Tax
What is Long Term Capital Gains (LTCG) on Property?
Twelve and a half percent, and no indexation. A sentence that would have been wrong two years ago — and that half the internet still hasn't caught up with.
The short answer
LTCG applies when you sell property held for MORE THAN 24 MONTHS.
It is taxed at 12.5%, without indexation.
A resident individual or HUF who bought before 23 July 2024 may instead pay 20% with indexation — whichever produces the smaller bill. NRIs and companies 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.
The 24-month line
Hold immovable property for more than 24 months and the gain is long term. 24 months or less, and it is short term.
- Long term: 12.5%. Exemptions available.
- Short term: your slab rate — up to 30%. No exemptions at all.
One month short, and the whole gain moves from 12.5% to your slab rate — for a high earner, 30% plus surcharge and cess.
On a ₹50 lakh gain: roughly ₹6 lakh versus ₹15 lakh. For four weeks.
And be careful about what your acquisition date actually is. For a flat bought under construction, it is genuinely contentious — allotment, agreement, or possession? It has been litigated. Ask your CA before you commit to a sale date.
The rate, and the choice
| Who you are | Acquired BEFORE 23 July 2024 | Acquired ON OR AFTER 23 July 2024 |
|---|---|---|
| Resident individual / HUF | The LOWER of: 12.5% without indexation, or 20% with indexation | 12.5% without indexation |
| NRI | 12.5% without indexation. No choice. | 12.5% without indexation |
| Company / LLP / firm | 12.5% without indexation. No choice. | 12.5% without indexation |
Add 4% Health & Education Cess to whatever comes out, plus surcharge at higher income levels.
A worked example
Resident individual. Bought 2019. Selling now.
- Sale price
- ₹1,20,00,000
- Less: transfer expenses
- − ₹2,40,000
- Less: purchase price (2019)
- − ₹60,00,000
- Less: documented improvements
- − ₹5,00,000
- Capital gain
- ₹52,60,000
Bought before 23 July 2024 → compute both
- Method A — 12.5%, no indexation
- ₹6,57,500
- Method B — 20%, with indexation (indexed cost ≈ ₹78L)
- ₹7,92,000
- Tax payable — the lower
- ₹6,57,500
The newer the purchase, the less inflation there is to index away, and the better 12.5% looks.
The older the purchase — 2005, 1998 — the more the indexed cost grows, and the more likely 20% with indexation produces the smaller bill. The same is true where you have large documented improvement costs.
Compute both. There is no rule of thumb that survives contact with real numbers.
The exemptions
Available on long term gains only:
- Section 54 — sell a residential house, buy another. Reinvest the gain. Capped at ₹10 crore.
- Section 54F — sell any other asset, buy a residential house. Reinvest the whole sale consideration.
- Section 54EC — invest the gain in NHAI/REC bonds within 6 months. ₹50 lakh cap. Five-year lock-in.
And the deadline nobody knows: if you haven't reinvested by your ITR due date, park the gain in a Capital Gains Account Scheme — or the exemption is lost.
NRIs
No grandfathering. 12.5% without indexation, whenever you bought.
And the buyer must deduct TDS under Section 195 — generally on the whole sale consideration, not the gain. Apply for a Lower Deduction Certificate before you agree the sale. It takes weeks, and applying afterwards helps nobody.
LTCG vs STCG
| 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.
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 LTCG tax rate on property in India?
12.5% without indexation, for property held more than 24 months. If you are a resident individual or HUF and acquired the property before 23 July 2024, you may instead pay 20% with indexation — whichever is lower. Add 4% cess, plus surcharge at higher incomes.
What is the holding period for LTCG on property?
More than 24 months. Property held for 24 months or less is short term, added to your income and taxed at your slab rate — with no exemptions available at all. Selling one month short of the line can more than double the tax.
Is indexation still available on property?
Only for resident individuals and HUFs, and only on property acquired before 23 July 2024. They may compute both ways and pay whichever is lower. NRIs, companies, LLPs and firms have no indexation option at all.
Which is better — 12.5% without indexation or 20% with?
It depends entirely on how long you held the property and what you spent improving it. Newer purchases usually favour 12.5%. Much older ones often favour 20% with indexation, because the indexed cost grows so large. There is no rule of thumb — compute both, or have your CA do it.
Can I avoid LTCG by reinvesting?
Yes — Sections 54, 54F and 54EC all allow it, on long term gains only. But watch the Capital Gains Account Scheme deadline: if you have not reinvested by the due date for filing your ITR, you must deposit the unutilised gain in a CGAS account, or the exemption is lost even if you buy the new house on time.