Selling your redeveloped flat: holding period and capital gains tax

What decides whether your sale is long-term, and how the tax on a redeveloped flat is worked out.

Land or building held for more than 24 months is long-term. For transfers on or after 23 July 2024, long-term gains are taxed at 12.5% without indexation. Resident individuals and HUFs who acquired before that date may instead pay the lower of that or 20% with indexation.

When does my flat count as long-term?

For land and buildings, a holding period of more than 24 months makes the gain long-term. Twenty-four months or less is short-term, and short-term gains are added to your income and taxed at your slab rate.

Here is the honest part. For a redeveloped flat, the date from which the holding period runs — the date you acquired your original flat, or the date you received the new one — is fact-specific and has been argued in several cases. It turns on how your agreements are worded and what actually happened. Please do not assume either way. Put your papers in front of a chartered accountant and take a written view on your own facts.

How is the tax calculated on a long-term gain?

For transfers on or after 23 July 2024, long-term capital gains on property are taxed at 12.5% without indexation (Section 112 of the Income-tax Act 1961; Section 197(1)(b) of the Income-tax Act 2025).

There is a grandfathering relief. A resident individual or resident HUF, for property acquired before 23 July 2024, pays the lower of 12.5% without indexation or 20% with indexation. It is not available to NRIs, companies, firms, LLPs or AOP/BOI. Surcharge on property LTCG is capped at 15%, plus 4% cess.

Run both computations on your own figures using the capital gains property calculator.
Check Section 50C: if the stamp duty value exceeds 110% of your actual price, the stamp duty value is treated as your sale consideration.

Can I defer or reduce the tax?

Under Section 45(5A) (Section 67 of the 2025 Act), in a registered redevelopment agreement the member's capital gain on giving up the old flat is taxed in the year the completion certificate is issued, not when you sign or move out. That is a deferral, not an exemption.

On an actual sale, Section 54 allows reinvestment in another residential house — one year before or two years after purchase, three years for construction, capped at Rs 10 crore. Section 54EC bonds are an alternative within six months, up to Rs 50 lakh. Our page on capital gains on redevelopment explains both, and the possession and corpus guide covers what happens at handover.

Work it out for your own society

Enter your cost, sale price and dates to see both computations side by side and the tax actually payable.

Open the Capital Gains Property Calculator

Common questions

Is the 12.5% rate applied to my whole sale price?

No. It applies only to the gain — broadly the sale consideration less your cost of acquisition, cost of improvement and expenses of transfer. If Section 50C applies because the stamp duty value exceeds 110% of your price, the stamp duty value is deemed to be the consideration. Work through your own numbers on the capital gains property calculator.

Does the grandfathered 20% with indexation option help everyone?

No. It is available only to a resident individual or resident HUF, and only for land or building acquired before 23 July 2024. NRIs, companies, firms, LLPs and AOP/BOI cannot use it. Even if you are eligible, it helps only when the indexed computation gives a lower tax, because you pay the lower of the two figures.

Should I ask a chartered accountant before selling my redeveloped flat?

Yes, and particularly on the holding period. Whether it runs from your original flat or the new one depends on your agreements and the sequence of events, and it has been litigated. That single question can decide whether your gain is short-term at slab rates or long-term at 12.5%. Get a written view on your own documents before you commit to a sale.