Running a small business or freelancing in Sri Lanka? You’re legally required to declare your income and pay taxes to the Inland Revenue Department (IRD). But don’t worry — this guide will break it all down step-by-step.
Whether you’re a sole proprietor, freelancer, or consultant, here’s how to pay your taxes correctly and avoid penalties.
✅ Who Needs to Pay Taxes as a Sole Proprietor?
If you:
- Run a small business under your own name
- Work as a freelancer or contractor
- Sell goods or provide services (online or offline)
…you are classified as a sole proprietor under Sri Lankan tax law and must file a Personal Income Tax Return.
🔍 What Tax Applies?
In 2025, income tax is charged on your total profit, not revenue. The standard individual income tax slabs (after deductions) are:
| Income Range (Annual) | Tax Rate |
|---|---|
| Up to Rs. 1.2 million | 0% |
| Next Rs. 500,000 | 6% |
| Next Rs. 500,000 | 12% |
| Next Rs. 500,000 | 18% |
| Next Rs. 500,000 | 24% |
| Above Rs. 3.2 million | 30% |
💡 You may also be eligible for deductions such as rent, insurance, or business-related expenses.
🧮 How to Calculate Your Tax
- Track your revenue from services or product sales.
- Deduct allowable expenses (rent, internet, materials, etc.)
- Use TaxCalculator.lk to instantly calculate your annual tax obligation.
📌 How to Pay Your Tax (Step-by-Step)
1. Register with the IRD
- Visit www.ird.gov.lk
- Get a Taxpayer Identification Number (TIN)
2. Maintain Records
- Keep invoices, receipts, bank statements, etc.
- You must report net profit accurately
3. File Annual Tax Return (before Nov 30)
- Use the RAMIS portal on the IRD website
- File Form Income Tax Return – Individuals
4. Pay Tax Due
- Via online banking, credit card, or physically at a bank
- Can be paid in advance installments or lump sum
📈 Tips to Stay Compliant & Save Tax
- 💡 Use accounting software or a spreadsheet to track monthly profit
- 💡 Claim allowable expenses like rent, mobile, internet, transport
- 💡 Avoid late filing penalties (Rs. 50,000+ in fines if overdue)
🤝 Need Help?
At www.TaxCalculator.lk, we offer:
- A free tax calculator for self-employed and business owners
- Help with registering with IRD
- Tax consultation or filing support
Start early, stay compliant, and pay only what you owe — no more, no less.
👉 Try the Freelancer/Sole Proprietor Tax Calculator now!
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