We are pleased to announce the release of our annual Handbook on Income Tax Deduction at Source in Bangladesh for the financial year 2026–27. This article is the summary of the handbook. You can download the complete PDF version of the handbook at the end of this article.
The Bangladesh TDS & TCS Handbook for Fiscal Year (FY) 2026-27, prepared by FMG Chartered Accountants, serves as a definitive guide for taxpayers, practitioners, and businesses navigating the evolving tax landscape in Bangladesh. This edition provides a comparative analysis with the previous fiscal year (FY 2025-26), highlighting critical changes introduced by the Finance Act 2026 and the Tax Deduction at Source Rules, 2026, while maintaining alignment with the Income Tax Act, 2023.
The handbook is structured to guide the “Responsible Person” through the selection of correct provisions, application of rates, and fulfillment of compliance obligations. A significant focus of the FY 2026-27 updates is the restatement of language to match new regulations and the introduction of specific rates for emerging sectors and transaction types.
1. Selection and Classification of Provisions
Selecting the correct TDS or TCS provision is the foundational step in tax compliance. The handbook emphasizes a systematic approach based on the nature of the transaction and the residency status of the recipient.
| Transaction Category | Primary Section | Key Considerations |
| Employment Income | Section 86 | Average rate based on estimated annual taxable income. |
| Supply of Goods/Works | Section 89 / Rule 3 | Matching items with specific Rule 3 categories. |
| Services (Resident) | Section 90 / Rule 4 | Identification of named services before applying rates. |
| Specific Resident Payments | Sections 91-118 | Priority over general supply/service sections for royalties, interest, etc. |
| Non-Resident Payments | Section 119 / Rule 5 | Verification of DTAA availability and Rule 5(2) certificates. |
| Special Collections (TCS) | Sections 120-139 | Import, property, and specific asset collections. |
2. Employment and Related Payments (Sections 86-88)
The taxation of employment-related payments remains largely consistent in principle, focusing on the average rate of tax.
- Section 86 (Salary & Benefits): Includes wages, bonuses, allowances, and perquisites. The responsible person must estimate the annual taxable income, apply the investment rebate, and deduct tax at the average rate.
- Section 87 (MP Honorarium): Deducted at the average rate based on estimated annual honorarium.
- Section 88 (WPPF): Payments from the Workers’ Profit Participation Fund are subject to a flat 10% deduction.
Payroll Process Note: Employers are required to revise estimates for any changes in joining, leaving, or bonuses and adjust deductions accordingly, issuing prescribed certificates to employees.
3. Supply, Contractors, and Physical Goods (Section 89 / Rule 3)
Section 89, read with TDS Rule 3, covers the supply of goods and execution of works. The FY 2026-27 schedule introduces several notable rate changes and refinements. For the total TDS rate list under section 89, please download the handbook. The link is given in the end of the article.
Key Rate Comparisons
| SL. | Description | FY 2025-26 | FY 2026-27 |
| 5 | Supply of gold, silver, ornaments, gems | 5% | 0.5% |
| 10 | Petroleum oil supply (refinery operations) | 1.5% | 1% |
| 15 | Recycled plastic, electrical/electronic goods | 3% | 1% |
| 16 | Raw materials for recycling industry | 1.5% | 1% |
| 18 | Manufacturing, civil works, construction | 5% | 5% |
| 19 | Tobacco raw materials supply | 10% | 10% |
Application Rules:
- No deduction applies to oil/gas from petrol pumps or CNG stations.
- Adjustments are permitted for tax already paid at the import stage (Section 120) or during distribution (Section 94).
4. Services to Residents (Section 90 / Rule 4)
The service sector sees significant adjustments in FY 2026-27, particularly in the differentiation between individual and non-individual service providers.
| Service Category | FY 2025-26 | FY 2026-27 |
| Advisory / Professional Fees | Ind. 15% / Other 7.5% | Ind. 15% / Other 7.5% |
| Technical Service Fees | 10% | Ind. 15% / Other 10% |
| Meeting Fees / Training / Honorarium | 10% | 20% |
| Mobile Operator Service Bills | 12% | 10% |
| Motor Garage / Workshop Bills | 8% | 5% |
| Catering / Event Management | Higher of 10% Comm. or 2% Gross | 2% of Gross Bill |
5. TDS Payments (Sections 91-118)
This segment covers specific transactions that override general supply or service rules.
- Royalty & Intellectual Property (Section 91): Maintained at 10%.
- Dividends (Section 117):
- Shareholders (non-individual): 20%.
- Individual shareholders (with TIN): Increased from 10% to 15%.
- Individual shareholders (without TIN): 15%.
- Export Cash Subsidy (Section 112): Reduced from 10% to 5%.
- Purchase of Precious Metals (Section 112A): A newly added section requiring a 0.5% deduction from the seller on the purchase of gold, silver, and gems.
- Lottery & Games (Section 118): Increased from 20% to 25%.
6. Non-Resident Payments (Section 119 / Rule 5)
Payments to non-residents are subject to rigorous withholding unless a certificate for a reduced rate or exemption is obtained under Section 119(2).
| Payment Description | FY 2025-26 | FY 2026-27 |
| Advisory / Consultancy | Individual 20% / Other 10% | Individual 20% / Other 10% |
| Architecture / Design Bills | 20% | 15% |
| Interest Payments | 20% | 10% |
| Advertisement Broadcasting | 20% | 15% |
| Insurance Premium Fees | 10% | 5% |
| Dividend (Other than Company/Fund) | 30% | 25% |
7. TCS and Special Collections (Sections 120-139)
7.1 Import-Stage Advance Income Tax (Section 120 / Rule 8)
Advance tax at the import stage is governed by seven distinct schedules based on H.S. codes.
- Schedule 1 & 2: 0% on essential goods and Bhutanese imports.
- Schedules 3-5: 1%, 2%, and 3% respectively.
- Schedule 6: 20% on specific luxury or controlled items.
- Schedule 7: Specific rate of Tk 600 per ton.
- Residual Rate: 5% for items not specifically listed.
7.2 Property and Developer Collections
The Finance Act 2026 introduces stricter collection through A-challan against each deed.
- Property Transfer (Section 125 / Rule 6): Rates vary by “Mouza Band” and “Plot Class” (A to F). For instance, Gulshan/Banani (Class A) land attracts 5% or Tk 9,00,000 per decimal, whichever is higher.
- Developer Collections (Section 126 / Rule 7): Residential structures in prime Dhaka areas are taxed at Tk 1,600 per sq. m., while commercial structures attract Tk 6,500 per sq. m.
7.3 Vehicles and Assets
- Commercially Plying Vehicles (Section 138): Fixed tax remains stable, e.g., Tk 25,000 for large buses.
- Helicopters (Section 138A): A new provision requiring Tk 1,000,000 at registration or fitness renewal.
- Retail Sales (Section 130A): A new provision for a 0.2% collection on goods sold directly to retail sellers.
8. General Withholding Provisions (Sections 140-151)
These sections define the operational framework for withholding.
- Specified Persons (Section 140): Broadened to include e-commerce platforms and hospitality entities with turnover > Tk 1 crore, and individuals with business turnover > Tk 10 crore.
- Gross-up Rule (Section 141): Provides the formula for payments made exclusive of tax.
- Higher Rate Penalties (Section 142): Rates are 50% higher if the payee fails to furnish Proof of Submission of Return (PSR) or if the required bank transfer method is not used.
- Assessee-in-Default (Section 143): Payer becomes liable for shortfall plus an additional 2% interest per month (capped at 24 months).
9. Compliance Calendar and Procedures
The compliance cycle is not complete until deposits are made and returns are filed.
9.1 Deposit Deadlines
- July to May: Within two weeks after the month’s end.
- June 1-20: Within seven days.
- Late June: Next day or same day for the last working day.
9.2 Quarterly Withholding Returns (Section 177)
Filing is mandatory for companies, firms, hospitals, and large-turnover individuals.
- Q1 (Jul-Sep): Deadline 25 October.
- Q2 (Oct-Dec): Deadline 25 January.
- Q3 (Jan-Mar): Deadline 25 April.
- Q4 (Apr-Jun): Deadline 25 July.
10. Consequences and Controls
The handbook concludes with a summary of penalties to ensure strict adherence.
| Failure | Consequence |
| No/Short Deduction | Recovery of shortfall + 50% additional amount. |
| Missing PSR / Bank Transfer | 50% higher withholding rate. |
| Late Deposit | 2% interest per month. |
| Return Not Filed | Penalty and assessment exposure under Section 177. |
| False Certification | Personal liability of the issuer. |
Click to Download The Handbook
The FY 2026-27 TDS & TCS Handbook reflects a move towards greater formalization and higher compliance standards in Bangladesh. By differentiating rates between individuals and corporations, introducing new collection points like retail sales and helicopters, and enforcing the use of A-challans and bank transfers, the tax authority aims to broaden the tax base and ensure transparency. For businesses, staying compliant requires a meticulous understanding of these specific schedules and a disciplined adherence to the quarterly reporting calendar.
Disclaimer: This article is a summary of the FMG Chartered Accountants’ TDS & TCS Handbook FY 2026-27 and should be used for informational purposes. Taxpayers are advised to consult with professional tax advisors for specific transactions.