Motor vehicle sale gains exempted from tax under new IRD amendment

Colombo, June 12 (Daily Mirror) - Gains arising from the sale of certain motor vehicles will no longer be treated as taxable income under a series of amendments introduced through the Inland Revenue (Amendment) Act, No. 11 of 2026, the Inland Revenue Department (IRD) announced.

The amendments, which came into effect following the certification of the Act on June 3, 2026, introduce several changes to the Inland Revenue Act, No. 24 of 2017, aimed at strengthening tax administration, improving compliance and encouraging non-cash transactions.

Among the key changes is the revision of capital gains tax rates. Individuals and partnerships will now be subject to a 15 per cent capital gains tax, while trusts, unit trusts, mutual funds and non-governmental organizations will be taxed at 30 per cent.

The amendments also broaden the scope of the five per cent withholding tax on service payments exceeding Rs. 100,000 per month. The revised provisions now cover a wider range of professions, including information technology specialists, social media specialists, artists, athletes, photographers, translators and writers.

The IRD said taxpayers will no longer be required to submit Statements of Estimated Tax (SET), with quarterly income tax instalments instead being calculated based on the tax liability of the immediately preceding year of assessment.

In addition, amounts received under life insurance policies upon the death of the insured person, maturity of the policy or surrender of the policy will be excluded from assessable income, subject to specified conditions.

The department has also introduced an interest waiver on late payments and underpayments of tax up to the 2024/25 year of assessment, provided the outstanding principal tax is paid in full on or before December 2, 2026.

Meanwhile, Taxpayer Identification Numbers (TINs) will be mandatory for a range of transactions, including opening bank accounts, registering and renewing motor vehicles, registering businesses, transferring shares and obtaining credit cards.

According to the IRD, the amendments are intended to enhance revenue collection, improve tax compliance and modernize the country's tax administration framework.