Labor Minister and Deputy Minister of Economic Development, Professor Anil Jayantha Fernando, confirmed on December 26 that banks are now deducting a 10% withholding tax from all deposit accounts, in line with recent government policy changes. The announcement came during a press conference held at the Presidential Media Unit, where Minister Fernando responded to inquiries from journalists regarding the tax deduction.
Minister Fernando explained that although the tax is levied at 10%, the government is working on a mechanism to refund this amount to individuals who do not meet the criteria for taxation. Specifically, he stated that the Department of Inland Revenue has been tasked with developing a system to ensure that those who are not liable for this tax will not be unfairly taxed. The refund process will allow for the return of the deducted amount to the relevant depositors.
The Minister clarified that, although the withholding tax applies only to individuals earning monthly interest income of Rs. 150,000 or more, there is currently no mechanism in place to return the 10% tax deducted from people with lower interest earnings. As a result, even depositors receiving interest income as low as Rs. 100 are subject to the 10% deduction, which has raised concerns about the administrative burden of retrieving these small amounts from the Inland Revenue Department.
Journalists pressed the Minister about the inconvenience caused to depositors, asking whether individuals would have to bear additional costs, such as bus fare, to reclaim the deducted amounts. Minister Fernando acknowledged the concern and promised to provide a comprehensive response in the near future, assuring the public that the government would address the issue.
The government’s decision to increase the withholding tax from 5% to 10% was made recently, with the intention of bolstering state revenue. However, President Anura Kumara Dissanayake had clarified in Parliament that the tax would apply exclusively to those receiving monthly interest income of Rs. 150,000 or more, sparking further questions about the tax’s fairness and its impact on low-income depositors.
