A bank manager in Sri Lanka typically earns a monthly salary of around Rs. 500,000, including all allowances and benefits. While this is a highly respectable income, many professionals wonder how much of it is actually taxed by the government under Sri Lankaโs current income tax system.
In this article, we break down how the Personal Income Tax (PIT) works in Sri Lanka for 2024/25, and how it applies to someone earning Rs. 500,000 per month.
๐งพ Basic Income Tax Rules in Sri Lanka (2024/25)
The Inland Revenue Act provides the following framework for resident individuals:
๐ Taxable Income
Your taxable income is calculated as:
Total Income โ Reliefs โ Allowable Deductions
๐ Tax-Free Threshold
- Every resident individual is entitled to a tax-free annual threshold of Rs. 1.2 million
๐ Thatโs Rs. 100,000 per month.
๐ Tax Rates (Progressive Slabs)
| Taxable Income Range (Annual) | Tax Rate |
|---|---|
| First Rs. 1.2 million | 0% |
| Next Rs. 500,000 | 6% |
| Next Rs. 500,000 | 12% |
| Next Rs. 500,000 | 18% |
| Next Rs. 500,000 | 24% |
| Next Rs. 500,000 | 30% |
| Excess over Rs. 3.7 million | 36% |
๐งฎ Tax Calculation for a Bank Manager (Monthly Income: Rs. 500,000)
Letโs walk through the calculation step-by-step:
โค 1. Total Annual Income
- Rs. 500,000 ร 12 = Rs. 6,000,000
โค 2. Less Tax-Free Allowance
- Rs. 6,000,000 โ Rs. 1,200,000 = Rs. 4,800,000 (Taxable income)
โค 3. Apply Tax Slabs
| Tax Band | Amount (Rs.) | Tax Rate | Tax (Rs.) |
|---|---|---|---|
| First Rs. 500,000 (after exemption) | 500,000 | 6% | 30,000 |
| Next Rs. 500,000 | 500,000 | 12% | 60,000 |
| Next Rs. 500,000 | 500,000 | 18% | 90,000 |
| Next Rs. 500,000 | 500,000 | 24% | 120,000 |
| Next Rs. 500,000 | 500,000 | 30% | 150,000 |
| Remaining Rs. 2.3 million | 2,300,000 | 36% | 828,000 |
โ
Total Tax Payable:
30,000 + 60,000 + 90,000 + 120,000 + 150,000 + 828,000 = Rs. 1,278,000 annually
โค Monthly Tax Payable:
Rs. 1,278,000 รท 12 = Rs. 106,500
๐ Summary
| Monthly Gross Income | Rs. 500,000 |
|---|---|
| Annual Gross Income | Rs. 6,000,000 |
| Annual Tax Payable | Rs. 1,278,000 |
| Monthly Tax Payable | Rs. 106,500 |
| Effective Tax Rate | ~21.3% |
So, a bank manager earning Rs. 500,000 a month will pay around Rs. 106,500 in income tax every month โ leaving them with a net income of around Rs. 393,500.
๐ก Key Considerations
- Allowable Reliefs (e.g., pension contributions, qualifying payments like solar installation costs) can reduce taxable income, but weโve excluded them here for simplicity.
- If the manager has non-cash benefits (e.g., vehicle, housing, etc.), they may also be taxed under employment benefit rules.
- This calculation assumes the person is tax resident in Sri Lanka and has only employment income.
โ Final Thoughts
Earning Rs. 500,000 a month places a bank manager in one of the higher tax brackets in Sri Lanka. With an effective tax rate of over 21%, it’s important to plan your finances smartly โ especially by using available reliefs and deductions legally allowed under the Income Tax Act.
If you fall into a similar income category, consider consulting a tax advisor to optimize your tax position and remain fully compliant with IRD regulations.
