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    FAQ - Frequently Asked Questions
  1. What is the due date of submission of Income Tax Return?  
The duly completed Return Form along with the Schedules and other required documents should be posted or delivered to the unit/Branch or Regional Office where your income tax file is dealt with, to reach the respective Unit/Branch/Office on or before 30th November, of each Year of Assessment.
  2. What is mean by “Company”?  
Company means by any company incorporated or registered under any law in force in Sri Lanka or elsewhere and includes a public corporation.
  3. What is mean by “Partnership”?  
Partnership means by shall not include any disposition, trust, grant, covenant, Agreement, assignment, settlement, or other arrangement by which the share of the divisible profits or the divisible loss of a partner of any partnership is shared with any other person or partnership.
  4. What is mean by “Charitable Institution”?  
Charitable Institution means by the trustee or trustees of a trust or corporation or an unincorporated body of persons established for a charitable purpose only or engaged solely in Carrying out a charitable purpose.
  5. What is mean by “profits” or “income”?  
Profits or Income means the net profits or income from any source for any period calculated in accordance with the provisions Inland Revenue Act.
  6. What is the meaning of Net Annual Value (NAV)?  

The Net Annual Value (NAV) of a house is treated as income of the owner, if that house is occupied by the owner or on behalf of the owner. A house is considered as occupied on behalf of the owner when it is kept by the owner for his own use by any member of his family.

The Net Annual Value (NAV) is computed as follows:

  • If a house is assessed for rating purpose by a local authority, the NAV is the Rating Assessment reduced by 25%.

  • If a house is not assessed for rating purpose, the NAV is determined on the basis of the rent which a tenant might reasonably be expected to pay, reduced by 25%

  7. Please explain the occupier’s Income?  
Occupier’s Income means, where a person occupies a house free of rent or pays a rent less than its net annual value, the net annual value or the excess of the net annual value over the rent paid, as the case may be, is deemed to be his income.
  8. What is mean by “Assessable income”?  
Assessable income means by the residue of the total statutory Income of any person, after deducting the aggregate amount of the deduction to which such person is entitled under Section 32 of Inland Revenue Act.
  9. What is mean by “Taxable Income”?  
Taxable Income means the residue of Assessable Income of a person after deducting the aggregate amount of the allowances to which such person is entitled under Section 33 of Inland Revenue Act.
  10. What is mean by “dividend” includes?  
    Any distribution of profit by a company to its share holders, in the form of-
  • Money or of an order to pay money.
  • Shares in any other company or
  • Debentures in that company or in any other company  and
The amount of any capital returned or distributed to the extent of the paid up value of any shares distributed by the company to its shareholders within six years preceding the date of such return or distribution of capital, such paid – up value representing the capitalization or the whole or any part of the profits of the company.
  11. Who are liable for VAT Registration?  
  • Every person who carries on a taxable activity
  • If his taxable supply exceeds or deemed to be exceed Rs. 650,000 per quarter or Rs. 2.5 Million per year.
  12. What is Means by "Taxable Supply”?  
Any supply of goods or services made or deemed to be made in Sri Lanka which is chargeable with tax under this Act and includes a supply chargeable at the rate Zero percent other than an exempt supply.
  13. Who can register to SVAT?  
  • Exporters(Providers of Zero rated services under section 7 of the VAT Act)
  • Registered persons engaged in any Specific Project.
  • Persons registered under Section 22(7), and who are entitled to claim input tax under the Act.
  • Manufacturers who supply goods manufactured in Sri Lanka (liable to VAT) to exporters to be utilized for manufactured of goods to be exported.
  • Suppliers who provide value added services to exporters which results in the improvement of the quality, character or value of any goods manufactured for export.
  14. S. M. E Sector
What is the Special Treatment for S. M. E Sector for the YA  2011/12 ?

(i) Income Tax rate is reduced to 10%, if the annual turnover does not exceed
     Rs. 300,000,000/- (other than buying and selling activities)

(ii) New undertaking on manufacture is
      Exempted from Income Tax
      for a period of 03 years
      if the investment in Capital Asset is more than Rs. 50 million.

(iii) Maximum income tax rate is
        reduced to 12%.
        applicable to
            Agriculture and

    Employment Income  
    Treat of Employment Income for the YA 2011/12  
  • No income tax file is maintained if an employee has no any other source of income.
  • Effective Tax free allowance is Rs. 600,000/-.
  • Government & private Sector employees are treated equally for PAYE System.

    Interest Income  
    Treat of Interest Income for the YA 2011/12  
    (i) Maximum rate of withholding tax is  
  • reduced to 8% on interest
  • paid to persons other than companies.
    (ii) Interest paid  
  • by state bank
  • to the senior citizens
  • is exempted
  • up to Rs. 500,000/-.
    New Investments
Implication & Benefit to New Investments for the YA 2011/12
  • 05 years tax holiday
  • for the companies
  • engaged in development of National Economy.
    Sectoral Exemptions
Sectoral Exemptions for the YA 2011/12
    Undertaking of  
  • fishing
  • producing agricultural seeds and
  • planting materials
  • is exempted
  • for 05 years
  • from income tax.
    New tax rates & other concessions
Income Tax for the YA 2011/12
  • Maximum tax rate on individual is reduced to 24% from 35%
  • Maximum tax rate on companies is reduced to 28% from 35%
  • Maximum tax rate on partnership is reduced to 8% from 10%
    removed on
    Specified Fees and

  • No more 20% of VAT rate on luxury items and tax rate of normal VAT and VAT on finance has been reduced to 12% from 20%
  • Optional VAT rate at initial stage is reduced to 2% from 5%
  • System on Advanced tax (i.e. WHT) on VAT is abolished.
  • Liable threshold for a quarter is increased to Rs. 25mn from R. 7.5mn.
  • Liable threshold is Rs. 500,000/- for a quarter.
  • Threshold for the following business has been increased to Rs. 25 mn. per quarter.

- Operating hotels,
- guest houses,
- restaurants or
- other similar business
- Processing of any local agricultural produce.
- Educational Services
- Supply of Labourers (Manpower)

    Debit tax  
    Debits tax has been abolished.  
    What are the Other benefits to individuals  
    * Duty concessions  
  • to the individual
  • who pays not less than Rs. 250,000/-
  • of annual income tax
  • for a period of
  • consecutive 10 years of assessment.
    * Issuing gold and silver cards to certain taxpayers.  
    * Taxpayers  
  • who complied with
  • Section 163(8) of Inland Revenue Act
  • will be given relief such as

                 accepting of return and
                 non issuing of additional assessment.

    * Individual taxpayers whose assessable income are less than Rs. 1,000,000/- and were already not required by the Inland     Revenue    Department to submit the Return of Income is exempted from submitting the statement of accounts.  
    * 10% Tax discount is given to any individual who pays quarterly installment of income tax 30 days prior to the due date.  
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