LTCG on Property Sale in India: Rates, Exemptions, Calculation (2026)

A sale produces long-term capital gains (LTCG) when the holding period exceeds 24 months. The clock starts from the registered date of acquisition (sale deed, allotment, or possession, depending on how the asset was created) and stops on the date of transfer under Section 2(47) of the Income Tax Act. Anything held 24 months or less is short-term capital gains, taxed at your slab rate.

The 24-month rule covers land, residential flats, builder floors, villas, plots, and commercial units. It applies whether the property is self-occupied, let out, or held as investment. Inherited property inherits the previous owner's holding period under Section 49(1), so a flat received from a parent who bought it in 2005 is already long-term the moment it is sold, even if the heir received it last year.

For under-construction property, several High Court rulings have held that the holding period runs from the allotment letter date rather than registration, provided payments began then. CBDT Circular No. 471 (1986) and 672 (1993) accept this for DDA-style allotments, and courts have extended it to builder allotments where rights were created at booking. Keep the allotment letter, builder-buyer agreement, and payment schedule, because the Assessing Officer will ask.

Agricultural land in a rural area, as defined under Section 2(14), is not a capital asset at all. Sale proceeds are fully exempt. Urban agricultural land, land within municipal limits, and land within the notified radius of large towns do qualify as capital assets and are taxed like any other property. Gurgaon land inside the MCG limits is almost always a capital asset. Verify current rural-area status with your CA before claiming the exemption.

Budget 2024 split the LTCG regime on property into two paths depending on when you sell.

For property sold on or before 22 July 2024, LTCG is taxed at 20% with indexation. The cost of acquisition is uplifted using the Cost Inflation Index (CII) notified by CBDT. For FY 2024-25 the CII is 363, and for FY 2001-02 (the base year for property acquired before April 2001) the CII is 100.

For property sold on or after 23 July 2024, resident individual and HUF sellers can choose the lower of 12.5% on the gain without indexation, or 20% on the gain with indexation. The choice is available only if the property was acquired before 23 July 2024. Property acquired on or after that date is taxed at a flat 12.5% without indexation. Companies, LLPs, and foreign sellers do not get the indexation option; they pay 12.5% flat. Surcharge and 4% health and education cess apply on top of either rate. Verify the current surcharge slabs for your assessment year with a CA, since surcharge thresholds have moved several times.

Start with the sale consideration: the actual contract price, or the stamp-duty valuation under Section 50C if higher by more than 10%. The 50C safe harbour means a contract price within 10% of the circle-rate value is accepted; anything lower is replaced by circle-rate value for the computation.

From that, deduct three things to reach the gain. First, the indexed cost of acquisition if you take the 20% path: original cost multiplied by (CII of sale year divided by CII of purchase year). Property purchased before 1 April 2001 can be stepped up to its fair market value on 1 April 2001, capped at stamp-duty value on that date under Section 55(2)(b)(i), and the CII of 100 is then applied. Second, the indexed cost of improvement for any capital additions after purchase, with proof of invoices. Third, transfer expenses: brokerage, legal fees, society transfer charges, and the TDS the buyer deducted.

Worked example. You bought a Sector 42 apartment for Rs 1.2 Cr in FY 2015-16 (CII 254) and sell it in FY 2024-25 (CII 363) for Rs 3.5 Cr. Brokerage was Rs 7 lakh.

12.5% path: Gain = 3,50,00,000 minus 1,20,00,000 minus 7,00,000 = Rs 2,23,00,000. Tax at 12.5% = Rs 27,87,500 before surcharge and cess.

20% indexed path: Indexed cost = 1,20,00,000 x (363 / 254) = Rs 1,71,49,606. Gain = 3,50,00,000 minus 1,71,49,606 minus 7,00,000 = Rs 1,71,50,394. Tax at 20% = Rs 34,30,079 before surcharge and cess.

The 12.5% path wins here by about Rs 6.4 lakh. The crossover usually favours indexation when the asset was held for very long periods or during high-inflation years. Run both numbers; do not assume one is always cheaper.

Three exemptions can eliminate the LTCG liability on a property sale, in whole or in part. Each has strict timelines and documentation.

Section 54 applies when a residential house is sold and the gain is reinvested in another residential house in India. The new house must be purchased within one year before or two years after the sale, or constructed within three years. Only one new residential property qualifies, unless the gain is up to Rs 2 Cr, in which case the exemption can be split across two houses once in a lifetime. From AY 2024-25, the Section 54 exemption is capped at Rs 10 Cr of investment, so gains reinvested beyond that remain taxable. Funds not yet used by the ITR due date must be parked in a Capital Gains Account Scheme (CGAS) with a nationalised bank.

Section 54EC lets you invest the LTCG in bonds of NHAI, REC, PFC, or IRFC within six months of sale. The cap is Rs 50 lakh per financial year, and across two financial years combined for the same transaction. These bonds have a five-year lock-in and currently yield around 5 to 5.25% taxable interest. Verify the current issuer list and coupon with your bank, since the roster and rate are updated periodically.

Section 54F applies when a long-term asset other than a residential house (land, commercial unit, shares) is sold and the entire net consideration, not just the gain, is reinvested in a residential house. Timelines mirror Section 54. The seller must not own more than one other residential house on the date of transfer. The Rs 10 Cr investment cap applies here too.

Failing to use the deposited amount within the deadline, or selling the new house within three years, reverses the exemption and taxes the amount in the year of default.

Under Section 194-IA, when a resident sells immovable property to another resident for Rs 50 lakh or more, the buyer must deduct 1% TDS on the full sale consideration (or stamp-duty value, whichever is higher) and deposit it to the government using Form 26QB within 30 days of the end of the month of payment. One Form 26QB is required per buyer-seller pair, so joint purchases from joint sellers can generate four forms.

The buyer does not need a TAN for this; the PAN of both parties is sufficient. After filing Form 26QB and paying the TDS, the buyer issues Form 16B to the seller, which the seller uses to claim credit in their ITR. Missing the deadline attracts interest at 1 to 1.5% per month under Section 201 plus a late fee of Rs 200 per day under Section 234E, capped at the TDS amount.

The Rs 50 lakh threshold applies to the per-transaction value, not per instalment. A property priced at Rs 1.8 Cr paid in three tranches still triggers 1% on each tranche. The threshold is also tested on the total consideration shared by all co-buyers; CBDT clarified via Finance Act 2022 amendments that aggregate consideration crossing Rs 50 lakh triggers TDS even if each co-buyer's share is below it.

For NRI sellers, Section 194-IA does not apply. Section 195 governs instead, and the TDS rate jumps to the LTCG rate itself: 12.5% plus surcharge (10 to 37% depending on sale value) plus 4% cess, applied on the full consideration, not just the gain. The buyer must have a TAN, file Form 27Q, and issue Form 16A. The NRI seller can apply to the Assessing Officer under Section 197 for a lower-TDS certificate based on actual gain, which usually brings the deduction down to the tax on the real gain and avoids a large refund wait.

An NRI selling Indian property faces both income tax (LTCG) and FEMA repatriation rules. Tax treatment is identical to residents on paper: 12.5% without indexation, or 20% with indexation if the asset was acquired before 23 July 2024. The Section 54, 54EC, and 54F exemptions are available in full.

Where NRIs differ is TDS and repatriation. Section 195 forces the buyer to withhold at 12.5% plus surcharge plus 4% cess on the gross consideration, which routinely exceeds the actual tax due. Apply for a Lower Deduction Certificate under Section 197 at least 30 to 45 days before registration; the Jurisdictional AO (based on the NRI's PAN) calibrates the TDS to the computed gain, so the deducted amount matches the real liability.

Sale proceeds must be routed through an NRO account. Up to USD 1 million per financial year can be repatriated to the NRE account or abroad after Form 15CA and 15CB from a Chartered Accountant certifying taxes have been paid. Repatriation of proceeds from more than two residential properties purchased with NRE or FCNR funds has specific RBI limits; verify the current limits with your authorised dealer bank.

If the property was inherited, the lineage of ownership and the original purchase cost must be documented. The holding period and cost base pass through from the previous owner under Section 49(1), so inherited Gurgaon flats bought by parents in the 1990s can produce large indexed costs that significantly reduce the taxable gain. Keep the predecessor's purchase deed, succession certificate, and any valuation reports. Consult a CA familiar with NRI returns before signing the sale agreement; the TDS, exemption, and repatriation steps must be sequenced in a specific order to avoid a long refund wait.

Four errors cause most LTCG disputes on property sales. First, ignoring the stamp-duty value under Section 50C. Haryana circle rates in Gurgaon are revised periodically; if your contract price falls below circle-rate value by more than 10%, the AO replaces your consideration with the circle-rate figure, often producing a gain where you reported none. Pull the current circle rate for the sector before pricing.

Second, missing the Capital Gains Account Scheme deadline. If you plan to invest in a new house under Section 54 but have not completed the purchase by the ITR due date (31 July for most individuals, 31 October for audit cases), the uninvested gain must be deposited in a CGAS account. Keeping the money in a regular savings account forfeits the exemption, even if you buy the house a month later.

Third, mis-computing the holding period for under-construction property. If you booked a flat in 2019, got possession in 2024, and sold in 2025, the holding period is six years from allotment, not one year from possession. The seller qualifies for LTCG, not STCG. Produce the allotment letter and payment ledger to defend the position; some AOs still default to the registration date.

Fourth, forgetting improvement costs. Capital improvements (false ceilings, modular kitchen, structural changes, wood flooring) made after purchase can be added to the cost base and indexed from the year of expense. Routine repairs and painting do not qualify. Keep contractor invoices, GST receipts, and bank statements. Verbal claims without proof are routinely rejected on scrutiny.

A fifth, growing problem: forgetting to reconcile Form 26AS and AIS entries. Both the buyer's TDS (Form 16B) and the registered sale value flow to the Annual Information Statement. Mismatches between what you declare and what AIS shows trigger an automated notice under Section 143(1)(a). Pull your AIS before filing, not after.