The “Dual-Option” Tax Choice of 2026

For properties acquired before July 23, 2024, you are no longer forced into one tax bracket. You have the Right to Choose the method that results in lower taxes.

• Option A: 12.5% Flat Rate (No Indexation): Ideal for properties in Bengaluru’s high-growth corridors (like Whitefield or Sarjapur) where the price appreciation has drastically outpaced inflation.
• Option B: 20% Rate (With Indexation): Best for ancestral properties or those held for 15+ years where the Cost Inflation Index (CII) significantly increases your purchase price, potentially bringing your “taxable gain” to zero.
• Holding Period: Under the new unified code, any property held for more than 24 months is treated as a Long-Term Capital Asset.

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Leveraging the Cost Inflation Index (CII 2025-26)

For those opting for the 20% rate, the CII remains your best defense. The CII for FY 2025-26 is 376.

• The Power of Indexation: It allows you to inflate the purchase price to current market levels.
• Formula: Indexed Cost = (Original Cost) \times \frac{CII \ of \ Sale \ Year (376)}{CII \ of \ Purchase \ Year}$
• Example: A plot bought in 2001 for ₹10 Lakhs is now valued at ₹37.6 Lakhs (Indexed Cost) for tax purposes, even if you sell it for much more.

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Fair Market Value (FMV) & Valuation Certificates

If your Bengaluru property was acquired before April 1, 2001, your tax planning starts with the Fair Market Value.

• Valuation Zone: You can adopt the FMV as of April 1, 2001, as your base cost.
• How We Help: We coordinate with Registered Valuers to obtain a legally defensible Valuation Certificate. This ensures the FMV is maximized (up to the stamp duty value), reducing your total taxable gain from the very start.
• Scrutiny Shield: A professional certificate acts as a shield against Income Tax notices questioning your cost of acquisition.

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Section 54 – Rolling Gains into a New Home

The most popular way to save tax in Bengaluru is reinvesting in another residential property.

• The Rule: Reinvest your Capital Gains into a new residential house in India.
• ₹10 Crore Cap: As per the latest 2024-26 amendments, the maximum exemption under Section 54 is capped at ₹10 Crore.
• Two-House Benefit: If your capital gains are below ₹2 Crores, you can invest in two residential houses (once-in-a-lifetime opportunity).

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Section 54F – Selling Land/Gold for a House

If you are selling a vacant plot, commercial shop, or gold to buy a home, Section 54F is your primary tool.

• Investment Rule: Unlike Section 54, you must reinvest the Entire Net Sale Proceeds (not just the gain).
• Proportionate Saving: If you reinvest only 50% of the sale proceeds, you only get 50% tax exemption.
• Timeline: Buy within 1 year before or 2 years after, or construct within 3 years of the sale.

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54EC Bonds – The “No-Real Estate” Route

Don’t want to buy another property? Use Section 54EC Capital Gains Bonds.

• Issuers: REC, NHAI, PFC, or IRFC.
• Limit: Maximum investment of ₹50 Lakhs per financial year.
• Lock-in: 5 Years (as per current rules).
• Deadline: You must invest within 6 months of the property sale date.

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The Capital Gains Account Scheme (CGAS)

If the ITR filing deadline arrives and you haven’t bought your new home yet, you must use the CGAS to protect your exemption.

• The 31st July Deadline: Deposit the unutilized gains into a CGAS account with a nationalized bank before filing your return.
• Why It Matters: This allows you to claim the exemption in your current tax return while giving you 2-3 years to actually spend the money on a new property.
• Our Service: We assist in the manual bank documentation and ensure the deposit is correctly reported in your Schedule CG.

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Accounting for Improvements & Transfer Costs

Every rupee spent on the property can be used to reduce tax.

• Cost of Improvement: Major renovations, adding a floor, or constructing a compound wall after 2001 can be added to your cost (with indexation).
• Transfer Expenses: Brokerage paid to agents (even 2% can be a huge deduction), legal fees, stamp duty, and advertisement costs are all deductible from the sale price.
• Supportings: We help you organize these bills to ensure they are accepted during an audit.

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Why Bangalore Sellers Choose Team IN Filings?

Real estate in Bengaluru is high-value. A 1% error can cost you lakhs in taxes or penalties.

• Precision Computation: We provide a side-by-side comparison of the 12.5% vs. 20% options.
• End-to-End Filing: From obtaining the Valuation Certificate to filing the ITR-2/ITR-3, we handle the entire workflow.
• Notice Management: If the department sends a “Defective Return” or “Scrutiny” notice regarding your property sale, our litigation team represents you directly.

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Team IN Filings | Bengaluru’s Real Estate Tax Specialists

Email: team@teamindia.co.in, Phone: 7019827351 and 8792858436