The National Board of Revenue (NBR) has intensified nationwide monitoring and verification of tax compliance, asking tax zones across the country to deploy special teams to ensure proper deduction and deposit of taxes at source under the Income Tax Act, 2023.

The revenue authority said the special drives are being conducted as per Section 147 of the Income Tax Act, 2023, which empowers tax officials to inspect businesses and verify whether taxes deducted at source have been correctly deposited into the government treasury.

The NBR urged all businesses, organisations and taxpayers to remain aware of the legal authority vested in tax officials under the law and to cooperate fully during inspection and verification activities.

According to the revenue authority, Section 147 authorises tax officials to enter any commercial or economic establishment, business premises or office without obstruction for on-site inspections.

During such visits, officials are empowered to examine and requisition account books, vouchers, bank statements, receipts and any other documents related to financial transactions or business activities.

The law also permits tax officials to inspect information stored in computer systems, cloud servers, digital records or electronic devices. Where necessary, they may gain access to password-protected or encrypted systems to verify tax-related information.

In addition, officials are authorised to temporarily seize and retain account books, documents, electronic records or digital devices if required to verify the accuracy of taxes deducted at source.

They may also collect copies of documents, images or account records and place identification marks or official seals on them for verification purposes.

The NBR said these powers are aimed at ensuring transparency in withholding tax administration and preventing revenue leakage through inaccurate or incomplete tax deductions.

The revenue authority also reminded taxpayers that Section 147(2) of the Income Tax Act provides for penalties against any individual or organisation that obstructs, resists or fails to cooperate with tax officials in carrying out their statutory duties.

The NBR urged all withholding tax deductors to deposit taxes deducted at source into the government treasury through the electronic challan (e-Challan) system, ensuring that the correct legal provision and the appropriate economic code are mentioned while making payments.

To address concerns over the implementation of Section 147, the NBR advised taxpayers facing any ambiguity, operational difficulty, alleged harassment or grievance to contact the member secretary of the NBR’s Section 147 Committee directly via email at [email protected].

The latest move comes as the tax authority seeks to strengthen compliance, improve monitoring of withholding tax collections and enhance revenue mobilisation through stricter enforcement of existing tax laws.

It has been assigned an ambitious revenue collection target of Tk 6.04 lakh crore for the 2026-27 fiscal year.

This historic target accounts for the majority of the overall Tk 6.95 lakh crore total government revenue collection goal for the period.

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Companies and organisations will be required to file tax returns on the income generated by employee welfare funds from the current fiscal year and pay a 27.5 percent tax on the earnings. 

The Income Tax Act 2023 incorporates the provision, lifting the tax exemption and amnesty on the compulsion to file returns for funds such as provident funds, gratuity funds and workers' profit participation funds maintained by the private sector.

The law, however, has exempted government-managed provident funds from taxation, raising questions.

TIM Nurul Kabir, executive director of the Foreign Investors' Chamber of Commerce & Industry, said there were many other avenues to collect tax.

"Employees benefit from provident funds after their retirement. So, the authority should not slap taxes on retirement benefit."

He said while levying the tax, the government has not treated provident funds of the private and public sectors equally.

"It is discriminatory," he said, adding that they would appeal to the tax authority for the withdrawal of the tax on income from provident funds.

Debabrata Roy Chowdhury, director for legal, regulatory and corporate affairs at Nestlé Bangladesh PLC, said the introduction of income tax on trust funds would lower the overall income from such schemes.

"This will have an adverse long-term impact on retired employees of private organisations."

Chowdhury urged the authority to address the issue in line with the spirit of the government's initiatives aimed at ensuring social security for private sector employees.

"The recent introduction of the universal pension scheme for private sector employees is a good example of that."

A senior official of the NBR, on condition of anonymity, said the income of government-managed provident funds was exempted in line with the Provident Fund Act 1925.

He said provident funds under the private sector had been historically exempted and there was no requirement to submit tax returns. As a result, it was unclear whether the funds were properly utilised.

"From now onwards, we will see proper disclosure."

The tax official said the contribution of payroll tax is about 3 percent of the total income tax although it should increase as the economy is growing.

Md Shahadat Hossain, a former president of the Institute of Chartered Accountants of Bangladesh, said income from investment in savings certificates, where people invest as a source of future earnings, is already taxed.

"From that perspective, the imposition of tax on provident and other employee welfare funds seems okay."

However, Towfiqul Islam Khan, senior research fellow at the Centre for Policy Dialogue, said social protection for private sector employees was low.

"Provident and other workers' welfare-related funds provide little social protection. The imposition of tax will increase inequality. But there can't be any discrimination in taxation between private and government provident funds."

Khan, citing the latest income tax law that replaced the Income Tax Ordinance 1984, said the NBR tried to find new avenues to increase tax collection and improve the nation's revenue-gross domestic product ratio, which is one of the lowest in the world.

"We can see the desperation of the tax authority to boost collection. This ultimately reveals the inability of the NBR to catch the tax evaders and illicit money makers."