Capital gains tax in Sri Lanka: complete guide to rates, exemptions, and how to report a gain

Last verified against the primary sources on 15 October 2026.

Take a hypothetical investor in Colombo who sells a commercial building for LKR 85,000,000 that was acquired 12 years ago for LKR 28,000,000. The gain is LKR 57,000,000. Under Sri Lanka's Inland Revenue Act, that gain is taxed on its own, at a flat rate: 15% for an individual on a sale made on or after 3 June 2026 [1]. That is LKR 8,550,000, due within 30 days after the end of the month of sale [2], not at the annual return in November. Getting this wrong, by treating the gain as exempt, under-reporting the cost base, or waiting for the annual return, means penalties and a potential IRD audit.

Sri Lanka reintroduced capital gains tax under the Inland Revenue Act No. 24 of 2017. A gain from the realisation of an investment asset is taxed at a separate flat rate, not at the progressive income tax bands, and it has its own return: the capital gains tax return, filed within 30 days after the end of the calendar month in which you sold [2].

The Inland Revenue (Amendment) Act No. 11 of 2026, certified on 3 June 2026, raised the rate for individuals and partnerships from 10% to 15%, and for trusts, unit trusts, mutual funds and NGOs from 10% to 30%, from that date [3] [1] [4].

This guide covers what counts as a taxable gain, the rates, the key exemptions (including Colombo Stock Exchange-listed shares and your own home), the cost base rules, and how to file.

How capital gains tax works in Sri Lanka

Under the Inland Revenue Act No. 24 of 2017, gains from the realisation of investment assets are part of investment income, but the First Schedule taxes them at their own rate rather than adding them to the progressive bands [2]:

Sources: the IRD's notice on Act No. 11 of 2026 for the 2026 rates [1], and First Schedule paragraph 4(4) for companies [2].

For individuals, two consequences follow:

• The gain does not push your salary into higher bands. Employment income is taxed at the 6% to 36% bands; the gain is taxed separately at 15%.
• Personal relief cannot be used against the gain. The LKR 1,800,000 personal relief is not deducted against gains from the realisation of investment assets (Fifth Schedule, paragraph 2(a)) [2] [5].

What assets are subject to tax on disposal in Sri Lanka

An "investment asset" is a capital asset held as part of an investment [2]. The most common categories:

Real property: Land, buildings, and structures held as investments. Your principal place of residence is excluded if it meets the conditions below.

Non-listed shares and partnership interests: Gains on the disposal of shares in private limited companies and interests in partnerships are taxable. This includes selling your shareholding in a family business.

Intangible property: Gains on the disposal of trademarks, patents, licences, and similar intangibles held as investments are taxable.

Foreign assets: Resident persons are taxed on worldwide income, so gains on foreign property or shares are generally within scope, with a foreign tax credit available for foreign tax paid on the same gain [2]. Confirm the treatment of offshore assets with a tax adviser.

Before treating a digital-asset disposal as an investment gain, review the income-versus-capital questions for cryptocurrency.

How the gain is calculated

The taxable capital gain equals:

Gain = Disposal consideration − Cost base

Disposal consideration is the amount received. A gift, or a transfer to an associate (such as a family member or a company you control), is treated as a sale at market value (section 46) [2].

Cost base is:

• The original acquisition cost of the asset
• Plus capital improvement costs (extensions, major renovations), not routine maintenance
• Plus incidental costs of acquisition: stamp duty, legal fees, conveyancing costs paid at purchase
• Plus incidental costs of disposal: agent fees, legal fees paid at sale

Indexation: The Act does not index the cost base for inflation [2]. The gain is measured in nominal terms. An asset acquired for LKR 5,000,000 in 2008 and sold for LKR 30,000,000 in 2026 generates a nominal gain of LKR 25,000,000, even though a significant portion reflects inflation rather than real appreciation.

Key exemptions: your home, listed shares, and small gains

1. Principal place of residence (own-home exemption)

A gain made by a resident individual on selling their principal place of residence is exempt if the individual [2]:

• Owned the property continuously for the three years before the sale, and
• Lived in it for at least two of those three years (counted day by day)

There is no requirement to reinvest the proceeds in another home. The exemption does not apply to investment or rental properties.

2. Listed shares (CSE exemption)

A gain on the sale of shares quoted in the official list of a stock exchange licensed by the Securities and Exchange Commission of Sri Lanka, in practice the Colombo Stock Exchange (CSE), is exempt [2]. It does not apply to:

• Shares in private limited companies
• Unlisted securities, including over-the-counter transactions

This exemption is why many Sri Lankan investors prefer CSE-listed equity over direct property or private company investment for capital appreciation.

3. Small gains

A resident individual's gain on an investment asset is exempt if the gain on that asset does not exceed LKR 50,000 and the individual's total gains for the year of assessment do not exceed LKR 600,000 [2].

4. Gifts and inheritance

• Gifts are taxable. A gift, including to a family member, is treated as a sale at market value, so the person giving the asset pays CGT on the gain (section 46) [2].
• Transfers on death are not. When an asset passes on death, the deceased is treated as selling at cost, so no gain arises; the heir takes over that cost and pays CGT only when they later sell (section 45) [2].
• Spouses. A transfer to a spouse or former spouse on death, divorce or a bona fide separation agreement also passes at cost, if the spouse elects in writing (section 44) [2].

Worked example: disposal of investment property

Hypothetical scenario:

A resident individual holds a commercial property as an investment asset (not a principal residence). The property is sold in November 2026.

• Disposal price: LKR 18,000,000
• Original acquisition cost (2015): LKR 6,500,000
• Stamp duty and legal fees at acquisition: LKR 325,000
• Capital improvements (extension built 2019): LKR 900,000
• Agent commission and legal fees at disposal: LKR 540,000
• Total cost base: LKR 6,500,000 + LKR 325,000 + LKR 900,000 + LKR 540,000 = LKR 8,265,000
• Taxable gain: LKR 18,000,000 − LKR 8,265,000 = LKR 9,735,000

Capital gains tax:

• Rate for an individual on a sale on or after 3 June 2026: 15%
• CGT payable: LKR 9,735,000 × 15% = LKR 1,460,250
• Capital gains tax return and payment due: 30 December 2026 (30 days after the end of November)

The individual also has employment income of LKR 2,400,000 for the year. That income is taxed separately under APIT at the progressive bands, after the LKR 1,800,000 personal relief. The gain does not change it: no personal relief is set against the gain, and the gain does not move the salary into a higher band.

Had the same property been sold in May 2026, before the rate change, the CGT would have been LKR 973,500 (10%).

How to report a capital gain

Gains from the realisation of an investment asset have their own return. The capital gains tax return is filed through RAMIS within 30 days after the end of the calendar month in which the sale took place (section 93(3)), and the tax is payable by the same date [2]. The return is a self-assessment.

The sequence for an individual:

1. Log in to the IRD's RAMIS portal.
2. Select the capital gains tax return for the month of the sale.
3. Enter the disposal details: asset description, date of acquisition, date of disposal, gross proceeds, cost base.
4. Keep the supporting documentation: sale agreement, purchase agreement, receipts for improvement costs, agent invoices.
5. Pay the tax by the return's due date.
6. Keep the filed return and the payment confirmation with your records for the year of assessment.

Deadline: 30 days after the end of the month of sale. For a sale in November 2026, that is 30 December 2026. This applies to companies as well as individuals.

For a step-by-step walkthrough of the RAMIS portal, see the RAMIS filing guide.

Common mistakes and compliance risks

Waiting for the annual return: The CGT return is due 30 days after the end of the month of sale, not on 30 November. Tax still unpaid fourteen days after the due date carries a penalty of 20% of the tax due but not paid under section 179(1) [2] [6], plus interest at 1.5% a month or part month from the due date under section 159(1) [2].

Treating all share gains as exempt: Only shares quoted on an SEC-licensed exchange are exempt. Private company share gains are fully taxable. Confirm listing status before applying the exemption.

Assuming a family gift is tax-free: A gift is a sale at market value for CGT purposes. Only transfers on death (and to a spouse on death or divorce, with an election) pass at cost.

Omitting improvement costs from the cost base: Many taxpayers report only the original acquisition cost, forgetting that legal fees, stamp duty, and documented improvement expenditure are also part of the cost base. Including all legitimate cost base items reduces the taxable gain.

Arriving at the land registry or share transfer without a TIN certificate: From 1 November 2026 a resident individual aged 18 or over must produce a valid TIN certificate to register land or title, and both the transferor and the transferee must produce one for a transfer of shares in a Sri Lankan company [7]. See our guide to the TIN certificate from 1 November 2026.

Frequently asked questions

Is capital gains tax in Sri Lanka a flat rate separate from income tax?

Yes. Gains from the realisation of investment assets are taxed at a flat rate, 15% for individuals and partnerships on gains from 3 June 2026 (10% before) and 30% for companies, separately from other income [1] [2]. Personal relief is not deducted against the gain.

Are gains on Colombo Stock Exchange shares taxable?

No. A gain on shares quoted on the official list of an SEC-licensed stock exchange, such as the CSE, is exempt [2]. The exemption does not cover private company shares or unlisted securities.

If I sell my home, do I have to reinvest the proceeds to get the exemption?

No. The own-home exemption depends only on ownership and occupation: you must have owned the home continuously for the three years before the sale and lived in it for at least two of those years [2]. There is no reinvestment condition. General investment property has no rollover relief: the gain is taxable when you sell.

What if I sell or give property to a family member below market value?

A gift, or a transfer to an associate such as a relative, is treated as a sale at market value [2]. The CGT is calculated on the market value, not on the price actually paid, and is assessed on the person transferring the asset.

When is the capital gains tax due?

With the capital gains tax return, within 30 days after the end of the calendar month in which the sale took place [2]. A sale on 12 November 2026 is due by 30 December 2026.

Is stamp duty on a property sale separate from income tax on the gain?

Yes. Stamp duty is a transaction cost, not income tax. Stamp duty paid at acquisition forms part of the cost base. Stamp duty paid at disposal is an incidental disposal cost that also reduces the taxable gain.

Talk to us. If you are about to sell property or private company shares and want the gain, the exemptions and the 30-day return worked out first, our tax team can go through it with you; book a consultation at our contact page.

WinCore Pvt Ltd

This guide is general information on the law as at 15 October 2026 and is not advice on your specific situation.

References

1. Inland Revenue Department. Notice to the Taxpayers SEC/PN/IT/2026/02, Amendments to the Inland Revenue Act (8 June 2026), item 20. https://www.ird.gov.lk/en/Lists/Latest%20News%20%20Notices/Attachments/794/SEC_PN_IT_2026-02_E.pdf . Primary. Accessed 15 October 2026.

1. Inland Revenue Department. Inland Revenue Act, No. 24 of 2017, consolidated text with amendments to 2025, ss.44 to 46, 93(3), 157, 159(1) and 179, First Schedule para 4(4), Third Schedule (f), (g) and (h), Fifth Schedule para 2(a). https://www.ird.gov.lk/en/publications/Acts_Income%20Tax_2017/IRA_Cons_Act_-_2025_Changes.pdf . Primary. Accessed 15 October 2026.

1. Parliament of Sri Lanka. Inland Revenue (Amendment) Act, No. 11 of 2026, certified 3 June 2026, capital gains rates. https://www.ird.gov.lk/en/publications/Acts_Income%20Tax_2017/IR_Act_No_11-2026_E.pdf . Primary. Accessed 15 October 2026.

1. KPMG Sri Lanka. Tax Flash: The Inland Revenue Amending Act (June 2026), capital gains rates. https://assets.kpmg.com/content/dam/kpmgsites/lk/pdf/kpmg-tax-news/2026/june/The_Inland_Revenue_Amending_Act_June_2026.pdf . Secondary. Accessed 15 October 2026.

1. Inland Revenue Department. Tax Chart, Year of Assessment 2025/2026, personal relief and gains from investment assets. https://www.ird.gov.lk/en/publications/SitePages/tax_chart_2526.aspx . Primary. Accessed 15 October 2026.

1. Inland Revenue Department. Guide to the Return of Income Tax, Y/A 2025/26, Section 09, penalty of 20 percent of tax due but not paid, 10 percent on a late instalment, interest at 1.5 percent a month or part of a month. https://www.ird.gov.lk/en/Downloads/IT_Individuals_Doc/Asmt_IIT_004_2025_2026_E.pdf . Primary. Accessed 15 October 2026.

1. Inland Revenue Department. Circular SEC/2026/E/07: Mandatory Submission of Taxpayer Identification Number (TIN) Certificate for Specified Transactions (22 September 2026), paras 1 to 4. https://www.ird.gov.lk/en/publications/Circulars_Circulars/SEC_2026_E_07_E.pdf . Primary. Accessed 15 October 2026.