Capital Gains Tax on Property Sale in India 2026

By Gopi, Investment Analyst · Published 16 Jul 2026 · Last updated 16 Jul 2026

Tax rates, exemption limits and filing requirements below are indicative for FY 2026-27 (AY 2027-28) and are subject to legislative change — consult a qualified chartered accountant or tax advisor before making decisions on the basis of this guide.

Selling a property in India in 2026 triggers capital gains tax obligations that depend on how long you held the property, when you bought it and what you plan to do with the proceeds. Budget 2024 changed the rules significantly by removing indexation for most sellers and cutting the long-term capital gains rate from 20% to 12.5%. A partial grandfathering provision was later added for properties purchased before 23 July 2024. Understanding which rate applies to you, which exemptions are available and how TDS is deducted can save a substantial amount. This guide covers the complete picture for a resident individual seller in FY 2026-27, with separate notes for NRI sellers and joint-ownership situations. The rules apply equally whether you are selling an investment flat in Bangalore — including at Godrej Beacon — or any other residential property across India.

For the home loan and tax benefits on the buying side, read our home loan tax benefits guide and our joint home loan guide. For the registration cost when you buy, see our property registration guide.

Short-Term vs Long-Term Capital Gains on Property

The holding period determines whether your gain is short-term or long-term, and that determines the tax rate:

The 24-month threshold for property has been in force since Budget 2017 (reduced from the earlier 36 months) and was not changed by Budget 2024, 2025 or 2026. The holding period is counted from the date of purchase / allotment to the date of sale / transfer. For an under-construction flat, most tax practitioners count the holding from the date of the Agreement to Sell or allotment letter, though the date of registration of the sale deed is the formal transfer date — get CA advice for your specific situation if the holding period is borderline.

STCG is taxed at slab rates: if you are in the 30% slab and sell a flat after 18 months, your entire gain is added to your income and taxed accordingly. There is no flat rate for property STCG the way there is for listed equities.

LTCG Rate After Budget 2024 — 12.5% Without Indexation

Finance Act 2024, effective 23 July 2024, changed the LTCG tax on property from 20% with indexation to 12.5% without indexation. For FY 2026-27, the applicable rate for all property sold on or after 23 July 2024 is 12.5% on the nominal gain (sale price minus original cost of acquisition and improvement costs, with no inflation adjustment).

Grandfathering Option for Properties Acquired Before 23 July 2024

After significant pushback during the Finance Act 2024 passage, a grandfathering provision was added for resident individuals and HUFs: if you acquired the property before 23 July 2024 and sell it on or after that date, you may choose whichever option gives you the lower tax liability:

• Option A: 12.5% LTCG without indexation (new default)
• Option B: 20% LTCG with indexation using the Cost Inflation Index (CII)

Compute both and pay the lower. For properties held since the early 2000s or 2010s in Bengaluru — where values have risen 3–8x — the indexed cost often reduces the gain substantially, making the 20%-with-indexation option the better choice even though the rate is higher. Run the numbers: CII for FY 2026-27 was notified at 384 (FY 2001-02 base = 100).

NRI sellers cannot use the grandfathering option. The 12.5% without indexation regime applies to all NRI property sales after 23 July 2024, regardless of when the property was purchased. For properties acquired on or after 23 July 2024, only the 12.5% no-indexation rate applies for both residents and NRIs.

Section 54 — Reinvest Gains in Another Home and Save Tax

Section 54 is the most commonly used exemption for resident individuals and HUFs who sell a residential property and reinvest the long-term capital gains in another residential property in India:

• What you sell: A residential house property that qualifies as a long-term capital asset (held >24 months)
• What you buy or build: One residential house property in India
• Timeline for purchase: Within 1 year before or 2 years after the date of sale
• Timeline for construction: Within 3 years from the date of sale
• Two-property option: If your LTCG does not exceed ₹2 crore, you may invest in two residential properties instead of one. This option is available only once in a lifetime
• Maximum exemption: Capped at ₹10 crore from FY 2023-24 onwards — gains above ₹10 crore are taxable even if reinvested
• Lock-in: The new property must not be sold within 3 years of purchase or construction; if it is, the exemption is reversed and the deferred gain becomes taxable in the year of the new sale

Only the capital gain amount needs to be reinvested, not the full sale proceeds. If your sale proceeds are ₹1.5 crore and your LTCG is ₹60 lakh, you need to invest only ₹60 lakh in the new property to claim full exemption. This distinguishes Section 54 from Section 54F (where the entire net consideration must be invested).

Section 54F — Selling a Non-Residential Asset and Buying a Home

Section 54F applies when you sell a long-term capital asset that is not a residential house — a commercial property, a plot of land, shares, gold or any other long-term asset — and reinvest the proceeds in a residential house in India:

• Critical difference from Section 54: Under 54F, you must invest the entire net sale consideration (not just the gains) in the new residential property to claim full exemption. Partial investment gives proportional exemption: (amount invested ÷ net consideration) × gain = exempt amount
• Ownership condition: On the date of sale of the original asset, you must not own more than one residential house property (other than the new one being acquired under 54F). If you already own two or more houses, Section 54F is not available
• Timelines: Same as Section 54 — purchase within 1 year before / 2 years after sale; construction within 3 years
• Maximum exemption: Also capped at ₹10 crore from FY 2023-24 onwards (the ₹10 crore cap is shared between Sections 54 and 54F)
• Lock-in: 3 years; selling the new property earlier reverses the exemption

Section 54EC — Save Tax With Infrastructure Bonds

Section 54EC allows you to defer or eliminate LTCG tax by investing in government-notified bonds, without the requirement to buy another property. This is useful if you do not intend to reinvest in real estate:

Current active issuers of Section 54EC bonds:

• REC Limited (Rural Electrification Corporation)
• PFC Limited (Power Finance Corporation)
• IRFC (Indian Railway Finance Corporation)

NHAI (National Highways Authority of India) discontinued fresh issuance of Section 54EC bonds from 3 September 2022. NHAI bonds are no longer available for this purpose. Do not act on information that includes NHAI as a current option — only REC, PFC and IRFC are active as of 2026.

Capital Gains Account Scheme — Parking Proceeds Safely

If your sale has completed but you have not yet bought or started constructing the new property before your income tax return filing deadline, you can park the unutilised capital gains in the Capital Gains Account Scheme (CGAS) to preserve the exemption claim:

• Open before filing your ITR — the account must be opened before the due date of filing your income tax return for the year of sale (31 July for most individuals; 31 October for audited cases)
• Two account types: Type A (savings, withdrawable on demand) and Type B (term deposit, withdrawal requires approval from the Income Tax Officer)
• Utilise within: 2 years from the date of sale (for purchase) or 3 years (for construction)
• If unused: The amount that remains unutilised after the time limit is taxable as LTCG in the year the time limit expires — not in the year of deposit
• Available at: Public sector banks and, from January 2026, also at 19 private sector banks including ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank and Yes Bank

CGAS cannot be used for Section 54EC bonds — the 6-month window for 54EC investment is absolute and has no CGAS fallback. If you miss the 6-month window for bond investment, that route is closed for that year’s gains.

How TDS Works When You Sell Property

TDS on property sale is the buyer’s obligation, not the seller’s — but sellers need to understand it because it affects the cash they actually receive at closing.

Resident Seller — Section 194-IA

When a resident individual sells property to a buyer for ₹50 lakh or more (measured by consideration or guidance value, whichever is higher), the buyer deducts 1% TDS from the payment. The seller nets 99% of the agreed price at closing; the 1% is deposited with the government in the seller’s name and available as a tax credit when the seller files the ITR. Since Budget 2025, incidental charges — parking, club membership, maintenance deposits — are included in the consideration base for this TDS calculation.

NRI Seller — Section 195

When the seller is an NRI, a completely different TDS regime applies under Section 195:

• No ₹50 lakh threshold — TDS applies regardless of the sale value
• TDS on LTCG (property held >24 months): 12.5% plus applicable surcharge plus 4% health and education cess. The effective maximum rate is approximately 14.95% where total income exceeds ₹1 crore (attracting 15% surcharge)
• TDS on STCG (property held ≤24 months): At slab rate; buyers typically apply 30% plus surcharge plus cess, giving an effective rate up to ~31.2% or higher
• TDS is on the entire sale consideration, not just the capital gain — this creates significant cash flow difficulty for NRI sellers who may face a refund only after filing their ITR months later
• Lower deduction certificate: An NRI seller can apply via Form 13 under Section 197 for a nil or lower TDS certificate from the Income Tax Officer, based on the actual expected tax liability on the gain. This is strongly advisable for NRI sellers to avoid locking up cash in excess TDS
• Form 27Q (not Form 26QB) is used by the buyer for NRI transactions; the buyer also needs a TAN, not just a PAN

Set-Off and Carry-Forward of Capital Losses

If you have capital losses in the same year:

• Short-term capital loss (STCL) can be set off against both STCG and LTCG
• Long-term capital loss (LTCL) can only be set off against LTCG (not STCG or regular income)
• Unabsorbed losses can be carried forward for 8 assessment years, but only if you file your ITR by the original due date. Missing the filing deadline permanently forfeits the carry-forward right

Joint Ownership — How Capital Gains Are Split and Taxed

When jointly owned property is sold, capital gains are computed and taxed separately in the hands of each co-owner in proportion to their ownership share under Section 26 of the Income Tax Act:

• The sale consideration, original cost, improvement cost and transfer expenses are all apportioned in the same ownership ratio
• Each co-owner independently determines whether the gain is STCG or LTCG, applies the applicable rate and claims exemptions
• Each co-owner can independently claim a Section 54 exemption on their proportional share of the LTCG by reinvesting their share in a new property — they do not need to invest together
• If ownership shares are not explicitly stated in the purchase or sale deed, equal shares are typically presumed
• TDS under Section 194-IA is deducted proportionately from each co-owner’s payment when the total consideration exceeds ₹50 lakh

For a married couple who bought as co-owners and both contributed to the EMI from their own accounts, this means each can independently claim the full Section 54 exemption on their proportionate LTCG by reinvesting their respective share. Read our joint home loan and co-ownership guide for the full picture on deductions during the loan phase.

Capital Gains Tax and the New Tax Regime

Choosing the new tax regime under Section 115BAC (which offers lower slab rates in exchange for giving up most deductions) does not change how capital gains are taxed. LTCG at 12.5% and STCG at slab rates apply identically under both regimes. The exemptions under Sections 54, 54F and 54EC remain available regardless of which tax regime you choose for your regular income. The regime choice only affects your ordinary income tax liability, not the special rate treatment of capital gains.

Frequently Asked Questions

1. What is the capital gains tax rate on property sold in 2026?

For property held more than 24 months (long-term), the rate is 12.5% without indexation under the rules applicable from 23 July 2024. For property held 24 months or less (short-term), gains are added to your total income and taxed at your applicable income tax slab rate. Budget 2025 and Budget 2026 made no changes to these rates.

2. Can I still use the indexation benefit on property I bought before July 2024?

Yes, but only if you are a resident individual or HUF. For property acquired before 23 July 2024 and sold on or after that date, you can choose whichever is lower: 12.5% LTCG without indexation, or 20% LTCG with indexation using the Cost Inflation Index. NRI sellers cannot use this grandfathering option and must apply 12.5% without indexation regardless of the purchase date.

3. What is the maximum I can invest in Section 54EC bonds to save capital gains tax?

The maximum investment in Section 54EC bonds is ₹50 lakh per financial year. The bonds must be purchased within 6 months of the date of sale; there is no extension and no Capital Gains Account Scheme fallback for this route. The current active issuers are REC, PFC and IRFC. NHAI stopped issuing these bonds in September 2022 and is no longer an option.

4. What happens if I cannot reinvest the gains before filing my income tax return?

You can park the unutilised capital gains in a Capital Gains Account Scheme (CGAS) account at any scheduled bank before the ITR filing deadline. The account must be opened before you file the return, not before the sale. You then have 2 years (for purchase) or 3 years (for construction) to use the funds. If you fail to invest the CGAS amount within this window, it becomes taxable as LTCG in the year the time limit expires.

5. How does capital gains tax work for an NRI selling property in India?

NRI sellers face TDS under Section 195 at the full LTCG rate of 12.5% plus surcharge plus cess (approximately 14.95% effective maximum for LTCG; up to ~31.2% or more for STCG) deducted on the entire sale consideration, not just the gain. NRIs cannot use the indexation grandfathering option. To avoid excess TDS tied up as a refund, an NRI seller should apply for a lower deduction certificate via Form 13 under Section 197 well before the sale.

6. If I sell jointly-owned property, does each co-owner need to reinvest separately under Section 54?

Yes. Capital gains are taxed in each co-owner’s hands proportionally to their ownership share, and each co-owner must independently satisfy the Section 54 reinvestment conditions to claim the exemption on their share. They do not need to buy the new property together — each can use their proportional gain towards their own reinvestment in a residential property. This allows both co-owners in a couple, for instance, to claim Section 54 exemption independently by reinvesting their respective share.

Conclusion

Capital gains tax on property in 2026 centres on one critical date — 23 July 2024. Property sold on or after that date is taxed at 12.5% without indexation. If you bought the property before that date and are a resident individual or HUF, you can choose between the new 12.5% no-indexation rate and the old 20% with-indexation rate, whichever gives you the lower liability. NRI sellers do not have this choice and face 12.5% plus surcharge plus cess on LTCG across the board. Three exemptions can reduce or eliminate the tax: Section 54 (reinvest gains in a home), Section 54F (sell a non-residential asset and reinvest the full consideration in a home) and Section 54EC (invest up to ₹50 lakh in REC, PFC or IRFC bonds within 6 months). If you cannot complete reinvestment before the ITR filing deadline, use the Capital Gains Account Scheme. For joint-ownership situations, each co-owner is taxed on their proportional share and can claim Section 54 independently. The tax regime choice (old or new) does not affect your capital gains liability — both regimes treat property LTCG at 12.5%. Always compute the numbers before selling; a few weeks’ planning on exemptions can make a significant difference to the net proceeds you retain.

For the costs on the buying side of the transaction, read our property registration guide and stamp duty guide.