Income tax relief in Sri Lanka for 2026: what you can claim and what changed

Last verified against the primary sources on 15 October 2026.

Apply the LKR 1,200,000 personal relief instead of the current LKR 1,800,000 and you're overstating taxable income by LKR 600,000. That means paying up to LKR 216,000 more tax than you owe. The Inland Revenue (Amendment) Act No. 2 of 2025 changed this [1]. Many payroll notes and online guides have not caught up.

This guide explains what is currently claimable for years from 1 April 2025, how to apply each relief correctly, which items have expired, and what records you need before filing.

Quick answer: For years of assessment starting on or after 1 April 2025, the primary personal relief is LKR 1,800,000 for resident individuals and non-resident Sri Lankan citizens (subject to statutory limits) [2]. Act No. 11 of 2026 did not change it, so it is unchanged for 2026/2027 [3]. Other reliefs continue only where they are expressly provided in the Fifth Schedule.

Section 52 and the Fifth Schedule: the legal foundation every relief claim must sit on

Relief claims sit inside Section 52 of the Inland Revenue Act and the Fifth Schedule [2].

In practice, this means:

• You do not claim relief by habit or historical practice.
• You claim relief only where the Schedule allows it for your year of assessment.
• You keep documentary evidence that supports both entitlement and amount.

The 2025 amendment increased personal relief and changed effective tax outcomes significantly, so year-of-assessment mapping is now critical.

Reliefs that are clearly active for years from 1 April 2025

1) Personal relief: LKR 1,800,000

For each year of assessment commencing on or after 1 April 2025, the personal relief under paragraph 2(a)(v) of the Fifth Schedule is LKR 1,800,000 for eligible individuals [2].

Important statutory notes:

• This relief is not deducted against gains from the realisation of investment assets.
• Trustees, receivers, executors, and liquidators are restricted from using this personal relief in those capacities.

2) Rental-income relief: 25%

For individuals with rental income from an investment asset, the law allows a relief equal to 25% of total rental income for repair, maintenance, and depreciation [2].

Condition: this relief should not be duplicated with separate claims for the same actual expenses.

3) Solar-panel relief: up to LKR 600,000

For resident individuals who acquire solar panels connected to the national grid, the relief is up to LKR 600,000 per year of assessment, limited to eligible expenditure or qualifying related loan payments [2].

Qualifying payments: donation relief framework

Paragraph 1 of the Fifth Schedule also sets qualifying payments, including donation categories.

A key item for individuals is donation in money to an approved charitable institution (as defined) with a cap of the lower of:

• one-third of taxable income, or
• LKR 75,000 [2].

There are also qualifying-payment routes involving government and specified public funds under the Schedule. Exact treatment depends on category, payment form, and supporting evidence.

Before claiming, classify the donation against the exact paragraph and keep payment proof plus recipient eligibility proof.

Time-limited relief windows that may no longer apply to your 2026 return

Many online checklists still present earlier relief baskets as if they are permanently available. The consolidated Act shows several items with explicit time limits [2].

Examples include period-specific provisions tied to earlier years of assessment for:

• health and education expenditure baskets,
• housing-loan interest relief windows,
• pension contribution relief, which applied only for a period ending in December 2022,
• specified listed-instrument purchase relief windows.

If your claim relies on a historical relief basket, verify that your year of assessment is still inside the statutory effective window.

Worked examples

Example 1: Employment-only taxpayer

• Annual employment income: LKR 2,700,000
• Personal relief: LKR 1,800,000
• Taxable income: LKR 900,000

Tax computation:

• 900,000 at 6% = 54,000

Annual tax before credits: LKR 54,000.

Example 2: Rental-income taxpayer using 25% relief

• Annual rental income: LKR 1,200,000
• Rental relief (25%): 300,000
• Net rental amount considered for tax base: 900,000

Then apply broader taxable-income computation with other income and relevant reliefs.

Example 3: Solar-panel relief scenario

• Eligible solar expenditure/loan repayments in year: LKR 720,000
• Relief cap: LKR 600,000

Allowable solar relief for year: LKR 600,000.

How to claim correctly in practice

1. Confirm year of assessment first.
2. Build a relief schedule by legal paragraph, not by spreadsheet label.
3. Attach evidence mapping for each relief line item.
4. Reconcile APIT and other credits before final tax payable.
5. Keep a review file ready for IRD query handling.

For employer-linked positions, align APIT declarations and year-end return preparation so relief assumptions do not conflict.

Evidence checklist you should keep

For personal relief and routine filing controls:

• income summaries by source,
• APIT and withholding certificates,
• return working papers.

For rental relief:

• rental agreements,
• receipt trail,
• schedule showing no double-claim of the same repairs/depreciation.

For solar relief:

• invoice bundle,
• installation/payment proof,
• loan repayment proofs where applicable,
• grid-connection and related supporting records.

For donation-based qualifying payments:

• payment proof,
• recipient qualification details,
• board or institutional approval evidence where required.

Relief control matrix: what to verify before claiming

Use this matrix during return preparation so each claim is evidence-backed.

This checklist approach helps prevent post-filing adjustments under routine IRD review.

Five relief claim errors that create IRD queries or cash losses

• Applying 1,200,000 instead of 1,800,000 for post-April-2025 years.
• Claiming historical relief categories outside their legal period.
• Claiming full rental expense sets while also taking 25% rental relief.
• Treating APIT deduction as final tax with no annual reconciliation.
• Missing or weak evidence for donation eligibility.

If you are unsure, run a pre-filing review before submission through RAMIS.

Where this sits in your annual compliance workflow

Use this sequence each year:

1. Confirm applicable rates and reliefs for that year of assessment.
2. Prepare income classification schedules.
3. Apply Section 52/Fifth Schedule reliefs.
4. Compute taxable income and annual tax.
5. Reconcile withholding credits.
6. File return on time and retain supporting file.

Pair this with the tax calendar and personal income tax calculator for planning. For the rates applied after relief, see income tax bands for 2026.

Sequencing rule that avoids over-claims

A practical sequence prevents calculation drift:

1. Classify income by source first.
2. Apply qualifying payments and reliefs allowed for that year.
3. Compute taxable income.
4. Apply slab rates.
5. Reconcile APIT and other withholding credits.

If this order is reversed, taxpayers often overstate reliefs or understate final tax.

2026 filing pack template for relief-heavy returns

For returns with multiple claims, keep a structured file:

• Cover memo with year of assessment and residency status
• Income schedules with source-wise totals
• Relief schedule with legal paragraph references
• Evidence index (invoice, receipt, certificate, agreement)
• APIT/withholding credit reconciliation
• Final tax computation and sign-off notes

This filing pack makes later notice responses faster and more consistent.

Factual summary

• Personal relief is LKR 1,800,000 for years from 1 April 2025.
• Rental-income relief remains 25% of total rental income (subject to anti-duplication conditions).
• Solar-panel relief remains up to LKR 600,000 where conditions are met.
• Donation qualifying payments are paragraph-specific and evidence-sensitive.
• Relief claims must be matched to effective dates in the Schedule, not legacy templates.

Talk to us. If you are claiming several reliefs and want the schedule and evidence checked before you file, our 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. https://www.ird.gov.lk/en/publications/Acts_Income%20Tax_2017/IR_Act_No_02-2025_E.pdf . Primary. Accessed 15 October 2026.

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

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