A reward most investors never claim
Here is something many people in Bangladesh miss: the government actually encourages you to invest. When you put money into approved places — and listed shares are one of them — you can get a slice of your income tax back at the end of the year. It is completely legal, it is built into the tax law, and yet most small investors never claim it. This guide explains how it works without the confusing tax language.
What is a tax rebate?
Think of a rebate as a discount on the tax you owe. Normally you calculate your tax for the year and pay it. But if you have invested in approved things during that year, the government lets you subtract a set amount from your tax bill as a thank-you for saving and investing. So you end up paying less tax than you otherwise would have — just because you invested.
How buying shares lowers your tax
Buying shares of companies listed on the stock market counts as an approved investment for this rebate. So do a few other things like a DPS (deposit scheme), life insurance premiums, and government savings certificates. When tax time comes, you add up how much you put into these approved places during the year, and a portion of that amount is taken off your tax bill.
How much can you actually save?
- The rebate is a percentage of the money you invested in approved places during the year
- There is a limit — you cannot count an unlimited amount; it is capped based on your income
- The exact percentage and the cap are set by the government and can change from one year to the next
- Because the rules change yearly, always check the current year's rate, or ask a tax person, before you count on a specific number
A simple way to picture it
Imagine your tax bill for the year is a certain amount. During that year you also bought shares and paid into a DPS. At tax time, you list those investments. The government applies the rebate percentage to your eligible investment and knocks that figure straight off your tax. The money you would have handed over as tax instead stays invested and working for you. That is the whole idea — you are rewarded for building your savings.
What you need to claim it
- A TIN (Tax Identification Number) — free to get, and needed to file a tax return
- Proof of your investment — for shares, your broker can give you a statement showing what you bought and held
- You claim the rebate when you file your yearly income tax return
- Keep your investment records safe through the year so claiming is easy at tax time
Things to keep in mind
The rebate is a genuine benefit, but do not buy shares only to save tax — buy good companies first, and treat the tax saving as a bonus on top. Also remember the rules (the percentage and the cap) are reviewed by the government most years, so the figure that was true last year may be different this year. When in doubt, confirm the current rules or sit with a tax adviser for a few minutes — it is worth it.