Property Sale Tax India — Capital Gains Guide FY 2025-26

Tax on selling a house or land in India. Short-term vs long-term property gains, no indexation after Budget 2024, how to calculate cost, and home loan interaction.

Updated: March 2025 (Budget 2024 applied — no indexation)

Property gains — short-term vs long-term

TypeHolding PeriodTax RateIndexation
Short-term capital gain (STCG)Less than 24 monthsSlab rate (5%–30%)Not applicable
Long-term capital gain (LTCG)24 months or more12.5%Not available (Budget 2024)
Budget 2024 removed indexation for property sold after July 23, 2024. Before this date, you could inflate the purchase price by inflation index to reduce gains. Now, LTCG is simply: sale price minus purchase price, taxed at 12.5%.

How to calculate your gain correctly

The purchase price (cost of acquisition) can include more than what you paid for the property:

  • Purchase price paid to seller
  • Stamp duty and registration charges at the time of purchase
  • Brokerage or agent commission at the time of purchase
  • Legal and documentation costs at purchase
  • Renovation or improvement costs (with approximate year)

From the sale proceeds, deduct:

  • Agent or broker commission paid at the time of sale
  • Legal fees for the sale transaction

Section 54 — reinvesting to save capital gains tax

If you sell a residential property and reinvest the gains into another residential property, you can claim exemption under Section 54:

  • Buy a new residential property within 1 year before or 2 years after the sale
  • Or construct a new residential property within 3 years after the sale
  • Maximum exemption capped at ₹10 crore (Budget 2023)
  • The new property must not be sold within 3 years
This is complex — the timing, amount invested, and property types matter precisely. A CA is recommended for property sale cases involving Section 54.

Home loan interaction — common misconceptions

Repaying a home loan does NOT reduce your capital gains. The loan is your financing — it is not part of the cost of the property for tax purposes. Many people incorrectly subtract their outstanding loan from the sale price.

What your home loan DOES affect:

  • Section 24(b) — interest on loan is deductible up to ₹2 lakh per year (old regime) if possession was received
  • Section 80C — principal repayment up to ₹1.5 lakh under old regime
  • If the property was under construction when sold: NO Section 24(b) deduction — possession was never given

Which ITR form?

Property sale always requires ITR-2. A CA is strongly recommended because the calculations are complex, especially with home loans, improvements, and Section 54 claims.

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