A Guide to Advance Personal Income Tax (APIT) in Sri Lanka
Advance Personal Income Tax (APIT) is the tax deducted by employers from employee salaries on a monthly basis and remitted to the Inland Revenue Department (IRD).
APIT applies to:
- All residents earning employment income.
- Non-resident Sri Lankan citizens.
- Employees working for foreign employers while residing in Sri Lanka.
A Quick Recap of Changes from 2018 to 2025
2018.04.01 to 2019.12.31 – PAYE with Rs. 1.2 Million Tax-Free Limit
This period followed the Inland Revenue Act, No. 24 of 2017. PAYE tax deductions were mandatory for all employers. Employees received a personal relief of Rs. 500,000 and a further Rs. 700,000 relief on employment income, making Rs. 1.2 million tax-free annually (Rs. 100,000 per month). Anyone earning more than this had to pay tax, and employers had to deduct and remit this to the IRD monthly.
2020.01.01 to 2022.12.31 – APIT Introduced
This period marked the introduction of Advance Personal Income Tax (APIT), replacing the mandatory PAYE system. One of the major shifts was that APIT deductions were no longer mandatory—employers could only deduct tax with the employee’s consent. The annual tax-free threshold increased to Rs. 3,000,000, giving full relief for monthly salaries up to Rs. 250,000. The maximum tax rate was capped at 18%.
2023.01.01 to 2025.03.31 – Revised Rates & Lower Relief
APIT became mandatory again. The monthly tax-free limit was reduced to Rs. 100,000 (Rs. 1.2 million annually), and tax rates ranged from 6% to 36%. Cumulative tax rules applied if employees earned more than Rs. 1.2 million during the year. Specific tables were used for lump-sums, retirement benefits, and employer-paid taxes.
2025.04.01 Onwards – Higher Tax Relief
From April 1, 2025, the APIT system continues to be mandatory for all employees. The monthly tax-free allowance has been increased to Rs. 150,000 (Rs. 1.8 million annually), and tax rates remain progressive, ranging from 6% to 36%. If an employee’s cumulative income for the year exceeds Rs. 1.8 million, tax must be calculated and deducted. The Inland Revenue Department has introduced eight updated APIT tax tables to handle different income types and cases.
New APIT brackets effective April 1, 2025:
| Monthly Income Bracket (LKR) | Tax Rate |
|---|---|
| Up to 150,000 | 0% |
| 150,001 - 208,333 | 6% |
| 208,334 - 266,667 | 12% |
| 266,668 - 325,000 | 18% |
| 325,001 - 383,333 | 24% |
| 384,334 - 441,667 | 30% |
| Above 441,667 | 36% |
APIT Tax Tables - Effective From 2025.04.01
Here is a summary of the 8 APIT Tax Tables in effect from April 1, 2025. Use the appropriate table depending on the nature of the employee’s income and their employment status.
Table 01 – Regular Monthly Salary Payments
Used for resident employees and non-resident Sri Lankan citizens who have declared their primary employment. Tax is deducted on a monthly basis with Rs. 150,000 personal relief. Rates range from 6% to 36%.
Table 02 – Lump-sum Payments
Applies to bonuses, arrears, and other one-time payments. Tax is calculated using the Estimated Gross Aggregate Remuneration (EGAR) and deductions already made under Table 01.
Table 03 – Terminal Benefits
Used for gratuities, ETF payments, commuted pensions, and other retirement-related payouts.
Table 04 – Non-Resident, Non-Citizen Employees
Applicable to foreign nationals working in Sri Lanka. Monthly and lump-sum incomes are taxed at rates between 6% and 36% using a tiered table and cumulative calculation.
Table 05 – Cumulative Employment Income
Applied when the monthly salary is below Rs. 150,000, but cumulative annual income exceeds Rs. 1.8 million. Also used when employment begins or ends mid-year.
Table 06 – Tax-on-Tax Scenarios
For situations where the employer pays the tax on behalf of the employee (instead of deducting it). The employer must use this table to compute additional tax-on-tax liability, with rates up to 56.25%.
Table 07 – Secondary Employment
For employees working multiple jobs or who have not submitted a primary employment declaration. Non-residents working second jobs are taxed at a flat 36%.
Table 08 – Foreign Employer Payments
Applies to Sri Lankan residents working remotely for foreign employers (without a local establishment). Since foreign employers won’t deduct APIT, the employee must pay it themselves each month.
Remitting APIT Payment
APIT is always based on salary paid in the previous month. Employers must deduct the tax and pay it to the IRD by the 15th of the following month. If the 15th is a weekend or holiday, payment should be done earlier.
Each monthly payment uses a period code in this format: YYMM0
- Example: March 2025 salary = 25030
- Tax Type Code for APIT = 03
APIT Annual Statement Filing
Every employer must submit an annual APIT statement by 30th April after the tax year ends, summarizing all deductions made during the year.
Certificate of Tax Deduction - T10
Employers are required to issue the T10 certificate to each employee on or before April 30th following the end of the assessment year. In cases where an employee's service is terminated during the year, the certificate should be provided within 30 days of termination.
Penalties for Non-Compliance
| Type of Non-Compliance | Penalty Applied |
|---|---|
| Late Payment | A 10% penalty is charged if the APIT is not paid within 14 days after the due date. |
| Interest on Overdue Payments | 1.5% interest is applied each month or part of a month until the tax is fully paid. |
| Failure to Deduct APIT | Employer responsible for unpaid tax. |
| Late/Failure to file the annual return | A flat fee of Rs. 50,000, with an additional Rs. 10,000 for each month or part thereof the delay persists, up to a maximum of Rs. 400,000. |
Important: Timely compliance is crucial to avoid heavy penalties.
Understanding APIT is essential for both employers and employees to ensure tax compliance and avoid penalties. With the updated rules effective from April 1, 2025, it’s more important than ever to apply the correct tax table, make timely payments, and maintain accurate records. Whether you're a business owner, HR manager, or employee, staying informed will help you handle tax responsibilities with confidence and ease.