Property investment is one of the most reliable ways to build wealth in India. But if you don’t plan for taxes, a big chunk of your profits can vanish. Every investor should understand how capital gains tax on property in India works and the exemptions available under the Income Tax Act.

With the new 2024–25 reforms, investors now have more choices — but also more confusion. This guide explains capital gains rules clearly, with examples and how Owne’s structured model helps investors optimize after-tax returns.

Capital Gains Tax Basics

When you sell property, the profit is taxed as capital gains.

Short-Term Capital Gains (STCG): Property held for 24 months or less; taxed at your income slab.
Long-Term Capital Gains (LTCG): Property held for more than 24 months; taxed at special LTCG rates.

These rules apply to all types of property: land, flats, houses, or plots.

New LTCG Rules (2024 Update)

For property sales on or after 23 July 2024, you can choose:

• 12.5% tax (no indexation)
• 20% tax (with indexation benefit)

Indexation adjusts the purchase price for inflation, reducing taxable gains.

Example:
Bought in 2012 for ₹50 lakh → Sold 2025 at ₹90 lakh → Indexed cost ~₹75 lakh → LTCG ₹15 lakh → Tax ₹3 lakh (20%).
Without indexation at 12.5% → ₹5 lakh tax.

For newer properties, the 12.5% option may be cheaper.

How to Calculate Capital Gains

1. Sale Price – transfer expenses (brokerage, legal fees)

2. Cost of acquisition + improvement

3. If choosing indexation: adjust using CII

4. Capital Gain = Sale Price – Adjusted Cost

5. Apply STCG or LTCG rate

6. Add 4% cess and surcharge (if applicable)

This method applies to both residents and NRIs.

Key Exemptions to Save Tax

Section 54 – Reinvest in a Residential Property

• Applies if you sell a residential property and reinvest in another.
• Reinvest within 2 years (purchase) or 3 years (construction).
• Can claim for two houses once if gains ≤ ₹2 crore.

Section 54F – Reinvest Gains from Any Asset

• Applicable when selling land, commercial property, or other assets.
• Must reinvest the full sale proceeds.
• Cannot own more than one residential house before reinvesting.

Section 54EC – Tax-Free Bonds

• Invest gains in NHAI or REC bonds within 6 months.
• Maximum ₹50 lakh.
• 5-year lock-in.

Examples of Tax Planning

Example 1: Section 54
Bought ₹60 lakh (2015) → Sold ₹1.2 crore (2025) → Indexed cost ~₹90 lakh → LTCG ₹30 lakh.
Reinvest in another house → Tax becomes zero.

Example 2: Section 54EC
Invest ₹30 lakh gains in NHAI bonds → Tax becomes zero (5-year lock-in).

Example 3: Choosing 12.5% vs 20%
Bought ₹70 lakh (2021) → Sold ₹90 lakh (2025).
Indexed cost ~₹76 lakh → Gain ₹14 lakh → 20% = ₹2.8 lakh vs 12.5% = ₹2.5 lakh.

Tax Rules for NRIs

NRIs pay capital gains tax similar to residents but with mandatory TDS.

TDS by buyer:
• STCG → as per slab (usually 30%)
• LTCG → 20% with indexation or 12.5% without indexation

NRIs can apply for lower TDS certificates.
Repatriation allowed up to USD 1 million/year with CA certificate.
Sections 54, 54F, and 54EC exemptions also apply to NRIs.

Common Mistakes

• Not including stamp duty/registration in cost base.
• Missing 6-month deadline for 54EC bonds.
• Assuming 12.5% is always cheaper.
• Not reinvesting within Section 54 timelines.
• Ignoring rental income tax during holding period.

How Owne Helps Investors Save Tax

Owne’s structured model assists investors with:

• Timed exits designed to qualify as LTCG
• Flexibility to plan around Section 54 or 54EC
• Clear cost and return visibility
• Diversification across multiple properties
• Tools and calculators for capital gains planning

FAQs

1. Can I claim both Section 54 and 54EC?
Yes, if conditions are met. You may split gains between both.

2. How is inherited property taxed?
Cost and holding period of the original owner are considered.

3. Can I use exemptions with the 12.5% tax option?
Yes. Exemptions apply under both tax options.

4. Do NRIs get indexation benefits?
Yes, under the 20% LTCG option.

5. How do I avoid capital gains tax?
Reinvest using Section 54, 54F, or 54EC bonds.

6. How is capital gains tax calculated?
Sale price – indexed cost – expenses = taxable gain.

7. How do I calculate Cost Inflation Index for property?
Indexed cost = Original cost × (CII of sale year ÷ CII of purchase year).

Conclusion

Property is a powerful wealth-building asset, but taxes can significantly reduce returns if not planned well. With India’s updated LTCG rules, investors can choose the tax option that minimizes liability while using Section 54, 54F, and 54EC to save lakhs legally.

Owne further simplifies this by offering structured timelines, IRR-linked returns, and well-planned exits to help reduce capital gains tax and maximize net returns.

Start by using our Capital Gains Calculator and explore how Owne helps investors grow wealth more efficiently.