The government today withdrew indexation benefit for the purpose of capital gains calculation in case of property sales. With the changes announced in the budget 2024-25, long term capital gains tax of 12.5% will be applicable on gains arising out of property sales without the indexation benefits. Earlier 20% LTCG was charged along with indexation benefit.
The move announced in the budget essentially means that those selling property will not be able to adjust their property purchase price at the time of sales with inflation growth over the holding period of the property. This will lead to higher tax outgo as the amount of capital gain will get enhanced without the inflation indexation.
“With rationalisation of rate to 12.5%, indexation available under second proviso to section 48 is proposed to be removed for calculation of any long-term capital gains which is presently available for property, gold and other unlisted assets. This will ease computation of capital gains for the taxpayer and the tax administration,” said the explanatory memorandum to the Finance Bill, 2024.
One of the key tax announcements in the first budget of Modi 3.0 has been towards rationalisation of capital gains structure. “Short term gains on certain financial assets shall henceforth attract a tax rate of 20%, while that on all other financial assets and all non-financial assets shall continue to attract the applicable tax rate,” finance minister Nirmala Sitharaman said in budget speech.
“Long term gains on all financial and non-financial assets, on the other hand, will attract a tax rate of 12.5%. For the benefit of the lower and middle-income classes, I propose to increase the limit of exemption of capital gains on certain financial assets to ₹1.25 lakh per year,” Sitharaman added.
“Listed financial assets held for more than a year will be classified as long term, while unlisted financial assets and all non-financial assets will have to be held for at least two years to be classified as long-term. Unlisted bonds and debentures, debt mutual funds and market linked debentures, irrespective of holding period, however, will attract tax on capital gains at applicable rates,” she added.
Leave a Comment
Your email address will not be published. Required field are marked*