LTCG Tax on Real Estate in Trivandrum: Key Facts You Should Know

Posted onMar 04, 2025

There are many important factors to consider while investing in real estate in Trivandrum, like the financial aspect, builder, type of property, and legal issues. One critical aspect of real estate transactions, especially with regard to sales, is the tax component, especially long-term capital gains tax.

What is Capital Gains Tax?

An investment is made with the aim of getting returns from it. In some cases, the profits can be realised quickly, whereas in other cases, they take time. When you realize profits after a long time, it is called long-term capital gains. This profit is subject to taxation. It can be on the sale proceeds of any capital asset like real estate, equipment, shares, vehicles, or expensive artwork. 

Even if you make a profit on the sale of these assets in the short run, they are still subject to taxation. These are some smart real estate investment tips for Trivandrum that you should be aware of.

Long Term Capital Gain (LTCG) Tax

If you earn a profit by selling real estate which was in your possession for more than 24 months, you have to pay long-term capital gains tax on it. You are entitled to an exemption of 1.25 lakhs, but anything above it is taxed at 20%, along with an added cess and surcharge as may be applicable as per the situation.

Tax Rate for Sale of Property

Your long-term capital gains tax liability if you sell real estate property will be as follows:

Long-term capital gains tax on the sale of property is taxed at:

• 20% with indexation (If you have sold before 23rd July 2024)
• 12.5% without indexation (If you sell on or after 23rd July 2024)

You can choose either of the two options, provided you have acquired these real estate properties post-22 July 2024.

Long-Term Capital Gain/Loss

• You have to pay a tax of 20% on the profit from property sale made on or prior to 22 July 2024 after adjusting for inflation through indexation.
• If you have sold on or after 23 July 2024 onwards, you have no indexation benefit and have to pay a tax of 12.5%.
• If you have purchased real estate property before 22 July 2024 and sold it on or after 23 July 2024, you can choose whether you want to pay 20% tax and avail of indexation benefit or just pay a flat tax of 12.5%.
• When you add the health and education cess, which is at 4% of the tax amount, you actually pay 20.8% tax on the profit you earn from selling real estate property.

What is Indexation?

Indexation allows you to adjust the cost of the asset depending on the rate of inflation. When you adjust for inflation, it increases the cost of acquiring the asset, thereby bringing down your profit, and eventually, decreasing the tax you have to pay.

In case your income puts you in the 30% tax category. If you sell some property and earn a profit, by availing indexation benefit, you will only need to pay 20% tax and not 30%.

How is LTCG Calculated?

Profit or Taxable Amount = Sale Amount of Property – (Indexed Cost of Acquisition + Indexed Cost of Improvement + Transfer Expenses).

Additionally, you can claim an exemption under section 54/54F/ 54EC, to determine the final taxable amount.

How can you Save on LTCG?

• By using the whole amount to acquire a new residential property within one year before selling the property or two years after selling it, OR constructing a new house within three years of selling. 
• By investing the entire amount in Rural Electrification Corporation Limited (RECL) and the National Highways Authority of India (NHAI) bonds within six months of selling the property, up to 50 lakhs annually.
• By investing the whole amount in a capital gains account scheme. Money withdrawn from this account can be used to buy property within 3 years.

Conclusion

Knowing about the long-term capital gains tax should be an important part of your real estate investment strategies in Trivandrum. If you have sold a property recently, consider investing in a Varma Homes apartment. As one of the leading builders in Kerala, we have excellent RERA-approved apartment projects in the best localities of Trivandrum, with world-class amenities. Check out our premium 2 and 3 BHK flats today.

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FAQ’s

How is Long-Term Capital Gains (LTCG) Tax Calculated on Real Estate in Trivandrum?

LTCG tax is calculated by deducting the Indexed Cost of Acquisition, Indexed Cost of Improvement, and Transfer Expenses from the sale price of the property. The formula is:

LTCG = Sale Price – (Indexed Cost of Acquisition + Indexed Cost of Improvement + Transfer Expenses)

• The Indexed Cost of Acquisition is the original purchase price adjusted for inflation using the Cost Inflation Index (CII) provided by the Income Tax Department.
• Transfer expenses like brokerage fees, legal fees, and registration charges are also deductible.
• After arriving at the final taxable gain, the tax rate is applied based on the date of sale (20% with indexation before 23rd July 2024, or 12.5% without indexation after).

What are the Exemptions Available to Save on LTCG Tax for Real Estate in Trivandrum?

There are several ways to save on LTCG tax under various sections of the Income Tax Act:

• Section 54: If you reinvest the capital gain to purchase a residential property within 1 year before or 2 years after the sale, or construct a house within 3 years, the gain is exempted.
• Section 54EC: Investing up to ₹50 lakhs in NHAI or RECL bonds within 6 months of the sale. These bonds come with a lock-in period of 5 years.
• Capital Gains Account Scheme (CGAS): If you need time to reinvest in property, you can deposit the gains in a capital gains account with a bank and use the funds to buy or construct property within the stipulated time.

What Happens If You Sell Property Purchased Before 22nd July 2024, After 23rd July 2024?

If you sell a property purchased before 22nd July 2024 or after 23rd July 2024, you get the option to:

• Pay 20% tax with indexation benefits (adjusting the purchase price for inflation to reduce taxable gains).
• Pay a flat 12.5% tax without indexation.

Choosing the right option depends on the inflation-adjusted purchase price — if the indexation significantly reduces your taxable profit, opting for the 20% with indexation might be more beneficial. However, if the indexation benefit is minimal, the 12.5% flat rate could be the better choice.