Capital Gains Tax on Selling Land in Maharashtra
- Long-term capital gains on land transferred on or after 23 July 2024 are taxed at 12.5% without indexation, under Section 112 of the Income-tax Act, 1961 as amended by the Finance (No. 2) Act, 2024.
- For land or a building acquired before 23 July 2024, a resident individual or HUF may instead choose the old 20% with indexation, and pay whichever of the two works out lower.
- Land becomes a long-term capital asset after it is held for more than 24 months; sell sooner and the gain is short-term, taxed at your slab rate.
- Rural agricultural land is not a capital asset under Section 2(14)(iii), so its sale attracts no capital gains tax at all; urban agricultural land is taxed normally.
- Surcharge and 4% health-and-education cess apply on top of the base rate, and exemptions under Sections 54B, 54F and 54EC can reduce the taxable gain.
If you are selling a plot in Karjat, Khopoli, Alibaug or anywhere else in Maharashtra, the tax on your profit follows central law, not state law — and the rules changed materially in July 2024. Here is how capital gains on land are calculated now, with a worked example.
How is capital gains tax on land calculated in Maharashtra?
Capital gains on land are governed by the Income-tax Act, 1961, which applies uniformly across India — there is no separate Maharashtra capital gains tax. The gain is the sale consideration minus the cost of acquisition and allowable expenses, and the rate depends on how long you held the plot.
Two numbers decide your liability: the holding period (which sets whether the gain is short-term or long-term) and the date of transfer (which sets which rate regime applies). Stamp duty and registration are state subjects collected by Maharashtra, but the tax on your profit from selling is a central levy assessed in your income tax return. The sale consideration is also compared against the ready-reckoner value under Section 50C: if the agreement value is lower than the stamp-duty value, the stamp-duty value is generally treated as the sale consideration for computing the gain.
What counts as long-term versus short-term for land?
Land held for more than 24 months before transfer is a long-term capital asset; land held for 24 months or less is short-term. Long-term gains get the concessional 12.5% rate, while short-term gains are added to your income and taxed at your slab rate.
This 24-month threshold applies to immovable property such as land and buildings. The holding period runs from the date of acquisition to the date of transfer. For inherited or gifted land, the previous owner’s holding period and cost of acquisition are counted as yours, which often pushes an inherited plot into the long-term category automatically.
| Situation | How the gain is taxed |
|---|---|
| Land held 24 months or less | Short-term — added to income, taxed at slab rate |
| Land held over 24 months, transferred on/after 23 Jul 2024 | Long-term — 12.5% without indexation |
| Land/building acquired before 23 Jul 2024 (resident individual/HUF) | Option: 12.5% without indexation or 20% with indexation, whichever is lower |
| Rural agricultural land (Section 2(14)(iii)) | Not a capital asset — no capital gains tax |
Can you still use 20% with indexation?
Yes, but only in one situation: a resident individual or HUF selling land or a building that was acquired before 23 July 2024. They may compute the tax both ways — 12.5% without indexation and 20% with indexation — and pay the lower figure.
Indexation adjusts your original cost upward using the Cost Inflation Index (CII) that the Central Board of Direct Taxes notifies each year, which raises the cost base and shrinks the taxable gain. The longer you held the plot and the higher inflation over that period, the more likely the 20%-with-indexation route produces a smaller bill. For land acquired on or after 23 July 2024, indexation is not available at all and the flat 12.5% applies. Companies, firms and non-resident sellers do not get the grandfathered 20% option on this class of asset.
Is agricultural land taxed the same way?
No. Rural agricultural land is excluded from the definition of a capital asset under Section 2(14)(iii), so selling it generates no capital gain to tax at all. Urban agricultural land, by contrast, is a capital asset and is taxed like any other land.
Whether a plot is rural or urban depends on its distance from a municipality and the population of that local body, as set out in Section 2(14)(iii). If the land falls outside those limits, its sale escapes capital gains tax entirely, no matter how large the profit. If it is urban agricultural land, the gain is taxable — but the seller may be able to defer it by reinvesting in new farmland under Section 54B. Because the rural-versus-urban test is fact-specific, it is worth confirming a plot’s status against the Section 2(14)(iii) criteria before assuming either outcome.
What does a worked long-term capital gains example look like?
Take a non-agricultural plot in the Karjat belt bought in May 2016 for ₹25,00,000 and sold in October 2026 for ₹85,00,000 by a resident individual. Held for roughly ten years, it is a long-term asset, and because it was acquired before 23 July 2024 the seller can choose between two routes.
| Step | Route A — 12.5% (no indexation) |
|---|---|
| Sale consideration | ₹85,00,000 |
| Less: cost of acquisition | ₹25,00,000 |
| Long-term capital gain | ₹60,00,000 |
| Tax at 12.5% | ₹7,50,000 (plus cess) |
Under Route B — 20% with indexation, the ₹25,00,000 cost is first indexed using the CII notified for FY2016–17 and FY2026–27: indexed cost = ₹25,00,000 × (CII of year of sale ÷ CII of year of purchase). That indexed figure is subtracted from ₹85,00,000 and the result is taxed at 20%. Because indexation lifts the cost base over a long holding period, Route B can land below Route A’s ₹7,50,000 — so a resident individual would compute both using the actual notified CII numbers and pay the lower. Surcharge (if applicable) and 4% health-and-education cess sit on top of either figure.
How can you reduce capital gains on land?
The main routes are reinvestment-based exemptions: Section 54B for reinvesting the gain on agricultural land into new farmland, Section 54F for investing the net sale proceeds in a residential house, and Section 54EC for parking up to ₹50 lakh of the gain in specified bonds within six months.
Each has its own conditions, timelines and caps, and they are not interchangeable — Section 54EC bonds carry a five-year lock-in, Section 54F requires you not to own more than one other house, and Section 54B needs the old land to have been farmed for two years. Choosing the right one, and documenting it correctly, is exactly the kind of decision to settle with a tax professional before the sale closes rather than after.
What should you verify before you sell land?
Confirm your holding period, locate your original cost and improvement records, check the ready-reckoner value against your agreement value for Section 50C, and establish whether the plot is rural agricultural land, urban agricultural land or ordinary non-agricultural land — because that single classification can change the tax from substantial to zero.
Then map the available exemptions to your plans for the proceeds, and factor in TDS: a buyer must deduct tax at source under Section 194-IA on most immovable property sales above the threshold, which affects your cash flow at closing. None of this is a reason to delay a sound sale — it is a reason to run the numbers early with an advisor so the tax outcome is a decision, not a surprise.
FAQ
What is the capital gains tax rate on land in India now?
Long-term capital gains on land transferred on or after 23 July 2024 are taxed at 12.5% without indexation under Section 112. A resident individual or HUF selling land acquired before that date may instead opt for 20% with indexation and pay the lower of the two.
How long must I hold land for the gain to be long-term?
More than 24 months. Land held for 24 months or less produces a short-term capital gain that is added to your income and taxed at your slab rate, with no concessional rate and no indexation.
Do I pay capital gains tax on selling agricultural land in Maharashtra?
Rural agricultural land is not a capital asset under Section 2(14)(iii), so its sale attracts no capital gains tax. Urban agricultural land is a capital asset and is taxable, though Section 54B may let you defer the gain by reinvesting in new farmland.
Is capital gains tax on land a state or central tax?
It is a central tax under the Income-tax Act, 1961, the same across India. Maharashtra levies stamp duty and registration charges on the transfer, but the tax on your profit is assessed in your income tax return.
Can I still claim indexation on land sold in 2026?
Only if you are a resident individual or HUF and the land or building was acquired before 23 July 2024. In that case you may choose 20% with indexation instead of 12.5% without it. Land acquired on or after 23 July 2024 gets the flat 12.5% rate with no indexation.
How can I save tax on capital gains from selling land?
By reinvesting under the relevant exemption: Section 54B (new agricultural land), Section 54F (a residential house) or Section 54EC (specified bonds up to ₹50 lakh within six months). Each has strict conditions and timelines, so confirm eligibility with a tax advisor before the sale.
Planning a land sale in the corridor?
Tax is only one part of a clean exit. If you are selling a plot in the Karjat–Khopoli–Alibaug corridor and want the records, title position and timing lined up before you negotiate, our team can walk through it with you.
Related reading
- Section 54B: saving tax when you sell farmland
- Raigad plot stamp duty in 2026
- NA plot vs agricultural land in 2026
- Land liquidity in 2026: selling a plot in a slow market
Tax and transaction costs
- Is there GST when you buy a plot? — the tax on a land purchase.
- The full cost of buying a plot — charges beyond the headline price.
- The plot cost calculator — add up the true outlay.
- A 50 lakh land investment in 2026 — what the budget buys.
- Karjat-Khopoli ready reckoner 2026 — the stamp-duty valuation floor.
Selling, returns and strategy
- Plot vs apartment as an investment — which builds wealth better.
- Plotted land vs a flat in MMR — comparing the two assets.
- Land vs gold, stocks, FDs and flats — where land fits in a portfolio.
- Risks of buying in emerging corridors — what can go wrong.
- How to compare land corridors — a framework for choosing.
- Areas appreciating near Mumbai — where demand is building.
- Land banking near Mumbai — holding land for the long term.
- Questions to ask about land-return claims — testing the promises.
Records, NRI and corridor
- Registering a land sale in Maharashtra — the step that secures possession.
- Reading a 7/12 extract — the core record of rights.
- The land-title checklist — documents to demand before you pay.
- Can an NRI buy land in India? — the rules for non-residents.
- The NRI agricultural-land restriction — what NRIs cannot buy.
- Land on the Khopoli-Pali road (SH-93) in 2026 — the corridor hub guide.
Citations and sources
Income-tax Act, 1961 — Section 112 (tax on long-term capital gains), Section 2(14) (definition of capital asset, including the rural agricultural land exclusion at 2(14)(iii)), and Section 50C (stamp-duty value as sale consideration), via the Income Tax Department. The 12.5%-without-indexation rate and the grandfathered 20%-with-indexation option for resident individuals/HUF on pre-23-July-2024 property were introduced by the Finance (No. 2) Act, 2024. Rate and holding-period explanations cross-checked against ClearTax and Tax2win. This article is general information, not tax advice — consult a qualified chartered accountant or tax professional for your specific case.
