Am I taxed on takings or on profit?

On profit — takings less the expenses incurred in earning them, plus capital allowances on business assets. Personal drawings are not an expense.

When does VAT registration become compulsory?

Once taxable turnover crosses Rs. 60,000,000 in a twelve-month period. VAT is separate from income tax and has its own filing cycle.

Do I file as an individual or as a business?

A sole proprietorship is not a separate taxpayer — the profit goes on your individual return. A partnership files its own return and allocates the divisible profit to each partner.

Income tax for business owners in Sri Lanka — Y/A 2025/2026

Trading profit after your business expenses, self-assessed with nothing withheld at source. Work out which schedules you file, what quarterly instalments apply, and what is due at year end.

Identify your tax profile

What did you earn this year?

Pre-filled for your profession — add what applies, skip what doesn't.

Pre-selected for Shop / business owner — add or remove anything that doesn't match your year.

1 of 6 selected

A worked example for business owners

Illustrative figures for a typical income mix for business owners — freelance or business — using the default amounts below. Your own numbers will differ; use the wizard above for your actual figures.

Illustrative income

Freelance or businessRs. 1,200,000

Total assessable incomeRs. 1,200,000

Taxable income after reliefsRs. 0

Income tax before creditsRs. 0

Estimated balance payableRs. 0

A sole proprietorship's profit is what's taxed, not what's in the till at year end, and the two numbers diverge fast once stock, drawings and unpaid supplier credit enter the picture — trading income has to be measured on an accruals basis, recognising sales when earned and costs when incurred, not simply when cash changes hands. Personal drawings from the business, however routine, are never a deductible expense; owners who pay themselves an informal "salary" from shop takings sometimes mistake that for a wage expense, but for a sole proprietorship it's simply profit distribution and stays fully taxable. VAT registration becomes compulsory once taxable turnover crosses Rs. 60,000,000 in any twelve-month period — not the calendar or tax year specifically — so a fast-growing shop needs to monitor the rolling figure, not just check once a year. Capital allowances apply to shop fittings, refrigeration, POS systems and vehicles used for the business, claimed over each asset's useful life rather than expensed when bought. If you're operating as a partnership rather than a sole proprietorship, the entity files its own return and allocates divisible profit to each partner by their agreed share — a distinction that changes who owes what and when, worth confirming before the first filing season, not after.

Common questions

Am I taxed on takings or on profit?: On profit — takings less the expenses incurred in earning them, plus capital allowances on business assets. Personal drawings are not an expense.
When does VAT registration become compulsory?: Once taxable turnover crosses Rs. 60,000,000 in a twelve-month period. VAT is separate from income tax and has its own filing cycle.
Do I file as an individual or as a business?: A sole proprietorship is not a separate taxpayer — the profit goes on your individual return. A partnership files its own return and allocates the divisible profit to each partner.

Work out a single figure instead

Income tax (IIT)

Estimate your annual liability across salary, freelance, interest and investment income — with 2025/2026 reliefs applied.

Quarterly installment

If you're self-employed: estimate your Q1–Q4 installments based on prior-year liability or current-year forecast.

VAT

Output VAT vs. input VAT, threshold check (Rs. 60M / quarter), schedule-by-schedule.