Selling property in India often brings a sense of relief — but also a significant tax bill. Capital gains tax on property sale can reduce your actual profit by lakhs if you don’t plan ahead.

The good news: Indian tax laws offer multiple exemptions that can help you reduce — or even eliminate — your capital gains tax through smart reinvestment.

This guide explains the capital gains tax rules for 2025, the difference between short-term and long-term gains, exemptions, examples, and how Owne’s Capital Gains Calculator helps sellers plan efficiently.

What Is Capital Gains Tax on Property?

Capital gain is the profit you make when you sell a property at a higher price than what you paid for it.

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

There are two types of capital gains based on the holding period:

• Short-term capital gain (STCG): Property held for less than 24 months. Taxed as per your income tax slab.

• Long-term capital gain (LTCG): Property held for 24 months or more. Taxed at either 12.5% flat (no indexation) or 20% with indexation.

Capital Gains Tax Rates in India (2025)

Holding period: Less than 24 months
Taxed at income slab (STCG)
No exemptions available.

Holding period: 24 months or more
Option 1: 12.5% flat (no indexation)
Option 2: 20% with indexation
Sellers can choose whichever results in lower tax.

Example: Capital Gains Without Exemptions

Purchase price (2016): ₹50 lakh
Sale price (2025): ₹1.2 crore
Indexed cost ≈ ₹80 lakh
LTCG = ₹40 lakh

Tax @20% with indexation = ₹8 lakh
Tax @12.5% without indexation = ₹8.75 lakh

In this case, the 20% with indexation option is better.

Exemptions to Save Capital Gains Tax

1. Section 54 – Reinvest in a Residential Property

Available when you sell a residential property and reinvest the capital gain in another residential home within the allowed time window.

You can buy:

• 1 year before sale, or

• 2 years after sale, or

• Build a house within 3 years

Section 54 can bring tax down to zero if reinvestment equals (or exceeds) the capital gain.

2. Section 54EC – Invest in Bonds

Invest up to ₹50 lakh of LTCG in NHAI or REC bonds within 6 months of sale.
Lock-in: 5 years.
Lower returns, but safe and tax-saving.

3. Section 54F – For Sale of Land, Gold, or Other Assets

If you sell a long-term asset (not a house) and reinvest in a residential home, exemption applies.
Condition: You must not own more than one residential property at the time of investment.

4. Section 54GB – Investment in Startups

Exemption available when investing capital gains into eligible startups.
Rarely used.

5. Set-Off of Capital Losses

Losses from shares or mutual funds can be used to reduce taxable gains.

Case Study: Seller in Bangalore

Purchase (2014): ₹70 lakh
Sale (2025): ₹1.5 crore
Indexed cost ≈ ₹1 crore
LTCG = ₹50 lakh
Tax @20% = ₹10 lakh

Seller reinvests ₹40 lakh into a new home.
Taxable gain = ₹10 lakh → Tax = ₹2 lakh
Saved ₹8 lakh in tax by using Section 54.

NRI Rules for Capital Gains

NRIs get the same exemptions as residents.

However:

• Buyer must deduct TDS @20% on sale

• NRI must file ITR in India to claim exemptions and refunds

Capital gains tax rules apply equally to NRI real estate investors in Bangalore or other cities.

How Owne Helps Sellers Save Tax

Owne simplifies tax planning by providing:

• Capital Gains Tax Calculator to compare 12.5% vs 20%

• Exemption modelling for Sections 54, 54EC, 54F

• Structured exits to qualify as LTCG (holding period 24+ months)

• Legal valuation checks to prevent disputes

Sellers maximize take-home value by planning tax before selling.

Common Mistakes Sellers Make

• Missing the 6-month window for 54EC bonds

• Reinvesting in multiple houses (not permitted under Section 54)

• Not reinvesting the entire gain when required

• Ignoring guidance value (tax is calculated on the higher value)

• Not using CGAS (Capital Gains Account Scheme) when unsure about reinvestment timing

FAQs

1. Do I have to pay capital gains tax if I reinvest in a new home?
No, if you meet Section 54 conditions.

2. Can NRIs save capital gains tax?
Yes. NRIs get the same exemptions but must file ITR in India.

3. Can stamp duty be added to purchase price?
Yes. Stamp duty, registration, brokerage, and improvement costs can all be included.

4. Is gifting property a way to avoid tax?
No. Gifting does not trigger capital gains, but the recipient pays tax at resale.

5. What if I miss the reinvestment deadline?
You lose the exemption. Use CGAS if reinvestment is delayed.

Conclusion

Capital gains tax can significantly reduce your profit from selling property in India. But with the right exemptions — Section 54, 54EC, 54F, and smart financial planning — you can legally save lakhs.

Owne makes this process easier by:

• Calculating tax liability upfront

• Structuring exits for LTCG eligibility

• Helping sellers plan reinvestments

• Ensuring legally compliant valuations

Use Owne’s Capital Gains Tax Calculator before selling to maximize your profit and minimize tax liability.