Budget 2027: Sri Lanka Raises Tax-Free Threshold to Rs. 1.95 Mn & Widens Income Tax Brackets
Individual taxpayers are set to receive take-home pay relief following key amendments to the Inland Revenue Act, No. 24 of 2017, unveiled in Sri Lanka’s 2027 Budget Speech.
Presented to Parliament today by President Anura Kumara Dissanayake in his capacity as Minister of Finance, the fiscal blueprint raises the annual personal income tax relief threshold from Rs. 1.80 million to Rs. 1.95 million. In practical terms, the monthly tax-free threshold for Pay-As-You-Earn (PAYE) taxpayers rises from Rs. 150,000 to Rs. 162,500, exempting a wider segment of middle-income earners from direct income taxation.
Alongside the higher tax-free allowance, the government has overhauled the progressive personal income tax rate structure by introducing a new 12% tax slab and widening the subsequent Rs. 500,000 income bands to Rs. 600,000.
Revised Personal Income Tax Structure
| Present Taxable Income Band | Present Rate | Revised Taxable Income Band | Revised Rate |
| Up to Rs. 1,000,000 | 6% | Up to Rs. 850,000 | 6% |
| Next Rs. 500,000 | 18% | Next Rs. 600,000 | 12% |
| Next Rs. 500,000 | 24% | Next Rs. 600,000 | 18% |
| Next Rs. 500,000 | 30% | Next Rs. 600,000 | 24% |
| Balance | 36% | Next Rs. 600,000 | 30% |
| — | — | Balance | 36% |