Capital Gain Tax on Property
Tax applicable on profit earned from the sale of immovable property in India.
Short-Term (STCG)
Slab Rate
Held < 24 months. Added to total income and taxed at individual slab rate.
Long-Term (LTCG)
20% + Indexation
Held ≥ 24 months. 20% tax with Cost Inflation Index (CII) benefit.
Exemption under Sec 54
Full / Partial
Reinvest gain in new residential property within 2 years (purchase) or 3 years (construction).
| Holding Period | Type | Tax Rate | Indexation | Exemption |
|---|---|---|---|---|
| < 24 months | STCG | Income slab rate | No | None |
| ≥ 24 months | LTCG | 20% | Yes | Sec 54 / 54EC / 54F |
| ≥ 24 months (NRI) | LTCG | 20% + TDS @20% | Yes | With Form 13 |
📌 How is LTCG calculated?
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Step 1: Find original purchase cost. Step 2: Apply CII – Indexed Cost = Purchase Price × (CII of sale year / CII of purchase year). Step 3: LTCG = Sale Price – Indexed Cost – Improvement Cost – Transfer Expenses. Step 4: Pay 20% tax on LTCG + surcharge + cess.
📌 Section 54EC – Capital Gain Bonds
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Invest up to ₹50 lakh in NHAI/REC bonds within 6 months of sale. Lock-in period of 5 years. Interest is taxable but the principal provides LTCG exemption.
Budget 2024 Update
LTCG tax rate reduced to 12.5% (without indexation) for transactions after July 23, 2024. Taxpayers may choose whichever is beneficial.
TDS on Property Purchase
Tax Deducted at Source under Section 194IA — mandatory for buyer when purchasing immovable property.
TDS Rate
1%
Buyer deducts 1% of sale value if property value ≥ ₹50 lakhs (Sec 194-IA).
Threshold
₹50 Lakhs
TDS is NOT applicable if total consideration is below ₹50 lakhs. No TDS on agricultural land.
Filing Deadline
30 Days
Deposit TDS via Form 26QB within 30 days from end of month in which deduction is made.
| Step | Action | Form / Portal | Timeline |
|---|---|---|---|
| 1 | Calculate TDS (1% of sale value) | Manual calculation | At time of payment |
| 2 | Deduct & Pay TDS | Form 26QB – TIN NSDL | Within 30 days |
| 3 | Generate TDS Certificate | Form 16B via TRACES | Within 15 days of filing |
| 4 | Provide to Seller | Form 16B | Before registration |
Pro Tip for Agents
Always verify TDS deduction before property registration. Missing TDS can attract 1% per month interest + 1.5% per month penalty under Sec 271C.
NRI Sellers — Higher TDS!
If seller is NRI, TDS is 20% (LTCG) or as per slab (STCG) under Sec 195. Buyer must obtain TAN and deduct accordingly.
GST on Under-Construction Property
Goods and Services Tax applicability on real estate transactions under various schemes.
Affordable Housing
1% GST
For homes up to ₹45 lakh. Carpet area ≤ 60/90 sqm.
Non-Affordable Housing
5% GST
For under-construction flats not qualifying as affordable housing. No ITC allowed.
Ready-to-Move (OC)
Nil GST
Completed projects with Occupancy Certificate. Only stamp duty + registration.
| Property Type | GST Rate | ITC | Condition |
|---|---|---|---|
| Affordable (New Scheme) | 1% | No | RERA registered, under-construction |
| Non-Affordable (New Scheme) | 5% | No | RERA registered, under-construction |
| Old / Legacy Scheme | 8% / 12% | Yes | Projects started before Apr 2019 |
| Ready-to-Move (OC issued) | Nil | N/A | Completion certificate available |
| Commercial (shops/offices) | 12% | Yes | Under-construction only |
Important
GST is charged on the entire property value including land. However, land component is typically valued at 1/3rd of total, effectively making the net rate lower in practice.
NRI Property Tax Rules
Special provisions and higher withholding taxes applicable to Non-Resident Indians.
TDS on Sale (Buyer deducts)
20% / 30%
LTCG: 20% | STCG: 30% (slab). Apply for lower TDS via Form 13 from ITO.
Repatriation Limit
$1M / Year
NRIs can repatriate up to USD 1 million per financial year from property sale proceeds.
DTAA Benefit
Available
Double Taxation Avoidance Agreement may reduce tax liability. File Form 10F + TRC with buyer.
| Account Type | Repatriable | Best Use | TDS on Interest |
|---|---|---|---|
| NRE Account | Fully | Fund property purchase from foreign income | Nil |
| NRO Account | Up to $1M/yr | Rental income, Indian earnings, sale proceeds | 30% |
| FCNR Account | Fully | Fixed deposits in foreign currency | Nil |
📌 Can NRI buy property in India?
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NRI can buy residential and commercial property. Cannot buy agricultural land / plantation / farmhouse (except by inheritance). Payment must be through NRE / NRO / FCNR account or inward remittance. No RBI permission needed for residential/commercial purchases.
📌 NRE vs NRO Account – which to use?
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NRE Account is fully repatriable. Use for fresh foreign income. Ideal for funding property purchase. NRO Account is partially repatriable (up to $1M/year). Used for rental income, Indian earnings. Sale proceeds can be credited here.
📌 Tax on rental income for NRI
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Rental income of NRI is taxed in India. Tenant must deduct TDS @30% under Sec 195 before paying rent. NRI can claim standard deduction of 30% + interest on home loan against rental income.
Rental Income Tax
How rental income from residential and commercial property is taxed under Income from House Property.
Standard Deduction
30%
Flat 30% of Net Annual Value is deductible — regardless of actual expenses.
Interest Deduction
No Limit
Full interest on home loan is deductible for let-out property under Sec 24(b).
Municipal Tax
Fully Deductible
Municipal taxes paid during the year are fully deductible from Gross Annual Value.
| Calculation Step | Formula / Rule |
|---|---|
| Gross Annual Value (GAV) | Higher of: Actual Rent Received or Fair Market Rent |
| Less: Municipal Tax | Deduct taxes paid to local authority |
| = Net Annual Value (NAV) | GAV – Municipal Tax |
| Less: Standard Deduction | 30% of NAV (Sec 24a) |
| Less: Home Loan Interest | Actual interest (no limit for let-out property) |
| = Income from House Property | Added to total income, taxed at slab rate |
TDS on Rent (Sec 194I / 194IB)
If monthly rent exceeds ₹50,000, tenant must deduct 5% TDS. Annual threshold is ₹2.4 lakh.
Loss Set-Off
Loss from house property (interest > income) can be set off against other income up to ₹2 lakh per year. Balance carried forward for 8 years.