Monthly Tax-Free Income Raised to Rs. 162,500/-

COLOMBO (News 1st); President Anura Kumara Dissanayake has announced another round of personal income tax relief, building on reforms introduced last year that reduced the tax burden on individual taxpayers.

The President said the government had already increased the annual tax-free income threshold from Rs. 1.2 million to Rs. 1.8 million in 2025, providing monthly tax savings ranging from Rs. 3,500 to Rs. 20,500 depending on income levels.

Under the latest Budget proposals, the tax-free threshold will increase even further, with the monthly tax-free income limit rising from Rs. 150,000 to Rs. 162,500. As a result, employees earning a monthly salary and allowances of up to Rs. 162,500 will not be required to pay income tax.

The government is also proposing significant changes to the personal income tax structure by widening income brackets and easing the progression of tax rates. The first taxable slab will remain at 6%, while the next bracket will be taxed at 12% instead of 18%, followed by rates of 18%, 24%, 30% and 36%.

The revised structure will also push back the point at which the highest tax rate applies, increasing the monthly income threshold for the maximum rate from Rs. 358,000 to Rs. 433,000.

According to the President, the latest revisions will provide individual taxpayers with additional monthly tax savings ranging from Rs. 750 to Rs. 15,750, on top of the relief already granted under the 2025 tax reforms.