Are you picking the right tax rebate investment in Bangladesh?

Every year, you set aside money for tax-rebate investments.

But the bigger question is rarely asked: are you putting it in the right place? With different options available in Bangladesh - each with a different return, risk profile, rebate ceiling, and flexibility. Probably we all are aware of the popular avenues, but the landscape is constantly changing. New instruments have entered the market. Rates are shifting. What worked for you two years ago may no longer be your best move today. So, let's explore!

National Savings Certificate/ Sanchayapatra (NSC)

NSC is the most popular tax-rebate investment avenue in Bangladesh. If you invest in NSC, you effectively receive approximately 9% return (if compounded) per year, and you can get up to BDT 75,000 tax rebate.

However, NSC has two significant limitations: you need to make one-off investment; and return gets decreased if you need early liquidation before maturity. 

Deposit Pension Scheme (DPS)

DPS is similar to NSC in terms of returns - you also receive approximately 8.75% - 9.75% per year. However, the tax rebate is much smaller: you receive only up to BDT 18,000 tax rebate through DPS in a year.

DPS is better suited if you want to invest money regularly, as you can save money each month. But because the tax rebate is smaller, many investors look elsewhere for higher tax rebate.

Insurance Products

Some investors purchase insurance policies to obtain tax rebates. However, insurance is an ideal tool for risk management not for savings goal and you typically get back lower return value than other options. Insurance is rarely the preferred choice for investors focused on maximising both returns and tax benefits. But for someone, who is interested to mitigate the risk of their absence, it could be very useful.

Direct Equity Investment

Investing in shares listed on the Dhaka Stock Exchange (DSE) or Chittagong Stock Exchange (CSE) offers the maximum possible tax rebate in Bangladesh – which is 10 lacs taka. This makes it theoretically the most powerful tax-saving tool available.

However, direct equity carries significant risk. Share prices can fall, and the concern over capital loss keeps many investors away. Returns are unpredictable, and a poor market cycle can wipe out the tax benefit entirely. For risk-averse investors, equities are not a comfortable fit.

Direct Treasury Bills & Bonds Investment

Investing directly in government treasury bills and bonds can be considered one of the safest investment of the country. While being eligible for BDT 75,000 tax rebate, it also allows investors to attain higher return than NSC (10%-11%).

However, like NSC, it requires a one-off lump sum investment (minimum BDT 1 lac). But in terms of liquidity, it's even worse than NSC as you can't liquidate the investment before maturity.

Debt mutual funds that invest your money in government treasury bills and bonds are one of the safest instruments in Bangladesh. With Debt mutual funds that completely avoid investment in stock market, you avoid stock market volatility entirely, while still qualifying for tax rebate up to 75,000 taka. And unlike NSC or direct bonds, you can invest monthly with product like IDLC SIP.

IDLC Income Fund: Pioneering Debt Mutual Fund Revolution

IDLC Income Fund was the first debt mutual fund launched in Bangladesh back in June 2021. It has quickly become the popular choice among investors seeking better safety, higher tax rebate, better return and affordable monthly investment. Here is why IDLC Income Fund is making such a big impact:

The table below summarizes how the key investment options compare across the most important criteria:

*As NSC, Treasury bill/bonds are tagged in the same category as Govt. Instruments, the combined maximum tax rebate can be achieved is BDT 75,000 from both avenue.