New income tax slabs in effect from July, says NBR chief

The budget proposes cutting tax slabs from seven to six, raising the burden on most taxpayers

The new income tax rates will kick in for earnings from the fiscal year starting in July, National Board of Revenue (NBR) Chairman Abdur Rahman Khan has said.

The changes will affect income earned between July 2025 and June 2026.

Annual income up to Tk 375,000 will remain tax-free, but earnings above that threshold will be taxed under a new six-slab structure, replacing the existing seven-tier system.

The new slabs are aimed at boosting revenue, but they will raise the tax burden on most taxpayers.

Finance Advisor Salehuddin Ahmed proposed the changes in his budget speech on Monday.

Although the tax-free threshold has been raised, people falling into taxable brackets will face steeper rates.

Confusion emerged as the budget document referred to “tax year” instead of “fiscal year”, leading to mixed reports in the media.

Some reports claimed that the tax-free income threshold would remain unchanged at Tk 350,000 for FY2026 and increase to Tk 375,000 from FY2027.

Others said the new threshold and slab structure would come into force from July this year.

Speaking at a post-budget press conference on Tuesday, NBR chief said: “The income from July onwards will fall under the new structure.

“Whatever income we make from July to June [FY2025-26], will be taxed under the new rates. That will be reflected in the return.”

To clarify further, when asked if the rate change applies from July, Rahman said: “Yes, you could say that. The income year starts in July. The one that ends in June (FY2024-25) will be taxed under the previous rates. That was already said last year.”

The mix-up comes from the difference between the “fiscal year” and the “tax year”, which, despite having the same numbers, cover different periods.

As per tax law, a “tax year” refers to the year in which returns are submitted for income earned in the previous fiscal year.

So, income earned during the ongoing fiscal year will be assessed in the 2025–26 tax year, and the return will be filed by November 2025 under the old seven-slab system, with a Tk 350,000 tax-free threshold.

In contrast, income earned during FY2026 fiscal will be taxed under the new structure in the 2026–27 tax year.

The return for that income, due between July and November 2026, will reflect the updated Tk 375,000 exemption limit and the six-tier tax bracket.

This approach allows taxpayers to plan tax-saving investments throughout the income year.

To benefit from any rebates in their 2026 return, people will need to align their financial plans with the new structure starting July 2025.