Capital Gains Tax on Property Sale#
Types of Capital Gains#
Short-Term Capital Gains (STCG)#
- Property held for less than 24 months
- Taxed as per income tax slab rate
Long-Term Capital Gains (LTCG)#
- Property held for 24 months or more
- Taxed at 20% with indexation benefit
Calculation of Capital Gains#
Capital Gains = Sale Price - (Cost of Acquisition + Improvement Expenses + Transfer Expenses)
Indexation Benefit#
Cost is adjusted using Cost Inflation Index (CII) to account for inflation. See our Cost Inflation Index guide for the current CII table, the indexation formula, and which properties still qualify after the July 2024 changes.
Example#
- Purchase: ₹50 lakh (FY 2012-13)
- Sale: ₹1.5 crore (FY 2026-27)
- Indexed cost: ₹1.02 crore (approx.)
- LTCG: ₹48 lakh
Exemptions Available#
Section 54#
- Reinvest in one residential property
- Capital gains up to ₹2 crore can be exempt
Section 54EC#
- Invest in capital gains bonds (NHAI, REC)
- Maximum: ₹50 lakh
- Lock-in: 5 years
Tax Calculation Example#
| Particulars | Amount (₹) |
|---|---|
| Sale consideration | 1,50,00,000 |
| Indexed cost | 1,02,00,000 |
| LTCG | 48,00,000 |
| Tax @20% | 9,60,000 |
Conclusion#
Proper planning can help reduce capital gains tax significantly.