Selling a home or plot brings one major concern. How much tax will you pay on the profit? Many sellers assume the entire sale value is taxed, but only the gain is considered. In 2026, the rules remain simple if you understand how capital gains work. This guide explains the basics, exemptions, TDS rules, and the steps that help you reduce your tax burden without confusion.
When Tax Applies to a Property Sale
The tax on selling property in India applies only when you earn a profit. It does not apply to the full selling price. A few basics guide the entire calculation.
- Only the gain is taxed.
- If your sale price is below the total cost and improvements, there is no tax.
- The holding period decides whether the gain is short-term or long-term.
- For properties bought after July 2024, indexation may not apply under the new rules.
These points apply to residential, commercial, and land transactions.
STCG and LTCG Explained
Capital gains are classified based on your holding period. This affects the tax rate and how the gain is calculated on a sale of property.
Short-Term Capital Gains
- Applies when the property is sold before 24 months.
- Gain is added to your income and taxed as per your slab.
- No indexation applies.
- Common for quick resales or investment flips.
Long-Term Capital Gains
- Applies when the holding period is 24 months or more.
- Under the old regime, LTCG is taxed at 20 per cent with indexation.
- Under the new regime, LTCG can be taxed at 12.5 per cent without indexation.
- Sellers choose whichever option gives a lower tax.
This is why queries about capital gains tax on property sale are among the most common during tax season.
Comparison Table
| Type | Holding Period | Tax Rate | Indexation |
|---|
| STCG | Less than 24 months | As per the slab | No |
| LTCG Old Regime | 24 months or more | 20 per cent | Yes |
| LTCG New Regime | 24 months or more | 12.5 per cent | No |
How Capital Gains Are Calculated
To calculate the gain, you need four basic values.
- Sale price
- Cost of acquisition
- Improvement cost
- Transfer charges such as brokerage and legal fees
Steps to Calculate
- Start with the sale value.
- Deduct transfer expenses.
- Deduct the purchase cost.
- Deduct renovation or improvement costs.
- Apply indexation only when eligible.
Simple Example
If you bought a flat for 60 lakh and sold it for 1 crore, spent 5 lakh on improvements and 1 lakh on transfer charges, your direct gain is 34 lakh. Indexation may reduce the taxable amount if you choose the old regime. This is why capital gains tax on residential property varies from case to case.
Key Exemptions under Sections 54, 54EC, and 54F
Several exemptions help reduce the tax on property sales in India if you reinvest the gains on time.
Section 54
- Applies to gains from selling a residential house.
- You must buy another home within one year before or two years after the sale.
- You may also construct a house within three years.
- The new property must be in India.
Section 54EC
- Applies to gains from land or buildings.
- You can invest up to 50 lakh in notified bonds.
- Investment must be made within six months.
- Lock-in is five years.
Section 54F
- Applies when you sell any asset other than a house.
- You must buy a residential house to claim the exemption.
- You should not own more than one house on the date of sale.
Comparison Table
| Section | Applies To | Investment Type | Time Allowed |
|---|
| 54 | Sale of the house | Buy or construct a house | 1 to 3 years |
| 54EC | Land or building | Govt bonds | 6 months |
| 54F | Sale of other assets | Buy house | 1 to 3 years |
NRI Tax Rules
NRIs follow the same gain rules with different TDS deductions.
- STCG is taxed at 30 per cent.
- LTCG is taxed at 20 per cent.
- TDS ranges from 20 to 30 per cent.
- A Lower Deduction Certificate helps avoid excessive TDS
- DTAA may also help, depending on the country of residence.
Ways to Reduce Your Taxes
Sellers can reduce the tax on selling real estate with simple planning.
- Reinvest gains under Section 54 or 54EC.
- Use a Capital Gains Account Scheme if you need more time.
- Wait until the 24-month mark before selling.
- Maintain detailed renovation bills.
- Pick the tax regime that reduces the final tax.
TDS Rules for Buyers and Sellers
TDS applies at the time of transfer.
- Buyers deduct 1 per cent TDS when the value crosses 50 lakh for resident sellers.
- For NRIs, buyers deduct 20 to 30 per cent based on the type of gain.
- Sellers use the TDS certificate when filing returns.
Conclusion
Clear knowledge of capital gains helps sellers plan their next move with confidence. Pune and Pimpri Chinchwad continue to grow because of strong infrastructure, planned development and long-term demand. As one of the trusted real estate developers in Pune, Pharande Spaces focuses on long-lasting construction and thoughtful communities. Sellers who plan to reinvest can explore new projects in Pimpri Chinchwad for steady appreciation and practical living. Making informed choices ensures your gains support your long-term goals.
By Admin | 
By Admin