Introduction
As of 1st April 2025, the Sri Lanka Inland Revenue Department (IRD) has updated its rules regarding Withholding Tax (WHT) on interest income. Whether you’re an individual saver or a business with fixed deposits, understanding how this tax is applied is critical to managing your finances effectively.
In this article, we break down how WHT is charged, who is affected, exemptions, and how you can plan better with the help of TaxCalculator.lk.
💰 What Is Withholding Tax (WHT) on Interest?
Withholding Tax is a direct tax deducted at the source by banks and financial institutions when they pay interest to depositors. The purpose is to collect income tax in advance on behalf of the taxpayer.
From 1st April 2025, under the latest provisions of the Inland Revenue (Amendment) Act No. 16 of 2024, WHT is re-applied on interest income above a certain threshold.
📅 Effective Date
📆 The new WHT regulations come into effect from 01 April 2025, aligning with the new tax year 2025/26 in Sri Lanka.
💡 Who Is Affected?
WHT applies to the following:
- Individual savings account holders
- Fixed deposit holders
- Companies earning interest income
- Partnerships, clubs, and associations
📊 WHT Rate on Interest Income – 2025/26
| Type of Taxpayer | Threshold (Per Month) | WHT Rate (Above Threshold) |
|---|---|---|
| Individuals | Rs. 100,000 | 5% |
| Non-Individuals | No threshold | 5% on entire amount |
✅ Important: If your total interest income does not exceed Rs. 100,000 per month, you can submit a declaration to your bank and request exemption from WHT.
🧾 Example Calculation
Let’s say you are an individual earning Rs. 150,000 per month as interest.
- Threshold: Rs. 100,000
- Taxable portion: Rs. 50,000
- WHT: 5% of Rs. 50,000 = Rs. 2,500
So, the bank will deduct Rs. 2,500 and remit it to the IRD. You will receive Rs. 147,500 in your account.
📋 How to Claim WHT or Avoid Overpayment
- If your total annual income is below the personal tax-free allowance (currently Rs. 1.2 million/year), you may claim a refund.
- You must file a personal income tax return with IRD via ird.gov.lk
- Use TaxCalculator.lk to estimate your total tax and check if WHT already covers your obligations.
✅ What You Should Do Now
- Check your monthly interest income from all accounts.
- If below Rs. 100,000/month, submit Form ITP/201 to your bank for exemption.
- If above the threshold, use our Interest Income WHT Calculator (coming soon!) to estimate deductions.
- File your individual tax return to reconcile overpayments or claim refunds.
🔍 Related Topics You Might Like
- PAYE Tax Calculator – 2025/26
- How to File Your IRD Return Online
- Tax-Free Allowance Sri Lanka – What’s New in 2025?
🤝 Need Help?
At TaxCalculator.lk, we simplify the Sri Lankan tax system. If you’re unsure about how WHT affects you, feel free to contact us for personalized assistance.
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