Capital gains on property FY 2026-27

Long-term capital gains on immovable property are taxed at 12.5% without indexation, with an option for resident individuals and HUFs to pay 20% with indexation for property acquired before 23 July 2024. Property held for more than 24 months is long-term; gains qualify for exemptions under Sections 54, 54F and 54EC.

Holding period and rate

Immovable property held for more than 24 months is a long-term capital asset; 24 months or less is short-term. Following Budget 2024, the LTCG rate is 12.5% without indexation (effective for transfers on or after 23 July 2024). Short-term gains are taxed at the applicable slab rate.

Computing the gain

Exemptions to reinvest the gain

• Section 54 — LTCG on a residential house reinvested in another residential house (one, or two once-in-a-lifetime up to a cap).
• Section 54F — LTCG on any long-term asset reinvested in a residential house (with conditions).
• Section 54EC — up to Rs.50 lakh invested in NHAI/REC bonds within 6 months.
• The exemption under 54/54F is now capped at Rs.10 crore of investment.

Practical points

Watch Section 50C: if the stamp-duty value exceeds the agreement value beyond the tolerance band, the stamp value is taken as the sale consideration. Where reinvestment is not completed before the return due date, deposit the gain in the Capital Gains Account Scheme to preserve the exemption. Capital Gains Account Scheme (CGAS) deposit required before ITR due date to preserve reinvestment exemption. Verify the latest tolerance band and caps.

Worked example: the 12.5% vs 20% choice

A resident individual bought a flat in FY 2015-16 for Rs.60,00,000 and sells it in February 2027 for Rs.1,60,00,000. Because the property was acquired before 23 July 2024, the seller may pay tax at the lower of the two regimes introduced by the Finance (No. 2) Act 2024:

Here the 12.5% route wins by ~Rs.1.7 lakh. The pattern: the longer the holding and the flatter the price growth, the more indexation helps; short holdings with steep appreciation favour 12.5%. Always compute both — the CII for the year of sale is notified annually by the CBDT, so verify the actual index at incometax.gov.in before finalising. For property acquired on or after 23 July 2024, only the 12.5% no-indexation route is available.

Reinvestment exemptions: 54 and 54F discipline

• Section 54 (sale of residential house): reinvest the gain in one residential house in India within 1 year before or 2 years after sale (3 years if constructing). Exemption is capped at Rs.10 crore. A once-in-a-lifetime option to buy two houses exists where the gain is up to Rs.2 crore.
• Section 54F (sale of any other long-term asset): reinvest the net consideration, and you must not own more than one other residential house on the sale date.
• Capital Gains Account Scheme: if the reinvestment is not complete by the return due date, park the unutilised amount in a CGAS deposit before filing — miss this and the exemption is lost even if you later buy in time.
• The new house is locked in for 3 years; selling earlier claws back the exemption into the year of the second sale.

TDS and reporting on the transaction

The buyer must deduct 1% TDS under Section 194-IA where consideration is Rs.50 lakh or more, deposit it via Form 26QB and issue Form 16B — as the seller, verify this credit in your 26AS before filing. If the seller is a non-resident, Section 195 applies instead: TDS at the capital-gains rate on the whole consideration unless the seller obtains a lower-deduction certificate under Section 197 — a step every NRI seller should take, since it converts a year-long refund wait into immediate cash flow.

Report the sale in Schedule CG with the property details; the AIS will carry the SRO-reported transaction value. Where stamp-duty value exceeds consideration by more than 10%, Section 50C substitutes the stamp value as deemed consideration — pre-empt this by obtaining a valuation report or invoking the DVO reference where the circle rate is stale.

Under the Income-tax Act 2025

From 1 April 2026, the capital-gains chapter is renumbered (Sections 112/112A of the 1961 Act appear under new numbering), but the FA 2024 rate architecture — 12.5% long-term rate, the pre-23 July 2024 grandfathering choice, and the 24-month holding period for immovable property — carries over. Anchor every computation to the transaction date and verify the applicable text on the department portal.

Losses, inherited property and joint ownership

• Inherited property: cost of acquisition is the previous owner's cost, and the holding period includes the previous owner's holding — most inherited urban property is long-term on day one and, if acquired by the previous owner before 2001, the FMV as on 1 April 2001 can be adopted as cost.
• Long-term capital loss on property sets off only against long-term gains, carries forward eight years, and requires an on-time return in the loss year — a belated return forfeits the carry-forward.
• Joint owners are taxed on their beneficial ownership shares, which follow funding, not the sale-deed name order. Document the funding trail; assessing officers routinely tax the first-named owner on 100% where contributions are unclear.
• Under-construction to completed: the holding period for a builder flat generally runs from the allotment letter where it confers identifiable rights — a litigated but well-supported position; keep the allotment and payment schedule on file.