If you’re selling property in India, one of the biggest questions is: “How much tax do I have to pay on my gains?”

In 2025, the rules around capital gains tax on property sale have been updated, including the new 12.5% flat rate option (without indexation) alongside the traditional 20% with indexation.

This guide explains capital gains tax on property, short-term and long-term rules, exemptions, and how sellers can save lakhs with proper planning.

What is Capital Gains Tax?

Capital gains tax is the tax you pay on the profit earned when selling a property for more than its purchase price.

Capital Gain = Sale Price – Purchase Price – Expenses (legal, brokerage, improvement costs)

Your tax depends on how long you held the property.

Short-Term vs Long-Term Capital Gains

Short-Term Capital Gain (STCG)
• Holding Period: Less than 24 months
• Tax Treatment: Taxed at your income tax slab rate

Long-Term Capital Gain (LTCG)
• Holding Period: 24 months or more
• Tax Treatment: 12.5% flat (no indexation) or 20% with indexation

Example: Short-Term Capital Gains

Bought in 2023 for ₹60 lakh
Sold in 2025 for ₹75 lakh
Gain = ₹15 lakh
Since held for less than 24 months, tax applies as per slab (for example, 30%)
Tax = ₹4.5 lakh

Example: Long-Term Capital Gains With Indexation

Bought in 2015 for ₹50 lakh
Sold in 2025 for ₹1.2 crore
Indexed cost ≈ ₹80 lakh
LTCG = ₹40 lakh
Tax @20% = ₹8 lakh

Example: Long-Term Capital Gains Without Indexation (12.5%)

Gain = ₹70 lakh (no indexation applied)
Tax @12.5% = ₹8.75 lakh

Sometimes 12.5% is cheaper, sometimes 20% with indexation is better. You must compare both.

Exemptions to Save Capital Gains Tax

Section 54 – Reinvest in Residential Property

• Available when selling a residential home
• Reinvest gains in another home within 1 year before or 2 years after sale
• Can construct within 3 years
• Once-in-a-lifetime option to reinvest in two homes if gains ≤ ₹2 crore

Section 54EC – Capital Gains Bonds

• Invest up to ₹50 lakh in NHAI or REC bonds
• Must invest within 6 months
• 5-year lock-in

Section 54F – Sale of Any Other Asset

• Applies when selling land, gold, commercial property
• Reinvest entire sale proceeds into a residential house

Section 54GB – Startup Investment

• Rarely used, applies when investing gains into eligible startups

Common Mistakes Sellers Make

• Not calculating indexation correctly
• Missing reinvestment timelines
• Forgetting that tax is based on guidance value if it is higher than sale price
• NRIs forgetting that buyers must deduct TDS

NRI Seller Rules

• Buyer must deduct TDS: 20% for LTCG, slab rate for STCG
• NRI needs Form 15CB to repatriate money
• Exemptions under Sections 54, 54EC, 54F are also allowed for NRIs

How Owne Simplifies Capital Gains

• Capital gains calculator to compare 12.5% vs 20%
• Support with Section 54 and 54EC planning
• Registered agreements ensure compliance
• Exits often structured beyond 24 months to qualify for LTCG

Case Study: Seller in Bangalore

Shalini bought a 2BHK in 2018 for ₹70 lakh
Sold in 2025 for ₹1.4 crore
Indexed cost = ₹95 lakh
LTCG = ₹45 lakh
Tax @20% = ₹9 lakh
Tax @12.5% = ₹8.75 lakh

She reinvested ₹40 lakh in a new home under Section 54 and paid zero tax.

FAQs

1. Do I always have to pay capital gains tax?
No. You can claim exemptions under Sections 54, 54F, or 54EC.

2. What if the sale price is lower than guidance value?
Tax is calculated on the higher of the two.

3. Do NRIs pay more tax?
No. Rates are same, but TDS applies upfront.

4. Can stamp duty and registration fees be added to cost?
Yes, they reduce taxable gain.

5. How do I compare 12.5% vs 20% with indexation?
Use Owne’s Capital Gains Calculator.

6. How to save capital gains tax on property sale?
Reinvest under Section 54 or Section 54EC bonds.

Conclusion

Understanding capital gains tax before selling can save lakhs. Choosing between STCG and LTCG, and between 12.5% vs 20% with indexation, makes a big difference.

Owne helps by offering calculators, structured exits, and legal compliance, making tax planning simpler.

Before selling, use Owne’s Capital Gains Calculator to estimate your tax and plan your savings.