Selling a flat bought in 2012 for ₹38 lakh at ₹1.1 crore. How much capital gains tax, and how can I save it?

Option A, 12.5% without indexation: gain of ₹72 lakh, tax about ₹9 lakh plus surcharge and cess.

Option B, 20% with indexation, available only to resident individuals and HUFs for property acquired before 23 July 2024: the cost is inflated by the cost inflation index (200 for 2012-13 against the index of the year of sale; using 376, the FY 2025-26 figure, as an illustration, the indexed cost is about ₹71.4 lakh). Gain of roughly ₹38.6 lakh, tax about ₹7.7 lakh plus cess. For a 2012 purchase indexation usually wins, as it does here.

Ways to reduce it: section 54 exempts the gain if you buy one residential house in India within two years (or one year before the sale) or construct within three years, capped at ₹10 crore of gain. Section 54EC exempts up to ₹50 lakh invested in REC, PFC or IRFC bonds within six months of the sale (five-year lock-in, about 5.25% interest). If the new house is not bought before the return due date, park the unused gain in a Capital Gains Account Scheme deposit at a nationalised bank by 31 July 2027 or the exemption is lost.

Two practical points: the buyer must deduct 1% TDS under section 194-IA on the full ₹1.1 crore and give you Form 16B; and the stamp-duty value, not the agreed price, is taken as consideration if it is more than 10% higher.