Capital Gains Tax on Property Sale in India 2026: Complete NRI Guide
Capital gains tax on property sale in India for FY 2025-26 (AY 2026-27) follows a revised structure introduced in the Union Budget 2024. For property purchased on or after July 23, 2024, long-term capital gains (LTCG) are taxed at a flat 12.5% without indexation.
For property purchased before July 23, 2024, sellers can choose between 12.5% without indexation or 20% with indexation, whichever results in lower tax. Short-term capital gains (property held for 24 months or less) are taxed at the sellers applicable income tax slab rate, which can be up to 30%.
Section 54 allows 100% LTCG exemption (capped at Rs 10 crore) if the gains are reinvested in another residential property within the prescribed timeline.
LTCG vs STCG: When Each Applies
A property held for more than 24 months qualifies as a long-term capital asset. LTCG on its sale is taxed at concessional rates.
A property held for 24 months or less is a short-term asset, and gains are taxed at normal income tax slab rates (up to 30% plus cess).
The 24-month rule is calculated from the date of purchase (or allotment, in case of under-construction property) to the date of sale.
The July 2024 Inflection Point
The Finance Act 2024 changed LTCG rules for real estate from July 23, 2024 onward. For properties purchased after this date, the LTCG rate is a flat 12.5% without indexation.
Indexation, which adjusted the purchase price for inflation using the Cost Inflation Index, is no longer available for these transactions.
For properties purchased before July 23, 2024, the government introduced a grandfathering provision. Sellers can compute tax under both methods (12.5% without indexation and 20% with indexation) and pay whichever is lower.
This protects long-term holders from paying higher tax on purely inflationary gains.
Section 54 Exemption: Reinvest and Pay Zero Tax
Section 54 of the Income Tax Act allows a complete exemption from LTCG tax if the seller reinvests the capital gain in another residential property in India.
The rules are as follows:
- Purchase the new property within 1 year before or 2 years after the sale.
- Construct the new property within 3 years after the sale.
- The maximum exemption is Rs 10 crore.
- If you reinvest only a portion of the gain, the exemption is proportional.
- The new property must be held for at least 3 years; selling it earlier revokes the exemption.
For NRIs selling overseas property and reinvesting into an Indian residential property, Section 54F may apply instead.
Section 54F requires that the seller own no more than 1 residential house (other than the new one) on the date of sale. The exemption is proportional to the ratio of net consideration reinvested.
Section 54EC: Bond Alternative
If reinvesting in another property is not practical, Section 54EC allows exemption by investing up to Rs 50 lakh in specified bonds (NHAI, REC, IRFC or PFC) within 6 months of the sale.
These bonds have a 5-year lock-in and carry a fixed interest rate (currently around 5 to 5.25%).
The Rs 50 lakh limit applies per financial year, and you must hold the bonds for 5 years without transfer or pledge.
NRI-Specific Considerations
NRIs selling property in India face TDS (Tax Deducted at Source) at 20% on LTCG and 30% on STCG. The buyer is required to deduct this TDS before paying the seller.
To reduce TDS to the actual tax liability (which may be lower after exemptions), the NRI seller can apply for a lower TDS certificate under Section 197 by filing Form 13 with the Assessing Officer.
To repatriate sale proceeds, the NRI must file Form 15CA (online) and Form 15CB (from a Chartered Accountant).
Under FEMA regulations, the total amount repatriated cannot exceed the value of 2 residential properties per individual. The CA certificate confirms that all taxes have been paid and the funds are eligible for transfer abroad.
Conclusion
- LTCG on property is 12.5% without indexation for post-July 2024 purchases. Pre-July 2024 purchases get a choice between 12.5% (no indexation) and 20% (with indexation).
- Section 54 exemption (up to Rs 10 crore) eliminates LTCG tax entirely if gains are reinvested in residential property within the prescribed timeline.
- Section 54EC allows Rs 50 lakh exemption via 5-year bonds (NHAI, REC, IRFC, PFC) within 6 months of sale.
- NRIs face 20% TDS on LTCG but can reduce it via Form 13. Repatriation requires Form 15CA/15CB and is limited to 2 properties under FEMA.
For a personalized tax computation on your DLF property transaction, connect with the DLFInfo advisory desk and your CA.
Frequently Asked Questions
What is the LTCG tax rate on property sale in India in 2026?
For property purchased after July 23, 2024, LTCG is taxed at 12.5% without indexation. For property purchased before that date, sellers can choose between 12.5% without indexation or 20% with indexation, whichever is lower. The Income Tax Act 2025 (effective April 1, 2026) continues this framework.
Can I avoid capital gains tax by buying another property?
Yes. Section 54 allows a 100% exemption on LTCG (up to Rs 10 crore) if you reinvest the gains in another residential property in India within 1 year before or 2 years after the sale, or in construction within 3 years. The new property must be held for at least 3 years.
What TDS applies when an NRI sells property in India?
TDS is 20% on LTCG and 30% on STCG (plus surcharge and cess). The buyer deducts TDS before paying the NRI seller. To reduce TDS to actual tax liability, the NRI can apply for a lower deduction certificate under Section 197 by filing Form 13.
How do NRIs repatriate property sale proceeds from India?
NRIs must file Form 15CA (online declaration) and obtain Form 15CB (CA certificate) confirming all taxes are paid. FEMA allows repatriation of sale proceeds for up to 2 residential properties. Funds are transferred from the NRO account to the NRIs overseas bank account.
