MoneyKit
Menu
HomeBlog

Tax

Property LTCG: 12.5% No-Indexation vs 20% With-Indexation

The Budget 2024 taxpayer choice on property LTCG — 12.5% flat vs 20% with CII indexation. Break-even holding period, worked ₹1Cr→₹2.5Cr sale, pre-Jul-2024 grandfathering.

By MoneyKit EditorialReviewed by MoneyKit Tax Desk, Reviewed against Finance (No. 2) Act 2024 + CBDT CII notificationsPublished Updated 12 min read

Budget 2024 rewrote property capital-gains tax mid-year. For properties acquired before 23 July 2024, sellers now get a taxpayer-friendly choice: pay LTCG at 12.5% flat (no indexation) OR the old 20% with CII indexation — whichever is lower. Properties acquired after that date are stuck with 12.5% flat. This post walks through when each option wins, with worked numbers.

The short answer

Why the choice exists — politics of Budget 2024

The original Budget 2024 proposal removed indexation entirely and lowered the rate from 20% to 12.5%. Middle-class property owners who’d held for decades realised their tax bills would go up because indexation’s shield was worth more than the lower rate for them. Public backlash (July 2024) led to the amended provision: pre-Jul-2024 properties get a choice.

Properties bought 23 Jul 2024 onwards get only the new 12.5% flat rate. The grandfathering protects existing owners and is the taxpayer-friendly outcome.

The two formulas

Option A — 12.5% flat, no indexation

LTCG = Sale price − Acquisition cost − Improvements Tax   = LTCG × 12.5%

Option B — 20% with CII indexation

Indexed cost = Acquisition cost × (CII sale year / CII acquisition year) LTCG         = Sale price − Indexed cost − Indexed improvements Tax          = LTCG × 20%

CII (Cost Inflation Index) is notified yearly by CBDT. FY 2001-02 is the base (CII = 100). FY 2024-25 is 363; FY 2026-27 projected at 391.

Worked example 1: ₹1 Cr → ₹2.5 Cr sale, 20-year hold

Option A — 12.5% flat

Option B — 20% with indexation

Indexation wins decisively at this holding period. In fact, a capital loss against LTCG from other assets (equity, bonds) is a bonus of ~₹70.5 L × 12.5% = ₹8.8 L of recoverable tax shield.

Worked example 2: ₹80 L → ₹1.2 Cr sale, 6-year hold

Option A — 12.5% flat

Option B — 20% with indexation

Indexation still wins here, by ~₹1.8 L. But margins are tighter — the gap would flip at shorter holdings or lower CII growth.

Worked example 3: ₹1 Cr → ₹1.3 Cr sale, 3-year hold

Option A — 12.5% flat

Option B — 20% with indexation

Tight — indexation wins by ₹23K. At slightly lower CII growth or slightly higher sale price, 12.5% would have won.

Worked example 4: ₹1 Cr → ₹1.5 Cr, 2-year hold

Option A — 12.5% flat

Option B — 20% with indexation

Here 12.5% wins by ~₹2.2 L. Short holding + high appreciation flips the decision.

Crossover table — acquisition year vs sale year (FY 2026-27)

The matrix below shows which option wins for a 1×, 2×, and 3× appreciation scenario, assuming FY 2026-27 sale and projected CII of 391. Read it as: for a property bought in FY 2010-11 and sold for 2× the purchase price in FY 2026-27, indexation wins.

Crossover matrix: which option wins at each acquisition year and appreciation ratio for a FY 2026-27 sale
Acquired FYCII that yearIndexed-cost multiplier1.5× appreciation2× appreciation3× appreciation
2001-02 (base)1003.91×Indexation (loss!)IndexationIndexation
2005-061173.34×Indexation (loss)IndexationIndexation
2010-111672.34×IndexationIndexation12.5% flat
2015-162541.54×Indexation12.5% flat12.5% flat
2020-213011.30×Indexation12.5% flat12.5% flat
2023-243481.12×12.5% flat12.5% flat12.5% flat
2024-25 (before 23 Jul)3631.08×12.5% flat12.5% flat12.5% flat
After 23 Jul 2024n/an/a12.5% flat (locked)12.5% flat (locked)12.5% flat (locked)

CII reference table (2001-02 base)

Keep this handy when computing the indexed cost of acquisition. Values are CBDT-notified for each assessment year; the last row is our working projection until CBDT notifies FY 2026-27 officially.

CBDT-notified Cost Inflation Index (CII) values from FY 2001-02 to FY 2026-27 with 2001-02 base = 100
FYCIIFYCIIFYCII
2001-021002010-111672019-20289
2002-031052011-121842020-21301
2003-041092012-132002021-22317
2004-051132013-142202022-23331
2005-061172014-152402023-24348
2006-071222015-162542024-25363
2007-081292016-172642025-26376
2008-091372017-182722026-27*391 (proj.)
2009-101482018-19280

*CBDT issues the formal FY 2026-27 notification in June–July 2026. Replace the projection with the notified value before filing AY 2026-27 returns.

Rule-of-thumb crossover

When sale price >> acquisition cost AND holding is short (< 8 years), 12.5% flat tends to win. When holding is long (15+ years) and appreciation is moderate (3-5x), indexation wins decisively.

Approximate crossover: 12.5% flat wins when (1 + appreciation) × 0.125 < (1 + appreciation − cii_growth) × 0.2, which simplifies roughly to: indexation wins if cii_growth > 0.375 × appreciation.

Plug the actual numbers into our Capital Gains Calculator — it runs both options side-by-side and highlights the lower tax automatically. No need to eye-ball the crossover.

When you MUST use the old rule (20% indexation)

When you’re locked into the new rule (12.5% flat)

Offsetting losses + reinvestment exemptions

Regardless of which option you pick:

ITR reporting

Property sale mandates ITR-2 or ITR-3. Schedule CG has separate lines for:

Practical pre-sale checklist

  1. Gather all acquisition-related documents: sale deed, registration charges, brokerage receipts, home-improvement bills.
  2. Compute CII-indexed cost using the exact FY of each capital outlay (acquisition + each improvement separately).
  3. Run both 12.5% and 20%-indexation scenarios in the Capital Gains Calculator. Pick the lower tax.
  4. Plan 54EC bonds / new-property purchase BEFORE signing the sale deed — exemption claims start from the sale date.
  5. Ensure the buyer deducts 1% TDS u/s 194-IA and deposits against your PAN. Check Form 26AS post-sale.

Run your own numbers

Our Capital Gains Calculator handles both rule options, CII indexation (2001-02 base), and Section 54EC bond exemption. Pair with the Income Tax Calculator if you have other-head income in the same year to compute total liability. For pre-purchase math (is this property worth buying?), see the rent vs buy post and the Home Loan Calculator.

Sources

Frequently asked questions

What is the new property LTCG rate after Budget 2024?
For properties acquired before 23 July 2024, you can choose between 12.5% flat (no indexation) and 20% with CII indexation — whichever is lower. For properties acquired on or after 23 July 2024, only 12.5% flat applies. Both rates exclude surcharge (10%/15%/25%/37% depending on income band) and 4% health & education cess.
Is indexation still available on property sale after Budget 2024?
Yes, but only for properties acquired before 23 July 2024. The Finance (No. 2) Act 2024 amendment preserved indexation as an option for grandfathered properties. Properties bought from 23 July 2024 onwards get the flat 12.5% rate with no indexation benefit.
At what holding period does 20% indexation beat 12.5% flat?
Around the 10–12 year mark, assuming moderate appreciation (3–5× sale-to-cost ratio). If the property has more than doubled in value over 15+ years, indexation almost always wins because the CII has compounded enough to shield a big chunk of the nominal gain. For 2–8 year holdings with strong appreciation, 12.5% flat usually wins.
How do I compute 12.5% LTCG on property?
LTCG = Sale price − Acquisition cost − Improvement cost (no indexation on any of them). Tax = LTCG × 12.5%. Surcharge + 4% cess added on top. Acquisition cost includes purchase price, registration, stamp duty, brokerage paid by you. Improvement cost = capital expenditure on extensions, floor additions, structural renovation — not regular repairs.
Can I claim Section 54 exemption under the new 12.5% regime?
Yes. Section 54 (reinvestment in another residential property within 2/3 years) applies to both the 12.5% and 20%-indexation options, up to the ₹10 Cr cap introduced in Budget 2023. So is Section 54EC (NHAI/REC bonds, ₹50 L cap, 5-year lock-in) and 54F (non-residential sale reinvested in residential). The Budget 2024 change affected only the computational rate, not the exemption sections.
What is the CII for FY 2026-27?
CBDT typically notifies the annual CII in June–July of each financial year. For FY 2024-25 it was 363, for FY 2025-26 it is 376 (notified per 2025 CBDT circular), and FY 2026-27 is projected around 391 based on retail inflation trends — pending formal notification. Use the official CBDT-notified value once released; our Capital Gains Calculator auto-updates within days of any CBDT notification.
Which option should I pick if I am selling inherited property?
Inherited property inherits the original owner’s acquisition date and cost under Section 49(1). If the deceased acquired before 23 July 2024 (almost always the case for inheritances), you — as the legal heir — get the 12.5% vs 20%-indexation choice. The indexation option usually wins because the holding period is effectively multi-generational; run both numbers in our Capital Gains Calculator to confirm.
Does TDS under 194-IA apply to property sales under the new regime?
Yes, unchanged. Buyer must deduct 1% TDS on sale consideration above ₹50 L (or stamp-duty value above ₹50 L, whichever is higher) and deposit it against the seller’s PAN via Form 26QB. This is a payment-on-account, not a final tax — the seller claims it as credit in Schedule TDS of ITR-2 / ITR-3. The TDS rate does not change based on whether the seller picks 12.5% or 20% indexation.
Is the 12.5% rate applicable to commercial property too?
Yes. The Budget 2024 amendment treats all immovable property alike — residential, commercial, industrial, plot of land. The 12.5% flat vs 20%-indexation choice applies to any long-term capital asset of immovable property held > 24 months and acquired before 23 July 2024. Post-23-Jul-2024 commercial property is also stuck at 12.5% flat.
Can I carry forward a loss from a 12.5%-option property sale?
Yes. LTCL (long-term capital loss) under either option can be set off against LTCG from any other source (equity, bonds, property) in the same year. Unabsorbed LTCL carries forward for 8 assessment years. Critically, to carry forward, you must file the ITR by the original due date (31 July 2026 for non-audit individuals for AY 2026-27) — belated returns forfeit carry-forward rights.

Use the calculator

Run the numbers for your own situation with our free calculators:

Capital Gains Calculator →Income Tax Calculator →Home Loan Calculator →

Read next

Tax

CTC to In-Hand Salary 2026

How CTC converts to in-hand salary in India FY 2026-27 — basic, HRA, EPF, professional tax, income tax. Worked examples at ₹10L, ₹25L, ₹50L, ₹1 Cr CTC under both regimes.

Tax

HRA Exemption 2026

HRA exemption under Section 10(13A) for FY 2026-27 — least-of-three formula, metro vs non-metro 50/40%, landlord PAN rules, worked examples across salary bands.

Tax

Tax Saving Guide FY 2026-27

Complete tax-saving guide for India FY 2026-27 — every Section 80 deduction, old vs new regime decision, HRA / Section 24 / 80C / 80D / 80CCD / 80E worked examples, and optimal allocation by income band.