Amendment comes after proposal to remove indexation benefit in calculation of LTCG on sale of immovable properties in Budget 2024-25.
- Budget proposed a lower 12.5% rate of LTCG tax on all assets (without indexation), down from 20%.
Indexation Benefits
- It adjusts asset purchase prices based on inflation.
- Thus neutralizing impact of Inflation on capital gains (Reducing overall tax liability of taxpayer).
Key Provisions of Amendment act
- Two LTCG tax rate options are offered to individuals or Hindu undivided Families on real estate properties (land or buildings) acquired before July 23, 2024.
- 12.5% tax rate without indexation benefit, or
- 20% tax rate with indexation benefit, whichever is more advantageous.
Capital Gain (CG)
- Defined as profits accumulated from sale of any capital asset (Real estate, stocks, bonds etc.).
- Since profits are categorized as an ‘income’, they are liable for taxation (known as capital gains tax)
- Types: Short-term CG, Long-term CG
- Short-term CG: CG on listed financial assets held for less than a year, while unlisted financial assets and all non-financial assets held for less than two years.
- Long-term CG: CG on listed financial assets held for more than a year, while unlisted financial assets and all non-financial assets held for at least two years.
