Act of Parliament · As enacted
Inland Revenue (Amendment) Act 2026
Official English translation. Where it differs from the Sinhala or Tamil text, the Act itself says which text prevails.
Official translationFrom Department of Government Printing, unchanged
This Act may be cited as the Inland Revenue
(Amendment) Act, No. 11 of 2026.
The provisions of this Act, other than the provisions of sections referred to in subsection (3) of this section, shall come into operation on the date on which the Bill becomes an Act of Parliament.
The provisions of this Act specified in Column I of the Table below which amend the provisions of the Inland
Revenue Act, No. 24 of 2017 (hereinafter referred to as the
“principal enactment”) specified in Column II of that Table, shall come into operation or be deemed to have come into operation, as the case may be, on the respective dates as specified in Column III of that Table.
Table
Column I
Column II
Column III
Section of this Act
Section of the principal enactment which is amended
Date of operation 2 8 01.04.2024 3 10(2A) 08.05.2023 5 52 01.04.2025 6 52A 01.04.2025 7 59(1A) and (2) 01.04.2025
Column I
Column II
Column III
Section of this Act
Section of the principal enactment which is amended
Date of operation 8 68(3) 01.04.2025 9 69(1)(d), (1A) and (2A) 01.04.2025 10 72(3) 01.04.2018 11 79(1), (2) and (3) 01.04.2025 12(1)(b)
84(2)(b) 01.04.2026 12(2)(c)
84(3)(f) 01.04.2025 16 90(3) and (6) 01.04.2026 17 91(1), (3), (4), (5) and (6) 01.04.2026 18 92(1) 01.04.2026 19 94(1) 01.04.2025 21 96A 01.01.2024 35 203(6) 31.03.2025 36
Item (b) of sub-paragraph (2B) of paragraph 4 of the First Schedule 01.04.2022 37
Sub-paragraphs (1A) and (2A) of the Second Schedule 01.04.2026 38
Paragraph (a)(iv) of the Third
Schedule 01.04.2018 38
Paragraphs (i)(ii), (s) and (ttt) of the Third Schedule 01.04.2025 40
Fifth Schedule 01.04.2025 41
Sixth Schedule 01.04.2024
s 2Amendment of section 8 of the principal enactment
Section 8 of the principal enactment is hereby amended in subsection (2) of that section as follows: -
by the substitution for the words “from any source whatsoever,” of that subsection, of the words “from other sources,”;
in paragraph (a) of that subsection, by the substitution for the words “payments; and”, of the word “payments;”;
in paragraph (b) of that subsection, by the substitution for the word “investment.”, of the words “investment; and”; and
by the addition immediately after paragraph (b) of that subsection, of the following new paragraph: -
“(c) gains from the realisation of motor vehicles.”.
s 3Amendment of section 10 of the principal enactment
Section 10 of the principal enactment is hereby amended as follows: -
in sub-paragraph (viii) of paragraph (b) of subsection (1) of that section, by the substitution for the words “to a reserve or provision for expenditures”, of the words “to a reserve or provision for expenditures”; and
in subsection (2A) of that section –
in paragraph (a), by the substitution for the words “bank draft or”, of the words
“bank draft or by depositing cash in the second mentioned person’s bank account or”; and
in paragraph (b) –
in sub-paragraph (i), by the substitution for the words “any payment by”, of the words “any payment to or by”; and
in sub-paragraph (ii), by the substitution for the words “any payment by”, of the words
“any payment to or by”.
s 4Amendment of section 46 of the principal enactment
Section 46 of the principal enactment is hereby amended by the insertion immediately after subsection (3)
of that section, of the following new subsection: -
“(3A) Where a person realises an asset by way of transfer of ownership of the asset as a gift or donation to the Government of Sri Lanka or any University which is established or deemed to be established under the Universities Act, No. 16 of 1978, the person shall be treated as deriving an amount in respect of the realisation equal to the net cost of the asset immediately before the realisation.”.
Amendment of section 52 of the principal enactment
5.
5. Section 52 of the principal enactment is hereby amended by the addition immediately after subsection (3) of that section, of the following new subsection: -
“(4) Where the deduction of any qualifying payment referred to in items (i)
and (v) of sub-paragraph (b) of paragraph 1
of the Fifth Schedule, in terms of subsection (1) of this section, is not possible, for any year of assessment commencing on or after
April 1, 2025, due to the reason that the total assessable income in the relevant year of assessment does not exceed the amount of the qualifying payment which shall be deducted in arriving at the taxable income of an individual or an entity, such amount of the qualifying payment which is not possible to be deducted in the relevant year of assessment shall be carried forward and deducted from the assessable income of the individual or entity of the year of assessment immediately succeeding the relevant year of assessment or from the assessable income of any consecutive year succeeding.”.
Insertion of new section 52A in the principal enactment
6.
6. The following new section is hereby inserted immediately after section 52 of the principal enactment, and shall have effect as section 52A of that enactment: -
52A. (1) Notwithstanding anything to the contrary in this Act, in calculating the assessable income of an individual for a year of assessment under section 4, any amount received or derived by an individual under a life insurance policy, whether as the policy holder or as a beneficiary of such policy, upon-
the death of the insured person;
the maturity of the policy; or
the surrender of the policy, shall be excluded.
Subsection (1) shall not apply to the following payments made in connection with or under a life insurance policy: -
“Amounts from life insurance policies
any amount received under a life insurance policy, which constitutes employment income or business income; or
any annuity, or any pension, retirement or superannuation payment or any payment made under a life insurance policy otherwise than on the death of the insured person or maturity of the policy.
Nothing in this section shall limit or affect the application of section 35.
For the purposes of this section,
“life insurance policy” means a contract of insurance issued by an insurer licensed under the Regulation of Insurance Industry Act,
No. 43 of 2000, which provides for the payment of money on the death of an individual.”.
Amendment of section 59 of the principal enactment
7.
7. Section 59 of the principal enactment is hereby amended as follows: -
by the insertion immediately after subsection (1) of that section, of the following new subsection: -
“(1A) Notwithstanding the provisions of subsection (1), with effect from the year of assessment commencing on April 1, 2025, a unit trust or mutual fund which fails to serve on every unit holder a certificate containing the details of income, exempt amounts, withholding tax and any other information as specified by the Commissioner-General within five months after the end of each year of assessment ending on the thirty first day of March, shall be deemed to be a company resident in Sri Lanka and the provisions of this Act relating to companies resident in Sri
Lanka shall apply.”; and
in subsection (2) of that section, by the substitution for the word and figure “subsection (1)”, of the words and figures “subsection (1) or (1A)”.
s 8Amendment of section 68 of the principal enactment
Section 68 of the principal enactment is hereby amended as follows: -
in subsection (3) of that section, by the substitution for the words “in any year of assessment”, of the words and figures “in any year of assessment prior to April 1, 2025,”; and
by the addition immediately after subsection (3) of that section, of the following new subsection: -
“(4) In the case of an institution referred to in sub-paragraph (a) of paragraph 1 of the
Fifth Schedule to this Act, with effect from the year of assessment commencing on April 1, 2025, where the Commissioner-General is satisfied that the cost of providing the services specified in such sub-paragraph is borne by such institution, the Commissioner-General shall grant a tax credit equal to the tax payable on the institution’s taxable income for the year of assessment.”.
s 9Amendment of section 69 of the principal enactment
Section 69 of the principal enactment is hereby amended as follows: -
in paragraph (d) of subsection (1) of that section, by the substitution for the words “so employed.”, of the following: -
“so employed:
Provided that, if such individual is a citizen or subject of any country other than Sri
Lanka, such individual shall not, by reason of being so deemed to be resident in Sri Lanka, be liable to income tax as a resident in respect of any income other than his income from the employment on such ship:
Provided further, any individual who is deemed to be a resident in Sri Lanka only for the purpose of income tax under this paragraph shall be treated as a resident in Sri Lanka during the period he is so employed.”; and
by the insertion immediately after subsection (1) of that section, of the following new subsections: -
“(1A) Notwithstanding the provisions of subsection (1), an individual shall not be a resident in Sri Lanka for a year of assessment, if the individual holds an Investor Category
Residence Visa issued by the Controller of
Immigration and Emigration.
For the avoidance of doubt, it is hereby declared that if an individual leaves Sri Lanka for an employment under a contract for a period of not less than one year with an employer who is not associated with the immediate Sri Lankan employer of the individual, such individual shall not be considered as a resident of Sri Lanka for the period commencing on the first day of the year of assessment in which the individual leaves Sri Lanka and ending on the date of expiry of such contract.”.
s 10Amendment of section 72 of the principal enactment
Section 72 of the principal enactment is hereby amended by the addition immediately after subsection (2) of that section, of the following new subsection: -
“(3) Notwithstanding anything to the contrary in subsection (2), a payment that has no source in
Sri Lanka shall be directly deducted in calculating income, to the extent that such payment is incurred during the year of assessment in relation to the export of goods or services from Sri Lanka.”.
s 11Amendment of section 79 of the principal enactment
Section 79 of the principal enactment is hereby amended as follows: -
by the renumbering of that section, as subsection (1) of that section;
in the renumbered subsection (1) of that section, by the substitution for the words “for an amount incurred”, of the words and figures “for an amount incurred in any year of assessment prior to April 1, 2025,”; and
by the addition immediately after the renumbered subsection (1) of that section, of the following new subsections: -
“(2) Where a non-resident person who carries on business through a Sri
Lankan permanent establishment incurs any expenditure in any year of assessment commencing on and after April 1, 2025 in the nature of head office expenditure, a sum equal to –
the amount of such expenditure;
or
the amount equal to ten per centum of such person’s assessable income from such business, whichever is lesser, shall be deducted for such year of assessment.
For the purpose of this section,
“head office expenditure” in relation to a non-resident person and for any year of assessment means, the executive and general administration expenditure incurred by or on behalf of such person outside Sri Lanka, including the expenditure –
which comprises the aggregate of the total income from employment of, and the total cost of travelling undertaken by every employee and every other person employed in, or managing the affairs of any office of such company outside
Sri Lanka; and
which is incurred in respect of any premises outside Sri
Lanka.”.
s 12Amendment of section 84 of the principal enactment
Section 84 of the principal enactment is hereby amended as follows: -
in subsection (2) of that section –
by the re-lettering of that subsection as paragraph (a) of that subsection; and
by the addition immediately after the re-lettered paragraph (a) of that subsection, of the following new paragraph: -
“(b) With effect from the year of assessment commencing on
April 1, 2026, such Authority shall file a monthly tax return containing such details and, in such manner, as specified by the Commissioner-General within thirty days after the end of each calendar month.”; and
in subsection (3) of that section –
by the substitution for the words “This section shall”, of the words and figures
“This section and section 84A shall”;
in paragraph (e) of that subsection, by the substitution for the words and figure “under section 9.”, of the words and figure “under section 9;”; and
by the addition immediately after paragraph (e) of that subsection, of the following new paragraph: -
“(f) payment of interest or discount by any financial institution to an individual resident in Sri Lanka, for any year of assessment commencing on or after
April 1, 2025 on any deposit maintained by such individual in such financial institution, if the individual has no taxable income for the year of assessment and provides a self-declaration to the financial institution as specified by the
Commissioner-General.”.
s 13Amendment of section 85 of the principal enactment
Section 85 of the principal enactment is hereby amended in paragraph (c) of subsection (1C) of that section, by the substitution for the words “academic or any individual”
of that paragraph, of the words “academic, auditor, modeller, personal trainer, coach, valuer, artist, actor, dancer, singer, musician, event organizer, photographer, videographer, therapist, counsellor, beautician, cook, electrician, dentist, veterinarian, social media specialist, brand ambassador, sports person, specialist for information technology, advertising agent, advisor, translator, writer, debt collector or any individual”.
s 14Amendment of section 86 of the principal enactment
Section 86 of the principal enactment is hereby amended by the addition immediately after subsection (8) of that section, of the following new subsection: -
“(9) The Commissioner-General may specify the procedures, formats and forms for filing statements required under subsections (2) and (8). Every withholding agent shall comply with the requirements relating to such procedures, formats and forms.”.
s 15Amendment of section 87 of the principal enactment
Section 87 of the principal enactment is hereby amended by the addition immediately after subsection (5) of that section, of the following new subsection: -
“(6) A withholding agent shall serve a withholding certificate on a withholdee, free of any charge or payment.”.
s 16Amendment of section 90 of the principal enactment
Section 90 of the principal enactment is hereby amended as follows: -
in the formula setout in subsection (3) of that section-
in item ‘A’ of that formula, by the sub-stitution for the words and figures “is the current estimated tax payable un-der section 91 or 92 by the instalment payer for the year of assessment;”, of the following: -
“(a) for any year of assessment prior to April 1, 2026, is the estimated tax payable by the instalment payer under section 91 or 92; and
for any year of assessment commencing on or after April
1, 2026, is the amount of tax payable by the instalment payer with respect to the taxable income under paragraph (a)
of subsection (1) of section 2
in the immediately preceding year of assessment:
Provided however, where the instalment payer has no taxable income for the immediately preceding year of assessment, or expects to derive during the current year of assessment a taxable income lower than the taxable income of the immediately preceding year of assessment, the estimated tax payable for the current year of assessment shall be considered as ‘A’. For this purpose, the estimated tax payable for the current year of assessment shall be calculated as per the procedure, and on the basis, specified by the
Commissioner-General;”;
in item ‘C’ of that formula-
in paragraph (b) of that item, by the substitution for the words
“for the year; and”, of the words and figures “for any year of assessment prior to the year of assessment commencing on
April 1, 2026;”;
by the insertion immediately after paragraph (b) of that item, of the following new paragraph: -
“(ba) tax withheld or to be withheld during the relevant year of assessment under
Division II, from payments received by the person that are included in calculating the person’s income for any year of assessment commencing on or after April 1, 2026;
and;”;
in the proviso to paragraph (c)
of that item, by the substitution for the words
“Provided however, in calculating”, of the words and figures “Provided however, prior to the year of assessment commencing on
April 1, 2026, in calculating”;
and
by the addition immediately after subsection (5) of that section, of the following new subsection: -
“(6) In ascertaining the amount of tax payable by the instalment payer for a year of assessment commencing on or after April 1,
2026, such instalment payer may take into account the foreign tax credit to be claimed under section 80. However, in doing so, the instalment payer may take into account the foreign income tax only if the instalment payer has paid such tax or the instalment payer reasonably estimates that such tax will be paid during the period corresponding to that year of assessment.”.
s 17Amendment of section 91 of the principal enactment
Section 91 of the principal enactment is hereby amended as follows: -
in subsection (1) of that section, by the substitution for the words “for a year of assessment”, of the words and figures “for any year of assessment commencing prior to April 1,
2026,”;
in subsection (3) of that section, by the substitution for the words and figure “Subject to subsection (6)”, of the words and figures
“For any year of assessment prior to the year of assessment commencing on April 1, 2026, subject to subsection (6)”;
in subsection (4) of that section, by the substitution for the words “In estimating tax payable for a year of assessment”, of the words and figures “In estimating tax payable for a year of assessment commencing prior to April 1,
2026”;
in subsection (5) of that section, by the substitution for the words “An instalment”, of the words and figures “Prior to the year of assessment commencing on April 1, 2026, an instalment”; and
in subsection (6) of that section, by the substitution for the words and figure “filed by a person under subsection (5)”, of the words and figures “filed by a person under subsection (5)
prior to the year of assessment commencing on
April 1, 2026,”.
s 18Amendment of section 92 of the principal enactment
Section 92 of the principal enactment is hereby amended in subsection (1) of that section, by the substitution for the words and figures “an estimate under section 91.”, of the words and figures “an estimate under section 91 prior to the year of assessment commencing on April 1, 2026.”.
s 19Amendment of section 94 of the principal enactment
Section 94 of the principal enactment is hereby amended as follows: -
in subsection (1) of that section –
in paragraph (c) of that subsection, by the substitution for the word and figures “section 82.”, of the words and figures “section 82; or”; and
by the addition immediately after paragraph (c) of that subsection, of the following new paragraph: -
“(d) an individual referred to in paragraph (c) of this subsection, whose interest income for the year of assessment does not exceed five thousand rupees.”; and
by the insertion immediately after subsection (2) of that section, of the following new subsection: -
“(2A) Notwithstanding the provisions of subsection (1), any person carrying on a
Business of Strategic Importance as approved under the provisions of the Colombo Port
City Economic Commission Act, No. 11 of 2021 shall file a tax return in the form and manner specified by the Commissioner-General.”.
s 20Amendment of section 95 of the principal enactment
Section 95 of the principal enactment is hereby amended as follows: -
by the renumbering of that section, as subsection (1) of that section; and
by the addition immediately after the renumbered subsection (1) of that section, of the following new subsection: -
“(2) For the avoidance of doubt, it is hereby declared that a capital gains tax return shall result in a self-assessment only for the payment of tax under section 82.”.
s 21Insertion of new section 96A in the principal enactment
The following new section is hereby inserted immediately after section 96 of the principal enactment, and shall have effect as section 96A of that enactment: -
96A. (1) Where an employee is in receipt of any arrears of salary in a year of assessment, such employee shall be entitled to a tax credit calculated in accordance with
“Applicability of the tax credit for salary arrears subsection (2). Such tax credit may be deducted from the income tax payable by such employee on his employment income for that year of assessment.
The tax credit referred to in subsection (1) shall be calculated according to the following formula: -
A = B – C where: ‘A’ is the tax credit allowed under this section which shall not exceed the income tax payable by the employee on the arrears of salary for the current year of assessment;
‘B’ is the income tax payable by the employee on the arrears of salary for the current year of assessment which is equal to the income tax payable on the aggregated employment income of the current year of assessment including the arrears of salary, less the income tax payable on the aggregated employment income excluding the arrears of salary;
‘C’ is the income tax payable, as calculated in terms of the applicable tax law for each previous year of assessment in which the arrears of salary are derived.
In this section, “arrears of salary”
means, gains and profits from employment received by an employee in the current year of assessment but in relation to any previous year of assessment from the same employment, as a result of reinstatement in service of an employment or re-appointment to the same employment after a disciplinary action, promotion to a post with effect from a previous date, entitlement to any remuneration increment with effect from a previous date of a previous year of assessment and similar reasons as specified by the Commissioner-General.
Tax credit granted under this section shall be considered by the Commissioner-General in specifying the circumstances under which the Advance Personal Income Tax shall be deducted under section 83A.
The Commissioner-General shall pay any refund claim on the application of this section within three months of the date of the refund claim made by the employee, prior to a tax audit.”.
s 22Amendment of section 100 of the principal enactment
Section 100 of the principal enactment is hereby amended in subsection (1) of that section, by the insertion immediately after paragraph (h) of that subsection, of the following new paragraphs: -
“(ha)
the Director of the Financial Intelligence Unit of the Central Bank of Sri Lanka, for the purpose of performing and discharging the duties and functions relating to anti-money laundering and countering the financing of terrorism under the provisions of the Prevention of Money
Laundering Act, No. 5 of 2006, the Convention on the Suppression of Terrorist Financing Act,
No. 25 of 2005 and the Financial Transactions
Reporting Act, No. 6 of 2006;
the Inspector-General of Police, for the purpose of performing and discharging the duties and functions relating to anti-money laundering and countering the financing of terrorism under the provisions of the Prevention of
Money Laundering Act, No. 5 of 2006 and the
Convention on the Suppression of Terrorist
Financing Act, No. 25 of 2005;
the Sri Lanka Accounting and Auditing Standards
Monitoring Board established under the Sri
Lanka Accounting and Auditing Standards Act,
No. 15 of 1995, for the purpose of performing and discharging the duties and functions of such
Board under that Act;”.
s 23Amendment of section 102 of the principal enactment
Section 102 of the principal enactment is hereby amended by the insertion immediately after subsection (1)
of that section, of the following new subsection: -
“(1A) Every company incorporated or registered in Sri Lanka, shall register with the Commissioner-General not later than thirty days from the date of such incorporation or registration.”.
s 24Amendment of section 103 of the principal enactment
Section 103 of the principal enactment is hereby amended by the addition immediately after subsection (5) of that section, of the following new subsections: -
“(6) (a) The Commissioner-General shall issue a
TIN Certificate to every person who is assigned a TIN under this section.
With effect from April 1, 2026, a person specified under subsection (3) of section 102 shall be required to submit the TIN Certificate for each of the purposes specified in Column I of the Table below and it shall be the responsibility of the relevant official specified in the corresponding entry in Column II of that Table to ensure compliance by that person of such requirement: -
Table
Column I
Column II
Purpose
Relevant official to open any account at any financial institution
Manager of the financial institution to obtain approval for a building plan
Chairman, Director
Enforcement or
Commissioner of the Local
Authority to register a motor vehicle
Commissioner-General of
Motor Traffic to renew the licence of a motor vehicle
Provincial Revenue
Commissioner or
Divisional Secretary to register a land or title to a land
Registrar-General of the Registrar General’s
Department to register a business
Divisional Secretary to transfer shares of a company incorporated in
Sri Lanka, by the transferee and transferor
Registrar-General of
Companies to obtain a credit card
Manager of the bank or credit card issuing entity
For the purpose of this subsection, the Commissioner-General and the relevant official specified in paragraph (b), may enter into an agreement for an alternative method of verifying the TIN Certificate.
The Commissioner-General may issue guidelines for the effective implementation of the provisions of this subsection.
The provisions of this section shall not apply to –
a person whose registration has been refused by the Commissioner-General under the provisions of section 102; or
a person who is restrained from obtaining a TIN Certificate in terms of the provisions of any other written law.
For the purposes of this Act, a TIN shall not be a secret or confidential information.”.
s 25Amendment of section 113 of the principal enactment
Section 113 of the principal enactment is hereby amended as follows: -
in subsection (1B) of that section, by the substitution for the words and figures “Subject to subsection (1C),”, of the words and figures
“Subject to subsections (1C) and (1D),”; and
by the addition immediately after subsection (1C) of that section, of the following new subsection: -
“(1D) With effect from the year of assessment commencing on April 1, 2025, a senior citizen shall file such person’s tax returns either in writing or electronically through a computer system or mobile electronic device.”.
s 26Amendment of section 135 of the principal enactment
Section 135 of the principal enactment is hereby amended by the addition immediately after subsection (6) of that section, of the following new subsection: -
“(7) With effect from the year of assessment commencing on April 1, 2025, where an individual, for any year of assessment (in this subsection referred to as the “current year of assessment”), has-
filed a return of income and declared the tax payable with respect to such individual’s taxable income under paragraph (a) of subsection (1) of section 2, in an amount not less than one hundred and twenty per centum of the tax payable on the taxable income for the year of assessment immediately preceding the current year of assessment;
paid the full amount of tax without claiming a tax refund; and
furnished an affidavit stating that no fraud, evasion, or willful default has been committed in relation to the tax payable for the current year of assessment, such return shall be accepted as filed, and no amended or additional assessment shall be made on such return under this section for the current year of assessment.”.