Capital gains tax on property sale in India for FY 2025-26: LTCG/STCG rates, Section 54, 54EC, 54F exemptions, TDS rules and two worked rupee examples.
Sell a house or a plot this year, and the profit gets taxed — 12.5% if you held it long enough, or your regular slab rate if you sold within two years. That's the short version. The longer version, the one that actually saves you money, is knowing which of two tax methods applies to you, and which of three exemptions can bring your bill down to zero. Let's get into it.
Simply put, it's the tax on your profit — sale price minus what you originally paid, minus a few allowable expenses. For any sale you complete in FY 2025-26 (that's AY 2026-27), the rule that charges this tax is Section 45 of the Income-tax Act, 1961, and the formula for working it out sits in Section 48. Sell on or after 1 April 2026, and the same tax applies, just renumbered under the Income-tax Act, 2025 — Section 67 for the charge, Section 72 for the computation. Nothing about how much you owe changes. Only the section number does.
This guide is written for a sale happening in FY 2025-26. Wherever a section number comes up, we've given both, so it still works for you whichever side of 1 April 2026 you're selling on.
Applies to | Does NOT apply to |
|---|---|
Individuals and HUFs selling a house, flat, or plot | Rural agricultural land (not treated as a capital asset at all) |
Sale of commercial property or urban land | Property held as stock-in-trade by a builder or dealer (taxed as business income instead) |
NRIs selling property located in India | Property gifted between spouses or parent and child — no tax at the point of the gift itself |
Co-owners, each taxed on their own share | Land acquired by the government through compulsory acquisition (separate rules apply) |
One thing worth flagging: if you inherited the property or got it as a gift, you're still covered here. The previous owner's cost and holding period simply carry over to you.
The one factor that decides almost everything else is how long you held the property. More than 24 months, and it's long-term (LTCG). Twenty-four months or less, and it's short-term (STCG) — taxed differently, and with none of the exemptions we'll cover further down.
Scenario | Rate | Indexation |
|---|---|---|
STCG (held 24 months or less) | Your income slab rate, up to 30% | Not available |
LTCG, property bought on or after 23 July 2024 | 12.5% flat | Not available |
LTCG, property bought on or before 22 July 2024 | Lower of 12.5% (no indexation) or 20% (with indexation) — your choice | Optional |
That 20%-with-indexation route only exists for resident individuals and HUFs, only for land or buildings, and only if you bought before 23 July 2024. [Source: incometaxindia.gov.in]. Companies, LLPs, and firms don't get this choice at all — for them, it's 12.5% flat regardless of when they bought the asset.
Cost Inflation Index (CII): CBDT set CII at 363 for FY 2024-25, and at 376 for FY 2025-26 through Notification No. 70/2025, dated 1 July 2025. You'll need the CII for both your purchase year and your sale year to work out the indexed cost.
The stamp duty override — Section 50C: if your actual sale price comes in lower than the government's stamp duty value (the circle rate), the higher stamp duty value gets treated as your sale price for tax purposes — unless the gap between the two is within 10%, in which case your actual price is accepted as-is. [VERIFY: exact corresponding section number for Section 50C under the Income-tax Act, 2025 — check against the incometaxindia.gov.in mapping utility before publishing.]
Section | Applies to | Reinvest in | Cap | Time limit |
|---|---|---|---|---|
54 (2025 Act: Section 82) | Sale of a residential house | A new residential house in India | ₹10 crore | 1 year before / 2 years after (purchase); 3 years (construction) |
54EC (2025 Act: Section 85) | Any long-term gain from land or a building | NHAI, REC, PFC, or IRFC bonds (HUDCO added April 2025) | ₹50 lakh per financial year | 6 months from the transfer date |
54F (2025 Act: Section 86) | Any long-term asset other than a house | A new residential house | ₹10 crore | Same as Section 54 |
Haven't found the right new property yet? You can still protect your exemption by parking the gain in a Capital Gains Account Scheme (CGAS) account at a public sector bank before you file your return. That buys you the same 2-year (purchase) or 3-year (construction) window to actually use the money.
Want to see all three sections working together — plus how HUF splitting and carrying forward losses can shrink the bill even more? Our guide on how to save LTCG tax legally in India walks through it step by step.
Example 1 — the common case. Suresh bought a flat in FY 2015-16 for ₹45,00,000 (CII 254). He sells it in FY 2025-26 for ₹95,00,000 (CII 376).
Method 1, 12.5% without indexation: Gain = ₹95,00,000 − ₹45,00,000 = ₹50,00,000. Tax = ₹6,25,000, plus 4% cess (₹25,000) = ₹6,50,000.
Method 2, 20% with indexation: Indexed cost = ₹45,00,000 × (376 ÷ 254) = ₹66,61,417. Gain = ₹95,00,000 − ₹66,61,417 = ₹28,38,583. Tax = ₹5,67,717, plus 4% cess (₹22,709) = ₹5,90,426.
Method 2 is cheaper by ₹59,574, so that's what Suresh picks. He then buys a new flat for ₹30,00,000 within two years and claims it under Section 54. Since that's more than his indexed gain of ₹28,38,583, the whole gain is exempt. Final tax: zero.
Example 2 — the edge case most articles skip. Priya and her husband Ramesh jointly own a plot, 50:50, bought in FY 2018-19 for ₹30,00,000 total (CII 280). They sell it in FY 2025-26 for ₹80,00,000 — but the stamp duty value at registration comes in at ₹92,00,000.
Since ₹80,00,000 is more than 10% below ₹92,00,000, Section 50C kicks in. The deemed sale value becomes ₹92,00,000, split ₹46,00,000 between them.
Each co-owner, Method 1 (12.5%): Gain = ₹46,00,000 − ₹15,00,000 = ₹31,00,000. Tax = ₹3,87,500, plus cess ₹15,500 = ₹4,03,000.
Each co-owner, Method 2 (20%, indexed): Indexed cost = ₹15,00,000 × (376 ÷ 280) = ₹20,14,286. Gain = ₹25,85,714. Tax = ₹5,17,143, plus cess ₹20,686 = ₹5,37,829.
Here, Method 1 actually wins — together, the couple saves ₹2,69,658 by skipping indexation. Why? Because seven years wasn't quite long enough for the indexed cost to beat the lower flat rate. This is exactly why you run both calculations every single time, no matter how old the property is.
Start with the full sale value — your sale price, or the stamp duty value if that's higher (Section 50C).
Subtract transfer expenses — brokerage, legal fees, and so on.
Subtract the cost of acquisition — what you originally paid (or the fair market value as on 1 April 2001, if you bought before that).
Subtract the cost of improvement — any documented renovation or construction spend.
What's left is your capital gain. Check the holding period to classify it as STCG or LTCG.
If it's LTCG on property bought before 23 July 2024, run both the 12.5% and 20%-indexed numbers, and use whichever is lower.
You don't have to do this math by hand. The Capital Gains Tax Calculator for India, FY 2025-26 runs both methods automatically and tells you which one to pick. If you just want a quick LTCG or STCG check on its own, there's also a dedicated LTCG Tax Calculator and STCG Tax Calculator.
Selling to a resident buyer, and the sale value (or stamp duty value, whichever is higher) is ₹50 lakh or more? The buyer has to deduct 1% TDS under Section 194-IA (Section 393(1), Table Sl. No. 3(i) under the 2025 Act) — and this is calculated on the full sale price, not just your profit.
Here's how the buyer actually does it:
Log into the Income Tax e-filing portal and go to e-File → e-Pay Tax → New Payment.
Select "26QB – TDS on Property" as the payment type.
Fill in the PAN details of both buyer and seller, the property address, and the sale amount.
Pay through net banking, RTGS/NEFT, or a debit card, and save the challan.
The payment must show up under Form 26QB within 30 days of that month's end.
Register on the TRACES portal, go to Download → Form-16B (for buyer), enter the seller's PAN and acknowledgement number, and hand Form 16B to the seller as proof of deduction.
If you're an NRI seller, a different rule applies — Section 195. TDS jumps to 20% (plus surcharge and cess) on LTCG, or over 30% on STCG, and it's deducted on the entire sale value unless you've already obtained a lower or nil-deduction certificate under Section 197. [VERIFY: exact corresponding section number for Section 195 under the Income-tax Act, 2025 — check against the incometaxindia.gov.in mapping utility before publishing.] For the full NRI compliance picture — DTAA credit, Form 1116, and which numbers now apply — see our guide on NRI selling property in India as a US resident.
The buyer deducted TDS at the wrong rate, or never filed Form 26QB. Check your Form 26AS or AIS about a week after the sale closes. Nothing there yet? The buyer may just not have filed. If they deducted at the wrong rate, that has to be corrected on their end through a revised Form 26QB — you can't file it yourself as the seller, so follow up directly with them.
You missed the Section 54EC six-month window. Unlike Section 54, which gives you years, the 54EC bond investment has to happen within six months of the sale, no exceptions for being a few days late. If you still have time left under Section 54 or 54F, fall back to one of those. If not, the gain simply becomes taxable.
Your CGAS deposit sat unused past the deadline. If you parked gains in a Capital Gains Account Scheme account and didn't buy (within 2 years) or build (within 3 years) in time, the unused amount automatically becomes taxable LTCG in the year the deadline passes — no fresh notice comes to remind you. Track this date yourself.
Late Form 26QB filing: ₹200 per day under Section 234E, capped at the TDS amount itself.
TDS not deducted at all: a penalty equal to the TDS amount under Section 271C, plus interest — 1% a month for late deduction, 1.5% a month for late deposit.
Fallen short on advance tax: interest under Sections 234B and 234C.
Underreported or misreported income: 50% of the tax on the missed amount (Section 270A), or 200% if it counts as misreporting.
Filed your ITR late: a flat ₹5,000 fee under Section 234F.
Not necessarily. Under Section 54, if you reinvest the long-term gain into a new residential house within the timelines given, that portion is exempt, up to ₹10 crore. Invest less than the full gain, and only the shortfall stays taxable.
Your cost of acquisition is whatever the previous owner paid (or the fair market value as on 1 April 2001, if that's earlier), and their holding period carries over to you too. This usually makes inherited property long-term from day one, so you get LTCG rates and all three exemptions straight away.
No, and this trips people up a lot. There's no separate capital gains break tied to age. Senior citizens get exactly the same Section 54, 54EC, and 54F exemptions as anyone else. The only age-linked benefit is a higher basic income exemption limit, which doesn't touch how capital gains are computed.
Yes, on the same terms as resident sellers, as long as the reinvestment property is in India. The real difference shows up on the TDS side — buyers deduct under Section 195 instead of 194-IA, at a much higher rate upfront, which you can later claim back if your actual liability is lower.
No. Section 50C only steps in if the stamp duty value is more than 10% higher than your declared price. Stay within that 10% gap, and your actual sale price is accepted as it is.
If you haven't bought, built, or deposited the gain in a CGAS account by your ITR due date, you lose the exemption for that return. And if you'd already deposited in CGAS but then let the 2 or 3-year window run out, that amount becomes taxable LTCG in the year the deadline expires.
Yes. Section 194-IA doesn't carve out an exception for family — if the resident seller's sale value is ₹50 lakh or more, 1% TDS applies no matter the relationship between buyer and seller.
ITR-2 if you have no business income, ITR-3 if you do. ITR-1 can't be used once you have capital gains to report — the details go under Schedule CG in either form.
More than 24 months from the date you acquired it. Exactly 24 months or under is short-term, taxed at your slab rate with none of the exemptions available.
Yes. Each co-owner works out their own share of the gain based on their ownership percentage, and can independently claim up to ₹10 crore under Section 54 or ₹50 lakh under Section 54EC on their own portion.
You can file a revised return under Section 139(5), usually before 31 December of the assessment year, to add the missed exemption — as long as you still meet the underlying reinvestment conditions.
No. That rate is only for long-term gains. Short-term gains on property get added to your total income and taxed at your regular slab rate, up to 30%, with no flat-rate option and none of the Section 54/54EC/54F exemptions.
Run both the 12.5% and 20%-with-indexation numbers before you file — Priya and Ramesh's example shows the "obviously cheaper" option isn't always the real one. Reinvest through Section 54, 54EC, or 54F before the clock runs out, not after. For the current TDS forms and filing steps, check the Income Tax Department's e-filing portal directly.
For educational purposes only. Verify all figures at official sources before acting. Toolisky is not affiliated with any government body. Consult a qualified CA or legal professional before making compliance decisions. See toolisky.com/accuracy-and-limitations.
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