📈 Govt. Mulls Raising Personal Tax-Free Threshold to Rs. 200,000

• Proposed Tax Relief: The Government is maintaining its commitment to increase the monthly personal income tax-free threshold to Rs. 200,000 (annual Rs. 2.4 million), with potential implementation linked to the upcoming 2027 Budget as discussions continue under President Anura Kumara Dissanayake. • Current Tax Structure: The monthly tax-free limit was previously raised from Rs. 100,000 to Rs. 150,000 (annual Rs. 1.8 million), alongside adjusted tax bands to ease public burden while expanding the overall tax base. • Fiscal Strategy & Revenue: Economic Development Deputy Minister Nishantha Jayaweera noted that rate📈 Sri Lanka Govt. Considers Raising Personal Tax Threshold to Rs. 200,000 The Government is planning to increase the monthly personal income tax-free threshold to Rs. 200,000, Economic Development Deputy Minister Nishantha Jayaweera told Parliament. • Proposed Relief: Plans are underway to raise the tax-free limit from the current Rs. 150,000 to Rs. 200,000 per month, fulfilling an election pledge aimed at easing the public burden. Relief measures are expected to align with the upcoming 2027 Budget, subject to state revenue growth. • Policy Direction: The medium-term fiscal strategy focuses on reducing tax rates while broadening the tax base and improving compliance. The tax-free threshold was previously increased from Rs. 100,000 to Rs. 150,000 (Rs. 1.8 million annually). • Economic Context: • State revenue expanded from 8.2% of GDP in 2022 to 16.6% in 2025. • The current tax structure remains heavily reliant on indirect taxes, with a direct-to-indirect tax ratio of 40:60. • Public investment declined from 5% to 3% of GDP during recent fiscal adjustments. • Expert Assessment: The Institute of Policy Studies (IPS) cautioned that immediate tax cuts may be premature due to high public debt and compliance gaps. IPS recommends focusing on post-IMF (2027) direct tax collection, digitalizing tax administration, and reducing exemptions to maintain macroeconomic stability.