2024-07-23 12:01:13
New Delhi: Finance Minister Nirmala Sitharaman presented the budget today. In this, it has been announced to abolish the indexation benefit on the sale of property. Till now, people selling property will not be able to increase their purchase price and reduce their capital gains. In the system till now, 20% tax was levied on long term capital gains from the sale of property within the indexation benefit. Now a new LTCG tax rate of 12.5% will be applicable without indexation benefit for capital gains on the sale of property. Let’s understand this with the help of an example. Suppose you bought a property for Rs 25 lakh in the financial year 2002-2003. You sell this property for Rs 1 crore in the financial year 2023-2024. According to the current rules, the purchase price of Rs 25 lakh can be increased with the CII numbers notified by the Income Tax. But after the new rule comes into force, there will be no need to increase the purchase price. Taxpayers will have to calculate capital gains by reducing the purchase price from the sale price. Sitharaman said this will make it easier for taxpayers and tax authorities to calculate capital gains.
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What is CII
Every financial year, the Income Tax Department publishes a Cost Inflation Index (CII) to be used in calculating indexation benefit. It is used to calculate the inflation-adjusted cost of a long-term capital asset. The inflation-adjusted acquisition cost is deducted from the sale value of the asset to determine the taxable capital gain. However, indexation benefit is available only on specific types of assets.