Monirul Islam, a banker, did a double take when he saw a Tk 2,500 charge on his loan account in December last year. He took the auto loan of Tk 10 lakh in 2016 and did not see that charge before.
Confused, he contacted his bank to enquire about the charge. He was told it was excise duty, which was introduced in 2017-18's budget.
The deduction annoyed him as it was an additional charge on top of the interest he has been paying for the auto loan. But that was not the end; later, when he checked his salary account he got a kick in the teeth: there was an identical charge on this one too.
Last year, his friend had sent Tk 10 lakh to Islam's salary account to open a fixed deposit account in his friend's name. Islam withdrew the amount on the same day and deposited it in his friend's newly opened fixed deposit account.
But due to this innocuous transaction of Tk 10 lakh his salary account too was slapped with the Tk 2,500 excise duty. With a view to boosting revenue collection, the government increased the excise duty on bank accounts in 2017-18.
Accounts with balance between Tk 1 lakh and Tk 5 lakh at any time of the year will have to pay Tk 150 in excise tax. For balance between Tk 1 lakh and Tk 5 lakh, Tk 500 excise duty would be imposed.
The duty on account balance of Tk 10 lakh to Tk 1 crore is Tk 2,500. For balance of Tk 1 crore to Tk 5 crore, the excise duty is Tk 12,000.
“Excise duty on loan and transaction amount is illogical because these are not savings or income,” said an aggrieved Islam.
A borrower has to pay numerous charges against loan account on top of the high interest rates. In this perspective, excise duty is an uncalled for burden on borrowers, he added.
The numerous charges, including the excise duty, discourage small investors to keep money with banks due to negative returns when inflation is considered. For instance, a customer with Tk 1 lakh in savings account will get Tk 3,000 a year at an average 3 percent interest. From the interest income, the customer will have to pay 10 percent income tax, which would come to Tk 300.
On the rest of Tk 2,700, the bank will deduct excise duty of Tk 150, annual account charge of Tk 300, debit card charge of Tk 500, and VAT of 15 percent on service charges that comes to Tk 120.
In total, Tk 1,370 is deducted from the interest income of Tk 3,000, meaning the customer gets to take home Tk 1,630.
This means, the return from Tk 1 lakh of investment is 1.63 percent, when the inflation rate is more than 5 percent.
The move to hike the excise duty came at a time when the banking sector is suffering because of huge loan scams and piled-up bad loans of Tk 88,589 crore as of March.
The government has put the tax burden on small depositors after failing to recover money from big defaulters, said a top executive of a private bank.