Capital gains tax on sale of property, land and house in India

When you sell a house, flat, plot or land, the profit is a capital gain. If you held the property for 24 months or less, it is a short-term capital gain (STCG), added to your income and taxed at your slab rate. If you held it for more than 24 months, it is a long-term capital gain (LTCG), taxed at 12.5%. A resident individual or HUF who bought before 23 July 2024 can instead pay 20% with indexation, if that is lower.

This guide is for sales in the financial year 2025-26 (AY 2026-27), under the Income-tax Act, 1961. It covers land, buildings, houses and flats. For shares, see our capital gains tax on shares guide.

Capital gains tax on property at a glance

Each row is explained below.

Short-term or long-term: the 24-month rule

Land, a building or a house is a long-term capital asset if you held it for more than 24 months before you sold it. If you held it for 24 months or less, the gain is short-term.

For inherited or gifted property, the time the previous owner held it also counts. See inherited or gifted property below.

STCG on property: taxed at your slab rate

A short-term gain on property has no special rate. It is added to your other income and taxed at the normal rate for your total income, under the old or new regime you choose.

If your other income is below the basic exemption limit, the unused part can be set against a short-term gain on property. This works for residents and non-residents. (Short-term gains on listed shares under section 111A follow a different rule: there, only residents can do this.)

Example 1. You bought a flat for ₹50,00,000 in December 2024 and sold it for ₹56,00,000 in February 2026. You paid ₹56,000 brokerage on the sale. You held it for less than 24 months.

The ₹5,44,000 is added to your income for FY 2025-26 and taxed at your slab rate.

LTCG on property: 12.5%, or 20% with indexation

For property sold on or after 23 July 2024, long-term capital gain is taxed at 12.5%, with no indexation. Before that date, the rate was 20% with indexation.

There is one choice for older property. If you are a resident individual or HUF and you bought the land or building before 23 July 2024, you can work out the tax both ways:

1. New law: 12.5% on the gain, without indexation.
2. Old law: 20% on the gain, with indexation.

If the tax under the new law is higher, the extra is ignored. In simple words, you pay the lower of the two.

This choice is only for land and buildings, and only for resident individuals and HUFs. Companies, firms and non-residents pay 12.5% without indexation.

How to calculate capital gains on sale of property

The law works out the gain like this:

Our capital gains tax on property calculator does this for you, with and without indexation.

Example 2: the old law gives lower tax. You are a resident individual. You bought a flat in FY 2015-16 for ₹30,00,000 and sold it in FY 2025-26 for ₹60,00,000. You paid ₹60,000 brokerage on the sale.

You pay the lower tax, ₹2,99,811, plus 4% cess of ₹11,992, a total of ₹3,11,803.

Example 3: the new law gives lower tax. You are a resident individual. You bought a plot in FY 2020-21 for ₹20,00,000 and sold it in FY 2025-26 for ₹60,00,000, with no sale expenses.

You pay ₹5,00,000, plus 4% cess of ₹20,000, a total of ₹5,20,000.

Both examples assume no surcharge applies and your other income already uses up your basic exemption limit. Which law gives lower tax depends on how long you held the property and how much its price went up, so work out both.

What is indexation, and was it removed?

Indexation raises your purchase cost for inflation, using the cost inflation index (CII) published for each financial year:

Indexed cost = cost × CII of the year of sale / CII of the year of purchase

For sales on or after 23 July 2024, indexation was removed. It is still used in one case: the old-law option for a resident individual or HUF selling land or a building bought before 23 July 2024.

For the latest notified value and how to use it, see our cost inflation index table.

Property bought before 1 April 2001

If you got the property before 1 April 2001, you can choose your cost:

• what you actually paid, or
• its fair market value on 1 April 2001.

For land or a building, the fair market value on 1 April 2001 cannot be more than its stamp duty value on that date, where a stamp duty value is available.

Section 50C: when the stamp duty value counts as the sale price

If you sell land or a building for less than the value fixed by the State stamp duty authority (the stamp duty value or circle rate), the law takes the stamp duty value as your sale value for capital gains.

There is a margin. If the stamp duty value is not more than 110% of your actual sale price, your actual sale price is used.

Example 4. Your agreed sale price is ₹80,00,000. 110% of it is ₹88,00,000.

If the agreement date and the registration date are different, the stamp duty value on the agreement date can be used. This applies only if you received at least part of the price by account payee cheque, account payee bank draft or electronic bank transfer on or before the agreement date.

Inherited or gifted property

Getting property by inheritance, will or gift is not a sale, so no capital gain arises at that time. Tax comes up when you sell it.

When you sell:

• Your cost is what the previous owner paid for it, plus the cost of any improvement made by them or by you.
• Your holding period starts from the date the previous owner got it. So a house your parent bought in 2010 and you inherited in 2025 is long-term when you sell it.

Sale of agricultural land: is it taxable?

It depends on where the land is.

Agricultural land counts as urban if it is inside a municipality or cantonment board with a population of 10,000 or more, or within this distance of its limits, measured in a straight line:

Land outside these areas is rural agricultural land.

Section 54B. If you sell urban agricultural land that you or your parents (or your HUF) used for farming for 2 years before the sale, and you buy other agricultural land within 2 years, the gain is exempt up to the amount you invest. If you sell the new land within 3 years, the exemption is taken back.

How to save capital gains tax on sale of property

The law gives these options. Each has conditions, so check them before you sell.

• Section 54, sell a house and buy a house. An individual or HUF selling a long-term residential house can buy one house 1 year before or 2 years after the sale, or build one within 3 years. The gain is exempt up to the amount invested, with a cap of ₹10 crore. Once in a lifetime, if the gain is up to ₹2 crore, you can buy two houses.
• Section 54EC, invest in bonds. Anyone selling long-term land or a building can invest the gain in notified bonds (such as NHAI or REC bonds) within 6 months. The limit is ₹50 lakh across the year of sale and the next year, and the bonds are locked in for 5 years.
• Section 54F, sell other land and buy a house. If an individual or HUF sells long-term land or a plot (anything other than a residential house) and invests the sale value in one house (bought 1 year before or 2 years after the sale, or built within 3 years), part or all of the gain can be exempt. The investment counted is capped at ₹10 crore, and the exemption may be denied if you already own more than one other house.
• Section 54B, for agricultural land used for farming, explained above.
• Capital gains account scheme. If you have not invested the money by the due date of your return, you can deposit it in this scheme at a bank before that date, and still claim the exemption under section 54, 54F or 54B.
• Set off losses. A capital loss on another asset in the same year reduces your gain (see losses below).

If you sell the new house within 3 years, the exemption under section 54 is taken back. Ask a CA before you rely on any of these.

TDS on sale of property: section 194-IA

If you sell property to a buyer and you are a resident, the buyer must deduct TDS:

This TDS is not an extra tax. You claim credit for it in your return.

NRIs selling property in India

If the seller is a non-resident, the buyer deducts TDS under section 195, not section 194-IA. The rates are higher:

Three points for NRIs:

1. No old-law option. The 20% with indexation choice is only for residents. A non-resident pays 12.5% without indexation on a long-term gain.
2. Lower TDS certificate. You can apply for a certificate of nil or lower TDS in Form 13, online on the TRACES portal. The buyer then deducts at the rate in the certificate, for the period it is valid.
3. Report the gain in your Indian income tax return for the year of sale, and claim credit there for the TDS deducted.

With the same facts as Example 2, a non-resident pays 12.5% on ₹29,40,000, which is ₹3,67,500, plus cess of ₹14,700, a total of ₹3,82,200.

Losses on sale of property

A capital loss cannot be set off against salary or any other head of income. To carry a loss forward, file your return by the due date. Our guide to belated returns and the late fee explains what happens if you miss it.

Surcharge, cess and advance tax

• Surcharge: on tax on long-term gains under section 112, surcharge is capped at 15% in both regimes. A short-term gain on property is part of your normal income, so the normal surcharge applies.
• Cess: 4% is added on the tax plus surcharge.
• Advance tax: if your total tax for the year is ₹10,000 or more, you pay advance tax: 15% by 15 June, 45% by 15 September, 75% by 15 December and 100% by 15 March. No interest under section 234C is charged on a shortfall caused by capital gains you could not estimate, if you pay that tax in the following instalments, or by 31 March if no instalment is left.

Which ITR form to file for property capital gains

ITR-1 and ITR-4 allow only long-term gains on listed shares and equity funds up to ₹1.25 lakh, so a gain on property needs ITR-2 or ITR-3. The gain goes in Schedule CG. For the other conditions of each form, see which ITR form to file.

If you have filed and left out a property sale, you can correct it with a revised return. If that time has passed, an updated return (ITR-U) may help.

Which law applies

This guide uses section numbers from the Income-tax Act, 1961, which governs the financial year 2025-26 and earlier. Sales from 1 April 2026 fall in tax year 2026-27, under the Income-tax Act, 2025, which uses different section numbers.

How FilingSetu can help

We file income tax returns with capital gains from property, land and houses.

• We help you claim the section 54 and 54EC exemptions.
• If you are an NRI selling property in India, we help with the TDS on the sale and with the lower TDS certificate.
• A chartered accountant checks every return before filing, and we help you e-verify it.
• You get a named manager, and the consultation is free.

See our ITR filing service

Frequently asked questions