Section 197 - Tax on long-term capital gains
The land/building comparison is not a universal taxpayer option. It is a statutory tax cap for a resident individual or HUF and applies only to qualifying pre-23 July 2024 assets.
Reviewed by CA Nikhil Gupta · Updated 9 October 2026
Current law and effective date
Section 197 is controlled against the consolidated Income-tax Act, 2025 as amended by the Finance Act, 2026. The Act and Income-tax Rules, 2026 operate from 1 April 2026; earlier years and saved proceedings require the repeal-and-savings framework rather than automatic migration.
Primary statute: Income Tax Department consolidated Act | Rules: Notified Income-tax Rules, 2026
2-minute decode
The land/building comparison is not a universal taxpayer option. It is a statutory tax cap for a resident individual or HUF and applies only to qualifying pre-23 July 2024 assets.
Who should use this section
Taxpayers with long-term capital gains outside the special section 198 bucket, including eligible pre-23 July 2024 land/building cases requiring the statutory cap comparison.
Old-law bridge
section 112
The old-law bridge is navigational, not automatic precedent transfer. Match the 1961 Act wording, saved proceedings, current 2025 Act text and effective date before importing an older interpretation.
Finance Act 2026 / current-law note
No section-specific Finance Act, 2026 textual substitution is separately flagged for section 197; the consolidated post-Finance-Act-2026 text remains the controlling version and must be used instead of pre-1 April 2026 extracts.
Professional alert
Store acquisition date and asset type. Run the land/building dual computation only for eligible resident individual/HUF cases. Keep indexed cost inputs and valuation support.
Connected Income-tax Rules, 2026 and Forms
| Rule | Current control | Form |
|---|---|---|
| No provision-specific Rule/Form is directly prescribed for this section in the mapping used here. Apply the statute directly and check the current Rules where another provision cross-refers to them. | ||
Worked application
A resident individual sells land acquired in 2015. Compute both prescribed outcomes and ignore the excess tax, if any, under the section 197 formula.
Evidence / compliance checklist
- Store acquisition date and asset type (section 197 evidence control 1).
- Run the land/building dual computation only for eligible resident individual/HUF cases (section 197 evidence control 2).
- Keep indexed cost inputs and valuation support (section 197 evidence control 3).
Common mistake
A common section 197 error is to apply the old-law label or headline rate without rebuilding the current statutory conditions. For “Tax on long-term capital gains”, the safer control is to test the exact taxpayer/transaction facts, the operative tax year, every linked Rule/Form and the Finance Act 2026 consolidated wording. Store acquisition date and asset type. Run the land/building dual computation only for eligible resident individual/HUF cases. Keep indexed cost inputs and valuation support.
Recommended approach
For section 197, start with the legal trigger in “Tax on long-term capital gains”, document the evidence for that trigger, then run the computation or procedural step against the current text. As a cross-check, verify this provision-specific checkpoint: General section 197 long-term capital gains rate: 12.5% subject to the section.
Thresholds, periods and timing checkpoints
- General section 197 long-term capital gains rate: 12.5% subject to the section.
- For qualifying land/building acquired before 23 July 2024 by an eligible resident individual/HUF, the statutory cap compares the new computation with the legacy indexed 20% outcome.
Related provisions and interaction map
Section 197 operates inside Chapter XIII special-rate computation; reconcile its particular tax bucket with the relevant capital-gains, unexplained-income or corporate-regime rules, plus surcharge, cess, return and loss-set-off provisions.
Provision summary - verify verbatim text in the official Act
Text-status note: This guide does not reproduce the complete verbatim provision for section 197. Use the linked official consolidated Act before quoting sub-section language or preparing a filing, opinion or litigation document.
Primary-source trail
Statute: Income-tax Act, 2025 as amended by Finance Act, 2026
Rules: Income-tax Rules, 2026
Law navigation: Income Tax Department 2025 Act / Rules hub
Quoting note: Use the official consolidated Act for verbatim legislative language.
FAQs
Does an old Income-tax Act, 1961 case automatically decide section 197?
No. The old-law bridge helps research, but transferability depends on materially matching language, transition rules and any Finance Act 2026 change.
Which text should be quoted in advice or litigation?
Quote the consolidated official statute for the relevant tax year. If this page presents a provision summary rather than complete statutory text, use the official consolidated Act for verbatim legislative language.