Reporting a Property Purchase or Sale in the Income Tax Return: AY 2026-27 Guide

A property deal in Bangalore reaches the Income Tax Department long before the return is filed. The sub-registrar reports the registration, and the buyer's tax deduction appears against the seller's PAN. This guide explains how buyers and sellers report a purchase or a sale in the return for financial year 2025-26 (assessment year 2026-27). It also covers the options that remain open in October 2026 for those who missed the due date.

Due Dates for Assessment Year 2026-27

The return for income earned between 1 April 2025 and 31 March 2026 is filed under the Income-tax Act, 1961. The Income-tax Act, 2025 applies to income earned from 1 April 2026. The dates for the current return are listed below.

• 31 July 2026: individuals filing ITR-1 or ITR-2, which covers most salaried buyers and sellers.
• 31 August 2026: ITR-3 and ITR-4 for business or professional income where no audit is required.
• 31 October 2026: taxpayers whose accounts need an audit.
• 31 December 2026: a belated return, with a late fee.
• 31 March 2027: a revised return to correct one already filed.

A belated return carries a late fee of Rs. 5,000, or Rs. 1,000 where total income is up to Rs. 5 Lakhs. Interest of 1% a month applies to any unpaid tax. Two further costs matter to property owners, and both are explained in the sections that follow.

Which Form to Use

The form depends on the kind of income, and a property deal changes the answer mainly for sellers. The usual cases are listed below.

• A salaried person who sold a flat, a house or a plot files ITR-2, which has the capital gains schedule.
• A person with business or professional income who sold a property files ITR-3.
• A buyer with no sale during the year files the form that fits the rest of the income.

A gain on property cannot be reported in ITR-1. A return filed in the wrong form may be treated as defective, and the department then asks for it to be filed again.

How a Sale Is Reported

A property held for more than 24 months gives a long-term capital gain, and a shorter holding gives a short-term gain. A short-term gain is added to income and taxed at the slab rate. A long-term gain is taxed at 12.5% without indexation.

Resident individuals and Hindu undivided families have a choice for land or buildings bought before 23 July 2024. They may compute the tax at 20% with indexation and pay the lower of the two amounts. The capital gains schedule of the return asks for the details listed below.

• The sale price, and the value adopted by the sub-registrar for stamp duty.
• The purchase price and the date of purchase.
• The cost of improvements, with the year of each.
• Transfer expenses such as brokerage and legal fees.
• The buyer's name, PAN and share, and the address of the property.

Where the stamp duty value is more than 110% of the sale price, the stamp duty value is taken as the sale price. Stamp duty and registration paid at the time of purchase form part of the cost. Invoices and bank records for every figure should be kept with the sale papers.

Exemptions on Reinvestment

A long-term gain may be reduced or removed by reinvesting it. The three exemptions that Bangalore sellers use most are listed below.

• Section 54: the gain from a residential house, invested in another residential house in India.
• Section 54F: the sale proceeds of any other long-term asset, such as a plot, invested in a residential house.
• Section 54EC: up to Rs. 50 Lakhs of the gain from land or a building, invested in specified bonds within six months.

Under sections 54 and 54F, the new house must be bought within one year before or two years after the sale, or built within three years. The cost of the new house counted for the exemption is capped at Rs. 10 Crore. Section 54F needs the whole net sale price to be invested for a full exemption, and a part investment gives a proportionate exemption.

Section 54F is not available to a seller who owns more than one residential house on the date of the sale, apart from the new one. The exemption is claimed in the return and is never automatic. Money still unused on the due date of the return must be placed in a Capital Gains Account Scheme deposit with a bank.

A capital loss is the first of the two costs of late filing. A loss on a sale is carried forward for eight years only when the return is filed by the due date.

What a Buyer Should Check

A buyer who pays Rs. 50 Lakhs or more for a property deducts tax at 1% from each payment to a resident seller. The limit is tested on the sale price or the stamp duty value, whichever is higher. For payments made up to 31 March 2026, the buyer pays the tax through Form 26QB within 30 days from the end of the month of deduction.

The buyer then downloads Form 16B from the TRACES portal and gives it to the seller within 15 days. Payments made from 1 April 2026 use Form 141 and Form 132 in place of these two forms. A buyer paying a developer in instalments repeats this for every instalment. A purchase from a non-resident seller follows different rates and a different procedure, and NRI buyers and sellers should take separate advice.

The return has no column for a purchase as such. A person whose total income is above Rs. 1 Crore lists the property at cost in the schedule of assets and liabilities. Every buyer should be ready to explain the source of the down payment, since the registration is reported to the department.

Matching the Annual Information Statement

For the financial year 2025-26, the sub-registrar reports every registration of Rs. 30 Lakhs or more to the department. The limit is Rs. 45 Lakhs for registrations from 1 April 2026. The entry appears in the Annual Information Statement of both the buyer and the seller. The tax deducted by the buyer appears in the seller's Form 26AS.

Both statements should be downloaded before the return is prepared. The sale price in the statement should match the sale deed, and the tax credit should match Form 16B. A wrong entry is flagged through the feedback option in the statement, and a wrong Form 26QB is corrected by the buyer on the TRACES portal.

Old Regime or New Regime

The new tax regime is the default. It gives lower slab rates and removes most deductions, including the two that matter to a borrower living in the home. The old regime keeps the deductions listed below.

• Interest on a home loan for a self-occupied house, up to Rs. 2 Lakhs a year.
• Principal repaid, within the Rs. 1.5 Lakhs limit, which also covers stamp duty and registration in the year they are paid.
• Interest paid before possession, claimed in five equal yearly parts from the year the home is completed.

A buyer with a large loan should work out the tax both ways. The EMI calculator shows the interest and principal in each year of a loan. The exemptions on capital gains are available under both regimes.

The choice of regime is the second cost of late filing. A person without business income chooses the old regime in a return filed by the due date. A belated return is taxed under the new regime, so the home loan deductions for the year are lost.

Options After the Due Date

A person who has not filed for assessment year 2026-27 should file the belated return by 31 December 2026. A person who filed on time and left out a sale, an exemption or a tax credit should file a revised return by 31 March 2027. After these dates, an updated return is allowed for up to 48 months with additional tax, but it cannot be used to claim a refund or reduce the tax.