Blog · Income year 1 July 2025 to 30 June 2026
Salary and a side business: how to complete your IT01
Many persons have a salary and also get fees or sales from a business. The two go on the same IT01 return. The tax bands apply to the total.
Two kinds of income
- Your salary is emoluments. Your employer gives you a statement of emoluments for the year.
- Your fees, sales or rent from the business are business income. Your bank statements show this income.
The salary part
The return fills in your emoluments and the PAYE tax that your employer kept back. Make sure that these values agree with your statement of emoluments. If a value is different, use the value on the statement.
The business part
Add all the money that your business got in the year. This is the gross income. Then subtract the expenses that you had only to get that income. Private expenses and the cost of assets are not expenses of the year.
Source: the authority's notes for the return, Note 2.
How the tax works
The tax bands apply to your total chargeable income, not to each part. Your salary usually fills the lower bands. Thus your business income usually gets your top rate.
| Chargeable income | Rate |
|---|---|
| First Rs 500,000 | 0% |
| Next Rs 500,000 | 10% |
| More than Rs 1,000,000 | 20% |
Source: s.4 and the First Schedule.
The tax that you paid before
The PAYE tax that your employer kept back counts against the tax for the year. You pay only the difference. If you paid too much, you get a refund.
Statements each quarter
A statement of income for each quarter is necessary only above a limit. The limit is Rs 4,000,000 of gross income from business and rent in the last income year. Most side businesses are less than this limit.
Source: s.106(2)(a).
Questions people ask
Do you pay tax two times on your salary?
No. The PAYE tax that your employer kept back counts against the tax for the year. You pay only the difference.
Is a side business taxed on its own?
No. The business income adds to your salary, and the tax bands apply to the total chargeable income.
Must you send a statement each quarter for a side business?
Only if your gross income from business and rent in the last income year was more than Rs 4,000,000.
Let IT01 AI do these steps
IT01 AI is an app for Mac, Windows and Linux. It reads your bank statements and your statement of emoluments on your computer, sorts each payment, and calculates the tax with each figure linked to the Act. One payment of Rs 4,990, and the licence has no end date.
This article explains the law as it stands on 3 October 2026. It is not tax advice.