The government has decided to retain the tax exemption on income earned from zero-coupon bonds for individual investors, reversing a proposal in the FY2026-27 budget to withdraw the long-standing benefit.
Finance Minister Amir Khosru Mahmud Chowdhury announced the decision today (29 June) while delivering his concluding remarks before the national budget was passed in parliament.
The move comes as a relief for individual investors, whose income from zero-coupon bonds will continue to be excluded from taxable income.
A zero-coupon bond is a debt instrument issued at a discount to its face value and does not pay periodic interest. Investors earn returns by receiving the bond’s full face value when it matures.
The tax exemption was introduced through the Finance Act for FY2007-08, effective from 1 July 2007, to encourage individual participation in the bond market and support the development of Bangladesh’s debt market.
Under the sixth schedule of the Income Tax Act, income from zero-coupon bonds received by individuals, excluding banks, insurance companies and financial institutions, is exempt from income tax, subject to certain conditions.
To qualify, the bonds must be issued by a bank, insurance company or financial institution with prior approval from Bangladesh Bank or the Bangladesh Securities and Exchange Commission (BSEC), or by another institution with approval from either regulator.
According to the BSEC’s annual report, 11 companies raised Tk6,675 crore through zero-coupon bond issuances in FY2023-24. However, the market slowed significantly in FY2024-25, with only one company raising Tk171 crore through the instrument.
Despite the slowdown, regulators continue to approve new issuances. In March, the BSEC approved City Sugar Industries to raise Tk1,300 crore and Akij Food and Beverage to raise Tk500 crore through zero-coupon bonds.
Market participants say retaining the tax exemption is expected to support investor confidence and help sustain interest in Bangladesh’s corporate bond market.
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