How much tax do I pay on selling a property in India?

If held more than 24 months the gain is long-term and taxed at 12.5% without indexation. A resident individual or HUF whose property was acquired on or before 22 July 2024 may instead pay 20% with indexation if that produces a lower tax. If held 24 months or less the gain is short-term and added to your income at slab rates. Health and education cess of 4% applies on top.

What is the TDS on sale of property?

The buyer must deduct 1% TDS under Section 194-IA where the consideration or stamp duty value is Rs 50 lakh or more, and deposit it using Form 26QB. No TAN is required. If the seller is a non-resident, Section 194-IA does not apply at all — Section 195 does, at a much higher rate on the whole consideration unless the seller obtains a lower-deduction certificate.

What happens if I sell property below circle rate?

Section 50C substitutes the stamp duty value as your sale consideration, so you are taxed on a gain you did not receive. A small tolerance band applies. Worse, the buyer can be taxed on the same shortfall as income from other sources under Section 56(2)(x) — so the same gap is taxed twice, on both sides of the deal.

How is capital gain calculated on inherited property?

You take the previous owner's cost of acquisition, and their holding period counts as yours, so an inherited property is usually long-term immediately. Inheriting does not reset the cost to the market value on the date of death. If the previous owner acquired it before 1 April 2001, you may opt for the fair market value as on 1 April 2001 instead.

How can I save tax on the sale of a house?

Reinvest under Section 54 by buying or building another residential house in India — one year before or two years after the sale, or construct within three years. Invest up to Rs 50 lakh in Section 54EC bonds within six months. If you cannot complete the reinvestment before your ITR due date, deposit the money in a Capital Gains Account Scheme account to preserve the exemption.

Capital Gains on Property Sale India

Scope and date. Written for FY 2025-26 (AY 2026-27) and FY 2026-27, current as at July 2026. Capital gains is one of the most fact-sensitive areas of Indian tax law — the same sale can be taxed very differently depending on dates, residential status and documentation. Treat this as a thorough map, not as advice on your transaction. For anything material, confirm the position with your CA and against the bare Act.

Capital Gains — a 6-part series

The Nine-Step Workflow

Every property sale follows the same sequence. Work through it in order and nothing gets missed.

Establish the date of acquisition and the date of transfer — and therefore whether the gain is short or long term.
Establish the cost — your own, or the previous owner's if inherited or gifted, or the 1 April 2001 fair market value if older.
Add cost of improvement, with bills.
Deduct transfer expenses — brokerage, legal fees, seller-borne stamp duty.
Compare the sale price against the stamp duty value — Section 50C.
Compute the gain both ways if the property qualifies for the indexation choice.
Apply any exemption — Section 54, 54EC, 54F — or deposit in CGAS.
Pay advance tax in the quarter the sale falls in.
Report in Schedule CG, and reconcile against AIS.

Holding Period for Property

Immovable property becomes long-term after 24 months. Below that, the gain is short-term and taxed at your slab rate — up to 30% plus surcharge and cess, against 12.5% if long-term. On a ₹30 lakh gain the difference can exceed ₹5 lakh, which is why a sale close to the boundary is worth deferring by a few weeks.

For an inherited property, the previous owner's holding period is included, so it is almost always long-term from day one.

12.5% or 20% with Indexation

A resident individual or HUF transferring land or a building acquired on or before 22 July 2024 pays the lower of 12.5% without indexation, or 20% with indexation. Compute both.

Non-residents do not get this choice. Companies, LLPs and firms do not get it. Property acquired on or after 23 July 2024 does not get it. And it applies only to land and buildings — not to any other asset.

Which one usually wins

Situation	Usually better
Held 15+ years, moderate appreciation	20% with indexation
Held 3–7 years, sharp appreciation	12.5% flat
Property that multiplied several times over	12.5% flat
Property that roughly tracked inflation	20% with indexation — sometimes to almost nil gain

There is no shortcut: compute both and take the lower. A full worked comparison is in Part 2, Example 1.

The Circle Rate Rule — Section 50C (78)

If you sell below the stamp duty value, that value is substituted as your sale consideration and you are taxed on a gain you never received. A small tolerance band applies where the difference is minor; beyond it, the full stamp duty value is used.

If the stamp duty value genuinely exceeds market value — a disputed title, an encroachment, a property in poor condition — you may ask the Assessing Officer to refer the valuation to a Valuation Officer. Do this during assessment, with evidence gathered at the time of sale.

The buyer is exposed too. Where property is bought below stamp duty value, the shortfall can be taxed in the buyer's hands as income from other sources under Section 56(2)(x). The same gap is taxed twice, on both sides. Never structure a deal below circle rate on the assumption that only the seller carries the risk.

TDS the Buyer Must Deduct

Seller	Section	Rate and mechanics
Resident	194-IA	1% where consideration or stamp duty value is ₹50 lakh or more. Deducted by the buyer, deposited with Form 26QB. No TAN required.
Non-resident	195	At the applicable capital gains rate plus surcharge and cess, on the whole consideration unless the seller obtains a lower-deduction certificate under Section 197. The buyer needs a TAN and files Form 27Q.

When the Seller Is an NRI

This is the single most common and most expensive mistake in Indian property transactions.

Section 194-IA does not apply. Deducting 1% out of habit leaves the buyer personally liable for the shortfall, plus interest and penalty.
Section 195 applies, and by default the deduction is on the entire sale consideration, not on the gain.
The NRI seller should apply for a lower or nil deduction certificate under Section 197 before the sale, so TDS is limited to the actual tax on the gain.
The buyer must obtain a TAN and file Form 27Q — Form 26QB is not available for this.
NRIs do not get the 12.5%-versus-20% indexation choice.

Establish residential status in writing

Before any money moves, get the seller's residential status confirmed in writing, with passport and residence evidence where relevant. A seller with an Indian address and PAN may still be a non-resident for tax purposes. The buyer carries the consequence of getting this wrong, not the seller.

Inherited Property

Inheriting is not a transfer — no tax at that point.
Your cost is the previous owner's cost, not the market value on the date of death.
Their holding period counts, so it is long-term straight away.
If the previous owner acquired it before 1 April 2001, you may opt for the fair market value as on 1 April 2001 — usually a much better figure, and worth getting a registered valuer's report for.
The indexation choice is tested on when the previous owner acquired it, so most inherited property qualifies.
Where several heirs sell jointly, the gain is apportioned by share, and each heir claims their own exemption separately.

Joint Development Agreements

Handing land to a developer in return for a share of the constructed area is a transfer. For an individual or HUF, the charge is deferred to the year the completion certificate is issued, rather than the year the agreement is signed — a substantial relief, since no money changes hands at signing.

The consideration is the stamp duty value of your share of the project on the date of the certificate, plus any cash received. If you sell your share before the completion certificate is issued, the deferral is lost and the gain is taxed in the year of that sale. JDA taxation is genuinely complex and the documentation drives the outcome — take advice before signing, not after.

Under-Construction Flats

The holding period generally runs from the date of allotment, not the date of possession or registration — keep the allotment letter.
Instalments paid over several years are all cost of acquisition; keep the full payment schedule and bank proofs.
Selling the allotment rights before possession is a transfer of a capital asset in its own right.

Reducing the Tax Legitimately

Cross the 24-month line if the sale is close to it.
Compute both methods where the indexation choice is available.
Section 54 — reinvest the gain in another residential house.
Section 54EC — up to ₹50 lakh in notified bonds within six months.
Combine them where the gain exceeds what one route can absorb.
CGAS — park the money before the ITR due date if the reinvestment is not complete.
Claim every improvement cost you can document.
Set off capital losses — see Part 6.

Documents to Keep

Original purchase deed and registration receipt
Allotment letter and full payment schedule, for under-construction purchases
All improvement bills with bank payment proof
Brokerage invoice and legal fee receipts for the sale
Sale deed and stamp duty valuation
Form 26QB / Form 16B for TDS
Registered valuer's report where 1 April 2001 fair market value is used
Succession certificate, will or probate for inherited property
CGAS deposit receipt and bond certificates where an exemption is claimed

In iAccounting, keeping the property in its own fixed asset ledger from the day you buy it — with stamp duty and registration capitalised into it and every improvement posted against it — means the cost side of this computation is a report, not a search through fifteen years of files.

What's Next?

Part 4 — Exemptions: Sections 54, 54EC and 54F in full
Part 6 — Losses, Advance Tax & ITR: paying and reporting the gain
Part 2 — Calculating the Gain
AIS Reconciliation — the department already knows about your sale

Capital Gains on a Property Sale — End to End