Cabinet gives approval to amend Tax Acts inclusive of new tax relief measures

The Cabinet has given its approval to a proposal made by Prime Minister and Finance Minister Mahinda Rajapaksa to formulate a transparent, effective and simplified tax structure as per a pledge made by the government through its election manifesto.

President Gotabaya Rajapaksa had earlier presented a special Cabinet paper at the inaugural meeting of the new Cabinet to introduce a convenient tax administration system and a self-compliance system to make tax payment easier. Accordingly, the Cabinet of Ministers approved the Prime Minister's proposal to amend the Inland Revenue Act bearing No. 24 of the Year 2017 which will be tabled in parliament for ratification.

According to the new amendments, income from agriculture, fisheries and livestock shall be exempted from income tax, with effect from the year of Assessment 2019/2020.

Income tax rate applicable on construction industry shall be reduced from 28% to 14%, with effect from the year of assessment 2019/2020.

Religious institutions shall fully be exempted from income tax, with effect from December 01, 2019.

Tax free threshold of the employment income of all public and private sector employees for the purpose of the Pay-As-You-Earn (PAYE) shall be increased from Rs. 100,000 to Rs. 250,000 per month and the excessive personal income shall be liable for income tax at the progressive rate of 06%, 12% on each tax slab of Rs. 250,000 and 18% on the excess, with effect from January 01, 2020.

Interest income up to Rs. 250,000 per month shall be exempted from the Withholding Tax, with effect from January 01, 2020, among other proposed tax amendments.

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