If you have invested in property or share market or intend to invest anywhere, then you must know the important changes made in this budget. The government has announced changes in capital gains tax in this budget. If you understand in simple language, capital gains tax means the tax imposed on your profits. Finance Minister Nirmala Sitharaman has announced major changes in capital gains tax in this budget, as well as removed the rule of indexation benefit, the impact of which can mainly affect real estate transactions.
Know what changes have happened
Long Term Capital Gains Tax (LTCG) on sale of property has been reduced from 20% to 12.5%. The Finance Minister also clarified the definition of long term. He said that the listed financial assets will be considered as long term investments only if they are held for one year or more. This will also include shares and mutual funds. At the same time, if both unlisted financial or non-financial assets are held for 2 years or more, then it will be considered as long term investment.
Property sellers may get a shock
This decision of the government may shock property sellers. This is because at first glance you would think that the government has reduced the long term capital gains tax. But there is a catch here. Actually, the indexation benefit which was available till now on selling property has been removed in this budget.
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Now know what is indexation benefit
Actually, in the indexation benefit, the new price of your property was calculated according to the inflation rate, after which 20 percent tax was levied on the amount left. But now it has been changed. For example, if you had bought a property for Rs 50 lakh ten years ago, then today its value would have become Rs 2 crore. Now in such a situation, if you sell this property, then as per the earlier rule, indexation benefit would be applicable on it. That means, keeping inflation in mind, a new value of your Rs 50 lakh would be calculated.
Now suppose that according to the inflation index, today the price of your land worth Rs 50 lakh is Rs 1.25 crore, then the value of your land would have been considered Rs 1.25 crore. Then as per the rules, long term gain tax is levied at the rate of 20 percent on your Rs 75 thousand. . But now this rule has been removed.