Personal Income Tax (PIT): SL has the highest level of income with zero tax in South Asia

Abstract

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.