You owe income tax in Sri Lanka once your total income passes Rs 150,000 a month, or Rs 1.8 million a year. The first Rs 1,800,000 of your annual income is tax-free. That is your personal relief. Income above it is taxed in progressive bands from 6% up to 36% for the 2025/26 year of assessment.
Income tax rates in Sri Lanka 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.
How much tax will you pay? Worked examples
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 →
Worked example: annual income Rs 2,000,000 (Rs 166,667/month).
Taxable = 2,000,000 − 1,800,000 = 200,000.
Tax = 200,000 × 6% = Rs 12,000/year (Rs 1,000/month).
Worked example: annual income Rs 5,000,000 (Rs 416,667/month).
Taxable = 5,000,000 − 1,800,000 = 3,200,000.
Tax = (1,000,000 × 6%) + (500,000 × 18%) + (500,000 × 24%) + (500,000 × 30%) + (700,000 × 36%) = 60,000 + 90,000 + 120,000 + 150,000 + 252,000 = Rs 672,000/year (Rs 56,000/month).
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 |
Tax-free allowance: the personal relief
Every individual gets the first Rs 1,800,000 of annual income tax-free. This is called the personal relief, and it applies automatically. You don’t need to claim it or file anything to get it. In monthly terms that is Rs 150,000: if your monthly income is at or below that, you owe no income tax at all. Once your income goes above Rs 150,000 a month, only the amount above the threshold is taxed, starting at 6%. The threshold has been changed more than once in recent years, so if you are reading an older article or an old payslip, check which year of assessment it refers to before you rely on the figure. For the current 2025/26 year of assessment, Rs 1,800,000 is the figure that applies.
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.
Individual vs company income tax
Individual income tax and company income tax are separate systems in Sri Lanka. Individuals pay tax on a progressive scale from 6% to 36% after the Rs 1,800,000 personal relief, as set out above. A company gets no personal relief and pays the standard corporate income tax rate of 30% on its profits, rising to 45% for betting and gaming and for the manufacture, import and sale of liquor or tobacco. If you run your business as a sole trader, the profit is taxed as your personal income under the rules on this page. If you have incorporated, the company is taxed separately from you, and you pay 15% withholding tax on any dividends it pays you. Partnerships sit in between: the partnership itself pays nothing on the first Rs 1,000,000 of divisible profit and 6% above that, and each partner then includes their share in their own return. For the full breakdown, see our guide to small business tax in Sri Lanka.
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.