Who is liable to pay income tax in Sri Lanka?
You are liable to income tax if you are a resident individual earning income from any source (employment, business, investment, or other), or a non-resident earning income arising in Sri Lanka. In practice, you owe tax for 2025/26 only if your total annual income exceeds the Rs 1.8 million personal relief — that’s Rs 150,000 per month.
Resident individuals are taxed on worldwide income; non-residents only on Sri Lankan-source income. You count as resident for a year of assessment if you ordinarily reside in Sri Lanka, or if you are present in Sri Lanka for 183 days or more in any 12-month period that begins or ends during that year (Inland Revenue Act s.69).
Common situations:
| Your situation | What applies to you |
|---|---|
| Employee only, under Rs 150,000/mo | No tax, no APIT deduction |
| Employee only, over Rs 150,000/mo | Employer deducts APIT monthly; usually nothing more to do |
| Employee + side income (freelance, rent, interest) | APIT on salary plus you declare other income in a return |
| Freelancer / consultant | Register with the IRD, pay quarterly instalments, file a return |
| Consultant paid in foreign currency | Special 15% maximum rate if remitted through a bank — see below |
Income tax rates for 2025/26
Applied to annual income after deducting the Rs 1,800,000 personal relief:
| Taxable income (after relief) | Rate |
|---|---|
| First Rs 1,000,000 | 6% |
| Next Rs 500,000 | 18% |
| Next Rs 500,000 | 24% |
| Next Rs 500,000 | 30% |
| Balance | 36% |
Rates set by the Inland Revenue (Amendment) Act No. 2 of 2025, effective 1 April 2025.
The tax brackets in plain terms
Sri Lanka’s income tax brackets for 2025/26 work like a staircase. The first Rs 1.8 million of annual income (Rs 150,000 a month) is the tax-free allowance, called the personal relief. Above it, the next Rs 1 million is taxed at 6%, the next Rs 500,000 at 18%, the next Rs 500,000 at 24%, the next Rs 500,000 at 30%, and anything above Rs 4.3 million of total income at 36%. Only the slice of income inside each bracket is taxed at that bracket’s rate, so crossing into a higher bracket never reduces your take-home pay.
| Total annual income | Monthly equivalent | Marginal rate |
|---|---|---|
| Up to Rs 1,800,000 | Up to Rs 150,000 | 0% (tax-free allowance) |
| Rs 1,800,001 to 2,800,000 | Rs 150,001 to 233,333 | 6% |
| Rs 2,800,001 to 3,300,000 | Rs 233,334 to 275,000 | 18% |
| Rs 3,300,001 to 3,800,000 | Rs 275,001 to 316,667 | 24% |
| Rs 3,800,001 to 4,300,000 | Rs 316,668 to 358,333 | 30% |
| Above Rs 4,300,000 | Above Rs 358,333 | 36% |
The same five rates expressed against total income, including the Rs 1.8 million relief. Unchanged for Y/A 2026/27 as at September 2026.
Worked example: annual income Rs 3,000,000 (Rs 250,000/month).
Taxable = 3,000,000 − 1,800,000 = 1,200,000.
Tax = (1,000,000 × 6%) + (200,000 × 18%) = 60,000 + 36,000 = Rs 96,000/year (Rs 8,000/month).
Try your own salary in the APIT calculator →
APIT: how tax is deducted from your salary
If you’re employed and earn over Rs 150,000/month, your employer deducts Advance Personal Income Tax (APIT) each month using IRD tax tables, and remits it for you. The monthly deduction on regular salary works out as:
| Monthly salary | APIT |
|---|---|
| Up to Rs 150,000 | Nil |
| Rs 150,001 – 233,333 | 6% of salary − Rs 9,000 |
| Rs 233,334 – 275,000 | 18% of salary − Rs 37,000 |
| Rs 275,001 – 316,667 | 24% of salary − Rs 53,500 |
| Rs 316,668 – 358,333 | 30% of salary − Rs 72,500 |
| Above Rs 358,333 | 36% of salary − Rs 94,000 |
Source: IRD APIT Tax Table 1, Y/A 2025/26.
Bonuses and other lump sums are taxed under a separate cumulative APIT table, so a bonus month is deducted differently from a normal month. If salary is your only income and APIT was deducted in full, the Act (s.94) doesn’t require you to file a return — though the IRD can still ask you to by notice, and if a return is issued to you on the e-filing portal you should file it. For the background to the scheme, see PAYE / APIT explained.
Calculate your monthly APIT and take-home pay →
Other income: rent, interest, freelance, foreign earnings
- Rental income is assessable. You may claim either the standard 25% deduction for repairs & maintenance (Fifth Schedule) or actual documented costs — never both. 10% AIT may be withheld by certain tenants and is creditable against your final tax.
- Bank interest (fixed deposits, savings) suffers 10% AIT withheld by the bank. It is still assessable income — the 10% is a credit, not a final tax, so higher earners may owe more and lower earners may claim a refund.
- Freelance / business income is assessable after deducting business expenses — see the complete freelancer deductions list and our self-employed tax guide.
- Foreign-currency service income (exporting services, remote work for overseas clients): if received in foreign currency and remitted through a Sri Lankan bank, tax on it is capped at 15%. Received outside banking channels, normal rates up to 36% apply. Full guide to foreign income tax →
Reliefs, deductions and qualifying payments
Sri Lanka has few personal deductions. Everything you can subtract for 2025/26 is here:
| Relief or deduction | Amount | Notes |
|---|---|---|
| Personal relief | Rs 1,800,000 | Every resident individual and non-resident citizen. Applied automatically. |
| Rent relief | 25% of gross rent | Standard deduction for repairs and maintenance on rental income; or claim actual documented costs instead, not both. |
| Business expenses | Actual | Costs incurred in producing business or freelance income, plus capital allowances on equipment at 20% a year. Freelancer deductions list. |
| Qualifying payment: donations to Government | Full amount | Donations in money to the Government, a local authority or a state fund. |
| Qualifying payment: donations to approved charities | Lower of 1/3 of taxable income or Rs 75,000 | Only charities approved by the Minister; keep the receipt. |
| Tax credits | Amount withheld | APIT on salary, 10% AIT on interest, 5% or 10% WHT on fees and rent, and quarterly instalments already paid are all subtracted from the tax due. |
Fifth Schedule to the Inland Revenue Act No. 24 of 2017. There is no deduction for EPF contributions, medical costs, school fees, insurance premiums or home-loan interest.
Capital gains on property and unlisted shares are taxed separately at 15% (10% before 3 June 2026): see the capital gains tax guide. Tax withheld from your interest, fees and rent is explained in the withholding tax guide.
Filing your return
The year of assessment runs 1 April – 31 March. The return for Y/A 2025/26 is due by 30 November 2026, filed online via the IRD e-services portal. You’ll need a TIN (Taxpayer Identification Number) first.
- How to file your income tax return, step by step →
- How to register for a TIN online →
- Download return forms (Sinhala & English) →
- All tax deadlines →
Sources: Inland Revenue Act No. 24 of 2017 (as amended); Inland Revenue (Amendment) Act No. 2 of 2025; IRD APIT Tax Tables Y/A 2025/26; IRD Notice PN/IT/2025-01.