Self-declaration mechanism to ease tax burden on low-income depositors

Wednesday, 21 May 2025 01:12 - - {{hitsCtrl.values.hits}}

Cabinet green lights to amend Inland Revenue Act No. 24 of 2017 to make provision of TIN mandatory for opening all types of bank accounts

The Cabinet of Ministers at their meeting on Monday approved introducing a self-declaration system aimed at protecting low-income domestic depositors from the recently increased retention tax on interest income.

The move was following concerns raised over the impact of the Inland Revenue (Amendment) Act No. 2 of 2025, which raised the withholding tax (WHT) on interest from 5% to 10% effective from 1 April 2025.

The change has led to tax deductions even from individuals earning less than Rs. 1.8 million annually, the threshold below which no income tax is levied.

To address this, the Cabinet approved the introduction of a self-statement or self-declaration mechanism that would allow depositors with annual earnings below the Rs. 1.8 million threshold to declare their exempt status and be relieved from the retention tax.

The measure aims to prevent undue financial strain on low-income earners and promote equitable tax compliance.

In tandem with this move, the Cabinet also gave the green light to amend the Inland Revenue Act No. 24 of 2017 to make the provision of a Taxpayer Identification Number (TIN) mandatory for opening all types of bank accounts. The amendment is expected to strengthen tax administration and improve compliance monitoring.

The proposal to this effect submitted by President Anura Kumara Disanayake in his capacity as the Finance, Policy Planning and Economic Development Minister was approved by the Cabinet of Ministers.

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