Dual Indexation Choice
Choose between 20% with indexation or 12.5% without indexation
What is This Hack?
For property bought before July 23, 2024, calculate tax under both 20% with indexation and 12.5% without indexation to pick the lower amount
How It Works
Budget 2024 (July 23, 2024) changed LTCG tax on property from 20% with indexation to 12.5% without indexation. BUT for properties purchased before July 23, 2024, the government provided a special grandfathering clause: you can calculate your tax under BOTH methods and choose whichever gives you a lower tax. 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. You must do both calculations in ITR and select the lower amount - it's your legal right.
Step-by-Step Implementation
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).
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.
Calculate Method 2: 12.5% without Indexation
No indexation benefit. LTCG = Sale Price - Original Purchase Price (actual amount paid). Tax = 12.5% of LTCG.
Use Our Calculator
Use our NRI Capital Gains Calculator or Capital Gains Comprehensive Calculator. Enter your property details - it will automatically compute both methods and highlight the lower tax.
Choose Lower Tax in ITR
When filing ITR-2, fill Schedule 112A for LTCG. Select the method that gives lower tax. Attach computation showing both calculations for transparency.
Maintain Records
Keep property purchase deed, sale deed, CII chart, and calculation worksheet. AO may ask for justification of your choice during assessment.
Real Example: Mumbai Flat Sale
Situation
Meera (NRI in Dubai) purchased a Mumbai flat in 2010 for ₹30 lakh. She sells it in 2025 for ₹1.5 crore. CII 2010: 167, CII 2025: 363.
Without This Hack
Only 12.5% method: LTCG = ₹1.5cr - ₹30L = ₹1.2cr. Tax = 12.5% = ₹15 lakhs.
With This Hack
Calculate both methods: Method 1 (20% indexed): Indexed cost = ₹30L × (363/167) = ₹65.2L. LTCG = ₹1.5cr - ₹65.2L = ₹84.8L. Tax = 20% = ₹16.96L. Method 2 (12.5%): Tax = ₹15L. Choose Method 2 (12.5%) - Lower tax!
💰 ₹1.96 lakhs saved by choosing optimal method
Common Pitfalls to Avoid
- Only for property bought BEFORE July 23, 2024 - verify purchase date
- You can't switch methods after filing ITR - calculate carefully first time
- 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
- Property purchased before July 23, 2024
- Sale after July 23, 2024
- 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
- Potential savings: ₹3-10 lakhs
- Implementation time: 1 hour calculation
- Legal status: fully legal
- Risk level: low
Related Topics
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How removal of indexation affects NRI property sellers with before-after comparison
Capital Gains Tax 2025: LTCG 12.5%, STCG 20%, Indexation Removal – Complete Impact Calculator
How the July 2024 changes affect property, stocks, mutual funds, gold, and other assets with strategic sale timing
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