Capital gains tax on selling property in India (2025 Act)

Which law applies

The Income Tax Department says the Income-tax Act, 2025 applies to events on or after 1 April 2026, and the Income-tax Act, 1961 to earlier events. The section numbers here are those of the 2025 Act. Check the date of your transfer against that cut-off. This guide states the Act as published in the Gazette; amendments proposed in the Finance Bill 2026 are not rules until you have checked the Finance Act as passed.

Short-term or long-term

Section 2(101)(a): a short-term capital asset is one held “for not more than twenty-four months immediately preceding the date of its transfer”. For land and buildings the 24-month rule applies (the 12-month period is for listed securities, units and similar assets). So:

• held 24 months or less: short-term;
• held more than 24 months: long-term.

How the gain is computed (section 72)

From the full value of the consideration received or accruing, deduct:

1. expenditure incurred wholly and exclusively in connection with the transfer; and
2. the cost of acquisition of the property and the cost of any improvement.

Interest that you claimed as a deduction under section 22(1)(b) or under Chapter VIII cannot be deducted again in computing the gain (section 72(3)).

Gain = full value of consideration − transfer expenses − cost of acquisition − cost of improvement.

The stamp duty value rule (section 78)

If the consideration for land or a building is less than the stamp duty value, the stamp duty value is deemed to be the full value of consideration for computing the gain, subject to two points:

• if the date of the agreement fixing the price and the date of registration differ, and part or all of the consideration was received on or before the agreement date in a specified banking or online mode, the stamp duty value on the date of the agreement may be used;
• if the stamp duty value does not exceed 110% of the consideration, the consideration is used.

The “stamp duty value” is the value adopted or assessed by the authority for stamp duty (section 2(105)): your state’s circle rate or ready reckoner. See circle rate and guidance value. A Valuation Officer reference is possible where the assessee claims that the stamp duty value exceeds fair market value (section 78(2)).

An advance received and retained in earlier negotiations is deducted from the cost in certain cases (section 81).

Long-term gain: 12.5% and the indexation option

Section 197(1)(b) taxes long-term capital gains at 12.5%, in addition to tax on the rest of the total income. For a resident individual or HUF, if the total income apart from the long-term gain is below the basic exemption, the gain is reduced by the shortfall (section 197(2)).

Land or building acquired before 23 July 2024, sold by a resident individual or HUF (section 197(3)): the excess of tax is ignored under the formula E = A − B, where A is the tax at 12.5% without indexation and B is the tax at 20% on a gain computed using the indexed cost of acquisition and indexed cost of improvement. In effect, the lower of the two amounts applies. Indexation uses the Cost Inflation Index notified by the Central Government (section 72(8)): the cost is multiplied by the index of the year of sale divided by the index of the first year of holding, or of the year beginning 1 April 2001, whichever is later.

Not covered by this option: non-residents, and any property acquired on or after 23 July 2024: they pay 12.5% without indexation. Check the section text, because the option is limited to residents.

Surcharge and cess may be added to the tax. We do not give those rates here; check the rates in force for your income level.

Short-term gain

Section 196 gives a special 20% rate only for short-term gains on listed equity shares and certain funds. For a property there is no special short-term rate in the sections read, so the gain goes into your total income and is taxed at the rates that apply to you: the default rates of section 202 or, if you opted out, the old regime.

Reducing or deferring the tax

Instead of paying the tax, you may qualify to reinvest the gain: in a house (sections 82 and 86), or in specified bonds (section 85). See capital gains exemptions: sections 82, 85 and 86.

Tax deducted by the buyer

For a resident seller, the buyer deducts 1% of the higher of the consideration and the stamp duty value if it is ₹50 lakh or more (section 393(1), Table 3(i)), reported on Form 141. This is an advance tax that you set against your final liability, not the tax on the gain. For a non-resident seller the deduction is at “rates in force” under section 393(2). See selling a property: costs and NRI selling property: TDS.

Which professional to consult

A chartered accountant for the computation; a registered valuer if you need an independent valuation for the cost of improvement or for a dispute on the stamp duty value; a property lawyer (an advocate enrolled with the State Bar Council) for the sale documents.