Two ways to compute your property tax now

By Parish Rao · 27 August 2026 · 5 minute read

Property sellers used to have one method. Now many have a choice, and the right answer genuinely differs from one property to the next. Choosing badly can cost lakhs on a single sale.

The two routes, in plain words

With indexation. Your original cost is inflated using the official index to reflect what money was worth then, and tax is charged on the remaining gain at the higher rate.

Without indexation. Your cost stays as it was, the full nominal gain is taxed, but at a lower rate.

Neither is automatically better. Which one wins depends almost entirely on how long you held the property and how much it actually appreciated.

The pattern to understand

Indexation helps most when a property was held a long time and grew modestly. Inflation adjustment does a lot of work over decades, and the higher rate applies to a much smaller number.

The lower flat rate tends to win when a property appreciated sharply in a shorter period. There is less inflation to adjust for, so the smaller rate on the full gain comes out ahead.

The crossover point is genuinely case by case. It depends on the purchase year, the sale price and the index for the year of sale, which for the current year is 384.

What this has to do with a valuer

Both routes start from the same place: your cost of acquisition. If the property was acquired before April 2001, that cost is its market value on 1 April 2001, and that is a valuation question.

Get that number wrong and both computations are wrong. Get it right and your CA can run both and pick the better outcome with confidence. So the valuation is not an alternative to the tax planning, it is the input the tax planning needs.

Why old properties usually still favour a strong 2001 value

For a property in the family since the seventies or eighties, the 2001 substitution typically lifts the cost enormously compared with the original price. That helps in either computation, and it helps most in the indexation route where the raised cost is then inflated further.

This is why the same advice holds regardless of which route you end up choosing. Establish the strongest defensible 2001 value first, then decide.

What to do

1. Establish the cost properlyA valuation for the 1 April 2001 value if the property is that old.
2. Give your CA both inputsThe certified cost and the sale figures.
3. Ask for both computationsNot just the one they usually run. Ask to see the two numbers side by side.
4. Decide before filingNot after. This is a choice made in the return.

An honest boundary

Which option applies to you, and whether any conditions or exceptions affect your case, is your chartered accountant's call. Rules in this area have changed recently and can change again. We are valuers, and we stay firmly on our side of that line.

What we guarantee is that the cost figure your CA computes from will stand up if anyone questions it. Read how we build it, or try the free capital gains calculator to see the shape of your numbers.