How Income Tax Works in Sri Lanka (2026)
Sri Lanka withholds APIT (Advance Personal Income Tax) monthly. The system is generous at the bottom: a LKR 1,800,000/year personal relief (LKR 150,000/month) is completely tax-free, then rates run 6% to 36%. The tax year runs 1 April – 31 March.
The APIT rates (annual taxable after relief)
| Taxable income (LKR) | Rate |
|---|---|
| First 1,000,000 | 6% |
| Next 500,000 | 18% |
| Next 500,000 | 24% |
| Next 500,000 | 30% |
| Above 2,500,000 | 36% |
EPF — the 8%
Employees contribute 8% of total monthly earnings (basic + fixed allowances, excluding overtime) to the Employees' Provident Fund. In monthly withholding, EPF is not subtracted before APIT.
Worked example
Monthly salary of Rs 300,000: annualized = 3.6M; taxable = 3.6M − 1.8M = 1.8M. APIT = 60,000 + 18% × 800,000 = Rs 204,000/year (≈Rs 17,000/mo). EPF = 24,000. Take-home ≈ Rs 259,000/month.
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Another worked example
Monthly salary of Rs 300,000: annual = Rs 3,600,000. Taxable = 3,600,000 − 1,800,000 = Rs 1,800,000. APIT = 60,000 + 18% × 300,000 = Rs 114,000/year (Rs 9,500/mo). EPF = 8% × 300,000 = Rs 24,000/mo. Take-home = 300,000 − 9,500 − 24,000 = Rs 266,500/month.
Reading your Sri Lankan payslip
Two big lines: APIT (the monthly withholding of your annual income tax) and EPF 8%. Remember the unusual order: APIT is computed on the full gross — EPF never reduces it. Overtime and bonuses appear in the APIT base but are excluded from EPF. Keep your T10 forms from each employer; the Inland Revenue Department reconciles annual APIT against them, and over-withholding (common after mid-year raises) gets refunded or adjusted.
Common mistakes
1. Forgetting the Rs 1.8 million relief. The first 1.8M of annual income is tax-free.
2. Subtracting EPF before APIT. Sri Lanka taxes the full gross — EPF never reduces taxable income.
3. Including overtime in EPF. Overtime and bonuses are APIT-taxable but EPF-excluded.
What counts as taxable income in Sri Lanka
The IRD taxes salary, allowances, bonuses, overtime, commissions, and benefits in kind at market value — all of it goes into the annual total before the Rs 1.8M relief. Remember: EPF contributions don't reduce this total. Exempt: genuine reimbursements and employer EPF/ETF contributions. Arrears salary (back-pay) is taxed in the year it's received, not the year it was earned — relevant if your employer settles old dues.
Tax year and filing in Sri Lanka
Sri Lanka's year of assessment runs 1 April to 31 March — these figures cover the 2026/27 year starting 1 April 2026. APIT withheld monthly is an advance, not always final: if your only income is salary and APIT was correctly withheld, you may not need to file — but the IRD's annual reconciliation can produce refunds or small top-ups. Keep every T10 certificate; without them, proving your APIT credits is painful.
Sources & verification
Figures compiled from: Inland Revenue Department Sri Lanka.
Last verified: 23 October 2026. This guide is an estimate, not tax advice.