LTCG Tax on Property After Budget 2024: 12.5 Percent Rule

On 23 July 2024 the rules for taxing profit on the sale of land or a building changed completely. Long-term capital gains are now taxed at a flat 12.5% with no indexation, instead of the old 20% with indexation that adjusted your purchase price for inflation. If you bought your property before that date, you still have a safety net worth understanding.

Before Budget 2024, long-term capital gains on property were taxed at 20%, but you could first inflate your purchase price using the Cost Inflation Index. That indexation often wiped out most of the taxable gain on an old property.

The Finance (No. 2) Act, 2024 amended Section 112 of the Income Tax Act, 1961. For any transfer of a long-term capital asset that takes place on or after 23 July 2024, the rate is now 12.5% and indexation is gone. The benefit of indexed cost under the proviso to Section 48 now applies only to transfers made before 23 July 2024.

This is a capital-gains computation, not a Chapter VI-A deduction. So it applies the same way whether you file under the old tax regime or the new one. Your choice of regime does not change how this gain is taxed.

Parliament added a transition relief so that owners of older property are not suddenly worse off. For a resident individual or a Hindu Undivided Family (HUF) who sells land or a building that was acquired before 23 July 2024, tax can be computed two ways:

• the new way: 12.5% without indexation, or
• the old way: 20% with indexation.

The taxpayer pays whichever of the two amounts is lower. In practice you compute both figures and any extra tax that the new method would have charged over the old method is simply ignored.

Two limits matter. First, this lower-of relief is written for a resident individual or HUF. Because the proviso is worded that way, non-residents and companies do not get this choice and are taxed at the flat 12.5% without indexation. Second, the property must have been acquired before 23 July 2024; anything bought on or after that date is taxed only at 12.5% without indexation, with no old-method option.

For land or a building to qualify as a long-term capital asset, you must hold it for more than 24 months. The CBDT confirmed in its Budget 2024 FAQ that the holding period for immovable property stays at 24 months. Sell within 24 months and the profit is a short-term capital gain, taxed at your normal slab rate, not at 12.5%.

The rate change does not touch the reinvestment exemptions. Whichever rate applies to you, you can still claim:

• Section 54 if you reinvest the gain from a residential house into another residential house.
• Section 54F if you reinvest the full sale value of any other long-term asset into a residential house.
• Section 54EC if you invest the gain, up to ₹50 lakh, in specified bonds such as NHAI or REC within six months.

The CBDT FAQ states the roll-over benefits remain the same as before. If your exemption fully covers the gain, the 12.5% versus 20% debate may not even matter for your final bill. For a deeper look at the bond route, see https://righttoinformation.wiki/section-54ec-capital-gains-bonds-nhai-rec-india and for shares and mutual funds under the separate Section 112A rules see https://righttoinformation.wiki/ltcg-tax-equity-shares-mutual-funds-section-112a-india .

If you use the old 20% with indexation method, you need the Cost Inflation Index (CII). The CBDT notified the CII for FY 2024-25, relevant to AY 2025-26, as 363 through Notification No. 44/2024 dated 24 May 2024. You divide the CII of the sale year by the CII of the purchase year, multiply by your cost, and that gives your indexed cost of acquisition.

1. Confirm you held the property for more than 24 months so the gain is long-term.
2. Note the sale date. On or after 23 July 2024 means the new rules apply.
3. Work out the plain gain: sale price minus actual cost and eligible expenses. Tax this at 12.5%.
4. If you are a resident individual or HUF and bought before 23 July 2024, also work out the indexed gain using the CII, and tax that at 20%.
5. Compare the two tax figures and keep the lower one.
6. Reduce the gain by any Section 54, 54F or 54EC exemption you qualify for before applying the rate.
7. Report the gain in Schedule CG of your income tax return.

• Registered sale deed and the original purchase deed.
• Proof of cost of improvement, with dated bills.
• Stamp duty and registration receipts.
• Bank statements showing the sale proceeds and any reinvestment.
• Bond certificates or new-property purchase deed if you claim an exemption.

• Assuming indexation still applies to a 2025 sale. For transfers on or after 23 July 2024 the indexed-cost proviso to Section 48 no longer applies.
• Expecting the lower-of choice as an NRI or a company. The relief is written for a resident individual or HUF only.
• Counting on a ₹1.25 lakh exemption. That enhanced annual exemption is for listed shares and equity mutual funds under Section 112A. It does not apply to land or building gains under Section 112.
• Selling within 24 months and expecting 12.5%. That makes the gain short-term, taxed at your slab rate.

Sunita Rao of Bengaluru bought a plot in 2010 for ₹20 lakh and sold it in March 2025 for ₹90 lakh. Because she is a resident individual who acquired the plot before 23 July 2024, she can compute her tax both ways. Under the new method her gain is ₹70 lakh, taxed at 12.5%, which is ₹8.75 lakh. Under the old method she indexes her ₹20 lakh cost using CII, which lifts her cost and shrinks her taxable gain, then applies 20%. She compares both figures and pays the lower one. For a property held this long, the old indexed method often wins, which is exactly why the relief exists.

Capital-gains disputes often turn on a property's value. If you need the official circle rate or the stamp-duty valuation history for your plot, you can file an RTI with the office of the Sub-Registrar or the local municipal body, which hold these records. A clear circle-rate record can support your cost figure and your reinvestment math. You can draft that request with https://righttoinformation.wiki/tools/ai-rti-draft-app.html , and if the office ignores you, escalate using https://righttoinformation.wiki/tools/first-appeal-app.html . To raise the matter publicly you can use https://righttoinformation.wiki/tools/awaaz-rti.html . Your right to this information flows from the RTI Act, 2005. For the wider playbook on using RTI well, read The RTI Playbook.

For any sale of land or a building on or after 23 July 2024, long-term capital gains are taxed at 12.5% without indexation, down from 20% with indexation earlier.

Yes. For transfers on or after 23 July 2024, the indexed cost of acquisition under the proviso to Section 48 is no longer available. Indexation applies only to transfers made before that date.

Only a resident individual or HUF who acquired the property before 23 July 2024 can. They compute tax at both 12.5% without indexation and 20% with indexation, and pay the lower amount.

No. The relief is worded for a resident individual or HUF. Non-residents and companies are taxed at the flat 12.5% without indexation.

More than 24 months. The CBDT confirmed in its Budget 2024 FAQ that immovable property keeps the 24-month holding period. Sell sooner and the gain is short-term, taxed at your slab rate.

The CII for FY 2024-25, relevant to AY 2025-26, is 363, notified by the CBDT through Notification No. 44/2024 dated 24 May 2024.

Yes. These reinvestment exemptions are unchanged. They apply whether your gain is taxed at 12.5% or 20%, and Section 54EC bond investment is capped at ₹50 lakh.

No. This is a capital-gains computation, not a Chapter VI-A deduction, so it works the same way under both the old and new income tax regimes.

No. The ₹1.25 lakh annual exemption applies to listed shares and equity mutual funds under Section 112A, not to land or building gains under Section 112.

• Finance (No. 2) Act, 2024, amendments to Section 112 and Section 48, Income Tax Act, 1961.
• CBDT FAQ on the new capital gains tax regime, Union Budget 2024-25, 24 July 2024.
• CBDT Notification No. 44/2024 dated 24 May 2024, Cost Inflation Index for FY 2024-25.

Reviewed by Dr. Shrawan Kumar Pathak.