Seller guide
Capital Gains Tax, TDS & Selling Costs
Selling property isn’t just about the price — what you actually keep depends on capital gains tax, the TDS your buyer withholds, and a handful of transaction costs. This guide breaks down all three under the rules in force for 2026: how the gain is taxed after the Budget 2024 changes, the exemptions that can wipe it out, how TDS and its forms work (including the 2026 procedural changes), and the other costs of closing a sale.
What stands between the price and your take-home
Three things sit between the sale price and the money in your account: the tax on your profit, the tax your buyer withholds, and the costs of closing the deal.
Note
Capital gain = sale price − cost of acquisition − cost of improvement − selling expenses. Everything below either changes this number or is withheld from what you receive.
The three buckets
Understand each and you can forecast your net proceeds.
- Capital gains tax — income tax on the profit you make
- TDS — tax the buyer withholds and deposits, credited back to you later
- Selling costs — brokerage, legal, transfer and loan-closure charges
Capital gains tax: short-term vs long-term
How long you owned the property decides how the profit is taxed. For real estate the dividing line is 24 months.
The holding period decides the rate
Same profit, very different tax bill.
| Holding period | Type | How it’s taxed |
|---|---|---|
| Sold within 24 months | Short-term (STCG) | Added to your income, taxed at your slab (up to 30%) + surcharge & cess |
| Held over 24 months | Long-term (LTCG) | 12.5% + surcharge & cess (see the purchase-date rule below) |
Long-term: which rate applies depends on when you bought
The Budget 2024 changed LTCG and the rules are fully active for 2026 — the treatment turns on your purchase date.
| When you bought | How LTCG is taxed |
|---|---|
| On or after 23 July 2024 | Flat 12.5% + surcharge & cess. Indexation not allowed. |
| Before 23 July 2024 (resident individual / HUF) | Whichever is lower: 12.5% without indexation, or 20% with indexation |
Note
With the 20% option, the purchase price is inflation-adjusted using the Cost Inflation Index (CII): indexed cost = purchase price × (CII of sale year ÷ CII of purchase year). Run both methods and pay the lower tax.
How the gain is calculated
Work the gain out before you worry about the rate.
The formula
Capital gain = sale price − cost of acquisition − cost of improvement − selling expenses. Tax then applies to this gain, after any exemptions.
Worked example
A flat bought for ₹50 lakh and sold for ₹90 lakh.
| Component | Amount |
|---|---|
| Sale price | ₹90,00,000 |
| Less: cost of acquisition | −₹50,00,000 |
| Less: cost of improvement | −₹5,00,000 |
| Less: brokerage (selling expense) | −₹2,00,000 |
| Capital gain | ₹33,00,000 |
Expenses that reduce your taxable gain
The right expenses — backed by proof — lower the gain the tax is charged on.
Warning
No bill, no deduction. Keep the purchase deed, stamp-duty and registration receipts, contractor and improvement invoices, brokerage and legal receipts, and bank statements — missing proof shrinks your deductions and inflates your taxable gain.
Selling expenses (off the sale consideration)
Costs incurred wholly and exclusively for the transfer come straight off the sale price.
- Brokerage / commission paid to sell
- Legal fees — sale-deed drafting, title check, documentation
- Advertising — portals, premium listings, digital, print
- Documentation — agreements, stamp paper, notary
- Transfer charges you bear — society transfer, builder NOC, mutation
Cost of acquisition
What the property originally cost you to buy.
- Purchase price
- Stamp duty
- Registration charges
- Legal charges at purchase
- Brokerage paid while buying
Cost of improvement
Capital improvements that added to the property (not routine repairs), if you can prove them with bills.
- Extra room or floor
- Modular kitchen, flooring replacement, false ceiling
- Electrical rewiring, bathroom renovation
- Boundary / compound wall, water-tank installation
Save the tax by reinvesting (Sections 54, 54EC, 54F)
The law lets you shelter the gain — sometimes entirely — if you reinvest it in specified ways within set time limits.
Tip
Reinvested correctly and on time, these exemptions can wipe out your LTCG completely. Plan the reinvestment before you sell, not after.
The three main exemptions
Pick the one that matches what you sold and what you’ll buy.
| Section | When it applies | Reinvest into |
|---|---|---|
| 54 | You sold a residential house | Another residential house (gains up to ₹10 crore) |
| 54EC | Long-term gain on land or building | Notified government bonds (up to ₹50 lakh, within 6 months) |
| 54F | You sold a non-residential asset (e.g. a plot) | A residential house (invest the net sale consideration) |
TDS on the sale
Tax Deducted at Source is withheld by the buyer before paying you and deposited with the government; you claim it back as credit when you file. It is deducted on the higher of the sale value or the stamp-duty value.
Rates & thresholds
Who withholds how much depends on the seller and the value.
| Seller | Sale value | TDS rate |
|---|---|---|
| Resident | Below ₹50 lakh | Nil |
| Resident | ₹50 lakh or more | 1% |
| Resident without PAN | ₹50 lakh or more | 20% |
| NRI (long-term gain) | Any value | 12.5% + surcharge & cess |
| NRI (short-term gain) | Any value | Income-tax slab |
Worked example (resident)
A resident selling for ₹80 lakh.
| Step | Amount |
|---|---|
| Sale price | ₹80,00,000 |
| TDS at 1% | ₹80,000 |
| Buyer pays the seller | ₹79,20,000 |
| Buyer deposits with the govt | ₹80,000 |
Note
The ₹80,000 isn’t lost — the seller claims it as TDS credit while filing the income-tax return.
TDS paperwork — and what changes in 2026
The buyer handles the filing, but the seller must confirm the credit lands.
Important
From 1 April 2026, under the new Income-tax Act 2025, the 1% TDS rule moves from Section 194-IA to Section 393, and Form 26QB is replaced by the consolidated Form 141. The rates and the ₹50 lakh threshold are unchanged — only the section numbers and forms.
Form 26QB
The challan-cum-statement the buyer files to deposit the TDS. No separate TAN is needed for this provision.
Form 16B
The TDS certificate the buyer downloads and gives the seller after depositing. Check the TDS shows in your Form 26AS / Annual Information Statement (AIS) before you file.
TDS when the seller is an NRI
If you are a Non-Resident Indian, Section 195 applies instead of the 1% rule — and it is far heavier.
Warning
For an NRI, TDS is deducted on the entire sale value, not just the gain, and at a much higher rate. Apply for a lower / nil deduction certificate from the tax officer before the sale to avoid a large amount being locked up until you file.
What’s different
The buyer’s obligation is bigger, so plan it early.
- TDS is under Section 195, at a rate well above 1%
- It is generally deducted on the gross sale consideration
- A lower / nil TDS certificate (where eligible) frees up the excess
Other selling costs
Beyond tax, budget for the direct costs of executing the transfer — many of which are also deductible from your capital gain.
Note
Builder transfer / NOC fees were historically quoted at ₹500–1,500+ per sq ft, but several regulators have capped them — e.g. UP-RERA limits the builder transfer / NOC fee to ₹25,000. Verify your local RERA before agreeing to a developer’s demand.
The usual line items
What most sellers actually pay to close.
| Cost | Typical amount |
|---|---|
| Brokerage / agency | 1–2% of sale price (negotiable) |
| Legal & documentation | ₹10,000–₹50,000 |
| Builder transfer / NOC | Capped in some states (e.g. UP-RERA ₹25,000) |
| Society transfer charges | If applicable |
| Advertising / photography / staging | Optional |
| Outstanding maintenance / property-tax arrears | If unpaid |
| Loan foreclosure / prepayment | See below |
Closing a home loan on the sale
If a loan is running on the property, it is cleared from the sale proceeds and the lender releases the documents.
The closure steps
Do these to get a clean, unencumbered title to the buyer.
- Get a foreclosure statement from the lender
- Pay off the outstanding loan (usually from the buyer’s payment)
- Collect the No Dues Certificate (NDC)
- Take back the original title documents
- Ensure the lender’s charge is removed from the records
Prepayment penalty
On a floating-rate home loan, banks cannot charge a prepayment / foreclosure penalty. On a fixed-rate loan, expect a penalty of about 2–4% of the outstanding principal.
What you actually take home
Put it together and this is the number that reaches your account.
Best practice
Net sale proceeds = sale price − outstanding loan − brokerage − legal & documentation − other selling expenses − applicable tax (after TDS credit and any exemptions).
Plan for the gap
The headline price and your bank balance are rarely the same number. Budget for the loan payoff, the costs above and the tax before you commit the money to your next purchase.
Frequently asked questions
How much capital gains tax do I pay when selling property?
If you held it more than 24 months the gain is long-term: 12.5% (plus surcharge and cess) with no indexation — or, for property bought before 23 July 2024, the lower of 12.5% without indexation or 20% with indexation. Sold within 24 months, the gain is added to your income and taxed at your slab (up to 30%).
Can I avoid capital gains tax on a property sale?
Often yes, by reinvesting: Section 54 (buy another residential house, gains up to ₹10 crore), Section 54EC (notified government bonds up to ₹50 lakh within 6 months) or Section 54F (invest the net consideration from a non-residential asset in a house) — each subject to conditions and time limits.
Who deducts TDS on a property sale, and how much?
The buyer deducts it and deposits it with the government. For a resident seller it is 1% on a sale of ₹50 lakh or more (20% if the seller has no PAN); for an NRI seller, Section 195 applies at a much higher rate. The seller claims the TDS as credit when filing their return.
What are Form 26QB and Form 16B?
Form 26QB is the challan-cum-statement the buyer files to deposit the 1% TDS (no TAN needed); Form 16B is the TDS certificate the buyer then issues to the seller. Verify the TDS appears in your Form 26AS / AIS before filing. From 1 April 2026, under the Income-tax Act 2025, these move to Section 393 and Form 141 — same rates and threshold.
How is TDS different for NRI sellers?
Under Section 195, TDS for an NRI is much higher than 1% and is usually deducted on the gross sale value — not just the gain — unless the seller obtains a lower or nil deduction certificate from the tax officer.
Which selling expenses can I deduct from capital gains?
Expenses incurred wholly and exclusively for the transfer — brokerage, legal and documentation fees, advertising, and any transfer / NOC charges you bear — plus the cost of improvement, if backed by bills. Keep every receipt; missing proof reduces your allowable deductions.
In summary
- 24 months hold beyond this and your gain is long-term
- 12.5% LTCG rate (no indexation) under the post-Budget-2024 regime
- 1% TDS the buyer deducts on a resident sale of ₹50 lakh+
- ₹50 lakh sale value at or above which TDS applies
This guide is general information for 2026, not tax or legal advice. Rates, thresholds, sections, forms and exemption limits change and depend on your individual circumstances — for example, the Section 393 / Form 141 changes take effect from 1 April 2026. Confirm the current position and your exact liability with a chartered accountant before you sell.
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