Senior savers squeezed by 10 % WHT
As Sri Lanka edges toward the presentation of its 2025 National Budget, a growing section of its elderly population finds itself trapped in an unexpected financial bind.
The Government’s decision to double the Withholding Tax (WHT) on interest income to 10 per cent effective April 1, 2025, has begun tightening the noose around the life savings of thousands of retired citizens who depend almost solely on bank deposit interest to live.
Inserted in the Inland Revenue (Amendment) Act No. 2 of 2025, the new tax law will make it mandatory for all banks and financial institutions to withhold 10 per cent of interest income as advance, irrespective of the amount of annual income of the depositor.
While intended to strengthen revenue collection, the measure has unintentionally hit those least able to bear the burden, several senior citizens living off modest savings complained. A senior citizen with Rs. 3 million in fixed deposits now earns around Rs. 300,000 annually as interest, but faces an automatic deduction of Rs. 30,000 under the new system, they pointed out.
After applying the standard Rs. 1.8 million personal tax free allowance, the actual tax payable may be less than Rs. 10,000. Yet the Inland Revenue Department (IRD) holds the full Rs. 30,000, leaving the retiree to navigate a complex refund process that can stretch for months.
“This system, taxes people beyond their true liability and expects them to beg for refunds later,” lamented Sunil Pilapitiya a retired engineer from Kandy. “For someone in their 70s, filling forms and visiting tax offices is not practical. Many of us just give up.”According to Census data, Sri Lankans aged 60 and above now account for nearly 18 per cent of the population about 3.9 million people. Of these, analysts estimate around one million elderly depositors are currently subject to WHT deductions. For many, this tax is not merely a fiscal inconvenience but a direct reduction in essential income used for food, medicine, and utility bills.
A national advocacy group for the elderly has voiced deep concern over what it calls “a policy that taxes the vulnerable to fill budget gaps”. In a recent statement, the organisation noted that the WHT revision “creates refund barriers so high that thousands of seniors will effectively pay more than their fair share”.
An official of the Finance Ministry noted that withholding tax systems are intended to simplify compliance, not punish low-income savers. “When interest earnings form the only income for many seniors, automatic deductions without regard to thresholds distort the equity of the tax system,” he said. A large group of retired public servants has urged the finance ministry to take corrective steps in the 2026 Budget. They recommended establishing a simple exemption declaration for low-income seniors at bank level and introducing automatic refund credits for overpayments within 60 days.
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