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Source tax (section 125) explained: mouza groups, land classes and the per-decimal floor
Everyone calls it "gain tax". The law calls it the tax collected under section 125 of the Income Tax Act 2023, and rule 6 of the Source Tax Rules 2026 sets it by three facts about your land: which mouza group it sits in, which class it falls in, and how many decimals there are. Get any of the three wrong and the figure is wrong.
The higher-of rule
For every transfer, two amounts are worked out and the higher is collected:
Limb 1 — the percentage: the group's rate (5%, 3% or 2%) multiplied by the land value stated in the deed.
Limb 2 — the floor: the per-decimal amount for the group's table and your land class, multiplied by the number of decimals.
Where the deed value is high, the percentage applies. Where it is low — and in prime areas, "low" means anything under several lakh per decimal — the floor takes over, and the tax stops falling in step with the declared price. That design is deliberate: it blunts the saving from under-declaring the value.
The seven groups
| Group | Rate | Floor range per decimal |
|---|---|---|
| 1. Gulshan, Banani, Motijheel, Tejgaon (Dhaka) | 5% | ৳3,00,000 – ৳9,00,000 |
| 2. Dhanmondi, Wari, Tejgaon Industrial Area, Shahbagh, Ramna, Paltan, Bangshal, New Market, Kalabagan (Dhaka) | 5% | ৳2,00,000 – ৳6,50,000 |
| 3. Mohammadpur, Kafrul, Uttara Model Town, Cantonment, Khilgaon, Jatrabari and other listed Dhaka stations | 5% | ৳85,000 – ৳4,00,000 |
| 4. Khilkhet, Uttara West, Mirpur, Pallabi, Badda and other listed Dhaka stations; Narayanganj Sadar | 5% | ৳75,000 – ৳3,50,000 |
| 5. Khulshi, Panchlaish and other listed Chattogram stations; listed Narayanganj and Gazipur stations | 3% | ৳35,000 – ৳1,75,000 |
| 6. Savar, Keraniganj, Dhamrai, Dohar, Nawabganj; further listed Chattogram, Gazipur and Narayanganj stations | 3% | ৳30,000 – ৳1,25,000 |
| 7. The rest of the five major city corporations, other city corporations, development-authority areas and district-headquarters pourashavas | 3% | ৳25,000 – ৳1,00,000 |
Outside the listed groups: pourashava mouzas pay 2% or ৳10,000 per decimal; upazila mouzas outside any pourashava pay 2% or ৳500 per decimal. The full floor table — all four class columns for all seven groups — is on the rates page.
The six classes
Rule 6(8) classes the land by who developed the area and what the plot is for: A commercial and B residential plots in development-authority areas (RAJUK, the housing authority, cantonments and similar); C commercial and D residential plots in private-developer areas; E industrial plots; F everything else. The same physical plot can sit in different classes in different families' paperwork — the deed's own statement of use is what the tax follows, which is why rule 6(3) insists the deed states it.
The flip, worked
A Class D plot of 5 decimals in the Mirpur group (Group 4): the floor is ৳1,50,000 × 5 = ৳7,50,000. Land value ৳30,00,000 → 5% is ৳1,50,000 → tax ৳7,50,000 (the floor is five times the percentage limb). Land value ৳2,00,00,000 → 5% is ৳10,00,000 → the percentage limb wins. They cross at exactly ৳1,50,00,000. The land calculator shows both limbs on every result, so you can see which side of the flip your own deed sits on.
The ceilings above everything
Section 125(2) caps the prescribed rates themselves: the tax may not exceed the highest of ৳20 lakh per katha of land, ৳1,000 per square foot of building or flat, or 10% of the deed value. The rule 6 rates sit well below those ceilings in ordinary cases — the caps exist so that the floor tables can never run away from the value of the transaction itself.
Questions
Is the section 125 tax a final tax?
Not any more. Until 30 June 2026 the tax collected at registration settled the seller’s capital-gains position. The Finance Act 2026 (section 91) changed that: from 1 July 2026 the amount collected at registration is an advance against the capital-gains liability assessed in the seller’s return. Budget for the deposit at registration, and expect the gain to be revisited at filing.
What happens if the deed does not state the use of the land?
Rule 6(3) is blunt: if the remarks column of the deed does not clearly state whether the land or building is residential, commercial or industrial, the tax is treated as not properly collected. The class drives the per-decimal floor, so the wording of the deed is a tax fact, not a formality — check it before the deed is engrossed.
Do government bodies pay section 125 tax?
Yes. Rule 6(4) expressly applies the tax to transfers by statutory and government bodies. The exemptions in rule 6(5) and section 125(3) cover mortgage deeds, UN and embassy transfers, no-claim deeds, partition deeds, waqf and debottor endowments, deeds without consideration, bank sales under power of sale, mortgages to lenders and approved sukuk vehicles — not government sellers.