Budget 2027 Income Tax: The New Slabs, and How Much You'll Save
TL;DR: Budget 2027 (announced 12 Nov 2026) proposes three changes to personal income tax: the tax-free relief rises from Rs. 1.8 million to Rs. 1.95 million a year (Rs. 162,500 a month); a new 12% band is added after the 6% band; and the bands widen to Rs. 50,000 a month, so the top 36% rate only starts at Rs. 433,333 a month. At a Rs. 300,000 monthly salary you save Rs. 5,250 a month — Rs. 63,000 a year. These are proposals: they apply from 1 April 2027, once Parliament amends the Inland Revenue Act. Calculate your saving →
If you earn a salary in Sri Lanka, the Budget 2027 speech had one clear piece of good news for you: your tax bill is going down. The President, presenting the budget as Finance Minister, proposed raising the tax-free threshold and redrawing the income tax bands so that the rate no longer jumps straight from 6% to 18%. Here is exactly what changes, what it is worth at your salary, and when it takes effect.
The new slabs, side by side
The monthly APIT slabs today, and the ones Budget 2027 proposes. The two big moves: the tax-free line rises by Rs. 12,500 a month, and a 12% band appears where the rate used to leap from 6% to 18%.
| Today | Rate | Budget 2027 | Rate |
|---|---|---|---|
| Up to Rs. 150,000 | 0% | Up to Rs. 162,500 | 0% |
| Rs. 150,001 – 233,333 | 6% | Rs. 162,501 – 233,333 | 6% |
| Rs. 233,334 – 275,000 | 18% | Rs. 233,334 – 283,333 | 12% |
| Rs. 275,001 – 316,667 | 24% | Rs. 283,334 – 333,333 | 18% |
| Rs. 316,668 – 358,333 | 30% | Rs. 333,334 – 383,333 | 24% |
| Above Rs. 358,333 | 36% | Rs. 383,334 – 433,333 | 30% |
| — | — | Above Rs. 433,333 | 36% |
Annually, the same change reads: relief Rs. 1.95 million; first Rs. 850,000 of taxable income at 6%; then Rs. 600,000 bands at 12%, 18%, 24% and 30%; 36% only above Rs. 5.2 million a year (it starts at Rs. 4.3 million today).
What you save at your salary
The relief is Rs. 750 a month at the bottom and caps at Rs. 15,750 a month once your salary passes Rs. 433,333. Three worked examples, on a steady monthly salary:
| Monthly salary | APIT today | APIT after Budget 2027 | You save / month | You save / year |
|---|---|---|---|---|
| Rs. 200,000 | 3,000 | 2,250 | 750 | 9,000 |
| Rs. 300,000 | 18,500 | 13,250 | 5,250 | 63,000 |
| Rs. 500,000 | 86,000 | 70,250 | 15,750 | 189,000 |
At Rs. 300,000 a month your take-home (before EPF) rises from Rs. 281,500 to Rs. 286,750, and your effective tax rate falls from 6.2% to 4.4%. At Rs. 500,000 the saving is already at the Rs. 15,750 cap — earning more does not save more, because every band above Rs. 433,333 is taxed at the same 36% under both structures.
When does it apply?
From the year of assessment 2027/2028, which starts 1 April 2027 — and only once Parliament amends the Inland Revenue Act (No. 24 of 2017). Until then, today’s slabs are the law and your employer keeps deducting APIT on them. Do not expect your December or January payslip to change; the first payslip on the new slabs should be April 2027.
What else changed in Budget 2027
- VAT removed from printed books and exercise books — school textbooks, dictionaries, encyclopedias and children’s drawing books are exempted from VAT.
- Special Commodity Levy cuts on food — sprats from Rs. 100 to Rs. 10 per kg, Maldive fish from Rs. 302 to Rs. 10 per kg, and dried chillies down Rs. 50 per kg, from 13 November 2026.
- The government estimates the personal tax changes alone cost about Rs. 16 billion in revenue; with the CESS removal and VAT exemptions the total is close to Rs. 29 billion.
Frequently asked questions
How much tax will I save under Budget 2027?
It depends on your salary: Rs. 750 a month just above Rs. 150,000, Rs. 5,250 a month at Rs. 300,000, and a maximum of Rs. 15,750 a month once your salary passes Rs. 433,333. Use the free calculator to check your exact figure.
When do the new tax slabs start?
From 1 April 2027 (year of assessment 2027/2028), once Parliament amends the Inland Revenue Act. Until then, today’s slabs apply.
What is the new tax-free threshold?
Rs. 1.95 million a year — Rs. 162,500 a month. Earn up to that and you pay no personal income tax on your salary.
What is the new 12% tax band?
Under Budget 2027, the income between Rs. 233,334 and Rs. 283,333 a month is taxed at 12% — a new band that sits between the 6% band and the 18% band. Today that same income is taxed at 18%.
Does Budget 2027 change the 36% top tax rate?
The rate stays at 36%, but it starts later: at Rs. 433,333 a month (Rs. 5.2 million a year) instead of Rs. 358,333 a month (Rs. 4.3 million a year).
General information only, not tax advice. The Budget 2027 figures are proposals announced on 12 November 2026 and are subject to Parliamentary approval. Confirm your position with your employer, your accountant, or the IRD.