Question 1

What is the personal relief for income tax in Sri Lanka?

Accepted Answer

From April 2025 (2025/2026 tax year), the personal relief is Rs. 1,800,000 per year. This means the first Rs. 150,000 of your monthly income is tax-free. For the 2024/2025 tax year, the personal relief was Rs. 1,200,000 (Rs. 100,000/month).

Question 2

What are the income tax rates in Sri Lanka from April 2025?

Accepted Answer

From April 2025, Sri Lanka uses progressive tax rates on income above the Rs. 1,800,000 personal relief: 6% for the first Rs. 1,000,000, 18% for the next Rs. 500,000, 24% for the next Rs. 500,000, 30% for the next Rs. 500,000, and 36% for income above Rs. 2,500,000 above relief. The 12% slab was removed in 2025/2026.

Question 3

Is EPF contribution deductible from taxable income?

Accepted Answer

No. Your EPF contribution (8% of salary) is a payroll deduction — it reduces your take-home pay but is NOT deducted from taxable income under the Inland Revenue Act. Employment profits for APIT Table 01 are also computed without deducting EPF.

Question 4

What tax reliefs are available in Sri Lanka?

Accepted Answer

Available reliefs include: Personal relief (Rs. 1.8M from April 2025; Rs. 1.2M for 2024/2025), rent relief of 25% on investment rental income, solar relief up to Rs. 600,000/yr for resident grid-connected installations, and Schedule-5 qualifying payments such as approved charity donations (capped at the lower of the donation, Rs. 75,000, or one-third of taxable income).

Question 5

When is income tax due in Sri Lanka?

Accepted Answer

APIT is deducted monthly by employers. Self-employed individuals must pay quarterly installments. The annual tax return is due by November 30th following the tax year end (March 31st), with any final balance payable by September 30th.

Question 6

Are non-residents taxed differently in Sri Lanka?

Accepted Answer

Yes. Non-residents are taxed only on Sri Lanka-sourced income. Relief eligibility depends on citizenship: non-resident Sri Lankan citizens still qualify for personal, rent and solar reliefs, while non-resident non-citizens are taxed from the first rupee under the same progressive brackets. Select "Non-Resident" above to see the difference.

Question 7

How is APIT calculated in Sri Lanka?

Accepted Answer

APIT (Advance Personal Income Tax) is the employer-side monthly withholding on regular employment profits, computed from IRD APIT Table 01 which has the Rs. 150,000/month relief built into its rows — EPF is not deducted first. APIT replaced the former PAYE system under the Inland Revenue (Amendment) Act No. 2 of 2025. This calculator estimates annual income tax; the monthly figure shown is an average, not your payslip APIT.

Question 8

What is the difference between APIT and PAYE?

Accepted Answer

PAYE (Pay As You Earn) was the previous system for employee tax withholding. APIT (Advance Personal Income Tax) replaced PAYE from April 2025 under the Inland Revenue (Amendment) Act. The calculation method is similar — both use progressive brackets on monthly income minus relief — but APIT has updated relief (Rs. 1.8M annually from April 2025) and applies to a broader range of income including employment, pension, and investment income.

Question 9

How are allowances treated for tax purposes?

Accepted Answer

Most allowances are taxable as part of your gross income. However, some specific allowances may be exempt, such as certain travel allowances for public sector employees. Generally, if an allowance is paid in cash and forms part of your remuneration, it is taxable. Non-cash benefits like company-provided vehicles have separate fringe benefit tax rules.

Question 10

How is foreign income taxed in Sri Lanka?

Accepted Answer

From April 2025, foreign-sourced income of tax residents is taxable in Sri Lanka. This includes employment income, business income, and investment income earned abroad. Non-residents are taxed only on Sri Lanka-sourced income. If you have paid tax on foreign income in another country, you may be able to claim a foreign tax credit to avoid double taxation, subject to applicable tax treaties.

Question 11

What is the effective tax rate vs marginal tax rate?

Accepted Answer

Your marginal tax rate is the rate applied to your next rupee of income. Your effective tax rate is your total tax divided by your total income, which is always lower than your marginal rate because lower brackets are taxed at lower rates. For example, on Rs. 2M annual income from April 2025, your marginal rate might be 6% but your effective rate could be only 0.6%.

Question 12

Can I claim deductions for medical or insurance expenses?

Accepted Answer

Direct medical expenses are not deductible. Life and health insurance premiums are also NOT deductions under the current return structure — the earlier deduction schedule was replaced. Deductions on the Y/A 2025/26 return are limited to qualifying payments listed in Schedule 5 (e.g. approved charity donations up to the lower of Rs. 75,000 or one-third of taxable income).

Tax Bracket (Annual)	2024/2025 Rate	From Apr 2025 Rate	Monthly Threshold
First Rs. 1,000,000 above relief(2024/25: first 500k @ 6%, next 500k @ 12%)	6% / 12%	6%	Rs. 150,001 - Rs. 233,333
Next Rs. 500,000	18%	18%	Rs. 233,334 - Rs. 316,667
Next Rs. 500,000	24%	24%	Rs. 316,668 - Rs. 400,000
Next Rs. 500,000	30%	30%	Rs. 400,001 - Rs. 483,333
Above Rs. 2,500,000 above relief	36%	36%	Rs. 483,334+

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