New law, same ideas. The Income-tax Act, 2025 applies from 1 April 2026 and uses the term “tax year”. Section numbers have changed. Where this guide mentions a section, it uses the old number people still search for, such as “section 54”, and says so.
Short-term or long-term?
For land and buildings (a house, flat, plot or shop), the holding period decides how the gain is taxed:
- Long-term: held for more than 24 months before the sale.
- Short-term: held for 24 months or less. The gain is added to your other income and taxed at your normal slab rates.
For inherited or gifted property, the previous owner’s holding period is included. For a flat bought under construction, the date of allotment and the payment schedule matter, so keep the allotment letter safely.
How the gain is computed
− Transfer expenses (brokerage, legal fees)
− Cost of acquisition (price paid + stamp duty and registration)
− Cost of improvement (construction, additions — not routine repairs)
= Capital gain
- DLC rate: in Rajasthan, the stamp duty value is based on DLC rates. If the agreed price is lower than the DLC value, the DLC value is generally treated as the sale price (the rule commonly known as section 50C under the old Act). There is no adjustment if the DLC value does not exceed 110% of the actual price. If you think the DLC value is too high, you can ask for it to be referred to a Valuation Officer.
- Bought before 1 April 2001: you can use the fair market value as on 1 April 2001 (not exceeding the stamp duty value on that date) instead of the original cost. A registered valuer’s report is normally needed.
- Inherited or gifted property: the cost is what the previous owner paid.
The 12.5% rate and the indexation option
For sales on or after 23 July 2024, long-term capital gains on land and buildings are taxed at 12.5% without indexation. Before that date the rate was 20% with indexation, where the cost is adjusted upwards using the Cost Inflation Index.
A grandfathering option was kept: if you are a resident individual or HUF and the land or building was acquired before 23 July 2024, you can work out the tax both ways and pay the lower amount.
| Option | How it works | Usually better when |
|---|---|---|
| 12.5% without indexation | Tax on sale price minus actual cost | The property rose sharply in value |
| 20% with indexation (resident individuals and HUFs, property acquired before 23 July 2024) | Tax on sale price minus inflation-adjusted cost | The property was held for many years and rose roughly in line with inflation |
Surcharge (where income is high) and 4% health and education cess are added to the tax. NRIs, firms and companies do not get the indexation option.
Illustration: a flat bought in 2015 for ₹40 lakh and sold in October 2026 for ₹1 crore gives a gain of ₹60 lakh. At 12.5%, tax is ₹7.5 lakh plus cess (and surcharge, if any). The indexed figure depends on the Cost Inflation Index for the purchase and sale years, so both should be calculated before filing.
Reinvestment exemptions
Three exemptions are used most often. They are still widely known by their old section numbers, which have changed under the 2025 Act.
Selling a house, buying a house (commonly known as section 54 under the old Act)
- For individuals and HUFs selling a residential house held long-term.
- Buy another residential house in India within 1 year before or 2 years after the sale, or construct one within 3 years.
- The exemption is limited to the gain reinvested, with an overall cap of ₹10 crore.
- Once in a lifetime, the gain can be invested in two houses if it does not exceed ₹2 crore.
- If the new house is sold within 3 years, the exemption can be taken back.
Specified bonds (commonly known as section 54EC under the old Act)
- For long-term gains on land or buildings, residential or not.
- Invest within 6 months of the sale in specified bonds (issued by bodies such as NHAI, REC, PFC and IRFC — check which issues are open).
- Investment is capped at ₹50 lakh, the bonds are locked in for 5 years, and the interest is taxable.
Selling other assets, buying a house (commonly known as section 54F under the old Act)
- For individuals and HUFs with long-term gains on any asset other than a residential house — for example a plot, a shop, shares or gold.
- The full net sale consideration (not just the gain) must be invested in one residential house within the same time limits; partial investment gives a proportionate exemption.
- You must not own more than one residential house (other than the new one) on the date of sale. The ₹10 crore cap also applies.
Not reinvested yet? Use the Capital Gains Account Scheme
If you have not bought or built the new house by the due date of your income tax return, deposit the unused amount in a Capital Gains Account Scheme account with an authorised bank before that due date. Without this deposit, the exemption for the unused amount is lost. Amounts not used within the time limit become taxable later.
Agricultural land has separate rules: rural agricultural land may not be a capital asset at all, and there is a separate reinvestment exemption for agricultural land. Check these before selling farmland near Jaipur.
TDS when the buyer pays the seller
- Resident seller: if the consideration (or stamp duty value, if higher) is ₹50 lakh or more, the buyer deducts TDS at 1% and deposits it using a PAN-based challan-cum-statement (the rule commonly known as section 194-IA under the old Act; form numbers have also changed under the new rules). With several buyers or sellers, the ₹50 lakh test applies to the total value.
- NRI seller: the buyer must deduct TDS on the payment at the rates that apply to non-residents, plus surcharge and cess — much higher than 1%, and with no ₹50 lakh threshold. An NRI can apply for a lower or nil deduction certificate before the sale.
- Seller’s check: make sure the TDS appears in your Form 26AS / AIS and claim the credit in your return. A seller without a valid PAN faces a higher TDS rate.
Documents to keep
- Purchase deed, allotment letter, payment receipts, stamp duty and registration receipts.
- Sale agreement, sale deed and bank proof of money received.
- Dated bills for construction or improvement, and JDA or society approvals.
- Brokerage and legal fee invoices.
- Registered valuer’s report for property held since before 1 April 2001.
- For inherited property: will or succession papers and the previous owner’s purchase documents.
- Reinvestment proof: new property deed, bond allotment, Capital Gains Account Scheme passbook.
- TDS certificate from the buyer and your AIS.
Mistakes to avoid
- Ignoring the DLC value when the agreed price is lower.
- Missing the 6-month bond window, which runs from the date of sale, not the end of the year.
- Not depositing unused money in the Capital Gains Account Scheme before the return due date.
- Forgetting advance tax on the gain in the instalments after the sale, which leads to interest.
- Claiming improvement costs without bills or for routine repairs.
- Accepting cash. Receiving ₹20,000 or more in cash as advance or consideration for immovable property is prohibited and attracts a penalty.
- Selling the new house too soon and losing the exemption already claimed.
- Not comparing both options where the indexation choice is available.