Property LTCG Tax Rule: An announcement was made in the budget regarding property tax, now the government has clarified… change in condition!

In Budget 2024, the government made a big change in the tax rules on selling property, after which the controversy increased. The government has reduced the LTCG tax on selling property in the long term to 12.5 percent. But the indexation benefit available on it was also removed, which used to reduce the tax liability on the profit made from the property. However, now the government has clarified on which property indexation will be applicable and on which property it will not?

Finance Minister Nirmala Sitharaman announced a standard long term capital gain (LTCG) tax in her budget speech. Earlier, different LTCG rates were applicable on many financial and non-financial assets. For example, 10 percent LTCG tax was levied on selling shares held for more than a year, while 20 percent tax was levied on selling non-financial assets like real estate and gold.

What is the new rule regarding property tax?
Now the government has made the Long Term Capital Gain (LTCG) tax uniform on the sale of any kind of property in the budget. This means that whether you sell shares or any property, you will have to pay 12.5 percent long term capital gain tax. However, the government has removed the indexation received on selling property. The government says that this has been done to simplify the tax system.

Indexation will still apply to these properties
According to the Union Budget, it is proposed to keep the LTCG tax at 12.5 per cent and remove the indexation under Section 48 of the Income Tax Act for calculation of any LTCG, which is currently in place for property, gold and other non-listed assets. Speaking on the budget proposal, Finance Secretary TV Somanathan said that the indexation benefit will apply to properties purchased before 2001.

A Times of India report states that the Union Budget 2024 has divided property sellers into two categories. The first includes property purchased or inherited before 2001 and the second includes property purchased or inherited in 2001 or after.

What is indexation?
Indexation adjusts the purchase price of a property according to inflation over time, which is used to calculate capital gains. The government releases the Cost Inflation Index (CII) every year to measure value changes relative to the base year (2001-2002). Indexation is calculated on this basis.