If you own property in Sri Lanka and earn rental income — whether you live here or overseas — you have a tax obligation. Here’s everything you need to know for the 2025/2026 assessment year.

Is Your Rental Income Taxable?

Yes. Rental income is classified as investment income under the Inland Revenue Act and is subject to income tax. This applies whether you rent out residential property, commercial property, or land.

Both residents and non-residents must pay tax on rental income sourced from Sri Lanka.

The 25% Rent Relief

Good news: you automatically get a 25% deduction on your total rental income. This is meant to cover maintenance, repairs, and other expenses related to the property.

For example, if your annual rent is Rs. 1,200,000:

• 25% deduction: Rs. 300,000
• Taxable rental income: Rs. 900,000

You don’t need receipts for this 25% — it’s applied automatically.

How Is Rental Income Taxed?

Your rental income (after the 25% deduction) is added to your other income (salary, business, etc.) and taxed at the progressive rates:

Income Slab	Rate
First Rs. 1,800,000 total	0%
Next Rs. 500,000	6%
Next Rs. 500,000	12%
Up to Rs. 4,300,000	18%-30%
Above Rs. 4,800,000	36%

So if rental income is your ONLY income and it’s below Rs. 2,400,000 (after the 25% deduction = Rs. 1,800,000 taxable), you may owe zero tax thanks to the personal relief.

Example: Rs. 50,000/Month Rent + Rs. 200,000/Month Salary

• Salary: Rs. 2,400,000
• Rental income: Rs. 600,000
• Rental deduction (25%): Rs. 150,000
• Net rental: Rs. 450,000
• Total taxable: Rs. 2,400,000 + Rs. 450,000 = Rs. 2,850,000
• Less personal relief: Rs. 1,800,000
• Taxable income: Rs. 1,050,000

Tax: Rs. 500,000 × 6% + Rs. 500,000 × 12% + Rs. 50,000 × 18% = Rs. 30,000 + Rs. 60,000 + Rs. 9,000 = Rs. 99,000 per year

Withholding Tax on Rent

If your tenant is a company or partnership, they may be required to deduct 10% Withholding Tax when paying rent. This WHT is not a final tax — it’s an advance payment that gets credited against your total tax liability when you file.

Filing Deadlines

Same as all taxpayers:

• SET: 15 August 2025
• Quarterly installments: Aug, Nov, Feb, May
• Return of Income: 30 November 2026

Calculate Your Tax on Rental Income

👉 Free Rental Income Tax Calculator 👈

Get Help With Property Tax

GDP Consultants can help property owners calculate and file their rental income taxes correctly — whether you live in Sri Lanka or overseas.

📞 Book a Free Tax Consultation | ☎️ +94 71 920 4903