Quick answer For a property sale in the tax year 2026-27, a gain on property held for more than 24 months is taxed at 12.5% without indexation. Resident individuals and HUFs who bought before 23 July 2024 may instead pay 20% with indexation, whichever is lower. Short-term gains are taxed at your slab rate. Add 4% cess and any surcharge.
Selling a flat in Zirakpur, a plot in Kharar or a house in Mohali usually means a large one-time gain, and the tax on it can surprise people who have not sold property since the rules changed in July 2024. This guide explains how the tax works for 2026-27, with a worked example, and how much you can legally save.
What changed, in one table
| Situation | Tax rate | Indexation |
|---|---|---|
| Held 24 months or less | Your slab rate | No |
| Held more than 24 months, bought on or after 23 July 2024 | 12.5% | No |
| Held more than 24 months, bought before 23 July 2024, resident individual or HUF | Lower of 12.5% (no indexation) or 20% (with indexation) | Optional |
| NRI seller, held more than 24 months | 12.5% | No |
All rates attract 4% health and education cess. Surcharge applies if your total income crosses ₹50 lakh, and for long-term gains it is capped at 15%.
How is the gain worked out?
Start with the sale price — or the collector rate value, if that is more than 110% of the sale price. Then deduct:
- Selling expenses such as brokerage and legal fees.
- Your purchase cost, including the stamp duty and registration you paid.
- The cost of major improvements, such as adding a floor.
If you choose indexation, the purchase and improvement costs are first raised for inflation: cost × CII of the year of sale ÷ CII of the year of purchase. The Cost Inflation Index is 384 for 2026-27, 376 for 2025-26 and 363 for 2024-25, on a base of 100 for 2001-02. Property bought before 1 April 2001 can use its fair market value on that date as cost, capped at the collector rate value then.
A worked example: a Zirakpur flat bought in 2016
The sale A resident bought a 3 BHK in Zirakpur in June 2016 for ₹40 lakh including stamp duty, and sells it in October 2026 for ₹85 lakh, paying ₹85,000 in brokerage and legal fees. Other income for the year is ₹12 lakh.
| 12.5% without indexation | 20% with indexation | |
|---|---|---|
| Purchase cost used | ₹40,00,000 | ₹58,18,182 (40 lakh × 384 ÷ 264) |
| Capital gain | ₹44,15,000 | ₹25,96,818 |
| Tax incl. surcharge and cess | ₹6,31,345 | ₹5,40,138 |
Here indexation wins by about ₹91,000: over ten years, indexation lifts the cost enough to outweigh the higher 20% rate. For a property bought more recently, or one whose price has risen much faster than the index, the 12.5% route is often lower. Always compare both.
How can you reduce the tax?
- Buy another house. Reinvest the long-term gain in a new residential house in India, bought within 1 year before or 2 years after the sale, or built within 3 years. The exemption is capped at ₹10 crore.
- Capital gain bonds. Invest up to ₹50 lakh in specified bonds (NHAI, REC, PFC, IRFC) within 6 months of the sale. They are locked in for 5 years.
- Capital Gains Account Scheme. If you plan to buy or build but have not done so by your return due date, park the amount in this bank scheme so the exemption is not lost.
- Claim every eligible cost. Stamp duty and brokerage on purchase, documented improvements, and selling expenses all reduce the gain. Keep receipts.
Watch the collector rate. Selling below the collector rate value does not lower your tax beyond a 10% margin. If the collector value is higher than 110% of your price, the gain is calculated on the collector value. Check it with our Collector Rate Finder.
Run your own numbers
Our free capital gains tax calculator does both calculations side by side, adds surcharge and cess, applies the collector value rule, and tells you how much you would need to reinvest to bring the tax to zero. If you are an NRI selling in India, also read how TDS works when an NRI sells property.
Planning to buy again with the proceeds? Our property tax guide covers the wider picture, and a free Property Check will help you vet the next project before you commit.
