Last updated: 11 October 2026 · Rates checked against: IRD Sri Lanka — Circular SEC/2025/E/02 and the self-declaration circular
Reviewed by Zia Shahid, Buzdy Banking Editor · Our methodology
In this guide
The rate on bank interest doubled in April 2025. There is a way out for people below the tax-free threshold, but only if they ask for it — the bank will not apply it on its own.
From 1 April 2025, banks deduct 10% Advance Income Tax on interest with a Sri Lankan source.
That is double the previous 5%.
A resident individual whose assessable income does not exceed Rs 1,800,000 can file a self-declaration with the bank to have the deduction stopped.
IRD circulars on AIT and the self-declaration procedure, year of assessment 2025/2026.
The rate
Banks and financial institutions must deduct Advance Income Tax from interest or discount with a source in Sri Lanka, at 10%, with effect from 1 April 2025. The previous rate was 5%.
The self-declaration — the part most people miss
A resident individual whose assessable income for the year does not exceed Rs 1,800,000 may file a self-declaration with the bank so that AIT is not deducted. The IRD's own conditions are specific:
- It is optional, not automatic — the bank grants relief only where a valid declaration has been received
- It must reach the bank before the deduction is made
- It is valid for one year of assessment only — 1 April to 31 March — so it has to be filed again each year
- It must be on the IRD's prescribed form, available from ird.gov.lk
Someone living on a small pension and bank interest can therefore lose 10% of that interest purely for not having filed a form in time.
Interest that is outside AIT
Banks are not required to deduct AIT on certain exempt interest, including interest on money held in foreign currency accounts.
Frequently asked questions
When did the rate change?
The 10% rate applies from 1 April 2025. It was 5% before that.
Is the self-declaration automatic?
No. The bank applies relief only where a valid declaration has been received from you.
How long does a declaration last?
One year of assessment, 1 April to 31 March. It must be filed again for the next year.
What if I file it late?
The declaration has to be received before the deduction is made; it does not reverse deductions already taken.
Sources
- IRD Sri Lanka — Circular SEC/2025/E/02
- IRD Sri Lanka — Circular to resident individuals with interest income
- IRD Sri Lanka — self-declaration form
This is information, not tax advice. The figures above were checked against the source named at the top of this page on 11 October 2026. Tax rules change, usually with each annual budget. For a decision about your own money, speak to a qualified tax adviser in your country.
Sign in with Google to join
