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With the National Assembly (NA) endorsing a 10% tax on interest income from fixed deposit interest income above Nu 300,000, the big question is how will the tax be levied after 1st January 2026 when the tax becomes effective.
The worry is especially for those who may have a long-term fixed deposit that may mature after 1st January 2026.
Here, an official from the Ministry of Finance (MoF) said that all the interest income earned till 31st December 2025 will not be taxed.
For example, if a person put a Nu 5 million fixed deposit in December 2016 at 8% interest rate for 10 years, then it should mature by December 2026.
The official explained that firstly the Nu 5 million (mn) principal will not be taxed at all. Then the 8% fixed deposit interest income till 31st December 2025 will be exempt from the 10% tax and the interest income from January to December 2026 will only be taxed 10%.
This means that the total interest income is Nu 4 mn for 10 years at the rate of Nu 400,000 per year. The interest income for 9 years at Nu 3.6 mn will not be taxed as it falls before 1st January 2026. Only the 400,000 interest income earned in 2026 will be considered for taxation but since there is a Nu 300,000 exemption of the Nu 400,000 only Nu 100,000 will be taxed 10% at Nu 10,000.
There will be no tax on interest income from saving and recurrent accounts.
NA also endorsed a 10% tax on dividends, with an exemption cap of Nu 300,000 per year. Dividends exceeding this threshold will be taxed.
This means if a person makes any dividend below or at this amount of Nu 300,000 there is no tax.
This decision, part of the Income Tax (Amendment) Bill 2025, came after extensive deliberation and now moves to the National Council (NC) for further discussion.
The government had initially proposed taxing interest earned from fixed deposits. However, the Economic and Finance Committee (EFC) recommended exempting interest income from fixed deposits up to Nu 500,000 and dividend income up to Nu 100,000 annually.
Mongar MP, Naiten Wangchuk, a member of the EFC, said that the proposed threshold of Nu 500,000 aimed to support people who rely on fixed deposit interest.
Despite this, several MPs did not agree with either the government’s or the committee’s proposals.
The Opposition Leader, Pema Chewang, said that the current government had previously removed such taxes in the first place to promote a culture of saving. He also talked about the removal of the Nu 10 entry and exit fee, which was supposed to be collected from the Pedestrian Terminal in Phuentsholing, which was a possible source of revenue for the government, questioning the fairness of introducing this tax measure now that there is a lack of funding.
Finance Minister, Lekey Dorji, stated that the tax was not designed to create inequality but to promote capital market development, and suggested that tax exemptions on fixed deposits and dividends should be the same amount since the EFC had initially recommended that the tax waiver for the FD and the dividend as different amounts.
Bumdeling-Jamkhar MP, Wangdi, raised concerns about rural citizens who depend on fixed deposit interest after selling their land, as they can no longer engage in manual labor.
Kengkhar-Weringla MP, Dorji Wangmo, also opposed both proposals, noting that many people prefer fixed deposits for retirement savings, especially since a large portion of the population, about 91% is not covered under any pension scheme and 83% of people who are currently working also do not fall under any pension schemes.
