Capital Gains Tax on Property Sale in India (2026): Rates, Rules and How to Save

Anoushka, Per Annum

24 Jul 2026 — 6 min read

Capital Gains Tax on Property Sale in India (2026)

Summary

For long-term capital gains (property held over 24 months) sold after 23 July 2024, tax is flat 12.5% without any indexation benefit.

If property was bought before 23 July 2024, you can opt for either 12.5% without indexation or 20% with indexation whichever is lower and gives you benefit.

Short-term gains (held 24 months or less) are charged at your income slab rate and can go as high as 30%.

You can avail exemptions upto 10 crore by investing your gain in a property, bond or a non-residential asset under section 54, 54EC and 54F respectively.

This provision will continue in Income Tax Act, 2025, which will come into effect from April 1, 2026 (only the section numbers will change).

Selling property in India remains one of the most significant tax events most people will experience in their lifetime. The tax treatment on Capital Gains on Property Sale in India (2026) will differ greatly depending on when you purchase and sell your property, and in case you make any error in calculating it, you may end up paying way more tax than you needed to.

What is Capital Gains Tax on Property

Capital Gains Tax is imposed on the profit achieved from selling a property for a price greater than the cost incurred in acquiring it. Your tax structure is strictly determined by the length of time you have possessed the property. As a result, it is categorized as a short-term or long-term capital asset.

Short Term vs Long Term Capital Gains

STCG- If the property is sold within 24 months of possession, then it is short term capital gain. The gains arising on this transaction are treated as an income and are taxed at the applicable income tax slab rate of the individual and are up to 30% in higher tax brackets. STCG does not have any exemption benefits like section 54, 54EC, 54F.

LTCG- The property is held for over 24 months. As on 23 July 2024 the LTCG on sale of property are taxed at a flat 12.5%. But the indexation benefit (which means adjusting purchase price for inflation) has been removed for properties which are sold off after 23 July 2024.

Capital Gains Tax Rates on Property (FY 2025-26 / AY 2026-27)

Scenario	Tax Rate	Indexation Benefit
Held ≤24 months (STCG)	Taxed at income slab rate (up to 30%)	Not applicable
Held >24 months, property bought on/after 23 July 2024	12.5% flat	Not available
Held >24 months, property bought before 23 July 2024	12.5% (no indexation) or 20% (with indexation), whichever is lower	Optional, taxpayer's choice
TDS on sale (property value ≥₹50 lakh)	1% deducted by buyer	Not applicable
TDS when seller is an NRI	~30% + surcharge/cess on full sale value	Not applicable

How Capital Gains Tax is Calculated

For short-term gains:
Sale Price − (Cost of Acquisition + Cost of Improvement + Transfer Expenses) = Short-Term Capital Gain, taxed at slab rate.

For long-term gains (property bought after 23 July 2024):
Sale Price − (Cost of Acquisition + Cost of Improvement + Transfer Expenses) = Long-Term Capital Gain, taxed at 12.5%.

For long-term gains (property bought before 23 July 2024, choosing indexation):
Sale Price − (Indexed Cost of Acquisition + Indexed Cost of Improvement + Transfer Expenses) = Long-Term Capital Gain, taxed at 20%.
(Indexed cost = Original Cost × Cost Inflation Index of sale year ÷ Cost Inflation Index of purchase year)

Worked example: A property bought in April 2015 for ₹30,00,000 and sold in March 2026 for ₹80,00,000, with ₹5,00,000 in improvement costs (also in 2015) and ₹2,00,000 in transfer expenses:

Without indexation: Gain = ₹80,00,000 − ₹35,00,000 − ₹2,00,000 = ₹43,00,000. Tax @12.5% = ₹5,37,500
With indexation (using CII 376 for FY 2025-26 and 254 for FY 2015-16):
- Indexed cost of acquisition = ₹30,00,000 × (376 ÷ 254) = ₹44,40,945
- Indexed cost of improvement = ₹5,00,000 × (376 ÷ 254) = ₹7,40,157
- Indexed gain = ₹80,00,000 − ₹44,40,945 − ₹7,40,157 − ₹2,00,000 = ₹26,18,898
- Tax @20% = ₹5,23,780
In this case, indexation gives the lower tax bill (₹5,23,780 vs. ₹5,37,500) — which is exactly why the law lets you choose whichever method costs less, for any property bought before 23 July 2024.

How to Save on Capital Gains Tax: Exemptions Under Sections 54, 54EC, and 54F

Section 54: Buying a Residential Property

You can exempt your LTCG on a residential property by reinvesting the sale amount into another residential property within 2 years of sale (in case of purchase) or within 3 years of sale (in case of construction). The maximum exemption cap is 10 crore.

Section 54EC: Investing in Specified Bonds

By investing up to 50 lakh in NHAI or REC bonds within 6 months of the sale, you can exempt your LTCG from taxes.

Section 54F: For Non-Residential Property

If you are selling a commercial asset, it will allow you to exempt the total sale consideration from tax on investing into buying a residential property.

Capital Gains Account Scheme (CGAS)

If you haven't invested in any property by the due date of filing your Income Tax return, you can deposit the capital gains in a CGAS account before this due date and still avail the exemption in case while finalizing the investment for your property.

TDS on Property Sale

If the sale value of the property is 50 Lakh and above, the buyer must deduct 1% of the sale value as TDS before making the payment and deposit it with the government within 7 days of making payment.

TDS is adjusted against the capital gains tax liability.If the seller is an NRI, TDS rate will be much higher and about 30% plus applicable surcharge/cess calculated on the full sale price and not just gains arising to the seller. A seller being an NRI can apply for lower/ Nil TDS Certificate via Form 13 if they are liable to pay a smaller amount or no tax.

Income Tax Act, 2025: What Changes for Property Sellers

TheIncome Tax Act, 2025 replacedIncome Tax Act, 1961 effective 1 April 2026. Most of the provision for capital gains tax at sections 45, 48, 54, 54EC, 54F remained the same and have only been renumbered in the new Act. The TDS provisions at section 194-IA and 195 are now section 393(1) and 393(2) with Form 141 replacing the earlier Form 26QB.

Final Thoughts

Understanding capital gains tax on property sale in 2026 is mostly about three things; duration of possession, sale year/purchase year of property and smart investments of the gains. Now, with indexation benefit removed for newly bought properties, the benefits gained from sections 54, 54EC and 54F make up for a good deal in saving taxes.

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Frequently Asked Questions (FAQs)

Q1 -What is the capital gains tax rate in India 2026?

A -Long-term capital gains on property (held over 24 months) are taxed at a flat 12.5% without indexation if bought on or after 23 July 2024. If bought earlier, you can choose 12.5% without indexation or 20% with indexation, whichever is lower. Short-term gains are taxed at your income slab rate.

Q2 - How to avoid capital gains tax on property sale in India?

A - You can't avoid it entirely, but you can legally reduce or eliminate it by reinvesting gains under Section 54 (into another residential property), Section 54EC (into NHAI/REC bonds, up to ₹50 lakh), or Section 54F (for non-residential asset sales).

Q3 -How is capital gains tax calculated in 2026?

A -Subtract the cost of acquisition, improvement costs, and transfer expenses from the sale price to get your gain. For long-term gains on property bought before 23 July 2024, you can use indexation to adjust the purchase cost for inflation before this calculation.

Q4 -Is property sale less than 50 lakhs taxable?

A -Yes. Capital gains tax applies regardless of the sale value, there's no minimum threshold for the tax itself. The ₹50 lakh figure only relates to a separate rule: TDS deduction by the buyer, which only kicks in at that value.

Q5 -What is the time limit for capital gains tax on property?

A -A property must be held for more than 24 months to qualify for long-term capital gains treatment. For claiming exemptions, Section 54 requires reinvestment within 2 years (purchase) or 3 years (construction), and Section 54EC requires investing in bonds within 6 months of the sale.