Govt. to raise PAYE tax threshold to Rs. 150, 000 - President

Following discussions with the International Monetary Fund (IMF) during the third review of its External Fund Facility (EFF), the government has reached an agreement to raise the Pay As You Earn (PAYE) tax threshold from Rs. 100, 000 to Rs. 150, 000 a month, President Anura Kumara Dissanayake announced in Parliament today (18). 

Explaining the new income tax revisions, President Dissanayake said that those earning a salary of Rs. 150, 000 were 100% exempt from tax. Those earning Rs. 200, 000 will be exempt from tax by 71% while someone earning a salary of Rs. 250, 000 will have 61% of their earnings tax free. The salary of a person earning Rs. 300, 000 will be 47% free from tax. The salary of someone earning Rs. 350, 000 a month will be 25.5% free from tax. 

“As such, we have managed to revise the PAYE tax to give less relief to those earning high salaries while giving more relief to people earning less,” the President pointed out. 

The President further announced the removal of Value Added Tax (VAT) on locally produced fresh milk and yogurt following discussions during the third review on the EFF. This was done considering the nutrition needs of the country’s children, he said. 

An agreement was also reached to increase Withholding Tax from 5% to 10%. However, there will be a process whereby low income earners can claim exemptions, he added.