💵 The government has decided to increase the Withholding Tax (WHT) on interest income from 5% to 10%.

⭕ In simple terms, if you had a fixed deposit of Rs. 1 million at an interest rate of 8%, you were originally set to receive Rs. 80,000 per year.

⭕ With the current 5% WHT, you receive Rs. 76,000, reducing your effective interest rate to 7.6%.

⭕ With the proposed 10% WHT, you will receive Rs. 72,000, further reducing your effective interest rate to 7.2%.

⭕ If your taxable income is below Rs. 1.5 lakhs per month, you can theoretically claim this withholding tax as a refund from the Inland Revenue Department (IRD).

⭕ The government has promised to streamline the tax refund process. However, the IRD and other government refund processes are notoriously slow and inefficient. The administrative cost of processing such refunds often exceeds the actual refund amount, particularly in these WHT cases.

⭕If the government truly wants to address this issue, they need to explore alternative solutions. One practical suggestion is to offer a 1%–2% higher interest rate for fixed deposits held by senior citizens and low-income earners. This would help offset the impact of WHT at the bank level.

⭕ The government wouldn’t even have to bear the extra cost directly. Instead, they could compensate banks through negotiated regulatory incentives allowing them to absorb the cost without financial strain.

#SriLanka #WHT