To calculate your income tax in Sri Lanka for Y/A 2025/2026: (1) add up your assessable income from all sources; (2) subtract the personal relief of LKR 1,800,000 and any qualifying payments to get your taxable income; (3) apply the progressive rates — 0% on the first LKR 1,800,000, 6% on the next 1,000,000, 18% on the next 500,000, 24% on the next 500,000, 30% on the next 500,000, and 36% on the balance above LKR 4,300,000; then (4) subtract tax already paid through APIT and WHT to get the balance payable or refund. For example, on a total annual income of LKR 6,000,000 the tax works out to LKR 1,032,000.
Individual income tax in Sri Lanka is charged on a progressive scale, so calculating what you owe comes down to four steps: total your income, subtract your reliefs, apply the progressive tax brackets, and subtract the tax already withheld. This guide shows the exact method for the Year of Assessment 2025/2026, with the current Sri Lanka income tax rates and a full worked example in rupees.
The four-step method
- Total your assessable income from all sources for the year.
- Subtract reliefs — the personal relief of LKR 1,800,000 plus any qualifying payments — to get your taxable income.
- Apply the progressive brackets to the taxable income.
- Subtract tax credits (APIT and WHT already paid) to get the balance payable or refund.
Each step is explained below.
Step 1: Total your assessable income
Add up everything taxable for the year (1 April 2025 to 31 March 2026):
- Employment income — salary, bonuses, allowances, and benefits.
- Business or professional income — net profit from self-employment.
- Investment income — interest, dividends, and rent.
- Other income — any other taxable receipts, including foreign income converted to rupees.
The total is your assessable income.
Step 2: Subtract reliefs to get taxable income
For Y/A 2025/2026, every resident individual gets a personal relief of LKR 1,800,000 (LKR 150,000 per month) — up from LKR 1,200,000 the previous year. On top of that, qualifying payments such as approved donations and the solar relief reduce your taxable income further.
Taxable income = Assessable income − Personal relief − Qualifying payments
Step 3: Apply the Sri Lanka income tax rates for 2025/2026
Sri Lanka uses a progressive system — each slice of income is taxed at its own rate, so there is no single income tax rate in Sri Lanka that applies to your whole income. The Sri Lanka income tax rates for Y/A 2025/2026, set by the Inland Revenue (Amendment) Act, No. 02 of 2025, run from 6% to 36% across five bands:
Sri Lanka income tax rates for Y/A 2025/2026
| Annual income (LKR) | Taxable income after relief | Rate |
|---|---|---|
| 0 – 1,800,000 | — | 0% (personal relief) |
| 1,800,001 – 2,800,000 | First 1,000,000 | 6% |
| 2,800,001 – 3,300,000 | Next 500,000 | 18% |
| 3,300,001 – 3,800,000 | Next 500,000 | 24% |
| 3,800,001 – 4,300,000 | Next 500,000 | 30% |
| Above 4,300,000 | Balance | 36% |
The earlier 12% band has been removed under the 2025 changes, so the rate steps from 6% straight to 18%. The lowest Sri Lanka tax rate on income above the relief is 6% and the top marginal rate is 36%. These are the rates for individual income tax; companies are taxed under a separate corporate schedule.
A worked example
Take an individual with a total annual income of LKR 6,000,000 and only the personal relief (no other qualifying payments).
Taxable income = 6,000,000 − 1,800,000 = 4,200,000 above the relief threshold.
Now tax each slice:
| Slice (LKR) | Amount | Rate | Tax |
|---|---|---|---|
| 1,800,001 – 2,800,000 | 1,000,000 | 6% | 60,000 |
| 2,800,001 – 3,300,000 | 500,000 | 18% | 90,000 |
| 3,300,001 – 3,800,000 | 500,000 | 24% | 120,000 |
| 3,800,001 – 4,300,000 | 500,000 | 30% | 150,000 |
| 4,300,001 – 6,000,000 | 1,700,000 | 36% | 612,000 |
| Total | 1,032,000 |
So the gross tax is LKR 1,032,000 — an effective rate of about 17.2% on the full LKR 6,000,000, even though the top marginal rate is 36%. That gap between marginal and effective rate is the whole point of a progressive system, and it is why "what bracket am I in" is the wrong question — only the income above each threshold is taxed at that band's rate.
Step 4: Subtract your tax credits
You rarely pay the full LKR 1,032,000 at filing, because tax has usually been withheld during the year:
- APIT — your employer deducts tax from your salary monthly and remits it to the IRD.
- WHT — banks and payers withhold tax on interest, dividends, and rent.
Both are credits. Subtract them from the gross tax:
Balance payable = Gross tax − APIT − WHT credits
If your credits exceed your tax, you are due a refund.
Common mistakes to avoid
- Confusing marginal and effective rates. Being "in the 36% bracket" does not mean 36% of all your income is taxed — only the portion above LKR 4,300,000.
- Forgetting reliefs. The LKR 1,800,000 personal relief and qualifying payments are easy to miss and directly reduce your taxable income.
- Ignoring credits. APIT and WHT you have already paid come straight off the bill — leaving them out means overpaying.
- Mixing up the year. Income is assessed for the year 1 April to 31 March, not the calendar year.
Let the engine do the arithmetic
Working the brackets by hand is fine for one salary, but income taxation in Sri Lanka gets error-prone once you add rent, dividends, foreign income, and multiple WHT certificates. The TaxWise IIT calculator runs the same 2025/2026 brackets and reliefs automatically and shows every step, so you can check your own working — or skip straight to IRD-ready schedules.
A note on the figures
These rates, bands and the LKR 1,800,000 personal relief are for the Year of Assessment 2025/2026 under the Inland Revenue (Amendment) Act, No. 02 of 2025. Tax law changes — always confirm the current figures against official IRD guidance or your live TaxWise computation before relying on them.
Frequently asked questions
What is the personal relief for 2025/2026 in Sri Lanka?+−
The personal relief (tax-free threshold) for Y/A 2025/2026 is LKR 1,800,000 per year, equivalent to LKR 150,000 per month. It was increased from LKR 1,200,000 with effect from 1 April 2025.
What are the income tax rates for 2025/2026?+−
After the LKR 1,800,000 personal relief, income is taxed progressively: 6% on the next LKR 1,000,000, 18% on the next 500,000, 24% on the next 500,000, 30% on the next 500,000, and 36% on any income above LKR 4,300,000. The previous 12% band was removed.
How much tax do I pay on a salary of LKR 6,000,000 a year?+−
On a total annual income of LKR 6,000,000 with only the personal relief, the tax is LKR 1,032,000: 0 on the first 1,800,000, then 60,000 + 90,000 + 120,000 + 150,000 across the middle bands, plus 612,000 at 36% on the top 1,700,000. That is an effective rate of about 17.2%.
Is the tax calculated on monthly or annual income?+−
Income tax is assessed on annual income for the Year of Assessment (1 April to 31 March). Employers deduct tax monthly through APIT, but the final liability is computed on your total income for the year, with APIT and WHT treated as credits.
Are APIT and WHT deducted from the tax I owe?+−
Yes. APIT withheld by your employer and WHT deducted on interest, dividends and rent are tax credits. You subtract them from your gross tax to get the balance payable, or a refund if your credits exceed your liability.