APIT in Sri Lanka: 2026 Tax Table & Employer Guide

APIT in Sri Lanka is the income tax that employers deduct from employees’ salaries each month and pay to the Inland Revenue Department. For the 2026/2027 year of assessment, the first Rs. 150,000 of monthly pay stays tax-free, and income above that is taxed at rates from 6% to 36%. Every employer must apply the correct IRD tax table, pay the tax by the 15th of the following month and file an annual return. Getting any of this wrong can lead to interest, penalties and unhappy staff.

This guide walks you through everything you need to handle APIT with confidence. You will find the latest tax-free threshold, the 2026 tax rates, which of the eight tax tables to use, step-by-step calculations with real examples, payment and filing deadlines, and the common mistakes to avoid. Read on to make sure your payroll stays accurate and compliant this year. 

What Is APIT in Sri Lanka?

APIT stands for Advance Personal Income Tax. It is the income tax that employers in Sri Lanka deduct from an employee’s pay each month and send to the Inland Revenue Department (IRD).

Under this system, employees do not pay income tax in one large amount at the end of the year. Instead, they pay it in small parts through their monthly salary. The employer works out the tax using the IRD’s APIT tax tables, deducts it before paying the salary, and pays it to the IRD.

This monthly deduction covers all income from employment. That includes basic salary, allowances, bonuses, commissions and the value of non-cash benefits, such as a company vehicle or housing.

The rules for this tax come under the Inland Revenue Act No. 24 of 2017, and it replaced the older PAYE (Pay As You Earn) tax. It was optional for a period, but it became mandatory for all employers from 1 January 2023.

For employees whose only income is their salary, correctly deducted APIT usually covers their full income tax for the year. 

Who Must Pay APIT?

Any person who earns employment income from Sri Lanka falls under the APIT system. The tax applies to these groups of employees:

• Resident employees: People who live in Sri Lanka, or who stay in the country for 183 days or more in a tax year (1 April to 31 March).
• Non-resident Sri Lankan citizens: Citizens who work for a Sri Lankan employer but live abroad, such as staff posted overseas.
• Non-resident foreign employees: Foreign nationals who earn employment income from a source in Sri Lanka.

Being covered by APIT does not always mean tax is deducted. Residents and non-resident citizens only pay when their monthly taxable pay goes above the tax-free threshold, which is Rs. 150,000 for most employees. Non-resident foreign employees do not get this personal relief, so tax may apply from the first rupee.

Taxable pay includes salary, wages, overtime, allowances, bonuses, commissions and non-cash benefits. Some amounts stay outside APIT, such as the employer’s contributions to EPF and ETF. 

Who Must Deduct APIT?

Every employer in Sri Lanka that pays employment income must deduct APIT. This includes private companies, partnerships, sole proprietors, government bodies, non-profit organisations and foreign companies with staff in Sri Lanka.

Before running payroll, the employer must register with the Inland Revenue Department and get a Taxpayer Identification Number (TIN). From there, the main duties are to:

• Work out APIT for each employee every month
• Deduct it from salary before payment
• Pay it to the IRD by the 15th of the following month
• Give each employee a T10 certificate at the end of the year

When an employee works for more than one employer, only one is treated as the primary employer. Every other employer uses the secondary employment table.

If an employer fails to deduct the correct amount, the employer becomes liable for the unpaid tax, along with interest and penalties. 

APIT Tax-Free Threshold for 2026

The tax-free threshold for the 2026/2027 year of assessment (1 April 2026 to 31 March 2027) is Rs. 1,800,000 a year, or Rs. 150,000 a month. This amount is known as the personal relief. No APIT is deducted when an employee’s monthly taxable pay stays at or below Rs. 150,000.

No change has been announced for 2026/2027, so the relief introduced on 1 April 2025 still applies. Here is how the threshold has moved in recent years:

Year of Assessment	Annual Tax-Free Threshold	Monthly Tax-Free Threshold
2023/2024	Rs. 1,200,000	Rs. 100,000
2024/2025	Rs. 1,200,000	Rs. 100,000
2025/2026	Rs. 1,800,000	Rs. 150,000
2026/2027	Rs. 1,800,000	Rs. 150,000

Only residents and non-resident Sri Lankan citizens get this relief. Non-resident foreign employees are not eligible, so APIT applies to their full pay.

Employees with more than one job should also note that the relief applies only once, through the primary employer. Secondary employers deduct APIT without it.  

APIT Tax Rates for 2026 (Year of Assessment 2026/2027)

Sri Lanka uses a progressive tax system, so the rate rises as income goes up. No rate change has been announced for 2026/2027, which means the rates introduced on 1 April 2025 still apply.

After the Rs. 1,800,000 personal relief, income is taxed in five bands, starting at 6% and reaching 36%. The 12% band that existed before April 2025 has been removed.

Annual Income (Rs.)	Monthly Income (Rs.)	Tax Rate
Up to 1,800,000	Up to 150,000	0%
1,800,001 – 2,800,000	150,001 – 233,333	6%
2,800,001 – 3,300,000	233,334 – 275,000	18%
3,300,001 – 3,800,000	275,001 – 316,667	24%
3,800,001 – 4,300,000	316,668 – 358,333	30%
Above 4,300,000	Above 358,333	36%

Each rate applies only to the part of income that falls within that band, not to the full salary. For example, an employee earning Rs. 250,000 a month pays 6% on the first Rs. 83,333 above the threshold and 18% on the remaining Rs. 16,667, giving a monthly APIT of Rs. 8,000.

These rates apply to residents and non-resident Sri Lankan citizens. 

APIT Tax Tables 2026: Which Table to Use

The IRD publishes eight APIT tax tables, each for a different type of employee or payment. The tables issued on 1 April 2025 still apply for 2026/2027.

• Table 1: Monthly Regular Income. Covers the monthly salary of resident employees and non-resident Sri Lankan citizens at their primary job.
• Table 2: Lump-Sum Payments. Bonuses and arrears are taxed here, based on the estimated total pay for the year.
• Table 3: Terminal Benefits. Gratuity, compensation for loss of employment and ETF payments fall under this table.
• Table 4: Non-Resident Foreign Employees. Monthly pay (4.1) and lump sums (4.2) for non-citizen non-residents, with no personal relief.
• Table 5: Cumulative Income. Applies when monthly pay is under Rs. 150,000 but yearly pay passes Rs. 1,800,000, or when staff join or leave mid-year.
• Table 6: Tax on Tax. For cases where the employer pays the employee’s tax.
• Table 7: Secondary Employment. Any employer who is not the primary employer uses this table.
• Table 8: Foreign Employer Income. Residents working in Sri Lanka for an overseas employer pay APIT themselves under this table.

Quick Guide: Employee Type vs APIT Table

Situation	Table
Regular monthly salary (resident or citizen)	1
Bonus or arrears	2
Gratuity or retirement payment	3
Non-resident foreign employee	4
Low monthly pay, high yearly total	5
Employer pays the tax	6
Second job	7
Working for an overseas employer	8

How to Calculate APIT: Step by Step

Working out APIT each month follows the same five steps. Here is how it works for a regular monthly salary.

Step 1: Work Out Gross Monthly Pay

Add up all cash payments for the month, including basic salary, allowances, overtime and commissions. Do not subtract the employee’s 8% EPF contribution, as it does not reduce taxable pay.

Step 2: Add the Value of Non-Cash Benefits

Next, include benefits such as a company vehicle, housing or free meals. The IRD sets fixed values for common benefits, so use those rates instead of guessing.

Step 3: Choose the Right Tax Table

Match the employee and payment type to the correct table. Most monthly salaries use Table 1, while bonuses use Table 2 and second jobs use Table 7.

Step 4: Apply the Tax Rates

Under Table 1, multiply the monthly taxable pay by the rate for its band, then subtract the fixed amount shown. For example, on Rs. 300,000: (300,000 × 24%) – 53,500 = Rs. 18,500.

Step 5: Deduct and Record the Tax

Finally, take the tax off the salary, show it on the payslip and record it in the payroll register for the monthly payment and annual return. 

APIT Calculation Examples

The examples below use the 2026/2027 rates to show how APIT works in common payroll situations.

Example 1: Salary Below the Threshold

An employee earns Rs. 140,000 a month. Since this is below the Rs. 150,000 tax-free limit, no APIT is deducted.

Example 2: Monthly Salary of Rs. 250,000

Using Table 1, this salary falls in the 18% band:
(250,000 × 18%) – 37,000 = Rs. 8,000 per month

Example 3: Salary With a Bonus

An employee earns Rs. 200,000 a month and receives a Rs. 300,000 bonus. Under Table 2, the estimated yearly pay is Rs. 2,700,000 (200,000 × 12 + 300,000).

• Tax on yearly pay: 2,700,000 × 6% = 162,000
• Less: 108,000 + monthly APIT for the year (3,000 × 12 = 36,000)
• APIT on the bonus: Rs. 18,000

Example 4: Employee With a Second Job

Someone earns Rs. 200,000 from a primary job and Rs. 50,000 from a second job. Under Table 7, primary pay between Rs. 150,001 and Rs. 233,333 means an 18% rate on the second job’s pay:
50,000 × 18% = Rs. 9,000 per month, deducted by the second employer. 

APIT Payment Process for Employers

After deducting APIT from salaries, the employer must pay it to the Inland Revenue Department on or before the 15th of the following month. For example, APIT deducted from October salaries is due by 15 November.

Employers can make the payment in two ways:

• Online: Through the IRD’s Online Tax Payment Platform (OTPP)
• At the bank: At any Bank of Ceylon branch, using an APIT paying-in slip

Each payment needs the correct details so the IRD can match it to the employer’s account:

• Taxpayer Identification Number (TIN)
• Tax type code for APIT: 03
• Payment period code for the month (for example, 25120 was used for December 2025)

If preprinted paying-in slips have not arrived, employers should get a Document Identification Number (DIN) through the IRD e-Services portal before paying.

Timing also matters when paying by bank draft or pay order. The IRD treats these as late if the funds clear after the due date, and interest and penalties on late payments are not waived. 

APIT Filing and Records

Along with monthly payments, employers have yearly filing duties. The main one is the annual APIT return, which shows the total pay and tax deducted for every employee during the year of assessment. This return is due by 30 April after the year ends. For 2026/2027, the deadline is 30 April 2027.

Employers must also give each employee an APIT/T10 Certificate of Income Tax Deductions. This certificate shows the employee’s total pay, non-cash benefits and the APIT deducted for the year. From 2025/2026, the IRD’s updated T10 format includes a field for the employee’s TIN.

Good records make both tasks easier and protect the employer during a tax audit. Keep the following for at least five years:

• Monthly payroll registers and payslips
• APIT calculations for each employee
• Payment receipts and paying-in slips
• Primary employment declarations 

Penalties for Late or Wrong APIT Payments 

Mistakes with APIT can become costly, because the employer, not the employee, carries the risk. If an employer fails to deduct APIT or deducts too little, the employer must pay the missing tax to the IRD from its own funds.

On top of the unpaid amount, the following charges can apply:

• Interest: 1.5% per month, or part of a month, from the original due date
• Late payment penalty: 20% of the unpaid tax if it is still not paid 14 days after the due date
• Late annual return: A separate penalty that grows for each month the return is overdue
• Non-compliance penalty: Up to Rs. 200,000 per year of assessment for withholding agents who break filing rules or make false declarations, under the 2026 amendments

The IRD has also made it clear that interest and penalties on late APIT payments will not be waived. 

Common APIT Mistakes Employers Make

Most APIT errors are not caused by complex rules. They come from small oversights that repeat every month. Here are the ones employers should watch for:

1. Using old tax tables: Applying the pre-April 2025 threshold of Rs. 100,000 instead of Rs. 150,000 leads to over-deduction.
2. Picking the wrong table: A secondary employer using Table 1 gives the employee personal relief twice, which leads to under-deduction.
3. Leaving out non-cash benefits: Company vehicles, housing and other benefits must be added to taxable pay at IRD values.
4. Treating bonuses as regular pay: Bonuses and arrears need Table 2, not Table 1.
5. Ignoring mid-year changes: Staff who join or leave during the year may need Table 5.
6. Missing the 15th deadline: Even a short delay brings interest and penalties.
7. Using the wrong payment codes: Incorrect tax type or period codes can cause payments to be recorded against the wrong month.
8. Not collecting primary employment declarations: Without one, the employer must treat the job as secondary employment.

A monthly payroll checklist helps catch these mistakes before payments go out.  

APIT Changes in 2026

The APIT rates, tax-free threshold and tax tables did not change for 2026/2027. The main updates came from the Inland Revenue (Amendment) Act No. 11 of 2026, published in the Gazette on 5 June 2026. Some changes apply backdated to earlier years.

Changes that matter most for employers and employees:

• Tax credit for salary arrears: Employees who receive salary arrears can claim a tax credit against tax on their employment income, effective from 1 January 2024.
• No tax return for many employees: From 1 April 2025, employees whose income is APIT-taxed salary plus interest of less than Rs. 5,000 do not need to file a return.
• Free tax certificates: Employers must issue tax deduction certificates to employees at no cost.
• Higher penalties: False declarations or certificate failures can cost up to Rs. 200,000 per year.
• Overseas staff: Employees leaving for overseas jobs of one year or more are treated as non-residents. 

APIT and Other Payroll Duties

APIT is only one part of an employer’s monthly payroll duties in Sri Lanka. Alongside it, employers must handle these statutory payments:

Payment	Employee Share	Employer Share
EPF (Employees’ Provident Fund)	8%	12%
ETF (Employees’ Trust Fund)	–	3%
Gratuity	–	Half a month’s salary per year of service

Gratuity applies to employees with five or more years of service at an employer with 15 or more workers, and it is paid when they leave.

Each payment follows its own rules, so the order of payroll steps matters. A simple monthly routine is to work out gross pay, deduct the employee’s EPF and APIT, add the employer’s EPF and ETF, and then pay the net salary.

Remember that EPF and ETF do not reduce taxable pay. APIT is still calculated on the full gross amount. 

How Employees Can Check or Claim APIT Refunds

Employees can check their APIT deductions in two ways. First, compare the yearly T10 certificate from the employer with monthly payslips. Second, log in to the IRD e-Services portal to confirm that the employer has paid the deducted tax to the IRD.

Sometimes more APIT is deducted than the employee actually owes. This often happens when someone:

• Leaves a job or stops working partway through the year
• Qualifies for extra reliefs, such as rent relief or solar panel relief
• Receives salary arrears and can claim the new tax credit

In these cases, the employee can claim a refund by filing an income tax return for the year, due by 30 November after the year ends. For 2025/2026 onwards, the IRD aims to process resident refund claims of up to Rs. 180,000 within three months, before any tax audit. 

Get Your Business Ready to Hire in Sri Lanka

Once you know how APIT works, the next step is putting it into practice each month. To make that easier, BR.LK offers free tools you can use right away:

• APIT Calculator: Check the correct APIT for any salary
• Payroll Studio: Run monthly payroll with APIT, EPF and ETF worked out
• EPF / ETF Calculator: Find employer and employee contributions
• Salary Slip Generator: Create payslips that show every deduction

Before you can deduct APIT, though, your business needs to be properly set up, with a registered company and a TIN from the IRD. If you are planning to hire your first employees, BR.LK can register your private limited company in Sri Lanka in 3 to 5 days, fully online. Our Business Ready package also includes your TIN certificate and bank account documents, so you can start paying staff the right way from day one.

Conclusion

APIT in Sri Lanka follows a clear set of rules once you break it down. For 2026/2027, the tax-free threshold stays at Rs. 150,000 a month, the rates run from 6% to 36%, and the eight IRD tax tables cover every type of employee and payment. The key is to pick the right table, include all taxable pay, and pay the tax by the 15th of each month.

Small errors can grow into interest and penalties, so it pays to build a simple monthly routine and check it against the latest IRD updates. With accurate calculations, timely payments and good records, employers can stay compliant and give employees confidence that their tax is handled correctly. 

Key Takeaways

• APIT is the income tax that employers deduct from employees’ monthly salaries and pay to the Inland Revenue Department.
• Every employer in Sri Lanka that pays employment income must register with the IRD, get a TIN and deduct APIT.
• The tax-free threshold for 2026/2027 is Rs. 1,800,000 a year, or Rs. 150,000 a month.
• Income above the threshold is taxed at progressive rates of 6%, 18%, 24%, 30% and 36%.
• Non-resident foreign employees do not get the personal relief, so APIT applies to their full pay.
• The IRD publishes eight APIT tax tables, and choosing the right one is the first step to a correct deduction.
• Taxable pay includes salary, allowances, bonuses and non-cash benefits, while EPF and ETF contributions do not reduce it.
• Employers must pay APIT by the 15th of the following month and file the annual return by 30 April.
• Late or missing payments attract 1.5% monthly interest and a 20% penalty if unpaid 14 days after the due date.
• The Inland Revenue (Amendment) Act No. 11 of 2026 added a tax credit for salary arrears and removed the need for many salaried employees to file a tax return. 

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