The National Board of Revenue has for the first time brought the transfer of agricultural land under its tax net in an attempt to boost receipts and curb tax-dodging.
The measure comes amid allegations that non-farm land outside the municipality areas are handed over in the name of agricultural land to evade tax.
From now onwards, sellers of farmland in rural and suburban areas will have to deposit 1 percent of the deed value of the property to the state coffers as tax.
“We hope the step will increase revenue receipts and put an end to tax evasion,” said Md Abdur Rahman Khan, first secretary of income tax policy at the NBR.
In the absence of any tax on capital gains from transfer of farmland, regular land is shown for agricultural use during transfers to evade taxes.
While no estimate is available on how much tax was lost for misuse of the facility, analysts endorsed the NBR's findings on tax evasion.
“They [NBR] are right,” said Abdul Bayes, professor of Economics at Jahangirnagar University, adding that in many cases, land in rural and sub-urban areas are used for establishing factories but are shown as farmland during ownership transfers.
Mahabub Hossain, an economist who closely follows the rural economy, too welcomed the NBR's move to impose tax on capital gains from farmland transfer.
“Land prices are rising. So, a portion of windfall gains of sellers should come for public expenditures,” he said.
The NBR is yet to conduct any assessment on how much revenue the state may get for slapping on the tax.
Apart from the imposition of tax on farmland, the NBR also raised the rate of tax on property transfers, including buildings, in city corporations and municipalities areas.
The NBR raised the rate of capital gains tax from 3 percent to 4 percent of the deed value in Rajuk and Chittagong Development Authority areas.
The rate of tax has been hiked to 3 percent of the deed value from 2 percent for land transfers in Gazipur, Narayanganj, Munshiganj, Manikganj, Narsingdi, Dhaka, Chittagong districts and city corporations except for Dhaka North and South.
Ownership transfers of land in areas under municipalities at the district headquarters will face tax of 3 percent of the deed value in place of the existing 2 percent.

The tax rate for municipalities situated in other areas such as the upazila level will be 2 percent of the quoted prices in place of the existing 1 percent.
Sajjad Zohir, director of Economic Research Group, said properties are registered quoting the rates determined by the government. In reality, actual transfer prices are higher than that, he said.
“The government should be realistic in determining the value of land and fix a rational tax structure,” he said, while advising the government to enlist the services of independent survey firms to ensure proper value is reflected during land transfer registration.
The NBR received Tk 765 crore as tax from property transfers in fiscal 2011-12, up from Tk 485 crore the previous year, according to official data.