LTCG on sale of Builder Buyer Agreement

The sale of the BBA will result in a Long-Term Capital Gain. Due to grandfathering rules for properties acquired before July 2024, you can choose between paying a 12.5% tax without indexation on the flat Rs. 17 Lakh profit, or a 20% tax with indexation. If you opt for indexation, you cannot index the full Rs. 45 Lakhs from 2010; instead, you must calculate the indexation benefit for each instalment separately from the year that specific payment was made.

Thanks for the clarification. However, I  have been made to understand that BBA falls under Other Capital Assets category and benefit of indexation is not available since no land /building or both have been transacted. Kindly clarify this too.

Sale of a builder-buyer agreement (assignment of right to receive an under-construction flat) is taxed as capital gains. Here is how it works:

Asset classification: The right under a BBA is a capital asset. It is NOT a building or land - it is the right/interest in property.

Long-term vs short-term: Since this is not a building or land directly, the holding period for LTCG is 24 months (not 36 months). If you held the BBA for more than 24 months from the date of the original BBA to the date of assignment/sale, the gain is LTCG. Below 24 months it is STCG.

Cost of acquisition: The total amount paid to the builder under the BBA (including installments, stamp duty, registration, and any other charges paid to the developer) is the cost of acquisition.

Indexation: If LTCG, you can apply cost inflation index (CII) to the cost of acquisition to compute indexed cost, which reduces the taxable gain. The CII for the year of acquisition and sale are both available from the income tax portal.

Tax rate: LTCG at 20% with indexation. STCG at your applicable slab rate (added to total income).

Section 54 exemption: If you use the sale proceeds to purchase another residential property within 2 years or construct within 3 years, the LTCG is exempt under Section 54. This exemption applies to assignment of BBA if the original BBA was for a residential property.

ITR form: Report this in ITR-2 or ITR-3 under Schedule CG.

For a full explanation of LTCG vs STCG rates, indexation, and which exemptions apply, see this [capital gains tax guide for AY 2026-27](https://taxgarden.in/blog/capital-gains-tax-india-ltcg-stcg-ay-2026-27).