How much tax do I pay on my salary in Sri Lanka? (2025/2026)
Salary tax in Sri Lanka is collected monthly through APIT (PAYE). For Y/A 2025/2026 the tax-free threshold is LKR 150,000 a month (LKR 1,800,000 a year); salary at or below it owes no APIT. Above it, income is taxed in progressive steps from 6% up to 36%. For example, on a salary of LKR 350,000 a month (LKR 4,200,000 a year), the income tax is about LKR 390,000 a year, or roughly LKR 32,500 a month, before EPF. EPF and ETF are separate retirement contributions, not income tax.
If you are a salaried employee in Sri Lanka, tax comes out of your pay every month through APIT — Advance Personal Income Tax, the system most people still call PAYE. This guide explains how much tax you actually pay on your salary for the Year of Assessment 2025/2026 (1 April 2025 to 31 March 2026), where the thresholds sit, and what comes off a few common salary levels.
How salary tax works in Sri Lanka
Your employer deducts APIT from your salary each month and remits it to the Inland Revenue Department on your behalf. APIT is not a separate tax — it is your income tax, collected as you earn. At the end of the year, your total tax is computed on your annual income, and the APIT already deducted is treated as a credit against it.
The amount deducted depends on one threshold and a set of progressive rates.
The tax-free threshold
Every resident gets a personal relief of LKR 1,800,000 a year — equivalent to LKR 150,000 a month. If your monthly salary is at or below LKR 150,000, no APIT is deducted. Above it, only the portion above the threshold is taxed, and it is taxed in steps.
The 2025/2026 rates
After the relief, annual income is taxed through progressive bands:
| Annual income (LKR) | Rate |
|---|---|
| 0 – 1,800,000 | 0% (personal relief) |
| 1,800,001 – 2,800,000 | 6% |
| 2,800,001 – 3,300,000 | 18% |
| 3,300,001 – 3,800,000 | 24% |
| 3,800,001 – 4,300,000 | 30% |
| Above 4,300,000 | 36% |
The previous 12% band was removed with effect from 1 April 2025, so the rate steps from 6% straight to 18%. Each slice of income is taxed at its own rate — being "in the 36% bracket" only means income above LKR 4,300,000 is taxed at 36%, not your whole salary.
What that means for common salaries
These examples show the annual income tax on a given gross salary, before EPF and any other reliefs. Your exact monthly APIT depends on your employer's deductions, so treat these as a guide and check your own figure with the PAYE / APIT calculator. The underlying method is the same one set out in how to calculate your income tax in Sri Lanka.
| Monthly salary | Annual | Tax-free | Annual tax | ≈ Monthly tax |
|---|---|---|---|---|
| LKR 150,000 | 1,800,000 | All | 0 | 0 |
| LKR 200,000 | 2,400,000 | 1,800,000 | 36,000 | 3,000 |
| LKR 350,000 | 4,200,000 | 1,800,000 | 390,000 | 32,500 |
Take the LKR 350,000/month case (LKR 4,200,000 a year). Taxable income is 4,200,000 − 1,800,000 = 2,400,000, taxed in slices: 1,000,000 at 6% (60,000) + 500,000 at 18% (90,000) + 500,000 at 24% (120,000) + 400,000 at 30% (120,000) = LKR 390,000 a year, about LKR 32,500 a month.
What about EPF and ETF?
EPF and ETF are retirement contributions, separate from income tax. Your 8% EPF contribution is deducted from your pay, your employer adds its share, and ETF is funded entirely by the employer. They reduce your take-home pay but are not income tax — and approved-fund balances are generally tax-free when paid out.
If salary is your only income
If you earn only a salary and your employer deducts APIT correctly, your tax is largely settled through the year. You may still need to file an annual return to confirm the position, claim qualifying payments (such as approved donations or solar relief), or recover any over-deduction as a refund.
A note on the figures
The personal relief of LKR 1,800,000, the LKR 150,000 monthly threshold, and the progressive bands are for the Year of Assessment 2025/2026 under the Inland Revenue (Amendment) Act, No. 02 of 2025. Tax law changes — confirm against current IRD guidance or your live TaxWise computation before relying on these figures. TaxWise prepares IRD-ready schedules; you submit the return yourself.
Frequently asked questions
How much salary is tax-free in Sri Lanka?
The personal relief is LKR 1,800,000 a year, equivalent to LKR 150,000 a month. A monthly salary at or below LKR 150,000 owes no APIT. Above that, only the portion above the threshold is taxed.
What is APIT and how is it different from PAYE?
APIT (Advance Personal Income Tax) is the system that replaced PAYE. It is the same idea: your employer deducts income tax from your salary each month and remits it to the IRD, and the amount deducted is credited against your final annual tax.
How much tax do I pay on a salary of LKR 350,000 a month?
A salary of LKR 350,000 a month is LKR 4,200,000 a year. After the LKR 1,800,000 relief, LKR 2,400,000 is taxed: 60,000 + 90,000 + 120,000 + 120,000 across the bands, totalling about LKR 390,000 a year, or roughly LKR 32,500 a month before EPF.
Is EPF deducted before calculating salary tax?
EPF and ETF are retirement contributions, separate from income tax. Your 8% EPF contribution reduces your take-home pay, but the income tax bands and the LKR 1,800,000 relief are what determine your APIT. Use the PAYE/APIT calculator for your exact payslip figure.
Do I need to file a return if I only earn a salary?
If APIT is deducted correctly, your tax is largely settled through the year, but you may still need to file to confirm the position, claim qualifying payments such as approved donations or solar relief, or recover an over-deduction as a refund.
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