Tax · Guide
Capital gains tax on sale of land: how much you pay and how to save it
Short answer
Land held for more than 24 months gives long-term capital gains, taxed at 12.5% without indexation plus 4% cess. Residents who bought before 23 July 2024 can instead pay 20% with indexation if that is lower. You can cut the tax by investing the gain in 54EC bonds or the sale proceeds in a house under 54F.
Selling a plot is often the largest single taxable event in a family's finances. The tax depends on how long you held the land, when you bought it, and whether you reinvest. This guide covers each, with a worked example for a plot bought in 2015 and sold in 2026.
By FinancePaisa Editorial Team · Research & editorialUpdated · 5 min read
On this page (8 sections)
Is my gain short-term or long-term?
For land and buildings the line is 24 months. If you held the land for more than 24 months before selling, the gain is long-term. If you sold within 24 months, it is short-term: the gain is added to your other income and taxed at your slab rate, with no special rate and no 54EC or 54F exemption.
Zameen bechne par kitna tax lagta hai? The long-term rate
- Transfers on or after 23 July 2024: 12.5% of the long-term gain, without indexation.
- Resident individuals and HUFs, land or building acquired before 23 July 2024: tax is the lower of 12.5% without indexation and 20% with indexation (cost raised by the Cost Inflation Index). Non-residents pay 12.5% only.
- Health and education cess of 4% is added. Surcharge applies if total income, including the gain, exceeds Rs 50 lakh.
- Long-term gain = sale price, minus transfer expenses such as brokerage, minus cost of acquisition and improvement.
Worked example: plot bought for Rs 15,00,000 in 2015, sold for Rs 45,00,000 in 2026
You paid brokerage and legal costs of Rs 50,000 on the sale. Your other income keeps total income under Rs 50 lakh, so there is no surcharge. This uses the 12.5% rate without indexation; if you are resident, also work out 20% with indexation and pay the lower.
| Step | Amount |
|---|---|
| Sale price | Rs 45,00,000 |
| Less transfer expenses | Rs 50,000 |
| Less cost of acquisition | Rs 15,00,000 |
| Long-term capital gain | Rs 29,50,000 |
| Tax at 12.5% plus 4% cess | Rs 3,83,500 |
| If you invest Rs 20,00,000 in 54EC bonds | Rs 1,23,500 tax |
| If you buy a house for Rs 30,00,000 under 54F | Rs 1,24,961 tax |
| If you put the whole Rs 44,50,000 into a house under 54F | Nil |
Sale price
- Amount
- Rs 45,00,000
Less transfer expenses
- Amount
- Rs 50,000
Less cost of acquisition
- Amount
- Rs 15,00,000
Long-term capital gain
- Amount
- Rs 29,50,000
Tax at 12.5% plus 4% cess
- Amount
- Rs 3,83,500
If you invest Rs 20,00,000 in 54EC bonds
- Amount
- Rs 1,23,500 tax
If you buy a house for Rs 30,00,000 under 54F
- Amount
- Rs 1,24,961 tax
If you put the whole Rs 44,50,000 into a house under 54F
- Amount
- Nil
How do 54EC bonds save tax on land?
- Invest the long-term gain (not the full sale price) in specified bonds within 6 months of the sale.
- The cap is Rs 50 lakh, across the year of sale and the next year combined.
- The bonds are locked in for 5 years. Eligible issuers include NHAI, REC, PFC and IRFC; HUDCO bonds qualify from 1 April 2025.
- Under the 2025 Act this exemption is section 85 (it was 54EC).
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Can I buy a house with the money and pay no tax? (54F)
Yes, under 54F (section 86 in the 2025 Act), if you sell any long-term asset other than a house, including land, and buy or build one residential house in India with the net sale amount. Invest all of it and the whole gain is exempt; invest part and the exemption is proportionate: gain × amount invested ÷ net sale amount. The exemption is capped at Rs 10 crore. Amounts you have not invested by the return due date go into a Capital Gains Account Scheme deposit at a bank to keep the claim alive.
Is tax payable on sale of agricultural land?
Agricultural land in a rural area is not a capital asset, so selling it does not create capital gains. Agricultural land within the limits of a municipality or close to one is a capital asset and is taxed like any other land. If you sell agricultural land that was used for farming and buy other agricultural land, 54B (section 83 in the 2025 Act) can exempt the gain.
Frequently asked questions
What is the capital gains tax rate on land in 2026?
For land held more than 24 months, 12.5% without indexation plus 4% cess. Residents who bought before 23 July 2024 can pay 20% with indexation if that gives less tax. Land held 24 months or less is taxed at your slab rate.
Can I use both 54EC and 54F on one sale?
Yes. You can invest part of the gain in 54EC bonds and part of the sale amount in a house under 54F, as long as you meet the conditions of each and do not claim the same rupee twice.
Is TDS deducted when I sell land?
The buyer must deduct TDS on purchases of immovable property above Rs 50 lakh. Your capital gains tax is computed when you file and the TDS is adjusted against it.
How is a plot received as a gift or inheritance taxed when sold?
The cost is the cost to the previous owner, and the holding period includes the time they held it. The gain is taxed in your hands when you sell.
Sources & references
- Tax on long-term capital gains — Income Tax Department (checked 22 Oct 2026)
- Various exemptions available from capital gains — Income Tax Department (checked 22 Oct 2026)
- Provisions of the Income-tax Act, 1961 vis-a-vis Income-tax Act, 2025 — CBDT
- Income-tax Act 1961 vs 2025: section mapping — eCourtsIndia (checked 22 Oct 2026)
Rates, fees, eligibility, and product terms cited on this page reflect the sources above at the time of publication and may have changed since. Always verify directly with the lender or regulator.