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CategoriesLand Investment

Buying Land as an Individual, HUF, LLP or Private Limited Company

By Girish Chhalwani,

TL;DR

  • Section 45(5A), which defers the tax on a joint development gain to the year of the completion certificate, is available only to individuals and Hindu Undivided Families. Firms, LLPs and companies do not get it.
  • Section 54F, the reinvestment exemption used when land is sold and the proceeds go into a residential house, is likewise an individual and HUF provision.
  • The choice between 12.5 per cent without indexation and 20 per cent with indexation, for property acquired before 23 July 2024, is open only to a resident individual or HUF. Everyone else is on 12.5 per cent.
  • So the two biggest tax levers available to a land holder in Maharashtra both switch off the moment the land sits inside a company or an LLP.
  • What a company buys you is different: limited liability, easier admission of investors, cleaner succession of the holding, and the ability to run development as a business.
  • Getting land out of a company later is expensive. Assume the structure you choose at purchase is the structure you sell from.
  • Before any of this, check whether the buyer is even eligible to acquire the land. Agricultural land in Maharashtra carries its own restrictions on who may purchase, and no tax argument survives an ineligible buyer.

Girish Chhalwani, Founder & CEO, THE EDGE Developments · 20+ years in Maharashtra land acquisition, tenure and NA conversion · 8 min read · Last updated 13 September 2026

The holding entity is a tax decision disguised as an administrative one, and it is made before the deed rather than after it. The question of buying land through a company rather than personally is usually raised for reasons of convenience and answered on reflex. The reflex is often wrong, because the concessions that matter most to a land holder are written for individuals and HUFs only.

The two provisions that decide most of it

Start with what is lost rather than what is gained, because the losses are specific and quantifiable while the gains are usually described in generalities.

Availability of the key concessions by holding entity
Provision Individual HUF Partnership firm LLP Private limited company
Section 45(5A) JDA deferral to the completion certificate year Yes Yes No No No
Section 54F reinvestment exemption into a residential house Yes Yes No No No
Option of 20 per cent with indexation for property acquired before 23 July 2024 Yes, if resident Yes, if resident No No No

Section 45(5A) is the one that surprises people most. A landowner who signs a joint development agreement while holding personally pays tax in the year the completion certificate issues, when there is something realisable in hand. The same landowner holding through a company pays on ordinary principles in the year of the transfer to the developer, years before any return.

That is not a rate difference. It is a cash-flow event in the wrong year.

What each structure is actually for

Individual

The default, and for a long-hold land position usually the right one. Every concession above is available. The costs are that liability is personal, that admitting a co-investor means co-ownership with all its partition and consent problems, and that succession runs through the ordinary law of inheritance with the delays that brings.

Hindu Undivided Family

Retains the concessions and adds a separate assessable entity with its own exemption limit, which can be useful where family funds are genuinely being deployed. It is not a wrapper to be created for a transaction. The source of funds and the character of the property have to be right, and unwinding a HUF holding is harder than creating one. Partition is a real event with real consequences, not an administrative step.

Partnership firm

Rarely the right answer for a pure land hold. It loses the concessions, and introduces the instability of a firm whose constitution changes when partners come and go. Where it appears, it is usually a legacy structure rather than a chosen one.

LLP

Limited liability with a partnership’s internal flexibility, and popular for exactly that reason. The trade is the loss of the individual and HUF concessions. An LLP earns its place when the activity is genuinely a business with multiple participants and shared risk, not when a single family is holding a parcel for ten years.

Private limited company

The right structure when the land is inventory for a development business, when outside investors are coming in, or when the holding needs to be transferable as shares rather than as land. It is the wrong structure for a family that intends to hold and eventually sell, because every rupee of gain is taxed inside the company and taxed again on the way out to the shareholders.

The exit problem nobody models at purchase

Land is easy to put into a company and expensive to take out of one. The route out is a transfer from the company to the shareholder or a third party, which is a transfer for tax purposes and an instrument for stamp duty purposes, on top of whatever has already been paid inside the company on the gain.

Selling the shares instead of the land avoids a second conveyance, and is the standard answer, but it brings its own set of buyer concerns: the purchaser inherits the company’s entire history, including liabilities that have nothing to do with the land. Sophisticated buyers price that risk. Unsophisticated ones refuse the structure entirely, which narrows the market for your asset.

Section 45(5A) only applies to Individuals and HUF.

Quicko, on the scope of the joint development deferral

The question that precedes all of this

None of the above matters if the proposed buyer cannot lawfully acquire the land. Agricultural land in Maharashtra carries restrictions on who may purchase it, and those restrictions attach to the character of the buyer. A company or an LLP proposing to buy agricultural land is in a materially different position from an individual agriculturist, and the answer is not uniform across situations.

Treat eligibility as the first question and tax as the second. A structure that is tax-optimal and ineligible to buy is not a structure, and a transfer made in the face of a restriction creates precisely the kind of defect the rest of this site is about.

A working decision sequence

  1. Is the buyer eligible to acquire this land at all? Tenure and buyer-character restrictions come first.
  2. What is the realistic exit? A sale in eight years, a joint development, a development you will run yourself, or a hold across a generation. Each points to a different answer.
  3. If a joint development is plausible, hold personally or in the HUF. Section 45(5A) is worth more than most of the reasons people give for incorporating.
  4. If a sale followed by reinvestment into a house is plausible, hold personally or in the HUF. Section 54F is not available otherwise.
  5. If outside money is coming in, or the land is inventory, use the company. That is what it is for, and the concessions you are giving up were never going to apply to a trading position anyway.
  6. Do not incorporate for liability reasons alone on a passive land hold. The liability profile of holding a parcel is not the liability profile of running a development.
  7. Do not restructure just before a transaction. Moving land into an entity shortly before a JDA or a sale is both a taxable event in itself and a poor look.

Frequently asked questions

Should I buy land in my own name or through a company

For a passive hold with a likely sale or joint development, personal or HUF holding preserves sections 45(5A) and 54F, which a company cannot use. For a development business or where investors are coming in, a company is the appropriate structure.

Can a company claim section 45(5A) on a joint development

No. The deferral to the completion certificate year is available only to individuals and Hindu Undivided Families.

Can an LLP claim section 54F

No. Section 54F is an individual and HUF provision.

Who can choose 20 per cent with indexation

A resident individual or HUF holding property acquired before 23 July 2024. Other taxpayers are on 12.5 per cent without indexation.

Is it expensive to move land out of a company later

Yes. The transfer is a taxable event and an instrument attracting stamp duty, on top of tax already borne inside the company on the gain. Selling the shares avoids a second conveyance but transfers the company history to the buyer.

Does the entity change the stamp duty on purchase

Stamp duty is charged on the instrument rather than on the identity of the buyer, with concessions that turn on the buyer only in specific cases such as the concession available to women purchasers. Compute it for your specific instrument rather than assuming.

Can a company buy agricultural land in Maharashtra

Restrictions apply to who may purchase agricultural land, and they attach to the character of the buyer. Confirm eligibility for the specific parcel and the specific buyer before choosing a structure.

Deciding whose name goes on the deed? Decide the exit first. The structure follows from it, and reversing the choice later is the expensive part.

Talk to THE EDGE

Related reading

Citations and sources

This article is general information, not tax or corporate advice on any particular holding. Take the structure decision with a chartered accountant and an advocate before the deed is drawn.

Two people exchanging house keys over a wooden desk with a document folder and pen
CategoriesLand Investment

Section 45(5A) and 54F: The Landowner Tax Playbook on a JDA and a Land Sale

By Girish Chhalwani,

TL;DR

  • Section 45(5A) applies only to individuals and HUFs, and only where the joint development agreement is registered. A company, an LLP or a firm does not get it.
  • It shifts the year of taxation to the year the local authority issues the completion certificate for the whole or part of the project, instead of the year the land is handed over.
  • Full value of consideration is the stamp duty value of the units received as on the date of the completion certificate, plus any cash received.
  • The relief is lost if the landowner transfers their share in the project before the completion certificate is issued. The gain is then taxed in the year of that transfer, using the stamp duty value at that time.
  • Monetary consideration under such an agreement carries TDS at 10 per cent under section 194-IC, rising to 20 per cent where PAN is not furnished.
  • Land held over 24 months is long term. After 23 July 2024 the rate is 12.5 per cent without indexation, and a resident individual or HUF holding property acquired before that date may instead opt for 20 per cent with indexation.
  • Section 54F can shelter the whole gain if the entire net consideration is reinvested in one residential house, subject to the one-house condition and a cap of Rs 10 crore from 1 April 2024. Section 54EC bonds take up to Rs 50 lakh.

Girish Chhalwani, Founder & CEO, THE EDGE Developments · 20+ years in Maharashtra land acquisition, tenure and NA conversion · 9 min read · Last updated 13 September 2026

The reason landowners get hurt in joint development is not the rate, it is the timing: without section 45(5A) the tax falls in the year the land is handed to the developer, years before a single unit or rupee comes back. Understanding when the liability crystallises, and what forfeits the deferral, is worth more to a landowner than any negotiation on the revenue share.

The problem section 45(5A) was written to solve

A joint development agreement typically hands the developer possession and rights over the land at signing. On ordinary capital gains principles that is the transfer, and the gain arises then. The landowner receives no money at that point, and often no units for three to five years. The result is a demand in a year with no liquidity behind it, satisfied by selling something else.

Section 45(5A) breaks that link by fixing the year of taxability at the year in which the certificate of completion is issued for the whole or part of the property. The gain still arises, and it still relates to the original transfer, but it becomes payable at a point when the landowner actually holds something realisable.

Who qualifies, and who does not

Eligibility for the section 45(5A) deferral
Landowner Deferral available Consequence if not
Individual Yes —
Hindu Undivided Family Yes —
Partnership firm No Gain taxed on ordinary principles in the year of transfer
LLP No Gain taxed on ordinary principles in the year of transfer
Private limited company No Gain taxed on ordinary principles in the year of transfer

This is the single most consequential fact in the section and it is routinely discovered too late, after the land has already been moved into a company for some unrelated reason. If a landholding is going into a joint development and the holder is an individual or a HUF, think very hard before restructuring the ownership first.

How the consideration is computed

Full value of consideration is the stamp duty value of the share of the project received by the landowner, as on the date the completion certificate is issued, plus any cash received.

Two features of that formula deserve attention. The valuation date is the completion certificate date, not the agreement date, so the landowner is taxed on the value of what the project has become rather than what was promised. And the cash component is added in full, which means a deal structured with a large upfront cash payment carries a larger measured gain than the same deal structured with more units.

FVC equals stamp duty value of the property you received as on the date of issue of Completion Certificate plus cash received, if any.

ClearTax, on the computation under section 45(5A)

The trap that forfeits the deferral

If the landowner transfers their share in the project before the completion certificate is issued, section 45(5A) does not apply, and the gain is taxed in the year in which that transfer took place, using the stamp duty value at that time.

This catches people who do the commercially obvious thing. A landowner who books a strong price for their allocated units during construction, or who sells the entitlement to a third party because a better use for the money appeared, has just pulled the tax event forward by years and lost the structure the section was giving them. If a pre-completion exit is genuinely wanted, model the tax before signing anything, not after.

TDS on the cash leg

Where the developer pays monetary consideration under such an agreement, section 194-IC requires deduction of tax at 10 per cent, rising to 20 per cent where the landowner has not furnished PAN. It is deducted on the payment, so it lands well before the gain becomes taxable under section 45(5A), and the credit has to be tracked across years rather than assumed to sit in the same return as the income.

Rate: what changed on 23 July 2024

Land and buildings are long-term capital assets when held for more than 24 months. The rate position after the Finance (No. 2) Act 2024 is a two-track one, and which track applies is a matter of who you are and when you bought.

Long-term capital gains on land after 23 July 2024
Situation Rate Indexation
Property acquired on or after 23 July 2024 12.5 per cent Not available
Resident individual or HUF, property acquired before 23 July 2024 Option of 12.5 per cent or 20 per cent, whichever is better Available only on the 20 per cent option
Other taxpayers 12.5 per cent Not available

For land bought long ago at a low cost, the 12.5 per cent route usually wins because indexation on a small base does not move much. For land bought comparatively recently at a high cost, the 20 per cent with indexation route can win. It is an arithmetic question, and it should be answered with the actual numbers rather than a rule of thumb.

Section 54F, and the conditions people fail

Section 54F exempts the gain on sale of a long-term capital asset other than a residential house, where the net consideration is reinvested in one residential house. Land is the classic qualifying asset, which is why this section matters so much to the readership of this article.

  1. Reinvestment window. Purchase from one year before the sale to two years after, or construct within three years of the sale.
  2. The one-house condition. The taxpayer must not own more than one residential house on the date of transfer. This is the condition that most often disqualifies people who assumed the section was available to them.
  3. Proportionate relief. Exemption equals amount reinvested divided by net consideration, multiplied by the long-term capital gain. Reinvest everything and the whole gain is sheltered. Reinvest part and you shelter that proportion, not that amount.
  4. Lock-in. The new house cannot be sold within three years of purchase or completion without the exemption being disturbed.
  5. Capital Gains Account Scheme. If the money cannot be reinvested before the return filing deadline, park it in CGAS to hold the exemption open.
  6. The cap. From 1 April 2024 the exemption is capped at Rs 10 crore however much is actually invested.

Section 54EC sits alongside as a smaller, simpler alternative: up to Rs 50 lakh into specified bonds. It is not an either-or with 54F in principle, but the arithmetic of combining them needs doing case by case.

Putting it together

The same land, three routes
Route When tax falls Shelter available
Outright sale of the land Year of sale 54F on full reinvestment, 54EC up to Rs 50 lakh
JDA, individual or HUF, share held to completion Year of the completion certificate 54F available on the gain, subject to its own conditions
JDA, share sold before the completion certificate Year of that earlier transfer Same sections, but the deferral is gone and the timing is out of your hands

The point is not that one route dominates. It is that the routes have materially different timing, and timing is what determines whether a landowner pays out of the deal or out of savings.

Frequently asked questions

Who can use section 45(5A)

Only individuals and Hindu Undivided Families, and only where the joint development agreement is registered. Firms, LLPs and companies are outside it.

In which year is the JDA gain taxed

In the year the local authority issues the completion certificate for the whole or part of the project, provided the landowner has not transferred their share earlier.

What happens if I sell my share before completion

The deferral is lost. The gain is taxed in the year of that transfer, computed using the stamp duty value at that time.

What is the TDS rate under section 194-IC

Ten per cent on the monetary consideration paid by the developer, and twenty per cent where PAN has not been furnished.

Can I claim section 54F if I already own a house

You may own one residential house on the date of transfer and still claim it. Owning more than one on that date disqualifies you.

Is there a limit on the section 54F exemption

Yes. From 1 April 2024 the exemption is capped at Rs 10 crore regardless of how much is actually reinvested.

Should I choose 12.5 per cent or 20 per cent with indexation

Only a resident individual or HUF holding property acquired before 23 July 2024 has the choice, and it should be decided by computing both on the actual cost and date rather than by a rule of thumb.

Considering a joint development on land you hold personally? The ownership structure and the exit timing decide the tax outcome, and both are set before the agreement is signed.

Talk to THE EDGE

Related reading

Citations and sources

This article is general information on the law as it stands at the date above. It is not tax advice on any particular transaction. Compute your position with a chartered accountant before signing.

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CategoriesLand Investment

TDS on Property Purchase 2026: Form 26QB Step-by-Step Guide

By Girish Chhalwani,

Key Takeaways

  • 1% TDS is mandatory when a resident buyer purchases immovable property (other than agricultural land) for Rs 50 lakh or more, under Section 194-IA of the Income-tax Act, 1961.
  • The 1% is charged on the sale consideration or the stamp-duty (ready-reckoner) value, whichever is higher — a rule in force since 1 April 2022.
  • You deposit the TDS using Form 26QB within 30 days from the end of the month in which you deducted it, then issue Form 16B to the seller within 15 days of that due date.
  • No TAN is needed — the buyer uses their PAN. But if the seller does not give a PAN, TDS jumps to 20% under Section 206AA.
  • From 1 October 2024, joint buyers or joint sellers are assessed on the aggregate consideration — sub-Rs 50 lakh shares no longer escape TDS.
  • If the seller is an NRI, Section 194-IA does not apply — a different, higher regime under Section 195 takes over.

By Girish Chhalwani, Founder & CEO, THE EDGE Developments · 20+ years in Maharashtra land acquisition and land-investment advisory · Reading time: 7 min · Last updated: 2 August 2026

The 1% TDS rule on a property purchase, in one answer

When a resident buyer purchases immovable property — other than agricultural land — for Rs 50 lakh or more, the buyer must deduct 1% TDS under Section 194-IA of the Income-tax Act, deposit it through Form 26QB within 30 days from the end of the month of deduction, and hand the seller a Form 16B certificate. The tax is the buyer’s legal responsibility, not the seller’s, and it is calculated on the sale consideration or the stamp-duty value, whichever is higher.

This catches many first-time buyers by surprise: you cannot simply pay the full price to the seller and settle up later. You pay the seller 99% and route the remaining 1% to the government in the seller’s name. Get the mechanics wrong and the interest, late-filing fee, and penalty land on you, the buyer — so this guide walks through every step, deadline, and edge case for 2026.

When does Section 194-IA apply? The Rs 50 lakh threshold

Section 194-IA applies whenever the consideration for the property, or its stamp-duty value, is Rs 50,00,000 (Rs 50 lakh) or more. If both the consideration and the stamp-duty value are below Rs 50 lakh, no TDS is due at all. The section covers buildings, flats, and land — but expressly excludes agricultural land.

Two points trip people up. First, the threshold is not “the price you negotiated” — it is the higher of the price and the government’s stamp-duty (ready-reckoner) value. A flat agreed at Rs 48 lakh can still cross the line if its ready-reckoner value is Rs 52 lakh. Second, the 1% is deducted on the whole value, not just the amount above Rs 50 lakh. There is no basic exemption slab here.

What is the 1% calculated on — price or ready-reckoner value?

The 1% is calculated on the sale consideration or the stamp-duty value, whichever is higher. This “whichever is higher” basis was inserted by the Finance Act 2022 with effect from 1 April 2022, aligning Section 194-IA with the anti-undervaluation logic already in Sections 50C and 56(2)(x). Before that, TDS was computed only on the stated consideration.

Here is how the arithmetic plays out in the three situations buyers most often face:

Scenario Agreement value Stamp-duty value TDS applies? 1% TDS deducted
Standard purchase Rs 80,00,000 Rs 78,00,000 Yes (≥ Rs 50L) Rs 80,000 (on Rs 80L)
Ready-reckoner higher than price Rs 48,00,000 Rs 55,00,000 Yes (higher value ≥ Rs 50L) Rs 55,000 (on Rs 55L)
Both values below threshold Rs 46,00,000 Rs 49,00,000 No Nil

In the standard Rs 80 lakh case, you pay the seller Rs 79,20,000 and deposit Rs 80,000 with the government against the seller’s PAN. The seller later claims that Rs 80,000 as a credit when filing their own income-tax return.

Buying jointly? The October 2024 aggregate-consideration rule

From 1 October 2024, where a property has more than one buyer or more than one seller, the consideration is the aggregate of all amounts paid by all buyers to all sellers — so individual sub-Rs 50 lakh shares no longer escape TDS. This was fixed by a proviso to Section 194-IA(2) inserted by the Finance (No. 2) Act 2024 (Clause 58).

The change closed a loophole. Earlier, a couple buying a Rs 90 lakh flat at Rs 45 lakh each could argue that neither share crossed Rs 50 lakh, so no TDS was due. That reading is now expressly blocked: the department looks at the Rs 90 lakh aggregate, confirms it is over the threshold, and each buyer deducts 1% on their own share and files a separate Form 26QB. In the Rs 90 lakh, 50:50 example, each spouse files Form 26QB for their Rs 45 lakh share and deposits Rs 45,000.

How to file Form 26QB: step-by-step

Form 26QB is a combined challan-cum-statement filed and paid online — you do not need a TAN, only the PAN of both the buyer and the seller. The process runs entirely on the Income-tax e-filing portal:

  1. Log in to the Income-tax e-filing portal and open e-Pay Tax → New Payment → “TDS on Sale of Property (Form 26QB)”.
  2. Select whether you are buying from a resident, and confirm the number of buyers and sellers (this drives the aggregate-consideration rule above).
  3. Enter the PAN of the buyer and the seller, the property address, the agreement date, the total consideration, and the stamp-duty value.
  4. The portal computes 1% of the higher value as the tax payable. Verify the figure against your own calculation.
  5. Pay online (net banking, debit card, or over-the-counter via the generated challan) and save the acknowledgement.
  6. After a few days, register on TRACES as a taxpayer and download Form 16B — the TDS certificate you must give the seller.

File a separate Form 26QB for each buyer-seller pairing. Two buyers and one seller means two Form 26QBs; one buyer and two sellers means two as well.

Form 16B — the certificate you must give the seller

Form 16B is the TDS certificate that proves you deposited the 1% against the seller’s PAN, and you must download it from TRACES and issue it to the seller within 15 days of the Form 26QB due date. Without it, the seller cannot cleanly claim credit for the tax you deducted, and disputes at handover are common when it is skipped.

Practically, sellers increasingly ask for Form 16B before releasing possession or the final no-dues letter, so treat it as part of closing — not an afterthought weeks later.

Deadlines and penalties at a glance

Every obligation under Section 194-IA is date-stamped. Missing a date shifts the cost onto the buyer, so keep this table beside your closing checklist:

Obligation Deadline / rate What triggers a cost
Deduct 1% TDS At payment / credit to seller Interest at 1% per month for non-deduction
Deposit via Form 26QB Within 30 days from end of the month of deduction Interest at 1.5% per month for late deposit
Issue Form 16B to seller Within 15 days of the 26QB due date Seller cannot claim TDS credit smoothly
Late filing of Form 26QB — Fee of Rs 200 per day under Section 234E
Seller has no PAN TDS at 20% (not 1%) Higher deduction under Section 206AA

On top of the above, a penalty of up to Rs 1,00,000 can apply under Section 271H for failure to file the statement. These are avoidable costs — none of them arise if you deduct, deposit, and certify on time.

When 194-IA does NOT apply: NRI sellers and Section 195

If the seller is a Non-Resident Indian (NRI), Section 194-IA and its comfortable 1% rate do not apply — the buyer must instead deduct TDS under Section 195, at rates far higher than 1%. This is the single most expensive mistake a buyer can make: deducting 1% from an NRI seller leaves you exposed for the shortfall, because the responsibility to deduct the correct amount is yours.

The Section 195 regime has its own mechanics — TDS on the capital gain, a TAN requirement, and Form 27Q instead of Form 26QB. We cover it in full in our dedicated guide to tax, TDS and repatriation when an NRI sells property in India, so this guide stays focused on the resident-seller case.

“Buyers treat TDS as the seller’s paperwork. It isn’t. Under 194-IA the liability sits with the buyer, so the day you deduct 1% you have taken on a compliance duty with hard deadlines. On a Rs 80 lakh purchase that is Rs 80,000 you are personally answerable for — file the 26QB, download the 16B, and keep both with your title papers. It costs nothing to do on time and a great deal to fix late.”

— Girish Chhalwani, Founder & CEO, THE EDGE Developments

Frequently asked questions

Is TDS calculated on the property price or the ready-reckoner value?

It is calculated on the higher of the two. Since 1 April 2022, Section 194-IA charges 1% on the sale consideration or the stamp-duty (ready-reckoner) value, whichever is higher. So if your agreement value is Rs 48 lakh but the ready-reckoner value is Rs 55 lakh, you deduct 1% of Rs 55 lakh.

I’m buying with my spouse — do we each deduct TDS or just once?

Since 1 October 2024, joint buyers are assessed on the aggregate consideration. If the combined value is Rs 50 lakh or more, each co-buyer deducts 1% on their own share and files a separate Form 26QB. A Rs 90 lakh flat split 50:50 means each spouse deposits Rs 45,000 — the sub-Rs 50 lakh individual shares no longer exempt you.

What happens if the seller doesn’t give me their PAN?

If the seller does not furnish a valid PAN, you must deduct TDS at 20% instead of 1%, under Section 206AA. PAN of both the buyer and the seller is mandatory on Form 26QB, so obtain the seller’s PAN in writing before you close.

Do I need a TAN to deduct TDS on a property purchase?

No. Section 194-IA specifically waives the TAN requirement for property buyers — you use your own PAN to file Form 26QB. A TAN is only needed in the separate case where the seller is an NRI and Section 195 applies.

My property is Rs 49 lakh — do I still need to deduct TDS?

Only if the stamp-duty value is Rs 50 lakh or more. If both the agreement value and the ready-reckoner value are below Rs 50 lakh, no TDS is due. But check the ready-reckoner value first, because it often exceeds the negotiated price and can pull you over the threshold.

The seller is an NRI — is the TDS still 1%?

No. When the seller is a Non-Resident Indian, Section 194-IA does not apply and the 1% rate is irrelevant. You must deduct under Section 195 at much higher rates, obtain a TAN, and file Form 27Q. See our separate NRI-seller guide for the full procedure.

When is Form 26QB due, and what is the penalty if I file late?

Form 26QB and the tax payment are due within 30 days from the end of the month in which you deducted the TDS. Late deposit attracts interest at 1.5% per month, late filing carries a fee of Rs 200 per day under Section 234E, and a penalty of up to Rs 1,00,000 can apply under Section 271H.

Buying a plot or villa near Mumbai?

THE EDGE Developments handles the full compliance trail — title, stamp duty, TDS, and registration — on every branded plotted and villa purchase, so nothing slips between agreement and possession. Explore our branded plots and villa developments, or talk to our land-investment team.

Related reading

Citations & sources

NRI family with property-sale papers and a wire-transfer receipt — NRI selling property in India, tax and repatriation
CategoriesNRI Guides

NRI Selling Property in India: Tax, TDS, Repatriation and How to Bring Money Home

By Girish Chhalwani,

THE EDGE — Direct Answer

When an NRI sells property in India, the buyer must deduct TDS before paying — approximately 13–18% for long-term capital gains (property held 24+ months) or 30%+ for short-term gains. The most important step is applying for a Lower Deduction Certificate (Form 13) before the sale to prevent excess TDS from being locked up for 8–12 months in a refund cycle. After the sale, file an Indian Income Tax Return to claim Section 54F exemption (reinvest in residential property) or Section 54EC (invest up to ₹50 lakh in NHAI/REC bonds within 6 months). To repatriate sale proceeds abroad, submit Form 15CA and 15CB to your Indian bank — up to USD 1 million per year from an NRO account, unlimited from an NRE account. Total processing typically takes 5–15 business days.

TL;DR — KEY TAKEAWAYS

  • The buyer must deduct TDS of ~13–18% (LTCG) or 30%+ (STCG) before paying an NRI seller.
  • Apply for a Lower Deduction Certificate (Form 13) BEFORE the sale to avoid locking up cash in excess TDS.
  • Repatriate via Form 15CA/15CB — up to USD 1M/year from an NRO account, unlimited from an NRE account.
  • File an Indian ITR even if TDS was fully deducted, to claim refunds and Section 54F/54EC exemptions.

When an NRI sells property in India, the buyer must deduct TDS (Tax Deducted at Source) at 12.5–23% before paying — and the NRI must file an Indian Income Tax Return to claim any excess refund. After tax compliance, repatriation of sale proceeds to your overseas account is governed by RBI rules. This guide walks through the entire process — from sale to wire transfer abroad.

Reading time: 13 minutes | Last updated: July 2026 | Author: Girish Chhalwani, Founder & CEO, THE EDGE Developments

The most common mistake NRI property sellers make is not applying for a Lower TDS Certificate before the sale. If the buyer deducts 20–23% TDS at source and the NRI’s actual tax liability is only 12.5%, they must wait 8–12 months for an ITR refund. A Lower Deduction Certificate from the Income Tax Department, applied for before the sale, allows TDS to be deducted at the actual liability rate — dramatically improving cash flow. — Source: Income Tax Department Circular, NRI TDS Guidelines 2024

What is the step-by-step process for an NRI to sell property in India?

Five steps: calculate your capital gains tax, apply for a Lower TDS Certificate before selling, execute the registered sale, file your Indian ITR, and repatriate the proceeds using Form 15CA/15CB. Doing them in this order protects your cash flow.

Step 1: Determine Capital Gains Tax Liability

Before anything else, calculate what you owe:

  • LTCG (held 24+ months): 12.5% flat rate on gains (post-Budget 2024); no indexation for properties acquired after July 23, 2024
  • STCG (held under 24 months): Taxed at applicable income slab rate (30% at highest bracket + surcharge + cess)
  • Add surcharge (10–37% of tax depending on gain amount) and cess (4%) to arrive at effective rate

Step 2: Apply for Lower TDS Certificate (Form 13) — Do This First

Before the sale, apply to the Income Tax Department for a Lower Deduction Certificate under Section 197. This certificate specifies the TDS rate applicable based on your actual tax liability — preventing over-deduction.

Timeline: Apply 30–60 days before expected sale date. Income Tax Department typically processes in 2–4 weeks.

Documents required: PAN, calculation of capital gain, purchase documents, sale agreement draft

Without this certificate: buyer deducts TDS at default NRI rates (significantly higher than actual liability in many cases).

Step 3: Execute the Sale

  • Agree on sale price and terms with buyer
  • Execute registered Agreement for Sale (AFS)
  • Buyer deducts TDS (as per Lower Deduction Certificate or standard rates) and deposits with Income Tax Department via Challan 26QB
  • Buyer provides TDS certificate (Form 16B) to seller
  • Execute and register Sale Deed at Sub-Registrar office in India (NRI can attend in person or via registered POA)

Step 4: File Indian Income Tax Return (ITR)

NRI sellers must file ITR in India for the financial year of sale — even if all tax was deducted at source. Benefits of filing:

  • Claim refund of any excess TDS deducted
  • Claim Section 54F exemption (if reinvesting in residential property)
  • Claim Section 54EC exemption (if investing in NHAI/REC bonds)
  • Provide documentation for repatriation clearance

File ITR before July 31 of the assessment year following the sale. You can file online through incometax.gov.in.

Step 5: Repatriate Funds from India to Abroad

What can be repatriated:

  • Sale proceeds from the sale of immovable property (up to 2 residential properties per NRI per year)
  • Repatriation limit: USD 1 million per financial year for NRO account (which includes all sources)
  • From NRE account: freely repatriable with no upper limit

Documents required for repatriation:

  • Form 15CA (self-declaration) and Form 15CB (CA certificate) — uploaded to Income Tax portal
  • Proof of property ownership and sale
  • Evidence that TDS was deducted/paid (Form 16B / Challan 26QB receipt)
  • ITR filing acknowledgement for the relevant year
  • Original FIRC(s) from the purchase — proving original funds were remitted from abroad

What TDS rates apply to NRI property sellers in 2026?

For LTCG, TDS runs ~13% to ~18% of the sale value depending on the surcharge band; for STCG it starts at 30% and can exceed 42%. A Lower Deduction Certificate reduces this to your actual liability.

Sale Type Standard TDS Rate Effective Rate with Surcharge & Cess
LTCG (held 24+ months, sale consideration ≤₹50L) 12.5% ~13.0%
LTCG (sale consideration ₹50L–₹1Cr) 12.5% + 10% surcharge ~14.3%
LTCG (sale consideration ₹1Cr–₹2Cr) 12.5% + 15% surcharge ~15.0%
LTCG (sale consideration ₹2Cr–₹5Cr) 12.5% + 25% surcharge ~16.3%
LTCG (sale consideration above ₹5Cr) 12.5% + 37% surcharge ~17.9%
STCG (held less than 24 months) 30% ~31.2% to 42.7% with max surcharge

A Lower Deduction Certificate can reduce these rates to actual liability. Consult a chartered accountant before any NRI property sale.

What exemptions can an NRI seller claim?

NRIs can claim the same LTCG exemptions as residents: Section 54F (reinvest the full sale consideration in an Indian residential property) and Section 54EC (invest up to ₹50 lakh in NHAI/REC bonds within 6 months).

Section 54F: Reinvest in Residential Property

Same as for residents: reinvest entire net sale consideration (not just gain) in a residential property within 1 year before or 2 years after sale (purchase) or 3 years (construction). Exempts entire LTCG. The new residential property must be in India.

Section 54EC: Infrastructure Bonds

Invest up to ₹50 lakh in NHAI or REC bonds within 6 months of sale. Exempt LTCG up to ₹50 lakh. 5-year lock-in period.

Can NRIs sell agricultural land they inherited?

Yes — NRIs who inherited agricultural land (or received it as a gift from a resident Indian) can sell it to a resident Indian only (not to another NRI). The sale proceeds can be credited to NRO account and repatriated within the USD 1 million annual limit after tax compliance.

Frequently Asked Questions

What TDS is deducted when NRI sells property in India?

For LTCG (held 24+ months): TDS ranges from ~13% to ~18% depending on sale value, due to surcharge on higher amounts. For STCG (held under 24 months): TDS at 30% plus surcharge and cess, which can reach 42%+. Apply for a Lower Deduction Certificate before sale to avoid over-deduction.

How does an NRI bring money to the US/UK/UAE after selling property in India?

File Form 15CA and 15CB with Income Tax portal. Submit to your Indian bank (NRO account) along with sale documents, Form 16B, ITR acknowledgement, and original FIRC from purchase. The bank will then execute the international wire transfer. Processing typically takes 5–15 business days.

How much money can an NRI repatriate from sale of property in India per year?

From an NRO account: up to USD 1 million per financial year (covering all sources including property sale proceeds). From an NRE account: unlimited repatriation (if original purchase was funded from NRE account or foreign remittance). There is no restriction on repatriation from NRE accounts.

Does an NRI need to file ITR in India when selling property?

Yes — if any capital gain arises from the sale, the NRI must file an ITR in India for that financial year. Even if TDS has been fully deducted, filing is necessary to claim exemptions (Section 54F, 54EC), claim any refund on excess TDS, and comply with Indian tax law.

About the Author — Girish Chhalwani

Girish Chhalwani is the Founder & CEO of THE EDGE Developments, a RERA-registered plotted-development company in the Karjat–MMR corridor. With 20+ years in Maharashtra land acquisition, NA conversion, and infrastructure-led land investment, he advises HNI and NRI investors on land strategy near Mumbai.

 ·  About THE EDGE Developments

Planning to Buy or Sell as an NRI?

THE EDGE Developments helps NRI investors buy, hold, and exit RERA-registered land near Mumbai with full tax and repatriation documentation. Speak with our team for a remote consultation.

Book an NRI Consultation →

This article is general information, not tax advice. Consult a qualified chartered accountant for your specific situation.

Banner cover: 'Capital Gains Tax on Land Sale 2026' with a calculator and pen on a financial document behind The Edge Developments logo.
CategoriesLand Investment

Capital Gains Tax on Land Sale in India 2026: Complete Guide with Examples

By Girish Chhalwani,

THE EDGE — Direct Answer

When you sell land held for 24+ months in India, you pay Long-Term Capital Gains (LTCG) tax at a flat 12.5% — with no indexation for properties purchased after 23 July 2024. For land bought before 23 July 2024, you may choose between 12.5% flat or the old 20% with indexation — whichever gives the lower tax bill. Land sold within 24 months is Short-Term Capital Gains (STCG) taxed at your income slab rate, up to 30%. Two legal routes to eliminate LTCG entirely: Section 54F — reinvest the full sale consideration (not just the gain) into a new residential property within 2 years of sale — or Section 54EC — invest up to ₹50 lakh in NHAI or REC bonds within 6 months. For NRI sellers, the buyer must deduct TDS at 12.5%+ (LTCG) or slab rate (STCG) before payment — the seller must apply for a Lower Deduction Certificate (Form 13) to reduce this burden.

TL;DR — KEY TAKEAWAYS

  • Land held 24+ months = LTCG at 12.5% flat (no indexation for property bought after 23 July 2024).
  • Land held under 24 months = STCG taxed at your income slab rate (up to 30%).
  • Property bought before 23 July 2024 can pick 12.5% flat or 20% indexed — whichever is lower.
  • Save tax legally via Section 54F (reinvest in a home) or Section 54EC (up to ₹50L in NHAI/REC bonds).

When you sell land in India, you pay capital gains tax on the profit. The rate depends on how long you held the land: Short-Term Capital Gains (STCG) if sold within 24 months — taxed at your income tax slab rate. Long-Term Capital Gains (LTCG) if held for 24+ months — taxed at 12.5% without indexation (post-Union Budget 2024 amendment). This guide explains every scenario with worked examples.

Reading time: 13 minutes | Last updated: July 2026 | Author: Girish Chhalwani, Founder & CEO, THE EDGE Developments

The Union Budget 2024 changed the LTCG tax structure for real estate. The indexation benefit (which reduced taxable gains by adjusting for inflation) was removed for properties acquired after July 23, 2024, with a flat LTCG rate of 12.5%. For properties acquired before July 23, 2024, taxpayers can choose between the old indexed 20% rate or the new 12.5% flat rate — whichever results in lower tax. — Source: Union Budget 2024, Income Tax Act Section 112A, Finance Act 2024

What is the difference between STCG and LTCG on land?

Land sold within 24 months is STCG, taxed at your slab rate (up to 30%). Land held 24+ months is LTCG, taxed at a flat 12.5% (with the pre-July-2024 option to use 20% with indexation).

Parameter Short-Term Capital Gain (STCG) Long-Term Capital Gain (LTCG)
Holding period Less than 24 months 24 months or more
Tax rate Your income tax slab rate (5%, 20%, or 30%) 12.5% flat (post-Budget 2024, no indexation)
Indexation benefit Not applicable Not available for assets bought after July 23, 2024
Old regime option Not applicable 20% with indexation for properties bought before July 23, 2024
Exemptions available Very limited Section 54F (invest in residential property), Section 54EC (bonds)

How do you calculate capital gains on a land sale?

Take the higher of your sale price or the stamp-duty value, subtract the cost of acquisition (indexed only for pre-July-2024 property), then subtract improvement and transfer costs — the balance is your taxable gain.

Step 1: Determine Sale Consideration

Sale Consideration = Higher of (Actual Sale Price) or (Stamp Duty Value / Circle Rate of property)

If the buyer pays below stamp duty value, the stamp duty value is treated as the actual sale consideration for tax purposes.

Step 2: Determine Cost of Acquisition

For land purchased after July 23, 2024: Cost of acquisition = actual purchase price (no indexation adjustment)

For land purchased before July 23, 2024: You may choose either:

  • Option A: Actual purchase price (for 12.5% flat LTCG calculation)
  • Option B: Indexed purchase price = Purchase Price × (CII of Sale Year ÷ CII of Purchase Year) for 20% LTCG calculation

Choose whichever gives you lower tax outflow.

Step 3: Calculate Capital Gain

Capital Gain = Sale Consideration − Cost of Acquisition − Improvement Costs − Transfer Expenses

Transfer expenses include: stamp duty paid by seller (if any), registration costs, brokerage, legal fees for the sale transaction.

Worked Example 1: Karjat NA Plot Purchased in 2021, Sold in 2026

Parameter Amount
Purchase Year March 2021
Sale Year July 2026
Holding Period 5 years 4 months (LTCG — held 24+ months)
Purchase Price ₹40,00,000
Sale Price ₹1,05,00,000
Transfer expenses (brokerage, legal) ₹2,00,000
Net Sale Consideration ₹1,03,00,000
Capital Gain (12.5% flat, no indexation) ₹1,03,00,000 − ₹40,00,000 = ₹63,00,000
LTCG Tax @ 12.5% ₹7,87,500

Compare with old indexed method (purchased before July 23, 2024 option): CII 2021 = 317, CII 2026 (est.) = 395

Indexed cost = ₹40L × (395/317) = ₹49.84L. Indexed gain = ₹1.03Cr − ₹49.84L = ₹53.16L. Tax @20% = ₹10.63L

Result: 12.5% flat rate (₹7.87L) is better than 20% indexed (₹10.63L) in this case.

Worked Example 2: STCG — Plot Sold Within 18 Months

Parameter Amount
Purchase Price ₹35,00,000
Sale Price (18 months later) ₹44,00,000
Capital Gain (STCG) ₹9,00,000
Investor income tax slab 30% (income above ₹10L/year)
STCG Tax @ 30% slab ₹2,70,000

How can you legally save capital gains tax on a land sale?

Two main routes for LTCG: Section 54F (reinvest the entire sale consideration in a residential property) and Section 54EC (invest up to ₹50 lakh in NHAI/REC bonds within 6 months). A Capital Gains Account Scheme parks funds if you can’t reinvest immediately.

Section 54F: Buy a Residential Property (LTCG Only)

If you reinvest the entire net sale consideration (not just the gain) into a new residential property within:

  • 1 year before or 2 years after the sale date (purchase), OR
  • 3 years after the sale date (construction)

…you get full LTCG exemption. Conditions: You must not own more than one other residential property at the date of sale.

Example: Sell land for ₹1.03 Cr. Reinvest full ₹1.03 Cr into a new residential flat within 2 years → LTCG tax = NIL.

Section 54EC: Capital Gains Bonds (LTCG Only)

Invest up to ₹50 lakh in NHAI or REC infrastructure bonds within 6 months of land sale → LTCG exemption up to ₹50 lakh. Lock-in period: 5 years. Interest rate: ~5.25–5.75% (taxable).

Capital Gains Account Scheme (CGAS)

If you cannot immediately invest in property or bonds, deposit the gains in a CGAS account with a nationalised bank before the ITR filing deadline. Funds must be used within the prescribed period.

What TDS must the buyer deduct on a land sale?

Under Section 194-IA, if the sale consideration exceeds ₹50 lakh, the buyer must deduct 1% TDS before paying the seller. This is not the buyer’s tax — it is an advance deduction from the seller’s tax liability. The seller gets credit for this TDS when filing ITR.

How are capital gains different for NRI sellers?

For NRI sellers, TDS is deducted at much higher rates — 12.5%+ (LTCG) or slab rate (STCG) plus surcharge and cess. A Lower TDS Certificate (Form 13) can reduce this to the actual liability.

  • LTCG properties: Buyer must deduct 12.5% + applicable surcharge + cess (effective rate can be 14–23%)
  • STCG properties: Buyer deducts at income slab rate applicable to NRI
  • Lower TDS certificate: NRI sellers can apply to Income Tax Department for a lower deduction certificate (Form 13) if actual tax liability is lower than standard TDS rate

Frequently Asked Questions

What is the capital gains tax on sale of land in India in 2026?

If held for 24+ months: 12.5% LTCG (flat rate, no indexation for properties bought after July 23, 2024). For properties bought before July 23, 2024: choose between 12.5% flat or 20% with indexation — whichever is lower. If held under 24 months: taxed at your income tax slab rate (up to 30%).

How can I avoid paying capital gains tax on land sale in India?

Legal exemptions: Section 54F (reinvest in residential property — full exemption if entire consideration reinvested), Section 54EC (invest up to ₹50L in NHAI/REC bonds). These are the two main legally sanctioned routes to reduce or eliminate LTCG on land sale.

Is indexation benefit available on sale of land in India in 2026?

No indexation for properties acquired after July 23, 2024 — flat 12.5% LTCG applies. For properties acquired before July 23, 2024: you have the option to use either the old 20% indexed method or the new 12.5% flat method — and can choose whichever results in lower tax.

Do I need to pay GST when selling land in India?

No. GST does not apply to the sale of land (only to construction services). Stamp duty and registration charges apply but these are state-level taxes, not GST. Plot sales in RERA-registered projects also do not attract GST on the land component. See THE EDGE’s complete guide to GST on land for the full explanation of when GST does and doesn’t apply.

About the Author — Girish Chhalwani

Girish Chhalwani is the Founder & CEO of THE EDGE Developments, a RERA-registered plotted-development company in the Karjat–MMR corridor. With 20+ years in Maharashtra land acquisition, NA conversion, and infrastructure-led land investment, he advises HNI and NRI investors on land strategy near Mumbai.

 ·  About THE EDGE Developments

Planning a Land Investment in the Karjat Corridor?

THE EDGE Developments offers RERA-registered, NA-converted plots with clean title and full documentation — the foundation for a tax-efficient long-term hold. Speak with our team for current pricing and a guided site visit.

Book a Consultation →

This article is general information, not tax advice. Consult a qualified chartered accountant for your specific situation.