The government has proposed increasing the monthly personal income tax-free threshold from Rs. 150,000 to Rs. 162,500 under the 2027 Budget, providing additional relief to salaried employees.

According to the official Budget Speech released by Parliament, President Anura Kumara Dissanayake has proposed raising the annual personal income tax-free allowance from Rs. 1.8 million to Rs. 1.95 million.

The President is currently delivering the 2027 Budget Speech in Parliament and has yet to announce these proposals during his address.

Under the proposed revisions, individuals earning monthly salaries and allowances of up to Rs. 162,500 will not be required to pay income tax on their salaries.

The Budget Speech also proposes revising the progressive personal income tax structure by widening tax brackets and introducing a 12% tax rate after the initial 6% bracket, replacing the existing 18% rate at that level.

The proposed tax rates will be 6%, 12%, 18%, 24%, 30% and 36%.

The revisions will also increase the monthly income threshold at which the highest personal income tax rate applies from Rs. 358,000 to Rs. 433,000.

According to the Budget Speech, the proposed changes will provide individual taxpayers with additional monthly tax relief ranging from Rs. 750 to Rs. 15,750, depending on their taxable income.

The document further states that, when combined with the tax reforms introduced in 2025, the total monthly tax relief provided to individual taxpayers will range from Rs. 4,250 to Rs. 36,250.

The proposals form part of the government’s planned amendments to the Inland Revenue Act aimed at providing further income tax relief.

The changes remain proposals outlined in the official Budget Speech and are subject to the necessary legislative process. (Newswire)