The World Opinion

Tag: INDEXATION

  • Finance Ministry’s BIG TAX Move Soon On Property Transaction Amid Indexation Discontent | Real Estate News

    In relief for property owners, the Finance Ministry is mulling to bring relief for transactions held before July 23, 2024, the date on which the Budget was presented. In the budget, Finance Minister Nirmala Sitharaman has removed the indexation rule on property transactions. The move led to significant discontent with experts pointing out that after the removal of the indexation benefit, sellers will have to pay more taxes.

    Seeing the widespread discontent, the NDA government is now planning to offer some relief to the property owners.  

    Finance Minister Nirmala Sitharaman has proposed an amendment to the Finance Bill, offering significant relief on capital gains tax for property transactions. According to the amendment, taxpayers can choose between a lower tax rate of 12.5 per cent without indexation or a higher rate of 20 per cent with indexation for properties acquired before July 23, 2024, the date the union budget was presented in the Lok Sabha. 

    Taxpayers can calculate their taxes under both options and select the one with the lower tax liability. This new cut-off date of July 23, 2024, replaces the previous cut-off of 2001, alleviating concerns for long-time property owners.

    In the Finance Bill, Sitharaman proposed a flat long-term capital gains tax of 12.5 percent with no indexation benefits. Before it, property transactions used to be taxed at 20 per cent with indexation benefit. Now with the proposed amendments, taxpayers will have a choice like they have in paying income tax under the old structure with deductions or under the new tax structure without deductions.

    The proposed amendment will apply not only to real estate transactions but also to unlisted equity transactions, which are done before July 23, 2024. All such transactions will be taxed at 10 per cent long-term capital gains instead of the budget proposal of 12.5 per cent tax.

    The Lok Sabha began discussing the Finance Bill after the Appropriation Bill for the central government’s expenditure for 2024-25 was passed by the House on Monday. The passage of the Finance Bill by Parliament will complete the budget process.

  • Budget 2024: Decoding The Calculation Of LTCG Under Old And New Capital Gain Tax Regime For House Purchased Before And After 2001 | Personal Finance News

    New Delhi: The Budget 2024 announcement has put the limelight on a fresh debate on whether removing indexation is going to have significant implications for property owners. 

    Sunil Tyagi, Maging Partner, Zeus Laws, in a candid conversation with Reema Sharma of Zee News has shared a detailed calculation on both the scenario when a house is bought before 2001 and after 2001. Here’s all you want to know.

    When a house / immovable property is sold the profit / gain from such sale can be long-term or short-term.

    Ø What is Short-Term Capital Gains (STCG)- If a house is sold within a period of 24 months from the date of its purchase, then any profits / gains from the sale of the house will be treated as short-term capital gain, and the amount of short-term capital gain which will be treated as a part of seller’s total income and will be taxed as per the existing tax slab rates as applicable to such Seller.

    Ø What is Long-Term Capital Gains (LTCG) –If a house is sold after a period of 24 months from the date of its purchase, then any profits / gains from the sale of the house will be treated as long-term capital gain, and the amount of long-term capital gain will be taxed @ long-term capital gain tax applicable in the financial year in which such sale has been affected.

    Ø What is Indexation – Indexation is the process of adjusting the purchase price of the immovable property for inflation.

    Prior to the changes in the Capital Gain Tax regime introduced in the 2024 Budget, the benefit of indexation (i.e., adjusting the value of property as per current market scenario) was available, and the Long-Term Capital Gains was taxable @ 20%.

    In the revised Capital Gain Tax regime introduced in the 2024 Budget, the tax on Long-Term Capital Gains has been reduced from 20% to 12.5% for property sales, however, the benefit of indexation has been discontinued. In cases of properties acquired prior to 01.04.2001, the fair market value as on 01.04.2001 shall be considered as Deemed Cost for computing capital gains tax.

    Case 1 : Calculation of Long Term Capital Gain tax under old and new Capital Gain Tax Regime in case a Case 1 : Calculation of Long Term Capital Gain tax under old and new Capital Gain Tax Regime in case a house is purchased after year 2001:




    Case 2: Calculation of Long Term Capital Gain tax under old and new Capital Gain Tax Regime in case a house is purchased before year 2001




     

    Meanwhile, Prashant Thakur, Regional Director & Head – Research, ANAROCK Group told Zee News, “The elimination of indexation benefits might cause a decrease in investor interest as indexation adjusts the buying price to account for inflation, thereby decreasing the capital gains tax on property sales. Without this advantage the tax burden rises, making real estate investment less appealing. This change could have an impact on high value properties potentially leading to a decrease in demand for such properties.”