Capital gains on property sale: LTCG, STCG and Section 54

Selling a house in India triggers capital gains. The Income Tax Act gives you four escape hatches — each with a catch.

Short-term (< 24 months)

Taxed at your slab rate. No exemption. The cleanest way to pay more tax than you should.

Long-term (> 24 months)

20% with indexation (pre-July 2024) OR 12.5% without indexation (post-July 2024). Choose whichever is lower. Budget 2024 gave a one-time grandfathering option.

Section 54 — reinvest in another house

If you buy another residential property within 2 years (or construct within 3), the gain is exempt up to ₹10 Cr (post-2023 cap).

Section 54EC — bonds

Invest up to ₹50L in NHAI / REC bonds within 6 months. 5-year lock-in, 5.25% interest.

Safety checklist for everyone in this deal

A property transaction in India touches a lot of hands. Here's what each party should insist on before money moves.

Buyers

• Verify title through a 30-year EC (Encumbrance Certificate) and cross-check the mother deed.
• Confirm RERA registration (where applicable) — the RERA number should match the one on the state RERA website.
• Never transfer a token amount on WhatsApp alone; insist on a receipt and a simple written agreement.
• Walk the property in person. Photo-only deals are a common vector for listing fraud.

Sellers

• Keep originals in a locker. Only ever share certified copies with prospective buyers.
• Insist on payment via cheque / NEFT / RTGS — avoid cash-heavy deals, especially above ₹2 lakh (20,000 cash cap for each leg under Section 269ST).
• Never hand over vacant possession until the sale deed is registered and the registration receipt is in your hand.

Agents, agencies and brokers

• Register under the state RERA (where brokering RERA-covered projects) and display your registration number on listings.
• Keep a written, dated engagement letter with the client covering brokerage %, exclusivity and a cancellation clause.
• Do a KYC on both sides before the first site visit — PAN + Aadhaar, photo ID match — and hold a copy on file.
• Never pocket earnest money directly; let it flow buyer ↔ seller and invoice the brokerage separately.

Owners

• Update your property tax every year — BBMP / MCD / BMC arrears follow the property and surface at sale time.
• On rental, include a 2–3-month notice period, a detailed inventory with photos, and a clause on painting + deep-cleaning at exit.
• Pay the rental TDS if you're a tenant paying over ₹50,000/month (Section 194-IB). Owners should chase the Form 16C from their tenant.

Final tip: when in doubt, walk away. The best real-estate deals are the ones you don't rush.