Rental Income Tax Calculator Sri Lanka

Rent Relief is a statutory deduction available to resident individuals and non-resident citizens under the Inland Revenue Act No. 24 of 2017. It allows a deduction of 25% of the gross rental income before applying progressive income tax rates. For example, if gross annual rental income is LKR 2,400,000, the Rent Relief deduction is LKR 600,000. This deduction is in addition to any municipal rates paid, and both are subtracted from gross rental income to arrive at net taxable rental income. Non-resident non-citizens are not eligible for Rent Relief.

Yes. Rental income derived from property located in Sri Lanka is taxable under the Inland Revenue Act No. 24 of 2017. It is treated as investment income and taxed at progressive individual income tax rates after deducting allowable expenses: municipal rates paid on the property and the 25% Rent Relief (for eligible persons). The net rental income is then subject to the progressive tax slabs starting from 0% on the first LKR 1,800,000 (the personal tax-free allowance for residents and non-resident citizens) up to 36% on the balance above LKR 4,300,000. Taxpayers must declare rental income in their annual income tax return filed with the Inland Revenue Department.

For payments to resident landlords, a tenant (where the tenant is a company, partnership, or individual in business) is required to withhold tax at 10% when the monthly rental payment exceeds LKR 100,000. For payments to non-resident landlords, the WHT rate is 14% regardless of the payment amount. WHT deducted by the tenant is a prepayment of the landlord's income tax liability. At year-end, the landlord reconciles the WHT credited against the assessed income tax to determine whether additional tax is payable or a refund is due. Tenants must issue WHT certificates to landlords and remit the deducted amounts to the IRD by the 15th of the following month.

Non-resident citizens (Sri Lankan citizens residing abroad) are entitled to the personal tax-free allowance of LKR 1,800,000 per year, which is the first slab at 0% in the progressive tax table, and they may also claim Rent Relief of 25%. Non-resident non-citizens (foreign nationals residing abroad who own Sri Lankan property) do not qualify for the personal tax-free allowance or Rent Relief. Their net rental income (after deducting only municipal rates) is subject to tax from the first rupee at progressive rates starting at 6%.

For resident individuals and non-resident citizens, the progressive tax slabs for the 2025/2026 tax year are: First LKR 1,800,000 at 0% (personal tax-free allowance); next LKR 1,000,000 at 6%; next LKR 500,000 at 18%; next LKR 500,000 at 24%; next LKR 500,000 at 30%; and any balance above LKR 4,300,000 at 36%. For non-resident non-citizens, the 0% slab does not apply. Tax begins at 6% from the first rupee of net income.

Individuals with rental income must file an income tax return with the Inland Revenue Department for each year of assessment (April 1 to March 31). The self-assessment return is typically due by November 30 of the following year (e.g., for the year of assessment ending March 31, 2025, the return is due by November 30, 2025). Tax not covered by withholding is paid in quarterly income tax instalments by 15 August, 15 November, 15 February and 15 May, and any balance is paid after the year ends. Late filing and late payment attract penalties and interest under the Inland Revenue Act.