Sri Lanka’s 2027 Budget proposes raising PAYE threshold to Rs. 162,500

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Sri Lanka’s 2027 Budget proposes raising the monthly tax-free threshold for salaried employees to Rs. 162,500, with personal income taxpayers receiving additional monthly relief of Rs. 750 to Rs. 15,750.

President Anura Kumara Dissanayake announced the proposals while presenting the 2027 Budget in Parliament today (November 12, 2026).

The proposed personal income tax changes will also provide relief to employees paying salary tax commonly known as Pay As You Earn (PAYE), now officially called Advance Personal Income Tax (APIT).

Under the proposals, the monthly tax-free threshold will increase from Rs. 150,000 to Rs. 162,500. The President said anyone receiving monthly salaries and allowances totalling up to Rs. 162,500 would therefore not be required to pay tax on their salary.

The changes include a further increase in the annual personal income tax exemption threshold and wider taxable income bands.

The monthly taxable income band subject to the 6% rate will be Rs. 70,833, while subsequent bands will widen from Rs. 41,667 to Rs. 50,000 per month.

A 12% tax rate will apply immediately after the 6% rate, replacing the current jump to 18%. The revised rates will therefore be 6%, 12%, 18%, 24%, 30% and 36%.

The monthly income threshold at which the highest personal income tax rate applies will rise from Rs. 358,000 to Rs. 433,000.

Dissanayake recalled that the government increased the annual personal income tax exemption threshold from Rs. 1.2 million to Rs. 1.8 million in 2025. This raised the monthly tax-free threshold from Rs. 100,000 to Rs. 150,000 and provided each personal income taxpayer with monthly relief ranging from Rs. 3,500 to Rs. 20,500.

He said the combined effect of the 2025 reforms and the proposed changes for 2027 would bring the total monthly tax relief provided by the government to between Rs. 4,250 and Rs. 36,250 per taxpayer.