Every resident individual gets a personal relief of LKR 1,800,000 a year against total income, applied automatically. On top of that, specific qualifying payments reduce taxable income further: a cash donation to an approved charity is deductible up to the lower of one-third of taxable income or LKR 75,000, while donations to the Government or the President's Fund are generally deductible without that cap. Both types of deduction require proof — keep every receipt.
Two things lower your tax bill before the bands apply: the personal relief every resident gets automatically, and qualifying payments you actually made during the year. Knowing the difference — and the LKR 75,000 cap on charitable donations — stops you over- or under-claiming.
Relief versus qualifying payment
Two different things reduce your tax, and it helps to keep them apart.
A relief is a fixed allowance subtracted before tax is calculated. The big one for individuals is the personal relief. It is automatic in the sense that every qualifying resident gets it; you do not "donate" anything to earn it.
A qualifying payment is a specific payment you actually make during the year, such as a donation, that the law lets you deduct. You only get it if you made the payment and can prove it.
Both lower your taxable income, but they come from different places. The personal relief is a structural part of the system; qualifying payments depend on what you chose to do with your money during the year.
The personal relief: LKR 1,800,000
Every qualifying resident individual gets a personal relief of LKR 1,800,000 a year, equivalent to LKR 150,000 a month. This was raised from LKR 1,200,000 with effect from 1 April 2025.
This is the tax-free threshold. Your total income is added up, the LKR 1,800,000 relief is subtracted, and only the balance is taxed through the progressive bands. If your total income is at or below LKR 1,800,000, your income tax is nil.
| Amount (LKR) | |
|---|---|
| Personal relief (per year) | 1,800,000 |
| Personal relief (per month) | 150,000 |
The personal relief is separate from qualifying payments. You take the relief regardless of any donations, and then qualifying payments come off on top of it. Do not treat the relief as a donation cap or confuse the two; they stack.
Run your own numbers in the income tax calculator
Cash donations to an approved charity
The most common qualifying payment for an individual is a cash donation to an approved charity, specifically one providing institutionalised care for the sick or the needy.
The deduction is limited. You can claim the lower of one-third of your taxable income or LKR 75,000.
| Donation deduction | Limit |
|---|---|
| Cash donation to an approved charity | Lower of 1/3 of taxable income or LKR 75,000 |
So the ceiling is LKR 75,000, but if one-third of your taxable income is less than that, the smaller figure applies. For example, if your taxable income is LKR 150,000, one-third is LKR 50,000, so your maximum deduction is LKR 50,000 even if you donated more. For most people with meaningful income, the LKR 75,000 cap is the binding limit.
Two conditions matter: the donation must be in cash, and the recipient must be an approved charity of the relevant kind. A donation to an organisation that is not approved, or a gift in kind rather than cash, does not qualify under this rule. Keep the receipt; without it, the deduction can be refused.
Donations to the Government or the President's Fund
Donations to the Government or to the President's Fund are also deductible as qualifying payments. These are treated more generously than ordinary charitable donations: government donations are generally allowed without the LKR 75,000 cap that applies to approved-charity donations.
The reasoning is straightforward. These are gifts to the state itself, and the system encourages them by not restricting the deduction in the same way. As with all qualifying payments, you need proof of the payment to claim it, so keep the official receipt or acknowledgement.
Solar and other reliefs exist, but confirm the limits
Beyond donations, other reliefs come and go, and their limits change from year to year. A common example is relief for solar panel installation, which has been available at various points to encourage household solar. There have been other targeted reliefs too.
The honest position is that these reliefs and their limits are the parts of the system that change most often. Budgets adjust them, withdraw them, or introduce new ones. Rather than quote a figure that may be out of date, confirm the current limit and eligibility with the IRD before you count on any such relief.
How to claim on your return
Qualifying payments and reliefs do not apply themselves; you claim them when you file. The order of operations is:
- Total your income for the year across all sources.
- Apply the personal relief of LKR 1,800,000 to arrive at taxable income.
- Deduct qualifying payments, such as approved-charity donations within the limit and government or President's Fund donations, from taxable income.
- Apply the progressive bands to the reduced figure to find your tax.
The sequence matters because the one-third limit on charitable donations is measured against taxable income, so the relief and the income figure feed into how much donation you can claim.
The annual return for Y/A 2025/2026 is due on or before 30 November 2026, and e-filing is mandatory. If you are new to filing, register for a TIN first if you do not already have one.
Worked example
Scenario: Total income for the year is LKR 3,000,000. You donated LKR 100,000 in cash to an approved charity, and gave LKR 50,000 to the President's Fund.
| Step | Item | Amount (LKR) |
|---|---|---|
| 1 | Total income | 3,000,000 |
| 2 | Less: personal relief | (1,800,000) |
| 3 | Taxable income before qualifying payments | 1,200,000 |
| 4 | Less: approved-charity donation (capped) | (75,000) |
| 5 | Less: President's Fund donation | (50,000) |
| Final | Taxable income after qualifying payments | 1,075,000 |
Two things to notice. First, although you donated LKR 100,000 to the charity, the deduction is capped. The limit is the lower of one-third of taxable income or LKR 75,000. One-third of LKR 1,200,000 is LKR 400,000, well above LKR 75,000, so the LKR 75,000 cap binds and you cannot deduct the full LKR 100,000. Second, the President's Fund donation is allowed in full, since government donations are generally not subject to the LKR 75,000 cap. The bands are then applied to the reduced figure of LKR 1,075,000, not to the original LKR 3,000,000.
Deductions versus tax credits: another distinction worth keeping straight
There is a third concept people sometimes fold into "deductions" that is actually separate: tax already withheld at source, such as the 10% deducted from bank interest or the 10% AIT deducted from rent above LKR 100,000 a month. That withheld tax is not a deduction against your income at all — it is a credit against your final tax bill, applied after the bands have already run.
The order matters, and it is worth setting out in full:
- Total income → less personal relief → taxable income.
- Taxable income → less qualifying payments (approved-charity donation within its cap, government/President's Fund donations) → reduced taxable income.
- Apply the progressive bands to the reduced taxable income → gross tax.
- Gross tax → less APIT, WHT, and AIT already deducted at source → balance to pay or refund.
Qualifying payments live at step 2, shrinking the base the bands are applied to. Withheld tax lives at step 4, reducing the bill itself rather than the income it is calculated on. Confusing the two — for example, trying to "deduct" your bank interest WHT from taxable income instead of crediting it against gross tax — produces the wrong final figure.
A second worked example: when a donation makes no difference
Not every donation actually lowers your tax bill, and it is worth seeing why. Take someone whose total income for the year is LKR 1,500,000, below the personal relief.
| Step | Item | Amount (LKR) |
|---|---|---|
| 1 | Total income | 1,500,000 |
| 2 | Less: personal relief | (1,800,000) |
| 3 | Taxable income | 0 (floored) |
| 4 | Less: qualifying payments | 0 (nothing to deduct from) |
| Final | Tax payable | LKR 0 |
Because taxable income is already nil after the relief, there is no taxable income left for a donation to reduce, and the qualifying-payment deduction has nothing to bite on. This person's tax bill is zero whether or not they donated. The lesson is not to avoid giving — it is to understand that the donation deduction only has value once your income is already above the personal relief and generating a positive taxable income figure. Below that line, the relief alone already does all the work.
Common mistakes to avoid
- Treating the personal relief as a qualifying payment. The relief is automatic and structural; qualifying payments are separate deductions on top of it. Confusing the two leads to double-counting or missed claims.
- Claiming the full donation amount without applying the cap. The lower of one-third of taxable income or LKR 75,000 applies regardless of how much you actually gave.
- Assuming a donation deduction has value when taxable income is already nil. If your income is fully covered by the personal relief, a further donation deduction changes nothing.
- Treating withheld tax (WHT/AIT) as a deduction rather than a credit. Withheld tax reduces the final bill at step 4, not the taxable income figure at step 2.
- Losing the receipt. Every qualifying payment needs documentary proof; an undocumented donation, however genuine, can be disallowed.
Keep your receipts
Every qualifying payment depends on proof. For donations, that means an official receipt or acknowledgement from the approved charity, the Government, or the President's Fund, showing the amount and the date. For reliefs like solar, keep the invoice and any documentation the IRD specifies. Without proof, a deduction can be disallowed even if the payment genuinely happened. File these with your records when you make the payment, not at the last minute, so they are ready when you prepare the return.
A note on planning your giving
Because the approved-charity deduction is capped at LKR 75,000, there is little tax benefit in giving more than that to a single approved charity in one year if your only motive is the deduction; the extra is not deductible. Donations to the Government or the President's Fund are treated differently and are generally uncapped, which is worth knowing if you intend to make a larger gift. None of this should drive your generosity, but if you are giving anyway, understanding the limits helps you record the right deductible amount and avoid claiming more than the rules allow.
Quick reference
- The personal relief of LKR 1,800,000 is automatic and separate from qualifying payments; they stack.
- A cash donation to an approved charity is deductible up to the lower of one-third of taxable income or LKR 75,000.
- Donations to the Government or President's Fund are deductible, generally without the LKR 75,000 cap.
- Solar and other reliefs exist but their limits change; confirm the current rule with the IRD.
- Keep receipts for everything you claim — without proof, a deduction can be disallowed.
A note on the figures
The personal relief of LKR 1,800,000, the approved-charity donation limit of the lower of one-third of taxable income or LKR 75,000, and the treatment of government donations described here are for the Year of Assessment 2025/2026 under the Inland Revenue (Amendment) Act, No. 02 of 2025. Targeted reliefs such as solar change frequently and are not detailed here, so confirm current limits and eligibility against IRD guidance before relying on these figures. Tax law can change; confirm critical figures against current IRD guidance before filing. TaxWise prepares IRD-ready schedules and calculations — you submit the return yourself. This page is educational and does not constitute legal or financial advice.