Statement of Estimated Income Tax – FAQs + Guide

Updated 2024

If it’s time for you to submit your ‘Statement of Estimated Income Tax Payable’ or ‘SET’ again and you’re still struggling to understand the ins and outs of the process, this blog is for you. We’ve answered some of the most common questions you might have while preparing your Statement of Estimated Income Tax form (SET form).

Let’s jump right into it.

Table of Contents

What is a Statement of Estimated Income Tax Payable (SET)?
Who do I submit the form to?
Who should submit a Statement of Estimated Income Tax Payable?
How do I estimate your payable tax amount?
When do I have to submit my SET?
When do I have to pay the estimated taxes mentioned in my SET?
When do I have to pick the revised statement when submitting SET?
How can I qualify for deductibles (qualifying payments/ relief)?
What are the deductions and important points to remember?
How can I estimate the tax based on my income?
How do I calculate the quarterly estimated income tax installment payments?
How do I qualify for foreign tax credits?
What are the penalties for missing a SET or installment payment?
Submit your SET forms with Simplebooks!

What is a Statement of Estimated Income Tax Payable (SET)?

If you earn over LKR 100,000 per month or up to LKR 1,200,000 for a year, then you need to file income tax.. 

Before you do this, you will have to inform the Government how much tax you owe them for the current financial year.

But, this seems a little tricky because you still haven’t completed the financial year, right? That is why you will have to estimate your tax amount.

This is where the Statement of Estimated Income Tax form comes in. The SET form will help you estimate how much income you will earn during the financial year, and based on this value, you can calculate how much tax you owe to the Government. 

These tax values are estimated for the year of assessment and then paid in four installments, once every three months. So, based on the estimation, you can make the payments quarterly (four times a year in total).

Who do I submit the form to?

Once you have completed the SET form, you can submit it by hand or through registered post to the Central Document Management Unit (CDMU), IRD Head Office, Chittampalam A Gardiner Mawatha, Colombo 02.

If you plan on physically submitting the SET you can also do it at any Regional Office available in your area.

You can now file your SET for the Year of Assessment (Y/A) 2024/2025 online through RAMIS on the IRD website. Log in to your RAMIS account and submit your return. Ensure you have all the required information and documents before submitting your return.

Who should submit a Statement of Estimated Income Tax Payable?

If you’re an individual or a business that’s;

1. Registered with the Department of Inland Revenue (IRD)

AND

2. Has a Tax Identification Number (TIN) 

you have to submit a Statement of Estimated Income Tax Payable (SET).

How do I estimate your payable tax amount?

Step 01: Make an estimate of your profits at the end of the 2024/2025 financial year.

Step 02 : Estimate how much tax you’ll have to pay for your estimated profit.

After you make these estimates, you have to mention them on your Statement of Estimated Income Tax Payable form and submit it to the Commissioner General at the Inland Revenue Department.

When do I have to submit my SET?

For every financial year of assessment, the first installment of the SET must be filed on or before the 15th of August 2024.

You need to submit your SET calculation for the entirety of the financial year (2024/2025 in this case) on the 15th of August 2024.

When do I have to pay the estimated taxes mentioned in my SET?

You will be paying the first quarterly payment as you submit your SET form on the 15th of August 2024.

After that, you’ve got four more installment payments to go.

Here is what your payment periods will look like:

After you make your final quarterly payment on the 15th of May 2025., you’ll have to make one last final payment on or before the 30th of September 2025.

There are a couple of things you should remember when you’re making your final payment : 

• You should only make your final payments (on or before 30th Sept 2025) after you’ve audited your finance records. 
• This means that the final payment you make will not be based on your estimated profits, it will be based on your actual profits.  
• If there were any differences between the estimated payable income tax and the actual income tax amount (based on your actual profits), you’ll have to pay the difference on or before the 30th of September 2025. 
• After you’ve settled your final payments on the 30th of September 2025, you have to submit a formal document that shows your audited tax returns on the 30th of November 2025

When do I have to pick the revised statement when submitting SET?

When you’re preparing your SET form, you will be asked whether you’re submitting:

1. Original statement OR;
2. Revised statement. 

If it is your first time filing for SET during the financial year, you can choose the ‘Original Statement’ option. 

In case you need to change any of the information you’ve mentioned on your Original Statement, you can submit a ‘Revised Statement’ (at any point during the financial year).

Your instalment payments for the remaining quarters will also change based on your Revised Statement. 

How can I qualify for deductibles  (qualifying payments/ relief)?

To qualify for qualifying payments, there are 5 possible ways:

1. Donate to an Approved Charity.

If you are the individual donor, you can choose between either 1/3 of the taxable income of the individual for that year of assessment or Rs. 75,000 as the deductible. The chosen value must be whichever is the lowest.

2. Donate to the Government or other specified institutions.
3. Profits remitted to the President’s Fund.
4. A contribution made by a resident individual to establish a shop for a female individual who is from the Samurdhi beneficiary family
5. Expenditure incurred by any person
   – in the production of a film at a cost not less than five million rupees
   – in the construction and equipping of a new cinema at the cost of not exceeding twenty-five million rupees
   – in the upgrading of a cinema at a cost of not exceeding ten million Rupees
   – The deduction of this expenditure is restricted to one-third of the taxable income.

To qualify for reliefs, you need to qualify for: 

1. Personal relief 

If you are a resident or non-resident (but citizen) then you are entitled to a personal relief of LKR 1,200,000 for each year of assessment. 

However, if you are a person who also acts as the trustee, receiver, executor, or liquidator then this will not apply.

The relief may be deducted from the assessable income of an individual except to the extent that the assessable income comprises gains from the realisation of investment assets.

2. Rent relief 

If you are a resident you are entitled to a deduction of 25% on the total rental income from an investment asset for the year of assessment.

But if it is supposed to be claimed for any actual expenditures like repairs, maintenance, and depreciation of the investment asset, then it cannot be deducted.

3. Solar Panel Relief

Resident individuals who have acquired solar panels to fix on their premises and connected to the national grid are entitled to deduct Rs. 600,000 for each year of assessment, up to the total expenditure made on such solar panels or up to the amounts paid to a bank in respect of any loan obtained to acquire such solar panels.

What are the deductions and important points to remember?

When you’re calculating the upcoming quarterly installment payments, there are a few things to remember.

• The estimated tax amount (SET) that you calculate will be relevant for the entire upcoming financial year.
• However, if your estimated tax amount for the next financial year either increases or decreases suddenly and you want to change the initial estimated tax amount you’ve filed, you’ll have to submit a revised SET to the Commissioner General with the new tax estimates.  
• If you’ve given a tax estimate that is lower than the actual amount of tax that you have to pay for the financial year, you will have to submit a cause for the difference to the Commissioner General in your revised SET forms.

How can I estimate the tax based on my income?

After you total your employment, interest, and business incomes, you get your value of ‘Estimated Assessable Income’. 

From this, you can deduct any reliefs and qualifying payments that you are entitled to. The value you are left with is the ‘Estimated Taxable Income’.

Individuals

How do I calculate the quarterly estimated income tax installment payments?

If you don’t have a dedicated accountant or a financial service calculating your SET for you, and you’re doing it on your own; here’s how the payment amounts are calculated for each quarter :

We’ve defined these terms for you:

• Estimated tax payable – The tax amount that you think you’ll have to pay for the upcoming financial year (2024/2025). This is calculated based on the estimated tax amount you’ll have to pay for your estimated profit.
• Previous installment payments – If you’ve made any advanced quarterly income tax payments up until now, you can deduct it. For example; if you’ve made tax payments in June or February, you can deduct that amount for your next quarterly installment.
• Advanced Income Tax (AIT) and Withholding Tax (WHT) –  If you’ve paid any tax payments in advance, you can deduct that.   

How do I qualify for foreign tax credits?

If you have access to a foreign investment income, you can receive a tax break. 

The foreign tax credit is limited to the amount of tax on the part of profits/ income that is related to the foreign tax credit. 

If you own or run a business abroad the company overseas can be taxed for this. 

However, if you are covered by a double tax agreement, which means your country has signed an agreement with the overseas country, then that company will not be taxed here

What are the penalties for missing a SET or installment payment

Penalties for late/missing or incorrect SET filing

1. If you fail to submit the SET, you could be fined up to 1 million rupees under Section 185 of the IR Act. 
2. Underpaying taxes due to an incorrect SET and material omission in the SET, penalty will be imposed under section 180 of the IR Act in the amount of-

1. 25% of the underpayment, if (b) does not apply;
or
2. 75% of the underpayment, if the amount of the underpayment is-

1. higher than ten million rupees or
2. higher than the 25% of the person’s tax liability for the period.

3. If your SET has false or misleading information, you could be fined 50,000 rupees OR the amount of tax you understated, whichever is higher under section 181 of the IR Act.
4. Even worse, if you intentionally lied on the SET, you could face a fine of up to 1 million rupees or be imprisoned for up to a year, or even both! (Section 190).

Penalties for late/missed or evaded installment payments.

I. Penalty for nonpayment /late payment – (Under Section 179 (2) of the IR Act)

If you don’t pay your full installment within 14 days of the due date, you’ll be charged a 10% penalty on the unpaid amount.

II. Fine and imprisonment – (Under Section 189 of the IR Act)

If you intentionally avoid making your installment payments, things get serious. You could face a fine of up to 10 million rupees or be imprisoned for up to 2 years, or even both!

III. Interest on under payment (Under Section 159 (1) of the IR Act).

On top of penalties, you’ll also be charged interest at 1.5% per month on any unpaid installment amount. This interest starts accruing from the original due date.

Submit your SET forms with Simplebooks!

Hey, we’re Simplebooks – a registered tax advisor.

This means that Simplebooks is capable of calculating and submitting your SET forms for you.

If you need help submitting your SET forms by the 15th of August this year, you can contact us.

Additional resources for further reading:
Everything you need to know about Income Tax in Sri Lanka
Withholding Tax Sri Lanka? Here’s Everything You Need to Know