When you sell immovable property (house, flat, plot or commercial), the profit is taxed as capital gains. Held for more than 24 months it is long-term (LTCG), taxed at 12.5% without indexation — but if you acquired it before 23 July 2024 you may instead choose 20% with indexation and pay whichever is lower. Held 24 months or less it is short-term (STCG), taxed at your slab rate. Reinvesting under Section 54, 54F or 54EC can bring the tax to nil. These special rates apply in both the old and new regimes.
Budget 2024 replaced the old flat 20%-with-indexation regime. For property sold on or after 23 July 2024 the base rate is 12.5% without indexation. Only property acquired before that date keeps a grandfathered choice between 12.5% (no indexation) and 20% (with indexation) — you compute both and pay the lower.
Capital Gains Tax Rates — Property (FY 2025-26)
How each property type is taxed by holding period, and which exemption applies. Cess of 4% and any surcharge are added on top of the rates below.
| Property & holding | Type | Tax rate | Exemption |
|---|---|---|---|
| House / flat — held > 24m | LTCG | 12.5% (or 20% indexed*) | Section 54, 54EC |
| House / flat — held ≤ 24m | STCG | At slab | — |
| Plot / land — held > 24m | LTCG | 12.5% (or 20% indexed*) | Section 54F, 54EC |
| Plot / land — held ≤ 24m | STCG | At slab | — |
| Commercial — held > 24m | LTCG | 12.5% (or 20% indexed*) | Section 54F, 54EC |
| Commercial — held ≤ 24m | STCG | At slab | — |
* 20%-with-indexation option only for property acquired before 23 July 2024; pay whichever is lower. Property acquired on/after 23 Jul 2024: only 12.5% without indexation.
Not sure whether your sale is long-term or short-term?
Ask a Capital-Gains Expert →12.5% Without Indexation vs 20% With Indexation
For property acquired before 23 July 2024, the law lets you compute LTCG both ways and pay the lower tax. Indexation uses the Cost Inflation Index (CII); the CII for FY 2025-26 is 363. As a rule of thumb, old property with modest price growth is often better off with 20% + indexation, while recently bought property tends to favour 12.5% flat.
Without indexation
- Flat 12.5% on (sale price − actual cost)
- No CII adjustment to the cost
- Simpler; usually better for newer property
- Only option for property bought on/after 23 Jul 2024
With indexation (pre-23 Jul 2024 only)
- 20% on (sale price − indexed cost)
- Cost inflated by CII (FY 2025-26 = 363)
- Often lower tax on long-held property
- Grandfathered — you pay whichever is lower
How the LTCG Is Actually Computed
A residential flat bought in 2018 for Rs 50 lakh and sold in FY 2025-26 for Rs 90 lakh, held over 6 years (long-term). First arrive at the gain, then the tax under the 12.5% route.
Step 1 — Long-term capital gain
Step 2 — 12.5% route
If the actual sale price is lower than the stamp-duty (circle-rate) value, Section 50C deems the stamp-duty value to be the sale consideration. A 10% tolerance applies: if the stamp-duty value does not exceed 110% of the actual price, your actual price is accepted. Sell for Rs 80L with a Rs 85L circle rate and you are fine; a Rs 95L circle rate makes gains compute on Rs 95L.
Want the exact 12.5% vs 20% comparison for your property?
Use the Capital Gains Calculator →Section 54, 54F & 54EC Exemptions
You can reduce or wipe out LTCG on property by reinvesting the gain (or proceeds) within set time limits. If you cannot reinvest before the ITR due date, park the amount in the Capital Gains Account Scheme (CGAS) to keep the exemption alive.
| Section | Sell what | Reinvest in | Time limit | Cap |
|---|---|---|---|---|
| 54 | Residential house (LTCG) | New residential house | Buy: 1yr before / 2yr after; build: 3yr | Rs 10 crore |
| 54F | Any other LTCA (plot, commercial) | One residential house | Buy: 1yr before / 2yr after; build: 3yr | Rs 10 crore (proportionate) |
| 54EC | Land or building (LTCG) | NHAI / REC / PFC / IRFC bonds | Within 6 months of sale | Rs 50 lakh (5-yr lock-in) |
Sections 54 and 54EC can be combined. 54F requires you not to own more than one other house on the sale date and the net consideration (not just the gain) to be reinvested.
NRI Property Sale — TDS & Exemptions
An NRI selling Indian property faces TDS on the whole sale value, not just the gain. Plan the deduction early with a lower-TDS certificate to avoid locking up cash in a refund.
| Aspect | NRI rule |
|---|---|
| TDS by buyer | 20% (LTCG) + surcharge + 4% cess on full consideration, u/s 195 |
| Lower / nil TDS | Apply u/s 197 for a certificate based on the actual gain |
| ITR & refund | File in India; claim Section 54/54F/54EC and refund of excess TDS |
| Section 54 / 54F | Available to NRIs; the new house must be in India |
| Repatriation | Sale proceeds repatriable under RBI/FEMA limits |
See our NRI TDS on property and NRI taxation guides below for the full mechanics.
If the sale-to-reinvestment gap crosses the ITR filing deadline, you must deposit the unused gain (or net consideration for 54F) into a Capital Gains Account Scheme account with a bank before filing, or the exemption is lost. Withdraw later to buy or construct within the time limit.
Exemption is worth claiming if
- You are genuinely buying/building another house
- Your gain is large and you can meet the time limits
- You can park funds in CGAS to bridge timing gaps
Reconsider if
- You will not complete purchase/construction in time
- 54F: you already own more than one other house
- The reinvested house is sold within 3 years (exemption reverses)
Sold or selling property? Let a CA compute the gain and exemptions.
Get Capital-Gains Help →Capital Gains on Property — Frequently Asked Questions
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