Capital Gains on Property

What is the capital gains tax on property in India?

The 24-month clock runs from the date you acquired the property. For an under-construction flat, that is usually the allotment or agreement date, not the possession date, and the difference decides whether you pay 12.5% or your slab rate. Get that date pinned down before you sign a sale agreement.

Should you choose 12.5% without indexation or 20% with it?

Only holders of property acquired before 23 July 2024 get the choice, and only resident individuals and HUFs. There is no single right answer. It turns on one thing: how fast your property appreciated compared with inflation.

If the property roughly doubled over a long holding, indexation lifts your cost a great deal, and 20% on a much smaller gain often wins. If the property appreciated sharply in a short period, indexation barely moves the cost, and 12.5% on the full gain wins. The crossover sits somewhere in the middle, and it is different for every property.

So do not take the rule of thumb from a broker. Compute both. Our capital gains calculator runs the two methods side by side. The tax payable is the lower of the two, and you choose it in the return.

What counts as your cost?

More than the purchase price. Stamp duty and registration charges you paid on acquisition form part of the cost. So does brokerage on the purchase. So does the cost of any improvement, meaning a structural addition, not repainting or replacing a geyser. On the sale side, brokerage and legal costs are deducted as transfer expenses.

Keep the receipts. The deduction is claimed by you and defended by you, and improvement cost is the head assessing officers question most often. If you paid stamp duty years ago, the stamp duty calculator will tell you what the rate in your state was and what to look for on the deed.

How do sections 54, 54F and 54EC reduce the tax?

Three routes, and they are not interchangeable.

The distinction that catches people is what each one measures. Section 54 works on the gain. Section 54F works on the whole sale consideration. A seller who confuses the two reinvests the gain, claims 54F, and finds most of the exemption disallowed.

Each of these carries statutory caps, deadlines and conditions: a monetary ceiling on the exemption, a window in months for a purchase and in years for construction, a limit on how many other houses you may own, and a maximum investment per financial year in 54EC bonds. Those figures change with almost every Finance Act. We could not open a primary source for the current caps while writing this page, so we are not printing numbers we cannot stand behind. Confirm the current limits on incometax.gov.in or with a chartered accountant before you commit money. Do not take them from a builder’s brochure.

What is the Capital Gains Account Scheme for?

Timing. If you sell in January and have not bought the replacement house by the time your return is due, the exemption is at risk. Depositing the unutilised gain in a Capital Gains Account with a designated bank before the return deadline preserves the claim while you keep looking. Withdraw it for the purchase within the statutory window and the exemption stands. Miss the window and the amount becomes taxable in that later year.

What do buyers and NRI sellers need to watch?

The buyer deducts 1% TDS under section 194-IA where the consideration is ₹50,00,000 or more, and deposits it against the seller’s PAN. That is the buyer’s legal obligation, not the seller’s. A buyer who skips it faces interest and penalty, and the seller finds the credit missing from Form 26AS.

Where the seller is a non-resident, the mechanism is completely different. TDS is deducted on the gain under the non-resident provisions, at rates far above 1%, and it is deducted whatever the sale value. The practical answer for an NRI seller is a lower or nil deduction certificate from the assessing officer, applied for well before the sale. Without it, a large sum is locked up until the refund comes through, which can take more than a year.

Have the section numbers changed?

Yes, from 1 April 2026. The Income-tax Act, 2025 replaces the 1961 Act and renumbers the capital gains provisions. Sections 111A, 112 and 112A become 196, 197 and 198. The reinvestment exemptions that were 54, 54EC and 54F now sit in the 85 to 88 range. The rates, holding periods and mechanics were carried across, so nothing in the table above moves. Only the section you quote does. The same renumbering runs through mutual fund taxation.

If you are wondering whether the asset was worth holding in the first place, we set out the arithmetic in is property a good investment in India.