Indexation on property: Did you need to promote your property after seeing it handsomely appreciating it for years? Effectively, you simply misplaced Rs 7.8 lakh after July 23, 2024.
Earlier than the Price range 2024 was introduced, the tax code had the indexation provision for property sellers in India. In response to that, they’d regulate a property’s buy worth to mirror inflation’s impact on it.
So, if inflation outpaced the rise within the property’s worth or if the property misplaced its worth over years, the property holder would declare a capital loss of their ITR return.
With that, they have been allowed to offset their losses towards long-term capital positive aspects (LTCG) in the identical monetary yr.
So, in case you bought a property price Rs 10 lakh within the yr 2000 and also you bought it in 2023 for Rs 1 crore, whereas the listed worth for a similar was Rs 1.10 crore, you could possibly present a Rs 10 lakh loss and offset it towards capital positive aspects in different belongings.
In her Price range 2024 speech, finance minister Nirmala Sitharaman introduced the top of indexation in property.
On the sale of property, the vendor pays 12.50 per cent LTCG.
Nonetheless, the sooner LTCG for a similar was 20 per cent, however with the indexation rule in place, property sellers may save tax.
With the brand new rule in place, will property sellers must pay extra tax?
Will they higher of within the earlier rule? Or, have they got to pay much less tax now?
It is determined by the acquisition worth, promote worth, length you maintain the property, and inflation fee through the holding interval.
Nonetheless, in a calculation, we are going to present you the way the sale of a property earlier than and after the brand new rule would have value you vastly within the type of revenue tax.
In a BankBazaar.com calculation, we’re taking the instance of a property that was bought for Rs 40 lakh in 2008 and bought for Rs 1 crore earlier than and after the announcement.
The calculation goes as follows-
Courtesy: Bankbazaar.com
As you may see within the chart above, based mostly on the associated fee inflation index in 2008-09 (137) and 2024-25 (363), the worth of the property bought for Rs 40 lakh could be Rs 1,05,98,540 in 2024-25.
It signifies that one would have had a lack of Rs 5,98,540 on promoting it.
For the reason that indexation rule was in place, you’d have paid zero tax on it.
In actual fact, you could possibly have claimed losses towards capital positive aspects in different belongings.
As per the brand new rule, since you’d earn LTCG of Rs 60 lakh on the property, your tax on the fee of 12.50 per cent could be Rs 7,50,000, and after together with 4 per cent cess on it, the tax would have been elevated to Rs 7,80,000.
AR Hemant, AVP BankBazaar.com says, “So it goes from a lack of Rs 5.98 lakh which you’ll offset towards different positive aspects to Rs 7.8 lakh. So, theoretically a rise of 14 lakh to your tax burden.”
