Since 23 July 2024, long-term capital gains on property are taxed at 12.5% without indexation. But for land or buildings bought before 23 July 2024, a resident individual or HUF can instead pay 20% with indexation — and pay whichever is lower. The choice matters: on older properties it can be worth lakhs.
Long-term or short-term?
Property held for more than 24 months is long-term. Sell sooner and the gain is added to your income and taxed at your slab rate.
The two ways to calculate
- 12.5% without indexation: sale value, less transfer expenses, less the actual cost and improvements.
- 20% with indexation: cost is inflated by the Cost Inflation Index — the index for the year of sale divided by the index for the year of purchase. The index for 2026-27 is 384 (the base year 2001-02 is 100). For property bought before April 2001 you may use its value on 1 April 2001 as the cost.
Example 1 — bought in 2015
Bought in June 2015 for ₹40 lakh, sold in September 2026 for ₹1 crore.
| 12.5%, no indexation | 20%, with indexation | |
|---|---|---|
| Cost used | ₹40,00,000 | ₹60,47,244 (40 lakh × 384 ÷ 254) |
| Capital gain | ₹60,00,000 | ₹39,52,756 |
| Tax (before cess) | ₹7,50,000 | ₹7,90,551 |
The flat 12.5% is lower here.
Example 2 — bought in 2005
Bought in 2005-06 for ₹20 lakh, sold in September 2026 for ₹1 crore.
| 12.5%, no indexation | 20%, with indexation | |
|---|---|---|
| Cost used | ₹20,00,000 | ₹65,64,103 (20 lakh × 384 ÷ 117) |
| Capital gain | ₹80,00,000 | ₹34,35,897 |
| Tax (before cess) | ₹10,00,000 | ₹6,87,179 |
Indexation saves over ₹3 lakh. The longer you have held the property, the more likely indexation wins.
Bringing the tax down further
- Buy another house — reinvesting the gain in a residential house in India can exempt it, within time limits (one year before or two years after the sale; three years to construct).
- Capital gains bonds — invest up to ₹50 lakh in specified bonds within six months of the sale.
- Not yet reinvested by the return due date? Park the amount in the Capital Gains Account Scheme to keep the exemption open.
- Stamp duty value — if the stamp duty value is higher than your sale price, that value is generally taken as the sale consideration.
- TDS — a buyer of property worth ₹50 lakh or more deducts 1% TDS; claim it against your tax.
Plan the exemption before the sale. Most of the saving comes from getting the timing and the paperwork right.
This article is general information based on the law as it stood on 15 Sep 2026. It is not advice for your situation — rules and dates change, and the right answer depends on your facts. Speak to us before acting on it.