Published: 12:00 AM, 15 June 2026
Bangladesh moves to end zero-coupon bond tax exemption
Despite pledging to strengthen the bond market and expand alternative sources of financing beyond the banking sector, the BNP government has proposed imposing tax on income earned from zero-coupon bonds in the budget for the 2026-27 fiscal year.
Since taking charge of the finance and planning ministries for the first time under the BNP government, Amir Khosru Mahmud Chowdhury has repeatedly stressed the need to revitalise the capital market and deepen the bond market.
In his budget speech on Thursday, he also announced plans to introduce new bond instruments.
However, the Finance Bill for the next fiscal year proposes withdrawing a tax exemption that individual taxpayers have enjoyed on income from zero-coupon bonds for nearly two decades.
To facilitate the change, the government has proposed amending the 6th Schedule of the Income Tax Act 2023, reports bdnews24.com.
Investors do not pay any tax on income generated from zero-coupon bonds at the moment.
According to the schedule, any income earned from zero-coupon bonds by individuals -- excluding banks, insurers and other financial institutions -- is deducted from total taxable income and therefore remains tax-free.
The exemption applies to bonds issued through a bank, insurance company or financial institution with prior approval from Bangladesh Bank or the Bangladesh Securities and Exchange Commission (BSEC).
Individual taxpayers also receive the same benefit when such bonds are issued by non-financial institutions, provided they have obtained prior approval from Bangladesh Bank or the BSEC.
The Finance Bill 2026 proposes abolishing this provision.
A zero-coupon bond is a debt instrument that does not pay periodic interest.
Instead, it is sold at a discount to its face value and redeemed at full value upon maturity.
The difference between the purchase price and the redemption value constitutes the investor's profit.
The tax exemption was introduced in the Finance Act for FY2007-08 and took effect on Jul 1, 2007.
According to BSEC's annual report, 11 companies raised Tk 66.75 billion through zero-coupon bond issuances in FY2023-24. In FY2024-25, one company raised Tk 1.71 billion through such bonds.
In March, City Sugar Industries, part of leading conglomerate City Group, received approval to raise Tk 13 billion through a bond issue to repay liabilities and invest in the sugar sector.
Akij Food and Beverage was also cleared to raise Tk 5 billion through zero-coupon bonds.
