How withholding tax works for the person receiving the money
Most guides to WHT are written for the company doing the paying. This one is written for you, the payee. Three things matter:
- The payer deducts the tax and gives you a withholding certificate. From 2026 they must issue it free of charge (section 87(6), added by Act No. 11 of 2026).
- The gross amount, before the deduction, is what goes into your income for the year.
- The tax withheld is a credit: it is subtracted from the income tax you owe. If the credit is bigger than your bill, the difference is refunded.
Withholding tax rates in Sri Lanka from 1 April 2025
| Payment | Rate | Applies when |
|---|---|---|
| Interest or discount (bank deposits, treasury bills, bonds) | 10% | All residents and non-residents; called AIT. A self-declaration can stop the deduction if your income is below the tax-free threshold. |
| Dividends | 15% | All dividends paid by resident companies. |
| Rent paid to a resident | 10% | Rent above Rs 100,000 a month. |
| Service fees paid to a resident individual | 5% | Fees above Rs 100,000 a month for professional or consulting services, commissions, teaching, and similar. |
| Royalties | 14% | All royalty payments. |
| Lottery, betting and gaming winnings | 14% | Winnings above Rs 500,000. |
| Rent, service fees and most payments to non-residents | 14% | Unless a double tax treaty sets a lower rate. |
| Gems sold at auction | 2.5% | Auction proceeds. |
IRD Tax Chart Y/A 2025/26 and the Inland Revenue (Amendment) Act No. 2 of 2025. Interest WHT rose from 5% to 10% on 1 April 2025.
AIT on fixed deposit and savings interest
Banks deduct 10% AIT from interest as it is credited. If your total income for the year, including the interest, is below the Rs 1.8 million personal relief, you can give the bank a self-declaration and the bank stops deducting. Giving a false declaration now carries a penalty of up to Rs 200,000 (section 178A, added in 2026), so only sign one if you are genuinely under the threshold. If AIT was deducted and you did not owe tax, you claim it back through your return. The AIT on interest guide covers senior citizens, joint accounts and refunds in detail.
5% WHT on professional and service fees
If you invoice a company more than Rs 100,000 in a month for consulting, professional, teaching, commission or similar services as an individual, the company must deduct 5% and pay it to the IRD under your TIN. This is not your final tax. Your fee income is business income taxed at the normal 6% to 36% bands after expenses and the personal relief; the 5% already paid is credited against that. Many consultants end up owing more; some, with expenses and a modest income, are owed a refund. Work it out in the income tax calculator, which handles WHT credits, and see the self-employed and freelancer guide for what you can deduct.
10% WHT on rent
A tenant who is a company, or who pays you more than Rs 100,000 a month, deducts 10% from the rent. On your return you declare the gross rent, take the 25% rent relief, add the net to your other income, and credit the 10% withheld. Individual tenants paying under Rs 100,000 a month do not withhold; you simply declare the rent.
15% on dividends
Dividend WHT at 15% is a final tax for individuals: the dividend is not added to your other income again. You still record it on the return.
The WHT certificate
Every payer who withholds must give you a certificate showing the gross payment, the tax deducted, their TIN and yours. Banks issue an annual AIT certificate (many make it available in online banking); companies issue one per payment or per year. You need these to claim the credits when you file your return, and the IRD can ask to see them. From 2026 payers who fail to issue certificates or annual statements face penalties of up to Rs 200,000 a year.
Claiming withheld tax back
File your return by 30 November, enter each credit against the income it relates to, and the portal computes the balance. Refunds of up to Rs 180,000 are fast-tracked and should arrive within three months; larger refunds can take longer. Claims must be made within 30 months of the end of the year of assessment. Employees whose only non-salary income is interest of Rs 5,000 or less do not need to file at all (section 94(1)(d)).