selling a residential property is no easy task it involves a lot of research on the best price to quote a good broker on checking how genuine the prospective buyer is etc whats even more confusing is what is the kind of money you need to pay as taxes to the government once the transaction is complete so here we take a look at this one part of the puzzle the capital gains taxtap to expand and read morewhen do you need to pay long term capital gains taxyou need to pay long term capital gains tax on the sale of a residential property if you have held the property for more than 2 years and if you have made a profit on the sale of the property the profit is calculated by arriving at the indexed value of the property if you have held the property for less than 2 years you have to pay short term capital gains tax on sale no indexation benefit is available on short term capital gains the long term capital gains tax is applied at 20 on the gain amount and short term capital gains tax depends on the income tax bracket you fall underhow to calculate how much capital gains tax to paycalculating how much you need to pay as long term capital gains tax is not very difficult for example if you had purchased a 2 bhk in a suburb of mumbai in the fy year 2005 2006 for rs 25 lakh and the property today fy 20222023 is worth rs 15 crore you will need to pay long term capital gains tax on the gains made after arriving at the indexed value of the property today ca amol kabra explains the calculation in this manner note cess and surchage as applicable will be levied on the long term capital gain amountthe formula applied for calculating the indexed value purchase pricecost inflation index of year of salecost inflation index of year of purchasethe cost inflation index value is declared by the government each year and can be accessed on the it website the inflation index for fy 20222023 has been notified as 331can cost of improvement be included in indexationyes says ca amol kabra in addition to the cost of acquisition of the property the cost of improvements made in your house can also be calculated and indexed to avail of further benefits he says this amount too can be deducted from the sales proceeds to arrive at the gains made the only catch is that you may need to show the costs incurred for home improvement and hence you need to preserve all the bills paidhow does investing in another property helpin case you invest the gains into another property you do not need to pay long term capital gains tax however you need to invest this amount into a property within 2 years of sale of your original property if what you are purchasing is a ready property