Understanding Payable Tax on Residential Property

When you sell a residential property in India, the profit earned from the sale is categorized as capital gains, which is subject to taxation under the Income Tax Act. The amount of tax you pay depends on whether the gains are classified as short-term capital gains or long-term capital gains. If the property is sold within 24 months of purchase, the profit is considered STCG and is taxed according to your applicable income tax slab rates. However, if the property is held for more than 24 months, the gains are treated as LTCG and taxed at 20% after indexation benefits. Surcharge and cess may apply, depending on your income level. Understanding these tax implications is essential to plan your finances effectively and explore available exemptions to reduce your tax liability.

Income Tax Payable on Different Types of Residential Property in India:

Type of Property

Holding Period

Tax Type

Tax Rate

Short-Term Residential Property

Less than 24 months

Short-Term Capital Gains

As per applicable income tax slab rates (e.g., 5%, 20%, or 30%)

Long-Term Residential Property

More than 24 months

Long-Term Capital Gains (LTCG)

20% with indexation benefit (plus surcharge and cess, if applicable)

Inherited Residential Property

Depends on the holding period

LTCG or STCG

Same as above, based on holding period from the date of inheritance

Residential Property (NRIs)

More than 24 months

Long-Term Capital Gains (LTCG)

20% with indexation benefit (plus surcharge and cess, if applicable)

How to Save Tax on the Sale of Residential Property?

Selling a residential property can lead to significant tax liabilities, but with proper planning, you can minimize your tax burden. The Income Tax Act offers several provisions, such as Section 54, Section 54EC, and Section 54F, which allow you to save tax by reinvesting the sale proceeds into another property, capital gains bonds, or specified assets. By understanding these exemptions and strategically timing your investments, you can reduce or even eliminate your capital gains tax. Additionally, leveraging indexation benefits and exploring joint ownership options can optimize your tax savings. Let’s dive into some key strategies to help you save tax on the sale of residential property.

Reinvest sale proceeds in a new residential property under Section 54.

Invest in capital gains bonds under Section 54EC to save tax.

Use Section 54F for tax exemption when buying a new residential property.

Claim indexation benefits to reduce long-term capital gains tax.

Consider joint ownership to split capital gains and lower tax liability.

Plan the sale timing to align with financial goals and tax-saving opportunities.

Explore exemptions for inherited property sales under specific conditions.

Consult a tax expert to ensure compliance and maximize savings.

Role of Prakasha & Co for Saving Tax on Residential Property

When it comes to navigating the complexities of tax laws and maximizing savings on the sale of residential property, Prakasha & Co stands as a trusted legal partner. With years of expertise in tax planning and property law, the firm provides tailored solutions to help clients minimize their capital gains tax liability while ensuring full compliance with the Income Tax Act. From advising on exemptions under Section 54, Section 54EC, and Section 54F to assisting with documentation and filing, Prakasha & Co. offers end-to-end support to make the process seamless and stress-free. Whether you’re selling an inherited property, reinvesting sale proceeds, or exploring tax-saving bonds, their team of legal experts ensures you make informed decisions to protect your financial interests.

Key Features:

Expert guidance on capital gains tax exemptions and deductions.

Assistance with reinvestment strategies under Section 54 and Section 54F.

Support for investing in capital gains bonds under Section 54EC.

Help with calculating indexation benefits for long-term capital gains.

Legal advice on joint ownership and tax implications.

Comprehensive documentation and filing support for property sales.

Tailored solutions for NRIs selling residential property in India.

Proactive planning to align property sales with tax-saving opportunities.

Dedicated team to ensure compliance with income tax regulations.

Contact Prakasha & Co for more information about how to save tax on the sale of residential property at

Phone no.: +91 7019 827 351