Tax

How a Bonus Is Taxed in Sri Lanka (APIT)

A bonus is taxed through the APIT lump-sum table (Table 2), not monthly, on cumulative yearly pay in Sri Lanka. Rates and worked example here.

Updated September 21, 2026 Reviewed by Anudi Imesha, Customer Success Consultant, Humanised HR and Payroll 6 min read

Tax update sri lanka 2022
On this page
  1. Which APIT table applies to a bonus?
  2. Why the monthly table gives the wrong answer
  3. Step-by-step deduction on a bonus
  4. Worked example: LKR 150,000 bonus on a LKR 100,000 salary
  5. A second example where the bonus is taxed
  6. EPF and ETF on bonuses
  7. Do this automatically in Humanised
  8. Bonus paid in instalments or in kind
  9. What the employee sees on the payslip and the T10
  10. Frequently asked questions
  11. Is a bonus always tax-free if the monthly salary is low?
  12. Does the employer choose whether to apply Table 1 or Table 2 to a bonus?
  13. What if the employee has already had tax deducted on an earlier bonus this year?
  14. Does a 13th-month payment count as a bonus for this purpose?
  15. Why does my bonus calculation differ from a colleague's on the same amount?

A bonus is employment income. It is taxed through APIT Tax Table 2, the table for lump sums (one-off payments, not monthly pay), not the regular monthly table. You work out the employee’s estimated total pay for the tax year: regular salary plus the bonus and any other lump sums. You apply the Table 2 rate to that total, then deduct tax on the bonus, giving credit for tax already withheld. Many bonuses on modest salaries end up untaxed. This happens because the year’s total stays under the LKR 1,800,000 annual relief.

Sources and year of assessment used: IRD, Guideline for Employers on Deducting APIT, SEC/2025/E/01, dated 25 March 2025, and APIT Tax Table No. 2, year of assessment 2025/2026, effective 1 April 2025 to 31 March 2026.

Which APIT table applies to a bonus?

Table 2 applies to lump-sum payments. The IRD guideline lists these lump sums taxed this way: bonus, incentive payments, leave encashment, and medical expense reimbursements. They also include salary arrears (back pay you owe), and the value of shares under an employee share scheme. Table 2 applies to resident employees, and to non-resident employees who are citizens of Sri Lanka. In both cases the employee must have given their employer a primary employment declaration, or have only one job. A non-resident, non-citizen employee’s bonus is taxed under Table 4.2 instead. See payroll for foreign employees in Sri Lanka. An employee with no primary declaration, or more than one job, falls under Table 7.

Why the monthly table gives the wrong answer

Table 1, the regular monthly table, is built around a steady monthly income spread evenly across the year. A bonus is a one-off spike. Taxing it as if it were another month of regular pay under-taxes it, because the monthly table’s relief gets applied to it again. It also misstates the year’s total tax. Table 2 instead looks at the employee’s whole expected year: pay already received, pay still to come, and every lump sum paid or payable. It taxes the bonus on where that total lands, crediting tax already deducted.

Step-by-step deduction on a bonus

  1. Work out (A): gross monthly pay already paid this tax year, up to and including the bonus month.
  2. Work out (B): gross monthly pay still payable for the rest of the tax year.
  3. Work out (C): all lump sums already made, being made now, and still payable this year.
  4. Add A + B + C to get the Estimated Gross Aggregate Remuneration (EGAR), called D. That is your best estimate of the employee’s total pay for the whole year.
  5. Find the Table 2 band D falls into, and apply the formula for that band. Then subtract tax already deducted on A and B (via Table 1), and on any earlier lump sum this year.
EGAR for the year (D)Tax deductible on the lump sum
D ≤ LKR 1,800,000Nil
LKR 1,800,001 – 2,800,000(D × 6%) − [108,000 + tax already deducted on A and B + tax already deducted on earlier lump sums]
LKR 2,800,001 – 3,300,000(D × 18%) − [444,000 + …]
LKR 3,300,001 – 3,800,000(D × 24%) − [642,000 + …]
LKR 3,800,001 – 4,300,000(D × 30%) − [870,000 + …]
Over LKR 4,300,000(D × 36%) − [1,128,000 + …]

Source: IRD APIT Tax Table No. 2, year of assessment 2025/2026.

Worked example: LKR 150,000 bonus on a LKR 100,000 salary

An employee earns a fixed LKR 100,000 a month. She receives a LKR 150,000 bonus in December, the ninth month of the April–March tax year.

  • A (pay already made, April–December) = LKR 100,000 × 9 = LKR 900,000
  • B (pay still to come, January–March) = LKR 100,000 × 3 = LKR 300,000
  • C (the bonus) = LKR 150,000
  • D = 900,000 + 300,000 + 150,000 = LKR 1,350,000

D is at or below LKR 1,800,000, so the tax on this bonus is Nil. This is a common outcome for staff on modest salaries. The annual relief covers the whole year’s income including the bonus, so nothing is held back on it. The regular monthly salary may still attract its own Table 1 tax if it is high enough on its own.

A second example where the bonus is taxed

An employee earns LKR 200,000 a month and receives a LKR 300,000 bonus in December.

  • A = LKR 200,000 × 9 = LKR 1,800,000; B = LKR 200,000 × 3 = LKR 600,000; C = LKR 300,000
  • D = 1,800,000 + 600,000 + 300,000 = LKR 2,700,000, which falls in the LKR 1,800,001–2,800,000 band
  • Monthly Table 1 tax on LKR 200,000 pay is LKR 3,000 a month. This comes from annual taxable pay of LKR 600,000 after the LKR 1,800,000 relief, taxed at 6% under Table 1’s first band. So tax already deducted on A is LKR 27,000 (9 months) and on B is LKR 9,000 (3 months)
  • Tax on the bonus = (2,700,000 × 6%) − (108,000 + 27,000 + 9,000) = 162,000 − 144,000 = LKR 18,000

Check any figure for your own numbers in the APIT calculator.

EPF and ETF on bonuses

Bonuses and incentive payments are excluded from EPF-liable and ETF-liable earnings. They sit outside the “included” list in the EPF Department’s earnings guidance, used in our EPF employer guide. That list covers salary, cost-of-living and regular allowances, holiday pay, commissions and piece-rate payments. A discretionary or annual bonus should not have EPF or ETF deducted on it. Only the pay elements on that included list count for contributions.

Do this automatically in Humanised

Bonus months are where manual tax tables break. Payroll software calculates APIT on the month’s pay, bonus included, without a separate spreadsheet.

Bonus paid in instalments or in kind

If a bonus is paid in two or more instalments across the year, each instalment is its own lump-sum event. Recompute the EGAR (D) at each payment, including all lump sums paid or payable so far, and credit tax already deducted on earlier instalments. The Table 2 examples in the IRD guideline work through exactly this case. A bonus paid in kind (goods, shares under a scheme) is valued at market value, and added to the lump-sum total the same way. Confirm the valuation method with your payroll reviewer for anything other than a plain cash bonus.

What the employee sees on the payslip and the T10

The bonus line should appear on its own, apart from regular salary. Show its APIT deduction too, even if that deduction is Nil. At year end, the bonus and the tax withheld on it feed into the employee’s T10 certificate. They also feed into the employer’s Annual Statement of Employer under Schedule 01 or Schedule 02, alongside the regular monthly figures. See the APIT employer guide for the T10 and annual statement process.

This is general payroll guidance. Every case is different. For your own case, speak to a payroll practitioner or a lawyer.

Frequently asked questions

Is a bonus always tax-free if the monthly salary is low?

Not always. It depends on whether the year’s total pay including the bonus stays at or under the LKR 1,800,000 relief. A large enough bonus on a modest salary can still push the total over the threshold and become taxable, as the second worked example shows.

Does the employer choose whether to apply Table 1 or Table 2 to a bonus?

No. The IRD guideline sets the table for you. Lump sums, including bonuses, are deducted under Table 2. Non-resident, non-citizen employees use Table 4.2. An employee with no primary declaration uses Table 7. Table 1 is for regular monthly pay only.

What if the employee has already had tax deducted on an earlier bonus this year?

The Table 2 formula subtracts tax already deducted on earlier lump sums this year. So the employee is not taxed twice on the same cumulative income. Only the extra tax due on the new total is deducted.

Does a 13th-month payment count as a bonus for this purpose?

Any lump sum described as a bonus, incentive, 13th-month payment, or similar one-off payment, falls within the IRD’s definition of a lump-sum payment. It is taxed under Table 2.

Why does my bonus calculation differ from a colleague’s on the same amount?

Table 2 tax on a bonus depends on that employee’s whole year of cumulative pay, not the bonus amount alone. Two employees on the same bonus but different regular salaries will have different EGAR figures and different tax outcomes.

Do this in Humanised

Humanised is payroll software in Sri Lanka. It calculates EPF, ETF and APIT every month and produces the payslips, bank file and returns. From LKR 10,000 a month.

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