Quarterly Tax Payments in Sri Lanka: Your 2025/2026 Guide
If you're self-employed, freelancing, or earning income that doesn't have tax deducted at source, you can't just wait until the end of the year to settle your tax bill. The Inland Revenue Department (IRD) requires you to pay estimated tax in four quarterly instalments throughout the year. These are called quarterly tax payments, and for most self-employed Sri Lankans, they're not optional.
This guide covers who needs to pay, when each instalment is due, how to calculate your amounts under the updated 2025/2026 tax brackets, and what it costs if you miss a deadline.
Who needs to make quarterly tax payments?
Under Section 90 of the Inland Revenue Act No. 24 of 2017, you become an "instalment payer" if you earn assessable income from a business, investment, or employment where your employer isn't required to withhold tax. In practice, that means:
- Freelancers and consultants, especially those earning foreign currency as Individual Service Exporters
- Self-employed professionals like doctors, lawyers, and accountants running their own practice
- Small business owners and sole proprietors
- Landlords and investors with rental or investment income not covered by final Withholding Tax (WHT)
- Remote workers for foreign employers, since no local APIT deduction applies
- Anyone with multiple income sources where APIT from employment doesn't cover the full liability
If your employer deducts APIT and that covers your entire tax liability (because you have no other income), you probably don't need to make quarterly payments. But the moment you add freelance work, rental income, or investment returns on top of that, you likely do.
Not sure whether you qualify as an Individual Service Exporter? Our guide on freelancer tax changes for 2025 explains the ISE classification and the concessionary 15% foreign income rate.
The quarterly payment schedule
The Sri Lankan tax year (Year of Assessment) runs from April 1 to March 31. Quarterly payments are due on the 15th of these months:
| Quarter | Period Covered | Due Date |
|---|---|---|
| Q1 | April to June | August 15 |
| Q2 | July to September | November 15 |
| Q3 | October to December | February 15 |
| Q4 | January to March | May 15 |
Each payment is due roughly six weeks after the quarter ends. That buffer gives you time to tally your income for the period and calculate the payment.
The pattern is the same every year: August 15, November 15, February 15, May 15.
By August 15 (the first instalment date), you also need to file a Statement of Estimated Tax (SET) with the IRD under Section 91. Plan to have both your SET and your first payment ready at the same time.
How to calculate your quarterly payment
The Statement of Estimated Tax (SET)
Your quarterly payments are based on the Statement of Estimated Tax. This is your best estimate of total annual tax liability, divided into four equal parts.
Here's how to work it out:
Step 1: Estimate your total annual income
Add up all your income sources: employment, freelance work, business profits, investment returns, rental income. If you're early in the year, project based on what you know so far.
Step 2: Subtract personal relief
For YoA 2025/2026, the personal relief is Rs. 1,800,000. This increased from Rs. 1,200,000 in the previous year.
Step 3: Subtract qualifying payments (if any)
This includes donations to approved charities, government donations, and other qualifying expenditures under Section 34 of the Act.
Step 4: Apply the progressive tax rates
For YoA 2025/2026, the tax brackets changed significantly under the Inland Revenue Amendment Act No. 2 of 2025. The old 12% bracket was removed, and the first bracket expanded. Here's the current structure:
| Taxable Income Slab | Tax Rate |
|---|---|
| First Rs. 1,000,000 | 6% |
| Next Rs. 500,000 | 18% |
| Next Rs. 500,000 | 24% |
| Next Rs. 500,000 | 30% |
| Balance | 36% |
This is a five-bracket system, down from the six brackets used in YoA 2024/2025. If you're comparing to last year, the jump from 6% to 18% (with no 12% step in between) is the biggest change. For a detailed walkthrough of how progressive tax works, see our income tax calculation guide.
If you earn foreign income as a freelancer or remote worker, a concessionary rate applies: 6% on the first Rs. 1,000,000 of taxable foreign income, then 15% on the rest. That's separate from the local income brackets above. See our foreign employment income guide for details.
Step 5: Subtract expected WHT and APIT credits
If you expect Withholding Tax to be deducted on some income (interest, certain dividends) or APIT to be deducted by your employer, subtract those estimated credits from your total tax.
Step 6: Divide by four
The remaining amount is your estimated annual tax payable. Divide it by four. That's each quarterly instalment.
Example calculation
Say you're a freelancer with local business income of Rs. 6,000,000 (after expenses) for YoA 2025/2026, and no other income sources:
| Step | Amount (LKR) |
|---|---|
| Estimated annual income | 6,000,000 |
| Less: Personal relief | (1,800,000) |
| Taxable income | 4,200,000 |
| Tax on first Rs. 1,000,000 at 6% | 60,000 |
| Tax on next Rs. 500,000 at 18% | 90,000 |
| Tax on next Rs. 500,000 at 24% | 120,000 |
| Tax on next Rs. 500,000 at 30% | 150,000 |
| Tax on remaining Rs. 1,700,000 at 36% | 612,000 |
| Total estimated tax | 1,032,000 |
| Less: Expected WHT/APIT credits | 0 |
| Annual tax payable | 1,032,000 |
| Quarterly instalment | 258,000 |
You'd pay Rs. 258,000 on each of the four due dates.
For comparison, the same Rs. 6,000,000 income under last year's six-bracket structure (YoA 2024/2025, with Rs. 1,200,000 personal relief) would have produced a different result. The new brackets mean higher marginal rates kick in sooner, but the increased personal relief partially offsets that.
Updating your estimate mid-year
Your SET isn't locked in. If your income changes significantly during the year (you land a big client, lose a contract, or receive unexpected investment income), you should update your estimate and adjust future quarterly payments.
It's better to overpay slightly and get a credit than to underpay and face penalties. Any overpayment gets credited against your final tax return.
Review your SET estimate at the end of each quarter before making the payment. If your actual income is tracking significantly above or below your original estimate, adjust the remaining instalments. The IRD cares about total compliance, not whether each quarter was perfectly equal.
What happens if you miss a deadline?
Missing a quarterly payment deadline has real financial consequences under the Inland Revenue Act. Here's exactly what you're looking at.
The 14-day grace period
You get a short buffer. Under Section 179(2), the penalty only applies if you fail to pay within 14 days of the due date. So if Q1 is due August 15, you have until August 29 before the penalty kicks in.
That said, interest starts accruing from the original due date regardless of the grace period. The grace period only protects you from the penalty, not from interest.
Penalty: 10% of the unpaid amount
If you don't pay within those 14 days, the IRD imposes a penalty of 10% of the instalment amount that was due. On our example of Rs. 258,000 per quarter, that's Rs. 25,800 in penalties for a single missed instalment.
Interest: 1.5% per month
On top of the penalty, interest accrues at 1.5% per month (or part of a month) on the unpaid amount, running from the original due date until you actually pay. This is compound interest under Sections 157 and 159(1), so it adds up faster than you'd expect.
Missing all four quarterly payments on our example of Rs. 1,032,000 annual liability would mean Rs. 103,200 in penalties alone, before interest. Add several months of compound interest at 1.5% per month and the total cost of non-compliance grows quickly.
Late filing penalty (separate from instalment penalties)
Beyond quarterly payment penalties, failing to file your annual tax return on time carries its own penalty under Section 178. The IRD calculates two amounts and charges you whichever is greater:
- 5% of tax owed plus 1% for every additional month you're late, or
- Rs. 50,000 plus Rs. 10,000 for every additional month
The total is capped at Rs. 400,000, but that cap is cold comfort when the minimum starts at Rs. 50,000.
How to make the payment
Quarterly tax payments go to the Inland Revenue Department. Each payment generates a Document Identification Number (DIN) that serves as your proof of payment. Keep every DIN reference. You'll need them when filing your annual return.
Payment methods:
- Online through the IRD portal
- Bank deposits to designated IRD accounts
- In person at IRD offices
Five ways to stay on top of quarterly payments
1. Set calendar reminders early
Mark August 15, November 15, February 15, and May 15 in your calendar with reminders at least a week in advance. Don't rely on memory. A recurring annual reminder takes 30 seconds to set up and saves you from a Rs. 25,800+ penalty.
2. Track income as it comes in
Don't wait until the quarter ends to tally your income. Record transactions as they happen. This makes each quarter's calculation straightforward instead of a last-minute scramble through bank statements and invoices.
3. Keep your SET updated
If your income is running significantly above or below your initial estimate, update your SET. This avoids a large surprise payment or a large refund claim at year-end.
4. Set aside money for tax
If you're self-employed, consider putting 15-25% of each payment you receive into a separate account earmarked for tax. When quarterly deadlines arrive, the money is already there.
5. Use a tax management tool
Stop calculating quarterly payments by hand
Taxable calculates your quarterly instalment amounts automatically based on your recorded income and expenses. It generates your Statement of Estimated Tax, tracks each quarter's payment status, and reminds you before deadlines. You record your transactions, and the platform tells you exactly how much to pay and when.
The full calendar for YoA 2025/2026
| Date | What's Due |
|---|---|
| August 15, 2025 | Q1 instalment + Statement of Estimated Tax (SET) |
| November 15, 2025 | Q2 instalment |
| February 15, 2026 | Q3 instalment |
| May 15, 2026 | Q4 instalment |
| September 30, 2026 | Balance payment due (if any remaining tax owed) |
Key takeaways
Quarterly tax payments are a legal requirement for most self-employed Sri Lankans and anyone earning income not covered by APIT or WHT. The deadlines are fixed: August 15, November 15, February 15, May 15. Missing them costs real money.
For YoA 2025/2026, remember the two big changes from last year: personal relief went up to Rs. 1,800,000, and the tax brackets shifted to a five-slab structure with no 12% step. Both affect your quarterly calculation.
The key to staying compliant is tracking your income throughout the year, keeping your estimate current, and paying on time. Whether you use a spreadsheet, a tax consultant, or a dedicated tool like Taxable, the important thing is that you do it. Because at 10% penalties plus 1.5% monthly compound interest, being late is always the most expensive option.