On April 8, 2025, a delegation from Inafi Bangladesh, led by its Governing Body Chairman Mr. Mohammad Muslim Chowdhury, including members of the Inafi Executive Board and Advisory Board, participated in an important meeting with the Chairman of the National Board of Revenue (NBR), Mr. Md. Abdur Rahman Khan, FCMA. The Member (Tax) and Member (VAT) of the NBR were also present at the meeting.
The meeting discussed some existing policy obstacles in the operations of microfinance institutions (MFIs). Three important proposals were raised regarding the issues under discussion, which hold special significance for the smooth operation of the microfinance sector.
Firstly, the issue of tax exemption on interest from microcredit operations was raised. Although the sixth schedule of the 2023 Tax Act exempts income from interest earned on microcredit loans from tax, the new ‘kha’ clause added to the Finance Act of 2024 is contradictory and confusing with this policy. A call was made to abolish or provide a clear explanation of this amendment.
Secondly, the complexity of approval in the use of funds was discussed. Currently, approval from the NGO Bureau is required for receiving foreign grants, and approval from the Microcredit Regulatory Authority (MRA) is needed for using surplus funds from microcredit operations. However, the additional approval requirement of the NBR (section 2, serial 43) is creating an unnecessary complication – which is causing a lack of coordination and trust among the organizations. A recommendation was made to abolish this section.
Thirdly, a proposal was made to provide VAT exemption on interest in microfinance operations. It is to be noted that an order issued on August 3, 2002, exempted the banking sector from VAT on interest from loans and interest paid on deposits. A similar exemption was recommended for microfinance institutions so that they can work more effectively towards financial inclusion.
The NBR Chairman attentively listened to all the proposals during the meeting and assured that he would quickly review the relevant laws and policies and take necessary actions.