How much capital gains tax do I pay when selling property in India?
Selling property in India triggers capital gains tax. The rate and treatment depend on how long you held the property.
Holding period and classification (from FY 2024-25 onwards):
| Holding Period | Classification | Tax Rate |
|---|---|---|
| Up to 24 months | Short-Term Capital Gains (STCG) | Added to income, taxed at your slab rate |
| More than 24 months | Long-Term Capital Gains (LTCG) | 12.5% without indexation |
Major change from Budget 2024: Indexation benefit has been removed for property sold on or after July 23, 2024. Previously, you could adjust the purchase price for inflation using the Cost Inflation Index (CII), which significantly reduced LTCG on properties held for many years. Now the flat 12.5% rate applies on the actual gain (sale price minus original purchase price).
For properties purchased before July 23, 2024: You can choose the more beneficial option: either 12.5% without indexation, or 20% with indexation (using the old rule). The government clarified this as a transitional relief.
Exemptions to reduce capital gains tax:
Section 54: Reinvest the capital gain in a new residential property within 2 years of sale (or 3 years if constructing). The entire gain can be exempt. Only one new property allowed (two if gain is under ā¹2 crore, exercisable once in a lifetime).
Section 54EC: Invest up to ā¹50 lakh of capital gains in specified bonds (NHAI or REC) within 6 months of sale. These bonds have a 5-year lock-in and earn around 5.25% interest.
Section 54F: If you sell any asset other than a residential property and reinvest the entire net consideration (not just the gain) in a new house, proportionate exemption is available.
TDS on property sale: The buyer must deduct 1% TDS (Section 194-IA) if the property value exceeds ā¹50 lakh. This is deposited using Form 26QB.
Pro tip: If you need time to find a new property, deposit the capital gains amount in a Capital Gains Account Scheme (CGAS) at a designated bank before the ITR filing deadline. You then have up to 3 years to use it for property purchase.
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