If you’re earning a salary in Sri Lanka in 2025/2026, there are important changes you need to know about. The Inland Revenue Department (IRD) has revised the income tax structure for the Year of Assessment 2025/2026 — and depending on your income level, you could be paying more or less tax than last year.
This guide breaks down everything in simple terms so you can understand exactly how much of your salary goes to tax.
What’s New for Y/A 2025/2026?
1. Personal Relief Increased to Rs. 1,800,000
Good news for every individual taxpayer — the tax-free threshold has been increased from Rs. 1,200,000 to Rs. 1,800,000 per year (Rs. 150,000 per month). This means you only start paying tax on income above this amount.
2. New Progressive Tax Slabs
The government has introduced revised tax bands effective from 1st April 2025:
| Taxable Income (LKR) | Tax Rate |
|---|---|
| First Rs. 1,000,000 | 6% |
| Next Rs. 500,000 | 18% |
| Next Rs. 500,000 | 24% |
| Next Rs. 500,000 | 30% |
| Balance | 36% |
Note: These rates apply to your taxable income — that is, your total income minus the Rs. 1.8 million personal relief.
3. Special Rate for Foreign Currency Earners
If you earn income from services rendered in or outside Sri Lanka and receive payment in foreign currency, a maximum tax rate of 15% applies. This is great news for IT professionals, freelancers, and BPO workers earning in USD, GBP, or EUR.
How to Calculate Your Income Tax (Example)
Let’s say your annual salary is Rs. 4,200,000 (Rs. 350,000 per month).
Step 1: Deduct personal relief Rs. 4,200,000 – Rs. 1,800,000 = Rs. 2,400,000 taxable income
Step 2: Apply tax slabs
| Slab | Amount | Rate | Tax |
|---|---|---|---|
| First Rs. 1,000,000 | 1,000,000 | 6% | 60,000 |
| Next Rs. 500,000 | 500,000 | 18% | 90,000 |
| Next Rs. 500,000 | 500,000 | 24% | 120,000 |
| Remaining Rs. 400,000 | 400,000 | 30% | 120,000 |
| Total Annual Tax | 390,000 |
Monthly tax deduction (APIT): Approximately Rs. 32,500
Don’t want to do this math manually? Use our free online tax calculator at www.taxcalculator.lk — just enter your monthly salary and get instant results.
Who Must File a Tax Return?
You are required to file an income tax return if:
- Your annual income exceeds Rs. 1,800,000 (Rs. 150,000/month)
- You are self-employed or freelancing
- You receive rental income, dividends, or interest income
- You are a company director
Filing deadline: 30th November 2026 for Y/A 2025/2026
Key Changes Coming in 2026/2027
The proposed Inland Revenue Amendment Bill (February 2026) includes several significant changes:
- Capital Gains Tax increased from 10% to 15% for individuals
- No more SET form filing requirement from Y/A 2026/2027
- New rules for expats leaving Sri Lanka for foreign employment
- Updated thin capitalisation rules for businesses
Stay updated on all these changes at TaxCalculator.lk — we update our calculators the moment new rules come into effect.
Take Action Now
👉 Calculate your 2025/2026 income tax instantly — it’s free, no sign-up required
👉 Use our APIT/PAYE Calculator to check your monthly deductions
👉 Need personal help? Book a consultation with our team of Chartered Accountants
Tags: Sri Lanka income tax 2025/2026, new tax rates, APIT calculator, salary tax, personal relief Rs 1.8 million, tax slabs Sri Lanka, IRD, TaxCalculator.lk
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