When a property is sold after holding it for a certain time period, the profit earned is classified as a capital gain. The long term capital gain on sale of property arises when the holding period exceeds a specified duration, making it subject to LTCG tax.
Understanding this tax rate is crucial for homeowners to plan their investments and minimize tax liabilities effectively.
Long-Term Capital Gain (LTCG) Tax Rates on Property Sale in India
When a property is sold after a specific holding period, the profit is classified as Long-Term Capital Gain (LTCG) and taxed based on asset type and conditions. Understanding these tax rates helps homeowners and investors plan their financial decisions wisely.
LTCG Tax Rates if the Transfer Happened Before 23/07/2024
| Tax Type | Condition | Applicable Tax |
|---|---|---|
| Long-term capital gains tax (LTCG) | Sale of listed Equity shares (If STT has been paid on purchase and sale of such shares) | 10% over and above Rs 1.25 lakh |
| Long-term capital gains tax (LTCG) | Sale of units of equity oriented mutual fund (If STT has been paid on sale of such units) | 10% over and above Rs 1.25 lakh |
| Long-term capital gains tax (LTCG) | Others | 20% |
LTCG Tax Rates if Transfer Happened on or After July 2024
| Tax Type | Condition | Applicable Tax |
|---|---|---|
| Long-term capital gains tax (LTCG) | Sale of Listed Equity shares (If STT has been paid on purchase and sale of such shares) | 12.5% over and above Rs 1.25 lakh |
| Long-term capital gains tax (LTCG) | Sale of units of equity oriented mutual fund (If STT has been paid on sale of such units) | 12.5% over and above Rs 1.25 lakh |
| Long-term capital gains tax (LTCG) | Land or Building or Both | Individual and HUF taxpayers have two available options: – 12.5% without indexation – 20% with indexation Other persons: – 12.5 % without indexation |
| Long-term capital gains tax (LTCG) | Others | 12.5% |
Source: LTCG Tax Rates After Budget 2024 by Economic Times
How to Save LTCG Tax on Property Sale
To save tax on long term capital gain on sale of property, homeowners can use various tax-saving options.
- Invest in a New Property (Section 54)
Reinvesting in a residential property within two years (or three years for construction) can exempt LTCG tax.
- Capital Gains Bonds (Section 54EC)
Investing up to ₹50 lakh in NHAI or REC bonds within six months helps claim tax exemption.
- Capital Gains Account Scheme (CGAS)
If reinvestment is delayed, depositing gains in a CGAS account secures tax benefits.
Read More: Tax Saving Strategies on LTCG
Comparison of Tax Rates After Budget 2024
The Union Budget 2024 introduced significant changes to the taxation of long-term capital gains (LTCG) across various financial instruments. Below is a comparison of LTCG tax rates before and after the budget:
| Product | LTCG Tax Rate Before Budget 2024 | LTCG Tax Rate After Budget 2024 |
|---|---|---|
| Listed Equity Shares (STT Paid) | 10% | 12.5% |
| Unlisted Equity Shares | 20% with indexation | 12.5% |
| Listed Preference Shares | 10% | 12.5% |
| Unlisted Preference Shares | 20% with indexation | 12.5% |
| Equity Mutual Funds (STT Paid) | 10% | 12.5% |
| Equity Mutual Funds (STT Not Paid) | 20% with indexation | 12.5% |
| Sovereign Gold Bonds (Listed) | 20% with indexation | 12.5% |
| Any Other Bonds (Listed) | 10% without indexation | 12.5% |
| Specified Mutual Funds (Debt Funds) | 20% with indexation | 12.5% |
| Other Mutual Funds (Gold Funds, Overseas Funds, FoFs) | 20% with indexation | 12.5% |
| Units of Alternative Investment Funds (AIFs) | 20% with indexation | 12.5% |
Source: Capital Gains Tax Regime Proposed in the Union Budget 2024-25
Tax Implications of Long-Term Capital Gains (LTCG) on Property Sales
Selling a property after two years results in a long term capital gain on sale of property, taxable under Indian law. Understanding its implications helps homeowners manage finances efficiently.
Key Tax Implications:
- Tax authorities impose a 20% LTCG tax on property sales with indexation benefits, allowing you to adjust for inflation and reduce taxable gains.
- Surcharge & Cess: A surcharge applies based on total income, along with a 4% health and education cess on the tax amount.
- Tax Deduction at Source (TDS): If the sale value exceeds ₹50 lakh, the buyer must deduct 1% TDS before making the payment to the seller.
- Advance Tax Payment: If applicable, sellers must pay advance tax on their LTCG to prevent interest penalties under Sections 234B and 234C.
Read More: Section 24B of Income Tax Act
How to Calculate Tax on Long-term Gains from Sale of Property
Calculating long-term capital gains (LTCG) on property sales involves a simple method to determine taxable gains after adjusting for costs and indexation.
Method & Formula:
LTCG = Sale Price − (Expenditure on Transfer + Indexed Cost of Acquisition + Indexed Cost of Improvement)
Following Steps Need to be followed:
- Determine Sale Price – The full consideration received from the buyer.
- Deduct Transfer Expenses – Any costs directly incurred for selling the property (e.g., brokerage, legal fees).
- Deduct Indexed Cost of Acquisition – Adjust the original purchase price for inflation using the Cost Inflation Index (CII).
- Deduct Indexed Cost of Improvement – Adjust the cost of any renovations or modifications made over the years.
Example Calculation
Let’s take an example to calculate Long-Term Capital Gains (LTCG) on a property sale. The steps involved are:
- Step 1: Start with the total sale value.
- Step 2: Deduct any expenses related to the sale.
- Step 3: The cost of acquisition will be subtracted.
- Step 4: Then the cost of improvement will be subtracted.
- Step 5: The remaining amount is the LTCG on the property.
Here’s a sample calculation based on these steps:
| Particulars | Amount (Rs.) |
|---|---|
| Sale Value (A) | 60,00,000 |
| Less: Expenses on Transfer (B) | 75,000 |
| Net Sale Value (A – B) | 59,25,000 |
| Less: Cost of Acquisition (COA) | 15,00,000 |
| Less: Cost of Improvement (COI) | 18,00,000 |
| LTCG on Sale of Property | 26,25,000 |
Also Read: Income Tax Saving on Home Loan.
What are the Tax Exemptions on LTCG on Sale of Property?
| Section | Exemption Type | Conditions | Lock-in Period |
|---|---|---|---|
| Section 54 | LTCG from sale of residential property | Reinvest in another residential property within 2 years (or 3 years if constructing) | NA |
| Section 54EC | LTCG up to ₹50 lakh | Invest in NHAI/REC bonds within 6 months | 5 years |
| Section 54F | LTCG from any capital asset (except house) | Full exemption if entire amount reinvested in residential property; partial exemption if partly reinvested | NA |
| Section 10(38) | LTCG on equity shares/mutual funds | Gains up to ₹1.25 lakh/year tax-free; excess taxed at 12.5% | NA |
Source: Changes in Capital Gain Tax
When Can You Invest in the LTCG Account Scheme?
Selling a property and reinvesting the gains in a new asset can be a lengthy process. To address this, the Capital Gains Account Scheme (CGAS), 1988 allows taxpayers to temporarily park their gains and still claim tax exemptions.
- If you do not reinvest long-term capital gains before the ITR filing deadline (31st July) of the sale year, you can deposit the amount in a Capital Gains Account with a PSU or approved bank.
- You can qualify for tax exemption under relevant sections by using this deposit for property purchase or construction within the stipulated time.
- If you do not utilize the funds within the permitted period, the government taxes the deposited amount as short-term capital gain in that financial year.
Read More: ITR Filing Guide
How to Fill Long Term Capital Gain in ITR-2
Filing long-term capital gain (LTCG) in ITR-2 requires accurate reporting of the sale transaction and related details.
Steps to Fill LTCG in ITR-2:
- Go to the “Capital Gains” Section – Select this tab in the ITR-2 form.
- Enter Sale Details – Specify the asset type (property, shares, etc.) and input the sale value.
- Provide Indexed Costs – Enter the indexed cost of acquisition and cost of improvement using the Cost Inflation Index (CII).
- Calculate LTCG – Subtract indexed costs and transfer expenses from the sale amount.
- Verify & Submit – Ensure all details are correct before submitting to avoid errors.
Accurate reporting helps in smooth tax filing and compliance.
Read More: How to File Rental Income in Tax Return
Conclusion
The long-term capital gain (LTCG) tax rate on sale of property in India in 2025 is 20% with indexation benefits, plus applicable cess and surcharges. Understanding these tax rules helps homeowners minimize liabilities and make informed financial decisions.
Staying updated ensures smooth and compliant property transactions.
Frequently Asked Questions
LTCG is calculated as Sale Price – (Indexed Cost of Acquisition + Indexed Cost of Improvement + Transfer Expenses). The taxable gain is then subject to 20% tax with indexation benefits, plus applicable cess and surcharges.
You can minimize LTCG tax by reinvesting the gains in a new residential property under Section 54, investing in 54EC bonds, or using the Capital Gains Account Scheme (CGAS) to defer tax until reinvestment.
There is no basic exemption limit for LTCG on property sales. However, you can claim exemptions under Sections 54, 54F, and 54EC by reinvesting gains in specified assets within the prescribed timelines.
For FY 2024-25, LTCG tax on property sales is 20% with indexation benefits, plus surcharge and 4% health & education cess. If gains exceed ₹50 lakh, an additional surcharge may apply as per income slab.
Yes, selling gold or jewellery attracts capital gains tax. If you hold it for over three years, the government taxes it as LTCG at 20% with indexation. If sold within three years, short-term capital gains apply as per income tax slab.
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