Opinion: Should Sri Lanka Raise Its Income Tax-Free Threshold Again?

Lanka Business Online reports that the government has proposed changing the monthly personal income-tax exemption from LKR 150,000 to LKR 200,000 in the upcoming Budget. The outlet identifies the material as an opinion article by the Advocata Institute, which questions another increase not long after the April 2025 adjustment.

Lanka Business Online says Advocata considers the proposal against the government’s aims of raising public revenue and expanding the role of direct taxes. The article says the effects on the number of taxpayers, the allocation of relief and the durability of public finances merit consideration.

Lanka Business Online reports that Inland Revenue Department figures for FY 2024/25 show 24% of registered employees had Advance Personal Income Tax (APIT) withheld under the earlier system, whose yearly exemption was LKR 1.2 million. Those employees represented 59% of gross remuneration and paid LKR 191 billion in APIT, according to the outlet.

Lanka Business Online says official figures are not available on the employee share subject to APIT under the current system, with a yearly exemption of LKR 1.8 million. The Advocata article estimates that roughly one in five formal-sector employees now pays APIT and notes that employment data do not cover all people paying personal income tax through other channels.