What is APIT (formerly PAYE) and how does it work? (Y/A 2025/2026)

If you are an employee in Sri Lanka, the tax on your salary is deducted by your employer every month before you are paid. That system is called APIT — the Advance Personal Income Tax — and it replaced what was previously known as PAYE (Pay As You Earn).

Check your monthly APIT deduction in the APIT calculator

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What APIT is

APIT stands for Advance Personal Income Tax. It is the mechanism through which income tax on employment income is collected monthly at source, before it reaches the employee's hands.

The system was previously called PAYE (Pay As You Earn) — the name changed, but the underlying mechanics are the same. If you were familiar with PAYE, you are already familiar with APIT. The two terms appear interchangeably in older documents and payslips; the current legal name is APIT.

The principle is straightforward: rather than an employee receiving a full year's salary and paying one large tax bill at the end, the tax is collected in portions each month as the income is earned. The employer acts as the collection agent — calculating the correct amount, deducting it from gross pay, and remitting it to the Inland Revenue Department (IRD) on the employee's behalf. By the time the year of assessment closes on 31 March 2026, most or all of a salaried employee's income tax has already been paid.

APIT is governed by the Inland Revenue Act No. 24 of 2017 (as amended), and the rates and reliefs for Y/A 2025/2026 reflect the changes under the Inland Revenue (Amendment) Act, No. 02 of 2025. The IRD publishes updated APIT tables each year of assessment.

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How the employer deduction works

Each month, your employer calculates the APIT due on your salary using the IRD APIT Table 02 (for resident employees). This table builds the annual personal relief and progressive bands into a monthly deduction schedule, so the employer does not need to work out the full annual liability each month — the table does the maths.

The personal relief for Y/A 2025/2026 is LKR 1,800,000 a year, which the monthly table converts to LKR 150,000 a month. The table applies this LKR 150,000 monthly relief before any tax rate is applied, so:

• A primary salary at or below LKR 150,000 a month generally produces a nil APIT deduction.
• A primary salary above LKR 150,000 is taxed on the excess through the progressive bands:

The monthly equivalent income bands are approximate guides. The actual APIT deduction uses the projected annual salary to determine which band applies — not just that month's pay in isolation. If your salary is consistent month to month, the monthly deduction is consistent. If it varies — because of bonuses, commission, or a mid-year raise — the employer recalculates the projected annual total and adjusts the deduction accordingly.

The deduction appears on your payslip as a line item. You do not need to initiate it; the employer has a legal duty to deduct and remit. If you are not seeing an APIT line on your payslip at a salary above LKR 150,000 a month from your primary job, raise it with your payroll team.

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Primary versus secondary employment

This is the rule that catches most people off guard.

The personal relief of LKR 1,800,000 a year is applied against one primary employment only. You cannot claim the relief twice — one person, one relief.

• Your primary employment is the job where the relief is applied. Every month, your primary employer's APIT table gives you the LKR 150,000 monthly equivalent before taxing the balance.
• A secondary employment is any other concurrent job. Because the relief has already been allocated to your primary employer, your secondary employer deducts APIT without any personal relief. The full gross pay from that secondary job is taxed at the relevant marginal rate from the first rupee.

Why this matters: if both employers applied the full relief, you would only have paid tax on income above LKR 3,600,000 (two reliefs of LKR 1,800,000 each) rather than the correct LKR 1,800,000. When the annual return is filed and the IRD reconciles your total income against one relief, there would be a shortfall — a balance tax to pay, possibly with a late-payment surcharge.

What to do: notify each employer of the correct status in writing. Direct the relief to your higher-paying or more regular job. Keep a record of that instruction. If your employment situation changes mid-year, notify both employers promptly so they can recalculate.

Two things to notice:

• The primary/secondary distinction applies to simultaneously held jobs. If you leave one job and start another, the new employer becomes your primary employer and applies the full relief for the remainder of the year.
• The annual return reconciles everything. Even if the employer deduction was wrong during the year — too high or too low — the return corrects the final position.

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How to make sure APIT is right for you

APIT happens automatically, but four steps keep it accurate:

1. Confirm your primary employer. Notify the employer where you want the personal relief applied. Do this in writing at the start of each year of assessment and whenever your employment situation changes.

2. Check your payslip from April 2025. The deduction should reflect the LKR 1,800,000 relief and the 6 / 18 / 24 / 30 / 36% bands. If your primary salary is at or below LKR 150,000 a month and a deduction is still appearing, ask payroll to review it against APIT Table 02.

3. Tell your employer about changes that affect your pay. A mid-year raise, a bonus, a change in allowances, or taking on a second job all change the correct deduction. Bonuses are employment income and are taxed; a large bonus in one month will produce a larger deduction that month, because the employer projects that month's pay forward to estimate the annual figure.

4. Keep your APIT certificate. At the end of the year of assessment, your employer issues a statement showing your total employment income and total APIT deducted for the year. This is the document you need when filing your annual return. Without it, you cannot credit the APIT already paid.

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How APIT reconciles with the annual return

APIT is an advance payment — the name says so. It is not your final tax. The final figure is determined in your annual income tax return, which for Y/A 2025/2026 is due on or before 30 November 2026, filed through the IRD e-Services portal (RAMIS).

The reconciliation works like this:

1. Aggregate all income for the year — salary from all employers, rental income, bank interest, dividends, freelance fees, and anything else assessable.
2. Apply the personal relief of LKR 1,800,000 once across all income.
3. Run the bands to arrive at total income tax liability for the year.
4. Subtract all APIT deducted by employers during the year (from your APIT certificates).
5. The result is either a balance payable or a refund due.

For a single-job employee with no other income, the APIT deducted across twelve months typically matches the liability closely, and the return produces little or nothing to settle. For anyone with a second job, rental income, significant bank interest, or other income sources, there will usually be a balance to pay — because only APIT covers the salary; other income is not withheld at the right rate automatically.

See our tax return deadline and penalties guide for filing requirements and what happens if you miss the deadline.

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The Statement of Estimated Tax is gone

From Y/A 2025/2026, the Statement of Estimated Tax (SET) has been abolished. Previously, some taxpayers with non-employment income were required to estimate their income for the year at the outset and file that estimate with the IRD, then reconcile it at year end.

That step no longer exists. Your tax is based on actual income as reported in the annual return — no estimate, no intermediate filing. For employees on APIT, this changes nothing about the monthly deduction; it simply removes an administrative step that never applied to most salaried employees in any case.

For a full list of what changed for Y/A 2025/2026, see our income tax changes guide.

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What counts as employment income for APIT

APIT covers all employment income — which is broader than basic salary alone. The following are all employment income subject to APIT:

• Basic salary and wages
• Allowances (transport, meal, housing, and other allowances paid by the employer)
• Bonuses and performance payments
• Commission and incentive pay
• Non-cash benefits that have a value (e.g. company car, employer-provided accommodation)

Terminal benefits are treated separately. Approved gratuity, compensation for loss of office, and approved retirement fund lump sums (EPF (Employees' Provident Fund), ETF (Employees' Trust Fund)) do not go through ordinary monthly APIT. They are taxed under concessionary rules:

• The first LKR 10,000,000 of qualifying terminal benefits is tax-free.
• The excess is taxed at concessionary rates of 6% and 12% under IRD APIT Table 03.

These figures should be confirmed against the current APIT Table 03 before you rely on them. For the full treatment of EPF, ETF, and gratuity, see our EPF, ETF and gratuity tax guide.

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Worked example

Example 1 — Single employer, consistent salary

Scenario: Rohan earns a salary of LKR 300,000 a month from a single employer. No other income. Full year of employment.

Annual calculation:

Monthly APIT deduction: LKR 222,000 ÷ 12 = approx. LKR 18,500 per month.

By 31 March 2026, Rohan's employer will have deducted approximately LKR 222,000 in total. When he files his annual return, the APIT credited equals his liability — nothing more to pay, no refund.

Example 2 — Two jobs: primary and secondary

Scenario: Priya holds two jobs simultaneously. Primary job: LKR 200,000/month. Secondary job: LKR 80,000/month. No other income.

Primary employment (relief applied):

Secondary employment (no relief):

Annual return reconciliation:

Priya owes LKR 67,200 when she files her return — the portion of liability not covered by the combined APIT deductions. This is normal for two-job situations; the secondary employer deducts APIT without the relief, but the band interaction on the combined income produces a balance at year end.

Run the numbers in the income tax calculator to estimate your combined liability before the return.

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Quick reference

• APIT = Advance Personal Income Tax — the new name for PAYE; same mechanics.
• Deducted by employer each month using IRD APIT Table 02 (residents).
• Personal relief: LKR 1,800,000/year (LKR 150,000/month) built into the table for primary employment.
• Secondary jobs: APIT deducted without the personal relief — the relief is used only once.
• It is an advance: final liability is settled in the annual return by 30 November 2026.
• SET abolished: no separate estimated tax filing required from Y/A 2025/2026.
• Terminal benefits: first LKR 10,000,000 tax-free; excess at 6%/12% under APIT Table 03.
• Keep your APIT certificate: essential for filing your annual return.

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A note on the figures

All figures and rates on this page apply to the Year of Assessment 2025/2026 (1 April 2025 to 31 March 2026) under the Inland Revenue (Amendment) Act, No. 02 of 2025. Tax law can change; confirm critical figures — including APIT Table 02 and Table 03 rates — 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.