Key Highlights
- Holding period: Property held >24 months = LTCG
- LTCG rate: 12.5% without indexation (properties purchased after 23 July 2024)
- Pre-23 July 2024 purchase: choose 12.5% (no indexation) or 20% (with indexation) — whichever is lower
- STCG (held 24 months or less): taxed at normal slab rates
- Section 50C: stamp duty value treated as sale consideration if actual price is lower
- Section 175 (54): reinvest in residential house — up to Rs 10 crore exempt
- Section 176 (54EC): invest in NHAI/REC bonds — Rs 50 lakh exempt
- Section 177 (54F): sell ANY long-term asset, reinvest in house — up to Rs 10 crore exempt
1. Holding Period and Classification
| Holding | Type | Tax Rate |
|---|---|---|
| 24 months or less | Short-Term Capital Gain (STCG) | Normal slab rates |
| More than 24 months | Long-Term Capital Gain (LTCG) | 12.5% (no indexation) |
2. LTCG Computation
Illustrative only. Mrs Gupta sells a flat for Rs 80 lakh that she bought for Rs 40 lakh in 2020 (more than 24 months held).
- Full Value of Consideration = Rs 80 lakh (or stamp duty value — whichever higher, Section 50C)
- Less: Cost of Acquisition = Rs 40 lakh (no indexation under new regime)
- Less: Transfer expenses (stamp duty paid, brokerage) = Rs 1.5 lakh
- LTCG = Rs 38.5 lakh; Tax at 12.5% = Rs 4,81,250 + cess
- If purchased before 23 July 2024: compare with 20% after indexation — pay lower of the two
3. Section 50C: Stamp Duty Value Rule
If sale price is less than the state government stamp duty value (circle rate): stamp duty value is treated as sale consideration. Tolerance: If actual price is within 10% of stamp duty value, actual price is accepted. If difference exceeds 10%: capital gains computed on stamp duty value AND buyer faces "other sources" tax on the excess received.
4. Section 175 (54): Reinvestment in Residential House
LTCG from sale of a residential house property is exempt if reinvested in buying/constructing a new residential house:
- Buy within 1 year before or 2 years after sale
- Construct within 3 years after sale
- Exemption = Amount invested (capped at LTCG); Maximum Rs 10 crore
- If new house sold within 3 years: exemption reversed
5. Section 176 (54EC): NHAI/REC Bonds
LTCG from any long-term asset (including property) exempt if invested in NHAI or REC bonds:
- Invest within 6 months of sale
- Maximum exemption: Rs 50 lakh per year
- Lock-in: 5 years — cannot sell, pledge, or take loan against bonds
- Interest on bonds is taxable at slab rates
6. Section 177 (54F): Sale of Non-Residential Asset
LTCG from sale of any asset OTHER than a residential house (commercial property, plot, shares, gold) exempt if sale proceeds reinvested in residential house:
- Cannot own more than 1 residential house (other than new one) on date of sale
- Buy within 2 years / construct within 3 years
- Proportional exemption if entire proceeds not invested
- Maximum exemption: Rs 10 crore
7. Capital Gains Account Scheme (CGAS)
Cannot complete reinvestment before ITR due date? Deposit gains in CGAS account with a bank. Amount deposited by ITR due date = treated as invested for exemption purposes. Actual investment must be completed within the time limits.
8. TDS on Property Sale (Buyer Deducts)
If property sale price exceeds Rs 50 lakh, the buyer must deduct TDS at 1% under Section 394 of ITA 2025 before paying the seller. This is not an NRI provision — it applies to all property sales above Rs 50 lakh regardless of the seller being resident or non-resident. Form 26QB must be filed by the buyer.
9. Why TaxClue
Property capital gains involve stamp duty provisions, Budget 2024 indexation options, reinvestment timing, and CGAS compliance. TaxClue provides end-to-end property capital gains advisory and ITR filing. Contact us to plan your reinvestment and minimise tax legally.