Property Capital Gains Indexation in Bengaluru: The 20% vs 12.5% Choice (CII 376)

Picture a homeowner in Whitefield who bought a 2BHK in 2010 and is now closing a sale in this financial year. Until a couple of years ago the long-term capital gains rule on that flat felt settled. Then the Finance (No. 2) Act 2024 changed the headline rate, kept a transitional escape hatch open for older purchases, and left many Bengaluru sellers staring at two different tax numbers for the same transaction. The good news for that Whitefield seller: for property bought before 23 July 2024, property capital gains indexation in Bengaluru is still on the table, and the choice between the old and the new method is alive for returns filed for assessment year 2026-27.

The short answer. If you bought your property before 23 July 2024 and are selling it now, you can compute long-term capital gains tax two ways and pay the lower one: 20% WITH indexation, or 12.5% WITHOUT indexation. The Cost Inflation Index (CII) for FY 2025-26 (AY 2026-27) is 376, up from 363 the previous year, notified by the CBDT via Notification No. 70/2025 dated 1 July 2025. The trade-off: indexation rewards long-held, slowly appreciating flats, while the flat 12.5% favours recently bought, high-gain ones, so the wrong pick can cost you real money.

Quick facts for a Bengaluru seller as of 24 June 2026: the Cost Inflation Index for FY 2025-26 (assessment year 2026-27) is 376, notified by the Central Board of Direct Taxes in Notification No. 70/2025 dated 1 July 2025, and this number is what you plug into the indexation calculation when you choose the 20% route. Property capital gains indexation is therefore back in play, but only for immovable property acquired before 23 July 2024.

What exactly is the 20% vs 12.5% choice for Bengaluru property?

It is a one-time, per-transaction option to pay the lower of two long-term capital gains figures on a property bought before 23 July 2024. The first option is the old method: a 20% tax rate applied to the gain after the purchase cost is inflated using the Cost Inflation Index. The second is the new method introduced by the Finance (No. 2) Act 2024: a flat 12.5% rate applied to the plain gain (sale price minus actual purchase cost) with no inflation adjustment at all. You are allowed to calculate both and pay whichever produces the smaller tax. This grandfathering applies to resident individuals and Hindu Undivided Families.

For a Bengaluru seller this matters because the city has both very old holdings (think a site bought in Jayanagar decades ago) and very recent ones (an apartment booked in a 2022 launch). Those two profiles often land on opposite sides of the decision.

How does property capital gains indexation use the Cost Inflation Index, and why is 376 the number that matters?

The Cost Inflation Index is the government-notified figure you use to restate your old purchase price in today's money so that pure inflation is not taxed as gain. For FY 2025-26 (AY 2026-27) the CII is 376, notified through CBDT Notification No. 70/2025 dated 1 July 2025, up from 363 for FY 2024-25. You take your purchase-year CII, your sale-year CII (376 for a sale in FY 2025-26), and scale the original cost by the ratio of the two.

The indexed cost formula is straightforward: indexed cost of acquisition equals original cost multiplied by (CII of year of sale divided by CII of year of purchase). The bigger that ratio, the larger your deductible cost, and the smaller your taxable gain under the 20% route.

How does the decision math actually work? An illustrative example.

The first thing to do is run both calculations on real numbers. Here is a clearly labelled illustrative example (the figures are made up to show the method, not a real listing).

Illustrative example. Suppose a Bengaluru flat was bought in FY 2014-15 for an assumed Rs 50,00,000 and is sold in FY 2025-26 for an assumed Rs 1,20,00,000. Under the 20% WITH indexation route, the indexed cost equals Rs 50,00,000 multiplied by (376 divided by the FY 2014-15 CII of 240), which works out to about Rs 78,33,333. The indexed gain is Rs 1,20,00,000 minus Rs 78,33,333, or about Rs 41,66,667, and tax at 20% is roughly Rs 8,33,333. Under the 12.5% WITHOUT indexation route, the gain is Rs 1,20,00,000 minus Rs 50,00,000, or Rs 70,00,000, and tax at 12.5% is Rs 8,75,000. In this illustration the indexation route is cheaper by about Rs 41,667, so this seller would pick 20% with indexation.

Now flip the holding period. If the same Rs 50,00,000 flat had been bought far more recently and sold for the same Rs 1,20,00,000, the CII ratio would be close to 1, indexation would barely lift the cost, and the flat 12.5% on the raw gain would usually win. That single variable, how long you held and how fast it appreciated, drives the answer. (CII of 240 for FY 2014-15 is used here only to illustrate the ratio mechanic; always confirm your own purchase-year index before filing.)

Who benefits from indexation and who benefits from the flat 12.5%?

Indexation helps the long-held, slow-appreciating property; the flat 12.5% helps the high-gain, recently bought property. If you have owned a Bengaluru asset for ten or fifteen years and its price grew at a steady pace, the inflation adjustment can shrink your taxable gain enough that even the higher 20% rate produces a smaller bill. That is the classic case for the old method.

The flat 12.5% route tends to win when the gain is large relative to the holding period: a flat bought in, say, 2021 or 2022 in a corridor that jumped sharply will show a big raw gain that indexation cannot meaningfully offset over so few years. There the lower rate on the full gain beats the higher rate on a barely-adjusted gain. The only reliable way to know is to compute both, because the break-even depends on your exact purchase year, purchase price, and sale price.

What about property bought on or after 23 July 2024?

For property acquired on or after 23 July 2024, there is no choice: only the 12.5% without indexation method applies. The grandfathering window covers acquisitions before that date, so a newer purchase is taxed at the flat long-term rate on the plain gain, with no Cost Inflation Index benefit at all. Bengaluru buyers entering the market now should plan on this single regime for future sales rather than expecting the dual option to return.

This is the structural shift the Finance (No. 2) Act 2024 made: a simpler, lower flat rate going forward, with the dual option preserved only as a transition for people who already owned property under the old rules.

What should a Bengaluru seller watch out for before filing AY 2026-27?

The biggest risk is picking a regime without running both numbers, because the cheaper option is not the same for every property. A second risk is mixing up the index years: the sale-year CII is 376 for a sale in FY 2025-26, but your purchase-year CII is specific to when you actually bought, and getting that wrong distorts the indexed cost. Note also that the FY 2026-27 CII is not yet notified as of 24 June 2026, so it remains awaited; do not assume a number for a sale dated into the next financial year.

Keep in mind too that the 20% versus 12.5% choice is about the rate and base only. Separate exemptions, such as reinvesting gains in another residential property, sit on top of this and can change the final tax either way. For how those reinvestment exemptions work for Bengaluru sellers, see our earlier reported guidance linked below.

The comparison table below summarises the trade-off between the two long-term capital gains routes for a property bought before 23 July 2024 and sold in FY 2025-26.

What is the step-by-step buyer and seller checklist?

Run through these seven steps before you file.

1. Confirm your acquisition date; only property bought before 23 July 2024 gets the dual choice.
2. Pull your actual documented purchase cost and the eligible cost of improvement.
3. Look up the Cost Inflation Index for your year of purchase and use 376 as the FY 2025-26 sale-year index.
4. Compute the 20% with indexation figure: index the cost, subtract from sale price, apply 20%.
5. Compute the 12.5% without indexation figure: subtract actual cost from sale price, apply 12.5%.
6. Compare the two tax amounts and select the lower one for your AY 2026-27 return.
7. Check whether a reinvestment exemption applies before finalising, and keep all supporting documents for assessment.

The questions below cover the points Bengaluru sellers ask most often.

Is the 20% vs 12.5% choice still available for AY 2026-27?

Yes. For property bought before 23 July 2024 and sold now, sellers filing assessment year 2026-27 returns can compute long-term capital gains both ways and pay the lower of 20% with indexation or 12.5% without indexation, under the Finance (No. 2) Act 2024 grandfathering.

What is the CII for FY 2025-26?

The Cost Inflation Index for FY 2025-26 (AY 2026-27) is 376, up from 363, notified by the CBDT in Notification No. 70/2025 dated 1 July 2025. You use 376 as the sale-year index when you choose the 20% with indexation route for a sale in this financial year.

What is the CII for FY 2026-27?

As of 24 June 2026 the Cost Inflation Index for FY 2026-27 has not been notified, so it is awaited. Do not assume a figure for it. For a sale dated into the next financial year, wait for the official CBDT notification before computing indexed cost.

Which option is better for my Bengaluru flat?

It depends on holding period and gain. Indexation helps long-held, slow-appreciating property; the flat 12.5% helps recently bought, high-gain property. The only safe approach is to calculate both numbers for your exact purchase price, purchase year, and sale price, then pick the lower tax.

For the official index values, see the Income Tax Department Cost Inflation Index page at incometax.gov.in, and for reporting on the notification see Business Standard and this explainer at CAclubindia.

For related Bengaluru capital gains coverage, read our detailed look at the long-term capital gains tax and Section 54 exemption for Bengaluru property, and our earlier reported walkthrough on how to use the Section 54 exemption when you sell one flat and buy another in Bengaluru.

Last updated 2026-06-24. PropNewz Team.