Long-term Capital Gains Tax Liability Calculated on Rs 2.3 Crore Sale of 2014 Purchase

Long-Term Capital Gains (LTCG) Exemption and Calculation

Company/Property: Residential house property purchased in February 2014 for Rs 81 lakhs and sold in November 2025 for Rs 2.3 crores

LTCG Calculation:

The property was sold after more than two years from the date of purchase, making the profits long-term capital gains. Section 54 of the Income Tax Act provides for exemption from long-term capital gains arising from the sale of a residential house if the capital gains are invested for acquiring another residential house property within the prescribed time period.

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For ready-to-move-in houses, the prescribed time period is two years after the date of sale or within one year prior to the sale of the house. In this case, the property was not purchased within one year prior to the sale, making the buyer ineligible for the exemption under Section 54.

Indexation Option:

The benefit of indexation on the sale of long-term capital assets has been practically removed, except for the purpose of computing tax payable by a resident individual or an HUF in respect of land and/or building purchased prior to 23rd July 2024 and sold on or after 23rd July 2024.

If the land and building are purchased before 23rd July 2024 and sold on or after this date, the taxpayer has the option to pay the lower of 12.50% on unindexed long-term capital gains or 20% of indexed long-term capital gains.

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Indexed Cost of the House Property:

The indexed cost of the house property bought in February 2014 and sold in November 2025 is Rs 1,38,43,637, taking the Cost Inflation Index of the financial year 2013-2014 as 220 and 376 for the financial year 2025-2026.

Tax Calculation:

The tax on plain long-term capital gains of Rs 1.49 crores at 12.50% comes to Rs 18,62,500, whereas the tax on indexed long-term capital gains of Rs 91,56,364 at 20% comes to Rs 18,31,272. Since the tax on indexed long-term capital gains is lower, the buyer can opt to pay tax at 20% on indexed long-term capital gains.