Selling, gifting, or even exchanging real estate in India can trigger complex tax consequences. Whether you’re a homeowner, investor, or developer, understanding capital gains tax and available exemptions is crucial to avoid surprises.
Let’s break down everything you need to know — with expert support available anytime at 👉 hemantconsulting.com
📌 Capital Gains on Sale of Property – The Basics
When you sell a property, the profit you earn is called a Capital Gain. Based on the holding period, it is categorized as:
| Type of Gain | Holding Period | Tax Rate |
|---|---|---|
| Short-Term Capital Gain (STCG) | Less than 24 months | Slab rate (per your income) |
| Long-Term Capital Gain (LTCG) | 24 months or more | 20% with indexation benefits |
📈 Indexed Cost of Acquisition (ICA)
For LTCG, you can reduce your taxable profit by applying the indexed cost:
💡 Indexed Cost = (Original Purchase Price × Cost Inflation Index of Sale Year) ÷ CII of Purchase Year
🧮 Need help with this calculation? Our tax consultants at HemantConsulting.com will prepare a detailed capital gains statement for you.
🛡️ Exemptions You Can Claim to Save Tax
You can legally save capital gains tax by reinvesting under certain sections:
✅ Section 54 – Reinvest in Another Residential Property
Available for individuals/HUF
Must reinvest in a new residential house within: → 1 year before or 2 years after sale (or construct within 3 years)
Max 2 properties allowed (if LTCG ≤ ₹2 Cr)
✅ Section 54EC – Invest in Bonds
Buy NHAI or REC Bonds within 6 months
Limit: ₹50 lakhs
Lock-in: 5 years
✅ Section 54F – If Full Sale Proceeds Reinvested
Applicable when selling non-residential property (like plots)
📢 Want to know which section is best for you? Just drop a query at HemantConsulting.com
🔄 Exchange of Properties – Is it Taxable?
Yes. Even bartering properties (like flat-to-flat) is treated as a “transfer” under Income Tax Act.
🔍 Fair Market Value (FMV) is used to compute gain.
🏢 Recent ITAT rulings clarified that even partial cash + property exchanges attract capital gains — so plan wisely.
📌 HemantConsulting.com provides advisory on capital gains for joint development agreements (JDAs), redevelopment deals, or land swaps.
🏦 Other Key Points to Note
TDS at 1% (Section 194-IA) is applicable on property sales > ₹50 lakh
PAN-Aadhaar linking is mandatory before executing the sale
Don’t forget to report property sales in ITR Schedule CG
Any reinvestment (like in Section 54) must be tracked and disclosed properly