If you earn a salary in Sri Lanka, a slice of it is deducted every month as APIT — Advance Personal Income Tax, the system most people still call PAYE. This guide explains exactly how it works for the 2025/26 year of assessment, so you can check your payslip with confidence.
What changed in 2025
Two important things changed from April 2025:
- The tax-free personal relief rose to Rs 1,800,000 per year (Rs 150,000 per month), up from Rs 1,200,000.
- The first tax band widened and the 12% rate was removed, so the rates now step 6% → 18% → 24% → 30% → 36%.
If you earn Rs 150,000 a month or less from employment, you pay no APIT at all.
The 2025/26 tax bands
Tax applies only to the portion of your annual income above the Rs 1,800,000 relief:
| Annual income slab | Rate |
|---|---|
| First Rs 1,800,000 | 0% (relief) |
| Next Rs 1,000,000 | 6% |
| Next Rs 500,000 | 18% |
| Next Rs 500,000 | 24% |
| Next Rs 500,000 | 30% |
| Balance above Rs 4,300,000 | 36% |
A worked example
Say you earn Rs 300,000 per month, or Rs 3,600,000 a year:
- The first Rs 1,800,000 is tax-free.
- The next Rs 1,000,000 is taxed at 6% = Rs 60,000.
- The next Rs 500,000 at 18% = Rs 90,000.
- The remaining Rs 300,000 at 24% = Rs 72,000.
That is Rs 222,000 of tax per year, or Rs 18,500 a month. After also deducting your 8% EPF contribution (Rs 24,000), your take-home pay is Rs 257,500.
You can run your own numbers instantly with our Sri Lanka Salary Calculator — it shows the full breakdown including EPF and ETF.
APIT vs EPF vs ETF — what's the difference?
These three deductions often get confused:
- APIT is income tax — it goes to the Inland Revenue Department.
- EPF (8% you + 12% employer) is your retirement savings — it comes back to you.
- ETF (3%, employer only) is an additional trust fund benefit.
Only APIT is a "cost". EPF and ETF are savings held in your name.
Key takeaways
- Below Rs 150,000/month, no salary tax applies.
- Tax is progressive — only the income above each threshold is taxed at the higher rate, never your whole salary.
- Always check your payslip against a calculator; errors in payroll software are common.
This article is general guidance, not tax advice. For your specific situation, consult a qualified tax professional or the Inland Revenue Department.
