Business Registration & Tax Structure
• Sole Proprietorship -Taxed under Individual Income Tax (IIT)
• Limited Liability Companies -Taxed under Corporate Income Tax (CIT)
• Tax Year (Year of Assessment) – Begins 01st April and ends 31st March of the following year
Income Tax
A) Individual Income Tax (IIT) Slabs
Calculated progressively based on net taxable profit after applying a Rs. 1,800,000 tax-free personal relief allowance
- Progressive Tax Rate for Individual Income Tax
| First 1,800,000.00 | Tax Free |
| Next 1,000,000.00 | 6% |
| Next 500,000.00 | 18% |
| Next 500,000.00 | 24% |
| Next 500,000.00 | 30% |
| Balance | 36% |
B) Corporate Income Tax Rate
Standard Corporate Rate: 30% on the organization’s tax profit
Note: Concessionary rates of 15% apply strictly to qualifying Service Exports remitted via local banks.
C) Crucial Deadlines & Timeline
Income tax is paid in four quarterly installments based on a fair estimate made at the start of the year.
| Start of Tax Year – April 1 | |
| Q1 Payment Due | August 15 |
| Q2 Payment Due | November 15 |
| Q3 Payment Due | February 15 (Following Year) |
| Q4 Payment Due | May 15 (Following Year) |
| End of Tax Year – March 31 | |
| Final Balance Settlement | September 30 |
| Annual Return Submission | November 30 |
- Final Settlement: If actual tax liability exceeds estimated quarterly payments, settle the difference by 30th September
- Return Submission: The final annual tax return must be filed on or before 30th November
APIT / PAYE (Employment Income)
A) Liability– Employees earning a monthly employment income of more than Rs 150,000.00 per month
B) Responsibility– The Employer is legally required to deduct the applicable tax amount from the employee’s salary and remit the same to the Inland Revenue account.
C) Tax Payment– APIT/PAYE payments related to the previous month should be completed before the 15th of the following month
D) Return Submission– on or before 30th April of the following year
Withholding Tax (WHT)
Applicable when businesses make specified payments under the Inland Revenue Act.
A) Liability– The liability to deduct WHT arises only for specified payments under the Inland Revenue Act. Generally, a person (individual, partnership, company, NGO, trust, etc.) making the following payments should be required to deduct WHT.
- Rent paid to a resident individual (where aggregate monthly rent exceeds Rs. 100,000) – 10%
- Certain service fees paid to resident individuals (professional services, commissions, teaching, lecturing, etc.) where the monthly payment exceeds Rs. 100,000 – 5%
In addition to the two payments above, several more payments need to be added to the list. We have mentioned only the most relevant payments that occurred in Small Business.
B) Responsibility– The Person/business making the payment must deduct the WHT and remit it to the IRD.
C) Tax Payment– WHT payments related to the previous month should be completed before the 15th of the following month
D) Return Submission– on or before 30th April of the following year
Stamp Duty
A) Liability– Any physical receipt, payment voucher, salary slip, or discharge voucher given for cash/property exceeding Rs. 25,000 requires a Rs. 25 stamp duty
B) Tax Payment– Can be paid by physically affixing stamps or via Registered Compounding Stamp Duty
C) Compounded Deadlines (Quarterly)– Payments and return submissions share the identical dates below
| 01st Quarter Payment | on or before 15th August |
| 02nd Quarter Payment | on or before 15th November |
| 03rd Quarter Payment | on or before 15th February of the following year |
| 04th Quarter Payment | on or before 15th May of the following year |
Please note that EPF and ETF are administered under labour law, not tax law.