Your principal residence

The biggest exemption for most people. If the property was your principal place of residence, owned continuously for the three years before the sale and lived in for at least two of those three years, the gain is exempt from CGT. This means the family home you've lived in for years typically attracts no CGT when you sell — but a second home, an investment property, or land you've held does.

Small-gain relief (LKR 50,000 / 600,000)

Small gains are excluded. A gain that does not exceed LKR 50,000 on a single transaction, or total gains not exceeding LKR 600,000 in a year of assessment, fall outside the charge. For most property sales the gain comfortably exceeds these thresholds, so this relief matters more for small parcels of land or part-disposals.

Gifts to relatives and spouse transfers

Transferring property to a close relative as a gift, or between spouses, is generally outside the CGT net. Transfers to the government or to an approved charity are also exempt. Note that the person who later sells the gifted property inherits its cost-base history for their own CGT calculation, so the tax isn't avoided forever — just deferred.

The 30 September 2017 cost base

For any property owned before 1 April 2018, the law deems the cost base to be the market value as at 30 September 2017, rather than the original purchase price. This protects long-term owners from being taxed on decades of appreciation — only the gain accruing after late 2017 is within scope. A retrospective valuation by a qualified valuer is the standard way to evidence this figure.

Companies are taxed differently

The 15% rate applies to individuals. Where a company or other entity realises an investment asset, the gain is treated as part of its income and taxed at the applicable corporate income tax rate (generally 30%), not the 15% individual CGT rate. If you hold property through a company structure, take specific advice on how the gain will be taxed.

What counts as 'realisation'

CGT is charged when an investment asset is realised — and 'realisation' is broader than a straight sale. It includes selling, exchanging one property for another, transferring ownership, and transfer on the owner's death. Gifting can also be a realisation event. The common thread is a change of ownership; the one-month clock starts from that date.

Capital Gains Tax on Property

When you sell a property in Sri Lanka for more than it cost you, the profit can be subject to Capital Gains Tax (CGT). Reintroduced in April 2018 and raised to 15% in April 2025, CGT is charged on the gain — not the full sale price — and several common situations are exempt. This guide explains exactly how the gain is worked out, what you can deduct, who doesn't have to pay, and how to file within the one-month deadline.

The Tax at a Glance


1 Apr 2018 – 31 Mar 2025	10%	CGT reintroduced for individuals under the Inland Revenue Act No. 24 of 2017
From 1 Apr 2025	15%	Raised to 15% by the Inland Revenue (Amendment) Act No. 2 of 2025 — the current rate

1 Apr 2018 – 31 Mar 2025

Rate10%

What changedCGT reintroduced for individuals under the Inland Revenue Act No. 24 of 2017

From 1 Apr 2025

Rate15%

What changedRaised to 15% by the Inland Revenue (Amendment) Act No. 2 of 2025 — the current rate

How Your Gain Is Calculated

Capital Gains Tax Calculator

Estimate the CGT on a property sale at the current 15% rate. For guidance only — confirm your liability with the Inland Revenue Department or a tax advisor.

Did you own this property before April 2018?

Selling price (LKR)

Purchase price (LKR)

What you originally paid for the property.

Improvements & construction (LKR)

Documented capital improvements made since acquisition.

Transaction costs (LKR)

Legal fees, valuation, advertising, and agent commission.

Exemptions & Key Concepts

Filing Your CGT Return

Progress0 of 7

Before You Sell — Key Watch-Outs

Good to know

A worked example

Property owned before 2018, valued at LKR 32M as at 30 Sep 2017, with LKR 1M of improvements and LKR 400,000 in transaction costs, sold for LKR 35.5M. Taxable gain = 35.5M − (32M + 1M + 0.4M) = LKR 2.1M. CGT at 15% = LKR 315,000, leaving net proceeds of about LKR 35.18M.

Watch out

The one-month deadline is strict

CGT must be filed and paid within one month of the sale — far tighter than annual income tax. Missing it attracts penalties and interest, so build the filing into your closing checklist rather than leaving it until your annual return.

Watch out

Undocumented costs can't be deducted

You can only reduce the gain by costs you can evidence. Cash-paid renovations with no invoice, or a purchase price understated on an old deed, can leave you with a larger taxable gain than expected. Keep paperwork from day one.

Tip

Get a 30 September 2017 valuation early

For property held before April 2018, a professional retrospective valuation as at 30 September 2017 sets your cost base — and a higher, well-supported valuation legitimately lowers your gain. Engage a qualified valuer before you sell, not after.

Good to know

Confirm the current rules with a tax advisor

Rates and thresholds change with each budget — the rate rose from 10% to 15% in April 2025. Before completing a sale, confirm the current rate, exemptions, and filing process with the IRD or a qualified tax advisor for your specific situation.

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