For many small and medium-sized enterprises (SMEs) in Sri Lanka, tax-related reporting can feel like one of the most complicated aspects of payroll. Among the most important tax compliance documents are the Certificate of Income Tax Deductions (T10) and the Annual Statement of Employer (commonly known as the APIT annual report). These reports need to be accurate, timely, and in line with government regulations. 

However, when payroll is managed manually or through spreadsheets, ensuring accuracy across multiple employees over several months becomes difficult and time-consuming. This is where HR software, particularly with integrated payroll features, becomes an invaluable tool. 

Understanding the Importance of T10 and the Annual Statement of Employer 

The T10 form is a monthly return that details the income tax deducted at source (under the Advanced Personal Income Tax or APIT system) for each employee. It needs to be filed with the Inland Revenue Department (IRD) and shared with employees. 

The Annual Statement of Employer, on the other hand, provides a year-end summary of all tax deductions made on behalf of employees throughout the financial year. This is also submitted to the IRD and plays a crucial role in maintaining transparency and compliance. 

Missing submission deadlines, submitting inaccurate amounts, or incorrectly categorizing employee tax data can result in penalties, legal complications, or loss of trust from employees. 

Common Challenges Faced by SMEs 

Many SMEs face the following issues when preparing these reports: 

• Collating accurate tax deduction data over 12 months 

• Keeping track of mid-year changes in salary or tax codes 

• Ensuring correct APIT percentages are applied for each employee 

• Maintaining consistent record-keeping for audit purposes 

• Understanding formatting and filing requirements by the IRD 

These challenges are magnified in companies with no dedicated payroll officer or tax consultant. Business owners and admin staff often find themselves navigating confusing forms and last-minute calculations. 

How HR Software Simplifies the Process 

Modern HR and payroll software solutions like Humanised automate the generation of both T10 forms and the Annual Statement of Employer. Here’s how: 

1. Automated Tax Calculations 
Once the system is configured with the updated tax tables and employee tax categories, the software automatically calculates APIT for each employee during payroll runs. This eliminates manual errors and ensures monthly deductions are correct. 

2. Real-Time Record Keeping 
Each employee’s salary, tax deductions, and changes throughout the year are recorded and stored in one centralized system. This ensures nothing is missed when generating year-end statements. 

3. One-Click Report Generation 
With just a few clicks, HR software can generate a T10 form or the APIT annual report for submission. These reports are often formatted to align with IRD standards, reducing rework or rejection due to formatting errors. 

4. Integrated Workflows with Payroll 
When tax reporting is built into your payroll process, you don’t have to export data to spreadsheets or external systems. The integration ensures consistency across payroll, tax filing, and employee communication. 

5. Easy Access for Employees 
In many HRIS systems, employees can log in to their own profiles and download their T10 statements for personal record-keeping, loan applications, or tax filing purposes. This reduces administrative workload and improves transparency. 

A Real Example: From Monthly Chaos to Smooth Compliance 

Consider a company with 20 employees. Previously, the admin team manually calculated each employee’s tax and copied the values into a template. With salary changes and different APIT brackets applied, they often had to redo calculations or cross-check data from past payslips. At year-end, consolidating the 12 months of deductions into the employer’s annual report took days. 

After switching to HR software, the entire process was automated. Each payroll cycle applied the correct tax percentages, stored the data, and allowed for instant report generation. T10 submissions became accurate and fast, and the annual statement was ready without hassle. 

What to Look for in a System 

If you are an SME evaluating HR software in Sri Lanka, here are key features to look for: 

• Pre-loaded and updatable APIT tax tables 

• Monthly and annual tax report generation 

• Automated calculations aligned with IRD requirements 

• Centralized digital record of all tax deductions 

• Export options and formatting that align with official forms 

Choosing the right solution means your business can stay focused on growth, without getting bogged down by administrative errors or tax-related stress. 

Turning Compliance into Confidence 

T10 and APIT reports don’t have to be a source of anxiety for SMEs. With the right HR software, these tax documents become part of a smooth, integrated payroll cycle. That means fewer mistakes, less time spent cross-checking numbers, and a more confident approach to tax compliance, both for your business and your employees.