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Capital gains tax on property in India depends on the holding period. If you sell within 2 years of purchase, the gain is Short-Term Capital Gain (STCG) and is added to your income and taxed at your income tax slab rate. If you sell after 2 years, it is Long-Term Capital Gain (LTCG). After Budget 2024, LTCG is taxed at 12.5% without indexation benefit. Previously, LTCG was taxed at 20% with indexation (Cost Inflation Index adjustment to increase the cost base). Taxpayers can choose the more favorable option for properties purchased before July 23, 2024.

Section 54 of the Income Tax Act allows you to claim exemption on LTCG from selling a residential property if you reinvest the gains (not the entire sale proceeds) in another residential property in India. You must purchase the new property within 1 year before or 2 years after the sale, or construct it within 3 years. The exemption is capped at ₹10 crore. Alternatively, Section 54EC allows investing LTCG up to ₹50 lakhs in specific government bonds (NHAI, REC) within 6 months to claim exemption.

You can deduct: agent/broker commissions (typically 1–2%); legal charges and documentation fees; outstanding home loan principal repayment; prepayment penalties; renovation or repair costs done to improve the property before sale (if added to cost of acquisition); and in some cases, stamp duty and registration paid at the time of original purchase (added to indexed cost base). Interest paid on the home loan is not deductible from capital gains but can be claimed under Sec 24(b) in the year of payment.