Capital Gains Tax on Property Sale in India
When you sell property in India, the profit (capital gain) is taxable. The tax rate and available exemptions depend on how long you held the property. This guide covers the rules as of Assessment Year 2026-27.
Short-Term Capital Gains (STCG)
Property held for < 24 months
Tax rate: Added to your income, taxed at your slab rate (up to 30% + surcharge + cess)
Indexation: Not available
Section 54 exemption: Not available
Long-Term Capital Gains (LTCG)
Property held for ≥ 24 months
Tax rate: 12.5% (without indexation) as per Budget 2024 amendments
Indexation: Removed for properties acquired after 23 July 2024. Properties acquired before this date can opt for 20% with indexation if it results in lower tax.
Section 54 exemption: Available (see below)
Need to know the current value of your property?
Capital gains are calculated using the government value or sale price, whichever is higher.
How Capital Gains Are Calculated
Capital Gain = Sale Price - Cost of Acquisition - Cost of Improvement - Transfer Expenses
| Component | What It Means |
|---|---|
| Sale Price | Higher of: actual sale price or government value (circle rate / stamp duty value) on date of sale |
| Cost of Acquisition | Price you originally paid + stamp duty + registration charges at time of purchase |
| Cost of Improvement | Capital expenditure on renovation (not repairs/maintenance) incurred after acquisition |
| Transfer Expenses | Brokerage, legal fees, and advertising costs incurred for the sale |
Important: Under Section 50C, if the sale price is less than the government value (circle rate), the government value is deemed to be the sale price for tax purposes. A tolerance of 10% is allowed (i.e., if the difference is within 10%, the actual sale price is accepted).
Tax Exemptions (Section 54 & 54EC)
Reinvest in a new residential property
If you sell a residential property and buy/construct another residential property within the specified time (purchase: 1 year before or 2 years after sale; construction: 3 years after sale), the capital gain invested in the new property is exempt. You can claim this for up to two residential properties if the gain is under ₹2 crore.
Lock-in: New property cannot be sold within 3 years, or the exemption is reversed.
Invest in specified bonds
Invest LTCG (up to ₹50 lakhs) in bonds issued by NHAI or REC within 6 months of the sale date. The bonds have a 5-year lock-in period and offer ~5% annual interest.
Lock-in: Bonds cannot be redeemed before 5 years.
Sale of non-residential asset
If you sell a non-residential capital asset (plot, commercial property) and invest the net sale consideration (not just the gain) in a new residential property, the proportionate gain is exempt. You must not own more than one residential property at the time of sale.
Lock-in: New property cannot be sold within 3 years.
TDS on Property Sale
Under Section 194-IA, if the property sale value exceeds ₹50 lakhs, the buyer must deduct 1% TDS and deposit it with the Income Tax department using Form 26QB within 30 days of the month of deduction.
For NRI sellers, TDS rates are higher: 12.5% for LTCG or slab rate for STCG (Section 195). NRI sellers can apply for a lower TDS certificate from the Assessing Officer if they plan to claim exemptions.
Disclaimer: This guide is for general informational purposes only and does not constitute tax or legal advice. Tax laws are subject to change — the rules described here reflect the position as of Assessment Year 2026-27 including Budget 2024 amendments. Always consult a qualified Chartered Accountant or tax advisor for your specific situation.