Elderly Savers Plead for Relief as Withholding Tax Deepens Hardship

Sri Lanka’s decision to double the Withholding Tax (WHT) on interest income to 10 percent has dealt a severe blow to thousands of senior citizens who depend entirely on their bank deposits to survive. For many retirees, the interest earned on years of careful savings is their only source of income used to buy medicine, pay rent, and meet daily needs.

But with the recent hike in WHT, their monthly income has begun to shrink, leaving them struggling to make ends meet. As the 2026 Budget nears, elderly depositors are appealing to President Anura Kumara Dissanayake and the Ministry of Finance to offer urgent relief not as a privilege, but as an act of fairness and compassion toward those who built the nation’s economy through a lifetime of work.

Under the Inland Revenue (Amendment) Act No. 2 of 2025, banks and financial institutions must deduct 10 percent of all interest income at source, regardless of the depositor’s total earnings. Although individuals with annual incomes below Rs. 1.8 million can file declarations to avoid the deduction, many retirees fall just above this threshold earning between Rs. 1.8 million and Rs. 4 million and now find themselves trapped in a rigid system that taxes them far beyond their true liability.

For example, a retiree with Rs. 3 million in fixed deposits may earn Rs. 300,000 a year in interest. Despite their effective tax being under Rs. 10,000 after allowances, they now face a mandatory Rs. 30,000 deduction three times higher than what they actually owe. Reclaiming this overpayment requires filing refund claims and enduring months of bureaucratic delays, a task most elderly citizens find overwhelming.

“This system takes more than what we owe and forces us to beg for our own money back,” said Senaka Samaraweera, a 72-year-old retiree from Galle. “We can’t spend hours filling forms or visiting tax offices. Many just give up and bear the loss.”

For elderly savers living on fixed incomes, this policy is not just a tax it’s a cut into their daily survival. The money lost could cover essential medicine, food, or utility bills. Economists warn that if the government fails to act, the policy could push thousands of seniors into poverty and erode faith in the fairness of Sri Lanka’s tax system.

The Inland Revenue Department has been under mounting pressure to raise state revenue, with total tax collection surpassing Rs. 3,400 billion by September. Yet, experts caution that relying on taxes from vulnerable groups undermines social trust and violates the principle of equity in taxation.

Inland Revenue Department

A collective of retired public servants recently urged the Finance Ministry to introduce an automatic exemption system for low-income seniors and ensure refunds of excess WHT within 60 days. “Fiscal targets must not come at the cost of humanity,” the group said in a joint appeal.

Sri Lanka’s aging population now exceeds 2.7 million, nearly 18 percent of the total population, and around one million depend on interest income from deposits, finance ministry data shows.

While the government has launched a special fixed-deposit scheme offering an additional three percent interest for citizens over 60 with deposits up to Rs. 1 million, critics argue that it does little to assist those already penalized by the 10 percent WHT.