Property prices in Chandigarh and Mohali have appreciated significantly over the last decade. A flat bought in Mohali Phase 7 for ₹40 lakh in 2015 may sell for ₹85–95 lakh today. That gain — the difference between what you paid and what you receive — is taxable as capital gains under the New Income Tax Act 2025.
Capital gains tax on property sale has undergone significant changes. The rate, the indexation rules, and the reinvestment exemptions are all different from what they were even two years ago. This article explains the current rules clearly, so you know what to expect before signing the sale deed.
Key Takeaways
- Property held more than 24 months = Long-Term Capital Gain (LTCG), taxed at 12.5%
- Property held 24 months or less = Short-Term Capital Gain (STCG), taxed at your slab rate
- For property bought before 23 July 2024: you can choose between 12.5% (no indexation) or 20% (with indexation)
- Reinvest LTCG in a new residential property to claim exemption (capped at ₹10 crore)
- If not reinvesting before ITR deadline, park funds in Capital Gains Account Scheme (CGAS)
- Buyer deducts 1% TDS on purchases above ₹50 lakh — claim this credit in your ITR
Short-Term vs Long-Term — The 24-Month Rule
The tax treatment depends entirely on how long you held the property before selling it.
Short-Term Capital Gain
Property held for 24 months or less. Gain taxed at your income tax slab rate (5%, 20%, or 30% depending on total income). No special rate or exemption available.
Long-Term Capital Gain
Property held for more than 24 months. Taxed at the special rate of 12.5% without indexation. Reinvestment exemption available. Better tax treatment.
Count from the date of the original agreement or allotment letter, not just the registration date. If you bought under a builder agreement in January 2024 and the registration happened in April 2024, the holding period starts from January 2024.
Current LTCG Rate — 12.5% Without Indexation
From 23 July 2024, the long-term capital gains rate on immovable property is 12.5% on the actual gain (sale price minus cost of acquisition), without any indexation benefit. This replaced the earlier rate of 20% with indexation.
Special Option for Property Bought Before 23 July 2024
If you purchased your property before 23 July 2024, you have a choice. You can compute your tax both ways and pay whichever is lower:
- Option A: 12.5% on gain computed without indexation
- Option B: 20% on gain computed with indexation (using the Cost Inflation Index)
For most long-held properties — bought 10 or more years ago — Option B (20% with indexation) often results in lower tax because indexation significantly increases the cost of acquisition, reducing the taxable gain. For recently acquired properties, Option A may be better. RLVC will calculate both to determine which works in your favour before you file.
Your cost of acquisition includes: purchase price, stamp duty and registration charges paid by you, brokerage paid at time of purchase, and home loan processing fees if directly related to the property purchase. Cost of improvement (major renovation, structural additions) can also be added — keep all bills.
Reinvestment Exemption — Save Tax by Buying Another Property
You can reduce or eliminate your LTCG tax liability by reinvesting the gain in a new residential property. Here is how it works:
Sell Your Chandigarh Flat
Compute your LTCG. This is the amount you need to reinvest to get full exemption.
Invest in a New Residential Property
Purchase a new residential property in India within 2 years from the date of sale, or construct one within 3 years. The exemption applies to the amount invested, not the full sale price.
Maximum Exemption — ₹10 Crore Cap
The exemption is capped at ₹10 crore. If your LTCG exceeds ₹10 crore, tax applies on the amount above ₹10 crore even if you reinvest everything.
One Property at a Time (Generally)
You can generally claim this exemption for purchase of one residential property. Purchasing two properties in one reinvestment is allowed only once in a lifetime if LTCG does not exceed ₹2 crore.
Do Not Sell the New Property Within 3 Years
If you sell the new property within 3 years of purchase, the exemption is reversed and the original LTCG becomes taxable in the year of that sale.
Many Chandigarh sellers who upgrade from a 2BHK to a 3BHK use the reinvestment exemption to eliminate capital gains tax entirely. The key is timing — complete the new purchase within 2 years of the sale deed date.
What if You Cannot Reinvest Before Your ITR Filing Date?
If you plan to reinvest but have not yet purchased a property by the time your ITR due date arrives (typically 31 July), you must deposit the capital gains amount in a Capital Gains Account Scheme (CGAS) at an authorised bank before filing your ITR.
- Open a CGAS account at any major nationalised bank (SBI, PNB, Bank of Baroda, etc.)
- Deposit the LTCG amount before the ITR filing date
- Claim exemption in your ITR for the amount deposited
- Withdraw from CGAS only to purchase or construct the new residential property
- If not utilised within the 2/3 year window, the deposited amount becomes taxable
If you sell your flat but neither reinvest nor deposit in CGAS before the ITR filing date, you lose the exemption for that year — even if you purchase a new property later. The CGAS step is mandatory to preserve the exemption.
TDS on Property Sale — What the Buyer Deducts
When you sell a property for ₹50 lakh or more, the buyer is required to deduct 1% TDS from the amount payable to you and deposit it with the government (using Form 26QB). You receive Form 16B as the TDS certificate.
This 1% TDS is not an additional tax — it is an advance collection of your capital gains tax. You claim it as a credit in your ITR and either pay the balance or receive a refund.
Frequently Asked Questions
How long must I hold a flat to qualify for long-term capital gains?
The threshold for immovable property is 24 months. If you sell a flat held for more than 24 months, it qualifies as a long-term capital gain at 12.5%. If sold within 24 months, it is a short-term gain taxed at your income slab rate.
What is the capital gains tax rate on selling a flat in Chandigarh?
For long-term capital gains (held more than 24 months), the current rate is 12.5% without indexation. If your property was purchased before 23 July 2024, you can also compute at 20% with indexation and pay whichever is lower. Short-term gains are taxed at your applicable slab rate.
Can I save capital gains tax by buying another property?
Yes. Reinvesting the LTCG amount in a new residential property within 2 years of sale (or 3 years for construction) qualifies for a full exemption up to ₹10 crore. The exemption is proportionate — if you reinvest only part of the LTCG, only that proportion is exempt.
What if I cannot buy a new property before my ITR due date?
Deposit the capital gains amount in a Capital Gains Account Scheme (CGAS) at a nationalised bank before filing your ITR. This preserves your exemption and gives you up to 2 or 3 years to complete the new property purchase.
Is the buyer liable to deduct TDS when buying my flat?
Yes. If the sale consideration is ₹50 lakh or more, the buyer must deduct 1% TDS from the payment made to you. You will see this in your AIS and Form 26AS. Claim it as TDS credit in your ITR and pay only the net tax remaining.