Stakeholders has sought clarification from the National Board of Revenue (NBR) regarding tax exemption facilities on investment in the Universal Pension Scheme (UPS) as there are no such exemption provisions in the existing income tax act.
According to the Universal Pension Management Act 2023, monthly subscription for UPS, which was launched by the government in August, will be treated as tax free investment and the amount received for monthly pensions will be exempted from income tax.
As per the Income Tax Act 2023, there is not provision about tax exemption against such investments while a section of the act said for availing tax exemption facilities under any other law or instrument, the provision should be clarified by the NBR through gazette notification. Otherwise, such an exemption would not be applicable.
NBR second secretary for tax law-1 Md Mohidul Islam Chowdhury said the amount of investment in the UPS was taxable as per existing income tax act of the country.
He said, 'Investment in UPS will be treated as taxable income as the Sixth Schedule of the income tax act does not mention pension scheme contributions.'
Life insurance premiums, contributions to provident funds and investments of up to Tk 5 lakh in government securities or mutual funds and in DPS Tk 1.20 lakh annually and in capital market are treated as tax exempted investment as per the income tax act, he said.
'The NBR may consider the issue if the UPS' authority apply for such an exemption,' he added.
National Universal Pension Authority executive chairman Kabirul Ezdani Khan said investment and the amount received monthly as pensions will be counted as tax free income as per the Universal Pension Management Act 2023.
'We conducted a meeting and also issued a letter to NBR for considering the UPS investment and monthly pension as tax free income at the draft stage of the Universal Pension Management Act 2023,' he said.' We are working with the NBR for issuing a statutory regulatory order in this regard,' he said.
Since August 17, the National Pension Authority has introduced four schemes and it has registered about 12,000 clients as of September 14, according to the UPS authority.
Of those, Pragati and Surokkha account for more than 80 per cent while Samata and Probash account for less than 20 per cent of the number. Under the universal pension scheme, subscription fees for participants between 18 years and 50 years range from Tk 1,000 to Tk 10,000.