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IRD encourages transactions through banks or cards
View(s):Taxpayers will no longer be able to obtain tax deductions for transactions exceeding Rs. 500,000 made to another person in a single day if they have not been made through a bank account or via card payment.
In a notice to taxpayers, the Inland Revenue Department (IRD) notes that no deduction shall be allowed to people in computing their income, and amounts incurred by them shall not be considered as “cost of an asset” where such people pay those amounts to another person exceeding Rs. 500,000 in a day, or in respect of a single transaction, or in respect of a series of single transactions relating to one event. The exemption is if they pay by way of an account payee cheque or account payee bank draft or by the use of a credit card, debit card or electronic payment system through a bank account.
The provision had been introduced with the aim of discouraging cash transactions and encouraging bank and card transactions, the IRD said. The provision is effective from May 8.
“Single Transaction” means the purchase or procurement of any goods or services, on a single invoice, receipt or statement and “bank account” means any account maintained in a bank or financial institution in Sri Lanka.
These restrictions, however, are not applicable to the Government (Departments, Ministries, and Local Authorities), any undertaking of the Government, public corporations, banks, financial institutions (as defined in Section 195 of the Inland Revenue Act), and classes of persons and payments prescribed by the Finance Minister, the IRD added.
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