Taxation or paying your tax is considered a civic duty in Sri Lanka or in other parts of the world. Every one of us who are legally eligible and financially stable should pay taxes.
Understanding the taxation system is often difficult. Many of us often come up with several questions and query regarding
Yes, it is very common to encounter individuals who are uncertain and confused about the Income Tax
When to start taxation…? How to pay it…? Am I eligible to pay my taxes regarding my yearly earnings….? What are the rates of paying taxes….?
This are some of the common questions I often find individuals and business owners and investors come up along regarding Income Tax Sri Lanka.
Well, no worries here you can educate yourself with all sort of necessary facts that you need to follow for paying your taxes.
Well-paying Income tax is nothing put paying a small portion of your salary to the Government on a yearly basis. And yes, it is a must deed for all to pay their tax in time and in proper amount, as failures to do so would result in either a preliminary fine or in worst case serving certain jail time.
Eventually all these taxes come in many forms and varieties. All these taxes collected from individuals and companies are mainly used to fund certain Government activities and projects to serve the nation and public.
Income Tax Act Sri Lanka – One of the most common question we see in random individuals is “Do I have to pay taxes”?
As per the Sri Lankan Government law and regulation, whether an individual or a business owner, if you are eligible as a tax paying member by the government you will have to file an income tax return every year.
This income tax return does come in handy, as it can be used to identify whether someone
Income Tax Act For Individuals and Professionals:
If an individual
- Monthly electricity bill for residential use paid does not exceed more than Rs.10,000
- Monthly credit card bill exceeding Rs.25,000
- Monthly residential telephone bill exceeding above Rs.10,000
- Capable to Purchase an air ticket to travel foreign destination.
- Owning a motor vehicle of own.
If the individual or the professional figure fits in any four of the requirements out of the given five, he or she has to pay in their income tax return with complete responsibility.
Paying these taxes and
Individuals and professionals are asked to be very careful while dealing with their taxation as incorrect tax returns will eventually lead to greater penalties and foes.
One might have to pay double the amount then that he or she was asked to pay off. Yes, it is always advised to my individual or professional friends to remember to include this following information in their income tax return filling.
- All sources and outcomes of income.
- Computation and accumulation of taxable incomes & tax liabilities.
- Exempt profits & income
- Value of assets and other related liabilities.
Sri Lanka income tax calculator
How much to pay in for Individual Tax?
The rate of individual taxation is completely comprised
One is considered to be Tax Free if his or her income is within or not more than a sum of Rs.500,000 per year.
But once it crosses the limitations then the first Rs.500,000 is taxed at a rate of 4%, then as follows:
- First Rs. 500,000/- 4%
- Next Rs. 500,000/- 8%
- Next Rs. 500,000/- 12%
- Next Rs. 500,000/- 16%
- Next Rs. 1, 000,000/- 20%
- On Balance 24%
Income Tax Act Sri Lanka For Company Tax:
Well, it can be pretty obvious to think that
As per the rules and regulation of
A tax of 10% of company profits distributed among the company shareholders and other authentic figures.
Annual Taxable income Rate for Various Companies in Sri Lanka
- Companies not dealing with Liquor and Tobacco 28%
- Companies dealing with Liquor and Tobacco 40%
- Dividend Tax 10%
- Deemed Dividend Tax 15%
- Remittance tax on non-resident companies 10%
Small or Medium Sized Enterprises, SMEs having a turnover up to LKR 50Mn per annum.
- Export of products goods or services.
1.Year of assessment 2017/2018: An annual rate of 14% is applied over the company profits and income of all these SMEs.
2.Year of assessment 2016/2017: An annual rate of 12% & 10% over company profits and income of these SMEs.
What if someone fail to provide a annual return in time or come up with a mistake:
Well, as told before all these taxations is not an easy job. The government is strict about certain taxation filling issues as it is what is returned to the country for its own good.
If an individual or professional or any sort of business owner fail or forgets to submit their income tax return, the Commissioner General can certainly impose a penalty up to Rs.50,000.
Planning to submit the annual return lately is considered
A fine of Rs.2,000 has to be paid and the excess or hidden amount has to be taxed twice.
Well, yes human can make errors and if your error has valid reason to back up your incorrect return, you can appeal against the penalty conducted by the Commissioner General against the assessment.
One has about 30 days to object. Simply draft a letter to the Commissioner General giving clear and valid facts.
The income tax return should be attached with the letter provided to the Commissioner General if that individual is appealing for not providing his or her Income Tax Sri Lanka in time.
When someone couldn’t submit an official appeal to the Commissioner General on time:
The Commissioner General will only extend the deadline for those unable to submit an appeal within appropriate time:
- Absence from Sri Lanka
- Other reasonable cause