Property Capital Gains & explained: this guide covers what Property Capital Gains & means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
1. Budget 2024 Change: Indexation Removed
Budget 2024 made a significant change to property capital gains taxation effective 23 July 2024:
- LTCG on property: Rate reduced from 20% to 12.5% — BUT indexation benefit removed
- STCG (held under 24 months): taxable at slab rates — no change
- Grandfathering: For properties purchased before 23 July 2024, taxpayers can CHOOSE between (a) 12.5% without indexation OR (b) 20% with indexation — whichever gives lower tax
2. Cost Inflation Index (CII)
CII adjusts the purchase cost for inflation — reducing the taxable capital gain. Base year 2001-02 = 100. CII for recent years:
| Financial Year | CII |
|---|---|
| 2001-02 | 100 |
| 2010-11 | 167 |
| 2015-16 | 254 |
| 2020-21 | 301 |
| 2023-24 | 348 |
| 2024-25 | 363 |
| 2025-26 | ~380 (provisional) |
3. Indexed Cost Computation
Indexed cost = Actual purchase price × (CII of sale year ÷ CII of purchase year)
Illustrative only. Property bought in 2010-11 for Rs 30 lakh. Sold in 2025-26 for Rs 90 lakh.
- Indexed cost = Rs 30L × (380/167) = Rs 68.26 lakh
- Capital gains with indexation = Rs 90L - Rs 68.26L = Rs 21.74L; tax at 20% = Rs 4.35L
- Capital gains without indexation = Rs 90L - Rs 30L = Rs 60L; tax at 12.5% = Rs 7.5L
- In this case, 20% WITH indexation is better (Rs 4.35L vs Rs 7.5L)
- For property bought before 23 July 2024: choose the lower option — 20% + indexation here
4. When 12.5% is Better than 20% + Indexation
The crossover point depends on how much the property has appreciated relative to inflation. If property has appreciated far faster than CII (e.g., prime urban property in metro cities), the 12.5% rate often becomes better. Properties held for very long periods (20+ years) typically benefit from indexation more. Properties bought after 23 July 2024 must use 12.5% without indexation — no choice.
5. Cost of Improvement
Major renovations and capital improvements to the property can be added to the cost of acquisition for capital gains computation. Only capital expenditure (not maintenance/repairs) qualifies. Keep receipts and invoices for all improvements. Improvement cost incurred before 1 April 2001 is ignored — improvements are deemed part of the base year cost.
6. Why TaxClue
Property capital gains computation — choosing between indexation and non-indexation, claiming improvement costs, and applying exemptions (Section 54, 54EC) — requires expert calculation. TaxClue maximises your tax saving on property sale. Contact us under ITA 2025.
