As enacted

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Inland Revenue Act 2006 · As enacted · Chapter XVI · Deductions from Interest Paid by Banks and Financial Institutions

133. Banks and financial institutions to deduct income tax

Official English translation. The Sinhala text prevails. Open the official Sinhala text, official PDF on documents.gov.lk

(1)

Every bank or financial institution shall, subject to the other provisions of this Act, deduct from the interest payable or creditable or from the discount allowable by it, on any sum of money deposited with it, income tax at the rate of ten per centum on the amount of such interest or discount;

such deduction shall be made at the time such interest is paid or credited or such discount is allowed.

(2)

For the purposes of a deduction under subsection (1), interest or discount shall not include any interest or discount—

(a)

which is exempt from income tax under this Act;

(b)

from which income tax has been deducted in accordance with section 95;

(c)

which accrues to the Consolidated Fund of the

Government of Sri Lanka or to any Provincial Fund of a Provincial Council; and

(d)

to which any—

(i)

foreign government; or

(ii)

person or partnership who or which is exempt from income tax, is beneficially entitled to.

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(3)

In relation to any interest payable or creditable or to discount allowable to any individual, not being any person referred to in subparagraph (ii) of paragraph (d) of subsection (2), by any branch of any bank or of any financial institution in any month in any year of assessment, the provisions of subsection (1) relating to the deduction of income tax shall not apply—

(a)

if the aggregate amount of such interest and such discount –

(i)

for that month of that year of assessment does not exceed one thousand rupees; or

(ii)

for that year of assessment does not exceed twelve thousand rupees; or

(b)

if such individual makes a declaration in writing to such branch that the aggregate amount of his income from interest and from discount, exclusive of any interest or discount referred to in paragraph (a) or paragraph (b) of subsection (2) —

(i)

for that month in that year of assessment does not exceed nine thousand rupees ; or

(ii)

for that year of assessment does not exceed one hundred and eight thousand rupees.

(4)

In relation to any interest payable or the discount allowable to any charitable institution, the provisions of subsection (3) shall apply as though there were substituted -

(a)

in sub-paragraph (i) of paragraph (a) of that subsection, for the words, “one thousand rupees”, of the words, “two thousand five hundred rupees”;

(b)

in sub-paragraph (ii) of paragraph (a) of that subsection, for the words “twelve thousand rupees”, of the words, “thirty thousand rupees”;

(c)

in sub-paragraph (i) of paragraph (b) of that subsection, for the words, “nine thousand rupees”, of the words, “twelve thousand rupees”; and

(d)

in sub-paragraph (ii) of paragraph (b) of that subsection, for the words, “one hundred and eight thousand rupees”, of the words, “one hundred and forty four thousand rupees”.

(5)

Where any person or partnership to whom or to which any interest is payable or creditable or any discount is allowable by any bank or financial institution, requests in writing such bank or financial institution to deduct income tax from such interest or discount at a rate higher than ten per centum, or where any such person being any individual or charitable institution, requests in writing such bank or financial institution to deduct income tax from any interest or discount referred to in subsection (3) or subsection (4), as the case may be, notwithstanding any limitation specified therein in relation to the amount of such interest or discount, such bank or financial institution shall comply with such request and deduct income tax accordingly; any deduction so made shall be deemed to be a deduction made under this section.

(6)

Every bank or financial institution which deducts income tax in accordance with the provisions of subsection (1) or subsection (4) from any interest paid or credited or any discount allowed by it to any person or partnership, as the case may be, shall issue to such person or partnership a statement setting out the following particulars :–

(a)

the gross amount of the interest paid or credited or of discount allowed, as the case may be;

(b)

the rate of tax and the amount of tax deducted;

(c)

the net amount of interest actually paid or credited or of discount actually allowed; and

(d)

the period to which such interest or discount relates.

Read on from s 134

Chapter XVII