Learn how to calculate your income tax in Sri Lanka for 2025/2026. Updated tax slabs, personal relief of Rs. 1.8M, and free tax calculator app. Step-by-step guide.

Whether you are a salaried employee, freelancer, or business owner in Sri Lanka, understanding how to calculate your income tax is essential. The Inland Revenue (Amendment) Act No. 02 of 2025 introduced significant changes to tax rates and reliefs, effective from 1 April 2025. This guide walks you through the complete process of calculating your income tax for the assessment year 2025/2026.

What Changed in 2025/2026?

The Sri Lanka government made several important changes to the income tax system. The personal relief — the amount you can earn before paying any tax — increased from Rs. 1,200,000 to Rs. 1,800,000 per year (Rs. 150,000 per month). This means if your total annual income is below Rs. 1,800,000, you have no income tax liability.

The tax slabs have also been revised. Here are the new rates effective from 1 April 2025:

Taxable Income (After Relief)	Tax Rate
First Rs. 1,000,000	6%
Next Rs. 500,000	18%
Next Rs. 500,000	24%
Next Rs. 500,000	30%
Balance above Rs. 2,500,000	36%

Step 1: Calculate Your Total Assessable Income

Add up income from all sources for the year:

• Employment income — your gross salary including allowances, bonuses, and non-cash benefits
• Business income — profits from self-employment, freelancing, or a sole proprietorship
• Investment income — interest from fixed deposits, dividends from shares
• Rental income — income from renting out property
• Other income — capital gains, foreign remittances, and any other taxable income

For example, if you earn a monthly salary of Rs. 250,000 and receive annual interest of Rs. 100,000 from fixed deposits, your total assessable income would be Rs. 3,100,000 (Rs. 3,000,000 salary + Rs. 100,000 interest).

Step 2: Deduct Personal Relief

Subtract the personal relief of Rs. 1,800,000 from your total assessable income.

Using our example: Rs. 3,100,000 – Rs. 1,800,000 = Rs. 1,300,000 taxable income.

Step 3: Deduct Qualifying Payments

Qualifying payments reduce your taxable income further. These include:

• Employee Provident Fund (EPF) contributions
• Employee Trust Fund (ETF) contributions
• Life insurance premiums (subject to limits)
• Approved charitable donations

Step 4: Apply the Tax Slabs

Apply the progressive tax rates to your taxable income:

Using our example (Rs. 1,300,000 taxable income):

• First Rs. 1,000,000 at 6% = Rs. 60,000
• Next Rs. 300,000 at 18% = Rs. 54,000
• Total tax = Rs. 114,000

Step 5: Deduct Tax Credits

Subtract any advance taxes already paid:

• APIT (Advance Personal Income Tax) deducted by your employer
• AIT (Advance Income Tax) withheld on interest income at 10%
• Any quarterly advance tax instalments paid

The balance is what you owe to the IRD, or what the IRD owes you as a refund.

Calculate Your Tax Instantly — Free App

Doing these calculations manually is time-consuming and error-prone. TaxCalc LK automates the entire process for you.

Download TaxCalc LK — Free Sri Lanka Income Tax Calculator

The app supports all assessment years from 2022/2023 to 2025/2026, handles multiple income sources, and generates a professional tax report you can share with your accountant or use for IRD filing.

Filing Deadline

The income tax return for the assessment year 2025/2026 must be filed by 30 November 2026. Late filing attracts a penalty of 5% of the tax owing, plus 1% for each additional month of delay.

Need Professional Help?

GDP Consultants, Chartered Accountants, offers free annual income tax return (AITR) filing with Pro and Premium subscription plans. Contact us at 0719204903 or visit taxcalculator.lk for more information.https://app.taxcalculator.lk