Capital Gains on Immovable explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Selling a residential house, land, or commercial property triggers capital gains tax under the Income Tax Act 2025. Major changes: indexation is abolished for property sold after 23 July 2024, and LTCG is now a flat 12.5% rate for all property held over 24 months.
Short-Term vs Long-Term for Property
Property held for more than 24 months is long-term. Held 24 months or less is short-term. Short-term gains are added to income and taxed at slab rates.
LTCG on Property: 12.5% Without Indexation
For property sold in Tax Year 2026-27 and beyond, LTCG is taxed at 12.5% flat — no Cost Inflation Index (CII) adjustment. Example: House bought for Rs. 30 lakh in 2018, sold for Rs. 1 crore in 2026. LTCG = Rs. 70 lakh. Tax = Rs. 8.75 lakh + cess.
Section 54 — Reinvestment in Residential House
- LTCG on sale of residential house exempt if reinvested in another residential house
- Purchase: within 1 year before or 2 years after sale
- Construction: within 3 years after sale
- Maximum: 1 new house (for LTCG up to Rs. 2 crore, 2 houses allowed as one-time option)
- Available to individuals and HUFs only
Section 54F — Any Long-Term Asset (Non-Property)
If you sell non-residential assets (gold, unlisted shares), LTCG is exempt proportionately if entire net sale consideration (not just gains) is invested in a residential house. One house rule applies. Not available if you already own 2+ houses at time of transfer.
Section 54EC — Bond Investment
LTCG from sale of land or building exempt up to Rs. 50 lakh if invested in NHAI/REC bonds within 6 months. Lock-in: 5 years. Both 54 and 54EC can be combined if LTCG exceeds Rs. 50 lakh.
TDS on Property Purchase — Section 194IA
Buyer must deduct 1% TDS on purchase of immovable property valued above Rs. 50 lakh. This is deposited via Form 26QB. Sellers credit this TDS in their ITR. Non-deduction by buyer = interest + penalty.
CGAS — Capital Gains Account Scheme
If the reinvestment property is not identified before the ITR due date (31 July), the LTCG must be deposited in a CGAS bank account (Type A or Type B). The deposit must be utilised within the Section 54 time limit or it becomes taxable.
Joint Property and Inherited Property
For jointly owned property, each owner's share of capital gain is computed proportionately and reported in their individual ITR. For inherited property, the original cost and holding period of the previous owner is adopted.
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Key Facts About Capital Gains on Immovable
- Applies in: All states across India, under the relevant central law.
- Mode: Mostly online via the official government portal.
- Typical timeline: Ranges from a few days to a few weeks depending on the case.
- Non-compliance: May attract penalties, interest or late fees.
- Expert help: TaxClue completes the entire process end to end for you.
Is indexation available for property sold after July 2024?
No. ITA 2025 removes indexation for property LTCG. All long-term property gains are taxed at flat 12.5% without CII adjustment.
What is the holding period for long-term property capital gains?
More than 24 months. Property held 24 months or less is short-term, taxed at slab rate.
Over 90% of compliance penalties in India arise from missed due dates — timely handling can save businesses thousands of rupees each year.
Capital Gains on Immovable: a key compliance topic in Indian tax and corporate law that businesses and individuals must understand to remain compliant.
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Why This Matters
Staying compliant with Indian regulations protects your business from penalties, interest and unnecessary legal trouble. It is always wise to maintain proper records and documentation so that any future scrutiny can be handled smoothly. Rules and thresholds in capital gains are revised periodically, so it helps to review your obligations at the start of each financial year. Professional guidance from a qualified CA, CS or advocate ensures that filings are accurate and submitted well before the due date.
Small businesses and startups especially benefit from setting up a simple compliance calendar to track recurring deadlines. Government portals now allow most applications and filings to be completed online, reducing paperwork and turnaround time.