Capital Gains Tax on Selling a Flat in India (2026): LTCG vs STCG
Dasadia Editorial Team · Updated July 2026
Selling a flat at a profit is good news — until the question of tax arrives. How much you owe depends almost entirely on one thing: how long you held the property. It also depends on choices most sellers never realise they have, and on reinvestment routes that can cut the bill to zero. This 2026 guide explains capital gains tax on a flat sale in plain terms — the difference between short-term and long-term gains, the major change the 2024 Budget brought, how to calculate what you owe, and the exemptions that can legally wipe it out.
Key takeaways
- The tax on a flat sale depends on the holding period: 24 months or less is short-term, more is long-term.
- Short-term gains are taxed at your slab rate (up to 30%); long-term gains at a flat 12.5% (without indexation).
- Since 23 July 2024, long-term property gains are taxed at 12.5% without indexation — down from 20% with indexation.
- Resident individuals selling property bought before that date can choose 12.5% (no indexation) or 20% (with indexation), whichever is lower.
- Sections 54, 54EC and 54F let you reinvest the gain and reduce the tax — potentially to zero — but only for long-term gains.
- Section 54 (another house) is capped at ₹10 crore; Section 54EC (bonds) at ₹50 lakh a year, within six months.
- The buyer deducts TDS on sale — 1% for a resident seller, but 12.5% on the full value for an NRI seller.
- Miss a reinvestment deadline and the full tax falls due — so plan the sale, don't just execute it.
Source: Income Tax Department · IncorpX
What are capital gains on property?
When you sell a flat for more than you paid, the profit is a ‘capital gain’, and it is taxed under the Income Tax Act. But the rate you pay is not fixed — it hinges on one thing above all: how long you owned the property before selling. Hold it briefly and the gain is short-term, taxed at your ordinary slab rate; hold it longer and it becomes long-term, taxed at a lower flat rate and eligible for generous exemptions. The gain itself is broadly the sale price minus what the property cost you, adjusted for improvements and selling expenses. Getting the classification and the deductions right can mean the difference between a hefty tax bill and none at all.
Source: Income Tax Department · ClearTax
LTCG vs STCG: the 24-month line
The dividing line is 24 months. Sell a property within 24 months of buying it and your profit is a short-term capital gain; hold it longer and it is a long-term capital gain — a distinction that changes the rate, the availability of exemptions, and how the gain is computed. If you inherited or were gifted the property, the previous owner’s holding period counts towards yours. Here is how the two compare.
The 2024 change: 12.5% without indexation — and the option
The biggest recent shift came in the Union Budget of July 2024, and it reshaped how long-term gains on property are taxed. For any property sold on or after 23 July 2024, the long-term rate is now a flat 12.5% — but the inflation adjustment known as indexation, which used to reduce the taxable gain, has been removed. Before that date, the rate was 20% with indexation. To soften the change, the law offers a choice, but only to resident individuals and Hindu Undivided Families, and only for property bought before 23 July 2024: you may pay whichever is lower — 12.5% without indexation, or 20% with indexation. For property bought after that date, only the 12.5% route applies, and non-residents do not get the choice at all. The practical upshot is that anyone selling an older property should calculate the tax both ways and pick the cheaper — for most, the new 12.5% wins, but for long-held, high-appreciation properties, indexation can still come out ahead.
Source: Income Tax Department · ClearTax
How to calculate your gain: a worked example
An example makes the choice concrete. Suppose you bought a flat for ₹50 lakh and sell it for ₹1.5 crore, having held it more than 24 months, and you are a resident who bought before July 2024. You can compute the tax two ways.
Here, the 12.5%-without-indexation route produces the lower tax — about ₹12.5 lakh against ₹15.7 lakh — so you would choose it, saving roughly ₹3.2 lakh, with surcharge and a 4% cess then added. The indexed cost uses the government’s notified Cost Inflation Index, and for very old properties the indexed route can occasionally win, which is exactly why you compute both.
Source: ClearTax · Bajaj Finserv
Exemptions that can cut your tax to zero: Sections 54, 54EC & 54F
This is where a large tax bill can shrink to nothing — through reinvestment. Three sections do the heavy lifting, and all apply only to long-term gains. Section 54 exempts the long-term gain on a residential house if you reinvest that gain in another residential house, buying it within one year before or two years after the sale, or constructing within three years; the exemption is capped at a ₹10 crore reinvestment, and you may buy two houses if the gain is up to ₹2 crore, once in a lifetime. Section 54EC exempts the gain from land or a building if you invest it — up to ₹50 lakh in a financial year — in specified bonds from bodies such as NHAI or REC, within six months of the sale, with a five-year lock-in. Section 54F applies when you sell an asset other than a house and reinvest the entire net sale proceeds in a residential home. If you cannot reinvest before your return is due, you can park the gain in a Capital Gains Account Scheme with a bank to keep the exemption alive — but miss a deadline, and the full tax falls due.
Source: Income Tax Department · Bajaj Finserv
Surcharge, cess, TDS and setting off losses
A few mechanics complete the picture. On top of the base rate, a surcharge applies to higher incomes — 10% above ₹50 lakh and 15% above ₹1 crore, though it is capped at 15% for capital gains — plus a 4% health and education cess. The buyer will also deduct TDS when you sell: 1% for a resident seller on a property over ₹50 lakh, but far more — 12.5% on the full sale value, or slab rates for a short-term gain — where the seller is an NRI, which is then reconciled in your return. If you make a loss rather than a gain, it can be set off only against other capital gains, not against salary or business income, and any unused long-term loss can be carried forward for eight years. You report it all in Schedule CG of your ITR, due by 31 July for most individuals.
Source: Patron Accounting · IncorpX
How to legally save on capital gains tax
Several legitimate strategies can reduce, defer or eliminate the tax — provided you act within the deadlines.
- Hold the property for more than 24 months to convert a short-term gain into a lower-taxed long-term one.
- Reinvest the gain in another residential house under Section 54, within the time limits.
- Invest up to ₹50 lakh of the gain in Section 54EC bonds within six months of the sale.
- If you bought before July 2024, compute both methods and choose the lower — 12.5% or 20% with indexation.
- Own the property jointly, so each co-owner computes their own gain and claims a separate exemption.
- If you can't reinvest before the ITR deadline, park the gain in a Capital Gains Account Scheme in time.
Source: Bajaj Finserv · Patron Accounting
The bottom line
Capital gains tax on a flat sale is far more manageable than the numbers first suggest. The rate turns on the 24-month holding period: sell sooner and you pay your slab rate; hold longer and it is a flat 12.5%, with resident owners of older property free to choose the old 20%-with-indexation route if it is cheaper. Above all, the reinvestment exemptions under Sections 54, 54EC and 54F can reduce the tax to zero if you act within the deadlines — which makes planning the sale, not just executing it, the real work. Before you sell, establish your holding period, compute the gain both ways if eligible, decide how to reinvest, and keep meticulous records. Do that, and you keep far more of your profit than a headline rate implies. Given the stakes and the deadlines, professional advice is well worth it.
Frequently asked questions
It depends on how long you held it. Sell within 24 months and the gain is short-term, taxed at your slab rate; hold longer and it is long-term, taxed at a flat 12.5% (without indexation), plus surcharge and cess.
Short-term (STCG) applies when a property is held 24 months or less and is taxed at slab rates up to 30%. Long-term (LTCG) applies when held more than 24 months and is taxed at 12.5%, with reinvestment exemptions available.
12.5% without indexation for property sold on or after 23 July 2024, plus surcharge (capped at 15%) and a 4% cess. Resident individuals selling older property can instead opt for 20% with indexation if it is lower.
Only through the optional 20%-with-indexation route, available to resident individuals and HUFs for property bought before 23 July 2024. For property bought after that date, indexation no longer applies.
Subtract the cost of acquisition, cost of improvement and transfer expenses from the sale price. For the indexation option, the cost is adjusted upward using the Cost Inflation Index before subtracting.
By reinvesting the gain: in another house under Section 54, in specified bonds (up to ₹50 lakh) under Section 54EC, or, for non-house assets, in a house under Section 54F — all within their time limits.
It exempts the long-term gain on a residential house if you reinvest that gain in another residential house within one year before or two years after the sale (or three years to construct), capped at a ₹10 crore reinvestment.
It exempts the long-term gain on land or a building if you invest it in specified bonds from bodies such as NHAI or REC within six months, up to ₹50 lakh a year, with a five-year lock-in.
Generally no. The reinvestment exemptions under Sections 54, 54EC and 54F apply only to long-term gains. The main way to access them is to hold the property beyond 24 months.
LTCG at 12.5% or STCG at slab rates, like residents, but the buyer must deduct TDS on the full sale value (12.5% for LTCG, or slab for STCG) under Section 195. NRIs cannot use the 20%-with-indexation option.
Deposit the gain in a Capital Gains Account Scheme with a bank before the return’s due date to keep the exemption alive, then use it within the prescribed two or three years.
ITR-2 (or ITR-3), reporting the details in Schedule CG. ITR-1 cannot accommodate capital gains. The due date for most individuals is 31 July.
Verified — key facts
- Holding period decides the tax: 24 months or less = short-term (slab rates up to 30%); more than 24 months = long-term (12.5% without indexation), plus surcharge and 4% cess.
- LTCG on property sold on/after 23 July 2024 is 12.5% without indexation; resident individuals/HUFs may opt for 20% with indexation for property bought before that date (whichever is lower). NRIs do not get this option.
- Gain = sale price − cost of acquisition − cost of improvement − transfer expenses; the indexation option adjusts cost using the Cost Inflation Index (CII for FY 2024-25 is 363).
- Section 54: exempts LTCG on a house reinvested in another house (1 year before / 2 years after, or 3 years to construct); capped at ₹10 crore; two houses if the gain is ≤ ₹2 crore.
- Section 54EC: exempts LTCG on land/building invested in NHAI/REC-type bonds within 6 months, up to ₹50 lakh a year, 5-year lock-in. Section 54F: for non-house assets reinvested in a house (net consideration).
- Reinvestment exemptions apply only to LTCG, not STCG; unreinvested gains can be parked in the Capital Gains Account Scheme before the ITR due date.
- Surcharge capped at 15% for capital gains; TDS on sale is 1% for resident sellers (over ₹50 lakh) or 12.5%/slab on the full value for NRI sellers (Section 195); capital losses set off only against capital gains, carried forward 8 years; reported in Schedule CG (ITR-2).
Disclaimer: This article is for informational purposes only and is not tax or financial advice. Capital gains rates, the indexation option, exemption limits, the Cost Inflation Index, surcharge, cess and TDS provisions are set by law, can change (including under the Income-tax Act, 2025 and annual Finance Acts), and depend on your specific circumstances. The worked example is illustrative and uses stated assumptions. Always verify the current rules and Cost Inflation Index on the Income Tax Department portal and consult a qualified chartered accountant before selling or filing.
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