Inland Revenue (Amendment) Act 2026 · As enacted
21. Insertion of new section 96A in the principal enactment
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
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.”.