If you sell a property within 24 months of purchase, the profit is Short-Term Capital Gain (STCG), taxed at your income tax slab rate. If held for more than 24 months, it is Long-Term Capital Gain (LTCG), taxed at 20% with indexation benefit (which adjusts the purchase price for inflation).

Indexation adjusts the original purchase price using the Cost Inflation Index (CII) published by the government, accounting for inflation over the holding period. This increases the purchase cost on paper, reducing the calculated capital gain and hence the tax payable. For example, a property bought for ₹50 lakhs in 2014 might have an indexed cost of ₹85 lakhs in 2024.

You can claim exemption under Section 54 by reinvesting the capital gain in a new residential property within 2 years (or constructing within 3 years). Under Section 54EC, you can invest up to ₹50 lakhs in specified bonds (NHAI, REC) within 6 months of sale. Section 54F allows exemption if the net sale consideration is invested in a new house.

Inheritance itself is not taxed, but when you sell inherited property, capital gains tax applies. The cost of acquisition is the original purchase price paid by the previous owner, and the holding period includes the period for which the previous owner held the property.