In a significant development, Finance Minister Nirmala Sitharaman has moved for amendments to the Finance Bill, introducing changes to the Long-Term Capital Gains (LTCG) tax calculation on real estate properties.
This move provides taxpayers with a choice in how they calculate their capital gains tax for properties acquired on or before July 23, 2023.
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Proposed Amendments
Under the revised proposal, taxpayers will have the option to choose between two methods for calculating their capital gains tax:
1. New Method: Tax at a flat rate of 12.5%.
2. Old Method: Tax at 20% with the benefit of indexation.
The Proposed Options
– New Method (12.5%): This method offers a straightforward approach where taxpayers can opt to pay a flat 12.5% tax on their long-term capital gains. This is designed to simplify the process and potentially lower the tax burden for some taxpayers.
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– Old Method (20% with Indexation): Indexation allows taxpayers to adjust the purchase price of their property based on inflation. By doing so, it reduces the taxable gain, thereby offering a way to potentially lower the overall tax liability. Under this method, the taxpayer pays a 20% tax on the indexed gains.
As this is a proposal within the budget, it is subject to approval by the Parliament. Taxpayers are advised to stay informed about the progress of these amendments and consult with their financial advisors or tax consultants to prepare for any potential changes.
Get a Copy of the Handbook on Income Tax Act with Free E-Book Access Click here.
