Capital Gains Tax on Property in India: Rates, Exemptions and Calculation
Planning to sell a property? Understand how capital gains tax works in India, how to calculate your profit, and which exemptions can help reduce your tax liability.
The good news is that understanding the rules before selling can help you prepare. This guide explains capital gains tax on property in simple terms, including the 2026 tax rates, exemptions and important rules for property sellers.
What Is Capital Gains Tax on Property?
When you sell a property for more than its purchase cost, the profit is called a capital gain. The tax charged on this profit is known as capital gains tax.It can apply when you sell:
- Residential apartments and houses
- Commercial properties
- Land and plots
Short-Term vs Long-Term Capital Gains on Property
The holding time decides whether your property sale results in a short-term or a long-term capital gain.| Particulars | Short-term Capital Gain (STCG) | Long-term Capital Gain (LTCG) |
|---|---|---|
| Holding period | 24 months or less | More than 24 months |
| Tax rate | Applicable income-tax slab rate | Generally 12.5% without indexation |
| Indexation | Not available | Limited relief for eligible older properties |
For property sold on or after July 23, 2024, the general LTCG rate is 12.5% without indexation. However, resident individuals and Hindu Undivided Families (HUFs) selling land or buildings bought before July 23, 2024 can compare this with the earlier 20% rate with indexation. They can use the more beneficial calculation, subject to the applicable conditions.
How Is Capital Gains Tax Calculated?
Start with this simple calculation:Capital Gain = Sale Price − Cost of Acquisition − Cost of Improvement − Eligible Selling Expenses
For example, if you bought a property for ₹80 lakh and sold it for ₹1.20 crore, your initial gain is ₹40 lakh. You can then account for eligible improvement costs and expenses directly related to the sale.
These may include:
- Purchase cost, including eligible acquisition expenses
- Eligible costs of structural improvements
Frequently Asked QuestionsFAQs
Short-term profits on property held for 24 months or less are generally taxed at the applicable income-tax slab rate. Long-term gains on property held for more than 24 months are generally taxed at 12.5% without indexation, subject to eligible relief for certain older properties.
You may qualify for exemptions by buying another residential house or investing in specified bonds under Sections 82, 86 or 85 of the Income-tax Act, 2025. The applicable conditions and limits must be met.
Under Section 82 (formerly Section 54), the eligible investment in a new residential property is capped at ₹10 crore, meaning any investment amount or capital gain exceeding this limit is ignored for the exemption. A one-time lifetime option to purchase or construct two houses is available when the capital gain does not exceed ₹2 crore, provided the new property is bought within 1 year before or 2 years after (or constructed within 3 years after) the sale date, and any unutilised funds are deposited into the Capital Gains Account Scheme (CGAS) before the ITR filing due date.
The notified Cost Inflation Index for FY 2026-27 is 384. It is relevant when calculating indexed costs for eligible older-property transactions.
Indexation is generally not available for property transfers made on or after July 23, 2024. Eligible resident individuals and HUFs selling land or buildings acquired before that date can compare the old 20% rate with indexation against the 12.5% rate without indexation.
Disclaimer: The information presented by TOI Homes, part of The Times of India Group, is for general informational purposes only and does not constitute financial, legal, or investment advice. All data and insights are based on sources believed to be reliable but are not guaranteed for accuracy or completeness and are subject to change due to market conditions. The developer and associated entities are not liable for decisions made based on this information. Real estate investments involve risks, and buyers are advised to conduct independent due diligence and consult certified advisors before investing. TOI Homes does not endorse or promote any specific property or developer unless explicitly stated.
