- · Tax-free threshold raised to Rs 162,500 a month
- · Rs 131 b for hospitals; doctors' DAT up to Rs 95,000
- · Rs 3 b more for digital schools, VAT off books
- · University academics to get Rs 25,000 more a month
- · Digital Economy Authority Bill due in first quarter
- · Record Rs 95 b to modernise rail and bus services
- · Rs 80 b to begin electrifying three Colombo Rail lines
- · Rs 30 b for Kurunegala to Galewela Expressway stretch
- · Rs 26.5 b to prevent repeat of national blackouts
- · 200% capital allowance for BOI exporters investing USD 3 m
- · Rs 174 b in concessionary loans for MSMEs
- · Rs 77 b for irrigation, including Ditwah-hit tanks
- · Rs 5 b for Pesalai harbour and Northern anchorages
- · Rs 13 b to lift exports to USD 5 b
- · Tourism Development Levy scrapped from April
- · 10,000 houses in 2027, grant raised to Rs 1.5 m
- · Rs 77 b for drinking water, 13 new schemes
- · Rs 230 b for Aswesuma and welfare allowances
- · Rs 110 b for final phase of salary hike
- · Rs 2,500 interim allowance for 2020 to 2024 retirees
- · Rs 9.5 b to digitalise police; Rs 10,000 more allowance
- · Rs 5.1 b for courts as prisons hold twice capacity
- · Higher tri-forces food allowance, new defence research centre
- · Rs 2 b per district for local priorities
- · Rs 5 b to double urban waste collection by 2029
- · Rs 260 b supplementary estimate for Ditwah rebuild
- · Rs 100 m for journalist scholarships and training
- · Deficit to widen to 4.5% of GDP
President and Finance Minister Anura Kumara Dissanayake yesterday (12) presented a Budget for 2027 that cuts income tax for a second time and raises allowances across the public service. It also commits a record Rs 2,000 billion to capital spending, while allowing the deficit to widen to fund reconstruction after Cyclone Ditwah.
Presenting the Government's third Budget in Parliament, the President said its main objective was "to move from economic stability towards transformation".
Under the tax proposals, the monthly income tax-free threshold will rise from Rs 150,000 to Rs 162,500 from April 2027. The rate on the first slab after the 6% band will fall from 18% to 12%, and the 36% top rate will apply only to monthly income above Rs 433,000, up from Rs 358,000. Individual taxpayers will save between Rs 750 and Rs 15,750 a month, at a cost of Rs 16 billion in revenue.
Households will see relief at the market sooner. From today, the Special Commodity Levy on imported sprats falls from Rs 100 to Rs 10 a kilogramme and on Maldive fish from Rs 302 to Rs 10. The levy on dried chillies drops by Rs 50. The levy on imported sugar, however, rises by Rs 10 a kilogramme to protect local produceRs
Books, exercise books, dictionaries and children's colouring books will be exempt from Value Added Tax. The Tourism Development Levy will be abolished and CESS rates on 800 import tariff lines will be cut by 25%. Together, the tax measures will cost Rs 21.2 billion in 2027 and Rs 28.4 billion in a full year, according to the Budget annexures.
At the same time, the Government is widening the tax net. Capital gains tax will extend to cryptocurrencies, telecommunications licences and high-value gems and jewellery. Income from online advertising and cloud services will be taxed by reference to where payment is made.
Public investment is the centrepiece of the Budget. Capital spending of Rs 2,000 billion, equal to 5.12% of GDP, includes Rs 80 billion to begin electrifying the Kelani Valley, Main and Coastal railway lines, a programme expected to cost more than Rs 1,200 billion. A further Rs 30 billion is set aside for the Kurunegala to Galewela section of the Central Expressway and Rs 27 billion for the Ruwanpura Expressway, within Rs 487 billion earmarked for highways, expressways and railways.
Public servants also gain. Medical officers' DAT allowance will rise from Rs 70,000 to Rs 95,000, nurses' special duty allowance will double to Rs 12,000 and police officers will receive Rs 10,000 more a month for food and accommodation. University academics, High Court judges and judicial officers will get Rs 25,000 more a month, while prison officers' risk allowance will double to Rs 16,000. Most of these increases will be paid in two halves, from July 2027 and in 2028.
Pensioners who retire between 2020 and 2024 will receive an interim allowance of Rs 2,500 a month from July 2027, pending a pension revision under the 2025 salary scale that will begin with the 2028 Budget. Monthly allowances for kidney patients and persons with disabilities will rise from Rs 10,000 to Rs 12,500, and Rs 230 billion has been allocated for social protection, including Aswesuma.
The relief comes at a fiscal cost. The Budget estimates put the 2027 deficit at Rs 1,493 billion, or 3.8% of GDP, rising to Rs 1,753 billion, or 4.5%, once a Rs 260 billion supplementary estimate for Ditwah reconstruction is included. That compares with 3.7% in 2026. Revenue is projected at 15.8% of GDP, below the 16% medium-term floor the Government set out in the same speech, and the gross borrowing requirement stands at Rs 3,800 billion.
The President said the supplementary estimate was needed because part of the Rs 500 billion approved by Parliament for Ditwah reconstruction had not been used, citing reasons including the war in the Middle East.
With the International Monetary Fund's Extended Fund Facility due to end in March, the Cabinet has appointed a committee headed by the Deputy Minister of Finance and Planning to report on whether Sri Lanka should enter another programme, and of what type.
The speech closed on a combative note. The President accused the Opposition of "clinging to superstitious beliefs" and said politics should be done among the people, "not by tying threads in cemeteries at night, nor by wasting the time of Parliament reciting curse verses".
Moments later, he invited all political parties to become partners in building the country. "Our country is greater than our differences," he said.
Parliament will now debate the Appropriation Bill.