Capital Gains Hacksmediumlow risk1 hour calculation1 min readUpdated 26 Jul 2026

Dual Indexation Choice

Resident individuals and HUFs pay the lower of 20% with indexation or 12.5% without

Potential Savings

₹3-10 lakhs

Time Required

1 hour calculation

Complexity

Medium

Legal Status

Fully legal

applicable toResident Individual/HUF

overview

What is this hack?

The second proviso to Section 112(1) covers land or building or both acquired before July 23, 2024 — and only where the seller is a resident individual or HUF. Compute the gain both ways (20% with indexation, 12.5% without) and pay the lower. Non-residents are outside the proviso entirely: an NRI selling the same flat pays 12.5% without indexation with no choice, so plan the sale on that basis.

how it works

How it works

Budget 2024 (July 23, 2024) changed LTCG tax on property from 20% with indexation to 12.5% without indexation. BUT where the seller is a resident individual or HUF and the asset is land or building or both acquired before July 23, 2024, the second proviso to Section 112(1) caps the tax: it is computed both ways and any excess of the 12.5%-without-indexation figure over the pre-amendment 20%-with-indexation figure is ignored. It is a cap on the tax, not a free choice of computation — so an indexed loss cannot be claimed — and it is not available to non-residents or to any asset other than land and building. This is huge because indexation benefits properties held for many years (purchased when prices were low), while the 12.5% flat rate benefits recent purchases or properties with high appreciation. Both computations have to be done; the tax payable is limited to the lower of the two.

steps

Step-by-step guide

01 ·

Verify Purchase Date

Confirm your property was purchased before July 23, 2024. Properties bought after this date only get 12.5% without indexation (no choice).

02 ·

Calculate Method 1: 20% with Indexation

Use Cost Inflation Index (CII) to inflate purchase price to current value. Formula: Indexed Cost = Original Cost × (CII of Sale Year / CII of Purchase Year). LTCG = Sale Price - Indexed Cost. Tax = 20% of LTCG.

03 ·

Calculate Method 2: 12.5% without Indexation

No indexation benefit. LTCG = Sale Price - Original Purchase Price (actual amount paid). Tax = 12.5% of LTCG.

04 ·

Use Our Calculator

Use our Capital Gains Comprehensive Calculator. Enter your property details - it will automatically compute both methods and highlight the lower tax.

05 ·

Choose Lower Tax in ITR

When filing ITR-2, report the gain in the capital gains schedule for land and buildings — Schedule 112A is only for listed equity shares and equity mutual fund units taxed under Section 112A. Select the method that gives lower tax. Attach computation showing both calculations for transparency.

06 ·

Maintain Records

Keep property purchase deed, sale deed, CII chart, and calculation worksheet. AO may ask for justification of your choice during assessment.

common pitfalls to avoid

Only for property bought BEFORE July 23, 2024 - verify purchase date
Indexation may not always be beneficial - recent purchases often better with 12.5%
CII values change annually - use correct year's CII
Additional cess and surcharge apply on top of base tax rate

prerequisites & requirements

Land or building or both acquired before July 23, 2024
Sale after July 23, 2024 by a resident individual or HUF — non-residents are outside the proviso
Hold for 24+ months (LTCG qualification)
All property documents: purchase deed, sale deed
Cost Inflation Index chart (available on Income Tax website)
Calculator or CA to compute both methods accurately

key benefits