The government is planning to impose of income tax on certain amount of profit generated from share trading / stock trading. Govt. plans to streamline operation of the country’s stock market. According to sources in the cabinet division the proposal for imposition of the tax on stock trading from finance ministry is likely to be discussed by the cabinet at its weekly meeting today. The cabinet may also to review a proposal on formulation of a new guideline for beneficiary owners’ accounts by which individual and institutional investors are doing share trading.

According to the new proposal the income tax rate will be 3 per cent on profit in a range of Tk 7,00,000 and Tk 10,00,000. The rate will be 5 per cent on share trading profit exceeding an amount of Tk 10,00,000. Fnance ministry sources mentioned,  Submission of mandatory income tax return may be incorporated into the proposed guideline for opening such accounts. If Cabinet approve the new proposal for stock trading if will come into effect from the next fiscal year beginning July 2010. National Board of Revenue informed if the cabinet approve this taxation rule it will need  approval by the parliament.

If the cabinet endorses the proposals, the new rules may affect 2.2 million account holders engaged in share trading in Dhaka and Chittagong stock exchanges.

Currently, the account holders do not need to pay tax to operate their accounts and also they are enjoying exemption from tax on profit generated from share trading. The government has also provided opportunity for investment of undisclosed money in the share market by paying 10 per cent income tax.

The securities and exchange commission, the stock market watchdog, has urged the investors, especially retail traders, to be ‘careful about investment’ after record-breaking rallies had been daily occurrences in the share market in the past several months. In November 1996, wild speculations and lax regulations sent Dhaka stocks soaring to 3,600 points before a crash took them to 700 points, wiping out thousands of families’ savings and slowing economic growth the following year.

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