Capital Gains Tax on Property Sale in India 2026: LTCG, STCG, Rates & Exemptions

Selling property in India can attract significant capital gains tax, with rates varying based on the holding period and acquisition date. For the Financial Year 2025-26 (Assessment Year 2026-27), property held for more than 24 months is classified as a Long-Term Capital Asset (LTCA), while property held for 24 months or less is a Short-Term Capital Asset (STCA).

The Union Budget 2024 introduced key changes, including the removal of indexation benefits for property acquired on or after July 23, 2024, and a uniform LTCG tax rate of 12.5% without indexation for many assets.

Parameter	Details (FY 2025-26 / AY 2026-27)
Definition of Capital Gains Tax	Tax on profits from transferring a capital asset, including property (land and building), shares, mutual funds, or certain insurance policies.
Types of Capital Gains on Property	Short-Term Capital Gains (STCG) and Long-Term Capital Gains (LTCG).
Short-Term Capital Asset Holding Period (Property)	Property held for 24 months or less from the date of acquisition.
Long-Term Capital Asset Holding Period (Property)	Property held for more than 24 months from the date of acquisition (reduced from 36 months by Union Budget 2024).
STCG Tax Rate on Property	Taxed as per the individual’s income tax slab rates.
LTCG Tax Rate on Property (Acquired on or after 23 July 2024)	12.5% without indexation.
LTCG Tax Rate on Property (Acquired before 23 July 2024)	Taxpayer may opt for 20% with indexation or 12.5% without indexation.
Indexation Benefit for LTCG on Property	No longer available for property acquired on or after 23 July 2024. Optional for property acquired before 23 July 2024.
LTCG Tax Rate (General, without indexation)	12.5% (uniform rate for many assets post-Budget 2024).
LTCG Tax Rate (General, with indexation, where applicable)	20% (for property acquired before 23 July 2024).
LTCG Tax Rate for NRIs (Property held > 24 months)	12.5% without indexation benefit.
Property Construction Timeline for LTCG Exemption (Section 54)	Within 3 years from the date of sale of the original property.
Maximum Investment in Specified Bonds (REC, NHAI) for LTCG Exemption (Section 54EC)	₹50 lakh for the financial year.
TDS Rate on LTCG for NRI Seller (Section 195)	20% plus applicable surcharge and cess.
TDS Rate on STCG for NRI Seller	30% plus applicable surcharge and cess.
LTCG Exemption Limit for Listed Equity/Equity MFs (Section 112A)	₹1.25 lakh (on gains exceeding this amount, 12.5% tax applies).
Income Tax Act Applicable	Income Tax Act, 1961, for income earned up to 31st March 2026.
Carry Forward of Capital Loss	Remaining loss can be carried forward for up to eight assessment years.
Set-off of Short-Term Capital Loss (STCL)	Can be set off against both STCG and LTCG.
Set-off of Long-Term Capital Loss (LTCL)	Can only be set off against LTCG.

Understanding these classifications and rates is for property sellers to accurately calculate their tax liability and explore available exemptions under the Income Tax Act, 1961.

LTCG vs STCG on Property: Key Differences

Capital gains tax on property in India is categorized into Long-Term Capital Gains (LTCG) and Short-Term Capital Gains (STCG), primarily based on the property’s holding period. For the financial year 2026-27, property held for more than 24 months is considered a long-term asset, while property held for 24 months or less is short-term.

The tax rates and benefits, such as indexation, differ significantly between these two categories, influencing a seller’s tax liability. Understanding these distinctions is for effective tax planning when selling property in India.

Feature	Short-Term Capital Gains (STCG) on Property	Long-Term Capital Gains (LTCG) on Property
Holding Period	Property held for 24 months or less (effective from Union Budget 2024 for FY 2026-27).	Property held for more than 24 months (effective from Union Budget 2024 for FY 2026-27).
Tax Rate (Resident Individuals & HUFs)	As per the taxpayer’s applicable income tax slab rates for FY 2026-27.	12.5% without indexation, or 20% with indexation (optional for property acquired before July 23, 2024, and transferred on or after July 23, 2024).
Tax Rate (NRIs)	Buyer deducts taxes at NRI’s income bracket rate (plus surcharge and cess). TDS rate is 30% for STCG.	12.5% without indexation benefit (plus surcharge and cess). TDS rate is 20% for LTCG.
Indexation Benefit	Not available. The cost of acquisition is not adjusted for inflation.	Removed for property acquired on or after July 23, 2024. For property acquired before this date, resident individuals and HUFs can opt for 20% with indexation.
Calculation of Gains	Profit is added to the taxpayer’s total income and taxed at marginal rates.	Calculated by deducting the cost of acquisition (adjusted for indexation if applicable) from the net sale consideration.
Deductions under Chapter VI-A	Not allowed from STCG.	Allowed for specific investments under sections like 54, 54F, and 54EC.
Set-off of Losses	Short-Term Capital Loss (STCL) can be set off against both STCG and LTCG.	Long-Term Capital Loss (LTCL) can only be set off against LTCG.
Carry Forward of Losses	Remaining STCL can be carried forward for up to eight years and set off against both STCG and LTCG.	Remaining LTCL can be carried forward for up to eight years and set off only against LTCG.
Exemptions (Section 54)	No direct exemption under Section 54 for STCG on property.	Exemption available if gains from residential property sale are reinvested in one or two new residential properties in India within specified timelines.
Exemptions (Section 54EC)	Not applicable.	Exemption available if capital gains from land or building are reinvested in notified bonds (e.g., NHAI, REC) within 6 months, up to ₹50 lakh.
Exemptions (Section 54F)	Not applicable.	Exemption available if capital gains from the sale of property (other than a house) are invested to buy a new house in India.
Tax Planning Strategy	Selling after 24 months avoids STCG tax.	Reinvesting gains in new property or specified bonds can reduce/eliminate LTCG tax.

The Union Budget 2024 significantly altered the by reducing the long-term holding period for property to 24 months and removing indexation benefits for newly acquired properties, making IT to verify the acquisition date.

Property Capital Gains Tax Rates 2026

For the Financial Year 2026-27, Long-Term Capital Gains (LTCG) on property held for over 24 months are taxed at 12.5% without indexation. Resident individuals and HUFs can opt for a 20% rate with indexation for property acquired before July 23, 2024, and transferred on or after this date. Short-Term Capital Gains (STCG) on property sold within 24 months are taxed at the seller’s applicable income tax slab rates.

Capital Gain Type	Tax Rate (FY 2026-27 / AY 2027-28)	Holding Period	Notes
LTCG on Property (acquired before July 23, 2024, transferred on/after July 23, 2024)	20% with indexation (optional for resident individuals/HUFs)	More than 24 months	Indexation benefit applies to the cost of acquisition.
LTCG on Property (acquired before July 23, 2024, transferred on/after July 23, 2024)	12.5% without indexation (taxpayer’s choice)	More than 24 months	Allows for tailored tax optimization.
LTCG on Property (acquired on or after July 23, 2024)	12.5% without indexation	More than 24 months	Indexation benefit is not available for these properties.
STCG on Property	As per income tax slab rates	Within 24 months	Profit is added to your total income. No indexation benefit.
LTCG on Property for NRIs	12.5% without indexation benefit	More than 24 months	TDS rate of 20% (plus surcharge and cess) under Section 195.
STCG on Property for NRIs	As per income tax slab rates	Within 24 months	TDS rate of 30% (plus surcharge and cess).
LTCG on Listed Equity Shares & Equity Mutual Funds (Section 112A)	10% on gains exceeding ₹1 lakh	More than 12 months	Exemption limit of ₹1.25 lakh for listed equity shares or equity mutual funds under Section 112A. No indexation.
STCG on Listed Equity Shares (Section 111A)	15%	Less than 12 months	Applies if Securities Transaction Tax (STT) is paid.
STCG on Listed Equity Shares (transferred on/after July 23, 2024)	20%	Less than 12 months	This rate applies to specific transfers.
LTCG on Debt Funds, Gold, Unlisted Shares (general)	12.5% without indexation	More than 24 months (for unlisted shares, 36 months for other assets)	Uniform rate for various non-equity assets.
Maximum investment in specified bonds (Section 54EC)	₹50 lakh	Within 6 months of property sale	Bonds issued by NHAI or REC for LTCG exemption.
Long-term capital losses carry forward	Can be carried forward for up to eight years	N/A	Can only be set off against other long-term capital gains.
Short-term capital losses carry forward	Can be carried forward for up to eight years	N/A	Can be set off against both STCG and LTCG.

The Union Budget 2026-27 did not introduce new amendments to property LTCG tax rules, maintaining the existing structure for the financial year.

Calculating Capital Gains on Property

Calculating capital gains on property involves determining the difference between the sale price and the adjusted cost of acquisition. For the financial year 2026-27, the holding period for property to be considered a long-term capital asset is more than 24 months, reduced from 36 months by the Union Budget 2024.

The method of calculation and applicable tax rates depend on whether the gain is short-term or long-term, and the property’s acquisition date.

• Identify Holding Period: Property held for 24 months or less results in Short-Term Capital Gains (STCG), taxed at your income tax slab rates. Property held for more than 24 months yields Long-Term Capital Gains (LTCG).
• Determine Cost of Acquisition: This is the original purchase price of the property. For properties acquired before July 23, 2024, and transferred on or after this date, resident individuals and HUFs can opt for a 20% tax rate with indexation benefit.
• Apply Indexation (if applicable): Indexation adjusts the cost of acquisition for inflation, reducing the taxable gain. This benefit is removed for property acquired on or after July 23, 2024, meaning the purchase price cannot be adjusted for inflation.
• Calculate Net Sale Consideration: Deduct transfer expenses like brokerage, advertising, stamp duty, and legal fees from the gross sale price. These expenses cannot be claimed again if already deducted under other Income Tax Act provisions.
• Compute Capital Gains: Subtract the indexed cost of acquisition (or original cost if no indexation) and transfer expenses from the net sale consideration. This difference is your capital gain.
• Consider Exemptions: Reinvesting LTCG from a residential property sale into one or two new residential properties can provide exemption under Sections 54 and 54F. There are specific time limits for purchase (1 year before sale to 2 years after) or construction (3 years).
• Utilize Capital Gains Account Scheme (CGAS): If you cannot immediately reinvest the gains, deposit the amount in a CGAS account. The funds must be reinvested in a new house within two years to maintain the exemption.
• Set Off Losses: Short-Term Capital Losses (STCL) from property held up to 24 months can be set off against both STCG and LTCG. Remaining losses can be carried forward for up to eight years, set off only against LTCG during that period.

Understanding these calculation methods and available exemptions is for optimizing your tax liability when selling property in India for the 2026-27 tax year.

Exemptions to Save Capital Gains Tax

Several provisions under the Income Tax Act, 1961, allow taxpayers to reduce or exempt capital gains tax on property sales in India. These exemptions primarily involve reinvesting the capital gains into specific assets or schemes within defined timelines. For the financial year 2026-27, the existing rules continue to apply as Budget 2026 did not introduce further changes to property LTCG rules.

• Reinvestment in Residential Property (Section 54): Capital gains from selling a residential property can be exempt if reinvested in one or two new residential properties. The new property must be purchased either one year before or two years after the sale, or constructed within three years of the sale date.
• Reinvestment in Other Property (Section 54F): If you sell any long-term capital asset other than a residential house, the capital gains can be exempt by investing the net sale consideration into purchasing a new residential house. This new house must be bought within one year before or two years after the sale, or constructed within three years.
• Investment in Capital Gains Account Scheme (CGAS): If you cannot invest the capital gains into a new property within the stipulated time before filing your Income Tax Return, you can deposit the amount into a CGAS account. The amount must then be utilised for the new property purchase or construction within the original time limits to maintain the exemption.
• Investment in Notified Bonds (Section 54EC): Capital gains from the sale of land or buildings can be exempt if reinvested in specified bonds issued by authorities like NHAI or Rural Electric Corp. The investment must be made within six months of the property sale, with a maximum investment limit of ₹50 lakh for the financial year.
• Long-Term Capital Loss Set-Off: If you incur a long-term capital loss (LTCL) on immovable property held for more than 24 months, IT can be carried forward for up to eight years. This LTCL can only be set off against other long-term capital gains in subsequent years, reducing your taxable income.
• Short-Term Capital Loss Set-Off: A short-term capital loss (STCL) on property held for up to 24 months can be set off against both short-term capital gains (STCG) and long-term capital gains (LTCG). Any remaining STCL can be carried forward for eight years and set off against future STCG and LTCG.
• Sale of Rural Agricultural Land: Gains from the sale of rural agricultural land in India are not considered capital gains and are therefore exempt from tax. This applies if the land is not situated in specified urban or semi-urban areas as per Section 2(14)(iii) of the Income Tax Act.

Understanding these exemptions helps property sellers in India optimise their tax liability on capital gains for the 2026-27 assessment year.

Capital Gains Tax: Property vs Equity

Capital gains tax rules in India differ significantly between property and equity investments, impacting holding periods and applicable tax rates. As of 2026, property held for over 24 months attracts LTCG tax at 12.5% without indexation, or 20% with indexation for specific cases, while listed equity LTCG exceeding ₹1.25 lakh is taxed at 12.5% without indexation.

Feature	Property	Listed Equity	Equity Mutual Funds
Holding Period for LTCG	More than 24 months (effective from Union Budget 2024)	More than 12 months	More than 12 months
LTCG Tax Rate (2026-27)	12.5% (without indexation) or 20% (with indexation, for property acquired before July 23, 2024, at taxpayer’s option)	12.5% (on gains exceeding ₹1.25 lakh, without indexation)	12.5% (on gains exceeding ₹1.25 lakh, without indexation)
STCG Tax Rate (2026-27)	As per income tax slab rates	20% (for transactions on or after July 23, 2024); 15% (if STT paid, under Section 111A)	15% (under Section 111A)
Indexation Benefit	Not available for property acquired on or after July 23, 2024. Optional for property acquired before July 23, 2024.	Not available for LTCG under Section 112A	Not available for LTCG under Section 112A
Exemption Limit for LTCG	No general exemption limit; exemptions via reinvestment (Sections 54, 54F, 54EC)	₹1.25 lakh (under Section 112A)	₹1.25 lakh (under Section 112A)
Reinvestment Exemptions	Sections 54 (new residential property), 54EC (specified bonds), 54F (new residential property from non-house asset sale)	Section 54F (investing gains from non-house asset sale into a new house)	Section 54F (investing gains from non-house asset sale into a new house)
Loss Set-off & Carry Forward	STCL can be set off against STCG and LTCG. LTCG loss can be carried forward for 8 years, set off only against LTCG.	STCL can be set off against STCG and LTCG. LTCG loss can be carried forward for 8 years, set off only against LTCG.	STCL can be set off against STCG and LTCG. LTCG loss can be carried forward for 8 years, set off only against LTCG.
NRI Tax Implications	LTCG taxed at 12.5% without indexation (if held > 24 months). TDS at 20% (LTCG) or 30% (STCG).	LTCG taxed at 12.5% (on gains > ₹1.25 lakh). STCG at 15% (Section 111A).	LTCG taxed at 12.5% (on gains > ₹1.25 lakh). STCG at 15% (Section 111A).

The Union Budget 2024 introduced a uniform 12.5% LTCG tax rate across many assets, simplifying the tax structure for investors in India.

Common Misconceptions on Property CGT

Several common misunderstandings exist regarding Capital Gains Tax (CGT) on property in India for 2026. For instance, many believe all property sales attract indexation benefits, but this changed for properties acquired on or after July 23, 2024.

Understanding these is for accurate tax planning and compliance.

• Indexation Benefit for All Properties: Indexation is no longer available for calculating LTCG on property acquired on or after July 23, 2024. However, resident individuals and HUFs can opt for a 20% rate with indexation for property acquired before July 23, 2024, and transferred on or after this date (Source: Income Tax Department).
• Fixed Holding Period for LTCG: The holding period for property to be classified as a long-term capital asset was reduced from 36 months to 24 months by Union Budget 2024. Property sold after 24 months from purchase now qualifies for LTCG treatment.
• Senior Citizens Have Special Exemptions: Senior citizens are subject to the same LTCG tax rules on property as other taxpayers. There is no blanket age exemption for capital gains; taxability depends on overall income and applicable age-based fundamental exemption limits for total taxable income.
• All Losses Can Be Set Off Against Any Gain: Short-Term Capital Losses (STCL) on immovable property (held up to 24 months) can be set off against both STCG and LTCG. However, Long-Term Capital Losses (LTCL) can only be carried forward for up to eight years and set off solely against other LTCG.
• Reinvestment in Any Property Qualifies for Exemption: Exemption on LTCG from the sale of residential property is available if gains are reinvested in one or two residential properties located in India. Reinvestment in properties outside India does not qualify for this exemption under Section 54.

Clarifying these points helps property sellers make informed decisions and avoid potential tax penalties.

Next Steps for Property Sellers

Property sellers in India must understand the tax implications for the Financial Year 2026-27 to optimize their capital gains. The Income Tax Act 2025, effective from April 1, 2026, continues existing provisions for property LTCG, with no new amendments introduced in Budget 2026-27.

To ensure compliance and potentially reduce your tax liability, consider these actionable steps:

• Determine Holding Period: Classify your property as a long-term capital asset if held for more than 24 months. If sold within 24 months, IT is a short-term capital asset, taxed at your income tax slab rates.
• Choose LTCG Calculation Method: For property acquired before July 23, 2024, and transferred on or after this date, resident individuals and HUFs can opt for a 20% tax rate with indexation or 12.5% without indexation. Property acquired on or after July 23, 2024, is taxed at 12.5% without indexation, as the indexation benefit has been removed.
• Reinvest Capital Gains for Exemption: To claim exemption under Section 54, reinvest gains from a residential property sale into one or two new residential properties in India. Purchase the new property within one year before or two years after the sale, or complete construction within three years.
• Utilize Capital Gains Account Scheme (CGAS): If immediate reinvestment in a new property is not possible, deposit the capital gains into a CGAS account. The amount must be reinvested within two years to maintain the exemption.
• Invest in Notified Bonds: For gains from the sale of land or buildings, consider investing up to ₹50 lakh in specified bonds issued by entities like NHAI or Rural Electric Corp. Under Section 54EC. This investment must be made within six months of the property sale.
• Carry Forward Capital Losses: If you incur a short-term capital loss (STCL) on property held for up to 24 months, IT can be set off against both STCG and LTCG. Any remaining loss can be carried forward for up to eight years and set off against LTCG during this period.

Understanding these provisions and planning your property sale and reinvestment strategically can significantly impact your tax outcome for the 2026-27 financial year.

Key Takeaways

• Property held for over 24 months is a long-term capital asset, taxed at 12.5% (without indexation) or 20% (with indexation, if eligible).
• Reinvesting capital gains into new residential property or specified bonds (up to ₹50 lakh) can provide significant tax exemptions under Sections 54 and 54EC.
• The Income Tax Act 2025, effective April 1, 2026, maintains the existing capital gains tax framework for property, with no new amendments in Budget 2026-27.

Consult a tax advisor to confirm your specific eligibility and optimize your capital gains tax strategy for property sales in 2026.

Frequently Asked Questions (FAQs)

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Disclaimer: This article is general information, not financial advice. Interest rates, fees, and eligibility change frequently. Verify current details with the lender or regulator (RBI / SEBI) before deciding.