Withholding Tax (TDS) Obligations for Businesses in Bangladesh
Who Is Legally Required to Deduct TDS?
The obligation to withhold tax at source is not limited to large corporations. It applies to:
- Companies, including foreign companies operating in Bangladesh
- Firms, associations, trusts, and funds
- Public-private partnerships, foreign contractors, and foreign enterprises
- Hospitals, clinics, and diagnostic centres
- E-commerce platforms, hotels, community centres, and transport agencies with annual turnover above BDT 1 crore, and non-farmer tobacco leaf producers
Common Withholding Tax Rates by Payment Category
| Payment Category | Rate |
|---|---|
| Salary (Section 86) | Average rate on estimated yearly taxable salary |
| General supply, manufacturing, or packaging (Section 89) | 5% |
| Tobacco supply | 10% |
| Agricultural commodities supply | 0.5% |
| Books supplied to non-government entities | 3% |
| Export garment sub-contracts | 1% |
| Professional/consultancy fees — individuals (Section 90) | 15% |
| Professional/consultancy fees — companies/firms | 7.5% |
| Technical service fees (Section 90) | 10% |
| Advertising / media agency commission (Section 90) | 10% on commission, or 0.65% on gross bill |
| Advertisement income — newspaper, TV, radio, website (Section 92) | 5% |
| Indenting commission (Section 90) | 7.5% |
| Freight forwarding commission (Section 90) | 1.5% on gross bill |
| Leasing and forwarding agents (Section 122) | 10% |
| Security, cleaning & catering services (Section 90) | 10% on commission, or 2% on gross bill |
| Insurance agent commission (Section 100) | 5% |
| Travel agency collection (Section 95) | 0.3% |
| Courier and packing services (on gross bill) | 2% |
| Property rent / convention hall or conference centre rent (Sections 109–110) | 10% |
| Interest on bank deposits — companies (Section 102) | 20% |
| Interest on bank deposits — other payees | 10% |
| Sanchayapatra (savings certificate) profit (Section 105) | 10% (0% for pensioner certificates up to BDT 5 lakh total investment) |
| Lottery / prize / crossword puzzle winnings (Section 118) | 20% |
| Dividend — company to company (Section 117) | 20% |
| Dividend — individual with TIN | 10% |
| Dividend — individual without TIN | 15% |
| Workers' Participation Fund (WPPF) (Section 88) | 10% |
Deposit Deadlines After Deduction
- July to May: within 14 days after the end of the deduction month.
- 1–20 June: within 7 days of deduction.
- 21–28 June: the next day.
- 29–30 June: the same day.
Monthly Return Filing & TDS Certificate
Under Section 177, every withholding entity must file a monthly Withholding Tax Return (WHTR), due by the 15th of the following month (or the next working day if the 15th falls on a holiday). The Additional Commissioner may grant an extension of up to 15 days.
The return must give a payee-wise breakdown: each payee's name, TIN (or reason for its absence), the amount paid, the section under which TDS was deducted, the rate applied, and the amount deducted and deposited. Returns are filed with the relevant DCT circle through the eTDS portal (etds.gov.bd), where the withholding entity must first register before submitting monthly returns.
Penalties for Non-Compliance
- Failure to deduct or deposit (Section 143): liability for the undeducted amount, a penalty of up to BDT 10 lakh, additional tax of 2% per month on the shortfall, and possible imprisonment of up to 1 year or a fine.
- Late deposit of deducted tax: interest of 2% per six months, for a maximum of 24 months.
- Payment made without deduction: the entire payment is disallowed as a business expense, directly increasing your taxable profit.
- Late or missed monthly return (Section 266(2)): the higher of 10% of the applicable tax or BDT 5,000, plus BDT 1,000 for each continuing month of default.
TDS on Payments to Non-Residents (Section 119)
Paying a foreign vendor, parent company, or consultant triggers a separate, generally higher set of withholding rates — and these payments are scrutinized closely because they move foreign currency out of Bangladesh:
| Payment Category | Rate |
|---|---|
| Royalty, licence fee, intangible asset | 20% |
| Technical service fee / technical assistance | 20% |
| Interest | 20% |
| Dividend — from a company, fund, or trust | 20% |
| Dividend — from any other person | 30% |
| Capital gain | 15% |
| Air/sea transport (non-DTAA countries) | 7.5% |
Worked Example: Deducting, Depositing, and Reporting TDS
A trading company hires a supply contractor to deliver packaging materials for BDT 5,00,000, invoiced on 10 October.
General supply falls under Section 89 at 5%.
5% of BDT 5,00,000 = BDT 25,000 withheld; the contractor is paid the balance of BDT 4,75,000.
Since October falls in the July–May window, the BDT 25,000 must be deposited via A-Challan under the correct income-tax economic code within 14 days of the end of October.
A Section 145 TDS certificate for BDT 25,000 is issued to the contractor, who uses it to claim credit on their own return.
The payment, rate, section, and deduction are listed against the contractor's name and TIN in the following month's WHTR, filed by the 15th.
TDS vs Advance Income Tax (AIT): Don't Confuse the Two
Businesses often lump these together, but they're triggered differently and sit under different rules:
| Aspect | TDS (Withholding Tax) | AIT (Advance Income Tax) |
|---|---|---|
| Who pays it | The payer, deducted from the payee's income before payment | The taxpayer themselves, often collected at import or by quarterly installment |
| When it applies | On specific domestic payments: salary, rent, supply, professional fees, etc. | At import of goods, or quarterly when total income exceeds the threshold |
| Common confusion point | Both are prepayments credited against the final tax liability on the annual return — neither is an extra, additional tax layered on top. | |
Don't Let TDS Slip Through the Cracks
Withholding tax is deceptively easy to overlook in day-to-day business operations — a missed rent deduction, a late eTDS return, a cash payment to a contractor, a foreign consultancy invoice paid at the wrong non-resident rate — but the consequences compound quickly through disallowed expenses, penalties, and monthly interest. Building TDS compliance into your regular accounting cycle, rather than treating it as a year-end afterthought, is the single biggest protection against these costs.
Professional Accountant, Income Tax Lawyer
🌐 Website: www.amarconsultant.com
📩 Email: info@amarconsultant.com
Disclaimer: This article summarizes withholding tax obligations understood to be in effect under the Income Tax Act, 2023 and related NBR circulars. Specific rates, thresholds, and procedures — including non-resident rates and DTAA treaty relief — are revised periodically through SROs, the annual Finance Act, and specific tax treaties. Always confirm the current requirement with the NBR or a licensed tax professional before deducting or filing.
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