Sell a property held for more than 24 months and the gain is Long-Term Capital Gain, taxed at 12.5% without indexation. Held for 24 months or less, it is Short-Term Capital Gain taxed at your normal slab rate. For property acquired before 23 July 2024 you may instead choose the old 20% with indexation if it gives lower tax. The buyer must deduct 1% TDS under Section 194IA when the sale value is Rs 50 lakh or more, and you can defer or exempt the gain by reinvesting under Section 54, 54F or 54EC.
From 23 July 2024 the LTCG rate on land and buildings is a flat 12.5% with no indexation. Only if the property was acquired before that date can you compare it against the earlier 20% with cost-inflation indexation and pay whichever is lower. Property bought on or after 23 July 2024 gets the 12.5% rate with no indexation option.
Capital Gains Rates by Property Type
The holding period decides short-term versus long-term; for immovable property the threshold is 24 months. Rates below are for FY 2025-26 (AY 2026-27).
| Property / Asset | Long-term if held | STCG | LTCG | Exemptions |
|---|---|---|---|---|
| Residential house | > 24 months | Slab | 12.5%* | 54, 54EC |
| Commercial property | > 24 months | Slab | 12.5%* | 54EC |
| Land (non-agricultural) | > 24 months | Slab | 12.5%* | 54EC, 54F |
| Plot + reinvest in a house | > 24 months | Slab | 12.5%* | 54F, 54EC |
| Rural agricultural land | — | Exempt | Exempt | Not a capital asset |
* Property acquired before 23 Jul 2024 may opt for 20% with indexation if it yields lower tax. Rural agricultural land (outside notified municipal limits) is not a capital asset and is fully outside capital-gains tax.
How to Compute Capital Gains on a Property Sale
Full value of consideration is the higher of the actual price received or the stamp-duty (circle) value under Section 50C. From it deduct the cost of acquisition (purchase price plus stamp duty, registration and brokerage at purchase), the cost of improvement, and transfer expenses. For the pre-July-2024 20% option, the cost is indexed using the Cost Inflation Index.
If the stamp-duty value of the property exceeds 110% of your actual sale price, the stamp-duty value is deemed to be your sale consideration and you are taxed on a gain higher than you actually received. If it is within 110%, your actual price is used. You can dispute an inflated circle rate before the Stamp Valuation Authority / Valuation Officer.
LTCG — flat 12.5% (no indexation)
STCG — held ≤ 24 months
Illustrative only. Add 4% health & education cess and any surcharge on high incomes; surcharge on LTCG is capped at 15%. Try our capital gains calculator for your own figures.
TDS on Property Sale — Section 194IA
When a property is sold for Rs 50 lakh or more, the buyer must deduct 1% TDS on the whole consideration under Section 194IA at the time of payment, deposit it via Form 26QB within 30 days of the month-end, and give the seller a Form 16B. As the seller, this TDS shows in your Form 26AS / AIS and is claimed against your final tax in the ITR.
- Threshold: sale value of Rs 50 lakh or more (on the consideration, not the gain).
- Rate: 1% of the total consideration (higher if the seller has no PAN).
- NRI seller: TDS is instead deducted under Section 195 at capital-gains rates, not 1% under 194IA.
- Deposit & certificate: Form 26QB within 30 days; issue Form 16B to the seller.
Buying or selling and unsure about 26QB / 16B?
Get TDS Help →Capital-Gains Exemptions — Sections 54, 54F & 54EC
| Section | You sell | Reinvest in | Window | Cap |
|---|---|---|---|---|
| 54 | Residential house (LTCG) | Another residential house | 1 yr before / 2 yrs after (or build in 3 yrs) | Reinvestment up to Rs 10 cr |
| 54F | Any long-term asset (not a house) | One residential house (net sale value) | 1 yr before / 2 yrs after (or build in 3 yrs) | Proportionate; cap Rs 10 cr |
| 54EC | Land or building (LTCG) | NHAI / REC / PFC / IRFC bonds | Within 6 months of sale | Rs 50 lakh per FY; 5-yr lock-in |
If you cannot reinvest before the ITR due date, park the gain in the Capital Gains Account Scheme (CGAS) with a bank and use it within the specified period.
Reinvesting works well if
- You are buying or building another home anyway
- Your gain is large and the 54/54F window fits your timeline
- You can lock Rs 50 lakh in 54EC bonds for 5 years
Think twice if
- You need the sale proceeds as liquid cash
- You may miss the reinvestment / CGAS deadline
- 54F use is broken by owning more than one other house
For inherited or gifted property the cost of acquisition is the price paid by the previous owner, and their holding period is added to yours — so many inherited properties are long-term from day one. If the previous owner acquired it before 1 April 2001, you may substitute the fair market value as on 1 April 2001 (or actual cost, whichever is higher).
Want the lowest legal tax on your property gain — and the return filed right?
Get Capital-Gains Help →Tax on Property Sale — Frequently Asked Questions
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