Very few budget announcements in recent past have raised as many queries as the LTCG (Long Term Capital Gains) Tax. After all, it concerns all of us, the common citizens of India, whether they are lower class or middle class. For the rich, it has always been a case of more tax reliefs than burden. Track2Realty is regularly getting queries with the underlying worry as to whether the LTCG Amendment makes the tax computation simpler or more complicated.
Here are a few oft-repeated queries:
Question #1: Has LTCG Indexation been restored in reality?
Answer: The Finance Minister has announced in Parliament that they have restored benefits of Indexation. But it doesn’t mean it has been restored in totality. Only change is that the law is now with prospective effect and not retrospective effect.
Now onwards, in case of LTCG from the transfer of land and buildings purchased before 23rd July 2024, the tax would be calculated @12.5% without Indexation or @20% with Indexation- whichever is lower. And that amount would be the tax liability.
Question #2: So, all the assets purchased up to 22nd July 2024 would be eligible for indexation, right?
Ans: Only immovable property, like land and buildings, would be eligible for this Indexation benefit. Other assets like your jewellery etc. would not be eligible.
Ok; Got it. Right?
Question #3. I have a partnership with a friend and we have purchased a land in that firm. Indexation benefit should be available for this land?
Answer: No! Indexation benefit has been restored only for individuals and HUFs (Hindu Undivided Families). Properties purchased by Firms, Companies, Associations etc. are no more eligible for Indexation.
Question #4: My son is now an NRI and he is having a non-agriculture land in my home town. When he will be selling his land, he would be entitled for the benefits of Indexation. Is this so?
Answer: No! Even amongst Individuals and HUFs, they are giving benefit of Indexation to only residents. Non-Residents would not get benefit of Indexation now onwards.
Question #5: If I sell my residential house and claim exemption from Capital Gains by investing in another house or in Capital Gains bonds, whether I can invest Capital Gains after Indexation to get full exemption?
Answer: Indexation as a concept for calculation of taxable Capital Gain is gone. It has been brought back only for limited purposes of tax liability determination. So for exemptions u/s. 54, 54B and 54EC, amount invested would be compared with gains without Indexation.
Even if you have some loss after Indexation, this much loss would not be allowed to be carried forward or adjusted with other Capital Gains.
Track2Realty View
This is a crude joke with the honest tax paying citizens of India. Indexation would be available only for land and buildings and not for other assets. If tax payer is Non-Resident or is a firm/company etc., then Indexation would not be available. It would be used for tax calculation but cannot be considered for determination of amount of loss or amount of investment to be done to get full exemption u/s. 54, 54B, 54EC etc.
So many ifs and buts makes the law more complicated now then earlier.
But the Finance Minister has mentioned it very clearly in Finance Bill memorandum that it is an exercise to simplify the act. This is their idea of simplification.
Ravi Sinha
Twitter: RaviTrack2Media
Ravi Sinha is a journalist with over two decades of cross-discipline media exposure. He is the CEO of real estate thinktank group Track2Realty. He has been writing extensively on the real estate sector for more than a decade now. Evaluation of real estate brand performance is his core domain expertise and he has immense insight into consumers’ psychograph. He has conceptualised Track2Realty BrandXReport as India’s 1st & only objective & non-paid brand rating journal that is industry-accepted benchmark of brand equity & ranking of the Indian real estate companies.
Track2Realty is an independent media group managed by a consortium of journalists. Starting as the first e-newspaper in the Indian real estate sector in 2011, the group has today evolved as a think-tank on the sector with specialized research reports and rating & ranking. We are editorially independent and free from commercial bias and/or influenced by investors or shareholders. Our editorial team has no clash of interest in practicing high quality journalism that is free, frank & fearless.
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