Tag: Long-term capital gain

Capital Gains Tax on Sale of Property: Rates, Indexation Choice, Stamp Duty Value and Exemptions (Tax Year 2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 15 September 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • A house, flat, plot or building held for more than 24 months gives a long-term gain taxed at 12.5% without indexation (section 197); held for 24 months or less, the gain is short-term and taxed at your slab rate.
  • A resident individual or HUF who acquired the land or building before 23 July 2024 pays the lower of 12.5% on the gain without indexation and 20% on the gain with indexation (section 197(3)).
  • If you sell below the stamp duty value, the stamp duty value is taxed as the sale price, with a 10% tolerance (section 78).
  • The buyer deducts 1% TDS where the consideration or stamp duty value is ₹50 lakh or more; rural agricultural land is not a capital asset at all.

Selling a house, flat, plot or shop is the most common capital gains event for individuals. The rules changed in 2024 (no indexation for property bought after 22 July 2024) and are now in the Income-tax Act, 2025. This post covers the gain, the rate, the stamp duty value rule, TDS and the ways to save tax.

Short-term or long-term

Land and buildings are short-term if held for 24 months or less, and long-term if held for more than 24 months (section 2(101)). The holding period starts from the date you acquired it (for a gift or inheritance, from the previous owner’s date) and ends on the date of transfer.

Rates

Gain Tax
Short-term Added to your income and taxed at slab rates
Long-term 12.5% on the gain computed without indexation (section 197(1))
Long-term, land or building acquired before 23 July 2024, seller is a resident individual or HUF The lower of: 12.5% without indexation, or 20% on the gain computed with the indexed cost of acquisition and improvement (section 197(3))

The surcharge on tax on long-term gains is capped at 15%, and cess is 4%.

Indexed cost of acquisition is the cost multiplied by (the Cost Inflation Index of the year of transfer ÷ the index of the first year you held the asset, or 2001-02 if later) (section 72(8)). The Central Government notifies the index each year.

Example. A flat bought on 01/04/2019 for ₹40,00,000 is sold on 15/09/2026 for ₹1,00,00,000, expenses of the sale being ignored. Assume (for illustration only, not notified figures) indexes of 289 for the year of purchase and 380 for 2026-27.

  • Without indexation: gain 60,00,000 × 12.5% = ₹7,50,000
  • With indexation: indexed cost 40,00,000 × 380 ÷ 289 = ₹52,59,516; gain ₹47,40,484 × 20% = ₹9,48,097
  • The resident individual pays the lower: ₹7,50,000 (plus cess).

For property bought long ago with modest appreciation, indexation can give the lower tax; for property bought recently, 12.5% without indexation usually does. Work out both.

Stamp duty value (section 78)

If the sale price of land or building is less than the stamp duty value, the stamp duty value is deemed to be your sale price for computing the gain.

  • If the stamp duty value is not more than 110% of the actual consideration, the actual consideration is used.
  • If the date of the agreement and the date of registration differ, and part or full consideration was received by account payee cheque, draft or electronic mode on or before the agreement date, the stamp duty value on the agreement date may be used.
  • If you claim that the stamp duty value is above the fair market value, the Assessing Officer may refer the matter to a Valuation Officer (section 78(2)).

The buyer can be taxed on the shortfall as income from other sources (section 92(2)(m)), and the value taxed becomes his cost of acquisition (section 73, serial 17), so a low registered price helps neither side.

Cost of acquisition and expenses

  • Cost: the price paid plus stamp duty and registration paid when you bought. For property acquired before 1 April 2001, the cost, or the fair market value on that date at your option, capped by the stamp duty value on that date (section 90(9) and (10)).
  • Cost of improvement: capital expenditure on additions and alterations, not repairs or expenses already claimed as deductions from house property income (section 90(1) and (2)).
  • Selling expenses: brokerage, legal fees and stamp duty on the sale, if borne by you, incurred wholly and exclusively for the transfer (section 72(1)(a)).
  • Interest claimed as a deduction under section 22 or Chapter VIII on the loan is not added to the cost (section 72(3)).

TDS on the sale

For a resident seller, the buyer must deduct 1% of the higher of the consideration and the stamp duty value, where either is ₹50 lakh or more, on the transfer of immovable property other than agricultural land (section 393(1), Table serial 3(i)). The seller takes credit for it in the return. Make sure the PAN of the seller is correct.

Joint development agreement (section 67(14))

If an individual or HUF gives land to a developer for a share of the built project (a registered “specified agreement”), the capital gain is taxed in the tax year in which the certificate of completion for the whole or part of the project is issued. The full value of consideration is the stamp duty value of the share on that date, plus any cash consideration. If the owner transfers the share before the completion certificate, the gain is taxed in the year of that transfer. The cost of the share when the owner later sells it is that same deemed consideration (section 73, serial 20).

Ways to save tax on the gain

Section Who Condition Limit
82 (earlier 54) Individual or HUF with a long-term gain on a residential house Buy one house within 1 year before or 2 years after the sale, or build one within 3 years; two houses once in a lifetime if the gain is up to ₹2 crore The cost of the new house up to ₹10 crore counts; gain above ₹10 crore is not considered for deposits
86 (earlier 54F) Individual or HUF with a long-term gain on any asset other than a residential house Invest the net consideration (not only the gain) in a house within the same time limits; you must not own more than one other house on the transfer date Cost above ₹10 crore is ignored
85 (earlier 54EC) Anyone with a long-term gain on land or building Invest within 6 months in NHAI or REC bonds redeemable after 5 years ₹50 lakh in a tax year (or across the year of sale and the next)
83 (earlier 54B) Individual or HUF selling agricultural land used for farming Buy other agricultural land within 2 years Cost of the new land

If you cannot invest before the return is filed, deposit the unutilised gain in a specified bank under the capital gains deposit scheme before the filing due date and attach the proof (sections 82(2), 83(2), 86(2)). See our posts on sections 82 and 86 and on the bonds.

The new asset must be kept for a minimum period. If you sell the new house within three years, the cost is reduced or taken as nil under section 82(1), and under section 86(7) the exempted gain is taxed as long-term gain in that year. If you transfer the bonds or take a loan against them within five years, the exempted gain is taxed (section 85(3) and (4)).

Agricultural land

Rural agricultural land in India is not a capital asset, so its sale gives no capital gain. Land is not rural, and is taxable, if it lies in the jurisdiction of a municipality or cantonment board with a population of 10,000 or more, or within a distance measured aerially from its limits of 2 km (population above 10,000 and up to 1 lakh), 6 km (above 1 lakh and up to 10 lakh) or 8 km (above 10 lakh) (section 2(22)). Urban agricultural land is taxed like other land, with section 83 available if you buy other agricultural land.

Compulsory acquisition

Compensation for compulsory acquisition is a capital gain. Enhanced compensation is taxed in the year you receive it, with a cost of nil (section 67(12) and (13)). Section 84 exempts the gain on compulsory acquisition of land or buildings of an industrial undertaking if you buy or build a new asset within 3 years to shift or set up the undertaking.

Reporting

Report the sale in the capital gains schedule of ITR-2 (or ITR-3), with date, cost, indexed cost if used, sale price, stamp duty value and any exemption claimed. Pay advance tax on the gain when you receive the sale money, so as to avoid interest.

Frequently asked questions

How is capital gains tax on a property sale calculated?

Sale price (or stamp duty value if higher by more than 10%) less brokerage and other expenses of the sale, less your cost of acquisition and cost of improvement. If you held it for more than 24 months, the gain is long-term and taxed at 12.5%; otherwise it is added to your income and taxed at slab rates.

Can I still use indexation?

A resident individual or HUF who acquired land or a building before 23 July 2024 may pay the lower of two amounts: 12.5% of the gain computed without indexation, or 20% of the gain computed with indexed cost of acquisition and improvement (section 197(3)). Others, and later purchases, get no indexation.

What is the stamp duty value rule?

If you sell land or building for less than the stamp duty value, the stamp duty value is treated as your sale price (section 78). If the stamp duty value is up to 110% of the actual price, the actual price is used. The date of the agreement can be used instead of the date of registration if part payment was made by a banking channel on or before the agreement.

Is TDS deducted on a property sale?

The buyer deducts 1% of the higher of the consideration and the stamp duty value where either is ₹50 lakh or more, on the transfer of immovable property other than agricultural land (section 393(1), Table serial 3(i)).

How can I save tax on the gain?

By reinvesting the long-term gain in a residential house (section 82 for a house sold, section 86 for other assets), in specified bonds (section 85, up to ₹50 lakh) or in agricultural land (section 83) within the time limits. Unutilised gain must be deposited under the capital gains deposit scheme before the return is filed.

Is agricultural land taxed on sale?

Rural agricultural land is not a capital asset, so there is no capital gain. Land that is within a municipality or cantonment board area with population of 10,000 or more, or within 2, 6 or 8 km of such local limits depending on the population, is a capital asset and taxable.

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.

Capital Gains Tax in India: Short-Term, Long-Term, Rates and Computation (Tax Year 2026-27)

Posted on by CA Meet Dhrangadhariya

Last updated: 26 July 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP

Quick summary

  • Capital gains are the profit on transfer of a capital asset, taxed in the year of transfer under section 67 of the Income-tax Act, 2025; they are computed as the sale value less expenses on the transfer, the cost of acquisition and the cost of improvement (section 72).
  • An asset held for 12 months or less (listed securities, equity-oriented fund units, UTI units, zero coupon bonds) or 24 months or less (everything else) is short-term; otherwise it is long-term (section 2(101)).
  • Short-term gains on listed equity with STT are taxed at 20%; long-term gains are taxed at 12.5%, and gains on listed equity with STT are taxed at 12.5% only on the part above ₹1,25,000 a year.
  • Resident individuals and HUFs can choose indexed cost at 20% for land or building acquired before 23 July 2024 if that gives a lower tax.

Profit on selling a house, plot, shares, mutual fund units or gold is taxed as capital gains. The rules sit in sections 67 to 91 of the Income-tax Act, 2025 (they were sections 45 to 55A of the 1961 Act), and the tax rates in sections 196 to 198. This post sets out the framework for tax year 2026-27, from the sale date to the tax.

What is taxed

Section 67(1): profits or gains from the transfer of a capital asset in a tax year are chargeable under the head “Capital gains” and are the income of the year in which the transfer took place. “Capital asset” means property of any kind held by you, whether or not connected with your business or profession (section 2(22)).

Some transactions are not a transfer (section 70): a gift or will by an individual or HUF, partition of a HUF, certain transfers between a company and its wholly owned subsidiary, amalgamation, and others. A gift is tax free to the giver, but the receiver takes over the cost and holding period of the giver (see our post on cost of acquisition).

The Act also specifically taxes some receipts as capital gains: insurance money received for destruction of a capital asset (section 67(2)), gains on conversion of a capital asset into stock-in-trade (section 67(6), taxed when the stock is sold), contributing an asset to a firm of which you are a partner (section 67(9)), enhanced compensation (section 67(12)), and a real estate joint development (section 67(14)).

Short-term or long-term (section 2(101))

Asset Short-term if held for
Security listed on a recognised stock exchange in India, unit of UTI, unit of an equity-oriented fund, zero coupon bond 12 months or less
Every other capital asset (unlisted shares, foreign shares, land, building, gold, debt fund units and so on) 24 months or less

The holding period runs from the date of acquisition to the date of transfer. It includes the previous owner’s period for a gift, will, inheritance and the other cases in section 73(1) Table serial 1, and, for shares or securities allotted by an employer under an ESOP, runs from the date of allotment. A specified mutual fund bought on or after 1 April 2023, a market linked debenture, and an unlisted bond or debenture transferred or redeemed on or after 23 July 2024 give short-term gains whatever the holding period (section 76).

How the gain is computed (section 72)

Capital gain = full value of consideration, less expenditure incurred wholly and exclusively on the transfer, less the cost of acquisition, less the cost of any improvement.

  • Interest claimed as a deduction under section 22(1)(b) or Chapter VIII and securities transaction tax are not deducted.
  • For land or building, if the sale price is less than the stamp duty value, the stamp duty value is taken as the sale price, but a gap of up to 10% is ignored (section 78). For unquoted shares sold below fair market value, the fair market value is used (section 79).
  • If the price cannot be ascertained, the fair market value on the transfer date is used (section 80).
  • Cost of improvement means capital expenditure on additions or alterations, not repairs (section 90(1) and (2)).

Cost of acquisition

Situation Cost
Bought What you paid
Gift, inheritance, will, certain transfers Cost to the previous owner (the last owner who acquired it otherwise), plus his cost of improvement (section 73(1), Table serial 1)
Acquired before 1 April 2001 Cost, or fair market value on 1 April 2001, at your option; for land or building the fair market value cannot exceed the stamp duty value on that date (section 90(9) and (10))
Long-term listed equity shares, equity-oriented fund units or business trust units acquired before 1 February 2018 The higher of (a) cost and (b) the lower of the fair market value on 31 January 2018 and the sale price (section 90(7))
Shares allotted under an ESOP or RSU The fair market value taken for the perquisite (section 73, serial 4)
Bonus shares and rights shares Nil for bonus shares; the amount paid for rights shares (section 90(5) and (6))

Tax rates (sections 196 to 198)

Gain Rate
Short-term gain on equity shares or units of an equity-oriented fund or a business trust, sold on a stock exchange with STT paid 20% (section 196)
Other short-term gains Normal slab rates
Long-term gain on listed equity shares, equity-oriented fund units or business trust units, where STT was paid on acquisition and transfer (STT on transfer only for fund and trust units) 12.5% on the gain above ₹1,25,000 in the year (section 198)
Other long-term gains (unlisted shares, property, gold, debt units and so on) 12.5%, without indexation (section 197)
Long-term gain on land or building acquired before 23 July 2024, by a resident individual or HUF The lower of 12.5% without indexation, and 20% with the indexed cost of acquisition and improvement (section 197(3))

Other points on rates:

  • For a resident individual or HUF, if the rest of your income is below the basic exemption limit, the shortfall is set against the capital gain before tax is applied (sections 196(2), 197(2) and 198(3)).
  • Chapter VIII deductions (section 123 and others) are allowed only from income other than these capital gains (sections 196(4), 197(5), 198(6)).
  • The rebate under section 156 is allowed against tax on income other than the special-rate capital gains. It does not wipe out tax on long-term gains under section 198 (section 198(7)).
  • Surcharge on tax on these capital gains is capped at 15% whatever the income (Finance Act, 2026), and cess is 4%.

Examples

1. Long-term gain on listed shares. A resident individual bought listed shares for ₹4,00,000 on 12/06/2025 and sold them on a stock exchange on 20/08/2026 for ₹6,10,000, with STT paid on both. Held for more than 12 months, so long-term.

  • Gain: 6,10,000 - 4,00,000 = ₹2,10,000
  • Exempt part: ₹1,25,000; taxable: ₹85,000
  • Tax at 12.5% = ₹10,625; cess 4% = ₹425; total ₹11,050

2. Short-term gain on listed shares. Bought on 01/04/2026 for ₹2,00,000, sold on 10/10/2026 for ₹2,50,000, STT paid. Gain ₹50,000; tax at 20% = ₹10,000 plus cess ₹400 = ₹10,400.

3. Listed shares bought before 1 February 2018. Cost ₹1,00,000 in 2015; value on 31 January 2018 ₹3,00,000; sold in 2026 for ₹5,00,000. Deemed cost = higher of 1,00,000 and the lower of 3,00,000 (value on 31/01/2018) and 5,00,000 (sale price) = ₹3,00,000. Gain = ₹2,00,000; taxable above ₹1,25,000 = ₹75,000 at 12.5% = ₹9,375.

4. Plot of land. Bought for ₹10,00,000 in March 2020 and sold for ₹30,00,000 in August 2026. Held more than 24 months, so long-term. Tax at 12.5% without indexation: 20,00,000 × 12.5% = ₹2,50,000. If indexing the cost at 20% gives a lower figure, the resident individual pays that lower tax, because the land was acquired before 23 July 2024. See our post on capital gains on property.

Losses

  • A short-term capital loss can be set off against any capital gain, short-term or long-term; a long-term capital loss only against long-term gains (section 108(2)).
  • A capital loss cannot be set off against other heads such as salary (section 109(2)).
  • Unabsorbed losses carry forward for eight tax years against capital gains of the matching kind (section 111), and only if the loss was determined in a return filed by the due date (section 121). See our post on capital loss set-off.

Reporting

Capital gains are reported in the capital gains schedule of the return, with each sale listed (date, cost, sale price). If you have capital gains beyond the long-term gains of ₹1,25,000 under section 198, you cannot use the simple ITR-1 (see our post on which ITR form to file). Pay advance tax on gains as they arise.

Frequently asked questions

What is a capital asset?

Property of any kind held by you, whether or not connected with your business, such as land, a house, shares, units, gold and jewellery, and certain other items (section 2(22)). Stock-in-trade and some other items are outside the definition.

When is a gain short-term or long-term?

Short-term if the asset is held for not more than 24 months before transfer; for a security listed in India, a UTI unit, a unit of an equity-oriented fund or a zero coupon bond the period is 12 months. A longer holding makes the gain long-term (section 2(101)).

What are the capital gains tax rates?

Short-term gain on listed equity shares and equity-oriented fund units sold with STT: 20%. Other short-term gains: slab rates. Long-term gains: 12.5%, and on listed equity shares and equity-oriented fund units with STT 12.5% only on gains above ₹1,25,000 in the year (sections 196 to 198).

Is indexation still available?

Only for a resident individual or HUF selling land or building acquired before 23 July 2024, who may pay the lower of 12.5% without indexation and 20% with indexation (section 197(3)). Indexation is not available for other assets.

How is the cost of acquisition fixed?

Generally what you paid; for gifted or inherited assets, the cost to the previous owner (section 73); for assets acquired before 1 April 2001, cost or fair market value on that date at your option; for listed equity acquired before 1 February 2018, the higher of cost and the lower of its value on 31 January 2018 and the sale price (section 90).

Can I set off a capital loss?

A short-term loss against any capital gain, a long-term loss only against long-term gains. Unabsorbed losses carry forward for eight tax years if the return was filed on time (sections 108, 111 and 121).

Official sources

Related reading

Disclaimer

This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.