Sri Lanka President unveils PAYE Tax threshold increase and relief measures

Sri Lankan President Anura Kumara Dissanayake announced a major revision to income tax thresholds during a special statement in Parliament today (December 18).

The government has reached an agreement with the International Monetary Fund (IMF) to raise the Pay As You Earn (PAYE) tax exemption limit from LKR 100,000 to LKR 150,000 per month.

This agreement was part of discussions during the third review of the Extended Fund Facility (EFF) for Sri Lanka.

“We began discussions during the third review regarding income tax for professionals,” President Dissanayake explained.

“We continued these talks and succeeded in raising the income tax exemption limit from LKR 100,000 to LKR 150,000,” he added.

As a result, individuals earning up to LKR 150,000 per month will no longer be required to pay income tax.

In addition to this increase in the tax exemption limit, President Dissanayake outlined changes to the personal income tax brackets.

The first personal income tax bracket, previously set at LKR 500,000, has now been revised to LKR 1,000,000, with a 6% tax rate.

Here are the details of the new tax exemptions:

• People earning LKR 150,000 per month will be fully exempt from income tax.
• Those earning LKR 200,000 per month will receive a 71% tax exemption.
• Individuals earning LKR 250,000 will receive a 61% tax exemption.
• People earning LKR 300,000 will receive a 47% tax exemption.
• Those earning LKR 350,000 per month will receive a 25.5% tax exemption.

The President emphasized that the tax revisions aim to provide greater relief to lower-income earners while offering less relief to higher-income earners.

“We have succeeded in adjusting the Pay As You Earn (PAYE) tax system to make the tax burden fairer,” he said.