Sri Lanka Capital Allowance Calculator (IRA 2017)

The Inland Revenue Act No. 24 of 2017 replaced the older 2006 Act on 1 April 2018 and set the framework for how Sri Lankan businesses deduct the cost of long-lived assets from taxable profits. Section 16 calls the deduction a depreciation allowance in the headings and a capital allowance in the running text; the two terms are interchangeable. The mechanic is straightforward: every depreciable asset is assigned to one of five classes by the Third Schedule, each class has a prescribed useful life, and the cost is written off in equal instalments over that life on a per-asset straight-line basis. There is no pooling, no half-year convention, and no accelerated allowance under the standard regime.

The five Third-Schedule classes

• Class 1 — Computers & data-handling equipment — useful life 5 yrs. Computers, laptops, servers, printers, scanners and peripheral devices used in business.
• Class 2 — Vehicles, plant & manufacturing machinery — useful life 5 yrs. Buses, minibuses, lorries, vans, taxis, construction equipment, and plant or machinery used in manufacturing.
• Class 3 — Furniture & other depreciable assets — useful life 5 yrs. Railroad cars, locomotives, vessels, aircraft, specialised public-utility plant, office furniture, and other depreciable assets not in another class.
• Class 4 — Buildings & permanent structures — useful life 20 yrs. Buildings, structures and similar works of a permanent nature used in the business.
• Class 5 — Intangible assets (excluding goodwill) — useful life = actual useful life (20 yrs if not ascertainable). Patents, copyrights, licences and software. Useful life = the actual useful life, or 20 years if not ascertainable.

The formula

Section 16(2) prescribes a straight-line write-off: annual allowance = cost ÷ useful life. The cost figure is the asset's capitalised value in the books — purchase price plus non-refundable taxes and direct acquisition costs. The allowance is claimed in full in the year of acquisition; there is no proration even if the asset was bought on the last day of the Y/A. The written-down value (WDV) at the end of year k is WDV(k) = max(0, cost − k × annual allowance), which the calculator computes both by walking the schedule and via a closed-form helper (wdvAfterYears) to cross-check that the two methods land on the same rupee.

Balancing allowance and balancing charge on disposal

When the asset is sold, scrapped, or otherwise transferred, Section 16(3)–(4) requires you to compare the disposal proceeds against the WDV. Three cases arise. If proceeds fall short of WDV, the difference is a balancing allowance — deducted from business income that Y/A as a final write-off of the un-recovered book value. If proceeds exceed WDV but stay at or below the original cost, the excess is a balancing charge— added to assessable business income to recapture the depreciation you previously claimed but didn't lose economic value on. If proceeds exceed the original cost, the excess is a capital gain — taxed under Sri Lanka's flat 10% capital gains regime, not added to the balancing charge. The calculator separates these two amounts so you can see exactly which figure goes on which line of the tax return.

What this calculator does not include

A few situations sit outside the standard regime and are out of scope here. Pooled depreciation (used in some jurisdictions but not in Sri Lanka). Half-year conventions. Goodwill, which is explicitly non-amortisable. Pre-April-2018 legacy assets that are still being written off under the old Act No. 10 of 2006. Bespoke allowances negotiated under the Board of Investment's Strategic Development Project regime. And dual-use assets — for these, capitalise only the business-use share and run that figure through the calculator. For the disposal side, the gain on assets sold above original cost is forwarded to the Sri Lanka CGT calculator rather than being computed here.

Three scenarios drawn from common SME situations. Plug each into the calculator above — the schedule and balancing figures should match to the rupee.

• IRD — Inland Revenue Act No. 24 of 2017 (Section 16 + Third Schedule)
• IRD — Capital Allowances guideline page
• Inland Revenue Department of Sri Lanka — official site

The asset classes and useful lives on this page were last cross-checked against the IRA 2017 (as amended by Act No. 45 of 2022) on 2026-05-17. The page is reviewed every April and whenever a new Inland Revenue Amendment Act takes effect.

Disclaimer. This calculator is an educational aid, not professional tax advice. For non-routine situations — BOI agreements, mixed-use assets, revaluation, or impairment — consult a chartered accountant. The example amount Rs 70,000/year quoted in Example 1 assumes the MacBook is wholly used in the business.