Inherited assets must be valued in tax files as NBR seeks to widen surcharge net
The measure expected to generate Tk1,000cr in additional revenue in FY28
Highlights:
- NBR to require valuation of inherited, gifted assets
- Wealthy taxpayers exploited "value unknown" asset declaration loophole
- Revised rules expected to add 4,000 surcharge taxpayers
- Land valuation data to integrate into online tax system
- NBR projects Tk1,000 crore extra revenue by 2027-28
- Asset-based surcharge applies to holdings above Tk4 crore
The National Board of Revenue is set to crack down on a long-standing tax loophole by making it mandatory for taxpayers to disclose the monetary value of inherited or gifted assets in their tax returns from the upcoming financial year.
For years, wealthy taxpayers have avoided significant levies by listing the high-value inherited properties, land, and gold as "value unknown" in their tax returns. Despite possessing assets worth many crores of taka, these individuals have managed to remain outside the surcharge net.
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According to NBR officials familiar with the matter, this practice is about to end. Under the new initiative, the monetary value of these assets will have to be determined and reported in taxpayers' returns.
Although Bangladesh does not impose a wealth tax, individuals with net assets exceeding Tk4 crore are subject to a surcharge on their annual income tax liability. NBR officials expect the revised valuation system to bring around 4,000 additional taxpayers within the surcharge regime while increasing the reported asset values of those already liable.
Experts welcome the initiative
Apurba Kanti Das, former member of the NBR's tax policy wing, described the existing practice as unsound.
"There are many taxpayers who have inherited assets worth crores or even hundreds of crores of taka, yet their tax files state 'value unknown.' This is a bad practice," he told The Business Standard.
"Can an asset exist without having any value? These assets should be valued so that at least some individuals come within the surcharge net and those already paying surcharge contribute according to their actual wealth."
Shams Mahmud, managing director of Shasha Denims Limited, also welcomed the initiative, calling it a positive step.
He said the practice of declaring assets as having an unknown value was also linked to corruption and argued that mandatory valuation would create an opportunity for the government to collect substantial additional revenue. However, he added that the NBR should consider reducing surcharge rates.
Land records to be integrated into tax system
Senior NBR officials said the revenue authority would soon collect mouza valuation data for different areas covering the past 40 years from the country's land offices. The information will be incorporated into the online tax return system to facilitate valuation.
As a result, taxpayers filing returns next year are expected to lose the option of listing the value of land, apartments and gold jewellery as unknown.
An NBR official, speaking on condition of anonymity, said the agency expected around 4,000 individuals to cross the Tk4 crore asset threshold solely because of the revised valuation methodology, while those already above the threshold would also report significantly higher asset values.
The official said the NBR estimated that the measure could generate approximately Tk1,000 crore in additional revenue in fiscal 2027-28.
Another official said an income tax circular explaining the valuation methodology would be issued by July.
The official said some taxpayers inherit houses in prime areas of the capital, hundreds of bighas of agricultural or non-agricultural land, or large quantities of gold jewellery, yet continue to declare such assets as having an unknown value in their tax records.
Using the mouza value applicable at the time of acquisition would often show that such assets are worth several crores of taka, potentially pushing the owners above the surcharge threshold when combined with other holdings, the official said.
He added that listing assets as having an unknown value had effectively become a strategy for avoiding asset-based surcharge obligations.
Current surcharge structure
According to NBR data, around 15,000 individuals currently pay the asset-based surcharge, contributing roughly Tk900 crore annually.
Under existing rules, taxpayers with assets worth more than Tk4 crore are liable for a surcharge on their income tax. The surcharge rate is 10% for assets valued between Tk4 crore and Tk10 crore, 20% for assets between Tk10 crore and Tk20 crore, 30% for assets between Tk20 crore and Tk50 crore, and 35% for assets exceeding Tk50 crore.
The surcharge is calculated as a percentage of the income tax payable. For example, a taxpayer with assets worth Tk7 crore who owes Tk2 lakh in income tax would be required to pay an additional Tk20,000 as a 10% surcharge.
