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Sri Lanka’s generous tax-free personal income tax threshold

Sri Lanka has the highest tax-free income threshold in South Asia – without the Maldives. Citizens are exempt from paying income tax unless they earn over LKR 1.2 million annually (LKR 100,000 per month). In comparison, neighbouring countries have much lower thresholds. Bangladesh's monthly tax-free threshold is equivalent to LKR 75,682, while Pakistan’s is LKR 54,710. India and Bhutan have thresholds of around LKR 91,000, slightly lower than Sri Lanka. Nepal stands out as an outlier with no tax-free income threshold, imposing a 1% tax even on the lowest income earners. Sri Lanka’s generous tax-free allowance makes it one of the more taxpayer-friendly countries in the region, at least for those at the lower end of the income scale who are exempt from paying taxes.   

Table 1: Tax free income threshold in South Asia (local currency and LKR equivalent) 

Country  

Annual Tax-free threshold in Local Currency  

Monthly Tax-free threshold in Local Currency  

LKR equivalent of Monthly Tax-free threshold* 

Sri Lanka  

LKR 1,200,000 

LKR 100,000 

LKR 100,000 

Bangladesh  

BDT 350,000 

BDT 29,167 

LKR 75,682 

Pakistan  

PKR 600,000 

PKR 50,000 

LKR 54,710 

India  

INR 300,000 

INR 25,000 

LKR 91,310 

Bhutan 

BTN 300,000 

BTN 25,000 

LKR 91,107 

Nepal  

Maldives  

MVR 720,000 

MVR 60,000 

LKR 1,183,248 

2024-10-01
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