Immovable Property or Land is considered to be a Capital Asset as per the Income Tax Act. A taxpayer who sells an immovable property or land should report such income or loss as Capital Gains it in the Income Tax Return and pay tax on it at the applicable rate. Capital Gain Tax on the sale of property or land is determined on the basis of the nature of the long term or short term.
Capital Gain on Sale of Property / Land
The Capital Gain can be of two types depending on the period of holding of the capital asset.
- Long Term Capital Gain (LTCG): If the taxpayer sells an immovable property or land held for more than 24 months, gain or loss on such sales is a Long Term Capital Gain (LTCG) or Long Term Capital Loss (LTCL).
- Short Term Capital Gain (STCG): If the taxpayer sells an immovable property or land held for up to 24 months, gain or loss on such sale is a Short Term Capital Gain (STCG) or Short Term Capital Loss (STCL).
Income Tax on Sale of Immovable Property
Income Tax on the sale of immovable property i.e. land, building, or house property is similar to the tax treatment of other capital assets.
Calculation of Long Term Capital Gain tax on sale of property in India
The income tax rate for LTCG on sale of property in India is 20% with Indexation benefit. Using the indexation benefit, the taxpayer can adjust the cost of the asset with the CII (Cost Inflation Index) List issued by the Income Tax Department. The Indexed Cost of Acquisition is used to calculate the Capital Gains. The cost of Improvement is the expense incurred by the taxpayer for making addition or improvements to the capital asset. The taxpayer can also calculate the Indexed Cost of Improvement.
| Particulars | Amount | |
| Sale Consideration | XXXX | |
| Less | Transfer Expenses | (XXXX) |
| Less | Indexed Cost of Acquisition | (XXXX) |
| Less | Indexed Cost of Improvement | (XXXX) |
| Less | Exemption u/s 54, 54EC, 54F | (XXXX) |
| Long Term Capital Gain | XXXX |
- Sale Consideration = In the case of immovable property, as per Section 50C of Income Tax Act, sale consideration should be the sale value of capital asset or value adopted by stamp duty valuation authority whichever is higher.
- Transfer Expenses = expenses incurred exclusively for the sale of the capital asset.
- Indexed Cost of Acquisition = Cost of Acquisition * (CII of year of Sale / CII of year of Purchase)
- Indexed Cost of Improvement = Cost of Improvement * (CII of year of Sale / CII of year of Improvement)
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Calculation of Short Term Capital Gain tax on sale of property in India
The Short Term Capital Gain is taxed as per the slab rates. There is no indexation benefit in the case of a Short Term Capital Gain. Further, the exemption under Section 54 to 54F is also not available. Thus, the Capital Gain is calculated on the basis of the cost of acquisition, cost of improvement, and transfer expenses.
| Particulars | Amount | |
| Sale Consideration | XXXX | |
| Less | Transfer Expenses | (XXXX) |
| Less | Cost of Acquisition | (XXXX) |
| Less | Cost of Improvement | (XXXX) |
| Short Term Capital Gain | XXXX |
ITR Form & Due Date for Income from Sale of Immovable Property
- ITR Form: Taxpayer should file ITR-2 (ITR for Capital Gains Income) on Income Tax Website since income on the sale of immovable property such as land, building, or house property is Capital Gains.
- Due Date – 31st July of the Assessment Year
- Up to FY 2019-20 – 31st July
31st July – for taxpayers to whom Tax Audit is not applicable
30th September – for taxpayers to whom Tax Audit is applicable - FY 2020-21 Onwards
31st July – for taxpayers to whom Tax Audit is not applicable
31st October – for taxpayers to whom Tax Audit is applicable
- Up to FY 2019-20 – 31st July
- Tax Audit: Since the income on the sale of unlisted stock is a Capital Gains Income, the applicability of tax audit under Section 44AB need not be determined.
Carry Forward Loss on Sale of Immovable Property
- The taxpayer can set off Short Term Capital Loss (STCL) against both Short Term Capital Gain (STCG) and Long Term Capital Gain (LTCG). They can carry forward the remaining loss for 8 years and set off against STCG and LTCG only.
- The taxpayer can set off Long Term Capital Loss (LTCL) against Long Term Capital Gain (LTCG) only. They can carry forward the remaining loss for 8 years and set off against LTCG only.
