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The Investment Rebate, Explained: Three Limits, One Answer

Section 78 of the Income Tax Act 2023 gives a tax rebate (বিনিয়োগ কর রেয়াত) for approved investment and donations. The rule is one sentence long — the rebate is the lowest of three figures — and almost everything people get wrong about it comes from hearing only one of the three.

The three limits

Your rebate is whichever of the three is smallest. That single design explains most rebate surprises: a large investment does not help if limit 1 is smaller, and a large income does not help if limit 2 is.

Worked example 1 — the income limit binds

Total income ৳20,00,000; investment ৳8,00,000. Limit 1: 3% of ৳20,00,000 = ৳60,000. Limit 2: 10% of ৳8,00,000 = ৳80,000. Limit 3: ৳7,50,000. The rebate is ৳60,000 — and the taxpayer could have invested twice as much without saving one taka more, because limit 1 was already the wall. This is the example our rebate calculator is tested against.

Worked example 2 — the investment limit binds

Total income ৳20,00,000; investment ৳50,000. Limits: ৳60,000 · ৳5,000 · ৳7,50,000. The rebate is ৳5,000. Here extra investment does pay: every additional ৳100 invested adds ৳10 of rebate, until investment reaches ৳6,00,000, where limit 2 meets limit 1 at ৳60,000 and the income limit takes over.

Worked example 3 — the ceiling binds

Total income ৳3,00,00,000; investment ৳1,00,00,000. Limits: ৳9,00,000 · ৳10,00,000 · ৳7,50,000. The rebate is the ceiling itself. It takes an income of ৳2,50,00,000 and an investment of ৳75,00,000 before the ceiling is even reachable — which is why quoting “rebates up to ৳7.5 lakh” as a headline, without the other two limits, misleads almost every reader.

Two more rules that matter

The rebate cannot beat the minimum tax. It reduces your calculated tax, but if your income is above the tax-free limit, the minimum tax (৳5,000, or ৳1,000 on a first return) remains payable after the rebate. Timing is everything. The investment must be made inside the income year — by 30 June — to count for that year's return; an investment made in July belongs to the next year. And instruments carry their own counting limits in the NBR's Income Tax Guide (a DPS counts up to ৳1,20,000 a year; sanchaypatra and government securities up to ৳5,00,000 together) — printed as guidance in the calculator, because guidance is what they are until you read them in the guide itself.