Do I Have to Pay Tax on My Solar Income in Sri Lanka?

If you’ve recently installed solar panels on your roof and started selling your extra electricity to the CEB or LECO, you’re probably enjoying the benefits — lower bills, a bit of extra income, and the feel-good factor of going green.

But at some point, a thought crosses your mind:

“Wait… do I need to pay tax on this income?”

It’s a good question — and one that many solar users in Sri Lanka are asking. So let’s break it all down in simple terms, without the legal jargon or stress.

First, What Exactly Is “Solar Income”?

If your solar setup is connected to the Net Plus or Net Accounting system, you’re likely earning monthly payments from the CEB or LECO. That’s because your panels are producing more electricity than you use — and the extra power gets sold back to the grid.

That money you receive is called solar income. And since it’s money coming in, it’s technically considered personal income by the Inland Revenue Department (IRD).

Is Solar Income Taxable in Sri Lanka?

Yes — but only if your total annual income goes over Rs. 1.2 million.

Here’s how it works:

• If solar is your only income, and you earn less than Rs. 100,000 per month, you don’t need to worry about tax.
• But if you also have a job, rental income, or a business, then your solar income is added to that total.
• If that total exceeds Rs. 1.2 million per year, you’ll be taxed based on how much it goes over.

Current Tax Rates (2024/2025)

Here’s a simplified look at the current tax structure for individuals in Sri Lanka:

Let’s say you earn Rs. 30,000/month from solar (that’s Rs. 360,000/year), and you also have a job that pays you Rs. 1,000,000/year. Your total income is Rs. 1,360,000, so only Rs. 160,000 will be taxed — and only at 6%. That works out to just Rs. 9,600 per year.

Not so bad, right?

So, What Do You Need to Do?

If you’re earning from solar, it’s important to stay compliant. Here’s a simple checklist:

1. Register with the IRD

You’ll need a Taxpayer Identification Number (TIN). It’s free and can be done online or at your nearest tax office.

2. Keep Track of Your Solar Payments

Create a simple record or spreadsheet to log the monthly payments you receive from CEB or LECO.

3. File Your Tax Return

Every year, you’ll need to submit your individual income tax return — even if you don’t owe tax. The tax year runs from April 1 to March 31, and returns are usually due by November 30.

Can You Reduce Your Tax Bill?

Yes, you can! If you’re earning income from your solar system, the government allows you to deduct certain expenses related to it — just like a business would.

You can deduct:

• Maintenance costs
• Insurance for the system
• Interest on a loan (if you financed your panels)
• Depreciation on your equipment (like panels and inverters)

Keep your receipts and records, and you can legally reduce your taxable income.

Quick Real-Life Example

Let’s say:

• You earn Rs. 30,000/month from solar = Rs. 360,000/year
• You have a full-time job paying Rs. 1,000,000/year
• Your total income = Rs. 1,360,000
• Your taxable income = Rs. 160,000 (over the Rs. 1.2M limit)
• You pay 6% on Rs. 160,000 = Rs. 9,600

Now, imagine you deduct Rs. 60,000 worth of solar-related expenses — your taxable income drops, and so does your tax bill.

What About Grants or Subsidies?

If you received a government grant or subsidy to help install your solar system, that money is not considered income, and you don’t pay tax on it.

Only the money you earn after the system is running — from selling electricity — is considered taxable.

Summary at a Glance

Final Thoughts

Going solar is a great move — for your wallet, the environment, and even your community. But just like any income source, the money you make from it comes with some basic responsibilities.

Don’t stress about it. As long as you:

• Keep records
• Register with the IRD
• File your return
• And claim your legal deductions

…you’ll be just fine.