Capital gains when you sell property

When you sell land or a building, the profit is a capital gain. Held for 24 months or less, it is added to your income and taxed at your slab rate. Held longer, it is long-term and taxed at 12.5 per cent, with a cheaper option for some older purchases and three ways to reinvest.

The law was renumbered; the ideas were not

From 1 April 2026 the Income-tax Act, 2025 replaced the Act of 1961. The concepts are familiar; the numbers are new, so your chartered accountant will quote one section and your bank may still say "section 54".

Start with the purchase date

How long you held the property decides the rules, counted from the day it became yours.

• Held 24 months or less: short-term. The gain is added to the rest of your income and taxed at your slab rate. There is no special short-term rate for land or buildings.
• Held more than 24 months: long-term. Taxed at 12.5 per cent, or, for some sellers, at the lower of two calculations.

A few weeks short of the line can cost a great deal. Check the date on your purchase deed before you fix the sale date.

The rate, and the choice

The standard rate on a long-term gain is 12.5 per cent, without indexation: you subtract what you paid from what you received, with no adjustment for inflation.

There is a choice for some sellers. If all three of these are true, you may work the tax out both ways and pay the lower figure:

1. You are a resident individual or a Hindu undivided family.
2. What you are selling is land, a building, or both.
3. It became yours before 23 July 2024.

The two are 12.5 per cent without indexation, and 20 per cent after indexation, where the cost is raised by the Cost Inflation Index notified for each year. There is no choice for non-residents, companies or firms, or for property acquired on or after 23 July 2024.

Both ways, worked

These are hypothetical round numbers with an assumed indexed cost. The further the price ran ahead of inflation, the likelier 12.5 per cent is lower; your chartered accountant works both with the real index.

Three ways to reinvest, three clocks

A long-term gain can be reduced or removed by reinvesting within fixed periods. Miss a date and the exemption is lost.

House sold, house bought (section 82, the old 54)

Sell a residential house and put the gain into one residential house in India. Buy it within one year before or two years after the sale, or build it within three years. The cost of the new house counts up to ten crore rupees. Where the gain is two crore rupees or less, it may go into two houses instead of one, but only once in a lifetime.

Plot sold, house bought (section 86, the old 54F)

Sell anything other than a house, a plot for instance, and put the whole net sale price, not just the gain, into one residential house, on the same clocks. Invest part and only that proportion is exempt. The route is closed if, on the date of sale, you already own more than one residential house besides the new one. The cost is capped at ten crore rupees.

Specified bonds (section 85, the old 54EC)

Sell land or a building and put the gain into bonds of the National Highways Authority of India, REC, or others the government notifies, redeemable after five years. You have six months from the sale, the limit is fifty lakh rupees, and the bonds must be held for five years. Cash them in early and the exempted gain is taxed in that year.

When the house is not ready by filing time

1. Deposit the amount you have not yet spent in the Capital Gains Accounts Scheme at an authorised bank, before the due date of your return.
2. File proof of the deposit with the return; the law treats the deposit as invested.
3. Spend it on the house within the time limit. Whatever is still unused when the three years end is taxed in that year.

This bridge serves the two house routes only.

The file to keep: your cost is only what you can prove

• The purchase deed. It proves your cost and the date the 24 months are counted from.
• Bills for improvements. A floor added, a boundary wall: they add to your cost.
• The sale deed and its stamp value. If the stamp duty value is more than 10 per cent above your price, the stamp duty value is taken as your sale price.
• What selling cost you. Brokerage and legal fees come off the sale price.
• The TDS your buyer deducted. Check it is credited against your PAN before you file; the TDS guide explains how it works.

Before you list it

Your buyer will check the colony's record and sanctioned layout; see them first. This is general information, not tax advice, as of October 2026. Check your own figures with a chartered accountant before selling or reinvesting.

Questions people ask

What is the capital gains tax rate on sale of property in 2026?

For land or a building held more than 24 months, 12.5 per cent without indexation, under section 197 of the Income-tax Act, 2025. Held 24 months or less, the gain is taxed at your slab rate.

Can I still claim indexation on property bought before 2024?

If you are a resident individual or HUF selling land or a building acquired before 23 July 2024, you may compare 12.5 per cent without indexation and 20 per cent with it, and pay the lower.

What is section 54 called in the new Income-tax Act 2025?

The house-for-house exemption is now section 82. The old 54F is section 86 and the old 54EC bond exemption is section 85.

How long do I have to buy a new house to save capital gains tax?

One year before or two years after the sale to buy, or three years to build. If the house is not bought by your return's due date, deposit the money in the Capital Gains Accounts Scheme first.

Where the facts come from. The facts and figures in this post come from verified government sources and verified RERA-registered brokers.

Indori Zameen is a private platform. It is not a government body and is not affiliated with one — always confirm a record with the concerned authority before you commit money.