Income tax is imposed in accordance with the provisions of the Inland Revenue Act, No. 24 of 2017, together with its subsequent amendments introduced by the Inland Revenue (Amendment) Acts No. 10 of 2021, No. 45 of 2022, No. 04 of 2023, No. 14 of 2023, and No. 02 of 2025. The Act provides the statutory authority to assess, levy, and collect income tax on the gains and profits of every person for each year of assessment commencing on or after 1 April 2018.
Sources of Income
Income tax is charged on the following categories of income:
Employment Income
An individual’s gains and profits from employment for a year of assessment.
Business Income
The gains and profits derived by a person from conducting a business during the relevant year of assessment.
Investment Income
The gains and profits earned from investments during the year of assessment.
Other Income
Gains and profits arising from any other source, excluding profits of a casual and non-recurring nature.
A person who is deemed to be resident in Sri Lanka for a year of assessment is liable to income tax on both income sourced within Sri Lanka and income derived from outside Sri Lanka, thereby being subject to tax on global income. In contrast, a non-resident person is chargeable to income tax only on gains and profits arising or derived from sources within Sri Lanka.
An individual who is resident in Sri Lanka for a year of assessment, or a non-resident who is a citizen of Sri Lanka, is entitled to an aggregate personal relief as follows.
- Rs. 500,000 for each year of assessment prior to 1 January 2020;
- Rs. 3,000,000 for each year of assessment commencing on or after 1 January 2020 but prior to 1 January 2023;
- Rs. 1,200,000 for each year of assessment commencing on or after 1 January 2023 but prior to 1 April 2025;
- Rs. 1,800,000 for each year of assessment commencing on or after 1 April 2025.
Personal relief shall not be available to an individual acting as a trustee, receiver, executor, or liquidator, nor shall it be deducted against gains arising from the realization of investment assets.
Acts
IRD-Act-No-24-2017-E