🧾 Advance Personal Income Tax (APIT) in Sri Lanka – Complete Guide

ByEntrepreneur

📅 Last Updated: March 2026

This article is continuously updated with the latest Advance Personal Income Tax (APIT) regulations in Sri Lanka, including tax rates, employer responsibilities, and compliance requirements issued by the Inland Revenue Department.

🔄 Latest Updates

Key Changes (2025/2026)

  • Monthly tax-free threshold: LKR 150,000
  • Annual tax-free threshold: LKR 1,800,000
  • Progressive tax rates range from 6% to 36%
  • Employers are required to deduct APIT under the PAYE system

👉 This section will be updated annually with new tax changes.

📘 What is APIT?

Advance Personal Income Tax (APIT) is a tax deducted from employee salaries by employers and paid directly to the Inland Revenue Department (IRD).

👉 It is part of the PAYE (Pay As You Earn) system in Sri Lanka.

👤 Who Needs to Deduct APIT?

Employers must deduct APIT if:

✔ They pay salaries to employees
✔ Employee income exceeds the tax-free threshold
✔ They are registered with IRD

Employees affected:

  • Full-time employees
  • Contract employees (in some cases)
  • Directors receiving remuneration

📊 APIT Tax Rates in Sri Lanka

🔹 Monthly Tax Slabs

Monthly Income (LKR)Tax Rate
Up to 150,0000%
150,000 – 233,3336%
233,333 – 275,00018%
275,000 – 316,66624%
316,666 – 358,33330%
Above 358,33336%

🧮 How to Calculate APIT (Example)

Example:

  • Monthly salary: LKR 250,000
  • Tax-free portion: LKR 150,000
  • Taxable portion: LKR 100,000

👉 Tax is calculated using progressive rates

Estimated APIT: LKR 6,000 – 8,000 per month

🏢 Employer Responsibilities

Employers must:

✔ Register for APIT/PAYE
✔ Deduct correct tax amount monthly
✔ Remit tax to IRD on time
✔ Maintain payroll records
✔ Issue tax statements to employees

📅 APIT Payment Deadlines

RequirementDue Date
Monthly APIT paymentOn or before 15th of following month

👉 Late payments attract penalties and interest.

📂 What is Included in APIT Calculation?

Included:

  • Basic salary
  • Allowances
  • Bonuses
  • Benefits in kind (in some cases)

Excluded:

  • Certain reimbursements
  • Approved exemptions

⚠️ Important: APIT vs Final Income Tax

AspectAPIT
TypeAdvance tax
Deducted byEmployer
Final tax?❌ Not always

👉 Employees may still need to file annual returns.

⚠️ Common APIT Mistakes

🚫 Not deducting APIT correctly
🚫 Using wrong tax slabs
🚫 Ignoring allowances/benefits
🚫 Missing payment deadlines
🚫 Poor payroll documentation

📉 Impact on Businesses

APIT affects:

  • Payroll management
  • Compliance requirements
  • Employee satisfaction

👉 Proper handling avoids disputes and penalties.

📜 Historical Changes

🔹 Previous System

  • Lower tax-free thresholds
  • Different slab structures

🔹 Recent Reforms

  • Increased relief to LKR 1.8 million annually
  • Revised progressive tax rates

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