Home › Guides
Developer flat VAT & section 126 tax, explained
Buy a flat from its developer and the deed carries a different tax architecture from a resale. Section 126 of the Income Tax Act replaces the section 125 structure tax with a per-square-metre levy, rule 7 adds two land taxes, and the VAT law takes its own percentage of the deed value. Here is each layer — and an honest account of the one layer this site will not fully price.
Layer 1 — the section 126 per-square-metre tax
Charged on the flat's floor area. Residential: ৳1,600 per sq m in mouza Group 1 (Dhanmondi, Gulshan side), ৳1,500 in Group 2, ৳1,400 in Group 3 (Uttara side), and ৳300 outside the listed areas. Commercial space is priced on its own ladder, from ৳6,500 down to ৳1,000 per sq m. On the worked Uttara example — 1,800 sq ft, which converts to 167.23 sq m — the line is 167.23 × ৳1,400 = ৳2,34,122.
Layer 2 — the land taxes
Rule 7(2) taxes the land under the building at 5% of its value in seven districts — Dhaka, Gazipur, Narayanganj, Munshiganj, Manikganj, Narsingdi and Chattogram — and 3% elsewhere. And rule 7(5) keeps the ordinary rule 6(1) land tax in play as well: the higher of the group percentage or the per-decimal floor on the flat's land share. What rule 7(5) removes is only the rule 6(2) structure tax — replaced, in effect, by Layer 1 and Layer 3.
Layer 3 — VAT on the supply
Under the VAT and SD Act schedule (SRO No. 183-Law/2025): 2% of the deed value for flats of 1 to 1,600 sq ft, 4.5% for flats of 1,601 sq ft and above, and 2% for land-development supplies. The step is a cliff, not a slope: a 1,601 sq ft flat pays 4.5% on the whole value, which on a ৳2 crore deed is ৳9,00,000 against ৳4,00,000 at the lower rate — a half-million-taka consequence of one square foot, and a fact worth knowing before you choose between two otherwise similar units.
Putting the layers together
The full worked example — Uttara, ৳2 crore, 1,800 sq ft — is on the Dhaka flat guide: developer's side ৳15,46,622, buyer's side ৳9,00,000, all-in ৳24,46,622. Run your own figures in the calculator's developer mode; the result separates the three layers so you can see which one is doing the damage.
Questions
What taxes does a developer pay when it sells a flat?
Three, under two statutes. Under section 126 of the Income Tax Act and rule 7 of the Source Tax Rules 2026: a per-square-metre tax on the flat (residential: ৳1,600 / ৳1,500 / ৳1,400 in mouza Groups 1–3, ৳300 outside the listed areas), plus a land tax of 5% of the land value in the seven listed districts (3% elsewhere), plus the rule 6(1) land tax. Under the VAT law: 2% on flats up to 1,600 sq ft and 4.5% above, on the deed value. The rule 6(2) structure tax does not apply (rule 7(5)).
Who actually bears the VAT — developer or buyer?
Legally the VAT is the developer’s liability as the supplier. Commercially, most Dhaka sale agreements pass registration-side costs to the buyer in the price or as an added charge, which is why buyers meet the figure at the registration desk. What matters for your budget is that the amount exists and is computed on the deed value — check your agreement for who carries it.
Why does this site not price the section 126 tax for every area?
Because the ladder’s middle steps are not verifiable. The rules’ residential ladder contains ৳1,300 and ৳700 steps in addition to the settled ৳1,600, ৳1,500, ৳1,400 and ৳300 — but the Gazette-faithful text available to us does not pin which mouza groups those steps attach to, and the commercial ladder’s group assignment is likewise unconfirmed. Guessing a group’s rate would misprice real flats by thousands of taka per unit. The calculator prices the line where the rate is settled and labels it conditional where it is not.