Capital Gains Tax on Selling Property in India (2026 Guide)

Selling a flat or plot is often the largest single transaction a family makes, and the tax on the profit can be large too. In the last two years the rules have changed twice: the 2024 Budget changed the long-term capital gains rate and indexation, and from 1 April 2026 India's new Income-tax Act, 2025 replaced the Income-tax Act, 1961, with new section numbers. This guide explains how capital gains on property work in late 2026, what changed, how the main exemptions work, and how TDS applies when you buy from a resident or an NRI.

This is general information, not tax or legal advice. Tax law has many conditions and exceptions. Confirm your position with a chartered accountant or on the Income Tax Department's website before you file or plan a sale.

Old Act vs new Act: why section numbers matter

The Income-tax Act, 2025 came into force on 1 April 2026. The basic rules for capital gains on property were carried over largely unchanged, but most section numbers were renumbered, and the Act now uses the term "tax year" instead of "previous year" and "assessment year".

The practical rule of thumb is:

• Sales made up to 31 March 2026 (that is, financial year 2025-26) are dealt with under the old 1961 Act, and you will see the familiar section numbers in that year's return.
• Sales made from 1 April 2026 fall under the new Act, and returns, notices and advice letters will cite the new numbers.

Because so many articles online still use the old numbers, here is the mapping as reported by tax commentators and the Income Tax Department's own section pages. We give both throughout this article.

• Capital gains charge: old Section 45, now Section 67.
• House sold, reinvested in a house: old Section 54, now Section 82.
• Investment in specified bonds: old Section 54EC, now Section 85.
• Any other long-term asset sold, reinvested in a house: old Section 54F, now Section 86.
• TDS on buying property from a resident: old Section 194-IA, now Section 393(1) (in its table of TDS rates).
• TDS on payments to non-residents, including NRI property sales: old Section 195, now Section 393(2).

If you are unsure which number applies to a particular document, ask your CA. The numbers have changed, but the questions you need to answer about your sale are mostly the same.

Short-term or long-term?

For land and buildings, the dividing line is 24 months:

• Held for 24 months or less before selling: the profit is a short-term capital gain, added to your income and taxed at your slab rate.
• Held for more than 24 months: the profit is a long-term capital gain (LTCG).

For an under-construction flat, the start date of holding is a common source of dispute (allotment date vs registration date). Ask your CA how it applies to your documents.

The current LTCG rate and the indexation change

The Finance (No. 2) Act, 2024 changed the rules for transfers on or after 23 July 2024:

• The LTCG rate became a flat 12.5% (plus surcharge, if applicable, and 4% health and education cess).
• Indexation was removed. You can no longer raise your purchase cost for inflation using the Cost Inflation Index.

Before this, property LTCG was taxed at 20% with indexation.

The grandfathering option for older property

After a public outcry, the government added relief for resident individuals and HUFs selling land or buildings bought before 23 July 2024. They can pay the lower of:

• 12.5% on the gain without indexation, or
• 20% on the gain with indexation.

This option is not available to NRIs, companies or other taxpayers, or to property acquired on or after 23 July 2024. The Cost Inflation Index is still notified each year for this purpose: the CBDT notified a CII of 384 for tax year 2026-27, under the new Act, as reported by Business Today in July 2026.

Exemptions that can reduce or remove the tax

Section 54 (new Section 82): sell a house, buy a house

If you sell a long-term residential house and reinvest the gain in another residential house in India, the reinvested gain can be exempt. The main conditions, as they have stood:

• Buy the new house within one year before or two years after the sale, or construct it within three years.
• The exemption is limited to the amount of the gain reinvested, with an overall cap of ₹10 crore.
• If the gain is up to ₹2 crore, you can choose, once in your lifetime, to invest in two houses instead of one.
• If you sell the new house within three years, the exemption can be withdrawn.

Section 54EC (new Section 85): specified bonds

You can invest the long-term gain from land or buildings in specified bonds (such as those issued by NHAI, REC, PFC and IRFC, as notified) within six months of the sale. The limit is ₹50 lakh in a financial year, and the bonds have a five-year lock-in. Interest on the bonds is taxable. Tax commentators have noted a small wording change in the new section, so confirm the current conditions before investing.

Section 54F (new Section 86): sell any other asset, buy a house

If you sell a long-term asset other than a residential house, such as a plot of land, shares or gold, and invest the net sale proceeds (not just the gain) in a residential house, the gain can be exempt, fully or proportionately. Conditions include not owning more than one residential house (other than the new one) on the date of transfer, and the same ₹10 crore cap.

Capital Gains Account Scheme

If you have not bought or built the new house by the due date for filing your return, you can deposit the unused amount in a Capital Gains Account with an authorised bank to keep the exemption alive. You must then use it within the time limits, or the unused amount becomes taxable. The CBDT amended the scheme in November 2025 to allow electronic deposits and add more banks, and online closures are scheduled to become mandatory from April 2027.

A worked example

Assumptions (illustrative only):

• Resident individual, selling a flat in Gurugram.
• Bought in financial year 2015-16 for ₹50 lakh (including stamp duty and registration).
• Sold in August 2026 (tax year 2026-27) for ₹1.2 crore. No improvements, and transfer expenses are ignored for simplicity.
• Cost Inflation Index: 254 for 2015-16 and 384 for 2026-27.
• Surcharge is ignored for simplicity, though it may apply at this level of income.

Option A: 12.5% without indexation

• Gain: ₹1.2 crore minus ₹50 lakh = ₹70 lakh
• Tax at 12.5% = ₹8.75 lakh
• Plus 4% cess = about ₹9.10 lakh

Option B: 20% with indexation

• Indexed cost: ₹50 lakh × 384 ÷ 254 = about ₹75.59 lakh
• Gain: ₹1.2 crore minus ₹75.59 lakh = about ₹44.41 lakh
• Tax at 20% = about ₹8.88 lakh
• Plus 4% cess = about ₹9.24 lakh

In this case Option A is slightly lower, so the seller would pay tax based on it. For older properties with a bigger indexation benefit, Option B often comes out lower. Always run both.

Using exemptions: If the seller buys a new home and reinvests the full ₹70 lakh gain within the time limits, the gain could be fully exempt under Section 82 (old 54). If instead the seller puts ₹50 lakh into specified bonds within six months under Section 85 (old 54EC), only the remaining ₹20 lakh would be taxed.

TDS when you are the buyer

Buying from a resident seller

If you buy immovable property (other than agricultural land) for ₹50 lakh or more from a resident, you must deduct 1% TDS and deposit it with the government. This was Section 194-IA; from 1 April 2026 it sits in Section 393(1) of the new Act. Commentators report that the forms have also been renumbered. Many sub-registrars ask for proof of TDS payment at registration.

Buying from an NRI seller

The rules are very different and much stricter:

• There is no ₹50 lakh threshold. TDS applies regardless of value.
• TDS is generally deducted at the rate applicable to the NRI's gain: 12.5% plus surcharge and cess for long-term gains, and higher rates for short-term gains, on the sale amount unless the NRI produces a lower or nil deduction certificate from the tax department.
• Until 30 September 2026, the buyer needed a TAN to deposit this TDS. From 1 October 2026, resident individual and HUF buyers can deposit it using their PAN, without a separate TAN, following an amendment by the Finance Act, 2026, as reported by Business Today.

Because the amount at stake is large, ask the NRI seller for a lower deduction certificate if their actual gain is small, and take a CA's help. Our NRI guide to buying property in Delhi NCR covers the NRI side in more detail.

Practical tips before you sell

• Gather your purchase deed, payment receipts, stamp duty proof and bills for any major improvements.
• Work out both LTCG options if you bought before 23 July 2024.
• If you plan to reinvest, note the deadlines on a calendar the day you sign the sale deed.
• If you are buying your next home, our hidden costs of buying a flat in Delhi NCR helps you budget for the new purchase.

Planning to sell or buy? You can list your property for free or browse homes in Gurugram and Noida on 6X Properties.

Sources

• CBDT notifies Cost Inflation Index of 384 for FY27 – Business Today, 16 July 2026
• Buying property from an NRI? TAN rule changes from October 1, 2026 – Business Today, 28 August 2026
• Govt gives option to calculate LTCG tax on properties, pay lower tax – The Week, 6 August 2024
• Tax on long-term capital gains – Income Tax Department
• Section 85 (specified bonds) – Income Tax Department
• Section 86 – Income Tax Department
• Capital gains exemptions under Income Tax Act 2025 – CA Club India
• Capital Gains Accounts (Second Amendment) Scheme, 2025 – Income Tax Department notification, November 2025
• Income-tax Act, 2025 – Wikipedia (commencement date)