Individual Income Tax in Sri Lanka – Complete Guide
📅 Last Updated: March 2026
This article is continuously updated with the latest individual income tax regulations in Sri Lanka, including new rates and changes issued by the Inland Revenue Department.
🔄 Latest Updates
Key Changes (2025/2026)
- Tax-free threshold increased to LKR 1,800,000 annually
- Monthly tax-free allowance: LKR 150,000
- Progressive tax rates range from 6% to 36%
👉 This section will be updated every year with new changes.
📘 What is Individual Income Tax?
Individual Income Tax is a direct tax imposed on income earned by individuals in Sri Lanka.
It applies to:
- Employment income (salary, bonuses)
- Business income
- Rental income
- Investment income
Sri Lanka follows a progressive tax system, meaning higher income levels are taxed at higher rates.
👤 Who Needs to Pay Income Tax?
You are required to pay income tax if:
✔ Your annual income exceeds LKR 1.8 million
✔ You earn income from:
- Employment
- Business or self-employment
- Investments
- Property (rent)
👉 Even salaried individuals may need to file returns depending on income sources.
📊 Current Individual Income Tax Rates
🔹 Annual Tax Slabs
| Taxable Income (LKR) | Tax Rate |
|---|---|
| First 1,800,000 | 0% |
| Next 1,000,000 | 6% |
| Next 500,000 | 18% |
| Next 500,000 | 24% |
| Next 500,000 | 30% |
| Balance | 36% |
🔹 Monthly APIT (Salary Tax)
| Monthly Income (LKR) | Tax Rate |
|---|---|
| Up to 150,000 | 0% |
| 150,000 – 233,333 | 6% |
| 233,333 – 275,000 | 18% |
| 275,000 – 316,666 | 24% |
| 316,666 – 358,333 | 30% |
| Above 358,333 | 36% |
🧮 How to Calculate Income Tax (Example)
Example:
- Monthly salary: LKR 250,000
- Tax-free portion: LKR 150,000
- Taxable income: LKR 100,000
Tax is calculated using progressive rates.
👉 Estimated monthly tax: LKR 6,000 – 8,000
🏢 APIT (Advance Personal Income Tax)
APIT is:
- Deducted monthly by employer
- Remitted to Inland Revenue Department (IRD)
- Adjusted against final tax liability
⚠️ Important: APIT is not always the final tax.
📅 Tax Filing & Payment Deadlines
🔹 Self-Employed / Business Income
| Installment | Due Date |
|---|---|
| 1st | 15 August |
| 2nd | 15 November |
| 3rd | 15 February |
| 4th | 15 May |
🔹 Annual Return
- Must be filed after end of Year of Assessment
📂 Types of Taxable Income
1. Employment Income
- Salaries, bonuses, allowances
- Subject to APIT
2. Business Income
- Sole proprietors
- Freelancers
3. Investment Income
- Interest income
- Dividends
4. Rental Income
- Income from property leasing
📉 Tax Reliefs & Exemptions
- Personal relief: LKR 1.8 million
- Approved donations
- Certain qualifying exemptions
⚠️ Common Mistakes
🚫 Not registering for TIN
🚫 Assuming APIT is final tax
🚫 Ignoring additional income sources
🚫 Missing tax deadlines
🚫 Incorrect tax calculations
📜 Historical Tax Rates (For Reference)
🔹 Previous System (2023/2024)
- Tax-free threshold: LKR 1,200,000
- Tax rates ranged from 6% to 36%
🔹 Tax Reform Updates
- Threshold increased to LKR 1,800,000
- Simplified tax structure