Piyush Prajapati
2 August, 2024
Property Sellers, Take Note! The long-term capital gains taxation rules and the long-term capital gains tax rate saw significant revisions in the union budget 2024. This blog is intended to assist you investors in navigating the tax system more effectively in light of the recent amendments introduced in the Union budget 2024.
Important Changes introduced with regards to Long-term Capital Gains in the union budget:
- (I) Benefit of indexation on property sales eliminated.
- (II) The new LTCG rate is 12.5%.
- (III) In the past, long-term capital gains from the sale of real estate were subject to a 20% tax rate with indexation.
- (IV) Properties purchased before April 1, 2001, will need to select the purchase price higher of the following
- (i) Actual Price of Property.
- (ii) Property's fair market value as of April 1, 2001
We can understand the changes in the LTCG with the help of the following illustration
| Property Bought in 2001 |
25,00,000 |
| Property Sold in 2024 |
3,50,00,000 |
| LTCG Tax Rate before Union Budget 2024 |
20.00% |
| Cost of Property with Indexation Benefit |
90,75,000 |
| LTCGs with Indexation Benefits |
2,59,25,000 |
| Tax before Union Budget 2024 |
51,85,000 |
| Property Bought in 2001 |
25,00,000 |
| Property Sold in 2024 |
3,50,00,000 |
| Tax Rate after Union Budget 2024 |
12.50% |
| Cost of Property without Indexation Benefit |
25,00,000 |
LTCGs without Indexation
Benefits |
3,25,00,000 |
| Tax after Union Budget |
40,62,500 |
The returns obtained and taxes paid on the sale of real estate are impacted by changes in long-term capital gains and long-term capital gains tax rates . Investors who want to sell their property may be impacted by the elimination of the indexation benefit since it may have an impact on their capital gains, which may raise the amount of taxes due.
These changes increase the importance of 54EC capital gain bonds as they help you save on the LTCG tax paid on the sale of property.
Note: Properties sold before 23rd July 2024 would still be able to take advantage of Indexation while calculating the price of the property.
Piyush Prajapati
2 August, 2024