Sri Lanka Budget proposes Rs 162,500 monthly-equivalent income-tax allowance

November 12 update: Budget proposes higher personal income-tax allowance

Sri Lanka's 2027 Budget proposes raising the annual personal income-tax-free allowance from Rs 1.8 million to Rs 1.95 million, according to published reporting reports on November 12. The monthly equivalent for salary and allowance income would rise from Rs 150,000 to Rs 162,500. This is the announced proposal, not the previously discussed Rs 200,000 threshold. It must not be treated as an instruction to change a current payslip before the required legal and administrative steps are completed.

The reported annual tax bands apply to taxable income after the personal allowance, not to the whole gross salary. The first Rs 850,000 of that taxable income would be charged at 6%. The next four bands, each Rs 600,000, would be charged at 12%, 18%, 24% and 30% respectively, with the remaining taxable income charged at 36%. These are progressive bands: entering a higher band does not make all earlier income taxable at that higher rate.

The published report says the proposed highest-rate starting point would move from roughly Rs 358,000 to Rs 433,000 a month. Those rounded monthly figures are explanatory equivalents of annual thresholds, not a separate monthly tax schedule verified here. The reports put the additional monthly relief at Rs 750 to Rs 15,750 depending on income. That is a range, not a promise that every employee will receive the maximum reduction.

The reports distinguish this proposed additional relief from the earlier 2025 change, when the annual allowance rose from Rs 1.2 million to Rs 1.8 million. Their larger combined-relief figures include that earlier change and must not be described as a fresh 2027-only reduction. EconomyNext also reports the proposed Rs 1.95 million annual allowance, but its short description of the first band is less clear than the published report's detailed band breakdown.

The measures remain Budget proposals requiring the relevant legislative process, including planned amendments to the Inland Revenue Act. This report has not verified a final commencement date or an Inland Revenue Department withholding table. An individual's treatment can depend on the nature of their income and other applicable rules, so these salary examples are not personal tax advice. The earlier pre-Budget report is retained below with its original publication date and photograph to keep the change from expectation to proposal clear.