Government Slashes Capital Gains Tax on Real Estate Sales : The Central Board of Direct Taxes (CBDT) has changed an important tax rule, so that now if people sell land, house or any other property, they can get some relief in tax. Actually, when a person sells a property bought a long time ago, its price automatically increases due to inflation in the meantime. There is a system to remove the effect of this inflation, which is called Cost Inflection Index (CII). Now the government has increased this index from 363 to 376.
Government Slashes Capital Gains Tax on Real Estate Sales
This means that if someone has bought a property earlier and now sells it, then the price of his purchase will now be considered higher than before. When the capital gain i.e. profit is calculated (selling price – indexed purchase price), the profit will look less and the tax levied on it will also be less. This new index will be applicable from the financial year 2025–26 and assessment year 2026–27.
Not everyone will get the benefit of New Tax Rates
The government’s argument is that when the price of a property increases only due to inflation, then that part should not be taxed. But this time one more thing has been changed. That is, now the benefit of CII will be available only in a few cases. In the 2024 budget, an attempt was made to simplify the tax rules, and now this indexation benefit will be available only on those properties that have been sold before 23 July 2024.
Yes, if someone bought land or house before 23 July 2024, and he sells it later, then he will get two options. First – pay 12.5 percent tax, without indexation, second – pay 20 percent tax, but with the benefit of indexation. That is, this new CII (376) will be useful for those who have old property. But NRIs, companies and LLPs will not get this option.
Old vs. New Capital Gains Tax Rates on Property
| Type of Capital Gain | Old Rate & Rules | New Rate & Rules (Post–July 23, 2024) |
|---|---|---|
| Long‑Term Capital Gain (LTCG) | • 20% with indexation benefit <br>• Option without indexation at 12.5% (optional choice) | • 12.5% without indexation (default for new assets) • Option to choose 20% with indexation for properties bought before July 23, 2024 |
| Short‑Term Capital Gain (STCG) | • Taxed as per individual slab rates (no change in rules) | • Still taxed as per income slab rates (unchanged) |
Capital Gains Tax : Indexation Benefit Ends After 23 July 2024 for New Property Purchases
According to a report by Livemint, tax expert Amit Maheshwari says that it is important for CII to be updated every year so that people can properly plan their tax on capital gains. Earlier this system was used for long term capital gains on land, house, gold, patent, securities etc. But now according to the new rule, this facility will be closed after 23 July 2024, except for those properties which were purchased earlier.
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