Short-term or long-term
Land or a building held for more than 24 months gives a long-term gain; held for 24 months or less, a short-term gain. A short-term gain is added to your income and taxed at your slab rate.
The rate since 23 July 2024
Long-term gains on property sold on or after 23 July 2024 are taxed at 12.5% without indexation (section 112, as amended by the Finance (No. 2) Act, 2024).
A resident individual or HUF selling land or a building bought before 23 July 2024 can instead pay 20% with indexation, if that is lower. Indexation raises the purchase cost by the Cost Inflation Index, so for a home held many years the indexed option often wins.
Health and education cess of 4% is added to the tax, and surcharge applies above set income levels.
Working out the gain
Gain = sale price − selling costs (brokerage, legal fees) − purchase cost (including stamp duty and registration) − cost of improvements. With indexation, the purchase and improvement costs are each multiplied by the index of the sale year divided by the index of the year they were incurred.
If the stamp duty value of the property is more than the sale price by over 10%, the stamp duty value is taken as the sale price (section 50C).
For property bought before 1 April 2001, you may use its fair market value on that date as the cost, supported by a valuer's report.
Exemptions
Section 54: invest the long-term gain from selling a house in another house in India, bought within one year before or two years after the sale, or built within three years. The exemption is capped at ₹10 crore. Once in a lifetime, a gain of up to ₹2 crore can go into two houses.
Section 54EC: invest up to ₹50 lakh of the gain in specified bonds (currently issued by REC, PFC, IRFC and HUDCO; NHAI stopped issuing them from April 2022) within six months of the sale; they are locked in for five years.
If you have not reinvested by the due date of your return, deposit the amount in a Capital Gains Account Scheme account at a bank to keep the exemption open.
Common questions
Is indexation still available on property?
Only for resident individuals and HUFs selling land or buildings bought before 23 July 2024, who may choose 20% with indexation instead of 12.5% without. For everyone else, and for property bought after that date, indexation is gone.
Does the buyer deduct TDS on my capital gain?
For a resident seller, the buyer deducts 1% of the price under section 194-IA when it is ₹50 lakh or more; it is credited against your tax. For an NRI seller, the buyer deducts tax on the gain under section 195.
Sources
- Income Tax Act, 1961: sections 48, 50C, 54, 54EC and 112, as amended by the Finance (No. 2) Act, 2024
- Cost Inflation Index as notified by CBDT
- Confirm with a chartered accountant before you file
Last checked 2026-10-01.