The Finance Ministry says it will look at ways to make the refund of tax withheld from fixed-deposit interest easier for taxpayers. This follows the Opposition Party’s call to review the current system, under which ten per cent is withheld even though individuals can earn up to Nu 400,000 in fixed-deposit interest tax-free.
The Finance Ministry says the ten per cent withholding tax on fixed-deposit interest will continue for now. It says the rate is prescribed under the Income Tax Act 2025 and is not a policy introduced by the ministry.
Under the Act, individuals who are not engaged in business can earn up to Nu 400,000 in fixed-deposit interest without paying income tax in an income year. However, ten per cent is initially withheld when the interest is paid.
Taxpayers can then claim back the amount they are entitled to when their tax liability is calculated.
The Opposition Party earlier this week has asked the government to instead apply the Nu 400,000 exemption when the interest is paid. In its letter to the Finance Minister, the party said people who are not required to pay the tax may still have to wait to get the withheld amount back. It said this could be a concern for people who rely on fixed-deposit interest to meet their regular expenses.
The party says it received several enquiries from the public.
However, the finance ministry says withholding tax helps ensure tax is collected on time and reduces the risk of non-compliance and revenue leakage.
The ministry says the Department of Revenue and Customs will now look at ways to simplify the refund process. The Department is also considering allowing eligible taxpayers to receive the refund without having to file a separate Personal Income Tax return.
The Department says applying the exemption directly when interest is paid could be difficult for people with fixed deposits in different financial institutions.
For example, a person could earn Nu 300,000 in interest from one bank and another Nu 250,000 from a second bank. In such cases, the banks would need a way to know how much of the Nu 400,000 exemption has already been used.
The ministry says it wants to find a solution that is practical and sustainable while balancing taxpayer convenience, compliance, and the efficient use of public resources.
Deki Lhazom
Edited by Sangay Chezom
