Long Term Capital Gain (LTCG) Tax on Property
Long Term Capital Gain (LTCG) on property means the profit earned from selling a real estate asset like land, house, or flat after holding it for more than 2 years.
This gain is taxable under Indian income tax laws.
When is It Called “Long Term”?
- If you sell property after 24 months (2 years) of owning it = LTCG
- If sold within 2 years, it’s a Short Term Capital Gain (STCG)
How to Calculate LTCG on Property
LTCG = Sale Price – Indexed Purchase Price – Expenses
| Component | Example (₹) |
|---|---|
| Sale Price | ₹80,00,000 |
| Purchase Price | ₹40,00,000 (in 2010) |
| Indexation Benefit | ₹40,00,000 × (CII of sale year ÷ CII of buy year) |
| Indexed Cost | ₹40,00,000 × (348 ÷ 167) ≈ ₹83,35,329 |
| LTCG | ₹80,00,000 – ₹83,35,329 = NIL or loss |
✅ CII = Cost Inflation Index (updated every year)
Tax Rate on LTCG from Property
- 20% flat tax after indexation
- Surcharge + Cess applicable based on total income
- No slab-based rate
Exemptions You Can Claim (To Save Tax)
1. Section 54 – If you sell a house and buy another residential house
- Purchase within 1 year before or 2 years after sale
- Construct within 3 years
- Exempt LTCG up to the cost of new house
- Max: 1 house in India only
2. Section 54EC – Invest in NHAI or REC bonds
- Within 6 months of sale
- Lock-in period: 5 years
- Max investment: ₹50 lakh
3. Section 54F – If you sell any asset (like land) and buy a residential house
- Must not own more than 1 house at time of sale
- Must invest entire sale amount (not just profit)
When & How to Pay LTCG Tax
- Pay tax before 31st July (same financial year) while filing ITR
- Declare under “Capital Gains” in ITR-2 or ITR-3
- Pay advance tax if gains are large, or interest may apply
Important Rules to Remember
| Rule | What It Means |
|---|---|
| Holding period | > 24 months for LTCG |
| Indexation benefit allowed | Yes, to adjust for inflation |
| Set-off of capital loss | Only against other LTCG (not salary income) |
| Gifted property | Cost to previous owner is considered |
Summary Table
| Feature | LTCG on Property |
|---|---|
| Holding Period | More than 24 months |
| Tax Rate | 20% (after indexation) |
| Indexation Benefit | Yes |
| Exemptions | Sec 54, 54F, 54EC |
| ITR Form | ITR-2 or ITR-3 |
| Advance Tax Required? | Yes, if large gain |
