Personal Income Tax (PIT): SL has the highest income tax rate at a lower income level in South Asia

Abstract

Sri Lanka imposes its highest tax rate at a relatively lower income threshold compared to other South Asian countries. Individuals earning over LKR 308,333 per month are subject to a steep 36% tax rate, making Sri Lanka the fastest in the region to reach its top tax bracket - the highest tax rate at which income is taxed. In comparison, India and Bhutan apply their top tax rate of 30% on incomes around LKR 457,000 and LKR 456,000, respectively, while Pakistan’s 35% rate applies to incomes above LKR 374,000. Bangladesh, with a lower top tax rate of 25%, taxes incomes above LKR 357,000. Nepal, the only country with a higher top tax rate than Sri Lanka, charges 39% on incomes over LKR 950,958, while its 36% rate applies to earnings above LKR 381,000—still higher than Sri Lanka’s threshold.