Archive · 18 Jul 2026
12.5% LTCG Tax Without Indexation May Save More
When you sell a property in India, you can choose between two ways to calculate your long-term capital gains tax.
One way is to adjust the purchase price for inflation (called indexation) and pay a 20% tax on the remaining gain.
The other way is to pay a flat 12.5% tax on the total gain without any adjustment.
A financial advisor, Dev Patel, explained that for properties bought before 23 July 2024 and sold in FY 2025-26, the flat 12.5% tax rate might save you more money, especially if your property's value has increased significantly.
For example, if you bought a property for ₹10 lakh in FY 2017-18 and sold it for ₹28 lakh in FY 2025-26, using indexation would result in a tax of ₹2,83,529, while the flat 12.5% tax rate would result in a tax of ₹2,25,000.
So, the flat rate could be cheaper if your property's value has grown a lot.
However, if you sell your property for less than ₹20.2 lakh, indexation might be the better option.
For properties purchased before 23 July 2024 and sold in FY 2025-26, eligible resident individuals and HUFs can choose between 20% tax with indexation or a flat 12.5% tax rate without indexation.
Indexation adjusts the purchase price for inflation, reducing the taxable capital gains.
A flat 12.5% tax rate is applied to the total capital gains without any adjustment for inflation.
For a property bought for ₹10 lakh in FY 2017-18 and sold for ₹28 lakh in FY 2025-26, the tax liability with indexation is ₹2,83,529, while the tax liability with the flat 12.5% rate is ₹2,25,000.
The break-even point for choosing between indexation and the flat rate is a sale price of ₹20.2 lakh.
- Who
- Resident individuals and Hindu Undivided Families (HUFs)
- What
- Comparison of tax liabilities between indexation and flat 12.5% tax rate for long-term capital gains on property sales
- When
- Properties purchased before 23 July 2024 and sold during FY 2025-26
- Where
- India
- Why
- To determine the more tax-efficient option for property sellers
Indexation Benefit
Flat 12.5% Tax Rate
Tax Calculation Method
Indexation Benefit
Indexation adjusts the purchase cost for inflation, reducing the taxable capital gains.
Flat 12.5% Tax Rate
A flat 12.5% tax rate is applied to the total capital gains without any adjustment for inflation.
Tax Liability
Indexation Benefit
Higher tax liability due to the 20% tax rate, even after adjusting for inflation.
Flat 12.5% Tax Rate
Lower tax liability due to the reduced 12.5% tax rate.
Break-even Point
Indexation Benefit
Indexation is beneficial if the sale price is below ₹20.2 lakh.
Flat 12.5% Tax Rate
The flat 12.5% tax rate is more beneficial if the sale price is above ₹20.2 lakh.
- Purchase Year
- FY 2017-18
- Purchase Price
- ₹10,00,000
- Sale Year
- FY 2025-26
- Sale Price
- ₹28,00,000
- Adjusted Cost with Indexation
- ₹13,82,353
- Long-term Capital Gain with Indexation
- ₹14,17,647
- Tax Payable with Indexation
- ₹2,83,529
- Long-term Capital Gain without Indexation
- ₹18,00,000
- Tax Payable without Indexation
- ₹2,25,000
- Break-even Point
- ₹20.2 lakh
- Eligibility for Indexation
- Resident individuals and HUFs for properties purchased before 23 July 2024
- Tax Rate for Properties Purchased on or after 23 July 2024
- 12.5% flat rate without indexation