Capital Gains Tax on Property in India 2026

By Gopi, Investment Analyst

Published 20 Jul 2026 · Last updated 20 Jul 2026

Prices & RERA details verified against the K-RERA portal, July 2026.

When you sell a residential property in India, the profit you make is a capital gain, and the tax on that gain depends on two things: how long you held the property and when you originally bought it. Budget 2024 changed the long-term capital gains rate on real estate, and the change introduced a choice that benefits owners of older properties. Understanding the rules before you sell can save a significant amount.

This guide walks through the short-term and long-term rates, the Budget 2024 indexation amendment, the main exemptions under Sections 54 and 54EC, the TDS a buyer must deduct on your sale, and how this applies if you are selling to buy on Bannerghatta Road or elsewhere in Bangalore. It closes with where our project, Godrej Castillo by Godrej Properties, fits for buyers reinvesting sale proceeds. Tax rules revise periodically; confirm the current position with a chartered accountant before you transact.

Capital Gains on Property 2026 — Quick Overview

Tax rates and limits indicative, as of July 2026 — confirm the current position with a chartered accountant before transacting.

Short-term vs Long-term Capital Gains

The holding period determines which rate applies. Sell a property within 24 months of buying it and the gain is short-term; it is added to your total income and taxed at your income tax slab rate, which can reach 30 per cent for higher-income individuals plus applicable surcharge and cess. Sell after more than 24 months and the gain becomes long-term, attracting the lower long-term rate.

The 24-month clock runs from the date of purchase (for ready-to-move units) or from the date of possession / allotment (for under-construction projects, which courts and the income tax department generally treat as the date the property was acquired). If you are unsure which date applies in your case, confirm with your tax adviser before you plan a sale timeline.

LTCG Rate After Budget 2024

Finance Act 2024 (Budget 2024, effective 23 July 2024) reduced the long-term capital gains rate on real estate from 20 per cent to 12.5 per cent but removed the indexation benefit for properties bought on or after that date. Indexation adjusts your purchase cost upward for inflation using the Cost Inflation Index (CII), which the Central Board of Direct Taxes announces each year on the Income Tax India portal. Removing it means a higher nominal gain is taxable even if the lower rate produces a comparable or smaller tax bill.

For properties bought before 23 July 2024, the government provided a grandfathering choice: you may calculate tax under both the old regime (20 per cent with indexation) and the new regime (12.5 per cent without indexation), and pay whichever is lower. This concession means most sellers of older properties will continue to benefit from indexation where inflation-adjusted holding costs are large relative to the gain.

Worked Example — Which Option Is Lower?

Consider a residential flat bought in FY 2015–16 for Rs 1 crore. CII for FY 2015–16 was 254. The property is sold in FY 2024–25 for Rs 1.8 crore. CII for FY 2024–25 was 363.

Option A — 12.5% without indexation: Gain = Rs 1.8 Cr − Rs 1 Cr = Rs 80 lakh. Tax = Rs 80 lakh × 12.5% = Rs 10 lakh.

Option B — 20% with indexation: Indexed cost = Rs 1 Cr × (363 ÷ 254) = Rs 1.429 Cr. Gain = Rs 1.8 Cr − Rs 1.429 Cr = Rs 0.371 Cr. Tax = Rs 37.1 lakh × 20% = Rs 7.42 lakh.

In this example, Option B (with indexation) saves around Rs 2.58 lakh. For properties held since 2015 or earlier, indexation often wins because the cumulative CII adjustment is large. For recently bought properties where the gain is modest, the 12.5 per cent flat rate can be lower. Always calculate both and use the lower figure. Surcharge and health and education cess apply on top; confirm with your CA.

Section 54 — Reinvest in Another Home

Section 54 of the Income Tax Act lets you exempt long-term capital gains from tax when you sell one residential property and use the proceeds to buy or build another. To qualify, the new property must be purchased within one year before the sale date or two years after it. If you are constructing rather than buying, the construction must be completed within three years of the sale. The exemption is limited to the lower of your actual capital gain or the cost of the new property.

If you sell for Rs 1.8 crore with a long-term gain of Rs 70 lakh and put Rs 70 lakh into a new apartment within two years, the entire gain is exempt. If you invest only Rs 40 lakh in the new property, Rs 40 lakh is exempt and Rs 30 lakh remains taxable. The new property must not be sold within three years of purchase or completion, or the exemption is reversed and taxed in the year of the second sale. The exemption is capped at Rs 10 crore from FY 2023–24 onward for very high-value properties.

Section 54EC — Invest in Specified Bonds

If you do not want to buy another property, Section 54EC lets you invest up to Rs 50 lakh of long-term capital gains in specified bonds — currently issued by REC and NHAI — within six months of the sale. The amount invested is exempt from capital gains tax. The bonds carry a lock-in period of five years; selling or pledging them before five years reverses the exemption. Interest earned on the bonds is taxable as income in the year it is received. The Rs 50 lakh cap applies per financial year, so a staggered sale across two financial years can potentially use the limit twice, though this requires careful timing and professional advice.

TDS When Your Buyer Pays You

Under Section 194-IA, when a buyer purchases a property priced above Rs 50 lakh, they must deduct 1 per cent of the total sale consideration as TDS before paying you the balance. The buyer deposits this TDS with the government via Form 26QB and issues you a TDS certificate (Form 16B). You then claim this as tax credit in your income tax return filed for the year of sale.

If the seller is an NRI, different TDS rates apply — 20 per cent on long-term gains and 30 per cent on short-term gains under a separate provision — and the process is more involved. Buyers of NRI-owned property should check the seller’s residential status before computing TDS. The NRI buying guide covers the TDS rules from the NRI seller’s perspective.

How This Applies at Godrej Castillo

Buyers using Section 54 to reinvest gains from a property sale need a RERA-tracked project with a clear title and a reliable possession timeline. Godrej Castillo in Hulimavu, on Bannerghatta Road, is registered with K-RERA and developed by an established builder with a documented approval trail, which helps satisfy the documentation a bank or tax adviser needs to record the reinvestment. If you are in the Section 54 window and looking for a new property, review the price list and the floor plans as part of your shortlist. The stamp duty and registration costs that sit on top of the base price are set out in our home loan and charges guide.