Solar Tax Relief in Sri Lanka: Up to Rs. 600,000 a Year

Sri Lanka has been quietly running one of the more generous renewable-energy tax incentives in the region. If you have installed solar panels on your home, or you are thinking about it, you can deduct a substantial chunk of the cost from your taxable income, year after year, until you have effectively claimed back the whole installation.

Most homeowners hear "Rs. 600,000 relief" and assume it is a one-shot deduction in the year of installation. It is not. The same Rs. 600,000 is available again the next year, and the year after that, until the full system cost has been recovered through tax savings.

This guide walks through what the relief is, exactly who qualifies, and how the multi-year claim works for a real Rs. 2,000,000 solar installation. By the end you will be able to estimate, to the rupee, how much tax this relief saves you.

What is the solar tax relief in Sri Lanka?

The solar tax relief is a deduction available to resident individuals who install on-grid solar PV systems on their own premises. It is granted under Section 52 of the Inland Revenue Act No. 24 of 2017, with the specific mechanics set out in Paragraph 2(g) of the Fifth Schedule of the Act.

Mechanically, the relief works like the personal relief or the rental income relief. It is subtracted from your assessable income before the progressive tax slabs are applied. So if your assessable income is Rs. 5,000,000 and you claim Rs. 600,000 in solar relief and Rs. 1,800,000 in personal relief, only Rs. 2,600,000 of your income gets taxed.

How much can I claim, and for how many years?

The cap is Rs. 600,000 per Year of Assessment. But here is the part most people miss: the same Rs. 600,000 ceiling resets every year.

Under Paragraph 2(g) of the Fifth Schedule, you keep claiming the annual relief until your cumulative deductions across all years equal one of two things:

1. The total expenditure you incurred to acquire the solar panels, or
2. If you bought the system with a bank loan, the total amount you have repaid to the bank.

So a small system can be fully claimed in a single year. A larger system spreads the relief over multiple years. Let's walk through what that looks like for a Rs. 2,000,000 installation, starting from the Year of Assessment 2024/2025.

Worked example: Rs. 2,000,000 solar system over 4 years

Suppose you install a Rs. 2,000,000 on-grid solar system in March 2025, near the end of YoA 2024/2025. Your assessable income is Rs. 5,000,000 each year.

In Year 4, you can only claim the Rs. 200,000 that is left of the original cost. After that, the relief is exhausted for this installation.

Who is eligible for solar tax relief?

The Inland Revenue Act sets four strict conditions. All four must be met for the relief to apply.

1. Resident individual. You have to be a tax resident of Sri Lanka in the Year of Assessment you are claiming.
2. You acquired the panels. The legal purchaser must be you, the person claiming the relief. A landlord cannot claim relief on panels their tenant paid for, and vice versa.
3. Fixed on your own premises. The panels must be installed on property you own. Renters generally cannot claim, because they do not own the building where the system is fixed.
4. Connected to the national grid. The system has to be an on-grid installation, with a connection through Ceylon Electricity Board (CEB) or LECO. Off-grid setups, standalone battery systems, and portable solar panels do not qualify.

How much tax does solar relief actually save me?

Tax savings depend on the marginal slab your relief sits in. Since solar relief reduces your taxable income, the saving is the amount of relief multiplied by the rate of the highest slab it pushes you out of.

Let's run the numbers for our Rs. 5,000,000-income earner. Note that the tax brackets changed between YoA 2024/2025 and YoA 2025/2026, so the savings differ by year. For a deeper walkthrough of how the slabs work, see our guide on calculating Sri Lankan income tax.

So a Rs. 2,000,000 solar system effectively returns Rs. 732,000 in tax savings over 4 years, on top of whatever you save on your CEB bill from net metering. The first year's saving is slightly lower because YoA 2024/2025 has the now-removed 12% bracket, which softens the top-slab impact. From YoA 2025/2026 onwards, the relief lands more heavily in the 30% to 36% bracket, which is why the annual saving jumps to Rs. 222,000.

What documents do I need to claim it?

Reliefs are documentation-heavy, and the IRD can ask for proof during an assessment up to several years after you have filed. Keep these on file for the entire claim period:

• Installation invoice from the solar contractor, showing the full system cost
• Proof of payment: bank slips, online transfer confirmations, or cheque copies
• Grid connection confirmation from CEB or LECO, including the connection date and connection type
• Loan documents and yearly repayment statements, if you financed the system

How do I claim solar relief when filing?

Solar relief is claimed on your annual tax return, but its impact starts earlier, at the quarterly instalment stage.

When you prepare your Statement of Estimated Tax (SET) at the start of the Year of Assessment, include the Rs. 600,000 (or your remaining balance, if you are partway through a multi-year claim) in your total reliefs. That reduces your estimated annual tax, which in turn reduces each of the four quarterly instalments due on August 15, November 15, February 15, and May 15. Our quarterly tax payments guide walks through the SET in detail.

At year-end, when you file your annual return, the solar relief appears in the reliefs section alongside personal relief and any rental income relief. The form itself does not ask for invoice numbers, but you must keep the supporting documents in case the IRD requests them.

How does Taxable handle solar relief?

Tracking a multi-year claim manually is where most taxpayers come unstuck. You need to remember how much you have already claimed in prior years, what is left of the cost, and how to fold that figure into the current year's SET before the August 15 deadline rolls around.

Taxable does this automatically. When you record your solar installation once, the app:

• Calculates the Rs. 600,000 annual cap for the current year and reduces it to your remaining balance in the final year of the claim
• Carries forward your cumulative claim across Years of Assessment, so you never accidentally over-claim
• Stores your installation invoice, payment proofs, and grid connection certificate as supporting documents tied to the relief record
• Updates your quarterly tax estimate the moment the relief is added, so your next instalment reflects the lower liability

The same applies to your other reliefs and to broader tax compliance, including the recently increased Rs. 1,800,000 personal relief that we covered in our breakdown of the YoA 2025/2026 changes.

If you have just installed solar, the most important thing you can do today is record the installation invoice, the proof of payment, and the grid connection confirmation. The relief is worth real money, sometimes more than the panels themselves earn back through net metering in the same period. Make sure it ends up on your return.