Capital Gains Tax on 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.
Capital gains tax on property depends on the holding period and the sale value less the (indexed) cost. Here is how to calculate it step by step.
Step-by-step
- Determine the holding period — over 24 months is long-term
- Compute the indexed cost of acquisition (for long-term, using the CII)
- Add the cost of improvement and transfer expenses (brokerage, etc.)
- Capital gain = sale value − indexed cost − expenses
- Apply the tax rate — LTCG at 20% with indexation (or 12.5% without, as applicable); STCG at slab rates
Example
A property bought for ₹30 lakh and sold for ₹80 lakh after 6 years: after indexing the cost and deducting expenses, the indexed long-term gain is taxed at the applicable long-term rate.
Save tax
Reinvest under Sections 54/54EC to reduce or eliminate the tax.
Frequently Asked Questions
How is capital gains tax on property calculated?
Sale value minus the indexed cost and transfer expenses, taxed at the long-term or short-term rate.
What is the LTCG rate on property?
20% with indexation (or 12.5% without, as applicable) for property held over 24 months.
Can I deduct brokerage from capital gains?
Yes — transfer expenses like brokerage are deductible.
How can I save capital gains tax on property?
By reinvesting under Sections 54 or 54EC.
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