IRD mandates stricter quarterly tax reporting for banks

By Nishel Fernando 
Sri Lanka’s Inland Revenue Department (IRD) has imposed stricter new quarterly filing requirements for the banks and financial institutions handling advance income tax (AIT) deductions on interest payments, effective immediately.
Under circular No. SEC/2025/E/05, issued by Commissioner General Rukdevi P.H. Fernando, only the institutions deducting 10 percent AIT on interest, discounts or Islamic financial transactions must now submit the detailed statements within 30 days after each quarter ending June 30, September 30 and December 31. The non-bank entities are explicitly exempt from this mandate, which replaces the 2023 guidelines (SEC/2023/E/05) and signals the IRD’s push for real-time tax oversight amid broader fiscal reforms.  
The first deadlines loom large, with the June 2025 quarter (period code 25261) due by July 30, 2025, followed by September 30 (25262), due October 30 and December 31 (25263), due January 31, 2026. Critically, the March quarter must be included in the annual filings due April 30, 2026. 
The institutions are set to face a complex two-track submission process: Quarterly statements (Form Asmt WHT_001Q_E) must be uploaded as PDFs via the IRD e-portal, while supporting Schedules 1 (tax-deducted transactions) and 4 (exempt/non-deducted transactions) require secure SFTP transfers after the pre-approval from the Commissioner General.  
Reconciliation could pose operational challenges, as data from Schedules 1 and 4 must align precisely with the annual filings. The IRD warns that errors risk severe penalties under Sections 181 (fines) or 190 (criminal charges) of the Inland Revenue Act. 
The banks must meticulously track the joint accounts, where the interest splits between the taxable and exempt portions and rigorously format the NIC numbers as text to avoid system errors and process the circular details with specific Excel remediation steps. 
With the July 30 deadline for the June filings approaching, the institutions are urged to use the IRD’s verification tools and seek support via the Call Centre (1944) or email ([email protected]) to navigate this heightened compliance burden.