⚠️ Important Tax Update

The tax treatment of terminal benefits in Sri Lanka has changed from time to time through amendments to the Inland Revenue Act and related regulations.

This calculator is based on the tax rules applicable to terminal benefit payments made on or after 1 April 2025, unless otherwise stated.

If your terminal benefit was paid before 1 April 2025, different tax rules may apply and the calculator results may not be accurate for historical payments.

Please obtain professional advice where the payment relates to a prior year or where there is uncertainty regarding the applicable tax treatment.

How to Identify Approved vs Non-Approved Terminal Benefits in Sri Lanka

When calculating tax on terminal benefits in Sri Lanka, it is important to determine whether the payment qualifies as an Approved Terminal Benefit or a Non-Approved Payment under the applicable Inland Revenue Act and current IRD guidelines.

✅ Common Examples of Approved Terminal Benefits

• Gratuity paid in accordance with applicable labour laws.
• Compensation paid upon genuine termination of employment.
• Payments under approved Voluntary Retirement Schemes (VRS).
• Approved retirement benefit and compensation schemes.
• Eligible Employees’ Trust Fund (ETF) and similar approved terminal benefit payments.
• Other qualifying terminal benefits recognized under applicable tax legislation.

Tax Treatment: Approved terminal benefits may qualify for special tax treatment, exemptions, concessions, or withholding provisions as prescribed by the Inland Revenue Act and current IRD guidelines applicable on the date of payment.

❌ Common Examples of Non-Approved Payments

• Payments that do not qualify as approved terminal benefits.
• Certain ex-gratia payments outside approved schemes.
• Payments lacking adequate supporting documentation.
• Benefits not covered by applicable tax concessions or exemptions.
• Amounts that do not satisfy relevant IRD requirements.

Tax Treatment: Non-approved payments may be taxed under the ordinary provisions of the Inland Revenue Act depending on the circumstances of the payment and the recipient’s tax position.

⚠️ Factors Affecting Tax Treatment

The tax treatment of terminal benefits may depend on:

• The nature of the payment.
• The date on which the payment is made.
• The employee’s employment history.
• The applicable Inland Revenue Act provisions.
• Current IRD guidelines and administrative practices.
• Supporting documentation and approvals.

📅 Why the Payment Date Matters

Tax laws relating to terminal benefits have changed over time and may change again in the future. Therefore, the tax treatment applicable to a payment may differ depending on the date on which the terminal benefit is received. Users should ensure that the correct rules applicable to the relevant payment period are considered when interpreting calculator results.