VDS and TDS in Bangladesh: rates, sections and worked calculations

VDS is VAT deducted at source. It sits under the VAT and Supplementary Duty Act 2012: a withholding entity paying for a service holds back the VAT element and deposits it to the government instead of paying it to the supplier.

TDS is income tax deducted at source. It sits under the Income Tax Act 2023: the payer holds back a slice of the payment itself as an advance against the supplier's own income tax.

Two different taxes, two different Acts, two different deposit mechanisms, and both can apply to the same invoice at the same time. Conflating them is the single most common error in this area, and it produces a payment that is wrong in both directions at once.

As of 19 August 2026, per the Value Added Tax and Supplementary Duty Act 2012 and its Rules 2016, and the Income Tax Act 2023, as amended by the Finance Act 2026. Rates, thresholds and schedules in Bangladesh are re-issued by SRO, often mid-year, and the figures here are drawn from professional secondary sources because NBR's own site was not reachable at review time. Confirm with your VAT consultant before you rely on any figure here. NBR is the authority; this page is not.

Income tax deducted at source, by the nature of the payment. The section is what an auditor will ask for, so record it with the deduction rather than reconstructing it later.

Advance income tax at import is a related deduction made by customs rather than by you, and it is creditable against the importer's own tax in the same way.

As of 19 August 2026, per the Value Added Tax and Supplementary Duty Act 2012 and its Rules 2016, and the Income Tax Act 2023, as amended by the Finance Act 2026. Rates, thresholds and schedules in Bangladesh are re-issued by SRO, often mid-year, and the figures here are drawn from professional secondary sources because NBR's own site was not reachable at review time. Confirm with your VAT consultant before you rely on any figure here. NBR is the authority; this page is not.

VDS follows the VAT the service itself carries. A standard-rated service withheld in full produces a deduction at the standard rate; a service on a truncated base produces a deduction at that base rate. There is no separate schedule of withholding percentages layered on top of the VAT rates.

As of 19 August 2026, per the Value Added Tax and Supplementary Duty Act 2012 and its Rules 2016, and the Income Tax Act 2023, as amended by the Finance Act 2026. Rates, thresholds and schedules in Bangladesh are re-issued by SRO, often mid-year, and the figures here are drawn from professional secondary sources because NBR's own site was not reachable at review time. Confirm with your VAT consultant before you rely on any figure here. NBR is the authority; this page is not.

For VDS, the obligation falls on withholding entities: government and semi-government bodies, autonomous and local authorities, NGOs, banks, insurers and financial institutions, limited companies, and educational institutions, among others named by the Act and by SRO. If you are a limited company paying for a service, assume the obligation applies until you have checked that it does not.

For TDS, the obligation is broader and follows the nature of the payment rather than the identity of the payer. A payment for a service, a professional fee, rent or a commission carries a deduction obligation on the person making it.

Deducting is only half the obligation. The amount has to reach the government under the right code, within the statutory window, and be evidenced back to the supplier so they can claim it against their own liability.

1. 01Deduct at the point of payment, not at the point of invoice, unless the rule for that category says otherwise.
2. 02Deposit to the treasury under the correct code for the tax and the zone, within the window the relevant rules set. Confirm the current deadline against the rules in force; it is not the same for VAT and for income tax.
3. 03Issue the supplier their evidence: a VDS certificate for VAT withheld, and the deduction record for income tax withheld, so they can claim the credit.
4. 04Keep the treasury challan. Without it you deducted the money and cannot prove you deposited it, which is the worst of both positions.

As of 19 August 2026, per the Value Added Tax and Supplementary Duty Act 2012 and its Rules 2016, and the Income Tax Act 2023, as amended by the Finance Act 2026. Rates, thresholds and schedules in Bangladesh are re-issued by SRO, often mid-year, and the figures here are drawn from professional secondary sources because NBR's own site was not reachable at review time. Confirm with your VAT consultant before you rely on any figure here. NBR is the authority; this page is not.

This is the part that surprises people, and it is the reason the obligation is worth automating rather than remembering. Failing to deduct does not leave the tax with the supplier. Under the Income Tax Act 2023 the person who should have deducted becomes liable for the amount as if it were their own tax, with the associated penalty and interest exposure.

The commercial consequence follows: you have already paid the supplier the gross amount, the supplier has no reason to return the difference, and the liability is yours. VAT withheld and not deposited carries its own exposure under the VAT Act.

As of 19 August 2026, per the Value Added Tax and Supplementary Duty Act 2012 and its Rules 2016, and the Income Tax Act 2023, as amended by the Finance Act 2026. Rates, thresholds and schedules in Bangladesh are re-issued by SRO, often mid-year, and the figures here are drawn from professional secondary sources because NBR's own site was not reachable at review time. Confirm with your VAT consultant before you rely on any figure here. NBR is the authority; this page is not.

On an invoice of BDT 100,000.00, before any VAT, the income tax deduction works out as follows. Every figure below is computed from the rate table above rather than typed in, so the two cannot disagree.

As of 19 August 2026, per the Value Added Tax and Supplementary Duty Act 2012 and its Rules 2016, and the Income Tax Act 2023, as amended by the Finance Act 2026. Rates, thresholds and schedules in Bangladesh are re-issued by SRO, often mid-year, and the figures here are drawn from professional secondary sources because NBR's own site was not reachable at review time. Confirm with your VAT consultant before you rely on any figure here. NBR is the authority; this page is not.

Deduction is a rules problem, not a judgement problem: the category decides the rate, the cumulative position decides whether a threshold has been crossed, and the payment run has to apply both without anyone remembering to. That is exactly the shape of work a system should be doing.