Right here’s how.
First, long run capital features (LTCG) tax has been diminished from 20% to 12.5% for all property gross sales.
However, second, the advantage of indexation – adjusting the worth of property-to-be-sold to replicate present market realities – has been taken away from properties purchased or inherited on or after 2001.
And, third, the indexation profit has been retained for properties purchased or inherited earlier than 2001.
This implies, to any extent further, for these promoting properties courting earlier than 2001, there’s a achieve within the type of decrease LTCG tax (there’s additionally a loss within the type of no indexation profit submit 2001).
And for these promoting properties courting 2001 or after, advantages from the decrease LTCG tax should be weighed in opposition to full lack of indexation profit.
Indexation for capital features tax works this manner: The indexation minimize off 12 months is 2001. Capital features tax was imposed on the distinction between the sale value and the listed worth of the property, that’s the worth decided by an authorized valuer who checked out April 2001 property costs.
So, for an condominium bought earlier than 2001, property valuation as of April 2001 can nonetheless be used as the bottom to find out the listed value, which shall be diminished from the sale value to find out capital features. And people features shall be taxes at a decrease charge, 12.5% as an alternative of 20%.
However for an condominium purchased in, say, 2003, capital features shall be calculated on precise buy value and sale value. There’s no indexation. However the LTCG charge is now decrease.
Through the post-budget press convention, finance secretary TV Somanathan claimed that 95% of the sellers won’t be adversely impacted. He additionally mentioned “there may be both a discount or change within the efficient charge of tax on property”.
“We have now a quite simple regime — listed and unlisted property are at 12.5% long-term and equities at 20%. The long run charge has been rationalised and it has not essentially gone up”, he mentioned.
