How is profit on selling a plot taxed in 2026?
If you sell a plot after holding it for more than 24 months, the profit is a long-term capital gain taxed at 12.5% without indexation, plus surcharge and cess. Sold within 24 months, the profit is short-term and added to your income at your slab rate. Land bought before 23 July 2024 gives resident individuals a choice of 20% with indexation instead.
| Situation | Tax on the gain |
|---|---|
| Held 24 months or less | Short-term: added to income, slab rate |
| Held over 24 months, bought on or after 23 July 2024 | Long-term: 12.5%, no indexation |
| Held over 24 months, bought before 23 July 2024 (resident individual or HUF) | Lower of 12.5% without indexation or 20% with indexation |
| NRI seller, long-term | 12.5% without indexation |
How can you reduce or avoid the tax?
Two common routes. Invest the net sale proceeds in one residential house (the section 54F route, renumbered section 86 under the Income-tax Act, 2025), or invest up to ₹50 lakh of the gain in specified bonds within six months (the 54EC route), which are locked in for five years.
- House route (54F, now section 86): buy a house within one year before or two years after the sale, or build one within three years. Full exemption needs the whole net sale consideration invested; partial investment gives a proportional exemption. You should not own more than one other house on the date of sale. The exemption is capped at ₹10 crore.
- Bond route (54EC): REC, PFC, IRFC and similar bonds, up to ₹50 lakh per financial year, within six months of the sale, five-year lock-in.
- Not ready by the filing date? Deposit the unused amount in the Capital Gains Account Scheme before your return's due date to keep the claim alive.
Building a house on the plot first: does that change things?
If you build a house and sell the house and land together, the holding period of the land and the building are counted separately, and the main exemption route becomes the one for selling a residential house (section 54, renumbered section 82). A chartered accountant should work out the split before you sell.
What about TDS when you sell?
If you are a resident and the price is ₹50 lakh or more, your buyer deducts 1% TDS. If you are an NRI, the buyer must deduct TDS at the capital gains rate, often on the full price unless you get a lower-deduction certificate from the tax department first. NRIs should apply for that certificate early.
A simple example
You bought a 1,250 sq ft plot for ₹69.9 lakh in 2026 and sell it for ₹90 lakh in 2031, after costs of sale. The long-term gain of ₹20.1 lakh is taxed at 12.5% (₹2.51 lakh plus cess) unless you use the house or bond route. These numbers illustrate the calculation, not a price forecast.
Frequently asked questions
What is the holding period for land to be long term?
More than 24 months. Land sold within 24 months of purchase gives short-term capital gains, taxed at your slab rate.
Is indexation available on land in 2026?
Only for land bought before 23 July 2024, and only for resident individuals and HUFs, who can choose the lower of 12.5% without indexation or 20% with indexation.
Can I save tax by buying another plot?
No. The house route needs a residential house, bought or built. Another plot alone does not qualify, though building a house on it within three years can.
Did the new Income-tax Act change capital gains rules?
From 1 April 2026 the Income-tax Act, 2025 replaced the 1961 Act and renumbered sections (for example 54 became 82 and 54F became 86). The rates and main conditions described here are the same.
Sources
- Finnovate: Capital gains tax on property in India explained
- Aditya Birla Capital: How to save capital gains tax on sale of land
- Income Tax Department: TDS on purchase of immovable property
General information, not legal, tax or financial advice. Rules and rates change; confirm with the sub-registrar, your bank or a chartered accountant before acting.