Tax
Capital Gains Tax on Property in India
The rules changed on 23 July 2024, and most Indian property sites are still publishing the old ones. Here is what actually applies now.
The short answer
Held more than 24 months: LTCG at 12.5%, WITHOUT indexation.
Held 24 months or less: STCG, at your slab rate — up to 30%.
Indexation was abolished on 23 July 2024. A resident individual or HUF who bought before that date may pay the lower of 12.5% without indexation or 20% with it.
NRIs get no such choice.
For decades, long term capital gains on property were 20%, with indexation — you adjusted your purchase price for inflation, which often cut the taxable gain dramatically.
The Finance (No. 2) Act, 2024 changed that. From 23 July 2024:
• LTCG on property is 12.5%
• Indexation is abolished
• The holding period stays at 24 months
A great deal of the tax content on Indian property websites still describes the old position. It is now wrong for most transactions. Check the date on anything you read — including this page.
What changed on 23 July 2024
The old rule: 20% with indexation. You restated your purchase price in today's money using the Cost Inflation Index, and were taxed only on the gain above inflation.
The new rule: 12.5%, no indexation. The rate came down; the inflation adjustment went away.
Roughly neutral for property with moderate appreciation. Materially worse for property that has appreciated a great deal — metro land, long-held flats — because a large nominal gain is now taxed in full.
There was an outcry, and a concession followed. For land and buildings acquired before 23 July 2024, a resident individual or HUF may compute the tax both ways and pay whichever is lower:
(a) 12.5% without indexation, or
(b) 20% with indexation.
Who does NOT get this: NRIs. Companies. LLPs. Firms. Non-resident HUFs.
For an NRI who has held a Mumbai flat since 2008, that is a materially worse outcome than before — and there is no way around it.
The current position
| Short Term (STCG) | Long Term (LTCG) | |
|---|---|---|
| Holding period | 24 months or less | More than 24 months |
| Tax rate | Added to your income, taxed at your slab rate — up to 30% | 12.5% without indexation |
| Indexation | Never available | Abolished for property acquired on or after 23 July 2024 |
| The grandfathering option | — | Resident individuals & HUFs only. Property acquired before 23 July 2024: pay the lower of 12.5% without indexation, or 20% with indexation. |
| NRIs | Slab rate | 12.5% without indexation. NO grandfathering. |
| Companies, LLPs, firms | Applicable rate | 12.5% without indexation. No grandfathering. |
| Exemptions | NONE. Sections 54, 54F and 54EC do not apply. | Sections 54, 54F, 54EC |
| Surcharge & cess | Applicable | Add 4% cess, plus surcharge at higher incomes |
Every rate above is a base rate. Add 4% Health & Education Cess, plus surcharge where your income crosses the thresholds. The effective rate is higher than the headline.
How to calculate it
The basic sum
Gain = Sale price − Cost of acquisition − Cost of improvement − Transfer expenses
- Sale price
- ₹1,20,00,000
- Less: brokerage, legal costs
- − ₹2,40,000
- Less: purchase price (2019)
- − ₹60,00,000
- Less: documented improvements
- − ₹5,00,000
- Capital gain
- ₹52,60,000
Held since 2019 → long term. Resident individual, bought before 23 July 2024 → both methods must be computed.
Compute both. Pay the lower.
- Method A — 12.5%, no indexation
- ₹6,57,500
- Method B — 20%, with indexation (indexed cost ≈ ₹78L)
- ₹7,92,000
- You pay the lower
- ₹6,57,500
For an older property — 2005, say — or one with large documented improvements, the indexed cost grows so much that 20% with indexation produces the smaller bill.
There is no rule of thumb. If you are a resident individual who bought before 23 July 2024, your CA must run both. Anyone who tells you which is better without doing the arithmetic is guessing.
NRIs — the harder deal
Three things stack against an NRI seller:
- No grandfathering. 12.5% without indexation, however long you have held it.
- TDS at a far higher rate. A resident buying from a resident deducts 1%. A buyer of an NRI's property deducts under Section 195 — at the LTCG rate plus surcharge and cess, generally on the whole sale consideration, not just the gain.
- The buyer needs a TAN to deduct it. Many individual buyers don't have one, and find the requirement alarming.
The remedy is a Lower Deduction Certificate from the Income Tax Department, computing TDS on the actual gain rather than the whole sale value. It takes weeks. Apply before you agree a sale, not after.
How to reduce it, legally
| Section | What it does | The catch |
|---|---|---|
| Section 54 | Sell a residential house, buy another residential house. The gain is exempt to the extent reinvested. | Buy within 1 year before or 2 years after; or construct within 3 years. Capped at ₹10 crore. |
| Section 54F | Sell any other asset — land, shares, gold, a shop — and buy a residential house. | You must reinvest the whole net sale consideration, not just the gain. And you must not own more than one other house. |
| Section 54EC | Invest the gain in specified bonds (NHAI, REC). | Within 6 months. Capped at ₹50 lakh. Five-year lock-in. |
All three apply ONLY to long term gains. There is no exemption for short term capital gains on property — which is the strongest argument there is for holding past the 24-month line.
You have 2 years to buy, or 3 years to construct. But your tax return is due long before that.
If you have not reinvested by the ITR due date, you must deposit the unutilised gain into a Capital Gains Account Scheme (CGAS) account.
Miss it, and the exemption is gone — even if you buy the perfect house, well within the two-year window, a year later.
It is a purely administrative failure. It happens every single year. It is entirely avoidable, and it costs people lakhs.
Mistakes that cost money
1. Assuming indexation still applies
It doesn't — not for anything bought on or after 23 July 2024, and not for NRIs at all. Half the tax content online is out of date.
2. Selling at 23 months
One month short of 24, and the gain is taxed at your slab rate instead of 12.5%, and no exemption is available. On a ₹50 lakh gain at the top bracket, that is roughly ₹15 lakh instead of ₹6.25 lakh — or zero, if you were going to reinvest.
3. Under-declaring the sale price
Under Section 50C, if the sale price is below the stamp duty value, the stamp duty value is deemed to be the sale price for the seller's capital gains. Taxed on it anyway.
And under Section 56(2)(x), the buyer may be taxed on the difference as income from other sources.
The seller saves nothing. The buyer inherits a liability they didn't know about. A tolerance of around 10% between the two values is generally allowed; beyond that, both provisions bite.
4. Not keeping improvement receipts
Cost of improvement reduces the gain — but only if you can document it. Every invoice, every bank transfer. Cash paid to a contractor with no paper trail reduces nothing at all.
5. Missing the CGAS deadline
See above. The single most avoidable way to lose an exemption you were entitled to.
We have written this against the current position and checked it carefully. But tax turns entirely on your specific facts: your residential status, when you bought, when you sell, which regime you are on, and what else is in your return.
Note also that the Income Tax Act, 2025 now replaces the 1961 Act, and section numbering is changing even where the substance is not. We use the familiar numbers — 54, 54F, 24(b), 80C — because those are what people search for and what CAs still say. Confirm the current section references with your accountant.
Before you sell a property, pay a CA. On a transaction this size it is the best-value fee you will ever pay, and the cost of getting it wrong runs to lakhs.
Frequently asked questions
What is the capital gains tax on property in India now?
Property held more than 24 months attracts long term capital gains at 12.5% without indexation. Property held 24 months or less is short term, added to your income and taxed at your slab rate. The rules changed on 23 July 2024 — indexation was abolished, and much of the tax content still online describes the old 20%-with-indexation position, which is now wrong for most transactions.
Can I still claim indexation on property?
Only in one situation. If you are a RESIDENT INDIVIDUAL or HUF and acquired the property BEFORE 23 July 2024, you may compute both ways and pay whichever is lower — 12.5% without indexation, or 20% with it. NRIs, companies, LLPs and firms have no indexation option at all.
What is the capital gains tax for an NRI selling property in India?
12.5% without indexation on long term gains, with no grandfathering regardless of when the property was bought. The buyer must also deduct TDS under Section 195 — at the LTCG rate plus surcharge and cess, generally on the whole sale consideration rather than the gain. Apply for a Lower Deduction Certificate before agreeing the sale, not after.
How can I avoid capital gains tax on property?
Legally, through Section 54 (reinvest a residential house in another residential house), Section 54F (reinvest any other asset in a residential house), or Section 54EC (invest the gain in specified bonds within six months, capped at Rs 50 lakh). All three apply only to LONG TERM gains — there is no exemption for short term.
What is the Capital Gains Account Scheme?
If you have not reinvested by the due date for filing your income tax return, you must deposit the unutilised gain into a CGAS account with a bank. Miss this and the exemption is lost — even if you buy the new house perfectly on time a year later. It is an administrative trap that catches people every year.
Does under-declaring the sale price save tax?
No, and it creates two problems. Under Section 50C, if the sale price is below the stamp duty value, the stamp duty value is deemed to be your sale price for capital gains — so you are taxed on it regardless. And under Section 56(2)(x), the buyer may be taxed on the difference as income from other sources. The seller saves nothing and the buyer inherits a liability.