Salaried employees and individual taxpayers in Sri Lanka are set to see an increase in their monthly take-home pay starting April 1, 2027 (Year of Assessment 2027/28), following personal income tax revisions announced in the 2027 National Budget.
Presented by President Anura Kumara Dissanayake on November 12, 2026, the reforms deliver monthly tax savings ranging from Rs. 750 to Rs. 15,750 by raising the tax-free allowance, re-introducing a 12% intermediate tax bracket, and widening upper income slabs.
What Is Changing in April 2027?
Subject to the passage of the Inland Revenue (Amendment) Bill, four structural updates will reshape Pay-As-You-Earn (PAYE) / Advance Personal Income Tax (APIT) deductions:
- Higher Tax-Free Threshold: The annual personal relief allowance increases from Rs. 1.80 million to Rs. 1.95 million, lifting the monthly tax-free salary limit from Rs. 150,000 to Rs. 162,500.
- New 12% Intermediate Bracket: Previously, income jumped directly from the 6% slab to 18%. Budget 2027 introduces a 12% rate between the two.
- Wider Taxable Bands: After the first Rs. 850,000 of taxable income (taxed at 6%), each subsequent bracket widens from Rs. 500,000 per year (Rs. 41,667/month) to Rs. 600,000 per year (Rs. 50,000/month).
- Delayed Top Rate (36%): The threshold at which the maximum 36% marginal tax rate kicks in rises from Rs. 4.30 million/year (Rs. 358,333/month) to Rs. 5.20 million/year (Rs. 433,333/month).
Current vs. Proposed Tax Slabs (Annual & Monthly)
| Tax Rate | Current Rules (Up to March 31, 2027) | Budget 2027 Rules (From April 1, 2027) |
| 0% (Tax-Free) | Up to Rs. 1,800,000/yr (Rs. 150,000/mo) | Up to Rs. 1,950,000/yr (Rs. 162,500/mo) |
| 6% | First Rs. 1,000,000/yr (Rs. 150,000 – 233,333/mo) | First Rs. 850,000/yr (Rs. 162,500 – 233,333/mo) |
| 12% | Not applicable | Next Rs. 600,000/yr (Rs. 233,333 – 283,333/mo) |
| 18% | Next Rs. 500,000/yr (Rs. 233,333 – 275,000/mo) | Next Rs. 600,000/yr (Rs. 283,333 – 333,333/mo) |
| 24% | Next Rs. 500,000/yr (Rs. 275,000 – 316,667/mo) | Next Rs. 600,000/yr (Rs. 333,333 – 383,333/mo) |
| 30% | Next Rs. 500,000/yr (Rs. 316,667 – 358,333/mo) | Next Rs. 600,000/yr (Rs. 383,333 – 433,333/mo) |
| 36% | Above Rs. 4,300,000/yr (Above Rs. 358,333/mo) | Above Rs. 5,200,000/yr (Above Rs. 433,333/mo) |
Take-Home Pay Comparison Across Salary Brackets
The table below compares monthly tax deductions and net take-home pay (before EPF/ETF or other deductions) for an individual with regular monthly employment income and no other income sources:
| Gross Monthly Salary | Monthly Tax (Current) | Monthly Tax (April 2027) | Monthly Tax Saving | Annual Tax Saving |
| Rs. 150,000 | Rs. 0 | Rs. 0 | Rs. 0 | Rs. 0 |
| Rs. 162,500 | Rs. 750 | Rs. 0 | Rs. 750 | Rs. 9,000 |
| Rs. 200,000 | Rs. 3,000 | Rs. 2,250 | Rs. 750 | Rs. 9,000 |
| Rs. 250,000 | Rs. 8,000 | Rs. 6,250 | Rs. 1,750 | Rs. 21,000 |
| Rs. 300,000 | Rs. 18,500 | Rs. 13,250 | Rs. 5,250 | Rs. 63,000 |
| Rs. 350,000 | Rs. 32,500 | Rs. 23,250 | Rs. 9,250 | Rs. 111,000 |
| Rs. 400,000 | Rs. 50,000 | Rs. 36,250 | Rs. 13,750 | Rs. 165,000 |
| Rs. 500,000+ | Rs. 86,000 | Rs. 70,250 | Rs. 15,750 | Rs. 189,000 |
Real-World Paycheck Examples
1. Entry-Level Professional Earning Rs. 162,500/Month
- Under Current Rules: Your first Rs. 150,000 is tax-free, while the remaining Rs. 12,500 is taxed at 6%—resulting in a Rs. 750 monthly tax deduction.
- From April 2027: Your entire salary falls within the new Rs. 162,500 tax-free threshold. Your tax drops to Rs. 0, adding Rs. 750/month (Rs. 9,000/year) to your pocket.
2. Mid-Career Executive Earning Rs. 200,000/Month
- Under Current Rules: Rs. 150,000 is tax-free and Rs. 50,000 is taxed at 6%, leaving a monthly tax bill of Rs. 3,000.
- From April 2027: Rs. 162,500 is tax-free and only Rs. 37,500 is taxed at 6%, lowering your monthly tax to Rs. 2,250. Every earner between Rs. 162,500 and Rs. 233,333 sees this exact Rs. 750/month saving.
3. Senior Specialist Earning Rs. 300,000/Month
- Under Current Rules: You pay Rs. 5,000 on your 6% band, Rs. 7,500 on your 18% band, and Rs. 6,000 on your 24% band—totalling Rs. 18,500/month.
- From April 2027:
- First Rs. 162,500: Rs. 0 (0%)
- Next Rs. 70,833 (up to Rs. 233,333): Rs. 4,250 (6%)
- Next Rs. 50,000 (up to Rs. 283,333): Rs. 6,000 (12%)
- Remaining Rs. 16,667 (up to Rs. 300,000): Rs. 3,000 (18%)
- Net Impact: Your total monthly tax drops to Rs. 13,250, boosting your take-home pay by Rs. 5,250/month (Rs. 63,000/year).
4. Department Head / Consultant Earning Rs. 500,000/Month
- Under Current Rules: You hit the 36% top rate on everything above Rs. 358,333, paying Rs. 86,000/month in income tax.
- From April 2027: Because the 36% threshold shifts up to Rs. 433,333 and intermediate bands are wider, your monthly tax drops to Rs. 70,250. This gives you the maximum relief of Rs. 15,750/month (Rs. 189,000/year). Any income earned above Rs. 433,333 continues to be taxed at 36%, meaning savings cap out at Rs. 15,750/month for all higher earners.
Key Dates & Reminders for Taxpayers
- Current Rules Still Apply Until March 31, 2027: Employers will continue deducting APIT under the existing Rs. 150,000 threshold for the remainder of the 2026/27 Year of Assessment.
- No Changes to Withholding Taxes (WHT): The 10% withholding tax on bank interest and rent (above Rs. 100,000/month) and the 15% tax on dividends remain unchanged.
- Expanded Capital Gains Tax (CGT): Individuals trading in digital/virtual assets (including cryptocurrencies) or high-value movable assets such as gems, jewellery, and precious metals should note that Budget 2027 expressly brings gains from these assets under CGT coverage.