Since 1 April 2025, employees in Sri Lanka pay noticeably less income tax: the tax-free allowance went up by half and the 12% band was removed. Here's how APIT (Advance Personal Income Tax, the tax your employer deducts from your salary) works now, with examples you can check against your own payslip.
The tax-free allowance
The first Rs. 1,800,000 a year of income is tax-free, which is Rs. 150,000 a month. Before April 2025 it was Rs. 1,200,000 a year (Rs. 100,000 a month). If you earn Rs. 150,000 a month or less, no APIT is deducted.
The tax bands
Income above the allowance is taxed in slices. Each rate applies only to the part of your income inside its band:
| Monthly income above Rs. 150,000 | Rate |
|---|---|
| First Rs. 83,333 | 6% |
| Next Rs. 41,667 | 18% |
| Next Rs. 41,667 | 24% |
| Next Rs. 41,667 | 30% |
| Everything above that | 36% |
In yearly terms: 6% on the first Rs. 1,000,000 above the allowance, then Rs. 500,000 each at 18%, 24% and 30%, and 36% on the rest. No changes were announced for 2026/27, so the same table applies.
Worked examples
| Monthly salary | Monthly APIT | Effective rate |
|---|---|---|
| Rs. 150,000 | Rs. 0 | 0% |
| Rs. 200,000 | Rs. 3,000 | 1.5% |
| Rs. 250,000 | Rs. 8,000 | 3.2% |
| Rs. 300,000 | Rs. 18,500 | 6.2% |
| Rs. 500,000 | Rs. 86,000 | 17.2% |
For Rs. 300,000: Rs. 150,000 is tax-free, leaving Rs. 150,000. The first Rs. 83,333 is taxed at 6% (Rs. 5,000), the next Rs. 41,667 at 18% (Rs. 7,500), and the remaining Rs. 25,000 at 24% (Rs. 6,000), a total of Rs. 18,500.
What about EPF?
Your 8% EPF contribution is deducted from your salary too, but it doesn't reduce your APIT: tax is worked out on your full earnings. So on Rs. 250,000, you pay Rs. 8,000 APIT and Rs. 20,000 EPF, and take home Rs. 222,000.
Things that change the result
- Bonuses and arrears use a separate APIT table, so the tax on a bonus month looks different.
- A second job is taxed under a different table, usually at higher rates from the first rupee, and the difference is settled in your annual return.
- Other income, such as rent or business income, is added up in your yearly tax return.
Enter your own salary in the Sri Lanka salary & APIT calculator to see your take-home pay, the tax in each band, and what your employer pays for EPF and ETF.
This guide is general information based on the Inland Revenue (Amendment) Act No. 2 of 2025. Check with the Inland Revenue Department or a tax advisor for your own situation.