1. What Qualifies as Long Term Capital Gain on Property?
For immovable property (house, flat, plot, commercial property), the holding period for LTCG treatment was reduced from 36 months to 24 months by Finance Act 2024, effective from 23 July 2024. If you held the property for 24 months or more before selling, the gain is treated as LTCG. If held for less than 24 months, it is STCG — taxed at your normal slab rate.
2. LTCG Tax Rates on Property — Post Finance Act 2024
The Finance Act 2024 (Budget July 23, 2024) introduced a major change. The tax rate on LTCG from immovable property changed from 20% (with indexation) to 12.5% (without indexation). However, a grandfathering provision was added for properties acquired before July 23, 2024.
| Acquisition Date | Option Available | Tax Rate |
|---|---|---|
| Before July 23, 2024 | Option A: Without Indexation | 12.5% |
| Option B: With CII Indexation | 20% | |
| On or After July 23, 2024 | Without Indexation only | 12.5% |
Compare both: compute LTCG with indexation (taxed @20%) and without indexation (taxed @12.5%). Choose whichever gives a lower final tax amount. For properties purchased long ago (e.g., before 2010), indexation typically reduces the gain significantly and the 20% option often wins. For recently acquired properties (e.g., post-2018), 12.5% without indexation may be better. Use our free LTCG Property Calculator to compare both options instantly.
3. How CII Indexation Works
Cost Inflation Index (CII) is a number published by CBDT each year (base year 2001-02 = 100). Indexation adjusts your purchase cost upward for inflation, reducing the taxable LTCG.
Example: Flat bought in FY 2010-11 for ₹30L. Sold in FY 2025-26.
Indexed Cost = ₹30L × (380 / 167) = ₹68.26L
LTCG (if sold at ₹1 Cr) = ₹1 Cr − ₹68.26L = ₹31.74L
Tax @20% = ₹6.35L (compare with 12.5% on ₹70L without indexation = ₹8.75L)
The CII table from 2001-02 to 2025-26 is available in our LTCG Calculator.
4. Section 54 Exemption — Reinvest in New Residential Property
Section 54 is the most widely used LTCG exemption. If you sell a residential property and reinvest the LTCG amount in a new residential property in India, the reinvested amount is exempt from tax.
5. Capital Gains Account Scheme (CGAS) — Don't Lose Your Exemption
If the sale happens before your ITR due date (31 July for non-audit, 31 Oct for audit cases) but you have not yet purchased or constructed the new property, you must deposit the unutilised LTCG amount in a Capital Gains Account Scheme (CGAS) at an authorised bank before the ITR filing deadline.
6. Section 54EC — Invest in NHAI / REC Bonds
If you don't want to buy another property, Section 54EC allows you to invest LTCG in specified bonds (NHAI — National Highways Authority of India, and REC — Rural Electrification Corporation) to claim exemption.
7. Practical Example — Flat Sold for ₹1.2 Crore
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Disclaimer: This guide is for general informational purposes only. Tax laws are subject to change. Always consult a qualified Chartered Accountant for your specific situation before making tax decisions. © 2026 Associate Piyush, Pune.