Key takeaways
- Sri Lanka's main relief for individuals is the personal relief of LKR 1,800,000 per year, applicable from the year of assessment starting 1 April 2025 to resident individuals and to Sri Lankan citizens (resident or not).
- Above the relief, income is taxed at progressive rates of 6% on the first LKR 1 million, then 18%, 24% and 30% on successive LKR 500,000 bands and 36% above (2025/26); most of the old itemised reliefs (rent, expenditure, solar-panel reliefs) were abolished or narrowed in the 2022–2023 reforms.
- The relief cannot be used against gains from realising investment assets, and the remaining "qualifying payments" (such as approved donations) are capped.
Last reviewed: October 2026
If you earn income in Sri Lanka, your tax bill depends mainly on one number: the personal relief. This guide explains which deductions and reliefs still exist for individuals in 2026, who can claim them, and how location-independent professionals living in Sri Lanka can keep their tax position clean.
Sri Lanka personal reliefs at a glance (2026)
| Relief / deduction | Amount | Who qualifies |
|---|---|---|
| Personal relief | LKR 1,800,000 per year (from 1 April 2025) | Resident individuals; Sri Lankan citizens even if non-resident |
| Tax year | 1 April – 31 March | – |
| Progressive rates above relief | 6% (first LKR 1m), 18%, 24%, 30%, 36% | All taxable individuals |
| Qualifying payments (e.g. approved charitable donations) | Capped | Taxpayers making eligible payments |
| Terminal benefits (gratuity, EPF/ETF withdrawals) | Concessionary scale (first LKR 10m at 0%, then progressive); employer withholding on payouts above LKR 5m | Employees on retirement or exit |
| Relief against investment-asset gains | Not allowed | – |
The personal relief: LKR 1,800,000
The Inland Revenue Department confirms an aggregate relief of LKR 1,800,000 for each year of assessment commencing on or after 1 April 2025. Key points:
- It applies to resident individuals and to Sri Lankan citizens whether resident or non-resident.
- It is deducted from total assessable income before progressive rates are applied.
- It cannot be deducted against gains from realising investment assets (for example the sale of shares or land held as investments), which are taxed separately.
- A trustee, receiver, executor or liquidator cannot claim it in that capacity.
Example: A resident consultant with LKR 4,000,000 of professional income in 2025/26 deducts LKR 1,800,000 and is taxed on LKR 2,200,000: 6% on the first LKR 1,000,000 (60,000), 18% and 24% on the next two LKR 500,000 bands (90,000 + 120,000) and 30% on the last LKR 200,000 (60,000) – LKR 330,000 in total.
What other deductions are available?
Since the 2022–2023 tax reforms, Sri Lanka has relied on a single high relief rather than many itemised deductions. In practice:
- Business and professional expenses: self-employed professionals deduct expenses incurred wholly and exclusively in producing their income (office, equipment depreciation through capital allowances, professional fees).
- Qualifying payments: certain donations to approved charitable institutions and contributions to government-approved funds remain deductible. Check the IRD's current list of approved institutions and caps.
- Employment income: employees cannot deduct personal expenses; employer-provided benefits are generally taxable, with some exemptions.
- Former reliefs for rent, general expenditure and solar-panel installation were removed or restricted in recent reforms.
Because these rules have changed several times since 2020, check the IRD's current tax chart before filing.
How deductions interact with residence
- Residents are taxed on worldwide income, so foreign salary, freelance fees and investment income all count towards taxable income, while the personal relief is available once.
- Non-resident foreigners are taxed only on Sri Lankan-source income and do not receive the personal relief; non-resident Sri Lankan citizens do.
- Foreign tax credits: tax paid abroad on foreign income can reduce Sri Lankan tax under a treaty or unilateral relief, but it is a credit, not a deduction.
Tips for location-independent professionals
- Register for a TIN and keep proof of every deductible business expense; the IRD increasingly cross-checks bank data.
- If you invoice foreign clients, keep contracts, invoices and proof that foreign-currency receipts were remitted to Sri Lanka, and check with an adviser whether any concession applies to export of services.
- Time asset disposals: the personal relief does not shelter investment-asset gains, so plan sales of shares or property separately.
Frequently asked questions
What is the tax-free allowance in Sri Lanka in 2025/26?
The personal relief is LKR 1,800,000 per year of assessment starting on or after 1 April 2025. It applies to resident individuals and to Sri Lankan citizens even if they are non-resident.
Can foreigners claim the personal relief in Sri Lanka?
Foreigners who are tax resident in Sri Lanka can claim it. Non-resident foreigners, taxed only on Sri Lankan-source income, cannot; non-resident Sri Lankan citizens can.
Is rent deductible in Sri Lanka?
The former rent relief was abolished in the recent reforms. Rent paid for business premises remains deductible as a business expense for self-employed taxpayers, but rent for your own home is not.
Are charitable donations tax deductible in Sri Lanka?
Donations to approved charitable institutions can qualify as qualifying payments within a capped amount. Keep receipts showing the institution's approval status.
Does the personal relief apply to capital gains?
No. The relief cannot be deducted against gains from realising investment assets, such as the sale of shares or land held as an investment.
Related guides
- Sri Lanka tax residency rules
- Crypto taxation in Sri Lanka
- Leaving Sri Lanka: ending your tax residency
Sources
- Inland Revenue Department of Sri Lanka – Income tax
- Inland Revenue Act No. 24 of 2017 (as amended)
This guide is general information, not personalised tax advice.
Earning income in or from Sri Lanka? Get a personalised tax plan with Heavnn → heavnn.io
