Giving big relief to home buyers, the Modi government at the Center on Tuesday decided to amend the existing system of Long-Term Capital Gains (LTCG). According to the information, after this change, tax payers will be allowed to choose between a lower tax of 12.5 percent (on properties without listing) or a higher rate of 20 percent with listing on properties acquired before July 23, 2024. . The government is brainstorming on this proposal, which can be implemented soon.
After this amendment, tax payers will get relief in tax on economic profits earned on immovable properties. This change was made through an amendment in the Finance Bill 2024. In fact, in the General Budget 2024, Finance Minister Nirmala Sitharaman had made many important tax related announcements. One of the major changes was to eliminate the benefit of indexation in the real estate sector. Also, in the budget, long-term capital gains tax was reduced from 20% to 12.5%. But now consideration is being given to amending it.
Changes were announced in the budget
In Budget 2024, the government had talked about a major change in the rules of tax on sale of property. After which the controversy increased. The government had reduced the LTCG tax on sale of property in long term to 12.5 percent. But the indexation benefit available on it was also removed. Later the government has clarified on which properties indexation will be applicable and which properties will not?
Finance Minister Nirmala Sitharaman had announced a standard Long Term Capital Gains (LTCG) tax in her budget speech. Earlier, different LTCG rates were applicable on various financial and non-financial properties. For example, 10 percent LTCG tax was levied on selling shares held for more than a year, whereas 20 percent tax was levied on selling non-financial properties like real estate and gold.
What was the new rule regarding property tax?
In the budget, the government had reduced Long Term Capital Gain (LTCG) tax on sale of any type of property. This meant that whether you sell shares or sell any property, you will have to pay long term capital gains tax of 12.5 percent. However, the government had removed the indexation available on selling property. After this the government said that this change was made to simplify the tax system.
What is indexation?
Indexation adjusts the purchase price of a property for inflation over time, which is used to calculate capital gains. The government releases the Cost Inflation Index (CII) every year to measure price changes relative to the base year (2001-2002). Indexation is done by calculating on this basis.