As enacted

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Inland Revenue Act 2006 · As enacted · Chapter IX · Special Provisions Relating to the Taxation of Certain Profits and of Dividends Out of Such Profits

37. Deduction of income tax from interest payable on certain deposit accounts

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

(1)

The provisions of this section shall apply to the accumulated interest (in this section referred to as “the relevant interest “) paid on a sum of money deposited in a banking institution by–

(a)

any individual; or

(b)

another person on behalf of any individual, under a scheme approved by the Commissioner-General which—

(i)

is operated by such banking institution; and

(ii)

conforms to such conditions as may be specified from time to time, by the

Commissioner-General.

The Commissioner-General shall, in specifying any matter which is required by this subsection to be specified by him, have regard to the need to encourage and facilitate savings.

(2)

Notwithstanding anything to the contrary in this Act–

(a)

the relevant interest paid to any individual shall be deemed to be income arising to such individual in the year of assessment in which such interest is paid to him and not in the year of assessment to which such interest relates, and such interest shall be liable to income tax at the appropriate rates specified in the Fifth Schedule to this Act ;

(b)

the banking institution paying the relevant interest to such individual shall, notwithstanding anything in paragraph (a), deduct from such interest an amount equal to ten per centum of such interest, and shall forthwith remit the sum so deducted to the

Commissioner-General;

(c)

where a banking institution deducts income tax in accordance with paragraph (b) from the relevant interest paid to any individual, it shall issue to such individual a statement in writing setting out the gross amount of the relevant interest payable, the rate and amount of tax deducted and the net amount actually paid;

(d)

where –

(i)

any amount is deducted in accordance with paragraph (b) from the relevant interest paid to any individual ; and

(ii)

the maximum rate at which such individual is liable to pay income tax for the year of assessment in which such deduction is made, in respect of profits and income (exclusive of the relevant interest) is less than fifteen per centum, then such individual shall be entitled, on the production of the statement referred to in paragraph (c) and subject to the provisions of Chapter XXVIII to a refund of such percentage of the relevant interest as is equal to the difference between fifteen per centum and such maximum rate of tax.

(3)

Where a banking institution which is required by subsection (2) to deduct any income tax from the relevant interest paid by it to any individual fails to deduct such income tax, then, the director, general manager or other principal officer of such banking institution, shall be personally liable for the tax which such institution, was required to deduct under this section, and such tax may be recovered from such director, general manager, or principal officer, by all the means provided for in this Act.

(4)

Where any money is deposited in a banking institution by an individual under a scheme approved by the

Commissioner-General under subsection (1), and such individual withdraws the interest on such money in contravention of the conditions imposed by the

Commissioner-General in relation to such scheme, additional assessments may, notwithstanding anything in this Act, be made in respect of every year of assessment to which the interest so withdrawn relates.

Read on from s 38

Chapter X