Income tax on salary in Bangladesh follows a structured framework prescribed by the National Board of Revenue (NBR). Employees calculate tax based on annual salary income, allowable exemptions and applicable tax slabs. Understanding this process helps ensure accurate tax computation and compliant return filing.
To calculate income tax on salary, begin by determining total annual salary income. From this amount, deduct allowable exemptions and applicable tax-free limits. Income tax slabs are then applied to the remaining taxable income. Any eligible investment rebate and tax already deducted at source are adjusted to arrive at the final tax payable.
The following step-by-step guide explains each stage of the calculation clearly, helping employees avoid errors and file their income tax returns with confidence.
Step 1: Identify Total Annual Salary Income
Total
annual salary income means everything you earn from your job during the tax
year. You add basic salary, house rent, medical, conveyance, and all
bonuses. Always include only the income you earn between July 1 and
June 30 for one tax return. This period defines a single tax year in
Bangladesh. You should exclude income earned outside these dates, as each
return covers only this fixed yearly window.
Basic
salary forms the core of your income and always counts fully. House rent,
medical, and conveyance allowances also count, even if part later gets
exemption. Festival bonuses, performance bonuses, and any job-related
benefits must be added to get the full salary figure.
Using
payslips or bank statements helps you avoid missing any amount and ensures
your total salary figure stays accurate. Here’s a sample monthly
salary breakdown (BDT 70,000). We will use this later to calculate how much
tax applies when a person withdraws this amount as salary.
Salary
Component | Monthly
(BDT) | Annual
(BDT) |
Basic
Salary | 35,000 | 420,000 |
House
Rent Allowance | 21,000 | 252,000 |
Medical
Allowance | 7,000 | 84,000 |
Conveyance
Allowance | 4,000 | 48,000 |
Other
Allowances | 3,000 | 36,000 |
Total
Salary | 70,000 | 840,000 |
This
total annual amount becomes the starting point for your income tax
calculation.
Step 2: Apply Salary Exemptions
Salary exemptions reduce the part of income you pay tax on. You subtract approved exempt portions from your total salary before tax slabs apply. House rent, medical, and conveyance allowances receive relief within fixed limits. You should apply exemptions first to reach the correct taxable income.
House rent allowance has a tax-free portion based on salary rules. You can claim exemption only up to the allowed limit. Any excess house rent becomes taxable. You should check your payslips carefully so you do not overclaim or miss the allowed amount.
Medical allowance also gets exemption within a set ceiling. Conveyance allowance may receive partial relief if paid regularly. You must subtract only the exempt portion, not the full amount. You should keep salary breakup records to avoid errors during calculation.
Step 3: Know about the Tax-Free Income Limit
Tax-free income limit decides how much of your income stays outside tax. You do not pay any tax on income within this limit. Only the amount that goes beyond your category limit becomes taxable. You must identify your category first to avoid paying extra tax.
Here’s the tax-free income limits by category:
- General taxpayers: BDT 350,000
- Women and senior citizens (65+): BDT 400,000
- Persons with disability: BDT 475,000
- Third-gender taxpayers: BDT 475,000
- War-wounded freedom fighters: BDT 500,000
Income within these limits stays fully tax free. You calculate tax only on the portion that crosses your allowed limit. Using the correct category helps you reduce tax legally and keeps your return accurate and compliant.
Step 4: Apply Income Tax Slabs
Income tax in Bangladesh works in layers, not one flat rate. You pay tax step by step based on income ranges. Each slab applies only to a fixed portion of your income. You never pay a higher rate on your full income, only on the excess part. Here’s a list of income tax slabs for individual taxpayers:
- First BDT 350,000: 0%
- Next BDT 100,000: 5%
- Next BDT 400,000: 10%
- Next BDT 500,000: 15%
- Next BDT 600,000: 20%
- Remaining income: 25%
Each slab rate applies only to its portion of income. You calculate tax for every slab separately and then add them together. This method keeps your tax fair and prevents overpayment when your income crosses into higher slabs.
Step 5: Apply Investment Rebate and Minimum Tax
Investment rebate helps you lower the tax you actually pay. You calculate tax first using slabs, then reduce it through approved investments. The rebate cuts your payable tax, not your income. Using this step correctly helps you stay compliant and save tax legally.
Approved investments include government savings schemes and life insurance premiums. You can claim rebates only within limits set by tax law. Any amount above the limit gives no extra benefit. You should keep proper documents to support every investment claim.
Minimum tax may still apply even when your calculated tax is low. You must pay this minimum amount if your income crosses the filing threshold. You should always check if minimum tax applies before finalizing your return.
Step 6: Adjust Tax Deducted at Source
Employers deduct income tax from your salary each month under Tax Deducted at Source. You subtract this deducted amount from your total calculated yearly tax. This step shows whether you need to pay more tax or can claim a refund.
If the deducted tax is higher than your final tax, you can claim a refund. If it is lower, you must pay the remaining balance before filing your return.
Step 7: Filing the Income Tax Return
Employees must file an income tax return showing salary income, exemptions, investments, and tax paid. Returns can be submitted online through the NBR system or manually as permitted.
Supporting documents should be retained for record purposes. Late submission may result in penalties as per tax regulations. Here’s a complete income tax calculation table for an employee of monthly salary BDT 75,000. Once yours is done, you can submit your tax return.
Income Tax Calculation (Monthly Salary: BDT 75,000)
Steps | Description | Amount
(BDT) |
Step
1 | Monthly
Salary | 75,000 |
Annual
Salary | 900,000 |
Basic
Salary (Annual) | 450,000 |
House
Rent Allowance (Annual) | 270,000 |
Medical
Allowance (Annual) | 90,000 |
Conveyance
Allowance (Annual) | 54,000 |
Other
Allowances (Annual) | 36,000 |
Total
Annual Salary | 900,000 |
Step
2 | House
Rent Exemption | (180,000) |
Medical
Allowance Exemption | (60,000) |
Conveyance
Allowance Exemption | (24,000) |
Total
Exemptions | (264,000) |
Step
3 | Income
After Exemptions | 636,000 |
Tax-Free
Limit (General Taxpayer) | (350,000) |
Taxable
Income | 286,000 |
Step
4 | First
350,000 @ 0% | 0 |
Next
100,000 @ 5% | 5,000 |
Remaining
186,000 @ 10% | 18,600 |
Total
Calculated Tax | 23,600 |
Step
5 | Monthly
Tax Deducted (TDS) | 1,500 |
Annual
Tax Deducted | (18,000) |
Final
Tax Payable | 5,600 |
So, with a BDT 75,000 monthly salary, your
estimated annual income tax is BDT 23,600. After adjusting BDT 18,000 already
deducted by your employer, you need to pay BDT 5,600 while filing your
return.
Final Thoughts
Income tax on salary in Bangladesh follows a clear order that you can handle step by step. You start with total yearly salary, apply allowed exemptions, and reach taxable income. Tax slabs set the amount, while rebates and deductions refine the final figure you must settle.
Clear records make the process smoother for you. Salary slips, allowance details, and investment proofs help you apply exemptions and rebates correctly. You avoid overpaying tax and reduce errors when your figures match official limits and slab rules.
Timely filing keeps you compliant and worry free. You adjust tax already deducted by your employer and pay any balance due. Filing on time prevents penalties and builds a clean tax record that supports future financial needs.
