Government gave relief in long term capital gains tax on property, know how you will benefit

There is good news for property owners. The government has announced relief in the rules of long term capital gains tax. In the Union Budget on July 23 , Finance Minister Nirmala Sitharaman changed the rules of long term capital gains tax on property.

She reduced the long term capital gains tax from 20 percent to 12.5 percent. But, the benefit of indexation was abolished. The real estate sector was disappointed with this change.

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Taxpayers will get the option of indexation

The government said on August 6 that now taxpayers will have the option to choose between 12.5% ​​and 20% tax rate of long term capital gains tax. If a taxpayer wants indexation benefit, he will have to pay 20% long term capital gains tax. If someone does not want to take indexation benefit, he will have to pay 12.5% ​​tax on long term capital gains. Taxpayers will get this option only in case of property sold before July 23.

Realty companies were disappointed due to the abolition of indexation benefit in the budget

Real estate companies were disappointed when the government abolished the benefit of indexation on long term capital gains tax on property in the Union Budget. Industry representatives had met the officials of the Finance Ministry in this regard and expressed their concerns. It is believed that after this the government has decided to give relief to taxpayers. The government has amended the Finance Bill, 2024 for this.

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Finance bill may be presented in Lok Sabha on 7 August

Finance Minister Nirmala Sitharaman may introduce the Finance Bill, 2024 in the Lok Sabha on August 7. When there is a change in the tax rules, the government has to get it passed in the Parliament. It is said that in the Finance Bill, the government has also amended the customs and excise duty on some things.

Relief only for those who sell property before 23 July

Real estate companies will get relief due to the government’s relaxation in the rules of long term capital gains tax on property. This will also benefit many property owners who have made long term capital gains by selling their property before July 23. Now they will have the option of calculating their long term capital gains with or without indexation. They will choose either of the two as per their benefit.

What is indexation benefit?

Due to indexation benefit, the purchase price of the property increases. Actually, under indexation, the purchase price of the property is adjusted with inflation. This can be understood with an example. Suppose you bought a property 15 years ago for Rs 10,00,000. You sold it on July 1 this year for Rs 20,00,000. In this way, your capital gain comes to Rs 10,00,000. But, your purchase price of Rs 10,00,000 increases to Rs 14,000 due to indexation benefit. This reduces your capital gain to just Rs 6 lakh.

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