The new administration headed by Prime Minister and Finance Minister Ranil Wickremsinghe has overhauled the taxation system introduced in 2019 by making several tax revisions to boost currently dwindling tax revenue.
The government had to forego revenue of around Rs 1.2 trillion and the loss of 1 million taxpayers(10 lakh) during the past two years as a result of sweeping tax cuts introduced in 2019, Inland Revenue Department(IRD) data showed.
The Value Added Tax has been increased to 12 percent from 8 percent and the Telecommunication Levy was increased to 15 percent from 11.25 percent with immediate effect, Finance Ministry sources revealed.
The Personal Income Tax(PIT) rates will be revised by reducing the threshold to Rs 1.8 million from Rs. 3 million with effect from October 1, 2022 as the high tax exemption threshold and the expenditure relief together with the low tax rates have impacted the revenue performance in 2020 and 2021.
PIT range will be 4 percent for the income of first Rs.1.2 million ,and it will be increased to 8,12,16,18 ,20 ,24 ,28,and 32for the next slabs Rs. 2.4milion .Rs 3.6 million ,Rs4.8 million,Rs.6 million, Rs7.2 million.Rs8.4 million Rs.9.6 million and above.
Advance Personal Income Tax (APIT)/ Withholding Tax on Employment Income (PAYE) wil be made mandatory for all taxpayers exceeding the personal relief of Rs. 1.8 million per year of assessment effective from October 1, 2022.
Advance Income Tax( AIT)/ Withholding Tax will also be made mandatory for all taxpayers and consider AIT on interest of individual taxpayers and dividends as final payments effective from October 1, 2022.
Withholding Tax will be imposed on service payments exceeding Rs. 100,000 per month made to individuals such as professionals at the rate of 5 percent effective from October 1, 2022.
Measures will be taken to re-introduction of relief on interest income of Rs. 1.5 million for senior citizens effective from October 1, 2022, Finance Ministry sources divulged.