Published on August 20, 2026
The tax on a sale is decided by cost, holding period and the exemption route you can actually complete — not by the price the buyer agreed to pay.
Capital gains tax is often treated as a problem for the year after the sale. By then the consideration has been received, the TDS has been deducted on a figure nobody checked, and the exemption the seller was counting on has already been missed because the new asset was not acquired in time. The computation itself is not obscure. What is obscure, until someone writes it down before the agreement is signed, is which cost can be taken, which holding period applies, and which exemption the facts will actually support.
The starting point is the cost of acquisition and the date it was acquired. For property that date is the registered deed, not the booking letter, unless the law for that class of asset says otherwise. Improvements that can be proved — a building constructed later, a substantial renovation with invoices — add to cost. Informal cash work does not. Where indexation is still available for that class of asset and that year, it is applied to the proved cost, not to a round number the seller remembers.
Holding period decides whether the gain is short-term or long-term, and therefore the rate. Listed equity, unlisted shares, residential house property, and other immovable property do not share one holding period. Mixing them in a single working is how a return files the wrong rate on the right sale.
Sections 54 and 54F are used more often than they are completed. Section 54 requires a residential house to be sold and another residential house to be acquired or constructed within the window the section gives. Section 54F applies when the asset sold is not a residential house, and the net consideration — not only the gain — is invested in a residential house. The two sections are not interchangeable. Using 54 language on a 54F sale is a common reason an exemption is denied later.
The new asset has to be in the seller’s name, in the time allowed, and for a consideration that can be traced from the sale proceeds. A booking in a relative’s name, a part-payment that sits outside the window, or a purchase that uses a fresh loan while the sale proceeds sit in a savings account, all need to be written into the working before anyone assumes the exemption will stand. Where the new asset will not be ready in time, the unutilised amount has to go into the Capital Gains Account Scheme, not into a current account that will be “used later”.
Section 54EC bonds are the other route: invest the gain, up to the notified cap, in specified bonds within the notified period. They are useful when the seller does not want another house. They are not useful when the seller wants both the exemption and immediate liquidity of the full gain.
Listed equity and equity-oriented funds follow their own rate and their own cost rules. Unlisted shares follow another. A demat statement is the source for listed holdings. For unlisted shares the source is the share certificate, the transfer deed, and the valuation that applied at the time of the earlier transfer if one took place. Grandfathering, if it still applies to that holding for that year, has to be computed on the statutory formula, not on a broker’s summary.
Losses can be set off only in the order the Act allows. A short-term loss is more flexible than a long-term loss. Carrying a loss forward requires the return for that year to have been filed on time. A sale planned for March that is going to generate a loss is wasted if the return for the year of the original loss was never filed.
When the seller is a non-resident, the buyer of immovable property is generally required to deduct tax at source on the consideration under section 195, unless a lower or nil deduction certificate is in force. The certificate is applied for on the computed gain, not on a request to deduct less. Without it, the buyer deducts on the gross consideration, and the seller spends the next year claiming a refund. Residential status for the year of sale, the cost file, and the exemption plan should be settled before the agreement is circulated, not after the buyer’s counsel asks for a TAN and a computation.
A usable capital-gains file contains the deed or contract note, the cost evidence, the holding-period working, the exemption or bond plan with dates, and — where TDS applies — the section and the rate the buyer should use. Once that file exists, the sale can proceed. Until it exists, the price in the agreement is only half the number that will matter at the end of the year.
Balaji T S & Co prepares that file as part of the sale, not as a note attached to the ITR. The difference is that the exemption is completed in the window the law gives, and the TDS deducted is the tax that is actually due.
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