• PAYE tax threshold increased to Rs. 150,000 per month
• VAT exemption for locally produced fresh milk and yoghurt

Sri Lanka will exempt monthly income earners up to Rs. 150,000 from the pay-as-you-earn (PAYE) tax, while the value added tax (VAT) on domestically manufactured fresh milk and yoghurt will also be exempted, President Anura Kumara Dissanayake said.

Speaking yesterday (18) at Parliament, he said that following the discussion with the International Monetary Fund (IMF) at the third review, the government has managed to increase the PAYE tax threshold from Rs. 100,000 to Rs. 150,000, monthly.

“Accordingly, the first slab which charges 6% will be increased from Rs. 500,000 per annum to Rs. 1 million per annum,” the President said.

He added that individuals earning Rs. 150,000 per month will receive 100% tax relief, while Rs. 200,000 monthly income earners will receive 71% tax relief, Rs. 250,000 a 61% tax relief, Rs. 300,000 a 47% tax relief, and Rs. 350,000 monthly income earners will receive 25.5%.

“Lower relief for high-income earners and more relief for low-income earners,” Dissanayake said.

Moreover, he said that the previous government implemented the VAT for dairy products including milk powder and yoghurt but the current government came to an agreement in the third review to exempt VAT from locally manufactured fresh milk and yoghurts.

Further, he said as a revenue measure, the government will be increasing the withholding tax from 5% to 10% from interest income.

“Generally, the elders or retired community deposits their savings in a bank and live from the interest income, if the interest income falls to the category of Rs. 150,000 per month that individual will be subjected to the tax,” Dissanayake said.

However, he said that the Inland Revenue Department (IRD) can retain the withholding tax even for interest-income earners less than Rs. 150,000 per month.

“Therefore, we will open a new division in the IRD, where any citizen who assumes that this tax will not be included in their bank accounts, where their interest income is less than Rs. 150,000 can go to IRD and present details about their tax situation to exempt themselves from the tax,” Dissanayake added.

He said that the division will be established within the IRD head office in Colombo and at sub offices island wide.