This article helps you calculate the minimum price above which you must sell your property to pay lower taxes under the taxation rule change as per Budget 2024.

This article is a part of our detailed article series on Union Budget 2024. Ensure you have read the other parts here: Show/Hide

📚 Table of Contents

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• What did Union Budget 2024 change about capital gains tax on real estate?
• How to calculate the minimum profit to pay lower capital gains taxes under the new rules as per Union Budget 2024?
• What is the minimum selling price for a ₹10 lakh property to pay lower tax in the new regime?
• How does profit CAGR differ from inflation implied by the CII?

What did Union Budget 2024 change about capital gains tax on real estate?

In a surprise move, Union Budget 2024 changed the capital gains taxation rules for real estate transactions:

• Removed indexation in the name of “simplification” of capital gains tax calculation
• Reduced the tax rate from 20% with indexation to 12.5% without indexation

The only things kept unchanged are:

• Definition of long-term (i.e. eligibility for long-term capital gains or LTCG) holdings kept intact at two years and above
• Any real estate gains due to selling before two years (i.e. short-term capital gains or STCG) will be taxed at the slab rate of the seller

Read more on the changes introduced here: Budget 2024: A Surprise in Real Estate Sales due to Indexation Benefit Removal: Is it good or bad?

Note: In another surprise amendment to the Finance Bill on 6th August, 2024, the option of paying 20% tax on gains with indexation has been added to all properties acquired before Union Budget 2024 speech date of 23rd July, 2024. This means that for all such properties, including those purchased before 1st April 2001, the capital gains tax can be the lower of:

• 20% with indexation (the previous rule)
• 12.5% without indexation (the new rule)

irrespective of the sale date thereby offering a grandfathering option for such properties. The exact amendment is this:

“where the income-tax computed .. exceeds the income-tax computed in accordance with the provisions of this Act, as they stood immediately before their amendment by the Finance (No. 2), Act, 2024, such excess will be ignored;”

If you read the text of the amendment carefully, then any loss cannot be offset or carried forward here since the amendment does not talk about losses. For properties acquired on or after 23rd July 2024, only the new 12.5% without indexation rule will apply.

We have covered the impact of this new change in detail here: Budget 2024 taxation rule reversal: grandfathering rule brings back indexation benefit to properties acquired before July 2024

Here is an easy-to-use calculator that incorporates all these rules:

How to Use the Capital Gains Calculator

This calculator helps you estimate the capital gains tax you'll need to pay when selling a property in India, based on the latest tax rules. We include adjustment for stamp duty/brokerage during both buying and selling as well as Pre-construction Home Loan Interest (assumed to be unclaimed for Section 24 deduction).

Understanding the Inputs

First, you’ll need to enter all the details of your property transaction. The calculator automatically populates some fields to make things easier, but you should always double-check and adjust them to match your specific situation.

• Purchase Year: Select the financial year you bought the property. A special “Before 2001-02” option is available for older properties.
• Purchase Price: Enter the total price you paid to acquire the property.
• Purchase Expenses: Enter the total amount paid for brokerage, stamp duty and registration fees.
• Pre-possession unclaimed home loan interest: Normally Home Loan Interest can be capitalised, i.e., added to the cost of the property (Section 24(b) Proviso). You're allowed to claim it in five equal instalments as deduction from house property income once the house is completed, but if you never claimed it, courts have allowed it to be considered part of cost of acquisition when calculating capital gains. Remember: Post-possession interest is not allowed as part of cost of acquisition. It is deductible under 'Income from House Property' (Sec. 24(b))
• Cost of Improvements (and their year): If you made any significant structural improvements to the property (e.g., adding a new floor, major renovations), enter the cost and the financial year the work was completed.
• Sale Year: Select the financial year the property was sold.
• Sale Price: Enter the total price you received from the sale.
• Transfer expenses: Enter the cost of sale like brokerage and other fees.
• Are you an NRI?: Use this box if you are a Non-Resident Indian since the tax rules are different for NRIs as per the changes in Budget 2024.

How to Calculate

Once all your details are entered, click the Calculate button to see the results.

The calculator will perform the following steps:

1. Determine the Holding Period: It checks the time between your purchase and sale dates to see if the gains are Short-Term Capital Gains (STCG) or Long-Term Capital Gains (LTCG).
   • STCG: If you sold the property within two years of buying it.
   • LTCG: If you held the property for two years or more before selling.
2. Calculate the Gains and Tax: The final calculation and tax rate depend on several factors:
   • If it’s STCG: The tax is calculated based on the tax slab you select (10%, 20%, or 30%). This section only appears if STCG is applicable.
   • If it’s LTCG: The calculator follows the grandfathering rule for properties acquired before July 23, 2024. It will calculate the tax using two methods and apply the one that results in a lower tax payment for you:
     • Method 1: 20% tax with indexation benefit (adjusts the purchase price for inflation).
     • Method 2: 12.5% tax without indexation.
   • If you are an NRI: The calculator will not apply the grandfathering rule. The tax will be calculated only at 12.5% without indexation, as per Budget 2024.

Understanding the Output

The results section will provide a clear breakdown of your transaction.

• Capital Gains Type: This will show either LTCG or STCG.
• Indexed Purchase Price: The adjusted cost of your property after accounting for inflation using the Cost Inflation Index (CII).
• Indexed Cost of Improvements: The inflation-adjusted cost of any improvements you made.
• Total Capital Gains: The final profit on which the tax is levied.
• Tax to be Paid: The estimated tax amount, formatted in Indian Rupees.

NRIs will not see the indexed values since it is not applicable to them.

How to calculate the minimum profit to pay lower capital gains taxes under the new rules as per Union Budget 2024?

Let us declare:

SP = Selling Price of the property

CP = Cost or construction price of the property

Profit_PCT (profit percentage) = SP/CP - 1

Indexation_PCT = CII_sell / CII_buy - 1 where CII comes from here: How to use the Cost Inflation Index (CII): latest value and historical rates

New tax regime as per Budget 2024

Tax = n * (SP - CP) where n = 12.5% or 1/8

or, Tax = n * (SP/CP - 1) * CP

or, Tax = n * Profit_PCT * CP

Old tax regime

Tax = 20% of (SP - I * CP) where I = CII_sell / CII_buy

or, Tax = 20% of (SP/CP - I) * CP

or, Tax = 20% of (Profit_PCT + 1 - I) * CP

or, Tax = 20% of (Profit_PCT + 1 - (Indexation_PCT+1)) * CP, since Indexation_PCT = I - 1

or, Tax = 20% of (Profit_PCT - Indexation_PCT) * CP

So if

Tax_new ≤ Tax_old_with_indexation then

n * Profit_PCT * CP ≤ 20% of (Profit_PCT - Indexation_PCT) * CP

or, n * Profit_PCT ≤ (Profit_PCT - Indexation_PCT) / 5 since 20% = 1/5

or, Profit_PCT * (n-1/5) ≤ - Indexation_PCT / 5

or, Profit_PCT ≥ Indexation_PCT / 5 * (1/5-n) [note the sign flip]

or, Profit_PCT ≥ Indexation_PCT / (1-5n)

With n = 12.5% = 1/8,

Profit_PCT ≥ Indexation_PCT / (1-5/8) or Profit_PCT ≥ 8/3 * Indexation_PCT

or, Profit_PCT ≥ 2.6667 * Indexation_PCT

We can now calculate the factors applicable for different tax rates from 10% to 15% for potential new values of the tax rate that replaces indexation.

What is the minimum selling price for a ₹10 lakh property to pay lower tax in the new regime?

For property sold in FY2024-25 after 23rd July 2024, this table gives the minimum selling price for ₹10 lakh purchased in the year as per this table.

For a ₹10 lakhs property purchased in FY2006-07, the minimum selling price must be ₹62.68 lakhs or higher to pay the same or lower tax than the old 20%-with-indexation rule.

We will show the tax calculation in the table below. We have rounded up the selling prices to the next lakh to make the calculation clearer.

Of course, you can save as part of this tax by investing up to ₹50 lakhs in Section 54EC capital gains bonds: How Section 54EC helps you save tax when you sell property.

How does profit CAGR differ from inflation implied by the CII?

The Cost Inflation Index (CII), given what the values are, is only used as an inflation proxy in capital gains calculation (table below). It is not to be used for actual inflation values.

Download as CSV

We can now calculate the actual minimum profit percentage for selling the property based on the inflation values, implied from CII, and create the table below:

The chart below shows the split of inflation change and profit percentage. It calculates the excess returns over inflation like this:

To understand whether it is the right price to sell your property:

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Whether the investor will get this minimum return when selling the property will be another consideration. If the property price is not appreciating enough then there might be a case of exiting that unit and reinvesting in a better-performing unit.