New tax law frees half a million PAYE tax payers

About half a million Pay As You Earn (PAYE) tax payers will not have to pay taxes under the new Inland Revenue Act which came into effect from April 01, 2018, Finance Ministry said yesterday.

The Act increased the PAYE tax threshold to Rs.1.2 million per annum from Rs.750, 000.

According to the ministry, this will free 40 percent of the current PAYE tax payers, who are estimated at 12 million, from paying PAYE tax. To compensate that, others will have to pay a higher tax rate.

Despite its 21 million population, Sri Lanka is said to be having only 16 million tax files, including that of the PAYE tax payers. 

The ministry also dismissed the claims that the money sent home by overseas workers will be taxed under the new Act.

Further, the ministry said there was no truth in claims that everyone above 18 years will be made to have a tax file.

The donations to religious places will not be taxed and taxes will be charged from the businesses that are being carried out based on some of the religious places, the ministry said.

They also said a 5 percent withholding tax will only charged from senior citizen deposits which earn more than Rs.125, 000 in interest income monthly.