The Cabinet has approved a proposal to provide relief to low-income individuals impacted by the recent increase in the withholding tax rate from 5% to 10%, introduced under the Inland Revenue (Amendment) Act No. 2 of 2025, which came into effect on April 1, 2025.
The revised tax policy has resulted in withholding tax being deducted even from individuals earning less than Rs. 1.8 million annually—the official threshold for income tax liability—causing financial strain on low-income earners and small-scale depositors.
In response, President Anura Kumara Dissanayake, in his capacity as Minister of Finance, Policy Planning, and Economic Development, proposed the introduction of a self-declaration mechanism. Under this system, individuals earning below the tax-free threshold can declare their income and claim exemption from the increased withholding tax on interest income.
Furthermore, the Cabinet also approved amendments to the Inland Revenue Act No. 24 of 2017, making it mandatory to provide a Tax Identification Number (TIN) when opening any type of bank account.
