Tax on Tax: Grossing Up Employer-Paid APIT
Tax on tax means the employer pays the employee's APIT. The IRD's Table 6 grosses this up. See the full rates, a worked example and the T10 entry.
On this page
- Why this happens
- Which table applies
- Table 6.1: monthly pay
- Worked example: gross LKR 300,000 a month
- Table 6.2: a bonus or other lump sum
- Worked example: a LKR 600,000 bonus
- Non-resident staff on a second job
- What the payslip and the T10 show
- If your case does not fit a table
- Frequently asked questions
- Does the employer pay tax on only part of an employee's tax?
- Does tax on tax apply to a bonus the same way as to monthly salary?
- Does an expatriate's tax-on-tax arrangement use the same tables?
- Is grossing up the employer's choice, or does the IRD set the method?
Tax on tax means the employer pays the employee’s income tax (APIT) without deducting it, or pays back tax already deducted. The IRD treats that payment as a benefit to the employee. So the employer must also pay tax on the tax it just paid. This is worked out with the IRD’s own Table 6, not by trial and error.
Why this happens
A job offer can promise a net salary. The employer then pays the tax on top, so take-home pay is fixed. The moment the employer pays that tax, the payment is itself taxable income. Taxing it creates an extra tax bill. That extra bill is tax on tax, or “grossing up”.
Which table applies
Table 6 has three parts, for three situations. Each one works from the employee’s remuneration (the Act’s word for salary or wages, including cost-of-living allowance, overtime pay and prescribed allowances). Use the one that matches your case.
| Situation | Table | What it needs |
|---|---|---|
| Employer pays an employee’s tax on regular monthly pay, or reimburses tax already deducted | Table 6.1 | The employee’s monthly remuneration |
| Employer pays tax on a bonus or other lump sum, taxed on the year’s cumulative total | Table 6.2 | The Estimated Gross Aggregate Remuneration (EGAR, the employee’s estimated total pay for the year) |
| Employer pays tax on a non-resident employee’s secondary job | Table 6.3 | Monthly pay from that secondary job |
Source: IRD, APIT Tax Table No. 06, Tax-on-tax Rates, year of assessment 2025/26, checked 20 September 2026. See how HRIS systems keep APIT tables updated.
Table 6.1: monthly pay
Read the tax the employer must pay straight off this table. No separate grossing-up sum is needed. “Relief from tax” means no tax is due.
| Monthly remuneration (LKR) | Tax payable by the employer |
|---|---|
| 0 – 150,000 | Relief from tax |
| 150,001 – 228,333 | (Monthly remuneration × 6.38%) − 9,570 |
| 228,334 – 262,500 | (Monthly remuneration × 21.95%) − 45,119 |
| 262,501 – 294,167 | (Monthly remuneration × 31.58%) − 70,398 |
| 294,168 – 323,333 | (Monthly remuneration × 42.86%) − 103,580 |
| 323,334 and above | (Monthly remuneration × 56.25%) − 146,875 |
Source: IRD APIT Tax Table No. 06, Table 6.1, year of assessment 2025/26.
Worked example: gross LKR 300,000 a month
Mr. De Silva earns LKR 300,000 a month. His employer has agreed to pay his tax, not deduct it from his pay. LKR 300,000 falls in the 294,168–323,333 band.
Tax payable by the employer = (300,000 × 42.86%) − 103,580 = 128,580 − 103,580 = LKR 25,000 for the month.
Source: IRD APIT Tax Table No. 06, Example 01.
Table 6.2: a bonus or other lump sum
A bonus taxed under Table 2, the table for a bonus or lump sum uses the year’s cumulative pay, not just the bonus month. Grossing up a bonus works the same way. First find the EGAR (Estimated Gross Aggregate Remuneration), marked D: pay already paid this tax year, plus pay still to come, plus every lump sum paid or payable. Then apply the matching band below.
| EGAR for the year (D) | Tax deductible on the lump sum |
|---|---|
| D ≤ 1,800,000 | Nil |
| 1,800,001 – 2,740,000 | (D × 6.38%) − [114,840 + Table 6.1 tax on pay already paid + Table 6.1 tax on pay still due + tax deducted earlier on lump sums] |
| 2,740,001 – 3,150,000 | (D × 21.95%) − [541,430 + the same three amounts] |
| 3,150,001 – 3,530,000 | (D × 31.58%) − [844,770 + the same three amounts] |
| 3,530,001 – 3,880,000 | (D × 42.86%) − [1,247,958 + the same three amounts] |
| Over 3,880,000 | (D × 56.25%) − [1,762,500 + the same three amounts] |
Source: IRD APIT Tax Table No. 06, Table 6.2.
Worked example: a LKR 600,000 bonus
Mr. Dayananda earns LKR 180,000 a month, unchanged for the year. His employer pays his tax on a LKR 600,000 bonus in April, month one of the tax year.
- A (pay already paid, April) = LKR 180,000
- B (pay still to come, May to March) = LKR 180,000 × 11 = LKR 1,980,000
- C (the bonus) = LKR 600,000
- D = 180,000 + 1,980,000 + 600,000 = LKR 2,760,000, in the 2,740,001–3,150,000 band
Monthly tax-on-tax on LKR 180,000 under Table 6.1 is (180,000 × 6.38%) − 9,570 = LKR 1,914.
Tax on the bonus = (2,760,000 × 21.95%) − [541,430 + (1,914 × 1) + (1,914 × 11)] = 605,820 − 564,398 = LKR 41,422.
Source: IRD APIT Tax Table No. 06, Example 02.
Non-resident staff on a second job
Table 6.3 covers only one case: a non-resident employee’s secondary employment. The employer’s tax there is a flat sum: monthly remuneration from that job × 56.25%, on any amount. Table 6 does not cover grossing up a non-resident’s main job. Ask the IRD before you apply Table 6 to that case. See payroll for foreign employees in Sri Lanka for the wider rules on that payroll.
Source: IRD APIT Tax Table No. 06, Table 6.3.
What the payslip and the T10 show
The employer remits this tax the same way it remits any other APIT. It appears on the payslip and feeds into the employee’s T10 certificate at year end, the same as normal Table 1 or Table 2 tax. Every employer stays a withholding agent under section 83 of the Inland Revenue Act No. 24 of 2017. Section 83(2) says that duty is not reduced by any other deduction the employer makes, or by any other law.
Source: Humanised’s APIT employer guide, reviewed 3 September 2026, citing Inland Revenue Act No. 24 of 2017.
If your case does not fit a table
The IRD’s own instruction: if these tables do not match the tax-on-tax benefit you give an employee, write to the IRD at tpl@ird.gov.lk. Do not guess at a formula of your own.
Source: IRD APIT Tax Table No. 06, item 04.
Do this automatically in Humanised. The payroll engine calculates APIT (income tax the employer takes from pay and sends to the IRD), including tax-on-tax under Table 6. It prepares one T10 per employee. Check the tax-on-tax figure before you issue it.
This is general payroll guidance. Every case is different. For your own case, speak to a payroll practitioner or a lawyer.
Frequently asked questions
Does the employer pay tax on only part of an employee’s tax?
Table 6 covers the employer paying or reimbursing the whole tax. Partial arrangements are not covered. Ask the IRD (tpl@ird.gov.lk) for that case.
Does tax on tax apply to a bonus the same way as to monthly salary?
Yes, but under a different table. Monthly pay uses Table 6.1. A bonus or other lump sum uses Table 6.2, on the year’s cumulative EGAR.
Does an expatriate’s tax-on-tax arrangement use the same tables?
Only for a non-resident employee’s secondary job, under Table 6.3. No source gives a Table 6 method for a non-resident, non-citizen employee’s main job. Confirm with the IRD before relying on one.
Is grossing up the employer’s choice, or does the IRD set the method?
The IRD sets the method. Once an employer agrees to bear an employee’s tax, Table 6 fixes the sum. The employer does not pick its own formula.
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