Sri Lanka Budget 2027: What It Means for Your Business and Your Pay
Sri Lanka's Budget 2027, presented in November 2026, is a balancing act: it keeps to the discipline of the IMF programme while offering the first real relief to households and businesses in several years. It's a large budget touching almost every sector. Below, each measure is given in the official terms first, followed by a plain-English explanation — so it makes sense whether or not you speak "accounting".
The big picture
A targeted primary surplus of about 2.3% of GDP, in line with the IMF programme.
A record capital-expenditure allocation of around Rs. 487 billion for highways, railways and post-cyclone recovery.
Relief measures costing roughly Rs. 29 billion in forgone revenue.
In simple terms: the government plans to take in a bit more than it spends (before paying interest on its debt) — a sign it's keeping money under control. At the same time it's spending big on roads and railways, and giving up about Rs. 29 billion in tax it could have collected, so it can offer relief.
Personal income tax: more take-home pay
Measure Before Budget 2027 Tax-free threshold Rs. 1.8 million/year Rs. 1.95 million/year (~Rs. 162,500/month) Top 36% rate applies above Rs. 4.3 million/year Rs. 5.2 million/year
A new 12% tax band is also reported, to smooth the old jump from 6% straight to 18%.
In simple terms: you can now earn up to about Rs. 162,500 a month before any income tax is taken. If you earn more, only the portion above each level is taxed at the higher rate — not your whole salary — and the highest 36% rate now kicks in much later. For most people, that means a bigger pay packet.
Cost of living: everyday wins
VAT removed on education materials — exercise books, textbooks, dictionaries, encyclopedias and children's drawing books.
Special Commodity Levy on sprats cut from Rs. 100 to Rs. 10 per kg, and on Maldive fish from Rs. 302 to Rs. 10 per kg (dry chillies also reduced).
Solar storage subsidy of about Rs. 25,000 per kilowatt of battery capacity, plus removal of import levies on solar batteries.
In simple terms: school books and some imported food staples should get cheaper, and putting solar batteries at home becomes more affordable. (VAT is the tax added to most things you buy; the Special Commodity Levy is a single flat tax on certain imported foods.)
For businesses
Concessional loans: about Rs. 174 billion at roughly 3–5% interest, with ~Rs. 67.7 billion in interest subsidies, for SMEs, women entrepreneurs and rural businesses (plus interest-free pledge loans for rice millers).
200% enhanced capital allowance for BOI-approved export-manufacturing and tourism projects above US$3 million.
CESS import taxes cut by 25% on 800 product categories from April 2027; PAL removed on imported newsprint and solar batteries.
Tourism Development Levy abolished from 1 April 2027.
In simple terms: small businesses can borrow money cheaply; big investors get a tax break (they can deduct twice what they spend on an approved project, lowering their tax bill); and many imported goods get cheaper because two import taxes — CESS and the PAL — are being cut or removed. Tourism businesses also lose one of their taxes.
Public sector pay & pensions
~Rs. 110 billion for the final phase of the public-sector salary revision.
Transport allowance for executive officers using personal vehicles doubled to Rs. 100,000/month; higher allowances for health workers, teachers and lecturers; prison-officer risk allowance up 100%.
Interim relief of Rs. 2,500/month for pensioners who retired between 2020 and 2024.
In simple terms: government workers get the last step of their pay rise and bigger allowances, and many recent pensioners get a small monthly top-up.
Welfare & health
Disability and kidney-patient allowances raised by Rs. 2,500 to Rs. 12,500/month.
Multi-year funding for hospital equipment (MRI, CT scanners), new ambulances and expansion of the 1990 Suwa Seriya service.
In simple terms: more monthly support for people with disabilities and kidney patients, and better-equipped hospitals and emergency services.
Agriculture & rural economy
Subsidised low-interest loans for farmers and rural businesses.
Fertiliser subsidy extended to Rs. 30,000 per hectare for non-paddy crops from the 2026/27 season.
In simple terms: farmers get cheaper loans and help with fertiliser costs for crops other than paddy.
Education & youth
High-speed internet expansion to secondary schools.
Student capital-markets scheme: starter share portfolios of up to Rs. 10,000 for eligible students over 18.
Monthly living allowance for private-degree students raised to Rs. 10,000.
In simple terms: faster internet in schools, a small "starter fund" to get young people investing, and more allowance for private-university students.
Infrastructure, energy & transport
Record capital spending on expressways and roads, plus electrification of key commuter railway lines.
Solar battery-storage subsidy to support energy resilience.
In simple terms: more new roads and modernised trains, and help to store solar power so you're less affected by outages.
Tourism, ports & aviation
Tourism Development Levy abolished; support for marine tourism and heritage/fort restoration; multilingual tourist police.
Colombo Port West Terminal II — a 3.2-km breakwater for about 3.2 million containers.
Bandaranaike International Airport Terminal 1 expansion from 6 to 9 million passengers, Terminal 2 expedited with JICA support, and a Ratmalana runway extension from 1,400 to 1,771 metres.
In simple terms: big upgrades to the main port and airport to handle more ships and travellers, and a push to attract more tourists.
What this means for you
Employers: payroll and PAYE/APIT (the tax deducted from salaries) tax tables will need updating once the new thresholds apply — plan for it ahead of 1 April 2027.
Earners: expect a little more in your pay; it may be worth revisiting your tax planning.
Business owners: if you import, export, invest, or need working capital, the import-tax cuts, investment allowance and cheap-loan schemes are worth exploring now.
How IMS Outsource can help
We help Sri Lankan businesses stay on top of changes like these — updating payroll for new tax tables, planning tax efficiently, and advising on incentives, financing and compliance. Get in touch and we'll help you turn Budget 2027 into a plan for your business.
Disclaimer: This article is general information, not tax or legal advice. Budget proposals may change during the parliamentary process and before enactment. Always confirm the final rules with the Inland Revenue Department or a qualified tax advisor before acting.
Sources & further reading
Official documents: Budget Speech 2027 and the Appropriation Bill (Ministry of Finance / Treasury).