What Expenses Can a Sri Lankan Freelancer Deduct?

Most freelancers know they now owe tax under the rules that kicked in on April 1, 2025. What they're less sure about is what they can subtract from their income before the tax bill is calculated. Some try to claim everything. Others claim nothing and end up paying tax on rupees they shouldn't have. Both are mistakes.

If you're still hazy on the 15% cap, our freelancer tax overview for 2025/2026 covers who qualifies. This guide picks up from there and goes deep on the expenses you can take off your income before the tax rate touches it.

What counts as a deductible business expense for a freelancer?

The core rule is in Section 11(1) of the Inland Revenue Act. You can deduct any expense "incurred during the year by the person and in the production of income from the business."

That phrase "in the production of income" is the test. You actually paid the money this year, and you paid it because of your freelance business, not your personal life. You don't have to make a profit in the same year to claim it. The test is intent, not outcome.

Why can't I write off my laptop the same way as my internet bill?

Some expenses get fully written off the year you pay. Others get spread over several years. Section 11(3) of the Act draws the line with a short test.

If what you bought wears out or stops being useful within 12 months, it's a revenue expense and you deduct the whole amount this year. If the benefit lasts longer than 12 months, it's a capital expense and you claim a piece of the cost each year over the asset's useful life.

A few examples:

The 12-month rule is the only thing that matters here. Not the price. Not the brand. Just whether the benefit lasts longer than a year.

Which everyday expenses can I claim against my freelance income?

These are the revenue expenses. If they pass the Section 11 test, you write off the full amount the year you pay. Common ones for a Sri Lankan freelancer:

• Internet and mobile bills for the share you actually use for work
• Software subscriptions (Adobe, Figma, GitHub, Notion, ChatGPT Plus, accounting tools)
• Web hosting, domain names, SSL certificates, cloud storage
• Bank charges, wire transfer fees, and FX conversion costs on foreign earnings
• Co-working day passes and short-term office rentals
• Professional development courses, conferences, books, certifications related to what you sell
• Marketing: website costs, paid ads, business cards, portfolio platforms
• Professional fees paid to lawyers, accountants, or tax consultants for your business
• Travel to client meetings or conferences (transport, parking, fuel)
• Office supplies under the 12-month line (paper, pens, cables, small accessories)
• Professional indemnity or other business-related insurance

The list isn't closed. If you can show an expense was incurred to produce your freelance income, it's defensible. Keep the receipt and a one-line note of what the spend was for.

How do I deduct my laptop, monitor, and furniture over time?

For assets that last longer than a year, Section 16 of the Act lets you claim capital allowances. You take the cost of the asset, divide it by the number of years over which it's written off, and that's your deduction each year.

The number of years comes from the Fourth Schedule, which groups assets into classes:

A worked example. On April 2, 2025 you buy a laptop for Rs. 350,000 and an external monitor for Rs. 80,000. Both are Class 1. Total cost is Rs. 430,000. Your capital allowance is Rs. 86,000 per year, claimed each year for 5 years (Years of Assessment 2025/26 through 2029/30). That Rs. 86,000 comes off your business income before tax is calculated. If you sell the laptop or stop using it for work before the 5 years are up, separate disposal rules apply, so record when an asset enters and leaves business use.

How do I split bills that I use for both work and personal life?

The most common case is home internet. You can't deduct the whole bill if you also browse Instagram on it. The IRD expects you to make an honest split, called apportionment, between business and personal use.

The split should be defensible, not optimistic. If you genuinely use your connection 70% for client work and 30% for personal browsing, claim 70% of the bill. Write down how you arrived at that number, even just one line in a note app, kept alongside the bill itself.

The same logic applies to:

• Home electricity, if you work from home
• Mobile phone bill, if you also use it for personal calls
• Rent or property charges, on a home that doubles as your workspace
• Vehicle costs, if your car gets used for client trips and personal errands

What expenses can I never deduct, even if they're tied to my work?

Section 10(1)(b) of the Act has a list of things you can't claim, even if they feel like they should be business expenses. The ones a freelancer usually trips on:

• Domestic and private expenses. Your grocery bill, your kids' tuition, the personal half of any mixed-use bill.
• Income tax itself. You can't deduct the tax you owe, or penalties and interest on late tax payments.
• Fines and penalties for breach of any law. Traffic fines, late filing fees from other regulators, anything punitive.
• Costs tied to exempt or final-WHT income. If you earn dividend income that's already had final 15% withheld, you can't claim expenses against it. We covered the difference between final and creditable WHT in Final vs Creditable Tax in Sri Lanka.
• Entertainment. Liquor, tobacco, accommodation, amusement, and hospitality outlays are out, even with clients. The narrow exception is where entertainment is itself your business (a restaurant, for example).
• Notional reserves and provisions. Money set aside for a vague rainy-day fund or "future bad debts" isn't a real expense. Only actual costs count.

How does Taxable handle freelancer expenses for you?

Tracking all this by hand is doable but easy to slip up on. The two things freelancers usually struggle with are remembering the apportionment split on each mixed-use bill, and keeping track of which year a capital asset is on (year 2 of 5? year 4 of 5?).

Taxable handles both. When you log an expense, you pick a category and set an allocation percentage, and the system remembers it. When you log a capital asset, Taxable assigns it to its Fourth Schedule class, calculates the yearly allowance, and feeds the right amount into each Year of Assessment automatically. Your Statement of Estimated Tax pulls all of it together with your foreign-currency income, so your quarterly instalment lands with the right number on the right deadline.

For the rest of the picture, our guides on quarterly tax payments and how to calculate income tax in Sri Lanka show how your deductions feed into the overall calculation.