Way of the new income tax regulations will affect you
Following the appointment of the new cabinet under President Gotabaya Rajapaksa several tax reforms were introduced to the public. One of the key areas that caught the eye of the working masses was the elimination of PAYE tax.
While some of the proposed tax reforms came into effect on the 1st of December, a majority of the tax reliefs that concern income tax comes into effect on the 1st of January 2020.
PAYE tax which was paid by many people has been replaced with Income tax. However, you only need to pay income tax if your monthly salary is over Rs 250,000. The cabinet earlier decided to increase the tax-free threshold from Rs 100,000 to Rs 250,000. If your monthly salary is over Rs 250,000 you will be subject to an income tax of 6%. If your monthly salary is over Rs 500,000 you will have to pay an income tax of 12% while anyone earning over Rs 750,000 a month will be subject to an income tax of 18%.
Similarly, if the income of an individual, from any source of income is less than Rs 3mn per annum he/she will be exempt from income tax. However, if it is over Rs 3mn the Government will charge income tax at progressive rates of 06%, 12% and 18% for each tax slab of Rs. 250,000 as mentioned above.
The Cabinet has also decided to eliminate Withholding Tax on Interest income up to Rs. 250,000 per month.
Here are some of the other decisions made by the Cabinet relating to taxes –
– Income from Agriculture, Fisheries, and Livestock shall be exempted from income tax, with effect from the year of Assessment 2019/2020.
– Income Tax Rate applicable on the construction industry shall be reduced from 28% to 14%, with effect from the year of Assessment 2019/2020.
– Religious institutions shall fully be exempted from income tax, with effect from December 01, 2019.
– Income earned from the supply of services for the receipt of foreign currency shall be exempted from income tax, with effect from December 01, 2019
– Income from the Information Technology and enabling services shall be exempted from all taxes, with effect from the year of Assessment 2019/2020.