The move is aimed at encouraging savings
Parliament: Finance minister Namgay Dorji introduced the Income Tax (Amendment) Bill 2016, which will make fixed deposits tax-free, in the National Assembly yesterday.
The bill will repeal the provisions of the Income Tax Act that imposes a tax on fixed deposits. The proposal was seconded by Chumey-Ura MP Tshewang Jurmi, who said the amendment will benefit the general public at large.
“No interest will be levied on fixed deposits once the Bill is passed,” the finance minister said, while introducing the Bill. He said the amendment of the Income Tax Act will also promote savings and lending by financial institutions.
The Bill has been referred to the finance committee of the House, which will review it and come up with recommendations. The finance committee will present its report on the Bill in the Assembly on November 28.
There was consensus among the members to deliberate the Bill, indicating that the money bill will sail smoothly through the House. The bill will be passed to the National Council but the house of review will have little say on it.
The finance minister said the government has been able to meet the expectations of the 11th Plan. He said the Rupee problem has been solved, banks have started lending and interest rates have been reduced.
“Today fixed deposits are taxed. We want fixed deposits to be tax-free with this amendment,” he said. Banks can lend more when fixed deposits increase, he said.
The amendment will also help non-resident Bhutanese save money in financial institutions. “I would like to request members to support the Bill,” he said.
Interest earned from fixed deposits is calculated as a part of the income of a person, who pays Personal Income Tax. The decision was approved by the Cabinet recently and accordingly the Bill was introduced.