When you sell a flat for more than it cost you, the profit is a capital gain and is taxed. How much tax depends on how long you owned the flat, what you can add to its cost, and whether you put the money into another home or specified bonds. This guide covers the rules for resident individuals selling a home in India.
Short-term or long-term?
| You owned the flat for | Type of gain | Tax |
|---|---|---|
| 24 months or less | Short-term capital gain (STCG) | Added to your income and taxed at your slab rate |
| More than 24 months | Long-term capital gain (LTCG) | 12.5% without indexation (see below for older homes) |
Health and education cess of 4% is added to the tax, and surcharge too on higher incomes. The holding period usually runs from the date you acquired the flat, normally the registration of your purchase. For a flat bought under construction, the date of allotment can matter, so ask your chartered accountant which date applies to you.
The 12.5% rate and the indexation choice
For sales on or after 23 July 2024, long-term gains on property are taxed at 12.5% without indexation. Before that, the rate was 20% with indexation, which raises the cost of the flat in line with inflation.
For a resident individual or HUF selling a home acquired before 23 July 2024, the tax is the lower of:
- 12.5% of the gain without indexation, or
- 20% of the gain worked out with indexation.
Indexation usually wins for homes owned for many years with only a modest rise in price; the flat 12.5% usually wins when the price has risen a lot. Work out both, or ask your CA to.
Working out the gain
Capital gain = sale price − expenses on the sale − cost of the flat − cost of improvements
- Cost of the flat: what you paid the seller or developer, plus stamp duty and registration, GST on an under-construction purchase, and brokerage you paid when buying.
- Improvements: lasting additions such as a new room or structural work, with bills. Routine repairs and painting don’t count.
- Sale expenses: brokerage and legal fees you pay to sell.
- Homes bought before 1 April 2001: you can use the fair market value on 1 April 2001 as the cost instead.
Example: you bought a flat in 2016 for ₹50 lakh and paid ₹3.5 lakh in stamp duty and registration. In 2026 you sell it for ₹90 lakh and pay ₹90,000 in brokerage. The gain is ₹90 lakh − ₹0.9 lakh − ₹53.5 lakh = ₹35.6 lakh. At 12.5% plus 4% cess, the tax is about ₹4.63 lakh. Because the flat was bought before July 2024, check whether 20% with indexation comes out lower.
If the sale price is below the stamp duty value
If you sell for less than the government’s stamp duty value (the ready reckoner value in Maharashtra) and the difference is more than 10%, the tax law treats the stamp duty value as your sale price. Selling far below the ready reckoner rate on paper doesn’t lower the tax, and the buyer can be taxed on the difference too.
Saving tax: buy another home (Section 54)
If you reinvest a long-term gain in one residential house in India, the gain is exempt up to the amount invested:
- Buy the new home within 1 year before or 2 years after the sale, or build it within 3 years.
- The exemption is capped at ₹10 crore of gain.
- Once in your lifetime, if the gain is up to ₹2 crore, you can split it across two homes.
- If you sell the new home within 3 years, the exemption is taken back.
Not ready to buy before your return is due? Deposit the unused gain in the Capital Gains Account Scheme at a bank before the income tax return due date, and use it for the new home within the time limits. Money left unused at the end is taxed then.
Saving tax: specified bonds (Section 54EC)
You can also invest up to ₹50 lakh of the long-term gain in specified bonds (such as those of NHAI, REC, PFC and IRFC) within 6 months of the sale. They are locked in for 5 years and the interest is taxable. You can use Section 54 and 54EC together on the same sale.
TDS when you sell
If the price is ₹50 lakh or more, the buyer must deduct 1% TDS, pay it to the government and file Form 26QB, and give you Form 16B. The TDS shows in your Form 26AS and counts towards your tax. Give the buyer your PAN, or the TDS rate goes up. Sellers who are NRIs are taxed differently, with TDS on the gain at much higher rates. See our NRI property guide.
Selling within 5 years? Check your home-loan deductions
If you claimed the Section 80C deduction for home-loan principal repayment, stamp duty or registration, and you sell the flat within 5 years from the end of the year you got possession, the deductions you claimed are added back to your income in the year of sale. See home loan tax benefits.
Reporting the sale
Report the sale and the gain in your income tax return, in the capital gains schedule (ITR-2 or ITR-3 rather than ITR-1), even if the gain is fully exempt. Keep your purchase and sale deeds, receipts for stamp duty, GST and brokerage, bills for improvements, and proof of any reinvestment.
FAQs
How long must I own a flat for the gain to be long-term?
More than 24 months.
Can I still use indexation?
Yes, if you are a resident individual or HUF and the flat was acquired before 23 July 2024: you pay the lower of 12.5% without indexation and 20% with it.
Do I pay capital gains tax if I buy another flat with the money?
Not on the part you reinvest under Section 54, within the time limits and the ₹10 crore cap.
Is there tax if I sell at a loss?
No tax. You can carry the loss forward for up to 8 years, as long as you file your return on time. A long-term loss can only be set off against long-term gains; a short-term loss can be set off against either.
This guide is general information about income tax as we understand it in October 2026, not tax advice. From April 2026 the Income-tax Act, 2025 replaced the 1961 Act and many section numbers changed; we use the familiar old numbers here. Rates and limits change in Budgets, so ask a chartered accountant before you sell.
Cover photo: Pride world city by Akshit 77, CC BY-SA 4.0, via Wikimedia Commons. Cropped, with text added.