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Capital Gain Tax

The Inland Revenue Act No.24 of 2017, taking effect from April 1, 2018 introduces Capital Gain Tax (CGT) on gain from the realization of investment assets. For income tax purposes, capital gain tax is treated as an investment income and it is charged in section 7(2) b as, “Gain from realization of investment assets as calculated under chapter IV (section 36-51)”

Tax base and calculation of CGT

Capital Gain Tax is a tax on gains realized on the transfer of ownership including sale, exchange, transfer, distribute, cancel, redeem, destroy, loss, expire, expropriate or surrender of an investment asset. The only gain that should be subject to CGT will be the gain on the realization of an investment asset.

Capital Gain is determined by subtracting the cost of investment asset from the consideration received / receivable or the Market Value at the time of realization, whichever is higher.

“Investment Asset” (Sec.195)

• Means a capital asset held as part of an investment, but –
• Excludes the principle place of residence of an individual, provided it has been owned by the individual continuously for the three years before disposal and lived in for at least two of those three years (calculated on a daily basis);

“Capital Asset”(Sec.195)

1. Means each of the following assets: -
   • Land or Building;
   • A membership interest in a company, partnership or trust;
   • A security or other financial assets;
   • An option, right or other interest in an asset referred to in the foregoing paragraphs; but
2. Excludes trading stock or a depreciable asset;

Excluded Investment Assets from CGT

• Principle place of residence (as mentioned above)
• Quoted shares listed in Colombo Stock Exchange (Section 9 - Third Schedule)

Exempted amount from CGT

Where resident individual’s gain from realization of an investment asset that does not exceed Rs.50,000/- and the total gains does not exceed Rs.600,000/- in the year of assessment.

Cost of an Investment Asset

The cost of an investment asset held by a person as at, 30.09.2017 is equal to the market value of the asset at that time. (Section 203(4))

Applicable CGT rates on realization of Investment Assets: 2018 to Date

Capital Loss

A loss from realization of investment asset will not be deductible against any gain from realization investment asset.

Furnishing of CTG Returns & Payment of Tax

Every Liable person shall file CGT return and make payment after the realization of investment asset.

• Due Date for Payment of Tax / Furnish Returns :
  • From 01-04-2018 to 31-03-2021
    • The CGT return and tax payment were due no later than one month after the realization of the investment asset took place.
  • On or after 01-04-2021
    • The CGT return must be filed, and the tax paid, not later than 30 days after the end of the relevant calendar month in which the realization of the investment asset took place.


• Submission :
  • Online through e-Services
  • The relevant Inland Revenue Metropolitan/Regional Office, the file is assigned
  • In respect of all other cases, to Central Document Management Unit (CDMU), 1^st Floor of Inland Revenue Head Office Building.