12.5% without indexation or 20% with indexation: which is better for an old flat?

For flats acquired before 23 July 2024, the law lets resident sellers pay whichever of the two works out cheaper.

You do not have to choose. If you are a resident individual or HUF selling land or a building acquired before 23 July 2024, the law gives you the lower of 12.5% without indexation or 20% with indexation. Older flats with modest price growth usually gain from indexation.

Why is everyone asking about 12.5% versus 20%?

For transfers on or after 23 July 2024, long-term capital gains on land or a building are taxed at 12.5% without indexation, under Section 112 of the Income-tax Act 1961 (Section 197(1)(b) of the Income-tax Act 2025). Long-term here means held for more than 24 months; 24 months or less is short-term and taxed at your slab rate.

Alongside this sits a grandfathering rule. Under the second proviso to Section 112(1)(a) — Section 197(3) of the 2025 Act — a resident individual or resident HUF selling land or a building acquired before 23 July 2024 pays the lower of the two computations: 12.5% without indexation, or 20% with indexation. It is not an election you make. It is simply whichever tax comes out smaller.

When does indexation actually win?

The intuition is straightforward. Indexation lifts your purchase cost using the Cost Inflation Index, so it helps most when the property is old and the price rise has been modest. The CII values are FY 2001-02 = 100, FY 2024-25 = 363, FY 2025-26 = 376 and FY 2026-27 = 384. Indexed cost is your cost multiplied by the CII of the year of transfer divided by the CII of the year of acquisition, or FY 2001-02 if that is later.

Where a flat has multiplied many times in value, or was bought fairly recently, the flat 12.5% usually produces the smaller bill. Rather than guess, run both sides in our capital gains property calculator.

Who does not get the 20% option?

NRIs, companies, firms, LLPs and AOP/BOI get only 12.5% without indexation. There is no indexation fallback for them.

Surcharge on property LTCG is capped at 15%; cess is 4%.
Section 50C: if the stamp duty value exceeds 110% of your price, that value is deemed the consideration.
In a registered redevelopment, Section 45(5A) shifts the taxable year to the completion certificate — see capital gains on redevelopment.

Old purchase deeds, improvement costs and inherited holdings can change the answer completely, and these facts are often genuinely unclear. Please have a chartered accountant check the computation before you sign. Buyers should also note the 1% deduction explained in our TDS calculator.

Work it out for your own society

Enter your purchase year, cost and sale price to see both computations side by side and the lower tax payable.

Open the Capital Gains Property Calculator

Common questions

Do I have to choose between 12.5% and 20% when filing?

No. If you are a resident individual or HUF and the land or building was acquired before 23 July 2024, the law itself gives you the lower of the two figures. Your return should reflect the smaller tax. A chartered accountant will compute both and report whichever is lower.

Can an NRI use 20% with indexation on an old Mumbai flat?

No. The grandfathering benefit is available only to a resident individual or a resident HUF. NRIs, companies, firms, LLPs and AOP/BOI pay 12.5% without indexation on long-term gains from land or a building, whatever the year of purchase. Surcharge is capped at 15% and cess is 4%.

Which CII figure applies if I sell in the current year?

CII 384 was notified by CBDT Notification No. 85/2026 dated 15 July 2026 and applies to tax year 2026-27, that is 1 April 2026 to 31 March 2027. For FY 2025-26 use 376 and for FY 2024-25 use 363. The base year FY 2001-02 is 100.