The government is set to introduce a mechanism to refund withholding tax (WHT) to retirees who fall outside the income tax bracket. This initiative follows the recent increase in withholding tax on bank deposit interest from 5 percent to 10 percent, aimed at boosting tax revenue.
While the higher tax rate is expected to generate additional income for the state treasury, retirees exempt from income tax will now have a clear process to reclaim excess amounts deducted from their interest income.
President Anura Kumara Dissanayake, during a discussion with Finance Ministry officials, emphasized the importance of implementing this mechanism swiftly to ease the financial burden on retirees. He stressed that addressing the hardships faced by retirees is a priority.
To further streamline tax processes, the President also called for the digitization of the VAT collection system and the rapid implementation of a comprehensive digital taxation framework to improve transparency and efficiency in revenue collection.
Retirees who have already had WHT deducted from their bank deposit interest can reclaim the amount by submitting bank statements and supporting documents as proof of the deductions. Banks typically provide an annual summary of WHT deductions, which serves as the foundation for filing a tax refund application.
Additionally, to ensure fairness, the government has exempted low-income earners from withholding tax. Individuals earning less than Rs. 150,000 per month can apply for exemption through the Inland Revenue Department.
This initiative reflects the government’s commitment to alleviating financial stress for retirees while enhancing overall tax revenue collection through improved systems and transparency.
