Govt. secures IMF nod to raise PAYE threshold to Rs.150,000

• President highlights professionals, including doctors and academics, were deeply dissatisfied with previous Rs.100,000 tax-free threshold
• Points out new PAYE tax revisions would adopt a more progressive structure

By Nishel Fernando

The government has reached an agreement with the International Monetary Fund (IMF) to raise the income tax-free threshold to Rs.150,000 per month, from the current Rs.100,000, a move aimed at providing relief to the lower-income groups.

“The salary of a person earning Rs.150,000 will be 100 percent free from PAYE (Pay-As-You-Earn),” President Anura Kumara Dissanayake announced in Parliament yesterday.

He highlighted that the professionals, including doctors and academics, were deeply dissatisfied with the Rs.100,000 tax-free threshold introduced during the previous regime. In response, he emphasised that the new PAYE tax revisions would adopt a more progressive structure.

“We have succeeded in revising the PAYE tax to grant larger benefits to the lower-income groups and smaller benefits to the high-income earners,” he said.

As part of the revisions, the 6 percent income tax applied to the first slab of Rs.500,000 will now extend up to Rs.1 million.

“A person who earns a Rs.200,000 salary will see 71 percent relief from PAYE. The relief for someone earning Rs.250,000 will be 61 percent. The salary of a person earning Rs.300,000 will see a 47 percent relief and a person earning Rs.350,00 will see a 25.5 percent relief from PAYE,” he reiterated.

The IMF, in its third review of Sri Lanka’s US $ 3 billion Extended Fund Facility programme, noted that the government and IMF had agreed on adjustments within the programme’s framework. 

These amendments align with the government’s priorities and are expected to be reflected in the upcoming budget proposals.