A Complete Guide to Real Estate Capital Gain Tax Rate

A Complete Guide to Real Estate Capital Gain Tax Rate


Capital gain is the profit received from the sale of a capital asset. The category of income includes the profit that is made. As a result, the income that is received must be taxed. The types of taxes that are to be paid can be Long-term or short-term capital gains taxes. They are subjected to taxes starting at 10% and 15%, respectively.

According to the Income Tax Act, capital gains tax in India is not due if a person inherits property and there isn’t a sale. On the other hand, if the inheritor chooses to sell the property, the tax will need to be paid on the proceeds of the sale. A few examples of capital assets are jewelry, equipment, leasehold rights, patents, trademarks, automobiles, residential real estate, commercial buildings, and land.


Types of Capital Assets


The two types of Capital Assets are as follows-

1. Long-Term Capital Asset: An asset is a long-term capital asset if people own it for a period greater than 36 months. This category will include debt-oriented mutual funds, jewelry, etc. that are held for a period of time greater than 36 months; in such cases, the 24-month reduction period does not apply.

2. Short-Term Capital Asset: Assets can be categorized as short-term capital assets if they are held for 36 months or less. However, the time period has been shortened from 36 to 24 months for immovable assets like real estate, buildings, and land. As a result, if someone decides to sell a piece of property, they’ve owned for more than 24 months, the money they make off it is considered a long-term capital gain.


How Are Capital Gains Calculated?


The calculation of capital gains varies depending on how long the asset has been owned. Following are some key points that people should be aware of when calculating capital gains:

  • Cost of Improvement- It is a cost incurred to perform any repairs, upgrades, or improvements to the asset. Only expenses for improvements that are incurred after April 1, 1981, will be taken into account.
  • Acquisition cost- It is the cost at which the asset was purchased by the seller.
  • Full Value Consideration- It is the amount that the seller will receive or will be entitled to receive after selling (transferring) the asset to the buyer. Even when the consideration is paid after the asset has been transferred, the capital gain is still taxable in that year.


Calculation of Long-Term Capital Gains


The procedure for calculating Long Term Capital Gains is as follows-

  • The owner must first take into account the asset’s total value.
  • The next step is for the person to deduct the following amounts:
  1. The expenses incurred as a result of the transfer.
  2. The amount of money spent making the purchase.
  3. The sum of money used to make improvements.
  • Finally, any exclusions made possible by Sections 54B, 54F, 54EC, and Section 54 must be subtracted from the total that was arrived at by applying the aforementioned formulas.


Calculation of Short-Term Capital Gains


The procedure for calculating Long Term Capital Gains is as follows-

  • The owner must first take into account the property’s whole value.
  • Next, the following points must be subtracted:
  1. costs that have been incurred to renovate the property.
  2. the costs incurred to buy the property.
  3. any costs incurred in the transfer of the property.
  • The short-term capital gain is determined as the sum remaining after the deduction.




The profits made through the sale of an investment, such as stocks, bonds, or real estate, are known as capital gains. Due to the lower capital gains taxes compared to ordinary income taxes, investors have an edge over wage workers. For anyone who deals in the real estate industry, it is extremely important that they be acquainted with information on what Capital Gains are.


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Achyut Group is a trusted brand due to its ethical values among the customer, vendors, and competitors. We believe in creating environment-friendly green buildings by conserving energy, water, and wood. The promoters of Achyut Group combine over 20+ years of experience in the construction legal, finance, and marketing sector.

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