About Lump-sum Payment Tax Calculator - Your Complete Guide to Sri Lankan APIT

Understanding how to calculate Advance Personal Income Tax (APIT) on lump-sum payments in Sri Lanka is crucial for both employers and employees. Our comprehensive calculator implements Tax Table No. 02 methodology to ensure accurate tax calculations on bonuses, arrears, and other irregular payments.

What are Lump-sum Payments?

Lump-sum payments are irregular compensation payments made to employees beyond their regular monthly salary. These include:

• Bonuses and Incentives: Performance bonuses, festival bonuses, annual bonuses
• Leave Encashment: Accumulated leave converted to cash payments
• Salary Arrears: Back payments due to salary adjustments or reinstatement
• Overtime Payments: Significant overtime compensation (in some cases)
• Share Scheme Benefits: Market value of shares allotted under employee share schemes

Understanding EGAR (Estimated Gross Aggregate Remunerations)

The cornerstone of lump-sum payment tax calculation is EGAR, which represents the total estimated income for the entire Year of Assessment (April 1st to March 31st).

EGAR Components

Component A (Aggregate Monthly Paid)

• Regular monthly salary × Number of months already paid in Y/A
• Represents income already received

Component B (Aggregate Monthly Payable)

• Regular monthly salary × Remaining months in Y/A
• Represents expected future income

Component C (Aggregate Lump-sum)

• Current lump-sum payment + Previous lump-sum payments in Y/A
• Represents all irregular payments for the year

EGAR = A + B + C

Tax Table No. 02 - How It Works

Unlike regular monthly tax (Table 01), lump-sum payments use a comprehensive annual calculation approach:

Tax Brackets (Tax Table No. 02)

EGAR Range	Tax Rate	Constant	Description
Up to Rs. 1,800,000	0%	Rs. 0	No tax
Rs. 1,800,001 - Rs. 2,800,000	6%	Rs. 108,000	Low rate bracket
Rs. 2,800,001 - Rs. 3,300,000	18%	Rs. 444,000	Medium rate bracket
Rs. 3,300,001 - Rs. 3,800,000	24%	Rs. 642,000	Higher rate bracket
Rs. 3,800,001 - Rs. 4,300,000	30%	Rs. 870,000	High rate bracket
Above Rs. 4,300,000	36%	Rs. 1,128,000	Maximum rate bracket

Calculation Formula

Tax Deductible = (EGAR × Rate%) - [(Constant + Total Annual Monthly Tax) + Previous Lump-sum Tax]

Where:

• Total Annual Monthly Tax: Monthly tax (Table 01) × 12 months
• Previous Lump-sum Tax: Tax already deducted on previous lump-sum payments in Y/A

Step-by-Step Calculation Process

Step 1: Calculate Monthly Tax (Tax Table No. 01)

Determine the monthly tax on regular salary using the standard APIT rates.

Step 2: Determine EGAR Components

• Calculate Component A (salary already paid)
• Calculate Component B (expected future salary)
• Calculate Component C (total lump-sum payments)
• Sum all components to get EGAR

Step 3: Apply Tax Table No. 02

• Identify the applicable tax bracket based on EGAR
• Apply the corresponding rate and constant

Step 4: Calculate Final Tax

• Deduct annual monthly tax and previous lump-sum tax
• Result is the tax deductible on current lump-sum payment

Practical Examples

Example 1: Mr. Ranaweera's Second Incentive Payment (Official IRD Example)

This comprehensive example from the Inland Revenue Department demonstrates calculating tax on a second lump-sum payment:

Scenario:

• Employee: Mr. Ranaweera (resident employee)
• Monthly Salary: Rs. 170,000 (fixed taxable salary)
• First Incentive (April 2025): Rs. 600,000 (tax paid: Rs. 36,000)
• Second Incentive (December 2025): Rs. 800,000 (current calculation)
• Months Already Paid: 9 months (April to December)

Step 1: Calculate EGAR (D)

Component	Calculation	Amount
A (Paid)	Rs. 170,000 × 9 months	Rs. 1,530,000
B (Payable)	Rs. 170,000 × 3 months	Rs. 510,000
C (Lump-sums)	Rs. 600,000 + Rs. 800,000	Rs. 1,400,000
D (EGAR)	A + B + C	Rs. 3,440,000

Step 2: Determine Tax Bracket

EGAR of Rs. 3,440,000 falls in the 24% bracket (Rs. 3,300,001 - Rs. 3,800,000)

Step 3: Calculate Monthly Tax (Tax Table No. 01)

For Rs. 170,000 monthly salary (6% bracket):

• Monthly tax = (Rs. 170,000 × 6%) - Rs. 9,000 = Rs. 1,200

Step 4: Apply Tax Table No. 02 Formula

Tax Deductible = (D × 24%) - [642,000 + Tax(A) + Tax(B) + Previous lump-sum tax]

• D × 24% = Rs. 3,440,000 × 24% = Rs. 825,600
• Aggregate monthly tax on A (9 months) = Rs. 1,200 × 9 = Rs. 10,800
• Aggregate monthly tax on B (3 months) = Rs. 1,200 × 3 = Rs. 3,600
• Previous lump-sum tax = Rs. 36,000

Final Tax Deductible = Rs. 825,600 - [Rs. 642,000 + Rs. 10,800 + Rs. 3,600 + Rs. 36,000] = Rs. 825,600 - Rs. 692,400 = Rs. 133,200

Result:

• Tax on December incentive: Rs. 133,200
• Effective tax rate: 16.65%
• Net payment after tax: Rs. 666,800

Example 2: Mid-Year Bonus

• Monthly Salary: Rs. 300,000
• Months Paid: 8 (April to November)
• Bonus Amount: Rs. 400,000
• Previous Lump-sum: Rs. 0

Calculation:

• Component A: Rs. 300,000 × 8 = Rs. 2,400,000
• Component B: Rs. 300,000 × 4 = Rs. 1,200,000
• Component C: Rs. 400,000 + Rs. 0 = Rs. 400,000
• EGAR: Rs. 4,000,000

Tax Bracket: 30% (Rs. 3,800,001 - Rs. 4,300,000) Tax Calculation: (Rs. 4,000,000 × 30%) - [(Rs. 870,000 + Annual Monthly Tax) + Rs. 0]

Important Compliance Notes

For Employers

• Mandatory Deduction: APIT on lump-sum payments is compulsory under Section 83A(1A) of the Inland Revenue Act
• Timing: Tax must be deducted at the time of making each payment
• Payment Deadline: Tax deducted during a month must be remitted by the 15th day of the following month
• Payment Method: Through any Bank of Ceylon branch using IRD remittance forms
• Documentation: Maintain detailed records of all calculations and payments
• Applicability: This applies to all resident employees and non-resident employees who are Sri Lankan citizens

For Employees

• Understanding Deductions: Know how your tax is calculated using Tax Table No. 02
• Joint Liability: If employer fails to deduct tax, you are jointly and severally liable for payment
• Employee Payment Deadline: If employer doesn't deduct, you must pay within 15 days after month end
• Planning: Consider timing of lump-sum payments for tax optimization
• Records: Keep documentation for tax return filing and verification
• Verification: Use this calculator to double-check employer calculations

Personal Tax Relief

Every individual receives Rs. 1,800,000 annual tax relief (approximately Rs. 150,000 per month):

• Built into Tax Table No. 01 for monthly salary calculations
• For lump-sum payments, no tax if EGAR remains at or below Rs. 1,800,000
• If monthly salary is below Rs. 150,000 but EGAR exceeds Rs. 1,800,000, Tax Table No. 02 must still be used

Year of Assessment Considerations

The Sri Lankan tax year runs from April 1st to March 31st. This affects:

• EGAR Calculations: Based on annual projections within the Y/A
• Previous Payments: Only consider payments within the current Y/A
• Month Counting: Count months from April 1st, not calendar year

Special Cases for Service Exporters and Remote Workers

Resident Employees with Foreign Employers (Tax Table No. 08)

If you're a resident employee working remotely for a foreign employer with no permanent establishment in Sri Lanka:

• Different Tax Table: Use Tax Table No. 08, not Table No. 02
• Self-Assessment: Since foreign employers won't deduct APIT, you must self-pay monthly
• Payment Deadline: Within 15 days after the end of the calendar month of receiving payment
• Tax Type: Individual Income Tax (IIT), not employer-withheld APIT
• Currency Conversion: Convert foreign currency to LKR at the time of receipt

Tax Table No. 08 Rates (Different from Table No. 02):

Cumulative Income	Tax Rate
Up to Rs. 1,800,000	Relief from tax
Rs. 1,800,001 - Rs. 2,800,000	6% less Rs. 108,000
Above Rs. 2,800,000	15% less Rs. 360,000

Important Note: Lump-sum payments (bonuses) are included immediately in the monthly cumulative income calculation, not calculated separately.

Independent Service Providers & Freelancers

Critical Distinction: If you're an independent contractor or freelancer (not an employee):

• Tax Table No. 02 and No. 08 do not apply to you
• Your income is classified as business income, not employment income
• Different tax provisions and calculation methods apply
• Consult tax professionals for business income tax calculations

Non-Resident, Non-Citizen Employees

If you're a non-resident and not a Sri Lankan citizen:

• Use Tax Table No. 04 instead of Table No. 02
• Similar EGAR methodology applies
• Different tax rates and constants
• Consult IRD guidelines for specific rates

Tax-on-Tax Arrangements (Employer Bears Tax)

If your employer agrees to pay your tax liability:

• Special Tax Table No. 06 applies with grossed-up rates
• Higher effective rates (e.g., 21.95% instead of 18%)
• The tax itself becomes taxable income that the employer covers
• Requires different formulas for calculation

Common Scenarios and Solutions

Multiple Lump-sum Payments

When receiving multiple lump-sum payments in the same Y/A:

• Each calculation includes all previous lump-sum payments
• Previous tax deductions are considered to avoid double taxation
• EGAR increases with each payment, potentially moving to higher brackets
• Keep detailed records of all payments and tax deductions

Mid-Year Employment Changes

For employees who change jobs mid-year:

• Calculations may need adjustment based on actual vs. projected income
• Coordination between employers may be required
• Provide new employer with previous employment details
• Final tax reconciliation at year-end through tax return

Leave Without Pay

Extended leave without pay affects:

• Component B calculations (reduced expected salary for remaining months)
• Overall EGAR calculations (lower annual projection)
• Monthly tax projections may need adjustment

Frequently Asked Questions (FAQs)

How do I calculate lump-sum payment tax in Sri Lanka?

To calculate lump-sum payment tax in Sri Lanka, use our free calculator by entering your regular monthly salary, months already paid in the current Year of Assessment (April to March), current lump-sum amount, and any previous lump-sum payments with their tax deductions.

The calculator automatically computes:

• EGAR (Estimated Gross Aggregate Remunerations) by adding:
  • Component A: Monthly salary already paid (salary × months paid)
  • Component B: Monthly salary payable (salary × remaining months)
  • Component C: Total lump-sum payments (current + previous)
• Tax Table No. 02 Application: Applies progressive rates (0% up to Rs. 1.8M, 6%-36% above)
• Tax Formula: (EGAR × Rate%) - [Constant + Monthly Tax + Previous Lump-sum Tax]

Results show your exact tax liability, applicable tax bracket, effective rate, and net payment after tax. The calculator uses the same methodology as the official IRD Mr. Ranaweera example, ensuring compliance with Inland Revenue guidelines.

What is EGAR (Estimated Gross Aggregate Remunerations)?

EGAR (Estimated Gross Aggregate Remunerations) is the total projected employment income for the entire Year of Assessment used to determine the correct tax bracket for lump-sum payments in Sri Lanka.

EGAR consists of four components:

1. Component A: Aggregate monthly remunerations already paid

   • Your regular monthly salary multiplied by months paid so far
   • Excludes previous lump-sum payments

2. Component B: Aggregate monthly remunerations payable

   • Your regular monthly salary multiplied by remaining months in Y/A
   • Projects future regular income

3. Component C: Aggregate lump-sum payments

   • Current lump-sum payment plus all previous lump-sum payments in current Y/A
   • Includes bonuses, leave encashment, arrears

4. Component D (EGAR): Total = A + B + C

Why EGAR Matters: EGAR ensures your lump-sum payment is taxed according to your total annual income bracket, preventing undertaxation of large one-time payments. The Year of Assessment runs from April 1st to March 31st in Sri Lanka.

What constitutes a lump-sum payment in Sri Lanka?

Under the Inland Revenue Act of Sri Lanka, lump-sum payments subject to APIT Tax Table No. 02 include:

1. Bonuses and Incentive Payments

   • Performance bonuses based on company or individual metrics
   • Festival bonuses (Sinhala/Tamil New Year, Christmas)
   • Annual bonuses paid irregularly
   • Sales incentives and commissions (if substantial)

2. Leave Encashment

   • Accumulated leave converted to cash payments
   • Upon resignation, retirement, or voluntary encashment
   • Unused annual leave or earned leave payments

3. Salary Arrears

   • Back payments due to salary adjustments or increases
   • Retroactive salary payments upon reinstatement
   • Delayed salary payments for past months

4. Medical Expense Reimbursements

   • Certain medical cost reimbursements classified as taxable income
   • Non-exempt medical payments exceeding thresholds

5. Employee Share Schemes

   • Market value of shares allotted under employee share schemes
   • Calculated at time of allotment
   • Reduced by employee's contribution for the shares

These payments differ from regular monthly salary and are taxed using the EGAR methodology under Tax Table No. 02 to ensure proper progressive taxation based on total annual income. Regular monthly salary uses Tax Table No. 01 instead.

How much tax will I pay on my bonus in Sri Lanka 2025?

Bonus tax in Sri Lanka 2025 depends on your total EGAR (annual projected income) and follows Tax Table No. 02 progressive rates:

EGAR Range (Rs.)	Tax Rate	Formula Constant
Up to 1,800,000	0%	Nil - No tax
1,800,001 - 2,800,000	6%	Rs. 108,000
2,800,001 - 3,300,000	18%	Rs. 444,000
3,300,001 - 3,800,000	24%	Rs. 642,000
3,800,001 - 4,300,000	30%	Rs. 870,000
Above 4,300,000	36%	Rs. 1,128,000

Formula: Tax Deductible = (EGAR × Rate%) - [Constant + Monthly Tax + Previous Lump-sum Tax]

Example from Official IRD Guide: Mr. Ranaweera with Rs. 170,000 monthly salary receiving an Rs. 800,000 bonus in December (with previous Rs. 600,000 bonus in April):

• EGAR: Rs. 3,440,000
• Tax Bracket: 24% (Rs. 3,300,001 - Rs. 3,800,000)
• Tax on December Bonus: Rs. 133,200
• Effective Rate: 16.65%

Use our calculator for your exact amount based on your specific income and payment details.

Can I receive multiple lump-sum payments in one year?

Yes, you can receive multiple lump-sum payments in one Year of Assessment (April to March) in Sri Lanka. Each calculation must include all previous lump-sum payments to compute accurate EGAR and tax liability.

Important Tracking Requirements:

1. Previous Lump-sum Amounts

   • Sum of all previous lump-sum payments in current Y/A
   • Must be added to current payment for Component C of EGAR
   • Example: Rs. 600,000 (April) + Rs. 800,000 (December) = Rs. 1,400,000 total

2. Previous Tax Deducted

   • Total tax already deducted on all previous lump-sum payments
   • Must be tracked and entered in calculator
   • Prevents double taxation on the same income
   • Example: Rs. 36,000 tax on April bonus deducted from December calculation

3. Bracket Movement Risk

   • As you receive more lump-sum payments, your EGAR increases
   • You may move into higher tax brackets (6% → 18% → 24% → 30% → 36%)
   • Later payments in the year typically face higher effective tax rates
   • Strategic timing can minimize tax liability

4. Documentation Requirements

   • Keep all payslips showing lump-sum payments
   • Maintain records of tax deduction amounts
   • Store for tax return filing and IRD compliance
   • Required for future lump-sum payment calculations

Example: If you received a Rs. 600,000 bonus in April with Rs. 36,000 tax, and receive another Rs. 800,000 in December, your December calculation must include both amounts (Rs. 1,400,000 total lump-sum) and deduct the Rs. 36,000 previous tax to calculate only the incremental tax on the December payment.

What are the payment deadlines for lump-sum tax in Sri Lanka?

Lump-sum payment tax deadlines in Sri Lanka are governed by Sections 86(1), 92(a), 93, and 371(4) of the Inland Revenue Act:

For Employers (Withholding Agents):

1. Payment Deadline: Tax deducted during a calendar month must be remitted to the Commissioner General of Inland Revenue by the 15th day of the following month

   • Example: Tax deducted in October → Pay by November 15th
   • Example: Tax deducted in March → Pay by April 15th

2. Payment Method: Remittance must be made through:

   • Any Bank of Ceylon branch
   • Using IRD-specified remittance forms
   • Online payment through IRD portal (if available)

3. Compliance Requirements:

   • Maintain detailed records of all calculations
   • Keep payment receipts and confirmation documents
   • Provide tax deduction certificates to employees

For Employees (Joint Liability):

1. When Employer Fails: If an employer fails to withhold and remit tax as required, the employee is jointly and severally liable for payment

2. Employee Payment Deadline: Must pay the tax within 15 days after the end of the calendar month in which the lump-sum payment was received

   • Example: Bonus received October 15th → Pay by November 15th
   • Example: Bonus received March 25th → Pay by April 15th

3. Payment Process:

   • Pay directly to Inland Revenue Department
   • Use Individual Income Tax (IIT) payment type
   • At Bank of Ceylon or via IRD online portal
   • Keep payment receipts for tax return filing

Consequences of Non-Compliance:

• Penalties and interest charges
• Legal action by IRD
• Joint liability means both employer and employee can be pursued

Always verify tax deduction on your payslip and keep documentation for compliance and tax return filing.

How is lump-sum tax different from monthly salary tax?

Lump-sum payment tax (Tax Table No. 02) differs significantly from monthly salary tax (Tax Table No. 01) in Sri Lanka:

Feature	Tax Table 01 (Monthly)	Tax Table 02 (Lump-sum)
Applies To	Regular monthly salary	Bonuses, arrears, leave encashment
Methodology	Monthly income only	EGAR (annual projection)
Calculation	Direct rate application	Formula-based with multiple deductions
Formula	(Monthly Income × Rate%) - Monthly Constant	(EGAR × Rate%) - [Annual Constant + Monthly Tax + Previous Lump-sum Tax]
Tax Brackets	6 brackets (0-36%)	6 brackets (0-36%) - same rates
Previous Tax	Not considered	Deducts monthly tax + previous lump-sum tax
Income Components	Current month only	Entire year projection (A + B + C)
Complexity	Simple, straightforward	Complex, multi-component

Why Different Methodology:

The EGAR methodology for lump-sum payments prevents undertaxation of large irregular payments by:

1. Annual Context: Ensures payment is taxed based on total annual income bracket, not just monthly income
2. Progressive Integrity: Maintains progressive tax system for all employment income
3. Double Taxation Prevention: Deducts taxes already paid to avoid taxing same income twice
4. Fair Taxation: Large bonuses taxed appropriately relative to total earnings

Example Comparison:

Monthly Salary Tax (Table 01):

• Rs. 300,000 monthly salary
• Tax = (300,000 × 24%) - 53,500 = Rs. 18,500
• Simple, same each month

Lump-sum Bonus Tax (Table 02):

• Rs. 500,000 bonus in December
• Must calculate EGAR including all monthly salary + all lump-sums
• Apply formula deducting 12 months of monthly tax
• Complex but ensures correct progressive taxation

Both tables use the same progressive rates (0%, 6%, 18%, 24%, 30%, 36%) but apply them using different methodologies appropriate for regular vs irregular income.

What if my employer doesn't deduct lump-sum tax?

If your employer fails to deduct lump-sum payment tax in Sri Lanka, you have joint and several liability under Sections 92(a) and 371(4) of the Inland Revenue Act. Here's what you must do:

Immediate Action Steps:

1. Payment Responsibility

   • You are legally required to pay the tax yourself
   • Deadline: Within 15 days after the end of the calendar month in which you received the lump-sum payment
   • Example: Bonus received October 15th → Must pay by November 15th

2. Calculate Tax Amount

   • Use our calculator to determine exact tax
   • Enter: monthly salary, months paid, lump-sum amount, previous payments
   • Calculator applies Tax Table No. 02 methodology correctly
   • Print/save calculation worksheet for your records

3. Payment Process

   • Pay directly to Inland Revenue Department
   • Use Individual Income Tax (IIT) payment type (not APIT)
   • Payment locations:
     • Any Bank of Ceylon branch
     • IRD online portal (if available)
     • IRD district offices

4. Required Documentation

   • Payment receipt from bank/IRD
   • Calculation worksheet from our calculator
   • Bank transfer confirmation
   • Payslip showing gross lump-sum amount

Long-term Compliance:

1. Tax Return Filing

   • Declare the lump-sum payment in your annual income tax return
   • Show self-paid tax amount with receipt numbers
   • Attach supporting documentation

2. Employer Follow-up

   • Notify your employer in writing of the failure
   • Request proper tax deduction for future lump-sum payments
   • Request tax deduction certificate (if they later regularize)

3. Record Keeping

   • Maintain all payment receipts
   • Keep calculation worksheets
   • Store for at least 5 years for IRD audit purposes

Consequences of Non-Payment:

• Penalties: Late payment penalties (typically 2% per month)
• Interest: Interest charges on unpaid tax amounts
• Legal Action: IRD can pursue legal action for tax evasion
• Joint Liability: Both you and employer can be held liable

Prevention:

• Always verify tax deduction on payslip
• Calculate expected tax using our calculator beforehand
• Request tax deduction certificate from employer
• If issues persist, report to IRD for employer compliance enforcement

Are there special rules for foreign employer lump-sum payments?

Yes, if you're a resident employee in Sri Lanka working for a foreign employer with no permanent establishment in Sri Lanka, special rules apply under Tax Table No. 08, not Tax Table No. 02:

Key Differences:

1. Tax Table Used

   • Foreign Employers: Tax Table No. 08 for cumulative foreign employment income
   • Different Rates: 6% up to Rs. 2.8M cumulative, then 15% cap above Rs. 2.8M
   • Not EGAR-based: Different methodology than Tax Table No. 02

2. Lump-sum Treatment

   • Bonuses and lump-sum payments from foreign employers are included immediately in your monthly cumulative employment income calculation
   • Not calculated separately using EGAR methodology
   • Simply added to cumulative income for the month received

3. Self-Payment Requirements

   • No Employer Deduction: Foreign employers typically won't deduct APIT
   • Monthly Self-Assessment: You must calculate and pay tax yourself
   • Payment Deadline: Within 15 days after the end of the calendar month of receiving payment
   • Tax Type: Individual Income Tax (IIT), not employer-withheld APIT

4. Currency Conversion

   • Convert foreign currency to LKR at the exchange rate on the date of receipt
   • Use Central Bank of Sri Lanka (CBSL) published rates
   • Apply to both regular salary and lump-sum payments

Important Distinctions:

Freelancers vs Employees:

• If you're an independent contractor or freelancer (not an employee):
  • Neither Tax Table No. 02 nor No. 08 apply to you
  • Your income is business income taxed under different provisions
  • Quarterly tax payment system applies
  • Use our Individual Service Exporter Tax Calculator instead

Non-Resident Non-Citizens:

• If you're not a Sri Lankan resident or citizen:
  • Tax Table No. 04 applies instead
  • Different rates and methodology
  • Consult IRD guidelines for specific rates

Recommendation: For accurate Tax Table No. 08 calculations for foreign employment income (including lump-sum payments), use our dedicated Foreign Employment Income Tax Calculator which handles:

• Cumulative income tracking
• Foreign currency conversion
• 15% capped rate application
• Monthly self-payment schedules

This lump-sum payment calculator is specifically designed for resident employees with local Sri Lankan employers using Tax Table No. 02 and EGAR methodology.

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Recent Updates & Changes

October 2025 Updates

• Fixed Critical Boundary Logic Bug: Corrected tax bracket boundary checks to use >= instead of >, ensuring accurate taxation at exact threshold values (e.g., Rs. 1,800,000)
• Updated Example Scenario: Changed example to official IRD Mr. Ranaweera scenario (Rs. 170,000 monthly salary, Rs. 800,000 December bonus with Rs. 36,000 previous tax)
• Enhanced Educational Content: Added comprehensive FAQ section, payment deadline information, and special cases for service exporters

September 2025 Updates

• Calculator Alignment with IRD Guidelines: Verified all formulas match official Inland Revenue Department Tax Table No. 02 guidelines
• EGAR Breakdown Visualization: Added detailed component breakdown table showing A, B, C, and D calculations
• Tax Table Reference Display: Interactive tax bracket table highlighting your applicable rate

Earlier 2025 Updates

• Initial calculator release with Tax Table No. 02 implementation
• Multi-lump-sum payment tracking support
• Previous tax deduction integration
• Year of Assessment (April-March) compliance

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Using the Lump-sum Payment Tax Calculator - Complete Guide

Step 1: Gather Required Information (1 minute)

Before using the calculator, collect the following information:

• Monthly Regular Salary: Your regular monthly gross salary (excluding bonuses)
• Months Already Paid: Number of months from April 1st to current month that you've been paid
• Current Lump-sum Amount: The bonus, leave encashment, or arrears amount being paid now
• Previous Lump-sum Payments: Total of any previous lump-sum payments in the current Y/A (April-March)
• Previous Tax Deducted: Tax already deducted on those previous lump-sum payments

Tip: Check your payslips from April onwards to accurately track previous lump-sum payments and their tax deductions.

Step 2: Enter Your Details in the Calculator (1 minute)

Input the gathered information into the calculator fields:

1. Monthly Regular Salary: Enter your base monthly salary (e.g., Rs. 170,000)
2. Months Already Paid: Count months from April (e.g., if December, enter 9)
3. Current Lump-sum Payment: Enter the amount you're receiving now (e.g., Rs. 800,000)
4. Previous Lump-sum Payments: Enter total of previous payments (e.g., Rs. 600,000)
5. Previous Tax on Lump-sum: Enter tax already deducted (e.g., Rs. 36,000)

Tip: Use the "Load Example" button to see the Mr. Ranaweera IRD scenario pre-filled.

Step 3: Review EGAR Calculation (1 minute)

After clicking "Calculate Tax", review the EGAR breakdown table:

• Component A: Verify monthly salary × months paid matches your records
• Component B: Verify monthly salary × remaining months is correct
• Component C: Confirm total lump-sum payments (current + previous) is accurate
• EGAR (D): Check the total (A + B + C)

Tip: EGAR determines your tax bracket, so verify all components carefully.

Step 4: Check Tax Bracket and Results (1 minute)

Review your tax calculation results:

• Tax Bracket: Which rate applies to your EGAR (0%, 6%, 18%, 24%, 30%, or 36%)
• Monthly Tax (Table 01): Tax on your regular monthly salary
• Tax Deductible Now: The actual tax to be deducted from your current lump-sum payment
• Net Payment After Tax: What you'll actually receive
• Effective Rate: Percentage of your lump-sum going to tax

Tip: The "Applied" badge in the Tax Table No. 02 reference section shows your specific bracket.

Step 5: Verify Results and Compare with Payslip (1 minute)

Once you receive your payslip:

1. Compare the calculated tax amount with actual payslip deduction
2. If there's a discrepancy, recheck your inputs
3. Contact HR/payroll department if significant differences exist
4. Keep calculator results for tax return filing documentation

Total Time: 3-5 minutes for complete calculation and verification

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Tax Optimization Strategies

Timing Considerations

• Year-End Payments: May result in higher tax brackets
• Split Payments: Spreading across tax years may reduce overall tax
• Salary Sacrifice: Converting lump-sum to regular salary may be beneficial

Planning Recommendations

• Annual Planning: Consider total compensation package
• Cash Flow: Plan for tax deductions on lump-sum payments
• Professional Advice: Consult tax professionals for complex situations

Technology and Accuracy

Our calculator ensures:

• Precise Calculations: Accurate to the rupee
• Current Rates: Based on latest tax tables
• Comprehensive Coverage: Handles all EGAR components
• Transparency: Shows detailed calculation steps

Legal Framework and Updates

The lump-sum payment tax system is governed by:

• Inland Revenue Act: Primary legislation
• Tax Guidelines: Detailed implementation rules
• Annual Updates: Tax rates and brackets may change yearly
• Circulars: Additional clarifications from tax authorities

Stay updated with the latest tax regulations and consult professional advice for complex situations. Our calculator provides accurate calculations based on current tax laws, but individual circumstances may require specialized guidance.

Getting Help

For complex tax situations involving:

• Multiple employers
• Non-resident tax status
• International income components
• Unusual timing scenarios

Consider consulting with qualified tax professionals or the Inland Revenue Department directly.

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This calculator and guide are based on current Sri Lankan tax laws and regulations. Tax laws may change, and individual circumstances can affect calculations. Always verify with current tax guidelines and seek professional advice when needed.