Who Declares Rental Income on Joint Property in Sri Lanka?

Two siblings inherit the family house in Nugegoda. They rent it out. Every month the tenant transfers the rent into one account, usually whoever lives closest or handles the paperwork, and when filing season comes around that sibling puts the whole amount on their return.

It feels tidy. One account, one return, one person dealing with the IRD.

It's also wrong, and it can cost the family several hundred thousand rupees a year in tax that nobody actually owed.

Who declares the rental income on a jointly owned property?

Each co-owner declares their own share. Not the person who collects it, not the eldest, not the one whose name is first on the deed.

The Inland Revenue Act deals with this directly. Section 29 is titled "Jointly owned investments" and it leaves very little room for interpretation.

Two things follow from that. First, apportionment isn't optional. The Act says amounts "shall be apportioned," so this is how the income is calculated, not a planning choice the family gets to make. Second, it cuts both ways. The rent gets split, and so do the deductions.

Section 3(3) backs this up from the other direction: "The taxable income of each person and the assessable income from each source shall be determined separately." You and your sibling are separate taxpayers who happen to own one thing together. The property isn't a taxpayer. It never files anything.

So when one person declares the whole rent, two returns are wrong at once. Theirs overstates income. The other owner's understates it, or doesn't exist at all.

How do you split the rent between co-owners?

By ownership interest, which usually means whatever the deed says.

If the deed gives you 60% and your brother 40%, that's the split for the rent and for the deductions. If you inherited equally under a testamentary case, that's your split. The money trail doesn't decide it. Rent landing entirely in one person's account changes nothing about whose income it is.

Where nobody can establish the shares, Section 29(2) treats them as equal. That's a fallback, not a default to reach for first. Check the deed before you assume an even split, because an inherited property divided among four children is not always divided into four equal parts.

Does each co-owner get their own personal relief and rent relief?

Yes, and this is where splitting the income properly turns into real money.

Every resident individual gets a personal relief of Rs. 1,800,000 for each year of assessment commencing on or after 1 April 2025, under paragraph 2(a) of the Fifth Schedule. It belongs to the person, not the property. Two owners bring two personal reliefs to the same house.

On top of that, paragraph 2(c) of the Fifth Schedule gives an individual with rental income from an investment asset a relief of 25% of the total rental income, described in the Act as "a relief for the repair, maintenance, and depreciation relating to the investment asset." Because it's an individual relief and Section 29 has already split the income, it's worked out on each owner's own share.

There's a condition attached, and it's an either-or, not a whichever-is-greater. The 25% is allowed "only to the extent no deduction or cost is claimed for any actual expenditures incurred by the taxpayer for the repair, maintenance, and depreciation of the investment asset." Claim the actual repair bills and you lose the deemed 25%. Our guide to rent relief for landlords works through which side of that choice usually wins.

One caution the Act does not resolve. Whether one co-owner can take the flat 25% while the other claims actual expenses on the same property is not addressed anywhere in the Act or the published guidance. The wording says "incurred by the taxpayer," which reads as a test applied to each individual, but nothing states that outright. If your family wants to split the treatment, take advice rather than assuming.

How much tax does each co-owner actually pay?

Nadeesha and Ruwan inherited their parents' house and own it equally. They rent it to a company for Rs. 500,000 a month, so Rs. 6,000,000 for the year. Both are resident individuals with no other income, and neither claims actual repair costs.

Section 29 splits the rent in half. Each of them is dealing with Rs. 3,000,000.

Rs. 27,000 each. Rs. 54,000 for the family.

Now run it the way families often do, with Nadeesha declaring the whole rent because the tenant pays into her account.

Same house. Same rent. Rs. 492,000 instead of Rs. 54,000.

The gap is Rs. 438,000, and it comes from two places. One personal relief was used instead of two, and stacking all the income on one person pushed it up through the bands into the 36% top rate instead of sitting in the 6% band twice. If the progressive slab mechanics aren't familiar, that's the effect in a single number.

Worth being clear about what this is. Splitting the income isn't a clever structure the family chose. It's what Section 29 says the income already is. Nadeesha declaring everything wasn't overpaying out of caution, she was filing an incorrect return that happened to be expensive. The same logic is why married couples in Sri Lanka file separately rather than as a household.

Who claims the withholding tax when the tenant deducts it?

If your tenant is a business, they're probably deducting Advance Income Tax before they pay you.

Under paragraph 10(1)(d) of the First Schedule, rent paid to a resident person is withheld at 0% where the aggregate payment doesn't exceed Rs. 100,000 a month, and at 10% on the full amount once it reaches Rs. 100,000 a month. Section 84(3)(b) then removes the obligation completely for "payments made by individuals, unless made in conducting a business," so a private tenant renting a home doesn't withhold anything regardless of the rent.

This withholding isn't final. Section 89 treats the withholdee as having paid the tax and entitles them to a credit for it, which is the difference between final and creditable tax and it matters here.

Back to Nadeesha and Ruwan. Rs. 500,000 a month clears the threshold, so the tenant withholds Rs. 50,000 a month, Rs. 600,000 across the year. Each owner's share of that credit is Rs. 300,000, set against tax of Rs. 27,000.

Each of them is owed a refund of Rs. 273,000.

That's a lot of money to have attached to the wrong name. And here the Act genuinely runs out of instructions.

The practical fix is upstream of all of this. Get both owners named on the tenancy agreement, give the tenant both TINs, and ask for the withholding certificate to reflect each owner's share. Sorting that out when the lease is signed is far easier than untangling it when one sibling is claiming a refund the paperwork says belongs to the other.

What happens when you sell a jointly owned property?

The gain splits the same way the rent did, and each owner deals with their own share.

The rate changed recently, so the date of your sale decides which one applies. The Inland Revenue (Amendment) Act, No. 11 of 2026, certified on 3 June 2026, raised the rate on an individual's gain from realising an investment asset from 10% to 15%, effective from that certification date. A sale completed before 3 June 2026 is still at 10%.

Say Nadeesha and Ruwan sell the house for Rs. 40,000,000. It came into their hands at a cost of Rs. 24,000,000, so the gain is Rs. 16,000,000, and Section 29 splits it equally.

No personal relief enters that calculation. Paragraph 2(a) of the Fifth Schedule says the personal relief "shall not be deducted against gains from the realisation of investment assets," so the Rs. 1,800,000 that shelters rental income does nothing for a capital gain.

One exclusion is worth knowing. An investment asset excludes an individual's principal place of residence, provided they owned it continuously for the three years before disposal and lived in it for at least two of those three years, counted daily. A house that a sibling actually lived in may sit differently from one that was always rented out. Our guide on selling property and capital gains tax goes through how the gain itself is worked out.

Does joint ownership double the Rs. 50,000 exemption?

No. This is the one that surprises people, because every other part of co-ownership divides neatly per person.

There's a small-gain exemption in paragraph (f) of the Third Schedule for a resident individual whose gain doesn't exceed Rs. 50,000, provided their total gains for the year stay under Rs. 600,000. For jointly owned property, subparagraph (ii) adds a condition: the exemption applies "only if the total gain made by all owners of the investment asset on realisation of the asset does not exceed Rs. 50,000."

Total gain. All owners. Tested once on the whole thing.

Three siblings sell a small plot at a combined gain of Rs. 90,000, so Rs. 30,000 each. Every individual share is comfortably under Rs. 50,000, and the instinct is that all three are exempt. They aren't. The Rs. 90,000 total exceeds Rs. 50,000, the exemption fails for the asset, and each sibling pays 15% on their Rs. 30,000, which is Rs. 4,500 apiece.

What should you record now to keep this simple later?

The families who find this straightforward are the ones who wrote things down years earlier. Four things are worth having.

1. The ownership split, in writing. Sourced from the deed, agreed between owners, and used consistently on every return. This is the single fact everything else derives from.
2. What the property cost, and what you spent on it. Purchase price or probate value, transfer costs, legal fees, and any capital improvements. A gain is consideration less cost, and on an inherited property held for twenty years the cost side is the part nobody can reconstruct from memory.
3. Rent received, by month. Gross rent, before anything the tenant deducted. The gross figure is what gets apportioned.
4. Withholding certificates. Whose name they're in and for what amount, because that's the document standing between each owner and their share of the credit.

If you also need to disclose the property itself, our guide on declaring assets and liabilities covers who has to and what counts.

So what should co-owners actually do?

Section 29 has already decided whose income the rent is. Each owner declares their share, each brings their own personal relief and their own 25% rent relief, and when the property sells, each files their own return within thirty days of that month's end and pays 15% on their share of the gain.

The family in our example wasn't being careless. They were being convenient. Rs. 438,000 a year is what the convenience cost, and getting it right isn't more work, it's just work split two ways instead of piled on one person.

If your split is currently guesswork, start with the deed. Everything else follows from that one number.