Sri Lanka income tax bands for 2026: rates, slabs, and worked examples

Last verified against the primary sources on 28 October 2026.

Updated 28 October 2026: the Rs 1,800,000 personal relief also applies to non-resident Sri Lankan citizens (section 52(3)); the text said resident individuals only.

What if the slab table your payroll system is still using was made obsolete on 1 April 2025, and every APIT deduction since then has been wrong?

The Inland Revenue (Amendment) Act No. 2 of 2025 changed both the personal relief (LKR 1,200,000 to LKR 1,800,000) and the slab architecture [1]. Act No. 11 of 2026 did not change either, so the same bands apply for Y/A 2026/27 [2]. Payroll teams running on pre-April-2025 logic are over-deducting from employees, or miscalculating personal tax entirely. This guide gives you the current structure, the numbers, and worked examples to verify your calculations today.

Quick answer: For a resident individual, and under section 52(3) also a non-resident individual who is a Sri Lankan citizen, the year-of-assessment relief is LKR 1,800,000, and taxable income above that relief is charged progressively at 6%, 18%, 24%, 30%, and 36% [3]. The first taxable LKR 1,000,000 is at 6%, then LKR 500,000 bands apply at higher rates.

What changed from 1 April 2025

The legal change is in the Inland Revenue (Amendment) Act No. 2 of 2025, effective 1 April 2025 [1].

Three practical changes matter most:

• Personal relief for resident individuals, and for non-resident Sri Lankan citizens under section 52(3), moved from LKR 1,200,000 to LKR 1,800,000.
• The slab design shifted to a wider first band: LKR 1,000,000 at 6%.
• Intermediate rates now step through 18%, 24%, 30%, with 36% on the balance.

This is why direct reuse of 2023 to 2025 APIT assumptions creates misstatements in 2025/2026 and later periods.

Sri Lanka income tax bands for 2026 (current structure)

For years of assessment commencing on or after 1 April 2025, resident and non-resident individuals are taxed as follows on taxable income [3].

Important: these are bands on taxable income after relief, not on gross income.

Bonuses and other lump-sum payments are handled separately in APIT; see our guide to tax on lump-sum and bonus payments.

Step-by-step method to calculate annual tax correctly

Use this order every time:

1. Compute annual assessable income (employment, business, investment, and other taxable sources).
2. Apply permitted qualifying payments and reliefs under Section 52 and the Fifth Schedule.
3. Arrive at taxable income.
4. Apply slab rates to taxable income, not total gross income.
5. Reconcile with tax already withheld (for example APIT) before determining balance payable or refundable.

The most common error is applying slab rates directly to gross salary without deducting the current relief first.

Worked examples for monthly earners

The examples below assume salary-only scenarios for simple comparison. Real positions may vary due to multiple income sources, exemptions, and withholding credits.

Example 1: LKR 100,000 per month

• Annual income: 1,200,000
• Personal relief: 1,800,000
• Taxable income: 0
• Annual income tax: LKR 0

Example 2: LKR 150,000 per month

• Annual income: 1,800,000
• Personal relief: 1,800,000
• Taxable income: 0
• Annual income tax: LKR 0

Example 3: LKR 250,000 per month

• Annual income: 3,000,000
• Less personal relief: 1,800,000
• Taxable income: 1,200,000

Tax on taxable income:

• First 1,000,000 at 6% = 60,000
• Next 200,000 at 18% = 36,000
• Total annual tax = 96,000

Indicative monthly equivalent: 96,000 / 12 = 8,000.

Use the personal income tax calculator to model your own profile.

Comparison: pre-April-2025 vs current system

For years of assessment from 1 April 2023 to 31 March 2025:

• Relief was LKR 1,200,000.
• Slabs started with 500,000 bands and included 12% in the second band.

For years from 1 April 2025 onward:

• Relief is LKR 1,800,000.
• First taxable band widened to 1,000,000 at 6%.
• Mid-bands now start at 18%.

Illustration at annual income LKR 3,000,000:

• Under the old structure, taxable income was higher and effective tax was significantly higher.
• Under the current structure, taxable income is lower due to the larger relief and revised slab architecture.

Operationally, this affects payroll design, cash-flow forecasts, and year-end personal tax planning.

APIT impact for employers and employees

APIT is the monthly withholding mechanism for employment income, while annual income tax is finalised through return filing and reconciliation.

Practical implications:

• Payroll engines must align with current year slab tables.
• Bonus months can still create temporary spikes in APIT deductions even under the new annual structure.
• Employees with multiple income streams must reconcile APIT credits against final annual liability.

For payroll operations detail, read the APIT deduction guide.

2026 decision table: salary-only planning view

For payroll planning and employee communication, this decision table is useful as a first-pass benchmark.

This table is for planning only. Final liability depends on full annual income profile, eligible reliefs, and tax credits.

Foreign-currency service and foreign-source cap (15% maximum)

From 1 April 2025, certain individual gains and profits are subject to a maximum 15% rate where statutory conditions are met, including foreign-currency receipt and remittance through a bank to Sri Lanka [1].

This is a specific rule and not a blanket reduced rate. Documentation and source characterisation matter.

If your profile includes export services or foreign-source income, keep evidence sets complete before filing.

Records to keep before you finalise a return

Most tax disputes are document disputes. Keep one filing pack with:

• APIT certificates and payroll deduction reports by month
• income schedules by source with reconciliation to bank/ledger records
• relief computation sheet with legal basis noted for each claim
• evidence file for foreign-currency remittances where a special rate is claimed
• prior-year assessment notices and payment confirmations

A complete records pack reduces response time if IRD issues a query after filing.

Filing-season control steps: what to do by April, July, August, October, November

Use this short control sequence each year:

1. April to June: validate payroll tax configuration against current slab logic.
2. July: run a mid-year tax variance check against APIT deductions.
3. August: work out the first quarterly instalment from the previous year's tax, if you pay instalments.
4. September to October: pay any balance for the previous year by 30 September, then complete draft return computations and relief evidence checks.
5. November: finalise the return and reconcile all withholding credits before submission.

If you run finance for multiple entities, maintain a single control tracker with owner and due date for each step.

Five errors that trigger IRD queries after you file

• Using outdated relief (1,200,000) after 1 April 2025.
• Treating slab bands as gross-income bands instead of taxable-income bands.
• Ignoring year-of-assessment boundaries when switching rates.
• Assuming APIT equals final annual tax in all cases.
• Failing to reconcile all withholding certificates before filing.

A controlled close process should include a tax-rate version check before monthly payroll sign-off.

Compliance timeline to pair with these bands

Use the statutory schedule so calculations and payments stay synchronised [4]:

• Quarterly instalment dates: 15 August, 15 November, 15 February, 15 May.
• Final payment for Y/A 2025/26: on or before 30 September 2026.
• Return filing for Y/A 2025/26: on or before 30 November 2026.

The Statement of Estimated Tax (SET) is no longer filed: Act No. 11 of 2026 discontinued it from Y/A 2026/27, and instalments now follow the previous year's tax [2]. See quarterly instalments after the SET.

For a consolidated schedule view, see Tax Calendar.

Related: Sri Lanka Income Tax Calculator 2026.

Factual summary

• Current personal relief is LKR 1,800,000 for years of assessment from 1 April 2025.
• Slab rates on taxable income are 6%, 18%, 24%, 30%, 36%.
• First taxable LKR 1,000,000 is charged at 6%.
• Income tax planning must use year-specific rules, not legacy slab assumptions.
• APIT withholding should be reconciled to final annual liability at filing.

Talk to us. If you want your payroll checked against the current bands, our payroll team and tax team can review it with you; book a consultation at our contact page.

WinCore Pvt Ltd

This guide is general information on the law as at 15 October 2026 and is not advice on your specific situation.

References

1. Parliament of Sri Lanka. Inland Revenue (Amendment) Act, No. 2 of 2025, operative 1 April 2025, personal relief, individual rates and the 15 percent rate on foreign-currency service and foreign-source income. https://www.ird.gov.lk/en/publications/Acts_Income%20Tax_2017/IR_Act_No_02-2025_E.pdf . Primary. Accessed 15 October 2026.

1. Parliament of Sri Lanka. Inland Revenue (Amendment) Act, No. 11 of 2026, certified 3 June 2026, s.17 (SET discontinued). https://www.ird.gov.lk/en/publications/Acts_Income%20Tax_2017/IR_Act_No_11-2026_E.pdf . Primary. Accessed 15 October 2026.

1. Inland Revenue Department. Inland Revenue Act, No. 24 of 2017, consolidated, s.52(2) and (3), First Schedule para 1 and Fifth Schedule para 2(a)(v). https://www.ird.gov.lk/en/publications/Acts_Income%20Tax_2017/IRA_Cons_Act_-_2025_Changes.pdf . Primary. Accessed 15 October 2026.

1. Inland Revenue Department. Tax Calendar 2026, instalment dates, final payment and return for Y/A 2025/26. https://www.ird.gov.lk/en/publications/Tax%20Calendar_Documents/Tax_Calendar_2026_E.pdf . Primary. Accessed 15 October 2026.