The Bhutanese Leading the way.
The National Assembly passed the Income Tax Amendment Bill 2025, confirming a higher tax exemption for interest income from fixed deposits compared to dividends.
Under the new law, interest income from fixed deposits will be exempt up to Nu 400,000 per year, while dividend income will remain tax-free up to Nu 300,000. Any income above these thresholds will be taxed at 10% starting next year. The Economic and Finance Committee defended the decision, arguing that fixed deposits carry no risk and guarantee a return, while dividends are unpredictable and depend on business performance.
The National Council had earlier proposed a sharper difference, suggesting a Nu 400,000 ceiling for fixed deposits and lowering the dividend exemption to Nu 200,000. Some MPs, however, questioned whether treating them differently might discourage people from investing in shares. Health Minister Tandin Wangchuk argued that both forms of income should have equal ceilings, noting that while deposits are risk-free, investing in shares supports businesses and involves risk that should be acknowledged in the tax policy.
Despite this, the Assembly eventually supported the committee’s proposal. Committee member Tashi Tenzin explained that while there was interest in raising the dividend ceiling to match fixed deposits, doing so was not possible at this stage because it had not been formally proposed earlier — a change that would have gone against parliamentary rules.
The revised thresholds will come into effect next year, affecting anyone whose annual fixed deposit interest exceeds Nu 400,000 or dividend income exceeds Nu 300,000. The debate, however, also showed that questions about how to balance fairness, risk, and economic growth are likely to remain part of future discussions.
The principal amount in the fixed deposits will never be taxed and it is only the annual interest income that is taxed.
