The Prime Minister Lyonchhen Tshering Tobgay said that the cabinet in a meeting on Friday decided to make Fixed Deposits exempt from taxes. Currently interest earned from fixed deposits in bank is considered to be part of one’s income and so is taxed under the Personal Income Tax.
The Bhutanese newspaper first reported in September that the government is planning to make fixed deposits tax free.
After the cabinet approval the next step is that the Finance Ministry will propose an amendment to the Income Tax Act in the upcoming winter session.
“The idea is to encourage people to save money so that it will not only benefit the individual but also the entire economy,” Lyonchhen said.
He said that the country is going through a time of unprecedented growth and prosperity and it is important for both individuals and the government to save money.
As of 2014-15 there was only Nu 878.96 mn as fixed deposits in banks which include even institutional depositors and he said that this was too low.
The plan is to put up the tax proposal in the winter sessions of the parliament and get it passed which would be in time for the March 2017 PIT deadline. The revenue foregone would be around Nu 43 mn according to the Finance Minister Lyonpo Namgay Dorji.