Short answer: Capital gains tax on sale of flat depends first on how long you held it. Sell within 24 months and the gain is taxed at your slab rate. Hold longer and it's taxed at 12.5%. If you're a resident individual who bought before 23 July 2024, you pay the lower of that and 20% with indexation.
- 24 months separates short-term from long-term for a flat (Income-tax Act 2025, s.2(101)).
- 12.5% on long-term gains, with a lower-of option at 20% with indexation for residents who bought before 23 July 2024 (s.197).
- Stamp value floor: if the guidance value is more than 110% of your price, it's treated as your sale price (s.78).
- Reinvest to save tax: a new home (s.82) or specified bonds up to ₹50 lakh (s.85).
- Our HOLD test: holding period, option, low-price check, deploy.
- Is my gain short-term or long-term?
- How does the 12.5% or 20% option work?
- What if I sell below the guidance value?
- How can I reduce or avoid the tax?
- Does the buyer deduct TDS?
- Worked examples
- The HOLD test before you sell (our framework)
- Capital gains checklist
- CA note
- Frequently asked questions
- Talk it through with acre&key
- Sources
The Income-tax Act 2025 took effect on 1 April 2026 (PIB), so section numbers have changed even where the rules look familiar. This guide uses the new numbers. It's general information; your CA should run your actual numbers.
Is my gain short-term or long-term?
A flat held for 24 months or less before transfer is a short-term capital asset (Income-tax Act 2025, s.2(101)). Over 24 months, the gain is long-term.
| Held for | Type | How it's taxed |
|---|---|---|
| 24 months or less | Short-term | Added to your income, at your slab rate |
| Over 24 months, bought on or after 23 Jul 2024 | Long-term | 12.5%, no indexation |
| Over 24 months, bought before 23 Jul 2024 (resident individual or HUF) | Long-term | Lower of 12.5% without indexation and 20% with indexation |
Rates are before surcharge and cess. When the holding period starts for an under-construction flat is a question for your CA.
How does the 12.5% or 20% option work?
Section 197 sets the long-term rate at 12.5%. For a resident individual or HUF selling land or a building bought before 23 July 2024, the Act ignores any tax above what you'd pay at 20% on the indexed gain. In practice, you pay the lower of the two.
Indexation raises your purchase cost by the Cost Inflation Index. The index for 2026-27 is 384 (CBDT Notification 85/2026). It was 264 for 2016-17 and 280 for 2018-19 (Income Tax Department).
What if I sell below the guidance value?
Section 78 treats the stamp duty value as your sale price when you sell for less, unless the stamp value is no more than 110% of your price. The stamp value on the agreement date can be used if you received part of the money by bank transfer or another specified mode on or before that date. Transferring to family instead of selling? A gift deed works differently. Check the guidance value on Kaveri; our guidance value table explains the rates.
How can I reduce or avoid the tax?
Two main routes for long-term gains:
- Buy or build a home (s.82). Buy one residential house in India within one year before or two years after the sale, or build one within three years. If the gain is ₹2 crore or less, you can choose two houses, once in a lifetime. Amounts above ₹10 crore don't count (s.82).
- Bonds (s.85). Invest up to ₹50 lakh within six months in bonds of the National Highways Authority of India, Rural Electrification Corporation or other notified bonds, redeemable after five years.
If you haven't reinvested by your return's due date, deposit the unused amount in the Capital Gains Account Scheme first. Selling the new house within three years, or selling or borrowing against the bonds within five, brings the tax back. Budget the next purchase with our stamp duty calculator, and if you'll borrow for it, see our home loan tax benefit page.
Does the buyer deduct TDS?
Yes, if the price or stamp value is ₹50 lakh or more. The buyer deducts 1% of the higher of the two and deposits it against your PAN. NRI sellers face different TDS rules; see our NRI guide.
Worked examples
All figures are illustrative and exclude surcharge, cess and transfer costs. They're for understanding, not filing.
Worked example 1: indexation wins
Bought in 2016-17 for ₹60,00,000; sold in 2026-27 for ₹1,20,00,000.
| Step | Option A: 12.5%, no indexation | Option B: 20%, indexed |
|---|---|---|
| Cost used | ₹60,00,000 | ₹60,00,000 × 384 ÷ 264 = ₹87,27,273 |
| Gain | ₹60,00,000 | ₹32,72,727 |
| Tax | ₹7,50,000 | ₹6,54,545 |
You'd pay ₹6,54,545, saving ₹95,455 against Option A.
Worked example 2: 12.5% wins
Bought in 2018-19 for ₹50,00,000; sold in 2026-27 for ₹1,50,00,000.
| Step | Option A: 12.5%, no indexation | Option B: 20%, indexed |
|---|---|---|
| Cost used | ₹50,00,000 | ₹50,00,000 × 384 ÷ 280 = ₹68,57,143 |
| Gain | ₹1,00,00,000 | ₹81,42,857 |
| Tax | ₹12,50,000 | ₹16,28,571 |
Here 12.5% is ₹3,78,571 cheaper. Big price gains favour Option A; modest ones favour indexation.
Worked example 3: the 110% test
| Sale price | Stamp duty value | Stamp value ÷ price | Sale price for tax |
|---|---|---|---|
| ₹90,00,000 | ₹98,00,000 | 108.9% | ₹90,00,000 (within 110%) |
| ₹90,00,000 | ₹1,02,00,000 | 113.3% | ₹1,02,00,000 (over 110%) |
In the second case, you're taxed on ₹12 lakh you didn't receive. Agree prices with the guidance value in view.
Worked example 4: reinvesting a ₹1 crore gain
| Route | Amount | Taxable gain left |
|---|---|---|
| No reinvestment | None | ₹1,00,00,000 |
| New flat for ₹70 lakh within two years | ₹70,00,000 | ₹30,00,000 |
| ₹50 lakh in bonds within six months, plus a ₹50 lakh flat | ₹1,00,00,000 | Nil |
How the reinvestment rules interact with the indexation option for pre-2024 purchases is something to settle with your CA.
The HOLD test before you sell (our framework)
| Step | Question | Why it matters |
|---|---|---|
| Holding period | Over 24 months on the transfer date? | Slab rate or 12.5% |
| Option | Bought before 23 July 2024? Which option is lower? | Can save lakhs, as in examples 1 and 2 |
| Low-price check | Is the guidance value more than 110% of the price? | Stamp value may replace your price |
| Deploy | New home or bonds, and by when? | Six months for bonds; one year before to two years after for a bought home |
Capital gains checklist
- [ ] Find your purchase deed date and cost, including stamp duty paid. Our legal checks guide lists the documents a buyer will ask for.
- [ ] Gather receipts for improvements.
- [ ] Check the current guidance value on Kaveri.
- [ ] Work out both options if you bought before 23 July 2024.
- [ ] Decide on reinvestment before the sale date, not after.
- [ ] Open a Capital Gains Account Scheme deposit if you need more time.
- [ ] Confirm the buyer's TDS and check it in your tax credit statement.
- [ ] Pull an encumbrance certificate for the buyer (Kaveri steps).
CA note
Tax depends on your residency, other income, the exact dates and any amendments made by the Finance Act 2026. Have a CA compute your liability and confirm exemptions before you sign a sale agreement. This page doesn't replace that advice.
Frequently asked questions
More than 24 months before the transfer. Held for 24 months or less, the gain is short-term and taxed at your slab rate.
12.5% plus surcharge and cess. Resident individuals and HUFs who bought before 23 July 2024 pay the lower of that and 20% with indexation.
Only through the lower-of option for residents who bought land or buildings before 23 July 2024. The Cost Inflation Index for 2026-27 is 384.
If the stamp duty value is more than 110% of your price, the stamp value is treated as your sale price for capital gains.
Yes, under s.82, if you buy within one year before or two years after the sale, or build within three years. Gains above ₹10 crore don't qualify.
Up to ₹50 lakh, within six months of the sale, in notified bonds redeemable after five years. Selling or borrowing against them early brings the tax back.
Yes, 1% of the higher of price and stamp value when either is ₹50 lakh or more. NRI sellers face different rules.
Generally, each owner is taxed on their share of the gain. Our joint home loan page covers co-ownership; confirm your shares with a CA.
Sources
Checked 19 Oct 2026.
- Income-tax Act, 2025 (Act 30 of 2025), Gazette of India, ss. 2(101), 78, 82, 85, 197 and TDS table: https://egazette.gov.in/WriteReadData/2025/265620.pdf
- Income Tax Department, Income-tax Act, 2025 as amended by the Finance Act 2026: https://www.incometaxindia.gov.in/documents/d/guest/income_tax_act_2025_as_amended_by_fa_act_2026-pdf
- PIB, Income-tax Act, 2025 in force from 1 April 2026: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2248005&lang=1®=3
- CBDT Notification 85/2026, Cost Inflation Index 2026-27, 15 Jul 2026: https://www.incometaxindia.gov.in/documents/d/guest/notification-no-85-2026-pdf
- Income Tax Department, Cost Inflation Index table: https://www.incometaxindia.gov.in/w/cost-inflation-index
- Income-tax Act, 2025, s.82 (India Code): https://indiacode.ecourtsindia.com/income-tax-act-2025/section/82/
- Income Tax Department, Capital gain overview: https://www.incometaxindia.gov.in/w/capital-gain
