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Explore the latest tax implications for key investment options in Sri Lanka, including Unit Trusts, Treasury Bills, Treasury Bonds, Fixed Deposits, Equities, and Debentures. Understand how Withholding Tax (WHT), Capital Gains Tax, and income tax apply to each asset class under the current Sri Lankan tax regulations. Make informed investment decisions with this concise tax comparison guide.

CAL Treasury Bills vs Bank Fixed Deposits

Short-term cash management with government backing

Treasury Bills Category Bank Fixed Deposits
Discounted instruments; return realized at maturity
Return MechanismDifferent
 Periodic interest paid
Short tenors (e.g., 3–12 months)
TenorDifferent
 Fixed terms set by bank
Government risk exposure
Risk ExposureDifferent
 Issuing bank risk
TaxDifferent
Strength: Efficient short-term yield with sovereign backing
PositioningAligned
 Bank deposit alternative for parked cash

Treasury Bonds vs Bank Fixed Deposits

Medium to long-term income with government backing

Treasury Bonds Category Bank Fixed Deposits
Fixed/Floating coupons; tradable in secondary market
LiquidityDifferent
 Held to term (early break fees may apply)
Multiple maturities; potential price appreciation
Return DriversDifferent
 Contracted rate for tenor
Government risk exposure
Risk ExposureDifferent
 Issuing bank risk
TaxDifferent
Strength: Sovereign-backed income with market tradability
PositioningAligned
 Bank deposit alternative for income seekers

CAL Complementary Investment Solutions

Build balanced portfolios by combining income, diversification, and growth

Unit Trusts
  • Diversified portfolios managed by professionals
  • Accessible entry points; automated contributions available
  • Flexible liquidity per fund’s dealing cycle
  • Tax:
Best used for: core allocation, disciplined saving, risk-adjusted returns
Debentures
  • Predictable coupons; potential listing for liquidity
  • Match cash flows to goals with tenor choice
  • Credit diversification across issuers
  • Tax:
Best used for: targeted income, laddering strategies
Equities
  • Ownership in businesses; long-term capital appreciation
  • Dividends as a complementary income stream
  • Pairs well with Unit Trusts for blended exposure
  • Tax:
Best used for: long-term growth, wealth compounding

* Where shown with an asterisk: subject to prevailing Inland Revenue guidelines.

According to the latest Sri Lankan tax regulations, equity investments are among the most tax-efficient, offering 0% Capital Gains Tax and only 15% Withholding Tax (WHT) on dividends.

Treasury Bills, Treasury Bonds, and Debentures are each subject to a 10% Capital Gains Tax on realized gains, reducing net returns.

Fixed Deposits and Unit Trust Funds are taxed at 10% WHT*, with their interest income also liable for additional income tax. However, in Unit Trust Funds, you are liable for the additional income tax only on Realized Earnings, i.e., only on the redemptions, and not on unrealized earnings. In Fixed Deposits, you are liable for the additional income tax at maturity.

For those aiming to maximize after-tax returns, equities remain the most efficient option, especially for long-term growth strategies.

*Unit Trust WHT is subject to different taxes applicable to asset classes the funds invest in, thus this value can change depending on the fund.

Income Tax For Monthly Income in Sri Lanka (LKR)

Income Tax Comparison
Taxable Monthly Income Tax
First 150,000/- 0 – Relief from Tax
150,000/- but not exceeding 233,000/- 6%
233,000/- but not exceeding 275,000/- 18%
275,000/- but not exceeding 317,000/- 24%
317,000/- but not exceeding 358,000/- 30%
More than 358,000/- 36%

Taxable Income Per Annum in Sri Lanka (LKR)

Taxable Income Tax Rate
Tax-free allowance up to LKR 1,800,000 Nil
Next LKR 1,000,000 6%
Next LKR 500,000 18%
Next LKR 500,000 24%
Next LKR 500,000 30%
Balance 36%

Want to learn more about Unit Trust Funds? 

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