12.5% or 20% With Indexation? How Tax on Selling Your Mumbai Flat Is Worked Out Now

Since 23 July 2024, long-term capital gains on property are taxed at 12.5% without indexation. But there's an important relief for many Mumbai owners, now in section 197 of the Income-tax Act, 2025.

The rule

• Base rate: Long-term capital gains are taxed at 12.5%.
• Relief for older property: For a resident individual or HUF selling land or a building acquired before 23 July 2024, any excess of the 12.5% tax over tax computed at 20% on the gain using indexed cost is ignored. In effect, you pay the lower of the two.
• Non-residents: The relief in section 197(3) is written for residents. NRIs pay 12.5% without indexation.

When does indexation win?

Indexation raises your cost in line with inflation. The longer you've held the flat and the slower its price has grown, the more likely the 20%-with-indexation figure is lower. For a flat whose price rose sharply, 12.5% without indexation can be lower.