How much tax is deducted from fixed deposit interest in Sri Lanka?

Since 1 April 2025 banks and finance companies deduct Advance Income Tax (AIT) at a flat 10% of the gross interest before crediting your account. On Rs 100,000 of interest, Rs 10,000 is withheld and you receive Rs 90,000. The rate is the same for fixed deposits and interest-bearing savings.

What is the AIT rate on interest income in 2025/26?

The AIT (also called withholding tax, WHT) rate on interest and discount paid by banks and financial institutions is 10%, in force from 1 April 2025 under IRD Notice PN/IT/2025-01. It replaced the earlier 5% rate. This tool covers the current 10% regime only.

Who can submit a self-declaration to avoid withholding tax on interest?

A resident individual whose total assessable income for the year of assessment does not exceed the personal relief of Rs 1,800,000 may give the payer a self-declaration under IRD Circular SEC/2025/E/03. The bank then pays interest gross, with no AIT deducted. Companies and non-residents cannot use this route.

Is the 10% AIT on FD interest a final tax or can I claim it back?

For resident individuals it is not a final tax. It is an advance credited against your final income-tax liability when you file your return. If your marginal rate is below 10%, or your income falls under the relief, the excess is refunded or settled at assessment. For non-residents it may be a final withholding tax depending on the Act and any tax treaty.

Does AIT apply to savings account interest as well as fixed deposits?

Yes. The 10% AIT applies to interest and discount paid by banks and financial institutions generally, fixed deposits, savings accounts, and similar interest-bearing products. The same self-declaration relief is available to eligible resident individuals across these products.

Why did my bank credit less interest than the FD advertised?

The advertised rate is gross. The bank withholds 10% AIT at source, so the amount credited is 90% of the gross interest. On an 11% one-year FD of Rs 2,000,000, gross interest is Rs 220,000 but Rs 22,000 is withheld, leaving Rs 198,000 credited, unless you have filed a valid self-declaration.

Do I still declare FD interest on my tax return if AIT was deducted?

Yes, for residents. Interest is assessable income and must be included in your return; the AIT already deducted is then claimed as a tax credit. This tool estimates the deduction only, use the Sri Lanka Income Tax Calculator to work out your final liability and how the credit applies.

When was this calculator last verified against IRD rules?

The 10% rate, the Rs 1,800,000 relief threshold, and the self-declaration procedure were last cross-checked against IRD PN/IT/2025-01, SEC/2025/E/02 and SEC/2025/E/03 on 2026-07-10. It is reviewed each April and after any Inland Revenue amendment.

Sri Lanka · Finance

Sri Lanka Fixed Deposit Interest Tax Calculator (10% AIT)

See exactly how much Advance Income Tax your bank withholds from fixed-deposit or savings interest under the 10% rate in force since April 1, 2025, the net you actually receive, and whether you can file a self-declaration to stop it. No signup, sources cited below.

By Induwara Ashinsana— Co-Founder, Ryzera TechnologiesUpdated Jul 10, 2026

Fixed deposit interest taxAIT @ 10%

IRD verified · 2026

Gross interest for the period (Rs)

The total interest your bank quotes before any tax is deducted.

Quick presets

Residency status

Total annual assessable income (Rs)

Optional, including this interest. Used only for the self-declaration check.

Gross interest

Rs 120,000

AIT deducted @ 10%

Rs 12,000

Net interest received

Rs 108,000

Deduction rate

10%

Flat 10% at source since 1 Apr 2025

Breakdown

Gross interest	Rs 120,000
Less: AIT / WHT @ 10%	− Rs 12,000
Net interest received	Rs 108,000

You can file a self-declaration. As a resident individual whose total assessable income is at or below the Rs 1,800,000 personal relief, you may give your bank a self-declaration (IRD SEC/2025/E/03) so that no AIT is withheld, the full Rs 120,000 is then paid to you gross.

Rate & procedure per

How it works

Since 1 April 2025 every licensed bank and finance company in Sri Lanka deducts Advance Income Tax (AIT), often still called withholding tax (WHT), from the interest it pays you. The rate is a flat 10% of the gross interest, set by the Inland Revenue Department in Notice PN/IT/2025-01 and applied under Circular SEC/2025/E/02. It replaced the earlier 5% rate. This calculator applies that rule in four steps.

Determine gross interest I. In “I know my interest” mode you enter it directly. In “Calculate from deposit” mode the tool uses a simple-interest estimate I = P × r × t, where P is the principal, r the annual rate as a decimal, and t the term in years (months ÷ 12). Compounding and bank-by-bank maturity values are handled by the dedicated FD calculator linked below.
Apply the 10% AIT. AIT = 0.10 × I. This is deducted at source, the bank never pays it to you.
Net interest. Net = I − AIT. The calculator cross-checks this against Net = I × 0.90 so the two independent formulas must agree to the cent.
Self-declaration test. A resident individual whose total assessable income for the year of assessment does not exceed the personal relief of Rs 1,800,000 (Y/A 2025/26) may give the payer a self-declaration under Circular SEC/2025/E/03, and the bank then pays interest gross with no AIT deducted. Non-residents cannot use this route.

One point trips up many savers: for resident individuals the AIT is not a final tax. Interest is assessable income, so the AIT already withheld is claimed as a credit against your final income tax when you file your annual return, any over- or under-deduction settles at assessment. If your income sits below the relief and you did not file a self-declaration in time, the withheld tax is refundable at assessment. Use the linked income tax calculator for the final-liability step. For non-residents the AIT may be a final withholding tax subject to the Act and any Double Taxation Agreement; this tool flags that rather than modelling it.

Worked examples

Retiree, one-year FD, eligible for self-declaration

Calculate mode · Rs 2,000,000 @ 11% · 12 months · resident · income Rs 900,000

Gross interest: Rs 2,000,000 × 0.11 × (12 ÷ 12) = Rs 220,000
AIT @ 10%: 0.10 × Rs 220,000 = Rs 22,000
Net interest: Rs 220,000 − Rs 22,000 = Rs 198,000
Income Rs 900,000 ≤ Rs 1,800,000 relief, resident → eligible
With a self-declaration filed: full Rs 220,000 received, no AIT withheld

Salaried professional, savings interest, not eligible

Known mode · Rs 120,000 interest · resident · income Rs 3,200,000

Gross interest: Rs 120,000 (entered directly)
AIT @ 10%: 0.10 × Rs 120,000 = Rs 12,000
Net interest: Rs 120,000 − Rs 12,000 = Rs 108,000
Income Rs 3,200,000 > Rs 1,800,000 relief → not eligible
The Rs 12,000 is a credit against final income tax at assessment

Boundary, income exactly at the relief threshold

Known mode · Rs 500,000 interest · resident · income Rs 1,800,000

AIT @ 10%: 0.10 × Rs 500,000 = Rs 50,000
Net interest: Rs 500,000 − Rs 50,000 = Rs 450,000
Income Rs 1,800,000 is at (≤) the relief → still eligible
One rupee more (Rs 1,800,001) would tip you into not-eligible

Frequently asked questions

Sources & references

Last cross-checked against these IRD sources on 2026-07-10. This tool is an informational estimate, not tax advice, for a binding position on your own circumstances, consult the IRD or a qualified tax advisor.

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