Short-term capital gains tax on property: selling within 24 months

The short answer

If you sell land, a building or a flat within 24 months of acquiring it, the profit is a short-term capital gain (STCG). There is no special rate for property: the gain is simply added to your salary, business, interest and other income, and the total is taxed at your normal slab rates — up to 30% plus surcharge and 4% cess at the top.

The gain is worked out the same way as a long-term gain, but without any indexation: sale price (or stamp duty value, if that is more than 110% of the price), minus selling expenses, minus the cost of acquisition and improvement.

Because the gain is taxed like ordinary income, two things work in your favour that do not apply to long-term gains at special rates: the basic exemption limit and, in the new regime, the rebate that brings tax to nil for income up to ₹12 lakh. On the other hand, the reinvestment exemptions under sections 54, 54EC and 54F apply only to long-term gains — there is no exemption for reinvesting a short-term gain.

A note on section numbers: the Income-tax Act, 2025 has applied from 1 April 2026 (the start of tax year 2026-27). Anything that happened before that date — a sale, a rent payment, a deduction — is governed by the Income-tax Act, 1961 and its section numbers. This guide gives both numbers where the new one has been confirmed.

When is a property gain short-term?

Land and buildings are short-term capital assets if held for not more than 24 months immediately before the transfer. This is section 2(101) of the Income-tax Act, 2025, carried over from section 2(42A) of the 1961 Act.

Count from the date you acquired the property — normally the registration of your purchase deed — to the date of transfer, normally the registration of the sale deed. Where possession is handed over under an agreement before registration, the date of transfer can be earlier; the definition of 'transfer' includes allowing possession in part performance of a contract. Do not assume the registration date settles the point if you handed over keys earlier.

For property received by inheritance or gift, the previous owner's holding period is added to yours, so a short-term gain on inherited property is rare. See the guide on inherited and gifted property.

If you are close to the line, waiting can change the tax substantially. A gain that becomes long-term a few weeks later is taxed at 12.5% (or 20% with indexation, for a resident individual or HUF on property acquired before 23 July 2024), and becomes eligible for reinvestment exemptions. See the guide on long-term capital gains on property.

How the gain is worked out

1. Full value of consideration: the price in the sale deed, or the stamp duty value if that is more than 110% of the price (section 78 of the 2025 Act, earlier section 50C of the 1961 Act).

2. Less: expenses wholly and exclusively for the transfer — brokerage, legal fees for the sale.

3. Less: cost of acquisition — purchase price plus stamp duty, registration fee and purchase brokerage. For an under-construction flat, the instalments paid, including GST charged on them.

4. Less: cost of improvement — capital additions only.

No indexation applies to a short-term gain. The computation rule is section 72 of the 2025 Act (section 48 of the 1961 Act).

The rate: your slab

New regime (the default; section 202 of the 2025 Act, earlier section 115BAC): income up to ₹4 lakh nil; ₹4–8 lakh 5%; ₹8–12 lakh 10%; ₹12–16 lakh 15%; ₹16–20 lakh 20%; ₹20–24 lakh 25%; above ₹24 lakh 30%. A rebate makes tax nil where total income does not exceed ₹12 lakh; it covers income taxed at slab rates, which includes a short-term gain on property, but not income taxed at special rates.

Old regime: ₹2.5 lakh nil for individuals below 60 (₹3 lakh for 60 to 80, ₹5 lakh for 80 and above); 5% to ₹5 lakh; 20% to ₹10 lakh; 30% above, with a rebate up to ₹5 lakh of total income.

Surcharge: 10% where total income exceeds ₹50 lakh and 15% where it exceeds ₹1 crore, rising further at higher incomes (the new regime caps surcharge at 25%). Unlike long-term gains, a short-term gain taxed at slab rates is not covered by the 15% surcharge cap. Cess: 4% on tax plus surcharge.

Which regime is better depends on your deductions. Under the old regime, deductions such as home loan principal and interest can reduce the income on which the gain is stacked; under the new regime, the slabs are wider. Work out both; the home loan tax benefits guide explains the deductions.

Worked example 1: a salaried seller

Illustrative numbers only. A salaried resident, aged 35, buys a flat in January 2025 for ₹60,00,000, paying stamp duty of ₹4,20,000 and a registration fee of ₹30,000. In November 2026 — 22 months later — she sells it for ₹72,00,000, paying brokerage of ₹72,000. The stamp duty value is within 110% of the price.

Cost of acquisition: ₹60,00,000 + ₹4,20,000 + ₹30,000 = ₹64,50,000. Net consideration: ₹72,00,000 − ₹72,000 = ₹71,28,000. Short-term gain: ₹71,28,000 − ₹64,50,000 = ₹6,78,000.

Her salary is ₹14,00,000. Under the new regime she gets a standard deduction of ₹75,000, so taxable salary is ₹13,25,000, and total income with the gain is ₹20,03,000.

Tax on ₹20,03,000 (new regime): nil on the first ₹4 lakh; ₹20,000 on ₹4–8 lakh; ₹40,000 on ₹8–12 lakh; ₹60,000 on ₹12–16 lakh; ₹80,000 on ₹16–20 lakh; 25% on the last ₹3,000 = ₹750. Total ₹2,00,750, plus 4% cess of ₹8,030 = ₹2,08,780.

Without the sale, tax on ₹13,25,000 would have been ₹20,000 + ₹40,000 + 15% of ₹1,25,000 (₹18,750) = ₹78,750, plus cess. So the gain added ₹1,22,000 of tax before cess — an effective 18% on the ₹6,78,000 gain. Had she waited two more months, the gain would have been long-term at 12.5% without indexation (she bought after 23 July 2024), about ₹84,750 before cess.

Worked example 2: a seller with little other income

Illustrative numbers only. A resident with interest income of ₹3,00,000 and no other income sells a plot after 18 months with a short-term gain of ₹5,00,000. Total income: ₹8,00,000.

New regime tax: nil on ₹4 lakh; 5% on the next ₹4 lakh = ₹20,000. Because total income does not exceed ₹12 lakh, the rebate covers the ₹20,000 and the tax is nil.

The basic exemption limit and rebate absorb short-term gains for people with low other income. They do not work the same way for long-term gains taxed at a special rate, which is one reason not to assume a long-term gain is always cheaper for a low-income seller. Compute both if you have a choice of timing.

The stamp duty value rule

If you sell below the circle rate, the stamp duty value can replace your price. The tolerance is 10%: the actual price stands if the stamp duty value does not exceed 110% of it.

Illustrative example: you sell for ₹50,00,000 and the stamp duty value is ₹58,00,000. 110% of ₹50,00,000 is ₹55,00,000; the stamp duty value is higher, so ₹58,00,000 is your sale consideration. If your cost was ₹52,00,000, your short-term gain is ₹6,00,000 rather than ₹(−)2,00,000 — a loss becomes a taxable gain.

If you believe the stamp duty value overstates the market value, you can ask for the valuation to be referred to a valuation officer during assessment. Keep evidence of why the property is worth less.

Losses: set-off and carry-forward

A short-term capital loss on property can be set off against any capital gain in the same year — short-term or long-term. A long-term capital loss can be set off only against long-term gains. Neither can be set off against salary, business or other income.

Unabsorbed capital losses can be carried forward for eight tax years and set off against capital gains of those years, following the same short-term/long-term rules. To carry forward a loss you must file your return by the due date — 31 July after the end of the tax year for most individuals not under audit.

Illustrative example: in one tax year you have a short-term loss of ₹3,00,000 on a flat and a long-term gain of ₹10,00,000 on a plot. You set the loss against the gain, leaving a long-term gain of ₹7,00,000 taxed at the applicable long-term rate.

Capital losses can be set off and carried forward in both the old and the new regime. (The new regime's restrictions on set-off apply to losses from house property, not to capital losses.) These set-off rules are in sections 70, 71 and 74 of the 1961 Act and are carried into the 2025 Act.

Selling an under-construction flat before possession

Selling your rights in an under-construction flat (by assignment or transfer of allotment) is also a transfer of a capital asset. If held for 24 months or less, the gain is short-term. The cost is what you have paid the builder so far, plus any transfer fee the builder charges. Whether a transfer of rights in a flat is 'land or building' for some purposes has been argued in the courts; the classification can matter for the stamp duty value rule and for exemptions on a long-term gain. Take advice before you sign an assignment.

TDS, advance tax and the return

If you are a resident and the price is ₹50 lakh or more, the buyer deducts 1% of the price (or of the stamp duty value, if higher) as TDS and deposits it against your PAN. It is credited against your tax, but 1% is usually much less than the tax on a short-term gain at slab rates. Pay advance tax on the balance in the next instalment after the sale to avoid interest.

Report the gain in your return for the tax year of the sale (ITR-2 for most individuals without business income), with the sale and purchase dates, the stamp duty value and the buyer's PAN.

If you are a non-resident, the buyer deducts tax on the gain at the rates in force — for a short-term gain, normally 30% plus surcharge and cess, unless you obtain a lower deduction certificate. See the guide on TDS when buying from an NRI.

Common mistakes

Selling a few weeks before 24 months are up without comparing the tax at both dates.

Applying indexation to a short-term gain. It never applies.

Trying to claim section 54 or 54EC on a short-term gain. These exemptions are for long-term gains only.

Assuming the buyer's 1% TDS covers your tax. On a short-term gain at slab rates it usually does not; pay advance tax on the balance.

Ignoring the stamp duty value when selling below the circle rate, turning an expected loss into a taxable gain.

Filing late and losing the right to carry forward a capital loss.

Forgetting that the old-regime and new-regime outcomes differ; compute both.

This is general information, not tax or legal advice. Tax law, rates and forms change with each Finance Act; confirm how the rules apply to your own facts with a chartered accountant before you sign, pay or file.

Common questions

Sources

• Income-tax Act, 2025, incometaxindia.gov.in: section 2(101) (short-term capital asset), section 72 (computation), section 78 (stamp duty value), section 202 (new regime rates); checked 2 October 2026
• Income-tax Act, 1961, indiacode.nic.in: sections 2(42A), 48, 50C, 70, 71, 74 and 115BAC; checked 2 October 2026
• Union Budget 2025-26, Finance Act, 2025 — new regime slabs and the rebate up to ₹12 lakh of income; indiabudget.gov.in; checked 2 October 2026
• Income Tax Department e-filing portal (incometax.gov.in) — return due dates and advance tax instalments; checked 2 October 2026

Last checked 2026-10-02.