6%-36% tax from next October for those who earn more than one lakh monthly!
The government has decided to broaden the base of the tax regime and reduce the tax relief granted to all income earners to the annual limit of 1.2 million rupees.
Accordingly, a tax of at least 6 per cent will come in the way of each person who earns more than 100,000 rupees a month.
The cabinet paper broad basing the tax regime came up for cabinet approval yesterday, and government sources state that this decision will come into effect from October 1.
This taxation policy continued during the previous government, and after Gotabhaya Rajapaksa became the President, several taxes, including the payee tax, were reduced during a tax revision introduced. Accordingly, the limit of the personal income tax slab stood at 3 million.
On May 20, 2022, the government reduced the annual income to 1.8 million rupees, and a new cabinet paper came up before the ministers revised the decision taken in May.
Any citizen earning more than 1.2 million rupees per year and up to 500,000 rupees annually must pay an income tax of 6% of their relevant earnings. From there, the increase will be on a steady gradient of 12, 18, and 24 per cent for each additional 5 million earned. The tax will go up to 30 and 36 per cent.
Thus, an income tax of 6 per cent to 36 per cent will come in handy on the salary of each person who earns more than 100,000 rupees monthly from October.
The taxation policy was one of the subjects of discussion at the basic staff-level agreement reached by the government with the International Monetary Fund recently.
These tax amendments are among the fundamental reforms required to obtain the extended fund facility (EFF) of 2.9 billion dollars provided by the fund for the next 48 months.
Apart from this, there have been amendments to the withholding tax, according to government sources.
