The interim budget of 2022 has taken the Sri Lankan workforce by storm with its sweeping tax proposals. While this budget proposes reforms across many areas of taxation, the ordinary general working population will be most affected by its Personal Income tax reforms.
This article compares how personal income tax will be calculated according to the proposed tax reforms compared to the existing ones. You can read more about the tax proposals in another article we have compiled in our website.
What you need to know
- It is proposed to reduce the existing personal relief threshold from LKR 3 mil to LKR 1.8 mil.
- The individual income tax slabs are proposed to reduce to LKR 1.2 mil from the existing LKR 3 mil.
- It is proposed to charge personal income tax at the following progressive rates of 4%, 8%, 12%, 16%, 20%, 24%, 28% and 32% for each LKR 1.2 mil slabs.
- APIT (Advance Personal Income Tax)/ withholding tax on employment income (PAYE) is mandatory for all taxpayers exceeding the qualifying relief of LKR 1.8 mil per Year of Assessment.
What if you earn a monthly salary of 160,000, which equals 1,920,000 (1.92 mils) Annually?
You’ll be paying LKR 400 a month APIT with the new reforms starting this October!
What if you earn a monthly salary of 250,000, which equals 3,000,000 (3 mils) Annually?
You’ll be paying LKR 4000 a month APIT with the new reforms starting this October.
What if you earn a monthly salary of 300,000, which equals 3,600,000 (3.6 mils) Annually?
You were paying LKR 3000 a month until October, whereas with the proposed reforms, you will be paying a total of LKR 8000.
You can see how you will be taxed under two different brackets. Here your total taxable income for the annum will be LKR 1,800,000 (3,600,000 – 1,800,000 LKR)
What if you earn a monthly salary of 450,000, which equals 5,400,000 (5.4 mils) Annually?
You were paying LKR 12,000 a month until October, whereas with the proposed reforms, you will be paying a total of LKR 24,000.
Here you will be taxed under three different tax bracket rates. This is for a total taxable income of LKR 3,600,000 per annum (3,600,000 – 1,800,000LKR)
What if you earn a monthly salary of 500,000, which equals 6,000,000 (6 mils) Annually?
You were paying LKR 15,000 a month until October, whereas with the proposed reforms, you will be paying a total of LKR 32,000.
You can see how you will be taxed under two different brackets. Here your total taxable income for the annum will be LKR 4,200,000 (6,000,000 – 1,800,000 LKR)
The interim Budget will cover the remaining four months of the Year 2022. As per President Ranil Wickramasinghe the interim budget is brought in order to prepare the basic foundation for the changing the economic trajectory of Sri Lanka from its downward spiral and for the formulation of a national economic policy to adapt to the changing world order.
