1. Start with residency and source

A resident individual is generally assessed on Sri Lanka and foreign income. A non-resident is generally assessed on Sri Lanka-source income only. A non-resident Sri Lankan citizen can still qualify for personal relief, while a non-resident non-citizen does not receive it in this model. Residence can depend on ordinary residence, presence tests, overseas employment contracts, investor-category visas and specialised rules. If the answer is uncertain, calculate both scenarios and ask a professional to settle the status before filing.

2. The foreign-income rule changed on 1 April 2025

For 2023/24 and 2024/25, qualifying service-export and other foreign-source gains earned in foreign currency and remitted through a bank to Sri Lanka were exempt. From 2025/26, that exemption was removed. When the statutory foreign-currency and bank-remittance conditions are met, the income is generally taxable with a maximum rate of 15%. Income that does not meet those conditions can fall into the normal progressive bands. Keep contracts, invoices, foreign-currency statements, conversion evidence and the Sri Lankan bank remittance trail.

A family transfer, loan, gift, capital receipt or movement of your own savings is not automatically foreign income. Record the underlying legal and economic source. Double-tax agreements and foreign tax credits can alter the result country by country, so the tracker treats an entered foreign credit as provisional.

3. Contractor expenses need a business purpose and evidence

Independent professionals and sole traders can review expenditure incurred in producing business income. Typical categories include subcontractors, professional fees, software, the business portion of phone and internet, work premises, direct work travel, advertising, staff costs, repairs, bank charges and interest on income-producing borrowing. A mixed-use cost must be apportioned. A computer, vehicle or other capital asset may require capital allowances instead of an immediate deduction.

Do not automatically claim private or domestic expenditure, income tax, government fines, entertainment, reserves, employee costs or costs connected with exempt and final-withholding income. A payment of Rs. 500,000 or more can also be denied when it is made outside accepted traceable payment methods. Store the date, payee, amount, invoice, purpose, payment method and business-use percentage. Records should generally be retained for at least five years, and longer when an assessment remains open.

4. Property purchases are records; rent and taxable sale gains are income

Buying a home or investment property is generally not income, and the purchase price is not an ordinary personal-income-tax deduction. Keep the deed, consideration, valuation, acquisition costs, capital-improvement records and traceable payment evidence because they can affect the asset cost when a later disposal is reviewed. Rent received is investment income and belongs in the rent category.

A sale, exchange or other realisation of investment property can create capital-gains tax on the gain—broadly, consideration less the recognised asset cost—not on the full sale proceeds or the bank remittance. A principal residence can be outside the investment-asset definition when the statutory ownership and occupation tests are met. The tracker therefore asks for the taxable gain after cost and exemptions, plus the realisation date; it does not calculate a conveyancing cost base or decide whether an exemption applies. A separate capital-gains return and payment can be due within 30 days after the end of the month of realisation, so material property transactions need professional review promptly.

5. Family context does not mean a joint return

Sri Lanka assesses each individual separately. There is no married-filing-jointly option in this tracker, no transfer of one spouse’s unused personal relief, and no current automatic child or dependant allowance for the supported years. Jointly owned investment income generally follows ownership shares. Create one workbook for each spouse, then use the two results only as a household cash-planning view.

6. Reconcile certificates, payments and deadlines

APIT deducted by an employer, AIT/WHT on bank interest, rent or professional services, self-assessment instalments and allowable foreign tax credits can reduce the balance payable. Resident-company dividends and lottery, reward, betting or gambling winnings are shown separately as final withholding payments so they do not enter the ordinary bands again. The Rs. 500,000 exemption applies per lottery winning only—not to the other types of winnings. Bank interest remains part of assessable income for a resident, with WHT generally treated as a credit.

Quarterly instalments are normally due on 15 August, 15 November, 15 February and 15 May. The final payment is generally due on 30 September after the year ends, and the income-tax return on 30 November. The 2026 amendment removed the Statement of Estimated Tax procedure from 2026/27 and changed the instalment basis; detailed IRD procedure for some lower-income or no-prior-liability cases should still be verified. Capital gains have a separate return and payment timetable.