Calculator for Proposed PAYE TAX

The government has introduced proposed adjustments to the Personal Income Tax (PIT) structure to support economic recovery and provide relief to middle-income earners. President Ranil Wickremesinghe, in his capacity as Minister of Finance, emphasized that these changes aim to balance fiscal responsibility with much-needed relief for mid-level earners. The Cabinet is expected to approve amendments to the Inland Revenue Act, with the revised tax structure coming into effect in April 2025.

Initially, the reforms set a tax-free threshold at Rs. 1.2 million per year, with tax bands of Rs. 500,000 each and marginal tax rates starting at 6%, going up to a maximum of 36%. However, in response to calls for greater relief from middle-income earners, the government resumed discussions with the IMF in mid-2024, as the country started to meet its fiscal goals.

Under the latest proposed amendments, the government plans to raise the tax bands from Rs. 500,000 to Rs. 720,000, while keeping the tax-free threshold at Rs. 1.2 million and maintaining the same marginal tax rates for each band, including the highest rate of 36%.

To help you calculate how these changes might benefit you, I’ve created a simple tax calculator that allows you to estimate potential savings under the new structure.