How the gain is computed
The gain is the sale price less the cost of acquisition, the cost of any improvement, and the expenses of transfer such as brokerage and legal fees. For property, if the stamp duty value exceeds the agreed price by more than 10%, the stamp duty value is taken as the sale price.
Short-term gains on assets other than listed equity are added to income and taxed at slab rates. Debt mutual funds bought on or after 1 April 2023 are taxed at slab rates regardless of how long they're held.
Saving tax by reinvesting
| Exemption | Applies to | Conditions |
|---|---|---|
| Section 82 (earlier 54) | Long-term gain on a residential house | Buy a house 1 year before or 2 years after, or construct within 3 years; gain above ₹10 crore not exempt; two houses allowed once if the gain is up to ₹2 crore |
| Section 85 (earlier 54EC) | Long-term gain on land or building | Invest in specified bonds within 6 months; up to ₹50 lakh; 5-year lock-in |
| Section 86 (earlier 54F) | Long-term gain on any asset other than a house | Invest the net sale consideration in a residential house; ₹10 crore cap |
| Section 83 (earlier 54B) | Agricultural land | Reinvestment in agricultural land within the time allowed |
If the reinvestment isn't made before the return due date, the unused amount has to be deposited in the Capital Gains Account Scheme to keep the exemption open.
Documents required
- Purchase and sale deeds, or broker contract notes and capital gains statements.
- Cost of improvement records.
- Transfer expenses — brokerage, legal fees.
- Stamp duty value of the property.
- Reinvestment documents — new property, bonds, or Capital Gains Account Scheme deposit.
- For inherited assets: the previous owner's cost and date of acquisition.
How we handle it
Classify the asset and period
Which rate applies depends on the asset and holding period.
Compute the gain
Cost, improvement and expenses, with indexation where it's still available.
Plan exemptions
Before the sale if possible — reinvestment deadlines are strict.
Advance tax
Tax on the gain paid in the next instalment to avoid interest.
Report in the return
Usually ITR-2 or ITR-3, with the capital gains schedules completed.
Practical notes from our engagements
- Advance tax missed on a large gain. Interest applies from the instalment after the sale. Pay in the next instalment.
- Capital Gains Account Scheme not used. If the new house isn't bought by the return due date, deposit the amount to keep the exemption.
- Inherited property cost taken as zero. The cost to the previous owner is available, and the holding period includes theirs.
How we handle capital gains
We compute the gain correctly, plan exemptions before deadlines pass, pay advance tax on time, and report the gain in the right schedules.
Related services
Frequently asked questions
What is the tax on long-term capital gains on shares?
12.5% on gains above ₹1.25 lakh a year, for listed equity shares and equity mutual funds held for more than 12 months.
What is the tax on short-term capital gains on shares?
20%, for listed equity shares and equity funds held for 12 months or less.
How is property sale taxed?
Long-term gains (held over 24 months) at 12.5% without indexation. For land or buildings bought before 23 July 2024, resident individuals and HUFs can choose 20% with indexation if lower.
How much can be invested in capital gains bonds?
Up to ₹50 lakh, within six months of the sale, under Section 85 (earlier 54EC).
Is there a limit on the house-to-house exemption?
Yes. Capital gain above ₹10 crore isn't exempt under Section 82 (earlier 54).
What are the new section numbers?
Under the Income-tax Act, 2025: Section 196 (earlier 111A), 198 (earlier 112A), 197 (earlier 112), 82 (earlier 54), 85 (earlier 54EC) and 86 (earlier 54F).