This 2026 guide from CMR Estates explains how capital gains tax on selling property works in India: short term and long term gains, current rates, how to calculate the gain, exemptions under Section 54, 54F and 54EC, NRI rules, and practical ways to save capital gains tax on property, with a Tricity example.

Disclaimer: This article is for general information and is not tax advice. Tax laws change with every Budget, so verify the latest rules on the Income Tax Department website or consult a chartered accountant before you decide.

What Is Capital Gains Tax on Property?

When you sell a property for more than you paid, the profit is called a capital gain, and the tax on that profit is called capital gains tax. A property is treated as a capital asset, so its sale is taxable under the head "Capital Gains". The tax applies to residential flats, houses, plots, shops, offices and land, whether you sell in Mohali, Chandigarh or anywhere else in India.

The gain becomes taxable in the financial year in which the sale (transfer) takes place. If you sell at a loss, no tax is payable, and the loss can be set off against other capital gains under the rules.

Short Term vs Long Term Capital Gain on Property

The tax you pay depends first on how long you held the property.

The holding period is counted from the date of purchase or allotment to the date of transfer, so keep your allotment letter safe.

Capital Gains Tax Rates on Property in 2026

After the changes introduced in the July 2024 Budget, the broad position for property sold in 2026 is as follows:

• Short term capital gains (STCG) on property: Taxed at your normal income tax slab rate.
• Long term capital gains (LTCG) on property: Taxed at 12.5 percent without indexation benefit, plus applicable surcharge and 4 percent health and education cess.
• Grandfathering option for old property: For land or buildings acquired before 23 July 2024, resident individuals and Hindu Undivided Families can choose the lower of two options: 12.5 percent without indexation, or 20 percent with indexation. This choice is not available to NRIs.

Indexation adjusts your purchase cost for inflation using the Cost Inflation Index (CII) notified by the government. For a property held for many years, the indexation route can sometimes produce a lower tax, which is why the calculation is worth running both ways for older properties.

How to Calculate Capital Gains Tax on Property Sale

The basic formula is simple:

Capital Gain = Full Value of Sale Consideration − (Cost of Acquisition + Cost of Improvement + Transfer Expenses)

1. Full value of sale consideration

This is the price at which you sell. Under Section 50C, if the stamp duty value (circle rate value) of the property is higher than the actual sale price beyond the permitted tolerance band, the stamp duty value is treated as the sale price for tax purposes. Check the current rates in our stamp duty guide for Mohali before finalising your price.

2. Cost of acquisition

This includes the purchase price plus stamp duty, registration charges and brokerage paid at the time of buying. If the property was inherited or gifted, the cost of the previous owner is generally used, and the holding period of the previous owner is also counted.

3. Cost of improvement

This covers capital expenses such as adding a floor, major structural changes or permanent additions. Routine repairs and painting are not counted. Keep bills and payment proof for every improvement.

4. Transfer expenses

Brokerage or commission paid on the sale, legal fees and similar expenses directly linked to the sale can be deducted.

Worked Example: Selling a Flat in Mohali

Capital Gains Exemptions on Property Sale

Section 54: Sale of Residential House and Purchase of Another House

Section 54 is available to individuals and HUFs who sell a long-term residential property and reinvest the gain in another residential house in India.

• Purchase timeline: Buy the new house within 1 year before or 2 years after the sale date.
• Construction timeline: Or construct the new house within 3 years after the sale.
• Exemption limit: The exemption is capped at ₹10 crore of the cost of the new house.
• Two houses: If the long-term gain is up to ₹2 crore, you may buy two residential houses, once in a lifetime.
• Lock-in: If you sell the new house within 3 years, the exemption is reversed.

Section 54F: Sale of Plot, Commercial Property or Other Long-Term Asset

Section 54F applies when you sell a long-term asset other than a residential house, for example a plot or a shop, and invest the net sale consideration in a residential house.

• The entire net sale proceeds (not just the gain) must be reinvested for a full exemption. If you reinvest only part of it, the exemption is proportionate.
• You should not own more than one residential house (other than the new one) on the date of transfer.
• The same purchase and construction timelines as Section 54 apply, and the same ₹10 crore cap is applicable.

If you own plots, also read our guide on residential plots in Mohali.

Section 54EC: Invest in Specified Bonds

Section 54EC lets you save tax on long-term gains from land or buildings by investing the gain in notified bonds, such as those issued by NHAI or REC.

• Invest within 6 months of the sale date.
• The maximum investment eligible for exemption is ₹50 lakh in a financial year.
• Bonds carry a 5-year lock-in.
• The interest on the bonds is taxable.

Capital Gains Account Scheme (CGAS)

If you cannot buy or build a new house before your income tax return due date, deposit the unused amount in a Capital Gains Account Scheme at a designated bank to preserve your exemption claim.

How to Save Capital Gains Tax on Property: 8 Practical Tips

1. Hold for more than 24 months so the gain qualifies as long term.
2. Plan reinvestment early under Section 54 or 54F before you sign the sale agreement.
3. Use Section 54EC bonds for the part of the gain you do not want to reinvest in real estate.
4. Deposit unused funds in CGAS before the return due date.
5. Claim every eligible cost, including stamp duty, brokerage, legal fees and improvement expenses.
6. Run both calculations (12.5 percent without indexation versus 20 percent with indexation) if you are a resident who bought before 23 July 2024.
7. Keep the sale price aligned with the stamp duty value to avoid Section 50C adjustments.
8. Consult a chartered accountant before finalising the sale deed to structure the transaction tax-efficiently.

Capital Gains Tax for NRIs Selling Property in India

NRIs pay the same capital gains tax as residents, but the way it is collected is different, and the compliance is stricter.

• TDS by the buyer: Under Section 195, the buyer must deduct tax at source when paying an NRI seller. For long term gains this is generally 12.5 percent plus surcharge and cess, and for short term gains it can be as high as 30 percent plus surcharge and cess, calculated on the whole amount if no lower certificate is obtained.
• Lower deduction certificate: An NRI can apply under Section 197 for a certificate that reduces or removes TDS, based on the actual gain. This can free up a lot of cash, so apply before the sale deed is registered.
• No indexation option: The dual option of 20 percent with indexation is available only to residents.
• Exemptions still available: NRIs can claim Section 54, 54F and 54EC if conditions are met.
• Repatriation: Sale proceeds can generally be sent abroad within FEMA limits, with tax payment proof and a chartered accountant certificate.

CMR Estates supports overseas owners through our NRI property services, and you can read more in our NRI guide to buying property in Chandigarh, Mohali and Panchkula.

TDS on Sale of Property for Resident Sellers

If you are a resident seller and the sale value is ₹50 lakh or more, the buyer must deduct 1 percent TDS under Section 194-IA. This is not an extra tax, as it is adjusted against your final liability. Ask the buyer for Form 16B so the credit shows in your Form 26AS.

Documents Needed When Selling Property

Keep these ready before you list the property:

• Original sale deed or allotment letter of the property
• Proof of purchase cost, stamp duty and registration payment
• Improvement bills and brokerage invoices
• PAN, Aadhaar and address proof of all owners
• Property tax receipts and no-dues certificates
• Bank loan closure letter, if there was a home loan
• For NRIs: passport, OCI or PIO card, Form 15CA and 15CB, and a Section 197 certificate if applicable

Common Mistakes Property Sellers Make

• Selling just before the holding period turns long term.
• Missing the reinvestment deadline for Section 54 or 54F.
• Reporting a very low sale value and facing a Section 50C notice.
• Losing cost and improvement proofs and paying tax on a higher gain.
• Not reporting the sale in the return, even when the gain is fully exempt.

Selling Property in Tricity with CMR Estates

The tax outcome of a sale depends on timing, pricing and the reinvestment plan. CMR Estates helps owners in Mohali, Chandigarh, Panchkula and Zirakpur with pricing through our property valuation service, buyer search through our property selling service and documentation support. If you plan to reinvest, our real estate investment service can shortlist new properties within your Section 54 timeline, and our home loan guide for Tricity can help you fund the purchase.

Frequently Asked Questions (FAQs)

Conclusion

The capital gains tax on property sale does not have to reduce your profit if you plan ahead. Know your holding period, calculate the gain correctly, use the exemptions under Section 54, 54F and 54EC, and keep every document safe. If you are an NRI, plan your TDS strategy before the deal closes.

Planning to sell or reinvest in the Tricity? Call CMR Estates at +91 97808 07869 or contact our team for a free property valuation, buyer search and reinvestment guidance, and consult your chartered accountant to finalise your tax plan.