Updated for 2025 IRD Regulations | By TaxCalculator.lk

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🔍 What is PAYE Tax?

PAYE (Pay-As-You-Earn) is a tax deducted at source from an employee’s salary by their employer in Sri Lanka. As of 2025, all resident individuals earning above the tax-free threshold are subject to PAYE based on the progressive income tax slabs issued by the Inland Revenue Department (IRD).

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📌 PAYE Tax-Free Threshold for 2025

For residents and citizens, the annual tax-free allowance remains:

Rs. 1,200,000 per annum (Rs. 100,000 per month)

Income above this threshold is taxed progressively.

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📊 PAYE Tax Rates – 2025 (Resident Individuals)

Annual Taxable Income (LKR)	Tax Rate
First 1,200,000	0% (Tax-free)
Next 500,000	6%
Next 500,000	12%
Next 500,000	18%
Next 1,500,000	24%
Next 1,500,000	30%
Balance	36%

🔺 Example: If your total annual income is Rs. 3,700,000, only the income above the tax-free band is taxed as per the above slabs.

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🧮 How to Calculate PAYE Tax – Step-by-Step (2025)

Let’s say your monthly gross salary is Rs. 400,000

Step 1: Calculate Annual Income

Rs. 400,000 x 12 = Rs. 4,800,000

Step 2: Subtract Tax-Free Allowance

Rs. 4,800,000 - 1,200,000 = Rs. 3,600,000 (taxable income)

Step 3: Apply Tax Slabs

Taxable Band	Rate	Tax Amount
First 500,000	6%	Rs. 30,000
Next 500,000	12%	Rs. 60,000
Next 500,000	18%	Rs. 90,000
Next 1,500,000	24%	Rs. 360,000
Remaining 600,000	30%	Rs. 180,000

➤ Total PAYE Tax = Rs. 720,000 annually

Or Rs. 60,000 per month (if deducted monthly)

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🧠 Pro Tips

• Allowances or reliefs (like donations, medical) may reduce taxable income — refer to IRD guidelines.
• Use a reliable PAYE calculator (like ours!) to avoid manual errors.

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💻 Use the Free Online PAYE Calculator

Try our PAYE Calculator for 2025 to instantly calculate your monthly tax.

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📞 Need Help Filing Your Return?

If you’re unsure about PAYE deductions, refunds, or self-assessment — we can help.

👉 Contact us now for support or consultation.