In Union Budget 2024-25, the government removed the indexation benefits on sale of property. Union Minister of Finance Nirmala Sitharaman announced the removal of indexation benefits for property sales and reduced long-term capital gains (LTCG) tax from 20 per cent to 12.5 per cent. So, if you are selling a property, the difference between the buying and selling price will be taxed at a flat rate of 12.5 per cent.
However, on August 7, 2024 after an outrage by investors, some of whom would have needed to pay higher tax with the removal of indexation, the government declared an amendment to the Finance Bill, 2024.
"The amendment states that taxpayers can choose to either use indexation and pay a 20 per cent tax rate or forgo indexation and pay the reduced 12.5 per cent rate, allowing them to select the option that minimises their tax liability," says Ridhima Bhatia, deputy general manager, Taxmann, a tax consultant.
These two options have been provided to individual taxpayers and Hindu Undivided Families (HUFs) under both new and old tax regimes.
The availability of two options has however, created confusion. Let's first understand how indexation benefit works, and then analyse which works better for you.
Indexation Benefit
Indexation is a process where the original purchase price of an asset is indexed to inflation, allowing the taxpayers to factor in inflation when paying capital gains. The buying price of a property is revised upwards for the period for which it was held, reducing the capital gains amount.
For instance, if you bought a residential plot in April 2010 for ₹10 lakh and sold it in April 2024 for ₹25 lakh, the profit or capital gain before applying indexation would be calculated by the following formula: Capital Gain = Selling Price - Purchase Price. The capital gain will be ₹25 lakh - ₹10 lakh = ₹15 lakh.
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the {{IssueName}} edition of {{MagazineName}}.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
Gold ETFs And FoFs
While Indians love to invest in physical gold, even mutual funds offer the option, but in paper format.
PLANNING TO BUY CHILD INSURANCE? THINK TWICE
Child insurance plans combine insurance and investment but often offer low returns due to high costs, making a combination of a term insurance cover and mutual fund a better option for securing your child’s higher education needs
How Do You Define Happiness?
Money does buy happiness, but after a while, the appeal fades. We talk about our relationship with money, but, maybe, it’s time to revisit our relationship with happiness
Avoid Crypto As It Is Highly Volatile
I am 22 years old and have recently started working. I want to invest a small portion of money in cryptocurrency. How should I go about it? Does it require a huge capital investment?
Invest Right, Don't Speculate
The lure of high returns and quick gains from equity tips, cryptocurencies, and equity F&O can be enticing. But remember, return of capital is more important than return on capital
The Wedding & Budget: Is Minimalist Trend The Right Knot For You?
Indian weddings are known for their pomp and grandeur, but minimalist weddings are also in vogue now. Dia Mirza was one such celebrity who went for a minimalist wedding. If you also want to keep things minimal on your big day, here’s how to do it
Here's How To Buy An ETF?
Mutual funds are the preferred choice for retail investors. However, they come at a cost and fund management risk, apart from other risks. A smarter alternative is to invest through ETFs.
How Passive Funds Help Diversify
Passive funds provide a simple way to invest in broad markets as well as in specific themes and sectors, making them ideal for an investor's satellite portfolio
The Rise Of Passive Funds
The popularity of passive funds among retail investors has risen post Covid, and fund houses are out with many variations of ETFs and index funds. Does this category present a new opportunity for investors?
Tax Reforms: What's In Store?
The government is working on reforming the existing Income-tax Act, 1961. The impending reforms have raised many questions in the minds of taxpayers. Will the old regime and deductions be done away with? Will it really simplify your life? What's the need for these reforms? We try to answer these and other questions regarding tax reforms