Short-term or long-term
| Holding period | Type | Tax |
|---|---|---|
| 24 months or less | Short-term capital gain | Added to income and taxed at slab rates |
| More than 24 months | Long-term capital gain | 12.5% without indexation; for property bought before 23 July 2024, individuals may choose 20% with indexation if lower |
Rates and the indexation option changed from 23 July 2024. Confirm the current position before computing tax.
How the gain is computed
- Start with the full sale value. If the stamp duty value is higher than the agreed price beyond the allowed tolerance, the stamp duty value may be used.
- Subtract transfer expenses such as brokerage and legal fees.
- Subtract the cost of acquisition: purchase price, stamp duty and registration paid at purchase.
- Subtract the cost of improvement, such as major additions, supported by bills.
- The balance is the capital gain.
Under-construction flats bought from builders
Many flats in Greater Noida West were booked under construction and registered years later. The holding period and cost need care: payments to the builder over several years, the date of allotment, and the date of registration can all matter. Keep the allotment letter, builder-buyer agreement, payment receipts and registry together.
Exemptions you may be able to claim
- Section 54: reinvest the long-term gain in one residential house in India, by buying within one year before or two years after the sale, or constructing within three years. The exemption is capped at ₹10 crore.
- Section 54EC: invest up to ₹50 lakh of the long-term gain in specified bonds within six months of the sale. The bonds have a lock-in period.
- Capital Gains Account Scheme: if you plan to reinvest but have not done so by the ITR due date, deposit the amount in a capital gains account with a bank to keep the exemption open.
TDS when you sell
If the sale value is ₹50 lakh or more, the buyer must deduct TDS and give you Form 16B. This TDS appears in your Form 26AS and is adjusted against your final tax. If you are an NRI, higher TDS rules apply and a lower-deduction certificate may help.
What to report in your ITR
Report the sale in the capital gains schedule, usually in ITR-2, with dates, sale value, cost, improvement and any exemption claimed. The sale is reported to the department by the registrar and appears in your AIS, so it must match.
Planning before you sign the sale deed often reduces tax. The timing of the sale, reinvestment and documentation all matter.
Frequently asked questions
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Sources
Information is for general guidance and not a substitute for professional advice. Rules, rates and due dates change; confirm with us before acting.