How is savings account interest calculated in Sri Lanka?

Sri Lankan banks accrue interest on the daily closing balance and credit it monthly. Each day earns balance × (annual rate ÷ 100) ÷ 365. Over a month of N days at a steady balance, that is balance × rate × N ÷ 365. The day counts across a year sum to 365, so a balance held unchanged for a full year earns exactly balance × rate in gross interest.

Is savings account interest taxed in Sri Lanka?

Yes. Banks withhold a 10% Advance Income Tax (AIT) on interest paid to resident depositors before crediting it, effective 1 April 2025 under IRD Circular SEC/2025/E/03. On Rs 30,000 of gross interest the bank keeps Rs 3,000 and credits you Rs 27,000. This calculator shows the gross, the AIT, and the net you actually receive.

What is the 10% AIT (Advance Income Tax) on bank interest?

AIT is a withholding tax the bank deducts at source on the interest it pays you and remits to the Inland Revenue Department on your behalf. It was raised to 10% from 1 April 2025. It is an advance against your final income tax, so if you file a return it is credited against what you owe.

How can I stop the 10% withholding tax on my savings interest?

If your total annual assessable income does not exceed the Rs 1,800,000 personal relief, you can file a self-declaration with your bank (per IRD Circular SEC/2025/E/02) and the bank will credit interest without withholding AIT. Untick the AIT option in this tool to model that case, but only file if you genuinely qualify.

How much interest will I earn on Rs 500,000 in a savings account?

At 6% p.a. over one year, Rs 500,000 earns Rs 30,000 gross interest. After the 10% AIT (Rs 3,000) you receive Rs 27,000 net if the interest is paid out. If you reinvest it and let it compound monthly, you finish with about Rs 527,678, roughly Rs 678 more, because each month's credited interest starts earning too.

What is the difference between reinvested and paid-out interest?

Paid out (simple): the net interest leaves the account each month, so your balance only grows by any top-up. Reinvested (compound): the net interest stays in the account and raises next month's daily balance, so interest earns interest. Over a year at 6% the compound option adds a few hundred rupees on Rs 500,000; the gap widens with higher rates and longer periods.

Does the day-count method really change my interest?

Month to month, yes, a 31-day month earns more than a 30-day or 28-day month at the same balance, because interest is 365-day daily accrual. Across a full non-leap year the day counts sum to 365, so the annual gross for a steady balance still equals balance × rate. The daily method matters most when your balance changes mid-year.

Are the bank interest rates in this tool accurate?

You enter the rate yourself. This tool does not scrape or guarantee any bank's live rate. Quoted savings rates are indicative and many banks use tiered or promotional slabs where different balance bands earn different rates. Use your account's actual rate, and treat the result as an estimate of the daily-balance, AIT-adjusted interest.

Sri Lanka · Finance

Sri Lanka Savings Account Interest Calculator

See what your rupee savings account really earns. This tool uses the daily-balance method every Sri Lankan bank applies, then deducts the 10% Advance Income Tax the bank withholds, so you get the net interest actually credited, not just balance × rate.

By Induwara Ashinsana· Co-Founder, Ryzera TechnologiesUpdated Jul 11, 2026

Savings interest & AIT breakdown

Daily-balance · 10% AIT

Initial deposit (Rs)

The lump sum already in the account.

Annual interest rate (% p.a.)

The nominal rate your bank quotes.

Period (months)

1 to 120 months.

Monthly top-up (Rs)

Optional. Added at each month end. 0 for none.

Interest handling

Withholding taxDeduct 10% AITBanks withhold this on interest by default. Untick only if you filed the low-income self-declaration.

Deposit presets

Net interest earned

Rs 27,678

Maturity balance

Rs 527,678

Effective net yield

5.54%

Annualised, after AIT

Total AIT withheld

Rs 3,075

Gross interest Rs 30,754

Month-by-month breakdown

Month	Opening	Days	Gross	AIT	Net credited	Closing
1Jan	500,000	31	2,548	255	2,293	502,293
2Feb	502,293	28	2,312	231	2,081	504,374
3Mar	504,374	31	2,570	257	2,313	506,687
4Apr	506,687	30	2,499	250	2,249	508,936
5May	508,936	31	2,593	259	2,334	511,270
6Jun	511,270	30	2,521	252	2,269	513,539
7Jul	513,539	31	2,617	262	2,355	515,895
8Aug	515,895	31	2,629	263	2,366	518,261
9Sep	518,261	30	2,556	256	2,300	520,561
10Oct	520,561	31	2,653	265	2,387	522,948
11Nov	522,948	30	2,579	258	2,321	525,269
12Dec	525,269	31	2,677	268	2,409	527,678
Total			30,754	3,075	27,678	527,678

Amounts shown in rupees, rounded for display. Headline figures use the unrounded values.

Can you stop the 10% AIT?

If your total annual assessable income does not exceed the personal relief of Rs 1,800,000, you can file a self-declaration with your bank so it credits interest without withholding AIT (IRD Circular SEC/2025/E/02). This tool never assumes eligibility, untick “Deduct 10% AIT” only after you have filed.

Interest is accrued on the daily balance and credited monthly, the convention Sri Lankan banks use (CBSL deposit-interest guidance). The 10% AIT follows IRD Circular SEC/2025/E/03 (effective 1 April 2025). Quoted bank rates are indicative; tiered or promotional slabs may differ. Sources are listed in full below the calculator.

How it works

Sri Lankan banks do not multiply your balance by the quoted rate once a year. They accrue interest on the daily closing balance and credit it monthly, the convention stated in the Central Bank of Sri Lanka's deposit-interest guidance and in every licensed bank's savings product terms. For a single day:

daily interest = balance × (annual rate ÷ 100) ÷ 365

For a month of N days at a steady balance B, that sums to B × (rate ÷ 100) × N ÷ 365. A 31-day month therefore earns more than a 28-day February at the same balance. But because the day counts across a non-leap year add up to exactly 365, a balance left untouched for a full year earns exactly B × rate gross, the day-count method only changes things month to month and when your balance moves. The calculator verifies its month-by-month loop against this closed form to the rupee.

The 10% AIT. On interest paid to resident depositors, the bank withholds Advance Income Tax before crediting it, raised to 10% with effect from 1 April 2025 (IRD Circular SEC/2025/E/03):

monthly AIT = monthly gross interest × 0.10
monthly net = monthly gross interest × 0.90

Reinvested vs paid out.Under “paid out” the net interest leaves the account each month, so the balance only grows by any top-up. Under “reinvested” the net interest is added to the balance, so next month accrues on a higher daily balance, interest earning interest. The effective net annual yield is derived from the actual growth, annualised: (final value ÷ principal contributed)^(12 ÷ months) − 1. With a monthly top-up this yield is a close approximation, since later contributions have had less time to earn.

If your annual assessable income does not exceed the Rs 1,800,000 personal relief, you may file a self-declaration so the bank stops withholding AIT (IRD Circular SEC/2025/E/02). The tool surfaces this as guidance and lets you model it by unticking the AIT option, but never assumes you qualify, by default it shows the deduction the bank actually makes.

Worked examples

Rs 500,000 at 6% p.a. · 1 year · paid out · AIT on

Day counts sum to 365, so gross annual interest = 500,000 × 0.06 = Rs 30,000
AIT = 30,000 × 0.10 = Rs 3,000
Net interest credited = Rs 27,000
Jan spot-check (31 days): 500,000 × 0.06 × 31/365 = Rs 2,547.95 gross → Rs 2,293.15 net
Effective net yield = (500,000 + 27,000) ÷ 500,000 − 1 = 5.40%

Rs 500,000 at 6% p.a. · 1 year · reinvested · AIT on

Each month the net interest (gross × 0.90) is added back to the balance
So next month accrues on a slightly higher daily balance
Maturity balance ≈ Rs 527,678 (vs Rs 527,000 if paid out and kept)
Net interest ≈ Rs 27,678 → about Rs 678 more than paying it out
Effective net yield ≈ 527,678 ÷ 500,000 − 1 = 5.54%

Edge case, Rs 1,000,000 at 7% p.a. · 1 year · paid out · self-declaration filed (AIT off)

Gross annual interest = 1,000,000 × 0.07 = Rs 70,000
AIT off (income below Rs 1,800,000 relief, self-declaration filed) → Rs 0 withheld
Net interest = Rs 70,000, a 7.00% effective yield
With AIT on it would be Rs 63,000 net, a 6.30% yield
The self-declaration is worth Rs 7,000 a year here

Frequently asked questions

Sources & references

The daily-balance method and the 10% AIT rate on this page were last cross-checked against the IRD and CBSL sources on 2026-07-11. The page is reviewed after any change to the AIT rate or the personal relief threshold. Quoted bank rates are user-entered and not verified by this tool.

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