Capital Gains Tax on Selling Property in India: The 2026 Rules

When you sell land, a house or a flat in India, the profit is taxed as a capital gain. If you held the property for more than 24 months, the gain is long-term and taxed at 12.5% without indexation; resident individuals and HUFs who bought before 23 July 2024 can instead pay 20% with indexation if that is lower. Gains on property held for 24 months or less are short-term and taxed at your slab rate. From 1 April 2026 these rules sit in the Income-tax Act, 2025, but the rates are the same.

Short-term or long-term?

Surcharge (for higher incomes) and 4% health and education cess apply on top. For inherited or gifted property, the holding period of the previous owner counts, and so does their cost.

What Budget 2024 changed

The Union Budget of 23 July 2024 cut the long-term rate on property from 20% to 12.5% but removed indexation, which adjusts your purchase cost for inflation using the Cost Inflation Index. For people who had owned property for many years, losing indexation could mean more tax, so the Finance (No. 2) Act, 2024 added a grandfathering option: a resident individual or HUF selling land or a building acquired before 23 July 2024 can calculate tax both ways and pay the lower amount. The option does not apply to NRIs or companies.

How to calculate the gain

1. Full value of consideration: the sale price, but not less than the stamp duty value if that is more than 110% of the price (old section 50C, renumbered in the 2025 Act).
2. Less transfer expenses: brokerage and legal fees connected with the sale.
3. Less cost of acquisition: what you paid, including stamp duty and registration. For property bought before 1 April 2001, you can use its fair market value on that date (not above the stamp duty value then).
4. Less cost of improvement: documented capital spending such as adding a floor.

If you use the indexation option, cost and improvement are multiplied by the index of the year of sale divided by the index of the year of purchase (or 2001-02 if later). The index for 2025-26 is 376.

Worked example

Suppose a resident individual bought a plot in Vadavalli in 2010-11 for ₹12 lakh (index 167) and sold it in 2025-26 for ₹80 lakh.

Here the 12.5% route is cheaper. For property with a higher cost relative to its sale price, or held for a long time with modest appreciation, indexation often wins. Run both numbers every time.

The Income-tax Act, 2025: what it means for sellers

The new Act took effect on 1 April 2026 and replaces “previous year” and “assessment year” with a single “tax year”. The department’s transition FAQs confirm that income earned in 2025-26 is still assessed under the 1961 Act, in assessment year 2026-27. A sale on or after 1 April 2026 is in tax year 2026-27 under the new Act. Section numbers have changed, so the familiar sections such as 48, 50C and 54 now appear under new numbers. The rates and the grandfathering option have carried over.

Reducing or deferring the tax

You can reduce long-term gains by reinvesting in a residential house, buying specified bonds within six months, or buying agricultural land in some cases. These are covered in how to save capital gains tax: 54, 54F and 54EC. You can also set off capital losses under the usual rules.

Practical points for Coimbatore sellers

• Keep your purchase deed, stamp duty receipts and bills for construction or improvement; without proof, cost claims are hard to defend.
• Agricultural land outside the urban limits specified in the Act is not a capital asset at all, so no capital gains tax arises. Land near Coimbatore city is often within the urban distance, so check before assuming.
• If the buyer pays ₹50 lakh or more, 1% TDS will be deducted; claim it in your return. See TDS on property purchase.
• Pay advance tax in the quarter of sale to avoid interest.

Frequently asked questions

What is the capital gains tax rate on property in 2026?

Long-term gains (property held more than 24 months) are taxed at 12.5% without indexation, plus surcharge and cess. Short-term gains are taxed at slab rates.

Can I still use indexation on property sale?

Only if you are a resident individual or HUF and the property was acquired before 23 July 2024. You can then pay the lower of 12.5% without indexation and 20% with indexation.

Does the new Income-tax Act 2025 change capital gains rates?

No. It renumbered the provisions and introduced the tax year concept, but the property rates and grandfathering option continue.

Is capital gains tax charged on the guideline value?

If the stamp duty value is more than 110% of the declared price, the stamp duty value is taken as the sale value for computing the gain.

This article is general information as of September 2026, not legal, tax or financial advice. Rules and rates change; confirm with a qualified advocate, chartered accountant or the relevant department before you act.

References

• CBDT: FAQs on transition to the Income-tax Act, 2025
• Arthgyaan: Budget 2024 grandfathering of indexation for property
• ClearTax: Income-tax Act 2025 old vs new section numbers
• Income Tax Department: Exemptions from capital gains