In Sri Lanka, employment income taxation has undergone significant reforms in recent years, especially with the revival of Advance Personal Income Tax (APIT). For the Year of Assessment (YA) 2024/2025, salaried employees must be aware of how primary and secondary employment income is taxed and the importance of filing T-10 forms. This article serves as a guide to understanding these critical aspects of tax compliance.
🔍 What is Employment Income?
Employment income refers to all forms of remuneration received by an individual in return for services rendered to an employer. This includes:
- Salaries and Wages
- Bonuses and Overtime
- Allowances (housing, transport, entertainment, etc.)
- Non-cash benefits (like vehicles, accommodation, etc.)
- Tax-on-tax benefits
According to the Inland Revenue Act, all these income types are subject to APIT unless explicitly exempted.
🧾 Advance Personal Income Tax (APIT)
Who is Subject to APIT?
All resident individuals earning income from employment—whether primary or secondary—are liable for APIT deductions, which are made monthly by their employer and remitted to the Inland Revenue Department (IRD).
🏢 Primary Employment and the T-10 Certificate
🔹 What is Primary Employment?
Primary employment is the main job from which an individual earns the bulk of their monthly income. Tax deductions from this employment are based on Tax Table No. 01, applicable when the employee has submitted a Primary Employment Declaration (APIT/001/EST).
🔹 How is Tax Deducted?
Tax is deducted according to a progressive rate schedule after a monthly personal relief of Rs. 100,000 has been considered. Below is a simplified version of Tax Table No. 01 for YA 2024/25:
| Monthly Income Range (Rs.) | Tax Rate |
|---|---|
| Up to 100,000 | Exempt |
| 100,001 – 141,667 | 6% – Rs. 6,000 |
| 141,668 – 183,333 | 12% – Rs. 14,500 |
| 183,334 – 225,000 | 18% – Rs. 25,500 |
| 225,001 – 266,667 | 24% – Rs. 39,000 |
| 266,668 – 308,333 | 30% – Rs. 55,000 |
| Above 308,333 | 36% – Rs. 73,500 |
🔹 T-10 Form: Certificate of Tax Deduction
Employees must receive a T-10 Certificate from their employer annually. It confirms the total income and APIT deductions made. This certificate is essential when filing the Return of Income and must be attached, even if tax deducted is zero.
👥 Secondary Employment and Additional Tax Obligations
🔹 What is Secondary Employment?
This refers to any additional employment apart from the primary one. Individuals must disclose their primary employment income range to the secondary employer using the Secondary Employment Declaration (APIT/002/EST).
🔹 How is APIT Deducted for Secondary Employment?
If a resident employee has secondary employment, tax is deducted based on Tax Table No. 07, depending on the combined monthly income from both jobs. The rates are as follows:
| Combined Monthly Income from Both Jobs | Tax Rate on Secondary Income |
|---|---|
| Less than Rs. 100,000 | 0% |
| 0 – 100,000 | 6% |
| 100,001 – 141,667 | 12% |
| 141,668 – 183,333 | 18% |
| 183,334 – 225,000 | 24% |
| 225,001 – 266,667 | 30% |
| 266,668 and above | 36% |
📌 Note: If the individual fails to submit the APIT/002/EST declaration, the secondary employer must deduct tax at 36%, regardless of the income.
✅ Summary of Compliance Steps for Employees
| Step | Action |
|---|---|
| 1️⃣ | Submit APIT/001/EST to primary employer |
| 2️⃣ | Submit APIT/002/EST to secondary employer (if applicable) |
| 3️⃣ | Review T-10 Certificate annually from each employer |
| 4️⃣ | Attach T-10 when filing your Return of Income |
| 5️⃣ | Ensure all APIT deductions are correctly made using IRD-approved tables |
📝 Final Thoughts
Understanding the APIT system and your responsibilities as a salaried taxpayer is crucial for staying compliant and avoiding penalties. Always ensure that accurate declarations are submitted to your employers and keep records of all certificates and correspondence with the Inland Revenue Department.
The Lanka Tax Club encourages all employees and HR professionals to familiarize themselves with APIT guidelines and ensure proper documentation during the 2024/2025 tax year.
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📬 Contact Us
✉️ Email: info@lankataxclub.lk
📞 Phone: +94 771 033 845 (WhatsApp)