists.
3. Ignoring allowance exemptions (HRA, medical up to ৳1,20,000).
4. Forgetting the rebate before finalizing your tax.
5. Ignoring the ৳5,000 minimum tax floor.
6. Missing TDS credits already deducted by your employer.
7. Filing under the wrong assessment year.

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The takeaway

For AY 2026-27, carry these with you:

• Tax-free thresholds: ৳3,75,000 general; ৳4,25,000 women/seniors; ৳5,00,000 disabled/third-gender; ৳5,25,000 freedom fighters.
• Slabs (above threshold): 10% → 15% → 20% → 25% → 30%.
• Minimum tax: ৳5,000 (৳1,000 first-time filers).
• Investment rebate: 15% of investment, capped at the lowest of 15% / 3% of income / ৳10 lakh.
• Deadline: 30 November 2026.

The single most overlooked tool is the investment rebate. If you haven't made eligible investments — DPS, life insurance, provident fund, Sanchaypatra — there's still time before 30 June 2026 to reduce your AY 2026-27 tax legally and significantly.

For official information, always verify with the NBR at nbr.gov.bd or etaxnbr.gov.bd. This guide is informational and does not constitute professional tax advice.