Sold Property in Delhi NCR? Understanding the New Capital Gains Rules (12.5% vs. 20%)

LTCG vs STCG on real estate explained

The Finance Act 2024 (No. 2) has fundamentally reshaped the landscape of Capital Gains taxation in India. Effective July 23, 2024, the rules for calculating taxes on the sale of assets—particularly real estate, gold, and shares—have changed.

For property owners in high-growth markets like Delhi, Noida, and Gurgaon, these changes bring both simplification and new calculation challenges. As a Chartered Accountant, I often hear the question: “Is the removal of indexation good or bad for me?”

The answer lies in the numbers. This guide breaks down the amendments, the “Grandfathering Option” for residents, and what this means for your tax liability.

1. The Core Amendments: What Changed on July 23, 2024?

The government aimed to simplify the tax regime by unifying rates and holding periods. Here is the snapshot of the new law:

• New LTCG Tax Rate: The Long-Term Capital Gains (LTCG) tax rate has been reduced from 20% to 12.5% for most assets.
• Removal of Indexation: The benefit of indexation (adjusting the purchase cost for inflation using the Cost Inflation Index) has been removed for assets sold on or after July 23, 2024.
• Exemption Limit Increased: For listed equity shares and equity-oriented mutual funds, the annual tax-free limit on LTCG (Section 112A) has increased from ₹1 Lakh to ₹1.25 Lakhs.

2. Changes in Holding Periods (To Qualify as Long-Term)

To qualify as a “Long-Term” asset (and benefit from the lower 12.5% rate), the holding period requirements have been streamlined:

Asset Class	Old Holding Period	New Holding Period
Listed Shares & Equity MFs	> 12 Months	> 12 Months (Unchanged)
Immovable Property (Land/Building)	> 24 Months	> 24 Months (Unchanged)
Unlisted Shares	> 24 Months	> 24 Months
Gold / Jewellery	> 36 Months	Reduced to > 24 Months
Debt Mutual Funds	> 36 Months	Taxed as Short Term (Slab Rate) if bought after 01-04-2023

3. The “Grandfathering Option” for Real Estate

This is the most critical provision for property owners in Delhi NCR. Following representation from stakeholders, the government introduced an amendment to the Finance Bill offering relief to Resident Individuals and HUFs.

The Choice (For Properties Acquired BEFORE July 23, 2024):

If you are a Resident Individual/HUF and you sell land or building acquired before July 23, 2024, you can choose the lower of the two tax liabilities:

1. 12.5% Tax on capital gains calculated without indexation.
2. 20% Tax on capital gains calculated with indexation.

Scenario:

• Case A (High Appreciation): You bought a plot in Noida Extension in 2010 for ₹20 Lakhs and sold it today for ₹2 Crores. The appreciation is massive. The 12.5% rate (without indexation) will likely be more beneficial because the tax rate reduction outweighs the inflation adjustment.
• Case B (Low Appreciation): You bought a flat in a slow market in Delhi for ₹1 Crore in 2015 and sold it for ₹1.4 Crores today. The profit is slim. Using 20% with indexation will likely result in lower tax (or even a capital loss) because indexation inflates your purchase cost significantly.

Note for NRIs: The option to choose between 12.5% and 20% is NOT available to Non-Resident Indians (NRIs). NRIs must generally pay tax at 12.5% without indexation on properties sold after July 23, 2024, subject to specific DTAA (Double Taxation Avoidance Agreement) benefits.

4. Capital Gain Exemptions: Are They Still Available?

Yes, the exemption sections remain valid and are crucial for tax planning.

• Section 54 (Residential House): If you sell a residential house and reinvest the gains into another residential house in India, you can claim an exemption.
  • Limit: Max exemption is capped at ₹10 Crores.
• Section 54F (Other Assets to Residential House): If you sell any other long-term asset (like Gold, Commercial Office, or Land) and reinvest the net consideration into a residential house.
  • Limit: Max exemption capped at ₹10 Crores.
• Section 54EC (Bonds): You can save tax by investing up to ₹50 Lakhs in specified bonds (NHAI, REC, PFC, IRFC) within 6 months of the sale. This is applicable only for Land and Building.

5. Actionable Insights for Taxpayers in Delhi NCR

• Calculate Before You File: Do not blindly apply the 12.5% rate. If you are a resident and held the property for a long time with moderate appreciation, ask your CA to compute liability under both the old (20% with indexation) and new (12.5% flat) regimes.
• Check Your Circle Rates: In areas like South Delhi or Gurgaon where circle rates are high, ensure your sale price aligns with stamp duty valuations to avoid “deemed income” penalties under Section 50C.
• Gold Monetization: With the holding period for Gold reduced to 24 months, it is now easier to liquidate jewellery or gold coins as Long-Term assets with a lower tax rate of 12.5%.
• Advance Tax: If you have sold a property recently, ensure you pay Advance Tax on the estimated capital gains to avoid interest under Section 234C.

Conclusion

The move to a flat 12.5% rate simplifies taxation for the majority of high-growth investments. However, for real estate—where holding periods are long and inflation is a real cost—the optionality provided to residents is a welcome relief.

Unsure which tax regime saves you more money?

Capital gains calculations can be complex, especially when dealing with cost of improvements, grandfathering clauses, and exemption limits.

Disclaimer: This article is for informational purposes only and does not constitute legal or tax advice. Tax laws are subject to amendments. Please consult a Chartered Accountant for advice specific to your facts.