Indexation was the mechanism that adjusted a property's original purchase cost upward for inflation before computing the taxable gain, using the government's Cost Inflation Index (CII) — the longer you'd held the property, and the more inflation had moved in between, the more your effective taxable gain shrank relative to the raw difference between sale price and purchase price. It was paired, historically, with a 20% LTCG rate on property.
The Union Budget presented on July 23, 2024 proposed removing that indexation benefit for most long-term capital assets, including property, in exchange for a lower flat rate applied to the un-indexed gain instead. That single change upended a planning assumption a lot of long-time property owners, NRIs included, had been building their expected tax bill around for years.
What indexation used to do
Under the pre-2024 approach, you'd look up the CII value for your year of purchase and your year of sale, use the ratio between them to inflate your original cost, and subtract that inflated cost — not the raw historical price — from your sale price to arrive at the taxable gain. For property held many years through periods of meaningful inflation, this could shrink the taxable gain substantially compared to simply subtracting the original purchase price, which is exactly why the 20% rate paired with indexation was, for a lot of long-held property, more favorable than it looks on paper.
The flat rate, and the (partial, resident-only) grandfathering
As enacted through the Finance (No. 2) Act, 2024, the default computation for property LTCG on transfers from July 23, 2024 onward became a flat, lower rate — commonly reported as 12.5% — applied without indexation. After public pushback on the original all-or-nothing proposal, an amendment added a comparison right, but a narrow one: for property acquired before July 23, 2024, resident individuals and HUFs can pay the lower of the old 20%-with-indexation figure or the new flat-rate figure, computed both ways and whichever comes out lower.
Multiple current secondary tax-advisory sources report that this resident-only dual-option comparison is not extended to non-resident sellers, including NRIs — meaning an NRI selling property acquired well before July 2024 would, on this reading, still compute LTCG only under the new flat-rate rule, with no indexation-based comparison available at all. This site's own LTCG vs. STCG explainer already flags the same NRI exclusion as something worth double-checking rather than assuming. Given how narrow this eligibility clause is, how recently it was amended, and how often narrow clauses like this get restated across secondary sources without being re-anchored to the primary statutory text each time, treat the NRI-exclusion point specifically as unconfirmed by this article and requiring direct verification against the Income-tax Act's current text, or a CA, before it informs any actual filing or sale-pricing decision.
Why the answer is still 'compute both ways' where the option exists
Even setting the NRI-eligibility question aside, the entire point of an indexation-vs-flat-rate comparison is that the better outcome depends entirely on your own numbers — how long you held the property, how much the CII moved across that specific holding period, and how much of your gain is genuine appreciation versus inflation catching up to the price. There's no shortcut answer that holds across sellers; a property with strong real appreciation over a low-inflation stretch can come out ahead under the flat rate, while a longer hold through a high-inflation period can favor the indexed 20% path where that comparison is actually available to the seller.
This area has already seen one legislative reversal within weeks of the original Budget 2024 proposal, and the specific question of NRI eligibility for the dual-option comparison is exactly the kind of detail that could see further clarification. Treat every rate, date, and eligibility rule in this article — and any figure a generic online calculator gives you — as a starting point for your CA to confirm against the current-year Act text, not a final number to build a sale decision around.
The LTCG/STCG classifier on this site's Real Estate Capital Gains page applies the flat, no-indexation computation consistent with the post-Budget-2024 default; it does not attempt to model the resident-only grandfathering comparison or its precise current eligibility rules, both of which should be confirmed separately before you rely on the classifier's output for a sale involving property acquired before July 23, 2024.