Capital Gain Computation

Section 48 lays out how to compute capital gains on an immovable property sale. The mechanics are simple in structure, sale price, less selling expenses, less cost of acquisition and improvement, but several rules can change what actually counts as your sale price or your cost, and that’s where NRIs commonly get tripped up.

The basic computation

Step	What it means
Full value of sale consideration	Actual sale price, or stamp duty value if the override rule applies (below)
Less: transfer expenses	Brokerage, commission, advertisement, legal fees, and so on
= Net sale consideration
Less: cost of acquisition/improvement	What you paid, plus capital improvements like renovation, no indexation on sales from 23 July 2024 onward
= Capital gain
Less: exemptions claimed (Section 54, 54F, and so on)	If reinvested per prescribed conditions
= Taxable capital gain	Taxed at 20% (with indexation) if sold before 23 July 2024, or 12.5% (without indexation) if sold on or after

The stamp duty valuation override, the rule most people don’t know about

Your actual sale consideration gets compared against the stamp duty value (also called circle rate, jantri rate, or DLC rate depending on your state) assessed at registration. If the stamp duty value exceeds your actual sale price by more than 10%, the stamp duty value becomes your full value of consideration for tax purposes, not what you actually received.

Scenario	Sale price	110% of sale price	Stamp duty value	Value used for tax
Stamp duty value clearly exceeds threshold	₹100	₹110	₹120	₹120, the stamp duty value
Stamp duty value is close but within tolerance	₹100	₹110	₹108	₹100, your actual sale price

This has a practical implication for TDS too, buyers deducting tax on purchases from NRI sellers often need to look at the higher of the two values when computing withholding, checking the stamp duty valuation before you finalize your sale price avoids surprises later.

Cost of acquisition for property bought before 1 April 2001

You take the higher of your actual acquisition cost, or the fair market value as on 1 April 2001, this also applies if you received the property as a gift or inheritance from someone who acquired it before that date. There’s a cap, though: this 1 April 2001 fair market value cannot exceed the property’s stamp duty value as of that date, so you can’t simply pick an inflated valuation to reduce your gain.

Inherited or gifted property

Your cost of acquisition and improvement is whatever it was for the person you received the property from, and your holding period counts from their original date of acquisition, not from when you received it. One genuinely unsettled point: whether indexation (where it still applied, pre-July 2024) should run from the date you inherited the asset, or from the previous owner’s original acquisition date. This remains under litigation, so treat it as an open question rather than a settled rule if it’s relevant to your specific sale.