Sri Lanka Tax Changes for 2026/2027: What Actually Changed

This article states the position as at September 4, 2026. A tracker that doesn't say when it was written is worse than no tracker at all. If you're reading this much later, check whether anything newer has landed.

The Sri Lanka tax changes for 2026/2027 arrived in two certified Acts and one heavily revised IRD circular. What catches people out isn't the headline items, it's the timing. Some started on April 1, 2026 with the new year of assessment. One of the biggest started on June 3, 2026, in the middle of the year. And several were backdated into years that have already closed, which means they change a return you may be sitting down to file right now.

Here's the whole delta for an individual taxpayer, with the amending instrument named for each item.

Which laws changed Sri Lankan tax for 2026/2027?

Two Acts, both certified by the Speaker. Neither is a proposal or a Bill awaiting passage.

Act No. 11 of 2026 runs to 42 sections, and section 1 explains why two changes in the same Act can start on different days. Section 1(3) contains a table listing certain sections with their own dates of operation, many of them in the past. Section 1(2) catches everything else: any provision not named in that table came into operation on the day the Bill became an Act, which is June 3, 2026.

So there are three groups of changes, not one. Those that started with the new year of assessment on April 1, 2026, those that started mid-year on June 3, 2026, and those deemed to have started in an earlier year entirely.

What changed from April 1, 2026?

Two things, and they're connected.

Quarterly instalments moved to a prior-year basis. Section 16 of the Act rewrote item "A" in the instalment formula in section 90(3). For any year of assessment commencing on or after April 1, 2026, "A" is now the amount of tax payable on your taxable income in the immediately preceding year of assessment. Not an estimate of what you'll earn this year. What you actually owed last year.

There's a proviso for people whose circumstances have changed. Where you had no taxable income last year, or you expect this year's taxable income to be lower than last year's, the estimated tax for the current year is used as "A" instead, calculated on the basis the Commissioner-General specifies.

The formula itself, (A minus C) divided by B, is unchanged. Item "C" picked up a new paragraph (ba) covering tax withheld or to be withheld during the year under Division II from payments included in your income. And a new section 90(6) lets you take a foreign tax credit under section 80 into account, but only where you've actually paid the foreign tax or you reasonably estimate you'll pay it during the corresponding period.

The Statement of Estimated Tax ended. Sections 17 and 18 confine sections 91 and 92 to years of assessment commencing before April 1, 2026. The formal SET filing that used to accompany your first instalment is gone for 2026/2027 onward. We covered the practical consequences of that in what happened to the Statement of Estimated Tax.

The IRD then issued a circular on how to apply the new section 90, revised it twice within nine days, and set a deadline for the declaration attachments. If you're using anything other than the standard prior-year basis, read which version of the IRD instalment circular governs your payment before you calculate anything.

Why did capital gains tax jump from 10% to 15% mid-year?

This is the largest number change for individuals, and the one most likely to be missed, because it doesn't line up with the tax year at all.

Section 36 amended paragraph 1 of the First Schedule so that gains from the realisation of investment assets are taxed at 10% before the general commencement date and 15% with effect from it. That amendment isn't named in the section 1(3) table, so it falls under section 1(2), which puts it at June 3, 2026. Within a single year of assessment, the rate now depends on when you sold.

Say you realised a gain of Rs. 4,000,000 on an investment property.

Two months apart, same gain, Rs. 200,000 of difference. And you can't soften it with your personal relief, because the Fifth Schedule is explicit that the relief "shall not be deducted against gains from the realisation of investment assets".

One thing that has not changed: section 90 still provides that gains derived or expected to be derived from the realisation of an investment asset are not considered for the purpose of quarterly instalments. Capital gains sit outside the instalment system and are dealt with separately.

Did the tax rates, brackets or personal relief change?

No. Neither moved, and that's worth stating plainly, because a lot of people assume a new amendment Act means new rates. Personal relief for a resident individual stays at Rs. 1,800,000, and the progressive bands are unchanged:

Both the relief and this table were last set by the Inland Revenue (Amendment) Act No. 2 of 2025, with effect from April 1, 2025. Act No. 11 of 2026 left them alone. If you want to see how the bands actually work on a real income, we walk through it in how to calculate your income tax.

Two more things stayed put. Your return of income is still due not later than eight months after the end of the year of assessment under section 93(1), which for a standard year means November 30. And the four instalment dates in section 90(2) are still August 15, November 15, February 15, and May 15 of the following year.

What changed for years that have already ended?

This is the group most people miss. The changes were made in 2026 but deemed to have started earlier, and several affect the 2025/2026 return due at the end of November.

Small bank interest no longer forces employees to file. A new section 94(1)(d) says an individual who would otherwise be exempt from filing, because their tax relates exclusively to employment income with APIT deducted, keeps that exemption where their interest income for the year does not exceed Rs. 5,000. Deemed effective April 1, 2025.

Individuals with no taxable income can stop interest being withheld. A new paragraph (f) in section 84(3) exempts interest or discount paid by a financial institution to a resident individual on a deposit, for any year of assessment commencing on or after April 1, 2025, where the individual has no taxable income for the year and gives the institution a self-declaration in the form the Commissioner-General specifies.

Some unused qualifying payments can now be carried forward. A new section 52(4) says that where a qualifying payment cannot be deducted in a year because your total assessable income doesn't cover it, the undeducted amount is carried forward to the immediately succeeding year, or any consecutive year after that. Deemed effective for years commencing on or after April 1, 2025.

Read the scope carefully. Section 52(4) applies to items (i) and (v) of sub-paragraph (b) of paragraph 1 of the Fifth Schedule, not to every qualifying payment. Paragraph 1(b) is the category dealing with donations to the Government, local authorities and certain statutory bodies and funds. The source documents we verify against don't reproduce items (i) and (v) themselves, so confirm with your tax agent which item your donation falls under before assuming it carries forward. Our guide to carrying tax relief forward covers the wider picture.

Selling a vehicle is explicitly out of the "other income" net. Section 8(2) lists what's excluded when calculating gains or profits from other sources. Section 2 of the amendment added a new paragraph (c) to that exclusion list: "gains from the realisation of motor vehicles." Deemed effective April 1, 2024. This is a clarification in the taxpayer's favour. Note where it sits, though. It's an exclusion within the "other sources" calculation, so it doesn't speak to a vehicle that forms part of a business.

Back-pay is no longer punished by the brackets. A new section 96A gives an employee who receives arrears of salary a tax credit calculated as B minus C, where B is the extra tax the arrears cause in the current year and C is the tax that would have been payable under the law for each previous year the arrears relate to. The credit can't exceed the current-year tax on the arrears. Deemed effective January 1, 2024. Section 96A defines "arrears of salary" as covering reinstatement or re-appointment after disciplinary action, a promotion backdated to an earlier date, a remuneration increment backdated into a previous year, and similar reasons the Commissioner-General specifies. Where the credit produces a refund, the Commissioner-General must pay it within three months of the claim, before any tax audit.

Senior citizens got an explicit choice of filing method. A new section 113(1D) provides that with effect from the year of assessment commencing April 1, 2025, a senior citizen shall file returns either in writing or electronically through a computer system or mobile electronic device.

Can I get my outstanding interest written off?

If you're carrying an old tax debt, this is the most valuable item in the Act, and it closes soon. Section 42 directs the Commissioner-General to write off outstanding interest on underpayments and late payments under three headings:

• Section 157 of the Inland Revenue Act, up to the year of assessment ending on March 31, 2025
• The Surcharge Tax Act, No. 14 of 2022
• The Finance Act, No. 35 of 2018, on debt repayment levy

The condition is that the full amount of tax and any applicable penalties, excluding anything the Commissioner-General has waived, are paid before six months expire from the date the general provisions came into operation. That date is June 3, 2026, which puts the cut-off at December 3, 2026.

Two details make this more generous than it first looks. If you'd already paid the tax and penalties before June 3, 2026, section 42(3)(a) treats you as having complied. And the Commissioner-General considers years of assessment and taxable periods separately, so clearing one year gets that year's interest written off even if other years are still outstanding.

Where do I now need a TIN certificate?

A new section 103(6) requires the Commissioner-General to issue a TIN Certificate to everyone assigned a TIN, and then makes that certificate a gate on eight everyday transactions. The requirement applies with effect from April 1, 2026. This is the complete list the Act gives, with the official responsible for checking:

The section also lets the Commissioner-General agree an alternative method of verifying the certificate with any of these officials, and issue guidelines for implementation, so the experience at the counter may vary. What doesn't vary is that you need the TIN first. If you don't have one, start with how to get a Taxpayer Identification Number.

What changed if I have not been filing?

The Act pushes in two directions at once, adding a formal warning step before prosecution and a real protection for people who file honestly.

A thirty-day warning now comes first. A new Chapter XVIIA, containing section 185A, applies where a person fails to file an annual statement under section 86, file a return of income under section 93, register under section 102, appear before the Commissioner-General under a section 123 notice, or furnish a tax return under section 126. In those cases the Commissioner-General shall serve a written notice saying proceedings will be instituted unless the person takes the necessary steps to comply within thirty days. Only a person who then fails without reasonable cause to comply with that notice commits the offence, which carries a fine up to Rs. 400,000, imprisonment up to six months, or both, on summary trial before a Magistrate.

Read that as a chance rather than a threat. Comply inside the thirty days and the prosecution route closes. Civil late-filing penalties are a separate matter, covered in the 2026 amendment penalties guide.

Filing more than last year buys you certainty. A new section 135(7) says that where an individual files a return declaring tax payable of not less than 120% of the tax payable on the preceding year's taxable income, pays the full amount without claiming a refund, and furnishes an affidavit stating no fraud, evasion or wilful default has been committed, the return shall be accepted as filed and no amended or additional assessment shall be made on it under section 135.

All three conditions have to hold. And note the timing: section 135(7) applies "with effect from the year of assessment commencing on April 1, 2025" and to "any year of assessment" after that. It isn't a one-year concession. It's available for your 2026/2027 return too.

What changed for SSCL?

The Social Security Contribution Levy (Amendment) Act No. 10 of 2026 lowered the point at which a business has to register. Section 2 closes off the previous registration paragraph at June 30, 2026, and adds a new paragraph for any period commencing on or after July 1, 2026. From that date, registration is required not later than fifteen days from the date the aggregate turnover for a quarter exceeds, or is likely to exceed, nine million rupees, or the date the aggregate turnover across four consecutive quarters exceeds, or is likely to exceed, thirty-six million rupees. Section 3 aligns the de-registration test to the same thirty-six million figure over four consecutive quarters.

SSCL is a separate levy from income tax and only bites above the threshold, so most individual taxpayers are unaffected. If you run a growing business, the lower trigger is the thing to watch. Our SSCL amendment guide has the detail.

What should I do about this now?

Working down the list, in rough order of how much money is at stake:

1. If you sold an investment asset this year, check the date. Where the gain is chargeable at all, a realisation on or after June 3, 2026 is taxed at 15%, not 10%. Small gains inside the Rs. 50,000 and Rs. 600,000 limits stay exempt.
2. If you're carrying old tax debt with interest, act before early December. The section 42 write-off needs the principal and penalties paid inside six months of June 3, 2026, and it works year by year.
3. Recalculate your instalments on the prior-year basis. "A" is last year's tax payable now, unless you qualify for one of the two alternative bases and file the declaration.
4. Get your TIN certificate before you need it. Eight common transactions now depend on it.
5. Check your 2025/2026 return against the backdated items before you file at the end of November. The Rs. 5,000 interest threshold, the qualifying payment carry-forward, the salary arrears credit and the motor vehicle exclusion all apply to years that have already closed.
6. If you've never filed, don't wait for the notice. Section 185A gives you thirty days once it arrives. Filing before it arrives is easier.

What should I watch for next?

Not everything that changes your obligations comes through an amendment Act. The IRD also issues circulars, and a circular can change how a rule is applied without changing the rule itself. That's what happened with quarterly instalments this year, where the department revised its circular three times in nine days.

A circular can't move a date Parliament set, but it can change the forms you file, the basis you're allowed to use, and when supporting documents are due. So check both sources.

As at September 4, 2026, the position above reflects Act No. 11 of 2026, Act No. 10 of 2026, and IRD circulars through mid-August 2026. Anything issued after that isn't in here.